Source: http://techlawjournal.com/home/newsbriefs/2003/02d.asp
Timestamp: 2019-04-19 22:46:41+00:00

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TLJ News: February 16-20, 2003.
2/20. The U.S. Court of Appeals (3rdCir) issued its opinion in Dluhos v. Strasberg, a case involving judicial review of an arbitration award regarding a domain name registration. The Appeals Court reversed a District Court affirmation of an arbitration award in favor of a trademark holder.
Introduction. Eric Dluhos is a pro se cyber squatter from New Jersey. He registered the domain name www.leestrasberg.com, thereby invoking the name of the famous acting coach, Lee Strasberg. Strasberg's widow still operates a theatre institute in her deceased husband's name. His estate still holds trademarks. Strasberg, the estate, and theatre institute's web site operator objected to Dluhos' registration, and ultimately instituted a Uniform Domain Name Dispute Resolution Policy (UDRP) arbitration, which they won.
Dluhos has little understanding of law. He sued in federal court, eventually raising numerous spurious claims, such as constitutional claims against non state actors, antitrust violations, and labor law violations. The District Court, among other things, affirmed the arbitration award, after reviewing it under the deferential standards set out in the Federal Arbitration Act (FAA). The Appeals Court reversed and remanded on the basis of an argument not raised by Dluhos -- the interrelation of FAA, the Anticybersquatting Consumer Protection Act (ACPA), and the UDRP. In short, the Appeals Court held that UDRP arbitrations are not mandatory, and therefore not subject to review under the FAA. However, while Dluhos never plead a claim under the ACPA, that is a remedy available to him in this case. The Appeals Court gave Dluhos the benefit of being a pro se litigant, and remanded to the District Court with instructions that it review the arbitration award under the standards set forth in the ACPA. The Appeals Court affirmed the dismissal of all of the spurious claims.
UDRP Arbitration. Eric Dluhos registered the domain name www.leestrasberg.com with the domain name registrar, Network Solutions Inc. (NSI), in 1999. The registration agreement required Dluhos to abide by the Internet Corporation for Assigned Names and Numbers’ (ICANN) Uniform Domain Name Dispute Resolution Policy (UDRP). The UDRP provides for arbitration of disputes regarding domain name registrations by an approved dispute resolution service provider.
Lee Strasberg was a famous acting coach. His widow, Anna Strasberg, owns and directs the Lee Strasberg Theatre Institute, and serves as the executrix of the Estate of Lee Strasberg. The Estate owns trademarks, including "The Lee Strasberg Institute" and "Actor by Lee Strasberg".
CMG Worldwide, which represents and manages Internet sites for the Estate, the Institute and Anna Strasberg, wrote to Dluhos demanding that he rescind the registration. He did not. CMG then instituted an arbitration proceeding under the ICANN UDRP.
Dluhos did not contest the arbitration proceeding before the National Arbitration Foundation (NAF), other than to write it a letter stating that he contested its jurisdiction. The NAF issued a decision against Dluhos and directed that the domain name be transferred to the Estate of Lee Strasberg.
District Court. Dluhos filed a complaint in U.S. District Court (DNJ) against the various Strasberg parties, NSI, and CMG challenging, among other things, the constitutionality of the dispute resolution process. Dluhos later filed an amended complaint in which he alleged harassment, breach of contract, Section 1983 violations, and violations of his First, Fifth and Fourteenth Amendment rights. The defendants then filed motions to dismiss. The District Court dismissed the complaint for failure to state a claim upon which relief can be granted. The District dismissed the constitutional and 1983 claims for lack of state action.
The District Court also reviewed the UDRP decision under the Federal Arbitration Act, which provides, at 9 U.S.C. § 10(a), that a District Court may overturn an arbitration award "... (2) Where there was evident partiality or corruption in the arbitrators, or either of them. (3) Where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced. ..." The District Court upheld the arbitration decision.
