TLJ News from March 6-10, 2013

US China Commission Reports on Trade Between US and PRC

3/8. The U.S.-China Economic and Security Review Commission released a paper [16 pages in PDF] titled "Staff Report on Monthly Trade Data with China".

This report states that "The U.S. trade deficit in goods with China in January 2013 was $27 billion, $1.7 billion higher than at the same point a year earlier. At this rate, the bilateral trade deficit will set a new record. However, the rise in the U.S. trade deficit with China is slower than a year ago, when the deficit increased by nearly $3 billion in January year-on-year. Exports to China in January grew by 12.1 percent over the previous year, compared to 4.4 percent in 2011- 2012. Even as export growth accelerated, the rise in imports from China dampened."

This report also states that "Computer and electronics products, as well as electrical equipment, exhibited the strongest growth among top U.S. imports from China."

This report includes data on the balance of trade in many categories. There is a huge imbalance in the category of "Information & Communications". For the month of January 2013 the US imported from the PRC $10,790,000,000, and exported to the PRC $336,000,000, for a deficit of $10,454,000,000. This is an increase of about $1.5 Billion from January 2012, when the deficit for this category was $8,400,000,000.

BLS Reports February 2013 Employment Data

3/8. The Department of Labor's (DOL) Bureau of Labor Statistics (BLS) released employment data for the U.S. for the month of February 2013. The BLS stated in a release that the seasonally adjusted unemployment rate in the US in February was 7.7%. This is a decrease from January, when it was 7.9%.

A drop in the unemployment rate is good. However, the underlying data also reflect a negative trend. On the bright side, 170,000 more people were employed in February. This contributed to the decline in the unemployment rate. On the other hand, fewer people were in the workforce. The size of the civilian labor force dropped by 130,000 in February. This too contributed to the decline in the unemployment rate. It also caused the participation rate to drop from 63.6% to 63.5%.

There is a several year long trend of decreasing demand for labor that is not accurately represented by the unemployment rate. See, story titled "Commentary: Unemployment Rate, Participation Rate, and Tech Policy" in TLJ Daily E-Mail Alert No. 2,505, January 8, 2012.

The BLS data shows that employment in legal services and most technology related categories was flat in February. However, employment in the movie and record category jumped upwards, and the long term growth trend in computer systems design continued.

The BLS reported that total employment in "Motion picture and sound recording industries" grew by 20,800 in February. This is an increase of 5.5% in just one month. It also represents over 12% of the total growth in employment in February. This may represent a statistical anomaly created by a change in BLS methods . Also, most of this reported growth came from revising downwards the data for recent months.

Nevertheless, the BLS reports that movie and record industry employment grew in February for the month, and for the year. There may be an implication for copyright policy. Assertions that unauthorized copying of movies and music is harming employment in those industries is unsupported by BLS data.

The BLS also reported total employment in the category of "Computer systems design and related services" increased in February by 5,800. It is up 80,600 from February of 2012.

BLS Table A-1, which is based on household surveys, shows that the seasonally adjusted total labor force shrunk from 155,654,000 to 155,524,000, a decrease of 130,000. This same table shows that total employment grew from 143,322,000 to 143,492,000, an increase of 170,000 persons with jobs. The BLS reported that total unemployment decreased from 12,332,000 to 12,032,000, a decrease of 300,000 unemployed people.

The unemployment rates in January and February, with less rounding, were 7.9227% and 7.7364%.

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.

Janet Yellen, Vice Chairman of the Federal Reserve Board (FRB) gave a speech in Washington DC on February 11, 2013 in which she stated that since the last recession there has been "weak recovery in employment" and that "technological change" poses challenges for workers.

Janet YellenYellen (at right) said that "A factor contributing to the high level of long-term unemployment in the current recovery is the relatively large proportion of workers who have permanently lost their previous jobs, as opposed to being laid off temporarily. This possibility and the unprecedented level and persistence of long-term unemployment in this recovery have prompted some to ask whether a significant share of unemployment since the recession is due to structural problems in labor markets and not simply a cyclical shortfall in aggregate demand."

She continued that "there might have been an increase in the degree of mismatch between the skills possessed by the unemployed and those demanded by employers." But, she said that she believes that it "has been largely cyclical and not structural".

"It will be a long road back to a healthy job market." She concluded that "Longer-term trends, such as globalization and technological change, will continue to pose challenges to workers in many industries."

