|9th Circuit Upholds Service
|3/20. The U.S.
Court of Appeals (9thCir) issued its opinion
Properties v. Rio International, a trademark
case involving Rule 4 alternative service of process by
e-mail, pre-trial discovery, and default issues. The Appeals
Court upheld the District Court order allowing service by
Rio Properties, Inc. (Rio) owns the RIO All Suite Casino
Resort, a major Las Vegas hotel and gambling casino. Rio
International Interlink (RII) is an offshore Internet gambling
operation that infringed Rio's trademarks in print advertising
and domain name registrations. RII has no physical location.
However, it does have a presence on web servers, and it has an
Rio filed a complaint in U.S.
District Court (DNev) against RII alleging various
trademark related claims. RII evaded service of process. The
District Court granted Rio's motion for alternate service of
process, pursuant to Rule 4(f), FRCP. Specifically, the Court
allowed service by e-mail at the address advertised by RII,
and by regular mail at the address provided by RII when
registering infringing domain names. RII subsequently provided
inadequate responses to discovery requests. It then failed to
comply with the Court's discovery orders. The Court granted
judgment by default to Rio. RII appealed.
The Appeals Court affirmed. On the issue of alternative
service of process, the Appeals Court found the e-mail and
regular mail service to be adequate.
As for service by e-mail, the Court wrote: "We
acknowledge that we tread upon untrodden ground. The parties
cite no authority condoning service of process over the
Internet or via email, and our own investigation has unearthed
no decisions by the United States Courts of Appeals dealing in
the federal courts. Despite this dearth of authority, however,
we do not labor long in reaching our decision. Considering the
facts presented by this case, we conclude not only that
service of process by email was proper -- that is, reasonably
calculated to apprise RII of the pendency of the action and
afford it an opportunity to respond -- but in this case, it
was the method of service most likely to reach RII."
"To be sure, the Constitution does not require any
particular means of service of process, only that the method
selected be reasonably calculated to provide notice and an
opportunity to respond."
The Court also wrote that "Although communication via
email and over the Internet is comparatively new, such
communication has been zealously embraced within the business
community. RII particularly has embraced the modern e-business
model and profited immensely from it. In fact, RII structured
its business such that it could be contacted only via its
email address. RII listed no easily discoverable street
address in the United States or in Costa Rica. Rather, on its
website and print media, RII designated its email address as
its preferred contact information."
The Appeals Court concluded that "RII had neither an
office nor a door; it had only a computer terminal. If any
method of communication is reasonably calculated to provide
RII with notice, surely it is email -- the method of
communication which RII utilizes and prefers. In addition,
email was the only court ordered method of service aimed
directly and instantly at RII, as opposed to methods of
service effected through intermediaries ... Indeed, when faced
with an international ebusiness scofflaw, playing hide and
seek with the federal court, email may be the only means of
effecting service of process. Certainly in this case, it was a
means reasonably calculated to apprise RII of the pendency of
the lawsuit, and the Constitution requires nothing more."
|1st Circuit Rules in PSLRA
|3/20. The U.S.
Court of Appeals (1stCir) issued its opinion
in Aldridge v. A.T. Cross, a securities class
action against a tech company that involves construction of
the heightened pleading requirements of the PSLRA.
Background. Cross is a publicly traded company that
make writing instruments. It also briefly produced pen based
computing products, without financial success. It stock price
suffered as a result. Michael Aldridge owned stock in Cross.
Complaint. Aldridge filed a complaint in U.S. District Court (DRI)
against Cross and four of its officers, and trusts which own a
part of Cross, alleging violation of federal securities laws
-- §§ 10(b) and 20(a) of the Securities Exchange Act of
1934 and Rule 10b5 thereunder. Aldridge sought class action
status. Defendants moved to dismiss for failure to state a
claim pursuant to Rule 12(b)(6), FRCP, and the PSLRA.
Private Securities Litigation Reform Act (PSLRA).
Congress passed the PSLRA, 15 U.S.C. § 78u-4, to insulate
defendants, and especially info and bio tech companies, from
abusive class action law suits. The PSLRA creates both a safe
harbor for forward looking statements, and a heightened
pleading requirement. Plaintiffs must "state with
particularity facts giving rise to a strong inference that the
defendant acted with the required state of mind."
