|News Briefs from
August 6-10, 2001
Export Administration Regulations
8/10. The Commerce Department's Bureau of
Export Administration (BXA) published in the Federal Register an interim
final rule that makes minor changes to the Export Administration Regulations
(EAR). The BXA's notice states that it amends the EAR "by revising Country
Group E:1 to include all terrorist-supporting countries, and replacing
references to Cuba, Iran, Iraq, Libya, North Korea, Sudan and Syria with Country
Group E:1 where appropriate. This rule also expands the scope of eligible
countries for License Exception TMP for exhibition and demonstration to all
countries except the new Country Group E:1, with certain restrictions. ... This
rule also expands the scope of eligible countries for License Exception TMP for
exhibition and demonstration by making Country Group D:1 eligible for this
provision. Under License Exception TMP, you may now export or reexport
commodities and software for exhibition or demonstration in any country,
including countries in Country Group D:1 ..." This rule is effective August
10, 2001. Comments on this rule must be received on or before September 10,
2001. See, Federal Register, August 10, 2001, Vol. 66, No. 155, at Pages 42108 -
Trial Court Quashes Subpoena for Names of Anonymous Posters
8/10. The Superior Court of California, Santa Clara County, Judge Neil Cabrinha
presiding, issued a bench ruling in Pre-Paid Legal Services Inc. v. Gregg Sturtz,
quashing a subpoena directed to Yahoo for the identities of anonymous posters
who criticized PPLS on a Yahoo message board. Two of the anonymous posters
targeted by the subpoena are represented by EFF. See, EFF
DOJ Opposes Microsoft Motion for Stay
8/10. The Department of Justice (DOJ) filed
in the U.S. Court of Appeals (DCCir)
its opposition to
Microsoft's motion for stay pending its petition for writ of certiorari. The
opposition is titled "Appellee's Response to Microsoft's Motion for Stay of
the Mandate Pending Petition for Writ of Certiorari." The DOJ asserted that
"Microsoft has little prospect of obtaining certiorari review, let alone
winning a reversal ..." On August 7, Microsoft filed a Petition
for Writ of Certiorari with the Supreme
Court, and its motion
titled "Appellant's Motion for Stay of the Mandate Pending Petition for
Writ of Certiorari".
8/10. The ICANN issued a Second Advisory
Concerning Equitable Allocation of Shared Registration System Resources.
People and Appointments
8/10. Rosalind Tyson was named Acting Regional Director of the SEC's
Pacific Regional Office. She replaces Valerie Caproni, who joined the law
firm of Simpson Thacher & Bartlett
in May. Tyson is currently Associate Regional Director for Regulation in the
Pacific Regional Office, a position she has held since 1993. See, SEC release.
8/10. National Telephone Cooperative Association
(NTCA) announced that Darren Pittman joined its staff as government
affairs representative for financing and economic development. He previously
worked for Sen. Phil Gramm (R-TX). See, NTCA release.
FCC Studies Broadband Deployment
8/9. The Federal Communication Commission
(FCC) held a meeting at which it addressed deployment and use of broadband
Internet access services. It released a summary of its latest statistics, which
show rapid growth in the number of broadband subscribers. It also adopted a
third notice of inquiry (NOI) into broadband deployment under Section 706 of the
The FCC released summary statistics on broadband penetration. It stated that
"High-speed lines connecting homes and businesses to the Internet increased
by 63% during the second half of the year 2000, to a total of 7.1 million. The
rate of growth for the full year was 158%." See, FCC
The FCC also adopted, but did not release, a NOI, as required by Section 706 of the Telecom Act of 1996,
into whether "advanced telecommunications capability" is being
deployed to all Americans in a reasonable and timely fashion. See, FCC
release. (See, CC Docket No. 98-146.)
The five FCC Commissioners all praised the merits of broadband Internet access
and expressed the desire to see its rapid deployment. The FCC's last Section 706
[PDF], issued on August 21, 2000, found that deployment of advanced
telecommunications capability generally appeared reasonable and timely. However,
it added the usual "digital divide" rhetoric about certain groups
being left behind.
Commissioner Michael Copps
stated that he is not satisfied with current progress. He states that "we
need to entertain the notion of moving away from the tone that most everything
is on track, that progress in rural areas and inner cities is being made, and
might not be quite as much as we like, but we are on track, and everything is
going to be fine. The fact is that we face an incredible infrastructure buildout
here, that I think is comparable to any of the infrastructure buildouts that we
have had in the history of the United States." See also, prepared
statement submitted by Commissioner Kevin Martin.
FCC and 3G
8/9. The FCC adopted, but did not
release, a notice of proposed rulemaking regarding reallocation of spectrum for
use by Third Generation (3G) wireless services. 3G is intended to bring
broadband Internet access to portable devices. The item is titled
"Memorandum Opinion and Order and Further Notice of Proposed
Rulemaking". The FCC seeks comment on reallocating spectrum in the
1910-1930 MHz, 1990-2025 MHz, 2150-2160 MHz, 2165-2200 MHz, and 2390-2400 MHz
bands. The FCC did not release this MOO & NPRM at the meeting. Rather, it
release, and Commissioners made statements. Commissioners Powell, Copps,
Abernathy, and Martin vote for the item; Tristani dissented in part. See, ET
Docket No. 00-258.
Chairman Michael Powell
stated that "the critical focus of the Commission, in its efforts,
increasingly are on increasing capacity in the marketplace for new and advanced
information services, and Third Generation efforts are one of the critical
components on the wireless technology side.
The FCC adopted a NPRM on January 4, 2001, regarding use of other spectrum
bands, specifically, 1710-1755 MHz, 1755-1850 MHz, 2110-2150 MHz, 2160-2165 MHz
and 2500-2690 MHz. Bruce Franca, Acting Chief of the Office of Engineering and Technology (OET),
gave an introduction to the January 4 NPRM. John Spencer, a Senior Attorney in
the Policy Division of the Wireless
Telecommunications Bureau summarized the new MOO & NPRM. He stated that
the 1910-1930 MHz band is currently allocated for use by unlicensed personal
communications services (PCS). 1990-2025 and 2165-2200 MHz is used for mobile
satellite service (MSS); 2150-2160 MHz is used for multipoint distribution
service; and 2390-2400 MHz is used for amateur radio and unlicensed PCS devices.
