TLJ News from August 26-31, 2007

FCC Dismisses M2Z's and NetfreeUS's Requests for 2155-2175 MHz Band Spectrum Licenses

8/31. The Federal Communications Commission (FCC) adopted and released an Order [25 pages in PDF] that dismisses without prejudice M2Z Networks' and NetfreeUS's requests for exclusive, nationwide licenses to use 20 MHz of spectrum in the 2155-2175 MHz band to provide free wireless broadband service.

The FCC wrote that "we dismiss without prejudice the above-captioned applications to provide service in the 2155-2175 MHz band, which has been allocated for fixed and mobile services, including Advanced Wireless Services (AWS)."

The FCC added that it denies the associated petitions for forbearance filed by M2Z and NetfreeUS, and dismisses related petitions to deny, filed by AT&T, Verizon, T-Mobile, the CTIA and others, and a petition for reconsideration as moot.

The FCC wrote that "We find that the petitions for forbearance are not in the public interest. In addition, we find that the public interest is best served by first seeking public comment on how the band should be used and licensed. We therefore dismiss all pending applications and related pleadings, without prejudice, in recognition of our plan set out below to expeditiously initiate a rulemaking process to consider service rules for the 2155-2175 MHz band".

M2Z proposed to use the 2155-2175 MHz band to provide wireless internet access. M2Z requested the spectrum for free, and without FCC rules. In return, M2Z proposed to offer free service for consumers and law enforcement at 384 kbps downstream and 128 kbps upstream, and pay 5% of its revenues from subscribers to the federal government.

For a more detailed description of M2Z's applications, see stories titled "FCC Accepts for Filing M2Z's Application for Free Spectrum" in TLJ Daily E-Mail Alert No. 1,532, February 5, 2007, and "Panel Debates M2Z Proposal" in TLJ Daily E-Mail Alert No. 1,541, February 21, 2007.

FCC Chairman Kevin Martin wrote in his statement [PDF] associated with this item that the "public interest is best served by considering fully the best use of this spectrum in a Notice of Proposed Rulemaking, rather than through forbearance petitions seeking exclusive use for a single entity filed by M2Z and NetfreeUS. The Commission received multiple proposals for innovative use of this spectrum apart from those proposed by M2Z and NetfreeUS, and they deserve due consideration as well."

Martin added that "We plan to issue this Notice of Proposed Rulemaking shortly to address these issues and adopt flexible rules that will encourage the innovative use of this unique piece of spectrum."

FCC Commissioner Michael Copps wrote in his statement [PDF] in support of this item that "the proper way to allocate this spectrum -- in the manner that best serves the public interest -- is to conduct a general rulemaking, which the Commission will initiate shortly."

Copps added that this rulemaking "should consider the following options: (1) opening this band to unlicensed use, as has proved so productive in other bands; (2) designating it for an open access model that would combine wholesale broadband access and a Carterfone mandate; (3) using it to provide free, advertiser-supported broadband service (as initially proposed by M2Z and one other applicant) as well as a fee-based premium broadband service; or (4) allocating it through a traditional, largely unconditioned auction." (Parentheses in original.)

See also, statement [PDF] by FCC Commission Jonathan Adelstein.

This item is FCC 07-161 in its proceedings titled "In the Matter of Applications for License and Authority to Operate in the 2155-2175 MHz Band" and "In the Matter of Petitions for Forbearance Under 47 U.S.C. § 160" and numbered WT Docket Nos. 07-16 and 07-30.

FCC Relaxes Regulation of BOCs' Provision of Long Distance Service

8/31. The Federal Communications Commission (FCC) adopted and released a Report and Order and Memorandum Opinion and Order [116 pages in PDF] that revises the regulatory regime for the provision of in-region long distance services by the three Bell Operating Companies (BOCs), AT&T, Verizon and Qwest, and their independent incumbent local exchange carrier (ILEC) affiliates. The FCC also issued a short release [PDF] that summarizing this item.

Robert McDowellFCC Commissioner Robert McDowell (at left) wrote in his statement [PDF] that "This is a classic instance where regulation had been appropriate to protect emerging competitors and consumers, but where the relevant market has become sufficiently competitive to warrant less onerous regulation, while continuing to protect consumers."

This item is FCC 07-159 in the proceeding titled "In the Matters of: Section 272(f)(1) Sunset of the BOC Separate Affiliate and Related Requirements; 2000 Biennial Regulatory Review Separate Affiliate Requirements of Section 64.1903 of the Commission’s Rules; and Petition of AT&T Inc. for Forbearance Under 47 U.S.C. § 160(c) with Regard to Certain Dominant Carrier Regulations for In-Region, Interexchange Services", and numbered WC Docket No. 02-112, CC Docket No. 00-175, and WC Docket No. 06-120.

The just released item states that under current FCC rules the BOCs must "choose between two different regulatory regimes in providing in-region, long distance services, both of which impose significant burdens and costs: the BOC can provide these services on a nondominant carrier basis through a section 272 separate affiliate; alternatively, it can provide these services directly or through an affiliate that is not a section 272 separate affiliate subject to dominant carrier regulation, including rate regulation and tariff-filing requirements". (Footnotes omitted from this and some other quotations.)

Also, "AT&T's and Verizon's independent incumbent LEC affiliates must provide in-region, domestic, interexchange telecommunications services and in-region, international telecommunications services only through rule 64.1903 separate affiliates".

