6/12. The House amended and passed HR 1115, the "Class Action Fairness Act", by a vote of 253-170. See, Roll Call No. 272. This bill amends 28 U.S.C. § 1332, regarding diversity of citizenship. It provides federal jurisdiction in certain class actions with a minimum total of aggregated claims where any member of a class of plaintiffs is a citizen of a state different from any defendant.

This bill is sponsored by Rep. Bob Goodlatte (R-VA) (at right), Rep. Rick Boucher (D-VA), and many other members of the House.

The House approved an amendment [3 pages in PDF] offered by Rep. James Sensenbrenner (R-WI), Rep. Boucher, Rep. Goodlatte, Rep. Jim Moran (D-VA), Rep. Cal Dooley (D-CA), Rep. Charles Stenholm (D-TX) and Rep. Lee Terry (R-NE). It broadens the category of class action that would remain in state court. First, this amendment raises the amount in controversy required for federal court jurisdiction from $2 Million to $5 Million. Second, it allows federal courts to return some intrastate class actions in which the law of that state governs to the courts of that state.

The bill would also require increased judicial scrutiny of class action settlements that provide for coupon and other non-cash settlement payments to plaintiffs. It would also prohibit geographic discrimination in awards to plaintiffs.

Rep. Goodlatte stated in a release that "With the House passage of this critical legislation we move one step closer to streamlining the ability of the courts to deal with class action lawsuits by making it easier for those involved in the case to transfer large multistate suits from the state courts to the federal courts ... Federal courts were actually designed by the Framers of the Constitution to handle large cases that crossed state boundaries. Neither federalism nor common sense support the current system’s handling of interstate class actions."

Rep. Goodlatte added that "This bill will help end the forum shopping abuses and resultant extortionate settlements that plague class action litigation today ... Presently, the only winners are the lawyers who may get a half-billion dollar payday. The Class Action Fairness Act will help ensure that real plaintiffs with real grievances are protected against settlements that give the lawyers millions and mere coupons to the consumers."

The House rejected three amendments offered by Democrats. See, amendment [2 pages in PDF] offered by Rep. Sheila Lee (D-TX), amendment [PDF] offered by Rep. Zoe Lofgren (D-CA) and Rep. Linda Sanchez (D-CA), and amendment [14 pages in PDF] offered by Rep. Max Sandlin (D-TX) and Rep. John Conyers (D-MI).

This bill has yet to pass the Senate. Rep. Goodlatte also stated that "We are optimistic that this legislation will pass in the Senate, and the President has indicated that he will sign it into law".

This bill is a re-introduction of HR 2341 (107th), which passed in the House by a vote of 233-190. See, story titled "Reps. Goodlatte and Boucher Re-Introduce Class Action Fairness Act" in TLJ Daily E-Mail Alert No. 619, March 10, 2003. However, the Senate did not pass that bill.

6/10. Rep. Lamar Smith (R-TX), the Chairman of the House Judiciary Committee's Subcommittee on Courts, the Internet and Intellectual Property (CIIP), gave a speech in Washington DC regarding intellectual property rights. He spoke at a conference hosted by the Progress and Freedom Foundation (PFF) and the George Mason University Tech Center titled "Promoting Creativity: Copyright in the Internet Age"

Rep. Smith (at right) began with the observation that "There is a good reason why those who wrote the Constitution embraced the concept of intellectual property protection. The Founding Fathers realized that if creators cannot gain from their creations, they won't bother to create."

"In looking for ways to protect both intellectual property and free exchange in the marketplace, there are currently a number of critical issues Congress must consider: piracy, the broadcast flag, patent rights, counterfeiting in the software industry, and a standard of ``fair use´´ that protects consumer rights", said Rep. Smith.

He criticized universities for their inconsistent conduct on intellectual property. He stated, "Look at what is happening on our university campuses. University students illegally download music, sometimes on publicly supported computers. When encouraged to exercise disciplinary measures, too many university administrators react with relative indifference: kids will be kids, they say. Yet these same university administrators pursue research and development projects as champions of a strong patent law. It's a curious inconsistency."

