News from June 26-30, 2003

7th Circuit Affirms Preliminary Injunction in Aimster Case

6/30. The U.S. Court of Appeals (7thCir) issued its opinion [23 pages in PDF] in In Re Aimster Copyright Litigation, affirming the District Court's preliminary injunction affecting the Aimster (aka Madster) file copying system.

Introduction. The Appeals Court affirmed the District Court's preliminary injunction based upon the plaintiffs' showing of a likelihood of success on the merits on the issue of contributory infringement. The District Court had also based its preliminary injunction upon vicarious infringement; however, the Appeals Court only briefly addressed this basis, and without reaching a clear holding. The Appeals Court also briefly rejected Aimster's various other arguments, such as those regarding the District Court's failure to hold an evidentiary hearing, the Digital Millinnium Copyright Act (DMCA), and First Amendment rights.

The Appeals Court's opinion is clear that it affirmed the District Court's preliminary injunctions. It did so upon an application of facts specific to the Aimster system. Many of the facts relied upon by the Court in affirming the District Court will not be present in other cases involving peer to peer file swapping networks, or involving other internet based infringement.

The opinion is 23 pages. But, it has no separate opinions or footnotes. It is densely packed with substantive analysis that will be pertinent in other cases, and legal debates, involving internet based copyright infringement.

Judge Richard Posner, the dean of the law and economic movement wrote the opinion. Yet, there is little economic analysis. There is also very little reliance upon precedent from other lower courts, or the opinion of the District Court. (The A&M Records v. Napster case is cited only twice -- once to say that the 9th Circuit erred, and once to say that the 9th Circuit sidestepped an issue. The District Court had relied heavily on the Napster case). Finally, Judge Posner wrote the opinion with his usual efficient use of words, but without his usual clarity.

Posner quipped that "To the recording industry, a single known infringing use brands the facilitator as a contributory infringer. To the Aimsters of this world, a single noninfringing use provides complete immunity from liability. Neither is correct." His opinion is an examination of considerations pertinent to finding where between these two arguments the dividing line may be. His analysis, which is not always clear, contains much that may be of concern to copyright owners whose products are infringed via the internet. For example, he argued that the Ninth Circuit erred in its contributory infringement analysis in the Napster case.

Readers interested in developments in copyright law may wish to read the opinion in full, rather than rely upon this article.

District Court. This is multidistrict litigation involving copyright related cases directed at shutting down the file copying service once named Aimster, and later renamed Madster. Plaintiffs are owners of copyrighted music, including record companies, songwriters and music publishers. The defendants are related to the Aimster file copying service, including its founder, John Deep, and companies founded to develop its software and to operate the system. Eleven lawsuits were initiated in various U.S. District Courts. They were consolidated and assigned to the U.S. District Court (NDIll).

On September 4, 2002, the District Court issued its Memorandum Opinion and Order granting a motion for preliminary injunction to plaintiffs. The Court held that the "Plaintiffs have unequivocally established that Aimster's users are engaged in direct copyright infringement." It rejected Aimster's Audio Home Recording Act (AHRA) defense.

The Court next held that the plaintiffs demonstrated a likelihood of success on the merits that Aimster engaged in both contributory and vicarious infringement.

The Court rejected Aimster's defense that its service is capable of substantial non-infringing uses, under the Supreme Court's decision in Sony v. Universal City Studios, 464 U.S. 417 (1984). The Court also found that Aimster is not eligible for any of the safe harbor protections of the Digital Millennium Copyright Act, because of its failure to comply with 17 U.S.C. § 512(i).

See also, story titled "District Court Finds Contributory and Vicarious Infringement by Madster" in TLJ Daily E-Mail Alert No. 502, September 5, 2002.

On October 31, 2002, the District Court issued its Preliminary Injunction Order. The Order provides that "Aimster is preliminarily enjoined from directly, indirectly, contributorily, or vicariously infringing in any manner any" of plaintiffs' copyrighted works. The Order continues that "Aimster shall immediately disable and prevent any and all access" to any of plaintiffs' copyrighted works "available on, over, through, or via any website, server, hardware, software, or any other system or service owned or controlled by Aimster ..."

Finally, the Order mandates that "Aimster shall affirmatively monitor and patrol for, and preclude access to" plaintiffs' copyrighted works on the Aimster system including "by employing such technological tools and measures that are reasonably available to carry out such obligations."

See also, story titled "District Court Enjoins Aimster" in TLJ Daily E-Mail Alert No. 541, November 4, 2002.

Appeals Court. A three judge panel of the Court of Appeals affirmed the District Court. Judge Posner wrote the opinion, in which Judges Ripple and Williams joined.

Judge Posner began by offering this preface to the case: "If the music is copyrighted, such swapping, which involves making and transmitting a digital copy of the music, infringes copyright. The swappers, who are ignorant or more commonly disdainful of copyright and in any event discount the likelihood of being sued or prosecuted for copyright infringement, are the direct infringers. But firms that facilitate their infringement, even if they are not themselves infringers because they are not making copies of the music that is shared, may be liable to the copyright owners as contributory infringers. Recognizing the impracticability or futility of a copyright owner’s suing a multitude of individual infringers ... , the law allows a copyright holder to sue a contributor to the infringement instead, in effect as an aider and abettor."

Posner is known for his application of economic analysis to legal principles. However, this opinion contains little economics. He is also possesses less enthusiasm for intellectual property protections that many in the Congress and the federal judiciary. Yet, he upheld the injunction.

This opinion is largely a discussion of, and application of, the Supreme Court's holding regarding contributory infringement in the Sony case to the facts of the present case. The Supreme Court in that case held that Sony did not contributorily infringe copyrights by selling the Betamax machine, because it had "commercially significant noninfringing uses", including "private, noncommercial timeshifting in the home". The bulk of Posner's opinion is devoted to affirming the District Court's conclusion that the plaintiffs had demonstrated a likelihood of success on the merits on the issue of contributory infringement. In the process, Posner gave a detailed review of the technology of the Aimster system, and how it is used, as well as the Betamax recorder, and how it is used.

Posner also drew principles from other areas of law. For example, he analogized contributory infringement to "the tort of intentional interference with contract, that is, inducing a breach of contract". He continued that "If a breach of contract (and a copyright license is just a type of contract) can be prevented most effectively by actions taken by a third party, it makes sense to have a legal mechanism for placing liability for the consequences of the breach on him as well as on the party that broke the contract." (Parentheses in original.) He also resorted to principles from criminal law -- regarding criminal intent and aiding and abetting -- when analyzing when constructive knowledge of actual infringement is sufficient to sustain a finding of liability by a contributory infringer.

