Internet Independence Declared, But the War to Regulate the Internet Has Only Just Begun

Wikipedia, Yahoo, Google and Facebook are among the usual suspects that have successfully galvanized public opposition to proposed online regulations.  The same cast of characters recently declared an Internet "Day of Independence."  But those seeking to enforce existing laws and enter into treaties regulating the Internet are finding themselves facing even more formidable foes – ranging from China to the U.S. Federal Reserve Bank.  And all signs suggest that the war to regulate commerce on the Internet has only just begun.

Part I:  Early Attempts at Regulation

Having been accused of aiding and abetting trademark infringement by jewelry icon Tiffany & Co., online auction site eBay successfully convinced the U.S. Court of Appeals for the Second Circuit that it was not vicariously responsible for the multitude of counterfeit Tiffany products that were being sold through its popular trading platform. Rather, the appeals court held that the onus lies on the brand owner to diligently police its marks against counterfeit items sold by eBay users.

After the eBay decision, brand owners’ focus began to shift away from eBay when seeking to stop the online sale of counterfeits, and began to focus more on websites and China-based “trading boards,” such as Alibaba, TradeTang, DHGate, Taobao and others. “Posting on these heavily-trafficked wholesale sites, a manufacturer located in mainland China or Hong Kong can make and sell hundreds of thousands of counterfeit products per week, and ship to distributors located all around the globe.  His sales make ten thousand listings for counterfeit goods on eBay seem like small potatoes in comparison,” says one source familiar with the Chinese trading sites.

As China’s online infrastructure expands, so too does the number of trade board users.  According to estimates, China now has 1 billion mobile phone subscriptions, but only about 14 percent of these already operate on China’s faster 3G networks, a number that will only increase as that nation invests in cellular infrastructure.

As a result, international trading boards run by Chinese Internet giant Alibaba Group are gearing up for an explosion in the number of consumers using their smartphones and tablet devices to buy products online in the next two years.  For example, Taobao Marketplace and Taobao Mall, which between them account for more than 400 million users, are already reporting a rapid sales growth by means of their iPad and iPhone applications.

Part II:  The Empire Strikes Back

The Chinese government has not sat idly by while its growing online companies are accused of harboring online counterfeiters.  When the U.S. Trade Representative recently listed Alibaba’s Taobao online retail site as one of the world’s most notorious markets in a U.S. government report, China’s Ministry of Commerce shot back with a vigorous attack:  “Since there is no conclusive evidence, there is no detailed analysis, this is very irresponsible and not objective,” said China Ministry of Commerce spokesman Shen Danyang.  “China believes the U.S. should … make fair assessments and avoid creating unnecessary negative effects for Chinese companies.”

In response to the mounting pressure, Alibaba hired high-powered lobbying firm Duberstein Group, and former Bush White House trade official James Mendenhall, now a partner at First Lady Michelle Obama’s former law firm Sidley & Austin, to represent Alibaba Group in talks with the U.S. government and industry groups.  These measures have already improved Alibaba Group’s image.

But an increase in the number of recently filed court cases suggests that the number of Chinese merchants that are actively trafficking in counterfeit goods on the Internet, through the use of “rogue websites” operating under spurious domain names incorporating trademarked brands, continues to skyrocket.

According to brand owners, “rogue websites” are unauthorized e-commerce sites that mimic legitimate channels of trade.  Consumers are lured to these sophisticated and well-designed websites that are replete with corporate advertising, credit card logos, and other indicia of legitimacy.  These sites often call themselves “sale outlets” in order to suggest that their merchandise is authentic.

However, such sites are actually devoted to illicit conduct, typically trafficking in counterfeit products, or offering illegal downloads of pirated music, movies or software.  These sites are also sometimes also used to steal consumers’ identities when the consumer reveals credit card information to make purchases, according to experts.  The U.S. Chamber of Commerce notes that studies demonstrate the dire implications and consequences of rogue websites distributing their illicit goods and illegal content to consumers.

Part III:  The Long Arm of the United States

In response to the growing problem, U.S. law enforcement and brands alike have taken concerted legal action against thousands of such sites in recent months. Similarly, the U.S. Department of Justice’s recent international raids on MegaUpload sent the signal that the federal government does not perceive online digital piracy of movies and music to be a victimless crime.

