|News from April 1-5,
Overture Files Patent Infringement Suit Against Google
4/5. Overture filed a complaint in U.S.
District Court (CDCal) against Google
alleging infringement of its U.S.
Patent No. 6,269,361. This 361 patent is titled "System and method for
influencing a position on a search result list generated by a computer network
Overture, which was formerly known as GoTo.com, operates an Internet search
engine which allows advertisers to bid for placement in search results. It wrote
in its 2001 10-K report to the Securities and Exchange Commission, that
"Overture operates an online marketplace that introduces consumers and
businesses who search the Internet to advertisers that provide products,
services and information. Advertisers participating in our marketplace include
retail merchants, wholesale and service businesses and manufacturers. Overture
facilitates these introductions through our search service, which enables
advertisers to bid in an ongoing auction for priority placement in our search
results after editorial approval. Priority placement means that the search
results appear on the page ranked in descending order of bid price, with the
highest bidder's listing appearing first. Each advertiser pays Overture the
amount of its bid whenever a consumer or business clicks on the advertiser's
listing in our search results."
1st Circuit Rules in Cellular Roaming Dispute
4/5. The U.S.
Court of Appeals (1stCir) issued its opinion
v. Sprint, a dispute pertaining to a wireless communications
roaming agreement. The Appeals Court reversed a District Court preliminary
injunction against Sprint.
Background. Sprint is a large telecommunications carrier with wireless
customers throughout the United States. Movistar is a small local carrier with
approximately 190,000 customers in Puerto Rico. Sprint and Movistar signed the
roaming agreement in 1999. Movistar had little understanding of Signal IDs (SIDs)
and Preferred Roaming List (PRLs), which are essential to the operation of
wireless networks. The PRL is a computer program installed in the subscriber's
handset so that the handset will search for known SIDs in rank order and connect
to the first available signal. Movistar relied upon Sprint and its handset
manufacturer to write and install the PRL.
In short, Sprint wrote a PRL for Movistar which included Sprint's Virgin Islands
SID (5142) in the Puerto Rico basic trading area (BTA). When Sprint subsequently
initiated service in Puerto Rico, using the 5142 SID, this caused many Movistar
subscribers, when calling within Puerto Rico, to roam onto the Sprint network,
and incur higher charges.
District Court. Movistar filed a complaint in U.S.
District Court (DPR) against Sprint alleging tortious interference with the
contractual relationship between Movistar and its subscribers, and violation of
a good faith covenant contained in the roaming agreement. Federal jurisdiction
is based upon diversity of citizenship. The applicable law is that of Puerto
Rico. The District Court issued a preliminary injunction against Sprint barring
it from broadcasting the 5142 SID in Puerto Rico.
Appeals Court. The Appeals Court reversed, on the basis that Movistar had
not demonstrated a likelihood of success on the merits. However, it added that
"Movistar may ultimately succeed on some or all of its claims once the
evidence is fully developed".
GAO Reports on XML Use by Government
4/5. The General Accounting Office (GAO)
released a report [73
pages in PDF] titled "Electronic Government: Challenges to Effective
Adoption of the Extensible Markup Language".
The Extensible Markup Language (XML) is described in the report as "a
flexible, nonproprietary set of standards for annotating or ``tagging´´
information so that it can be transmitted over a network such as the Internet
and readily interpreted by disparate computer systems."
The report states that "While XML's technical standards -- such as
specifications for tagging, exchanging, and displaying information -- have
largely been worked out by commercial standards setting organizations and are
already in use, equally important business standards are not as mature and may
complicate nearterm implementation. For example, standards are not yet complete
for (1) identifying potential business partners for transactions, (2) exchanging
precise technical information about the nature of proposed transactions so that
the partners can agree to them, and (3) executing agreed upon transactions in a
formal, legally binding manner. Many standards setting organizations in the
private sector are creating various XML business standards, and it will be
important for the federal government to adopt those that achieve widespread
acceptance. However, it is not yet clear which business standards meet this
The report further finds that "No explicit governmentwide strategy for XML
adoption has been defined to guide agency implementation efforts and ensure that
agency enterprise architectures address incorporation of XML" and that the
"needs of federal agencies have not been uniformly identified and
consolidated so that they can be represented effectively before key standards
setting bodies." Also, the report finds that the "government has not
yet established a registry of government unique XML data structures (such as
data element tags and associated data definitions) that system developers can
consult when building or modifying XML based systems."
The report recommends that "Given the statutory responsibility of OMB to develop and oversee
governmentwide policies and guidelines for agency IT management, we recommend
that the director of OMB, working in concert with the federal CIO Council and NIST, develop a strategy for governmentwide
adoption of XML to guide agency implementation efforts and ensure that the
technology is addressed in agency enterprise architectures."
The report further recommends that this strategy should develop "a process
with defined roles, responsibilities, and accountability for identifying and
coordinating government unique requirements and presenting consolidated, focused
input to private sector standards setting bodies during the development of XML
standards." The report also recommends that the strategy should develop
"a project plan for transitioning the CIO Council's pilot XML registry
effort into an operational governmentwide resource." Finally, the report
recommends that this strategy should develop "policies and guidelines for
managing and participating in the governmentwide XML registry, once it is
operational, to ensure its effectiveness in promoting data sharing capabilities
among federal agencies."
Sen. Joe Lieberman (D-CT), Chairman
of the Senate Governmental Affairs
Committee, requested the report. David McClure, the GAO's Director of
Information Technology Management Issues, wrote the report. See, also, the World Wide Web Consortium's (W3C) XML web page.
People and Appointments
4/5. Federal Communications Commission (FCC)
Chairman Michael Powell
designated FCC Commissioner Kevin Martin to be
chairman of the of the Federal
State Joint Conference on Advanced Telecommunications Services. See, FCC
4/5. The law firm of Hunton & Williams
elected 15 attorneys to partnership, including Emerson Briggs, Doug Heffner,
Derek Johnston, and John Martin. Emerson
Briggs works in the Washington DC office, where he focuses patent and
trademark litigation at the administrative, trial and appellate levels; he also
works on the protection, enforcement and licensing of e-commerce and Internet
patents, trademarks and copyrights. Doug Heffner
also works in the Washington DC office, where he focuses on international trade.
Johnston works in the Atlanta office, where he focuses the development
and commercialization of products and services in the computer, software,
hardware, Internet, e-commerce and information technologies industries. John
Martin works in the Richmond office, where he focuses on trial and
appellate litigation, with an emphasis on antitrust, intellectual property and
unfair competition. See, HW
4/5. The Recording Industry Association of
America (RIAA) stated that "its physical anti-piracy efforts in 2001
led to a record number of arrests, raids, illegal product seizures, guilty pleas
and convictions." It stated that in 2001 more than 230 distribution
operations were raided, up from approximately 100 in 2000. Similarly, it stated
that more than 145 manufacturing operations were raided, up from approximately
50 in 2000. It also stated that number of search warrants issued was up 74%.
See, RIAA release.
4/5. The Treasury Department extended the
deadline for submitting comments regarding its study of information sharing
practices among financial institutions and their affiliates, to May 1, 2002.
in Federal Register, April 5, 2002, Vol. 67, No. 66, at Page 16488.
