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February 20, 2006, Alert No. 1,313.
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IG Report Criticizes Treasury Department's Communications Procurement Program

2/16. The Department of the Treasury's (DOT) Office of the Inspector General (OIG) released a report [43 pages in PDF] on February 10, 2006, titled "Treasury Communications Enterprise Procurement Was Poorly Planned, Executed, and Documented". This is report is numbered OIG-06-028.

The report found that the DOT's "poor planning and execution" of is the Treasury Communications Enterprise (TCE) procurement "led to delays and increased costs". The DOT decided to procure its own agency specific communications enterprise, rather than rely on existing government wide Government Service Administration (GSA) contracts.

The OIG report found that the DOT's "GSA contract vehicles, both at the outset and following the TCE bid protest decision, was incomplete and that the business case documentation provided by Treasury, both during and after completion of our fieldwork, was deficient. We expected the documents provided for our review to show evidence that Treasury had considered various GSA (government-wide) telecommunications contract vehicles as alternatives to TCE during 2002 and 2003. This was done to a limited extent, but the documents provided did not show evidence that cost analyses had been performed to compare TCE with these alternatives." (Parentheses in original.)

The OIG report also found that the DOT "was not able to provide an adequate business case supporting this major acquisition. Throughout our audit field work, we made repeated requests for planning documents, including the TCE business case." The report states that after much procrastination, the DOT provided documents that "were neither cohesive, comprehensive, nor complete."

The report recommends that "In light of the fact that Treasury has reopened the TCE solicitation, we are recommending that Treasury consider all options before awarding the contract, including the option of canceling the solicitation."

Rep. Tom Davis (R-VA), the Chairman of the House Government Reform Committee, released a statement [2 pages in PDF] in response to the OIG report on February 13. He wrote that "From the beginning, I had misgivings about the TCE procurement. I suspected for the last year or so that TCE was an ill-considered stovepipe program conceived at a time when we needed to move in the opposite direction. We should be meeting the government's pressing need for secure, efficient, and cost-effective movement of information across agencies, departments, and jurisdictions of government. I felt that TCE would foster the perpetuation of duplicative agency-specific administrative functions across government that are far more costly and far less efficient than GSA抯 centrally managed acquisition infrastructure for telecom."

Rep. Davis added that the OIG report "confirms all of my negative assumptions about the TCE scheme."

Rep. Davis letter also wrote a letter on February 16 to Secretary of the Treasury John Snow and Office of Management and Budget (OMB) Director Joshua Bolten about government communications procurement generally.

He wrote that "I do not support agencies erecting stovepipe infrastructures that too often are not interoperable and that do not facilitate the government's pressing need for secure, efficient and cost-effective movement of information across agencies, departments and jurisdictions of government."

Second, he wrote that "agency-specific procurements like TCE foster the perpetuation or creation of duplicative administrative procurement functions across government that are far more costly and far less efficient than centrally managed core infrastructure procurements."

And, he added that "this acquisition has been poorly planned and executed from the start."

He also noted that "Previously, I suggested that Treasury make every effort to use the existing General Services Administration (GSA) government-wide telecommunications contract -- FTS 2001 -- or other GSA contract vehicles for its immediate needs and then work with GSA on its comprehensive government communications Networx procurement slated for award next year.

Finally, he asked Snow and Bolten to advise him as to what actions they intend to take in response to the DOT/OIG report.

5th Circuit Addresses Personal Jurisdiction in IPR Cases

1/25. The U.S. Court of Appeals (5thCir) issued its opinion [10 pages in PDF] in Luv N' Care v. Insta Mix, holding that personal jurisdiction over an out of state defendant in copyright, trademark and Lanham Act unfair competition suits may be based upon the stream of commerce theory.

Luv N' Care, Ltd. is a Louisiana corporation based in Louisiana. It designs, manufactures, and sells infant care products.

Insta Mix, Inc. is a small Colorado corporation that makes a two chambered plastic bottle with a freezable core. It holds a related patent. It has no offices or employees in Louisiana. It does not sell outside of Colorado. However, it sells wholesale to Wal-Mart in Colorado, which in turns has retail stores around the U.S., including in Louisiana. Wal-Mart ships some Insta Mix bottles to Louisiana.

