TLJ News from June 11-15, 2005

People and Appointments

6/16. John Swainson was named to the 100 member Board of Directors of the U.S. Chamber of Commerce. He is the P/CEO of Computer Associates. See, U.S. Chamber release.

More News

6/16. The House approved HR 2862, the "Science, the Departments of State, Justice, and Commerce, and Related Agencies Appropriations Act for Fiscal Year 2006", by a vote of 418-7. See, Roll Call No. 268. This bill includes a provision, approved on June 15, that pertains to access to library records under the USA PATRIOT Act. See, story titled "House Approves Amendment Related to Section 215 of the PATRIOT Act" in TLJ Daily E-Mail Alert No. 1,155, June 16, 2005.

NAB and CEA Address Digital to Analog Converter Boxes

6/15. The Association for Maximum Service Television Stations (MSTV) and the National Association of Broadcasters (NAB) announced in a release that they "intend to pursue development of a prototype high quality, low cost digital to analog converter box for terrestrial digital television reception."

NAB P/CEO Eddie Fritts stated in this release that "A workable, low cost converter box is vital to the success of the digital transition. This project demonstrates our commitment to move the process forward. I trust the consumer electronics industry will respond favorably and join us in developing this important technology."

Consumer Electronics Association (CEA) P/CEO Gary Shapiro responded in a release that this is a "publicity stunt" by the NAB and MSTV. He said that "This publicity stunt is novel considering that no one before has suggested any problem with creating a relatively simple digital to analog converter box. The issue is market demand. No one sells the product in the U.S. today as most local broadcasters do not have full-power HDTV broadcasts and only 11 percent of TV sets are even used to receive over-the-air (OTA) broadcasting."

Shapiro added that "We suggest broadcasters focus their resources on promoting OTA broadcasting, rather than trying to confuse the situation and delay a cut-off date".

Glassman Argues That Trade Through Rule Impedes Technology and Innovation

6/15. Securities and Exchange Commission (SEC) Commissioner Cynthia Glassman gave a speech titled "SEC in Transition: What We've Done and What's Ahead". Among other things, she bashed the SEC's recently adopted Regulation NMS. She said that "Instead of relying on competition, technology and innovation to drive execution quality, Reg NMS gives that job to the government."

The SEC's vote on Reg NMS [PDF] was 3-2. Glassman and Commissioner Paul Atkins wrote a dissent [44 pages in PDF] in which they made the same point, but in greater detail.

Cynthia GlassmanGlassman (at right) said on June 15 that "We have been dealing with market structure issues for years. From the beginning, the problem that generated the most comment was the inefficiency caused by the Intermarket Trading System (``ITS´´) trade-through rule in the listed market. The rule was designed to prevent a market from trading through a better price in another market. With the development of electronic markets, the rule produced inefficiencies by slowing the electronic markets to the speed of the manual markets if a manual market was displaying the best price. Under the ITS rule, a manual market has 30 seconds to decide whether to execute an order. If the specialist decided not to execute an order, and prices moved during the interim, the order likely couldn't be executed anywhere else."

She added that "Instead of coming up with a solution to this discrete problem, however, the end result of our lengthy review of market structure was the imposition of even more complex trade-through restrictions on both the listed market and the Nasdaq market. This occurred notwithstanding the lack of compelling empiric

FRB Governor Addresses Effects of Info Tech on Financial Markets

6/15. Federal Reserve Board (FRB) Governor Donald Kohn gave a speech in New York City, New York, titled "Managing Risk in a Changing Economic and Financial Landscape". One of his topics that he addressed was how information and communications technologies have changed financial markets.

Donald KohnHe said that "Change in financial markets over the past decade or so has been rapid and profound. New computing and telecommunication technologies, along with the removal of legal and regulatory barriers to entry, have resulted in greater competition among a wider variety of institutions, in broader geographic areas, and across an expanding array of instruments. The result has been an increase in the efficiency with which financial markets channel funds from savers to spenders and an improvement in the ability of both savers and spenders to adjust their risk profiles."

He added that "Among the key technological innovations are those that have enabled the development of databases critical to pricing and managing the risks of financial instruments. The ability to value risky assets laid the foundation for understanding the risks embedded in those assets and managing those risks on a portfolio basis."

He also commented on technological innovation. "Stable economic environments encourage innovation; indeed fostering a stable economic environment is an important way in which central banks can contribute to public welfare."

Microsoft Brings Suits Against Counterfeiters Under New Anti Counterfeiting Amendments Act

6/15. Microsoft announced that it filed four complaints in U.S. District Courts in the Eastern District of Virginia and the Central District of California against companies that its alleges distributed its software and software components in violation of various laws. These complaints illustrate use of the new civil remedies created by the Anti Counterfeiting Amendments Act (ACAA).

In addition to routine allegations of distribution of counterfeit software, the complaints also allege violation of the ACAA. This bill was enacted in December of 2004 as a part of HR 3632 (108th Congress), the "Intellectual Property Protection and Courts Amendments Act of 2004". This bill is now Public Law No. 108-482.

The anti-counterfeiting provisions revised and expanded 18 U.S.C. § 2318, which pertains to trafficking in counterfeit labels, documentation and packaging of computer programs, phonorecords, and movies.

Microsoft stated in a release that the ACAA "strengthened the software industry's ability to protect itself from those abusing certificate of authenticity (COA) labels -- the ``authentication´´ labels that are paired with legitimate software. Previously, legal action was taken against those selling or possessing counterfeit COA labels. The law created specific criminal and civil penalties for the distribution of genuine COA labels with the software the COA labels were intended to authenticate."

