News from January 21-25, 2002
DAAG Kolasky Addresses IPR, Mergers and Antitrust
1/25. William Kolasky, Deputy Assistant Attorney General for the Antitrust Division of the Department of Justice, gave a speech titled "U.S. and EU Competition Policy: Cartels, Mergers, and Beyond" to the Council for the United States and Italy Bi-Annual Conference in New York, New York.
Intellectual Property. Kolasky addressed the relationship between intellectual property rights (IPR) and antitrust law. He stated that "intellectual property and antitrust laws share the common purpose of promoting innovation and enhancing consumer welfare." Also, "intellectual property should generally be treated just as any other property for purposes of the antitrust laws. A patent or a copyright gives the patent holder or copyright holder the right to exclude others from using its property just as a deed to land gives the landowner the right to keep trespassers off. In both cases, what antitrust cares about is the structure, conduct, and performance of the markets in which the property is used, not the existence of the property itself."
He stated that the Antitrust Division and the Federal Trade Commission (FTC) would hold hearings on IPR issues later this year. He said that the hearings would cover "the importance of intellectual property to businesses and innovation; competitive issues raised by the type and scope of patents issued, as well as by the procedures and criteria used during the patent examination process; the licensing of intellectual property; standard setting; competitive concerns raised by the settlement of patent disputes; comparative international treatment of many of these issues; and the role of the U.S. Court of Appeals for the Federal Circuit in developing antitrust law."
He also touched on differences between Europe and the U.S. on the essential facilities doctrine. He stated that "the European Commission appears to be taking a more expansive view than we do of the essential facilities doctrine, especially as it applies to intellectual property. In the United States, we have generally applied the essential facilities doctrine much more narrowly, believing that its overuse might reduce incentives to innovate and invest."
Merger Reviews. He asserted that Europe and the U.S. have an "excellent working relationship in reviewing the growing number of mergers that are notified in both jurisdictions." As for the dispute over the GE Honeywell merger, he said we "are eager to put that case behind us and move on, hoping it will prove to be an aberration."
He also discussed plans by the Antitrust Division and FTC to allocate industries. He said that "we are endeavoring to improve the functioning of the clearance process by which the FTC and we decide which agency will conduct particular investigations. Although the clearance process has generally functioned smoothly, the allocation of industries between the two agencies developed over the years in a somewhat ad hoc fashion along lines that in some cases no longer make sense given how those industries have evolved. This has resulted in too many instances of investigations being delayed by clearance disputes between the two agencies."
He did not list industries that would be allocated to each agency. He did state that "The proposed changes are currently being reviewed with the congressional committees that have oversight over our two agencies and will, hopefully, be completed soon."
People and Appointments
1/25. Maureen McLaughlin has been named Senior Counsel in the FCC's Office of Legal Counsel. She was previously Counsel and later Senior Counsel to the Senate Commerce Committee's Communications Subcommittee, where she worked on communications issues, e-commerce issues, and FCC oversight. Before that, she worked it the FCC's International and Wireless Telecommunications Bureaus. And before that, she worked for the law firm of Sheppard Mullin. See, FCC release [PDF].
1/25. Harry Wingo has been named Special Counsel in the FCC's Office of General Counsel. He previously worked for the law firm of Skadden Arps. He worked in the communications group, and focused on broadcast and satellite matters. Before law school, he graduated from the U.S. Naval Academy, and served for six years as a U.S. Navy SEAL officer. See, FCC release [PDF].
1/25. The law firm of Preston Gates named several new partners. Katherine Marelich was named a partner in the litigation group in the Los Angeles office. She focuses on intellectual property law, with an emphasis on copyright, trademark, antitrust and unfair business practices litigation. Audra Mori was also named a partner in the litigation group in the Los Angeles office. She focuses on copyright and trademark cases. John Lange was named a partner in the technology and intellectual property group in the Seattle office. He works with software, television, wireless communications and other high tech companies on transactions related to product development, cross licensing, online marketing and product distribution via retail, wholesale and OEM sales channels. See, Preston Gates release regarding Marelich and Mori, and release regarding Lange.
1/25. The Senate confirmed John Williams to be Chief Counsel for the Internal Revenue Service and an Assistant General Counsel in the Department of the Treasury.
1/25. The Senate confirmed Marcia Krieger to be a U.S. District Judge for the District of Colorado.
1/25. The Senate confirmed James Mahan to be a U.S. District Judge for the District of Nevada.
1/25. Federal Communications Commission (FCC) Chairman Michael Powell left the hospital after a two night stay.
More News
1/25. Beyond.com filed a Chapter 11 bankruptcy petition. Beyond.com is a Santa Clara, California, based company that builds, manages and markets online stores for businesses. It also announced that "it has agreed to sell substantially all of its assets to Digital River, Inc." See, Beyond.com release.
1/25. The National Telecommunications and Information Administration (NTIA) released a report regarding alternative frequencies for use by state and local public safety agencies.
1/25. The Antitrust Division released a notice regarding its rules regarding delivery of Hart Scott Rodino premerger filings. It states that "Law firms or corporate counsel offices may now send these filings via express mail (i.e., FedEx, UPS, etc.) or 3rd party couriers to the following address: Premerger Unit, Antitrust Division, Patrick Henry Building, 601 D Street, N.W., Room 10-013, Washington, D.C. 20530". See, ATR release.
1/25. Randolph May, of the Progress and Freedom Foundation (PFF), released a paper [PDF] titled "A Scorecard for Evaluating Whether State Telecommunications Policies are Deregulatory and Pro-competitive". This paper provides "basis for scoring whether a state’s telecommunications policies are, in fact, "deregulatory" and "pro-competitive", or, whether, instead, they tilt too far in a "regulatory" and "anti-competitive" direction." However, it does not actually score the states. May is a Senior Fellow and the Director of Communications Policy at the PFF.
