Tech Law Journal Daily E-Mail Alert
September 10, 2001, 9:00 AM ET, Alert No. 264.
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FTC Approves Chevron Texaco Merger
9/7. The FTC approved a consent order allowing the proposed merger of Chevron and Texaco, with divestiture requirements. See, Agreement Containing Consent Order. See also, Chevron release, Texaco release, and FTC release. These are oil companies, not technology companies. However, the FTC's disposition of this merger may be pertinent to technology companies that are contemplating mergers and other transactions.
Intel and Via Technologies in Patent Dispute
9/7. Intel filed a complaint in U.S. District Court (DDel) against Via Technologies (Via) and S3 Graphics alleging patent infringement. Intel alleges that Via's P4X266 and P4M266 chipsets infringe Intel patents. Meanwhile, Via announced that it has filed a complaint with the Taiwan Fair Trade Commission alleging anti competitive behavior by Intel. Via also announced that it would file a patent infringement action against Intel in the U.S. It states that Intel's Pentium 4 infringes its patents. See, Via release.
Senate Judiciary Committee Chairman Comments on Microsoft Case
9/6. Sen. Patrick Leahy (D-VT), the Chairman of the Senate Judiciary Committee, released a statement regarding the Justice Department's (DOJ) announcement that it would not seek the break up of Microsoft. The Committee has both oversight authority over the DOJ and jurisdiction over antitrust legislation.
Sen. Leahy wrote that "This decision avoids lengthy additional trial time and is cause for cautious optimism that this case will be resolved more quickly for the benefit of all consumers. The Department's intention to pursue remedies targeted at Microsoft's conduct may produce more immediate results for consumers, competitors and computer sellers than any structural solution could. But prosecutors should hold to their original intention of securing a remedy that will genuinely rectify the competitive problems revealed through the trial process -- not just for the short term but over the long haul. With the brisk pace of change in the computer and high-tech industries, it will be no easy task to ensure that the remedies proposed will be effective in the competitive environment today as well as tomorrow. ..."
Evans Proposes Legislation to Delay 3G Spectrum Auctions
9/6. Commerce Secretary Donald Evans wrote a letter to Vice President Dick Cheney in which he proposed delaying "auction deadlines for spectrum bands that are candidates for use in connection with third generation (3G) advanced mobile wireless services." He also enclosed a proposed bill to accomplish this purpose. The NTIA, which is a part of the Commerce Department, has management responsibilities for spectrum assigned to government users. The FCC manages spectrum used by the private sector.
Evans elaborated that "While the Federal Government is committed to identifying spectrum for 3G services as expeditiously as possible, the current statutory auction deadline affecting certain of the bands under consideration does not provide sufficient time to conclude the identification process and conduct an auction before September 30, 2002. Accordingly, this legislative proposal shifts the statutory deadlines originally established in the Balanced Budget Act of 1997 for completion of the auctions of and collection of receipts for spectrum licenses in the 1710-1755 MHz and 2110-2150 MHz bands from September 30, 2002, to September 30, 2004."
JCS Chairman Testifies on 3G
9/5. General Henry Shelton, Chairman of the Joint Chiefs of Staff, testified to the Senate Appropriations Committee's Subcommittee on Defense on a wide range of issues, including reallocating of spectrum currently used by the military for use by Third Generation (3G) wireless services. See, prepared testimony.
He stated that "I am concerned that further reallocation of frequency spectrum for commercial use, without comparable spectrum to execute DoD's critical functions, will have a major impact on our ability to execute our missions. Our success on the battlefield largely depends on our ability to use advanced communications technology to exchange vital information between decision-makers, commanders, and deployed forces."
One of the spectrum bands being proposed for reallocation is the 1755-1850 MHz band, currently used by the military. General Shelton stated that "this proposal is problematic for two reasons. First, according to our analysis, sharing with commercial users is not possible due to interference over large geographical areas and metropolitan centers. Second, moving DoD communications to a different, but comparable, spectrum could be problematic due to the lengthy transition period required."
His prepared testimony on 3G spectrum on September 5 was identical to his prepared testimony on 3G spectrum to the House Armed Services Committee on June 28, 2001.
Federal Reserve and Technology
8/31. Federal Reserve Board Vice Chairman Roger Ferguson gave a speech at a conference sponsored by the Federal Reserve Bank of Kansas City, in Jackson Hole, Wyoming. The speech was titled "Technology, Information Production, and Market Efficiency." The conference was titled "Economic Policy for the Information Economy." See also, agenda, with links to some of the presentations.
