This Document Contains Chapters 9 to 10 Chapter 9 Internet Law Social Media and Privacy True/False 1. In an attempt to combat spam, thirty-six states have enacted laws that prohibit or regulate its use. A. True B. False Answer: True 2. Using a domain name that is identical or similar to the trademark of another is legal. A. True B. False Answer: False 3. The Anticybersquatting Consumer Protection Act applies to most, but not all, domain name registrations of trademarks. A. True B. False Answer: False 4. Federal law prohibits the Federal Trade Commission from cooperating and sharing information with foreign agencies in investigating and prosecuting those involved in spamming. A. True B. False Answer: False 5. Using another’s trademark in a meta tag does not normally constitute trademark infringement, even if it is done without the owner’s permission. A. True B. False Answer: False 6. A claim of trademark dilution requires proof that consumers are likely to be confused by a connection between the unauthorized use and the mark. A. True B. False Answer: False 7. A licensor might grant a license allowing a trademark to be used as part of a domain name. A. True B. False Answer: True 8. In some states, an unsolicited e-mail must include a toll-free phone number that the recipient can use to ask the sender to send no more unsolicited e-mail. A. True B. False Answer: True 9. Federal law permits the sending of unsolicited commercial e-mail and does not prohibit spamming activities. A. True B. False Answer: False 10. Cybersquatting is illegal only if a domain name is identical to the trademark of another, not if the name is merely confusingly similar. A. True B. False Answer: False 11. Cybersquatting occurs when key words are inserted into the hyper text markup language code to tell Internet browsers specific information about a Web page. A. True B. False Answer: False 12. When you download an application on your smartphone, you are typically entering into a license agreement. A. True B. False Answer: True 13. Downloading music into a computer’s random access memory, or RAM, is not copyright infringement, even if it is done without authorization. A. True B. False Answer: False 14. Penalties exist for anyone who circumvents encryption software or other technological antipiracy protection. A. True B. False Answer: True 15. The manufacture, import, sale, and distribution of devices or services for the circumvention of encryption software is prohibited. A. True B. False Answer: True 16. An Internet service provider is liable for any act of copyright infringement by its customer. A. True B. False Answer: False 17. A company can distribute file-sharing software with the object of promoting its use to infringe copyrights without liability for the resulting acts of infringement by its users. A. True B. False Answer: False 18. Much of the material on the Internet, including software and database information, is not copyrighted. A. True B. False Answer: False 19. The law does not restrict the “fair use” of methods for the circumvention of encryption software or other technological antipiracy protection for educational and other non commercial purposes. A. True B. False Answer: True 20. No federal court has held that digitally sampling a copyrighted sound recording of any length constitutes copyright infringement. A. True B. False Answer: False 21. Social media users can post trademarked images or copyrights materials without infringing the owners’ rights, even if it is done without permission. A. True B. False Answer: False 22. Social media posts have no uses in litigation. A. True B. False Answer: False 23. An employer may have a right to terminate a person based on his or her violation of the employer’s social media policy. A. True B. False Answer: True 24. Employees’ posts on social media may be protected under labor laws. A. True B. False Answer: True 25. Employers cannot monitor employees’ electronic communications made in the ordinary course of business. A. True B. False Answer: False 26. Federal law prevents a provider of communication services—such as a cell phone company—from divulging private communications to certain entities and individuals. A. True B. False Answer: True 27. Federal wiretapping law covers electronic forms of communication. A. True B. False Answer: True 28. Federal law permits the intentional interception of any wire, oral, or electronic communication. A. True B. False Answer: False 29. Federal law permits the intentional accessing of stored electronic communication even if the accessing is unauthorized. A. True B. False Answer: False 30. Law enforcement uses social media to detect and prosecute criminals. A. True B. False Answer: True 31. Social media posts are routinely included in discovery in litigation. A. True B. False Answer: True 32. Cyber torts are torts that arise from online conduct. A. True B. False Answer: True 33. Online defamation is wrongfully hurting a person’s reputation by communicating false statements about that person to others online. A. True B. False Answer: True 34. It is frequently the companies rather than courts or legislatures that are defining the privacy rights of their online users. A. True B. False Answer: True 35. To maintain a suit for the invasion of privacy, a person must have a reasonable expectation of privacy in the particular situation. A. True B. False Answer: True Multiple Choice Fact Pattern 9-1 (Questions 1–3 apply) Sound Financials Corporation sends daily e-mail ads to its previous customers and those who have opted to receive the notices. Instable Investments, Inc., sends e-mail ads to any e-mail address that Instable can find on the Web or otherwise generate. 