|News Briefs from July
House Delays Votes on Trade Promotion Authority and Bell
7/31. The House, which will likely break for its traditional summer recess at
the end of this week, has delayed consideration of several major bills. The
House will not vote on either trade promotion authority (also known as fast
track) or the Tauzin Dingell bill, at least until September.
The Tauzin Dingell bill, which would provide regulatory relief to the Bell
companies, was reported by the House Commerce Committee on May 9. It was
reported unfavorably by the House Judiciary Committee on June 13. Supporters had
sought to move it quickly to the House floor. The U.S.
Telecommunications Association, which represents the Bell companies, issued
a release praising
this latest development.
Meanwhile, the Information Technology Association
of America (ITAA) issued a release condemning a bill in the Senate that
would provide regulatory relief to the Bells.
House Passes Jordan FTA Bill
7/31.The House passed HR 2603, a bill to implement the U.S. Jordan Free Trade
Agreement. There is little trade between the U.S. and Jordan. However, the FTA
includes language pertaining to labor and the environment, as well as e-commerce
and intellectual property, that may serve as a precedents for future free trade
agreements. The labor and environmental provisions were controversial.
2nd Circuit Affirms Net Gambling Conviction
7/31. The U.S.
Court of Appeals (2ndCir) issued its opinion in USA
v. Cohen, a criminal case involving Internet gambling. Jay Cohen
was charged by indictment with eight counts of violation of the Wire Wager Act
in connection with his operation of an Antigua based gambling business that
advertised in, and took bets from, the U.S. over the Internet. A trial jury of
the U.S. District Court (SDNY) convicted him on all
eight counts. The Court of Appeals affirmed.
18 U.S.C. § 1084 provides, in part, that "Whoever being engaged in the
business of betting or wagering knowingly uses a wire communication facility for
the transmission in interstate or foreign commerce of bets or wagers or
information assisting in the placing of bets or wagers on any sporting event or
contest, or for the transmission of a wire communication which entitles the
recipient to receive money or credit as a result of bets or wagers, or for
information assisting in the placing of bets or wagers, shall be fined under
this title or imprisoned not more than two years, or both."
DC Circuit Rules in Adrx v. Biovail
7/31. The U.S.
Court of Appeals (DCCir) issued its opinion
Pharmceuticals v. Biovail, appeals from two District Court
decisions in a private antitrust case involving patents and Food
and Drug Administration drug applications. The Appeals Court affirmed the
District Court's dismissal of the antitrust counterclaim for failure to
sufficiently allege injury, but reversed its decision to do so with prejudice.
7/31. Rep. Tom Davis (R-VA) and Rep. Jim Moran (D-VA) introduced HR 2678,
a bill to create an exchange program between the federal government and the
private sector to develop expertise in information technology management. The
bill was referred to the House Committee
on Government Reform. See also, statement by
7/31. Sen. Tom Harkin (D-IA) introduced
S 1273, which is titled the "Improving Health Care in Rural America Act.'
It would amend the Public Health Service Act to provide for rural health
services outreach, rural health network planning and implementation, and small
health care provider quality improvement grant programs, and telehomecare
demonstration projects. It was referred to the Senate Committee on Health,
Education, Labor, and Pensions.
7/31. Sen. Tim Johnson (D-SD)
introduced S 1283, a bill to establish a program for the delivery of mental
health services by telehealth. It was referred to the Senate Committee on
Health, Education, Labor, and Pensions.
House Holds Hearing on FASB Rules for Combinations of
7/31. The House Commerce Committee's
Subcommittee on Commerce, Trade, and Consumer Protection held a hearing titled Current
Issues Before the Financial Accounting Standards Board. During the last
Congress the FASB and some Members of
Congress clashed over accounting standards for combinations of businesses. Some
members argued that FASB proposals to eliminate the pooling of interests method
would have treated mergers of high tech companies unfairly and unrealistically.
The FASB revised its position on July 20, 2001. Members of the Subcommittee
expressed satisfaction at the July 31 hearing.
The FASB had proposed requiring that all mergers be viewed, not as the melding
of separate entities, but as a direct purchase, requiring companies to accept
the purchase method of accounting. The rules at the time permitted a pooling
system of accounting favored by many high tech companies that own considerable
intangible assets. Many high tech companies to took advantage of this pooling
system of accounting when merging. This method allows companies to merge without
attaching a goodwill accounting charge.
The House Commerce Committee held a hearing last year. Then, Rep. Cal Dooley
(D-CA) and Rep. Chris Cox (R-CA) introduced a bill that would have placed a
moratorium on FASB's ability to eliminate the pooling method of accounting. The
FASB is an independent body that has been charged by the SEC with writing
accounting rules. Congressional actions were a shot across its bow.
On July 20, 2001, the FASB revised its rules to accommodate the new economy. It
issued two Statements. Statement 141 requires that all business combinations be
accounted for under a single method - the purchase method. Use of the pooling of
interests method is no longer permitted. Statement 142 requires that goodwill no
longer be amortized to earnings, but instead be reviewed for impairment. This
change provides investors with greater transparency regarding the economic value
of goodwill and its impact on earnings.
Rep. Cliff Stearns, the Chairman of the Subcommittee, presided throughout the
hearing. He praised the FASB in his opening
statement. He said that "I find that the results of the FASB’s
business combinations project and the related accounting treatment for
intangible assets, as outlined in Statements’ 141 and 142, speak well for
having an private independent standard setting board. The FASB should be
commended for an open process that included several public hearings and working
with all parties to understand their concerns regarding business
combinations." He also focused on international accounting standards and on
pro forma reporting. He stated that "some level of standardization should
be applied to pro forma reporting."