Ferguson reviewed a paper on the effects of information technology on markets, which he summarized as follows: "Improvements in information technology -- most notably, the rapid growth of the Internet -- have made participating in the market much easier and cheaper and, as a result, the market has drawn in many new and unsophisticated investors. These "noise traders" cannot differentiate between accurate and distorted information about a given company. Thus, company managers see greater opportunity to boost their firm's stock price by fooling investors through the release of distorted information -- and have a strong incentive to do so because of the shift toward stock-based compensation and the widespread use of equity financing in the "new economy." In the end, according to the paper, more information is available, but its quality has deteriorated, which reduces the benefit from information technology for market efficiency." See, paper [PDF] titled "Technology, Information Production, and Market Efficiency," by Gene D’Avolio, Efi Gildor, and Andrei Shleifer.
Ferguson challenged the argument that "information technology has greatly expanded the presence of uninformed investors in the equity market." He stated that "households have been reducing the portion of their equities that they hold directly and have increasingly invested through mutual funds and variable annuities ... That is, households have been handing over more and more of their equity portfolio to professional managers, who tend to be relatively well informed investors."
He argued that instead, "The late 1990s were a period of optimism about the prospects for the U.S. economy, reflecting the pickup in productivity growth that was generated, in large part, by information technology. The resultant optimism about the economy's growth prospects was accompanied by a complacent attitude toward risk ..."
On a related topic, he stated that new information technologies have benefited consumers. He stated that "new technologies have surely led to a general increase in welfare. New delivery technologies, such as the Internet, when combined with automated underwriting and credit scoring, have given borrowers the opportunity to select from a broader set of providers of credit cards, mortgages, and even some types of small business loans ..." He also praised "web sites to allow Internet banking and software to permit PC banking."
However, he also cautioned that "the implications of these newer delivery channels for banking products other than mortgages and credit cards seem more potential than real for the vast majority of bank retail customers." He cited the statistic that "Only 6 percent of households reported having used a computer to conduct business with a financial institution in 1998."
9/4. Ferguson also gave a speech at the Federal Reserve Bank of Philadelphia titled "The Evolving Financial and Payment System". He stated that "accelerating changes in technology have created new financial products and services as well as whole new ways of conducting financial business." He stated that XML, or extensible markup language, "is becoming increasingly important in the financial markets and that it raises interesting possibilities for the future." The Federal Reserve Board's Payments System Development Committee held a one day workshop in June on the implications of XML for the payment system.
10th Circuit Rules on Scienter Requirement of PSLRA
9/7. The U.S. Court of Appeals (10thCir) issued its opinion in Philadelphia v. Fleming Companies, a class action securities action involving application of the Private Securities Litigation Reform Act (PSLRA). Congress passed the PSLRA, 15 U.S.C. § 78u-4, to insulate defendants, and especially info and bio tech companies, from abusive class action law suits. The PSLRA creates both a safe harbor for forward looking statements, and a heightened pleading requirement. Plaintiffs must "state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind." See, 15 U.S.C. § 78u-4(b)(2). The Appeals Court affirmed the District Court's dismissal. Seven circuits have now addressed the scienter requirement of the PSLRA, but without consensus.
District Court. Plaintiffs filed a complaint in the U.S. District Court (WDOkla) against Fleming Companies, and several of its officers, alleging securities fraud under Section 10b of the Securities Exchange Act of 1934. They sought class action status. Defendants moved to dismiss pursuant to FRCP 12(b)(6). Plaintiffs twice amended their complaint. The District Court dismissed the complaint, stating that the second amended complaint did not meet the pleading requirements for scienter set forth in the PSLRA.
Other Circuits. Six other circuits have previously addressed this issue, reaching various results. See, Janas v. McCracken (In re Silicon Graphics Sec. Litig.), 183 F.3d 970 (9th Cir 1999); Novak v. Kasaks, 216 F.3d 300 (2d Cir); In re Advanta Corp. Sec. Litig., 180 F.3d 525 (3d Cir 1999); Bryant v. Avado Brands, 187 F.3d 1271 (11th Cir 1999); Greebel v. FTP Software, 194 F.3d 185 (1st Cir 1999); and Helwig v. Vencor, (6th Cir 2001).
