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June 10, 2003, 9:00 AM ET, Alert No. 677.
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9th Circuit Rules on Misappropriation of Trade Secrets, and Application of Antitrust Law to Patents

6/5. The U.S. Court of Appeals (9thCir) issued its opinion [20 pages in PDF] in Bourns v. Raychem, pair of consolidated cases involving misappropriation of trade secrets, and antitrust law. The Court held that in an antitrust action based upon threats to enforce invalid patents, the plaintiff must show that it was an actual competitor, not merely a bystander, in order to prove antitrust injury.

Raychem Corporation developed and produced polymeric positive temperature coefficient (PPTC) devices. These devices, which are used in computers, consumer electronics, telecommunications instruments, and other applications, controll power surges. Basically, these devices consist of two layers of conductive foil surrounding a mixture of a nonconductive polymer and conductive carbon black. When current in the device becomes excessive, its lattice bonds break and stops the current. On cooling, the lattice reforms and current automatically resumes.

Raychem obtained patents on its PPTC inventions. It also required employees to sign a contract in which they agreed to keep in confidence any proprietary information received from the Raychem. Steven Hogge was one such employee.

Hogge left Raychem, and took with him proprietary documents. Hogge worked with Bourns Inc. to produce and market PPTC devices based upon proprietary information obtained from Raychem. Hogge and Bourns also hired employees who had previously worked for Raychem.

Raychem filed a complaint in state court in California against Bourns and Hogge alleging misappropriation of trade secrets. Defendants removed the case to U.S. District Court (CDCal). The jury returned a verdict in favor of Raychem for compensatory damages against both Bourns and Hogge, and for punitive damages against Bourns. The Court reduced the size of the awards, and Raychem accepted the remittitur.

Bourns appealed. He argued that the District Court erred in the instructions to the jury on misappropriation of trade secrets. The Appeals Court affirmed.

In a separate action, Bourns filed a complaint in U.S. District Court (CDCal) against Raychem alleging violation of Sections 1 and 2 of the Sherman Act and Section 7 of the Clayton Act. At issue on appeal is Bourns' claim that Raychem prevented Bourns from competing in the PPTC business by threatening to enforce invalid patents. The jury returned a verdict for Bourns. The Court denied Raychem's motion for judgment as a matter of law. Raychem argued that there was no antitrust injury.

The Court of Appeals reversed, holding that there was no antitrust injury. It relied on the Supreme Court decision in Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172 (1965). The Appeals Court wrote that "the Supreme Court held that possession and use of a fraudulently-acquired patent was not a per se violation of the Sherman Act but could be treated as an offense under the antitrust laws if the patent was employed to produce monopoly power in a specified market. Bourns' successful attack on the Raychem patents and its establishment of the lithium batteries market as affected by the patents was not the end of Bourns' case. Bourns had to show that, at the time Raychem threatened it with patent litigation, it was more than a hopeful bystander. Bourns had to show that Raychem's fraudulent bluffing had inflicted antitrust injury on it."

"Only an actual competitor or one ready to be a competitor can suffer antitrust injury", wrote the Appeals Court. "The threats that Bourns showed were made by Raychem to enforce its patents were made in May 1994 and September 1994. They were threats to a bystander who was pawing the ground: don't get into our turf. They were not threats to a competitor or to a business prepared to be a competitor. They did constitute an abuse of Raychemís invalid patents. They did not constitute antitrust injury for the threats were not addressed to a business in the market or to a business that was prepared to enter the market."

Judge John Noonan wrote the opinion of the Appeals Court, in which Judge Wallace Tashima joined. Judge Harry Pregerson joined as to the trade secrets action, but dissented as to the antitrust action.

FCC Announces NPRM Regarding Communications Facilities and the National Historic Preservation Act

6/9. The Federal Communications Commision (FCC) released a notice of proposed rulemaking (NPRM) [7 pages in PDF] regarding communications facilities and the National Historic Preservation Act (NHPA). The FCC also issued a short release [2 pages in PDF] summarizing the NPRM.

