|News from December
12/20. The House and Senate passed HConRes 295, a resolution providing for the
sine die adjournment of the first session of the 107th Congress. The House and
Senate are scheduled to reconvene for the second session in late January.
Before adjourning, the House passed the economic stimulus bill by a vote of 224
to 193 during an all night session that stretched into December 20. See, Roll
Call No. 509. However, Senate Majority Leader Tom Daschle (D-SD) prevented it from
coming to a vote in the Senate. This bill, HR 3529, is named the Economic
Security and Worker Assistance Act.
Nor did the Congress pass legislation implementing the NextWave settlement
agreement before adjourning. The agreement is effective only if legislation is
passed by December 31, 2001.
The adjournment also leaves pending many other tech related bills, including the
Tauzin Dingell bill, and bills pertaining to spam, tax credits for broadband
deployment, distance learning, Internet gambling, and trade promotion authority.
Xerox v. Palm
12/20. The U.S.
District Court (WDNY) ruled that Palm's Graffiti handwriting technology for
hand held computers infringes a Xerox patent. Palm promptly announced that it
Xerox is the assignee of U.S.
Patent No. 5,596,656, which is titled "Unistrokes for Computerized
Interpretation of Handwriting." Xerox filed a complaint in federal Court in
Rochester, New York, against 3Com Corporation, U.S. Robotics Corporation, U.S.
Robotics Access Corporation, and Palm Computing,
Inc. claiming that the Graffiti software in its PalmPilot line of hand held
computers infringed its unistrokes patent.
Eric Benhamou, Ch/CEO of Palm, said in a release
that "We assert that the Graffiti handwriting technology does not infringe
the Xerox patent and that Palm has strong arguments to support its defense ...
Palm will defend itself vigorously and does not intend for this litigation to
affect its business strategy or business model nor that of its licensees."
Federal Circuit Affirms in Interactive Pictures v. Infinite
12/20. The U.S.
Court of Appeals (FedCir) issued its opinion in Interactive
Pictures v. Infinite Pictures, a patent infringement case.
Interactive Pictures is the holder of U.S.
Patent 5,185,667, titled "Omniview motionless camera orientation
system". It filed a complaint in U.S. District Court (EDTenn) against
Infinite Pictures (formerly known as Omniview) alleging patent infringement,
based on the doctrine of equivalents. Infinite asserted invalidity. The trial
jury found the patent infringed, and not invalid. It awarded $1 Million in
damages. The Appeals Court affirmed.
FTC Seeks Comment on Use of Disgorgement as Remedy
12/20. The FTC
announced that it is seeking public comments on the use of disgorgement as a
remedy for competition violations, including those involving the Hart Scott
Rodino (HSR) Premerger Notification Act, FTC Act, and Clayton Act. See, notice to be published
in the Federal Register. Comments are due by March 1, 2002.
Senate to Hold Hearing on Comcast AT&T Broadband and
EchoStar DirecTV Mergers
12/20. Sen. Herb Kohl (D-WI) and Sen. Mike DeWine (R-OH), the Chairman and
ranking Republican on the Senate
Judiciary Committee's Subcommittee on Antitrust, Business Rights &
Competition, jointly announced that their Subcommittee will hold a hearing on
the proposed mergers of Comcast and AT&T Broadband, and EchoStar and
The two issued a release
in which they stated that "The deal between AT&T and Comcast, already
the nation's largest and third largest cable companies, would create a cable
giant with over 21 million subscribers. We have serious concerns about the
impact that such consolidation will have on consumers, especially given the
increasing level of concentration in the entire media industry. Consumers
already face rising cable bills, and we fear that further concentration in this
industry may only heighten this trend. We continue to believe that more
competition, rather than additional consolidation, is needed in this industry.
We recognize, however, that this deal does have the potential to bring cable
telephony to a far greater number of consumers, therefore bringing important and
needed competition to the local telephone market."
They added that "We anticipate holding a hearing on this proposed merger
early next year within the context of consolidation in the subscription
television market, including a review of the proposed Echostar DirecTV
The National Association of Broadcasters
(NAB), which opposes the EchoStar DirecTV merger, issued a release in
which it states that it commissioned a public opinion poll, and that it
concluded therefrom that a majority of respondents want the government to block
the deal. The NAB stated that respondents were asked whether they agree with the
following: "Television providers are too important to allow the elimination
of competition. The federal government should not allow the only two satellite
television companies to merge into just one."
