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August 8, 2003, 9:00 AM ET, Alert No. 714.
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FTC Files Administrative Complaint Seeking Rescission of Aspen Tech's Acquisition of Hyprotech

8/7. The Federal Trade Commission (FTC) filed an administrative complaint [10 pages in PDF] seeking to rescind the recent acquisition by Aspen Technology, Inc. of Hyprotech Ltd. The FTC alleges that the acquisition combined two competing software makers in violation of the FTC Act and the Clayton Act. See also, FTC release.

The complaint states that "AspenTech is a developer and worldwide supplier of manufacturing, engineering, and supply chain simulation computer software, including non-linear process engineering simulation software used by the refining, oil & gas, petrochemical, specialty chemical, air separation, pharmaceutical, fine chemical and other process manufacturing industries and by engineering and construction companies to support those industries."

The complaint further states that before its acquisition by AspenTech, "Hyprotech was a wholly-owned operating division of AEA Technology plc. ... Hyprotech had been a developer and worldwide supplier of manufacturing, engineering and supply chain simulation computer software, including nonlinear process engineering simulation software used by the refining, oil & gas, petrochemical, specialty chemical, air separation, pharmaceutical, fine chemical and other process manufacturing industries and by engineering and construction companies to support those industries."

The complaint states that AspenTech acquire Hyprotech on or about May 31, 2002, in a transaction that was not reportable under the Hart Scott Rodino Act.

The FTC alleges that prior to the acquisition, "AspenTech and Hyprotech were direct and actual competitors" in various software markets, and that the acquisition created a worldwide dominant firm in these markets, and is anticompetitive.

The FTC alleges that the acquisition violates Section 7 of the Clayton Act, 15 U.S.C. § 18. It seeks rescission of the consummated transaction.

David McQuillin, P/CEO of AspenTech, stated in a release that "We do not agree with the FTC’s assertions but, on the contrary, are confident that the acquisition has brought significant benefits to our customers and is not anticompetitive ... Over the past year we have worked closely with our customers to develop new innovations that would have been impossible prior to the merger. We will continue to bring these new innovations to market and fulfill our customers’ expectations promised by the merger. We believe a vigorous defense against the allegations of the complaint is in the best interests of our customers and our shareholders and that is what we intend to do."

Bankruptcy Court Approves SEC MCI WorldCom Settlement

8/6. The U.S. Bankruptcy Court (SDNY) issued an order approving the Securities and Exchange Commission's (SEC) settlement with MCI WorldCom. See, SEC release.

The settlement provides for a civil penalty of $2.25 Billion, to be satisfied by payment of $500 Million in cash and by transfer of common stock in the reorganized company having a value of $250 Million to a distribution agent to be appointed by the District Court, on the effective date of the plan of reorganization.

On July 7, 2003, the U.S. District Court (SDNY) issued issued its Opinion and Order approving the settlement. See, story titled "District Court Approves SEC Settlement with WorldCom" in TLJ Daily E-Mail Alert No. 693, July 8, 2003.

Stasia Kelly, MCI WorldCom's newly appointed General Counsel, stated in a release that "Today's ruling represents a key milestone as MCI moves toward emergence from Chapter 11 protection. It represents additional validation of all the positive steps the company has taken over the past year to both put its house in order and establish itself as a leader in good corporate governance. We look forward now to completing our confirmation hearing and emerging from Chapter 11 protection."

This is In re WorldCom, Inc., et al., Ch. 11 Case No. 02-13533 (Bankr. S.D.N.Y.)

District Court Holds IBM Pension Plan Violates Age Discrimination Prohibitions of ERISA

8/1. The U.S. District Court (SDIll) issued a Memorandum and Order [24 pages in PDF] in Cooper v. IBM, in which the Court held that IBM's pension plan violates the age discrimination provisions of the ERISA.

Cathi Cooper, and others who have participated in IBM Personal Pension Plan, are the plaintiffs in this action. IBM's Pension Credit Formula (PCF), under which participants accrue a normal retirement benefit payable in the form of a life annuity commencing at age 65, is based on the number of "base points", which is determined by the employee's age in the year worked. Plaintiffs assert that this discriminates on the basis of age. That is, they assert that IBM's PCF causes an older employee to receive a lower rate of benefit accrual than an younger employee.

Cooper and others filed a complaint in U.S. District Court against The IBM Personal Pension Plan and IBM Corporation alleging that its pension plan violates the age discrimination provisions of the Employee Retirement Income Security Act (ERISA), which is codified at 29 U.S.C. §§ 1001-1461.

