|News from September
10th Circuit Rules in Private Telecom Antitrust Case
9/10. The U.S.
Court of Appeals (10thCir) issued its split opinion
Communications v. Southwestern Bell, a private antitrust case
involving definition of the relevant market, application of the Noerr Pennington
doctrine, and application of the state action and exclusive jurisdiction
doctrines. After several pretrial orders, and a jury trial, plaintiffs were
awarded $20 Million. The Appeals Court affirmed.
Background. Telecor Communications and the eight other plaintiffs are
independent pay phone service providers. They compete with Southwestern Bell,
the incumbent local exchange carrier (ILEC) in the state of Oklahoma, which had
a legal monopoly until passage of the Telecommunications Act of 1996. In
anticipation of passage of the Act, and competition in pay phone service,
Southwestern Bell engaged in a campaign to secure long term, hard to cancel,
contracts with the owners of locations for pay phones, to make entry by
competitors more difficult. The competitors offered better commissions to
location owners, but after two years, Southwestern Bell still held 87 percent.
District Court. Telecor and the others plaintiffs filed a complaint in U.S. District Court (WDOkla) against
Southwestern Bell alleging violation of state and federal antitrust law, seeking
treble damages. Telecor argued that the relevant market is pay phone service.
Southwestern Bell argued that the relevant market included pay phone and
cellular services. The District Court ruled on summary judgment that the
relevant market was pay phones. The District Court also allowed Telecor to
present evidence regarding alleged misleading statements made by Southwestern
Bell to the state utilities regulator. The jury then returned a verdict for
Telecor. Southwestern Bell appealed.
Appeals Court. The Appeals Court affirmed the District Court's ruling
excluding cellular phones from the relevant market definition. It wrote that
"Location owners are the relevant customers for purposes of locating
Southwestern Bell's pay phone facilities, and from the location owners'
perspective, cellular phone services and pay phone services are not
The Appeals Court next rejected Southwestern Bell's argument that the admission
of evidence of misleading statements to the state regulator violated the Noerr
Pennington doctrine, which provides immunity from antitrust liability under the
Sherman Act to private parties who petition the government for redress of
grievances, notwithstanding the anti competitive purpose or consequences of
The Appeals Court also rejected Southwestern Bell's argument that the state
action doctrine barred use of the contracts between Southwestern Bell and
location owners that were negotiated before the passage of the Telecom Act of
Judge David Ebel wrote the opinion. Judge Paul Kelly dissented. He would have
reversed on two issues: the definition of the relevant market, and the
application of the state action and exclusive jurisdiction doctrines.
Plaintiffs are represented by the law firm of Boies Schiller & Flexner.
Qwest Withdraws Long Distance Applications
9/10. Qwest Communications withdrew its Section 271
applications to provide in region interLATA services in the states of Colorado,
Washington, Utah, Idaho, Iowa, Nebraska, North Dakota, Montana and Wyoming.
Qwest stated that it "expects to refile an application for all nine states
by the end of September". See, Qwest
Federal Communications Commission (FCC)
Chairman Michael Powell
stated in a release that "The FCC cannot approve such applications by the
Bell Companies unless they satisfy the requirements of sections 271 and 272 of the
Powell continued that "In my view, Qwest's application was razor close to
approval. Ultimately, the outstanding issues were very narrow, but nonetheless
important. Despite extensive examination of the record supporting these
applications, questions remain regarding whether Qwest has complied with the
safeguards set forth by Congress in section 272 of the Act. Section 272 governs
how a Bell Company's long distance separate affiliate operates. In these
applications, Qwest did much to otherwise demonstrate that it has complied with
the market-opening provisions of the section 271 competitive checklist."
Powell added that "I am confident that Qwest, in consultation with the
states, Department of Justice, and this Commission, will expeditiously resolve
the outstanding issues that prevented approval."
Steve Davis, Qwest's SVP of Policy and Law, stated that "there have been
questions raised regarding our plans to restate our financial statements for
prior periods. Our new application will address those concerns and demonstrate
our full compliance with the 1996 Act."
