|News from January
TechNet Makes Broadband Policy Recommendations
1/15. The Technology Network
(TechNet) released a document [PDF]
titled "A National Imperative: Universal Availability of Broadband by
2010" in which it calls on policy makers to "make broadband a national
priority and to set a goal of making an affordable 100 megabits per second
broadband connection available to 100 million American homes and small
businesses by 2010." The report also lists numerous policy recommendations.
SEC Fines BellSouth
1/15. The Securities and Exchange
Commission (SEC) filed a civil complaint in U.S.
District Court (NDGa) against Bellsouth
alleging violations of federal securities laws. The SEC also instituted a
related administrative proceeding against BellSouth. Both proceedings pertain to
BellSouth's actions and omissions relating to its Latin American subsidiaries in
Venezuela (Telcel) and Nicaragua (Telefonia Celular de Nicaragua). See also, SEC
release and order
instituting administrative proceeding.
The SEC found in its order that BellSouth violated §§ 13(b)(2)(A) and
13(b)(2)(B) of the Securities Exchange Act of 1934. It further ordered BellSouth
to cease and desist from committing any further violations. These sections are
the "books and records" and "internal controls" provisions,
respectively, of the Foreign Corrupt Practices Act (FCPA). The SEC found that
"Telcel created false books and records by improperly recording the falsely
documented, unsubstantiated payments to the offshore companies as bona fide
services. In addition, Telcel's internal controls failed to detect the
unsubstantiated payments for a period of at least two years."
The SEC also found that Telefonia created false books and records by improperly
recording payments to the wife of a Nicaraguan legislator as "consulting
BellSouth consented to the entry of this cease and desist order. It also
consented to entry of judgment in the court proceeding directing it to pay a
$150,000 civil penalty.
FCC Sets Comment Deadlines in Rule Making Proceedings
1/15. The Federal Communications
Commission (FCC) published a notice
in the Federal Register in which it set deadlines for public comments in
response to its notice of proposed rulemaking (NPRM) regarding the appropriate
regulatory requirements for incumbent local exchange carriers' (ILECs')
provision of broadband telecommunications services. The FCC adopted this NPRM at
its December 12 meeting. Comments are due March 1, 2002; and reply comments are
due April 1, 2002. This is CC Docket No. 01-337. See, Federal Register, January
15, 2002, Vol. 67, No. 10, at Pages 1945 - 1947.
1/15. The Federal Communications Commission
(FCC) published a notice
in the Federal Register in which it set deadlines for public comments in
response to its notice of proposed rulemaking (NPRM) regarding its unbundling
analysis under § 251
of the Communications Act and the identification of specific unbundling
requirements for incumbent local exchange carriers (ILECs). The FCC adopted this
NPRM at its December 12 meeting. Comments are due March 18, 2002; reply comments
are due April 30, 2002. This is CC Docket No. 01-338. See, Federal Register,
January 15, 2002, Vol. 67, No. 10, at Page 1947 - 1953.
EPIC Files FOIA Suit Seeking LEAs' Records Re Purchase of
1/15. The Electronic Privacy
Information Center (EPIC) filed a complaint
District Court (DC) against the Department
of Justice (DOJ) and the Department of the
Treasury (DOT) alleging violation of the Freedom of Information Act (FOIA), 5 U.S.C. § 552. The
complaint alleges that the EPIC submitted FOIA requests for records pertaining
to the purchase of personal information from the private sector by law
enforcement agencies that are a part of the DOJ or DOT, including the Federal
Bureau of Investigation (FBI) and Internal Revenue Service (IRS). The complaint
further alleges that the DOJ and DOT failed to respond fully to the FOIA
requests. The EPIC seeks an order directing the DOJ and DOT to disclose the
requested records in their entireties.
The complaint references an article in the Wall Street Journal reporting that
federal law enforcement agency "employees had electronic access to
citizens' assets, phone numbers, driving records, and other personal information
from their desktop computers."
The complaint further states that "The use of private sector databases of
personal information enables the government to obtain detailed information on
citizens while avoiding the creation of files that would implicate protections
provided under the Privacy Act ..." See, 5 U.S.C. § 552a.
The EPIC seeks to compel the various law enforcement agencies that are a part of
the DOJ and DOT to produce "all records relating to transactions,
communications, and contracts concerning businesses that sell individuals'
Chris Hoofnagle, who is listed as lead counsel for the EPIC in the complaint,
stated in a release
that "Through the mining of public records and the purchase of credit
reporting data, private sector companies are amassing troves of personal
information on citizens for the government ... Serious questions exist involving
citizen access to profiles, their accuracy, and the potential for misuse of
People and Appointments
1/15. Jonathan Aberman
joined the Washington DC office of the law firm of Fenwick & West as a partner. David
Dutil joined the firm as an associate in the Washington DC office. Aberman
focuses on representing companies in biotechnology, computer software, Internet
services, and other industries. He previously was a partner in the Northern
Virginia office of the law firm of Pillsbury
Winthrop. See, F&W
1/15. Jerry Blackstock joined the litigation section of the Atlanta
office of the law firm of Hunton & Williams.