But following through to see these complex cases to completion is another story.  First, online distribution networks are fluid, and the common ownership and control of rogue websites is very difficult to trace and track down, requiring constant monitoring.  For example, forensic investigators using advanced data-mining software programs such as RogueFinder are able to link dozens — even hundreds — of seemingly unrelated domain names and websites.  This careful research can thereby lay the foundation to properly sue the anonymous entities operating a vast number of infringing websites, but also illustrates the enormous challenge of monitoring online counterfeiting networks that not only grow exponentially but are also in a constant state of flux.

Using this type of data, federal courts in New York, Florida and Nevada have ordered thousands of domain names and corresponding websites to be taken down, and handed over to intellectual property owners.  But Internet counterfeiters can simply shift the infringing content to new websites with new domain names only days later, brazenly hawking the same counterfeit products in open violation of court orders.

Second, no longer relegated to dimly lit basements and backrooms in factories, some accused infringers are now organized--and well represented.  MegaUpload’s founders have showed up in federal court in Virginia represented by mega-firms Hogan Lovells, Squire Sanders, Sidley Austin, and most recently, Quinn Emanuel. 

And their high-priced legal representation has paid off, so far.  The Quinn Emanuel lawyers have already raised questions about the procedural aspects of the Justice Department’s MegaUpload seizures, and have cast serious doubt on whether New Zealand’s arrest warrants will even stick, undoubtedly giving Justice Department lawyers heartburn.  “I frankly don't know that we are ever going to have a trial in this matter,” District Judge Liam O’Grady said to a Justice Department prosecutor at a recent hearing in the case.

Part IV:  "Follow the Money"

Law enforcement authorities have realized the critical importance of regulating online payment processing—which is essential to Internet counterfeiters’ business model—but have found it equally challenging to monitor and seize cash flows associated with the purchase of counterfeit goods online.

In April 2012, the U.S. Department of Justice and U.S. Immigration and Customs Enforcement seized more than $896,000, plus the domain names of seven websites accused of selling counterfeit sports apparel. Aggressively using anti-money laundering statutes in conjunction with the PATRIOT Act’s specific provisions giving the federal government jurisdiction over “Interbank” accounts, the Justice Department was able to use warrants to allow the U.S. to seize $826,883 that had been transferred from PayPal accounts to Interbank accounts held by Chinese banks in the U.S.

However, while the PATRIOT Act gives Justice Department lawyers a powerful weapon, no such provision exists in U.S. law for intellectual property owners acting on their own in civil cases.  In fact, some intellectual property owners have been stymied in their ability to even gather insight into the finances of international counterfeiters from international banks operating in the U.S. itself.

In one such case, Tiffany & Co. alleged that major Chinese state-owned banks maintain bank accounts for counterfeiters in China that ship fake designer goods into the United States.  The three accused banks - Bank of China, China Merchants Bank and the Industrial and Commercial Bank of China - all have branches in New York City.  The luxury-goods maker had petitioned to have the Chinese banks freeze assets in accounts owned by the alleged counterfeiters and turn over information about the clients to their attorneys.

However, the banks’ lawyers pointed out that the Federal Reserve, which regulates New York-based branches of foreign banks, supports the notion of treating each branch as a “separate entity,” and the idea that New York branches of foreign banks cannot be used as conduits through which to export American laws abroad.  A lawyer for the New York Federal Reserve had presented an oral argument in a similar case involving offshore accounts, warning that a decision in favor of disclosure could spark “a global asset hunt” in the New York court system, according to a court transcript.

In fact, an amicus brief the Federal Reserve Bank filed became part of a series of arguments in the Tiffany case that led District Judge Pauley to rule that Tiffany needed to seek information from the banks’ headquarters in China – and not in a New York courtroom.

However, just weeks after the Tiffany decision, another judge in the same courthouse, faced with essentially identical facts, held that luxury brand group Gucci America, Inc., was entitled to information held by Bank of China and other Chinese financial institutions, and that those banks were required to freeze the defendants’ assets. This matter is currently before the Second Circuit Court of Appeals, which is now charged with resolving the contradictory rulings

It is clear that a simple legal solution to bringing the Internet in line with established laws and traditional norms of intellectual property ownership is simply not in the foreseeable future.   Beleaguered intellectual property owners, faced with such significant opposition, must both adapt their existing business models, and continue to lobby for the passage of more creative laws as well as aggressive application of existing laws.  However, doing so will likely place them in a protracted battle with political and commercial forces far more powerful than they may have ever bargained-for.

And that is just the beginning.

