News from April 21-25, 2005

9th Circuit Affirms Dismissal of Trademark Infringement Case Regarding Parallel Imports

4/25. The U.S. Court of Appeals (9thCir) issued its opinion [17 pages in PDF] in American Circuit Breaker v. Oregon Breakers, a trademark case involving parallel imports and gray markets.

American Circuit Breaker Corporation (ACBC) holds the U.S. trademark for "STAB-LOK". Schneider Canada holds the Canada trademark for "STAB-LOK". One company manufactures circuit breakers for both ACBC and Schneider. The only difference is that those made for ACBC have black casing, while those made for Schneider have gray casing. All bear the "STAB-LOK" trademark. Oregon Breakers bought, imported into the U.S., and sold in the U.S., gray circuit breakers.

ACBC filed a complaint in the U.S. District Court (DOre) against Oregon Breakers alleging trademark infringement, unfair competition, and trademark dilution. The District Court dismissed the complaint.

The Court of Appeals affirmed. The Court wrote a substantial review of the concepts of territoriality and universiality in trademark law, the history of the applicable portions of U.S. trademark statutory and case law, and the different kinds of gray markets.

The present case is about circuit breakers. However, the Court of Appeals noted that "More recently, the principle of territoriality ``has been criticized as obsolete in a world market where information products like computer programs cannot be located at a particular spot on the globe´´", quoting from J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition, (4th ed. West 2005).

The Court of Appeals wrote that "It is now generally agreed and understood that trademark protection encompasses the notion of territoriality." However, it also held that "Ultimately, what is at issue is whether there is a likelihood of confusion as to source under the well established precedent of §§ 32 and 4B(a) of the Lanham Act."

It held that this likelihood of confusion is lacking in this case. It wrote that "consumers purchasing circuit breakers from Oregon Breakers are getting exactly the same circuit breaker, both in specification and quality, as they would purchase from ACBC. In other words, the goods are genuine. Rather than being confused, customers who purchase the gray STAB-LOK circuit breakers from Oregon Breakers get exactly what they expect."

The Court of Appeals concluded, "In short, because there is no material fact as to infringement, ACBC’s claims of trademark infringement and unfair competition must fail. What is missing here is evidence of infringement that undermines ACBC’s goodwill or leaves consumers in a state of ``legal confusion.´´" Hence, the Court of Appeals affirmed the judgment of the District Court in its entirety.

This case is American Circuit Breaker Corporation v. Oregon Breakers, Inc. and Stephen Reames, No. 03-35375, an appeal from the U.S. District Court for the District of Oregon, D.C. No. CV-01-00308-DCA, Judge Donald Ashmanskas presiding. Judge Margaret McKeown wrote the opinion of the Court of Appeals, in which Judges Melvin Brunetti and Ronald Gould joined.

GAO Releases Report on LOCAL TV Act

4/25. The Government Accountability Office (GAO) released a report [21 pages in PDF] titled "LOCAL TV ACT: Administrative Funds May No Longer Be Necessary".

This is another in a series of GAO reports on the Launching Our Communities' Access to Local Television Act of 2000, or LOCAL TV Act, which was Public Law No. 106-553, and is codified at 47 U.S.C. §§ 1101-1110. The purpose of the LOCAL TV Act is to facilitate access to signals of local television stations for households located in nonserved and underserved areas.

The report states that the act "created the LOCAL Television Loan Guarantee Program (LOCAL TV Program), which provides for loan guarantees of up to 80 percent of loans totaling no more than $1.25 billion in the aggregate to finance projects to enable local television signal access to communities where distance and topography limit access to over-the-air television broadcast signals or cable service."

The report states that the omnibus appropriations bill enacted in December 2004 (Public Law No. 108-447) "rescinded the unobligated balances of prior year appropriations that were available for guaranteeing loans under the LOCAL TV Program." It also points out that President Bush's fiscal year 2006 budget proposal states that unobligated budget authority for this program had been rescinded and that the Bush administration does not propose additional funds for this program.

The report recommends that "Given the congressional rescission of funding to support loan guarantees under this program, we are submitting a matter for congressional consideration to rescind the balance of the $2 million appropriated for administrative expenses to carry out the LOCAL TV Program and transferred to GovWorks, that remains unobligated by contracts in that account, if the Congress decides not to provide future loan guarantee funding."

Comcast and Time Warner to Buy Adelphia

4/25. Comcast announced in a release on April 21, 2005, that Time Warner and Comcast "have reached definitive agreements to acquire substantially all the assets of Adelphia Communications Corporation (OTC: ADELQ) for a total of $12.7 billion in cash and 16% of the common stock of Time Warner's cable subsidiary, Time Warner Cable Inc. Time Warner Cable and Comcast also will swap certain cable systems. In addition, Time Warner Cable will redeem Comcast's interests of 17.9% in Time Warner Cable and 4.7% in Time Warner Entertainment Company, L.P. (TWE) (together an effective 21% economic ownership of Time Warner Cable) ..." (Parentheses in original.) See also, Time Warner release and Adelphia release [PDF].