Robert Sachs, P/CEO of the NCTA, said in a statement
that "The AT&T Broadband/ Comcast merger brings together two of the top
management teams in the cable business and positions the companies well to
compete with phone giants the likes of SBC and Verizon, and the proposed
EchoStar/ DirecTV direct broadcast satellite powerhouse. Consumers will be the
beneficiaries of vigorous competition between the cable, telephone and satellite
NIPC Warns of Vulnerability in Windows XP
12/20. The FBI's NIPC issued its Advisory 01-030,
titled "Universal Plug and Play Vulnerabilities". It states that the
"The NIPC is tracking what Microsoft refers to as a critical vulnerability
in the universal plug and play (UPnP) service in Windows XP, Millennium Edition
(ME), and Windows 98 or 98SE systems. This vulnerability could lead to denial of
service attacks and system compromise.." See, Microsoft's
page with information and patches. It states that "Microsoft strongly
urges all Windows XP customers to apply the patch immediately." See also,
eEye Digital Security release.
BellSouth Withdraws 271 Application in Georgia & Louisiana
12/20. BellSouth announced
that it is withdrawing its applications with the FCC pursuant to Section 271 to provide
long distance service in Georgia and Louisiana.
FCC Chairman Michael Powell
released a statement
in which he said that "The FCC cannot approve such applications by the Bell
Companies unless they satisfy the requirements of section 271 of the
Communications Act." He continued that "questions remain regarding
whether BellSouth has satisfied the rigorous requirements of the statute and our
precedents, including the adequacy of the company's operational support systems,
the integrity of its performance data and its change management process, and
related issues. We look forward to working with the company and with the Georgia
and Louisiana utility commissions to provide them with any additional guidance
they need to understand and satisfy the demanding requirements in this
Margaret Greene, President - Regulatory & External Affairs for BellSouth,
stated that "When we asked the FCC in October for permission to sell long
distance services in Georgia and Louisiana, we were armed with the unqualified
endorsements of the Georgia and Louisiana public service commissions. We
believed that we had built a very solid case that presented compelling evidence
of BellSouth's compliance with the Telecommunications Act of 1996 ... We still
believe this is true; however, we will comply with the FCC's request for
additional information to supplement the record and believe that this will
result in a timely and decisive approval."
Groups representing CLECs expressed
approval of the withdrawal. Russell Frisby, President of CompTel, said in a release that "The
FCC's request for BellSouth to provide additional information sends a clear
message to the Bell companies that their business tactics to delay and block
competitive carriers will not succeed." See also, ALTS
US Imposes Tariffs on Ukraine for Failure to Protect IPR
12/20. The Office of the U.S. Trade
Representative (USTR) announced that the U.S. is imposing tariffs on certain
goods from the Ukraine as a result of the Ukraine's failure to enact legislation
to crack down on sound recording and optical media piracy.
USTR Robert Zoellick stated in a release that
"The United States is moving forcefully to protect its rights. We've worked
with Ukraine over the past two years to avoid enacting sanctions. We hope
Ukraine will now redouble its efforts to deal with intellectual property rights
piracy and pass the legislation needed to allow us to lift sanctions".
The Recording Industry Association of America
(RIAA) and the International Intellectual
Property Alliance (IIPA) both praised the decision. RIAA EVP Neil Turkewitz
said in a release that
"Ukraine has been one of the world's leading producers of pirate CDs, and
its failure to effectively address the situation will essentially foreclose its
present efforts to accede to the WTO. Today's action by the Rada in rejecting
legislation supported by President Kuchma and the world trading community will
have dramatic implications on Ukrainian society at every level -- economic,
political and cultural."
Eric Schwartz, Counsel to the IIPA, stated in a release [PDF]
that: "It is disappointing that bilateral trade relations between the
United States and Ukraine have been reduced to trade sanctions and the removal
of trade benefits when we should instead be working to open markets and improve
our trade relations. But today’s action is the result of Ukraine’s failure
to take appropriate steps against illegal production of materials in Ukraine
that it pledged it would undertake over 18 months ago. In fact, this is the
culmination of several years of unsuccessful efforts by the U.S. and European
public and private sectors to get the government of Ukraine to take the proper
steps to take some control over unchecked optical media piracy."
WTO DG Moore Releases Year End Message
12/20. World Trade Organization (WTO) Director
General Mike Moore released a year end message
in which he reviewed WTO accomplishments of 2001, and listed some goals for
He wrote that "This has been an outstanding year for the World Trade
Organization, perhaps the most significant in our brief history. We have
concluded a successful Ministerial Conference in Doha, Qatar and, as USTR Bob
Zoellick said, '... removed the stain of Seattle'." He added that
"we have welcomed more than a quarter of the world's population into our
membership from Lithuania, Moldova, China and Chinese Taipei."
