Tech Law Journal Daily E-Mail Alert
May 23, 2003, 9:00 AM ET, Alert No. 668.
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FTC Files Complaint Against Staples Alleging False Statements in Web Site

5/22. The Federal Trade Commission (FTC) filed a civil complaint [8 pages in PDF] in U.S. District Court (DMass) against Staples alleging violation of the Federal Trade Commission Act (FTCA) and the FTC's Mail Order Rule in connection with its misrepresentations regarding one day delivery and website access to its "realtime inventory".

Staples sells office supplies, furniture, technology products, and other items by catalog, telephone, and the internet. The complaint alleges that "Prior to May 4, 2002, on its website, Defendant made ``one day´´ delivery representations to all United States customers who viewed the website. ... Defendant’s policy, however, is to deliver products that are promised for one-day delivery in one business day." (Emphasis in original.)

The complaint also alleges that "First-time visitors to Defendant's website are required to submit their U.S. ZIP code before they can browse the website for items to purchase. Defendant’s website states, ``To view realtime inventory availability, please enter the ZIP code where products will be shipped.´´ ... Prior to May 4, 2002, customers who entered their ZIP code on Defendant’s website as requested did not actually view Defendant’s real time inventory. The website was not updated in real time."

The FTC also announced that it reached a settlement with Staples, under which Staples will pay a $850,000 fine. See also, proposed Consent Decree [10 pages in PDF], which was also filed on May 22. See also, FTC release.

4th Circuit Rules in Cyber Squatting Case

5/19. The U.S. Court of Appeals (4thCir) issued its split opinion [62 pages in PDF] in International Bancorp v. SBM, a cyber squatting case. The Appeals Court affirmed a District Court summary judgment that the use of forty-three domain addresses infringe a foreign corporation's rights under the Lanham Act and violate the Anticybersquatting Act.

The Societe Des Bains De Mer Et Du Cercle Des Etrangers A Monaco (SBM) operates resorts and casinos in Monte Carlo, Monaco, including the "Casino de Monte Carlo". It registered a trademark in 1863 in Monaco. It has not registered a trademark in the U.S. Although, it does have some operations in the U.S., such as advertising and marketing.

International Bancorp others operate internet gambling web sites. Fifty three of their web sites have domain names that incorporate some portion of the trademarked term.

SBM first challenged the gambling operations' use of its trademark before the World Intellectual Property Organization (WIPO). A WIPO panel ruled in SBM's favor, and ordered the transfer of the domain names to SBM.

The gambling operations then filed a complaint in U.S. District Court (EDVa) against SBM seeking declaratory judgment that they are entitled to keep the disputed domain names. SBM counterclaimed under the Lanham Act, 15 U.S.C. § 1111 et seq., for trademark infringement under § 1125(a), trademark dilution under § 1125(c), cybersquatting under § 1125(d)(1), and unfair competition in violation of § 1126(h).

The District Court ruled against SBM on its § 1125(c) trademark dilution claim, because SBM did not show actual economic harm, and on its § 1126(h) unfair competition claim. However, the Court ruled in favor of SBM on its trademark infringement claim and on its cybersquatting claim. The Court also awarded SBM $51,000 in statutory damages and ordered the transfer of 43 of the 53 contested domain addresses.

The Appeals Court affirmed. Judge Diana Motz dissented. She wrote that "The majority reaches the unprecedented conclusion that an entity's use of its foreign trademark solely to sell services in a foreign country entitles it to trademark protection under United States law, even though the foreign mark holder has never used or registered its mark in the United States."

6th Circuit Adopts Standard for Substantial Similarity in Copyright Infringement Cases

5/20. The U.S. Court of Appeals (6thCir) issued its opinion in Kohus v. Mariol, a copyright infringement case involving the alleged copying of a design drawing. The Appeals Court adopted a standard for determining whether substantial similarity exists in copyright infringement cases. Basically, it modified the "ordinary observer" approach. It held that the Court should focus on the perspective of the intended audience, which usually means ordinary consumers, but, in a few cases, such as the present one, means persons with expertise in the field. Moreover, the Court held that where the target audience of the expression is persons with expertise, admission of expert testimony may be appropriate.

