TLJ News from January 11-15, 2006

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1/15. The Department of Homeland Security (DHS) began a test of its e-Passports technology, which involves chips with biographic and biometric information, at Terminal G of the San Francisco International Airport (SFO). See, DHS release.

Sen. Reid Asks FCC to Investigate Sale of Consumer Phone Data

1/13. Sen. Harry Reid (D-NV), the Senate Democratic leader, sent a letter to Federal Communications Commission (FCC) Chairman Kevin Martin regarding the sale of phone customers' proprietary information.

He wrote that "Several major news outlets reported that anyone can obtain the cell or landline phone number of any user, or gain access to the calling record related to any cell phone number, by visiting certain Web sites and paying a fee."

Sen. Harry ReidSen. Reid (at right) stated that this would be a "remarkable assault on the privacy rights of Americans", and requested the FCC to investigate.

He asked the FCC to "begin an investigation into how online data brokers are obtaining Americans' private phone records, and whether phone companies are doing enough to protect the personal and private information with which they are entrusted. The Commission should consider whether any laws have been broken or whether there are any loopholes in current law that need to be closed to stop the abuse of consumers' personal information."

On July 7, 2005, the Electronic Privacy Information Center (EPIC) filed a complaint with the Federal Trade Commission (FTC) regarding the sale of consumer phone records.

The EPIC complaint alleged that Intelligent e-Commerce, Inc. (IEI) "advertises and provides online ordering forms for its customers to obtain a variety of information about consumers in the U.S. and Canada. Such information includes detailed phone call records as well as the addresses on file for post office box and private mailbox holders.  These categories of personal information are protected by regulation or statute, and cannot be obtained without legal justification, but are nevertheless offered for sale on"

The EPIC complaint asked the FTC to investigate IEI's information brokerage activities and to enjoin it from selling information collected in violation of federal law.

The EPIC asserted that there is a violation of Section 5(a) of the FTC Act, which is codified at 15 U.S.C. § 45(a). It provides that "Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful." The EPIC alleged in its complaint that "Several categories of information offered for sale by IEI are not available except by misrepresentation or fraud in the violation of a federal statute."

The EPIC also asserted that there is a violation of 47 U.S.C. § 222.

9th Circuit Rules in § 253 Cases Brought by Qwest Against Local Governments

1/13. The U.S. Court of Appeals (9thCir) issued a pair of opinions in cases in which Qwest challenged the authority of local governments to regulate telecommunications. On January 13 a three judge panel issued its opinion [14 pages PDF] in Qwest v. Tucson, dismissing some claims, and affirming the District Court's summary judgment for the municipalities on other claims. On January 12 the same panel issued its opinion [13 pages in PDF] in Qwest v. Berkeley, affirming the District Court's summary judgment for Qwest.

In both cases Qwest argued that 47 U.S.C. § 253 preempts local ordinances. Subsection 253(a) provides that "No State or local statute or regulation, or other State or local legal requirement, may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service."

However, Subsection 253(c) then provides that "Nothing in this section affects the authority of a State or local government to manage the public rights-of-way or to require fair and reasonable compensation from telecommunications providers, on a competitively neutral and nondiscriminatory basis, for use of public rights-of-way on a nondiscriminatory basis, if the compensation required is publicly disclosed by such government."

Qwest has previously brought Section 253 challenges to municipal ordinances. The two just issued opinions follow, and rely upon, previous opinions of the 9th Circuit in Section 253 cases. See, for example, October 12, 2004, opinion [17 pages in PDF] of the 9th Circuit in Qwest v. Portland. This is App. Ct. No. 02-35473. It is reported at 385 F.3d 1236. See also, story titled "9th Circuit Rules in Qwest v. Portland" in TLJ Daily E-Mail Alert No. 996, October 14, 2004. See also, April 24, 2001, opinion [27 pages in PDF] of the 9th Circuit in Auburn v. Qwest. This is App. Ct. Nos. 99-36173 and 99-36219. It is reported at 260 F.3d 1160.

Qwest v. Tucson. Qwest provides telecommunications services. The defendants below, and appellees in this appeal, are municipalities located in the state of Arizona, including the City of Tucson. They all charge Qwest between 2% and 5% of its gross revenues for operating within their bounds. All money collected by each city goes into a general fund, and is not designated for rights of ways related programs. The cities also enacted ordinances that imposed licensing and franchise requirements on Qwest.

