Tech Law Journal Daily E-Mail Alert
November 5, 2001, 9:00 AM ET, Alert No. 301.
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DOJ and Microsoft Reach Settlement
11/2. The Department of Justice (DOJ) and Microsoft agreed to terms of settlement of the government's antitrust law suit against Microsoft. They released a Stipulation and Proposed Final Judgment which prohibits Microsoft from engaging in certain enumerated business practices, and specifies enforcement mechanisms.
The Proposed Final Judgment (PFJ) requires Microsoft to establish uniform licensing practices, to allow OEMs to put icons and shortcuts on the desktop, and to disclose certain application programming interfaces (APIs) and communications protocols. The PFJ also bars Microsoft from preventing original equipment manufacturers (OEMs) from distributing or promoting non Microsoft middleware, such as browsers, and from preventing the automatic launching of such middleware. The PFJ also bans certain exclusive dealing, and compels the licensing of certain Microsoft intellectual property rights (IPR).
The PFJ has a duration of five years, but can be extended. It provides that the DOJ may continue to investigate Microsoft via depositions, interrogatories and inspections. It also creates a three person technical committee to monitor Microsoft's compliance with the PFJ for the Court. The PFJ provides that the Court retains jurisdiction, and that only the DOJ has remedies under the PFJ.
None of the states that also sued Microsoft are yet a party to the settlement. Also, the PFJ has yet to be approved by the newly assigned U.S. District Court Judge, Colleen Kotelly.
Attorney General John Ashcroft stated that "A vigorously competitive software industry is vital to our economy and effective antitrust enforcement is crucial to preserving competition in this constantly evolving high-tech arena. ... This historic settlement will bring effective relief to the market and ensure that consumers will have more choices in meeting their computer needs." See, DOJ release.
Microsoft Chairman and Chief Software Architect Bill Gates said in statement that "This agreement contains significant rules and regulations on how we develop and license our software, but it also allows Microsoft to keep innovating on behalf of consumers. It goes beyond the Court of Appeals decision in some areas, and provides for ongoing oversight by an independent committee. We are resolved to implementing this settlement promptly and fully, and we will put all the necessary resources in place to ensure this." See also, MSFT release.
Summary of the Enforcement Provisions of the Proposed Final Judgment
11/2. The Proposed Final Judgment (PFJ) negotiated by Microsoft and the Justice Department also provides for enforcement of its terms.
No Third Party Rights. The PFJ creates no remedies for states, Microsoft's competitors, or any other third parties. It states that "The United States shall have exclusive responsibility for enforcing this Final Judgment." See, PFJ, § IV.A.1. It further states that "Nothing in this Final Judgment is intended to confer upon any other persons any rights or remedies of any nature whatsoever ..." See, PFJ, § VIII.
Inspection, Depositions and Interrogatories. The PFJ gives the DOJ many authorities to facilitate its enforcement of the terms of the PFJ. It allows it "Access during normal office hours to inspect any and all source code, books, ledgers, accounts, correspondence, memoranda and other documents and records in the possession, custody, or control of Microsoft ..." It also allows the DOJ to interview Microsoft employees either "informally or on the record". It also requires Microsoft to respond, under oath, to written interrogatories from the DOJ. See, PFJ, § IV.A.2.
Further Court Proceedings. The PFJ also allows the DOJ "to seek such orders as are necessary from the Court to enforce this Final Judgment ..." See, PFJ, § IV.A.4.
Technical Committee. The PFJ requires the appointment of a three person technical committee (TC), to be located at Microsoft's Redmond campus, that will provide services to the Court. The PFJ provides that "The TC shall have the power and authority to monitor Microsoft's compliance with its obligations under this final judgment." The DOJ picks one member; Microsoft picks a second; and these two pick a third. All are required to be unbiased experts in software design and engineering. See, PFJ, § IV.B.
Microsoft Internal Compliance Officer. The PFJ requires Microsoft to appoint an internal Compliance Officer with duties enumerated in the PFJ. See, PFJ, § IV.C.
Five Year Duration. The PFJ states that "Unless this Court grants an extension, this Final Judgment will expire on the fifth anniversary of the date it is entered by the Court." See, PFJ, § V.