On April 25, 2005, the Securities and Exchange Commission (SEC) announced that the SEC and the Department of Justice "reached an agreement to settle a civil enforcement action and resolve criminal charges against Adelphia Communications Corporation, its founder John J. Rigas, and his three sons, Timothy J. Rigas, Michael J. Rigas and James P. Rigas". See, SEC release.

Adelphia filed a Chapter 11 bankruptcy petition back in 2002 in the U.S. Bankruptcy Court for the Southern District of New York.

This transaction will require numerous regulatory and judicial approvals, including Hart Scott Rodino review, Federal Communications Commission (FCC) review, local franchising approvals, and bankruptcy court approval.

Comcast further stated that following upon completion of the transaction, both Comcast and Time Warner Cable will gain customers and improve the geographic clusters of customers. Comcast stated that it will have a net gain of 1.8 Million customers, bringing its total to 23.3 Million.

Comcast elaborated in its release that "Taking into account the proposed acquisition, swaps and redemptions, on a net basis, Time Warner Cable will gain approximately 3.5 million basic video subscribers. Specifically, Time Warner Cable will add around 3 million Adelphia subscribers and more than 1 million Comcast subscribers, and will give Comcast approximately 750,000 current Time Warner Cable subscribers. It will then manage a total of approximately 14.4 million basic subscribers --12.9 million consolidated and 1.5 million in 50%-owned continuing joint ventures with Comcast. That will make Time Warner Cable the second-largest multi-channel video provider in the U.S. -- ahead of all other cable operators, except for Comcast, and ahead of both major satellite companies."

The SEC stated in its release that it charged "that Adelphia, at the direction of the individual defendants: (1) fraudulently excluded billions of dollars in liabilities from its consolidated financial statements by hiding them on the books of off-balance sheet affiliates; (2) falsified operating statistics and inflated earnings to meet Wall Street estimates; and (3) concealed rampant self-dealing by the Rigas family, including the undisclosed use of corporate funds for purchases of Adelphia stock and luxury condominiums. The USAO also announced that it had entered into a Non-Prosecution Agreement with Adelphia and had settled forfeiture claims against Rigas family members."

The SEC added that "Under the settlement agreement, which is subject to the approval of the District and Bankruptcy Courts for the Southern District of New York, the Rigas family members will forfeit in excess of $1.5 billion in assets that they derived from the fraud, including the Rigas family's interests in certain cable properties. Upon the forfeiture of these assets, Adelphia will obtain title to those cable properties and will pay $715 million into a victim fund to be established in the District Court in accordance with the Non-Prosecution Agreement. Under the Non-Prosecution Agreement, payment to the victim fund must occur at or around the time of Adelphia's emergence from chapter 11."

People and Appointments

4/25. Peter Lesser was named Industry Executive Advisor to the Consumer Electronics Association (CEA). He is the P/CEO of X-10. The CEA stated in a release that he will be a "liaison between association staff and its Board of Industry Leaders, assisting with governance, staffing and other issues as requested by the Board Chairman or CEA's President and CEO. Lesser succeeds long-time consumer electronics industry executive Jerry Kalov, who recently passed away."

4/25. Chris Liddell was named Chief Financial Officer (CFO) of Microsoft, beginning May 9, 2005. He was previously CFO International Paper. Before that, he was CEO of Carter Holt Harvey, a New Zealand company. See, Microsoft release.

More News

4/25. The National Institute of Standards and Technology (NIST) released NIST Special Publication 800-78 [17 pages in PDF], titled "Cryptographic Algorithms and Key Sizes for Personal Identity Verification".

FCC Announces Agenda for April 28 Meeting

4/22. The Federal Communications Commission (FCC) announced the agenda [PDF] for its Thursday, April 28, 2005 event titled "Open Meeting".

The agenda includes four items. The FCC will consider a report and order regarding the Mandatory Electronic Filing for International Telecommunications Services. This is IB Docket No. 04-426.

The FCC will consider an order addressing petitions for clarification and/or reconsideration of the Subscriber List Information (SLI)/Directory Assistance (DA) First Report and Order, and SLI/DA Order on Reconsideration and Notice. This is CC Docket Nos. 96-115, 96-98, and 99-273.

The FCC will consider a notice of inquiry (NOI) regarding standards that allow viewers that are unserved by a digital television broadcast station to receive network programming via satellite.

The FCC will also consider a notice of proposed rulemaking (NPRM) to implement satellite broadcast carriage requirements in the noncontiguous states, as required by Section 210 of the Satellite Home Viewer Extension and Reauthorization Act of 2004 (SHVERA).

