News Briefs from August 6-10, 2001

Export Administration Regulations
8/10. The Commerce Department's Bureau of Export Administration (BXA) published in the Federal Register an interim final rule that makes minor changes to the Export Administration Regulations (EAR). The BXA's notice states that it amends the EAR "by revising Country Group E:1 to include all terrorist-supporting countries, and replacing references to Cuba, Iran, Iraq, Libya, North Korea, Sudan and Syria with Country Group E:1 where appropriate. This rule also expands the scope of eligible countries for License Exception TMP for exhibition and demonstration to all countries except the new Country Group E:1, with certain restrictions. ... This rule also expands the scope of eligible countries for License Exception TMP for exhibition and demonstration by making Country Group D:1 eligible for this provision. Under License Exception TMP, you may now export or reexport commodities and software for exhibition or demonstration in any country, including countries in Country Group D:1 ..." This rule is effective August 10, 2001. Comments on this rule must be received on or before September 10, 2001. See, Federal Register, August 10, 2001, Vol. 66, No. 155, at Pages 42108 - 42110.
Trial Court Quashes Subpoena for Names of Anonymous Posters
8/10. The Superior Court of California, Santa Clara County, Judge Neil Cabrinha presiding, issued a bench ruling in Pre-Paid Legal Services Inc. v. Gregg Sturtz, quashing a subpoena directed to Yahoo for the identities of anonymous posters who criticized PPLS on a Yahoo message board. Two of the anonymous posters targeted by the subpoena are represented by EFF. See, EFF release.
DOJ Opposes Microsoft Motion for Stay
8/10. The Department of Justice (DOJ) filed in the U.S. Court of Appeals (DCCir) its opposition to Microsoft's motion for stay pending its petition for writ of certiorari. The opposition is titled "Appellee's Response to Microsoft's Motion for Stay of the Mandate Pending Petition for Writ of Certiorari." The DOJ asserted that "Microsoft has little prospect of obtaining certiorari review, let alone winning a reversal ..." On August 7, Microsoft filed a Petition for Writ of Certiorari with the Supreme Court, and its motion titled "Appellant's Motion for Stay of the Mandate Pending Petition for Writ of Certiorari".
8/10. The ICANN issued a Second Advisory Concerning Equitable Allocation of Shared Registration System Resources.
People and Appointments
8/10. Rosalind Tyson was named Acting Regional Director of the SEC's Pacific Regional Office. She replaces Valerie Caproni, who joined the law firm of Simpson Thacher & Bartlett in May. Tyson is currently Associate Regional Director for Regulation in the Pacific Regional Office, a position she has held since 1993. See, SEC release.
8/10. National Telephone Cooperative Association (NTCA) announced that Darren Pittman joined its staff as government affairs representative for financing and economic development. He previously worked for Sen. Phil Gramm (R-TX). See, NTCA release.
FCC Studies Broadband Deployment
8/9. The Federal Communication Commission (FCC) held a meeting at which it addressed deployment and use of broadband Internet access services. It released a summary of its latest statistics, which show rapid growth in the number of broadband subscribers. It also adopted a third notice of inquiry (NOI) into broadband deployment under Section 706 of the Telecom Act.
The FCC released summary statistics on broadband penetration. It stated that "High-speed lines connecting homes and businesses to the Internet increased by 63% during the second half of the year 2000, to a total of 7.1 million. The rate of growth for the full year was 158%." See, FCC release.
The FCC also adopted, but did not release, a NOI, as required by Section 706 of the Telecom Act of 1996, into whether "advanced telecommunications capability" is being deployed to all Americans in a reasonable and timely fashion. See, FCC release. (See, CC Docket No. 98-146.)
The five FCC Commissioners all praised the merits of broadband Internet access and expressed the desire to see its rapid deployment. The FCC's last Section 706 report [PDF], issued on August 21, 2000, found that deployment of advanced telecommunications capability generally appeared reasonable and timely. However, it added the usual "digital divide" rhetoric about certain groups being left behind.
Commissioner Michael Copps stated that he is not satisfied with current progress. He states that "we need to entertain the notion of moving away from the tone that most everything is on track, that progress in rural areas and inner cities is being made, and might not be quite as much as we like, but we are on track, and everything is going to be fine. The fact is that we face an incredible infrastructure buildout here, that I think is comparable to any of the infrastructure buildouts that we have had in the history of the United States." See also, prepared statement submitted by Commissioner Kevin Martin.
FCC and 3G
8/9. The FCC adopted, but did not release, a notice of proposed rulemaking regarding reallocation of spectrum for use by Third Generation (3G) wireless services. 3G is intended to bring broadband Internet access to portable devices. The item is titled "Memorandum Opinion and Order and Further Notice of Proposed Rulemaking". The FCC seeks comment on reallocating spectrum in the 1910-1930 MHz, 1990-2025 MHz, 2150-2160 MHz, 2165-2200 MHz, and 2390-2400 MHz bands. The FCC did not release this MOO & NPRM at the meeting. Rather, it released press release, and Commissioners made statements. Commissioners Powell, Copps, Abernathy, and Martin vote for the item; Tristani dissented in part. See, ET Docket No. 00-258.
Chairman Michael Powell stated that "the critical focus of the Commission, in its efforts, increasingly are on increasing capacity in the marketplace for new and advanced information services, and Third Generation efforts are one of the critical components on the wireless technology side.
The FCC adopted a NPRM on January 4, 2001, regarding use of other spectrum bands, specifically, 1710-1755 MHz, 1755-1850 MHz, 2110-2150 MHz, 2160-2165 MHz and 2500-2690 MHz. Bruce Franca, Acting Chief of the Office of Engineering and Technology (OET), gave an introduction to the January 4 NPRM. John Spencer, a Senior Attorney in the Policy Division of the Wireless Telecommunications Bureau summarized the new MOO & NPRM. He stated that the 1910-1930 MHz band is currently allocated for use by unlicensed personal communications services (PCS). 1990-2025 and 2165-2200 MHz is used for mobile satellite service (MSS); 2150-2160 MHz is used for multipoint distribution service; and 2390-2400 MHz is used for amateur radio and unlicensed PCS devices.
