Tech Law Journal Daily E-Mail Alert
January 14, 2002, 9:00 AM ET, Alert No. 345.
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Court Rejects Settlement Agreement in Private Antitrust Actions Against Microsoft
1/11. The U.S. District Court (DMd), Judge Frederick Motz presiding, rejected the proposed Settlement Agreement between Microsoft and plaintiffs in over 100 private antitrust class action lawsuits against it alleging that it overpriced its products. Under the proposed Settlement Agreement, Microsoft would have provided $1 Billion in cash, training, support and software to over 12,500 public schools. These cases may now be litigated.
Tom Burt, Deputy General Counsel for Microsoft, stated in a release that "While we are confident that Microsoft ultimately will prevail in these lawsuits, we are disappointed that we have missed this opportunity to improve education for disadvantaged children while resolving litigation ... Microsoft went the extra mile to make this settlement work. We sought input from educators to fully address issues regarding the independence of the education foundation that was a key part of the proposed settlement. We also made modifications to the original agreement to ensure that schools would have the option to use the software and platform of their choice. Microsoft is always open to looking for reasonable ways to resolve litigation. We will review the courts opinion and at the same time move forward with the next steps in the litigation".
In contrast, Ed Black, a Microsoft critic, and P/CEO of the Computer & Communications Industry Association (CCIA), stated in a release that "By attempting to buy their way out of legal trouble with the ‘donation’ of Microsoft products and hardware to schools, they sought only to leverage a market that had been the one of the few Microsoft has struggled to dominate: education."
Appeals Court Affirms FCC Broadband PCS Spectrum Auction Order
1/11. The U.S. Court of Appeals (DCCir) issued its opinion in High Plains Wireless v. FCC, affirming an order of the Federal Communications Commission (FCC) regarding the auction of broadband PCS licenses. The Appeals Court addressed several issues, including the FCC's rule against collusion in auctions, standing to challenge FCC auction orders, and the effect of ex parte communications by Members of Congress.
Background. The FCC allocated 120 MHz of spectrum for broadband personal communications services (PCS). It divided the spectrum into blocks: three of 30 MHz each (known as the A, B, and C blocks) and three of 10 MHz each (D, E, and F). It also divided spectrum geographically. Licenses for the C, D, E, and F blocks were established for each of 493 Basic Trading Areas (BTAs). For example, the FCC established BTAs for both Lubbock and Amarillo, Texas. The FCC then auctioned licenses for use of this spectrum, with open (auction participants became aware of each others' bids as they were cast), simultaneous (all 493 BTAs were open for bidding at the same time), and ascending auctions. The FCC also has an anti collusion rule.
High Plains and Mercury (now known as Tritel Communications) both sought broadband PCS licenses in west Texas. Both bid in the FCC F block license auctions for Lubbock, and in the D and F block auctions for Amarillo. High Plains was the successful bidder for the F block license in Amarillo. Mercury was the successful bidder for the F block license in Lubbock.
Reflexive Bidding and the Anti Collusion Rule. Mercury used a bidding tactic known as reflexive bidding, in which it sought to deter others from bidding in certain markets. It communicated this by including the BTA numbers for specific markets in its dollar bids. The FCC's BTA number for Lubbock is 013; its BTA number for Amarillo is 264. Mercury placed bids in which the last three numbers of bids for a license in one market corresponded to the BTA for another market.
The Appeals Court wrote: "In one round of the auction, for example, Mercury bid $1,375,013 on the F block license in Lubbock, "013" being the BTA for Amarillo; after High Plains bid again for the F block license in Lubbock, Mercury bid $1,615,264 on the F block license in Amarillo, "264" being the BTA for Lubbock. ... By repeatedly thus encoding its bids, Mercury was able to warn High Plains that if High Plains did not stop bidding, then Mercury would drive up the price of the F block license in Amarillo. ... The message was not lost on High Plains, which stopped bidding for the F block license in Lubbock."
High Plains filed an emergency motion to disqualify Mercury from the auction on the grounds that it violated the FCC's anti collusion rule. The FCC did not rule on this motion. High Plains later filed a motion to deny the award of licenses to Mercury. The FCC granted licenses to Mercury.
