Tech Law Journal Daily E-Mail Alert
May 7, 2002, 9:00 AM ET, Alert No. 426.
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EU to Impose Tax on Downloaded Products
5/6. The European Commission issued a release in which it stated that the EU's Council of Economics and Finance Ministers will meet on Tuesday, May 7, to impose a new tax on products that are downloaded electronically. The rule will require U.S. companies to charge a value added tax (VAT) on sales into the European Union (EU).
The release states that "The Council is due to adopt definitively, without discussion, a Directive and a Regulation to modify the rules for applying value added tax (VAT) to certain services supplied by electronic means as well as subscription- based and pay- per- view radio and television broadcasting. The new rules, based on Commission proposals of 7 June 2000 (see IP/00/583 and MEMO/00/31), will create a level playing field for the taxation of digital e-commerce in accordance with the principles on the taxation of e-commerce agreed at a 1998 OECD Ministerial Conference. The rules will ensure that when these services are supplied for consumption within the European Union, they will be subject to EU VAT, and that when they are supplied for consumption outside the EU, they will be exempt from VAT. The changes modernise the existing VAT rules to accommodate the emerging electronic business environment and to provide a clear and certain regulatory environment for all suppliers, located within or outside the EU. The rules also contain a number of facilitation and simplification measures aimed at easing the compliance burden for business. Member States must implement the new measures by 1 July 2003." (Hyperlinks added.)
CDT Files Amicus Brief in Yahoo v. LICRA
5/6. The Center for Democracy and Technology (CDT) filed an amicus curiae brief [45 pages in PDF] with the U.S. Court of Appeals (9thCir) in Yahoo v. LICRA, a case involving a French court order that Yahoo "render impossible" access by persons in France to certain content on servers located in the United States.
The CDT argues that "The French judgment that prompted this appeal places our tradition of free expression in jeopardy. It represents a direct attempt by a foreign nation to apply its law extraterritorially to restrict the freedom of expression of U.S. based online speakers who are protected by the First Amendment."
In 2000 two French groups, LICRA and UEJF, obtained a judgment from a French court ordering Yahoo to "render impossible" access by persons in France to Nazi related content on servers located in the United States. The French court issued the following order: "We order the Company YAHOO! Inc. to take all necessary measures to dissuade and render impossible any access via to the Nazi artifact auction service and to any other site or service that may be construed as constituting an apology for Nazism or a contesting of Nazi crimes."
Yahoo, which is a Delaware corporation based in San Jose, California, then filed a complaint in U.S. District Court (NDCal) seeking a declaratory judgment that the judgment of the French court is unenforceable in the U.S. as contrary to the U.S. Constitution, and in particular, the First Amendment.
The French parties have sought to evade an adverse ruling by the U.S. Courts by raising a wide range of procedural issues, while at the same time down playing the First Amendment issue. They filed a Rule 12(b)(2) motion to dismiss the complaint for lack of personal jurisdiction. The District Court issued its Order Denying Motion to Dismiss [PDF] on June 7, 2001. On November 7, 2001, the District Court issued its Order Granting Motion for Summary Judgment [PDF] in favor of Yahoo. The District Court rejected the French parties' arguments regarding substantial controversy, actual controversy, comity, forum shopping, substantial compliance with the French order, and pre-trial discovery.
The District Court held that "What is at issue here is whether it is consistent with the Constitution and law of the United States for another nation to regulate speech by a United States resident within the United States on the basis that such speech can be accessed by Internet users in that nation." Then, with little further explanation, the District Court held that the First Amendment precludes enforcement within the United States of a foreign court order intended to regulate the content of speech over the Internet. The French parties appealed to the Court of Appeals, again, focusing on precedural issues.
The CDT, along with many other speech related groups, filed the present amicus brief in support of Yahoo. They seek to focus the Appeals Court's attention on the First Amendment. Amici argue that "The French judgment that prompted this appeal places our tradition of free expression in jeopardy. It represents a direct attempt by a foreign nation to apply its law extraterritorially to restrict the freedom of expression of U.S. based online speakers who are protected by the First Amendment. It does so because the Plaintiff, Yahoo! ..., has chosen the Internet as its means of communication.
