|News Briefs from
November 1-5, 2001
Senators Seek Tax Credit for Home Computer Purchases
11/5. Sen. George Allen (R-VA) and Sen. Barbara Boxer (D-CA) are seeking to
have a temporary version of S 488, the
Education Opportunity Tax Credit Act, included in economic stimulus legislation.
Sen. Allen and others introduced the bill on March 8, 2001.
This bill provides that for individuals "there shall be allowed as a credit
... an amount equal to the qualified elementary and secondary education
expenses", the definition of which includes "computer technology or
equipment expenses", including "Internet access and related
services". The bill sets a maximum credit of $1,000 per student or $2,000
The two Senators wrote a letter to President Bush in which they stated that a
short term version of the bill would stimulate the economy and help close the
"digital divide". The wrote that "This proposal increases access
to computers and the Internet in the home for households of all incomes, and
consumers reap the tangible, and intangible, benefits of buying a major durable
good -- something they would not otherwise do during these uncertain economic
times." See, Allen
Sen. Hatch Comments on Microsoft Settlement
11/5. Sen Orrin Hatch (R-UT), the leading
critic of Microsoft in the Senate, released a statement
regarding the proposed settlement between the Department of Justice and
Microsoft. He stated that "In the coming days, I will study the settlement
proposal closely to ensure that it would restore competition to the computer
industry, particularly where the D.C. Circuit found Microsoft to have violated
the antitrust laws. As we all know, the devil is in the details."
EPIC Wants Commerce Committee to Question Muris on Microsoft
11/5. The Electronic Privacy Information Center
(EPIC) wrote a letter
to members of the House Commerce
Committee's Commerce, Trade, and Consumer Protection Subcommittee regarding
its hearing scheduled for Wednesday, November 7. Federal
Trade Commission (FTC) Chairman Timothy Muris will be the
only witness at the hearing, which is titled "Challenges Facing the Federal
Trade Commission". President Bush appointed Muris to head the FTC earlier
this year. This hearing will be the first time that Muris will testify to the
House Commerce Committee as Chairman of the FTC.
The EPIC wrote that "we urge committee members to ask Chairman Muris why
his agency has not begun a public investigation into information collection
practices of Microsoft through Passport and associated services." The
letter was written by Marc Rotenberg and Chris Hoofnagle of EPIC and Jason
Catlett of Junkbusters.
On July 26, 2001, EPIC and others filed a complaint [PDF]
with the FTC requesting that it conduct an investigation of Microsoft, and
enjoin a number of software features and services which it alleges violate
§ 5 of the Federal Trade Commission Act, 15 U.S.C. § 45. The
EPIC and others submitted an updated complaint
[PDF] to the FTC regarding Microsoft's Passport and other software and services
on August 15. The FTC has not publicly announced that it has taken any action
with respect to these complaints.
See also, speech
by Timothy Muris titled "Protecting Consumers' Privacy: 2002 and
Beyond", which he delivered on October 4, 2001 at a privacy conference in
Fed Circuit Rules on Doctrine of Unclean Hands in Patent
11/5. The U.S.
Court of Appeals (FedCir) issued its opinion in Aptix
v. Quickturn Design Systems, a case involving the application of
the doctrine of unclean hands to patent prosecutions and patent infringement
Amr Mohsen, the founder and Ch/CEO of Aptix
Corporation is the inventor of U.S.
Patent No. 5,544,069, titled "Structure having different levels of
programmable integrated circuits interconnected through bus lines for
interconnecting electronic components". This patent discloses and claims
field programmable circuit boards that permit computer programmers to
reconfigure the electronic components of an integrated circuit. Aptix is the
assignee of this patent. Aptix, in turn, licensed this patent to both Meta
Systems and Mentor Graphics.
In 1998, Aptix and Meta jointly filed a complaint in U.S.
District Court (NDCal) against Quickturn
Design Systems alleging infringement of this patent. Quickturn asserted
counterclaims and added Mentor Graphics as a counterclaim defendant.
During this litigation Mohsen forged research notebooks, staged the
disappearance and reappearance of notebooks, and ultimately, asserted the Fifth
Amendment at an evidentiary hearing.
The District Court determined that this patent was unenforceable and dismissed
the complaint, invoking the unclean hands doctrine stated in Keystone
Driller v. General Excavator, 290 U.S. 240 (1933). The District Court then
found that this was an exceptional case under 35 U.S.C. § 285, and ordered
Aptix to pay Quickturn's attorney fees and costs.
The Appeals Court distinguished between misconduct before the USPTO in
prosecuting a patent, and subsequent misconduct before the U.S. District Court
in a proceeding concerning the validity of the patent. The Appeals Court stated
that Mohsen's misconduct was entirely in the U.S. District Court. Moreover, the
Appeals Court noted that the licensees of the patent, Meta Systems and Mentor
Graphics, had engaged in no misconduct. Hence, Judge Rader, writing for the
Court, concluded that "The trial court had broad discretionary power to
fashion appropriate relief in this case, including denying any and all relief to
Aptix, and ordering Aptix to compensate Quickturn for its reasonable attorney
fees and costs. Indeed, this relief was entirely fitting. However, the record
does not support a judgment rendering the '069 patent unenforceable. Keystone I
and the doctrine of unclean hands do not provide a basis for punishing Aptix by
nullifying the grant of a property right. Accordingly, this court affirms the
district court's dismissal of the complaint and its award of attorney fees, and
vacates the judgment of unenforceability."
