|TLJ News from November 11-15, 2006|
SEC Releases Annual Report
11/15. The Securities and Exchange Commission (SEC) released a report [109 pages in PDF] titled "2006 Performance and Accountability Report". This report addresses many technology related topics, including interactive data, e-proxy rules, information technology (IT) security at the SEC, e-authentication, upgrading equipment and software in forensics lab to improve the recovery of data store on electronics devices, teleworking by SEC employees, and use of IT in examinations and enforcement.
Interactive Data. SEC Chairman Chris Cox wrote in a cover letter to the report that "The SEC’s Interactive Data initiative has paved the way for the imminent conversion of our public company disclosure regime to a global system of financial information exchange built on ``smart data´´. In 2006, we awarded three separate contracts totaling $54 million to transform the agency's 1980s-vintage public company disclosure system from a form-based electronic filing cabinet to a dynamic real-time search tool with interactive capabilities."
The body of the report states that "The SEC continued to build upon a voluntary program initiated in FY 2005 that allows registrants to use eXtensible Business Reporting Language in their financial disclosure filings. In early 2006, an interactive data test group was launched to explore how new Internet-based reporting technologies can improve the financial reporting process for investors, financial intermediaries, the SEC, and companies themselves. The pilot program enables participant companies to determine the benefits of using interactive data and provide feedback to the SEC, and enables investors and analysts to assess new technologies for analyzing interactive data reports submitted to the SEC in XBRL format."
See also, the SEC's February 2005 rule changes that initiated the SEC's XBRL Voluntary Program, and its web page summary of the program.
E-proxy Rules. Cox wrote that "We proposed e-proxy rules, to further advance our goal of tapping the enormous power of technology and the Internet to simplify and improve disclosure."
See also, story titled "SEC Proposes to Allow Internet Delivery of Proxy Materials" in TLJ Daily E-Mail Alert No. 1,263, December 1, 2006.
Telework. The report states that the SEC has increased its telework participation rate to 34% of SEC employees. The report adds that the SEC is one of the few federal agencies that does not exclude certain job functions or groups of employees from teleworking.
The report states that "In FY 2006 the SEC purchased and deployed new technology that allows employees to access their files via the Internet at any time or location, thereby facilitating more telework without compromising the security of the SEC’s information. Also, the SEC continued its pilot ``virtual workforce´´ project in the Division of Corporation Finance, in which an initial group of 10 employees works from home full-time."
IT Security. The report states that during the past year "the SEC implemented a wide variety of new policies and procedures governing the assessment and management of information security risk. These procedures include comprehensive approaches for identifying security risk; configuring, testing, and monitoring information systems; incident response; remedial action tracking; and many other areas. The SEC also completed the certification and accreditation of its major systems, and conducted awareness training for 99 percent of SEC staff. In addition, the agency also established and tested its disaster recovery and business continuity plans in accordance with recommendations from previous years."
The report continues that the SEC will "refine and extend the procedures and management controls put in place during FY 2006 to reduce the residual risk. The most important of these will be improvements in the processes for controlling changes to the technical environment, strengthening the management of user accounts and passwords, and measures to tighten the physical perimeter around sensitive areas of the SEC’s premises. In addition, the agency will remediate a number of specific technical issues in such areas as patch management, data security, and intrusion detection systems."
Forensics Lab. The report states that during FY 2006 the SEC's Division of Enforcement "implemented a new forensic lab equipped with state-of-the-art equipment and software. The lab allows Enforcement to retrieve data stored on electronic devices like personal computers, servers and laptops. Since such data is volatile, subject to damage, and requires special processing and handling, the forensic lab has created special protocols that are essential to the preservation and authentication of this data."
The report adds that "Enforcement has also trained a team of examiners who are able to perform forensic-related activities such as recovering deleted data and analyzing email and other relevant artifacts. The forensics program has fundamentally transformed Enforcement’s ability to receive, process, and analyze electronic storage devices."
Examinations and Enforcement. The report states that the management information systems used for examinations and enforcement programs "are antiquated and do not provide the kind of high-quality information capture and reporting that is required for such large programs. The SEC began a multiyear initiative to upgrade or replace these systems in 2006 ..."
The report continues that the SEC "has historically not invested sufficiently in its administrative systems infrastructure, which has been a contributing factor to the internal controls issues discussed elsewhere in this report. The agency began to address these issues in 2006 with an upgrade to the core accounting system and other investments in procurement and budgeting systems; over the next three years, additional upgrades are planned."
The report also states that the SEC's Office of Information Technology "certified and accredited eight major applications; recertified the agency's accounting and general support systems because of major upgrades; and completed 14 electronic authentication risk assessments. E-authentication is a review process at the transaction level designed to help agencies ensure that authentication processes provide the appropriate level of assurance."