Senators Introduce MVDDS Licensing Bill
9/10. Sen. Mary Landrieu (D-LA) and
others introduced S 2922,
the Emergency Communications and Competition Act of 2002 (ECCA). The bill would
provide for the licensing, without auction, of Multichannel Video Distribution
and Data Services (MVDDS). MVDDS could provide high speed Internet access to
unserved and underserved populations.
Sen. Landrieu stated in the Senate that "The ECCA provides that MVDDS
applicants will be licensed in the same manner as satellite companies who
applied on the same day to share the same spectrum. Currently, the FCC plans to
subject only MVDDS applicants to an auction process. This would impose a
discriminatory tax on an innovative new technology. Unfortunately, this is more
of the same burdensome regulation that I believe has contributed to the collapse
of the telecommunications sector."
She added that "We must ensure that our laws and regulations are
technologically neutral so that government policies don't replace the role of
the marketplace in determining the fate of consumer products and services."
See, Cong. Rec., Sept. 10, 2002, at Pages S8463-4.
Sen. Conrad Burns (R-MT) is
a cosponsor of the bill, and the ranking Republican on the Communications
Subcommittee. He stated in the Senate that "unless we pass this
legislation, we may never see the deployment of this new service. The FCC has
determined that licenses for this new service should be auctioned. I appreciate
the FCC's effort to help generate new revenues for the Federal Treasury, but we
must never let that consideration override good public policy judgments. The
public interest is best served when the spectrum is licensed promptly to
applicants that are ready to deploy service."
Sen. Burns continued that "We are now confronted with a case of first
impression in which the FCC has determined to issue licenses to both terrestrial
and satellite applicants that share the same spectrum. Previously this was
thought to be technologically impossible, as I mentioned, the FCC has now
determined that the terrestrial based MVDDS can share with satellites. In my
judgment, the same Federal resource must be licensed in the same manner to all
applicants, regardless of the technology they will employ. To do otherwise is to
pick industry winners and losers. This bill corrects this problem." See,
Cong. Rec., Sept. 10, 2002, at Page S8468.
The bill would require that the Federal
Communications Commission (FCC) "shall assign licenses in the 12.2-12.7
GHz band for the provision of fixed terrestrial services using the rules,
policies, and procedures used by the Commission to assign licenses in the
12.2-12.7 GHz band for the provision of international or global satellite
communications services in accordance with section 647 of the Open-market
Reorganization for the Betterment of International Telecommunications Act (47
Moreover, the bill would require the FCC to grant licenses "not later than
six months after the date of the enactment of this Act."
The bill would require licensees to "allocate 4 percent of its capacity for
services that promote the public interest ... , such as -- (i) telemedicine;
(ii) educational programming, including distance learning; (iii) high speed
Internet access to unserved and underserved populations; and (iv) specialized
local data and video services intended to facilitate public participation in
local government and community life."
In addition, the bill would require that "Each licensee ... shall
disseminate Federal, State, and local Emergency Alert System warnings to all
subscribers of the licensee". In particular, "Each licensee ... shall
provide immediate access for national security and emergency preparedness
personnel to the terrestrial services covered by the license ... Whenever the
Emergency Alert System is activated [or] Otherwise at the request of the
Secretary of Homeland Security."
The bill is also cosponsored by Sen. Trent Lott (R-MS), Sen. Judd Gregg (R-NH),
Sen. Barbara Mikulski (D-MD), Sen. Patrick Leahy (D-VT), Sen. Max Baucus (D-MT),
Sen. John Kerry (D-MA), and Sen. Chris Dodd (D-CT). The bill was referred to the
Senate Commerce Committee.
USTA Asks USTR Not to Export US Telecom Policies
9/10. The Office of the U.S. Trade Representative
(USTR) held a hearing regarding market access in the Free Trade Area of the
Americas (FTAA) negotiations. Walter McCormick, P/CEO of the United States Telecom Association (USTA),
testified that the USTR should not seek to include mandatory network unbundling
and TELRIC pricing in either bilateral free trade agreements (FTAs) or within a
FTAA agreement. McCormick also urged the USTR to coordinate spectrum allocations
for third generation (3G) wireless services.
McCormick stated that "The elimination of barriers in telecommunications
markets, together with the implementation of fair and transparent regulatory
frameworks, will be critical to the development of robust communications and
electronic commerce capabilities in all countries that participate in the FTAA."
