Tech Law Journal Daily E-Mail Alert
February 1, 2002, 9:00 AM ET, Alert No. 359.
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Rogan Announces USPTO FY 2003 Budget Proposal
1/31. U.S. Patent and Trademark Office (USPTO) Director James Rogan announced that the administration's FY 2003 budget request for the USPTO will be $1.365 Billion. He stated in a press teleconference on January 31 that this is a 21.2% increase over the FY 2002 appropriation, and that it will enable the USPTO to hire more patent examiners, reduce patent pendency, and improve patent quality.
Rogan stated that this will enable the USPTO to hire an additional 950 patent examiners. Rogan noted that the average pendency is now 25 months. "By hiring more examiners we are hoping that it will help us with the backlog."
Nicholas Godici, the Commissioner for Patents, also participated in the teleconference. He added that "with this kind of hiring ... our projections are that we are going to be able to act on 60,000 more patent applications than we would have."
Rogan also said that the proposed budget would enable the USPTO to complete the transformation of the trademark filing system into a fully electronic operation by 2004.
The USPTO is entirely funded by user fees. However, for many years, appropriations bills have diverted some of these fees to fund other government programs. Opponents have argued that this diversion leads to under funding of the USPTO, which in turn delays the issuance of patents, and harms innovation and the development of new technologies.
Rogan stated that "the administration is proposing a one time surcharge" of $207 Million. "45 Million will be budgeted for the USPTO's business plan" and $162 Million will go for national security and homeland defense. Rogan stated that "there will be a 19.3 percent proposed surcharge for patents." Rogan reiterated that while this is a one time surcharge, he can make no guarantees regarding budget proposals in future years.
He also stated that the administration is proposing budget increases of around 3% for agencies that are not related to national defense or homeland security. Hence, the 21% proposed increase for the USPTO reflects "an incredible investment in the work at the Patent and Trademark Office."
Rogan will speak in Washington DC at a hearing on February 6 titled "Competition and Intellectual Property Law and Policy in the Knowledge Based Economy". This hearing is part of a series being hosted by the Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice (DOJ).
FTC to Take Action Against Spammers
1/31. Howard Beales, Director of the FTC's Bureau of Consumer Protection, spoke on "Privacy Regulation and the Federal Trade Commission" at the 2nd Annual Privacy & Data Security Summit sponsored by the International Association of Privacy Officers. He also addressed unsolicited e-mail.
He stated that "What we are planning to do, what we are in the process of doing, actually, for the first time, is to launch a systematic attack on spam that is itself fraudulent and deceptive. And that is an enormous fraction of what we see in our spam database. We have a database where you can forward your spam if you like -- We get about 10,000 pieces of spam a day."
He continued that "we are busy looking for cases. Some of those cases will involve messages that are themselves deceptive. We are also working on cases that involve claims that you can opt out, when in fact what clicking on the link to unsubscribe will do is simply verify that you have a valid e-mail address, so that you can get lots of spam, instead of just a little. Those cases take a little bit longer to develop. But, we will be acting on that front, and you will see the first set of cases very soon."
USTR Zoellick Addresses China, WTO and IT
1/31. Robert Zoellick, the U.S. Trade Representative (USTR), gave a speech to the U.S. China Business Council in Washington DC in which he discussed the PR China's accession to the WTO, and information technology.
He stated that "China's 15-year long journey to attain membership in the World Trade Organization has been a modern long march, not to the caves of the hinterland, but toward the seas of commerce and the ports of new open doors." He added that "The prospects for peace depend significantly -- but of course not completely -- upon the maintenance and acceleration of China's path in the last quarter century: toward openness to the outside world and acceptance of international norms."
Zoellick also focused on information technology. He stated that "The policies that have been at the core of China's spectacular growth in the last twenty-five years -- progress toward freer markets, greater openness to foreign competition and investment, deregulation and privatization, tariff reduction -- could serve as a model to others.
