|News from January
Rogan Announces USPTO FY 2003 Budget Proposal
1/31. U.S. Patent and Trademark Office (USPTO)
Director James Rogan
announced that the administration's FY 2003 budget request for the USPTO will be
$1.365 Billion. He stated in a press teleconference on January 31 that this is a
21.2% increase over the FY 2002 appropriation, and that it will enable the USPTO
to hire more patent examiners, reduce patent pendency, and improve patent
Rogan stated that this will enable the USPTO to hire an additional 950 patent
examiners. Rogan noted that the average pendency is now 25 months. "By
hiring more examiners we are hoping that it will help us with the backlog."
Nicholas Godici, the Commissioner for Patents, also participated in the
teleconference. He added that "with this kind of hiring ... our projections
are that we are going to be able to act on 60,000 more patent applications than
we would have."
Rogan also said that the proposed budget would enable the USPTO to complete the
transformation of the trademark filing system into a fully electronic operation
The USPTO is entirely funded by user fees. However, for many years,
appropriations bills have diverted some of these fees to fund other government
programs. Opponents have argued that this diversion leads to under funding of
the USPTO, which in turn delays the issuance of patents, and harms innovation
and the development of new technologies.
Rogan stated that "the administration is proposing a one time
surcharge" of $207 Million. "45 Million will be budgeted for the
USPTO's business plan" and $162 Million will go for national security and
homeland defense. Rogan stated that "there will be a 19.3 percent proposed
surcharge for patents." Rogan reiterated that while this is a one time
surcharge, he can make no guarantees regarding budget proposals in future years.
He also stated that the administration is proposing budget increases of around
3% for agencies that are not related to national defense or homeland security.
Hence, the 21% proposed increase for the USPTO reflects "an incredible
investment in the work at the Patent and Trademark Office."
Rogan will speak in Washington DC at a hearing on February 6 titled
"Competition and Intellectual Property Law and Policy in the Knowledge
Based Economy". This hearing is part of a series being hosted by the Federal Trade Commission (FTC) and the Antitrust Division of the Department of
FTC to Take Action Against Spammers
1/31. Howard Beales, Director of the FTC's Bureau of Consumer Protection, spoke
on "Privacy Regulation and the Federal Trade Commission" at the 2nd
Annual Privacy & Data Security Summit sponsored by the International Association of Privacy
Officers. He also addressed unsolicited e-mail.
He stated that "What we are planning to do, what we are in the process of
doing, actually, for the first time, is to launch a systematic attack on spam
that is itself fraudulent and deceptive. And that is an enormous fraction of
what we see in our spam database. We have a database where you can forward your
spam if you like -- email@example.com. We get about
10,000 pieces of spam a day."
He continued that "we are busy looking for cases. Some of those cases will
involve messages that are themselves deceptive. We are also working on cases
that involve claims that you can opt out, when in fact what clicking on the link
to unsubscribe will do is simply verify that you have a valid e-mail address, so
that you can get lots of spam, instead of just a little. Those cases take a
little bit longer to develop. But, we will be acting on that front, and you will
see the first set of cases very soon."
FCC Commissioner Abernathy Addresses Regulation, 3G, IP
Telephony, and Trade
1/31. FCC Commissioner Kathleen
Abernathy spoke at a luncheon hosted by the Federal Communications Bar Association's
International Practice Committee at the FCC offices in Washington DC.
She stated that there are five key principles to her regulatory philosophy: (1)
Congress, through the Communications Act, defines the agenda of the FCC, (2) the
FCC should rely upon competitive markets whenever possible, (3) the FCC should
write clear rules, with clear definitions, and then enforce these rules, (4) the
FCC should be humble about what it can know, and (5) the FCC is a service based
organization that should act promptly.
She stated that both domestically, and internationally, there are five areas
where markets do not function efficiently, and hence, there is a role for
regulators: (1) interconnection, (2) resale obligations, (3) colocation, (4)
rights of way, and (5) non discriminatory access to critical facilities.
IP Telephony. Abernathy was asked about promoting Internet protocol
telephony. She stated that "IP telephony is not necessarily ready for prime
time in the U.S." She also noted that some engineers say that it is vastly
superior to analog, and that the FCC has increased its hiring of engineers in
3G Spectrum. Abernathy was also asked about what the FCC is doing to make
more spectrum available for Third Generation (3G) wireless services, which are
intended to bring broadband Internet access to portable devices. She responded
that "we have less spectrum than any other country in the world to assign
to new technologies." She added that "we have more spectrum devoted to
defense" than any other country, and that much spectrum is devoted to
"There is a need for increased spectrum for wireless," said Abernathy.
"It is inbumbent upon us .. to figure out how we get it ... and how we
balance 3G needs with defense needs and public safety needs." She concluded
by saying that "we are in that process as we speak."
She did not address specific spectrum bands for potential reallocation. Nor did
she mention the creation of secondary markets in spectrum rights.
Trade. Abernathy was also asked about the United
States Trade Representative (USTR) and telecom competition. February 1 is
the extended deadline for filing comments with the USTR regarding the operation
and effectiveness of the World Trade Organization
(WTO) Basic Telecommunications Agreement, the telecommunications provisions of
the North American Free Trade Agreement (NAFTA), and other telecommunications
trade agreements. See, supplemental
notice in Federal Register.
Abernathy stated that "we cannot apply the trade pressure that other
entities in the U.S. can." She said that the FCC can engage in dialogue
with other nations, and can work with the USTR on an "information sharing
basis." However, "at the end of the day, they are the ones making the
1/31. The U.S.