Appeals Court. Dluhos appealed. On appeal, he raised, for the first time, antitrust and labor law claims. However, Dluhos never raised the Anticybersquatting Consumer Protection Act (ACPA). The Appeals Court reversed the District Court's decision not to vacate the decision of the UDRP arbitrator.
The Appeals Court first examined whether an UDRP arbitration is an arbitration within the meaning of the FAA. It reasoned that "If a dispute-resolution mechanism indeed constitutes arbitration under the FAA, then a district court may vacate it only under exceedingly narrow circumstances. 9 U.S.C. § 10. ... The net result of a court's application of this standard is generally to affirm easily the arbitration award under this extremely deferential standard -- a result that is squarely in line with the purpose behind the FAA where courts are tasked with reviewing an arbitration decision."
The Court added, "If, however, a dispute-resolution mechanism does not constitute arbitration under the FAA, then a district court has no jurisdiction to review the result absent an independent jurisdictional hook."
The Appeals Court continued that "At issue before us then is whether the nonbinding domain name resolution policy (UDRP) proceeding that shifted Appellant’s registered domain name to the Strasberg defendants constitutes arbitration under the FAA. If this proceeding qualifies as arbitration under the FAA, then the dispute resolution is subject to extremely limited review. If it does not fall under the FAA umbrella, then the district court lacked jurisdiction to examine -- and thus to affirm -- the result under the lax FAA review standards."
The Appeals Court held that, due to the terms of the UDRP, it is does not provide for arbitration that is reviewable under the FAA. The Court held that a UDRP arbitration is not mandatory, for two reasons.
"First, the UDRP obviously contemplates the possibility of judicial intervention, as no provision of the policy prevents a party from filing suit before, after or during the administrative proceedings." The Court also wrote that "The UDRP was intended to ensure that the parties could seek independent judicial resolution of domain name disputes, regardless of whether its proceeding reached a conclusion. ... Indeed, unlike methods of dispute resolution covered by the FAA, UDRP proceedings were never intended to replace formal litigation."
"Second, because the trademark holder or the trademark holder’s representative is not required to avail itself of the dispute resolution policy before moving ahead in the district court, these proceedings do not qualify as the type that would entail a court’s compelling party participation prior to independent judicial review -- thus removing the proceeding from the warmth of the FAA blanket."
The Court also added that a "proceeding settles a disputed proceeding only to the extent that a season-finale cliffhanger resolves a sitcom's storyline -- that is, it doesn't. It is true that the language of the resolution policy describes the dispute-resolution process as ``mandatory,´´ but ``the process is not `mandatory´ in the sense that either disputant's legal claims accrue only after a panel's decision.´´ Parisi, 139 F. Supp. 2d at 751 (quoting Bankers Ins. Co., 245 F.3d at 319). Only the domain-name registrant is contractually obligated to participate in the proceeding if a complaint is filed."
Hence, the Appeals Court concluded that the arbitration award was not subject to review under the FAA, and it vacated the District Court's decision upholding the award under the FAA.
However, the Appeals Court did not conclude at this point. While Dluhos never argued that the District Court should have reviewed the arbitration award under standards set forth in the ACPA, the Appeals Court nevertheless held that it should have. Hence, it remanded to the District Court with instructions to review the award under the ACPA.
The Appeals Court wrote that "Because the UDRP -- a private covenant -- cannot confer federal jurisdiction where none independently exists, the remaining question is whether the Congress has provided a cause of action to challenge its decisions. In the Anticybersquatting Consumer Protection Act, we hold that it has."
It continued that "Under this modern amendment to the Lanham Act, a registrant whose domain name has been ``suspended, disabled, or transferred´´ may sue for a declaration that the registrant is not in violation of the Act, as well as for an injunction returning the domain name."