1/25. The Office of the U.S. Trade Representative (USTR) announced that "The chief negotiators of the Free Trade Agreement between Chile and the United States scheduled two new meetings for March and April 2002. This agreement was reached at the end of the 10th Round of Negotiations held between January 22 and 25, in Santiago." It also stated that "During this week, the parties met to address the following issues: market access, antidumping, services, investment, financial services, e-commerce, intellectual property rights, government procurement, dispute settlement and institutional issues. Labor, environmental issues, sanitary and phytosanitary as well as customs procedures were addressed in videoconferences." See, USTR release.
FTC Official Addresses Privacy
1/24. Howard Beales, Director of the Bureau of Consumer Protection of the Federal Trade Commission (FTC), gave a speech titled "Privacy Notices and The Federal Trade Commission's 2002 Privacy Agenda" in San Francisco, California.
Beales said that "The events of September 11 make it clear that privacy is not, and cannot be, an absolute right."
He stated that the FTC has "changed the focus of the program somewhat. For example, in the past the Commission's privacy program was focused primarily on information collection. In contrast, we believe that the focus should be on misuse of information."
He also stated that the FTC's "past focus was primarily directed to online privacy ... . Adverse consequences can occur whether the information was originally collected online or off. The risk of identity theft is real, and the consequences are the same, whether the thief steals your credit card number from an online website or from your mailbox. Thus, many of our initiatives focus on the misuse of personal information collected offline as well as information collected online."
Beales reviewed several recent FTC privacy related actions, including its settlement with Eli Lilly, its proposed changes to the Telemarketing Sales Rule, its monitoring of compliance with the Fair Credit Reporting Act, and its role regarding identity theft. He also discussed the role of privacy notices, and the FTC's recent workshop on privacy notices by financial institutions under the Gramm Leach Bliley Act.
He then spoke at length about privacy notices. He stated that "privacy notices need to be written for consumers. That's their intended audience, not the regulators who prescribed them or the lawyers who will dissect them."
He concluded by listing "three key principles that should guide our next steps. First, it takes time to digest significant regulatory changes. ... Second, there remains an enormous amount that we do not know. ... Finally, we need to focus more clearly on what consequences we are trying to avoid."
Split Federal Circuit Allows Prosecution Laches Claim to Proceed
1/24. The U.S. Court of Appeals (FedCir) issued its opinion in Symbol Technologies v. Lemelson Medical, reversing a District Court order dismissing a prosecution laches claim in a patent declaratory judgment action. The Appeals Court held that the equitable doctrine of laches may be applied to bar enforcement of patent claims that issued after an unreasonable and unexplained delay in prosecution even though the applicant complied with pertinent statutes and rules. The ruling provides technology companies that produce things a further means for fighting submarine patents.
Background. This action pertains to numerous patents of defendant Lemelson Medical involving machine vision and automatic identification technology. Symbol Technologies and other plaintiffs design, manufacture, and sell bar code scanners and related products. In 1998, plaintiffs' customers began to receive letters from Lemelson stating that the use of the plaintiffs' products infringed various Lemelson patents. Lemelson claims priority based upon specifications that were originally filed as early as 1954. Plaintiffs assert unreasonable and prejudicial delay by Lemelson.
District Court. Plaintiffs filed two complaints in U.S. District Court (DNev) against Lemelson Medical and others pursuant to 28 U.S.C. § 2201(a) seeking declaratory judgments that the patents are invalid, unenforceable and not infringed by plaintiffs or their customers. In particular, plaintiffs asserted prosecution laches. The two suits were consolidated. The District Court dismissed the prosecution laches claim. This appeal followed.
Issue. The Appeals Court stated that "The sole issue on appeal is whether, as a matter of law, the equitable doctrine of laches may be applied to bar enforcement of patent claims that issued after an unreasonable and unexplained delay in prosecution even though the applicant complied with pertinent statutes and rules." Alternatively, stated in layman's terms, the question is whether the courts can, in the absence of applicable language in the Patent Act, prevent patentees from enforcing certain submarine patents.
Amici. The case attracted several amici curiae briefs, in support of the plaintiffs, and the notion of prosecution laches. For example, the Semiconductor Industry Association submitted a brief [PDF], along with the National Association of Manufacturers. They argued that "Unreasonable delay in the prosecution of a patent is pernicious because it allows an applicant to lie in wait for years, watching others invest in and develop a new technology, while secretly amending claims to cover it. Because those bringing the technology to market remain unaware of the submerged threat, they cannot factor it into their investment decisions or design around the still hidden claims. And once the applicant surfaces to demand payment, the targets may have little choice but to pay for a license rather than jeopardize their entire investment or undergo the costs of retooling or redesign."
The Intellectual Property Owners Association (IPO) filed a brief in which it argued that the courts have equitable power to deny enforcement to patents based on unjustifiable and prejudicial delay in prosecution. Likewise, the U.S. Chamber of Commerce filed a brief [PDF] siding with the plaintiffs in arguing for reversal. It argued that allowing enforcement of patents obtained by unreasonable and inexcusable prosecution delay unjustly penalizes users of matured technologies and unjustly rewards the patentee for the delay.
Appeals Court Holding. Judge Robert Mayer wrote the opinion of the three judge panel, in which Judge Raymond Clevenger joined. The Court wrote that the defense of prosecution laches finds its origin in two Supreme Court cases: Woodbridge v. U.S., 263 U.S. 50 (1923) and Webster Electric v. Splitdorf Electrical, 264 U.S. 463 (1924). The Court rejected the argument of Lemelson that Webster Electric and its progeny only apply to interference actins. The Court also rejected Lemelson's argument that the language and legislative history of the 1952 Patent Act preclude application of prosecution laches. The Court reversed the District Court and remanded.
