|News from March 6-10, 2002|
". The hearing also focused on HR 3130
and S 1549,
the "Technology Talent Act".
Go to News Briefs from March 1-5, 2002.
These companion bills would authorize the appropriation of $25 Million for Fiscal Year 2002, and such sums as necessary for the succeeding years, to create a competitive grant program at the National Science Foundation (NSF) to fund institutions to bring more students into science, mathematics, and engineering programs. Congress provided $5 Million in FY02 and $2 Million for FY03 for a pilot program.
See, prepared testimony of Carl Weiman (University of Colorado), Steven Johnson (Sinclair College), Kathleen Howard (Swarthmore), Narl Davidson (Georgia Tech), and Daniel Wubah (James Madison University).
1st Circuit Rules in Trademark Case
3/7. The U.S. Court of Appeals (1stCir) issued its opinion in Tamko Roofing Products v. Ideal Roofing Company, a trademark infringement dispute involving roofing products manufacturers. Plaintiff, Tamko, obtained an injunction and monetary relief in the District Court. Defendant, Ideal, appealed the award of attorneys fees, the award of damages based on its profits, and the permanent injunction. The Appeals Court affirmed in full.
7th Circuit Rules on Insurers' Duty to Defend Trademark Infringement Cases
3/7. The U.S. Court of Appeals (7thCir) issued its opinion in Platinum Technology v. Federal Insurance, a case involving an insurer's duty to defend. Platinum Technology sued Federal Insurance for failure to defend it in a trademark infringement suit with Platinum Software Corporation. Platinum Technology settled with Platinum Software, and then filed a complaint against Federal Insurance to recover the settlement amount. Platinum Technology prevailed in the District Court. The Appeals Court reversed.
Greenspan Addresses Economy and Technology
3/7. Federal Reserve Board Chairman Alan Greenspan delivered his semi annual report on monetary policy to the Senate Banking Committee. He stated that "The recent evidence increasingly suggests that an economic expansion is already well under way, although an array of influences unique to this business cycle seems likely to moderate its speed." See, prepared testimony.
Greenspan also restated several themes regarding the effects of technology and the technology sector on the economy. He stated that "The retrenchment in capital spending over the past year and a half 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, and that imbalance exerted significant downward pressure on prices and the profits of producers of high tech goods and services."
"New orders for equipment and software hesitated in the middle of 2000 and then fell abruptly as firms re-evaluated their capital investment programs. Uncertainty about economic prospects boosted risk premiums significantly, and this rise, in turn, propelled required, or hurdle, rates of return to markedly elevated levels. In most cases, businesses required that new investments pay off much more rapidly than they had previously. For much of last year, the resulting decline in investment outlays was fierce and unrelenting. Although the weakness was most pronounced in the technology area, reductions in capital outlays were broad based."
He added that "Inventories, especially among producers and purchasers of high tech products, did run to excess over the past year, as sales forecasts went badly astray; alas, technology has not allowed us to see into the future any more clearly than we could previously. But technology did facilitate the quick recognition of the weakening in sales and backup of inventories. This enabled producers to respond forcefully, as evidenced by output adjustments that have resulted in the extraordinary rate of inventory liquidation we experienced late last year."
House Subcommittee Approves Dot Kids Bill
3/7. The House Commerce Committee's Subcommittee on Telecommunications and the Internet approved HR 3833 [PDF] without amendment by a unanimous voice vote. The bill is titled the "Dot Kids Implementation and Efficiency Act of 2002". It is sponsored by Rep. John Shimkus (R-IL) and Rep. Ed Markey (D-MA).
This bill provides that "The NTIA shall require the registry selected to operate and maintain the United States country code Internet domain to establish, operate, and maintain a second level domain within the United States country code domain that provides access only to material that is suitable for minors and not harmful to minors".
An earlier version of the bill, HR 2417, would have required a "top-level, International domain". The Subcommittee held a hearing on HR 2417 on November 1, 2001. See, TLJ Daily E-Mail Alert No. 300, Nov. 2, 2001.
