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August 15, 2006, Alert No. 1,431.
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DC Circuit Upholds FCC's Forbearance Order Regarding Unbundling Obligations Under § 271

8/15. The U.S. Court of Appeals (DCCir) issued its opinion [22 pages in PDF] in Earthlink v. FCC, denying Earthlink's petition for review of the Federal Communications Commission's (FCC) order granting the regional bell operating companies' (RBOCs) petitions for forbearance from enforcement of the FCC's rules that would impose obligations to share, or unbundle, certain parts of their new fiber networks with competitors, such as Earthlink, on regulated terms and conditions.

Verizon, SBC, Qwest, and BellSouth all filed petitions for forbearance with the FCC pursuant to 47 U.S.C. § 160(c). It provides, in part, that "Any telecommunications carrier, or class of telecommunications carriers, may submit a petition to the Commission requesting that the Commission exercise the authority granted under this section with respect to that carrier or those carriers, or any service offered by that carrier or carriers. ... The Commission may grant or deny a petition in whole or in part and shall explain its decision in writing."

Section 160(a) provides that the FCC "shall forbear from applying any regulation or any provision of this chapter to a telecommunications carrier or telecommunications service, or class of telecommunications carriers or telecommunications services, in any or some of its or their geographic markets, if the Commission determines that --- (1) enforcement of such regulation or provision is not necessary to ensure that the charges, practices, classifications, or regulations by, for, or in connection with that telecommunications carrier or telecommunications service are just and reasonable and are not unjustly or unreasonably discriminatory; (2) enforcement of such regulation or provision is not necessary for the protection of consumers; and (3) forbearance from applying such provision or regulation is consistent with the public interest."

The FCC decided to forbear from applying the unbundling obligations listed in 47 U.S.C. § 271 for fiber-to-the-home loops, fiber-to-the-curb loops, packetized functionality of hybrid copper-fiber loops, and packet switching.

The FCC adopted, but did not release, this Memorandum Opinion and Order (MOO) on October 22, 2004. See, story titled "FCC Announces Report and Order Regarding Unbundling Obligations Under § 271" in TLJ Daily E-Mail Alert No. 1,005, October 27, 2004. The FCC's Report and Order is FCC 04-254. The FCC released the text [26 pages in PDF] of this MOO on October 27, 2004.

The FCC's proceeding is titled "In the Matters of Petition for Forbearance of the Verizon Telephone Companies Pursuant to 47 U.S.C. § 160(c), SBC Communications Inc.'s Petition for Forbearance Under 47 U.S.C. § 160(c), Qwest Communications International, Inc. Petition for Forbearance Under 47 U.S.C. § 160(c), BellSouth Telecommunications, Inc. Petition for Forbearance Under 47 U.S.C. § 160(c)". It is numbered WC Docket Nos. 01-338, 03-235, 03-260, and 04-48.

Earthlink, an internet service provider that benefited from the unbundling rules at issue, filed a petition for review of the order granting the petitions for forbearance. The Court of Appeals unanimously denied the petition.

Janice BrownJudge Janice Brown (at right), a recent appointment, wrote the opinion of the Court of Appeals. Judges Sentelle and Edwards joined.

The Court of Appeals concluded that "the FCC's decision (1) survives Chevron analysis, (2) is neither arbitrary nor inconsistent with FCC precedent, and (3) is supported by the record."

Earthlink sought de novo review. The FCC argued in its brief [50 pages in PDF] that the FCC's action is subject to Chevron deference. See, Chevron U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984). The Court of Appeals agreed with the FCC and applied Chevron deference.

The forbearance "statute imposes no particular mode of market analysis or level of geographic rigor". The Court of Appeals continued that "Seizing on the phrase ``geographic markets´´ in § 160(a), EarthLink contends the decision to forbear on a nationwide basis -- without considering more localized regions individually -- is per se improper. This argument is tenuous, at best. In context, the language simply contemplates that the FCC might sometimes forbear in a subset of a carrier’s markets; it is silent about how to determine when such partial relief is appropriate. Similarly, the statute does not require consideration of specific services."

The Court of Appeals also concluded that "Nothing in § 160 prohibits weighing such considerations in assessing the impact of forbearance on rates, consumers, and the public interest."

The Court also wrote that 47 U.S.C. § 706 "explicitly directs the FCC to ``utiliz[e]´´ forbearance to ``encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans.´´ As the precise interplay between section 706 and the three-part forbearance inquiry is not self-evident from the text, it is precisely the type of ambiguity entrusted to reasonable agency construction. The language of section 706 suggests a forward-looking approach and, reading the two statutory provisions together, we cannot fault the FCC for interpreting it to inform the § 160 analysis."

The Court next rejected Earthlink's argument that the FCC's order "arbitrarily assessed broadband competition in an irrational and ad hoc manner."

And finally, the Court rejected Earthlink's argument that the record does not support the FCC's forbearance determination. It explained that "Given the FCC's forward-looking interpretation and application of the statute, the agency only needed to show that the positive short-term impact of unbundling would be outweighed by the longer-term positive impact that not unbundling would have on rates, consumers, and the public interest. The record here is up to the task."

