|4th Circuit Rules on Relation of Telecom Act
to Antitrust Law
5/20. The U.S.
Court of Appeals (4thCir) issued its
[27 pages in PDF] in Cavalier
Telephone v. Verizon Virginia,
another appellate opinion addressing alleged violations of the interconnection
provisions of the Telecom Act of 1996, and violations of Section 2 of the Sherman
Act. See also, the Goldwasser and Trinko cases. This issue is now
before the Supreme Court. It granted certiorari in the Trinko case in
Background. Cavalier Telephone, a competitive local exchange carrier (CLEC),
entered into an interconnection agreement with Verizon Virginia, an incumbent
local exchange carrier (ILEC). Interconnection is mandated by
47 U.S.C. § 251.
Cavalier alleges that Verizon implemented interconnection in a manner to prevent
Cavalier from competing.
District Court. Cavalier filed a complaint in
U.S. District Court (EDVa) against
Verizon alleging, among other things, that Verizon monopolized or attempted to
monopolize the relevant telecommunications market, in violation of § 2 of the
Sherman Act, 15 U.S.C.
§ 2. The District Court dismissed the antitrust claim for failure to state
a claim upon which relief may be granted. This appeal followed.
Appeals Court. The Court of Appeals affirmed.
It reasoned that "When enacting the Telecommunications Act,
Congress could well have elected to rely only on the antitrust laws to create
competition in local telecommunications markets by simply implementing the
Supremacy Clause to preempt State laws that granted exclusive franchises in
local markets. But foreseeing the inefficiency of that approach, Congress opted
to take the proactive approach of creating new duties under the
Telecommunications Act. By ``jump-starting´´ and ``accelerating´´ the creation
of competition in the local markets through enactment of §§ 251 and 252 of the
Telecommunications Act, Congress imposed
more dramatic obligations on the local monopolies than would have been imposed
simply by subjecting them to preexisting antitrust liability. This was necessary
because the antitrust laws alone do not require legitimate monopolies to give up
their monopolies or to help competitors."
"In furtherance of its intent to jump-start or accelerate
competition in local markets through means independent of the antitrust laws,
Congress enacted §§ 251 and 252 of the Telecommunications Act to impose
entirely new duties, which were in
addition to the duties imposed by § 2 of the Sherman Act", wrote the Appeals
Court. "These obligations exceed the duties imposed by the antitrust laws, and
failure to fulfill them would not have supplied the foundations of a monopoly
"Thus, it appears that Congress wished to have both acts further
competition in local telecommunications services markets through independent
means. Stated otherwise, Congress intended that even as it imposed new duties through
enactment of the Telecommunications Act that would fall outside the parameters
of the antitrust laws, it intended that the duties imposed by the antitrust laws
would be left ``untouched.´´"
"For all of these reasons, we conclude that the Sherman Act
continues to apply in its own traditional domain, applying as it did before the
Telecommunications Act, and the Telecommunications Act imposes new duties that
may be enforced in accordance with its own provisions but not under the Sherman
Act unless the conduct otherwise would have supported a claim under the Sherman
Act absent the authority of the Telecommunications Act."
The Appeals Court concluded that "Because we find that
Cavalier’s complaint alleges only breaches of duties that did not exist prior to
the enactment of the Telecommunications Act and would not have supported a claim
of monopolization or attempted monopolization, it has failed to state a claim
under § 2 of the Sherman Act, and the State analogue, upon which relief can be
granted. We therefore hold that the district court properly granted Verizon’s
motion to dismiss this action pursuant to Rule 12(b)(6), and we affirm the
judgment of the district court."
Judge Niemeyer wrote the opinion for the three judge panel. Judge Widener
joined. Judge Morton Greenberg, a judge of the
U.S. Court of Appeals (3rdCir) on
senior status, sitting by designation, wrote a dissent.
This issue is far from settled. See for example, the
Seventh Circuit's July 25, 2000,
Goldwasser v. Ameritech, 222 F.3d 390 (7th Cir. 2000), dismissing an
antitrust claim. In contrast, see the
of June 20, 2002, of the U.S. Court of
Appeals (2ndCir) in the Trinko case, which reversed the District Court's
dismissal of antitrust claims.
On March 10, 2003, the Supreme Court granted certiorari in
Verizon v. Trinko.