Earlier in the day, Rep. Smith's CIIP Subcommittee held a hearing on Rep. Smith's bill (HR 2391) to amend patent law to protect and encourage collaborative research at universities and elsewhere. A representative of Yale University (Rep. Smith's alma mater) testified at the hearing. See, following story, titled "Representatives Introduce Patent Bill to Encourage Collaborative Research".

He also addressed software piracy. "The software industry is under siege by professional pirates primarily due to the counterfeiting of authentication features on software, like the certificates of authenticity, or COAs. Thieves steal or counterfeit these COAs and affix them to pirated products to deceive consumers into thinking they are getting the real product." However, he did not elaborate on legislative proposals.

Broadcast Flag. Rep. Smith discussed the DTV transition and the broadcast flag. He stated that "We are in the midst of a transition to digital television. As early as 2006, all broadcasts must be aired in digital format. This presents opportunities for American consumers, businesses, and copyright owners. As with many technological advances, the DTV transition has been frustrated by both technological and legal hurdles."

"There is a great danger of massive piracy of unprotected broadcasts once the transition to DTV is complete", said Rep. Smith. "Pirates can easily copy and redistribute millions of digital files in a matter of seconds. In the absence of protection against unauthorized redistribution, it is unlikely that content owners will make high-value programming available to broadcasters."

He added that "Last August, the Federal Communications Commission adopted a notice of proposed rulemaking on digital broadcast copy protection. My Subcommittee has great interest in the FCC's action because the agency might issue rules that impact the Copyright Act and therefore involve my Subcommittee's jurisdiction."

On August 8, 2002, the FCC adopted a Notice of Proposed Rulemaking (NPRM) [15 pages in PDF] in its proceeding titled "In the Matter of Digital Broadcast Copy Protection". This NPRM proposes that the FCC promulgate a broadcast flag rule, and seeks comment on this, and related questions. This is MB Docket No. 02-230. See, stories titled "FCC Issues NPRM on Broadcast Flag" and "FCC Debates Its Authority to Promulgate Broadcast Flag Rule" in TLJ Daily E-Mail Alert No. 489, August 12, 2003.

Fair Use. Rep. Smith continued that "I know controversy continues over what the broadcast flag will and will not do.  And whether it will have an adverse affect on the ability of consumers to make ``fair use´´ of copyrighted broadcast television."

"We know fair use is a defense that may limit any of the copyright owner's exclusive rights. The Copyright Act states that fair use of a copyrighted work for purposes such as criticism, comment, news reporting, teaching, scholarship, or research does not constitute infringement. Fair use is determined on a case-by-case basis" said Rep. Smith. "For example, in Sony Corp. v. Universal City Studios, the Supreme Court held that the practice of taping free television broadcasting for later viewing was a fair use." (Sony is reported at 464 U.S. 417.)

He stated that "It is important that the transition to DTV and any implementation of rules requiring the use of the broadcast flag technology does not have an adverse affect on how consumers may legitimately use lawfully acquired entertainment products.

Rep. Smith also addressed fair use rights in the context of licensing restrictions and technological protection measures. He said that "some believe the profitability of intellectual property can be protected using extended private licensing strategies. But we must be careful that such licensing agreements do not improperly assert intellectual property and thus have a negative effect on the markets or consumer interests."

He also stated that "my Subcommittee seeks to ensure that new technologies designed to prevent piracy do not limit the public's ability to make fair use of copyrighted works."

6/10. Rep. Lamar Smith (R-TX) and others introduced HR 2391, the "Cooperative Research and Technology Enhancement (CREATE) Act of 2003", on June 9, 2003. On June 10, the House Judiciary Committee's Subcommittee on Courts, the Internet, and Intellectual Property held a hearing on the bill. See, TLJ copy of HR 2391.

Amendments to the Patent Act. Section 103(c), codified at 35 U.S.C. § 103, pertains to conditions for patentability, and non-obviousness. It currently provides that "Subject matter developed by another person, which qualifies as prior art only under one or more of subsections (e), (f), and (g) of section 102 of this title, shall not preclude patentability under this section where the subject matter and the claimed invention were, at the time the invention was made, owned by the same person or subject to an obligation of assignment to the same person."