The FCC's new regulatory framework provides that AT&T, Verizon and Qwest may "provide in-region, interstate, long distance services either directly or through affiliates that are neither section 272 separate affiliates nor rule 64.1903 separate affiliates, subject to nondominant carrier regulation, as long as they comply with certain targeted safeguards ... as well as with other continuing statutory and regulatory obligations".

In addition, this item states that "We also forbear from application of the Equal Access Scripting Requirement (EA Scripting Requirement) to the BOCs. We find this requirement, under which incumbent LECs must provide customers seeking new telephone exchange service with certain information regarding their long distance options, no longer justified as applied to AT&T, Qwest, and Verizon, given the marketplace changes that have occurred since the requirement’s adoption and the requirement’s relative costs and benefits. We also find good cause to waive the EA Scripting Requirement for the BOCs' independent incumbent LEC affiliates."

FCC Commissioners Michael Copps and Jonathan Adelstein concurred in part, and dissented in part. They wrote in their statement [PDF] that they are "concerned that the Order does not fully take into account the significant consolidation that has taken place in the marketplace and what this means for consumers. Nor does the Order put in place a comprehensive mechanism for monitoring changes in the marketplace (e.g., in the long-distance, wireless, and access markets) that would enable the Commission to reliably make decisions. Consumers will not be well-served if the Commission allows the competitive options to dwindle to a choice of bundles from a duopoly of providers. With this concern in mind, we cannot support the decision to reach beyond the rulemaking proceeding to use forbearance to take away equal access scripting -- a long-standing and useful tool for consumers seeking information about competitive options." (Parentheses in original.)

FCC Commissioner Deborah Tate wrote in her statement [PDF] that "Today’s decision takes a carefully balanced approach, providing regulatory relief to the incumbent Bell Operating Companies, allowing them to respond to marketplace demands efficiently and effectively, but ensuring that less intrusive or less costly regulation remains that protects important consumer interests and competition."

FCC Chairman Kevin Martin wrote no separate statement for this item.

The FCC also released a separate Memorandum Opinion [7 pages in PDF] in its proceeding titled "In the Matter of Petition of AT&T Inc. for Forbearance Under 47 U.S.C. § 160(c) with Regard to Certain Dominant Carrier Regulations for In-Region, Interexchange Services".

This item denies as moot, because of the above discussed item, a related petition for forbearance filed by AT&T.

AT&T requested that the FCC forbear from applying certain dominant carrier regulations to in-region, interstate, interexchange services, including international services, provided by any AT&T affiliates, forbear from applying separate affiliate requirements for independent ILECs to AT&T’s provision of interexchange services in AT&T’s independent ILEC service areas, and forbear from obligations that require BOCs to inform new customers that they have a choice of long distance providers and to read them a list of providers.

This item is FCC 07-160 in WC Docket No. 06-120. McDowell wrote a single statement that addressed both this item, and the item discussed above. No other Commissioners wrote statements regarding this item.

EU Court of First Instance to Release Decision in Microsoft Case

8/31. The European Union's Court of First Instance announced that on September 17, 2007, at 9:30 AM, it will release its decision in Microsoft v. European Commission, No. T-201/04.

This proceeding is Microsoft's appeal of the European Commission's (EC) 2004 action that mandates that Microsoft remove certain code from its products sold in the Europe, and that it license certain proprietary technology and intellectual property rights to its competitors. The EC also fined Microsoft 497 Euros at that time.

The U.S. Department of Justice's (DOJ) Antitrust Division has frequently criticized the EC's 2004 decision.

On September 11 the Association for Competitive Technology (ACT) will host a lunch titled "The Growing Threat to American Competitiveness: Is Antitrust Policy Being Used as a New Form of Protectionism?" It will focus on various EC actions against US technology companies, including Microsoft, Intel and Apple, based upon asserted violations of antitrust law. The speakers will be Rep. Robert Wexler (D-FL), Robert Atkinson (Information Technology and Innovation Foundation), Steve DelBianco (ACT), and Ronald Cass (Center for the Rule of Law).

See, stories titled "European Commission Seeks 497 Million Euros and Code Removal from Microsoft" in TLJ Daily E-Mail Alert No. 863, March 25, 2004, and "European Commission Releases Microsoft Decision" in TLJ Daily E-Mail Alert No. 883, April 23, 2004. See also, Microsoft web page for this proceeding.

Six Groups Endorse House Version of Patent Reform Act

8/31. The Consumer Federation of America (CFA), Consumers Union (CU), Electronic Frontier Foundation (EFF), Knowledge Ecology International (KEI), Public Knowledge (PK), and U.S. Public Interest Research Group (USPIRG) sent a letter [3 pages in PDF] to House Judiciary Committee (HJC) leaders expressing support for HR 1908 [LOC | WW] the "Patent Reform Act of 2007".

The HJC amended and approved this bill on July 18, 2007. See, story titled "House and Senate Judiciary Committees Approve Patent Reform Bills" in TLJ Daily E-Mail Alert No. 1,613, July 20, 2007.

The House Rules Committee is scheduled to meet on Thursday, September 6, 2007, to adopt a rule for its consideration by the full House. The House could take up the bill on Friday, September 7.