See, 15 U.S.C. § 1114(2)(D)(v), which provides that "A domain name registrant whose domain name has been suspended, disabled, or transferred under a policy described under clause (ii)(II) may, upon notice to the mark owner, file a civil action to establish that the registration or use of the domain name by such registrant is not unlawful under this chapter. The court may grant injunctive relief to the domain name registrant, including the reactivation of the domain name or transfer of the domain name to the domain name registrant."
The Court added that "we must liberally construe the pro se litigant’s pleadings, and we will apply the applicable law, irrespective of whether he has mentioned it by name."
2/19. The Securities and Exchange Commission (SEC) filed a civil complaint in U.S. District Court (EDNY) against Samuel Aaron Meltzer alleging securities fraud in connection sending false and misleading spam touting stocks.
The complaint states that "Defendant Meltzer is a professional Internet ``spammer´´ who used the Internet to commit securities fraud. In return for compensation from stock promoters and issuers, Meltzer sent millions of unsolicited emails and created numerous websites to promote various penny stocks. In order to conceal his identity -- and to avoid the detection of web hosts seeking to stop Internet spam -- Meltzer operated under at least thirty different assumed Internet identities."
The complaint further alleges that his "spam and websites made false and misleading representations about the stock he helped to promote. First, Meltzer falsely stated that his recommendations represented his own investment opinions based on his review of the issuer's public filings and his interviews with the issuer's management. In fact, Meltzer did not review the issuers' filings, did not interview their management, and simply republished recommendations and representations that he received from the promoters who had hired him." And, "Second, in his emails and websites, Meltzer knowingly or recklessly made false and misleading representations concerning the issuers' current business and projections of future performance that had no reasonable basis in fact."
The complaint also states that "Meltzer touted the stocks of at least twelve issuers and received at least $159,619.62 in stock and cash as ill-gotten gains as a result of his fraudulent conduct."
The two count complaint alleges fraud in violation of Section 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint seeks an injunction against further violations of federal securities law, an accounting, disgorgement of illegal gains, civil penalties, and an order prohibiting Meltzer from participating in an offering of penny stock.
The complaint alleges facts constituting undisclosed touting. However, there is no count alleging illegal touting. Section 17(b) of the Securities Act, codified at 15 U.S.C. § 77q(b), provides that "It shall be unlawful for any person, by the use of any means or instruments of transportation or communication in interstate commerce or by the use of the mails, to publish, give publicity to, or circulate any notice, circular, advertisement, newspaper, article, letter, investment service, or communication which, though not purporting to offer a security for sale, describes such security for a consideration received or to be received, directly or indirectly, from an issuer, underwriter, or dealer, without fully disclosing the receipt, whether past or prospective, of such consideration and the amount thereof."
2/19. U.S. Trade Representative (USTR) Robert Zoellick is on a trip to Japan and PR China to discuss trade related issues. On February 17 he held a press roundtable in Beijing regarding his talks. He discussed intellectual property at length. See, transcript [PDF].
He stated that "the WTO accession of 2001 opens the door to build an economic relationship for years to come. What we are now focused on is the task of WTO implementation, getting down to the basics of business." He added that "We have near term problems to solve so I talked to the Vice Premier and Minister Shi about our ... intellectual property issues ..."
He met with Vice Premier Wen Jiabao (see, Business Week bio) and Ministry of Trade and Economic Cooperation (MOFTEC) Minister Shi Guangsheng (see, ChinaOnline bio).
Zoellick (at right) stated that "there are a whole host of laws and rules that have to be changed as part of the WTO implementation process. But as a general matter, I think China has tried to follow through on this pretty well. In fact, our focus is more on the enforcement side. I talked with both the Vice Premier and Minister Shi about the enforcement of intellectual property rights. But this is again why China is a particularly interesting place because you build interests within China that recognize the benefits of intellectual property protection because of the software development here and the creative industries development here. As I discussed with Minister Shi, they put a lot of laws in place. They know there has been rampant piracy. He talked to me about some of the criminal penalties that they were putting in place, which is very important if you're going to be effective on this. This is an area where, frankly, our businesses will work with us and the Chinese government and Chinese businesses share the same interest."