Qwest filed a complaint in U.S. District Court (DAriz) against several municipalities in the state of Arizona alleging that the defendants charged unlawful fees and imposed unlawful requirements on Qwest for use of their rights of way. It alleged violations of Section 253, as well as 18 U.S.C. § 1983.

The cities promptly amended their ordinances to exempt Qwest from the licensing and franchise requirements. (Qwest is the successor to a pre-statehood claim of territorial franchise.)

The Court of Appeals held that "Qwest is no longer subject to the Cities' licensing and franchise requirements, so its claims challenging these requirements are moot. Because the underlying claims are moot, the Court need not address Qwest's § 1983 argument."

The Court of Appeals also noted that "the old ordinances would have been preempted by state law to the extent that they required Qwest to obtain a license or franchise. See City of Auburn, 260 F.3d at 1174 (holding that licensing and franchise ordinances were preempted by state law to the extent they required a telecommunications provider asserting a territorial franchise to obtain a franchise)." (Parentheses in original.)

The Court of Appeals then held that the Tax Injunction Act (TIA) precludes Qwest's challenges to the 2% to 5% charges. This statute, which is codified at 28 U.S.C. § 1341, provides in full that "The district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State."

But first, the Court of Appeals held that the ordinances challenged by Qwest do impose taxes within the meaning of the TIA. The Court of Appeals held that where "an ordinance requires that a telecommunications provider pay a percentage of its gross revenues to the municipality, and the revenue from that charge is directed to the municipality’s general fund, the charge constitutes a tax."

Then, it held that "This type of challenge seeking to avoid paying a tax is the archetypical action that the Tax Injunction Act carves out of federal jurisdiction."

The Court of Appeals noted that Qwest's remedy is to challenge these ordinances in Arizona state courts, which are courts of general jurisdiction.

However, as a practical matter, state court judges, who are products of their state's political processes, are unlikely to overturn state or local taxes assessed against out of state corporations.

This case is Qwest Corporation v. City of Surprise, City of Tucson, et al., App. Ct. No. 04-16940, an appeal from the U.S. District Court for the District of Arizona, D.C. No. CV-01-02500-JAT, Judge James Teilborg presiding. Judge Stephen Trott wrote the opinion of the Court of Appeals in which Judges Thomas Nelson and Richard Paez joined.

Qwest v. Berkeley. In contrast, Qwest prevailed in its action against the City of Berkeley. However, in this case, the city imposed by municipal ordinance a complex and wide ranging regulatory regime that the Court of Appeals held runs afoul of 47 U.S.C. § 253(a).

In 1999 Qwest contracted with Lawrence Berkeley National Laboratory (LBNL) to provide telecommunications services. To do so it first needed to install a local loop between LBNL and Qwest's central system, which in turn meant use of the city's rights of way. Qwest applied for construction permits. Berkeley did not issue the permits. Rather, it enacted an ordinance that regulated telecommunications companies and their use of the public rights of way.

Qwest filed a complaint in the U.S. District Court (NDCal) against Berkeley, its city council, and two city employees, alleging Berkeley's ordinance was preempted by Section 253. The District Court granted temporary injunctive relief to Qwest. Berkeley then enacted a replacement ordinance, numbered 6630, which is at issue in this appeal. Qwest amended its complaint, and the District Court granted summary judgment for Qwest, holding that 6630 is preempted by Section 253. The Court of Appeals affirmed.

The Court of Appeals followed a two step analysis. First, it determined that 6630 is preempted by Section 253(a). Second, it determined that 6630 does not fall within the safe harbor language of Section 253(c).

6630 requires telecom companies to pay a fee that is not based upon the cost of maintaining the public rights of way.

The Court of Appeals held, as it did in Qwest v. Portland, that in Section 253 challenges, the challenger need not prove that the ordinance actually has the effect of prohibiting the provision of telecommunications services; it need only prove that the ordinance may have the effect of prohibiting the provision of telecommunications services.