While the facts of this case involve designs for latches on portable children's playyards, the standard announced by the Appeals Courts' for determining whether there is substantial similarity in cases where the audience is persons with special expertise, would be applicable in cases involving, for example, copyrighted computer program code.

Background. Louis Kohus designs and invents consumer products. Previously, Kohus and John Mariol formed a corporation. This corporation developed a portable children's playyard. At issue in this case is a design drawing for a latch on this item. Kohus and Mariol had disagreements, which they litigated. Eventually, they settled. In the settlement Kohus was assigned "all rights, title and interest ... in ... design drawings".

Subsequently, Mariol, as a contractor for another company, developed another portable playyard. He also obtained two patents. However, his claims regarding the latch were rejected, on the grounds that it was anticipated by the original design drawing (that had been assigned to Kohus).

District Court. Kohus filed a complaint in U.S. District Court (SDOhio) against Mariol and others alleging copyright infringement. The District Court granted summary judgment to Mariol. Applying the ordinary observer test, it found that substantial similarity was lacking. This appeal followed.

Court of Appeals. The Court of Appeals vacated the District Court judgment, articulated a standard for substantial similarity, and remanded to the District Court for further proceedings.

The Court wrote that there is a two step test. First, filter out unprotected elements. Second, determine whether there is substantial similarity to the protected elements.

The Court wrote that "The essence of the first step is to filter out the unoriginal, unprotectible elements -- elements that were not independently created by the inventor, and that possess no minimal degree of creativity, see Feist, 499 U.S. at 345 -- through a variety of analyses." The Court also elaborated on this filtering process.

Then, "Once the unprotectible elements have been filtered out, the second step is to determine whether the allegedly infringing work is substantially similar to the protectible elements of the original." The Court continued that courts should apply the "ordinary reasonable person" standard. However, it added that "The test was designed for cases where the lay audience purchases the product at issue, and where the lay audience's untutored judgment determines whether the product will sell."

The Court elaborated, "In cases where the target audience possesses specialized expertise, however, the specialist's perception of similarity may be much different from the lay observer's, and it is appropriate in such cases to consider similarity from the specialist's perspective. The larger principle here is that the inquiry in the second prong of the substantial similarity test should focus on the intended audience. This will ordinarily be the lay public, in which case the finder of fact's judgment should be from the perspective of the lay observer or, as Monogram Models put it, the ordinary reasonable person. But in cases where the audience for the work possesses specialized expertise that is relevant to the purchasing decision and lacking in the lay observer, the trier of fact should make the substantial similarity determination from the perspective of the intended audience. Expert testimony will usually be necessary to educate the trier of fact in those elements for which the specialist will look."

The Appeals Court concluded: "The first prong of the inquiry will almost certainly require expert testimony, because the drawings are technical in nature and a lay person is unlikely to understand what constitutes creativity in this area, which elements are standard for the industry, and which elements are dictated by efficiency or by external standards. In conducting the second prong, the district court should consider substantial similarity from the viewpoint of the intended audience, the nature of which the court must determine. This appears to be one of those rare cases where the intended audience is not the lay public: the drawings are technical and are appropriate for patent treatment; interpretational guidance is needed for the lay viewer to imagine the structure and function of the device that the drawings depict; and the initial purchasers of the device would probably be trained engineers, capable of discerning technical niceties that the ordinary person would not detect, and likely to base their purchasing decision on such details."

Representatives Address FCC's Failure to Produce Triennial Review Order

5/22. Rep. Charles Bass (R-NH) and Rep. Leonard Boswell (D-IA) spoke in the House regarding the Federal Communications Commission's (FCC) triennial review order. The FCC announced this order in February, but has yet to release the text of the order. See, TLJ story titled "FCC Announces UNE Report and Order", February 20, 2003.

Rep. Boswell stated that "Three months ago, the FCC adopted its Triennial Review order. I believe the economic implications of this action will be of great benefit throughout our Nation. However, the FCC has had 3 months to issue rules on this action and has done nothing. Meanwhile the companies are held hostage because, quite frankly, their hands are tied."

