Intel Accepts Recommendation of Japanese FTC Regarding Anticompetitive Marketing Practices

3/31. Intel announced that its Japanese subsidiary, Intel Kabushiki Kaisha (IJKK), accepts the March 8, 2005 recommendation from the Japan Fair Trade Commission (JFTC).

The JFTC wrote in a March 8 English language release [3 pages in PDF] that it "requires IJKK to cease and desist its conducts which violate Section 3 of the Antimonopoly Act".

The JFTC stated that IJKK sells Intel X86 central processing units (CPUs) to Japanese original equipment manufacturers (OEMs). It continued that IJKK has made these OEMs refrain from buying CPUs from Intel's competitors through its use of rebates and a market development fund.

The recommendation compels IJKK to stop certain practices related to these rebates and fund.

Intel added in its March 31 statement that "Although IJKK accepts the Recommendation, the company does not agree with the facts underlying the JFTC's allegations and the application of law in the Recommendation. IJKK continues to believe its business practices are both fair and lawful, but the company believes that the cease and desist provisions of the Recommendation will not impair it from continuing to meet customer requirements."

USTR Release Report on Anti-Competitive Regulations in Telecom Sector

3/31. The Office of the U.S. Trade Representative (USTR) released a document [10 pages in PDF] titled "Results of the 2005 Section 1377 Review of Telecommunications Trade Agreements".

Peter Allgeier (at right), the acting USTR, stated in a release that "We are deeply concerned by the tepid commitment some of our trade partners have shown to competition in the telecommunications sector. This is especially true in countries such as China, India and Japan where national operators are already competing on a global level, but remain protected at home by relatively closed markets. It is very hard to see a legitimate reason why these markets should not be open to full and effective competition".

See, full story.

Bush Seeks Extension of Trade Promotion Authority

3/31. President Bush wrote a letter to the Speaker of the House, and the President of the Senate, in which he asked the Congress to extend trade promotion authority (TPA) for two years. The current TPA expires on July 1, 2005. The request was anticipated.

TPA gives the President the authority to negotiate trade agreements that the Congress can approve or reject, but not amend.

Bush wrote that "We must continue to pursue bilateral and regional agreements to open new markets, and we must complete negotiations in the World Trade Organization to reduce global barriers to trade. We will continue to enforce vigorously the trade laws so that American businesses and workers are competing on a level playing field."

People and Appointments

3/31. President Bush announced his intent to nominate Gordon England to be Deputy Secretary of Defense. He is currently Secretary of the Navy. He has also been Deputy Secretary of Homeland Security. Before coming to Washington DC, he worked for General Dynamics. See, White House release.

3/31. President Bush announced his intent to nominate Eric Edelman to be Under Secretary of Defense for Policy. He is a career Foreign Service officer. See, White House release.

3/31. Lydia Parnes was named Director of the Federal Trade Commission's (FTC) Bureau of Consumer Protection. She was the acting Director. She has worked for the FTC since 1981. See, FTC release.

3/31. Elizabeth Schimel was named SVP of content development for Comcast's Online division. See, Comcast release.

3/31. Gary Kunis was named Chief Technology Officer of Nortel Networks. Also, Brian McFadden was named Chief Research Officer. See, Nortel release.

People and Appointments

3/30. Scott Friestad was named Associate Director of the Securities and Exchange Commission's (SEC) Division of Enforcement. He has worked at the SEC since 1995. See, SEC release.

Supreme Court Hears Oral Argument in Brand X Case

3/29. The Supreme Court heard oral argument in FCC v. Brand X. The Federal Communications Commission (FCC), as well as cable companies, want the Court to overturn the 2003 opinion [39 pages in PDF] of the 9th Circuit, which vacated the FCC's 2002 Declaratory Ruling (DR) that cable modem service is an information service, and that there is no separate offering as a telecommunications service.

Former Chairman Powell, and other Commissioners who supported the Declaratory Ruling (DR), have the understanding that the old regulatory classifications of the Communications Act are becoming increasingly obsolete as new technologies are developed, and technologies converge. They were driven by their policy goals of promoting investment in new facilities, promoting technological innovation, promoting intermodal competition between different providers, and ultimately, promoting the deployment of inexpensive and ubiquitous broadband, and all of the news services that will run over broadband.

In contrast, the Justices, in their questions and comments, where concerned almost exclusively with applying the statute, without regard to the consequences. The Justices also displayed no interest in issues related to deference to the decisions of administrative agencies.

Background. On March 14, 2002, the FCC adopted a Declaratory Ruling and Notice of Proposed Rulemaking [75 pages in PDF]. The Declaratory Ruling (DR) component of this item states that "we conclude that cable modem service, as it is currently offered, is properly classified as an interstate information service, not as a cable service, and that there is no separate offering of telecommunications service."