HR 2391 would amend Section 103(c) to read "Subject matter developed by another person, which qualifies as prior art only under one or both of subsections (e) and (g) of section 102 of this title, shall not preclude patentability under this section where the subject matter and the claimed invention were, at the time of the earliest filing date for which a benefit is sought under this title, owned by the same person or subject to an obligation of assignment to the same person."

Section 102(f), codified at 35 U.S.C. § 102, pertains to conditions for patentability, and novelty and loss of right to patent. It currently provides, in part, that "A person shall be entitled to a patent unless ... (f) he did not himself invent the subject matter sought to be patented".

HR 2391 would amend Section 102(f) by inserting after the word "patented" the following: "‘except that subject matter under this subsection shall not be considered prior art or as evidence of obviousness under section 103 of this title".

Rep. Smith's Explanation. Rep. Smith, the Chairman of the Subcommittee, explained the context of this bill in a prepared statement. He stated that "Congress enacted a series of Patent Law Amendments in 1984. One of these amendments, codified at 35 USC § 103 (c), created a ``safe harbor´´ for inventions that were the product of a collaboration involving co-inventors within a single company. The amendment changed the U.S. patent system to reflect the manner in which companies actually conduct their internal research activities." (Emphasis in original.)

Rep. Smith continued that "The legislative history makes clear that Congress intended to discourage individuals from attempting to use nonpublic information, also known as ``secret prior art,´´ to challenge the issuance or validity of a patent where co-inventors voluntarily exchanged confidential information concerning a prior invention developed by one or more of the research partners."

"What the legislative history leaves unclear and significantly, what we are here to explore today, are the arguments for and against expanding the secret prior art exception to collaborations involving researchers at more than one organization."

"Unlike 1984, today's biotech, pharmaceutical, and nano-technology companies conduct much of their research with partners such as universities or other public or private organizations."

Rep. Smith stated that the bill's purposes are "to promote communication among ``team researchers´´ located at multiple organizations", "to discourage those who would use the discovery process to harass co-inventors who voluntarily collaborated on research resulting in a patentable invention", "to increase public knowledge", and "to accelerate the commercial availability of new inventions."

Witness Testimony. John Thomas of the Georgetown University Law Center wrote in his prepared testimony that this bill "provides that prior art available under 35 U.S.C. § 102(f) may not be considered as evidence of obviousness under 35 U.S.C. § 103. The effect of the Act is to overturn the 1997 holding of the U.S. Court of Appeals for the Federal Circuit in OddzOn Products, Inc. v. Just Toys, Inc., which ruled that derived prior art may serve as evidence of obviousness." See, August 8, 1997 opinion of the U.S. Court of Appeals (FedCir), reported at 122 F.3d 1396.

Jon Soderstrom, Director of Technology Transfer at Yale University, elaborated in his prepared testimony regarding the significance of the OddzOn case for collaboration research.

He wrote that "In spite of the trend toward scientific collaboration and the economic and practical necessity for such collaborations," the OddzOn case "threatens to discourage such collaborative activity."

He continued that "In OddzOn, the Federal Circuit interpreted subsection 103(c)of the Patent Act to hold that prior art under subsections 102(f) or (g) could be used to determine the obviousness of an invention in situations where: (a) there was no common ownership or assignment of the invention and information being shared among the collaborators, and (b) the information exchanged was not publicly known."

"Prior to the OddzOn decision, it was uncertain whether information under 102(f) and (g) of the U.S. Patent Act (35 U.S.C.) that was shared among collaborators, but was not published or generally known, would qualify as prior art in determining whether an invention was obvious under section 103. Thus, there was some doubt as to whether courts would interpret 103(c) to distinguish collaborations involving one entity from those involving more than one entity."

Soderstrom called OddzOn a "a wake-up call to the patent community that information under 102(f) or (g) could invalidate a patent in the circumstances of a collaborative research effort. The OddzOn decision creates a significant threat for the loss of intellectual property rights for inventors who engage in joint research and development projects with scientists not employed by the same company or institution."