He asked, "how is it possible the United States can ship a large piece of military equipment halfway around the world in a shorter period of time than it takes the FCC to send its rules up a flight of stairs?"

He urged the FCC "to complete its work and bring some certainty to the telecommunications industry". See, Congressional Record, May 22, 2003, at page H4532.

Rep. Bass stated that "the United States is the most technologically advanced country in the world. One measure, however, where the U.S. is sorely lacking behind other industrialized nations is high-speed Internet access for citizens and small businesses alike. The United States is not even among the top five countries in these broadband access rates. In fact, we are behind South Korea, Canada, Taiwan and Sweden, just to name a few. The statistics for DSL, a form of broadband that uses the telephone infrastructure, are even worse. The U.S. is not even in the top 10."

He continued that the FCC "has begun to see that regulation of DSL harms the ability of companies to deploy that technology. Part of the FCC's Triennial Review, adopted this past February, improved some of the DSL regulations. That should help make DSL deployment easier. However, there are two problems. The first is that the FCC has yet to actually issue these rules agreed upon in February, and the second is that action in February is just a start."

He added that "The FCC is looking at whether or not to regulate DSL as a telephone service. The broadband provided over cable, satellite or wireless is not as regulated as telephone." See, Congressional Record, May 22, 2003, at page H4532.

Rep. Bass is a member of the House Commerce Committee, and its Telecommunications and Internet Subcommittee.

FRB Governor Addresses Prospects for Economic Growth

5/22. Federal Reserve Board (FRB) Governor Mark Olson gave a speech in Minnesota titled "Assessing Prospects for Economic Growth in the United States".

He stated that "the economy will probably remain soft in the near future and that inflation will remain low. Nonetheless, I continue to believe that the pieces are in place for future robust growth." Also, FRB Chairman Alan Greenspan testified before the Joint Economic Committee on May 21. He stated in his prepared testimony that "the consensus expectation for a pickup in economic activity is not unreasonable, though the timing and extent of that improvement continue to be uncertain". Olson also focused on trends in the technology and communications sectors.

Olson said that "By late 2000, the boom had come to an end. The stock market began to retreat in early 2000, and by the end of the year, analysts were revising down their expectations for future earnings. Many businesses were cutting back sharply on capital investment -- particularly in high-tech equipment -- as demand and profits weakened and many companies, such as those in the telecommunications industry, found that they had overspent on equipment during the boom."

Olson continued that "the fundamentals look favorable" for the business sector. "In the near term, lower oil prices should reduce the costs of production for many businesses and free funds for other uses. Also, with interest rates low, the incentives for capital expenditure in the tax code in place until late 2004, and prices for high-tech goods still falling, the cost of capital should remain low."

He added that "Over the longer run, the continuing rapid pace of technological innovation implies that there are many potential investments that offer attractive returns. In the uncertain business environment that has prevailed for some time, many businesses have probably been making do with their existing equipment, stretching out their normal replacement cycles, especially for rapidly depreciating high-tech equipment. Overall, though shifts in business attitudes are difficult to measure, I believe that markets reward businesses that outperform their competitors and that, as demand picks up, companies will respond to opportunities to incorporate technological advances in production, communication, and organization."

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.
People and Appointments

5/22. Dan Brouillette was named Staff Director for the House Commerce Committee. He previously was Assistant Secretary of Energy for Congressional and Intergovernmental Affairs. From 1989 to 1996 he worked on the personal staff of Rep. Billy Tauzin (R-LA), who is now the Chairman of the Committee.

5/22. President Bush announced his intent to nominate Joshua Bolten to be Director of the Office of Management and Budget (OMB), replacing Mitch Daniels. Bolten is currently Assistant to the President and Deputy Chief of Staff for Policy at the White House. Before that, he worked on the Bush Cheney campaign and transition. Before that, he worked for Goldman Sachs International. And before that, he was General Counsel to the U.S. Trade Representative (USTR) during the administration of the elder George Bush. From 1985 to 1989, he was International Trade Counsel to the Senate Finance Committee. He has also worked for the law firm of O'Melveny & Myers. See, White House release. Bolton stated at a White House ceremony that he would be a "tight-fisted custodian of the people's money". See, transcript.

