11/3. The Federal Trade Commission (FTC) filed an administrative complaint [5 pages PDF] against Zango, Inc., Keith Smith and Daniel Todd alleging unfair or deceptive trade practices in violation of Section 5 of the FTC Act in connection with their adware distribution practices.

The FTC also entered into a detailed settlement agreement with the respondents which prohibits them from engaging in certain software download related practices.

This case involves the practices of a small, disreputable and unethical adware company. Nevertheless, the settlement agreement may provide guidance for the wide range of businesses that provide software downloads as to what acts, and omissions, the FTC considers to be unfair or deceptive business practices.

There is no adware specific federal statute. However, Section 5 of the FTC Act, which is codified at 15 U.S.C. § 45, provides that "Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful".

Lydia Parnes, Director of the FTC's Bureau of Consumer Protection, stated in a release that "it violates federal law to secretly install software that forces consumers to get pop-ups that disrupt their computer use".

In July of 2006, 180solutions, Inc. merged with Hotbar, Inc. and changed the combined company's name to Zango, Inc. The other respondents, Smith and Todd, are named individually, and in their capacity as officers of Zango, Inc.

The complaint alleges that the respondents distributed by internet downloading "adware" that monitors the internet use of computers and displays pop-up advertisements based on that internet use. It states that the respondents distributed their adware through affiliates and sub-affiliates acting on their behalf who bundled their adware with purportedly free software programs, which the complaint describes as "lureware".

The complaint states that "When installing the lureware, consumers often have been unaware that Respondents' adware would also be installed because that fact was not adequately disclosed to them. In some instances, no reference to Respondents’ adware was made on the website offering the lureware or in the install windows. In other instances, information regarding Respondents’ adware was available only by clicking on inconspicuous hyperlinks contained in the install windows or in lengthy terms and conditions regarding the lureware. Because the lureware often was bundled with several different programs, the existence and information about the effects of Respondents' adware could only be ascertained, if at all, by clicking through multiple inconspicuous hyperlinks."

The complaint also states that the respondents, acting through affiliates or sub-affiliates, installed their adware by "drive-by downloads", by "exploiting security vulnerabilities in Internet web browsers", which downloads involve no notice to the consumer.

The complaint alleges that "Respondents knew or should have known that there was widespread failure by their affiliates and sub-affiliates to provide adequate notice of their adware and obtain consumer consent to its installation."

The complaint further alleges that the respondents made "identifying, locating, and removing their adware extremely difficult for consumers".

The FTC entered into an Agreement Containing Consent Order [12 pages in PDF] with the respondents. The respondents admit no wrongdoing or violation of law. However, the respondents agree not to engage in certain adware distribution practices, and make a $3 Million "payment" to the FTC.

The agreement provides that the respondents cannot install software on consumers' computers without obtaining express consent. It also requires respondents to make their adware capable of uninstallation. It also regulates the relationship between the respondents and their affiliates.

The FTC filed its administrative complaint after receiving a complaint [PDF] from the Center for Democracy and Technology (CDT).

The CDT's Ari Schwartz stated in a release that "This is a landmark settlement, and one that sends an important message to companies that have built their businesses on the backs of Internet users without any concern for what those users want ... With this action, the FTC has again made clear that it is prepared to go after companies, regardless of size or market position, that engage in unfair and deceptive practices to distribute their products."

The CDT release adds that "More important than the $3 million payment called for under the settlement, is a requirement that Zango cease communications with Internet users who downloaded the Zango/180solutions software before Jan. 1, 2006. Not only does this provide relief for many unwitting Zango "users," it also sends a message that companies will not be permitted to retain customer bases built on patterns of unfair practices."

This case is In the Matter of Zango, Inc., formerly known as 180Solutions, Inc., Keith Smith and Daniel Todd, FTC file number 052 3130.

11/6. The Federal Trade Commission (FTC) filed a complaint [PDF] in U.S. District Court (NDCal) against Yesmail, Inc. alleging violation of CAN-SPAM Act in connection with its bulk commercial e-mail practices. See also, FTC release.

The complaint states that Yesmail provides e-mail marketing services to its business clients. The CAN-SPAM Act requires certain commercial e-mailers must allow recipients to opt-out of receiving further messages. The complaint further states that Yesmail both sends e-mail, and processes opt-out messages. However, Yesmail configured its own e-mail filters to block these opt out messages.