McCormick said that some telecommunications policies, such as mandatory network
unbundling and TELRIC pricing, are under review in the U.S. by the Congress,
courts, and Federal Communications Commission
(FCC), and should not be exported to other countries. McCormick argued that
doing so "would undermine foreign investment incentives".
He concluded with a discussion of the importance of "coordination of radio
spectrum". He stated that the "USTR should encourage the coordination
of frequency allocation, which will be necessary to improve international
roaming capabilities among the countries of the Americas. International
roaming capabilities will be key to the growth of third generation (3G) wireless
services throughout the region."
House Committee Approves Federal Agency Protection of Privacy
9/10. The House Judiciary
Committee approved and reported HR 4561,
the Federal Agency Protection of Privacy Act, by a unanimous voice vote, without
The bill, which is sponsored by Rep. Bob
Barr (R-GA), would require federal agencies to prepare and make available
for public comment an initial privacy impact analysis when it proposes new
TDA Awards e-Learning Grant to China
9/10. The U.S. Trade and Development Agency (TDA)
awarded a feasibility study grant for e-learning to the Chinese Ministry of
Foreign Trade and Economic Cooperation.
The TDA stated that the grant "provides $417,000 to establish an E-Learning
program in China focused on the World Trade Organization (WTO). The project will
use E-learning technology combined with traditional teaching methods to
facilitate WTO learning via the Internet, enabling government officials at
various levels, entrepreneurs and the general public to have a comprehensive
understanding of the WTO and its legal instruments." See, State Department release.
PFF Releases Paper on ICANN
9/10. The Progress and Freedom Foundation (PFF)
released a paper
[23 pages in PDF] titled "Domain Names Services: Let Competition, Not ICANN,
Rule". The paper, which was written by the PFF's William Adkinson, argues
that the Internet Corporation for Assigned Names
and Numbers (ICANN) should end price and service regulation, and terminate
its "mission creep."
The current Memorandum of Understanding (MOU) between the Department of Commerce
(DOC) and ICANN is scheduled to expire at the end of this month.
The paper states that "In the mold of a traditional economic regulatory
agency, ICANN regulates entry into the domain name business and sets the price
at which some (but not other) domain name registries can offer services. While
such regulation may once have been justified, the domain name marketplace is now
competitive." (Parentheses in original.)
It adds that "ICANN appears to be engaging in regulatory ``mission creep,´´
seeking to regulate in detail the nature of service offerings in the domain name
marketplace. If not restrained, ICANN thus threatens to morph into an entity
that might more appropriately be called the ``Internet Commerce Commission.´´
Such an entity is neither necessary nor desirable. Instead, the Department of
Commerce should use this opportunity to end economic regulation of the DNS once
and for all."
Tech Crime Report
9/10. Juliette Quintero plead guilty in U.S. District Court (CDCal) to one
count of mail fraud and two counts of wire fraud in connection with defrauding
bidders in auctions conducted via eBay. She auctioned items, received payments,
but did not deliver the goods. See, USAO release and CCIPS release.
9/10. Timothy Ganley, a former VP for Strategic Sales at Critical Path, was
sentenced by the U.S.
District Court (NDCal) to serve six months in prison. He previously plead
guilty to charges contained in a criminal indictment
of insider trading in violation of 15 U.S.C. § 78j(b), 15 U.S.C. § 78ff(a),
and 17 CFR 240.10b-5. See, USAO
People and Appointments
9/10. Rep. John Sununu (R-NH)
defeated incumbent Sen. Bob Smith (R-NH)
in the New Hampshire Republican Senate primary.
9/10. Elizabeth Dole
won the seven way North Carolina Republican Senate primary. She will face Erskine Bowles,
who won the Democratic primary. Both seek the seat of retiring Sen. Jesse Helms (R-NC).
9/10. Anne Weismann was named Deputy Chief of the Federal Communications Commission's (FCC) Enforcement Bureau. She will help oversee the
common carrier enforcement activities of the Enforcement Bureau's Market
Disputes Resolution Division, Telecommunications Consumers Division and
Investigations and Hearings Division. She previously worked at the Department of
Justice's Federal Programs Branch. See, FCC release.
