TLJ News from May 6-10, 2005

Hewitt Pate Resigns

5/10. Hewitt Pate, the Assistant Attorney General (AAG) in charge of the Department of Justice's Antitrust Division, resigned, effective June 30, 2005. See, statement by Attorney General Alberto Gonzales.

Hewitt PatePate (at right) joined the Antitrust Division in 2001 as a Deputy AAG under former AAG Charles James. When James left after a short tenure, President Bush nominated Pate to be AAG. The Senate confirmed him in June of 2003. Pate previously worked in the antitrust section of the law firm of Hunton & Williams.

Pate has pursued international cooperation and convergence in competition law and enforcement through the International Competition Network. However, he has also differed, especially with the European Union, on key issues, such as Microsoft.

Pate also differed with the EU on unilateral conduct and mandatory intellectual property licensing generally.

See, story titled "Pate Addresses US EU Differences on Antitrust, Microsoft, and IPR" in TLJ Daily E-Mail Alert No. 913, June 8, 2004; story titled "Pate Criticizes EC Decision Regarding Microsoft" in TLJ Daily E-Mail Alert No. 869, April 5, 2004; and story titled "US Antitrust Chief Says EU's Microsoft Decision Could Harm Innovation and Consumers" in TLJ Daily E-Mail Alert No. 863, March 25, 2004.

The Antitrust Division, under Pate's leadership, has generally allowed companies to complete procompetitive mergers. However, Pate's tenure is also marked by the Antitrust Division's failed attempt to block Oracle's acquisition of PeopleSoft.

On February 26, 2004, the U.S. and several states filed a complaint against Oracle alleging that its proposed acquisition of PeopleSoft would lessen competition substantially in interstate trade and commerce in violation of Section 7 of the Clayton Act, which is codified at 15 U.S.C. § 18. The plaintiffs sought an injunction of the proposed acquisition. See, story titled "Antitrust Division Sues Oracle to Enjoin Its Proposed Acquisition of PeopleSoft" in TLJ Daily E-Mail Alert No. 846, March 1, 2004.

On September 9, 2004, following trial, the District Court issued its Findings of Facts, Conclusions of Law and Order Thereon [164 pages in PDF]. It held that the government failed to meet its burden of showing by a preponderance of the evidence that the proposed merger is likely substantially to lessen competition in a relevant product and geographic market. See, story titled "DOJ Loses Oracle Case" in TLJ Daily E-Mail Alert No. 974, September 10, 2004.

Pate pursued cartel offenses. The DOJ stated in a release that "Since he became Assistant Attorney General, more than $717 million in criminal fines were obtained against 31 corporations and 37 individuals as a result of criminal antitrust prosecutions."

President Bush has not yet nominated a successor, or announced his intent to nominate.

Senate Approves REAL ID Act

5/10. The Senate approved the conference report on HR 1268, the "Emergency Supplemental Appropriations Act for Defense, The Global War on Terror, and Tsunami Relief, 2005" on a roll call vote of 100-0. See, Roll Call No. 117. The House approved the conference report on May 5, 2005. President Bush supports the bill, and will likely soon sign it into law.

This conference report includes HR 418, the "REAL ID Act of 2005". Title II of the REAL ID Act is titled "Improved Security for Driver's Licenses and Personal Identification Cards". It sets minimum standards that states must follow for issuing a driver's license or identification card to an individual. The bill also sets minimum standards for what information must be included on drivers' licenses and identification cards.

The REAL ID Act also provides that "To be eligible to receive any grant or other type of financial assistance made available under this title, a State shall participate in the interstate compact regarding sharing of driver license data, known as the `Driver License Agreement´, in order to provide electronic access by a State to information contained in the motor vehicle databases of all other States."

See, story titled "House Approves Bill Providing for Federally Regulated Identification Cards and Databases" in TLJ Daily E-Mail Alert No. 1,130, May 6, 2005.

IRS Loses Appeal Over 3% Excise Tax on Communications

5/10. The U.S. Court of Appeals (11thCir) issued its opinion [22 pages in PDF] in AIBG v. US, holding that certain telephone services purchased by the American Bankers Insurance Group (AIBG) from AT&T are not subject to the excise tax on communications. See, full story.

