TLJ News from November 26-30, 2005

DOJ and Samsung File Plea Agreement

11/30. The Department of Justice (DOJ) released a Plea Agreement between the DOJ and Samsung in which Samsung agreed to plead guilty "at arraignment to a one-count Information to be filed in the United States District Court for the Northern District of California."

On October 13, 2005, the DOJ charged Samsung by criminal Information filed in the U.S. District Court (NDCal) with fixing the prices of dynamic random access memory (DRAM) sold to original equipment manufacturers (OEMs), in violation of Section 1 of the Sherman Act, which is codified at 15 U.S.C. § 1.

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

The DOJ also announced in October that Samsung had agreed to plead guilty. The just released plea agreement is dated October 13, 2005. The just released document also indicates that it was filed with the U.S. District Court on November 30, 2005. And, the DOJ Public Affairs Office stated that the Samsung pled in open court on November 30.

See also, story titled "DOJ Charges Samsung with DRAM Price Fixing" in TLJ Daily E-Mail Alert No. 1,233, October 14, 2005.

BEA Data Shows Growth in Tech Investment

11/30. The Department of Commerce's (DOC) Bureau of Economic Analysis (BEA) released revised quarterly gross domestic product (GDP) data. See, BEA release. The BEA reports that the GDP increased at an annual rate of 4.3 % in the third quarter of 2005.

The data released by the BEA also shows that over the last year investment in both software and computers and peripherals has grown far faster than the economy as a whole. In the third quarter of 2004 spending on fixed investment in nonresidential software (annual rate, in current dollars, seasonally adjusted) was $179.9 Billion. In the third quarter of 2005 it was $203.1 Billion.

In the third quarter of 2004 the same statistic for fixed investment in nonresidential computers and peripheral equipment was $92.3 Billion. It rose to $105 Billion in the third quarter of 2005.

See also, statement by Deputy Secretary of Commerce David Sampson.

People and Appointments

11/30. The Securities and Exchange Commission (SEC) announced that its General Counsel, Giovanni Prezioso, "will leave the Commission to return to the private sector. Prezioso, 47, was named General Counsel in April 2002. He has not yet accepted another position and will remain at the Commission until early 2006 to assist with transition matters." See, SEC release.

More News

11/30. President Bush gave a long speech on terrorism and the war in Iraq. He did not discuss technology policy. However, he closed by reciting the posthumous words of a U.S. Marine who died in Iraq. The medium of this Marine's last words was a laptop computer. Bush said, "One of those fallen heroes is a Marine Corporal named Jeff Starr, who was killed fighting the terrorists in Ramadi earlier this year. After he died, a letter was found on his laptop computer. Here's what he wrote, he said, ``[I]f you're reading this, then I've died in Iraq. ...´´"

11/30. The Recording Industry Association of America (RIAA) announced the filing of yet another round of civil complaints in U.S. District Courts on behalf of large record companies against 754 individuals alleged to have infringed copyrights on peer to peer file sharing systems. See, RIAA release.

7th Circuit Rules on Telemarketing and First Amendment

11/29. The U.S. Court of Appeals (7thCir) issued its opinion [12 pages in PDF] in Goodman v. Illinois, a case regarding telemarketing and the First Amendment right of free speech. The Court of Appeals affirmed the District Court's denial of injunctive relief to a would be telemarketer.

This case does not involve federal telemarketing statutes or rules. Rather, Jason Goodman, a chiropractor, wants to hire telemarketers in the state of Illinois to advertise his services to persons who may have been in automobile accidents. However, the Illinois Medical Practice Act (IMPA) prohibits medical professionals from soliciting professional patronage.

Goodman filed a complaint in U.S. District Court (CDIll) against Illinois seeking declaratory and injunctive relief. He alleged that the state ban on his telemarketing is unconstitutional under the First Amendment. He requested a preliminary injunction against the state. The District Court denied this request, and he appealed.