Several members addressed the role of the Congress in the setting of accounting
standards. Rep. Billy Tauzin (R-LA),
the Chairman of the full Committee said in his prepared
statement that "this Committee asserts its jurisdiction over the [FASB]
precisely because this organization's role in accounting standards setting is
extremely important to commerce in general and to the evolving new economy,
characterized by the high tech sector, in particular." He praised the FASB
for "modernizing appraisals of intangible assets to reflect the realities
of many information based companies." He also said the the Committee
"will play a strong oversight role in the adoption of any international
standards by the United States." Similarly, Rep. Anna Eshoo (D-CA), who represents a
Silicon Valley district, stated that "there are tensions of values between
the FASB and the Congress," but this is "healthy".
See also, prepared testimony of witnesses: Edmund
Jenkins (FASB), James
Leisenring (International Accounting Standards Board), and Barry
Rogstad American Business Conference).
Technology, Privacy, and Red Light Cameras
7/31. The House Transportation
Committee's Highways and Transit Subcommittee held a hearing on red light
cameras. See, prepared
testimony of Rep. Dick Armey (R-TX). He stated that "Technology can be
a tool of freedom. Communication advances like the Internet, for instance, have
broken down barriers and spread the message of democracy around the globe.
Unfortunately, technology can sometimes serve the opposite effect. New
technologies can actually undermine our freedoms and create problems far greater
than those they are meant to solve. For years the federal government has spent
millions of dollars promoting photo enforcement systems and helping local
jurisdictions install them."
Senate Holds Hearing on 3G and Spectrum Management
7/31. The Senate Commerce
Committee's Communications Subcommittee held a hearing on spectrum
management and third generation wireless systems. This next generation of
wireless communications technology is intended, among other things, to bring broadband
Internet access to portable devices. However, a significant amount of
spectrum will have to be allocated for use by 3G systems. There is not enough
suitable unused spectrum. Hence, spectrum allocated to other users would have to
be shared or reallocated.
Several bands have been identified for possible use by 3G systems. The incumbent
users of this spectrum, including the Department of Defense and ITFS users, such
as schools and churches, have adamantly opposed reallocation of spectrum that
they use. As a result, in the year since former President Clinton made
reallocation of spectrum for 3G use a major policy goal, the agencies
responsible for spectrum management, the NTIA and FCC, have held meetings,
issued reports, and received comments, but made very little progress towards
making any spectrum available for 3G uses. Now, the Congress has stepped in.
The Subcommittee heard testimony that paralleled a similar hearing before the
House Telecom Subcommittee last week, and numerous other events in the last
year. The spectrum managers testify that spectrum is a nationalized resource;
they license its use in the public interest; and, they are working with
interested parties to locate spectrum for possible sharing or reallocation. And,
they testified to the Senate Communications Subcommittee, they are still
looking. The incumbent licensees testify that the spectrum licensed to them
cannot be reassigned without causing grievous harm to national security,
education, rural communications, or other sacred services. Finally, the
communications companies that wish to develop 3G ask for spectrum to be
Several Senators suggested that one problem is that incumbent users have no
incentive to more efficiently use spectrum licensed to them, or to relocate to
other bands. Sen. Ted Stevens (R-AK)
used the hearing to explore a possible solution that is specific to incumbent
use by the Department of Defense in the 1755 to 1850 MHz band. He suggested that
proceeds from the reauction of this spectrum might go directly to the Department
Sen. Ron Wyden (D-OR) suggested broader
reform of the spectrum regime. He stated in opening that "It seems to me
that the central problem ... is that we have got a Jurassic system. It is
virtually unchanged since the 1920s when spectrum was used for radio and radio
only, and it is creating all of the wrong incentives. There is incumbent license
holders who want to keep licenses scarce, so they occupy as much spectrum as
possible. They fight tooth and nail against giving any out -- in effect, sort
of, collect ransom for holding the spectrum hostage. And if you have got a
bright new idea that needs spectrum, you better have a lot of patience for a lot
of red tape. It seems to me that we have got a variety of reforms that we ought
to be looking at. To me, one of the centerpieces of that effort ought to be to
make sure that licensees in the future need to have some flexibility incentives
to sell or lease excess spectrum, instead of hoarding it."
Sen. Wyden later added that "we have insufficient financial incentives for
the development of creative technologies that improve efficiency". He added
that the way things are going, "we are going to have a proceeding. We will
have another proceeding. Have another proceeding. And a motion for a proceeding.
And my sense is that at the end of three or five years, if we don't speed this
up, and inject some real marketplace forces, the world isn't going to look all
that much different on the civilian side." He concluded that we need
"to retool the system ... the system is the problem ... a dinosaur ... it
is a system skewed away from innovation."
Sen. Conrad Burns (R-MT) suggested that
reforming spectrum management would be more complicated than passing the Telecom
Act of 1996.
See, prepared testimony in PDF of government spectrum managers: William Hatch
(National Telecommunications and Information Administration) and Julius Knapp
(FCC's Office of Engineering and Technology). See also, prepared testimony of incumbent
users of spectrum identified for possible reallocation for 3G systems: Linton Wells
(Department of Defense) and Carroll
McHenry (Nucentrix Broadband Networks). See also, prepared testimony by prospective
3G service providers: Denny Strigl
(Verizon Wireless), Mark Kelly
(Leap Wireless), Martin Cooper
(ArrayComm), and Thomas Wheeler
(Cellular Telecommunications & Internet Association).