Dissent. Judge Pauline Newman dissented strenuously. She wrote that "The Patent Act and implementing regulations authorize the filing of continuing applications provided that certain requirements are met. Heretofore, there has been no cause of action whereby a patentee who fully complied with the statute and rules must nonetheless defend the charge that he should have done more than the statute and rules require." She continued that "my colleagues on this panel have chosen to intervene, creating a new equitable cause of action called ``prosecution laches.´´  This judicial creation of a new ground on which to challenge patents that fully comply with the statutory requirements is in direct contravention to the rule that when statutory provisions exist they may be relied on without equitable penalty." She concluded that "It is inappropriate for this court, under the guise of equity, to change the law and adopt the position that was rejected by the Congress."
URAA. The problems associated with delay in patent prosecution have been reduced by the passage of the Uruguay Round Agreements Act (URAA). This statute, which was signed by former President Clinton on December 8, 1994, limits the duration of patents until 20 years after the filing of the initial application. However, there are still applications that have been pending since before passage of the URAA.
Bush Seeks More Funding for Homeland Defense and Communications Compatibility
1/24. Bush gave a speech to a gathering of mayors and county officials at the White House. He stated that his FY 2003 budget "proposes $3.5 billion in federal aid to state and local first responders. That is a thousand percent increase over what our government has spent. It's necessary money. It's part of the $38 billion budget I'm going to be asking for for homeland security."
He added that "Part of our task is to recognize there's 36,000 local jurisdictions all around the country. ... How do we make sure that the communications equipment and the rescue equipment is compatible not only within a state but nationwide?"
Deputy USTR Addresses Telecom and IT Competition in Japan
1/24. Jon Huntsman, Deputy United States Trade Representative (USTR), gave a speech at the Foreign Correspondents Club of Japan in Tokyo. He spoke about "the business of putting sacred cows to pasture through structural and regulatory reform".
He offered some telecom reform proposals: "Although Japan has taken some important steps forward in this sector, we still think more needs to be done to establish a genuinely pro-competitive regime. One important proposal is to eliminate and reduce the maze of filing and reporting requirements on carriers that compete with NTT. Streamlining these requirements would enable competitive carriers to respond to market forces more quickly and lower their cost of doing business in Japan. We are also looking forward to Japan's vigorous enforcement of its dominant carrier regulation, which is intended to prevent anti-competitive abuses by NTT. And we are continuing to work with Japan to reduce interconnection rates to competitive levels."
Huntsman praised the beneficial effects of telecom deregulation in the U.S. "Take, for example, what happened in the wake of telecom deregulation in the United States. Information technology (IT) grew from 4 to 8 percent of the economy between 1977 and 1998. Long distance telephone traffic more than doubled between 1988 and 1998. Competitive local carriers invested over $50 billion in the U.S. between 1996 and 2001 and their revenues increased from $3 billion to about $10 billion. Who could have imagined you could get so much vitality and growth out of a previously monopolized sector?"
He also stated that "We are therefore working with Japan to promote the use of e-commerce in the private sector, expand and accelerate e-government initiatives that would make business transactions with the Japanese Government more efficient and less costly, and protect intellectual property rights in the digital age. This would include the implementation of a well-balanced ISP (Internet Service Provider) liability law, which would in turn spur the development of innovative products for Japan's software industries."
He continued that "We welcome Japan's ambitious goal of constructing one of the world's most advanced telecommunications network infrastructures by 2005, particularly given the multiplier effect growth in this sector can have on stimulating investment, efficiency, and productivity throughout the economy."
AAI Files Tunney Act Claim Against DOJ and Microsoft
1/24. The American Antitrust Institute (AAI) filed a complaint [PDF] in U.S. District Court (DC) against Microsoft and the Department of Justice (DOJ) seeking declaratory relief pursuant to 15 U.S.C. § 16(b), which is also known as the Tunney Act. The AAI seeks to compel Microsoft and the DOJ to disclose further information about their Proposed Final Judgment (PFJ). The AAI opposes the proposed settlement.
The Tunney Act provides, in part, that "Any proposal for a consent judgment submitted by the United States for entry in any civil proceeding brought by or on behalf of the United States under the antitrust laws shall be filed with the district court before which such proceeding is pending and published by the United States in the Federal Register at least 60 days prior to the effective date of such judgment."
The Act further provides that "the United States shall file with the district court ... a competitive impact statement which shall recite (1) the nature and purpose of the proceeding; (2) a description of the practices or events giving rise to the alleged violation of the antitrust laws; (3) an explanation of the proposal for a consent judgment, including an explanation of any unusual circumstances giving rise to such proposal or any provision contained therein, relief to be obtained thereby, and the anticipated effects on competition of such relief; (4) the remedies available to potential private plaintiffs damaged by the alleged violation in the event that such proposal for the consent judgment is entered in such proceeding; (5) a description of the procedures available for modification of such proposal; and (6) a description and evaluation of alternatives to such proposal actually considered by the United States."
The AAI complaint asserts that the DOJ's competitive impact statement must be amended "(1) to include an explanation of why certain remedies previously pursued by the Justice Department were abandoned; (2) to include an explanation of the Justice Department’s evaluation and comparison of  the remedies that are being pursued in the PFJ and the various alternative remedies that are not; and (3) to include an explanation of how the PFJ will affect private litigation".
Count I of the 16 page complaint seeks a declaratory judgment that the DOJ has made insufficient disclosures under the Tunney Act. Count II seeks a declaratory judgment that Microsoft has made insufficient disclosures. Count III seeks an injunction against the DOJ and Microsoft against proceeding with their proposed settlement.
Greenspan Testifies About the Economy and Technology
1/24. Alan Greenspan, Chairman of the Board of Governors of the Federal Reserve System, testified before the Senate Budget Committee. See, prepared testimony [PDF].
He said that "The retrenchment in capital spending over the past year was central to the sharp slowing we experienced in overall activity. The steep rise in high tech spending that occurred in the early post Y2K months was clearly not sustainable. The demand for many of the newer technologies was growing rapidly, but capacity was expanding even faster, exerting severe pressure on prices and profits. New orders for equipment and software hesitated in the middle of 2000 and then fell sharply as firms re-evaluated their capital investment programs."
