TLJ News from February 1-5, 2013

People and Appointments

2/5. The National Science Foundation (NSF) announced in a release that its Director, Subra Suresh, will leave at the end of March. He will become President of Carnegie Mellon University on July 1, 2013. See also, White House news office release.

6th Circuit Addresses Meaning of Trade Secret

2/4. The U.S. Court of Appeals (6thCir) issued its opinion in US v. Howley, affirming convictions of two persons for stealing trade secrets, in violation of 18 U.S.C. § 1832(a).

Roberts and Howley worked for Wyko Tire Technology. Wyko is a contractor of Goodyear, which makes, among other things, tires for large earthmoving vehicles. Wyko also had a contract to supply HaoHua South China Rubber Company, a company owned by the government of the People's Republic of China (PRC), with with parts used in making such tires. However, Wyko lacked the requisite technology.

Roberts and Howley visited a Goodyear factory which made the type of tires that HaoHua also wanted to make. The factory was surrounded by a fence. Visitors had to pass through a security checkpoint. The two men signed secrecy agreements with Goodyear. They were told by a security guard that no cameras were allowed inside the Goodyear factory. But, when briefly left alone, they used a cell phone camera to photograph a device they sought to replicate for HaoHua.

Wyko e-mail correspondence also demonstrated that the two knew that HaoHua sought to compete with Goodyear in making tires for large earthmoving vehicles, and that obtaining technology from Goodyear would help Wyko to help HaoHua to do this.

They e-mailed the photos to HaoHua. However, another Wyko employee, its IT manager, saw the e-mails, suspected wrongdoing, and copied them to Goodyear, which reported the matter to the FBI.

The Department of Justice (DOJ) obtained grand jury indictments. The trial jury convicted both men. See, story titled "Two Engineers Convicted of Theft of Trade Secrets for PRC by Cell Phone Camera" in TLJ Daily E-Mail Alert No. 2,178, December 14, 2010.

However, the District Court sentenced them to serve only four months of home confinement, 150 hours of community service, and four years of probation.

The defendants appealed their convictions. At issue is whether the machines in the photographs constitute trade secrets within the meaning of criminal prohibition. The DOJ appealed their slap on the wrist sentences. The Court of Appeals affirmed the conviction, and reversed the sentences.

The Congress amended Section 1832 in December of 2012, but not in a manner that would affect this case. See, S 3642 [LOC | WW], the "Theft of Trade Secrets Clarification Act of 2012", in the 112th Congress. See also, stories titled "Senate Passes Theft of Trade Secrets Clarification Act" in TLJ Daily E-Mail Alert No. 2,477, November 28, 2012, "House Passes Theft of Trade Secrets Clarification Act" in TLJ Daily E-Mail Alert No. 2,494, December 19, 2012, and "Obama Signs Theft of Trade Secrets Clarification Act" in TLJ Daily E-Mail Alert No. 2,500, December 31, 2012,

The statutory language in effect at the time the defendants took the photographs, provided, in part, that "Whoever, with intent to convert a trade secret, that is related to a product or service used in or intended for use in interstate or foreign commerce, to the economic benefit of anyone other than the owner thereof, and intending or knowing that the offense will, injure any owner of that trade secret, knowingly ... without authorization copies, duplicates, sketches, draws, photographs, downloads, uploads, alters, destroys, photocopies, replicates, transmits, delivers, sends, mails, communicates, or conveys such information" shall be punished.

Section 1832 does not define trade secret. However, 18 U.S.C. § 1839 does.

A "trade secret" is "all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if -- (A) the owner thereof has taken reasonable measures to keep such information secret; and (B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, the public".

The Court of Appeals wrote that "Not all business knowledge is a trade secret", but that the machinery at issue includes trade secrets, because Goodyear took "reasonable measures to keep such information secret" within the meaning of Section 1832, and the defendants photographed the machinery "without authorization" and "intending or knowing that the offense will ... injure any owner of that trade secret" within the meaning of Section 1839.

The defendants also argued on appeal that Section 1832 is unconstitutionally vague. The Court of Appeals rejected this, in part because it rejected this argument in its 2002 opinion in US v. Yang, 281 F.3d 534.

The Court added, "Nor is there anything about this prosecution that suggests Roberts and Howley were trapped by a hopelessly vague line between what the law allows and what it proscribes. Ordinary people in Roberts’ and Howley’s shoes would readily know that Goodyear’s designs were trade secrets. And they would readily know that § 1832 prohibits stealing those designs. Nothing about the statute suggests that it permits arbitrary and discriminatory enforcement, and indeed Roberts and Howley do not argue otherwise. As applied to Roberts and Howley, this statute is not unconstitutionally vague."

