Internet Law & Taxes [5]
Judge Dismisses SearchKing's Lawsuit Against Google
U.S. District Court Judge Vicki Miles-LaGrange on Tuesday granted Google's motion to dismiss a suit that alleged the company manipulated search results in its powerful Web index and denied a motion for a preliminary injunction brought by SearchKing, who claimed Google unfairly removed links to its site and those of its partners from the index, causing financial losses. The judge dismissed the case on the grounds that Google's formula for calculating the popularity of a Web page, or "PageRank," constitutes opinions protected by the First Amendment. "PageRanks are opinions--opinions of the significance of particular Web sites as they correspond to a search query," according to the decision filed in the U.S Western District Court of Oklahoma. "The court simply finds there is no conceivable way to prove that the relative significance assigned to a given Web site is false," the decision said. "Accordingly, the court concludes Google's PageRanks are entitled to full constitutional protection." [Full story: Judge dismisses suit against Google - CNET News]
EU Sales Tax Headache Looms for US E-Tailers on July 1
On July 1, new European Union regulations regarding the Value Added Tax (VAT) are set to take effect. Analysts and VAT experts say the new measure will have an impact on all U.S.-based businesses that provide digitally downloaded products and services to consumers in the EU. And that includes companies that offer things like Web-hosting, ASP services, sales of downloadable software and upgrades, the sale of electronic books, streaming music, digital movies, computer games and even distance-learning services. Suppliers outside the EU will have to charge the VAT rate (a levy that is something akin to a sales tax) in the EU country where the consumer resides. PricewaterhouseCoopers has set up an informational EBusiness Toolkit Web site to help American and other non-EU e-commerce and ASP operators gain more little understanding about the issues involved. The new law means that companies based in the United States will in effect be forced to raise prices for European buyers - and more than just a little. The VAT rates vary widely in the European Union. They vary from 15 percent in Luxembourg to as high as 25 percent in Denmark and Sweden - which is much higher than the 5 to 8 percent sales tax that American consumers pay. Currently only EU businesses in the 15 member countries (with a further 10 to join the EU by May 1, 2004) have to charge VAT, according to Fay. But from July 1, all businesses will have to comply with this new ruling. Suppliers outside the EU will have to charge the VAT rate in the EU country where the consumer resides. These rules only apply to downloaded digital content supplied by non-EU suppliers to consumers based in the EU. It does not apply to hard goods ordered from non-EU suppliers which are delivered by traditional means. Digital B2B sales over the Net are excluded as these are taxed for VAT on what is called a reverse charge basis. In other words the EU-based business customer self assesses the VAT liability in its VAT returns. The U.S. based supplier will not therefore have to register or charge VAT in respect of business to business sales. [Full story: EU VAT: a New Tax Headache for E-Commerce - Ecommerce News]
eBay Faces Serious Patent Infringement Lawsuit
Trial is scheduled for next month in a complicated patent infringement lawsuit filed against eBay, according to the auction giant's annual 10-K report filed with the Securities and Exchange Commission. And the stakes are high. eBay says in its filing that "if the plaintiff were to prevail on any of its claims, we might be forced to pay significant damages and licensing fees, modify our business practices or even be enjoined from conducting a significant part of our U.S. business." The suit was filed by Great Falls, Va.-based MercExchange LLC in September, 2001, but the patents involved date back to the mid 1990s, when MercExchange founder Tom Woolston applied for patents covering methods of creating and searching online marketplaces and auctions. That was about five months before eBay founder Pierre Omidyar launched the eBay Web site. There's a complex history of motions for dismissal in the case, but the upshot, according to the 10-K document, is that claims regarding two patents are scheduled for trial April 22 in the U.S. District Court for the Eastern District of Virginia in Norfolk. eBay's Half.com fixed-price subsidiary is also a defendant in the case.
California Moves Closer to Taxing Internet Sales
California this week took a step closer to collecting tax on sales of consumer goods over the Internet -- a move rejected by its governor in better budgetary times. A tax committee of California's Senate on Wednesday approved two bills that would clear the way for the state to collect sales tax on goods sold by out-of-state vendors to its residents via the Web, a move that could help it recoup an estimated $1.75 billion in lost annual tax revenue. The first Internet tax bill would require California to join a group of 35 states and the District of Columbia, working to help states tax remote sellers, including those that operate online and via mail-order. A second pending tax bill would require retailers with "bricks and mortar" locations in California to collect state sales tax on Internet transactions with California customers through their online subsidiaries and partners. California residents are currently required to report and pay such sales taxes, although few do.
F5 Awarded Cookie Persistence Technology Patent
F5 Networks Inc., today announced that it has been awarded a patent for its Cookie Persistence technology. F5’s patented Cookie Persistence technology uses an HTTP cookie stored on the customer’s computer to allow the customer to reconnect to the same server previously visited at a Web site. This is important, for example, where a customer adds items to a shopping cart at a Web site, then leaves the site before completing the transaction. When the customer returns, Cookie Persistence allows a traffic management device to direct the customer to the server that has stored the customer’s shopping cart information, allowing the customer to complete the transaction. Without Cookie Persistence, the traffic management device could direct the customer’s request to a different server, which may not know about the customer and his shopping cart status. F5 has already filed patent infringement lawsuits against a number of companies.