Court of Appeals (3rdCir) issued its opinion in USA
v. Moore, an appeal of a sentence imposed for violation of 18 U.S.C. § 491. The
defendant is a juvenile who participated in a scheme to create counterfeit $20
bills at home using a personal computer, scanner, printer and paper cutter, and
then pass them at a Six Flags theme park. He was caught, plead guilty, and was
sentenced to 12 months imprisonment, one year of supervised release, and
restitution to Six Flags. He appealed the sentence. The Appeals Court affirmed.
Cal App Holds for Visa in Gambling Debts Case
1/31. The Court
of Appeal of California (3) issued its opinion [PDF]
v. Visa, holding that Visa cannot be held liable under California
consumer protection laws for the use of Visa bank cards to pay illegal gambling
Paul Emery filed a complaint in California Superior Court against Visa
International Service Association and Visa U.S.A. Inc. alleging unfair and
unlawful business practices and deceptive advertising in connection with the use
of VISA bank cards to pay illegal gambling debts.
The trial court granted Visa's motion for summary judgment. The Court of Appeal
affirmed. It wrote that "This lawsuit is misconceived legally and
factually. As a so-called consumer protection action, it lacks a defendant who
has engaged in any wrongful conduct and consumers who have been harmed. Because
plaintiff, a misguided private attorney general, has failed to identify any
triable issues of fact and bases his lawsuit on mistaken legal concepts of
expansive civil and criminal liability where none exists, we affirm."
The Court of Appeal reasoned that "VISA does not approve merchants, does
not endorse their activities, does not authorize any particular merchant
transactions, and has no say whatsoever in how the merchants operate their day
to day businesses. Indeed, the unrefuted evidence shows that VISA has no
regular, direct dealings at all with any of the merchants. VISA merely makes
available a payment system to member financial institutions, which merchants can
use, and adjusts credit transactions among those members."
The Court continued: "In essence, plaintiff ascribes vicarious liability to
VISA for its failure to police millions of merchants who allow payment with a
VISA bank card. While such expansive responsibility may be plaintiff’s idea of
needed social policy, he fails to present evidence of any viable theory of
agency. In the absence of sufficient evidence to raise a genuine triable issue
of fact, his lawsuit fails, along with his misguided notion of
Editor's Note: See, HR 556,
the Unlawful Internet Gambling Funding Prohibition Act, which was passed by the House Financial Services
Committee on October 31, 2001. The bill would attempt to stem illegal
Internet gambling by preventing the use of credit cards, wire transfers, and
other financial instruments in connection with illegal Internet gambling. It
provides that "No person engaged in the business of betting or wagering may
knowingly accept, in connection with the participation of another person in
unlawful Internet gambling (1) credit ... (including credit extended through the
use of a credit card); (2) an electronic funds transfer ... ; (3) any check ...;
or (4) the proceeds of any other form of financial transaction as the Secretary
may prescribe by regulation ..." See also, TLJ Daily E-Mail Alert
No. 299, November 1, 2001.
FCC Comments on FTC's Proposed Changes to Telemarketing Sales
1/31. Dane Snowden, Chief of the FCC's Consumer
Information Bureau, commented in a release
on the FTC's
proposal to change the Telemarketing Sales Rule (TSR). He stated that "We
at the Federal Communications Commission share the Federal Trade Commission's
commitment to ensuring that consumers' concerns are addressed by telemarketing
rules. We will be following closely the progress of the FTC's recent proposal to
create a national do-not-call registry to help consumers in their interactions
On January 22, the FTC announced that it is proposing numerous changes to its
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 an FTC notice [150 pages in PDF].
European Commission Approves HP Compaq Merger
1/31. The European Commission approved the merger of Hewlett Packard Company and Compaq Computer Company.
It stated in a release
that its "analysis focused on the combination of HP's and Compaq's
activities in the markets for personal computers (PCs), servers, handheld
products, storage solutions and services. In addition, the Commission also
assessed the impact of the merger on HP's joint development of the Itanium processor with Intel as well as the importance of HP's
increased opportunity for joint sales of PCs and printers following the
integration of Compaq's PC products."
PC Market. It concluded that in the PC market "the merged entity
will continue to face strong competition in Europe from a number of credible
rivals including IBM, Dell and Fujitsu Siemens, which together with
the absence of significant barriers to entry and the practice of non-exclusive
contractual relationships between retailers and manufacturers would prevent the
new HP from any attempt to raise prices significantly."
Server Market. It concluded that in the server market "the proposed
transaction was not likely to raise competitive issues. Indeed, while the
servers market can be broken down according to price bands into entry level
servers, mid-range and large servers, HP and Compaq are largely complementary
except in the entry level market segment where the combined entity will have
relatively high market shares. However, the Commission's analysis of that
segment confirmed that the new HP would not be able to act independently from
either customers or competitors as a result of the combination of series of
elements among which the dynamic and growing nature of the market, the absence
of entry barriers and the presence of several strong competitors as well a
series of fringe suppliers, not to mention the white brands built around Intel
Itanium. In addition, "As to the potential impact of HP and Intel's
jointly developed Itanium processor, the Commission's analysis concluded that
the merged entity would not be able to foreclose competitors' access to this
component and that it was in HP and Intel's interest to guarantee unrestricted
HP Ch/CEO Carly
Fiorina said that this "announcement confirms that the deal does not
raise competition concerns in Europe, and we see it as an encouraging step in
the continuing process of satisfying regulators worldwide that this deal will
provide a real stimulus for competition in information technology markets."
