TLJ News from May 26-31, 2008

More News

5/30. The Department of Homeland Security's (DHS) Federal Emergency Management Agency (FEMA) announced in a release that it "will perform the unified aggregator/gateway role for the Commercial Mobile Alert System, mandated by the Warning Alert Response Network (WARN) Act". Federal Communications Commission (FCC) Chairman Kevin Martin praised the announcement. He added in a release that "With the American public increasingly relying on wireless communications in everyday life, it is essential that we support and advance new ways to share critical, time-sensitive information with them in times of crisis.  The ability to deliver accurate and timely warnings and alerts through cell phones and other mobile devices is an important next step in our efforts to help ensure that the American public has the information they need to take action to protect themselves and their families prior to, and during, disasters and other emergencies."

Reps. Thompson and Langevin Advocate Government Authority to Regulate Cyber Security

5/29. Rep. Bennie Thompson (D-MS), Chairman of the House Homeland Security Committee (HHSC), and Rep. James Langevin (D-RI), Chairman of the HHSC's Subcommittee on Emerging Threats, Cybersecurity, and Science and Technology, sent a letter [PDF] to Rep. John Dingell (D-MI), Chairman of the House Commerce Committee (HCC), regarding enactment of legislation to expand government authority to regulate cyber security practices related to protecting the bulk power system (BPS) from cyber attacks. See also, HHSC release.

The letter states that "The effective functioning of this infrastructure is highly dependent on computer-based control systems that are used to monitor and manage sensitive processes and physical functions. Once largely proprietary, closed systems, these control systems are becoming increasingly connected to open networks, such as corporate intranets and the Internet."

The letter continues that this conversion increasingly exposes the BPS to cyber threats from "foreign nation states, domestic criminals and hackers, and disgruntled employees working within an organization". Moreover, a cyber attack could result in a "catastrophic loses of power for long periods of time".

The letter continues that the North American Electric Reliability Corporation (NERC) lacks "authority to regulate potentially vulnerable cybersecurity assets" or "to issue orders to owners and operators in the event of an imminent exploitation of a BPS asset".

The Subcommittee held a hearing on May 21, 2008, at which Joseph Kelliher, Chairman of the Federal Energy Regulatory Commission (FERC) stated that additional authority is necessary to adequately protect the BPS against cyber attack. See, prepared testimony [11 pages in PDF].

See also, May 21, 2008, statement [PDF] by Rick Sergel, P/CEO of the NERC.

Rep. James LangevinHence, Rep. Thompson and Rep. Langevin (at right) conclude in their letter that "a statutory mechanism is necessary to protect the grid against cyber security threats". More specifically, they want the Congress to enact legislation that would amend the Federal Power Act (FPA) to give the FERC authority to order cybersecurity standards to protect the reliability of the BPS upon "a finding by a national security or intelligence agency that there is a national security threat to the BPS". Moreover, these orders "could be kept confidential".

The "grid" would include generator owners, generator operators, transmission owners, and transmission operators. Some of these are publicly owned, and some are cooperatives. Many of these suffer from managerial incompetencies. See for example, discussion below of the Government Accountability Office (GAO) report on deficient information security practices at the Tennessee Valley Authority (TVA).

On the other hand, the "grid" also includes private sector companies involved in generating and transmitting electricity. Also, there is the matter of large electricity consumers. Reps. Thompson's and Langevin's letter does not specify what entities would be subject to the regulatory authority that they propose.

The GAO released a report [62 pages in PDF] on May 21 on cyber security at the TVA, a huge government owned utility. The report states that the TVA "has not fully implemented appropriate security practices to protect the control systems used to operate its critical infrastructures. TVA’s corporate network infrastructure and its control systems networks and devices at individual facilities and plants reviewed were vulnerable to disruption."

For example, the report states that "on the corporate network, one remote access system we reviewed that was used for the network was not securely configured, and individual workstations we reviewed lacked key patches and had inadequate security settings for key programs. Further, network infrastructure protocols and devices provided limited protections. In addition, the intrusion detection system that TVA used had significant limitations on its ability to effectively monitor the network. For example, although a network intrusion detection system was deployed by TVA to monitor network traffic, it could not effectively monitor certain data for key computer assets."