The report is vague in its description of IT programs used to facilitate enforcement and examination. For example, it describes some of its IT projects underway simply as "Upgrade analytical tools available to examiners" and "Redesign the enforcement case management system to improve management of penalties and disgorgement".
House Judiciary Committee Holds Hearing on Caller ID Spoofing
11/15. The House Judiciary Committeee (HJC) held a hearing on HR 5304, the "Preventing Harassment through Outbound Number Enforcement (PHONE) Act". This bill would criminalize the modification of caller ID information with intent to mislead.
Rep. Tim Murphy (R-PA), the sponsor of the bill, wrote in his prepared testimony that "A criminal could try to obtain personal financial information from individuals by using a bank's phone number, ... An ex-spouse could harass a former wife or husband who has blocked calls from the ex-spouse’s phone line, ... A pedophile could stalk a child by stealing a school phone number or the phone number of a friend of the child".
Phil Kiko, Chief of Staff and General Counsel of the HJC, wrote in his prepared testimony that caller ID spoofing "creates two categories of victims: 1) the person who receives a telephone call identified as coming from someone other than the actual caller; and 2) the person whose caller identification is used fraudulently to disguise the true identity of the caller."
He continued that "I fall into the second category, because without my knowledge or consent, my caller identification (``ID´´) was used hundreds, if not thousands, of times to mask the true identity of a fraudulent caller. As a result, my family and I have received up to 20 telephone calls a day from angry people who fall into category one, who were either: returning the telephone call of the fraudulent caller; asking me to stop calling them; or asking me to take them off the telemarketing list."
He added that caller ID information is "circulated to other fraudulent callers", and that "The only effective way to end being victimized is to change one’s telephone number".
James Martin (The 60 Plus Association) wrote in his prepared testimony that "have not received what you might consider an alarming number of complaints on this issue. But it’s only a matter of time. This is a stink that's coming and we want to be proactive."
On June 6, 2006, the House approved HR 5126, the "Truth in Caller ID Act of 2006", by voice vote. The House Commerce Committee (HCC) amended and approved the bill on May 24, 2006.
The Senate has not approved HR 5126. However, the Senate Commerce Committee's (SCC) stalled communications reform bill does include a section titled "Truth in Caller ID" that is similar to HR 5126. It was offered by Sen. Bill Nelson (D-FL) and Sen. Olympia Snowe (R-ME).
Rep. Murphy also testified that "I also included an amendment to prompt the FCC to address the practice of caller ID fraud in H.R. 5672, the Fiscal Year 2007 Science, State, Justice, Commerce Appropriations Act. Still, I believe my bill, H.R. 5304, appropriately goes further by amending criminal law to fully protect Americans from the practice of caller ID fraud."
Gutierrez Discusses IPR in PR China
11/15. Secretary of Commerce Carlos Gutierrez gave a speech on November 15 to the Shanghai American Chamber of Commerce in Shanghai, Peoples Republic of China, in which he discussed a range of topics, including trade, intellectual property rights (IPR), and IPR enforcement. He also gave a speech on November 14 in Beijing in which he focused on IPR enforcement.
Gutierrez said that met with Vice Premier Wu Yi and PM Wen Jiabao (at left) during this visit.
Gutierrez discussed the US China Joint Commission on Commerce and Trade (JCCT) in his November 15 speech. He said, "As you know, in April we had a very successful meeting. The Chinese made a number of important commitments."
See, stories titled "Hu Says PR China Will Strengthen Intellectual Property Rights and Increase Market Access" in TLJ Daily E-Mail Alert No. 1,355, April 21, 2006, and "PR China's Vice Premier Offers Minimal Assurances Regarding IPR Theft" in TLJ Daily E-Mail Alert No. 1,349, April 13, 2006.
Gutierrez (at right) continued that "On their own initiative, the Chinese government agreed to require that all PCs made in China, or imported into China, be pre-loaded with legitimate software. Additionally, government agencies are now required to buy computers with pre-loaded, licensed software."
He added that "These are significant results that came out of the talks. In the six months since the JCCT meetings, we've seen important progress on each of these fronts, and we've heard anecdotal evidence that software companies are seeing higher sales. But we must continue to press for decisive and specific action.
Gutierrez also said that on November 14 he announced in Beijing "three specific challenges facing China that need to be addressed in the very near term. They include: 1. Lowering criminal thresholds for prosecuting those involved in commercial piracy and counterfeiting; 2. Allowing greater market access for audiovisual products, and 3. Sharing factories' pirated disc exemplars with the international laboratories that trace pirated optical discs to their source."
He commented that "These are important improvements in IPR that have gone unaddressed by the Chinese for too long."
Gutierrez commented later in his speech on the 15th on the consequences of the November 7, 2006, House and Senate elections. He said that "we are encouraged by initial signs that the new Congress is willing to work with the Administration to advance a positive trade agenda."