The Court of Appeals wrote that the question of "whether reflexive bidding violated the rule against collusion appears to have been an unsettled -- indeed, an unasked -- question before the DEF auction. In this circumstance it was not unreasonable for the Commission to have deemed the rule ambiguous with respect to whether reflexive bidding was prohibited."
Ex Parte Communications by Members of Congress. At least 27 Members of Congress inquired of the FCC about Mercury's licenses and the delay in their award. The Appeals Court wrote that the FCC's ex parte communications rule is violated if communications are both "directed to the merits or outcome of a proceeding" and "not served on the parties." It wrote that since none of the communications in this matter met both criteria, there was no violation of the rule.
Standing. The Appeals Court also addressed whether or not it had standing to hear this matter. The Appeals Court held that High Plains had standing to challenge the award of the F block license in Lubbock, because it had bid on that. However, High Plains lacked standing to challenge the award of licenses other than the F block license in Lubbock, on which it had not bid.
Judge Douglas Ginsburg wrote the opinion of the Court affirming the FCC. Judges Edwards and Sentelle joined.
Federal Circuit Rules on Priority in Patent Interferences
1/11. The U.S. Court of Appeals (FedCir) issued its opinion in Brown v. Barbacid, an appeal from a priority decision in a patent interference proceeding. A divided Appeals Court reversed.
This is a case involving an interference between U.S. Patent No. 5,185,248, of which Mariano Barbacid is an inventor, and Squib is the assignee, and U.S. patent application Serial No. 07/937,893, of which Michael Brown is an applicant. Both the Barbacid patent and the Brown application claim an assay for identifying new anti cancer compounds that inhibit farnesyl transferase (FT), an enzyme involved in the control of cell growth. The USPTO Board of Patent Appeals and Interferences awarded priority to Barbacid. The Appeals Court reversed. Judge Rader wrote the opinion of the Court. Judge Newman dissented.
Federal Circuit Rules in HRT v. Astechnologies
1/11. The U.S. Court of Appeals (FedCir) issued its opinion in HR Technologies v. Astechnologies, a patent infringement action involving a process for preparing glass fiber containing polymer sheet. H.R. Technologies (HRT) filed a complaint in U.S. District Court (EDMich) against Astechnologies alleging infringement of its U.S. Patent No. 5,665,185. Astechnologies counterclaimed alleging noninfringement, unfair competition in violation of the Lanham Act, and various state claims. The District Court dismissed without prejudice. Astechnologies appealed. It sought dismissal with prejudice. The Appeals Court affirmed the dismissal without prejudice. However, it reversed the dismissal of Astechnologies' counterclaims. Hence, the judgment of the District Court was affirmed in part, vacated in part, and remanded.
Third Circuit Affirms in In Re Ikon Securities Litigation
1/1. The U.S. Court of Appeals (3rdCir) issued its opinion in In Re Ikon Office Solutions Securities Litigation, a case involving scienter is class action securities litigation.
This is a class action suit against Ernst & Young, the accounting firm for Ikon, alleging violation of § 10(b) of the Securities Exchange Act, and Rule 10b-5 thereunder. Plaintiffs allege that Ernst & Young issued an unqualified audit report approving Ikon's financial statements for FY 1997 knowing that they overstated pre-tax income or, even if Ernst & Young did not have actual knowledge of the overstatement, it recklessly performed its audit.
The U.S. District Court (EDPa) granted summary judgment to Ernst & Young on the grounds that plaintiffs failed to raise a genuine issue of material fact with respect to two elements of a prima facie 10(b) claim: scienter (that Ernst harbored an intent to deceive or acted with reckless disregard for the truth and accuracy of Ikon's financial disclosures) and causation (that the inflated value of Ikon's stock price dropped when the market reevaluated the security after a corrective disclosure). The Appeals Court affirmed on the issue of scienter. It did not address the issue of causation.
Greenspan Addresses Effects of Technology and Terrorism on Economy
1/11. Federal Reserve Board Chairman Alan Greenspan gave a speech at the Bay Area Council Conference in San Francisco, California, titled "The Economy". He stated that "immediately prior to September 11, there were tentative signs that some sectors of the U.S. economy had begun to stabilize ..." However, "That hope was decisively dashed by the tragic events of early September. Adding to the intense forces weighing on asset prices and economic activity before September 11 were new sources of uncertainty and risk that began to press down on global demand for goods and services."
