7/1. The U.S. Court of Appeals (2ndCir) issued its opinion [31 pages in PDF] in Arnold's Wines v. Boyle, a case regarding state regulation of internet and other direct wine sales, and the Commerce Clause and the 21st Amendment to the Constitution.

The Court of Appeals held, in an opinion written by Judge Richard Wesley, that New York's alcoholic beverage regulatory regime, which allows certain direct sales by in state retailers, but bans all direct sales by out of state retailers, does not violate the Commerce Clause. Nor, he wrote, does it run afoul of the Supreme Court's 2005 opinion in Granholm v. Heald, which reversed Judge Wesley's previous opinion affecting internet wine sales.

Granholm was a 5-4 opinion, with Justice David Souter joining the majority. Judge Sonia Sotomayor joined in Wesley's reversed opinion. She is now on track to replace Souter on the Supreme Court.

Introduction. Arnold's Wines operates two retail wine stores in Indianapolis, Indiana. It wants to sell wine directly to customers in the state of New York. But, New York's alcohol sales law prevents this. Retailers are prohibited from making off premises sales. However, there is an exception for in state retailers that have obtained an off premises sales license to deliver goods in their own trucks.

Arnold's and some of its would be customers in New York filed a complaint in the U.S. District Court (SDNY) seeking declaratory and injunctive relief, alleging that New York's legislatively mandated three tier sales system violates the Commerce Clause of the Constitution. The District Court dismissed the complaint. This appeal followed.

Internet wine sales cases are in a class of their own. Court opinions regarding wine sales are pertinent to other areas of e-commerce, but are not determinative. Two things distinguish e-commerce in wine from e-commerce in other goods and services. First, the 21st Amendment of the Constitution gives the states authority to regulate alcohol. Although, the Supreme Court's interpretations of the meaning of this authority have wandered over the years.

The 21st Amendment provides, in part, that "The transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited."

Second, states have an interest in protecting health and safety of children that is relevant to alcohol sales, but not to most other types of sales.

States, including New York, have also persistently regulated alcohol sales to protect in state wineries, retailers and distributors. (It should also be noted that another policy objective of discriminatory state laws is tax collection. It is easier for states to collect taxes from in state retailers.)

The Supreme Court invoked the Dormant Commerce Clause to overturn two protectionist state laws in Granholm v. Heald, which was consolidated with Swedenburg v. Kelly. Granholm involved the state of Michigan, while Swedenburg involved the state of New York.

See, the 6th Circuit's August 28, 2003, opinion in Heald v. Engler, 342 F.3d 517, holding the Michigan statute unconstitutional. See also, the 2nd Circuit's February 12, 2004, opinion in Swedenburg v. Kelly, 358 F.3d 223, upholding the New York statute. And see, story titled titled "2nd Circuit Rules in Internet Wines Sales Case" in TLJ Daily E-Mail Alert No. 840, February 19, 2004.

See also, the Supreme Court's May 16, 2005, opinion in Granholm v. Heald, 544 U.S. 460. And see, story titled "Supreme Court Grants Certiorari in Internet Wine Sales Cases" in TLJ Daily E-Mail Alert No. 905, May 26, 2005, and story titled "Supreme Court Rules in Internet Wine Sales Case" in TLJ Daily E-Mail Alert No. 1,137, May 17, 2005.

Article I, Section 8, of the Constitution provides that "The Congress shall have Power ... to regulate Commerce with foreign Nations, and among the several States ...".

The Dormant Commerce Clause is the judicial concept that the Constitution, by delegating certain authority to the Congress to regulate commerce, thereby bars the states from legislating on certain matters that affect interstate commerce, even in the absence of Congressional legislation. It is applied to block states from regulating in a way that materially burdens or discriminates against interstate commerce.

The Supreme Court's opinion in Granholm was narrow. It merely held that state laws that permit in state wineries directly to ship alcohol to consumers, but restrict the ability of out of state wineries to do so, violate the commerce clause.

Some states have responded by tweaking their statutes so that they no longer expressly ban out of state direct sale while allowing in state direct sales. Nevertheless, states continue to accomplish the same objective -- protection of in state economic interests to the detriment of interests in other states and other countries. And, Courts of Appeals are upholding these post Granholm laws.

In addition to the just released opinion of the 2nd Circuit, see the 7th Circuit's August 7, 2008, opinion [11 pages in PDF] in Patrick Baude v. David Heath and Wine and Spirits Wholesalers of Indiana, App. Ct. Nos. 07-3323 and 07-3338.