36. Refer to Fact Pattern 9-1. In those states with antispam laws, federal law A. prohibits or regulates the use of spam. B. requires the use of spam by business entities. C. bans the use of spam altogether. D. preempts the application of state law to commercial e-mail with certain exceptions. Answer: D 37. Refer to Fact Pattern 9-1. One of the advertisers—either Sound Financials or Instable Investments—is acting within the bounds of federal law. Federal law permits the sending of A. unsolicited commercial e-mail. B. solicited commercial e-mail only. C. commercial e-mail to randomly generated addresses. D. commercial e-mail to addresses “harvested” from Web sites through the use of specialized software. Answer: A 38. Refer to Fact Pattern 9-1. Sound Financials and Instable Investments are subject to the laws of the states in which they are located and do business. Thirty-six states A. prohibit or regulates the use of spam. B. require the use of spam by business entities. C. ban the use of spam altogether. D. preempt the application of state law to commercial e-mail. Answer: A 39. Tech Outsourcing, Inc., registers a domain name that is the same as, or confusingly similar to, the trademark of Tech Resourcing Corporation and then offers to sell the domain name back to Tech Resourcing. This is A. cybersquatting. B. typosquatting. C. trademark infringement. D. trademark dilution. Answer: A 40. Rowan registers a domain name—sweetfriedpotatos.com—that is a misspelling of a popular brand—sweetfriedpotatoes.com. This is A. cybersquatting. B. typosquatting. C. trademark infringement. D. trademark dilution. Answer: B 41. To protect domain name rights from would-be cybersquatters and typosquatters, AgriBusiness Inc. and other large corporations may have to A. register thousands of domain names across the globe. B. pay the owners of Web sites with identical or confusingly similar domain names for the number of unique visits, or hits, to the sites. C. change their domain names to avoid identical or confusingly similar domain names. D. change their trademarks to avoid identical or confusingly similar domain names. Answer: A 42. Without authorization, Brady uses the trademark of Ciera Coffee Company to promote cheap, flavorless candy, which is not similar to Ciera’s products but diminishes the quality of the coffee company’s mark. This is A. cybersquatting. B. typosquatting. C. trademark infringement. D. trademark dilution. Answer: D 43. Far & Wide Corporation uses the trademark of Google Inc. in a meta tag without Google’s permission. This is A. cybersquatting. B. typosquatting. C. trademark infringement. D. trademark dilution. Answer: C 44. Riley obtains permission from Saga Company to use the firm’s game app on Riley’s smartphone, tablet, and other mobile device. But Riley does not obtain ownership rights in the app. This is A. a license. B. a cookie. C. cloud computing. D. a violation of the law. Answer: A 45. ConnectWeb, Inc., an Internet service provider (ISP), supplies information to the Federal Trade Commission concerning possible unfair or deceptive conduct in foreign jurisdictions. For this disclosure, federal law gives ConnectWeb and other ISPs immunity from liability. This is A. goodwill. B. fair use. C. a safe harbor. D. a license. Answer: C Fact Pattern 9-2 (Questions 11–13 apply) CallTalk Corporation, a smartphone and phone-time seller, chooses to use and register “calltalk” as its second-level domain. Later, CallTalk’s less successful competitor, CellTalk Company, chooses to use and register “caltalk” (an intentional misspelling of “calltalk”) as its second-level domain. Still later, Call&Talk, Inc., uses the domain name “callltalk” (also a deliberate misspelling of “calltalk”) without CallTalk’s authorization, to sell pornographic phone conversations. 46. Refer to Fact Pattern 9-2. By using a similar domain name to CallTalk’s, CellTalk is most likely attempting to profit from its competitor’s A. goodwill. B. fair use. C. license. D. safe harbor. Answer: A 47. Refer to Fact Pattern 9-2. CallTalk wants to sue Call&Talk for its unauthorized use of the domain name “callltalk.” Before bringing the suit, CallTalk has to ask the court for a subpoena to discover A. the true identity of the owner of the unauthorized site. B. the amount of the profits of the unauthorized site. C. the estimated costs of the court proceedings and discovery. D. all of the registered variations of the name “calltalk.” Answer: A 48. Refer to Fact Pattern 9-2. Call&Talk’s use of the domain name “callltalk,” without CallTalk’s authorization, to sell pornographic phone conversations, is A. goodwill. B. fair use. C. a license. D. trademark dilution. Answer: D 49. BeFriends Corporation uses the trademark of Community Life Inc., a social media site, as a meta tag without Community Life’s permission. This may be permissible A. if the appropriating site has nothing to do with the meta tag. B. if the two sites appear in the same search engine results. C. if