Posner first concluded simply making something that is used by others to infringe does not make the producer a contributory infringer. He wrote that "The fact that copyrighted materials might sometimes be shared between users of such a system without the authorization of the copyright owner or a fair-use privilege would not make the firm a contributory infringer. Otherwise AOL's instant-messaging system, which Aimster piggybacks on, might be deemed a contributory infringer. For there is no doubt that some of the attachments that AOL's multitudinous subscribers transfer are copyrighted, and such distribution is an infringement unless authorized by the owner of the copyright. The Supreme Court made clear in the Sony decision that the producer of a product that has substantial noninfringing uses is not a contributory infringer merely because some of the uses actually made of the product (in that case a machine, the predecessor of today’s videocassette recorders, for recording television programs on tape) are infringing." (Parentheses in original.)

Posner wrote that Sony's "video recorder was being used for a mixture of infringing and noninfringing uses and the Court thought that Sony could not demix them because once Sony sold the recorder it lost all control over its use."

Posner next addressed the Supreme Court's use of the terms "copying equipment" and "the sale of other articles of commerce", noting that Aimster provided a system, rather than a piece of equipment. He noted that the plaintiffs argued that "the provider of a service, unlike the seller of a product, has a continuing relation with its customers and therefore should be able to prevent, or at least limit, their infringing copyright by monitoring their use of the service and terminating them when it is discovered that they are infringing."

He concluded that "the ability of a service provider to prevent its customers from infringing is a factor to be considered in determining whether the provider is a contributory infringer." However, he added that "It is not necessarily a controlling factor".

He added that "If a service facilitates both infringing and noninfringing uses, as in the case of AOL's instant-messaging service, and the detection and prevention of the infringing uses would be highly burdensome, the rule for which the recording industry is contending could result in the shutting down of the service or its annexation by the copyright owners (contrary to the clear import of the Sony decision), because the provider might find it impossible to estimate its potential damages liability to the copyright holders and would anyway face the risk of being enjoined."

Posner continued that "We also reject the industry's argument that Sony provides no defense to a charge of contributory infringement when, in the words of the industry’s brief, there is anything ``more than a mere showing that a product may be used for infringing purposes.´´" He added that the Supreme Court in Sony "was unwilling to allow copyright holders to prevent infringement effectuated by means of a new technology at the price of possibly denying noninfringing consumers the benefit of the technology." Posner also added that "the Ninth Circuit erred in A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, 1020 (9th Cir. 2001), in suggesting that actual knowledge of specific infringing uses is a sufficient condition for deeming a facilitator a contributory infringer."

Posner also wrote the "we reject Aimster's argument that to prevail the recording industry must prove it has actually lost money as a result of the copying that its service facilitates."

He continued that "when a supplier is offering a product or service that has noninfringing as well as infringing uses, some estimate of the respective magnitudes of these uses is necessary for a finding of contributory infringement. ... But the balancing of costs and benefits is necessary only in a case in which substantial noninfringing uses, present or prospective, are demonstrated."

"We also reject Aimster's argument that because the Court said in Sony that mere ``constructive knowledge´´ of infringing uses is not enough for contributory infringement, ... and the encryption feature of Aimster’s service prevented Deep from knowing what songs were being copied by the users of his system, he lacked the knowledge of infringing uses that liability for contributory infringement requires. Willful blindness is knowledge ..." (Citation omitted.)

He analogized from the criminal law. Just as a drug trafficker can not escape criminal liability by insulating himself from the actual transaction, "no more can Deep by using encryption software to prevent himself from learning what surely he strongly suspects to be the case: that the users of his service -- maybe all the users of his service -- are copyright infringers."

But Posner also hedged. "This is not to say that the provider of an encrypted instant-messaging service or encryption software is ipso factor a contributory infringer should his buyers use the service to infringe copyright, merely because encryption, like secrecy generally, facilitates unlawful transactions."

He concluded that "Our point is only that a service provider that would otherwise be a contributory infringer does not obtain immunity by using encryption to shield itself from actual knowledge of the unlawful purposes for which the service is being used."

Next, Posner addressed and rejected Aimster's argument that "all Aimster has to show in order to escape liability for contributory infringement is that its file-sharing system could be used in noninfringing ways, which obviously it could be." (Emphasis in original.)

Posner reviewed the possible non-infringing uses of the Aimster service, such as swapping non-copyrighted music, and concluded that it all comes down to "the question is how probable they are".

Reviewing the factual record in the present case, Posner concluded that "Because Aimster failed to show that its service is ever used for any purpose other than to infringe the plaintiffs' copyrights, the question (as yet unsettled, ...) of the net effect of Napsterlike services on the music industry's income is irrelevant to this case. If the only effect of a service challenged as contributory infringement is to enable copyrights to be infringed, the magnitude of the resulting loss, even whether there is a net loss, becomes irrelevant to liability." (Parentheses and emphasis in original. Citation omitted.)

He continued that "Even when there are noninfringing uses of an Internet file-sharing service, moreover, if the infringing uses are substantial then to avoid liability as a contributory infringer the provider of the service must show that it would have been disproportionately costly for him to eliminate or at least reduce substantially the infringing uses. Aimster failed to make that showing too, by failing to present evidence that the provision of an encryption capability effective against the service provider itself added important value to the service or saved significant cost. Aimster blinded itself in the hope that by doing so it might come within the rule of the Sony decision." (Emphasis in original.)

This completed Posner's discussion of contributory infringement. He then shifted to vicarious infringement. However, he dwelt only briefly on this issue. He wrote that "we are less confident than the district judge was that the recording industry would also be likely to prevail on the issue of vicarious infringement should the case be tried, though we shall not have to resolve our doubts in order to decide the appeal."

Posner also briefly rejected the free speech arguments of Aimster. But then, Posner was bound to, given the Supreme Court's recent opinion in the Eldred case. On January 15, 2003, the Supreme Court issued its opinion [89 pages in PDF] in Eldred v. Ashcroft, upholding the constitutionality of the Copyright Term Extension Act, against, among other things, a challenge that it violated the First Amendment. See also, TLJ story titled "Supreme Court Upholds CTEA in Eldred v. Ashcroft", January 15, 2003.

NTIA Releases E-SIGN Act Report

6/30. The National Telecommunications and Information Administration (NTIA) released a report titled "Electronic Signatures: A Review of the Exceptions to the Electronic Signatures in Global and National Commerce Act". It recommends retaining most of the nine exceptions enumerated in the Act. See also, PDF copy [79 pages].

The Congress passed the Electronic Signatures in Global and National Commerce (E-SIGN) Act in 2000. It was S 761. It is now Public Law No. 106-229, codified at 15 U.S.C. §§ 7001, et seq.

The E-SIGN Act provides for the acceptance of electronic signatures in interstate commerce, with certain nine enumerated exceptions. The E-SIGN Act provides, in part, that "Notwithstanding any statute, regulation, or other rule of law (other than this title and title II), with respect to any transaction in or affecting interstate or foreign commerce -- (1) a signature, contract, or other record relating to such transaction may not be denied legal effect, validity, or enforceability solely because it is in electronic form; and (2) a contract relating to such transaction may not be denied legal effect, validity, or enforceability solely because an electronic signature or electronic record was used in its formation." See, Section 101(a) of the Act, codified at 15 U.S.C. § 7001(a).

