News from April 1-5, 2002
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 search engine".
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 in Movistar 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 criterion."
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 release [PDF].
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. Derek 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 release.
More News
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. See, notice 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.
Correction
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 corrected.
Professor Advocates Application of Doctrine of Misuse to Anti Circumvention Rights
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 burkx006@umn.edu.
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 business incubators".
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 desk."
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 negotiations.
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 release [PDF].
FCC Declares that EchoStar's Two Dish Plan Violates Statute and Rules
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." (Footnotes omitted.)
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 Commission's rules."
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 release.
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.
More News
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 Application".
5th Circuit Rules in Cyber Squatting Case
4/3. The U.S. Court of Appeals (5thCir) issued its opinion in Gallo 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 claim construction.
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 Requirements
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 proceeding.
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 market."
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 court."
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 a call.
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 time."
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 such arrangements."
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 release.
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.
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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, Adelphia release [PDF].
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.
Judge 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 program.
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 Congress."
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 their entireties".
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", said Sobel.
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 identification system.
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 nation's security."
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 release.
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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 release.
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 in IDX 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 therein."
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 package.
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 secrets."
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 protection."
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 property ..."
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 of trust."
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 large."
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 release.
4/1. James 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.
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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 of Contract.
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". See, Qwest release.
4/1. Xerox 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 release.
4/1. The U.S. Court of Appeals (1stCir) issued its opinion in Cashmere 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.