10th Circuit Rules in Universal Service Case
7/31. The U.S. Court of Appeals
(10thCir) issued its opinion
in Qwest v. FCC, a consolidation of petitions for review of the FCC's
orders establishing a federal funding mechanism to support universal
telecommunications services in high-cost areas. The Appeals Court reversed and
remand the Ninth Order of the FCC "because it does not provide sufficient
reasoning or record evidence to support its reasonableness." However, the
Appeals Court upheld the Tenth Order, the FCC's computer model of the costs of
providing service in a given area.
People and Appointments
7/31. The Senate
Judiciary Committee completed two days of hearings on the nomination of Robert
Mueller to be Director of the Federal Bureau of Investigation.
7/31. The law firm of Howrey Simon announced the addition
of nine new partners in its Houston and Chicago offices, six of whom focus on
intellectual property. Edward O’Toole, Richard Schnurr, Anthony
Nimmo and Christine Dudzik joined the Chicago office from Marshall O'Toole Gerstein Murray &
Borun. Michael Padden joined the Chicago office from Gardner Carton & Douglas. Stephen Lundwall
joined the Houston office. See, HS release.
7/31. The Senate Finance Committee
held a hearing on several pending nominations, including Rosario Marin to
be Treasurer of the United States and Jon Huntsman to be a Deputy U.S.
7/31. The Senate confirmed James Ziglar to be Commissioner of Immigration
7/31. The House Science
Committee's Research Subcommittee held a hearing titled "Innovation in
Information Technology: Beyond Faster Computers and Higher Bandwidth." The
hearing examined the effect of federal research and development spending on
promoting innovation in information technology.
7/31. The U.S. Court of Appeals (FedCir)
issued its opinion in Viskase
v. American National Can, a patent infringement case
involving shrink wrap. The Appeals Court affirmed in part, reversed in part, and
7/31. The USPTO published the online version
Today [PTO] for July/August.
7/31. The USPTO published a final
rule in the Federal Register adjusting certain patent fees. See, Federal
Register, July 31, 2001, Vol. 66, No. 147, at Pages 39447 - 39450.
House Votes for Extension of Export Administration Act
7/30. The House passed HR 2602 by a voice vote. This bill would extend the
Export Administration Act, which is set to expire on August 20, until November
20. The extension would provide the Congress more time to work on replacement
legislation to update the current export control regime. The Senate Banking Committee passed S 149, the
Export Administration Act of 2001, sponsored by Sen. Mike Enzi (R-WY), on March 22 by a vote
of 19 to 1. That bill is supported by the Bush administration, but opposed
by several Republican Senators who assert that it would jeopardize national
security. S 149 would ease restraints on the export of most dual use
products, such as computers and software. It would end export controls on high
performance computers based upon MTOPS. However,
it would increase penalties for remaining violations. There are several bills
pending in the House; the House International Relations Committee has held
Intergraph Files Patent Infringement Suit Against Intel
7/30. Intergraph filed a complaint [PDF] in U.S.
District Court (EDTex)
against Intel alleging patent infringement.
Intergraph alleges that Intel infringed two Intergraph patent pertaining to
parallel instruction computing, through the manufacture and sale of processors
and computing systems based on Intel's IA-64 EPIC (explicitly parallel
instruction computing) architecture. IA-64 EPIC is included in Intel's new Itanium chips.
Patents in Suit. Intergraph alleges infringement of U.S. Patent Nos. 5,794,003.
of which it is the assignee. The '003 patent is titled "Instruction cache
associative crossbar switch system". It discloses a "computing system
as described in which individual instructions are executable in parallel by
processing pipelines, and instructions to be executed in parallel by different
pipelines are supplied to the pipelines simultaneously. The system includes
storage for storing an arbitrary number of the instructions to be executed. The
instructions to be executed are tagged with pipeline identification tags
indicative of the pipeline to which they should be dispatched. The pipeline
identification tags are supplied to a system which controls a crossbar switch,
enabling the tags to be used to control the switch and supply the appropriate
instructions simultaneously to the differing pipelines."
The '028 patent is titled "Software scheduled superscalar computer
architecture." It discloses a "computing system is described in which
groups of individual instructions are executable in parallel by processing
pipelines, and instructions to be executed in parallel by different pipelines
are supplied to the pipelines simultaneously. During compilation of the
instructions those which can be executed in parallel are identified. The system
includes a register for storing an arbitrary number of the instructions to be
executed. The instructions to be executed are tagged with pipeline
identification tags and group identification tags indicative of the pipeline to
which they should be dispatched, and the group of instructions which may be
dispatched during the same operation. The pipeline and group identification tags
are used to dispatch the appropriate groups of instructions simultaneously to
the differing pipelines."
Request for Relief. Intergraph asks for a declaration that the patents in
suit have been infringed, preliminary and permanent injunctive relief, actual
damages, and enhanced damages.