See, story titled "Supreme Court Grants Certiorari in Verizon v. Trinko"
in TLJ Daily E-Mail
Alert No. 620, March 11, 2003.
Also, on May 21, the
U.S. Court of Appeals (9thCir) issued
amended opinion [47 pages in PDF] in MetroNet Services v. U S West.
The Court made revisions to its original opinion, and denied petitions for
rehearing and rehearing en banc. This is an antitrust case involving the
market for small business local telephone services in Seattle, Washington. The
Appeals Court reversed the District Court's grant of summary judgment to
U S West (now Qwest). In so doing, the
Appeals Court rejected U S West's argument that it has antitrust immunity. This
issue is already before the Supreme Court in the Trinko case. See, story
titled "9th Circuit Rules on Antitrust Immunity of ILECs" in
TLJ Daily E-Mail
Alert No. 634, April 1, 2003.
|9th Circuit Rules in Antitrust Case
5/13. The U.S.
Court of Appeals (9thCir) issued its
opinion [29 pages in PDF] in Paladin
v. Montana Power, an antitrust case involving the natural gas industry.
However, while this is not a technology case, the topics addressed by the Court,
including the essential facilities doctrine, illegal tying, and illegal group
boycotts, may be applicable in other antitrust cases.
Paladin is a natural gas marketer. Montana Power is a natural gas pipeline
company. Paladin filed a complaint in U.S. District
Court (DMont) against Montana Power and others alleging federal antitrust and
state law tort claims. Paladin alleged that Montana Power and another company
created an illegal group boycott, that Paladin created an illegal tying
arrangement, and that Paladin possessed storage facilities that constitute
essential facilities and that it illegally monopolized them.
The District Court granted summary judgment to
Montana Power and the other defendants on the federal antitrust claims, and
dismissed the state law claims. The Appeals Court affirmed.
|7th Circuit Addresses Erroneous Copyright
Registrations, Assignments, and Works Made for Hire
5/21. The U.S.
Court of Appeals (7thCir) issued its
opinion [PDF] in Billy
Bob Teeth v. Novelty,
a copyright infringement and trade dress infringement case involving novelty
teeth. The dispute does not involve technology. Nevertheless, the Court
addressed issues, such as authorship, registration, erroneous registration,
assignment, and works made for hire, that are applicable in copyright cases
This case involves a dispute over novelty teeth. These are phony teeth that are
oversized, crooked, and chipped that fit over a person's real teeth. They are
purchased and used for the purpose of humor, such as to imitate the movie
character, Austin Powers.
Rich Bailey, while a dental student, first made
a set of the phony teeth as a gag. He did not register a copyright (that is, as
the author of a sculpture work). Bailey and
Jonah White later formed a
partnership to make and sell the teeth, and operated under the name "Billy Bob
Teeth". Sales rose to $5 Million per year. But still, there was no copyright
registration. They then formed a corporation. White then designed, or authored, the teeth that
are at issue in this case. Belatedly, in 1999, the Billy Bob corporation obtained copyright
registrations for "Sculpture and Artwork in Novelty Teeth" and "Sculpture and
Artwork in Novelty Teeth with Chip." On the registrations the author was
described as "Billy Bob Teeth, Inc., employer for hire of Jonah White."
Novelty began making phony teeth
similar to Billy Bob's. Novelty marketed them as Bubba Teeth and Hilljack Teeth.
Novelty obtained no license from Billy Bob. Billy Bob asserts that Novelty's
teeth were copies, that Novelty used the same packaging, and that Novelty made
bad bad teeth. This, asserted Billy Bob, caused some purchasers of Novelty's
teeth to complain to Billy Bob.
Billy-Bob filed a complaint in U.S. District Court (SDIll)
against Novelty alleging copyright infringement and trade dress infringement. During trial
White, as owner, signed a nunc pro tunc copyright assignment, assigning his
works to Billy Bob. The jury awarded Billy Bob $105,000 in damages
for copyright infringement on Novelty's sale of Bubba Teeth, $30,000 in damages
on the sale of Hilljack Teeth, and $7,046.40 in damages for trade dress
The District Court then granted judgment as matter of law to
Novelty on the basis that the copyrights were invalid because neither of the
works was a "work made for hire." That is, the Billy Bob corporation
did not exist at the time the teeth were authored. The Court also conditionally granted the
motion for a new trial. It upheld the damage award for trade dress infringement.