Reaction to the Microsoft Proposed Final Judgment
11/2. Reaction to the Proposed Final Judgment (PFJ) negotiated by Microsoft and the Department of Justice has been as varied as support for the underlying lawsuit. Those who opposed the government's law suit have tended to praise the settlement, while those who supported the law suit and favored the break up of Microsoft condemned the settlement.
Jeffrey Eisenach of the Progress and Freedom Foundation said in a release that the "settlement that fails to meaningfully address any of the court's findings. It's an embarrassment for the Justice Department, a disservice to the law and an affront to the DC Circuit." He also stated that "The states should not accept this deal, and the judge should reject it, with prejudice." Anti Microsoft groups also condemned the PFJ. See, SIIA release and CCIA release and analysis.
In contrast, Robert Levy of the Cato Institute said that settlement "means Microsoft's billionaire rivals will have failed in their attempt to use government to win in the political arena what they couldn't win in the marketplace. It also means that consumers won’t have to pick up the tab while high-tech executives devote more resources to politicking than to the development of integrated products. To settle the case, Microsoft will have to make more concessions than justified by this baseless lawsuit and the company still faces litigation from competitors, opportunistic trial lawyers, the European Union, and perhaps even state attorneys general who don't agree to the settlement. That's regrettable, but at least the federal antitrust lawsuit won't be around to sap economic growth so essential to the post WTC recovery."
House Majority Leader Dick Armey (R-TX) also released a statement in which he said that "Although this issue should have been settled long ago, today's decision is welcome. In a time of economic distress, the court has delivered a homerun for consumers. Businesses should not be afraid that when they create popular products, they'll be saddled with endless litigation. They shouldn't be second guessed by lawyers and bureaucrats. It's the consumers who benefit when companies spend less time in the courtroom, and more time developing new products. I urge the state attorneys general to avoid dragging this case out in these tough economic times. This is a case that the government should never have brought."
Trade News
10/31. Rep. Henry Hyde (R-IL) introduced HR 3189, a bill to extend the Export Administration Act until April 20, 2002.
11/1. Sen. Max Baucus (D-MT) spoke in the Senate to express his concerns about the upcoming World Trade Organization (WTO) meeting in Doha, Qatar. He addressed protecting the U.S. softwood lumber and steel industries, including environment and labor provisions, and assuring accession of Taiwan to the WTO. See, Congressional Record, November 1, 2001, at page S11355.
10/31. Rep. Marcy Kaptur (D-OH) stated in the House, again, that Doha, Qatar, is not an appropriate site for the WTO ministerial." She cited Qatar's opposition to U.S. actions in Afghanistan, Qatar's record on human rights, and Qatar's treatment of women. Kaptur is also a leading protectionist on trade issues. See, Congressional Record, October 31, 2001, at page H7563-4.
10/31. Rep. Joe Knollenberg (R-MI) also spoke in the House about trade and granting the President trade promotion authority. He stated that "we have to pass trade promotion authority now. If we do not, we will let down America's world class workers, farmers and businesses. The global marketplace is increasingly competitive. Without TPA, America will lag behind. Our foreign competitors have negotiated some 130 preferential agreements while we, absent TPA, have negotiated exactly three. We need to get back in the game." See, Congressional Record, October 31, 2001, at page H7534.
11/2. The U.S. Department of State (DOS) stated that a U.S. trade official said that a Brazilian proposal on drug patents would undermine the WTO agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS). See, DOS release.
USPTO Encourages Fax Use for Some Communications
11/2. Nicolas Godici, acting head of the USPTO, wrote a letter in which he stated that "we at the USPTO would like to encourage you to communicate with the USPTO via facsimile. Facsimile transmissions may be used for correspondence as set forth in 37 CFR 1.6 such as: amendments, petitions for extension of time, authorization to charge a deposit account, an IDS, terminal disclaimers, a notice of appeal, an appeal brief, CPAs under 37 CFR 1.53(d), and RCEs." However, the USPTO also stated that "the Office currently does not permit new application filings (other than a CPA under 37 CFR 1.53(d)), requests for reexamination, drawings, and certain correspondence set forth in 37 CFR 1.6(d) by facsimile."
