TLJ News from April 6-10, 2008

GAO Reports on Sale of Sensitive and Stolen Military Items on eBay and Craigslist

4/10. The House Oversight and Government Reform Committee's (HOGRC) Subcommittee on National Security and Foreign Affairs held a hearing titled "Investigation into the Sale of Sensitive, In-Demand Military Equipment and Supplies on the Internet".

The Government Accountability Office (GAO) submitted a report [35 pages in PDF] titled "Internet Sales: Undercover Purchases on eBay and Craigslist Reveal a Market for Sensitive and Stolen U.S. Military Items".

The GAO wrote that "We found numerous defense-related items for sale to the highest bidder on eBay and Craigslist from January 2007 through March 2008. A review of eBay and Craigslist policies and procedures determined that, although these Web sites have taken steps to regulate their user communities and define items that are prohibited from sale, there are few safeguards to prevent sensitive and stolen defense-related items from being sold to either domestic or foreign users of these sites."

In addition, the report finds that "Many of these items were stolen from the U.S. military."

The report also notes that its previous GAO reports have found that "our undercover investigators purchased items from the Government Liquidation Web site that should not have been sold to the public", including "digital microcircuits used in F-14 fighter aircraft".

The report identifies some of the sensitive defense items sold through eBay or Craigslist: "Two F-14 components", "Night vision goggles, a uniform "that could be used by a terrorist to pose as a U.S. service member", and body armor.

Craigslist's CEO, Jim Buckmaster, wrote in his prepared testimony [PDF] that the "nature of its 450 distinct local marketplaces discourages the use of craigslist by people who are interested in acquiring military equipment for export outside of the United States."

He stated that "an advertisement can be posted in only one of craigslist's 450 cities. There is no function permitting an advertisement to be posted throughout craigslist. In fact, posting the same advertisement to multiple cities or areas violates craigslist's terms of use, and we have implemented technical measures to prevent cross-posting to multiple areas. Similarly the search feature within craigslist is restricted to searching one city site".

eBay's Tod Cohen wrote in his prepared testimony [4 pages in PDF] about how eBay works with the Department of Defense to flag and remove listings of potentially illegal military items, and with law enforcement agencies to investigate and prosecute illegal activities.

See also, opening statement of Rep. John Tierney (D-MA), Chairman of the Subcommittee, and HOGRC's web page with hyperlinks to prepared testimony of other witnesses.

People and Appointments

4/10. The Senate confirmed Catharina Haynes to be a Judge of the U.S. Court of Appeals for the 5th Circuit.  See, Congressional Record, April 10, 2008, at Page S2954. See also, White House biography. She is a partner in the Dallas, Texas, office of the law firm of Baker Botts.

4/10. The Senate confirmed Brian Miller to be a Judge of the U.S. District Court for the Eastern District of Arkansas by a vote of 88-0. See, Roll Call No. 102 and Congressional Record, April 10, 2008, at Page S2954.

4/10. The Senate confirmed James Randal Hall to be a Judge of the U.S. District Court for the Southern District of Georgia. See, Congressional Record, April 10, 2008, at Page S2954.

4/10. The Senate confirmed John Mendez to be a Judge of the U.S. District Court for the Eastern District of California. See, Congressional Record, April 10, 2008, at Page S2954.

4/10. The Senate confirmed Stanley Thomas Anderson to be a Judge of the U.S. District Court for the Western District of Tennessee. See, Congressional Record, April 10, 2008, at Page S2954.

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4/10. Rep. John Conyers (D-MI) and Rep. Lamar Smith (R-TX) released a joint statement regarding Google. They wrote that "In February, the House Judiciary Committee announced plans to hold a hearing on the State of Competition on the Internet. Yesterday’s announcement of a two-week trial venture between Yahoo! and Google, as well as reports of a possible Yahoo!/AOL merger, further underscore the need for a hearing on the state of competition on the Internet and online advertising. The Judiciary Committee’s Task Force on Competition Policy and Antitrust Laws will continue to explore these issues."

4/10. The Federal Communications Commission (FCC) announced that its Public Safety and Homeland Security Bureau will host an event titled "Promoting an Effective Emergency Alert System on the Road to a Next Generation EAS" on Monday, May 19, 2008, at 9:00 AM to 12:45 PM, in the FCC's Commission Meeting Room. See, FCC notice.

