To Zoom or Not to Zoom, that is the Question: How a Global Pandemic Exposed the Flaws of Global Consumer Privacy Protection Laws


By: Angel Shah


A global pandemic, caused by the novel coronavirus disease or “COVID-19”, has inundated the world, with seemingly no end in sight.[i] To try to stop the spread of this highly infectious disease, governments around the world have taken strict measures, including enacting severe lockdown orders that have shut down entire countries.[ii] Even in the United States, most states are under “shelter in place” orders, whereby people are forbidden from leaving their homes, except for essential tasks, and almost all businesses and entities are closed, except for those providing essential services.[iii] In this dystopian landscape, where almost the entire population of the world is stuck at home, the need to stay connected has risen exponentially.[iv] In particular, one communications software, Zoom, has had a meteoric rise in popularity, driven by the need for businesses, institutions, governments and individuals to stay connected. [v]

Zoom, in simplest terms, is a cloud-based video conferencing service with a “local, desktop client and a mobile app that allows users to meet online, with or without video.” [vi] Zoom also offers the ability to have a chat session inside a Zoom meeting, record meetings, share screens, collaborate online and a variety of other features.[vii] It has a both a free option, allowing up to 100 individuals to connect at one time for up to forty minutes at a time, or various paid versions of software, where up to 1000 people can connect at one time, host longer sessions, and gain access to additional features.[viii] Zoom’s ease of use and affordable pricing has made it one of the most popular video conferencing applications in the world, and is used by individuals, small businesses, schools, universities, Fortune 500 companies, and even governments around the world. [ix]

Zoom was started in 2011 by Eric Yuan, a former Cisco Webex engineer, and launched in 2013.[x] Since then, it became a global hit, becoming a “unicorn” company when it hit a $1 billion valuation in 2017, and went public in 2019 with a valuation of $16 billion.[xi] Although Zoom had an extraordinary run for the past few years, Zoom really took off during the pandemic, going from an average of 10 million daily users in December of 2019 to an average of 200 million daily users in March of 2020.[xii] All of these extra users have pushed the stock price Zoom up further, and as of April 20th of 2020, Zoom had a market capitalization of $41.86 billion.[xiii]

The surge in Zoom usage is mostly driven by the pandemic and lock down measures instituted by governments. Due to the fact that most face-to-face interactions are now forbidden, individuals, businesses, institutions, and even governments have turned to online methods of communication, with Zoom being the platform of choice for many.[xiv] Many businesses, including companies of all sizes, are hosting team meetings and working from home using Zoom. Many schools and universities around the world are using Zoom as a substitute for in-person classes.[xv] Governments are also using Zoom to communicate and stay in touch. Further, many people are using Zoom to stay in touch with friends and family, host happy hours, participate in group yoga sessions, and engage in other recreational activities online.[xvi]

The explosive growth of Zoom has not all been positive though, and has exposed many vulnerabilities and flaws in the software.[xvii] A variety of issues have popped up relating to security and privacy on the software, and all of the extra attention has resulted in increased scrutiny of the company.[xviii] All of Zoom’s issues broadly fall into two main categories: (1) issues related to the privacy practices of the company itself, and (2) issues related to the exploitation of the flaws in the software that allow third-parties to use the software maliciously.. In regards to the first set of issues, multiple news outlets have exposed the fact that Zoom was harvesting and sharing information about Zoom users without their knowledge or consent with companies such as Facebook and LinkedIn, while also not being completely truthful about the security features of the software.[xix] The second set of issues relate to the fact that hackers were able exploit software flaws to hijack Zoom meetings through the practice commonly referred to as “Zoom-bombing,” hack customer accounts, steal customer information, gain access to recorded meetings, and even remotely gain access to user’s cameras without their knowledge. [xx] The second set of issues caused particular problems in the educational setting, with uninvited intruders or Zoom bombers taking over virtual classrooms and using it to express hate speech, make inappropriate comments, and even showing obscene material to children.[xxi]

There have been a variety of allegations leveled against the company, many which are backed up by detailed investigations and strong evidence.[xxii] A Vice Motherboard investigation revealed that Zoom sent information to Facebook for iPhone users even if they did not have a Facebook account.[xxiii] In another report, a former NSA hacker discovered that, through a bug in the system, hackers could take control of a person’s webcam or audio through Zoom, as well as get root access on a Mac device.[xxiv] The FBI also released a warning about hijacking of zoom feeds, also known as “Zoom-bombing”, and reported that it had received multiple complaints about hate speech and pornographic material that had been displayed in virtual classrooms.[xxv] Additionally, there have been reports of a feature that allowed Zoom users to data-mine LinkedIn information, automated tools that could discover Zoom meeting IDs, that supposedly private video calls were viewable online, that some meetings were being routed through Chinese servers (whereby they could potentially be intercepted by the Chinese government), that Zoom accounts were being sold on the dark web, that recorded meetings could be downloaded from the cloud, and that hackers were selling Zoom vulnerabilities for as much as $500,000 on the dark web.[xxvi]

In regards to all of these issues, multiple class-action lawsuits have been filed against the company, from both users and investors.[xxvii] The first class-action lawsuit, filed on March 30, 2020 by law firm Wexler Wallace LLP, accused the company of disclosing consumer information to Facebook and potential other third-parties, without obtaining consumer consent, in violation of California’s new privacy laws.[xxviii] The second class-action lawsuit was filed on March 31, 2020, filed by Tycko & Zavarelli LLP, also alleged that the Zoom unlawfully shared information with Facebook, as well as for negligence, unjust enrichment, breach of implied contract, violation of privacy laws, amongst other charges.[xxix] A third class-action law suit was filed against Zoom on April 3, 2020 by Clarkson Law Firm, P.C., for unauthorized data sharing with Facebook, inaccurate claims about end-to-end encryption, and vulnerabilities in webcam software.[xxx] A fourth class-action law suit was filed, this time by investors, for violations of federal securities laws by having “inadequate data privacy and security measures,” for asserting that the company offered end-to-end encryption when it did not, and not taking care of these issues earlier, even though Zoom was allegedly aware of some of the problems.[xxxi] A fifth class-action lawsuit was filed on April 13, 2020, by law firm Loevy and Loevy, against Zoom, Facebook, and LinkedIn, alleging that the companies “eavesdropped” on Zoom user’s conversations and personal information, and collected or recorded this information without user consent.[xxxii]

In response to many of the allegations stated above and other privacy concerns, many companies, institutions, and countries have banned the use of Zoom. For example, Google, Siemens, Standard Chartered, SpaceX, as well as many others, have all banned the use of Zoom for company communications.[xxxiii] Some governments and public organizations have also banned the use of Zoom, especially as it was revealed that some of the information traveled through Chinese servers, including Taiwan, Germany, the United States Senate, U.S. Department of Defense, and Australian Defense Force.[xxxiv] Many school systems around the world have also banned the use of Zoom for teaching purposes, including New York City Public Schools and Clark County public schools.[xxxv] It is likely that many other companies, schools, and institutions will follow suit.

Further, it is unlikely that the lawsuits will be the extent of Zoom’s problems.[xxxvi] Zoom is already under investigation by the state attorneys general of Connecticut, New York, and Florida to determine whether Zoom “violated any laws by failing to protect users’ privacy and secure its systems.”[xxxvii] Further, privacy watchdogs and governments around the world have also expressed concern about Zoom’s practices, including regulators in Hong Kong, the United Kingdom, South Korea, New Zealand, Australia, and Singapore.[xxxviii] Moreover, Zoom has claimed that it is compliant with a variety of privacy regulations around the world including US Federal Risk and Authorization Management Program (FedRAMP), Health Insurance Portability and Accountability Act (HIPAA), EU General Data Protection Regulation (GDPR), amongst others.[xxxix] Yet, a reputed cyber security expert has stated that Zoom may have already violated the GDPR, and may face fines or investigations from regulators of various European countries.[xl] Additionally, Democratic members of Congress have urged the Federal Trade Commission to launch an official probe in regards to Zoom’s privacy practices.[xli] It is also possible that other jurisdictions may launch probes further down the road, once the extent of the damage has been assessed.