9/10. Helen Hubbard was named Tax Legislative Counsel in the Treasury
Department's Office of Tax Policy.
She was previously a partner at Ernst & Young
in the Accounting Methods and Inventory group in the National Tax Department.
Prior to that, she was a partner with Akin Gump. See, release.
GAO Reports on Control of Deemed Exports
9/9. The General Accounting Office (GAO)
released a report [34
pages in PDF] titled "Export Controls: Department of Commerce Controls over
Transfers of Technology to Foreign Nationals Need Improvement".
The report focuses on "deemed exports". It begins by explaining that
the U.S. "controls exports of certain civilian technologies that have
military uses. U.S. firms may be required to obtain a license from the
Department of Commerce before exporting these ``dual-use´´ technologies from
the United States to many other countries, including countries of concern.
Commerce regulations also deem domestic transfers of controlled dual-use
technologies to citizens of these countries to be exports. As a result, Commerce
may require firms that employ foreign nationals working with these technologies
in this country to obtain ``deemed´´ export licenses.
The report notes that "In fiscal year 2001, Commerce approved 822 deemed
export license applications and rejected 3. Most of the approved licenses
allowed foreign nationals from countries of concern to work with advanced
computer, electronic, or telecommunication and information security technologies
in the United States. China accounted for 73 percent of licenses approved in
fiscal year 2001. Russia, Iran, India, Syria, Israel, Iraq, and Pakistan
accounted for another 14 percent, collectively."
The report identifies weaknesses in the Depart of Commerce's efforts to detect
possible unlicensed deemed exports. It states: "First, Commerce did not
screen thousands of H-1B change of status applications submitted domestically to
INS for foreign nationals already in the United States. We found that in fiscal
year 2001 about 15,000 individuals from countries of concern changed their
immigration status to obtain jobs that could have involved controlled
technology. Second, Commerce could not readily track the disposition of the 160
cases referred to field offices for follow-up because it lacks a system for
doing so. As a result of these shortcomings, Commerce may be missing
opportunities to detect firms that should have applied for deemed export
The report was prepared for Rep.
Christopher Shays (R-CT), Chairman of the House Government Reform Committee's
Subcommittee on National Security, Veterans Affairs, and International
EPIC Comments on FTC's Proposed Consent Order Affecting
Microsoft's Privacy Practices
9/9. The Electronic Privacy Information Center
(EPIC) and other groups submitted a comment
to the Federal Trade Commission (FTC)
regarding the FTC's proposed
consent order [8 pages in PDF] settling an administrative complaint [6 pages in
PDF] against Microsoft alleging
violation of Section 5(a) of the Federal Trade Commission Act (FTCA) in
connection with Microsoft's privacy and security practices. The complaint and
consent order focus on Microsoft's sign-on and online wallet services named
Passport and Passport Express Purchase.
The EPIC comment states that "We believe that the Consent Order will go far
in improving security and privacy practices associated with the Microsoft
Passport Service. However, privacy hazards continue to remain in the Passport
The EPIC recommends four changes. Its want the FTC to "require more
transparency from Microsoft", "examine authentication systems that are
deployed and under development", "ensure that Microsoft is complying
with the EU-US Safe Harbor, and that specifically, access to the entire Passport
profile for correction and deletion is possible", and "strengthen the
security program for Microsoft by limiting the Passport system".
The EPIC and other groups filed a pair of complaints last year with the FTC that
preceded the FTC's action. The EPIC and others submitted their original complaint [PDF]
on July 26, 2001, and an updated complaint
[PDF] on August 15, 2001. Both complaints pertained to Microsoft's Passport and
privacy, and alleged violation of Section 5 of the FTCA. See, story titled
"EPIC Complains about Microsoft Passport" in TLJ Daily E-Mail Alert
No. 250, August 16, 2001, and story titled "EPIC Complains to FTC About
Windows XP" in TLJ
Daily E-Mail Alert No. 236, July 27, 2002.
On August 8 of this year the FTC brought and settled an administrative
complaint. The complaint alleged that Microsoft "represented, expressly or
by implication, that it maintained a high level of online security by employing
sufficient measures reasonable and appropriate under the circumstances to
maintain and protect the privacy and confidentiality of personal information
obtained from or about consumers in connection with the Passport and Passport
Wallet services", whereas, in fact, Microsoft "did not maintain a high
level of online security ..."