Section 103 (15 U.S.C. § 7003) then enumerates nine categories of exempt records -- that is, records to which Section 101 does not apply. The exceptions are (1) wills, codicils, and testamentary trusts, (2) domestic and family law records, (3) Uniform Commercial Code records, (4) court documents, (5) utility cancellation notices, (6) housing default and foreclosure notices, (7) health and life insurance cancellation notices, (8) product recall notices, and (9) hazardous materials.

The E-SIGN Act also tasked the NTIA with writing a report for the Congress on these nine exceptions. The report released on June 30 is this Congressionally mandated report. Specifically, the E-SIGN Act provides that "The Secretary of Commerce, acting through the Assistant Secretary for Communications and Information, shall review the operation of the exceptions in subsections (a) and (b) to evaluate, over a period of 3 years, whether such exceptions continue to be necessary for the protection of consumers. Within 3 years after the date of enactment of this Act, the Assistant Secretary shall submit a report to the Congress on the results of such evaluation."

The NTIA published a series of notices in the Federal Register, and in its website, soliciting public comments regarding these exceptions. It received 43 comments.

Wills, Codicils, and Testamentary Trusts.  The report concludes that "For the states that have not enacted electronic transactions laws, the removal of the ESIGN exception would leave persons in that state free to execute electronic wills, trusts and codicils with software that may not be available at the time the will is probated or its authenticity questioned. Technological and structural systems for preserving software to allow access to the documents for many years or decades in the future have yet to be implemented in state court probate systems. As a result, the removal of the ESIGN exception for wills, codicils, and testamentary trusts could create significant confusion. For these reasons, NTIA recommends the retention of the ESIGN exception for wills, codicils, and trusts."

Domestic and Family Law Records. The report concludes that "Family law documents contain extremely sensitive information, often requiring a higher level of protection and confidentiality", and that "states are just beginning to grapple with the issues surrounding utilizing electronic family law documents including authentication and privacy." It also states that "Despite expanding use, the concern persists that until authentication methods and technologies demonstrate consistent reliability, especially where so much depends upon the accuracy of the documents, electronic documents should not be used comprehensively for all family law cases." Consequently, the report concludes that "Further testing and development of technologies in this environment may in time assuage these concerns. NTIA recommends, therefore, that the ESIGN exception for family law documents should be retained in the statute at this time."

Uniform Commercial Code Records. The report recommends that "the ESIGN exception for the UCC be retained as part of the statute, but modified to exclude electronic letter of credit transactional records governed by Article 5 and electronic notices governed by Article 6."

Court Records. The report concludes that "The federal and state courts have made considerable achievements in the area of electronic transactions and document management systems. Although their advances toward a completed transition to a paperless court process have been significant, there are still important consumer interests that require the protections afforded by ESIGN. For these reasons, the removal of ESIGN section 103(b)(1) exception for court records and documents at this time would be premature. The NTIA recommends its retention as a part of the ESIGN Act."

Utility Cancellation Notices. The report recommends that "the ESIGN exception for utility cancellation notices be retained as part of the statute, and modified to allow companies to send electronic notice of utility service cancellations in cases where consumers voluntarily receive electronic billing services under state law."

Housing Default and Foreclosure Notices. The report recommends "maintaining the Housing Default and Foreclosure Notices exception."

Health and Life Insurance Cancellation Notices. The report recommends "that Congress retain ESIGN's exception for cancellation notices for health and life insurance benefits."

Product Recall Notices. The report states that "although ESIGN and state UETA laws require verification or acknowledgment of receipt of the recall notice communication, using electronic mail notices are difficult for manufacturers and producers to monitor because consumers tend to change electronic mail addresses and in most cases they do not provide the new information to the manufacturers and distributors until that information is requested. Moreover, unfortunately, much of the e-mail received by consumers is SPAM, unsolicited messages that offer a variety of products and services or that serve as vehicles for fraudulent schemes, computer viruses and unsavory promotions. There is a high risk that consumers may erroneously treat electronic recall notices as SPAM and delete or ignore the notice. Thus, the intent and urgency of the recall notification would be lost." The report recommends "that Congress retain the ESIGN product recall exception at this time."

Hazardous Materials. The report concludes that "Given the significant experience that EPA and the RSPA have in this area, the information presented by these agencies provides compelling evidence that the removal of the ESIGN exception for hazardous and dangerous materials documents would create the potential for dangerous conditions to exist in the hazardous materials transport industry. The risk of information presented in this evaluation indicates that the removal of the exception would pose a significant risk of injury to health and public safety."

GAO Reports on Info Tech at Bioterrorism Preparedness Agencies

6/30. The General Accounting Office (GAO) released a report [103 pages in PDF] titled "Bioterrorism: Information Technology Strategy Could Strengthen Federal Agencies' Abilities to Respond to Public Health Emergencies".

The report states that "Many of the activities under way to prepare for and respond to public health emergencies -- including bioterrorism -- are supported by information technology (IT), which can better enable public health agencies to identify naturally occurring or intentionally caused disease outbreaks and can support communications related to public health."

The GAO focuses on IT at six federal agencies involved in bioterrorism preparedness and response, the Department of Agriculture (USDA), Department of Defense (DOD), Department of Energy (DOE), Department of Health and Human Services (HHS), Department of Veterans Affairs (VA), and Environmental Protection Agency (EPA). The GAO found that these six agencies "have a large number of existing and planned bioterrorism-related information systems. Specifically, these agencies identified 72 information systems and supporting technologies, as well as 12 other IT initiatives. Of the 72 systems, 34 are surveillance systems, 18 are supporting technologies, 10 are communications systems, and 10 are detection systems."

The GAO further found that "The use of emerging information technologies to support the public health infrastructure could help to improve federal agencies' abilities to prepare for and respond to public health emergencies. Agencies have taken steps to adopt such emerging technologies. For example, Los Alamos National Laboratory is working on a Web-based system called the Forensics Internet Research Exchange, which supports the sharing of biothreat information among research and government agencies and uses public networks to securely transport private intra-agency and interagency information. However, barriers exist, such as the lack of a mechanism for identifying and prioritizing appropriate emerging information technologies for their transition into the public health community."

The GAO also recommends "setting priorities for IT initiatives and coordinating the development of IT standards for the health care industry."

More News

6/30. President Bush signed HR 2312, the ORBIT Technical Corrections Act of 2003, which extends the deadline for the International Mobile Satellite Organization (Inmarsat) to conduct and initial public offering of securities. See, White House release.

6/30. The U.S. Patent and Trademark Office (USPTO) published a notice in the Federal Register announcing and describing amendments to its rules of practice in patent cases. These changes take effect on July 30, 2003. See, Federal Register, June 30, 2003, Vol. 68, No. 125, at Pages 38611 - 38630.