Greenspan elaborated that recent economic weakness has resulted in part from retrenchment in the technology sector. "We had already observed a coincident deceleration in activity among the world economies over the past year, owing apparently, at least in part, to the retrenchment in the high technology sector. The global nature of most technology industries and the global reach of the capital markets in which the firms in these industries are valued and funded appears to have fostered a greater synchronousness in world activity in this cycle, seemingly broader than has generally been the case."
Now, Greenspan sees signs of economic stability, which he attributes to the use of new information technologies. He explained that "indications of stabilization, similar in many respects to those observed in the period immediately preceding September 11, have been appearing with greater frequency. A possible significant contributor to this emergence of stability -- if that is what it is -- may be the very technologies that have fostered coincident global weakness: those that have substantially improved access of business decision makers to real time information."
He added that "Today, businesses have large quantities of data available virtually in real time. As a consequence, they address and resolve economic imbalances more rapidly than in the past."
Greenspan also stated that "the evidence strongly suggests that new technologies will present ample opportunities to earn enhanced rates of return. Indeed, anecdotal reports from businesses around the country suggest that the exploitation of available networking and other information technologies was only partially completed when the cyclical retrenchment of the past year began. Many business managers are still of the view, according to a recent survey of purchasing managers, that less than half of currently available new, and presumably profitable, supply chain technologies have been put into use."
However, he also cautioned that "While these opportunities remain abundant, they will now play out against the backdrop of a major uncertainty that we all must deal with these days -- the specter of further terrorist incidents on American soil."
SEC Official Addresses E-Marketing and Data and Communications Backup
1/10. Paul Roye, Director, Securities and Exchange Commission's Division of Investment Management, gave a speech to the Practicing Law Institute in New York City titled "Understanding Securities Products of Insurance Companies". He addressed many issues, including the use of the Internet to market variable products, and the need for backup data and communications systems to ensure business continuity if terrorists strike.
Internet Marketing. He stated that "the variable products industry is characterized by innovative products and rapid growth" and that "the internet is emerging as a new distribution medium for variable insurance products."
He continued that "Several firms are building annuity supermarkets to service online investors and financial advisers. These firms are not only providing educational information, but access to variable products; in some cases, allowing investors to compare several annuity contracts side by side."
He also addressed "electronic only" variable annuities, in which the offeror does not provide paper copies of any document relating to the annuity contract.
Terrorism and Data and Communications Backup. Roye stated that "the year's single most significant change occurred on September 11th. ... Never again will we take our security for granted. And never again will we turn a blind eye to the threat of terrorism. Never again will the financial services industry take its communications systems, its record storage facilities and its back office infrastructure for granted. September 11th heightened our awareness of the importance, indeed the necessity, of having back-up systems and disaster recovery/ business continuity plans in place."
He also cautioned that "our Inspections Office has committed to making contingency planning a focus of future inspections. When they come knocking, our inspections staff will ask for a copy of contingency plans and likely will ask questions about alternative physical facilities, back-up records storage and back-up communications systems."
GAO Reports on Software Acquisition Problems at DLA
1/11. The General Accounting Office (GAO) released a report [49 pages in PDF] titled "Information Technology: Inconsistent Software Acquisition Processes at the Defense Logistics Agency Increase Project Risks".
The GAO wrote that the Defense Logistics Agency (DLA) "relies on software intensive systems to support this work. An important determinant of the quality of software intensive systems, and thus DLA's mission performance, is the quality of the processes used to acquire these systems."
The GAO concluded that the "DLA does not have mature software acquisition processes across the agency, Moreover, DLA does not have a software process improvement program in place to effectively strengthen its corporate software acquisition processes." The GAO report recommends "establishing a framework for long-term institution software process improvement."
The report was prepared for Sen. Carl Levin (D-MI) and Sen. John Warner (R-VA), the Chairman and ranking Republican on the Senate Armed Services Committee, and Rep. Bob Stump (R-AZ) and Rep. Ike Skelton (D-MO), the Chairman and ranking Democrat on the House Armed Services Committee.
Qualcomm Asserts UWB Prevents GPS Enabled PCS Phones from Reporting Location
1/11. Qualcomm submitted a statement [25 pages in PDF] to the Federal Communications Commission (FCC) in which it argued that its tests show that ultra wideband (UWB) devices interfere with the Global Positioning System (GPS) devices in GPS enabled PCS phones, thus preventing them from complying with E-911 requirements.
