News Briefs from July 26-31, 2001

House Delays Votes on Trade Promotion Authority and Bell Relief
7/31. The House, which will likely break for its traditional summer recess at the end of this week, has delayed consideration of several major bills. The House will not vote on either trade promotion authority (also known as fast track) or the Tauzin Dingell bill, at least until September.
The Tauzin Dingell bill, which would provide regulatory relief to the Bell companies, was reported by the House Commerce Committee on May 9. It was reported unfavorably by the House Judiciary Committee on June 13. Supporters had sought to move it quickly to the House floor. The U.S. Telecommunications Association, which represents the Bell companies, issued a release praising this latest development.
Meanwhile, the Information Technology Association of America (ITAA) issued a release condemning a bill in the Senate that would provide regulatory relief to the Bells.
House Passes Jordan FTA Bill
7/31.The House passed HR 2603, a bill to implement the U.S. Jordan Free Trade Agreement. There is little trade between the U.S. and Jordan. However, the FTA includes language pertaining to labor and the environment, as well as e-commerce and intellectual property, that may serve as a precedents for future free trade agreements. The labor and environmental provisions were controversial.
2nd Circuit Affirms Net Gambling Conviction
7/31. The U.S. Court of Appeals (2ndCir) issued its opinion in USA v. Cohen, a criminal case involving Internet gambling. Jay Cohen was charged by indictment with eight counts of violation of the Wire Wager Act in connection with his operation of an Antigua based gambling business that advertised in, and took bets from, the U.S. over the Internet. A trial jury of the U.S. District Court (SDNY) convicted him on all eight counts. The Court of Appeals affirmed.
18 U.S.C. § 1084 provides, in part, that "Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined under this title or imprisoned not more than two years, or both."
DC Circuit Rules in Adrx v. Biovail
7/31. The U.S. Court of Appeals (DCCir) issued its opinion in Andrx Pharmceuticals v. Biovail, appeals from two District Court decisions in a private antitrust case involving patents and Food and Drug Administration drug applications. The Appeals Court affirmed the District Court's dismissal of the antitrust counterclaim for failure to sufficiently allege injury, but reversed its decision to do so with prejudice. Remanded.
New Bills
7/31. Rep. Tom Davis (R-VA) and Rep. Jim Moran (D-VA) introduced HR 2678, a bill to create an exchange program between the federal government and the private sector to develop expertise in information technology management. The bill was referred to the House Committee on Government Reform. See also, statement by Rep. Davis.
7/31. Sen. Tom Harkin (D-IA) introduced S 1273, which is titled the "Improving Health Care in Rural America Act.' It would amend the Public Health Service Act to provide for rural health services outreach, rural health network planning and implementation, and small health care provider quality improvement grant programs, and telehomecare demonstration projects. It was referred to the Senate Committee on Health, Education, Labor, and Pensions.
7/31. Sen. Tim Johnson (D-SD) introduced S 1283, a bill to establish a program for the delivery of mental health services by telehealth. It was referred to the Senate Committee on Health, Education, Labor, and Pensions.
House Holds Hearing on FASB Rules for Combinations of Businesses
7/31. The House Commerce Committee's Subcommittee on Commerce, Trade, and Consumer Protection held a hearing titled Current Issues Before the Financial Accounting Standards Board. During the last Congress the FASB and some Members of Congress clashed over accounting standards for combinations of businesses. Some members argued that FASB proposals to eliminate the pooling of interests method would have treated mergers of high tech companies unfairly and unrealistically. The FASB revised its position on July 20, 2001. Members of the Subcommittee expressed satisfaction at the July 31 hearing.
The FASB had proposed requiring that all mergers be viewed, not as the melding of separate entities, but as a direct purchase, requiring companies to accept the purchase method of accounting. The rules at the time permitted a pooling system of accounting favored by many high tech companies that own considerable intangible assets. Many high tech companies to took advantage of this pooling system of accounting when merging. This method allows companies to merge without attaching a goodwill accounting charge.
The House Commerce Committee held a hearing last year. Then, Rep. Cal Dooley (D-CA) and Rep. Chris Cox (R-CA) introduced a bill that would have placed a moratorium on FASB's ability to eliminate the pooling method of accounting. The FASB is an independent body that has been charged by the SEC with writing accounting rules. Congressional actions were a shot across its bow.
On July 20, 2001, the FASB revised its rules to accommodate the new economy. It issued two Statements. Statement 141 requires that all business combinations be accounted for under a single method - the purchase method. Use of the pooling of interests method is no longer permitted. Statement 142 requires that goodwill no longer be amortized to earnings, but instead be reviewed for impairment. This change provides investors with greater transparency regarding the economic value of goodwill and its impact on earnings.
Rep. Cliff Stearns, the Chairman of the Subcommittee, presided throughout the hearing. He praised the FASB in his opening statement. He said that "I find that the results of the FASB’s business combinations project and the related accounting treatment for intangible assets, as outlined in Statements’ 141 and 142, speak well for having an private independent standard setting board. The FASB should be commended for an open process that included several public hearings and working with all parties to understand their concerns regarding business combinations." He also focused on international accounting standards and on pro forma reporting. He stated that "some level of standardization should be applied to pro forma reporting."