The report continues that "On control systems networks, firewalls were bypassed or inadequately configured, passwords were not effectively implemented, logging of certain activity was limited, configuration management policies for control systems software were not consistently implemented, and servers and workstations lacked key patches and effective virus protection."

Also, "physical security at multiple locations did not sufficiently protect critical control systems".

9th Circuit Upholds Search and Seizure of Home Computer Not Covered by Warrant

5/29. The U.S. Court of Appeals (9thCir) issued its opinion [PDF] in US v. Giberson, rejecting a 4th Amendment challenge to a police search and seizure of a home computer that arose out of a traffic stop.

North Las Vegas Police stopped Francis Giberson while driving a car with an expired license plate. He then produced a fake state identification card, but no drivers license. The federal Department of Health and Human Services (DHHS) investigated.

The DHHS obtained a warrant to search Giberson's home for evidence pertaining to the fake identification, as well as for tax, income, and employment records. The warrant did not authorize the search or seizure of any computers. Nevertheless, federal agents found a computer in his home, temporarily took possession of it, and made a copy of its hard drive. They then obtained a second warrant to search this mirror copy.

They found evidence of crimes unrelated to the basis for the search warrant -- receiving and possession of child pornography in violation of 18 U.S.C. § 2252(a). Giberson was charged with these crimes. He moved to suppress the evidence obtained from the search of his computer. The District Court denied the motion.

The Court of Appeals affirmed.

The Court of Appeals wrote that "a search warrant authorizing the seizure of materials also authorizes the search of objects that could contain those materials". However, it added that "We have not yet had occasion to determine, in an opinion, whether computers are an exception to the general principle that a warrant authorizing the seizure of particular documents also authorizes the search of a container likely to contain those documents."

It held, in this opinion, that "where there was ample evidence that the documents authorized in the warrant could be found on Giberson's computer, the officers did not exceed the scope of the warrant when they seized the computer."

The Court of Appeals rejected the argument that computers are different, for 4th Amendment analysis, from containers such as filing cabinets. It concluded that while computers may contain a larger amount and range of content, and intermingle relevant with irrelevant material, this does not warrant different treatment. It also rejected the argument that personal computers are different because they may also contain material that  is protected by the 1st Amendment.

Another argument, not addressed by the Court of Appeals, is that computers should be subject to different treatment because, unlike physical objects, such as filing cabinets, they are more susceptible to automated sorting and searching, merging with other digital data, manipulation and analysis, long term retention, distribution to other law enforcement agencies and others, and loss. For example, in the present case, the federal investigators used forensic software that located and extracted the digital images that served as the basis for the prosecution.

Under this argument, the potential for privacy related injury to the targets of digital searches is greater than the risk to the targets of file cabinet searches. However, the Court of Appeals did not address this argument.

This case is USA v. Francis Eugene Giberson, U.S. Court of Appeals for the 9th Circuit, App. Ct. No. 07-10100, an appeal from the U.S. District Court for the District of Nevada, D.C. No. CR-04-00299-BES, Judge Brian Sandoval presiding.

Judge Clifford Wallace wrote the opinion of the Court of Appeals, in which Judges Mary Schroeder and Roger Benitez joined. Judge Wallace was appointed in 1972 by former President Nixon. Judge Schroeder was appointed in 1979 by former President Carter. Judge Benitez is a Judge of the U.S. District Court for the Southern District of California, sitting by designation. He was appointed by President George Bush.

10th Circuit Rules for Parody Cybersquatter

5/29. The U.S. Court of Appeals (10thCir) issued its opinion [28 pages in PDF] in Utah Lighthouse Ministry v. Foundation for Apologetic Information and Research, affirming the District Court's summary judgment for the defendants on claims of trademark infringement, unfair competition, and cybersquatting.