However, he continued that "new technologies will present ample opportunities to earn enhanced rates of return. Indeed, reports from businesses around the country suggest that the exploitation of available networking and other information technologies was only partially completed when the cyclical retrenchment of the past year began. Many business managers are still of the view, according to a recent survey of purchasing managers, that less than half of currently available new, and presumably profitable, supply chain technologies have been put into use. If the recent more favorable economic developments continue and gather momentum, uncertainties will diminish, risk premiums will fall, and the pace of capital investment embodying these technologies will increase. As we have witnessed so clearly in recent years, the resulting enhanced growth of productivity will lift our standard of living."
Cato Panel Debates Facial Recognition Technologies
1/24. The Cato Institute hosted a panel discussion titled "Eye in the Sky -- and Everywhere Else: Do Biometric Technologies Violate Our Rights?" The speakers included John Woodward, a Senior Policy Analyst for the Rand Corporation, and Marc Rotenberg, the Executive Director of the Electronic Privacy Information Center (EPIC).
The debate focused on the use of facial recognition technologies. Woodward stated that "there is no right to privacy in the face you show in public". He pointed out that neither the Supreme Court of the U.S., nor of any state, has recognized such a privacy right. He added that "the key to facial recognition is what goes in the database. ... I think that is where you have to focus your regulatory concerns."
Rotenberg conceded that the courts have not found a privacy right in facial features shown in public. However, he continued that key issue is whether the government can compel the revealing of one's identity when in public. He also stated that "the most obvious database of facial images ... are the two hundred million digitized photographs that sit in department of motor vehicle agencies." He asked rhetorically whether one has "any reason to believe that those images won't be incorporated into that database."
Rotenberg also suggested that the U.S. Congress has a clear obligation to legislate a framework for the regulation of the use of facial recognition technology, much as it has long regulated telephone wiretaps.
Woodward stated that September 11 was a watershed day for facial recognition technology. He said that pre 9-11, the prevailing view was "why do we really need this technology?", and post 9-11, the prevailing view is "why aren't we using this technology?"
Tech CEOs Advocate Federal Broadband Policy
1/24. A group of CEOs of major technology companies traveled to Washington DC to ask policy makers to adopt a national broadband policy. The group, which is organized as the Computer Systems Policy Project (CSPP), includes Michael Dell (Dell), Craig Barrett (Intel), Christopher Galvin (Motorola), Lou Gerstner (IBM), and Lars Nyberg (NCR).
The CSPP also held a press conference in Washington DC to release a report titled Building the Foundation of the Networked World [28 pages in PDF]. This report states that "The President and the Administration should articulate by the end of 2002 a clear, 10-year vision for this nation's wired/wireless infrastructure and adopt them as part of a national strategy for 21st century economic development." It also states what the elements of the national policy should be.
More Bandwidth. The report recommends that the national policy should provide that "By year-end 2003, 80 percent of U.S. homes should be able to get at least 1.5 Mbps capacity and 50 percent of U.S. homes should be able to get 6 Mbps from at least two providers." It also states that "by the end of the decade 100 million homes and small businesses should be able to get up to 100 Mbps affordable broadband capacity."
More Spectrum. The report states that the U.S. government should "make available in the marketplace 120 MHz of spectrum by 2004, with another 80 MHz made available by 2010, to be harmonized with global spectrum use to the maximum extent possible. In addition, the U.S. should implement a process to make additional licensed and unlicensed spectrum available beyond 2010 in a way that is consistent with an effective, long term vision for its management.
Fewer Regulatory Barriers. The report states that "Government at all levels should take steps to eliminate barriers to widespread, advanced, wired and wireless broadband deployment."
Tax Incentives. The report states that "Congress should adopt incentives such as a rural broadband tax credit to increase investment in the infrastructure at all levels." See, for example, S 88, the Broadband Internet Access Act of 2001.
More Research. The report also calls for more federal research and development spending.
The report takes no position on many policy issues affecting broadband deployment and adoption, such as the Tauzin Dingell bill, and various proposals to modify copyright laws affecting digital content.  See also, CSPP release.
Judicial Nominee Discusses Privacy and Electronic Court Records
1/24. The Senate Judiciary Committee held a hearing on several non-controversial judicial nominations, including that of Michael Melloy to be a judge of the U.S. Court of Appeals for the Eighth Circuit.
Melloy was appointed as a U.S. Bankruptcy Judge in 1986. He was appointed to the U.S. District Court for the Northern District of Iowa in 1992. He is also Chairman of the Bankruptcy Administration Committee of the Judicial Conference. In September 2001, the Judicial Conference's Committee on Court Administration and Case Management, with input from the Bankruptcy Administration Committee, released its report [PDF] titled "Report on Privacy and Public Access to Electronic Case Files".
This report states that "documents in bankruptcy case files should be made generally available electronically to the same extent that they are available at the courthouse", with the exception that certain personally identifying information, such as social security numbers, dates of birth, financial account numbers, and names of minor children, be redacted.
Sen. Maria Cantwell (D-WA), who presided at the hearing, asked Melloy about privacy. He stated that court documents can contain "pretty sensitive information". He added that "we have been concerned about identity theft that might result from posting that type of information on the Internet. And, we have take some measures to adjust those concerns."
Melloy's nomination is supported by both Sen. Charles Grassley (R-IA) and Sen. Tom Harkin (D-IA). He is likely to be confirmed with bipartisan support.
People and Appointments
1/24. Joe Ford will resign as CEO of Alltel, effective July 1. However, he will remain as Chairman of the Board of Directors. Scott Ford, who is currently Alltel's President and Chief Operating Officer, will become President and CEO, effective July 1. See, Alltel release.
1/24. Spencer Klein joined the law firm of McDermott Will & Emery as a partner in the corporate department of the firm's New York office. He will head the firm's M&A practice. He was previously a partner with the law firm of Shearman & Sterling in New York. See, MWE release.