The Congress included the SHVERA in the huge omnibus appropriations bill, HR 4818 (108th Congress), that it enacted late last year. Section 210 amended 47 U.S.C. § 338(a) by adding the following paragraph:

"(4) CARRIAGE OF SIGNALS OF LOCAL STATIONS IN CERTAIN MARKETS- A satellite carrier that offers multichannel video programming distribution service in the United States to more than 5,000,000 subscribers shall (A) within 1 year after the date of the enactment of the Satellite Home Viewer Extension and Reauthorization Act of 2004, retransmit the signals originating as analog signals of each television broadcast station located in any local market within a State that is not part of the contiguous United States, and (B) within 30 months after such date of enactment retransmit the signals originating as digital signals of each such station. The retransmissions of such stations shall be made available to substantially all of the satellite carrier's subscribers in each station's local market, and the retransmissions of the stations in at least one market in the State shall be made available to substantially all of the satellite carrier's subscribers in areas of the State that are not within a designated market area. The cost to subscribers of such retransmissions shall not exceed the cost of retransmissions of local television stations in other States. Within 1 year after the date of enactment of that Act, the Commission shall promulgate regulations concerning elections by television stations in such State between mandatory carriage pursuant to this section and retransmission consent pursuant to section 325(b), which shall take into account the schedule on which local television stations are made available to viewers in such State."

This event is scheduled for 9:30 AM on Thursday, April 28, 2005 in the Commission Meeting Room, Room TW-C305, 445 12th Street, SW. The event will be webcast by the FCC. The FCC does not always take up all of the items on its agenda. The FCC does not always start its monthly meetings at the scheduled time.

Appeals Court Rules in Hoffer v. Microsoft

4/22. The U.S. Court of Appeals (FedCir) issued its opinion [14 pages in PDF] in Hoffer v. Microsoft, a patent case involving technology by which remote users of computer terminals obtain data concerning economic activity from an index, and interactively post and receive messages concerning economic topics.

Steven Hoffer is the holder of U.S. Patent No. 5,799,151, titled "Interactive Electronic Trade Network and User Interface". He filed a complaint in U.S. District Court (NDCal) against Microsoft and others.

The District Court held that the defendants did not infringe claim 21, and that claim 22 is invalid for indefiniteness.

The Court of Appeals affirmed the judgment of noninfringement. It reversed the judgment of invalidity on the ground of indefiniteness.

Judge Pauline Newman wrote a concurring opinion to express her "concern at the court's decision not to review the entirety of the appealed claim construction".

The Court of Appeals has also released one errata [PDF] and another errata [PDF], both of which correct two obvious typographical errors in the opinion.

This case is Steven Hoffer v. Microsoft Corporation, International Business Machines Corporation, and Ariba Inc., No. 04-1103, an appeal from the U.S. District Court for the Northern District of California, D.C. No. 01-CV-20731 JW, Judge James Ware presiding. Judges Newman Bryson and Dyk wrote the per curiam opinion of the Court of Appeals.

People and Appointments

4/22. President Bush announced his intent to nominate General Peter Pace of the U.S. Marine Corps, to be Chairman of the Joint Chiefs of Staff. President Bush also announced his intent to nominate Admiral Edmund Giambastiani, of the U.S. Navy, to be Vice Chairman of the Joint Chiefs of Staff. See, White House release.

House Crime Subcommittee Holds Hearing on § 209 of PATRIOT Act, Stored Communications and VOIP

4/21. The House Judiciary Committee's Subcommittee on Crime Terrorism, and Homeland Security held oversight hearings on Thursday, April 21. It addressed among other topics, § 209 of the PATRIOT Act.

§ 209 is titled "Seizure of voice-mail messages pursuant to warrants". This was not a controversial provision during the public debates leading up to enactment of the PATRIOT Act in 2001. It was understood by most people as applying to voice mail messages. However, since 2001, some have argued that the actual language of this section is far broader in scope, and could affect voice over internet protocol (VOIP) services.

The explanation of this interpretation is somewhat intricate. Moreover, the government witness on this subject, Laura Parsky, added no clarity at the hearing. In response to questions on this subject, she evaded, dissembled, and ran out the time clock.

§ 209 provides, in full, as follows:

"Title 18, United States Code, is amended--
  (1) in section 2510--
    (A) in paragraph (1), by striking beginning with `and such' and all that follows through `communication'; and
    (B) in paragraph (14), by inserting `wire or' after `transmission of'; and
  (2) in subsections (a) and (b) of section 2703--
    (A) by striking `CONTENTS OF ELECTRONIC' and inserting `CONTENTS OF WIRE OR ELECTRONIC' each place it appears;
    (B) by striking `contents of an electronic' and inserting `contents of a wire or electronic' each place it appears; and
    (C) by striking `any electronic' and inserting `any wire or electronic' each place it appears."

The first thing that § 209 of the PATRIOT Act did was amend 18 U.S.C. § 2510, which is the definitional section of Chapter 119. That is, Title 18 is the Criminal Code; Chapter 119 of Title 18 is titled "Wire and Electronic Communications Interception and Interception of Oral Communications"; and, §§ 2510-2522 comprise Chapter 119. Chapter 119 pertains to wiretaps.

