TLJ News from June 11-15, 2006

Atkins Says SEC Seeks More Rational Approach to Section 404

6/15. Securities and Exchange Commission (SEC) Commissioner Paul Atkins gave a speech in which he addressed the Sarbannes Oxley Act, its Section 404, and the SEC's rules implementing Section 404.

Paul AtkinsAtkins (at right) said that "We will continue to work on a more rational approach to implementing Section 404."

Smaller public companies, and especially high tech companies, and their supporters in the Congress, have argued that the SEC's implementation of Section 404 imposes considerable burdens on smaller companies, without benefiting investors. They seek change.

The American Electronics Association (AEA) released a report [23 pages in PDF] last year titled "Sarbanes-Oxley Section 404: The Section of Unintended Consequences and its Impact on Small Business". It states that "Skyrocketing implementation costs have put high-tech companies in the position of having to delay major projects at a time when many are struggling to compete with low-cost competition from Asia. Section 404 implementation is the quintessential example of the law of unintended consequences, with the biggest victim being small business."

Also, on May 8, 2006, the Government Accountability Office (GAO) released a report [93 pages in PDF] titled "Sarbanes-Oxley Act: Consideration of Key Principles Needed in Addressing Implementation for Smaller Public Companies". The report finds that smaller public companies face disproportionately higher costs of compliance than do larger companies, and that the Act creates other difficulties for smaller companies. See, story titled "GAO Reports that Section 404 of Sarbanes Oxley Burdens Small Public Companies" in TLJ Daily E-Mail Alert No. 1,366, May 9, 2006.

Atkins said, in the English language version of his June 15 speech, that "I am confident that the Sarbanes-Oxley Act can offer considerable benefits to shareholders. The emphasis on good controls over financial reporting is laudable. Section 404 focuses on the integrity of financial information and seeks to give shareholders additional insight into the credibility of financial statements."

However, he added that "There has been much discussion within and outside of the SEC regarding ways in which individual provisions of the Sarbanes-Oxley Act may be imposing a greater cost than was anticipated, or than may be justified by the benefits imparted to investors. Reducing these costs is essential. Reflecting this, the SEC and other agencies are actively seeking approaches that would mitigate the costs of implementing Section 404. I can assure you that in the coming months, the SEC and the PCAOB will be considering steps to cut the costs while maintaining the benefits of Section 404."

He said that the Public Company Accounting Oversight Board's (PCAOB) Auditing Standard Number 2 (AS2) [300 pages] "will be revised", and that "the SEC will monitor the PCAOB's efforts to improve Section 404 oversight".

He said that the SEC has "announced an additional postponement of Section 404 for smaller filers, including smaller foreign private issuers, such that they will now be required to comply with the management assessment required by Section 404 for fiscal years beginning on or after December 16, 2006."

He also said that "In the next few weeks, we expect to solicit views on the management assessment process to ensure that the guidance we ultimately propose addresses the needs and concerns of public companies. We will also seek input on the appropriate role of outside auditors in connection with the management assessment required by Section 404, and on the manner in which outside auditors provide the required attestation."

"We also anticipate that we will issue guidance to management to assist in its performance of a top-down, risk-based assessment of internal control over financial reporting. To ensure that this guidance is of help to non-accelerated filers and smaller public companies, we intend that this guidance will be scalable and adaptable to their individual circumstances", said Atkins.

Finally, he said that "The PCAOB will propose revisions to AS 2 that will ensure that auditors take a top-down approach to their audits and that they use a risk-based approach. The PCAOB will also revisit and clarify what, if any, role the auditor should play in evaluating the company's process of assessing internal control effectiveness."

Atkins spoke via teleconference to the French Association Of Corporate Governance in Paris, France.

Many small tech companies seek reform through the SEC rulemaking process. However, if the SEC does not act, the Congress might enact legislation. Most members of Congress that seek reform have waited, either for the SEC to act, or for Sen. Paul Sarbanes (D-MD) and Rep. Mike Oxley (R-OH) to leave the Congress. Both are retiring at the end of the current Congress.

However, on May 17, 2006, Rep. Tom Feeney (R-FL) and others introduced HR 5405, the "Competitive and Open Markets that Protect and Enhance the Treatment of Entrepreneurs Act", or COMPETE Act. Also on May 17, Sen. Jim DeMint (R-SC) and others in introduced the companion bill in the Senate, S 2824.

The introduction of these bills was timed to coincide with an SEC conference on Section 404 held on May 17, 2006.

Section 404 is titled "Management assessment of internal controls". It currently provides, in full, as follows:

HR 5405 and S 2824 would add a new subsection 404(c) that, among other things, creates an exemption for smaller public companies. It would apply to any company that either "has a total market capitalization for the relevant reporting period of less than $700,000,000", "has total product revenue for that reporting period of less than $125,000,000", or "has fewer than 1500 record beneficial holders of securities".

House CIIP Subcommittee Holds Hearing on Patent Trolls

6/15. The House Judiciary Committee's (HJC) Subcommittee on Courts, the Internet, and Intellectual Property (CIIP) held a hearing titled "Patent Trolls: Fact or Fiction".

Rep. Lamar Smith (R-TX), the Chairman of the Subcommittee, wrote in his opening statement that "According to its critics, the troll is an individual who invents a patented product or process of suspect legal integrity or who acquires such a patent from a third party. The owner is characterized as someone who makes money by extorting a license from a manufacturer who allegedly has infringed the patent. Fearing the possibility of an injunction that will force the manufacturer to cease operations, the company settles."

Rep. Lamar SmithRep. Smith (at right) also said that "patent practice frequently pits conflicting interests against one other. For example, a software developer might endorse a specific change to the current statutory treatment of injunctive relief or damages computation set forth in the Patent Act. These same revisions would be opposed by a number of patentee interests, especially those in the biotechnology and pharmaceutical industries. Different entities use the patent system in different ways, depending on their respective business models."

Ed Reines, an attorney in the Silicon Valley office of the law firm of Weil Gotshal & Manges, wrote in his prepared testimony [13 pages in PDF] that "the existence of entities fairly characterized as patent trolls is a fact. If lawyers start a company purely to buy a patent out of bankruptcy, and promptly seek royalties that are one hundred thousand times what they just paid for the patent, you have a patent troll under any reasonable definition. This is particularly true where the demand is based on an implausible theory of infringement." He added that a troll "Acquires patents, but does not invent technology itself." He did not identify any trolls in his written testimony.

