Tech Law Journal Daily E-Mail Alert
July 8, 2002, 9:00 AM ET, Alert No. 464.
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WorldCom: Rep. Tauzin Requests Information From SEC
7/2. Rep. Billy Tauzin (R-LA) and Rep. Jim Greenwood (R-PA) wrote a letter to Securities and Exchange Commission (SEC) Chairman Harvey Pitt requesting information and documents pertaining to the SEC's investigations of the accounting practices of WorldCom, Tyco, Global Crossing, Xerox, and Qwest Communications.
For example, they asked, "For the period from January 1998 through the date upon which the SEC began its current formal inquiry into the company, did the SEC review any of the 10-Qs or 10-Ks filed by the company? If so, identify the filings reviewed, provide a brief description of the reviews conducted, and provide all records relating to such reviews."
Rep. Tauzin is Chairman of the House Commerce Committee. Rep. Greenwood is Chairman of its Subcommittee on Oversight and Investigations.
WorldCom: Sen. Grassley Questions SEC and WorldCom About Bonuses
7/2. Sen. Charles Grassley (R-IA) wrote two letters [PDF] to Securities and Exchange Commission (SEC) Chairman Harvey Pitt and WorldCom President John Sidgmore asking for information about large bonuses paid recently to WorldCom officers, directors and employees.
Sen. Grassley stated to Pitt: "I commend you for taking action that bars WorldCom from paying its officers, directors or employees more than $100,000 in severance. It appears that many top executives viewed WorldCom as their personal piggy bank, and that practice must be stopped. While these recent actions hopefully shut the barn door, a lot of questionable bonuses and payments were made earlier by WorldCom. For example, Bernard J. Ebbers, the chief executive of WorldCom, got a $10 million bonus, as did Scott Sullivan, the chief financial officer."
Sen. Grassley also asked for "the dollar figure, name and title of every employee, director or officer of WorldCom who received a bonus (in any form) with a value of greater than $100,000 (at the time it was awarded) for any year since January 1, 1999."
He asked for the same information from WorldCom. He also asked Sidgmore to inform him of "what actions that WorldCom has taken, or is considering taking, to have bonuses returned (or to not provide a bonus) to the company to improve its financial situation."
WorldCom: Representatives Write FCC Re Continuity During Bankruptcy
7/2. Rep. Ed Markey (D-MA) sent a letter [PDF] to Federal Communications Commission (FCC) Chairman Michael Powell regarding a possible WorldCom bankruptcy.
Rep. Markey, who is the ranking Democrat on the House Telecom Subcommittee, wrote that "I am concerned that any decision by WorldCom management to seek bankruptcy protection could prove disruptive to essential communications as well as economic activity in our country."
He also stated that "I believe it wise, however, for the Commission to prepare adequately for such an event in order to minimize any harm to the public and to ensure that telecommunications services continue if bankruptcy does occur."
Rep. Markey continued. "While the Commission chose not to intervene directly to ensure continuity of service when Excite@Home and Northpoint Communications went bankrupt last year and cut-off Internet access for ten of thousands of Americans, I hope you agree that the hazards posed to the public if WorldCom were to go bankrupt go to the core of the Commission's responsibilities. In addition to the millions of Americans who subscribe to WorldCom for traditional telephone service, WorldCom is also responsible for carrying a vast portion of the nation's email traffic. In fact, some analysts calculate WorldCom's email traffic carriage to be as high as 70 percent of those emails that travel within that Unites States and 50 percent of all such traffic worldwide."
Rep. Markey cited 47 U.S.C. § 214(a), which provides, in part, that "No carrier shall discontinue, reduce, or impair service to a community, or part of a community, unless and until there shall first have been obtained from the Commission a certificate that neither the present nor future public convenience and necessity will be adversely affected thereby."
