FCC Releases Order Permitting AOL Time Warner to Provide Advanced IM Services

8/20. The Federal Communications Commission (FCC) released a Memorandum Opinion and Order [13 pages in PDF] granting AOL Time Warner's petition to remove the FCC's restriction on its provision of video streaming advanced Instant Messaging based high speed services (AIHS). The FCC had imposed this restriction in its order approving the merger of AOL and Time Warner in early 2001. See, full story.

The District Court construed the claim at issue. In particular, it construed the term "electronic multi-function card" to mean a "device having the width and outer dimensions of a standard credit card with an embedded electronic circuit allowing for the conversion of the card to the form and function of at least two different single-purpose cards".

The parties filed cross motions for summary judgment. The District Court granted 3Com's motion for summary judgment of noninfringement both literally and under the doctrine of equivalents and denied E-Pass's motion for summary judgment of infringement under the doctrine of equivalents. It reasoned that credit cards are much smaller that Palm Pilots. (See, opinion reported at 222 F. Supp. 2d 1157.) E-Pass then brought this appeal.

Reaction. E-Pass stated in a release that "A similar litigation against Microsoft and Compaq (now Hewlett Packard) in the U.S. District Court in Texas had been stayed pending the Federal Circuit decision. The basis for the stay is now over, the decision being binding upon the Texas court, and it is expected that both the Palm/3Com and Microsoft/Compaq litigations will resume sometime within the next four to six weeks." (Parentheses in original.)

E-Pass added that "It is expected that E-pass will be filing additional patent infringement actions in the not-too distant future."

10th Circuit Rules in Cell Tower Case

8/20. The U.S. Court of Appeals (10thCir) issued its split opinion in U.S. Cellular Telephone of Greater Tulsa v. City of Broken Arrow, a cellular tower permitting case. The local zoning authority denied two applications for permits. The Appeals Court held that the denials were supported by "substantial evidence", as required by Section 332 of the Communications Act. Judge Milton Shadur dissented. He labeled Broken Arrow's permitting process "TEGWAR", or "the exciting game without any rules".

U.S. Cellular is a wireless telecommunications service provider. United States Cellular Telephone of Greater Tulsa applied to the City of Broken Arrow, Oklahoma for two specific use permits for the construction of cellular transmission towers. The first was for a a 120 foot monopole cellular transmission tower. The second was for a 240 foot, self-supporting cellular transmission tower. Broken Arrow denied the applications.

U.S. Cellular filed two complaints in the U.S. District Court (NDOkla) against Broken Arrow. The District Court held that the denial of one application was not supported by substantial evidence, and granted summary judgment to U.S. Cellular. The District Court held that the denial of the other application was supported by substantial evidence.

47 U.S.C. § 332(c)(7) pertains to the preservation of local zoning authority. Subsection (c)(7)(A) provides that "nothing in this chapter shall limit or affect the authority of a State or local government or instrumentality thereof over decisions regarding the placement, construction, and modification of personal wireless service facilities." However, subsection (c)(7)(B) enumerates several limitations upon local zoning authority. Subsection (c)(7)(B)(iii), which is at issue in this case, provides that "Any decision by a State or local government or instrumentality thereof to deny a request to place, construct, or modify personal wireless service facilities shall be in writing and supported by substantial evidence contained in a written record."

The Appeals Court upheld the District Court's affirmance of the denial of one application, and reversed the District Court's reversal of the denial of the other application.

Judge Tacha, writing for the majority, stated that "judicial review under the substantial-evidence standard is quite narrow." He reviewed the city's ordinance, U.S. Cellular's arguments regarding compliance with the ordinance, and the city's reasons for denying the the applications. He concluded that Broken Arrow satisfied the substantial evidence requirements of the federal statute.

Judge Shadur wrote in his dissent that Broken Arrow practices an "egregious brand of anarchy". He wrote that "It has in fact prescribed a set of rules, but when U.S. Cellular has then conformed meticulously to every one of the prescribed standards, the Broken Arrow response has been ``Too bad -- you lose anyway.´´ And regrettably the majority opinion has sanctioned that level of lawlessness on the City's part."

He concluded that "Congress has enacted the Telecommunications Act for a dual purpose: to facilitate the growth of wireless telephone service on a national basis, while at the same time preserving local control -- subject to specified restrictions -- over the siting of towers. What the majority has permitted Broken Arrow to do, I submit, is to subvert the careful balance prescribed by Congress."

This case is U.S. Cellular Telephone of Greater Tulsa v. City of Broken Arrow, Nos. 02-5128 and 02-5172, appeals from the U.S. District Court for the Northern District of Oklahoma, D.C. Nos. 01-CV-0550EA(J) and 01-CV-0518E(M).

FCC Release NOI On Communications Towers and Migratory Birds

8/20. The Federal Communications Commission (FCC) adopted a Notice of Inquiry (NOI) [pages in PDF] "to gather comment and information on the impact that communications towers may have on migratory birds."