In Baude, the Court of Appeals upheld a new Indiana statute that prohibits shipping wine to a customer without a face to face meeting. This has the effect of prohibiting most Indiana residents from purchasing wine over the internet from west coast or foreign wineries. See also, story titled "7th Circuit Rules in Wine Sales Case" in TLJ Daily E-Mail Alert No. 1,811, August 12, 2008.

Baude v. Heath involved an Indiana statute. Arnold's assertions are thus not without irony. Arnold's is in Indiana, which has a long history of discriminating against out of state wine sellers. Yet, Arnold's now complains about New York's discriminatory regulatory regime.

See also, the 7th Circuit's 2000, opinion in Bridenbaugh v. Freeman-Wilson, 227 F.3d 848. In that case, 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 (Bridenbaugh v. O'Bannon, 78 F. Supp.2d 828 (N.D. Ind. 1999)). Then, the 7th Circuit reversed, upholding the constitutionality of the state ban.

Court of Appeals Opinion. In the present case, the Court of Appeals affirmed the District Court's dismissal of the complaint. Arnold's Wines lost.

It wrote that under the Dormant Commerce Clause states may not pass laws that discriminate against out of state economic interests unless those laws advance a legitimate local purpose that cannot be adequately served by reasonable nondiscriminatory alternatives. It added that the 21st Amendment alters Dormant Commerce Clause analysis of state laws governing the importation of alcoholic beverages.

It continued that while the 21st Amendment seemingly gives the states complete control, "state powers under the Twenty-first Amendment are not without limitation; the Amendment does not immunize all regulation of alcoholic beverages from Commerce Clause scrutiny."

It wrote, citing Granholm, that state alcohol laws are only "protected under the Twenty-first Amendment when they treat liquor produced out of state the same as its domestic equivalent."

But what of New York licensing of only in state retailers to make off premises deliveries? The Court of Appeals reasoned that both alcoholic beverages made in state and out of state "may be shipped directly to New York consumers by licensed in-state retailers". It added that the fact that out of state retailers cannot make the same deliveries as in state retailers does not cause the statute to run afoul of Granholm.

That is, New York law "treats in-state and out-of-state liquor evenhandedly under the state's three-tier system, and thus complies with Granholm's nondiscrimination principle."

TLJ Comment. The present opinion and the 7th Circuit's 2008 opinion in Baude v. Heath have similarities. Both cases are post Granholm. Both involve Commerce Clause challenges to state regulation of alcohol sales. Both state regulatory regimes had the effect of discriminating against interstate commerce. (Both also discriminate against foreign commerce in a manner that the European Union asserts violates the U.S.'s World Trade Organization (WTO) obligations. However, the federal courts have no authority to enforce WTO obligations.)

Both opinions seized upon a single aspect of the state regulatory regimes that is not discriminatory to conclude that the regulatory regime as a whole is not discriminatory.

In Baude v. Heath, the state required one face to face meeting between the customer and the seller to establish identity and minimum age. The Court asserted that this is not discriminatory because the requirement applies to all sellers, both in and out of state. However, it is far easier for an Indiana customer to make a visit to a local seller to establish age and identity than it is to travel to California, Europe or Australia for the same purpose. The disparate costs of making this face to face visit lead to the result that far fewer customers will make these visits for the purpose of purchasing from distant sellers. And this results in a discriminatory impact.

In the present case, the state allowed direct sales and deliveries by in state retailers, but not by out of state retailers. The Court asserted that this is not discriminatory because these in state retailers are free to make direct sales of alcoholic beverages made in state and out of state. However, the discrimination against the out of state retailers remains. They cannot participate in the three tier system. Moreover, out of state retailers may carry different product lines than in state retailers, particularly out of state products, thereby expanding consumer choice.

It should also be noted that Judge Wesley is a product of the New York political system. He previously worked as a New York legislative aide, and then legislator, before being elected a state judge. His opinions may be colored by his continuing political loyalties.

These cases suggest that state legislatures, and some reviewing Courts of Appeals, despite the Granholm opinion, continue to give slight regard to both the Commerce Clause and principles of free trade. This bodes ill for the future on e-commerce.

Judges and Vote Counting. Judge Wesley wrote the just released opinion. He also wrote the 2004 opinion that was reversed by the Supreme Court in Granholm v. Heald.

Granholm was a 5-4 opinion. Justice Kennedy wrote the opinion for the majority. One of the Justices who joined in the majority was Souter. Souter has retired. His likely replacement is Sotomayor.

She was a member of the 2004 three judge panel of the 2nd Circuit in Swedenburg v. Kelly. She joined with Wesley in voting to uphold New York's discriminatory regulatory regime.

In the next term, there may no longer be five votes on the Supreme Court for striking down, under the Commerce Clause, state regulatory regimes that discriminate against internet wine sales.