The District Court granted summary judgment to plaintiffs. IBM issued a release in which it stated that "IBM disagrees with the district court's ruling and believes that it will prevail on appeal. IBM's pension plan does not discriminate on the basis of age."

This case is Cathi Cooper, Beth Harrington, and Matthew Hillesheim v. The IBM Personal Pension Plan and IBM Corporation, S.D. Illinois, Civil No. 99-829-GPM.

Judge Posner Opines On Amicus Briefs

8/6. Judge Richard Posner of the U.S. Court of Appeals (7thCir) issued a solo opinion [7 pages in PDF] in Voices for Choices v. Illinois Bell Telephone. This case is an appeal from a District Court decision which held that portions of the state of Illinois's Public Utilities Act are preempted by Section 251 of the Communications Act, pertaining to interconnection. However, this opinion does not address the merits of the appeal. Rather, it is an opinion explaining his reasons for refusing to accept two amicus curiae briefs. The Judge could have accepted the briefs, and then ignored them. But instead, he used this case as a vehicle for comparing and contrasting the natures of the legislative and judicial processes, and explaining the appropriate and inappropriate uses of amicus briefs. In short, ordinarily individual legislators and interests groups should not submit amicus briefs.

The Defendants below, and the appellants before the Seventh Circuit, are Illinois Bell Telephone Company, and other SBC companies. They filed an appeal brief.

The Speaker of the Illinois House, Michael Madigan, and the President of the Illinois Senate, Emil Jones, filed a motion for leave to file an amicus curiae brief. The Communications Workers of America also sought leave to file an amicus brief. They support the position of SBC on appeal.

Judge Posner first listed several general reasons why a court might not accept amicus briefs: "judges have heavy caseloads and therefore need to minimize extraneous reading; amicus briefs, often solicited by parties, may be used to make an end run around court-imposed limitations on the length of parties' briefs; the time and other resources required for the preparation and study of, and response to, amicus briefs drive up the cost of litigation; and the filing of an amicus brief is often an attempt to inject interest group politics into the federal appeals process."

He then explained the nature of the legislative and judicial processes. "The legislative process is democratic, and so legislators have an entirely legitimate interest in determining how interest groups and influential constituents view a proposed statute. Statutes pass because there is more political muscle behind than in front of them, not because they are ``wise´´ or ``just,´´ though they may be. The judicial process, in contrast, though ``political´´ in a sense when judges are asked to decide cases that conventional legal materials, such as statutory and constitutional texts and binding precedent, leave undetermined, so that some mixture of judges' values, temperament, ideology, experiences, and even emotions is likely to determine the outcome, is not democratic in the sense of basing decision on the voting or campaign-financing power of constituents and interest groups. An appeal should therefore not resemble a congressional hearing."

He continued that "The fact that powerful public officials or business or labor organizations support or oppose an appeal is a datum that is irrelevant to judicial decision making, except in a few cases, of which this not one, in which the position of a nonparty has legal significance. And even in those cases the position can usually be conveyed by a letter or affidavit more concisely and authoritatively than by a brief."

He concluded that "No matter who a would-be amicus curiae is, therefore, the criterion for deciding whether to permit the filing of an amicus brief should be the same: whether the brief will assist the judges by presenting ideas, arguments, theories, insights, facts, or data that are not to be found in the parties’ briefs. The criterion is more likely to be satisfied in a case in which a party is inadequately represented; or in which the would-be amicus has a direct interest in another case that may be materially affected by a decision in this case; or in which the amicus has a unique perspective or specific information that can assist the court beyond what the parties can provide."

He reviewed the amicus briefs, and found that they are largely redundant of the SBC brief. "Essentially, the proposed amicus briefs merely announce the ``vote´´ of the amici on the decision of the appeal. But, as I have been at pains to emphasize in contrasting the legislative and judicial processes, they have no vote."

This case is Voices for Choices, et al. v. Illinois Bell Telephone Co., et al., Nos. 03-2735 and 03-2766, appeals from the U.S. District Court for the Northern District of Illinois, Eastern Division, Judge Charles Kocoras presiding, D.C. Nos. 03-3290 and 03-3643.

Judge Posner has addressed amicus briefs before. See, his opinion in John Ryan v. Commodity Futures Trading Commission, 125 F.3d 1062 (7thCir. 1997). He wrote that "amicus curiae" means "friend of the court, not friend of a party", and that "We are beyond the original meaning now; an adversary role of an amicus curiae has become accepted".

