Tech Law Journal Daily E-Mail Alert
January 29, 2003, 9:00 AM ET, Alert No. 593.
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1st Circuit Addresses Scraper Robots and Section 1030
1/28. The U.S. Court of Appeals (1stCir) issued its opinion in EF Cultural Travel v. Zefer and Explorica, upholding a District Court preliminary injunction prohibiting use of a "scraper tool" to collect pricing information from a web site. The Court's analysis involved application of the ban on unauthorized access to a computer contained in 18 U.S.C. § 1030.

Background. EF Cultural is a student travel business. It maintains a web site that contains price information. Explorica is also a student travel business; it was formed by several former EF employees. Zefer Corporation built a scraper tool that collected two years of pricing data from EF's web site. This computer program accessed price information contained in the HTML source code in the files stored on EF's web server, and then placed this price information in an Excel spreadsheet. Explorica then used this data to set its prices just below those of EF.

EF's access had been facilitated by use of confidential information obtained in violation of a broad confidentiality agreement signed by EF's former employees. Specifically, Zefer was able develop this program, including the ability to circumvent EF's security, with the assistance of an Explorica VP who was previously VP for information strategy at EF. This VP had signed a confidentiality agreement with EF. However, Zefer signed no confidentiality agreement.

Statute. Subsection 1030(a)(4) provides, in part, that "Whoever ... knowingly and with intent to defraud, accesses a protected computer without authorization, or exceeds authorized access, and by means of such conduct furthers the intended fraud and obtains anything of value, unless the object of the fraud and the thing obtained consists only of the use of the computer and the value of such use is not more than $ 5,000 in any 1-year period ... shall be punished as provided in subsection (c) of this section."

Subsection 1030(e)(6) defines "exceeds authorized access" as "to access a computer with authorization and to use such access to obtain or alter information in the computer that the accesser is not entitled so to obtain or alter."

Title 18 is the Criminal Code. However, Subsection 1030(g) creates a private right of action.

Section 1030 is also sometimes referred to as the Computer Fraud and Abuse Act, and the CFAA.

EF 1. EF filed a complaint in U.S. District Court (DMass) against Explorica, several of its employees, and Zefer, alleging copyright infringement, and violation of  Section 1030.

Previously, EF obtained an injunction against Explorica, which the First Circuit upheld. See, December 17, 2001 opinion and story titled "Court Upholds Injunction Under CFAA Against Use of Scraper Program" in TLJ Daily E-Mail Alert No. 330, December 18, 2001.

However, that injunction relied upon the confidentiality agreement. That opinion did not address Zefer, because it was protected by a bankruptcy stay.

EF 2. Zefer is now out of bankruptcy, and EF seeks to have the injunction extended to Zefer. The District Court granted the injunction, based upon its reasoning that lack of authorization can be inferred from the circumstances using a reasonable expectations test.

The Appeals Court affirmed, but on different, and narrower grounds. It upheld the injunction solely because "an injunction properly issued against a named party means that anyone else with notice is precluded from acting to assist the enjoined party from violating the decree or from doing so on behalf of that party".

The Appeals Court wrote in the instant opinion that "The district court thought that a lack of authorization could also be inferred from the circumstances, using ``reasonable expectations´´ as the test; and it said that three such circumstances comprised such a warning in this case: the copyright notice on EF's homepage with a link directing users to contact the company with questions; EF's provision to Zefer of confidential information obtained in breach of the employee confidentiality agreements; and the fact that the website was configured to allow ordinary visitors to the site to view only one page at a time."

The Court continued that "We agree with the district court that lack of authorization may be implicit, rather than explicit. After all, password protection itself normally limits authorization by implication (and technology), even without express terms. But we think that in general a reasonable expectations test is not the proper gloss on subsection (a)(4) and we reject it."

The Court reasoned that "Our basis for this view is not, as some have urged, that there is a ``presumption´´ of open access to Internet information. The CFAA, after all, is primarily a statute imposing limits on access and enhancing control by information providers. Instead, we think that the public website provider can easily spell out explicitly what is forbidden and, consonantly, that nothing justifies putting users at the mercy of a highly imprecise, litigation-spawning standard like ``reasonable expectations.´´ If EF wants to ban scrapers, let it say so on the webpage or a link clearly marked as containing restrictions."