The complaint is dated October 24, 2006. The FTC also announced that it has entered into a Stiputated Final Order [PDF] that bars further violation of the CAN-SPAM Act, requires Yesmail to pay a "civil penalty" of $50,717, and imposes reporting and record keeping requirements on Yesmail.

The CAN-SPAM Act is the "Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003". It was S 877 in the 108th Congress. It is now Public Law No. 108-187. It is codified at 15 U.S.C. § 7701-7713.

This case is USA v. Yesmail, Inc. dba @Once Corporation, U.S. District Court for the Northern District of California, D.C. No. C 06 6611.

11/2. Microsoft and Novell announced a set of agreements to collaborate with respect to Linux. See, Microsoft release (and documents hyperlinked therein), transcript of joint news conference, and Joint letter to the Open Source Community.

The letter states that "Microsoft is coming to terms with Linux". It adds that "Today, for the first time, Microsoft is collaborating directly with a Linux and Open Source software vendor. With this news, Microsoft is saying that Linux is an important part of the IT infrastructure. More importantly, Microsoft announced today that it will not assert its patents against individual, non-commercial developers. Novell has secured an irrevocable promise from Microsoft to allow individual and non-commercial contributors the freedom to continue open source development, free from any concern of Microsoft patent lawsuits."

See also, Patent Cooperation Agreement (PCA). The PCA provides that Microsoft "covenants not to sue Novell's Customers and Novell's Subsidiaries' Customers for infringement under Covered Patents of Microsoft on account of a such Customers' use of specific copies of a Covered Product as distributed by Novell or its Subsidiaries ... for which Novell has received Revenue (directly or indirectly) for such specific copies; provided the foregoing covenant is limited to use by a Customer of Novell (i) of such specific copies that are authorized by Novell in consideration for such Revenue, and (ii) within the scope authorized by Novell in consideration for such Revenue."

This agreement only covers Novell's Linux products.

11/3. The Copyright Office (CO) published a notice in the Federal Register that announces, describes, sets the effective date (October 20, 2006), and attaches a copy of, it Memorandum Opinion (MO) regarding the designation of certain digital subscription music services as preexisting subscription services.

See, Federal Register, November 3, 2006, Vol. 71, No. 213, at Pages 64639-64647.

Background. On September 20, 2006, the Copyright Royalty Board (CRB), at the request of SoundExchange, Inc., referred a question of law to the Register of Copyrights regarding the conditions under which an entity may be a "preexisting subscription service" within the meaning of 17 U.S.C. § 114(j)(11).

17 U.S.C. § 114 provides a statutory license to perform a sound recording publicly by means of a digital audio transmission.

Subsection (d)(2) provides a statutory license for certain performances "of a sound recording publicly by means of a subscription digital audio transmission ... , an eligible nonsubscription transmission, or a transmission ... that is made by a preexisting satellite digital audio radio service". Subsection (d)(2)(B) contains the reference to "preexisting subscription service" that is at issue. Subsection (j)(11) provides a definition of "preexisting subscription service".

Subsection (j)(11) provides that a "preexisting subscription service" means "a service that performs sound recordings by means of noninteractive audio-only subscription digital audio transmissions, which was in existence and was making such transmissions to the public for a fee on or before July 31, 1998, and may include a limited number of sample channels representative of the subscription service that are made available on a nonsubscription basis in order to promote the subscription service."

SoundExchange collects and distributes royalties from various digital music services on behalf of artists and record companies.

The MO states that the CRB asked this: "Is the universe of preexisting subscription services -- defined in 17 U.S.C. Sec.  114(j)(11) as services which perform sound recordings by means of noninteractive audio -- only subscription digital audio transmissions and which were in existence and making such transmissions to the public for a fee on or before July 31, 1998 -- [limited by] law to only Muzak (provided over the DiSH Network), Music Choice, and DMX?" (Parentheses and brackets in original. Footnotes omitted.)

Arguments of Affected Parties. DMX, Inc. and Sirius Satellite Radio, Inc. argued that the Section 114 term "service" means the use of the music, while SoundExhange argued that it means the business entity operating the service.