4/10. The Information Technology and Innovation Foundation (ITIF) released a memorandum [PDF] titled "Which Broadband and IT Vision for America?" The author is Robert Atkinson, head of the ITIF. As with many of his other papers and speeches, Atkinson argues here that there is a politically left perspective and politically right perspective, but that there is also a preferable middle ground approach. He argues that in broadband policy debates the political right sees government as the problem -- big content and network companies need freedom from regulation. Meanwhile, the political left sees these companies as the problem -- access and content should be free. Atkinson cites Japan as a nation to study. He then argues that "we need a debate in America that focuses on the most important issues like how to get fast broadband networks to all Americans; how to use IT to transform our health care system, transportation system, education system, and government; and how to encourage all organizations to become digital, thereby driving productivity and income growth and a better quality of life. To get there we will need smart public-private partnerships. Big corporations, as well as small entrepreneurial ones, will play key roles in spurring digital transformation. But so too will government, in part by ensuring the public interest is protected, but just as importantly by helping private actors take into account public benefits (what economists call positive externalities) when making decisions."

7th Circuit Addresses Libel Suits Involving Anonymous Posts to Web Sites

4/9. The U.S. Court of Appeals (7thCir) issued its opinion in Wendler & Ezra v. American International Group, vacating the judgment of the District Court, which previously dismissed a complaint alleging defamation in an anonymous internet posting.

This case involves demonstrating that the defendant actually made the allegedly defamatory posting. The Court of Appeals held that the District Court was correct to refuse to consider an affidavit regarding the source of the posting, which contained a conclusion, but lacked certain explanatory detail. However, the Court of Appeals vacated because the District Court dismissed when there was a timely set of interrogatories and motion to compel, which had not yet been answered by the defendant, or addressed by the District Court.

Wendler & Ezra (W&E) is a law firm that represents truck drivers in tort litigation. American International Group (AIG) is a collection of insurance companies. There often exists considerable animosity between tort lawyers and insurers (and their attorneys) of the insureds who are sued by tort lawyers.

This litigation concerns an anonymous posting to an electronic bulletin board in the web site of the International Brotherhood of Teamsters. This web site is used by truck drivers. W&E asserts that the posting was made by someone at AIG for the purpose of driving clients away from W&E. It supported this allegation with an affidavit signed by the webmaster of the Teamsters web site, who stated that the posting at issue originated from an internet protocol (IP) address registered to AIG.

The posting stated that Brian Wendler was "arrested for alleged domestic battery" and "Don't make the same mistake me and my husband did -- it's a waste of time and money." W&E asserts that while the statement about the arrest is true, the other is not. Moreover, W&E assert that it implies that it was made by a client of W&E and that the client was dissatisfied.

W&E filed a complaint in U.S. District Court (SDIll) against AIG alleging defamation, and related state law claims. Federal jurisdiction is based upon diversity of citizenship. The District Court dismissed the complaint. It reasoned that the affidavit's lack of explanatory detail prevented its use. The District Court then refused to allow W&E to depose AIG on the issue of original of the posting.

W&E brought the present appeal.

The Court of Appeals wrote that W&E "offered an affidavit by Phillip Ybarrolaza, who describes himself as the webmaster at According to the affidavit, software told Ybarrolaza that the posting originated from the IP address, which is registered to AIG. The affidavit did not state, however, what software had been employed, how it worked, what data had been provided to the program, and what if anything had been done to find out whether the poster had spoofed one of AIG' addresses."

The Court of Appeals continued that the "affidavit does not say what software he used, what data he fed it, what results it produced, and how alternative explanations (including spoofing) were ruled out. We have said over and over that an expert' ipse dixit is inadmissible." (Parentheses in original.)

It wrote that "An expert who supplies nothing but a bottom line supplies nothing of value to the judicial process."

Hence, the Court of Appeals concluded that the District Court did not err in excluding the affidavit.

Moreover, the Court of Appeals did not find error in refusing the deposition request, on the grounds that the discovery period had closed. However, the Court of Appeals vacated and remanded because W&E had submitted a timely interrogatory, and timely filed a motion to compel, which AIG had not answered.

This case is Wendler & Ezra v. American International Group, Inc., U.S. Court of Appeals for the 7th Circuit, App. Ct. No. 07-1860, an appeal from the U.S. District Court for the Southern District of Illinois, No. 04-CV-641-WDS, Judge William Stiehl presiding.

People and Appointments

4/9. President Bush named William Wichterman to be Special Assistant to the President and Deputy Director of Public Liaison. Wichterman was previously Vice Chair of the Legislative Practice Group at the law firm of Covington & Burling. Although, he is not an attorney. Before that he worked for former Sen. Bill Frist (R-TN). See, White House release.