Several members addressed the role of the Congress in the setting of accounting standards. Rep. Billy Tauzin (R-LA), the Chairman of the full Committee said in his prepared statement that "this Committee asserts its jurisdiction over the [FASB] precisely because this organization's role in accounting standards setting is extremely important to commerce in general and to the evolving new economy, characterized by the high tech sector, in particular." He praised the FASB for "modernizing appraisals of intangible assets to reflect the realities of many information based companies." He also said the the Committee "will play a strong oversight role in the adoption of any international standards by the United States." Similarly, Rep. Anna Eshoo (D-CA), who represents a Silicon Valley district, stated that "there are tensions of values between the FASB and the Congress," but this is "healthy".
See also, prepared testimony of witnesses: Edmund Jenkins (FASB), James Leisenring (International Accounting Standards Board), and Barry Rogstad American Business Conference).
Technology, Privacy, and Red Light Cameras
7/31. The House Transportation Committee's Highways and Transit Subcommittee held a hearing on red light cameras. See, prepared testimony of Rep. Dick Armey (R-TX). He stated that "Technology can be a tool of freedom. Communication advances like the Internet, for instance, have broken down barriers and spread the message of democracy around the globe. Unfortunately, technology can sometimes serve the opposite effect. New technologies can actually undermine our freedoms and create problems far greater than those they are meant to solve. For years the federal government has spent millions of dollars promoting photo enforcement systems and helping local jurisdictions install them."
Senate Holds Hearing on 3G and Spectrum Management
7/31. The Senate Commerce Committee's Communications Subcommittee held a hearing on spectrum management and third generation wireless systems. This next generation of wireless communications technology is intended, among other things, to bring broadband Internet access to portable devices. However, a significant amount of spectrum will have to be allocated for use by 3G systems. There is not enough suitable unused spectrum. Hence, spectrum allocated to other users would have to be shared or reallocated.
Several bands have been identified for possible use by 3G systems. The incumbent users of this spectrum, including the Department of Defense and ITFS users, such as schools and churches, have adamantly opposed reallocation of spectrum that they use. As a result, in the year since former President Clinton made reallocation of spectrum for 3G use a major policy goal, the agencies responsible for spectrum management, the NTIA and FCC, have held meetings, issued reports, and received comments, but made very little progress towards making any spectrum available for 3G uses. Now, the Congress has stepped in.
The Subcommittee heard testimony that paralleled a similar hearing before the House Telecom Subcommittee last week, and numerous other events in the last year. The spectrum managers testify that spectrum is a nationalized resource; they license its use in the public interest; and, they are working with interested parties to locate spectrum for possible sharing or reallocation. And, they testified to the Senate Communications Subcommittee, they are still looking. The incumbent licensees testify that the spectrum licensed to them cannot be reassigned without causing grievous harm to national security, education, rural communications, or other sacred services. Finally, the communications companies that wish to develop 3G ask for spectrum to be reallocated.
Several Senators suggested that one problem is that incumbent users have no incentive to more efficiently use spectrum licensed to them, or to relocate to other bands. Sen. Ted Stevens (R-AK) used the hearing to explore a possible solution that is specific to incumbent use by the Department of Defense in the 1755 to 1850 MHz band. He suggested that proceeds from the reauction of this spectrum might go directly to the Department of Defense.
Sen. Ron Wyden (D-OR) suggested broader reform of the spectrum regime. He stated in opening that "It seems to me that the central problem ... is that we have got a Jurassic system. It is virtually unchanged since the 1920s when spectrum was used for radio and radio only, and it is creating all of the wrong incentives. There is incumbent license holders who want to keep licenses scarce, so they occupy as much spectrum as possible. They fight tooth and nail against giving any out -- in effect, sort of, collect ransom for holding the spectrum hostage. And if you have got a bright new idea that needs spectrum, you better have a lot of patience for a lot of red tape. It seems to me that we have got a variety of reforms that we ought to be looking at. To me, one of the centerpieces of that effort ought to be to make sure that licensees in the future need to have some flexibility incentives to sell or lease excess spectrum, instead of hoarding it."
Sen. Wyden later added that "we have insufficient financial incentives for the development of creative technologies that improve efficiency". He added that the way things are going, "we are going to have a proceeding. We will have another proceeding. Have another proceeding. And a motion for a proceeding. And my sense is that at the end of three or five years, if we don't speed this up, and inject some real marketplace forces, the world isn't going to look all that much different on the civilian side." He concluded that we need "to retool the system ... the system is the problem ... a dinosaur ... it is a system skewed away from innovation."
Sen. Conrad Burns (R-MT) suggested that reforming spectrum management would be more complicated than passing the Telecom Act of 1996.
See, prepared testimony in PDF of government spectrum managers: William Hatch (National Telecommunications and Information Administration) and Julius Knapp (FCC's Office of Engineering and Technology). See also, prepared testimony of incumbent users of spectrum identified for possible reallocation for 3G systems: Linton Wells (Department of Defense) and Carroll McHenry (Nucentrix Broadband Networks). See also, prepared testimony by prospective 3G service providers: Denny Strigl (Verizon Wireless), Mark Kelly (Leap Wireless), Martin Cooper (ArrayComm), and Thomas Wheeler (Cellular Telecommunications & Internet Association).