See, HP release.
The deal still requires the approval of the Federal
Trade Commission (FTC), and shareholders. The FTC is not likely to raise
USTR Zoellick Addresses China, WTO and IT
1/31. Robert Zoellick, the U.S. Trade
Representative (USTR), gave a speech
to the U.S. China Business Council in Washington DC in which he discussed the PR
China's accession to the WTO, and information technology.
He stated that "China's 15-year long journey to attain membership in the World Trade Organization has been a modern long
march, not to the caves of the hinterland, but toward the seas of commerce and
the ports of new open doors." He added that "The prospects for peace
depend significantly -- but of course not completely -- upon the maintenance and
acceleration of China's path in the last quarter century: toward openness to the
outside world and acceptance of international norms."
Zoellick also focused on information technology. He stated that "The
policies that have been at the core of China's spectacular growth in the last
twenty-five years -- progress toward freer markets, greater openness to foreign
competition and investment, deregulation and privatization, tariff reduction --
could serve as a model to others.
He continued: "Let me cite one example -- information technology. China
could have taken the route of East Asian industrial policy, such as it
experimented with through automobiles in the mid-1990s, and tried to build up a
domestic industry behind high protectionist walls. Understanding the global
character of the emerging IT sector, China chose a different course. It has
joined the Information Technology Agreement, agreeing to reduce its tariffs on
all IT products to zero by the year 2005."
"The result? Taiwanese companies, the IT powerhouses of the region, have
invested about $9 billion in assembly and production plants on the Mainland. One
quarter of the world's desktop computers are already manufactured in China, and
one-half of the world's CD-ROMs. Within this decade, China will become the
world's largest supplier of IT hardware. It will be the location of choice for
IT assembly. It is becoming a design and development partner, and will challenge
Taiwan as a semiconductor production center. It will soon be the second largest
market in the world for personal computers. This is a spectacular example of how
openness can lead to growth", said Zoellick.
Zoellick also cautioned that "Japan's experience provides a note of caution
for China: If China tries to subvert the free trade principles of the WTO by
twisting them into elements of a bureaucratic industrial policy, it will both
fail to derive the advantages of those principles and undercut global WTO
objectives. For example, it is critical for China to understand that the
benefits it has accrued from the zero tariffs of the Information Technology
Agreement will evaporate if it attempts to distort the basic intent of the
Agreement. I have in mind provisions in China's new tariff schedule and
implementing regulations that would differentiate between imports of IT products
for domestic production and those intended for domestic sale, with the latter
being subject to a tariff. We will make this point as often as necessary -- and
it will have to be made often -- to the Chinese."
People and Appointments
1/31. Microsoft named Scott Charney as its chief security strategist,
effective April 1. Charney is currently a principal for Price Waterhouse Coopers' Cybercrime
Prevention and Response Practice. From 1991 through 1999 he was chief of the Computer Crime and Intellectual
Property Section (CCIPS) of the Criminal Division of the Department of
Justice. See, MSFT
1/31. President Bush named Jay Lefkowitz Deputy Assistant to the
President and Director of the Domestic Policy Council. Lefkowitz has been
General Counsel at the Office of
Management and Budget since March 2001. Before that, he was a partner in the
Washington DC office of the law firm of Kirkland
& Ellis. He also worked for the elder George Bush from 1991 to 1993.
1/31. Tim Caruso was named Deputy Executive Assistant Director of the FBI
for Counterintelligence and Counterterrorism. Pat D'Amuro was named
Assistant Director of the FBI for Counterterrorism. See, FBI release and biographies of Caruso
1/31. The Silicon Valley based law firm of Gray Cary merged with the nine
attorney Washington DC law firm of Blumenfeld & Cohen. Gray Cary has over
470 attorneys in offices in Palo Alto, San Diego, San Francisco, Austin,
Sacramento, and Seattle. Blumenfeld & Cohen focuses on telecommunications
and technology law. See, GC release.
1/31. The Washington DC law firm of Wiley Rein
& Fielding added Rod Glover
Barnes as partners, and Charles Lemley
as an associate. All three previously worked in the Washington DC office of the
law firm of Gardner Carton & Douglas. They
are litigators who represent technology based companies. See, WRF release.
DuMont joined the Washington DC law firm of Wilmer Cutler & Pickering as counsel in
the firm's litigation section. He was previously Assistant to the Solicitor General of the U.S. He also
worked briefly on computer crime and privacy issues an Associate Deputy Attorney
General. He is also a former law clerk to Judge Richard Posner of
the U.S. Court of Appeals (7thCir).
See, WCP release.
1/31. Jano Cabrera left the Recording
Industry Association of America (RIAA) to join former Vice President Al
Gore's political action committee as communications director. Before going to
work for the RIAA he worked for the Gore Lieberman campaign as Gore's Deputy
National Spokesman. Before that he was a Deputy Press Secretary in the Office of
the Vice President.
1/31. The Copyright Office published
in the Federal Register announcing that it is further extending the time period
for filing additional comments in response to its March 9, 2001, Notice of Inquiry
concerning the interpretation and application of the copyright laws to certain
kinds of digital transmissions of prerecorded musical works in light of an
agreement between the Recording Industry
Association of America (RIAA), the National
Music Publishers Association (NMPA), and The Harry Fox Agency (HFA). See, 17 U.S.C. § 115.
Comments are due by February 6, 2002. Reply comments are due February 27, 2002.
See, Federal Register, January 31, 2002, Vol. 67, No. 21, at Pages 4694 - 4695.