House Judiciary Committee Approves Class Action Fairness Act
3/7. The House Judiciary Committee amended and approved HR 2341, the Class Action Fairness Act of 2001, by a vote a 16 to 10. The bill is sponsored by Rep. Bob Goodlatte (R-VA), Rep. Rick Boucher (D-VA), and others. It may come up for a vote in the full House next week.
The bill would add new sections to Title 28 of the U.S. Code pertaining to procedures governing interstate class actions brought pursuant to Rule 23 of the Federal Rules of Civil Procedure to ensure that the class members are treated fairly in settlements. For example, if a settlement provides that the class members would receive non cash benefits, the court must make "a written finding that, the settlement is fair, reasonable, and adequate for class members". This provision is designed to limit the ability of class action lawyers to negotiate settlements that provide the lawyers with attorneys fees in cash, while leaving the class members with no cash recovery.
The bill would also amend 28 U.S.C. § 1332, regarding diversity of citizenship. It would provide federal jurisdiction in certain class actions where "any member of a class of plaintiffs is a citizen of a State different from any defendant" and the aggregated claims exceed $2 Million. However, it would also provide an exception when "the substantial majority of the members of the proposed plaintiff class and the primary defendants are citizens of the State in which the action was originally filed". This provision is designed to limit the ability of class action lawyers to bring suits in distant forums that are particularly friendly to the class action bar.
See also, March 7 policy statement released by the Republican House Policy Committee in support of the bill.
Bush Addresses Post Enron Corporate Responsibility
3/7. President Bush gave a speech in Washington DC on corporate responsibility. He stated that "To properly inform shareholders and the investing public we must adopt better standards of disclosure and accounting practices for all of corporate America." He then enumerated his recommendations, some of which would require either Congressional legislation, or Securities and Exchange Commission (SEC) rule making.
For example, he stated that "to further ensure that information is reliable, we will need reforms within the accounting profession. Auditors are a critical external check on management, and we must ensure that the integrity of their work is never compromised. Accounting is one of the most and one of the most respected professions in our country, and it can help protect its own integrity by developing and enforcing clear standards of conduct. The profession also needs an independent regulatory board to hold accounting firms to the highest ethical standards. And the SEC should exercise more effective and broad oversight of accounting standards. The SEC should also do more to guard against conflicts of interest, requiring, for example, that an external auditor not be permitted to provide internal audits to the same client."
Bush also stated that "It is important to provide sound regulation and remedies where needed, without inviting a rush of new lawsuits that exploit new problems instead of solving them." However, he did not specifically reference the Private Securities Litigation Reform Act (PSLRA) or the Securities Litigation Uniform Standards Act (SLUSA), or class action litigation generally, or any pending bills.
Technology companies may take comfort in the items not included in President Bush's list of recommendations. For example, he did not address proposed legislation that would affect the tax treatment of stock options. S 1940, sponsored by Sen. Carl Levin (D-MI), Sen. John McCain (R-AZ), and others, would provide that corporate tax benefits from stock option compensation expenses would be allowed only to the extent such expenses are included in a corporation's financial statements.
Registration of Copyright
3/7. The Copyright Office published a notice in the Federal Register announcing that it has amended its Rule 202.3, regarding registration of copyrights, without inviting public comment. The changes pertain only to registering a group of contributions to a periodical. See, Federal Register, March 7, 2002, Vol. 67, No. 45, at Pages 10329.
37 CFR § 202.3 remains obsolete for registering works written for, and published in, new media. It continues to reference print newspapers, textbooks, and other old media, but not the Internet, web sites, e-mail, and other new media.
3/7. The House passed HR 3090, the "Job Creation and Worker Assistance Act" by a vote of 417 to 3. See, Roll Call No. 52. The Senate will likely vote on the bill on Friday morning, March 8. The bill would extend regular 26 week jobless benefits by 13 weeks.
3/7. The General Accounting Office (GAO) released a report [75 pages in PDF] titled "Identity Theft: Prevalence and Cost Appear to be Growing".
3/7. World Trade Organization (WTO) Director General Mike Moore commented on President Bush's decision to impose a tariff on certain steel imports. He stated that "It is not appropriate for me to comment on issues or negotiate in public ... Our rules and good offices are always available. I have a policy of not commenting on individual disputes, no matter how large or small ... Of course, it is always preferable if issues are settled between Members. That applies to each and every matter of difference between Members". See, WTO release.
