8/7. The U.S. Court of Appeals (7thCir) issued its opinion in Baude v. Heath, a case regarding state regulation of direct wine sales. The Court of Appeals upheld a state statute that prohibits shipping wine to a customer without a face to face meeting. This has the effect of prohibiting Indiana residents from purchasing wine over the internet from west coast wineries.

Judge Frank Easterbrook, who wrote the opinion, concluded that it is not a burden on interstate commerce to require Indiana residents to travel to Napa valley to present a photo ID in person in order to have wine shipped to them in Indiana.

This opinion is a set back for internet wine sales. However, its impact upon electronic commerce involving most other goods and services may be limited. Easterbrook based his holding upon the conclusion that limiting underage wine drinking is a legitimate state interest. Sales of goods and services that are not legitimately restricted by age or identity will not likely be affected.

In 2005 the Supreme Court issued its 5-4 opinion [73 pages in PDF] in Granholm v. Heald holding that Michigan's and New York's regulatory schemes that permited in-state wineries directly to ship alcohol to consumers, but restricted the ability of out-of-state wineries to do so, violate the dormant commerce clause.

That is, states had discriminated against out of state wineries, including internet based wine sales, to protect in state businesses and distribution systems.

The Supreme Court's 2005 opinion made it easier for businesses that engage in electronic commerce to challenge the constitutionality of state protectionist statutes that discriminate against internet based commerce.

See also, story titled "Supreme Court Rules in Internet Wine Sales Case" in TLJ Daily E-Mail Alert No. 1,137, May 17, 2005.

The state of Indiana revised its statutes after the 2005 opinion. However, it continued to regulate wine sales in a manner that harms internet wine sales. Also, some state legislators may have voted for the new regulatory regime with an intent to discriminate against out of state wineries.

The Court of Appeals summarized two statutory provisions at issue in this appeal. It wrote that "wineries inside and outside Indiana may ship to customers, if (a) there is one face-to-face meeting at which the buyer’s age and other particulars can be verified; and (b) the vintner is not allowed to sell to retailers in any state as its own wholesaler."

Patrick Baude and others filed a complaint in U.S. District Court (SDInd) against David Heath, in his capacity as Chairman of the Indiana Alcohol and Tobacco Commission, alleging that the two statutory provisions are unconstitutional restraints on interstate commerce.

The District Court enjoined enforcement of both statutory provisions. It concluded that they have a disparate impact on out of state sellers.

This appeal followed. The Court of Appeals affirmed the District Court's judgment as to the unconstitutionality of the wholesaler restriction. However, it reversed as to the face to face requirement.

Judge Easterbrook cited the Supreme Court's opinion in Pike v. Bruce Church, 397 U.S. 137 (1970), and applied its "test". However, he did not articulate what the test is.

The Supreme Court wrote in Pike v. Bruce Church that "Where the statute regulates even-handedly to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental, it will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits. If a legitimate local purpose is found, then the question becomes one of degree. And the extent of the burden that will be tolerated will of course depend on the nature of the local interest involved, and on whether it could be promoted as well with a lesser impact on interstate activities."

Easterbrook wrote that there is a legitimate state interest in "keeping alcohol out of minors' hands". Moreover, if states "make it easier for minors to get wine by phone or Internet", then "sales to minors will increase".

As for the burden on interstate commerce, here is Easterbrook's logic. "Many oenophiles vacation in wine country, and on a tour through Napa Valley to sample the vintners' wares a person could sign up for direct shipments from dozens of wineries." In contrast, Indiana "wineries are all over the map".

Thus, wrote Easterbrook, "A connoisseur might well find it easier to visit and sign up at 30 California wineries than at 30 Indiana wineries."

Therefore, Easterbrook concluded that "Indiana's system does not disadvantage California (or other) wineries in general."

