News Briefs from May 11-15, 2001

FTC Halts Deceptive Ads of Juno and Gateway
5/15. The Federal Trade Commission (FTC) filed, and simultaneously settled, two administrative complaints alleging deceptive advertising practices in the marketing of Internet access services by Juno Online Services and Gateway. The FTC alleged that various acts of Juno and Gateway constituted unfair or deceptive acts or practices in or affecting commerce in violation of § 5(a) of the Federal Trade Commission Act. In particular, both companies advertised as "free" services that were not in fact free. Both companies agreed to stop misrepresenting the prices of their services.
The FTC filed an administrative complaint [PDF] against Juno alleging that it misrepresented that consumers who participated in its free trial offers for its Premium Internet service would be able to cancel at any time before the free trial period ended and incur no charges if they were not satisfied. The FTC and Juno simultaneously settled the matter, with Juno agreeing to stop misrepresenting the price of its Internet services, to clearly and conspicuously disclose the cancellation terms for these services, and to provide adequate customer support to handle consumer requests to cancel. The proposed settlement also requires Juno to reimburse certain former subscribers for long distance telephone charges they incurred to use its services. See, Agreement Containing Consent Order [PDF]. See also, FTC release.
The FTC filed a separate administrative complaint against Gateway alleging that it misrepresented that it provided one year of free service with Internet access. The FTC and Gateway settled the matter, with Gateway agreeing to stop misrepresenting the price of its Internet services. See, Agreement Containing Consent Order.
Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection, had this to say: "Free Internet access often turned out too good to be true for many consumers, a fact made clear by a significant volume of complaints by consumers to the FTC. Hidden fees often lurked in minuscule fine print tucked away at the end of ads or service agreements. Today's agreement will help make sure more consumers don't get taken for a ride on the Internet highway when it comes to the true cost of Internet access." See, release.
The Commission voted 5-0 to proceed with both of these complaints. The settlement agreements will be subject to public comment, after which the Commission will decide whether to make them final. It very likely will approve them.
Financial Privacy
5/15. The Free Congress Foundation and other groups wrote a letter to Treasury Secretary Paul O'Neill regarding OECD and FATF violations of financial privacy. The letter states that the "current proposals of OECD and FATF attempt to institute the popularly rejected 'Know Your Customer' financial regulation, thereby sidestepping the domestic legislative process. We are concerned about the attempt to get Know Your Customer adopted as an international 'best practice' under the guise of increasing transparency." The letter concludes, "Our modern economy requires a liberal capital policy that engenders the consumer trust that comes with respect for privacy. We strongly urge you to make a clear statement instituting policies that respect financial privacy and that the Treasury Department opposes the type of reporting requirements being advanced by the OECD and FATF."
5/15. Rep. John Dingell (D-MI) wrote a letter to Commerce Secretary Donald Evans regarding the new agreement negotiated by the ICANN and VeriSign. Dingell stated that "The agreement incorporates a most unusual technique for encouraging competition. It awards VeriSign, the current $500-million, monopoly registry and holder of the most popular dot-com domain name, advantages in the registry renewal process and in terms, pricing, dispute resolution and many other contract provisions that the newer, much smaller registries will not have." On May 14, Ted Kassinger, General Counsel of the Commerce Department, which must approve the agreement, released a statement in which he said that "The Department of Commerce has been reviewing the VeriSign-ICANN (Internet Corporation for Assigned Names and Numbers) proposal. We have communicated our general thinking, are pleased with the progress, and are confident an agreement can be reached in the near term."
Software Defined Radio
5/15. Intel submitted a reply comment to the FCC in its proceeding regarding software defined radio. Intel recommended that "SDR rules (1) distinguish between radio control and user application software and not impose certification requirements on user application software and (2) permit a manufacturer to create an open SDR platform that would enable third parties to develop innovative programs that optimize RF parameters of the radio and seek certification as a Class III permissive change on their own. Experience in both the wireless and wired industries demonstrates the workability and benefit of market solutions that maintain network integration and foster the development of innovative products." (See, In the Matter of Authorization and Use of Software Defined Radio, ET Docket No. 00-47).