Other Circuits. The pleading requirements of the PSLRA
have been interpreted, with conflicting conclusions, by
various circuits. See, for example, Janas v.
McCracken (In re Silicon Graphics Sec. Litig.), 183 F.3d
970 (9th Cir 1999); Novak
v. Kasaks, 216 F.3d 300 (2d Cir); In re Advanta
Corp. Sec. Litig., 180 F.3d 525 (3d Cir 1999); Bryant
v. Avado Brands, 187 F.3d 1271 (11th Cir 1999); Helwig
v. Vencor, (6th Cir 2001); Philadephia
v. Fleming (10th Cir, 2001); and Nathenson
v. Zonagen (5th Cir, 2001).
Holding. The District Court dismissed the complaint.
The Court of Appeals, following its precedent in Greebel
v. FTP Software, 194 F.3d 185 (1st Cir 1999), reversed and
remanded, except as to the trust defendants. The Appeals Court
stated that "the PSLRA did not mandate a particular test
to determine scienter and that this court would continue to
use its case by case fact specific approach". It further
stated that "plaintiff must show either that the
defendants consciously intended to defraud, or that they acted
with a high degree of recklessness" and that "the
plaintiff may combine various facts and circumstances
indicating fraudulent intent to show a strong inference of
scienter. As part of the mix of facts, the plaintiff may
allege that the defendants had the motive ... and opportunity
... to commit the fraud".
|6th Circuit Rules in
Copyright Registration Case
|6/20. The U.S.
Court of Appeals (6thCir) issued its opinion
v. Stevie Wonder, a case regarding copyright
registrations that deposit copies reconstructed from memory.
Derrick Coles applied for a copyright registration for a song
in 1990. The recording of the song deposited with his
application was made in 1990, from memory. Stevie Wonder had
produced recordings of the song in the early 1980s.
Coles filed a complaint in U.S.
District Court (NDOhio) in 1998 against Stevie Wonder and
others alleging copyright infringement. The District Court
held for defendants.
The Appeals Court affirmed. It wrote that "the 1990
recording must be viewed as a reconstruction only, not a copy,
and therefore he could not receive a valid copyright
registration in the 1982 version of the song." The Court
added that this "rule permits an artist to protect an
original song against potential infringement by registering
the original work with the Copyright Office immediately after
its creation by depositing either a recording of the song or a
written version of it with the copyright application; by
retaining a copy of a recording of the original song or
written version of it that dates from the time of creation for
deposit with a subsequent copyright application; or by making
the copy for deposit by referring to a recording or written
version of the original work." The Appeals Court relied
v. MTV Networks, 152 F.3d 1209 (9th Cir. 1998).
|Antitrust and Sports
|6/20. The U.S.
Court of Appeals (1stCir) issued its opinion
v. Major League Soccer, an antitrust case
involving sports leagues.
Soccer players filed a complaint in the U.S.
District Court (DMass) against Major League Soccer, its
member teams, and others, alleging violation of Sections 1 and
2 of the Sherman Act, 15 U.S.C.
§§ 1 and 2, and
Section 7 of the Clayton Act, 15 U.S.C.
The District Court granted summary judgment for defendants on
the Sherman § 1 and Clayton Act counts. After a 12 week
trial on the § 2 count, the jury returned a special
verdict leading to judgment in favor of defendants. The
players appealed. The Court of Appeals affirmed.
|Trade Promotion Authority
|3/20. Sen. Charles
Grassley (R-IA) and 25 other Republican Senators wrote a
letter to the Sen. Tom
Daschle (D-SD) and Sen.
Trent Lott (R-MS) requesting that a date certain be set
for a vote in the Senate on HR
3005, a bill to give the President trade promotion
authority. The House passed the bill on December 6, 2001. The Senate Finance
Committee then approved its version of the bill by a vote
of 18 to 3.
Appropriations Committee's Subcommittee on Commerce,
Justice, State, and the Judiciary held a hearing on the
proposed budget for FY 2003 for the Office of the U.S. Trade Representative (USTR).
Subcommittee Chairman Rep.