The FCC seeks comments on several subjects, including "information that is supported by evidence concerning the number of migratory bird collisions with communications towers and the role that specific factors associated with communications towers may have in increasing or decreasing the incidence of such collisions. Such factors may include lighting, height, and particular type of antenna structure (including guyed and unguyed structures), meteorological conditions, location, physiographic features of sites, and known migratory bird migration corridors."

In addition, the FCC seeks "information on whether any current or proposed research may provide useful data regarding the subjects of this inquiry, and what other actions may be necessary to spur additional, necessary research."

The FCC also seeks comments "on whether certain measures might minimize any adverse impacts of communications tower siting and construction on migratory birds, whether any such measures are supported by adequate and reliable empirical and/or scientific evidence, and how the use of such measures may affect the ability of licensees and other parties to provide efficient and reliable communications services."

This is merely a notice of inquiry. However, the FCC also stated that "Depending on the record developed in this proceeding, the Commission will consider whether the current state of research would support further action by the Commission in this area, including possible amendments of its environmental rules."

This proceeding is titled "In the Matter of Effects of Communications Towers on Migratory Birds". The FCC announced the adoption of the NOI, and released its text, on August 20. However, the FCC also stated that it adopted the NOI back on August 8.

The FCC also issued a release [2 pages in PDF]. The FCC has not set a deadline for comments. Those will be announced in a future notice in the Federal Register. Initial comments will be due 60 days after publication in the Federal Register. Reply comments will be due within 90 days of publication in the Federal Register. For more information, contact Bill Stafford at 202 418-0563 or Bill.Stafford@fcc.gov. This WT Docket No. 03-187.

Powell Predicts Imminent Release of Triennial Review Order

8/20. Federal Communications Commission (FCC) Chairman Michael Powell held a news conference at the FCC at which he was asked when the FCC would release its triennial review order.

He responded, "I really think that this week. I have said that before. I really do. So, stayed tuned. Hopefully, we will get it out of here in the next couple of days. So, I would be looking for it towards the end of the week."

The FCC announced, but did not release, it triennial review order on February 20, 2003. See, stories titled "FCC Announces UNE Report and Order", "FCC Order Offers Broadband Regulatory Relief", "FCC Announces Decision on Switching", "Commentary: Republicans Split On FCC UNE Order", and "Congressional Reaction To FCC UNE Order" in TLJ Daily E-Mail Alert No. 609, February 21, 2003.

Powell Announces Localism in Broadcasting Initiative

8/20. Federal Communications Commission (FCC) Chairman Michael Powell held a news conference at the FCC to announce a "localism in broadcasting initiative". The initiative includes creating a localism task force, creating a blue ribbon panel on diversity, issuing a Notice of Inquiry on localism, and speeding the issuance of LPFM licenses.

Powell (at right) stated that the FCC will create a localism task force, to be chaired by Michelle Ellison and Robert Radcliffe of the FCC. It will conduct empirical studies on localism, organize a series of public hearings, advise the FCC on steps that it might take, and advise the Congress on possible legislation.

Powell stated that he has directed the staff of the FCC's Media Bureau to prepare a Notice of Inquiry (NOI) on localism. He added that it will work "in parallel" with the localism task force. It will inquire, among other things, whether "localism rules continue to operate effectively".

Powell also discussed the creation of a "blue ribbon panel" on diversity. He announced that it will be chaired by former Florida Public Service Commission Chairman Julia Johnson. Powell also reiterated his support for Sen. John McCain's (R-AZ) diversity bill. See, S 267, the "Telecommunications Ownership Diversification Act of 2003 ". See also, TLJ story titled "Sen. McCain Introduces Telecom Diversity Bill" in TLJ Daily E-Mail Alert No. 595, January 31, 2003.

Powell also stated that the FCC will speed its issuance of low power FM licenses. He stated that LPFM broadcasters are non-commercial, educational, who provide a community service. He added that "adding stations will dilute concentration". He also pointed out that the LPFM licensees are not counted for the purpose of statistically calculating concentration, so that granting more LPRM licenses will not result in allowing further consolidation among commercial broadcasters.

Powell explained that the changes to the media ownership rules announced in June were required by statute and court opinions. He added that the changes were "accurate and well balanced". However, he said that the FCC has heard "public concerns", and this initiative is a response to those concerns.

He also said that the FCC will not stay its rules changes. Also, he said that "the ownership caps are not on the table", unless the FCC receives direction from Congress.

On June 2, 2003, the FCC announced its Report and Order and Notice of Proposed Rulemaking [257 pages in PDF] amending its media ownership rules. See, story titled "FCC Announces Revisions to Media Ownership Rules" in TLJ Daily E-Mail Alert No. 672, June 3, 2003.

Copps Criticizes Powell's Localism in Broadcasting Initiative

8/20. Federal Communications Commission (FCC) Commissioner Michael Copps responded to FCC Chairman Michael Powell's localism in broadcasting initiative. He called it "a day late and a dollar short".

Earlier on August 20, Powell announced an initiative that includes creating a localism task force, issuing a notice of inquiry on localism, and speeding the activation of low power FM stations. See, FCC release [3 pages in PDF]. See, story titled "Powell Announces Localism in Broadcasting Initiative" in TLJ Daily E-Mail Alert No. 722, August 20, 2003.