He also argued that there are six areas of patent law in need of reform, "treble damages based on claims of willfulness", submarine patents (which he described as "patents that are secret until long after the date of invention and long after the market in an area of technology has developed"), the "unlimited right patent applicants have to file continuation applications when seeking patents", damage apportionment, forum shopping, and injunctive relief. Although, he added that the opinion [12 pages in PDF] of the Supreme Court in eBay v. MercExhange will "improve the law of patent injunctions". See also, story titled "Supreme Court Rules on Availability of Injunctive Relief in Patent Cases" in TLJ Daily E-Mail Alert No. 1,371, May 16, 2006.

Dean Kamen is an inventor, and President of DEKA Research & Development Corporation, a company that develops and patents new technologies, which it then licenses to others. He is also a past winner of the Medal of Technology.

He wrote in his prepared testimony [5 pages in PDF] that "while there do seem to be certain bad actors who inappropriately assert questionable patents, there are also bad actors who deliberately infringe the legitimate patent rights of others."

He argued that the term patent troll has been used to describe people and companies who activities are "legitimate and constructive" and "represent part of the intended purpose of the U.S. patent system".

For example, he said that the term "troll" is sometimes used to describe "those who don't manufacture products embodying their patent", "those who offer a license as an alternative to suing for patent infringement", or "those who sue alleged infringers that have products already on the market".

He wrote that "In trying to prevent the bad acts of a few so-called patent trolls, we must be careful not to destroy the patent system that has been the driving force behind the innovation that has made the United States an unrivaled global leader over the past two centuries."

He argued that patent law must recognize the "right to exclude", including by "permanent injunction", and that "Weakening the standard for granting permanent injunctions would be tantamount to adopting compulsory licensing."

Paul Misener, of Amazon.com, wrote in his prepared testimony that a patent troll is "a moniker usually ascribed to entities that own and enforce patents without substantially practicing them".

He offered two proposals for revising patent law with respect to damages. First, "allow successful claimants with method patents to obtain damages only back to the point that the defendant had actual notice or knowledge of alleged infringement and, as under current law, in no case back more than six years before the complaint was filed". Second, "clarify that when courts analyze whether a plaintiff should be entitled to an award of lost profits as a matter of law, a plaintiff should be entitled to such an award only if, and for the time that, the defendant's infringing product competes with a product that the plaintiff makes or sells".

Chuck Fish of Time Warner offered no definition of troll in his prepared testimony [9 pages in PDF]. He wrote that it is not "productive to engage in name calling exercises". However, he had not reservation about attorney name calling. He said that there is a PI to IP problem in the legal profession. "There has been a huge increase in cases, many of them brought by former tort lawyers who have found patent litigation more lucrative than traditional tort work." He pointed out the that number of patent cases has grown rapidly, while the number brought in the U.S. District Court (EDTex), Marshall Division, has skyrocketed.

He urged full funding of the USPTO as well as "limits on abuse of continuation practice, meaningful post grant opposition procedures, publication of all patent applications, and improved ability of the public to submit prior art during prosecution."

People and Appointments

6/15. President Bush announced his intent to nominate eight people to be Members of the National Science Foundation's (NSF) National Science Board, all for terms that expire on May 10, 2012. The eight are Mark Abbott, Camilla Benbow, John Bruer, Patricia Galloway, Jose Marie Griffiths, Karl Hess, Thomas Taylor, and Richard Thompson. See, White House release.

6/15. President Bush announced his intent to designate Daniel Pearson and Shara Araonoff to be the Chairman and Vice Chairman, respectively, of the U.S. International Trade Commission (USITC) for two year terms beginning on June 17, 2006. See, White House release and USITC release and release.

More News

6/15. President Bush signed S 193, the "Broadcast Decency Enforcement Act of 2005". See, White House release and speech by President Bush.

6/15. The Office of the Attorney General of the State of New York announced in a release that it has entered into settlement with EMI Music North America "to end its pervasive "pay-for-play" practices in the music industry". The release states that "investigation determined that EMI provided illegal financial benefits to obtain airplay and boost the chart position of its artists by bribing radio station employees with concert tickets, video games, and hotel and airfare expenses; providing a stream of financial inducements to radio stations to assist with overhead costs; using independent promoters as conduits for the illegal payments to radio stations; and engaging in fraudulent call-in campaigns to increase the airplay of particular songs." It adds that New York has already entered into settlements with Sony BMG, Warner and Universal, and that "The investigation is continuing".

6/15. The Antitrust Modernization Commission (AMC) published notice in the Federal Register requesting public comments on any topic related to the AMC's study. The deadline for comments is July 10, 2006. See, Federal Register, June 15, 2006, Vol. 71, No. 115, at Pages 34590-34591.

6/15. The Progress and Freedom Foundation (PFF) released a paper [14 pages in PDF] titled "A Skeptic's Primer on Net Neutrality Regulation". It argues that "Net neutrality is a premature bit of industrial policy that favors companies in one tier of the Internet over companies in another tier."

DOJ Sues to Block New Jersey Investigation of Phone Companies' Transfer of Phone Call Records

6/14. The U.S. Department of Justice (DOJ) filed a civil complaint [14 pages in PDF] in U.S. District Court (DNJ) against the the Attorney General of the state of New Jersey, other New Jersey officials, and phone companies that have been subpoenaed by New Jersey. The complaint seeks declaratory judgment that the state lacks authority to issue the subpoenas.

Background. On May 11, 2006, USA Today published an article titled "NSA has massive database of Americans' phone calls". It stated that "The National Security Agency has been secretly collecting the phone call records of tens of millions of Americans, using data provided by AT&T, Verizon and BellSouth ..."

See also, story titled "Bush Responds to USA Today Story Regarding NSA Database of Phone Calls" Alert No. 1,369, Friday, May 12, 2006, and story titled "BellSouth and Verizon Attack USA Today Story" in TLJ Daily E-Mail Alert No. 1,372, Wednesday, May 17, 2006.

New Jersey's Attorney General, Zulima Farber, issued subpoenas duces tecum (for records) to AT&T, Verizon, Cingular Wireless, Sprint Nextel, and Qwest on May 17, 2006, to investigate this matter.

Count I of the two count complaint alleges that the subpoenas are invalid and preempted by the supremacy clause of the Constitution, unnamed federal laws, and "exclusive control over foreign intelligence gathering activities, national security, the conduct of foreign affairs, and the conduct of military affairs".

See, full story.

FCC Announces Agenda for June 21 Meeting

6/14. The Federal Communications Commission (FCC) released an agenda [PDF] for its event on June 21, 2006, titled "Open Meeting". This agenda includes consideration of yet another item on the multicast must carry obligations of cable operators, another NPRM on the FCC's broadcast ownership rules, and an item that will likely add interconnected VOIP providers to the tax base for the FCC's USF subsidy program.

Multicast Must Carry. The FCC will consider a Second Order on Reconsideration and Second Further Notice of Proposed Rulemaking (2ndFNPRM) regarding mandatory carriage of digital broadcast television signals by cable operators. This is CS Docket No. 98-120.