10th Circuit Rules in Universal Service Case
7/31. The U.S. Court of Appeals (10thCir) issued its opinion in Qwest v. FCC, a consolidation of petitions for review of the FCC's orders establishing a federal funding mechanism to support universal telecommunications services in high-cost areas. The Appeals Court reversed and remand the Ninth Order of the FCC "because it does not provide sufficient reasoning or record evidence to support its reasonableness." However, the Appeals Court upheld the Tenth Order, the FCC's computer model of the costs of providing service in a given area.
People and Appointments
7/31. The Senate Judiciary Committee completed two days of hearings on the nomination of Robert Mueller to be Director of the Federal Bureau of Investigation.
7/31. The law firm of Howrey Simon announced the addition of nine new partners in its Houston and Chicago offices, six of whom focus on intellectual property. Edward O’Toole, Richard Schnurr, Anthony Nimmo and Christine Dudzik joined the Chicago office from Marshall O'Toole Gerstein Murray & Borun. Michael Padden joined the Chicago office from Gardner Carton & Douglas. Stephen Lundwall joined the Houston office. See, HS release.
7/31. The Senate Finance Committee held a hearing on several pending nominations, including Rosario Marin to be Treasurer of the United States and Jon Huntsman to be a Deputy U.S. Trade Representative.
7/31. The Senate confirmed James Ziglar to be Commissioner of Immigration and Naturalization.
More News
7/31. The House Science Committee's Research Subcommittee held a hearing titled "Innovation in Information Technology: Beyond Faster Computers and Higher Bandwidth." The hearing examined the effect of federal research and development spending on promoting innovation in information technology.
7/31. The U.S. Court of Appeals (FedCir) issued its opinion in Viskase v. American National Can, a patent infringement case involving shrink wrap. The Appeals Court affirmed in part, reversed in part, and remanded.
7/31. The USPTO published the online version of USPTO Today [PTO] for July/August.
7/31. The USPTO published a final rule in the Federal Register adjusting certain patent fees. See, Federal Register, July 31, 2001, Vol. 66, No. 147, at Pages 39447 - 39450.
House Votes for Extension of Export Administration Act
7/30. The House passed HR 2602 by a voice vote. This bill would extend the Export Administration Act, which is set to expire on August 20, until November 20. The extension would provide the Congress more time to work on replacement legislation to update the current export control regime. The Senate Banking Committee passed S 149, the Export Administration Act of 2001, sponsored by Sen. Mike Enzi (R-WY), on March 22 by a vote of 19 to 1. That bill is supported by the Bush administration, but opposed by several Republican Senators who assert that it would jeopardize national security. S 149 would ease restraints on the export of most dual use products, such as computers and software. It would end export controls on high performance computers based upon MTOPS. However, it would increase penalties for remaining violations. There are several bills pending in the House; the House International Relations Committee has held several hearings.
Intergraph Files Patent Infringement Suit Against Intel
7/30. Intergraph filed a complaint [PDF] in U.S. District Court (EDTex) against Intel alleging patent infringement. Intergraph alleges that Intel infringed two Intergraph patent pertaining to parallel instruction computing, through the manufacture and sale of processors and computing systems based on Intel's IA-64 EPIC (explicitly parallel instruction computing) architecture. IA-64 EPIC is included in Intel's new Itanium chips.
Patents in Suit. Intergraph alleges infringement of U.S. Patent Nos. 5,794,003. and 5,560,028, of which it is the assignee. The '003 patent is titled "Instruction cache associative crossbar switch system". It discloses a "computing system as described in which individual instructions are executable in parallel by processing pipelines, and instructions to be executed in parallel by different pipelines are supplied to the pipelines simultaneously. The system includes storage for storing an arbitrary number of the instructions to be executed. The instructions to be executed are tagged with pipeline identification tags indicative of the pipeline to which they should be dispatched. The pipeline identification tags are supplied to a system which controls a crossbar switch, enabling the tags to be used to control the switch and supply the appropriate instructions simultaneously to the differing pipelines."
The '028 patent is titled "Software scheduled superscalar computer architecture." It discloses a "computing system is described in which groups of individual instructions are executable in parallel by processing pipelines, and instructions to be executed in parallel by different pipelines are supplied to the pipelines simultaneously. During compilation of the instructions those which can be executed in parallel are identified. The system includes a register for storing an arbitrary number of the instructions to be executed. The instructions to be executed are tagged with pipeline identification tags and group identification tags indicative of the pipeline to which they should be dispatched, and the group of instructions which may be dispatched during the same operation. The pipeline and group identification tags are used to dispatch the appropriate groups of instructions simultaneously to the differing pipelines."
Request for Relief. Intergraph asks for a declaration that the patents in suit have been infringed, preliminary and permanent injunctive relief, actual damages, and enhanced damages.
Forum Shopping. Intergraph is a Delaware Corporation based in Huntsville, Alabama. Intel is a Delaware Corporation based in Santa Clara, California. The inventors are residents of California. Intergraph filed its complaint in Marshall, Texas, a town of 25,000 located at the intersection of U.S. Routes 59 and 80.
