The Canadian Paddy Power Saga Continues

For those of you who haven't read it yet, I suggest reading the first, second, and third posts I made about Paddy Power's behavior towards its Canadian clients.  To summarize, they cancelled their Canadian clients' accounts with little notice (they were still taking bets from Canadians the same day that they announced accounts would be frozen at noon), citing the vague reason of "Canadian law."

Below is a copy of their e-mail message sent to Canadian account holders on February 21, 2011--a week after the initial e-mail they sent.  Notice that they now refer to their "legal advisors" and the "Canadian Criminal Code" after multiple clients criticized them for being vague about what "Canadian law" had been violated.  They still do not mention what section of the Criminal Code has supposedly been breached for the many years during which they accepted Canadian users.

Dear ________,

Based on a recent recommendation from our local legal advisors as a result of issues arising under the Canadian Criminal Code, we have decided to restrict Canadian residents' access to our services. Accordingly, further to our email to you of 14th February, and the 7 days notice provided therein, we have now closed your account with us here at Paddy Power.

Do you still have money in your account?

If you still have a balance on your account, we will of course return this to you. In order to obtain the balance on your account we would appreciate if you would please contact our Customer Service team for assistance so that we can arrange a refund of the balance due. Paddy Power customer service details are set out at the bottom of this email for your convenience.

Do you still have a bet that has not been settled yet?

If you have any outstanding bets that have not yet been settled, we will of course honour these bets. You can check the status of any of your bets that have not yet settled by contacting our Customer Service team.

We appreciate your custom and hope that your experience with paddypower.com was an enjoyable one. If you have any questions about this decision or your account in general please feel free to contact our Customer Service team using the details below.

Best Wishes,

Paddy Power Customer Service Team

A few points should be made about this e-mail.

Firstly, it took seven days from the original e-mail to release the excuse that there are problems under the Canadian Criminal Code related to Paddy Power's provision of services to Canadian users.  This comes after betting forums and blogs were critical of Paddy Power's failure to provide any explanation of what "Canadian law" referred to in their first e-mail was being violated.

Secondly, Paddy Power has still yet to cite, with any specificity, the section of the Criminal Code which they claim has been violated.  There are 849 sections to the Criminal Code by my count.  It would be nice to know which one of those sections Paddy Power claims has been violated.  Perhaps it is s. 365, which prohibits the fraudulent practice of sorcery, or s. 338, which bans cattle theft.

Thirdly, Paddy Power has been a large company for some time and has presumably always had legal advisors.  The Canadian Criminal Code has not made any new offences related to betting to my knowledge for years, other than to change the sentencing guidelines for some offences, while maintaining the same elements for the offence.  Presuming that there have been no changes in the Criminal Code regarding betting, why is it that Paddy Power all of a sudden has a change of heart and declares that what it is doing is unlawful.

The entire nonsensical "Criminal Code" excuse is best addressed by looking at a much simpler explanation: Paddy Power uses GTECH G2 technology for its gaming, and the monopolistic government-run gaming corporations in three provincial jurisdictions within Canada have put pressure on Gtech to bar foreign companies without Canadian licenses from providing services to Canadians, even though they have done so for years without Canada's federal Attorney-General taking any actions against them which would suggest that their activities are unlawful.

Bwin, which uses the same technology as Paddy Power, gave a much simpler explanation for why they took the same Canadian-blocking actions that Paddy Power took:

We regret to inform you that in light of the recent announcements by the British Columbia Lottery Corporation, Loto-Québec and the Atlantic Lottery Corporation regarding the launch of regulated online gaming products in Canada, our Download Casino vendor, GTECH G2, has decided to block Canadian Users from using their software.

Only operators licensed by the Canadian authorities will be permitted to offer online gaming products to Canadian residents.

We regret to inform you that we have to follow this decision and that the block is effective since 24.09.2010 onwards.

As your access to the Download Casino has been terminated by an external legal issue, we are not able to allow you to continue playing.

We regret that as this is due to an alteration within the Law in Canada.

While I don't buy that anything other than provincial laws, which cannot apply to other provinces and should not result in a Canada-wide ban, have been altered of late, at least Bwin was more open and pointed out that it was because their software vendor, GTECH G2, was the decision-maker behind all of this.