This appeal followed.
The Appeals Court reversed the judgment as a matter of law (JMOL) regarding
The Court first addressed the nature of works made for hire. It wrote that "A copyright
``vests initially in the author or authors of the
work.´´ 17 U.S.C. § 201. Under the
``work made for hire´´ provisions in
17 U.S.C. §
101, employers are considered authors. A ``work made for hire´´ is a work prepared
by an ``employee within the scope of his or her employment´´ or a ``work specially
ordered or commissioned´´ within nine specified categories.
Community for Creative
Non-Violence v. Reid, 490
U.S. 730, 738 (1989). When a work falls within the nine categories, it can be a
work made for hire if ``the parties expressly agree in a written instrument
signed by them that the work shall be considered a work made for hire.´´ § 101.
For an item to be a commissioned work, then, the parties must agree in advance
that that is what it will be."
The Court concluded that Billy Bob cannot claim that the works are
works made for hire, because Billy Bob did not exist at the time that they were
The Appeals Court continued, however, that the error on the
registration is not fatal to Billy Bob's case. It wrote that inadvertent errors
on registration certificates do not bar infringement actions. The Court wrote,
"So Jonah White is the author of the teeth in question and, in this case,
Billy-Bob, Inc. claims ownership of the copyright by assignment from White.
Copyrights, like other property rights, can be transferred from an owner to
another entity." And this was accomplished by the mid-trial assignment.
Moreover, the Appeals Court held that Novelty lacks standing to
challenge the assignment. It wrote that "The statute is in the nature of a
statute of frauds and is designed to resolve disputes among copyright owners and
transferees." And since, in this case, there is no dispute between Billy Bob,
White and Bailey, there is no reason to set aside the assignment.
Hence, the Appeals Court affirmed in part (the trade dress infringement
award), and reversed in part (the JMOL on the copyright infringement awards).
Billy Bob gets what the jury awarded it.
|Adelstein Addresses Media Ownership
5/20. Federal Communications Commission (FCC)
speech [7 pages in PDF] to the Media Institute regarding the FCC's review of
its media ownership rules.
He said that the public opposes further media consolidation. He also rejected
the idea that the development of new technologies for the dissemination of
information warrant changing long standing media ownership rules.
Adelstein (at right) stated that "Despite
the oft-repeated exhortation that technology has changed
everything, a simple fact remains. No technological advances have made it
possible for every person who wants to broadcast in a local community to do so.
We therefore must reaffirm that the public interest is served by promoting all
three of the basic principles that form the foundation of American broadcasting
system: localism, diversity, and competition -- not just competition alone."
He added that "Neither cable nor the Internet has changed the huge market power
granted by federal license to use scarce broadcast spectrum, particularly when
that license comes with the requirement to be carried on cable."
He offered several recommendations. "First, we must consider how to hold
broadcasters accountable to
the public for the benefits they claim will result from consolidation. ...
Before allowing media companies to expand into traditionally protected areas,
the public should know how it will benefit them. The FCC should then require an
annual showing from the consolidated broadcaster that it met its commitments."
"Second", said Adelstein, "diversity concerns stemming from cross-ownership of a
broadcast station with other media outlets like newspapers or cable should be
addressed based upon a specific showing of the diverse voices available in
individual local markets and the power of the proposed combination to undermine
"Third, with respect to the national cap, while I clearly prefer
to keep the cap at the 35% level that Congress established, in my opinion, the
only other number that makes legal and policy sense is 40%, the number the
market is at today."
|The Tech Law Journal Daily E-Mail Alert will not be
published on Monday, May 26, Tuesday, May 27, or Wednesday, May
28, for a Memorial Day break.
|Capitol Hill News
5/21. The House Judiciary Committee
amended and passed
the Class Action Fairness Act, by a vote of 20-14. It was a largely party
line vote, with Republicans supporting the bill, and Democrats opposing it.
However, Rep. Rick Boucher (D-VA), a
cosponsor of the bill, voted for it. See also, story titled "House
Committee Holds Hearing on Class
Action Reform Bill" in TLJ Daily E-Mail Alert No. 664, May 19, 2003.