The FCC has previously addressed this topic. See, story titled "FCC Adopts Digital Multicasting Must Carry Order" in TLJ Daily E-Mail Alert No. 1,075, February 11, 2005. See also, story titled "Digital Multicasting Must Carry Developments" in TLJ Daily E-Mail Alert No. 1,073, February 9, 2005.

Cable companies oppose imposing multicast must carry obligations on cable companies. See for example, the National Cable Telecommunications Association's (NCTA) comment [8 pages PDF] of June 8, 2006. Broadcasters urge the FCC to impose such obligations. See for example, June 14 filing [13 pages in PDF] and June 8 comment [PDF] of the National Association of Broadcasters (NAB).

Broadcast Ownership Rules. The FCC will consider a Further Notice of Proposed Rulemaking (FNPRM) regarding its broadcast ownership rules. This is MB Docket No. 02-277, MM Docket No. 01-235, MM Docket No. 01-317, and MM Docket No. 00-244.

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.

These 2003 rule changes were, in part, a response to the directions of the U.S. Court of Appeals (DCCir). For example, on April 2, 2002, the DC Circuit issued its opinion in Sinclair Broadcast Group v. FCC, remanding the FCC's local television ownership rule for further consideration. See, story titled "DC Circuit Remands Local TV Ownership Rule to FCC" in TLJ Daily E-Mail Alert No. 402, April 3, 2002.

Similarly, on February 19, 2002, the DC Circuit issued its opinion in Fox v. FCC. The Court held that the FCC's national TV station ownership rule (NTSO) and its cable broadcast cross ownership rule (CBCO) both violate the Administrative Procedure Act (APA) as arbitrary and capricious, and Section 202(h) of the Telecom Act. See, stories titled "DC Circuit Vacates Cable Broadcast Cross Ownership Rule", TLJ Daily E-Mail Alert No. 372, February 20, 2002, and "FCC Files Petition for Review of Appeals Court Opinion in Fox v. FCC" in TLJ Daily E-Mail Alert No. 415, April 22, 2002.

However, after the FCC wrote new rules in 2003, the legal challenge was heard by a different circuit. Then, on June 24, 2004, the U.S. Court of Appeals (3rdCir) issued its opinion [213 pages in PDF] in Prometheus Radio Project v. FCC overturning some of the FCC's media ownership rules. See, story titled "3rd Circuit Rules in Media Ownership Case" in TLJ Daily E-Mail Alert No. 930, July 1, 2004. The Supreme Court denied certiorari. See, story titled "Supreme Court Denies Certiorari in Media Ownership Rules Case" in TLJ Daily E-Mail Alert No. 1,153, June 14, 2005.

Universal Service. The FCC will consider a Report and Order and NPRM regarding, among other things, expanding the scope of entities taxed to support the FCC's universal service subsidy program. This item may address interconnected voice over internet protocol (VOIP) providers.

The FCC's agenda only identifies the universal service contribution aspect of this item. However, the agenda also states that this item is related to numerous open proceeding, including WC Docket No. 04-36 (the FCC's omnibus IP enabled services proceeding), CC Docket No. 96-45 (the perpetual universal service proceeding), CC Docket No. 98-171 (another universal service proceeding), CC Docket No. 90-571 (ADA), CC Docket No. 92-237 (NANP), CC Docket No. 99-200 (number resource optimization), CC Docket No. 95-116 (number portability), and CC Docket No. 98-170 (truth in billing).

See, June 14, 2006, comment [9 pages in PDF] submitted by the Voice on the Net (VON) Coalition, and June 8 and May 23 comments [10 pages in PDF] submitted by Verizon.

Finally, the FCC will consider a NPRM regarding processing and service rules for the 17/24 GHz Broadcasting Satellite Service (BSS).

This event is scheduled for 9:30 AM on Wednesday, June 21, 2006 in the FCC's Commission Meeting Room, Room TW-C305, 445 12th Street, SW. The event will be webcast by the FCC. The FCC does not always consider all of the items on its published agenda. The FCC sometimes adds items to the agenda without providing the "one week" notice required 5 U.S.C. § 552b. The FCC does not always start its monthly meetings at the scheduled time. The FCC usually does not release at its meetings copies of the items that it adopts at its meetings.

Senate Judiciary Committee Holds Hearing on Communications and Antitrust

6/14. The Senate Judiciary Committee (SJC) held a hearing titled "Reconsidering Our Communications Laws: Ensuring Competition and Innovation".

Rep. James Sensenbrenner (R-WI), the Chairman of the House Judiciary Committee (HJC), testified. He took the unusual step of going to the other body to testify against a bill just approved by his body. Although, the procedure followed by the House Republican leadership in enacting HR 5252 provides an explanation for his action.

Background. On June 8, 2006, the House approved HR 5252, the "Communications Opportunity, Promotion, and Enhancement Act of 2006" (COPE Act). This is a bill drafted by the House Commerce Committee (HCC), with careful attention to leaving out any provisions that would give the HJC a claim to jurisdiction. The HJC has jurisdiction over, among other things, antitrust law. Antitrust law has long played a major role in regulating the conduct of communications companies.

Rep. James SensenbrennerRep. Sensenbrenner (at right) is the sponsor of HR 5417, the "Internet Freedom and Nondiscrimination Act of 2006". The HJC approved this bill on May 25, 2006. See, story titled "House Judiciary Committee Approves Net Neutrality Bill" in TLJ Daily E-Mail Alert No. 1,379, May 26, 2006. See also, story titled "Sensenbrenner and Conyers Introduce Net Neutrality Bill" in TLJ Daily E-Mail Alert No. 1,375, May 22, 2006.

This bill would amend the Clayton Act to prohibit anticompetitive conduct in which network providers fail to provide service and interconnection on nondiscriminatory terms, block or impair lawful content, or prohibit users from attaching devices to the network.

The House leadership has not allowed this bill to be considered by the full House. Moreover, the House Rules Committee refused to make in order an amendment to HR 5252 containing language substantially similar to HR 5417. House members were not given the opportunity to approve or reject Rep. Sensenbrenner's proposal.

Rep. Sensenbrenner is displeased both with the diminishment of antitrust law in the communications sector by HR 5252, and the diminishment of the role of the HJC in ensuring competition in communications.

The House did approve an amendment to HR 5252, offered by Rep. Lamar Smith (R-TX), that provides that "Nothing in this section shall be construed to modify, impair, or supercede the applicability of the antitrust laws or the jurisdiction of the district courts of the United States to hear claims arising under the antitrust laws." It also provides that "The term 'antitrust laws' has the meaning given to it in subsection (a) of the first section of the Clayton Act (15 U.S.C. 12(a)), except that such term includes section 5 of the Federal Trade Commission Act (15 U.S.C. 45) to the extent that such section 5 applies to unfair methods of competition."