People and Appointments

5/10. President Bush nominated John Sullivan to be General Counsel of the Department of Commerce (DOC). If confirmed by the Senate, he will replace Theodore Kassinger, who has left the DOC. See, White House release. President Bush announced his intent to nominate Sullivan on April 26, 2005. See, White House release. Sullivan is Deputy General Counsel of the Department of Defense. Before that, he was an attorney in the Washington DC office of the law firm of Mayer Brown Rowe & Maw.

5/10. Adrienne Kroepsch joined Warren Communications News, publisher of Communications Daily and other publications, as an Assistant Editor. She covers the satellite beat. She previously worked for the American Association for the Advancement of Science.

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5/10. The Department of Commerce's (DOC) National Telecommunications and Information Administration (NTIA) released a report [38 pages in PDF] titled "Radio Frequency Identification: Opportunities and Challenges in Implementation". This paper focuses on the technology of, and likely applications for, RFID technology. The report also briefly touches on intellectual property rights issues (at pages 30-31) and privacy and security issues (at pages 33-37).

5/10. The Federal Communications Commission's (FCC) Office of Engineering and Technology (OET) released a public notice [2 pages in PDF] titled "OET Clarifies Emission Mask Measurements for DTV Transmitters". This item is DA 05-1321.

GAO Reports on Electronic Substitutes for USPS Mail Service

5/9. The Government Accountability Office (GAO) released a report [PDF] titled "U.S. Postal Service: The Service’s Strategy for Realigning Its Mail Processing Infrastructure Lacks Clarity, Criteria, and Accountability".

This report addresses the U.S. Postal Service's (USPS) lack of clear strategy for responding to changes in the marketplace. However, it also touches on one of those changes -- consumers' substitution of electronic mail and electronic payments for the USPS's First Class Mail delivery service.

The report states that "Questions remain about how the Service intends to realign its processing and distribution infrastructure and workforce. The Service’s strategy for realigning has not been clear because the Service has outlined several seemingly different strategies over the past 3 years. None of these strategies include criteria and processes for eliminating excess capacity, which may prolong inefficiencies. Also, the strategy lacks sufficient transparency and accountability, excludes stakeholder input, and lacks performance measures for results."

The report finds that "First-Class Mail volume, the class that contributes the majority of revenue to institutional costs, declined 5 percent from fiscal year 2000 to 2004 and this downward trend is expected to continue. The Service has attributed the declining First-Class Mail volume to the impact of electronic diversion as businesses, nonprofit organizations, governments, and households increasingly automate their financial transactions and divert correspondence to the Internet. For example, electronic bill payment allows users to pay bills using the Internet rather than sending checks through the mail."

The report adds that "recent legislation that became effective October 28, 2004, is intended to improve the efficiency of check processing and may reduce reliance on the physical movement of checks through the mail.5 It is likely that this change will accelerate the decline in First-Class Mail volume."

People and Appointments

5/9. William Mercer was named Principal Associate Deputy Attorney General at the Department of Justice (DOJ), effective in June. He is the U.S. Attorney for the District of Montana. See, DOJ release.

5/9. Penrose Albright, the Assistant Secretary for Programs, Plans & Budgets in the Department of Homeland Security's (DHS) Science & Technology directorate, resigned. See, statement by Secretary of Homeland Security Michael Chertoff.

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5/9. On May 5, 2005, the Board of Directors of the National Council of Textile Organizations (NCTO) voted to support the Dominican Republic Central American Free Trade Agreement (DR-CAFTA). See also, May 9 statement by the new U.S. Trade Representative, Robert Portman.

5/9. The Copyright Office published a notice in the Federal Register that recites, describes, and sets the effective date (June 8, 2005) for, its rule changes regarding reports of use of sound recordings under the statutory license for preexisting subscription services. See, Federal Register, May 9, 2005, Vol. 70, No. 88, at Pages 24309 - 24310.

People and Appointments

5/8. Lloyd Cutler died. He was one of the founding partners of the Washington DC law firm of Wilmer Cutler & Pickering, which is now Wilmer Cutler Pickering Hale & Dorr. See, release.