The Court of Appeals also declined to hold that "all non-cost based fees are automatically preempted". Rather, it held that "courts must consider the substance of the particular regulation at issue".

But, the Court continued that the city "makes no attempt to assert that its non-cost based fee is not the type of regulation that prohibits or may have the effect of prohibiting the provision of telecommunications services." Instead, the city asserted that its ordinance "escapes preemption because it allows telecommunications companies protected by § 253(a) to be excluded from paying this fee by complying with the ``common carrier exemption procedure.´´"

The Court then summarized the requirements for this exemption procedure. It includes reporting requirements, disclosure of information, and production of contracts. It also requires carriers to consent to audits of its books. It also provides that the city may deny rights of way use permits, and impose fines and penalties.

The Court concluded that these requirements "are patently onerous and have the effect of prohibiting Qwest and other telecommunications companies from providing telecommunications services."

The Court then analyzed whether 6630 falls within the 253(c) safe harbor, which allows cities to "manage the public rights-of-way". The Court again reviewed the ordinance, and concluded that Berkeley ordinance regulates carriers, not rights of way.

In conclusion, the Court of Appeals held that "Section 253(a) preempts Ordinance 6630 because the enactment contains regulations and requirements that have the effect of prohibiting telecommunications companies from providing telecommunications services in the City of Berkeley. Furthermore, the offending provisions are not saved by the ``safe harbor´´ clause found in § 253(c) because they are not regulations that manage the public rights-of-way, but regulations that allow the City to manage the telecommunications companies themselves by requiring the companies to certify and document their legal and technical qualifications. We also determine that Ordinance 6630 is not severable."

This case is Qwest Communications, Inc. v. City of Berkeley, et al., App. Ct. No. 03-15852, an appeal from the U.S. District Court for the Northern District of California, D.C. No. CV-01-00663-SI, Judge Susan Illston presiding. Judge Stephen Trott wrote the opinion of the Court of Appeals in which Judges Thomas Nelson and Richard Paez joined.

State Department Official Discusses IPR, Free Trade, and Internet Regulation

1/13. Anthony Wayne, Assistant Secretary for Economic and Business Affairs, gave a speech in Houston, Texas, in which he discussed, among other topics, promoting intellectual property rights, advancing free trade, and blocking United Nations efforts to regulate the internet.

Anthony WayneWayne (at right) stated that in 2005 "We helped protect innovation through stronger protection and enforcement of intellectual property rights around the world, for instance through the U.S.­EU and G8 leaders' agreements to strengthen IP enforcement as well as our work to improve enforcement in China, Ukraine, Russia, Pakistan, and Latin America."

He also said that "Protecting innovation is another pillar of our economic diplomacy. Roughly 7% of annual global trade involves trade in illegitimate goods. Counterfeiting alone costing U.S. businesses as much as $250 billion annually. We also recognize that the nations in which intellectual property crime takes place are also suffering great economic consequences. Indeed, 71% of Latin American businesses polled in 2005 listed IP theft as one of the most pressing problems they face."

"To win this battle, we need to build stronger teams -- across borders, across industries, across governments, and between the public and private sectors. And we need you to help us build them", said Wayne. "Without this protection, the stimulus to innovate -- to create value -- is gone. In Peru, where piracy levels reached 98%, the once-thriving legitimate record industry has nearly disappeared. In Mexico, an industry association estimates that 28,000 jobs have been lost due to music piracy."

He also said that the U.S. has been promoting free trade, open markets, and the Doha Development Agenda. And, he stated that "We also seek to improve the global business climate by promoting transparency".

Wayne also touched on internet regulation. He said that "At the World Summit on the Information Society in Tunisia, we led the successful efforts to preserve private sector leadership of the Internet and the free flow of information, despite a concerted effort by a powerful array of states to turn it over to an international governing body."

See also, stories titled "Tempest in Tunis Subsides" in TLJ Daily E-Mail Alert No. 1,255, November 17, 2005; "NTIA Rebuffs UN Efforts to Gain Control Over Internet Governance" in TLJ Daily E-Mail Alert No. 1,166, July 1, 2005; and "Ambassador Gross Says UN Will Not Be in Charge of the Internet" in TLJ Daily E-Mail Alert No. 1,212, September 13, 2005.