The Department of Defense, which uses spectrum in the 1755-1850 MHz band for a variety of national defense purposes, opposes reallocation of this spectrum for 3G services. Likewise, Instructional Television Fixed Service (ITFS) and Multichannel Multipoint Distribution Service (MMDS) users, which are allocated spectrum in the 2500-2690 MHz band, oppose the reallocation of that spectrum. ITFS users include the Catholic Television Network. MMDS users in this band include Sprint, WorldCom, and CLECs that are deploying broadband data and voice services in rural and other areas.
Is 2500-2690 MHz Off the Table? Chairman Powell stated crypticly at the meeting that "I also wanted to note that, an item of great controversy, the MMDS and ITFS spectrum, is not covered in this item. But, I merely wanted to announce that there is a companion item that we have every intention of making an effort to have voted by the end of the month that will state conclusively what the state of affairs is with respect to those spectrum bands." Commissioner Gloria Tristani read a dissent, which also pertained to this band. She stated that "the Commission should have also used this opportunity to lay to rest the uncertainty surrounding the ITFS and mulitpoint MDS operations in the 2500-2690 MHz (2.5 GHz) band."
More Background. On March 30, the FCC, which has authority over the 2500-2690 MHz band, released its report [101 pages in PDF] titled "Final Report: March 30, 2001: Spectrum Study of the 2500-2690 MHz Band: The Potential for Accommodating Third Generation Mobile Systems". This report concluded that this spectrum is being used to provide important services, that it is already heavily licensed throughout the country, that it would be technically difficult to segment or share this spectrum, and that relocation could cost between $10.2 and $30.4 Billion. See also, executive summary. The NTIA, which has spectrum management authority with respect to the 1755-1850 MHz band, released a similarly gloomy report [169 pages in PDF] titled "The Potential for Accommodating Third Generation Mobile Systems in the 1710–1850 MHz Band: Federal Operations, Relocation Costs, and Operational Impacts". See also, executive summary.
NextWave's 3G Plans
8/9. NextWave Communications held a press briefing in Washington DC at which corporate executives described their plans to build out a Third Generation (3G) wireless network optimized for bringing broadband Internet access to mobile computing devices.
NextWave is currently in Chapter 11 bankruptcy. The FCC has cancelled its C block licenses and re-auctioned them to other parties. However, the U.S. Court of Appeals (DCCir) issued an opinion on June 22 holding that the FCC is prevented from canceling NextWave's spectrum licenses by § 525 of the Bankruptcy Code. On August 6 the FCC filed a motion for stay pending a petition for writ of certiorari. On the same day NextWave filed a reorganization plan with the bankruptcy court.
NextWave P/CEO Allen Salmasi stated that he expects that the Supreme Court will issue an order denying the FCC's petition for writ of certiorari late this year. He also stated that NextWave does not need FCC approval to proceed at this time with buildout operations; it will, however, need FCC approval to go on air.
NextWave officers stated that it will employ CDMA technology that will initially provide a peak transmission rate of 144 Kbps, and later a peak rate of 2 Mbps. They also stated that NextWave plans to operate as a "carriers' carrier" that will sell its wireless services at wholesale rates to "Mobile Virtual Network Operator (MVNO) distribution partners".
EPIC Seeks Discovery from DOJ in its Carnivore FOIA Suit
8/9. The Electronic Privacy Information Center (EPIC) filed a Motion to Stay Proceedings Pending Discovery [PDF] with the U.S. District Court (DDC) in its action against the Department of Justice (DOJ) to compel compliance with its Freedom of Information Act (FOIA) request for records pertaining to the FBI's Carnivore e-mail surveillance program.
EPIC filed its Original Complaint for Injunctive Relief in August 2000. The DOJ has searched for, and produced, some records in response to EPIC's FOIA request. It has also moved for summary judgment. EPIC asserts that "the record raises substantial doubt as to the adequacy of the FBI's search. This doubt can only be resolved through the discovery ..." EPIC seeks a stay of proceedings on the DOJ's motion for summary judgment while it conducts discovery. See also, EPIC's Carnivore litigation page.
Privacy Legislation and Freedom of Speech
8/9. The Cato Institute released a paper [PDF]  titled "Internet Privacy and Self-Regulation Lessons from the Porn Wars," by Tom Bell. It argues that "The same points that have helped strike down statutory limits on Internet speech thought harmful to its readers (because it is indecent or harmful to minors) argue against enacting new statutory limits on speech thought harmful to its subjects (i.e., privacy legislation). In both cases, self-help offers Internet users a less-restrictive means of preventing the alleged harms caused by free speech than does legislation. In both cases, the alternative offered by digital self-help makes regulation by state authorities not only constitutionally suspect but, from the more general points of view of policy and effectiveness, functionally inferior." See also, executive summary. Tom Bell is an associate professor at the Chapman University School of Law and an adjunct scholar at the Cato Institute.
Decisions in Patent Infringement Cases
8/9. The U.S. Court of Appeals (FedCir) issued its opinion in MSM Investments v. Carolwood Corp., a patent infringement case. MSM is the assignee of U.S. Patent 5,071,878, which is titled "Use of methylsulfonylmethane to enhance diet of an animal". MSM filed a complaint in U.S. District Court (NDCal) against several defendants alleging infringement of the '878 patent. Defendants moved for summary judgment of invalidity under 35 U.S.C. § 102(b) based on public use more than one year prior to the effective filing date of the ’878 patent. The District Court granted summary judgment. The Appeals Court affirmed.