Frank Wolf (R-VA) stated that the USTR's proposed budget
($32 Million) is "miniscule", and hence, the hearing
ought to address policy, rather than appropriations. USTR Robert
Zoellick then testified that, among other things, the
Congress ought to enact legislation granting the President
trade promotion authority. Subcommittee members discussed
Russian chicken policy, Mexican tomatoes, the Cuban trade
embargo, U.S. sugar policy, and other issues.
|SEC Files Insider Trading
|3/20. The Securities and
Exchange Commission (SEC) announced that it filed a civil complaint
in U.S. District Court
(DAriz) against John Harbottle alleging insider trading in
violation of § 10(b) of the Exchange Act, 15 U.S.C.
§ 78j(b), and Rule 10b-5 thereunder, 17 C.F.R. §
240.10b-5. The complaint alleges that Harbottle traded in the
stock of Interact Commerce Corp. prior to the public
announcement that Interact would be acquired by Sage Group.
Harbottle was previously CFO of Interact. See also, SEC
|FEC Holds Hearing on
Political Activity on the Internet
|3/20. The Federal Election
Commission (FEC) held a hearing on its Notice of
Proposed Rulemaking (NPRM) [PDF] regarding political
activity on the Internet. The FEC did not vote on adoption of
its proposed rule changes.
This NPRM proposes three rule changes, each of which lists
specific political activities on the Internet which are
permissible. It would allow individuals to use their own
computer to engage in campaign activity on the Internet; it
would allow corporations and unions to place hyperlinks to
candidates and parties in their web sites; and, it would allow
corporations and unions to publish in their web sites press
releases announcing candidate endorsements. (This NPRM was
published at Federal Register, October 3, 2001, Vol. 66, No.
192, at pages 50358 - 50366.)
The FEC is the federal agency responsible for enforcing the
Federal Election Campaign Act (FECA). The FECA gives the FEC
authority to regulate campaign contributions and expenditures.
The NPRM proposes a new rule 117.2 that would state that
"the establishment and maintenance of a hyperlink from
the web site of a corporation or labor organization to the web
site of a candidate, political committee or party committee
for no charge or for a nominal charge would not be a
contribution or expenditure" within the meaning of the
The NPRM also proposes a new rule 117.3 that would provide
that "a corporation or labor organization may make a
press release announcing a candidate endorsement available to
the general public on its web site" under certain
Third, the NPRM proposes that "no contribution results
where an individual, without receiving compensation, use
computer equipment, software, Internet services or Internet
domain name(s) that he or she personally owns to engage in
Internet activity for the purpose of influencing any election
for Federal office, whether or not the individual's activities
are known to or coordinated with any candidate, authorized
committee or party committee."
The three rules state activities that are permissible.
However, witnesses, and at least one Commissioner, expressed
reservations about rule making in this area.
The FEC heard from three witnesses, Robert Bauer of the Perkins Coie Political
Law Group, Laurence Gold of the AFL-CIO, and James
Bopp of the James
Madison Center for Free Speech. These witnesses argued in
their formal comments, and in their oral testimony, that while
the proposed rule changes merely state activities that are
permissible and unregulated, these rules would give rise to
the implication that other political activities on the
Internet are impermissible, or regulated.
For example, Bauer stated in his formal comments submitted on
December 3, 2002 that "The unspoken yet unavoidable
conclusion is that, should the Commission adopt the NPRM,
Commission regulations would restrict all other uses of
Internet applications." He added in his oral testimony
that the adoption of these rules would be the first step in a
process of building a body of rules that will become too
complicated for individuals to understand without the
assistance of counsel. This, said Bauer, would lead many
individuals to simply forego engaging in political activity on
Gold stated that there are several other problems with the
proposed regulations. He stated that the proposed regulations
are not placed within the context of Reno v. ACLU, 521 U.S.
844 (1997), and that this leaves regulated parties in the
dark. He objected to the proposed rule allowing corporations
and unions to provide hyperlinks in their web sites. He argued
that the provision of a hyperlink should not be regulated, and
should not be subject to conditions. He added that a hyperlink
is merely like providing an address, and does not constitute
"anything of value" within the meaning of the FECA.
That is, he argued that "the item at issue is exempt to
begin with". He also stated that the proposed rule
regarding press releases announcing candidate endorsements is
Bopp argued in his prepared testimony that "the proposed
rules are underprotective of the free speech rights of those
engaged in the political marketplace of ideas. ... the
proposed rules should be withdrawn."