Rep. Billy Tauzin (R-LA) and Rep. Fred Upton (R-MI) also wrote to Chairman Powell. They wrote that "In the wake of recent revelations regarding WorldCom's accounting improprieties and given the distinct possibility that WorldCom may soon file for bankruptcy, we urge that all necessary steps should be taken to ensure that our nation's telecommunications infrastructure and consumers are protected from disruptions in service and degradation of service quality which could result from such an occurrence."
They also stated that "WorldCom owns MCI, the nation's second largest long distance carrier, and it is the world's largest Internet backbone provider, carrying approximately 50% of the Internet's total traffic and 70% of e-mail in the United States."
However, unlike Rep. Markey, they did not suggest that Section 214 covers Internet backbone or e-mail service, or that regulating Internet services is a "core" responsibility of the FCC.
Incoming EU Competition Director General Addresses Antitrust
7/1. Philip Lowe, who will take office as the EU Competition Director General on September 1, gave a speech to the American Antitrust Institute in Washington DC. He discussed the principles underlying EU competition policy, aids provided by national governments, different standards employed by the EU and the US in merger reviews, efficiencies, economic analysis, and other topics.
Rep. Berman to Advocates Self Help to Combat P2P Piracy
6/25. Rep. Howard Berman (D-CA) gave a speech regarding solutions to peer to peer piracy. He said he intends to introduce legislation to create a safe harbor for copyright owners who employ technological self help measures to thwart peer to peer piracy.
Rep. Berman, who is the ranking Democrat on the House Judiciary Committee's Court, Internet and Intellectual Property Subcommittee, stated that the "future and fate of the technology sector is also inextricably tied to that of the entertainment industry". He also stated that the "next growth cycle for many technology companies depends, to a certain extent, on the availability of media products and services". Moreover, "Internet piracy threatens to undermine the symbiosis between the technology and media industries". And hence, "P2P piracy must be cleaned up".
He advocated "the use of strong DRM technologies", but not "government mandates on technology". He also said the "Copyright infringement lawsuits against infringing P2P users have a role to play, but are not viable or socially desirable options for addressing all P2P piracy".
He then advocated "technological self help measures". He elaborated that "Copyright owners could employ a variety of technological tools to prevent the distribution of copyrighted works over a P2P network. Interdiction, decoy, redirection, file blocking, and spoofing technologies can help prevent unauthorized P2P distribution."
Rep. Berman added that "When deployed to thwart P2P piracy, however, such technological self-help may run afoul of common law doctrines and state and federal statutes, including the federal Computer Fraud and Abuse Act. In other words, while P2P technology is free to innovate new, more efficient methods of P2P distribution that further exacerbate the piracy problem, copyright owners are not equally free to craft technological responses."
Hence, he argued that "Congress should free copyright creators and owners to develop and deploy technological tools for addressing P2P piracy. We could do this by creating a safe harbor from liability for copyright owners that use technological means to prevent the unauthorized distribution of their copyrighted works via P2P networks."
He added that "Such legislation should not allow a copyright owner to damage the property of a P2P file trader or any intermediaries, including ISPs. For instance, a copyright owner shouldn't be allowed to introduce a virus that disables the computer from which infringing works are being made available to a decentralized, P2P network."
He concluded by stating that "I intend to introduce legislation creating such a safe harbor for technological self help measures."
Shakeup at Qwest
7/5. Drake Tempest, Qwest Communications EVP and General Counsel, stated in a release that "We have no reason to believe that we are the subject of any investigation by the U. S. Department of Justice ... It's outrageous that we would learn about such an investigation through the media. We have disclosed everything asked of us and have cooperated fully with the Securities Exchange Commission and Congress".
7/7. Qwest announced the replacement of Robin Szeliga as Chief Financial Officer. Oren Shaffer, who was formerly CFO of Ameritech, joined Qwest as Vice Chairman and CFO. See, Qwest release.
7/7. Qwest also announced that Gary Lytle will replace Pete Belvin as VP for Policy and Law. Lytle was interim President of the U.S. Telecom Association (USTA) in 2000 and 2001. Before that, he was VP for federal relations at Ameritech.