The second thing that § 209 of the PATRIOT Act did was amend 18 U.S.C. § 2703, which is now titled "Required disclosure of customer communications or records". That is, Chapter 121 of Title 18 is now titled "Stored Wire and Electronic Communications and Transactional Records Access". §§ 2701-2712 comprise Chapter 121. It pertains to stored communications.

Notably, the words "voice mail" do not appear in § 209 of the PATRIOT Act. Most importantly, what § 209 primarily did was replace the word "electronic" with the words "wire or electronic" in § 2703, which enables the government to acquired stored communications.

§ 2703 now provides, in part, that "A governmental entity may require the disclosure by a provider of electronic communication service of the contents of a wire or electronic communication, that is in electronic storage in an electronic communications system for one hundred and eighty days or less, only pursuant to a warrant ..." (Emphasis added.)

In 2001 the DOJ represented that this meant that the government could obtain voice mail under the Stored Communications Act (SCA). That is, the SCA applied to electronic communications. However, voice mail was a wire communications that was stored. Wire communications can be obtained with a wiretap order, but that entails more requirements than a warrant obtained under the SCA.

One witness, Peter Swire, a law professor at Ohio State University, argued that the § 2703 is now quite broad. He wrote in his prepared testimony [12 pages in PDF] that "Section 209 sweeps far more broadly than has been publicly discussed. What if the contents of ordinary telephone calls become stored as a matter of routine? This storage is likely to become far more common with the imminent growth of Voice over Internet Protocol ("VoIP") telephone calls. VoIP uses the packet-switching network of the Internet to connect telephone calls rather than the traditional circuit-switching used by established phone systems."

Swire wrote that "Use of VoIP is likely to result in a drastic increase in storage of the content of telephone calls for at least two reasons. First, the use of computers for making telephone calls makes it trivially easy for one party to store the contents of the conversation. This ease of storage comes at a time of plummeting cost of computer storage, as shown in the enormously greater size of today’s typical hard drives. Ordinary users may store phone calls in the future the way they store e-mails and photos today or log their instant message sessions."

Swire also wrote that "A second technological change with VoIP is the likelihood that there will be systematic ``caching,´´ or storage, of telephone communications at the network level. One existing product, for instance, is called ``CacheEnforcer.´´ CacheEnforcer stores communications for a group of users, such as for a company or a network operated by a university."

He concluded that "If Section 209 is retained in its current form, then the stored phone calls of our near future will be available to law enforcement with less than a probable cause warrant. Now we see how misleading it is to describe Section 209 as ``seizure of voice mail messages pursuant to warrants.´´ Section 209 applies to all stored ``wire´´ communications (that is, to all stored telephone communications), and not just to voice mail. In addition, Section 209 would often allow law enforcement access to these conversations with less than a warrant, such as through a 2703(d) order." (Parentheses in original.)

He repeated these same arguments in his oral testimony, and in response to questions.

Swire was able to testify at the hearing about his analysis of the statute. He was also able to relate discussions during the Clinton administration, for which he worked. But this was long before passage of the PATRIOT Act. He could not testify as to how the DOJ interprets this section, how the DOJ is using this section, or how the DOJ might use this section in the future.

Laura Parsky, a Deputy Assistant Attorney General in the DOJ's Criminal Division, is the DOJ's lead person on this topic. She was present at the hearing. She could have addressed the issues raised by Swire. But she did not, either in her prepared testimony, or in response to questions from the Subcommittee.

Rep. Howard Coble (R-NC) and Rep. Bill Delahunt (D-MA) questioned her about the issues raised by Swire. However, she provided evasive non-responsive answers.

Hence, at the conclusion of the hearing, it remained unclear, from the public record, how the DOJ interprets and uses § 209, and how this might be affecting privacy and liberty interests of individuals.

Another issue, that was addressed by witnesses, is what difference does it make if Swire's analysis is correct, and/or if the DOJ does actually use § 209 rather than a Title III order, for example, to obtain cached files associated with VOIP communications.

Both a stored communications order and a wiretap order require a judge to issue an order upon a finding of probable cause. Hence, there is a significant safeguards with both.

However, there are additional things that are required for a Title III order that are not required for a stored communications order. A wiretap order can only be issued if the investigation involves one of the enumerated crimes that can serve as a predicate for the issuance of a wiretap order. Also, a wiretap order also requires the involvement of a high ranking official of the DOJ.

There is also the matter of suppression of evidence illegally obtained. That is, 18 U.S.C. § 2515, titled "Prohibition of use as evidence of intercepted wire or oral communications", applies to Title III wiretaps, but not to the accessing of stored communications.

§ 2515 provides that "Whenever any wire or oral communication has been intercepted, no part of the contents of such communication and no evidence derived therefrom may be received in evidence in any trial, hearing, or other proceeding in or before any court, grand jury, department, officer, agency, regulatory body, legislative committee, or other authority of the United States, a State, or a political subdivision thereof if the disclosure of that information would be in violation of this chapter."