This NPRM is a part on an ongoing process at the FEC that
began years ago, and will likely continue for some time. On
November 1, 1999, the FEC issued a Notice
of Inquiry (NOI) that revealed that the FEC was
considering treating common activities such as email and
hyperlinking as political contributions or expenditures under
the FECA, and hence subject to FEC regulation, reporting
requirements, and/or contribution limits. See, TLJ story, FEC
to Review Campaign Activity on the Internet, November 8,
The FEC received about 1,300 comments in response to its NOI.
Almost all were critical of the FEC for considering regulation
of the Internet or freedom of speech. See, TLJ story, Citizens
Urge FEC to Stay Away from the Internet, January 12, 2000.
One of the events which preceded the FEC's NOI was the filing
of a complaint with the FEC regarding a personal web site
operated by Zach Exley. Benjamin
Ginsburg, an elections lawyer with the law firm of Patton Boggs,
who was also affiliated with the Bush presidential campaign,
filed a complaint
with the FEC on May 4, 1999. The complaint alleged that Zach
Exley's anti-Bush web site violated various technical rules
governing campaign money in federal elections. In particular,
he alleged that Exley violated the FECA by failing to file
campaign expenditure reports. Zach Exley's web site was
parodic, defamatory, immature, low budget, and highly critical
of George Bush. After receiving public comment in response to
its NOI, the FEC determined to take no action against Exley.
It released a letter
to Exley, and an FEC
narrative, on or about April 14, which stated that the FEC
would take "no action" against him. See, TLJ story, FEC
Takes No Action Against Anti Bush Web Site, April 20,
FEC Commissioner Sandstrom raised the issue of the meaning of
hyperlinks. The proposed regulations use the term, but provide
no definition. He stated that the technology is changing.
"We are using a technical term, ... we are are not sure
of its meaning." He questioned whether technology such as
Microsoft Smart Tags would constitute hyperlinks.
The hearing of March 20 was solely a hearing. The FEC did not
approve the regulations proposed in the NPRM. TLJ asked two
Commissioners and one FEC employee whether the FEC would act
before the November 2002 federal elections. One said that it
may not; one said "sure"; and one was non-committal.
Commissioner Brad Smith told TLJ during a break that several
years ago it appeared as though the Internet might play a
significant role in political campaigning. However, he added
that that has not happened, as candidates have continued to
use traditional media for advertising.
|Senate Subcommittee Holds
Another Hearing on Identity Theft
|3/20. The Senate
Judiciary Committee's Subcommittee on Technology,
Terrorism, and Government Information will held yet another
hearing on identity theft. Sen. Dianne Feinstein
(D-CA) presided. She is the sponsor of S 1399,
the Identity Theft Prevention Act of 2001.
See, prepared testimony of witnesses: Howard
Beales (Director of the Federal
Trade Commission's Bureau of Consumer Protection), Christine
Gregoire (Attorney General of Washington), Linda
Foley (Identity Theft Resource Center), Lou
Cannon (Fraternal Order of Police), and Sallie
Twentyman. See also, prepared
statement of Sen. Orrin
Hatch (R-UT), the ranking Republican on the Senate
|3/20. The Senate
Commerce Committee held a hearing on HR
1542, the Tauzin Dingell bill. Sen. Ernest Hollings
(D-SC), who opposes the bill, presided. Rep. Billy Tauzin
(R-LA) and Rep. John
Dingell (D-MI) testified. The House passed the bill on
February 27. See, prepared
statement of Rep. Dingell.
3/20 The National
Telecommunications and Information Administration (NTIA)
published in its web site information about its April 4-5 Spectrum
Summit, including the agenda.
3/20. The Bureau of Export
Administration (BXA) published a notice
in the Federal Register regarding rule changes pertaining to
the export of microprocessors. This rule change
implements President Bush's January 2, 2002 announcement that
the license exception level for exports of general purpose
microprocessors would be raised from 6,500 Million Theoretical
Operations Per Second (MTOPS) to 12,000 MTOPS. This rule
change is effective March 21, 2002. See, Federal Register,
March 21, 2002, Vol. 67, No. 55, at Pages 13091 - 13092.