It should be acknowledged though, that although the limelight is currently on Zoom, these issues are not unique to Zoom alone. Rather, the fault lies with patchwork of privacy laws we have in place[xlii], as there are only a few laws globally that have any “teeth”, and even those are regularly violated by repeat offenders who end up only paying fines,[xliii] or worse, entering into settlement agreements without facing any penalties at all.[xliv] As such, there are no real consequences for large multi-national companies, who essentially get to “regulate” themselves[xlv], and surprisingly, often fall short of acceptable behavior.[xlvi] And even when privacy laws do exist, and on the rare chance that they are enforced, fines do not serve as effective deterrents,[xlvii] and that is assuming  if they can even be charged at all.[xlviii] My only hope is that this debacle, which has affected all aspects of our modern society, including businesses, schools, and governments, will motivate regulators to finally start taking privacy protection seriously.

With that being said, Zoom has already fixed some of the issues that have been raised,[xlix] and the founder has apologized multiple times for the shortcomings of the company.[l] Yet, it remains to be seen if that will be enough, particularly as new flaws in software and actions the company failed to take are discovered every day.[li] The most likely reason for all of these problems is that the company was unable to handle the increased usage of the platform during the pandemic, as almost all aspects of everyday life turned to Zoom, as well as all of the unwanted attention the pandemic brought to company.[lii] Now, as the company faces five class-action lawsuits, multiple probes from regulators both in the United States and abroad, as well as the fury of its consumers over its privacy practices, it remains to be seen how the company will weather the storm.[liii] The most important lesson through all of this though, for consumers of any type of widely used software, is to understand the privacy policy of any software one uses, to make sure to adjust the default settings to make oneself more secure, and to ensure that best practices are followed for whatever software is being used, particularly if it Zoom.[liv]

[i] Hilary Brueck and Anna Miller, World Health Organization Declares the Coronavirus a Pandemic, Business Insider, March 11, 2020,

[ii] Juliana Kaplan, Lauren Frias, and Morgan McFall-Johnson, A Third of the Global Population is on Coronavirus Lockdown — Here’s Our Constantly Updated List Of Countries  And Restrictions, Business Insider, (last accessed April 20, 2020).

[iii] Erin Schumaker, Here Are the States that Have Shut Down Nonessential Businesses, ABC News, April 3, 2020,

[iv] Ashley Carman, Why Zoom Became So Popular, The Verge, April 3, 2020,

[v] Id.

[vi] Keanu Gene C. Valibia, Zoom for Instructors, UC Riverside, Available at:

[vii] Id.

[viii] Zoom Meeting Plans for Your Business, Zoom, (last accessed April 20, 2020).

[ix] Nivas Ravichandran, How Zoom Grew to Millions of Businesses, Freshworks, (last visited April 20, 2020).

[x] Mansoor Iqbal, Zoom Revenue and Usage Statistics 2020, Business of Apps, April 16, 2020

[xi] Id.

[xii] Eric S. Yuan, A Message to Our Users, Zoom Blog, April 1, 2020,

[xiii] Stock Quote for Zoom Video Communications, Inc. (ZM), (last accessed April 20, 2020).

[xiv] Rae Hodge, Using Zoom While Working from Home? Here Are the Privacy Risks to Watch Out For, CNET, April 3, 2020,

[xv] Mark Liberman, Zoom Use Skyrockets During Coronavirus Pandemic, Prompting Wave of Problems for Schools, Education Week, April 3, 2020,

[xvi] Aly Walansky, Virtual Happy Hours Are The New Way To Go Out: Here’s How To Plan A Great One, Forbes, March 26, 2020,

[xvii] Rae Hodge, Zoom: Two new security exploits uncovered, CNET, April 16, 2020,

[xviii] Id.

[xix] Paul Wagenseil, Zoom Privacy and Security Issues: Here’s Everything That’s Wrong (So Far), Tom’s Guide, April 20, 2020,

[xx] Id.

[xxi] Kristen Setera, FBI Warns of Teleconferencing and Online Classroom Hijacking During COVID-19 Pandemic, FBI Boston, March 30, 2020,

[xxii] Hodge, supra note 17; Wagenseil, supra note 18.

[xxiii] Joseph Cox, Zoom iOS App Sends Data to Facebook Even if You Don’t Have a Facebook Account, Vice Motherboard, March 26, 2020,

[xxiv] Mike Peterson, Two More macOS Zoom Flaws Surface, as Lawsuit & Government Probe Loom, Apple Insider, April 1, 2020,

[xxv] Setera, supra note 21.

[xxvi] Hodge, supra note 17; Wagenseil, supra note 18.

[xxvii] Hodge, supra note 17.

[xxviii] Joel Rosenblatt, Zoom Sued for Allegedly Illegally Disclosing Personal Data, Bloomberg, March 30, 2020,; Available at:

[xxix] Second class-action lawsuit, available at:

[xxx] Third class-action lawsuit, available at:

[xxxi] Carrie Mihalcik, Zoom Sued by Shareholder Over Security Issues, CNET, April 8, 2020,; Available at:

[xxxii] Fifth class-action lawsuit, available at:

[xxxiii] Jitendra Soni, More Top Companies Ban Zoom Following Security Fears, Tech Radar, April 15, 2020,

[xxxiv] Brandon Vigliarolo, Who Has Banned Zoom? Google, NASA, and More, Tech Republic, April 9, 2020,

[xxxv] Id.

[xxxvi] Amy Miller, Zoom Faces Global Scrutiny Over Privacy Missteps as US States Begin Probes, MLex, April 3, 2020,

[xxxvii] Id.

[xxxviii] Id.

[xxxix] Zoom Privacy Policy, available at:

[xl] Kevin Townsend, Zoom’s Security and Privacy Woes Violated GDPR, Expert Says, Security Week, April 2, 2020,

[xli]Cristiano Lima, Zoom’s legal perils mount as Democrats call for FTC probe, Politico, April 7, 2020,

[xlii] Nuala O’Connor, Reforming the U.S. Approach to Data Protection and Privacy, Council on Foreign Relations, Jan. 30, 2018,

[xliii] GDPR Enforcement Tracker,

[xliv] Alfred Ng, Government Watchdog Finds Weak Enforcement of US Privacy Regulations, CNET, Feb. 13, 2019,

[xlv] Lou Mastria, A Milestone for Privacy Self-Regulation, International Association of Privacy Professionals, April 19, 2019,

[xlvi]  Jamie Condliffe, The Week in Tech: Huge Fines Can’t Hide America’s Lack of a Data Privacy Law, New York Times, July 26, 2019,

[xlvii] Id.

[xlviii] Ng, supra note 43.

[xlix] Wagenseil, supra note 18.

[l] Tilley and McMillan, Zoom CEO: ‘I Really Messed Up’ on Security as Coronavirus Drove Video Tool’s Appeal, Wall Street Journal, April 4, 2020,; Yuan, supra note 12.

[li] Natasha Singer and Nicole Perlrath, Zoom’s Security Woes Were No Secret to Business Partners Like Dropbox, New York Times, April 20, 2020,


[liii] Violet Blue, Zoom is now ‘the Facebook of video apps’, Engadget, April 10, 2020,

[liv] Best Practices for Securing Your Zoom Meetings, Zoom,

Gaming the System: Money Laundering through Microtransactions and In-Game Currencies

Alexandra Norton


With what seems like new technological advances developing daily, cybercrimes are becoming more and more common, with little to no policing in place. As of December 2018, there were more than 4.1 billion internet users in the world.[1] It is estimated that cybercrime has inflicted global losses of over one billion dollars.[2] While there are currently laws and policies in place for certain online transactions, specifically online gambling, there are no laws or regulations in place in the United States when it comes to laundering money through microtransactions or in-game currency transactions. Currently, videogames do not have any governmental regulation when it comes to monitoring currency transactions. Instead, it is up to the company itself to regulate and monitor its own transactions and to punish individuals who act immorally in the game. These punishments usually involve a ban from the game but have no legal consequences.

There are many issues faced when it comes to these new methods to commit cybercrime. With the influx of new technology, these issues will create new and possibly more efficient means to launder money. One example of these new technologies is cryptocurrency, which is a type of virtual currency that functions as a real currency but is not issued or backed by central governments.[3] The traditional methods for money laundering, such as the use of shell companies, offshore accounts, or fraudulent record keeping, are not always going to be the most effective and inconspicuous ways to launder money. Prosecutors and policy makers are currently focused on the traditional money laundering methods and not on the ones involving new technologies because the usual methods are what have been used for an extensive period of time, while the new methods are appearing as technology continues to advance. Because of these advancements, cybercriminals are beginning to turn to new ideas such as laundering money through in-game currencies and microtransactions.

