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November 5, 2002, 9:00 AM ET, Alert No. 542.
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Virginia Court Affirms Denial of Motion to Quash Subpoena for AOL Records on Anonymous Poster
11/1. The Virginia Supreme Court issued its opinion [MS Word] in AOL v. Nam Tai Electronics, affirming a Virginia trial court order refusing an ISP's (AOL) motion to quash a subpoena duces tecum based upon an electronics company's (Nam Tai) California action against anonymous persons who allegedly published false and defamatory messages about it on a Yahoo message board. See also, opinion [TXT] without footnotes. Bottom line: AOL cannot protect the anonymity of its subscriber in this case.

Background. Nam Tai is a Hong Kong based company that makes telecommunication products, palm sized PCs, personal digital assistants (PDAs), linguistic products, calculators and various components including LCD modules and RF modules for mobile phones, transformers and LCD panels. Its stock is traded on the NASDAQ exchange.

Yahoo, an Internet portal, maintains a message board for discussion of Nam Tai stock. America Online (AOL) is, among other things, an Internet service provider based in Loudon County, Virginia.

Nam Tai asserts that numerous anonymous individuals posted defamatory messages about Nam Tai to the Yahoo message board. It further asserts that one such person used the email address "Scovey" received notice of, but did not participate in, the court proceedings described below.

California Action. Nam Tai first filed a complaint in California Superior Court (Los Angeles County) against 51 unnamed individuals alleging violation of the California unfair business practices statutes in connection with their publishing allegedly "false, defamatory, and otherwise unlawful messages" on the Yahoo message board devoted to a discussion of Nam Tai stock.

Nam Tai obtained a subpoena duces tecum from the California Superior Court directing Yahoo to disclose its subscriber data on "scovey2". Yahoo complied. The information that it disclosed revealed that "scovey2" obtained his Internet access through AOL, that "scovey2" used IP address which is registered to AOL, and that "scovey2" provided to Yahoo the alternate email address of "".

Nam Tai then obtained a commission for out of state discovery from the California Superior Court to depose AOL's custodian of records in the state of Virginia.

Virginia Action. Nam Tai then filed a praecipe in the Circuit Court of Loudoun County, Virginia, for a foreign subpoena duces tecum. The clerk of the trial court issued the subpoena directing AOL's custodian of records to produce records related to "". Rather than comply, AOL filed a motion to quash the subpoena duces tecum, asserting the First Amendment right to speak anonymously. AOL also argued that its motion should be granted, based upon principles of comity. After receiving further guidance from the California Superior Court, the Virginia Circuit denied AOL's motion to quash and directed AOL to comply with the subpoena duces tecum. AOL appealed.

Virginia Supreme Court. The Supreme Court affirmed the trial court order pursuant to principles of comity, and its application of the Uniform Foreign Depositions Act (Virginia Code §§ 8.01-411 through –412.1).

Section 411 provides that "Whenever any mandate, writ or commission is issued out of any court of record in any other state . . . witnesses may be compelled to appear and testify and to produce and permit inspection or copying of documents in the same manner and by the same process and proceeding as may be employed for the purpose of taking testimony or producing documents in proceedings pending in this Commonwealth."

The Virginia Supreme Court, relying on its previously decided case, AOL v. APTC, stated the Virginia will afford comity to an order issued by a court of another state, if certain conditions are met. "First, the foreign court must have personal and subject matter jurisdiction to enforce its order within its own judicatory domain. Second, the procedural and substantive law applied by the foreign court must be reasonably comparable to that of Virginia. Third, the foreign court's order must not have been falsely or fraudulently obtained. And, fourth, enforcement of the foreign court's order must not be contrary to the public policy of Virginia, or prejudice the rights of Virginia or her citizens."

The Court addressed each of these four conditions in its analysis of AOL's challenge to enforcement of the subpoena. It found that the California subpoena satisfied all found conditions.

Commerce Department Official Addresses IT Issues
10/28. Deputy Secretary of Commerce Samuel Bodman gave a speech on cyber security at a US EU Information Security Forum in Brussels, Belgium. Bodman also gave a broader speech on electronic commerce, information security, protection of digital intellectual property, broadband deployment, and spectrum management.

