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News Briefs from March 21-25, 2001

3/23. Cisco announced that it has settled the patent litigation brought against it by Visual Interactive Phone Concepts, Inc., the exclusive licensor to HandTrade. Cisco entered into a non-exclusive licensing agreement as part of the settlement. Cisco also stated that the licensed patents cover systems for conducting transactions using video-enabled wired and wireless phones, and that all claims against Cisco have been dismissed. See, Cisco release.
3/23. U.S. District Court (SDFl) entered final judgments imposing permanent injunctive and other relief against all defendants in the civil action SEC v. Gateway Technologies, Cheyenne Holding Corp., Randolph Ross and Timothy Kavanaghin. The defendants violated § 17(a) of the Securities Act of 1933 and § 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, by offering and selling investments in Gateway -- a company purportedly building an internet telephone system -- by way of false, misleading and incomplete information. Also, defendants Cheyenne, Ross and Kavanagh violated § 15(a) of the Exchange Act by acting as unregistered brokers. See, SEC release.
3/23. A Jillann Reeves was charged by criminal complaint in the U.S. District Court (WDWash) with criminal copyright infringement, in violation of 18 U.S.C. § 2319 and 17 U.S.C. § 506(a)(1). Defendant copied of over 2,000 Sony PlayStation, Gameboy, and Nintendo games, and over 140 movies, and sold them over the Internet. See, release.
3/23. A Florence Foster filed a complaint [PDF] in U.S. District Court (MDFl) against Pinnacle Holdings and three of its officers and directors alleging violation of federal securities laws. Plaintiff, who is represented by the law firm of Milberg Weiss, and others, seeks class action status. Count I alleges violation of § 10b of the Exchange Act, and Rule 10b-5 thereunder, by all defendants. Count II alleges violation of § 20(a) of the Exchange Act by the individual defendants (controlling person liability). Pinnacle Towers, of Sarasota, Florida, is a provider of tower and rooftop antenna site space for wireless communications. Milberg Weiss is a law firm that specializes in bringing class action securities suits against technology companies when their stock prices drop.
3/23. The Teachers' Retirement System of Louisiana filed a complaint in U.S. District Court (SDCal) against Gateway and one of its former officers alleging violation of federal securities laws. Plaintiff, which is represented by the law firm of Berstein Litowitz, seeks class action status. Gateway is a leading producer of desktop PCs, laptops, network servers, and peripherals.
3/23. The FBI's NIPC issued an advisory in which it stated that it has "received reports of an Internet worm named 'Lion' that is infecting computers and installing distributed denial of service (DDOS) tools on various computer systems. Illegal activity of this nature typically is designed to create large networks of hosts capable of launching coordinated packet flooding denial of service attacks." The NIPC issues three levels of warnings: assessments, advisories, and alerts. Advisories are of the middle level of importance.
3/23. The FBI's NIPC issued an advisory regarding the warnings issued by Microsoft and VeriSign about the theft of two VeriSign Class 3 Software Publisher digital certificates. The certificates are dated January 29 and 30, 2001. The NIPC stated that "this incident poses a significant security threat because an unauthorized user of these certificates could misrepresent malicious software as an authentic Microsoft product. These include, for example, programs, updates, patches, macros, and other downloads available over the Internet. The NIPC is advising all Internet users to manually approve all certificates until a patch is available and installed, which is currently under development by Microsoft." See also, VeriSign Alert and Microsoft Security Bulletin.
3/22. The Senate Banking Committee amended and approved S 149, the Export Administration Act of 2001, a bill which eases restraints on the export of most dual use products, such as computers and software. The mark-up was originally scheduled for March 15, but was delayed to allow the Bush administration more time to review it. Committee Chairman Phil Gramm (R-TX) offered a manager's amendment which incorporates changes requested by the administration. National Security Advisor Condoleezza Rice submitted a letter in which she stated that if the changes contained in the manager's amendment are adopted, then "the Administration will support the bill." See also, committee release.
The Export Administration Act expired in 1990. Since, then, the administration has used a series of temporary emergency powers to continue its export control regime. The current extension expires on August 20. Sen. Gramm stated at the hearing that the bill "is based on a belief that we want the United States to be the leader in high-tech development and employment while, at the same time, we protect the technologies that could be used to harm us or our allies." He added that it will "build a higher fence around a smaller number of things."
