TLJ News from November 6-10, 2005

AG Gonzales Proposes Intellectual Property Protection Act

11/10. Attorney General Alberto Gonzales gave a speech at a U.S. Chamber of Commerce event in which he discussed intellectual property, and proposed new legislation to offer greater civil and criminal protections for some intellectual property rights holders.

See, draft [17 pages in PDF] of HR __, the "Intellectual Property Protection Act of 2005", and the Department of Justice's (DOJ) summary and comments [13 pages in PDF].

Alberto GonzalesGonzales (at right) stated that "we've just sent to Congress important legislation to address the problem of intellectual property crime: the Intellectual Property Protection Act of 2005. This is a comprehensive legislative package designed by the Department of Justice to help overhaul and update America’s intellectual property statutes. It is a reflection of the sustained commitment on the part of the Department and the Administration to ensure that we are doing everything we can to combat this problem."

See, full story.

Senate Approves Stop Counterfeiting in Manufactured Goods Act

11/10. The Senate amended and approved S 1699, the "Stop Counterfeiting in Manufactured Goods Act". Sen. Arlen Specter (R-PA) introduced this bill on September 14, 2005. The Senate Judiciary Committee (SJC) amended and approved the bill on November 3, 2005.

The House has yet to approve this bill. However, on May 23, 2005, the House approved HR 32, which is also titled the "Stop Counterfeiting in Manufactured Goods Act". It is very similar, but not identical, to S 1699. See, story titled "House Approves Bill Regarding Trafficking in Counterfeit Marks" in TLJ Daily E-Mail Alert No. 1,141, May 24, 2005.

S 1699 would amend 18 U.S.C. § 2320, which pertains to "Trafficking in counterfeit goods or services". It would criminalize trafficking in counterfeit labels. The first sentence of § 2320(a) provides that "Whoever intentionally traffics or attempts to traffic in goods or services and knowingly uses a counterfeit mark on or in connection with such goods or services shall, if an individual, be fined not more than $2,000,000 or imprisoned not more than 10 years, or both, and, if a person other than an individual, be fined not more than $5,000,000."

This bill would insert the phrase "or intentionally traffics or attempts to traffic in labels, patches, stickers, wrappers, badges, emblems, medallions, charms, boxes, containers, cans, cases, hangtags, documentation, or packaging of any type or nature, knowing that a counterfeit mark has been applied thereto, the use of which is likely to cause confusion, to cause mistake, or to deceive".

Sen. Patrick Leahy (D-VT), the ranking Democrat on the SJC, and a cosponsor of the bill, stated in the Senate that "this bill that will give law enforcement improved tools to fight counterfeit trademarks, and that it could work a significant change in the efforts to combat this type of theft". See, Congressional Record, November 10, 2005, at Pages S12714-5.

Sen. Leahy also summarized its content. He said that it "makes several improvements to the U.S. Code. The bill strengthens 18 U.S.C. 2318, the part of the criminal code that deals with counterfeit goods and services, to make it a crime to traffic in counterfeit labels or packaging, even when counterfeit labels or packaging are shipped separately from the goods to which they will ultimately be attached. Savvy counterfeiters have exploited this loophole to escape liability. This bill closes that loophole."

18 U.S.C. § 2318 criminalizes trafficking "in a counterfeit label affixed or designed to be affixed to a phonorecord, or a copy of a computer program or documentation or packaging for a computer program, or a copy of a motion picture or other audiovisual work".

Sen. Leahy added that "The bill will also make counterfeit labels and goods, and any equipment used in facilitating a crime under this part of the code, subject to forfeiture upon conviction. Any forfeited goods or machinery would then be destroyed, and the convicted infringer would have to pay restitution to the lawful owner of the trademark.

Sen. Specter elaborated that the "loophole was exposed by the Tenth Circuit Court of Appeals in United States v. Giles, 213 F.3d 1247--10th Cir. 2000. In this case, the United States prosecuted the defendant for manufacturing and selling counterfeit Dooney & Bourke labels that third parties could later affix to generic purses. Examining Title 18, section 2320, of the United States Code, the Tenth Circuit held that persons who sell counterfeit trademarks that are not actually attached to any ``goods or services'' do not violate the federal criminal trademark infringement statute. Since the defendant did not attach counterfeit marks to ``goods or services,'' the court found that the defendant did not run afoul of the criminal statute as a matter of law. Thus, someone caught red-handed with counterfeit trademarks walked free."

Sen. Specter also stated that "I would like to make it clear for the record that this bill is not intended to apply to ``good actor´´ Internet service providers that serve as third party intermediaries to online transactions and take demonstrable steps to prevent the exchange or trafficking of counterfeit goods on their networks."