Of course, two other Justices have also departed since 2005 -- Rehnquist and O'Connor. Both were in the minority in Granholm v. Heald. Their replacements, Roberts and Alito, have not yet had the occasion to opine on internet wine sales.

This case is Arnold's Wines, Inc., et al. v. Boyle, et al., U.S. Court of Appeals for the 2nd Circuit, App. Ct. No. 07-4781-cv, an appeal from the U.S. District Court for the Southern District of New York. Judge Wesley wrote the opinion of the Court of Appeals, in which Judges Walker and Calabresi joined. Judge Calabresi also wrote a long concurring opinion.

7/2. The Office of the U.S. Trade Representative (OUSTR) published a notice in the Federal Register that announces that it "has determined not to initiate an investigation under section 301 of the Trade Act of 1974 with respect to a petition alleging that the Government of Israel has breached obligations under the WTO Agreement to protect intellectual property rights (IPR)".

The Institute for Research: Middle Eastern Policy (IRMEP) filed this petition on May 13, 2009. The IRMEP is neither an IP rights holder injured by Israel's violations of the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement, nor an advocacy group that represents IP rights holders.

Section 301 is the statutory means by which the US asserts its international trade rights, including its rights under WTO Agreements. In particular, under the "Special 301" provisions of the Trade Act of 1974, the OUSTR identifies trading partners that deny adequate and effective protection of intellectual property or deny fair and equitable market access to U.S. artists and industries that rely upon intellectual property protection. The Special 301 provisions are codified at 19 U.S.C. § 2411 et seq.

The OUSTR wrote that the IRMEP lacks standing because it has not alleged a "significant interest".

It also wrote that "to the extent the petition does describe any TRIPS Agreement issues, those issues would be addressed more effectively through the established Special 301 process and the on-going Out-of-Cycle Review of Israel's IPR protection".

Finally, the OUSTR wrote that the petition requests the immediate suspension of the US-Israel FTA, and this is not a remedy provided for by the Section 301 statute.

See, Federal Register, July 2, 2009, Vol. 74, No. 126, at Page 31789.

6/26. The Office of the U.S. Attorney (OUSA) for the Eastern District of Michigan announced in a release that "Monica Conyers, 44, of Detroit, pleaded guilty today to one count of conspiracy to commit bribery". Monica Conyers is the wife of Rep. John Conyers (D-MI), the Chairman of the House Judiciary Committee (HJC). The OUSA release elaborates that Monica Conyers "admitted to misusing her office of Detroit City Council President pro tem, and her position as a trustee of the City of Detroit General Retirement System pension, for personal gain. Specifically, according to the records, Ms. Conyers and an aide received payments from persons who sought contracts, money and/or favorable treatment from the City Council or the pension fund."

6/25. President Obama nominated Charlene Honeywell to be a Judge of the U.S. District Court for the Middle District of Florida. See, White House news office release and release.

6/25. President Obama nominated Jeffrey Viken to be a Judge of the U.S. District Judge for the District of South Dakota. See, White House news office release and release.

6/25. The Senate Judiciary Committee (SJC) approved the nomination of Todd Jones to be the U.S. States Attorney for the District of Minnesota for the term of four years. See, Congressional Record, June 25, 2009, at Page S7069.

6/25. The Senate Judiciary Committee (SJC) approved the nomination of John Kacavas to be the U.S. Attorney for the District of New Hampshire for the term of four years. See, Congressional Record, June 25, 2009, at Page S7069.

Federal Holiday. See, OPM list of holidays.

Independence Day.

The House will not meet. See, Rep. Hoyer's schedule for the week of July 6.

The Senate will meet at 2:00 PM. It will resume consideration of HR 2918 [LOC | WW], an untitled bill to make appropriations for the legislative branch for FY 2010.

10:00 AM. The U.S. Court of Appeals (FedCir) will consider on the briefs Orenshteyn v. Citrix Systems, App. Ct. No. 2003-1427. Location: Courtroom 201.

Deadline to submit reply comments to the Federal Communications Commission (FCC) regarding the March 12, 2009, petition filed by Denali Spectrum License Sub, LLC asking the FCC to forbear from applying the unjust enrichment provisions of the FCC's competitive bidding rules. See, notice in the Federal Register, June 9, 2009, Vol. 74, No.109, at Pages 27318-27319.

Deadline to submit initial comments to the Federal Communications Commission (FCC) in response to its public notice regarding technical specifications for FM digital audio broadcasting (DAB). This public notice is DA 09-1127 in MM Docket No. 99-325. See, notice in the Federal Register, June 12, 2009, Vol. 74, No. 112, at Pages 27985-27988.