He also gave a lecture in Washington DC in November of 2002 in which he discussed the filing of amicus curiae briefs with the Supreme Court in intellectual property cases. He stated that "Although an amicus curiae brief can be filed by an individual, most are filed either by organizations, or by individuals who are representatives of organizations. They may be pretending to be real flesh and blood human beings. So, I think amicus curiae brief practice provides some clue to the roll of interest groups in the area of law."

Judge Posner was reviewing amicus briefs as possible empirical evidence in support of his public choice theory based explanation for what he saw as a large expansion of intellectual property protections in the last 20 years. He continued that "since 1980 the Supreme Court has decided 30 intellectual property cases in which amicus curiae briefs were filed, and which there was an issue of, a substantive issue of intellectual property, rather than a procedural or jurisdictional issue that would be peripheral to, of peripheral interest to the intellectual property. And now, there is a 31st case, the Eldred case, which is pending in the Supreme Court. And in these 31 cases, including Eldred, a total of 276 amicus curiae briefs supporting or opposing intellectual property protection were filed, and a pretty healthy majority, 154 out of the 276, almost 60 percent, support intellectual property rights. But it turns out that this imbalance in favor of intellectual property, which you would sort of expect from this asymmetry of appropriability that I have been emphasizing, is actually due entirely to the 11 patent cases in my 31 case sample, where 82 briefs were filed in support of validity, or other claim of the patentee, and only 48 against. In the other cases the score is 72 in support of intellectual property rights, and 74 against. So, basically, 50 50. And, in the Eldred case itself, despite the enormous majority by which the Sony Bono Act, the Act challenged in the case, passed Congress, 36 amicus curiae briefs were filed, and 18 are in support of the constitutionality of the Bono Act, and the other 18 are opposed."

He added that "that interest group pressure is not always necessary to get legislation passed. It is certainly not necessary to get judges to adopt a particular position."

What is notable about this analysis is that Judge Posner examined interest group participation in the Courts as possible evidence in support of a public choice explanation of law making that encompasses the judicial process. Thus, he examined the judicial process (and its interest group amici), as though it may operate like the legislative process (and its interest group lobbyists). In contrast, in his Voices for Choices and John Ryan opinions, Posner argued that the judicial process should not operate like the legislative process.

More Court Opinions

8/7. The California Court of Appeal issued its opinion [MS Word] in Sargent Fletcher v. Able Corp., a case regarding the burden of proof and the burden of producing evidence in a misappropriation of trade secrets case brought under the California Uniform Trade Secrets Act (UTSA). This is Sargent Fletcher, Inc. v. Able Corporation, No. B145831, an appeal from the Superior Court of Los Angeles County, Judge Harold Cherness presiding, Super. Ct. No. KC025385.

8/7. The U.S. Court of Appeals (FedCir) issued its split opinion [MS Word] in HP v. Mustek, a patent infringement case involving optical scanner technology. This is Hewlett Packard Company v. Mustek Systems, Inc. and Mustek, Inc., Nos. 02-1372, 02-1395, and 02-1465, appeals from the U.S. District Court (SDCal), Judge Robert Whaley presiding.

8/1. The U.S. Court of Appeals (7thCir) issued its opinion [15 pages in PDF] in Berger v. Xerox, modifying and affirming the holding of the U.S. District Court (SDIll) that Xerox's pension plan violates the ERISA. This case is David Berger and Gerry Tsupros v. Xerox Corporation Retirement Income Guarantee Plan, No. 02-3674, an appeal from the U.S. District Court for the Southern District of Illinois, D.C. No. 00-584-DRH, Judge David Herndon presiding.

FCC and NTIA Announce Timetable for Implementation of WRC-03 Final Acts

8/7. The Federal Communications Commission (FCC) and the Department of Commerce's (DOC) National Telecommunications and Information Administration (NTIA) announced a plan for implementation in the U.S. of the Final Acts of the 2003 World Radiocommunications Conference (WRC-03). See, NTIA release and substantially identical FCC release [3 pages in PDF].

The FCC plans, among other things, to issue, this year, its Report and Order in its NPRM regarding making more spectrum available for unlicensed devices, such as Wi-Fi. The FCC also plans to issue this year a Report and Order allocating spectrum for broadband internet access by passengers and crew on commercial aircraft.

The release states that "Under the WRC-03 Implementation Plan, the FCC, in coordination with NTIA, plans to consider the results of WRC-03 in several key proceedings". It then states that during the "Fourth Quarter 2003" it plans to consider "Revisions of Parts 2 and 15 of the Commission's rules to permit Unlicensed National Information Infrastructure (U‑NII) devices in the 5 GHz band -- Report and Order". It also states that its fourth quarter plans include "Extension of the allocation to the mobile-satellite service (Earth-to-space) on a secondary basis in the band 14-14.5 GHz to permit operation of the aeronautical mobile-satellite service -- Report and Order". (Parentheses in original.)

