Tech Law Journal Daily E-Mail Alert
March 14, 2002, 9:00 AM ET, Alert No. 388.
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House Passes Class Action Reform Bill
3/13. The House amended and passed HR 2341, the Class Action Fairness Act of 2001, on a largely party line vote of 233 to 190. See, Roll Call No. 62.
The House agreed to an amendment [PDF] offered by Rep. Melissa Hart (R-PA) which requires the Judicial Conference of the U.S. to write a report on class action settlements in the federal courts. The House also agreed to an amendment [PDF] offered by Rep. Ric Keller (R-FL) which requires disclosure of the full amount of attorney's fees charged by the plaintiffs' attorneys.
The bill would add new sections to Title 28 to ensure that class members are treated fairly in settlements. It provides that if a settlement provides that the class members would receive non cash benefits, the court must make "a written finding that, the settlement is fair, reasonable, and adequate for class members".
The bill would also amend 28 U.S.C. § 1332, regarding diversity of citizenship. It would provide federal jurisdiction in certain class actions where "any member of a class of plaintiffs is a citizen of a State different from any defendant" and the aggregated claims exceed $2 Million. However, it would also provide an exception when "the substantial majority of the members of the proposed plaintiff class and the primary defendants are citizens of the State in which the action was originally filed".
The bill is opposed by plaintiffs' trial lawyers. It faces stronger opposition in the Senate.
7th Circuit Comments on Jury Verdict in mySimon Trademark Case
3/13. The U.S. Court of Appeals (7thCir) issued its opinion in Simon Property Group v. mySimon, a Lanham Act case brought by a bricks and mortar real estate manager against a comparison shopping web site. The Appeals Court dismissed an appeal brought by the real estate manager on the grounds that the matter appealed is not yet final. However, the Appeals Court discussed in detail the facts of the case. It referred to the weakness of the plaintiff's case, and the strength of the defendant's case. It added that the plaintiff's lawyer did "a whale of a selling job" to the jury.
Background. Simon Property Group (SPG) is a Delaware corporation based in Indianapolis, Indiana. It is a real estate investment trust that owns and manages retail real estate, primarily shopping malls. mySimon is a California corporation based in San Francisco. It is now owned by CNET Networks. It provides web based comparison shopping.
District Court. SPG filed a complaint in U.S. District Court (SDInd) against mySimon alleging violation of the Lanham Act and various state statutes. SPG alleges that it owns exclusive rights to the "Simon" name, and that "mySimon",, and a cartoon character named "Simon" infringe its rights. SPG initially sought a temporary restraining order (TRO), and preliminary injunction, barring defendant's use of the "Simon" names.
The District Court denied the motion for TRO at the outset, and SPG did not pursue the matter. The Indianapolis jury returned a verdict in favor of the Indianapolis based SPG on liability under the Lanham Act. It also awarded SPG $11.5 Million in profits, $5.3 Million in corrective advertising, and $10 Million in state law punitive damages.
SPG then sought a permanent injunction. mySimon moved for judgment as a matter of law and a new trial. The District Court reduced damages to $10 in nominal damages, and $50,000 in punitive damages. The District Court ordered a new trial on the corrective advertising issue. However, the District Court did not overturn the verdict on liability. The District Court crafted an injunction order that required mySimon, after one year, to transfer its domain name to SPG and to stop using the "Simon" name. However, the District Court also stated that the injunction would not issue until entry of final judgment (which has not taken place, because the new trial has yet to held).
SPG promptly appealed the District Court's non entry of a permanent injunction, and the one year delay regarding the use of the name "Simon".
Appeals Court. A unanimous three judge panel dismissed the appeal on the grounds that there was no final order to appeal. It held that the District Court had merely postponed the relief requested, not denied it. The Appeals Court also noted that SPG had abandoned its motion for a preliminary injunction after it had lost its motion for a TRO, and that therefore, SPG could not show the requisite element of irreparable harm.
However, the Court of Appeals also discussed the facts of the case in some detail, and commented upon the jury verdict. This unusual dicta may portend how the Appeals Court may rule if the case is properly brought before it on all issues.
The Appeals Court noted of SPG, that "Unlike mySimon, it does not offer comparison shopping services on the Internet." It also noted that "no other American property management company had ever attempted to ``brand´´ any of its shopping malls", and that SPG did not attempt to brand its name until after mySimon began operations. It also wrote that "SPG's advertising agency reported that brand recognition for the ``Simon´´ name was ``almost nonexistent´´ before 1999."