Privacy News
5/15. Rep. Dick Armey (R-TX) wrote a letter to Secretary Tommy Thompson requesting that the Department of Health and Human Services halt its ongoing plans to mandate a "unique health identifier for individuals". Armey stated in his letter that the plan is illegal under legislation passed in 1998. (See, Public Law 106-554, 106th Congress.) He also stated that the plan would threaten the privacy of individuals' medical records. Armey wrote: "Imagine the implications for personal privacy if everyone had a government- issued medical ID number and the government had an unfettered search- and- seizure power over private medical records. That unfettered search- and- seizure power is currently poised to become law, thanks to the Clinton privacy regulations that are being finalized right now. The addition of a universal identifier would make that power all the more troubling."
5/15. Microsoft announced its intent to sign the Safe Harbor Agreement of the EU data directive. See, release.
Trade and Fast Track
5/15. Rep. Marcy Kaptur (D-OH), a leading protectionist in the House, gave an speech in the House in which she criticized President Bush's request for "fast track," now also called "trade promotion authority." She stated that Bush "knows that Congress has repeatedly rejected Fast Track, most recently in 1998. He also knows that he does not have the support or votes in this Congress to pass this misguided approach. ... Without congressional oversight and input, trade agreements will be negotiated by unrepresentative delegates, who were never elected, standing up for the rights of international corporations, instead of our hardworking constituents, not to mention that a thing called the Constitution of the United States grants to Congress the right to regulate commerce with foreign nations."
5/15. The ICANN finalized accreditation agreements with the new .biz and .info top-level domain (TLD) registries. The registry operators, NeuLevel for .biz and Afilias for .info, were among seven registry operators for new TLDs selected by the ICANN Board of Directors in November of 2000. Both agreements provide for a multi step launch process, which allows trademark holders to submit trademark claims before the application process is opened. See, ICANN release.
U.S. Department of Commerce General Counsel Ted Kassinger stated that ".biz and .info will offer consumer choice, provide our entrepreneurs with new avenues to pursue their ideas and are a welcome addition to the domain name marketplace. We congratulate ICANN on this latest progress in introducing competition consistent with maintaining Internet stability." See, DOC release.
Personal Jurisdiction in Patent Case
5/15. The U.S. Court of Appeals (FedCir) issued its opinion in Inamed v. Kuzmak, a case involving personal jurisdiction in a patent case. Plaintiffs filed a complaint for declaratory relief pertaining to four patents against defendant Kuzmak in the U.S. District Court for the Central District of California (Los Angeles). Kuzmak, who registered the patents, resides in New Jersey. The plaintiffs are all corporations with their principal places of business in California. The District Court dismissed for lack of personal jurisdiction over the defendant. The Appeals Court reversed. Kuzmak had written an infringement letter to an attorney in New York who was the registered agent for a corporation that is a resident of California, and had negotiated license agreements and received royalty payments that were based on the manufacture of goods by a plaintiff in California; hence, he satisfied the minimum contacts requirements of International Shoe and its prodigy.
Draft Convention on Jurisdiction and Foreign Judgments
5/15. The U.S. Copyright Office held a public roundtable discussion on the intellectual property aspects of the preliminary draft Convention on Jurisdiction and Foreign Judgments in Civil and Commercial Matters being negotiated by the Hague Conference on Private International Law. The draft Convention would create jurisdictional rules governing international lawsuits and provide for recognition and enforcement of judgments by the courts of member states. Member states would be required to recognize and enforce judgments covered by the Convention if the jurisdiction in the court rendering the judgment is founded on one of the bases of jurisdiction required by the Convention. The first part of a Diplomatic Conference is planned for June 2001, and the second part will be held in 2002, in The Hague. See also, notice of meeting.
More Intellectual Property News
5/15. The Senate Judiciary Committee postponed indefinitely its hearing on patents relating to business methods and the Internet. This committee often postpones matters.
5/15. DirecTV released a statement regarding a complaint that it filed on March 15 in U.S. District Court (CDCal) against 80 individuals alleging trafficking in illegal signal theft equipment. DirecTV, which is a unit of Hughes Electronics Corp., is a satellite television provider.