The letter of the six groups states that "Numerous flaws have emerged within the current patent system that can foster poor quality patents and invite uncertainty that inflates the risk and cost of litigation, especially in the areas of software and online services. As a result, innocent innovators may face unwarranted threats of liability and spend valuable resources on unnecessary litigation and licensing instead of on innovation. The poor quality of these issued patents also discourages follow-on innovation and distorts competition, which ultimately harms consumers and the general public. H.R. 1908 takes a significant first step towards improving patent quality and reducing the costs and uncertainties of litigation."

The letter praises the provisions in the bill regarding post grant reviews, third party submissions, apportionment of damages, and willful infringement standards. This letter does not comment upon the Senate version of the bill.

The Senate Judiciary Committee (SJC) approved the Senate version of bill on July 19, 2007. It S 1145 [LOC | WW]. It is also titled the "Patent Reform Act of 2007". The full Senate has not yet taken up this bill.

People and Appointments

8/31. Sen. John Warner (R-VA) announced that he will not run for re-election to the Senate in 2008. See also, statement by President Bush.

8/31. Tony Snow, Press Secretary to President Bush, resigned, effective September 14, 2007. President Bush named Dana Perino to replace him. See, transcript of news conference of President Bush.

More News

8/31. The U.S. District Court (DConn) sentenced Eli El to serve 30 months in prison following his plea of guilty to one count of conspiracy to commit criminal copyright infringement. The Department of Justice (DOJ) stated in a release that he participated "in the distribution of approximately 20,000 copyright works over the Internet through the warez scene -- an underground online community of individuals and organized groups who use the Internet to engage in the large-scale, illegal distribution of copyrighted software".

8/31. Federal Reserve Board (FRB) Governor Ben Bernanke gave a speech in Jackson Hole, Wyoming, titled "Housing, Housing Finance, and Monetary Policy" in which he touched on the role of information technology in housing finance. He said that "the new mortgage market came to look more like a textbook financial market, with fewer institutional ``frictions´´ to impede trading and pricing of event-contingent securities. Securitization and the development of deep and liquid derivatives markets eased the spreading and trading of risk. New types of mortgage products were created. Recent developments notwithstanding, mortgages became more liquid instruments, for both lenders and borrowers. Technological advances facilitated these changes; for example, computerization and innovations such as credit scores reduced the costs of making loans and led to a "commoditization" of mortgages. Access to mortgage credit also widened".

DOJ Reports that Final Judgments Against Microsoft Have Achieved Their Goals

8/30. The Department of Justice's (DOJ) Antitrust Division and some state Attorneys General filed a pleading titled "Review of the Final Judgments by the United States and New York Group" with the U.S. District Court (DC) in U.S. v. Microsoft.

The DOJ and several state AGs stated that the purpose of the final judgments was to "eliminate Microsoft's illegal practices, to prevent recurrence of the same or similar practices and to restore the competitive threat that middleware products posed prior to Microsoft's unlawful conduct", and that "the Final Judgments have achieved these goals".

They added that "the Final Judgments have safeguarded the ability of software developers to develop, distribute, and promote competing middleware products".

Thomas BarnettThomas Barnett (at left), the Assistant Attorney General in charge of the Antitrust Division, stated in a release that "The Antitrust Division has made enforcement of the final judgments an important priority and will continue to vigorously enforce the antitrust laws in computer software markets".

The DOJ's filing elaborated that "Since the entry of the Final Judgments, there have been a number of developments in the competitive landscape relating to middleware and to PC operating systems generally that suggest that the Final Judgments are accomplishing their stated goal of fostering competitive conditions among middleware products, unimpeded by anticompetitive exclusionary obstacles erected by Microsoft."

It continued that "Microsoft's Internet Explorer web browser faces renewed competition, primarily from Firefox but also from a range of other products including Opera and Apple's Safari browser. All of these competing browsers are cross-platform and therefore allow applications delivered over the Internet, either directly via the browser or as browser ``plugins,´´ to work on multiple operating systems."

"Increasingly", the DOJ stated, "web content is delivered through cross-platform browser plug-ins such as Adobe's Flash and Apple's QuickTime. Flash in particular has rapidly become a popular vehicle for delivering multimedia content on websites such as YouTube. Both technologies enable streaming of audio-video content over the web to multiple web browsers on multiple operating systems. Apple's iTunes software has also become enormously popular on Windows, competing with Microsoft's media middleware; a number of other media players, including those from Real and Yahoo, also provide Microsoft with substantial competition." (Footnote omitted.)

The DOJ filed its action against Microsoft in 1998. It is D.C. No. 98-98-1232. There is also a parallel action brought by numerous states. It is D.C. No. 98-1233.

Some, but not all, of the states that are a party to the states' antitrust action against Microsoft joined in the DOJ's report.

The state of California and several other states filed a pleading [21 pages in PDF] in which they argued that "Microsoft's market power remains undiminished and that key provisions of the Final Judgment -- those relating to middleware -- have had little or no competitively significant impact."

These states wrote that "the Final Judgment clearly has had little or no discernible impact in the marketplace as measured by the most commonly used metric -- market shares. In the market at the heart of the case -- Intel-compatible PC operating systems -- Microsoft’s share has remained persistently high at supra-monopoly levels. Microsoft’s share of this market has stayed within a narrow range, from 93% in 1991 to 92% in 2006." (Footnotes omitted.)