People and Appointments

1/13. Federal Communications Commission (FCC) Commissioner Deborah Tate was named Federal Chair of the Federal-State Joint Board on Universal Service and the Federal-State Joint Board on Jurisdictional Separations. See, FCC order [PDF]. Tate wrote in a statement [PDF] that she will endeavor to "ensure that all consumers -- especially those in rural and high-cost areas -- are able to obtain services at reasonable rates."

1/13. Frank D'Amelio was named Chief Operating Officer (COO) of Lucent Technologies. See, Lucent release.

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1/13. The Office of the U.S. Trade Representative (USTR) released a statement by Barbara Weisel, an Assistant USTR, regarding trade negotiations with Thailand. She stated that "we could be in the position of concluding this agreement by the spring", but that "We have a significant amount of work remaining to conclude this agreement within the timeframe we have set". She said that this free trade agreement (FTA) would "eliminate tariffs on trade between the United States and Thailand". She added that this FTA would also "liberalize the Thai services sector, including telecommunications, financial services, distribution, and other sectors, and strengthen the protection of intellectual property".

1/13. The Federal Communications Commission (FCC) released the agenda [PDF] for its event on January 20 titled "Open Meeting". Consistent with January meetings in prior years, the Commission will not vote on the adoption of any items. Rather, the Commissioner will hear reports from various of the bureaus and offices of the FCC. The meeting is scheduled for 9:30 AM on Friday, January 20, 2006, in the Commission Meeting Room, 445 12th Street, SW.

1/13. Rambus filed a complaint [17 pages in PDF] in U.S. District Court (NDCal) against Micron Technology, Inc. and Micro Semiconductor Products, Inc. alleging patent infringement. See, Rambus release. This is another in a series of related actions, pending in different District Courts. The complaint states that it pertains to patents related to DDR2, GDDR2, GDDR3 and RLDRAM II memory components, DDR2 memory modules, and DDR2, GDDR2, and GDDR3 memory controllers.

9th Circuit En Banc Panel Rules Against Yahoo in French Internet Censorship Case

1/12. The U.S. Court of Appeals (9thCir) issued its fractured en banc opinion [99 pages in PDF] in Yahoo v. LICRA, a case regarding whether Yahoo can obtain from the U.S. District Court a declaratory judgment that a French court order censoring internet speech on its servers in the U.S. is violative of the First Amendment. The panel issued a short, two paragraph, per curiam opinion that, like the three judge panel, reversed the District Court's judgment in favor of Yahoo. This outcome is a defeat for internet service providers such as Yahoo, internet speakers, and freedom of speech online.

Five members of the eleven member panel wrote separate opinions offering differing legal analyses. Although, the en banc panel essentially broke down into three groups. Two groups of three each supported dismissal of Yahoo's action, and one group of five supported affirming the District Court's judgment in favor of Yahoo.

The District Court held that there is personal jurisdiction over the French defendants, and a violation of the First Amendment. The three judge panel held that the District Court lacks personal jurisdiction. Eight judges of the en banc opined that the District Court has specific personal jurisdiction. Three opined that it does not. However, three of the eight member majority also opined that the case lacks ripeness. Only five of eleven judges opined that there is both specific personal jurisdiction and ripeness. The Court reversed and remanded with instructions to dismiss the action without prejudice.

That is, French entities went to a French court and obtained an order imposing a prior restraint on speech on Yahoo servers located in the U.S. Yahoo sought a declaratory judgment in the U.S. District Court that the French order is unenforceable in the U.S. for violation of the First Amendment's free speech clause. The Court of Appeals' collection of conflicting opinions now orders the dismissal of Yahoo's action.

See, full story.

People and Appointments

1/12. Federal Communications Commission (FCC) Chairman Kevin Martin appointed twenty-five persons to the FCC's Independent Panel Reviewing the Impact of Hurricane Katrina on Communications Networks. See, FCC release [PDF]. He appointed no representatives from any VOIP service provider, ISP, or information technology company or group.

1/12. Susan Wyderko was named acting Director of the Securities and Exchange Commission's (SEC) Division of Investment Management. She has worked at the SEC for twenty years. See, SEC release.

