4/8. The U.S. Court of Appeals (4thCir) issued its opinion [20 pages in PDF] in Beskind v. Easley, holding that North Carolina's ban on direct shipment of wine from out of state wineries to North Carolina residents violates the Commerce Clause.

Numerous state protectionist statutes have the effect of banning many forms of e-commerce, including sales of wines, cars, contact lenses, and other products. These types of laws also obstruct internet based travel agencies, pharmacies, mortgage brokers, and many other services. See, for example, story titled "House Subcommittee Holds Hearing on State Impediments to E-Commerce", TLJ Daily E-Mail Alert No. 518, September 27, 2002.

E-commerce proponents (and small wineries and oenophiles) have had some success in challenging these types of statutes under the Constitution's Commerce Clause. However, in the case of internet wine sales, and other direct sales of alcoholic beverages, the challenge is complicated by the authority to regulate alcohol sales granted to the states by the 21st Amendment.

North Carolina Statute. North Carolina's alcoholic beverage control (ABC) statute prohibits the direct shipment of wine from out of state to consumers in the state. The statute does not ban direct shipment from in state wine makers. For example, it provides that it is unlawful "for any person who is an out-of-state retail or wholesale dealer in the business of selling alcoholic beverages to ship or cause to be shipped any alcoholic beverage directly to any North Carolina resident who does not hold a valid wholesaler's permit".

Dormant Commerce Clause. Article I, Section 8, of the Constitution provides that "The Congress shall have Power ... to regulate Commerce with foreign Nations, and among the several States ..." The dormant commerce clause is the judicial concept that the Constitution, by delegating certain authority to the Congress to regulate commerce, thereby bars the states from legislating on certain matters that affect interstate commerce, even in the absence of Congressional legislation. It is applied to block states from regulating in a way that materially burdens or discriminates against interstate commerce. See, Gibbons v. Ogden, 22 U.S. 1 (1824), and Cooley v. Board of Wardens, 53 U.S. 299 (1851). More recent treatments of the concept include Healy v. The Beer Institute, 491 U.S. 324 (1989), and CTS Corp. v. Dynamics Corp. of America, 481 U.S. 69 (1987).

21st Amendment. The 21st Amendment provides, in part, that "The transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited."

District Court. The Oakstone Winery is a small winery in California that sells primarily over the internet and through direct sales. Donald Beskind and other individuals are wine consumers who reside in the state of North Carolina. Donald Beskind, the Oakstone Winery, and other individuals, filed a complaint in U.S. District Court (WDNC) against Michael Easley, in his capacity as Governor of North Carolina, Ann Fulton, in her capacity as chairman of the North Carolina Alcoholic Beverage Control Commission, and other state officials, alleging that the ban on direct shipment violates the dormant Commerce Clause of the Constitution.

The District Court ruled on summary judgment that that state statute is facially discriminatory in its treatment of in state and out of state wine makers. It declared that the statute violates the Commerce Clause, and enjoined its enforcement. North Carolina appealed.

Appeals Court. The Appeals Court affirmed the District Court's conclusion that the ABC laws unconstitutionally discriminate against out-of-state wine manufacturers and sellers. However, it vacated the District Court's remedy -- striking down the statutory provisions.

The Court reasoned that the Commerce Clause's grant of authority to Congress to regulate interstate commerce "carries with it an implied ``dormant´´ aspect that restricts the power of the States to burden interstate commerce".

The Court then identified how it is to analyze dormant Commerce Clause challenges in cases that also implicate states' authority under the 21st Amendment. It wrote that "we determine first whether the purported State regulation violates the Commerce Clause without consideration of the Twenty-first Amendment. If we conclude that it does, then we look at the State's Twenty-first Amendment interests and determine ``whether the principles underlying the Twenty-first Amendment are sufficiently implicated by the [State regulation] ... to outweigh the Commerce Clause principles that would otherwise be offended.´´" (Brackets and dots in original. Citation to Bacchus Imports, 468 U.S. 263, at 275 (1984) omitted.)

The Appeals Court concluded first that "A facial examination of North Carolina's ABC laws leaves little doubt that those laws treat in-state manufacturers of wine differently from out-of-state manufacturers of wine, with the undoubted effect of benefiting the in-state manufacturers and burdening the out-of-state manufacturers." And, "Because North Carolina's ABC laws discriminate against out-of-state wine manufacturers and shippers in favor of in-state wine manufacturers and shippers, the scheme violates ``a central tenet of the Commerce Clause.´´" (Citation omitted.)

