Tech Law Journal Daily E-Mail Alert
July 20, 2001, 9:00 AM ET, Alert No. 231.
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InterTrust v. Microsoft
7/19. InterTrust, a provider of digital rights management technologies, announced that it will file a second amended complaint in the U.S. District Court (NDCal) against Microsoft adding a claim for infringement of InterTrust's U.S. Patent No. 5,920,861, which discloses techniques for defining, using, and manipulating rights management data structures. InterTrust will seek monetary damages and injunctive relief, including an injunction prohibiting further infringement by Microsoft products, including Microsoft's Reader (application for reading electronic books) and Digital Asset Server. See, release.
InterTrust filed its original complaint on April 26, 2001, alleging infringement of its U.S. Patent No. 6,185,683. On June 27, InterTrust filed its first amended complaint [PDF], adding a claim for infringement of its U.S. Patent No. 6,253,193. (Case No. C 01 1640 JL.)
House Holds Hearing on Internet Taxes
7/18. The House Judiciary Committee's Commercial & Administrative Law Subcommittee held a hearing on HR 1410, the Internet Tax Moratorium and Equity Act, sponsored by Rep. Ernest Istook (R-OK) and others. This bill would temporarily extend that existing moratorium on multiple and discriminatory Internet taxes, and Internet access taxes. It would also provide that state and local taxing authorities may require out of jurisdiction Internet sellers (and other remote sellers) to collect sales taxes.
The U.S. Supreme Court ruled in Quill v. North Dakota, 504 U.S. 298 (1992) that state and local taxing authorities are barred under the Commerce Clause from requiring remote sellers without a substantial nexus to the taxing jurisdiction to collect sales taxes for sales to persons within the jurisdiction. However, the Court added that Congress may extend such authority. HR 1410 would provide such taxing authority.
ITFA. Congress passed the Internet Tax Freedom Act (ITFA) in 1998, creating the existing three year moratorium, which expires on October 21 of this year. Proponents of increasing state and local taxing authority seek to bundle their proposals with a moratorium extension. Some others seek only an extension of the moratorium contained in the ITFA. Rep. Chris Cox (R-CA) is sponsoring a pair of bills that would do only this.
State Tax Base. Rep. Jerrold Nadler (D-NY) supports Rep. Istook's bill. He stated that Congress should "enable state and local governments to levy sales and use taxes" This, he said, is for the purpose of "protecting the tax bases of state and local governments." Rep. Spencer Bachus (R-AL) stated that "you have those taxes being undermined because more and more people are going to the Internet". Grover Norquist of Americans for Tax Reform countered that the Internet is not a threat to state and local tax collection. First, he said that it accounts for about 1% of sales, while the "state governments are flush with resources" that they do not tax, such as services. Norquist added that Internet retailers are taking sales away from catalogue sellers, not brick and mortar retailers located within the taxing jurisdictions.
States Rights. Rep. Istook testified that this is not just a tax collection issue -- it is a states rights issue also. That is, if states are not able to put their policies into effect with revenues collected from sales taxes, political power will shift to Washington. Norquist retorted that this states rights argument is "George Wallace's argument."
Privacy. Rep. Bob Barr (R-GA) and Norquist raised the issue of privacy. Under the proposed legislation, retailers would need to collect data, including individuals' names, addresses, items purchased, and locations of purchases. Norquist pointed out that this would enable the government to track individuals. He also reminded the Subcommittee that "this government can't keep people's FBI files private". Rep. Istook responded that "the government's interest is in the overall level of sales", not individual level data. Rep. Mel Watt (D-NC) argued that "this is pretty much a red herring issue", noting that the IRS already collects far more personal information.
See, opening statement of Subcommittee Chairman Bob Barr, and prepared testimony of Rep. Ernest Istook. See also, prepared testimony of other witnesses: Grover Norquist, Frank Julian, and Jon Abolins.
Senate Approps Committee Approves CJS Bill
7/19. The Senate Appropriations Committee approved its version of HR 2500, the appropriations bill for the Departments of Commerce, Justice, and State, and for the Judiciary, and for related agencies, including the FCC, FTC, and SEC. The House passed its version of this bill, which is also known at the CJS appropriations bill, on July 18. See, Senate Appropriations release.
The Senate version of the bill now includes $73.0 Million for the NTIA; $43.4 Million is for public telecommunications facilities, planning and construction, and $15.5 Million for information infrastructure grants. The bill also includes $252.5 Million for the FCC, $514 Million for the SEC, and $696.5 Million for the NIST.
The Senate bill also provides $1.1 Billion for the USPTO, which is a part of the Department of Commerce. The House bill provides $1.129 Billion. The USPTO is funded by fees collected from users. However, the amount of fees collected exceeds that made available to the USPTO. The difference is diverted to subsidize other government programs, a practice that is opposed by the intellectual property community.