This case is Earthlink, Inc. v. FCC and USA, respondents, and BellSouth, Corporation, et al., intervenors, U.S. Court of Appeals for the District of Columbia Circuit, App. Ct. No. 05-1087, a petition for review of a final order of the FCC.

9th Circuit Addresses Trademark Abandonment

8/14. The U.S. Court of Appeals (9thCir) issued its opinion [18 pages in PDF] in Electro Source v. Pelican Products, a case regarding trademark abandonment.

The Court of Appeals reversed the summary judgment of the District Court for Pelican Products, the defendant and alleged infringer.

This case involves a registered trademark of a backpack luggage manufacturing and sales business. Ultimately, the business was a failure, and stopped manufacturing more backpacks. However, the owner continued to sell his inventory. The Court of Appeals wrote that he "kept plugging, selling a few backpacks and promoting them at trade shows for several years until he assigned" the trademark to a third party.

15 U.S.C. § 1127 provides, in part, as follows:

"A mark shall be deemed to be ``abandoned´´ if either of the following occurs:
  (1) When its use has been discontinued with intent not to resume such use. Intent not to resume may be inferred from circumstances. Nonuse for 3 consecutive years shall be prima facie evidence of abandonment. ``Use´´ of a mark means the bona fide use of such mark made in the ordinary course of trade, and not made merely to reserve a right in a mark.
  (2) When any course of conduct of the owner, including acts of omission as well as commission, causes the mark to become the generic name for the goods or services on or in connection with which it is used or otherwise to lose its significance as a mark. Purchaser motivation shall not be a test for determining abandonment under this paragraph."

The Court of Appeals held that there is no abandonment of a trademark when a troubled business continues to transport and sell trademarked goods in the ordinary course of trade as part of a good faith effort to deplete inventory. Abandonment requires "both discontinuance of all bona fide trademark use in the ordinary course of trade and an intent not to resume such use. ... Legitimate commercial transport or sales of trademarked goods, even for a failing business, are sufficient to defeat a claim of abandonment."

This case is Electro Source LLC v. Brandess-Kalt-Aetna Group, Inc., Pelican Products, Inc., U.S. Court of Appeals for the 9th Circuit, App. Ct. Nos. 04-56648, 04-55909, and 04-56648, appeals from the U.S. District Court for the Central District of California, D.C. Nos. CV-02-07974-NM.

People and Appointments

left8/15. Mike Gallagher (at left) joined the Progress and Freedom Foundation (PFF) as an adjunct fellow. He remains a partner in the Washington DC office of the law firm of Perkins Coie. He was previously the head of the Department of Commerce's (DOC) National Telecommunications and Information Administration (NTIA). See, PFF release.

8/14. Erik Sirri was named Director of the Securities and Exchange Commission's (SEC) Division of Market Regulation. He is a professor of finance at Babson College in Massachusetts. See, SEC release.

8/14. Nathan Koble joined the National Association of Manufacturers (NAM) in the new position of Director of Internet Strategies. He previously worked for Lockheed Martin. He will supervise the NAM's web team and oversee the day to day operation of the NAM web site.

There was no issue of the TLJ Daily E-Mail Alert on Monday, August 14, 2006.
9th Circuit Addresses Aesthetic Functionality Doctrine in Trademark Law

8/11. The U.S. Court of Appeals (9thCir) issued its opinion [PDF] in Au-Tomotive Gold v. Volkswagen, a trademark case involving the nebulous doctrine of aesthetic functionality. The District Court held that the unlicensed sale of keychains and license plate covers with car makers' trademarked logos was not trademark infringement. The Court of Appeals reversed.

Volkswagen (VW) and Audi make cars. They also make parts and accessories, including key chains and license plate covers. They also hold trademarks. Au-Tomotive Gold (AG) makes key chains and license plate covers that incorporate some of these trademarks, without permission from the car makers.

AG filed a complaint in U.S. District Court (DAriz) against VW and Audi seeking declaratory judgment that its activities did not constitute trademark infringement or trademark counterfeiting under 15 U.S.C. § 1114, unfair competition under 15 U.S.C. § 1125(a), or trademark dilution under 15 U.S.C. § 1125(c). VW and Audi filed counterclaims for trademark infringement under 15 U.S.C. § 1114(1)(a), false designation of origin under 15 U.S.C. § 1125(a), trademark dilution under 15 U.S.C. § 1125(c), consumer fraud under the Arizona Consumer Fraud Act, tortious interference with contract, tortious interference with business expectancy, and trademark counterfeiting under the Arizona Consumer Fraud Act.

The District Court ruled for AG on cross motions for summary judgment. It held that AG's products are not trademark infringements or trademark counterfeiting because they are protected by the aesthetic functionality doctrine. It also enjoined VW and Audi from enforcing their trademarks against AG or its customers.

VW and Audi brought this appeal. The Court of Appeals reversed, vacated and remanded. It held that VW and Audi established a prima facie case with respect to infringement.

