SEC Commissioner Condemns SEC and DOJ Efforts to Weaken Attorney Client Privilege

1/18. Paul Atkins, one of four Commissioners of the Securities and Exchange Commission (SEC), gave a speech in Dallas, Texas, in which he condemned the activities of the Department of Justice (DOJ) and SEC that weaken the attorney client privilege.

Atkins (at right) said that "The two Federal agencies that have been most vigorous in seeking waiver of the attorney-client privilege have been" the DOJ and SEC. He reviewed in some detail the memoranda and practices of the two agencies.

He argued that long standing legal privileges should be respected. He also argued that weakening privileges has adverse consequences.

For example, he said that "As the SEC and other Federal agencies press to have the attorney-client privilege waived, the entire privilege is weakened. As knowledge of its weakening spreads, corporate employees will be less candid and forthcoming, corporate internal investigations will be less trustworthy, and shareholders and government investigators will be frustrated in their efforts to prevent misdeeds."

Atkins said that this weakening creates another problem for companies. It exposes them to the risk of having to disclose attorney client communications and work product privilege items to third party requestors on the theory that the privileges have been waived as to all the world.

He cited the June 19, 2006 opinion [50 pages in PDF] of the U.S. Court of Appeals (10thCir) in In re Qwest Communications International, which is reported at 450 F.3d 1179. This case is App. Ct. No. 06-1070, a petition for writ of mandamus to the U.S. District Court for the District of Colorado, D.C. No. 01-CV-1451-REB-CBS. The Supreme Court then denied Qwest's petition for writ of certiorari.

Atkins also said that "Not only does the SEC and Department of Justice policy of pressing corporations to waive the common law attorney-client privilege open them to disclosure to the world, but it also can have the effect of individuals' waiving the Fifth Amendment Constitutional right against self-incrimination by pressuring the business organization to do what the SEC or the Department of Justice could not do directly."

There have been Congressional hearings on this subject, and there are pending bills. The House has passed HR 3013 [LOC | WW], the "Attorney-Client Privilege Protection Act of 2007" on November 13, 2007.

This bill, as passed, provides, in part, that "In any Federal investigation or criminal or civil enforcement matter, an agent or attorney of the United States shall not ... demand, request, or condition treatment on the disclosure by an organization, or person affiliated with that organization, of any communication protected by the attorney-client privilege or any attorney work product" or "condition a civil or criminal charging decision relating to a organization, or person affiliated with that organization, on, or use as a factor in determining whether an organization, or person affiliated with that organization, is cooperating with the Government ... any valid assertion of the attorney-client privilege or privilege for attorney work product ..."

See also, stories titled "Rep. Scott and Rep. Forbes Introduce Bill to Protect Attorney Client Privilege" in TLJ Daily E-Mail Alert No. 1,609, July 16, 2007, and "House Passes Bill Regarding Attorney Client and Work Product Privileges" in TLJ Daily E-Mail Alert No. 1,676, November 14, 2007.

The companion bill in the Senate, S 186 [LOC | WW], has yet to be approved by the Senate Judiciary Committee (SJC).

Atkins also used this speech to praise the Supreme Court's January 15, 2008, opinion [33 pages in PDF] in Stoneridge v. Scientific Atlanta. See, story titled "Supreme Court Rules in Stoneridge v. Scientific Atlanta" in TLJ Daily E-Mail Alert No. 1,701, January 16, 2008.

Jury Acquits Man of Unlawful Access to E-Mail of Others

1/18. A trial jury of the U.S. District Court (DUtah) acquitted William Kurt Dobson of all charges.

On August 9, 2006, a grand jury returned an indictment that charged Dobson with violation of 18 U.S.C. § 1030(a)(2)(C) and 18 U.S.C. § 2511(1)(a) in connection with his alleged accessing of e-mail of other persons.

For a summary of the indictment, see story titled "Grand Jury Indicts Man for Accessing E-Mail of Others at Former Place of Employment" in TLJ Daily E-Mail Alert No. 1,430, August 11, 2006.

Section 1030 codifies the Computer Fraud and Abuse Act (CFAA). Section 2511(1)(a) provides that "any person who -- (1) intentionally intercepts, endeavors to intercept, or procures any other person to intercept or endeavor to intercept, any wire, oral, or electronic communication ... shall be punished ..."

Dobson was represented by Peter Stirba of the law firm of Stirba Associates, in Salt Lake City, Utah.