The Court added that "This case itself illustrates the flaws in the ``reasonable expectations´´ standard. Why should the copyright symbol, which arguably does not protect the substantive information anyway, Feist Publ'ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 344-45 (1991), or the provision of page-by-page access for that matter, be taken to suggest that downloading information at higher speed is forbidden."

So, EF gets its injunction, but the Court did so on the basis of facts (use of confidential information) that will not be present in most other "scrapper" cases.

Postscript. EF now has a detailed Terms of Use page in its web site that provides, in part, that "You may not without the prior written permission of EF use any computer code, data mining software, "robot," "bot," "spider," "scraper" or other automatic device, or program, algorithm or methodology having similar processes or functionality, or any manual process, to monitor or copy any of the web pages, data or content found on this site or accessed through this site."

Sen. Grassley Identifies Pending Tax Issues
1/28. Sen. Charles Grassley (R-IA), the Chairman of the Senate Finance Committee, prepared, but did not deliver, a speech to the Tax Council. A staff member read the speech in his place. The speech covered the Foreign Sales Corporation (FSC) tax regime (and its replacement, the Extraterritorial Income tax regime), both of which have been held by the World Trade Organization (WTO) to constitute prohibited export subsidies.

Sen. Grassley's speech stated that "Another important issue is the WTO decision on FSC-ETI. Our bipartisan bicameral working group has continued throughout the fall. I think we can reach an agreement on this issue, if all parties interested in FSC-ETI are reasonable and the EU shows some restraint. We showed restraint on beef and bananas. The EU should allow us time to enact legislation before even considering sanctions."

Sen. Grassley's speech also covered extending the moratorium contained in the Internet Tax Freedom Act. It expires latter this year. The speech stated that, "In other business, the present federal moratorium on the states' ability to tax Internet transactions expires this year. There are several other provisions that will expire this year."

Pam OlsonIn addition, Pam Olson (at right), Assistant Secretary of the Treasury for Tax Policy, has given two speeches recently in which she addressed FSC/ETI and other globalization related tax issues in more detail.

On January 27 she gave a speech to the USC Law School Tax Institute. She stated that "With the World Trade Organization having recently declared a feature of our international tax regime an export subsidy illegal under the WTO rules and the burst of corporate inversion transactions in the last couple of years, we find ourselves in a position where significant change to our international tax rules seems inevitable." She added that "From the vantage point of an increasingly global marketplace, our tax rules appear outmoded, at best, and punitive of U.S. economic interests, at worst. ... our international tax policy seems to have been based on the principle that if we have a competitive advantage, we should tax it!" On January 25 she gave a speech to the ABA Tax Section. This speech overlapped her January 27 speech.

First Circuit Rules on Section 252(e)(6) Jurisdiction
1/28. The U.S. Court of Appeals (1stCir) issued its opinion in Destek v. New Hampshire PUC, a case involving federal court jurisdiction to review state public utility commission determinations under 47 U.S.C. § 252(e)(6).

Verizon and the University of New Hampshire (UNH) entered into an agreement under which Verizon contracted to provide asynchronous transfer mode (ATM) cell relay service to the UNH within New Hampshire. Verizon also submitted a petition with the New Hampshire Public Utilities Commission (NHPUC) seeking approval of the agreement as a special contract pursuant to N.H. Rev. Stat. Ann. § 378:18.

Destek Networking Group, a networking company, sought to intervene in the NHPUC proceedings and opposed the approval of the agreement. It argued that special contracts pursuant to this state statute are discriminatory and minimize competition. The NHPUC approved the proposed special contract.

Destek filed a complaint in U.S. District Court (DNH) against the NHPUC, its Commissioners, and Verizon seeking judicial review pursuant to § 252(e)(6). It also alleged violation of 42 U.S.C. § 1983 by Verizon.

The District Court concluded that the NHPUC did not make a § 252 determination, and hence, it lacked subject matter jurisdiction. The Court also held that the Commissioners are immune, both in the official or individual capacities. Finally, it held that Verizon is not liable under § 1983. The Appeals Court affirmed on all points.

4th Circuit Certifies Questions to State Court in Challenge to Net Smut Statute
1/28. The U.S. Court of Appeals (4thCir) issued an opinion [20 pages in PDF] in PSINet v. Chapman, a case regarding the constitutionality of an Internet porm statute. The Court certified two questions of state law to the Supreme Court of Virginia.