Easterbrook also rejected the argument that "Internet-based age-verification services" would be a less restrictive means to protect the state interest in limiting underage drinking. He wrote that "neither the record in this case nor any third-party testing" shows this.

Easterbrook also wrote that age verification by delivery services is out of the question because of the Supreme Court's recent opinion [17 pages in PDF] in Rowe v. New Hampshire Motor Transport Association. He wrote that "states cannot require interstate carriers to verify the recipients' age".

See also, story titled "Supreme Court Affirms in Rowe v. New Hampshire Motor Transport Association" in TLJ Daily E-Mail Alert No. 1,720, February 20, 2008.

Easterbrook also relied on the Supreme Court's recent opinion [65 pages in PDF] in Crawford v. Marion County Election Board, which upheld the constitutionality of a state law requiring photo identification ID for voting. He wrote that "a belief that in-person verification with photo ID reduces vote fraud has enough support to withstand a challenge under the first amendment, it would be awfully hard to take judicial notice that in-person verification with photo ID has no effect on wine fraud and therefore flunks the interstate commerce clause."

But then, that case is hardly relevant. That was not an interstate commerce case, and voters vote at their local polling stations. For example, there was no requirement that voters wishing to vote for a particular candidate must travel to Napa Valley to vote.

See also, story titled "Supreme Court Upholds State Statute Requiring Photo ID to Vote" in TLJ Daily E-Mail Alert No. 1,756, April 29, 2008.

It should be noted too that prior to the Supreme Court's 2005 opinion in Granholm v. Heald, two circuits had upheld discriminatory states wine sales statutes -- the 2nd and 7th Circuits. Moreover, the 7th Circuit opinion was written by Easterbrook. While his opinion was not under review in 2005, its holding was in effect overturned.

In Bridenbaugh v. Wilson, the plaintiffs challenged the constitutionality of an Indiana statute that made it unlawful for persons in another state to ship an alcoholic beverage directly to an Indiana resident. The District Court held that the Indiana direct shipment regulation was unconstitutional under the Commerce Clause, and granted the plaintiffs' summary judgment motion. See, Bridenbaugh v. O'Bannon, 78 F. Supp.2d 828 (N.D. Ind. 1999). Then, the Seventh Circuit reversed, upholding the constitutionality of the state ban.

Easterbrook wrote in that opinion, "Where's the functional discrimination?"

This case is Patrick Baude, et al. v. David Heath and Wine and Spirits Wholesalers of Indiana, U.S. Court of Appeals for the 7th Circuit, App. Ct. Nos. 07-3323 and 07-3338, appeals from the U.S. District Court for the Southern District of Indiana, Indianapolis Division, D.C. No. 1:05-CV-0735-JDT-TAB, Judge John Tinder presiding. Judge Frank Easterbrook wrote the opinion of the Court of Appeals, in which Judges Bauer and Posner joined.

8/11. T3 Technologies announced in a release that it "is moving ahead with its plans to file a formal complaint" against IBM with the European Commission's Directorate General for Competition.

T3 added that "it has retained counsel and expert witnesses" and has met with EC officials.

On July 2, 2008, IBM acquired Platform Solutions, Inc. (PSI), a privately held technology company headquartered in Sunnyvale, California. See, IBM release.

T3 did not make public the text of its EC complaint. However, on November 26, 2007, T3 filed a related complaint [46 pages in PDF] in U.S. District Court (SDNY) against IBM alleging violation of Sections 1 and 2 of the Sherman Act, Section 3 of the Clayton Act, and New York and Florida state laws.

T3 alleged in the U.S. complaint that the relevant antitrust markets are the worldwide market for mainframe computers that are compatible with IBM mainframe operating systems, and the worldwide market for IBM compatible mainframe operating systems.

Its complaint further alleged that IBM has illegally tied its mainframes to its operating systems, leveraged its monopoly over mainframe operating systems to maintain its monopoly over IBM compatible mainframes, denied access to an essential facility, and denied access to critical information, among other things.