Qualcomm wrote that its tests show "that close proximity of UWB devices to GPS enabled wireless phones will prevent the location of wireless callers to 911 from being determined in compliance with the Commission's E-911 mandate. The presence of UWB emissions within the GPS spectrum significantly raises the noise floor of the GPS sensor to the extent that it will render the GPS device useless in reporting position information to Public Safety Answering Points (PSAPs), and hence it will not be possible to meet the safety of life system requirements embodied in the Commission's E-911 rules in the face of UWB emissions."
UWB devices, which use very narrow pulses with very wide bandwidths, have potential applications in both radar and communications technologies. This is ET Docket No. 98-253.
FCC Applies Ban on Unsolicited Faxes to Foreign Faxer
1/11. The Federal Communications Commission (FCC) released a Forefeiture Order imposing a $1,107,500 fine against 21st Century Fax for faxing unsolicited advertisements to consumers in violation of the Telephone Consumer Protection Act (TCPA), 47 U.S.C. § 227, and FCC rules, 47 C.F.R. § 64.1200(a)(3). See, FCC release.
Section 227(b) provides that "... It shall be unlawful for any person within the United States ... to use any telephone facsimile machine, computer, or other device to send an unsolicited advertisement to a telephone facsimile machine ..." 21st Century Fax argued that the statute did not apply to it because its faxes originated in the United Kingdom. The FCC wrote that "the term ``person´´ in Section 227(b)(1) includes the individual who actually performs the faxing as well as the corporate entity on whose behalf he or she is acting." The FCC noted that 21st Century Fax maintains offices, employees and agents in the U.S., and hence, is "within the United States" within the meaning of the statute.
21st Century Fax also argued that the TCPA violates the First Amendment. The FCC rejected this argument, noting that the U.S. Court of Appeals (9thCir) has ruled to the contrary. See, Destination Ventures v. FCC, 46 F.3d 54 (1995).
Commerce Committee Investigates Andersen's Destruction of Enron Records
1/11. Rep. Billy Tauzin (R-LA) and Rep. James Greenwood (R-PA) wrote a letter to Andersen CEO Joseph Berardino regarding "thousands of other responsive documents [that] were knowingly destroyed by Andersen employees working on the Enron engagement".
Rep. Tauzin is Chairman of the House Energy and Commerce Committee. Rep. Greenwood is Chairman of the Commerce Committee's Subcommittee on Oversight and Investigations.
The letter requests information about Andersen employees who have worked on the Enron audit engagement, information about Andersen's destruction of paper and electronic records, and copies of reconstructed or retrieved documents.
Monday, Jan 14
9:30 AM. The U.S. Court of Appeals (DCCir) will hear oral argument in Sinclair Broadcast Group v. FCC, No. 01-1079. Judges Sentelle, Rogers and Williams will preside.
9:30 AM. The U.S. Court of Appeals (DCCir) will hear oral argument in COMSAT Corp v. FCC, No. 00-1458. Judges Sentelle, Rogers and Williams will preside.
10:30 AM. The American Association of Motor Vehicle Administrators' (AAMVA) Task Force on Identification Security will announce its recommendations regarding the issuance of identification cards, and the use of biometric data. For more information, contact Jason King at 703 908-8287 or See also, web cast information. Location: Holeman Lounge, National Press Club, 529 14th St. NW, 13th Floor, Washington DC.
1:30 PM. The U.S. International Telecommunication Advisory Committee (ITAC) will hold a meeting. See, notice in Federal Register, October 17, 2001, Vol. 66, No. 201, Page 52825. Location: State Department.
Tuesday, Jan 15
8:30 AM - 5:00 PM. The North American Numbering Council (NANC) will meet. Location: FCC, 445 12th Street, SW, Room TW-C305 (Commission Meeting Room), Washington DC.
9:30 AM. The Communications for Coordinated Assistance and Response to Emergencies Alliance (Comcare) will hold a press conference to release a report titled "The E-Safety Program -- Making Americans Safer". For more information contact Alan Kitey at or 202 429-0574. See, Comcare release. Location: Zenger Room, National Press Club, 529 14th St. NW, 13th Floor, Washington DC.