Information Security. He stated in his speech on security that "Information security is a critical component of the homeland security equation. As the world is increasingly connected by the Internet, we are also more vulnerable from different directions ... the cyber world has no borders. Just last week, this vulnerability was evidenced by the ``distributed denial of service´´ attack launched against the Internet root servers. While this attack did not significantly impact Internet users, it does remind us of the constant threat that cyber attacks pose."

He continued that "we must strike the right balance between private sector leadership and government involvement. President Bush has consistently advocated a policy agenda that promotes market based solutions and encourages competition ... and which regulates, when absolutely necessary, in a transparent and unobtrusive manner."

He also stated that "Information security is -- and should be -- incorporated into the fabric of doing business ... it must be an integral part of a company's strategic planning and operations, just like marketing or product development. Companies must institutionalize the process of identifying critical assets, assessing their vulnerabilities, and managing the risks associated with these vulnerabilities."

E-Commerce. In his broader speech, Bodman reiterated President Bush's commitment to "to pursue an e-commerce agenda that promotes market based solutions". He stated that "the private and public sectors must communicate and collaborate to remove barriers to e-commerce and to strengthen the security of our information and communication networks."

Intellectual Property. He said that "Respecting and enforcing IP rights is necessary for innovation to flourish. The digital marketplace presents us with difficult challenges, however. The same avenues that provide unprecedented opportunities to distribute content also enable widespread piracy. And, we've seen that technological solutions that promise protection for digital content raise legitimate concerns for innovators and consumers."

He continued that "I understand the complexities of a digital rights management system, but I don't see how not developing a solution, or delaying implementation benefits anyone in the long run ... I know that some of you are legitimately concerned that efforts to ``fix´´ these new vulnerabilities will eviscerate consumers' fair use rights, curtail innovation in other areas, or inappropriately prevent business model evolution. In other words, that the cure could be worse than the disease ... these issues are valid, but I would also counter that not taking action entails substantial risks and could be extremely costly in the long-run."

He concluded that "Government should continue to do its part ... enforcing the law to make piracy an elusive and ineffective competitor to legitimate digital content, facilitating industry progress, and engaging and educating consumers. But, I have confidence that the market has the wisdom to deliver an effective solution to digital rights management ..."

Broadband. Bodman stated that "Governments need to create the right environment for further investment in broadband and enabling technologies by supporting research and development, promoting e-government, promoting innovative approaches like broadband demand aggregation, and educating consumers."

Spectrum. He briefly touched on spectrum management. He said that "will be making available 90 megahertz of radio spectrum for advance wireless telecommunications services. Making additional spectrum available will allow industry to meet the anticipated demand for 3G wireless services while spurring the development of innovative new wireless applications."

PFF Releases Report Ranking States in Use of IT
11/4. The Progress & Freedom Foundation (PFF) released a report [62 pages in PDF] titled "The Digital State 2002: How State Governments Use Digital Technologies". The report ranks the fifty states according to how well their governments use, deploy and manage information technology.

The PFF used a questionaire to collect information from the states in eight areas. First, "The use of the Internet and Intranets to locate, file and store paperwork as well as for procurement and intra-governmental projects." Second, "The use of the Internet for tax information, forms and filing as well as for digital record keeping." Third, "The use of the Internet for program information, eligibility requirements and processing applications for administrative purposes. In addition, the security of access to client records was measured." Fourth, " The use of the Internet and two-way, digital multimedia applications for law enforcement, judicial and corrections officials as well as to provide public information."

Fifth, "Measures for online or digital access to, and promotion of, information about state government and the electoral process and the use of the Internet as an information management tool for the legislature." Sixth, "Measures of institutional arrangements for digital policy decision making and long-term infrastructure management." Seventh, "The use of digital technologies for education, including functions in the areas of administration, instruction and reporting." And eighth, "The use of geographic information systems and data -- in intra-governmental and in transportation policy -- as well as institutional arrangements for collecting and making GIS available to the public."

The PFF ranked states in each of these eight categories, and overall. The top ranked state was Arizona. The next nine states were Michigan, Washington, Illinois, Wisconsin, Virginia, Utah, Indiana, South Dakota, and Maryland. The report contains the overall ranking of only the top 25 states. California was not in the top 25.

