An Ars Technica article titled Bill Would Penalize Companies for Aiding Internet Censorship describes an interesting pending bill that includes a provision for punitive damages against companies that give up user information to would-be censors or block content from US government sites. As summarized by Ars Technica:

“US-based companies could be held liable for helping officials in other countries censor the Internet, if a bill proposed by House Representative Chris Smith (R-NJ) is approved. Smith recently announced his plans to push the Global Online Freedom Act (HR 275) to the House floor for voting after having lobbied human rights organization Reporters Without Borders for support. Among other things, the Global Online Freedom Act will bar US companies from disclosing personally-identifiable information about a user, except for ‘legitimate foreign law enforcement purposes.’

‘American high-tech firms have produced the technology and know-how that has led to a modern-day information revolution,’ Smith said in a statement. ‘Sadly, however, instead of working to allow everyone to benefit from these advancements, these same high-tech firms are colluding with dictators and tyrannical regimes such as China to suppress human rights information and punish pro-democracy advocates.’

Among other things, the Act appears to be a direct response to the furor over Yahoo’s involvement in outing a number of Chinese dissidents to the government, resulting in their arrest and imprisonment. At least two Chinese pro-Democracy advocates have filed lawsuits against Yahoo for turning over their e-mails to the government, but Yahoo has said repeatedly that it simply complied with the requests of local law enforcement and was not aware of the nature of the investigations. . . .

The Global Online Freedom Act would not only prevent companies like Yahoo from giving up the goods to totalitarian regimes, but would also prohibit US-based Internet companies from blocking online content from US government or government-financed web sites in other countries. When it comes to non-government sites, the Act would require companies to disclose to the newly-created Office of Global Internet Freedom the terms that they do filter, and for the Office to continually monitor these filtered terms.

If the companies violate any of these new restrictions, they could face civil and criminal penalties of up to $2 million, and aggrieved citizens (those who have suffered from the companies’ violations, like the Chinese dissidents discussed above) are free to pursue punitive damages and other legal remedies from the offenders.”

The current version of the bill is available here. The official summary of the bill is available here.

The specific provision on punitive damages provides: “(c) Private Right of Action- Any person aggrieved by a violation of this section may bring an action for damages, including punitive damages, or other appropriate relief in the appropriate district court of the United States, without regard to the amount in controversy, and without regard to the citizenship of the parties.”

According to LegalNewsline.com, Utah’s attorney general is open to the idea of capping punitive damages in order to preserve the state’s favorable legal climate. As we mentioned last week, Utah ranked 5th in the recent Harris Poll/U.S. Chamber of Commerce survey of in-house corporate counsel. The State Farm v. Campbell case apparently did little to tarnish Utah’s reputation as a favorable venue for defendants, even though the Utah Supreme Court approved a $145 million punitive damages award (compared to $1 million in compensatory damages) which the U.S. Supreme Court later reversed, saying the case was “neither close nor difficult.”

UPDATE (By Jeremy Rosen on 4/29 at 4:50 pm): On remand in State Farm v. Campbell, after the United States Supreme Court had made it very clear that the case (with high compensatory damages that included a punitive component) would only permit a 1:1 ratio of punitive to compensatory damages, the Utah Supreme Court nonetheless found that a 9:1 ratio would be permitted. It must not take much for a jurisdiction to be considered a favorable legal climate for business.