Source: http://www.techlawjournal.com/alert/2005/10/05.asp
Timestamp: 2019-04-20 12:59:50+00:00

Document:
TLJ Daily E-Mail Alert No. 1,227, October 5, 2005.
October 5, 2005, 9:00 AM ET, Alert No. 1,227.
10/3. The Supreme Court invited the Office of the Solicitor General to file a brief in the case KSR International v. Teleflex, a patent case involving the issue of obviousness. The Court has not yet granted certiorari, but this request suggests that it might.
10/3. The Supreme Court granted certiorari, vacated, and remanded, without opinion, in US v. Maxwell, a case regarding the authority of the Congress to enact criminal statutes under the authority of the Commerce Clause.
Since the Supreme Court issued no opinion, and will issue no opinion, it has passed up an opportunity to discuss what authority the Congress has under the Commerce Clause to enact criminal statutes that pertain to conduct involving use of computers and the internet.
The Supreme Court wrote in its October 3, 2005, Order List [84 pages in PDF], at page 2, that "The motion of respondent for leave to proceed in forma pauperis is granted. The petition for a writ of certiorari is granted. The judgment is vacated and the case is remanded to the United States Court of Appeals for the Eleventh Circuit for further consideration in light of Gonzales v. Raich, 545 U.S. __ 2005. The Chief Justice took no part in the consideration or decision of this motion and this petition."
This case involves the constitutionality of 18 U.S.C. § 2252A(a)(5)(B), which addresses pormography on computer disks or computers hard drives. The defendant was charged and convicted in the U.S. District Court of violation of this statute. The U.S. Court of Appeals (11thCir) reversed his conviction on the grounds that the Congress lacked authority to enact this statute.
Gonzales v. Raich involved the constitutionality of the Controlled Substances Act (CSA). On June 6, 2005, the Court issued its opinion [79 pages in PDF] upholding a section of the CSA as a valid exercise of federal power. The Court concluded that the Congress has broad and sweeping power to enact criminal statutes under the Commerce Clause. See, story titled "Supreme Court Upholds Broad Congressional Power to Enact Criminal Statutes Under Commerce Clause" in TLJ Daily E-Mail Alert No. 1,149, June 7, 2005.
There is no general grant of criminal law making authority in the Constitution, although, the Congress often acts as though there were. There is an implied power to enact certain criminal laws as "necessary and proper for carrying into Execution" other enumerated powers. See, Article I, Section 8, Clause 18. Some federal criminal statutes, such as the CSA and some technology related criminal statutes, are based upon the authority of the Commerce Clause. See, Article I, Section 8, Clause 2.
The Supreme Court has just vacated the judgment of the Court of Appeals, and let stand the criminal statute at issue. This means that the Supreme Court has determined that the statute at issue is constitutional. However, the Supreme Court has written nothing that serves as precedential guidance, and that puts the Congress and the American public on notice as to what types of federal criminal regulation of internet related conduct will pass constitutional muster, and why.
Nevertheless, the Supreme Court's opinion in Gonzales v. Raich, and its disposition of the present case, suggest that the Supreme Court will not be receptive to further challenges to criminal prohibitions of internet related conduct based upon the argument that they exceed Congressional Commerce Clause authority.
Much bad conduct involving the internet is clearly commercial and interstate. However, some of the bad acts that are related to the use of information technologies are committed by individuals who are not buying or selling anything in interstate commerce. Some of these individuals are sitting at home, using their personal computers. Yet, the Congress is increasingly regulating this conduct. The Supreme Court has just upheld one such criminal law. It appears likely that it will uphold others that are similarly challenged.
This case is U.S. v. James Maxwell, Sup. Ct. No. 04-1382.
10/4. President Bush held a news conference at which he discussed his nomination of Harriet Miers to be an Associate Justice of the Supreme Court. See, transcript.
He said that "I expect the Senate to conduct fair hearings, and to hold an up or down vote on Harriet's nomination by Thanksgiving."
He also said that "She shares my philosophy that judges should strictly interpret the laws and the Constitution of the United States, and not legislate from the bench."
PATRIOT Act. Bush also discussed the USA PATRIOT Act, and extension of those provisions that are scheduled to expire at the end of this year.
He said that "We also got to continue to make sure we meet our obligations to prevent further terrorist attack. One of the most important effective tools for safeguarding our country is the Patriot Act. This good law allows law enforcement officers to hunt down terrorists with many of the same tools they already use to fight organized crime and drug dealers. The Patriot Act is getting results; it's a positive piece of legislation. Parts of it are set to expire. Congress needs to recognize that terrorist threats won't expire, and so they need to send me a bill that reauthorizes the Patriot Act."