This is Docket No. RM 2000-7B.
1/31. The U.S.
Court of Appeals (9thCir) issued its opinion
[PDF] in Gardner
v. Nike, a case regarding the assignability of exclusive licenses
under the Copyright Act. Affirmed.
1/31. Chris Israel gave a speech
titled "Online Privacy -- Observations, Acknowledgements, Actions Taken and
Challenges" at the Privacy Officers Association Second Annual Privacy and
Data Security Summit Washington DC. Israel is the Deputy Assistant Secretary for
Technology Policy at the Department of Commerce.
Antitrust Regulators to Hold Hearings on Intellectual Property
1/30. The Federal Trade Commission (FTC) and
the Antitrust Division of the Department
of Justice (DOJ) will hold a series of joint hearings on antitrust and
intellectual property. The hearings are titled "Competition and
Intellectual Property Law and Policy in the Knowledge Based Economy".
The opening hearing will be on February 6 at 2:00 PM at the FTC's main building
in Washington DC. It will feature addresses by current and former government
officials. The speakers at this event will be Timothy Muris (FTC Chairman), Charles James (Assistant
Attorney General for the Antitrust Division), James Rogan (Director of the USPTO),
Pauline Newman (Judge
of the U.S. Court of Appeals for the Federal
Circuit), Robert Pitofsky (Professor at Georgetown University Law Center),
Todd Dickinson (Howrey Simon), Gerald Mossinghoff (Oblon Spivak), Richard
Gilbert (Professor at U.C. Berkeley), and Richard Levin (President of Yale).
On February 8, there will be two concurrent sessions in the morning at the FTC,
titled "Patent Law for Antitrust Lawyers" and "Antitrust Law for
Patent Lawyers". On February 20, there will be a day long set of sessions
at the FTC titled "Economic Perspectives on Intellectual Property,
Competition and Innovation".
The series will continue at the Haas School of Business
at the University of California at Berkeley on February 25-28. The title of
these sessions will be "Business and Economic Perspectives on Real World
Experience with Patents". Finally, on March 19-20, there will be sessions
back at the FTC titled "Business and Other Perspectives on Real World
Experience with Patents". See, FTC release and DOJ release.
William Kolasky, Deputy Assistant Attorney General for the Antitrust Division,
gave a speech on
January 25 in which he discussed this series of hearings. He stated that
"We will invite interested businesses, consumers, legal practitioners,
academics, and government agencies to participate in discussions covering a
broad range of topics, including: 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."
Kolasky also stated that the hearings will address "whether and, if so,
under what circumstances, a refusal to license intellectual property might give
rise to an antitrust violation". He added that the hearings will address
"how our approach compares to that of the EU and our other major trading
partners. Recently, for example, 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."
Fed Circuit Rules on Breach of Duty to Assign Patent
1/30. The U.S.
Court of Appeals (FedCir) issued its opinion in University
of West Virginia v. VanVoorhies, a case regarding breach of duty
to assign patent applications by university students and professors.
Kurt VanVoorhies was a graduate student in engineering, and later post graduate
research assistant professor, at the University of
West Virginia (UWV). UWV had a policy that provided that UWV "owns
worldwide right, title and interest in any invention made at least in part by
University personnel, or with substantial use of University resources ..."
Moreover, VanVoorhies and a UWV professor executed a patent application in 1992.
They assigned all rights to the UWV. The written assignment also covered
continuation in part (CIP) applications relating to the invention.
VanVoorhies later executed a second patent application in which he claimed
himself as the sole inventor, and a company owned by him as assignee. The patent
applications pertained to antennae for wireless power transmission.
WVU sued VanVoorhies in 1997 in U.S.
District Court (NDWV) alleging that VanVoorhies breached his duty to assign
the second invention to WVU. VanVoorhies filed various counterclaims,
including fraud, breach of fiduciary duty, breach of contract, invalid
assignment, and RICO. The District Court granted WVU summary judgment that
VanVoorhies breached his duty to assign to WVU; it also granted WVU summary
judgment on VanVoorhies' counterclaims.
The Appeals Court held that the second application was a continuation in part of
the first application, and that VanVoorhies had a duty to assign it. Affirmed.
People and Appointments
1/30. Riaz Karamali
joined the Menlo Park office of the law firm of Perkins Coie as a partner. He focuses on
corporate finance, mergers and acquisitions, and venture capital transactions
for technology companies and investors in such companies. He was previously a
partner with General Counsel Associates
in Mountain View, California. Before that, he an associate with the law firm of Gibson Dunn & Crutcher. See, PC release.
1/30. The Copyright Office published
a notice in
the Federal Register announcing "the initiation of the voluntary
negotiation period for determining reasonable rates and terms for two compulsory
licenses, which in one case, allows public performances of sound recordings by
means of eligible nonsubscription transmissions, and in the second instance,
allows the making of an ephemeral phonorecord of a sound recording in
furtherance of making a permitted public performance of the sound
recording." See, Federal Register, January 30, 2002, Vol. 67, No. 20, at
Pages 4472 - 4474.
1/30. The Securities and Exchange Commission
(SEC) announced that it has developed a series of fake investment scam web sites
that are "designed to warn investors who rush into investment opportunities
on the Internet without fully investigating the offers." See, SEC release.
1/30. The U.S. Patent and Trademark Office (USPTO)
announced that "An examination for persons seeking registration before the
United States Patent and Trademark Office as patent attorneys and agents will be
held on Wednesday, October 16, 2002, pursuant to the provisions of 37 CFR §§
10.5, 10.6, and 10.7. The deadline for filing applications along with the $40.00
non-refundable application fee and the $310.00 examination fee and all necessary
showings required by 37 CFR §§ 10.7(a) and (b) is Friday, July 5, 2002."