Finally, it should be noted that the statutory provisions regarding stored communications also draw distinctions between read and unread e-mail and between newer and older e-mail, and provide that some is available with a mere subpoena.

TLJ attempted to speak with Laura Parsky about this issue. An assistant told TLJ that she would not speak with TLJ. TLJ also attempted to speak with someone in the DOJ's Office of Public Affairs (OPA). No one from the OPA has returned a phone call from TLJ since Gonzales became Attorney General.

Another witness at the hearing took a broader view of government access to individual's stored communications. James Dempsey, Executive Director of the Center for Democracy and Technology (CDT), wrote in his prepared testimony [PDF] that "A storage revolution is sweeping the field of information and communications technology. Service providers are offering very large quantities of online storage, for email and potentially for voicemail. Increasingly, technology users are storing information not in their homes or even on portable devices but on networks, under the control of service providers who can be served with compulsory process and never have to tell the subscribers that their privacy has been invaded. New Voice over Internet Protocol (VoIP) services may include the capability to store past voice conversations in a way never available before, further obliterating the distinction between real-time interception and access to stored communications."

He continued that "Section 209 takes a seemingly small category of information out of the full protection of the Fourth Amendment and moves it under the lowered protections accorded to remotely stored communications and data. But stored voicemail is the tip of an iceberg. Increasingly, individuals are using stored email to store documents, including draft documents on computers operated by service providers and accessed through a Web interface."

He recommended to the Subcommittee that "Rather than allowing growing amounts of personal information to fall outside the traditional protections of the Fourth Amendment, it is time to revisit the rules for networked storage (whether of voice or data) and bring them more in line with traditional Fourth Amendment principles, by requiring contemporaneous notice as the norm and covering both newer records and older records (again, whether voice or data) under the same probable cause standard. That would be truly technology neutral and would have the advantage of not allowing technology advances to erode privacy protections."

Laura Parsky's prepared testimony [20 pages in PDF] addressed § 209 solely in the context of voice-mail and e-mail. She wrote that "Section 209 rendered the rules for stored voicemail messages more consistent with those for other types of stored messages such as electronic mail (e-mail) and answering machine messages. Prior to the Act, access to stored voicemails was unnecessarily encumbered by rules designed to apply to on-going access to live communications rather than the rules for a single access to stored communications." She did not address VOIP communications.

Nor did Steven Martinez, Deputy Assistant Director of the FBI's Cyber Division. He wrote in his prepared testimony § 209 "permits law enforcement officers to seize voice mail with a search warrant rather than a surveillance, or Title III, order." He added that "The importance of this provision is best understood in the context of how often terrorists and other criminals rely on technology to relay their plans to each other instead of risking face-to-face in-person meetings."

§ 209 is not limited to seizures in terrorism related investigations.

House Crime Subcommittee Holds Hearing on § 217 of PATRIOT Act and Computer Trespassers

4/21. The House Judiciary Committee's Subcommittee on Crime Terrorism, and Homeland Security held an oversight hearing on Thursday, April 21. It addressed among other topics, § 217 of the PATRIOT Act, titled "Interception of Computer Trespasser Information".

Government witnesses argued that this section is necessary to enable e-commerce businesses and ISPs to work with law enforcement agencies to catch computer hackers. Other witnesses argued that there are no protections against misuse and abuse. The risk, they argued, is that the government, with no court approval, could monitor the communications of all of the users and customers of an ISP indefinitely.

§ 217 of the PATRIOT Act added a new subsection (i) to 18 U.S.C. § 2511, which contains the basic prohibition against interception of communications. § 2511(a) provides that any person who "intentionally intercepts, endeavors to intercept, or procures any other person to intercept or endeavor to intercept, any wire, oral, or electronic communication" shall be punished.

§ 217 adds a new exception for government interception of computer trespassers, where the owner of the trespassed computer consents. It provides as follows:

"It shall not be unlawful under this chapter for a person acting under color of law to intercept the wire or electronic communications of a computer trespasser transmitted to, through, or from the protected computer, if--
  (I) the owner or operator of the protected computer authorizes the interception of the computer trespasser's communications on the protected computer;
  (II) the person acting under color of law is lawfully engaged in an investigation;
  (III) the person acting under color of law has reasonable grounds to believe that the contents of the computer trespasser's communications will be relevant to the investigation; and
  (IV) such interception does not acquire communications other than those transmitted to or from the computer trespasser."

§ 217 also amends 18 U.S.C. § 2510, which is the definitional section of Chapter 119. Title 18 is the Criminal Code; Chapter 119 of Title 18 is titled "Wire and Electronic Communications Interception and Interception of Oral Communications"; and, §§ 2510-2522 comprise Chapter 119. Chapter 119 pertains to wiretaps. § 217 provides definitions for the terms "protected computer" and "computer trespasser".