Senate Approves Protecting American Goods and Services Act of 2005

11/10. The Senate amended and approved S 1095, and untitled bill pertaining to trademark crimes. the "Protecting American Goods and Services Act of 2005". Sen. John Cornyn (R-TX) introduced this bill on May 20, 2005. The Senate Judiciary Committee (SJC) amended and approved the bill on November 3, 2005.

The version approved by the Senate contains no title. However, earlier versions of the bill included the title "Protecting American Goods and Services Act of 2005".

Sen. Patrick Leahy (D-VT), the ranking Democrat on the SJC, stated that this bill "will help to combat this growing scourge. It amends the definition of trafficking in the counterfeit law to criminalize the possession of counterfeit goods with the intent to sell or traffic in those goods, as well as to include any distribution of counterfeits with the expectation of gaining something of value -- criminals should not be able to skirt the law simply because they barter illegal goods and services in exchange for their illicit wares. Finally, the bill's new definition will criminalize the importation and exportation of counterfeit goods, as well as of bootleg copies of copyrighted works into and out of the United States." See, Congressional Record, November 10, 2005, at Pages S12712-4.

This bill would amend 18 U.S.C. § 2320(e) to provide that the term "traffic" means "to transport, transfer, or otherwise dispose of, to another, for purposes of commercial advantage or private financial gain, or to make, import, export, obtain control of, or possess, with intent to so transport, transfer, or otherwise dispose of".

It would also amend this section to provide that "the term `financial gain´ includes the receipt, or expected receipt, of anything of value''.

Bush Picks Cresanti for Technology Administration

11/10. President Bush nominated Robert Cresanti to be Under Secretary of Commerce for Technology. If confirmed by the Senate, he will replace Phillip Bond, who has already resigned. See, White House release and release.

Cresanti was previously VP for Public Policy at the Business Software Alliance (BSA). Before that, he worked for the Information Technology Association of America (ITAA). He joined the ITAA in September of 2000, after working as Staff Director of the former Senate Committee on the Year 2000 Problem. See, TLJ Daily E-Mail Alert No. 20, September 14, 2000.

Before that he was Staff Director of the Financial Institutions Subcommittee of the Senate Banking Committee. He has also worked for Sen. Bob Bennett (R-UT), and other members of Congress. Cresanti is a lawyer from Texas.

Bush nominated Cresanti to head the Technology Administration (TA), which includes the Office of Technology Policy (OTP), the National Institute of Standards and Technology (NIST), and the National Technical Information Service (NTIS). The NTIS collects and disseminates scientific, technical, engineering and related business information produced by the U.S. government and foreign sources.

Currently, Michelle O'Neill is both the acting Under Secretary of Commerce for Technology, and the acting Deputy Under Secretary of Commerce for Technology.

More People and Appointments

11/10. President Bush nominated David Spooner to be an Assistant Secretary of Commerce (for import administration). If confirmed by the Senate, he will replace James Jochum, who has already resigned. He is currently the Textile Negotiator for the Office of the U.S. Trade Representative (USTR). See, White House release and release.

11/10. President Bush nominated Leo Maury Gordon to be a Judge of the U.S. Court of International Trade. See, White House release and release.

11/10. Attorney General Alberto Gonzales announced the selection of Arif Alikhan to be the "Deputy Coordinator of the Administration's International IP Enforcement Office". Chris Israel remains the Coordinator for International IP Enforcement. See, speech.

More News

11/10. The Government Accountability Office (GAO) wrote a letter [50 pages in PDF] to leaders of the House and Senate Commerce Committees titled "Telecommunications: Preliminary Information on the Federal Communications Commission’s Spectrum Allocation and Assignment Process".

11/10. The Progress & Freedom Foundation's (PFF) Center for the Study of Digital Property created an IP Academic Advisory Council (IPAAC), and announced its members: Donald Boudreaux (George Mason University department of economics), John Duffy (George Washington University law school), Richard Epstein (University of Chicago law school), Mark Grady (University of California, Los Angeles law school), Stan Liebowitz (University of Texas at Dallas School of Management), Douglas Lichtman (University of Chicago law school), Julia Mahoney (University of Virginia law school), Ronald Mann (University of Texas School of Law), Fred McChesney (Northwestern University Law School and Business School), Adam Mossoff (Michigan State University law school), and Mark Schultz (Southern Illinois University law school). James DeLong (PFF) and Solveig Singleton (PFF) are the Co-Chairs of the IPAAC. Amy Smorodin (PFF) is the Secretariat. See, PFF release.