Brand X, EarthLink, the State of California, and the Consumer Federation of America filed petitions for review in which they argued that cable modem service is both an information service and a telecommunications service, and is therefore subject to regulation on a common carriage basis. That is, they argue that cable broadband providers must be required to let other internet service providers (ISPs) use their facilities.

On October 6, 2003 the U.S. Court of Appeals (9thCir) issued its opinion [39 pages in PDF] in Brand X Internet Services v. FCC, vacating the FCC's declaratory ruling that cable modem service is an information service, and that there is no separate offering as a telecommunications service. See also, story titled "9th Circuit Vacates FCC Declaratory Ruling That Cable Modem Service is an Information Service Without a Separate Offering of a Telecommunications Service" in TLJ Daily E-Mail Alert No. 754, October 7, 2003. This opinion is also reported at 345 F.3d 1120.

Oral Argument. Two things may be notable about the Justices' questions and comments during the oral argument in the this case.

First, there was almost nothing said regarding the Chevron doctrine, the 9th Circuit's determination not to apply Chevron deference, or the implications of the unusual procedure that resulted in the Court of Appeals not applying Chevron deference.

The 9th Circuit decided without applying the deference to administrative agencies required by Chevron U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984). Rather, it concluded that it was bound by the doctrine of stare decisis to follow its June 22, 2000 opinion in AT&T v. Portland, which held that cable modem service is a telecommunications service. (The Portland case is also reported at 216 F.3d 871.)

The FCC was not a party to that earlier action; it had not yet issued its DR. Moreover, the cable operator, AT&T, argued for telecommunications status, rather than information services status. AT&T's success in implementing its legal strategy now plagues companies that build broadband facilities.

The Appeals Court's proceeding in the present case was a consolidation of numerous petitions for review filed in several different circuits. The case only went to the 9th Circuit because it won the lottery. Had the case gone to any other circuit, the Portland decision would not have bound the Court under the doctrine of stare decisis. The Court would likely have applied Chevron deference, and the DR would have been upheld.

However, none of this was discussed by the Justices during oral argument.

Second, the Justices said almost nothing about how the FCC's policy for promoting broadband deployment will be affected by the Court's decision in this case.

While Justices repeatedly discussed policy implications of various possible rulings in the MGM v. Grokster case at 10:00 AM, they had nothing to say about the policy implications in the FCC v. Brand X case at 11 AM..

Most of the Justices asked few or no questions. Justice Antonin Scalia and Justice Stephen Breyer dominated the discussion. Justice David Souter also contributed significantly.

Justices Scalia and Breyer asked questions regarding the statutory definitions in the Communications Act, various acts enacted by the Congress, and the definitions therein. There was also much discussion of the FCC's 1980 Computer II decision, which created a dichotomy of "basic services" and "enhanced services." It decided that the later are not subject to common carrier treatment under the Communications Act.

Scalia was unconcerned, in his questions and comments, about the policy implications for various possible regulatory treatments of broadband modem service. He said that the FCC's implementation is "good policy", but "how do you get this out of the definitions". He said that at the FCC "they are doing it all on policy grounds", and on the basis "of whether we like the result it produces".

Justice Breyer did comment later that he had no idea how consumers are going to get their broadband service in twenty years, so why not leave this to the agency with expertise in the matter.

Chief Justice Rehnquist was not active in the questioning in this case. However, at one point he commented that in passing the Telecommunications Act of 1996 the "Congress apparently wanted to go in the direction of deregulation".

Reaction. Randolph May, the Director of Communications Policy Studies at the Progress and Freedom Foundation (PFF), attended the oral argument. The PFF supports reversal of the 9th Circuit.

He was resigned when he spoke with reporters afterwards outside of the Supreme Court building. He said that "cable cannot come away from it feeling that they have a slam dunk". He added that now the cable industry "may have to get its legislative strategy cranked up".

He added that he thinks that Justice Scalia would follow the statute strictly, and affirm the judgment of the 9th Circuit, while Justice Breyer would likely defer to the FCC.

In addition, the PFF's Kyle Dixon, who previously worked for former Chairman Powell, stated in a release on March 25 that "Consumers benefit most when companies battle to build them the most sophisticated networks possible, not when regulators let companies free-ride on existing networks ... Should the FCC lose in Court or on remand to the 9th Circuit, ... the result would saddle broadband with regulatory costs, uncertainties and economic distortions, further delaying real choice for consumers."