He was previously Chair of the Litigation Department of the law firm of Powell Goldstein Frazer & Murphy. See, H&W release.
1/15. President Bush gave a speech
in New Orleans, Louisiana, in which he advocated passage of legislation giving
the President trade promotion authority, also known as fast track authority.
1/15. The Communications for Coordinated
Assistance and Response to Emergencies Alliance (Comcare) released a report
titled "The E-Safety Program To Make Americans Safer". See also, executive
summary. The report offers a set of policy recommendations for improving
emergency communications. It recommends more wireless and wireline capacity;
continued deployment of E-911 service, and its extension to automobiles; and
federal funding for training, education, and research. It also recommends that
"first responders and their supporting agencies could be connected to each
other through a national emergency electronic registry, data sharing systems,
mapping, and other applications that could send real time emergency information
to and from multiple agencies."
1/15. The U.S.
Court of Appeals (FedCir) issued its opinion in EZ
Dock v. Schaffer Systems, an patent infringement case
involving interpretation of the on sale bar. The U.S. District Court (DMinn)
held that EZ Dock's U.S.
Patent No. 5,281,055 invalid under the on sale bar, codified at 35 U.S.C. § 102(b).
The Court of Appeals reversed and remanded.
Third Circuit Rules in Sherman § 2 Antitrust Case
1/14. The U.S.
Court of Appeals (3rdCir) issued its divided opinion in Lepage's
v. 3M, an antitrust case involving transparent tape. The majority
reversed a District Court order denying 3M judgment as a matter of law on a
Sherman Act Section 2 claim. The dissenter wrote that the majority's opinion
"would weaken § 2 of the Sherman Act to the point of impotence ... a
consummation greatly to be desired by the behemoths of industry, such as Microsoft ..."
Background. LePage filed a complaint in U.S.
District Court (EDPenn) against 3M alleging
violation of antitrust law. It alleged, among other things, that 3M used its
monopoly over its Scotch tape brand to gain a competitive advantage in the
private label tape portion of the transparent tape market in the U.S. through
the use of 3M's multi-tiered bundled rebate structure, which offered higher
rebates when customers purchased products in a number of 3M's different product
The jury returned a verdict in favor of 3M on unlawful agreements in restraint
of trade and exclusive dealing, and against 3M on monopolization and attempted
monopolization claims under Section 2 of the Sherman Act. 3M filed motions for
judgment as a matter of law (JMOL) and for a new trial. The District Court
granted 3M's motion for JMOL on the attempted maintenance of monopoly power
claim, but denied 3M's motion JMOL in all other respects, and denied the motion
for a new trial. The District Court entered a judgment for trebled damages of
$68,486,679. The present appeal followed.
Appeals Court. The Appeals Court affirmed the order granting the motion
for JMOL of law with respect to the attempted maintenance of monopoly claim, but
reversed the order denying the motion for JMOL in all other respects. Hence, the
case was remanded to the District Court with instructions to enter judgment in
favor of 3M. Judge Morton Greenberg wrote the opinion of the Court, in which
Judge Samuel Alito joined.
Dissent. Judge Dolores Sloviter wrote a long and stirring dissent. She
wrote that "the majority applies reasoning that would weaken § 2 of the
Sherman Act to the point of impotence. While that may be a consummation greatly
to be desired by the behemoths of industry, such as Microsoft or 3M, it would be an
incalculable loss to business generally and to the consumer. Section 2, the
provision of the antitrust laws designed to curb the excesses of monopolists and
near monopolists, is the equivalent in our economic sphere of the guarantees of
free and unhampered elections in the political sphere. Just as democracy can
thrive only in a free political system unhindered by outside forces, so also can
market capitalism survive only if those with market power are kept in
5th Circuit Denies Rehearing in PSLRA Class Certification Case
1/14. The U.S. Court of Appeals
(5thCir) issued its opinion
v. Compaq denying Berger's petition for rehearing en banc. This
is a case involving the heightened class certification requirements under the Private
Securities Litigation Reform Act of 1995 (PSLRA). A three judge panel
of the Court of Appeals issued its original opinion
on July 25, 2001 reversing the District Court's class certification order. See,
257 F.3d 475.
District Court. Mark Berger and others filed a complaint in U.S.
District Court (SDTex) against Compaq
and some of its directors alleging violations of §§ 10(b) and 20(a) of
the Securities and Exchange Act of 1934 (15 U.S.C. §§ 78j(b) and 78t(a)), and
Rule 10b-5 thereunder (17 C.F.R. § 240.10b-5). Berger and others sought
class action status. The District Court certified a plaintiff class and
appointed class representatives.
