Tech Law Journal Daily E-Mail Alert
August 28, 2001, 9:00 AM ET, Alert No. 258.
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3rd Circuit Reverses Gag Order in Key Logger System Case
8/27. The U.S. Court of Appeals (3rdCir) issued its opinion in USA v. Scarfo, regarding "a lawyer's right to make extrajudicial statements to the press relating to a former client's pending criminal case." This opinion is noteworthy because the underlying case, which involves government search and seizure of information from personal computers, has attracted wide attention from technology writers and legal scholars, their readers, and practitioners.
Background. Nicodemo Scarfo is an encryption savvy mobster who is charged with various illegal gambling acts. The FBI obtained Scarfo's encryption passphrase by surreptitiously installing on his personal computer the FBI's "Key Logger System", which records keystroke entries. Most recently, the FBI has invoked the Classified Information Procedures Act, Title 18, U.S.C, Appendix III, to avoid producing information about the "Key Logger System" to a Scarfo. He seeks discovery regarding the FBI's "Key Logger System" to support his motion to suppress evidence gathered as a result of use of the system. His first attorney in this case, Donald Manno, was disqualified by the District Court. Manno subsequently talked to the Philadelphia Enquirer about legal and privacy issues raised by the FBI's "Key Logger System."
Gag Order. The Court then ordered that: "no lawyer representing or who has represented a party in this criminal matter could make any extrajudicial statement to the press regarding legal issues which may be raised concerning electronic or computer surveillance techniques, which a reasonable person would expect to be disseminated by means of public communication, which he knows or reasonably should know will have a substantial likelihood of causing material prejudice to the determination of the anticipated or filed pre-trial motion, or the conducting of a fair trial in the case."
Appeals Court. The Appeals Court reversed the gag order. It wrote that the attorney's "comments on an interesting legal issue did not pose a threat to the fairness of the trial or to the jury pool. Nor did the District Court identify a risk of a carnival-type atmosphere in the case, although organized crime cases often draw massive public interest. ... There having been no identifiable prejudice or risk of prejudice, the gag order was erroneous."
James Bond 007: Doctrine of Laches Bars Claims of Infringement
8/27. The U.S. Court of Appeals (9thCir) issued its opinion [PDF] in Danjaq v. Sony, a case applying the equitable doctrine of laches to ancient claims of infringement of intellectual property rights in the name James Bond. The Appeals Court affirmed the District Court ruling that the doctrine of laches bars the plaintiffs' forty year old claims.
This is a long but fascinating opinion that recounts the history and content of the James Bond books and screenplays, and the law of the doctrine of laches in the context of intellectual property claims.
Spread Spectrum Devices
8/27. August 27 was the deadline to submit comments to the FCC in its further notice of proposed rule making (FNPRM) of May 10 regarding spread spectrum devices. See, Further Notice of Proposed Rule Making and Order, adopted by the FCC on May 10, 2001, and released on May 11, 2001. This is the proceeding titled "In the Matter of Amendment of Part 15 of the Commission's Rules Regarding Spread Spectrum Devices" and numbered ET Docket No. 99-231.
This FNPRM proposes to amend Part 15 of the FCC's rules to improve spectrum sharing by unlicensed devices operating in the 2.4 GHz band (2400 - 2483.5 MHz), provide for introduction of new digital transmission technologies, and eliminate unnecessary regulations for spread spectrum systems. Specifically, this FNPRM proposes to revise the rules for frequency hopping spread spectrum systems operating in the 2.4 GHz band to reduce the amount of spectrum that must be used with certain types of operation, and to allow new digital transmission technologies to operate pursuant to the same rules as spread spectrum systems. It also proposes to eliminate the processing gain requirement for direct sequence spread spectrum systems, which will provide manufacturers with increased flexibility and regulatory certainty in the design of their products.
The FCC published comments in its web site. See, for example, comment [PDF] submitted by Apple Computer, comment [PDF] submitted by Intel, comment [PDF] submitted by Texas Instruments, and comment [PDF] submitted by IEEE 802.
New Documents
USCA: opinion in Ford v. Texas re protectionist statute barring Internet car sales, 8/27 (HTML, USCA).