6/30. The Copyright Office (CO) published a notice in the Federal Register announcing and describing technical amendments that it has made to its regulation pertaining to architectural works. This amends 37 CFR part 202. See, Federal Register, June 30, 2003, Vol. 68, No. 125, at Pages 38630 - 38631.

6/30. The Internet Corporation for Assigned Names and Numbers (ICANN) published in its web site its report titled "Report by ICANN to United States Department of Commerce Re: Progress Toward Objectives of Memorandum of Understanding".

6/30. On June 26, 2003, EchoStar and DirecTV filed a complaint in the Court of Common Pleas, Franklin County, Ohio, against the state of Ohio seeking a declaratory judgment that Ohio's 6% sales tax on direct broadcast satellite television service, but not on cable television service, is unconstitutional. See, DirecTV release. Plaintiffs allege that the tax violates the Commerce Clause. Also, June 30, EchoStar stated in a release that "The satellite TV companies have submitted a request to the North Carolina Department of Revenue to obtain refunds for their customers of approximately $30 million of sales taxes paid by them in North Carolina since Jan. 1, 2002. Under North Carolina law, this is a required first step in challenging this tax in North Carolina, where there are more than 700,000(a) satellite TV customers. If the North Carolina Department of Revenue does not agree to provide the refunds within 90 days, the companies plan to file a lawsuit against the State of North Carolina because the statute that imposes a five percent tax on their customers in the state is unconstitutional and otherwise unlawful."

6/30. The National Institute of Standards and Technology's (NIST) Computer Security Division (CSD) published in its web site its second public draft [62 pages in PDF] of its publication titled "Guide for the Security Certification and Accreditation of Federal Information Systems". This is NIST Special Publication 800-37 authored by Ron Ross and Marianne Swanson. Public comments are due by August 31, 2003. Comments may be submitted to

6/30. Broadcom stated in a release that it has "settled all outstanding litigation with National Semiconductor Corporation and the two companies have agreed to a comprehensive patent cross-license. In May 2002, National Semiconductor brought an action against Broadcom in the United States District Court for the Eastern District of California alleging that certain Broadcom products infringed its patents. In July 2002, Broadcom filed counterclaims in the case alleging that certain National Semiconductor products infringed Broadcom patents. In the settlement, the companies agreed to dismiss all outstanding claims and counterclaims in the litigation with prejudice. The settlement also includes a cross-license of certain issued and to be issued patents between the companies for the life of the patents."

Supreme Court Denies Cert in SBCCI v. Veeck

6/27. The Supreme Court denied certiorari, without opinion, in SBCCI v. Veeck. See, Order List [12 pages in PDF] at page 9. This denial lets stand a divided en banc opinion of the U.S. Court of Appeals (5thCir) regarding the effect upon copyright protection of legislative incorporation by reference of model codes.

Background. The Southern Building Code Congress International (SBCCI) is a nonprofit organization that develops, promotes, and promulgates model building codes. Local governments, in turn, enact its codes into law by reference, in whole, or in part. SBCCI asserts a copyright in each of its codes.

Peter Veeck operates a web site that contains information about North Texas, including the towns of Anna and Savoy. Several towns in North Texas have adopted SBCCI model codes, including Anna and Savoy. Veeck purchased from SBCCI CDs with copies of the building codes. In disregard of the software license and copyright notice, Veeck copied and published these building codes into his web site.

District Court. The SBCCI filed a complaint in U.S. District Court (EDTex) against Veeck alleging copyright infringement. The District Court ruled on cross motions for summary judgment that Veeck had infringed valid copyrights, and permanently enjoined Veeck from further infringement. Veeck appealed.

Appeals Court: Three Judge Panel. On February 2, 2001, a divided three judge panel of the U.S. Court of Appeals (5thCir) issued its opinion upholding the judgment of copyright infringement.

Veeck argued that SBCCI did not hold a valid copyright. He argued that once enacted into law by reference, codes loose their copyright status. He also argued merger -- that is, once enacted by reference into law, codes become a fact which can be expressed in only one way. He also argued that due process rights of citizens to know the law was violated. He further argued freedom of speech, waiver, misuse, and fair use. The Court rejected all of these arguments.

The Court noted that the Supreme Court of the United States held in Banks v. Manchester, 128 U.S. 244 (1888), that a private reporter of judicial opinions could not assert copyright protection because judicial opinions are written by publicly paid judges, and are hence publicly owned, and because of the public interest in access to the law. However, the Court distinguished Banks on the basis that SBCCI, not a publicly paid official, created to the model codes.

The Court further argued the policy underlying copyright protection for private code writers: "We believe that if code writing groups like SBCCI lose their incentives to craft and update model codes and thus cease to publish, the foreseeable outcome is that state and local governments would have to fill the void directly, resulting in increased governmental costs as well as loss of the consistency and quality to which standard codes aspire. A second glance at the names of the amici supporting SBCCI's position in this case provides an idea of the potential sweep of a contrary holding that the authors of model codes could not enforce copyrights in their works once the ultimate reason for their very creation is realized. As amici state in their brief supporting SBCCI, 'these codes and standards are widely used and adopted by local and state government and federal authorities throughout the United States who do not otherwise have the necessary facilities and resources to develop these safety standards independently.' "

See also, TLJ story titled "5th Circuits Affirms Judgment of Internet Copyright Infringement", February 5, 2001

Appeals Court: En Banc. On June 7, 2002, a divided en banc panel of the Fifth Circuit issued its opinion reversing the three judge panel. The Court split 9-6, with Judge Edith Jones writing for the majority.

First, the Court wrote that the Supreme Court precedents of Banks v. Manchester and Wheaton v. Peters, 33 U.S. (8 Pet.) 591 (1834) support Veeck. Both cases involved claims by reporters to hold copyrights in their published copies of court opinions. The Supreme Court held in these cases that judges, as public officials, cannot claim to be authors of their official opinions for the purpose of copyright protection. The Supreme Court denied copyright protection to the court reporters.

The Fifth Circuit wrote that it extended this reasoning to the present case. It wrote that "we hold that when Veeck copied only ``the law´´ of Anna and Savoy, Texas, which he obtained from SBCCI's publication, and when he reprinted only ``the law´´ of those municipalities, he did not infringe SBCCI's copyrights in its model building codes." (Emphasis in original.)

Second, the Court held that the Copyright Act and the merger doctrine support Veeck. The Court wrote that "The statute excludes from copyright protection ideas, procedures, processes, systems methods of operation, or information in the public domain. See 17 U.S.C. § 102(b) ... If an idea is susceptible to only one form of expression, the merger doctrine applies and § 102(b) excludes the expression from the Copyright Act. ... Veeck copied the building code of the towns of Anna and Savoy, Texas, based on their adoption of a version of the SBCCI model code. The codes are ``facts´´ under copyright law. They are the unique, unalterable expression of the ``idea´´ that constitutes local law."