3/20. The Federal Communications
Commission (FCC) published a notice
in the Federal Register containing rule changes that implement
its reorganization of the existing Cable Services and Mass
Media Bureaus into a new Media Bureau. These new rules go into
effect on March 25, 2002. See, Federal Register, March 21,
2002, Vol. 67, No. 55, at Page 13230 - 13235.
3/20. The Federal Communications
Commission (FCC) published a notice
in the Federal Register containing rule changes that implement
its reorganization by establishing a Media Bureau, a Wireline
Competition Bureau, and a Consumer and Governmental Affairs
Bureau, and by reorganizing its International Bureau. These
new rules go into effect on March 25, 2002. See, Federal
Register, March 21, 2002, Vol. 67, No. 55, at Pages 13215 -
3/20. The Senate passed HR
2356, the campaign spending bill. President Bush stated in
that he will sign the bill.
|House Passes Telecommuting
|The House passed HR 3924,
the "Freedom to Telecommute Act of 2002", by a vote
of 421-0. See, Roll
Call No. 71. This bill would permit the use of
telecommuting by employees of federal contractors in the
performance of contracts with executive agencies.
|Senators Introduce Net
|3/20. Sen. Ron Wyden
(D-OR) and Sen. George
Allen (R-VA) introduced the Science
and Technology Emergency Mobilization Act, a bill to
provide for the mobilization of technology and science experts
to respond quickly to the threats posed by terrorist attacks
and other emergencies. It would create a National Emergency
Technology Guard (NET Guard), a Technology Reliability
Advisory Board, and a center for evaluating antiterrorism and
disaster response technology within the National Institute of Standards
and Technology (NIST).
This NET Guard would bear some similarity to the National
Guard. However, it would be involved in such activities as
rebuilding "critical technology infrastructures in the
event of a future major terrorist attack, natural disaster, or
"This country has already mobilized the military, the
government and law enforcement to fight terrorism, but America
has yet to tap the tremendous technology and science talents
of the private sector," said Sen. Wyden in a release.
"This legislation invites a generation raised on
information technologies to help their fellow citizens when
"Mobilizing private sector technologists to help meet our
basic communications needs during times of crisis is one of
the most important capabilities necessary to properly respond
with coordinated efforts to protect our people and ensure our
homeland security," said Sen. Allen. "September 11
taught us at least two things: how technological improvements
to help our security are needed for State, local and federal
services, and the depth of the reservoir of American good will
to provide solutions."
The bill provides that its purpose is to create "teams of
volunteers with technology and science expertise, organized in
advance and available to be mobilized on short notice ... a
database of private sector equipment and expertise that
emergency officials may call upon in an emergency ... (and) a
national clearinghouse and test bed for innovative civilian
technologies relating to emergency prevention and
NET Guard. The bill provides that "the President
shall establish an office within the Executive Branch for the
purpose of mobilizing technology and science experts to form a
national emergency technology guard. The office shall be
headed by a Director, who shall be appointed by the President
by and with the advice and consent of the Senate. ... The
Director shall develop a procedure by which a group of
individuals (including individuals from a single company or
academic institution or from multiple such entities) with
technological expertise may form a team and apply for
certification as a national emergency technology response
team." The bill also addressed certification and
Technology Reliability Advisory Board. The bill would
also create a nine member Board to "provide guidance to
government, industry, and the public on technical aspects of
how to make technology infrastructure less vulnerable to
disruption", "make recommendations with respect to
what constitute good practices with respect to redundancy,
backups, disaster planning, emergency preparedness and
recovery of technological and communications systems",
and "coordinate its efforts, as appropriate, with the
Office of Homeland Security, the President’s Critical
Infrastructure Protection Board, and the National
Center for Civilian Homeland Security Technology
Evaluation. Finally, the bill would create at the NIST a
Center that would "serve as a national clearinghouse for
innovative technologies relating to security and emergency
preparedness and response".
|Thursday, March 21
|8:30 AM - 12:00 NOON. The law firm of Steptoe & Johnson and
The Open Group will host a workshop titled "Liability and
Information Assurance: The Role of Law, Regulation, and Self
Regulation". The workshop will focus on allocating
liability for breaches of information security, and the
various roles that law, regulation, and private contractual
agreements can or should play in the allocation of
responsibility for information security failures. RSVP to salbertaz @steptoe.com.
For more information, contact mschneck @steptoe.com.