The ACAA provides that "Whoever ... knowingly traffics in--
  (1) a counterfeit label or illicit label affixed to, enclosing, or accompanying, or designed to be affixed to, enclose, or accompany--
    (A) a phonorecord;
    (B) a copy of a computer program;
    (C) a copy of a motion picture or other audiovisual work;
    (D) a copy of a literary work;
    (E) a copy of a pictorial, graphic, or sculptural work;
    (F) a work of visual art; or
    (G) documentation or packaging; or
  (2) counterfeit documentation or packaging,
shall be fined under this title or imprisoned for not more than 5 years, or both."

The bill addresses not only "counterfeit label"s, but also "illicit label"s. It defines this latter category as genuine labels that are used without the authorization of the copyright holder.

More specifically, the bill provides that an "illicit label" is "a genuine certificate, licensing document, registration card, or similar labeling component--
  (A) that is used by the copyright owner to verify that a phonorecord, a copy of a computer program, a copy of a motion picture or other audiovisual work, a copy of a literary work, a copy of a pictorial, graphic, or sculptural work, a work of visual art, or documentation or packaging is not counterfeit or infringing of any copyright; and
  (B) that is, without the authorization of the copyright owner--
    (i) distributed or intended for distribution not in connection with the copy, phonorecord, or work of visual art to which such labeling component was intended to be affixed by the respective copyright owner; or
    (ii) in connection with a genuine certificate or licensing document, knowingly falsified in order to designate a higher number of licensed users or copies than authorized by the copyright owner, unless that certificate or document is used by the copyright owner solely for the purpose of monitoring or tracking the copyright owner's distribution channel and not for the purpose of verifying that a copy or phonorecord is noninfringing".

The bill also creates a new civil remedy for violation of these anti-counterfeiting provisions.

The four actions are Microsoft Corp. v. East Outlet, LLC and Super Supplier LLC, Va., E.D. Va., D.C. No. 4:05 CV 105; Microsoft Corp. v. #9 Software, Inc., E.D. Va., D.C. No. 4:05 CV106; Microsoft Corp. v. CEO Microsystems, Inc., C.D. Cal., D.C. No. SACV05-0559 CJC (RNBx); and Microsoft Corp. v. Wiston Group, Inc., C.D. Cal., D.C. No. CV05-4210 ABC (PJWx).

House Approves Amendment Related to Section 215 of the PATRIOT Act

6/15. The House approved an amendment to HR 2862, the "Science, the Departments of State, Justice, and Commerce, and Related Agencies Appropriations Act for Fiscal Year 2006" that pertains to Section 215 of the USA PATRIOT Act. The amendment was offered by Rep. Bernie Sanders (VT).

The vote was 238-187. The vote was largely partisan. Democrats voted 199-1 for the amendment. Republicans voted 38-186. See, Roll Call No. 258.

This is an appropriations bill. Hence, it contains no substantive law. The amendment merely limits the use of funds appropriated by this bill for certain purposes.

It reads as follows: "None of the funds made available in this Act may be used to make an application under section 501 of the Foreign Intelligence Surveillance Act of 1978 (50 U.S.C. 1861) for an order requiring the production of library circulation records, library patron lists, book sales records, or book customer lists."

See, full story.

FCC Releases NPRM Regarding Its Mismanagement of Universal Service Programs

6/15. The Federal Communications Commission (FCC) adopted and released a notice of proposed rulemaking [56 pages in PDF] that relates to its management of its universal service subsidy programs, including the schools and libraries (or e-rate) program, the rural health care program, the low income program, and the rural high cost program.

This NPRM is limited primarily to the management of these programs by the FCC. It does not reform the universal service funding mechanisms. (But, see Paragraph 65.) It does address the process for making disbursements under the e-rate program, and the calculation of those disbursements. See also, FCC release [2 pages in PDF] describing this NPRM, statement [PDF] by Chairman Kevin Martin, statement [PDF] by Commissioner Michael Copps, and statement [PDF] by Jonathan Adelstein.

This NPRM states that the FCC has disbursed "approximately $30.3 billion" in universal service subsidies since 1997. (See, Paragraph 5.)

The NPRM states that "we seek comment on ways to improve the management, administration, and oversight of the" Universal Service Fund (USF). (Paragraph 1.) It also states that "We recognize that some parties have raised concerns ranging from mismanagement to intentionally defrauding the program, and we take these concerns seriously." (Paragraph 2.)

E-rate. Much of the NPRM pertains to the FCC's management of its e-rate program. This NPRM follows several recent developments. First, the House Commerce Committee's (HCC) Subcommittee on Oversight has held a series of hearings examining and demonstrating the widespread fraud and abuse in the e-rate program.

Second, the Department of Justice (DOJ) has brought criminal prosecutions in connection with fraud in the e-rate program.

Third, the Government Accountability Office (GAO) has released a series reports regarding waste, fraud and abuse in the e-rate program, the lack of management by the FCC, and the lack of performance studies by the FCC.

Fourth, the program has come under mounting pressure from the Congress, with some members suggesting that the program be transferred to another agency, and others, such as HCC Chairman Joe Barton (R-TX) suggesting that the program be terminated. See, story titled "Chairman Barton Suggests Ending E-Rate Program" in TLJ Daily E-Mail Alert No. 1,097, March 17, 2005.

The Government Accountability Office (GAO) released a report [21 pages in PDF] in March, 2005, titled "Telecommunications: Concerns Regarding the Structure and FCC's Management of the E-Rate Program". The GAO presented this report at a hearing of the HCC's Subcommittee on Oversight and Investigations titled "Problems with the E-rate Program: GAO Review of FCC Management and Oversight", on March 16, 2005.

This GAO report found that the "FCC's program oversight mechanisms contain weaknesses that limit FCC’s management of the program and its ability to understand the scope of waste, fraud, and abuse within the program."

