| 8th Circuit Rules on
Preemption & Abstention Issues in State Regulation of
Cellular Contracts |
2/14. The U.S.
Court of Appeals (8thCir) issued its opinion
[PDF] in Cedar
Rapids Cellular Telephone v. Miller, a case
regarding issues of federal preemption and abstention involved
in state statutory prohibitions of certain terms pertaining to
minimum terms, penalties, and arbitration that are contained
in the contracts of wireless phone services providers.
Background. The Attorney General of the state of Iowa
notified several wireless service providers that operated in
Iowa that their 12 to 24 month term service agreements with
cancellation fees of $300 and more violate the Iowa Consumer
Credit Code. The Attorney General also objected to the
arbitration provisions in the contracts.
Complaint. The wireless service providers filed a
complaint in U.S. District Court (NDIowa) against the Attorney
General of Iowa seeking declaratory and injunctive relief. The
wireless service providers sought declarations that the
federal Communications Act preempts application of the Iowa
state law to the term service agreements, that the federal
Arbitration Act preempts application of the Iowa statute to
the arbitration clauses in the term service agreements, that
the Iowa statute interferes with interstate commerce, that the
Iowa statute is void for vagueness under the due process
clause of the Fourteenth Amendment, and that the Iowa Consumer
Credit Code does not apply to their cellular telephone
businesses. They also sought to enjoin action against them.
District Court Holding. The District Court held that it
lacked jurisdiction over the preemption claims, on the grounds
that that are federal defenses that cannot form a basis for
federal jurisdiction. The District Court held that it did have
jurisdiction over the remaining federal claims arising under
the dormant commerce clause and the due process clause. It
also assumed, without deciding, that it had supplemental
jurisdiction over the appellants' state law claims. However,
it still dismissed the case pursuant to several abstention
doctrines. Three wireless service providers then brought this
appeal: Cedar Rapids Cellular Telephone, Davenport Cellular
Telephone Company, and WWC License.
Appeals Court. The Sixth Circuit reversed and remanded.
It first held that the preemption claims provide federal
jurisdiction because the wireless service providers seek
injunctive relief. It then held that the District Court
correctly chose to abstain from the claims of two of the
wireless service providers, but should have stayed their
claims, rather than dismiss them. As for the third appellant,
the Appeals Court held that District Court should not have
abstained, and on remand, the District Court should consider
the federal claims. |
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| People and Appointments |
2/14. David Szady was named Assistant Director for
Counterintelligence at the Federal
Bureau of Investigation (FBI). Grant Ashley was
named Assistant Director for Criminal Investigations. See, FBI
release.
2/14. Anthony Thornley was named P/COO of Qualcomm. William
Keitel was named SVP/CFO. See, Qualcomm
release.
2/11. Mark Itri
joined the Orange County office of the law firm of McDermott Will & Emery as a
partner. He focuses on patent and trademark prosecution and
litigation, and client counseling and opinion work. He
concentrates on electronic and computer software arts, the
internet, photocopiers, printers, facsimile devices,
mechanical devices and instruments, pattern and speech
recognition, and server and network systems. He was previously
a partner at Fitzpatrick Cella
Harper & Scinto. See, MWE release.
2/11. Andreas Weitbrecht, John Kallaugher, Marc
Hansen and Jean Paul Poitras joined the Brussels
office of the law firm of Latham
& Watkins as partners. All four are antitrust lawyers
who previously worked at the law firm of Wilmer Cutler & Pickering.
Poitras focuses on trade, customs and EU competition law. He
has advised on a dispute concerning the WTO compatibility of
the EC 3G UMTS mobile telephone standard; he also has
represented coalitions of computer and telecommunications
companies in opposing EC trade protection measures against
semiconductors and computer equipment. Kallaugher focuses on
EU competition law, aviation and general transactional
matters. He has represented international airlines, computer
reservation systems and airline associations. Hansen focuses
on EU competition, technology, and trade regulatory law; he
represents clients in the communications, IT and online
services and media sectors regarding content licensing and new
digital delivery formats, and related digital rights
management issues. Weitbrecht focuses on European and German
antitrust law. See, LW
release. |
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| 6th Circuit Rules in Lanham
Act Case |
| 2/15. The U.S.