Ideally, Canadians won't put up with this monopolistic racket being run by their provincial governments, and will simply go to a third online betting site which doesn't use the same software instead of being strong-armed into giving patronage to the government-run sites.  I believe Betfair might be a suitable alternative for any Canadians who don't like being told that their government-licensed forms of recreation are morally superior to the Austrian (Bwin) or British/Irish (Paddy Power)-licensed forms of recreation.

Paddy Power Clients Beware: You could be living in the next "Restricted Territory"

For those of you who have not read Part 1 and Part 2 of my story about Paddy Power, I will give you a summary: Paddy Power gave its Canadian clients the Valentine's Day gift of an abrupt account freezing, citing the vague reason of "Canadian law" despite having served Canadian customers for years, without citing any section of Canadian law that makes serving Canadians unlawful. Paddy Power also happens to use the same gaming platform that at least three Canadian provinces are just starting to use for their own online gaming.

A user had a conversation with Paddy Power's "Live Help" Team, and asked, among other things, whether Paddy Power would cover the charges of any withdrawal since it was through no fault of the client's that Paddy Power was suddenly forcing the withdrawal. Here are some excerpts from the February 15, 2011 transcript between "Mark S" and the Paddy Power user, including any spelling/grammar mistakes:

Paddy Power User: Ok, and will you waive the wire fee since I'm being forced to withdraw the money?

Mark S: Unfortunately we wont be liable for any bank charges. Due to the fact that you signed up to paddypower and used it from a restricted territory as per our terms and conditions,if there are any bank charges you would be liable for them.

Mark S: http://www.paddypower.com/bet/help

Paddy Power User: I just checked it. You only just added "Canada" to the list. I never *opened* an account from a restricted territory.

Mark S: If you then type in terms and conditons.

Paddy Power User: Also, the T&Cs say nothing about "Restricted Territories" at all, but even if they did, I never opened an account from a restricted territory. You were accepting bets from Canadians right up until yesterday morning.

Mark S: For various legal or commercial reasons, we do not permit accounts to be opened by, or used from, customers based in certain jurisdictions, including the United States of America and its territories and the countries listed below. This list of jurisdictions may be changed by us from time to time with or without notice. You agree that you shall not open an account, nor attempt to use your account, if you are based in these jurisdictions

Paddy Power User: Right.

Mark S: The list then includes Canada.

Paddy Power User: Yeah.

Paddy Power User: I opened my account before it was listed there.

Mark S: "you shall not open an account, nor attempt to use your account..."

Mark S: This list of jurisdictions may be changed by us from time to time with or without notice.

Paddy Power User: Yes, it may. And I did not attempt to use it once it was changed.

Paddy Power User: So, where is the contractual obligation for me to pay for Paddy Power's choice to close my account?

Mark S: As per our chat above, we need your details sent to us. We are not liable for any charges if they are incurred. We have to abide by the Canadian laws I'm afraid and it is out of our hands unfortunately.

Paddy Power User: Canadian laws don't tell you to charge me for a bank wire.

And later on in the transcript:

Paddy Power User: When you guys send an e-mail about "Canadian law" and can't even quote the section of the law you claim is violated, nobody is fooled.

Mark S: I cannot comment on that statement I'm afraid. If you send in the details we have requested for you I can organise the bank withdral/transfer for you.

So there you have it. Even if they accept you with open arms when you first open your account, your country could be added to the list of Paddy Power's restricted territories "without notice" and you will be responsible for the bank charges involved in withdrawing your money, despite the fact that Paddy Power is the one making the decision to compel that withdrawal.

And, although Paddy Power repeatedly cites that vague but oh-so-authoritative-sounding "Canadian law" as their reason for closing the accounts, they "cannot comment on that statement" when pressed further about it.

If this can happen to Canadian Paddy Power users, this can happen to any Paddy Power users. Wherever in the world you may be, just remember: Caveat emptor.

Post scriptum: Should any readers from Paddy Power's company come to this blog, I encourage them to explain in the comments section of the blog just what "Canadian law" their account cancellation e-mails were referring to.

Paddy Power Abruptly Cuts off its Canadian Account Holders (Part 2)

In yesterday's post about Paddy Power cutting off its clients in Canada, I suggested that the Canadian provincial governments which have been getting into the business of online gaming may have put pressure on Paddy Power to stop doing business with Canadians.

I thought I might further point out how Paddy Power is in direct competition with the Canadian provinces.