They added that "The other product of principal focus at the liability trial was web browsers. Largely due to the success of Mozilla's Firefox web browser, Microsoft’s usage share has slipped from 95% in 2002 to 85% in 2006 -- still well above monopoly levels."

Microsoft submitted a pleading [12 pages in PDF] titled "Microsoft's Report Concerning Final Judgments" that responds to the California group of state AGs.

Microsoft countered that diminishing Microsoft's market share "was not the objective of the Final Judgments and should not be the standard by which the effectiveness of the Final Judgments is assessed."

Microsoft elaborated that it "did not achieve its position in the PC operating systems market unlawfully; rather, the Court found that Microsoft maintained that position by specific anticompetitive means. Having prohibited Microsoft from further employing those or similar means, and having created mechanisms to facilitate competition with Microsoft, the Final Judgments created an environment in which market forces can determine the relative success and thus the market shares of participants. Measured by that standard, the Final Judgments have been a success."

See also, Microsoft's exhibit [44 pages in PDF] and exhibit [45 pages in PDF].

Most of the provisions of the final judgments in these actions expire in November of this year. Although, the protocol licensing provisions of the final judgments have been extended through November of 2009.

The U.S. District Court, Judge Colleen Kotelly presiding, is scheduled to hold a status conference on September 11, 2007.

FCC Fines Wireless Carriers For Tardy Location Tracking Capabilities

8/30. The Federal Communications Commission (FCC) fined three wireless carriers for not meeting the FCC's handset location identification requirements. The FCC mandated that 95% of subscribers' handsets be location capable by December 31, 2005.

The Notice of Apparent Liability for Forfeiture (NALF) [10 pages in PDF] affecting Sprint Nextel fines it $1,325,000. The NALF states that 81.3 percent of Sprint Nextel's subscribers' handsets were location capable at the end of 2005, and that Nextel Partners' rate was lower.

The NALF [PDF] affecting Alltel states that it achieved a location tracking rate of 84 percent. The NALF fines it $1,000,000. The NALF [8 pages in PDF] affecting US Cellular fines it $500,000.

See also, FCC release [PDF], and statement [PDF] by FCC Chairman Kevin Martin. These FCC documents emphasize to public safety uses of wireless location information.

Location determination capabilities in communications and information technology devices also promote other FCC goals, including facilitating location based advertising, location based social networking, aggregation and incorporation of location data into electronic databases, and surveillance.

On May 31, 2007, the FCC concluded that location obligations also extend to interconnected voice over internet protocol (VOIP) services. That item also sets standards for location accuracy. See, story titled "FCC Extends E911 Location Tracking Rules to Interconnected VOIP" in TLJ Daily E-Mail Alert No. 1,589, May 31, 2007.

Court of Appeals Vacates $11 Million Damage Award Against Spamhaus

8/30. The U.S. Court of Appeals (7thCir) issued its opinion in e360 Insight v. Spamhaus Project, affirming the entry of default against Spamhaus, but vacating the $11,715,000 judgment and injunction against Spamhaus.

While this is an action involving various tort theories for wrongful listing by a spam blacklister of an e-mail marketing company, the issues in this case all pertain to civil procedure -- service of process, entry of default, remedies following default, and setting aside of default judgments.

Spamhaus Project is a United Kingdom company that publishes a list of internet protocol (IP) addresses of spammers that internet service providers (ISPs) can use as part of their efforts to block spam e-mail. Spamhaus blacklisted e360 Insight, LLC, an e-mail marketing company based in the state of Illinois.

e360 filed a complaint [PDF] in state court in Illinois against Spamhaus alleging tortious interference with contractual relations, tortious interference with prospective economic advantage, defamation per se and defamation quod. e360 sought compensatory and punitive damages, and an injunctive requiring Spamhaus to remove e360 from its blacklist. Spamhaus removed the action to the U.S. District Court (NDIll). Spamhaus filed an answer [PDF].

However, Spamhaus then withdrew its answer, and its counsel withdrew from representation of it. e360 then filed a motion [PDF] for default judgment and permanent injunction. The District Court granted the motion. e360 then obtained a judgment [PDF]  in the amount of $11,715,000, plus costs, and a permanent injunction.

Spamhaus then returned to court with new counsel and sought to set aside the judgment, pursuant to Rule 60, Federal Rules of Civil Procedure. The District Court denied the motion.

Spamhaus brought the present appeal. See, Spamhaus's brief [PDF] and e360's brief [PDF].

The Court of Appeals affirmed the District Court's entry of the default judgment. However, it vacated the award of damages and injunctive relief and remanded to the District Court for further proceedings. It held that the District Court failed to undertake an inquiry into the proof of damages and the necessity of injunctive relief and issued an injunction that is overbroad.

e360's wrote in a May 20, 2007, release that "E360's position is that is a fanatical, vigilante organization operating in the United States with blatant disregard for U.S. law. In addition, E360 has proven Spamhaus routinely exposes their customers and volunteers to extreme legal risk by continuing to engage in improper blacklisting, defamation, extortion and blackmail in the name of fighting spam."

See also, e360 web page with hyperlinks to pleadings, and e360 web page with hyperlinks to other releases regarding this litigation.

This case is e360 Insight LLC v. Spamhaus Project, U.S. Court of Appeals for the 7th Circuit, App. Ct. Nos. 06-3779 and 06-4169, appeals from the U.S. District Court for the Northern District of Illinois, Eastern Division, D.C. No. 06 C 3958, Judge Charles Kocoras presiding. Judge Ripple wrote the opinion of the Court of Appeals, in which Judges Kane and Evans joined.