The Court of Appeals affirmed. The Court reasoned that the burden was on Goodman to show that his telemarketing was protected speech. However, he did not, for example, submit transcripts to be used by telemarketers. Since he did not meet his burden, the District Court was within its discretion to deny the preliminary injunction.

The Court continued that this is a commercial speech case. Hence, the Supreme Court's the four prong test in Central Hudson Gas & Elec. Corp. v. Pub. Serv. Comm’n of New York, 447 U.S. 557 (1980), is controlling. In that case the Supreme Court wrote that a state can suppress "commercial messages that do not accurately inform the public about lawful activity."

The Court of Appeals added that the "Supreme Court has recognized the danger of misleading statements when telemarketing professional services, noting that because professionals render services rather than sell standardized products, there is a ``consequent enhanced possibility for confusion and deception if they were to undertake certain kinds of advertising.´´" (Citing Va. Bd. of Pharmacy v. Va. Citizens Consumer Council, Inc., 425 U.S. 748 (1976).)

This case is Jason Goodman v. Illinois Department of Financial and Professional Regulation, U.S. Court of Appeals for the 7th Circuit, App. Ct. No. 05-1188, an appeal from the U.S. District Court for the Central District of Illinois, D.C. No. 04 C 3232, Judge Jeanne Scott presiding.

SEC Proposes to Allow Internet Delivery of Proxy Materials

11/29. The Securities and Exchange Commission (SEC) adopted a staff recommendation to publish a notice in the Federal Register that proposes to amend the SEC's rules to allow companies to use the internet to satisfy proxy material delivery requirements.

The SEC issued a release that describes this item. However, this item has not yet been listed in the SEC's web page that lists and hyperlinks proposed rule changes, and the SEC has yet to publish a notice in the Federal Register. See, full story.

More News

11/29. The U.S. Court of Appeals (FedCir) issued its opinion [13 pages in PDF] in IPInnovations v., affirming the District Court's summary judgment of non-infringement of U.S. Patent No. 4,877,404, titled "Graphical interactive software system". This case is IPInnovations LLC v., Digital Think, Inc, and Docent, Inc., U.S. Court of Appeals for the Federal Circuit, App. Ct. Nos. 04-1571 and 05-1153, appeals from the U.S. District Court for the Southern District of Texas. Judge Rader wrote the opinion of the Court of Appeals, in which Judges Newman and Dyk joined.

11/29. The Federal Trade Commission (FTC) announced in a release that it approved an application submitted by the Entertainment Software Rating Board (ESRB) asking that it be allowed to revise its safe harbor program in accordance with the Children's Online Privacy Protection Act (COPPA).

11/29. The Senate Commerce Committee (SCC) held an event titled "Open Forum on Decency". See, prepared statement [5 pages in PDF] of Federal Communications Commission (FCC) Chairman Kevin Martin.

Supreme Court to Consider Availability of Injunctive Relief in Patent Cases

11/28. The Supreme Court granted certiorari in eBay v. Mercexchange, a patent infringement case against eBay involving the fixed-price purchasing feature of eBay's website. The main issue is the standard to be followed by courts in granting injunctions against infringement.

The relevant statute, which is codified at 35 U.S.C. § 283, 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."

eBay and its amicus curiae supporters argue that Federal Circuit opinions do not follow Section 283. Rather, they all but ignore the "principles of equity" language, and require District Courts to accord patent holders an irrebuttable presumption of entitlement to injunctive relief. Moreover, they argue that these automatic injunctions have dire consequences for the information technology sector.

Proponents of injunctive relief argue that patents are a form of property, and that the essential attributes of property are the owner's right to use the property, and the owner's right to exclude others from using the property. However, patent law confers no right to use upon the owner -- only a right to exclude. Moreover, since patents by nature are conceptual, and publicly disclosed, the owner has no means of excluding, other than by judicial injunction. If deprived of injunctive relief, the character of the right is substantially degraded, and the patent is of much less value. And hence, the incentive to invest, research, develop, and disclose is substantially lessened.