Amici continue that "The French court's order is but one example of the sort of judgment that this and other American courts can expect to see with increasing frequency as Internet use expands throughout the world. It is a predictable consequence of the global character of the Internet and the conflicts that inevitably will arise concerning speech protected by the U.S. Constitution but forbidden by repressive laws elsewhere."
Trademarks, Gripe Sites, and Free Speech
5/6. The American Civil Liberties Union (ACLU) filed an amicus curiae brief [33 pages PDF] with the U.S. Court of Appeals (6thCir) in Taubman Company v. Mishkoff. The case involves trademark, anti cybersquatting, and First Amendment law in the context of registering domain names that include trademarks, for the purpose of criticizing the trademarks' holders.
The plaintiff, Taubman Company, owns shopping malls. It holds trademarks. The defendant, Henry Mishkoff, registered domain names containing trademarks registered by Taubman. He then published criticism of Taubman in web sites located at these URLs. See, for example,
Taubman filed a complaint in U.S. District Court (EDMich) against Mishkoff alleging Eastern District of Michigan for trademark infringement, unfair competition, and violation of the Anti Cybersquatting Protection Act (ACPA), 15 U.S.C. 1125(d). The District Court issued a preliminary injunction against Mishkoff.
On appeal, the ACLU sides with Mishkoff. It asks that the preliminary injunction be vacated on the grounds that it constitutes a prior restraint of protected speech in violation of the First Amendment. The ACLU argues that "there are a growing number of cases in which trademark owners have tried to use these remedies to stifle legitimate criticism and speech protected by the First Amendment." The ACLU also argues that Mishkoff's actions do not constitute infringement or a violation of the ACPA.
Online Games and Gambling Legislation
5/2. Rep. Carolyn Kilpatrick (D-MI) introduced HR 4652, titled the "Consumer Protection for On-Line Games Act". It would provide a minimal federal regulatory scheme for games of chance and games of skill provided over communications networks.
The bill would provide that the Federal Trade Commission (FTC) "shall prescribe rules in accordance with this section to prohibit unfair and deceptive acts and practices in the labeling and advertising of games of chance and games of skill offered by means of the communications networks by network game operators".
The bill further provides that FTC rules shall "prohibit network game operators from making false, nonsubstantiated, nonverifiable, or misleading claims regarding (A) the fairness of any specific such game of chance or game of skill, or combination thereof played by the consumer; (B) whether the game offered is a game of skill or a game of chance, or a combination thereof; and (C) if the game offered is a game of chance, or a combination of skill and chance, whether all participants (including the game operator) are accorded equal or unequal chance".
The FTC has only civil enforcement authority.
The bill also provides for "a self- regulatory organization" of online game operators that would "enforce compliance by its members". Such organization would be able discipline its members by "expulsion" or by "revocation of the authority to display or advertise any seal or insignia".
The defines "network game operator" as "a public or private business enterprise that engages in the business of providing game playing services (as opposed to the sale or download of a game as a publisher or distributor), either for a fee or for free, using a communication path between the player and the game operator that is part of a communications network."
The bill defines "communications network" as "a public or private communication system that is used for the exchange of information or participation in transactions (or both) and includes systems such as the telephone system, cable systems, satellite systems, wireless systems, or the Internet."
The bill has no original cosponsors. It was referred to the House Commerce Committee, of which Rep. Kilpatrick is not a member.
On Wednesday, May 8, the House Judiciary Committee is scheduled to mark up HR 3215, the "Combatting Illegal Gambling Reform and Modernization Act". This bill, which is sponsored by Rep. Bob Goodlatte (R-VA), and 155 other members of the House, would limit Internet gambling.
The Goodlatte bill would amend 18 U.S.C. 1081 and  1084, which contain the definitions and prohibition, respectively, of the Wire Act. The Wire Act currently criminalizes the use of "wire communications facilities" in interstate commerce for gambling. The Wire Act does not ban gambling. This is a matter of state law. HR 3215 expands the prohibition to cover all communications between states or with other foreign countries. It maintains the principle that gambling is otherwise a matter of state law. Hence, under HR 3215, use of the Internet for gambling purposes would become illegal (if interstate or foreign).