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4/9. Sen. Arlen Specter (R-PA), the ranking Republican on the Senate Judiciary Committee (SCC), stated in a release that "The Chairman and I differ on a number of aspects of the proposed patent reform legislation", S 1145 [LOC | WW], the "Patent Reform Act of 2007". He added that "The principal sticking point is the issue of how to assess damages in patent infringement lawsuits. We thought we had reached an agreement on this matter, but the language continued to shift, so we do not yet have a deal on the package. I am hopeful that we can reach an agreement, but more work has to be done to get it right."

4/9. Federal Communications Commission (FCC) Chairman Kevin Martin testified before the House Appropriations Committee's (HAC) Subcommittee on Financial Services on April 9, 2008. He stated in his prepared testimony [6 pages in PDF] that the FCC "is requesting spending authority of $338,874,783 for Fiscal Year 2009. As in prior years, the Commission proposes to receive a direct appropriation of $1,000,000 and to raise the remainder, or $337,874,783, through regulatory fees. During the current fiscal year, the Commission has a spending level of $313,000,000, with all but $1,000,000 raised through regulatory fees." Martin testified by the Senate Appropriations Committee (SAC) on April 8, 2008. See, prepared testimony [25 pages in PDF]. He addressed the DTV transition, broadcasters' transition to digital, carriage of digital signals, DTV related enforcement efforts, and consumer education regarding the DTV transition.

OUSTR Releases Section 1377 Review of Telecom Trade Agreements

4/8. The Office of the U.S. Trade Representative (USTR) released a report [15 pages in PDF] titled "Results of the 2008 Section 1377 Review of Telecommunications Trade Agreements".

This annual report is written pursuant to Section 1377 of the Omnibus Trade and Competitiveness Act of 1988, which is codified at 19 U.S.C. § 3106. The OUSTR solicits and reviews comments prior to writing these reports.

VOIP Communications. The report states that "a trade association representing leading  VoIP providers submitted comments highlighting difficulties its members face in the provision of VoIP abroad, particularly in countries such as China, India, Oman, and the United  Arab Emirates."

The report adds that "These commenters highlighted market entry barriers such as restrictions on the type of VoIP permitted in a country. For example, some countries allow computer-to-computer VoIP, but do not permit computer-to-Public Switched telephone Network (PSTN) VoIP."

See, VON Coalition's comment, accessible on the OUSTR web page with hyperlinks to comments.

People's Republic of China. The report states that commenters complain about "capitalization requirements which appear excessive by almost any measure".

It also states that commenters "assert that another barrier to entry is an apparent but unwritten policy that only existing telecommunications licenees in China are eligible to serve as joint venture partners for foreign companies."

It also states that commenters "raise concerns about the rules governing the provision of satellite capacity in China. Foreign satellite operators are generally prohibited from signing contracts directly with Chinese telecommunications companies".

It also states states that "The fact that the Chinese government owns and controls all major basic service operators in the telecommunications sector and pays an active role in managing the industry's structure continues to raise serious questions about the ability of the regulator to act impartially, as required under China's WTO Reference Paper commitments."

The report also identifies a "widespread lack of transparency in the development, implementation, and dissemination of rules" in the PRC.

Germany. The report states that commenters complain that "delays in obtaining access to wholesale product offerings from Germany's major supplier Detsche Telekom AG (DTAG) have adversely impacted their businesses, causing commenters to question whether competitive suppliers are being offered reasonable access to DTAG's network."

It adds that commenters "make reference to the long delays in obtaining Internet Protocol (IP) Bitstream and Asyncronous Transfer Mode (ATM) Bitstream access to DTAG's network".

Australia. The report states that "For competitive suppliers that are dependent on the network of Telstra (Australia's major supplier) to serve their own customers, Telstra’s longstanding efforts to resist network access obligations through legal challenges to the regulator and political pressure on the government continues to create an environment of legal and financial uncertainty. One current problem is the competitors’ inability to install (i.e., "co-locate") their equipment in individual switching centers operated by Telstra exchanges." (Parentheses in original.)

Mexico. The report states that "Mexico continues to defer the implementation of the CITEL (Inter-American Telecommunications Commission) Mutual Recognition Agreement (MRA) for conformity assessment of telecommunications equipment vis-à-vis the United States." (Parentheses in original.)

The report also states that commenters complain about "excessively high mobile termination rates" in Mexico and some other nations.

