Developer Claims Patent Troll Lodsys Demanded To Be Paid Via Swedish Bank To Avoid Taxes

from the no-that's-not-scammy-at-all... dept

In the past few months, we wrote about how patent troll Lodsys sued app developer Todd Moore because he called Lodsys a "patent troll." Stunningly, Lodsys' lawyer more or less admitted this to Moore's lawyer, and that allowed Moore to hit Lodsys with an anti-SLAPP motion for trying to stifle free speech. Lodsys quickly ran away, which happens semi-frequently. If you don't recall, Lodsys, which got some patents from Intellectual Ventures (though it's unclear if IV still gets a cut of any proceeds), likes to claim that a very large percentage of mobile apps infringe on its patents, and has spent the past few years sending around demand letters to shake down app developers.

However, at a lunchtime talk in DC recently, Todd Moore spoke about the legal battle with Lodsys, and apparently added a fascinating tidbit that I had not seen anywhere before. As reported by Rob Pegoraro, who was in attendance, Lodsys apparently demanded Moore pay up to a Swedish bank:

Moore noted the fundamental asymmetry of patent trolling, saying he could only fight because he had pro bono representation: "Most people who can't get a free lawyer like me will settle."

He also described some blunt bargaining by Lodsys--"how much will you give us so we go away?"--with the funds to be deposited in a Swedish bank account to avoid U.S. taxes.

So, not only is Lodsys up to some fairly questionable practices concerning demanding payment over a highly questionable patent -- and sometimes going after people for exercising their free speech rights -- according to Moore's statements at this event, the company may also be trying to dodge US taxes to boot. It makes you hope that perhaps Lodsys is on the list of 25 companies that the FTC plans to investigate in detail, to understand how they operate.

Filed Under: apps, patent trolls, patents, taxes, todd moore
Companies: lodsys

VP Joe Biden Believes There's 'No Legal Reason' The Government Can't Slap A Sin Tax On 'Violent Media'

from the brain-disengaged,-all-power-rerouted-to-mouth dept

I'm not sure where vice president Joe Biden is getting his information, but he seems rather confident that a tax can be levied against "violent media." He may want to check with the Supreme Court, which has ruled against regulating violent video games and found taxing certain varieties of speech differently to be a violation of the First Amendment.

Possibly Biden just got carried away with the jovial spirit of censorship pervading the post-Sandy Hook political climate. Or maybe he was just in an overly-agreeable mood and started making affirmative statements without considering what he was saying.

Or maybe he was just "playing to the crowd," which was entirely comprised of reps for various religious/community groups.

Those present for the Monday evening meeting included Franklin Graham, son of the evangelist Billy Graham and CEO of the Billy Graham Evangelistic Association, and Barrett Duke, the vice president of the Ethics & Religious Liberty Commission, the Southern Baptist Convention’s public policy arm.

The meeting also included Bruce Reed, Biden’s chief of staff, and Melissa Rogers, the director of the White House Office of Faith-Based and Neighborhood Partnerships, according to people who attended.

This is not to say that all members (or even all representatives) of religious communities are censorious or prone to pushing their subjective morality on others. There are several exceptions. Franklin Graham, however, isn't one of the exceptions.

Graham, two people in the meeting said, told Biden the government should consider taxing media companies that broadcast violent images and produce violent video games.

He floated the idea that media and entertainment that portray violence should be subject to a special tax, with the proceeds going to help victims and their families," said Rabbi Julie Schonfeld, the executive vice president of the Rabbinical Assembly.

Let's stop here for a moment and take a look at this proposal, possibly in the way that might befit a nation's Vice President.

First off, the idea is bad and Graham should feel bad. As was mentioned above, applying additional tax to certain forms of speech is a clear violation of free speech rights. The government would be applying this tax to whatever it arbitrarily deemed "violent" enough to qualify for the "sin tax." (This is really what this amounts to -- a tax on certain speech and, indirectly, certain consumer behavior.)