He also wrote that "We are already planning a major Symposium in May next
year which will address the concerns expressed by some Ministers at Doha on our
relations with the public." He stated that one suggestion for the agenda is
the "impact of technology and the digital divide".
Commissioner Copps Opposes Liquor Ads
Commissioner Michael Copps
released a statement
regarding NBC's decision to carry liquor ads. He stated that "A race to the
bottom is never pretty to watch, whether it's a network saying that it has to
show liquor ads in prime time because they are running on cable, or whether it's
a network pushing the limits on indecency because it says it has to compete
against prurient shows on another network. Apart from the question of whether
these ads are or are not a matter for regulation, this is most certainly an area
where we could use some sense of social responsibility, some understanding of
what is being foisted on our children, and some vision to reach for the stars
instead of plumbing the depths."
See also, December 20 statement by Rep. Ed Markey (D-MA), the ranking
Democrat on the House Telecom Subcommittee.
People and Appointments
12/20. President Bush announced his intent to nominate Paul Atkins to be
a Commissioner of the Securities and Exchange
Commission (SEC), for the remainder of a five year term expiring on June 5,
2003. He is currently a partner in the Washington DC office of PWC. He was
previously a partner in the Washington DC office of Coopers & Lybrand.
Before that, he was an attorney, Counsel, Chief of Staff, and Counselor at the
SEC. And before that, he was an associate at the law firm of Davis Polk & Wardwell. See, White
12/20. President Bush announced his intent to nominate Cynthia Glassman
to be a Commissioner of the Securities and
Exchange Commission (SEC), for the remainder of a five year term expiring on
June 5, 2006. She is currently a principal at Ernst
& Young. Before that, she worked at Furash & Company. From 1977
through 1986 she worked at the Federal
Reserve System in several positions, including Economist and Senior
12/20. The Association for Local
Telecommunications Services (ALTS) announced changes to its Executive
Committee. Roscoe Young, P/COO of KMC Telecom, will be the new Chairman. Dan
Moffat, P/CEO of New Edge Networks, will be First Vice Chair. Robert
Taylor, P/CEO of Focal Communications, will be Executive Vice Chair. See, ALTS
12/20. Verizon filed an application with
the FCC to provide in region interLATA service
in New Jersey pursuant to 47 U.S.C. § 271. See,
12/20. The FCC released its Notice
of Proposed Rulemaking (NPRM) regarding the appropriate
regulatory requirements for the incumbent local exchange carriers’ (ILECs’)
provision of domestic broadband telecommunications services. The FCC
adopted, but did not release, this NPRM at its December 12 meeting.
7th Circuit Upholds Dismissal of Private Antitrust Action
Against Merging RBOCs
12/19. The U.S.
Court of Appeals (7thCir) issued its opinion
Austin Coalition v. SBC, affirming the dismissal of a private
antitrust action challenging the SBC Ameritech merger. The Appeals Court held
that this action is barred by Section 7 of the Clayton Act.
The plaintiffs, the South Austin Coalition Community Council (a Chicago area
group), and others, sought to stop the merger of SBC
and Ameritech. Ameritech and SBC were two of the original Regional Bell
Operating Companies (RBOCs) formed by the break up of the Bell system in the
1980s. They merged in 1999, with the approval of the Department of Justice's Antitrust Division and the FCC. See, DOJ/ATR pleadings. The
plaintiffs filed a complaint in U.S.
District Court (NDIll) against SBC alleging violation of federal antitrust
laws. They argued that had SBC and Ameritech not merged, each would have entered
the other's core markets and created extra competition to consumers' benefit.
District Court. The District Court dismissed the complaint on the grounds
that the plaintiffs lacked standing. The Court reasoned that the allegations in
the complaint were too speculative and vague to justify putting the
administrative conclusions to the test. This appeal followed.
Appeals Court: Standing and Pleading Requirements. The Appeals Court
affirmed the dismissal, but on other grounds. First, the Appeals Court held that
the plaintiffs do have standing to maintain the suit. It wrote that FRCP
8 sets out the minimal pleading requirements, and the plaintiffs met those
by alleging facts amounting to injury in fact (satisfying the Article III
standing requirement) and antitrust injury (satisfying the antitrust statutory
requirement). The Court noted that Rule 8 sets out special pleading requirements
for some types of cases, and the Congress has established requirements in
others, such as the Private Securities Litigation Reform Act (PSLRA). However,
there are no special pleading requirements for private antitrust actions.