This case is USA v. Sean Edward Howley and Clark Alan Roberts, U.S. Court of Appeals for the 6th Circuit, App. Ct. Nos. 11-6040, 11-6071 and 11-6194, appeals from the U.S. District Court for the Eastern District of Tennessee at Knoxville, D.C. No. 3:08-cr-175, Judge Thomas Phillips presiding. Judge Sutton wrote the opinion of the Court of Appeals, in which Judges Siler and McKeague joined.

Sen. Leahy Seeks to Move 16 Judicial Nominees

2/4. The Senate Judiciary Committee (SJC) released an expanded agenda for its executive business meeting on February 7, 2013. It includes 16 judicial nominees.

The SJC held an executive business meeting on January 31 at which it held over consideration of the three judicial nominees on that agenda: Richard Taranto (USCA/FedCir), Robert Bacharach (USCA/10thCir), and William Kayatta (USCA/1stCir). All three are again on the agenda for the SJC's meeting on February 7.

SJC rules allow any member to hold over a bill or nomination for one week. Sen. Patrick Leahy (D-VT), the Chairman of the SJC, may be burning through these holds.

Sen. Charles Grassley (R-IA), the ranking Republican on the SJC, pointed out that Sen. Leahy is bringing to a vote in the 113th Congress nominees who were the subject of hearings in the 112th Congress. This, he said, is disrespectful of the three new members of the SJC, Sen. Jeff Flake (R-AZ), Sen. Ted Cruz (R-TX), and Sen. Mazie Hirono (D-HI).

Sen. Leahy urged the SJC to approve Taranto, Bacharach and Kayatta. He said that Sen. Susan Collins (D-ME) supports Kayatta, but said nothing about Taranto or Bacharach.

The Taranto nomination, which was filibustered in the 112th Congress, could have the greatest impact upon technology law, because he has been nominated for the U.S. Court of Appeals (FedCir). See also, story titled "Richard Taranto and the Federal Circuit" in TLJ Daily E-Mail Alert No. 2,497.

In addition to Taranto, Bacharach and Kayatta, the February 7 agenda includes consideration of 13 other judicial nominees who were nominated in the 112th Congress, and re-nominated by President Obama on January 3, 2013.

The agenda lists Patty Schwartz (USCA/3rdCir) and Caitlin Halligan (USCA/DCCir). Schwartz was filibustered in the 112th Congress.

Halligan is General Counsel in the Manhattan District Attorneys Office in New York, but has been nominated for the U.S. Court of Appeals (DCCir). Her nomination is particularly controversial, because President Obama is trying to give her the seat that Democrats long kept vacant during the Bush administration. She was technically not subject to a filibuster at the close of the 112th Congress, but she had been earlier, and a cloture vote failed.

The agenda also lists Katherine Failla (USDC/SDNY), Troy Nunley (USDC/EDCal), and Pamela Ki Mai Chen (USDC/EDNY). All three were approved by the SJC in the 112th Congress, but not until just before it adjourned.

The agenda also lists Andrew Gordon (USDC/DNev), Ketanji Jackson (USDC/DC), Raymond Moore (USDC/DColo), Beverly O'Connell (USDC/CDCal), Analisa Torres (USDC/SDNY), and Derrick Watson (USDC/DHa). These nominations were pending in the SJC at the close of the 112th Congress.

Finally, the agenda also lists Mark Barnett and Claire Kelly who have been nominated for the U.S. International Trade Commission (USITC), which has jurisdiction over intellectual property based import exclusion orders.

Absent from this agenda is William Orrick (USDC/NDCal). He was filibustered in the 112th Congress, and re-nominated by Obama on January 3.

The SJC has not yet held a hearing on the nomination of Valerie Caproni, a former FBI General Counsel, to be a Judge of the USDC/SDNY. See, story titled "Obama Nominates Caproni to District Court" in TLJ Daily E-Mail Alert No. 2,474, November 19, 2012, and her SJC questionnaire responses.

Sen. Ayotte and Rep. Chabot Introduce Bills to Make the Internet Tax Freedom Act Permanent

2/4. Sen. Kelly Ayotte (R-NH) and Sen. Dean Heller (R-NV) introduced S 31 [LOC | WW], the "Permanent Internet Tax Freedom Act of 2013", on January 22, 2013. This bill would make permanent the current partial ban on state internet access taxes and multiple and discriminatory taxes on electronic commerce.

The current moratorium, which is codified at 47 U.S.C. § 151 note, is scheduled to expire on November 1, 2014.

The Congress enacted the original Internet Tax Freedom Act (ITFA) in late 1998. The original ban was for three years. The Congress enacted three temporary extensions, in 2001, 2004 and 2007. The Congress has also added to the definitions, and exemptions.