1/30. U.S. Trade Representative (USTR) Robert
Zoellick and Australian Minister of Trade Mark Vaile met. The office of the USTR
released a statement in which it said that the two "considered how they
might advance the proposal for a possible free trade agreement (FTA) between the
United States and Australia. They discussed how an FTA could contribute to their
shared goals of achieving open markets globally in the WTO's Doha Development
Agenda and in the Asia-Pacific region. They directed their staffs to examine the
elements of a possible FTA and to provide the results of this work in the coming
months." See, USTR
1/30. The Office of the U.S. Trade Representative
(USTR) announced that on January 30 "the United States and Hungary signed
an agreement in Budapest in which Hungary agreed to reduce or suspend its
tariffs on $180 million worth of key U.S. agricultural and industrial exports
annually, starting in April 2002." The agreement covers, among other
things, automatic data processing machines, office machine parts, laser disks,
and telephone equipment. See, USTR release.
EPIC Seeks Government Investigations of Microsoft's Passport
1/29. The Electronic Privacy Information Center
(EPIC) announced that it will continue its efforts to induce government
regulators to investigate Microsoft in connection its Passport and related
services. It urged state attorneys general to take action under state unfair and
deceptive trade practices statutes. It will also file a complaint with the FTC
pertaining to the EU safe harbor provisions.
Last year, the EPIC unsuccessfully sought a Federal
Trade Commission (FTC) investigation. See, original complaint [PDF]
submitted on July 26, 2001, and updated complaint
[PDF] submitted on August 15. EPIC requested that the FTC conduct an
investigation of Microsoft, and enjoin a number of software features and
services, that EPIC alleges violate § 5 of the Federal Trade Commission
Act, 15 U.S.C. § 45.
However, the FTC has not publicly announced that it has taken any action with
respect to these complaints.
EPIC alleged in its complaints that this "concerns the privacy implications
of the Microsoft XP operating system that is expected to become the primary
means of access for consumers in the United States to the Internet. ...
Microsoft has engaged, and is engaging, in unfair and deceptive trade practices
intended to profile, track, and monitor millions of Internet users. Central to
the scheme is a system of services, known collectively as ``.NET,´´ which
incorporate ``Passport,´´ ``Wallet,´´ and ``HailStorm´´ that are designed
to obtain personal information from consumers in the United States unfairly and
deceptively. The public interest requires the Commission to investigate these
practices and to enjoin Microsoft from violating Section 5" of the FTCA.
EPIC Legislative Counsel Chris Hoofnagle stated in a teleconference on January
29 that the EPIC is pursuing two other strategies. First, it just sent a letter
to state attorneys general urging them "to take action to protect consumers
against unfair and deceptive trade practices raised by Microsoft Corporation’s
Passport service ..."
Second, Hoofnagle stated that EPIC intends to submit another complaint to the
FTC in which it will allege that Microsoft's actions violate the safe harbor
provisions of the EU directive on data protection.
Hoofnagle added that Microsoft is violating federal and state unfair and
deceptive trade practices laws by not disclosing the security risks associated
with Microsoft's Passport. However, he conceded that while there have been
numerous security breaches involving the loss of personal information, none have
involved Microsoft's Passport. He also stated that EPIC will not file its own
private lawsuit against Microsoft.
1/29. The National Telecommunications and
Information Administration (NTIA) published a notice
in the Federal Register regarding the availability of Technology Opportunity Program (TOP)
grants for FY 2002. All grants awarded for FY 2001 involved projects that make
some use of the Internet. Some funded projects provide medical, public housing,
and other information through web sites. Other projects provide networking and
training. See, NTIA list of grantees
for FY 2001.
Grant applications for FY 2002 are due by 8:00 PM EST, on March 21, 2002. See,
Federal Register, January 29, 2002, Vol. 67, No. 19, at Page 4240.
State of the Union Address
1/29. President Bush delivered the State of
the Union address to a joint session of the Congress. He focused on the war
against terrorism, homeland defense, and the state of the economy. However, he
also briefly touched upon two technology related issues.
He stated that "We will improve intelligence collection and sharing, expand
patrols at our borders, strengthen the security of air travel and use technology
to track the arrivals and departures of visitors to the United States."
However, he did not elaborate further on the use of technology.
He also urged the Senate to pass legislation granting the President trade
promotion authority, which is also known as fast track. He stated that
"Good jobs depend on expanded trade. Selling into new markets creates new
jobs, so I ask Congress to finally approve Trade Promotion Authority." The
House has already passed its TPA bill, HR 3005.
Sen. Charles Grassley (R-IA) issued a
release in which commented on the State of the Union address. It stated that he
would "continue to work to advance trade promotion authority for the
President, noting free trade is key to creating jobs." Sen. Grassley is the
ranking Republican on the Senate
Finance Committee, which has jurisdiction over TPA legislation.
Sen. Kyl Criticizes Export Administration Act
1/29. Sen. Jon Kyl (R-AZ) spoke in the
Senate about the S 149,
the Export Administration Act of 2001, and the PR China's use of foreign
technology to modernize its military. He stated that it is "China's primary
objective in acquiring these and other military technologies, to be able to
defeat our long standing, democratic ally Taiwan in a conflict quickly enough to
prevent American military intervention."