Zoellick also said that "In the free trade agreements we negotiated with Chile and Singapore, what became a priority issue for a lot of the business software industry and the entertainment industry was establishing new intellectual property rights for a digital world, and in particular the question of, as you downloaded software or music or movies into your memory was there a property right even though you never had a hard copy, you never had a physical form? Because if you didn't people could obviously send it out on networks. So we were establishing property rights of a different type for the changing area."
He continued that "I think part of what I hope to do with the Chinese authorities is, first, establish this as a mutual interest. And I think we are well on our way to doing that given the creative industries here. Second, is to encourage, and I think this part has already been well on its way, make sure you have the right legal structure. Then third, step up the enforcement action. One point that I think is important and is not applied in some countries, but I was pleased again to discuss this with Minister Shi, is the need for criminal penalties. Because, sometimes if it's just financial penalties, it becomes a cost of doing business. So, like you, wherever I go in the world you see major problems of pirating so this is not a problem that is done overnight. But then the next step is, I want to try to build a culture of cooperation in intellectual property so as we turn to the next set of issues, particularly those related to the digital world, that we can try to establish the right standards."
Zoellick also traveled to Tokyo, Japan to attend the World Trade Organization (WTO) Informal Ministerial Meeting. Afterwards, he held a press roundtable. See, February 16 transcript [PDF]. He criticized the Japanese government for resisting tariff cuts in agriculture. He stated that, "they're sacrificing Japan's strengths on the altar of rice."
Zoellick is scheduled to testify before the House Ways and Means Committee on Wednesday, February 26.
2/19. Rep. Bob Goodlatte (R-VA) and Rep. Rick Boucher (D-VA) travelled to Brussels, Belgium this week for discussions with members of the European Parliament and European Commission regarding cyber security and intellectual property. Reps. Goodlatte and Boucher are co-chairs of the Congressional Internet Caucus.
Rep. Goodlatte (at right) issued a release that stated that he and Rep. Boucher "commended the EU Commission on its recent plan to establish a European Network and Information Security Agency to coordinate network security policy in an effort to avert cyber-attacks, but cautioned the Commission against the agency setting network security standards, as opposed to voluntary, industry-led standardization." See, the EU proposal [MS Word].
Rep. Goodlatte's release also stated that the two Congressmen "spoke in support of a recent EU Directive on the Enforcement of Intellectual Property Rights, which would harmonize civil and criminal penalties for intellectual property infringement throughout the EU. However, Goodlatte and Boucher strongly urged the expansion of the Directive to include criminal penalties for non-commercial mass distribution of copyrighted works, similar to the NET Act in U.S. law, which was authored by Congressman Goodlatte." See, January 30, 2003, proposal for a directive [PDF].
Reps. Goodlatte, Boucher, and others regularly travel to Europe to discuss technology related issues. Their last trip was in February of 2002. See, story titled "Rep. Goodlatte Addresses Trip to Russia and EU" in TLJ Daily E-Mail Alert No. 381, March 5, 2002, and transcript of Rep. Goodlatte's media roundtable of February 28, 2002.
2/19. Narda Jones was named Legal Counsel to the Federal Communications Commission's (FCC) Wireline Competition Bureau Chief. She will provide advice on universal service and other issues. She has been with the FCC since January of 2001. Before that, she an Assistant Minnesota Attorney General and advised the Minnesota Public Utilities Commission on telecommunications and energy issues. See, FCC release [MS Word].
2/19. The Rural Utilities Service (RUS) published a notice in the Federal Register stating that it has amended its regulations on Telecommunications Standards and Specifications for Materials, Equipment and Construction, by rescinding the current issue of RUS Bulletin 345-22, RUS Specification for Voice Frequency Loading Coils, PE-26. The RUS stated that "This specification has become outdated because of advancements made in the delivery of telecommunications services to rural subscribers." This change takes effect on March 21, 2003. See, Federal Register, February 19, 2003, Vol. 68, No. 33, at Pages 7897-7898.