the use is reasonably necessary. D. under no circumstances. Answer: C 50. BurgerBoy Restaurant Corporation allows its trademark to be used as part of a domain name for BurgerBoyNY, Inc., an unaffiliated company. BurgerBoyNY does not obtain ownership rights in the mark. This is A. goodwill. B. fair use. C. a license. D. a safe harbor. Answer: C 51. To test computer security and conduct encryption research, Tech Solutions Inc. circumvents the encryption software and other technological antipiracy protection of United Business Corporation’s software. Under the Digital Millennium Copyright Act, this is A. a violation of copyright law. B. prohibited but not a violation of copyright law. C. a “fair use” exception to the provisions of the act. D. permitted for reconsideration every three years. Answer: C 52. Dona downloads music into her computer’s random access memory, or RAM, without authorization. This is A. copyright infringement. B. within Dona’s rights as a computer user. C. a basis of liability for the computer maker if it does not act against Dona. D. none of the choices. Answer: A 53. Because of the loss of significant amounts of revenue as a result of unauthorized digital downloads, file-sharing has created problems for A. the motion picture industry. B. recording artists and their labels. C. the companies that distribute file-sharing software. D. all of the choices. Answer: D 54. InfoFree Inc., makes and sells devices and services for the circumvention of encryption software and other technological antipiracy protection. Under the Digital Millennium Copyright Act, this is A. a violation of copyright law. B. prohibited but not a violation of copyright law. C. a “fair use” exception to the provisions of the act. D. permitted for reconsideration every three years. Answer: A 55. Stefano transfers copyrighted music recordings, without the copyright owners’ authorization, to his friends. This is A. copyright infringement. B. a license. C. a safe harbor. D. none of the choices. Answer: A 56. Sly includes in his song “Sneaky” a few seconds of Wily’s copyrighted sound recording “Wits” without permission. Some federal courts have found that such digital sampling is A. a violation of copyright law. B. a “fair use” exception to the provisions of the act. C. not a “fair use” exception to the provisions of the act. D. all of the choices. Answer: D 57. OntheWeb Company is an Internet service provider. OntheWeb’s customer Phoebe commits copyright infringement. OntheWeb is not liable for Phoebe’s activity A. unless OntheWeb is aware of Phoebe’s violation. B. unless OntheWeb is not aware of Phoebe’s violation. C. unless OntheWeb shuts down Phoebe after learning of the violation. D. under any circumstances. Answer: A 58. Justin’s posts on Facebook provide information that establishes his intent and what he knew at a particular time, indicating potential liability. For this and other reasons, social media posts are often A. included in discovery in litigation. B. used by law enforcement to detect and prosecute criminals. C. used by federal regulators in investigations into illegal activities. D. all of the choices. Answer: D 59. Zoe and other users of Facebook and other social networking sites post trademarked images and copyrighted materials on these sites without permission. This A. is a violation of the intellectual property rights of the owners of the images and materials. B. is within the rights of the users of social networks. C. is a subject for dispute resolution by the providers of the social networks. D. falls under the “business-extension exception” to the Electronic Communications Privacy Act. Answer: A 60. Oversight Corporation monitors employees’ electronic communications made in the ordinary course of business. This A. is a violation of the rights of Oversight’s employee. B. is within Oversight’s rights as an employer. C. is a subject for dispute resolution by the communications providers that Oversight uses. D. falls under the “business-extension exception” to the Electronic Communications Privacy Act. Answer: D 61. Keisha is an employee of Leeway Corporation. She uses social media in a way that violates her employer’s stated social media policies. Leeway first disciplines its employee and then, after a second transgression, fires her. This A. is a violation of Keisha’s rights as an employee. B. is within Leeway’s rights as an employer. C. is a subject for dispute resolution by the social media that Keisha used. D. falls under the “business-extension exception” to the Electronic Communications Privacy Act. Answer: B 62. Auto Maker Components LLC is an employer based in Michigan. Michigan state law prohibits employers from taking adverse action against an employee or job applicant based on what the person has posted online. This applies to A. social media sites. B. e-mail accounts. C. cloud storage accounts. D. all of the choices. Answer: D 63. Sales & Revenue, Inc., discovers that defamatory statements about its policies and products are being posted in an online forum. TransWeb Inc., the Internet service provider whose users are posting the messages, refuses to disclose the identity of the person or persons responsible. Sales & Revenue files a suit against the anonymous users. The plaintiff can obtain from TransWeb the identity of the persons responsible for