This NPRM seeks public comment on the draft Nationwide Agreement [28 pages in PDF] of the FCC, the Advisory Council on Historic Preservation, and the National Conference of State Historic Preservation Officers, regarding undertakings for communications facilities, including communications towers and antennas, under the NHPA. Section 106 of the NHPA, which is codified at 16 U.S.C. ß 470 et seq., requires federal agencies to consider the effects of federal undertakings on historic properties.

FCC Chairman Michael Powell wrote a separate statement [PDF]. He wrote that "The proposed agreement seeks to clarify the regulatory muddle and delay that has beset many tower-construction proposals by defining key terms, establishing public-participation standards and describing how to submit projects to State Historic Preservation Officers. Our goal is to identify promptly those proposed sites that do impact historic sites and develop mitigation plans or alternative siting plans that allow services to be deployed in those areas. The proposed agreement will also serve to allow those sites that do not have any potential historic impact to move forward without regulatory delay."

The FCC adopted this NPRM on May 27, but did not release it until June 9, 2003. It is titled "In the matter of Nationwide Programmatic Agreement Regarding the Section 106 National Historic Preservation Act Review Process". It is WT Docket No. 03-128. For more information, contact Frank Stilwell at 202 418-1892 or

Comments are due by August 8, 2003. Reply comments are due by September 8, 2003.

Sen. Baucus Asks for GAO Report on Lack of Transparency in the FTA Process

6/5. Sen. Max Baucus (D-MT) and Rep. Cal Dooley (D-CA) wrote a letter to the General Accounting Office (GAO) requesting that it conduct an investigation into how the Bush administration makes decisions regarding the selection of free trade agreement (FTA) negotiating partners and the allocation of negotiating resources.

Sen. Max BaucusSen. Baucus (at right) is the ranking Democrat on the Senate Finance Committee, which has jurisdiction over most trade issues. He and Rep. Dooley were active supporters of legislation passed in the last Congress that gave the President trade promotion authority.

Sen. Baucus stated in a release [PDF] that "I am increasingly concerned about the lack of an organized and transparent process for selecting future FTA partners. Our negotiating resources are finite, and I want to be sure we are putting them to the best possible use."

Rep. Dooley added that "Senator Baucus and I are also working to incorporate the input of numerous trade stakeholders in deciding how to best pursue new FTAs."

GAO Reports on DHS's Visa Entry/Exit Information Technology

6/9. The General Accounting Office (GAO) released a report [57 pages in PDF] titled "Information Technology: Homeland Security Needs to Improve Entry Exit System Expenditure Planning". The report finds that the Immigration and Naturalization Service (INS), which is now a part of the Department of Homeland Security (DHS), "has not yet satisfied two OMB requirements -- having a system security plan and assessing the system's impact on the privacy of individuals -- both of which are critical to understanding system requirements and ensuring that acquired system capabilities satisfy these requirements."

The report also states that "INS's preliminary plans for the entry exit system show that it intends for the system to have functional and performance capabilities that the Congress specified in law. These capabilities include being able to collect and match alien arrival and departure data electronically, being accessible to the border management community, and being able to read tamper-resistant documents with biometric identifiers. However, we also observed that this first expenditure plan does not adequately disclose material information about the system, such as what system capabilities and benefits are to be delivered, by when, and at what cost. Without sufficiently detailed information on system plans and progress, the Congress will be impeded in its oversight efforts for the system."

The report was prepared for Sen. Thad Cochran (R-MS), Sen. Robert Byrd (D-WV), Rep. Harold Rogers (R-KY), and Rep. Martin Sabo (D-MN), the Chairman and ranking Democrats on the Appropriations Committees' Homeland Security Subcommittees.

