Tech Law Journal Daily E-Mail Alert
October 29, 2002, 9:00 AM ET, Alert No. 537.
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Appeals Court Affirms Dismissal of Class Action Antitrust Suit Against MSFT & OEMs
10/28. The U.S. Court of Appeals (4thCir) issued its opinion [41 pages in PDF] in Gravity v. Microsoft, affirming the District Court's dismissal of a class action antitrust suit against Microsoft and several original equipment manufacturers (OEMs).

Gravity filed a complaint in U.S. District Court (DC) against Microsoft, Compaq, Dell, and Packard Bell NEC in 1999 alleging violation of federal antitrust laws. It sought class action status. This is one of the many class action antitrust suits filed against Microsoft in the wake of the federal government's action against Microsoft. The Judicial Panel on Multidistrict Litigation transferred this action to the U.S. District Court (DMd) where it was coordinated with about 64 other antitrust actions against Microsoft. The other antitrust actions were consolidated. However, this action was not, because it was the only action that alleged claims against OEMs.

The Appeals Court summarized the complaint as "alleging a ``hub- and- spoke´´ conspiracy between Microsoft and the OEM Defendants to restrain trade, in violation of § 1 of the Sherman Act, and a conspiracy to maintain Microsoft’s alleged monopolies in the sale of operating systems, word processing, and spreadsheet software, in violation of § 2 of the Sherman Act. [and] ... that the OEM Defendants and Microsoft violated the Sherman Act by entering into licensing agreements with the following anticompetitive provisions: (1) a prohibition against removing icons, folders, or Start menu entries from the Windows desktop; (2) a prohibition against modifying the initial Windows boot sequence; (3) the integration of Internet Explorer (IE), Microsoft’s Internet browser software, and other application software with Microsoft’s operating software; and (4) the inclusion of long-term distribution contracts, exclusive dealing distribution arrangements, and perprocessor license fees."

The District Court dismissed the complaint pursuant to FRCP 12(b)(6) for failure to state a claim. This appeal followed. A divided three judge panel of the Fourth Circuit affirmed the District Court. Judge Williams wrote for the majority. Judge Gregory wrote a dissent (beginning at page 29).

USPTO Schedules Roundtables on Small Business Views on Foreign Patent Challenges
10/28. The U.S. Patent and Trademark Office (USPTO) published a notice in the Federal Register that sets tentative dates for a series of roundtable meeting in Los Angeles, Chicago and Washington DC regarding small business views on foreign patent challenges. The notice also requests, and sets deadlines for submitting, comments.

Comments are due by December 19, 2002. Requests to participate in round table meetings are due by November 22, 2002. The round table meetings are tentatively scheduled for December 2 in the Los Angeles area, December 4 in the Chicago area, and December 19 in the Washington DC area. See, Federal Register, October 28, 2002, Vol. 67, No.208, at Pages 65786 - 65787.

These USPTO roundtables follow a recent General Accounting Office (GAO) report [PDF] titled "Federal Action Needed to Help Small Businesses Address Foreign Patent Challenges". This report was released on August 22, 2002. See also, story titled "GAO Reports Foreign Patent Challenges Facing Small Businesses" in TLJ Daily E-Mail Alert No. 497, August 23, 2002. The GAO report recommended that the USPTO conduct hearings to receive input from small businesses.

The GAO found 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 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.

The USPTO notice states that "The USPTO requests that interested parties submit comments and/or recommendations on achieving additional harmonization of patent laws. It is suggested that this input be categorized as follows: (1) Cost and fee related issues. (2) Procedural and administrative issues. (3) Substantive patent law issues. (4) Enforcement issues. (5) Miscellaneous issues.

Cato Criticizes High Tech Pork
10/28. The Cato Institute published a paper [28 pages in PDF] titled "Birth of the Digital New Deal: An Inventory of High Tech Pork Barrel Spending".

The report states that "Just as policymakers proposed a litany of New Deal programs and spending initiatives during the Great Depression era, lawmakers today are devising many new federal programs aimed at solving the supposed emergencies or disasters that will befall the telecommunications industry without government assistance."

Adam Thierer, Wayne Crews, and Thomas Pearson, the paper's authors, wrote that "The new communications, cyberspace, and Internet related spending initiatives that policymakers are considering or have already implemented can be grouped into four general categories: (1) broadband deployment; (2) digital education, civic participation, and cultural initiatives; (3) cybersecurity; and (4) research and development. Dozens of new federal programs have been proposed in these areas during the 107th Congress. And dozens of other assistance programs already exist."