5/21. The Senate Commerce
Committee held a hearing on unsolicited bulk e-mail. See,
prepared testimony of Sen. Charles
Schumer (D-NY), and
prepared testimony of Sen. Mark Dayton
(D-MN). See also, prepared testimony of
Orson Swindle (Federal Trade Commission), Mozelle
Thompson (Federal Trade Commission),
Ted Leonsis (American Online),
Enrique Salem (Brightmail),
Trevor Hughes (Network Advertising Initiative),
Mark Rotenberg (Electronic Privacy Information Center), and
Ronald Scelson (Scelson Online Marketing).
5/21. The Senate Banking Committee
held a hearing titled "National Export Strategy". See,
statement of Sen. Richard Shelby
opening statement of Sen. Elizabeth Dole
(R-NC). See also, prepared testimony of witnesses:
Merrill (President of the Export Import Bank of the United States),
(President of the Overseas Private Investment Corporation), and
Barreto (Administrator of the Small Business Administration.
5/21. The House Homeland Security Committee's
(HHSC) Subcommittee on Cybersecurity, Science, and Research
& Development held a hearing titled "Homeland Security Science and
Technology: Preparing for the Future." See,
prepared testimony of
McQueary, Under Secretary of the Department
of Homeland Security (DHS). He testified about, among other topics, the
Threat and Vulnerability, Testing and Assessment (TVTA) program. He wrote that
the purposed of the TVTA is "to create advanced modeling, and information and
analysis capabilities that can be used by the organizations in the Department to
fulfill their missions and objectives. One thrust of this program is to develop
advanced computing, information, and assessment capabilities in support of
threat and vulnerability analysis, detection, prevention and response. This
portfolio also conducts extensive research and development activities in the
area of cybersecurity, addressing areas not currently addressed elsewhere in the
Federal government. An example of this is developing tools and techniques for
assessing and detecting the insider threat."
|Thursday, May 22
The House will meet at 10:00 AM for legislative business.
9:30 AM. The Senate Judiciary
Committee will hold an executive business meeting. The agenda includes
consideration of several nominations, including Michael Chertoff (to be
Judge of the U.S. Court of Appeals for
the 3rd Circuit), David Campbell (U.S. District Court for the District of
Arizona), Robert McCallum (to be Associate Attorney General), Peter
Keisler (to be Assistant Attorney General in charge of the
Civil Division), and
Hewitt Pate (to be
Assistant Attorney General in charge of the
Antitrust Division). The agenda also
includes consideration of several bills, including
S 554, a
bill to allow photographic, electronic, broadcast, or television coverage of
federal court proceedings. See,
Press contact: Margarita Tapia at 202 224-5225. Location: Room 226, Dirksen
10:00 AM. The Senate Commerce
Committee will hold yet another hearing on media ownership. Press contact:
Rebecca Hanks 202 224-2670 or Andy Davis at 202 224-6654. Location: Room 253,
10:00 AM. The Senate Indian Affairs Committee will hold a hearing on
telecommunications in Indian country. Location: Room 485, Russell Building.
10:00 AM. The House
Judiciary Committee's Subcommittee on Courts, the Internet and
Intellectual Property will meet to mark up
the "United States Patent and Trademark Fee Modernization Act of 2003".
The event will be webcast. Press contact: Jeff Lungren or Terry Shawn at 202 225-2492.
Location: Room 2141, Rayburn Building.
11:00 AM. The House Judiciary
Committee's Subcommittee on Commercial and Administrative Law will meet to
mark up HR 49,
the "Internet Tax Nondiscrimination Act". The event will be webcast.
Press contact: Jeff Lungren or Terry Shawn at 202 225-2492. Location: Room
2141, Rayburn Building.
2:00 PM. The Senate Judiciary
Committee will hold a hearing on several pending
judicial nominations, including Richard Wesley (Second Circuit), Ronnie Greer
(Eastern District of Tennessee), Thomas Hardiman (Western District of
Pennsylvania), Mark Kravitz (District of Connecticut), John Woodcock (District
of Maine). Press contact: Margarita Tapia at 202 224-5225. Location: Room
226, Dirksen Building.