But he also cautioned about a "rising tide" of protectionism.
Specifically, he said that "America and China must work together to stem the rising tide of protectionist sentiment in our nations. We must demonstrate to our citizens the benefits that free and fair trade can bring to our economies. We must also show our citizens that we will hold our trading partners accountable on their commitments to open their markets. Promises to open markets must be kept."
He made a similar point in his speech on November 14. He said that "Another victim of widespread IP theft in China is American support for expanding our trade relationship. Those who espouse protectionism as a legitimate economic policy have a loud voice. They cite specific imbalances. And they point to the lack of robust IP protection in China as a top reason why we should put protectionist policies in place. This would be the wrong course. However, we can't disprove the critics with rhetoric. We need results."
He also used his November 14 speech to review recent progress in PR China on IPR enforcement. He then outlined three areas that remain to be addressed.
First, he said that "China should lower its criminal thresholds for prosecuting those involved in commercial piracy and counterfeiting. Allowing criminal operations to exist safe from prosecution because of unreasonable legal thresholds does not fulfill China's WTO commitment. It does not provide real remedies and meaningful deterrents to IP theft."
Second, he said that "China should allow greater market access for audiovisual products. The current barriers to entry for legitimate goods in the Chinese market create a haven for pirates."
Third, he said that "China should join those countries that share their factories' optical disc exemplars with the international laboratories that trace pirated discs to their source. This will greatly enhance the ability of forensic examiners, rights holders, and law enforcement to eliminate piracy at its source."
He also stated in his November 15 speech that "over-regulation ... burdens the economy and costs jobs", and that China should embrace "rule of law, transparency, fairness and open competition ..."
People and Appointments
11/15. President Bush nominated James Rogan (at right) to be a Judge of the U.S. District Court for the Central District of California. See, White House release. This is a new nomination. He is a former Member of Congress. He served on the House Judiciary Committee (HJC), and its Subcommittee on Court and Intellectual Property, and the House Commerce Committee. After losing his seat to Rep. Adam Schiff (D-CA), Rogan was appointed head of the US Patent and Trademark Office (USPTO). If confirmed, he would be one of only a few judicial appointees of President Bush with a background in technology related areas of law. See also, TLJ biography of Rogan written in 1999. However, he is a also pro-life conservative who was a House Manager of the Clinton impeachment trial. Many Democrats will oppose his confirmation by the Senate.
11/15. President Bush again nominated Terrence Boyle to be a Judge of the U.S. Court of Appeals (4thCir). He has been a Judge of the U.S. District Court (EDNC) since 1984. Bush first nominated him for the 4th Circuit in May of 2003. Senate Democrats have long prevented the Senate from voting on Judge Boyle. See, White House release.
11/15. President Bush again nominated William Haynes (at left) to be a Judge of the U.S. Court of Appeals (4thCir). He is the General Counsel of the Department of Defense (DOD). Bush first nominated him in September of 2003. He is another judicial nominee who has for years been blocked by Senate Democrats, who have enough votes to keep his nomination from coming to a vote, but not enough votes to defeat him. See, White House release.
11/15. President Bush again nominated William Myers to be a Judge of the U.S. Court of Appeals (9thCir). He is now of counsel to the law firm of Holland & Hart in Boise, Idaho.
11/15. President Bush again nominated Randy Smith to be a Judge of the U.S. Court of Appeals (9thCir). He is a state court judge in Idaho. See, White House release.
11/15. President Bush again nominated Michael Wallace to be a Judge of the U.S. Court of Appeals (5thCir). See, White House release.
11/15. President Bush again nominated Peter Keisler (at right) to be a Judge of the U.S. Court of Appeals (DCCir). Bush first nominated Keisler for this position in June of this year. He is currently the Assistant Attorney General in charge of the Civil Division. He was previously an attorney at the law firm of Sidley Austin, where he represented AT&T. See, White House release.
11/15. President Bush nominated Benjamin Settle to be a Judge of the U.S. District Court for the Western District of Washington. See, White House release.
11/15. Sen. Charles Grassley (R-IA) and Sen. Max Baucus (D-MT) sent a letter to Susan Schwab, the US Trade Representative, regarding the Peoples Republic of China's protectionist policies regarding electronic payments services. They wrote that as part of commitments upon joining the World Trade Organization (WTO), "China pledged to phase out a variety of financial services restrictions over time". These commitments take effect on December 11, 2006. The two Senators wrote that the "People's Bank of China is considering policies that would allow China Union Pay ("CUP") to remain the sole domestic electronic payments provider in China." They urged Schwab "to seek confirmation from the highest level of authorities in China that China will fully carry out its financial services commitments."