Holding. However, the 10th Circuit had not previously ruled on this issue. The Appeals Court held that plaintiffs can adequately plead scienter by setting forth facts raising a strong inference of intentional or reckless misconduct. The Court also held that "the most reasonable reading of the PSLRA in regard to motive and opportunity pleadings is the view adopted by the First Circuit in Greebel and the Sixth Circuit in Helwig. The PSLRA was obviously intended to eliminate frivolous securities litigation through its heightened scienter pleading requirements. Allegations of motive and opportunity, with nothing more, could allow potentially frivolous lawsuits to go forward with only minimal allegations of scienter. But evidence of motive and opportunity may be relevant to a finding of scienter, and thus may be considered as part of the mix of information that can come together to create the "strong inference" of scienter required by the PSLRA. When reviewing a plaintiff's allegations of scienter under the PSLRA, a court should therefore examine the plaintiff's allegations in their entirety, without regard to whether those allegations fall into defined, formalistic categories such as "motive and opportunity," and determine whether the plaintiffs' allegations, taken as a whole, give rise to a strong inference of scienter."
Attorneys. The plaintiffs are represented by several law firms, including Milberg Weiss, a law firm based in San Diego that specializes in bringing securities class action suits against technology companies. Defendants are represented by several law firms, including Brobeck Phleger.
USTR Zoellick Discusses Trade Promotion Authority
9/7. USTR Robert Zoellick held a press conference in Mexico City at which he addressed progress in the U.S. Congress on passing trade promotion authority (formerly called fast track). See, transcript.
He stated that House Ways and Means Committee Chairman Bill Thomas (R-CA) "will probably try to push forward early in September. He's been having discussions with some of his Democratic colleagues, about how to try to do so in a way that deals with environmental labor as well as trade issues in a positive consentive based fashion, and that will be the process that you will see unfold in the course of September." See, HR 2149.
He also stated that Sen. Bob Graham (D-FL) and Sen. Frank Murkowski (R-AK) have a bill in the Senate, and that Sen. Max Baucus (D-MT) and Sen. Charles Grassley (R-IA), the Chairman and ranking Republican on the Senate Finance Committee, have been "having discussions". See, S 1104.
He concluded that "the President and I, and Secretary Evans, and Secretary Veneman, and our colleagues who will also be spending a lot of time on trying to secure that authority over the course of the next two months. President Bush is the first President not to have that authority from the five prior presidents, and one of the arguments that we made is that frankly in many areas the United States has been falling behind because we don't have that trade negotiating authority."
Also on September 7, Zoellick issued a release in which he stated that "Expanding our access to foreign markets can help ignite economic recovery and expansion by providing American farmers, workers and businesses new opportunities to sell their products overseas. U.S. Trade Promotion Authority is an important part of President Bush's plan for opening markets and promoting American economic prosperity. I look forward to continuing to work with the Congress to get TPA enacted this fall."
USTR Zoellick Addresses PR China Joining WTO
9/7. USTR Robert Zoellick released a statement regarding the PR China's accession to the World Trade Organization (WTO). He stated that "China made commitments on insurance as part of its bilateral accession agreement with the United States. These commitments will be incorporated into China's WTO accession agreement, and therefore would be applicable for all WTO members. We expect China to uphold all of its commitments and obligations."
U.S. Jordan Free Trade Agreement
9/6. Sen. Max Baucus (D-MT) gave a speech in the Senate in which he advocated passage of S 643, a bill sponsored by Sen. Baucus that would implement the U.S. Jordan Free Trade Agreement (FTA) [PDF]. This FTA was negotiated by the Clinton administration last year, but has not yet been ratified by the Senate. Trade with Jordan is minimal. However, controversy has arisen because many see this FTA as a blueprint for future FTAs. The main dispute is whether these FTA's should contain language addressing labor and environmental issues, as does this FTA.
This FTA is also significant because it contains extensive language pertaining to intellectual property and e-commerce. This FTA addresses patents, trademarks, copyright, and enforcement of IPR. It also provides that the parties will not impose new customs duties on electronic transmissions.
Sen. Baucus noted that the "Bush Administration supports it and has no intention or renegotiating a new agreement. The Jordanian Parliament ratified the Agreement last May. Our colleagues in the House have already approved the implementing legislation for the agreement." (See, HR 2603.) He urged swift passage without amendment.
FBI Executes Search Warrant on Islamic ISP
9/5. The FBI executed a sealed search warrant at the offices of Internet service provider InfoCom Corporation, in a suburb north of Dallas, Texas.