According to a press release from December 2010, Paddy Power uses GTECH G2 to power some of its online gaming.  Meanwhile, according to a press release on Gtech.com:

In Canada, Loto-Quebec will utilize GTECH G2’s online poker platform which will be shared by the British Columbia Lottery Corporation and the Atlantic Lottery Corporation.

In other words, at least three Canadian provinces are using the same gaming platform company as Paddy Power uses.  It would be interesting to see whether each province's relevant Access to Information documents allows Canadians to investigate the communications that government-owned gambling corporations might have sent to Gtech about whether they want Gtech's other clients to be allowed to compete with the Canadian companies.

Bwin is another user of Gtech's services.  According to CalvinAyre.com, Bwin sent this letter to its users back in September 2010:

“We regret to inform you that due to the new regulations of the British Columbia Lottery Corporation, Loto-Québec and the Atlantic Lottery Corporation, online gaming products in Canada are prohibited. Unfortunately we are required to add Canada to our list of excluded countries. Players from Canada will no longer be permitted to play at Casino Club starting September 24th, 2010.”

Now, those corporations only represent a few of Canada's provinces.  They do not have the power to impose their laws on other Canadian provinces.  They also generally cannot make laws which deal with foreign commerce--an area which is controlled by the federal government.

Is it a coincidence that suddenly the companies which use the same gaming platform provider as the Canadian provinces getting into online gaming are cutting off Canadian clients?  I think it at least warrants some looking into by Canada's Competition Bureau.

Paddy Power Abruptly Cuts off its Canadian Account Holders

For more information on the recent Paddy Power shutdown in Canada, read the follow-up to this blog post.

The legality of online sports betting, gambling, and other games of chance is, in many jurisdictions, "iffy."  For years, major online sports betting sites like Paddy Power and Betfair have been afraid to cater to American users for fear that they could have an arrest warrant issued against them by a single activist state, as was the case with Peter Dicks of Sportingbet, who had an arrest warrant issued against him by Louisiana and was arrested after getting off a plane in JFK Airport.

Fortunately, many countries with vague laws on the legality of betting in other countries have not taken the same approach as the United States.  However, someone in Canada sent me an e-mail they received abruptly from Paddy Power today with the following message:

Dear _______,

It has come to our attention that you are using a Canadian bank card. In accordance with Canadian law we will now be unable to take bets from Canada. Due to this, we will unfortunately have to block your debit/credit card and in turn close your account. You will still be able to withdraw any outstanding funds from your account for the next seven days. Please contact our support team if you require any assistance.

From 12pm GMT (Monday 14th February 2011), we will no longer be able to accept payments from Canadian sources.

We appreciate your custom and hope that your experience with paddypower.com was an enjoyable one. If you have any questions about this decision or your account in general please feel free to contact our Customer Service team using the details below.

Best Wishes,

Paddy Power Customer Service Team

This e-mail was sent without any warning, and Paddy Power was still taking bets from Canadians earlier that day.

So, why the sudden change?

One can only speculate, but an abrupt change like this might have been brought on by an activist Attorney-General in Canada, either federally or provincially.  At least one province in Canada recently started allowing its residents to engage in online gambling.  Perhaps a legal department in that government is making legal threats to cut out the private, free market competition.

Whatever the case, Canadians have one less competitor in the market which can only mean one thing:  Worse odds.  Whoever is responsible for this change is doing nothing but protecting the remaining betting companies, including government-operated ones, from competition.

If this is a case of government authorities strong-arming foreign companies, I would remind Canada of its Constitution's Charter of Rights and Freedoms:

2. Everyone has the following fundamental freedoms:

(a) freedom of conscience and religion;

(b) freedom of thought, belief, opinion and expression, including freedom of the press and other media of communication;

(c) freedom of peaceful assembly; and

(d) freedom of association.

Placing bets in another country strikes me as "freedom of association."  If the betting isn't occurring in Canada, I see it as no different than sending a letter and some money to a foreign bookmaker to request that they place a bet in the foreign country.  The bets do not take place in Canada, and unlike the United States, to my knowledge there are no laws on the Canadian books which prohibit transmitting money to a foreign country for the purpose of gaming.  In fact, Canada's s. 202 of Canada's Criminal Code refers to it being illegal to "import" certain promotional betting materials into Canada, but makes no mention of it being illegal to "export" funds for the purpose of a bet being placed in a foreign country.