The Gloves are Off: Rawlings Sues Wilson for Trademark Infringement

In St. Louis, Missouri, Rawlings Sporting Goods has filed a federal lawsuit against competitor Wilson Sporting Goods for displaying a baseball glove with gold-colored webbing and stitching in its promotional materials.  Rawlings alleges the product violates its Gold Glove Award trademarks.

Wilson's 2012 promotional materials had shown Brandon Phillips, a second baseman with the Cincinnati Reds, holding a Wilson-brand baseball glove with metallic gold-colored webbing, stitching and lettering, according to Rawlings' Complaint.

After Phillips won a Gold Glove Award in 2011, Rawlings alleges Wilson supplied the Major League Baseball player with a glove made by Wilson with gold coloring that Rawlings alleges violates its trademarks.

Eighteen Gold Gloves are awarded each year (with the exception of 1957, 1985 and 2007), one at each of the nine positions in each league.

Rawlings claims that it owns the trademarks for the words "Gold Glove Award" and for the distinctive gold-colored baseball glove that is the centerpiece of the award.

In addition to the award, Rawlings supplies winners with baseball gloves with metallic gold distinguishing marks.  Since 1957, the Complaint notes that Rawlings has distributed 981 Gold Glove Awards.

"(Wilson's) unauthorized use of the Gold Glove Marks dilutes and is likely to dilute the distinctiveness of these marks by eroding the public's exclusive associations and reputation of the marks, and otherwise lessening the capacity of the marks to identify and distinguish Rawlings' good and services," Rawlings' Complaint alleges.

It is not clear if Wilson sold any of the allegedly infringing gloves in commerce, but its use of a copycat gold glove as a promotional item may be sufficient to violate the Lanham Act if the Court finds that such use was likely to cause confusion and/or dilute the famous Gold Glove Marks.

Is "CHIPOTLE" a Valid Trademark?

Chipotle chilis - meco variety

The word "chipotle" comes from the Nahuatl word chilpoctli meaning "smoked chili pepper," and is a smoke-dried jalapeño pepper.  It is a flavorful chili pepper used primarily in Mexican and Mexican-inspired cuisines, such as Mexican-American and Tex-Mex.  The word has widely been used generically to describe this type of flavor.


Enter Chipotle Mexican Grill, Inc., a chain of restaurants located in the United States, UK and Canada, specializing in delicious burritos and tacos, and known for its fresh, natural ingredients and “assembly-line” production method. 


Despite its enormous success and popularity (as long lines of customers can attest), the company continues to face an uphill battle in legally capturing the word “CHIPOTLE” as a trademark. When the restaurant chain applied for the word trademark in 2003, the US Trademark Examiner initially refused to register it, finding that it was "highly descriptive of the goods and/or services."  


However, the Examiner went on to invite the company to offer specific evidence of distinctiveness, including dollar sales under the mark, advertising figures, samples of advertising, consumer or dealer statements of recognition of the mark, and any other evidence that establishes the distinctiveness of the mark as an indicator of source.  The Examiner reminded the company that "the [Trademark] Office will decide each case on its own merits."

Subsequently in June 2008, the CHIPOTLE trademark application became a registration on the Supplemental Trademark Register.  The Supplemental Register is a purgatory for descriptive or otherwise problematic marks which may (or may not) mature to the Principal Register.A quick search on Google demonstrates that CHIPOTLE has clearly become associated with the Plaintiff's restaurants.  


But can the CHIPOTLE word ever qualify to become a legally protectable trademark in its own right?  It may depend on whether CHIPOTLE is deemed "generic" or "descriptive" by a court.  The distinction is subtle, but meaningful.  A generic mark can NEVER become a trademark.  Examples of generic words are CHICKEN, RESTAURANT and GRILL. However, a mark that is descriptive CAN become a trademark, if sufficient "distinctiveness is acquired" by a single company.  Here, generic/descriptive use by unauthorized third parties create a chicken-and-egg problem for the restaurant chain, which is stuck with creating "distinctiveness in the making."  


Can such a brand owner who is still trying to establish trademark rights meaningfully assert a viable legal claim?  For example, Subway sandwich shops offer a product called CHIPOTLE CHICKEN. This usage does not appear to be licensed, and has apparently not drawn a lawsuit (yet). However, when the Kroger Company launched a product called CHIPOTLE CHICKEN in supermarkets, it was summarily sued and chose to settle.  Such outcomes can help a Plaintiff demonstrate good faith efforts to police the marketplace, but they do not in and of themselves resolve the ultimate linguistic -- and legal -- matter.  If larger and more visible third parties (such as Subway) continue to use the word in a generic or descriptive (i.e., non-trademark) manner, CHIPOTLE may be confined to those marks that never escape their perpetual sentence in trademark purgatory.  Only time will tell.