4/5. Ed Black, P/CEO of the Computer &
Communications Industry Association (CCIA), criticized the U.S. Postal Service's ongoing e-commerce
activities at a press conference in Washington DC. He stated that "the
rapid growth of e-commerce has enticed Federal and State governments to view the
Internet and e-commerce as a new platform for government provided products and
services the directly compete against the private sector. CCIA cannot
countenance the government as a competitor in nascent or even thriving private
sector commercial markets." The other participants included Leslie Paige (CAGW),
Rick Merritt (PostalWatch), Pete Sepp (National Taxpayers Union), Rob Fike
(Americans for Tax Reform), Ed Hudgins (Objectivist Center), and Jason Thomas
(Citizens for a Sound Economy). See also, CCIA release.
4/5. The U.S.
Court of Appeals (FedCir) issued its opinion in In
Re Jagannadha Sastry, an appeal from the U.S. Patent and
Trademark Office's (USPTO) Board
of Patent Appeals and Interferences (BPAI). Sastry and other individuals
filed U.S. patent application No. 07/945,865 in 1992. It pertains to a
composition for treating and preventing HIV. A USPTO examiner rejected all of
the claims of the application for obviousness and lack of enablement. The
USPTO's BPAI reversed the enablement rejection, but sustained the obviousness
rejection. The Court of Appeals affirmed.
4/5. The article titled "District Court Orders DOJ to Expand Its Search for
Carnivore Records", TLJ Daily E-Mail Alert No. 397, March 27, 2002,
contains a hyperlink to the March 25 Memorandum
Order issued by the U.S.
District Court (DC) in EPIC
v. DOJ, a Freedom of Information Act (FOIA) suit regarding
records pertaining to the FBI's e-mail surveillance system known as Carnivore.
The Order was transcribed by TLJ from the Court's file, and published in the TLJ
web site. TLJ made an error in transcribing this order. The error has been
Professor Advocates Application of Doctrine of Misuse to Anti
4/4. Dan Burk, a
law professor at the University of Minnesota, gave a lecture at the George Washington University Law School on
the topic of anti circumvention misuse. He argued that the anti circumvention
provisions of the DMCA create a new form of intellectual property rights, that
these rights are ripe for abuse, and that they should be subject to the
equitable doctrine of misuse, as applied in patent and copyright cases.
The Digital Millennium Copright Act (DMCA), 17 U.S.C. § 1201,
was enacted by the Congress in 1998. It provides at § 1201(a)(1) that
"No person shall circumvent a technological measure that effectively
controls access to a work protected under this title." It further provides
at § 1201(a)(2) that "No person shall manufacture, import, offer to
the public, provide, or otherwise traffic in any technology, product, service,
device, component, or part thereof, that (A) is primarily designed or produced
for the purpose of circumventing a technological measure that effectively
controls access to a work protected under this title; (B) has only limited
commercially significant purpose or use other than to circumvent a technological
measure that effectively controls access to a work protected under this title;
or (C) is marketed by that person or another acting in concert with that person
with that person's knowledge for use in circumventing a technological measure
that effectively controls access to a work protected under this title."
Prof. Burk noted that, unlike the exclusive rights in copyrighted works provided
by 17 U.S.C. § 106,
the anti circumvention provisions of the DMCA are not subject to the fair use
limitations of 17 U.S.C.
§ 107. However, Prof. Burk focused -- not on possible legislative amendment
of the DMCA -- but rather on possible court imposed limitations on the exercise
of DMCA rights based upon competition law principles and the doctrine of misuse,
such as have been applied to a limited extent in patent and copyright cases.
Burk argued that the anti circumvention rights of the DMCA may be used for
purposes other than preventing unauthorized copying or distribution of
copyrighted works. He elaborated that the DMCA has provided new licensing
opportunities. That is, the DMCA gives the holder of the access control
technology a private right of action against someone who traffics in a
circumvention technology. This holder may bring suit to enjoin the trafficker.
Alternatively, the holder may contract not to bring suit, subject to an
agreement by the trafficker to make payments.
Hence, argues Burk, the DMCA creates a right to exclude, analogous to that of
the Patent Act, and allows parties to enter into agreements that are in the
nature of licensing agreements, as the Patent Act contemplates. This licensing
process may be used, for example, to impose anti competitive licensing terms, or
to suppress competing technologies. And, some leveraging of the DMCA, says Prof.
Burk, should be judicially interpreted to be an abuse of intellectual property
rights under the doctrine of misuse.
He cited the case of Brulotte v. Thys, 379 U.S. 29 (1964), in which the
Supreme Court held that a patent holder's attempt to collect royalties beyond
the term of the patent constituted misuse of the patent. Prof. Burk acknowledged
that the U.S. Court of Appeals (FedCir),
which has jurisdiction over appeals from patent cases, views the misuse doctrine
with disfavor, and will apply it only in clear cases, such those matching the
facts of Brulotte. However, he stated that other circuit courts have been
more willing to apply the doctrine of misuse in copyright cases.
While Prof. Burk did not focus on legislative changes, some Members of Congress,
such as Rep. Rick Boucher (D-VA),
have advocated amending the DMCA. See, for example, speech of
March 6, 2001, in which he stated that "Several of us made an effort in
1998 to limit the new crime under Section 1201 to circumvention for the purpose
of infringement. But in the momentum to enact the measure, essentially unamended,
we were not able to have that change adopted. With the growing realization on
the part of the education community, and supporters of libraries, of the threat
to fair use rights which Section 1201 poses, perhaps the time will soon come for
a Congressional reexamination of this provision. Perhaps the only conduct that
should be declared criminal is circumvention for the purpose of infringement.
Perhaps a more limited amendment could be crafted to ensure the continued
exercise of fair use rights of libraries, and in scholastic settings,
notwithstanding the provisions of Section 1201."
Burk spoke to a group of faculty, students, and others at The George Washington
University Law School, as part of a lecture series sponsored by The Dean
Dinwoodey Center for Intellectual Property Studies.
Burk has also written a draft paper. However, it is not sited or quoted herein
because it is subject to a "do not site or quote without author's
permission" restriction. Prof. Burk can be reached at email@example.com.
Commerce Dept. Official Addresses Technology Policy
4/4. Bruce Mehlman, of the Department of Commerce's Technology Administration, gave a speech titled
"Technology Led Economic Development in the Post Bubble, Post 9/11, Post
Enron America" at the National Governors' Association Regional
Competitiveness Forum in Denver, Colorado.
Mehlman stated that "State and regional public policies directly impact the
pace of economic growth, high wage job creation, and global investment.
Decisions made at the local level play a critical role in establishing the
environment needed to let innovators innovate and entrepreneurs create jobs,
companies, and community wealth." He continued that there are "four
basic steps community leaders can take to help set the business climate to
sustain technology growth", promote innovation, support entrepreneurship,
improve infrastructure and empower people.
With respect to innovation, he advocated "Supporting research excellence,
at universities, federal labs and industry; protecting intellectual property
rights and encouraging technology transfer; providing a certain and navigable
regulatory framework that prioritizes innovation; and encouraging linkages and
consortia between knowledge creators and commercializers".
With respect to entrepreneurship, he advocated "pursuing tax policies that
encourage investment and risk capital; supporting trade inside and outside the
cluster, encouraging entrepreneurship education at all levels; and supporting
With respect to infrastructure, he stated that "the telecommunications
infrastructure is particularly critical in the information age, with broadband
networks holding a key to enterprise efficiency and cross cluster productivity.