DMX argued that it is eligible. It wrote that "any subscription service that has been in existence and making noninteractive audio-only subscription digital audio transmissions to the public for a fee since prior to July 31, 1998 is a ``preexisting subscription service´´ for the purposes of the compulsory license available under Section 114(d)(2)(B) ..." DMX is represented by Bruce Rich of the law firm of Weil Gotshal & Manges.

SoundExchange argued that DMX is not eligible on the grounds that it acquired the entity providing the service out of the bankrupt estate of the previous owner. It argued that only Muzak and Music Choice, which was formerly known as Digital Cable Radio Associates, are eligible. SoundExchange is represented by Thomas Perrelli of the law firm of Jenner & Block.

Sirius argued that "The Sirius audio service, when carried over the DISH Network, is also entitled to treatment as a preexisting subscription service". Sirius is represented by Bruce Joseph of the law firm of Wiley Rein & Fielding.

SoundExchange responded that DISH/Echostar is not eligible, and hence, neither is Sirius.

Opinion of the Register of Copyright. The Copyright Office's Memorandum Opinion (MO) states that Section 114 "is not a model of clarity or consistency".

It states that "In sum, eligibility for a preexisting subscription service license is limited to subscription services that satisfy the definition of 17 U.S.C. Sec.  114(j)(11), which includes being in operation on July 31, 1998 and continuously operating since that time. In 1998, Congress identified those entities which satisfied the definition and were eligible at that time as being DMX, Music Choice and the DiSH Network. Therefore, today, those same services are the only ones that may qualify as being preexisting subscription services, since they are the only ones which can satisfy the requirement of being in operation as of July 31, 1998."

It adds that "Moreover, for purposes of participating in a rate setting proceeding, the term ``preexisting subscription service´´ is best interpreted as meaning the business entity which operates under the statutory license. A determination of whether DMX is the same service that was identified by the legislative history in 1998 and has operated continuously since that time requires a factual analysis that is beyond the scope of the Register's authority for questions presented under 17 U.S.C. Sec.  802(f)(1)(B)."

The MO reasons that "the better reading of the statute is that the preexisting services must be limited to the three named entities in the Conference Report, i.e., DMX (operated by TCI Music), Music Choice (operated by Digital Cable Radio Associates), and the DiSH Network (operated by Muzak) that were in existence and making transmissions of sound recordings by means of noninteractive audio-only subscription digital transmissions on or before July 31, 1998." (Parentheses in original.)

"The question remains, however, whether the designation applies to the type of offerings made by the service or the business entity operating at the relevant time." The MO concludes that "the beneficiary of the grandfather provision should be the business entity that was providing the service at the time. While there is a debate among the parties as to whether DMX today is the same business entity as it was in 1998, the Office declines to reach this question because it would involve the interpretation of facts that go beyond the scope of this inquiry."

The MO continues that "On the other hand, it is appropriate for the Office to consider whether for purposes of Sec. 114 Sirius can provide the same type of music service that Muzak offered in 1998 through DiSH Network. The answer to this inquiry hinges on the status of DiSH Network and whether it or the music service content provider offered over its network is the beneficiary of the grandfather provision. On this point, Sirius concedes that DiSH Network is a satellite television service which, in 1998, sought out a music service provider to supply the audio music channels. It also notes that the Sec. 114 statutory license covers only audio services and that the royalty fees are calculated based on the revenues associated with the provision of the sound recordings and not the revenues generated by DiSH Network. We also note that DiSH Network is the apparent beneficiary of the exemption in Sec. 114(d)(1)(C)(iii) which allows a direct broadcast satellite service provider to retransmit to the listener noninteractive music programming provided by a licensed source. Yet in spite of these facts, Sirius maintains that DiSH Network is the preexisting subscription service because it was specifically named in the legislative history, or alternatively, that Sirius itself is the beneficiary of the designation as a preexisting service through DiSH, because it is the provider of music services over the DiSH Network."

