Tech Law Journal Daily E-Mail Alert
August 23, 2002, 9:00 AM ET, Alert No. 497.
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District Court Grants Summary Judgment to Prodigy in Patent Infringement Case
8/22. The U.S. District Court (SDNY) issued its Memorandum and Order Granting Summary Judgment [27 pages in PDF] in British Telecom v. Prodigy granting summary judgment to Prodigy. This is a case brought by British Telecom (BT) to test whether it can assert, based on a 1989 patent, that it has patented hyperlinking and web browsing on the Internet. The Court rejected this assertion.
BT asserted in its complaint filed on December 13, 2000, that its U.S. Patent No. 4,873,662, titled "Information handling system and terminal apparatus therefor", also known as the "Sargent patent", covers hyperlinking and web browsing. It alleged that Prodigy infringed that patent directly by being an Internet Service Provider (ISP), and that it induced and contributed to patent infringement by its subscribers.
The District Court held "that as a matter of law, no jury could find that Prodigy infringes the Sargent patent, nor that Prodigy contributes to infringement of the Sargent patent".
While the sole defendant is Prodigy, the case was brought to test the validity and enforceabilty of its patent against a broad array of web related entities and individuals. Prodigy is just one of thousands of ISPs.
BT's complaint alleges that by maintaining "a web server which stores plural blocks of information, i.e. web pages, at locations of a storage medium, such as a disk" and by including in these web pages both "a displayed portion" and "an undisplayed portion with hidden information that is not seen by the user" which includes "addresses associated with the displayed portion", Prodigy is infringing BT's patent.
BT sought declaratory relief that its patent is valid and enforceable, that Prodigy has directly and contributorily infringed, and induced infringement, of the patent, and enjoining Prodigy from further infringement. BT also sought damages, costs, and attorney fees.
Prodigy, which is now a subsidiary of SBC Communications, asserted the defenses of non-infringement and invalidity.
On March 13, 2002, the District Court issued its Opinion and Order Following Markman Hearing [38 pages in PDF]. It concluded that BT's patent describes a system in which multiple users, located at remote terminals, can access data stored at a central computer.
The Court held in its August 20 opinion that there are several reasons why the BT patent is not infringed by Prodigy or its subscribers. First, it distinguished between accessing data from a central computer, as described by the BT patent, and accessing information from the Internet. It also distinguished between accessing blocks of information, as described by the BT patent, and accessing information on the Internet. Finally, it distinguished between complete addresses, as described by the BT patent, and virtual addresses used on the Internet.
The Court wrote that "The Internet is a network of computers intertwined with each other in order to allow users around the world to exchange information. The whole purpose of the Internet is for the sources of information to be in many places rather than centralized. Any user can retrieve information that is stored on a Web server in any physical location, as long as that server is connected to the Web. ... This ``network of networks创 or ``system of systems创 allows users access to information from a variety of sources, in any location. BT cites the general rule that addition to an accused apparatus of one or more features than the claim requires does not preclude a finding of infringement. But what BT characterizes as ``additions创 are fundamental differences in the nature of the claim elements. As it did during the Markman hearing, BT would have me exclude the word ``central创 from the construction of ``central computer.创 The Court expressly rejected BT's interpretation by ruling that the Sargent patent claims a central computer that is a single computer with a centralized database. Because the Internet is not a computer network consisting of a centralized computer that stores all of the data accessible by remote terminals, Web servers on the Internet cannot literally infringe the '662 patent."
The Court wrote that "A key distinction between the '662 patent and the Prodigy Internet Service is the requirement of the '662 patent that information be stored as blocks of information." The Court continued that "Unlike the blocks of information required by the '662 patent, HTML code, which is the primary language of the World Wide Web and of the Prodigy Internet Service, does not use blocks. HTML code does not separate displayed information into a first sub-unit, and nondisplayed information in a contiguous, separable second sub-unit. Rather, HTML code contains information to be displayed intermingled with other information concerning formatting and linking, such as URLs and anchors."
See also, TLJ story titled "Patent Infringement Suits Lay Claims to Hyperlinking Technology", December 21, 2000.
House Committee Seeks Records from Global Crossing and Citibank
8/21. Rep. Mike Oxley (R-OH), Chairman of the House Financial Services Committee (HFSC), wrote a letter [4 pages in PDF] to Gary Winnick and John Legere asking for records pertaining to "corporate governance and financial management; the relationships between securities analysts and the companies they analyze; and the impact of potential conflicts of interest faced by securities analysts." Winnick is Chairman of Global Crossing. Legere is CEO of Global Crossing.