Appeals Court: Clayton Act. The Appeals Court affirmed the dismissal on
the basis of an obscure Clayton Act exemption. It held that this action, as
plead, is barred by Section 7 of the Clayton Act, codified at 15 U.S.C. § 18, which
creates an antitrust merger exemption for common carriers "where there is
no substantial competition".
15 U.S.C. § 18, ¶ 4. This section provides that "Nor shall
anything herein contained be construed to prohibit any common carrier subject to
the laws to regulate commerce from aiding in the construction of branches or
short lines so located as to become feeders to the main line of the company so
aiding in such construction or from acquiring or owning all or any part of the
stock of such branch lines, nor to prevent any such common carrier from
acquiring and owning all or any part of the stock of a branch or short line
constructed by an independent company where there is no substantial competition
between the company owning the branch line so constructed and the company owning
the main line acquiring the property or an interest therein, nor to prevent such
common carrier from extending any of its lines through the medium of the
acquisition of stock or otherwise of any other common carrier where there is no
substantial competition between the company extending its lines and the company
whose stock, property, or an interest therein is so acquired."
This section was enacted by the Congress in 1914 with regulated railroads in
mind. Nevertheless, the Appeals Court held that its language is broad enough to
encompass telecommunications carriers, and that it remains in effect today,
notwithstanding telecom deregulation. The Court further suggested that the
statute is obsolete, but added that its repeal is a job for the Congress, not
The opinion of the three judge panel was written by Judge Frank Easterbrook,
a leading authority on antitrust law.
Senators Introduce Telework Tax Credit Bill
12/19. Sen. John Kerry (D-MA), Sen. Conrad Burns (R-MT), Sen. Jon Corzine (D-NJ), and Sen. Max Baucus (D-MT) introduced S 1856,
the Teleworking Advancement Act. This bill would amend the Internal Revenue Code
to provide tax credits to incent employer and employee participation in telework
arrangements. The bill was referred to the Senate Finance Committee, of which
Sen. Baucus is the Chairman.
Sen. Kerry addressed the bill in the Senate. He said that "millions of
American workers participate in ``telework´´ arrangements, otherwise known as
telecommuting, which allow them to work outside of their normal work
location." He said that "Our legislation combines tax incentives and
an employer awareness campaign to stimulate further growth in telework
He elaborated that the bill would credit two tax credits. First, "The
employer telework tax credit would allow employers to claim a credit of up to
$500 for each employee who participates in an employer sponsored telework
arrangement during the taxable year. For employees who telework on a partial
basis, the credit would be prorated. Employees of small businesses, those with
100 or fewer employees, and disabled employees, as defined by the Americans with
Disabilities Act, would be eligible for a maximum credit of $1,000."
Second, "The telework equipment tax credit would allow individuals or
businesses to claim a credit equal to 10 percent of qualified telework expenses
paid, pursuant to an employer sponsored telework arrangement. Either the
employer or the employee, depending on who incurred the expense, would be
eligible for the credit. The maximum credit would be $500. For employees of
small businesses (those with 100 or fewer employees) and disabled employees, as
defined by the Americans with Disabilities Act, the credit would be 20 percent
of eligible expenses, with a maximum credit of $1,000. Qualified telework
expenses includes expenses paid or incurred for computers, software, modems,
telecommunications equipment, and access to Internet or broadband technologies,
including applicable taxes and other expenses for the delivery, installation, or
maintenance of such equipment."
See, Kerry statement in Congressional Record, December 19, 2001, at pages
Tech Companies Oppose Ultrawideband Delay
12/19. Representatives of Intel, IBM, Texas Instruments, Sharp Labs and Siemens
wrote a letter
to FCC Chairman Michael Powell, and the
other Commissioners, "regarding the Commission's removal of the
ultra-wideband (UWB) item from its December 12, 2001, open meeting agenda."
notice of deletion of UWB item from agenda. (This is ET Docket No. 98-153.)
They wrote that "We are concerned that a short delay could be extended,
which in turn would be a substantial setback to the timely development and
deployment of UWB services. This could have a negative impact on current
industry momentum focused on building UWB technology and products. This
proceeding is more than three years old with almost 800 comments, notices, and
technical studies on the docket. UWB proponents have filed detailed technical
analyses showing that operation of their devices will not cause harmful
interference to other users of the spectrum, both government and non-government.