Understanding Trademark Bullying

Many successful companies seeking to aggressively protect their intellectual property portfolio of valuable brands have been accused of becoming “trademark bullies.”  Their accusers argue that rather than using a reasoned, measured approach to address actual commercial threats, these large brand owners deliberately use the specter of civil litigation to threaten alleged infringers into submission.

Trademark infringement litigation may be brought either in federal court, or can also be commenced by opposing or seeking to cancel trademark applications in the United States Patent and Trademark Office (“USPTO”) in a lengthy and byzantine administrative proceeding that can last years and cost the parties thousands of dollars.  Because the cost of litigating trademark disputes can be prohibitive, especially for smaller companies or individuals, many accused infringers choose to settle or otherwise resolve their conflict without the merits of the underlying conflict ever being adjudicated.

Consequently, commentators -- and sometimes even the brands’ own customer base – have vocally accused some brand owners of overzealously enforcing their perceived trademark rights against others in a manner that smacks of bad faith or anticompetitive conduct used to squelch competition or free speech.

The issue has recently gotten so much attention, that Trademarkia has published its list of "biggest trademark bullies", and the USPTO itself released a report to Congress on the issue.

Why would savvy and well-represented companies sometimes risk going too far and potentially alienating their own customer base?  While every case is different, under existing U.S. Intellectual Property law, an established brand may very well face a Hobson’s choice:  risk the ire of an angry mob, or face ongoing brand erosion and even extinction in a world of ever-expanding fakes and imitators.  A few examples of alleged "trademark bullying" warrant mentioning:

• Chick-Fil-A sells more than $4B of sandwiches each year.  The company’s humorous “EAT MOR CHIKIN” trademarked slogan held up by aggrieved cattle (see right), became an instant hit for the company’s efforts at marketing and promotion.  When a small local farmer named Mr. Muller-Moore sought to federally register the “EAT MORE KALE” slogan in the U.S. Patent and Trademark Office, the corporation opposed his application on the grounds that his mark was likely to cause confusion with their slogan.

• Famous fashion house Louis Vuitton has serially sued Hyundai for a Super Bowl advertisement that depicted a basketball emblazoned with the LV logo, had a case against the makers of the movie Hangover 2 dismissed, and famously demanded that University of Pennsylvania Law School remove a promotional poster.

• Hansen Beverage Company, maker of the popular “MONSTER ENERGY DRINK” sent Rock Art Brewery a letter demanding that Rock Art cease and desist its use of “VERMONSTER” as a trademark for beer.  Ultimately, after a public outcry on Twitter, the parties settled their dispute outside of court, with Rock Art permitted to keep selling their brew.

• Non-profit Susan G. Komen for the Cure opposes dozens of trademark applications for wording that includes “FOR A CURE” or “FOR THE CURE.”  When the charity opposed an application for “MUSH FOR THE CURE” sought by a local non-profit, it became national news. 

So what do each of these four examples have in common? Each circumstance may seem like an example of brand protection gone awry, and perhaps they are.

However, Difficult Legal Lines Must Inevitably Be Drawn

It is worth reminding their critics that if each of these brand owners had not acted to draw a line in the sand, they would undoubtedly face the prospect of closer and closer copyists, and eventually encounter even more widespread infringement.  Where any specific line between infringer and innocent victim is drawn in each case is another matter, but it is clear that a legal line still must be drawn somewhere, and the clear incentive for brand owners under current law is to be zealously protective of their investment in their brands.

One legal reason for brand owners to be zealous is that in the event of a brand owner’s complete failure to act, their targets may be entitled to legally rely on the affirmative defense that their delay has been inexcusable.  This potentially crippling defense is known as “estoppel by laches” or “laches” for short.  The laches defense is also sometimes described as "estoppel by acquiescence."

Similar to an undefined statute of limitations, laches may be available as a defense when an infringer was actually known about by the Plaintiff, or even should have been known about under the circumstances, and the delay in bringing suit was inexcusable.