FTC NPRM on GLB Standards for Security of Customer Financial Data
7/30. The FTC published in its web site a copy of a notice of proposed rule making (NPRM) to be published in the Federal Register on the subject of standards relating to administrative, technical, and physical information safeguards for financial institutions subject to the FTC's jurisdiction. The Gramm Leach Bliley (GLB) Act, passed during the last Congress, requires the FTC and other agencies to promulgate rules establishing standards for the protection of customers' financial data. See also, FTC release.
Senate Judiciary Committee Begins Mueller Hearing
7/30. The Senate Judiciary Committee held the first day of hearings on the nomination of Robert Mueller to be Director of the Federal Bureau of Investigation. Sen. Patrick Leahy (D-VT), Chairman of the Committee, said in his opening statement that "The American public has lost some confidence in the Bureau. This is not just a PR problem. This erosion of public trust threatens the FBI's ability to perform its mission." See also, opening statement of Sen. Orrin Hatch (R-UT), the ranking Republican.
Mueller stated in his prepared testimony that "Waco, Ruby Ridge, the FBI lab, Wen Ho Lee, Robert Hanssen, and the McVeigh documents – these familiar names and events remind us all that the FBI is far from perfect and that the next Director faces significant management and administrative challenges." He also stated that "while new technologies create new possibilities for the global economy, they also present new opportunities for enterprising criminals. Here, as well, the FBI is responsible for ensuring the security of our technological infrastructure and for bringing cybercriminals to justice."
The hearing continues on July 31 at 10:00 AM in Room 216 of the Hart Building.
Code Red
7/30. Officials from government agencies, groups and Microsoft held a press conference to request that companies and others running servers with Microsoft's Internet Information Services (IIS) install a patch provided by Microsoft that prevents the Code Red worm from infecting servers. See, Microsoft release.
The FBI's National Infrastructure Protection Center (NIPC) explained the threat: "The worm scans the Internet, identifies vulnerable systems, and infects these systems by installing itself. Each newly installed worm joins all the others causing the rate of scanning to grow rapidly. This uncontrolled growth in scanning directly decreases the speed of the Internet and can cause sporadic but widespread outages among all types of systems. Code Red is likely to start spreading again on July 31st, 2001 8:00 PM EDT and has mutated so that it may be even more dangerous. This spread has the potential to disrupt business and personal use of the Internet for applications such as electronic commerce, email and entertainment." See, NIPC Alert 01--016 (7/29).
Court Affirms Injunction of Unlicensed Broadcaster
7/30. The U.S. Court of Appeals (6thCir) issued its opinion in USA v. Szoka, a case involving an unlicensed FM radio micro broadcaster. Of course, the FCC ordered him to stop, the local District Court granted the FCC an injunction, and the Appeals Court affirmed. However, the Appeals Court's reconciliation of the issuance of an injunction with the First Amendment and the law of injunction makes interesting reading.
Jerry Szoka. The appellant broadcasted dance music, and news and information for gays and lesbians, in Cleveland, Ohio, on empty frequency (96.9 FM) at a low power (48.8 watts). He did not have a license from the FCC. He did not seek a license. He just started broadcasting.
FCC Licensing. The National Radio Act of 1927 nationalized spectrum, and created a National Radio Commission to issue licenses in the "public interest". The Communications Act of 1934 continued this framework, and transferred licensing and regulatory authority to the FCC, which licenses spectrum to this day. The Supreme Court declined to extend First Amendment protections afforded other media to broadcast media in the landmark decision, NBC v. FCC, 319 U.S. 190 (1943). The Court reaffirmed this holding in Red Lion v. FCC, 395 U.S. 367 (1969).
Low Power FM. The FCC recently instituted a program for licensing non-commercial low power FM broadcasters -- over the strenuous objections of commercial broadcasters and National Public Radio. However, this program does not extend to those who have violated FCC licensing rules in the past. Hence, Szoka is not eligible.
Legal Proceedings. The FCC moved to shut Szoka down. There is a separate proceeding in Washington DC. The FCC issued a cease and desist order. An administrative law judge rejected Szoka's First Amendment arguments. Szoka has petitioned for review by the U.S. Court of Appeals (DCCir). Oral arguments are next month. However, Szoka ignored the cease and desist order, so the FCC also filed a complaint in U.S. District Court (NDOhio) against Szoka seeking an injunction. It is the issuance of a permanent injunction by the District Court in Cleveland that is the subject of the present appeal.
Public Interest. Szoka raised the obvious, but futile, argument that the FCC's use of the courts to obtain an injunction of his broadcast operation implicates the First Amendment, to no avail. Szoka (through his attorney, Mark Wallach, of the Cleveland law firm of Calfee Halter & Griswold) also argued that for the government to obtain an injunction, it had to satisfy not only the Communications Act of 1934, but also the equitable standards for issuance of an injunction -- likelihood of success on the merits, irreparable injury, absence of substantial harm to others, and public interest in issuance of the injunction. The government argued against application of equitable standards to the FCC. Thus, it argued that in managing spectrum in the public interest, the FCC could not actually be held to a public interest standard. The Court of Appeals agreed, and so held.
The District Court, while granting the FCC its injunction, had stated in dicta that "the Court is inclined to agree that the FCC's non-commercial low-power broadcasting ban smacks of favoritism towards wealthier interest groups who do not wish to share the airwaves with non-commercial stations." It also wrote that the FCC's ban on low-power stations would run "contrary to the FCC's obligation to distribute the airwaves in a manner that furthers the 'public interest' and, thus, would be inconsistent with the First Amendment."