Forum Shopping. Intergraph is a Delaware Corporation based in Huntsville,
Alabama. Intel is a Delaware Corporation based in Santa Clara, California. The
inventors are residents of California. Intergraph filed its complaint in
Marshall, Texas, a town of 25,000 located at the intersection of U.S. Routes 59
FTC NPRM on GLB Standards for Security of Customer Financial
7/30. The FTC
published in its web site a copy of a notice of proposed
rule making (NPRM) to be published in the Federal Register on the subject of
standards relating to administrative, technical, and physical information
safeguards for financial institutions subject to the FTC's jurisdiction. The
Gramm Leach Bliley (GLB) Act, passed during the last Congress, requires the FTC
and other agencies to promulgate rules establishing standards for the protection
of customers' financial data. See also, FTC release.
Senate Judiciary Committee Begins Mueller Hearing
7/30. The Senate Judiciary Committee
held the first day of hearings on the nomination of Robert Mueller to be
Director of the Federal Bureau of Investigation. Sen. Patrick Leahy (D-VT), Chairman of the
Committee, said in his opening statement
that "The American public has lost some confidence in the Bureau. This is
not just a PR problem. This erosion of public trust threatens the FBI's ability
to perform its mission." See also, opening statement of
Sen. Orrin Hatch (R-UT), the ranking Republican.
Mueller stated in his prepared testimony
that "Waco, Ruby Ridge, the FBI lab, Wen Ho Lee, Robert Hanssen, and the
McVeigh documents – these familiar names and events remind us all that the FBI
is far from perfect and that the next Director faces significant management and
administrative challenges." He also stated that "while new
technologies create new possibilities for the global economy, they also present
new opportunities for enterprising criminals. Here, as well, the FBI is
responsible for ensuring the security of our technological infrastructure and
for bringing cybercriminals to justice."
The hearing continues on July 31 at 10:00 AM in Room 216 of the Hart Building.
7/30. Officials from government agencies, groups and Microsoft held a press
conference to request that companies and others running servers with Microsoft's
Internet Information Services (IIS) install a patch provided by Microsoft that
prevents the Code Red worm from infecting servers. See, Microsoft
The FBI's National Infrastructure Protection
Center (NIPC) explained the threat: "The worm scans the Internet,
identifies vulnerable systems, and infects these systems by installing itself.
Each newly installed worm joins all the others causing the rate of scanning to
grow rapidly. This uncontrolled growth in scanning directly decreases the speed
of the Internet and can cause sporadic but widespread outages among all types of
systems. Code Red is likely to start spreading again on July 31st, 2001 8:00 PM
EDT and has mutated so that it may be even more dangerous. This spread has the
potential to disrupt business and personal use of the Internet for applications
such as electronic commerce, email and entertainment." See, NIPC Alert 01--016
Court Affirms Injunction of Unlicensed Broadcaster
7/30. The U.S.
Court of Appeals (6thCir) issued its opinion
v. Szoka, a case involving an unlicensed FM radio micro
broadcaster. Of course, the FCC ordered him to stop, the local District Court
granted the FCC an injunction, and the Appeals Court affirmed. However, the
Appeals Court's reconciliation of the issuance of an injunction with the First
Amendment and the law of injunction makes interesting reading.
Jerry Szoka. The appellant broadcasted dance music, and news and
information for gays and lesbians, in Cleveland, Ohio, on empty frequency
(96.9 FM) at a low power (48.8 watts). He did not have a license from
the FCC. He did not seek a license. He just started broadcasting.
FCC Licensing. The National Radio Act of 1927 nationalized spectrum, and
created a National Radio Commission to issue licenses in the "public
interest". The Communications Act of 1934 continued this framework, and
transferred licensing and regulatory authority to the FCC, which licenses
spectrum to this day. The Supreme Court declined to extend First Amendment
protections afforded other media to broadcast media in the landmark decision, NBC
v. FCC, 319 U.S. 190 (1943). The Court reaffirmed this holding in Red
Lion v. FCC, 395 U.S. 367 (1969).
Low Power FM. The FCC recently instituted a program for licensing
non-commercial low power FM broadcasters -- over the strenuous objections of
commercial broadcasters and National Public Radio. However, this program does
not extend to those who have violated FCC licensing rules in the past. Hence,
Szoka is not eligible.
Legal Proceedings. The FCC moved to shut Szoka down. There is a separate
proceeding in Washington DC. The FCC issued a cease and desist order. An
administrative law judge rejected Szoka's First Amendment arguments. Szoka has
petitioned for review by the U.S. Court of Appeals (DCCir). Oral arguments are
next month. However, Szoka ignored the cease and desist order, so the FCC also
filed a complaint in U.S. District Court (NDOhio)
against Szoka seeking an injunction. It is the issuance of a permanent
injunction by the District Court in Cleveland that is the subject of the present
Public Interest. Szoka raised the obvious, but futile, argument that the
FCC's use of the courts to obtain an injunction of his broadcast operation
implicates the First Amendment, to no avail. Szoka (through his attorney, Mark Wallach,
of the Cleveland law firm of Calfee Halter & Griswold) also argued that for
the government to obtain an injunction, it had to satisfy not only the
Communications Act of 1934, but also the equitable standards for issuance of an
injunction -- likelihood of success on the merits, irreparable injury, absence
of substantial harm to others, and public interest in issuance of the
injunction. The government argued against application of equitable standards to
the FCC. Thus, it argued that in managing spectrum in the public interest, the
FCC could not actually be held to a public interest standard. The Court of
Appeals agreed, and so held.
The District Court, while granting the FCC its injunction, had stated in dicta
that "the Court is inclined to agree that the FCC's non-commercial
low-power broadcasting ban smacks of favoritism towards wealthier interest
groups who do not wish to share the airwaves with non-commercial stations."