Third, the Court wrote that judicial precedent from other supports Veeck. In particular, the Court distinguished two cases based on similar facts. In CCC Info. Servs. v. Maclean Hunter Mkt. Reports, Inc., 44 F.3d 61 (2d Cir. 1994), cert. denied, 516 U.S. 817 (1995), the Second Circuit upheld the copyright of a privately prepared listing of automobile values that states required insurance companies to use. In Practice Mgt. Info. Corp. v. American Med. Ass'n, 121 F.3d 516 (9th Cir. 1997), cert. denied, 522 U.S. 933 (1997), opinion amended by 133 F.3d 1140 (9th Cir. 1998), the Ninth Circuit held that the American Medical Association did not lose the right to enforce its copyright when use of its promulgated coding system was required by government regulations. In the present case, the Court distinguished the legislative act of reference from the legislative act of incorporation."

Judge Weiner wrote a long and vigorous dissent, joined by five other Judges, which differed from the majority on all major points. See also, story titled "Divided En Banc 5th Circuit Reverses in Veeck v. SBCCI", TLJ Daily E-Mail Alert No. 448, June 11, 2002.

Solicitor General Opposes Granting Certiorari. On December 2, 2002, the Supreme Court invited the Solicitor General (SG) to file a brief expressing the views of the United States. In May, 2003, the SG submitted a brief to the Supreme Court in which it argued against Supreme Court review at this time.

The SG argued that the Fifth Circuit correctly decided this case. It wrote that the Court properly applied the Supreme Court's holding in Banks v. Manchester and correctly interpreted the Copyright Act. It also argued that the "Development by the lower courts of the law in this area would further clarify the effect, if any, that different government uses of copyrighted materials have on the copyright of those materials."

Uncertainty. The Fifth Circuit's en banc opinion arguably created a conflict between the Fifth Circuit, and the First, Second and Ninth Circuits. In the least, the law remains uncertain in this area.

In addition to the Fifth Circuit's opinion in Veeck, there are three other relevant cases. In Building Officials and Code Adm. v. Code Tech., Inc., 628 F.2d 730, 736 (1st Cir. 1980), the Court declined to invalidate the copyright of a building code created by nonprofit group and adopted by the state. However, it also expressed doubt over the enforceability of the copyright given that the state had adopted the code.

In CCC Info. Servs. v. Maclean Hunter Mkt. Reports, Inc., 44 F.3d 61 (2d Cir. 1994), cert. denied, 516 U.S. 817 (1995), the Court upheld the copyright of a privately prepared listing of automobile values that states required insurance companies to use.

Finally, In Practice Mgt. Info. Corp. v. American Med. Ass'n, 121 F.3d 516 (9th Cir. 1997), cert. denied, 522 U.S. 933 (1997), opinion amended by 133 F.3d 1140 (9th Cir. 1998), the Court held that the American Medical Association did not lose the right to enforce its copyright when use of its promulgated coding system was required by government regulations.

Nevertheless, the SG argued in its brief that "The Fifth Circuit's narrow decision in this case is consistent with the only one of those decisions to address an analogous circumstance, and it does not conflict with the two other decisions, which addressed substantially different factual and legal issues." And, SBCCI rebutted this argument in its supplemental brief [PDF].

More News

6/27. The General Accounting Office (GAO) released a report [44 pages in PDF] titled "Video Surveillance: Information on Law Enforcement’s Use of Closed-Circuit Television to Monitor Selected Federal Property in Washington, D.C."

6/27. The Supreme Court denied certiorari in Monsanto v. Bayer CropScience. See, Order List [12 pages in PDF] at page 4. This is S.C. No. 02-197.

6/27. The Supreme Court stated that "The Court will take a recess from today until Monday, September 8, 2003." See, Order List [12 pages in PDF] at page 12.

Senate Commerce Committee Approves FCC Reauthorization Bill

6/26. The Senate Commerce Committee amended and approved S 1264, the Federal Communications Commission Reauthorization Act of 2003. The bill would reauthorize the Federal Communications Commission (FCC) through 2008. However, the bill also contains many significant substantive provisions pertaining to media ownership rules, e-rate fraud, FCC enforcement, lobbying by former FCC officials, and the effect of bankruptcy on spectrum auctions. See, full story.

Sen. John McCain

Senate Commerce Committee Approves Commercial Spectrum Enhancement Act

6/26. The Senate Commerce Committee amended and approved HR 1320, the Commercial Spectrum Enhancement Act. The House passed its version of the bill on June 11 by a vote of 408-10. See, Roll Call No. 260. The Senate version of the bill now contains the NorthPoint amendment. The House bill does not.

This bill, which is sponsored by Rep. Fred Upton (R-MI), would change the process for reallocating spectrum from federal users to commercial users, such as for Third Generation (3G) wireless services. For example, the Department of Defense (DOD) currently uses spectrum in the 1710-1755 MHz band. The National Telecommunications and Information Administration (NTIA) and Federal Communications Commission (FCC) have identified this band for reallocation for 3G services. The DOD will incur expenses to relocate to other spectrum bands. The bill would create a Spectrum Relocation Fund, funded by auction proceeds, to compensate federal agencies for the cost of relocating. The bill would replace the current role of the House and Senate Appropriations Committees.

The Senate Commerce Committee approved, by a vote of 13 to 8, an amendment offered by Sen. John Sununu (R-NH) and Sen. Maria Cantwell (D-WA), that would exempt from auction spectrum for fixed terrestrial services in the 12.2-12.7 GHz.

This amendment would benefit NorthPoint. It describes its technology as follows: "Northpoint is a patented, digital, wireless, cell based, terrestrial transmission technology that reuses radio frequency spectrum previously reserved for satellite systems. Northpoint can reuse this spectrum by keeping the terrestrial signal below the level to cause interference to the satellite signal, but above the level required to provide reliable terrestrial service. This is accomplished through several means, one of which is directional transmission. The Northpoint system consists of directional broadcast antennas located on towers, poles, buildings or mountains. The transmissions are oriented in a limited azimuth range, based upon the look angles to the satellite systems with which the Northpoint system will share frequencies, allowing harmonious simultaneous co-channel transmissions between satellite and terrestrial services." See, NorthPoint paper [9 pages in PDF]. See also, story titled "FCC Acts on Northpoint Application" in TLJ Daily E-Mail Alert No. 417, April 24, 2003.

Sen. Maria CantwellSen. Cantwell (at right) argued that this amendment is about promoting broadband deployment in rural areas. She continued that exceptions have been allowed in the past, such as for first responders, and that an exception should be made here.

Sen. Burns spoke in support of the amendment. He said that "this is a very narrow piece of spectrum". He also commented that when spectrum is auctioned, sometimes the auction price is so high that companies have no money left to finance buildout.