Court of Appeals (6thCir) issued its opinion
in Abercrombie
& Fitch v. American Eagle Outfitters, a
Lanham Act case. Abercrombie & Fitch (A&F) filed a
complaint in U.S. District Court (SDOhio) against American
Eagle alleging infringement of unregistered trade dress in
violation of Section 43(a) of the Lanham Act. The District
Court granted summary judgment to American Eagle on the
grounds that A&F sought protection for something that was
not trade dress. The Court of Appeals affirmed on other
grounds -- that the designs were functional, and therefore,
not protectable. |
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| Senate Committee Holds
Hearing on Privacy |
2/13. The Senate
Judiciary Committee's Technology, Terrorism, and
Government Information Subcommittee held a hearing on privacy,
identity theft, and protection of personal information. Sen. Dianne Feinstein
(D-CA), who presided at the hearing, stated that "there
are ominous signs that we are losing control over our personal
information", and that legislation must be passed to
protect personal privacy.
Sen. Judd Gregg (R-NH)
testified as as witness to advocate passage of S 848,
the Social Security Number Misuse Prevention Act of 2001,
which would prohibit the display, sale, or purchase of social
security numbers. This bill is sponsored by Sen. Feinstein,
and cosponsored by Sen. Gregg.
Sen. Feinstein advocated passage of S 1055,
which contains the ban on sale of social security numbers of S 848,
but also includes many other provisions. It would require that
individuals' consent be obtained before a wide range of types
of data could be sold. She is the sponsor of this bill also.
See also, prepared testimony of Richard
Stana (GAO), Susan
Fisher (Doris Tate Crime Victims Bureau), Doug
Comer (Intel), John
Avila (Walt Disney Company), and Frank
Torres (Consumers Union). |
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| Should Tech Companies Be
Held Liable for Security Defects? |
2/14. Bruce Schneier, founder and CTO of Counterpane Internet
Security, spoke at a luncheon on Capitol Hill on cyber
security. He advocated holding technology companies liable for
security defects.
He stated that cyber security "is less a technology
problem, and more a business problem. That, in fact, we have a
lot of technologies that can be brought to bear to solve our
security problems, to make our networks more secure, to make
our data more secure. The hard part is getting companies to
implement them, whether it is software companies, their own
products, or whether companies who are spending more on coffee
than network security."
He continued that to incent companies to make more secure
products, there must be costs for making insecure products. He
said that "right now, having poor security makes you more
cost effective, makes you get your products out faster, makes
your budgets less."
He said that the legal system must "enforce liabilities.
I really believe that we need liabilities in software and
networks. The notion that a company can produce a product that
is systemically flawed, and not be liable, only holds true in
software. It doesn't hold true in other industries. It doesn't
hold true in consumer products. And, every software company
will scream about this. But, I think that it is important. We
are seeing some changes in that in this past year. A judge
told the Department of the Interior in October to get their
network off of the Internet, because they could not protect
the privacy of their constituents, their customers."
Secondly, Schneier argued that the legal system should
"allow parties to transfer liabilities. This is where the
insurance industry comes in. The whole goal of the insurance
industry is to smooth risk, to transfer risk." He added
that "Once the insurance industry gets involved, they
will start mandating certain levels of security, based on
actual data, based on actual payouts."
Schneier spoke at an event was hosted by the Forum on
Technology and Innovation, which was founded by Sen. Bill Frist (R-TN), Sen. Jay Rockefeller
(D-WV), and the Council on
Competitiveness. Richard Clarke, Special Advisor to the
President for Cyberspace Security, also spoke at the event.
Senators Frist and Rockefeller, and Vint Cert of WorldCom,
also spoke. |
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| Securities Regulation News |
2/14. Rep. Ken
Bentsen (D-TX) introduced HR 3769,
a bill to require disclosure, in electronic form, to the Securities and Exchange Commission
(SEC), and to the public, of the sale of securities by an
officer, director, affiliate, or principal shareholder of an
issuer of the securities. The bill was referred to the House Committee
on Financial Services.
2/15. The Consumers Union
advocated rolling back the Private Securities Litigation
Reform Act (PSLRA) and the Securities Litigation Uniform
Standards Act (SLUSA). See, CU
release.
2/13. The American
Electronics Association (AEA) announced its opposition to S 1940,
the "Ending the Double Standard for Stock Options
Act". The bill, which is sponsored by Sen. Carl Levin (D-MI), Sen. John McCain (R-AZ), Sen. Peter Fitzgerald
(R-IL), Sen. Richard
Durbin (D-IL), and Sen.
Mark Dayton (R-MN), would require companies to treat stock
options for employees as an expense on financial statements if
they take a tax deduction for stock option compensation.