Judge Mayer dissented in part: "Because a fraud upon the court is no less
grave than a fraud on the Patent and Trademark Office, I would affirm the
district court's holding that the '069 patent is unenforceable. The maxim of
unclean hands is applied broadly, giving substantial discretion to the officer
of the court in its application."
USPTO Tests Negative for Anthrax
11/5. The USPTO announced that "over
the weekend, the Centers for Disease Control and Prevention (CDC) confirmed that
all 88 samples taken at the USPTO tested negative for Anthrax. Consequently, the
tests taken to date indicate that the USPTO is Anthrax free. In the interest of
continued safety, the USPTO will test for Anthrax periodically." See, release.
People and Appointments
11/5. Peter Bresnan was named Deputy Chief Litigation Counsel
of the SEC's
Division of Enforcement. He replaces Stephen Crimmins, who left the SEC in July.
Bresnan joined the SEC in 1995. Before that, he worked in the New York office of
the law firm of Davis Polk & Wardwell.
Bresnan is currently litigating the SEC's first insider trading case alleging
the passing of inside information over the Internet. See, SEC release.
11/5. Global Crossing named Mike
McDuffie VP for Federal Programs. He is a retired Army general and former
director for logistics for the Joint Chiefs of Staff for the U.S. Department of
Defense. See, release.
11/5. The law firm of Wilson Sonsini Goodrich
& Rosati announced that it elected five associates as new members of the
Ann Dy is in the firm's Securities and Commercial Litigation practice
group in its Palo Alto, California, office. Steven
Guggenheim is in the Securities Litigation practice group in the Palo
Alto office. Robert
Ishii is in the Corporate and Securities practice group in the San
Francisco office. Christian
Montegut is in the Corporate and Securities practice group in the
Kirkland, Washington, office. Robert
O'Connor is in the Corporate and Securities practice group, and is
Managing Attorney of Salt Lake City office. See, WSGR
11/5. Albert Foer, President of the American Antitrust Institute, sent
a letter to
Charles James, Assistant Attorney General in charge of the Department of
Justice's Antitrust Division opposing the EchoStar DirecTV merger.
11/5. The U.S.
Court of Appeals for the District of Columbia Circuit heard oral argument in
Teledesic v. FCC, No. 00-1466.
DOJ and Microsoft Reach Settlement
11/2. The Department of Justice (DOJ)
and Microsoft agreed to terms of
settlement of the government's antitrust law suit against Microsoft. They
released a Stipulation
and Proposed Final Judgment which prohibits Microsoft from engaging in
certain enumerated business practices, and specifies enforcement mechanisms.
The Proposed Final Judgment (PFJ) requires Microsoft to establish uniform
licensing practices, to allow OEMs to put icons and shortcuts on the desktop,
and to disclose certain application programming interfaces (APIs) and
communications protocols. The PFJ also bars Microsoft from preventing original
equipment manufacturers (OEMs) from distributing or promoting non Microsoft
middleware, such as browsers, and from preventing the automatic launching of
such middleware. The PFJ also bans certain exclusive dealing, and compels the
licensing of certain Microsoft intellectual property rights (IPR).
The PFJ has a duration of five years, but can be extended. It provides that the
DOJ may continue to investigate Microsoft via depositions, interrogatories and
inspections. It also creates a three person technical committee to monitor
Microsoft's compliance with the PFJ for the Court. The PFJ provides that the
Court retains jurisdiction, and that only the DOJ has remedies under the PFJ.
None of the states that also sued Microsoft are yet a party to the settlement.
Also, the PFJ has yet to be approved by the newly assigned U.S. District Court
Judge, Colleen Kotelly.
Attorney General John Ashcroft stated that "A vigorously competitive
software industry is vital to our economy and effective antitrust enforcement is
crucial to preserving competition in this constantly evolving high-tech arena.
... This historic settlement will bring effective relief to the market and
ensure that consumers will have more choices in meeting their computer
needs." See, DOJ release.
Microsoft Chairman and Chief Software Architect Bill Gates said in statement
that "This agreement contains significant rules and regulations on how we
develop and license our software, but it also allows Microsoft to keep
innovating on behalf of consumers. It goes beyond the Court of Appeals decision
in some areas, and provides for ongoing oversight by an independent committee.
We are resolved to implementing this settlement promptly and fully, and we will
put all the necessary resources in place to ensure this." See also, MSFT
Summary of Prohibited Conduct Sections of the Proposed Final
11/2. The Proposed Final
Judgment (PFJ) prohibits Microsoft from engaging in certain business
practices, and requires it to follow certain other practices.
No Retaliation. Microsoft is prohibited from retaliating against any
original equipment manufacturer (OEM) for developing or selling any competing
software. The PFJ states that "Microsoft shall not retaliate against an OEM
by altering Microsoft's commercial relations with that OEM ... because it is
known to Microsoft that the OEM is or is contemplating: 1. developing,
distributing, promoting, using, selling, or licensing any software that competes
with Microsoft Platform Software or any product or service that distributes or
promotes any Non-Microsoft Middleware; 2. shipping a Personal Computer that (a) includes
both a Windows Operating System Product and a non-Microsoft Operating System, or
(b) will boot with more than one Operating System; or 3. exercising any of
the options or alternatives provided for under this Final Judgment." See,
PFJ, § III.A.