Conferees on PATRIOT Act Extension Bill to Meet

11/9. Representatives and Senators will meet on Thursday, November 10, 2005, at 1:30 PM regarding legislation to amend the USA Patriot Act, and extend sunsetted provisions of the Act.

On July 21, 2005, the House amended and approved HR 3199, the "USA PATRIOT and Terrorism Prevention Reauthorization Act of 2005". This bill permanently extends 14 of the 16 sections of the PATRIOT that are scheduled to sunset at the end this year. It provides for a further 10 year sunset for § 206 (regarding roving wiretaps) and § 215 (regarding access to business records, including library records, under the FISA). The final vote in the House was 257-171. The vote broke down largely along party lines. Republicans voted 214-14, while Democrats votes 43-156. See, Roll Call No. 414. See, story titled "House Approves PATRIOT Act Extension Bill" in TLJ Daily E-Mail Alert No. 1,180, July 22, 2005.

The Senate has approved a much different bill. On July 21, the Senate Judiciary Committee amended and approved S 1389, the "USA PATRIOT Improvement and Reauthorization Act of 2005". See, story titled "Senators Introduce Bill to Extend Expiring Provisions of PATRIOT Act" in TLJ Daily E-Mail Alert No. 1,175, July 15, 2005. The full Senate approved this bill on July 29, 2005. Technically, the Senate substituted the language of S 1389 for the House approved version of HR 3199. Hence, the number of the bill approved by the Senate is HR 3199.

The Congress enacted the USA PATRIOT Act immediately after the terrorist attacks of September 11, 2001. § 224 of the PATRIOT Act sunsets sixteen sections of Title II of the Act at the end of this year. These sixteen provisions pertain mostly to surveillance, searches, and seizures by the Federal Bureau of Investigation (FBI).

Many of the sections of Title II pertain to wiretapping in traditional telecommunications, surveillance in new internet protocol based services, and accessing stored electronic data.

The meeting will take place in the House Judiciary Committee's main hearing room, Room 2141, of the Rayburn Building.

Portman Says There Has Been a Lack of Progress in Talks Leading Up to Hong Kong Meeting

11/9. Robert Portman, the U.S. Trade Representative (USTR), and Mike Johanns, the U.S. Secretary of Agriculture, held a telephonic news conference regarding Doha round talks, and next month's meeting in Hong Kong, China. See, transcript [10 pages in PDF].

Robert PortmanPortman (at right) said that "we've not made the progress that we had hoped to make in order to put together a program for the Hong Kong meeting". Portman and Johanns spoke while en route from talks in Geneva, Switzerland, to meetings in Africa.

The two also held a news conference in Geneva. Johanns said there that "I'm optimistic that we can make significant progress in Hong Kong even if it is not as much as Ministers would have liked. ... We may not get as far as we had hoped for in the Hong Kong meeting, but having said that, we can still make good progress, we can lay a pathway to have a successful round completed by the end of 2006." See, transcript.

The World Trade Organization (WTO) will hold its Sixth WTO Ministerial Conference in Hong Kong on December 13-18, 2005. See, WTO notice.

Portman said during the airborne news conference that "We've had constructive conversations about the various elements of the WTO-Doha Round. But I am sorry to report that we've not made the progress that we had hoped to make in order to put together a program for the Hong Kong meeting that would enable us to set forth a framework or as the WTO language would be ``modalities´´ in order for us to complete the negotiation more rapidly. So we've made some progress. We have been able to bridge some differences and at least narrow the discussion, but we have not been able to come up with the formulas or modalities to be able to negotiate into 2006."

He continued that I'm hopeful that within the next few weeks we can still make the kind of progress that we'd hope to make by now in order for the Hong Kong meeting to be even more productive. But the Hong Kong meeting is still very much on. The United States is pushing hard for a successful meeting, and again over the next few weeks we're going to be pushing for even more of a consensus in order for us to have a more successful meeting -- and then if we're successful, negotiation throughout 2006."

Portman added that "I will remind those listening that the Hong Kong meeting was never meant to be the end of this process. It was always meant to be a milestone along the way, but an important one. It's a meeting of all the ministers. It's an opportunity to take stock of where we are, but also again we'd hoped it would have been an opportunity to make some tough decisions on at least the framework for discussion going forward. Again I'm not sure we're going to be able to meet those framework aspirations but I do believe it's important to push hard to try to make that happen. In any case, I believe the Hong Kong meeting is extremely important and it ought to be kept on the Doha schedule."

