News from March 6-10, 2002
Stimulus Bill Signed Into Law
3/8. The Senate passed HR 3090, by a vote of 85-9. See, Roll Call No. 44. The House passed the bill on March 7; the Senate agreed to the House version; and President Bush signed the bill on March 9. See also, President Bush's remarks at the signing ceremony.
This bill is now titled the "Job Creation and Worker Assistance Act of 2002". It previously went by the name of the "Economic Security and Recovery Act of 2001". The bill will, among other things, extend jobless benefits by another 13 weeks. However, much of the bill relates to reductions of taxes on businesses, such as an acceleration of depreciation, and increased expensing.
Walter McCormick, P/CEO of the U.S. Telecom Association, stated in a release that the bill "will have a positive influence on the struggling telecommunications industry by encouraging new investments and creating more jobs for telecom workers. The legislation includes a key provision to allow for 30 percent accelerated depreciation on equipment purchases."
Sun Sues Microsoft
3/8. Sun Microsystems filed a complaint [7MB in PDF] in U.S. District Court (NDCal) against Microsoft alleging violation of federal and California antitrust laws, and copyright infringement. Sun also filed a Motion for Preliminary Injunction [3MB in PDF]. Sun recently settled a 1997 lawsuit against Microsoft. The 76 page complaint seeks a crippling set of regulations of Microsoft's software design and licensing practices, as well as treble damages.
The suit, which is built upon the opinion [125 pages in PDF] of the U.S. Court of Appeals (DCCir) in U.S. v. Microsoft, 253 F.3d 34, alleges that Microsoft illegally maintained monopoly power over the market for Intel compatible PC operating systems by engaging in anticompetitive acts that impeded the distribution and/or use of Sun's Java.
Alleged Violations. The complaint alleges illegal maintenance of an Intel compatible PC operating system monopoly in violation of § 2 of the Sherman Act, illegal monopolization of a web browser market in violation of § 2 of the Sherman Act, unlawful tying of MSIE to Windows operating systems in violation of § 1 of the Sherman Act, attempted monopolization of a workgroup server operating system market in violation of § 2 of the Sherman Act, unlawful tying of Windows server operating system to Windows PC operating systems in violation of § 1 of the Sherman Act, unlawful tying of IIS web server software to Windows workgroup server operating systems in violation of § 1 of the Sherman Act, unlawful tying of the .NET framework to Windows PC and workgroup server operating systems in violation of § 1 of the Sherman Act, exclusive dealing in violation of § 1 of the Sherman Act, and illegal monopolization of the Office suite in violation of § 2 of the Sherman Act.
The complaint also alleges two violations of California state law: the California Cartwright Act, and unfair competition.
Finally, the complaint alleges copyright infringement. Sun alleges that Microsoft has distributed an unlicensed implementation of the Java Runtime Environment.
Relief Requested. Sun seeks declaratory, injunctive, and monetary relief. It seeks an injunction against distribution of any Microsoft Windows PC operating system, or the .NET Framework, "unless Microsoft distributes the most current, unmodified binary implementation of the Java Runtime Environment for Windows provided by Sun to Microsoft, and ensures it is installed and enabled as the default Java Runtime Environment for any and all configurations of such products ..."
Sun also seeks to compel Microsoft to disclose to the public the source code for any Microsoft browser product, including a "complete specification of all interfaces and protocols between such browser product and any Microsoft operating system or middleware product"; Sun also seeks to compel Microsoft to give free licenses to "use and distribute products implementing or derived from Microsoft's source code ..."
Sun also seeks an injunction against bundling IIS with any Windows server OS.
Sun seeks an injunction against "distributing any Microsoft product that subsets or supersets any published standard or protocol approved by and available for non-discriminatory license through an independent, internationally recognized industry standards organization".
Sun also seeks to compel Microsoft to publicly disclose and license for free "all interfaces, protocols, and technical information that Microsoft employs to enable Microsoft's PC operating system to interoperate effectively with applications and/or platform software (e.g. workgroup server operating systems, middleware, etc.) installed on that or any other device, including (without limitation) any PC, server, telephone, personal digital assistant or set-top box".
Finally, Sun seeks an injunction against "distributing Microsoft's Virtual Machine for Java unless it is shipped as an integrated component" and in Sun's version.