Communities around the country are beginning to employ a number of strategies to
boost broadband deployment and usage. The localities that create the most
broadband friendly environments may be like the localities that attracted
railroads in the last century, while the localities that don't prioritize
bandwidth may end up like the towns by-passed by the railroads."
He also reviewed policies of the Bush administration related to technology,
including proposals for increased research and development funding and increased
funding for the U.S. Patent and Trademark Office, support for trade promotion
authority legislation, support of amending the Export Administration Act,
cybersecurity initiatives, and promoting e-government.
Mehlman is Assistant Secretary for Technology Policy at the U.S. Department of Commerce.
9th Circuit Rules in Post Sale Trademark Case
4/4. The U.S.
Court of Appeals (9thCir) issued its opinion
[PDF] in Karl
Storz Endoscopy v. Surgical Technologies, a post sale trademark
case involving rebuilt surgical endoscopes.
Background. Karl Storz Endoscopy
(Storz) makes endoscopes. Endoscopes are fiber optic based surgical instruments
used in minimally invasive surgical and diagnostic procedures, such as
arthroscopy, urology and gynecology, to obtain a focused and illuminated view
inside the body. Surgical Technologies (Surgi Tech) repairs endoscopes,
including complete rebuilds. Storz asserts that Surgi Tech's rebuilds replaced
"essentially all of the endoscope's functional parts," retaining only
the block element bearing Storz's trademarks. Surgi Tech did not put its own
mark on these rebuilt endoscopes. Pacific Medical Repair acts as an intermediary
between hospitals and endoscope repairers.
District Court. Storz filed a complaint in U.S. District Court (SDCal) against
Surgi Tech and Pacific alleging trademark and trade dress infringement, unfair
competition and passing off in violation of the Lanham Act, 15 U.S.C. § 1051 et
seq., and unfair trade practices in violation of California Business and
Professions Code § 17200 et seq. The District Court granted summary judgment to
Pacific and summary judgment in part to Surgi Tech. Storz appealed.
Appeals Court. The Appeals Court held both that Surgi Tech's rebuilding
of endoscopes involved the use of marks in commerce. It also held that there
were material issues of fact regarding the likelihood of post sale confusion.
Hence, it reversed and remanded.
President Bush Addresses Trade Promotion Authority
4/4. President Bush gave a speech
on trade promotion authority at the Department of State in Washington DC. He
called on the Senate to pass a bill by April 22.
Trade promotion authority, which is also known as fast track, would give the
President authority to negotiate trade agreements that could only be approved or
rejected, but not amended, by the Congress. The House passed its version of the
bill, HR 3005,
on December 6, 2001. The Senate
Finance Committee approved a Senate version of the bill later in December.
President Bush stated, "I believe strongly in trade. I believe not only is
trade in my nation's interests, I think trade is in the interest of those
nations who struggle with poverty, that desire a route out of poverty."
He continued that "trade is important for American workers, too. Lost in
the debate on trade here at home is the fact that many people are able to find
better jobs as the result of an active trade policy in the United States. And so
we're here to talk about a way to make sure that our nation trades and our
nation works with other countries in the world to trade. In order for that to do
so, the United States Senate must past trade promotion authority. I need that
authority. Every day we go by without the authority is another day we are
missing opportunities to help our economy, to help our workers, to help our
country, to relate to our friends around the world. If the Senate acts to give
me trade promotion authority -- and I expect them to do so -- I will use it to
expand commerce and work for higher-paying jobs for American workers. And so
today, I urge the Senate leadership to lead, to act, and to get this bill to my
Bush also stated that "In eight years since the TPA, the trade promotion
authority, expired, we have missed a lot of opportunity in America. And it's
cost -- and when you miss opportunity, it tends to affect the average worker in
our country. More than 150 regional free trade and customs agreements exist
throughout the world; the European Union is party to 31 of them; Mexico is party
to 10; the world's largest economy is party to three. While we've been marking
time, our competitors have been working, and they've been signing agreements.
While we have been delaying, they've been trading."
President Bush also reviewed recent trade accomplishments and pending trade
President Bush concluded: "The United States Senate needs to affirm
America's trade leadership, and bring both measures I've talked about today --
the trade promotion authority, and the Andean trade preference act -- to the
floor by April 22nd."
Sen. Charles Grassley (R-IA), the
ranking Republican on the Senate
Finance Committee, responded that "The President's right. Every day
without Trade Promotion Authority is another day the United States can't fully
advance the interests of its farmers, workers and businesses at the negotiating
table." See, Grassley
FCC Declares that EchoStar's Two Dish Plan Violates Statute
4/4. The Federal Communications Commission
(FCC) issued a Declaratory
Ruling and Order [21 pages in PDF] in which it declared that EchoStar's two
dish plan violates both the Satellite Home Viewer Improvement Act of 1999
(SHIVA) and the FCC's regulations.
EchoStar, which is also known as the Dish Network, provides direct broadcast
satellite (DBS) television service. EchoStar has placed some local stations in
particular markets on ``wing slot´´ satellites, and as a result, some EchoStar
subscribers are required to use a second satellite dish antenna to receive and
view these local stations.
The FCC wrote that "The SHVIA grants satellite carriers a royalty free
copyright license that enables satellite carriers to make secondary
transmissions of a broadcast station’s signal into that station's local
designated market area (``DMA´´) without obtaining the authorization of those
holding copyrights in the individual programs broadcast by that station. In
exchange, the law requires that, by January 1, 2002, if a satellite carrier
carries one local broadcast station in a local market pursuant to this license,
it must carry all qualified local broadcast stations in the market upon request.
This requirement is also known as the ``carry one, carry all´´ rule."
The SHIVA also provides, at 47 U.S.C. § 338(d),
that "the satellite carrier shall retransmit the signal of the local
television broadcast stations to subscribers in the stations' local market on
contiguous channels and provide access to such station's signals at a
nondiscriminatory price and in a nondiscriminatory manner on any navigational
device, on-screen program guide, or menu."
The FCC did not amend its rules, or initiate a rule making proceeding. Nor did
it interpret its rules to prohibit the use of a second dish antenna. Rather, it
issued a declaratory ruling that "EchoStar's ``two-dish plan,´´ as
implemented, violates Section 338(d) of the Act and Section 76.66(i) of the
The FCC continued that "we find that EchoStar's offer of a ``free´´ dish
has not been implemented as such and, in these instances, constitutes a
violation of the statutory and regulatory prohibition of providing access to
certain stations at a discriminatory price. In addition, we find that EchoStar
does not, as required, retransmit the signal of local television broadcast
stations to subscribers on contiguous channels and provide access to local
television broadcast station signals in a nondiscriminatory manner on its
on-screen program guide or menu. In essence, although it may be possible to
offer certain local stations by use of a second antenna without engaging in
prohibited conduct, we find that EchoStar has not done so in this case."
Ken Ferree, Chief of the FCC's Media Bureau, said in a release
that "we took an important and necessary action to ensure that all
broadcast stations are carried in a non- discriminatory manner. EchoStar's two
dish plan was implemented in such a way as to make some stations unavailable to
subscribers as a practical matter."