There is a also a bill pending in the Senate Commerce Committee (SCC) -- S 2686, sponsored by Sen. Ted Stevens (R-AK). It is currently scheduled for Committee markup next week.

Rep. Sensenbrenner's Testimony. Rep. Sensenbrenner wrote in his prepared testimony that antitrust law, and the Judiciary Committees, have long played an important role in ensuring competition in communications markets.

He noted that the Telecommunications Act of 1996 included, at Section 601(c)(1), a clause that provides that "Nothing in this Act or the amendments made by this Act shall be construed to modify, impair, or supersede the applicability of any of the antitrust laws."

But, he continued, "Despite the inclusion of this antitrust savings clause, a record of considerable judicial confusion has developed in our Nation's courts. In 2000, the Seventh Circuit issued the Goldwasser decision, ignoring the plain language of the antitrust savings clause and holding that the Telecom Act ``must take precedence over the general antitrust laws.´´ In 2004, the Supreme Court embraced the reasoning of the Goldwasser court in Verizon v. Trinko. The decision stated: ``One factor of particular importance is the existence of a regulatory structure designed to deter and remedy anticompetitive harm. Where such a structure exists ... it will be less plausible that the antitrust laws contemplate such additional scrutiny. . . .´´ The Court concluded: ``against the slight benefits of antitrust intervention here, we must weigh a realistic assessment of its costs.´´ This is precisely the judicial analysis that Congress precluded in the 1996 Act, and this holding has done violence to remedial antitrust enforcement and competitive gains in the telecommunications marketplace."

On January 13, 2004, the Supreme Court issued its opinion [22 pages in PDF] in Verizon v. Trinko, 540 U.S. 398, holding that a claim alleging a breach of an ILEC's duty under the 1996 Telecom Act to share its network with competitors does not state a violation of Section 2 of the Sherman Act. See, story titled "Supreme Court Holds That There is No Sherman Act Claim in Verizon v. Trinko" in TLJ Daily E-Mail Alert No. 815, January 14, 2004. See also, opinion of the U.S. Court of Appeals (7thCir) in Goldwasser v. Ameritech, 222 F.3d 390 (7th Cir. 2000).

Rep. Sensenbrenner argued that "This assault on the antitrust laws should be of concern to Members of both bodies of Congress, but particularly to those who serve on the Committees charged with overseeing their implementation."

He continued there is currently a duopoly in the provision of broadband services, and that HR 5252 "invites the risk of competitive abuse by depriving those injured by this misconduct from an effective antitrust remedy. Specifically, H.R. 5252 provides the FCC with ``exclusive´´ authority to define and adjudicate discriminatory broadband practices. This authority displaces the antitrust laws and the vital pro-competitive and pro-consumer purposes they advance."

He also argued that Rep. Smith's amendment provides "little consolation". He said that it is a "nearly-verbatim recitation of the antitrust savings clause contained in the 1996 Act effectively circumvented by the Trinko court. In fact, the amendment passed by the House is weaker than the savings provision contained in the 1996 Act for two important reasons. First, it is a ``rule of construction´´ by its own terms, while the savings provision in the 1996 Act contained no such limitation. Second, the amendment is narrower because it applies only to one section of H.R. 5252, while the savings provision in the 1996 Act applied to the entire 1996 Act and subsequent amendments to it.

More Statements and Testimony. Sen. Patrick Leahy (D-VT) wrote in his opening statement that "a number of issues raised in Chairman Stevens' bill are squarely within the jurisdiction of this Committee. Chairman Sensenbrenner ran into a similar situation in the other body. I look forward to working with the members of this Committee to put forward a strong bill along the lines of Chairman Sensenbrenner's effort to protect consumers, competition, and the Internet".

Sen. Herb Kohl (D-WI) wrote in his opening statement that "We must ensure that consumers have unfettered access to all internet content free from discrimination. And we must prevent broadband providers from being able to determine winners and losers on the information superhighway. At the same time, broadband providers need to be able to manage their networks so that the profusion of video content does not degrade the internet experience for everyone."

He also argued for "ensuring that our antitrust enforcement agencies are at full strength to protect competition in the telecom industry. Under current law, the Federal Trade Commission is prevented from exercising any jurisdiction over telecom ``common carriers.´´ This common carrier exemption should be repealed so that the FTC can protect consumers from unfair methods of competition in this industry as in any other."

FTC Commissioner William Kovacic urged the Congress "to ensure that the FTC’s capacity to address pressing consumer protection and competition issues is not diminished as it considers legislation regarding the provision of broadband services" in his prepared testimony.

He testified that telecommunications common carrier exemption is "outdated and a harmful obstacle to good policymaking". He elaborated that "As the telecommunications and Internet industries continue to converge, the common carrier exemption is likely to frustrate the FTC’s ability to stop deceptive and unfair acts and practices and unfair methods of competition with respect to interconnected communications, information, and entertainment services."

He also wrote that "as Congress considers legislation to amend the Communications Act, the Commission believes that any new legislation should clearly preserve the FTC’s existing authority over activities currently within its jurisdiction. In this regard, some recent legislative proposals would assign to the FCC specific competition and consumer protection authority. We are concerned that any new grant of authority to the FCC not be misread to oust the FTC from its established jurisdiction. The Commission does not believe that Congress intends to remove the FTC from the business of protecting consumers and maintaining competition in the broadband services industry."

See also, prepared testimony of Vinton Cerf (Google), prepared testimony of David Cohen (Comcast), prepared testimony of Walter McCormick (USTelecom), prepared testimony of Christopher Putala (Earthlink), prepared testimony of Blair Levin (Stifel Nicolaus & Company), prepared testimony of Paul Morris (Utah Telecommunication Open Infrastructure Agency), and prepared testimony of Jeff Kuhns (Pennsylvania State University).

7th Circuit Affirms Sentences of eBay Fencers

6/14. The U.S. Court of Appeals (7thCir) issued its opinion [24 pages in PDF] in USA v. Wasz, affirming the judgment of the District Court. This is a criminal case in which the only legal issues on appeal pertain to the sentences imposed on the defendants. However, the Appeals Court's opinion also contains a detailed description of the activities of the defendants that resulted in their prosecutions. They fenced stolen goods through the eBay auction site.

They purchased merchandise stolen from Home Depot and other home improvement stores from thieves who operated across several states. They sometimes directed the thieves as to what products to steal, and paid them advances. They paid the thieves about 33% to 40% of the retail prices, and then resold the stolen items at eBay at an average of 62% of retail prices, using multiple user names. They auctioned 13,000 items with retail sales prices totaling more than $2.3 Million.