8/9. The U.S. Court of Appeals (FedCir) issued its opinion in Day v. Reeves Brothers, a patent infringement case involving newspaper printing technology. Day is the holder of U.S. Patent No. 4,770,928. It relates to a method of manufacturing compressible printing blankets used for printing newspapers, magazines, and other products made using offset lithographic printing methods. Printing blankets are used in the printing industry to transfer ink from a printing plate to paper. Reeves Brothers manufactures compressible printing blankets. Day filed a complaint in U.S. District Court (DSCar) against Reeves Brothers alleging infringement of two claims of the '928 patent. The District Court granted summary judgment of non-infringement based upon its construction of the claims, and under the doctrine of equivilents. The Appeals Court affirmed.
Trade Promotion Authority
8/9. Senate Majority Leader Tom Daschle (D-SD) gave a speech at the Woodrow Wilson International Center for Scholars in Washington DC in which he criticized President George Bush on a wide range of foreign policy issues. Sen. Charles Grassley (R-IA) responded by criticizing the Democrats' positions on trade promotion authority (TPA), and by calling upon Sen. Daschle to set a date for taking up TPA legislation in the Senate.
Sen. Daschle's speech covered many issues. It also touched upon trade and TPA (which is also known as fast track). He stated that "We need to recognize that the benefits of trade come with real costs, and to the extent we recognize those costs and address them, we better position ourselves to maintain and enhance our status as the world's leading economic power. We need to address head-on the concerns and fears that people have about globalization. But we should not use these concerns as a pretext for protectionism. As we move forward in opening markets and increasing trade, we need to address core labor standards and environmental protections, and help people who are dislocated by trade and globalization."
Sen. Grassley, the ranking Republican on the Senate Finance Committee, and a leading proponent of TPA, responded to Sen. Daschle's speech. He stated that "It's ironic that the Democrats are trying to characterize President Bush and the Republicans as isolationists. It's President Bush who is leading the effort to get trade promotion authority through the U.S. Congress. Trade promotion authority is the key to unlocking new export markets for U.S. agriculture, manufactured goods and services. Trade promotion authority is vital to maintaining U.S. economic leadership in the world. It seems hypocritical for Democratic party to be criticizing President Bush for his leadership abroad when it is they who have stymied our efforts here at home to get the President the tools he needs to lead.
Sen. Grassley also said that "I would call upon them to set a date certain to take up legislation granting the President trade promotion authority in the Senate this year. Scheduling a vote on trade promotion authority would show real leadership and speak much louder than words ever could."
RUS Amends Rules
8/9. The USDA's Rural Utilities Service (RUS) published a notice of rule changes in the Federal Register pertaining to the financing of new telecommunications services. The notice states that the RUS is "amending its regulations covering lien accommodations under certain circumstances where the borrower's financial strength is sufficient to protect security for the Government's loans and the lender seeking a lien accommodation." See, Federal Register, August 9, 2001, Vol. 66, No. 154, at Pages 41755 - 41772.
People and Appointments
8/9. FCC Commissioner Kathleen Abernathy announced at the August 9 FCC meeting that Jason Scism will be her Special Assistant for congressional, intergovernmental and industry relations. He is currently a summer intern, and student at George Mason University School of Law. He will continue his legal studies at night. Prior to law school, he worked for the House Commerce Committee. See also, FCC release.
8/9. Vera Elson joined the Silicon Valley office of the law firm of McDermott Will & Emery as a partner in its intellectual property group. She represents high tech and other clients in intellectual property litigation, and provides strategic counseling on intellectual property matters. She also has masters degree in electrical engineering. See, release.
BuildNet Files Chapter 11 Petition
8/8. BuildNet and six of its subsidiaries filed a Chapter 11 bankruptcy petition in U.S. Bankruptcy Court (MDNCar). NxTrend Technology, a wholly owned subsidiary of BuildNet, is not included in the petition. BuildNet, of Research Triangle Park, North Carolina, provides management software to homebuilders and suppliers in the residential construction industry. NxTrend Technology, of Colorado Springs, Colorado, makes supply chain management software. See, BuildNet release.
9th Circuit Rules in Trade Secrets Case
8/8. The U.S. Court of Appeals (9thCir) issued its opinion [PDF] in Yeti v. Deckers and Granville, a case involving misappropriation of trade secrets. Plaintiff had a boot design. Defendant, James Granville, after signing a non disclosure agreement, obtained information about the boot from plaintiff. His employer, Deckers Outdoor Corporation, the other defendant, then incorporated trade secrets obtained from plaintiff into its products. Plaintiff filed a complaint in U.S. District Court (DMont), based upon diversity of citizenship, against defendants, alleging misappropriation of trade secrets and other claims. Plaintiff prevailed, and this appeal followed. The trial court did not award exemplary damages, and plaintiff cross appealed on this issue. The Appeals Court affirmed on all points raised by defendants, but reversed the District Court's refusal to consider exemplary damages.
Privacy and Surveillance Cameras
8/8. The Supreme Court of the Oregon issued its opinion in Oregon v. Clay, a criminal case regarding Oregon's photo radar law. Defendant, Sara Clay, was convicted under Oregon's photo radar surveillance law (ORS 811.123) of driving 11 miles per hour over the speed limit. The Oregon Court of Appeals affirmed, but the Oregon Supreme Court reversed. The Supreme Court did not hold the statute unconstitutional. Rather, the Court reversed on evidentiary grounds. It held that since the state had not presented evidence that Clay was either the driver or registered owner of the car, the conviction cannot stand.
Collocation Rules
8/8. The FCC released its Fourth Report and Order [PDF] in the proceeding named "In the Matter of Deployment of Wireline Services Offering Advanced Telecommunications Capability" and numbered CC Docket No. 98-147. The order was adopted by the FCC on July 12. Commissioner Kevin Martin wrote a separate opinion concurring in part, and dissenting in part.