The Utah Lighthouse Ministry (UTLM) and its founders are critics of the Church of Jesus Christ of Latter-day Saints, which is also known as the LDS Church and Mormon Church. The Foundation for Apologetic Information and Research (FAIR) and its VP and webmaster, Allen Wyatt, defend the Church.

Both the UTLM and FAIR operate web sites that sell books. Moreover, they sell many of the same books.

The Court of Appeals opinion states that "Wyatt created a website parodying the UTLM website". It was critical of the UTLM. It carried no advertising. However, it hyperlinked to FAIR's main web site, which sells books. Wyatt also registered domain names similar to "Utah Lighthouse Ministry", including and The defendants have since ceased publication of the offending web site, and transferred domain names to the UTLM.

UTLM had not registered its trademark at the time it filed its complaint.

The UTLM filed a complaint in U.S. District Court (DUtah) against FAIR, Wyatt and others pleading various intellectual property and competition law claims. The District Court granted summary judgment to the defendants. The three counts at issue on appeal are trademark infringement and unfair competition in violation of 15 U.S.C. § 1125(a), and cybersquatting in violation of 15 U.S.C. § 1125(d).

The Court of Appeals affirmed.

§ 1125(a)(1)(B), which is also known as § 43 of the Lanham Act, provides that "Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which ... in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities ... shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act".

The Court of Appeals held that UTLM's trademark infringement and unfair competition claims fail for three reasons.

First, it held that UTLM had not registered its trademark, so it had to show that its mark had acquired secondary meaning. However, it concluded that UTLM failed to present sufficient evidence to enable a reasonable jury to find that the mark had acquired a secondary meaning.

Second, it held that the defendants did not use the mark "in connection with any goods or services".

It should be noted that other courts have held that a web site that links to commercial web sites is itself commercial. See, for example, 2001 opinion of the U.S. Court of Appeals (4thCir) in People for the Ethical Treatment of Animals v. Doughney, a cybersquatting case which is also reported at 263 F.3d 359. See also, story titled "4th Circuit Affirms Judgment Against Parody Web Site Operator" in TLJ Daily E-Mail Alert No. 256, August 24, 2001.

Third, the Court of Appeals held that there was no likelihood of confusion.

It applied the 10th Circuit's six part test for analyzing likelihood of confusion: "(1) the degree of similarity between the marks; (2) the intent of the alleged infringer in using the mark; (3) evidence of actual confusion; (4) similarity of products and manner of marketing; (5) the degree of care likely to be exercised by purchasers; and (6) the strength or weakness of the marks."

It also wrote that "The fact that the Wyatt website is a successful parody weighs heavily against a finding of likelihood of confusion. A parody adopts some features of the original mark, but relies upon a difference from the original mark to produce its desired effect. ... In contrast, an unsuccessful parody -- one that creates a likelihood of confusion -- is not protected from an infringement suit."

The Court of Appeals then addressed the cybersquatting claim. One of the statutory elements of this claim is that there was a "bad faith intent to profit". The statute enumerates nine factors to be considered by the court. The Court of Appeals held that the statute supports a finding that there was no bad faith intent to profit, notwithstanding the facts that FAIR registered and used confusingly similar domain names to attract visitors, and then sold books to them.

The key set of facts of this case for the Court was that the defendants' offending web site's main attribute was that it criticized the view expressed in the plaintiff's web site. Not all similarly situated defendants have received this degree of leniency from federal courts.

In another intellectual property case, the same defendant, UTLM, was not accorded the benefit of engaging in online expression and criticism.

In 1999 the UTLM and its founders were sued by the Intellectual Reserve, Inc., the intellectual property arm of the LDS Church, for publishing online material from the Church Handbook of Instructions, which the Church did not wish to be publicly available. Intellectual Reserve obtained an injunction under the Copyright Act. See, December 6, 1999, preliminary injunction, and TLJ summary of the case. That case is Intellectual Reserve, Inc. v. Utah Lighthouse Ministry, Inc., Jerald Tanner, Sandra Tanner, et al., U.S. District Court for the District of Utah, D.C. No. 2:99-CV-808C.