The Appeals Court then concluded that "North Carolina failed to identify any Twenty-first Amendment interest that is served by authorizing in-state wineries to sell and ship directly to consumers while simultaneously prohibiting out-of-state direct shipment."

Hence, the Appeals Court found that North Carolina's laws unconstitutionally discriminate against outside sellers, such as Oakstone Winery. However, the Appeals Court declined to enjoin enforcement of the statutes. It concluded that "North Carolina retains great flexibility to determine what sort of relief to provide to cure the discriminatory treatment, and thus we follow North Carolina's indication of its preference."

Related Cases. Several other courts have addressed the issue of state bans on direct sales of wines, and reached different results.

On November 12, 2002, the U.S. District Court (SDNY) issued a similar opinion [32 page PDF scan] in Swedenburg v. Kelly, holding that New York state's ban on the direct shipment of out of state wine is unconstitutional. See, story titled "Court Holds New York's Ban on Internet Wine Sales Is Unconstitutional", in TLJ Daily E-Mail Alert No. 551, November 18, 2002.

However, the U.S. Court of Appeals (7thCir) reached a different conclusion in its opinion in Bridenbaugh v. Wilson. In that case, the plaintiffs challenged the constitutionality of an Indiana statute that made it unlawful for persons in another state to ship an alcoholic beverage directly to an Indiana resident. The District Court held that the Indiana direct shipment regulation was unconstitutional under the Commerce Clause, and granted the plaintiffs' summary judgment motion (Bridenbaugh v. O'Bannon, 78 F. Supp.2d 828 (N.D. Ind. 1999)). Then, the Seventh Circuit reversed, upholding the constitutionality of the state ban.

Judge Frank Easterbrook wrote that "This case pits the twenty-first amendment, which appears in the Constitution, against the ``dormant commerce clause,´´ which does not." He continued that the 21st Amendment (which repealed prohibition) "directly authorizes state control over imports, while the premise of dormant commerce clause jurisprudence is an inference that the grant of power to Congress in Art. I sec.8 cl. 3 implies a limitation on state authority over the same subject. We must decide how the combination of express grant and implied withdrawal of state power applies to" the Indiana ban on direct sales of wine. He came down on the side of the 21st Amendment.

Perhaps the Swedenburg and Beskind cases are distinguishable from the Bridenbaugh case on their underlying facts. New York and North Carolina exempted in state wineries from their ban on direct sales. Indiana did not.

Indeed, the Appeals Court in Beskind noted that "At least one reasonable nondiscriminatory alternative is available to North Carolina and it would require North Carolina simply to return to the pre-1981 structure and require in-state wines to pass through the same three-tiered scheme that all other wines must pass through." And, the Appeals Court noted in Bridenbaugh that "Wine originating in California, France, Australia, or Indiana passes through the same three tiers and is subjected to the same taxes. Where's the functional discrimination?"

See also, Bainbridge v. Bush, 148 F.Supp.2d 1306 (M.D.Fla. 2001), in which the District Court upheld Florida's ban on direct shipment of wine. However, it was vacated and remanded by the 11th Circuit in Bainbridge v. Turner, 311 F.3d 1104, 1112 (2002).

4/8. The U.S. Court of Appeals (DCCir) issued its opinion [12 pages in PDF] in AT&T v. FCC, vacating Federal Communications Commission's (FCC) orders that fined AT&T for slamming.

AT&T changed the long distance carrier of two customers without their authorization, a practice know as "slamming". The FCC fined AT&T $80,000 (by forfeiture orders). AT&T then brought this petition for review.

The Appeals Court vacated the forfeiture orders, holding that the FCC's requirement that telecommunications carriers guarantee that the actual line subscriber has authorized the service change order exceeds the FCC's statutory authority to prescribe procedures to verify that authorization.

4/7. Intel and Via Technologies announced that they "reached a settlement agreement in a series of pending patent lawsuits related to chipsets and microprocessors. The agreement encompasses 11 pending cases in five countries involving 27 patents." See, Intel release and similar Via release.

Intel stated that "Under terms of the settlement both companies will dismiss all pending legal claims in all jurisdictions. The companies also entered into a ten-year patent cross license agreement covering each company's products. As part of the agreement Intel granted VIA a license to sell microprocessors that are compatible with the x86 instruction set but not pin compatible or bus compatible with Intel microprocessors."

Intel also stated that it "agreed for a period of three years, not to assert its patents on VIA bus or pin compatible microprocessors. Intel also granted VIA a four year license to design and sell chip sets that are compatible with the Intel microprocessor bus and agreed not to assert its patents on VIA or its customers or distributors on such chip sets for a fifth year. The agreement will be royalty bearing to Intel for some products. The license agreements do not apply to S3 Graphics, a company partially owned by VIA."