Appeals Court. Defendants sought interlocutory review of the
certification order, on the grounds that it failed to meet requirements of the
PSLRA. Congress passed the PSLRA in 1995 to insulate defendants from abusive
suits, particularly technology related companies with volatile stock prices. The
Appeals Court held that the District Court "improperly shifted the burden
of proof to the defendants by adopting a presumption that the class
representatives and their counsel are adequate in the absence of specific proof
to the contrary. Second, it applied an impermissibly lax standard for adequacy
that ignores the PSLRA's mandate that class representatives, and not lawyers,
must direct and control the litigation."
Petition for Rehearing. On petition for rehearing the plaintiffs argued
that the Court's original opinion created an additional, independent requirement
for the adequacy standard for class certification under FRCP 23 by reading the
provisions of the PSLRA into FRCP 23(a)(4). In denying rehearing, the Appeals
Court wrote: "This we have not done, nor have we changed the law of this
circuit regarding the standard for conducting a rule 23(a)(4) adequacy inquiry.
Rather, we mean to emphasize that Congress enacted the "lead
plaintiff" provisions of the PSLRA, 15 U.S.C. § 78u-4(a)(3)(B), to
direct courts to appoint, as lead plaintiff, the most sophisticated investor
available and willing so to serve in a putative securities class action."
WTO Appellate Body Affirms FSC Decision
1/14. The Appellate Body of the World Trade
Organization (WTO) issued its report [PDF]
holding that the U.S. tax regime regarding extraterritorial income violates the
WTO obligations of the U.S.
The Foreign Sales Corporation (FSC) tax regime, and its replacement legislation
passed in late 2000, benefit U.S. companies, such as Microsoft, Cisco, and
Motorola, that sell products abroad. The FSC tax scheme allowed a portion of a
U.S. taxpaying firm's foreign source income to be exempt from U.S. income tax.
The European Union (EU) filed a
complaint about the FSC scheme with the WTO, alleging that it was a prohibited
export subsidy. A WTO dispute settlement panel sided with the EU in 1999, and
the WTO Appellate Body upheld its findings in early 2000. As a consequence, the
Congress passed the Foreign Sales Corporation Repeal and Extraterritorial Income
Exclusion Act of 2000, which preserved the benefits to U.S. exporters. The EU
again filed a complaint. And again, a WTO panel sided with the EU. And now, that
finding has been affirmed.
U.S. Trade Representative Robert Zoellick
stated in a release
that "We are disappointed with the outcome ... Given prior decisions, we
knew this would be an uphill struggle, but we believed it was important to make
our case for a level playing field on tax rules. The United States respects its
WTO obligations, which serve America's interests, and we intend to continue to
seek to cooperate with the EU in order to manage and resolve this dispute."
Zoellick added that "This is an especially sensitive dispute that, at its
core, raises questions of a level playing field with regard to tax policy ... We
will be consulting closely with Congress and affected U.S. interests regarding
Zoellick and U.S. exporters argue that there is an unlevel playing field because
most nations have a territorial tax regime, under which they tax the income of
corporations within their territory. The U.S. has a global tax regime dating
back to the 19th Century. American corporations are taxed by the United States
government for their domestic and foreign income. That is, under the basic
rules, if an American corporation sells its products in France, the U.S. taxes
the income. However, if a French corporation sells its products in the U.S.,
France does not tax the income of the corporation operating in the U.S.
This puts U.S. corporations at a competitive disadvantage with respect to their
foreign competitors when competing in a global economy. Hence, Congress has
enacted various exceptions to the general rule, through such methods as the
foreign tax credit, the Domestic International Sales Corporation (DISC), the
Foreign Sales Corporation (FSC), and finally, the bill passed in 2000. U.S.
exporters, and their supporters in Congress and the administration, argue that
this is simply leveling the playing field between U.S. and European companies.
In contrast, the EU contends that by giving tax breaks to U.S. exporters, the
U.S. is, in effect, subsidizing exports, in violation of its trade agreements.
EU Trade Commissioner Pascal Lamy stated in a release that
"We now have a definitive legal ruling on the FSC case. Of course I'm
pleased that the WTO has confirmed what we always believed. We have made a point
of handling this dispute in a very reasonable manner. Now it is up to the US to
comply with the WTO's findings and to settle this matter for once and for all.
As to how, we look forward to rapid US proposals."
It is possible that Europe might now retaliate by imposing high tariffs on the
products of U.S. companies. Neither Europe nor the U.S. seek a trade war, and
the EU is likely pursuing the FSC issue to obtain a bargaining chip to use in
other trade negotiations. However, if there were a trade war, Europe would
likely target U.S. technology and aircraft companies.