The GAO also wrote that the "FCC established E-rate as a multibillion-dollar program operating under an organizational structure unusual to the federal government, but never conducted a comprehensive assessment to determine which federal requirements, policies, and practices apply to the program, to USAC, and to the Universal Service Fund itself. As a result, FCC has struggled with determining which fiscal and accountability requirements apply to the E-rate program. We believe that issues exist concerning the applicability of certain statutes and the extent to which FCC has delegated certain functions for the E-rate program to USAC -- issues that FCC needs to explore and resolve."

Also, the GAO report found that the "FCC has not developed meaningful performance goals and measures for assessing and managing the program. As a result, there is no way to tell whether the program has resulted in the cost-effective deployment and use of advanced telecommunications services for schools and libraries.

The GAO has written numerous reports on the various universal service programs. The NPRM lists these in its footnote 18. The NPRM addresses some of the matters raised in some of these GAO reports.

Commissioner Copps wrote that "I am concerned about one aspect of the NPRM. It asks if we should replace the application process and distribute E-Rate funds directly to schools and libraries according to their size. Such a change could also allow funds to be used for unspecified communications-related services and equipment, rather than requiring applications that specify services and equipment. So many questions about this approach remain unaddressed. Distributing funds directly to schools could conceivably exclude Catholic and other private and parochial schools from the E-Rate program. Tying funds to school size could conceivably result in our rural and insular schools being denied the funds they need for the extraordinary cost of services in these areas, just because they have fewer students. And if schools are given a sum of money to be used for unspecified purposes rather than for specified and verifiable services and equipment, it could be much more difficult to identify fraud."

High cost. The NPRM also addresses the FCC high cost program. The NPRM notes that the FCC disbursed about $3.4 Billion in 2004 under this program, as compared to the $2.25 Billion cap on the e-rate program.

This program is not plagued by fraud. However, its method of distributing subsidies, and its effectiveness, have been criticized. Recent efforts to re-examine the program in the Congress have failed.

For example, Robert Crandall of the Brookings Institution, speaking at an American Enterprise Institute (AEI) panel discussion on telecom policy on December 14, 2004, asserted that universal service "has nothing to do with universality of service". Rather, it is "a huge slush fund moving around between competing political groups". See, story titled "AEI Panel Addresses Telecom Regulation" in TLJ Daily E-Mail Alert No. 1,041, December 20, 2004.

The Senate Commerce Committee (SCC) took up a limited high cost universal service reform bill in the 108th Congress, S 1380 (108th), the "Rural Universal Service Equity Act of 2003". Sen. Gordon Smith (R-OR) and others introduced this bill on July 9, 2003. See, story titled "Sen. Smith Introduces Universal Service Reform Bill" in TLJ Daily E-Mail Alert No. 697, July 14, 2003. The SCC approved this bill on September 22, 2004. See, story titled "Senate Commerce Committee Approves Rural Universal Service Reform Bill" in TLJ Daily E-Mail Alert No. 983, September 24, 2004.

Most of the high cost program subsidies go to a few states. Sen. Trent Lott (R-MS), who represents one of those states, said that this is "just a show vote". Sen. Byron Dorgan (D-ND) said that this bill "will go nowhere". Indeed, the full Senate took no action on the bill.

Performance Studies. This NPRM also contains a lengthy section asking for comments about how it might assess the effectiveness of its universal service programs. (See, for example, Paragraphs 24-29, which pertain to assessing the effectiveness of the e-rate program.)

The FCC does not need to conduct a lengthy rule making proceeding before it may conduct a study of the effectiveness of its programs. Nevertheless, the FCC has included this in its NPRM, and set an unusually long comment period -- 150 days after publication in the Federal Register -- which likely will delay any performance study until well into 2006.

It may also be the case that the FCC is not cooperating with outside entities that seek to study the performance of the FCC's universal service programs. For example, in March of 2005 TLJ requested information from the FCC's Wireline Competition Bureau regarding what data the FCC possesses on broadband internet access penetration at schools and libraries; TLJ also requested access to that data for the purpose of conducting a statistical analysis of the relationship between e-rate subsidies and increased broadband penetration. The FCC has not responded.

This NPRM is FCC 05-124 in Docket Nos. 96-45, 02-6, 02-60, 03-109 and 97-21, and the new WC Docket No. 05-195.

Brad Smith to Leave FEC

6/15. Brad Smith announced that he will resign from the Federal Election Commission (FEC), effective August 21, 2005. He has been the FEC's most forceful advocate of leaving unregulated constitutionally protected speech on the internet. See, FEC release.

The FEC is currently engaged in a rule making proceeding regarding its regulation of internet speech. The McCain Feingold bill required the FEC to write implementing regulations. The U.S. District Court overturned the FEC's previous rule, which exempted certain internet speech.

The FEC will hold a public hearing on Tuesday, June 28, and Wednesday, June 29. See, notice and notice in the Federal Register, Vol. 70, No. 63 April 4, 2005, at pages 16967 - 16979. See also, list of witnesses, with links to written comments.

Smith will return to the faculty of the Law School at Capital University in Columbus, Ohio.

President Bush has not yet named a replacement.

More People and Appointments

6/15. Peter Allgeier was named U.S. Representative to the World Trade Organization (WTO). He is currently the Deputy U.S. Trade Representative. Prior to Robert Portman's recent confirmation by the Senate as USTR, Allgeier was the acting USTR. Allgeier will replace Linnet Deily. See, USTR release.

More News

6/15. Dan Glickman, President of the Motion Picture Association of America (MPAA), gave a speech [MS Word] at a Progress and Freedom Foundation (PFF) event. He argued that free markets and intellectual property rights are necessary to incent creation of entertainment content.

