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January 3, 2002, 9:00 AM ET, Alert No. 338.
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Court Upholds State Spam Statute Against Commerce Clause Challenge
1/2. The California Court of Appeal (1/2) issued its opinion [PDF] in Ferguson v. Friendfinders, holding that a California statute that regulates the use of unsolicited e-mail advertising does not violate the dormant commerce clause of the U.S. Constitution. The Court rejected the notion that any state regulation of the Internet violates the commerce clause.
Proceedings Below. Mark Ferguson, a California resident, filed a complaint in California Superior Court for San Francisco County against Friendfinders, Inc. and Conru Interactive, Inc., two California businesses located in Palo Alto, California, alleging that they sent unsolicited e-mail advertisements that did not comply with the requirements set forth in  17538.4 of the California Business and Professions Code. He also alleged trespass, unfair business practices, and unlawful advertising practices. He sought class action status. Defendants filed a demurrer, which the trial court granted. The trial court held, among other things, that "California Business and Professions Code section 17538.4 unconstitutionally subjects interstate use of the Internet to inconsistent regulations, therefore violating the dormant Commerce Clause of the United States Constitution."
The Statute: Requirements for Unsolicited Advertising E-mail. 17538.4 provides that no unsolicited advertising e-mail may be sent in California unless in meets certain enumerated requirements. Subsection (a) provides that there must be a return e-mail address for recipients to use to opt out of receiving further e-mail. Subsection (b) provides that there must be a notice at the top of the e-mail notifying the recipient of the right to opt out. Subsection (c) provides that once a recipient has notified the sender of his decision to opt out, the sender cannot send that person any further unsolicited e-mail.
The Statute: Limited to In State Mailers. 17538.4 also contains restrictions on its scope. Subsection (d) provides, in part, that "this section shall apply when the unsolicited e-mailed documents are delivered to a California resident via an electronic mail service provider's service or equipment located in this state."
Dormant Commerce Clause. Article I, Section 8, of the Constitution 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 Constitution, by delegating certain authority to the Congress to regulate commerce, thereby bars the states from legislating on certain matters that affect interstate commerce, even in the absence of Congressional legislation. It is applied to block states from regulating in a way that materially burdens or discriminates against interstate commerce. See, Gibbons v. Ogden, 22 U.S. 1 (1824), and Cooley v. Board of Wardens, 53 U.S. 299 (1851). More recent treatments of the concept include Healy v. The Beer Institute, 491 U.S. 324 (1989), and CTS Corp. v. Dynamics Corp. of America, 481 U.S. 69 (1987).
Court of Appeal. The Court of Appeal reversed the trial court. The Court reasoned that the dormant commerce clause entails a two part enquiry: first, whether the state regulation discriminates against interstate commerce, and second, whether the regulation imposes a burden on interstate commerce that is clearly excessive in relation to the local benefits.
The Court stated that the first part of the analysis invokes the strict scrutiny test. However, it noted that the statute equally affects in state and out of state e-mailers. Hence, there is no discrimination against out of state e-mailers. Moreover, the Court reasoned, since the statute only applies to e-mailers sent via a service provider or equipment located in California, it cannot be said to regulate commerce wholly outside of California.
The Court stated that the second part of the analysis involves a balancing test. It found that protecting its citizens from the harmful effects of unsolicited e-mail is a legitimate state interest, and the statute furthers that interest. On the other side of the scale, the Court found that regulating unsolicited e-mail does not burden interstate commerce. Rather, it benefits it by reducing fraud. Moreover, the requirements imposed upon the senders are slight. Hence, in applying the balancing test, the benefits of the statute outweigh the burdens.
Washington Statute. The state of Washington has also upheld its anti spam statute against a dormant commerce clause challenge. See, Commercial Electronic Mail Act, Chapter 19.190 Revised Code of Washington, at RCW 19.190.020. On October 29, 2001, the Supreme Court of the United States denied a petition for writ of certiorari in this case, Heckel v. Washington. The California Court of Appeal relied on this Washington precedent.