International Telecommunications Union's (ITU) WRC-03 took place in Geneva, Switzerland from June 9 through July 4, 2003. The conference addressed a large number of issues, and adopted its "Final Acts". Two items addressed by the conference particularly affect information technology. One item pertains to allocating spectrum in the 5 GHz band for use by unlicensed devices, including, but not limited to, WiFi devices. Another item pertains to allocating spectrum for broadband access by passengers and crew on commercial aircraft.

Prior to the conference, on May 15, 2003, the Federal Communications Commission (FCC) adopted a Notice of Proposed Rulemaking (NPRM) [28 pages in PDF] proposing to make available an additional 255 MHz of spectrum for unlicensed use. This NPRM proposed allocating the 5.470-5.725 GHz band. See also, FCC press release [PDF], and stories titled "FCC Adopts NPRM to Increase Unlicensed Spectrum" and "FCC Unlicensed Spectrum NPRM and the Jumpstart Broadband Act" in TLJ Daily E-Mail Alert No. 663, May 16, 2003, and "FCC Releases NPRM Regarding Increasing Amount of Unlicensed Spectrum" in TLJ Daily E-Mail Alert No. 674, June 5, 2003.

The resolution adopted by the WRC-03 on spectrum for unlicensed devices, and that is a part of the Final Acts, parallels the proposal contained in the FCC's NPRM.

And now, in the August 7 statements by the FCC and NTIA, the FCC states that it plans to complete this NPRM in the fourth quarter of 2003.

The WRC-03 also approved a secondary allocation for aeronautical mobile satellite services in the 14-14.5 GHz band for the provision of internet and other data services on aircraft. Boeing plans to provide real time two way broadband services on its aircraft for passengers and crew. However, prior to the WRC-03, the international table of frequency allocations provided that the 14-14.5 GHz band could not be used for "aeronautical mobile services". The WRC-03 Final Acts deleted this exclusion.

And now, in the August 7 statements by the FCC and NTIA, the FCC states that it plans to issue its report and order on this matter in the fourth quarter of 2003.

See also, stories titled "FCC Meeting Addresses WRC-03" in TLJ Daily E-Mail Alert No. 696, July 11, 2003; and "Delegates Discuss World Radiocommunications Conference" in TLJ Daily E-Mail Alert No. 703, July 22, 2003.

Friday, August 8

The House is in recess until September 3. Senate is in recess until September 2. The Supreme Court is in recess.

Deadline to submit comments to the Federal Communications Commision (FCC) in response to its notice of proposed rulemaking (NPRM) [7 pages in PDF] regarding 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 National Historic Preservation Act (NHPA). This proceeding 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 See, story titled "FCC Announces NPRM Regarding Communications Facilities and the National Historic Preservation Act" in TLJ Daily E-Mail Alert No. 677, June 10, 2003. See also, notice in the Federal Register, July 9, 2003, Vol. 68, No. 131, at Pages 40876 - 40887.

Monday, August 11

2:00 - 3:30 PM. The American Enterprise Institute (AEI) will host a panel discussion titled "Trade Agreements and Capital Controls". The speakers will be John Taylor (Treasury Department) and Jagdish Bhagwati (Columbia University). See, notice. Location: AEI, 12th Floor, 1150 17th Street, NW.

Deadline to submit comments to the General Services Administration's (GSA) Office of Electronic Government and Technology regarding its draft policy titled "Draft E -- E-Authentication for Federal Agencies". See, notice in the Federal Register, July 11, 2003, Vol. 68, No. 133, at Pages 41370 - 41374.

Tuesday, August 12

Deadline to submit comments, or requests to speak at the September 2, 2003 public hearing, on the Treasury Department's and the Internal Revenue Service's (IRS) notice of proposed rulemaking (NPRM) regarding regulations that "affect certain taxpayers who participate in the transfer of stock pursuant to the exercise of incentive stock options and the exercise of options granted pursuant to an employee stock purchase plan (statutory options)." See, notice in the Federal Register, June 9, 2003, Vol. 68, No. 110, at Pages 34344 - 34370.

Wednesday, August 13

10:00 AM - 12:00 PM. The Federal Communications Commission's (FCC) Wireless Telecommunications Bureau (WTB) will hold a public forum to present the new application search interfaces that will be available for the public to access Multipoint Distribution Service/Instructional Television Fixed Service (MDS/ITFS) Application data. See, notice [PDF]. Location: Room 4-B-516, 4th Floor, FCC, 445 12th Street, SW.