T3 wrote in its release that its EC complaint "will be based on a history of actions by IBM abusing its monopoly power in the mainframe industry. T3 alleges that IBM has prevented the sales of competing mainframe hardware products by tying the sale of its operating system to its mainframe hardware, withholding patent licenses and certain intellectual property to the detriment of mainframe customers."

Ed Black, head of the Computer and Communications Industry Association (CCIA), stated in a release that "T3's announcement today, a month after the PSI buyout by IBM, adds credence to the evidence that competition in this critical market is being stifled and would-be competitors have few other options to seek relief".

Black continued that "Authorities need to look at what is happening and step in before it's too late. The cost to consumers, to the economy and the security risk of having 90 percent of the mainframe market controlled by one company is too high."

Black also asserted that "Unfortunately, US antitrust authorities have been AWOL with regard to many competition and antitrust matters for the last 7 years."

The House will not meet.

The Senate will meet at 2:00 PM in pro forma session only.

6:00 - 9:15 PM. Part one of a two part continuing legal education (CLE) seminar hosted by the DC Bar Association titled "Software Patent Primer: Acquisition, Exploitation, Enforcement, and Defense". The speakers will be Martin Zoltick (Rothwell Figg), Stephen Parker (Watchstone P&D), Brian Rosenbloom (Rothwell Figg), and David Temeles (Bean Kinney & Korman). The price to attend ranges from $105 to $160. For more information, call 202-626-3488. See, notice. Location: DC Bar Conference Center, B-1 Level, 1250 H St., NW.

The Federal Communications Commission (FCC) will commence Auction 78, the AWS-1 and Broadband PCS auction. See, Public Notice (DA 08-1090) and notice in the Federal Register, May 29, 2008, Vol. 73, No. 104, at Pages 30919-30938.

9:00 AM - 12:15 PM. The DC Bar Association will host a panel discussion titled "Legal Cybersleuth's Guide to Investigative Research". The speakers will be Carole Levitt and Mark Rosch (both of Internet For Lawyers). The price to attend ranges from $109 to $149. For more information, contact 202-626-3463. See, notice. Location: DC Bar Conference Center, B-1 Level, 1250 H St., NW.

12:00 NOON - 1:30 PM. The Center for American Progress (CAP) will host an event titled "A Progressive Strategy Toward China". The speakers will be Stapleton Roy (Kissinger Associates), Harry Harding (George Washington University), Michael Schiffer (Stanley Foundation), Robert Sussman (CAP), and Nina Hachigian (CAP). See, notice. Location: CAP, 10th floor, 1333 H St., NW.

6:00 - 9:15 PM. Part two of a two part continuing legal education (CLE) seminar hosted by the DC Bar Association titled "Software Patent Primer: Acquisition, Exploitation, Enforcement, and Defense". The speakers will be Martin Zoltick (Rothwell Figg), Stephen Parker (Watchstone P&D), Brian Rosenbloom (Rothwell Figg), and David Temeles (Bean Kinney & Korman). The price to attend ranges from $105 to $160. For more information, call 202-626-3488. See, notice. Location: DC Bar Conference Center, B-1 Level, 1250 H St., NW.

10:00 AM - 4:00 PM. The U.S.-China Economic and Security Review Commission will hold a public meeting to work on its 2008 Annual Report to Congress. See, notice in the Federal Register, July 29, 2008, Vol. 73, No. 146, at Pages 43978-43979. Location: Conference Room 333, Hall of the States, 444 North Capitol St., NW.

6:00 PM. Extended end of settlement period for the Federal Communications Commission's (FCC) Auction 85, regarding LPTV and TV Translator Digital Companion Channels. See, Public Notice [PDF] of extension of settlement period, and notice in the Federal Register, August 7, 2008, Vol. 73, No. 153, at Page 46005.