The two defendants were sentenced to serve 70 and 83 months in prison. These sentences were based upon both the total retail sales prices of the stolen items, and the conclusion that the two were organizers or leaders of the offense. The Wasz's argued that their sentences should be based upon their net gains (eBay auction revenues less amounts paid to the thieves). Alternatively, they argued that their sentences should be based upon the retailers lost profits.

The Court of Appeals affirmed. It wrote that "the Waszes each may be held to account for the total value of the merchandise stolen by their thieving co-defendants and sold by either Bruce or Laura Wasz on eBay", and that the appropriate measure of loss is the total retail value.

This case is USA v. Laura Wasz and Bruce Wasz, U.S. Court of Appeals for the 7th Circuit, App. Ct. Nos. 05-1463 and 05-1464, appeals from the U.S. District Court for the Northern District of Illinois.

USPTO Seeks Further Comments on Patentable Subject Matter

6/14. The U.S. Patent and Trademark Office (USPTO) published a notice in the Federal Register that extends the deadline for comments on guidelines to be used by the USPTO in reviewing patent applications to determine whether the claims in the applications are directed to patent eligible subject matter. The new deadline is July 31, 2006. See, Federal Register, June 14, 2006, Vol. 71, No. 114, at Pages 34307-34308.

The USPTO issued interim guidelines last year. It published a notice in the Federal Register requesting comments. See, Federal Register, December 20, 2005, Vol. 70, No. 243, at Pages 75451 - 75452. See also, story titled "USPTO Seeks Comments on Subject Matter Eligible for Patents" in TLJ Daily E-Mail Alert No. 1,278, December 22, 2005.

The USPTO seeks comments that take into consideration the imminent opinion in Laboratory Corp. of America Holdings v. Metabolite Laboratories, Inc., Sup. Ct. No. 04-607. The Supreme Court heard oral argument on March 21, 2006, but has not yet issued its opinion. Although, it will likely issue this opinion soon. See also, Supreme Court docket.

The USPTO's original deadline for comments was June 30, 2006. The extension will enable commenters time to review the Court's opinion before filing comments.

Lab Corp pertains to patentable subject matter under 35 U.S.C. § 101. Also, while this extension enables comments to address the Lab Corp case, the scope of the request for comments is broader.

See also, stories titled "Supreme Court Grants Certiorari in LabCorp v. Metabolite" in TLJ Daily E-Mail Alert No. 1,244, November 1, 2005, and "Chief Justice Roberts Recuses Himself in Case Regarding Patentable Subject Matter" in TLJ Daily E-Mail Alert No. 1,247, November 4, 2005.

More News

6/14. The Federal Trade Commission (FTC) published a notice in the Federal Register that it has determined to maintain its rule regarding deceptive advertising as to sizes of viewable pictures shown by television
receiving sets. See, Federal Register, June 14, 2006, Vol. 71, No. 114, at Pages 34247-34249.

6/14. Sen. Olympia Snowe (R-ME), Sen. Byron Dorgan (D-ND), and representatives of various pro network neutrality groups held a news conference on Capitol Hill to promote S 2917, the "Internet Freedom and Preservation Act". See also, story titled "Snowe and Dorgan Introduce Net Neutrality Bill" in TLJ Daily E-Mail Alert No. 1,375, May 22, 2006. Meanwhile, the SavetheInternet.com web site boasts over one million signatures on its online network neutrality petition.

6/14. The House Commerce Committee's (HCC) Subcommittee on Commerce, Trade, and Consumer Protection held a hearing titled "Violent and Explicit Video Games: Informing Parents and Protecting Children". Lydia Parnes, Director of the Bureau of Consumer Protection at the Federal Trade Commission (FTC) wrote in the FTC's prepared testimony [PDF] that "Because of First Amendment and other issues, the Commission continues to support private sector initiatives by industry and individual companies ..."

6/14. The U.S. Court of Appeals (FedCir) issued its per curiam opinion [1 page in PDF] affirming the judgment of the District Court in Amado v. Microsoft, App. Ct. Nos. 05-1531 and 05-1581.

6/14. The Federal Communications Commission (FCC) released a Public Notice [3 pages in PDF] titled "DTV Channel Election Issues".

House Subcommittee Holds Hearing on State Telecom Taxes

6/13. The House Judiciary Committee's (HJC) Subcommittee on Commercial and Administrative Law held a hearing titled "State Taxation of Interstate Telecommunications Services".

Rep. Chris CannonRep. Chris Cannon (R-UT) (at left) wrote in his opening statement that "Taxes on communications services are a jumble. The tax rates on communications are about at the point where these taxes approach the level of ``sin´´ taxes. We want to encourage the use of communications by ALL people, not move the cost beyond what the poor amongst us can afford."

Scott Mackey (Kimbell Sherman Ellis) wrote in his prepared testimony [PDF] that "excessive and discriminatory taxation of communications consumers has gotten worse".

Stephen Kranz (Council On State Taxation, which represents tax paying companies) wrote in his prepared testimony [PDF] that "The tax system has not kept pace with changes in telecommunications technology, generally rendering the current system inequitable and unworkable. The telecommunications tax system should be overhauled to eliminate the discriminatory administrative and tax burden facing telecommunications providers and services."

David Quam (National Governors' Association), wrote in his prepared testimony that the "ability of states to structure their revenue systems is a core element of sovereignty that must be respected by the federal government". Therefore, the Congress should do nothing. See also, prepared testimony [PDF] of Steven Rauchenberger (Illinois State Senate and National Conference of State Legislatures).

Cerf and Others Warn that FCC's CALEA Order Threatens Internet Security and Innovation

6/13. The Information Technology Association of America (ITAA) released a paper [21 pages in PDF] titled "Security Implications of Applying the Communications Assistance to Law Enforcement Act to Voice over IP".

The authors include Vint Cerf (Google), Whitfield Diffie (Chief Security Officer of Sun Microsystems), Susan Landau (Sun Microsystems), Steven Bellovin (Columbia University), Matt Blaze (University of Pennsylvania), Ernest Brickell (Intel), Clinton Brooks, Jon Peterson (NeuStar), and John Treichler (Applied Signal Technology).

The Communications Assistance for Law Enforcement Act (CALEA) provides that telecommunications carriers, but not information services, must design their equipment and networks to facilitate lawfully conducted wiretaps and other intercepts. On August 5, 2005, the Federal Communications Commission (FCC) adopted an order [59 pages in PDF] that provides that facilities based broadband service providers and interconnected voice over internet protocol (VOIP) providers are subject to requirements under the CALEA. See also, story titled "FCC Amends CALEA Statute" in TLJ Daily E-Mail Alert No. 1,191, August 9, 2005

On June 9, 2006. the U.S. Court of Appeals (DCCir) issued its divided opinion [29 pages in PDF] upholding all of the FCC's August 5, 2005, order. See, story titled "Court of Appeals Upholds All of FCC's CALEA Order" in TLJ Daily E-Mail Alert No. 1,388, June 9, 2006.