the defamatory messages by A. using the authority of the court. B. gaining unauthorized access to TransWeb’s servers. C. deceiving TransWeb into revealing the posters’ identities. D. no legal or illegal means. Answer: A 64. Omni Corporation provides cell phones, laptops, and tablets for its employees to use “in the ordinary course of its business.” Omni intercepts the employees’ business communications made on these devices. This is A. a violation of the rights of Omni’s employees. B. a matter for which Omni must obtain its employees’ consent. C. a subject for dispute resolution by the communications providers that Omni uses. D. excluded from the coverage of the Electronic Communications Privacy Act. Answer: D 65. April and other employees of Bodegas & Bistros Inc. (2B) maintain a password-protected social media page to “vent about work.” When 2B learns of the page, the company intimidates April into revealing the password, and after reviewing the posts, fires her and the other participants. Most likely, this is A. a violation of the Stored Communications Act. B. within 2B’s rights as an employer. C. a subject for dispute resolution by the communications providers that the employees’ page uses. D. a “business-extension exception” under the Electronic Communications Privacy Act. Answer: A 66. Paige applies to work for Quibbling & Company. Reece applies for admittance to State University. As part of their applications, Paige and Reece are asked to divulge their social media passwords. Legislation that protects individuals from having to disclose their social media passwords has been enacted in A. no states. B. most states but not by the federal government. C. all states and by the federal government. D. four states. Answer: D 67. Mobile Device Company (MDC) discovers that defamatory statements about its policies and products are being posted in an online forum. NuView Inc., the Internet service provider whose users are posting the messages, refuses to disclose the identity of the person or persons responsible. MDC should A. bring a suit against “John Doe” and use the authority of the court to obtain the identity from NuView. B. bring a suit against NuView for publishing the statements. C. counter the statements with its own posts in an effort to enhance the company’s goodwill. D. post defamatory statements about NuView and its users. Answer: A 68. Copious Bounty, LLC, and other companies operate social media Web sites, issue apps for mobile devices, obtain ad revenue from search engines, and sell directly to consumers from other sites. The privacy rights of the users of these products are frequently defined, not by the courts or legislatures, but by A. the companies that own the sites and the apps. B. retailers who have had to change their procedures to compete. C. spammers, cybersquatters, and typosquatters. D. Internet service providers. Answer: A 69. Global Reach Corporation uses invisible files created on the computers, smartphones, and other mobile devices of visitors to its Web sites to track the users’ browsing activities. These files are A. licenses. B. cookies. C. cloud computing. D. a violation of the law. Answer: B 70. Interactive Entertainment Corporation markets its products online. Through the use of cookies, Interactive Entertainment and other online marketers can A. track individuals’ Web browsing activities. B. gain access to competitors’ servers. C. “sweet talk” consumers into buying certain products. D. attack competitors’ Web sites. Answer: A Essay 71. “Dawn” is a song included in the sound track of “eDay,” a movie produced and distributed by FasTrac Corporation. The song features a digital sampling of a few seconds of the guitar solo of one of George Harrison’s copyrighted sound recordings without permission. Does this digital sampling constitute copyright infringement on the part of FasTrac? Explain. Answer: Yes, the digital sampling described in this question most likely would be held to constitute copyright infringement. To transfer materially digitally, online or otherwise, it must be “copied.” So, generally, whenever a party downloads music or other software into a computer’s random access memory, or RAM, without authorization, a copyright is infringed. In other words, technology has vastly increased the potential for copyright infringement. Thus, digitally sampling a copyrighted sound recording of any length constitutes copyright infringement. In this question, a few seconds of the guitar solo of one of George Harrison’s copyrighted sound recordings has been digitally sampled without permission in “Dawn.” This song is then included in the film “eDay,” which is produced and distributed by FasTrac. The sampling involved “copying” the solo digitally into a computer. This constitutes copyright infringement. 