The report was written by Kent Lassman of the PFF.

GAO Reports on Federal Agency Transfer of Intellectual Property
11/1. The General Accounting Office (GAO) released a report [102 pages in PDF] titled "Intellectual Property: Federal Agency Efforts in Transferring and Reporting New Technology".

The 1980 Bayh Dole Act and the Technology Transfer Commercialization Act of 2000 (TTCA) require that the GAO issue a report to Congress on the implementation of these acts at least every 5 years. (The Bayh Dole Act was titled the "The Patent and Trademark Law Amendments Act"; it is Public Law No. 96-517; it is codified at 35 U.S.C. § 200, et seq. The TTCA was HR 209 in the 106th Congress; it is Public Law No. 106-404.)

The Bayh Dole Act provides that inventions created under government contracts and grants may become the property of the contractors and grantees. The TTCA pertains to the licensing of inventions created in federal facilities. It requires, among other things, that federal agencies with laboratories and technology transfer functions to provide the Office of Management and Budget (OMB) with reports on their technology transfer programs.

This GAO report provides "information on how federal agencies had identified, patented, and licensed inventions created in their own facilities during fiscal years 1997-2001." It addresses "(1) the extent to which the agencies complied with the [TTCA] requirement to submit reports on their technology transfer activities to OMB and the Department of Commerce at the time they submit their fiscal year 2003 budget requests and (2) what the agencies have done -- since the issuance of our 1999 report on the issue -- to improve compliance with reporting requirements under the Bayh Dole Act for inventions created under contracts and grants." (Brackets inserted by TLJ.)

This report states that "These acts generally have been considered a success, because the federal agencies and their funding recipients now can profit from their inventions and thus have a greater incentive to produce new technology. In addition, the technology created is more likely to be made available to those who can use it."

The report found that "Federal agencies did not fully comply with the requirement of the [TTCA] that they submit reports on their technology transfer activities to the [OMB] and the Department of Commerce ..." (Brackets added.) Moreover, it found that contractors and grantees are not complying with their reporting obligations under the Bayh Dole Act.

The report was prepared for Sen. Patrick Leahy (D-VT) and Sen. Orrin Hatch (R-UT), the Chairman and ranking Republican on the Senate Judiciary Committee, Sen. Ron Wyden (D-OR) and Sen. George Allen (R-VA), the Chairman and ranking Republican on the Senate Commerce Committee's Subcommittee on Subcommittee on Science, Technology, and Space, Rep. Howard Coble (R-NC) and Rep. Howard Berman (D-CA), the Chairman and ranking Democrat on the House Judiciary Committee's Subcommittee on Courts, the Internet, and Intellectual Property, and Rep. Vernon Ehlers (R-MI) and Rep. James Barcia (D-MI), the Chairman and ranking Democrat on the House Science Committee's Subcommittee on the Environment, Technology, and Standards. The report was signed by John Stephenson, Director, Natural Resources and Environment, at the GAO.

There is also another GAO document [13 pages in PDF] titled "Intellectual Property: Industry and Agency Concerns Over Intellectual Property Rights". It was prepared as testimony for a hearing of the House Government Reform Committee's Subcommittee on Technology and Procurement Policy on May 10, 2002. It too took the position that "the framework for promoting and protecting intellectual property rights in the government has been considered a success." However, others at the hearing said otherwise.

Rep. Tom Davis (R-VA), who presided at the hearing, said in his opening statement that most leading information technology companies refuse to do research for the government because of intellectual property and red tape concerns.

He stated in his prepared testimony that "In an environment where private sector R&D spending accounts for almost three fourths of the total spent in the United States, the Government's role has changed to become a partner in innovation, rather than the sole driving force. Because IP right are the most valued assets of companies, the Government must ensure that its policies and procedures reflect this partnership for innovation."