The FCC adopted a further order on May 3, 2006. See, story titled "FCC Further Amends CALEA Statute" in TLJ Daily E-Mail Alert No. 1,365, May 8, 2006.

Neither the FCC's orders, nor the majority opinion in ACE v. FCC, can be reconciled with the plain meanings of the relevant sections of the CALEA and the Communications Act, or the Commissioners' and Judges' duties to follow the statute, rather than create new law. However, this just released paper is not about law. Rather, it is a basic technological explanation for laymen of the PSTN, VOIP communications, and government intercepts. It explains how the FCC's orders will either harm internet security, or damage flexibility and innovation on the internet.

The paper states that "The network architectures of the Internet and the Public Switched Telephone Network (PSTN) are substantially different. Lack of understanding of the implications of the differences has led to some difficult -- and potentially dangerous -- policy decisions. One of these is the recent FBI request to apply the Communications Assistance for Law Enforcement Act (CALEA) to VoIP."

"Some cases -- intercept against a VoIP call made from a fixed location with a fixed Internet address2 connecting directly to a big Internet provider's access router -- are the equivalent to a normal phone call, and such interceptions are relatively easy to do. But if any of these conditions is not met, then the problem of assuring interception is enormously harder."

It concludes that "In order to extend authorized interception much beyond the easy scenario outlined above, it is necessary either to eliminate the flexibility that Internet communications allow -- thus making VoIP essentially a copy of the PSTN -- or else introduce serious security risks to domestic VoIP implementations. The former would have significant negative effects on U.S. ability to innovate, while the latter is simply dangerous. The current FBI and FCC direction on CALEA applied to VoIP carries great risks."

Senate Commerce Committee Holds Hearing on Communications Reform Bill

6/13. The Senate Commerce Committee (SCC) held a hearing on S 2686, the "Communications, Consumer's Choice, and Broadband Deployment Act of 2006". This is Sen. Ted Stevens' (R-AK) bill, 151 pages long in the June 9 draft, that would revise many areas of communications and technology law.

It would streamline the video franchising process (Title III), revise the universal service subsidy system by, among other things, requiring more types of service providers to pay into the universal service fund (Title II), provide video and audio broadcast flag mandates (Title IV), and allow for municipal broadband services (Title V).

Title VI is the Wireless Innovation Act (WIN). It would require the FCC to complete its broadcast white space rulemaking proceeding, to permit unlicensed, non-exclusive use of unassigned, non-licensed television broadcast channels.

Title IX pertains to network neutrality. Section 901, the only section in this title of the bill, is titled "Neutral Networks for Consumers". It provides for annual studies by the FCC for five years, but no legislative mandates.

See, full story.

FCC Grants Petitions of BellSouth, Verizon & Qwest

6/13. The Federal Communications Commission (FCC) released an order [9 pages in PDF] that grants a petition filed by BellSouth, and that grants in part petitions filed by Verizon and Qwest. The order grants Special Temporary Authority (STA) from the enforcement of specific statutory provisions, and waiver of certain FCC rules implementing such provisions, to plan for and undertake disaster recovery.

This authority affects certain separate affiliate requirements under 47 U.S.C. § 272, anti-slamming rules, structural separation requirements, tariff filing requirements, and network disclosure rules.

The order provides the following summary: "For purposes of disaster relief planning only, the Bureau issues today a one-year STA from the enforcement of, and waiver of the rules implementing, section 272 of the Communications Act of 1934, as amended (Act or Communications Act) to allow the companies to share non-public, Bell Operating Company (BOC) network information with their section 272 and other affiliates. We also grant Verizon a one-year waiver of the structural separation requirements of Part 64, Subpart T of the Commission’s rules to allow Verizon to engage in integrated disaster recovery planning with its former GTE affiliates. Moreover, for purposes of disaster response, we grant the Petitioners, upon invocation of their disaster response plans, limited STA from the enforcement of section 272 of the Act and waiver of (1) the accompanying rules, to permit the Petitioners use of their corporate network, personnel and facilities, including their affiliates, throughout their entire regions; (2) the “arm’s length” negotiations requirement of section 32.27 of the Commission’s affiliate transaction rules; (3) dominant carrier tariffing requirements of Part 61 of the Commission’s rules; (4) customer advance notice requirements of the Commission’s “slamming” rules; and (5) the Commission’s network disclosure rules’ prior notice and waiting period requirements." (Footnotes omitted; parentheses in original.)

People and Appointments

6/13. Timothy Keeler was named Chief of Staff of the Office of the U.S. Trade Representative (USTR). He was previously Deputy to the Assistant Secretary for Legislative Affairs at the Treasury Department. See, USTR release.

English Professor Raises Copyright Misuse in Complaint Against Estate of James Joyce

6/12. Stanford English professor Carol Shloss filed a complaint [24 pages in PDF] in U.S. District Court (NDCal) against Sean Sweeney and the estate of James Joyce seeking declaratory relief pursuant to copyright law. She requests, among other things, a declaratory judgment that copyright misuse prohibits copyright enforcement against her.

Introduction. Shloss alleges that she wrote a book, from which over thirty pages were deleted because of litigations threats to her publisher and employer from the estate of James Joyce. She wants to publish the deleted pages on the internet, but the estate still objects. She therefore seeks a court judgment that she may do so.

This 139 paragraph complaint contains numerous factual allegations, four multipart claims, and nine items in the prayer for relief. Much of what is in this complaint is common to many other copyright actions involving literary works.

Stanford law professor Lawrence Lessig, who is one of Shloss's attorneys, wrote in his blog on June 13, 2006, that "This is the first in what we expect will be a series of cases defending the boundaries of fair use." However, what may prove to be more significant is that one of the claims for relief is based on the emerging doctrine of copyright misuse.

The complaint makes numerous factual allegations in support of its misuse claim, such as frivolous assertion of the copyright. In addition, the complaint alleges that the defendants have used copyright's right of exclusion to limit commentary on and criticism of the underlying copyrighted works.

The plaintiff is an academic who writes about James Joyce. Lessig and a group of student lawyers from the Stanford University Law School represent her. They are likely acting both to enable Shloss to publish her online supplement, and to make new law that will impact a broad range of copyright practices. The other counsel for Shloss is Robert Spoo, an attorney with the Oklahoma law firm of Doerner Saunders. Before becoming an attorney, he was a professor in the English Department at the University of Tulsa, and Editor of the James Joyce Quarterly. He is now also Legal Counsel to the International James Joyce Foundation.