The underlying federal case is a constitutional challenge to a 1999 amendment to a Virginia state statute regulating material that is deemed harmful to minors. The amendment adds language referring to any "electronic file or message containing an image". Internet service providers, People for the American Way, and others filed a complaint in the U.S. District Court (WDVa) against Warren Chapman and James Chambloss (who were sued in their capacity as attorneys for Virginia) challenging the statute's constitutionality under the First Amendment and the dormant commerce clause. The District Court granted summary judgment to the plaintiffs, and enjoined enforcement of the electronic component of the statute.

This appeal followed. However, the Appeals Court has not yet reached the merits of the appeal. In the present opinion, the Court merely certifies two questions of state law to the Virginia Supreme Court, namely: "A. Would the use of any of the technological access controls identified by the Attorney General of Virginia preclude conviction under Virginia Code § 18.2-391 as amended in 1999?" and "B. Does the prohibition against knowingly displaying pornographic materials that are ``harmful to juveniles´´ apply to displays made only in connection with the sale, rental, or loan of such materials? If not, what must the government establish to prove that a defendant has knowingly displayed such materials ``for commercial purpose´´?"

More News
1/24. Bruce Mehlman, Assistant Secretary for Technology Policy at the Department of Commerce (DOC), gave a speech in which he discussed the Bush administration's high tech agenda, and several "principles to guide our efforts going forward". He said that "we must remember that digital literacy is more than having Internet access and broader than technical proficiency. It's also about learning digital rights and wrongs. Respecting intellectual property rights, practicing security as second nature, and valuing others' privacy are all going to be critical to a functionally literate information society." He also stated that "we must recognize that technologies only benefit society when we use them wisely. Technology can enable us to improve our lives and make the world a safer, more abundant, and more equitable place. Or it can exacerbate problems. For example, encryption technologies that protect our privacy also conceal terrorist communications." He spoke to the ICT Literacy Summit in Washington DC.

1/28. The U.S. Court of Appeals (9thCir) issued its opinion in Brother Records v. Jardine, a trademark infringement dispute involving use of the name "Beach Boys". Nearly forty years ago, Al Jardine, Mike Love, Brian Wilson, Carl Wilson, and Dennis Wilson formed a band named the The Beach Boys. They soon incorporated Brother Records Inc. (BRI) to, among other things, hold the intellectual property of The Beach Boys. Carl Wilson is dead. Brian Wilson no longer tours. And, some of the others do not want to tour together. Nevertheless, Jardine has toured, and used the trademarked name "Beach Boys", without license from BRI. BRI filed a complaint in U.S. District Court (CDCal) against Jardine alleging trademark infringement. Jardine asserted the defenses of fair use, laches, estoppel, and unclean hands. He also counterclaimed for breach of employment agreement, breach of license agreement, and for a declaratory judgment that he could tour as the "Beach Boys Family and Friends." The Court granted summary judgment to BRI. The Court of Appeals affirmed.

Wednesday, January 29
The House will meet at 12:00 NOON.

9:30 AM. The Senate Judiciary Committee will hold a hearing on pending judicial nominations. Location: Room 226, Dirksen Building.

10:00 AM. U.S. Trade Representative Robert Zoellick, Sen. Charles Grassley (R-IA), and others, will hold a press conference to announce a campaign to gain congressional approval of the U.S. Chile Free Trade Agreement. Location: Room S-207, Mansfield Room, U.S. Capitol.

11:00 AM. The House Ways and Means Committee will hold an organization meeting. It will adopt committee rules, approve the committee budget for the 108th Congress, approve the committee oversight plan, and announce assignments. Location: Room 1100, Longworth Building.

11:00 AM - 12:00 NOON. The Department of Commerce (DOC) will host a media roundtable on technology issues. The participants will include Phil Bond (Under Secretary of Commerce for Technology), Ben Wu (Deputy Under Secretary), Bruce Mehlman (Assistant Secretary for Technology Policy), Chris Israel (Deputy Assistant Secretary), and Arden Bement (NIST Director). The topics will include the State of the Union Address, the President’s tech priorities for 2003, and new reports by the Office of Technology Policy. See, notice. Location: DOC, Room 4813, 14th and Constitution Ave., NW.

11:00 AM. Howard Beales, Director of the Federal Trade Commission's (FTC) Bureau of Consumer Protection will hold a press conference titled "FTC Cracks Down on Student Survey Companies: Data Collected for ``Educational Purposes´´ from Kids as Young as 10, Sold to Target Marketers". See, notice. Location: FTC, 600 Pennsylvania Avenue, NW, Room 432.