Steven Martinez, Deputy Assistant Director of the FBI's Cyber Division, wrote in his prepared testimony, that § 217 "makes the law technology-neutral. Section 217 places cyber-trespassers -- those who are breaking into computers -- on the same footing as physical intruders. Section 217 allows the victims of computer-hacking crimes voluntarily to request law enforcement assistance in monitoring trespassers on their computers. Just as burglary victims have long been able to invite officers into their homes to catch the thieves, hacking victims can now allow law enforcement officers into their computers to catch cyber-intruders."

He also argued that § 217 "enhances privacy. First, it is carefully crafted to ensure that law enforcement conducts monitoring against trespassers in a manner entirely consistent with protecting the privacy rights of law abiding citizens. Second, the essence of the section -- to help catch hackers -- serves a vital function in the FBI's ability to enforce data privacy laws."

Martinez concluded that § 217 "has played a key role in a variety of hacking cases, including investigations into hackers’ attempts to compromise military computer systems. Allowing section 217 to expire at the end of this year would help computer hackers avoid justice and prevent law enforcement from responding quickly to victims who are themselves asking for help."

Laura Parsky, a Deputy Assistant Attorneys General in the DOJ's Criminal Division, wrote in her prepared testimony [20 pages in PDF] that this section "brought criminal procedures up to date with modern technology", and that it "did not adversely affect any legitimate privacy rights".

She also argued that "Because computer owners often lack the expertise, equipment, or financial resources required to monitor their systems themselves, they commonly have no effective way to exercise their rights to protect themselves from unauthorized attackers."

Both Parsky and Martinez used the analogy of home owners. They said that owners can invite the police into their homes to arrest a buglar. They argued that operators of computer systems should be able to do the same to enable police to catch computer hackers.

The analogy has limitations. In the case of homeowners and burglars, there are no third parties. In contrast, when police, or the FBI's cyber division, monitor a computer system, they may access the communications, not only of the computer trespassers, but also the legitimate users of that computer system.

Rep. Howard Coble (R-NC) asked the government witnesses who it is under § 217 that has an expectation of privacy.

Parsky responded by discussing the threats posed by computer hackers, including identity theft. Martinez discussed how the government works cooperatively with e-commerce businesses.

Peter Swire, a law professor at Ohio State University, said that it is the e-commerce customers and e-mail users who have an expectation of privacy.

Parsky said that this is a consent situation. Swire shook his head in disbelief.

Swire provided prepared testimony [12 pages in PDF]. He wrote that § 217 "lacks logical safeguards against abuse."

He argued that § 217 should, and as drafted, does, "enable system owners and law enforcement to coordinate effectively in facing hacker attacks". He also argued that § 217 "should not become a license for widespread wiretapping by law enforcement." He argued that as drafted, it fails on this second criteria.

The first problem, according to Swire, is there is no requirement that the authorization from the owner of the computer system be in writing.

"It will provide the name of the person inside the organization who takes responsibility for inviting law enforcement to review the e-mails and other computer traffic at the organization. If there is any dispute after the fact about what happened, law enforcement will have the benefit of being able to show the authorization. The system owner or operator will have the benefit of knowing that an employee has taken a proven, written step to authorize law enforcement to enter. That will reduce the risk that any law enforcement officers will talk their way into a computer system without true consent by the system owner. In addition, customers and users of the system will have the benefit of knowing that the system owner actually did consent to having communications monitored", wrote Swire.

Swire also argued that there should be a reporting requirement, to disclose "how often and in what contexts Section 217 has been used".

Finally, Swire argued that "there should be a statutory suppression remedy for exceeding the scope of permitted wiretapping".

Swire offered one possible scenario: "suppose that law enforcement arm-twists a major ISP to let law enforcement camp at the ISP and look at all the e-mails. Under current Section 217, all of the e-mails of all of the users could become grist for future investigations. All of them could be used in subsequent trials, against ordinary e-mail users who had no connection at all to computer hacking."

He concluded that "The lack of a suppression remedy means that law enforcement can violate the wiretap laws with respect to e-mail and web surfing with essentially no legal repercussion."

Jim Dempsey, Executive Director of the Center for Democracy and Technology, was similarly critical of § 217. He wrote in his prepared testimony [8 pages in PDF] that it allows "off the books surveillance". There is no judicial order, no report to a court, no time limits on intercepts,  no notice to the people whose communications have been intercepted, and no reporting of data to the Congress.

Dempsey argued that except in the case of emergency intercepts, there should be a requirement that the government obtain a Title III wiretap order, and the statutory suppression rule should apply.

At the conclusion of the hearing, Rep. Bobby Scott (D-VA), the ranking Democrat on the Subcommittee, asked about the consequences, "if AOL doesn't care about our privacy".