Judge Richard Posner, for whom Lessig once clerked, wrote the following dicta in his 2002 opinion in Ty v. Publications International: "ownership of a copyright does not confer a legal right to control public evaluation of the copyrighted work." See also, story titled "Posner Addresses Copyright Misuse" in TLJ Daily E-Mail Alert No. 788, November 28, 2003. This case may convert this principle from dicta into law.

Similarly, Judge Thomas Ambro wrote in Video Pipeline v. Buena Vista Home Entertainment that "A copyright holder's attempt to restrict expression that is critical of it (or of its copyrighted good, or the industry in which it operates, etc.) may, in context, subvert -- as do anti-competitive restrictions -- a copyright's policy goal to encourage the creation and dissemination to the public of creative activity." (Parentheses in original.) Although, in Video Pipeline the Court found no copyright misuse.

TLJ previously published a story that summarizes the history of the doctrine of misuse, its application in Ty v. Publications International, its application in Video Pipeline, and some other possible applications. See, story titled "3rd Circuit Breaks New Ground on Copyright Misuse" in TLJ Daily E-Mail Alert No. 727, August 27, 2003. (See also, story titled "3rd Circuit Addresses Fair Use and Copyright Misuse" in Alert No. 727, and story titled "Supreme Court Denies Cert in Video Pipeline v. Buena Vista" in TLJ Daily E-Mail Alert No. 842, February 24, 2004.)

Spoo told TLJ that the doctrine of copyright misuse is still in the formation process. He said that he expects this case has "the makings of a very interesting opinion", and that whichever side loses in the District Court will likely appeal to the U.S. Court of Appeals (9thCir).

Also, the Stanford Law Review published an article titled "Rethinking Copyright Misuse", by Katherine Judge, in its December 2004 issue. See, 57 Stan. L. Rev. 901. Judge is another former clerk of Judge Posner.

Factual Background in Shloss v. Sweeney. James Joyce was an early 20th Century author of fictional literary works. He wrote a collection of short stories titled Dubliners [Amazon] (published in 1914), and the novels titled A Portrait of the Artist as a Young Man [Amazon] (1916), Ulysses [Amazon] (1922), and Finnegans Wake [Amazon] (1939).

James Joyce had an emotionally troubled daughter, Lucia Joyce, who was institutionalized. She died in 1982. James Joyce died in 1941, but there remain claims of copyrights in both published and unpublished works. Stephen Joyce, a grandson of James Joyce, aggressively asserts copyright claims.

Sean Sweeney is the trustee of the estate of James Joyce, which estate asserts ownership and control of copyrights in the works of James Joyce.

Carol Shloss is the author of a book, one version of which was published by Farrar, Straus & Giroux in 2003 as Lucia Joyce: To Dance in the Wake [Amazon]. This 576 page version does not include over 30 pages of material removed because of demands and litigation threats made to Shloss's publisher and employer.

Shloss argues in her book that Lucia Joyce influenced the work of her father. The deleted materials focus on the life of Lucia Joyce. Hence, the complaint alleges that as a result of the deletions book reviewers "found her documentary support lacking".

The complaint states that Shloss wants to publish the deleted pages on the internet as an "Electronic Supplement", but needs a declaratory judgment from the Court that such publication would not infringe copyrights.

There are a variety of items at issue in this case. For example, there are the published literary works of James Joyce, such as Finnegans Wake. There are also letters and other unpublished works of James Joyce. These are available in the collections of various libraries, which own the original copies. Nevertheless, the estate asserts ownership of the copyrights in these items. There are also items, such as medical records, and works of of Lucia Joyce, that are not authored by James Joyce.

Misuse Allegations. The complaint alleges that "Defendants are using threats of copyright infringement to unlawfully secure an exclusive right or limited monopoly not granted by the copyright laws ... that Defendants knew or should have known that Shloss' quotations in the planned Electronic Supplement constitute a fair use ... that the Estate is using threats of copyright infringement to restrain Shloss's free speech and artistic expression in order to illegally extend the scope of Defendants' copyright ..."

The complaint further alleges that "Defendants' demand that Shloss not use Lucia Joyce's works and letters, along with her medical records and uncopyrighted information contained in those works, letters, and records, was an effort to secure an exclusive right or limited monopoly not granted by the copyright laws."

The complaint further alleges that "Defendants and Stephen Joyce have used their limited copyright monopoly to exact punishment or to gain leverage with respect to matters unrelated to the copyrights in James Joyce's writings."

The complaint concludes that "Shloss is entitled to a declaratory judgment that Defendants' copyright misuse prohibits copyright enforcement by Defendants against Shloss."

The prayer for relief requests that the Court enter judgment "Declaring that due to Defendant's copyright misuse they cannot assert copyrights they control against Shloss."

Parties, Jurisdiction and Venue.  Lessig wrote in his blog on June 13 that the action was filed against Stephen Joyce. However, the complaint does not name Stephen Joyce as a defendant. Rather, it names two defendants other than Stephen Joyce.

The complaint names Sean Sweeney as a defendant, and alleges that he resides in New York. It alleges that he is the executor of the estate of James Joyce. The complaint also names the estate as a defendant, and alleges that it is organized under the laws of Great Britain.

Most factual allegations in the complaint regarding the actions of the estate concern Stephen Joyce, who is a alleged to be an agent of the estate.

Shloss is a resident of the Northern District of California.

The complaint was filed on June 12. The defendants have not yet filed answers. Shloss's attorneys have granted the estate an extension of time to file its answer until the end of July.

This case is Carol Shloss v. Sean Sweeney in his capacity as trustee of the Estate of James Joyce, and the Estate of James Joyce, U.S. District Court for the Northern District of California, D.C. No. 06-3718.

In addition, The New Yorker published an article titled "The Injustice Collector: Is James Joyce's grandson suppressing scholarship?" by D.T. Max on June 19, 2006.

Supreme Court Requests Solicitor General Brief in Hatch v. Cellco Partnership

6/12. The Supreme Court requested that the Solicitor General file a brief regarding whether or not it should grant the petition for writ of certiorari in Hatch v. Cellco Partnership. See, Order List [9 pages in PDF] at page 2, and Supreme Court docket.

This case concerns the scope of state authority to regulate wireless service providers. This request suggests that the Supreme Court may be considering granting certiorari.

The legislature of the state of Minnesota enacted, and the governor signed, a statute pertaining to "Wireless Consumer Protection".

Cellco Partnership, dba Verizon Wireless, and other wireless service providers, filed a complaint in U.S. District Court (DMinn) against Mike Hatch, in his capacity as Attorney General of Minnesota, seeking declaratory and injunctive relief that the statute is preempted by 47 U.S.C. § 332(c)(3)(A), and that it is unconstitutionally vague.