The paper argues that "Washington subsidy and entitlement programs typically have a never ending lifespan and often open the door to increased federal regulatory intervention. That kind of political meddling could also displace private sector investment efforts or result in technological favoritism by promoting one set of technologies or providers over another. Moreover, subsidy programs are unnecessary in an environment of technological competition, characterized by both proliferating consumer choices and uncertain market demand for new services. Finally, perhaps the leading argument against the creation of a Digital New Deal is that by inviting the feds to act as a market facilitator, the industry runs the risk of becoming more politicized over time.

It recommends that "Before high tech sector leaders become too comfortable in Washington circles, they should ask themselves if they want their future to be so closely tied to the whims of federal legislators and regulators."

GAO Reports on Monitoring of Employee Computer Use
10/28. The General Accounting Office (GAO) released a report [PDF] titled "Employee Privacy: Computer Use Monitoring Practices and Policies of Selected Companies".

The GAO "conducted interviews with officials from 14 Fortune 1,000 private sector companies". It found that "All 14 companies we reviewed store their employees’ electronic transactions: e-mail messages, information of Internet sites visited, and computer file activity."

It also found that "These companies reported they collect this information to create duplicate or back-up files in case of system disruptions; to manage computer resources such as system capacity to handle routine e-mail and Internet traffic; and to hold employees accountable for company policies."

"Eight of these companies reported that they would read and review these electronic transactions if they receive other information that an individual may have violated company policies. When such circumstances arise, these employers can review employees' electronic transactions to find if violations of company computer-use policies such as visits to sites containing offensive or disruptive material and improper protection of proprietary information have occurred. On the other hand, 6 companies we contacted routinely analyzed their employees’ transactions to find possible inappropriate uses of company computer resources."

The report also addressed employee notification. It stated that "all of the companies we contacted had policies that contained most of the elements experts agreed should be included in company computer-use policies. For example, all company policies affirmed their rights to review employee use of company computer assets, described appropriate employee uses of these assets, and detailed penalties for misuse. We also found that all companies disseminated information about these policies, although in a variety of ways. For example, 8 companies require new employees to attend training that includes the review of companies’ computer-use policies. Some companies required employees to complete on-line training while others used videotapes."

Finally, the report "found that none of the companies we studied had changed any of their employee computer-use policies or monitoring practices after the September 11 terrorist attacks."

The report was prepared for the late Rep. Patsy Mink (D-HI), formerly the ranking Democrat on the House Education and Workforce Committee's Subcommittee on 21st Century Competitiveness.

Rep. Boucher Writes AG Ashcroft In Support of Echstar Directv Merger
10/28. Rep. Rick Boucher (D-VA) wrote a letter to Attorney General John Ashcroft regarding the Department of Justice (DOJ) Antitrust Division's pending review of the proposed merger of Echostar and Directv.

Rep. Rick BoucherRep. Boucher (at right), who is a member of the House Commerce Committee, and its Telecom Subcommittee, wrote "to ask that the Department of Justice favorably examine the revisions to the proposed merger between EchoStar Communications Corporation and Hughes Electronics Corporation. The applicants have recently proposed major revisions, including structural remedies to address competitive concerns, and I would ask that the Department consider seriously these revisions given the potential for increased benefits to consumers, particularly in rural communities and small media markets."

Rep. Boucher focused on "increased access to local broadcast stations". He wrote that "The more efficient use of spectrum that will result from the merger is likely the only way to affect the goals of SHVIA for all 210 designated market areas (DMAs)."

The Federal Communications Commission (FCC), which has responsibility for deciding upon applications for transfer of licenses associated with the proposed merger, has already declined to approve the transaction, and referred the matter to an administrative law judge for an evidentiary hearing. See, TLJ story titled "FCC Declines to Approve EchoStar DirectTV Merger", October 10, 2002.

Rep. Boucher also addressed the parties' efforts to restructure the proposal to meet regulatory concerns. He stated that "It is my understanding that revisions proposed by EchoStar and DirecTV include the divestiture of spectrum to Rainbow DBS, a facilities based DBS competitor. With the addition of these channels, Rainbow DBS proposes to provide expanded service to consumers, maintaining a competitive environment in the post merger DBS market."

In the past, Rep. Boucher has advocated approval of the proposed merger on the basis that it would facilitate the provision of broadband Internet access services in rural areas via satellite. In this letter he stated merely that "the merger proponents promise ... universal access to broadband services". See also, story titled "EchoStar DirecTV Merger and Broadband Internet Access" in TLJ Daily E-Mail Alert No. 321, December 5, 2001.