The current ban provides that "No State or political subdivision thereof may impose ... Taxes on Internet access" or "Multiple or discriminatory taxes on electronic commerce". There are, however, grandfathered taxes, and numerous exceptions.

See, full story.

Other ICT Tax Issues for the 113th Congress

2/4. The just introduced S 31 and HR 434 address only a small subset of the larger set of burdensome state and local taxes directed at information and communications technology (ICT). These bill only address internet access taxes and multiple and discriminatory taxes on electronic commerce.

There will likely be other bills introduced in the 113th Congress to address other state ICT tax problems.

For example, Rep. Zoe Lofgren (D-CA), Sen. Ron Wyden (D-OR), and/or others may reintroduce in the 113th Congress the "Wireless Tax Fairness Act of 2011". See, HR 1002 [LOC | WW] and S 543 [LOC | WW] from the 112th Congress. These bills would limit state taxation of wireless services, including "mobile services, mobile service providers, or mobile service property".

Second, Rep. Bob Goodlatte (R-VA) and/or others may reintroduce in the 113th Congress the "Business Activity Tax Simplification Act". See, HR 1439 [LOC | WW] from the 112th Congress. Rep. Goodlatte, who is now Chairman of the House Judiciary Committee (HJC), has been sponsoring related bills for many Congresses.

Third, Rep. Lamar Smith (R-TX), Sen. Wyden and/or others may reintroduce in the 113th Congress the "Digital Goods and Services Tax Fairness Act". See, HR 1860 [LOC | WW] and S 971 [LOC | WW] from the 112th Congress. These bills would provide that "No State or local jurisdiction shall impose multiple or discriminatory taxes on or with respect to the sale or use of digital goods or digital services."

Fourth, Representatives or Senators may reintroduce in the 113th Congress the "Telecommuter Tax Fairness Act". See, HR 2600 [LOC | WW] from the 111th Congress. These bills would limit abusive state taxation of the incomes of individuals who live out of state, but who use internet and computer technology to telework for a company in the tax imposing state.

Also, none of these bills would do anything to limit abusive or burdensome taxes on ICT imposed by the federal government.

For example, there is the federal excise tax on telephone service, codified at 26 U.S.C. § 4251, et seq. See, HR 428 [LOC | WW] from the 112th Congress, introduced by former Rep. Dean Heller (R-NV). Now Sen. Dean Heller (R-NV reintroduced this bill on February 4, 2013 in the 113th Congress as S 213 [LOC | WW].

There are also federal ICT taxes imposed by the Federal Communications Commission (FCC) through its universal service tax and subsidy programs.

People and Appointments

2/4. President Obama re-nominated Scott Kieff to be a member of the U.S. International Trade Commission for the term expiring June 16, 2020. See, White House news office release. President Obama first nominated him on September 11, 2012. He is a professor at George Washington University law school. He is a Republican pick for one the six seats on the USITC. The USITC is not an Article III court. However, it exercises judicial authority in Section 337 (19 U.S.C. § 1337) proceedings regarding orders that exclude the importation into the US of articles that infringe intellectual property rights.

More News

2/4. The Department of Commerce's (DOC) National Telecommunications and Information Administration's (NTIA) announced that its Commerce Spectrum Management Advisory Committee (CSMAC) will meet on Thursday, February 21, 2013, in Stanford, California, from 9:00 AM to 12:00 NOON. See, notice in the Federal Register, Vol. 78, No. 23, February 4, 2013, at Page 7758. The NTIA will webcast this event. The committee will hear report for five working groups (WG):

FTC Releases Report on Mobile Privacy Disclosures

2/1. The Federal Trade Commission (FTC) released a report [36 pages in PDF] titled "Mobile Privacy Disclosures: Building Trust Through Transparency".

It enumerates numerous "suggestions" and "recommendations" for the businesses and organizations involved in mobile communications regarding their privacy related practices and disclosures.

Recommendations Contained in the Report. It states that the mobile platforms (that is, the mobile operating systems providers, Google, Apple, Amazon, Microsoft, Blackberry) "should ... Provide just-in-time disclosures to consumers and obtain their affirmative express consent before allowing apps to access sensitive content like geolocation". Platforms should also "Promote app developer best practices."

See, full story.

BLS Reports January 2012 Employment Data

2/1. The Department of Labor's (DOL) Bureau of Labor Statistics (BLS) released employment data for the U.S. for the month of January 2012. The BLS stated in a release that the seasonally adjusted unemployment rate in the US in January was 7.9%. This is an increase from December, when it was 7.8%.