Table: Total Number of Employees in Thousands by ICT Industry Sector
  Computer & peripheral equipment 157.6 158.4 159.4 158.9
  Communication equipment 110.8 108.3 107.8 107.8
  Semiconductors & electronic comp. 385.9 382.5 381.9 381.2
Information Services:        
  Publishing industries, except Internet 740.3 729.9 730.2 728.2
  Motion picture & sound recording 370.8 379.3 374.8 395.6
  Broadcasting, except Internet 283.9 285.8 286.3 287.1
  Telecom. 865.9 855.1 854.8 855.2
  Data processing, hosting & related serv. 249.6 251.6 252.9 252.1
  Other information services 170.6 178.5 178.2 178.5
Professional Services:        
  Legal services 1,119.7 1,128.0 1,124.5 1,124.7
  Computer systems design & related serv. 1,588.8 1,658.5 1,663.6 1,669.4
Source: BLS, March 8, 2013 employment report, Table B-1.

House Judiciary Committee to Consider Legislation to Allow Cell Phone Unlocking

3/8. The House Judiciary Committee (HJC) announced in a release on March 8, 2013 that the HJC and Senate Judiciary Committee (SJC) "will work together to find a solution that would restore consumers ability to unlock their cell phones,  in order to switch from one wireless carrier to another".

This release also states that HJC members "expect to introduce legislation in the immediate future".

Rep. Bob Goodlatte (R-VA) stated in this release that "As chairman of the House Judiciary Committee, I intend to work closely with members of the House and Senate Judiciary Committees to ensure that cell phone users have the ability and freedom to use their cell phone with the carrier of their choosing."

Rep. John Conyers (D-MI), the ranking Democrat on the HJC, stated that "It is important that we work on a bipartisan basis to address the issue of cell phone unlocking to provide consumers with greater choices and affordability in this vital marketplace."

More Judicial Appointments

3/7.The Senate Judiciary Committee (SJC) held an executive business meeting at which it approved by voice vote the nominations of Sheri Chappell (USDC/MDFl), Michael McShane (USDC/DOre), Nitza Alejandro (USDC/EDPenn), Luis Restrepo (USDC/EDPenn), and Jeffrey Schmehl (USDC/EDPenn).

Sen. Klobuchar Introduces Bill to Authorize FCC to Direct Wireless Device Unlocking

3/6. Sen. Amy Klobuchar (D-MN), Sen. Mike Lee (R-UT) and Sen. Richard Blumenthal (D-CT) introduced S 481 [LOC | WW | PDF], the "Wireless Consumer Choice Act", a bill that would give the Federal Communications Commission (FCC) regulatory authority with respect to unlocking of wireless devices.

This bill would direct the Federal Communications Commission (FCC) to write regulations directing wireless service providers to permit subscribers to unlock wireless devices. It would not affect the Digital Millennium Copyright Act (DMCA).

Sen. Amy KlobucharSen Klobuchar (at right) stated in a release that "Consumers should have flexibility and choice when it comes to their wireless service and they deserve to keep and use cell phones they have already purchased ... This legislation will help allow consumers to unlock their phones."

The bill provides that "Pursuant to its authorities under title III of the Communications Act of 1934 (47 U.S.C. 301 et seq.), the Federal Communications Commission, not later than 180 days after the date of enactment of this Act, shall direct providers of commercial mobile services and commercial mobile data services to permit the subscribers of such services, or the agent of such subscribers, to unlock any type of wireless device used to access such services."

The bill adds that "Nothing in this Act alters, or shall be construed to alter, the terms of any valid contract between a provider and a subscriber."

This clause would give unclear directions to the FCC. It lacks clarity regarding whether the FCC would have authority to alter the terms of contracts, to prohibit enforcement by providers of terms in contracts, or to mandate that future contracts either contain or not contain certain provisions. Indeed, it may be unclear today what authority the FCC possesses without enactment of this bill.

The bill is clear that it only reaches providers of "commercial mobile services" and "commercial mobile data services" which are defined by the Communications Act. And, it only reaches unlocking of devices to "access such service". Hence, it does not reach all unlocking. And, it does not reach wireless device makers or software developers.

Unlocking may constitute a violation of the anti-circumvention provisions of the Digital Millennium Copyright Act (DMCA). The Librarian of Congress has statutory authority to exempt classes of works from teh ban on circumvention, but in its fifth triennial rules it declined to create a three year exemption for unlocking wireless devices.

