TLJ News from February 1-5, 2007

FTC Releases Final Order and Opinion in Rambus DRAM Proceeding

2/5. The Federal Trade Commission (FTC) released its final order and several other documents in its administrative proceeding against Rambus involving standard setting, licensing, and dynamic random access memory (DRAM) technology. These items address remedies imposed upon Rambus for its unlawful monopolization in the markets for four computer memory technologies that were incorporated into industry standards for DRAM chips.

The FTC held on August 2, 2006, that Rambus violated Section 5 of the Federal Trade Commission Act by failing to disclose certain patent rights. However, the FTC did not at that time address remedies.

The FTC released the following documents on February 5, 2007:

The FCC summarized the remedies imposed by the order and opinion. The FTC wrote in a release that the FTC "requires Rambus to license its SDRAM and DDR SDRAM technology and sets maximum allowable royalty rates it can collect for the licensing, bars Rambus from collecting or attempting to collect more than the maximum allowable royalty rates from companies that may already have incorporated its DRAM technology, and requires Rambus to employ a Commission-approved compliance officer to ensure that Rambus's patents and patent applications are disclosed to industry standard-setting bodies in which it participates."

For further background on this proceeding see story titled "FTC Files Administrative Complaint Against Rambus" in TLJ Daily E-Mail Alert No. 455, June 20, 2002; story titled "ALJ Dismisses FTC Complaint Against Rambus" in TLJ Daily E-Mail Alert No. 839, February 18, 2004; and story titled "FTC Holds That Rambus Unlawfully Monopolized Markets" in TLJ Daily E-Mail Alert No. 1,427, August 8, 2006.

And see, FTC Docket No. 9302 for hyperlinks to pleadings in this proceeding.

8th Circuit Addresses Sections 253 & 1983 in Rights of Way Case

2/5. The U.S. Court of Appeals (8thCir) issued its opinion [10 pages in PDF] in Level 3 v. St. Louis, a Section 253 dispute between a telecom company and a municipality. This opinion, for the first time, sets the standard for applying Section 253 in the 8th Circuit. It is a standard that municipalities will appreciate. Although, communications companies will be dismayed, and other circuits have rendered different interpretations. This opinion does not resolve, for the 8th Circuit, the question of whether Section 253 creates a private right of action under Section 1983.

Statutes. 47 U.S.C. § 253 provides, at Subsection (a), 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."

The, it provides, at Subsection (c), 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."

The Congress, in drafting this language for the Telecommunications Act of 1996, attained compromise at the expense of clarity. Consequently, this section has been often litigated, with different courts supplying different interpretations. This is the first opinion of the Court of Appeals for the 8th Circuit, which includes North Dakota, South Dakota, Nebraska, Minnesota, Iowa, Missouri, and Arkansas.

42 U.S.C. § 1983 provides, in part, that "Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress, except that in any action brought against a judicial officer for an act or omission taken in such officer’s judicial capacity, injunctive relief shall not be granted unless a declaratory decree was violated or declaratory relief was unavailable."

Background. In the present case, Level 3 and St. Louis entered into a contract in 1999 regarding Level 3's access to municipal rights of way. The contract incorporated provisions from St. Louis' municipal code. In particular, it provided that St. Louis can charge Level 3 footage fees that are based not only on the linear feet of conduit installed by Level 3, but also on the number of active conduits within each linear foot.

In 2003, the parties to disputed the legality of this language.

District Court. Both parties filed complaints in the U.S. District Court (EDMo). Level 3 alleged violation of Section 253, as well as Section 1983. St. Louis sought a declaratory judgment as to the validity of the contract. The District Court consolidated the two cases.

The District Court rejected Level 3's Section 1983 claim, but held on summary judgment that the contract violates Section 253. St. Louis brought the present appeal. State and local government organizations and telecom companies filed amicus curiae briefs.

Court of Appeals. The Court of Appeals reversed the grant of summary judgment to Level 3 on the Section 253 claim.

The Court of Appeals wrote that Subsection (a) is a "rule of preemption", while Subsection (c) is "a safe harbor functioning as an affirmative defense" to that rule. It held that "a plaintiff suing a municipality under section 253(a) must show actual or effective prohibition, rather than the mere possibility of prohibition." There is no burden on the municipality under Subsection (c) until the plaintiff has sustained its burden under Subsection (a). The also Court held that the "fair and reasonable compensation" clause in Subsection (c) cannot serve has the basis of the plaintiff's claim. The Court acknowledged and cited some precedent to the contrary.