He concluded that "The OddzOn decision creates significant problems due to the very nature of collaborative research and development projects among universities, government labs, and industry. The unhindered flow of information among researchers within these collaborations is essential to the conduct of research and crucial to a successful outcome. Laws and policies that have the effect of impeding the flow of information among researchers will, for obvious reasons, have a stifling effect on the progress and success of such projects. We support efforts that will help to remedy undesirable impediments to collaborative research created by the OddzOn decision. This could readily result in more efficient development of products utilizing tax supported research results, and an increase in the transfer of technology for the public good."

See also, prepared testimony of other witnesses: Eric Steffe (Sterne Kessler Goldstein & Fox) and Jeffrey Kushan (Sidley Austin, for Genentech).

Cosponsors. The bill is has broad bipartisan support on the Subcommittee. It is cosponsored by Rep. Howard Berman (D-CA), the ranking Democrat on the Subcommittee, and Rep. John Conyers (D-MI), the ranking Democrat on the full Committee. It is also cosponsored by Rep. Rick Boucher (D-VA), Rep. Bob Goodlatte (R-VA), Rep. Howard Coble (R-NC), Rep. Mark Green (R-WI), Rep. Tammy Baldwin (D-WI), Rep. Melissa Hart (R-PA), Rep. Zoe Lofgren (D-CA), and Rep. Robert Wexlar (D-FL).

6/5. Sen. Patrick Leahy (D-VT) introduced S 1191 the "Intellectual Property Protection Restoration Act of 2003" on June 5, 2003. Rep. Lamar Smith (R-TX) and Rep. Howard Berman (D-CA) introduced the companion bill in the House, HR 2344, also titled the "Intellectual Property Protection Restoration Act of 2003".

Eleventh Amendment. "The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State."

Supreme Court Cases. The problem addressed by these bills results from the recent Supreme Court opinions interpreting the 11th Amendment. For example, in Seminole Tribe v. Florida the Court held that the Congress lacks authority under Article I of the Constitution to abrogate the States' 11th Amendment immunity from suit in federal courts. The Court extended this to the context of intellectual property in the 1999 rulings in Florida Prepaid v. College Savings Bank (invalidating the Patent and Plant Variety Protection Remedy Clarification Act) and College Savings Bank v. Florida Prepaid (invalidating the Trademark Remedy Clarification Act).

S 1191 and HR 2344. S 1191 and HR 2344 state that one of the purposes is to "help eliminate the unfair commercial advantage that States and their instrumentalities now hold in the Federal intellectual property system because of their ability to obtain protection under the United States patent, copyright, and trademark laws while remaining exempt from liability for infringing the rights of others".

Sen. Leahy (at right) stated in the Senate that "I believe that there is an urgent need for Congress to respond to the Florida Prepaid decisions, for two reasons. First, the decisions opened up a huge loophole in our Federal intellectual property laws. If we truly believe in fairness, we cannot tolerate a situation in which some participants in the intellectual property system get legal protection but need not adhere to the law themselves. If we truly believe in the free market, we cannot tolerate a situation where one class of market participants have to play by the rules and others do not."

Second, said Sen. Leahy, these were 5-4 decisions. He said that "Over the past decade, in a series of five-to-four decisions that might be called examples of ``judicial activism,´´ the current Supreme Court majority has overturned Federal legislation with a frequency unprecedented in American constitutional history. In doing so, the Court has more often than not relied on notions of State sovereign immunity that have little if anything to do with the text of the Constitution. ... We are faced with a choice. We can respond -- in a careful and measured way -- by reinstating our democratic policy choices in legislation that is crafted to meet the Court's stated objections. Or we can run away, abdicate our democratic policy-making duties to the unelected Court, and go down in history as the incredible shrinking Congress." See, Congressional Record, June 5, 2003, at Page S7479-80.

This bill would do several things. First, it would prevent states from recovering damages for infringement of state owned intellectual property (either patent, copyright or trademark), unless they have first waived their 11th Amendment sovereign immunity from suits against them for their infringement of the intellectual property of others.

Second, it would provide that states that violate intellectual property rights "in a manner that deprives any person of property in violation of the fourteenth amendment of the United States Constitution, shall be liable to the party injured in a civil action in Federal court for compensation for the harm caused by such violation." The bill contains similar language for violations which constitute takings under the 5th Amendment.