While the bill would direct the wireless service providers to allow unlocking, it would do so by directing the FCC to regulate the relationship between the service provider and its customers. This bill does not authorize consumers to unlock their phones.

This bill would not change the circumstance that unlocking may violate the DMCA. (Some groups argue that unlocking does not violate the DMCA in the first place.) For example, if this bill were enacted into law, the FCC might by promulgation of rules, and enforcement of those rules, compel service providers to unlock phones. But, those same companies (and especially AT&T and Verizon) might sue the makers, importers or distributors of things that consumers use to unlock phones on their own. This bill does not create or facilitate a consumer self help option.

Christopher Lewis of the Public Knowledge (PK) stated in a release regarding this bill that "the root of this problem lies in parts of the Digital Millennium Copyright Act" and "Amending the DMCA itself will ensure stronger competition, and also that consumers can use the devices they've bought in whatever lawful way they choose."

Senate Again Rejects Cloture on Halligan Nomination for DC Circuit

3/6. The Senate rejected a motion to invoke cloture on the nomination of Caitlin Halligan to be a Judge of the U.S. Court of Appeals (DCCir) by a  vote of 51-41. See, Roll Call No. 30.

Halligan is being filibustered. Invoking cloture is the only method for terminating a filibuster. Pursuant to Senate Rule XXII, a cloture motion requires a three fifths majority for passage. See, Senate memorandum titled "Filibusters and Cloture in the Senate".

It was a nearly straight party line vote. Democrats voted yes, and Republicans voted no. However, Sen. Lisa Murkowski (R-AK) voted yes, and Sen. Harry Reid (D-NV) voted no. Sen. Reid, the Senate Majority Leader, sometimes votes no when his side loses, to preserve the procedural right to bring a motion for reconsideration.

This outcome was expected. The Senate also failed to invoke cloture on her nomination during the 112th Congress. President Obama first nominated her in 2010.

The DC Circuit is critical for many technology related areas of law because its hears many petitions for review and appeals from final orders of the Federal Communications Commission (FCC) and other federal agencies.

However, Halligan's uncomfirmability stems in part from her positions on several issues that are both of intense interest to many voters, and that might come before the DC Circuit. It is also the result of the circumstance that President Obama and Senate Democrats are trying to place her in a seat that Senate Democrats long kept open during the Bush administration.

Moreover, Sen. Reid is making only a limited effort to win confirmation of the most controversial of President Obama's nominees. Sen. Reid's overriding goal is getting Democrats elected and re-elected to the Senate, and thereby maintaining a Democratic majority in the Senate. This entails not compelling Senate Democrats to cast votes on bills or nominees that might contribute to their loosing voter support in their states.

He successfully enabled Senate Democrats to maintain their majority in 2010 when House Democrats, who had been compelled to vote many controversially bills in the 111th Congress, were routed and lost their majority status. Sen. Reid also led Democrats to victory in the 2012 elections, even though far more incumbent Democrats than incumbent Republicans were up for re-election.

The cloture vote on Halligan was procedural. Losing it enabled Sen. Reid to shield Democrats from having to vote in a critical up or down vote. Red state Democrats might especially be concerned about the consequences of voting for nominees such as Halligan.

Halligan is General Counsel for the New York County District Attorney's Office. Previously, she worked at the law firm of Weil Gotshal & Manges for several years. Before that, she was Solicitor General of New York State. Before that, she held several positions in the Office of the New York State Attorney General, including Chief of the Internet Bureau. She was also briefly worked for the Washington DC law firm of Wiley Rein.

Sen. Charles Grassley (R-IA), the ranking Republican on the Senate Judiciary Committee (SJC), stated that "The Senate determined, more than a year ago, that this nomination should not be confirmed. Rather than accepting the Senate’s decision, the President has renominated Ms. Halligan. It is time for the President and Senate Democrats to accept the fact that this nomination is not going to be confirmed by the Senate. We need to move on." See, prepared statement.

"This is a court where we can least afford to confirm an activist judge", said Sen. Grassley. He then said that when she worked in the New York AG's office, "She was using the full weight of her office to advance and promote a political agenda masked by a legal doctrine that is well outside of the legal mainstream", including in a case against gun manufacturers which he called an "invitation to legislate from the bench". Sen. Grassley said that "the New York state appellate court found her argument to be completely meritless, and explicitly rejected her theory".