Secondly, the direct flow of tax revenue from "violent media" to "victims and their families" makes an implicit connection between the two principals. This links the two in the government's eyes and in the public's eyes. This also handily allows the government to dodge the fact that there is very little, if any, explicit connection between "violent media" and violence. In essence, this presumes guilt on violent media creators and punishes them for exceeding some arbitrarily acceptable "violence" threshold.

Then there's perhaps the most troubling aspect: who decides what amount of violence is non-taxable and where does that line get crossed? If it's a PG-13 film, does it go untaxed? Does any M-rated game immediately have the tax applied? Will game developers and filmmakers explore other paths, like explicit sexuality, simply because violence gets taxed and sex doesn't? Or will they, more likely, adapt to the new chilling effect and produce stunted, sanitized output?

There are other questions to consider as well. With the consumers footing the bill for violent movies and games, will this price hike affect purchases by attaching some sort of stigma to the products themselves? Would the government label these items with something like: "2% of this purchase goes to victims of violence," thus making consumers feel complicit in violent criminal activity simply by purchasing the media?

[Bonus: will the MPAA be involved? It is one of Biden's buddies and its rating system is built on one of the most bizarrely abitrary set of 'standards' in the entertainment industry.]

These are just a few aspects that should be considered before anyone even brings the subject up, much less offers Vice Presidential-backing for the idea. But Biden seems almost charmingly naive in his response:

Biden told Graham that there was “no restriction on the ability to do that, there’s no legal reason why they couldn’t” tax violent images, Clark added.

I'm guessing at this point someone has gotten word to Biden that there's actually at least one legal reason the government can't tax "violent images," because there has been no further word from either proponent of this terrible idea.

Graham’s representatives did not respond to requests for comment. Biden’s office also did not respond to requests to comment about the meeting.

Maybe Biden felt this conversation would never leave the room and therefore felt comfortable making ridiculous claims. He certainly appears to have tried to chill a little free speech himself.

Five people who attended the 2½-hour meeting told POLITICO that Biden made a specific plea to those present to keep his words off the record from reporters.

“He basically just said in general that these stakeholder meetings that if you put words into the vice president’s mouth it sometimes comes out wrong and gets misquoted,” said Shantha Alonso, the director of the poverty program at the National Council of Churches.

Well, that's a nice out to have. I guess we'll see if the "I was misquoted/comment was off the record" excuse gets run up the flagpole sometime soon. If it doesn't, we might be safe in assuming that, no matter what conclusions the CDC reaches in its study of violence and violent media, Biden and like-minded supporters will be moving forward with their reinterpretations of the First Amendment.

(h/t to Techdirt reader Colin for sending this our way. Not sure which Colin it is as multiple Colins come up in the search, but he knows who he is and can certainly take credit for the tip in the comment section.)

Filed Under: censorship, first amendment, joe biden, taxes, video games, violence, violent media, violent video games

Washington State Apparently Taxes Clubs For People Saying On Yelp That They Danced

from the tax-tax-revolution dept

Dancing, what could be more controversial? Whether it's arresting NYC subway travelers for doing the charleston, or body slamming anyone dancing silently at a memorial to freedom, there appears to be something our government dislikes about musically-induced gyrations. With that in mind, it's with a total lack of surprise that I report that the state of Washington is attempting to make up the tax revenue they forgave Microsoft by finding any clubs in Seattle that offer patrons an "opportunity to dance" and taxing the testicles off of them. It all began, apparently, when state lawmakers revised their software royalty tax because of Microsoft.

In April 2010, Washington State’s Legislature changed the definition of its software royalty tax and effectively granted amnesty to Microsoft, helping the company lock up $1.51 billion in savings from its thirteen-year Nevada tax dodge - and more than $100 million annually each year into the future.