HR 3215 also criminalizes "the transmission of a communication in interstate or foreign commerce ... which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers". Also, like HR 556, the Unlawful Internet Gambling Funding Prohibition Act, sponsored by Rep. James Leach (R-IA), HR 3215 would prohibit the use of credit, electronic funds transfers, and checks in connection with illegal gambling.
USPTO Director Wants to Give Customers More Choices
5/3. U.S. Patent and Trademark Office (USPTO) Director James Rogan gave a speech at the Licensing Executives Society Spring Meeting. He stated that the two challenges facing the USPTO are reducing pendency and improving patent quality. He said that to meet these challenges, the USPTO will have to change its paradigm, and give patent applicants more choices.
"We cannot sacrifice quality for the sake of pendency," said Rogan, adding that "we can give you two week pendancy -- you may not want to defend that patent in court." He said that reducing pendency and improving quality "is a dream unless we change the paradigm under which we operate".
"Today, we expect this year to get about 375,000 new applications ... Those applications will get in line behind 350,000 pending applications, in the backlog. Our average pendency today is about two years. ... Pendency in some areas of the technical arts, like in engineering can be three and four years." He added that "In a 21st Century information based technology driven economy we cannot operate under that paradigm and expect to be competitive and perform the service for our customers that they expect."
Rogan then reviewed the different types of customers that the USPTO has, and what their different interests are. For example, he said that there are people "you work with that never have any intention of really moving something ... maybe they want a registration for now just to see what happens". Although, he offered a caution about submarine patents. Next, he said that there are also applicants who have already gone through a European Patent Office search. There are some who have already done an extensive in house search. And, there are some who like the old fashioned process.
"What I am suggesting is that right now it is a one size fits all model. That is not good for business. And, I don't think it is for governance. I want to see if there is a way that we can ... give our customers the opportunity to decide what it is that they need from us when they need it." He added that there is a working group at the USPTO that is studying this, and taking comments from USPTO customers.
He wrapped up with the following statement. "This train is coming down the track. We are dead serious. I have no idea whether we are going to be able to sell it the administration, or we are going to be able to sell it to Congress, or we are going to be able to sell it to the user community. But, we are sure going to try."
Nobel Economists Comment on Broadband Regulation
5/3. Numerous comments have been submitted to the Federal Communications Commission (FCC) recently that pertain to its regulatory treatment of broadband services. Perhaps it is noteworthy that among the many comments is one from veteran Nobel prize winning economists Kenneth Arrow and Gary Becker.
Arrow, Becker, and others submitted a comment [PDF] in which they argue that the FCC "should not regulate broadband Internet access at this time. In the current market, there is no justification for substituting government regulatory criteria for the competitive process of the marketplace in arriving at optimal technologies, access arrangements, and business models. The results of such regulation can only suppress investment into new technologies and services that would otherwise increase consumer choice and enhance the development of advanced communications networks."
They reason that "Whatever the virtue of common carrier and unbundling regulations as applied to legacy networks -- be they telephone or cable -- applying such regulations to the new facilities necessary for the provision of broadband Internet access service would likely have a significant and distorting impact on the willingness of existing providers to make the risky new investments needed to provide broadband services efficiently. While, in certain circumstances, common carrier and unbundling requirements may help open a monopoly market to competition, imposing such rules at the beginning of a product cycle is likely to prove harmful to entrepreneurs and consumers alike. This is particularly the case when all indications are that robust competition among a number of facilities based alternatives will otherwise prevail."
They also argue that "There are significant costs in imposing common carrier and/or unbundling obligations on any providers of broadband Internet access services. It is typically not possible to have cost based rates and, at the same time, encourage efficient investment when there is substantial technological change and uncertainty associated with the success of such investments. Particularly, at this point in the evolution of broadband Internet access technologies, proper public policy should aim to encourage, rather than discourage, investment."
In addition, they stated that "In the light of the emerging competition among different technologies, broadband Internet access providers already have adequate incentives to negotiate access arrangements with unaffiliated ISPs that bring additional value to consumers through new content, features, and functions."