Sen. Whitehouse and Sen. Leahy Sponsor Bill to Limit Contacts Between White House and DOJ

8/30. The Senate Judiciary Committee (SJC) announced in the agenda for its executive business meeting to be held on Thursday, September 6, 2007, that it may again attempt to mark up S 1845 [LOC | WW], an untitled bill that would limit communications between the staffs of the White House and the Department of Justice (DOJ).

This bill, if enacted by the Congress, not vetoed by the President, and not held unconstitutional by the federal judiciary, would prevent White House staff from communicating with employees of the DOJ regarding any "ongoing investigation conducted" by the DOJ.

The bill does nothing to limit communications between Senators, Representatives, or Congressional staff and DOJ staff regarding ongoing investigations of the DOJ.

The bill would provide exceptions for communications between the President, Vice President, Counsel to the President, or Counselor to the President , and the Attorney General, Deputy Attorney General, or Associate Attorney General. The bill would also provide exceptions for communications where both parties are exempted by designation. This would apply to persons on the White House staff designated by the President, and persons employed by the DOJ designated by the Attorney General, provided that the President and Attorney General provide a written "explanation of the necessity of that designation" to the Senate and House Judiciary Committees.

The bill provides that both parties to the communication must be exempted. Thus, the President could not communicate with most officers of the DOJ regarding ongoing investigations without first giving the requisite notice to Congressional Committees.

The bill is silent regarding the codification of these provisions. It contains nothing regarding administrative enforcement, who can bring an action for its violation, and what remedies are available. The bill is silent as to whether the notices of designations would be made public, or be subject to production under the federal Freedom of Information Act (FOIA) request.

The Constitution provides that "executive Power shall be vested in a President", who "shall take Care that the Laws be faithfully executed". This bill may constitute an attempt to statutorily limit the exercise of a power by the executive that the Constitution has conferred upon the executive.

Sen. Sheldon Whitehouse (D-RI) introduced this bill on July 23, 2007. The only cosponsor is Sen. Patrick Leahy (D-VT). Both are members of the SJC, which has jurisdiction over the bill.

Sen. Whitehouse stated in an August 27, 2007, release regarding the resignation of Alberto Gonzales that "a great deal of work remains to be done to restore Americans’ confidence in this great Department, to restore its traditions and spirit, and to restore its ability to fairly and dispassionately enforce the law."

This bill was also on the agenda for the SJC's business meeting of Thursday, August 2, 2007.

More News

8/30. The Federal Communications Commission (FCC) published a notice in the Federal Register that announces, describes, and sets comments deadlines for the Further Notice of Proposed Rulemaking (FNPRM) portion of its Report and Order (R&O) and FNRPM regarding the roaming obligations of CRMS providers. The FNPRM asks whether the FCC should extend roaming obligations to broadband data services. Initial comments are due by October 29, 2007; reply comments are due by November 28, 2007. The FCC adopted this item on August 7, 2007, and released the text on August 16, 2007. It is FCC 07-143 in WT Docket No. 05-265. See, Federal Register, August 30, 2007, Vol. 72, No. 168, at Pages 50085-50095. See also, story titled "FCC Adopts CMRS Roaming Order and NPRM" in TLJ Daily E-Mail Alert No. 1,623, August 15, 2007. The FCC also published a separate notice in the Federal Register that announces, describes, and sets the effective date (October 29, 2007) for the R&O portion of this item, in which the FCC determined that CMRS carriers have roaming obligations as to Title II services. See, Federal Register, August 30, 2007, Vol. 72, No. 168, at Pages 50064-50074.

8/30. Microsoft and Eolas Technologies, Inc., settled a patent infringement case, but did not disclose the terms of the settlement. This case is Eolas Technologies Incorporated. et al. v. Microsoft Corporation, U.S. District Court for the Northern District of Illinois, D.C. No. 99 C 0626. See also, story titled "Federal Circuit Vacates in Eolas Patent Case" in TLJ Daily E-Mail Alert No. 1,087, March 3, 2005.

7th Circuit Addresses Jurisdiction in Actions Against Companies Owned by Foreign Governments

8/29. The U.S. Court of Appeals (7thCir) issued its opinion in Autotech Technologies v. Integral Research & Development Corporation, vacating the judgment and writ of execution of the District Court.

The Court of Appeals held that the District Court properly exercised jurisdiction over a claim by a U.S. company against a commercial semiconductor manufacturer that is owned by a foreign government. However, it vacated the judgment against the foreign semiconductor maker on other procedural grounds.

Integral is a semiconductor maker owned by the Belarusian government. Autotech and Integral litigated a dispute ten years ago in U.S. District Court and state court. (Autotech held the exclusive rights to sell Integral products in the U.S., but Integral still sold to third parties.) The parties settled, the District Court incorporated the settlement in an order, and retained jurisdiction. Autotech promptly returned to court asserting contempt for breach of the order.

The court ordered Integral to pay sanctions of $5,000 per day. Integral recently obtained a judgment for over $18 Million for unpaid sanctions. Integral brought the present appeal.