Court Upholds First Amendment Right of Unlicensed Printer
7/30. The U.S. Court of Appeals (8thCir) issued its opinion [PDF] in Steele v. Bemidji. This is another first Amendment case involving the government licensing of speech -- in this case, print speech. Steele filed a complaint in U.S. District Court (DMinn) against the City of Bemidji, city officials, and others, seeking relief from actions by Bemidji to prevent him from distributing his newspapers. He did not have a solicitation permit, an obstruction permit, or post a bond. The district court granted summary judgment to the defendants. The Appeals Court reversed as to Steele's First Amendment claims.
7/30. The National Cable & Telecommunications Association (NCTA) extended the employment contract of P/CEO Robert Sachs through December 31, 2004. See, release.
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7/30. eBay filed a complaint in U.S. District Court (NDCal) against BidBay alleging trademark infringement.
7/30. BellSouth filed a request with the Tennessee Regulatory Authority seeking an endorsement for a Section 271 application to the FCC for permission to provide in region interLATA services. See, BS release.
7/30. The Florida Public Service Commission began hearings on the petition by AT&T, TCG South Florida, and MediaOne for structural separation of BellSouth Telecommunications into two distinct wholesale and retail corporate subsidiaries. The Regional Bell Operating Companies (RBOCs) oppose structural separation. See, BellSouth release and Verizon release.
Colin Powell Wants China to Take Advantage of Information Technology
7/28. Secretary of State Colin Powell was interviewed on CCTV, the PR China's state television. He stated that "We need no enemies, we want no enemies, we want to help people. We want to help China and we want to help China take advantage of the new 21st Century world of information technology, access to international markets. Trade with us, let American products come here -- Chinese products come to the United States." See, transcript.
House Report Concludes P2P Networks Endanger Children
7/27. The Minority Staff of the Special Investigations Division of the House Committee on Government Reform released a report [PDF] titled "Children's Access to Pornography Through Internet File-Sharing Programs". The report, which was prepared at the request of Rep. Steve Largent (R-OK) and Rep. Henry Waxman (D-CA), examined peer to peer networks, including Music City Morpheus, BearShare, and Aimster.
The report found that peer to peer (P2P) file copying networks other than Napster are growing rapidly in popularity. It also found that one of the major categories of content on these networks is pornography, including videos. Moreover, innocent search terms, such as "Britney Spears", return as results pornographic files, thereby endangering children. Finally, the report found that use of these peer to peer networks is free, and unaffected by the filtering software.
The report contains no recommendations for government action. Rep. Waxman stated that he wants to "draw attention" to the problem. He added that "As legislators, we can try to pass laws to address these issues. But sometimes legislation can’t solve the entire problem by itself. In this case, parental awareness and parental involvement matter more than legislation. And that's the whole point of the report Mr. Largent and I are releasing today." He also said that in comparison, the debate over the V-Chip is "trivial." See, statement.
Antitrust Law News
7/27. The U.S. Department of Justice (DOJ) announced that it would file a complaint to block United Airlines from acquiring US Airways. The DOJ asserted that the merger "would reduce competition, raise fares, and harm consumers on airline routes throughout the United States." See, DOJ release. United then announced that the two companies "have terminated their merger agreement." See, United release. See also, US Airways release.
Denial of Trademark Application Upheld
7/27. The U.S. Court of Appeals (FedCir) issued its opinion in In Re Save Venice New York, Inc., a appeal from the U.S. Patent and Trademark Office Trademark Trial and Appeal Board. The Board denied Save Venice's application (Serial No. 75/222,218) for a composite mark consisting of the phrases “THE VENICE COLLECTION” and “SAVE VENICE INC.” and an image of the winged Lion of St. Mark on the grounds that it was geographically deceptively misdescriptive. The Appeals Court affirmed.
Statute. § 2(e)(3) of the Lanham Act provides in relevant part that: "No trademark by which the goods of the applicant may be distinguished from the goods of others shall be refused registration on the principal register on account of its nature unless it ... (e) Consists of a mark which ... (3) when used on or in connection with the goods of the applicant is primarily geographically deceptively misdescriptive of them."
Background. Save Venice is a not-for-profit New York corporation devoted to preserving and restoring some of the cultural treasures of Venice, Italy. However, almost none of the goods that it sells are made in Venice. The PTO refused the registration because the mark was geographically deceptively misdescriptive. The Board affirmed the examiner's refusal to register the mark.
Dow v. Sumotomo
7/27. The U.S. Court of Appeals (FedCir) issued its opinion in Dow v. Sumitomo, a patent infringement action. The District Court entered summary judgment of noninfringement for Sumitomo. The Appeals Court vacated and remanded.
Dow Chemical is the assignee of U.S. Patent No. 4,499,255 which is directed to a process for making high purity epoxy resins. Dow filed a complaint in U.S. District Court (EDMich) against Sumitomo alleging that certain processes used by Sumitomo infringe this patent. The District Court determined that certain limitations required by claim 1 of the patent are not present in Sumitomo's processes either literally or under the doctrine of equivalents, and granted Sumitomo's motion for summary judgment of noninfringement.