Deadline to file Petitions to Participate and the accompanying $150 filing fee with the Copyright Royalty Judges regarding its proceeding to determine the Phase I distribution of 2004 and 2005 royalties collected under the cable statutory license. See, notice in the Federal Register, July 15, 2008, Vol. 73, No. 136, at Pages 40623-40624.

Deadline to file a Petition to Participate and the accompanying $150 filing fee with the Copyright Royalty Judges in connection with its proceeding to determine the Phase I distribution of 2004 and 2005 royalties collected under the cable statutory license. See, notice in the Federal Register, July 15, 2008, Vol. 73, No. 136, at Pages 40623-40624.

Deadline to submit comments to the National Institute of Standards and Technology's (NIST) Computer Security Division (CSD) regarding its SP 800-41 Rev. 1 [43 pages in PDF] titled "Guidelines on Firewalls and Firewall Policy".

EXTENDED TO AUGUST 28. Deadline to submit initial comments to the Copyright Office in response to its notice of proposed rulemaking regarding the scope and application of the Section 115 compulsory license to make and distribute phonorecords of a musical work by means of digital phonorecord deliveries. See, original notice in the Federal Register, July 16, 2008, Vol. 73, No. 137, at Pages 40802-40813.

Deadline to submit comments to the Bureau of Industry and Security (BIS) in response to its Notice of Inquiry (NOI) regarding recommendations made by the Deemed Export Advisory Committee (DEAC) with respect to BIS's deemed export licensing policy. The BIS seeks comments on, among other things, whether the scope of technologies on the Commerce Control List (CCL) that are subject to deemed export licensing requirements should be narrowed, and if so, which technologies should be subject to deemed export licensing requirements. See, notice in the Federal Register, May 19, 2008, Vol. 73, No. 97, at Pages 28795-28797.

Deadline to submit comments to the Federal Bureau of Investigation (FBI) in response to it notice of proposed rulemaking (NPRM) regarding fees for providing fingerprint based and name based Criminal History Record Information (CHRI) checks and other identification services for noncriminal justice purposes including employment and licensing. See, notice in the Federal Register, June 19, 2008, Vol. 73, No. 119, at Pages 34905-34913.

Deadline to submit comments to the U.S. Patent and Trademark Office (USPTO) in response to its notice of proposed rulemaking (NPRM) regarding revisions to its rules of practice to adjust the transmittal and search fees for international applications filed under the Patent Cooperation Treaty (PCT). See, notice in the Federal Register, June 18, 2008, Vol. 73, No. 118, at Pages 34672-34676.

Deadline to submit comments to the Department of Justice's (DOJ) Civil Rights Division (CRD) in response to its notice of proposed rulemaking (NPRM) regarding accessibility standards under the Americans with Disabilities Act of 1990. One topic addressed by this NPRM is regulation of state and local government agencies' communications with individuals with disabilities with the assistance of broadband video interpreting services (VIS). VIS allows an individual who is deaf or hard of hearing to view and sign to a video interpreter, who is at another location, who can see and sign to the individual through a camera. See, notice in the Federal Register, June 17, 2008, Vol. 73, No. 117, at Pages 34465-34508.

CANCELLED. 1:00 - 5:00 PM. The Department of Health and Human Services' (DHHS) American Health Information Community Consumer Empowerment Workgroup will meet. See, notice in the Federal Register, July 29, 2008, Vol. 73, No. 146, at Page 43937. Location: Room 1114, Switzer Building, 330 C St., SW.

8/5. Alison Pepper joined the Interactive Advertising Bureau (IAB) as Director of Public Policy. She was previously Manager for Government Affairs at Experian. Mike Zaneis remains the IAB's VP of Public Policy. See, IAB release.

8/12. The Department of State announced that its Advisory Committee on International Communications and Information Policy (ACICIP) has been re-chartered for an additional two years. See, notice in the Federal Register, August 12, 2008, Vol. 73, No. 156, at Pages 46962-46963.

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