An essential element of laches is the requirement that the party invoking the doctrine has somehow changed its position as a result of the delay.  In other words, the defendant is now in a worse position than at the time the claim should have been brought.  For example, the delay in asserting the claim may have caused the defendant to open up more stores, hire more employees and build up its own reputation in reliance on the brand owner’s unfair inaction.

Even worse yet, if a brand owner fails to act against numerous infringers in the marketplace, it may very well face the dire prospect of losing its trademark altogether under a doctrine known as “genericide.”  

Some words that started out as brand names and “killed” by such widespread genericide are: aspirin, bundt cake, cellophane, dry ice, escalator,
 granola, kerosene, linoleum, minibike, nylon,
 pogostick, tarmac, thermos, touch-tone, trampoline,
 yo-yo and zipper.

In each of these cases, the brand owner failed to act to sufficiently police the marketplace to stop widespread third-party unauthorized uses.  Ultimately, these erstwhile brands passed into the netherworld of “dead” trademarks, devoid of legal protection altogether.

But Are These Extreme Historical Examples of Genericide that Can’t Recur Today?

Harris Interactive released a list of products ranked by brand equity, a measure of the brand's popularity with U.S. consumers.  Among the top 10 are Ziploc food bags, Hershey’s Milk Chocolate Candy Bars, Kleenex Facial Tissues, Clorox Bleach, WD-40 Spray Lubricant, Heinz Ketchup, Windex Glass Cleaner and Campbell’s Soups.  In other words, some of the most valuable and well-known trademarks in the world.

It is clear from this list alone that success in today's marketplace can be a double-edged sword.  The companies who manufacture these products have done an incredible job in advertising and marketing them, so successful in some cases that the brand name is in danger of becoming a genericized trademark.  If the companies on this list aren't zealous, they could end up losing the trademark for the products that they have worked so hard to market successfully.

Ultimately, trademark law is intended to protect consumers and companies from confusion with established brands.  Quality control and brand reputation are crucial in today's marketplace, and zealous trademark protections are a perfectly logical and legal way to protect customers from fraud, and to give companies the tools they need to protect their valuable investment.  In conclusion, in this age of rampant counterfeiting and infringement, it is important to fully understand why in their zeal to protect their valuable brands, aggressive tactics can seem like a viable option for brand owners, even if sometimes they risk going too far.

Can Anheuser-Busch Trademark 3-Letter Airport Codes Such as LGA?

Last year, beer conglomerate Anheuser-Busch/InBev filed multiple "intent to use" trademark applications for 14 U.S. telephone area codes. Now Anheuser-Busch has applied for trademark registrations for 42 U.S. airports, including New York's LaGuardia and JFK airports; Los Angeles International Airport; and San Francisco International Airport. Not surprisingly, the class of goods listed in each filing is "beer."  


The International Air Association Transport Association already owns trademarks on all the airport codes, but trademark law permits the use and filing for trademark registrations for codes if used in connection with a bona fide offering of goods or services that are not likely to cause confusion with those preexisting registrations/uses.  Anheuser-Busch's area code trademark applications had previously led to speculation that the company was trying to mimic the success of 312 Urban Wheat Ale, the popular beer by Chicago's Goose Island Beer Company—which Anheuser-Busch bought last year—in cities including New York and Los Angeles.  One can only wonder what type of local beer would be associated with LaGuardia airport, "Overpriced LGA Yellow Cab Ale"?

Meat Loaf Sues Impersonator for Cybersquatting

First and foremost, I must confess that I am a fan of Marvin (now “Michael”) Aday, better known to the world as the singer Meat Loaf.  I have the seven anthems from Bat out of Hell Part I permanently etched on my iPod, and every word of Phil Rizzuto’s monologue from Paradise By the Dashboard Light memorized.  I am also a trademark lawyer who generally represents Plaintiffs in Court against infringers, including having litigated major cases involving “replicas” and “knockoffs.”  So it was with great interest and pro-Meat Loaf bias that I read about the singer's recently filed federal Complaint against U.K.-based impersonator Dean Torkington.

In contrast to the legitimate MeatLoaf.net site, Dean Torkington apparently registered the Internet domain name MeatLoaf.org. MeatLoaf.com was apparently already taken (not by the rocker, but by Rebeccah’s Fine Foods, who registered it in 1995, and who doesn’t seem to have done much with it since then).

Initially, it is worth noting that Torkington’s website and materials identify himself as a “tribute.”  Tribute bands and celebrity impersonators present a challenging (if not amusing) area of intellectual property law.