Cameras and Facial Recognition Software Defended
8/8. The Security Industry Association (SIA) hosted a panel discussion at the National Press Club in Washington DC regarding the use of closed circuit TV cameras and facial recognition software. Richard Chase of the SIA stated that "It is time to stop focusing solely on how this technology could be potentially abused, and start talking about how this technology can be positively used in a responsible and effective way. ... It is time to stop irresponsible grandstanding and fear mongering, and to start open and honest dialogue on the shaping of policies, which will ensure responsible use. This technology is about public safety and life safety. It is an invaluable tool for law enforcement to ensure we have safe communities in which we raise our families. See, Chase statement. See also, prepared statements of Joseph Atick (Visionics Corporation) and Thomas Seamon (International Association of Chiefs of Police), and SIA release.
Securities Fraud
8/8. The U.S. District Court (CDCal) sentenced Mark Jakob to 44 months in prison. He earlier plead guilty to two counts of securities fraud and one count of wire fraud in connection with his perpetration of the Emulex stock hoax. He disseminated a false press release that was picked up by news services, and then caused Emulex stock price to drop. Emulex makes storage networking products. (USA v. Jakob, D.C. No. CR-00-1002-DT.) See, SEC release.
8/8. The SEC reached a settlement in its civil securities fraud action against Fred Moldofsky. The SEC filed a complaint in the U.S. District Court (SDNY) against Moldofsky on March 30, 2000, alleging that he posted a series of fraudulent press releases about Lucent on a Yahoo Finance message board. (SEC v. Moldofsky, D.C. No. 00 Civ. 2425 (LTS).) See, SEC release.
USTR Zoellick Talks Tech in India
8/8. USTR Robert Zoellick arrived in India for three days of meetings with Indian government officials and private sector leaders. Zoellick will hold discussions with Indian business leaders, including those in the information technology sector. He stated in a release that "I am interested in learning more about India's IT sector, which is contributing remarkably to India's economic development and to the growing economic linkages between the United States and India."
Next week, Zoellick will visit Iowa, home state of Sen. Charles Grassley (R-IA), the ranking Republican on the Senate Finance Committee, which has jurisdiction over many trade issues.
DOJ and USPS Crack Down on Internet Porm
8/8. Attorney General John Ashcroft and Chief Postal Inspector Kenneth Weaver held a press conference to announce the results of an undercover operation directed at trafficking of child pormography through the mail and via the Internet. The program, named "Operation Avalanche," has resulted so far in 144 searches in 37 states with 100 arrests. See, DOJ release.
FCC Commissioner Martin Picks Staff
8/8. FCC Commissioner Kevin Martin announced the selection of staff. Sam Feder will be interim Senior Legal Advisor, and will focus on common carrier matters. David Brown will be interim Legal Advisor, and will focus on mass media and cable issues. Monica Desai will be interim Legal Advisor, and will focus on wireless and international issues. Ginger Clark will be Confidential Assistant, and will handle scheduling for Martin. Dolly Johnson will be Staff Assistant, and will handle scheduling for Legal Advisors.
Sam Feder previously worked at the FCC as Associate Chief of the Competitive Pricing Division of the Common Carrier Bureau and as Legal Advisor to former Commissioner Furchtgott- Roth for common carrier matters. Before joining the FCC he worked at the Washington DC law firms of Harris Wiltshire & Grannis and  Kellogg Huber. His minor in college was computer science.
David Brown previously worked at the FCC as an Attorney Advisor in the Video Services Division of the Mass Media Bureau. Before that he was an associate at the Philadelphia law firm of Weber Goldstein Greenberg & Gallagher. He was also a staff attorney in Pennsylvania's Office of Inspector General, Governor's Office of General Counsel.
Monica Desai previously worked at the FCC as an attorney in the Commercial Wireless Division of the Wireless Telecommunications Bureau (WTB) and in the Public Safety and Private Wireless Division of the WTB. Before that she was an associate at the law firm of Sonnenschein Nath & Rosenthal. She was also an adjunct professor at the George Mason University School of Law.
More People and Appointments
8/8. Lauren Van Wazer was named Special Counsel to the Chief of the FCC's Office of Engineering and Technology, effective August 20, 2001. She was previously interim Legal Advisor to FCC Commissioner Michael Copps for wireless and international issues. Before that she was a senior staff attorney in the Commercial Wireless Division of the Wireless Telecommunications Bureau. And before 1999, she was an associate at the law firm of Arnold & Porter. She also held several management positions in the Network Services department of AT&T.
8/8. Avanex Corporation announced that Thomas LaWer has been promoted to VP and General Counsel, and will be Secretary to the Board. LaWer joined Avanex in 2000. Prior to that, he was an associate at the law firm of Wilson Sonsini. Avanex makes photonic processors for optical communications networks. See, Avanex release.
Microsoft Appeals to Supreme Court
8/7. Microsoft filed a Petition for Writ of Certiorari with the Supreme Court. Microsoft also filed a motion titled "Appellant's Motion for Stay of the Mandate Pending Petition for Writ of Certiorari" with the U.S. Court of Appeals (DCCir). See also, PDF copy in USCA web site.
Microsoft seeks to have the entirety of U.S. District Court Judge Thomas Jackson's findings of fact and conclusions of law vacated. Microsoft submits that the question presented for review is "Whether the court of appeals erred in not disqualifying the district judge as of the date of his earliest known violation of 28 U.S.C. § 455(a) and the Code for Conduct of United States Judges, thus requiring that his findings of fact and conclusions of law be vacated."