Kenneth Arrow is an emeritus professor of economics at Stanford University. His Nobel prize winning career is built upon his "Arrow's Theorem". See, Social Choice and Individual Values, first published in 1951. Gary Becker is a Nobel prize winning economist at the University of Chicago and the Hoover Institution.
They filed their comment in three pending FCC proceedings: In the Matter of Review of the Section 251 Unbundling Obligations of Incumbent Local Exchange Carriers (CC Docket No. 01-339), In the Matter of Review of Regulatory Requirements for Incumbent LEC Broadband Telecommunications Services (CC Docket No. 01-337), and In the Matter of Appropriate Framework for Broadband Access to the Internet Over Wireline Facilities (CC Docket No. 02-33).
People and Appointments
5/6. Lawrence Harris was named Chief Economist of the Securities and Exchange Commission (SEC), effective July 1. He is currently a professor at the Marshall School of Business at the University of Southern California. He will replace Acting Chief Economist William Atkinson, who is retiring in July. See, SEC release.
5/1. The Association of Communications Enterprises (ASCENT) named Walter Blackwell to be its new President. See, ASCENT release.
More News
5/6. The U.S. Court of Appeals (7thCir) issued its opinion in In re Brand Name Prescription Drugs Litigation, a Sherman Act price fixing case involving prescription drugs. Plaintiffs are retail sellers of prescription drugs. The defendants/ appellees are their suppliers. The District Court granted summary judgment to defendants. The Appeals Court affirmed.
5/6. The U.S. Court of Appeals (9thCir) issued its opinion [PDF] in Barcamerica v. Tyfield Importers, a trademark case involving abandonment by naked licensing. This is a dispute over who may use the "Leonardo Da Vinci" trademark for wines. Barcamerica registered the mark with the USPTO. It later sued Tyfield and others for trademark infringement. However, Barcamerica had engaged in naked licensing of the mark. That is, it failed to exercise adequate quality control over the licensees, with the trademark ceasing to function as a symbol of quality and controlled source. The District Court thus ruled that the mark had been abandoned. The Appeals Court affirmed.
5/6. Openwave and IBM announced "a 10-year alliance". See, IBM release.
5/2. The U.S. District Court (NDCal) sentenced Roger Ver to 10 months in prison for selling explosives without a license over the eBay auction web site, in violation of 18 U.S.C. 842(a)(1). He was also sentenced for illegally storing explosives in a residential apartment in violation of 18 U.S.C. 842(j), and for mailing injurious articles through the U.S. Postal Service in violation 18 U.S.C. 1716. See, USAO release.
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Tuesday, May 7
The House will meet at 12:30 PM for morning hour and at 2:00 PM for legislative business. No votes are expected before 6:30 PM. The House will consider a number of measures under suspension of the rules.
The Supreme Court is on recess until May 13.
9:00 AM - 4:00 PM. The Association for Competitive Technology will host a series of panel discussions on technology issues. The panels are as follows. 10:00 AM: E-Commerce and the Revenge of the Middleman; 11:00 AM: International Trade and the IT Industry; 1:00 PM: Pitfalls of Regulating Technology. 2:00 PM: Antitrust Enforcement and Merger Approvals in the IT industry; and 3:00 PM: How to make Fiscal Policy Friendly to Small Business. Location: Room HC-8, U.S. Capitol.
The Council of the Americas will hold a three day conference titled "New Realities in the Hemisphere" on May 5-7. On May 7 at 9:00 AM Sen. Max Baucus (D-MT) will speak. At 11:45 USTR Robert Zoellick will speak. See, agenda [PDF]. For more information, call 202 639-0724. Location: Loy Henderson Conference Room, State Dept., 2201 C Street, NW.
POSTPONED. 9:30 AM. The Senate Commerce Committee will hold a hearing on the Memorandum of Agreement between the Federal Trade Commission (FTC) and the Department of Justice's (DOJ) Antitrust Division regarding division of responsibility for merger reviews. Press contact: Andy Davis 224-6654.