Senate Subcommittee Holds Hearing on EchoStar DirecTV Merger
3/6. The Senate Judiciary Committee's Subcommittee on Antitrust, Competition and Business and Consumer Rights held a hearing on the pending merger of Echostar and DirecTV.
The witness panel was stacked with opponents of the merger: Jay Nixon (Attorney General of the State of Missouri), Robert Pitofsky (a former Chairman of the Federal Trade Commission), Gene Kimmelman (Consumers Union), and Edward Fritts (National Association of Broadcasters). See, prepared testimony of Nixon, Pitofsky, Fritts, and Kimmelman.
However, the Subcommittee also heard from the heads of the two merging companies: Charles Ergen (Ch/CEO of Echstar) and Eddy Hartenstein (Ch/CEO of DirecTV). See, prepared testimony of Hartenstein and Ergen.
Much of the testimony of witnesses, statements of Senators, and question and answer session, focused on competition between direct broadcast satellite (DBS) service providers, and between DBS and cable service providers, in the provision of TV type programming. Opponents argued it would harm competition. Ergen and Hartenstein argued it would enhance competition. However, there was also some discussion of the merged entity's plans to provide broadband Internet access services.
Ergen focused on Internet access. He stated that "A very important benefit of the Echostar and Hughes merger is that it will eliminate the so-called ``digital divide´´ that exists in the ``wired´´ world today by making satellite delivered high speed Internet access a viable alternative for all Americans. Today, about 67 million households have access to DSL or cable modem service. These are the digital ``haves´´ who are located primarily in the major metropolitan areas. But in rural America today, there's what I like to call a ``no-opoly.´´ Nobody -- not the cable companies, not the phone companies -- is providing broadband service."
"Initially, the combined company will have the subscriber base and financial means to make our current satellite broadband offerings more affordable. But, we are committed to making next generation satellite broadband service a reality for customers everywhere in the United States by deploying a new generation of satellites utilizing Ka-band spectrum. We will offer a high speed Internet service that is not only price competitive with existing providers in urban and suburban settings, but also a tremendous benefit for rural consumers who have no broadband options."
Sen. Orrin Hatch (R-UT), the ranking Republican on the full Committee, expressed concern about broadband. He stated that "In addition to the traditional antitrust inquiry, I have some concerns about the operation of gatekeeper power over broadband internet services that might limit the options consumers have in accessing the information they want from the internet." See, Sen. Hatch's opening statement.
Sen. Hatch added that "I am concerned for the success of the DBS business as a competitive force for the benefit of television viewers, broadband internet subscribers, and creative content developers who need distribution choices to deliver their goods and services to consumers."
No member of the Subcommittee endorsed the merger. Sen. Sam Brownback (R-KS) stated that "the benefits of this merger, in my view, are murky." Sen. Arlen Specter (R-PA) stated that "it is hard to understand how competition would not be lessened" by this merger.
Sen. Herb Kohl (D-WI), the Chairman of the Subcommittee, stated that antitrust authorities, if they approve this merger, must issue a detailed consent decree that would impose a number of requirements on the merged entity (such as provisions pertaining to a uniform national pricing plan, delivery of local programming in all TV markets, must carry, and broadband deployment).
Sen. Mike DeWine (R-OH), the ranking Republican on the Subcommittee, stated that he is "keeping an open mind about this deal because, frankly, it does offer some tangible benefits." He further stated "The parties also argue that a combined satellite company would be able to offer a less expensive, more price competitive high speed Internet product. As the country continues to move toward greater use of broadband services, consumers certainly would be well serviced by an improved satellite option."
Sen. Wayne Allard (R-CO), who is not a member of the Committee, participated in the hearing, but only to provide a glowing introduction of Charles Ergen, whose company is based in Middleton, Colorado. See also, Sen. Leahy's prepared statement.
David Charles, Chairman of the National Alliance of Medical Researchers and Teaching Physicians, wrote a letter to Sen. Kohl on March 5 expressing support for the merger on the basis that satellite based high speed Internet services would facilitate telemedicine in rural areas.
