News Briefs from July 1-5, 2001

Bush Picks Mueller for FBI Director
7/5. President Bush nominated Robert Mueller to be Director of the FBI. He was acting Deputy Attorney General for the Department of Justice from January through May of 2001. Before that he was the U.S. Attorney for the Northern District of California, which includes the Silicon Valley / San Francisco area. Prior to that he was Chief of the Homicide Section of the U.S. Attorney's Office for the District of Colombia. He was also the Assistant Attorney General in charge of the Criminal Division during the administration of the elder President Bush. See also, statement by President Bush and statement by Attorney General John Ashcroft.
Members of Congress were quick to criticize the FBI, but not Mueller. Sen. Pat Leahy (D-VT), the Chairman of the Senate Judiciary Committee, stated in a release that "The new FBI director will inherit an agency with superb resources and capabilities, but it is also an agency beleaguered by a series of high-profile mistakes and by a culture that too often does not recognize and correct its errors. It will be the committee's job to determine if Mr. Mueller is the right person for the job." The Committee has jurisdiction over this nomination. Also, Sen. Charles Grassley (R-IA), another member of the Senate Judiciary Committee, stated in a release that he will meet with Mueller on Monday, July 9. He stated that "I look forward to sitting down with Mr. Mueller and talking about the systemic problems I've identified with the FBI and the kinds of dramatic reforms that must be made in order to restore public confidence in federal law enforcement". Rep. Bob Barr (R-GA), a member of the House Judiciary Committee, stated in a release that "The FBI is an agency, that in recent years, has grown too powerful with too little oversight; and as a result, has lost much confidence of the American people."
8th Circuit Rules in Digi International Securities Case
7/5. The U.S. Court of Appeals (8thCir) issued its unpublished opinion [PDF] in In Re Digi International Securities Litigation, a consolidation of securities fraud actions. The numerous plaintiffs' complaints allege violation of  10(b) and 20(a) of the Securities Exchange Act of 1934, and other causes of action. Plaintiffs alleged fraud by Digi International and three of its former officers for artificially and fraudulently inflating Digi's earnings by improperly accounting for Digi's investments in AetherWorks. Defendants moved to dismiss the complaints for failure to plead fraud with particularity pursuant to FRCP 9(b) and the Private Securities Litigation Reform Act (PSLRA), and for failure to state a claim pursuant to FRCP 12(b)(6). The District Court dismissed some claims prior to discovery, and others in a second ruling after discovery. Plaintiffs appealed. The Appeals Court affirmed with little explanation. However, the Appeals Court did comment on the meaning of scienter.
9th Circuit Construes False Claims Act
7/5. The U.S. Court of Appeals (9thCir) issued its opinion [PDF] in Seal 1, federal False Claims Act case. Abraham Gale worked for ten weeks for Packard-Bell NEC (PBNEC) before being fired. He then filed a qui tam action against that company under the False Claims Act (FCA), alleging that it had committed fraud by selling computers to the government as new even though they contained used parts. The government declined to intervene. Gale then learned from government investigators that Zenith may have been involved in the same type of fraud as PBNEC; he then filed a separate FCA action against Zenith. The District Court held that it did not have jurisdiction over Gale's FCA claim against Zenith. The Appeals Court affirmed on the basis that Gale was not the original source of the information against Zenith.
The False Claims Act is a statute designed to give "whistle blowers" an incentive to disclose fraud upon the government. It allows parties who bring qui tam actions, as "relators" on behalf of the government, to share in the recovery. The Appeals Court noted that "The compensation available to relators, however, encourages parasitic lawsuits in which those with no independent knowledge of fraud use information already available to the government to reap rewards for themselves without exposing any previously unknown fraud."
Gowlings and Smith Lyons Merger
7/4. The partners of the Canadian law firm of Gowling Lafleur Henderson and the Toronto based Smith Lyons voted to merge their operations, effective September 1, 2001. See, release.
James Condemns EU Action on GE Honeywell Merger
7/3. The EU announced that it is blocking GE's acquisition of Honeywell. It asserted that antitrust is the basis. See, EU release. U.S. Assistant Attorney General in charge of the Antitrust Division, Charles James, promptly condemned the action as protectionist, rather than antitrust based.
James issued the following statement. "Having conducted an extensive investigation of the GE/Honeywell acquisition, the Antitrust Division reached a firm conclusion that the merger, as modified by the remedies we insisted upon, would have been procompetitive and beneficial to consumers. Our conclusion was based on findings, confirmed by customers worldwide, that the combined firm could offer better products and services at more attractive prices than either firm could offer individually. That, in our view, is the essence of competition. The EU, however, apparently concluded that a more diversified, and thus more competitive, GE could somehow disadvantage other market participants. Consequently, we appear to have reached different results from similar assessments of competitive conditions in the affected markets. Clear and longstanding U.S. antitrust policy holds that the antitrust laws protect competition, not competitors. Today's EU decision reflects a significant point of divergence. For years, U.S. and EU competition authorities have enjoyed close and cooperative relations. In fact, there were extensive consultations in this matter throughout the entire process. This matter points to the continuing need for consultation to move toward greater policy convergence."