DC Circuit Rules on Waiver of Attorney Client Privilege in FTC v. GSK
7/2. The U.S. Court of Appeals (DCCir) issued its opinion in FTC v. Glaxo Smith Kline, a case regarding the scope of the attorney client privilege in a drug patent related proceeding. The District Court held that the privilege was waived because GSK had distributed the documents subject to the claim of privilege to various attorneys, consultants and third parties, and thus, not kept the documents confidential. The Appeals Court reversed.
Background. Glaxo Smith Kline (GSK) makes paroxteine hydrochloride hemihydrate, a drug used in the treatment of depression and panic disorder. It markets this drug under the brand name Paxil. Other companies applied to the Food and Drug Administration (FDA) for permission to sell generic versions of Paxil when GSK's patents expire.
FTC Proceeding. The Federal Trade Commission (FTC) commenced an investigation into whether GSK, in an attempt to prevent or delay competition from generic versions of Paxil, abused the process for listing its patents in the FDA's compilation of "Approved Drug Products with Therapeutic Evaluations." The FTC issued a subpoena requesting documents from GSK, including documents that it had been ordered to disclose in a previous patent infringement lawsuit against generic manufacturers, and documents related to the manufacturing and marketing of Paxil, the listing and use of any patents regarding Paxil, and any filings with the FDA regarding Paxil. GSK did not produce all requested documents.
District Court. The FTC filed a complaint in U.S. District Court (DC) to enforce its subpoena. The dispute was reduced to whether GSK must produce 91 documents. GSK raised both the attorney client privilege and work product privilege. The FTC argued that GSK had forfeited its claim to confidentiality by disseminating the documents widely both within GSK and to consultants and other third parties. The FTC also belatedly argued that the documents lacked confidential content. The District Court ordered GSK to produce the 91 documents. It reasoned that GSK had failed to meet its burden with respect to two requisite elements of the attorney client privilege: that the documents were kept confidential, and that the documents contained confidential information. It wrote that GSK had "not sustained its burden of demonstrating that the relevant documents were distributed on a 'need to know' basis or to employees that were 'authorized to speak or act' for GSK". It also rejected the work product argument. GSK appealed.
Court of Appeals. The Court of Appeals reversed. It wrote that the District Court had placed an overreaching burden on GSK. It wrote that "The Company's burden is to show that it limited its dissemination of the documents in keeping with their asserted confidentiality, not to justify each determination that a particular employee should have access to the information therein. Not only would that task be Herculean -- especially when the sender and the recipient are no longer with the Company -- but it is wholly unnecessary. After all, when a corporation provides a confidential document to certain specified employees or contractors with the admonition not to disseminate further its contents and the contents of the documents are related generally to the employees' corporate duties, absent evidence to the contrary we may reasonably infer that the information was deemed necessary for the employees' or contractors' work."
The Appeals Court also reversed the District Court's determination regarding lack of confidential content, but on procedural grounds. (The FTC did not raise this argument until its reply brief for the District Court, thereby depriving GSK an opportunity to respond.) The Appeals Court did not address the work product privilege issue, because it reversed on other grounds.
IIPA Comments on Copyright and Andean Trade
7/1. The International Intellectual Property Alliance (IIPA) submitted comments [PDF] to the U.S. International Trade Commission (ITC) regarding copyright issues associated with the Andean Trade Preferences Act (ATPA). The IIPA wrote that the "ATPA is not solely an anti-narcotics program."
The ITC, among other things, makes determinations in investigations involving unfair practices in import trade involving allegations of infringement of U.S. patents and trademarks by imported goods. The ITC may order the exclusion of the imported product from the United States. The ITC requested comments to assist it in the preparation of its 2001 annual ATPA report to Congress.