72. Sonya and other employees of TransGlobal Inc. maintain a password-protected social media page on which they post comments on work-related issues. The posts range from positive to negative, supporting the page’s purpose to “vent about work.” When TransGlobal learns of the page, the company intimidates Sonya into revealing the password, and after reviewing the posts, fires her and the other participants. Which federal law discussed in this chapter most likely applies to this situation? Has this law been violated? Discuss. Answer: The federal law discussed in this chapter that most likely applies to the situation described in this question is the Stored Communications Act (SCA), which is part of the Electronic Communications Privacy Act (ECPA). And the SCA appears to have been violated here. The SCA prohibits intentional and unauthorized access to stored electronic communications and sets forth criminal and civil sanctions for violators. A person can violate the SCA by intentionally accessing a stored electronic communication. The SCA also prevents “providers” of communication services, such as cell phone companies and social media networks, from divulging private communications to certain entities and individuals. In this question, the employees of Trans Global maintain a password-protected social media page on which they post comments on work-related issues. The company gains access by intimidating one of the employees, and after reviewing the posts, fires all of the participating employees. This appears to be a violation of the SCA because the company’s access was intentional and unauthorized—intimidation does not constitute authorization. As a result, the employees should be allowed to retain their social media page, be reinstated to their jobs, be given back pay, and possibly obtain compensatory and other damages. Chapter 10 International Law in a Global Economy True/False 1. International law is a body of law that governs relations between and among citizens, not countries. A. True B. False Answer: False 2. Under the principle of comity, one nation may defer and give effect to the laws and judicial decrees of another country. A. True B. False Answer: True 3. Under the principle of comity, all foreign governments are subject to all U.S. laws. A. True B. False Answer: False 4. The act of state doctrine provides that the executive branch of one country will not examine the validity of public acts committed by a recognized foreign government within its own territory. A. True B. False Answer: False 5. Confiscation occurs when a government seizes private property for an illegal purpose or without just compensation. A. True B. False Answer: True 6. The act of state doctrine does not have important consequences for firms doing business in other countries. A. True B. False Answer: False 7. Expropriation occurs when a government seizes private property for a proper purpose and awards just compensation. A. True B. False Answer: True 8. The Foreign Sovereign Immunities Act spells out what a “foreign state” includes. A. True B. False Answer: True 9. Under the Foreign Sovereign Immunities Act, a foreign state can be a political subdivision of a foreign state. A. True B. False Answer: True 10. The doctrine of sovereign immunity cannot immunize a foreign nation from the jurisdiction of U.S. courts. A. True B. False Answer: False 11. According to the Foreign Sovereign Immunities Act, a foreign state that has committed a tort in the United States is protected from the jurisdiction of the U.S. courts. A. True B. False Answer: False 12. According to the Foreign Sovereign Immunities Act, a foreign state that waived its immunity by implication is subject to the jurisdiction of the U.S. courts. A. True B. False Answer: True 13. The simplest way for a U.S. firm to do business in a foreign market is to export its products directly to that market. A. True B. False Answer: True 14. In direct exporting, a U.S. company signs a sales contract with a foreign purchaser that provides for the conditions of shipment and payment of goods. A. True B. False Answer: True 15. When a U.S. firm wishes to increase its involvement in an international market, it normally establishes an agency relationship with a foreign firm. A. True B. False Answer: False 16. A party to a licensing agreement generally agrees to pay royalties on some basis. A. True B. False Answer: True 17. International franchisees usually do not pay fees for the license to use a trademark or trade name. A. True B. False Answer: False 18. In a joint venture, the parent company in the United States retains complete ownership and authority over all phases of the operation. A. True B. False Answer: False 19. Restrictions on imports may include prohibitions. A. True B. False Answer: True 20. A tariff is always a flat rate per unit. A. True B. False Answer: False 21. Restrictions on imports may include quotas. A. True B. False Answer: True 22. Tariffs are imposed only on exports. A. True B. False Answer: False 23. Quotas are limits on the amounts of goods that can be exported. A. True B. False Answer: False 24. Dumping is the exporting of environmentally polluting goods to a foreign market. A. True B. False Answer: False 25. Dumping is the sale of imported goods at “less than fair value.” A. True B. False Answer: True 26. The chief aim of the World Trade Organization and other trade agreements is to maximize trade barriers among their members. A. True B. False Answer: False 27. The chief aim of the European Union and other trade organizations is to minimize trade barriers among their members. A. True B. False Answer: True 28. The primary goal of the North American Free Trade Agreement is to eliminate tariffs among the United States, Canada, and Mexico. A. True B. False Answer: True 29. All international sales contracts should have a choice-of-language clause to designate