1/12. Karen Knutson was named Vice President, Government Relations of the Business Software Alliance (BSA). She will surpervise the BSA government relations staff in both Washington DC and Brussels, Belgium. She was previously VP of Government Relations at ML Strategies, a Washington DC based lobbying and public affairs firm affiliated with the law firm of Mintz Levin. See, BSA release.

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1/12. The Business Software Alliance released a report [PDF] titled "Online Holiday Shopping and Consumer Confidence Project", which contains a summary of data collected in a poll of U.S. consumers. It states that 21% of all holiday shopping was done online. The report also summarizes responses to questions regarding identity theft, spyware, viruses, and credit card fraud. For example, respondents were asked "This holiday season, how confident were you when you shopped online that you were protected from spyware". 13% responded extremely confident, 28% responded very confident, 36% responded somewhat confident, 19% responded not very confident, and 1% responded not confident at all. This report is not based upon a random sample of consumers. The pollster, Harris Interactive, sent a large number of surveys by e-mail, and then tabulated responses.

1/12. A grand jury of the U.S. District Court (CDCal) returned a five count indictment that charges Jason Jones, Jonathan Bryant, and Pei "Patrick" Cai with conspiring to traffic in a technology used to circumvent a copyright protection system, conspiring to infringe on a valid copyright for financial gain, and conspiring to willfully infringe a copyrighted work by reproducing and distributing pirated works worth more than $1,000. The U.S. Attorneys Office stated in a release that the three defendants pirated video games by pre-installing games on specially modified Xbox game consoles.

NAB Opposes Encryption at Source Mandate for Digital Radio

1/11. David Rehr, P/CEO of the National Association of Broadcasters (NAB), sent a letter [3 pages in PDF] to Mitch Bainwol, Ch/CEO of the Recording Industry Association of America (RIAA), regarding "content protection issues associated with terrestrial digital radio broadcasting".

Rehr informed Bainwol that there are already many ways to steal copyrighted digital music, and that proposals to mandate encryption at the source are unwarranted.

Rehr wrote that the "NAB questions the degree to which HD Radio threatens copyright or will facilitate unauthorized, digital distribution of sound recordings. Those desiring to obtain and listen to pure, uninterrupted performances of sound recording in lieu of radio already have an abundant number of means to do so. Peer-to-peer file sharing and the hours of uninterrupted music that can be stored on CDs and discs are but a few such means. iPod uploads and digital music on the Internet would seem to present much larger and more immediate threats to copyright holders."

Rehr continued that the NAB opposses the RIAA's proposal to enact legislation that would empower the Federal Communications Commission (FCC) "to mandate that all radio broadcasters encrypt their digital content at the source".

"An encryption proposal would also likely obsolete HD Radio units already on the market and millions more currently in the manufacturing pipeline. By making obsolete receivers already installed in automobiles, an encryption proposal could increase automakers' frustration and potentially imperil the future integration of HD Radio units into automobiles."

Moreover, wrote Rehr, "mandatory encryption could set back the hundreds of broadcasters who have already licensed and are deploying (or have deployed) HD Radio transmission equipment. An overly broad encryption system would risk making these stations’ broadcast transmission equipment obsolete."

4th Circuit Rules in Trademark Infringement and Dilution Case

1/11. The U.S. Court of Appeals (4thCir) issued its opinion [16 pages in PDF] in CareFirst of Maryland v. First Care, a trademark infringement and dilution case, affirming the judgment of the District Court for the alleged infringer.

CareFirst of Maryland is a large health maintenance organization associated with Blue Cross Blue Shield. First Care is a small group of family care physicians located in southeastern Virginia. CareFirst of Maryland's predecessor registered "CARE-FIRST" as a trademark, service mark, and collective membership mark with the U.S. Patent and Trademark Office in 1989. First Care began its use of the term "First Care" in 1995. In 2004, CareFirst of Maryland filed a complaint in U.S. District Court (DMd) against First Care. It sought $28 Million in damages.

The District Court granted judgment to First Care, on the basis that there is no likelihood of confusion. The Court of Appeals affirmed.

Most of the opinion addresses the trademark infringement claim. The Court of Appeals wrote that "To demonstrate trademark infringement under the Lanham Act, a plaintiff must prove, first, that it owns a valid and protectable mark, and, second, that the defendant’s use of a ``reproduction, counterfeit, copy, or colorable imitation´´ of that mark creates a likelihood of confusion."