USCA: opinion in Danjaq v. Sony re doctrine of laches and infringement, 8/27 (HTML, USCA).
USCA: opinion in USA v. Scarfo re FBI Key Logger System gag order, 8/27 (HTML, USCA).
USCA: opinion in Nora Beverages v. Perrier Group re trade dress infringement, 8/23 (HTML, USCA).
5th Circuit Upholds Protectionist Car Dealership Law
8/27. The U.S. Court of Appeals (5thCir) issued its opinion in Ford Motor Company v. Texas, upholding the constitutionality of a protectionist Texas statute backed by car dealerships that prevents the car makers from selling cars over the Internet. The Court rejected a Commerce Clause challenge to the statute by 3 to 0. However, Judge Edith Jones condemned the existing precedent, argued that the statute harms consumers, and invited the Supreme Court to review the case.
Background. Electronic commerce provides the potential for producers of goods or services to reduce or remove the role of dealers, brokers and other middlemen. It can enable producers to interact directly with customers, thereby enabling consumers to realize significant savings. In some situations, middlemen who risk losing some or all of their role have resorted to seeking legislative or regulatory protection. In the present case, auto dealers threatened by competition from Internet sales have lobbied for, and obtained, legislative protection. In Texas, for example, one statutory section prohibits the selling cars without a dealer's license, while its companion section prohibits car makers from obtaining dealer's licenses.
Facts. Ford marketed pre-owned vehicles in Texas via a web site. On November 2, 1999, the Texas Motor Vehicle Division filed an administrative complaint against Ford with the Texas Motor Vehicle Board for selling cars without a dealer's license.
District Court. Ford filed a complaint in U.S District Court (WDTex) against the state of Texas alleging that Texas' dealership statute violates Ford's rights under the U.S. Constitution, including the dormant Commerce Clause, the speech clause of the First Amendment, and the Equal Protection and Due Process clauses of the 14th Amendment. Ford also asserted that the statute is unconstitutionally vague. Both parties filed motions for summary judgment. The District Court granted Texas's motion for summary judgment as to all of Ford's claims.
Dormant Commerce Clause. The Commerce Clause, at Art. I, 8, provides that "The Congress shall have Power ... To regulate Commerce with foreign Nations, and among the several States ..." The "dormant Commerce Clause" is the judicial concept that the Commerce Clause also blocks states from regulating in a way that materially burdens or discriminates against interstate commerce. The Appeals Court held that the Texas statute does not discriminate against interstate commerce. It relied heavily on a case growing out of the 1973 oil embargo and resulting shortage -- Exxon v. Maryland, 437 U.S. 117 (1978). During the 1973 shortage gas stations owned by producers and refiners received preferential treatment. Afterwards, Maryland passed a law prohibiting producers and refiners from operating gas stations in Maryland. The Supreme Court found this to be a bar on vertical integration that did not burden interstate commerce. It rejected a Commerce Clause challenge.
In the Ford case, the Appeals Court reasoned that Exxon is controlling. It elaborated that the dormant Commerce Clause only bars state discrimination against out of state businesses. Discrimination against a class of businesses that is defined by some characteristic other than its state is not violative of the dormant Commerce Clause. The Court wrote that the Texas statute "does not discriminate based on Ford's contacts with the State, but rather on the basis of Ford's status as an automobile manufacturer." Moreover, it "does not protect dealers from out-of-state competition, it protects dealers from competition from manufacturers."
District Court Affirmed. The Appeals Court also rejected Ford's argument that the Texas statute limits speech -- i.e., the content of its web site. Similarly, it rejected the remaining claims. The District Court was affirmed in full. The opinion was written by Judge Benavides. Judges DeMoss and Jones joined.