The report also identifies commenter complaints about El Salvador, Guatemala, Jamaica, Oman, and Singapore.

See also, OUSTR release [PDF].

This report does not cover US compliance with trade agreements. Nor does it address activities or operations of the US government, or state governments, that create barriers to foreign communications or technology businesses in the US.

TACD Adopts Net Neutrality Resolution

4/8. The Trans Atlantic Consumer Dialogue (TACD) met in Washington DC on April 5-8, 2008. It adopted and released a document [PDF] titled "Resolution on Net Neutrality".

It states that consumers "have the right to attach devices of their choice; have the right to access or provide content, services, and applications of their choice; have the right for their access to be free from discrimination according to source, destination, content, or type of application."

It also states that "in a neutral Internet, ISPs and communications networks: do not unfairly block content, applications or devices; do not deliberately degrade access for content, applications, or devices; do not prioritize data according to its source or destination; do not discriminate against particular providers of content, applications, services, or devices."

It recommends that "National regulators should ensure that ISPs comply with the above mentioned principles by regularly reviewing the practices of ISPs, establishing procedures to receive and act upon any complaints about blocking or degrading access to content or application, and conducting independent testing for blocking, degradation, or other discriminatory action."

It urges the US Federal Communications Commission (FCC) to " establish a strong set of network neutrality rules".

The document states that "TACD calls upon telecommunications and competition regulators in the US and EU to require that ISPs provide fair and accurate information regarding Internet service plans, including average estimated speeds and any existing caps on bandwidth. ISPs and network providers should also detail their compliance with net neutrality principles and regulations; where any content, services, applications, or devices have been blocked or degraded on their networks, ISPs and network providers must be able to justify to the regulators how these actions fall within the scope of legitimate network management."

It also states that "TACD calls upon regulators and lawmakers to ensure that consumers have recourse to an effective complaint and enforcement mechanism if providers fail to provide service plan information or discriminate unfairly against content, services, applications, or devices."

It also states that "TACD calls upon regulators to periodically assess the extent to which ISPs and network providers discriminate against content, services, applications, or devices on their network; whether such discrimination falls outside the scope of legitimate network management; and take action against unfair discrimination."

The TACD is a group comprised of groups based in US and European nations. Its US based members include the Public Knowledge (PK), Consumers Union (CU), Consumer Federation of America (CFA), Electronic Frontier Foundation (EFF), Electronic Privacy Information Center (EPIC), Center for Digital Democracy (CDD), American Civil Liberties Union (ACLU), and others.

The TACD has no member groups from Asian nations, or other regions.

People and Appointments

4/8. President Bush announced his intent to appoint Richard Mangogna to be the Department of Homeland Security's (DHS) Chief Information Officer. See, White House release and statement by Michael Chertoff.

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4/8. The Department of Homeland Security (DHS) issued a release titled "Protecting Our Federal Networks Against Cyber Attacks".

4/8. The Department of Homeland Security (DHS) published a notice in the Federal Register that announces, describes, recites, and sets the comment deadline (June 9, 2008) for, its request for comments regarding its interim final rule [48 pages in PDF] that extends the period of Optional Practical Training (OPT) from 12 to 29 months for qualified F-1 non-immigrant students. This rule change compensates in a limited way for the Congress's failure to enact legislation to increase the annual cap on the number of H1B visas. See, story titled "DHS Extends OPT to 29 Months As Congress Sits on H1B Reform Proposals" in TLJ Daily E-Mail Alert No. 1,742, April 7, 2008. See also, Federal Register, April 8, 2008, Vol. 73, No. 68, at Pages 18944-18956.

4/8. The Department of Commerce's (DOC) National Telecommunications and Information Administration (NTIA) issued a release [PDF] regarding the status of the DTV transition converter box coupon program.

11th Circuit Rules on Web Page Meta Tags and Trademark Infringement

4/7. The U.S. Court of Appeals (11thCir) issued its opinion [33 pages in PDF] in North American Medical Corporation v. Axiom Worldwide, a trademark infringement case involving the use of meta tags in the source code of web pages.

Summary. The District Court held that when a product manufacturer holds trademarks for its product names, and a competing manufacturer uses those trademarked terms in the meta tags of its web site, this can constitute trademark infringement. It held that in this case the defendants infringed trademarks.

The District Court also granted a preliminary injunction based upon a presumption, rather than a showing, of irreparable harm.

The Court of Appeals upheld the District Court as its finding of trademark infringement, but overturned the preliminary injunction.