5/22. The Senate confirmed Consuelo Maria Callahan to be a Judge of the U.S. Court of Appeals (9thCir) by a vote of 99-0. See, Roll Call No.195.

5/22. The Senate confirmed Scott Coogler to be a Judge of the U.S. District Court for the Northern District of Alabama.

5/22. The Senate confirmed Gregory Mankiw to be a Member of the Council of Economic Advisers.

FCC Sets Deadlines for Comments in Broadband Over Powerline Inquiry

5/22. The Federal Communications Commission (FCC) published a notice in the Federal Register that describes the FCC's Notice of Inquiry [21 pages in PDF] in its proceeding titled "In the Matter of Inquiry Regarding Carrier Current Systems, including Broadband over Power Line Systems". This notice also sets deadlines for public comments. Comments are by August 6, 2003, and reply comments are due by September 5, 2003.

The FCC announced, but did not release, this Notice of Inquiry (NOI) at its April 23, 2003, meeting. It released the text of the NOI on May 6, 2003. See, story titled "FCC Announces NOI Regarding Broadband Over Powerlines" in TLJ Daily E-Mail Alert No. 628, April 24, 2003, and story titled "FCC Releases NOI on Broadband Over Power Lines" in TLJ Daily E-Mail Alert No. 656, May 7, 2003.

This NOI states that broadband over power line (BPL) "systems use existing electrical power lines as a transmission medium to provide high-speed communications capabilities by coupling RF energy onto the power line. Because power lines reach virtually every community in the country, BPL could play an important role in providing additional competition in the offering of broadband infrastructure to the American home and consumers. In addition, BPL could bring Internet and high-speed broadband access to rural and underserved areas, which often are difficult to serve due to the high costs associated with upgrading existing infrastructure and interconnecting communication nodes with new technologies."

This NOI requests "information and technical data so that we may evaluate the current state of BPL technology and determine whether changes to Part 15 of the Commission’s rules are necessary to facilitate the deployment of this technology."

See, Federal Register, May 23, 2003, Vol. 68, No. 100, at Pages 28182 - 28186. This is ET Docket No. 03-104. For more information, contact Anh Wride at 202 418-0577 or

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 meeting. See, 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. See, nomination guidelines and notice in the Federal Register, February 14, 2003, Vol. 68, No. 31, at Pages 7509.

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.

Wednesday, May 28

The Federal Communications Commission (FCC) will begin Auction 49 (lower 700 MHz band).

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 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 or Ryan Wallach at Location: Willkie Farr & Gallagher, 1875 K St., NW.

Deadline to submit to the National Institute of Standards and Technology (NIST) the 2003 Award Applications for the Malcolm Baldrige awards. See, 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, Arlington, VA.

10:00 AM - 12:00 NOON. The Federal Communications Commission's (FCC) Office of Engineering and Technology (OET) will host a tutorial titled "Radio Noise Measurement and Related Standards". The speaker will be Akira Sugiura, a professor at Tohoku University. Location: FCC, Commission Meeting Room (TW-C305), 445 12th Street, SW.

Monday, June 2

Likely date for the Federal Communications Commission (FCC) to take action in its review of media ownership rules.

Deadline to submit comments to the National Institute of Standards and Technology (NIST) regarding its proposal to withdraw seventeen Federal Information Processing Standards (FIPS). The list of FIPS publications proposed for withdrawal includes FIPS 73, Guidelines for Security of Computer Applications; FIPS 83, Guideline on User Authentication Techniques for Computer Network Access Control; FIPS 102, Guideline for Computer Security Certification and Accreditation; FIPS 112, Password Usage; and FIPS 127-2, Database Language SQL (ANSI X3.135-1992). See, notice in the Federal Register, March 4, 2003, Vol. 68, No. 42, at Pages 10204-10205.