AOL Time Warner also filed, in January, a complaint against Microsoft alleging violation of antitrust law.
The lawsuit was filed in San Jose, California. Sun demanded a jury. Sun's attorneys of record are Day Casebeer, Brobeck Phleger, and Clifford Chance. Lead counsel is Lloyd Day. See also, Sun release.
DC Circuit Rules in Copyright Case
3/8. The U.S. Court of Appeals (DCCir) issued its opinion in Sturdza v. United Arab Emirates, a case involving alleged copyright infringement, and other claims.
This is a dispute between architects over a design for a new embassy for the United Arab Emirates (UAE). Elena Sturdza filed a complaint in U.S. District Court (DC) against the UAE and Angelos Demetriou, another architect, alleging copyright infringement in connection with the alleged theft of her design for the UAE's new embassy. The District Court granted summary judgment to the defendant's, based on its conclusion that no jury could find Demetriou's design "substantially similar" to Sturdza's.
The Appeals Court reversed. It concluded that "Demetriou's design, though different in some ways from Sturdza's (as the district court thought), is sufficiently similar with respect to both individual elements and overall look and feel for a reasonable jury to conclude that the two are substantially similar." (Parentheses in original.)
The Appeals Court also addressed the use of expert witnesses in copyright cases. Sturdza had sought to introduce such testimony on the issue of substantial similarity.
The Appeals Court noted that "Until recently, expert evidence was permitted only to help juries determine ``whether ... the alleged infringer used the copyrighted work in making his own´´ (actual copying), not to determine ``whether ... the copying was ... an unlawful appropriation´´ (substantial similarity)", citing Whelan Assocs. v. Jaslow Dental Lab., 797 F.2d 1222 at 1232 (3d Cir. 1986).
The Appeals Court noted, however, that "A growing number of courts now permit expert testimony regarding substantial similarity in cases involving computer programs, reasoning that such testimony is needed due to the ``complexity and unfamiliarity [of computer programs] to most members of the public", citing Whelan and Computer Associates v. Altai, 982 F.2d 693, at 713-14 (2d Cir. 1992).
Also, the Court wrote that "Neither we nor any other circuit, however, has considered whether expert evidence is admissible to show substantial similarity of architectural works, nor has any circuit other than the Fourth approved the use of such evidence outside the computer program context." In the end, the Appeals Court left the matter to be resolved by the District Court on remand.
FTC Sues Information Brokers for Pretexting
3/8. The Federal Trade Commission (FTC) announced that it filed three civil complaints in U.S. District Courts against information brokers alleging violation of the Federal Trade Commission Act and the Gramm Leach Bliley Act in connection with the practice of pretexting, or obtaining confidential financial information under false pretexts. The FTC also announced that it settled the three lawsuits.
See, for example, complaint [PDF] and stipulated final judgment [PDF] in FTC v. Information Search, Inc. This complaint alleges that "To obtain customer information, defendants use, or cause others to use, false pretenses, fraudulent statements, fraudulent or stolen documents or other misrepresentations, including posing as a customer of a financial institution, to induce officers, employees, or agents of financial institutions (and persons defendants believe to be such officers, employees, or agents) to disclose customer information."
The complaint further alleges that defendants advertised and sold their services on the web. Under the terms of the settlement, defendants will cease their practice of pretexting, and not disclose information acquired by pretexting.
Howard Beales, Director of the FTC's Bureau of Consumer Protection, stated in a release that "The clients of pretexters are often law firms and other businesses. These buyers should beware because knowingly obtaining pretexted information is illegal as well."
FCC to Address Classification of Cable Internet Access
3/8. The Federal Communications Commission (FCC) announced the agenda for its Thursday, March 14, meeting. It includes consideration of a Declaratory Ruling and Notice of Proposed Rulemaking (NPRM) addressing the legal classification and the appropriate regulatory framework for broadband access to the Internet over cable system facilities. This is GN Docket No. 00-185.
The agenda also includes consideration of a Report and Order concerning streamlined procedures for transfer of control applications by domestic telecommunications carriers pursuant to § 214 of the Communications Act of 1934 (CC Docket No. 01-150), and consideration of an Order and NPRM concerning charges for changing end users' presubscribed interexchange carriers (CCB/CPD File No. 01-12 and RM No. 10131).