Sen. Grassley also criticized her views and writings regarding trial of terrorists in civilian courts.

Sen. Grassley also responded to Democrats who argued that there is an urgent need for more judges on the DC Circuit. First, he pointed out that the Democrats long blocked President Bush's nominee for this seat. Then, he said that "since 2005, the D.C. caseload has actually continued to decline. The total number of appeals filed is down over 13 percent. The total number of appeals pending is down over 10 percent; filings per panel are down almost 6 percent. Compared to other Courts of Appeals, the D.C. Circuit caseload measured by number of appeals pending per panel is 54 percent less than the national average."

Senate Judiciary Committee Holds DOJ Oversight Hearing

3/6. The Senate Judiciary Committee (SJC) held a hearing titled "Oversight of the Department of Justice". The only witness was Attorney General Eric Holder. Most of the hearing was devoted to non-technology related issues. However, cyber security, theft of intellectual property and trade secrets by cyber intrusion, Section 1030, Aaron Schwartz, and other tech issues were addressed.

Sen. Patrick Leahy (D-VT), the Chairman of the SJC, did not address tech issues in either his oral or written open statement [2 pages in PDF].

In his opening statement, Sen. Charles Grassley (R-IA), the ranking Republican on the SJC, listed numerous written requests for information from Senators that remain unanswered by the DOJ. He also complained about DOJ information being made available to the Senate Intelligence Committee (SIC) but not the SJC.

Eric HolderHolder (at right) focused on guns in his written opening statement [4 pages in PDF], which he read at the hearing.

Much of the hearing focused on non-technology related topics, such as elections and voting, guns, and sequestration. The remainder of this article addresses only the technology related matters that came up at this hearing.

Cyber Security. Holder said that "we've worked to combat emerging national security threats, such as cyber intrusions and cyber attacks directed against our systems and infrastructure by nation states and non-state actors, including terrorist groups. Last summer, the Department created the National Security Cyber Specialists network to spearhead these efforts. The network is comprised of prosecutors and other cyber specialists across the country who will work closely with the FBI and other partners to investigate malicious cyber activity, seek any necessary cooperation, and, where appropriate, bring criminal prosecutions as part of our government-wide effort to deter and disrupt cyber threats to our national security."

Sen. Sheldon Whitehouse (D-RI) raised President Obama's "cyber executive order", and said that he also wanted Congressional legislation.

See, Executive Order of February 13, 2013, and story titled "Obama Signs Cyber Security Order and Policy Directive" in TLJ Daily E-Mail Alert No. 2,525, February 19, 2013.

Sen. Whitehouse also asked Holder for a "briefing" on DOJ prosecution of cyber crime, including the Coreflood case, which involves botnets. See, U.S.A. v. John Does, U.S. District Court (D-CT), D.C. No. 3:11-cv-00561-VLB. See, also DOJ release of April 27, 2011.

Cyber Theft of IP and Trade Secrets. Sen. Whitehouse also lamented that the DOJ has not brought "a single cyber prosecution against a hacker", such as one in People's Republic of China (PRC), who has accessed a US computer network and stolen trade secrets for commercial espionage.

See, related story in this issue titled "Mandiant Releases Report on Cyber Espionage by People's Liberation Army".

Sen. Whitehouse asked for a "briefing". Holder said that the DOJ would sent witnesses to such a hearing.

Later in the hearing, Sen. Chris Coons (D-DE) addressed theft by cyber intrusion, the Mandiant report, and whether there should be a new private right of action.

See, related story in this issue titled "Sen. Coons Proposes Private Right of Action for Cyber Theft of Trade Secrets".

Allegations of Improper Cyber Prosecutions. Sen. Leahy asked Holder about improper use of the Computer Fraud and Abuse Act (CFAA) by federal prosecutors, such as prosecutions based merely on a violation of a terms of use agreement.

Holder said that "we constantly monitor that", and "that is something we can look at". Holder made no commitments, and no statements of DOJ policy.

The CFAA, which is codified at 18 U.S.C. § 1030, is the primary statutory authority for both criminal prosecutions, and private rights of action, alleging computer hacking and unauthorized cyber intrusions. However, some of its terms are vague. The DOJ alleged violation of Section 1030 in the prosecutions of Lori Drew and Aaron Schwartz.