6/15. The Department of Homeland Security (DHS) announced that Visa Waiver Program (VWP) countries will be required to produce passports with digital photographs by October 26, 2005. The DHS stated in a release that "all VWP countries must also present an acceptable plan to begin issuing integrated circuit chips, or e-passports, within one year."

6/15. The Federal Communications Commission (FCC) published in its web site a page titled "The FCC's Payola Rules". FCC Commissioner Jonathan Adelstein wrote in a release [PDF] the "We are enlisting everyone who watches and listens to the media in the effort to catch violations of our payola rules. Like a Neighborhood Watch program, putting viewers on alert will help us enforce the law and deter future abuses. It serves as another reminder that there is an unequivocal, legal obligation -- up and down the chain of production and distribution -- to disclose all forms of payola."

6/15. The Federal Communications Commission (FCC) released a report [26 pages in PDF] titled "FCC Report to Congress as Required by the ORBIT Act: Sixth Report". The 106th Congress enacted the Open-Market Reorganization for the Betterment of International Telecommunications Act (ORBIT Act). It is Public Law No. 106-180. It is codified at 47 U.S.C. § 646. The present report is FCC 05-127.

Sen. McCain Introduces DTV Transition Bill

6/14. Sen. John McCain (R-AZ) and Sen. Joe Lieberman (D-CT) introduced S 1237, the "Spectrum Availability for Emergency-Response and Law-Enforcement to Improve Vital Emergency Services Act". The bill would establish a hard date of December 31, 2008, for the transition in the U.S. from analog to digital television. See, full story.

Senate Subcommittee Holds Hearing on Injunctions in Patent Litigation

6/14. The Senate Judiciary Committee's Subcommittee on Intellectual Property held another hearing on reform of the Patent Act. This hearing was scheduled to obtain testimony on various proposals to revise the language in the Patent Act that provides for injunctive relief as a remedy for infringement of patents. See, 35 U.S.C. § 283. However, the witnesses also testified, and the Senators asked questions, on a wide range of other patent issues.

There is considerable consensus among patent reform advocates on some reform issues, such as that the U.S. Patent and Trademark Office (USPTO) needs to be adequately funded, and that there should be some sort of administrative post grant review process. However, the subject of injunctive relief is both fundamental to patent law, and hotly debated. The witness panel reflected this division.

Two witnesses (Carl Gulbrandsen, who spoke on behalf of universities, and Jeffrey Kushan, who spoke on behalf of the pharmaceutical and biotech sectors) argued forcefully for the ready availability of injunctive relief when infringement has been shown. In contrast, other witnesses (such as Jonathan Band, who spoke on behalf of the financial services sector) argued equally forcefully against the current regime.

Sen. Orrin Hatch (R-UT), the Chairman of the Subcommittee, presided throughout the hearing. Sen. Patrick Leahy (D-VT) was also present for the full hearing. Sen. Ted Kennedy (D-MA), who is rarely involved in technology related issues, was present at the beginning of the hearing, made a brief statement about the importance of patent law, and then left shortly thereafter. No other Senators participated in the hearing. However, about twenty-five Senate staff members sat through the hearing.

Sen. Orrin HatchSen. Hatch read a long opening statement. He also stated later that he expects there to be a Senate bill, that it is a high priority, that he will work with Sen. Leahy and their counterparts in the House on a bipartisan basis, and that he is not committed to any position. At the end of the hearing he asked the witnesses to "help us get it right". He concluded, "we're doing the work of the Lord".

Sen. Leahy also read an opening statement. He said that "there is a very good chance that Senator Hatch and I will produce legislation that can reach the President's desk."

The Subcommittee heard testimony from six witnesses. See, prepared testimony of Carl Gulbrandsen (Wisconsin Alumni Research Foundation), prepared testimony of Jonathan Band (on behalf of Visa and the Financial Services Roundtable), prepared testimony of Mark Lemley (Stanford Law School), prepared testimony of Jeffrey Kushan (Sidley Austin, on behalf of pharmaceutical and biotech companies), prepared testimony of Chuck Fish (Time Warner), and prepared testimony of Jeffrey Hawley (Intellectual Property Owners Association).

For example, on the injunction issue, Band argued that "The possibility of a broad injunction and treble damages means that a financial services institution must take even the most frivolous patent infringement claim seriously. The current rules regarding injunctions and damages place all the leverage in the hands of the patent owner, even if the patent is extremely weak. If Congress does not correct the remedies under the patent law, the surge in the number of patents relating to financial services will lead to financial services institutions paying out ever-larger license fees to holders of suspect patents, to the detriment of our customers."

In contrast, Kushan argued that "Reforms that raise questions as to whether a patent owner will be able to prevent the unauthorized use of a patented invention, particularly after the patent has been fully adjudicated and found valid and infringed, will cause significant harm to the biotechnology and pharmaceutical sectors. Such reforms should not be included in any legislation that is designed to reflect a consensus reform package that will benefit all industries that use the patent system."

Sen. Hatch focused on the injunction issue during the question and answer session. He had staff display four huge exhibits containing the language of four alternatives:

1. the current statute
2. the language contained in the April committee print of the House Judiciary Committee's Subcommittee on Courts, the Internet, and Intellectual Property (CIIP)
3. the language that Sen. Hatch identified as the "high tech" proposal
4.the language of the just introduced HR 2795.

He asked each of the witnesses to identify their choices.

The current statute provides that "The several courts having jurisdiction of cases under this title may grant injunctions in accordance with the principles of equity to prevent the violation of any right secured by patent, on such terms as the court deems reasonable."