Next Fed Chairman. President Bush was also asked about the process for selecting the next Chairman of the Federal Reserve Board (FRB). He said that the process is "ongoing".
Alan Greenspan's term of office expires on January 31, 2006.
Bush added that "There is a group of people inside the White House who are bringing forth -- who will bring forth nominees. These are people that -- the nominees will be people that, one, obviously, can do the job; and secondly, will be independent. It's important that whomever I pick is viewed as an independent person from politics. It's this independence of the Fed that gives people not only here in America, but the world, confidence."
Other topics discussed at the press conference included Iraq, Hurricane Katrina, federal spending, Social Security, avian flue, elections, and politics.
10/3. The Supreme Court denied certiorari in Board of Trustees, University of Illinois v. Fujitsu Limited, et al., Sup. Ct. No. 04-1346. See, Order List [84 pages in PDF], at page 14. This is a patent infringement case involving plasma screen technology, and 11th Amendment immunity of state universities. This order denies the petition for writ of certiorari to the U.S. Court of Appeals (FedCir). The Federal Circuit dismissed an appeal from the U.S. District Court (NDCal) for lack of jurisdiction.
10/3. The Supreme Court denied certiorari in Brokaw v. Qualcomm, Sup. Ct. No. 04-1711, a case involving a former Qualcomm employee's loss of non-vested stock options upon his termination by Qualcomm. See, Order List [84 pages in PDF], at page 20. This order denies a petition for writ of certiorari to the U.S. Court of Appeals (9thCir). See, unpublished opinion [3 pages in PDF] of the Court of Appeals. This case is App. Ct. No. No. 04-55198. This was an appeal from the U.S. District Court (SDCal), D.C. No. CV-01-01172-DMS.
10/3. The Supreme Court denied certiorari in James Kay v. FCC, Sup. Ct. No. 05-46. See, Order List [84 pages in PDF], at page 43. On January 11, 2005, the U.S. Court of Appeals (DCCir) issued its opinion [11 pages in PDF] in an appeal from a final order of the Federal Communications Commission (FCC) denying James Kay's application for review of the decision of the FCC's Wireless Telecommunications Bureau finding untimely the "finder's preference" request Kay filed involving specialized mobile radio systems (SMR) station WNPA325. The Court of Appeals affirmed the FCC. The Appeals Court No. is 04-1014.
10/3. The Supreme Court issued an Order List [84 pages in PDF] on October 3, 2005. This issue addresses some, but not all, of the technology related items in this list. More coverage is forthcoming.
10/3. Rep. Ernest Istook (R-OK) announced that he will run for Governor of the state of Oklahoma. He has been one of the members of the House who has been most active in seeking to address, through federal legislation, problems associated with online pormography. He has used his position as a member of the House Appropriations Committee to add amendments to appropriations bills requiring that internet filtering technology be used when certain federal funding is involved. Most of the Representatives and Senators who have led the efforts to censure internet content and internet use have also left the Congress. Former Sen. Dan Coats (R-IN) left the Senate in 1999, and is now Ambassador to Germany. Former Rep. Bob Franks (R-NJ) retired to run for the Senate in 2000 (and lost). Former Sen. Ernest Hollings (D-SC) retired at the end of the 108th Congress.
10/4. Sun Microsystems and Google announced "an agreement to promote and distribute their software technologies". They stated that this agreement "aims to make it easier for users to freely obtain Sun's Java Runtime Environment (JRE), the Google Toolbar and the OpenOffice.org office productivity suite". The two companies stated that "Sun will include the Google Toolbar as an option in its consumer downloads of the Java Runtime Environment". See, Sun release and Google release.
10/4. The U.S. Court of Appeals (11thCir) issued its opinion [30 pages in PDF] in HGI v. Wetmore, a diversity case involving software licensing.
This case may be of interest, not only because of its discussion of licensing law, but also because it is a case study of the pitfalls and risks to software companies in pursuing those they suspect of piracy, and those who deal outside of their authorized distribution chain. The software company's target sued for breach of contract and fraud in the inducement, won in the District Court, and obtained an award of damages for accrued lost profits, and for punitive damages. The Court of Appeals affirmed all of this, but reversed the District Court's refusal to also award damages for lost future profits for undelivered software.