Well, it wouldn't do for the state to simply have less tax revenue, so to make that amount up they decided to shake down Seattle clubs with a relatively ancient tax on "opportunities to dance" and demanding back taxes from tons of clubs. Just to throw out some numbers, we're talking about tens and even hundreds of thousands of dollars owed per club. Moreover, this tax was actually never intended to be applied to night clubs, ballrooms, or bars. It was originally meant for clubs that partook in some ancient ritual called "jazzercise". Now it's being selectively reinterpreted to tax these clubs, even if their patrons don't dance at all.

It works like this: If the state believes that you give your patrons the opportunity to dance, then you pay the tax even when people don’t dance. That’s according to Mike Gowrylow, with the Department of Revenue. Gowrylow: “You could have somebody go into a nightclub, or a bar, or tavern, and they pay cover charges. Unless you followed every person around, you wouldn’t know if they actually danced or not, so the only simple way we could have of defining this is if you give them the opportunity to dance, then the tax applies.”

This has led to a sadly hysterical practice by club owners that involves strategically placing club furniture throughout their floors as a sort of obstacle course to prevent dancing. No, seriously, that is actually happening.

That said, while government could win championships in evil, they're not real big on doing actual work, so you'd imagine it would be quite difficult for Department of Revenue employees to go to different clubs and bars to see if the obstacle courses are obstacle-y enough to warrant no taxation. As it turns out, they don't even bother. Instead, they just troll the internet to see if anyone mentions any dancing at these places. Seriously.

Gowrylow says auditors search the Internet to find out whether people dance at specific clubs. One clubowner reports an auditor told him: “You have the opportunity to dance, and we verified it by 8 or 10 different references on Yelp.”

Think it can't get any stupider? Wrong. One club offers this.

“My auditor… came in with an obituary of a girl who committed suicide,” says another club owner. “When I argued that we aren’t primarily a dance club—we have ‘No Dancing’ signs up everywhere—she flashed this obit that said the girl liked to dance at [our club]. The auditor said, ‘I know this is ridiculous, but I have to do this.’”

Yay, bureaucracy. To pay these thousands-of-dollars fines, many of the clubs in Seattle are asking for donations, noting that, if something in the assessments doesn't change, their businesses may not survive. I know a decent-sized software company that should probably be donating right about now.

Filed Under: dancing, social media, taxes, washington

Intuit Continues To Make Sure Filing Taxes Is Complicated

from the getting-intuit dept

Three years back, Mike wrote a piece about how Intuit, maker of TurboTax software, was actively lobbying against a system that would allow for a simple, quick way of filing income taxes (a way that might possibly mean fewer people need to buy TurboTax). Basically, the government could give you pre-filled out forms with all the info it received from your employer and you could just review it, click okay, and be done with your taxes. Intuit's explanation for fighting this ranged from lying by saying taxpayers already had access to that functionality (they don't) and misleading when they said it was a conflict of interest for the government to be the tax preparer and collector (the government wouldn't be doing any actual preparation). Now, as we approach the income tax deadline in the United States, Intuit has changed its tune. That doesn't mean they've stopped lobbying against this system, which has been backed by presidents from Reagan to Obama. Rather, their excuses have simply changed to be at once even more misleading and simultaneously more honest.

Let's take the first excuse, for instance.

Intuit argues it might cost some taxpayers more money.

Well, thank science that we have disinterested parties like Intuit looking out for our tax-paying well-being. The system would cost more money? Obviously the government is trying to force more taxes out of hard-working 'Mericans! That would be the conclusion you could reach if the proposed return-free filing program wasn't entirely optional. Instead, Intuit comes off as merely wishing to keep choices away from Americans. As for their second reason:

Such changes would hurt its business.

Boom, honesty. Requesting tax-paying options not be given to American citizens because it would hurt a company's bottom line is an interesting argument to make. By interesting, of course, I mean laughably silly. What's not silly is that for the past five years, the $11.5 million Intuit has paid in lobbying efforts has resulted in the selling out of the American taxpayer. Reports suggest that enabling a return-free system would save taxpayers up to $2 billion (with a "b") and over two hundred million hours in preparation time.