He continued: "Let me cite one example -- information technology. China could have taken the route of East Asian industrial policy, such as it experimented with through automobiles in the mid-1990s, and tried to build up a domestic industry behind high protectionist walls. Understanding the global character of the emerging IT sector, China chose a different course. It has joined the Information Technology Agreement, agreeing to reduce its tariffs on all IT products to zero by the year 2005."
"The result? Taiwanese companies, the IT powerhouses of the region, have invested about $9 billion in assembly and production plants on the Mainland. One quarter of the world's desktop computers are already manufactured in China, and one-half of the world's CD-ROMs. Within this decade, China will become the world's largest supplier of IT hardware. It will be the location of choice for IT assembly. It is becoming a design and development partner, and will challenge Taiwan as a semiconductor production center. It will soon be the second largest market in the world for personal computers. This is a spectacular example of how openness can lead to growth", said Zoellick.
Zoellick also cautioned that "Japan's experience provides a note of caution for China: If China tries to subvert the free trade principles of the WTO by twisting them into elements of a bureaucratic industrial policy, it will both fail to derive the advantages of those principles and undercut global WTO objectives. For example, it is critical for China to understand that the benefits it has accrued from the zero tariffs of the Information Technology Agreement will evaporate if it attempts to distort the basic intent of the Agreement. I have in mind provisions in China's new tariff schedule and implementing regulations that would differentiate between imports of IT products for domestic production and those intended for domestic sale, with the latter being subject to a tariff. We will make this point as often as necessary -- and it will have to be made often -- to the Chinese."
 Cal App Holds for Visa in Gambling Debts Case
1/31. The Court of Appeal of California (3) issued its opinion [PDF] in Emery v. Visa, holding that Visa cannot be held liable under California consumer protection laws for the use of Visa bank cards to pay illegal gambling debts.
Paul Emery filed a complaint in California Superior Court against Visa International Service Association and Visa U.S.A. Inc. alleging unfair and unlawful business practices and deceptive advertising in connection with the use of VISA bank cards to pay illegal gambling debts.
The trial court granted Visa's motion for summary judgment. The Court of Appeal affirmed. It wrote that "This lawsuit is misconceived legally and factually. As a so-called consumer protection action, it lacks a defendant who has engaged in any wrongful conduct and consumers who have been harmed. Because plaintiff, a misguided private attorney general, has failed to identify any triable issues of fact and bases his lawsuit on mistaken legal concepts of expansive civil and criminal liability where none exists, we affirm."
The Court of Appeal reasoned that "VISA does not approve merchants, does not endorse their activities, does not authorize any particular merchant transactions, and has no say whatsoever in how the merchants operate their day to day businesses. Indeed, the unrefuted evidence shows that VISA has no regular, direct dealings at all with any of the merchants. VISA merely makes available a payment system to member financial institutions, which merchants can use, and adjusts credit transactions among those members."
The Court continued: "In essence, plaintiff ascribes vicarious liability to VISA for its failure to police millions of merchants who allow payment with a VISA bank card. While such expansive responsibility may be plaintiff’s idea of needed social policy, he fails to present evidence of any viable theory of agency. In the absence of sufficient evidence to raise a genuine triable issue of fact, his lawsuit fails, along with his misguided notion of consumerism."
Editor's Note: See, HR 556, the Unlawful Internet Gambling Funding Prohibition Act, which was passed by the House Financial Services Committee on October 31, 2001. The bill would attempt to stem illegal Internet gambling by preventing the use of credit cards, wire transfers, and other financial instruments in connection with illegal Internet gambling. It provides that "No person engaged in the business of betting or wagering may knowingly accept, in connection with the participation of another person in unlawful Internet gambling (1) credit ... (including credit extended through the use of a credit card); (2) an electronic funds transfer ... ; (3) any check ...; or (4) the proceeds of any other form of financial transaction as the Secretary may prescribe by regulation ..." See also, TLJ Daily E-Mail Alert No. 299, November 1, 2001.