People and Appointments
4/4. Enrique Fiallo resigned as Ch/CEO of Enterasys. Vice Chairman J.E. Riddle and
COO Jerry Shanahan resigned as well. Enterasys announced that William O'Brien
will be interim CEO and Director, and Yuda Doron will be
President. See, Enterasys
4/4. Carolyn Gleason was named head of the International Trade Practice
Group of the law firm of McDermott Will &
Emery. She focuses on dispute settlement under the General Agreement on
Tariffs and Trade (GATT) and the World Trade
Organization (WTO). The group handles WTO cases, import relief, customs
work, export control work, bilateral and regional trade issues, trade
legislation and other international trade matters, and preventing competitors
from engaging in unfair trade practices. See, MWE release.
4/4. Commerce Secretary Donald Evans
announced that representatives of 15 companies will join him on a business
development mission to Beijing and Shanghai, China, on April 21-25. Several tech
companies will send representatives including Applied Materials (EVP David Wang), Borland Software (SVP/GC Keith Gottfried), Lucent (James Brewington), and Motorola (EVP Robert Barnett). See, release.
4/4. The Department of Commerce's National
Telecommunications and Information Administration (NTIA) began its two day
"Spectrum Summit". The summit is addressing spectrum allocation and
efficiency, the spectrum requirements of new technologies, and regulatory
processes. It continues on Friday, April 5, in the Ronald Reagan International
Trade Center, 1300 Pennsylvania Avenue, NW. See, keynote speech
by Commerce Secretary Donald Evans.
4/4. Qwest stated in a release
that "it has been informed by the U. S. Securities and Exchange Commission
(SEC) that it has approved a formal order of investigation of the company. The
order covers the same subject matters as the SEC's informal investigation that
Qwest previously disclosed."
4/4. Securities and Exchange Commission (SEC)
Chairman Harvey Pitt
gave a speech to the
Kellogg Graduate School of Management and Northwestern Law School in Chicago,
Illinois. He stated that "we need to revisit whether our system of
corporate governance is set up to assist corporate leaders in making rational
determinations about what the right thing to do is". He continued that
"There are a number of ways current corporate governance standards can be
improved to strengthen the resolve of honest managers and the directors who
oversee management's actions and make them more responsive to the public's
expectations and interests. We think the best way to do that is a two fold
approach: first, make certain that officers and directors have a clear
understanding of what their roles are, and second, apply serious consequences to
those who do not live up to their fiduciary obligations."
4/4. The U.S. Patent and Trademark Office (USTR)
published a notice
in its web site regarding "Processing of Papers Filed After Allowance of an
5th Circuit Rules in Cyber Squatting Case
4/3. The U.S.
Court of Appeals (5thCir) issued its opinion
v. Spider Webs, a cyber squatting case. The Appeals Court
affirmed a District Court order that a cyber squatter transfer a domain name
under the Anti- Cybersquatting Consumer Protection Act.
Background. The Ernest and Julio Gallo
Winery holds a U.S. trademark in the name "Ernest & Julio
Gallo." Spider Webs registered about 2,000 domain names, including
ernestandjuliogallo.com. About 300 of its registrations could be associated with
existing businesses. Spider Webs sells its domain names on its web site, and on
eBay. However, Spider Webs never offered to sell to Gallo. Spider Webs refused
Gallo's requests to transfer the domain name. Once Gallo filed suit, Spider Webs
published a web site at this domain which it named the "Whiney Winery"
web site; it was critical of Gallo.
District Court. Gallo filed a complaint in U.S. District Court (SDTex) against
Spider Webs and several individuals alleging violation of the Anti-
Cybersquatting Consumer Protection Act (ACPA), 15 U.S.C. § 1125(d),
and federal and Texas anti-dilution, trademark infringement, and unfair
competition laws. The District Court granted summary judgment to Gallo under the
ACPA and Texas anti- dilution law, and ordered Spider Webs to transfer the
domain name to Gallo.
Statute. 15 U.S.C. § 1125(d)(1)(A) provides, in part, that "A
person shall be liable in a civil action by the owner of a mark ... if, without
regard to the goods or services of the parties, that person (i) has a bad faith
intent to profit from that mark, including a personal name which is protected as
a mark under this section; and (ii) registers, traffics in, or uses a domain
name that -- (I) in the case of a mark that is distinctive at the time of
registration of the domain name, is identical or confusingly similar to that
mark; (II) in the case of a famous mark that is famous at the time of
registration of the domain name, is identical or confusingly similar to or
dilutive of that mark; or (III) is a trademark, word, or name protected by
reason of section 706 of Title 18 or section 220506 of Title 36." The
statute lists nine factors to be considered by the Court in determining whether
"bad faith" exists.
Appeals Court. Spider Webs conceded that Gallo holds a valid trademark,
and that the domain name at issue is confusingly similar to it. The only issue
on appeal was whether Spider Webs had a "bad faith intent to profit"
within the meaning of ACPA.
The Appeals Court held that an item by item consideration of the "bad
faith" factors warranted a ruling in Gallo's favor. One factor (VII)
weighed in Spider Webs' favor -- it did not provide false contact information
when registering the domain.
The Appeals Court also addressed factor VI, regarding "the person's offer
to transfer, sell, or otherwise assign the domain name to the mark owner or any
third party for financial gain ..." The Appeals Court wrote that
"although Spider Webs has not offered this domain name for sale, it has
registered other domain names that are identical or similar to the names of
well- known businesses and products, has offered other domain names for sale,
and has refused to accept less than $10,000 per name."
The Appeals Court also held that it "is not limited to the consideration of
the listed statutory factors, but can consider other factors as well".
Quoting from an earlier trademark case involving Gallo, the Appeals Court wrote
that when "the senior user's trademark is famous in the marketplace and
where the junior user was aware of the trademark and of its fame, a presumption
of bad faith arises from the choice of the same name because it is inferrable
that the junior user adopted the mark for the purpose of profiting from the aura
of goodwill surrounding the senior user's mark." See, E. & J. Gallo
Winery v. Gallo Cattle Co., 12 U.S.P.Q.2d 1657, 1675 (E.D. Cal. 1989), aff'd,
967 F.2d 1280 (9th Cir. 1992).
The Appeals Court also affirmed the award of statutory damages under the ACPA.
Federal Circuit Reverses in Pickholtz v. Rainbow Technologies
4/3. The U.S.
Court of Appeals (FedCir) issued its opinion in Pickholtz
v. Rainbow Technologies, a patent infringement case involving
Pickholtz is the inventor and owner of U.S.
Patent 4,593,353, titled "Software protection method and
apparatus". It describes an apparatus for the prevention of piracy of
computer software. The invention prevents computer software on an external
memory device (e.g., a magnetic disc) from executing on a computer unless the
software is authorized to do so.
Pickholtz filed a complaint in U.S.
District Court (NDCal) against Rainbow
Technologies and Software Security alleging patent infringement. The
District Court granted summary judgment of non-infringement. Pickholtz appealed.
The Court of Appeals reversed and remanded. The Court held that the District
Court improperly construed the terms "computer" and "located in
the computer" to exclude peripherals.
Broadband Coalition Advocates Relief from Unbundling
4/3. A group of six trade associations held a press conference in Washington DC
to announce the formation of a group named the High Tech Broadband Coalition (HTBC).
One purpose of this coalition is to file a comment with the Federal Communications Commission (FCC) in an
The HTBC will file a comment with the FCC on Friday, April 5, advocating that
the FCC refrain from imposing Section 251 unbundling obligations on new fiber
and DSL facilities deployed on the customer side of the central office. The
coalition did not make available a copy of the comment to be filed. The
unbundling requirement at issue is codified at 47 U.S.C. § 251(c)(3).