Finally, the agenda includes consideration of a NPRM concerning mitigation of orbital debris by satellite systems, and consideration of a NPRM inviting comments on how best to remedy interference to 800 MHz band public safety systems. See, FCC notice.
FCC to Require Truth and Accuracy
3/8. The Federal Communications Commission (FCC) published a notice in the Federal Register in which it stated that it has initiated a rule making proceeding to revise Section 1.17 of its rules, pertaining to making truthful statements to the FCC. The notice states that the FCC proposes to revise the rule to "(1) To provide that the rule prohibits incorrect statements or omissions that are the result of an intent to deceive or negligence; (2) to make clearer that the rule covers statements made to the Commission in all contexts; (3) to include oral statements and not just written statements; and (4) to include all persons making statements to the Commission (e.g., including non-regulatees)."
The ruled would be amended to read as follows: "Sec. 1.17 Truthful and accurate statements to the Commission. (a) The Commission or its representatives may, in writing, require written statements of fact relevant to the determination of any matter within the jurisdiction of the Commission. (b) No person shall, in any written or oral statement of fact submitted to the Commission, intentionally or negligently provide incorrect material information or intentionally or negligently omit any material information bearing on any matter within the jurisdiction of the Commission." See, Federal Register, March 8, 2002, Vol. 67, No. 46, at Pages 10658 - 10659.
People and Appointments
3/8. Sen. Fred Thompson (R-TN) announced that he will not seek re-election to the Senate.
3/8. Deborah Klein was named Chief of Staff of the newly created Media Bureau at the Federal Communications Commission (FCC). She was previously Chief of the Consumer Protection and Competition Division of the Cable Services Bureau. Before that, she was an attorney at the Federal Trade Commission's (FTC) Bureau of Competition, where she worked on antitrust investigations and litigation. See, FCC release. (The FCC's new Media Bureau will handle the policy and licensing programs relating to electronic media, including cable TV, broadcast TV and radio in the U.S. and its territories. It will also handle post licensing matters regarding Direct Broadcast Satellite (DBS) service. The FCC's reorganization plan takes effect on March 25. See, FCC release.)
3/8. Richard Engelman was named Chief Engineer, and Jacquelynn Ruff was named Assistant Bureau Chief, of the Federal Communications Commission's (FCC) International Bureau. Engelman has been with the FCC for 25 years. Ruff has been with the FCC since 1999. She previously worked for the law firm of Wilmer Cutler & Pickering.
More News
3/8. The Securities and Exchange Commission (SEC) announced that it filed a civil complaint in the U.S. District Court (MDLa) against Harral Dunbar, individually and dba Ghost International, an Internet web site operation. The complaint alleges violation of federal securities laws in connection with the fraudulent sale of securities over the Internet. The District Court entered a temporary restraining order on March 4 freezing defendants' assets. This is D.C. No. 02-233-B-M1. See, SEC release.
3/8. The Federal Communications Commission (FCC) issued a notice regarding the status of unprocessed mail. It stated that "The Commission possesses a large volume of unprocessed mail received from USPS during late January 2002, as well as an additional quantity received in late October and early November 2001 following the discovery of anthrax contamination on Capitol Hill and at certain USPS mail processing facilities. All of this mail has been commercially cleansed and is now being processed for delivery within the Commission. We expect the processing and delivery of all backlogged mail to be completed by March 29, 2002."
NTIA Urges FCC to Permit Limited Secondary Markets for Spectrum
3/7. The National Telecommunications and Information Administration (NTIA) submitted a comment to the Federal Communications Commission (FCC) in its long running rule making proceeding regarding taking tentative steps towards creating secondary markets for spectrum. The NTIA submitted its comment in the form of a letter from NTIA Director Nancy Victory to FCC Chairman Michael Powell. She urged the FCC "to move expeditiously to permit leasing and eliminate other barriers to the development of secondary markets for spectrum".
The FCC announced its Notice of Proposed Rule Making [61 pages in PDF] at its open meeting of November 9, 2000. Victory also urged the FCC to "act promptly".
This proceeding is titled "In the Matter of Promoting Efficient Use of Spectrum Through Elimination of Barriers to the Development of Secondary Markets". It is WT Docket No. 00-230. See also, TLJ story titled FCC Discusses Secondary Markets for Wireless Spectrum, and TLJ news analysis titled Mobile Internet Access Devices and the Internet, both dated November 10, 2000. See also, DOC release of March 7, 2002.