European Commission Approves HP Compaq Merger
1/31. The European Commission approved the merger of Hewlett Packard Company and Compaq Computer Company.
It stated in a release that its "analysis focused on the combination of HP's and Compaq's activities in the markets for personal computers (PCs), servers, handheld products, storage solutions and services. In addition, the Commission also assessed the impact of the merger on HP's joint development of the Itanium processor with Intel as well as the importance of HP's increased opportunity for joint sales of PCs and printers following the integration of Compaq's PC products."
PC Market. It concluded that in the PC market "the merged entity will continue to face strong competition in Europe from a number of credible rivals including IBM, Dell and Fujitsu Siemens, which together with the absence of significant barriers to entry and the practice of non-exclusive contractual relationships between retailers and manufacturers would prevent the new HP from any attempt to raise prices significantly."
Server Market. It concluded that in the server market "the proposed transaction was not likely to raise competitive issues. Indeed, while the servers market can be broken down according to price bands into entry level servers, mid-range and large servers, HP and Compaq are largely complementary except in the entry level market segment where the combined entity will have relatively high market shares. However, the Commission's analysis of that segment confirmed that the new HP would not be able to act independently from either customers or competitors as a result of the combination of series of elements among which the dynamic and growing nature of the market, the absence of entry barriers and the presence of several strong competitors as well a series of fringe suppliers, not to mention the white brands built around Intel processors."
Itanium. In addition, "As to the potential impact of HP and Intel's jointly developed Itanium processor, the Commission's analysis concluded that the merged entity would not be able to foreclose competitors' access to this component and that it was in HP and Intel's interest to guarantee unrestricted access."
HP Ch/CEO Carly Fiorina said that this "announcement confirms that the deal does not raise competition concerns in Europe, and we see it as an encouraging step in the continuing process of satisfying regulators worldwide that this deal will provide a real stimulus for competition in information technology markets." See, HP release.
The deal still requires the approval of the Federal Trade Commission (FTC), and shareholders. The FTC is not likely to raise objections.
FCC Commissioner Abernathy Addresses Regulation, 3G, IP Telephony, and Trade
1/31. FCC Commissioner Kathleen Abernathy spoke at a luncheon hosted by the Federal Communications Bar Association's International Practice Committee at the FCC offices in Washington DC.
She stated that there are five key principles to her regulatory philosophy: (1) Congress, through the Communications Act, defines the agenda of the FCC, (2) the FCC should rely upon competitive markets whenever possible, (3) the FCC should write clear rules, with clear definitions, and then enforce these rules, (4) the FCC should be humble about what it can know, and (5) the FCC is a service based organization that should act promptly.
She stated that both domestically, and internationally, there are five areas where markets do not function efficiently, and hence, there is a role for regulators: (1) interconnection, (2) resale obligations, (3) colocation, (4) rights of way, and (5) non discriminatory access to critical facilities.
IP Telephony. Abernathy was asked about promoting Internet protocol telephony. She stated that "IP telephony is not necessarily ready for prime time in the U.S." She also noted that some engineers say that it is vastly superior to analog, and that the FCC has increased its hiring of engineers in this area.
3G Spectrum. Abernathy was also asked about what the FCC is doing to make more spectrum available for Third Generation (3G) wireless services, which are intended to bring broadband Internet access to portable devices. She responded that "we have less spectrum than any other country in the world to assign to new technologies." She added that "we have more spectrum devoted to defense" than any other country, and that much spectrum is devoted to broadcast.
"There is a need for increased spectrum for wireless," said Abernathy. "It is incumbent upon us .. to figure out how we get it ... and how we balance 3G needs with defense needs and public safety needs." She concluded by saying that "we are in that process as we speak."
She did not address any specific spectrum bands under consideration for potential reallocation. Nor did she mention the creation of secondary markets in spectrum rights.
Trade. Abernathy was also asked about the U.S. Trade Representative (USTR) and telecom competition. February 1 is the extended deadline for filing comments with the USTR regarding the operation and effectiveness of the World Trade Organization (WTO) Basic Telecommunications Agreement, the telecommunications provisions of the North American Free Trade Agreement (NAFTA), and other telecommunications trade agreements. See, supplemental notice in Federal Register.