The speakers at the event were Robert Holleyman (P/CEO of the Business Software Alliance), Gary Shapiro (P/CEO
of the Consumer Electronics Association), Jerry
Jasinowski (President of the National Association
of Manufacturers), George Scalise (President of the Semiconductor Industry Association),
Matthew Flanigan (President of the Telecommunications
Industry Association), and Rhett Dawson (ITIC).
The CEA's Shapiro stated that the coalition wants to "advance last mile
broadband investment and deployment in the United States." He added that
"to get broadband deployed, and to meet the national policy of broadband
deployment, requires that our federal government, through the FCC, unshackle
some of the regulations which are currently affecting the deployment of
broadband." He elaborated that "the best way to reach universal
adoption of broadband is through strong broadband facilities based competition.
That is competition between cable modems, wireline broadband, like DSL and
fiber, satellite, fixed and mobile wireless, and any other new technologies that
may be developed."
Shapiro stated that the comment would be filed in the FCC's "triennial
review of unbundling obligations". See, Notice
of Proposed Rulemaking [PDF] titled "In the Matter of Review of Section
251 Unbundling Obligations of Incumbent Local Exchange Carriers ...". This
is CC Docket No. 01-338, announced on December 12, 2001. The FCC also announced
on the same date a separate Notice
of Proposed Rulemaking [PDF] regarding the current regulatory requirements
for incumbent local exchange carriers' (ILECs) broadband telecommunications
services. This is CC Docket No. 01-337.
Other technology related groups criticized the HTBC's proposals. For example,
the Information Technology Association of America
(ITAA) issued a release
in which it stated that "vibrant competition rather than special
accommodations for monopoly telephone companies is in the best interest of
broadband users". Harris Miller, President of the ITAA, stated in this
release that "the issue that the HTBC seeks to place before the Federal
Communications Commission is whether to trade re-monopolization of the telephone
markets for broadband investment by the Bell operating companies ... That's a
deal that trades away consumer choice, investment, innovation, and a free
Miller elaborated that "Congress makes the laws. The 1996 Telecom Act
requires monopoly telephone companies to open their facilities in exchange for
access to new markets. Second, the Coalition is mistaken in suggesting that the
Act gives the FCC forbearance authority. By suggesting the FCC use such a shaky
legal authority, the Coalition risks creating considerable uncertainly to new
broadband investment and the prospect of numerous, time consuming challenges in
Similarly, CapNet's Executive Director, Tim
Hugo, stated in a release that the HTBC "called for the FCC to implement
the core elements of H.R. 1542,
commonly referred to as the Tauzin Dingell broadband legislation, as part of the
agency's triennial review of the Section 251 unbundling rules of the 1996
Telecommunications Act. ... The 1996 Telecommunications Act was passed by
Congress, and if need be, can be amended by Congress. As the FCC is not a
legislative body, CapNet contends that the appropriate forum for this debate is
the United States Congress, not the FCC."
FCC Grants VoiceStream's Petition for Waiver of PAS Rules
4/3. The Federal Communications Commission
(FCC) released its Memorandum
Opinion and Order [13 pages in PDF] granting VoiceStream Wireless Corporation's
petition for waiver of the FCC's wireless priority access service (PAS) rules.
VoiceStream filed its petition
[PDF] on November 28, 2001. The National
Communications System (NCS) supported the petition. The FCC adopted its
order on March 15, 2002, but did not release it until April 3.
The FCC's PAS rules, at Section 64.402, permit commercial mobile radio service (CMRS)
operators to voluntarily allow national security and emergency preparedness
users in emergencies to access the next available wireless channel to originate
The FCC granted VoiceStream a waiver "until notification by VoiceStream or
NCS that the per call invocation feature can be commercially deployed on a
global system for mobile communications (GSM) system, upon expiration or
termination of the contract between VoiceStream and NCS, DynCorp or any other
service integrator acting on behalf of NCS, to provide a wireless priority
access capability; or by December 31, 2002, whichever is earliest."
The waiver will allows VoiceStream to immediately deploy PAS.
FCC Commissioner Michael Copps
wrote a separate statement in which he supported the granting of the waiver, but
dissented to the extent that the FCC order does not require service providers to
disclose to their customers the implications of the new PAS system. He wrote
that "I would therefore require any carrier that implements a PAS to inform
its customers of the creation of the system and the impact on its customers'
ability to complete calls in an emergency. With this information our citizens
can decide which carrier they are most comfortable with, and how much to rely on
their wireless phone in an emergency. ... We must not ``hide the ball´´ when
it comes to PAS. Consumer anger will be overwhelming if the first time consumers
learn that a PAS has reduced their chance of completing a call is in the
aftermath of an emergency. Our citizens deserve to be fully informed ahead of
Commissioner Kevin Martin
echoed Copps' concerns. He did not dissent, but wrote that "I also
encourage PAS carriers to inform their customers when they have entered into
See also, FCC
release. This is WT Docket No. 01-333.
People and Appointments
4/3. Microsoft announced that Rick
Belluzzo "will transition out of his role as president and chief
operating officer on May 1, although he will continue to work at the company
through September to ensure a smooth transition." See, MSFT
4/3. Giovanni Prezioso
was named General Counsel of the Securities and
Exchange Commission (SEC). He currently is a partner in the Washington
DC office of the law firm Cleary Gottlieb Steen
& Hamilton, which he joined out of law school in 1982. He will succeed David
Becker, who will leave the Commission on May 7, 2002. See, SEC release.
4/3. Hewlett Packard and Compaq named 150 senior managers as a part of their
merger integration. See, HP release.
4/3. Adelphia Communications Corporation
stated that "the Securities and Exchange Commission (SEC) is conducting an
informal inquiry into its previously disclosed co-borrowing agreements and has
asked the Company to provide clarification and related documentation." See,
4/3. The Securities and Exchange Commission
(SEC) initiated an administrative proceeding against David Thatcher, who was
previously President and Chief Financial Officer of Critical
Path, a provider of Internet messaging infrastructure products and services.
The SEC simultaneously issued a consent order in which it suspended Thatcher
from appearing or practicing before the SEC as an accountant. The SEC previously
filed a civil complaint in U.S. District
Court (NDCal) against Thatcher. In that action, the SEC obtained a judgment
enjoining him from further violations of federal securities laws, and requiring
him to pay a civil penalty of $110,000. Thatcher, among other things, materially
overstated Critical Path's revenue, and materially understated its loss, in
contravention of Generally Accepted Accounting Principles. See, SEC release.
4/3. The U.S.
Court of Appeals (FedCir) issued its opinion in Ecolab
v. Paraclipse, a patent infringement case. Ecolab filed a
complaint in U.S. District
Court (DNeb) against Paraclipse alleging infringement of its U.S.
Patent No. 5,365,690 titled "Flying insect trap using reflected and
radiated light. The jury returned a verdict of noninfringement. The Appeals
Court affirmed in part, reversed in part, and remanded for a new trial.
DC Circuit Remands Local TV Ownership Rule to FCC
4/2. The U.S.
Court of Appeals (DCCir) issued its opinion
in Sinclair Broadcast
Group v. FCC, remanding the FCC's local television ownership rule
for further consideration.