6th Circuit Rules on Jurisdiction in Web Related Trademark Infringement Case
3/6. The U.S. Court of Appeals (6thCir) issued its opinion in Neogen v. Neo Gen, a trademark infringement case involving the issue of personal jurisdiction over an out of state defendant.
Background. Neogen is in the business of developing and marketing a health care, food, and animal related products and services, including diagnostic test kits. Neo Gen (also known as NGS) performs diagnostic testing of blood samples. Neo Gen both advertises and distributes test results through its web site. It is a a Pennsylvania corporation with its sole physical place of business in Pittsburgh.
District Court. Neogen filed a complaint in U.S. District Court (WDMich) against Neo Gen alleging trademark infringement, federal dilution and unfair competition, violation of the Michigan Consumer Protection Act, violation of the Michigan Pricing and Advertising Act, and unjust enrichment. The District Court dismissed for lack of personal jurisdiction over Neo Gen.
Appeals Court. The Appeals Court applied International Shoe, and reversed. It wrote that "Because NGS knew that it was doing business with Michigan customers, and performed part of its services in Michigan by mailing test results there and providing special passwords to Michigan customers, NGS could reasonably anticipate being haled into a court in Michigan. Neogen has therefore overcome NGS's due process challenge by establishing a prima facie case that the exercise of personal jurisdiction over NGS by a court in Michigan does not offend ``traditional notions of fair play and substantial justice.´´ " See, International Shoe v. Washington,
326 U.S. 310 (1945).
Senate Committee Holds Hearing on Communications Infrastructure
3/6. The Senate Commerce Committee's Communications Subcommittee held a hearing on the security, resiliency and reliability of the communications infrastructure in light of the terrorist attacks of September 11. The hearing focused on public safety communications.
Sen. Daniel Inouye (D-HI), the Chairman of the Subcommittee, presided. He stated that "we must continue to explore ways to improve the resiliency and reliability of our communications infrastructure. Moreover, because reliable communications are critical to the success of emergency personnel, our efforts should also include a consideration of ways in which new technological tools -- such as location information, peer to peer communications, reverse messaging, and broadband applications -- can be utilized by emergency personnel in order to help save lives."
Agostino Cangemi, of the Department of Information Technology and Telecommunications of the City of New York, testified. He stated that New York City (NYC) is mapping the location, and identifying the ownership, of all broadband fiber in NYC. His office is coordinating with businesses to facilitate their obtaining redundant and resilient communications systems. He stated that NYC is also developing a redundant fiber conduit for its own facilities. He also stated that NYC is allowing property owned by the city to be used for telecom facilities, such as wireless service antennas, to improve coverage.
Steve Souder, of Montgomery County, Maryland, stated that communications between first responders on September 11 functioned well. He elaborated that this was a result on long term planning following an incident on January 13, 1982, when a jet crashed on take off from Reagan National Airport into the Potomac River in downtown Washington DC. First responders, which then operated with radios on divergent portions of the radio spectrum, could not communicate effectively. All but five people on the flight died.
As a result, the FCC allocated the 800 MHz band for public safety personnel. This, said Souder, enabled the first responders on September 11, 2001 to communicate effectively. However, Souder continued that public safety personnel have also become dependent on cellular networks to communicate with other government and private sector entities. These cellular networks gridlocked in New York on September 11. He stated that this needs to be addressed. He also said that public safety authorities need more spectrum.
Sen. Conrad Burns (R-MT), the ranking Republican on the Subcommittee, questioned witnesses about their need for more spectrum. Souder responded that the FCC has allocated spectrum to be vacated by TV broadcasters as they transition to digital television, but that this is not scheduled to become available until 2006. Souder stated that the additional spectrum is needed now.
Sen. Ron Wyden (D-OR) stated that "I am going to be introducing legislation very shortly that is the technology equivalent of the national guard". He further explained that private companies, such as Intel, are interested in providing equipment and personnel. He also questioned witnesses about this. He asked if it would be useful to have a pre existing database listing private sector resources that public safety could call upon in a disaster. Cangemi said that "it would be extraordinarily helpful". Sen. Wyden also advocated the creation of a "strategic technology reserve" containing technology equipment, analogous to the "strategic petroleum reserve". Both Cangemi and Souder praised the concept.
