Tech Law Journal Daily E-Mail Alert
April 12, 2002, 9:00 AM ET, Alert No. 409.
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House Committee Holds Hearing on USPTO Budget and Operations
4/11. The House Judiciary Committee's Subcommittee on Courts, the Internet, and Intellectual Property held an oversight hearing titled "The U.S. Patent and Trademark Office: Operations and Fiscal Year 2003 Budget".
Members of the Subcommittee and witnesses from the American Intellectual Property Law Association (AIPLA), the Intellectual Property Owners Association (IPO), and an employees' union used the occasion to criticize the continuing diversion of USPTO user fees to fund other government programs.
Rep. Howard Coble (R-NC), the Chairman of the Committee, said in his opening statement that "it pains me that we must continue to address the ongoing diversion of agency funds to other government programs." He added that "I am a realist, and realistically speaking, I do not believe that the appropriators will cede their authority to control PTO funding in the near future."
Rep. Zoe Lofgren (D-CA) stated that this amounts to a tax on invention. She added that "taxing the engine for the economy is a crazy thing to do." Rep. Darrell Issa (R-CA) questioned whether "it would be inappropriate to tax a constitutional obligation of government."
Rep. John Conyers (D-MI), the ranking Democrat on the full Committee, did not attend the hearing, but submitted a statement for the record. He stated that "the PTO takes no money from taxpayers; instead, it is fully funded by user fees and generates approximately $1 billion per year in revenues from those fees. This success has been an Achilles’ heel – appropriators take advantage of the revenues and treat the PTO as a cash cow, diverting hundreds of millions of dollars of fees every year for other government programs. That diversion is making it exceedingly difficult for the PTO to hire or even retain qualified examiners."
The AIPLA's Michael Kirk stated in his prepared testimony that "To date, approximately $700,000,000 in patent and trademark fees paid by USPTO users have been diverted from, rescinded, or made unavailable to the USPTO. The result is that longer delays in obtaining protection for valuable new technologies and marketing efforts are increasing the uncertainty in the marketplace, and are diminishing the value of the rights ultimately obtained."
Rep. Howard Berman (D-CA), the ranking Democrat on the Subcommittee, introduced humor into the discussion. He questioned USPTO Director James Rogan about the diversion of fees. Rogan, a Republican, was a member of the Subcommittee until he lost his re-election bid in 2000. Rep. Berman, a Democrat, asked Rogan whether the diversion of fees violates the Republican Contract with America. Rogan responded: "Thank you for asking that question."
Rogan offered the following explanation of the administration's FY2003 budget proposal for the USPTO in his prepared testimony: "It would give the USPTO the largest increase in its funding history. The President’s budget request would allow us to spend $1.365 billion of the fee revenues we expect to generate, an increase of $237 million or 21.2% over the FY 2002 enacted level. Of the $1.527 billion in revenues we expect to collect next year, $1.265 billion will be available to us in FY 2003. In addition, we will have access to $100 million carried forward from FY 2002. In effect, the President’s budget provides the USPTO with the equivalent of 100 percent of our traditional fees, plus an additional $45 million. This additional funding will enable us to: (1) hire 950 patent examiners; (2) transform trademarks to a fully electronic operation by 2004; and (3) implement the President's management agenda, including e-government, outsourcing, and workforce restructuring. In order to fund the USPTO's and the President's priorities, the budget request includes a one-time surcharge on both patent and trademark fees that will generate an additional $207 million in FY 2003. A 19.3 percent surcharge will apply to all patent statutory fees, including the filing, issue, maintenance, extension, appeal and revival fees.  Discounted fee rates for independent inventors and small businesses will remain in effect. For trademarks, a 10.3 percent surcharge will apply to the initial filing and post registration fees."
The hearing also focused on reducing patent pendency, improving patent quality, attracting and retaining patent examiners, electronic filings, and the possibility of converting the USPTO into a government corporation. See also, prepared testimony of Colleen Kelley (National Treasury Employees Union) and John Williamson (IPO).