Sen. Kyl continued that "S 149 was approved despite serious concerns
of some, including myself, that the U.S. export control process is ineffective
in stopping the export of militarily sensitive technologies to countries, like
China, that pose a potential military threat to the United States or to U.S.
interests abroad. S 149, if enacted into law, would allow China to import even
more sensitive technology than it has in the past. It would decontrol a number
of dual use technologies, including items used to make nuclear weapons and long
S 149 would modernize export control laws. It would ease restraints on most dual
use products, such as computers and software, but increase penalties for
violations. The Bush Administration has endorsed it. The Senate passed it by a
vote of 85 to 14, five days before the terrorist attacks of September 11, over
the opposition of a small group of Senators who asserted that it would harm
national security. See, Roll Call No.
275. The House
International Relations Committee passed a much different version just
before the August 2001 recess.
1/29. The Electronic Privacy Information Center
(EPIC) wrote a letter
to state attorneys general urging them "to take action to protect consumers
against unfair and deceptive trade practices raised by Microsoft Corporation’s
Passport service and related “Wallet,” “Kids Passport,” “Hailstorm,”
and “.Net Services.” These systems unfairly and deceptively gather personal
information and expose consumers to the release, sale, and theft of their
personal information." Last year, the EPIC unsuccessfully sought a Federal Trade Commission (FTC) investigation of
the same practices.
People and Appointments
1/29. Steve Moore joined the Institute for
Policy Innovation as a Senior Research Fellow. Moore is also the President
of The Club for Growth.
1/29. IBM's Board of Directors elected Samuel
Palmisano CEO, effective March 1. He is currently President and Chief
Operating Officer. He will remain as President. He will replace Louis
Gerstner, who will remain IBM Chairman through the end of 2002. In addition,
John Thompson, IBM Vice Chairman, will retire from the company and board
on September 1. See, IBM
Kaminer joined the Washington DC office of the law firm of Fulbright & Jaworski as a senior
associate. He focuses on intellectual property, information technology and
corporate matters. See, FJ
1/29. The Federal Communications
Commission (FCC) released its it annual report
[PDF] titled "Telecommunications Industry Revenues: 2000".
1/29. The General Accounting Office (GAO)
released a report [PDF]
titled "Defense Acquisitions: Collection and Reporting of Information
Technology Purchases". The Floyd Spence National Defense Authorization Act
for FY 20011 directed the Secretary of Defense to collect specific procurement
data on the purchase of information technology products and services made by the
military services and defense agencies, and to issue his first annual report to
the Armed Services Committees by March 15, 2002. This brief report concludes
that the DOD is making good progress in meeting these requirements.
1/29. The U.S.
Court of Appeals (FedCir) issued its opinion in In
Re Kenneth Berger. Berger filed a patent application which
described a shape for beverage cans. The patent examiner rejected certain
claims, pursuant to 35
U.S.C. § 112, for being indefinite. The U.S. Patent and Trademark Office
Board of Patent Appeals and Interferences affirmed. The Appeals Court affirmed.
Global Crossing Files Chapter 11 Petition
1/28. Global Crossing, and some of
its affiliates, filed a Chapter 11 bankruptcy petition in the U.S. Bankruptcy Court (SDNY). Global
Crossing also stated in a release
that it filed "coordinated proceedings in the Supreme Court of
Bermuda." Global Crossing operates a fiber optic network in Asia, the
Americas, and Europe. It also provides telephone, Internet access, and data
Motorola & Nokia Sue Turkish Cellular Company for RICO
Violations and Computer Hacking
1/28. Motorola Credit Corporation and Nokia
Corporation filed a complaint
in U.S. District Court (SDNY) against
Kemal Uzan, other members of the Uzan family, and corporations controlled by the
Uzan family, regarding cellular communications deals in the nation of Turkey.
Motorola and Nokia allege "theft of more than $3 billion".
The complaint states that the defendants, who are politically well connected in
Turkey, were awarded a Global System for Mobile Telephony (GSM) license by the
Turkish government. Motorola then provided defendants loans to obtain base
stations from Motorola, and Nokia provided loans to obtain switching equipment
from Nokia. This equipment was then used to build a GSM and 2.5G wireless
telecommunications system in Turkey. However, Motorola and Nokia did not get
paid up front. And now, they allege they have been defrauded out of $3 Billion.
The complaint states that the defendants borrowed from Motorola and Nokia, and
then intentionally and illegally diluted the value of stock pledged as
collateral for the loans. The complaint also alleges that defendants
manufactured transactions to transfer assets from the debtor companies.
The complaint alleges numerous violations of the Racketeer Influenced and
Corrupt Organizations Act (RICO), 18 U.S.C. § 1962. It
alleges that the predicate acts of racketeering are mail fraud, wire fraud,
extortion, intimidation and computer hacking.
Computer Hacking. Count 8 alleges fraud in connection with computers in
violation of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030(a)(4).
Count 9 alleges interception of electronic communications in violation of the
Electronic Communications Privacy Act, 18 U.S.C. § 2511(1)(a).
Count 10 alleges X unlawful access to stored electronic communications in
violation of the Electronic Communications Privacy Act, 18 U.S.C. § 2701(a)(2).
The complaint states that defendants twice recruited employees of Motorola
Turkey to hack into the computer system of Motorola Inc. to obtain unauthorized
access to proprietary and confidential information about Motorola Inc. and its
customers. The complaint further states that the target of the hacking was
"Motorola Inc.’s global customer contacts outside of North America",
and that the second attempt succeeded. The allegations of fact pertaining to
computer hacking are found at ¶¶ 165- 176.