Rep. Ross Introduces Resolution Critical of FCC BPL Rules

4/21. Rep. Mike Ross (D-AR) introduced HRes 230, a resolution that criticizes the Federal Communications Commission's (FCC) broadband over powerline (BPL) rules.

The resolution states that the FCC "should reconsider and revise rules governing broadband over power line systems". The FCC promulgated these rules in its Report and Order [86 pages in PDF] adopted on October 14, 2004, and released on October 28, 2004. This item is FCC 04-245 in ET Docket No. 04-37 and ET Docket No. 03-104.

See also, story titled "FCC Adopts BPL Report and Order" in TLJ Daily E-Mail Alert No. 997, October 15, 2004, and story titled "FCC Adopts Broadband Over Powerline NPRM" in TLJ Daily E-Mail Alert No. 836, February 13, 2004. The FCC released the text [38 pages in PDF] of the NPRM on February 23, 2004.

Rep. Ross' resolution states that the FCC has not sufficiently studied potential interference.

The resolution states that "the FCC should conduct a full and complete radio wave interference analysis involving field studies and broadband over power line test demonstration systems, to determine the actual, measured effect of broadband over power line on public safety systems, and a comprehensive interference analysis, with the participation of public safety agencies and organizations, and other interested parties".

It also stated that "the FCC should allow extensive public review and comment on this study, and the results of the study, and a summary of the public comment thereon should be published before broadband over power line systems are deployed ..."

The resolution was referred to the House Commerce Committee. Rep. Ross is a member.

DOJ Charges Hynix with DRAM Price Fixing

4/21. The Department of Justice (DOJ) filed a criminal information [pages in PDF] in U.S. District Court (NDCal) that charges Hynix Semiconductor, Inc. with price fixing in violation of Section 1 of the Sherman Act. The information alleges that Hynix conspired with others to fix the prices for Dynamic Random Access Memory (DRAM) semiconductor memory products sold to original equipment manufacturers (OEMs). The DOJ also announced that Hynix "has agreed to plead guilty and to pay a $185 million fine".

The information alleges the following acts: "(a) participating in meetings, conversations, and communications in the United States and elsewhere to discuss the prices of DRAM to be sold to certain OEMs; (b) agreeing, during those meetings, conversations, and communications, to charge prices of DRAM at certain levels to be sold to certain OEMs; (c) issuing price quotations in accordance with the agreements reached; and (d) exchanging information on sales of DRAM to certain OEM customers, for the purpose of monitoring and enforcing adherence to the agreed-upon prices."

Section 1 of the Sherman Act, which is codified at 15 U.S.C. § 1, provides, in part, that "Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine ..."

The complaint alleges that the OEMs affected by this conspiracy were Dell, Compaq, Hewlett-Packard, Apple, IBM, and Gateway.

Attorney General Alberto Gonzales stated in a release that "Price fixing imperils free markets, impairs innovation, and harms American consumers ... Today's charge and its resulting guilty plea are another significant step forward in the Department's ongoing fight to break up and prosecute international cartels that harm American consumers. This case shows that high-tech price-fixing cartels will not be tolerated."

This is another in a series of DOJ DRAM price fixing prosecutions. On December 2, 2004, the DOJ charged four are executives of Infineon Technologies AG, and its subsidiary, Infineon Technologies North America Corporation. See, story titled "DOJ Brings More DRAM Price Fixing Charges" in TLJ Daily E-Mail Alert No.1,030, December 3, 2004.

On September 15, 2004, the DOJ filed a criminal information in the U.S. District Court (NDCal) against Infineon Technologies AG, charging price fixing in violation of 15 U.S.C. § 1. Simultaneous, Infineon agreed to plead guilty and to pay a $160 Million fine. See also, DOJ release and Infineon release. On October 20, 2004, Infineon plead guilty. See also, story titled "DOJ Charges Infineon With Felony Price Fixing; Infineon Pleads Guilty" in TLJ Daily E-Mail Alert No. 978, September 16, 2004.

Also, on December 17, 2003, the DOJ announced that it charged Alfred P. Censullo, a former employee of Micron Technology Inc., with violation of 18 U.S.C. § 1503 in connection with his "altering and concealing documents containing competitor pricing information, which were requested in a federal grand jury subpoena". See, DOJ release.

These DRAM related prosecutions have been filed in the U.S. District Court for the Northern District of California. Scott Hammond, Director of Criminal Enforcement in the DOJ's Antitrust Division, and other DOJ attorneys are handling these prosecutions.

USTR Nominee Discusses IPR Theft in PR China

4/21. The Senate Finance Committee held a hearing on the nomination of Rep. Robert Portman (R-OH) to be the U.S. Trade Representative (USTR).

Portman wrote in his prepared testimony [PDF] that "we have ongoing trade disputes with the European Union, with our neighbors to the south and north, and a number of other countries. But here, China deserves special mention."

He wrote that "By becoming part of the WTO, China has also been brought into a rules-based system of international trade". But, he added, "the Chinese do not always play by the rules."