It also wrote that the FCC's ban on low-power stations would run "contrary
to the FCC's obligation to distribute the airwaves in a manner that furthers the
'public interest' and, thus, would be inconsistent with the First
Court Upholds First Amendment Right of Unlicensed Printer
7/30. The U.S.
Court of Appeals (8thCir) issued its opinion [PDF] in
v. Bemidji. This is another first Amendment case involving the
government licensing of speech -- in this case, print speech. Steele filed a
complaint in U.S. District Court (DMinn) against the City of Bemidji, city officials, and
others, seeking relief from actions by Bemidji to prevent him from distributing
his newspapers. He did not have a solicitation permit, an obstruction permit, or
post a bond. The district court granted summary judgment to the defendants. The
Appeals Court reversed as to Steele's First Amendment claims.
7/30. The National Cable & Telecommunications
Association (NCTA) extended the employment contract of P/CEO Robert Sachs
through December 31, 2004. See, release.
7/30. eBay filed a complaint in U.S. District Court (NDCal)
against BidBay alleging trademark
7/30. BellSouth filed a request with the
Tennessee Regulatory Authority seeking
an endorsement for a Section 271 application to the FCC for permission to
provide in region interLATA services. See, BS
7/30. The Florida Public Service Commission
began hearings on the petition by AT&T, TCG South Florida, and MediaOne for structural
separation of BellSouth Telecommunications into two distinct wholesale and
retail corporate subsidiaries. The Regional Bell Operating Companies (RBOCs)
oppose structural separation. See, BellSouth
release and Verizon
Colin Powell Wants China to Take Advantage of Information
7/28. Secretary of State Colin Powell was interviewed on CCTV, the PR China's
state television. He stated that "We need no enemies, we want no enemies,
we want to help people. We want to help China and we want to help China take
advantage of the new 21st Century world of information technology, access to
international markets. Trade with us, let American products come here -- Chinese
products come to the United States." See, transcript.
House Report Concludes P2P Networks Endanger Children
7/27. The Minority Staff of the Special Investigations Division of the House Committee on Government Reform
released a report
[PDF] titled "Children's Access to Pornography Through Internet
File-Sharing Programs". The report, which was prepared at the request of Rep. Steve Largent (R-OK) and Rep. Henry Waxman (D-CA), examined peer
to peer networks, including Music City Morpheus, BearShare, and Aimster.
The report found that peer to peer (P2P) file copying networks other than
Napster are growing rapidly in popularity. It also found that one of the major
categories of content on these networks is pornography, including videos.
Moreover, innocent search terms, such as "Britney Spears", return as
results pornographic files, thereby endangering children. Finally, the report
found that use of these peer to peer networks is free, and unaffected by the
The report contains no recommendations for government action. Rep. Waxman stated
that he wants to "draw attention" to the problem. He added that
"As legislators, we can try to pass laws to address these issues. But
sometimes legislation can’t solve the entire problem by itself. In this case,
parental awareness and parental involvement matter more than legislation. And
that's the whole point of the report Mr. Largent and I are releasing
today." He also said that in comparison, the debate over the V-Chip is
"trivial." See, statement.
Antitrust Law News
7/27. The U.S. Department of Justice
(DOJ) announced that it would file a complaint to block United Airlines from acquiring US Airways. The DOJ asserted that the
merger "would reduce competition, raise fares, and harm consumers on
airline routes throughout the United States." See, DOJ release.
United then announced that the two companies "have terminated their merger
agreement." See, United release.
See also, US
Denial of Trademark Application Upheld
7/27. The U.S.
Court of Appeals (FedCir) issued its opinion in In Re Save Venice New York, Inc., a appeal
from the U.S. Patent and Trademark Office Trademark Trial and Appeal Board. The
Board denied Save Venice's application (Serial No. 75/222,218) for a composite
mark consisting of the phrases “THE VENICE COLLECTION” and “SAVE VENICE
INC.” and an image of the winged Lion of St. Mark on the grounds that it was
geographically deceptively misdescriptive. The Appeals Court affirmed.
Statute. § 2(e)(3) of the Lanham Act provides in relevant part that:
"No trademark by which the goods of the applicant may be distinguished from
the goods of others shall be refused registration on the principal register on
account of its nature unless it ... (e) Consists of a mark which ... (3) when
used on or in connection with the goods of the applicant is primarily
geographically deceptively misdescriptive of them."
Background. Save Venice
is a not-for-profit New York corporation devoted to preserving and restoring
some of the cultural treasures of Venice, Italy. However, almost none of the
goods that it sells are made in Venice. The PTO refused the registration because
the mark was geographically deceptively misdescriptive. The Board affirmed the
examiner's refusal to register the mark.
Dow v. Sumotomo
7/27. The U.S.
Court of Appeals (FedCir) issued its opinion in Dow
v. Sumitomo, a patent infringement action. The District
Court entered summary judgment of noninfringement for Sumitomo. The Appeals
Court vacated and remanded.
Dow Chemical is the assignee of U.S. Patent
No. 4,499,255 which is directed to a process for making high purity epoxy
resins. Dow filed a complaint in U.S. District Court (EDMich)
against Sumitomo alleging that certain processes used by Sumitomo infringe this
patent. The District Court determined that certain limitations required by claim
1 of the patent are not present in Sumitomo's processes either literally or
under the doctrine of equivalents, and granted Sumitomo's motion for summary
judgment of noninfringement.