Earthlink is an internet service provider that supports affirmance of the 9th Circuit. Dave Baker, VP for Law and Public Policy at EarthLink, opined in a statement released after the oral argument that this case "will decide whether consumers will be able to choose their broadband provider over cable and ultimately, over DSL as well. More broadly, it will determine whether a wide variety of innovative voice, video and data services become available, or whether Internet users will be limited to only those services their cable company provides."

He stated that "We believe the Supreme Court will affirm the Ninth Circuit's decision. ... Cable companies built their networks using government-granted monopoly franchises, access to public rights of way and discounted rates for pole attachments. Nonetheless, they now dictate what services, devices and applications companies can offer and consumers can use on those networks. We expect that the Supreme Court will affirm that consumers, and not cable companies, should make those choices."

TLJ also spoke with Earl Comstock, outside counsel for Earthlink, outside the Court. He was pleased with the questions and comments from the Justices, and "cautiously optimistic" about the outcome.

This case is NCTA v. Brand X Internet Services, No. 04-277, and FCC v. Brand X Internet Services, No. 04-281, petitions for writ of certiorari to the U.S. Court of Appeals for the 9th Circuit.

Supreme Court Hears Oral Argument in MGM v. Grokster

3/29. The Supreme Court heard oral argument in MGM v. Grokster. Justices were active in asking tough questions of both the peer to peer (P2P) and entertainment industries' counsel. See, full story.

Cato Paper Argues For Negligence Liability Rather Than Statutory Regulatory Regime for Data Security Breaches

3/29. James Harper, the Director of Information Policy Studies at the Cato Institute, released an essay titled "When Data Security Regulations Fail, There Is an Alternative".

This essay argues that data aggregators, such as ChoicePoint, and banks, such as Bank of America, should not be subjected to a uniform statute based data regulatory regime. Rather, there should be a judicially imposed liability regime based upon the law of negligence.

ChoicePoint announced on February 21, 2005 that "organized criminals posing as legitimate companies gained access to personal information" about 145,000 individuals. See, story titled "ChoicePoint Describes Its Sale of Data to Identity Thieves" in TLJ Daily E-Mail Alert No. 1,081, February 23, 2005.

Bank of America announced on February 25, 2005 that it lost "computer data tapes" during "shipment to a backup data center". It stated in its release that "The missing tapes contained U.S. federal government charge card program customer and account information".

There are proposals to regulate data aggregators. For example, on March 2, 2005, Rep. Ed Markey (D-MA), the ranking Democrat on the House Commerce Committee's Subcommittee on Commerce, Trade and Consumer Protection, introduced HR 1080, the "Information Protection and Security Act". This bill would require information brokers to comply with a set of new fair information practice rules. It would give enforcement authority to the Federal Trade Commission (FTC) and states. It would also allow a private cause of action.

Similarly, the Electronic Privacy Information Center (EPIC) argued for regulation of data aggregators even before the recent disclosures by ChoicePoint, Bank of America, and others. It advocates extending Fair Credit Reporting Act (FCRA) like regulation to data aggregators. See, for example, story titled "EPIC Seeks Congressional Hearing and FTC Workshop on Data Products and FCRA" in TLJ Daily E-Mail Alert No. 1,052, January 10, 2005, and "EPIC Urges FTC to Open Investigation on Data Products and FCRA" in TLJ Daily E-Mail Alert No. 1,042, December 22, 2004.

Harper argues that "Data security regulation is a proven failure", and cites the history of the FCRA as proof.

He states that the credit bureaus "have been besieged for years by complaints about inaccuracy and unfairness. This despite the Fair Credit Reporting Act, a federal regulatory scheme imposed 30 years ago to address inaccuracy and unfairness in credit reporting. The FCRA was amended in 2003 to address inaccuracy and unfairness in credit reporting. Again."

Harper argues that "regulation is no more capable of divining threats to data security than, say, a common law liability regime, or even businesses’ natural interest in maintaining their operations, integrity, image, brand, and assets."

Hence, he advocates, "Rather than hurried, one-size-fits-all federal regulation, imagine a rule where negligent holders of sensitive data suffer liability for damage caused by breaches. Imagine they have to pay injured parties for the consequences. Ten thousand breaches causing $1000 damage would cost a negligent data holder $10 million, along with adverse publicity and all the rest. Under such a rule, breached companies would race to shore up the damage because further damage would create further liability."

Harper further states that it is not necessary to pass legislation. Simply allow the common law process in the various state court to extend the law of negligence to data security breaches.