Abernathy stated that "we cannot apply the trade pressure that other entities in the U.S. can." She said that the FCC can engage in dialogue with other nations, and can work with the USTR on an "information sharing basis." However, "at the end of the day, they are the ones making the trades."
FCC Comments on FTC's Proposed Changes to Telemarketing Sales Rule
1/31. Dane Snowden, Chief of the FCC's Consumer Information Bureau, commented in a release on the FTC's proposal to change the Telemarketing Sales Rule (TSR). He stated that "We at the Federal Communications Commission share the Federal Trade Commission's commitment to ensuring that consumers' concerns are addressed by telemarketing rules. We will be following closely the progress of the FTC's recent proposal to create a national do-not-call registry to help consumers in their interactions with telemarketers."
On January 22, the FTC announced that it is proposing numerous changes to its TSR. The proposals include the creation of a national "do not call" registry, and a prohibition on blocking caller ID systems by telemarketers. In addition, the proposed rule contains several Internet related items.
The TSR, which is codified 16 CFR Part 310, implements the 1994 Telemarketing Consumer Fraud and Abuse Prevention Act, 15 U.S.C. §§ 6101-6108. The TSR prohibits specific deceptive and abusive telemarketing acts or practices, requires disclosure of certain material information, requires express verifiable authorization for certain payment mechanisms, sets record keeping requirements, and specifies those transactions that are exempt from the TSR. The proposed ruled is contained in an FTC notice [150 pages in PDF].
People and Appointments
1/31. Microsoft named Scott Charney as its chief security strategist, effective April 1. Charney is currently a principal for Price Waterhouse Coopers' Cybercrime Prevention and Response Practice. From 1991 through 1999 he was chief of the Computer Crime and Intellectual Property Section (CCIPS) of the Criminal Division of the Department of Justice. See, MSFT release.
1/31. President Bush named Jay Lefkowitz Deputy Assistant to the President and Director of the Domestic Policy Council. Lefkowitz has been General Counsel at the Office of Management and Budget since March 2001. Before that, he was a partner in the Washington DC office of the law firm of Kirkland & Ellis. He also worked for the elder George Bush from 1991 to 1993. See, WH release.
1/31. Tim Caruso was named Deputy Executive Assistant Director of the FBI for Counterintelligence and Counterterrorism. Pat D'Amuro was named Assistant Director of the FBI for Counterterrorism. See, FBI release and biographies of Caruso and D'Amuro.
More News
1/31. The Copyright Office published a notice in the Federal Register announcing that it is further extending the time period for filing additional comments in response to its March 9, 2001, Notice of Inquiry concerning the interpretation and application of the copyright laws to certain kinds of digital transmissions of prerecorded musical works in light of an agreement between the Recording Industry Association of America (RIAA), the National Music Publishers Association (NMPA), and The Harry Fox Agency (HFA). See, 17 U.S.C. § 115. Comments are due by February 6, 2002. Reply comments are due February 27, 2002. See, Federal Register, January 31, 2002, Vol. 67, No. 21, at Pages 4694 - 4695. This is Docket No. RM 2000-7B.
1/31. The U.S. Court of Appeals (9thCir) issued its opinion [PDF] in Gardner v. Nike, a case regarding the assignability of exclusive licenses under the Copyright Act. Affirmed.
1/30. The Office of the U.S. Trade Representative (USTR) announced that on January 30 "the United States and Hungary signed an agreement in Budapest in which Hungary agreed to reduce or suspend its tariffs on $180 million worth of key U.S. agricultural and industrial exports annually, starting in April 2002." The agreement covers, among other things, automatic data processing machines, office machine parts, laser disks, and telephone equipment. See, USTR release.
Friday, Feb 1
The House will meet at 10:00 AM in pro forma session only.