Motorola's General Counsel, Peter Lawson, stated in a release
that "We are taking the unusual step of jointly filing this action because
it is clear to both companies that the Uzans had no intention of dealing in good
faith with us in an effort to resolve this situation. ... This action is in
recognition that this is not a normal commercial dispute between private parties
- it is, rather, a premeditated and unlawful attempt by the Uzans to rob both
Motorola and Nokia of our assets."
Motorola seeks compensatory damages of over $2 Billion. Nokia seeks compensatory
damages of $700 Million. Both also seek treble damages under RICO, and punitive
damages, and well as declaratory and injunctive relief.
The complaint contains 343 numbered paragraphs. It runs 117 pages as filed,
excluding exhibits. It also alleges alleges fraud, and violations of Illinois
Few Congressional Web Sites are Rated Highly
1/28. The Congress Online
Project (COP) released a report titled
"Congress Online: Assessing and Improving Capitol Hill Web Sites". The
report concludes that "There is a digital divide within Congress between a
small group of offices that host good to excellent Web sites and the vast
majority that host fair to poor sites."
The report also concluded that "neither congressional offices nor the
public they serve are yet reaping the benefits of this powerful new
The report found that "Constituents, special interest groups, and reporters
are seeking basic legislative information such as position statements,
rationales for key votes, status of pending legislation, and educational
material about Congress. However, offices are using Web sites primarily as
promotional tools ..."
The COP report identified 35 web sites for praise. It picked both the web site
of the House Commerce Committee and
that of the House Commerce
The COP reviewed 605 web sites of Members of Congress, Congressional committees,
and Congressional leadership offices. The COP also interviewed Congressional
staff and conducted constituent focus groups. The COP is funded by a grant from
the Pew Charitable Trusts. The report was written by George Washington
University and the Congressional Management Foundation.
ProComp Opposes Microsoft Antitrust Settlement
an anti Microsoft group, submitted a lengthy comment [PDF] in
opposition to the Proposed
Final Judgment (PFJ) filed with U.S. District Court (DC) in the case U.S.
January 28 was the deadline for the public to submit comments on the proposed
settlement, pursuant to the 15 U.S.C. § 16,
which is also known as the Tunney Act. It requires that "Before entering
any consent judgment proposed by the United States under this section, the court
shall determine that the entry of such judgment is in the public interest."
ProComp's comment begins with the statement, "This proposed decree is so
ineffective that it would not have prevented Microsoft from destroying Netscape
and Java, the very acts that gave rise to this lawsuit. It is so ineffective in
controlling Microsoft that it might as well have been written by Microsoft
ProComp asserts that the "public interest" standard under the Tunney
Act "is determined in this case by the unanimous legal ruling of the Court
of Appeals for the District of Columbia Circuit sitting en banc. That Court held
that Microsoft has maintained its monopoly in personal computer operating
systems in clear violation of Section 2 of the Sherman Act. No decree that fails
to cure that illegality and prevent its recurrence can conceivably serve the
The comment elaborates that "the proposed settlement takes no steps to
remedy Microsoft’s foreclosure of middleware threats from competing Internet
browsers and cross platform Java technology, Microsoft’s related efforts to
illegally increase the applications barrier to entry protecting its Windows
monopoly, or Microsoft’s illegal commingling of browser and other middleware
code with Windows. Further, the proposed settlement does not assure that future
middleware competitors will have access to the necessary technical information
to interoperate properly with Windows, and does not open up the critical
Original Equipment Manufacturer ("OEM") distribution channel to these
future competitors. Finally, the PFJ ignores the competitive threat to
Microsoft’s monopoly presented by server-based distributed applications, and
thus fails to address Microsoft’s practice of protecting its monopoly by
controlling proprietary interfaces and communications protocols."
ProComp's comment also states that "The proposed decree is riddled with
ambiguities and loopholes and grants unilateral, essentially unreviewable, power
to Microsoft to define the scope of its own ambiguous obligations. As such, the
PFJ is an illusory contract, and unenforceable as a matter of well settled
The comment argues that "divestiture remains the most effective remedy for
Microsoft’s wide ranging unlawful practices. Conduct remedies like the
proposed decree are a second best solution, because they rely on the defendants
good will to comply."
In conclusion, the ProComp recommends that "the Court must find that the
Proposed Final Judgment is not in the public interest. At a minimum, the Court
should defer any judgment on the PFJ until the upcoming remedies hearing in the
ongoing litigation is conducted. This is necessary to avoid inconsistent
ProComp's filing also included a 34 page affidavit signed by Kenneth Arrow, an
emeritus professor of economics at Stanford University. His Nobel prize winning
career is built upon his "Arrow's Theorem". See, Social
Choice and Individual Values, first published in 1951.
Arrow wrote in his affidavit that "As the D.C. Circuit found, Microsoft
violated Sec. 2 of the Sherman Act in impermissibly maintaining its monopoly
through actions designed to eliminate the threat to that monopoly posed in the
mid 1990s by competition from Netscape Navigator and Java middleware. Given that
finding, the remedies in this case should eliminate the benefits to Microsoft of
its illegal conduct; should restore, if possible, the possibility of competition
in operating systems; and should not allow Microsoft to protect its illegally
maintained monopoly from current and future competition in related markets, such
as server operating systems and Web services. In my opinion, the PFJ fails to
accomplish these objectives."
The ProComp comment lists as its authors the famous lawyers Robert Bork and
Kenneth Starr. It also lists Michael Pettit of ProComp and Kevin Arquit of the
law firm of Clifford Chance. Finally, its lists Glenn Manishin of the law firm of
Kelley Drye & Warren. See also, ProComp release.