The Appeals Court further reviewed the evidence. It wrote that "SPG won a verdict despite presenting relatively weak evidence that its ``Simon´´ name had attained secondary meaning or that consumers were likely to confuse SPG with mySimon. For example, the vast majority of SPG's ``consumer´´ witnesses who testified that they had heard of SPG were professionals whose jobs required them to be aware of the company. They included employees of SPG's advertising agency, real estate analysts who covered SPG, executives of the National Association of Real Estate Investment Trusts (of which SPG is a member), and members of a law firm that represents SPG. Indeed, because SPG's witnesses were so unrepresentative of the average consumer, the district court termed their testimony regarding secondary meaning ``so slight as to amount to almost nothing.´´ Additionally, the district court noted, ``Simon´´ is an extremely common first name and surname, weakening SPG's argument that mySimon's use of the name is likely to confuse consumers. In contrast, mySimon presented substantial survey evidence demonstrating that there was no likelihood of confusion between mySimon and SPG." (Parentheses in original.)
The Appeals Court also wrote that "Despite the relative strength of mySimon's evidence and the relative weakness of SPG's, SPG's lawyer must have done a whale of a selling job as the jury awarded the company $11.5 million in mySimon's ``profits´´ (although mySimon had not yet earned any profits), $5.3 million in corrective advertising (although SPG had not engaged in any corrective advertising) ..." (Parentheses in original.)
The Appeals Court, in conclusion, stated that the item being appealed was not a definitive disposition of the matter because, "The judge, as the case continues, is free to revise his ruling at any time before entering final judgment." Perhaps, the District Court judge is also free to revise his ruling in light of the Appeals Court's comments.
GAO Reports on IT at Veterans Administration
3/13. The General Accounting Office (GAO) released a report [PDF] titled "VA Information Technology: Progress Made, but Continued Management Attention Is Key to Achieving Results". The report, which was prepared for the House Veterans' Affairs Committee's Subcommittee on Oversight and Investigations, concludes that "many aspects of VA's IT environment remain troublesome".
The report states that "Significant work, nonetheless, is still required before the department will have a functioning enterprise architecture in place for acquiring and utilizing information systems across VA in a cost effective and efficient manner."
The report states further that the Veterans Administration "continues to report pervasive and serious information security weaknesses. Thus far, its actions toward establishing a comprehensive computer security management program have not been sufficient to ensure that the department can protect its computer systems, networks, and sensitive veterans health care and benefits data from unnecessary exposure to vulnerabilities and risks."
Bills Introduced
3/12. Rep. Tom Davis (R-VA) and Rep. Dan Burton (R-IN) introduced HR 3924, a bill to authorize telecommuting for federal contractors. It was referred to the House Government Reform Committee, of which Rep. Burton is the Chairman.
3/12. Rep. Tom Davis (R-VA) and Rep. Dan Burton (R-IN) introduced HR 3925, a bill to establish an exchange program between the federal government and the private sector in order to promote the development of expertise in information technology management. It was referred to the House Government Reform Committee.
3/11. Sen. Richard Lugar (R-IN) introduced S 2005, a bill to authorize the negotiation of free trade agreement with the Republic of the Philippines. It was referred to the Senate Finance Committee.
Compuware Sues IBM
3/13. Compuware filed a complaint [50 pages in PDF] in U.S. District Court (EDMich) against IBM alleging copyright infringement, violation of federal and state antitrust laws, and other claims.
Compuware is a Michigan corporation with its principle place of business in Farmington Hills, Michigan. It provides software products and services for the testing, development, and management of mainframe computers, distributed computer networks, and Web based systems. In particular, Compuware develops and sells software tools that work with IBM's mainframes and software.
The complaint alleges that "IBM has copied and misappropriated portions of Compuware's mainframe software tools, and wrongfully used Compuware's technology to develop competing products, including, among other things, File Manager."
The complaint further alleges that "IBM is also using its monopoly power in the sale of mainframe computers and related software to subvert competition on the merits. In particular, IBM is (a) denying critical information to Compuware and others in an effort to undermine their development efforts, (b) tying the licensing of its monopoly software to mainframe software tools licensed in competition with Compuware and other ISVs so that customers are forced to obtain mainframe software tools from IBM, and (c) using its position operating the information technology departments of thousands of major corporations to steer their purchases of the mainframe software tools."