Money laundering involves three steps: placement, layering, and integration.[4] Once the dirty money has been obtained, criminals place it into things such as shell corporations, companies that exist only on paper but do not have any employees or physical offices.[5] This is when most criminals are caught because placing large amounts of money into accounts without a verifiable source looks suspicious if not done carefully.[6] After the placement, the money needs to be layered or exchanged through multiple transactions so that the original source cannot be traced.[7] Finally, the laundered money is integrated back into the legitimate financial world.[8] This is usually done through bank notes, loans, or any number of recognizable financial instruments.[9]

The United States has several pieces of legislation in place to help battle this growing problem, but none of this legislation is aimed specifically at money laundering through microtransactions and in-game currencies. Congress passed the Bank Secrecy Act (“BSA”) in 1970 as the first law to fight money laundering in the United States.[10] The IRS discusses the Bank Secrecy Act, stating that it“…requires businesses to keep records and file reports that are determined to have a high degree of usefulness in criminal, tax, and regulatory matters. The documents filed by businesses under the BSA requirements are heavily used by law enforcement agencies, both domestic and international to identify, detect and deter money laundering whether it is in furtherance of a criminal enterprise, terrorism, tax evasion, or other unlawful activity.”[11] The Money Laundering and Financial Crimes Strategy Act of 1998 amended the BSA in part by requiring the U.S. Treasury and Justice Departments and Executive Bank to submit an annual National Money Laundering Strategy.[12] The U.S. government is partnered with a number of participating federal agencies to create the document that lays out objectives each year and reviews the objectives from the previous year.[13] The United States enacted the Computer Fraud and Abuse Act (“CFAA”) in 1984.[14] Unfortunately, the CFAA seems to struggle to keep up with new technologies and is almost always in a constant state of needing to be amended. Additionally, the CFAA deals more with unauthorized access or exceeding authorized access of a computer or network rather than the crimes that take place on a computer or the internet.[15] The CFAA does little, if anything, to address the new and emerging criminal activities that are taking place in cyberspace and it does not reach beyond the boundaries of the United States.

Microtransactions are just one of the many ways that criminals are laundering money as technology continues to develop. Microtransactions are systems that allows players to purchase virtual currencies, digital assets, and additional gaming content.[16] In a featured article on GameSpot, author Eddie Makuch discusses microtransactions, stating“[t]he name derives from the fact that, oftentimes, a microtransaction purchase is small in price and function, typically no more than $10. Lower-priced microtransactions in the range of 99 cents to $10 may make up the bulk of sales, but it’s not the only option. Many games, on console, PC, and mobile, offer ‘micro’ transactions that cost up to $100 or in some cases even more.”[17] Microtransactions are present in mobile apps and free-to-play model games such as League of Legends or Fortnite. Microtransactions are also present in games in which players have to initially purchase a base game, usually in the form of loot boxes; an example of these games is Overwatch. Base game purchasing occurs when an individual pays a base price for access to a game, and then the individual will pay for access to extra things within the game through microtransactions. Videogame publisher Activision is well known for using microtransactions as a source for a constant revenue stream. In 2017, Activision Blizzard reported more than $4 billion in revenue from microtransactions alone.[18]

Microtransactions are frequently used in free-to-play and mobile game markets in the form of in-app purchases.[19] Free-to-play and mobile games use microtransactions to attract players who can play the base game for free but have the option to purchase additional content through in-app purchases.[20] The free-to-play model can be attractive to some because they think that they aren’t paying anything, but, through clever scheming, game developers can lure players into spending extra money on purchases through microtransactions. An example of this would be Fortnite. Fortnite is a free-to-play game that offers cosmetics and battle passes to earn more cosmetic items.[21] In a survey conducted in 2018, 68.8% of Fortnite players said they spent money on the game and, of those who spent money, they spent an average of $84.67.[22] With over 125 million players, Fortnite is earning several hundred million dollars a month off of a free-to-play microtransactional model.[23]

Another way that criminals are laundering money is through in-game currencies. In-game currencies are exactly what they sound like: some form of currency in a virtual world. Depending on the game, in-game currency can be obtained in a variety of ways, but they all involve time and effort. Massively multiplayer online role-playing games (“MMORPGs”), such as World of Warcraft, Final Fantasy XIV, and Star Wars, all have in-game currencies and even their own in-game economies. For example, in World of Warcraft, characters can receive gold in numerous ways. Characters can loot gold off of a dead enemy or sell items in the in-game auction house and receive gold from another player, paying a fee for using the auction house that gets put back into the game economy. In MDY Industries, LLC v. Blizzard Entertainment, Inc., the United States Court of Appeals for the Ninth Circuit discusses the same idea stating that “[a]s a player advances, the character collects rewards such as in-game currency, weapons, and armor. WoW’s virtual world has its own economy, in which characters use their virtual currency to buy and sell items directly from each other, through vendors, or using auction houses.”[24]

Most games ban in-game currency transactions, but this has not stopped the market for this activity. There are websites that offer individuals the opportunity to buy and sell in-game currencies for real money. Because this act alone is not considered a crime, there is no government regulation or monitoring. It is up to the game companies themselves to try and police and monitor players who break the rules of the game. If a player is caught buying gold on World of Warcraft, Blizzard can ban that player’s account or take that gold away; the player spent their money for nothing. As mentioned previously, Blizzard monitors these types of transactions through its game and takes the gold away or bans the accounts, but there is no government monitoring or regulation, making it a perfect way for criminals to launder money.

It is not uncommon for criminals to invest into legitimate businesses to cover up a money laundering operation. Free-to-play games that rely on microtransactions could continue to develop a way for criminals to launder their money. This would require criminals to invest into the creation of a semi-successful game in order to launder the money through it. Criminals invest into real businesses to launder their money, so why not one that sells virtual, useless items?[25] Laundering money through microtransactions would be harder to track because the transactions would not draw a lot of attention or suspicion. Microtransactions, by their nature, are small transactions. Because the transactions are smaller, criminals would have a lot of small transactions being recorded multiple times. Through a free-to-play game or mobile game, microtransactions are common, and the money would not look suspicious coming through in the small increments.

Another way that criminals could launder money with microtransactions is through selling accounts on games such as Fortnite. A criminal could create an account, buy cosmetics through microtransactions with illegal money on that account, and then sell the account online for real, clean cash. Fortnite accounts can sell anywhere from $5 to $3,500.[26] Usually, in cases like this, the laundered money comes in the form of stolen credit cards. By the time the crime has been reported, the account is already sold, and the money that the criminal has received is “clean” money. If this method of laundering money was applied to the three steps of money laundering, the placement step would occur when the criminal buys cosmetics through microtransactions with the illegal money. The layering step would be also be fulfilled by the criminal using microtransactions to buy cosmetics, as there are multiple transactions that hide the original source of the money. Finally, the integration step would take place when the criminal sells the account for clean money.

According to Symantec, credit cards are the number one item being sold on underground servers, making up 28% of sales followed by bank accounts at 24%.[27] In a joint investigation with British newspaper the Independent and cybersecurity firm Sixgill, it was uncovered that Fortnite money laundering operations around the globe were being conducted in more than 5 countries.[28] Sixgill also found that Fortnite items made more than $250,000 on eBay over a 60-day period, but it is unclear how much criminals are profiting from the money laundering scheme.[29]

Because there are no government regulations in place to monitor or police money laundering through microtransactions and in-game currencies, it is currently up to the developers and companies to keep track of transactions and implement their own punishment systems. As discussed previously, Blizzard Entertainment monitors in-game transactions and flags suspicious in-game currency transactions. If the transaction proves to be illegitimate, Blizzard punishes the account by either confiscating the gold or banning it. No legal consequences occur because buying in-game currency online is not illegal, it’s just against the rules. This system applies to all individuals, not just ones who are laundering money. Blizzard’s system is not fool proof, as in-game currency transactions and buying gold online does not mean an account will automatically be flagged. Plenty of illicit transactions still slip through the cracks. Blizzard is just one example of a game publisher that does monitor its game transactions, However, there are many companies that do not, making these companies perfect targets for money launderers to clean their money.

To illustrate how a lack of laws and regulations allows criminals to launder money through microtransactions and in-game currencies, here is an example for each. If a criminal were to launder money through microtransactions, he or she could use stolen cards that he acquired through the Dark Web and use them to create an account on a free-to-play game such as Overwatch. From there, the criminal can buy loot boxes through a series of microtransactions and acquire valuable cosmetic appearances. The criminal could go as far as paying to have the account ranked up to increase the value before selling it for “clean money.” Because there are no laws or regulations about buying accounts from other people, only peer and company disapproval, this is an easy way for criminals to launder their money without government interference; there is no government involvement at all. If there was an algorithm that was able to track microtransactional purchases, in this instance for the loot boxes, it would flag and notify the company, which would then notify the government when a suspicious amount of loot boxes were being purchased.