The Drew case is U.S.A.  v. Lori Drew, U.S. District Court for the Central District of California, D.C. No. CR-08-0582-GW. See also, stories titled "Lori Drew Pleads Not Guilty in Section 1030 Case" in TLJ Daily E-Mail Alert No. 1,794, June 23, 2008, "Law Professors Argue for Dismissal of MySpace Section 1030 Prosecution" in TLJ Daily E-Mail Alert No. 1,810, August 11, 2008, and "Jury Returns Guilty Verdict in Lori Drew Case" in TLJ Daily E-Mail Alert No. 1,865, December 2, 2008.

The Schwartz case is U.S.A. v. Aaron Schwartz, U.S. District Court for the District of Massachusetts, D.C. No. 1:11-cr-10260-NMG. See also, stories titled "Grand Jury Returns Indictment for Unauthorized Downloading of 4.8 Million JSTOR Articles" in TLJ Daily E-Mail Alert No. 2,264, July 20, 2011, and "Aaron Schwartz Commits Suicide" in TLJ Daily E-Mail Alert No. 2,508, January 15, 2013.

Sen. John Cornyn (R-TX) asked about the prosecution of Schwartz by the DOJ, and possible "prosecutorial zeal" and "misconduct".

Holder said that Schwartz's death was a "tragedy". But, he continued that there has been a disconnect between the plea negotiations that actually occurred, and statements that have been made regarding penalties sought by the DOJ. Holder said that the DOJ made a plea offer of 3 months. It made another offer that would have allowed the District Court to impose a sentence of 0 to 6 months. He added that "those offers were rejected". And, "there was never an intention" by the DOJ to seek a lengthy prison sentence.

Holder added that "a good examination has been done" by the DOJ of its actions in this case.

Sen. Cornyn persisted on this subject. He asked whether there was "prosecutorial misconduct or overreach" by the DOJ in the Schwartz case. Holder said no.

Sen. Cornyn used the words "inappropriate" and "bully" to describe prosecutorial conduct in the Schwartz case. He also compared the DOJ's "prosecution of Sen. Ted Stevens" to that of Schwartz. Sen. Cornyn said that Sen. Stevens was "on the receiving end of prosecutorial misconduct".

Sen. Cornyn concluded that "both of these men are dead", so now it is "hard to make recompense".

Antitrust. Holder said in opening that the DOJ "has taken significant steps to ensure robust enforcement of antitrust laws". However, he did not elaborate, and Senators asked no questions regarding antitrust or competition law.

Notably, there was no discussion of standards essential patents, FRAND commitments, and patent assertions.

Surveillance and ECPA Reform. Holder did not address any surveillance, Foreign Intelligence Surveillance Act (FISA), or Electronic Communications Privacy Act (ECPA) issues in his opening statement.

Also, Senators did not raise any of these issues. However, members of the SJC introduced proposals late in the 112th Congress to reform the ECPA.

Sen. Leahy proposed creating a warrant requirement for accessing stored e-mail. See, story titled "Senate Judiciary Committee Approves Leahy Bill to Require Warrant for Accessing Cloud Stored E-Mail" in TLJ Daily E-Mail Alert No. 2,479, November 30, 2012.

Sen. Al Franken (D-MN) introduced in the 112th Congress S 1223 [LOC | WW], the "Location Privacy Protection Act of 2011".

Senators and Holder spent much time discussing the hypothetical issue of drone strikes within the US. On the same day, on the Senate floor, Senators were debating this issue in the context of the confirmation of a new Director of Central Intelligence.

However, the only issue in the SJC was use of drones to kill people. There was no discussion of use of drones for surveillance purposes.

Sen. Coons indirectly referenced the FISA in the context of drone strikes in the US. He asked about the possibility of a form of judicial review, similar to that in the FISA. Otherwise, there was no discussion of the surveillance under either the FISA or Title 18 at this hearing.

Other Matters. The SJC periodically holds Department of Justice (DOJ) oversight hearings at which the Attorney General (AG) appears. This hearing conformed to historic patterns. Senators of the same party as the President and AG complemented the AG and praised the DOJ for being less political and partisan than when the other party last controlled the White House and DOJ. Senators not from the party of the President and AG criticized the AG for refusing to comply with requests for documents, and lamented that the DOJ is now more political and partisan.

Elections and the Voting Rights Act are also perennial issues at these hearings. Democratic Senators pressed the AG on enforcement of those laws that would likely benefit Democratic candidates. Republican Senators pressed the AG on enforcement of those laws that would likely benefit Republican candidates.