EMC Sues Hitachi for Patent Infringement
4/12. EMC Corporation filed a complaint [PDF] in U.S. District Court (DMass) against Hitachi alleging patent infringement. EMC, a Massachusetts based provider of storage systems, software and services, alleges in its complaint that Hitachi infringed its U.S. Patent Nos. 6,101,497, 6,092,066, 5,544,347, 5,742,792, 5,909,692, and 6,108,748, which pertain to EMC's Symmetrix Remote Data Facility (SRDF) and TimeFinder software products, data migration, and the storage of mainframe data. EMC also filed a complaint [PDF] with the U.S. International Trade Commission. See also, EMC release.
USTR Zoellick Addresses IPR and IT in China
4/10. U.S. Trade Representative (USTR) Robert Zoellick held a press conference in Beijing, China, in which he addressed intellectual property rights (IPR), information technology, and other topics. See, transcript.
Regarding IPR, he had this to say. "But there's still a long way to go. One of the other points I've tried to make in this -- and this gives you a feel for the conversations I'm trying to have with people -- is that IPR is critically linked to investment because most companies coming in these days are now in knowledge industries. So, if you want to continue to be a location that draws foreign investment -- and that's the other thing you can see how they're using foreign business participation to help increase competitiveness -- it's in their own interest to do this. And then on top of that you take a society like China where I suspect that its intellectual property development is going to be pretty high, whether it be in software or other areas, and it's in their own interest. So, the idea is to share how it's in their self-interest to take action, but obviously to recognize that this is a problem that still needs a lot of work."
He also stated that "China has been trying to become a member of the Information Technology Agreement and it's very close to doing so. They had some restrictions on the ability to import IT products through requirements for end-user approval. We think we can work those out."
FCC Issues Order on Remand in CALEA Proceeding
4/11. The Federal Communications Commission (FCC) released an Order on Remand [59 pages in PDF] in the proceeding titled "In the matter of Communications Assistance for Law Enforcement Act". This is CC Docket No. 97-213. The order was adopted on April 5, but not released until April 11.
The Congress passed the CALEA in 1994 to allow law enforcement authorities to maintain their wiretap capabilities in new telecom devices, by requiring carriers to make their wireline, cellular, and broadband PCS equipment capable of certain surveillance functions. In August 1999 the FCC issued an Order implementing and expanding the requirements placed on carriers. Several parties filed Petitions for Review. On August 15, 2000 the U.S. Court of Appeals (DC Cir.) released its opinion vacating parts of the FCC order, and remanding the matter to the FCC. See, USTA v. FCC, 227 F.3d 450.
Trade Promotion Authority
4/11. Deputy Treasury Secretary Kenneth Dam released a statement regarding trade promotion authority. He stated that "One week ago, President Bush made a major statement calling on the United States Senate to bring Trade Promotion Authority (TPA) to the Senate floor by April 22. ... We view Trade Promotion Authority -- the ability for the executive branch to negotiate the details of trade agreements and then submit them to Congress for approval in a simple up or down vote as an essential legislative component of our free trade strategy."
SEC Sues Xerox for Financial Fraud
4/11. The Securities and Exchange Commission (SEC) filed a civil complaint in U.S. District Court (SDNY) against Xerox alleging that Xerox "defrauded investors" in violation of federal securities laws. The complaint states that "In a scheme directed and approved by its senior management, Xerox disguised its true operating performance by using undisclosed accounting maneuvers -- most of which were improper -- that accelerated the recognition of equipment revenue by over $3 billion and increased earnings by approximately $1.5 billion." The SEC also announced that it simultaneously entered into a settlement agreement with Xerox.
The complaint states that Xerox used "one-time actions," "one-offs," "accounting opportunities" and "accounting tricks". It states that "Xerox falsely portrayed itself as a business meeting its competitive challenges and increasing its earnings every quarter. Many of these accounting actions violated the established standards of generally accepted accounting principles (``GAAP´´). All of them should have been disclosed to investors in a timely fashion because, singly and collectively, they constituted a significant departure from Xerox's past accounting practices and misled investors about the quality of the earnings being reported."