USPTO Issues HP Molecular Electronics Patent
7/3. The USPTO issued U.S. Patent No. 6,256,767, which discloses a demultiplexer for a molecular wire crossbar network. This may facilitate molecular based computing. The inventors are Philip Kuekes and Stanley Williams; the assignee is Hewlett Packard (HP).
"We have a strategy to reinvent the integrated circuit with molecular rather than semiconductor components," said Williams in an HP release. "We've received two key patents and have several more pending that we believe will eventually enable computers to be millions of times more efficient than they are today." See also, U.S. Patent No. 6,128,214, issued on October 3, 2000.
7/3. The U.S. Court of Appeals (DCCir) issued its opinion in NPR v. FCC, a petition for review of an FCC order regarding noncommercial educational broadcast licenses. The Appeals Court vacated the FCC's determination that noncommercial educational broadcast applications are subject to auction when the applicant applies to operate on a channel that has not been reserved for noncommercial educational stations.
9th Circuit Reverses Recip Comp Determination
7/3. The U.S. Court of Appeals (9thCir) issued its opinion [PDF] in US West v. Washington, an appeal of a District Court summary judgment affirming a Washington state reciprocal compensation arbitration determination. Washington concluded that AT&T Wireless should be compensated at the lower end-office rate for US West traffic terminating on its network, rather than at the higher tandem rate. US West filed a complaint in U.S. District Court (WDWash) seeking review of the arbitration determination. AT&T counterclaimed. The District Court upheld the arbitration determination. The Appeals Court reversed.
Privacy News
7/3. The ACLU sent a letter to the FTC asking it to investigate Eli Lilly for inadvertently using the "to" line to address an e-mail to hundreds of users of the anti depressant drug Prozac, thereby disclosing the e-mail list to those on the list. See also, ACLU release.
The Senate Commerce Committee, which is now Chaired by Sen. Ernest Hollings (D-SC), has scheduled a hearing on Internet privacy for Wednesday, July 11, at 9:30 AM. See, release.
People and Appointments
7/3. Kevin Martin was sworn in as an FCC Commissioner. His term ends June 30, 2006. His prior experience includes being an associate at the Washington DC law office of Wiley Rein & Fielding, advisor to former Commissioner Harold Furchtgott-Roth, and aide to George W. Bush. See, FCC release.
7/5. Seth Waxman joined the Washington DC office of the law firm of Wilmer Cutler & Pickering as a partner. He was previously Solicitor General of the United States. See, release.
7/3. President Bush announced his intent to nominate Phil Bond to be Under Secretary of Commerce for Technology. This office oversees the National Institute of Standards and Technology and the National Technical Information Service. He is currently director of Hewlett Packard's Federal Public Policy Programs. Bond was Chief of Staff to Rep. Jennifer Dunn (R-WA) from 1993 to 1998. See, White House release and HP release.
7/3. President Bush announced his intent to nominate Clifford Sobel to be Ambassador to the Netherlands. Sobel is Chairman of Net2Phone, a provider of Internet telephony service. See, WH release. He is also a major Republican political contributor.
More News
7/3. The ICANN released its Third Status Report to the Department of Commerce regarding the transfer of responsibility for functions involving the technical management of the Internet from the U.S. Government and its contractors to the private sector.
7/3. The FTC filed a complaint in U.S. District Court (DUtah) against Christopher Enterprises alleging violation of the Federal Trade Commission Act in connection with marketing of unproven herbal health products via the Internet and other media. The parties simultaneously filed a Stipulated Order for Preliminary Injunction. See also, FTC release.
Court Construes ECPA, PPA, 1A & 4A in Computer Seizure Case
7/2. The U.S. Court of Appeals (6thCir) issued its opinion in Guest v. Leis, a civil case against a police department arising out of the seizure of computer equipment used to operate BBSs. The District Court and Appeals Court ruled for the defendant police department on all issues.
Background. Plaintiffs are bulletin board service operators, host computer owners, and users. They filed two complaints in U.S. District Court (SDOhio) against the Hamilton County Sheriff's Department and various individuals. Plaintiffs alleged violation of the Electronic Communications Privacy Act (ECPA), the First and Fourth Amendments, the Privacy Protection Act (PPA), and various state law claims. Defendants temporarily seized computer equipment, pursuant to warrants, that stored images that were illegal as obscenity or child pormagraphy. The District Court granted defendants either qualified immunity or summary judgment on all claims. Plaintiffs appealed.