The BLS stated in its release that this is "essentially unchanged" from December. When the BLS first reported the December unemployment rate, on January 4, it stated that it was 7.8%, and that this was unchanged from November. (It still reports 7.8% for December.) And, when the BLS first reported the November unemployment rate, on December 7, it stated that it was 7.7%. (It has since revised that to 7.8%.)

Due to revisions and the BLS's elastic use of the English language, the unemployment rate has unchanged from 7.7% to 7.9% in the last two months.

Once again, a bright spot in the BLS employment data is that total employment in the category of "Computer systems design and related services" continued to grow in January.

BLS Table A-1, which is based on household surveys, shows that the seasonally adjusted total labor force grew from 155,511,000 to 155,654,000, an increase of 143,000. The labor force participation rate remained constant at 63.6%. This same table shows that total employment grew from 143,305,000 to 143,322,000, an increase of 17,000 persons with jobs. The BLS reported that total unemployment increased from 12,206,000 to 12,332,000, an increase of 126,000 unemployed people.

The unemployment rate in January, with less rounding, was 7.9227%.

BLS Table B-1, which is based upon business surveys, reveals employment trends in various industry sectors, including information and communications technology (ICT) sectors. The BLS's categories do not facilitate precise analysis of trends in ICT. Nevertheless, the data set out in the table below contains ICT related categories. (This table also includes legal services because most of the subscribers to TLJ are lawyers.)

The table below contains ICT related excerpts from the BLS table titled "Table B-1. Employees on nonfarm payrolls by industry sector and selected industry detail". This is the seasonally adjusted data.

Table: Total Number of Employees in Thousands by ICT Industry Sector
  Computer & peripheral equipment 157.8 158.5 158.5 159.7
  Communication equipment 111.3 108.1 108.2 107.6
  Semiconductors & electronic comp. 385.2 381.1 383.1 383.6
Information Services:        
  Publishing industries, except Internet 741.0 732.7 730.2 731.6
  Motion picture & sound recording 356.6 386.0 388.3 388.0
  Broadcasting, except Internet 284.8 284.3 285.4 285.6
  Telecommunications 869.2 854.1 850.1 855.0
  Data processing, hosting & related serv. 248.3 249.9 251.5 252.6
  Other information services 169.7 177.8 176.0 177.9
Professional Services:        
  Legal services 1,119.1 1,126.1 1,128.0 1,125.6
  Computer systems design & related serv. 1,575.8 1,655.2 1,659.6 1,664.2
Source: BLS, February 1, 2013 employment report, Table B-1.

People and Appointments

Jonathan Leibowitz2/1. Jonathan Leibowitz (at left) announced in a release that he will leave the Federal Trade Commission (FTC) on February 15, 2013. He has been a Commissioner since 2004, and Chairman since 2009. See also, statement by Sen. Patrick Leahy (D-VT).

2/1. President Obama nominated James Stock to be a member of the Executive Office of the President's (EOP) Council of Economic Advisors (CEA). See, White House news office release. He has briefly been Chief Economist of the CEA. Before that, he was a professor at Harvard University.

2/1. Mark Sullivan, Director of the U.S. Secret Service (USSS) since 2006, will leave. In addition to its protective and anti-currency counterfeiting functions, the USSS has responsibilities in investigating certain crimes involving computers, counterfeiting of credit cards and identification documents, and other threats to payment and financial systems. See, DHS release.

GAO Report Faults Cyber Defenses at FCC

2/1. The Government Accountability Office (GAO) released a report [35 pages in PDF] titled "Information Security: Federal Communications Commission Needs to Strengthen Controls over Enhanced Secured Network Project".

It states that the FCC "suffered a security breach on its agency network" in September of 2011. It discusses the FCC's subsequent efforts to protect against and detect cyber attacks, and its Enhanced Security Network (ESN) project.

But, this report finds that "FCC did not effectively implement appropriate information security controls in the initial components of the ESN project. Although the commission deployed enhanced security controls and tools for monitoring and controlling security threats as of August 2012, it had not securely configured these tools and other network devices to sufficiently protect the confidentiality, integrity, and availability of its sensitive information."

As a consequence, the GAO reports that "sensitive information remained at unnecessary risk of inadvertent or deliberate misuse, improper disclosure, or destruction."

More News

2/1. The National Institute of Standards and Technology's (NIST) Computer Security Division (CSD) released its draft SP 800-63 -2 [123 pages in PDF], titled "Electronic Authentication Guideline". The deadline to submit comments is March 4, 2013.

2/1. The Federal Trade Commission (FTC) granted early termination on February 1, 2013 of the HSR waiting periods for the transactions involving GT Nexus and TradeCard. See, FTC notice of February 4, 2013. The two companies announced their merger plans on January 7, 2013, See, release.

Go to News from January 26-31, 2013.