The District Court denied the wireless companies' request for a permanent injunction.

The wireless companies appealed to the U.S. Court of Appeals (8thCir). It issued its opinion [13 pages in PDF] on December 9, 2005, reversing the judgment of the District Court, and instructing it to grant the wireless companies a permanent injunction.

The Court of Appeals offered this summary of the Minnesota law: "The statute forbids the providers to implement changes in the terms and conditions of subscriber contracts that ``could result´´ in increased rates or an extended contract term, unless they first obtain affirmative written or oral consent from the subscriber."

It "also requires providers to deliver copies of the subscriber contracts to the subscribers, ... and, in the event a subscriber proposes a change to the contract, to disclose clearly any rate increase or contract extension that could result from the change. ... The statute further requires providers to maintain recorded or electronic verification of the ``disclosures´´ required by the law."

Section 332 provides that "no State or local government shall have any authority to regulate the entry of or the rates charged by any commercial mobile service or any private mobile service, except that this paragraph shall not prohibit a State from regulating the other terms and conditions of commercial mobile services."

The Court of Appeals reasoned that the section of the statute that regulates provider initiated changes is not a consumer protection provision that falls within the meaning of "other terms and conditions". Rather, it "effectively regulates rates", and is therefore preempted by Section 332. That is, it "requires providers to maintain rates different from those that would be charged if the providers were left to follow the terms of their existing contracts, which typically allow an adjustment of rates after reasonable notice of fewer than 60 days."

In addition, the Court of Appealst held that the other provisions of the state statute are not separable. Hence, the entirety is preempted.

The state of Minnesota then petitioned the Supreme Court for writ of certiorari.

In addition, a collection of groups filed an amicus brief [28 pages in PDF] urging the Supreme Court to grant certiorari. These groups are the American Association of Retired Persons (AARP), Consumers Union, National Association of Consumer Advocates, National Association of State Utility Consumer Advocates (NASUCA), and National Consumer Law Center.

They wrote that this case "not only affects the 185 million Americans who currently subscribe to some form of wireless service, but every state whose laws conceivably could be affected by the Eighth Circuit’s decision." They argue that the Court of Appeals was incorrect in concluding that the statute regulates rates.

This case is Mike Hatch v. Cellco Partnership, et al., Sup. Ct. No. 05-1159, a petition for writ of certiorari to the U.S. Court of Appeals for the 8th Circuit, App. Ct. No. 04-3198.

Cellco Partnership is represented by Helgi Walker, an attorney in the Washington DC office of the law firm of Wiley Rein & Fielding. She was previously Associate Counsel to the President, early in the administration of President Bush. Before that, she was a legal advisor to former FCC Commissioner Harold Furchtgott-Roth. The AARP and others are represented by Stacy Canan of the AARP Foundation.

More Supreme Court News

6/12. The Supreme Court denied rehearing in M2 Software, Inc. v. Madacy Entertainment, Sup. Ct. No. 05-967. See, Order List [9 pages in PDF] at page 9, and docket.

6/12. The Supreme Court denied certiorari Wayne Harter v. Commissioner for Patents, Sup. Ct. No. 05-1338 See, Order List [9 pages in PDF] at page 4, and docket.

9th Circuit Affirms in Marder v. Lopez

6/12. The U.S. Court of Appeals (9thCir) issued its opinion [18 pages in PDF] in Marder v. Lopez, Sony, and Paramount, a copyright case arising out of the release of a music video, featuring Jennifer Lopez, that may have included scenes based upon the 1983 movie titled "Flashdance". The Court of Appeals affirmed the judgment of the District Court, which dismissed Marder's complaint.

In 1982 Maureen Marder, a dancer, assisted the author of the screenplay for Flashdance. She was paid, and signed a general release that released Paramount from all claims arising out of the making of the movie. In 2003, Sony made and released a music video for the song titled "I'm Glad", performed by Lopez.

Marder then filed a complaint in U.S. District Court (CDCal) against Lopez, Sony and Paramount, seeking a declaration that she is a co-author of Flashdance, and a co-owner of the copyright. She also sought to recover part of the revenues from the sale of the video. The District Court dismissed her complaint for failure to state a claim.

The Court of Appeals affirmed. It held that the 1982 release "constituted a waiver of all claims against Paramount arising out of her contributions to the film Flashdance. Her current claims against Paramount are barred by the Release. Marder’s suit against Sony and Lopez was properly dismissed because she cannot bring an infringement action if she cannot assert a valid copyright interest in Flashdance and she has no existing evidence of copyright ownership."

This case is Maureen Marder v. Jennifer Lopez, Sony Music Entertainment, Inc., and Paramount Pictures Corporation, U.S. Court of Appeals for the 9th Circuit, App. Ct. No. 04-55615, an appeal from the U.S. District Court for the Central District of California, D.C. No. CV-03-08226-TJH.

8th Circuit Rules in Newspaper Freelance Case

6/12. The U.S. Court of Appeals (8thCir) issued its opinion [6 pages in PDF] in Star Tribune v. Minnesota Newspaper Guild Typographical Union, affirming the judgment of the District Court, which held that the Star Tribune, which publishes a daily newspaper in Minneapolis, Minnesota, violated its collective bargaining agreement (CBA) with an employees' union that regulates work done in the newspaper's news and editorial departments.

The CBA permits the Star Tribune to contract with freelance writers who are "experts or specialists". The Star Tribune contracted with a broadcast meteorologist to write a daily column. When the Star Tribune began publishing these columns in the news section, rather than the weather section, the union filed a grievance. The arbitrator held that the CBA prohibits the Star Tribune from publishing the works of freelance experts in the news section, notwithstanding that absence of any language to that effect in the CBA.

The District Court then affirmed the arbitration award.

The Court of Appeals affirmed the District Court. The Star Tribune Company v. Minnesota Newspaper Guild Typographical Union, U.S. Court of Appeals for the 8th Circuit, App. Ct. No. 05-3955, an appeal from the U.S. District Court for the District of Minnesota.

Last week, the Supreme Court denied certiorari in Tokyo Kikai Seisakusho, Ltd. v. Goss International Corp., a case involving trade protectionism in the U.S. in the market for printing presses. The Supreme Court let stand the January 23, 2006, opinion [32 pages in PDF] of the 8th Circuit holding that a foreign company that sold large printing presses to newspaper publishers in the U.S. at lower prices than U.S. manufacturers violated U.S. law. See, story titled "Supreme Court Denies Cert in Trade Protectionism Case" in TLJ Daily E-Mail Alert No. 1,385, June 6, 2006.

Meanwhile, groups such as the Newspaper Association of America (NAA), report that the total number of daily newspapers, and total circulation, continue their long decline.

Go to News from June 6-10, 2006.