Location: 1330 Connecticut Avenue, NW.
AM. The Senate
Appropriations Subcommittee's Subcommittee on Commerce,
Justice, State, and the Judiciary will hold a hearing on the
administration's proposed budget estimates for FY 2003 for the
Federal Bureau of Investigation, Immigration and
Naturalization Service, and the Drug Enforcement
ROOM CHANGE. 10:00 AM. The
Financial Services Committee will hold a hearing titled
"The Effects of the Global Crossing Bankruptcy on
Investors, Markets, and Employees". Location: Room 2128,
10:30 AM. Sen. George Allen
(R-VA) and other members of the Senate Republican High
Tech Task Force (HTTF) will hold an informal press
roundtable to discuss the HTTF policy agenda. Location: Room
366, Dirksen Building.
AM. The House
Commerce Committee will meet to mark up HR 3833, the
Dot Kids Implementation and Efficiency Act of 2002.
11:30 AM. Federal Trade
Commission (FTC) Chairman Timothy Muris will be the
keynote speaker at the Privacy & American Business Eighth
Annual Conference: Managing the New Privacy Revolution.
Location: Omni Shoreham Hotel, 2500 Calvert Street, NW.
12:15 PM. The Federal
Communications Bar Association's Transactional Practice
Committee will host a brown bag lunch on satellite and other international
telecommunications transactions. RSVP to Brian Madden at
202 416-6770. Location: Leventhal
Senter & Lerman, 2000 K Street, NW.
2:00 PM. The House
Government Reform Committee's Technology and Procurement
Policy Subcommittee will hold a hearing on titled "How
The Federal Government Can Transition From Old Economy Speed
to Become A Model for Electronic Government". Location:
Room 2154, Rayburn Building.
PM. The Senate
Commerce Committee's Subcommittee on Science, Technology,
and Space will hold hearing to examine federal research and
3:30 PM. Margaret
Radin (Stanford University Law School) will give a lecture
titled "Contract Today and Tomorrow: Binding Commitment
in the Networked World". Location: Georgetown University
Law Center, Faculty Lounge, 5th Floor, McDonough Hall, 600 New
Jersey Ave., NW.
8:00 PM. Deadline to submit applications to the National Telecommunications
and Information Administration (NTIA) for Technology Opportunity
Program (TOP) grants for FY 2002. See, notice
in Federal Register.
|Friday, March 22
|The House will not be in session.
9:00 AM. The House
Government Reform Committee's District of Columbia
Subcommittee will hold a hearing titled "Privacy v.
Security: Electronic Surveillance in the Nation's
Capital". Location: Room 2154, Rayburn Building.
10:00 AM - 1:00 PM. The Network
Reliability and Interoperability Council (NRIC) will hold
a meeting. See, FCC
notice [PDF] of March 14, and notice
in Federal Register. Location: Room TW-C305, FCC, 445 12th St.
|Monday, March 25
|The House will be in recess for the Spring District Work
Period. (The House will return on Monday, April 8). The Senate
will also be in recess for two weeks.
|Tuesday, March 26
|8:00 AM - 5:15 PM. The Michigan State University Quello
Communications Law and Policy Symposium will host its Third
Annual Rethinking Access conference. See, schedule of
speakers. Location: Willard Intercontinental Hotel.
|Wednesday, March 27
|11:00 AM. The Cato Institute
will host a panel discussion on spam. The speakers will be
Howard Beales (Federal Trade
Commission), Rebecca Richards (TRUSTe), Chris Hoofnagle (Electronic Privacy Information
Center), and Jerry Cerasale (Direct Marketing
Association). See, online
registration page. Lunch will follow the program.
Location: Cato, 1000 Massachusetts Ave., NW.
12:15 PM. The Federal
Communications Bar Association's (FCBA) Telecom
Competition Committee will host a brown bag lunch. The
speakers will be Jim Bird, head of the FCC's
transactions team, and other FCC representatives. RSVP to
Wendy Parish at wendy
@fcba.org. Location: FCC, 445 12th Street, SW, Eighth
Floor, Conference Room 1.
12:30 PM. Larry Thompson, Deputy Attorney General of
the U.S., will speak at the Heritage
Foundation. See, notice.
Location: 214 Massachusetts Ave NE.
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