the official language by which the contract will be interpreted. A. True B. False Answer: True 30. Force majeure clauses in international business contracts commonly set forth the major clauses of the contracts. A. True B. False Answer: False 31. Foreign exchange markets comprise a worldwide system for buying and selling currency. A. True B. False Answer: True 32. Generally, a foreign government cannot sue under U.S. antitrust laws in U.S. courts. A. True B. False Answer: False 33. Any conspiracy that has a substantial effect on U.S. commerce is within the reach of the U.S. antitrust laws. A. True B. False Answer: True 34. A U.S. citizen can bring a civil suit in a U.S. court against a U.S. entity for a tort allegedly committed overseas. A. True B. False Answer: True 35. U.S. laws that prohibit discrimination in employment apply to U.S. employees working for U.S. firms located abroad. A. True B. False Answer: True Multiple Choice 36. Yokio, Ltd., and Zeno, S.A., transact an international sale of goods. At the request of these parties, a court in Portugal resolves a dispute between them. A U.S. court will most likely honor the judgment A. if it is consistent with U.S. laws and public policy. B. if it is consistent with Portuguese laws and public policy. C. if it does not benefit the U.S. to deny it. D. under no circumstances. Answer: A 37. Michael, a citizen of Ireland, and Nina, a citizen of the United States, enter into a contract. When Nina breaches the contract, Michael obtains an award of damages in an Irish court. He asks a U.S. court to enforce the award. The U.S. court defers to and enforces the Irish court’s decree. This is A. a travesty of justice. B. the act of state doctrine. C. the doctrine of sovereign immunity. D. the principle of comity. Answer: D 38. The basis for India to give effect to the laws and court decisions of the United States is primarily A. courtesy and respect. B. fear and intimidation. C. admiration and envy. D. payments of cash and exchanges of property. Answer: A 39. Premier Clothing, Inc., a U.S. firm, obtains a judgment in a U.S. court against Quang Tri, Ltd., a Vietnamese business. Whether the court’s judgment will be enforced by a court in Vietnam depends on the Vietnamese court’s application of A. the act of state doctrine. B. the doctrine of sovereign immunity. C. the principle of comity. D. the World Trade Organization. Answer: C 40. Mountain Mining Company, a U.S. firm, owns property in Bolivia. The government of Bolivia seizes the property for an illegal purpose without paying just compensation. This is A. confiscation. B. defalcation. C. dumping. D. expropriation. Answer: A 41. Sudan seizes the assets of Triage Medical, Inc., a U.S. firm. Triage’s recovery from Sudan in a U.S. court may be prevented by A. the act of state doctrine. B. the doctrine of sovereign immunity. C. the Foreign Corrupt Practices Act. D. the principle of comity. Answer: A 42. Call Center Corporation, a U.S. firm, owns property in India. The government of India seizes the property for a proper public purpose and pays Call Center just compensation. This is A. confiscation. B. defalcation. C. dumping. D. expropriation. Answer: D 43. UniOil, a U.S. firm, owns property in Venezuela. When the government of Venezuela seizes the property, UniOil asks a U.S. court to order the property’s return. The court rules that Venezuela is exempt from the court’s jurisdiction. This is A. a travesty of justice. B. the act of state doctrine. C. the doctrine of sovereign immunity. D. the principle of comity. Answer: C 44. US Cars, a U.S. firm, owns property in Argentina. The government of Argentina seizes the property. US Cars claims that this is confiscation. The government of Argentina claims that it is expropriation. The burden of proof lies with A. the U.S. government. B. the government of Argentina. C. US Cars. D. the U.S. Supreme Court. Answer: B 45. Soleful Shoes, Inc. owns property in Somalia. The Somalian government seizes the property. In order for the seizure to be considered an expropriation and not a confiscation, the Somalian government must A. pay just compensation to Soleful Shoes. B. give Soleful Shoes at least thirty days notice of the seizure. C. give Soleful Shoes at least ninety days notice of the seizure. D. notify the U.S. government before the seizure. Answer: A 46. Metallic Metals, Inc., a U.S. firm, files a suit against a Venezuela government agency. The agency has committed a tort in the United States. Under the Foreign Sovereign Immunities Act A. the Venezuelan government agency is not immune from the jurisdiction of the U.S. courts. B. the Venezuelan government agency is immune from the jurisdiction of the U.S. courts. C. Metallic Metals cannot bring a suit against the Venezuelan agency. D. Metallic Metals must file suit in Venezuela. Answer: A 47. In some cases, foreign states are not immune from the jurisdiction of U.S. courts. These circumstances are governed by A. the Uniform Commercial Code. B. the Foreign Sovereign Immunities Act. C. the European Union. D. the North American Free Trade Agreement. Answer: B 48. Wrugged Woolens, Inc., a U.S. corporation, sets up a specialized marketing organization in Scotland by appointing a foreign agent. This is called A. direct exporting. B. indirect exporting. C. a joint venture. D. piracy. Answer: B 