The FTC and Microsoft simultaneously entered into an Agreement Containing
Consent Order. Microsoft admitted to no violations of federal law. Microsoft
will pay no fine. However, the agreement, which has a twenty year duration,
imposes numerous requirements for Microsoft's information security program. See
also, story titled "FTC Files and
Settles Complaint Against Microsoft", August 8, 2002.
The Computer & Communications
Industry Association (CCIA), a long time Microsoft critic, also submitted a
comment. It wrote that "we are disturbed that the proposed consent order
does nothing to address the root causes of the problems identified by the
Commission and will allow Microsoft to continue to abuse its illegal monopoly to
the detriment of consumers and their privacy."
The CCIA wrote that "Passport is merely one of the more recent outgrowths
of Microsoft's dominance in desktop computing, and is integral in Microsoft's
strategy to perpetuate its monopoly power on the Internet. Microsoft has ensured
that Passport will become the dominant authentication and sign-on service by
requiring or inducing users of other dominant Microsoft applications and
services to obtain Passport accounts."
The CCIA also wrote that the consent order is flawed because
"commitments made by Microsoft to remedy its conduct are ultimately
dependent on Microsoft’s willingness to stand by them. Microsoft has shown
time and again that it is fundamentally incapable of living up to obligations
that have been imposed on it by government authorities."
The CCIA urges the FTC to "withdraw from the proposed consent order, to
continue its investigation into the lawfulness of Microsoft's anticompetitive
use of Passport and related technologies, and take steps to address the
fundamental causes of Microsoft’s ongoing unlawful behavior, which harms
consumers, thwarts competition, and impedes innovation."
Rep. Stearns Addresses NextWave Spectrum Auctions
9/9. Rep. Cliff Stearns (R-FL) spoke
in the House on September 9 regarding the re-auction of spectrum which NextWave
previously obtained in an FCC auction.
Rep. Stearns is the sponsor of HR 4738,
an untitled bill that would provide that the Federal
Communications Commission (FCC) "shall return to the winning bidders of
auction 35 the full amount of all deposits and downpayments made by such winning
bidders for licenses that the Commission has not by that date delivered to such
NextWave obtained spectrum licenses at
FCC auctions in 1996. The FCC permitted NextWave to obtain the licenses, and
make payments 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
cancelled the licenses. It then proceeding to re-auction the disputed spectrum.
The U.S. Court of Appeals (DCCir)
ruled in its June 22, 2001, opinion
that the FCC is prevented from canceling the spectrum licenses by § 525 of the
Bankruptcy Code. The FCC petitioned the Supreme Court for writ of certiorari.
The Court granted certiorari. Oral argument is scheduled for October 8. (This is
Supreme Court Nos. No. 01-653 and 01-657.)
In addition, the FCC is scheduled to hold an open meeting on Thursday, September
12. The agenda
for the meeting published in the FCC web site does not list this matter.
However, various recently published news stories, citing no sources, have
reported that the FCC may announce that it is providing relief to the winning
bidders, such as Verizon Wireless and Deutsche Telekom's T-MobileUSA, in the
January 2001 re-auction.
Rep. Stearns stated that "Although the FCC recently returned most of the
down payment funds previously deposited by all these successful bidders, it
continues to hold, without interest, Mr. Speaker, substantial sums, equal to 3
percent of the total amount of the winning bids. It apparently intends to hold
these sums indefinitely."
"Despite the lengthy delay in delivering the licenses, moreover, the FCC
takes the position that the successful bidders remain obligated, on a mere
10-day notice, to pay the full amount of their successful bids if and when the
FCC, at some unknown future date, establishes its right to deliver those
Stearns said that "this is grossly unfair" and "adversely affects
their capacity to serve the needs of their customers, because they must have
this capital always on hand and they cannot use it for long-term benefits for
Rep. Stearns offered this explanation of his bill. "First, it requires the
FCC promptly to refund to the winning bidders the full remaining amount of their
deposits and their down payments. Second, it gives each winning bidder an
opportunity to elect, within 15 days after enactment, to relinquish its rights
and to be relieved of all further obligations under Auction No. 35. Those who
choose to retain their rights and obligations under Auction No. 35 will
nonetheless be entitled to a return of their deposits and down payments in the
interim period. If and when the FCC is in a position to deliver the license at
issue to those who remain obligated, they will be required to pay the full
amount of their bid in accordance with the FCC's existing regulations. Those who
elect to terminate their rights and obligations under this auction will be free
to pursue their business interests without the burdens under which they must
Rep. Stearns' bill has 40 cosponsors, including broad bipartisan support from
members of the House Commerce
Committee, the committee which oversees the FCC.