Copps stated in a release that "This proposal is a day late and a dollar short. It highlights the failures of the recent decision to dismantle ownership protections. To say that protecting localism was not germane to that decision boggles the mind. The ownership protections, as well as the other public interest protections that the Commission has dismantled over the past years, are all designed to promote localism, diversity and competition. We should have heeded the calls from over 2 million Americans and so many Members of Congress expressing concern about the impact of media concentration on localism and diversity before we rushed to a vote. We should have vetted these issues before we voted. Instead, we voted; now we are going to vet. This is a policy of ‘ready, fire, aim!’"

"We now hear that there may be localism issues after all. But what’s going to happen while we study localism over the next year? The answer is: deals, deals and more deals." Copps (at left) continued that "By refusing to stay our rules, we guarantee a rash of mergers, acquisitions and swaps that cannot be undone because the genie will be out of the bottle long before this new task force reports. While we study, Big Media conglomerates will gobble up still more local stations and licenses will be renewed without examining how stations are serving their local communities."

Commissioner Copps did add that "promoting low-power radio stations is a welcome step and one that I support ..."

However, Rep. Billy Tauzin (R-LA), the Chairman of the House Commerce Committee, weighed in low power FM. He stated in a release he supports the goal of localism in broadcasting, and that "This initiative represents an important first step toward that goal, but at the same time, the FCC should move cautiously to make certain that low power radio stations do not create interference problems for existing license holders. Low power radio stations provide an important community service, but the FCC will accomplish nothing if it solves one problem only to create another."

See also, the FCC's LPFM web page.

Mark Cooper of the Consumer Federation of America stated in a release that "The FCC's suggestion that it will further study the issue of media concentration, without staying its June 2 rules, is an insult to those of us who suggested, in the record that the Commission had not done its homework. The appropriate time for study is before rules are issued, not afterwards."

Cooper added that "We are certain that the Chairman's actions today will not stop the political firestorm that the FCC rules have created."

People and Appointments

8/20. Federal Communications Commission (FCC) Chairman Michael Powell announced his intention to appoint Bryan Tramont (at right) to be FCC Chief of Staff. He replaces Marsha MacBride. Tramont is currently Powell's Senior Legal Advisor, with responsibility for wireless, international, technology, and consumer issues. Tramont previously was Senior Legal Advisor to Commissioner Kathleen Abernathy. Before that, he was Senior Legal Advisor to former Commissioner Harold Furchtgott-Roth. And before that, he was an attorney in the Washington DC office of the the law firm of Wiley Rein & Fielding. Tramont is also an adjunct law professor at The Catholic University of America. See, FCC release [PDF].

8/20. Julia Johnson, a former Chairman of the Florida Public Services Commission, was named Chairman of the Federal Communications Commission's (FCC) new Federal Advisory Commission on Diversity in the Digital Age. See, FCC release [PDF].

8/20. Michelle Ellison and Robert Radcliffe will chair the Federal Communications Commission's (FCC) localism task force, which was announced by FCC Chairman Michael Powell on August 20. Ellison is a Deputy General Counsel in the FCC's Office of General Counsel. Before she joined the FCC in 1995 she was a partner in the law firm of Williams & Connolly. Radcliffe is a Deputy Bureau Chief of the FCC's Media Bureau.

FTC Chairman Explains Role of FTC

8/19. Federal Trade Commission (FTC ) Chairman Timothy Muris gave a luncheon speech at a conference in Aspen, Colorado hosted by the Progress and Freedom Foundation. The FTC also released an extended written version.

He addressed the philosophy underlying a government consumer protection program. Then, he addressed how this philosophy is employed by the FTC in specific areas, such as fraud, spam, privacy, deceptive advertising, and the FTC's e-commerce initiative. Finally, he addressed the FTC's policy research and development.

Muris (at right) stated that the American economic system is "a three-legged stool". The first leg is "competition based on free enterprise". The second leg is "the legal structure of contract, property, and other private law that largely focuses on the relative rights of particular parties". The third leg is "Public agencies -- entrusted to promote consumer welfare by preserving competition and protecting consumers". He elaborated that one must first understand that nature of, and limitations of the first two legs, competition and the private law of contract, property and tort, to understand how the third leg, which involves the FTC, can best be performed.

"Competition presses producers to offer the most attractive array of price and quality options possible. In competitive industries, the imperative to gain new sales by satisfying consumer needs increases the choices available. In competitive markets, when consumers dislike the offerings of one seller, they can turn to others. This ability to shift expenditures imposes a rigorous discipline on each seller to satisfy consumer preferences. Competition does more than simply increase choices for consumers, however. It motivates sellers to provide truthful, useful information about their products and drives them to fulfill promises concerning price, quality, and other terms of sale. Consumers can punish a seller's deceit or failure to fulfill a promise by voting with their feet -- and their pocketbooks."

He added that for "products purchased infrequently, for which an individual consumer cannot usually rely on personal experience to evaluate a seller's truthfulness, private institutions can help provide the information that augments or substitutes for such experience." He cited the publication of Consumer Reports as an example.