It then recited the 4th Circuit's seven part test for determining whether there exists a likelihood of confusion: "(1) the strength or distinctiveness of the plaintiff’s mark as actually used in the marketplace; (2) the similarity of the two marks to consumers; (3) the similarity of the goods or services that the marks identify; (4) the similarity of the facilities used by the markholders; (5) the similarity of advertising used by the markholders; (6) the defendant’s intent; and (7) actual confusion."

The Court first focused on actual confusion. It noted that CareFirst of Maryland's only evidence of actual confusion was the results of a telephone survey of 130 people who were CareFirst of Maryland members who lived in or near First Care's place of business. The survey found only two persons who had both heard of First Care and thought that it was related to or affiliated with CareFirst of Maryland. The Court thus concluded that there is no evidence of actual confusion.

The Court held that while "proof of actual confusion is not necessary to show a likelihood of confusion, the absence of any evidence of actual confusion over a substantial period of time -- here, approximately nine years -- creates a strong inference that there is no likelihood of confusion."

The Court went to evaluate the six other factors. It found that the mark is weak, rather than strong, because the words "care", "first", "first care", and "care first" are frequently used by others.

Next, on the question of the similarity of the marks, the Court found that the two entities use the marks differently, and hence, this factor favors First Care. It wrote that CareFirst of Maryland's "mark is almost always paired with the Blue Cross Blue Shield language, while the First Care mark is always presented by itself, or at most with the suffix ``P.C.´´"

Next, on the question of the similarity of the goods or services that the marks identify, the Court found that this factor favors neither party. Both are related to health care. However, the Court added that "the actual services offered by the parties do not even overlap. First Care only offers direct medical services to individuals. CareFirst does not; rather, it contracts with participating providers who agree to treat CareFirst members."

The Court continued that none of the other factors work in CareFirst of Maryland's favor. Hence, it affirmed the summary judgment of the District Court for First Care on the trademark infringement claim.

The Court also affirmed the summary judgment on the trademark dilution claim. It following the holding of the Supreme Court in Moseley v. V Secret Catalogue, Inc., 537 U.S. 418, that evidence of actual dilution is required. See, March 4, 2003 opinion [21 pages in PDF], and story titled "Supreme Court Rules in Trademark Dilution Case" in TLJ Daily E-Mail Alert No. 618, March 6, 2003.

This case is CareFirst of Maryland, Inc. v. First Care, App. Ct. No. 04-2493, an appeal from the U.S. District Court for the Eastern District of Virginia, at Norfolk, D.C. No. CA-04-191-2, Judge Robert Doumar presiding.

Perhaps it should be noted also that there is legislation pending in the Congress the would revise the Lanham Act as a result of the Moseley case. On April 19, 2005, the House approved HR 683, the "Trademark Dilution Revision Act of 2005" by a vote of 411-8. See, Roll Call No. 109. See, story titled "House Approves Trademark Dilution Bill" in TLJ Daily E-Mail Alert No. 1,119, April 20, 2005.

The House Judiciary Committee's Subcommittee on Courts, the Internet and Intellectual Property (CIIP) held a hearing on February 17, 2005. See, story titled "CIIP Subcommittee Holds Hearing On Trademark Dilution Revision Act" in TLJ Daily E-Mail Alert No. 1,081, February 23, 2005. The CIIP Subcommittee amended and approved this bill on March 3, 2005. See, story titled "House CIIP Subcommittee Amends and Approves Trademark Dilution Revision Act" in TLJ Daily E-Mail Alert No. 1,088, March 4, 2005. The House Judiciary Committee approved HR 683 on March 9, 2005. See, story titled "House Judiciary Committee Approves Trademark Dilution Bill" in TLJ Daily E-Mail Alert No. 1,093, March 11, 2005.

The Senate has yet to approve this bill.

9th Circuit Rules On Availability of Injunctive Relief in Copyright Case

1/11. The U.S. Court of Appeals (9thCir) issued its opinion [PDF] in LGS Architects v. Concordia Homes of Nevada, a copyright infringement case involving architectural plans. The Appeals Court reversed the District Court's denial of the copyright holder's motion for a preliminary injunction, in a straightforward application of the law of copyright infringement and injunctive remedies.