These analyses also explain why studies that purport to show harmful
interference gave incorrect results. It is time to issue a decision."
UWB devices, which use very narrow pulses with very wide bandwidths, have
potential applications in both radar and communications technologies. It has
been argued that UWB devices can use large portions of already allocated
spectrum with minimal or no interference to incumbent users.
Intel submitted a comment
[PDF] to the FCC back on November 27, 2000, in which it stated that "Intel
believes that UWB is a very promising technology for enabling short distance,
high data rate connections that can support new and innovative applications, and
Intel supports the FCC in the formation of regulations for UWB transmissions in
order to bring these benefits to the marketplace in a timely manner."
See also, NTIA Report
01-383 titled "The Temporal and Spectral Characteristics of
Ultrawideband Signals" and dated January 2001; NTIA Report 01-384
titled "Measurements to Determine Potential Interference to GPS Receivers
from Ultrawideband Transmission Systems" and dated February 2001; and NTIA Report
01-45 titled "Assessment of Compatibility between Ultrawideband (UWB)
Systems and Global Positioning Systems (GPS) Receivers" and dated March
EU US Reach Music Copyright Agreement
12/19. The EU issued a release
in which it stated that "The European Union and the United States today
agreed on a temporary solution of their dispute over music copyright. The
dispute was over the way in which smaller bars, shops and restaurants in the US
have hitherto played music without paying royalties. Today's agreement came
during a meeting between EU Trade Commissioner Pascal Lamy and his counterpart,
US Trade Representative Robert Zoellick. A World Trade Organisation disputes
procedure last year found in favour of the EU. ... However, the US is still
obliged to bring its legislation into line with its WTO obligations."
EU Trade Commissioner Pascal Lamy
stated in the release that "We have agreed on a process that will result in
a US financial contribution to support projects and activities for the benefit
of European music creators ... This is a good example of how we can manage our
problems in a co-operative manner, while keeping in mind our international
obligations and commitments."
House Subcommittee Holds Hearing on Electronic Communications
12/19. The House Commerce Committee's
Subcommittee on Commerce, Trade, and Consumer Protection held a hearing titled
"Electronic Communications Networks in the Wake of September 11th".
Rep. Cliff Stearns (R-FL), the
Chairman of the Subcommittee, presided. He said in his opening
statement that "a company like Ebay is an ECN because it facilitates
the meeting of buyers and seller without the intervention of a middleman. More
specialized ECNs, like our witness today, specialize in facilitating markets in
stock by causing buyers and seller to meet electronically using private
electronic networks. ECNs are electronic networks that do not have physical
trading locations. Therefore, they are somewhat less susceptible to disruption
of service stemming from events in a particular location." However, he
pointed out during the question and answer session that some of this advantage
is lost by the fact that most of the offices of ECNs involved in securities
trading are located in Manhattan.
Rep. Billy Tauzin (R-LA), the
Chairman of the full committee, submitted a statement
for the record. He said that "As our economy continues to evolve into an
electronic marketplace, the fundamental principle of commerce that we must
protect is the ability to exchange information as efficiently and reliably as
possible. Continuity of operations is part of this equation. ... The purpose of
the hearing today is to identify any barriers that may prevent the technology at
our witnesses' disposal from being used more broadly to the benefit of
investors. As the world leader of free markets, the United States must make sure
that regulation serves to make technology an asset to strong markets – not
stand as an impediment."
Matthew Andresen of The Island ECN said in
statement that "we should eliminate any barriers that inhibit fair
competition between electronic and traditional markets. Currently, there are two
main market structure changes that must be immediately pursued to ensure such
fair competition. First, ECNs must be permitted to freely disseminate their
market data to investors without sacrificing the very qualities that make ECNs
compelling alternatives to traditional markets. Second, since all markets are
competing in the same securities for the same customers, all markets must be
permitted to operate under the same ground rules in the same manner."
See, prepared testimony of witnesses: Steven
Randich (NASDAQ), Matthew
Andresen (The Island ECN), Catherine
Kinney (NYSE), Kim
Bang (Bloomberg Tradebook), Kevin
O'Hara (Archipelago), Joel
Steinmetz (SVP of Instinet), and Keith
Jamiatis (NYFIX Millennium).