12:15 PM. The FCBA's Online Communications Committee will host a brown bag lunch. The topic will be "Digital Rights Management & Development". For more information, contact Aileen Pisciotta at RSVP to Location: Cole, Raywid & Braverman, 1919 Pennsylvania Ave., NW, Suite 200.

1:00 PM. The House Commerce Committee will meet. The agenda will include adoption of the rules, subcommittee jurisdictions and ratios, and the appointment of subcommittee Chairmen, Vice Chairmen and members. The agenda also includes the mark up of nine bills. The sixth item on the mark up agenda is "HR ___, a bill to authorize the Federal Trade Commission to collect fees to fund the Do-Not-Call registry". Location: Room 2123, Rayburn Building.

2:30 PM. The House Ways and Means Committee's Subcommittee on Trade will hold its organizational meeting. Location: Room 1100, Longworth Building.

4:00 PM. The Cato Institute will host a book forum on Rethinking the Network Economy: The True Forces that Drive the Digital Marketplace, by Stan Liebowitz. John Lott (American Enterprise Institute) and Tom Lenard (Progress and Freedom Foundation) will comment. Webcast. A reception will follow. See, Cato notice. Location: Cato, 1000 Massachusetts Ave., NW.

Day three of three day COMNET Conference & Expo. See, conference web site. Location: Washington Convention Center.

Deadline to submit comments to the Federal Trade Commission (FTC) regarding the consent agreement that it entered into with Quicken Loans Inc. On December 30, 2002, the FTC filed an administrative Complaint [8 pages in PDF] against Quicken Loans, an online lender, alleging that it violated the Fair Credit Reporting Act (FCRA). The FTC and Quicken Loans also settled the matter. See, Agreement Containing Consent Order [7 pages in PDF]. See also, story titled "FTC Charges Quicken Loans with Violation of FCRA" in TLJ Daily E-Mail Alert No. 575, January 3, 2003. See, notice in the Federal Register, January 21, 2003, Vol. 68, No.  13, at Pages 2775-2776.

Thursday, January 30
9:30 AM. The Senate Commerce Committee will hold a hearing to examine media ownership, focusing on consolidation in the radio industry. Location: Room 253, Russell Building.

9:30 AM. The Senate Judiciary Committee will hold a business meeting to consider pending calendar business. See, notice. Location: Room 226, Dirksen Building.

9:30 AM. The Senate Armed Services Committee will hold a hearing to examine the nominations of Paul McHale to be an Assistant Secretary of Defense for Homeland Security, and Christopher Henry to be Deputy Under Secretary of Defense for Policy. Location: Room 216, Hart Building.

10:00 AM. David Dorman, CEO of AT&T, will speak on the future of the telecommunications industry. Location: National Press Club, Zenger Room, 529 14th St. NW, 13th Floor.

4:00 PM. The Cato Institute will host an event titled "Who Are the Real Free Traders in Congress?" to release a study of voting records on trade issues. The speakers will be Rep. Tom Petri (R-WI), Sen. Sam Brownback (R-KS), and Dan Griswold (Cato). See, notice and registration page. Location: Cato, 1000 Massachusetts Ave., NW.

Friday, January 31
12:00 NOON. The Progress & Freedom Foundation (PFF) will host a briefing titled "The FCC & Telecom Recovery: A Scorecard for Evaluating the Rules". The speakers will be Randolph May (PFF), Thomas Lenard (PFF), Solveig Singleton (Competitive Enterprise Institute), Adam Thierer (Cato Institute), and Jeffrey Eisenach (PFF). RSVP to Rebecca Fuller at 202 289-8928 or Location: Room B-340, Rayburn Building.

Deadline to submit comments to the National Institute of Standards and Technology (NIST) regarding its draft publication [78 pages in PDF] titled "Guidelines for the Security Certification and Accreditation of Federal Information Technology Systems". This is NIST Special Publication 800-37. It was written by Ron Ross and Marianne Swanson in the NIST's Information Technology Laboratory's Computer Security Division, with input from others. Send comments to

Extended deadline to submit reply comments to the Federal Communications Commission (FCC) on whether it should change its rules restricting telemarketing calls and facsimile advertisements. This is CG Docket No. 02-278. See, original notice in the Federal Register, earlier notice of extension [PDF], and further notice in Federal Register of extension.