Uniform License Agreements. The PFJ states that "Microsoft's
provision of Windows Operating System Products to Covered OEMs shall be pursuant
to uniform license agreements with uniform terms and conditions." See, PFJ,
No Restriction on Desktop Icons and Shortcuts. The PFJ states that
"Microsoft shall not restrict by agreement any OEM licensee from exercising
any of the following options or alternatives: 1. Installing, and displaying
icons, shortcuts, or menu entries for, any Non-Microsoft Middleware or any
product or service ... that distributes, uses, promotes, or supports any
Non-Microsoft Middleware, on the desktop or Start menu, or anywhere else
..." See, PFJ, § III.C.1.
Middleware. The PFJ bars Microsoft from preventing OEMs from distributing
or promoting non Microsoft middleware, such as browsers, Java Virtual Machine,
media players, messaging software, and e-mail software. See, PFJ, § III.C.2.
The PFJ also bars Microsoft from restricting OEMs from "Launching
automatically, at the conclusion of the initial boot sequence or subsequent boot
sequences, or upon connections to or disconnections from the Internet, any
Non-Microsoft Middleware ..." See, PFJ, § III.C.3.
Disclosure of APIs and Communications Protocols. The PFJ contains
provisions designed to give independent software vendors (ISVs) and others the
opportunity to develop products that compete with Microsoft's middleware
products. These provisions require the disclosure of application programming
interfaces (APIs) and communications protocols.
The PFJ requires Microsoft to disclose "for the sole purpose of
interoperating with a Windows Operating System Product, via the Microsoft
Developer Network ("MSDN") or similar mechanisms, the APIs and related
Documentation that are used by Microsoft Middleware to interoperate with a
Windows Operating System Product." See, PFJ, § III.D.
Moreover, the PFJ requires Microsoft to "make available for use by third
parties, for the sole purpose of interoperating with a Windows Operating System
Product, on reasonable and non-discriminatory terms ..., any Communications
Protocol that is, on or after the date this Final Judgment is submitted to the
Court, (i) implemented in a Windows Operating System Product installed on a
client computer, and (ii) used to interoperate natively (i.e., without the
addition of software code to the client or server operating system products)
with Windows 2000 Server or products marketed as its successors installed on a
server computer." (Parentheses in original.) See, PFJ, § III.E.
However, the PFJ also limits disclosure by Microsoft. It states that Microsoft
is not required to disclose "portions of APIs or Documentation or portions
or layers of Communications Protocols the disclosure of which would compromise
the security of anti-piracy, anti-virus, software licensing, digital rights
management, encryption or authentication systems, including without limitation,
keys, authorization tokens or enforcement criteria." See, PFJ, § III.J.1.
No Exclusive Agreements. The PFJ prohibits Microsoft from entering into
agreements requiring the exclusive support or development of certain Microsoft
software. It provides, subject to certain exceptions, that "Microsoft shall
not enter into any agreement ... on the condition that such entity distributes,
promotes, uses, or supports, exclusively or in a fixed percentage, any Microsoft
Platform Software ..." See, PFJ, § III.G.
Compulsory Licensing of IPR. The PFJ requires Microsoft to license
intellectual property rights (IPR) to ISVs and others "that are required to
exercise any of the options or alternatives expressly provided to them under
this Final Judgment, provided that 1. all terms, including royalties or other
payment of monetary consideration, are reasonable and non-discriminatory; 2. the
scope of any such license (and the intellectual property rights licensed
thereunder) need be no broader than is necessary ... 3. ... rights may be
conditioned on its not assigning, transferring or sublicensing its rights under
any license granted under this provision ..." (Parentheses in original.)
See, PFJ, § III.I.
Summary of the Enforcement Provisions of the Proposed Final
11/2. The Proposed Final
Judgment (PFJ) negotiated by Microsoft and the Justice Department also
provides for enforcement of its terms.
No Third Party Rights. The PFJ creates no remedies for states,
Microsoft's competitors, or any other third parties. It states that "The
United States shall have exclusive responsibility for enforcing this Final
Judgment." See, PFJ, § IV.A.1. It further states that "Nothing in
this Final Judgment is intended to confer upon any other persons any rights or
remedies of any nature whatsoever ..." See, PFJ, § VIII.
Inspection, Depositions and Interrogatories. The PFJ gives the DOJ many
authorities to facilitate its enforcement of the terms of the PFJ. It allows it
"Access during normal office hours to inspect any and all source code,
books, ledgers, accounts, correspondence, memoranda and other documents and
records in the possession, custody, or control of Microsoft ..." It also
allows the DOJ to interview Microsoft employees either "informally or on
the record". It also requires Microsoft to respond, under oath, to written
interrogatories from the DOJ. See, PFJ, § IV.A.2.
Further Court Proceedings. The PFJ also allows the DOJ "to seek such
orders as are necessary from the Court to enforce this Final Judgment ..."
See, PFJ, § IV.A.4.
Technical Committee. The PFJ requires the appointment of a three person
technical committee (TC), to be located at Microsoft's Redmond campus, that will
provide services to the Court. The PFJ provides that "The TC shall have the
power and authority to monitor Microsoft's compliance with its obligations under
this final judgment." The DOJ picks one member; Microsoft picks a second;
and these two pick a third. All are required to be unbiased experts in software
design and engineering. See, PFJ, § IV.B.