12/19. The SEC filed a civil complaint in
U.S. District Court (DDC)
against Sean Price and Benjamin Maldonado alleging insider trading. The two
simultaneously consented to entry of judgment restraining them from violation of
federal securities laws, ordering disgorgement of loses avoided, and ordering
payment of civil penalties. Price is an SVP of Safenet, an Internet security
company. Maldonado was previously a stockbroker in the Washington DC office of
Merrill Lynch. The complaint alleges that Price tipped Maldonado in advance of a
Safenet announcement that the company expected to report quarterly financial
results below analysts' expectations, and that Maldonado subsequently sold
29,500 shares that were owned by him and members of his family. See also, SEC release.
AT&T Broadband and Comcast to Merge
12/19. AT&T announced that the Boards of
Directors of AT&T and Comcast
"approved a definitive agreement to combine AT&T Broadband with Comcast
... The new company ... will have approximately 22 million subscribers ... 2.2
million high-speed data customers and one million cable telephony
customers." AT&T added that it "will spin off AT&T Broadband
and simultaneously merge it with Comcast, forming a new company to be called
AT&T Comcast Corporation." See, AT&T release.
See also, Comcast
The merger requires antitrust and FCC review, and approval by both companies'
shareholders. The law firm of Wachtell Lipton
Rosen & Katz represents AT&T. Davis
Polk & Wardwell represents Comcast.
People and Appointments
12/19. Suzanne Tetreault was named Associate Bureau Chief and Chief of
Staff of the FCC's Enforcement Bureau. She
has been with the FCC since 1991. See, FCC
12/19. President Bush announced his intention to nominate John Rogers to be a U.S. Circuit
Judge for the Sixth Circuit. See, White
12/19. President Bush announced his intention to nominate Timothy Stanceu
to be Judge of the U.S. Court of International Trade. See, White
12/19. The USPTO published an announcement
in its web site that it "now accepts maintenance fee payments by deposit
account over the Internet."
12/19. Sen. George Allen (R-VA) and Sen. John Kerry (D-MA) introduced S 1858, a
bill to permit the closed circuit televising of the criminal trial of Zacarias
Moussaoui for the victims of September 11th. The bill was referred to the Senate Judiciary Committee.
12/19. December 19 was the deadline to submit comments to the National Telecommunications and Information
Administration (NTIA) in response to its Request for Comments on Deployment
of Broadband Networks and Advanced Telecommunications. See, notice
in Federal Register. The NTIA has been publishing these comments in its web
site. See, index
of comments, with hyperlinks.
Computer and Internet Crimes
12/18. A grand jury of the U.S. District Court (NDCal)
returned an indictment against Herbert Derungs in connection with allegations
that he auctioned over eBay baseball bats
that he falsely claimed had belonged to Derek Jeter of the New York Yankees and
Nomar Garciaparra of the Boston Red Sox. The indictment charges fraud by wire
and three counts of mail fraud, in violation of 18 U.S.C. §§ 1343 and 1341. See, USAO
release. The indictment also charges one count of utilizing a
telecommunications device in interstate communications with intent to threaten
and harass, in violation of 47 U.S.C. § 223(a)(1)(C).
This section provides that "Whoever, ... makes a telephone call or utilizes
a telecommunications device, whether or not conversation or communication
ensues, without disclosing his identity and with intent to annoy, abuse,
threaten, or harass any person at the called number or who receives the
communications." The indictment states that Derungs sent a threatening
12/18. Nicholas Mamich plead guilty in U.S.
District Court (DDC) to one felony count of fraud in connection with
computers, in violation 18 U.S.C. §
1030(a)(2)(B). Mamich hacked into the the Public Access to Court Electronic Records
(PACER) computer system operated by the Administrative Office of the United
States Courts. PACER maintains docket information, electronically stored case
related documents, case statistic reports, and other related information.
Specifically, Mamich devised a program that placed hidden files on the PACER
servers which bypassed the PACER billing program, so that no charges would
accrue to him for downloading files. See, CCIPS release.
12/18. USTR Robert Zoellick and EU Trade
Lamy held a press conference in Brussels, Belgium, at which they discussed
trade liberalization, the new WTO round, the Doha meeting, trade promotion
authority, anti dumping legislation, intellectual property, steel, Russia's WTO
accession, and other matters. See, transcript.
Doctrine of Equivalents
12/17. The U.S.
Court of Appeals (FedCir) issued its opinion in Intermatic
v. Lamson & Sessions, a patent infringement case involving
the doctrine of equivalents. Intermatic holds U.S.