More News
1/24. CTIA Chairman Thomas Wheeler wrote a letter to FCC Chairman Michael Powell opposing FCC mandated wireless number portability. He stated that "The difficulty with the wireless number portability regulation (which, as you know, was specifically not required by Congress but imposed by the FCC) is how it will force carriers to redirect spending that otherwise would go to expanding consumer service. There is no cost-benefit analysis to support a Commission action that forces carriers to redirect scarce resources from system build outs and expanded coverage to number portability that is neither mandated by Congress, nor warranted by a lack of wireless competition." (This is WT Docket No. 01-184.)
1/24. Sen. Jean Carnahan (D-MO) and Sen. Mark Dayton (D-MN) introduced S 1897, a bill to require prompt disclosure in electronic form of certain sales of securities. Sen. Carnahan explained her bill. "One warning sign that a company may be in trouble is when its executives are selling large amounts of company stock, as occurred at Enron. I have learned, however, that information about insider sales of stock is not easily accessible. Under our current system, a company's officers are required to file a disclosure form with the Securities and Exchange Commission, (SEC), any time they sell securities issued by their company. ... The paper disclosure forms are not easily accessible to the public. ... This is unacceptable in the electronic age. So today I am introducing legislation that requires information about insider sales of publicly traded companies to be filed electronically on the day of the sale." See, Congressional Record, January 24, 2002, at page S101.
1/24. The SEC announced that iCapital Markets LLC, formerly Datek Securities Corp., consented to pay a $6.3 Million penalty in connection with SEC allegations of securities fraud and widespread violations of the SEC's broker dealer books and records and reporting provisions. See also, SEC release and Datek web site.
1/24. Biogen announced that "it has reached a settlement in its long standing litigation with Berlex Laboratories over a claim that the manufacture of AVONEX® (Interferon beta-1a) infringes Berlex’s “McCormick” patents." See, Biogen release.
Identity Theft is Most Common Consumer Complaint to FTC
1/23. The Federal Trade Commission (FTC) published data on consumer complaints in 2001. It received 204,000 complaints. Of these, the largest number (86,168, or 42% of all complaints) pertained to identity theft. Complaints pertaining to Internet auctions came in a distant second, at 10% of all complaints. In third place, 7% pertained to Internet services and computers.
In a state by state breakdown, the state or district with the highest per capita identity fraud rate was the District of Columbia (76.7 per 100,00), followed by California (44.6 per 100,000). The most common use of personal information was credit card fraud (42%), followed by phone or utilities fraud (20%), and then by bank fraud (13%). See, FTC release.
US Imposes Tariffs on Ukrainian Exports for IPR Violations
1/23. The U.S. announced that it is placing prohibitive tariffs on Ukrainian exports "because of the continued failure of the Ukrainian Parliament to enact legislation cracking down on sound recording and optical media piracy. The sanctions, which will require the payment of 100 percent duties on imports of Ukrainian metals, footwear, and other products, will offset U.S. government estimates of the amount of annual damages to the U.S. economy caused by the piracy of optical media (CDs, CD-ROMs, DVDs, etc.)."
U.S. Trade Representative Robert Zoellick stated in a release that "Today's action highlights that the United States will move forcefully to protect its rights when our trading partners do not live up to their commitments".
SEC Chairman Pitt Addresses Post Enron Disclosure System Reforms
1/23. Harvey Pitt, Chairman of the Securities and Exchange Commission (SEC), gave a speech to the 29th Annual Securities Regulation Institute in Denver, Colorado, regarding post Enron reform. He addressed "how we must improve our existing disclosure and financial reporting system".
He stated that "the public can have full confidence that our Enforcement Division will learn who bears responsibility for this disaster and those who violated the laws we administer will be appropriately sanctioned."
He also stated that "There are many systemic problems that need repair in the wake of Enron. In my view, these include ... an outdated disclosure model that does not provide timely disclosure when it is most needed, and focuses on historical information while neglecting current and trend information". He reviewed a number of possible changes to the disclosure system, including "Making use of technology to simplify disclosure documents".
Treasury Secretary O'Neill Addresses Japanese Economy and Communications
1/23. Treasury Secretary Paul O'Neill gave a speech in Tokyo, Japan, in which he advocated pro competitive reforms. He said that "Japan has tremendous resources in the diligence of its workforce and the competitiveness of the best of its firms", but that every country "goes through periods where decisive economic adjustments and changes in policy are required."
He stated that "I would also like to discuss the introduction of true price competition throughout Japanese industry. While Japan's best firms face price competition on a daily basis -- both at home and abroad -- in significant parts of the Japanese economy there are firms that owe their survival less to the creation of real economic value than to barriers and regulation. Increased price competition through deregulation and structural reform can lead to adjustments and some dislocation. However, it also creates economic opportunities and activity that will lead to a new entry by both domestic and foreign firms, increased employment, renewed growth, and a secure future."
He cited mobile communications as an example. "The telecommunications industry is a clear example of the benefits that opening up new markets to competition can bring. Freeing up entry and price competition in mobile telephone services led to a rush of investment in base station and antenna facilities, and to a skyrocketing number of cellular telephone subscribers. And, as a result of the opportunities created and the new competition introduced, NTT DoCoMo is now a world leader in mobile communications innovation."
FBI Wants to Hire Special Agents with IT Skills
1/23. The FBI announced that it "plans to hire approximately 900 Special Agents (SAs) before September 30, 2002 and is focusing its recruitment efforts on identifying candidates for the Special Agent position who possess certain critical skills which are deemed essential to address our increasingly complex responsibilities." The first item on the FBI's list of skills is "Computer Science and other Information Technology specialities". See, FBI release.