Wednesday, Jan 16
8:30 AM - 5:00 PM. The North American Numbering Council (NANC) may continue its meeting of January 15, if necessary. Location: FCC, 445 12th Street, SW, Room TW-C305 (Commission Meeting Room), Washington DC.
11:00 AM. The Cato Institute will host a panel discussion titled "Closing 'Windows' on Antitrust or Opening a New Era of Intervention? Competition Policy after the Microsoft Settlement". The participants will be Jeffrey Eisenach (Progress and Freedom Foundation), Robert Levy (Cato), Kenneth Starr (Kirkland & Ellis), Jonathan Zuck (Association for Competitive Technology), and James Miller (Citizens for a Sound Economy). A luncheon will follow. See, online registration page. Location: Cato Institute, 1000 Massachusetts Avenue, NW, Washington DC.
Thursday, Jan 17
9:30 AM. The Federal Communications Commission (FCC) will hold a meeting that will focus on a review of FCC policies and procedures by the Commissioners and senior agency officials. There will be three panel presentations. Panel One will include Chiefs of the Mass Media Bureau, Cable Service Bureau and Common Carrier Bureau. Panel Two will include the Chiefs of the Consumer Information Bureau and the Enforcement Bureau. Panel Three will include the Chiefs of the Office of Engineering and Technology, the International Bureau, and the Wireless Telecommunications Bureau. See, FCC release. Location: FCC, Commission Meeting Room (Room TW-C305), 445 12th Street, SW, Washington DC.
People and Appointments
1/11. President Bush announced his intent to appoint three more Members of the President's National Security Telecommunications Advisory Committee (NSTAC): Thomas Casey (Global Crossing), Christopher Galvin (Ch/CEO of Motorola), and Edward Whitacre (Ch/CEO of SBC Communications). See, current list of NSTAC Members. See also, White House release.
1/11. President Bush announced his intent to nominate Donald Prophete to be General Counsel of the Equal Employment Opportunity Commission. He has been Senior Attorney and Director of the Law Department for Labor and Employment for Sprint since 1997. See, White House release.
1/8. Jay Alexander joined the law firm of Fulbright & Jaworski as a senior counsel in the firm's Washington DC office. He focuses on patent litigation matters involving satellite communications, cellular telephones, semiconductor manufacturing processes, computer software, and gene sequencing. He previously worked in the Washington DC office of the law firm of Kirkland & Ellis. See, F&J release.
1/7. Daniel Pascucci joined the San Diego office of the law firm of Fish & Richardson as a principal. He previously was a partner at Gray Cary Ware & Freidenrich. He focuses on complex class action and technology litigation involving telecommunications and Internet law. See, F&R release.
1/7. Robert Zinkham was named chairman of the Venable law firm's business division, encompassing all of the firm's specialty business practice subdivisions. See, release.
1/7. Patricia Russo was named P/CEO of Lucent Technologies. She succeeds Henry Schacht who will become chairman. Russo most recently was P/COO of Eastman Kodak Company. Before that, she was one of the founding executives of Lucent when it was spun off from AT&T in 1996. See, Lucent release.
More News
1/11. The National Telecommunications and Information Administration (NTIA) published in its web site copies [PDF and MS word] of the "NTIA Manual of Regulations & Procedures for Federal Radio Frequency Management (January 2000 Edition with January/ May/ September 2001 Revisions)".
1/11. The Drug Enforcement Administration (DEA) published a notice in the Federal Register of its intent to conduct performance verification testing of public key infrastructure (PKI) enabled controlled substance orders. See, Federal Register, January 11, 2002, Vol. 67, No. 8, at Pages 1507 - 1508.
1/11. The Food and Drug Administration (FDA) published a notice in the Federal Register announcing the availability of the guidance titled "General Principles of Software Validation." This document provides guidance to medical device manufacturers and FDA staff concerning requirements for validating software used in medical devices, in device production, or in implementing the manufacturer's quality system. See, Federal Register, January 11, 2002, Vol. 67, No. 8, at Pages 1482 - 1488.
1/11. The U.S. Customs Service announced that Space System/ Loral has agreed to pay a $20 Million fine for allegedly passing licensable technology to China to improve its missile guidance systems. See, release.
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