The BTLJ Podcast: This Week in Tech Law – October 15th, 2020
Hosts Ibrahim Hinds ’23 and Kurt Fredrickson ’23 cover recent criminal charges against the founders of one of the world’s largest BitCoin exchanges, the House’s antitrust report on Facebook, Google, Apple, and Amazon, and the Supreme Court copyright case between Oracle and Google.
[Ibrahim] You’re listening to the Berkeley Technology Law Journal Podcast. Here are some headlines about what’s been happening This Week in Tech Law. I’m Ibrahim Hinds.
[Kurt] And I’m Kurt Fredrickson. Today we’ll be covering criminal charges brought against the founders of one of the world’s largest cryptocurrency exchanges, the conclusion of a patent infringement trial involving Cisco Systems, a major Congressional report accusing large tech companies of anticompetitive behavior, and the Supreme Court case between Google and Oracle regarding Google’s alleged copyright infringement of Oracle’s APIs.
[Ibrahim] On Thursday, October 1st, Manhattan federal prosecutors and the U.S. Commodity Futures Trading Commission, or CFTC, filed criminal charges against the four founders of BitMEX, one of the world’s largest BitCoin trading exchanges.1 The founders were charged with violating the Bank Secrecy Act, conspiracy to violate the Bank Secrecy Act, and violating the Commodity Exchange Act.2 BitMEX’s alleged violations date back to September 2015, when BitMEX announced that it would no longer serve U.S. customers.3 However, an investigation by federal prosecutors revealed evidence that suggests that BitMEX failed to take reasonable measures to prevent the use of the exchange by U.S. customers.4
BitMEX is not the first cryptocurrency exchange to be suspected of criminal activity, but, according to the New York Times, “it is the largest and most established to face criminal charges.”5 The same article contends that BitMEX and its CEO Arthur Hayes are known for “pushing the limits in the unregulated cryptocurrency industry.”6 For example, BitMEX is most well-known for allowing customers to “buy and sell contracts tied to the value of Bitcoin . . . with few of the restrictions and rules that [are] in place in other exchanges.”7
One of the corporate entities controlling BitMEX, HDR Global Trading Limited, defended the founders in a statement released on October 1st.8 HDR said, “we strongly disagree with the U.S. government’s heavy-handed decision to bring these charges and intend to defend the allegations vigorously.”9 However, Jerry Brito, the executive director of Coin Center, a cryptocurrency research group, told the New York Times that “the vast majority of firms that service the U.S. are compliant,” and that it is “not surprising” that the government would bring charges against BitMEX’s founders.10
The CEO and CTO of BitMEX have resigned following these charges.11 Since the news of the charges broke, users of BitMEX have withdrawn nearly thirty percent of BitMEX’s total BitCoin balance.12 Legal representatives for the four founders have stated they intend to contest the charges in the upcoming weeks.13
[Kurt] On Monday, October 5th, Judge Henry Coke Morgan, Jr., of the Eastern District of Virginia ruled that Cisco, the major network and telecommunications multinational, must pay $1.9 billion in damages to Centripetal Networks, a cybersecurity solutions startup, for willful patent infringement of four of Centripetal’s patents.14 The patent damages award is one of the largest in U.S. history,15 second only to a $2.5 billion damage award to Merck & Co. for infringement of one of its drug patents in 2016.16
The patents in question relate to methods and systems used to protect secured networks.17 Between 2015 and 2017, Cisco held numerous meetings with Centripetal to discuss buying or licensing Centripetal’s patents,18 but the companies could not reach a deal in these meetings.19 The Court found that Cisco incorporated technology shared with its employees during these meetings into its own products without permission from Centripetal.20
During the trial, Centripetal claimed that Cisco’s routers infringed on their technology for detecting network threats.21 Cisco argued that its products did not infringe on Centripetal’s patents because Cisco’s routers could only determine whether malicious activity had occurred in the past, while Centripetal’s patents detected malicious activity in real-time.22 Cisco also argued that even if its routers did infringe Centripetal’s patents, the patents should be invalidated.23 Judge Morgan ultimately found for Centripetal, stating in his opinion that Cisco’s expert witnesses often contradicted Cisco’s own engineers on whether the detection of network threats was in real-time or not.24 In addition, Judge Morgan ordered Cisco to pay enhanced damages for willful infringement, because Cisco took information from private meetings with Centripetal and used this information to develop its products.25 Judge Morgan stated, “the fact that Cisco released products with Centripetal’s functionality within a year of these meetings goes beyond mere coincidence.”26 Judge Morgan also explained that Cisco’s enormous success with the infringing products contributed to his decision in determining damages.27 Cisco plans to appeal the decision to the U.S. Federal Circuit Court of Appeals.28
[Ibrahim] In a report released on Tuesday, October 6th, the House of Representatives’ Subcommittee on Antitrust, Commercial, and Administrative Law accused tech giants Amazon, Apple, Facebook, and Google of engaging in anticompetitive and monopolistic practices.29 The subcommittee supplemented the report with a proposal for antitrust legislation aimed at large tech companies.30 According to the Washington Post, the “450-page document[ capped] a roughly 16-month investigation by the House’s top antitrust panel.”31 The report disclosed the use of questionable means to strengthen each company’s respective dominance in web searches, smartphone sales, social networks, and online retail.32 The subcommittee also highlighted the failure of the federal government to provide comprehensive regulations and “protect the American people from abuses of monopoly power.”33