This Appeals Court opinion addresses the issue of personal jurisdiction. It discloses little about the underlying claims. It states only that this is a copyright and Lanham act case involving a "bottle cap".

Nor does the opinion state whether or not Luv N' Care filed preemptively in Louisiana in anticipation of being sued in Colorado. However, the Court did write, "If Luv n' care's suit is indeed frivolous, the district court presumably will deal with that deficiency."

Luv N' Care filed a complaint in U.S. District Court in the Western District of Louisiana against Insta Mix and its related entities alleging copyright infringement, and trademark dilution and unfair competition under the Lanham Act, which is codified at 15 U.S.C. Ё 1125.

The District Court dismissed the complaint for lack of personal jurisdiction. The Court of Appeals reversed.

The Court of Appeals first offered this introduction to the law of personal jurisdiction. "The Due Process Clause of the Fourteenth Amendment guarantees that no federal court may assume jurisdiction in personam of a nonresident defendant unless the defendant has meaningful ``contacts, ties, or relations创 with the forum state." (Citing and quoting from International Shoe Co. v. Washington, 326 U.S. 310 (1945).)

The Court continued that "Jurisdiction may be general or specific. Where a defendant has ``continuous and systematic general business contacts创 with the forum state" ... "the court may exercise ``general创 jurisdiction over any action brought against that defendant." Moreover, "Where contacts are less pervasive, the court may still exercise ``specific创 jurisdiction ``in a suit arising out of or related to the defendant's contacts with the forum.创" (Citing and quoting from Helicopteros Nacionales de Colombia, S. A. v. Hall, 466 U.S. 408 (1984).)

The Court noted that "This case presents only the question of specific jurisdiction."

The Court added that "A federal court may satisfy the constitutional requirements for specific jurisdiction by a showing that the defendant has ``minimum contacts创 with the forum state such that imposing a judgment would not ``offend traditional notions of fair play and substantial justice.创" (Citing International Shoe.)

The Court continued that for Insta Mix to have minimum contacts with the state of Louisiana, it must have engaged in some act whereby it purposely availed itself of the privilege of conducting activities in Louisiana, thus invoking the benefits and protections of its laws. Moreover, the Court wrote, Insta Mix must have reasonably anticipated being haled into court in Louisiana."

The Court of Appeals held that these requirements were satisfied by Insta Mix's placing a product into the stream of commerce, when it knew that some of the product would ultimately reach Louisiana. The Court further rejected the argument that the stream of commerce theory of personal jurisdiction, which is a products liability law concept, is not applicable to disputes involving either copyright, trademark, or Lanham Act unfair competition claims. The Court added in a footnote that "We reserve judgment on whether jurisdiction would lie for other causes of action outside the arena of products liability."

This case is Luv N' Care, Ltd. v. Insta Mix, Inc., et al., U.S. Court of Appeals for the 5th Circuit, App. Ct. No. m 04-31171, an appeal from the U.S. District Court for the Western District of Louisiana.

Utah Supreme Court Addresses Personal Jurisdiction Based upon Sending E-Mail

2/10. The Supreme Court of the State of Utah issued its opinion [15 pages in PDF] in Fenn v. Mleads, holding that the courts of Utah cannot exercise personal jurisdiction over an out of state defendant who sends one email message to a state resident without knowledge of the residence of the recipient or the location at which the recipient will retrieve the message.

Background. Brittney Fenn, the plaintiff in the trial court and respondent before the Supreme Court, is a resident of Utah.

Mleads Enterprises, Inc., the defendant and petitioner, is an Arizona corporation based in Arizona. It is a mortgage lead company. These companies typically develop collections of data on consumers seeking mortgages, and then sell data to mortgage lenders. One method that these companies use to obtain data is to send bulk unsolicited e-mail. Mleads contracted with a marketing agent to advertise Mleads's services to consumers. Mleads' agent sent an unsolicited e-mail message to Fenn.