Summary of Prohibited Conduct Sections of the Proposed Final Judgment
11/2. The Proposed Final Judgment (PFJ) prohibits Microsoft from engaging in certain business practices, and requires it to follow certain other practices.
No Retaliation. Microsoft is prohibited from retaliating against any original equipment manufacturer (OEM) for developing or selling any competing software. The PFJ states that "Microsoft shall not retaliate against an OEM by altering Microsoft's commercial relations with that OEM ... because it is known to Microsoft that the OEM is or is contemplating: 1. developing, distributing, promoting, using, selling, or licensing any software that competes with Microsoft Platform Software or any product or service that distributes or promotes any Non-Microsoft Middleware; 2. shipping a Personal Computer that (a) includes both a Windows Operating System Product and a non-Microsoft Operating System, or (b) will boot with more than one Operating System; or 3. exercising any of the options or alternatives provided for under this Final Judgment." See, PFJ, § III.A.
Uniform License Agreements. The PFJ states that "Microsoft's provision of Windows Operating System Products to Covered OEMs shall be pursuant to uniform license agreements with uniform terms and conditions." See, PFJ, § III.B.
No Restriction on Desktop Icons and Shortcuts. The PFJ states that "Microsoft shall not restrict by agreement any OEM licensee from exercising any of the following options or alternatives: 1. Installing, and displaying icons, shortcuts, or menu entries for, any Non-Microsoft Middleware or any product or service ... that distributes, uses, promotes, or supports any Non-Microsoft Middleware, on the desktop or Start menu, or anywhere else ..." See, PFJ, § III.C.1.
Middleware. The PFJ bars Microsoft from preventing OEMs from distributing or promoting non Microsoft middleware, such as browsers, Java Virtual Machine, media players, messaging software, and e-mail software. See, PFJ, § III.C.2. The PFJ also bars Microsoft from restricting OEMs from "Launching automatically, at the conclusion of the initial boot sequence or subsequent boot sequences, or upon connections to or disconnections from the Internet, any Non-Microsoft Middleware ..." See, PFJ, § III.C.3.
Disclosure of APIs and Communications Protocols. The PFJ contains provisions designed to give independent software vendors (ISVs) and others the opportunity to develop products that compete with Microsoft's middleware products. These provisions require the disclosure of application programming interfaces (APIs) and communications protocols.
The PFJ requires Microsoft to disclose "for the sole purpose of interoperating with a Windows Operating System Product, via the Microsoft Developer Network ("MSDN") or similar mechanisms, the APIs and related Documentation that are used by Microsoft Middleware to interoperate with a Windows Operating System Product." See, PFJ, § III.D.
Moreover, the PFJ requires Microsoft to "make available for use by third parties, for the sole purpose of interoperating with a Windows Operating System Product, on reasonable and non-discriminatory terms ..., any Communications Protocol that is, on or after the date this Final Judgment is submitted to the Court, (i) implemented in a Windows Operating System Product installed on a client computer, and (ii) used to interoperate natively (i.e., without the addition of software code to the client or server operating system products) with Windows 2000 Server or products marketed as its successors installed on a server computer." (Parentheses in original.) See, PFJ, § III.E.
However, the PFJ also limits disclosure by Microsoft. It states that Microsoft is not required to disclose "portions of APIs or Documentation or portions or layers of Communications Protocols the disclosure of which would compromise the security of anti-piracy, anti-virus, software licensing, digital rights management, encryption or authentication systems, including without limitation, keys, authorization tokens or enforcement criteria." See, PFJ, § III.J.1.
No Exclusive Agreements. The PFJ prohibits Microsoft from entering into agreements requiring the exclusive support or development of certain Microsoft software. It provides, subject to certain exceptions, that "Microsoft shall not enter into any agreement ... on the condition that such entity distributes, promotes, uses, or supports, exclusively or in a fixed percentage, any Microsoft Platform Software ..." See, PFJ, § III.G.