This is also one of the main issues involved in current debates in the Congress regarding patent law reform. While some internet based companies, such as eBay, support legislation that would raise the standard for issuance injunctions, many patent holders oppose such efforts. There have been numerous House and Senate hearings in 2005, and considerable lobbying and negotiations; however, no consensus has been obtained, and no bill has yet been reported by either the House Judiciary Committee or Senate Judiciary Committee.

The Supreme Court may provide eBay some of the relief that it has been unable to obtain from the Congress.

See, full story.

Extradited Ukrainian Infringer Pleads Guilty in U.S. District Court

11/28. Maksym Vysochanskyy, aka Maksym Kovalchuk, pled guilty in U.S. District Court (NDCal) to criminal copyright infringement in violation of 18 U.S.C. § 2319(a), trafficking in counterfeit goods in violation of 18 U.S.C. § 2320(a), and engaging in monetary transactions in property derived from specified unlawful activity in violation of 18 U.S.C. § 1957(a).

There are two notable attributes of this case. First, he committed his crimes abroad, but was extradited to the U.S. Second, law enforcement authorities located him by monitoring his e-mail.

These charges arose out of his distribution of counterfeit computer software over the internet from December 2000 to May 2003. Vysochanskyy, who is from Ukraine, was extradited from Thailand to the U.S. Sentencing is scheduled for February 13, 2006 at 1:30 PM.

John Wolfe, of the Business Software Alliance (BSA), stated in a release that "Using pirated software harms the legitimate market worldwide, costing billions of dollars each year. This case demonstrates that law enforcement agencies’ around the globe are cooperating to seek out offenders no matter where the incident occurs -- whether here in the U.S. or abroad. They can run, but they can't hide."

A Department of Justice (DOJ) release states that "Vyschanskyy's overseas arrest was made possible when U.S. agents monitoring his email traffic observed him make travel plans from Ukraine to Thailand, and flew to Bangkok to meet him."

FTC Releases Report on Effectiveness of Spam Countermeasures

11/28. The Federal Trade Commission's (FTC) Division of Marketing Practices released a report [10 pages in PDF] titled "Email Address Harvesting and the Effectiveness of Anti-Spam Filters". This report covers e-mail address harvesting, the use of spam filters by internet service providers (ISP), and the masking of e-mail addresses. See also, FTC release.

The FTC created and used 150 undercover e-mail accounts to collect data for this report.

First, the FTC found that "addresses posted on websites were at risk of being harvested by spammers, but that addresses posted in chat rooms, message boards, USENET groups and weblogs (``blogs´´) were far less likely to be harvested."

Second, the FTC found that "anti-spam filters utilized by two free web-based ISPs effectively blocked the vast majority of spam sent to harvested addresses. The implication of this finding is that ISP spam filtering technologies are substantially reducing the burden of spam on consumers."

Third, the FTC found that masking of e-mail addresses, such as by replacing the "@" symbol with the letter "at", was "very effective in thwarting harvesting".

TLJ Practices. Several years ago TLJ determined from an analysis of web site access logs that a significant amount of the traffic at the TLJ web site consisted of automated e-mail harvesting. TLJ has since adopted a policy of not publishing full and hyperlinked e-mail addresses in the TLJ web site. A few e-mail addresses are published as non-hyperlinked graphics. Most are published without hyperlinks, and masked, by substituting the terms "at" and "dot" for "@" and ".". For example, carney at techlawjournal dot com is the masked e-mail address of the publisher.

Antitrust Division and FTC to Hold Hearings on Single Firm Conduct

11/28. The Department of Justice's (DOJ) Antitrust Division and the Federal Trade Commission (FTC) announced that they will hold a series of joint hearings on the implications of single firm conduct under the antitrust laws.

The DOJ and FTC will also solicit written comments. However, no hearing dates or deadlines have been set. See, DOJ release and substantially identical FTC release.