11/15. The American Association of Publishers (AAP) announced in a release that "Books sales were up in September for most of the categories". It added that e-book sales "saw an increase of 1.3 percent for the month ($2.4 million); the category also posted an increase of 21.2 percent for the year." In addition, "Audio Book sales were up by 4.3 percent for the month with sales totaling $16.4 million; sales for the year were down by 22.2 percent."
5th Circuit Holds that Cable Television Service is Not a Utility Under 11 U.S.C. § 366
11/14. The U.S. Court of Appeals (5thCir) issued its opinion [PDF] in Darby v. Time Warner, a bankruptcy case regarding cable service. The Court of Appeals held that cable television service is not a utility within the meaning of 11 U.S.C. § 366. This is the provision in the Bankruptcy Code that protects debtors from a cut off of service by a utility because of the filing of a bankruptcy petition.
The Court of Appeals did not mention internet access, but added in a footnote that "We express no opinion on the effect of §366 on telephone service that is bundled with cable service." The Court of Appeals wrote nothing about the status of cable modem service alone, which would enable a customer to obtain VOIP service from a third party service or software provider.
Background. Damon Darby filed a Chapter 13 bankruptcy petition in the U.S. Bankruptcy Court for the Southern District of Texas. He was a customer of Time Warner Cable (TW). The Court of Appeals opinion does not state whether or not he received multichannel video programming service, cable modem based internet access service, and/or voice communications service from TW.
Darby offered TW a deposit to reinstate his "cable service". TW refused. Darby filed a motion with the bankruptcy court seeking an order compelling TW to reinstate service pursuant to 11 U.S.C. § 366. The bankruptcy court denied the motion. The District Court affirmed. Darby brought the present emergency appeal to the Court of Appeals.
Statute. Subsection 366(a) provides, in full, that "Except as provided in subsection (b) of this section, a utility may not alter, refuse, or discontinue service to, or discriminate against, the trustee or the debtor solely on the basis of the commencement of a case under this title or that a debt owed by the debtor to such utility for service rendered before the order for relief was not paid when due."
However, Subsection 366(b) then provides, in full, that "Such utility may alter, refuse, or discontinue service if neither the trustee nor the debtor, within 20 days after the date of the order for relief, furnishes adequate assurance of payment, in the form of a deposit or other security, for service after such date. On request of a party in interest and after notice and a hearing, the court may order reasonable modification of the amount of the deposit or other security necessary to provide adequate assurance of payment."
Court of Appeals Opinion. The Court of Appeals affirmed. It wrote, and the legislative history of this section supports the conclusion, that Congress enacted this section to prevent monopoly gas, electric and telephone service providers from cutting off service to customers solely because they had filed a bankruptcy petition.
The Court of Appeals noted that there is competition now, and that Darby has other alternatives, such as satellite service.
The Court of Appeals wrote that "We hold that Time Warner is not a utility as contemplated by § 366", and that "cable service is not covered by § 366, and Time Warner is not required to reinstate Darby’s service despite his offer of adequate assurances of future payment."
The Court of Appeals opinion is not clear as to what service Darby received from Time Warner. Nor is it clear as to how this opinion might affect cable internet access, other internet access platforms, or other services enabled by such services.
The Court of Appeals refers to Darby's service several times as "cable service". It relies on a District Court opinion that involved "cable television". In the penultimate sentence, the Court of Appeals wrote that "Because cable television is neither a necessity nor would Darby be faced with crippling inconvenience in obtaining alternate service, Time Warner is not a utility as contemplated by § 366."
There is also a footnote to this sentence: "We express no opinion on the effect of §366 on telephone service that is bundled with cable service."
TLJ Analysis. The statute interpreted by the Court of Appeals was written at time when voice communications was provided by a regulated monopoly, and consisted of plain circuit switched analog voice service.
The policy argument for prohibiting automatic cut offs of bankruptcy petitioners' service was based both upon the monopoly status of the provider, and the essentiality of the service.
Multichannel video programming provided by cable companies is now neither a monopoly service (there is satellite service, increasing telephone company video service, and related services such as DVD sales and rentals) nor essential (it is largely entertainment).
Voice communications for most consumers is now longer obtained from a monopoly provider. However, voice service provided by a telephone company is used for communications with health service providers and public safety agencies, and hence, remains essential. Voice service provided by a cable company, whether provided as a circuit switched service, or as an internet protocol enabled service, is likewise essential. But so too is voice service provided by a third party VOIP service or software provider, when it runs over the broadband connection provided by a cable company, or any other broadband service provider.
The Court of Appeals opinion appears to hold only that a cable company's multichannel video programming service, when provided alone, is not covered by Section 366.
The rest is murk. The Court of Appeals opinion states that it does not address "telephone service that is bundled with cable service". But, the Court of Appeals failed to elaborate on its use of the terms "telephone service" and "bundled with". The Court of Appeals did not explain whether or not VOIP service is a "telephone service". Nor did the Court of Appeals explain whether the term "bundled with" means only services provided by the cable company, or also voice services provided or enabled by third parties.