Legislative History. Sen. Leahy has been trying for many years, without success, to pass legislation addressing this problem. He sponsored similar legislation in the 107th Congress -- S 2031, the "Intellectual Property Protection Restoration Act of 2002". Sen. Sam Brownback (R-KS) was a cosponsor. However, at the beginning of the 108th Congress, he gave up his seat on the Judiciary Committee, and is not longer active on this issue.

S 2031 (107th), in turn, was a revised version of S 1611 (107th), the "Intellectual Property Protection Restoration Act of 2001, introduced on November 1, 2001.

The related bill in the House was HR 3204 (107th), sponsored by Rep. Howard Coble (R-NC) and Rep. Howard Berman (D-CA). Rep. Coble was the Chairman of the House Subcommittee on Courts, the Internet, and Intellectual Property in the 107th Congress. Rep. Smith is now the Chairman.

Sen. Dianne Feinstein (D-CA), who is also a member of the Senate Judiciary Committee, is the main obstacle to passage of this legislation. She represents UC Berkeley and other California institutions that do not want to give up their immunity.

See also, story titled "Senate Judiciary Committee Considers Federalism and Intellectual Property" in TLJ Daily E-Mail Alert No. 522, October 3, 2002, and "Sen. Leahy Reintroduces Bill to Close 11th Amendment Loophole to IPR" in TLJ Daily E-Mail Alert No. 394, March 22, 2002.

6/12. President Bush announced his intent to nominate Pamela Harbour to be a Commissioner of the Federal Trade Commission (FTC) for the remainder of a seven year term expiring September 25, 2009. She is a partner in the New York City office of the law firm of Kaye Scholer. Previously, she worked for 11 years in the Office of the Attorney General of the State of New York. She was Deputy Attorney General and Chief of the Public Advocacy Division. She was also Assistant First Deputy to Attorney General Eliot Spitzer. If confirmed, she will replace Sheila Anthony. See, White House release and second release.

6/11. The Senate confirmed Richard Wesley to be a Judge of the U.S. Court of Appeals for the Second Circuit by a vote of 96-0. See, Roll Call No. 215. Wesley is currently an Associate Justice of the Court of Appeals of New York.

6/11. The Senate confirmed Mark Kravitz to be a Judge of the U.S. District Court for the District of Connecticut by a vote of 97-0. See, Roll Call No. 217.

6/11. The Senate confirmed Ronnie Greer to be a Judge of the U.S. District Court for the Eastern District of Tennessee by a vote of 97-0. See, Roll Call No. 216.

6/12. The Senate confirmed Clay Johnson to be Deputy Director for Management at the Office of Management and Budget (OMB). See, OMB release.

6/12. J.D. Edwards filed a complaint [12 pages in PDF] in state court in Denver, Colorado, against Oracle in connection with Oracle's hostile offer to acquire PeopleSoft.

On June 2, J.D. Edwards and PeopleSoft announced a definitive agreement under which PeopleSoft will acquire J.D. Edwards. See, PeopleSoft release [4 pages in PDF] and J.D. Edwards release.

On June 6, Oracle made a hostile bid for PeopleSoft. Oracle stated in a release [PDF] that it will "commence a cash tender offer to purchase all of the outstanding shares of PeopleSoft ... for $16 per share, or approximately $5.1 billion." See also, Oracle document [PDF] titled "Frequently Asked Questions Document". See, story titled "Oracle Makes Hostile Bid for PeopleSoft" in TLJ Daily E-Mail Alert No. 676, June 9, 2003.

The three count complaint alleges intentional interference with contract, intentional interference with prospective business relations of J.D. Edwards, and intentional interference with prospective business relations of PeopleSoft. PeopleSoft is not a plaintiff. However, J.D. Edwards alleges that since it is has a binding contract to merge with PeopleSoft, economic benefits to PeopleSoft will accrue to it.

J.D. Edwards seeks declaratory relief, $1.7 Billion in compensatory damages, unspecified punitive damages, and cost and attorneys fees.