FTC Completes HP Compaq Review
3/6. The Federal Trade Commission (FTC) announced that it has closed its investigation of the proposed merger of Hewlett Packard (HP) and Compaq without taking action. See, FTC release.
The FTC wrote to the parties: "The Commission has conducted an investigation of possible violations of Section 5 of the Federal Trade Commission Act and Section 7 of the Clayton Act by the consummation of a proposed merger of Hewlett Packard Company and Compaq Computer Corporation. Upon further review of this matter, it now appears that no further action is warranted by the Commission at this time. Accordingly, the investigation has been closed." See, for example, letter to HP.
HP Ch/CEO Carly Fiorina stated in a release that "We are gratified by the FTC's decision. It validates our conviction from the outset that the merger can only enhance competition throughout our markets ... Completion of the FTC review marks a major milestone in the approval process, and we are now focused on winning the shareowner vote."
FTC Files Complaint Against Palm for False Advertising
3/6. The Federal Trade Commission (FTC) brought and settled an administrative action against Palm for inaccurate advertising claims regarding its PDAs. See, FTC release.
The FTC filed an administrative complaint [PDF] against Palm alleging violation Section 5(a) of the Federal Trade Commission Act, 15 U.S.C. § 45, in connection with claims in advertising and packaging that Palm's hand held computers, or personal data assistants (PDAs), come with built-in wireless access to the Internet and e-mail.
The complaint alleges that Palm "has represented, expressly or by implication, that ... Palm PDAs, as sold, contain everything that consumers need to access the Internet and their email accounts, wirelessly."
The complaint continues: "In truth and in fact ... Palm PDAs, as sold, other than the Palm VII model line, do not contain everything that consumers need to access the Internet and their email accounts, wirelessly. In order to wirelessly access the Internet and their email accounts using the Palm m100, Palm III, or Palm V model lines, consumers must purchase and carry a separate wireless modem or a device to connect the Palm to certain mobile telephones."
The complaint further alleges that Palm made similarly false claims that "Palm PDAs, as sold, can perform common business functions such as data base management, custom form creation, and viewing Microsoft Word and Excel documents."
The FTC and Palm simultaneously entered into an Agreement Containing Consent Order settling the matter. Without admitting wrongdoing, Palm agreed, for example, that it would not misrepresent that its PDAs are "able to perform any common business function that it cannot perform without additional products or services that consumers must purchase".
The FTC imposed no fine. The Commission voted 5 to 0 to approve the agreement. The agreement becomes final after a 30 day public comment period. See also, Exhibits A-E [7 MB in PDF], and the FTC's Analysis of Proposed Consent Order to Aid Public Comment.
WCT and WPPT Treaties Enter into Force
3/6. The World Intellectual Property Organization (WIPO) released a statement regarding the WIPO Copyright Treaty (WCT) and the WIPO Performances and Phonograms Treaty (WPPT). The WCT and WPPT, which pertain to protecting copyrights in cyberspace, were negotiated in 1996. They each become effective three months after ratification by 30 nations. Gabon became the 30th country to join the WCT last December. Honduras became the 30th state to join the WPPT on February 20, 2002. Hence, the WCT entered into force on March 6, and the WPPT will enter into force on May 20, 2002.
WIPO Director General Kamil Idris stated that "While we have reached the key number of 30 countries required for entry into force, I urge all other countries to follow suit and to incorporate the provisions of the WCT and WPPT into their national legislation. This will create the conditions necessary for the broad-based and legitimate distribution of creative works and recordings on the Internet".
Bush Defends Appeals Court Nominees
3/6. President Bush met with Judge Charles Pickering at the White House. Bush has nominated him to be a judge of the U.S. Court of Appeals (5thCir). Some Democrats oppose his confirmation. Pickering has been a judge for the U.S. District Court (SDMiss) since 1990. Bush stated at a photo opportunity that "I nominated a very good man from Mississippi named Charles Pickering to the appellate bench, and I expect him to be confirmed by the United States Senate. I think the country is tired of people playing politics all the time in Washington. And I believe that they're holding this man's nomination up for political purposes. It's not fair, and it's not right." See, transcript.