Sen. Edwards Introduces Bills to Fight Cyber Jihad
1/28. Sen. John Edwards (D-NC)
introduced S 1900,
the Cyberterrorism Preparedness Act of 2002, and S 1901, the
Cybersecurity Research and Education Act of 2002. Sen. Edwards stated that
"we must be prepared to fight against a cyberjihad."
S 1900 would authorize the appropriation of $70 Million in FY 2003 for grants to
be administered by the National Institute of
Standards and Technology (NIST) "to support the development of
appropriate cybersecurity best practices, support long-term cybersecurity
research and development, and perform functions relating to such
activities." S 1901 would authorize appropriations for a cybersecurity
graduate fellowship program, and other educational programs.
Sen. Edwards spoke in the Senate in support of his bills. He stated that
"there is a dark side to the internet, a new set of dangers. Today, if you
ask an expert quietly, he or she will tell you that cyberspace is a very
vulnerable place. Terrorists could cause terrible harm. They might be able to
stop all traffic on the internet. Shut down power for entire cities for extended
periods. Disrupt our phones. Poison our water. Paralyze our emergency
services--police, firefighters, ambulances. The list goes on. We now live in a
world where a terrorist can do as much damage with a keyboard and a modem as
with a gun or a bomb."
He added that "cybercrime is already a billion dollar drain on our economy,
a drain growing larger each year."
He also said that The Cyberterrorism Preparedness Act will address the first
goal of cybersecurity -- making sure we're taking the steps we already know to
improve our security. The second bill I am introducing today -- the
Cybersecurity Research and Education Act -- focuses on our second task:
``training the trainers´´ and increasing the number of researchers, teachers,
and workers committed to cybersecurity."
ACT Submits Comments on Microsoft
1/28. The Association
for Competitive Technology (ACT) submitted a comment
[PDF] in support of the Proposed
Final Judgment (PFJ) filed with U.S. District Court (DC) in the case U.S.
v. Microsoft. It states that the PFJ "prevents
Microsoft from engaging in exclusionary or retaliatory tactics, as well as
foreclosing a number of more specific paths to unfair competition. However, it
is carefully crafted to ensure that Windows will remain available to consumers
as a reliable operating platform."
ACT also stated that "many of the Litigating States' proposals seem to have
been designed by Microsoft’s competitors. Indeed, the companies that will
benefit most from the Litigating States' efforts are the same ones that have led
the campaign to scuttle settlement efforts in this case and to impose
far-reaching restrictions on Microsoft: AOL Time Warner, Sun Microsystems,
Oracle, IBM, and Apple."
DOJ Recommends Approval of Verizon NJ 271 Application
1/28. The Antitrust Division of the
Department of Justice (DOJ) submitted its evaluation
[PDF] to the Federal Communications Commission
(FCC) recommending that it approve Verizon's
application to provide in region interLATA services in the state of New Jersey.
This is CC Docket No. 01-347. See, DOJ release.
The DOJ wrote that "The record in this
matter suggests that Verizon has succeeded in opening its local markets in New
Jersey to competition in most respects. Subject to the Commission satisfying
itself as to the pricing issues discussed below, the Department
recommends approval of Verizon’s application ..."
Verizon has already gained approval to provide long distance services in
Pennsylvania, Connecticut, Massachusetts, and New York. It also has applications
pending for the states of Rhode Island and Vermont. Sarah Deutsch, VP and
Associate General Counsel of Verizon, stated in a release
that "We are very pleased ..."
6th Cir Rules in H1B Case
1/28. The U.S.
Court of Appeals (6thCir) issued its opinion
v. Reno, an H1B visa case. Prakash Vaideeswaran received a
non-immigrant, temporary employee visa pursuant to 8 U.S.C. §
1101(a)(15)(H)(i)(b). That is, he held an H1B visa that enabled him to work for
a computer company. The Immigration and Naturalization Service (INS) denied a
request to extend this visa on the grounds that he had moved from Oregon to
Hawaii. The District Court upheld the INS decision. The Appeals Court ruled that
it lacked jurisdiction. It referred to 8 U.S.C. § 1252(a)(2)(B)(ii), which
provides that "no court shall have jurisdiction to review . . . (ii) any
other decision or action of the Attorney General the authority for which is
specified under this subchapter to be in the discretion of the Attorney General
1/28. Qwest announced that "it is
withdrawing its plans to share private customer account information among
different divisions in the company. Citing customer concerns, the company said a
decision on when and how it might share information within Qwest would be made
after the Federal Communications Commission
(FCC) has an opportunity to issue new rules, expected later this year."
People and Appointments
1/28. Jeffrey Sheldon joined the Washington DC office of the law firm of McDermott Will & Emery as a partner in the
firm's regulation and government affairs department. He will also be a member
the firm's telecommunications practice group, advising telecom clients regarding
legislative and regulatory matters. He was previously VP of Cogent Communications. Before that,
he was VP and General Counsel of United Telecom
Council. See, MWE release.
1/28. Ernest Kelly will retire as President of the Association of Communications Enterprises
(ASCENT) on April 30, 2002. His replacement has not been named. See, release.
1/26. President Bush stated in his regular Saturday radio
address that "My budget calls for the largest increase in defense
spending in the last 20 years, investing in more precision weapons, missile
defenses, unmanned vehicles, and high tech equipment for our soldiers on the
Go to News Briefs for January 21-25, 2002.