The Congress has held several hearings on this issue. See, stories titled "House Subcommittee Holds Hearing on Data Aggregators" in TLJ Daily E-Mail Alert No. 1,096, March 16, 2005; "Senate Banking Committee Holds Hearing on Data Security" in TLJ Daily E-Mail Alert No. 1,093, March 11, 2005; and "Senate Judiciary Committee Could Hold Hearings on ChoicePoint, Technology, Privacy and Security" in TLJ Daily E-Mail Alert No. 1,083, February 25, 2005.

See also, story titled "Reed Elsevier Reveals Fraudulent Access to Databases of Personal Information" in TLJ Daily E-Mail Alert No. 1,093, March 11, 2005.

9th Circuit Rejects California's 11th Amendment Defense of Bogus Escheat of Intel Stock

3/29. The U.S. Court of Appeals (9thCir) issued its opinion [22 pages in PDF] in Taylor v. Westly, a case involving the 11th Amendment of the U.S. Constitution, and the state of California's attempt to confiscate the Intel stock of a resident of England under a plundering escheat scheme.

Background. Chris Taylor is a former employee of Intel. He lives in England. His wife is former general counsel for  Intel in Europe. He owns or owned 52,224 shares of Intel stock. The state of California confiscated and sold his stock. He wants his money back. California will not give it to him.

There is a second plaintiff in this case, Nancy Gonsalves, a former TWA flight attendant. California confiscated and sold her 7,000 shares of TWA stock. She too wants her money back.

California asserts that it has acquired the stock of Taylor and Gonsalves pursuant to the legal procedure of escheat. However, California's escheat procedure resembles confiscation of property by third world people's republics more than it resembles the doctrine of escheat.

Escheat derives from the common law of England, where it was developed during the medieval era. The Court of Appeals wrote that escheat "formerly terminated a tenancy so that on the death of a tenant without heirs, or as a result of a tenant’s felony that worked a corruption of the blood, the land escheated to the lord of the fee."

Of course, there are no more kings and lords. Today, the doctrine of escheat has evolved to allow the state to acquire title to the property of persons that has long been abandoned, and for which the state can locate no living owner or heirs.

The Court of Appeals wrote that escheat is "a means of dealing with money where money and property are unclaimed and the person entitled to it is dead or gone, gone to a degree that the person cannot be found and there is no other individual with a good claim."

California has attempted to further expand its powers under escheat to seize property, including stock in technology companies located in California, and even when the owners are alive and locatable.

It has drastically shortened the time period in which property may be found to be abandoned to three years. And, in the case of corporate stock, it has resorted to legal fictions to find abandonment.

In the present case, California asserts that abandonment is evidenced by the fact that Taylor did not cash any dividend checks over a three year period. But, Intel issued no dividends during the relevant time period, so Taylor had no checks to deposit, cash or negotiate.

California asserts also that Taylor abandoned his stock by not voting in elections of Directors. Although, many stockholders never vote, or sign proxies.

Finally, California asserts that Taylor abandoned his stock by being "lost" or "unknown". Yet, California knew who he was, and made no attempt to establish that he had died (he hadn't). Moreover, Intel knew where he was, and was in correspondence with him on various matters. California made no attempt learn his location, or to contact him.

Moreover, Taylor had certificates issued to him. They were in his possession. They had not been abandoned.

The California statutory escheat procedure also requires that the state publish the names of people, and their property, that is subject to escheat. California never published Taylor's name or property. Also, the statute requires the state to institute a judicial escheat proceeding. California never did this.

California nevertheless confiscated Taylor's shares by ordering Intel to cancel his shares and issue new shares to the state. The state then sold these shares, and put the money in the general fund.

Nancy Gonsalves was subjected to a similar confiscation. The Court of Appeals, in its recitation of the facts, made no effort to conceal its distain for California's escheat scheme. It wrote for example, that "California is taking the flight attendant's stock in her airline on the basis, basically, that she cannot be found, even while she is standing in court shouting, ``Here I am! Here I am! Give me my money!´´ And the State of California turns a deaf ear, pretending it cannot hear her."

District Court. When Taylor and Gonsalves learned of the confiscation, they filed a complaint in the U.S. District Court (EDCal) against Steve Westly, in his capacity as Controller of the State of California. They sought a variety of relief, including monetary damages. They also alleged violation of the Due Process and Takings clauses of the U.S. Constitution, violation of federal securities laws, and violation of the state Unclaimed Property Act.

They also sought a declaratory judgment and "disgorgement and return of either their stock investment or the return of the reasonable value thereof".

California moved to dismiss for lack of subject matter jurisdiction. It argued that it is immune from suit under the 11th Amendment of the U.S. Constitution. The District Court dismissed the complaint, without reaching the merits of the case. It held that California has 11th Amendment immunity. This appeal followed.

