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February 22, 2002, 9:00 AM ET, Alert No. 374.
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FTC Issues Opinion Letter Re Web Based Physician Joint Venture
2/21. The Federal Trade Commission's (FTC) Bureau of Competition (BOC), which enforces federal antitrust laws, issued a non binding opinion letter to MedSouth Inc. regarding its plan to operate a nonexclusive physician network joint venture. The joint venture will include an extensive web based clinical data record system. The letter states that the BOC sees no reason to challenge the program. See also, FTC release.
MedSouth. MedSouth is a multi specialty physician practice association located in the southern part of Denver, Colorado. It has formed a joint venture with consultants, a health care information technology service provider, and a national clinical laboratory.
Joint Venture. The opinion letter describes the program: "It will have two major parts: (1) a web based electronic clinical data record system that will permit MedSouth physicians to access and share clinical information relating to their patients; and (2) the adoption and implementation of clinical practice guidelines and performance goals relating to the quality and appropriate use of services provided by MedSouth physicians. All physicians contracting through MedSouth will be required to participate in these activities. With these systems, MedSouth believes it will be able to improve and standardize members' treatment of specific diagnoses and their fulfillment of standards of care; reduce medical errors and improve patient care outcomes; permit its members to provide their services more efficiently and to reduce the aggregate long term cost of physician services; and demonstrate to payers, employers, and others that the integrated and coordinated delivery of services by primary care and specialist physicians can improve the quality and delivery of physician services."
Data System. The letter also elaborates on the data system: "The web based clinical data record system is intended to permit MedSouth members rapidly to access and exchange clinical information relating to patients, including lab and radiological reports, transcribed patient records and office visit information, treatment plans, and prescription information. The doctors will be able to order prescriptions on line, and at a future time will be able to determine whether the patient filled the prescription. The system can aggregate data from multiple doctors to show, for example, the trend of results on tests done at different times and places. In the future, data relating to hospital discharges and procedures also may be included. MedSouth expects this system to reduce duplicative testing and procedures, speed up treatment, decrease medical errors and adverse drug interactions, and facilitate communication and coordination of services among referring and referral physicians. Each practice will acquire the hardware necessary to use the system."
Sale of Services to Health Plans. The letter also states that "MedSouth proposes to offer the medical services of its participating members pursuant to this program to commercial third party payers, and to negotiate and execute contracts under which MedSouth members would provide services to health plan enrollees."
Nonexclusive Network. MedSouth will operate as a nonexclusive network. Its physicians will be available individually to negotiate and contract with customers not wishing to purchase the network services.
BOC Conclusion. The BOC concluded that "the proposed program appears to have the potential to improve the quality and effectiveness of health care services that are delivered to patients, and thus to provide important benefits to consumers. ... we have concluded that we would not recommend a challenge to MedSouth fully implementing the program and then offering it to payers on a collective basis. As long as doctors are, in fact, willing to deal individually on competitive terms with payers who do not want the package product, as you represent will be the case, significant anticompetitive effects appear unlikely."
SEC Files Insider Trading Suit
2/21. The Securities and Exchange Commission (SEC) filed a civil complaint in U.S. District Court (NDGa) against John Fitzgerald alleging violation of federal securities laws. The complaint alleges that Fitzgerald engaged in insider trading in CheckFree Holdings Corporation securities, in violation of Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. 240.10b-5.
The complaint alleges that "On February 2, 2000, an executive officer of CheckFree told Fitzgerald that CheckFree had agreed to merge with TransPoint, a joint venture of Microsoft Corporation, First Data Corporation, and Citibank". The complaint further alleges that "Between February 9, 2000, and February 15, 2000, Fitzgerald purchased a total of 5,857 shares of CheckFree stock on three separate days, including the day of the merger announcement, at an average price of $64.54 per share. ... On February 18, 2000, the third day after the merger was announced, Fitzgerald sold 5,000 shares at an average price of $82.085 per share."
This is D.C. No. 1:02-CV-489. See also, SEC release.
People and Appointments
2/21. The AT&T Board of Directors named two additional Board members: David Dorman, President of AT&T, and Charles Noski, the CFO. See, AT&T release.
2/21. Intel named both Douglas Busch and Sandra Morris to the position of Chief Information Officer. See, Intel release.
DOJ Recommends Approval of Verizon's Vermont 271 Application
2/21. The Department of Justice's (DOJ) Antitrust Division submitted an evaluation [PDF] to the Federal Communications Commission (FCC) recommending that the FCC approve Verizon's application to provide in region interLATA services in the state of Vermont, pursuant to 47 U.S.C. § 271.
The DOJ wrote that "Verizon has generally succeeded in opening its local markets in Vermont to competition and recommends approval of Verizon's application for Section 271 authority in Vermont ..." However, the DOJ urged the FCC to look carefully at Verizon's pricing of unbundled network elements, to determine whether they are cost based.