Sinclair Broadcast Group, a diversified
television broadcasting company, currently owns and operates, programs, or
provides sales services to 63 television stations in 40 markets. It filed a
petition for review of the Federal Communications
Commission's (FCC) local television ownership rule. See 47
C.F.R. § 73.3555(b). This rule allows common ownership of two TV stations
in the same local market if one of the stations is not among the four highest
ranked stations in the market and eight independently owned, full power,
operational TV stations remain in that market after the merger.
Sinclair challenged this duopoly rule on the grounds that its "eight
voices" exemption is arbitrary and capricious, that failing to fully
grandfather existing local marketing agreements (LMAs) violates § 202(g)
of the 1996 Act, is impermissibly retroactive, and constitutes an unlawful
taking of property in violation of the Fifth Amendment, and that the
restrictions violate the First Amendment.
The Appeals Court held that the FCC "has failed to demonstrate that its
exclusion of non-broadcast media in the eight voices exception is not arbitrary
and capricious. Accordingly, we remand the local ownership rule to the
Commission for further consideration." However, the Appeals Court rejected
both Sinclair's statutory challenge to the local ownership rule provision on
television LMAs, and its constitutional challenges.
Judith Rogers wrote the opinion of the three judge panel, in which Judge
Stephen Williams joined. Judge
David Sentelle dissented in part. He offered additional arguments for
finding the eight voices exemption arbitrary and capricious. He also argued that
the Appeals Court should have vacated, rather than remanded, the rule. Finally,
in discussing Sinclair's First Amendment argument, he wrote that the Appeals
Court is still stuck with the scarcity doctrine, and that it is time for the
Supreme Court to review it. See, National
Broadcasting Company v. United States, 319 U.S. 190 (1943), and Red
Lion v. FCC, 395 U.S. 367 (1969).
The Media Access Project (MAP), a
Washington DC based group that advocates FCC regulation of speech, issued a release [PDF]. It
stated that "While today's decision is a temporary setback, it actually
underscores the FCC's power to promote media diversity. MAP is confident that,
in the end, existing ownership rules will be retained. The decision today
forcefully demonstrates that when the Supreme Court's precedent is accurately
applied, the FCC possesses full freedom to protect the public and promote
diversity of viewpoints."
EPIC Files FOIA Suit Against Office of Homeland Security
4/2. The Electronic Privacy Information Center
(EPIC) filed a complaint
[PDF] in U.S. District Court (DC)
against the Office of Homeland
Security (OHS) and Tom Ridge alleging
violation of the Freedom of Information Act (FOIA), 5 U.S.C. § 552. The
EPIC seeks expedited release of records regarding a government national
identification system, biometric identification systems, and a trusted flier
The complaint alleges that "Subsequent to the terrorist attacks of
September 11, 2001, the newly created Office of Homeland Security reportedly
began drafting legislation, and planning and designing security systems, that
could implicate the privacy rights of American citizens. These initiatives
reportedly include proposed model state legislation requiring that driver's
licenses issued to noncitizens be tied to visas; the development of biometric
identification systems; and establishment of a ``trusted flier´´ program that
would create a new federally issued identity card."
The EPIC submitted its FOIA request to the OHS on March 20, 2002, requesting
"all records relating to efforts to standardize driver's licenses across
the country in the possession of the Office for Homeland Security, including but
not limited to memos, talking points, reports and draft legislation." The
EPIC also requested "all records associated with [the trusted-flier
program] and other proposals being considered by the Office that rely on
biometric technology to identify citizens and visitors to America."
The EPIC also requested expedited processing of its FOIA request, noting that
"there is a particular urgency to inform the public about the
government’s proposed activity," and that "funding and legislative
decisions" regarding this activity "are currently before
The complaint alleges that defendants have violated the FOIA and the
Administrative Procedure Act through "failure to timely respond to
plaintiff's request for expedited processing" and "failure to grant
plaintiff's request for expedited processing". The EPIC seeks a court order
compelling defendants to "immediately to process the requested records in
While the FOIA provides that all federal agencies are covered, "including
the Executive Office of the President" (see, 5 U.S.C. § 552(f)), this has
been limited by court rulings. Many activities of the Executive Office of the
President are not subject to the FOIA.
David Sobel, General Counsel of the EPIC, stated at a press conference on April
2 that "the Office of Homeland Security is based in the Executive Office of
the President". He added that the EOP has not indicated to the EPIC, or in
its web site, whether it considers the OHS to be covered by the FOIA. "I am
not entirely sure what the administration's position is on this question",
Marc Rotenberg, Executive Director of the EPIC, stated that OHS policy making
"should be done in the bright light of day." He also wrote a letter to
Congressional leaders, in which he stated that "We submitted this request
because of the enormous implications for privacy and civil liberties in America
if such a system were deployed, and because we believe that the Office of
Homeland Security should be subject to the same open record laws that govern
other federal agencies which engage in substantial policymaking."
Rotenberg concluded in the letter that "It is imperative that the Office of
Homeland Security comply with the Freedom of Information Act, a law that helps
ensure the preservation of open government and the protection of the
constitutional values of the United States." However, the letter does not
explicitly ask for anything from the Congress.
FTC Files Suits Against Fraudulent Spammers and Online Sellers
4/2. The Federal Trade Commission (FTC)
announced that it has filed several civil complaints alleging fraudulent spam,
online fraud, and violation of the FTC's Mail Order Rule. See also, FTC release.
The FTC filed a complaint
[PDF] on March 29 in the U.S. District Court (SDOhio) against Linda Lightfoot
and Charles Childs, dba Universal Direct, alleging violation of the Federal
Trade Commission Act in connection with an spam chain letter.
The FTC filed a complaint
[PDF] in the U.S. District Court (WDWash) against David Walker alleging
violation of the Federal Trade Commission Act in connection with the use of a
web site to promote fraudulent cancer treatment products.
The FTC filed a complaint
[PDF] on March 5 in the U.S. District Court (DOr) against Sound City 2000 and
Linda Simmons alleging violation of the FTC's Mail Order Rule in connection with
the sale through a web site of compact discs, which defendants failed to ship
within the promised time period. The District Court entered a Consent Decree [PDF]
on March 6 barring defendants from further violation of the rule.
FBI Creates Cyber Division
4/2. The Federal Bureau of Investigation (FBI)
created a Cyber Division, and appointed Larry Mefford as its Assistant Director.
The FBI stated that this division will "focus and coordinate the multitude
of disciplines within the FBI that are cyber related. The division will
supervise and facilitate the FBI's investigation of federal violations in which
the Internet, computer systems and networks are exploited as the principal
instruments or targets of criminal activity."
Mefford was previously Associate Special Agent in Charge of the FBI's San
Francisco Field Office. He is a career Special Agent, without specialization in
computer science. See, FBI release.
EPIC to File FOIA Suit Against Office of Homeland Security
4/2. The Electronic Privacy Information Center
(EPIC) announced that it will file a complaint today in U.S. District Court (DC) against the Office of Homeland Security
alleging violation of the Freedom of Information Act (FOIA), 5 U.S.C. § 552. The
EPIC seeks the expedited release of documents concerning a government national
The EPIC submitted a FOIA request to the OHS in March. The EPIC stated in a
release that "News reports indicate that Governor Ridge, head of the Office
of Homeland Security, has drafted legislation that would link state driver's
license records to federal agency databases." EPIC Executive Director Marc
Rotenberg stated that "the potential privacy implications of these
proposals are far reaching. Under well established open record laws, Governor
Ridge has an obligation to the American people to ensure that these decisions
are made in the open."