The Department of Defense, which uses spectrum in the 1755-1850 MHz band for a
variety of national defense purposes, opposes reallocation of this spectrum for
3G services. Likewise, Instructional Television Fixed Service (ITFS) and
Multichannel Multipoint Distribution Service (MMDS) users, which are allocated
spectrum in the 2500-2690 MHz band, oppose the reallocation of that spectrum.
ITFS users include the Catholic Television Network. MMDS users in this band
include Sprint, WorldCom, and CLECs that are deploying broadband data and voice
services in rural and other areas.
Is 2500-2690 MHz Off the Table? Chairman Powell stated crypticly at the
meeting that "I also wanted to note that, an item of great controversy, the
MMDS and ITFS spectrum, is not covered in this item. But, I merely wanted to
announce that there is a companion item that we have every intention of making
an effort to have voted by the end of the month that will state conclusively
what the state of affairs is with respect to those spectrum bands."
Tristani read a dissent,
which also pertained to this band. She stated that "the Commission should
have also used this opportunity to lay to rest the uncertainty surrounding the
ITFS and mulitpoint MDS operations in the 2500-2690 MHz (2.5 GHz) band."
More Background. On March 30, the FCC, which has authority over the
2500-2690 MHz band, released its report [101 pages in PDF]
titled "Final Report: March 30, 2001: Spectrum Study of the 2500-2690 MHz
Band: The Potential for Accommodating Third Generation Mobile Systems".
This report concluded that this spectrum is being used to provide important
services, that it is already heavily licensed throughout the country, that it
would be technically difficult to segment or share this spectrum, and that
relocation could cost between $10.2 and $30.4 Billion. See also, executive
summary. The NTIA, which has spectrum
management authority with respect to the 1755-1850 MHz band, released a
similarly gloomy report [169
pages in PDF] titled "The Potential for Accommodating Third Generation
Mobile Systems in the 1710–1850 MHz Band: Federal Operations, Relocation
Costs, and Operational Impacts". See also, executive
NextWave's 3G Plans
8/9. NextWave Communications held a
press briefing in Washington DC at which corporate executives described their
plans to build out a Third Generation (3G) wireless network optimized for
bringing broadband Internet access to mobile computing devices.
NextWave is currently in Chapter 11 bankruptcy. The FCC has cancelled its C
block licenses and re-auctioned them to other parties. However, the U.S. Court of Appeals (DCCir) issued an
on June 22 holding that the FCC is prevented from canceling NextWave's spectrum
licenses by § 525
of the Bankruptcy Code. On August 6 the FCC filed a motion for stay pending a
petition for writ of certiorari. On the same day NextWave filed a reorganization
plan with the bankruptcy court.
NextWave P/CEO Allen Salmasi stated that he expects that the Supreme Court will
issue an order denying the FCC's petition for writ of certiorari late this year.
He also stated that NextWave does not need FCC approval to proceed at this time
with buildout operations; it will, however, need FCC approval to go on air.
NextWave officers stated that it will employ CDMA technology that will
initially provide a peak transmission rate of 144 Kbps, and later a peak rate of
2 Mbps. They also stated that NextWave plans to operate as a "carriers'
carrier" that will sell its wireless services at wholesale rates to
"Mobile Virtual Network Operator (MVNO) distribution partners".
EPIC Seeks Discovery from DOJ in its Carnivore FOIA Suit
8/9. The Electronic Privacy Information Center
(EPIC) filed a Motion to Stay
Proceedings Pending Discovery [PDF] with the U.S. District Court (DDC)
in its action against the Department of Justice
(DOJ) to compel compliance with its Freedom of Information Act (FOIA) request
for records pertaining to the FBI's Carnivore e-mail surveillance program.
EPIC filed its Original
Complaint for Injunctive Relief in August 2000. The DOJ has searched for,
and produced, some records in response to EPIC's FOIA request. It has also moved
for summary judgment. EPIC asserts that "the record raises substantial
doubt as to the adequacy of the FBI's search. This doubt can only be resolved
through the discovery ..." EPIC seeks a stay of proceedings on the DOJ's
motion for summary judgment while it conducts discovery. See also, EPIC's Carnivore litigation page.
Privacy Legislation and Freedom of Speech
8/9. The Cato Institute released a paper [PDF] titled
"Internet Privacy and Self-Regulation Lessons from the Porn Wars," by
Tom Bell. It argues that "The same points that have helped strike down
statutory limits on Internet speech thought harmful to its readers (because it
is indecent or harmful to minors) argue against enacting new statutory limits on
speech thought harmful to its subjects (i.e., privacy legislation). In both
cases, self-help offers Internet users a less-restrictive means of preventing
the alleged harms caused by free speech than does legislation. In both cases,
the alternative offered by digital self-help makes regulation by state
authorities not only constitutionally suspect but, from the more general points
of view of policy and effectiveness, functionally inferior." See also, executive summary. Tom
Bell is an associate professor at the Chapman
University School of Law and an adjunct scholar at the Cato Institute.
Decisions in Patent Infringement Cases
8/9. The U.S.
Court of Appeals (FedCir) issued its opinion in MSM
Investments v. Carolwood Corp., a patent infringement case. MSM
is the assignee of U.S.
Patent 5,071,878, which is titled "Use of methylsulfonylmethane to
enhance diet of an animal". MSM filed a complaint in U.S. District Court (NDCal)
against several defendants alleging infringement of the '878 patent. Defendants
moved for summary judgment of invalidity under 35 U.S.C. § 102(b)
based on public use more than one year prior to the effective filing date
of the ’878 patent. The District Court granted summary judgment. The Appeals
8/9. The U.S.
