Law Commons^™

Mtic (Carousel) Fraud: Twelve Ways Forward; Two Ways 'Preferred' - Has The Technology-Based Administrative Solution Been Rejected?, Richard Thompson Ainsworth

Faculty Scholarship

In a May 31, 2006 Communication to the Council, the European Parliament, and the European Economic and Social Committee, the European Commission indicated a need to develop a co-ordinated strategy to improve the fight against fiscal fraud [COM(2006) 254 final]. Although the Communication considers fiscal fraud broadly (VAT, excise duties and direct taxes) the most pressing need seems to be for a VAT strategy that will effectively deal with MTIC (Missing Trader Intra-Community) or carousel fraud. To this end the Commission hosted a conference: Fiscal Fraud - Tackling VAT Fraud: Possible Ways Forward. The March 29, 2007 conference was constructed …

Zappers: Tax Fraud, Technology And Terrorist Funding, Richard Thompson Ainsworth

Faculty Scholarship

"Zappers," or automated sales suppression devices, have brought unheard of efficiencies and economies of scale to a very simple tax fraud - skimming cash sales at point of sale (POS) terminals (electronic cash registers). Until recently the largest tax fraud case in Connecticut, also the "largest computer driven tax-evasion case in the nation," was a zapper case. Stew Leonard's Dairy in Norwalk Connecticut skimmed $17 million in receipts and hid the cash in St. Martin (a Caribbean island). Talal Chahine and his wife, Elfat El Aouar, owners of the La Shish restaurant chain in Detroit Michigan have the dubious honor …

Technological Due Process, Danielle K. Citron

Faculty Scholarship

Distinct and complementary procedures for adjudications and rulemaking lie at the heart of twentieth-century administrative law. Due process required agencies to provide individuals notice and an opportunity to be heard. Agencies could foreclose policy issues that individuals might otherwise raise in adjudications through public rulemaking. One system allowed focused advocacy; the other featured broad participation. Each procedural regime compensated for the normative limits of the other. Both depended on clear statements of reason.

The dichotomy between these procedural regimes has become outmoded. This century's automated decision-making systems collapse individual adjudications into rulemaking while adhering to the procedural safeguards of neither. …

Uk Car-Flipping: The Vat Fraud Market-Place And Certified Solutions, Richard Thompson Ainsworth

Faculty Scholarship

Missing Trader Intra-Community (MTIC) fraud and its offspring carousel fraud and contra trading fraud are siphoning huge amounts of VAT revenue from the UK Treasury. This fraud is not a function of the goods involved. It is a function of the market-place. Recently another type of market-place dependent VAT fraud has taken hold in the UK - car-flipping.

In some instances the market-place where these frauds festers is a pre-existing or natural market-place, one that grows out of legitimate commercial practices. Fraudsters enter this market-place (so the argument goes) and take advantage of legitimate businesses who unwittingly get caught up …

What's Wrong With The Patent System? Fuzzy Boundaries And The Patent Tax, James Bessen, Michael J. Meurer

Faculty Scholarship

The annual number of patent lawsuits filed in the U.S. has roughly tripled from 1970 to 2004. The number of suits was more or less steady in the 1970s, climbed slowly in the 1980s, and exploded in the 1990s. Why? The usual answers point to (1) the growth of the “new economy” and the concomitant explosion of patenting, (2) the failure of the Patent Office to reject patents on old or obvious inventions, or (3) the rise of the patent troll. There is an element of truth in all these answers, but even collectively they do a poor job explaining …

Imaging The Mind, Minding The Image: An Historical Introduction To Brain Imaging And The Law, Laura Stephens, Shahram Khoshbin

Faculty Scholarship

Since ancient times, people have yearned to attribute human behaviors to a physical source within the head. Recently, neuroimaging technologies have given us the technical ability to look at the living brain, its structures, and some of its functions without the need for invasive procedures. However, the science has a long way to go before these technologies can allow us fully to appreciate the anatomical and physiologic underpinnings of human thoughts, states of mind, motives, will, or behaviors.

In this Article, we use an historical overview to introduce the various new technologies for imaging the brain. Today, the goal of …

An Empirical Look At Software Patents, James Bessen, Robert M. Hunt

Faculty Scholarship

U.S. legal changes have made it easier to obtain patents on inventions that use software. Software patents have grown rapidly and now comprise 15 percent of all patents. They are acquired primarily by large manufacturing firms in industries known for strategic patenting; only 5 percent belong to software publishers. The very large increase in software patent propensity over time is not adequately explained by changes in R&D investments, employment of computer programmers, or productivity growth. The residual increase in patent propensity is consistent with a sizeable rise in the cost effectiveness of software patents during the 1990s. We find evidence …

Biometrics, Certified Software Solutions, And The Japanese Consumption Tax: A Proposal For The Tax Commission, Richard Thompson Ainsworth

Faculty Scholarship

Significant change is anticipated in the Japanese Consumption Tax. The Japanese Tax Commission is recommending that the rate should double, multiple rates should be employed, and the "bookkeeping method" of accounting should be abandoned in favor of the European "invoice method."