Richard Carroll, of the Small Business Technology Coalition, said in his prepared testimony that the prevailing attitude of the government is "We paid for it. We own it." Carroll said that "for small high tech companies in particular, the government culture of ``we pay for it, we own it´´ has a chilling effect on their interest in innovating for the government. Understand, that these companies are the most likely to bring forth the innovations needed to transform our defense systems, and to meet the needs of homeland defense with rapid, innovative, and affordable solutions. These new ideas represent the heart of their company's assets, and their ability to offer strong competitive alternatives to the status quo is clearly predicated on some level of intellectual property protection. If they lose that intellectual property because the government provides it to their competitors, the very survival of the company is threatened." See, list of witnesses, with links to prepared testimony.

Supreme Court News
11/4. The Supreme Court of the U.S. returned from a two week recess. It issued three opinions. None were technology related. All three were on writ of certiorari to the U.S. Court of Appeals (9thCir). The Supreme Court reversed the Ninth Circuit in all cases.

The Supreme Court granted certiorari in Illinois v. Telemarketing Associates, No. 01-1806, a case involving regulation of charity telemarketing. See, Order List [13 pages in PDF] at page 2. The Supreme Court denied certiorari in Sprint v. William Gagnon, a race discrimination case. See, Order List [13 pages in PDF] at page 3.

The Court also announced that it will take a recess from Monday, November 18, 2002, until Monday, December 2, 2002.

Tuesday, November 5
9:30 AM. The U.S. Court of Appeals (DCCir) will hear oral argument in 21st Century Telesis v. FCC, No. 01-1435. Judges Randolph, Rogers and Williams will preside. Location: Courtroom 20, 333 Constitution Ave., NW.

Deadline to submit applications to the Agriculture Department's Rural Utilities Service for grants under its pilot program for the provision of broadband transmission service in rural America for fiscal year 2002. See, notice in the Federal Register.

Wednesday, November 6
9:00 AM. FTC Commissioner Orson Swindle will give a speech titled "Promoting a Culture of Security" at a Cross Sectoral Industry Association meeting regarding the role of business in promoting a culture of security. At 11:15 AM, Swindle, Thomas Niles (U.S. Council for International Business), Joseph Alhadeff (VP/CPO of Oracle), Sandra Wilson (OECD) will hold a media briefing. RSVP is required for media briefing. See, notice. Press contact: Jonathon Huneke (USCIB) at 212 703-5043 or Location: Morrison & Foerster, 2000 Pennsylvania Ave., NW, Suite 5500.

9:30 - 11:30 AM 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 November 6 event is titled "Antitrust Law and Patent Landscapes". The 9:30 AM program is titled "Standard Setting Organizations: Evaluating the Anticompetitive Risks Of Negotiating IP Licensing Terms and Conditions Before A Standard Is Set". The 2:00 PM program is titled "Relationships Among Competitors and Incentives to Compete: Cross Licensing of Patent Portfolios, Grantbacks, Reach Through Royalties, and Non- Assertion Clauses". Location: FTC Room 432, 600 Pennsylvania Ave., NW.

10:00 - 11:30 AM. Media Security and Reliability Council (MSRC) will hold a meeting. FCC Chairman Michael Powell will participate. The MSRC is a federal advisory committee formed after the terrorist attacks of September 11, 2001, to study ways to secure and maintain broadcast and multichannel video programming distribution (MVPD) in the face of terrorist attacks, natural disasters and other threats. See, FCC release [PDF]. Location: FCC, Commission Meeting Room (TW-C305), 445 12th Street, SW.

12:15 PM. The FCBA's Global Telecommunications Development Committee and International Practice Committee will host an event titled "What Happened in Marrakesh? A Debriefing on the 2002 ITU Plenipot". The speakers will be David Gross, Coordinator of International Communications and Information Policy at the State Department. RSVP to jhindin Location: Wiley Rein & Fielding, 1750 K St, 10th Floor.

Thursday, November 7
The Senate will meet at 10:30 AM in pro forma session only.

Day one of a two day conference hosted by the American Bar Association's Section of Antitrust Law. See, program. The basic price to attend is $875. Location: National Press Club, 529 14th St NW.