FCC Releases Annual Report on Video Programming
1/14. The Federal Communications Commission
(FCC) released its 8th
Annual Report [122 pages in PDF] on the status competition in the market for
the delivery of video programming. The report finds that "competitive
alternatives continue to develop. Cable television still is the dominant
technology for the delivery of video programming to consumers in the MVPD
marketplace, although its market share continues to decline. As of June 2001, 78
percent of MVPD subscribers received their video programming from a franchised
cable operator, compared to 80 percent a year earlier."
It further found that "The total number of subscribers to both cable and
non-cable MVPDs continues to increase. A total of 88.3 million households
subscribe to multichannel video programming services as of June 2001, up 4.6
percent over the 84.4 million households subscribing to MVPDs in June
The report also states that "The most significant convergence of service
offerings continues to be the pairing of Internet service with other service
offerings. There is evidence that a wide variety of companies throughout the
communications sector are providing multiple services, including data access.
Cable operators continue to expand the broadband infrastructure that permits
them to offer high-speed Internet access. The most popular way to access the
Internet over cable is still through the use of a cable modem and personal
Internet Securities Fraud
1/14. The Securities and Exchange
Commission (SEC) filed a civil complaint in U.S. District Court (SDCal) against
three individuals and four related entities alleging violation of § 17(a)
of the Securities Act of 1933, § 10(b) of the Securities Exchange Act of
1934, and Rule 10b-5 thereunder. The complaint alleges that the defendants
engaged in an Internet based "pump and dump" scheme. The complaint
alleges that defendants acquired stocks, touted them in a web site named Red Hot
Stocks, and then sold them. See, SEC release.
People and Appointments
1/14. Laurence Meyer
submitted his resignation Monday as a member of the Board of Governors of the
Federal Reserve System, effective the last day of his term, January 31, 2002.
Auchter was named a partner in the law firm of Robins, Kaplan, Miller & Ciresi. He works in
the intellectual property section of the Washington DC office. He focuses on
patent litigation, counseling and prosecution involving consumer and industrial
electronics, electronic power technology, medical devices and instruments,
semiconductor processing, semiconductor devices and circuits, aerospace
technology, satellite communications, interactive voice technologies,
telecommunications, computer hardware and software, and other technologies. See,
Hill joined the Washington DC office of the law firm of Howrey Simon Arnold & White as a partner
in the antitrust practice group. He was previously a partner in the Washington
DC office of the law firm of Sidley &
Austin. See, Howrey
1/14. Hogan & Hartson, a Washington DC
based law firm, and Squadron Ellenoff Plesent & Sheinfeld, a law firm based
in New York City and Los Angeles, announced that they will merge. See, H&H release.
1/14. The law firm of Morrison & Foerster
announced that 14 attorneys have been elevated to partner. The list includes Hector
Gallegos (who is in the Litigation, IP, and Computer & Software
sections in the firm's Los Angeles office), Heike
Fischer (Corporate and IP, Palo Alto), Erik
Olson (Litigation and IP, Palo Alto), Erica
Wilson (Litigation, Palo Alto), Eric
Acker (Litigation and IP, San Diego), Rosemary
Tarlton (IP, San Francisco), and Thomas
Treffert (IP, San Francisco). See, MoFo
1/14. President Bush gave a speech
in Aurora, Missouri, in which he addressed economic issues. He stated that
"the role of government is not to create wealth. The role of government is
to create an environment in which people are willing to take risk, an
environment in which people are willing to risk capital, an environment that
heralds the entrepreneur and the small business person." He defended tax
cuts and free trade.
1/14. The Federal Communications Commission
(FCC) published a notice
in the Federal Register of its final rule regarding spectrum aggregation limits
for commercial mobile radio services (CMRS). The FCC eliminated the CMRS
spectrum cap rule effective January 1, 2003; it also raised the cap to 55 MHz in
all markets until the sunset date, and eliminated the cellular cross interest
rule in Metropolitan Statistical Areas (MSAs), but retained the rule in Rural
Service Areas (RSAs). The FCC first announced this action on November 8, 2001.
See, November 8
release [PDF]. See also, Federal Register, January 14, 2002, Vol. 67, No. 9,
at Pages 1626 - 1643.
1/14. The Securities and Exchange Commission
(SEC) released an order
in which it censured KPMG, for engaging in
improper professional conduct because it purported to serve as an independent
accounting firm for an audit client at the same time that it had made
substantial financial investments in the client. The SEC found that KPMG
violated the auditor independence rules by engaging in such conduct. KPMG
consented to the SEC’s order without admitting or denying the SEC’s
findings. See, SEC release.
1/14. The U.S.
District Court (DDC) issued its opinion [PDF] in U.S
ex rel. Fisher v. Network Software Associates, a case involving
the six year statute of limitations of the False Claims Act.