The firm stated in a release that "The federal government mischaracterized Mr. Dobson as a ``disgruntled former employee´´ but the evidence at trial showed him to be a founder, shareholder and director of local technology startup, S5 Wireless, at the time he reviewed the email. Unauthorized interception of email communications is similar to unauthorized interception of telephone conversation according to federal statute. However, consent is a defense to the crime -- meaning if the company had consented to review of the emails, no crime had been committed."

Stirba stated in this release that Dobson "has been totally and completely exonerated by this acquittal". He added that "It has always been the fact that as a founder and director of S5 Wireless, he never broke the law when he reviewed his own company's email."

This case is U.S.A. v. William Kurt Dobson, U.S. District Court for the District of Utah, D.C. No. 2:06CR00563 TC.

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1/18. The Federal Trade Commission (FTC) announced that it will publish a notice [3 pages in PDF] in the Federal Register that sets upward revisions to the minimum thresholds for the Hart Scott Rodino Antitrust Improvements Act of 1976. This pertains to the premerger notification and waiting period requirements of Section 7A of the Clayton Act, which are codified at 15 U.S.C. § 18a. These thresholds are adjusted annually. For example, the basic threshold for the aggregate total amount of the voting securities and assets of the acquired entity is raised to $252.3 Million. This notice further states that these new thresholds take effect 30 days after publication of a notice in the Federal Register. The FTC has published this notice in its web site, but not yet in the Federal Register.

1/18. The National Association of Broadcasters (NAB) responded to the Federal Communications Commission's (FCC) Office of Engineering and Technology's (OET) announcement on January 17, 2008, that it "will begin a second phase of laboratory bench testing on the performance of prototype" television white space devices on January 24, 2008. The NAB's Dennis Wharton stated in a release that the "NAB's paramount objective remains the delivery of interference-free digital broadcast television to more than 100 million American households. We are not opposed to new technology; however, given the failing grade performance and incomplete implementation of the devices submitted in the first round of tests, we have a high degree of skepticism whether tests of these devices will demonstrate that a practical service using portable devices can be introduced without jeopardizing DTV service." The FCC's Public Notice [12 pages in PDF] is numbered DA 08-118.

1/18. The U.S. Court of Appeals (1stCir) issued its opinion in Naser Jewelers v. Concord, a First Amendment challenge to a municipal ordinance of the City of Concord, New Hampshire, banning signs that display electronically changeable messages (ECMs). The Court of Appeals affirmed the judgment of the District Court, which upheld the constitutionality of the ordinance. The Court of Appeals reasoned that the ordinance is a content neutral restraint that need only be narrowly tailored to serve a significant governmental interest and leaves open alternative channels of communication. This case is Naser Jewelers, Inc. v. City of Concord, New Hampshire, U.S. Court of Appeals for the 1st Circuit, App. Ct. No. 07-2098, an appeal from the U.S. District Court for the District of New Hampshire.

8th Circuit Addresses Offers to Distribute CP on P2P Systems

1/17. The U.S. Court of Appeals (8thCir) issued its opinion [5 pages in PDF] in US v. Sewell, a case involving use of the Kazaa peer to peer file sharing system. However, this is not a copyright infringement case. Rather, it is a criminal case involving offers to distribute child pornography (CP) in violation of 18 U.S.C. § 2251(d)(1)(A).

The Department of Justice (DOJ) is bringing numerous CP prosecutions, many of which result in the issuance of court opinions. TLJ does not cover these cases. However, some of these cases may impact enforcement of copyright laws.

Some of both CP and music infringement cases involve peer to peer systems. Some of the holdings or dicta in CP cases might be invoked in copyright cases. For example, the Court of Appeals wrote in the present case that "In the context of the Kazaa program, placing a file in a shared folder with descriptive text is clearly an offer to distribute the file."

The CP statute reaches "offering ... to ... distribute", which falls short of actual production or distribution. There are currently proposals to amend copyright law to reach attempted infringement, which falls short of actual infringement. For example, the DOJ's Sigal Mandelker testified at a hearing of the House Judiciary Committee's (HJC) Subcommittee on Courts, the Internet and Intellectual Property (SCIIP) on December 13, 2007, that the Copyright Act should be amended to criminalize attempts to commit criminal copyright infringement. See, prepared testimony [PDF].

This proposal is also in the DOJ's draft proposal [29 pages in PDF] titled the "Intellectual Property Protection Act of 2007", and earlier drafts. See also, story titled "AG Gonzales Proposes Intellectual Property Protection Act" in TLJ Daily E-Mail Alert No. 1,252, November 14, 2005, and story titled "DOJ Releases Proposed Revisions to Copyright and Trademark Law" in TLJ Daily E-Mail Alert No. 1,584, May 21, 2007.

