Daily E-Mail Alert No. 85, Dec. 18, 2000.

Tech Law Journal Daily E-Mail Alert

Dec. 18, 2000, 8:00 AM ET, Alert No. 85.
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Congress

12/15. The House and Senate both passed HR 4577 on Friday night. It contains the FY 2001 Labor Education, Treasury Postal, and Legislative Branch appropriations bills. The House passed this conference report on a roll call vote of 292 to 60. See, Roll Call No. 603. This is a short bill which incorporates by reference 9 just introduced major bills. Copies of all but one of these major bills have not yet been published online by the Congress. However, a release issued by the House Appropriations Committee states that the bill "includes the Children's Internet Protection Act which requires schools and libraries to implement filtering technology for computers with Internet access as a condition of receiving education technology funds, library services funds, or universal service discounts" (i.e., e-rate subsidies). The release also states that "Technology purchased with educational technology or library service funds must have filters on computers accessible to minors. The conference agreement also includes the Neighborhood Children's Internet Protection Act, which requires schools or libraries with Internet access to hold public hearings and adopt Internet use policies for material inappropriate for minors."

12/15. The House and Senate both passed HR 2816, the Computer Crime Enforcement Act, a bill to make available grants to assist state and local law enforcement agencies in enforcing state and local criminal laws relating to computer crime. the bill is sponsored by Rep. Matt Salmon (R-AZ).

New Documents

FTC: technical amendments to the FTC Rules of Practice, 12/15 (TXT, FedReg).

USA: Plea Agreement of Jason Spatafore for criminal copyright infringement for Internet film piracy, 12/15 (PDF, USA).

Milberg: Complaint against Deutsche Telekom, 12/13 (PDF, MW).

SEC: Order re administrative proceeding against Jeffrey Honigman, 12/12 (HTML, SEC).

SEC News

12/14. The SEC brought and settled an administrative complaint against MicroStrategy. It also filed a complaint in U.S. District Court (DDC) against its CEO, Michael Saylor, its COO, Sanjeev Bansal, and its former CFO, Mark Lynch, alleging civil accounting fraud, for overstating the company's revenue and earnings from the sale of software and services contrary to GAAP. The SEC alleged that Microstrategy prematurely recognized revenue. It sold software, as well as software upgrades, enhancements, and consulting services. In multiple element deals, when it sold software, it also recognized anticipated future revenue up front. The SEC also simultaneously settled this action. The settlement provides for the three officers to disgorge a total of $10 Million, and pay $350,000 in penalties. See, SEC release. In October, Microstrategy settled two class action securities suits brought on behalf of shareholders for the same accounting practices. See, Microstrategy release.

12/12. The SEC brought and settled an administrative complaint against Jeffrey Honigman under §§ 15(b) and 19(h) of the Securities Exchange Act of 1934 for manipulating the immediate after-market of the initial public offering (IPO) of the securities of Paravant Computer Systems. Honigman was formerly associated with Duke and Company, a SEC registered broker-dealer. Duke sold securities in the Paravant IPO to accounts controlled by individuals who had agreed to sell those securities immediately back to Duke. Duke then repurchased the Paravant securities from the controlled accounts and sold them to Duke's customers at artificially inflated prices. Paravant Computer Systems (PCS) is a subsidiary of Paravant Inc., a defense electronics company. PCS makes rugged handheld, vehicle mount, and laptop systems for Command, Control, Communications and Computer applications for land armed forces. See, SEC Order.

News Briefs

12/16. The FCC continued its regular pattern of leaking confidential pre-decisional information to the press regarding its pending review of the merger of AOL and Time Warner. The Washington Post reported in a story in its Saturday edition that the FCC may require AOL to make its instant messaging service interoperable with other IM services. Quote: "The FCC recommendation, about an inch-thick document that was distributed late Wednesday evening to the five commissioners, includes a clause to ensure that AOL does not discriminate in its contracts with other instant-messaging firms, sources said." Background: Oct. 12 statement of FCC Chairman Kennard and statement of Comm'n Powell.

12/16. The Swedish PTS awarded UMTS licenses to four entities: Europolitan, HI3G, Orange, and Tele2. UMTS, or Universal Mobile Telecommunications System, is one Third Generation (3G) wireless technology. It is a successor to the European GSM standard. It has the goal of providing broadband mobile Internet access at 2Mbps. See, UMTS Forum. The PTS awarded the licenses on the basis of its assessment of merit, rather than by competitive auction. Ten applied in this beauty contest. The six rejected contestants, and the reasons for their rejections, were as follows: Broadwave (deficiency of technical feasibility), Mobility4Sweden (deficiency of financial feasibility), Reach Out Mobile (deficiency of technical feasibility), Telia (deficiency of technical feasibility), Tenora (deficiency of financial and technical feasibility), and Telenordia Mobil (it scored fewer points than the four winners on commitments concerning coverage and development rate). See, PTS press release (English). See also, documents in Swedish: Bakgrund och Bedömning, Inledande Prövning, and Fördjupad Prövning och Avgörande.