The Torkington "mini-tour bus."

With most tribute bands, there is not likely to be much evidence of actual confusion at the point when an ordinarily prudent consumer buys a ticket to a tribute show.  (Such a duped consumer would be no true fan of Meat Loaf, as Torkington is at best, a poor-man’s Meat Loaf).  I must confess that if I saw Torkington’s tiny little "tour bus" parked in the lot, I would most certainly NOT suspect that the genuine Meat Loaf was nearby, and would not begin my search for an autograph.

Rather, in such cases, a Plaintiff must rely on more creative applications of trademark law, such as the doctrine of initial interest confusion, otherwise known as the “bait and switch.”  Under this established concept, even ordinarily prudent consumers are initially confused and attracted to the second-comer’s product or service, only to later discover the lack of authenticity.  Such infringement is still legally actionable, as it serves to divert interest and undermine the brand owner’s rights.

Aday references this theory in his Complaint, in which he asserts that true fans are searching for the genuine website on the Internet, only to discover Torkington’s close imitation.  Further, Torkington's use of logos and images is a little too close for comfort, and there is even an allegation that Torkington created a YouTube handle "Michael Aday" to fraudulently impersonate the Plaintiff.

Of course, because the nature of all tribute bands is, in a sense, expressive and therefore potentially constitutionally protected free speech, tribute bands can readily assert the nominative fair use defense, which can be applied where the defendant's use of the trademark refers to something other than the real product.  A federal court in the New Kids on the Block v. News America Publishing Inc. case articulated a three-part test for nominative fair use:

First, the product or service in question must be one not readily identifiable without use of the trademark; second, only so much of the mark or marks may be used as is reasonably necessary to identify the product or service; and third, the user must do nothing that would, in conjunction with the mark, suggest sponsorship or endorsement by the trademark holder.

There are numerous Meat Loaf tribute bands which may satisfy this test, for example:  Dashboard Lights, Anything for Loaf, and my own personal favorite, Peat Loaf.

Finally, and potentially problematically for Mr. Torkington, if his domain name registration of MeatLoaf.org is deemed to have been in bad faith to capitalize on consumer confusion, he would not only lose the domain name, but face up to $100,000 in statutory damages.

In conclusion, Mr. Torkington may have come a little too close for comfort with his imitation of life.  In the words of the true Meat Loaf’s classic song, Torkington’s tributes will be gone when the morning comes.

When is Undercover Recording Legal?

Recording telephone calls and in-person conversations is a common practice of undercover private investigators as well as aggressive investigative journalists. Such recordings can make or break a case or investigation.  In fact, most private investigators view undercover recording as an indispensable tool in their arsenal. However, others don't use recordings because of the complex legal risks that it creates.

However, there are important questions of law that must be fully understood before developing a consistent policy about making and using undercover recordings. Both federal and state statutes govern the use of electronic recording equipment. The unlawful use of such equipment can give rise not only to civil lawsuits brought by the "harmed" parties, but also criminal prosecution is possible.

Accordingly, it is critical that investigators, lawyers and journalists fully understand all the laws that may apply to a given set of circumstances, and appreciate what their rights and responsibilities are when recording and disclosing communications.

Although many of the relevant statutes address wiretapping and eavesdropping (i.e., listening in on conversations of others without their knowledge), these same laws may apply to recording of any conversations, including phone calls and in-person discussions.

Federal law generally allows recording of telephone calls and other electronic communications with the consent of at least one party to the call. A majority of the states and territories have adopted wiretapping statutes based on this federal law, although most also have extended the law to cover in-person conversations.

Thirty-eight states and the District of Columbia permit individuals to record conversations to which they are a party, without expressly informing the other parties that they are doing so. These states are generally referred to as "one-party consent" states, and as long as the investigator (or the person doing the recording) is a party to the conversation, it is legal for him to record it.

Twelve other states require, under most circumstances, the consent of ALL parties to a conversation. Those jurisdictions are California, Connecticut, Florida, Illinois, Maryland, Massachusetts, Michigan, Montana, Nevada, New Hampshire, Pennsylvania and Washington.

Regardless of the specific jurisdiction involved, it is almost always illegal to record a conversation to which you are NOT a party, do not have consent to tape, and could not naturally overhear in a public place.

Additionally, complex legal concerns can arise when interstate telephone calls are recorded by one of the parties to the call. For example, an investigator located in New York State who records a telephone conversation without the consent of a party located in Illinois would not violate New York State law, but could be civilly and even criminally liable under Illinois law.