Rep. Oxley also sent a letter [4 pages in PDF] to Sanford Weill, Ch/CEO of Citigroup, the parent company of Salomon Smith Barney (SSB), requesting records. This request focuses records pertaining to Jack Grubman, a former SSB stock analyst.
Both letters also request records "relating to the announced sale of a majority interest in Global Crossing to Hutchison Telecommunications Limited and Singapore Technologies Telemedia". Global Crossing announced on August 9 that it proposed to sell for $250 Million a 61.5% interest in a newly constituted Global Crossing to Hutchison Telecommunications Limited, a wholly owned subsidiary of Hutchison Whampoa Limited, and Singapore Technologies Telemedia. See, Global Crossing release regarding the proposed sale.
Rep. Oxley set a deadline of September 4 for responding to the requests, after which date, the Committee may issue subpoenas. See also, HFSC release.
DOJ Recommends Approval of Qwest Long Distance Request
8/21. The Department of Justice's (DOJ) Antitrust Division issued its evaluation [35 pages in PDF] conditionally recommending that the Federal Communications Commission (FCC) approved Qwest Communications' Section 271 petition to provide in region interLATA services in the states of Montana, Utah, Washington, and Wyoming.
The DOJ wrote that "Qwest's Application demonstrates that it has succeeded in opening its local markets in Montana, Utah, Washington, and Wyoming in many respects. However, Qwest's assertions that it provides adequate manual order processing and electronically auditable billing for UNE-platform service remain questionable, although evidence submitted by Qwest after its application was filed may support the FCC抯 approval of this application at the conclusion of this proceeding. It also is unclear whether the UNE rates in Montana and Wyoming, which were developed recently, are appropriately cost-based. The Department therefore recommends that the Commission approve Qwest抯 application for long distance authority in these states only if it is able to assure itself that the concerns expressed in this Evaluation have been resolved."
The DOJ evaluation also addresses line sharing and broadband connections. Qwest unbundles the high frequency portion of its loops so that Competitive Local Exchange Carriers (CLECs), such as Covad, can provide Digital Subscriber Line (DSL) service to customers who receive voice service from Qwest. Covad complained that Qwest improperly provisions such lines, and that it has long refused Covad's request to provide a router test of end-to-end continuity of the data signal on such lines.
The DOJ concluded that "Although Qwest has instituted router testing for its retail customers, it still refuses to perform the router test requested by Covad. Qwest has presented no justification for its refusal to provide the same router testing for CLECs as it does for its retail customers. If Qwest does not agree to follow the same provisioning process for both wholesale and retail customers, then it must provide a detailed explanation justifying its refusal to do so, including data demonstrating that the performance results are equivalent even where the testing process differs."
See also, Qwest release and DOJ release.
CDT Reports on Access to State Court Records
8/20. The Center for Democracy and Technology (CDT) published a report titled "A Quiet Revolution in the Courts: Electronic Access to State Court Records". It is subtitled "A CDT Survey of State Activity and Comments on Privacy, Cost, Equity and Accountability".
The CDT reports that "this movement to post court information online represents a quiet revolution in citizen access and government accountability, part of the growing reality of e-government. Public access to electronic court records provides a convenient way for the public to monitor the judicial system and ensure the fairness and equality of its operations."
However, the CDT also wrote that "At the same time, a review of current practices indicates that the state and local courts are engaged in a series of difficult and novel balancing acts. One involves the balance between privacy and accountability. What information should be available online? ... Another set of issues concern cost: Is it appropriate to charge for online access?"
The bulk of the report is a state by state summary of the type of electronic access provided, and contact information. The report was principally researched by CDT Research Fellow Kathy Roche.
Federal Circuit Rules on Preemption and Shrink Wrap Contracts
8/20. The U.S. Court of Appeals (FedCir) issued its opinion in Bowers v. Baystate Technologies, a patent, copyright and contract case involving templates for CAD software. The Appeals Court affirmed in part and reversed in part.
Background. Harold Bowers created a template to aid in the use of computer aided design (CAD) software, such as the CADKEY tool of Cadkey, Inc. He filed a patent application for his template in 1989, and U.S. Patent No. 4,933,514 was issued in 1990.
CAD software works with menus, and menus nested within menus, which may be difficult for some to use. Bowers' patent disclosed a template, or desktop digitizing tablet, with various commands arranged in logical locations. The user points to and clicks upon the desired command.
George Ford designed Geodraft, a DOS based add-on program to operate with CAD. Geodraft allows an engineer to insert technical tolerances for features of the computer generated design. He copyrighted Geodraft. Bowers then obtained an exclusive license to Ford's Geodraft. Bowers then bundled and sold his template and Geodraft software, with a shrink wrap agreement that prohibits reverse engineering.