Court of Appeals (FedCir) issued its opinion in Day
v. Reeves Brothers, a patent infringement case involving
newspaper printing technology. Day is the holder of U.S.
Patent No. 4,770,928. It relates to a method of manufacturing compressible
printing blankets used for printing newspapers, magazines, and other products
made using offset lithographic printing methods. Printing blankets are used in
the printing industry to transfer ink from a printing plate to paper. Reeves Brothers
manufactures compressible printing blankets. Day filed a complaint in U.S.
District Court (DSCar)
against Reeves Brothers alleging infringement of two claims of the '928 patent.
The District Court granted summary judgment of non-infringement based upon its
construction of the claims, and under the doctrine of equivilents. The Appeals
Trade Promotion Authority
8/9. Senate Majority Leader Tom Daschle
(D-SD) gave a speech
at the Woodrow Wilson International Center for
Scholars in Washington DC in which he criticized President George Bush on a
wide range of foreign policy issues. Sen.
Charles Grassley (R-IA) responded by criticizing the Democrats' positions on
trade promotion authority (TPA), and by calling upon Sen. Daschle to set a date
for taking up TPA legislation in the Senate.
Sen. Daschle's speech covered many issues. It also touched upon trade and TPA
(which is also known as fast track). He stated that "We need to recognize
that the benefits of trade come with real costs, and to the extent we recognize
those costs and address them, we better position ourselves to maintain and
enhance our status as the world's leading economic power. We need to address
head-on the concerns and fears that people have about globalization. But we
should not use these concerns as a pretext for protectionism. As we move forward
in opening markets and increasing trade, we need to address core labor standards
and environmental protections, and help people who are dislocated by trade and
Sen. Grassley, the ranking Republican on the Senate Finance Committee, and a
leading proponent of TPA, responded to Sen. Daschle's speech. He stated that
"It's ironic that the Democrats are trying to characterize President Bush
and the Republicans as isolationists. It's President Bush who is leading the
effort to get trade promotion authority through the U.S. Congress. Trade
promotion authority is the key to unlocking new export markets for U.S.
agriculture, manufactured goods and services. Trade promotion authority is vital
to maintaining U.S. economic leadership in the world. It seems hypocritical for
Democratic party to be criticizing President Bush for his leadership abroad when
it is they who have stymied our efforts here at home to get the President the
tools he needs to lead.
Sen. Grassley also said that "I would call upon them to set a date certain
to take up legislation granting the President trade promotion authority in the
Senate this year. Scheduling a vote on trade promotion authority would show real
leadership and speak much louder than words ever could."
RUS Amends Rules
8/9. The USDA's Rural Utilities
Service (RUS) published a notice
of rule changes in the Federal Register pertaining to the financing of new
telecommunications services. The notice states that the RUS is "amending
its regulations covering lien accommodations under certain circumstances where
the borrower's financial strength is sufficient to protect security for the
Government's loans and the lender seeking a lien accommodation." See,
Federal Register, August 9, 2001, Vol. 66, No. 154, at Pages 41755 - 41772.
People and Appointments
8/9. FCC Commissioner Kathleen
Abernathy announced at the August 9 FCC meeting that Jason Scism will
be her Special Assistant for congressional, intergovernmental and industry
relations. He is currently a summer intern, and student at George Mason University School of Law.
He will continue his legal studies at night. Prior to law school, he worked for
the House Commerce Committee. See
8/9. Vera Elson joined the Silicon Valley office of the law firm of McDermott Will & Emery as a partner in its
intellectual property group. She represents high tech and other clients in
intellectual property litigation, and provides strategic counseling on
intellectual property matters. She also has masters degree in electrical
engineering. See, release.
BuildNet Files Chapter 11 Petition
8/8. BuildNet and six of its subsidiaries filed a Chapter 11 bankruptcy petition
in U.S. Bankruptcy Court (MDNCar). NxTrend Technology, a wholly owned subsidiary
of BuildNet, is not included in the petition. BuildNet, of Research Triangle
Park, North Carolina, provides management software to homebuilders and suppliers
in the residential construction industry. NxTrend Technology, of Colorado
Springs, Colorado, makes supply chain management software. See, BuildNet
9th Circuit Rules in Trade Secrets Case
8/8. The U.S.
Court of Appeals (9thCir) issued its opinion
[PDF] in Yeti
v. Deckers and Granville, a case involving misappropriation of
trade secrets. Plaintiff had a boot design. Defendant, James Granville,
after signing a non disclosure agreement, obtained information about the boot
from plaintiff. His employer, Deckers Outdoor Corporation, the other defendant,
then incorporated trade secrets obtained from plaintiff into its products.
Plaintiff filed a complaint in U.S. District Court (DMont),
based upon diversity of citizenship, against defendants, alleging
misappropriation of trade secrets and other claims. Plaintiff prevailed, and
this appeal followed. The trial court did not award exemplary damages,
and plaintiff cross appealed on this issue. The Appeals Court affirmed on all
points raised by defendants, but reversed the District Court's refusal to
consider exemplary damages.
Privacy and Surveillance Cameras
8/8. The Supreme Court of the Oregon
issued its opinion
in Oregon v. Clay, a criminal case regarding Oregon's photo radar law.
Defendant, Sara Clay, was convicted under Oregon's photo radar surveillance law
(ORS 811.123) of driving 11 miles per hour over the speed limit. The Oregon
Court of Appeals affirmed, but the Oregon Supreme Court reversed. The Supreme
Court did not hold the statute unconstitutional. Rather, the Court reversed on
evidentiary grounds. It held that since the state had not presented evidence
that Clay was either the driver or registered owner of the car, the conviction
8/8. The FCC released its Fourth
Report and Order [PDF] in the proceeding named "In the Matter of
Deployment of Wireline Services Offering Advanced Telecommunications
Capability" and numbered CC Docket No. 98-147. The order was adopted by the
FCC on July 12. Commissioner Kevin
Martin wrote a separate
opinion concurring in part, and dissenting in part.