A court located in New York State may even apply Illinois' laws, depending on its "conflict of laws" rules. Therefore, an aggrieved party may choose to file suit or a criminal complaint in either jurisdiction, depending on which law is ultimately more favorable to the party's claim (and where jurisdiction lies).

Additionally, federal law may apply when the conversation is between parties who are in different states, although it is unsettled whether a court will hold in a given case that federal law preempts state law.

Therefore, in light of the complex laws governing electronic recording of conversations between private parties, private investigators are strongly advised to err on the side of caution when recording or disclosing an interstate telephone call.

Forensic Clues Hidden on the Internet

The following explains some of the terms used in Internet forensics, and suggests where relevant clues about a domain name may be hiding:

"IP Address"

Each and every computer on the Internet has a unique address - just like a telephone number or street address - which is a rather long and complicated string of numbers. It is called its "IP address" (IP stands for "Internet Protocol"). IP Addresses are hard to remember, so the Domain Name System makes using the Internet far easier for humans by allowing words in the form of a "domain name" to be used instead of the arcane, numerical IP address. So instead of typing 64.233.161.104, you can just type that IP address' domain name, and you would then be directed to the website that you are seeking connected to that domain name.

It is possible to "geolocate" an IP address by using a variety of free services available on the Internet. Geolocation is the practice of determining the physical, real world location of a person or computer using digital information processed and collected on the Internet.

Geolocation can offer the city, ZIP code or region from which a person is or has connected to the World Wide Web by using their device's IP Address, or that of a nearby wireless access points, such as those offered by coffeeshops or internet cafes.

Determining the country of an Internet user based on his or her IP address is relatively simple and accurate (95%-99% percent) because a country is required information when an IP range is allocated and IP registrars supply that information.

Determining the specific physical location of an IP Address down to a city or ZIP code, however, is a little more difficult and slightly less accurate because there is no official source for the information. Further, users sometimes share IP addresses and Internet service providers often base IP addresses.

Even when not accurate, though, geolocation can place users in a bordering or nearby city, which may be good enough for the investigation.

Internet Corporation for Assigned Names and Numbers (ICANN)

The Internet Corporation for Assigned Names and Numbers (ICANN) is an internationally organized, non-profit corporation that has the ultimate responsibility for Internet Protocol address space allocation, generic (gTLD) and country code (ccTLD) Top Level Domain name system management, and root server system management functions. As a private-public partnership, ICANN is dedicated to preserving the operational stability of the Internet; to promoting healthy and lawful competition; to achieving broad representation of global Internet communities; and to developing policies to foster these goals.

"Registrant"

Registrants are individuals or entities who register unique domain names through Internet Registrars. The Registrant is required to enter a registration contract with his Registrar, which sets forth the terms under which the registration is accepted and will be maintained. The Registrant's data is ultimately recorded in a number of locations: with the Registry, the Registrar, and, if applicable, with his webhosting provider.

"Registrar"

Domain names are registered by individual Registrants through many different companies known as Internet "Registrars." GoDaddy, for example, is a major ICANN-accredited Registrar. There are currently approximately 430 accredited Internet Registrars. A complete listing of accredited Registrars is in the ICANN Accredited Registrar Directory. A Registrar asks individuals, or "Registrants", various contact and technical information that makes up the official registration record. The Registrar maintains detailed records of the Registrant's contact information and submits the information to a central directory known as the "Registry." The Registry provides other computers on the Internet the information necessary to send the Registrant e-mail or to find the Registrant's Website on the Internet.

"Registry"

The Registry is the authoritative, master database of all domain names registered in each Top Level Domain. The Registry operator keeps the master database and also generates the "Zone File" which allows computers to route Internet traffic to and from Top Level Domains (TLD's) anywhere in the world. Internet users don't interact directly with the Registry; users can register names in TLDs by using an ICANN-Accredited Registrar (see above). Two of the largest Registries are Verisign (with authority over.com and.net TLDs, among others), and the Public Interest Registry ("PIR")(with authority over.org TLD's).

Top Level Domain (TLD)

Top Level Domains (TLDs) are the names at the top of the DNS naming hierarchy. They appear in domain names as the string of letters following the last (rightmost) ".", such as "net" in "http://www.example.net". The administrator for a TLD controls what second-level names are recognized in that TLD. The administrators of the "root domain" or "Root Zone" control what TLDs are recognized by the DNS. Generally speaking, two types of TLDs exist: generic TLDs (such as.com,.net,.edu) and country code TLDs (such as.jp,.de, and.cn).