Appeals Court Holding. The Appeals Court affirmed on all issues. The Appeals Court held that there was no violation of the ECPA because police had a valid warrant before seizing and searching the computers. The Appeals Court also held that there was no illegal prior restraint of speech. It wrote that "Police are permitted to seize evidence of a crime - even expressive materials - if the seizure is pursuant to a valid warrant."
The Appeals Court also affirmed on the PPA claims. The PPA prohibits the government from seizing work product materials that are intended for publication. The Appeals Court held that "The targeted files - obscene images or pirated software - would not qualify as protected work product or documentary material because both definitions exclude 'property designed or intended for use, or which is or has been used as, the means of committing a criminal offense.' "
Rep. Armey Criticizes Tampa Surveillance System
7/2. House Majority Leader Dick Armey (R-TX) issued a statement regarding the city of Tampa's use of surveillance cameras and face recognition software to identify and track individuals. He wrote that "Contact between the police and the community is essential. Placing police officers in a remote control booth to watch the every move of honest citizens isn't going to make us safer. This is a full-scale surveillance system. Do we really want a society where one cannot walk down the street without Big Brother tracking our every move? We gave away our privacy in allowing red light and photo radar cameras to take the place of police on our streets. Now Tampa has taken the next step, and there's nowhere to turn for those who value their privacy."
Sabre and EDS Complete Transaction
7/2. The U.S. Department of Justice, Antitrust Division, announced that it will not challenge the planned sale of Sabre's airline infrastructure information technology assets to EDS after the parties informed the DOJ that they were abandoning an agreement that would have transferred EDS' internal airline reservation system, known as SHARES, to Sabre. See, DOJ release. The two companies announced the completion of the transaction. See, Sabre release and EDS release.
Metricom Files Chapter 11 Petition
7/2. Metricom filed a Chapter 11 bankruptcy petition in U.S. Bankruptcy Court (NDCal). Metricom, based in San Jose, California, will continue to provide its Ricochet wireless data service. Metricom is represented by the law firm of Murphy Sheneman.
AMD and Alcatel Settle
7/2. AMD and Alcatel Business Systems announced the settlement of AMD's lawsuit against Alcatel. AMD filed a complaint in the Supreme Court of the State of New York against Alcatel alleging that it had breached a contract to supply AMD flash memory products. The action was removed to the U.S. District Court (SDNY). The two companies did not disclose the terms of the settlement. See, AMD release.
7/2. Daniel Lungren joined the law firm of Venable Baetjer as a partner. He represented Los Angeles County and Orange County in the U.S. House of Representatives from 1979 through 1989. He was a member of the House Judiciary Committee. He was also California Attorney General from 1991 through 1999. See, Venable release.
7/2. Paige Anderson joined the Center for Democracy and Technology (CDT), a Washington DC based non profit group that focuses on technology policy. She will work on a new project aimed at addressing the global digital divide through legal and regulatory reform in developing countries. Anderson was previously an attorney in the Washington DC office of the law firm of Akin Gump, where she had practiced communications law since 1996. See, Akin Gump bio.
7/2. The Washington DC based law firm of Arnold & Porter opened an office in Northern Virginia. It will be headed by Robert Ott, and will initially have 19 attorneys specializing in technology and commercial transactions, intellectual property protection, commercialization and litigation, venture capital, private and public equity financings, and IPOs. See, release.
7/2. The Washington DC based law firm of Shaw Pittman announced its merger with Klein & Martin, a 15 attorney Los Angeles law firm that focuses on complex business, technology and health care transactions. See, release.
7/2. Georg Berrisch joined the Brussels office of the Washington DC based law firm of Covington & Burling. Berrisch is a German Rechtsanwalt and EU litigator. He previously was the the Managing Partner of the Brussels office of the German firm Gaedertz. See, release [PDF].
More News
7/2. The U.S. Patent and Trademark Office (USPTO) began a pilot program under which 125 patent examiners will work at home using workstations provided by the USPTO. These examiners will have full electronic searching through encrypted transmission over high speed data lines. See, release.
7/2. Napster temporarily suspended file transfers. It stated that "There were problems with the databases upon which the new file identification technology relies ..." and that transfers would be resumed "as soon as possible but we don't yet have a sense of a precise time." See, Napster release.
People and Appointments
7/1. Randy New, BellSouth's VP for Public Policy, left BellSouth effective July 1. See, release.
7/1. David Sappington joined the FCC as Chief Economist. He was previously an economics professor at the University of Florida. He replaces Gerald Faulhaber, who is returning to his position as Professor of Public Policy and Management at the Wharton School of the University of Pennsylvania. See, FCC release [PDF].
7/1. Jonathan Levy, who has been with the FCC since 1980, was appointed Deputy Chief Economist. He has specialized in economic analysis of mass media, cable television, and satellite television issues. Levy has also assisted in the design and implementation of the FCC's spectrum auctions, in particular the DBS and MMDS auctions.

Go to News Briefs from June 26-30, 2001.