Cameras and Facial Recognition Software Defended
8/8. The Security Industry
Association (SIA) hosted a panel discussion at the National Press Club in Washington DC regarding
the use of closed circuit TV cameras and facial recognition software. Richard
Chase of the SIA stated that "It is time to stop focusing solely on how
this technology could be potentially abused, and start talking about how this
technology can be positively used in a responsible and effective way. ... It is
time to stop irresponsible grandstanding and fear mongering, and to start open
and honest dialogue on the shaping of policies, which will ensure responsible
use. This technology is about public safety and life safety. It is an invaluable
tool for law enforcement to ensure we have safe communities in which we raise
our families. See, Chase
statement. See also, prepared statements of Joseph
Atick (Visionics Corporation) and Thomas
Seamon (International Association of Chiefs of Police), and SIA
8/8. The U.S. District Court (CDCal) sentenced Mark
Jakob to 44 months in prison. He earlier plead guilty to two counts of
securities fraud and one count of wire fraud in connection with his perpetration
of the Emulex stock hoax. He disseminated a false press release that was
picked up by news services, and then caused Emulex stock price to drop. Emulex makes storage networking products. (USA
v. Jakob, D.C. No. CR-00-1002-DT.) See, SEC release.
8/8. The SEC reached a settlement in its
civil securities fraud action against Fred Moldofsky. The SEC filed a complaint
in the U.S. District Court (SDNY) against Moldofsky on
March 30, 2000, alleging that he posted a series of fraudulent press releases
about Lucent on a Yahoo Finance message
board. (SEC v. Moldofsky, D.C. No. 00 Civ. 2425 (LTS).) See, SEC release.
USTR Zoellick Talks Tech in India
Robert Zoellick arrived in India for three days of meetings with Indian
government officials and private sector leaders. Zoellick will hold discussions
with Indian business leaders, including those in the information technology
sector. He stated in a release that "I
am interested in learning more about India's IT sector, which is contributing
remarkably to India's economic development and to the growing economic linkages
between the United States and India."
Next week, Zoellick will visit Iowa, home state of Sen. Charles Grassley (R-IA), the ranking
Republican on the Senate Finance Committee, which has jurisdiction over many
DOJ and USPS Crack Down on Internet Porm
8/8. Attorney General John Ashcroft and Chief Postal Inspector Kenneth Weaver
held a press conference to announce the results of an undercover operation
directed at trafficking of child pormography through the mail and via the
Internet. The program, named "Operation Avalanche," has resulted so
far in 144 searches in 37 states with 100 arrests. See, DOJ release.
FCC Commissioner Martin Picks Staff
8/8. FCC Commissioner Kevin
Martin announced the selection of staff. Sam Feder will be interim
Senior Legal Advisor, and will focus on common carrier matters. David Brown
will be interim Legal Advisor, and will focus on mass media and cable issues. Monica
Desai will be interim Legal Advisor, and will focus on wireless and
international issues. Ginger Clark will be Confidential Assistant, and
will handle scheduling for Martin. Dolly Johnson will be Staff Assistant,
and will handle scheduling for Legal Advisors.
Sam Feder previously worked at the FCC as Associate Chief of the
Competitive Pricing Division of the Common
Carrier Bureau and as Legal Advisor to former Commissioner Furchtgott- Roth
for common carrier matters. Before joining the FCC he worked at the Washington
DC law firms of Harris Wiltshire &
Grannis and Kellogg Huber. His minor
in college was computer science.
David Brown previously worked at the FCC as an Attorney Advisor in the
Video Services Division of the Mass Media
Bureau. Before that he was an associate at the Philadelphia law firm of Weber Goldstein Greenberg & Gallagher. He
was also a staff attorney in Pennsylvania's Office of Inspector General,
Governor's Office of General Counsel.
Monica Desai previously worked at the FCC as an attorney in the
Commercial Wireless Division of the Wireless
Telecommunications Bureau (WTB) and in the Public Safety and Private
Wireless Division of the WTB. Before that she was an associate at the law firm
of Sonnenschein Nath & Rosenthal.
She was also an adjunct professor at the George Mason University School of Law.
More People and Appointments
8/8. Lauren Van Wazer was named Special Counsel to the Chief
of the FCC's Office of Engineering and
Technology, effective August 20, 2001. She was previously interim Legal
Advisor to FCC Commissioner Michael
Copps for wireless and international issues. Before that she was a senior
staff attorney in the Commercial Wireless Division of the Wireless Telecommunications Bureau. And
before 1999, she was an associate at the law firm of Arnold & Porter. She also held
several management positions in the Network Services department of AT&T.
8/8. Avanex Corporation announced that Thomas
LaWer has been promoted to VP and General Counsel, and will be Secretary to
the Board. LaWer joined Avanex in 2000. Prior to that, he was an associate at
the law firm of Wilson Sonsini. Avanex makes
photonic processors for optical communications networks. See, Avanex
Microsoft Appeals to Supreme Court
8/7. Microsoft filed a Petition
for Writ of Certiorari with the Supreme
Court. Microsoft also filed a motion
titled "Appellant's Motion for Stay of the Mandate Pending Petition for
Writ of Certiorari" with the U.S.
Court of Appeals (DCCir). See also, PDF copy in USCA web
Microsoft seeks to have the entirety of U.S. District Court Judge Thomas
Jackson's findings of fact and conclusions of law vacated. Microsoft
submits that the question presented for review is "Whether the court of
appeals erred in not disqualifying the district judge as of the date of his
earliest known violation of 28 U.S.C. § 455(a)
and the Code for Conduct of United States Judges, thus requiring that his
findings of fact and conclusions of law be vacated."
On June 28 the U.S. Court of Appeals (DCCir)
issued its en banc
opinion in USA v. Microsoft. This is an antitrust action brought by the
Department of Justice's Antitrust Division
and by individual states. The Court of Appeals affirmed in part, reversed in
part, and remanded in part the District Court's judgment assessing liability.