Bush Wants Soldiers to Have High Tech Equipment
1/23. President Bush gave a speech to the Reserve Officers Association in Washington DC in which he said that his proposed FY 2003 budget calls for a large increase in military spending. He stated that "My '03 budget calls for more than $48 billion in new defense spending. This will be the largest increase in defense spending in the last 20 years, and it includes another pay raise for the men and women who wear the uniform." He also stated that "We will invest in more precision weapons, in missile defenses, in unmanned vehicles, in high-tech equipment for soldiers on the ground."
Sen. Grassley Calls for February Vote on TPA
1/23. Sen. Charles Grassley (R-IA), the ranking Republican on the Senate Finance Committee, spoke in the Senate in support of quick passage of trade promotion authority (also know as TPA, or fast track). He stated that "Trade Promotion Authority for the President is not only key to our economic recovery. It is also an important tool which helps us help other nations in the world, especially poorer countries. Trade creates jobs." He added that "The bill has strong bipartisan support. It will pass the Senate by a strong margin. That is why I am urging the majority leader to put TPA on the floor for a vote by the end of February."
NTIA Chief Addresses Broadband Policy
1/23. National Telecommunications and Information Administration (NTIA) chief Nancy Victory gave a speech titled "The New Medium for a New Media?" at the Broadband Outlook 2002 Conference in Washington DC. She stated that the administration does not yet have a broadband policy. However, she offered some broad principles.
She stated that the government should facilitate the deployment of broadband, but that "wherever possible, the market, not government, should drive this deployment." She also said that "as we saw on September 11th, there are network reliability and security advantages to having a diversity of facilities based competitors." She also said that government should promote a "technology neutral paradigm", and that "the market might not always work as well or at the same pace in all areas, particularly in rural and certain urban areas."
FCC Official Addresses Broadband Policy
1/23. Kenneth Ferree, Chief of the FCC's Cable Services Bureau, gave a speech titled "How Do You Build The Information Superhighway?" at the Broadband Outlook 2002 Conference in Washington DC.
He addressed several issues, including open access. He stated that "it’s not entirely clear what the advantage of building a network is if it always is possible to use someone else’s. And, in a reverse chicken and egg problem, the ``someone else´´ that you are expecting to build the network might never come along because of the lack of an economic return on the investment in new facilities. ... So we have to be wary of accepting, without due and thorough consideration, apparently attractive propositions like ``open access.´´ "
Ferree also stated that "Another theory is that infrastructure deployment must first be ubiquitous, or nearly so, before we fret too much over adoption rates. This is the ``build it and they will come´´ approach to the broadband revolution. It also is a favorite among those who favor government subsidies for broadband deployment. The problem with this one is that it just does not appear to be so as a factual matter. By all accounts, a large majority of homes passed by cable, something like 70%, now have cable modem service available and almost half of qualified DSL homes have DSL service available. Nonetheless, few Americans are making the economic choice to subscribe to broadband services." He concluded, "And I don’t think it is any mystery as to why. The fact is that there are very few true broadband applications that would generate consumer demand today."
Bills Introduced
1/23. Rep. Tom Davis (R-VA), Rep. James Moran (D-VA), Rep. Jo Ann Davis (R-VA), and Rep. Frank Wolf (R-VA) introduced HR 3611, a bill to permit the closed circuit televising of the criminal trial of Zacarias Moussaoui for the victims of September 11th. It was referred to the House Judiciary Committee.
1/23. Rep. Ed Markey (D-MA) introduced HR 3617, titled the "Accountability for Accountants Act of 2002", a bill to withdraw certain benefits of the Private Securities Litigation Reform Act (PSLRA) from auditors that perform non-audit functions. It was referred to the House Committee on Financial Services. See, Markey release.
People and Appointments
1/23. President Bush nominated 24 people to be U.S. District Court Judges. See, White House release.
1/23. Linda Thomsen was named Deputy Director of the Securities and Exchange Commission's Division of Enforcement. She has worked at the SEC since 1995. Before that, she worked at the law firm of Davis Polk & Wardwell. See, SEC release.
1/23. Pepper English, BellSouth's Vice President Congressional Relations, was named to the Democratic National Committee's 2004 Site Selection Advisory Committee.
1/23. Nacer Benjelloun Touimi, of Morocco, was named Senior Advisor to World Trade Organization (WTO) Director General Mike Moore. His function will include coordination within the Secretariat for promoting coherence. Moore stated in a release that "Coherence is about making sure technical assistance is delivered in the most effective way to those who need it most".
More News
1/23. The U.S. Department of Agriculture's Rural Utilities Service published a notice in the Federal Register regarding the availability of $80 Million in loans in the Broadband Pilot Loan Program for FY 2002. This loan program exists to finance the construction of facilities and systems providing broadband transmission service to rural consumers. See, Federal Register, January 23, 2002, Vol. 67, No. 15, at Pages 3140 - 3143.
1/23. World Trade Organization (WTO) Director General Mike Moore gave a speech in Strasbourg, France, in which he addressed the recent meeting in Doha and the new round of trade negotiations.
Supreme Court Denies Cert in Mouse Patent Case
1/22. The Supreme Court denied certiorari in Logitech v. Gart, No. 01-710. See, January 22, 2002, Order List [PDF], at page 5.
This is a petition for writ of certiorari from the June 26, 2001 opinion of the U.S. Court of Appeals (FedCir) in Gart v. Logitech, a patent infringement case involving computer mouses. Samuel Gart holds U.S. Patent 4,862,165, which relates to ergonomically shaped computer mouses for reducing muscle fatigue.
Gart filed a complaint against Logitech, a producer of mouses and other computer input devices, in U.S. District Court (CDCal) alleging infringement of this patent. On cross motions for summary judgment, the District Court determined that Logitech did not infringe the patent either literally or under the doctrine of equivalents. The District Court also determined on a motion for summary judgment the starting dates for accrual of damages pursuant to 35 U.S.C. § 287(a). The Appeals Court vacated the grant of summary judgment of no infringement, either literally or under the doctrine of equivalents, and remanded for further proceedings. The Appeals Court also reversed in part the § 287 determination. The Supreme Court denied certiorari without opinion.