3/6. President Bush gave a speech to the Hispanic Chamber of Commerce in Washington DC at which he introduced and defended Miguel Estrada. Estrada is a partner in the Washington DC office of the law firm of Gibson Dunn & Crutcher. President Bush stated, "I want to recognize Miguel Estrada. Miguel. Miguel is a really bright attorney who I've named to the U.S. -- nominated to the U.S. Court of Appeals, D.C. Circuit. They're playing too much politics in the United States Senate on our judge nominees. This man deserves a hearing and he deserves a vote. This is a good, solid jurist who ought to be on that bench. And I'm calling on the United States Senate to move quickly on Miguel's nomination, so that we can have a good, young Latino; smart, brilliant man represent our nation." See, transcript. See also, Estrada's GDC bio.
People and Appointments
3/6. Monica Desai, Legal Advisor to Federal Communications Commission (FCC) Commissioner Kevin Martin for wireless and international matters, is leaving his office to join the Common Carrier Bureau's Competitive Pricing Division. An FCC release states that she seeks "a flexible work schedule, which will enable her to spend more time with her family". Samuel Feder, who has been Commissioner Martin's Legal Advisor for common carrier matters, will assume responsibility for wireless and international issues. Daniel Gonzalez joined the office as Legal Advisor for common carrier matters. Gonzalez was previously Vice President, External and Regulatory Affairs, for XO Communications. Before that, he was Legal Advisor to former FCC Commissioner Rachelle Chong for common carrier matters.
3/6. Henry Sténson was named Senior Vice President, Corporate Communications, at Ericsson. He will begin during the summer of 2002. He will replace Roland Klein, who is leaving Ericsson. See, Ericsson release.
3/6. Jonathan Lamy was named Director of Communications at the Recording Industry Association of America (RIAA). He replaces Jano Cabrera left to become Communications Director for former Vice President Al Gore's political action committee, Leadership '02. Lamy previously worked in media relations for Sen. Patrick Leahy (D-VT), the current Chairman of the Senate Judiciary Committee, and Rep. Marty Meehan (D-MA), a member of the House Judiciary Committee. The Judiciary Committees have jurisdiction over intellectual property matters.
3/6. The House Commerce Committee's Subcommittee on Telecommunications and the Internet postponed its meeting to mark up HR 3833 [PDF], the "Dot Kids Implementation and Efficiency Act of 2002", to Thursday, March 7. The bill would provide that "The NTIA shall require the registry selected to operate and maintain the United States country code Internet domain to establish, operate, and maintain a second level domain within the United States country code domain that provides access only to material that is suitable for minors and not harmful to minors". The original version of the bill, HR 2417, would have required a top level international domain. The Subcommittee held a hearing on HR 2417 on November 1, 2001. See, TLJ Daily E-Mail Alert No. 300, Nov. 2, 2001.
3/6. The Federal Trade Commission (FTC) published notice in the Federal Register that it will host a two day public workshop on May 16 and 17 to explore issues relating to the security of consumers' computers and the personal information stored in them or in company databases. Requests to participate as a panelist in the workshop must be filed on or before April 1, 2002. See, Federal Register, March 6, 2002, Vol. 67, No. 44, at Pages 10213 - 10215.
3/6. U.S. Trade Representative (USTR) Robert Zoellick met with the Singapore Minister for Trade George Yeo to discuss the status of negotiations on the U.S. Singapore Free Trade Agreement (FTA). Zoellick stated in a release that "The United States and Singapore are making excellent progress in our negotiations for a Free Trade Agreement ... This will be a concrete sign of America's economic and political commitment to Singapore, Southeast Asia, and free trade."
3/6. The General Accounting Office (GAO) released a report [PDF] titled "Information Security: Additional Actions Needed to Fully Implement Reform Legislation". The report addresses "efforts by the federal government to implement provisions for Government Information Security Reform ... that were enacted as part of the National Defense Authorization Act for Fiscal Year 2001." This report was written by Robert Dacey, Director of Information Security Issues at the GAO, to submit as prepared testimony to House Government Reform Committee's Subcommittee on Government Efficiency, Financial Management and Intergovernmental Relations.
Go to News Briefs from March 1-5, 2002.