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William Donaldson5/8. William Donaldson (at right), the Chairman of the Securities and Exchange Commission (SEC), gave a speech in Philadelphia, Pennsylvania at the 2005 CFA Institute Annual Conference. He said that "As the structures supporting the analyst profession changed, so did the information upon which it rested. Data which was once available to a privileged few, and was difficult to obtain, became available to anyone with an Internet connection. But this transparency, and ``information proliferation,´´ did not necessarily translate into better analysis. Indeed, there’s probably more unreliable information -- masquerading as ``analysis´´ -- floating around today than ever before." He continued that "In the aftermath of the dot-com bubble, and the Global Settlement, investment research remains in transition. A number of fundamental questions have yet to be answered: How can we ensure the continued development of a robust marketplace and compensation for comprehensive, high-quality research?"

DC Circuit Reverses FCC's Broadcast Flag Rules

5/6. The U.S.Court of Appeals (DCCir) issued its opinion [34 pages in PDF] in American Library Association v. FCC, overturning the Federal Communications Commission's (FCC) broadcast flag rules. See, full story.

7th Circuit Rules Copyright Act Does Not Preempt State Right of Publicity Claim

5/6. The U.S. Court of Appeals (7thCir) issued another opinion [PDF] in Toney v. L'Oreal, a case regarding whether a claim under the Illinois right of publicity statute is preempted by federal copyright law. A three judge panel issued its original opinion [11 pages in PDF] on September 21, 2004. The present opinion, issued by the same three judge panel following a petition for rehearing, replaces the September 21 opinion. In short, the Court of Appeals initially held that the Illinois right of publicity claim is preempted, but has now reversed itself and held that the Illinois claim is not preempted.

June Toney, a model, authorized the use of her likeness in national magazine advertisements, up until a specified date. Toney filed a complaint in state court in Illinois against L'Oreal and others alleging that they used her likeness beyond the authorized time, in violation of the Illinois Right of Publicity Act (IRPA) and the Lanham Act, 15 U.S.C. § 1125, et seq. The defendants argued that the IRPA claim is preempted by the federal Copyright Act.

L'Oreal also removed the action to the U.S. District Court (NDIll). The District Court held that the IRPA claim is preempted by the federal Copyright Act, 17 U.S.C. § 101, et seq. The Court of Appeals initially affirmed. Toney filed a petition for rehearing. No other Judges of the 7th Circuit favored rehearing en banc. However, the same three judge panel that issued the initial opinion, issued another opinion on May 6 reversing itself and the District Court. Toney's claim under the Illinois right of publicity statute is not preempted by federal copyright law. The case is remanded to the District Court, where Toney may now proceed with her IRPA claim.

The preemption section, which is codified at 17 U.S.C. § 301, provides, in part, that "all legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright as specified by section 106 in works of authorship that are fixed in a tangible medium of expression and come within the subject matter of copyright as specified by sections 102 ... are governed exclusively by this title. Thereafter, no person is entitled to any such right or equivalent right in any such work under the common law or statutes of any State."

17 U.S.C. § 102, in turn, defines the subject matter of copyright as "original works of authorship fixed in any tangible medium of expression", including photographs.

Toney alleges that the defendants used photographs, which are subject to copyright protection. Hence, the defendants argue that the IRPA claim is preempted by the Copyright Act. However, the IRPA does not protect a person from use of a particular photograph. Rather, it protects a person's right of publicity, or as the Court of Appeals stated, "the very identity or persona of the plaintiff as a human being".

The Court reasoned that "Toney's identity is not fixed in a tangible medium of expression. There is no ``work of authorship´´ at issue in Toney's right of publicity claim. A person's likeness -- her persona -- is not authored and it is not fixed. The fact that an image of the person might be fixed in a copyrightable photograph does not change this. From this we must also find that the rights protected by the IRPA are not ``equivalent´´ to any of the exclusive rights within the general scope of copyright that are set forth in § 106. Copyright laws do not reach identity claims such as Toney's. Identity, as we have described it, is an amorphous concept that is not protected by copyright law; thus, the state law protecting it is not preempted."

This case is June Toney v. L'Oreal, U.S.A., Inc., et al., U.S. Court of Appeals for the Seventh Circuit, App. Ct. No. 03-2184, an appeal from the U.S. District Court for the Northern District of Illinois, Eastern Division, D.C. No. 02 C 3002, Judge Ronald Guzman presiding. Judge Kanne wrote both of the opinions of the Court of Appeals, in which Judges Williams and Evans joined.