11th Amendment. The 11th Amendment provides that "The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State."

It is an ancient principle, the 18th Century rationale of which has little relevance today. Nevertheless, the Supreme Court given it new meaning in recent years. For example, in Seminole Tribe v. Florida the Supreme Court held that the Congress lacks authority under Article I of the Constitution to abrogate the States' 11th Amendment immunity from suit in federal courts. The Supreme Court extended this to the context of intellectual property in the 1999 rulings in Florida Prepaid v. College Savings Bank (invalidating the Patent and Plant Variety Protection Remedy Clarification Act) and College Savings Bank v. Florida Prepaid (invalidating the Trademark Remedy Clarification Act).

The immunity doctrine contained in the 11th Amendment has also been limited by the doctrine of Ex Parte Young, 209 U.S. 123 (1908), which provides that a federal court may enjoin a state from enforcing a law the constitutionality of which has been challenged. The general principle is that, notwithstanding the 11th Amendment, one can bring suit in federal court against a state seeking prospective injunctive relief. However, one cannot seek monetary damages.

For example, the Supreme Court held in 2002 in Verizon Maryland v. Public Service Comm. of Maryland [PDF], that "In determining whether the doctrine of Ex Parte Young avoids an Eleventh Amendment bar to suit, a court need only conduct a straightforward inquiry into whether [the] complaint alleges an ongoing violation of federal law and seeks relief properly characterized as prospective."

Court of Appeals. The Court of Appeals reversed in a scathing and unanimous opinion.

The issue before the Court of Appeals was whether the District Court erred in dismissing the complaint for lack of subject matter jurisdiction, pursuant to the 11th Amendment. The issue was not the legality of the confiscation of stock.

The task of the Court of Appeals, therefore, was to construe a claim for money as a claim for prospective injunctive relief.

So, the Court of Appeals reasoned, this is not a suit for money damages. It is a suit for injunctive relief. The Court reasoned that California has not confiscated and sold the stock. Rather, it is merely holding the stock, and the proceeds of its sale, in trust for Taylor and Gonsalves. And, Taylor and Gonsalves seek injunctive relief ordering the state to return to them their property that is being held in trust.

The Court of Appeals concluded that "Because the plaintiffs seek genuinely prospective relief, and because the funds they seek are held by the state as custodian in trust for them rather than as the state's own funds, much as a municipality holds a car towed from an expired parking meter, the complaint should not have been dismissed under the Eleventh Amendment for lack of jurisdiction. The judgment is vacated and the case is remanded for proceedings consistent with this opinion."

In crafting this opinion, the Court of Appeals not only got around 11th Amendment immunity; it also held, as a part of its analysis that the property is held in trust, that California had not complied with its own escheat statute. Hence, the Court of Appeals has issued an opinion that will make it more difficult for the state to prevail on the merits on remand to the District Court.

11th Amendment and Intellectual Property Rights. The state of California asserts 11th Amendment immunity to shield it from adverse court judgments, not only to protect its fraudulent escheat scheme, but also to protect other profitable, but improper appropriations. In particular, the 11th Amendment also shields it from suits for monetary damages for infringement of copyrights and patents, and other violations of intellectual property rights. The state maintains a huge system of universities that profit financially from its infringement of the intellectual property rights of others.

The present case does not address intellectual property rights (IPR) litigation. Nevertheless, this opinion cannot be comforting to IPR counsel at state universities.

The Court of Appeals opinion, which was written by Judge Kleinfeld, has taken a complaint that asks for money based upon the wrongful conduct of state officials, and held that this is not a claim for monetary damages (which would be barred by the 11th Amendment), but rather that this is a claim for injunctive relief (which is not barred by the 11th Amendment) because its asks the court to order the return of money held in trust.

Another judge with Kleinfeld's concern for property rights, and slight regard for the 11th Amendment, hypothetically might conclude that an IPR owner whose rights have been infringed by a state is not seeking monetary damages, but rather is seeking an order for the return of funds held in trust by the infringing state for the owner of the infringed right. It is a stretch. But then, the opinion in Taylor v. Westly is a stretch.

Three Judge Panel. Appeals from the District Court are almost always heard by randomly assigned three judge panels. Taylor and Gonsalves may have won this round because they were very lucky in the draw of the panel.

The 9th Circuit is dominated by judges from California. None of this panel is from California. Moreover, two of the panelists are far more protective of individuals' property rights against state incursions than the 9th Circuit as a whole.

One judge, Richard Beezer, who is probably most remembered in the technology sector for his opinion in the Napster case, was one of Ronald Reagan's appointments. He is from Seattle, Washington. Another judge, Richard Cudahy, is not even a member of the 9th Circuit. He is a senior status judge on the 7th Circuit.