It remanded the case to the District Court to consider the Supreme Court's May 15, 2006, opinion [12 pages in PDF] in eBay v. MercExchange, which held that the traditional four factor framework that guides a court's decision whether to grant an injunction applies in patent cases.

See, story titled "Supreme Court Rules on Availability of Injunctive Relief in Patent Cases" in TLJ Daily E-Mail Alert No. 1,371, May 16, 2006.

See, full story.

Federal Circuit Receives Amicus Briefs Re Business Method Patents and Patentable Subject Matter

4/7. Various entities filed amicus curiae briefs with the U.S. Court of Appeals (FedCir) in In re Bernand Bilski and Rand Warsaw, an appeal from the U.S. Patent and Trademark Office's (USPTO) Board of Patent Appeals and Interferences (BPAI), regarding patentable subject matter.

The BPAI's September 26, 2006, opinion [71 pages in PDF] affirmed the rejection of a claim for an invention that discloses a method of doing business, and not a tangible physical thing, on that grounds that it is not patentable subject matter under 35 U.S.C. § 101.

Section 101 provides, in full, that "Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title."

The Federal Circuit's 1998 opinion in State Street Bank and 1999 opinion in AT&T v. Excel Communications held that business methods can be patentable subject matter.

See, full story.

Microsoft Threatens Yahoo with Hostile Proxy Battle

4/7. Steve Ballmer, CEO of Microsoft, sent a letter on April 5, 2008, to the Board of Directors of Yahoo regarding Microsoft's offer to acquire Yahoo.

"It has now been more than two months since we made our proposal to acquire Yahoo! at a 62% premium to its closing price on January 31, 2008, the day prior to our announcement." He wrote that "If we have not concluded an agreement within the next three weeks, we will be compelled to take our case directly to your shareholders, including the initiation of a proxy contest to elect an alternative slate of directors for the Yahoo! board."

Steve BallmerBallmer (at right) added that, "If we are forced to take an offer directly to your shareholders, that action will have an undesirable impact on the value of your company from our perspective which will be reflected in the terms of our proposal."

Microsoft made an unsolicited bid on February 1, 2008 to acquire Yahoo for $31 per share. See, stories titled "Microsoft Makes Offer to Acquire Yahoo" and "Google Opposes Microsoft Bid for Yahoo" in TLJ Daily E-Mail Alert No. 1,710, February 4, 2008.

Yahoo responded that Microsoft's offer undervalues Yahoo. See, story titled "Yahoo Asserts Microsoft Offer Undervalues Yahoo" in TLJ Daily E-Mail Alert No. 1,715, February 11, 2008.

Ballmer wrote that "While there has been some limited interaction between management of our two companies, there has been no meaningful negotiation to conclude an agreement. We understand that you have been meeting to consider and assess your alternatives, including alternative transactions with others in the industry, but we’ve seen no indication that you have authorized Yahoo! management to negotiate with Microsoft. This is despite the fact that our proposal is the only alternative put forward that offers your shareholders full and fair value for their shares ..."

Yahoo's Roy Bostock and Jerry Yang responded in a letter to Ballmer on April 7, 2008. They wrote that "Our Board carefully considered your unsolicited proposal, unanimously concluded that it was not in the best interests of Yahoo! and our stockholders, and rejected it publicly on February 11, 2008."

They also stated that "your letter mischaracterizes the nature of our discussions with you".

They added that "we have continued to make clear that we are not opposed to a transaction with Microsoft if it is in the best interests of our stockholders. Our position is simply that any transaction must be at a value that fully reflects the value of Yahoo!".

Yahoo traded for just under $28 per share on Monday, morning, April 7, 2008. It has a price to earnings ratio of almost 60. See, Yahoo Finance's Yahoo web page.

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4/7. The U.S. Patent and Trademark Office (USPTO) announced a two year pilot program for three to five law schools titled "Law School Clinical Certification Program". Qualifying law schools will be able to operate clinics for law students that will give these students some experience in patent or trademark practice. See, USPTO release, program web site, and application form [20 pages in PDF]. The deadline for laws schools to apply to participate is May 30, 2008

4/7. The Department of Health and Human Services (DHHS) Centers for Medicare & Medicaid Services published a notice in the Federal Register that announces, describes, recites, and sets the effective date (June 6, 2008) for, it final rule regarding electronic prescriptions. See, Federal Register, April 7, 2008, Vol. 73, No. 67, at Pages 18917-18942.

Go to News from April 1-5, 2008.