The Court of Appeals vacated the judgment. It first held that the District Court had jurisdiction. It held that Integral does not have immunity under the Foreign Sovereign Immunities Act (FSIA), which is codified 28 U.S.C. §§ 1602-11, because it falls under both the waiver exception, which is codified at 28 U.S.C. § 1605(a)(1), and the commercial activity exception, which is codified at 28 U.S.C. § 1605(a)(2).

The Court of Appeals further rejected the argument that the FSIA does not authorize federal district courts to enter monetary contempt sanctions against foreign sovereigns.

However, the Court of Appeals vacated because of flaws in service, the lack of specificity of the property to be covered by the writ of execution, and the lack of evidence supporting the finding of contempt and the amount of the judgment.

This case is Autotech Technologies L.P. v. Integral Research & Development Corporation, U.S. Court of Appeals for the 7th Circuit, App. Ct. No. 06-1718, an appeal from the U.S. District Court for the Northern District of Illinois, Eastern Division, D.C. No. 96 C 3193, Judge David Coar presiding. Judge Wood wrote the opinion of the Court of Appeals, in which Judge Kane and Williams joined.

6th Circuit Addresses Jurisdiction Over Government of Lebanon in Telecom Dispute

8/29. The U.S. Court of Appeals (6thCir) issued its opinion [6 pages in PDF] in American Telecom v. Republic of Lebanon, affirming the judgment of the District Court the a U.S. District Court lacked jurisdiction over the government of Lebanon in a telecom dispute.

American Telecom (AT) was a bidder for a contract to manage cellular telephone networks in Lebanon. The government of Lebanon disqualified it, and awarded contracts to other companies.

AT then filed a complaint in U.S. District Court (EDMich) alleging breach of contract, fraud, promissory estoppel, and breach of quasi contract. AT obtained service, Lebanon did not answer, and AT obtained a default judgment. Lebanon then moved to set aside the judgment for lack of jurisdiction. The District Court set aside the judgment. AT brought this appeal.

The Court of Appeals affirmed. It held that the government of Lebanon is immune under the Foreign Sovereign Immunities Act (FSIA), which is codified 28 U.S.C. §§ 1602-11. Moreover, this case does not fall under the commercial activity exception, which is codified at 28 U.S.C. § 1605(a)(2).

This subsection provides that "A foreign state shall not be immune from the jurisdiction of courts of the United States or of the States in any case ... in which the action is based upon a commercial activity carried on in the United States by the foreign state; or upon an act performed in the United States in connection with a commercial activity of the foreign state elsewhere; or upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States".

The Court of Appeals reasoned that bidding for the cellular telephone management contract was a commercial activity, and that it occurred outside of the U.S., so the issue is whether it caused a "direct effect" in the U.S. within the meaning of Subsection 1605(a)(2). It concluded that there was no direct effect.

This was only a bidding process, it occurred abroad, and had AT been awarded a contract it would have been required to form a Lebanese company and deposit all revenues into a Lebanese bank account. The Court of Appeals wrote that "Therefore, we hold that the mere act of including an American company in or excluding an American company from the process of bidding on a contract, where both parties' performance is to occur entirely in a foreign locale, does not, standing alone, produce an immediate consequence in the United States, and therefore, does not ``cause a direct effect in the United States´´ for purposes of 29 U.S.C. § 1605(a)(2)."

This case is American Telecom Company, LLC and American Telecom Group-USA, LLC v. Republic of Lebanon, U.S. Court of Appeals for the 6th Circuit, App. Ct. No. 05-2408, an appeal from the U.S. District Court for the Eastern District of Michigan, at Detroit, D.C. No. 04-72596, Judge Nancy Edmonds presiding. Judge Batchelder wrote the opinion of the Court of Appeals, in which Judges Ryan and Sutton joined.

DC Court Rules for HITN and Clearwire in DC Spectrum Case

8/29. The U.S. District Court (DC) issued its opinion [9 pages in PDF] in Nextel Spectrum Acquisition Corporation v. Hispanic Information and Telecommunications Network, a contract dispute concerning spectrum usage rights in unused spectrum in the 2.5 GHz band. The District Court dismissed Nextel's complaint. This is also a victory for Clearwire, although it is not a party to this case. See, full story.

FCC Revises Universal Service Rules

8/29. The Federal Communications Commission (FCC) released a Report and Order [46 pages in PDF] regarding its waste, fraud and abuse plagued e-rate tax and subsidy program, and other universal service programs. In this item the FCC promises to "strengthen oversight".

This item addresses enforcement of tax collection from telecommunications carriers and voice over internet protocol service providers.

First, it amends FCC rules to increase penalties for late payments and late filing.

Second, this item amends FCC rules to increase the record keeping burdens on taxed entities, as well as their contractors and consultants.

It adds the following requirement: "Any entity required to contribute to the federal universal service support mechanisms shall retain, for at least five years from the date of the contribution, all records that may be required to demonstrate to auditors that the contributions made were in compliance with the Commission’s universal service rules. These records shall include without limitation the following: financial statements and supporting documentation; accounting records; historical customer records; general ledgers; and any other relevant documentation. This document retention requirement also applies to any contractor or consultant working on behalf of the contributor."

This item also addresses subsidy fraud. First, it amends FCC rules to extend the debarment rules, which previously only applied to the e-rate program, to also apply to high cost, low income, and rural healthcare programs.