9:30 AM. The FCC will hold a meeting. The agenda includes a number of spectrum related items. The Spectrum Policy Task Force will report on its findings and recommendations. The FCC's International Bureau will report on the outcome of the International Telecommunication Union Plenipotentiary Conference. The FCC will consider a Second Report and Order that would allocate spectrum in the 1.7 and 2.1 GHz bands that can be used to provide advanced wireless services (AWS), such as 3G or IMT-2000. The FCC will consider a Notice of Proposed Rulemaking (NPRM) concerning service rules for (AWS) in the 1.7 GHz and 2.1 GHz bands. And, the FCC will consider a NPRM and Order concerning allocation and service rules for the Dedicated Short Range Communication Services in the 5.850-5.925 GHz band. Location: FCC, 445 12th Street, SW, Room TW-C05 (Commission Meeting Room).

RESCHEDULED FOR DECEMBER 2. 10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in Altiris v. Symantec, No. 02-1137. This is a patent infringement case involving technology for remotely controlling the boot process of a computer. Location: 717 Madison Place, NW.

Friday, November 8
The Senate will meet at 10:30 AM in pro forma session only.

Day two of a two day conference hosted by the American Bar Association's Section of Antitrust Law. See, program. The basic price to attend is $875. Location: National Press Club, 529 14th St NW.

8:30 - 10:00 AM. The American Enterprise Institute (AEI) will host an event titled "Post Election Review of Telecommunications Policy". The speakers will be former FCC Commissioner Harold Furchtgott Roth and Greg Sidak. RSVP to Veronique Rodman at 202 862-4871 or vrodman Location: AEI, 11th Floor, Conference Room, 1150 17th Street, NW.

9:00 AM - 4:45 PM. The FCC's Consumer / Disability Telecommunications Advisory Committee will meet. Location: FCC, 445 12th Street, SW, Room TW-C305 (Commission Meeting Room).

9:30 AM. The U.S. Court of Appeals (DCCir) will hear oral argument in AT&T v. FCC, No. 01-1511. Judges Ginsburg, Edwards and Garland will preside. Location: 333 Constitution Ave., NW.

10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in Cygnus Telecommunications Technology v., No. 02-1325. This is a consolidated patent case appealed from the U.S. District Court (NDCal). Location: 717 Madison Place, NW.

Monday, November 11
Veterans Day. The FCC will be closed.

Deadline to submit comments to the National Institute of Standards and Technology (NIST) regarding its draft publication [62 pages in PDF] titled "Guide to Selecting Information Technology Security Products". This is NIST Special Publication 800-36 (draft). It was written by Timothy Grance, Marissa Myers and Marc Stevens in the NIST's Information Technology Laboratory's Computer Security Division. Send comments to

Deadline to submit comments to the National Institute of Standards and Technology (NIST) regarding its draft publication [78 pages in PDF] titled "Guide to IT Security Services". This is NIST Special Publication 800-35 (draft). It was written by Tim Grance, Joan Hash, Marc Stevens, Kristofor O’Neal, Nadya Bartol and Robert Young  in the NIST's Information Technology Laboratory's Computer Security Division. Send comments to

Deadline to submit comments to the National Institute of Standards and Technology (NIST) regarding its draft publication [66 pages in PDF] titled "Security Considerations in Federal Information Technology Procurements A Guide for Procurement Initiators, Contracting Officers, and IT Security Officials". This is NIST Special Publication 800-4A (draft). It was written by Tim Grance, Joan Hash and Marc Stevens in the NIST's Information Technology Laboratory's Computer Security Division. Send comments to

Tuesday, November 12
TIME? Day one of a two day conference titled "W3C Workshop on the Future of P3P". The topic is the the World Wide Web Consortium's (W3C) Platform for Privacy Preferences Project (P3P). The W3C has a web site for the event, but all of the material information, such as a the agenda, participants, and papers, is all either password protected, or not provided. Location: Dulles, Virginia campus of America Online, Seriff Auditorium, Creative Center 2, America Online Dulles campus; enter the campus at Creative Center 3 (CC3), 22110 Pacific Blvd, Dulles, VA.

CANCELLED? 9:30 AM. The U.S. Court of Appeals (DCCir) will hear oral argument in Z Tel Communications v. FCC, No. 01-1461. This is a challenge to the FCC's order approving Verizon's Section 271 application to provide in region interLATA service in the state of Pennsylvania. Judges Ginsburg, Edwards and Garland will preside. Location: 333 Constitution Ave., NW.