Verizon has already obtained FCC approval to provide long distance services in Massachusetts, Pennsylvania, Connecticut, and New York. This is CC Docket No. 02-7. See also, DOJ release and Verizon release.
California Supreme Court To Review DeCSS Case
2/20. The Supreme Court of the State of California ordered review of the Court of Appeal decision in DVD Copy Control Association v. Bunner, a case regarding California trade secret law, and the publication of the DeCSS program in web sites. The Santa Clara County Superior Court issued a preliminary injunction. On November 1, 2001, the California Court of Appeal (6th) issued its opinion reversing that injunction. See, Conference Results [PDF], February 20, 2002, at page 1.
Plaintiff. DVD is sometimes known as Digital Versatile Disc. CSS is a Content Scrambling System for DVD to protect intellectual property rights by means of encryption. The DVD Copy Control Association (DVDCCA) is a trade association of businesses in the movie industry. It controls the rights to CSS. DVDCCA licenses the CSS decryption technology to manufacturers of hardware and software for playing DVDs.
Defendant. DeCSS is a decryption tool that facilitates infringement. DeCSS consists of computer source code which describes a method for playing an encrypted DVD on a non CSS equipped DVD player or drive. It was written by Jon Johansen, a 15 year old Norwegian. Andrew Bunner published a copy of DeCSS on a web site.
Complaint. The DVDCCA filed a complaint in 1999 in California Superior Court against Andrew Brunner and others alleging violation of the California Uniform Trade Secrets Act in connection with their publishing copies of DeCSS in web sites, or linking to copies of DeCSS.
Preliminary Injunction. The Superior Court issued an order granting a preliminary injunction in January 2000 which enjoined defendants from "[p]osting or otherwise disclosing or distributing, on their web sites or elsewhere, the DeCSS program, the master keys or algorithms of the Content Scrambling system (‘CSS’), or any other information derived from this proprietary information."
The Court of Appeal. The Court of Appeal reversed. It reasoned that the DeCSS source code is speech entitled to First Amendment protection. It also noted that unlike copyright, trade secret protection is not secured by the Constitution. The Court of Appeal further reasoned that the Superior Court order constituted a prior restraint of pure speech.
Supreme Court. On February 20, 2002, the state Supreme Court agreed to hear the case. It did not issue an opinion; it did not set a date for oral argument. This is Supreme Court No. S102588.
Economist Estimates Costs of Nine States' Microsoft Remedy
2/21. Stan Liebowitz, Professor of Economics at the Management School of the University of Texas at Dallas, released a study [PDF] titled "Swiss Cheese Windows: Estimating Some Costs of the Nine State Remedy". He assesses the affect of the proposal of the nine states that have not joined in the Microsoft antitrust settlement. He asserts that requiring Microsoft to remove middleware code from Windows operating system could cost software producers as much as $80 Billion over three years.
Liebowitz wrote that "While these nine states have dropped the proposal to break-up Microsoft, they have instead proposed a remedy that pokes enough holes in the Windows platform to suggest the Swiss cheese analogy. One key element of their proposed remedy relates to the replacement of middleware components of the Windows operating system. These states would have Microsoft completely remove its middleware code from Windows at the request of a computer manufacturer or third party licensee. The effects of this proposed remedy, if it were implemented, would be felt by many in the information technology (IT) industry -- software developers, service firms, resellers, business users and consumers."
He concluded that "PC software producers would incur as much as $30 billion to $80 billion over the next three years in development, testing, marketing, and support costs. This extra cost is due to software developers having to adapt their software to new middleware they might not prefer because there is no safety net middleware they can always count on being available to all Windows computer users." Moreover, wrote Liebowitz, "Consumers pay either way -- higher prices, fewer choices of software, less certainty that software they buy will run properly."
George Bush and Jiang Zemin Talk Trade
2/21. President Bush and Chinese President Jiang Zemin held a joint press conference in Beijing, PR China. They addressed many topics, including trade. See, transcript.
President Jiang stated that "We have agreed to vigorously carry out bilateral exchanges and cooperation in such areas as economy and trade, energy, science and technology, environmental protection, the prevention of HIV/AIDS, and law enforcement, conduct strategic dialogue on regional economic and financial matters, and hold within the year meetings of the Joint Economic Commission, Joint Commission on Commerce and Trade, and Joint Commission on Science and Technology."
President Bush stated that "China as a full member of the WTO will now be a full partner in the global trading system, and will have the right and responsibility to fashion and enforce the rules of open trade. ... I believe equally dramatic changes lie ahead. These will have a profound impact not only on China itself, but on the entire family of nations. And the United States will be a steady partner in China's historic transition toward greater prosperity and greater freedom."
More News
2/21. Treasury Secretary Paul O'Neill gave a speech at the U.S. Chamber of Commerce in Washington DC regarding the administration's economic and budget priorities.