Microsoft Internal Compliance Officer. The PFJ requires Microsoft to
appoint an internal Compliance Officer with duties enumerated in the PFJ. See,
PFJ, § IV.C.
Five Year Duration. The PFJ states that "Unless this Court grants an
extension, this Final Judgment will expire on the fifth anniversary of the date
it is entered by the Court." See, PFJ, § V.
Reaction to the Microsoft Proposed Final Judgment
11/2. Reaction to the Proposed Final Judgment (PFJ) negotiated by Microsoft and
the Department of Justice has been as varied as support for the underlying
lawsuit. Those who opposed the government's law suit have tended to praise the
settlement, while those who supported the law suit and favored the break up of
Microsoft condemned the settlement.
Jeffrey Eisenach of the Progress and Freedom
Foundation said in a release
that the "settlement that fails to meaningfully address any of the court's
findings. It's an embarrassment for the Justice Department, a disservice to the
law and an affront to the DC Circuit." He also stated that "The states
should not accept this deal, and the judge should reject it, with
prejudice." Anti Microsoft groups also condemned the PFJ. See, SIIA release
and CCIA release and analysis.
In contrast, Robert Levy of the Cato Institute
said that settlement "means Microsoft's billionaire rivals will have failed
in their attempt to use government to win in the political arena what they
couldn't win in the marketplace. It also means that consumers won’t have to
pick up the tab while high-tech executives devote more resources to politicking
than to the development of integrated products. To settle the case, Microsoft
will have to make more concessions than justified by this baseless lawsuit and
the company still faces litigation from competitors, opportunistic trial
lawyers, the European Union, and perhaps even state attorneys general who don't
agree to the settlement. That's regrettable, but at least the federal antitrust
lawsuit won't be around to sap economic growth so essential to the post WTC
House Majority Leader Dick Armey (R-TX)
also released a statement
in which he said that "Although this issue should have been settled long
ago, today's decision is welcome. In a time of economic distress, the court has
delivered a homerun for consumers. Businesses should not be afraid that when
they create popular products, they'll be saddled with endless litigation. They
shouldn't be second guessed by lawyers and bureaucrats. It's the consumers who
benefit when companies spend less time in the courtroom, and more time
developing new products. I urge the state attorneys general to avoid dragging
this case out in these tough economic times. This is a case that the government
should never have brought."
Sen. Leahy Plans Hearing on Microsoft Settlement
11/2. Sen. Patrick Leahy (D-VT), Chairman
of the Senate Judiciary Committee,
stated that his committee will hold hearing on the proposed settlement of the
Microsoft antitrust case. He stated that the Committee "has closely
monitored high tech competition issues over the last few years, and we will
continue to do so. The terms of the settlement and its implementation will be
the focus of future hearings. We will want to hear from the Justice Department,
and other affected parties, about whether the remedies ensure that consumers get
high-quality and innovative products at reasonable prices. We will want to
examine whether competitors have adequate opportunities to provide those
products and computer manufacturers have the freedom to configure their machines
as they think best, and whether the remedies are sufficiently adaptable to the
constantly changing competitive environment of the Internet and computer
industries." See, statement.
Fed Circuit Rules in J&M v. Harley Davidson
11/2. The U.S.
Court of Appeals (FedCir) issued its opinion in J&M
v. Harley Davidson, a patent infringement case involving
microphones in motorcycle helmets. The plaintiffs are the applicants and
licensee of U.S.
Reissue Patent Number 34,525. Plaintiffs alleged infringement by Harley
Davidson, and its supplier, Radio Sound. The District Court held that the patent
in suit was not infringed, either literally, or under the doctrine of
equivalents. The Appeals Court affirmed.
USPTO Encourages Fax Use for Some Communications
11/2. Nicolas Godici, acting head of the USPTO, wrote a letter in which he
stated that "we at the USPTO would like to encourage you to communicate
with the USPTO via facsimile. Facsimile transmissions may be used for
correspondence as set forth in 37 CFR 1.6 such as: amendments, petitions for
extension of time, authorization to charge a deposit account, an IDS, terminal
disclaimers, a notice of appeal, an appeal brief, CPAs under 37 CFR 1.53(d), and
RCEs." However, the USPTO also stated that "the Office currently does
not permit new application filings (other than a CPA under 37 CFR 1.53(d)),
requests for reexamination, drawings, and certain correspondence set forth in 37
CFR 1.6(d) by facsimile."
NIPC Issues Advisory re DDoS Attacks
11/2. The FBI's National Infrastructure
Protection Center (NIPC) issued Advisory 01-026
regarding politically motivated cyber attacks, and distributed denial of service
(DDoS) attacks. It stated that "Cyber protests and hacktivist activity have
increased since Advisory 01-021
was issued and the potential for targeting U.S. organizations is higher than in
September. In the aftermath of the 11 September attacks, hacking groups have
formed and participated in pro-U.S. and anti-U.S. cyber activities, fought
mainly through web defacements. There has been minimal activity in the form of
DDoS attacks, mostly between opposing protesting groups."