Proceedings Below. Fenn filed a complaint in Utah District Court (trial court) against Mleads and ten John Doe defendants. Fenn also seeks to sue on behalf of others similarly situated. Mleads moved to dismiss for lack of personal jurisdiction. The relevant evidence before the court included the single e-mail message to Fenn. Fenn asserted specific personal jurisdiction. The District Court dismissed the case for lack of personal jurisdiction.

The Utah Court of Appeals (intermediate appellate court) issued its opinion on November 12, 2004, reversing the District Court. The Court of Appeals concluded that "Sending one email to a resident of Utah is sufficient ``contact创 to satisfy the long-arm statute and the minimum contacts requirement of due process for a statutory claim arising from the sending of that email. Additionally, the state's and Fenn's interests in this case trump the burdens imposed upon Mleads. Thus, we hold that the district court ruled incorrectly in dismissing this case on summary judgment for lack of personal jurisdiction."

The Supreme Court of Utah granted certiorari on March 17, 2005. See also, story titled "Utah Supreme Court Grants Certiorari to Decide Whether Sending One E-Mail Can Create Personal Jurisdiction" in TLJ Daily E-Mail Alert No. 1,102, March 24, 2005.

In the proceedings below, Fenn asserted specific personal jurisdiction, but not general jurisdiction. Hence, the only issue before the Supreme Court was whether the court could exercise specific personal jurisdiction.

Supreme Court Opinion. The Supreme Court began by noting that the court has jurisdiction if "(1) the Utah long-arm statute extends to defendant抯 acts or contacts, (2) plaintiff抯 claim arises out of those acts or contacts, and (3) the exercise of jurisdiction satisfies the defendant's right to due process under the United States Constitution."

However, since the parties agreed that the long arm statute extends to Mleads's actions, and that Fenn's claim arises out of those acts or contacts, the only issue before the Supreme Court was the due process limitations upon the exercise of personal jurisdiction. The Supreme Court then applied International Shoe v. Washington, 326 U.S. 310 (1945), its progeny, and related opinions of the Utah Supreme Court.

The Supreme Court held that sending a single e-mail message, of a limited nature, when the sender does not know the location of the recipient, is not a sufficient contact to create specific personal jurisdiction.

The Supreme Court wrote that "The fact that the contact with Utah occurred via the Internet does not change the analysis. ``Traditionally, when an entity intentionally reaches beyond its boundaries to conduct business with foreign residences, the exercise of specific jurisdiction is proper,创 and ``[d]ifferent results should not be reached simply because business is conducted over the Internet.创 Nevertheless, ``[t]he 憁inimum contacts standard is not susceptible of mechanical application, and instead, involves an ad hoc analysis of the facts,创 particularly when dealing with the Internet because emails and websites present unique and complicated problems for jurisdictional analysis. The main complication is that a defendant, like Mleads, is generally unaware of the geographic location to which it sends an email because that information is not necessarily provided with the email address." (Footnotes omitted.)

The Supreme Court went on to analyze and apply the purposeful availment test, the effects test, and whether "the nature and quality of the activity is generally of such a degree to support the exercise of jurisdiction".

With respect to the nature and quality, the Supreme Court noted that "sending mass emails into Utah, or even a threatening or otherwise tortious individual email, may result in a substantial connection between the defendant and Utah if the nature and quality is such as to have a meaningful impact on Utah and its citizens." However, it concluded that the single e-mail, of an advertising nature, to a person whose residence is unknown, is not of a nature and quality to give rise to personal jurisdiction.

In summary, the Supreme Court wrote that "under a minimum contacts analysis for Internet activity, ``[p]roper inquiry must not focus on the mere quantity of contacts, but rather upon the quality and nature of those contacts as they relate to the claims asserted.创 We do not intend to permit corporations to hide behind the excuse of ignorance in not knowing where they or their agents send email advertisements. However, before asserting jurisdiction arising out of those emails, a plaintiff must demonstrate a substantial connection to Utah created by the one email contact. Specifically, the plaintiff must establish that the corporation purposefully availed itself of the benefits of conducting business in Utah, knew its email may injure persons in Utah, or the nature and quality of the sent email supports the exercise of personal jurisdiction in Utah. One way, but not necessarily the only way, a plaintiff may establish that the nature and quality of the activity supports jurisdiction is to demonstrate that the defendant磗 conduct created an active or interactive relationship with Utah. However, we do not limit jurisdiction under the general ``nature and quality创 to the active/passive test." (Footnotes omitted.)