The Appeals Court affirmed in part the Judge Jackson's judgment that Microsoft
violated § 2 of the Sherman Act by employing anticompetitive means to
maintain a monopoly in the operating system market. It vacated in full the Final
Judgment containing the break up order. Finally, it remanded the case to a
different trial judge, because Judge Jackson "engaged in impermissible ex
parte contacts by holding secret interviews with members of the media and made
numerous offensive comments about Microsoft officials in public statements
outside of the courtroom, giving rise to an appearance of partiality."
ProComp, an anti Microsoft group,
released a statement
on August 2 in which it stated that "It is clear that Microsoft has gone
into its four-corners offense, trying to run out the clock until its unlawful
product, Windows XP, is shipped to consumers. It should not be surprising if
Microsoft next appeals to the U.S. Supreme Court".
Steve DelBianco, VP of the Association for
Competitive Technology (ACT), a pro Microsoft group, stated on August 7 that
"It's ironic that some, including AOL Time Warner, would discount
Microsoft's decision as a delaying tactic, when it is clear that they are
desperately trying to delay Windows XP as they continue to play catch-up on the
innovation they've neglected while whining to Congress and the courts. If AOL
and the state Attorneys General had a credible case to block Windows XP, they
could file for injunction at any time. But they don’t have a case, and
they can't be so foolish as to stop the rollout of a product that will give a
much needed shot in the arm to the tech sector."
Muris Promises Continuity of Antitrust Enforcement
Chairman Timothy Muris
gave a speech in
Chicago to the American Bar
Association's Antitrust Section Annual Meeting titled "Antitrust
Enforcement at the Federal Trade Commission: In a Word -- Continuity". He
stated that "I am fully committed to the institution and its mission of
protecting consumers through actively enforcing our antitrust and consumer
protection laws" and that "Continuity will be the norm, with changes
at the margins."
He summarized the purpose of antitrust enforcement by the FTC: "Although
there are disagreements about specific cases, there is widespread agreement that
the purpose of antitrust is to protect consumers, that economic analysis should
guide case selection, and that horizontal cases, both mergers and agreements
among competitors, are the mainstays of antitrust." He also stated that
press reports that "the Bush administration will relax antitrust
enforcement" are unfounded.
He told the gathering of antitrust practitioners that "if you come in with
transactions that would not fly in the past, you are likely to "crash"
unless you have compelling, stubborn facts on your side. To some of you, let me
say it more bluntly. A few members of the merger bar have been telling the press
that we are going to have more relaxed standards. Those folks will be doing
their actual or potential clients a big disservice if those clients act on that
Antitrust and High Tech. Muris also addressed high tech companies. He
stated that "Merger analysis in "high tech" industries is not
fundamentally different than in other industries. The basic Guidelines analysis
can be applied. We should proceed, however, cognizant of our lesser experience
in high tech industries. Moreover, the high tech arena, by its nature, is
constantly changing. New high tech industries, often with new technical issues,
continue to be born and to change. One aspect of high tech may warrant
especially close scrutiny. The fierce competition for success in these
industries often results in the "winner" enjoying a (perhaps
short-lived) monopoly. We should be especially reluctant to allow those firms to
merge with actual (or potential) competitors. This was part of the basis for my
criticism of the Clinton Antitrust Division's failure to challenge the
Microsoft-Web TV merger."
Microsoft. Muris also addressed non merger enforcement. "There are
several important issues here, such as competition in pharmaceuticals and
intellectual property issues. ... More recent developments confirm the
importance of a strong non-merger agenda. We used to believe that antitrust
counseling, at least for major companies, would generally deter anticompetitive
conduct. We have learned, however, from ADM, the vitamins case, numerous other
price-fixing cases, and from Microsoft."
AAG James Announces New Program for Merger Investigations
8/7. Charles James, Assistant Attorney General in charge of the Antitrust Division (ATR) gave a speech in Chicago
to the American Bar Association's Antitrust
Section. He summarized key staff appointments, and announced a new program for
conducting Hart Scott Rodino merger investigations. He stated that
"The program has two parts: (1) aggressive use of the initial HSR waiting
period to identify possible competitive issues and routes of inquiry; and (2)
early consultations with parties to negotiate, where possible, specific
procedural agreements for the investigation." See also, ATR release.
James also reflected upon his predecessors, including "Joel Klein, whose
civil enforcement initiatives fearlessly confronted some of the most complex
issues of the so-called New Economy."
Commerce Committee Leaders Write Sec. Evans re TLDs
8/7. Rep. Billy Tauzin (R-LA), Rep. John Dingell (D-MI), Rep. Fred Upton (R-MI), and Rep. Ed Markey (D-MA) sent a letter to Commerce Secretary Donald
Evans regarding the ICANN process
for selecting new Internet Top Level Domain Names (TLDs). The four want the
"ICANN to expeditiously initiate a new TLD round", and want the
Department of Commerce to monitor the ICANN with respect to this. The four are
the Chairman and ranking Democrat of the House Commerce Committee, and the
Chairman and ranking Democrat on the Telecom and Internet Subcommittee,
They also wrote that "there is pending in the Telecommunications and the
Internet Subcommittee a bill that would require the Department of Commerce to
negotiate with ICANN to chose an entity to operate a “.kids” domain. “.kids”
would provide a safe place for children to access the Internet, a goal we all
strongly support." See, HR 2417, the
Dot Kids Domain Name Act of 2001, sponsored by Rep. John Shimkus (R-IL) and Rep.
California Has Personal Jurisdiction over Non Resident DeCSS
8/7. The Court of Appeal of California (6th Appellate District) issued its opinion [PDF]
v. Superior Court, holding that California's long-arm
jurisdiction statute reaches owners, publishers, and operators of web sites
when, in violation of California law, they make available for copying or
distribution trade secrets or copyrighted material of California companies.
Jurisdictional Issue. This opinion does not address the merits of the
case; that is, it does not address whether or not the defendant did violate the
trade secrets or copyrights of the plaintiff. Rather, this opinion deals only
with jurisdiction; that is, it addresses whether the California courts have
authority to try this case. California's long arm jurisdiction statute
authorizes California courts to "exercise jurisdiction on any basis not
inconsistent with the Constitution of this state or of the United States."