However, he said that competition in the market sometimes fails to protect consumer welfare, because "some sellers are unconcerned about repeat business and reputation or because deception is difficult to detect because of information asymmetries".

But here, the second leg, the private law of property, contract and tort can be employed to overcome deficiencies in the first leg, market based competition. Muris stated that here the government provides "default rules -- terms that apply when the parties do not explicitly specify otherwise. The more efficient these rules, the greater the scope for exchange and thus the greater the gain in consumer welfare. When contracts are formed, even in the most complex transactions, parties do not find it useful to define the terms for every contingency possible. Instead, courts, legislatures, and agencies have developed default rules that are like buying off-the-rack clothing rather than specially tailored clothes. Rather than writing your own contract, you get it ``off the rack,´´ as it has come down in the judicial and legislative pronouncements. Many of these rules of exchange are so basic -- for example, rules against fraud, breach of contract, and deceptive advertising -- that we do not even think about them as rules at all."

However, sometimes neither market based competition, nor private enforcement for contract, property and tort rights, is sufficient to protect consumers. Muris stated that "One can easily imagine sellers unconcerned about repeat customers or reputation, or who make product claims that are difficult to verify, and who rely on the fact that few injured consumers will undertake the often difficult task of suing to vindicate their rights."

This then creates the need for the third leg of the American economic system, the public agencies, such as the FTC, that are authorized to promote consumer welfare by preserving competition and protecting consumers. The FTC fulfills these two functions by enforcing the antitrust statutes, and by enforcing the ban on unfair or deceptive acts or practices contained in the FTC Act. However, Muris's address focused almost exclusively in consumer protection, as opposed to competition, authority.

Muris reviewed in detail the FTC's activities in the areas of fraud, advertising, health claims, privacy, spam, international cooperation, and the FTC's e-commerce initiative

On the subject of e-commerce, Muris stated that "While many states are regulating e-commerce to promote important public interest objectives, such as protecting consumers from deception and fraud, some of these actions also shield local businesses from out-of-state competition."

He cited some examples: "some states require that online vendors maintain a physical office in the state, others completely prohibit online sales or shipments of certain products. Many states also require that out-of-state sellers obtain an in-state license before selling particular goods, such as caskets or contact lenses, or services, such as medical or legal advice. Some observers question whether the attendant higher prices and loss of variety outweigh the consumer protection benefits."

On the subject of privacy, he stated that "Fair Information Practices or ``FIPs´´ appears to be an appealing model because it is seemingly based on consumer consent, on contracts between consumers and businesses. In practice, however, consent is illusory. For most consumers, the costs of exercising choice -- although not high -- are not worth the perceived benefits. Consider the billions of privacy notices sent to consumers under Gramm Leach Bliley. Very few have exercised their right to opt-out of information sharing. Part of the problem, no doubt, is the difficulty of understanding some of the notices."

"Nor is opt-in the solution", said Muris. "Because most consumers will not expend the time and effort to consider the choice, opt-in is only the correct default if most fully-informed consumers would refuse to share information. Explaining the benefits and costs of information sharing is beyond the competence of even the best drafted short notices. We cannot make people focus on this, or any other, issue."

Muris States Spam Debate on Capitol Hill is Veering Off On the Wrong Track

8/19. Federal Trade Commission (FTC ) Chairman Timothy Muris addressed government efforts to deal with spam in his speech at the Progress and Freedom Foundation conference in Aspen, Colorado. See, extended written version. He stated that spam is a problem that should be addressed by government action, but that current legislative proposals are veering off on the wrong track. He stated, for example, that a "Do Not Spam Registry" would be unenforceable, and do little to reduce spam. Similarly, many bills go into detail on non-deceptive spam, which Muris argues is not the real problem.

He began by stating that "It is not apparent, however, that any regulatory solution exists for spam. Spam is one of the most daunting consumer protection problems that the Commission has ever faced." He added that "Despite the concerted efforts of government regulators, legislators, Internet service providers, and other interested parties, the problem continues to worsen."

He analyzed how spam differs from other forms of marketing. "First, unlike telemarketers or direct mail users, spammers can easily hide their identity and cross international borders. Email can be sent from anywhere to anyone in the world, without the recipient knowing who sent it. Spammers are technologically adept at hiding their identities, using false header information, and routing their emails across borders and through open relays, making it extremely difficult even for experienced government investigators with subpoena power to track them."

Moreover, "Because of the anonymity the technology affords, spammers are often exceptionally bold fraud artists", said Muris.

"Second, there are fundamental differences between the costs of email and other forms of marketing. Unlike phone calls or mail solicitations, sending additional spam is essentially costless. Instead, recipients and Internet Service Providers bear most of the costs. Because email technology allows spammers to shift the costs almost entirely to third parties, there is no incentive for the spammers to reduce the volume," said Muris. "If spammers had to pay the actual costs of spam, normal market forces would eliminate much of the spam problem."