12/15. AT&T notified the FCC that it "intends to fulfill its MediaOne merger conditions by spinning off the Liberty Media Group. The company will also take the other steps needed to ensure that it will not have attributable interests, under the FCC's rules, in providers of video programming purchased by Time Warner Entertainment (TWE)." See, AT&T release.

12/15. Gary Lytle, Chairman of the USTA, wrote a letter [PDF] to the FCC regarding reciprocal compensation, and in particular, compensation for Internet bound traffic. He reaffirmed the ILECs' desire for "mandatory inter-carrier compensation structure for Internet-bound traffic".

12/15. The USITC voted to institute an investigation of certain field programmable gate arrays as a result of a complaint filed by Xilinx on Nov. 16, 2000, that alleged that Altera violated § 337 of the Tariff Act of 1930 by importing into the U.S., and selling within the U.S., field programmable gate arrays, and products containing same, that infringe patents owned by Xilinx. See, USITC release. Both companies produce programmable logic devices, and are involved in litigation. See also, Xilinx release of Dec. 4 regarding the filing this complaint with the USITC, and Altera's esponse.

12/15. Jason Spatafore pled guilty to one count of a four count Information [PDF] charging criminal copyright infringement in U.S. District Court (NDCal). Spatafore, aka Dis-man, reproduced and distributed over the Internet digital copies of the film titled "Star Wars Episode I: The Phantom Menace," in violation of 17 U.S.C. § 506(a)(2) and 18 U.S.C. § 2319(c)(3). The Dis-man will be sentenced on March 23, 2001 by Magistrate Judge Spero in San Francisco. Ross Nadel, an Asst. U.S. Attorney for the Northern District of California, is prosecuting the case. See, plea agreement [PDF], and release.

12/15. The FTC published in the Federal Register several technical amendments to its Rules of Practice. See, Federal Register, Dec. 15, 2000, Vol. 65, No. 242, pages 78407 - 78409.

12/13. Atmel and STMicroelectronics announced that they settled all claims against each other in two patent infringement lawsuits pending in the U.S. District Courts (NDTex and DDel). Atmel, based in San Jose, California, makes advanced logic, mixed signal, nonvolatile memory, and RF semiconductors. STMicroelectronics, formerly know as SGS - Thomson Microelectronics, is based in Geneva, Switzerland, and makes semiconductor integrated circuits. See, Atmel release and ST release. ST filed its original complaint in U.S. District Court (NDTex) against Atmel on July 25, 2000, alleging patent infringement. The suit concerned nine patents covering manufacturing processes as well as various products, including memory products, microcontroller products, and smart card products. ST alleged infringement of U.S. Patents 5,748,528; 5,594,793; 5,452,467; 5,045,495; 5,031,092; 4,879,693; 4,849,942; 4,553,314; and 4,348,743. Neither company disclosed the terms of the settlement, except to state that they "entered into a broad patent cross-license agreement".

12/13. The Jungreis Foundation filed a complaint [PDF] in U.S. District Court (SDNY) against Deutsche Telekom, six underwriters, and one director, Ron Sommer, alleging violation of federal securities laws in connection with the filing by Deutsche Telekom of a registration statement with the SEC on May 22, 2000, and the issuance of a prospectus dated June 17. Plaintiff alleges that there were material omissions from the registration statement and prospectus regarding Deutsche Telekom's acquisition of VoiceStream, which was announced on July 24. The plaintiff, which seeks class action status, is represented by the law firms of Milberg Weiss and Fruchter & Twerskey. Count one alleges registration statement fraud in violation of § 11 of the Securities Act of 1933. Count two alleges prospectus fraud in violation of § 12(a)(2) of the Act. Count three alleges controlling person liability under § 15 of the Act. Milberg Weiss is a law firm that specializes in bringing class action securities suits against technology companies when their stock prices drop. It has also recently filed similar suits against AT&T, WorldCom, PSINet, and Gateway.

12/13. The USITC decided to review an initial determination (ID) issued by the Administrative Law Judge Sidney Harris terminating an investigation based on withdrawal of the complaint by complainant Rambus. His ID accused Rambus of judge shopping, and conditioned the termination on any future refiling of the Rambus complaint being assigned to him. Rambus petitioned for this review. Rambus filed, but later withdrew, a complaint against Hyundai Electronics alleging violation of § 337 of the Tariff Act of 1930 by importing into the U.S., and selling within the U.S., SDRAMs, and products containing same, that infringe patents owned by Rambus. Hyundai and Rambus are also parties to litigation in U.S. District Court involving claims regarding patent infringement, patent validity, and anticompetitive practices.

Editor's Note: This column includes all News Briefs added to Tech Law Journal since the last Daily E-Mail Alert. The date indicates when the event occurred, not the date of posting to Tech Law Journal.

Today

The EU and the US will hold a summit in Washington DC. The agenda contains many items, including ongoing trade disputes, such as the FSC replacement bill. See, EU release.

The American Enterprise Institute will host a program titled "The European Union, The United States, and the World Trading System." Pascal Lamy, the EU Comm'n for Trade, is scheduled to speak at 3:30 PM. Location: Wohlstetter Conference Center, Twelfth Floor, AEI, 1150 17th Street NW, Washington DC, 20036.