On June 28 the U.S. Court of Appeals (DCCir) issued its en banc opinion in USA v. Microsoft. This is an antitrust action brought by the Department of Justice's Antitrust Division and by individual states. The Court of Appeals affirmed in part, reversed in part, and remanded in part the District Court's judgment assessing liability. The Appeals Court affirmed in part the Judge Jackson's judgment that Microsoft violated § 2 of the Sherman Act by employing anticompetitive means to maintain a monopoly in the operating system market. It vacated in full the Final Judgment containing the break up order. Finally, it remanded the case to a different trial judge, because Judge Jackson "engaged in impermissible ex parte contacts by holding secret interviews with members of the media and made numerous offensive comments about Microsoft officials in public statements outside of the courtroom, giving rise to an appearance of partiality."
ProComp, an anti Microsoft group, released a statement on August 2 in which it stated that "It is clear that Microsoft has gone into its four-corners offense, trying to run out the clock until its unlawful product, Windows XP, is shipped to consumers. It should not be surprising if Microsoft next appeals to the U.S. Supreme Court".
Steve DelBianco, VP of the Association for Competitive Technology (ACT), a pro Microsoft group, stated on August 7 that "It's ironic that some, including AOL Time Warner, would discount Microsoft's decision as a delaying tactic, when it is clear that they are desperately trying to delay Windows XP as they continue to play catch-up on the innovation they've neglected while whining to Congress and the courts. If AOL and the state Attorneys General had a credible case to block Windows XP, they could file for injunction at any time.  But they don’t have a case, and they can't be so foolish as to stop the rollout of a product that will give a much needed shot in the arm to the tech sector."
Muris Promises Continuity of Antitrust Enforcement
8/7. FTC Chairman Timothy Muris gave a speech in Chicago to the American Bar Association's Antitrust Section Annual Meeting titled "Antitrust Enforcement at the Federal Trade Commission: In a Word -- Continuity". He stated that "I am fully committed to the institution and its mission of protecting consumers through actively enforcing our antitrust and consumer protection laws" and that "Continuity will be the norm, with changes at the margins."
He summarized the purpose of antitrust enforcement by the FTC: "Although there are disagreements about specific cases, there is widespread agreement that the purpose of antitrust is to protect consumers, that economic analysis should guide case selection, and that horizontal cases, both mergers and agreements among competitors, are the mainstays of antitrust." He also stated that press reports that "the Bush administration will relax antitrust enforcement" are unfounded.
He told the gathering of antitrust practitioners that "if you come in with transactions that would not fly in the past, you are likely to "crash" unless you have compelling, stubborn facts on your side. To some of you, let me say it more bluntly. A few members of the merger bar have been telling the press that we are going to have more relaxed standards. Those folks will be doing their actual or potential clients a big disservice if those clients act on that presumption."
Antitrust and High Tech. Muris also addressed high tech companies. He stated that "Merger analysis in "high tech" industries is not fundamentally different than in other industries. The basic Guidelines analysis can be applied. We should proceed, however, cognizant of our lesser experience in high tech industries. Moreover, the high tech arena, by its nature, is constantly changing. New high tech industries, often with new technical issues, continue to be born and to change. One aspect of high tech may warrant especially close scrutiny. The fierce competition for success in these industries often results in the "winner" enjoying a (perhaps short-lived) monopoly. We should be especially reluctant to allow those firms to merge with actual (or potential) competitors. This was part of the basis for my criticism of the Clinton Antitrust Division's failure to challenge the Microsoft-Web TV merger."
Microsoft. Muris also addressed non merger enforcement. "There are several important issues here, such as competition in pharmaceuticals and intellectual property issues. ... More recent developments confirm the importance of a strong non-merger agenda. We used to believe that antitrust counseling, at least for major companies, would generally deter anticompetitive conduct. We have learned, however, from ADM, the vitamins case, numerous other price-fixing cases, and from Microsoft."
AAG James Announces New Program for Merger Investigations
8/7. Charles James, Assistant Attorney General in charge of the Antitrust Division (ATR) gave a speech in Chicago to the American Bar Association's Antitrust Section. He summarized key staff appointments, and announced a new program for conducting Hart Scott Rodino merger investigations. He stated that "The program has two parts: (1) aggressive use of the initial HSR waiting period to identify possible competitive issues and routes of inquiry; and (2) early consultations with parties to negotiate, where possible, specific procedural agreements for the investigation." See also, ATR release.
James also reflected upon his predecessors, including "Joel Klein, whose civil enforcement initiatives fearlessly confronted some of the most complex issues of the so-called New Economy."
Commerce Committee Leaders Write Sec. Evans re TLDs
8/7. Rep. Billy Tauzin (R-LA), Rep. John Dingell (D-MI), Rep. Fred Upton (R-MI), and Rep. Ed Markey (D-MA) sent a letter to Commerce Secretary Donald Evans regarding the ICANN process for selecting new Internet Top Level Domain Names (TLDs). The four want the "ICANN to expeditiously initiate a new TLD round", and want the Department of Commerce to monitor the ICANN with respect to this. The four are the Chairman and ranking Democrat of the House Commerce Committee, and the Chairman and ranking Democrat on the Telecom and Internet Subcommittee, respectively.
They also wrote that "there is pending in the Telecommunications and the Internet Subcommittee a bill that would require the Department of Commerce to negotiate with ICANN to chose an entity to operate a “.kids” domain. “.kids” would provide a safe place for children to access the Internet, a goal we all strongly support." See, HR 2417, the Dot Kids Domain Name Act of 2001, sponsored by Rep. John Shimkus (R-IL) and Rep. Markey.
California Has Personal Jurisdiction over Non Resident DeCSS Poster
8/7. The Court of Appeal of California (6th Appellate District) issued its opinion [PDF] in Pavlovich v. Superior Court, holding that California's long-arm jurisdiction statute reaches owners, publishers, and operators of web sites when, in violation of California law, they make available for copying or distribution trade secrets or copyrighted material of California companies.