The Tax Commission faces a tax policy dilemma. The aging population drives the need for a tax increase (making the Consumption Tax an obvious target for revenue enhancement) at exactly the same time the population is shrinking in overall size, thereby reducing the number of working-consumers who can pay the higher tax.

These are dramatic changes for the Japanese …

Digital Consumption Tax (D-Ct), Richard Thompson Ainsworth

Faculty Scholarship

Modern technology is dramatically changing the way consumption taxes are collected, but it is also changing the way policymakers assess the operation and impact of these taxes. Whether the design is a standard credit-invoice value added tax (VAT) of European design, or a retail sales tax (RST) of American design, or the credit subtraction VAT without invoices type of consumption tax (CT) of Japanese design, technology is having a profound impact.

Government certified transaction software is in place in the United States. The Streamlined Sales Tax offers taxpayers in 18 states the option of having their retail sales tax determined …

Biometrics: Solving The Regressivity Of Vats And Rsts With 'Smart Card' Technology, Richard Thompson Ainsworth

Faculty Scholarship

Biometric identifiers embedded in national identity cards puts a formerly impossible goal of consumption taxation within the grasp of policymakers for the first time. Never before has it been possible to design a broad-based, single rate consumption tax that is truly progressive.

No consumption tax has ever had all three of the critical attributes of a progressive consumption tax: a broad base, a single rate, and measured relief for those in greatest need. Although economists have urged that a broad base and a single rate be pursued over progressivity, most consumption taxes instead seek progressivity at the expense of both …

Carousel Fraud In The Eu: A Digital Vat Solution, Richard Thompson Ainsworth

Faculty Scholarship

Recent reports from the UK's Office for National Statistics estimate (as of May 11, 2006) that Missing Trader Intra-community Fraud (MTIC) may exceed 10 billion pounds this year.

Carousel fraud, a variant of MTIC where the same goods are sold over and over again, exploits the lingering non-certified, non-digital attributes of the EU VAT. The UK believes that carousel fraud cost the Exchequer between 1.12 and 1.9 billion pounds in the 2004-05 financial year. This article proposes that carousel fraud be eliminated in the EU through selective insertion of Digital VAT functionality into the present system. In other words, it …

Minimum Contacts In A Borderless World: Voice Over Internet Protocol And The Coming Implosion Of Personal Jurisdiction Theory, Danielle K. Citron

Faculty Scholarship

Modern personal jurisdiction theory rests on the twin pillars of state sovereignty and due process. A nonresident's "minimum contacts" with a forum state are treated as the equivalent of her territorial presence in the state and hence justify a state's exercise of sovereignty over her. At the same time, the nonresident's "purposeful availment" of opportunities within the state is seen as implying her agreement to that state's jurisdiction in exchange for the protection of its laws. This theory presumes that a nonresident directs voice communications to known places by dialing a telephone number's area code.

Voice over Internet Protocol ("VoIP") …

Chapter 3: Open Source Software: Free Provision Of Complex Public Goods, James Bessen

Faculty Scholarship

Open source software, developed by volunteers, appears counter to the conventional wisdom that private provision of public goods is socially more efficient. But complexity makes a difference. Under standard models, development contracts for specialized software may be difficult to write and ownership rights do not necessarily elicit socially optimal effort. I consider three mechanisms that improve the likelihood that firms can obtain the software they need: pre-packaged software, Application Program Interfaces (APIs) and Free/Open Source software (FOSS). I show that with complex software, some firms will choose to participate in FOSS over both "make or buy" and this increases social …

The Digital Vat (D-Vat), Richard Thompson Ainsworth

Faculty Scholarship

The most sustained U.S. tax policy debate of the past 30 years concerns proposals to replace and/ or supplement the Federal Income Tax with a consumption tax. Public finance economists and legal tax policy scholars challenged and defended the current income tax system on grounds of fairness, efficiency, and simplicity.

This debate over revamping the national taxing scheme has not been argued purely in the academic forum. Concrete legislative proposals have been advanced for a national retail sales tax, a European-style Value Added Tax, as well as a whole host of what David Bradford calls "the two-tiered consumption taxes."