People and Appointments
7/27. Greg Abbott joined the Austin office of the law firm of Bracewell & Patterson in its Appellate
Group, effective August 1, 2001. He was previously a Justice of the Texas
Supreme Court. See, release.
7/27. FCC Commissioner Kathleen
Abernathy named Stacy Robinson to be her Legal Advisor for mass media
issues. Robinson has previously worked at the law firms of Skadden Arps, Alston & Bird, and Wiley, Rein & Fielding, and at Discovery Communications, Inc.
She will start in mid August.
7/27. Microsoft announced the filing seven complaints in U.S.
District Courts in Illinois, Michigan, and Ohio alleging copyright
infringement. Each complaint alleges distribution of counterfeit copies of
components of Office 97 and/or Windows 95/98/2000 software. See, release.
7/27. Rep. Jerry Moran (R-KS) and
others introduced HR 2669, a bill to improve access to telecommunications and
Internet services in rural areas, by providing government loans and grants. The
bill was referred to the House
Agriculture Committee and the House
Commerce Committee. See, Moran
4th Circuit Rules Jurisdiction May be Based Upon Location of
7/26. The U.S.
Court of Appeals (4thCir) issued its opinion
Science Board of Directors v. Nolan, holding that personal
jurisdiction may be based upon maintaining a web site in the territory of a
federal district court where the suit is brought.
The Christian Science Board of Directors filed a complaint in U.S. District
Court for the Western District of North Carolina against David Nolan and others
alleging trademark infringement under the Lanham Act. Nolan was a resident of
California. However, Nolan maintained a web site in North Carolina, the content
of which was the subject of the law suit. Nolan contracted with a co-defendant
in North Carolina to operate the web site for him. Nolan periodically sent
content to North Carolina to be added to the web site.
Plaintiff obtained a default judgment against Nolan enjoining him from using the
contested marks. He violated this injunction. When he was ordered to appear in
response to a civil contempt notice he asserted that the default judgment was
void for lack of personal jurisdiction. The District Court rejected this
argument. This appeal followed.
The Appeals Court affirmed. It reasoned that the exercise of jurisdiction over
Nolan by the District Court in North Carolina was consistent with the North
Carolina long arm jurisdiction statute, and did not violate the due process
requirement of "minimum contacts" set forth in International Shoe v.
Washington, 326 U.S. 310 (1945) and elaborated in Burger King v. Rudzewicz, 471
U.S. 462 (1985).
Definition of Trade Secret in EEA is Not Unconstitutionally
7/26. The U.S.
Court of Appeals (6thCir) issued its opinion
v. David Krumrei, holding that the definition of trade secret
contained in the Economic Espionage Act (EEA) is not unconstitutionally vague.
Krumrei was indicted on one count of violating the EEA, 18 U.S.C.
§ 1832(a)(2), by knowingly and without authorization transmitting a trade
secret to a competitor of the owner. He asserted that the EEA is
unconstitutionally vague. The District Court disagreed. The Appeals Court
House Holds Hearing on Privacy
7/26. The House Commerce Committee's
Subcommittee on Commerce, Trade, and Consumer Protection held a hearing titled
"How Do Businesses Use Customer Information: Is the Customer's Privacy
Protected?" This was the sixth and last in a series of hearings held by the
Subcommittee. Rep. Cliff Stearns
(R-FL), Chairman of the Subcommittee, stated that "there are substantial
benefits that accrue to our economy from the unencumbered flow of information,
particularly consumer information." See, opening
Paul Misener of Amazon.com said in his prepared
testimony that "there is no inherent need for legislation. We firmly
oppose the adoption of any non-federal privacy law that addresses online
activities. Nonetheless, Amazon.com could support limited federal legislation,
but only if it preempts state laws, only if it bars private rights of action,
and only if it applies to offline as well as online activities."
Harriet Pearson of IBM said in her prepared
testimony that "any U.S. privacy regime should be a national solution,
not a patchwork of fifty conflicting regimes. The regime should encourage
transparency and choice. It should hold government and non-profit organizations
accountable to similar standards asked of industry. It should neither
discriminate against the Internet nor create new private rights of action."
See, prepared statements of witnesses: Harriet
Pearson (IBM), Jacqueline
Hourigan (General Motors), Zeke
Swift (Proctor & Gamble), Paul
Misener (Amazon.com), David
Johnson, (Land’s End), Jennifer
Barrett (Acxiom), Deborah
Zuccarini (Experian), and John
Rep. Billy Tauzin (R-LA), the
Chairman of the full Committee, said in his prepared
statement that "Going forward, one thing should be clear: I don’t see
a need to legislate on false scenarios. We cannot and will not design some
elaborate new privacy regime that will take into account every possible daydream
of how information could be used. Reality must be taken into account."
House Holds Hearing on Market Data
7/26. The House Financial
Services Committee's Capital Markets Subcommittee held its second hearing on
market data, titled "Implications to investors and market transparency of
granting ownership rights over stock quotes." Rep. Richard Baker (R-LA), Chairman of
the subcommittee, said in his opening statement
[PDF] that the purpose of the hearing was to discuss "the question of
whether there should be legislation to explicitly establish a proprietary right
over market databases or to give protection to the operators of the databases
through new private causes of action."