This item also amends FCC rules to increase the record keeping requirements of subsidized entities. For example, for the high cost program, it provides that "All eligible telecommunications carriers shall retain all records required to demonstrate to auditors that the support received was consistent with the universal service high-cost program rules."

This item retains the requirement that schools and libraries and rural health care providers retain for five years their records evidencing that the funding they received was proper. It adds that this requirement extends to services providers, both with respect to schools and libraries and rural health care providers.

This item also states that "there is nearly 100 percent connectivity for public schools", and that "97 percent of the public schools with Internet access used broadband connections to access the Internet".

None of the five Commissioners wrote statements for this item.

This item is FCC 07-150 in WC Docket No. 05-195, CC Docket No. 96-45, CC Docket No. 02-6, WC Docket No. 02-60, WC Docket No. 03-109, and CC Docket No. 97-21.

Copps and Adelstein Discuss Broadband Issues

8/29. Sen. Mark Pryor (D-AR) chaired a field hearing of the Senate Commerce Committee (SCC) in Little Rock, Arkansas, titled "State of Broadband in Arkansas". Federal Communications Commission (FCC) Commissioners Michael Copps and Jonathan Adelstein testified. See, Copps' prepared testimony [3 pages in PDF] and Adelstein's prepared testimony [8 pages in PDF].

Copps wrote that "we need a Universal Service Fund that has broadband as its core mission". He said that "we need to embrace all kinds of solutions", and that this "might include tax incentives, more Rural Utilities Service loans".

Adelstein wrote that "We need to make broadband the dial-tone of the 21st Century."

He also discussed policy areas outside of the authority of the FCC. He advocated "providing adequate funding for Rural Utilities Service broadband loans and grants, and establishing new grant programs supporting public-private partnerships that can identify strategies to spur deployment; ensuring RUS properly targets those funds; providing tax incentives for companies that invest in broadband to underserved areas; devising better depreciation rules for capital investments in targeted telecommunications services; investing in basic science research and development to spur further innovation in telecommunications technology; and improving math and science education so that we have the human resources to fuel continued growth, innovation and usage of advanced telecommunications services."

He also argued for "a comprehensive broadband communications deployment plan". He added that this includes "a strategy to prevent outsourcing of jobs overseas".

He again advocated network neutrality mandates. "We must also work to preserve the open and neutral character that has been the hallmark of the Internet".

Also, he discussed the upcoming 700 MHz auction, unlicensed spectrum, and the 3650 MHz band, and the 70/80/90 GHz band.

People and Appointments

8/29. Jocelyne Gray was named the Department of Homeland Security's (DHS) White House Liaison. See, DHS release.

More News

8/29. The National Archives and Records Administration (NARA) published a notice in the Federal Register that announces the renewal of its Advisory Committee on Electronic Records Archives (ACERA). See, Federal Register, August 28, 2007, Vol. 72, No. 166, at Page 49319.

8/29. The Center for Public Integrity (CPI) issued a release regarding the District Court's Memorandum Opinion [18 pages in PDF] in Center for Public Integrity v. FCC. The U.S. District Court (DC) held on August 27, 2007, that the contents of Forms 477, submitted to the Federal Communications Commission (FCC), are exempt from production by the FCC in response to a request made pursuant to the Freedom of Information Act (FOIA), which is codified at 5 U.S.C. § 552. Peter Smith, the CPI's legal counsel, stated in the release that the CPI "is considering its legal options, including an appeal or a motion for Judge Huvelle to reconsider her decision". See also, story titled "District Court Grants Summary Judgment to FCC in Broadband Data FOIA Case" in TLJ Daily E-Mail Alert No. 1,629, August 28, 2007.

8/29. The Federal Trade Commission (FTC) approved an application to appoint a compliance officer, Chirag Asaravala, in its administrative proceeding titled "In the Matter of Rambus, Inc." and numbered FTC Docket No. 9302. See, FTC release. On August 2, 2006, the FTC released its opinion [120 pages in PDF] which concluded that Rambus unlawfully monopolized the markets for four computer memory technologies that have been incorporated into industry standards for dynamic random access memory (DRAM) chips. See also, story titled "FTC Holds That Rambus Unlawfully Monopolized Markets" in TLJ Daily E-Mail Alert No. 1,427, August 8, 2006, and story titled "FTC Files Administrative Complaint Against Rambus" in TLJ Daily E-Mail Alert No. 455, June 20, 2002.

SEC Files Civil Action Against Juniper Networks for Stock Options Backdating

8/28. The Securities and Exchange Commission (SEC) filed a civil complaint [13 pages in PDF] in U.S. District Court (NDCal) against Juniper Networks that charges violation of Section 10b of the Securities Exchange Act of 1934 and other federal securities laws in connection with Juniper's alleged backdating of employee stock option grants and failing to properly disclose and account for its true compensation expenses.

The SEC announced that it simultaneously settled with Juniper. It stated in a release that "Without admitting or denying the allegations, Juniper has consented to a permanent injunction against violations of the antifraud and other provisions of the federal securities laws." See also, Juniper release.

Juniper is a Sunnyvale, California, based company that that sells Internet Protocol networking solutions.

This case is SEC v. Juniper Networks, Inc., U.S. District Court for the Northern District of California, San Jose Division, D.C. No. C 07 4430 JW RS.

