Tech Law Journal Daily E-Mail Alert
December 6, 2002, 9:00 AM ET, Alert No. 562.
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Indictment Charges Theft of Trade Secrets from Transmeta, Sun, NEC & Trident
12/4. A grand jury of the U.S. District Court (NDCal) returned an indictment [10 page PDF scan] against Fei Ye and Ming Zhong alleging economic espionage, possession of stolen trade secrets, transportation of stolen property, and conspiracy, in violation of various federal criminal statutes.

The indictment alleges theft of trade secrets of Transmeta Corporation, which makes software based microprocessors, including the Crusoe line, Sun Microsystems, NEC Electronics Corporation, and Trident Microsystems, which makes graphics controllers and multimedia integrated circuits for desktop and portable computing applications.

While the indictment alleges that the defendants conspired to provide stolen trade secrets to the PRC, it does not list any PRC government entity as a conspirator.

The indictment contains ten counts. Count I alleges conspiracy in violation of 18 U.S.C. §§ 371, 1831(a)(5), and 1832(a)(5). It states that "On or about a date unknown but at least by the summer of 2001, and continuing to on or about November 24, 2001, in the Northern District of California and elsewhere, the defendants did knowingly conspire and agree with each other and other persons to commit the following offenses: economic espionage, in violation of 18 U.S.C. § 1831(a)(3); possession of stolen trade secrets, in violation of 18 U.S.C. § 1832(a)(3); and foreign transportation of stolen property, in violation of 18 U.S.C. § 2314."

The indictment further alleges that "It was part of the conspiracy that the defendants and other persons would and did establish and promote Supervision, Inc. ... to produce and sell microprocessors in the People's Republic of China (PRC). ... It was further part of the conspiracy that the defendants would travel to the PRC and take with them documents and materials containing trade secrets belonging" to Transmeta and Sun.

The indictment also describes certain trade secrets that the defendants stole. The indictment also contains two counts of economic espionage in violation of 18 U.S.C. § 1831(a)(3), five counts of possession of stolen trade secrets in violation of 18 U.S.C. § 1832(a)(3), and two counts of foreign transportation of stolen property in violation of 18 U.S.C. § 2314.

The U.S. Attorneys Office for the Northern District of California stated in a release that "Both defendants are former employees of Transmeta and Trident. Fei Ye also worked at Sun and NEC. Some of the stolen trade secrets were seized from the defendants at the San Francisco International Airport (SFO) while they were attempting to fly to China. Other trade secrets were seized from the defendants' residences and Ming Zhong's Transmeta office in the County of Santa Clara."

7th Circuit Reverses in FutureSource v. Reuters
11/27. The U.S. Court of Appeals (7thCir) issued its opinion [8 pages in PDF] in FutureSource v. Reuters, a case involving the affect of a bankruptcy sale upon a contract involving intellectual property rights.

Background. Reuters is a news service. Bridge Information Services was, and FutureSource is, a competitor of Reuters. Bridge contracted with FutureSource to provide FutureSource with continuously updated financial markets data for resale to FutureSource's customers.

Bridge later filed for bankruptcy. Reuters bought the assets used in Bridge's financial markets data service in a bankruptcy court auction for $275 Million. This purchase was pursuant to an asset purchase agreement that provided that Reuters assumed no contractual or other obligations of Bridge other than those specified; it did not specify Bridge's contract with FutureSource. The bankruptcy court order stated that Reuters took the assets free of all liens and claims.

District Court. FutureSource filed a complaint in U.S. District Court (NDIll) against Reuters alleging breach of contract, and seeking to compel Reuters to continue providing the service that Bridge had provided to FutureSource. The District Court granted FutureSource an injunction. Reuters appealed.

Appeals Court. The Appeals Court reversed. Judge Richard Posner, writing for a three judge panel, stated the issue: "So all that has to be decided is whether Reuters is obligated to furnish the Bridge data service to FutureSource free of charge until the end of time." He concluded that it was not so obligated.