Patent No. 5,280,135, titled "Outdoor Electrical Outlet Cover". It
filed a complaint in U.S. District Court
(NDIll) against Lamson & Sessions alleging patent infringement. The jury
returned a verdict in favor of Intermatic. The Appeals Court addressed the
issues of claim construction, literal infringement, the doctrine of equivalents,
and invalidity. The Appeals Court affirmed in part and reversed in part. Judge
Newman dissented in part, regarding the doctrine of equivalents.
12/17. The U.S.
Court of Appeals (FedCir) issued its opinion in Bose
v. JBL, another patent infringement case involving the doctrine
of equivalents. Bose is the owner of U.S.
Patent No. 5,714,721 titled "Porting", which relates to
loudspeaker technology. Bose filed a complaint in U.S. District Court (DMass) against JBL
alleging patent infringement. JBL moved for summary judgment of
non-infringement, both literal and under the doctrine of equivalents. The
District Court granted JBL summary judgment of non-infringement with respect to
literal infringement, but denied its motion for summary judgment under the
doctrine of equivalents. After a bench trial, the District Court entered
judgment for Bose and awarded damages. The Appeals Court affirmed.
The Supreme Court will hear oral
argument in the Festo case, No. 00-1543, on January 8, 2002. See, Festo
Corporation v. Shoketsu Kinzoku Koygo Kabushiki, 234 F.3d 558, 56 USPQ2d 1865
(Fed. Cir. 2000) (en banc), cert. granted, 121 S.Ct. 2519 (2001).
Court Upholds Injunction Under CFAA Against Use of Scraper
12/17. The U.S.
Court of Appeals (1stCir) issued its opinion
v. Explorica, a case regarding application of the Computer Fraud
and Abuse Act (CFAA) and Copyright Act to use of a scraper software to extract
price information from a competitor's web site. The Appeals Court affirmed a
district court injunction against use of the robot.
Background. EF and Explorica both provide global tours for high school
students. EF maintains a web site from which one may acquire the price of a
particular tour. Explorica hired a programmer (named Zefer) who designed and
used a computer program called a scraper. It made made over 30,000 inquiries to
EF's web site to collect tour price data. It then organized this data in a
spreadsheet. Explorica then used this data to undercut EF's prices. Zefer was
able develop this program, including the ability to circumvent EF's security,
with the assistance of an Explorica vice president who was previously VP for
information strategy at EF. This VP had signed a confidentiality agreement with
District Court. When EF learned of the scraper, it filed a complaint in U.S. District
Court (DMass) against Explorica alleging violation of the CFAA, 18 U.S.C. § 1030, et
seq., the Copyright Act, the Racketeer Influenced and Corrupt Organizations Act
(RICO), 18 U.S.C. § 1961, and various related state laws. EF sought a
preliminary injunction barring Explorica from using the scraper program, and a
return of all materials generated through use of the scraper. The District Court
granted EF a preliminary injunction under the CFAA, relying on the copyright
notice to find unauthorized access. This interlocutory appeal followed.
CFAA: Prohibition. 18 U.S.C. § 1030(a)(4) provides, in relevant part,
that "Whoever knowingly and with intent to defraud, accesses a protected
computer without authorization, or exceeds authorized access, and by means of
such conduct furthers the intended fraud and obtains anything of value, unless
the object of the fraud and the thing obtained consists only of the use of the
computer and the value of such use is not more than $5,000 in any 1-year
CFAA: Definition of Authorized Access. The definitions section, at 18
U.S.C. § 1030(e)(6), provides that "the term ``exceeds authorized
access´´ means to access a computer with authorization and to use such access
to obtain or alter information in the computer that the accesser is not entitled
so to obtain or alter".
CFAA: Private Right of Action. 18 U.S.C. § 1030(g) provides, in part,
that "Any person who suffers damage or loss by reason of a violation of
this section may maintain a civil action against the violator to obtain
compensatory damages and injunctive relief or other equitable relief. Damages
for violations involving damage as defined in subsection (e)(8)(A) are limited
to economic damages. ..."
Appeals Court: Authorized Access. The Appeals Court wrote that the case
turned on whether Explorica's access to EF's web servers "exceeds
authorized access" within the meaning of §§ 1030(a)(4) and (e)(6). The
Court noted that the former EF VP had signed a broad confidentiality agreement,
and then provided confidential information about the web site to the Explorica
programmer writing the scraper. The Court concluded that EF "will likely
prove that whatever authorization Explorica had to navigate around EF's site
(even in a competitive vein), it exceeded that authorization by providing
proprietary information and know-how to Zefer to create the scraper.
