Tech Law Journal Daily E-Mail Alert
August 13, 2002, 9:00 AM ET, Alert No. 490.
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SEC Chairman Warns Legal Profession to Avoid Mistakes of Accounting Profession
8/12. Securities and Exchange Commission (SEC) Chairman Harvey Pitt gave a speech in Washington DC to a bar group. He talked about his experiences in his first year in office, and new parameters for the way lawyers representing public companies appear and practice before the SEC. He stated that lawyers must represent corporate and shareholder interests, not the interests of corporate managers.
He stated that "The Sarbanes Oxley Act should alert this group that, in addition to auditors and corporate leaders, Congress believes lawyers representing public companies also have responsibilities requiring governmental definition. Most lawyers blanch at that notion. The relationship between lawyers and clients is often intensely personal, similar in some respects to the relationship between priest and penitent in the confessional. Lawyers are zealously supposed to guard, defend and promote the interests of their clients. To do that, clients must feel comfortable confiding in their lawyers. Efforts to impose governmental controls on how lawyers fulfill their responsibilities, some argue, can infringe upon the willingness of clients to confide in their lawyers, and curtail their ability to receive the benefits that flow from an unfettered lawyer client dialogue."
Pitt continued, "But, the merits of that concern, if any, apply to individual representations, not the representation of public companies. Lawyers for public companies represent the company as a whole and its shareholder wners, not the managers who hire and fire them. This should be self evident, but recent events indicate some corporate lawyers have lost sight of this axiom, a form of professional blindness that isn't new."
Pitt concluded that "lawyers who represent public companies must use their legal acumen to pursue only those goals whose sole purpose is to further legitimate corporate interests, not the interests of individual managers -- even if management's individual goals arguably are supportable by a literal reading of the law."
Pitt stated that this means that "When a corporation hires a lawyer, the lawyer represents the corporation and its shareholders. Being ever mindful of this answer can help protect lawyers from the fate visited upon the accounting profession. While management has the power to hire or fire lawyers who represent a corporation, lawyers must ask themselves -- as well as management -- how what they're being asked to do is intended to further the company's and shareholders' interests. Corporate lawyers must be vigilant and protect against conflicts arising between management and shareholders. Most corporate lawyers recognize and fulfill that duty -- but the profession, as a whole, must hold this duty paramount."
Sens. Baucus and Grassley Propose Working Group on ETI/FSC
8/12. Sen. Max Baucus (D-MT) and Sen. Charles Grassley (R-IA) wrote a letter [PDF] to U.S. Trade Representative (USTR) Robert Zoellick and Deputy Secretary of the Treasury Kenneth Dam regarding the Extraterritorial Income Exclusion Act (ETI).
The two Senators, who are the Chairman and ranking Republican on the Senate Finance Committee (SFC), asked the two administration officials to join them in a "legislative executive, bicameral, bipartisan working group" to address the ETI issue in September.
The World Trade Organization (WTO) has ruled that the ETI, and its predecessor, the Foreign Sales Corporation Act (FSC), constitute illegal export subsidies. These tax regimes greatly benefit U.S. companies that export their products, including high tech exporters. The U.S. unsuccessfully argued to the WTO that the U.S. has a global tax system, while European nations have territorial tax systems, that this puts U.S. exporters at a competitive advantage, and that tax regimes such as ETI and FSC that exempt certain foreign source income from taxation merely level the playing field.
Sens. Baucus and Grassley wrote that "we appreciate that you believe we need to promptly advance legislation which has a high probability of enactment. Since the European Union may be authorized to impose substantial retaliatory duties against American exports, a failure to resolve this issue could prove costly for the American workers, farmers, businesses, and consumers. Given the legislative and dispute settlement posture of this matter, we believe it is important to show progress toward compliance."
Both Dam and Zoellick testified before a SFC hearing on ETI/FSC on July 30. See, Dam's prepared testimony [PDF or HTML] and Zoellick's prepared testimony [PDF or HTML].
Federal Circuit Rules in Patent Case Involving Surfing the Web by Voice
8/9. The U.S. Court of Appeals (FedCir) issued its opinion in In re Thrift, an appeal from a U.S. Patent and Trademark Office (USPTO) Board of Patent Appeals and Interferences (BPAI) decision. The BPAI affirmed a patent examiner's rejection of claims of Philip Thrift and Charles Hemphill in U.S. Patent Application No. 08/419,229, titled "Voice Activated HyperMedia Systems Using Grammatical Metadata." The Appeals Court vacated the BPAI decision on certain claims.
This appeal involves a 1995 patent application that pertains to surfing the web with voice commands. The patent examiner rejected the application, and the BPAI affirmed. The Court of Appeals affirmed as to certain claims contained in the application, but vacated as to others.
Thrift and Hemphill, who have assigned their rights under this patent application to Texas Instruments, filed their '229 application in 1995. In 1996, the patent examiner rejected their claims for obviousness, in light of prior art, pursuant to 35 U.S.C. 103. Thrift and Hemphill amended their claims, and the examiner again rejected all of their claims for obviousness, in 1997. The BPAI then affirmed the examiner's rejection, as to all claims.
The '229 application included as its first claim "A voice activated Hypermedia system using grammatical metadata, said system comprising: a. a speech user agent; b.  a network browsing module; and c. an information resource located on a computer network wherein said speech user agent facilitates voice activation of said network browsing module to access said information resource."
That it, this claim is comprised of a speech interface that allows users to access information located on a computer network using a network browsing module. The patent examiner rejected this claim, and others that were dependent upon it. This was affirmed by the BPAI, and again by the Court of Appeals.