See, prior TLJ coverage of Intel Via litigation: "Intel and Via Technologies in Patent Dispute", TLJ Daily E-Mail Alert No. 264, September 10, 2001; "Update on Intel v. Via", TLJ Daily E-Mail Alert No. 265, September 11, 2001; "More Intel Via Patent Infringement Suits Filed", TLJ Daily E-Mail Alert No. 274, September 27, 2001; and "Intel and Via Settle Patent Disputes Re K7 Chipsets", TLJ Daily E-Mail Alert No. 328, December 14, 2001.

4/7. The Senate confirmed Cormac Carney to be a Judge of the U.S. District Court for the Central District of California by a vote of 80-0. See, Roll Call No. 126.

4/8. The General Accounting Office (GAO) released a report [27 pages in PDF] titled "Defense Acquisitions: Steps Needed to Ensure Interoperability of Systems That Process Intelligence Data". The report pertains to battlefield intelligence systems, such as reconnaissance aircraft, satellites, and ground stations. The report finds that "At times, these systems are not interoperable -- either for technical reasons (such as incompatible data formats) and/or operational reasons. Such problems can considerably slow down the time to identify and analyze a potential target and decide whether to attack it." (Parentheses in original.). It further finds that the Department of Defense's "process for testing and certifying that systems will be interoperable is not working effectively".

4/8. The Copyright Office (CO) published a notice in the Federal Register stating that its "interim rule governing the form, content, and manner of service of notices of termination of transfers and licenses granted by authors on or after 1978 is being adopted as a final rule with one change". See, Federal Register, April 8, 2003, Vol. 68, No. 67, at Pages 16958 - 16959.

4/7. Sen. Orrin Hatch (R-UT) introduced S 800, a bill to prevent the use of a misleading domain name with the intent to deceive a person into viewing obscenity on the internet. The bill was referred to the Senate Judiciary Committee.

4/7. House and Senate conferees met and reached an agreement regarding S 151, the "Prosecutorial Remedies and Tools Against the Exploitation of Children Today Act of 2003", also known as the PROTECT Act. Proponents of this legislation intend to pass the conference report before the Congress recesses at the end of this week for its Easter recess. See also, release of Sen. Orrin Hatch (R-UT) and statement by Sen. Patrick Leahy (D-VT).

The House will meet at 10:00 AM.

10:00 AM. The House Commerce Committee's Subcommittee on Telecommunications and the Internet will meet to mark up HR 1320, the Commercial Spectrum Enhancement Act. The event will be webcast. Location: Room 2123, Rayburn Building.

10:00 AM - 12:00 NOON. The House Science Committee will hold a hearing titled "The Societal Implications of Nanotechnology" and HR 766, the Nanotechnology Research and Development Act of 2003. The witnesses will be Ray Kurzweil (Kurzweil Technologies), Vicki Colvin (Rice University), Langdon Winner (Rensselaer Polytechnic Institute), and Christine Peterson (Foresight Institute). The event will be webcast. Location: Room 2318, Rayburn Building.

10:00 AM. The House Judiciary Committee's Task Force on Antitrust will hold a hearing on HR 1086, the "Standards Development Organization Advancement Act of 2003". The event will be webcast. Location: Room 2141, Rayburn Building.

10:00 AM. The U.S. Court of Appeals (FedCir) will hold oral argument in First Graphics v. M.E.P. CAD, No. 02-1469, an appeal from the U.S. District Court (NDIll). Location: Courtroom 402, 717 Madison Place, NW.

10:00 AM. The House Appropriations Committee's Subcommittee on Commerce, Justice and the Judiciary (CJS) will hold a hearing on the budget for the Supreme Court. Location: Room H-309, Capitol Building.

2:00 AM. The House Appropriations Committee's Subcommittee on Commerce, Justice and the Judiciary (CJS) will hold a hearing on the budget for the Federal Trade Commission (FTC). FTC Chairman Timothy Muris will testify. Location: Room H-309, Capitol Building.

6:00 - 8:00 PM. The Federal Communications Bar Association (FCBA) will host a continuing legal education (CLE) seminar titled "The World Radio Conference 2003: How Does It Work? What Will It Mean?". The price is $60 for FCBA members, $50 for government, academic and law student members, and $80 for non-members. RSVP to Wendy Parish at wendy@fcba.org. Location: Capital Hilton Hotel, 16th & K Sts. NW, Senate Room.

The House will meet at 10:00 AM.