The EPIC may face threshhold questions regarding whether the OHS is required to
provide access to all or some of its records under the FOIA. The FOIA provides
several statutory exemptions, one of which pertains to national defense. Section
552(b)(1) exempts matters that are "(A) specifically authorized under
criteria established by an Executive order to be kept secret in the interest of
national defense or foreign policy and (B) are in fact properly classified
pursuant to such Executive order".
Also, while the FOIA provides that all federal agencies are covered,
"including the Executive Office of the President" (see, 5 U.S.C. §
552(f)), this has been limited by court rulings. Many activities of the
Executive Office of the President are not subject to the FOIA. The OHS is a part
of the Executive Office of the President.
USTR Releases Report on Barriers to Trade
4/2. The U.S. Trade Representative (USTR)
issued its annual report
titled "2002 National Trade Estimate Report on Foreign Trade
Barriers". See also, USTR release.
This report details on a nation by nation basis, among other things, the extent
of protection of intellectual property rights; tariff barriers to the import of
semiconductors, computers, computer parts, software, and telecommunications
equipment; regulation of Internet content, ISPs, encryption, and e-commerce; and
dominant telecom carrier protection by national regulators.
See, in particular, the report's chapter [35
pages in PDF] on the European Union, chapter [29 pages in
PDF] on the People's Republic of China, chapter [45 pages in
PDF] on Japan, and chapter [9 pages in
PDF] on Mexico. However, the USTR report contains no chapter summarizing
barriers to trade imposed by the United States.
USTR Robert Zoellick
stated in a release
that "By identifying barriers to trade, we can work with our trading
partners, globally, regionally, and bilaterally, to eliminate these barriers,
while further liberalizing our market at home. Trade improves the economic
well-being of Americans, advances freedom around the world, and promotes our
Federal Circuit Opinions
4/2. The U.S.
Court of Appeals (FedCir) issued its opinion in Enzo
Biochem v. Gen-Probe, a patent infringement case. Enzo Biochem is
the assignee of U.S.
Patent No. 4,900,659, which is directed to nucleic acid probes that
selectively hybridize to the genetic material of the bacteria that cause
gonorrhea. Enzo filed a complaint in U.S.
District Court (SDNY) against Gen-Probe and others alleging patent
infringement. The District Court granted defendants' motion for summary judgment
that claims 1-6 of the 659 patent are invalid for failure to meet the written
description requirement of 35 U.S.C. § 112. The
Appeals Court affirmed, 2-1.
4/2. The U.S.
Court of Appeals (FedCir) issued its opinion in Griffin
v. Bertina, an appeal from the decision of the U.S. Patent and
Trademark Office Board of Patent Appeals and Interferences awarding judgment in
an interference to the senior party, Bertina. The Appeals Court affirmed.
4/2. The U.S.
Court of Appeals (FedCir) issued its opinion in Leggett
& Platt v. Hickory Springs, a patent infringement and
misappropriation of trade secrets case. Leggett & Platt (L&P) is the
assignee of U.S.
Patent No. 5,052,064, titled "Stackable bedding foundation".
L&P filed a complaint in U.S.
District Court (NDIll) against Hickory Springs alleging patent infringement,
inducing third parties to infringe, tortious interference with contract, and
misappropriation of trade secrets. The District Court ruled that Hickory did not
infringe the patent, either literally, or under the doctrine of equivalents. It
also held that Hickory did not misappropriate trade secrets. The Appeals Court
affirmed in part (literal infringement), and reversed in part (doctrine of
equivalents and misappropriation of trade secrets), on the grounds that material
issues of fact exist.
People and Appointments
4/2. Jack Lever was named Chair of the Intellectual Property Department
of the law firm of McDermott Will & Emery.
He replaces Ray Lupo. See, MWE
4/2. The National Institute of Standards and
Technology (NIST) published a notice
in the Federal Register announcing that it "approves FIPS 198, The
Keyed-Hash Message Authentication Code (HMAC), and makes it compulsory and
binding on Federal agencies for the protection of sensitive, unclassified
information. FIPS 198 is an essential component of a comprehensive group of
cryptographic techniques that government agencies need to protect data,
communications, and operations." This standard is effective August 6, 2002.
See, Federal Register, April 2, 2002, Vol. 67, No. 63, at Pages 15548 - 15549.
4/2. Herbert Derungs plead guilty in U.S.
District Court (NDCal) to three counts of mail fraud in violation of 18 U.S.C. § 1341,
and three counts of wire fraud in violation of 18 U.S.C. § 1343.
Derungs sold over eBay baseball bats that he
falsely claimed had been used in games by major league baseball players. See, USAO
4/2. The U.S. Patent and Trademark Office (USPTO)
published a copy of the March
April issue of USPTO Today [PDF] in its web site.
4/2. The U.S. Patent and Trademark Office (USPTO)
announced that it will hold a series of half day seminars on the Trademark Electronic Application System
(TEAS) in Philadelphia, Cleveland, Dallas, Denver, and San Francisco. See, USPTO notice.
7th Circuit Rules in Software Trade Secrets Case
4/1. The U.S.
Court of Appeals (7thCir) issued its opinion
v. Epic Systems, a trade secrets case involving software. The
Appeals Court affirmed the District Court's summary judgment that the IDX failed
to identify with specificity the trade secrets that it accused the defendants of
misappropriating. However, it reversed the District Court's ruling that a
confidentiality agreement regarding the software was unenforcable.
Background. IDX Systems and Epic Systems both make software for use
in managing the financial side of a medical practice. A major customer of IDX,
the University of Wisconsin Medical
Foundation (UWMF), which comprises more than 1,000 physicians, used IDX
software until December 2000, when it switched to Epic software.
The UWMF had contracted with IDX that it would not allow the software and
related materials furnished by IDX to be "examined ... for the purpose of
creating another system". It also contracted not to "use or disclose
or divulge to others any data or information relating to" the system or
"the technology, ideas, concepts, know- how, and techniques embodied
District Court. IDX filed a complaint in U.S. District Court (WDWisc) against
Epic, UWMF, and two employees of UWMF who had previously worked for Epic. IDX
alleged that the UWMF and the two employees stole IDX's trade secrets, and broke
contractual promises of confidentiality. IDX alleged that Epic tortiously
induced UWMF and the two employees to do these things. Jurisdiction was based
upon diversity of citizenship. The Court applied Wisconsin law.
In support of its missapropriation of trade secrets claims, IDX submitted to the
District Court a 43 page description of the methods and processes underlying and
the inter- relationships among various features making up IDX's software
The District Court dismissed the tort claims against Epic on the pleadings,
observing that the Wisconsin trade secrets statute overrides any theory that
conflicts with the state's law of trade secrets. It also ruled that the
confidentiality agreements are invalid under Wisconsin law because they do not
contain temporal and geographic limitations. Finally, the District Court granted
summary judgment to the defendants on the trade secret claim, after concluding
that IDX had failed to identify with specificity the trade secrets that it
accused the defendants of misappropriating.
Wisconsin Trade Secrets Statute. The District and Appeals Court applied
Wis. Stat. § 134.90(1)(c), which provides that "Trade secret" means
"information, including a formula, pattern, compilation, program, device,
method, technique or process to which all of the following apply: 1. The
information derives independent economic value, actual or potential, from not
being generally known to, and not being readily ascertainable by proper means
by, other persons who can obtain economic value from its disclosure or use. 2.