Sen. Burns also commented that perhaps, rather than auctioning spectrum, the federal government should treat it like federal lands. He suggested that perhaps service providers should "graze on spectrum" the way ranchers "graze on public lands".

Sen. Ted Stevens (R-AK) stated that this amendment "would allow small rural areas to get wireless service", and that without this amendment, some communities in the state of Alaska will remain without wireless services. He said that "This bill is not going to leave the Senate unamended."

Sen. John McCain (R-AZ), the Chairman of the Committee, stated that he opposes this amendment, the administration opposes it, and the wireless industry opposes it. He said that "this would give away valuable spectrum".

Specifically, the amendment provides that "Section 647 of the ORBIT Act (47 U.S.C. 765f) is amended (1) by striking ``global satellite communications services.´´ and inserting ``global satellite communications services or for the provision of fixed terrestrial services in the 12.2-12.7 GHz band.´´; and (2) by adding at the end the following: ``No license for fixed terrestrial services in the 12.2-12.7 GHz band may be used for the provision of mobile terrestrial telephony services.´´."

The Committee also discussed an amendment written by Sen. Ted Stevens (R-AK). However, he did not offer it.

It would require the National Telecommunications and Information Administration (NTIA), "at the time of providing an initial estimate of relocation costs" to the FCC pursuant to paragraph (4)(A) of the bill, to submit to the House and Senate Appropriations and Commerce Committees for their "approval", a "copy of such estimate and the timelines for relocation". It further states that "Unless disapproved within 30 days, the estimate shall be approved. If disapproved, the NTIA may resubmit a revised initial estimate."

See also, TLJ story titled "House Subcommittee Holds Hearing On Commercial Spectrum Enhancement Act", March 25, 2003; story titled "House Subcommittee Approves Spectrum Relocation Fund Bill" in TLJ Daily E-Mail Alert No. 641, April 10, 2003; story titled "House Commerce Committee Passes Spectrum Relocation Bill" in TLJ Daily E-Mail Alert No. 653, May 1, 2003; and story titled "House Passes Commercial Spectrum Enhancement Act" in TLJ Daily E-Mail Alert No. 679, June 12, 2003.

Sen. Feinstein Introduces Bill to Require Disclosure of Unauthorized Access to Electronic Data

6/26. Sen. Dianne Feinstein (D-CA) introduced S 1350, the "Notification of Risk to Personal Data Act", a bill to require government agencies, commercial entities or individuals that own or license electronic databases containing personal information to notify individuals whose information is stored in those databases when the security of the database is breached.

The bill provides that "Any agency, or person engaged in interstate commerce, that owns or licenses electronic data containing personal information shall, following the discovery of a breach of security of the system containing such data, notify any resident of the United States whose unencrypted personal information was, or is reasonably believed to have been, acquired by an unauthorized person."

The bill defines "personal information"  as "an individual's last name in combination with any 1 or more of the following data elements, when either the name or the data elements are not encrypted:
(A) Social security number.
(B) Driver's license number or State identification number.
(C) Account number, credit or debit card number, in combination with any required security code, access code, or password that would permit access to an individual's financial account."

The bill defines "breach of security" as "the compromise of the security, confidentiality, or integrity of computerized data that results in, or there is a reasonable basis to conclude has resulted in, the unauthorized acquisition of and access to personal information maintained by the person or business".

The bill is not technology neutral. It covers unauthorized access to electronic records, but not unauthorized access to paper records. Nor does it cover unauthorized paper or verbal disclosures of personal information.

The bill provides for enforcement by the Federal Trade Commission (FTC) and state attorneys general. It further specifies fines for violations.

Sen. Dianne Feinstein

Sen. Feinstein (at right) stated that "I strongly believe Americans should be notified if a hacker gets access to their most personal data. This is both a matter of principle and a practical measure to curb identity theft." See, Congressional Record, June 26, 2003, at pages S8738-9.

She elaborated that "If individuals are informed of the theft of their Social Security numbers or other sensitive information, they can take immediate preventative action. They can place a fraud alert on their credit report to prevent crooks from obtaining credit cards in their name; they can monitor their credit reports to see if unauthorized activity has occurred; they can cancel any affected financial or consumer or utility accounts; they can change their phone numbers if necessary."

The bill also contains a limited preemption clause. It states that "The provisions of this Act shall supersede any inconsistent provisions of law of any State or unit of local government relating to the notification of any resident of the United States of any breach of security of an electronic database containing such resident's personal information (as defined in this Act), except as provided under sections 1798.82 and 1798.29 of the California Civil Code." (Parentheses in original.)

Sen. Feinstein stated that "the bill would allow California's new law to remain in effect, but preempt conflicting State laws. It is my understanding that legislators in a number of States are developing bills modeled after the California law. Reportedly, some of these bills have requirements that are inconsistent with the California legislation. It is not fair to put companies in a situation that forces them to comply with database notification laws of 50 different States."

The bill was referred to the Senate Judiciary Committee. Sen. Feinstein is a member.

Appeals Court Vacates Java Must Carry Injunction in Sun v. Microsoft

6/26. The U.S. Court of Appeals (4thCir) issued its opinion [28 pages in PDF] in Sun Microsystems v. Microsoft, vacating the portion of the District Court's preliminary injunction that requires Microsoft to incorporate in and distribute with every copy of its Windows PC operating system and every copy of its web browser Sun's Java software. This was also known as the "must carry injunction". See, December 23, 2002 opinion [42 pages in PDF] of the District Court.

However, the Appeals Court upheld the portion of the District Court's preliminary injunction prohibiting Microsoft from distributing any software developments of Java software, other than products licensed to Microsoft by Sun in a 2001 settlement agreement arising out of prior litigation over Microsoft's alleged misuse of Java source code.

District Court. Sun Microsystems filed a complaint in the U.S. District Court (NDCal) against Microsoft alleging violations of antitrust law, and copyright infringement. This is just one of several such antitrust actions filed in the wake of the governments' success. The Judicial Panel on Multidistrict Litigation transferred the action to the U.S. District Court (Maryland) for resolution of pretrial issues.

This action is distinct from the federal government's antitrust action against Microsoft, which was brought in the U.S. District Court (DC). It is also distinct from Sun's earlier Java related suit against Microsoft in the U.S. District Court (NDCal). However, this case builds on these previous cases.

In the present case Sun asked the District Court to require Microsoft to carry Java. It seeks an injunction requiring Microsoft "to set up Sun's most current Java runtime environment to be installed by default on any product containing .NET, including Windows XP (the most recent iteration of the Windows operating system) and Internet Explorer. Under the proposed injunction, the Java runtime environment is to be provided by Sun to Microsoft at no cost, and it must pass the relevant Java compatibility tests available from the Java Community Process." (Parentheses in original.)