2/19. The Securities and Exchange Commission (SEC) filed a civil complaint in U.S. District Court (EDCal) against Paul Moller and Moller International, Inc. alleging a fraudulent, unregistered offering and the filing of a fraudulent Form 10-SB. The SEC's complaint states that Moller used "E-mail, and an internet website to solicit investor interest and sell" stock. Its states that he made fraudulent claims regarding "Skycar" technology. This, claimed Moller, is a flying car, that can hover, or fly 400 MPH 15 feet above highways, that would sell for the price of a luxury car. He raised $5 Million from investors. See also, SEC release.
2/19. The Electronics Industry Association (EIA) announced its legislative and policy agenda. It includes supporting several tax related legislative proposals, such as "accelerated depreciation schedules and first-year bonus depreciation, enhancement and permanence of the R&D tax credit, tax relief for overseas profit repatriation, elimination of FICA tax on severance and a broadband tax incentive." It also includes several trade related items, including support for the Export Administration Act. The EIA also stated that it will submit comments to the USTR regarding free trade agreements "to ensure that high tech and business priorities are included". Also, with respect to broadband, the group will support "passage of strong deregulatory legislation". See, EIA release.
2/18. Several groups, including the ACLU, filed a Petition for Writ of Certiorari [150 pages in PDF] with the U.S. Supreme Court seeking review of the November 18, 2002 opinion [56 pages in PDF, redacted] of the Foreign Intelligence Surveillance Court of Review (FISCOR). The ACLU argues that the FISCOR's interpretation of the Foreign Intelligence Surveillance Act (FISA) "seriously compromises the privacy and free-speech rights of people living in the United States".
Standing and Intervention. The petitioners are the American Civil Liberties Union (ACLU), the National Association of Criminal Defense Lawyers, the American-Arab Anti-Discrimination Committee (ADC), and the Arab Community Center for Economic and Social Services. None of these is a party to this proceeding, or alleges injury by government action. Nor does any petitioner represent any party, or person claiming injury.
Hence, the petition is also a motion for leave to intervene for the purpose of petitioning for writ of certiorari.
Petitioners do not assert that the FISA grants non-parties standing to sue, appeal or petition for writ of certiorari. Rather, petitioners argue that they should be permitted to intervene, because a reading of the FISA "that would disallow parties other than the government from petitioning for a writ of certiorari would effectively foreclose this Court from reviewing any decision by the Court of Review in favor of the government."
The FISCOR had permitted several groups to participate as amicus curiae.
Petitioners' Argument. The petitioners assert that there are two questions. First, "Does the USA PATRIOT Act ... authorize the government to conduct surveillance under the Foreign Intelligence Surveillance Act ... even where the government's primary purpose is law enforcement rather than foreign intelligence?"
Petitioner's second argument is, "If the Patriot Act authorizes the government to conduct surveillance under FISA even where the government's primary purpose is law enforcement, does FISA as amended by the Patriot Act contravene the First or Fourth Amendment of the United States Constitution?"
Ziad Asali, President of the ADC, stated in a release that "We do not enter into this litigation lightly; we firmly believe that these expanded powers erode the functionality and checks and balances of our judicial system".
Background. This case involves the Foreign Intelligence Surveillance Act (FISA) and the specialized courts that it created, the Foreign Intelligence Surveillance Court (FISC) and the Foreign Intelligence Surveillance Court of Review (FISCOR). The FISC is now comprised of eleven District Court judges appointed by the Chief Justice of the United States. The FISCOR was comprised of three Appeals Court judges on senior status, Ralph Guy (6th Circuit), Laurence Silberman (DC Circuit), and Edward Leavy (9th Circuit).
The November 18 opinion is the first opinion of the FISCOR. It related to the FISC's Memorandum Opinion of May 17 imposing restrictions upon the federal government's FISA surveillance.