Compulsory Licensing of IPR. The PFJ requires Microsoft to license intellectual property rights (IPR) to ISVs and others "that are required to exercise any of the options or alternatives expressly provided to them under this Final Judgment, provided that 1. all terms, including royalties or other payment of monetary consideration, are reasonable and non-discriminatory; 2. the scope of any such license (and the intellectual property rights licensed thereunder) need be no broader than is necessary ... 3. ... rights may be conditioned on its not assigning, transferring or sublicensing its rights under any license granted under this provision ..." (Parentheses in original.) See, PFJ, § III.I.
Surveillance of Cable Subscribers Under the Anti Terrorism Bill
10/31. Rep. Billy Tauzin (R-LA), Chairman of the House Commerce Committee, submitted a statement for the Congressional Record regarding the meaning and intent of Section 211 of HR 3162, the anti terrorism bill, which President Bush signed into law on October 26.
Section 211 of the anti terrorism act amends Section 631 of the Communications Act of 1934 (47 U.S.C. § 551), which prohibits cable companies from disclosing certain customer information. Section 211 was included in the bill to clarify that laws regarding interception and disclosure of wire and electronic communications apply to cable service providers when they provide telephony or Internet access services. Without this new provision, terrorists and other criminals could have avoided surveillance by obtaining telephone service from cable operators. However, this section still excepts "records revealing cable subscriber selection of video programming from a cable operator."
Rep. Tauzin's statement articulates this purpose. However, he offers further information about the underlying intent of the Congress. For example, he states that under Section 211 the government can obtain a "cable subscriber's name, address, or the means of payment" but not what programs he watched. Second, he stated that the privacy protection for cable video programming does not extend to "streaming of content over the Internet".
Rep. Tauzin stated that section 211 "clarifies that cable television subscribers continue to enjoy certain privacy protections, while also ensuring that law enforcement officials have the same ability to gain access to cable subscriber Internet and telephony information as they do with conventional telephone service. The drafters of this language intend the phrase 'records revealing cable subscriber selection of video programming from a cable operator' to mean information about which video programming service or services a cable subscriber has purchased from a cable company. It does not include information such as a cable subscriber's name, address, or the means of payment. Importantly, this language does not impose any new requirements on cable companies to maintain or collect additional records containing subscriber information."
Rep. Tauzin continued that " 'Video programming' is intended to refer to traditional video programming services comparable to broadcast television ... as opposed to the emerging types of video programming services that enable subscribers to communicate with other viewers or subscribers. Nor does 'video programming' include streaming of content over the Internet."
Rep. Tauzin also stated that "to the extent a cable company enables its subscribers to communicate with other persons through the provision of telephone service or Internet access service, it must comply with the same laws, found in title 18, governing the interception and disclosure of wire and electronic communications that apply to any other telephone company or Internet service provider. In these instances, Section 631 simply would not apply." See, Congressional Record, October 31, 2001, at page  E1969.
10/31. Richard Cook was named Vice Chairman of the American Electronic Association. He is P/CEO of MAPICS. See, AEA release.
11/1. AOL Time Warner named Wayne Pace its new EVP and CFO. Michael Kelly, who previously held the position, was moved down to COO of AOL. See, release.
10/30. AOL Time Warner named Iris Knobloch its SVP for international relations and strategic policy in Europe. She will be based in London. She was previously worked for the law firms of Norr Stiefenhofer & Lutz and O'Melveny & Myers. See, AOLTW release.
More News
10/2. The U.S. Court of Appeals for the District of Columbia Circuit heard oral argument in COMSAT v. FCC, No. 00-1458.
10/1. Rep. Billy Tauzin (R-LA), Rep. Ed Markey (D-MA), and Rep. Richard Burr (R-NC) sent a letter [PDF] to FCC Chairman Michael Powell stating their "disappointment with a recent Commission decision permitting increased commercialization of public broadcasting licenses."
11/1. Rep. Tom Tancredo (R-CO) introduced HR 3222, a bill to limit the number of H1-B nonimmigrant visas issued in any fiscal year. The bill was referred to the House Judiciary Committee.
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Rogan to Get Confirmation Hearing
11/1. James Rogan, President Bush's nominee to head the USPTO, is finally scheduled to receive a confirmation hearing before the Senate Judiciary Committee. The Senate Republican High Tech Task Force sent a letter last week to Sen. Patrick Leahy (D-VT), Chairman of the Committee, seeking prompt consideration of this nomination. See, HTTF release.