Hence, Muris concluded that "spam is a major problem that normal market forces will not solve and is therefore a prime candidate for governmental intervention. The very technology that makes email such a powerful and revolutionary tool for business, however, makes spam a problem that the application of the Commission's law enforcement and regulatory tools cannot solve. There is no quick or simple ``silver bullet.´´"

He also commented that "In our haste to reduce spam, we must avoid over-regulation that could impede the flow of useful information to consumers. It is important to include legitimate marketers in this discussion because they have a strong interest in solving the spam problem -- the sheer volume of spam and its impact on consumer confidence is eroding a valuable form of marketing."

Muris then turned to the spam related legislation that is currently pending in the House and Senate. See, stories titled "House Judiciary Committee Holds Hearing on Spam Bill", "House Commerce Committee Holds Hearing on Spam Bills", and "Spam Bills Pending in the House and Senate" in TLJ Daily E-Mail Alert No. 696, July 11, 2003.

He stated that "Parts of these proposals can help, but no one should expect any new law to make a substantial difference by itself. Unfortunately, the legislative debate seems to be veering off on the wrong track, exploring largely ineffective solutions. For example, a ``Do Not Spam´´ list is an intriguing idea, but it is unclear how we can make it work. Most spam is already so clearly illegitimate that the senders are no more likely to comply than with the ``ADV´´ laws they now ignore."

He added that "We are sure the National Do Not Call Registry will reduce calls significantly. There is no basis to conclude that a Do Not Spam list would be enforceable or produce any noticeable reduction in spam. If it were established, my advice to consumers would be: Don't waste the time and effort to sign up."

Muris then offered his own assessments. (This speech contains his personal views, and not those of the FTC.) He argued that "There are three issues that any spam legislation must confront to be effective: First, legislation must enhance the ability to find the person sending the spam messages. Although technological changes will most effectively deal with this issue, we have proposed five procedural legislative changes that can provide some assistance in our law enforcement investigations. Thus far, proposed spam legislation has not included these additional changes that would make it easier for us to find and prosecute spammers, although some of them are included in other legislative proposals."

He elaborated on this point. He said that " proposals in both the House and the Senate require us to prove knowledge to bring an action against a seller that hires a spammer. Under one of the Senate bills, it would be extremely difficult successfully to sue a seller that hires a third-party to send email that is deceptive or otherwise violates the act, such as by not providing a working "opt-out." The FTC would have to prove that the seller knew, or consciously avoided knowing, that the third-party emailer it hired intended to violate the law. This standard requires proof of both the seller's and spammer's level of knowledge."

Second, spam legislation "must deal with how to punish the person sending the spam messages. Most spam we see already violate the FTC Act. Outside the spam context, when we find a fraudulent seller, we often can freeze assets and seek restitution of ill gotten gains for consumers. Unfortunately, most of our spam enforcement targets to date have very limited assets."

Finally, said Muris, "legislation can determine what standards will govern non-deceptive, unsolicited commercial email. This is the least important issue for dealing with the current spam problem, which involves few legitimate marketers. Ironically, because the legislation will do little to solve the current spam plague, this is the issue to which the proposals are most clearly addressed."

He concluded that "In the end, legislation cannot do much to solve the spam problem, because it can only make a limited contribution to the crucial problems of anonymity and cost shifting. Some of the proposed legislation, unfortunately, could be harmful or, at best, useless."

9th Circuit Rules on Recovery of Fees in Cases Involving Both Copyright and Non-Copyright Claims

8/19. The U.S. Court of Appeals (9thCir) issued its opinion [10 pages in PDF] in Traditional Cat Association v. Traditional Cat Association, a case involving both copyright and non-copyright claims. At issue is the recovery of fees by the prevailing party.

The Copyright Act, at 17 U.S.C. § 505, provides that "In any civil action under this title, the court in its discretion may allow the recovery of full costs by or against any party other than the United States or an officer thereof. Except as otherwise provided by this title, the court may also award a reasonable attorney's fee to the prevailing party as part of the costs."

The District Court denied fees, rather than making an attempt to apportion fees between the copyright and non-copyright claims. The Appeals Court reversed and remanded.

It held that the District Court "should first decide whether the copyright and non-copyright claims are related. If they are, then the district court should proceed to calculate a ``reasonable´´ fee award. If the district court determines that the copyright and noncopyright claims are not related, the defendants cannot recover fees for the non-copyright claims, but the district court must attempt to arrive at a fair apportionment and then calculate a reasonable fee award.

This case is The Traditional Cat Association, Inc. v. Traditional Cat Association, No. 01-56595, an appeal from the U.S. District Court for the Southern District of California, Judith Keep presiding, D.C. No. CV-99-00754-JNK

Music Publishers File Appeal Brief in P2P Infringement Case

8/18. The National Music Publishers Association (NMPA), representing Jerry Liebler and other music publishers and songwriters, and the Recording Industry Association of America (RIAA) and Motion Picture Association of America (MPAA), representing MGM and other movie and record companies, filed appeal briefs with the U.S. Court of Appeals (9thCir) in Liebler v. Grokster and MGM v. Grokster. The MPAA/RIAA brief was filed under seal. The NMPA brief is also under seal. However, the NMPA has released a public redacted version of its brief [45 pages in PDF]. See, full story.