10:30 AM - 12:00 NOON. Rep. Sander Levin (D-MI), the ranking Democrat on the House Ways and Means Committee's Subcommittee on Trade will speak at the Center for Strategic and International Studies (CSIS) on trade promotion authority. Location: CSIS, B-1 Conference Level, 1800 K Street, NW.
12:00 NOON. The Advisory Committee to the Congressional Internet Caucus will host a luncheon. The speaker will be Marty Cooper, inventor of the portable cellular telephone and CEO or ArrayComm. RSVP to rsvp or Danielle Wiblemo at 202 638-4370. Location: Reserve Officers Assoc.
1:30 to 3:30 PM. The State Department's International Telecommunication Advisory Committee, Radiocommunication Sector (ITAC-R) will hold a meeting. The ITAC advises the State Department on policy, technical and operational issues with respect to the International Telecommunication Union. This meeting will address preparations for the ITU-R World Radiocommunication Conference 2003 (WRC-03). See, notice in Federal Register. Location: State Dept., Dean Acheson Auditorium.
4:00 PM. Rep. Sherwood Boehlert (R-NY) and others will hold press conference to announce the introduction of a bill to reauthorize the National Science Foundation (NSF). Location: Room 2318, Rayburn Building.
Wednesday, May 8
The House will meet at 10:00 AM for legislative business.
9:00 AM - 12:00 NOON. The Telecommunications Service Priority System Oversight Committee will meet. See, notice in Federal Register. Location: NCS conference room, 2nd floor, 701 South Court House Road, Arlington, VA.
9:30 AM. The Senate Governmental Affairs Committee will hold a hearing to examine infrastructure security, focusing on private public information sharing. Location: Room 342, Dirksen Building.
10:00 AM. The House Judiciary Committee will hold a meeting to mark up several bills, including HR 3482, the Cyber Security Enhancement Act of 2001 and HR 3215, the Combatting Illegal Gambling Reform and Modernization Act. Location: Room 2141, Rayburn Building.
10:00 AM - 12:00 NOON. The Federal Communications Bar Association's International Practice Committee will host a roundtable discussion with David Gross, Deputy Assistant Secretary for International Communications and Information Policy, U.S. Department of State. RSVP to Maggie McBride at 202 719-7101. Location: Wiley Rein & Fielding, 1750 K Street, NW.
10:00 AM. The Senate Judiciary Committee will hold a hearing regarding reform of the Federal Bureau of Investigation and Department of Justice. See, notice. Press contact: Mimi Devlin at 202 224-9437. Location: Room 226, Dirksen Building.
12:00 NOON - 1:30 PM. Marybeth Peters, Register of Copyrights, will speak at the Center for Strategic and International Studies (CSIS). For more information, contact Joelle Laszlo at 202 775-3175 or jlaszlo Location: 4th Floor Conference Room, CSIS, 1800 K St NW.
1:00 PM. Rep. Cliff Stearns (R-FL), Chairman of the House Commerce Committee's Subcommittee on Commerce, Trade & Consumer Protection, and others, will hold a press conference to announce the introduction of information privacy legislation. Location: H-321, House Radio and TV Gallery, Capitol.
Extended deadline to submit comments to the FCC in its proceeding titled "In the Matter of Rules and Policies Concerning Multiple Ownership of Radio Broadcast Stations in Local Markets Definition of Radio Markets". See, FCC release [PDF].
Thursday, May 9
The House will meet at 10:00 AM for legislative business. 10:00 AM. The House Judiciary Committee's Subcommittee on Crime will meeting to conduct a hearing on, and to mark up, HR 4623, the Child Obscenity and Pormography Prevention Act of 2002. Webcast. Location: Room 2141, Rayburn Building.
10:00 AM - 12:00 NOON. The House Science Committee's Subcommittee on Research will hold a hearing on the National Science Foundation Reauthorization Act of 2002. Press contact: Heidi Tringe Heidi.Tringe or 202 225-4275. Webcast. Location: Room 2318, Rayburn Building.