LGS is an architectural firm. Concordia builds homes. LGS and Concordia entered into a licensing agreement which permitted Concordia to use certain of LGS's copyrighted architectural plans for a specified building project. Concordia also used LGS's plans on a second project not covered by this agreement.

LGS filed a complaint in U.S. District Court (DNev) against Concordia alleging copyright infringement and breach of contract. It also filed a motion for a preliminary injunction, which the District Court denied. The Court issued no written findings of fact, or conclusions of law. It merely stated that "I don’t see your likelihood of success on the merit".

LGS brought this interlocutory appeal. The Court of Appeals reversed and remanded.

On appeal, Concordia argued that the appeal is moot, because the second housing project was completed, and because it stated that it would not use LGS's plans for any more projects. The Court of Appeals rejected this argument. Defendants' promises to do no more wrong are insufficient to escape injunctive remedies.

The Court of Appeals the summarized the law regarding preliminary injunctions. It quoted from A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004, (9th Cir. 2001): "Preliminary injunctive relief is available to a party who demonstrates either: (1) a combination of probable success on the merits and the possibility of irreparable harm; or (2) that serious questions are raised and the balance of hardships tips in its favor. These two formulations represent two points on a sliding scale in which the required degree of irreparable harm increases as the probability of success decreases." It added, quoting from Sun Microsystems, Inc. v. Microsoft Corp., 188 F.3d 1115 (9th Cir. 1999), that "Under federal copyright law, ... a plaintiff that demonstrates a likelihood of success on the merits of a copyright infringement claim is entitled to a presumption of irreparable harm."

Hence, the Appeals Court concluded that LGS need only show a reasonable likelihood of success on its copyright infringement claim to obtain a preliminary injunction.

It then stated that "A plaintiff must meet two requirements to establish a prima facie case of copyright infringement: (1) ownership of the allegedly infringed material and (2) violation by the alleged infringer of at least one of the exclusive rights granted to copyright holders", and that "When a licensee exceeds the scope of the license granted by the copyright holder, the licensee is liable for infringement."

In this case, Concordia did not dispute that LGS owns a valid copyright in the architectural plans at issue. Thus, the Court of Appeals concluded that "LGS's likelihood of success on the merits depends solely upon whether Concordia exceeded the scope of its license." And, the Court concluded that "Concordia exceeded the scope of its license when it used the four architectural plans in the construction" of the second project.

The Court also concluded that "Concordia's defense that LGS breached the covenant of good faith and fair dealing by refusing to authorize reuse is unavailing. ... because ... Concordia never tendered any base reuse fee."

So, the Court held that "Because Concordia exceeded the scope of the licensing agreement, LGS is likely to succeed on the merits of its copyright infringement claim. LGS is therefore entitled to a preliminary injunction prohibiting Concordia from reproducing, distributing, publicly displaying, or creating derivative works based upon LGS’s architectural plans."

This case is LGS Architects, Inc., et al. v. Concordia Homes of Nevada, U.S. Court of Appeals for the 9th Circuit, App. Ct. No. 04-16677, an appeal from the U.S. District Court for the District of Nevada, D.C. No. CV-04-00574-RCJ, Judge Robert Jones presiding.

SEC Seeks Companies to Participate in Interactive Data Test Group

1/11. The Securities and Exchange Commission (SEC) announced in a release that it will "offer expedited reviews of registration statements and annual reports to companies that volunteer for a test group as part of the Commission’s interactive data initiative".

The SEC and its new Chairman, Chris Cox, have recently been promoting the use of interactive data and XBRL. See, speech of November 7, 2005, in Tokyo, Japan, and speech of November 11, 2005, in Boca Raton, Florida. See also, story titled "SEC Chairman Cox Discusses Use of Interactive Data in Corporate Reporting" in TLJ Daily E-Mail Alert No. 1,250, Wednesday, November 9, 2005.