The House will return from its Independence Day District Work Period. It will meet at 2:00 PM for legislative business. It will consider numerous non-technology related items under suspension of the rules. Votes will be postponed until 6:30 PM. See, Rep. Hoyer's schedule for the week of July 6.

8:30 AM - 3:00 PM. The National Institute of Standards and Technology's (NIST) Technology Innovation Program Advisory Board will meet. See, notice in the Federal Register, June 23, 2009, Vol. 74, No. 119, at Pages 29675-29676. Location: NIST, Administration Building, Employees' Lounge, Gaithersburg, MD.

2:30 PM. The Senate Judiciary Committee's (SJC) Subcommittee on Antitrust will hold a hearing titled "The Bowl Championship Series: Is it Fair and In Compliance with Antitrust Law?". See, notice. Location: Room 226, Dirksen Building.

3:00 PM. Extended deadline to submit grant applications to the National Institute of Standards and Technology (NIST) for funding under its Technology Innovation Program (TIP). The TIP is offering grants for research and development of, among other things, civil infrastructure sensing technologies. See, original notice in the Federal Register, March 31, 2009, Vol. 74, No. 60, at Pages 14524-14531, amendment notice in the Federal Register, May 19, 2009, Vol. 74, No. 95, at Page 23396, and extension notice in the Federal Register, July 2, 2009, Vol. 74, No. 126, at Pages 31709-31710.

TIME? The Department of State's (DOS) International Telecommunication Advisory Committee (ITAC) will meet to discuss the International Telecommunication Union's (ITU) Regional Preparatory Meeting for the World Telecommunication Development Conference on August 13-25, 2009 in Lima, Peru. See, notice in the Federal Register, June 22, 2009, Vol. 74, No. 118, at Pages 29529-29530. Location: AT&T, 10th floor, 1120 20th St., NW.

Effective date of the Federal Communications Commission's (FCC) final rule regarding the reconfigured 800 MHz band plan established for the U.S.-Canada border contained in the Fourth Memorandum Opinion and Order released on February 25, 2009. This 4thMO&O is DA 09-442 in WT Docket No. 02-55. See, notice in the Federal Register, May 5, 2009, Vol. 74, No. 85, at Pages 20602-20605.

The House will meet at 10:00 AM for legislative business. The schedule for the week includes consideration of HR 2965 [LOC | WW], the "Enhancing Small Business Research and Innovation Act of 2009". See, Rep. Hoyer's schedule for the week of July 6.

9:30 AM. There will be an event to release a report titled "PointSmart ClickSafe. Task Force Best Practice Recommendations for Child Online Safety". The report is the product of a coalition of companies and groups, including AOL, Comcast, Cox, Google, Symantec, Yahoo, Verizon, Common Sense Media, Internet Keep Safe Coalition, PTA, Family Online Safety Institute, and Children's Partnership. Location: Room HC-6, Capitol Building.

9:30 AM - 12:30 PM. The National Archives and Records Administration's (NARA) Information Security Oversight Office's (ISOO) Public Interest Declassification Board (PIDB) will meet. See, notice in the Federal Register, June 23, 2009, Vol. 74, No. 119, at Pages 29729-29730. Location: NARA, Room 105, 700 Pennsylvania Ave., NW.

10:00 AM. The House Commerce Committee's (HCC) Subcommittee on Commerce, Trade and Consumer Protection will hold a hearing titled "The Proposed Consumer Financial Protection Agency: Implications For Consumers And The FTC". Location: Room 2123, Rayburn Building.

10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in Sky Technologies v. SAP, App. Ct. No. 2008-1606. Location: Courtroom 201.

2:00 PM. The Senate Commerce Committee (SCC) will meet to mark up several bills, including S 649 [LOC | WW], the "Radio Spectrum Inventory Act". See, notice. Location: Room 253, Russell Building.

Deadline to submit reply comments to the Federal Communications Commission (FCC) in response to its Notice of Inquiry [59 pages in PDF] regarding the drafting of a "national broadband plan", as required by Section 6001(k) of HR 1 [LOC | WW], the huge spending bill passed by the Congress in February. See also, "Broadband Plan Statute: Public Law No. 111-5, § 6001(k)" and stories titled "FCC Releases NOI on Broadband Plan" and "Additional Questions Asked by FCC's Broadband Plan Notice of Inquiry" in TLJ Daily E-Mail Alert No. 1,924, April 11, 2009. This NOI is FCC 09-31 in Docket No. GN 09-51.

Deadline to submit comments to the Internet Corporation for Assigned Names and Numbers (ICANN) regarding its document [PDF] titled "Proposals for the Systematization of ICANN’s Organizational Review Processes".