Victory wrote that "Leasing and other secondary market activities promise to increase spectrum efficiency by allowing radio frequencies to be used in ways that more closely follow changing demand. Private sector leasing arrangements would not only provide opportunities and incentives for licensees to ensure full use of their spectrum, but also would address changes or spikes in spectrum demand faster and more effectively than the government licensing process."
She stated further that the FCC "should not attempt to regulate or micromanage the leasing process or require secondary user registration or secondary filings."
However, she stated that the FCC "should initially limit secondary arrangements to spectrum allocated on an exclusive basis for wireless radio services".
She also offered several terms and conditions that should apply to secondary arrangements. She wrote that "In any leasing or secondary market relationship, the licensee must remain ultimately responsible for adhering to the obligations of its license". She also wrote that "a lessee should have no greater rights to use the spectrum than does the licensee". Moreover, spectrum aggregation limits should also be applied to spectrum used under secondary arrangements. Finally, she wrote that "Other rules that restrict the types of entities that can use particular spectrum or the uses that can be provided in a set of frequencies should apply to secondary market arrangements".
Amazon and Barnes & Noble Settle Patent Case
3/7. Online booksellers Amazon.com and Barnesandnoble.com (BN) settled a patent infringement and validity case pending in the U.S. District Court (WDWash). Company representatives stated only that there is a settlement, and that its terms are confidential.
At issue was Amazon's U.S. Patent No. 5,960,411, which was issued on September 28, 1999. It is also sometimes referred to as the "one click" method and system for placing an order to purchase an item via the Internet.
Amazon filed its complaint in District Court on October 21, 1999, against BN alleging patent infringement, and seeking a preliminary injunction. Amazon alleged that BN's "Express Lane" ordering system infringes its 411 patent. BN, in turn, challenged the validity of the 411 patent. The District Court issued a preliminary injunction, and BN appealed that order.
On February 14, 2001, the U.S. Court of Appeals (FedCir) issued its opinion in Amazon v. Barnesandnoble, 239 F.3d 1343. The Court of Appeals found that Amazon carried its burden with respect to demonstrating the likelihood of success on the issue of infringement, but that BN raised substantial questions as to the validity of the 411 patent. It found that the District Court committed error by misreading the factual content of the prior art references, and by failing to recognize that BN had raised a substantial question of invalidity of the asserted claims in view of these prior art references. However, the Court hastened to add, "this conclusion only undermines the prerequisite for entry of a preliminary injunction. Our decision today on the validity issue in no way resolves the ultimate question of invalidity." Hence, the Appeals Court reversed and remanded to the District Court.
Amazon's 411 patent is frequently cited as an example by proponents of legislative reform in the area of business method patents.
Rep. Howard Berman (D-CA) and Rep. Rick Boucher (D-VA) have introduced bills in this, and the previous, Congress that would make several changes to the business method patent process. See, HR 1332, the Business Method Patent Improvement Act of 2001. See also, HR 5364 (106th Congress), and TLJ story, Bill Would Change Business Method Patent Process, October 3, 2000.
More recently, on February 20, the European Commission released a proposal for a Directive on patents of computer implemented inventions. See, document titled "Patents: Commission proposes rules for inventions using software" and document titled "Proposal for a Directive on the patentability of computer implemented inventions -- frequently asked questions".
The proposal states that inventions "whose operation involves the use of a computer program and which make a ``technical contribution´´ -- in other words which contribute to the ``state of the art´´ in the technical field concerned -- would be eligible for patents. Computer programs as such would not be eligible for a patent under the proposal. Nor would business methods that employ existing technological ideas and apply them to, for example, e-commerce. These would continue where appropriate to be covered by copyright law or the law of confidentiality."
House Committee Holds Hearing on Math Science & Engineering Grants
3/7. The House Science Committee's Subcommittee on Research held a hearing titled "Meeting the Demands of the Knowledge Based Economy: Strengthening Undergraduate Science, Mathematics and Engineering Education". The hearing also focused on HR 3130 and S 1549, the "Technology Talent Act".
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.
More News
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.
More News
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.