The Court of Appeals opinion has nothing to say about what other broadband enabled services, other than voice, might be essential.
Were the Court of Appeals to address these questions in a future opinion, the essentiality component of the policy analysis would weigh in favor of extending Section 366 status to internet access service provided by a cable company, as well as to voice service provided by a cable company (regardless of the technology), and to any third party service that enables voice communications provided over cable.
The same argument would also apply to any broadband service provider, as well as to any provider of a VOIP service that utilizes any broadband service.
On the other hand, for few consumers are any of these services available from only a single service provider, so the monopoly component of the policy analysis would weigh against extending Section 366 status.
This case is Damon Fitzgerald Darby v. Time Warner Cable, Inc., U.S. Court of Appeals for the 5th Circuit, App. Ct. No. 05-20931, an appeal from the U.S. District Court for the Southern District of Texas. Judge Carl Stewart wrote the opinion of the Court of Appeals, in which Judges Edith Jones and Smith joined.
Capitol Hill News
11/14. The House Judiciary Committee's (HJC) Subcommittee on Commercial and Administrative Law held a hearing titled "The Administrative Law, Process and Procedure Project for the 21st Century". Morton Rosenberg of the Library of Congress's (LOC) Congressional Research Service (CRS) wrote in his prepared testimony [9 pages in PDF] that "innovations in technology and science" appear to require a fresh look at old administrative process issues. He wrote, for example, that "the exploding use of the Internet and other forms of electronic communications presents extraordinary opportunities for increasing government information available to citizens and, in turn, citizen participation in governmental decisionmaking through e-rulemaking. A number of recent studies has suggested that if the procedures used for e-rulemaking are not carefully developed, the public at large could be effectively disenfranchised rather than enhancing public participation." He also referenced "the continued issue of avoidance by the agencies of notice and comment rulemaking by means of ``non-rule rules.´´" See also, prepared testimony [16 pages in PDF] of Curtis Copeland (CRS), and prepared testimony [10 pages in PDF] of TJ Halstead (CRS).
11/14. The Senate Judiciary Committee (SJC) held a hearing titled "Competition in Sports Programming and Broadcasting: Are Consumers Winning". See, opening statement of Sen. Patrick Leahy (D-VT). See, also prepared testimony of Jeffrey Pash (National Football League), prepared testimony of Daniel Fawcett (Directv), and prepared testimony of Landel Hobbs (Time Warner).
Movie Companies Sue Company that Copies CSS Protected DVD Content onto PVPs
11/13. Paramount Pictures Corporation, and other movie companies, filed a complaint [2 MB PDF scan] in U.S. District Court (SDNY) against Load 'N Go Video, Inc. alleging violation of 17 U.S.C. §§ 501 and 1201 in connection with copying movies and TV programs from CSS protected DVDs to its customers' portable video players.
The plaintiffs are Paramount, 20th Century Fox, Universal, Warner Brothers, Disney, and Columbia.
The sole defendant is Load 'N Go Video, Inc. The web site with the URL of www.loadngovideo.com was not operational at the time of publication of this story. However, cached copies of its pages were available via Google.
One cached web page states that "Load ‘N Go Video was founded by technology professionals in Boston, Massachusetts with a great enthusiasm for the exploding portable video industry. After discovering the difficulty and tedium involved in converting and loading video content to view on Portable Video Players, the founders decided to create a value-added service to save both the time and effort of its consumers."
It adds that "Our mission is to help our customers enjoy the advantages of the portable video player revolution without being overwhelmed by the technology", and that its service is to "load video content on to portable video players".
The movie companies' complaint alleges "unauthorized and unlawful copying, distribution and exploitation of numerous motion pictures and/or television programs in which Plaintiffs own the copyrights or exclusive distribution rights ... and ... unauthorized and unlawful circumvention of an encryption-based DVD access control and copy prevention system that provides protection for Plaintiffs' copyrighted content."
The complaint states that "In exchange for payment from its customers, Defendant copies Plaintiffs' copyrighted works from DVDs and then ultimately loads said copyrighted material onto the customer's portable video player (``PVP´´) -- an example of which is Apple's ``iPod.´´ Through the practice, Defendant illegally copies and distributes Plaintiffs' copyrighted works ..."
The complaint continues that "Before releasing Plaintiffs' copyrighted works in DVD format, Plaintiffs employ the Content Scramble System (``CSS´´) -- an encryption-based DVD access control and copy prevention system that provides protection for their copyrighted content. Upon information and belief, Defendant's service of copying Plaintiffs' protected DVD content and then loading said content onto the customer's PVP involves the circumvention of CSS, in violation of the anti-circumvention provisions of the Digital Millennium Copyright Act ..."
