The Secrets of Room 641A
“They might as well come in and lock my doors… shut me down,” says Patti McKee, owner of a thrift store in Spartanburg, S.C. “Everything in here is made in China!”
Your yard sale? That’s at risk too. And the stuff you sell on Craigslist — or if you’re still old school, the newspaper classifieds. Our investigation into the multifront War on You continues this morning, kicking off another week of market uncertainty… prior to the election.
The Supreme Court got back to work in October after its customary three-month break. The cases making headlines so far are hot-button issues like affirmative action and gay marriage. But two cases — little covered — could have a much bigger impact on your day-to-day life.
One case — which the justices will hear a week from today — affects your right to resell stuff you already own.
No, really, it does.
For more than a century, the Supreme Court has recognized something called “first-sale doctrine.” That means you can resell copyright material that you bought without compensating the copyright holder. Or it did, until Supap Kirtsaeng came along.
Kirtsaeng came from Thailand to the United States in 1997 to study at Cornell. He was taken aback by the price of textbooks, knowing they were much cheaper in his native land. So he had his relatives buy them back home and ship them to him.
Then he realized this could be a very profitable line of work: Family members bought books in bulk and shipped them to him, and he sold them on eBay — hauling in more than $1.2 million, according to court documents.
John Wiley & Sons sued Kirtsaeng for copyright infringement… and so far has prevailed. Last year. a federal appeals court held that anything made overseas is not subject to the first-sale doctrine — only American-made products or “copies manufactured domestically.”
[Full disclosure: Wiley has published several books by Agora Financial editors — most recently Addison’s The Little Book of the Shrinking Dollarand Chris Mayer’s World Right Side Up — but the two firms are independent of one another.]
To call the ruling’s potential implication “wide-ranging” is an understatement.
“This is a particularly important decision for the likes of eBay and Craigslist,” writes MarketWatch columnist Jennifer Waters, one of the few mainstream reporters on the case, “whose very business platform relies on the secondary marketplace. If sellers had to get permission to peddle their wares on the sites, they likely wouldn’t do it.”
And then there’s the matter of used auto sales: About 40% of “American” cars have technology and parts made elsewhere.
True, in the event the Supreme Court rules against Kirtsaeng, Congress will likely write legislation to keep the typical Craigslist or eBay transaction on the up and up.
The ruling’s Pandora’s box: Imagine a “resale transaction tax” to be dumped into a fund that compensates copyright holders. How about new regulations on transactions of more than, say, $5,000. The possibilities are endless. Can you feel the warmth generated from Congress as they wring their hands with anticipation?
Another Supreme Court case of the 2012-13 session has already been decided. It affects you directly… and as far as we can tell, you have no recourse.
Flashback: In the 1970s, after the Church Committee found the government had been spying on everyone from Birchers to Black Panthers, Congress passed laws forbidding eavesdropping without a warrant… and punishing companies like AT&T if they cooperated with any illegal eavesdropping. Each violation was punishable by up to five years in prison and a $10,000 fine.
Fast-forward to 2001, when Sept. 11 “changed everything.” The Bush White House authorized all manner of illegal wiretaps, which was exposed by The New York Times in late 2005. And the National Security Agency recruited the telecom companies to assist.
In 2007, a former AT&T technician named Mark Klein described a special room — Room 641A — in an office tower at 611 Folsom St. in San Francisco. Its sole purpose: vacuuming up phone calls, emails and web searches for the NSA.
“I flipped out,” said Klein when he discovered what was going on. “They’re copying the whole Internet. There’s no selection going on here. Maybe they select out later, but at the point of handoff to the government, they get everything.”
In 2008, Congress took an unprecedented step — granting the telecom companies retroactive immunity from any civil or criminal liability for its lawbreaking. We were tracking the bill at the time.
“Immunity doesn’t enhance freedom; it rewards lawlessness,” Fox legal analyst Andrew Napolitano objected. “If the government and the telecoms had obeyed the law, there would be no need for immunity. Show me the legal justification for illegal spying on Americans, and I’ll show you a government that just doesn’t care about the Constitution.”
Groups like the Electronic Frontier Foundation (EFF) immediately went to court, saying the law “robs innocent telecom customers of their rights without due process of law.”
The lower courts brazenly upheld the law. Two weeks ago, the Supreme Court refused to review those decisions.
“We’re disappointed,” said the EFF’s legal director Cindy Cohn, “since it lets the telecommunications companies off the hook for betraying their customers’ trust and violating the law by handing their communications and communications records to the NSA without a warrant.”
The NSA has wasted no time pressing on the gas following this new green light. The security agency is proceeding apace with plans to open the innocuously named Utah Data Center next year.
“Flowing through its servers and routers and stored in near-bottomless databases,” author James Bamford wrote last spring in Wired, “will be all forms of communication, including the complete contents of private emails, cellphone calls and Google searches, as well as all sorts of personal data trails — parking receipts, travel itineraries, bookstore purchases and other digital ‘pocket litter.’”