1/14. The U.S. Attorneys Office for the Eastern District of Virginia formed a
Computer Hacking and Intellectual Property (CHIP) unit. The unit will be
comprised of six Assistant United States Attorneys. The Eastern District of
Virginia includes the tech heavy northern Virginia suburbs of Washington DC.
1/14. The U.S.
Court of Appeals (2ndCir) issued its opinion in
Century Fox v. Marvel, a contract and Lanham Act case regarding
the rights of trademark licensees.
1/14. The U.S. Court of Appeals (DCCir)
heard oral argument in Sinclair Broadcast Group v. FCC, No. 01-1079.
1/14. The U.S. Court of Appeals (DCCir)
heard oral argument in COMSAT Corp v. FCC, No. 00-1458.
BellSouth Chairman Wants Regulatory Relief
1/13. BellSouth Chairman & CEO Duane Ackerman gave a speech
in Amelia Island, Florida, in which he advocated changes to the regulatory
environment in which phone companies and other communications companies operate.
He wants deregulation of DSL service. He also discussed a regulatory model in
which competition would be facilities based, rather than based on the
requirement that the incumbent phone companies, such as BellSouth, provide
unbundled networks elements to competitors.
He stated that "I see four basic observations about the reigning regulatory
model. By that I mean the model, applied to the wireline segment of the
communications industry, a model that continues to constrain residential retail
prices while creating a wholesale market of UNEs, UNE-p in particular,
priced at TELRIC."
He elaborated: "First, the reigning model does not protect consumers.
Second, it has distorted the investment of CLECs and ILECs -- to the detriment
of consumers; its most visible and serious outcome being the glut of capital it
enticed into high-speed, wireline facilities to serve businesses in metro areas.
It discourages competitors from investing in their own facilities. Third, by
distorting investment, it contributed heavily to the current capital scarcity in
the industry; these capital woes turned out to be one of the substantive drivers
of America's economic slowdown. Fourth, this regulatory model slows the delivery
of advanced services to consumers, especially in under-served areas. The upshot
of these four observations is plain: A new regulatory model is needed."
He stated that a new regulatory model is also warranted because technologies and
markets have changed dramatically since passage of the Telecom Act of 1996.
Wireless competes with wireline phone service. Data is a major portion of
network traffic. Computers and the Internet are now a part of communications.
Cable broadband competes with DSL.
Court Rejects Settlement Agreement in Private Antitrust
Actions Against Microsoft
1/11. The U.S.
District Court (DMd), Judge Frederick
Motz presiding, rejected the proposed Settlement
Agreement between Microsoft and plaintiffs in over 100 private antitrust
class action lawsuits against it alleging that it overpriced its products. Under
the proposed Settlement Agreement, Microsoft would have provided $1 Billion in
cash, training, support and software to over 12,500 public schools. These cases
may now be litigated.
Tom Burt, Deputy General Counsel for Microsoft, stated in a release
that "While we are confident that Microsoft ultimately will prevail in
these lawsuits, we are disappointed that we have missed this opportunity to
improve education for disadvantaged children while resolving litigation ...
Microsoft went the extra mile to make this settlement work. We sought input from
educators to fully address issues regarding the independence of the education
foundation that was a key part of the proposed settlement. We also made
modifications to the original agreement to ensure that schools would have the
option to use the software and platform of their choice. Microsoft is always
open to looking for reasonable ways to resolve litigation. We will review the
courts opinion and at the same time move forward with the next steps in the
In contrast, Ed Black, a Microsoft critic, and P/CEO of the Computer & Communications Industry
Association (CCIA), stated in a release that "By
attempting to buy their way out of legal trouble with the ‘donation’ of
Microsoft products and hardware to schools, they sought only to leverage a
market that had been the one of the few Microsoft has struggled to dominate:
Greenspan Addresses Effects of Technology and Terrorism on
1/11. Federal Reserve Board
Chairman Alan Greenspan gave a speech
at the Bay Area Council Conference in San Francisco, California, titled
"The Economy". He stated that "immediately prior to September 11,
there were tentative signs that some sectors of the U.S. economy had begun to
stabilize ..." However, "That hope was decisively dashed by the tragic
events of early September. Adding to the intense forces weighing on asset prices
and economic activity before September 11 were new sources of uncertainty and
risk that began to press down on global demand for goods and services."
Greenspan elaborated that recent economic weakness has resulted in part from
retrenchment in the technology sector. "We had already observed a
coincident deceleration in activity among the world economies over the past
year, owing apparently, at least in part, to the retrenchment in the high
technology sector. The global nature of most technology industries and the
global reach of the capital markets in which the firms in these industries are
valued and funded appears to have fostered a greater synchronousness in world
activity in this cycle, seemingly broader than has generally been the
Now, Greenspan sees signs of economic stability, which he attributes to the use
of new information technologies. He explained that "indications of
stabilization, similar in many respects to those observed in the period
immediately preceding September 11, have been appearing with greater frequency.