More Microsoft News
1/2. The U.S. District Court (DC) issued an order [PDF] in the Microsoft antitrust case setting a hearing for January 7 on Microsoft's motion to amend the scheduling order (to delay the trial date). Nine of the state plaintiffs have not joined in the settlement agreement negotiated by Microsoft, the Department of Justice, and the other state plaintiffs. The hearing will be held at 9:15 AM before Judge Colleen Kotelly. This is Civil Action No. 98-1233 (CKK).
Bush Relaxes Computer Export Controls
1/2. President Bush announced that he is relaxing certain controls on the export of high performance computers and microprocessors. This change applies to "Tier 3 countries", which include Russia, Israel, India, Pakistan, and China. Currently, U.S. exporters are required to notify the Department of Commerce of proposed exports to Tier 3 countries of computers with the capacity to conduct at least 85,000 Millions of Theoretical Operations Per Second (MTOPS). President Bush raised this level to 190,000 MTOPS.
This change will become effective after the expiration of a 60 day notice period for the U.S. Congress. Bush wrote a letter to Congressional leading informing them of the change. He wrote, in part: "In accordance with the provisions of section 1211(d) of the National Defense Authorization Act for Fiscal Year 1998 (Public Law 105-85), I hereby notify you of my decision to establish a new level for the notification procedure for digital computers set forth in section 1211(a) of Public Law 105-85. The new level will be 190,000 millions of theoretical operations per second (MTOPS). In accordance with the provisions of section 1211(e), I hereby notify you of my decision to remove Latvia from the list of countries covered under section 1211(b)."
See also, White House release and statement by the Deputy Press Secretary.
Federal Circuit Reverses in Linear Technology v. Micrel
12/28. The U.S. Court of Appeals (FedCir) issued its opinion in Linear Technology v. Micrel, a patent infringement case involving application of the on-sale bar.
Linear Technology filed a complaint in U.S. District Court (NDCal) against Micrel alleging infringement of U.S. Patent No. 4,755,741, which pertains to adaptive transistor drive circuitry used in telecommunications, cell phones and computers. The District Court held the patent invalid due to the on-sale bar.
35 U.S.C. 102(b) provides that "A person shall be entitled to a patent unless ... (b) the invention was patented or described in a printed publication in this or a foreign country or in public use or on sale in this country, more than one year prior to the date of the application for patent in the United States".
The Appeals Court reversed. The Court stated that in its recent decision, Group One v. Hallmark Cards, 254 F.3d 1041 (2001), required reversal. In that opinion, which was handed down after the District Court ruled in this case, the Court changed the analysis required to determine whether an offer for sale has occurred.
More News
1/2. The U.S. Patent and Trademark Office (USPTO) announced that it "discovered a programming error that has resulted in Notices of Allowance mailed on or after November 13, 2001 and before December 23, 2001 being printed with a zero (0) in the patent term adjustment field, regardless of whether the application is entitled to patent term adjustment or not." See, USPTO notice.
1/2. The Senate Government Affairs Committee will hold a hearing regarding the collapse of Enron, and how it might be exploited for political purposes. Sen. Joe Lieberman (D-CT) is the Chairman of the full Committee. Sen. Carl Levin (D-MI), Chairman of its Permanent Subcommittee on Investigations, also announced that his subcommittee is investigating Enron. See, Levin release and statement.
1/2. The GAO released a report [PDF] titled "Purchase Cards: Control Weaknesses Leave Two Navy Units Vulnerable to Fraud and Abuse". It reviews the breakdown of internal controls over purchase card activity at two Navy units in San Diego, California -- the Space and Naval Warfare Systems Command (SPAWAR) Systems Center and the Navy Public Works Center. The report found that the two units are "vulnerable to fraudulent, improper, and abusive purchases and theft and misuse of government property" and recited instances of abuse. For example, the GAO could not verify that certain items, "including laptop computers, personal digital assistants (PDA) such as Palm Pilots, and digital cameras, were in the possession of the government." The GAO also found that PDAs were purchased "without documented government need", and that flat panel monitors were purchased at excessive prices. The report also sets out recommendations for more effective management control.