The IIPA commented that "Inadequate and ineffective copyright enforcement continues to inflict significant trade distortions in the Andean region. High levels of piracy of music, audiocassettes and compact discs, business, entertainment and multimedia software on all platforms, films, television programs, videocassettes, textbooks, tradebooks, reference and professional publications and journals, all hurt U.S. creators."
It continued that "Business software piracy appears in various formats, including counterfeiting, resellers, mail order houses, bulletin boards, other internet based distributions and end user piracy. The greatest threat comes from end user piracy ..."
The IIPA also wrote that "as the forms of piracy shift from hard goods and more toward digital media, the challenges faced by the copyright industries and national governments to enforce copyright laws grow exponentially. Fundamentally, the Internet transforms copyright piracy from a mostly local phenomenon to a global plague. It makes it cheaper and easier than ever for thieves to distribute unauthorized copies of copyrighted materials around the globe. Modern copyright laws must respond to this fundamental change by providing that creators have the basic property right to control distribution of copies of their creations. Copyright owners must be able to control delivery of their works, regardless of the specific technological means employed. Criminal and civil justice systems must work in a transparent and expeditious manner and result in deterrent penalties and remedies."
People and Appointments
7/2. President Bush announced his intent to nominate Daniel Pearson to be a Commissioner of the International Trade Commission for a nine year term expiring in 2011. Pearson has worked for Cargill since 1987. Before that he worked for former Sen. Rudy Boschwitz (R-MN). See, White House release.
7/3. Greg Jenner was named Senior Advisor and Acting Deputy Assistant Secretary for Tax Policy at the Department of the Treasury, effective July 8, 2002. Jenner was a partner in the Tax and Legislative Groups at the Venable law firm. Prior to that, he was a partner with Price Waterhouse Coopers. Before that, he worked in the Treasury Department in the first Bush administration. And before that, he worked for the Senate Finance Committee. See, Treasury release.
7/1. Scott Ford became the President and Chief Executive Officer of Alltel. See, release.
6/28. Brad Sonnenberg was named SVP and General Counsel of Covad. He was Deputy General Counsel. He replaces Dhruv Khanna. See, Covad release.
6/25. Mark Slaven was named Chief Financial Officer of 3Com Corporation. He was previously Vice President and Treasurer of 3Com. He replaces Mike Rescoe. See, 3Com release.
More News
6/5. The Federal Communications Commission (FCC) published a notice [PDF] in its web site that it has adopted a revised Schedule of Regulatory Fees. However, it did not publish the Schedule of Regulatory Fees.
7/5. The World Intellectual Property Organization (WIPO) published a database containing information about cybersquatting cases before the WIPO Arbitration and Mediation Center. The WIPO Center is a dispute resolution service provider under the Uniform Domain Name Dispute Resolution Policy (UDRP) of the Internet Corporation for Assigned Names and Numbers (ICANN). See, WIPO release.
7/2. The U.S. District Court (DC) issued a memorandum opinion [36 pages in PDF] in USA v. Microsoft regarding compliance with the Tunney Act.
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Notices & Disclaimers
Copyright 1998 - 2002 David Carney, dba Tech Law Journal. All rights reserved.
Monday, July 8
The House will return from its Independence Day work period. It will meet at 2:00 PM for legislative business. No votes expected before 6:30 PM.
The Senate will return from its Independence Day work period. It will meet at 2:00 PM to begin consideration of S 2673, the accounting reform bill.
10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in Optical Disc v. Del Mar Avionics, a patent infringement case involving CD technology, No. 01-1606. Location: Courtroom 402, 717 Madison Place, NW.
10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in Texas Digital Systems v. Telegenix, No. 02-1032. Location: Courtroom 402, 717 Madison Place, NW.
10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in HM Electronics v. 3M, a patent infringement case involving wireless communications technology, No. 02-1037. Location: Courtroom 201, 717 Madison Place, NW.