Sen. Gramm offered an amendment on behalf of Sen. Bob Bennett (R-UT), who was not present, that repeals  provisions of the 1998 National Defense Authorization Act which require the president to use MTOPS to set restrictions on the export of high performance computers. On March 21 Sen. Bennett and Sen. Harry Reid (D-NV) introduced this proposal as a stand alone bill, S 591. See, Bennett release.
Sen. Mike Enzi (R-WY), sponsor of the bill, offered an amendment regarding the sunset provision of the bill, by allowing the President to extend it. Under the amendment, the authority under the Act will terminate on Sept. 30, 2004, unless the President provides to Congress a detailed report on both the Act and the operation of export controls, and provides to Congress either a "legislative reform proposals" or certification "that no legislative reforms are necessary."
Sen. Jim Bunning (R-KY) stated that he may offer an amendment on the Senate floor to raise penalties for violation of the Act.
All amendments were passed by voice vote without opposition. The vote on the bill, as amended, was 19 to 1. Sen. Richard Shelby (R-AL), the sole dissenter, stated that "we need to make sure that there is a balance here, and that the Defense Department is at the table." He also wants a "blue ribbon commission" to study the issue.
3/22. The House Judiciary Committee's Subcommittee on Courts, Internet, and Intellectual Property held an oversight hearing titled ICANN, NEW gTLDS, and the Protection of Intellectual Property. Subcommittee Chairman Howard Coble (R-NC) said in his opening statement that "the assignment of domain names is done through a privately administered system which produces registrations that result in a global presence, accessible from anywhere in the world. In contrast, intellectual property rights are publicly administered on a territorial basis and are exercisable only within that territory. That is the crux of the problem before us." See, prepared testimony of Elana Broitman, Steven Metalitz, Jeffrey Neuman, and Louis Touton.
3/22. The House Commerce Committee's Subcommittee on Health held a hearing titled Assessing HIPAA: How Federal Medical Record Privacy Regulations Can Be Improved. See, testimony of witnesses: John Melski (Marshfield Clinic), John Clough (Cleveland Clinic Foundation), Bob Heird (Anthem BlueCross BlueShield), Carlos R. Ortiz (CVS Pharmacy), Janlori Goldman (Georgetown University), Paul Appelbaum (Univ. Mass. Med. School), Mary E. Foley (American Nurses Assoc.). See also, statement by Rep. Billy Tauzin (R-LA).
3/22. The House Government Reform Committee's Technology and Procurement Subcommittee held a hearing titled "Toward a Telework Friendly Government Workplace: Successes and Impediments in Managing Federal Telework Policies."
3/22. Rep. Nathan Deal (R-GA) introduced HR 1171, the Universal Service Support Act, a bill to repeal caps on high-cost universal service support. The bill would amend Section 254 of the Communications Act of 1934 by adding a new subsection that would render the FCC's regulations setting caps and limitations on universal service ineffective. Sen. Conrad Burns (R-MT) introduced a companion bill in the Senate, S 500, on March 8. See also, Burns release of Mar. 9.
3/22. Rep. Tammy Baldwin (D-WI) introduced HR 1160, a bill to terminate operation of the Extremely Low Frequency Communication System of the Navy. The bill was referred to the Armed Services Committee.
3/22. Rep. Ken Lucas (D-KY) introduced HR 1188, a bill to encourage the use of technology in the classroom. The bill was referred to the Education and Workforce Committee and the Ways and Means Committee.
3/22. The Pennsylvania Public Utility Commission (PUC), by a 5 to 0 vote, adopted a plan for the "functional structural separation" of Verizon Pennsylvania into wholesale and retail units. See, Joint Motion by Chairman Quain and Vice-Chairman Bloom [PDF]. The PUC stated that "Verizon would continue to operate as one company but the wholesale and retail divisions would be required to operate at arms-length pursuant to a code of conduct." See, PUC release [PDF]. This is less than the requirement of forming a separate affiliate, for which AT&T had lobbied. Verizon, which waged a massive PR and lobbying campaign, declared victory. "The commission recognized that dividing Verizon Pennsylvania into two separate entities -- one to sell wholesale services and one to sell retail services -- is unwarranted," said Daniel Whelan, P/CEO of Verizon Pennsylvania. See, Verizon release. Meanwhile, AT&T stated that "it is disappointed that the PUC did not require full structural separation of Verizon Pennsylvania, but heartened by the Commission's recognition of Verizon's past abuses and resolve to bring vibrant competition to the state’s local phone market." See, AT&T release. The PUC was also disturbed by Verizon's campaigning. Said Commissioner Quain, "there exists a very public prima facie case that Verizon has pursued an extensive, systematic campaign of misinformation in connection with the structural separation case." See, Quain statement [PDF]. See also, statement [PDF] by Commissioner Brownell and statement [PDF] by Commissioner Fitzpatrick. See also, CompTel response and USTA response.