SEC Sues Software CEO for False Financial Statements
1/2. The SEC announced that it filed a civil complaint in U.S. District Court (DUtah) against Bruce Acacio alleging violation of federal securities laws. Acacio is the Ch/CEO of California Software Corporation, an Irvine, California, based software company. The complaint alleges, among other things, that Acacio provided false and misleading information in the offer and sale of securities, falsified the books and records of an issuer of securities, and provided false information to auditors in connection with the audit of financial statements. Acacio simultaneously consented to entry of an injunction enjoining him from future violations of federal securities laws; he also agreed to pay $30,000 in penalties. (See, SEC v. Acacio, U.S. District Court for the District of Utah, D.C. No. 2:01CV-1010ST.)
Friday, Jan 4
10:00 AM - 1:00 PM. The FCC's Network Reliability and Interoperability Council will hold a meeting. See, notice in Federal Register, November 13, 2001, Vol. 66, No. 219, at Page 56823. Location: FCC, Commission Meeting Room, Room TW-C305, 445 12th St. SW., Washington DC.
12:15 PM. The Federal Communications Bar Association's Wireless Telecommunications Practice Committee will host a luncheon. The speakers will be advisors to the FCC Commissioners: Peter Tenhula (Powell), Bryan Tramont (Abernathy), Paul Margie (Copps), and Monica Desai (Martin). The price to attend is $15.00. RSVP to Wendy Parish at wendy@fcba.org. Location: Sidley Austin Brown & Wood, 1501 K Street, NW Conference Room 6-E, Washington DC.
Deadline to submit oppositions and comments to the FCC in response to Cingular Wireless', Nextel's, and Verizon Wireless' petitions for reconsideration of certain provisions of the FCC's October 12 orders addressing and conditionally approving requests for waivers and approval of revised deployment plans for wireless Enhanced 911 (E911) services. See, FCC Notice. (CC Docket No. 94-102.)
Monday, Jan 7
9:15 AM. The U.S. District Court (DC) will hold a hearing on Microsoft' motion to amend the scheduling order (to delay the trial date) in the government antitrust lawsuit. Nine of the state plaintiffs have not joined in the settlement agreement negotiated by Microsoft, the Department of Justice, and the other state plaintiffs. See, order [PDF]. This is Civil Action No. 98-1233 (CKK), Judge Colleen Kotelly presiding.
10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in Bowers v. Baystate Technologies, No. 01-1108. Location: Courtroom 402, 717 Madison Place, NW, Washington DC.
Deadline to resubmit comments with the U.S. Department of Justice (DOJ) regarding the proposed settlement in the antitrust case titled U.S. v. 3d Systems Corp. and DTM Corp. (D.C. No. 1:01CV01237). The original comment period closed on November 26, 2001. However, because of disruption of the U.S. Mail in Washington DC, the DOJ requests that comments be resubmitted. The deadline is 15 after publication of a notice in the Federal Register on December 21, 2001, which would fall on Saturday, January 5. See, notice in Federal Register, December 21, 2001, Vol. 66, No. 246, at Page 65992.
Tuesday, Jan 8

The Supreme Court will hear oral argument in Festo Corporation v. Shoketsu Kinzoku Koygo Kabushiki, No. 00-1543, a case regarding the doctrine of equivalents in patent law.

Wednesday, Jan 9
10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in Fantasy Sports v. Sportsline.com, No. 01-1217, an appeal from the U.S. District Court (EDVa). This is a patent infringement case regarding U.S. Patent 4,918,603, titled "Computerized Statistical Football Game". (D.C. No. 99-CV-2131103; opinion at F. Supp. 2d 886 (E.D.Va. 2000).) Location: Courtroom 402, 717 Madison Place, NW, Washington DC.
10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in ManTech Telecommunications v. US, No. 01-5090. Location: Courtroom 402, 717 Madison Place, NW, Washington DC.
12:15 PM. The Federal Communications Bar Association's Telecom Competition Issues Committee will host a brown bag lunch. Michael Katz, a Deputy Assistant Attorney General for the DOJ's Antitrust Division, and former Chief Economist of the FCC, will speak about his observations on the similarities and differences that characterize the two agencies' approach to competition issues. Location: CTIA, 1250 Connecticut Ave., NW, 8th floor conference room, Washington DC.
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