However, the Advisory continues that the "NIPC has reason to believe that
the potential for future DDoS attacks is high. The protesters have indicated
they are targeting web sites of the U.S. Department of Defense and organizations
that support the critical infrastructure of the United States, but many
businesses and other organizations -- some completely unrelated to the events --
have been victims. In the current situation, infrastructure support systems must
take a defensive posture and remain vigilant at a higher state of alert. System
administrators are encouraged to check their systems for zombie agent software
and ensure they institute best practices such as ingress and egress
11/2. The U.S. Court of Appeals for the
District of Columbia Circuit heard oral argument in COMSAT v. FCC,
Rep. Goodlatte Introduces Gambling Bill
11/1. Rep. Bob Goodlatte (R-VA)
and others introduced the Combatting
Illegal Gambling Reform and Modernization Act [PDF]. The bill would
amend 18 U.S.C. §§ 1081 and 1084, which contain the definitions and
prohibition, respectively, of the Wire Act. The Wire Act currently criminalizes
the use of "wire communications facilities" in interstate commerce for
gambling. The Wire Act does not ban gambling. This is a matter of state law. The
Goodlatte bill expands the prohibition to cover all communications between
states or with other foreign countries. It maintains the principle that gambling
is otherwise a matter of state law. Hence, under the Goodlatte bill, use of the
Internet for gambling purposes would become illegal (if interstate or foreign).
Rep. Goodlatte held a press conference to announce the introduction of the bill.
He was joined by several cosponsors of the bill, including Rep. Mike Oxley (R-OH) and Rep. John LaFalce (D-NY), who are the
Chairman and ranking Democrat on the House Financial Services
Committee. On October 31, this Committee amended and approved HR 556,
the Unlawful Internet Gambling Funding Prohibition Act, by vote of 34 to
18. HR 556 would attempt to stem illegal Internet gambling by preventing the use
of credit cards, wire transfers, and other financial instruments in connection
with illegal Internet gambling. Rep. Oxley stated that the two bills are
Rep. Lamar Smith (R-TX), Chairman
of the House Judiciary Committee's
Crime Subcommittee, stated his support for the bill. He said that he expected to
hold a hearing, and maybe a mark up, before the end of the year. Rep. Jim Gibbons (R-NV) stated that
legalized gambling, such as in Nevada, is heavily regulated and taxed, while
Internet gambling is illegal, unregulated and untaxed. He also said that the
Goodlatte bill does not conflict with, or preempt Nevada state law.
Rep. Frank Wolf (R-VA) also attended
the press conference. Rep. Rick Boucher
(D-VA), who is a Co-Chairman of the Internet Caucus, along with Rep. Goodlatte,
did not attend; however, Rep. Goodlatte said that he supports the bill.
All Communications. The criminal prohibition of the Wire Act, 18 U.S.C. §§ 1084
currently provides 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 ... shall be fined under this
title or imprisoned not more than two years, or both." Since the current
statute affects only wire communication facilities, and some Internet
communications do not involve wires, it leaves open the possibility that some
Internet gambling may not be illegal under the Wire Act.
The Goodlatte bill provides that "whoever, being engaged in a gambling
business, knowingly (1) for the transmission in interstate or foreign commerce
..." or between the U.S. and abroad "... of bets or wagers ... shall
be fined under this title or imprisoned not more than five years, or both."
Hence, it pertains to all communications, not just wire communications.
Moreover, the maximum penalty for violation is increased from 2 to 5 years.
Also, the Goodlatte bill would amend 18 U.S.C. § 1081,
which currently defines ''wire communication facility'' as "any and all
instrumentalities, personnel, and services (among other things, the receipt,
forwarding, or delivery of communications) used or useful in the transmission of
writings, signs, pictures, and sounds of all kinds by aid of wire, cable, or
other like connection between the points of origin and reception of such
transmission." As amended, it would provide that "communications
facility" means "any and all instrumentalities, personnel, and
services (among other things, the receipt, forwarding, or delivery of
communications) used or useful in the transmission of writings, signs, pictures,
and sounds of all kinds by aid of wire, cable, satellite, microwave, or other
like connection (whether fixed or mobile) between the points of origin and
reception of such transmission."
Illegal Gambling Funding. The Goodlatte bill also criminalizes "the
transmission of a communication in interstate or foreign commerce ... 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". Also, like HR 556,
the bill prohibits the use of credit, electronic funds transfers, and checks in
connection with illegal gambling.
Exclusion of Fantasy Sports Leagues. The Goodlatte bill also contains a
detailed definition of "bets or wagers". This definition excludes
"participation in any game or contest in which participants do not stake or
risk anything of value other than (I) personal efforts of the participants in
playing the game or contest or obtaining access to the Internet". This
definition also excludes certain "participation in any simulation sports
game or educational game or contest in which (if the game or contest involves a
team or teams) all teams are fictional and no team is a member of an amateur or
professional sports organization ..." and the distribution of winnings
conforms to the requirements of the bill.
Exclusion of Intrastate Online Gambling. The bill also excludes certain
intrastate Internet gambling activities. It provides that "Nothing in this
section prohibits the use of a communication facility for the transmission of
bets or wagers or information assisting in the placing of bets or wagers, if (1)
at the time the transmission occurs, the individual or entity placing the bets
or wagers or information assisting in the placing of bets or wagers, the
gambling business, and any facility or support service processing those bets or
wagers is physically located in the same State, and the State has a secure and
effective customer verification and age verification system to assure compliance
with age and residence requirements ..." Nevada has enacted a relevant
statute, but not licensed any such operations.