Rogan, a Republican, was a member of the House Judiciary Committee, and its Courts and Intellectual Property Subcommittee, until he was defeated in the 2000 general election. He is also considered to be a potential candidate for statewide office in California. Confirmation for this post could take him out of contention for statewide office. Sen. Dianne Feinstein (D-CA) will preside at his confirmation hearing at 10:00 AM on November 7.
Monday, Nov 5
The House will meet at 2:00 PM in pro forma session only. The Senate will meet at 3:00 PM; it will likely meet in executive session to consider the nomination of Larry Hicks to be a U.S. District Court Judge.
? 9:00 AM. Status conference in USA v. Microsoft before Judge Colleen Kotelly. See, Scheduling Order [PDF] of September 28. Location: Courtroom 11.
9:30 AM. The U.S. Court of Appeals for the District of Columbia Circuit will hear oral argument in Teledesic v. FCC, No. 00-1466. Judges Edwards, Williams and Randolph will preside. Location: 333 Constitution Ave., NW, Washington DC.
10:00 AM. The FCC's Technological Advisory Council will hold a meeting. See, notice in Federal Register, October 5, 2001, Vol. 66, No. 194, at pages 51046 - 51047. Location: FCC, 445 12th St., SW., Room TW-C305, Washington DC.
9:30 AM - 5:30 PM. Day one of a three day conference and exhibition hosted by the NIST and NISO titled "4th annual Electronic Book Conference". See, Nov. 5 agenda. The price to attend is $400. See, registration page. Location: Ronald Reagan Building, 1300 Pennsylvania Ave., NW, Washington DC.
Monday, Nov 5
Stanford Univ.
6:30 - 8:00 PM PT. The Stanford University Law School will host a panel discussion titled The Good News About the New, New Economy. The participants will be Mozelle Thompson (Federal Trade Commission Commissioner), Hank Barry (partner in Hummer Winblad Venture Partners and former CEO of Napster), Carly Fiorina (Ch/CEO of Hewlett Packard), Yair Landau (President of Sony Pictures Digital Entertainment), and Lawrence Lessig (Professor at Stanford Law School). See also, FTC release. Location: Stanford University Law School, Room 290.
Tuesday, Nov 6
The House will meet at 12:30 PM for morning hour and at 2:00 PM for legislative business. No recorded votes are expected before 6:00 PM. The House will consider a number of measures under suspension of the rules. The Senate will likely resume its consideration of HR 3061, the Labor HHS appropriations bill.
9:30 AM - 5:30 PM. Day two of a three day conference and exhibition hosted by the NIST and NISO titled "4th annual Electronic Book Conference". The price to attend is $400. See, registration page. Location: Ronald Reagan Building, 1300 Pennsylvania Ave., NW, Washington DC. See, Nov. 6 agenda.
12:30 PM. The Federal Communications Bar Association's (FCBA) State and Local Practice Committee will host a brown bag luncheon on "OTARD" and status of BOMA v. FCC. The speakers will be Matthew Ames (Miller & Van Eaton), James Barker (Latham & Watkins), and Jeffrey Steinberg (FCC's Wireless Telecom. Bureau). RSVP to Mitsi Herrera. Location: Wiley Rein & Fielding, 1750 K Street, NW, Washington DC.
Wednesday, Nov 7
9:30 AM - 5:30 PM. Day three of a three day conference and exhibition hosted by the NIST and NISO titled "4th annual Electronic Book Conference". The price to attend is $400. See, registration page. Location: Ronald Reagan Building, 1300 Pennsylvania Ave., NW, Washington DC. See, Nov. 6 agenda.
10:00 AM. The House Commerce Committee's Subcommittee on Commerce, Trade and Consumer Protection will hold a hearing titled Challenges Facing the Federal Trade Commission. FTC Chairman Timothy Muris will be the only witness. Location: Room 2123, Rayburn Building.