Bob Dutkowsky, Ch/P/CEO of J.D. Edwards, stated in a release that "Oracle's sole aim is to disrupt a merger that will create value for the key stakeholders of J.D. Edwards and PeopleSoft ... Oracle’s unsolicited offer for PeopleSoft will only destroy value for our companies' shareholders, customers and employees and the technology community overall. We will not sit by idly while Oracle pursues this arrogant, unlawful and destructive course of action."

Also named as defendants are Pepper Acquisition Corporation and John Does 1-50. The complaint alleges that Pepper is a wholly owned subsidiary of Oracle "formed for the sole purpose of making a tender offer for the Common Stock of PeopleSoft." The complaint alleges that "Does 1 through 50 participated in or caused the tortious conduct identified in this Complaint."

The complaint alleges that "Oracle's purpose in this effort is to prevent the competition it would face if the J.D. Edwards/PeopleSoft Contract is consummated, while its chosen method for achieving its objective is an illusory offer to acquire PeopleSoft. Oracle's so-called offer is conditioned upon PeopleSoft breaching the Contract with J.D. Edwards."

J.D. Edwards has its headquarters in Denver, Colorado. It is represented by David Berger of the Silicon Valley law firm of Wilson Sonsini. Local counsel in Denver is Stephen Baity of the law firm of Godin Baity.

10:00 AM. The Senate Banking Committee will hold a hearing on several pending nominations, including that of Greg Mankiw to be a member of the President's Council of Economic Advisors. Location: Room 538, Dirksen Building.

12:00 NOON. The Cato Institute will host a panel discussion titled "Canning Spam: Can We Shift the Cost of Unsolicited E-mail Back to Spammers?". The speakers will be Orson Swindle (Commissioner of the Federal Trade Commission), Wayne Crews (Cato), and Dave Baker (Earthlink). See, notice and online registration page. Lunch will be served. Location: Room B-369, Rayburn Building.

2:00 - 3:00 PM. The Information Technology Association of America (ITAA) will host a webcast program titled "The Do's and Don'ts of Workplace Email and Web Monitoring". The presenters will be Cathy Bissoon, (Reed Smith) and Susan Getgood (Surf Control). See, notice and registration information.

CANCELLED. The Federal Communications Commission's (FCC) Network Reliability and Interoperability Council (NRIC) will hold a meeting. The NRIC will next meet on September 15, 2003 from 1:00 - 4:00 PM. See, notice of cancellation [PDF].

The House will meet at 12:30 PM.

The Supreme Court will return from a one week recess.

Deadline to submit comments to the Federal Communications Commission (FCC) regarding News Corp.' proposed acquisition of an interest in DirecTV. See, FCC notice [7 pages in PDF], and story titled "FCC Sets Deadlines for Comments on News Corp.'s DirecTV Deal" in TLJ Daily E-Mail Alert No. 664, May 19, 2003. This is MB Docket No. 03-124. For more information, contact Marcia Glauberman at mglauber@fcc.gov or 202 418-7046 or Linda Senecal at lsenecal@fcc.gov or 202 418-7044.

Deadline to submit comments to the Bureau of Industry and Security (aka Bureau of Export Administration) regarding its proposal titled "Best Practices for Exporters/Re-exporters and Trade Facilitation/Freight Forwarding Companies Regarding the Transit, Transshipment, and Reexport of Dual-Use Items".For more information, contact Rick Cupitt at rcupitt@bis.doc.gov or 202 482-1459. See, notice in Federal Register, May 16, 2003, Vol. 68, No. 95, at Pages 26567 - 26569.

10:00 AM. The Senate Finance Committee will hold a hearing titled "The Implementation of U.S. Bilateral Free Trade Agreements With Singapore and Chile". Location: Room 215, Dirksen Building.

RESCHEDULED FOR JUNE 24. 12:15 PM. The Federal Communications Bar Association's (FCBA) Cable Practice Committee will host a brown bag lunch. The speaker will be Kyle Dixon, Deputy Bureau Chief of the Federal Communications Commission's (FCC) Media Bureau, and Special Counsel to the Chairman for Broadband. RSVP to Wendy Parish at wendy@fcba.org. Location: National Cable & Telecommunications Association (NCTA), 1724 Massachusetts Ave., NW, 2nd Floor Conference Room.