8:00 - 10:15 AM. The Arlington County Bar Association and the D.C. Bar Association's Intellectual Property Law Section will host a continuing legal education (CLE) seminar titled "Patent Damages -- Current Legal Issues and Strategies". The speakers will be Abram Hoffman and Edward Gold, both of the Economics and Statistics Practice of Price Waterhouse Coopers. The price to attend is $60. For more information, contact 703 228-3390 or acbahead@juno.com. Location: Washington Golf and Country Club, 3017 N. Glebe Road, Arlington VA.

9:30 AM. The Senate Judiciary Committee will hold an executive business meeting. See, notice. Location: Room 226, Dirksen Building.

10:00 AM. The House Appropriations Committee's Subcommittee on Homeland Security will hold a hearing on the budget for science and technology at the Department of Homeland Security. Under Secretary of Science and Technology Charles McQueary will testify. Location: Room 2359, Rayburn Building.

10:00 AM. The Senate Appropriations Committee's Commerce, Justice, State, and the Judiciary Subcommittee will hold a hearing on the proposed budget for fiscal year 2004 for the Federal Bureau of Investigation (FBI). Location: Room S-146, Capitol Building.

10:00 AM. The House Appropriations Committee's Subcommittee on the VA, HUD and Independent Agencies will hold a hearing on the budget for the National Science Foundation. Location: Room H-143, Capitol Building.

10:00 AM. The Senate Judiciary Committee will hold an executive business meeting. The agenda includes consideration of S 731, the "Secure Authentication Feature and Enhanced Identification Defense Act of 2003" (SAFE ID Act), and S 274, a bill pertaining to class action procedure. The agenda also includes consideration of several pending judicial nominations, including Carolyn Kuhl (9th Circuit), Leon Holmes (Eastern District of Arkansas), Susan Braden (Federal Claims), Charles Lettow (Federal Claims), Cecilia Altonaga (Southern District of Florida), and Patricia Minaldi (Western District of Louisiana). Location: Room 226, Dirksen Building.

12:00 NOON - 1:45 PM. The Legislation Committee of the DC Bar Association's Intellectual Property Law Section will host a luncheon program titled "Trademark Legislative Agenda". The speakers will be Michael Heltzer (International Trademark Association), Amy Cotton (USPTO), and Paul Levy (Public Citizen Litigation Group). For more information, call 202 626-3463. The price to attend ranges from $25 to $35. Location: D.C. Bar Conference Center, 1250 H Street NW, B-1 level.

2:00 PM. The Senate Appropriations Committee's Homeland Security Subcommittee will hold a hearing on the proposed budget for fiscal year 2004 for science and technology. Under Secretary of Science and Technology Charles McQueary will testify. Location: Room 192 or 159 (?), Dirksen Building.

The Progress & Freedom Foundation (PFF), a Washington based think tank that focuses on technology and communications issues, will hold its 10th anniversary celebration. Mitch Daniels, Director of the Office of Management and Budget (OMB), will be the after dinner speaker. FCC Chairman Michael Powell and FTC Chairman Timothy Muris will also be present. For more information, contact Jane Creel at 202 289-8928 or jcreel@pff.org. See, PFF notice. Location: Renaissance Mayflower Hotel.

Day one of a two day conference hosted by the American Association for the Advancement of Science (AAAS) titled "Colloquium on Science and Technology Policy". See, notice and agenda [PDF]. Location: Washington Plaza Hotel, 10 Thomas Circle, 14th and M Streets, NW.

The House will meet at 10:00 AM.

9:30 AM. The Copyright Office (CO) will hold the first of four hearings in Washington DC regarding the exemption of certain classes of works from the Digital Millennium Copyright Act's (DMCA) prohibition against circumvention of technological measures that control access to copyrighted works. See, notice in the Federal Register, March 20, 2003, Vol. 68, No. 54, at Pages 13652 - 13653. See also, CO web page on rulemakings on anticircumvention, the relevant statutory sections at 17 U.S.C. §§ 2101-2105, and story titled "Copyright Office to Hold Hearings on DMCA Anti Circumvention Exemptions", TLJ Daily E-Mail Alert No. 628, March 21, 2003. Location: Mumford Room, LM-649, James Madison Building, Library of Congress, 101 Independence Ave, SE

9:30 AM. The U.S. Court of Appeals (DCCir) will hear oral argument in Unity Broadcasting v. FCC, No. 02-1101. Judges Edwards, Randolph and Tatel will preside. Location: 333 Constitution Ave., NW.

Day long meeting of the Federal Communications Commission's (FCC) Consumer Advisory Committee.