Count 1 alleges direct and contributory copyright infringement under 17 U.S.C. § 101 et seq. Compuware alleges, for example, that "IBM knowingly and willfully copied both the object code and source code of Compuware's mainframe software tools, namely, the File-AID and Abend-AID IMS computer programs in order to develop IBM's new product line. IBM's File Manager program includes several modules that appear to have been literally copied from Compuware's source code or are substantially similar thereto." Compuware adds that IBM even copied its "bugs".
Count 2 alleges misappropriation of trade secrets under Michigan state law. Count 3 alleges intentional interference with contractual relations.
Count 4 alleges unlawful tying in violation of § 1 of the Sherman Act, 15 U.S.C. § 1. Count 5 alleges monopoly leveraging in violation of § 2 of the Sherman Act, 15 U.S.C. § 2. Count 6 alleges attempts to monopolize in violation of § 2 of the Sherman Act.
Count 7 alleges tortious interference with business expectancy.
Counts 7 through 15 allege unfair competition under the laws of the states of California, Connecticut, Nebraska, North Carolina, South Carolina, Tennessee, Utah, and Washington.
Compuware is represented by the Palo Alto law firm of Fenwick & West, and by the Detroit law firm of Honigman Miller Schwartz & Cohn. This is D.C. No. Case No. 02-70906. See also, Compuware release.
1st Circuit Rules in Cable Franchising Case
3/13. The U.S. Court of Appeals (1stCir) issued its opinion in Nepsk v. Town of Houlton, a case regarding a cable franchising authority's refusal to renew a cable TV franchise.
Background. Nepsk filed an application to renew its cable television franchise -- late. The Town of Houlton, Maine, decided not to renew the franchise, in part because Nepsk did not plan to offer Internet access services. Rather, Houlton decided to solicit competitive bids. It awarded the franchise to a competitor of Nepsk.
Complaint. Nepsk filed a complaint in U.S. District Court (DMaine) alleging violation of the Cable Communications Policy Act of 1984, as amended by the Cable Television Consumer Protection and Competition Act of 1992 and the Telecommunications Act of 1996.
Count I of the complaint alleged violation of the renewal procedures set forth at 47 U.S.C. §§ 546(a)-(g). Count II alleged that Houlton had conditioned the renewal of Nepsk's franchise on its willingness to provide high speed internet service to its subscribers in violation of 47 U.S.C. § 541(b)(3)(D), which prohibits franchising authorities from requiring cable operators to provide certain "telecommunication service[s]" as a condition of a franchise award, and 47 U.S.C. § 544(e), which states that "[n]o State or franchising authority may prohibit, condition, or restrict a cable system's use of any type of ... transmission technology." Count III alleged that Houlton unreasonably refused to award Nepsk's franchise in violation of 47 U.S.C. § 541(a)(1).
District Court Decisions. The District Court granted judgment on the pleadings to Houlton on Counts I and II. It granted summary judgment to Houlton on Count III. Nepsk appealed.
Court of Appeals. The Court of Appeals affirmed. However, the Appeals Court's opinion, as well as the decisions of the District Court, were based, in part on procedural facts peculiar to this case. Nepsk filed its franchise renewal application late, and failed to file a timely opposition to the motion for judgment on the pleadings.
Greenspan Addresses High Tech Investment
3/13. Federal Reserve Board Chairman Alan Greenspan electronically delivered a speech to the Independent Community Bankers of America in Honolulu, Hawaii, titled "The U.S. Economy". He addressed, among other things, investment in high tech, and its effect on the economy.
He stated that "firms' choices about the types of investments to make matter crucially for how much labor productivity ultimately is boosted. In the late 1990s, for example, businesses allocated much more of their investment dollars toward high tech, higher return capital than they did in earlier years. Businesses made this shift and are continuing to move further in that direction in response to the extremely rapid decline in the prices of high tech assets and the new opportunities that these assets have afforded. According to one set of calculations, of the roughly 2-1/2 percent annual rate of increase in output per hour, or labor productivity, between 1995 and 2001, perhaps a quarter of that growth could be attributed to on-going shifts in the composition, as distinct from the dollar level, of capital."
Greenspan also stated that "Improvements in the quantity and quality of our workforce’s education enhance workers' skills and contribute importantly to the growth of labor productivity. But far more important over the past six years have been the gains in output attributable to technological innovation, especially information technology and improved managerial organization ..."