New Bills
5/15. Rep. Jerry Weller (R-IL) and 20 other Representatives introduced HR 1835, a bill to amend the Internal Revenue Code of 1986 to exclude from gross income computers and Internet access provided by an employer for the personal use of employees. The bill was referred to the House Ways and Means Committee, of which Rep. Weller is a member.
5/15. Rep. Barney Frank (D-MA) and Rep. Jim McGovern (D-MA) introduced HR 1842, the Cable Consumer Rights Act of 2001, a bill to reinstate the authority of the FCC and local franchising authorities to regulate the rates for cable TV service. The bill was referred to the House Commerce Committee, where it is unlikely to see any action. Rep. Frank said this: "After 5 years of de-regulation we have learned that the problem was not too much FCC action, but too little." See, Frank release. The bill would repeal Subsection (b) of Section 301 of the Telecommunications Act of 1996.
5/15. Rep. Felix Grucci (R-NY) introduced HR 1846, a bill to amend Section 254 of the Communications Act of 1934 to require schools and libraries receiving e-rate subsidies to block access to Internet services that enable users to access the web and transfer e-mail in an anonymous manner. It was referred to the House Commerce Committee.
5/15. Rep. Nancy Johnson (R-CT), Rep. Bob Matsui (D-CA), and Rep. Pete Sessions (R-TX) introduced HR 1848, a bill to amend the Internal Revenue Code of 1986 to more accurately codify the depreciable life of semiconductor manufacturing equipment. The bill was referred to the House Ways and Means Committee; Johnson and Matsui are both senior members of the Committee.
More News
5/15. The Senate Banking Committee met and voted on the nomination of James Jochum to be Assistant Secretary of Commerce for Export Administration. He was unanimously approved. There was no debate or discussion.
5/15. The GAO wrote a letter [PDF] to Rep. Steve Buyer (R-IN), Chairman of the House Veterans' Affairs Committee's Subcommittee on Oversight and Investigations, regarding information technology practices at the Veterans' Administration. The letter responds to questions from Rep. Buyer regarding the VA's lack of a Chief Information Officer, security weaknesses at the VA, the VA's lack of an integrated department wide enterprise architecture, and capital investment in information technology at the VA.
5/15. The House Judiciary Committee's Subcommittee on Immigration and Claims held a hearing on the Immigration and Naturalization Service (INS) and the Executive Office for Immigration Review (EOIR). See, prepared testimony of witnesses: Roy Beck (Numbers USA), Kevin Rooney (INS), Thomas Wenski (National Conference of Catholic Bishops).
5/15. Bart Greenberg joined the Orange County office of the law firm of Preston Gates & Ellis as a partner. He was previously with Riordan & McKinzie. His practice focuses on mergers and acquisitions and debt and equity financings, including in the information technology industry. He also handles licensing of software and other products and technologies, as well as the leasing of facilities for cellular and other communications purposes. See, release.
5/15. The U.S. Court of Appeals (DC Cir) heard oral argument in U.S. Cell Corp. v. FCC, Appeal No. 00-1072.
FCC General Counsel Appointments
5/14. FCC Chairman Michael Powell named Jane Mago and John Rogovin to be the General Counsel and Deputy General Counsel of the FCC. Mago has been with the FCC since 1978, and has been Acting General Counsel since the departure of Bill Kennard's General Counsel, Chris Wright, in January. Prior to that she was a Deputy Chief of the Enforcement Bureau. She has held numerous other positions at the FCC, including Senior Legal Advisor to then Commissioner Powell.
Rogovin was previously a partner in the telecommunications group in the Washington DC office of the law firm of O'Melvany & Myers. Prior to that, he was a Deputy Assistant Attorney General in the Civil Division of the Reno Justice Department, where he supervised the Federal Programs Branch. Among the functions of the Federal Programs Branch is to assist and represent federal government departments that do not comply with the Freedom of Information Act. Rogovin was also lead counsel in AAPS v. Hillary Clinton, in which he defended the secret proceedings of Hillary Clinton's Health Care Task Force.
The primary responsibilities of the Office of General Counsel are to provide legal advice to the FCC, and to defend the orders of the FCC. These are particularly important tasks at the FCC, for three reasons. First, some of the language in the statutes conferring authority upon the FCC is not drafted with clarity. Second, even when the statutory language is clear, the FCC often issues orders which exceed or contravene its authority. Finally, even when the statute is clear, and the FCC follows the statute, aggressively litigious companies and groups regulated by the FCC still bring legal challenges to its orders.
