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November 22, 2005, 8:00 AM ET, Alert No. 1,258.
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Texas Sues Sony BMG Alleging Violation of Texas Spyware Statute

11/21. The state of Texas file a complaint [8 pages in PDF] in state court in Texas against Sony BMG Music Entertainment alleging violation of its state statute titled "Consumer Protection Against Computer Spyware Act", or CPACSA. The complaint alleges that Sony has sold audio CDs with software, some of which is related to content protection, which software also degrades the consumers' PC performance, and exposes the PC to certain virus threats, without disclosure to consumers.

Greg Abbott, who is the Attorney General of the State of Texas, stated in a release that "Sony has engaged in a technological version of cloak and dagger deceit against consumers by hiding secret files on their computers ... Consumers who purchased a Sony CD thought they were buying music. Instead, they received spyware that can damage a computer, subject it to viruses and expose the consumer to possible identity crime."

The complaint states that Sony has sold CDs that contain "its own proprietary media player designed to play audio tracks on a personal computer (as opposed to a consumer using third-party programs such Microsoft Windows Media Player). These audio CDs utilize XCP Technology (``XCP创) which Sony BMG represents is designed to ``protect the audio files embodied on the CD.创" (Parentheses in original.)

The complaint adds that Sony marked the CD packages with the notice "Content Protected", but that it made "no disclosures on the packaging that anything will be installed on the consumer's computer".

The complaint elaborates on the details of the software installed on consumers' PCs. "During the installation of its media player, Sony BMG creates and installs components of its XCP technology in a folder it names ``C:/Windows/System32/$sys$filesystem.创 Unbeknownst to the consumer, Sony BMG also installs a file named ``Aries.sys创 in the same folder which conceals the XCP files and the folder in which they are installed, such that the owner of the computer performing a search of the file system would not be able to locate and remove the XCP technology. Essentially, the Aries.sys driver masks any folder or file name on a consumer's computer that begins with the characters ``$sys$,创 which are the first characters of the folders, files, and registry entries associated with the XCP technology. Moreover, these hidden files and folder are installed within the consumer's Microsoft Windows ``System32创 subfolder, such that a consumer may confuse that software with essential files needed to run the computer's operating system."

The complaint also states that "The Aries.sys file is not required to play Sony BMG抯 copy protected CDs; rather its purpose is to conceal the copy protection software installed by Sony BMG.", and that "Sony BMG does not disclose the fact that its technology includes this cloaking component to consumers on either the CD itself or in its licensing agreement." It adds to that Sony's proprietary media player is not required to play the CDs.

The complaint then addresses how this undisclosed installation of software can harm consumers. First, it consumes system memory. The complaint states that "Sony BMG抯 XCP technology remains hidden and active on a consumer抯 computer at all times after installation, even when Sony BMG抯 media player is not active. During the installation process, Sony BMG installs another hidden file named, ``$sys$drmserver.exe创 which is cloaked and constantly consumes system memory, resulting in a reduction in a consumer抯 available system resources."

"In addition, a consumer attempting to remove the XCP technology finds that Sony BMG has made it extremely burdensome if not impossible to do so -- Sony BMG does not make an uninstall utility readily available. The consumer must first contact customer service via email to receive a patch that will ``uncloak创 the hidden files (in part by deleting the Aries.sys file), and then requiring the consumer to contact customer service again if he/she wants to remove the XCP software."

The second type of possible harm to consumers is increased vulnerability to virus threats. The complaint states that "Despite Sony BMG's assertions, various news sources have recently reported the spread of newly created viruses which exploit Sony BMG抯 cloaking technology. As a result, a consumer without knowledge of the installation of the Aries.sys file on their computer may be vulnerable to new security risks, and given the cloaked nature of these files, and the extremely burdensome impediments to removing them, that consumer may find it difficult or impossible to protect themselves from future risks."

The complaint seeks injunctive relief and damages in the amount of $100,000 per violation.