Baystate then developed a competing template and software, which incorporated features of Bowers' product. Under competition from Baystate, Bowers entered into a distribution agreement with Cadkey whereby Cadkey bundled Bowers' template and software for free. Bowers sought to make money off of selling software upgrades. Baystate subsequently acquired Cadkey, and repudiated the contract with Bowers.
District Court. Baystate filed a complaint in U.S. District Court (DMass) against Bowers alleging that Baystate抯 products do not infringe the 514 patent, that the 514 patent is invalid, and that the 514 patent is unenforceable. It sought declaratory relief. Bowers filed counterclaims for copyright infringement, patent infringement, and breach of contract (including the prohibition on reverse engineering).
The trial jury found for Bowers on all claims, and awarded him $1,948,869 for copyright infringement, $3,831,025 for breach of contract, and $232,977 for patent infringement. The District Court set aside the copyright damages as duplicative of the contract damages and entered judgment for $5,270,142, including pre-judgment interest. Baystate appealed. Bowers cross appealed the District Court's denial of copyright damages.
Court of Appeals. The Court of Appeals affirmed in part, and reversed in part. It affirmed the breach of contract award. It also affirmed the District Court's modification of the damages award (by finding copyright damages duplicative of contract damages). Finally, it reversed the judgment as to patent infringement, as a matter of claim construction.
The Appeals Court held that the Copyright Act, and in particular, 17 U.S.C. 301, does not preempt or narrow  Bowers' contract claims. The Court held this as a matter of the law of the originating Court -- in this case, the First Circuit. The Court further found that Bowers had presented ample evidence of reverse engineering by Baystate of the subject matter covered by the shrink wrap contract. The Court affirmed the judgment for breach of contract, and the dollar amount of the award.
The Appeals Court then affirmed the District Court's decision to set aside the jury's award of copyright damages. It wrote that "The shrink wrap license agreement prohibited, inter alia, all reverse engineering of Mr. Bowers' software, protection encompassing but more extensive than copyright protection, which prohibits only certain copying. Mr. Bowers' copyright and contract claims both rest on Baystate's copying of Mr. Bowers' software. ... In this case, the breach of contract damages arose from the same copying and included the same lost sales that form the basis for the copyright damages. The district court, therefore, did not abuse its discretion by omitting from the final damage award the duplicative copyright damages."
The Appeals Court also wrote that "Because this court affirms the district court's omission of the copyright damages, this court need not reach the merits of Mr. Bowers' copyright infringement claim."
On the patent infringement claim, the Appeals Court reversed. It wrote that "this court perceives no basis upon which a reasonable jury could find that Baystate's accused templates infringe claim 1 of the '514 patent." Hence, there was no literal infringement. Bowers did not assert infringement under the doctrine of equivalents.
GAO Reports on Foreign Patent Challenges Facing Small Businesses
8/22. The General Accounting Office (GAO) released a report [126 pages in PDF] titled "International Trade: Federal Action Needed to Help Small Businesses Address Foreign Patent Challenges".
The GAO convened a panel of 39 U.S. patent attorneys with expertise in obtaining foreign patents for both small and large businesses. It then sent a questionnaire to a random sample of small businesses that had obtained or considered obtaining foreign patents in the last 5 years.
The GAO concluded from these efforts that "Foreign patent costs are the most significant impediment that small businesses face in trying to protect their inventions abroad, according to the small businesses and patent attorneys GAO contacted. The minimum cost to a small business to obtain and maintain a relatively simple patent in the United States for 20 years could be about $10,000, based on a scenario that GAO developed. However, extending this patent to nine other countries, which could be a typical small business foreign patent strategy, could cost between $160,000 and $330,000 ..."
The GAO found that other impediments include "companies' limited resources and limited foreign patent knowledge; differences among foreign patent systems, which increase costs and make the process more complex; and the existence of challenging business climates and weak patent enforcement in certain countries."
The GAO also reported that "More than 70 percent of the survey respondents in both groups supported federal efforts to promote harmonization among the world's patent laws and systems and to seek patent cost reduction."
Finally, it found that "nearly 70 percent of the businesses thought that federal financial assistance to help defray the costs of foreign patents would be helpful, but less than 50 percent of the patent attorneys held this view. Most of the patent attorneys regarded federal financial assistance as an indirect solution to the broader problem of a lack of uniformity among global patent systems. Conversely, nearly 70 percent of the attorneys, but only about 40 percent of the businesses, thought that making information about foreign patents available to small businesses, particularly those that are just beginning to consider foreign patents, would be useful."