Exclusion of Internet Advertising. The Goodlatte bill also excludes
advertising from its definition of "information assisting in the placing of
bets or wagers". Hence, legal gambling operations could still advertise on
Enforcement. In addition to criminal penalties, the bill would allow
federal, state, local, and tribal law enforcement agencies to obtain injunctions
against violation of the act. It also provides that "any common carrier,
subject to the jurisdiction of the Federal
Communications Commission" may enjoined from providing service to
entities in violation of the act, and gives such carriers immunity from suit for
discontinuing such service.
ISP Exception. Finally, the bill provides that "No relief requiring
the blocking of websites may be granted under paragraph (1) against an
interactive computer service (as defined in section 230(f) of the Communications
Act of 1934), unless the service is acting in concert with a person who is
violating the law and the service receives actual notice of the relief."
House Subcommittee Holds Hearing on Kids Domain
11/1. The House Commerce Committee's
Subcommittee on Telecommunications and the Internet held a legislative hearing
on HR 2417,
the Dot Kids Domain Name Act of 2001. The bill, as introduced, would
attempt to require the ICANN to create
a top level domain for content suitable for minors. However, an amendment would
merely require the NTIA to ensure that a second level domain -- .kids.us -- is
created for this purpose. Members of the subcommittee lauded these proposals.
Nancy Victory, head of the NTIA,
offered her criticism.
Rep. Fred Upton (R-MI), the Chairman
of the Subcommittee, stated that "just like dot com, or dot gov, or dot org
-- a dot kids should be created, which would be a safe place devoted solely to
material which is appropriate for kids -- where parents could choose to send
Rep. Ed Markey (D-MA), the ranking
Democrat, said that this arrangement would be distinguishable from prior
legislation that has been held unconstitutional by the courts. He said that only
speech in the .kids.us space would be affected. Speech elsewhere on the Internet
would remain unaffected. He added that "there is no requirement that anyone
use this space." Rep. John Shimkus
(R-IL), the lead sponsor of the bill, predicted that the bill has a good chance
of moving in the House.
Nancy Victory said in her opening testimony
that "The bill as introduced seeks to mandate the creation of a top level
".kids" domain by requiring the Internet Corporation for Assigned
Names and Numbers (ICANN) to select a .kids domain operator. Such regulation of
the management of the Internet domain name system is inconsistent with the
established policy goal of privatization of that system, and particularly,
private sector leadership with respect to the introduction of new top level
She continued that "Among other things, unilateral action by the United
States to create an "international" .kids domain is at odds with the
global nature of the Internet and its domain name system. International reaction
to U.S. efforts to legislate in the area of domain name management could hamper
the United States' abilities to advance its foreign policy objectives,
particularly critical telecommunications and information policy goals. Our
international allies have a strongly held aversion to United States' efforts to
assert its national will on the Internet, a global resource."
Victory added that the amendment providing for the creation of a .kids.us domain
space eliminates some of these objections, but "still raises some policy
and legal grounds. Particularly, I note that the amendment continues to require
content standards and enforcement by the Department of Commerce. It also alters
the existing contractual obligations between the Department of Commerce and
NeuStar that were established through the government procurement process and it
changes the company's expectations with respect to its opportunities under the
The Subcommittee also heard testimony from David Hernand (CEO of Neu.Net), Page
Howe (P/CEO of KidsDomain), Bruce Taylor (President and Chief Counsel of the
National Law Center for Children and Families), and Donna Hughes (former COPA
No one from the Center for Democracy and
Technology (CDT) testified at the hearing. However, on October 31 the group
wrote a letter to Rep.
Upton and Rep. Markey that is critical of HR 2417, the .kids Domain Name Act.
Legislators Introduce Bills to Address Infringement by States
11/1. Rep. Howard Coble (R-NC) and Rep. Howard Berman (D-CA) introduced HR
3204, the Intellectual Property Protection Restoration Act (IPPRA) of 2001. Sen. Patrick Leahy (D-VT) introduced S 1611,
the companion bill in the Senate. Reps. Coble and Berman are the Chairman and
ranking Democrat on the House
Judiciary Committee's Courts, Internet and Intellectual Property
Subcommittee. Sen. Leahy is the Chairman of the Senate Judiciary Committee. Sen.
Leahy sought unsuccessfully to pass similar legislation in the last Congress,
while Sen. Orrin Hatch (R-UT) was
Chairman of the Senate Judiciary Committee.
The purpose of these bills is to prevent states from infringing patents,
copyrights and trademarks. The bill would, among other things, prevent states
from recovering damages for infringement of state owned intellectual property,
unless they have first waived their Eleventh Amendment sovereign immunity from
suits against them for their infringement of the intellectual property of
The problem addressed by these bills arose in 1996 when the Supreme Court of the
U.S. ruled in Seminole
Tribe of Florida v. Florida that the Congress lacks authority under Article
I of the Constitution to abrogate the States' 11th Amendment immunity from suit
in federal courts. See also, the 1999 opinions of the Supreme Court in Florida Prepaid
Postsecondary Education Expense Board v. College Savings Bank (invalidating
the Patent and Plant Variety Protection Remedy Clarification Act) and College Savings
Bank v. Florida Prepaid Postsecondary Education Expense Board (invalidating
the Trademark Remedy Clarification Act).