The SEC release adds that "Companies that participate in the voluntary program's new test group will furnish financial data contained in their periodic and investment company reports in XBRL format for at least one year and provide feedback on their experiences, including the costs and benefits associated with reporting in the interactive data format. Because of the efficiencies staff anticipates in reviewing their filings prepared in XBRL and to encourage participation in the test group, the Commission staff will offer volunteers expedited reviews of registration statements under the Securities Act of 1933 that the staff has selected for review."

It also states that "For well-known seasoned issuers, the Division of Corporation Finance staff will offer to inform volunteers whether or not the staff will select their annual reports on Form 10-K for review. The staff will notify each well-known seasoned issuer volunteer whether it will select the volunteer's Form 10-K for review within 30 days after filing and will undertake to provide any comments on that filing within 45-60 days of filing."

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."

See also, story titled "SEC Proposes to Allow Internet Delivery of Proxy Materials" in TLJ Daily E-Mail Alert No. 1,263, December 1, 2005.

Bush Discusses NSA Surveillance and PATRIOT Act

1/11. President Bush gave a speech, and answered questions, about terrorism, the PATRIOT Act, and the National Security Agency's (NSA) domestic electronic surveillance program, in Louisville, Kentucky.

Bush was asked a question about "that National Security Agency thing".

Bush said that the NSA "should protect America by taking the phone numbers of known al Qaeda and/or affiliates and find out why they're making phone calls into the United States, and vice versa. And I did so because the enemy still wants to hurt us. And it seems like to me that if somebody is talking to al Qaeda, we want to know why."

"I understand people's concerns about government eavesdropping. And I share those concerns, as well", said Bush. "So obviously I had to make the difficult decision between balancing civil liberties and, on a limited basis -- and I mean limited basis -- try to find out the intention of the enemy. In order to safeguard the civil liberties of the people, we have this program full scrutinized on a regular basis. It's been authorized, reauthorized many times. We got lawyers looking at it from different branches of government."

He added that "We have briefed the leadership of the United States Congress, both Republican and Democrat, as well as the leaders of the intelligence committees, both Republicans and Democrats, about the nature of this program. We gave them a chance to express their disapproval or approval of a limited program taking known al Qaeda numbers -- numbers from known al Qaeda people -- and just trying to find out why the phone calls are being made."

Bush then discussed the legal authority for this surveillance program. "I have the right as the Commander-in-Chief in a time of war to take action necessary to protect the American people. And secondly, the Congress, in the authorization, basically said the President ought to -- in authorization of the use of troops -- ought to protect us. Well, one way to protect us is to understand the nature of the enemy. Part of being able to deal with this kind of enemy in a different kind of war is to understand why they're making decisions they're making inside our country."

On January 9, 2006, a group of law professors and former government officials wrote a letter to Congressional leaders and the Chief Judge of the FISA court in which they argued that the President lacks legal authority for the NSA domestic surveillance program. See, story titled "Law Professors Assert That NSA Electronic Surveillance Program Violates Law" in TLJ Daily E-Mail Alert No. 1,287, January 11, 2006.

See also, story titled "Bush, Gonzales & Hayden Discuss Presidential Intercepts and PATRIOT Act" in TLJ Daily E-Mail Alert No. 1,276, December 20, 2005.

Bush also discussed extending the sixteen sections of the USA PATRIOT Act that are scheduled to sunset on February 3, 2006. "The Patriot Act is up for renewal. That's another piece of legislation which is important to protect. Do you realize that the Patriot Act has given our FBI and intelligence services the same tools of sharing information that we have given to people that are fighting drug lords. In other words, much of the authorities that we ask for in the Patriot Act to be able to fight and win the war on terror has already been in practice when it comes to dealing with drug lords. And I can't tell you how important it is to reauthorize the legislation."

People and Appointments

1/11. Alan Beller, Director of the Securities and Exchange Commission's (SEC) Division of Corporation Finance, will leave the SEC in February. See, SEC release.

1/11. Thomas Leary will rejoin the Washington DC office of the law firm of Hogan & Hartson, effective February 13, 2006. He was a member of the Federal Trade Commission (FTC). See, Hogan & Hartson release.

1/11. 3Com Corporation announced that its P/CEO, Bruce Claflin, "will retire at the conclusion of an executive search for a replacement, which currently is underway." See, 3Com release.

Go to News from January 6-10, 2006.