Count 1 of the complaint alleges fraud in violation of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. Count 2 alleges violation of Section 13(a) of the Exchange Act and Exchange Act Rules 13a-1, 13a-13, and 12b-20, regarding the filing with the SEC of annual and quarterly reports. Count 3 alleges violation of Section 13(b) of the Exchange Act and Exchange Act Rule 13b2-1, regarding the keeping of books, records, and accounts.
The complaint requests an injunction against further violation of federal securities laws, an order requiring Xerox to restate its financial results for the periods 1997 through 2000, and an order "requiring Xerox's Board of Directors to appoint a special committee comprised entirely of outside directors which, within 30 days after the entry of such order, shall retain a qualified consultant, not unacceptable to the Commission, to perform a complete review of Xerox's material internal accounting controls and policies. ..."
The SEC also announced that "Without admitting or denying the allegations of the complaint, Xerox consented to the entry of a Final Judgment that permanently enjoins the company from violating the antifraud, reporting and recordkeeping provisions of the federal securities laws ... . In addition, Xerox agreed to pay a $10 million civil penalty and to restate its financial results for the years 1997 through 2000.  Xerox also agreed to have its board of directors appoint a committee composed entirely of outside directors to review the company's material internal accounting controls and policies." See. SEC release.
Anne Mulcahy, Xerox Chairman and CEO, stated in a release that "The settlement with the Commission effectively resolves Xerox's outstanding issues with the SEC ... Xerox today is a stronger company with a new management team that has taken all the right steps to turn our business around. With the SEC matters now behind us, we are better positioned to continue fortifying our business through operational improvements and future growth opportunities -- creating enhanced value for our customers and shareholders."
Ways and Means Committee Holds Hearing on Trade Relations with Russia
4/11. The House Ways and Means Committee's Subcommittee on Trade held a hearing on normal trade relations with Russia.
Peter Allgeier, a Deputy U.S. Trade Representative, stated in his prepared testimony that "A key part of Russia's broader economic reform program is achieving membership in the World Trade Organization (WTO). President Putin has made WTO membership and integration into the global trading system a top priority, seeing this as part of Russia's economic reform program that is aimed at achieving sustainable growth, promoting high tech industry, attracting international investment, and raising living standards for the Russian people."
Allgeier continued that, "Of course, intensifying our efforts to work with Russia on WTO accession does not mean that we will welcome Russia's entry into the WTO on any terms. We are negotiating with Russia to increase market access for U.S. exports -- in goods, services and agriculture -- and we will work with other WTO members and the Congress to ensure that the Russian Government implements the many rules of the WTO. Russia must follow through with its stated plans to make comprehensive changes to its legal and regulatory system in a number of areas ... protection of intellectual property. Some of these changes are already underway, but it is up to the Russian Government to pass new laws and ensure that the laws in place are fully enforced in a manner consistent with the international trading system."
He also stated that "In the services area, we are continuing to push hard for increased access in telecommunications, distribution and financial services."
Allgeier also addressed Jackson Vanik. He sated that "To close out the history books of the Cold War, the President has urged the Congress to finally end Jackson Vanik's application to Russia. The Jackson Vanik Amendment was drafted twenty-eight years ago to bring about free emigration. We believe that the Amendment has served this purpose in Russia -- Russia has been in full compliance with Jackson Vanik's emigration provisions since 1994. Continued application of Jackson Vanik, however, is an indication to Russia that they continue to be suspect and viewed as a Cold War adversary."
Alan Larson, Under Secretary of State for Economic, Business, and Agricultural Affairs, also testified in support of terminating the application of Jackson Vanik amendment of the 1974 Trade Act to Russia. See, prepared testimony.
Rep. Tom Lantos (D-CA) also testified in support of "graduating the Russia Federation from the provisions of the Jackson Vanik Amendment and granting it Permanent Normal Trade Relations (PNTR)." See, prepared testimony.
See also, prepared testimony of other witnesses: Thomas Pickering (U.S. Russia Business Council), Robert Liuzzi (Ad Hoc Committee of Domestic Nitrogen Producers), Wayne Wood (American Farm Bureau Federation), Harold Luks (NCSJ), and Richard Edlin (Greenberg Traurig).