People and Appointments
7/27. Greg Abbott joined the Austin office of the law firm of Bracewell & Patterson in its Appellate Group, effective August 1, 2001. He was previously a Justice of the Texas Supreme Court. See, release.
7/27. FCC Commissioner Kathleen Abernathy named Stacy Robinson to be her Legal Advisor for mass media issues. Robinson has previously worked at the law firms of Skadden Arps, Alston & Bird, and Wiley, Rein & Fielding, and at Discovery Communications, Inc. She will start in mid August.
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7/27. Microsoft announced the filing seven complaints in U.S. District Courts in Illinois, Michigan, and Ohio alleging copyright infringement. Each complaint alleges distribution of counterfeit copies of components of Office 97 and/or Windows 95/98/2000 software. See, release.
7/27. Rep. Jerry Moran (R-KS) and others introduced HR 2669, a bill to improve access to telecommunications and Internet services in rural areas, by providing government loans and grants. The bill was referred to the House Agriculture Committee and the House Commerce Committee. See, Moran release.
4th Circuit Rules Jurisdiction May be Based Upon Location of Web Site
7/26. The U.S. Court of Appeals (4thCir) issued its opinion in Christian Science Board of Directors v. Nolan, holding that personal jurisdiction may be based upon maintaining a web site in the territory of a federal district court where the suit is brought.
The Christian Science Board of Directors filed a complaint in U.S. District Court for the Western District of North Carolina against David Nolan and others alleging trademark infringement under the Lanham Act. Nolan was a resident of California. However, Nolan maintained a web site in North Carolina, the content of which was the subject of the law suit. Nolan contracted with a co-defendant in North Carolina to operate the web site for him. Nolan periodically sent content to North Carolina to be added to the web site.
Plaintiff obtained a default judgment against Nolan enjoining him from using the contested marks. He violated this injunction. When he was ordered to appear in response to a civil contempt notice he asserted that the default judgment was void for lack of personal jurisdiction. The District Court rejected this argument. This appeal followed.
The Appeals Court affirmed. It reasoned that the exercise of jurisdiction over Nolan by the District Court in North Carolina was consistent with the North Carolina long arm jurisdiction statute, and did not violate the due process requirement of "minimum contacts" set forth in International Shoe v. Washington, 326 U.S. 310 (1945) and elaborated in Burger King v. Rudzewicz, 471 U.S. 462 (1985).
Definition of Trade Secret in EEA is Not Unconstitutionally Vague
7/26. The U.S. Court of Appeals (6thCir) issued its opinion in USA v. David Krumrei, holding that the definition of trade secret contained in the Economic Espionage Act (EEA) is not unconstitutionally vague. Krumrei was indicted on one count of violating the EEA, 18 U.S.C. § 1832(a)(2), by knowingly and without authorization transmitting a trade secret to a competitor of the owner. He asserted that the EEA is unconstitutionally vague. The District Court disagreed. The Appeals Court affirmed. 
House Holds Hearing on Privacy
7/26. The House Commerce Committee's Subcommittee on Commerce, Trade, and Consumer Protection held a hearing titled "How Do Businesses Use Customer Information: Is the Customer's Privacy Protected?" This was the sixth and last in a series of hearings held by the Subcommittee. Rep. Cliff Stearns (R-FL), Chairman of the Subcommittee, stated that "there are substantial benefits that accrue to our economy from the unencumbered flow of information, particularly consumer information." See, opening statement.
Paul Misener of said in his prepared testimony that "there is no inherent need for legislation. We firmly oppose the adoption of any non-federal privacy law that addresses online activities. Nonetheless, could support limited federal legislation, but only if it preempts state laws, only if it bars private rights of action, and only if it applies to offline as well as online activities."
Harriet Pearson of IBM said in her prepared testimony that "any U.S. privacy regime should be a national solution, not a patchwork of fifty conflicting regimes. The regime should encourage transparency and choice. It should hold government and non-profit organizations accountable to similar standards asked of industry. It should neither discriminate against the Internet nor create new private rights of action."
See, prepared statements of witnesses: Harriet Pearson (IBM), Jacqueline Hourigan (General Motors), Zeke Swift (Proctor & Gamble), Paul Misener (, David Johnson, (Land’s End), Jennifer Barrett (Acxiom), Deborah Zuccarini (Experian), and John Ford (Equifax).
Rep. Billy Tauzin (R-LA), the Chairman of the full Committee, said in his prepared statement that "Going forward, one thing should be clear: I don’t see a need to legislate on false scenarios. We cannot and will not design some elaborate new privacy regime that will take into account every possible daydream of how information could be used. Reality must be taken into account."
House Holds Hearing on Market Data
7/26. The House Financial Services Committee's Capital Markets Subcommittee held its second hearing on market data, titled "Implications to investors and market transparency of granting ownership rights over stock quotes." Rep. Richard Baker (R-LA), Chairman of the subcommittee, said in his opening statement [PDF] that the purpose of the hearing was to discuss "the question of whether there should be legislation to explicitly establish a proprietary right over market databases or to give protection to the operators of the databases through new private causes of action."
Congress amended the Securities and Exchange Act of 1934 in 1975 to put in place the current market data regime. Rep. Mike Oxley (R-OH), the Chairman of the full Committee, said in his opening statement [PDF] that "New communications technology, like the Internet, have transformed the markets so significantly that the rules that were put in place in 1975 are now outdated." Brokerages are required to provide quotation and trading data immediately and without compensation to the self regulatory organizations (SROs), such as the NASDAQ, which consolidate the data, and sell it to information vendors and brokerage firms.