But, hey, that apparently won't stop the company and a couple of key allies from fanning the flames of anti-government conservatives to make sure it rakes in billions (also with a "b"). Intuit has decried the simple filing solution to be "big government", despite the conservative argument generally looking to make the tax system more simple. Backing them, unbelievably, is tax activist Grover Norquist.

Can someone please tell me why the hell Grover is fighting simpler taxes?

Filed Under: lobbying, paying taxes, taxes
Companies: intuit

One Step Closer To Sales Taxes On All Internet Purchases

from the is-that-really-necessary? dept

On Friday, Congress came one step closer to imposing a federal "internet sales tax" on any internet purchases by agreeing to amendment that more or less indicates strong support for a more comprehensive internet sales tax down the road. This kind of tax has been pushed for years mainly by two key constituents: (1) big box offline retailers who think that the online guys are only beating them because they don't have to charge a sales tax for out of state purchases (2) local state governments who think they're being ripped off by not being able to collect such taxes. There are still some hurdles in the way, but it's becoming clear that this kind of tax is inevitable. The amendment passed 75 to 24, so it's got plenty of support. Max Baucus, who heads the Senate Finance Committee which could kill such a bill if it had less support, has already noted that his state, Montana, has no sales tax at all, and he's a bit ticked off that Montana residents may need to start paying sales tax online. Still, as the article above notes, Baucus's ability to block the bill via the Finance Committee is limited due to the size of the support among other Senators. I've yet to see a compelling argument for why such a tax makes sense -- other than random state governments insisting they need the money -- but at this point it seems almost inevitable that it's going to happen.

Filed Under: internet, retail, shopping, taxes

Austrian Rights Holder Group Wants To Hit Cloud Services With A 'You Must Be A Pirate' Tax

from the cloudy-with-a-chance-of-rent-seeking dept

Another "YOU ARE ALL PIRATES" levy is being proposed by Austrian rights holders group Autoren. In addition to the fees already paid by consumers on blank CDs and DVDs, IG Autoren is pushing even further. And it's not just interested in physical media.

Consumers in Austria already pay levies on blank CDs and DVDs. Rights holders have been advocating to expand these kinds of fees to hard drives and other forms of storage media as well, and apparently aren’t just thinking about local storage. In its newspaper, IG Autoren wrote:

“We not only want a hard disc levy, we also want a levy for the usage of the cloud.”

Hardware makers have pushed back, calling these proposed levies what they really are: double dipping. Consumers already pay the levy on blank media and now, Autoren wants to tax the computer, the hard drive and the cloud it connects to. With the dropoff in sales of blank media, IG Autoren's got to make up the income somewhere, right? This is what passes for "fairness" in the eyes of rights holders. If one form of media dies out, along with its associated fees, it must be replaced with another. Rather than face the fact that a business model that predicates itself on the assumption that piracy is the main reason people purchase CDs, DVDs, hard drives and cloud storage is a thoroughly flawed model, IG Autoren would rather push for additional levies -- all in the name of the artists, of course.

One would think that if levying taxes on storage was such a money maker, artists would be better off selling blank CDs at their merch tables if they could collect the levy directly, rather than through a third party. In fact, for those further down on the sales chart, it just might be, considering the "trickle down" effect continues to rain dollars on the most successful artists while leaving the other 95% with mere pennies.

Not that IG Autoren is interested in approaching this logically. To defend its rent-seeking, it points to Germany, the country with some of the most screwed up concessions to rights holders' demands.

Rights holders on the other hand point to Germany, where levies are already in effect. German consumers currently pay €13.65 ($17.66) for every PC and between €7 and €9 for external hard drives. However, there is no fee for cloud storage services in Germany.

The European Commission is currently considering reforms to copyright law to better apply it to the digital age. IG Autoren apparently believes means this means it should be able to apply its levies, ones that began back in the analog age of cassettes, to cloud services and any other technology that could conceivably hold an mp3. And it's not just IG Autoren. As reported back in October, a coalition of rights holders sent a submission stating that they were "entitled" to remuneration for personal copies. Fortunately, the commission's paper pointed out that cloud services actually reduced the number of copies made, making a private copy levy "less appropriate."