The complaint elaborates that "Defendant engages in an enterprise in which it, unlawfully and without authorization, circumvents the CSS access control and copy prevention system that protects Plaintiffs' DVDs and then copies Plaintiffs' copyrighted works contained on said DVDs and ultimately loads said copyrighted material onto the customer's PVP. Specifically, Defendant's customers select from a wide variety of commercially available DVDs that are offered for sale and for ``loading´´ by Defendant and that contain Plaintiff's copyrighted works ..."
"Defendant's customers either purchase one of three models of PVPs that Defendant offers for sale or send to Defendant their own PVPs. Using DVDs ordered by its customers, Defendant, among other activities, circumvents the CSS protecting the DVDs and then copies and loads Plaintiffs' copyrighted material onto the customer's PVP. Defendant then sends the ``loaded´´ PVPs back to its customers, along with copies of the DVDs. In exchange for this service, Defendant receives payment from its customers at a price that includes a charge for the costs associated with copying videos from the DVDs and ``loading´´ the PVPs."
The first count alleges that this is infringement, under 17 U.S.C. § 501, of exclusive rights provided under 17 U.S.C. § 106.
There are numerous limitations on the exclusive rights of copyright, including fair use, which is codified at 17 U.S.C. § 107.
The complaint further pleads that the defendants' infringement is willful, and hence, plaintiffs are entitled to recover attorneys fees under 17 U.S.C. § 505.
The second count alleges circumvention in violation of 17 U.S.C. §§ 1201(a)(1)(A), 1201(a)(2) and 1201(b).
§ 1201(a)(1)(A) provides, in part, that "No person shall circumvent a technological measure that effectively controls access to a work protected under this title."
§ 1201(a)(2) provides, in full, that "No person shall manufacture, import, offer to the public, provide, or otherwise traffic in any technology, product, service, device, component, or part thereof, that -- (A) is primarily designed or produced for the purpose of circumventing a technological measure that effectively controls access to a work protected under this title; (B) has only limited commercially significant purpose or use other than to circumvent a technological measure that effectively controls access to a work protected under this title; or (C) is marketed by that person or another acting in concert with that person with that person’s knowledge for use in circumventing a technological measure that effectively controls access to a work protected under this title."
§ 1201(b) provides, in part, that "No person shall manufacture, import, offer to the public, provide, or otherwise traffic in any technology, product, service, device, component, or part thereof, that -- (A) is primarily designed or produced for the purpose of circumventing protection afforded by a technological measure that effectively protects a right of a copyright owner under this title in a work or a portion thereof ..."
There is no fair use exception to the ban on circumvention. Although, bills are introduced in each Congress that would create such an exception.
The complaint further pleads that the plaintiffs are entitled to maximum statutory damages, and attorneys fees, under 17 U.S.C. §§ 1203.
The complaint requests broad injunctive relief, damages, costs and attorneys fees.
The plaintiffs are represented by Christine Pepe, Robert Rotstein, and Lisa Stone of the law firm of McDermott Will & Emery.
Art Brodsky, of the Public Knowledge, stated in a release that "The movie studios charge copyright infringement. In essence, they are saying that it's illegal for a consumer to copy a DVD onto another device for personal use. This argument is simply wrong, and if allowed to stand, will further weaken yet again whatever rights consumers have left to use their own, legally purchased media, as they see fit."
TLJ spoke with Don Goldberg of the Digital Freedom Campaign (DFC). He argued that there is no infringement because consumers have the right to use lawfully obtained content as they choose, including making copies for their own personal use.
As for the circumvention claim, he said that the DFC does "support a fair use exemption for the DMCA".
This case is Paramount Pictures Corporation, et al. v. Load 'N Go Video, Inc., U.S. District Court for the Southern District of New York, D.C. No. 06-CV-12931, Judge Paul Crotty presiding.
Judge Croty previously worked for Verizon. See, story titled "Bush Nominates Verizon's Crotty for Federal Judgeship" in TLJ Daily E-Mail Alert No. 972, September 8, 2004.
WTO Appellate Body Issues Report in Customs Dispute Between US and EU
11/13. The World Trade Organization's (WTO) Appellate Body released its report [136 pages in PDF] that upholds parts, and reverses parts, of the WTO Panel's report regarding the European Union's customs practices, including customs classification of liquid crystal display (LCD) monitors.
Trade officials on both sides of the Atlantic claimed victory, and denounced the actions of the other.
John Veroneau, a Deputy US Trade Representative, stated in a release that "Like every other WTO Member, the EU must administer its customs law uniformly across its territory. Today’s report confirms the panel’s finding that the EU does not do so when it comes to the classification of LCD monitors."
The EU stated in a release that the WTO Appellate Body report confirms "the legality of the European Community's (EC) customs system".