Fenn was represented by Denver Snuffer of Sandy, Utah, and Jesse Riddle of Draper, Utah. MLead was represented by Jill Dunyon, of Snow, Christensen and Martineau in Salt Lake City, Utah, and Derek Newman, Roger Townsend, and Venkat Balasubramani of Newman & Newman in Seattle, Washington.

The present case is Brittney Fenn v. Mleads Enterprises, Inc., Supreme Court of the State of Utah, Sup. Ct. No. 20041072-SC, a petition for writ of certiorari to the Court of Appeals. The Court of Appeals case number is 20030948-CA. Its opinion is reported at 2004 UT App 412 and 103 P.3d 156. The case was filed in the District Court, Third District, Sandy Department, Judge Denise Lindberg presiding. Its case number is 030400108.

9th Circuit Affirms Dismissal of Class Action Suit Against Directv for Sending Signal Theft Demand Letters

2/15. The U.S. Court of Appeals (9thCir) issued its opinion [34 pages in PDF] in Sosa v. Directv, affirming the judgment of the District Court dismissing a class action lawsuit brought against DBS provider Directv alleging violation of the RICO for sending demand letters to likely signal thieves. The Court of Appeals held that the First Amendment based Noerr Pennington doctrine precludes RICO claims in this situation.

Directv is a direct broadcast satellite (DBS) service provider. It broadcasts electronically scrambled signals. Consumers purchase electronic equipment from third party vendors, and an access card, or smart card, provided by Directv, to descramble the signal.

In previous anti signal theft related litigation against sellers of smart card programming technology, Directv obtained names and addresses of individuals who purchasers from these defendants. Directv then sent letters to these purchasers accusing them of violating a federal criminal statute, and threatening civil legal action unless they forfeited the equipment to Directv and settled with Directv for an unspecified sum.

Some recipients of the demand letter filed a complaint in state court in California, which the trial court dismissed. The state intermediate appeals court affirmed, and the state Supreme Court declined to review the case.

Rod Sosa, and others, filed a complaint in U.S. District Court alleging violation of the federal Racketeer Influenced and Corrupt Organizations Act (RICO), which is codified at 18 U.S.C. Ё 1961-1968. They alleged as predicate acts extortion and mail and wire fraud. They also sought class action status.

The District Court dismissed the federal action pursuant to the Noerr Pennington doctrine. See, Eastern R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961) and United Mine Workers v. Pennington, 381 U.S. 657 (1965).

The Court of Appeals ruled that the disposition of the state court action does not bar the federal action under the doctrine of res judicata, but only because the state court judgment was not final at the time of the judgment in the federal action.

The Court of Appeals then affirmed the judgment of the District Court on the merits. The RICO claim is barred by the Noerr Pennington doctrine.

The Court of Appeals wrote that "Our decision today makes clear that the Noerr-Pennington doctrine requires that, to the extent possible, we construe federal statutes so as to avoid burdens on activity arguably falling within the scope of the Petition Clause of the First Amendment. Prelitigation communications demanding settlement of legal claims must be afforded Noerr-Pennington protection when we construe statutes asserted to regulate them. RICO does not unambiguously include the presuit demand letters in this case within the scope of conduct it enjoins, so we decline to give it such a broad construction."

This case is Rod Sosa, et al. v. Directv, Inc., et al., U.S. Court of Appeals for the 9th Circuit, App. Ct. No. 04-55036, an appeal from the U.S. District Court for the Central District of California, D.C. No. CV-03-05972-AHM, Judge Howard Matz presiding.

Marsha Berzon wrote the opinion of the Court, in which Judge Ferdinand Fernandez joined. Judge Owen Panner wrote a concurring opinion. He argued briefly that the court did not need to address the Noerr Pennington issue. That is, if it affirmed, the case would be dismissed. If it reversed, the case would also be dismissed, because the state court judgment is now final, and has res judicata effect.