The writer of the opinion, Andrew Kleinfeld, another Republican, is from Fairbanks, Alaska.

5th Circuit Dismisses Appeal of Class Action Certification Order in Baldridge v. SBC

3/29. The U.S. Court of Appeals (5thCir) issued an opinion [PDF] in Baldridge v. SBC Communications, a class action case brought by employees of Cingular Wireless seeking overtime pay under the Fair Labor Standards Act (FLSA). The Appeals Court dismissed for lack of appellate jurisdiction.

Lindsey Baldridge and other named plaintiffs are employees of Cingular Wireless. (Cingular is a joint venture of SBC and BellSouth.) The filed a complaint in U.S. District Court (EDTex) alleging violation of the FLSA. They also sought class action status. The District Court issued an order certifying the class, pursuant to the class action provision of the FLSA, which is codified at 29 U.S.C. § 216(b), but narrowed its scope. The District Court also scheduled a further hearing on class certification.

The District Court did not certify its order for appeal. The plaintiffs nevertheless brought this interlocutory appeal. The Court of Appeals dismissed the appeal for lack of jurisdiction.

28 U.S.C. § 1291 provides in part that "The courts of appeals ... shall have jurisdiction of appeals from all final decisions of the district courts of the United States ..." That is, the general rule is that the Court of Appeals can only hear an appeal from a "final decision". The Court of Appeals wrote that "an order conditionally certifying a class and authorizing notice is not a final decision, terminating the litigation and allowing appeal under § 1291."

The Court continued that this interlocutory appeal does not fit the collateral order exception to the final judgment rule of of Section 1291 articulated by the Supreme Court in its 1949 decision in Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, because the District Court's order does not conclusively determine the disputed question.

Rule 23(f) of the Federal Rules of Civil Procedure, provides, in part, that "A court of appeals may in its discretion permit an appeal from an order of a district court granting or denying class action certification under this rule if application is made to it within ten days after entry of the order. ..." However, the Appeals Court held that Rule 23 is inapplicable, because the present action is based upon the class action language of the FLSA.

The case proceeds in the District Court.

This case is Lindsey Baldridge, et al. v. SBC Communications, et al., U.S. Court of Appeals for the 5th Circuit, App. Ct. No. m 04-10819, an appeal from the U.S. District Court for the Northern District of Texas (NDTex).

Bush to Nominate Alice Fisher to Head DOJ's Criminal Division

3/29. President Bush announced his intent to nominate Alice Fisher to be Assistant Attorney General in charge of the Department of Justice's (DOJ) Criminal Division. She is currently an attorney at the law firm of Latham & Watkins. If confirmed by the Senate, she will replace Christopher Wray. See, White House release.

She began her legal career as an associate attorney at the law firm of Sullivan & Cromwell. She then worked as Deputy Special Counsel to the U.S. Senate Special Committee to Investigate Whitewater Development and Related Matters. Sen. Hillary Clinton (D-NY), whom she investigated, will have the opportunity to vote for or against her confirmation. In 1996 she went to work for Latham & Watkins. However, from 2001 through 2003, she was one of the Deputy Assistant Attorneys General in the Criminal Division.

The DOJ's Criminal Division is important for technology for several reasons. First, there is the USA PATRIOT Act. Title II of the Act contains many provisions related to electronic surveillance and new technologies. Also, many of the sections of Title II sunset at the end of this year. The Congress will extend the terms of, and perhaps make substantive amendments to, many of these sections. The Criminal Division will likely represent the DOJ and the Bush administration during this legislative process.

The Criminal Division also includes the Computer Crimes and Intellectual Property Section (CCIPS), which prosecutes crimes related to computer hacking, unauthorized access to computers, and related activities.

The CCIPS is also responsible for criminal enforcement of intellectual property laws.

Note on Terminology. TLJ uses the phrase "Assistant Attorney General in charge of the Criminal Division" to describe the Assistant Attorney General (AAG) who leads the Criminal Division. TLJ uses similar terminology for other AAGs. The positions of "Assistant Attorney General" exist by statute. However, there is no statutory position of "Assistant Attorney General in charge of the Criminal Division". Nor are there similar positions for other DOJ divisions. By practice, one AAG is in charge of Criminal Division. Moreover, Presidents announce at the time of a nomination of a person to be an AAG which division that person will lead. Hypothetically, someone who is an AAG, and in charge of the Criminal Division, could be reassigned to lead the Antitrust Division, or another division. Although, some Senators would complain loudly.