The SEC filed a second civil complaint [22 pages in PDF] in the same court against Lisa Berry, a former General Counsel of Juniper Networks and KLA-Tencor Corporation that also charges violation of Section 10b and other federal securities law in connection with backdating of stock options.

This case is SEC v. Lisa Berry, U.S. District Court for the Northern District of California, San Jose Division, D.C. No. C 07 4430 RMW HRL.

KLA-Tencor is a San Jose, California, based company that makes semiconductor equipment. The SEC release added that KLA-Tencor "previously settled charges brought by the Commission."

Lerach Retires

8/28. The law firm of Lerach Coughlin Stoia Geller Rudman & Robbins announced in a release that William Lerach "is retiring from the law firm ... as of August 31st." The new firm will be known as Coughlin Stoia Geller Rudman & Robbins.

Lerach, who was previously a partner in a predecessor Milberg Weiss law firm, was a leading class action litigator who brought many class action securities cases against information technology and communications companies.

Some in the tech sector who have advocated legislative and judicial reform of class action litigation procedure have viewed him as a personification of the deficiencies of the class action system.

Former Rep. Rick White (R-WA) once recited a poem about Lerach during debate at a mark up of the Securities Litigation Uniform Standards Act (SLUSA) in 1998. See, story titled "House Subcommittee Approves Securities Litigation Reform Bill", Tech Law Journal, June 11, 1998.

Last month, David Bershad, a former partner of Lerach, agreed to plead guilty in a criminal action arising out of the payment of kickbacks to named plaintiffs in class action lawsuits filed by law firm of Milberg Weiss Bershad & Schulman (MWBS). Moreover, Bershad agreed to cooperate with prosecutors.

See, story titled "Bershad Agrees to Cooperate with Prosecutors" in TLJ Daily E-Mail Alert No. 1,607, July 9, 2007. See also, story titled "Milberg Weiss Indicted for Paying Illegal Kickbacks to Class Action Plaintiffs" in TLJ Daily E-Mail Alert No. 1,375, May 22, 2006.

The firm added in its August 28 release that "For the past seven years, Lerach's name has been associated with an ongoing investigation by the United States Attorney’s Office into allegations of improper payments to clients by the Milberg Weiss law firm. Lerach noted that stepping aside from the daily practice of law will allow him to focus his time and energy on this matter, and allow the firm to move forward with its work."

Lerach stated in this release that "I have appreciated the opportunity to fight for the victims of corporate fraud; however, I realize that my success has made me a target ... These allegations have proven to be personally time-consuming, and I have decided to focus single-mindedly on putting the matter behind me once and for all."

People and Appointments

8/28. The Department of Homeland Security (DHS) announced the selection of numerous new members of its Homeland Security Advisory Council (HSAC), and the HSAC's State and Local Officials Senior Advisory Committee, Private Sector Senior Advisory Committee, Emergency Response Senior Advisory Committee, and Secure Borders and Open Doors Advisory Committee. The DHS's release lists these new members.

District Court Grants Summary Judgment to FCC in Broadband Data FOIA Case

8/27. The U.S. District Court (DC) issued a Memorandum Opinion [18 pages in PDF] in Center for Public Integrity v. FCC, a case regarding whether the contents of Forms 477, submitted to the Federal Communications Commission (FCC), must be produced by the FCC in response to a request made pursuant to the Freedom of Information Act (FOIA), which is codified at 5 U.S.C. § 552. The District Court held that most of the information sought by the Center for Public Integrity (CPI) is exempt. See, full story.

AG Gonzales to Resign

Alberto Gonzales8/27. Attorney General Alberto Gonzales (at right) will resign effective September 17, 2007.

Sen. Patrick Leahy (D-VT), the Chairman of the Senate Judiciary Committee (SJC), and a frequent critic of Gonzales, stated in a release that "Under this Attorney General and this President, the Department of Justice suffered a severe crisis of leadership that allowed our justice system to be corrupted by political influence. It is a shame, and it is the Justice Department, the American people and the dedicated professionals of our law enforcement community who have suffered most from it."

Sen. Orrin Hatch (R-UT), the ranking Republican on the SJC, stated in a release that "Alberto Gonzales has been the President’s strong right arm in fighting terrorists using the tools of law enforcement, and he helped successfully protect the American homeland during his tenure. Beyond that, he has overseen the Department of Justice’s efforts to protect children from Internet predators, to combat human trafficking, and to prevent the spread of meth in our communities."

Sen. Hatch added that "I hope that history will remember Attorney General Gonzales for his honorable service to his country, rather than for the absurd political theater to which some critics have subjected him."

Solicitor General Paul Clement will become the acting Attorney General in the event that the Senate has not confirmed a replacement. The position of Deputy Attorney General (DAG) is vacant; Craig Moford is acting DAG.

People and Appointments

8/27. Deputy U.S. Trade Representative Karan Bhatia will leave the Office of the U.S. Trade Representative in October. See, OUSTR release.

8/27. Thomas Collamore was named SVP for Communications and Strategy and Counselor to the President of the U.S. Chamber of Commerce. He previously worked for former Sen. Fred Thompson (R-TN). See, U.S. Chamber release.

More News

8/27. Acer announced in a release that it has entered into a definitive agreement to acquire Gateway. The deal is subject to regulatory approvals, including U.S. antitrust merger review under the Hart Scott Rodino Act, and U.S. foreign investment review under the Exon Florio provision.

Go to News from August 21-25, 2007.