49. WiFi Corporation, a U.S. firm, signs a contract with Bueno Computadores, Ltd., an Argentinean firm, for a shipment and payment for WiFi’s goods. This is A. a distribution agreement. B. a joint venture. C. direct exporting. D. licensing. Answer: C 50. Optima Medico Corporation, a U.S. firm, signs a contract with Pharma Beneficial, Ltd., a Canadian firm, to give Pharma the right to sell Optima’s products in Canada. This is A. a distribution agreement. B. a joint venture. C. direct exporting. D. licensing. Answer: A 51. KO Marketing Company, a U.S. firm, signs a contract with Librador Corporacion, a Chilean firm, to give Librador the right to use Innovative’s animation techniques and characters in product promotions. This is A. a distribution agreement. B. a joint venture. C. direct exporting. D. licensing. Answer: D 52. The U.S. corporation Fun Toys, Inc. sets up a firm in China. The parent company remains in the United States and retains complete ownership of the China branch as well as complete authority and control over all phases of the operation. This is A. a distribution agreement. B. a wholly owned subsidiary. C. a joint venture. D. direct exporting. Answer: B 53. Secure Investments, Inc., a U.S. firm, expands into international markets through a joint venture. In this situation, Secure owns A. all of the operation, and its profits and liabilities. B. all of the operation, and none of its profits and liabilities. C. none of the operation, and none of its profits and liabilities. D. part of the operation, and shares its profits and liabilities. Answer: D 54. Senator Brown and other politicians want to restrict the flow of technologically advanced products and data from the United States to other countries. To restrict or encourage exports, Congress can A. do nothing. B. assess antidumping duties. C. impose export taxes. D. set export quotas. Answer: D 55. Vieux Carré S.A., a French firm, imports its goods into the United States and offers those goods for sale at “less than fair value.” “Fair value” is the price of A. comparable goods in a select “basket” of other countries. B. Vieux Carré’s goods in France. C. Vieux Carré’s goods in the United States. D. Vieux Carré’s goods on the world market. Answer: B 56. The United States and other members of a certain organization agree to grant normal trade relations status to each other with regard to imports and exports. This organization is A. the Convention on Contracts for the International Sale of Goods. B. the International Export-Import Bank. C. the United Nations. D. the World Trade Organization. Answer: D 57. The United States taxes each barrel of imported oil at a flat rate. This is A. an antidumping duty. B. a dumping duty. C. a quota. D. a tariff. Answer: D 58. The government of Japan sets a limit on the amount of rice that can be imported from the United States. This is A. a dumping duty. B. an antidumping duty. C. a quota. D. a tariff. Answer: C 59. Canada and the United States form an agreement to govern their commercial exchanges with one another. This is A. a bilateral agreement. B. a lateral agreement. C. a multilateral agreement. D. a unilateral agreement. Answer: A 60. Wytex, Inc., a U.S. firm, and Findora Commercial, a Nigerian firm, are parties to a contract that specifies that the official language of the contract is English. This is A. a choice-of-forum clause. B. a choice-of-language clause. C. a choice-of-law clause. D. an arbitration clause. Answer: B 61. Telfonix Corporation, a U.S. firm, and Adex, Inc., a British firm, are parties to a contract with a forum-selection clause. The forum specified in the clause A. must be within the geographic boundaries of the United States. B. must be within the geographic boundaries of Britain. C. need not be within the geographic boundaries of either party. D. must be within the geographic boundaries of either the United States or Britain. Answer: C 62. Quality Energy Company, a U.S. firm, and Royal Petro, a Dutch firm, enter into a contract that includes an arbitration clause. This clause must provide that the arbitrator will be A. any specified third party. B. the American Arbitration Association. C. the Dutch Arbitration Organization. D. the International Chamber of Commerce. Answer: A 63. Suisse Internationale, a Swiss maker of athletic equipment, enters into a price fixing agreement with Total World Sports, a U.S. wholesaler of Suisse’s products. U.S. courts will apply U.S. antitrust laws if A. the agreement was made in Switzerland. B. the agreement was made in the United States. C. the price fixing has a substantial effect on U.S. commerce. D. the Swiss government agrees to be sued in the United States. Answer: C 64. Bulbous Cordials, Inc., a U.S. firm, enters into an agreement with Columbiana Cacao, S.A., a South American firm, to fix the price of dark chocolate in the U.S. market. If the agreement is a per se violation of U.S. antitrust laws, a U.S. court could exercise jurisdiction over A. Bulbous Cordials and Columbiana Cacao. B. Bulbous Cordials only. C. Columbiana Cacao only. D. neither Bulbous Cordials nor Columbiana Cacao. Answer: A 65. Two Japanese firms—Mikato, Ltd., and Shuzushi, Ltd.