"While it is clear that DiSH is identified in the legislative history as the preexisting service, often without any reference to Muzak as the provider of the audio channels carried over the DiSH network, the DiSH Network standing alone cannot be viewed as the preexisting service, nor does it have a need to be designated as such because of the exemption it enjoys under Sec. 114(d)(1)(C)(iii). Section 114 involves the licensing of the public performance right to make digital transmissions of sound recordings. In 1998, the service making these transmissions over the DiSH Network was Muzak. Thus, it was Muzak that made the transmissions under the Sec. 114 statutory license and it was Muzak that incurred the obligation to pay the royalties. Because DiSH itself did not operate under the Sec. 114 statutory license, it makes no sense for it alone to be considered the preexisting service. Thus, the reference to DiSH Network in the legislative history is best interpreted as including the actual music service that did offer subscription transmissions of sound recordings over the DiSH Network at that time, i.e., Muzak."

The MO adds that "to allow Sirius to step into the shoes of Muzak and offer the same type of subscription transmissions is inconsistent with a narrow construction of the grandfather provision."

The House will not meet. It may return from it elections recess on Monday, November 13, 2006. See, Republican Whip Notice. However, the adjournment resolution, HConRes 483, provides for returning on Thursday, November 9, at 2:00 PM.

The Senate will not meet. See, HConRes 483.

Day one of a four day a partially closed conference hosted by the Federal Trade Commission (FTC) titled "Protecting Consumers in the Next Tech-ade". The topics to be addressed include "The Changing Nature of Consumer Products, Mobile Devices and Marketing, Data Security and Privacy, Convergence, The Evolving Internet, Payment Systems and Trends, Advertising and Marketing Trends, and Demographic Shifts". The November 9 session is closed to the public. See, notice and conference web site. Location: George Washington University, Lisner Auditorium, 730 21st Street, NW.

1:30 PM. Attorney General Alberto Gonzales, Secretary of Homeland Security Michael Chertoff, European Union VP Franco Frattini, Finland's Minister of Justice Leena Luhtanen, and Finland's Minister of Interior Kari Rajamaki will hold a news conference regarding on transnational crime. Location: Department of Justice (DOJ), Conference Center, 7th Floor, 10th Street and Constitution Ave., NW.

Election Day.

2:00 PM. The U.S. Court of Appeals (FedCir) will hear oral argument in Plumtree Software v. Datamize, App. Ct. No. 06-1017, an appeal from the U.S. District Court (NDCal). Location: Courtroom 201, 717 Madison Place, NW.

2:00 PM. The U.S. Court of Appeals (FedCir) will hear oral argument in Thompson v. Microsoft, App. Ct. No. 06-1073. Location: Courtroom 203, 717 Madison Place, NW.

ON THE BRIEFS. 2:00 PM. The U.S. Court of Appeals (FedCir) will hear oral argument in Missiontrek v. Onfolio, App. Ct. No. 06-1271, an appeal from the Trademark Trial and Appeal Board (TTAB). Location: Courtroom 203, 717 Madison Place, NW.

Day two of a four day a partially closed conference hosted by the Federal Trade Commission (FTC) titled "Protecting Consumers in the Next Tech-ade". The topics to be addressed include "The Changing Nature of Consumer Products, Mobile Devices and Marketing, Data Security and Privacy, Convergence, The Evolving Internet, Payment Systems and Trends, Advertising and Marketing Trends, and Demographic Shifts". The November 9 session is closed to the public. See, notice and conference web site. Location: George Washington University, Lisner Auditorium, 730 21st Street, NW.

9:00 AM. The Department of Commerce's (DOC) Bureau of Industry and Security's (BIS) Information Systems Technical Advisory Committee will meet. The agenda includes "Graphics Processors Technology", "Frequency Standards", "Telephony Signaling", "Phase Noise", and "Frequency Synthesizer Assemblies". See, notice in the Federal Register, October 25, 2006, Vol. 71, No. 206, at Page 62416. Location: Room 3884, Hoover Building, 14th Street between Constitution and Pennsylvania Avenues, NW.

12:15 PM. The Federal Communications Bar Association's (FCBA) Diversity Committee and Young Lawyers Committee will host a panel discussion titled "The Role of Mentoring in the Legal Profession". The speakers may include Kyle Dixon (Wilmer Hale), Marvin Ammori (Georgetown University Law Center), Judy Harris (ReedSmith) and James Sandman (Arnold & Porter). RSVP by November 3 to Colin Sandy at csandy at neca.org or LadyStacie Rimes at 202-682-5995. Location: Sidley Austin, , 6th Floor, 1501 K Street, NW.