12:30 PM. Sen. Paul Sarbanes (D-MD), Chairman of the Senate Banking Committee, will hold a press conference regarding corporate financial reporting, investor confidence, and the economy. Also participating will be Margaret Blair (Georgetown University), Jeff Faux (Economic Policy Institute), Gary Gensler, and Larry Mitchell (George Washington University). Press contact: Jesse Jacobs at 202 224-1654. Location: Room SC-6, Capitol Building.
TIME CHANGE. 1:00 PM. The House Financial Services Committee will hold a hearing titled The Accounting Problems at WorldCom. The scheduled witnesses are Bernard Ebbers (former CEO of WorldCom), Scott Sullivan (former CFO), David Myers (former SVP and Controller), John Sidgmore (P/CEO), and Bert Roberts (Chairman), Melvin Dick (former Senior Global Managing Partner, Technology, Media, and Communications Practice, Arthur Andersen), and Jack Grubman (Salomon Smith Barney). Press contact: Peggy Peterson at 202 226-0471. Location: Room 2128, Rayburn Building.
Deadline to file comments with the Federal Communications Commission's (FCC) Spectrum Policy Task Force in response to its request for comments on spectrum policy, including taking steps toward market oriented allocation and assignment policies, interference, efficient use of spectrum, public safety communications, and international issues. See, Public Notice [PDF].
Tuesday, July 9
The House will meet at 10:30 AM for morning hour and 12:00 NOON for legislative business. It will consider a number of measures under suspension of the rules.
9:00 AM. The House Commerce Committee's Subcommittee on Oversight and Investigations will hold a hearing on the proposal to create a Department of Homeland Security. See, notice. Webcast. Press contact: Ken Johnson or Jon Tripp at 202 225-5735. Location: Room 2123, Rayburn Building.
9:30 AM. FCC Commissioner Kathleen Abernathy will hold a press briefing. RSVP to Ann Monahan at amonahan or 202 418-2535. Location: FCC, Room 8B-115, 445 12th St., SW.
Wednesday, July 10
The House will meet at 10:00 AM for legislative business.
9:30 AM. The House International Relations Committee will meet to mark up HR 5005, the Homeland Security Act of 2002. Location: Room 2172, Rayburn Building.
9:30 AM - 4:30 PM. The FTC and DOJ will continue their series of events titled Competition and Intellectual Property Law and Policy in the Knowledge Based Economy. This event will be a panel of speakers addressing "Federal Circuit Jurisprudence: Substantive Trends and Analysis". The first session, running from 9:30 AM to 12:00 NOON, will address "Trends in Federal Circuit Jurisprudence". The second session, running from 1:30 PM to 4:30 PM, will address "Patent Law Analysis in Federal Circuit Jurisprudence". For more information, call Gina Talamona at 202 514-2007. See, FTC notice. Location: Room 432, FTC Main, 600 Pennsylvania Ave, NW.
10:00 AM. The House Commerce Committee's Subcommittee on Telecommunications and the Internet will hold a hearing titled Corporation for Public Broadcasting Oversight and a Look Into Public Broadcasting in the Digital Era. Press contact: Ken Johnson or Jon Tripp at 202 225-5735. Location: Room 2322, Rayburn Building.
10:00 AM. The House Armed Services Committee will hold a hearing on HR 5005, a bill to establish a Department of Homeland Security. Location: Room 2118, Rayburn Building.
10:00 AM. The Senate Judiciary Committee will hold an executive business meeting. See, notice. Location: Room 226, Dirksen Building.
10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in Reiffin v. Microsoft, No. 01-1380, a patent case. Location: Courtroom 402, 717 Madison Place, NW.
12:00 NOON. Treasury Secretary Paul O'Neil will give a luncheon speech titled "The Economy, Investors and Corporate Governance". The price to attend is $45 for members and $90 for non members. See, online registration page. Location: U.S. Chamber of Commerce, 1615 H Street, NW.