Senate Judiciary Committee Holds Hearing on Judicial Nominees
4/11. The Senate Judiciary Committee held a hearing on several pending judicial nominees: Jeffrey Howard (to be a judge of the U.S. Court of Appeals for the First Circuit), Percy Anderson (U.S.D.C., Central District of California), John Walter (U.S.D.C., Central District of California), Michael Baylson (U.S.D.C., Eastern District of Pennsylvania), William Griesbach (U.S.D.C., District of Wisconsin), Joan Lancaster (U.S.D.C., District of Minnesota), and Cynthia Rufe (U.S.D.C., Eastern District of Pennsylvania).
These nominees received bipartisan praise from members of the Committee, and from Senators and Representatives who came to testify on their behalf.
Jeffrey Howard is a former U.S. Attorney for New Hampshire, former New Hampshire Attorney General, and failed gubernatorial candidate. Michael Baylson, who has been nominated for the Eastern District of Pennsylvania, is a partner in the law firm of Duane Morris. He represented GTE and Bell Atlantic in merger related proceedings before the Pennsylvania Public Utility Commission. The merged entity is now named Verizon.
John Walter, one of the two nominees for the Central District of California (Los Angeles), is a partner with the law firm of Walter Finestone & Richter. The other, Percy Anderson, is a partner with the law firm of Sonnenschein Nath & Rosenthal.
Sen. Orrin Hatch (R-UT), the ranking Republican on the Committee, also used the hearing to criticize delays by the Democratic majority in confirming President Bush's nominees. "The Committee's unwillingness to move more expeditiously on these nominations is exacerbating the circuit court vacancy crisis that exists in America today. Nearly one in five circuit court seats is vacant".
Friday, April 12
The House will not be in session.
The Supreme Court of the U.S. is on recess until Monday, April 15.
10:00 AM - 12:00 NOON. The American Enterprise Institute (AEI) will hold a panel discussion titled Is Open Source the Future of Software? The participants will be Robert Hahn (AEI Brookings), James Bessen (Research on Innovation), David Evans (NERA), Lawrence Lessig (Stanford University), and Brad Smith (Microsoft). See, AEI online registration page. Location: 1150 17th St., NW.
10:00 AM - 12:00 NOON. The National Commission on Libraries and Information Science (NCLIS) will hold an open business meeting. See, notice in Federal Register. Location: Conference Room, NCLIS Office, 1110 Vermont Avenue, NW, Suite 820.
The Federal Communications Bar Association (FCBA) will host a luncheon. The speaker will be Nancy Victory, Director of the NTIA. RSVP to Wendy Parish at wendy by Tuesday, April 9, at 5:00 PM.
Deadline to submit comments to the Federal Communications Commission (FCC) regarding its annual report to Congress regarding progress made in achieving the objectives of the Open Market Reorganization for the Betterment of International Telecommunications Act (ORBIT Act), 47 U.S.C. § 646. The next FCC Orbit Act report is due to Congress on June 15, 2002. See, FCC notice [PDF].
Monday, April 15
Extended deadline to submit comments to the Federal Trade Commission (FTC) regarding proposed changes to its Telemarketing Sales Rule (TSR). See, notice in Federal Register. See also, FTC release.
Tuesday, April 16
9:30 AM. The Senate Commerce Committee will hold a hearing to examine the Technology Administration and the National Institute of Standards and Technology (NIST), including the Advanced Technology Program. Location: Room 253, Russell Building.
10:00 AM. The Senate Health, Education, Labor, and Pensions Committee will hold a hearing to examine medical privacy issues. Location: Room 216, Hart Senate Office Building.
6:00 - 8:15 PM. The Federal Communications Bar Association (FCBA) will host a CLE seminar titled U.S. Spectrum Policy: Convergence or Co-Existence? This is Part II of a two part series.
6:30 - 8:30 PM. The IP Law Forum of the Women's Bar Association of DC and the IP Section of the District of Columbia Bar will host a panel discussion and reception titled "What Judges Want: Effective Advocacy in Technology Cases". The speakers will be Judge Paul Michel of the U.S. Court of Appeals (FedCir), Judge Yvette Kane of the U.S. District Court (WDPenn), and Judge Marvin Garbis of the U.S. District Court (DMd). The price to attend is $40. For more information, contact the WBA at 202 639-8880. Location: Auditorium, The Hirshhorn Museum, 7th Street and Independence Ave., SW.