Washington Tech Calendar
New items are highlighted in red.
Monday, February 20

George Washington's birthday.

The House will not meet on Monday, February 20, through Friday, February 24. It will next meet on Tuesday, February 28. See, Republican Whip Notice.

The Senate will not meet on Monday, February 20, through Friday, February 24. See, 2006 Senate calendar.

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

12:00 NOON UTC. Deadline to submit comments to the Internet Corporation for Assigned Names and Numbers (ICANN) regarding the proposed agreements that would settle litigation between VeriSign and the ICANN. See, story titled "ICANN Seeks Comments on Settlement of Litigation with VeriSign" in TLJ Daily E-Mail Alert No. 1,300, January 31, 2006.

Tuesday, February 21

9:00 AM - 4:00 PM. The Securities and Exchange Commission's (SEC) Advisory Committee on Smaller Public Companies will hold a meeting. For more information, contact Kevin O'Neill at 202 551-3260. See, notice. Location: SEC Headquarters, Room L-006, 100 F Street, NE.

12:15 PM. The Federal Communications Bar Association's (FCBA) Mass Media Practice Committee will host a brown bag lunch titled "Broadcasters Delve Into the Digital Future". The speakers will be Rick Chessen (Sheppard Mullin), David Fleming (General Counsel of Gannett Broadcasting), Albert Shuldiner (General Counsel of iBiquity), Steve Smith (Broadcast Technology Consultants, Inc.), and Mike Starling (NPR). For more information, contact Eva Dia at edia at sheppardmullin dot com. Location: Sheppard Mullin, 1300 I Street, 11th floor.

Wednesday, February 22

10:00 AM. The Center for Democracy and Technology (CDT) will host a news conference on the release a report on "Erosion of Privacy Protections in the Digital Age". Jerry Berman and Jim Dempsey of the CDT will speak. The CDT notice states that the remote call-in number is (800) 377-8846, and that the participant code is 48434056#. It adds that "Reporters planning to participate in person or by phone should RSVP with David McGuire (202) 637-9800 x106" or dmcguire at cdt dot org. Location: CDT conference room, 1634 I St. NW, 11th floor.

12:00 NOON - 1:30 PM. The Federal Communications Bar Association's (FCBA) International Telecommunications Committee will host a brown bag lunch. The topic will be the FCC's International Bureau's (IB) accomplishments in 2005 and goals for 2006. The speaker will be Don Abelson, Chief of the IB. For more information, contact Ann Henson at ann at fcba dot org. Location: Skadden Arps, 11th floor, 700 14th St., NW.

12:00 NOON. The Federal Communications Bar Association's (FCBA) Wireless Committee will host a lunch. The topic will be "Impact of the U.S. Wireless Industry on the U.S. Economy". The speaker will be Roger Entner (Ovum). The price to attend is $15. Registrations and cancellations are due by 12:00 NOON on February 17. See, registration form [PDF]. Location: Sidley Austin, 1500 K Street, 6th Floor.

2:00 - 4:00 PM. The Department of State's International Telecommunication Advisory Committee (ITAC) will hold the seventh in a series of weekly meetings to prepare for the International Telecommunications Union's (ITU) 2006 ITU Plenipotentiary Conference, to be held November 6-24, 2006, in Antalya, Turkey. See, notice in the Federal Register, December 21, 2005, Vol. 70, No. 244, at Page 75854. This notice incorrectly states that these meetings will be held on Tuesdays; they are on Wednesdays. For more information, contact Julian Minard at 202 647-2593 or minardje at state dot gov. Location: AT&T, 1120 20th St., NW.

Thursday, February 23

8:00 AM - 2:00 PM. The Board of Directors of the National Cable & Telecommunications Association (NCTA) will meet. For more information, contact: Barbara York or Kawania Wooten at 202 775-3669. Location: St. Regis Hotel.