The report was prepared at the request of Sen. Christopher Bond (R-MO), the ranking Republican on the Senate Small Business Committee, and Rep. Donald Manzullo (R-IL), Chairman of the House Small Business Committee.
DOJ Official Addresses Online Copyright Infringement
8/20. John Malcolm, Deputy Assistant Attorney General in charge of the Computer Crimes and Intellectual Property Section (CCIPS) at the Department of Justice (DOJ), gave a speech at the Progress and Freedom Foundation's Aspen Summit 2002 in which he addressed the role of law enforcement in online copyright infringement. He wrote that "Effective law enforcement is obviously going to be a critical part of that equation. The Department of Justice stands ready to do its part." See, text of speech as prepared for delivery.
He wrote that "The demise of Napster has done nothing to dampen the demand for on-line content, and Napster has been replaced by even more sophisticated peer to peer services such as Morpheus, Kazaa, and Grokster." He added that "intellectual property piracy is increasing in the on-line environment".
Malcolm elaborated that "unlike in the past, when law enforcement would shut down the initial distribution source and in effect ended the piracy operation, in the digital age, cutting off the initial source does not end the threat, as each and every copy distributed prior to law enforcement intervention continues to exist on the Internet and can be reproduced and distributed indefinitely by others."
He added that "this poses significant challenges to law enforcement. Moreover, many, if not most, of the major software pirates are highly skilled, covering their tracks, operating in relative anonymity, moving from location to location to conduct their activities, and many times hijacking the computers of innocent users to perpetrate their crimes."
Malcolm also reviewed some pending legislation. He wrote that "There are several proposals currently being debated by Congress to address this problem. They range from a proposal offered by Senator Fritz Hollings which would prohibit firms from making or selling digital media devices that did not incorporate so-called ``standard security technologies创 to a proposal offered recently by Congressman Howard Berman which would permit copyright holders to disrupt file sharing systems when they suspect that copyrighted material is being distributed without authorization." See, HR 5001, introduced by Rep. Berman on July 25, 2002, and S 2048, introduced by Sen. Hollings on March 21, 2002.
He also discussing private litigation efforts and enforcement proceedings by the DOJ.
He concluded that "Civil remedies are simply inadequate against those who are judgment proof or who are adept at hiding their money or who may be engaging in massive IP theft for non-economic reasons or who may simply move their illegal operations to another venue and set up shop again. Moreover, the tools available to civil litigators are usually not as effective as the tools available to law enforcement authorities. Further, federal law enforcement authorities have the ability to conduct multi jurisdictional and international investigations, which is of particular importance since many of the criminal organizations that engage in massive infringement operate overseas and since the Internet knows no geographic boundaries."
Publication Schedule
TLJ did not publish an issue of the TLJ Daily E-Mail Alert on Thursday, August 22. The TLJ Daily E-Mail Alert will not be published on Wednesday, August 28, Thursday, August 29, Friday, August 30, or Monday, September 2.
Record Companies Withdraw Lawsuit Against Internet Backbone Companies
8/20. The Recording Industry Association of America (RIAA) announced that the lawsuit brought by thirteen of its member music companies against four Internet backbone companies has been "withdrawn".
On August 15, the music companies filed a complaint in U.S. District Court (SDNY) against four Internet backbone companies seeking an order requiring the defendants to block access to the Internet protocol addresses assigned to the Listen4ever servers in the People's Republic of China. The complaint alleged that Listen4ever operates a web site that engages in infringement of the music companies' copyrighted sound recording by making them available for download. Plaintiffs also filed a motion for preliminary injunction.
The RIAA stated in a release that only that the complaint was "withdrawn" because the infringing web site is "now offline".
The RIAA published in its web site one huge PDF file that includes various documents, including the Complaint, Plaintiffs' Memorandum of Law in Support of Their Motion for Preliminary Injunction, and declarations of witnesses and experts.
The one count complaint sought only injunctive relief, pursuant to Section 512(j)(1)(B)(ii) of the Digital Millennium Copyright Act (DMCA), which section is codified at 17 U.S.C. 512. The complaint requested "That the Court order Defendants to block Internet traffic to and from the website ... all the pages affiliated with it, and any substantially similar successor website".
The defendants were AT&T Broadband, Cable and Wireless USA, Sprint Corporation -- Advanced Network Systems, and UUNet Technologies, Inc. The operator of the infringing web site was not named as a defendant.
Friday, August 23
9:30 AM. Executives of Time Warner Telecom and BellSouth will hold a press briefing on an undisclosed topic. Reporters may join by conference call by calling 800 313-6624 and asking for the Time Warner BellSouth press event. Location: BellSouth Washington office, 9th Floor, 1133 21st St., NW.