Day two of a two day conference hosted by the American Association for the Advancement of Science (AAAS) titled "Colloquium on Science and Technology Policy". See, notice and agenda [PDF]. Location: Washington Plaza Hotel, 10 Thomas Circle, 14th and M Streets, NW.

The House will be in recess from April 14 through April 25 for the Spring District Work Period.

12:00 NOON. The Cato Institute will host a panel discussion titled "What's Up with the PATRIOT Act? Concerns about the Legislative Response to 9/11 and the Prospect of a PATRIOT II". The speakers will be Tim Lynch (Cato), and Jim Dempsey (Center for Democracy and Technology). See, notice and registration page. Lunch will be served. Location: Room B-338, Rayburn Building.

Deadline to submit comments to the Federal Communications Commission (FCC) in response to its Notice of Proposed Rulemaking (NPRM) [MS Word] titled "In the Matter of Second Periodic Review of the Commission's Rules and Policies Affecting the Conversion To Digital Television". This is MB Docket No. 03-15, RM 9832, and MM Docket Nos. 99-360, 00-167, and 00-168. See, FCC release and notice in the Federal Register, February 18, 2003, Vol. 68, No. 32, at Pages 7737-7747.

Deadline to submit comments to the Federal Communications Commission (FCC) in response to its Notice of Proposed Rulemaking (NPRM) regarding on how to use the reallocated Mobile Satellite Service (MSS) spectrum as well as other bands previously proposed for Advanced Wireless Service (AWS) use, the relocation of the Multipoint Distribution Service (MDS), and additional flexibility for the Unlicensed Personal Communications Service (UPCS) band spectrum. This is ET Docket 00-258 and IB Docket No. 99-81. See, notice in the Federal Register, March 13, 2003, Vol. 68, No. 49, at Pages 12015 - 12020.

9:30 AM. The Copyright Office (CO) will hold the second of four hearings in Washington DC regarding the exemption of certain classes of works from the Digital Millennium Copyright Act's (DMCA) prohibition against circumvention of technological measures that control access to copyrighted works. See, notice in the Federal Register, March 20, 2003, Vol. 68, No. 54, at Pages 13652 - 13653. See also, CO web page on rulemakings on anticircumvention, the relevant statutory sections at 17 U.S.C. §§ 2101-2105, and story titled "Copyright Office to Hold Hearings on DMCA Anti Circumvention Exemptions", TLJ Daily E-Mail Alert No. 628, March 21, 2003. Location: West Dining Room, LM-621, James Madison Memorial Building, Library of Congress, 101 Independence Ave, SE.

9:30 AM. The U.S. Court of Appeals (DCCir) will hear oral argument in Covad v. Bell Atlantic, No. 02-7057. This case pertains to the applicability of the Telecommunications Act of 1996 and Section 2 of the Sherman Act, 15 U.S.C. § 2, to allegations that an incumbent local exchange carrier (ILEC) has monopolized or attempted to monopolize a market for local telecommunications services. See, amicus curiae brief of the USA/FCC. Location: 333 Constitution Ave., NW.

9:30 AM. The U.S. Court of Appeals (DCCir) will hear oral argument in Cell Telecom v. FCC, No. 02-1264. Judges Edwards, Randolph and Tatel will preside. Location: 333 Constitution Ave., NW.

12:00 NOON - 1:45 PM. The Legislation Committee of the DC Bar Association's Intellectual Property Law Section will host a luncheon program titled "Patent Legislative Agenda". The speakers will be Hayden Gregory (American Bar Association), Chris Katopis (Deputy Administrator for External Affairs, United States Patent and Trademark Office), and Michael Kirk (American Intellectual Property Law Association). The price to attend ranges from $25 to $35. For more information, call 202 626-3463. Location: D.C. Bar Conference Center, 1250 H Street NW, B-1 Level.

Deadline to submit reply comments to the Federal Communications Commission (FCC) regarding its notice of proposed rulemaking (NPRM) pertaining to the service rules for the Dedicated Short Range Communications Systems in the 5.850-5.925 GHz band (5.9 GHz band). See, notice in the Federal Register, January 15, 2003, Vol. 68, No. 10, at Pages 1999-2002. For more information, contact Nancy Zaczek at 202 418-7590 or nzaczek@fcc.gov, or Gerardo Mejia at 202 418-2895 or gmejia@fcc.gov.

Deadline to submit to the National Institute of Standards and Technology (NIST) the 2003 Eligibility Certification Package for the Malcolm Baldrige awards. See, Eligibility Forms [MS Word].