CANCELLED. 12:15 PM. The Federal Communications Bar Association's (FCBA) Mass Media Practice Committee will host a brown bag lunch on "current issues". RSVP to moconnell @newscorp.com. Location: NAB, 1771 N Street, NW.

2:00 PM. The Senate Judiciary Committee will hold a hearing to examine whether personal and national security risks compromise the potential of P2P networks. Press contact: Margarita Tapia at 202 224-5225. Location: Room 226, Dirksen Building.

Deadline to submit reply comments to the Federal Communications Commission (FCC) in response to its notice of proposed rulemaking (NPRM) regarding its slamming rules. Slamming is the unauthorized changing of subscriber's selection of a provider of telephone exchange service or telephone toll service. The FCC adopted this NPRM on February 28, 2003, and released it on March 17. See, Third Order on Reconsideration and Second Further Notice of Proposed Rulemaking [63 pages in PDF]. This is FCC Docket No. 94-129. See also, FCC release [PDF]. For more information, contact Kelli Farmer at 202 418-7057.

2:30 PM. The Senate Judiciary Committee's Antitrust, Competition Policy and Consumer Rights Subcommittee will hold a hearing on the proposed NewsCorp DirecTV transaction, focusing on global distribution. Press contact: Margarita Tapia at 202 224-5225. Location: Room 226, Dirksen Building.

Scheduled completion of voting by the Media Security and Reliability Council's (MSRC) Advisory Committe on the MSRC's Best Practices Recommendations [5 pages in MS Word] to ensure effective delivery of emergency information to the public during terrorist attacks, natural disasters, and other emergencies. The MSRC provides recommendations to the Federal Communications Commission (FCC) and industry. See, story titled "Media Security and Reliability Council Considers Recommendations" in TLJ Daily E-Mail Alert No. 669, May 29, 2003.

The Federal Trade Commission (FTC) will host a workshop titled "Information Flows: The Costs and Benefits to Consumers and Businesses of the Collection and Use of Consumer Information". It will address the issue of the costs and benefits to consumers and businesses of consumer information collection and use. It will explore how consumer information is collected and used by businesses to facilitate commercial transactions, as well as how it can be used to fight fraud. See, agenda. The FTC states that "preregistration will be required for the press". Location: FTC Conference Center, 601 New Jersey Ave., NW.

The Senate Commerce Committee will meet to mark up S 877, the "Controlling the Assault of Non-Solicited Pormography and Marketing Act of 2003", or "CAN-SPAM Act", sponsored by Sen. Conrad Burns (R-MT) and Sen. Ron Wyden (D-OR). Location: Room 253, Russell Building.

9:00 AM - 5:00 PM. The Department of Defense's (DOD) Technology and Privacy Advisory Committee (TAPAC) will hold a public meeting. The TAPAC is a Total Information Awareness Project oversight board. The notice states that "The purpose of the meeting is for presentations of interest and discussion concerning the legal and policy considerations implicated by the application of advanced information technologies to counter-terrorism and counter-intelligence missions." For more information, contact Lisa Davis, TAPAC Executive Driector, at 703 695-0903. See, notice in the Federal Register, June 11, 2003, Vol. 68, No. 112, at Page 34909. Location: Hyatt Arlington, 1325 Wilson Blvd., Arlington, VA.

9:30 AM. The Federal Communications Commission (FCC) will hold a meeting. Location: FCC, 445 12th Street, SW, Room TW-C05 (Commission Meeting Room).

Deadline to submit comments to the Copyright Office (CO) in response to its notice in the Federal Register "requesting comment on proposed regulations that set rates and terms for the use of sound recordings in eligible nonsubscription transmissions and new subscription services, other than transmissions made by certain noncommercial entities, together with related ephemeral recordings. The rates and terms are for the 2003 and 2004 statutory licensing period, except in the case of new subscription services in which case the license period runs from 1998 through 2004." This notice also states that "The agreement published herein supersedes the agreement published in the Federal Register on May 1, 2003, and parties should only comment on the proposed rates and terms set forth in this notice." See, Federal Register, May 20, 2003, Vol. 68, No. 97, at Pages 27506 - 27513. See also, superseded notice in the Federal Register, May 1, 2003, Vol. 68, No. 84, at Pages 23241 - 23249. For more information, contact David Carson (CO General Counsel) or Tanya Sandros (Senior Attorney, CARP) at 202 707-8380.