Deadline to submit comments to the Federal Communications Commission (FCC) in response to its notice of proposed rulemaking (NPRM) regarding its slamming rules. Slamming is the unauthorized changing of subscriber's selection of a provider of telephone exchange service or telephone toll service. The FCC adopted this NPRM on February 28, 2003, and released it on March 17. See, Third Order on Reconsideration and Second Further Notice of Proposed Rulemaking [63 pages in PDF]. This is FCC Docket No. 94-129. See also, FCC release [PDF]. For more information, contact Kelli Farmer at 202 418-7057.

SUPERSEDED. Deadline to submit comments to the Copyright Office (CO) in response to its request for public comments on "proposed regulations that set rates and terms for the use of sound recordings in eligible nonsubscription transmissions for the 2003 and 2004 statutory licensing period, and for the use of sound recordings in transmissions made by new subscription services from 1998 through December 31, 2004, in addition to the making of ephemeral recordings necessary for the facilitation of such transmissions." See, notice in the Federal Register, May 1, 2003, Vol. 68, No. 84, at Pages 23241 - 23249. See, superseding notice in the Federal Register, which also sets June 19, 2003, as the deadline for public comments.

5:00 PM. Deadline to submit nominations to the Department of Commerce's Technology Administration for appointment to the Joint High Level Advisory Panel of the United States Israel Science and Technology Commission. See, notice in the Federal Register, May 2, 2003, Vol. 68, No. 85, at Pages 23443 - 23444.

Rep. Meeks Addresses MCI WorldCom Bankruptcy

5/20. Rep. Gregory Meeks (D-NY) spoke in the House about the MCI WorldCom bankruptcy. He stated that "After recording the largest corporate fraud in United States history, costing thousands of jobs and $176 billion in losses to investors, representing three times that of Enron, WorldCom is back, just rebranding themselves to their former name MCI."

Meeks, who is a member of the House Financial Services Committee, continued that "As a supporter of reforming our bankruptcy laws, I am shocked how MCI or any other company can be rewarded for cooking the books, cheating and stealing, and stand to gain by their criminal behavior. Reorganization under the bankruptcy laws should not apply when the assets are the product of criminal activities. Bankruptcy should not be the vehicle for laundering stolen goods. This is the case with MCI, even though they have changed their name and recently rolled out a new marketing campaign to distance themselves from their ``criminal stigma.´´ What an artificial advantage for MCI, our bankruptcy laws."

He also joked, "here is an idea how MCI can market themselves. They can market by saying: MCI stands for massive corporate indiscretions." See, Congressional Record, May 20, 2003, at page H4263.

More News

5/21. The Commerce Department's Technology Administration (TA) released a report [9 pages in PDF] titled "A National Benchmarking Analysis of Technology Business Incubator Performance and Practices", and a report [PDF] titled "Business Incubation: Emerging Trends for Profitability and Economic Development in the US, Central Asia and the Middle East".

5/22. The Securities and Exchange Commission (SEC) issued an Order Instituting Public Administrative Proceedings against PricewaterhouseCoopers alleging improper professional conduct in connection with its audit of SmarTalk TeleServices, a bankrupt provider of prepaid telephone cards and wireless services. See also, SEC release.

5/21. The Office of the U.S. Trade Representative (USTR) announced that the U.S. and Bahrain intend to seek to negotiate a free trade agreement. The USTR stated in a release that "The proposed free trade agreement would support Bahrain's commitment to transparency, openness and the rule of law, and would include increased protection for intellectual property and specific provisions to encourage the development of e-commerce."

5/22. The Senate Commerce Committee held another hearing on media ownership. See, statement of Sen. Ernest Hollings (D-SC), the ranking Democrat on the Committee, and statement of Sen. Wayne Allard (R-CO). See also, prepared testimony of witnesses: Rupert Murdoch (Ch/CEO of News Corporation), Tom Fontana (Writers Guild), Gene Kimmelman (Consumers Union), and Kent Mikkelsen (Economists, Inc.).

5/22. The Senate Indian Affairs Committee held a hearing on telecommunications in Indian country. See, prepared testimony of Kelly Levy of the National Telecommunications and Information Administration (NTIA).

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