Jurisdictional Issue. This opinion does not address the merits of the case; that is, it does not address whether or not the defendant did violate the trade secrets or copyrights of the plaintiff. Rather, this opinion deals only with jurisdiction; that is, it addresses whether the California courts have authority to try this case. California's long arm jurisdiction statute authorizes California courts to "exercise jurisdiction on any basis not inconsistent with the Constitution of this state or of the United States."
DVD CCA Complaint. The DVD Copy Control Association (DVD CCA) filed a complaint in the Superior Court for Santa Clara County California against Matthew Pavlovich and others alleging misappropriation of trade secrets and other claims.
Defendant. Pavlovich published the DeCSS program in a web site which he owned and operated. He is not a resident of California. However, he is the President of a technology start up company, and a leader of the open source movement. He also testified that he knew that the movie industry was based in California, and that DeCSS would harm that industry. He sought to quash the summons.
DVD and DeCSS. DVD is sometimes known as Digital Versatile Disc. CSS is a Content Scrambling System for DVD to protect intellectual property rights by means of encryption. DeCSS is a decryption tool that facilitates piracy.
Holding. The Court of Appeal held that the exercise of jurisdiction over Pavlovich is consistent with California's long arm statute. The Court relied heavily on the Supreme Court of the United States' opinion in Calder v. Jones, 465 U.S. 783 (1984), which held that the California courts could exercise jurisdiction in a defamation case over a non resident Floridian who published an article in the National Enquirer, a print publication that circulated in California. The defendant in Calder, like Pavlovich, had sufficient minimum contacts with the California that it would not offend traditional notions of fair play and substantial justice to exercise jurisdiction, notwithstanding non resident status. In both cases the defendant knew that his activities were actionable, and were causing injury in California. The Court stated that Pavlovich's knowledge that the movie industry was based in California was significant.
BellSouth's paper advocates an abandonment of the goal of local wireline competition as envisioned by the 1996 Act. What now matters, according to BellSouth's paper, is competition between wireline service and wireless and Internet services, not competition among wireline service providers.
Fed Circuit Affirms in Pall v. PTI
8/7. The U.S. Court of Appeals (FedCir) issued its opinion in Pall v. PTI Technologies, a patent infringement case involving filter technology for filtering high temperature corrosive chemicals such as hot acids used in the etching process of semiconductor chips.
PTI filed a complaint in the U.S. District Court (CDCal) against Pall alleging infringement of U.S. Patent No. 4,663,041, titled "Fluorocarbon filter element". Pall filed a complaint in the U.S. District Court (EDNY) against PTI alleging infringement of its U.S. Patent No. 4,609,465, titled "Filter cartridge with connector seal." The California action was transferred to New York and the two cases were consolidated.
The District Court granted Pall's motion for summary judgment of non infringement of the '041 patent, and PTI's motion for summary judgment of non infringement of the '465 patent. The Appeals Court affirmed the District Court's decision on the '041 patent, but vacated and remanded to the District Court for further proceedings on the '465 patent.
More Intellectual Property News
8/7. The U.S. Court of Appeals for the Federal Circuit heard oral argument in Xerox v. 3Com, No. 00-1464, a patent infringement case involving handwriting recognition software.
8/7. The U.S. Court of Appeals for the Federal Circuit heard oral argument in Taiwan Semiconductor v. ITC, No. 01-1060.
8/7. The United States suspended the special duty-free status for Ukrainian products and issued a preliminary list [PDF] of other products that could face sanctions, due to Ukraine's persistent failure to curb unauthorized production of optical media products, including CDs, CD-ROMs, and DVDs. See, USTR release. The RIAA was pleased. See, RIAA release.
8/7. The USPTO published in its web site a copy of the August issue of the USPTO Pulse.
8/7. Priscilla Dunckel joined the Dallas office of the law firm of Baker Botts as a partner in the intellectual property group, and head of the Dallas trademark office. She will focus on trademark law, as well as matters involving copyrights, trade secrets, Internet law and the licensing of entertainment rights. She was previously with Thompson & Knight. She graduated from Southern Methodist University law school in 1993. See, release.
FCC Will Petition for Writ of Certiorari in NextWave Case
8/6. The FCC filed a motion with the U.S. Court of Appeals (DCCir) in the NextWave v. FCC. The motion is titled "Motion to Stay the Mandate Pending the Filing of a Petition for a Writ of Certiorari." It states that the "Acting Solicitor General authorized the FCC on August 6, 2001, to file a petition" for writ of certiorari to review the Appeals Court's June 22 opinion holding that the FCC is prevented from canceling NextWave's spectrum licenses by the Bankruptcy Code. The FCC's motion further requests that the U.S. Court of Appeals "stay issuance of the mandate in this case pending the government's filing of a petition for a writ of certiorari in the Supreme Court."
Background. This is a continuation of the seemingly never ending litigation deriving from the FCC's bungled management of the C Block auctions. NextWave obtained spectrum licenses at FCC auctions in 1996. The FCC permitted NextWave to obtain the licenses then, and later make payment under an installment plan, thus creating a debtor creditor relationship between NextWave and the FCC. NextWave did not make payments required by the plan, and filed a Chapter 11 bankruptcy petition. The FCC, which usually acts as though the Communications Act of 1934 is the only legal authority which constrains its actions, cancelled the licenses. However, the FCC was blocked by the bankruptcy court, citing § 525 of the Bankruptcy Code. The U.S. District Court (SNDY) affirmed. The U.S. Court of Appeals (2ndCir) issued its order reversing and remanding the case on Nov. 24, 1999; it issued its opinion explaining its reversal in May 2000. The FCC then re- auctioned this spectrum to Verizon Wireless, Voice Stream and other successful bidders, which intend to use it for third generation wireless, and other, services.