This case is US v. Malcolm E. Sewell, U.S. Court of Appeals for the 8th Circuit, App. Ct. No. 07-1991, an appeal from the U.S. District Court for the Western District of Missouri.

USTR Schwab Addresses PRC Violations, Doha Negotiations, and Korea US FTA

1/17. Susan Schwab, the U.S. Trade Representative (USTR), gave a speech [6 pages in PDF] in Washington DC in which she discussed the People's Republic of China's violations of trade treaty obligations, ongoing Doha round trade negotiations, the Korea US free trade agreement, and other topics.

The US has filed complaints against the PRC with the World Trade Organization (WTO). See, story titled "US to Complain to WTO Regarding PR China's Failure to Protect IPR" in TLJ Daily E-Mail Alert No. 1,562, April 9, 2007.

Schwab said that "we fully expect the WTO to begin handing down decisions early this year that vindicate our claims in the remaining three cases -- auto parts, intellectual property rights enforcement, and market access."

She added that "We hope the Chinese and others will take note that when it comes to our enforcement efforts more generally, we have won or successfully settled the cases we have taken to the WTO 96% of the time."

She also counseled against Congressional legislation that targets the PRC. She said that the Bush administration has "serious concerns about the unintended consequences of proposed legislation targeting China. (And there always are unintended consequences.) Quite frankly, we have serious concerns about some of the intended consequences, too." (Parentheses in original.)

She concluded on this subject with the observation that "This is not a good time for Congress to be seeking quick-fixes for complex international economic challenges."

Regarding the Doha round, she said that "we continue to press ahead in Geneva, pushing for an outcome that will increase economic growth and development and alleviate poverty by generating new trade flows in agriculture, goods, and services."

She also discussed free trade agreements (FTAs). She said that "The first up on our legislative agenda this year is the Colombia Trade Promotion Agreement." However, the Korea US FTA is "the most commercially significant FTA of them all".

Schwab continued that "The good news is that we continue to work in good faith with our Korean colleagues to fully re-open this important market and ensure that U.S. beef gets treated with the respect that international standards of science demand."

"U.S. farmers, ranchers, service providers, and manufacturers have so much to gain by opening this enormous -- and traditionally closed -- market", said Schwab. "I look forward to -- indeed I relish -- having this debate about American competitiveness and how much we stand to gain from a bilateral agreement with this major trading partner, friend and ally in Asia."

PFF Releases First Two Parts of Media Metrics Study

1/17. The Progress & Freedom Foundation's (PFF) Adam Thierer released an item that announces that he and Grant Eskelsen of the PFF are working on a project titled "Media Metrics: The True State of The Modern Media Marketplace".

This item also includes the first installment of the project -- its analytical framework. Thierer also published the second installment, which is titled "Household Access to Media Services & Technologies".

Thierer states that he intends to "create a massive online database for the public, the press, and policymakers to use as a resource". He argues that "in recent years, media criticism has been infused with an unprecedented level of raging emotionalism, so much so that it sometimes borders on mass hysteria".

Thierer further state that "there are a number of objective metrics than can be used to prove that we as a society are better off in almost every way possible. Indeed, I hope to show that we are blessed to live in a golden age of media. We have access to more inputs and outlets, more and better news options, more diverse information and entertainment sources, more local fare, more media gadgets, more ways to interact with our fellow citizens, and so on".

People and Appointments

1/17. Tony Scott was named Chief Information Officer (CIO) and Corporate Vice President of Microsoft. He was previously CIO of Walt Disney Company. See, release.

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1/17. Ben Bernanke, Chairman of the Federal Reserve Board (FRB), testified before the House Budget Committee. He stated in his testimony that "In the business sector, investment in equipment and software appears to have been sluggish in the fourth quarter".

1/17. The Federal Communications Commission (FCC) released a Public Notice [12 pages in PDF] that announces that the FCC's Office of Engineering and Technology (OET) "will begin a second phase of laboratory bench testing on the performance of prototype television white space devices on January 24, 2008." This notice is numbered DA 08-118.

1/17. The Federal Communications Commission (FCC) held an event titled "Open Meeting". The FCC Commissioners heard status reports from senior officials in various FCC Bureaus and Offices. See, FCC web page with hyperlinks to presentations.