The House Commerce Committee passed a broad database bill in the last Congress that included a title on market data. However, that bill never made it to the House floor. See, HR 1858 (106th Congress). That bill would have amended the Securities and Exchange Act to provide a civil remedy for certain misappropriation of market data. The jurisdiction of the House Financial Services Committee (previously called the House Banking Committee) was expanded at the beginning of the 107th Congress to include securities regulation. This had previously been handled by a subcommittee of the Commerce Committee that had been chaired by Rep. Oxley.
Richard Ketchum, President of the NASDAQ, said in his prepared testimony [PDF] that the NASDAQ supported HR 1858, but also believes "There may be circumstances in which copyright, trade secret, and unfair competition and/or misappropriation rights and remedies, in addition to those that would have been available under H.R. 1858, may properly need to be asserted by market information processors." He added that all SROs should be able to protect its market data, and establish prices.
In contrast, Hardy Callcott, General Counsel of Charles Schwab, said in his prepared testimony [PDF] that "Database protection legislation should not give the securities markets a property right over market information. Market data is made up of the facts that are the most critical feature of our capital markets. No one can own this, or any, set of facts. Granting ownership or copyright protection to any one party would simply be contrary to the goal of ensuring broad access to market information." He also said that the SEC should "continue to play a critical role in enforcing the non- discrimination requirements, as well as setting and enforcing general standards for such issues as capacity, sequencing, and synchronization."
Free Trade Agreement Advances In Congress
7/26. The Senate Finance Committee held a business meeting at which it approved S 643, a bill to implement the agreement establishing a U.S. Jordan free trade area. Also, the House Ways and Means Committee held a meeting at which it approved HR 2603, the U.S. Jordan Free Trade Area Implementation Act of 2001. Trade between the U.S. and Jordan is not significant. However, this trade agreement is significant because it may serve as a standard for future trade agreements.
It includes labor and environmental (L&E) conditions. The FTA provides that neither party "shall fail to effectively enforce its" L&E laws. These provisions are controversial, and are at the heart of the current debate over extending fast track trade negotiating authority to the President.
The U.S. Jordan FTA also addresses enforcement of intellectual property rights and electronic commerce. Jordan agreed to ratify and implement the WIPO's Copyright Treaty and WIPO Performances and Phonograms Treaty within two years. The FTA also provides that "each Party shall seek to refrain from: (a) deviating from its existing practice of not imposing customs duties on electronic transmissions; (b) imposing unnecessary barriers on electronic transmissions, including digitized products; and (c) impeding the supply through electronic means of services ..." See also, the U.S. Jordan Free Trade Agreement (FTA) [PDF], signed on October 24, 2000.
Export Administration Act News
7/26. The Senate Banking Committee held a hearing on the nomination of Michael Garcia to be Assistant Secretary for Export Enforcement at the Department of Commerce. Garcia is an Assistant U.S. Attorney for the Southern District of New York, where he was involved in the prosecutions stemming from the World Trade Center bombing and the bombings of U.S. embassies in East Africa. Sen. Paul Sarbanes (D-MD), Chairman of the Committee, praised Garcia. Garcia stated that "I will work hard to ensure that any violations of U.S. dual use exports are detected, investigated and sanctioned."
Sen. Sarbanes said that he wanted the Committee to approve his nomination early next week, and the full Senate to approve it before it goes on its August recess.
Sen. Sarbanes also used the hearing to advocate passage of S 149, the Export Administration Act, a bill which would ease restraints on the export of most dual use products, such as computers and software. However, the bill would also raise penalties for certain violations. The Senate Banking Committee approved the bill on March 22 by a vote of 19 to 1. The current act expires on August 20. Sen. Sarbanes noted that Senate Majority Leader Tom Daschle (D-SD) favors consideration of the bill in the Senate before the August recess.
Sen. Torricelli Introduces Bill to Criminalize Hacking School Computers
7/26. Sen. Robert Torricelli (D-NJ) introduced S 1252, the School Website Protection Act of 2001. It would criminalize tampering with computers of schools and institutions of higher education. The bill provides, in part, that 18 U.S.C. 1030(a) is amended by adding the following clause to the list of prohibited acts: "knowingly causes the transmission of a program, information, code, or command, and as a result of such conduct, intentionally affects or impairs without authorization a computer of an elementary school or secondary school or institution of higher education". The bill was referred to the Senate Judiciary Committee, of which Sen. Torricelli is a member.
Smart Currency
7/26. The Senate Banking Committee held a hearing on the nomination of Henrietta Fore to be Director of the Mint. She testified that "Our currency must be smart, with an electromagnetic signature ..." She did not elaborate, and none of the Senators present questioned her on this topic. Sen. Sarbanes said he will seek her confirmation by the full Senate before the August recess.
EPIC Complains to FTC about Microsoft's Windows XP
7/26. The Electronic Privacy Information Center (EPIC), and twelve other interest groups, filed a complaint [PDF] with the Federal Trade Commission (FTC) against Microsoft alleging that the soon to be released Windows XP operating system will adversely affect the privacy of users, and violate the Federal Trade Commission Act ban on unfair and deceptive trade practices.