Supreme Court News

6/9. The Supreme Court denied certiorari, without opinion, in Swartz v. USPTO, No. 02-1565. See, Order List [8 pages in PDF] at page 2.

6/9. After releasing several non technology related opinions on Monday, June 9, the Supreme Court announced that "The Court will take a recess from today until Monday, June 16, 2003." See, Order List [8 pages in PDF] at page 8.

Bush Nominates Goldsmith to Head OLC

6/9. President Bush nominated Jack Goldsmith to be an Assistant Attorney General in charge of the Office of Legal Counsel. Bush announced his intent to nominate Goldsmith back in April. If confirmed, he will replace Jay Bybee, whom President Bush nominated to be a Judge of the U.S. Court of Appeals for the Tenth Circuit, and the Senate confirmed in March. Goldsmith clerked for Judge Harvie Wilkinson (U.S. Court of  Appeals for the 4th Circuit) and Justice Anthony Kennedy (Supreme Court). He was briefly an associate at the law firm of Covington & Burling. He then taught at the University of Virginia School of Law. He is currently a professor at the University of Chicago School of Law, on leave. See, White House release.

He is the author of "Against Cyberanarchy". See also, "Against Cyberanarchy, 65 Chi. L. Rev. 1199 (1998). His publications also include "Regulation of the Internet: Three Persistent Fallacies", 73 Chic.-Kent L. Rev. 1119 (1998), and "The Internet and the Abiding Relevance of Territorial Sovereignty", 5 Ind. J. Glob. Leg. Stud. 475 (1998).

The Office of Legal Counsel has a history of serving as a stepping stone to higher office in Republican administrations. Other former heads of the OLC include Chief Justice William Rehnquist, Justice Antonin Scalia, former Attorney General William Barr, 10th Circuit Judge Jay Bybee, and 4th Circuit Judge Mike Luttig. Some press accounts list now list Luttig as a possible future Supreme Court nominee by President Bush.

More People and Appointments

6/9. President Bush nominated Phillip Figa to be a Judge of the U.S. District Court for the District of Colorado. He is litigation attorney, and partner, in the law firm of Burns Figa & Will, in Engelwood, Colorado. If confirmed, he will replace Judge Richard Matsch, who has gone on senior status. See, White House release.

6/9. President Bush nominated Robert Clive Jones to be a Judge of the U.S. District Court for the District of Nevada. He is a Judge of the U.S. Bankruptcy Court. See, White House release.

6/9. President Bush nominated Christopher Wray to be an Assistant Attorney General in charge of the Department of Justice's (DOJ) Criminal Division. Bush announced his intent to nominate Wray back in April. If confirmed, he will replace Michael Chertoff, whom President Bush has nominated to be a Judge of the U.S. Court of Appeals for the Third Circuit. Wray is part of the Georgia contingent at the DOJ. He previously worked for the law firm of King & Spaulding. The DOJ's Computer Crimes and Intellectual Property Section (CCIPS) is a part of the Criminal Division. See, White House release.

More News

6/9. Federal Trade Commission (FTC) Chairman Timothy Muris issued a statement regarding the Department of Homeland Security's (DHS) announcement on June 6 that it will create a cyber security division. He stated that "I commend Secretary Ridge and the Department of Homeland Security for creating the National Cyber Security Division to help protect our critical infrastructure. The National Cyber Security Division represents a consolidated, highly organized team of information security experts, which will surely make a significant and immediate contribution toward the protection of our nationís critical cyber assets. Information technology has become a vital, inseparable component of daily business transactions and consumer activities. Practicing safe computing, from the family room to the board room, will minimize vulnerabilities and ensure that the United States remains a paradigm of technical innovation. The National Cyber Security Division at DHS will play an integral role in monitoring current trends, identifying weaknesses, and initiating education campaigns." See also, story titled "DHS Creates Cyber Security Division" in TLJ Daily E-Mail Alert No. 676, June 9, 2003.