2:00 - 3:30 PM. The FTC's Bureau of Competition will hold a public workshop on merger investigation best practices. This is the last workshop of a seven part, five city, series. This event will focus on accounting and financial data. See, FTC release. Location: FTC, Room 332, 600 Pennsylvania Ave., NW.
6:00 - 8:00 PM. The FCBA will host a Continuing Legal Education seminar titled Global Telecom Markets: Issues and Strategies for Representing Clients Abroad. This seminar will cover (1) telecom trade and market access issues, (2) transaction financing and approval, and (3) the International Telecommunications Union (ITU).
Deadline to submit comments to the Bureau of Industry and Security (BIS), formerly known as the Bureau of Export Administration (BXA), in response to its Notice of Inquiry (NOI) regarding "the current limit for use of License Exception TSR for exports and reexports of technology and software on the Commerce Control List (CCL) of the Export Administration Regulations (EAR) under Export Classification Control Numbers (ECCNs) 4D001 and 4E001". BIS states that "These ECCNs control technology and software that can be used for the development, production, or use of computers. The goal of this notice of inquiry is to collect information from industry that will assist BIS in evaluating whether the current TSR eligibility level of 33,000 Millions of Theoretical Operations per Second (MTOPS) for exports and reexports to most countries should be adjusted, taking into consideration the control level for the export of computer equipment and the control policies of other member countries of the Wassenaar Arrangement." See, notice in the Federal Register.
Thursday, July 11
The House will meet at 10:00 AM for legislative business.
10:00 AM - 4:00 PM. The FTC and DOJ will continue their series of events titled Competition and Intellectual Property Law and Policy in the Knowledge Based Economy. This event will be a panel of speakers addressing "Federal Circuit Jurisprudence: Jurisdiction, Choice of Law, and Competition Policy Perspectives". The first session will run from 10:00 AM to 12:30 PM. The second session will run from 2:00 PM to 4:00 PM. For more information, call Gina Talamona at 202 514-2007. See, FTC notice. Location: Room 432, FTC Main, 600 Pennsylvania Ave, NW.
12:00 NOON. Sen. John McCain (R-AZ), the ranking Republican on the Senate Commerce Committee, will hold a press conference regarding "corporate governance reform". Location: First Amendment Room, National Press Club, 529 14th St. NW, 13th Floor.
Deadline to submit comments to the FCC regarding its Declaratory Ruling and Second Further Notice of Proposed Rulemaking clarifying that providers of Internet protocol telecommunications relay services are eligible for reimbursement from the Interstate TRS Fund. See, FCC notice [PDF].
Friday, July 12
The House will meet at 9:00 AM for legislative business. No votes are expected after 6:00 PM.
10:00 AM. Hearing before the U.S. District Court (EDVa) in Washington Post v. Gator on the Washington Post's motion for preliminary injunction. Plaintiffs allege web based copyright infringement in their complaint [99 pages in PDF] and Memorandum in Support of Plaintiffs' Motion for Preliminary Injunction [35 pages in PDF]. Tape recorders and cameras are prohibited in the courtroom. Location: Room 800, 8th Floor, Albert Bryan Courthouse, 401 Courthouse Square, Alexandria, VA.
12:00 NOON. The Cato Institute will host a briefing titled Profiling and National IDs: Security and Freedom in a Free Society. The speakers will be Charlotte Twight (author of Dependent on D.C.: The Rise of Federal Control over the Lives of Ordinary Americans), Robert Levy (Cato), and Timothy Lynch (Cato). See, registration page. Lunch will follow. Location: Room B-354, Rayburn Building.
12:00 NOON - 2:00 PM. The Progress and Freedom Foundation (PFF) will host a panel discussion titled When Wireless Grows Up: Mandates vs. Markets for a ‘Mature’ Industry. The scheduled speakers include Rudy Baca (Precursor Group), Steven Berry (CTIA) and Kevin Krufky (office of Sen. Sam Brownback). See, PFF notice. To register, contact Rebecca Fuller at 202 289-8928 or Location: Room B340, Rayburn Building.