The FISA is codified at 50 U.S.C. §§ 1801-1862. It sets out rules for the collection of information categorized as foreign intelligence surveillance. It is a regime distinct from the "Title III" regime for the issuance of warrants in criminal proceedings. The FISA was enacted in 1978, and has been amended several times since, most recently by the USA PATRIOT Act, which was passed shortly after the terrorist attacks of September 11, 2001.
One notable change enacted in the Patriot Act pertained to the purpose surveillance. Prior to passae of the Patriot Act, the government had to certify that "the purpose" of the surveillance was to obtain foreign intelligence information. The Patriot Act merely required that foreign intelligence information be a "significant purpose".
Pursuant to the FISA, the government applied to the FISC for a surveillance order for a United States person who the government contends is aiding, abetting, or conspiring with others in international terrorism.
FISC Ruling. The FISC granted the order on May 17, 2002, but also imposed restrictions upon the government. It wrote that "law enforcement officials shall not make recommendations to intelligence officials concerning the initiation, operation, continuation or expansion of FISA searches or surveillances. Additionally, the FBI and the Criminal Division [of the Department of Justice] shall ensure that law enforcement officials do not direct or control the use of the FISA procedures to enhance criminal prosecution, and that advice intended to preserve the option of a criminal prosecution does not inadvertently result in the Criminal Division's directing or controlling the investigation using FISA searches and surveillances toward law enforcement objectives."
FISCOR Ruling. The FISCOR's opinion of November 18 states that "To ensure the Justice Department followed these strictures the court also fashioned what the government refers to as a ``chaperone requirement´´; that a unit of the Justice Department, the Office of Intelligence Policy and Review (OIPR) (composed of 31 lawyers and 25 support staff), ``be invited´´ to all meetings between the FBI and the Criminal Division involving consultations for the purpose of coordinating efforts ``to investigate or protect against foreign attack or other grave hostile acts, sabotage, international terrorism, or clandestine intelligence activities by foreign powers or their agents.´´ If representatives of OIPR are unable to attend such meetings, ``OIPR shall be apprized of the substance of the meetings forthwith in writing so that the Court may be notified at the earliest opportunity.´´"
The FISCOR wrote that the FISC "apparently believes it can approve applications for electronic surveillance only if the government's objective is not primarily directed toward criminal prosecution of the foreign agents for their foreign intelligence activity. But the court neither refers to any FISA language supporting that view, nor does it reference the Patriot Act amendments, which the government contends specifically altered FISA to make clear that an application could be obtained even if criminal prosecution is the primary counter mechanism."
The FISCOR reversed the FISC's orders to the extent that they imposed conditions upon the government, and remanded the matter to the FISC.
This is the proceeding titled "In re: Sealed Case No. 02-001 Consolidated with 02-002". See also, story titled "FISA Appeals Court Reverses FISA Lower Court", TLJ Daily E-Mail Alert No. 552, November 19, 2002.
2/18. The Supreme Court of New Hampshire issued its opinion in Remsburg v. Docusearch regarding whether private investigators and information brokers are liable in tort for privacy invasions of third parties about whom they are collecting and disseminating information. See, full story.
2/18. The U.S. Attorneys Office (CDCal) charged Alan Giang Tran by criminal complaint with intentionally causing damage to a protected computer, and recklessly causing damage by intentionally accessing a protected computer. The USAO stated in a release that Tran was previously employed as the network administrator for a company whose servers he accessed without authorization. The USAO further stated that he changed passwords, and deleted programs, thereby shutting down the company's operations.
2/18. William Donaldson was sworn in as Chairman of the Securities and Exchange Commission (SEC). See, statements by President Bush and Donaldson.
2/18. The World Intellectual Property Organization (WIPO) released data on the number of international patent applications received by the WIPO in 2002. See, release.
Go to News from February 11-15, 2003.

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