Enforcement Bureau Appointments
5/14. Linda Blair was appointed Associate Chief of the FCC's Enforcement Bureau; Lisa Fowlkes was appointed Assistant Bureau Chief. Blair joined the FCC in 1988. She has previously been Chief of the Mass Media Bureau's Audio Services Division. Fowlkes was Legal Advisor to the Chief of the Enforcement Bureau on mass media and other non-common carrier-related enforcement issues. Prior to joining the Enforcement Bureau, she was an attorney in the Washington DC office of the law firm of Verner Liipfert. And before that, she worked at the FCC.
FCC Hires From Antitrust Division
5/14. William Spencer was appointed Deputy Managing Director of the FCC. Previously, Spencer was Chief of the Budget and Fiscal Unit in the Antitrust Division of the Department of Justice (DOJ). Chairman Powell was Chief of Staff of the Antitrust Division prior to being appointed an FCC Commissioner. The FCC, under the Chairmanship of Bill Kennard, and continuing with the Chairmanship of Michael Powell, assumes that it has antitrust merger review authority, redundant of the statutory authority held by the DOJ and FTC.
More FCC Appointments
5/14. Martha Johnston was appointed Director of the FCC's Office of Legislative and Intergovernmental Affairs. She was previously Associate Director for Public Affairs with the Association of Trial Lawyers of America. Dane Snowden was appointed Chief of the FCC's Consumer Information Bureau. She was previously a VP at
Patent Cases
5/14. The U.S. Court of Appeals (FedCir) issued its opinion in Tegal v. Tokyo Electron America, an appeal from a contempt order issued for violation of an injunction in a patent infringement action. Tegal filed a complaint in U.S. District Court (EDVa) against Tokyo Electron America (TEA) alleging infringement of its U.S. Patent No. 4,464,223, which relates to plasma etching equipment that is used in fabricating semiconductor chips. The District Court found that TEA had willfully infringed the '223 patent, and issued an injunction against further infringement. Tegal then alleged the TEA violated the injunction by facilitating the infringing activity by a company that is a subsidiary of a subsidiary of TEA's parent corporation. The District Court found that the injunction had been violated, and issued the contempt order, which is the subject of this appeal. The Appeals Court reversed, on the basis that there was no evidence that TEA had violated the injunction. The Appeals Court reasoned that facilitation "entails some affirmative act; it is not enough to show that TEA failed to take steps to prevent its corporate affiliates from servicing the IEM etchers. In the absence of a showing of control over another party, merely permitting that party to commit infringing acts does not constitute infringement, and it likewise cannot constitute 'facilitating infringing acts.' "
5/14. The U.S. Court of Appeals (FedCir) issued its opinion in Biotec Biologisch Naturverpackungen v. Biocorp and Novamont, a patent infringement case. Biotec filed a complaint in U.S. District Court (CDCal) against Biocorp and Novamont alleging infringement of its U.S. Patents Nos. 5,362,777 and 5,280,055, which pertain to biodegradable starch based products. The District Court ruled on summary judgment that the patents are valid and enforcable. The jury returned a verdict finding the defendants liable for infringement or inducement of infringement, but not willful infringement. Following final judgment, the defendants appealed, and plaintiff cross appealed the finding of no willful infringement. The Appeals Court affirmed.
Copyright Term Extension
5/14. The Copyright Office (CO) published final rule changes in the Federal Register regarding extended renewal terms. The CO is making technical amendments in the regulation regarding copyright renewal to reflect the modification in duration of the extended renewal term from 47 years to 67 years as a result of the Sonny Bono Copyright Term Extension Act. See, Federal Register, May 14, 2001, Vol. 66, No. 93, at Pages 24267 - 24268. See also, PDF copy in CO web site.