If criminals were to launder money through in-game currencies, they could again use stolen cards and use these cards to create an account on a game such as World of Warcraft. From there, the criminals would go onto a currency selling website and buy the game currency. In World of Warcraft, the gold would be traded from the gold selling account to the buying account. Then, the account that purchased the gold would turn around and sell the gold or the account all together effectively making the money “clean money.” By having an algorithm that could identify and flag large gold transactions, Blizzard is already one step ahead of most other game companies, but there is no requirement for reporting to the government. It should be required that all game companies have to monitor in-game transactions and report any potentially illegal activity to the government for further investigation.

The United States should create a policy that makes it mandatory for companies to implement an anti-laundering algorithm or protocol to monitor and track microtransactions and in-game transactions that would be able to flag and notify the companies of potential criminal activity. After investigation, companies should then be required to report any potential criminal activity to the government for further investigation. In addition, criminal punishments must be decided for individuals who launder money through in-game currencies or microtransactions, or individuals who knew about the crime taking place rather than, at worst, simple account bans.

With new technological advances coming out daily, crimes will continue to advance as criminals look for new ways to commit their crimes. Money laundering through microtransactions and in-game currencies is still a relatively new idea that will only become a more popular method to launder money the longer that legislators’ heads are turned away. Implementation of regulations and policies as well as cooperation with international governments are necessary for any hope of battling money laundering through microtransactions and in-game currencies.

[1] Ann Mulligan & Sonal Dashani, Countering Cybercrime through Money Laundering Regimes (2016),

[2] Id.

[3] Omari Marian, Are Cryptocurrencies Super Tax Havens, 112 Mich. L. Rev. First Impressions 38 (2013).

[4] Kevin Horridge, How Money Laundering Really Works (Sept. 26, 2019),

[5] Id.

[6] Id.

[7] Id.

[8] Kevin Scura, Money Laundering, 50 AM. Crim. L. Rev. 1271, 1272 (2013).

[9] Id.

[10] Bank Secrecy Act, IRS, (Jun. 26, 2019),

[11] Id.

[12] See generally, National Money Laundering Strategy, (last visited Feb. 21, 2020).

[13] Id.

[14] 18 U.S.C. § 1030.

[15] Id.

[16] Kishan Mistry, P(l)aying to Win: Loot Boxes, Microtransaction Monetization, and A Proposal for Self-Regulation in the Video Game Industry, 71 Rutgers U. L. Rev. 537, 539 (2018).

[17] Eddie Makuch, Microtransactions, Explained: Here’s What You Need to Know (2018),

[18] Mistry, supra note 16, at 547.

[19] Erik Allison, Comment, The High Cost of Free-to-Play Games: Consumer Protection in the New Digital Playground, 70 SMU L. Rev. 449, 450-54 & n.1 (2017).

[20] Chelsea King, Note, Forcing Players to Walk the Plank: Why End User License Agreements Improperly Control Players’ Rights Regarding Microtransactions in Video Games, 58 WM. & Mary L. Rev. 1365, 1367 (2017); Yen-Shyang Tseng, Note, Governing Virtual Worlds: Interaction 2.0, 35 Wash. U. J. L. & Pol’y 547, 554 (2011).

[21] Paul Tassi, Study Says 69% of ‘Fortnite’ Players Spend Money on the Game, $85 Spent on Average (Jun. 26, 2018, 8:34 AM),

[22] Id.

[23] Id.

[24] See MDY Industries, LLC v. Blizzard Entertainment, Inc. 629 F.3d 928, 935 (2010).

[25] Steve Messner, How microtransactions and in-game currencies can be used to launder money (April 13, 2018),

[26] See generally, (last visited Feb. 21, 2020).

[27] § 9:1. Council of Europe MONEYVAL Report: Criminal Money Flows on the Internet: Methods, Trends and Multi-Stakeholder Counteraction (March 9, 2012); See also, G Data Whitepaper (2009): Underground Economy,

[28] Tamara Evdokimova, Criminals are using Fortnite to Launder Money (Jan. 24, 2019),

[29] Id.

Free Hong Kong: A Case for Independence

Erich Greiner

            I. A History of the Current Protests


            It has now been two years since a Hong Kong teenager brutally murdered Poon Hiu-Wing while travelling in Taiwan, strangling her before stuffing her body in a suitcase and disposing of the corpse near a Taipei subway station before returning to Hong Kong.[1] So doing, Chan Tong-Kai inadvertently launched a massive grassroots movement and generated a monumental debate about the role of the international community in enforcing and ensuring the human rights of others.[2]

The Hong Kong authorities eventually arrested Chan, and he confessed to the grisly murder of his then-pregnant girlfriend while vacationing in Taiwan.[3] The Taiwanese government requested that Chan be extradited to face trial and punishment.[4] But, Hong Kong could not do so because it was not party to an extradition treaty with Taiwan, despite being party to such agreements with twenty other countries including the United Kingdom and the United States.[5] Hong Kong authorities, led by their chief executive Carrie Lam and her Chinese superiors capitalized on the moment. They proposed a bill to amend Hong Kong’s extradition law, which would abandon the current language preventing extradition to “the Central People’s Government or the government of any other part of the People’s Republic of China,” in favor of allowing extradition to mainland China, Taiwan, and Macau.[6]

The proposed bill would allow individuals accused of crimes to be deported from Hong Kong to face trial in those territories, and it would exempt many commercial offenses such as tax evasion from the extradition law.[7] The government claimed that those accused of crimes would be subject to extradition only if their alleged crime carried a maximum sentence of at least seven years; that extradition would only occur on a case-by-case basis; that Hong Kong courts would render the final determination as to extradition; and that those accused of political or religious crimes would not be extradited.[8] Further, despite prior statements as early as last May that authorities would not seek to extradite Chan under the proposed law, Lam and the leadership argued that the bill was required to ensure Chan was brought to justice in Taiwan.[9]

Opposition to the bill was massive. The response of the people of Hong Kong was swift, severe, and from all members of society. They expressed concern over the bill’s ability to facilitate human rights violations at the hands of China’s ruling Communist Party.[10], [11] Critics labelled it a “Trojan Horse” and one opposing lawmaker described the government’s use of Ms. Poon’s death as “political opportunism at its worst.”[12] Debate led to physical scuffles between the supporting and opposing factions, leading to a lawmaker being carried out in a stretcher.[13] University, secondary school, international students, and church groups started opposing petitions in the hundreds.[14] Lawyers and law students marched in the streets, and a million protestors followed suit in some of the largest demonstrations since the British ceded Hong Kong to Chinese control in 1997.[15], [16]

The international community also expressed concern.[17] A United States congressional commission expressed that the bill made Hong Kong more susceptible to China’s “political coercion”.[18] Both the United Kingdom and Canada expressed concern with the “potential effect” that the new extradition law would have on their countries’ citizens living in Hong Kong, while the European Union expressed its concerns in a diplomatic note to Lam.[19]

Such fears and concerns over the underlying purpose and effects of the extradition bill seem vindicated when viewed in light of several senior Communist Party officials’ endorsements and Chinese propaganda outlets’ broadcasts declaring protestors co-conspirators with China’s enemies.[20] Though the bill was withdrawn in September, protests continued.[21] Even as the Party celebrated 70 years of rule in October, the specter of its past violations loomed in Hong Kong, only five years after the failure of the Umbrella Movement to achieve free elections and full democracy.[22], [23]

Conjuring images of the infamous Tianmen Square, police officers took increasingly violent measures against unarmed citizens. Police beat protestors with batons; they fired tear gas, rubber bullets, and even live ammunition into crowds, striking an 18-year-old demonstrator in the chest.[24], [25], [26] In the face of escalating violence, including a stabbing of a pro-Bejing lawmaker, the petrol bombing of officers, and the shooting death of another protestor by police as protestors attempted to set up road blocks, the government eventually yielded and held local council elections in November.[27] In a landslide vote, 17 out of 18 councils elected pro-democracy councilors.[28] However, the movement is far from satisfied. The people of Hong Kong have five key demands: First, for the ongoing protests not to be characterized by the government; second, that all arrested protestors receive amnesty; third, that an independent inquiry into police brutality be conducted; fourth, universal suffrage for Hong Kongese; and fifth—already met—the withdrawal of the extradition bill.[29]

It is vital that these demands are met, because the Basic Law—guarantees of the freedom of assembly and speech that were made as part of the “one country, two systems” arrangement established when Britain ceded the territory to China in 1997, expires in 2047, leaving the fate of Hong Kong and its people unclear.[30]


            II. Potential Statehood


Whether these reforms are enough to protect the people of Hong Kong remains questionable at best. Even under the Basic Law, Hong Kongese are at risk of reprisal. For instance, Mr. Lam Wing Kee, a bookseller in Hong Kong, alleges that he was abducted by authorities and charged with “operating a bookstore illegally” by Chinese authorities because he sold books critical of the Chinese leadership.[31] Other violations on the Chinese mainland have been cause for continual concern.