1/17. The Federal Communications Commission (FCC) published a notice in the Federal Register that announces, describes, recites, and sets the effective date (March 17, 2008) for, the rules changes contained in its Second Order on Reconsideration pertaining to low power FM. The FCC adopted this order on November 27, 2007, and released it on December 11, 2007. This order is FCC 07-204 in MB Docket No. 99-25. See, Federal Register, January 17, 2008, Vol. 73, No. 12, at Pages 3202-3218.

1/17. The Federal Communications Commission (FCC) published a notice in the Federal Register that announces, describes, and recites the rules changes contained in its Report and Order and Declaratory Ruling pertaining to Telecommunications Relay Services and Speech to Speech Services for Individuals with Hearing and Speech Disabilities. The FCC adopted this order on October 26, 2007, and released it on November 19, 2007. This order is FCC 07-186 in CG Docket No. 03-123. See, Federal Register, January 17, 2008, Vol. 73, No. 12, at Pages 3197-3202. This notice does not set the effective date for these rules changes.

OUSTR Seeks Special 301 Comments on Countries that Deny Adequate IPR Protection

1/16. The Office of the U.S. Trade Representative (OUSTR) published a notice in the Federal Register that solicits comments to assist it in making Special 301 identifications of countries that deny adequate and effective protection of intellectual property rights (IPR) or deny fair and equitable market access to U.S. persons who rely on intellectual property protection.

Section 182 of the Trade Act of 1974, which is codified at 19 U.S.C. § 2242, and which is also known as Special 301, requires the OUSTR to make these identifications.

This notice adds that the OUSTR "requests that, where relevant, submissions mention particular regions, provinces, states, or other subdivisions of a country in which an act, policy, or practice deserves special attention in this year's report. Such mention may be positive or negative. For example, submissions may address China's IPR protection and enforcement at the provincial level, including, where relevant, with respect to areas that were the focus of the Special Provincial Review of China conducted in 2007".

The deadline for comments from all parties except foreign governments is 10:00 AM on Monday, February 11, 2008. The deadline for comments from foreign governments is 10:00 AM on Friday, February 29, 2008.

See, Federal Register, January 16, 2008, Vol. 73, No. 11, at Pages 2958-2959.

6th Circuit Addresses Arbitrability of Copyright Claims When Copyright Holder Has a Contractual Relationship with Infringer

1/16. The U.S. Court of Appeals (6thCir) issued its opinion [9 pages in PDF] in NCR v. Korala, a copyright dispute involving a contract arbitration clause.

NCR Corporation provides automatic teller machines (ATMs), and related equipment, software, and services. NCR has registered or applied for registrations of copyrights in its software. One software application of NCR is named "APTRA XFS". It is installed on ATMs that run on the Windows operating. Another software application of NCR is named "S4i". It is installed on ATMs that run on the OS/2 operating system.

NCR entered into an agreement in 1998 with Korala Associates Ltd. (KAL), which is located in Scotland, titled "Software License Agreement". This agreement provides that Korala will develop and license to NCR three specific software components for NCR's ATMs. NCR also agreed to loan to Korala computer hardware and software that were necessary to enable Korala to develop these components.

NCR alleges that is loaned equipment with the APTRA XFS software, and that Korala illegally copied and analyzed NCR's copyrighted software to produce its own competing software. NCR also alleges that Korala acquired from NCR's licensees ATMs with the S4i software, and that Korala likewise copied that.

The agreement between NCR and Korala provides that "Any controversy or claim arising out of or relating to this contract, or breach thereof, shall be settled by arbitration ..."

NCR filed a complaint in U.S. District Court (SDOhio) against Korala pleading numerous copyright related claims, and other claims, but not breach of contract.

NCR pled two counts of direct infringement of two software copyrights -- one each for the copying of the APTRA XFS and S4i software. NCR pled two counts of contributory infringement, based upon Korala's alleged inducement of NCR licensees to breach confidentiality restrictions in NCR licensing agreements. NCR pled one count of tortious interference with NCR contracts with its licensees. NCR pled one count of illegally importing infringing software into the U.S. Finally, NCR pled one count of common law unfair competition.

The District Court issued an order compelling arbitration. NCR brought the present appeal.

The Court of Appeals affirmed as to some counts of the complaint, but reversed as to other counts in the complaint.

The Court of Appeals applied the principle that "the cornerstone of our inquiry rests upon whether we can resolve the instant case without reference to the agreement containing the arbitration clause".