This case is State of Texas v. Sony BMG Music Entertainment LLC, District Court of Travis County, Texas.

Texas is developing a record as a regulator of information technology. In addition to the present action, on March 22, 2005, Texas filed a complaint [14 pages in PDF] in state court in Texas against Vonage alleging violation of the Texas Deceptive Trade Practices Act (DTPA) in connection with Vonage's marketing and sale of voice over internet protocol (VOIP) service. See, story titled "Texas Sues Vonage Over Marketing of VOIP Service" in TLJ Daily E-Mail Alert No. 1,101, March 23, 2005.

Also, in 2004, Texas was a plaintiff in the failed lawsuit against Oracle seeking to block Oracle's acquisition of PeopleSoft on antitrust grounds. See, February 26, 2004, complaint. See also, stories titled "DOJ Loses Oracle Case" in TLJ Daily E-Mail Alert No. 974, September 10, 2004, and "Antitrust Division Sues Oracle to Enjoin Its Proposed Acquisition of PeopleSoft" in TLJ Daily E-Mail Alert No. 846, March 1, 2004.

Disclosure. One of the attorneys for the state of Texas whose name appears on the complaint is a former law school classmate and roommate of the publisher of TLJ. Readers may wish to take this into consideration is assessing the accuracy and objectivity of any TLJ coverage of this lawsuit.

Federal Circuit Affirms Holding Regarding Claim Invalidity in IPXL v. Amazon

11/21. The U.S. Court of Appeals (FedCir) issued its opinion [PDF] in IPXL Holdings v. Amazon, affirming the District Court's holding regarding invalidity of claims.

IPXL filed a complaint in U.S. District Court (EDVa) against Amazon alleging that Amazon's one click system infringes its U.S. Patent No. 6,149,055, titled "Electronic fund transfer or transaction system".

The District Court granted summary judgment to Amazon. It held that Amazon did not infringe the patent, and that all of the claims at issue are invalid. It also awarded attorneys fees to Amazon under 35 U.S.C. 285. Its opinion is reported at 333 F. Supp. 2d 513.

The Court of Appeals affirmed the holdings regarding invalidity, did not reach the infringement issues, and reversed the award of attorneys fees on the grounds that the motion for attorneys fees was not timely filed.

This case is IPXL Holdings LLC v., Inc., U.S. Court of Appeals for the Federal Circuit, App. Ct. Nos. 05-1009 and 05-1487, appeals from the U.S. District Court for the Eastern District of Virginia, at Alexandria, No. 04-CV-70, Judge Leonie Brinkema presiding. Judge Clevenger wrote the opinion of the Court of Appeals, in which Judges Rader and Schall joined.

7th Circuit Holds Federal Wiretapping Statute Can Apply to Secret Use of Video Cameras

11/21. The U.S. Court of Appeals (7thCir) issued its opinion [PDF] in Doe v. Smith, a civil action for violation of the federal wiretapping statute, which is codified at 18 U.S.C. Ё 2510-22. The Court of Appeals reversed and remanded the District Court's dismissal. The Court of Appeals held that secretly recording with an video camera (that also captures an audio track), and then distributing the recording by e-mail, can constitute a civil violation of the federal wiretapping statute.

The defendant, Jason Smith, used a video camera to secretly record a bedroom encounter with the plaintiff, who brought this suit anonymously as Jane Doe. The camera may have captured audio and video. Smith then distributed the recording by e-mail. One recipient published the recording on the internet.

Doe filed a complaint in U.S. District Court (CDIll) against Smith alleging, among other claims, violation of the federal wiretapping statute. The District Court dismissed this claim. The Court of Appeals reversed.

Most cases involving application of the federal wiretapping statute involve wiretapping. However, the statute applies to interception of "any wire, oral, or electronic communication". Also, while the most common form of interception of oral communications is bugging to obtain the content of conversations, the language of the statute is much broader. Hence, the Court of Appeals reversed, and remanded to the District Court to determine such facts as whether there was an audio track, and whether Doe had an expectation of privacy.