The complaint states that "Microsoft has engaged, and is engaging, in unfair and deceptive trade practices intended to profile, track, and monitor millions of Internet users. Central to the scheme is a system of services, known collectively as ".NET," which incorporate "Passport," "Wallet," and "HailStorm" that are designed to obtain personal information from consumers in the United States unfairly and deceptively."
The complainants want the FTC to investigate Microsoft, and then order Microsoft to "revise the XP registration procedures so that purchasers of Microsoft XP are clearly informed that they need not register for Passport to obtain access to the Internet; ... block the sharing of personal information among Microsoft areas provided by a user under the Passport registration procedures absent explicit consent; ... [and] incorporate techniques for anonymity and pseudo- anonymity that would allow users of Windows XP to gain access to Microsoft web sites without disclosing their actual identity".
Finally, the complainants ask the FTC to remedy an implied antitrust violation that was not articulated in the complaint. They want the FTC to require Microsoft to "incorporate techniques that would enable users of Windows XP to easily integrate services provided by non-Microsoft companies for online payment, electronic commerce, and other Internet- based commercial activity".
Antitrust Law News
7/26. The U.S. Court of Appeals (2ndCir) issued its opinion in Virgin Atlantic Airways v. British Airways, an antitrust action. Virgin filed a complaint in U.S. District Court (SDNY) against British Airways (BA) alleging violation of §§ 1 and 2 of the Sherman Act. It alleged that BA engaged in predatory business practices, including the use of incentive agreements with corporate clients and travel agencies. Virgin argued that these agreements offered below cost pricing and thus attracted passengers to BA's transatlantic flights, and that losses from pricing tickets below cost were recouped by coupling these flights with other routes on which BA exercised monopoly power and could charge higher fares. The District Court granted summary judgment to BA. The Appeals Court affirmed. John Warden, a partner in the law firm of Sullivan & Cromwell, is lead counsel for British Airways in this case. He is also lead counsel for Microsoft in the government's antitrust case in Washington DC.
DOJ Cannot Support Verizon's Pennsylvania 271 Application
7/26. The Department of Justice (DOJ) released its competitive analysis of Verizon's application to provide in region interLATA services in Pennsylvania under Section 271 of the Telecom Act of 1996. The DOJ did not endorse the application because of problems with Verizon's electronic billing. See also, DOJ release.
The report concluded that competitive local exchange carriers (CLECs) "have made significant inroads into the local markets in Pennsylvania. Electronic billing, however, may be an important factor with respect to whether entry will continue in the foreseeable future. Because of the timing of this application, Verizon has not been able to demonstrate that its billing system modifications have fully resolved its billing problems in actual commercial operations. Absent such evidence, the Department cannot support Verizon's application at this time. The Department notes, however, that the Commission may have additional information during its consideration of Verizon's application. The Commission may therefore be able to assure itself that Verizon's billing problems have been resolved and may be in a position to approve Verizon's application by the close of these proceedings."
John Thorne, Verizon SVP and Deputy General Counsel, had this to say about the DOJ recommendation: "We are pleased the Justice Department recognizes that with more than one million local lines already controlled by competitors, there is strong evidence of broad-based competition in Pennsylvania. Today’s DOJ evaluation, combined with the Pennsylvania Public Utility Commission’s report supporting our long-distance bid, means that our application is on track for FCC approval."
People and Appointments
7/26. Lynn Turner, who has been Chief Accountant of the SEC since July 1998, will leave the SEC in August, and return to Colorado State University. See, SEC release.
7/26. The Senate Judiciary Committee approved the nomination of James Ziglar to be head of the Immigration and Naturalization Service (INS) by a vote of 19-0.
7/26. Joel Taubenblatt will become Legal Advisor to Tom Sugrue, Bureau Chief of the FCC's Wireless Telecommunications Bureau. Taubenblatt was previously a Senior Staff Attorney in the Commercial Wireless Division of the Bureau. He joined the FCC in July 1996.
7/26. Catherine Seidel will join the FCC's Wireless Telecommunications Bureau as Associate Bureau Chief and Chief of Staff. She was previously Chief of the Telecommunications Consumers Division of the FCC’s Enforcement Bureau. Before that she served as Chief of the Wireless Bureau’s Enforcement and Consumer Information Division. Before joining the FCC in 1994, she worked for Verizon.
7/26. Kelly Quinn will join the FCC's Wireless Telecommunications Bureau's Auctions and Industry Analysis Division as Deputy Chief. She was previously a Legal Advisor in the Office of the Bureau Chief. Before that she was an associate at the law office of Squire Sanders & Dempsey.
7/26. FRB Vice Chairman Roger Ferguson was sworn in for a new term on the Board of Governors of the Federal Reserve System. See, FRB release.
More News
7/26. The Department of Justice filed its opposition to Microsoft's petition for rehearing in the antitrust case.
7/26. The GAO released its report [PDF] titled "Critical Infrastructure Protection: Significant Challenges in Developing Analysis, Warning, and Response Capabilities." The GAO presented this as testimony to the Senate Judiciary Committee's Subcommittee on Technology, Terrorism and Government Information.

Go to News Briefs from July 21-25, 2001.