The District Court (Maryland), in granting this relief, wrote that "The theory underlying Sun’s requested injunction is that Microsoft, having unlawfully fragmented the Java platform and having destroyed Sun's channels of distribution for that platform, is now taking advantage of its past antitrust violations to leverage its monopoly in the Intel-compatible PC market into the market for general purpose, Internet enabled distributed computing platforms."

The Court added that "The ``must-carry´´ remedy Sun proposes is designed to prevent Microsoft from obtaining future advantage from its past wrongs and to correct the distortion in the marketplace that its violations of the antitrust laws have caused."

In reaching this conclusion, the Court conceded that Sun's Java, not Microsoft's .NET, is dominant today. But, the Court reasoned, as part of the analysis of likelihood of irreparable harm, that the market might reach an irreversible "tipping point".

See also, story titled "District Court Rules Microsoft Must Carry Sun's Java" in TLJ Daily E-Mail Alert No. 574, December 24, 2003.

Appeals Court. The Appeals Court vacated the mandatory injunction. It wrote that "Because the district court was unable to find immediate irreparable harm and because it entered a preliminary injunction that does not aid or protect the court’s ability to enter final relief on Sun’s PC operating-systems monopolization claim, we vacate the mandatory preliminary injunction."

However, the Appeals Court affirmed the District Court injunction prohibiting Microsoft from distributing products that infringe Sun's copyright interests.

The Court noted that "The traditional office of a preliminary injunction is to protect the status quo and to prevent irreparable harm during the pendency of a lawsuit ultimately to preserve the court’s ability to render a meaningful judgment on the merits." Yet, mandatory injunctions generally do not preserve the status quo.

The Court reviewed the requisite elements for granting a preliminary injunction, and found that immediate irreparable harm if the injunction is not entered was lacking.

The Court also held that "the mandatory preliminary injunction aimed at preventing ``distortion´´ in the new emerging market for middleware has not been linked in fact or by any established legal theory to the final relief that Sun seeks in its claim that Microsoft has illegally maintained its monopoly in the market for worldwide licensing of Intel-compatible PC operating systems.

Reaction. Lee Patch, Sun's VP for Legal Affairs, stated in a release that "We are extremely pleased with the Appellate Court's ruling today affirming the copyright infringement injunction. This decision confirms that Microsoft violated our prior settlement agreement, and that it did so in a way that continued to fragment the Java platform on PCs ... While we are disappointed with the delay that results from the Court's determination to vacate and remand the Must Carry preliminary injunction, the Court accepted the District Court's determination that Microsoft engaged in anticompetitive acts. We look forward to a speedy trial and our opportunity to more fully address these and significant additional violations when we present our complete antitrust case against Microsoft."

5th Circuit Holds Texas Wine Sales Statute Unconstitutional

6/26. The U.S. Court of Appeals (5thCir) issued its opinion [39 pages in PDF] in Dickerson v. Bailey, a constitutional challenge to Texas' ban on direct sale by out of state wine sellers. The law affects, among other things, internet wine sales by small wineries. The Appeals Court held that the Texas statute violates the dormant commerce clause.

Background. Doyne Bailey is administrator of the Texas Alcoholic Beverage Commission (TABC), and hence, responsible for enforcing Texas's statute banning direct sale of wines by out of state wineries. The Texas statute (TABC § 107) bars out of state wineries from selling and shipping their products directly to Texas residents. However, the statute permits Texas residents to purchase directly from in state wineries. C.A. Dickerson and several other Texans tried to buy wine made in the state of Arkansas by Wiederkehr Wine Cellars.

District Court. Dickerson and others filed a complaint in U.S. District Court (SDTex) against Bailey alleging violation of 42 U.S.C. § 1983, based upon violation of the dormant commerce clause. The District Court granted summary judgment to Dickerson. It held that the Texas statute, as applied to Dickerson, violates the commerce clause, and is not saved by the 21st Amendment.

Statutes. Article I, Section 8, of the Constitution provides that "The Congress shall have Power ... to regulate Commerce with foreign Nations, and among the several States ..." The dormant commerce clause is the judicial concept that the Constitution, by delegating certain authority to the Congress to regulate commerce, thereby bars the states from legislating on certain matters that affect interstate commerce, even in the absence of Congressional legislation. It is applied to block states from regulating in a way that materially burdens or discriminates against interstate commerce. See, Gibbons v. Ogden, 22 U.S. 1 (1824), and Cooley v. Board of Wardens, 53 U.S. 299 (1851).

The 21st Amendment provides, in part, that "The transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited."

Section 1983 provides, in part, that "Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress, except that in any action brought against a judicial officer for an act or omission taken in such officer's judicial capacity, injunctive relief shall not be granted unless a declaratory decree was violated or declaratory relief was unavailable."

Appeals Court. The Court of Appeals affirmed. The Court first addressed the dormant commerce clause. It wrote that "The Supreme Court has long recognized that this provision has a necessary, logical corollary: If Congress has the power to regulate commerce among the states, then the states lack the power to impede this interstate commerce with their own regulations."

The Court then addressed the Texas statute. "Similar to the regulatory regimes in many other states, the TABC creates a three-tier system that strictly separates ownership and operations between manufacturers, wholesalers, and retailers. The vertical integration of the manufacture, distribution or sale of alcoholic beverages is strictly prohibited." The Court added that "And, with rare exceptions, manufacturers are permitted to sell only to wholesalers; wholesalers only to retailers; and retailers only to consumers."

One of these exceptions is for in state wineries. The Court wrote that "these statutes permit in-state wineries to sell and ship wine directly to in-state consumers, thereby providing in-state wine manufacturers with an economic advantage by exempting them from having to operate solely within the TABC's otherwise mandatory three-tier system. These exceptions are not available to out-of-state wineries."

The Court was not impressed by the arguments of the TABC. "In the face of these statutes, the Administrator baldly asserted before the district court and re-asserts on appeal that the TABC does not discriminate between in-state and out-of-state wineries. It is clear beyond peradventure, however, that the TABC permits in-state wineries to circumvent Texas’s three-tier system and both sell and ship directly to in-state consumers; and it is equally clear that the statutes prevent out-of-state wineries from exercising the same privileges. To paraphrase the Bard, that which we call discrimination by any other name would still smell as foul."

The Court also reviewed the legislative history of the statute, including the Texas Wine Marketing Act, which expressly stated that the purpose of the exception for in state wineries is to promote the sale and consumption of Texas wine over those wines produced in other states.

The Court concluded that "In purpose and effect, TABC § 107.07 and related statutes discriminate against out-of-state economic interests and thereby impede interstate commerce in violation of the Commerce Clause."