6/9. The Federal Communications Commision (FCC) published a notice in the Federal Register regarding its Second Memorandum Opinion and Order, adopted on February 3, 2003, regarding fixed satellite and terrestrial systems in the Ku-Band. This order is effective August 8, 2003. This is ET Docket No. 98-206. See, Federal Register, June 9, 2003, Vol. 68, No. 110, at Pages 34336 - 34339.

House To Take Up Internet Gambling Bill

6/9. The House Rules Committee adopted a structured rule for consideration of HR 2143, the "Unlawful Internet Gambling Funding Prohibition Act". The House is scheduled to take up the bill on Tuesday, June 10. The rule makes in order only three amendments.

The bill would attempt to bar internet gambling operations access to the U.S. financial services system by banning the use of credit cards, wire transfers, or any other bank instrument to fund illegal gambling transactions. The bill does not ban gambling. This is a matter of state law.

The first amendment, the Kelly amendment [2 pages in PDF], offered by Rep. Sue Kelly (R-NY) of the House Financial Services Committee, provides that "No provision of this Act shall be construed as altering, limiting, extending, changing the status of, or otherwise affecting any law relating to, affecting, or regulating gambling within the United States."

Second, there is the Lee amendment [2 pages in PDF] offered by Rep. Sheila Lee (D-TX), a member of the House Judiciary Committee. It would remove credit cards, as well as "credit, or the proceeds of credit" from the list of items that may not be used to fund illegal gambling operations. This would essentially gut the bill.

Third, there is the Sensenbrenner Cannon Conyers amendment [2 pages in PDF]. The bill currently provides that the term "bets or wagers" does not include "(ix) any lawful transaction with a business licensed or authorized by a State." This amendment would strike this exception.

This amendment would remove from the bill the exception that creates a carve out for state approved gambling on horse racing, dog racing, and jai alai. Hence, it would expand the prohibition of the bill. However, passage of this amendment would cause the horse racing, dog racing, and jai alai industries, and their supporters to oppose the bill.

See also, stories titled "House Subcommittee Holds Hearing on Internet Gambling Bills" in TLJ Daily E-Mail Alert No. 652, May 2, 2003; "House Crime Subcommittee Approves Internet Gambling Bill" in TLJ Daily E-Mail Alert No. 656, May 7, 2003; "House Judiciary Committee Approves Internet Gambling Bill" in TLJ Daily E-Mail Alert No. 662, May 15, 2003; and "House Financial Services Committee Approves Revised Internet Gambling Bill" in TLJ Daily E-Mail Alert No. 666, May 21, 2003.

Tuesday, June 10

The House will meet at 10:30 AM for morning hour and 12:00 NOON for legislative business. The House will consider several items under suspension of the rules, including HR 1086, the "Standards Development Organization Advancement Act". The House will also consider HR 2143, the "Unlawful Internet Gambling Funding Prohibition Act", subject to a rule. See, Republican Whip Notice.

8:00 AM - 5:30 PM. The Progress and Freedom Foundation (PFF) will host a conference titled "Promoting Creativity: Copyright in the Internet Age". The speakers will include Brad Brown (George Mason University Tech Center), James Burger (Dow Lohnes & Albertson), Richard Epstein (University of Chicago), Mike Godwin (Public Knowledge), Scott Kieff (Washington University), Edmund Kitch (University of Virginia), Stanley Liebowitz (University of Texas at Dallas), Rep. Lamar Smith (R-TX), James Delong (PFF), Michael Abramowicz (GMU School of Law), Greg Aharonian (Patent News), Michael Einhorn, Bruce Kobayashi (GMU School of Law), Katherine Lawrence (University of Michigan Business School), Adam Mossoff (Clerk, U.S. Court of Appeals for the Fifth Circuit), Harold Furchtgott Roth, Solveig Singleton (CEI), and William Adkinson (PFF). RSVP to Brooke Emmerick at 202 289-8928 or Location: J.W. Marriott Hotel, 1331 Pennsylvania Ave., NW.