In 2017, China began blocking images of Winnie the Pooh behind its “Great Firewall” because social media sites and bloggers used the character to satirize the physical appearance of President Xi Jingping.[32] Most recently, a Chinese student studying at the University of Minnesota was arrested and sentenced to six months imprisonment after returning to Wuhan for tweets that contained “unflattering portrayals of a ‘national leader’”.[33] The government has rounded up hundreds of thousands of Uighur Muslims and ethnic Kazakhs, forcing them into internment camps for re-education and hard labor so that they may be turned “into a disciplined, Chinese-speaking industrial work force, loyal to the Communist Party and factory bosses.”[34]

The coronavirus outbreak has led to further human rights violations. China has ordered martial law, forcing individuals into quarantine, ended transportation in and out of the city, and made it nearly impossible for necessary food and medical supplies to enter Wuhan province, even as the death toll has reached 636 people with over 31,000 are estimated to be infected (with many experts believing the true statistics to be much higher).[35] This, coming after a Wuhan doctor passed away from coronavirus after being silenced by police despite warning about the virus in December.[36] The outbreak has led to further protests in Hong Kong, where it was announced that hundreds of citizens would be displaced from residences in order to turn those residences in to quarantine centers, and at least fifty-seven cases have been reported in the city.[37]

Article I of the United Nations Charter states in part that the purpose of the United Nations is to “develop friendly relations among nations based on respect for the principle of equal rights and self-determination of peoples.”[38]  Article 73, dealing with “non-self-governing territories”, holds that:


[m]embers of the United Nations which have or assume responsibilities for the administration of territories whose peoples have not yet attained a full measure of self-government recognize the principle that the interests of the inhabitants of  these territories are paramount, and . . . ensure, with due respect for the culture of the peoples concerned, their political, economic, social and educational advancement, their just treatment, and their protection against abuses.[39]


These principles are central to international relations, and, if violated, give cause for peoples who are denied access to redress from their government to seek secession and recognition as a state.[40], [41] Moreover, the right of secession has historically applied to states emerging from prior colonial rule, or to putative states seeking refuge from egregious human rights violations.[42] Applying international custom, it is likely that the Hong Kongese may forward a successful case for statehood if they seek to do so on customary grounds.

Moreover, applying the elements of statehood as put forth in the Montevideo Convention, to obtain statehood status, a putative state must have territory, a permanent population, a working government recognized by its people, and capacity to conduct international relations, normally measured by recognition by other states.[43] Hong Kong has long-established territorial bounds; a permanent population of native Hong Kongese as well as British and Canadian citizens; a newly elected operating council with the support of its people; and, as an economic and political hub, has been backed by major United Nations’ members including the United Kingdom, the United States, France, Canada, and Australia.[44], [45] Hong Kong has also entered into treaties including the aforementioned extradition treaties with 20 states including the United States and the United Kingdom, justifying recognition under both the Declaratory Theory of Recognition—in which a putative state that meets the Montevideo test is a state—or the Constitutive Theory that requires formalized evidence of recognition of the putative state by the international community at large.[46], [47]

Therefore, the people of Hong Kong and the international community would be justified according to international law in taking all steps necessary to ensure the rights of the people of Hong Kong by pursuing statehood and seceding from the control of mainland China and its Communist regime.[48] The Security Council cannot and should not stand idly by as abuses of human rights continue. Failure to impose sanctions, diplomatic pressure, or consider deploying peacekeeping forces will only embolden President Xi Jinping, since he has not been held accountable for his threat to end any separatist movement with “bodies smashed and bones ground to powder.”[49]

[1] Daniel Victor and Tiffany May, The Murder Case That Lit the Fuse in Hong Kong, N.Y. Times, June 15, 2019,

[2] Id.

[3] Id.

[4] Hong Kong-China Extradition Plans Explained, BBC, Dec. 13, 2019,

[5] Id.

[6] Id.

[7] Id.

[8] Id.

[9]  Victor and May, Supra note 1.

[10] Supra note 4.

[11] Victor and May, Supra note 1.

[12] Id.

[13] Id.

[14] Supra note 4.

[15] Id.

[16] Victor and May, Supra note 1.

[17] Supra note 4.

[18] Id.

[19] Id.

[20] Victor and May, Supra note 1.

[21] The Hong Kong Protests Explained in 100 and 500 Words, BBC, Nov. 28, 2019,

[22] Id.

[23] Victor and May, Supra note 1.

[24] Editors, Tianmen Square Protests, History, May 31, 2019,

[25] Victor and May, Supra note 1.

[26] Supra note 21.

[27] Id.

[28] Id.

[29] Id.

[30] Id.

[31] Supra note 4.

[32] Stephen McDonnell, Why China Censors Banned Winnie the Pooh, BBC News, July 17, 2017,

[33] Bethany Allen-Ebrahimian, University of Minnesota Student Jailed in China Over Tweets, Axios, Jan. 23, 2020,

[34] Chris Buckley and Austin Ramzy, China’s Detention Camps for Muslims Turn to Forced Labor, N.Y. Times, Dec. 16, 2018,

[35] Amy Qin, Steven Lee Myers, and Elaine Yu, China Tightens Wuhan Lockdown in ‘Wartime’ Battle with Coronavirus, N.Y. Times, Feb. 6, 2020,

[36] Id.

[37] Jessie Pang, Hong Kong Protestors Rally Against Planned Virus Quarantine Centers, Reuters, Feb. 16, 2020,

[38] U.N. Charter art. I, para. 2 (emphasis added).

[39] U.N. Charter art. 73, para 1(a) (emphasis added).

[40] In re: Secession of Quebec, 2 S.C.R. 217 (1998).

[41] Theodore Christakis, Secession, Oxford Bibliographies, May 25, 2016,

[42] Id.

[43] Convention on Rights and Duties of States adopted by the Seventh International Conference of American States, Dec. 26, 1933, 49 Stat. 3097,

[44] History,

[45] Supra note 21.

[46] Supra note 4.

[47] Leonhardt van Efferink, William Worster: Sovereignty—Two Competing Theories of State Recognition—William Worster, Exploring Geopolitics, Feb. 2010,

[48] Excerpt of Kofi Annan’s Report on UN Reform, Mar. 21, 2005, (In relevant part, “But if national authorities are unable or unwilling to protect their citizens, then the responsibility shifts to the international community to use diplomatic, humanitarian and other methods to help protect the human rights and well-being of civilian populations. When such methods appear insufficient, the Security Council may out of necessity decide to take action under the Charter of the United Nations, including enforcement action, if so required.”).

[49] Supra, note 4.

Day Zero: Blessing the Rains in South Africa

Meagan McNeely


In 2018, after years of below-average rainfall[1], the South African government announced the impending arrival of “Day Zero,” the day on which city tap water would be officially turned off.[2] The city of Cape Town, South Africa, had a population of four million residents in 2018.[3] The city prepared “two hundred emergency water stations;” each station was meant to serve twenty thousand residents.[4] In order to avert the impending crisis of Day Zero, the city of Cape Town implemented numerous water restrictions. These restrictions were largely successful; in May 2018, Day Zero was pushed back.[5] Now, in January of 2020, Day Zero serves as both a story of success and a grim reminder of the trials which lie ahead. With rapid climate change, political unrest, and unprecedented population growth, cities across the world should take note of South Africa’s initiatives to prevent future water crises.