Congressional investigators levied different accusations at each of the four companies.34 Facebook is accused of deliberately getting rid of competition through acquisitions and copying other companies’ products.35 Google is accused of going to “great lengths” to ensure the supremacy of its search engine, including paying Apple billions of dollars to be the default search engine on Apple products.36 Apple in turn is accused of monopolistic policies on its App Store, including giving rivals low rankings in search results and removing them from the App Store.37 Lastly, Amazon is accused of mining data from its third-party sellers and using the data to offer competing products at lower prices.38 Apple, Facebook, and Google have responded to the allegations with statements highlighting their popular appeal to customers as the cause of their success, rather than monopolistic practices.39 Amazon has called the proposed antitrust legislation included in the report “flawed.”40
The goal of the proposed legislation from the Democrat-led Judiciary Committee is to ensure antitrust law is applicable to large technology companies.41 Republicans have pushed back against the proposed legislation, with Congressman Ken Buck of Colorado saying “he would rather see targeted antitrust enforcement over onerous and burdensome regulation that kills industry innovation.”42 Additionally, Republicans were disgruntled by the lack of comment on allegations regarding perceived anti-conservative bias among such tech platforms.43
William Kovacic, former chairman of the Federal Trade Commission, said the House Judiciary Committee’s antitrust report “has the potential to be the most influential study of its kind since the 1970s.”44 He added, “it could lead to really big changes, but any changes would come slowly.”45 The new legislation is expected to be introduced within the first six months of the next Congressional session.46
[Kurt] On Wednesday, October 7th, the Supreme Court heard oral arguments in a landmark copyright case between tech giants Oracle and Google.47 During oral arguments, Oracle alleged that Google copied over 11,000 lines of code from Oracle’s application programming interfaces, also known as APIs, thereby infringing on Oracle’s copyright of the code.48 APIs are prewritten code that define common functions, which makes it easier for a coder to call those same functions to write other, more complex code. Oracle’s APIs are written in Java, and although Java itself is an open-source language and is free to use, Oracle’s APIs require a license.49 Google allegedly copied certain portions of Oracle’s APIs, and included these copied portions in their own APIs.50 Google then used their APIs in its Android smartphone operating system.51
Google claims that these snippets of code amount to basic computer commands, not creative expression, and, therefore, are not copyrightable.52 Oracle disagreed, alleging that “to hold unprotectable the thousands of lines of code Google copied would strip all code of copyright protection.”53 Upon reaching the Federal Circuit in 2014, the appellate court ruled against Google, finding that the code was not barred from being copyrightable simply because it serves a function, and remanded the case to the district court for further proceedings on the issue of whether Google’s use of the APIs constituted fair use.54 Although Google filed a writ of certiorari following that decision, the Supreme Court denied review at that time.55 In 2018, the Federal Circuit again ruled against Google, rejecting Google’s argument that using Oracle’s copyrighted code was fair use.56 Google again filed a writ of certiorari with the Supreme Court, and the Court took on the case for both issues, copyrightability and fair use.57
In oral argument, Google maintained that its use of Oracle’s code constituted fair use, because there was no other way to implement its Android software.58 The Court pushed back on this assertion, with Chief Justice Roberts responding “the only reason there is only one way to do it is because some of Oracle’s product expression was very successful.”59 Justice Sotomayor also asked why Google had used Oracle’s code instead of spending money to write their own, as Apple had done for its iOS.60 Lawyers for Google responded that the code was so basic to interoperability of applications with Android that they had no choice but to include it.61
The Trump Administration has sided with Oracle, with Solicitor General Noel Francisco arguing in an amicus brief to the Supreme Court that Google’s “unauthorized copying harmed the market” for Oracle’s APIs.62 The case has major implications for both copyrightability and fair use for computer code, and Google has called the case “the copyright case of the decade.”63
[Ibrahim] Before we conclude, we would like to extend our congratulations to UC Berkeley Professor Dr. Jennifer Doudna for winning the 2020 Nobel Prize in Chemistry for her work on Crispr-Cas9.64 Crispr is a tool for editing DNA that utilizes an enzyme, Cas9, to make very precise edits to the DNA of any organism.65 According to the New York Times, Crispr-Cas9 is used in laboratories around the world and holds promise for the future repair of life-threatening mutations.66 Dr. Doudna and her partner, Dr. Emmanuelle Charpentier, are only the sixth and seventh women in history to win the Nobel Prize in Chemistry, and the first women-only team to be awarded the prize.67
[Kurt] Thank you for listening! The BTLJ Podcast is brought to you by Podcast Editors Andy Zachrich and Haley Broughton. Today’s episode was written by Ibrahim Hinds and Kurt Fredickson, and was produced by Ximena Velazquez-Arenas. Our Executive Producer is BTLJ Senior Online Content Editor Allan Holder. BTLJ’s Editor-in-Chief is Emma Lee.
[Ibrahim] We are committed to bringing you interesting news at the intersection of technology and the law. If you enjoyed our podcast, please support us by subscribing and rating us on Apple Podcasts, Spotify, or wherever you listen to your podcasts.
[Kurt] If you have any questions, comments, or suggestions, write us at btljpodcast@gmail.com.
[Ibrahim] The information presented here does not constitute legal advice and is only up-to-date as of Friday, October 9th. This podcast is intended for academic and entertainment purposes only.