The Court of Appeals heard oral argument on April 8, 2004. See, audio file [MPG].

TLJ's coverage of the September 21, 2004 opinion is found in TLJ Daily E-Mail Alert No. 981, September 22, 2004.

11th Circuit Rules in Cell Tower Case

5/6. The U.S. Court of Appeals (11thCir) issued its opinion [PDF] in Michael Linet, Inc. v. Village of Wellington, a cell tower construction case. The Court of Appeals affirmed the District Court's judgment in favor of the local government that refused permission to construct a cell tower on a golf course. The Court of Appeals construed 47 U.S.C. § 332 in a manner that imposes minimal restraints on local governments.

Michael Linet, Inc. is a Florida corporation that serves as an agent to various cellular phone service providers, including Metro PCS, Inc. Linet sought to construct a 120 foot flagpole, with a cellular communications antenna concealed inside, on a golf course. The Village of Wellington refused permission.

Linet filed a complaint in U.S. District Court (SDFla) against the Village of Wellington alleging violation of 47 U.S.C. § 332 and 42 U.S.C. § 1983. The District Court dismissed the § 1983 claim, and held that the city did not violate § 332. The Court of Appeals affirmed.

The Supreme Court's March 2005 opinion [22 pages in PDF] in City of Rancho Palos Verdes v. Abrams resolved the § 1983 issue. The Supreme Court held that an individual who brings an action to enforce the limitations on state and local authority to regulate the location, construction, and modification of wireless communications facilities under 47 U.S.C. § 332, cannot also recover damages under 42 U.S.C. § 1983. See also, story titled "Supreme Court Holds That Individuals Who Sue Under §332 Cannot Also Recover Damages Under §1983" in TLJ Daily E-Mail Alert No. 1,101, March 23, 2005.

The Court of Appeals also affirmed the District Court on the § 332 claim.

47 U.S.C. § 332 provides, at § 332(c)(7)(A) that "Except as provided in this paragraph, nothing in this chapter shall limit or affect the authority of a State or local government or instrumentality thereof over decisions regarding the placement, construction, and modification of personal wireless service facilities." § 332(c)(7)(B) then provides limitations to this general rule.

§ 332(c)(7)(B) prevents state and local governments from unreasonably discriminating among providers, and from prohibiting the provision of service. It also provides that "Any decision by a State or local government or instrumentality thereof to deny a request to place, construct, or modify personal wireless service facilities shall be in writing and supported by substantial evidence contained in a written record."

Linet argued that the city unreasonably discriminated, and rejected the request without substantial evidence.

The Court of Appeals wrote that "Aesthetic objections coupled with evidence of an adverse impact on property values or safety concerns can constitute substantial evidence." It noted too that the city "heard objections from residents and a realtor concerning the cell site's negative impact on real estate values."

This case is Michael Linet, Inc. v. Village of Wellington, Florida, App. Ct. No. 04-14759, an appeal from the U.S. District Court for the Southern District of Florida, D.C. No. 03-80856-CV-DMM.

People and Appointments

5/6. John Stanley will join the General Counsel's office at Lenovo International. He has been Federal Communications Commission (FCC) Commissioner Kathleen Abernathy's acting legal advisor for wireline competition issues. See, FCC release. Lenovo acquired IBM's personal computing division earlier this year.

5/6. Lauren (Pete) Belvin will become acting legal advisor on wireline competition issues for Federal Communications Commission (FCC) Commissioner Kathleen Abernathy. Belvin's prior work experience includes positions at the law firm of Wilkinson Barker & Knauer, Qwest Communications, the Senate Commerce Committee, and the FCC. She has worked as legal advisor to FCC Commissioners, in the Office of Strategic Planning, in the Office of General Counsel, in the Office of Legislative Affairs, and in the Cable Television Bureau. See, FCC release.

5/6. President Bush announced his intent to nominate Edmund Hawley to be Assistant Secretary of Homeland Security for the Transportation Security Administration (TSA). See, White House release.

Go to News from May 1-5, 2005.