9:00 AM - 3:00 PM. The President's Council of Advisors on Science and Technology (PCAST) will meet. The agenda includes a discussion of the status of the work of its workforce education and information technology manufacturing competitiveness subcommittees, a discussion of draft report from the subcommittee on the science and technology of combating terrorism, and a discussion of its review of the federal National Nanotechnology Initiative. See, notice in the Federal Register, May 29, 2003, Vol. 68, No. 103, at pages 32037 - 32038. Location: Washington Room (roof level), Hotel Washington, 15th Street & Pennsylvania Avenue, NW.

10:00 AM. The House Judiciary Committee's Subcommittee on Courts, the Internet, and Intellectual Property will hold a hearing on HR 2391, the "Cooperative Research and Technology Enhancement (CREATE) Act of 2003." The hearing will be webcast. Press contact: Jeff Lungren or Terry Shawn at 202 225-2492. Location: Room 2141, Rayburn Building.

10:00 AM. The House Government Reform Committee's Subcommittee on Technology, Information Policy, Intergovernmental Relations and the Census Subcommittee will hold a hearing "Geospatial Information: A Progress Report on Improving Our Nation's Map-Related Data Infrastructure". The witnesses will include Mark Forman (Administrator of E-Government and Information Technology, OMB), Scott Cameron (Chairman, Geospatial One-Stop Board of Directors), Linda Koontz (Director, Information Management, GAO), Susan Kalweit (Chairman, Interagency Geospatial Preparedness Team, FEMA), Gene Trobia (President, National States Geographic Information Council), Jack Dangermond (ESRI, Inc.), and Michael Ritchie (Management Association for Private Photogrammetric Surveyors).

1:00 PM. The House Ways and Means Committee's Trade Subcommittee will hold a hearing titled "Implementation of U.S. Bilateral Free Trade Agreements with Chile and Singapore". Location: Room 1100, Longworth Building.

Wednesday, June 11

The House will meet at 10:00 AM for legislative business. It may consider HR 1320, the "Commercial Spectrum Enhancement Act", under suspension of the rules, and HR 1115, the "Class Action Fairness Act of 2003", subject to a rule. See, Republican Whip Notice.

9:30 AM. The Senate Judiciary Committee will hold a hearing on several pending nominations, including that of William Pryor to be a Judge of the U.S. Court of Appeals for the 11th Circuit. Press contact: Margarita Tapia at 202 224-5225. See, notice. Location: Room 226, Dirksen Building.

10:00 AM. The House Commerce Committee's Subcommittee on Telecommunications and the Internet will hold a hearing titled "The Spectrum Needs of Our Nation's First Responders". The hearing will be webcast. See, notice. Press contact: Ken Johnson or Jon Tripp at 202 225-5735. Location: Room 2322, Rayburn Building.

10:00 AM. The The House Commerce Committee will hold a hearing titled "Reauthorization of the Federal Trade Commission: Positioning the Commission for the Twenty-First Century". See, notice. Press contact: Ken Johnson or Jon Tripp at 202 225-5735. Location: Room 2123, Rayburn Building.

10:00 AM. Jane Mago, Chief of the Federal Communications Commission's (FCC) Office of Strategic Planning and Policy Analysis, will hold a press briefing to discuss the upcoming projects, goals, mission and recent activities of the Office. Location: FCC, 445 12th St., SW, South Conference Room, third floor.

10:00 - 11:30 AM. The Cato Institute will host a program titled "Taxing the Internet: Questions for Governors and Legislators". Lunch will follow the program. Bill Owens, Governor of Colorado, will speak. See, Cato notice. Location: 1000 Massachusetts Avenue, NW.

2:00 PM. The Senate Judiciary Committee will hold a hearing on "P2P file sharing networks, focusing on personal and national security risks". Press contact: Margarita Tapia at 202 224-5225. Location: Room 226, Dirksen Building.