Deadline to submit applications to the Federal Communications Commission (FCC) for membership on the FCC's Consumer Advisory Committee. For more information, contact Scott Marshall at 202 418-2809

Monday, February 3
10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in Bell Communications v. Fore Systems, No. 02-1083. Location: Courtroom 201, 717 Madison Place, NW.

Deadline to submit comments to the Federal Communications Commission (FCC) in response to its Notice of Inquiry (NOI) in the proceeding titled "In the matter of Facilitating the Provision of Spectrum Based Services to Rural Areas and Promoting Opportunities for Rural Telephone Companies To Provide Spectrum Based Services". This is WT Docket No. 02-381. For more information, contact Robert Krinsky at 202 418-0660. See also, notice in the Federal Register, January 7, 2003, Vol. 68, No. 4, at Pages 723 - 730.

EXTENDED TO FEBRUARY 18. Deadline to submit comments to the Federal Communications Commission (FCC) in response to its Further Notice of Proposed Rulemaking, (FNPRM), released last month, regarding whether providers of various services and devices not currently within the scope of the FCC's 911 rules should be required to provide access to emergency services. This is CC Docket No. 94-102 and IB Docket No. 99-67. See, notice in the Federal Register, January 23, 2003, Vol. 68, No. 15, at Pages 3214 - 3220. See also, notice of extension.

Deadline to submit comments to the Copyright Office (CO) in response to its notice of proposed rulemaking (NPRM) regarding the form, content, and manner of service of notices of termination under Section 203 of the Copyright Act. 17 U.S.C. § 203 pertains to the termination of transfers and licenses granted by the author. See, notice in the Federal Register, December 20, 2002 Vol. 67, No. 245, at Pages 77951 - 77955. For more information, contact David Carson, CO General Counsel, at 202 707-8380.

Deadline to submit comments to the Federal Trade Commission (FTC) regarding MSC.Software's December 30, 2002, petition [8 page PDF scan] for approval of its proposed divestiture of Nastran software to EDS. The petition is titled "Petition of MSC.Software Corporation for Approval of Proposed Divestiture". It was filed in the FTC's administrative proceeding titled "In the Matter of MSC.Software Corporation". This is FTC Docket No. 9299. In August 2002, the FTC and MSC also entered into an Agreement Containing Consent Order [22 pages PDF] which provides that MSC must divest at least one copy of its current advanced Nastran software, including the source code. The divestiture will be through royalty free, perpetual, non-exclusive licenses to one or two acquirers who must be approved by the FTC. For more information, contact Daniel Ducore of the FTC's Bureau of Competition at 202 326-2526.

Tuesday, February 4
? Tentative date for a hearing at the USPTO to assist it in writing a report to the Congress regarding technological protection systems for digitized copyrighted works and to prevent infringement. This report is required by the Technology, Education and Copyright Harmonization Act of 2002 (TEACH). See, notice in the Federal Register, December 9, 2002, Vol. 67, No. 236, at Pages 72920 - 72921. For more information, contact Michael Shapiro at 703 305-9300 or
Wednesday, February 5
10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in Altima Communications v. USITC, No. 02-1110. The U.S. International Trade Commission barred the import by Altima Communications, a Broadcom subsidiary, of certain ethernet networking products found to infringe Intel patents. Fish and Richardson represents Intel in this matter. Location: Courtroom 402, 717 Madison Place, NW.

10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in Crossroads Systems v. Chaparral Network Storage, No. 02-1158. This is an appeal from the U.S. District Court (WDTex) in a  patent infringement case involving storage router technology. (D.C. No. 00-CA-217-SS.) Location: Courtroom 203, 717 Madison Place, NW.

10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in Digital Privacy v. RSA Security, No. 02-1440. This is an appeal from the U.S. District Court (EDVa) in a patent infringement case involving the pre-boot protection of unauthorized use of computer programs and data. Location: Courtroom 201, 717 Madison Place, NW.

11:00 AM. The Cato Institute will host a panel discussion titled "Battle over the Broadcast Flag: The IP Wars and the HDTV Transition". The speakers will be Fritz Attaway (Motion Picture Association of America), Jim Burger (Dow Lohnes & Albertson), Mike Godwin (Public Knowledge), and Andy Setos (Fox Entertainment Group). See, notice and registration page. Lunch will follow. Location: Cato, 1000 Massachusetts Ave., NW.


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