TLJ News from November 6-10, 2011

SEC Brings Administrative Action Against China Based Software and Consulting Firm

11/10. The Securities and Exchange Commission (SEC) issued an order that initiates an administrative proceeding against Longtop Financial Technologies Limited for failure to comply with the reporting requirements of Section 13(a) of the Exchange Act, and Rule 13a-1 thereunder.

Longtop is a company registered with that SEC that is based in Hong Kong and Xiamen, People's Republic of China (PRC), that provides software, consulting and support services for the financial services industry in the PRC.

The SEC alleges that Longtop failed to file its required annual report for the year ending on March 31, 2011.

On September 8, 2011, the SEC filed a complaint in the U.S. District Court (DC) against Deloitte Touche Tohmatsu CPA Ltd. seeking enforcement of an administrative subpoena. That complaint states that the SEC is investigating "possible fraud" by Longtop.

Obama Nominates Taranto for Federal Circuit

11/10. President Obama withdrew the nomination of Edward Dumont to be a Judge of the U.S. Court of Appeals for the Federal Circuit. At the same time, President Obama nominated Richard Taranto for this position.

See, White House news office release and release. See also, Congressional Record, November 10, 2011, at Page 7393.

Dumont is an attorney in the Washington DC office of the law firm of Wilmer Hale. Taranto is an attorney with the two attorney Washington DC law firm of Farr & Taranto. He has wide appellate experience in patent, copyright and communications cases.

Taranto represented various Verizon companies in Verizon Services v. Cox Fibernet. This was a patent infringement case involving voice over internet protocol (VOIP) technology brought by Verizon in the U.S. District Court (EDVa). The trial jury returned a verdict of noninfringement as to some patents, and invalidity as to others. Verizon appealed to the U.S. Court of Appeals (FedCir), which affirmed. See, April 16, 2010, opinion.

Taranto represented Lucent in Lucent Technologies v. Gateway, patent infringement cases involving methods for compressing digital audio files to reduce consumption of storage space -- MP3 technology. See, September 25, 2008 opinion of the Federal Circuit, and story titled "Federal Circuit Affirms in Lucent v. Gateway", TLJ Daily E-Mail Alert No. 1,832, September 25, 2008.

Taranto represented Rambus over many years in some of the many proceedings relating to its participation in the JEDEC standards setting process and later assertion of patent rights.

In 2005 Taranto represented Grokster before the Supreme Court in MGM v. Grokster. See, story titled "Supreme Court Hears Oral Argument in MGM v. Grokster" in TLJ Daily E-Mail Alert No. 1,106, March 30, 2005. The Supreme Court ruled against Grokster. See, story titled "Supreme Court Rules in MGM v. Grokster" in TLJ Daily E-Mail Alert No. 1,163, June 28, 2005.

Over a decade ago, in the late 1990s, during the Section 271 turmoil, Taranto represented Bell Atlantic, a predecessor of Verizon. For example, Bell Atlantic, represented by Taranto, was an intervening party in SBC v. FCC. See, TLJ web page titled "SBC v. FCC". Back then, the regional bell operating companies or RBOCs (the incumbent phone companies created by the breakup of AT&T in the 1984 Modified Final Judgment) wanted to provide in region interlata service (long distance). But, the Federal Communications Commission (FCC) was applying 47 U.S.C. §§ 271-275, which were enacted in the Telecommunications Act of 1996, to reject the RBOCs' requests. SBC, the once and future component of AT&T, filed a complaint in the U.S. District Court (NDTex) alleging that Section 271 constitutes an unconstitutional bill of attainder. Other RBOCs intervened. The District Court ruled for SBC and against the FCC. A divided U.S. Court of Appeals (5thCir) reversed. See, story titled "Fifth Circuit Court of Appeals Reverses Judge Kendall's Decision in SBC v. FCC", Tech Law Journal, September 5, 1998. The Supreme Court denied certiorari. See, story titled "Supreme Court Denies Certiorari in SBC v. FCC", Tech Law Journal, January 21, 1999.

Still further back, he represented Warner Jenkinson before the Supreme Court in Warner Jenkinson v. Hilton Davis Chemical, a patent case involving the doctrine of equivalents. See, March 3, 1997, opinion of the Supreme Court.

More Judicial Appointments

11/10. President Obama nominated Gonzalo Curiel to be a Judge of the U.S. District Court for the Southern District of California. See, White House news office release and release. He is a state trial court judge in California. Before that, he was a long time federal prosecutor in California.