The CIIP Committee Print [52 pages in PDF] provides that "A court shall not grant an injunction under this section unless it finds that the patentee is likely to suffer irreparable harm that cannot be remedied by the payment of money damages. In making such a finding, the court shall not presume the existence of irreparable harm, but shall consider and weigh evidence that establishes or negates any equitable factor relevant to a determination of the existence of irreparable harm, including the extent to which the patentee makes use of the invention."

The "high tech" proposal provides that "The several courts having jurisdiction of cases under this title may grant injunctions in accordance with the principles of equity to prevent the violation of any right secured by patent, on such terms as the court deems reasonable. Unless the court has made a determination that the infringement is willful, in determining equity the court shall consider the fairness of the remedy in light of all the facts, the relevant interests of the parties and the public associated with the invention."

HR 2795 [63 pages in PDF] provides that "In determining equity, the court shall consider the fairness of the remedy in light of all the facts and the relevant interests of the parties associated with the invention. Unless the injunction is entered pursuant to a nonappealable judgment of infringement, a court shall stay the injunction pending an appeal upon an affirmative showing that the stay would not result in irreparable harm to the owner of the patent and that the balance of hardships from the stay does not favor the owner of the patent.".

Gulbrandsen (university representative) and Kushan (pharmaceutical and biotech representative) defended the current statute.

Bond (financial services representative) stated that the CIIP committee print language is the best, while the current statute is the worst alternative of the four.

Lemley (law professor from Stanford) advocated the "high tech" proposal.

Hawley (as head of the diverse IPO) did not take a definitive position, but said that HR 2795 is an improvement on the CIIP committee print.

Fish (Time Warner) argued that the current language, but not the Federal Circuit's interpretation, needs no changes. He suggested that the Congress enact identical language, but this time, underline the words "may" and "principles of equity". He also suggested that the Congress could highlight these words in yellow.

Sen. Leahy asked witnesses whether the Congress should require that demand letters sent by patent holders to alleged infringers be detailed enough to support a petition for declaratory relief. Lemley, Hawley, Fish, and Bond expressed support for the requirement. Gulbrandsen was the sole dissenter. He said that such a requirement would lead to more litigation.

Sen. Hatch also raised the subject of forum shopping. Lemley said that "there is obviously forum shopping going on" and that the biggest problem is suits being filed in the U.S. District Court for the Eastern District of Texas. Bond suggested that there should be a requirement that either the plaintiff or defendant be located in the district where the suit is brought. Gulbrandsen quipped that venue should lie in Madison, Wisconsin.

Sen. Hatch and witnesses also discussed interlocutory appeals (that is, appeals of preliminary rulings, before final judgment). Bond argued that interlocutory appeals should be allowed after Markman hearings.

There was also much testimony and discussion of USPTO funding, treble damage awards, and apportionment of damages.

See also, story titled "House CIIP Subcommittee Holds Hearing on Patent Bill" in TLJ Daily E-Mail Alert No. 1,151, June 10, 2005; and story titled "Summary of the Committee Print of the Patent Act of 2005" in TLJ Daily E-Mail Alert No. 1,122, April 25, 2005.

APEC Statement Addresses Technology Related Trade Issues

6/14. Asia Pacific Economic Cooperation (APEC), which hosted a meeting of trade ministers in Cheju, Korea, on June 2-3, 2005, released a post meeting statement. It addresses several technology related topics, including duties on electronic transmissions, protection of intellectual property, and promoting the adoption of digital technologies.

Duties on Electronic Transmissions. The APEC statement provides that "We instructed officials to continue discussions on the proposal for a permanent WTO moratorium on customs duties on electronic transmissions. We noted the value of a permanent moratorium in creating a predictable investment environment for business and fostering innovation, while noting that these discussions must take due consideration of the positions any APEC economy may take in the WTO."

IPR Protection. The APEC statement provides that "We reaffirmed the important contribution of effective intellectual property rights (IPR) protection and enforcement in promoting investment, spurring innovation and driving economic growth, and reiterated the need to build on APEC's work already underway in this area."

It further provides that "We urged economies to take concrete steps to reduce trade in counterfeit and pirated goods, curtail online piracy, as well as to increase cooperation and capacity building. We therefore endorsed the APEC Anti-Counterfeiting and Piracy Initiative and instructed officials to intensify their work in the coming months to develop the guidelines called for in the Initiative as concrete deliverables for the November AMM. We stressed the need to provide capacity building and encouraged exchange of experience to strengthen intellectual property protection and enforcement cooperation among member economies. In this regard, we welcomed the APEC high-level symposium on IPR to be held in Xiamen, China in September this year."

Adoption of Digital Technologies. The APEC statement provides that "In today's global economy increasingly interconnected by technology, we recognise the importance of expanding and improving the digital capabilities and skills of all APEC Member economies. In this context, we acknowledged the progress made by the APEC Digital Opportunity Centre (ADOC) in bridging the digital divide and look forward to reviewing ADOC's accomplishments following its upcoming ADOC Trainers Program, ICT Elite Camp, and ADOC Week 2005. We are confident that such events will greatly enhance the ability of economies to participate in and contribute to the global economy, thus facilitating trade and investment."

It further provides that "We affirmed the expansion of trade in information and electronic products that has contributed to economic development in the Asia-Pacific region. We look forward to the APEC Seminar on IT/Electronics Industry to be held in September."

On June 14, the Office of the U.S. Trade Representative issued a release about the APEC meeting. It states that APEC statement includes "a comprehensive anti-counterfeiting and piracy initiative sponsored by the United States, Korea and Japan. The initiative calls for development of strong, regionwide measures by the end of the year to combat growing regional challenges of trade in counterfeit and pirated goods and on-line piracy".