House Subcommittee Holds Hearing on Telecom Law Reform

11/9. The House Commerce Committee's (HCC) Subcommittee on Telecommunications and the Internet (TI) held a hearing titled "Staff discussion draft of legislation to create a statutory framework for Internet Protocol and Broadband Services". See, draft of bill [PDF].

See, statement by Rep. Fred Upton (R-MI), Chairman of the TI Subcommittee, statement by Rep. John Dingell (D-MI), the ranking Democrat on the full Committee.

See also, prepared testimony [7 pages in PDF] of James Ellis (SBC), prepared testimony [4 pages in PDF] of Tim Krause (Alcatel North America), prepared testimony [13 pages in PDF] of Paul Mitchell (Microsoft TV Division), prepared testimony [17 pages in PDF] of Christopher Putala (EarthLink), prepared testimony [32 pages in PDF] of Wayne Rehberger (XO Communications), prepared testimony [12 pages in PDF] of Edward Salas (Verizon Wireless), prepared testimony [17 pages in PDF] of Michael Willner (Insight Communications), prepared testimony [10 pages in PDF] of James Yager (National Association of Broadcasters), prepared testimony [PDF] of Joel Wiginton (Sony Electronics), prepared testimony [9 pages in PDF] of Frank Bowe (Hofstra University), prepared testimony [12 pages in PDF] of Harry Haasch ( Alliance for Community Media), prepared testimony [9 pages in PDF] of Gene Kimmelman (Consumers Union), prepared testimony [9 pages in PDF] of Tony Clark (North Dakota PSC, on behalf of the National Association of Regulatory Utility Commissioners), prepared testimony [14 pages in PDF] of Marilyn Praisner (Montgomery County Council, on behalf of the National Association of Telecommunications Officers and Advisors), and prepared testimony [15 pages in PDF] of Delbert Wilson (Industry Telephone Company).

See also, statement by Gary Shapiro (Consumer Electronics Association).

Bush Nominates Tennessee Regulator to FCC

11/9. President Bush nominated Deborah Tate to be a member of the Federal Communications Commission (FCC) for the remainder of a five year term expiring on June 30, 2007. See, White House release and release.

Deborah TateTate (at right) is a Director of the Tennessee Regulatory Authority (TRA). She is an attorney from Tennessee who has also worked for former Tennessee Governors Don Sundquist and Lamar Alexander.

Sen. Lamar Alexander (R-TN) is now a U.S. Senator, and a leading defender of states' right to tax internet commerce. See also, story titled "Sen. Alexander Introduces Bill Regarding Internet Tax Moratorium" in TLJ Daily E-Mail Alert No. 838, February 17, 2004.

Tate is a member of the National Association of Regulatory Utility Commissioners (NARUC), and Chairman of its Washington Action Committee

She has also served on the FCC's Federal-State Joint Conference on Advanced Telecommunications Services.

The TRA files comments in FCC proceedings. For example, the TRA recently filed a comment [PDF] in the FCC's proceeding regarding imposing 911/E911 regulation upon interconnected voice over internet protocol (VOIP) service providers. The TRA praised the FCC's May 2005 911 VOIP order, and advocated a regulatory role for states. However, the TRA opposed FCC plans to compel VOIP service providers to shut off service to customers.

The TRA has also opposed federal preemption of state authority to set rates, terms and conditions for Section 271 elements.

FCC Chairman Kevin Martin released a statement [PDF]. "If confirmed, Debi Tate will be an excellent addition to the Commission. She has a distinguished career in state government, and she has worked closely with the Commission in her role as Director of the Tennessee Regulatory Authority. Also, if confirmed, I look forward to continuing to work closely with Commissioner Copps. He has served admirably at the Commission for the past four years, and I respect his insight and thoughtfulness on issues before the Commission. I welcome both Debi and Michael, and I appreciate their continued dedication to public service."

The USTA praised the nomination. See, release.

More People and Appointments

11/9. President Bush nominated Michael Copps to be a member of the Federal Communications Commission (FCC) for a five year term expiring on June 30, 2010. See, White House release and release. Copps is currently an FCC Commissioner.

11/9. President Bush nominated Paul McNulty to be the Deputy Attorney General. Bush previously announced his intent to make this nomination. See, White House release.

11/9. The House Judiciary Committee (HJC) approved HR 2791, the "United States Patent and Trademark Fee Modernization Act of 2005".

More News

11/09. The House Judiciary Committee (HJC) approved HR 2791, the "United States Patent and Trademark Fee Modernization Act of 2005".

CTIA Writes Guidelines for Wireless Content

11/8. The Cellular Telecommunications Industry Association (CTIA) released a document [2 pages in PDF] titled "Wireless Content Guidelines". These are guidelines that wireless carriers may voluntarily adopt regarding the classification of wireless content, and limiting access to certain classified content by certain users.