DC Circuit Rules in Comptel v. FCC on EELs
10/25. The U.S. Court of Appeals (DCCir) issued its opinion in Comptel v. FCC, a case regarding the requirement of the Telecommunications Act of 1996 that the incumbent local exchange carriers (ILECs) lease unbundled network elements (UNEs) to competitive local exchange carriers (CLECs). See, 47 U.S.C. § 251(c)(3).

The Competitive Telecommunications Association (Comptel) filed a petition for review of two orders of the Federal Communications Commission (FCC) pertaining CLECs' access to a combination of UNEs known as the enhanced extended link (EEL). EELs are unbundled loops and transport network elements.

The Court of Appeals denied the petition for review.

Herschel Abbott of BellSouth, an ILEC, stated in a release that "This part of the network is highly competitive, as are some others. BellSouth is pleased that the Court recognized the authority of the FCC to permit highly competitive portions of the network to remain competitive and to prevent others from gaming the system."

More News
10/28. The Federal Communications Commission (FCC) published a notice in the Federal Register regarding its third biennial review of its broadcast ownership rules pursuant to § 202 of the Telecommunications Act of 1996. The FCC seeks comments on the national television multiple ownership rule, the local television multiple ownership rule, the radio television cross ownership rule, and the dual network rule. The FCC announced this Notice of Proposed Rulemaking (NPRM) at its meeting on September 12. See, story titled "FCC Announces Broad Review of Media Ownership Rules" in TLJ Daily E-Mail Alert No. 509, September 16, 2002. This notice sets deadlines for comments. Comments are due by December 2, 2002. Reply comments are due by January 2, 2003. See, Federal Register, October 28, 2002, Vol. 67, No. 208, at Pages 65751 - 65776. This is MB Docket No. 02-277.

10/28. Qwest stated in a release that it "has concluded that its policies and practices for determining the value of the various elements of the fees earned in connection with the sales of optical capacity assets for cash did not support the accounting treatment. As a result, the company concluded that it should defer the $531 million of revenue previously recognized on such sales over the life of the underlying agreements."

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Tuesday, October 29
9:30 AM - 4:30 PM. The SEC will hold a full day hearing on issues relating to the structure of the U.S. equity securities markets. The SEC stated in a release that the topics will include "the collection, consolidation and dissemination of market data through intermarket plans; broker dealers' duty of best execution and corresponding marketplace rules relating to intermarket access, trade throughs, and price protection; the role of national securities exchanges, electronic communications networks (ECNs), and alternative trading systems; and the self regulatory system". See also, schedule and list of participants. Location: SEC, 450 5th Street, NW.

8:45 AM - 3:45 PM. The NIST's Advanced Technology Program (ATP) Advisory Committee will hold a partially closed meeting. The agenda includes a review of ATP policy, organization, and budget, and an update from an international community panel on technology programs. Pre-registration is required to attend; contact Carolyn Peters by October 24, at carolyn.peters or 301 975-5607. See, notice in Federal Register. Location: NIST, Administration Building, Lecture Room B, Gaithersburg, MD.

12:15 PM. The FCBA's Common Carrier Committee will host a brown bag lunch. The speaker will be Bill Maher, Chief of the FCC's Wireline Competition Bureau. Location: Willkie Farr & Gallagher, 1875 K Street, 2nd Floor, NY conference Room.

Deadline for the DOJ's Antitrust Division to release its evaluation of SBC's Section 271 application with the FCC to provide in region interLATA service in the state of California. This is WC Docket No. 02-306.

Wednesday, October 30
POSTPONED TO APRIL 30, 2003. The FCC will hold Auction No. 46. This is the 1670-1675 MHz band auction. See, notice of postponement in Federal Register, October 10, 2002, Vol. 67, No. 197, at Pages 63095 - 63096.

9:00 AM - 12:00 NOON. The Telecommunications Service Priority (TSP) System Oversight Committee will hold a meeting. The agenda includes TSP/WPS program update, TSP sponsorship policies, and OSS concept. For more information, contact Deborah Bea at 703 607-4933. See, notice in the Federal Register. October 11, 2002, Vol. 67, No. 198, at Page 63452. Location: National Communications System (NCS), second floor conference room, 701 South Court House Road, Arlington, VA.

10:00 AM - 12:00 NOON and 2:00 - 4:00 PM. The FTC and the DOJ's Antitrust Division will hold the final workshops in their joint series titled "Competition and Intellectual Property Law and Policy in the Knowledge Based Economy" on October 25 and 30 and November 6. The October 30 event is titled "Competition, Economic, and Business Perspectives on Substantive Patent Law Issues: Non-Obviousness and Other Patentability Criteria". Location: FTC, Room 432, 600 Pennsylvania Ave., NW.