Online Undercover Investigations and Impossibility
5/14. The U.S. Court of Appeals (5thCir) issued its opinion in USA v. Farner, a case rejecting the defenses of factual and legal impossibility in a case involving use of the Internet to attempt to entice a minor to engage in illegal sexual activity. Defendant Farner used e-mail and instant messaging to solicit sez from an undercover FBI agent who represented to him that she was 14 years old. Farner believed the FBI agent to be 14 years old, and arranged a meeting with her, where he was arrested. He was charged with violation of 18 U.S.C. § 2422(b). He stipulated to evidence, and waived jury trial. The District Court found him guilty. He moved for judgment of acquittal, based on the defense of impossibility. The District Court ruled factual impossibility is not a defense if the crime could have been committed had the attendant circumstances been as the defendant believed them to be; and, the defendant thought the FBI agent was 14. The Appeals Court affirmed. It questioned whether factual and legal impossibility are distinguishable, as well as the continuing viability of the defense. However, the Appeals Court ruled that to overcome a defense of impossibility there must be proof of two elements. First, the defendant acted with the kind of culpability otherwise required for the commission of the underlying substantive offense. Second, the defendant had engaged in conduct which constitutes a substantial step toward commission of the crime.
A ruling for the defendant in this case would have undermined the FBI's Innocent Images program, as well as other online undercover investigations. David Knowlton, Principal Deputy Assistant Director of the FBI's Criminal Investigative Division testified to the House Judiciary Committee's Crime Subcommittee on July 13, 2000. He stated: "In 1995, the FBI began an undercover investigation, code named 'Innocent Images,' focusing on persons who, through the use of on-line computers, indicate a willingness to travel for the purposes of engaging in sexual activity with a child and those persons who use the Internet or other on-line services to disseminate original images of child pornography ... Since 1995, the FBI has investigated more than 790 cases involving persons traveling interstate to meet minors for the purposes of engaging in illicit sexual relationships and more than 1850 cases involving persons trading child pornography." See, prepared testimony.
Trade, New WTO Round, and Fast Track
5/14. Sen. Chuck Hagel (R-NE) gave an speech in the Senate on trade in which he advocated free trade, granting the President fast track trade negotiating authority, and launching a new round of WTO negotiations. He also linked advancement of free trade to human rights and stability. He stated: "Stability, security, economics, markets, communications, trade, and investments are all interconnected. ... Trade binds nations together in strategic and political alliances. Throughout history trade and commerce have been key instruments that have helped break down totalitarian governments and dictatorships, and opened the doors to democracy and higher standards of living ... Trade and international investment have helped pave the way for peace in many areas of the world. Trade and democracy are interconnected. Trade and investment lead to political and economic stability."
5/14. Commerce Secretary Donald Evans gave a speech in Washington DC in which he advocated free trade, and fast track trade promotion authority for the President.
Juster Sworn in at BXA
5/14. Kenneth Juster was sworn in as the Under Secretary of Commerce for Export Administration. Juster was previously a partner in the Washington DC office of the law firm of Arnold & Porter, where he handled international trade and transactions, and international arbitration and litigation. He worked for Lawrence Eagleburger at the State Department during the administration of the elder Bush.
New Bills
5/14. Rep. Bill Barrett (D-WI) introduced HR 1825, the Consumer Debit Card Protection Act, a bill to amend the Electronic Fund Transfer Act to safeguard consumers in connection with the utilization of certain debit cards. The bill was referred to the Financial Services Committee.
More News
5/14. The USPTO published in its web site its FY 2000 USPTO Annual Report.
5/14. The Supreme Court of the U.S. denied certiorari in Metro Communications Co. v. Ameritech Corp., No. 00-1432. See, Order List [PDF] for May 14, 2001, at page 4.
5/14. Negotiations continued on Monday between the U.S. Commerce Department, VeriSign, and the ICANN over renewal of VeriSign's contract to manage the .com and .net domains.
5/14. ICANN published in its web site its Proposed Budget -- Fiscal Year 2000-2001.
5/14. The U.S. Chamber of Commerce promoted Michael Magán to VP and Deputy Chief of Staff in the Chamber's Executive Office. See, release.