I would also point out that people should not be prohibited from engaging in recreational activities simply because it offends someone else's religious sense of morality--that would certainly be a violation of the freedom of conscience and religion.  Of course, governments always attempt to justify such actions as being to "protect" the person engaging in the activity from themselves, and having nothing to do with the religious laws which were used to justify these laws when they were first enacted ages ago.  This argument from morality-enforcers always reminds me of what Ronald Reagan said the nine most dangerous words in the English language are.

Then there's also Section 7 of the same Charter mentioned above:

7. Everyone has the right to life, liberty and security of the person and the right not to be deprived thereof except in accordance with the principles of fundamental justice.

Canadian courts have held that "liberty" goes beyond just being free from being confined.  One Supreme Court decision stated, "Liberty means more than freedom from physical restraint. It includes the right to an irreducible sphere of personal autonomy wherein individuals may make inherently private choices free from state interference."  One would think that the choice as to whether one wants to risk throwing their money away is a matter of personal autonomy, but perhaps not.

Anyways, this post descended into a rant, but the main point is that for some reason one of the biggest betting websites out there is no longer accepting Canadian customers, only a few months after at least one Canadian province entered into the same industry.  It will be interesting if more details come out about just who is responsible for this change in Paddy Power's policy, and whether other online betting companies will follow suit.

The Legality of In-App Purchases

A story broke recently about how the Federal Trade Commission is going to be investigating the legality of in-app sales to minors.

In-app purchases, which are short for "in application purchases," allow people who have already purchased one application to continue making purchases within that application.  The problem with this is that some children have their parents purchase games for them using the parents' credit cards, and then the children continue to make purchases within those games which are charged to the same credit card.  Naturally, parents can be shocked when their next credit card bill reveals hundreds or thousands of dollars in charges which they never authorized.

A letter from Congressman Edward Markey to the FTC has brought this issue up.  It's now expected that the FTC is going to investigate whether these in-app purchases are legal, or whether they amount to an unfair trade practice.

Knowing how bureaucrats operate, there will probably be a few months of expensive investigations before the FTC decides that the in-app purchases might be unfair.  Then, they will have some sort of expensive consultation as to how to regulate in-app purchases, after which thirty new positions in the FTC will be made to deal with in-app purchases.

Whether that happens or not, parents who are worried about in-app purchases by their children should simply abide by one rule:  Don't give out your credit card number to kids.  It doesn't go over well.

New Nominet Domain Takedown Policy for Criminal Websites

Traditionally, websites which are engaged in criminal activity have their web hosts targeted by law enforcement or, in the case of copyright or trademark infringement, private lawyers.  Domain registrars and the authorities which authorize them to grant domain registrations are usually not responsible for dealing with the content of the websites.

However, in recent days, projects like Operation In Our Sites in the United States have seen actual domain names seized by the authorities (usually for intellectual property infringement).  Now, domain names in the United Kingdom may be subject to similar takedowns.

Nominet, which is the domain name registration authority which oversees the .uk TLD for the United Kingdom, is inviting various groups in the United Kingdom to submit proposals on a new policy for .uk domain name suspensions in relation to criminal activity.  The Serious and Organised Crime Agency, Home Office, British Customs, and other enforcement agencies are among those invited to submit comments.

It is likely that with this new policy, it will become easier to take down criminal websites without being at the mercy of the web hosts responsible for providing the content.  While shutting down a host can just result in a fraudulent or IP infringing webmaster to simply switch their nameservers to a new host, targeting the actual domain will ensure that they have no ability to keep the website up.  Naturally, there will be an appeals process.  Those who believe that they have been wrongfully targeted will be able to appeal to Nominet or another agency over the takedown.

As long as this new takedown policy is not used to make it easier for authorities to silence controversial political content (most countries do not have as strong protections of free speech as the First Amendment provides), it should be good news for those who are tired of copyright infringers simply switching hosts every time a DMCA takedown notice gets sent to the host.  It will be a major disincentive to start online streaming sites and other infringing websites when the sleazy webmasters realize that they can build up their PageRank only to have it all seized overnight.

For more information about the policy change proposal, view the Nominet takedown policy pamphlet.

Are Streaming Movie Sites Legal? The Legality of Streaming Sites

The question of whether movie sites are legal is one that is often posed in Internet forums by site developers looking to make a quick buck. Obviously, it’s illegal to directly host copyrighted content if the person hosting it does not have a copyright license for it.