Copyright Holders Move for Summary Judgment Against Peer to
9/9. Members of the Motion Picture Association of
America (MPAA), Recording Industry
Association of America (RIAA) and National
Music Publishers Association (NMPA) filed a motion for summary judgment, and
supporting pleadings, under seal, with the U.S. District Court (CDCal) in MGM
v. Grokster. The MPAA, RIAA and NMPA member companies allege
contributory and vicarious copyright infringement by the peer to peer services
Kazaa, Grokster and MusicCity.
The RIAA stated in a release that "In deference to the confidential
evidence designated by defendants, the plaintiffs' summary judgment brief has
been filed confidentially, under seal."
However, the RIAA summarized its arguments as follows. First, the defendants
"built their networks to emulate Napster in almost every respect. They
succeeded beyond their wildest dreams. Having begun with Napster technology and
a Napster business model, they have marketed their service to Napster users and
argued the same legal defenses as Napster".
Second, the defendants "have built their networks into candy stores of
infringement that allow a user to find the most popular music and movies of our
time without paying any of the rights holders". Third, the defendants
"are earning millions of dollars from the service".
Fourth, the defendants "are acutely aware that the services are being used
to facilitate copyright infringement on a massive scale for movies and
music". Fifth, the defendants "built and controlled the networks in a
way that they could easily prevent the copyright infringements from occurring.
The defendants' principal defense that they have no ability to control the
network is belied by a myriad of facts, including the fact that Kazaa
demonstrated its ability to turn off the Morpheus system at whim".
And finally, the copyright holders' brief argues that the defendants "have
been engaged in much more activity than merely distributing software as they
claim. Rather, they were the genesis of and continue to be the sustainer of
FBI Announces Meetings on Criminal Information Sharing and
9/9. The Federal Bureau of Investigation (FBI)
published a notice
in the Federal Register announcing a series of meetings on October 8-10 of the
Compact Council created by the National Crime Prevention and Privacy Compact Act
of 1998 regarding the sharing of law enforcement information among government
The notice states that "the federal government and sixteen states are
parties to the Compact which governs the exchange of criminal history records
for licensing, employment, and similar purposes. The Compact also provides a
legal framework for the establishment of a cooperative federal state system to
exchange such records."
The notice states that the agenda for the meetings includes "(1) United
States Customs Service Request for Access to the Interstate Identification Index
(III) for NonCriminal Justice Purposes, (2) Immigration and Naturalization
Service (INS) Request to Allow State Repository Criminal History Maintenance and
Dissemination, (3) Standards/ Procedures for Identity Verification, (4) Proposed
Sanctions Rule, (5) National Applicant Database Requests, (6) Use of the III for
Background Checks on Applicants' References, Relatives, Friends, and Associates,
(7) Revised Rule to Allow INS Use of III for Emergency Child Placement, (8)
Qualification Requirements and Audit Criteria, (9) United States Department of
Justice Requirement for System Use, and (10) A Safer Nation -- Proposed Briefing
The meetings will be held on the evening of October 8, and all day on October
9-10, at the Wyndham Washington. See, Federal Register, September 9, 2002, Vol.
67, No. 174, at Page 57245.
Tech Crime Report
9/9. The U.S. Attorney's Office (USAO) for the Central District of California
announced that Richard Dopps, a former employee of The Berman Companies, plead
guilty in U.S. District Court (CDCal)
to "one felony count of obtaining information from a protected
computer". The USAO stated in a release that he
accessed the computer system of his former employer and read the e-mail messages
of company executives for the purpose of gaining a commercial advantage at his
new job at a competitor." See also, CCIPS release.