For example, with respect to the claim of direct infringement of the APTRA XFS copyright, the Court of Appeals wrote that "While a court would not need to reference the 1998 Agreement to determine if NCR owns a copyright for APTRA XFS, a court would need to reference the Agreement to determine what, if any, authorization NCR provided to KAL with respect to the APTRA XFS software contained on the ATM that NCR loaned to KAL under the 1998 Agreement." Hence, that claim must be arbitrated.

However, with respect to the claim of direct infringement of the S4i copyright, the Court of Appeals wrote that "No reference to the 1998 Agreement is necessary to determine whether (1) NCR owns a copyright in the S4i software or (2) KAL was licensed or authorized to access and/or copy the S4i software. While the 1998 Agreement is not limited to KAL’s developing software only for ATMs running APTRA XFS software, neither the Agreement itself nor the circumstances surrounding its implementation implicate the S4i software." Hence, that claim must be remanded to the District Court

The Court of Appeals also held that the common unfair competition claim and the illegally importing infringing software claim, as it pertains to APTRA XFS, must also be arbitrated. The Court of Appeals returned the other claims to the District Court.

This case is NCR Corporation v. Korala Associates LTD, U.S. Court of Appeals for the 6th Circuit, App. Ct. No. 06-3685, an appeal from the U.S. District Court for the Southern District of Ohio at Dayton, D.C. No. 04-00407, Magistrate Judge Michael Merz presiding. Judge Alice Batchelder wrote the opinion of the Court of Appeals, in which Judges Kennedy and Clay joined.

10th Circuit Remands in NEHCEPF v. Woodruff and Nacchio

1/16. The U.S. Court of Appeals (10thCir) issued a divided opinion [PDF] in NEHCEPF v. Woodruff, Nacchio and Qwest, a class action securities fraud case.

Joseph Nacchio is a former CEO of Qwest Communications. Woodruff is a former Chief Financial Officer of Qwest. The New England Health Care Employees Pension Fund and others filed class action securities fraud actions in U.S. District Courts against Qwest, Nacchio, Woodruff, and others. The present appeal concerns a settlement that was negotiated and approved by the plaintiffs and Qwest and certain others, but not by Nacchio and Woodruff. The District Court approved the settlement. Nacchio and Woodruff appealed.

The Court of Appeals held that Nacchio and Woodruff have standing to challenge the settlement, and remanded the case to the District Court to provide a more extensive explanation for its decision. Judge Kelly wrote the opinion of the Court of Appeals, in which Judge Baldock joined. Judge Briscoe wrote a lengthy dissent.

This case is New England Health Care Employees Pension Fund, et al. v. Robert Woodruff, et al., U.S. Court of Appeals for the 10th Circuit, App. Ct. No. 06-1482.

MySpace and State AGs Sign Document Regarding Online Safety

1/16. MySpace, which is owned by News Corporation, and most state Attorneys General entered into and released a document [12 pages in PDF] on January 14, 2008, titled "Joint Statement on Key Principles of Social Networking Safety".

It acknowledges the benefits of social networking sites and MySpace's efforts to improve online safety for minors. It provides for the creation of a task force to study online identity management tools and other online safety tools. The appendices, which come after the signatures, list numerous web site design and functionality changes that MySpace has made, or plans to implement.

The document contains no call for state or federal legislation. No other social networking service, and no federal agency is a party to the document.

See, full story.

People and Appointments

1/16. Kathy Leodler joined the Recording Industry Association of America (RIAA) as Director of Investigations for its Western Region Anti-Piracy Unit. She was previously acting Special Agent in Charge of the Federal Bureau of Investigation's (FBI) office in San Diego. See, RIAA release.

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1/16. Oracle and BEA Systems announced in a release that "they have entered into a definitive agreement under which Oracle will acquire all outstanding shares of BEA for $19.375 per share in cash. The offer is valued at approximately $8.5 billion, or $7.2 billion net of BEA's cash on hand of $1.3 billion." Larry Ellison, CEO of Oracle, stated in this release that "Oracle Fusion middleware has an open ``hot-pluggable´´ architecture that allows customers the option of coupling BEA's WebLogic Java Server to virtually all the components of the Fusion software suite." This transaction requires regulatory approvals.

1/16. Sun Microsystems and MySQL AB announced in a release and release that Sun "has entered into a definitive agreement to acquire MySQL AB, an open source icon and developer of one of the world's fastest growing open source databases for approximately $1 billion in total consideration". This transaction requires regulatory approvals.

Go to News from January 16-20, 2008.