If the past is any indication, these rights holders will likely be granted a levy on hard drives and other storage devices, but cloud services may be a tougher battle. Considering many services offer limited free accounts and are likely unwilling to foot the bill for a €7-9 levy, this means these services won't be available (at least not the free option) in countries collecting this fee. The end result of this rent-seeking is fewer options for the public simply because a handful of rights holding organizations feel they're "owed" a cut from anything that can conceivably hold copied files.

Filed Under: austria, cloud computing, copying, copyright, levies, taxes

Booming Nigeria To Adopt One Of The West's Dying Ideas: 'You Must Be A Criminal' Copyright Levies

from the don't-follow-us,-we're-lost dept

Recently, we noted that copyright levies in Europe are looking more and more anachronistic for the high-tech world. It seems that Nigeria has not noticed this, since Afro-IP points out to us that the Copyright (Levy of Materials) Order 2012 has been approved there, which will bring them in for a very wide range of goods:

The Director-General who disclosed this in Abuja, indicated that the materials regulated by the levy imposed by the new Copyright Order include storage media like Audio Cassettes, Mini Discs, CDs, DVDs, Blu-ray, SD Memory Cards, Video Cassettes, USB Flash drives, I-Pods and Photocopying Paper. Others are equipment and devices like Photocopying Machines, MP3 Players, Digital Juke box, Mobile Phones, CD recorders, DVD Recorders, Blu Ray Recorders, Computer External Hard Drives, Analogue Audio Recorders, Analogue Video Recorders, Personal Computers, Printing Plates, Printers/Printing Machines, Radio/TV Sets enabling recording, Camcorders and Decoders/Signal Receivers.

The money is going to the usual places:

"The Commission is expected to disburse the funds to beneficiaries who are essentially approved collective management organisations (CMOs) subject to retaining 10 per cent of the collected levy for administrative purposes of agencies that would be involved in the implementation of the scheme", he stated, adding, "The Order also permits the Commission to retain 20 per cent of the fund for anti-piracy purposes; and 10 per cent for promotion of creativity", he stated.

It's particularly sad to see that exactly double the amount will be spent on "anti-piracy purposes" compared to the "promotion of creativity." That not only seems precisely the wrong way round but is regrettable in a country where it was piracy that helped build the hugely-successful local film industry.

It's obviously great to see African countries like Nigeria develop as an increasingly important player in the world of technology, but it's depressing to see its politicians repeating the mistakes of the West in this area. Imposing retrogressive levies do little to help local artists, but are likely to hinder the development of local hardware industries because of the extra costs they impose on purchasers.

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Filed Under: copyright levies, nigeria, piracy, taxes

Facebook's Lower Stock Price Means Saverin Doubled Tax Bill By Leaving The Country

from the oops dept

Back when Facebook first rolled out its IPO in the same smooth and easy fashion as an Olympic hurdler racing with his testicles twisted like a Navy Pier pretzel, Eduardo Saverin, Facebook co-founder, entered the crosshairs of some United States congressmen looking to make some noise. See, Eduardo decided that taxes suck and he wanted to incur as little of said suckiness as possible, so he renounced his American citizenship and declared his love for Singapore. This, according to Chuck Schumer and Bob Casey, made him evil personified.

Exhibit 1: Artist's rendering based upon Chuck Schumer's description

The argument was that Saverin had allowed this country to help make him rich and now, in an evil move that was completely legal, he was going to evade paying the full taxes of an American citizen by no longer being one. To combat this unholy act, Schumer and Casey unveiled the oh-so-cleverly named EX-PATRIOT Act, which would levy heavy taxes on Saverin and anyone else who thought they could escape the virtous clutches of the American tax system.

"This is a great American success story gone horribly wrong," Schumer told reporters Thursday. "Eduardo Saverin wants to defriend the United States of America just to avoid paying taxes. We aren't going to let him get away with it."