The Appellate Body affirmed the panel report's conclusion that the EU's "tariff classification of liquid crystal display monitors with digital video interface amounts to non-uniform administration".
The US filed a complaint with the WTO in 2004 initiating this proceeding. A WTO panel issued its report on June 16, 2006. See, story titled "WTO Panel Releases Report on US-EC Dispute Over LCD Monitors" in TLJ Daily E-Mail Alert No. 1,396, June 21, 2006. Both the US and EU appealed parts of the panel report.
"Today's Appellate Body report reinforces that the EU is subject to the same rules as other WTO Members. The EU’s internal decisions about how to organize itself do not excuse it from or diminish its obligations to other WTO Members", said Veroneau. "We would have preferred the original panel to have made a broader finding about the EU’s system as a whole. In that regard, we are pleased that in today’s report, the Appellate Body reversed the panel’s decision to limit its findings to particular instances of administration of EU customs law. The EU’s administration of its rules on LCD monitors is indicative of how the system as a whole operates. Had the panel considered the EU system as a whole, it should have reached that conclusion."
The EU stated that the European Commission is "only found in violation of GATT rules in one very specific and complex case of tariff classification (out of the 19 cases put forward by the US)." (Parentheses in original.)
The EU added that "The Appellate Body's report confirms that the US has failed to bring any evidence that the EU's customs administration system is inconsistent with the EU's WTO obligations to ensure uniform administration and prompt review of administrative decisions."
Supreme Court Denies Certiorari in Commercial Speech Case
11/13. The Supreme Court denied certiorari in BASF Corporation v. Peterson, a freedom of speech case. This lets stand the opinion of the Supreme Court of Minnesota. The Supreme Court passed up an opportunity to protect the free speech rights of publishers of trade publications, and to bring clarity to its regime that affords different levels of constitutional protection to different speakers.
The Supreme Court wrote that "The motion of Chamber of Commerce of the United States of America for leave to file a brief as amicus curiae is granted. The motion of CropLife America for leave to file a brief as amicus curiae is granted. The motion of Product Liability Advisory Council, Inc. for leave to file a brief as amicus curiae is granted. The petition for a writ of certiorari is denied." See, Order List [13 pages in PDF] at page 11.
This is a class action brought in the state of Minnesota, under the New Jersey Consumer Fraud Act, based upon BASF's labeling of pesticides, and a BASF sponsored trade magazine article about pesticides. The class action plaintiffs prevailed in the trial court. The Minnesota Court of Appeals affirmed, rejecting BASF's First Amendment arguments. The Supreme Court of Minnesota declined to address the First Amendment issues.
BASF wrote in its Petition for Writ of Certiorari [PDF] to the US Supreme Court that one of the issues is "Whether the First Amendment prohibits a state law claim that a manufacturer committed an unconscionable commercial practice by (a) distributing a truthful magazine article on a subject of public importance and (b) accurately reporting to responsible government officials the unlawful use of the manufacturer’s products."
See also, amicus brief [29 pages in PDF] of the U.S. Chamber of Commerce, which urged the Supreme Court to grant certiorari and reverse the judgment of the Supreme Court of Minnesota. It wrote that "For years, the Court has sent conflicting signals on the proper definition of ``commercial speech.´´ The resulting jurisprudential uncertainty has led the lower courts to take widely diverging approaches in determining when corporate speech is subject to reduced protection under the First Amendment. In this case, the decision below deepens that conflict by treating a breathtakingly broad class of speech as “commercial,” which menaces our system of free expression. According to Minnesota's courts, commercial speech includes all statements of fact: (i) made by persons engaged in commerce (including all businesses and their public relations firms); (ii) made to an audience including actual or potential purchasers of their products (including readers of a trade journal); and (iii) addressing any matter in which the speaker has some form of commercial interest ..." (Parentheses in original.)
This case is BASF Corporation v. Ronald Peterson, et al., Sup. Ct. No. 06-144, a petition for writ of certiorari to the Supreme Court of the Minnesota. The Supreme Court of Minnesota case is C3-02-857.
FTC Announces Promotions and Hirings
11/13. The Federal Trade Commission (FTC) announced numerous recent promotions and new hires. See, FTC release.
Bill Cohen was named Deputy General Counsel for Policy Studies at the FTC. He has worked on FTC hearings and reports on antitrust issues involving patent policy and state action protections. He was also the project manager for innovation in the FTC's hearings on global and innovation based competition. He was also an Attorney Advisor to former Chairman Janet Steiger.
Karen Grimm was named Assistant General Counsel for Policy Studies. She previously worked for the law firm of Sutherland Asbill & Brennan.