10:00 AM. The Senate Judiciary Committee has scheduled a hearing on pending nominations. Panel I will be five nominees to be U.S. District Court Judges: Joe Heaton (WD Oklahoma), Clay Land (MD Georgia), Frederick Martone (Arizona), Danny Reeves (ED Kentucky), and Julie Robinson (Kansas). Panel II will be James Rogan, the nominee to be Director of the U.S. Patent and Trademark Office (USPTO). Sen. Dianne Feinstein (D-CA) will preside. Location: Room 226, Dirksen Building.
10:00 AM. The U.S. International Trade Commission (USITC) will begin a Section 337 evidentiary hearing regarding the importation of integrated circuits. The complainants are United Microelectronics, UMC Group (USA), and United Foundry Service. The respondents are Silicon Integrated Systems and Silicon Integrated Systems. This investigation pertains to U.S. Patents No. 5,559,352 and 6,117,345. See, Investigation No. 337-TA-450. ALJ Sidney Harris will preside. Location: Courtroom A, ITC Building, 500 E Street SW, Washington DC.
12:15 PM. The Federal Communications Bar Association's (FCBA) Online Communications Committee will host a brown bag lunch titled "Broadband, When? -- the View from Earthlink". The speaker will be Dave Baker, VP of Law & Public Policy at Earthlink. RSVP to Scott Harris at sharris@ Location: Lampert & O'Connor, 5th Floor, 1750 K St., NW, Washington DC.
Thursday, Nov 8
9:30 AM. The Federal Communications Commission (FCC) will hold a meeting to consider five items: (1) a Report and Order concerning reexamination the Commercial Mobile Radio Services (CMRS) spectrum aggregation limits and the cellular cross interest rule (WT Docket No. 01-14); (2) a Notice of Proposed Rule Making (NPRM) concerning whether to undertake a comprehensive examination of its rules and policies of local radio ownership (MM Docket No. 00-244); (3) a Memorandum Opinion and Order on Reconsideration concerning its periodic review of the progress of the conversion to digital television (MM Docket No. 00-39); (4) a NPRM concerning the establishment of national performance measurements and standards for unbundled network elements and interconnection (CC Docket Nos. 98-56, 98-147, 98-147, 96-98, and 98-141); and a Report and Order concerning its policies, rules and requirements for Cable Landing Licenses (IB Docket No. 00-106). See, FCC notice. Location: Commission Meeting Room, FCC, 445 12th Street, SW, Washington DC.
10:00 AM. The House Financial Services Committee's Oversight and Investigations Subcommittee and the House Ways and Means Committee's Social Security Subcommittee will hold a joint hearing titled Preventing Identity Theft by Terrorists and Criminals. Location: Room 2128, Rayburn Building.
12:15 PM. The Federal Communications Bar Association's (FCBA) Global Telecom Development Committee will host a brown bag luncheon titled Telco Privatization: the Role of International Financial Institutions. The speakers will be David Satola (World Bank Group) and Janet Hernandez (Coudert Bros.). RSVP to Kent Bressie. Location: Wilkinson Barker & Knauer, 2300 N Street, Suite 700, Washington DC.
NIPC Issues Advisory re DDoS Attacks
10/2. The FBI's National Infrastructure Protection Center (NIPC) issued Advisory 01-026 regarding politically motivated cyber attacks, and distributed denial of service (DDoS) attacks. It stated that "Cyber protests and hacktivist activity have increased since Advisory 01-021 was issued and the potential for targeting U.S. organizations is higher than in September. In the aftermath of the 11 September attacks, hacking groups have formed and participated in pro-U.S. and anti-U.S. cyber activities, fought mainly through web defacements. There has been minimal activity in the form of DDoS attacks, mostly between opposing protesting groups."
However, the Advisory continues that the "NIPC has reason to believe that the potential for future DDoS attacks is high. The protesters have indicated they are targeting web sites of the U.S. Department of Defense and organizations that support the critical infrastructure of the United States, but many businesses and other organizations -- some completely unrelated to the events -- have been victims. In the current situation, infrastructure support systems must take a defensive posture and remain vigilant at a higher state of alert. System administrators are encouraged to check their systems for zombie agent software and ensure they institute best practices such as ingress and egress filtering."