Day three of the 2nd Annual Privacy & Data Security Summit, sponsored by the International Association of Privacy Officers. See, online brochure [PDF]. Location: Hyatt Regency, 400 New Jersey Ave., NW.
12:30 PM. The FCBA will host a luncheon. The speaker will be FCC Commissioner Kevin Martin. There will be a reception at 12:00 NOON. The price to attend is $45 for FCBA members, $35 for government and law student members, and $55 for non-members. Registrations and cancellations due by 5:00 PM on Tuesday, January 29. To register, contact Wendy Parish at Location: Capital Hilton Hotel, 16th & K Streets NW.
12:30 - 2:00 PM. Harold Furchtgott Roth will give a speech titled "A Tough Act to Follow: The Telecommunications Act of 1996". To register, contact Linzey Powers at lpowers Location: American Enterprise Institute, 12th floor, 1150 17th St., NW.
Deadline to submit comments to the Federal Election Commission (FEC) in response to its requests comments on the second draft of the revisions to the 1990 national voluntary performance standards for computerized voting systems and the first draft of the revisions to the 1990 national test standards. See, notice in Federal Register, December 20, 2001, Vol. 66, No. 245, at Pages 65708 - 65710.
12:00 NOON. Extended deadline to submit comments to the Office of the United States Trade Representative (USTR) regarding the operation and effectiveness of the World Trade Organization (WTO) Basic Telecommunications Agreement, the telecommunications provisions of the North American Free Trade Agreement (NAFTA), and other telecommunications trade agreements. This request for comments is pursuant to an annual review of telecom agreements required by Section 1377. The original notice (Federal Register, December 27, 2001, Vol. 66, No. 248, at Pages 66963 - 66964) set January 28 as the deadline. A supplemental notice (Federal Register, January 29, 2002, Vol. 67, No. 19, at Pages 4305 - 4306) extended the deadline to February 1.
Monday, Feb 4
9:00 AM. The Cato Institute will release a study titled "The Digital Dirty Dozen" which lists and evaluates the worst high tech legislative proposals of this Congress. The speakers will be Wayne Crews and Adam Thierer. This study will be released at an invitation only press breakfast. For more information, contact Jerry Brito at 202-218-4621. Location: Cato, 1000 Mass. Ave., NW.
10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in Telecom Technical Services v. Siemens Rolm. Plaintiffs sued Seimens Rolm alleging violation of federal antitrust laws; they alleged monopolization of alleged markets for telecommunications equipment; they also sought class action status. Seimens asserted various counterclaims, including patent infringement. The U.S. District Court (NDGa) denied class action status. (This is Appeals Court No. 01-5090 and D.C. No. 95-CV-549-WBH.) Location: Courtroom 201, 717 Madison Place, NW.
10:00 AM. The House Judiciary Committee will hold a hearing on HR 2341, the Class Action Fairness Act of 2001, sponsored by Rep. Bob Goodlatte (R-VA). Location: Room 2141, Rayburn Building.
Deadline to submit petitions and comments to the FCC's Cable Services Bureau regarding the applications of Hughes Electronics Corporation and EchoStar Communications Corporation to the FCC requesting consent to the transfer of control of licenses and authorizations involved in the EchoStar DirecTV merger. See, FCC notice [MS Word]. Oppositions and responses are due by February 25, 2002. This is CS Docket No. 01-348.
Tuesday, Feb 5
9:30 AM. The U.S. Court of Appeals (DCCir) will hear oral argument in EchoStar v. FCC, No. 01-1032. Judges Ginsburg, Edwards and Sentelle will preside.
RESCHEDULED FOR FEB 12. 12:15 PM. The FCBA's Transactional Practice Brown Committee will host a brown bag lunch on wireless transactions.
1:30 PM. The U.S. International Telecommunication Advisory Committee (ITAC) will hold a meeting. See, notice in Federal Register. Location: State Dept.
2:30 PM. The Senate Finance Committee will hold a hearing to hear testimony on the President's FY 2003 budget and tax proposals. Treasury Secretary Paul O'Neill will testify. Location: Room 215, Dirksen Building.