The CTIA stated in a release that this "is intended to give consumers, particularly parents, the ability to limit what Internet content can be accessed through their family's wireless devices."

The document states that signing companies "agree to classify Carrier Content in a minimum of two classifications: (1) Generally Accessible Carrier Content that is available to consumers of all ages; and (2) Restricted Carrier Content accessible only to consumers age 18 years and older or to a consumer less than 18 years of age when specifically authorized by a parent or guardian."

It states that "Restricted Carrier Content" includes "lotteries, gambling, or material that is excessively violent or sexually explicit".

It states also that signing companies "will not provide Restricted Carrier Content until the carrier has deployed controls that can restrict access to such content", and "If a participating wireless carrier offers Restricted Carrier Content, the carrier will restrict, or provide controls that restrict the consumer’s access to such content based on the content classification standard."

This document states little about the "content classification standard". It does provide that this "content classification standards ... will be based on, or use, existing classification criteria established and maintained by third party entities not affiliated with the carriers."

The CTIA did not disclose which companies have signed this document.

Kathleen AbernathyFederal Communications Commission (FCC) Commissioner Kathleen Abernathy (at right) praised the CTIA in a statement [PDF]. She wrote that "This voluntary program ultimately will provide wireless carriers and their customers with the information and means to limit children's access to the potentially objectionable material that is increasingly available on Internet-enabled wireless handsets. Although advanced technology provides new and improved opportunities to manage our lives and educate our children, in some instances it can also make the already-challenging job of parenting even more difficult. The voluntary initiative announced today by CTIA demonstrates that the wireless industry appreciates these challenges and is willing to better empower parents."

FCC Commissioner Jonathan Adelstein wrote in a statement [PDF] that "This industry effort should really help families who rely on their cellphones but do not want their children inadvertently exposed to adult material."

10th Circuit Dismisses Appeal in USF Case

11/8. The U.S. Court of Appeals (10thCir) issued its opinion in In Re Universal Service Fund Telephone Billing Practice Litigation. It dismissed this appeal for lack of jurisdiction.

This case is class action litigation involving the federal Universal Service Fund (USF) program. The plaintiffs filed a complaint in the U.S. District Court (DKan) against defendants, AT&T and Sprint, alleging that they conspired among themselves and with MCI WorldCom to recover funds from the USF program in violation of the Communications Act, at 47 U.S.C. §§ 201 and 202, the Clayton Act, at 15 U.S.C. §§ 15 and 26, and the Sherman Act, at 15 U.S.C. § 1.

The District Court compelled arbitration of the claims of the plaintiffs who are residential customers of MCI WorldCom, pursuant to a written arbitration agreement.

The defendants also moved, in the absence of an applicable arbitration agreement, to compel arbitration of the claims of the plaintiffs who are business customers of MCI WorldCom, and to stay the litigation pending the outcome of that arbitration. The District Court denied this request for mandatory arbitration and stay. Its opinion is reported at 320 F. Supp. 2d 1135.

A&T and Sprint then filed this interlocutory appeal.

The Court of Appeals did not reach the merits of the appeal. It held that it lacks jurisdiction to hear this appeal. The order at issue is not a final decision.

AT&T and Sprint argued that the Federal Arbitration Act (FAA), at 9 U.S.C. § 16(a)(1)(A) and (B), gives the Court of Appeals jurisdiction to hear this appeal.

The Court of Appeals wrote that while the FAA provides for interlocutory appeals of denials of motions for mandatory arbitration and stays, these provisions of the FAA only apply where there is an underlying arbitration agreement. And, the Court of Appeals concluded that since "none exists", there is no jurisdiction under the FAA.

Mark Hinderks of the law firm of Stinson Morrison Hecker represents Sprint. Michael Doss of Sidley Austin represents AT&T.

This case is In Re Universal Service Fund Telephone Billing Practice Litigation, U.S. Court of Appeals for the 10th Circuit, App. Ct. No. 04-3241, an appeal from the U.S. District Court for the District of Kansas, D.C. No. 02-MD-1468-JWL. Judge Porfilio wrote the opinion of the Court of Appeals, in which Judges Ebel and Herrera joined.

People and Appointments

11/8. The U.S. Patent and Trademark Office (USPTO) published a notice in the Federal Register that names the eight members of the USPTO's Performance Review Board. The members are Stephen Pinkos (Deputy Director), Vickers Meadows (Chief Administrative Officer), John Doll (Commissioner for Patents), Lynne Beresford (Commissioner for Trademarks), David Freeland (Chief Information Officer), James Toupin (General Counsel), Lois Boland (Director of International Relations), and Howard Goldberg (acting Chief Financial Officer). See, Federal Register, November 8, 2005, Vol. 70, No. 215, at Pages 67672 - 67673.