Several Islamic groups held a press conference to criticize the action. The Council on American Islamic Relations (CAIR) and others issued a release in which they stated that "Early yesterday morning, more than 80 agents from the FBI, INS, Customs Service, and other federal agencies raided the offices of Infocom Corporation in Richardson, Texas." It added that "Infocom hosts web sites for some 500 companies worldwide", including a number of Middle Eastern web sites. CAIR also described the action as an "anti Muslim witch hunt."
On August 13 the Wall Street Journal published an opinion piece by Daniel Pipes and Steven Emerson which stated that "The very existence of both Hamas and Islamic Jihad is largely attributable to organizing and funding from individuals living in the U.S." The piece then went on to discuss the use of web sites based in the U.S.
More News
9/6. People for the American Way, a liberal group based in Washington DC, released a report titled "John Ashcroft's First Six Months at the Justice Department: The Right Wing Dream Team Takes Over." While the report harshly criticizes Attorney General Ashcroft on numerous old social issues, such as abortion, school prayer, gun control, and capital punishment, it contains no criticism on new technology related issues, such as electronic privacy, encryption rights, CALEA, and intellectual property rights.
9/7. The U.S. Court of Appeals for the District of Columbia Circuit heard oral argument in Fox v. FCC, No. 00-1222. Judges Ginsburg, Edwards and Sentelle presided. The case is a challenge to the FCC media ownership rules.
9/7. BellSouth released a statement in opposition to S 1364, the Telecommunications Fair Competition Enforcement Act of 2001, introduced by Sen. Ernest Hollings (R-SC) on August 3, 2001.
Monday, September 10
9:30 AM. The U.S. Court of Appeals for the District of Columbia Circuit will hear oral argument in High Plains Wireless v. FCC, No. 00-1292. Judges Ginsburg, Edwards and Sentelle will preside. Location: 333 Constitution Ave., NW, Washington DC.
9:30 AM. Brown University will host a press conference titled "Report Card on E-Government." For more information, contact Mark Nickel at (401) 863-2476. Location: National Press Club, Murrow Room, 529 14th St. NW, 13th Floor, Washington DC.
11:00 AM. Several groups will hold a press conference on the War on Drugs and its impact on privacy and other civil liberties. The groups will urge the Senate Judiciary Committee to examine these issues at its hearing on September 11 on the nomination of John Walters to be Director of National Drug Control Policy. The speakers will be Bradley Jansen (Free Congress Foundation), Tom DeWeese (American Policy Center), Eric Sterling (The Criminal Justice Policy Foundation). Location: J.W. Marriott Hotel, Salons J&K Ballroom level, 1331 Pennsylvania Ave., NW, Washington DC.
First day of a two day conference hosted by the International Trademark Association (INTA) and the National Bar Association (NBA) titled "Basics of Trademark Law Forum". See, INTA brochure [PDF] for regisration information, prices, and agenda. Location: Grand Hyatt Washington, 1000 H Street NW, Washington DC.
FCC Wireless Telecom. Bureau (WTB) fees changes go into effect. See, WTB release.
Deadline to submit comments to the FCC regarding SBC's Section 271 application to provide interLATA service in the states of Arkansas and Missouri. (CC Docket No. 01-194.) See, FCC notice [PDF].
Tuesday, September 11
The Judicial Conference of the U.S., which makes policy for the federal courts, will meet to consider the recommendations contained in the report [PDF] titled "Report on Privacy and Public Access to Electronic Case Files." This report was prepared by the Administrative Office of U.S. Courts' Committee on Court Administration and Case Management. It recommends that most civil and bankruptcy cases should be made available in electronic format, with redactions of some personal data identifiers, but that criminal cases should not be made available. See also, AOUSC release [PDF].
Second day of a two day conference hosted by the International Trademark Association (INTA) and the National Bar Association (NBA) titled "Basics of Trademark Law Forum". See, INTA brochure [PDF] for regisration information, prices, and agenda. Location: Grand Hyatt Washington, 1000 H Street NW, Washington DC.
9:00 AM - 12:00 NOON. The USTR's Industry Sector Advisory Committee on Services for Trade Policy Matters (ISAC-13) will hold a meeting. It will be open to the public from 9:00 - 9:45 AM. It will be closed to the public from 9:45 AM to 12:00 NOON. Location: Conference Room 6057, Department of Commerce, 14th Street between Pennsylvania and Constitution Avenues, NW, Washington DC. See, notice in Federal Register, September 7, 2001, Vol. 66, No. 174, at Page 46861.