Perhaps that case illustrates the absence of a sound policy basis for extending full copyright protection to unpublished works that are not intended for publication. See also, Salinger v. Random House, 811 F.2d 90 (2nd Cir. 1989) and New Age Publications v. Henry Holt, 873 F.2d 576 (2nd Cir. 1989), the cases that established this often criticized application of the Copyright Act.

People and Appointments

5/29. Decker Anstrom, P/COO of Landmark Communications, was reelected to serve a second one year term as Chairman of the Board of Directors of the National Cable & Telecommunications Association (NCTA). See, NCTA release with list of election results.

5/29. Rosalind Tyson was named Regional Director of the Securities and Exchange Commission's (SEC) Los Angeles Regional Office, which oversees enforcement and examination functions in southern California, Arizona, Nevada, and Hawaii. She is currently acting Regional Director. She replaces Randall Lee. See, SEC release.

5/29. President Bush announced his intent to nominate five persons to be members of the Board of Directors of the Corporation for Public Broadcasting (CPB):
  • Lori Gilbert for the remainder of a six year term expiring on January 31, 2012,
  • Cheryl Halpern for the remainder of a six year term expiring on January 31, 2014,
  • former Sen. David Pryor (D-AR) for the remainder of a six year term expiring on January 31, 2014,
  • Bruce Ramer for the remainder of a six year term expiring on January 31, 2012, and
  • Liz Sembler for the remainder of a six year term expiring on January 31, 2014.
See, White House release.

More News

5/29. The Federal Communications Commission (FCC) published a notice in the Federal Register that accelerates the deadlines for submitting comments in response to its notice of proposed rulemaking (NPRM) regarding small, minority owned and women owned businesses in broadcasting. The previously announced deadlines were July 15 (for initial comments) and August 14 (for reply comments). See, original notice in the Federal Register, May 16, 2008, Vol. 73, No. 96, at Page 28400-28407. The new deadlines are June 30 and July 14. See, notice accelerating comment deadlines in the Federal Register, May 29, 2008, Vol. 73, No. 104, at Page 30875. The FCC adopted this NPRM on December 18, 2007, and released the text on March 5, 2008. See, NPRM [70 pages in PDF], first corrections [2 pages in PDF] and second correction [2 pages in PDF]. This NPRM is FCC 07-217 in MB Docket Nos. 07-294, 06-121, 02-277, and 04-228, and MM Docket Nos. 01-235, 01-317, and 00-244.

5/29. The Federal Communications Commission (FCC) announced in a notice in the Federal Register that it has renewed the charter of the WRC-11 Advisory Committee through May 23, 2010. See, Federal Register: May 29, 2008, Vol. 73, No. 104, at Page 30938.

US and Japan File Complaints with WTO Regarding EU Duties on Tech Products

5/28. The Office of the U.S. Trade Representative (OUSTR) announced and described a complaint that it has filed with the World Trade Organization (WTO) against the European Union (EU).

This complaint (a request to initiate dispute settlement consultations) pertains to EU duties imposed upon cable and satellite boxes that can access the internet, flat panel computer monitors, and certain computer printers that can also scan, fax and/or copy.

This complaint alleges that these EU duties violate the WTO Information Technology Agreement [18 pages in PDF]. See also, the WTO's web page titled "Information Technology Agreement".

Japan has also filed a complaint with WTO against the EU.

Susan Schwab, head of the OUSTR, stated in a release that these duties are "protectionist gimmicks" that "discourage technological innovation". See also, second release.

She wrote in statement [PDF] that "The EU claims that this equipment has evolved beyond the technology subject to the ITA. However, if ITA participants only provided duty-free treatment to products with the technology that existed at the time the ITA was concluded, very few ITA products would be eligible for duty-free treatment today."

People and Appointments


5/28. Stephen Smith was named Chief Administrative Officer of the U.S. Patent and Trademark Office (USPTO). See, USPTO release.