"Specifically, I will focus on stopping Chinese pirating of U.S. intellectual property, rolling back China’s industrial policies that exclude our products, expanding market access for our goods and services, and realizing China’s full implementation of its commitments on transparency and distribution rights for American products."

Sen. Charles Grassley (R-IA), the Chairman of the Committee, praised Portman in his opening statement [PDF], and urged his confirmation.

Sen. Max Baucus (D-MT), the ranking Democrat on the Committee, wrote in his opening statement [PDF] that "we have to do a better job enforcing the trade agreements we already have. I believe Congress is losing its appetite for further trade deals because it is not confident the administration is holding our trading partners to their obligations. There are reports almost daily about China’s failure to comply with the WTO’s provisions on intellectual property rights. China also maintains burdensome restrictions in the agriculture and services sectors.

Sen. Baucus added that "If the administration wants Congress to continue passing new trade agreements, it must do a better job convincing Congress it’s doing all it can to enforce the agreements we already have."

Sen. Baucus stated that "One way to do that is to create a new senior-level position at USTR responsible for enforcing trade agreements. A Chief Enforcement Officer could be confirmed by the Senate, and therefore held accountable directly to the Congress. I hope that we can work together on this important issue."

See, S 817, and story titled "Sen. Stabenow Introduces Bill to Create Position of Special Trade Prosecutor" in TLJ Daily E-Mail Alert No. 1,118, April 19, 2005.

Sen. Baucus also stated that "trade agreements are becoming less relevant to U.S. commercial interests. We have been choosing free trade agreement partners based on foreign policy and using the scarce resources at USTR to negotiate agreements without much commercial relevance to our economy."

Portman pointed out that one of the objectives of the USTR was to promote freedom around the world.

Sen. Baucus added that "It's hard to muster the enthusiasm necessary to get a trade agreement through Congress when that agreement offers negligible benefits to the U.S. economy. We need to start targeting our resources toward economies -- like Korea and Taiwan".

9th Circuit Rules on Warrant Requirement for Searching Laptops

4/21. The U.S. Court of Appeals (9thCir) issued its opinion [PDF] in US v. Caymen, a criminal case involving a warrantless search by police of the contents of the hard drive of a laptop computer. The defendant acquired a laptop by credit card fraud. The Court of Appeals affirmed the holding of the District Court that a warrant was not required.

Nicolai Caymen, a resident of the small town of Ketchikan, Alaska, ordered a computer online using the credit card information of another person. The credit card holder reported the fraud. In this small, insular town, Caymen's crime unraveled quickly. Police seized the laptop. Then, with the permission of the credit card holder, but not Caymen, the police searched the contents of the laptop for evidence of credit card fraud. The search led them to evidence of another crime, for which Caymen was prosecuted.

Caymen filed a motion to suppress evidence of the crime obtained as a result of the search of the laptop, on Fourth Amendment grounds. He argued that the laptop was his, and could not be searched without either his permission, or a search warrant. The District Court denied the motion to suppress.

The Court of Appeals affirmed.

The Court wrote that the Fourth Amendment requirement for a search warrant depends upon whether the individual by his conduct has exhibited a subjective expectation of privacy, and further whether the individual's subjective expectation of privacy is one that society is prepared to accept as reasonable.

The Court reasoned that while Caymen may have possessed an expectation of privacy in the contents of the laptop, his expectation was not reasonable, because of how he came to possess the laptop. The Court added that this is not a question of legal title to the laptop. Rather, it is a matter of the reasonableness of the expectation of privacy.

The Court wrote that "The Fourth Amendment does not protect a defendant from a warrantless search of property that he stole, because regardless of whether he expects to maintain privacy in the contents of the stolen property, such an expectation is not one that ``society is prepared to accept as reasonable.´´ A legitimate expectation of privacy means more than a subjective expectation of not being discovered. ... Whatever possessory interest a thief may have, that interest is subordinate to the rights of the owner ... We see no ground on which to distinguish property obtained by fraud from property that was stolen by robbery or trespass".

It added that "What matters is a reasonable expectation of privacy that society is prepared to accept as reasonable, and one who takes property by theft or fraud cannot reasonably expect to retain possession and exclude others from it once he is caught."

This case is U.S.A. v. Nicolai Caymen, U.S. Court of Appeals for the 9th Circuit, No. 03-30365, an appeal from the U.S. District Court for the District of Alaska, D.C. No. CR-03-00002-RRB.

More News

4/21. The Senate Judiciary Committee's Subcommittee on Intellectual Property cancelled, without notice, again, its hearing titled "The Patent System Today and Tomorrow". Committee staff states that there will be a hearing on Monday, April 25, at 1:30 PM.

4/21. The Senate Appropriations Committee's Subcommittee on Homeland Security held a hearing on the FY 2006 budget for the Department of Homeland Security (DHS). Secretary Michael Chertoff testified. See, transcript.

Go to News from April 16-20, 2005.