Congress amended the Securities and Exchange Act of 1934 in 1975 to put in place
the current market data regime. Rep. Mike
Oxley (R-OH), the Chairman of the full Committee, said in his opening statement
[PDF] that "New communications technology, like the Internet, have
transformed the markets so significantly that the rules that were put in place
in 1975 are now outdated." Brokerages are required to provide quotation and
trading data immediately and without compensation to the self regulatory
organizations (SROs), such as the NASDAQ, which consolidate the data, and sell
it to information vendors and brokerage firms.
The House Commerce Committee passed
a broad database bill in the last Congress that included a title on market data.
However, that bill never made it to the House floor. See, HR 1858
(106th Congress). That bill would have amended the Securities and Exchange Act
to provide a civil remedy for certain misappropriation of market data. The
jurisdiction of the House Financial Services Committee (previously called the
House Banking Committee) was expanded at the beginning of the 107th Congress to
include securities regulation. This had previously been handled by a
subcommittee of the Commerce Committee that had been chaired by Rep. Oxley.
Richard Ketchum, President of the NASDAQ,
said in his prepared
testimony [PDF] that the NASDAQ supported HR 1858, but also believes
"There may be circumstances in which copyright, trade secret, and unfair
competition and/or misappropriation rights and remedies, in addition to those
that would have been available under H.R. 1858, may properly need to be asserted
by market information processors." He added that all SROs should be able to
protect its market data, and establish prices.
In contrast, Hardy Callcott, General Counsel of Charles
Schwab, said in his prepared testimony
[PDF] that "Database protection legislation should not give the securities
markets a property right over market information. Market data is made up of the
facts that are the most critical feature of our capital markets. No one can own
this, or any, set of facts. Granting ownership or copyright protection to any
one party would simply be contrary to the goal of ensuring broad access to
market information." He also said that the SEC should "continue to
play a critical role in enforcing the non- discrimination requirements, as well
as setting and enforcing general standards for such issues as capacity,
sequencing, and synchronization."
Free Trade Agreement Advances In Congress
7/26. The Senate Finance Committee
held a business meeting at which it approved S 643, a bill to implement the
agreement establishing a U.S. Jordan free trade area. Also, the House Ways and Means Committee held a
meeting at which it approved HR 2603, the U.S. Jordan Free Trade Area
Implementation Act of 2001. Trade between the U.S. and Jordan is not
significant. However, this trade agreement is significant because it may serve
as a standard for future trade agreements.
It includes labor and environmental (L&E) conditions. The FTA
provides that neither party "shall fail to effectively enforce its"
L&E laws. These provisions are controversial, and are at the heart of the
current debate over extending fast track trade negotiating authority to
The U.S. Jordan FTA also addresses enforcement of intellectual property
rights and electronic commerce. Jordan agreed to ratify and implement
the WIPO's Copyright Treaty
and WIPO Performances and Phonograms Treaty within two years. The FTA also
provides that "each Party shall seek to refrain from: (a) deviating from
its existing practice of not imposing customs duties on electronic
transmissions; (b) imposing unnecessary barriers on electronic transmissions,
including digitized products; and (c) impeding the supply through electronic
means of services ..." See also, the U.S. Jordan
Free Trade Agreement (FTA) [PDF], signed on October 24, 2000.
Export Administration Act News
7/26. The Senate Banking Committee
held a hearing on the nomination of Michael Garcia to be Assistant
Secretary for Export Enforcement at the Department of Commerce. Garcia is an
Assistant U.S. Attorney for the Southern District of New York, where he was
involved in the prosecutions stemming from the World Trade Center bombing and
the bombings of U.S. embassies in East Africa. Sen. Paul Sarbanes (D-MD), Chairman of
the Committee, praised Garcia. Garcia stated that "I will work hard to
ensure that any violations of U.S. dual use exports are detected, investigated
Sen. Sarbanes said that he wanted the Committee to approve his nomination early
next week, and the full Senate to approve it before it goes on its August
Sen. Sarbanes also used the hearing to advocate passage of S 149, the Export
Administration Act, a bill which would ease restraints on the export of most
dual use products, such as computers and software. However, the bill would also
raise penalties for certain violations. The Senate Banking Committee approved
the bill on March 22 by a vote of 19 to 1. The current act expires on August 20.
Sen. Sarbanes noted that Senate Majority Leader Tom Daschle (D-SD) favors consideration of
the bill in the Senate before the August recess.
Sen. Torricelli Introduces Bill to Criminalize Hacking School
7/26. Sen. Robert Torricelli (D-NJ)
1252, the School Website Protection Act of 2001. It would criminalize
tampering with computers of schools and institutions of higher education. The
bill provides, in part, that 18 U.S.C. 1030(a) is
amended by adding the following clause to the list of prohibited acts:
"knowingly causes the transmission of a program, information, code, or
command, and as a result of such conduct, intentionally affects or impairs
without authorization a computer of an elementary school or secondary school or
institution of higher education". The bill was referred to the Senate Judiciary Committee, of
which Sen. Torricelli is a member.
7/26. The Senate Banking Committee
held a hearing on the nomination of Henrietta Fore to be Director of the
Mint. She testified that "Our currency must be smart, with an
electromagnetic signature ..." She did not elaborate, and none of the
Senators present questioned her on this topic. Sen. Sarbanes said he will seek
her confirmation by the full Senate before the August recess.
EPIC Complains to FTC about Microsoft's Windows XP
7/26. The Electronic Privacy Information Center
(EPIC), and twelve other interest groups, filed a complaint [PDF]
with the Federal Trade Commission (FTC)
against Microsoft alleging that the soon to be released Windows XP operating
system will adversely affect the privacy of users, and violate the Federal Trade
Commission Act ban on unfair and deceptive trade practices.