Supreme Court Denies Cert in Case Involving Arbitration Clauses in Wireless Contracts

5/27. The Supreme Court denied certiorari in T-Mobile USA v. Laster, a class action case regarding wireless services. Although, the issue in this certiorari proceeding was enforceability of arbitration clauses in consumer contracts under the Federal Arbitration Act (FAA).

This denial of certiorari lets stand the October 25, 2007, opinion of the U.S. Court of Appeals (9thCir), which held that the arbitration provisions at issue are unenforceable. This is a defeat for the wireless communications industry, and a victory for class action lawyers. The various participants debate the consequences for consumers.

See, Orders List [9 pages in PDF] at page 1, and Supreme Court docket.

The 9th Circuit's opinion is arguably inconsistent with the FAA, which is codified at 9 U.S.C. § 1, et seq., and precedent construing the FAA.

9 U.S.C. § 2 provides, in full, that "A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract."

The 9th Circuit rested its holding upon the "save upon" clause of Section 2, and California state law.

The CTIA submitted an amicus brief [26 pages in PDF] urging the Supreme Court to grant certiorari and the reverse the judgment of the 9th Circuit.

It wrote that "virtually all members of the wireless industry ... rely on alternative dispute resolution mechanisms to resolve disputes efficiently and to reduce costs for their customers. Individual arbitration clauses appear in hundreds of millions of subscriber contracts throughout the United States, and virtually all of those arbitration provisions are called into question if the Ninth Circuit's decision survives."

It further argued that "Wireless carriers operate in a highly competitive marketplace, resulting in better services at lower prices for consumers. In that market, there is a premium on maintaining customer loyalty -- carriers have a substantial economic incentive to avoid losing customers. For that reason, most customer disputes are settled at the customer service level, and subscribers who take advantage of individual arbitration procedures are ordinarily satisfied with the outcome. Customers are happy, and the costs of dispute resolution are kept low. The Ninth Circuit’s decision, however, forces carriers to abandon arbitration in favor of class action litigation."

It also asserted that the result of the 9th Circuit's opinion "will be higher costs for carriers and customers alike, leaving the plaintiffs’ bar as the only beneficiary".

There is also legislation pending in the Congress that would render uneforceable arbitration clauses in consumer contracts, including the contracts at issue in the present case.

For example, HR 3010 [LOC | WW], the "Arbitration Fairness Act of 2007", would amend Section 2 to provide "No predispute arbitration agreement shall be valid or enforceable if it requires arbitration of (1) an employment, consumer, or franchise dispute ...".

The 9th Circuit has provided, by judicial opinion, what the proponents of HR 3010 have been unable to obtain from the Congress.

This case is T-Mobile USA, Inc. v. Jennifer Laster, et al., Sup. Ct. No. 07-976, a petition for writ of certiorari to the U.S. Court of Appeals for the 9th Circuit, App. Ct. No.  06-55010.

The Supreme Court also denied certiorari in T-Mobile v. Bruce Gatton, Sup. Ct. No. 07-1036, and in T-Mobile v. Charles Ford, Sup. Ct. No. 07-1103. See, Orders List at page 2.

Supreme Court Denies Cert in Commerce Clause Case

5/27. The Supreme Court denied certiorari in Stroman Realty v. Martinez, a commerce clause case. See, Orders List [9 pages in PDF] at page 2 and Supreme Court docket.

This lets stand the October 10, 2007, opinion of the U.S. Court of Appeals (7thCir), which affirmed the District Court's dismissal pursuant to the abstention doctrine.

This is another in a series of setbacks to Stroman Realty, which seeks to have the federal courts' adjudicate on the merits its claims that various state regulators are violating the commerce clause of the Constitution.

See also, story titled "5th Circuit Rules No Personal Jurisdiction Over Out of State Regulator of Online Commerce" in TLJ Daily E-Mail Alert No. 1,700, January 15, 2008, and story titled "5th Circuit Rules on Personal Jurisdiction Over State Regulators" in TLJ Daily E-Mail Alert No. 1,768, May 16, 2008.