The Eleventh Amendment states: "The Judicial power of the United States
shall not be construed to extend to any suit in law or equity, commenced or
prosecuted against one of the United States by Citizens of another State, or by
Citizens or Subjects of any Foreign State."
Rep. Coble described the bills as a "balanced and minimal approach to
solving the complex problem of preventing the individual States from infringing
intellectual property with impunity." See, Congressional Record, November
1, 2001, at page E1986.
Rep. Berman stated that "These bills will rectify a serious inequity in
intellectual property protection resulting from recent Supreme Court decisions.
These recent decisions held that, under the Eleventh Amendment of the United
States Constitution, states have sovereign immunity in state and federal courts
against money damages suits for intellectual property infringements. The Supreme
Court came to this conclusion despite unequivocal Congressional intent to
abrogate state sovereign immunity through enactment of the Copyright Remedy
Clarification Act (CRCA), Patent Remedy Act (PRA), and Trademark Remedy
Clarification Act (TRCA) in 1992."
Rep. Berman continued: "While immune from suit for money damages when they
infringe the intellectual property rights of others, states can still secure
protection for their own patents, copyrights, and trademarks under federal law,
and can sue infringers of their rights for money damages. I believe it is a
serious inequity to allow a State to sue infringers of its intellectual property
rights when the State itself can infringe the rights of others with
impunity." See, Congressional Record, November 1, 2001, at pages E1993-4.
Sen. Leahy also summarized the bills. "The IPPRA has two essential
components. First, it places States on an equal footing with private parties by
eliminating any damages remedy for infringement of State owned intellectual
property unless the State has waived its immunity in Federal suits for
infringement of privately owned intellectual property. Second, it improves the
limited remedies that are available to enforce a nonwaiving State's obligations
under Federal law and the United States Constitution." See, Congressional
Record, November 1, 2001, at pages S11364-5.
Powell Forms Merger Review Team for EchoStar DirecTV
11/1. FCC Chairman Michael Powell announced the formation of an FCC merger
review group for EchoStar's proposed
acquisition of DirecTV. The group will be headed by Kenneth Ferree. The other
members will be Jim Bird, David Sappington, Barbara Esbin, Julius Knapp, JoAnn
Lucanik, Royce Sherlock, Donald Stockdale, and Doug Webbink.
Ferree is Chief of the FCC's Cable Services
Bureau. Another member of the group, Royce Sherlock, is the Deputy Chief of
the Policy Division of the Cable Services Bureau. Esbin also works in this
bureau. However, neither EchoStar nor DirecTV are cable companies; they are
satellite broadcasters. Also, Knapp is Deputy Bureau Chief of the Office of
Engineering & Technology. Moreover, three of the eight are economists.
Sappington is the FCC's Chief Economist. Stockdale is an Economist in the FCC's
Office of Plans and Policy. Webbink is an Economist in the FCC's International
If regulators at the DOJ, FTC and FCC were to focus on the market for multi
channel video programming via satellite broadcast as the relevant market for
antitrust analysis purposes, then the merger would be objectionable on the basis
of concentration. However, if regulators were to view the relevant market as all
providers of multi channel video programming, including DBS, cable, and
technologies still in development, then the merger may be good for competition.
Hence, it may be significant that Chairman Powell has selected a team that
includes cable regulators as well as satellite regulators, and technologists and
economists as well as lawyers.
Jim Bird, who has also been picked for the team, holds the titles of Senior
Counsel in the FCC's Office of General Counsel,
and head of its Transaction Team.
Former FCC Chairman William Kennard brought Bird to the FCC in January of 2000
to head of the FCC's de facto antitrust merger review process. He previously
worked for the law firm of Shea &
Gardner. See, FCC release
of January 12, 2000.
JoAnn Lucanik is with the Satellite Division of the FCC's International Bureau.
Finally, Esbin is an Associate Bureau Chief in the Cable Services Bureau. She is
the author of the FCC's 1998 study, OPP Working
Paper No. 30 [PDF], titled "Internet Over Cable: Defining the Future in
Terms of the Past." This is a tome -- 129 pages and 497 footnotes. See, TLJ News Analysis
from 1998 regarding this report. Esbin recently returned to the FCC following a
short stay at the law firm Dow Lohnes.
Chairman Powell stated in a release
that "The team I have assembled includes experts from different FCC offices
and bureaus that deal with areas and issues relevant to these companies and I am
confident that the review will be thorough, fair and timely. Given the
significant concentration that would result from this transaction, it will be
rigorously scrutinized by this team and the Commission."
On October 28, EchoStar Communications, which provides satellite broadcasting
under the name Dish Network, and General Motors (GM), which owns Hughes
Electronics, which provides satellite broadcasting under the name DirecTV,
announced the signing of definitive agreements that provide for the spin off of
Hughes from GM and the merger of Hughes with EchoStar. See, EchoStar release
announcing the merger.
The FCC has no statutory authority to conduct antitrust merger reviews; the DOJ
and FTC do. The FCC does, however, have authority to determine whether the
transfer of licenses issued by the FCC are in the public interest. It often
conducts proceedings on license transfer applications that are duplicative of
the DOJ's or FTC's antitrust merger reviews. Also, while Powell has appointed a
team to review this transaction, no license transfer application has been
submitted to the FCC for its review.