10:00 AM - 12:00 NOON. The House Science Committee's Subcommittee on Research will meet to mark up HR 3130, the Technology Talent Act of 2001 (immediately following the hearing on the NSF reauthorization bill). This bill would authorized grants to be awarded on a competitive basis to institutions of higher education to increase the number of students studying and receiving associates or bachelor's degrees in science, mathematics, engineering, and technology. Press contact: Heidi Tringe Heidi.Tringe or 202 225-4275. Webcast. Location: Room 2318, Rayburn Building.
2:00 PM. The Senate Judiciary Committee will hold a hearing on pending judicial nominations. Location: Room 226, Dirksen Building.
2:00 PM. The House Ways and Means Committee's Subcommittee on Select Revenue Measures will hold another hearing on the Extraterritorial Income Regime. Location: Room 1100, Longworth Building.
Deadline to pre-register to attend the National Institute of Standards and Technology's (NIST) Advanced Technology Program (ATP) Advisory Committee meeting on May 14. The agenda includes a discussion on universities and R&D technology issues, a presentation on In-Q-Tel (the CIA's Silicon Valley venture capital group), an update on the ATP competition, and a presentation on the ATP Computer Based Software Focus Program. Submit your name, time of arrival, e-mail address and phone number to Carolyn Stull at carolyn.stull or 301 975-5607. See, notice in Federal Register.
Friday, May 10
The House will meet at 9:00 AM for legislative business. No votes are expected after 2:00 PM.
8:30 AM - 4:30 PM. The New America Foundation and Public Knowledge will co-host a conference titled "Protecting the Information Commons: Asserting the Public Interest In Copyright Law and Digital Infrastructure". The scheduled speakers include Rep. Rick Boucher (D-VA). RSVP to Tina Sherman at 202 986-2700 or sherman Location: National Guard Association, One Massachusetts Avenue NW.
9:00 AM - 5:00 PM. The Copyright Office (CO) will hold "a public roundtable discussion concerning issues raised in the course of an ongoing rulemaking proceeding to adopt requirements for giving copyright owners reasonable notice of the use of their works for sound recordings under the section 114 and 112 statutory licenses and for how records of such use shall be kept and made available to copyright owners." See, notice in Federal Register. Requests to attend or participate must be submitted by close of business on Monday, May 6, 2002. Location: Room LM620 (Dining Room A), James Madison Memorial Building, First and Independence Avenue, SE.
9:30 AM. The U.S. Court of Appeals (DCCir) will hear oral argument in AT&T v. FCC, No. 01-1467, and Verizon v. FCC, No. 01-1371. Judges Ginsburg, Randolph and Tatel will preside. Location: 333 Constitution Ave. NW.
9:30 AM - 1:00 PM. The Securities and Exchange Commission (SEC) will hold an event titled "Investor Summit" which will also be webcast. See, SEC release. Location: WOD Room, basement, SEC, 450 5th Street NW.
10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in ULead Systems v. Lex Computer, No. 01-1320, an appeal from the U.S. District Court (CDCal). The lower court held that U.S. Patent No. 4,538,188 is unenforceable due to the owner's inequitable conduct in fraudulently paying reduced small entity maintenance fees to the USPTO when it was not a small entity. Location: LaFayette Square, at 717 Madison Place, NW.
11:30 AM. The American Electronics Association (AEA) will hold a press briefing regarding the Internal Revenue Service's (IRS) proposal to impose payroll taxes on certain broad based stock options beginning January 1, 2003. To participate by telephone, call 703 871-3016. See, AEA notice. RSVP to Deanna Keim at 202 289-6700 or djkeim Location: AEA, 601 Pennsylvania Ave. NW, 6th Floor. (The entrance is on Indiana Ave. between 6th and 7th Streets.)
12:15 PM. The The FCBA's Wireless Committee will host a luncheon.
1:00 PM. The House Commerce Committee's Subcommittee on Telecommunications and the Internet will hold a field hearing titled "Chatting On Line: A Dangerous Proposition for Children." Rep. Fred Upton (R-MI) will preside. Press contact: Ken Johnson or Jon Tripp at 202-225-5735. Location: Kalamazoo Central High School, Kalamazoo, Michigan.