Samsung was hit with a patent infringement lawsuit yesterday over an emoticon patent (see below). Plaintiff Varia Holdings LLC charges that Samsung mobile phones violate its 2007 U.S. Patent (No. 7,167,731) for an “Emoticon Input Method and Apparatus.”
Earlier this month, I wrote about Amazon terminating its Amazon Associates program in California in wake of the Golden State passing ABX1 28, a new law that imposed use tax collection duties on certain out-of-state retailers.
Last week, Amazon upped the stakes when Charles T. Halnan, an Amazon lobbyist, submitted a proposed statewide referendum to Attorney General Kamala D. Harris regarding Section 1 of ABX1 28. That section states that retailers with an affiliate or corporate nexus with the State of California must collect use taxes from their California customers who have purchased tangible personal property.
Two days ago, Amazon sent out a “Notice of Contract Termination Due to Potential New California Law” to its Amazon Associates in California. The letter warned that Amazon would terminate its affiliate program with California residents if the state required out-of-state retailers, such as Amazon, to start collecting use taxes if they paid referral commissions to persons within the state.
For well over a decade, the Amazon Associates Program has worked with thousands of California residents. Unfortunately, a potential new law that may be signed by Governor Brown compels us to terminate this program for California-based participants. It specifically imposes the collection of taxes from consumers on sales by online retailers – including but not limited to those referred by California-based marketing affiliates like you – even if those retailers have no physical presence in the state.
We oppose this bill because it is unconstitutional and counterproductive. It is supported by big-box retailers, most of which are based outside California, that seek to harm the affiliate advertising programs of their competitors. Similar legislation in other states has led to job and income losses, and little, if any, new tax revenue. We deeply regret that we must take this action.
As a result, we will terminate contracts with all California residents that are participants in the Amazon Associates Program as of the date (if any) that the California law becomes effective. We will send a follow-up notice to you confirming the termination date if the California law is enacted.
Amazon is no stranger to tax disputes. Thus far, the typical tax claim concerning the online retail goliath involves its obligation to collect sales taxes. Several states have contended that the presence of Amazon Associates within its borders was sufficient to meet the substantial nexus mandated by the Commerce Clause in order for a state to require that a retailer collect sales taxes for purchases by residents within the state. Amazon usually “fixes” that problem by terminating its Associates in the complaining state.