A possible significant contributor to this emergence of stability -- if that is
what it is -- may be the very technologies that have fostered coincident global
weakness: those that have substantially improved access of business decision
makers to real time information."
He added that "Today, businesses have large quantities of data available
virtually in real time. As a consequence, they address and resolve economic
imbalances more rapidly than in the past."
Greenspan also stated that "the evidence strongly suggests that new
technologies will present ample opportunities to earn enhanced rates of return.
Indeed, anecdotal reports from businesses around the country suggest that the
exploitation of available networking and other information technologies was only
partially completed when the cyclical retrenchment of the past year began. Many
business managers are still of the view, according to a recent survey of
purchasing managers, that less than half of currently available new, and
presumably profitable, supply chain technologies have been put into use."
However, he also cautioned that "While these opportunities remain abundant,
they will now play out against the backdrop of a major uncertainty that we all
must deal with these days -- the specter of further terrorist incidents on
Appeals Court Affirms FCC Broadband PCS Spectrum Auction Order
1/11. The U.S.
Court of Appeals (DCCir) issued its opinion
in High Plains Wireless
v. FCC, affirming an order of the Federal
Communications Commission (FCC) regarding the auction of broadband PCS
licenses. The Appeals Court addressed several issues, including the FCC's rule
against collusion in auctions, standing to challenge FCC auction orders, and the
effect of ex parte communications by Members of Congress.
Background. The FCC allocated 120 MHz of spectrum for broadband personal
communications services (PCS). It divided the spectrum into blocks: three of 30
MHz each (known as the A, B, and C blocks) and three of 10 MHz each (D, E, and
F). It also divided spectrum geographically. Licenses for the C, D, E, and F
blocks were established for each of 493 Basic Trading Areas (BTAs). For example,
the FCC established BTAs for both Lubbock and Amarillo, Texas. The FCC then
auctioned licenses for use of this spectrum, with open (auction participants
became aware of each others' bids as they were cast), simultaneous (all 493 BTAs
were open for bidding at the same time), and ascending auctions. The FCC also
has an anti collusion rule.
High Plains and Mercury (now known as Tritel
Communications) both sought broadband PCS licenses in west Texas. Both bid
in the FCC F block license auctions for Lubbock, and in the D and F block
auctions for Amarillo. High Plains was the successful bidder for the F block
license in Amarillo. Mercury was the successful bidder for the F block license
Reflexive Bidding and the Anti Collusion Rule. Mercury used a bidding
tactic known as reflexive bidding, in which it sought to deter others from
bidding in certain markets. It communicated this by including the BTA numbers
for specific markets in its dollar bids. The FCC's BTA number for Lubbock is
013; its BTA number for Amarillo is 264. Mercury placed bids in which the last
three numbers of bids for a license in one market corresponded to the BTA for
The Appeals Court wrote: "In one round of the auction, for example, Mercury
bid $1,375,013 on the F block license in Lubbock, "013" being the BTA
for Amarillo; after High Plains bid again for the F block license in Lubbock,
Mercury bid $1,615,264 on the F block license in Amarillo, "264" being
the BTA for Lubbock. ... By repeatedly thus encoding its bids, Mercury was able
to warn High Plains that if High Plains did not stop bidding, then Mercury would
drive up the price of the F block license in Amarillo. ... The message was not
lost on High Plains, which stopped bidding for the F block license in
High Plains filed an emergency motion to disqualify Mercury from the auction on
the grounds that it violated the FCC's anti
collusion rule. The FCC did not rule on this motion. High Plains
later filed a motion to deny the award of licenses to Mercury. The FCC granted
licenses to Mercury.
The Court of Appeals wrote that the question of "whether reflexive bidding
violated the rule against collusion appears to have been an unsettled -- indeed,
an unasked -- question before the DEF auction. In this circumstance it was not
unreasonable for the Commission to have deemed the rule ambiguous with respect
to whether reflexive bidding was prohibited."
Ex Parte Communications by Members of Congress. At least 27 Members of
Congress inquired of the FCC about Mercury's licenses and the delay in their
award. The Appeals Court wrote that the FCC's ex parte communications rule is
violated if communications are both "directed to the merits or outcome of a
proceeding" and "not served on the parties." It wrote that since
none of the communications in this matter met both criteria, there was no
violation of the rule.
Standing. The Appeals Court also addressed whether or not it had standing
to hear this matter. The Appeals Court held that High Plains had standing to
challenge the award of the F block license in Lubbock, because it had bid on
that. However, High Plains lacked standing to challenge the award of licenses
other than the F block license in Lubbock, on which it had not bid.