PPI Rates States on Laws Affecting Internet
3/13. The Progressive Policy Institute (PPI), a Democratic think tank, released a report [33 pages in PDF] titled "The Best States for E-Commerce". The report measures how state laws, regulations, and administrative actions support or hinder Internet use. It found that the best states are Oregon, Utah, Indiana, Louisiana, and Iowa. It found that the worst states are California, Alabama, New Mexico, and South Carolina.
The report states that "state government policies can have a significant positive or negative impact on the growth of the Internet in their states. Through their regulations on individuals, industry sectors, or professions, states regulate the ease, and in some cases, the ability of Internet users to buy certain goods and services online. States control tax rates on Internet access. Through their own actions to digitize state government, they control how much and how easy it is for Internet users to conduct online transactions with their government. And finally, they determine if state residents can engage in legally binding online transactions by whether the state recognizes the legal validity of digital signatures."
The report scored each state on several criteria, including their laws affecting Internet sales and transactions involving contact lenses, prescription drugs, wine, mortgages auctioneering, insurance, and cars. The report also rated states on access taxes, e-government, telemedicine, and the Uniform Electronic Transactions Act.
The report states that "We hope our findings encourage states to examine carefully their laws, particularly those designed to protect incumbent bricks and mortar companies against e-commerce competitors, with an eye toward giving their citizens more choices and options as Internet users."
The report was written by Robert Atkinson and Thomas Wilhelm. See also, PPI release.
Thursday, March 14
The House will meet at 10:00 AM for legislative business.
9:00 AM. The House Judiciary Committee's Subcommittee on Courts, the Internet, and Intellectual Property will hold a hearing titled "Patent Law and Non-Profit Research Collaboration." Location: Room 2141, Rayburn Building.
9:30 AM. The FCC will hold a meeting. See, agenda. Location: FCC, 445 12th Street, SW, Room TW-C05.
10:00 AM. The Senate Judiciary Committee will hold a hearing titled "Competition, Innovation, and Public Policy in the Digital Age: Is the Marketplace Working to Protect Digital Creative Works? "The witnesses will be Richard Parsons (AOL TW), Craig Barrett (Intel), Jonathan Taplin (Intertainer), Joe Kraus, and Justin Hughes (UCLA Law School). Location: Room 226, Dirksen Building.
10:00 AM - 12:00 NOON. The House Science Committee's Subcommittee on Environment, Technology, and Standards will hold a hearing titled "Technology Administration: Review and Reauthorization". The witnesses will be Phillip Bond (Under Secretary of Commerce for Technology), Arden Bement (Director of the NIST), Michael Wojcicki (Modernization Forum), Birgit Klohs (Right Place Program), and Christopher Hill (George Mason Univ.). Location: Room 2318, Rayburn Building.
11:00 AM. FTC Chairman Timothy Muris will speak at the 6th Annual Georgetown University Law Center (GULC) Corporate Counsel Institute. Location: GULC, 600 New Jersey Avenue, NW.
12:00 PM. The FCBA will host a luncheon. The speaker will be Craig McCaw, Ch/CEO of Teledesic. A reception will begin at 12:00 NOON, followed by lunch at 12:30 PM. RSVP to Wendy Parish at wendy by 12:00 NOON on Tuesday, March 12. Location: Capital Hilton Hotel, 16th and K Streets, NW.
2:00 PM. The Senate Judiciary Committee will hold a business meeting. See, agenda. Location: Room 106, Dirksen Building.
Friday, March 15
The House will not be in session.
9:00 AM. The AFL-CIO's Department for Professional Employees will host a panel of speakers who will advocate retention of the FCC's newspaper and broadcast cross ownership rules. FCC Commission Michael Copps will speak. See, AFL-CIO notice. For more information, contact Leandra Kennedy at lkennedy or 202 638-0320. Location: National Press Club, Holeman Lounge, 529 14th St. NW, 13th Floor.
9:30 - 11:00 AM. The Progressive Policy Institute (PPI) will host a panel discussion on the impact of new homeland security efforts on privacy issues. The panelists will be Robert Atkinson (PPI), Shane Ham (PPI), and Jim Dempsey (Center for Democracy and Technology). RSVP to 202 547-0001. Location: PPI, 600 Pennsylvania Ave., SE, Suite 400.
11:00 AM. FTC Chairman Timothy Muris will give the keynote address at the Consumer Federation of America's Assembly. Location: Washington Plaza Hotel, 10 Thomas Circle, NW.