Cal App Overturns Injunction in DeCSS Case
11/1. The California
Court of Appeal (6th) issued its opinion
[PDF] in DVD
Copy Control Association v. Bunner, reversing a trial court
preliminary injunction against publishing copies of the DeCSS program in web
sites. The injunction had been based upon California trade secret law.
Plaintiff. 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. The DVD Copy Control Association (DVDCCA) is a trade
association of businesses in the movie industry. It controls the rights to CSS.
DVDCCA licenses the CSS decryption technology to manufacturers of hardware and
software for playing DVDs.
Defendant. DeCSS is a decryption tool that facilitates piracy. DeCSS
consists of computer source code which describes a method for playing an
encrypted DVD on a non CSS equipped DVD player or drive. It was written by Jon
Johansen, a 15 year old Norwegian. Andrew Bunner published a copy of DeCSS on a
Complaint. The DVDCCA filed a complaint in 1999 in California Superior
Court against Andrew Brunner and others alleging violation of the California
Uniform Trade Secrets Act in connection with their publishing copies of DeCSS in
web sites, or linking to copies of DeCSS.
Preliminary Injunction. The Superior Court issued an order granting a
preliminary injunction in January 2000 which enjoined defendants from
"[p]osting or otherwise disclosing or distributing, on their web sites or
elsewhere, the DeCSS program, the master keys or algorithms of the Content
Scrambling system (‘CSS’), or any other information derived from this
The Court of Appeal. It reasoned that the DeCSS source code is speech
entitled to First Amendment protection. It noted that unlike copyright, trade
secret protection is not secured by the Constitution. The Court of Appeal
further reasoned that the Superior Court order constituted a prior restraint of
pure speech. It reversed.
Fed Circuit Addresses Certificates of Correction in Patent
11/1. The U.S.
Court of Appeals (FedCir) issued its divided opinion in Superior
Fireplace v. Majestic Products, an patent infringement case
involving the granting of certificates of correction.
The District Court ruled on summary judgment that Superior Fireplace’s
certificate of correction for U.S.
Patent No. 5,678,534 is invalid and that the uncorrected version of this
patent is not infringed. The Appeals Court affirmed, 2 to 1, this portion of the
District Court judgment. However, it vacated and remanded the District Court's
decision on an attorneys fees issue.
Judge Linn, writing for the majority, opined that because the correction of the
alleged mistake under 35
U.S.C. § 255 broadened a claim and was not clearly evident from the
specification, drawings, and prosecution history, the certificate of correction
Judge Dyk wrote in his dissent that "I part company with the majority when
it reads into the statute a requirement that the error be apparent from the
prosecution history, a requirement which is equally lacking an 'express
indication' in the statute. I accordingly dissent from the majority’s holding
that the certificate of correction is invalid ..."
Rogan to Get Confirmation Hearing
11/1. James Rogan, President
Bush's nominee to head the USPTO, is finally scheduled to
receive a confirmation hearing before the Senate Judiciary Committee. The
Senate Republican High Tech Task Force sent a letter last week to Sen. Patrick Leahy (D-VT), Chairman of the
Committee, seeking prompt consideration of this nomination. See, HTTF
Rogan, a Republican, was a member of the House Judiciary Committee, and its
Courts and Intellectual Property Subcommittee, until he was defeated in the 2000
general election. He is also considered to be a potential candidate for
statewide office in California. Confirmation for this post could take him out of
contention for statewide office. Sen.
Dianne Feinstein (D-CA) will preside at his confirmation hearing at 10:00 AM
on November 7.
3rd Circuit Dismisses Interconnection Appeal
11/1. The U.S.
Court of Appeals (3rdCir) issued its opinion in AT&T
v. Verizon, a case regarding interconnection agreements. The New
Jersey Division of the Ratepayer Advocate appealed an order of the U.S. District
Court (DNJ) affirming the New Jersey Board of Public Utilities' determination
with respect to interconnection rates for AT&T's and Verizon's New Jersey
corporations. The Appeals Court did not reach the merits; rather, it dismissed
the appeal on the grounds that appellant lacked constitutional standing to bring
11/1. AOL Time Warner named Wayne
Pace its new EVP and CFO. Michael Kelly, who previously held the
position, was moved down to COO of AOL. See, release.
10/1. Rep. Billy Tauzin (R-LA), Rep. Ed Markey (D-MA), and Rep. Richard Burr (R-NC) sent a letter [PDF]
to FCC Chairman Michael Powell stating their "disappointment with a recent
Commission decision permitting increased commercialization of public
11/1. Sen. Max Baucus (D-MT) spoke in
the Senate to express his concerns about the upcoming World Trade Organization (WTO) meeting in Doha,
Qatar. He addressed protecting the U.S. softwood lumber and steel industries,
including environment and labor provisions, and assuring accession of Taiwan to
the WTO. See, Congressional Record, November 1, 2001, at page S11355.
11/1. Rep. Tom Tancredo (R-CO)
introduced HR 3222, a bill to limit the number of H1-B nonimmigrant visas
issued in any fiscal year. The bill was referred to the House Judiciary Committee.
Go to News Briefs from October 26-31.