11/10. President Obama nominated John Tharp to be a Judge of the U.S. District Court for the Northern District of Illinois. See, White House news office release and release. He is an attorney in the Chicago office of the law firm of Mayer Brown.

11/10. President Obama nominated John Lee to be Judge of the U.S. District Court for the Northern District of Illinois. See, White House news office release and release. He is an attorney in the Chicago law firm of Freeborn & Peters.

11/10. President Obama nominated George Russell to be a Judge of the U.S. District Court for the District of Maryland. See, White House news office release and release. He is currently a state court judge in Maryland. Before that, he was an Assistant U.S. Attorney for the District of Maryland.

11/10. The Senate Judiciary Committee (SJC) held an executive business meeting at which it approved by voice vote the nomination of Susie Morgan to be a Judge of the U.S. District Court for the Eastern District of Louisiana.

11/10. The Senate Judiciary Committee (SJC) held an executive business meeting at which it approved by voice vote the nomination of Michael Horowitz to be Inspector General of the Department of Justice (DOJ).

Senate Debates Resolution of Disapproval of FCC's BIAS Rules

11/9. The Senate began its consideration of SJRes 6, a resolution of disapproval of the Federal Communications Commission's (FCC) rules, adopted in late December 2010, regulating the network management practices of broadband internet access service (BIAS) providers.

The FCC's rules are contained in the Report and Order (R&O) [194 pages in PDF] adopted on December 21, 2010, and released on December 23, 2010. This R&O is FCC 10-201 in GN Docket No. 09-191 and WC Docket No. 07-52. See also, stories in TLJ Daily E-Mail Alert No. 2,186, December 22, 2010, and TLJ Daily E-Mail Alert No. 2,188, December 24, 2010.

The resolution under consideration provides, pursuant to the Congressional Review Act (CRA), which is codified at 5 U.S.C. § 802, that it is "Resolved by the Senate and House of Representatives of the United States of America in Congress assembled, That Congress disapproves the rule submitted by the Federal Communications Commission relating to the matter of preserving the open Internet and broadband industry practices (Report and Order FCC 10-201, adopted by the Commission on December 21, 2010), and such rule shall have no force or effect."

The House previously passed its version of this resolution, HJRes 37, on April 8, 2011, by a vote of by a vote of 240-179. See, story titled "House Passes Resolution Disapproving the FCC's BIAS Rules" in TLJ Daily E-Mail Alert No. 2,220, April 11, 2011.

The FCC's regulations have not yet taken effect, because the FCC delayed so long in publishing them in the Federal Register. The FCC's regulations are set to take effect on November 20, 2011.

The Obama administration has threatened a Presidential veto. See, story titled "OMB Says President's Advisors Would Recommend Veto of HJRes 37" in TLJ Daily E-Mail Alert No. 2,217, April 5, 2011.

The FCC's rules are also the subject of pending judicial review.

The debate broke down along party lines. Republicans supported the resolution. Democrats opposed it.

The Senate may continue its consideration of this resolution on Thursday, November 10.

Sen. Kay Hutchison (R-TX), the sponsor of the resolution, and ranking Republican on the Senate Commerce Committee (SCC), spoke in support. See, Congressional Record, November 9, 2011, at Pages S7239-41, and YouTube video (17 minutes, 40 seconds).

Sen. Kay Hutchison hspace=Sen. Hutchison (at right) criticized "the Obama administration's relentless imposition of new regulations", by the FCC, and by other federal agencies.

She said that "Today's issue involves bureaucratic overreach", because the FCC "decided to regulate the Internet. Last December, three FCC Commissioners, on a party-line vote, voted to impose rules that restrict how Internet service providers offer broadband services to consumers. Those rules, known as net neutrality, impose 19th century-style monopoly regulations on the most competitive and important job-creating engine of the 21st century, the Internet."

She continued that "This marks a stunning reversal from the hands-off approach to the Internet that Federal policymakers have taken for more than a decade."

She argued that "The net neutrality order allows the FCC to tell broadband providers what kind of business practices are reasonable and unreasonable. The FCC, however, did not bother to clearly define in its rules what the agency considers to be reasonable. This point is vital to understand. With such an arbitrary and yet poorly defined standard, companies will be forced to err on the side of caution. Rather than risk possible punishment from the FCC, many companies will simply decide: Maybe we will not invest right now in new technologies. Maybe it is too risky to develop and deploy new services. At the very least, it will delay such investment. This kind of regulatory uncertainty will be crippling for companies and particularly small providers."