The complaint states that "Microsoft has engaged, and is engaging, in
unfair and deceptive trade practices intended to profile, track, and monitor
millions of Internet users. Central to the scheme is a system of services, known
collectively as ".NET," which incorporate "Passport,"
"Wallet," and "HailStorm" that are designed to obtain
personal information from consumers in the United States unfairly and
The complainants want the FTC to investigate Microsoft, and then order Microsoft
to "revise the XP registration procedures so that purchasers of Microsoft
XP are clearly informed that they need not register for Passport to obtain
access to the Internet; ... block the sharing of personal information among
Microsoft areas provided by a user under the Passport registration procedures
absent explicit consent; ... [and] incorporate techniques for anonymity and
pseudo- anonymity that would allow users of Windows XP to gain access to
Microsoft web sites without disclosing their actual identity".
Finally, the complainants ask the FTC to remedy an implied antitrust violation
that was not articulated in the complaint. They want the FTC to require
Microsoft to "incorporate techniques that would enable users of Windows XP
to easily integrate services provided by non-Microsoft companies for online
payment, electronic commerce, and other Internet- based commercial
Antitrust Law News
7/26. The U.S.
Court of Appeals (2ndCir) issued its opinion in Virgin
Atlantic Airways v. British Airways, an antitrust action. Virgin filed a complaint in U.S.
District Court (SDNY)
against British Airways (BA)
alleging violation of §§ 1 and 2 of the Sherman Act. It alleged that BA
engaged in predatory business practices, including the use of incentive
agreements with corporate clients and travel agencies. Virgin argued that these
agreements offered below cost pricing and thus attracted passengers to BA's
transatlantic flights, and that losses from pricing tickets below cost were
recouped by coupling these flights with other routes on which BA exercised
monopoly power and could charge higher fares. The District Court granted summary
judgment to BA. The Appeals Court affirmed. John Warden, a partner in the law
firm of Sullivan & Cromwell, is lead counsel for British Airways in this
case. He is also lead counsel for Microsoft in the government's antitrust case
in Washington DC.
DOJ Cannot Support Verizon's Pennsylvania 271 Application
7/26. The Department of Justice (DOJ)
released its competitive
analysis of Verizon's application to
provide in region interLATA services in Pennsylvania under Section 271 of the Telecom Act
of 1996. The DOJ did not endorse the application because of problems with
Verizon's electronic billing. See also, DOJ release.
The report concluded that competitive local exchange carriers (CLECs) "have
made significant inroads into the local markets in Pennsylvania. Electronic
billing, however, may be an important factor with respect to whether entry will
continue in the foreseeable future. Because of the timing of this application,
Verizon has not been able to demonstrate that its billing system modifications
have fully resolved its billing problems in actual commercial operations. Absent
such evidence, the Department cannot support Verizon's application at this time.
The Department notes, however, that the Commission may have additional
information during its consideration of Verizon's application. The Commission
may therefore be able to assure itself that Verizon's billing problems have been
resolved and may be in a position to approve Verizon's application by the close
of these proceedings."
John Thorne, Verizon SVP and Deputy General Counsel, had this to say about the
DOJ recommendation: "We are pleased the Justice Department recognizes that
with more than one million local lines already controlled by competitors, there
is strong evidence of broad-based competition in Pennsylvania. Today’s DOJ
evaluation, combined with the Pennsylvania Public Utility Commission’s report
supporting our long-distance bid, means that our application is on track for FCC
People and Appointments
7/26. Lynn Turner, who has been Chief Accountant of the SEC
since July 1998, will leave the SEC in August, and return to Colorado State
University. See, SEC release.
7/26. The Senate Judiciary Committee
approved the nomination of James Ziglar to be head of the Immigration and
Naturalization Service (INS) by a vote of 19-0.
7/26. Joel Taubenblatt will become Legal Advisor to Tom Sugrue, Bureau
Chief of the FCC's Wireless Telecommunications
Bureau. Taubenblatt was previously a Senior Staff Attorney in the Commercial
Wireless Division of the Bureau. He joined the FCC in July 1996.
7/26. Catherine Seidel will join the FCC's Wireless Telecommunications
Bureau as Associate Bureau Chief and Chief of Staff. She was previously Chief of
the Telecommunications Consumers Division of the FCC’s Enforcement Bureau.
Before that she served as Chief of the Wireless Bureau’s Enforcement and
Consumer Information Division. Before joining the FCC in 1994, she worked for
7/26. Kelly Quinn will join the FCC's Wireless Telecommunications
Bureau's Auctions and Industry Analysis Division as Deputy Chief. She was
previously a Legal Advisor in the Office of the Bureau Chief. Before that she
was an associate at the law office of Squire
Sanders & Dempsey.
7/26. FRB Vice Chairman Roger Ferguson
was sworn in for a new term on the Board
of Governors of the Federal Reserve System. See, FRB
7/26. The Department of Justice filed its opposition to
Microsoft's petition for rehearing in the antitrust case.
7/26. The GAO released
its report [PDF] titled
"Critical Infrastructure Protection: Significant Challenges in Developing
Analysis, Warning, and Response Capabilities." The GAO presented this as
testimony to the Senate Judiciary Committee's Subcommittee on Technology,
Terrorism and Government Information.
Go to News Briefs from July 21-25, 2001.