Deborah MajorasFTC Chairman Deborah Majoras (at right), stated that "Over-enforcement of the monopolization laws leads to high false positives that chills pro-competitive behavior that benefits consumers. Under-enforcement, however, may result in false negatives in which firms continue to engage in exclusionary conduct that harms consumers."

Single firm conduct includes unilateral actions, which may or may not be anti-competitive, by firms that obtained market power by growth, efficiency and innovation, rather than by merger or collusion. Microsoft and Intel both raise single firm conduct issues.

The US and the EU have taken different approaches to single firm conduct. See for example, September 10, 2004 speech  in Tokyo, Japan, by former Assistant Attorney General Hewitt Pate titled "Securing the Benefits of Global Competition". See also, story titled "Pate Addresses US Competition Law And Differences With EU" in TLJ Daily E-Mail Alert No. 975, September 13, 2004.

The DOJ and FTC wrote in their releases that "The primary goal of the hearings, which will begin in spring 2006, is to examine whether and when specific types of single-firm conduct are pro-competitive or benign, and when they may harm consumers."

The DOJ and FTC elaborated that "Section 2 of the Sherman Antitrust Act, which proscribes exclusionary or predatory monopoly conduct, presents some of the most complex issues facing the Department, the FTC, the courts, the antitrust bar, and the business community. The hearings will examine and analyze a wide-range of legal and economic issues to help define the boundaries between single-firm conduct that is legal and conduct that is illegal under current antitrust laws."

They added that "Participants will critically examine and discuss the standards used in recent cases, including DOJ's enforcement actions against Microsoft, American Airlines, and Dentsply, and FTC cases against Intel, Unocal, and Rambus. Private actions, such as those in Trinko and LePage's, also will be examined. Hearing participants also will examine what economic learning contributes to the analysis with respect to exclusionary or predatory conduct."

The DOJ and FTC also stated that there is "an international component as well. In an increasingly globalized economy, in which transactions can have an impact on multiple jurisdictions, it is imperative that U.S. businesses understand the appropriate line between procompetitive and anticompetitive single-firm conduct and that U.S. antitrust enforcers are able to discuss and share with their foreign counterparts the latest legal and economic scholarship relating to these issues."

The Antitrust Modernization Commission (AMC) is also studying single firm conduct.

GAO Reports on Offshoring of Services

11/28. The Government Accountability Office (GAO) released a report [86 pages in PDF] titled "Offshoring of Services: An Overview of the Issues". This is a long report that addresses many different issues, including the effect of offshoring upon U.S. living standards, employment, income variation, data privacy, and national security.

The report states that "traditional economic theory predicts that offshoring is likely to benefit the overall economy", but it also presents opposing viewpoints.

The report states that "Advances in information technology (IT) and developments in the management of business processes, coupled with a large pool of educated workers in other countries, allow companies to move services work outside of the U.S. as part of a larger trend toward global interdependence. For example, U.S. companies are now able to move software programming, accounting, or telephone call center services to lower-wage locations such as India, the Philippines, and Eastern Europe."

With respect to the likely effect upon U.S. living standards, the report states that "Traditional economic theory on international trade predicts that in the long run, offshoring is likely to be beneficial for the average U.S. standard of living; however, some economists have argued that offshoring could harm U.S. living standards if it contributes to the erosion of important U.S. industries, undermines U.S. technological leadership, or leads to a decrease in average U.S. wages."

With respect to the likely effect upon U.S. employment, the report states that "Many economists agree that offshoring is not likely to affect aggregate U.S. employment in the long run but acknowledge that in the short run some workers will lose their jobs when employers relocate production abroad. In addition, some economists argue that an important effect of offshoring and increased trade are structural changes that will generate permanent shifts in the types of work conducted by the U.S. labor force."

The report states that there is "disagreement among economists about whether offshoring is likely to significantly affect the distribution of income in the U.S." Similarly, the report states that experts vary in their assessments of the threats to privacy and national security.