The USTR release adds that "These measures will complement APEC economies' efforts to ensure effective enforcement of intellectual property rights and measurable results in reducing counterfeiting and piracy in their home markets."

See also, APEC release of June 3 on the anti-counterfeiting initiative.

People and Appointments

6/14. The Senate approved the nomination of Thomas Griffith to be Judge of the U.S. Court of Appeals for the DC Circuit by a vote of 73-24. See, Roll Call No. 136. President Bush commended the Senate in a release. He added that " I look forward to the Senate's prompt consideration and up-or-down votes for my other judicial nominees." President Bush also gave a speech on June 14, 2005 in which he referenced judicial appointments. He said that "the American people made it clear they want judges who faithfully interpret the law, not legislate from the bench. I applaud Senator Frist and Senator Specter and Senator Hatch and other members of the United States Senate in confirming some outstanding nominees who have waited a long time for a vote: Priscilla Owen and Janice Rogers Brown and Bill Pryor. I'll continue to urge the Senate to fulfill its constitutional responsibility by giving every judicial nominee an up or down vote on the Senate floor."

6/14. President Bush nominated Margaret Mary Sweeney to be a Judge of the U.S. Court of Federal Claims for a term of fifteen years. See, White House release.

6/14. President Bush nominated Thomas Craig Wheeler to be a Judge of the U.S. Court of Federal Claims for a term of fifteen years. See, White House release.

6/14. David McGuire was named Director of Communications at the Center for Democracy and Technology (CDT). He was previously a technology reporter for He can be reached at 202 637-9800 ext. 106 or dmcguire at cdt dot org.

More News

6/14. The Senate Homeland Security and Governmental Affairs Committee held a hearing on the Bush administration's program titled "Strategy Targeting Organized Piracy" or "STOP". See, prepared testimony [PDF] of  Jon Dudas (Director of the U.S. Patent & Trademark Office), prepared testimony [PDF] of Victoria Espinel (acting Assistant U.S. Trade Representative for Intellectual Property), prepared testimony [PDF] of Daniel Baldwin (acting Assistant Commissioner of the Office of Strategic Trade, U.S. Department of Homeland Security), prepared testimony [PDF] of Laura Parsky (Deputy Assistant Attorney General in the Criminal Division of the Department of Justice), prepared testimony [PDF] of Loren Yager (General Accounting Office), prepared testimony [PDF] of Brad Huther (U.S. Chamber of Commerce), prepared testimony [PDF] of Franklin Vargo (National Association of Manufacturers), and prepared testimony [PDF] of Jeffrey Evans (P/CEO of The Will-Burt Company).

6/14. The Federal Communications Commission released the text [44 pages in PDF] of its Declaratory Ruling (DR) and Notice of Proposed Rulemaking (NPRM) regarding implementation of the Commercial Spectrum Enhancement Act (CSEA). It adopted this item at its meeting of June 9, 2005. See also, story titled "FCC Adopts DR and NPRM Regarding CSEA Implementation" in TLJ Daily E-Mail Alert No. 1,152, June 13, 2005. This item is FCC 05-123 in WT Docket No. 05-211. Comments on the NPRM will be due 30 days after publication of a notice in the Federal Register. Reply comments will be due within 45 days. This publication has not yet taken place.

6/14. President Bush gave a speech on June 14, 2005 in which he stated that "I call upon the United States Congress to renew all the provisions of the Patriot Act. The Patriot Act is an important piece of legislation. It gives those folks who are on the front line of fighting terror the same tools -- many of the same tools that are used to track down drug kingpins or tax cheats. If those tools are good enough to track down drug kingpins, they ought to be good enough in this war on terror to give to our law enforcement so we can better defend this country."

6/14. Rep. Rick Boucher (D-VA) wrote an opinion article titled "A Deal Made in Washington?", which is published in CNET. He argues that any broadcast flag legislation should be tied to his proposal to create a fair use exemption to violation of the anti-circumvention provisions of the DMCA. He wrote that "If the MPAA expects Congress to ratify a rule that would limit the ability of ordinary consumers to share lawfully acquired digital broadcast television programs with one another, then it shouldn't be surprised if Congress insists that the MPAA accept in return a restoration of the fair use rights taken from consumers through the enactment of the Digital Millennium Copyright Act (DMCA)." On May 6, 2005, 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, story titled "DC Circuit Reverses FCC's Broadcast Flag Rules" in TLJ Daily E-Mail Alert No. 1,131, May 9, 2005. On March 9, 2005, Rep. Boucher reintroduced his fair use bill. See, HR 1201 and story titled "Reps. Boucher, Doolittle and Barton Reintroduce Digital Media Consumers' Rights Act" in TLJ Daily E-Mail Alert No. 1,111, April 8, 2005.

6/14. The National Institute of Standards and Technology (NIST) released its Special Publication 800-52 [33 pages in PDF], titled "Guidelines for the Selection and Use of Transport Layer Security (TLS) Implementations". This publication is a guideline for implementing TLS in the federal government to protect sensitive information. It includes recommendations on the selection of cipher suites.

6/14. The U.S. Court of Appeals (DCCir) issued its opinion [9 pages in PDF] in Minnesota Christian Broadcasters v. FCC, affirming the decision of the Federal Communications Commission (FCC) not to award a bidding credit that is available to new entrants, in an FCC auction for a construction permit for a new FM radio station.

Supreme Court Denies Certiorari in Media Ownership Rules Case

6/13. The Supreme Court denied certiorari in Media General v. FCC, and related proceeding on petitions for writs of certiorari. This denial lets stand the opinion [213 pages in PDF] of the U.S. Court of Appeals (3rdCir) in Prometheus v. FCC, which overturned some of the Federal Communications Commission's (FCC) media ownership rules.