2:00 PM. The House Rules Committee will meet to adopt a rule for consideration of HR 1115, the "Class Action Fairness Act".

2:30 PM. The Senate Commerce Committee's Subcommittee of Competition, Foreign Commerce, and Infrastructure will hold a hearing on reauthorization of the Federal Trade Commission (FTC). The first panel of witnesses will include Commissioners of the FTC. The second panel will include Marc Rotenberg (Electronic Privacy Information Center), Susan Grant (National Consumers League), Sarah Deutsch (Verizon), Larry Sarjeant (U.S. Telecom Association), Scott Cooper, Ari Schwartz (Center for Democracy and Technology). Location: Room 253, Russell Building.

2:30 PM. The House International Relations Committee's Subcommittee on the Western Hemisphere will hold a hearing on Radio and Television Marti. Location: Room 2200, Rayburn Building.

Thursday, June 12

The House will meet at 10:00 AM for legislative business. It may consider HR 1320, the "Commercial Spectrum Enhancement Act", under suspension of the rules, and HR 1115, the "Class Action Fairness Act of 2003", subject to a rule. See, Republican Whip Notice.

9:30 AM. The Senate Judiciary Committee will hold an executive business meeting. Press contact: Margarita Tapia at 202 224-5225. See, notice. Location: Room 226, Dirksen Building.

12:15 PM. The Federal Communications Bar Association's (FCBA) Online Communications Practice Committee will host a brown bag lunch. The speaker will be Vinton Cerf. RSVP to Christine Peyton at Location: Wiley Rein & Fielding, 1750 K St., NW, 10th Floor, Room 10E.

Friday, June 13

10:00 AM. The Senate Banking Committee will hold a hearing on several pending nominations, including that of Greg Mankiw to be a member of the President's Council of Economic Advisors. Location: Room 538, Dirksen Building.

12:00 NOON. The Cato Institute will host a panel discussion titled "Canning Spam: Can We Shift the Cost of Unsolicited E-mail Back to Spammers?". The speakers will be Orson Swindle (Commissioner of the Federal Trade Commission), Wayne Crews (Cato), and Dave Baker (Earthlink). See, notice and online registration page. Lunch will be served. Location: Room B-369, Rayburn Building.

2:00 - 3:00 PM. The Information Technology Association of America (ITAA) will host a webcast program titled "The Do's and Don'ts of Workplace Email and Web Monitoring". The presenters will be Cathy Bissoon, (Reed Smith) and Susan Getgood (Surf Control). See, notice and registration information.

CANCELLED. The Federal Communications Commission's (FCC) Network Reliability and Interoperability Council (NRIC) will hold a meeting. The NRIC will next meet on September 15, 2003 from 1:00 - 4:00 PM. See, notice of cancellation [PDF].

Monday, June 16

The Supreme Court will return from a one week recess.

Deadline to submit comments to the Federal Communications Commission (FCC) regarding News Corp.' proposed acquisition of an interest in DirecTV. See, FCC notice [7 pages in PDF], and story titled "FCC Sets Deadlines for Comments on News Corp.'s DirecTV Deal" in TLJ Daily E-Mail Alert No. 664, May 19, 2003. This is MB Docket No. 03-124. For more information, contact Marcia Glauberman at or 202 418-7046 or Linda Senecal at or 202 418-7044.

Deadline to submit comments to the Bureau of Industry and Security (aka Bureau of Export Administration) regarding its proposal titled "Best Practices for Exporters/Re-exporters and Trade Facilitation/Freight Forwarding Companies Regarding the Transit, Transshipment, and Reexport of Dual-Use Items".For more information, contact Rick Cupitt at or 202 482-1459. See, notice in Federal Register, May 16, 2003, Vol. 68, No. 95, at Pages 26567 - 26569.

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