However, webmasters often try to get around copyright law by linking outside of their own site to a third party website—usually located in some hard-to-sue country like China or the Netherlands—and therefore never hosting any copyrighted content on their own site.

The problem with this is that even if a webmaster links to third party websites with copyrighted content, the webmaster is still infringing on a copyright in most jurisdictions. In the United States, there is no doubt that this constitutes contributory copyright infringement.

Contributory copyright infringement is the idea that even if someone doesn’t directly infringe on a copyright by broadcasting it or copying it themselves, they have assisted in infringing it somehow and are therefore still personally liable. By linking to infringing content on a third party website, website owners are assisting that third party in violating a copyright.

This same principle can be used to hold liable torrent indexing websites, P2P software, and affiliate programs which pay out cash for ads hosted on infringing sites.

So, if you’re wondering whether it’s legal to post streaming video sites, or whether it infringes on someone’s copyright, the answer is that it’s almost certainly a violation of a copyright, and you should seek some other, less risky source of online revenue.

And, even if it’s not for revenue, you still shouldn’t do it because the fact that you don’t make money off of blatant copyright infringement doesn’t mean that you’re not still liable.

Is Bing infringing on Google’s copyright?

It was recently revealed that Google monitored the differences between Google and Bing’s search results, to see whether Bing was copying Google’s results. After purposefully misspelling some key phrases, Google’s workers found that Bing was ranking the same search results for the same misspelled words.

So, is the fact that Bing is mimicking Google’s search results copyright infringement? The answer is: Probably not.

Bing apparently has a toolbar which monitors its users’ Internet activity. In doing so, it’s able to determine its own users’ preferences when they search for a misspelled key phrase. Naturally, Google’s indexing algorithm probably functions the same way, only by monitoring its own data rather than by using a toolbar since it has access to its own search data anyways.

Assuming that both companies have put some R&D time into finding the best algorithm to rank search results, albeit using different methods, it’s likely that Bing’s monitoring of users’ Google activity will end up ranking their results the same as Google itself.

However, even if Bing is simply directly copying Google’s search results and not even compiling its search results as a result of what it monitors on its toolbar, it is unlikely that it would constitute copyright infringement.

Plain lists are usually not copyrighted. The information that appears in a Google search is just the site name, URL, and meta tag information or other text pulled from the relevant page of the website. Unless Google has annotated its search results, and Bing has copied those, Bing probably has not done anything illegal.

Domain Name Lease

Websites like Sedo and GoDaddy allow domain name owners to sell their domains to interested buyers through auction, fixed price, and open offer services.  However, not every domain name owner likes the idea of selling their name permanently, and would rather have clients paying a regular fee to use the name.  The solution in this case is often a domain name lease agreement.

A domain name lease agreement is an arrangement wherein the rightful owner of a domain name allows a person who wants to use that name to pay a rental fee for its use, rather than simply selling it outright.  By doing this, owners of domains ensure that they aren't permanently giving up the rights to a name which may become more valuable in the future.

Here are some potential clauses that domain name lease agreements might include:

• Sales clause.  People who rent the domains probably don't want to pay permanently.  A sales clause can require the owner to sell the domain name on a certain date after the leasing period, but the sale price of the domain might be indexed by the contract to the income of the business which uses the domain name, so that the seller gets an amount proportionate to the value of the domain name when the domain is finally sold.
•  
• Intellectual property rights clause.  In the event that an agreement does not provide for the sale of the domain name, owners will want to be sure that they are not losing any rights to that name.  The fact that another business uses the name and promotes it in relation to their business might give them certain trademark rights over the name, enabling them to sue or launch an ICANN dispute against the rightful owner if the name continues to be used by the owner after a lease agreement expires.  A clause which ensures that the owner retains an absolute right to the domain name is therefore ideal.
•  
• Choice of law clause.  If the domain name owner lives in New York and the person renting it lives in Germany, the owner will probably find it preferable to ensure that the contract contains a clause making it subject only to New York law.  That way, the owner is less confused about their legal obligations.
•  
• Forum for disputes clause.  In the event that the contract is broken, that owner will not want to travel all the way to Germany for litigation due to time and expense.  A clause which states that any disputes may only be resolved in a New York court would be favorable to the domain name owner.

These are just a few of the potential clauses that may be contained in a domain name lease agreement, but they give an idea of some of the complications involved.  For more information on domain name leasing, contact a lawyer qualified in Internet law.