FCC Extends Effective Date of Portions of New Unsolicited Fax Rule

8/18. The Federal Communications Commission (FCC) adopted and released an Order on Reconsideration [6 pages in PDF] in its proceeding titled "In the Matter of Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991". This Order on Reconsideration amends the FCC's recent Report and Order pertaining to unsolicited faxes. It extends the effective date of the Report and Order's determination that an established business relationship will no longer be sufficient to show that an individual or business has given express permission to receive unsolicited faxes. This is CG Docket No. 02-278.

This Order on Reconsideration pertains to the FCC's Report and Order [164 pages in PDF], which was adopted on June 26, 2003, and released on July 3, 2003. The Report and Order amends the FCC's rules implementing the Telephone Consumer Protection Act (TCPA). The Report and Order addresses several subjects, including unwanted telephone solicitations, establishment of a national do not call registry, transmission of caller ID information, and unsolicited faxes. See, Paragraphs 185-203, which address unsolicited faxes, and Appendix A, which contains the rules changes.

The FCC published a notice in the Federal Register on July 25, 2003 regarding this Report and Order. It provides that the effective date of the unsolicited faxes provisions is August 25, 2003. See, Federal Register, July 25, 2003, Vol. 68, No. 143, at Pages 44143 - 44179. 

The FCC's Order on Reconsideration (OR) states that "we issue this limited reconsideration of the Report and Order and extend, until January 1, 2005, the effective date of our determination that an established business relationship will no longer be sufficient to show that an individual or business has given express permission to receive unsolicited facsimile advertisements. We also extend, until January 1, 2005, the effective date of amended rule 47 C.F.R. § 64.1200(a)(3)(i)."

The OR elaborates that "Section 64.1200(a)(3)(i), as amended, requires the sender of a facsimile advertisement to first obtain from the recipient a signed, written statement that includes the facsimile number to which any advertisements may be sent and clearly indicates the recipient's consent to receive such facsimile advertisements from the sender."

The OR also offered an explanation for the extension. It states that "many organizations may need additional time to secure this written permission from individuals and businesses to whom they fax advertisements."

The OR adds that "the only effective dates of the Commission's Report and Order extended by this Order are: 1) the determination that an established business relationship will no longer be sufficient to show that an individual or business has given express permission to receive unsolicited facsimile advertisements; and 2) the requirement that the sender of a facsimile advertisement first obtain the recipient’s express permission in writing. Therefore, until the amended rule at 47 C.F.R. § 64.1200(a)(3)(i) becomes effective on January 1, 2005, an established business relationship will continue to be sufficient to show that an individual or business has given express permission to receive facsimile advertisements. The effective date of our amended definition of an ``established business relationship´´ is not affected by our determination here."

Federal Circuit Rules on Personal Jurisdiction in Patent Cases

8/18. The U.S. Court of Appeals (FedCir) issued its opinion [MS Word] in Electronics for Imaging v. Coyle, a case regarding personal jurisdiction in patent infringement actions. The Appeals Court reversed the District Court's dismissal for lack of personal jurisdiction.

Electronics for Imaging (EFI) is a Delaware corporation based in California. It makes hardware and software imaging solutions for network printing. Kolbet Labs is a Nevada corporation. Both Jan Coyle and Kolbet Labs engage in the research and development of computer software and hardware technology that can be used to more efficiently control digital printers and copiers. Coyle obtained U.S. Patent No. 6,337,746, titled "Interface card for coupling a computer to an external device".

EFI filed a complaint in U.S. District Court (NDCal) against Jan Coyle and Kolbet Labs seeking injunctive and declaratory relief. In particular, EFI sought a declaration that Coyle's 746 patent is invalid, that EFI had not misappropriated trade secrets, and that EFI had not breached contracts.

Coyle and Kolbet Labs, who have initiated their own litigation in Nevada, moved to dismiss the California action for lack of personal jurisdiction. EFI asserted specific, but not general, jurisdiction. The District Court dismissed, on the basis that the defendants did not have minimum contacts with the state of California. It applied Ninth Circuit law regarding personal jurisdiction. This appeal followed.

The Appeals Court reversed. It first addressed the question of whether to apply Ninth Circuit or Federal Circuit law on the issue of personal jurisdiction. The Appeals Court held that Federal Circuit law applies to the patent claim and Ninth Circuit law applies to the state law claims.

It first wrote that "Determining whether specific personal jurisdiction over a nonresident defendant is proper entails two inquiries: whether a forum state's long-arm statute permits service of process, and whether the assertion of jurisdiction would be inconsistent with due process."

The Court then stated that since California's long-arm statute permits service of process to the limits of the due process clauses of the U.S. Constitution, "the personal jurisdiction analysis in this case narrows to one inquiry: whether jurisdiction comports with due process."