Sen. Coons Proposes Private Right of Action for Cyber Theft of Trade Secrets

3/6. The Senate Judiciary Committee (SJC) held a hearing titled "Oversight of the Department of Justice". Sen. Christopher Coons (D-DE) condemned foreign theft of American trade secrets by cyber intrusion, and proposed creating a private right of action.

Attorney General Eric Holder stated that cyber theft of trade secrets is a huge and growing problem, and that the Department of Justice (DOJ) should work with Sen. Coons on his proposal.

Sen. Christopher CoonsSen. Coons (at left) said that "In intellectual property, I come out of manufacturing, manufacturing relies on trade secret protection as much as on patenting for critical steps in manufacturing. And there has been just a barrage of assaults, and theft of American intellectual property. A firm called Mandiant, recently released a report, documenting just widespread, and you have spoken to this, theft of American intellectual property. But the number of prosecutions by DOJ around trade secrets has been very light. And I understand the limitations of resources."

Sen. Coons asked, "Would a private right of action, a federal private right of action, help accelerate perhaps some of the assertion of rights, and the ability to pursue justice on behalf of American manufacturers and inventors?"

Holder responded to Sen. Coons. "I think that this is certainly something we should talk about, we should discuss. My instincts take me in a direction that I think where you are, that perhaps that is something we should do, but what I would like to do is work with you, have the appropriate people from the Department sit down, and meet perhaps with your staff, and talk about that possibility. But I do think that the theft of intellectual property, trade secrets, has a devastating impact on our economy, threatens our national security, and is worthy of our attention. This is a problem that is large, but is getting larger, and as you look over the horizon, this is an area where we are going to have to devote more attention as a nation."

Sen. Coons said that "I am glad to hear you say that because I think all of us are on notice that there is probably the greatest widespread theft in human history going on at the moment, and it really does have a negative and cumulative impact."

Sen. Coons did not elaborate on what private right of action he would envision.

The Computer Fraud and Abuse Act (CFAA), which is codified at 18 U.S.C. § 1030, already contains a private right of action.

However, it only provides a right of action against the "violator" who gained or exceeded authorized access to a protected computer system. So for example, if an economic espionage unit of the military of a foreign government stole trade secrets by cyber intrusion, and then transferred those secrets to a company within that country, there would be no private right of action under Section 1030 against that company.

The Tariff Act of 1930, as amended at Section 337, provides a private right of action by rights holders before the U.S. International Trade Commission (USITC) for orders that exclude importation of articles that infringe patents or trademarks, or violate certain other intellectual property rights.

However, Section 337 does not reference trade secrets -- either articles that practice stolen trade secrets, or that are made by processes that practice stolen trade secrets. See, 19 U.S.C. § 1337.

There is also the Economic Espionage Act. The domestic section, which is codified at 18 U.S.C. § 1832, criminalizes theft of trade secrets, but does not contain a private right of action.

The espionage section, which criminalizes theft of trade secrets by any "foreign government, foreign instrumentality, or foreign agent", and which is codified at 18 U.S.C. § 1831, contains no private right of action.

18 U.S.C. § 1836 provides that the DOJ may obtain a civil injunction.

In the 112th Congress, former Sen. Herb Kohl (D-WI), Sen. Coons, and Sen. Whitehouse introduced S 3389 [LOC | WW], the "Protecting American Trade Secrets and Innovation Act of 2012", a bill to amend Section 1836 to create private rights of action under both Sections 1831 and 1832.

This bill would affect all theft of trade secrets, including by insiders, not only theft by cyber intrusion. However, the bill contemplates cyber intrusion because it authorizes ex parte orders for the seizure of computers used to steal trade secrets.

This bill provides for the award of compensatory damages, and under some circumstances, exemplary damages. It also provides for orders for the payment of royalties. It also authorizes "appropriate injunctive relief against any violation", but does not expressly provide for injunctions against manufacture or importation.

As for private rights of action directed at foreign governments, it might be noted that a U.S. District Court is not likely to be able to, among other things, exercise jurisdiction over an espionage unit of the People's Liberation Army.

EC Demands Money from Microsoft, Again

3/6. The European Commission (EC) demanded that Microsoft give it another 561 Million Euros because Microsoft shipped some computers without the EC mandated "browser choice screen".