She also said that the "Congress has never given the FCC the explicit authority to regulate how internet providers manage their networks. That is why the new rules represent an unprecedented power grab by the unelected Commissioners at the FCC."

She added that the FCC "has already lost this fight in the courts", citing the opinion of the U.S. Court of Appeals (DCCir) in Comcast v. FCC.

"It is time for the Senate to stop this overreach." The Congress, not agencies, should write the law, and the Congressional Review Act (CRA) gives the Congress the authority to reign in rogue agencies, such as the FCC, said Sen. Hutchison.

Sen. John Rockefeller (D-WV) spoke in opposition. He said "Americans want the Internet to remain free and open. Americans want to be able to go where they want and do what they want on the Internet. They want to be able to develop new businesses; read and watch video; and reach out to friends, family, and community -- online. And they want to do all of these things on the Internet, without having to ask permission from their broadband provider. The FCC has promulgated balanced rules that let Americans do all of these things -- and keep the Internet open and free." See, prepared statement, and Congressional Record, November 9, 2011, at Pages S7241-5.

He argued that "In a world without a free and open Internet, there would be nothing to stop broadband providers from blocking access to websites that offer products that compete with those of its affiliates. In a world without a free and open Internet, companies could pay Internet providers to guarantee that their websites open more quickly than competitors. In a world without a free and open Internet, companies could pay Internet providers to make sure that their online sales are processed more quickly than competitors with lower prices – particularly disturbing in these tough economic times. In a world without a free and open Internet, there would be nothing to prevent Internet service providers from charging users a premium in order to guarantee operation in the “fast lane.”"

Sen. Mitch McConnell (R-KY) stated in the Senate that "Everywhere I go in Kentucky, I hear from businesses large and small that they are struggling to comply with the mountains of rules and regulations coming out of Washington. At a time when the private sector would like to create jobs and grow the economy, it seems as if too many here in Washington want to create regulations and grow government." See, Congressional Record, November 9, 2011, at Pages S7229-30.

He continued that the FCC's "net neutrality regulations ... are a solution in search of a problem. It is an overreaching attempt to fix the Internet when the Internet is not broken. According to the FCC's own data, 93 percent of broadband subscribers are happy with their service. If Americans weren't happy with their provider or felt the provider was favoring some form of content over others, they could switch providers. But now the FCC says its regulations are necessary because of what might happen in the future--what might happen in the future--if broadband providers have incentives to favor one type of content over another, despite the fact that after 15 years, there is no evidence of this occurring in any significant way. If Internet providers were so interested in doing this, wouldn't they have done it by now? Instead, the FCC has exceeded its authority to grow the reach of government under the guise of fixing a problem that doesn't even exist."

Sen. Roger Wicker (R-MS) stated in the Senate that "The FCC order reads that Internet providers ``shall not block lawful content, applications, services or non-harmful devices, subject to reasonable network management.'' It goes on to say that providers ``shall not unreasonably discriminate in transmitting lawful network traffic over a consumer's broadband Internet access service.''

"But the terms ``lawful´´ and ``reasonable´´ are not easily defined. Under the order, what is lawful and what is reasonable would be determined by unelected bureaucrats. The FCC would rule as a de facto police of the open and free Internet. The FCC would be the final arbiter of what broadband service providers can and cannot do." See, Congressional Record, November 9, 2011, at Pages S7246.

Sen. John Kerry (D-MA) argued that the Senate opponents of the FCC's rules "are trying to say to the American people that they want to liberate the Internet, when, in fact, what they want to do is imprison the Internet within the hands of the most powerful communications entities today to act as the gatekeepers who will control the ability of the Internet to do the very kind of development that brought us here. What they are talking about, their concept, this CRA challenge is that wolf in sheep's clothing."

He said that as a result of the FCC's rules, "Innovators now know they are not going to have to go ask a big telephone company: Hey, Verizon, hey AT&T, will you guys please let us have access so we can go do this thing? Oh, well, maybe we will do that, but we are going to charge you in order to do that. They completely destroy the openness that is provided, this ability for anybody in America to sit in their home or school or somewhere and come up with an idea and innovate. That freedom to innovate, the freedom to innovate is what has made the Internet the platform for economic and social development it is today, and a vote for the CRA is a vote to stifle that."