3/22. BellSouth responded to the petition filed by AT&T on March 21 with the Florida Public Service Commission seeking structural separation of BellSouth into separate retail and wholesale operations. Joseph Lacher, President of BellSouth Florida, said, "It is time, if not long past time, for AT&T to stop complaining and start competing." See, BellSouth release. See also, AT&T release.
3/22. The NTIA submitted its report to Congress on Sections 109 and 117 of the Copyright Act, as required by § 104 of the Digital Millennium Copyright Act. § 109, which contains what is known as the "first sale doctrine," permits the owner of a copy or phonorecord to sell or otherwise dispose of possession of that copy or phonorecord without the authority of the copyright owner, notwithstanding the copyright owner's exclusive right of distribution. § 117 permits the owner of a copy of a computer program to make a copy or adaptation of the program for archival purposes or as an essential step in the utilization of the program in conjunction with a machine. The report reviews the comments received by the NTIA in response to its June 5, 2000, request for public comment, and testimony heard at its November 29, 2000 hearing.
3/22. The USPTO published a notice in the Federal Register regarding amending its rules of practice relating to applications filed under the Patent Cooperation Treaty. See, Federal Register, March 22, 2001, Vol., No. 56, at Pages 16004 - 16007.
3/22. FTC Chairman Robert Pitofsky stated that "I plan to step down from the Commission promptly after a new chairman is confirmed by the full Senate. I am willing to stay on as Chairman until that time to make sure the FTC enjoys a smooth transition. However, I anticipate that the new Chairman should be in place by June 1 at the latest." See, release. Pitofsky's term does not expire until September. President Bush will nominate George Mason University law professor Timothy Muris to be the next FTC Chairman.
3/22. The FTC announced that it will hold another workshop on competition issues that arise in connection with business to business (B2B) and business to consumer (B2C) e-commerce. The workshop will be held on May 7 and 8 in Washington DC. See, release.
3/22. Sen. Pat Roberts (R-KS) introduced the Permanent Trade Promotion Authority and Market Access Act of 2001, a bill to give the President fast track trade negotiating authority. "It is imperative that Congress gives the Executive Branch every tool possible to aggressively pursue new trade agreements," said Sen. Roberts. See, Roberts release. Also, Sen. Charles Grassley (R-IA), Chairman of the Senate Finance Committee, stated that "the President's lack of trade negotiating authority harms the vital national interests of the United States, because it undermines our credibility at the negotiating table." See, Grassley release.
3/22. Rep. Michael Simpson (R-ID) introduced HR 1203, the Ninth Circuit Court of Appeals Reorganization Act of 2001. This bill would split the U.S. Court of Appeals, Ninth Circuit, into two circuits. It would create a new 12th Circuit comprised of the states of Washington, Oregon, Alaska, Idaho, Montana, and Hawaii. The 9th Circuit would be left with the states of California, Arizona, and Nevada. This is the companion bill to S 346, which was introduced by Sen. Frank Murkowski (R-AK) on February 15, 2001.
3/22. The USTR announced that the U.S. and Greece resolved their World Trade Organization dispute over television piracy. This case concerned the Greek government's failure to enforce its intellectual property laws effectively against television stations that broadcast U.S. copyrighted works without authorization. See, release.
3/22. The California Court of Appeal issued its opinion [PDF] in Advanced Bionics Corp. v. Medtronics Inc., a case regarding a covenant not to compete in an employment contract. Order affirmed; petition for writ of mandate denied.
3/22. The U.S. Court of Appeals (DC Cir) heard oral argument in Coalition for Noncommercial Media v. FCC, Appeal No. 00-1253. This is a petition for review of an FCC order approving a license transfer associated with the sale of WNEQ-TV by the Western New York Public Broadcasting Association (WNYPBA) to LIN Television Corp.