From …

Governing By Negotiation: The Internet Naming System, Tamar Frankel

Faculty Scholarship

This Article is about the governance of the Internet naming system. The subject is fascinating, not simply because the naming system is an important system affecting the Internet, although it is; and not because the Internet is important, although it is. The subject is fascinating because it offers a rare opportunity to examine and learn from the evolution of an incoherent governance structure. The naming system is special in that it is the product of a new technology; it reflects the changes and pressures brought by the new technology, and involves the interests of government and private entities, domestic and …

Patents And The Diffusion Of Technical Information, James Bessen

Faculty Scholarship

Does the disclosure requirement of the patent system encourage the diffusion of inventions? This paper builds a simple model where firms choose between patents and trade secrecy to protect inventions. Diffusion is not necessarily more likely with a patent system nor is the market for technology necessarily greater.

The Software Patent Experiment, Robert M. Hunt, James Bessen

Faculty Scholarship

Over the past two decades, the scope of technologies that can be patented has been expanded to include many items previously thought unsuitable for patenting, for example, computer software. Today, the U.S. Patent and Trademark Office grants 20,000 or more software patents a year. Conventional wisdom holds that extending patent protection to computer programs will stimulate research and development and, thus, increase the rate of innovation. In this article, Bob Hunt and Jim Bessen investigate whether this has, in fact, happened. They describe the spectacular growth in software patenting, who obtains patents, and the relationship between a sharp focus on …

Patent Thickets: Strategic Patenting Of Complex Technologies, James Bessen

Faculty Scholarship

Patent race models assume that an innovator wins the only patent covering a product. But when technologies are complex, this property right is defective: ownership of a product's technology is shared, not exclusive. In that case I show that if patent standards are low, firms build "thickets" of patents, especially incumbent firms in mature industries. When they assert these patents, innovators are forced to share rents under cross-licenses, making R&D incentives sub-optimal. On the other hand, when lead time advantages are significant and patent standards are high, firms pursue strategies of "mutual non-aggression." Then R&D incentives are stronger, even optimal.

The Magic Lantern Revealed: A Report Of The Fbi's New Key Logging Trojan And Analysis Of Its Possible Treatment In A Dynamic Legal Landscape, Woodrow Hartzog

Faculty Scholarship

Magic Lantern presents several difficult legal questions that are left unanswered due to new or non-existent statutes and case law directly pertaining to the unique situation that Magic Lantern creates. ²⁵ The first concern is statutory. It is unclear what laws, if any, will apply when Magic Lantern is put into use.²⁶ The recent terrorist attacks in the United States have brought the need for information as a matter of national security to the forefront. Congress recently passed legislation (i.e. USA PATRIOT Act) ²⁷ that dramatically modifies current surveillance law, thus further complicating the untested waters of a …

Section 1983'S And Laws Clause Run Amok: Civil Rights Attorney's Fees In Cellular Facilities Siting Disputes, Jack M. Beermann, Clive B. Jacques

Faculty Scholarship

In this article, we argue that enforcing the TCA against state and local zoning authorities raises serious legal concerns, especially if such enforcement is via a § 1983 "and laws" action. In particular, we argue that courts should not award attorney's fees under § 1988 to providers who prevail in claims alleging violation of TCA section 704. First, we argue that this is not an appropriate "and laws" claim because the TCA's cell siting provisions, in the main, do not create rights that are enforceable via § 1983 action. Further, in our view Congress did not intend that providers be …

Genetic Testing For Susceptability To Disease From Exposure To Toxic Chemicals: Implications For Public And Worker Health Policies, Michael S. Baram

Faculty Scholarship

The Environmental Genome Program intends to identify "susceptibility genes" that would indicate if a person is more vulnerable to cancer or other disease as a result of exposure to certain chemicals in the workplace, the environment, foods, or other products. Research findings and the capability to test persons for such genes are likely to impugn and challenge health policies and regulatory programs that do not take genetic susceptibility into account when conferring health benefits and restricting chemical exposures. This article focuses on the Occupational Safety and Health Administration (OSHA) and discusses four options available to this agency for protecting genetically …

Symposium: Advances In Biomaterials And Devices, And Their Financing, Michael S. Baram, Ronald A. Cass, Steven Bauer, Joyce Wong, Martin Yarmush, Joshua Tolkoff, Rufus King

Faculty Scholarship

My name is Professor Michael Baram and I direct the Center for Law and Technology here at the law school. Today's meeting is the third annual Technology Law Symposium to be held here, sponsored by the high technology law firm of Testa, Hurwitz & Thibeault, LLP and the Center for Law and Technology.