The Court also held that "a plaintiff suing a municipality under section 253(a) must show actual or effective prohibition, rather than the mere possibility of prohibition". Again, the Court cited much precedent to the contrary. It commented that "We disagree with the approach of our sister circuits because they reach a conclusion contrary to a complete analysis of the section."

The Court added that "The plaintiff need not show a complete or insurmountable prohibition, ... but it must show an existing material interference with the ability to compete in a fair and balanced market."

The Court stated in its recitation of facts that "Level 3 admitted that it could point to no services it had been unable to provide to date because of the Agreement". Hence, it found that it was error to grant summary judgment to it.

Finally, the Court of Appeals discussed whether Section 253 gives rise to an action for damages under Section 1983. Here too, the circuits are in conflict. This Court ducked the issue. It wrote that "We refrain from joining the fray over whether section 253 creates a private right of action because, as we held above, Level 3 has shown no violation of section 253, whether or not that section creates an enforceable right. Thus, the district court did not err by denying summary judgment on the section 1983 claim."

This case is Level 3 Communications LLC v. City of St. Louis, Missouri, U.S. Court of Appeals for the 8th Circuit, App. Ct. Nos. 06-1398 and 06-1459, appeals from the U.S. District Court for the Eastern District of Missouri.

11th Circuit Rules in Case Involving Disposition of Copyrights by Bankruptcy Court

2/5. The U.S. Court of Appeals (11thCir) issued its opinion [45 pages in PDF] in Tompkins v. Lil' Joe Records, a case regarding the transfer of copyrights held by a bankrupt record company by the Bankruptcy Court. The Court of Appeals affirmed the judgment of the District Court, which upheld the Bankruptcy Court's assignment of the copyrights to another record company, but rejected the artist's contract claims for royalties. This case illustrates one way in which bankruptcy proceedings may work to the detriment of creators.

The plaintiff below, and the appellant in this appeal, is Jeffrey Tompkins, a recording artist, who is known professionally as JT Money [Wikipedia]. He signed a contract in 1989 with Luke Records, Inc., in which he gave Luke Records exclusive, unlimited and perpetual rights throughout the world to the copyrights in sound recordings recorded by him during the term of the contract. In return, he was to receive royalties. Tompkins records three albums, which Luke Records distributed.

Subsequently, Luke Records became the debtor in possession in an involuntary Chapter 7 bankruptcy proceeding, which was later converted into a Chapter 11 proceeding. Tompkins received notice of the proceeding, and filed a proof of claim for royalties owed. The defendants, Lil' Joe Records, Inc., and others, acquired assets, including copyrights in Tompkins works, of the debtor through the bankruptcy proceeding.

The Bankruptcy Court further issued an order that all executory contracts of the debtor are rejected, and barred all claims based upon executory contracts. A contract is executory if it is incomplete, to the extent that some performance under the contract remains. The 1989 contract was executory because Luke Records had yet to pay royalties for past and future sales.

The Court allowed thirty days to contest the order. Tompkins filed nothing with the Court. That is, Lil' Joe Records acquired the copyrights to Tompkins' works without any acquiring any obligation to pay royalties to Tompkins.

Tompkins later filed a complaint in U.S. District Court (NDGa) against Lil' Joe Records and others alleging violation of the Copyright Act and the Lanham Act, and various state law claims. The case was transferred to the Middle District of Florida. The District Court granted summary judgment to Lil' Joe Records.

And now, the Court of Appeals has affirmed. It held that Tompkins transferred the copyrights to Luke Records, that the rejection of the contract by the Bankruptcy Court did not cause ownership of the copyrights to revert back to Thompkins, and that the copyrights passed into Luke Records' bankruptcy estate and from there were assigned to Lil’ Joe Records.

The Court of Appeals also emphasized the importance of the finality of bankruptcy orders. It held that the District Court did not err in granting summary judgment. Rather, it wrote that any error was Tompkins', for not participating more actively in the Bankruptcy Court proceeding.

This case is Jeffrey Tompkins v. Lil' Joe Records, Inc., et al., U.S. Court of Appeals for 11th Circuit, App. Ct. No. 05-10143, an appeal from the U.S. District Court for the Middle District of Florida, D.C. No. D.C. Docket No. 02-61161-CV-FAM.