2:30 PM. The Senate Commerce
Committee's Subcommittee on Communications will hold a hearing to examine
wireless broadband in rural areas. Location: Room 562, Dirksen Building.
|Friday, May 23
The House will meet at 9:00 AM for legislative business.
10:00 - 11:30 AM. The Federal Communications
Commission's (FCC) Media Security and Reliability Council will hold a
notice in Federal Register: November 19, 2002, Vol. 67, No. 223, at Page
69742. For more information, contact Barbara Kreisman at 202-418-1600.
Location: FCC, 445 12th St. SW Room TW-C305.
Deadline to submit to the Department of
Commerce (DOC) nominations for award of the
National Medal of Technology.
notice in the Federal Register, February 14, 2003, Vol. 68, No. 31, at
|Monday, May 26
Memorial Day. The House and Senate will be in recess for
the Memorial Day District
Work Period from May 26 through May 30. The Supreme Court is in recess.
|Tuesday, May 27
Deadline to submit comments to the U.S.
Patent and Trademark Office (USPTO) regarding its notice of proposed rulemaking (NPRM)
to amend its regulations to implement the Madrid Protocol Implementation Act of
2002 (MPIA). See,
notice in the Federal Register, March 28, 2003, Vol. 68, No. 60, at Pages
15119 - 15138.
|Thursday, May 29
12:15 PM. The Federal Communications Bar
Association's (FCBA) Cable Practice Committee will host a brown bag lunch.
The speaker will be Ken Ferree, Bureau Chief of the Federal
Communications Commission's (FCC) Media
Bureau. RSVP to Wendy Parish at
firstname.lastname@example.org. Location: National Cable &
Telecommunications Association (NCTA), 1724 Massachusetts Ave., NW, 2nd
Floor Conference Room.
12:15 PM. The Federal Communications Bar
Association's (FCBA) Young Lawyers Committee (YLC) will host a brown bag
lunch. The topics will be "YLC Year in Review, Planning Meeting 2003, and
Elections". For more info contact Yaron Dori at
email@example.com or Ryan Wallach at
Willkie Farr & Gallagher, 1875 K St.,
Deadline to submit to the National
Institute of Standards and Technology (NIST) the 2003 Award Applications
for the Malcolm Baldrige awards.
Application Form [MS Word].
|Friday, May 30
10:00 AM. The U.S. Patent and Trademark Office
(USPTO) will a public hearing its notice of proposed rulemaking (NPRM)
to amend its regulations to implement the Madrid Protocol Implementation Act of
2002 (MPIA). See,
notice in the Federal Register, March 28, 2003, Vol. 68, No. 60, at Pages
15119 - 15138. Location: USPTO, Patent Theater, 2121 Crystal Drive, Room 200,
5/20. U.S. Telecom Association (USTA)
P/CEO Walter McCormick criticized the Federal
Communications Commission (FCC) for failing to release its triennial review
order, which the FCC announced that it had adopted back in February. He stated
in a release that
this delay is "an open-ended policy limbo that deepens telecom's fiscal woes and
ill-serves the nation." See also, story titled "Rep. Upton Criticizes FCC for Failure to
Release Triennial Review Order" in TLJ Daily E-Mail Alert No. 666, May 21, 2003.
5/21. The Treasury Department's Michael
Dawson gave a speech
titled "Protecting Critical Financial Infrastructure". Dawson is the Deputy
Assistant Secretary for Critical Infrastructure Protection and Compliance Policy
at the Treasury Department. He spoke in Chicago, Illinois.
5/21. The National Telecommunications and
Information Administration (NTIA) published a web site titled "State and
Local Rights of Way". It contains a survey of state rights of way laws, a
collection of "Rights of Way Success Stories", and a collection of hyperlinks to
the web sites of groups and other government entities involvrd in rights of way
issues. Some service providers assert that state, local, and federal government
entities impose rights of way obstacles to the timely deployment of broadband
5/21. The Federal Election Commission (FEC)
announced that it has assessed civil fines in sixty-six administrative cases. It
fined the Level 3 Communications Inc. Political Action Committee $700 for filing
a late report. It fined the Sony Pictures Entertainment Inc. PAC $343.75 for
filing a late report. It also fined the Friends of John Conyers $5,250 for not
filing a quarterly report. Rep. John
Conyers (D-MI) is the ranking Democrat on the
House Judiciary Committee. See,
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