Edith Jones Invites Supreme Court Review. Jones wrote a "concurring" opinion which reads more like a dissent. She wrote that she concurred only because Exxon v. Maryland "compelled" that result. She continued that "Exxon seems woefully out of step with the Court's more recent cases." She also wrote that "Texas's outright prohibition on retail competition from out-of-state auto manufacturers is about as negative toward interstate commerce as legislative action can get. If, as the Court says, its negative commerce clause jurisprudence intends to prevent "economic protectionism" of local businesses, ... , and to stop states from imposing higher (in this case prohibitive) costs on products from out-of-state sources, ... , then Ford's dealer- cooperative, consumer- friendly program ought not be stymied by parochial state legislation. It should be obvious that the flow of interstate goods is diminished when barriers to entry totally prevent fair competition by a class of potential distributors: the favored local distributors' price and service incentives become less keenly competitive, prices rise, and overall sales will decline from the free-market equilibrium point. Since this Texas statute appears to reflect a genre of state laws favoring local automobile dealers over out-of-state manufacturers, perhaps the Supreme Court will give us further guidance."
The elder President Bush had once seriously considered Judge Jones, now 52, for a seat on the Supreme Court. Former President Reagan appointed her to the Appeals Court at the age of 36. She is a graduate of the University of Texas.
Tristani to Leave FCC
8/27. FCC Commissioner Gloria Tristani announced that she will leave the FCC, effective September 7, 2001. See, FCC release. Tristani is a Democrat from New Mexico who was appointed in 1997 by former President Clinton. She will return to New Mexico, where she will likely run for public office. She has spoken in the past about challenging Rep. Heather Wilson (R-NM), who sits on the House Commerce Committee and its Telecom Subcommittee. More recently, she has spoken about running against Sen. Pete Domenici (R-NM).
Tristani was generally supportive of former Chairman William Kennard. She distinguished herself from other Commissioners by promoting the V-Chip, and constantly scolding radio and TV broadcasters for indecency, violence and lack of diversity in their programming. She also outraged religious broadcasters by seeking to limit their eligibility for educational licenses. She also was the most consistent opponent of media consolidation.
Tristani was also a supporter of the e-rate subsidy program, universal service generally, and programs to increase the used of telecommunications services in Indian country specifically.
There are currently three Republicans (Powell, Martin, and Abernathy) and two Democrats (Copps and Tristani) on the FCC. Tristani's departure will not upset the Republican majority. By law, President Bush must nominate a Democrat, who must be confirmed by the Senate.
8/24. FCC Commissioner Gloria Tristani gave a speech in Albuquerque, New Mexico. She complained about obscenity on broadcast radio, the lack of Hispanic characters on broadcast TV, and the "digital divide" in Internet access.
Standard Files Chapter 11 Bankruptcy Petition
8/27. Standard Media International, the parent company of the Industry Standard and, filed a Chapter 11 petition in U.S. Bankruptcy Court (NDCal).
Standard Media also stated that "The court will now oversee the sale of Standard Media's assets, which include the magazine's subscriber list ..." See, release. The company's online privacy policy states that "The Industry Standard will not release your personal data to anyone else without your consent."
The Daily E-Mail Alert will not be published on Thursday, August 30, Friday, August 31, or Monday, September 3 (Labor Day).
Tuesday, August 28

10:00 AM - 12:00 NOON. The FCC's Advisory Committee for the 2003 World Radiocommunication Conference will hold a meeting. Location: Commission Meeting Room, 445 12th Street, SW, Room TW-C305, Washington DC.

Wednesday, August 29
9:00 AM. There will be a press conference at the National Press Club titled "Online Banking Privacy Report". For more information, contact Dan Lerner of the Center for Democracy and Technology at 637-9800 x315 or Location: Murrow Room, 529 14th St. NW, 13th Floor, Washington DC.
More News
8/27. The USPTO published in notice in the Federal Register requesting comments on issues associated with the development of a plan to remove the patent and trademark classified paper files from the USPTO's public search libraries. Comments are due by September 26, 2001. See, Federal Register, August 27, 2001, Vol. 66, No. 166, at Pages 45012 - 45014.
8/23. The U.S. Court of Appeals (2ndCir) issued its opinion in Nora Beverages v. The Perrier Group, a trade dress infringement case involving water bottles decided under  43(a) of the Lanham Trademark Act, 15 U.S.C. 1125(a).
8/15. Covad Communications Group, Inc., the parent company of Covad Communications Company, filed a Chapter 11 petition for bankruptcy in the U.S. Bankruptcy Court (DDel). See, Covad release. Covad, based in Santa Clara, California, provides DSL service.
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