9/9. A grand jury of the U.S. District
Court (EDCal) returned an indictment against four individuals involved in a
bank fraud scheme. The USAO stated in a release [PDF]
that the scheme "involved the use of a computer to create fraudulent checks
using account information which was wrongfully obtained from various
9/9. The U.S. Attorney for the Northern District of California charged Yervant
Lepejian by criminal information
[7 pages in PDF] with one count of wire fraud in violation of 18 U.S.C. § 1343.
Lepejian is a former Ch/CEO of HPL Technologies, a Silicon Valley software
maker. The USAO stated in a release
that Lepejian "engaged in a scheme to defraud" HPL, its shareholders
and the Securities and Exchange Commission
(SEC). It further stated that "as part of the scheme the defendant caused
false and illusory sales to be recorded as revenue by HPL in violation of
Generally Accepted Accounting Principles (``GAAP´´) and HPL's own internal
revenue recognition policies; that he made and caused to be made material false
statements to HPL's auditors, to the SEC, and the public regarding HPL's revenue
and profits; and that he deprived his employer, HPL Technologies, of its right
to his honest and faithful services by creating false sales, causing those false
sales to be recognized as revenue, and making and causing to be made material
false statements to HPL, its auditors, the SEC."
In addition, on September 11, the SEC filed a civil complaint in U.S. District Court (NDCal) against
Lepejian alleging violation of §17(a) of the Securities Act (15 U.S.C. §
77q(a)), §10(b) of the Exchange Act (15 U.S.C. §78j(b)) and Rule 10b-5
thereunder, as well as §§13(a), 13(b)(2)(A), 13(b)(2)(B) and 13(b)(5) of the
People and Appointments
9/9. The U.S. Attorney for the Northern District of California, Kevin Ryan,
announced the new organization and management of his office. Ross Nadel
will remain Chief of the Computer Hacking and Intellectual Property (CHIP) Unit.
He has held the position since the unit was created in 2000. Elizabeth De La
Vega will remain as Chief of the San Jose Branch Office, with Eumi Choi
as Deputy Chief. Hannah Horsley will be Chief of the Appellate
Section. Patrick Robbins will be Chief of the Securities Fraud Section. Martha
Boersch will be Chief of the Organized Crime Strike Force. Miranda Kane
will be Chief of the White Collar Crime Section. Steven Gruel will be
Chief of the Major Crimes (formerly General Crimes) Section. See, USAO
9/9. Qwest Communications announced that Janet
Cooper has rejoined the company as SVP and Treasurer. See, Qwest
9/9. The National Telecommunications and
Information Administration (NTIA) published in its web site an amendment
to its contract with NeuStar regarding the
management of the .us top level domain.
9th Circuit Reverses in Trek Trademark Case
9/6. The U.S.
Court of Appeals (9thCir) issued its opinion
[28 pages PDF] in Thane
v. Trek, a trademark case. The Appeals Court reversed the
District Court's summary judgment for Thane.
Background. Trek Bicycle
Corporation is a leading manufacturer of bicycles and related products. In
1981, the USPTO granted Trek a trademark for the use of "TREK" on
bicycles and bicycle frames. See, Trademark Registration No. 1168276. It has
also been awarded several other trademarks based on variations of the word
"trek". Trek has extensively advertised its trademark. Trek also
sponsors and supplies bicycles to the professional bicycle racing team captained
by Lance Armstrong, four time
winner of the Tour de France.
Armstrong and his USPS team have
also won numerous other international bicycle races riding Trek bicycles. Their jerseys
prominently display the Trek name. Armstrong presented a Trek bicycle to the
President at a White House ceremony. Trek also makes stationary exercise cycles.
Thane International makes, among other
things, stationary exercise equipment, which it markets via television
infomercials. In addition to its Bun and Thigh Isolator, it markets OrbiTrek
Pro. Thane insists that the Trek portion of these names comes, not from Trek
bicycles, but from the Star Trek television series.
Thane filed an application with the USPTO to register "ORBITREK" for
goods described as "stationary exercise machines." Trek filed a Notice
of Opposition with the Trademark Trial and Appeal Board.
District Court. Thane filed a complaint with the U.S.
District Court (CDCal) seeking a declaration that it had not violated
trademark laws under the Lanham Act, state common law, or state statutory law.