The Appeals Court noted that consumers sometimes buy products bearing marks such as Mercedes tri-point star for the appeal of the mark itself, and without regard to whether it signifies the origin or sponsorship of the product. In this case, AG argued that consumers bought its products with VW and Audi logos, not because the logos designated the origin of the products, but because the consumers wanted the aesthetic quality of the products. Hence, AG argued that its products are not subject to trademark protection.

The Court of Appeals concluded that AG's position "would be the death knell for trademark protection. It would mean that simply because a consumer likes a trademark, or finds it aesthetically pleasing, a competitor could adopt and use the mark on its own products. Thus, a competitor could adopt the distinctive Mercedes circle and tri-point star or the well-known golden arches of McDonald’s, all under the rubric of aesthetic functionality."

This case is Au-Tomotive Gold, Inc. v. Volkswagen of America, Inc., et al., U.S. Court of Appeals for the 9th Circuit, App. Ct. No. 04-16174, an appeal from the U.S. District Court for the District of Arizona, D.C. Nos. CV-01-00162-WDB and CV-01-00508-WDB, Judge William Browning presiding.

Washington Tech Calendar
New items are highlighted in red.
Tuesday, August 15

The House will next meet at 2:00 PM on Wednesday, September 6. See, Republican Whip Notice.

The Senate will next meet at 11:00 AM on Tuesday, September 5.

9:00 AM - 1:00 PM. Day two of a two day meeting of the National Commission on Libraries and Information Science (NCLIS). See, notice in the Federal Register, August 7, 2006, Vol. 71, No. 151, at Page 44716. Location: West Dining Room, Madison Building, Library of Congress, 101 Independence Ave., SE.

1:00 - 3:00 PM. The Department of State's (DOS) International Telecommunication Advisory Committee will meet to prepare for ITU Radiocommunication Sector's Special Committee on Regulatory/Procedural Matters that will take place on December 4-8, 2006, in Geneva, Switzerland. See, notice in the Federal Register, May 4, 2006, Vol. 71, No. 86, at Pages 26397-26398. Location: Boeing Company, 1200 Wilson Blvd., Arlington, VA.

6:00 - 9:15 PM. Day one of a two day continuing legal education (CLE) seminar titled "Software Patent Primer: Acquisition, Exploitation, Enforcement and Defense" hosted by the DC Bar Association. The speakers will include Stephen Parker (Novak Druce), Brian Rosenbloom (Rothwell Figg Ernst & Manbeck), David Temeles (Temeles & Temeles), and Martin Zoltick (Rothwell Figg). The price to attend ranges from $95-$170. For more information, call 202-626-3488. See, notice and notice. Location: D.C. Bar Conference Center, 1250 H Street NW, B-1 Level.

Wednesday, August 16

6:00 - 9:15 PM. Day two of a two day continuing legal education (CLE) seminar titled "Software Patent Primer: Acquisition, Exploitation, Enforcement and Defense" hosted by the DC Bar Association. For more information, call 202-626-3488. See, notice and notice. Location: D.C. Bar Conference Center, 1250 H Street NW, B-1 Level.

Friday, August 18

Deadline to submit comments to the Internet Corporation for Assigned Names and Numbers' (ICANN) General Names Supporting Organization (GNSO) regarding its report titled "GNSO Initial Report: Introduction of New Generic Top-Level Domains". See, request for comments.

Tuesday, August 22

Deadline to submit comments to the U.S. Patent and Trademark Office (USPTO) regarding its "modified plan to remove the paper search collection of marks that include design elements from the USPTO's Trademark Search Facility and replace them with electronic documents. The USPTO has determined that the paper search collection is no longer necessary due to the availability and reliability of the USPTO's electronic search system." See, notice in the Federal Register, June 23, 2006, Vol. 71, No. 121, at Pages 36065-36068.

Wednesday, August 23

8:30 AM - 2:30 PM. The American Electronics Association (AeA) will host an event titled "AeA Annual Government - Industry Executive Interchange". See, notice. Prices to attend range from $195-$295. Location: The Spy Museum, 800 F St., NW.

12:00 NOON - 3:00 PM. The DC Bar Association will host a panel discussion titled "DR-CAFTA: The United States-Dominican Republic-Central America Free Trade Agreement A Roundtable with the Ambassadors". The speakers will include ambassadors to the U.S. from Dominican Republic, Guatemala, Honduras, Nicaragua, El Salvador, and Costa Rica. The price to attend ranges from $15-40. For more information, call 202-626-3488. See, notice. Location: Arnold & Porter, 555 12th St., NW.

1:30 - 3:30 PM. The Department of State will host a meeting to hear public views on issues related to the possible expansion of the mandate of the International Mobile Satellite Organization (IMSO) to include new oversight and regulatory responsibilities that may affect U.S. and non-U.S. mobile satellite services providers. See, notice in the Federal Register, August 10, 2006, Vol. 71, No. 154, at Pages 45897-45898. Location: Harry S. Truman building, 2201 C St., NW.

CANCELLED. Federal Communications Commission (FCC) Auction 67 is scheduled to begin. This is the 400 MHz Air-Ground Radiotelephone Service auction. See, FCC notice of cancellation [PDF] and notice of cancellation in the Federal Register, May 17, 2006, Vol. 71, No. 95, at Page 28695.

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