11/8. Douglas Naquin was named Director of the Office of the Director of National Intelligence's (DNI) newly created Open Source Center, which is a data aggregation and analysis program. Naquin works for the Central Intelligence Agency (CIA). See, DNI release.

More News

11/8. The Office of the Director of National Intelligence (DNI) issued a release in which it announced a program titled "Open Source Center". This use of the phrase "open source" is inconsistent with the commonly understood meaning of the phrase. This is not a software center. Rather, the DNI states that this center, to be based at the Central Intelligence Agency (CIA), will aggregate and use data obtained from the "Internet, databases, press, radio, television, video, geospatial data, photos and commercial imagery".

SEC Chairman Cox Discusses Use of Interactive Data in Corporate Reporting

11/7. Chris Cox, Chairman of the Securities and Exchange Commission (SEC), gave a speech in Tokyo, Japan, at the 12th XBRL International Conference. He discussed the SEC's progress towards, and benefits of,  accommodating interactive data in corporate reporting. He said that "every appointment I make as Chairman will be consistent with this vision of tapping the possibilities of interactive data".

The SEC adopted  rule changes on February 3, 2005 that established its XBRL Voluntary Program, which provides for the submission to the SEC of XBRL documents as exhibits to certain periodic reports and investment company act filings. See also, SEC release summarizing its rule changes.

XBRL is an acronym for "eXtensible Business Reporting Language". The SEC states in a summary of XBRL that "Interactive data relies on standard definitions to ``tag´´ various kinds of information, turning SEC financial reports that have previously been text-only into documents that can be retrieved through computer searches, and analyzed in a variety of spreadsheet programs and analytical software. The data can also be more readily used to compare companies' financial performance, and better identify ``outliers´´ that could represent attractive investment opportunities -- or increased risk of misstatements or fraud."

Chris CoxChairman Cox (at left) discussed advances in information technology, XBRL, and the use of interactive data in corporate disclosure and financial reporting.

"Technology is fueling a radical change in the way that business and individuals receive, process, and interact with data. It's high time that the SEC's financial reporting caught up with the information revolution", said Cox. "In the global business environment of the 21st century, people and firms need to communicate 24/7. They need to find seamless ways to accommodate different reporting systems, different languages, and different regulatory environments. Not just businesses and regulators, but investors, too, want faster access to more and better information than ever before."

Cox pointed out that the SEC's EDGAR system "has become out of date. It's essentially the same now as it was a decade ago."

He said that the XBRL Voluntary Program "was designed to encourage all of the participants to help us assess the potential for using interactive data both within and outside the Commission. For our registrants, it's an opportunity to explore the costs and benefits of using interactive data. They're helping us understand the impact of using XBRL on their financial reporting systems, and on their internal financial controls and processes. We're also learning how XBRL can help companies communicate with their shareholders and the markets generally."

"In the months ahead, I expect that investors and analysts will continue to pilot the use of interactive data applications. That will help us assess how this new flexible format might help them to improve their own analyses and decisions."

He added that "For software providers and other technology providers, this is an opportunity to showcase the capabilities of XBRL and interactive data and tangibly demonstrate the impact to the aforementioned parties. For the SEC, this is our opportunity to assess how the use of interactive data can help us improve our internal review of information, and how it can help us make it available in more useful form to the public."

Cox also discussed the use of interactive data in the context of differing accounting standards. He said that "The global debates over the "right" way to do accounting might never be settled. We may never have a global accounting Esperanto. But if the development of taxonomies for data tagging progresses sufficiently, some day in the future it may well be possible for the users of financial information to render it according to any accounting regime they choose: US GAAP, IFRS, or any other system."

He stated that "Instead of being forced to resolve genuinely difficult financial issues on a Procrustean bed of arbitrary rules which don't suit the user's analytical purpose, accountants, analysts and investors around the world could all view that information from multiple perspectives."

Cox spoke at a conference in Japan. He noted that "XBRL has already received significant support from the Japanese government. In fact, as many of you know, the Bank of Japan plans to implement a voluntary XBRL filing program for over 500 regulated entities, possibly as early as next January. In addition, the counterpart of the SEC in Japan -- the Financial Services Agency -- has already formed a committee to accelerate the use of XBRL in financial disclosure. The FSA anticipates introducing an XBRL-based filing system for financial statements in the near future. The SEC and the FSA have a bilateral Memorandum of Understanding that permits us to partner on issues such as this, and so I expect that Japan's experiences using XBRL will form an important part of our dialogue in the months ahead." See also, XBRL Japan. (This is in Japanese. See, Google's Translate page.)