Our meeting today is focused on an exciting area of research and product development. This area involves the use of conventional as well as new genetically engineered biomaterials in new medical device configurations for implantation and with the purpose of restoring bodily functions, regenerating tissue, bone, cartilage, …

Symposium: Regulatory And Liability Considerations, Michael S. Baram, Ellen Flannery, Patricia Davis, Gary Marchant

Faculty Scholarship

You can tell from remarks by prior speakers that regulatory approvals and liability prevention are of critical importance to progress in biomaterials. Gene therapy trials and the tragic outcomes of some of those trials have raised the specter of government suspension of clinical studies, termination of funding, and potential liability for personal injury under malpractice or products liability doctrines. Regulatory requirements and the terms of research grants and contracts have to be very carefully addressed by organizations testing, developing, making, selling and using biomaterials, biotechnology, and medical devices. However, many regulatory requirements are incomplete, ambiguous and confusing because the agencies …

Symposium: Patent Rights And Licensing, Michael S. Baram, Ashley Stevens, Thomas Meyers, Michael J. Meurer

Faculty Scholarship

This panel will discuss intellectual property - the patent incentive, patentability issues, licensing, and litigation-related matters. It will be moderated by Dr. Ashley Stevens, the Director of the Office of Technology Transfer at Boston University. Ashley has multiple degrees, including a doctorate in physical chemistry from Oxford University. He has worked in the biotech industry for a number of years, mostly with startup companies and academic research organizations such as the Dana Farber Cancer Institute, where he was also Director of Technology Transfer. Ashley was instrumental in the startup and operations of firms such as Biotechnica International, and started his …

Waiting For Technology: Path Dependence As A Random Walk, James Bessen

Faculty Scholarship

The role of historical accident in technology selection has been difficult to measure. This paper develops a quantifiable model for a basic and widely applicable form of path dependence: the random walk. This real options model is applied to the transition in British cotton spinning at the beginning of the century.

In contrast to neoclassical models based on simple net present value calculations, when investment is irreversible, firms may choose to wait rather than to invest in a superior new technology. The magnitude and effect of this option to wait can be calculated. British spinning firms waited significantly before adopting …

Discovery, Learning And Adoption Of New Techniques: Choosing Specialization To Optimize Technical Progress, James Bessen

Faculty Scholarship

Why is it that adopting new technologies takes so long and costs so much? Clearly, firms do not know all the details necessary to implement a complex technology efficiently; learning these details requires extensive search. However, this explanation has a problem: even limited search may be so costly that newly discovered techniques will not be tried. We find that specialization solves this problem. If a complex process is divided into many small components, each searched in parallel, then discoveries are readily tested. Moreover, specialized search can perform surprisingly well even for processes of indefinite complexity. We measure the returns to …

Transgenic Agriculture: Biosafety And International Trade, Michael S. Baram, Calestuous Juma, Sheldon Krimsky, Rufus King

Faculty Scholarship

We stand at the threshold of a new century that will bring novel methods of producing foods, industrial materials, pharmaceuticals, and other products important to society and industry.² Today's session will, therefore, address a subject of great importance: the introduction of genetically modified crops, livestock, micro-organisms, and other substances into agriculture and related fields, made possible by American and foreign corporate biotechnology.

Price Discrimination, Personal Use And Piracy: Copyright Protection Of Digital Works, Michael J. Meurer

Faculty Scholarship

The growth of digital information transmission worries copyright holders who fear the new technology threatens their profits because of greater piracy and widespread sharing of digital works. They have responded with proposals for expanded protection of digital works. Specifically, they seek restrictions on personal use rights regarding digital works provided by the fair use and first sale doctrines. The proposed changes in the allocation of property rights to digital information significantly affect the ability of copyright holders to practice price discrimination. Broader user rights make discrimination more difficult; broader producer rights make discrimination easier. I argue that more price discrimination …

The Laws Of Genetics, Michael S. Baram

Faculty Scholarship

It used to be that high technology meant nuclear physics and missile systems, and presented the threat of physical destruction. Today, "high tech" means biotechnology and electronic communication systems, and the focus has shifted to concerns about more subtle problems like loss of privacy, inability to control personal information, and the discriminations and other adversities that often follow.

Lmo's: Treasure Chest Or Pandora's Box, Michael S. Baram

Faculty Scholarship

Biotechnology is beginning to trans- A form agriculture across the globe. After thousands of years of traditional plant and animal breeding, and centuries of mechanization and chemical application, genetic research has opened a Pandora's box of living modified organisms (LMOs) designed to improve the productivity and efficiency of commercial agriculture. A multitude of transgenic crops and animals is now being introduced into commerce by biotechnology companies, and b nations are puzzling out how to appropriate the benefits and manage the risks.

American biotechnology companies and agencies are the leading proponents of using LMOs. They claim that two decades of costly …