3/22. The Pennsylvania Public Utility Commission (PPUC) is scheduled to vote on a plan to break Verizon into a wholesale and a retail unit. On Sept. 30, 1999, the PPUC issued an Opinion and Order directing Verizon to submit a plan to create a separate affiliate to supply retail telecommunications services. It stated that this would "jump-start competition in the local telecommunications markets. It will increase the number of local telephone companies consumers can choose from and boost investment in high-tech data and voice networks." On April 27, 2000, the PPUC issued an Order instituting the current Structural Separation proceeding. On January 26, 2001, the Recommended Decision of Administrative Law Judge Weismandel was issued. See, agenda.
3/21. AT&T filed a petition with the Florida Public Service Commission seeking structural separation of BellSouth into separate retail and wholesale operations. See, AT&T release.
3/21. President Bush will nominate Timothy Muris to be Chairman of the Federal Trade Commission. Timothy Muris is currently a professor at George Mason University School of Law. He held several top positions at the FTC during the Reagan administration, including Director of the Bureau of Competition, Director of the Bureau of Consumer Protection, and Assistant to the Director of the Office of Policy, Planning & Evaluation. He was also Deputy Counsel to President Reagan’s Task Force on Regulatory Relief and Executive Associate Director of the Office of Management & Budget. He has written widely about antitrust, consumer protection, franchising, and budget law and policy. The term of the current Chairman, Robert Pitofsky, ends in September, but he may step down earlier. The FTC is one of three federal agencies exercising antitrust merger review authority over transactions involving technology companies. The FTC has also been increasingly active on online privacy issues.
3/21. The House passed by voice vote HR 496, the Independent Telecommunications Consumer Enhancement Act of 2001, sponsored by Rep. Barbara Cubin (R-WY). This bill provides regulatory relief to small (less than 2% of subscriber lines) telephone companies. The House Commerce Committee approved this bill on February 28 by unanimous voice vote.
3/21. The House Commerce Committee's Subcommittee on Telecom & the Internet approved a revised version of HR 718, the Unsolicited Commercial Electronic Mail Act of 2001. The bill is sponsored by Rep. Heather Wilson (R-NM) and Rep. Gene Green (D-TX), and has almost 100 cosponsors. The House passed Rep. Wilson's anti-spam bill in the 106th Congress (HR 3113) on July 18, 2000, by a vote of 427 to 1, but it was not acted upon by the Senate. She reintroduced the same bill on Feb. 14. She offered an amendment in the nature of a substitute at the Wednesday morning markup. The amendment, and the bill as amended, both were adopted by unanimous voice votes. However, the bill is still a work in progress, and is likely to be amended further by the full Commerce Committee, by the Judiciary Committee, which also has jurisdiction, and then by the Senate.  See also, statement of Commerce Committee Chairman Billy Tauzin (R-LA) and statement of ranking Democrat John Dingell (D-MI).
Rep. Chris Cox (R-CA) stated at the markup that he opposes the language in the bill which creates a state parens patriae cause of action. He also praised the bill generally, and its rejection of a class action remedy specifically. He argued that a state parens patriae cause of action may create an end run around the ban on class actions. He and Rep. Wilson agreed to work on further language before the full committee markup.
Rep. Bob Goodlatte (R-VA), who is on the Judiciary Committee, wants to strengthen the bill's ban on forging header information in UCE. He has introduced HR 1017, which would also criminalize the selling or distributing of "any computer program that (i) is designed or produced primarily for the purpose of concealing the source or routing information ... (ii) has only limited commercially significant purpose or use other than to conceal such source or routing information; or (iii) is marketed by the violator or another person acting in concert with the violator and with the violator's knowledge for use in concealing the source or routing information of such messages".
HR 718, as amended on March 21, would:
 • criminalize the sending of any unsolicited commercial e-mail with knowledge that any domain name, header information, or data or time stamp is false or inaccurate.
 • prohibit sending commercial e-mail without a valid e-mail address to which the recipient may send an opt out reply.
 • prohibit continuing to send commercial e-mail after a recipient has opted out of receiving further e-mail from that sender.