6/12. The U.S. Court of Appeals (4thCir) issued its unpublished opinion [9 pages in PDF] in Svezzese v. Duratek. This is a class action securities fraud suit against a radioactive waste management services company, and several of its officers. The issue before the Court is the scienter requirements of the Private Securities Litigations Reform Act (PSLRA). The District Court dismissed the complaint. The Court of Appeals affirmed.

It is a nine page opinion on an important issue that explains the basis for the disposition. Yet, the Court designated it as nonprecedential.

The Appeals Court noted that "Under the 1995 Private Securities Litigation Reform Act (PSLRA), a securities fraud complaint must also meet heightened pleading standards, particularly with respect to scienter. See 15 U.S.C.A. § 78u-4(b)". The Appeals Court reviewed the various standards adopted by other federal circuits, but stated that "We have not yet adopted a specific standard as to what precisely a plaintiff must plead in order to meet the PSLRA's scienter requirement."

Following a review of the facts of the case, it concluded that "all of the allegations in the complaint, whether considered individually or collectively, fail to provide a sufficient basis to meet even the most lenient PSLRA pleading standard." Hence, the 4th Circuit has yet to interpret the meaning of the scienter requirement under the PSLRA. Most of the other circuits have weighed in, and adopted one of three standards.

6/12. The Securities and Exchange Commission (SEC) filed a civil complaint in U.S. District Court (NDCal) against Terry Davis, a former VP and Controller of Network Associates, alleging violation of federal securities laws in connection with a scheme to overstate Network Associates' revenues and earnings and thereby inflate its stock price. Also, on June 11, the U.S. Attorneys Office (NDCal) charged Davis by criminal information [PDF] with securities fraud in violation of 15 U.S.C. § 78j(b) and § 78ff, 17 C.F.R. § 240.10b-5, and aiding and abetting under 18 U.S.C. § 2.

The SEC's civil complaint alleges that he "filed false and misleading financial statements with the Commission from at least the second quarter of fiscal 1998 through at least the fourth quarter of fiscal 2000". Moreover, the complaint alleges that while Davis knew of the fraud, he sold shares of Network Associates.

The four count SEC complaint alleges fraud in violation of Section 10(b) of the Exchange Act Section 10(b) and Rule 10b-5 thereunder; insider trading in violation of Section 17(a) of the Securities Act, Section 10b of the Exchange Act, and Rule 10b-5 thereunder; falsifying books and records and making false statements to auditors in violation of Section 13(b)(5) Exchange Act  and Rules 13b2-1 and 13b2-2 thereunder; and aiding and abetting violations in violation of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-13. See also, SEC release.

Davis entered a plea of guilty to the criminal charges in U.S. District Court. See also, USAO release.

6/12. The House passed HR 2312, the "ORBIT Technical Corrections Act of 2003". The bill was introduced on June 3, 2003 by Rep. John Shimkus (R-IL). The bill states that it would "amend the Communications Satellite of 1962 to provide for the orderly dilution of the ownership interest in Inmarsat by former signatories to the Inmarsat Operating Agreement." Specifically, it provides that "Clause (ii) of section 621(5)(A) of the Communications Satellite Act of 1962 (47 U.S.C. 763(5)(A)) is amended -- (1) by striking `December 31, 2002' and inserting `June 30, 2004'; and (2) by striking `June 30, 2003' and inserting `December 31, 2004'."

6/12. The Federal Communications Commission (FCC) released an order regarding Cingular Wireless's possible violations of the enhanced 911 (E911) Phase II provisions of the FCC's Rules for its Global System for Mobile Communications (GSM) network and the FCC Order granting Cingular a waiver of the E911 Phase II rules for its GSM network. The order adopts and attaches a consent decree under which Cingular is fined (the order designates this as a "voluntary contribution") $675,000. See also, FCC release.