"Whois"Data

All domain name Registries operate a "Whois" server for the purpose of providing information about all the Internet domain names registered with them. In a Shared Registry System, where most information about a domain name is held by separate individual Registrars, the Registry's Whois server provides a referral to the Registrars own Whois server, which provides more complete information about the domain name. The Whois service contains Registrant, administrative, billing and technical contact information provided by Registrars for domain name registrations.

By collecting and analyzing the Whois data, the Registry data, the Registrar data, and other bits and pieces of data about any websites associated with the domain name(s) you are interested in, a forensic investigator can often reconstruct a Registrant's identity, location and other contact information (e-mail, etc.).

Online Counterfeiting Likely to Escalate

Numerous federal lawsuits have been filed by Intellectual Property owners in recent years to attempt to address the intensifying online threat from "rogue websites."

Additionally, the US Department of Justice and US Department of Immigration and Customs Enforcement have seized millions of dollars in assets, as well as shuttered many such websites by utilizing existing criminal laws in the ongoing Operation In Our Sites.

However, while Internet traffic to these sites has been measured and determined to be substantial, little research has been done to empirically survey the existing body of data related to this phenomenon.

A comprehensive empirical survey of over 3,000 Internet websites that federal courts have ordered shut down because of their sale of counterfeit goods has revealed that online counterfeiters can collect immense profits by generating over $10,000 in sales with a $1,000 initial investment.

An analysis of an online counterfeiters' potential profit margin can be summarized in the sample breakdown of typical revenue and costs as follows: The average cost of registering a single Internet domain name: $10-$20 per domain name, annually. The average cost of hosting multiple e-commerce websites on a shared server: $120 to $160, annually. International shipping is either paid for by the customer, or absorbed by seller if it is a nominal cost (less than $10 per item). Credit Card/online payment processing fees: 3-5% of sale price. Wholesale cost of counterfeit goods varies by brand and product category.

For example, a typical counterfeit coat has a $40-$50 wholesale cost, retails for $230-$300 on a rogue website. A typical counterfeit handbag: $40-$50 wholesale cost, retails for $200-$300 on a rogue website. A typical counterfeit bracelet: $10 wholesale cost, retails for $70-$80 on a rogue website. A typical counterfeit watch: $10 wholesale cost, retails for $160 on a rogue website. 


Therefore, starting with a $1,000 investment, if one sets up a hosted e-commerce website ($160) linked to five domain names ($100), and invests the remaining funds ($700) in selling and shipping wholesale counterfeit goods, one could generate: Up to $11,200 by selling 70 counterfeit watches (11.2x the initial investment); Up to $5,600 by selling 70 counterfeit bracelets (5.6x the initial investment); or Up to $4,200 by selling 14 counterfeit coats or handbags (4.2x the initial investment).

This low-risk business model offers a comparable return on investment (ROI) to trafficking in illegal narcotics.  Because of this dramatic ROI, online counterfeiting networks are exponentially spreading on the Internet like an infection. For example, the ROI from a single successful website selling counterfeit products encourages the creation of many more such websites.

Skilled programmers who have access to sophisticated technology and an extensive supply of counterfeit products are creating and operating these sites. To protect their business model, they are employing a variety of creative tactics to frustrate efforts to monitor them and remove them from the marketplace.

For example, they dynamically redirect their websites across multiple servers located in different countries. Significant server bandwidth is dedicated to hosting such sites, with large blocks of server space and IP addresses dedicated to managing the Internet traffic to them. Counterfeiters' websites are creating significant actual consumer confusion. One reason is that prices for counterfeit goods are designed to be credible to suggest genuine, discounted products rather than low quality counterfeits. Goods received are typically shipped directly from locations throughout China and Hong Kong, and

China is the country most often named as the country of the Registrant. However, Registrants do not usually provide legitimate or consistent contact information when registering new domain names, often using gibberish, nonsensical words and false addresses. Further, some Registrants are using the "Privacy Protection" services offered by Registrars to purchase a cloak of further anonymity. Software applications make it easier for infringers to create, register and warehouse thousands of domain names that contain permutations of trademarked brands. These conclusions make it likely that "rogue websites" selling counterfeit goods will likely continue to proliferate, demanding that legal action be taken by brand owners.