People and Appointments

3/29. President Bush announced his intent to nominate Rachel Brand to be Assistant Attorney General in charge of the Office of Legal Policy at the Department of Justice (DOJ). She is now the Principal Deputy Assistant Attorney General in the OLP. She has previously worked as Associate Counsel to the President, for the law firm of Cooper Carville & Rosenthal, which is now Cooper & Clark, and for Supreme Court Justice Anthony Kennedy. The responsibilities of the OLP relate to, among other things, the screening, selection and confirmation of judicial nominees. See, White House release.

3/29. President Bush announced his intent to nominate Regina Schofield to be Assistant Attorney General in charge of the Office of Justice Programs (OJP) at the Department of Justice (DOJ). She is currently Director of Intergovernmental Affairs and White House Liaison at the Department of Health and Human Services. See, White House release.

3/29. President Bush announced his intent to nominate Philip Perry to be General Counsel at the Department of Homeland Security (DHS). If confirmed by the Senate, he will replace Joe Whitley. Perry is an attorney in the Washington DC office of the law firm of Latham & Watkins. He is a partner in the litigation section, where he focuses on government contracts. He has also worked in short stints at the Office of Management and Budget (OMB), where he was General Counsel, and before that, at the Department of Justice (DOJ), where he was briefly the acting Associate Attorney General; that is, he oversaw several of the key non-criminal divisions at the DOJ, including the Antitrust Division and the Civil Division. See, White House release.

3/29. Mark Hurd was named P/CEO of Hewlett Packard. He previously worked for NCR, most recently as P/CEO. See, HP release.

3/29. Cheryl Linthicum, Mark Taylor and Teri Yohn were named Academic Accounting Fellows in the Securities and Exchange Commission's (SEC) Office of the Chief Accountant. Linthicum is a professor of accounting at the University of Texas at San Antonio. Taylor is a professor of accounting at Creighton University in Omaha, Nebraska. Teri Yohn is a professor at Georgetown University. See, SEC release.

Supreme Court Denies Cert in Newspaper Defamation Case

3/28. The Supreme Court denied certiorari in Norton v. Troy Publishing Company, letting stand the judgment of the Supreme Court of Pennsylvania in a defamation case against a publisher for accurate reporting. See, Order List [12 pages in PDF].

This case arises out of a dispute among elected officials in Chester County, Pennsylvania. One elected member of the Parkersburg Borough Council (William Glenn) said at the council's chambers that certain other officials (Council President James Norton, Borough Mayor Alan Wolfe and Borough Solicitor James Marlowe) were homosexuals.

Tom Kennedy, a reporter for the Chester County Daily Local, wrote a story that accurately reported Glenn's statements. His story also reported Norton's response. The story did not report whether or not the Glenn's statements were true. The Daily Local is published by Troy Publishing Company. The Daily Local is owned by William Caufield.

Norton, Wolfe and Marlowe filed complaints in state court against Glenn, Kennedy, Caufield, and Troy Publishing, alleging, among other things, defamation. The case was tried before a jury. The Court gave the jury a neutral reportage instruction. The plaintiffs obtained judgment against Glenn for defamation, and Glenn did not appeal. The jury found for the other defendants. Norton, Wolfe and Marlowe appealed.

That is, Glenn made false statements (about Norton, Wolfe and Marlowe). Kennedy made truthful statements (about what Glenn and Norton said). Norton, Wolfe and Marlowe argue that Kennedy, Caufield and Troy Publications can be held liable for defamation for publishing these true statements. And in particular, they argue that Kennedy, Caufield and Troy are not entitled to have the trial court instruct the jury that they are entitled to a neutral reportage privilege.

The Superior Court of Pennsylvania (an intermediate appellate court) agreed. It held that there is no neutral reportage privilege, reversed the trial court, and remanded for a new trial.

The Superior Court wrote in its opinion [12 pages in PDF] that "this privilege does not appear in the United States Constitution, the Pennsylvania Constitution, or in any Pennsylvania statutory law. Our research has uncovered no Pennsylvania case adopting the neutral reportage privilege. ... Therefore, the ultimate question is whether or not Pennsylvania adopts the neutral reportage privilege? We answer this question in the negative."

Kennedy, Caufield and Troy Publishing appealed to the highest court in Pennsylvania. The Supreme Court of Pennsylvania affirmed the Superior Court. It wrote in its opinion [17 pages in PDF] that the "fair reportage privilege ... grants immunity from defamation suits to media entities which accurately report the official proceedings of government".

And now, the U.S. Supreme Court, which has jurisdiction over the First Amendment issue, but not the Pennsylvania constitutional issue, has denied certiorari.