Accordingly, the district court's finding that Explorica likely violated the
CFAA was not clearly erroneous."
Appeals Court: Loss. The Appeals Court next examined whether there was
"damage or loss" sufficient to enable EF to maintain a civil action
against Explorica. It wrote that "In the absence of a statutory definition
for ``loss,´´ we apply the well-known rule of assigning undefined words their
normal, everyday meaning. ... The word ``loss´´ means ``detriment,
disadvantage, or deprivation from failure to keep, have or get.´´ ...
Appellees unquestionably suffered a detriment and a disadvantage by having to
expend substantial sums to assess the extent, if any, of the physical damage to
their website caused by appellants' intrusion. That the physical components were
not damaged is fortunate, but it does not lessen the loss represented by
Copyright and CFAA. The District Court had found a violation of the CFAA
based on copyright. The Appeals Court wrote in a footnote that "we express
no opinion on the district court's ruling that EF's copyright notice served as a
``clear statement [that] should have dispelled any notion a reasonable person
may have had the `presumption of open access´ ´´ to EF's website."
First Amendment. Explorica raised the argument that the injunction
violates its First Amendment free speech rights -- but not until oral argument.
Hence, the Appeals Court did not consider it.
The Appeals Court upheld the injunction. However, by relying on the breach of
the confidentiality agreement by the former EF employee, rather than copyright
law, to find unauthorized access, the Appeals Court narrowed the class of cases
to which its holding will likely apply in the future.
Computer and Internet Crimes
12/17. Mark Dipadova was sentenced in U.S.
District Court (DSCar) to trafficking in counterfeit goods in violation of 18 U.S.C. § 2320. He
operated a web site that sold counterfeit luxury items such as Rolex and Cartier
watches. He received 24 months in prison, and was ordered to pay $138,264.85 in
restitution to the owners of the trademarks that he infringed. Strom Thurmond
Jr. is the USA for South Carolina. See, CCIPS release.
12/17. The USAO for the Southern District of California announced the arrest of
Stephen Suplita. A grand jury of the U.S.
District Court (SDCal) returned an indictment against Suplita on December
14, 2001, charging that he used his computer to gain unauthorized access to
Enjoya.com Inc.'s computer system, and that he intentionally caused damage to
the computer system. See, USAO
Second Circuit Affirms in Sprint v. Connecticut Siting Council
12/17. The U.S.
Court of Appeals (2ndCir) issued its opinion
Spectrum v. Connecticut Siting Council, affirming the judgment of
District Court (DConn) which declared that the Connecticut Siting Council
(CSC) erred when it interpreted the provisions of Connecticut General Statutes
§ 16-50i(a)(6) to exclude from its jurisdiction the telecommunications towers
and associated equipment used in Sprint's PCS systems and that CSC did have such
jurisdiction, and ordering CSC to accept, process and act upon requests for
authority to construct such telecommunications towers and associated equipment
in the same manner as other applicants in its jurisdiction.
People and Appointments
12/17. Christopher Olsen was named Assistant Chief of the
FCC's Enforcement Bureau's Market Disputes
12/17. The FTC
announced that it filed a complaint in U.S. District Court (NDNY)
defendants located in Montreal, Canada, alleging violation of the
Federal Trade Commission Act and the FTC's Telemarketing Sales Rule. The
complaint states that the defendants operated a telemarketing scam that targeted
elderly U.S. citizens, conned them into disclosing credit card numbers, and then
used web site payment services to illegally bill the consumers' credit cards for
merchandise they did not order. The FTC also stated that the District Court
issued a temporary restraining order. See, FTC release.
12/17. The House Financial
Services Committee issued its report on HR 556,
the Unlawful Internet Gambling Funding Prohibition Act. See, Report No. 107-339.
12/17. The FCC released an order imposing a
$1,020,000 fine against America's Tele-Network Corp. for slamming customers in
violation of the Communications Act and the FCC's rules. (EB-00-TC-164) See, FCC release.
12/17. The FCC released it Order
[69 pages in PDF], which it announced back on November 8, regarding procedures
for processing applications for submarine cable landing licenses. See also, November
12/17. The Department of Commerce's Technology
Administration hosted a workshop titled "Understanding Broadband
Demand: Digital Content & Rights Management". See, opening remarks
of Bruce Mehlman (Asst. Sec. for the TA). See also, program agenda.
Go to News Briefs from December 11-15,