People and Appointments
5/11. Bryan Tramont will become Chief of Staff in the FCC's Wireless Telecommunications Bureau. He is currently Senior Legal Advisor to FCC Commissioner Harold Furchtgott-Roth. Previously, he was an associate in the Washington DC office of the law firm of Wiley Rein & Fielding. HFR will leave the FCC as soon as the Senate confirms his replacement. The Senate Commerce Committee's confirmation hearing is scheduled for Thursday, May 17. Katie King, who is currently an Attorney Advisor in the Common Carrier Bureau, will be HFR's Senior Legal Advisor with responsibility for wireless and international issues for the short remainder of his tenure. See, HFR release [PDF] and FCC release.
Interactive TV NOI Comments
5/11. Friday, May 11, was the deadline to file reply comments with the FCC in response to its Notice of Inquiry (NOI) regarding cable open access. (See, In the Matter of Nondiscrimination in the Distribution of Interactive Television Services Over Cable, CS Docket No. 01-7.)  The FCC's electronic filing system contains 27 original comments and 7 reply comments.
AT&T submitted a reply comment in which it requested the FCC to close the proceeding without recommending any new regulations. It stated that interactive TV (ITV) is a nascent industry, that there is no evidence of anti- competitive behavior, that the First Amendment prohibits the regulation of ITV, and that concerns over cable operators utilizing set-top boxes to discriminate against unaffiliated ITV service providers are misplaced. See also, similar reply comment submitted by the NCTA.
Three consumer groups (MAP, CU, and CFA) submitted a reply comment that responded to the NCTA's original comment that argued that regulation of ITV would violate the First Amendment.
Motorola submitted a reply comment in which it argued that the FCC should not propose regulation of the nascent ITV area and should allow this new technology to develop further before determining whether any regulatory action is needed. It also argued that issues relating to the retail availability of set-top equipment should be handled in the in another FCC proceeding -- CS Docket 97-80.
Unused E-Rate Subsidies
5/11. The GAO released a report [PDF] titled "Schools and Libraries Program: Update on E-Rate Funding." The FCC run e-rate program subsidizes schools' and libraries' expenses for telecommunications, Internet access, and internal connections by taxing telephone use. The FCC has fixed the subsidy level at $2.25 Billion per year. The GAO report contains two findings. First, the total dollar amount of requests for subsidies is now more than $2.25 Billion per year, and continues to grow. Second, schools and libraries are not spending a significant portion of their allotted subsidies. The GAO report states that "Data from January 2001 indicate that more than $880 million (24 percent) of the $3.7 billion committed to applicants for the first 2 program years remains unused." The report also found that "For the third program year (2000), the requests exceeded $4.2 billion." The report was prepared at the request of the Senate Appropriations Committee's Subcommittee on Commerce, Justice, State and the Judiciary. This subcommittee has jurisdiction over the FCC budget. It ranking Democrat, Sen. Ernest Hollings (D-SC), is also the ranking Democrat on the Senate Commerce Committee, which oversees the FCC.
ECPA and Privacy
5/11. The U.S. Court of Appeals (6thCir) issued its opinion in Adams v. Battle Creek, a case involving the Electronic Communications Privacy Act (ECPA). Adams is a police officer for the City of Battle Creek Police Department. He was issued an alpha numeric pager by the department. The department cloned his pager and monitored his messages. Adams filed a complaint in the U.S. District Court (WDMich) alleging violation of the ECPA, the Fourth Amendment search and seizure clauses, and various state laws. On cross motions for summary judgment, the District Court ruled for Battle Creek. The District Court held that the surreptitious monitoring fell within the business use exception contained in the ECPA. It held that the Fourth Amendment was not violated because Adams had no expectation of privacy. The Appeals Court reversed, holding that the business use exception did not apply. Merritt wrote the opinion for the three judge panel; Boggs joined; and Krupansky dissented.
5/11. A trial jury of the U.S. District Court (NDIll) returned a verdict of guilty against Christian Morley for violation of the No Electronic Theft Act (NET Act). The NET Act, which was passed in 1997, amended copyright law to facilitate prosecution of Internet based copyright infringement. Since then, Justice Department prosecutions under the Act have been rare. While other prosecutions have resulted in plea agreements, this was the first case in which a jury convicted a defendant under the Act. See, BSA release.
More News
5/11. The EU Commission approved Bertelsmann's acquisition of a controlling interest in the RTL Group, a European TV and radio conglomerate. See, Bertelsmann release.

Go to News Briefs from May 6-10.