The FCC announced its a Report and Order revising its media ownership rules on June 2, 2003. See, story titled "FCC Announces Revisions to Media Ownership Rules" in TLJ Daily E-Mail Alert No. 672, June 3, 2003. The FCC released the Report and Order on July 2, 2003. See, story titled "FCC Releases Media Ownership Order and NPRM" in TLJ Daily E-Mail Alert No. 692, July 7, 2003. On June 24, 2004 the Court of Appeals issued its opinion. See, story titled "3rd Circuit Rules in Media Ownership Case" in TLJ Daily E-Mail Alert No. 930, July 1, 2004.

FCC Chairman Kevin Martin stated in a release [PDF] that "I am now looking forward to working with all of my colleagues as we reevaluate our media ownership rules consistent with the Third Circuit's guidance and our statutory obligations."

Jonathan AdelsteinFCC Commissioner Jonathan Adelstein (at right) stated in a release [PDF] that "This decision is a rare victory for the public over some of the most powerful corporations in America. The American public is concerned about concentration in the media, and our court system has rightly responded. The court's decision puts the issue of media consolidation right back in the FCC's hands and gives us an opportunity for a fresh start, so we better get it right this time. We need to be very careful because once we allow greater media concentration, we can't put the toothpaste back in the tube. We can't let a handful of media giants dominate the discourse in any community."

Adelstein added that "Learning from the backlash against the rules last time, we now need to involve the public and Congress more fully in our deliberations. We need to hold public hearings across the country, and call for more studies from experts and academics. I look forward to working with Chairman Martin and all of my colleagues on a bipartisan basis to fix the rules so they comply with the court order. We need a comprehensive response that recognizes our media ownership rules work together to prevent a single owner from gaining too much control over what the American people see, hear and read."

FCC Commissioner Michael Copps stated in a release [PDF] that "The ball is clearly back in the Commission’s court. The FCC has a fresh opportunity now to come up with a set of rules to encourage localism, competition, and diversity in our media. If we work together, conduct outreach to engage the American people, and gather a more complete record, I am confident of our ability to craft rules that will withstand judicial scrutiny and the scrutiny of the American people. I am ready to roll up my sleeves and work with my colleagues to get the job done."

The Supreme Court denied certiorari in Media General, Inc. v. FCC, No. 04-1020, NAB v. FCC, No. 04-1033, Tribune v. FCC, No. 04-1036, Newspaper Association of America v. FCC, No. 04-1045, FCC v. Prometheus Radio Project, No. 04-1168, and Sinclair Broadcast Group v. FCC, No. 04-1177. See, Order List [11 pages in PDF].

Supreme Court Rules on Research Exemption to Patent Infringement

6/13. The Supreme Court issued its opinion [17 pages in PDF] in Merck KGaA v. Integra LifeSciences I, vacating the opinion of the  U.S. Court of Appeals (FedCir). This is a case regarding the limited statutory exemption to patent infringement, codified at 35 U. S. C. §271(e)(1), for research using DNA and genetic manipulation techniques. The Court issued a short opinion that merely construed the statute, without engaging in any discussion of the common law research exemption, or the policy implications of allowing research exemptions.

For a detailed summary of the facts of the case, the proceedings in the District Court and Court of Appeals, and the issues involved, see story titled "Supreme Court Takes Case Involving Research Exemption to Patent Infringement" in TLJ Daily E-Mail Alert No. 1,053, January 11, 2005.

This was a unanimous opinion, written by Justice Antonin Scalia. He approached this solely as a matter of interpretation of the literal language of the statute, 35 U.S.C. § 271. There is nothing in this opinion about the policy or purposes of research exemptions -- not even a discussion of promoting new drug research. There is nothing about a common law research exemption. There is nothing about the October 3, 2002 opinion of the Federal Circuit in Madey v. Duke, 307 F.3d 1351. No other Justices wrote concurring or dissenting opinions.

Justice Scalia wrote at the outset that "This case presents the question whether uses of patented inventions in preclinical research, the results of which are not ultimately included in a submission to the Food and Drug Administration (FDA), are exempted from infringement by 35 U. S. C. §271(e)(1)."

35 U.S.C. § 271(a) contains the general prohibition of patent infringement. It provides that "whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent."

Then, § 271(e)(1) provides that "It shall not be an act of infringement to make, use, offer to sell, or sell within the United States or import into the United States a patented invention (other than a new animal drug or veterinary biological product (as those terms are used in the Federal Food, Drug, and Cosmetic Act and the Act of March 4, 1913) which is primarily manufactured using recombinant DNA, recombinant RNA, hybridoma technology, or other processes involving site specific genetic manipulation techniques) solely for uses reasonably related to the development and submission of information under a Federal law which regulates the manufacture, use, or sale of drugs or veterinary biological products." (Parentheses in original.)

Integra is the owner of the patents in suit, which relate to a short tri-peptide segment of fibronectin having the sequence Arg-Gly-Asp, also known simply as "RGD peptide". The RGD peptide sequence promotes cell adhesion to substrates in culture and in vivo. The RGD sequence promotes this beneficial cell adhesion by interacting with avß3 receptors on cell surface proteins called integrins.

Merck provided funding for angiogenesis research conducted by David Cheresh at the Scripps Research Institute.

Integra and other plaintiffs filed a complaint in U.S. District Court (SDCal) against Merck, Cheresh and Scripps, alleging patent infringement in connection with use of the RGD peptide in the experiments related to angiogenesis.