The information is the subject of efforts to maintain its secrecy that are
reasonable under the circumstances." See, Wisconsin Statutes, Chapter 134 [PDF].
Appeals Court: Trade Secrets. The Appeals Court affirmed the District
Court's conclusion that IDX had failed to identify with specificity the
allegedly misappropriated trade secrets. The Appeals Court wrote that "to
show that particular information is a trade secret, a firm such as IDX must
demonstrate that it is valuable, not known to others who might profit by its
use, and has been handled by means reasonably designed to maintain secrecy. Like
the district judge, we think that IDX failed to do this. It has been both too
vague and too inclusive, effectively asserting that all information in or about
its software is a trade secret."
The Court elaborated that IDX's 43 page submission "does not separate the
trade secrets from the other information that goes into any software package.
Which aspects are known to the trade, and which are not? That's vital under the
statutory definition. Likewise, IDX's tender of the complete documentation for
the software leaves mysterious exactly which pieces of information are the trade
The Court also commented on some of the items in IDX's 43 page submission.
"Perhaps screen displays could be copyrighted, but no copyright claim has
been advanced, and a trade secret claim based on readily observable material is
a bust. ... Other details, such as the algorithms that the software uses to do
real-time error checking (a vaunted feature of IDX's software), may be genuine
trade secrets, but IDX has not tried to separate them from elements such as its
input and output formats. Nor does it contend that the defendants decompiled the
object code or otherwise obtained access to the algorithms that power the
program; it alleges only that [UWMF] transferred to Epic those details that
ordinary users of the software could observe without reverse engineering."
The Appeals Court also offered some advice for parties seeking to protect their
software related intellectual property. First, it commented that
"Reluctance to be specific is understandable; the more precise the claim,
the more a party does to tip off a business rival to where the real secrets lie
and where the rival's own development efforts should be focused. Still, tools
such as protective orders are available to make this process less risky, and
unless the plaintiff engages in a serious effort to pin down the secrets a court
cannot do its job." Second, the Court wrote that since "it is hard to
prove that particular information qualifies as a trade secret, many producers of
intellectual property negotiate with their customers for additional
Appeals Court: Confidentiality Agreements and Competition Analysis. The
Appeals Court reversed the District Court's holding that the contractual
promises are unenforceable because they are unlimited in temporal and geographic
scope, and thus unduly restrain trade.
The Appeals Court wrote that the District Court relied, incorrectly, on
precedent dealing with restrictive covenants limiting competition between
employers and their ex-employees. It wrote that "Rules limiting the extent
of no-compete clauses are based on the fact that they tie up human capital and,
if widely adopted, may have the practical effect of preventing horizontal
competition in economically significant markets. ... But neither rationale
applies to contracts that restrict the use of particular information between
businesses that have vertical (supplier- to- customer) rather than horizontal
(competitor- to- competitor) relations."
The Appeals Court continued that "IDX did not contract for limitations on
Epic's ability to compete; contracts between IDX and the [UWMF] are vertical in
nature and protect intellectual property without affecting competition. They may
compel rivals such as Epic to do more work to develop software independently,
but this promotes rather than restricts competition."
The Appeals Court added that "trade secret law is compatible with antitrust
law; the same can be said for contracts protecting intellectual property that,
though not demonstrably a trade secret, is commercially valuable. Rivals such as
Epic, as non-parties to the vertical arrangements, remain entitled to discover
and use the information independently and to compete vigorously.
Notable and Quotable. Judge Frank Easterbrook,
who wrote the opinion of the Appeals Court, concluded: "Nothing in the
antitrust laws gives one producer a right to sponge off another's intellectual
People and Appointments
4/1. The Hewlett Packard Board of Directors
announced that it will not nominate Walter Hewlett to the Board. HP
stated in a release
that "The board's decision not to nominate Walter Hewlett is based on his
ongoing adversarial relationship with the company, as evidenced by his recent
litigation against HP, as well as concerns about his lack of candor and issues
4/1. Joanna McIntosh was named director of the Policy for a
Networked Society (PNS) program at the Markle
Foundation. She was previously vice president of International Affairs at AT&T. She represented AT&T in Washington
DC and before the WTO and other multilateral, regional, and bilateral
organizations, on international policy matters, including efforts to liberalize
trade and foreign investment in international telecommunications networks and
services. Markle stated in a release that
the PNS program "works to promote international and domestic policy making
processes that are open, transparent, and accountable to multiple stakeholders,
including public, private and non-profit organizations as well as the public at
4/1. Rep. Bob Goodlatte (R-VA)
named Elyse Bauer his new press secretary. She was previously Deputy
Press Secretary to Rep. Frank Wolf
(R-VA). She replaces Janet Polarek who has returned to Lynchburg,
Virginia. See, Goodlatte
Blank was named a partner in the New York office of the law firm of Latham & Watkins. He focuses on intellectual
property litigation and counseling, including patent infringement, trademark
infringement, trade dress infringement, unfair competition, and copyright
infringement. He also advises clients on technology transactions and
intellectual property issues that arise in connection with mergers, acquisitions
and corporate financings. See, LW release.
4/1. The Department of Commerce's (DOC) National
Telecommunications and Information Administration (NTIA) announced that it
"has exercised the option to extend the term of the contract with ICANN for IANA
functions for the six-month period of 04/01/2002 through 09/30/2002." See, Modification
4/1. Qwest announced that
"as a result of an accounting rule change, SFAS 142, it would potentially
reduce the carrying value of goodwill by an estimated $20-$30 billion".
announced that "it has reached an agreement in principle with the Division
of Enforcement of the Securities and Exchange
Commission, the terms of which the Division has agreed to recommend to the
Commission. The agreement in principle concerns the settlement of proposed
allegations on matters that have been under investigation since June 2000. The
proposed agreement is subject to the approval of the Commission." Xerox
also stated that "The agreement in principle calls for a restatement of
Xerox's financials for the years 1997 through 2000 as well as an adjustment of
previously announced 2001 results" and that "the agreement in
principle calls for the SEC to file a complaint and a consent order in federal
district court for injunctive relief and a civil penalty of $10 million."
However, "Xerox would neither admit nor deny the allegations of the
complaint". See, Xerox
4/1. The U.S. Court of Appeals
(1stCir) issued its opinion
v. Saks Fifth Avenue, a Lanham Act case. The Cashmere & Camel
Hair Manufacturers Institute, a trade association of cashmere manufacturers
dedicated to preserving the name and reputation of cashmere, and one of its
members, filed a complaint in U.S.
District Court (DMass) against Saks
Fifth Avenue and others alleging the advertising of women's
"cashmere" blazers that contained no cashmere, in violation of the
Lanham Act, 15 U.S.C.
§ 1125(a), and Massachusetts state law. The District Court dismissed. The
Appeals Court reversed.
4/1. The U.S.
District Court (DMass) granted the Securities
and Exchange Commission's (SEC) motion for a preliminary injunction, asset
freeze, and other relief in SEC
v. Anamar Communications, Inc. and Brett Mallory, a civil
securities fraud action. The SEC alleged in its complaint, filed on March 15,
2002, that Anamar and Mallory violated § 17(a) of the Securities Act of
1933, § 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5
thereunder by fraudulently offering and selling shares of Anamar stock via the
Internet and other means. The complaint alleges that defendants falsely stated
that Verizon would buy Anamar. See, SEC release.
Go to News Briefs from March 26-31, 2002.