William Archey, P/CEO of the AEA, stated in a release
that "The high tech industry was the first in the US
economy to distribute stock options to its entire workforce,
from top executives down to entry level positions. As it
stands, stock options help employers attract and retain
qualified workers by giving them a financial stake in the
future of the company. Many companies would find the tax and
accounting regime of the Levin McCain bill so onerous that
they would discontinue offering options to all but the most
senior executives."
Archey added that "The current rules governing accounting
and tax treatment of stock options are transparent and
consistent and require no added complications. The Levin
McCain bill would frustrate investors and impose unnecessary
costs on broad based employee stock option plans. The high
tech industry successfully defeated this bill in 1997. We will
mount a similar effort this time as well."
2/15. Stephen Cutler, Director of the Securities & Exchange
Commission's (SEC) Division of Enforcement, gave a speech
in Hallandale, Florida, regarding SEC enforcement efforts. He
stated that "there is a dark cloud hanging over all of us
these days. Practically overnight, a system we'd all come to
believe in has been exposed as plagued with weaknesses."
He added that "there has never been a better time to
consider wide ranging and meaningful policy reform."
Cutler also stated that "many of our investigations flow
from complaints or other submissions by members of the public.
... In 2001, the Enforcement Complaint Center, our online
mailbox, received an average of 365 emails per business day,
up from fewer than 300 per business day during year 2000. In
comparison, during January 2002, the Complaint Center averaged
525 emails per day, a 45% increase over the 2001
average."
2/13. David Thatcher plead guilty in U.S. District Court (NDCal)
to securities fraud in violation of 18 U.S.C.
§ 371, in connection with his participation in
transactions in which Critical
Path improperly recognized revenue during the 3rd and 4th
quarters of 2000. See, Plea
Agreement [PDF] and USAO release. |
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| Newspaper Broadcast Cross
Ownership Rule |
2/15. Friday, February 15, was the extended deadline to file
reply comments with the FCC in its proceeding regarding cross
ownership of broadcast stations and newspapers. (This is MM
Docket No. 01-235.) Media companies recommended that the FCC
eliminate this cross ownership rule.
Cox Enterprises submitted a reply
comment [PDF] in which it argued that the daily newspaper
broadcast cross ownership restriction cannot withstand
judicial scrutiny under the First Amendment, and is contrary
to the policy embodied in the Telecommunications Act of 1996
Congress that free markets and competition best promote the
public interest. It therefore argued for abolition of cross
ownership rules. Other media companies submitted similar
comments.
The Tribune Company submitted a reply
comment [PDF] in which it argued that "newspaper
circulation and television ratings have suffered significant
declines as a result of the emergence of new media
competition, principally from cable/ satellite and the
Internet." It argued that this renders the regulated
media vulnerable to new competitors.
Gannett Company submitted a reply
comment [PDF] stating that the FCC should eliminate the
cross ownership rule because "traditional media outlets
have been inundated with new competitors, sufficient that the
cross ownership restriction is no longer necessary to protect
competition or diversity."
The Newspaper Association of America submitted a comment
[PDF] in which it argued that "The media marketplace is
more robust than ever -- there are more broadcast stations,
radio stations, cable and other MVPD households, weekly and
alternative newspapers, and Internet subscribers than at any
other time in U.S. history".
The Consumers Union and
the AFL-CIO previously submitted comments arguing for
continuation of the restriction. |
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| Monday, Feb 18 |
| Presidents' Day. The FCC will be closed. The House and
Senate will be in recess from February 18 through 22. |
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| Tuesday, Feb 19 |
4:00 PM. Deadline to submit grant applications to the
Department of Labor's Employment and Training Administration
for funds for skills training programs. These grants are
financed by user fees paid by employers in the H-1B visa
program. See, notice
in Federal Register, January 10, 2002, Vol. 67, No. 7, at Page
1368. This notice changes a deadline of February 12 contained
in a previous
notice in the Federal Register.
Extended deadline to submit reply comments to the FCC in
response to its Further Notice of Proposed Rulemaking
regarding its cable horizontal and vertical ownership
limits. See, original
notice [PDF] in Federal Register of October 11, 2001, and
extension Order
[PDF] of January 29, 2002. The NCTA requested the extension.
Deadline to submit comments to the Federal Trade Commission (FTC)
regarding its proposed settlement with Eli Lilly (which
accidentally disclosed the e-mail addresses of 669 subscribers
to a Prozac e-mail list). The proposed settlement requires Eli
Lilly to establish a security program. See, notice
in the Federal Register.
Deadline to submit comments to the Federal Communications Commission
(FCC) in the matter of Ambient's application for a
determination that it is an exempt telecommunications company.