Day three of a four day a partially closed conference hosted by the Federal Trade Commission (FTC) titled "Protecting Consumers in the Next Tech-ade". The topics to be addressed include "The Changing Nature of Consumer Products, Mobile Devices and Marketing, Data Security and Privacy, Convergence, The Evolving Internet, Payment Systems and Trends, Advertising and Marketing Trends, and Demographic Shifts". The November 9 session is closed to the public. See, notice and conference web site. Location: George Washington University, Lisner Auditorium, 730 21st Street, NW.

Deadline to submit comments to the Office of the U.S. States Trade Representative's (USTR) Trade Policy Staff Committee (TPSC) regarding barriers to U.S. exports of goods, services and overseas direct investment for inclusion in the USTR's annual report titled "National Trade Estimate Report on Foreign Trade Barriers", or "NTE". See, notice in the Federal Register, August 14, 2006, Vol., No. 156, at Pages 46525-46527.

Deadline to submit reply comments to the Federal Communications Commission's (FCC) Federal-State Joint Board on Universal Service in response to the FCC's public notice [PDF] requesting comments regarding the use of reverse auctions to determine high cost universal service funding to eligible telecommunications carriers. This proceeding is WC Docket No. 05-337 and CC Docket No. 96-45. See, notice in the Federal Register, August 25, 2006, Vol. 71, No. 165, at Pages 50420-50421.

The House and Senate may meet at 2:00 PM. See, HConRes 483.

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

6:00 - 8:15 PM. The DC Bar Association will host a continuing legal education (CLE) seminar titled "Managing E-Discovery Requests Under the New 2006 Federal Rules Amendments". The speaker will be Conrad Jacoby. The price to attend ranges from $80 to $135. For more information, call 202-626-3488. See, notice. Location: D.C. Bar Conference Center, 1250 H Street NW, B-1 Level.

Day four of a four day a partially closed conference hosted by the Federal Trade Commission (FTC) titled "Protecting Consumers in the Next Tech-ade". The topics to be addressed include "The Changing Nature of Consumer Products, Mobile Devices and Marketing, Data Security and Privacy, Convergence, The Evolving Internet, Payment Systems and Trends, Advertising and Marketing Trends, and Demographic Shifts". The November 9 session is closed to the public. See, notice and conference web site. Location: George Washington University, Lisner Auditorium, 730 21st Street, NW.

The Federal Communications Commission (FCC) and other federal offices will be closed. See, Office of Personnel Management's (OPM) list of federal holidays.

2:00 - 3:00 PM. The Information Technology Association of America (ITAA) will host a webcast titled "The FTC's Privacy & Data Security Jurisdiction, implications of the BJ's Wholesale Case and Other Recent Enforcement Actions". The speakers will be Stuart Ingis (Venable) and Emilio Cividanes (Venable). See, notice and registration page.

Deadline to submit comments to the Federal Trade Commission (FTC) regarding its proposed consent agreements with Information and Real Estate Services, LLC, and other real estate businesses. See, story titled "FTC Charges Real Estate Groups that Limited Publication of Listings on Certain Web Sites" in TLJ Daily E-Mail Alert No. 1,469, October 16, 2006, and notice in the Federal Register, October 18, 2006, Vol. 71, No. 201, at Pages 61474-61478.

Veterans Day.

The House and Senate return from their elections recess. See, HConRes 483.

12:00 NOON - 1:15 PM. The DC Bar Association will host a panel discussion titled "The Future of Obviousness: Will Teaching/Suggestion/Motivation to Combine Remain the Test?". The speakers will include Delano Jordan (Kenyon & Kenyon). The price to attend ranges from $15 to $35. For more information, call 202-626-3463. See, notice. Location: D.C. Bar Conference Center, 1250 H Street NW, B-1 Level.

12:15 - 1:30 PM. The Federal Communications Bar Association's (FCBA) Legislative Committee will host a brown bag lunch. This is a planning meeting. RSVP to Amy Levine amy dot levine at mail dot house dot gov or 202-225-3861. Location: Verizon, Suite 400 West 1300 I St., NW.