12:00 NOON. Deadline to submit comments to the USTR regarding the acts, policies, and practices of trading partners of the U.S. that are relevant to the decision as to whether they should be identified under Section 182 of the Trade Act of 1974 (19 U.S.C. § 2242). Section 182, which is commonly referred to as the "Special 301" provisions in the Trade Act, requires the USTR to identify countries that deny adequate and effective protection of intellectual property rights or deny fair and equitable market access to U.S. persons who rely on intellectual property protection. The USTR also requests comments on the U.S. Government's 1998 Memorandum of Understanding with Paraguay on intellectual property matters, including enforcement. See, notice in the Federal Register

12:30 PM. The FCBA's Online Communications Committee will hold a brown bag lunch. The topic will be the role of ISPs in security and law enforcement compliance. The speakers will be Christopher Bubb (AOL Time Warner) and Betty Ellen Shave (Associate Chief for International Matters, Computer Crime and Intellectual Property Section, Department of Justice. Location: Cole Raywid & Braverman, 1919 Pennsylvania Ave., NW, No. 200.

EXTENDED TO DECEMBER 6. Deadline to submit comments to the FCC in response to its Notice of Proposed Rulemaking (NPRM) [15 pages in PDF] in its proceeding titled "In the Matter of Digital Broadcast Copy Protection". This NPRM proposes that the FCC promulgate a broadcast flag rule, and seeks comment on this, and related questions. This is MB Docket No. 02-230. See also, FCC release [PDF]. See also, Order [PDF] of October 11, 2002 extending deadlines.

Thursday, October 31
The Senate will meet at 10:30 AM in pro forma session only.

8:30 AM- 4:15 PM. Day one of a two day CLE seminar hosted by the FCBA titled "Communications Law 101: A Practitioner's Primer". The price to attend is $250 for lawyers and paralegals in private practice or corporate positions, and $125 for those in government service, non-profit positions or in law school. Location: Georgetown University Law Center, 600 New Jersey Ave., NW.

12:00 NOON - 1:00 PM. The National Telecommunications Cooperative Association (NTCA) will host a luncheon to release the results of its 2002 Wireless Survey. RSVP to Donna Taylor at 703 351-2086 or by October 28. Location: NTCA Headquarters, 4121 Wilson Blvd., 10th floor, Arlington, VA. If traveling by Metro, go to the Ballston/MU on the orange line.

2:30 - 4:30 PM. The FCC's WRC-03 Advisory Committee will meet. See, notice in the Federal Register. Location: FCC, 445 12th Street, SW, Room TW-C305 (Commission Meeting Room).

Friday, November 1
8:30 AM - 1:00 PM. Day two of a two day CLE seminar hosted by the FCBA titled "Communications Law 101: A Practitioner's Primer". The price to attend is $250 for lawyers and paralegals in private practice or corporate positions, and $125 for those in government service, non-profit positions or in law school. Location: Georgetown University Law Center, 600 New Jersey Ave., NW.

Deadline to submit reply comments to the FCC regarding BellSouth's Section 271 application with the FCC to provide in region interLATA service in the states of Florida and Tennessee. This is WC Docket No. 02-307. See, FCC notice [PDF].

Deadline to submit reply comments to the FCC regarding the petition for declaratory ruling in CC Docket No. 01-92 requesting that the FCC determine that wireless termination tariffs are not a proper mechanism for establishing reciprocal compensation arrangements between local exchange carriers (LECs) and commercial mobile radio service (CMRS) providers. See, FCC notice [PDF].

Monday, November 4
The Senate will meet at 10:30 AM in pro forma session only.

The Supreme Court will return from its recess, which it began on October 22.

Deadline to submit comments to the NTIA in response to its request for comments on two of the nine exceptions to the Electronic Signatures in Global and National Commerce (E-SIGN) Act. The E-SIGN Act provides for the acceptance of electronic signatures in interstate commerce, with certain enumerated exceptions. The two categories of exempt documents that are the subject of this request for comments are court records and hazardous materials notices. The Act tasks the NTIA with studying these exemptions, and providing reports to Congress. See also, NTIA release, notice in Federal Register, September 3, 2002, Vol. 67, No. 170, at Pages 56277 - 56279, regarding court records, and notice in Federal Register, September 3, 2002, Vol. 67, No. 170, at Pages 56279 - 56281, regarding hazardous materials notices.

Deadline to submit reply comments to the FCC regarding SBC's Section 271 application with the FCC to provide in region interLATA service in the state of California. This is WC Docket No. 02-306. See, FCC notice [PDF].