The Court, reviewing the Supreme Court's holding in International Shoe and other cases, wrote that "Under the governing framework of personal jurisdiction, as developed in the Supreme Court jurisprudence, the exercise of jurisdiction over nonresident defendants of a forum state is not inconsistent with due process if the nonresident defendants have certain ``minimum contacts´´ with the forum ``such that the maintenance of the suit does not offend `traditional notions of fair play and substantial justice.´" It added that "In general, there must be ``some act´´ by which defendants ``purposefully avail[]´´ themselves of the ``privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.´´" (Citations omitted.)

Then, applying Federal Circuit law to the patent invalidity claim, the Appeals Court wrote that "This court has adopted a three-factor test embodying the Supreme Court's jurisprudence on specific personal jurisdiction.  To determine whether jurisdiction over an out-of-state defendant comports with due process, we look to whether (1) the defendant purposefully directed its activities at residents of the forum state, (2) the claim arises out of or relates to the defendant's activities with the forum state, and (3) assertion of personal jurisdiction is reasonable and fair."

The Court applied this three part test to the present case, and concluded the exercise of personal jurisdiction comports with due process. The Court found that Coyle and Kolbet Labs had purposefully directed their activities at residents of the California, because they had hired California firms to prosecute their patent claim, hired a California lawyer to contact EFI, telephoned EFI in California, and sent representatives to visit EFI's facilities in California. The Court then found that EFI's claim of invalidity arises out of or relates to Coyle and Kolbet Labs' activities. Finally, the Court found that the assertion of personal jurisdiction is reasonable and fair, noting for example, that Nevada is geographically adjacent to California.

The Court then applied the Ninth Circuit's law of personal jurisdiction to the state law contract and trade secrets claims, and found the exercise of personal jurisdiction by the California court appropriate.

This case is Electronics for Imaging, Inc. v. Jan Coyle and Kolbet Labs, No. 02-1536, an appeal from the U.S. District Court for the Northern District of California.

NTIA Releases Report to Congress Re Internet Filtering Technology

8/18. The National Telecommunications and Information Administration (NTIA) released a report to Congress titled "Children's Internet Protection Act: Study of Technology Protection Measures". See also, NTIA release.

The Children's Internet Protection Act (CIPA), which the Congress passed in October of 2000, requires, at Section 1703, that the NTIA prepare this report.

The CIPA requires that schools and libraries receiving federal subsidies for telecommunications, internet access or internal connections adopt an internet safety policy and employ technological protections that block or filter certain visual depictions deemed obscene, pornographic, or harmful to minors. The CIPA also requires the NTIA to (1) evaluate whether the technology measures currently available adequately address the needs of educational institutions, and (2) evaluate the development and effectiveness of local Internet safety policies. The NTIA first requested and received comments from the public.

The report concludes that "currently available technology measures have the capacity to meet most, if not all, of [the] needs and concerns" expressed by commenters. The report elaborates that "Based on the comments, existing technology protection measures are helping to meet the concerns of educational institutions to protect children from inappropriate materials they may encounter while using the Internet. The occurrence of overblocking and underblocking, however, has resulted in some dissatisfaction and frustration by users with the existing technology protection measures."

See, for example, comment submitted by the Center for Democracy and Technolgy ("filtering technology and products will both overblock and underblock access to Internet content with respect to any content-based standard"), and comment submitted by the American Library Association ("No filtering tool exists which can be perfectly calibrated to block out only material that is not protected by the Constitution, without blocking access to material that has constitutional protection.").

The report also makes two legislative recommendations. First, "Technology vendors should offer training services to educational institutions on the specific features of their products." Second, "CIPA's definition of ``technology protection measure´´ should be expanded to include more than just blocking and filtering technology in order to encompass a vast array of current technological measures that protect children from inappropriate content."

BXA Announces Fine of Computer Exporter

8/18. The Bureau of Industry and Security (BIS), which is also still known as the Bureau of Export Administration (BXA), announced an action pertaining to E&M Computing Ltd. The BIS stated that it charged E&M with violating the Export Administration Regulations (EAR) by selling and servicing computers and computer components to customers in Israel, including a nuclear research center.

The BIS stated in a release that it "charged that E&M caused the export of central processing units (CPUs), a workstation, a server, and a high performance computer to Israel without the required export licenses. BIS also charged that E&M evaded the EAR by purchasing computers from another vendor after learning that BIS would deny the first vendor’s license application to export the items."

The BIS stated that it fined E&M $165,000, and that it imposed a three year denial of export privileges, but suspended the denial, for three years.

4th Circuit Affirms Dismissal of Antitrust Action Against Washington Post

8/18. The U.S. Court of Appeals (4thCir) issued its unpublished opinion [13 pages in PDF] in Berlyn v. Gazette Newspapers, in which the Appeals Court affirmed the District Court's dismissal of an antitrust action against the Washington Post and subsidiaries. This action pertains to regional weekly print publications, and not to either the Washington Post daily print newspaper, or the Washington Post web site.

Berlyn, Inc., and other plaintiffs are small, community oriented, weekly print newspaper publishers in the Washington DC and Baltimore areas.

The Washington Post Company publishes the Washington Post. It also owns The Gazette Newspapers, Inc., which publishes numerous weekly, community newspapers in the area. The Gazette is a 50% owner of the Washington and Baltimore Suburban Press Network, Inc. (Press Network), which is an organization designed to provide advertisers with one-stop shopping for placing ads in a series of local papers throughout the region.