DVD CCA Complaint. The DVD Copy Control
Association (DVD CCA) filed a complaint in the Superior Court for Santa
Clara County California against Matthew Pavlovich and others alleging
misappropriation of trade secrets and other claims.
Defendant. Pavlovich published the DeCSS program in a web site which he
owned and operated. He is not a resident of California. However, he is the
President of a technology start up company, and a leader of the open source
movement. He also testified that he knew that the movie industry was based in
California, and that DeCSS would harm that industry. He sought to quash the
DVD and DeCSS. DVD is sometimes known as Digital Versatile Disc. CSS is a
Content Scrambling System for DVD to protect intellectual property rights by
means of encryption. DeCSS is a decryption tool that facilitates piracy.
Holding. The Court of Appeal held that the exercise of jurisdiction over
Pavlovich is consistent with California's long arm statute. The Court relied
heavily on the Supreme Court of the United States' opinion in Calder
v. Jones, 465 U.S. 783 (1984), which held that the California courts could
exercise jurisdiction in a defamation case over a non resident Floridian who
published an article in the National Enquirer, a print publication that
circulated in California. The defendant in Calder, like Pavlovich, had
sufficient minimum contacts with the California that it would not offend
traditional notions of fair play and substantial justice to exercise
jurisdiction, notwithstanding non resident status. In both cases the defendant
knew that his activities were actionable, and were causing injury in California.
The Court stated that Pavlovich's knowledge that the movie industry was based in
California was significant.
BellSouth's paper advocates an abandonment of the goal of local wireline
competition as envisioned by the 1996 Act. What now matters, according to
BellSouth's paper, is competition between wireline service and wireless and
Internet services, not competition among wireline service providers.
Fed Circuit Affirms in Pall v. PTI
8/7. The U.S.
Court of Appeals (FedCir) issued its opinion in Pall
v. PTI Technologies, a patent infringement case involving
filter technology for filtering high temperature corrosive chemicals such as hot
acids used in the etching process of semiconductor chips.
PTI filed a complaint in the U.S. District Court (CDCal) against Pall
alleging infringement of U.S.
Patent No. 4,663,041, titled "Fluorocarbon filter element". Pall
filed a complaint in the U.S. District Court (EDNY)
against PTI alleging infringement of its U.S.
Patent No. 4,609,465, titled "Filter cartridge with connector
seal." The California action was transferred to New York and the two cases
The District Court granted Pall's motion for summary judgment of non
infringement of the '041 patent, and PTI's motion for summary judgment of non
infringement of the '465 patent. The Appeals Court affirmed the District Court's
decision on the '041 patent, but vacated and remanded to the District Court for
further proceedings on the '465 patent.
More Intellectual Property News
8/7. The U.S. Court of Appeals for the Federal
Circuit heard oral argument in Xerox v. 3Com, No. 00-1464, a patent
infringement case involving handwriting recognition software.
8/7. The U.S. Court of Appeals for the Federal
Circuit heard oral argument in Taiwan Semiconductor v. ITC, No.
8/7. The United States suspended the special duty-free status for Ukrainian
products and issued a preliminary
list [PDF] of other products that could face sanctions, due to Ukraine's
persistent failure to curb unauthorized production of optical media products,
including CDs, CD-ROMs, and DVDs. See, USTR release. The RIAA was pleased. See, RIAA release.
8/7. The USPTO published in its web site a
copy of the August
issue of the USPTO Pulse.
8/7. Priscilla Dunckel joined the Dallas office of the law firm of Baker Botts as a partner in the
intellectual property group, and head of the Dallas trademark office. She will
focus on trademark law, as well as matters involving copyrights, trade secrets,
Internet law and the licensing of entertainment rights. She was previously with Thompson & Knight. She graduated from
Southern Methodist University law school in 1993. See, release.
FCC Will Petition for Writ of Certiorari in NextWave Case
8/6. The FCC filed a motion
with the U.S.
Court of Appeals (DCCir) in the NextWave v. FCC.
The motion is titled "Motion to Stay the Mandate Pending the Filing of a
Petition for a Writ of Certiorari." It states that the "Acting
Solicitor General authorized the FCC on August 6, 2001, to file a petition"
for writ of certiorari to review the Appeals Court's June 22 opinion
holding that the FCC is prevented from canceling NextWave's spectrum licenses by
the Bankruptcy Code. The FCC's motion further requests that the U.S. Court of
Appeals "stay issuance of the mandate in this case pending the government's
filing of a petition for a writ of certiorari in the Supreme Court."
Background. This is a continuation of the seemingly never ending
litigation deriving from the FCC's bungled management of the C Block auctions. NextWave obtained spectrum licenses at FCC
auctions in 1996. The FCC permitted NextWave to obtain the licenses then, and
later make payment under an installment plan, thus creating a debtor creditor
relationship between NextWave and the FCC. NextWave did not make payments
required by the plan, and filed a Chapter 11 bankruptcy petition. The FCC,
which usually acts as though the Communications Act of 1934 is the only legal
authority which constrains its actions, cancelled the licenses. However, the FCC
was blocked by the bankruptcy court, citing § 525 of the
Bankruptcy Code. The U.S. District Court (SNDY) affirmed. The U.S. Court of Appeals (2ndCir)
issued its order reversing and remanding the case on Nov. 24, 1999; it issued
explaining its reversal in May 2000. The FCC then re- auctioned this spectrum to
Verizon Wireless, Voice Stream and other successful bidders, which intend to use
it for third generation wireless, and other, services.