Supreme Court Denies Cert in Copyright Preemption Case
1/22. The Supreme Court denied certiorari in Taco Bell v. Wrench,  No. 01-701, a case involving preemption of state law contract and tort remedies by the federal Copyright Act. See, January 22, 2002, Order List [PDF], at page 5.
Background. The plaintiffs, Wrench LLC and its two principals, are the creators of a cartoon character named "Psycho Chihauhua." Following discussions with the plaintiffs, the defendant, Taco Bell, began an ad campaign featuring a Chihuahua dog similar to that developed by plaintiffs, but without plaintiffs' permission.
District Court. Plaintiffs filed a complaint in U.S. District Court (WDMich) against Taco Bell, based upon diversity of citizenship, in which they plead various implied contract and tort causes of action. The trial court issued three opinions. It granted summary judgment to Taco Bell on the grounds that the Copyright Act preempted all of the claims, including those based on breach of an implied in fact contract. The trial court also held that plaintiffs' concept lacked the novelty necessary to sustain their claims. (See, D.C. No. 98-00045, W.D. Mich., 1998 WL 480871, 36 F. Supp. 2d 787, and 51 F. Supp. 2d 840.)
Appeals Court. On June 6, 2001, the U.S. Court of Appeals (6thCir) issued its opinion reversing the District Court. It held that the preemption language of the Copyright Act, found at § 301, provides that a state common law or statutory claim is preempted if the work is within the scope of the "subject matter of copyright," as specified in §§ 102 and 103, and, the rights granted under state law are equivalent to any exclusive rights within the scope of federal copyright as set out in § 106. The Appeals Court held that neither the subject matter nor equivalency prongs of the test were satisfied, and hence, there is no preemption. It held that since the plaintiffs' claims pertain to intangible ideas and concepts, they do not come within the subject matter of copyright; § 102(b) expressly excludes intangible ideas and concepts. It also held that an implied in fact contract claim under Michigan law contains the additional element of expectation of compensation, which is not an element of a § 106 claim, and hence, not equivalent. The Appeals Court also held that the Michigan Courts would not impose a novelty requirement in an implied in fact contract claim.
Supreme Court. The Supreme Court denied Taco Bell's petition for writ of certiorari, without opinion.
AOL Time Warner Files Treble Damages Antitrust Suit Against Microsoft
1/22. Netscape filed a complaint in U.S. District Court (DC) against Microsoft alleging violation of the Sherman Antitrust Act, the parallel sections of the District of Columbia Code, and the common law claim of tortious interference. Netscape seeks treble damages and injunctive relief.
Netscape, which is now a subsidiary of AOL Time Warner, relies upon facts and conclusions of law previously adjudicated in the government's antitrust action against Microsoft. See, Judge Thomas Jackson's Findings of Fact [PDF] (November 5, 1999), Conclusions of Law (April 3, 2000), and Final Judgment (June 7, 2000). See also, opinion of the U.S. Court of Appeals (DCCir) (June 28, 2001). In addition, Netscape alleges that Microsoft continues to engage in illegal and anticompetitive conduct.
The twenty page, seven count, complaint reviews the history of web browsers from Netscape's release of Navigator 1.0 in 1994 through Microsoft's Internet Explorer's current 80% share. It also reviews the history and status of the government's antitrust action against Microsoft, which is also pending in the U.S. District Court for the District of Columbia. (See, D.C. Nos. 98-1232 and 98-1233.)
Netscape Communications Corporation is a Delaware corporation with its principal place of business in Mountain View, California. AOL completed its acquisition of Netscape in 1999. AOL subsequently merged with Time Warner. Hence, Netscape is now a wholly owned subsidiary of AOL Time Warner. It is the producer of the browser named Navigator.
The complaint pleads seven causes of action: (1) Sherman Act § 2 -- Illegal Monopoly Maintenance of Intel- Compatible PC Operating Systems (see, 15 U.S.C. § 2), (2) Sherman Act § 2 -- Further Acts of Illegal Monopoly Maintenance, (3) Sherman Act § 1 -- Illegal Tying of Windows and Internet Explorer (see, 15 U.S.C. § 1), (4) Sherman Act § 2 -- Illegal Monopolization of the Web Browser Market, (5) Sherman Act § 2 -- Attempted Monopolization of the Web Browser Market, (6) Parallel Violations of District of Columbia Code §§ 28-4502 and 28-4503, and (7) common law liability for intentional interference with contractual relations and intentional interference with prospective economic advantage and/or prospective contractual or business relations.
The complaint seeks treble damages for the alleged antitrust violations, punitive damages for tortious interference, and attorneys fees. It also seeks "injunctive relief sufficient to prevent further antitrust injury to Netscape and to restore competition lost in the market for Web browsers, and to enable middleware platforms to compete with Intel- compatible PC operating systems".
Randall Boe, General Counsel to AOL, stated in a release that "Netscape's lawsuit is a logical extension of the findings entered by the District Court and unanimously affirmed by the Court of Appeals that Microsoft thwarted competition, violated the antitrust laws and illegally preserved its monopoly at Netscape's expense". He added that "There is no question that Microsoft's conduct violated the law and harmed competition and consumers. Netscape's lawsuit seeks not only an award of damages, but for the Court to provide injunctive relief that will help restore competition on the computer desktop. We support the efforts and goals of the non-settling state attorneys general who continue to seek appropriate remedies to end Microsoft's anticompetitive conduct and illegal activities. The aims of Netscape's lawsuit are entirely consistent with their efforts."
The complaint lists Netscape's attorneys as the law firms of Kirkland & Ellis and Cravath Swaine & Moore.