It wrote no opinion. One could speculate as to why the Supreme Court would not grant certiorari in such a compelling case. One possible reason is that the privilege at issue benefits only "media entities". The Supreme Court has never recognized that the First Amendment confers upon any institutional press any benefit that it does not confer upon all people.

For example, the Supreme Court wrote in is 1972 opinion in Branzburg v. Hayes, which is reported at 408 U.S. 665, that "Freedom of the press is a `fundamental personal right´ which `is not confined to newspapers and periodicals. It necessarily embraces pamphlets and leaflets. ... The press in its historic connotation comprehends every sort of publication which affords a vehicle of information and opinion.´ ... The informative function asserted by representatives of the organized press ... is also performed by lecturers, political pollsters, novelists, academic researchers, and dramatists. Almost any author may quite accurately assert that he is contributing to the flow of information to the public ..."

See also, the concurring opinion of former Chief Justice Warren Burger in FNB v. Bellotti, which is reported at 435 U.S. 765 (1978). He wrote that "The very task of including some entities within the ``institutional press´´ while excluding others, whether undertaken by legislature, court, or administrative agency, is reminiscent of the abhorred licensing system of Tudor and Stuart England -- a system the First Amendment was intended to ban from this country."

"Because the First Amendment was meant to guarantee freedom to express and communicate ideas, I can see no difference between the right of those who seek to disseminate ideas by way of a newspaper and those who give lectures or speeches and seek to enlarge the audience by publication and wide dissemination", wrote Burger. "In short, the First Amendment does not ``belong´´ to any definable category of persons or entities: It belongs to all who exercise its freedoms."

Rotunda and Nowak sum up the Supreme Court's interpretation. "The Court has refused to draw any constitutional distinction between speech and ``the press,´´ or between speech and the ``institutional press,´´ or between speech and the ``organized media.´´ The reason for the judicial unwillingness to make such a differentiation lies, in part, in the fact that there is no principled way of doing so." See, Ronald Rotunda and John Nowak, Treatise on Constitutional Law, 2nd ed., at vol. 4, pages 112-113, ¶ 20.19.

BIS Announces Rulemaking Regarding Deemed Exports

3/28. The Bureau of Industry and Security (BIS) published a notice in the Federal Register that it identifies as an "Advance notice of proposed rulemaking" pertaining to deemed exports.

The BIS notice states that it seeks comments regarding the report [64 pages in PDF] written by the Department of Commerce's (DOC) Office of Inspector General (OIG) titled "Deemed Export Controls May Not Stop the Transfer of Sensitive Technology to Foreign Nationals in the U.S." The BIS states that adopting the OIG's recommendations would require the BIS to amend its regulations.

The BIS, which was previously named the Bureau of Export Administration (BXA), regulates exports for national security purposes. This includes regulation of the export of dual use items, such as computers, microprocessors, software and encryption products. This BIS also regulates business practices that it identifies as "deemed exports", such as employment of foreign nationals, use of software by foreign nationals, and access to technical data by foreign nationals. The BIS also has used its regulation of exports to attempt to control domestic production and sales.

The deadline to submit comments is May 27, 2005.

See, Federal Register, March 28, 2005, Vol. 70, No. 58, at Pages 15607 - 15609.

People and Appointments

3/28. The Voice Over IP Security Alliance announced in a release that it elected its Board of Directors for 2005-2006. The positions, persons, and employers are as follows.
 • Chairman, David Endler, TippingPoint.
 • Secretary, Jonathan Zar, Sonicwall.
 • Treasurer, Anne Coulombe, Enterasys Networks.
 • Best Practices Committee Chair, Jeffrey Stutzman, PriceWaterhouseCoopers.
 • Security Requirements Committee Chair, Andrew Graydon, Borderware.
 • Security Research Committee Chair, Ofir Arkin, Insightix.
 • Testing Committee Chair, Brian Tolly, Spirent Communications.

More News

3/28. The Supreme Court announced that "The Court will take a recess from Monday, April 4, 2005, until Monday, April 18, 2005." See, Order List [12 pages in PDF] at page 12.

3/28. The Copyright Office published a notice in the Federal Register announces, describes, recites, and sets the effective date (March 28) for its amendments to its regulations concerning group registration of published photographs to limit to 750 the number of photographs that may be identified on continuation sheets submitted with a single application form and filing fee. The regulations also provide that the date of publication for each photograph may be identified in a text file on the CD-ROM or DVD that contains the photographic images or on a list that accompanies the deposit and provides the publication date for each image. See, Federal Register, March 28, 2005, Vol. 70, No. 58, at Pages 15587 - 15590.

Go to News from March 21-25, 2005.