—enter into a joint venture in an attempt to increase their market share of the U.S. auto market. If the joint venture is not a per se violation of U.S. antitrust laws, a U.S. court could exercise jurisdiction over the firms A. if the joint venture has a substantial effect on U.S. commerce. B. if the joint venture has any effect on U.S. commerce. C. if the joint venture was entered into in the United States. D. under no circumstances. Answer: A 66. Bango! Business, Inc., a U.S. firm, may have committed, in Chile, acts that would constitute, in the United States, violations of U.S. antitrust laws. These laws apply A. extraterritorially. B. only to signatories of the North American Free Trade Agreement. C. only to members of the World Trade Organization. D. only within U.S. borders. Answer: A 67. Qang and other foreign citizens allege human rights violations committed overseas by the government of Burma on behalf of Railway Construction Company, a U.S. firm. To seek redress for their injuries in a U.S. court, these citizens can A. allege antitrust injuries under the Sherman Act. B. bring civil suits under the Alien Tort Claims Act. C. file criminal complaints under Title VII of the Civil Rights Act. D. do nothing. Answer: B 68. Sam, or any U.S. citizen, can bring a civil suit in a U.S. court against a foreign entity for A. a tort allegedly committed in the United States only. B. a tort allegedly committed in the United States or overseas. C. a tort allegedly committed overseas only. D. no purpose. Answer: B 69. Real World Sports Corporation (RWSC) is a U.S. firm with a workplace in Switzerland. Generally, RWSC must abide by U.S. anti-discrimination laws in Switzerland A. under any circumstances. B. under no circumstances. C. unless to do so would contravene the cultural norms of Switzerland. D. unless to do so would violate the law of Switzerland. Answer: D 70. Miranda is a U.S. citizen working in Europe for Tourist Vacations, Inc., a U.S. travel agency. Tourist fires Miranda for reasons that she believes violate U.S. antidiscrimination laws. Those laws apply A. extraterritorially. B. only to signatories of the North American Free Trade Agreement. C. only to members of the World Trade Organization. D. only within U.S. borders. Answer: A Essay 71. The management of Sport Shoes Corporation, a U.S. firm, wants to expand into foreign investment and employment markets. They are considering either opening their own production facility in a foreign country or entering into a licensing agreement with a foreign firm. What are the advantages and disadvantages of each of these courses of action? Answer: One of the advantages of opening a wholly owned production facility, in the United States or in a foreign nation, is that all of the profits accrue to the owner. The disadvantages include the risk involved in opening a production facility in a foreign country. There is a possibility of the foreign government’s expropriation of the facility. Expropriation is the taking of private property for a public purpose and the paying of just compensation. Foreign governments have also sometimes confiscated the property of foreign companies. Confiscation is the taking of private property for a public purpose without just compensation. Under the act of state doctrine, U.S. courts would be reluctant to intervene, either by ordering the property returned or ordering the payment of a fair price. Thus, there could be a considerable sum of money at risk in a foreign production facility. A licensing agreement, by contrast, involves relatively little capital investment and represents less risk of loss from a confiscation or an expropriation. By entering into a licensing agreement with a foreign firm for the rights to manufacture Sport products, or to sell products under the Sport trademark, Sport eliminates the chance that its assets would be lost if they were confiscated. Of course, there will also be fewer profits and those will likely be in the form of royalties. 72. Savory Cooking Sauces, Inc., a U.S. business firm, makes and sells distinctively flavored cooking sauces. Although the recipes are secret, the ingredients could be revealed and the sauces could be reconstructed with diligent efforts. What can Savory do to prevent its products from being “decoded” and pirated abroad? Answer: One possibility is that Savory Cooking Sauces, or any U.S. firm, or any domestic firm in any nation, can license its recipe, formula, product, or process to a foreign company to avoid the theft of the trade secret. The foreign firm would obtain the right to make and sell the product according to the recipe (or formula, or right to use the process, or other trade secret) and agree to keep the information confidential and to pay royalties to the licensing firm. The royalties might be based on so many cents per unit made or a percentage of profits from units sold in a particular geographic territory. Licensing can benefit both parties to the deal. A firm that receives the license can take advantage of an established reputation. The firm that grants the license can receive income from the sale of the license or the sales of its products and may enhance its reputation through this marketing. Once a firm’s products are more widely known globally, the firm may experience an increased demand for other products that it makes or sells. Test Bank for Essentials of the Legal Environment Today Roger LeRoy Miller 9781305262676
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