See also, the IASB's web site on XBRL.

Grokster to Cease Distributing Client Application for its P2P File Sharing System

11/7. The Recording Industry Association of America (RIAA) and National Music Publishers Association (NMPA) announced that they have settled their copyright infringement case against Grokster. The settlement provides for the end of the Grokster peer to peer (P2P) file sharing system.

The RIAA and NMPA stated in a joint release [PDF] that "The owners and operators of the Grokster peer-to-peer (P2P) network ... have agreed to settle the three-year-old legal case with the nation’s major record companies, motion picture studios and music publishers. A consent judgment will be submitted to the court today for its approval."

The RIAA and NMPA continued that "The settlement includes a permanent injunction prohibiting infringement -- directly or indirectly -- of any of the plaintiffs' copyrighted works. This includes ceasing immediately distribution of the Grokster client application and ceasing to operate the Grokster system and software."

The web site states that "There are legal services for downloading music and movies. This service is not one of them. Grokster hopes to have a safe and legal service available soon."

On June 27, 2005, the Supreme Court issued its unanimous opinion [55 pages in PDF] in MGM v. Grokster, reversing the judgment of the U.S. Court of Appeals (9thCir) regarding vicarious copyright infringement by the distributors of P2P systems.

The Supreme Court held that "one who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties."

See also, story titled "Supreme Court Rules in MGM v. Grokster" in TLJ Daily E-Mail Alert No. 1,163, June 28, 2005.

The RIAA and MPAA added that since the Supreme Court's ruling, "the legitimate online marketplace has already begun to expand. In addition to legal download and subscription services like Rhapsody, Napster, iTunes,, Sony Connect, Yahoo! Music and others, a nascent legal P2P network marketplace is emerging. Joining Wurld Media, PassAlong and Intent Media in the legitimate P2P space, iMesh has announced a legitimate P2P business model and the launch of its newly configured service. Individual record companies have also announced numerous licensing agreements in recent months with companies such as Mashboxx and Snocap."

Robert Holleyman, P/CEO of the Business Software Alliance (BSA), stated in a release that "Last summer the Supreme Court stated clearly that if you build a business based on copyright infringement, you will face legal consequences. Grokster appears to have collapsed under the weight of those consequences. While Grokster was best known for swapping music and movies, it also engaged in a large amount of trade in pirated software as well. Today's shutdown of this service is a welcome victory in our ongoing fight against piracy."

3rd Circuits Holds Employer May Sue Former Employee Under § 1030

11/7. The U.S. Court of Appeals (3rdCir) issued its opinion [19 pages in PDF] in P.C. Yonkers v. Celebrations, a case involving the civil cause of action provision of the Computer Fraud and Abuse Act (CFAA), which is codified at 18 U.S.C. § 1030(g).

It would appear from the plain language of the statute that there is a civil cause of action, and that there is no exemption for former employees who access the computers of their former employers. It states that there is a "civil action". Nevertheless, the District Court questioned this. Hence, the Court of Appeals wrote a long explanation of the proposition that a statute that states that it creates a "civil action" does in fact create a civil action.

Moreover, the Court of Appeals wrote that these civil actions are are not limited to classic hacking cases. Actions by former employers may give rise to a civil suit under § 1030(g). In the present case the claim fails, not because there is no cause of action, but because the plaintiff failed to introduce sufficient evidence in support of its claim.

This is a civil action involving two competing operators of retail stores that sell party goods, such as Halloween items. P.C. Yonkers (P.C. is an abbreviation for Party City), and others P.C. franchisees, filed a complaint in U.S. District Court (DNJ) against Celebrations, and its founder, Andrew Hack, who had previously been an employee of P.C., before leaving to set up Celebrations. P.C. alleged unauthorized access to a protected computer system in violation of § 1030(g).

P.C. alleged that Hack hacked its PCs, to steal its many valuable trade secrets regarding retail sales of party goods in the northern New Jersey and New York City area. P.C. alleged that Hack accessed its computers, without authorization, on numerous occasions. However, most of these occurred while Hack worked for P.C. Hack argued that he worked for P.C. out of a home office, and accessing computer networks remotely is what teleworkers do. He also argued that any instances in which he accessed the PCs of P.C. after his departure would have been for P.C. business.

The District Court denied injunctive relief requested by P.C., for lack of evidence, and because § 1030 does not provide a civil remedy. This appeal followed.