The plaintiffs filed a complaint in the U.S. District Court (DMd) against the Washington Post, Gazette, and  Press Network alleging violations of federal and state antitrust laws. The complaint also includes state law claims of unfair competition, breach of contract, and tortious interference with contract.

More specifically, the plaintiffs alleged violations of Section 1 of the Sherman Act (15 U.S.C. § 1), Section 2 of the Sherman Act (15 U.S.C. § 2), Section 7 of the Clayton Act (15 U.S.C. § 18), and Section 11-204(a)(1) of the Maryland Antitrust Act. They alleged that the Press Network's bylaws, which gave Gazette effective veto power over which newspapers could become members of the Press Network, violated Section 1 of the Sherman Act. They alleged that the Gazette and the Washington Post have been engaged in an attempt to monopolize, and they and the Press Network have conspired to monopolize the community newspapers business throughout Southern Maryland, including Prince George's and Montgomery Counties, in violation of Section 2 of the Sherman Act. They also alleged that the Gazette's acquisition of a regional newspaper in southern Maryland violated Section 7 of the Clayton Act.

The District Court dismissed all claims.

The Court of Appeals affirmed. It wrote that "Two essential elements of Appellants' federal and state antitrust claims are proof of the relevant product and geographic markets. ... That is, in order to determine whether any antitrust violation has occurred, ``we must first define the relevant market because the concept of competition has no meaning outside its own arena, however broadly that arena is defined. The plaintiff in an antitrust case bears the burden of proof on the issue of the relevant product and geographic markets.´´ ... A relevant product market ``is composed of products that have reasonable interchangeability for the purposes for which they are produced ...´´" (Citations omitted.)

The Court summarized the plaintiffs' argument as follows: "the product market consists of the legal and commercial advertising services provided by weekly community newspapers and the Post Company's Extra. Excluded from this proposed market are other forms of print advertising, such as direct mail and fliers, along with non-print media advertising on radio or local cable television."

The Court wrote that this is a flawed argument. "The consumers in this case are the advertisers, and from the advertisers' perspectives, direct mail and other forms of advertising may well be ``reasonably interchangeable.´´"

The Appeals Court also wrote that "There is an additional, fundamental weakness with Appellants' definition of the relevant product market. While their market definition is underinclusive as explained above, it is also overinclusive, because it places legal advertising in the same market as commercial advertising." The Court therefore concluded that the plaintiffs "have failed to meet their burden to establish the relevant product market".

The Appeals Court also held that the plaintiffs' allegation of per se violation of the Sherman Act fails. Therefore, the District Court was correct to dismiss the action.

The Appeals Court also wrote that "Unpublished opinions are not binding precedent in this circuit. See Local Rule 36(c)." However, it is not apparent from the text of the opinion why the Appeals Court designated this opinion as "unpublished".

This case is Berlyn, Inc. et al. v. The Gazette Newspapers, Inc., Washington Post, No. 02-2152, an appeal from the U.S. District Court for the District of Maryland, at Baltimore, Judge Frederic Smalkin presiding, D.C. No. CA-01-606-S.

People and Appointments

8/18. Former Rep. Steve Largent (R-OK) will replace Tom Wheeler as P/CEO of the Cellular Telecommunications & Internet Association (CTIA), effective November 2003. Largent is a former member of the House Commerce Committee, and its Telecommunications and Internet Subcommittee. He resigned at the end of 2001 to run for Governor of Oklahoma. He lost in the general election. See, CTIA release.

8/18. Marsha MacBride (at right) is resigning as Chief of Staff of the Federal Communications Commission (FCC). She has worked at the FCC since 1991. She has been Chief of Staff since January of 2001, when Michael Powell became Chairman. She worked for Disney before joining the FCC. The FCC release [PDF] announcing her resignation did not state what she will do next.

More News

8/18. The U.S. Trade Representative (USTR) released an Information Circular [3 pages in PDF] regarding the 5th Ministerial Conference of the World Trade Organization (WTO) scheduled for September 10-14, 2003 in Cancún, Mexico. This document provides information for persons planning to attend as representatives of non-government organizations.

8/18. The U.S. Court of Appeals (7thCir) issued its opinion [34 pages in PDF] in Learning Curve Toys v. Playwood Toys, a trade secrets case. Playwood Toys, which make toy trains, filed a complaint in the U.S. District Court (NDIll) against Learning Curve Toys. It obtained a jury verdict for misappropriation of a trade secret, and awarding 8% for a license that would have been negotiated, absent the misappropriation. The District Court granted judgment as a matter of law, holding that PlayWood did not have a protectable trade secret. The Appeals Court reversed, and reinstated the jury verdict. This is Learning Curve Toys, Inc. v. Playwood Toys, Inc., No. 02-1916, an appeal from the U.S. District Court for the Northern District of Illinois, Eastern Division, D.C. No. 94 C 6884, Judge Rebecca Pallmeyer presiding.

Go to News from August 11-15, 2003.