FTC Proposes Changes to Telemarketing Sales Rule
1/22. Federal Trade Commission (FTC) announced that it is proposing numerous changes to its Telemarketing Sales Rule (TSR). The proposals include the creation of a national "do not call" registry, and a prohibition on blocking caller ID systems by telemarketers. In addition, the proposed rule contains several Internet related items.
The TSR, which is codified 16 CFR Part 310, implements the 1994 Telemarketing Consumer Fraud and Abuse Prevention Act, 15 U.S.C. §§ 6101-6108. The TSR prohibits specific deceptive and abusive telemarketing acts or practices, requires disclosure of certain material information, requires express verifiable authorization for certain payment mechanisms, sets record keeping requirements, and specifies those transactions that are exempt from the TSR. The proposed ruled is contained in a notice [150 pages in PDF] to be published in the Federal Register.
The notice states that the proposed rule provides that "facsimile transmissions, electronic mail, and other similar methods of delivery are direct mail for purposes of the direct mail exemption".
The proposed rule also narrows the exemptions to the TSR. For example, it excepts calls involving the sale of Internet services and web services from the business to business exemption. The proposed version of § 310.6(g) would provide an exemption for "Telephone calls between a telemarketer and any business, except calls to induce a charitable contribution, and those involving the sale of Internet services, Web services, or the retail sale of nondurable office or cleaning supplies; provided, however, that § 310.5 of this Rule shall not apply to sellers or telemarketers of nondurable office or cleaning supplies, Internet Services, or Web services."
Also, since this proposed rule includes the terms "Internet services" and "web services", the proposed rule adds definitions of these terms, at § 310.2(m) and § 310.2(bb), respectively.
"Internet services" is defined as "the provision, by an Internet Service Provider, or another, of access to the Internet." Moreover, the notice states that the FTC "intends for this term to encompass the provision of whatever is necessary to gain access to the Internet, including software and telephone or cable connection, as well as other goods or services providing access to the Internet. Specifically, the term includes provision of access to the Internet, or any component thereof, such as electronic mail, the World Wide Web, websites, newsgroups, Internet Relay Chat or file transfers."
Similarly, the term "Web services" is defined as "designing, building, creating, publishing, maintaining, providing, or hosting a website on the Internet."
The notice also states that the FTC "has decided not to expand the Rule's coverage to online solicitations."
FTC Commissioner Orson Swindle wrote in a concurring statement that the FTC's "regulatory scheme would be more effective if it covered the entire spectrum of entities engaged in telemarketing. Under the Telemarketing Act and the TSR, however, the Commission lacks jurisdiction in whole or in part over the calls of entities such as banks, telephone companies, airlines, insurance companies, credit unions, charities, political campaigns, and political fund raisers. In addition, the Commission also proposes to exempt from the TSR calls made on behalf of certain religious organizations."
The FTC requests that public comments be submitted by March 29, 2002. Also, FTC staff will conduct a public forum on June 5, 6, and 7, 2002, to discuss the written comments.
Groups Oppose FTC and Antitrust Division Industry Allocation Plan
1/22. The Consumers Union and the Consumer Federation of America wrote a letter to Sen. Ernest Hollings (D-SC), the Chairman of the Senate Commerce Committee, regarding "the Bush administration's plans to transfer the oversight of media industry mergers from the Federal Trade Commission (FTC) to the Department of Justice (DOJ)".
These groups stated that "this jurisdictional gerrymandering seems to have been motivated more by politics and ideology than a desire to better serve the public. Such a move would be extremely detrimental to the public interest and to media consumers. We urge you to continue to do your utmost to persuade the administration to abandon its plans."
People and Appointments
1/22. President Bush made a recess appointment of Cynthia Glassman to be a Commissioner of the Securities and Exchange Commission (SEC), thereby avoiding the Senate confirmation process. 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 Economist.
1/22. President also reappointed Isaac Hunt to be a Commissioner of the Securities and Exchange Commission (SEC). He was first appointed to the SEC by former President Clinton in 1996.
1/22. Alison Ritchie was named Chief Executive Officer of BTopenworld, BT's mass market Internet division. See, BT release.
1/22. Phil Bond, who is currently Undersecretary for Technology at the Department of Commerce (DOC), will also assume the role of Chief of Staff. He will replace Laurie Fenton. Prior to his appointment to the DOC, he directed federal public policy at Hewlett Packard; he also was an SVP for Government Affairs and Treasurer of the Information Technology Industry Council (ITIC). He has also worked as Chief of Staff to Rep. Jennifer Dunn (R-WA), and as Deputy Assistant Secretary of Defense for Legislative Affairs for then Secretary of Defense Dick Cheney. See, DOC release and Technology Administration web site.
1/22. Sen. George Allen (R-VA) announced several changes to his legislative and communications staff, effective February 1. Paul Unger has been named Counsel and Legislative Director. Matt Raymond will be Communications Director and Senior Policy Advisor. Carrie Cantrell will be Press Secretary. All are current members of Sen. Allen's staff. Sen. Allen is a member of the Senate Commerce Committee, and its Communications Subcommittee. See, Allen release.
More News
1/22. The Copyright Office published a notice in the Federal Register directing "all claimants to royalty fees collected under the section 119 statutory license in 2000 to submit comments as to whether a Phase I or a Phase II controversy exists as to the distribution of these fees, and a Notice of Intention to Participate in a royalty distribution proceeding." See, Federal Register, January 22, 2002, Vol. 67, No. 14, at Pages 2912 - 2914.
1/22. The Department of Justice's (DOJ's) Computer Crimes and Intellectual Property Section (CCIPS) announced two criminal copyright infringement actions involving an Internet piracy group. The DOJ stated that defendant Kentaga Kartadinata operated an electronic mail server for the group, and defendant Mike Nguyen "managed several of the file servers that contained thousands of pirated software titles, including Windows operating systems and various utility programs. The file servers also contained video games and DVD movies, which were often made available to group members prior to the commercial release at movie theaters." See, CCIPS release.

Go to News Briefs from January 16-20, 2002.