He first stated that "Nonsensical interpretations of contracts, as of statutes, are disfavored. ... Not because of a judicial aversion to nonsense as such, but because people are unlikely to make contracts, or legislators statutes, that they believe will have absurd consequences."

He then reasoned that "The argument that FutureSource makes on behalf of these results is that" its contract with Bridge "gave it a license to use Bridge's intellectual property and that an intellectual property license, like a tenancy in real estate, is not extinguished by the sale of the underlying property. This is true in general; and we may further assume that the contract did convey to FutureSource an interest in intellectual property. Although data are not copyrightable, compilations of data that involve a significant element of creativity are, Feist Publications, Inc. v. Rural Telephone Service Co., 499 U.S. 340, 348, 358-59 (1991); 17 U.S.C. §§ 101, 103, and for all we know that is the character of the Bridge data service, on which Bridge owns a copyright the validity of which is not challenged. No matter. The bankruptcy court's sale order, consistent with 11 U.S.C. § 363(f), extinguished all ``interests´´ in the assets acquired by Reuters, and this included an interest in the intellectual property that Reuters acquired from Bridge."

Judge Posner was not kind to the District Court judge. He concluded that "Obviously a preliminary injunction should not be entered if the plaintiff has no claim; and FutureSource has none. The next step in the district court presumably will be the filing of a motion for summary judgment by Reuters and its grant by the district judge."

Wal-Mart Withdraws Subpoena in DMCA Dispute
12/5. Lawyers for FatWallet stated that Wal-Mart "backed down" in a DMCA dispute over the posting of a Wal-Mart's Thanksgiving advertising circular in the FatWallet web site. Wal-Mart had demanded that FatWallet take down the posting, which it did. It had also obtained a subpoena from the U.S. District Court (NDIll) on November 27 directing FatWallet to disclose the identity of the anonymous user who posted Wal-Mart's sale prices.

FatWallet operates a web site that, among other things, enables users to post and discuss information about prices and products. FatWallet's attorneys threatened to obtain an order quashing the subpoena.

Wal-Mart had obtained the subpoena, pursuant to a provision in the Digital Millennium Copyright Act, which provision is codified at 17 U.S.C. § 512(h), that allows a party claiming a copyright to obtain a subpoena to learn the identity of a poster. The subpoena is issued by a court clerk as a ministerial function, without the filing of a complaint, the proving of ownership of a copyright, or notice to the poster.

FatWallet objects both to the statute itself, as well as the circumstances under which this subpoena was obtained. It asserts that the advertising circular, which is merely data on prices at which Wal-Mart offers items for sale, is not copyrightable subject matter.

Deirdre Mulligan, an attorney for FatWallet, stated in a release that "When the DMCA passed, many were concerned that the takedown provisions were heavily tilted against speakers -- by merely claiming copyright, any individual or business can silence speech. While this case caught the public's attention, there are certainly other instances of speakers being wrongfully silenced under the DMCA."

Tim Storm, President FatWallet said in the same release that "We're pleased Wal-Mart dropped its request for the poster’s identity, but an injustice still occurred here. The use of the DMCA to remove factual information about prices that retailers charge consumers is just wrong. We stand by our belief that consumers have the right to share the factual shopping information required to be a smart consumer. That is what FatWallet is all about."

See also, story in TLJ Daily E-Mail Alert No. 560, Wednesday, December 4, 2002.

People and Appointments
12/5. The U.S. Telecommunications Association (USTA) named Brad Edwards Vice President for Government Affairs. He has been with the USTA since March. He previously worked for the American Council of Life Insurers and UST Public Affairs. Before that he worked for Sen. Jesse Helms (R-NC). See, USTA release.
More News
12/5. The Commerce Department's (DOC) Technology Administration (TA) published in its web site a report [114 pages in PDF] titled "Suborbital Reusable Launch Vehicles and Applicable Markets". The report was prepared by The Aerospace Corporation for the DOC's Office of Space Commercialization. See also, TA release.