The Court likewise rejected the TABC's argument that the statute is saved by the 21st Amendment. It concluded that the plaintiffs established "the discriminatory intent and effect of the challenged statutes, the availability of alternative means to enforce Texas's core concerns under the Twenty-First Amendment, and the absence of any safe harbor for the challenged statutes under § 2 of the Twenty-First Amendment. In stark contrast, the Administrator’s defense of § 107.07 and related sections of the TABC is ``nothing but a pretextual rationale ... for economic protectionism.´´ Texas may not use the Twenty-First Amendment as a veil to hide from constitutional scrutiny its parochial economic discrimination against out-of-state wineries."

The Court wrote in conclusion that "small out-of-state wineries, which constitute a substantial majority of the total number of wineries throughout the country, are hurt by these discriminatory restrictions, as Texas wholesalers (despite having permits to import their wine) do not import their products because the quantity of product and the consumer demand in each wholesaler’s local market are too small to justify the wholesaler’s marginal cost in importing and selling the product. The Texas legislature thus achieves exactly what it sought: Texas wines are more available for purchase by Texas consumers because these consumers are essentially denied access to the products of out-of-state wineries, and vice-versa. This is exactly the type of geographic discrimination that is prohibited by the Commerce Clause and, as applied, is a patent violation of Plaintiffs’ constitutional rights."

Other Opinions. Several other courts have addressed the issue of state bans on direct sales of wines. On November 12, 2002, the U.S. District Court (SDNY) issued its opinion [32 page PDF scan] in Swedenburg v. Kelly, holding that New York state's ban on the direct shipment of out of state wine is unconstitutional. See, story titled "Court Holds New York's Ban on Internet Wine Sales Is Unconstitutional", in TLJ Daily E-Mail Alert No. 551, November 18, 2002.

April 8, 2003. The U.S. Court of Appeals (4thCir) issued its opinion [20 pages in PDF] in Beskind v. Easley, holding that North Carolina's ban on direct shipment of wine from out of state wineries to North Carolina residents violates the Commerce Clause. See, TLJ story titled "4th Circuit Holds North Carolina Ban On Internet Wine Sales Is Unconstitutional", April 8, 2003 (also published in TLJ Daily E-Mail Alert No. 640, April 9, 2003).

Also, the U.S. District Court (EDVa), which is in the Fourth Circuit, held that Virginia's statute unconstitutionally discriminated against out of state wine and beer manufacturers and sellers and was not saved by the 21st Amendment. See, Bolick v. Roberts, 199 F. Supp. 2d 397. However, the Virginia state legislation subsequently amended its statute. Then, on May 23, 2003, the Court of Appeals issued its per curiam opinion [6 pages in PDF] in Bolick v. Danielson, vacating the District Court opinion, and remanding for consideration of the statute as amended. See, story titled "4th Circuit Vacates District Court Opinion in Case Affecting Internet Alcohol Sales" in TLJ Daily E-Mail Alert No. 671, June 2, 2003.

However, the U.S. Court of Appeals (7thCir) reached a different conclusion in its opinion in Bridenbaugh v. Wilson. In that case, the plaintiffs challenged the constitutionality of an Indiana statute that made it unlawful for persons in another state to ship an alcoholic beverage directly to an Indiana resident. The District Court held that the Indiana direct shipment regulation was unconstitutional under the Commerce Clause, and granted the plaintiffs' summary judgment motion (Bridenbaugh v. O'Bannon, 78 F. Supp.2d 828 (N.D. Ind. 1999)). Then, the Seventh Circuit reversed, upholding the constitutionality of the state ban.

The Fifth Circuit wrote in the present case that its opinion is consistent with Bridenbaugh, because in that case there was no exception for in-state wineries. Both in-state and out-of-state wine had to pass through the state's three tier regulatory system. The 7th Circuit wrote that "Indiana insists that every drop of liquor pass through its three-tier system and be subjected to taxation. Wine originating in California, France, Australia, or Indiana passes through the same three tiers and is subjected to the same taxes. Where’s the functional discrimination?"

See also, Bainbridge v. Bush, 148 F.Supp.2d 1306 (M.D.Fla. 2001), in which the District Court upheld Florida's ban on direct shipment of wine. However, it was vacated and remanded by the 11th Circuit in Bainbridge v. Turner, 311 F.3d 1104, 1112 (2002).

People and Appointments

6/26. President Bush nominated Rene Acosta to be an Assistant Attorney General for the Civil Rights Division. If confirmed by the Senate, he will replace Ralph Boyd. See, White House release.

6/26. President Bush nominated Penrose Albright to be an Assistant Secretary of Homeland Security. See, White House release.

6/26. The Senate confirmed Joshua Bolten to be Director of the Office of Management and Budget (OMB).

6/26. Former Sen. Strom Thurmond (R-SC) died.

FCC News

6/26. The Federal Communications Commission (FCC) announced, but did not release, its Eighth Annual Report on the state of competition in the Commercial Mobile Radio Services (CMRS) industry. The FCC issued a press release [2 pages in PDF] describing the Report. Also, FCC Chairman Michael Powell wrote a statement in which he argued that the Report "demonstrates how a lighter regulatory hand has ushered in innovation and technological advancement, and the power of facilities-based competition into the marketplace." In contrast, Commissioner Michael Copps wrote a separate statement [3 pages in PDF] in which he complained that these reports contain "insufficient data. Much of the limited data included are unverifiable and are derived from sources with a stake in the outcome of our determination." He added that "The Report is largely based on unverified corporate press releases and advertisements, surveys conducted by industry lobbying organizations, unverified Wall Street analysts’ reports that may be influenced by the stock holdings of those analysts’ firms, SEC filings that are not designed for this purpose, and newspaper reports." This is WT Docket No. 02-379.

6/26. The Federal Communications Commission (FCC) announced, but did not release, a Report and Order pertaining to satellite licensing procedures. The FCC issued a brief press release [1 page in PDF]. See also, statement [PDF] by FCC Chairman Michael Powell. This is IB Docket Nos. 02-34 and 00-248.

6/26. The Federal Communications Commission (FCC) announced, but did not release, a Report and Order amending its rules implementing the Telephone Consumer Protection Act of 1991 (TCPA) and establishing a national do not call registry. The FCC issued a press release [4 pages in PDF] describing the Report and Order. See also, statement of FCC Chairman Michael Powell, statement of Commissioner Kathleen Abernathy, statement of Commissioner Michael Copps, and statement of Commissioner Jonathan Adelstein. This is CG Docket No. 02-278.

6/26. The Federal Communications Commission (FCC) approved Qwest Communications' Section 271 application to provide in region interLATA services in the state of Minnesota. See, FCC release [2 pages in PDF] and FCC order [114 pages in PDF].

More News

6/26. The Department of Justice's (DOJ) Antitrust Division issued a release regarding its participation in the second annual International Competition Network (ICN) Conference in Merida, Mexico on June 23 - 25, 2003.

6/26. The House passed HRes 277, expressing support for freedom in Hong Kong, by a vote of 426-1. See, Roll Call No. 326.

Go to News from June 21-25, 2003.