People and Appointments

2/5. James Kroeker was named Deputy Chief Accountant for Accounting in the Securities and Exchange Commission's (SEC) Office of the Chief Accountant. He previously worked for Deloitte and Touche. See, SEC release.

2/5. Joe Keeley previously joined the Copyright Office (CO) as a Senior Counsel. He previously was counsel to the House Judiciary Committee's (HJC) Subcommittee on Courts, the Internet and Intellectual Property (CIIP).

2/5. Randy Tritell was named Director of the Federal Trade Commission's (FTC) newly created Office of International Affairs. Hugh Stevenson was named Deputy Director for International Consumer Protection. Stacy Feuer was named Assistant Director for International Consumer Protection. See, FTC release.

More News

2/5. The Federal Trade Commission (FTC) announced that it has created an Office of International Affairs. The FTC stated in a release that this will put "international antitrust, consumer protection, and technical assistance programs under one office".

US Files Complaint with WTO Regarding PRC Export Subsidies

2/2. The Office of the U.S. Trade Representative (OUSTR) announced in a release that the U.S. has requested World Trade Organization (WTO) dispute settlement consultations with the People's Republic of China regarding "its provision of subsidies that appear to be prohibited by WTO rules".

This is only the third U.S. complaint against the PRC. The first involved the PRC's value added tax rebates that discriminated against imported semiconductors. See, story titled "US Complains to WTO About PR China's Tax Preference for Domestic Producers of Integrated Circuits" in TLJ Daily E-Mail Alert No. 859, March 19, 2004; story titled "Japan Joins US in Complaining to WTO About China's Discriminatory Tax on Integrated Circuits" in TLJ Daily E-Mail Alert No. 869, April 5, 2004; and story titled "PR China Agrees to Stop Preferential Tax Treatment for Domestic Producers of Integrated Circuits" in TLJ Daily E-Mail Alert No. 936, July 13, 2004.

The second complaint, which is still pending, alleges that PRC regulations that impose local content requirements in the automobile sector violate WTO obligations.

The OUSTR release states that "Several of the subsidy programs at issue appear to grant export subsidies, which provide incentives for foreign investors in China and their Chinese partners to export to the United States and other markets.  These subsidies offer significant benefits and are available for all products made in China, including, for example, steel, wood, paper, and other manufactured products."

It elaborates that "China applies a series of measures that, by allowing for refunds, reductions, or exemptions from taxes and other payments owed to the government, appear designed to subsidize exports of manufactured goods or to support the purchase of domestic over imported equipment and certain other manufacturing inputs.  These measures appear to be contrary to a number of WTO rules, including the explicit prohibitions against export subsidies and import substitution subsidies set forth in the WTO Agreement on Subsidies and Countervailing Measures."

More News

2/2. Attorney General Alberto Gonzales gave a speech in Dallas, Texas. He did not discuss technology related issues. However, he did address the judicial decision making and the judicial selection process.

2/2. Peter Mandelson, the EC's Commissioner for Trade stated in a speech in London on February 2, 2007, regarding globalization and Doha negotiations. He said that "we must complete the Doha Round of WTO talks". He also said that "China and the other large emerging economies need to be fully integrated into the global trading system, and their contribution to the system in the form of reciprocal openness needs to reflect their growing strength."

People and Appointments

2/1. The Senate confirmed Irving Williamson to be a Member of the U.S. International Trade Commission for a term expiring on June 16, 2014. See, Congressional Record, February 1, 2007, at page S1543.

2/1. The Senate confirmed Dean Pinkert to be a Member of the U.S. International Trade Commission for a term expiring on December 16, 2015. See, Congressional Record, February 1, 2007, at page S1543.

2/1. The Senate confirmed Lawrence Joseph O'Neill to be a Judge of the U.S. District Court for the Eastern District of California by a vote of 97-0. See, Roll Call No. 40 and Congressional Record, February 1, 2007, at page S1543.

2/1. The Senate confirmed Valerie Baker to be a Judge of the U.S. District Court for the Central District of California. See, Congressional Record, February 1, 2007, at page S1543.

2/1. The Senate confirmed Gregory Kent Frizzell to be a Judge of the U.S. District Court for the Northern District of Oklahoma by a vote of 99-0. See, Roll Call No. 41, and Congressional Record, February 1, 2007, at page S1543.

Go to News from January 26-31, 2007.