Sen. Lisa Murkowski (R-AK) argued that "The rule put into place by the FCC in 2010 circumvents Congress. It assumes an authority that this body never consented to. We cannot allow the executive branch to go down this road. We just should not allow it. No provision of any statute explicitly gives the FCC the authority to impose these sweeping rules on the Internet."

Sen. Al Franken (D-MN) said that "net neutrality is the free speech issue of our time"

Sen. Al FrankenSen. Franken (at left) speculated that "Without net neutrality, Myspace or Friendster -- remember them -- could have partnered with Comcast to gain priority access or to block Facebook altogether. Blockbuster could have paid AT&T to slow down or completely block streaming of Netflix videos. Barnes & Noble could have paid Verizon to block access to Imagine a world where the corporation with the biggest checkbook can control what we see and how fast we access content on the Internet."

He said that "this resolution of disapproval amounts to little more than political gamesmanship from fringe organizations", and "is a procedural stunt that wastes limited time".

Sen. John Barrasso (R-WY) said that "we have unelected, unaccountable bureaucrats, who are ignoring Congress and voting for regulation of the Internet." He added that "The administration is now making it a priority -- a priority -- to regulate another sector of our economy over jobs. The FCC has opened the door for Washington bureaucrats to take over one-sixth of our economy."

Sen. John McCain (R-AZ) said, "Might I remind the bureaucrats at the FCC that as a government agency, the FCC is not elected by the people only the House, Senate, and the President are duly elected. And, as our Constitution makes clear, the authority to legislate is solely vested in the elected representatives of the American people, not five politically appointed FCC Commissioners. As such, the resolution before us today not only seeks to undo bad policy, it also seeks to restore the constitutional integrity of the Congress. If we fail to pass this resolution of disapproval, our institutional credibility will be further eroded."

Sen. Marco Rubio (R-FL), Sen. Pat Toomey (R-PA), Sen. John Boozman (R-AR), Sen. Roy Blunt (R-MO), Sen. Jim DeMint (R-SC), Sen. James Inhofe (R-OK) also spoke in support of the resolution.

Sen. Mark Udall (D-CO) and Sen. Maria Cantwell (D-WA) also spoke in opposition to the resolution.

For more on House consideration of its resolution, see:

FCC Announces Tentative Agenda for November 30 Meeting

11/9. The Federal Communications Commission (FCC) released a tentative agenda for its event scheduled for November 30, 2011, titled "Open Meeting".

It states that the FCC is scheduled to adopt a Report and Order (R&O) that "allocates spectrum in the 413-457 MHz band and adopts service and technical rules to allow the use of new types of implanted medical devices that use functional electric stimulation".

It also states that FCC staff is scheduled to make a presentation on "broadband adoption efforts".

This event is scheduled for 10:30 AM, on Wednesday, November 30, in the FCC's Commission Meeting Room, Room TW-C305, at 445 12th Street, SW. The FCC will webcast this event.

People and Appointments

11/8. The Senate confirmed Evan Wallach to be a Judge of the U.S. Court of Appeals for the Federal Circuit by a vote of 99-0. See, Roll Call No. 199. See, Congressional Record, November 8, 2011, at Page S7228. He has been a Judge of the U.S. Court of International Trade since 1997.

People and Appointments

11/7. The Senate confirmed Charles McCullough to be Inspector General of the Intelligence Community at the Office of the Director of National Intelligence (ODNI). See, Congressional Record, November 7, 2011, at Page S7161.

More News

11/7. Eleazar Gomez Ortiz pled guilty in the U.S. District Court (EDCal) to conspiracy to commit criminal copyright infringement and traffic in counterfeit labels, illicit labels, and counterfeit documentation and packaging. The Federal Bureau of Investigation (FBI) stated in a release that Ortiz sold the counterfeit music CDs and motion picture DVDs in public flea markets in the Sacramento, California, area.

11/7. The U.S. District Court (DKan) sentenced Timothy Weatherly to serve 27 months in prison following his plea of guilty to one count of conspiracy to traffic in counterfeit goods and make false statements. The Federal Bureau of Investigation (FBI) stated in a release that he and others imported counterfeit Cisco equipment from the People's Republic of China (PRC), packaged this equipment with counterfeit Cisco labels and manuals, and then sold the counterfeits as genuine Cisco products on the eBay auction web site. The FBI added that the "conspirators obtained access to Cisco's confidential serial number verification website in order to obtain legitimate serial numbers" and "used multiple shippers and other methods to attempt to keep shipments from being seized by customs officials".

Go to News from November 1-5, 2011.