The Court of Appeals wrote that "Doe may be able to establish that the recording had a sound track and that she had an expectation of privacy, the two ingredients of the statutory definition: `` `oral communication means any oral communication uttered by a person exhibiting an expectation that such communication is not subject to interception under circumstances justifying such expectation, but such term does not include any electronic communication创. 18 U.S.C. 2510(2). A silent film would be outside this definition, but most video recorders capture sound as well."

The Court of Appeals continued that "Next comes the question whether Smith ``intercepted创 the oral communication. This defined term ``means the aural or other acquisition of the contents of any wire, electronic, or oral communication through the use of any electronic, mechanical, or other device.创 18 U.S.C. 2510(4). If Doe and Smith engaged in ``oral communication创 in Smith抯 bedroom, then its acquisition by a video recorder -- an ``electronic . . . device创 -- is covered. And if the interception was forbidden by 2511(1)(a), then its disclosure was forbidden by 2511(1)(c)."

This case is Jane Doe v. Jason Smith, U.S. Court of Appeals for the 7th Circuit, No. 05-1903, an appeal from the U.S. District Court for the Central District of Illinois, D.C. No. 04-3173, Judge Richard Mills presiding. Judge Frank Easterbrook wrote the opinion of the Court of Appeals, in which Judges Williams and Evans joined.

Delivery of a number of copies of TLJ Daily E-Mail Alert No. 1,257 (Monday, November 21, 2005) was blocked. Hence, this issue has been published in the TLJ web site.
Washington Tech Calendar
New items are highlighted in red.
Tuesday, November 22

The House will next meet on Tuesday, December 6, 2005.

The Senate will next meet on Monday, December 12, 2005.

1:00 - 2:00 PM. The National Science Foundation (NSF) National Science Board will meet. The Board will discuss a report [12 pages in PDF] titled "National Science Board 2020 Vision for the National Science Foundation". See, notice in the Federal Register, November 16, 2005, Vol. 70, No. 220, at Pages 69604 - 69605. Location: NSF, Public Meeting Room 120, 4201 Wilson Boulevard, Arlington, VA.

Wednesday, November 23

Deadline to submit comments to the Internal Revenue Service (IRS) regarding its notice of proposed rulemaking (NPRM) regarding the source of income derived from international communications activity. See, notice in the Federal Register, September 19, 2005, Vol. 70, No. 180, at Pages 54859 - 54878.

Thursday, November 24

Thanksgiving Day.

There will be no issue of the TLJ Daily E-Mail Alert.

The Federal Communications Commission (FCC) and other federal offices will be closed. See, Office of Personnel Management's (OPM) list of federal holidays.

Friday, November 25

Deadline to submit reply comments to the Federal Communications Commission (FCC) in response to its notice of proposed rulemaking (NPRM) regarding closed captioning rules for video programming. See, notice in the Federal Register, September 26, 2005, Vol. 70, No. 185, at Pages 56150-56157. This NPRM is FCC 05-142 in CG Docket No. 05-231.

Deadline to submit initial comments to the Federal Communications Commission (FCC) in response to the notice of proposed rulemaking (NPRM) regarding the the specific relocation procedures applicable to Broadband Radio Service (BRS) operations in the 2150-2160/62 MHz band, which the FCC previously decided will be relocated to the newly restructured 2495-2690 MHz band. The FCC also seeks comment on the specific relocation procedures applicable to Fixed Microwave Service (FS) operations in the 2160-2175 MHz band. This NPRM is FCC 05-172 in ET Docket No. 00-258. See, notice in the Federal Register, October 26, 2005, Vol. 70, No. 206, at Pages 61752 - 61762.

Monday, November 28

Deadline to submit written comments to the Department of Justice's (DOJ) Antitrust Division and the Federal Trade Commission (FTC) regarding their joint workshop on October 25, 2005, titled "Competition and Real Estate Workshop". See, FTC notice and notice in the Federal Register, September 8, 2005, Vol. 70, No. 173, at Pages 53362 - 53364.