After the initial announcement of Day Zero, Cape Town residents were asked to use only fifty liters of water per day.[6] For context, the typical American uses a minimum of three hundred liters per day; twenty-five liters equals roughly four minutes in the shower.[7] Households using more than the allotted fifty liters were fined or, in extreme cases, had a meter installed that automatically shut off their water.[8] It became illegal to fill a swimming pool with city water; instead, citizens often used their pools for emergency bathing and water supply.[9] Cafes began using paper cups and plates to eliminate the need for excessive dishwashing, and city-operated parks and golf courses were functionally abandoned.[10] By the time the reservoirs and dams were at a mere one-third of overall capacity, the fifty-liter restriction was less than the minimum amount recommended by the United Nations “for domestic water needs.”[11] With Day Zero hanging overhead, the permitted daily usage of water was to be reduced to no more than twenty-five liters per day.[12]

With the criminalization of typically simple tasks such as washing a vehicle, Cape Town residents became creative in their conservation efforts.[13] Showering over a bucket in order to catch and reuse water, flushing toilets once a day, and only washing clothing when absolutely necessary became common techniques to conserve water.[14] In spite of these efforts, “water trafficking” became an issue.[15] While illegal to actually charge for well or river water, traffickers could “charge for labor and transport.”[16]  This became a lucrative business, yet it remained in a “legal gray area.”[17]

The city of Cape Town also made concessions. Beginning with the cessation of watering municipal facilities such as public parks, the city also reduced water allocation to fruit farms.[18] While hospitals and other important civic structures maintained their water usage, Day Zero affected all residents, agriculturists, and hospitality workers.[19] The city allowed nighttime irrigation, implemented the reparation of infrastructure, and approved potential desalination construction.[20] City officials also took measures to reduce water pressure to minimize leakage and subsequent water loss.[21]

By August 2019, the dams in Cape Town were over eighty percent capacity.[22] Day Zero came and went.[23] Partially credited to long overdue rains, the conservation efforts of the city of Cape Town and its residents prevented the manifestation of a full crisis. Such efforts should act as a model to other world cities facing water shortages and potential crises.

Cities with large populations, such as Mexico City and Jakarta, are already having structural problems. One-fifth of Mexico City residents only have tap water for a few hours per week.[24] The city of Jakarta is essentially sinking due to the dire need to pull up ground water.[25] Australia voiced concerns, reporting that it may run out of water in approximately ten years.[26] Southern California experienced a five-year drought, causing agricultural issues and widespread fires.[27] These cities are not alone in this risk; many cities with “inadequate infrastructure” and unsanitary conditions could easily find themselves in a water crisis.[28] Further, political stability and the looming threat of rapid climate change make worldwide water famine a practical reality.[29]

Just as Day Zero came and went for South Africa, many large cities are likely to narrowly avoid the catastrophic consequences of simply not having enough water. Citizens of the world should begin making conservation efforts and become more aware of excessive usage. While climate change and political dynamics may play a role, the deciding factor in avoiding any crisis is the action of the people. It might not always rain, and the world must be prepared.

[1] Charlotte Edmond, Cape Town Almost Ran Out of Water. Here’s How it Averted the Crisis., World Economic Forum (Aug. 23, 2019),

[2] Craig Welch, Why Cape Town is Running Out of Water, and Who’s Next, Nat’l Geographic (Mar. 5, 2018),

[3] Christian Alexander, Cape Town’s ‘Day Zero’ Water Crisis, One Year Later, City Lab (Apr. 21, 2019),

[4] Welch, supra note 2.

[5] Krista Mahr, How Cape Town Was Saved From Running Out of Water, Guardian (May 4, 2018, 8:04 AM),

[6] Welch, supra note 2.

[7] Welch, supra note 2.

[8] Mahr, supra note 5.

[9] Aryn Baker, What It’s Like to Live Through Cape Town’s Massive Water Crisis, Time, (last visited Jan. 21, 2020).

[10] Id.

[11] Baker, supra note 9.

[12] Id.

[13] Edmond, supra note 1.

[14] Mahr, supra note 5.

[15] Baker, supra note 9.

[16] Id.

[17] Id.

[18] Mahr, supra note 5.dian

[19] Baker, supra note 9.

[20] Mahr, supra note 5.rdian

[21] Edmond, supra note 1.

[22] Id.

[23] Id.

[24] Welch, supra note 2.

[25] Id.

[26] Id. (Information accurate as of the date this article was written; subsequent wildfires may affect this number.)

[27] Id.

[28] Id.

[29] Id.

Parallel Imports and the Principle of Exhaustion: The First Sale Rule in International Commerce

Kyle C. Williams


The lack of harmony in international trade law regarding parallel imports of goods that are protected by intellectual property (IP) rights has created challenges for IP owners doing business in foreign markets. Many jurisdictions differ with respect to the policies and laws prohibiting or allowing parallel imports of goods protected by intellectual property rights.[1] However, preventing IP owners from using their rights to monopolize the re-sale of protected products from third parties can benefit fair trade and competition policy. Because each jurisdiction differs in policy, IP owners must consider the law of the jurisdiction where a potential licensee/distributor operates for the sale of a protected product to determine whether its products may be re-sold in competition with the IP owner in their domestic market.[2] The principle of exhaustion of intellectual property rights will determine whether an IP owner may prevent a third-party purchaser re-selling a product as a parallel import in the IP owners’ domestic market.


International jurisdictions have trade policies that follow the principle of either national exhaustion or international exhaustion regarding the extent of intellectual property rights after a particular product has reached the market.[3] Under a national exhaustion regime, the IP owner loses the right to restrict trade of a product using its protected IP in the country where it was first put into commerce.[4] However, the IP owner reserves the right to restrict the first sale of a product using its protected IP in any other jurisdiction.[5] This form of the principle allows for the IP owner to maintain control over their rights and retain the ability to authorize re-sale in exchange for additional compensation in a licensing agreement with a foreign distributor/manufacturer.


Under an international exhaustion regime, the IP owner loses the right to restrict trade of a product using its IP after it has first been put to commerce wherever the product has been sold. This form of the exhaustion principle effectively prohibits the IP owner from preventing third-parties from re-selling their products both abroad and in the IP owners’ domestic market.[6] Intellectual property law in the US provides the IP owner with the exclusive right to benefit from the sale of a protected product in most cases. Once the first sale rule has been met, however, the policies of the jurisdiction where the product was sold dictate whether those rights remain in effect.[7] The adoption of the first sale rule can stimulate growth within the market by supporting competition and a stable price for many protected consumer goods.


  1. Intellectual Property Rights and Parallel Importation


Despite the attempt to establish uniformity of intellectual property rights internationally, regulation of parallel imports has not been consistent amongst many of the world’s most prominent international partners. Trademark, patent, and copyright law in the US, for example, each address the issue of parallel imports differently. Moreover, Article 6 of the agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) asserts that the issue of exhaustion shall not be addressed by the agreement.[8] The consequence is that each jurisdiction on the international stage will decide whether to have a national exhaustion regime or an international exhaustion regime. The US applies an international exhaustion regime through the use of the first sale rule, requiring IP owners to rely on other mechanisms to address parallel imports.


  1. US Trademark Protection against Parallel Imports


Trademark Law in the US limits the tools available for IP owners to protect against parallel imports. In Matrix Essentials, Inc., the Fifth Circuit held that liability under trademark infringement is predicated on a finding that the infringers’ activities are likely to cause confusion.[9] In order to find infringement, the consumer must either be misled with respect to defects in the goods or be confused regarding whether the seller is authorized by the manufacturer/IP owner to sell the goods purchased in good faith.[10]


Citing Shell Oil Co., the fifth circuit agreed that trademark law does not usually apply to the sale of genuine goods that contain the mark of the legal IP owner even if those sales are conducted without the IP owners’ consent.[11] Thus, if the goods are not counterfeit, were acquired legally, contain the IP owners mark, and fit the quality control standards of the IP owner, there can be no infringement for re-sale.[12]


US trademark law does provide protection for IP owners through the Lanham Act. When goods sold through a third-party are protected by the original IP rights, and are materially different from those sold by the IP owner, the Lanham Act provides a remedy for cases of infringement.[13] Section 32(1) creates a remedy for the use of civil actions against infringement of registered trademarks.[14] Section 42 allows the customs and border patrol to prevent imports of goods that infringe both registered and unregistered trademarks.[15] Section 43(b) allows a party to create a civil action to enjoin importation of any goods that are likely to infringe on a registered or unregistered trademark.[16] Courts in the US have found that even subtle differences are enough since the standard is a low bar.[17] However, these protections do not solve for the re-sale of identical goods put into the domestic market.