These and other related cases are significant for internet based businesses that seek federal judicial relief from state regulation that they assert is arbitrary, discriminatory, protectionist, or technophobic.

Stroman Realty, Inc. is a business located in Conroe, Texas. It is an advertiser and resale broker of timeshare intervals in the secondary resale market. Timeshare refers to ownership of property that is divided by time. That is, property has multiple owners, each of which is entitled to use and possession for limited periods of time. This case involves timeshares in real property, such as vacation condos and homes.

While Stroman is located in Texas, the location of the property that is divided into timeshares and brokered by Stroman is located in many states and countries. Moreover, both buyers and sellers are spread around. However, its real estate brokers are licensed by the state of Texas.

State regulators in various states, including Illinois, have attempted to regulate Stroman's activities. Stroman has filed many complaints against distant state regulators alleging violation of the commerce clause of the U.S. Constitution.

Dean Martinez is the current Secretary of the Illinois Department of Financial and Professional Regulation. Stroman filed a complaint in U.S. District Court (NDIll) against his predecessor, Ferdinand Grillo.

The state of Illinois reacted by promptly initiating a related administrative proceeding before the Illinois Office of Banks and Real Estate, and then asserting various arguments for dismissal of the U.S. District Court action.

The District Court dismissed pursuant to the abstention doctrine.

While there is a commerce clause in the Constitution, there is no federal abstention doctrine in the Constitution. Rather, the Supreme Court created it in its 1971 opinion in Younger v. Harris, which is also reported at 401 U.S. 37.

In that case a defendant in a state criminal proceeding filed a complaint in federal court seeking an injunction of the state criminal proceeding. Former Justice Hugo Black wrote that there is a "longstanding public policy against federal court interference with state court proceedings", even though it has "never been specifically identified". He concluded that the doctrine restrains "courts of equity from interfering with criminal prosecutions".

The U.S. Court of Appeals (7thCir) issued its opinion on October 10, 2007, affirming the judgment of the District Court.

The Court of Appeals summarized the holding of Younger v. Harris also follows: "federal courts must abstain from enjoining or otherwise interfering in ongoing state court proceedings that are (1) judicial in nature, (2) involve important state interests, and (3) provide an adequate opportunity to raise the federal claims, as long as (4) no exceptional circumstances exist that would make abstention inappropriate."

It then held that the doctrine of Younger v. Harris applies to Stroman's District Court action.

There are, however, significant differences between Younger v. Harris and the Stroman case. The former case involved an attempt to interfere with an ongoing criminal court proceeding. When Stroman filed, there was no ongoing proceeding. Stroman's action interfered with nothing. Illinois initiated a proceeding in order to assert interference with an ongoing proceeding.

Moreover, in Stroman, once the state initiated an action, it was neither criminal nor in court.

Although, other federal courts have similarly relaxed the requirements for application of the doctrine of Younger v. Harris.

The tactic employed by Illinois in this case may serve to delay, inconvenience, and raise the litigation costs of, distant plaintiffs. However, it does not ultimately evade judicial review.

Stroman, and other similarly situated plaintiffs, can present evidence and arguments related to their federal constitutional claims in the state proceeding. Then, if a hostile administrative agency rejects their claims, they can seek judicial review. Younger v. Harris goes to interference with ongoing state trial court proceedings, not judicial review of final orders in those proceedings.

The Court of Appeals concluded, "We see no reason why Stroman's dormant Commerce Clause claim could not also be adequately addressed on judicial review in the event of an adverse administrative decision."

The 7th Circuit also recently applied the doctrine of Younger v. Harris in a telecommunications case. See, story title "7th Circuit Applies Abstention Doctrine in Automated Phone Call Case" in TLJ Daily E-Mail Alert No. 1,641, September 21, 2007.

The present case is Stroman Realty, Inc. v. Dean Martinez, Sup. Ct. No. 07-1096, a petition for writ of certiorari to the U.S. Court of Appeals for the 7th Circuit, App. Ct. No. 06-3214.