The Supreme Court ultimately held that the use of patented compounds in preclinical studies is protected under §271(e)(1) as long as there is a reasonable basis for believing that the experiments will produce the types of information that are relevant to an investigational new drug application (IND) or new drug applications (NDA) submitted to the Food and Drug Administration (FDA) pursuant to the Federal Food, Drug, and Cosmetic Act of 1938.

More Supreme Court News

6/13. The Supreme Court issued six opinions and an Order List [11 pages in PDF]. The Court has yet to issue its opinions in MGM v. Grokster (regarding copyright and P2P systems), and NCTA v. Brand X (regarding regulation of broadband internet services).

The Court announced that "The Court will take a recess from Monday, June 13, 2005, until Monday, June 20, 2005."

The Court denied certiorari in EMR Network v. FCC. This lets stand the December 7, 2004 opinion [8 pages in PDF] of the U.S. Court of Appeals (DCCir) regarding environmental impacts of FCC decisions. EMR Network filed a petition asking the FCC to initiate an inquiry on the need to revise its regulations to address nonthermal effects of radio frequency (RF) radiation. The FCC's Office of Engineering and Technology (OET) rejected EMR's initial petition; EMR submitted further materials; and, the FCC issued an order rejecting EMR's petition. EMR then filed a petition for review, arguing that the FCC violated § 102 of the National Environmental Policy Act (NEPA), which is codified at 42 U.S.C. § 4332. The Court of Appeals rejected the petition for review. It reviewed the actions of the FCC, the language of the NEPA, and other court cases construing the NEPA, and concluded that the FCC did not violated the NEPA. The Appeals Court case number is 03-1336. The Supreme Court number is 04-1515. See, Order List [11 pages in PDF] at page 4.

4th Circuit Rules in 11th Amendment Immunity Case

6/13. The U.S. Court of Appeals (4thCir) issued its opinion [38 pages in PDF] in Constantine v. George Mason University, a case in which the Court of Appeals rejected the state of Virginia's assertion of 11th Amendment immunity to suit under the ADA and Section 1983.

The facts of this case do not involve technology. However, the opinion contains a long analysis of 11th Amendment immunity, which is involved in several areas of technology related law. The opinion, for example, relies upon College Savings Bank v. Florida Prepaid, 527 U.S. 666 (1999), an intellectual property case, in its discussion of waiver of 11th Amendment immunity. See also, Seminole Tribe of Florida v. Florida, 517 U.S. 44 (1996).

Carin Constantine is a law student at George Mason University (GMU) who failed an examination in a course on Constitutional law. She states that she had a headache. She asserts that GMU's failure to allow her retake the exam upon more favorable terms violates her rights under the Americans with Disabilities Act (ADA). Moreover, she wrote a critical article in a law student newspaper. So, she further asserts that actions taken by GMU, a state university, violated her First Amendment rights.

Constantine filed a complaint in U.S. District Court (EDVa) against GMU, her Constitutional law professor (Nelson Lund), and other individuals associated with GMU, alleging First Amendment retaliation in violation of 42 U.S.C. § 1983 and disability discrimination in violation of Title II of the ADA and § 504 of the Rehabilitation Act.

GMU (and the other defendants) asserted 11th Amendment immunity, and also moved to dismiss for failure to state a claim upon which relief can be granted. The District Court (Judge Hilton presiding) dismissed for failure to state a claim.

The Court of Appeals (with Judge Dennis Shedd writing for the Court) reversed. The 11th Amendment does not bar this suit. Moreover, the complaint does state claims for violation of the ADA and § 1983. The judgment of the District Court is reversed, and the case is remanded.

GAO Reports on Spam, Phishing and Spyware Threats to Federal Agencies

6/13. The Government Accountability Office (GAO) released a report [79 pages in PDF] titled "Information  Security: Emerging Cybersecurity Issues Threaten Federal Information Systems". It finds that "many agencies have not fully addressed the risks of emerging cybersecurity threats", such as spam, phishing and spyware.

The report finds that "Spam, phishing, and spyware pose security risks to federal information systems. Spam is a problem not only because of the enormous resources it demands, but also because it now serves as a means for other types of attack. Phishing can lead to identity theft and loss of sensitive information; it can easily result in reduced trust in and therefore use of electronic government services, thereby reducing the efficiencies that such services offer."

The report states that "Phishers have targeted federal entities such as the Federal Bureau of Investigation (FBI), Federal Deposit Insurance Corporation (FDIC), and the Internal Revenue Service (IRS). Spyware threatens the confidentiality, integrity, and availability of federal information systems by capturing and releasing sensitive data, making unauthorized changes to systems, decreasing system performance, and possibly creating new system vulnerabilities, all without the user’s knowledge or consent. The blending of these threats creates additional risks that cannot be easily mitigated with currently available tools."

The report finds that "many agencies have not fully addressed the risks of emerging cybersecurity threats as part of their required agencywide information security programs, which include performing periodic assessments of risk; implementing security controls commensurate with the identified risk; ensuring security-awareness training for agency personnel; and implementing procedures for detecting, reporting, and responding to security incidents."

It also adds that "several agencies reported that current enterprise tools to address emerging cybersecurity threats are immature and therefore impede efforts to effectively detect, prevent, remove, and analyze incidents. For example, although most agencies (20 of 24) reported implementing agencywide approaches to mitigating spam, some agencies reported concerns that these tools could not be relied upon to accurately distinguish spam from desired e-mails."

More News

6/13. A grand jury of the U.S. District Court (DC) returned an eleven count criminal indictment of Bruce A. Schiffer on June 9, 2005, in connection with his alleged operation of an internet connected computer file server for the purpose of enabling others to either upload or download files that consist of child pormography. Schiffer was arraigned in U.S. District Court on June 13. See also, Department of Justice (DOJ) release.

Go to News from June 6-10, 2005.