The EC stated in a release that "Microsoft failed to roll out the browser choice screen with its Windows 7 Service Pack 1 from May 2011 until July 2012. 15 million Windows users in the EU therefore did not see the choice screen during this period."

The EC did not make a new finding of anti-competitive conduct. Rather, it concluded that Microsoft violated commitments that it was compelled to make after a previous EC finding of anti-competitive conduct.

This relates to regulatory proceedings in the US and Europe that date back to 1998, when the U.S. Department of Justice's (DOJ) Antitrust Division sued Microsoft in the U.S. District Court (DC). These single firm conduct cases involve allegations of tying an operating system to an internet browser. The DOJ wrapped up its case over a decade ago. The decade long supervision by the District Court is over. Moreover, the market share of both Microsoft's OS and browser have significantly eroded, and technologies have moved on. However, the EC has not.

Joaquín Almunia, the EC's VP for Competition Policy, gave a speech on March 6 in which he asserted that this matter is "very serious" and warrants a payment of 561 Million Euros.

However, these assertions are further undercut by the fact that the foul for which Microsoft was just fined was afoot for fourteen months before the EC or any of Microsoft's critics, competitors or consumers, noticed anything amiss.

The EC has repeatedly demanded money from Microsoft in this long running proceeding. The EC demanded 497 Million Euros from Microsoft back in 2004. See, stories titled "European Commission Seeks 497 Million Euros and Code Removal from Microsoft" in TLJ Daily E-Mail Alert No. 863, March 25, 2004, and "European Commission Releases Microsoft Decision" in TLJ Daily E-Mail Alert No. 883, April 23, 2004.

The EC demanded another 899 Million Euros from Microsoft in 2008. See, story titled "EC Demands More Money From Microsoft" in TLJ Daily E-Mail Alert No. 1,723, February 26, 2008.

Microsoft is a US based technology company. The companies that have complained to antitrust regulators around the world about Microsoft are mostly US companies.

Google is another US based technology company. Microsoft and other US based companies have endeavored to induce the same regulatory wrath against Google that it Microsoft has experienced. The EC is still conducting an antitrust investigation of Google that is redundant of an already completed US investigation.

The EC has not yet concluded whether it will demand money from Google, and/or order Google to change  its business practices.

The U.S. Federal Trade Commission (FTC) finished its investigation of Google in January of this year. It concluded that it will take no action against Google with respect to search bias. It also reached a settlement with Google that imposed some minor requirements with respect to Google's alleged abuse of standards essential patents (SEPs) for which it was bound by FRAND commitments. See, story titled "FTC Concludes Its Investigation of Google" in TLJ Daily E-Mail Alert No. 2,504, January 7, 2013.

The EC also investigated and faulted Intel, another US based technology company that also faced a parallel FTC action. See, stories titled "FTC and Intel Settle Antitrust Claims", "FTC and Intel Settle Antitrust Claims", and "Commentary on Antitrust Processes" in TLJ Daily E-Mail Alert No. 2,018, August 4, 2010.

The EC demanded over 1 Billion Euros from Intel in 2009. See, story titled "European Commission Initiates Proceeding Against Intel Alleging Anticompetitive Behavior" in TLJ Daily E-Mail Alert No. 1,617, July 26, 2007, story titled "EC Fines Intel One Billion Euros" in TLJ Daily E-Mail Alert No. 1,937, May 12, 2009, and story titled "EC Releases Intel Decision" in TLJ Daily E-Mail Alert No. 1,986, September 22, 2009.

Joaquin AlmuniaAlmunia (at right) stated in the EC release that "In 2009, we closed our investigation about a suspected abuse of dominant position by Microsoft due to the tying of Internet Explorer to Windows by accepting commitments offered by the company. Legally binding commitments reached in antitrust decisions play a very important role in our enforcement policy because they allow for rapid solutions to competition problems. Of course, such decisions require strict compliance. A failure to comply is a very serious infringement that must be sanctioned accordingly."

Neither the FTC nor the Antitrust Division released statements regarding this latest action by the EC, or the EC's redundant regulation of US companies generally.

Microsoft stated in a release that "We take full responsibility for the technical error that caused this problem and have apologized for it. We provided the Commission with a complete and candid assessment of the situation, and we have taken steps to strengthen our software development and other processes to help avoid this mistake -- or anything similar -- in the future."

Go to News from March 1-5, 2013.