Trek counterclaimed for trademark infringement pursuant to 15 U.S.C. § 1114(1),
false designation of origin pursuant to 15 U.S.C. § 1125(a), and trademark
dilution pursuant to 15 U.S.C. § 1125(c). Trek also plead various state law
claims. The District Court granted Thane's motion for summary judgment and
denied Trek's, holding that "any reasonable juror would conclude that there
is no likelihood of confusion between Trek Bicycle Corporation's 'Trek' mark and
Thane's 'OrbiTrek' mark." This appeal followed.
Appeals Court. The Appeals Court reversed and remanded as to all claims
in which likelihood of confusion is an issue. It held that "a reasonable
jury could decide the likelihood of confusion issue in favor of either
NewCom Executives Indicted
9/6. A grand jury of the U.S. District Court (CDCal) returned
a 36 count indictment against Sultan Warris Khan, Asif Mohammad Khan, Steven
Veen, and Alexander Remington, alleging, among other things, securities fraud,
making false statements to the Securities and
Exchange Commission (SEC), and money laundering.
Three of the defendants were executives of NewCom, a computer peripheral company
that was based in Westlake Village, California. Sultan Khan was its President,
CEO and Chairman. Asif Khan was its EVP. Veen was its CFO. Remington is the
owner of Micro Equipment Corporation, which distributes computer parts and
peripherals and was NewCom's main supplier. See, USAO release.
The SEC previously filed and settled a civil complaint against NewCom, the
Khans, and others. See, SEC release.
Law Professor Criticizes Supreme Court Spectrum Speech Cases
9/6. The American Enterprise Institute's (AEI)
and Brookings Institution's Joint Center
for Regulatory Studies published a paper
[77 pages in PDF] titled "The Logic of Scarcity: Idle Spectrum As a First
Amendment Violation", by Stuart Benjamin. The article takes issue with the
Supreme Court's landmark First Amendment cases involving use of spectrum -- National
Broadcasting Company v. US, 319 U.S. 190 (1943) and Red
Lion v. FCC, 395 U.S. 367 (1969).
He writes that "The Supreme Court has distinguished the regulation of radio
spectrum from the regulation of printing presses, and applied more lenient
scrutiny to the regulation of spectrum, based on its conclusion that the
spectrum is unusually scarce."
"I suggest that in most cases the only interest that would justify a
refusal to allocate spectrum is nontrivial interference. I thus conclude that,
even if one accepts the current state of the doctrine, the government cannot
exclude noninterfering uses from the spectrum."
Benjamin, who is a law professor at the University of Texas, argues that
"the scarcity rationale does not support, and instead undercuts, government
actions that limit the use of the spectrum. ... And no other rationale would
distinguish spectrum from print in a way that would support government
constraints on the former but not the latter."
He argues in this paper that the appropriate standard of review "is the
intermediate scrutiny ordinarily applied to content neutral speech regulation.
In order to satisfy such scrutiny, the government must put forward an important
or substantial government interest. I suggest that in most cases the only
interest that would justify a refusal to allocate spectrum is nontrivial
interference. I thus conclude that, even if one accepts the current state of the
doctrine, the government cannot exclude noninterfering uses from the
People and Appointments
9/6. Shellie Blakeney was named Legal Advisor to the Tom Sugrue, Bureau
Chief of the Federal Communications Commission's (FCC) Wireless Telecommunications Bureau. She has
worked at the FCC since 1998. See, release
9/6. Tina Jonas was named the Federal
Bureau of Investigation's (FBI) Chief Financial Officer and Assistant
Director, Finance Division. See, FBI release.
9/6. The Justice Department (DOJ) filed a
complaint in U.S. District Court (DC) against Archer Daniels Midland (ADM) to block a
joint venture with a competing corn wet miller in order for ADM to proceed with
its proposed acquisition of Minnesota
Corn Processors (MCP). The DOJ simultaneously filed a proposed consent
decree. See, DOJ release.
Meanwhile, ADM announced "the completion of the acquisition" of MCP in
of September 6. It did not reference the litigation. According to the DOJ, the
transaction would have reduced the number of competitors in the relevant market
from five to four. ADM has a history with the DOJ.
Go to News from September 1-5, 2002.