12/5. The Federal Communications Commission (FCC) published in its web site the latest semi-annual report [34 page PDF scan] of its Inspector General.

12/5. The U.S. Patent and Trademark Office's (USPTO) published in its web site the annual report [14 pages in PDF] of the Patent Public Advisory Committee,

12/5. The U.S. Patent and Trademark Office's (USPTO) published in its web site the annual report [28 pages in PDF] of the Trademark Public Advisory Committee, dated November 29, 2002.

12/5. The U.S. government's Overseas Private Investment Corporation (OPIC) announced that it "will provide $300,000 in insurance to International Communications Systems, Inc. (ICS) of Huntington Station, New York, for the purchase of voice/data transit traffic equipment and Internet routing equipment for its Moldovan subsidiary, ICS Moldova. The new equipment will enable ICS Moldova to carry traffic between Moldova and the rest of the world, at the same time improving the existing system both in quality and in volume of traffic available, and providing state of the art routing technology at a reduced cost." See, OPIC release.

12/5. The Federal Communications Commission (FCC) published a notice in the Federal Register announcing Auction 50, and seeking comment on reserve prices or minimum opening bids and other auction procedures. The deadline to submit comments is December 9, 2002. The deadline for reply comments is December 16, 2002. The auction, which pertains to 54 Personal Communications Service (PCS) licenses in the 900 MHz band, is scheduled to commence on March 26, 2003. See, Federal Register, December 5, 2002, Vol. 67, No. 234, at Pages 72417 - 72422.

Friday, December 6
10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in Apex Computer v. Raritan, No. 02-1303. This is an appeal from the U.S. District Court (SDNY) in a patent infringement case. Location: Courtroom 201, 717 Madison Place, NW.

10:00 AM - 1:00 PM. The FCC's Network Reliability and Interoperability Council (NRIC) will hold a meeting. The meeting, which will be chaired by FCC Chairman Michael Powell and NRIC Chairman Richard Notebaert, will address "recommendations to protect the nation's communications infrastructure -- both physical and cyber -- against attack". Afterwards, Powell and Notebaert will hold a press conference to discuss the Homeland Security issues presented at the meeting. For more information, contact Robin Pence at 202 418-0505. See, FCC notice [MS Word]. See also, notice in the Federal Register. Location: FCC, Room TW-C305, 445 12th St. SW.

12:00 NOON. The Progress & Freedom Foundation (PFF) and the Pacific Research Institute for Public Policy will host two panel discussions. The first panel, comprised of Randolph May (PFF), Adam Thierer (Cato Institute), and Edward Hearst, will present their new book titled Telecrisis: How Regulation Stifles High Speed Internet Access. The second panel, comprised of FCC Commissioner Kevin Martin, Assistant Secretary of Commerce for Technology Policy Bruce Mehlman, and Senate Commerce Committee senior counsel for communications William Bailey, will discuss the book and telecommunications and broadband policy. Persons interested in attending should contact Rebecca Fuller at 202 289-8928 or See, PFF release. Location: Room B369, Rayburn House Office Building.

? 12:15 - 1:30 PM. The FCBA's Wireless Telecommunications Practice Committee will host a luncheon titled "WiFi -- What's all the Buzz About?" The speakers will be Julie Knapp (Deputy Chief of the FCC's Office of Engineering & Technology), Peter Pitsch (Intel), and Rebecca Arbogast (Legg Mason). The price to attend is $15. RSVP to Location: Sidley Austin Brown & Wood, 1501 K St. NW, 6th Floor, Conference Room 6E.

12:30 PM. Rep. Richard Armey (R-TX), the outgoing House Majority Leader, will speak at a luncheon. Location: National Press Club, 529 14th St. NW, 13th Floor.

2:00 - 3:00 PM. Bill Whyman, President of the Precursor Group, will speak at an Information Technology Association of America (ITAA) event. The title of his presentation is "Precursor Group's Tech Demand Model: IT Spending Set to Improve in '03". See, ITAA notice. For more information, contact Madeleine Wickwire at

Extended 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] and Order [PDF] of October 11, 2002 extending deadlines.