Judge Douglas Ginsburg wrote the opinion of the Court affirming the FCC. Judges
Edwards and Sentelle joined.
Third Circuit Affirms in In Re Ikon Securities Litigation
1/11. The U.S.
Court of Appeals (3rdCir) issued its opinion in In
Re Ikon Office Solutions Securities Litigation, a case involving
scienter is class action securities litigation.
This is a class action suit against Ernst &
Young, the accounting firm for Ikon,
alleging violation of § 10(b) of the Securities Exchange Act, and Rule
10b-5 thereunder. Plaintiffs allege that Ernst & Young issued an unqualified
audit report approving Ikon's financial statements for FY 1997 knowing that they
overstated pre-tax income or, even if Ernst & Young did not have actual
knowledge of the overstatement, it recklessly performed its audit.
District Court (EDPa) granted summary judgment to Ernst & Young on the
grounds that plaintiffs failed to raise a genuine issue of material fact with
respect to two elements of a prima facie 10(b) claim: scienter (that Ernst
harbored an intent to deceive or acted with reckless disregard for the truth and
accuracy of Ikon's financial disclosures) and causation (that the inflated value
of Ikon's stock price dropped when the market reevaluated the security after a
corrective disclosure). The Appeals Court affirmed on the issue of scienter. It
did not address the issue of causation.
Federal Circuit Rules on Priority in Patent Interferences
1/11. The U.S.
Court of Appeals (FedCir) issued its opinion in Brown
v. Barbacid, an appeal from a priority decision in a patent
interference proceeding. A divided Appeals Court reversed.
This is a case involving an interference between U.S.
Patent No. 5,185,248, of which Mariano Barbacid is an inventor, and Squib is
the assignee, and U.S. patent application Serial No. 07/937,893, of which
Michael Brown is an applicant. Both the Barbacid patent and the Brown
application claim an assay for identifying new anti cancer compounds that
inhibit farnesyl transferase (FT), an enzyme involved in the control of cell
growth. The USPTO Board of Patent Appeals and Interferences awarded
priority to Barbacid. The Appeals Court reversed. Judge Rader wrote the opinion
of the Court. Judge Newman dissented.
Federal Circuit Rules in HRT v. Astechnologies
1/11. The U.S.
Court of Appeals (FedCir) issued its opinion in HR
Technologies v. Astechnologies, a patent infringement action
involving a process for preparing glass fiber containing polymer sheet. H.R.
Technologies (HRT) filed a complaint in U.S. District Court (EDMich) against
Astechnologies alleging infringement of its U.S.
Patent No. 5,665,185. Astechnologies counterclaimed alleging noninfringement,
unfair competition in violation of the Lanham Act, and various state claims. The
District Court dismissed without prejudice. Astechnologies appealed. It sought
dismissal with prejudice. The Appeals Court affirmed the dismissal without
prejudice. However, it reversed the dismissal of Astechnologies' counterclaims.
Hence, the judgment of the District Court was affirmed in part, vacated in part,
FCC Applies Ban on Unsolicited Faxes to Foreign Faxer
1/11. The Federal Communications Commission
(FCC) released a Forefeiture
Order imposing a $1,107,500 fine against 21st Century Fax for faxing
unsolicited advertisements to consumers in violation of the Telephone Consumer
Protection Act (TCPA), 47
U.S.C. § 227, and FCC rules, 47 C.F.R. § 64.1200(a)(3). See, FCC release.
Section 227(b) provides that "... It shall be unlawful for any person
within the United States ... to use any telephone facsimile machine, computer,
or other device to send an unsolicited advertisement to a telephone facsimile
machine ..." 21st Century Fax argued that the statute did not apply to it
because its faxes originated in the United Kingdom. The FCC wrote that "the
term ``person´´ in Section 227(b)(1) includes the individual who actually
performs the faxing as well as the corporate entity on whose behalf he or she is
acting." The FCC noted that 21st Century Fax maintains offices, employees
and agents in the U.S., and hence, is "within the United States"
within the meaning of the statute.
21st Century Fax also argued that the TCPA violates the First Amendment. The FCC
rejected this argument, noting that the U.S.
Court of Appeals (9thCir) has ruled to the contrary. See, Destination
Ventures v. FCC, 46 F.3d 54 (1995).
GAO Reports on Software Acquisition Problems at DLA
1/11. The General Accounting Office (GAO)
released a report [49 pages
in PDF] titled "Information Technology: Inconsistent Software Acquisition
Processes at the Defense Logistics Agency Increase Project Risks".
The GAO wrote that the Defense Logistics Agency
(DLA) "relies on software intensive systems to support this work. An
important determinant of the quality of software intensive systems, and thus
DLA's mission performance, is the quality of the processes used to acquire these
The GAO concluded that the "DLA does not have mature software acquisition
processes across the agency, Moreover, DLA does not have a software process
improvement program in place to effectively strengthen its corporate software
acquisition processes." The GAO report recommends "establishing a
framework for long-term institution software process improvement."