4:00 PM. The Cato Institute will host a book forum on Against the Dead Hand: The Uncertain Struggle for Global Capitalism [Amazon], by Brink Lindsey (Cato Institute). The commenters will be Robert Zoellick (U.S. Trade Representative), Sebastian Mallaby (Washington Post), and Douglas Irwin (Dartmouth). See, online information and registration page. Location: The Cato Institute, 1000 Massachusetts Ave., NW.
Deadline to submit applications to the NTIA for planning and construction grants for public telecommunications facilities under the Public Telecommunications Facilities Program (PTFP) for FY 2002. See, notice in Federal Register.
Wednesday, Feb 6
10:00 AM. The Senate Finance Committee will hold a hearing titled Ongoing U.S. Trade Negotiations. The scheduled witnesses are Robert Zoellick (USTR), Gary Broyles (National Association of Wheatgrowers), George Scalise (Semiconductor Industry Association), and Arthur Wainwright (National Association of Manufacturers). Location: Room 215, Dirksen Building.
10:00 AM - 12:00 NOON. The FCC's Advisory Committee for the 2003 World Radiocommunication Conference (WRC-03) will meet.  Location: FCC, 445 12th Street, SW, Room TWC305 (Commission Meeting Room), Washington DC. This meeting had previously been scheduled for January 30. See, FCC notice of postponement [PDF].
12:15 PM. The FCBA's Online Committee will host a brown bag lunch. RSVP to Scott Harris at sharris
2:00 PM. The Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice (DOJ) will hold the first of a series of joint hearings on antitrust and intellectual property. The hearings are titled "Competition and Intellectual Property Law and Policy in the Knowledge Based Economy". The speakers at the opening hearing will be Timothy Muris (FTC Chairman), Charles James (Assistant Attorney General for the Antitrust Division), James Rogan (Director of the USPTO), Judge Pauline Newman (U.S. Court of Appeals for the Federal Circuit), Robert Pitofsky (Professor at Georgetown University Law Center), Todd Dickinson (Howrey Simon), Gerald Mossinghoff (Oblon Spivak), Richard Gilbert (Professor at U.C. Berkeley), and Richard Levin (President of Yale). See, FTC release and DOJ release. Location: Room 432, FTC, 600 Pennsylvania Ave., NW.
Deadline to submit comments to the Federal Communications Commission (FCC) regarding Verizon's Section 271 application to provide in region interLATA services in the state of Vermont. See, FCC notice [PDF]. This is CC Docket No. 02-7.
Thursday, Feb 7
10:00 AM. The Senate Judiciary Committee will hold an executive business meeting. Location: Room 226, Dirksen Building.
12:30 PM. Tom Ridge, Director of the Office of Homeland Security will speak at a luncheon. Location: Ballroom, National Press Club, 529 14th St. NW, 13th Floor.
Computer Crimes
1/31. The U.S. Court of Appeals (3rdCir) issued its opinion in USA v. Moore, an appeal of a sentence imposed for violation of 18 U.S.C. § 491. The defendant is a juvenile who participated in a scheme to create counterfeit $20 bills at home using a personal computer, scanner, printer and paper cutter, and then pass them at a Six Flags theme park. He was caught, plead guilty, and was sentenced to 12 months imprisonment, one year of supervised release, and restitution to Six Flags. He appealed the sentence. The Appeals Court affirmed.
1/22. The Department of Justice's (DOJ's) Computer Crimes and Intellectual Property Section (CCIPS) announced two criminal copyright infringement actions involving an Internet piracy group. The DOJ stated that defendant Kentaga Kartadinata operated an electronic mail server for the group, and defendant Mike Nguyen "managed several of the file servers that contained thousands of pirated software titles, including Windows operating systems and various utility programs. The file servers also contained video games and DVD movies, which were often made available to group members prior to the commercial release at movie theaters." See, CCIPS release.
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