Opinion of the DC Circuit.  NextWave petitioned the FCC to reconsider its cancellation of its licenses. The FCC refused, and NextWave petitioned for review by the Court of Appeals in the District of Columbia. The DC Circuit ruled on June 22 that the 2nd Circuit had not already addressed NextWave's bankruptcy claims. It wrote that the FCC is prevented from canceling the spectrum licenses pursuant to § 525 of the Bankruptcy Code. It wrote that the FCC "violated the provision of the Bankruptcy Code that prohibits governmental entities from revoking debtors' licenses solely for failure to pay debts dischargeable in bankruptcy. The Commission, having chosen to create standard debt obligations as part of its licensing scheme, is bound by the usual rules governing the treatment of such obligations in bankruptcy."
Chairman Powell. FCC Chairman Michael Powell released a statement in which he said that "I welcome the decision today by the Justice Department to support our appeal of the NextWave case to the Supreme Court. High Court review will protect the integrity of the FCC's auctions program, which Congress has chosen as the best method of assigning scarce and precious spectrum resources to those that will put them to their most productive use. Through this appeal, I also hope the Court will clarify how the important public policy goals of the Bankruptcy Code should interact with the equally important public policy goal of ensuring that spectrum is used for the benefit of the American people. The FCC's petition for a writ of certiorari is due to be filed on September 22nd."
Consequences. The FCC's management of this spectrum, and the resulting litigation, have created considerable regulatory uncertainty, delayed the use of valuable spectrum, and delayed the deployment of new technologies that might use this spectrum. Moreover, even if the claims of NextWave and the re-auction winners are settled, or resolved by the courts, it is hypothetically possible that other communications companies that did not participate in the auction will bring legal challenges to the FCC's handling of this process.
Rep. Goodlatte Addresses Internet Policy Issues
8/6. Rep. Bob Goodlatte (R-VA) gave a speech regarding security, privacy, encryption and export controls.
He stated that "the Federal Government needs to ensure that it plays an enabling and not an inhibiting role in supporting the movement of industry and people into the Information Age. It is critical that policy makers recognize that the information technology industry has become a thriving force in our economy because of the simple fact that it has largely been left alone to develop and grow according to the demands of free market processes."
Privacy. Rep. Goodlatte stated that "To its credit, Congress is moving cautiously in considering privacy legislation. The House Commerce Committee has held a comprehensive series of online privacy hearings throughout the year. I expect that some legislation will soon result from those hearings." However, he added "It is more likely that with the shift of power in the Senate, we will see significant privacy legislation introduced and considered in the Senate. Senator Hollings, Chairman of the Senate Commerce Committee, has made no secret of the fact that he is currently putting together a comprehensive privacy bill. I fear that Chairman Hollings' proposal will not achieve the appropriate balance between regulation and freedom that we are discussing today, but I will reserve judgment until I have seen specific legislation."
Encryption. Rep. Goodlatte and Rep. Zoe Lofgren (D-CA) co-sponsored the Security and Freedom through Encryption (SAFE) Act in several previous Congresses. See, for example, HR 850 IH (106th Congress). It never became law. However, swelling support for the bill lead the Clinton administration to adopt rules significantly liberalizing encryption export laws. Rep. Goodlatte stated that "Congress is continuing to monitor the implementation of the new encryption regulations, to make sure that they are allowing U.S. companies to fully compete in the global marketplace by freely exporting strong encryption products. Congress remains ready to act legislatively if the regulatory process breaks down, but so far, that process seems to be working effectively."
Export Administration Act. The EAA had been scheduled to expire on August 20, but was just extended through November 20. Rep. Goodlatte stated that "This stop-gap authorization should give both the House and Senate sufficient time to consider various export reform legislation including the 'Export Administration Act of 2001' (S. 149), a comprehensive rewrite of the EAA, introduced by Senators Enzi and Gramm. An export reform bill is likely to pass before the November deadline." He added that "Any rewrite of the EAA should include the following key ingredients: (1) streamlined procedures that will lead to faster licensing decisions, shortening the review time before technology products can be exported, and (2) regarding high performance computers, moving away from MTOPS to a system that looks at the technology as a whole and is flexible with increases in technology."
U.S. Business Groups File Amicus Brief in Yahoo v. LICRA
8/6. Several American business groups filed an amicus curiae brief [PDF] with the U.S. District Court (NDCal) in the case Yahoo v. LICRA. The case, which concerns French efforts to limit speech on Yahoo servers located in the U.S., involves constitutional and jurisdictional issues raised by Internet speech.
French Action. Last year two French groups, LICRA and UEJF, obtained a judgment from a French court ordering Yahoo to "render impossible" access by persons in France to certain content on servers located in the United States.
U.S. Action. Yahoo, which is a Delaware corporation based in San Jose, California, then filed a complaint in U.S. District Court seeking a declaratory judgment that the judgment the French court is unenforceable in the U.S. as contrary to the U.S. Constitution.
French Motion to Dismiss. The French, who asserted French jurisdiction over Yahoo in their suit in France, asserted that the U.S. Court did not have jurisdiction over them in Yahoo's suit against them. They filed a Rule 12(b)(2) motion to dismiss the complaint in the U.S. District Court for lack of personal jurisdiction. The District Court issued its Order Denying Motion to Dismiss [PDF] on June 7. It held that it had personal jurisdiction over the defendants under California's long arm jurisdiction statute, which permits a court to exercise jurisdiction to the full extent authorized by the Due Process Clause of the Constitution. The Court stated that the purposeful availment requirement was met because defendants had written a demand letter to Yahoo in California, used U.S. Marshals in California to serve papers on Yahoo, and sought an order of the French court directing Yahoo's operations in California.
Amici. The groups filing the amicus brief on the merits in support of Yahoo are the U.S. Chamber of Commerce, Commercial Internet eXchange Assoc., Information Technology Association of America, US Internet Industry Association, Online Publishers Assoc., and U.S. Council for International Business.