Opinion of the DC Circuit. NextWave petitioned the FCC to
reconsider its cancellation of its licenses. The FCC refused, and NextWave
petitioned for review by the Court of Appeals in the District of Columbia. The
DC Circuit ruled on June 22 that the 2nd Circuit had not already addressed
NextWave's bankruptcy claims. It wrote that the FCC is prevented from canceling
the spectrum licenses pursuant to § 525 of the Bankruptcy Code. It wrote
that the FCC "violated the provision of the Bankruptcy Code that prohibits
governmental entities from revoking debtors' licenses solely for failure to pay
debts dischargeable in bankruptcy. The Commission, having chosen to create
standard debt obligations as part of its licensing scheme, is bound by the usual
rules governing the treatment of such obligations in bankruptcy."
Chairman Powell. FCC Chairman Michael Powell released a statement
in which he said that "I welcome the decision today by the Justice
Department to support our appeal of the NextWave case to the Supreme Court. High
Court review will protect the integrity of the FCC's auctions program, which
Congress has chosen as the best method of assigning scarce and precious spectrum
resources to those that will put them to their most productive use. Through this
appeal, I also hope the Court will clarify how the important public policy goals
of the Bankruptcy Code should interact with the equally important public policy
goal of ensuring that spectrum is used for the benefit of the American people.
The FCC's petition for a writ of certiorari is due to be filed on September
Consequences. The FCC's management of this spectrum, and the resulting
litigation, have created considerable regulatory uncertainty, delayed the use of
valuable spectrum, and delayed the deployment of new technologies that might use
this spectrum. Moreover, even if the claims of NextWave and the re-auction
winners are settled, or resolved by the courts, it is hypothetically possible
that other communications companies that did not participate in the auction will
bring legal challenges to the FCC's handling of this process.
Rep. Goodlatte Addresses Internet Policy Issues
8/6. Rep. Bob Goodlatte (R-VA) gave
a speech regarding security,
privacy, encryption and export controls.
He stated that "the Federal Government needs to ensure that it plays an
enabling and not an inhibiting role in supporting the movement of industry and
people into the Information Age. It is critical that policy makers recognize
that the information technology industry has become a thriving force in our
economy because of the simple fact that it has largely been left alone to
develop and grow according to the demands of free market processes."
Privacy. Rep. Goodlatte stated that "To its credit, Congress is
moving cautiously in considering privacy legislation. The House Commerce
Committee has held a comprehensive series of online privacy hearings throughout
the year. I expect that some legislation will soon result from those
hearings." However, he added "It is more likely that with the shift of
power in the Senate, we will see significant privacy legislation introduced and
considered in the Senate. Senator Hollings,
Chairman of the Senate Commerce
Committee, has made no secret of the fact that he is currently putting
together a comprehensive privacy bill. I fear that Chairman Hollings' proposal
will not achieve the appropriate balance between regulation and freedom that we
are discussing today, but I will reserve judgment until I have seen specific
Encryption. Rep. Goodlatte and Rep.
Zoe Lofgren (D-CA) co-sponsored the Security and Freedom through Encryption
(SAFE) Act in several previous Congresses. See, for example, HR 850 IH (106th
Congress). It never became law. However, swelling support for the bill lead the
Clinton administration to adopt rules significantly liberalizing encryption
export laws. Rep. Goodlatte stated that "Congress is continuing to monitor
the implementation of the new encryption regulations, to make sure that they are
allowing U.S. companies to fully compete in the global marketplace by freely
exporting strong encryption products. Congress remains ready to act
legislatively if the regulatory process breaks down, but so far, that process
seems to be working effectively."
Export Administration Act. The EAA had been scheduled to expire on August
20, but was just extended through November 20. Rep. Goodlatte stated that
"This stop-gap authorization should give both the House and Senate
sufficient time to consider various export reform legislation including the
'Export Administration Act of 2001' (S. 149), a
comprehensive rewrite of the EAA, introduced by Senators Enzi and Gramm.
An export reform bill is likely to pass before the November deadline." He
added that "Any rewrite of the EAA should include the following key
ingredients: (1) streamlined procedures that will lead to faster licensing
decisions, shortening the review time before technology products can be
exported, and (2) regarding high performance computers, moving away from MTOPS
to a system that looks at the technology as a whole and is flexible with
increases in technology."
U.S. Business Groups File Amicus Brief in Yahoo v. LICRA
8/6. Several American business groups filed an amicus curiae brief [PDF]
with the U.S. District Court (NDCal)
in the case Yahoo
v. LICRA. The case, which concerns French efforts to limit speech
on Yahoo servers located in the U.S., involves constitutional and jurisdictional
issues raised by Internet speech.
French Action. Last year two French groups, LICRA and UEJF,
obtained a judgment from a French court ordering Yahoo to "render
impossible" access by persons in France to certain content on servers
located in the United States.
U.S. Action. Yahoo, which is a Delaware corporation based in San Jose,
California, then filed a complaint in U.S. District Court seeking a declaratory
judgment that the judgment the French court is unenforceable in the U.S. as
contrary to the U.S. Constitution.
French Motion to Dismiss. The French, who asserted French jurisdiction
over Yahoo in their suit in France, asserted that the U.S. Court did not have
jurisdiction over them in Yahoo's suit against them. They filed a Rule 12(b)(2)
motion to dismiss the complaint in the U.S. District Court for lack of personal
jurisdiction. The District Court issued its Order Denying Motion to
Dismiss [PDF] on June 7. It held that it had personal jurisdiction over the
defendants under California's long arm jurisdiction statute, which permits a
court to exercise jurisdiction to the full extent authorized by the Due Process
Clause of the Constitution. The Court stated that the purposeful availment
requirement was met because defendants had written a demand letter to Yahoo in
California, used U.S. Marshals in California to serve papers on Yahoo, and
sought an order of the French court directing Yahoo's operations in California.
Amici. The groups filing the amicus brief on the merits in support of
Yahoo are the U.S. Chamber of Commerce, Commercial Internet eXchange Assoc.,
Information Technology Association of America, US Internet Industry Association,
Online Publishers Assoc., and U.S. Council for International Business.