Day one of a three day conference hosted by the American Intellectual Property Law Association (AIPLA) titled "2003 Practical Patent Prosecution Training for New Lawyers". See, notice [PDF]. Location: Arlington, VA.

Thursday, August 14

Deadline to submit comments to the National Institute of Standards and Technology (NIST) regarding its document [12 pages in PDF] titled "Draft Federal Information Processing Standard (FIPS) 199 on Standards for Security Categorization of Federal Information and Information Systems". The NIST states that this document "defines requirements to be used by Federal agencies to categorize information and information systems, and to provide appropriate levels of information security according to a range of risk levels." For more information, contact Ron Ross at 301 975-5390 or See, notice in the Federal Register, May 16, 2003, Vol. 68, No. 95, at Pages 26573 - 26574.

Friday, August 15

Deadline to submit comments to the Federal Communications Commission (FCC) in response to a Petition for Rulemaking on compliance by carriers with relevant statutory provisions on disclosure of customer information in 911 emergencies. The petition was submitted by the National Emergency Number Association (NENA), the Association of Public Safety Communications Officials International (APCO), and the National Association of State Nine One One Administrators (NASNA). See, FCC notice [3 pages in PDF]. For more information, contact Barbara Reideler or Jared Carlson at 202 418-1310.

FRB Governor Addresses Banking Operational Risks and Information Technology

8/7. Federal Reserve Board (FRB) Governor Susan Bies gave a speech in Des Moines, Iowa titled "The Role of Community Bank Directors in Strengthening Corporate Governance". She addressed, among other things, the relationship between operational risk and information technology in community banking.

She explained that "operational risk" is "any risk that arises from inadequate or failed internal processes, people, or systems or from external events. Examples of operational risk include employee fraud, customer lawsuits, failed information system conversions, and mis-sent wires."

Susan BiesBies (at right) stated that "Operational risk has always been part of banking. But the greater variety of products and services that banks provide, the evolution of business processes (including substantially greater reliance on information technology and telecommunications), and changes in the ethical environment in which we live have all contributed to more observable exposures to this type of risk. Many of the community bank failures in recent years have been due to operational risks. In a few cases, dominant chief executives perpetrated frauds by manipulating the internal controls. In others, the management information systems necessary to monitor exposures in riskier lines of business were never built. As a result, other managers and the boards did not have the information necessary to monitor and understand the growing risks inherent in what appeared to be profitable strategies." (Parentheses in original.)

People and Appointments

8/7. The Federal Bureau of Investigation (FBI) reorganized its Office of Public and Congressional Affairs (OPCA) into two offices. Eleni Kalisch was named Assistant Director in charge of the new Office of Congressional Affairs (OCA). Cassandra Chandler was named Assistant Director in charge of the new Office of Public Affairs (OPA). See, FBI release.

More News

8/7. Federal Communications Commission (FCC) Commissioner Michael Copps issued a release [PDF] in which he complained about the FCC's lack of action against a sleazy broadcaster in New York City. The release states that "Last August WNEW-FM in New York ran an Opie & Anthony show which allegedly contained a broadcast of sexual activity at St. Patrick’s Cathedral as part of an on-air stunt", and the FCC has received complaints, but taken no action. Copps stated that "The time has come for the Commission to send a message that it is serious about enforcing the indecency laws. Yet, we continue to turn a deaf ear to the millions of Americans who are fed up with the patently offensive programming coming their way so much of the time." The FCC has fined Infinity Broadcasting, Inc., the licensee of WNEW(FM), for other evil broadcasting. See, June 6, 2002 Notice of Apparent Liability for Forefeiture.

8/7. Rep. Bob Goodlatte (R-VA) stated in a release that he traveled to Costa Rica and met with members of the Costa Rica Legislative Assembly regarding internet gambling. The release states that "While Internet gambling is illegal in Costa Rica, there are sufficient loopholes in the existing law to allow Internet gambling businesses to create companies in the country which provide services to support the Internet gambling industry. It is estimated that there are as many as 5,000 people presently employed in these Internet gambling service jobs in Costa Rica." Rep. Goodlatte stated that "The United States has a vested interest in seeing the government of Costa Rica increase the oversight of these off-shore gambling sites, most of which are doing direct business, illegally, with people in the United States ... Any time there is such a massive unregulated flow of funds, it is ripe for corruption and crime."

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