But, as fate would have it, Facebook's stock price dropped faster than a Righthaven lawsuit. And the result, according to Forbes, may be that Saverin paid more in taxation than he would have had he stayed in The States.

A couple of things got missed in the furore. The first was that he had to pay tax on his Facebook stock as if he sold it on the day of his citizenship renunciation. The value then was some $2.4 billion, leading to a $365 million tax bill. That tax bill is fixed of course: now that he’s no longer a citizen he doesn’t get any tax breaks or credits on losses he might make. Which of course he has done. Since he crystallised that tax bill his stock (assuming he’s still holding it and he would have been until just now because of the lock in around the IPO) has halved in value to about $1.2 billion. But he still owes that $365 million.

So, at least so far, the net effect of his renunciation has been to double his tax bill, not reduce it. Oh, and if he hasn’t paid the tax as yet then he has to pay interest to the IRS on it.

And there we have it. Schumer and Casey drafted legislation, which didn't pass, to combat a guy who did something legal because they insisted it was unfair that he escape full taxation by renouncing his citizenship. It turns out that Saverin's renunciation caused him to be overtaxed by a rather substantial rate. Any takers on whether Schumer and Casey would be open to Saverin claiming relief from this overtaxation?

Filed Under: chuck schumer, eduardo saverin, stock, taxes
Companies: facebook

Politician All For Transparency Until It Might Make Him Look Bad In A Campaign Commercial

from the hello-streisand dept

Apparently, California broadcasts many key state legislature hearings, just like many legislative bodies these days. However, right before a hearing on some key ballot initiatives, apparently California Senate President pro tem Darrell Steinberg ordered that the feed be turned off for the meeting. Critics noted that Steinberg was vigorously supporting one of the ballot measures, which involves sales and income tax issues. After complaining about cutting off the feed, Steinberg and his staff basically admitted that they did it because they don't want footage to be used against them in campaign commercials by opponents:

Steinberg spokesman, Rhys Williams justified the disruption of CalChannel service this way: 'It was inappropriate to provide legislative resources to promote the ballot measure campaigns of either side, and in particular to make those public-funded resources easily available for exploitation in political TV commercials.'"

In other words, because the public debate on these issues might lead others to make campaign commercials, it should not be transparent or shared at all.

The committee's own chairperson, Lois Wolk, was apparently horrified that the video was cut off, noting that "she had begun the hearing with a statement expressing hope that it would help voters reach a reasoned decision on the four measures." Oops.

Steinberg, to his credit has now apologized and admitted that: "It wasn't a good reason... When you mess up, you mess up. I'm sorry and it won't happen again." At least he recognizes that, but the initial move was still pretty blatant and raises significant questions about his motivations in cutting off this most basic form of governmental transparency.

Filed Under: california, darrell steinberg, live feed, politics, taxes, transparency

California Bet 2% Of Its Budget On Facebook's Stock Price Remaining High

from the oops dept

California, a state that has had budget problems for years, apparently bet approximately 2% of its budget on the idea that Facebook's stock would remain at or above $35 and that a bunch of insiders would sell, racking up tax revenue for the state. However, with the stock continuing to drop, the state's fiscal analyst is now warning that perhaps over a billion dollars in expected tax revenue may be at risk. The state's budget is $91.3 billion, and that was built on the assumption that a successful Facebook IPO and insider sales (at an average price of $35) would bring in $1.9 billion. Of course, the stock has been in decline since its IPO, dropping below $20, hence the concern.

What I love about the linked article, however, is that the Bloomberg reporter sought to get a comment from Facebook over this (the company declined). What did he think Facebook would have to say? That it would try harder? That it felt bad that the state overestimated its stock price just about as much as the company itself did? I would imagine that budget overruns by the state due to Facebook's falling stock are pretty far down the list of priorities for Mark Zuckerberg these days...

Filed Under: california, stock, taxes
Companies: facebook