Monday, August 26
8:00 - 11:00 AM. Equity International will host a conference titled "Homeland Security Financing Briefing". Speakers will address supplemental homeland security spending for 2002, priorities for 2003 homeland security spending, critical infrastructure protection, counter terrorism programs of the FBI, and how to win homeland security contracts. Ron Dick, Director of the FBI's National Infrastructure Protection Center, will speak from 9:15 to 9:30 AM. Other speakers include Dale Watson (Executive Assistant Director for Counterterrorism at the FBI), William Hoagland (Staff Director of the Senate Budget Committee), Scott Lilly (Minority Staff Director of the House Appropriations Committee), Paul Bergeron (Office of the Deputy Assistant to the Secretary of Defense for Chemical & Biological Defense), and Donald Vincent (VP for Homeland Security at Booz Allen). Location: Holeman Lounge, National Press Club, 529 14th St., NW.
1:00 PM. FTC Chairman Timothy Muris, Postmaster General John Potter, and other government officials will hold a press conference regarding telemarketing fraud. See, release. Location: USPS Headquarters, 475 L'Enfant Plaza SW, Ben Franklin Room (11th Floor).
Tuesday, August 27
10:00 AM - 12:00 NOON. The State Department's International Telecommunication Advisory Committee (ITAC) will meet. See, notice in Federal Register, July 23, 2002, Vol. 67, No. 141, at Page 48241. Location: Room 1105, State Department.
8:00 AM - 3:30 PM. The National Academy of Sciences (NAS) will host partially open, and partially closed, seminar titled "Review of the Patent Office's 21st Century Strategic Plan". See, agenda. Location: NAS, Lecture Room, 500 Fifth Street, NW.
Deadline to submit comments to the National Telecommunications and Information Administration (NTIA) in response to its request for comments on the effectiveness of Internet blocking and filtering technologies.  1703 of the Children's Internet Protection Act (CIPA) [PDF] directs NTIA to initiate a notice and comment proceeding to evaluate whether currently available Internet blocking or filtering technology protection measures and Internet safety policies adequately address the needs of educational institutions. It also directs NTIA to make recommendations to Congress on how to foster the development of technology protection measures that meet these needs. See, notice in the Federal Register.
Wednesday, August 28
Day one of a two day public hearing before the Federal Election Commission (FEC) on its second Notice of Proposed Rulemaking (NPRM) [67 pages in MS Word] regarding the Bipartisan Campaign Reform Act of 2002 (BCRA), the recently enacted campaign finance reform legislation. This NPRM pertains to "electioneering communications". The proposed rules would exempt webcasts. See also, FEC release.
Thursday, August 29
8:30 AM - 12:35 PM. The President's Homeland Security Advisory Council (PHSAC) will hold a meeting to receive briefings and to discuss best practices in the areas of mergers and acquisitions, information technology, personnel management and related issues that may concern the creation of the proposed Department of Homeland Security. Public access is limited. See, notice in Federal Register. Location: Indian Treaty Room, Eisenhower Executive Office Building, 725 Seventeenth St., NW.
Day two of a two day public hearing before the Federal Election Commission (FEC) on its second Notice of Proposed Rulemaking (NPRM) [67 pages in MS Word] regarding the Bipartisan Campaign Reform Act of 2002 (BCRA), the recently enacted campaign finance reform legislation. This NPRM pertains to "electioneering communications". The proposed rules would exempt webcasts. See also, FEC release.
Deadline to submit comments to the FEC regarding its NPRM regarding "electioneering communications".
People and Appointments
8/22. California Governor Gray Davis appointed Jo-Lynne Lee as a Judge of the Alameda County Superior Court. She is an attorney with the law firm of Griffith Castle & Schwartzman, whose attorneys only act as court appointed special masters, court appointed discovery referees, and private mediators and arbitrators in construction defect litigation and other real estate disputes.
More News
8/22. The Securities and Exchange Commission (SEC) announced in a release the SEC Chairman Harvey Pitt wrote a letter to the National Association of Securities Dealers (NASD) and the New York Stock Exchange (NYSE) requesting that they review the initial public offering (IPO) process, including IPO allocation practices and the roles of issuers and underwriters in the price setting and offering process. The SEC did not publish the letter.
8/20. The U.S. Trade and Development Agency (TDA) announced in a release that the TDA and the nation of Jordan "entered into a grant agreement to fund technical assistance in planning for the liberalization of Jordan's fixed line telecommunications services". The amount of the grant is $417,252.
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