Threat to the Internet. Amici argued in their brief that "At issue
in this case is whether a foreign country can control the content that U.S.
individuals, entrepreneurs, businesses, community organizations, libraries and
churches can place on the "exponentially growing, worldwide medium that is
the Internet." ", quoting from ACLU v. Reno. The amici stressed that
the French ruling could have a "devastating impact" on the Internet
and internet commerce. It elaborated that "The decision of the French court
in this case represents one of the greatest threats to the promise of the
Internet seen to date. The French court concluded that, because French citizens
sought out and managed to located material on a U.S. company's website that is
offensive to French law, courts in France can assert jurisdiction over the U.S.
company, and mandate that the company restrict French citizens' access to that
material." Hence, "if the French court's decision is recognized in
this country, every piece of information posted on the Internet will have to
conform to the laws of every country in which that material might be accessed
Legal Arguments. The amici advanced two legal arguments. First, they
argued that "United States courts may not enforce judgments of foreign
courts that lack personal jurisdiction over U.S. defendants, because enforcement
of such judgment would violate the Due Process Clause of the Fifth
Amendment." Second, they argued that "even if a foreign court properly
exercises personal jurisdiction over a given defendant, a foreign judgment
should not be enforced if the foreign legal system lacked prescriptive
jurisdiction over the subject matter of the conduct at issue."
Fed Circuit Affirms in Innovad v. Microsoft
8/6. The U.S.
Court of Appeals (FedCir) issued its opinion in Innovad
v. Microsoft, a patent infringement action involving
dialing systems in hand held computers.
Innovad filed a complaint in U.S. District Court (NDTex)
against Psion, Apple Computers, Ericsson, HP,
Phillips Electronics, Everex Systems, Sony Electronics, and LG Electronics
alleging patent infringement. Innovad alleged infringement of its U.S.
Patent No. 4,882,750, for a programmable dial system, by making, selling,
and using palm sized computers that automatically dial preprogrammed telephone
numbers when loaded with appropriate software. Innovad also named as defendants
Microsoft and Odyssey Computing,
alleging patent infringement for manufacturing the software to perform these
Microsoft, Psion and Apple moved for summary judgment. The District Court
determined that plaintiffs did not infringe, either literally or by equivalents,
the patent in suit, because it does not cover any dialer units with a keypad and
the accused devices include keypads. The Court of Appeals affirmed.
GAO Releases Report on On-Line Securities Trading
8/6. The GAO released
a report [PDF] titled
"On-Line Trading: Investor Protections Have Improved but Continued
Attention Is Needed". The report, which was prepared for Rep. John Dingell (D-MI) and Rep. Ed Markey (D-MA), addresses
progress being made by broker dealer web sites regarding investor privacy, trade
execution, margin risk, trading risk, and the potential for service disruptions.
The report found that the number of complaints, relative to the number of on
line trades, declined from 1999 to 2000.
The report also recommended that the SEC (1) "work with the securities
industry to establish a consistent and meaningful measure for outages and delays
and ensure that broker- dealers maintain consistent records of system outages
and delays, and disclose the potential for service disruption on their Web
sites"; (2) "take steps to ensure broker- dealers disclose additional
information related to investor protection on their Web sites"; and (3)
"monitor the extent to which broker- dealers accept OCIE
recommendations on disclosing trading risk, potential for systems outages and
failures, and protecting investor records and information. If SEC finds that
broker-dealers are not incorporating such recommended practices, we recommend
that SEC's Acting Chairman consider further rulemaking in these areas."
BellSouth Seeks to Redefine Competition
8/6. BellSouth released a paper [PDF] titled
"Measuring Local Competition in a Changing Telecommunications Market".
It was written by Steve Pociask, and funded by BellSouth. The paper argues
"once separate industries are converging to form an Information Sector, and
with this convergence comes heightened inter-industry competition between the
various means of transporting electronic information. However, while the
Information Sector is rapidly changing, government measurements of competition
The paper states that currently, "telecommunications industry policymakers
rely on old measurements that understate and underestimate the actual level of
the competition." Instead, the paper asserts that any measures of the level
of competition should include use of cell phones and Internet data services,
including email messaging, instant messaging, voice over internet protocol, IP
teleconferencing and virtual PBX services. See, also BS
The paper does not address the competition goals of the Telecom Act of 1996. One
of the main goals of the 1996 Act was to end the incumbent local exchange
carriers' (ILECs) monopoly control over local wireline phone service. These
ILECs, such as BellSouth, own almost all of the local facilities, including the
central offices and the copper wires that run from the local offices into homes
and businesses. § 151
of the Telecom Act requires telecommunications carriers to interconnect with
other telecommunications carriers. It also mandates many specific things which
ILECs must do for their competitors. ILECs have the duties to negotiate, to
interconnect, to provide unbundled access to their network elements, to offer
communication services at wholesale rates, and to allow collocation of equipment
of competitive local exchange carriers (CLECs) in their central offices.
However, the Bells have dragged their feet, and as a result, competition in the
local loop has fallen far short of the goals of the authors of the 1996 Act.
Appeals Court Decisions
8/6. The U.S.
Court of Appeals (3rdCir) issued its opinion in Newton
v. Merrill Lynch, a case involving class certification under FRCP
23 in cases involving allegations of violation of federal securities laws.
8/6. The U.S.
Court of Appeals (1stCir) issued its opinion
Candle v. Bridgewater Candle, a case involving claims of
copyright infringement, trade dress infringement, tortious interference, and
deceptive trade practices. The dispute involved candle fragrance labels.
People and Appointments
8/6. Paul Margie will become legal advisor to FCC Commissioner Michael Copps for spectrum
and international issues, effective August 20, 2001. Margie is currently Senior
Commerce Counsel for Sen. John
Rockefeller (D-WV), a senior member of the Senate Commerce Committee. He is
also an Adjunct Professor of Law at Georgetown University (GU), where he
co-teaches a course titled Law
in Cyberspace. He previously worked at the Washington DC law firm of Wiley, Rein & Fielding, in its communications
and technology law practice groups. See, GU
Go to News Briefs from August 1-5, 2001.