7/19. The House Judiciary Committee postponed indefinitely its scheduled mark up of HR 2047, the Patent and Trademark Office Authorization Act of 2002. The bill provides that "There are authorized to be appropriated to the United States Patent and Trademark Office for salaries and necessary expenses for fiscal year 2002 an amount equal to the fees collected in fiscal year 2002 ..." Hence, it seeks to end the diversion of USPTO fees to fund other government programs.
People and Appointments
7/19. The Department of Justice formally announced the appointments of Hewitt Pate, Deborah Herman, and Michael Katz to be Deputy Assistant Attorney Generals (DAAGs) in the Department of Justice (DOJ) Antitrust Division; however, these selections have long been public knowledge. Hewitt Pate was appointed DAAG in charge of regulatory matters; he will oversee airline, transportation, energy and other regulatory matters. He previously was a partner in the litigation, intellectual property and antitrust section of the law firm of Hunton & Williams. See, DOJ release and Hunton release.
7/19. Deborah Herman was appointed DAAG in charge of civil enforcement. She was previously a partner in the antitrust litigation section of the law firm of Jones Day. She has experience in telecommunications and high technology issues. See, DOJ release.
7/19. Michael Katz was appointed DAAG in charge of economic analysis. He is a professor of economics and business at the University of California at Berkeley's Haas School. He also directs the school's Center for Telecommunications and Digital Convergence. From 1994 through 1996 he was Chief Economist at the FCC. His areas of interest include networks industries, intellectual property licensing, telecommunications policy, and cooperative research and development. See, DOJ release and Berkeley bio.
7/19. The Senate Banking Committee held a hearing on the nomination of Harvey Pitt to be Chairman of the Securities and Exchange Commission.
7/19. The Senate Judiciary Committee approved the nomination of Roger Gregory to be a Judge on the U.S. Court of Appeals (4thCir).
7/19. The Senate Judiciary Committee approved the nomination of Ralph Boyd to be Assistant Attorney General for the DOJ's Civil Rights Division, and the nomination of Robert McCallum to be Assistant Attorney General for the DOJ's Civil Division.
New Documents
Hollings: S 1189, re FCC rules on media concentration, 7/18 (HTML, LibCong).
USCA: order re responses to Microsoft's petition for rehearing, 7/19 (PDF, USCA).
Friday, July 20
8:00 AM. FTC Chairman Timothy Muris will speak at the National Chamber Foundation Democratic Privacy Retreat. Location: Lansdowne Resort, Leesburg, Virginia.
9:30 AM. The House Commerce Committee's Subcommittee on Telecommunications and the Internet will hold a a hearing titled "An Examination of the Entertainment Industry's Efforts to Curb Children's Exposure to Violent Content." The scheduled witnesses are Lee Peeler (Federal Trade Commission). Douglas Lowenstein (Interactive Digital Software Association), Jack Valenti (Motion Picture Association of America), Hilary Rosen (Recording Industry Association of America), Doug McMillon (Wal-Mart Stores), Daphne White (The Lion & Lamb Project). Location: Room 2123, Rayburn Building.
Monday, July 23
1:00 PM. The Senate Commerce Committee's Science, Technology, and Space Subcommittee will hold a hearing to examine E-health and consumer empowerment focusing on current and future use of technology for improvement of health. Location: Room 253, Russell Building.
SEC v. Stadtt Media
7/18. The SEC announced that it settled all claims in SEC v. Stadtt Media, a civil securities fraud action pending in the U.S. District Court (NDTex). Stadtt Media, and four of its owners and employees, fraudulently raised over $900,000 from about 50 investors for the development of a website called Defendants falsely represented that Stadtt Media owned patents on Internet related inventions and that a major investment banking firm was committed to underwriting a $100 Million initial public offering. The defendants consented to final judgments that impose permanent injunctions and other equitable relief against them. However, no civil penalties were imposed, and payment of disgorgement was ordered, but waived for inability to pay.
More News
7/19. The U.S. Court of Appeals (DCCir) issued an order [PDF] in USA v. Microsoft regarding Microsoft's July 18 petition for rehearing [PDF]. The Court wrote, "Upon consideration of appellant’s petition for rehearing filed on July 18, 2001, it is ORDERED that appellees respond thereto and do so on or before August 3, 2001. A reply to the response will not be accepted by the court."
7/19. The House rejected HJRes 50 by a vote of 169 to 259. See, Roll Call No. 255. This resolution, which is sponsored by Rep. Dana Rohrabacher (R-CA) and Rep. Sherrod Brown (D-OH), would have ended normal trade relations with China. Specifically, it would have disapproved of the extension of the waiver authority contained in § 402(c) of the Trade Act of 1974 with respect to the People's Republic of China.
7/19. The Senate Judiciary Committee approved S 407, the Madrid Protocol Implementation Act, a bill to amend the Trademark Act of 1946 to provide for the registration and protection of trademarks in order to carry out provisions of certain international conventions.
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