2/20. Lincoln Bloomfield, Assistant Secretary of State for Political Military Affairs, gave a speech regarding the State Department's portion of the export control system at an American Institute of Aeronautics and Astronautics (AIAA) conference. He is responsible for the State Department's Office of Defense Trade Controls (DTC). He also discussed the upgrading of the DTC's information technology infrastructure. He stated that "Our plan is to initiate a six month beta test of a fully electronic licensing program in the coming weeks ..."
2/21. The U.S. Court of Appeals (9thCir) issued its opinion [PDF] in US Cellular v. GTE Mobilnet, a case regarding interpretation of a 1982 limited partnership agreement pertaining to cellular telephone service in the Los Angeles area. The District Court held that the agreement had not been breached. The Appeals Court affirmed.
Friday, Feb 24
The House and Senate are in recess this week.
10:00 AM. The 21st Century IP Coalition, a group of companies and associations concerned with USPTO fees and funding, will hold a meeting. For information call Wayne Paugh in the IPO office at 202 521-6717.
Monday, Feb 25
The Senate will reconvene at 12:00 NOON following its Presidents Day recess. The House will not be in session.
Deadline to submit oppositions and responses 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]. This is CS Docket No. 01-348.
4:00 PM. Deadline for Members of the House to submit to the House Rules Committee proposed amendments to HR 1542, the Tauzin Dingell bill. See, Cong. Rec., Feb. 7, 2002, at H217.
6:30 PM. The National Press Club will host a panel discussion on distance learning. The topics to be discussed include copyright issues. The speakers will be Deborah Everhart ( and Martin Irvine (Georgetown University). Coffee reception starts at 6:30 PM. The program starts at 7:15 PM, and is scheduled to finish at 9:00 PM. Location: NPC, 529 14th St. NW, 13th Floor.
Tuesday, Feb 26
The House will reconvene at 2:00 PM following its Presidents Day recess.
12:15 PM. The Federal Communications Bar Association's (FCBA) Cable Practice Committee and the National Cable & Telecommunications Association (NCTA) will host a luncheon. The speaker will be Sarah Whitesell, Associate Bureau Chief of the FCC's Cable Services Bureau. The price to attend is $15. RSVP to Wendy Parish at Reservations and cancellations must be received by Friday, February 22. Location: 1724 Massachusetts Avenue, NW.
1:00 - 4:00 PM. Rep. Gil Gutknecht (R-MN), Vice Chairman of the House Science Committee, will hold a "Technology and Terrorism Demonstration". Location: Room 2318, Rayburn Building.
4:00 PM. The House Judiciary Committee's Subcommittee on Crime will mark up HR 3482, the "Cyber Security Enhancement Act of 2001". Rep. Lamar Smith (R-TX), the Chairman of the Subcommittee, and the sponsor of the bill, will likely offer an amendment in the nature of a substitute. Location: Room 2237, Rayburn Building.
Deadline to submit reply comments to the Federal Communications Commission (FCC) in the matter of Ambient's application for a determination that it is an exempt telecommunications company. It is an electric power company that also provides broadband Internet access and related information services over power lines to electrical outlets in residences. See, FCC release [PDF].
Wednesday, Feb 27
Day one of a two day conference titled "Combatting Cyber Attacks on Your Corporate Data". See, conference information page. Location: Omni Shoreham Hotel.
10:00 AM. The Senate Judiciary Committee will hold a hearing to examine sovereign immunity and the protection of intellectual property. Sen. Patrick Leahy (D-VT) will preside. Location: Room 226, Dirksen Building.
6:00 - 8:00 PM. The Federal Communications Bar Association (FCBA) will host a Continuing Legal Education (CLE) seminar titled "Unlicensed Operation Under FCC Rules". The price to attend is $60 for FCBA members, $50 for government and law student members, and $80 for non-members. Registrations and cancellations due by 12:00 NOON on Tuesday, February 26. To register, contact Wendy Parish at wendy Location: Capital Hilton Hotel, 16th & K Streets, NW.
Extended deadline to submit reply comments to the Copyright Office 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. See, notice in Federal Register, January 31, 2002, Vol. 67, No. 21, at Pages 4694 - 4695. This is Docket No. RM 2000-7B.
Thursday, Feb 28
Day two of a two day conference titled "Combatting Cyber Attacks on Your Corporate Data". See, conference information page. Location: Omni Shoreham Hotel.
12:15 PM. The Federal Communications Bar Association's Transactional Practice Committee will host a brown bag lunch on mass media transactions. RSVP to Sue Fischer at 202 776-2000. Location: Dow Lohnes & Albertson, 1200 New Hampshire Aveune, NW.
4:00 PM. Adam Mossoff (Professor at Northwestern University School of Law) will give a lecture titled "The Relevance of Natural Rights in Intellectual Property Today". For more information, contact Prof. Robert Brauneis at or 202 994-6138. Location: George Washington University Law School, 2000 H Street, NW.
6:30 - 8:30 PM. FCC Commissioner Michael Copps will speak at a Federal Communications Bar Association (FCBA) reception on "the value of mentoring in building a career." Location: Kelley Drye & Warren, 1200 19th Street, NW.
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