6:00 - 9:15 PM. The DC Bar Association will host a continuing legal education (CLE) seminar titled "Basics of Intellectual Property Taxation". The speakers will be Kenneth Appleby (Foley & Lardner). The price to attend ranges from $80 to $135. For more information, call 202-626-3488. See, notice. Location: D.C. Bar Conference Center, 1250 H Street NW, B-1 Level.

Day one of a five day meeting of the Department of Commerce's Judges Panel of the Malcolm Baldrige National Quality Award. See, notice in the Federal Register, October 20, 2006, Vol. 71, No. 203, Pages 61958-61959. Location: National Institute of Standards and Technology, Building 222, Room A230, Gaithersburg, MD.

Deadline to submit comments to the Copyright Royalty Board regarding its amendments to the procedural regulations governing the practices and procedures of the Copyright Royalty Judges in royalty rate and distribution proceedings. See, notice in the Federal Register, September 11, 2006, Vol. 71, No. 175, at Pages 53325-53331.

Deadline to submit reply comments to the Federal Communications Commission (FCC) in response to it notice of proposed rulemaking (NPRM) regarding compensation of providers of telecommunications relay services (TRS) from the Interstate TRS Fund. The FCC adopted this item on July 13, 2006, and released it on July 20, 2006. It is FCC 06-106. This proceeding is titled "Telecommunications Relay Services and Speech-to-Speech Services for Individuals With Hearing and Speech Disabilities" and numbered CG Docket No. 03-123. See, notice in the Federal Register, September 13, 2006, Vol. 71, No. 177, at Pages 54009-54017.

Deadline to submit initial comments to the Federal Communications Commission (FCC) in response to it further notice of proposed rulemaking (FNPRM) regarding maritime Automatic Identification Systems (AIS). The FCC adopted this item on July 20, 2006, and released it on July 24, 2006. It is FCC 06-108 in WT Docket No. 04-344. See, notice in the Federal Register, October 12, 2006, Vol. 71, No. 197, at Pages 60102-60106.

11/3. Alexander Cohen was named Deputy General Counsel for Legal Policy and Administrative Practice at the Securities and Exchange Commission (SEC), effective "mid-November". He is currently a partner in the Hong Kong office of the law firm of Latham & Watkins. See, SEC release.

11/3. The U.S. District Court (EDNY) sentenced Sanjay Kumar to serve 12 years in prison, and pay an $8 Million fine, following his previous pleas of guilty to securities fraud and other offenses related to his fraudulently inflating the quarterly revenue and earnings of Computer Associates (CA). Kumar was previously Ch/CEO of CA. See, SEC release.

11/6. President Bush continues to give speeches on behalf of Republican candidates for office in the November 7 elections. He continues to campaign on differences between Republicans and Democrats on the National Security Agency's (NSA) electronic surveillance program. See, November 2 speech in Elko, Nevada, November 2 speech in Billings, Montana, November 3 speech in Springfield, Missouri, November 6 speech in Topeka, Kansas, and November 5 speech in Grand Island, Nebraska. Bush has also discussed partisan differences on judicial appointments, and especially Sam Alito and John Roberts.

11/2. Federal Reserve Board (FRB) Governor Susan Bies gave a speech at Drake University in Des Moines, Iowa, titled "The Economic Outlook". She stated that "Spending on equipment and software, which grew quite rapidly from mid-2004 to early 2006, has advanced at a more moderate pace lately. The recent slowdown in the growth of business sales would be expected, all else equal, to have a damping influence on capital spending, and in fact business confidence has moved down since the start of the year." However, she added that "the demand for information technology equipment is also likely to be well maintained, in part because of the recent introduction of a new generation of microprocessing chips and more-efficient large servers."

11/1. Federal Reserve Board (FRB) Chairman Ben Bernanke gave a speech in Washington DC titled "Community Development Financial Institutions: Promoting Economic Growth and Opportunity". One of the points that he made was that technology has led to a democratization of credit. He said that "In recent years, advances in information and communication technologies, improved methods of risk measurement and risk assessment, the availability of more-comprehensive information about individuals' credit histories, and an increased ability of retail lenders to obtain funds from capital markets have led to what has been called the ``democratization´´ of credit."

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