9th Circuit Affirms Dismissal of Antitrust Case Against Amazon and Borders

5/27. The U.S. Court of Appeals (9thCir) issued it opinion [6 pages in PDF] in Gerdlinger v. Amazon and Borders, a class action antitrust case. The Court of Appeals affirmed the District Court's dismissal for lack of standing.

Amazon sells books through its web site. Borders sells books at physical stores. Amazon and Borders entered into a marketing agreement in 2001.

The Court of Appeals summarized that "Under the agreement, Borders' website address directs shoppers to what is known as a mirror website, a site hosted by Amazon. The books purchased through the mirror site are sold and shipped by Amazon, and Borders receives a commission for each book sold. The agreement enables Borders to tap the online market and Amazon to expand its customer base to include customers loyal to the Borders brand."

In addition, "Borders abandoned its direct participation in the online market and agreed that it would not reenter the market during the term of the agreement."

The Court added that "the agreement also specified that Amazon would not charge customers of the mirror site higher prices than Amazon charged to customers of its own site."

In this class action, the nominal plaintiff is Gary Gerdlinger. He filed a complaint in U.S. District Court (NDCal) alleging per se market allocation, and per se price fixing, both in violation of Section 1 of the Sherman Act, which is codified at 15 U.S.C. § 1.

Amazon and Borders submitted a declaration showing that the prices for books on the Amazon web site declined after the two entered into their agreement.

Gerdlinger purchased books from Amazon. However, he did not submit evidence showing that he had ever purchased an item for a higher price than he would have paid had there been no marketing agreement.

The District Court concluded that he had suffered no injury in fact, and therefore lacked antitrust standing. It dismissed his complaint with prejudice. The present appeal followed.

The Court of Appeals affirmed.

It wrote that Article III of the U.S. Constitution "requires proof of injury-in-fact, causation, and redressability". It continued that "For Article III purposes, an antitrust plaintiff establishes injury-in-fact when he ``has suffered an injury which bears a causal connection to the alleged antitrust violation.´´ ..." (Citations omitted.)

The Court of Appeals continued that to establish standing, a plaintiff cannot rely solely on allegations in pleadings, but rather must also submit evidence, such as affidavits, regarding the existence of standing.

First, the Court of Appeals addressed standing for the market allocation claim.

While Gerdlinger had alleged in his complaint that he was "forced to pay supra-competitive prices", Amazon and Borders submitted evidence that rebutted this.

"In the face of that evidence," wrote the Court, "Gerlinger needed to show some injury. It became Gerlinger’s burden, in order to defeat the motion, to ``set out specific facts showing a genuine issue for trial.´´ Fed. R. Civ. P. 56(e). Gerlinger failed to satisfy his burden to establish a genuine issue as to whether he suffered an injury-in-fact." He did not do this. "Nor did he show or even allege that he himself experienced any reduced selection of titles, poorer service or any other potentially conceivable form of injury."

Therefore, the Court of Appeals held that he "lacks standing to maintain an antitrust claim for alleged market allocation."

Second, the Court of Appeals addressed the price fixing claim.

The Court of Appeals wrote that the part of the agreement that provided that Amazon would not charge customers of the mirror site higher prices than it charged customers at its own site "looks very much like a lawful joint venture or a licensing agreement to share brand names."

However, it did not decide the price fixing claim on the merits because it concluded that "the plaintiff has not shown any injury-in-fact caused by the agreement, and he therefore lacks Article III standing to bring this claim as well."

This case is Gary Gerdlinger v. Amazon and Borders, U.S. Court of Appeals for the 9th Circuit, App. Ct. No. 05-17328, an appeal from the U.S. District Court for the Northern District of California, D.C. No. CV-02-05238-MHP, Judge Marilyn Patel presiding. Judge Mary Schroeder wrote the opinion of the Court of Appeals, in which Judges Jay Bybee and George Wu joined.

Go to News from May 21-25, 2008.