3:30 - 4:30 PM. The Heritage Foundation will host an address by Rep. Jim Ryun (R-KS) titled "Reforming Congress for a Safer Homeland: The Need for Congressional Committee Reorganization". Location: 214 Massachusetts Ave., NE.

6:00 - 8:00 PM. The FCBA will host a CLE seminar titled "FCC Winter Preview". The panelists will include Donald Abelson (Chief of the FCC's International Bureau), Thomas Sugrue (Chief of the FCC's Wireless Telecommunications Bureau), Kenneth Feree (Chief of the FCC's Media Bureau), and William Maher (Chief of the FCC's Wireline Competition Bureau), and Bryan Tramont (Senior Legal Advisor to FCC Chairman Michael Powell). Location: Sidley Austin Brown & Wood, Conference room 6-E.

6th Circuit Rules on Insurance Defense and Patent Suits
11/4/ The U.S. Court of Appeals (6thCir) issued its split opinion in United National v. SST Fitness, a case regarding an insurer's ability to recoup money paid for the defense of an insured in a patent and trademark infringement case, under reservation that there is no duty top defend, when the insured later obtaineds a declaratory judgment that there is no duty to defend or indemnify. Applying Ohio principles of contract law, the Appeals Court held that the insurer may recover.

SST Fitness Corporation (SST) purchased liability insurance from United National Insurance Company (United National), which agreed to provide defense costs and indemnify SST. In another action, Precise Exercise Equipment filed a complaint against SST alleging patent and trademark infringement and other claims. United National paid SST's defense costs, but first wrote a letter to SST in which it stated that it "reserves the right to recoup from SST any defense costs and fees to be paid subject to this reservation letter on the basis that no duty to defend now exists or has existed with regard to the tendered suit." SST accepted payment of its defense costs without objecting to the reservation.

United National then filed a complaint against SST seeking a declaratory judgment that United National owed no duty to defend or indemnify SST in the patent infringement action. The District Court granted declaratory judgment to United National. The U.S. Court of Appeals (6thCir) affirmed. See, June 29, 1999 opinion. United National then sought to recover the amounts that it had paid for the defense of SST under reservation. The District Court denied this motion. The Appeals Court reversed. United National gets its money back.

3rd Circuit Rules on Bankruptcy Jurisdiction in Learnout & Hauspie Case
11/4. The U.S. Court of Appeals (3rdCir) issued its opinion [PDF] in Stonington Partners v. Learnout & Hauspie, a bankruptcy jurisdiction case.

Learnout & Hauspie (LH) is a speech recognition software company that is incorporated and headquartered in Belgium. Stonington Partners is an ERISA fiduciary that manages institutional capital on behalf of public and private entities, including pension funds, private endowments, and financial institutions. It purchased Dictaphone Corporation in 1995, and sold it to LH in 2000.

Stonington filed an action in Delaware Chancery Court against LH and several former officers and directors alleging that LH bought Dictaphone with worthless LH stock, and that LH procured Dictaphone by fraud.

LH then filed a bankruptcy petition in the U.S. Bankruptcy Court (DDel). The next day it filed an insolvency proceeding in the nation of Belgium.

Stonington filed claims in both insolvency proceedings. It sought to pursue its Dictaphone claim in the Belgium court, where it would receive more favorable treatment. LH argued that the Delaware Bankruptcy Court has exclusive jurisdiction. The Bankruptcy and District Court ruled in favor of LH.

The Court of Appeals reversed and remanded. It wrote that "We conclude that the order preventing Stonington from pursuing the issue of the priority, treatment, and classification of its claims in the Belgian proceedings and ordering that these issues be determined exclusively by the Delaware Bankruptcy Court in accordance with the Bankruptcy Code was issued without consideration of all relevant legal principles. Accordingly, we will reverse and remand for further proceedings consistent with this opinion."

People and Appointments
11/4. James Carter was named Deputy Assistant Secretary of the Treasury for Policy Coordination. He was previously an Associate Director of the National Economic Council. Before that, he was a senior economist on the staff of Congress' Joint Economic Committee. He has also worked as an economic and budget advisor to former Sen. John Ashcroft (R-MO) and Republican National Committee (RNC) Chairman Haley Barbour. See, Treasury release.
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