It is an electric power company that also provides broadband
Internet access and related information services over power
lines to electrical outlets in residences. See, FCC
release [PDF]. |
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| Wednesday, Feb 20 |
9:00 AM - 4:30 PM. The Federal
Trade Commission (FTC) and the Antitrust Division of the
Department of Justice (DOJ) will hold the third in a series of
joint hearings on antitrust and intellectual property.
There will be two sessions (9:00 AM - 12:30 PM and 2:00 - 4:30
PM) titled "Economic Perspectives on Intellectual
Property, Competition and Innovation". The morning
speakers will be Wesley Cohen (Carnegie Mellon Univ.), Robert
Evenson (Yale), Edmund Kitch (Univ. of Virginia), James
Langenfeld (LECG), and Maureen O’Rourke (Boston Univ.). The
afternoon speakers will be Shane Greenstein (Northwestern),
Margaret Calvert (Economists, Inc.), Joshua Lerner (Harvard
Business School), Stan Liebowitz (Univ. of Texas at Dallas),
Philip Nelson (Economists, Inc.), Janusz Ordover (NYU), and
Lawrence White (NYU). Location: Room 432, FTC, 600
Pennsylvania Ave., NW.
8:00 AM - 6:00 PM. The FCBA and Georgetown University
Law Center (GULC) will co-host a CLE program titled
"FCC Speaks". FCC Chairman Michael Powell will speak
on "The Path to the Digital Broadband Migration" at
8:30 AM. FCC Commissioners Abernathy, Copps, and Martin will
participate in a panel discussion at 4:20 PM. The program will
also include panels titled "National Broadband
Policy", "Competition Policy Panel",
"Spectrum Allocation Policy", "Media Ownership
Working Group", "Digital Television Task
Force", and "Homeland Security Council". See, full
schedule. The price to attend is $795, $745 (GULC alumni),
$695 (FCBA members), $595 (government employees). Location:
GULC, Moot Courtroom, 600 New Jersey Ave., NW. |
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| Thursday, Feb 21 |
9:30 AM. The U.S.
Court of Appeals (DCCir) will hear oral argument in Unity
Broadcasting v. FCC, No. 01-1148. Judges Henderson,
Randolph and Rogers will preside. Location: 333 Constitution
Ave. NW.
12:15 PM. The FCBA's
(FCBA) Young Lawyers Committee will hold a brown bag lunch.
RSVP to Yaron Dori at ydori
@hhlaw.com. Location: Hogan
& Hartson, 555 13th Street, NW, Room 13E-407 (use East
Tower elevators). |
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| IIPA Submits Special 301
Recommendations to USTR |
2/15. Friday, February 15, was the deadline to submit
comments to the Office of the U.S.
Trade Representative (USTR) regarding foreign countries
that deny adequate and effective protection of intellectual
property rights or deny fair and equitable market access to
U.S. persons who rely on intellectual property protection. The
USTR requested these comments pursuant to its duties under
§ 182 of the Trade Act of 1974, 19
U.S.C. § 2242, which is better known as the "Special
301" provisions.
The International
Intellectual Property Alliance (IIPA) submitted a comment
which it summarized in a seven page release
[PDF]. IIPA urged the USTR "to maintain Ukraine as a
Priority Foreign Country under Special 301" because it
has "failed to adopt and enforce an adequate law
controlling pirate optical media production originating
there."
The IIPA urged the USTR to elevate Brazil, Kuwait, Turkey and
Pakistan to the Priority Watch List. It also asked that
Argentina, Costa Rica, Dominican Republic, Egypt, India,
Indonesia, Israel, Korea, Lebanon, Philippines, Russia,
Taiwan, and Uruguay be kept on the Priority Watch List.
The IIPA also urged the USTR "to continue monitoring the
compliance of the People’s Republic of China and Paraguay,
under Section 306 of the Trade Act, with their bilateral
commitments to the U.S. on copyright and copyright enforcement
and (for China) on its market access commitments. Under
Section 306, failure to comply with these commitments can
result in virtually immediate trade sanctions."
The Business Software Alliance
(BSA), which is a member of the IIPA, stated in a separate release
that "China still maintains abhorrent end user piracy
rates and needs to step up enforcement efforts." The BSA
also singled out Taiwan, Korea and Italy. "Taiwan needs
to adopt a more integrated approach to stem the growth of
corporate end user piracy in 2002". It further stated
that "Korea continues to fall short in curtailing
corporate end user piracy" and that "end user piracy
of business application software in Italy remains among the
highest in Europe". |
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