Additional federal statutory protection against parallel imports exist in the 1930 Tariff Act. Section 526 of the Act blocks parallel imports of goods protected under a trademark owned by a US person without written consent, regardless whether the goods are identical or materially different.[18] However, Section 526 only applies to goods manufactured outside the US, and does not apply when the US person who owns the trademark also owns a trademark for the goods in the manufacturing country, or a corporate affiliation with a foreign manufacturer.[19] Thus, Section 526 may protect a US IP owner of a registered trademark from parallel imports sold in their domestic market as a biproduct of a licensing agreement with a foreign distributor, but will not protect against third-party sales if the foreign distributor is a parent or subsidiary corporation of the IP owner.


  1. US Copyright Protection against Parallel Imports


Under the Copyright Act, the owner or exclusive licensee of a federal copyright maintains the exclusive right to import and distribute materials using that copyrighted material in the United States.[20] However, the first sale rule limits this right of importation and distribution by only providing the IP owner the right to control the first public sale, while granting no rights over subsequent resales of the same copyrighted material.[21] US courts had differing opinions as to whether the Copyright Act protected against the resale of copyrighted products if those products were manufactured abroad until the US Supreme Court addressed this issue in Kirtsaeng.


Court in Kirtsaeng held that the first sale rule applies to goods protected by US Copyright Law regardless of whether the goods were manufactured in the US or abroad.[22] The Court found that because the product was brought to sale by the IP owner, and because there are no geographical restrictions on where the first sale rule applies, the IP owner/manufacturer could not prevent Kirtsaeng from creating a parallel import of the copyrighted material.[23] Thus, the rationale of the first sale rule would apply in any jurisdiction after the IP owner put the goods to market anywhere in the world. Therefore, Copyright Law in the US also provides limited protection against parallel imports.


  1. US Patent Law Protection against Parallel Imports


Under 35 U. S. C. §154(a) a US Patent holder has the right to “exclude others from making, using, offering for sale, or selling [its] invention throughout the United States or importing the invention into the United States.”[24] The Supreme Court, however, has affirmed in Impression Products, Inc. that once the patentee sells one of its protected products the patentee can no longer control the patented item through the patent laws because those rights will have been exhausted.[25] The Court reasoned that because the purpose of patent law is for the patentee to receive his/her reward for the use of his/her invention, that law furnishes “no basis for restraining the use and enjoyment of the thing sold.”[26] Thus, the first sale rule extends to all applicable intellectual property rights provided by US federal law. Protection against parallel imports is therefore limited in the jurisdiction of the United States.


  1. International Law and Parallel Imports


Most nations around the world utilize an international exhaustion regime. However, many nations include specific variations on the core principle. The United States and Canada, for example, both use an international exhaustion regime based on a standard of whether the parallel import is materially different from the IP owner’s original product.[27] If no material differences are found then the product may be imported into the country subject to national competition law by state or province.[28]


Some nations and international blocs have national exhaustion regimes within their borders. For example, the European Union (EU) prohibits IP owners from restricting the trade of parallel imports within its member states, while requiring each member state to block parallel imports from outside the EU.[29] The EU prohibits any individual member state from operating an international exhaustion regime in an effort to promote free trade policies amongst its member states while restricting foreign trade.[30] Similar to the examples set by North America and Western Europe, most nations apply a national or international exhaustion regime under the first sale rule to address parallel imports and IP rights.


  1. International Exhaustion Regimes


Many prominent players in international trade operate within an international exhaustion regime. Australia, Singapore, China, Hong Kong, and Japan all operate within this type of regime. Although all of these nation states follow the international exhaustion principle, they all approach the policy differently.


Under Section 123 of the Australian Trademarks Act 1995, a parallel importer may claim a defense to trademark infringement if the goods have been legally marked by the IP owner, or if the mark was applied with the IP owners’ consent.[31] Under Schedule 2 to the Competition and Consumer Act 2010, IP owners may protect against trademark infringement where the parallel importer makes a false representation regarding a performance characteristic, use, benefit, warranty, guarantee, or country of origin information that is different from the actual IP owners product.[32] This is similar to the “material differences” standard used in North America to prove infringement.


China does not currently have legislation in place to regulate parallel imports, but Chinese customs may prevent physical goods from entering the country that violate Customs protection of intellectual property rights.[33] China has avoided many cases regarding parallel imports in its courts because multinational corporations usually manufacture products in China and export them into other jurisdictions.[34] The low cost of manufacturing goods in China helps to prevent most parallel importers from purchasing goods at a lower price elsewhere and selling them into China.[35] At present, parallel imports freely exist without restriction in the Chinese market, so the nation can be considered to be under an international exhaustion regime by proxy. However, without clear legislation or binding case law precedent, a definitive regime cannot be established.[36]


In contrast to the ambiguity for treatment of parallel imports in mainland China, Hong Kong has a relatively clear international exhaustion regime. With respect to trademark law, Hong Kong mirrors the first sale rule of the United States in that it looks to whether the protected goods have been altered from the original standard put to market by the IP owner, and whether the goods will harm the distinctive character of the trademark.[37] Upon the enactment of a revised copyright law in 2007, Hong Kong now includes a far more protectionist standard against parallel imports for goods under copyright than with trademarks.


It is an actionable offense in Hong Kong to sell imported parallel copies of goods protected by copyright for any business purpose to the public, unless the good is computer software.[38] Additionally, the importation of genuine goods for educational purposes is allowed as a form of fair use within its borders.[39] Hong Kong also provides a criminal action as a remedy if a party sells, or imports for sale, goods that are protected by copyright (with exceptions for computer software, within the previous 15 months of the import.)[40] A criminal action is also available for the parallel import of protected motion pictures made available to a viewing public.[41] Thus, Hong Kong has a hybrid international exhaustion regime.


In Japan, the so-called “Fred Perry” case, heard by the Supreme Court of Japan, established the rule on parallel imports in that jurisdiction. In the Fred Perry case, a party brought suit against a parallel importer after goods associated with a valid international licensing agreement entered into the Japanese market in competition with the IP owner of the marks used for those goods. The Supreme Court of Japan held that if the goods sold in the domestic market are genuine goods produced with the consent of the IP owner, from an identical source and with identical quality, the parallel import cannot violate Japanese trademark rights.[42] Therefore, parallel imports in Japan follow the international exhaustion regime under a version of the first sale rule.


  1. National Exhaustion Regimes


Although most industrious nations follow some form of international exhaustion for the regulation of parallel imports using IP rights, some follow the national exhaustion model despite the global focus on free trade policy. The Philippines and Russia, both hybrid national exhaustion regimes, maintain protectionist policies regarding the creation of parallel distribution channels for IP protected products.


The Philippine system is a hybrid national regime because only copyright and patent IP owners may restrict parallel imports, while trademark IP owners must endure competition from parallel distribution channels.[43] Trademark law in the Philippines permits the importation of genuine products sourced from the IP owner of the mark used on a given product.[44] The law does, however, prohibit the copying or simulation of trademarked goods.[45] In Solid Triangle Sales Corp. v. The Sheriff of RTC Quezon City, the Supreme Court of Manila held that only in cases of fraud or deceit may a parallel importer be found liable of unfair competition based on whether the imported product is passing off as something different.[46]


Section 190 of the IP Code authorizes the importation of copyright protected works, where the IP owner is a domestic producer, only when the work is not available in the Philippines and is in the personal luggage of a natural person.[47] Additionally, the amount of copies must not exceed three in total.[48] The law does not, however, address commercial quantities of genuine goods under protection of copyright law.[49] Thus, the courts may have discretion to determine the fate of a parallel importer that has been accused of copyright infringement.


Patent law in the Philippines is much more concrete regarding parallel imports of IP protected products. Where the subject matter of the patent is a product, the IP owner maintains the right to restrict an unauthorized person or entity from making, using, offering for sale, selling, or importing that product.[50] Although there are limitations on an IP owners’ rights after the protected product has been put to sale, those rights only effect domestic producers, not foreign distributors.[51] Thus, Philippine patent law maintains a national exhaustion regime with respect to most of its IP rights related to the activity of parallel importation.