The House will meet at 10:00 AM for legislative business. The schedule for the week includes consideration of HR 2965 [LOC | WW], the "Enhancing Small Business Research and Innovation Act of 2009". See, Rep. Hoyer's schedule for the week of July 6.

RESCHEDULED FROM JUNE 18. 10:00 AM. The House Foreign Affairs Committee's (HFAC) Subcommittee on Terrorism, Nonproliferation and Trade will hold a hearing titled "The Export Administration Act: A Review of Outstanding Policy Considerations". See, notice. Location: Room 2172, Rayburn Building.

10:00 AM. The House Judiciary Committee's (HJC) Subcommittee on Courts and Competition Policy will hold a hearing titled "Trends Affecting Minority Broadcast Ownership". See, notice. Location: Room 2141, Rayburn Building.

10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in Resqnet.com v. Lansa, App. Ct. No. 2008-1365. Location: Courtroom 201.

10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in L-3 Communications v. US, App. Ct. No. 2008-5111. Location: Courtroom 201.

12:00 NOON. The National Economists Club (NEC) will host a lunch titled "Green Jobs and Patent Protection: The Clean Technologist Case for Consistent Policymaking". The speaker will be Robert Shapiro (ecoIDEA Institute). To make reservations, contact 703-493-8824 or info at national-economists dot org. Location: Chinatown Garden Restaurant, 2nd floor, 618 H St., NW.

Deadline to submit comments to the National Institute of Standards and Technology (NIST) regarding its "Release 1.0 of the Smart Grid Interoperability Standards Framework". See, notice in the Federal Register: June 9, 2009, Vol. 74, No. 109, at Pages 27288-27289.

The House may meet at 9:00 AM for legislative business. See, Rep. Hoyer's schedule for the week of July 6.

10:00 AM. The Senate Finance Committee (SFC) will hold a hearing on the nomination of William Wilkins to be Chief Counsel of the Internal Revenue Service (IRS). See, notice. Location: Room 215, Dirksen Building.

12:00 NOON - 2:00 PM. The Progress & Freedom Foundation (PFF) will host an event titled "Regulating Online Advertising: What Will it Mean for Consumers, Culture & Journalism?". The speakers will be Howard Beales (George Washington University), Thomas Lenard (Technology Policy Institute), Jules Polonetsky (Director of the Future of Privacy Forum), Mark Adams (PFF), and Berin Szoka (PFF). See, notice. Location: Room 208, Capitol Visitor Center.

7/2. The U.S. Court of Appeals (9thCir) issued its opinion [14 pages in PDF] in Marlyn Neutraceuticals v. Mucos Pharma, a case regarding product recalls in trademark infringement litigation. The Court of Appeals held that "a district court must find a substantial risk of danger to the public or other special circumstances in order to enter an interlocutory order recalling a product in a trademark infringement case". This case is Marlyn Neutraceuticals, Inc. v. Mucos Pharma GMBH & Co., U.S. Court of Appeals for the 9th Circuit, App. Ct. No. 08-15101, an appeal from the U.S. District Court for the District of Arizona, D.C. No. CV-07-00012-ROS, Judge Roslyn Silver presiding. Judge Sidney Thomas wrote the opinion of the Court of Appeals, in which Judge Clifford Wallace and Susan Graber joined.

7/2. The National Telecommunications and Information Administration (NTIA) published a notice in the Federal Register that announces, recites, and sets the effective date (July 2, 2009) for, amendments to its Manual of Regulations and Procedures for Federal Radio Frequency Management. See, Federal Register, July 2, 2009, Vol. 74, No. 126, at Page 31638-31639.

6/30. The U.S. Court of Appeals (2ndCir) issued an amended opinion [17 pages in PDF] in Zino Davidoff v. CVS, a trademark case involving unique product codes (UPCs). See, story titled "2nd Circuit Holds Removal of Unique Product Codes From Noncounterfeit Products Can Constitute Trademark Infringement" in TLJ Daily E-Mail Alert No. 1,959, June 22, 2009.

6/29. The U.S. Patent and Trademark Office (USPTO) announced in a release that the USPTO and the National Board of Patents and Registration of Finland (NBPR) "agreed to partner in establishing a Patent Prosecution Highway (PPH) pilot program. PPH agreements are cooperative initiatives that streamline the patent system and promote expeditious, inexpensive and high-quality patent protection throughout the world. The U.S.-Finnish PPH is USPTO's tenth such agreement with other nations' patent and trademark offices. The pilot period will begin on July 6, 2009, and continue for a period of one year."

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