 • prohibit sending unsolicited commercial e-mail without identifying it as such, providing notice of opt out opportunity, and providing a physical address.
 • prohibit sending unsolicited commercial e-mail in violation of an ISP's policy, if such policy is clear and posted.
 • create immunity from state and federal civil and criminal liability for ISPs that block e-mail.
 • create civil remedies for ISPs, the FTC, e-mail recipients, and states.
3/21. Sen. Chris Dodd (D-CT) introduced S 586, a bill to authorize negotiation for the accession of Chile to the North American Free Trade Agreement, to provide for fast track consideration, and for other purposes; to the Committee on Finance.
3/21. Sen. Bob Smith (R-NH) introduced S 589, a bill to make permanent the moratorium on Internet taxes. It was referred to the Senate Commerce Committee.
3/21. Rep. Michael Honda (D-CA) and Rep. Steve Horn (R-CA) introduced HR 1149, a bill to amend the Domestic Volunteer Service Act of 1973 to create as a component of the Volunteers in Service to America program a technology corps that uses VISTA volunteers and other persons to facilitate the use of information technology in schools, libraries, and community centers.
3/21. FEC Commissioner Bradley Smith spoke at the Cato Institute about his book, Unfree Speech: The Folly of Campaign Finance Reform. However, he did not address any issues pertaining to FEC regulation of political activity on the Internet.
3/21. The NTIA submitted comments to the FCC in its rule making proceeding on software defined radio (SDR).
3/21. The U.S. Court of Appeals (3rdCir) issued its opinion in In Re Cendant, a case regarding attorneys fees awards in securities class action suits.
3/21. President Bush announced his intent to nominate Peter Allgeier to be a Deputy USTR. He is currently the Senior Director for International Economic Affairs at the National Economic Council; prior to that, he worked at the USTR. President Bush also announced his intent to nominate Linnet Deily to be a Deputy USTR. She presently works for the Charles Schwab Corporation. See, release.
3/21. Sen. Chris Dodd (D-CT) introduced S 586, the Chile Fast Track Act of 2001, a bill to authorize negotiation for the accession of Chile to the North American Free Trade Agreement, and to provide for fast track consideration. It has been referred to the Senate Finance Committee. On January 22 Sen. Phil Gramm (R-TX) introduced S 136, the Fast Track Trade Negotiating Authority Act. On March 22 Sen. Pat Roberts (R-KS) introduced S 599, the Permanent Trade Promotion Authority and Market Access Act of 2001.
3/21. The U.S. Court of Appeals (FedCir) issued its opinion in Kroll v. Finnerty, an attorney misconduct case that concerns the scope of federal patent jurisdiction. Kroll is an attorney licensed to practice in New York State, and is registered to practice as a patent attorney before the USPTO. The New York Grievance Committee initiated disciplinary action against him in response to grievances filed by three of his clients regarding his prosecution of patents on their behalf. Kroll then filed a complaint in U.S. District Court (EDNY) asserting that federal patent law preempts the disciplinary action. The District Court granted summary judgment to Finnerty, counsel for the grievance committee. Kroll appealed. The Court of appeals agreed that there is no preemption, but also found that the complaint was "absolutely devoid of merit." Hence, it vacated the summary judgment, and remanded with instructions to dismiss for lack of jurisdiction.
3/21. John Richardson, deputy head of the EC delegation to the U.S., gave a speech in Brussels titled "Two Issues Determining the Future of Transatlantic Relations," in which he addressed the U.S. replacement legislation for the Foreign Sales Corporation tax regime, passed at the end of the last Congress. The WTO ruled that the previous FSC regime constituted an illegal export subsidy. Richardson stated that "the Congress has changed the law, but in a way which leaves the relative advantage of exports intact, and we have brought another panel against the US. We will win this one too, and Congress will not be pleased."
3/21. The U.S. Attorney (SDNY) unsealed a five count complaint charging Fausto Estrada with theft of trade secrets under the Economic Espionage Act, mail fraud and interstate transportation of stolen property. Estrada, who was also arrested, is charged with stealing confidential documents from the credit card company MasterCard and offering to sell them to Visa. The FBI's Computer Intrusion and Intellectual Property Squad caught Estrada in a sting operation. AUSA Marc Weinstein is in charge of the prosecution. See, DOJ release.

Go to News Briefs from March 16-20, 2001.

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