Deadline to submit initial comments to the Federal Communications Commission (FCC) in response to its notice of proposed rulemaking (NPRM) regarding whether its roaming requirements for commercial mobile radio service (CMRS) providers should be modified, expanded, or eliminated. This NPRM is FCC 05-160 in WT Docket Nos. 05-265 and 00-193. See, notice in the Federal Register, September 28, 2005, Vol. 70, No. 187, at Pages 56612 - 56620.

Deadline to submit nominations for members of the Commerce Spectrum Management Advisory Committee to the Department of Commerce's National Telecommunications and Information Administration (NTIA). See, NTIA release.

Tuesday, November 29

10:00 AM. The Supreme Court will hear oral argument in Illinois Tool Works v. Independent Ink, No. 04-1329, a patent tying antitrust case. See, story titled "Supreme Court Grants Certiorari in Patent Tying Antitrust Case" in TLJ Daily E-Mail Alert No. 1,158, June 21, 2005.

12:00 NOON - 1:30 PM. The Federal Communications Bar Association (FCBA) will host an event titled "The On-Going Debate Over the Sunshine Act". Location: __.

TIME? The Senate Commerce Committee (SCC) will host an event titled "Open Forum on Decency". Press contact: Melanie Alvord (Stevens) at 202 224-8456 or Melanie_Alvord at commerce dot senate dot gov, or Aaron Saunders (Stevens) at 202 224-3991 or Aaron_Saunders at commerce dot senate dot gov. Location:__.

More News

11/21. The Federal Communications Commission (FCC) rescheduled its next meeting. It had been scheduled for December 15. It is now rescheduled for December 9. December 9 is Commissioner Kathleen Abernathy's last day at the FCC.

11/18. The U.S. Court of Appeals (6thCir) issued its opinion [PDF] in Stratienko v. Cordis, a case involving claims of misappropriation of a trade secrets and breach of contract. These are state law claims. Federal jurisdiction is based upon diversity of citizenship. The Court of Appeals affirmed the District Court's summary judgment for the defendant, Cordis. The District Court and Court of Appeals held, among other things, that under the state law of Tennessee, there is no cause of action for conversion of trade secrets. This case is Alexander Stratienko v. Cordis Corporation, U.S. Court of Appeals for the 6th Circuit, App. Ct. No. 04-6349, an appeal from the U.S. District Court for the Eastern District of Tennessee, at Chattanooga, D.C. No. 02-00005, Judge Allan Edgar presiding.

11/18. Cisco Systems announced a "definitive agreement for Cisco to acquire Scientific-Atlanta". Scientific-Atlanta provides set top boxes, end-to-end video distribution networks and video system integration. See, Cisco release.

11/18. The National Archives and Records Administration (NARA) changed the deadline for submitting comments in regarding the draft NARA guidance for implementing Section 207(e) of the E-Government Act of 2002. This Act requires the NARA to adopt "policies and procedures" that provide that federal statutes regarding archiving of government records "are applied effectively and comprehensively to Government information on the Internet and to other electronic records". The NARA had previously announced that comments are due by December 29, 2005. See, notice in the Federal Register, November 14, 2005, Vol. 70, No. 218, at Pages 69165 - 69168. The NARA has moved the deadline up to November 30, 2005. See, notice in the Federal Register, November 18, 2005, Vol. 70, No. 222, at Page 69994. See also, story titled "NARA Requests Comments on Archiving Internet and Other Electronic Records" in TLJ Daily E-Mail Alert No. 1,253, November 15, 2005.

11/17. U.S. Trade Representative (USTR) Rob Portman returned from a ten day trip to Europe, Africa, India, People's Republic of China, and Korea. See, USTR release summarizing his trip.

11/17. John Snow, the Secretary of the Treasury, gave a speech, in which he argued, among other things, that lower tax rates, especially for capital gains and dividends, promote innovation and investment.

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