Deadline to submit comments to the FCC on the World Radiocommunication Conference Advisory Committee's (WRC-03 Advisory Committee) recommendations of February 6, 2002, regarding the 2003 World Radiocommunication Conference (WRC-03). See, notice [PDF].
Monday, March 18
9:30 AM. The U.S. Court of Appeals (DCCir) will hear oral argument in Costa de Oro TV v. FCC, No. 01-1153. Judges Ginsburg, Henderson and Tatel will preside. Location: 333 Constitution Ave. NW.
12:00 NOON. Deadline to submit requests to USTR to testify orally at its April 1 hearing negotiation of a U.S. Singapore Free Trade Agreement. See, notice in the Federal Register.
Deadline to submit comments to the FCC in response to its notice of proposed rulemaking (NPRM) regarding its unbundling analysis under § 251 of the Communications Act and the identification of specific unbundling requirements for incumbent local exchange carriers (ILECs). The FCC adopted this NPRM at its December 12 meeting. This is CC Docket No. 01-338. See, notice in the Federal Register. Note: SBC submitted a request for extension of deadline [PDF] on March 11.
Tuesday, March 19
9:30 AM - 4:30 PM. The Federal Trade Commission (FTC) and the Department of Justice (DOJ) Antitrust Division will continue their joint hearings titled "Competition and Intellectual Property Law and Policy in the Knowledge Based Economy." From 9:30 AM until 12:00 NOON, there will be presentations on "Business Perspectives on Patents". From 1:30 until 4:30 PM, there will be presentations on "Business Perspectives on Patents: Biotech and Pharmaceuticals. See, agenda. Location: Room 432, FTC, 600 Pennsylvania Ave., NW.
10:00 AM. The Senate Appropriations Committee's Subcommittee on Commerce, Justice, State, and the Judiciary will hold a hearing on the proposed budget estimates for Fiscal Year 2003 for the FTC, and other agencies. Location: Room 138, Dirksen Building.
Wednesday, March 20
9:30 AM. The Senate Commerce Committee will hold a hearing on "competition in the local telecommunications marketplace". Sen. Ernest Hollings (D-SC) will preside. Location: Room 253, Russell Building.
9:30 AM - 4:30 PM. The Federal Trade Commission (FTC) and the Department of Justice (DOJ) Antitrust Division will continue their joint hearings titled "Competition and Intellectual Property Law and Policy in the Knowledge Based Economy." From 9:30 AM until 12:00 NOON, there will be presentations on "Business Perspectives on Patents: Hardware and Semiconductors". From 1:30 until 4:30 PM there will be presentations on "Business Perspectives on Patents: Software and the Internet". See, agenda. Location: Room 432, FTC, 600 Pennsylvania Ave., NW.
10:00 AM. The Senate Judiciary Committee's Subcommittee on Technology, Terrorism, and Government Information Subcommittee will hold hearings to examine identity theft and information protection. Sen. Dianne Feinstein (D-CA) will preside. Location: Room 226, Dirksen Building.
CANCELLED. 10:00 AM. The FCC's Technological Advisory Council will hold a meeting. See, notice in Federal Register, February 26, 2002. See, cancellation notice in Federal Register. The next meeting is April 26; see, FCC notice of March 12.
12:15 PM. The FCBA's Cable Committee will host a luncheon. The speaker will be Catherine Bohigian, Legal Advisor to FCC Commissioner Kevin Martin. The price to attend is $15. RSVP to Wendy Parish at wendy by 5:00 PM on March 18.
2:00 PM. The House Appropriations Committee's Subcommittee on Commerce, Justice, State, and the Judiciary will hold a hearing on the proposed budget for FY 2003 for the USTR.
6:00 - 8:00 PM. The FCBA's will host a Continuing Legal Education (CLE) seminar titled "Telecommunications 201". Location: Capital Hilton Hotel, 16th and K Streets, NW.
People and Appointments
3/13. Federal Trade Commission (FTC) Commissioner Mozelle Thompson was elected Chair of the OECD's Committee on Consumer Policy. See, FTC release.
3/13. President Bush nominated David Gross for the rank of Ambassador during his tenure of service as Deputy Assistant Secretary for International Communications and Information Policy in the Bureau of Economic and Business Affairs and U.S. coordinator for International Communications and Information Policy. See, White House release.
3/12. The Senate confirmed Ralph Beistline to be a U.S. District Judge for the District of Alaska.
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