However, another claim (Claim 11) added the ability to create a grammar, or established set of standard query words. Furthermore, under this claim, each user can construct a grammar and associate its terms with a uniform resource locations (URL), thus allowing users to access URLs by reciting phrases. The patent examiner rejected this claim, and others dependent upon it. This was affirmed by the BPAI. However, the Court of Appeals vacated as to these claims.
The Appeals Court wrote that the BPAI's "rejection is simply inadequate on its face. The Board sustained the examiner's very general and broad conclusion of obviousness based on his finding that ``[t]he use of grammar is old and well known in the art of speech recognition as a means of optimization which is highly desirable."
The Appeals Court continued that "Although this statement is likely true, it fails to address the grammar creation capability limitations of claim 11. While the examiner's statement generally addresses the use of grammar, it does not discuss the unique limitations of extracting, modifying, or processing the grammar to interact with hypermedia sources. The Board's decision is not supported by substantial evidence because the cited references do not support each limitation of claim 11."
The Appeals Court also vacated as to a similar claim (Claim 14) on the basis that its rejection too was "not supported by substantial evidence".
The matter is now remanded to the Patent Office for further proceedings.
Federal Circuit Upholds Validity of Cipro Patent
8/9. The U.S. Court of Appeals (FedCir) issued its opinion in Bayer v. Schein, a patent infringement case involving the drug know as Cipro. The Court found Bayer's patent valid against a Section 102(d) challenge.
Bayer AG is the assignee of U.S. Patent No. 4,670,444 and Reexamination Certificate B1 4,670,444, which are directed towards a class of chemical compounds that includes the broad spectrum antibiotic ciprofloxacin. Bayer filed four complaints in U.S. District Court (DNJ) against Schein Pharmaceuticals and others alleging patent infringement. The District Court consolidated these actions.
Schein raised the affirmative defense of invalidity under 35 U.S.C. 102(d), which provides that "A person shall be entitled to a patent unless ... (d) the invention was first patented or caused to be patented, or was the subject of an inventor's certificate, by the applicant or his legal representatives or assigns in a foreign country prior to the date of the application for patent in this country on an application for patent or inventor's certificate filed more than twelve months before the filing of the application in the United States".
The District Court held that the '444 patent was entitled to the filing date of its U.S. parent, Application No. 292,560 and thus was not invalid under Section 102(d). The Court granted Bayer's motion for summary judgment on validity.
Schein and other defendants appealed. They argued on appeal that the '444 patent cannot claim the benefit of the parent application because the parent is invalid for failure to satisfy the best mode requirement of 35 U.S.C. 112.
The Court of Appeals affirmed. However, it split in its analysis of the best mode requirement. Judge Clevenger wrote the opinion of the Court, in which Judge Dyk joined. Judge Rader wrote a concurring opinion.
Rader wrote that "this court purports to use this easy case to erect a new best mode test. Fortunately, both this court's failure to find a best mode in this case and the wealth of prior case law render this Bayer case mostly dicta". 
Tuesday, August 13
Day six of six of the American Bar Association's annual meeting. See, TLJ's complete listing of technology law related events. Location: various hotels across Washington DC. Highlights include the following:
  8:30 AM. Program titled "The Antitrust Year in Review". Location: Ritz-Carlton, The Plaza Ballroom, Lobby Level.
  9:00 AM. Program titled "Cyber-Sleuthing: A Guide to Level Computer Assisted Discovery and Collection of Electronic Data". Location: Hilton Washington, Jefferson Ballroom East, Concourse Level.
  12:00 PM. Event titled "Antitrust Luncheon: Developments in Federal Antitrust Enforcement 2002". Charles James, Assistant Attorney General for Department of Justice's Antitrust Division will speak. Location: Ritz-Carlton, The Ritz-Carlton Ballroom, Salon III, Lobby Level.
  2:00 PM. Program titled "Developments in Merger Law and Policy 2002". Location: Ritz-Carlton, The Plaza Ballroom, Lobby Level.
10:00 AM. The U.S. District Court (DC) will hold a status hearing in USTA v. FBI, D.C. No. 1:1998cv2010. Judge Hogan will preside. Location: Courtroom 8, 333 Constitution Ave., NW.
10:00 AM - 12:00 NOON. The State Department's International Telecommunication Advisory Committee (ITAC) will meet. See, notice in Federal Register. Location: Room 1105, State Department.
Wednesday, August 14
1:00 - 5:00 PM. The Department of Commerce's (DOC) National Telecommunications and Information Administration (NTIA) will host a roundtable meeting regarding the convergence of communications technologies, including the Telephone Number Mapping (ENUM) Protocol that facilitates convergence between the Internet and the public switched telephone network. See, NTIA release, agenda, and notice in the Federal Register. For more information, contact Wendy Lader, NTIA Office of Policy Analysis and Development, at 202 482-1150 or wlader @ntia.doc.gov. Location: Room 4830, DOC, 1401 Constitution Ave., NW. 
People and Appointments
8/12. California Gov. Gray Davis appointed James Kleinberg to be a Judge of the Santa Clara County Superior Court. Kleinberg is a partner in the Silicon Valley office of the law firm of Bingham McCutchen (formerly McCutchen, Doyle Brown & Enersen). He is a trial lawyer who focuses on intellectual property, securities, antitrust, and trade regulation. His intellectual property cases have involved the Internet, web design and filtering technologies, semiconductors, security systems for automated teller machines, computer disk drives, and market research studies.
8/12. James Gilmore joined the law firm of Kelley Drye & Warren as a partner in the firm's Washington DC office. He will focus on corporate and technology law. Gilmore is a former Governor and Attorney General of the state of Virginia, and a former Republican National Committee Chairman. He is also the Chairman of the Advisory Panel to Assess Domestic Response Capabilities for Terrorism Involving Weapons of Mass Destruction, which is also known as the Gilmore Commission.
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