Threat to the Internet. Amici argued in their brief that "At issue in this case is whether a foreign country can control the content that U.S. individuals, entrepreneurs, businesses, community organizations, libraries and churches can place on the "exponentially growing, worldwide medium that is the Internet." ", quoting from ACLU v. Reno. The amici stressed that the French ruling could have a "devastating impact" on the Internet and internet commerce. It elaborated that "The decision of the French court in this case represents one of the greatest threats to the promise of the Internet seen to date. The French court concluded that, because French citizens sought out and managed to located material on a U.S. company's website that is offensive to French law, courts in France can assert jurisdiction over the U.S. company, and mandate that the company restrict French citizens' access to that material." Hence, "if the French court's decision is recognized in this country, every piece of information posted on the Internet will have to conform to the laws of every country in which that material might be accessed ..."
Legal Arguments. The amici advanced two legal arguments. First, they argued that "United States courts may not enforce judgments of foreign courts that lack personal jurisdiction over U.S. defendants, because enforcement of such judgment would violate the Due Process Clause of the Fifth Amendment." Second, they argued that "even if a foreign court properly exercises personal jurisdiction over a given defendant, a foreign judgment should not be enforced if the foreign legal system lacked prescriptive jurisdiction over the subject matter of the conduct at issue."
Fed Circuit Affirms in Innovad v. Microsoft
8/6. The U.S. Court of Appeals (FedCir) issued its opinion in Innovad v. Microsoft, a patent infringement action involving dialing systems in hand held computers.
Innovad filed a complaint in U.S. District Court (NDTex) against Psion, Apple Computers, Ericsson, HP, Phillips Electronics, Everex Systems, Sony Electronics, and LG Electronics alleging patent infringement. Innovad alleged infringement of its U.S. Patent No. 4,882,750, for a programmable dial system, by making, selling, and using palm sized computers that automatically dial preprogrammed telephone numbers when loaded with appropriate software. Innovad also named as defendants Microsoft and Odyssey Computing, alleging patent infringement for manufacturing the software to perform these functions.
Microsoft, Psion and Apple moved for summary judgment. The District Court determined that plaintiffs did not infringe, either literally or by equivalents, the patent in suit, because it does not cover any dialer units with a keypad and the accused devices include keypads. The Court of Appeals affirmed.
GAO Releases Report on On-Line Securities Trading
8/6. The GAO released a report [PDF] titled "On-Line Trading: Investor Protections Have Improved but Continued Attention Is Needed". The report, which was prepared for Rep. John Dingell (D-MI) and Rep. Ed Markey (D-MA), addresses progress being made by broker dealer web sites regarding investor privacy, trade execution, margin risk, trading risk, and the potential for service disruptions. The report found that the number of complaints, relative to the number of on line trades, declined from 1999 to 2000.
The report also recommended that the SEC (1) "work with the securities industry to establish a consistent and meaningful measure for outages and delays and ensure that broker- dealers maintain consistent records of system outages and delays, and disclose the potential for service disruption on their Web sites"; (2) "take steps to ensure broker- dealers disclose additional information related to investor protection on their Web sites"; and (3) "monitor the extent to which broker- dealers accept OCIE recommendations on disclosing trading risk, potential for systems outages and failures, and protecting investor records and information. If SEC finds that broker-dealers are not incorporating such recommended practices, we recommend that SEC's Acting Chairman consider further rulemaking in these areas."
BellSouth Seeks to Redefine Competition
8/6. BellSouth released a paper [PDF] titled "Measuring Local Competition in a Changing Telecommunications Market". It was written by Steve Pociask, and funded by BellSouth. The paper argues "once separate industries are converging to form an Information Sector, and with this convergence comes heightened inter-industry competition between the various means of transporting electronic information.  However, while the Information Sector is rapidly changing, government measurements of competition have not".
The paper states that currently, "telecommunications industry policymakers rely on old measurements that understate and underestimate the actual level of the competition." Instead, the paper asserts that any measures of the level of competition should include use of cell phones and Internet data services, including email messaging, instant messaging, voice over internet protocol, IP teleconferencing and virtual PBX services. See, also BS release.
The paper does not address the competition goals of the Telecom Act of 1996. One of the main goals of the 1996 Act was to end the incumbent local exchange carriers' (ILECs) monopoly control over local wireline phone service. These ILECs, such as BellSouth, own almost all of the local facilities, including the central offices and the copper wires that run from the local offices into homes and businesses. § 151 of the Telecom Act requires telecommunications carriers to interconnect with other telecommunications carriers. It also mandates many specific things which ILECs must do for their competitors. ILECs have the duties to negotiate, to interconnect, to provide unbundled access to their network elements, to offer communication services at wholesale rates, and to allow collocation of equipment of competitive local exchange carriers (CLECs) in their central offices. However, the Bells have dragged their feet, and as a result, competition in the local loop has fallen far short of the goals of the authors of the 1996 Act.
Appeals Court Decisions
8/6. The U.S. Court of Appeals (3rdCir) issued its opinion in Newton v. Merrill Lynch, a case involving class certification under FRCP 23 in cases involving allegations of violation of federal securities laws.
8/6. The U.S. Court of Appeals (1stCir) issued its opinion in Yankee Candle v. Bridgewater Candle, a case involving claims of copyright infringement, trade dress infringement, tortious interference, and deceptive trade practices. The dispute involved candle fragrance labels. Affirmed.
People and Appointments
8/6. Paul Margie will become legal advisor to FCC Commissioner Michael Copps for spectrum and international issues, effective August 20, 2001. Margie is currently Senior Commerce Counsel for Sen. John Rockefeller (D-WV), a senior member of the Senate Commerce Committee. He is also an Adjunct Professor of Law at Georgetown University (GU), where he co-teaches a course titled Law in Cyberspace. He previously worked at the Washington DC law firm of Wiley, Rein & Fielding, in its communications and technology law practice groups. See, GU bio.

Go to News Briefs from August 1-5, 2001.