People and Appointments

Nancy Victory11/28. Federal Communications Commission (FCC) Chairman Kevin Martin named Nancy Victory (at right) Chair of the FCC’s Independent Panel Reviewing the Impact of Hurricane Katrina on Communications Networks. She is a partner in the law firm of Wiley Rein & Fielding (WRF). Martin previously worked at WRF. She is also a former head of the National Telecommunications and Information Administration (NTIA). She is also Chair of the FCC's Advisory Committee for the 2007 World Radiocommunication Conference (WRC-07). See, story titled "Powell Appoints Nancy Victory to WRC-07 Post" in TLJ Daily E-Mail Alert No. 761, October 20, 2003. She is also a member of the Progress & Freedom Foundation's (PFF) Digital Age Communications Act Project's (DACA) Advisory Committee. See, FCC release [PDF].

11/28. Kevin Washington was named Director of the Federal Communications Commission's (FCC) Office of Legislative Affairs. He was previously Deputy Director of the Department of Education's No Child Left Behind Office of Communications and Outreach. See, FCC release [PDF].

More News

11/28. The Government Accountability Office (GAO) released a report [56 pages in PDF] titled "Information Technology: Centers for Medicare & Medicaid Services Needs to Establish Critical Investment Management Capabilities".

11/28. The Government Accountability Office (GAO) released a report [65 pages in PDF] titled "Information Technology: HHS Has Several Investment Management Capabilities in Place, but Needs to Address Key Weaknesses".

WTO Releases Draft Hong Kong Ministerial Text

11/26. Pascal Lamy, the Director-General of the World Trade Organization (WTO), released a document [44 pages in MS Word] titled "Doha Work Programme: Preparations for the Sixth Session of the Ministerial Conference: Draft Ministerial Text". This draft addresses many topics, including both e-commerce and TRIPS. The tentative language of this draft provides that "Members will maintain their current practice of not imposing customs duties on electronic transmissions until our next Session".

This document states that it "is a first draft" and that "this draft text does not purport to represent agreement overall". Moreover, it indicates that much specific language for the final document has yet to be drafted.

E-Commerce. The draft document's language on e-commerce is as follows: "We take note of the reports from the General Council and subsidiary bodies on the Work Programme on Electronic Commerce, and that the examination of issues under the Work Programme is not yet complete. We [agree to reinvigorate that work, including the development-related issues under the Work Programme and discussions on the trade treatment, inter alia, of electronically delivered software. We agree to maintain the current institutional arrangements for the Work Programme. We declare that Members will maintain their current practice of not imposing customs duties on electronic transmissions until our next Session]." (Brackets in original.)

TRIPS. This draft also contains three paragraphs that pertain to Trade-Related Aspects of Intellectual Property Rights (TRIPS). First, it states that "We take note of the report of the Chairman of the Special Session of the Council for TRIPS setting out the progress in the negotiations on the establishment of a multilateral system of notification and registration of geographical indications for wines and spirits, as mandated in Article 23.4 of the TRIPS Agreement and paragraph 18 of the Doha Ministerial Declaration, contained in document TN/IP/14, and agree to intensify these negotiations in order to complete them within the overall time-frame for the conclusion of the negotiations that were foreseen in the Doha Ministerial Declaration."

Second, it references a paragraph to be drafted later. It states that "[Text to be inserted following meeting of TRIPS Council on 29 November]". (Brackets in original.)

Third, it states that "We take note of the work done by the Council for Trade-Related Aspects of Intellectual Property Rights pursuant to paragraph 11.1 of the Doha Decision on Implementation-Related Issues and Concerns and paragraph 1.h of the General Council Decision of 1 August 2004, and [direct it to continue its examination of the scope and modalities for complaints of the types provided for under subparagraphs 1(b) and 1(c) of Article XXIII of GATT 1994 and make recommendations to our next Session. It is agreed that, in the meantime, Members will not initiate such complaints under the TRIPS Agreement]." (Brackets in original.)

Go to News from November 21-25, 2005.