9:00 AM - 5:00 PM. The Computer System Security and Privacy Advisory Board (CSSPAB) will hold the first session of a three day meeting. The CSSPAB advises the Secretary of Commerce and the Director of NIST on security and privacy issues pertaining to federal computer systems. All sessions will be open to the public. See, notice in Federal Register, August 27, 2001, Vol. 66, No. 166, at Pages 45009 - 45010. Location: National Security Agency's National Cryptologic Museum, Colony 7 Road, Annapolis Junction, Maryland.
10:30 AM. The Senate Judiciary Committee will hold a hearing on the nomination of John Walters to be Director of National Drug Control Policy. Several groups which advocate privacy rights have urged the Committee to examine the impact of the War on Drugs on privacy rights. Sen. Joe Biden (D-DE) will preside. Location: Room 226, Dirksen Building.
2:00 PM. The Senate Commerce Committee will hold a hearing on E-911 issues. Location: Room 253, Russell Building.
2:00 PM. The Congressional Internet Caucus Advisory Committee will host three panel presentations on e-learning, an e-learning technology fair, and a cocktail reception. RSVP to or Danielle at 202-637-4370. Location: Room 902, Hart Building, Washington DC. The schedule is as follows:
 • 2:00 PM. Grades K-12 Panel.
 • 3:00 PM. Higher Education Panel.
 • 4:00 PM. Workforce Training Panel.
 • 5:00 PM. Cocktail Reception and E-Learning Technology Fair.
6:00 - 8:00 PM. The Federal Communications Bar Association (FCBA) will host a reception for new NTIA chief Nancy Victory. The price to attend is $35 for private sector people, and $20 for government employees and students. RSVP to Wendy Parish at by Friday, September 7, at 10:00 AM. Location: Capital Hilton Hotel, 16th & K Streets NW, Washington DC. 
Wednesday, September 12
9:00 AM - 5:00 PM. The Computer System Security and Privacy Advisory Board (CSSPAB) will hold the second session of a three day meeting. The CSSPAB advises the Secretary of Commerce and the Director of NIST on security and privacy issues pertaining to federal computer systems. All sessions will be open to the public. See, notice in Federal Register, August 27, 2001, Vol. 66, No. 166, at Pages 45009 - 45010. Location: National Security Agency's National Cryptologic Museum, Colony 7 Road, Annapolis Junction, Maryland.
10:00 AM. The House Commerce Committee's Subcommittee on Telecommunications and the Internet will hold a hearing titled "Transition to Digital Television: Progress on Broadcaster Buildout and Proposals to Expedite Return to Spectrum." Location: Room 2322, Rayburn Building.
2:00 PM. The Senate Judiciary Committee's Technology, Terrorism, and Government Information Subcommittee will hold a hearing on S 1055, sponsored by Sen. Dianne Feinstein (D-CA), and requiring the consent of an individual prior to the sale and marketing of such individual's personally identifiable information. Sen. Feinstein will preside. Location: Room 226, Dirksen Building.
Deadline to submit comments to the FCC in response to its Notice of Proposed Rulemaking (NPRM) regarding implementation of the local competition provisions of the Telecom Act of 1996. This NPRM invites parties to update and refresh the record on issues pertaining to the rules the FCC adopted in the First Report and Order in CC Docket No. 96-98. See, notice in Federal Register, August 13, 2001, Vol. 66, No. 156, at Page 42499.
9/7. September 7 was Gloria Tristani's last day as an FCC Commissioner. See, Tristani's farewell address.
9/6. The law firms of Latham & Watkins (LW) and Stibbe Paris announced that they will combine, giving the firm 95 lawyers in Paris and over 200 attorneys throughout Europe. Olivier Delattre will be the Managing Partner of LW's Paris office. The office will focus on mergers and acquisitions, capital markets, project finance, banking and finance, intellectual property and information technology, European Union competition, labor and tax. See, LW release.
9/4. Kenneth Wilson joined the Menlo Park office of the law firm of Perkins Coie (PC) as a partner in the firm's intellectual property practice. Wilson handles patent, copyright, trademark, trade secret and other technology related litigation, and counsels high tech companies on intellectual property matters. Wilson was previously a partner in the Palo Alto office of the law firm of Wilson Sonsini. See, PC release.
9/6. Gregory Jenner joined the Venable law and lobbying firm as a partner in the firm's Tax and Legislative and Regulatory groups, the firm announced today. Mr. Jenner is a former partner in the Price Waterhouse Coopers national office where he was the national office leader for InfoComm. See, release.
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