Maybe insert a more concrete transition into talking about Russia? For many years, parallel imports of IP protected goods into the Russian market were prohibited and considered counterfeit.[52] If parallel goods were caught by customs agents they would be confiscated for a period of 10 days allowing for the Russian IP owner to execute a civil suit to have them destroyed following payment of court ordered damages.[53] In 2018, the Russian Constitutional court held that although there is a conflict of interest between IP trademark owners and parallel importers, Russia maintains a policy of national/regional exhaustion of IP protection, so parallel imports are prohibited.[54]


Russian courts have, however, begun the process of liberalizing the policy against parallel importation. The Constitutional Court has also held that IP owners should be barred from abusing their rights by restricting the import of goods that meet unique public interests.[55] The courts have also used their discretion in judgements to lower damages for cases of parallel imports of genuine goods rather than making damages equal to a judgement for the sale of counterfeit goods.[56] As a member of the Eurasian Economic Union, there is international exhaustion between the member states, but like the EU, a practice of national exhaustion applies to all foreign parallel imports.[57]


  1. Rationale and Policy Considerations


Globalization has sparked a wildfire of free trade policy across the industrial world. Naturally, to promote free trade policy, the sale of goods must be allowed to move between markets with minimal restraint. However, producers must have a means to protect themselves and their work product. Intellectual property rights provide one mechanism to protect those interests. On the other hand, IP rights offer an opportunity to abuse free market principles by promoting activity that restricts healthy competition.[58] Adopting a policy of exhaustion is an attempt to regulate the potential abuse of IP rights while protecting foreign and domestic producers.


Parallel importation on the global market does provide a nuisance to IP owners, but there is great benefit in promoting the activity. Owners of IP bring a product to market with set prices and launch dates. This activity allows producers to exert a large amount of control over consumer access and competition in the region where sales are being executed by effectively promoting market segmentation.[59] Thus, the decision to use either an international or national/regional exhaustion regime for IP rights reflects economic competition policy of the country in question. Therefore, the strength of the domestic economy may indicate which regime will evolve in that country.


Intellectual property rights confer a monopoly over what amounts to an intangible asset.[60] This asset may be affixed to any number of physical products that enter the market anywhere in the world. The IP monopoly is intended to provide the IP owner the right to profit off of its inventive work product, but under the principle of exhaustion that monopoly does not extend past the sale of an individual product that has been affixed with the protected IP after it has been put into commerce.[61] This restriction on the extension of IP rights to prevent parallel imports preserves an important  channel for commerce that benefits competition and often strengthens the international economy.

[1] Christopher Heath, Parallel Imports and International Trade, WIPO, July 9, 1999, at 3, par. 1 Available at:

[2] Michala Meiselles, Hugo Wharton, International Licensing Agreements: IP, Technology Transfer and Competition Law, 32-34, par. 4 (2018) Available at:

[3] Fabio Giacopello, Parallel import: The Battle Between Safe and Cheap, HFG Law & Intellectual Property, Last updated: 3 Apr. 2019, at 1, par. 5 Available at:

[4] Id.

[5] Id.

[6] Id.

[7] Mary LaFrance, Wag the Dog: Using Incidental Intellectual Property Rights to Block Parallel Imports, 20 Mich. Telecomm. & Tech. L. Rev. 45, 51 (2013). Available at:

[8] TRIPS: Agreement on Trade-Related Aspects of Intellectual Property Rights, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1C, 1869 U.N.T.S. 299, 33 I.L.M. 1197, Art. 6 (1994) Available at:

[9] Matrix Essentials, Inc. v. Emporium Drug Mart, Inc., of Lafayette, 988 F.2d 587, 590 (5th Cir. 1993)

[10] Id.

[11] Id.

[12] Id.

[13] Mary LaFrance, Wag the Dog: Using Incidental Intellectual Property Rights to Block Parallel Imports, 20 Mich. Telecomm. & Tech. L. Rev. 45, 52 (2013) Available at:

[14] 15 U.S.C. § 1114(1) (2012)

[15] Id.

[16] Id.

[17] Mary LaFrance, Wag the Dog: Using Incidental Intellectual Property Rights to Block Parallel Imports, 20 Mich. Telecomm. & Tech. L. Rev. 45, 53 (2013) Available at:

[18] 19 U.S.C. § 1526 (2012)

[19] Mary LaFrance, Wag the Dog: Using Incidental Intellectual Property Rights to Block Parallel Imports, 20 Mich. Telecomm. & Tech. L. Rev. 45, 55 (2013) Available at:

[20] 17 U.S.C. § 602(a)(1) (2012)

[21] Mary LaFrance, Wag the Dog: Using Incidental Intellectual Property Rights to Block Parallel Imports, 20 Mich. Telecomm. & Tech. L. Rev. 45, 58 (2013) Available at:

[22] Kirtsaeng v. John Wiley & Sons, Inc., 568 U.S. 519, 553, 133 S. Ct. 1351, 185 L. Ed. 2d 392 (2013)

[23] Id.

[24] 35 U. S. C. §154(a)

[25] Impression Prod., Inc. v. Lexmark Int’l, Inc., 137 S. Ct. 1523, 1531, 198 L. Ed. 2d 1 (2017)

[26] Id. at 1532.

[27] Impression Prod., Inc. v. Lexmark Int’l, Inc., 137 S. Ct. 1523, 1531, 198 L. Ed. 2d 1 (2017); Dupont of Canada Ltd. v. Nomad Trading Co. (1968) 55 CPR 97

[28] Id.

[29] Mary LaFrance, Wag the Dog: Using Incidental Intellectual Property Rights to Block Parallel Imports, 20 Mich. Telecomm. & Tech. L. Rev. 45, 76 (2013). Available at:

[30] Id.

[31] Trade Marks Act 1995, (Cth) s 123 (Austl.)

[32] Competition and Consumer Act 2010 (Cth) sch. 2 (Austl.); Star Micronics Pty Ltd. v. Five Star Computers Pty Ltd. (1991) 22 IPR 473

[33] Article 3, Regulations of the People’s Republic of China on Customs Protection of Intellectual Property Rights (2004) Available at:

[34] Daniel Chow, Exhaustion of Trademarks and Parallel Imports in China, 51 Santa Clara L. Rev. 1283, 1286 (2011). Available at:

[35] Id.

[36] Id. at 1309.

[37] Section 20, Trade Marks Ordinance (Cap. 559 of the Laws of Hong Kong)

[38] Copyright Ordinance (Cap. 528 of the Laws of Hong Kong)

[39] Angela Wang & Co, Parallel Importation of Goods in Hong Kong and Mainland China (Part I – Hong Kong), MONDAQ, Last updated: 25 Feb. 2008, at 1, par. 11 Available at:

[40] Id.

[41] Id.

[42] Case H14 (Ju) 1100, Judgment on February 27, 2003 (H15) Available at:

[43] Ignacio S Sapalo, PHILIPPINES: PARALLEL PROBLEM, SVBB, 01 October 2007, at 1, par. 2, Available at:

[44] Section 166 of Republic Act 8293, the Intellectual Property Code (IP Code)

[45] Id.

[46] Solid Triangle Sales Corp. v. The Sheriff of RTC Quezon City, Branch 93, 370 SCRA 509 Available at:

[47] Ignacio S Sapalo, PHILIPPINES: PARALLEL PROBLEM, SVBB, 01 October 2007, at 1, par. 8, Available at:

[48] Id.

[49] Id.

[50] Section 71(a), Rep. Act No. 8293 (Intellectual Property Code), as amended by Rep. Act No. 9502 Available at: https://PH_Intellectual-Property-Code-of-the-Philippines-Republic-Act-No-8293-2015-Edition.pdf

[51] Ignacio S Sapalo, PHILIPPINES: PARALLEL PROBLEM, SVBB, 01 October 2007, at 1, par. 10, Available at:

[52] Olga Yashina, Russian Federation: Parallel Imports In Russia: Same Game, Different Rules, MONDAQ, Last updated: 3 December 2018, at 1, par. 1, Available at:

[53] Id.

[54] Id. at 8.

[55] Id. at 10.

[56] Id at 12.

[57] Id. at 16.

[58] E. Bonadio, Parallel Imports in a Global Market: Should a Generalized International Exhaustion be the Next Step?, European Intellectual Property Review, 33(3), 1 (2011) Available at: Imports in a Global Market.pdf;Exhaustion

[59] Keith E. Maskus, Economic Perspectives on Exhaustion and Parallel Imports, CALBOLI 9781783478705 PRINT (M3966) (G).indd, 106 (2016) Available at:

[60] E. Bonadio, Parallel Imports in a Global Market: Should a Generalized International Exhaustion be the Next Step?, European Intellectual Property Review, 33(3), 1 (2011) Available at: Imports in a Global Market.pdf;Exhaustion

[61] Id.