6:00 - 8:00 PM. The DC Bar Association will host an event at which Kenneth Wainstein, U.S.Attorney for the District of Columbia, will speak. The price to attend ranges from $0-$15. For more information, call 202 626-3463. See, notice. Location: Hogan & Hartson, 555 13th St., NW.

Deadline to submit reply comments to the Federal Communications Commission (FCC) in response to its notice of proposed rulemaking (NPRM) regarding the rules for expanding the scope of the Emergency Alert System (EAS) to cover certain digital services. The FCC adopted a report and order (R&O) and further NPRM on November 3, 2005. The R&O expanded the categories of service providers that are subject to the FCC's EAS mandates to include providers of digital broadcast and cable TV, digital audio broadcasting, satellite radio, and direct broadcast satellite (DBS) services. The NPRM asks for comments how the FCC should plan this "next-generation alert and warning system". See, story titled "FCC Requires DBS, Satellite Radio, Digital Broadcasters, and Others to Carry AES Communications" in TLJ Daily E-Mail Alert No. 1,247, November 4, 2005. The R&O and NPRM is FCC 05-191 in EB Docket No. 04-296. It was released on November 10, 2005. See, notice in the November 25, 2005, Vol. 70, No. 226, at Pages 71072 - 71077.

Friday, February 24

11:45 AM - 2:00 PM. The American Enterprise Institute (AEI) will host a program titled "The Google Copyright Controversy: Implications of Digitizing the World's Libraries". The speakers will be Robert Hahn (AEI-Brookings Joint Center), Douglas Lichtman (University of Chicago), and Hal Varian (University of California at Berkeley). See, notice. Location: AEI, 12th floor, 1150 17th St., NW.

Monday, February 27

The Senate will return from its Presidents' Day recess. See, 2006 Senate calendar.

12:30 PM. New York Governor George Pataki will give a speech. See, notice. Location: Ballroom, National Press Club, 529 14th St. NW, 13th floor.

4th Circuits Holds that Governors Can Blacklist Reporters Without Violating Section 1983

2/15. The U.S. Court of Appeals (4thCir) issued its opinion [16 pages in PDF] in Baltimore Sun v. Ehrlich, affirming the District Court's dismissal of a Section 1983 complaint against Maryland Governor Robert Ehrlich for instructing state officials not to talk to two newspaper writers.

Robert Ehrlich, the Governor of the state of Maryland, issued an executive order that no state department or agency shall speak with one news reporter and one columnist employed by the Baltimore Sun, a daily newspaper. Gov. Ehrlich took no other actions against the two, or their newspaper.

The Baltimore Sun and others filed a complaint in U.S. District Court (DMd) against Ehrlich alleging violation of 42 U.S.C. 1983 in connection with his allegedly unconstitutional retaliation for exercising of First Amendment speech and press rights.

The District Court dismissed the complaint for failure to state a claim upon which relief can be granted. The Court of Appeals affirmed.

Section 1983 provides, in part, that "Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress, except that in any action brought against a judicial officer for an act or omission taken in such officer抯 judicial capacity, injunctive relief shall not be granted unless a declaratory decree was violated or declaratory relief was unavailable."

The Court of Appeals wrote that "As speech reflecting the Governor's own views and intent, the directive is not actionable because it is only the Governor's opinion and because he himself need not talk to reporters. As an internal directive, it extended only to the official conduct and speech of others in the executive branch. Because it neither communicated a threat to The Sun, nor divulged private information in its function as an internal directive, it is not actionable."

This case is The Baltimore Sun Company, et al. v. Robert Ehrlich, U.S. Court of Appeals for the 4th Circuit, App. Ct. No. 05-1297, an appeal from the U.S. District Court for the District of Maryland, at Baltimore, Judge William Quarles presiding, D.C. No. CA-04-3822-1-WDQ. Judge Niemeyer wrote the opinion of the Court of Appeals, in which Judges Luttig and Traxler joined.

Correction

2/20. The article in TLJ Daily E-Mail Alert No. 1,312, February 17, 2006, titled "House Commerce Committee Seeks Information from Phone Data Brokers" incorrectly referenced Rep. Ed Whitfield as "R-GA". In fact, he represents the state of Kentucky.

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