The Court of Appeals affirmed the denial of the injunction, on one of the two grounds relied upon by the District Court. First, it held that P.C. had not introduced evidence sufficient to support the grant of an injunction. For example, it could not show what information, if any, had been accessed by Hack.

Second, the Court of Appeals addressed the extent to which § 1030 provides civil remedies. While most of § 1030 pertains to criminal prohibitions, § 1030(g) provides, in part, that "Any person who suffers damage or loss by reason of a violation of this section may maintain a civil action against the violator to obtain compensatory damages and injunctive relief or other equitable relief."

This subsection continues that "A civil action for a violation of this section may be brought only if the conduct involves 1 of the factors set forth in clause (i), (ii), (iii), (iv), or (v) of subsection (a)(5)(B)."

These five factors, in turn, are as follows:

  "(i) loss to 1 or more persons during any 1-year period (and, for purposes of an investigation, prosecution, or other proceeding brought by the United States only, loss resulting from a related course of conduct affecting 1 or more other protected computers) aggregating at least $5,000 in value;
  (ii) the modification or impairment, or potential modification or impairment, of the medical examination, diagnosis, treatment, or care of 1 or more individuals;
  (iii) physical injury to any person;
  (iv) a threat to public health or safety; or
  (v) damage affecting a computer system used by or for a government entity in furtherance of the administration of justice, national defense, or national security;"

The Court of Appeals held, unlike the District Court, that "not only the relevant case law, but also the plain language of the statute, militate in favor of the availability of a civil remedy, and specifically, the type of injunctive relief sought by the PC plaintiffs."

There is also precedent for the proposition that there is a civil remedy under § 1030(g). On August 28, 2003, the U.S. Court of Appeals (9thCir) issued its opinion [15 pages in PDF] in Theofel v. Farey-Jones, a case regarding Rule 45 subpoenas (which are essentially issued by the litigants' attorneys) which are directed to internet service providers. The Appeals Court held that overbroad subpoenas for e-mail messages may give rise to a private right of action under the Stored Communications Act or the Computer Fraud and Abuse Act, but not the Wiretap Act. See, story titled "9th Circuit Holds That An Unlawful Subpoena to ISP for E-Mail Can Violate the Stored Communications Act" in TLJ Daily E-Mail Alert No. 729, August 29, 2003.

This case is P.C. Yonkers, Inc., et al. v. Celebrations The Party and Seasonal Superstor, et al., U.S. Court of Appeals for the 3rd Circuit, App. Ct. No. 04-4254, an appeal from the U.S. District Court for the District of New Jersey, D.C. Civil No. 04-cv-04554, Judge Joseph Greenaway presiding. Judge Rendell wrote the opinion of the Court of Appeals, in which Judges Roth and Barry joined.

Supreme Court Denies Certiorari in Software Copyright Case

11/7. The Supreme Court denied certiorari in Krause v. Titleserv, a software copyright case involving interpretation of 17 U.S.C. § 117(a)(1), which provides a defense to copyright infringement where the owner of a copy of a program modifies that program as an "essential step in the utilization of the computer program". The denial of certiorari lets stands the 2nd Circuit's tortured construction of the statute to permit modifications that "improve" the program. See, Order List [9 pages in PDF] at page 3. See, full story.

People and Appointments

11/7. Ian Ballon joined the law firm of Greenberg Traurig as a shareholder in its Los Angeles and Palo Alto, California, offices. Ballon's clients include e-Bay, Knight-Ridder, Fujitsu America, EMI Records, Twentieth Century FOX Film Corporation and Universal Studios. He was previously at Manatt Phelps & Phillips. See, release.

More News

11/7. The U.S. Patent and Trademark Office (USPTO) announced in a release that the USPTO and IP Australia, which includes the nation of Australia's patent office, have "initiated a pilot project to test the feasibility of IP Australia performing search and examination services for the USPTO on international applications filed with the USPTO under the Patent Cooperation Treaty (PCT)".

11/7. Peter Mandelson, the European Commissioner for Trade, gave a speech in Brussels, Belgium, in which he discussed progress in the Doha Development Agenda talks. He said, "To be precise, the US does not think our market access offer in agriculture is enough to persuade Congress to slash domestic support. Also, it does not go far enough for Brazil, although half of the G20 like the level we have aimed at, while the G90 would be worried if we went further because of preference erosion." He added that "The overall objective is to arrive at a situation where we have, by later this week, or sometime the week after, a first blueprint for HK. Achieving it this week will be a tall order, and unlikely."

Go to News from November 1-5, 2005.