Saturday, December 7
Louisiana Senate runoff election between Sen. Mary Landrieu (D-LA) and Republican Suzanne Terrell.
Monday, December 9
2:00 PM. The Information Technology Association of America (ITAA) will host a web cast event titled "Protecting Intellectual Property in Federal Government Contract Procurements". The speaker will be Diana Richard of the law firm of Gibson Dunn & Crutcher. See, online registration page. For more information, contact Thomas Vincent at

Extended deadline to submit comments to the FCC in response to its requests for comments regarding whether to revise, clarify or adopt any additional rules in order to more effectively carry out Congress's directives in the Telephone Consumer Protection Act of 1991 (TCPA). This is CG Docket No. 02-278. See, original notice in the Federal Register, and notice of extension [PDF].

Tuesday, December 10
12:15 PM. The FCBA's Cable Practice Committee will host a luncheon. The speaker will be Marsha MacBride (FCC Chief of Staff). The price is $15. No walk-ins. For more information, contact Lisa Cordell at 202 939-7900. RSVP to Location: NCTA, 1724 Massachusetts Ave., NW.

Deadline to submit comments to the National Telecommunications and Information Administration (NTIA) regarding the wills, codicils, and testamentary trusts exception to the E-SIGN Act. The Electronic Signatures in Global and National Commerce (E-SIGN) Act provides, at Section 101, for the acceptance of electronic signatures in interstate commerce, with certain enumerated exceptions. Section 103 of the Act provides that "The provisions of section 101 shall not apply to ... a State statute, regulation, or other rule of law governing the creation and execution of wills, codicils, or testamentary trusts". The Act also requires the NTIA to review, evaluate and report to Congress on each of the exceptions. See, notice in the Federal Register, October 11, 2002, Vol. 67, No. 198, at Pages 63379 - 63381.

Wednesday, December 11
9:30 AM. The FCC will hold a meeting. Location: FCC, 445 12th Street, SW, Room TW-C05 (Commission Meeting Room).
Thursday, December 12
9:00 AM. The President's Council of Advisors on Science and Technology's (PCAST) Subcommittee on Federal Research and Development Investment and its National Benefits will hold an open public forum on federal technology transfer mechanisms. See, notice in the Federal Register. Location: RAND Washington Office, 1200 S. Hayes St., Arlington, VA, Room 4204 (which is accessible from the Pentagon City metro stop).

12:00 NOON. The Cato Institute will host a Capitol Hill briefing titled "Yellow Light on Total Information Awareness". The scheduled speakers include Wayne Crews, Robert Levy, Charles Peña. See, notice and online registration form. Location: 1539 Longworth House Office Building.

The FCBA will host its annual Chairman's Dinner. See, registration form [PDF]. Location: Washington Hilton and Towers.

Day one of a two day conference hosted by the Practicing Law Institute and the FCBA titled "Telecommunications Policy and Regulation". At 12:15 PM FCC Commissioner Kevin Martin will deliver a keynote address. Location: Reagan International Trade Center.

Friday, December 13
9:15 - 11:30 AM. The American Enterprise Institute (AEI) will host a panel discussion titled "Intellectual Property: A Positive Side for Developing Country Business?". The speakers will be Michael Finger (AEI), Ron Layton (LightYears IP), and others. Location: AEI, 12th floor, 1150 17th St., NW.

9:30 AM. The U.S. International Trade Commission (USITC) will meet regarding the preliminary countervailing duty investigation regarding DRAMs and DRAM Modules from Korea (Investigation No. 701-TA-431). See, notice published in the Federal Register. Location: Main Hearing Room, ITC Building, 500 E Street, SW.

Day two of a two day conference hosted by the Practicing Law Institute and the FCBA titled "Telecommunications Policy and Regulation". Location: Reagan International Trade Center.

EXTENDED TO JANUARY 17. Deadline to submit reply 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] and Order [PDF] of October 11, 2002 extending deadlines.

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