The report was prepared for Sen. Carl Levin
(D-MI) and Sen. John Warner (R-VA), the
Chairman and ranking Republican on the Senate Armed Services Committee, and Rep. Bob Stump (R-AZ) and Rep. Ike Skelton (D-MO), the Chairman
and ranking Democrat on the House Armed
Qualcomm Asserts UWB Prevents GPS Enabled PCS Phones from
1/11. Qualcomm submitted a statement
[25 pages in PDF] to the Federal Communications
Commission (FCC) in which it argued that its tests show that ultra wideband
(UWB) devices interfere with the Global Positioning System (GPS) devices in GPS
enabled PCS phones, thus preventing them from complying with E-911 requirements.
Qualcomm wrote that its tests show "that close proximity of UWB devices to
GPS enabled wireless phones will prevent the location of wireless callers to 911
from being determined in compliance with the Commission's E-911 mandate. The
presence of UWB emissions within the GPS spectrum significantly raises the noise
floor of the GPS sensor to the extent that it will render the GPS device useless
in reporting position information to Public Safety Answering Points (PSAPs), and
hence it will not be possible to meet the safety of life system requirements
embodied in the Commission's E-911 rules in the face of UWB emissions."
UWB devices, which use very narrow pulses with very wide bandwidths, have
potential applications in both radar and communications technologies. This is ET
Docket No. 98-253.
Commerce Committee Investigates Andersen's Destruction of
1/11. Rep. Billy Tauzin (R-LA) and Rep. James Greenwood (R-PA) wrote a letter to Andersen CEO Joseph Berardino regarding
"thousands of other responsive documents [that] were knowingly destroyed by
Andersen employees working on the Enron engagement".
Rep. Tauzin is Chairman of the House
Energy and Commerce Committee. Rep. Greenwood is Chairman of the Commerce
Committee's Subcommittee on Oversight and Investigations.
The letter requests information about Andersen employees who have worked on the
Enron audit engagement, information about Andersen's destruction of paper and
electronic records, and copies of reconstructed or retrieved documents.
People and Appointments
1/11. President Bush announced his intent to appoint three more Members of the
President's National Security
Telecommunications Advisory Committee (NSTAC): Thomas Casey (Global Crossing), Christopher
Galvin (Ch/CEO of Motorola), and Edward
Whitacre (Ch/CEO of SBC Communications).
See, current list of NSTAC
Members. See also, White
1/11. Mark Schneider rejoined the Washington DC office of the law firm of
& Austin. Until January 11, he was Associate General Counsel for the Federal Communications Commission (FCC), focusing
on spectrum issues. Before that, he was Senior Legal Advisor to former FCC
Commissioner Susan Ness, focusing on wireless and international
telecommunications issues. And before that, he was a partner at Sidley &
Austin, where he focused on representing clients before the FCC. See, FCC
1/11. President Bush announced his intent to nominate Donald Prophete to
be General Counsel of the Equal Employment Opportunity Commission. He has been
Senior Attorney and Director of the Law Department for Labor and Employment for Sprint since 1997. See, White
1/11. Jon Dudas was named Deputy Director of the U.S. Patent and Trademark Office (USPTO). Dudas
was previously Senior Floor Director for the Speaker of the House, Rep. Dennis Hastert (R-IL). Prior to that,
he served as the Deputy General Counsel and Staff Director for the House Judiciary Committee, and
Counsel to the Courts and Intellectual Property Subcommittee. USPTO Director
James Rogan was previously a member of these committees.
1/11. The National Telecommunications and
Information Administration (NTIA) published in its web site copies [PDF and
MS word] of the "NTIA Manual of Regulations & Procedures for Federal
Radio Frequency Management (January 2000 Edition with January/ May/ September
1/11. The Drug Enforcement Administration (DEA)
published a notice
in the Federal Register of its intent to conduct performance verification
testing of public key infrastructure (PKI) enabled controlled substance orders.
See, Federal Register, January 11, 2002, Vol. 67, No. 8, at Pages 1507 - 1508.
1/11. The Food and Drug Administration (FDA)
published a notice
in the Federal Register announcing the availability of the guidance titled
"General Principles of Software Validation." This document provides
guidance to medical device manufacturers and FDA staff concerning requirements
for validating software used in medical devices, in device production, or in
implementing the manufacturer's quality system. See, Federal Register, January
11, 2002, Vol. 67, No. 8, at Pages 1482 - 1488.
1/11. The U.S. Customs Service announced
that Space System/ Loral has agreed to pay a $20 Million fine for allegedly
passing licensable technology to China to improve its missile guidance systems.
Go to News Briefs from January 6-10, 2002.