Wednesday, April 17
10:00 AM. 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 Securities and Exchange Commission (SEC). Location: Room H-309, The Capitol.
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 Federal Communications Commission (FCC). Location: Room H-309, The Capitol.
9:00 AM. Oral argument on cross motions for summary judgment in Swedenburg v. Kelly, a constitutional challenge by a Virginia winery and wine consumers to New York State's liquor control law, which prohibits out of state wineries from selling directly to New York residents, including via the Internet. Location: U.S. District Court, Southern District of New York, New York, NY.
9:30 AM - 12:00 NOON. The U.S. International Telecommunication Advisory Committee (ITAC), which advises the Department of State on policy and technical issues with respect to the International Telecommunication Union (ITU), will meet to prepare for the June 2002 meeting of the Telecommunication Sector Advisory Group (TSAG). Location: Alliance for Telecommunications Industry Solutions (ATIS), 1200 G Street NW, Suite 350.
10:00 AM. The FEC will hold a hearing regarding voting system standards. See, notice in Federal Register.
12:15 PM. The FCBA's Mass Media Committee will host a brown bag lunch. The speaker will be Jane Mago, FCC General Counsel. RSVP to: kdole Location: 1st Floor, NPR, 635 Mass Ave., NW, Washington DC.
12:15 PM. The FCBA's Online Communications Committee will host a brown bag lunch. The speaker will be Scott Marcus, Senior Advisor for Internet Technology at the Federal Communications Commission's (FCC) Office of Plans and Policy. The title will be "Broadband, When? -- A View from OPP". RSVP to Scott Harris at Location: Wiley Rein & Fielding, 1776 K St., NW, 4th Floor Conference Room.
2:00 - 3:00 PM. The FCBA's International Practice Committee will host an event titled "Today's International Issues". The speaker will be FCC Commissioner Michael Copps. RSVP to Scott Harris. Location: FCC, 445 12th Street, SW.
Thursday, April 18
8:30 AM. Rep. Joe Knollenberg (R-MI) will speak at a breakfast hosted by the Greater Washington Board of Trade's Federal PAC and CapNet. RSVP to either JaimeHjort or 202 857-5909. Location: Greater Washington Board of Trade Board Building, 1129 20th Street, NW, Suite 200.
8:30 AM - 4:00 PM. The Progress and Freedom Foundation will host an event titled "Digital Online Content: Creating a Market that Works". James Rogan, Undersecretary of Commerce for Intellectual Property, will speak. Location: J.W. Marriott Hotel, 1331 Pennsylvania Ave, NW.
9:30 AM. The FCC will hold a meeting. See, agenda. Location: FCC, 445 12th Street, SW, Room TW-C05 (Commission Meeting Room).
9:30 AM - 12:00 NOON. The American Enterprise Institute (AEI) will host a pair of panel discussions titled "Gene Related Inventions: Evolving Patent Standards and Their Consequences". The first panel will address "Science, Economics, and Patent Law". The panelists will be Lee Bendekgey (Incyte Genomics), Iain Cockburn (Boston University), and Rochelle Seide (Baker Botts). The second panel will be titled "Perspectives from the Patents and Trademark Office and Capitol Hill". The panelists will be John Doll (USPTO), Chris Katopis (House Subcommittee on Courts, the Internet, and Intellectual Property), Maureen Mellody (office of Rep. Howard Berman (D-CA)), and Gerald Mossinghoff (Oblon, Spivak). See, agenda and online registration page. Location: 12th Floor, AEI, 1150 17th Street, NW.
Day one of a two day ALI-ABA course for inside and outside counsel titled "Trademarks, Copyrights, and Unfair Competition for the General Practitioner and the Corporate Counsel". The price to attend is $685. See, online brochure. Location: Loews L'Enfant Plaza.
Day one of a two day conference titled "IT Law and the Response to Terror: New Laws, Rules and Strategies". The event is hosted by the Computer Law Association and the FCBA. See, online brochure [PDF]. Location: Monarch Hotel, 2401 M Street NW.
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