Suzanne Michel was named Deputy Assistant Director of the Office of Policy Coordination in the Bureau of Competition. She was previously the FTC's Chief Counsel for Intellectual Property. The FTC stated that she will "continue to develop the Bureau's intellectual property initiatives".
James Cooper, an economist who has worked on real estate issues, was named Deputy Director in the Office of Policy Planning. He was previous an Assistant Director.
Greg Luib was named Assistant Director of the Office of Policy Planning. He was previously an Attorney Advisor. He worked on the FTC's Noerr Pennington doctrine report, and on the formation of the FTC's Internet Access Task Force.
Alden Abbott was named Associate Director of the Bureau of Competition. He was previously Assistant Director of the Office of Policy and Coordination. Before that, he worked at the Department of Commerce. He is also a member of the part time faculty at the George Mason University law school.
Sean Gates was named Deputy Assistant Director in the Anticompetitive Practices Division. He was previously a senior staff attorney in the Division. He worked on the Union Oil Company of California matter.
Peter Richman was named Deputy Assistant Director for the Mergers III Division. He was previously a senior attorney in the Division. Jolanta Sterbenz was named Deputy Assistant Director for the Mergers III Division. She currently works for the law firm of Hogan & Hartson. Richman and Sterbenz have both worked on energy industry matters, which are part of the responsibility of Mergers III. However, this Division also handles software.
Jeanine Balbach was named Chief of Staff of the Bureau of Competition. She was previously an assistant to the Director, a staff attorney in the Mergers II Division, and an Attorney Advisor to former Chairman Timothy Muris.
Mary Beth Richards was named Deputy Director of the Bureau of Consumer Protection. She is currently Deputy Bureau Chief and Chief of Staff of the Federal Communications Commission's (FCC) Consumer and Governmental Affairs Bureau. She will start on November 27, 2006. See, separate FTC release.
11/13. The Supreme Court issued an order in KSR International v. Teleflex, a case regarding patent obviousness that is scheduled for oral argument on November 28, 2006. The Supreme Court wrote that "The motions of the Solicitor General for leave to participate in oral argument as amicus curiae and for divided argument are granted." See, Order List [13 pages in PDF] at page 1. The question presented [PDF] is "Whether the Federal Circuit has erred in holding that a claimed invention cannot be held "obvious", and thus unpatentable under 35 U.S.C. § 103(a), in the absence of some proven ``'teaching, suggestion, or motivation' that would have led a person of ordinary skill in the art to combine the relevant prior art teachings in the manner claimed.´´". (Hyperlinks added.) See also, amicus brief of the Office of the Solicitor General, and story titled "Supreme Court Grants Cert in Patent Obviousness Case" in TLJ Daily E-Mail Alert No. 1,399, June 26, 2006. See also, Supreme Court docket. This is Sup. Ct. No. 04-1350.
11/13. The U.S. Court of Appeals (1stCir) issued its opinion in John Hancock v. Abbott Laboratories, affirming the judgment of the District Court for Abbott. This is a contract interpretation dispute between two companies that jointly financed the development of pharmaceutical compounds, with profits to be shared. John Hancock filed a complaint in U.S. District Court (DMass) against Abbott, based upon diversity of citizenship, seeking declaratory judgment that Abbott's delayed investment allowed John Hancock to terminate its payments but retain its share of any future profits. The District Court applied Illinois contract law, pursuant to a choice of law clause in the contract, and granted judgment to John Hancock. This case is John Hancock Life Insurance Company, et al. v. Abbott Laboratories, U.S. Court of Appeals for the 1st Circuit, App. Ct. No. 05-2710, an appeal from the U.S. District Court for the District of Massachusetts, Judge Douglas Woodlock presiding. Judge Lipez wrote the opinion of the Court of Appeals, in which Judges Stafford and Torruella joined.
11/13. The Small Business Administration (SBA) published a notice in the Federal Register stating that, effective November 28, 2006 it "is denying a request for a waiver of the Nonmanufacturer Rule for Personal Computers". See, Federal Register, November 13, 2006, Vol. 71, No. 218, at Page 66214.
11/13. The Electronic Privacy Information Center (EPIC) released a short item that is critical of Robert Cresanti, Chief Privacy Officer of the Department of Commerce (DOC), and the DOC generally. One issue of concern to the EPIC is the export of communications surveillance equipment to the People's Republic of China. The EPIC wrote that Cresanti "had more than 25 meetings with business lobbyists across the country during a two-month period in 2006 even though he was unable to attend 1 pre-scheduled meeting with privacy advocates in Washington, DC." The EPIC stated in a separate release that it is concerned about the DOC's failure to restrict the export to PR China of "high-tech equipment that is used for communications surveillance and censorship". The Export Administration Act (EAA), as expired, and the implementing regulations, authorize the DOC's Bureau of Industry and Security (BIS) to regulate exports to protect US national security.
Go to News from November 6-10, 2006.