The software company in this case is Microsoft. Although, it is not a party to this case. The Court of Appeals wrote that Microsoft, through its subsidiary, Microsoft Licensing, Inc. (MSLI), and its business partner, Wetmore Printing Company, a Texas based company, "attempted to set an ill-conceived trap to ensnare a suspected software pirate, HGI. The trap, however, only managed to ensnare Wetmore."
Microsoft and Wetmore worked together to build a case against HGI Associates, Inc., and its principal, Ron Schwarz, who are based in the state of Florida. HGI sells software products in the secondary market. Wetmore, in consultation with Microsoft, dealt with HGI, invited Schwarz to its offices, made representations to him, entered into contracts for the sale of software products, received payment from HGI, and began to ship products. Then, Wetmore claimed all had been a mistake, and refused to perform on its contracts.
The consequence was that instead of HGI and Schwarz being prosecuted, HGI filed a civil complaint in U.S. District Court (SDFl) against Wetmore alleging breach of contract and fraud.
The District Court held that Wetmore breached its contracts, and engaged in fraud in the inducement. It awarded HGI damages for accrued lost profits from Wetmore's breach of the contracts and fraud, in the amount of $811,733, plus prejudgment interest. The District Court also awarded HGI $50,000 in punitive damages. However, the District Court refused to award damages for lost future profits.
Wetmore filed an appeal, which only increased its problems. The Court of Appeals rejected all of its appeal points. HGI cross-appealed the denial of damages for lost future profits. The Court of Appeals held that the District Court erred on this point, and reversed and remanded for a determination of such damages.
The Court of Appeals held that the contracts formed by Wetmore and HGI are valid and enforceable. It also rejected Wetmore's argument that the contracts are void as against public policy.
The Court reasoned that while "violation of intellectual property rights is of great concern to public policy", there was no violation of IPR in this case. Wetmore argued that the software that was the subject of the contracts was unlicensed. Au contraire, concluded the Court. There was a contract to sell only licensed software; and Microsoft approved the transaction, and did not subsequently assert its IPR, or issue any cease and desist letters. Thus, the Court held that Wetmore "cannot now circumvent this valid contractual obligation to HGI. Wetmore's argument that the contract violates public policy fails because the actual contract created did not violate Microsoft's rights or public policy."
The Court also addressed the doctrines of copyright waiver and copyright estoppel, the availability of punitive damages for fraudulent inducement, and the availability of damages for future lost profits on the undelivered software.
This opinion does not address the law regarding secondary markets for software products. The District Court and Court of Appeals applied Texas law to questions of contract formation, interpretation, and validity, and Florida law to questions of remedies and damages.
This Court's legal analysis relies upon citations to state statutes, and court opinions on contract law. For a more thorough discussion of software licensing law, see, Modern Licensing Law: 2005 Edition, by Raymond Nimmer and Jeff Dodd.
This case is HGI Associates, Inc. v. Wetmore Printing Company, U.S. Court of Appeals for the 11th Circuit, App. Ct. No. 04-11931, an appeal from the U.S. District Court for the Southern District of Florida, D.C. No. 01-07160-CV-JIC.
The Senate will meet at 10:00 AM. It will resume consideration of HR 2863, the defense appropriations bill.
12:30 PM. Former Secretary of Commerce Don Evans will give a luncheon address on financial services industry and the relation between the flow of capital and freedom. Location: Ballroom, National Press Club, 529 14th St. NW, 13th Floor.
2:15 PM. The Senate Foreign Relations Committee will hold a business meeting to consider numerous pending nominations, including business meeting to consider the nominations of Robert Mosbacher (to be President of the Overseas Private Investment Corporation), Jan Boyer (US. Alternate Executive Director of the Inter-American Development Bank), Boyden Gray (Representative of the United States of America to the European Union), Josette Shiner (US Alternate Governor of the International Bank for Reconstruction and Development, and other positions). See, notice. Location: Room S-116, Capitol Building.
2:30 PM. The Senate Commerce Committee's Subcommittee on Trade, Tourism, and Economic Development will hold a hearing on spyware. The witnesses will include Deborah Majoras, Chairman of the Federal Trade Commission (FTC). Sen. Gordon Smith (R-OR) will preside. See, notice. Press contact: Melanie Alvord (Stevens) (202) 224-8456 or Melanie_Alvord at commerce dot senate dot gov, or Andy Davis (Inouye) at 202 224-4546 or Andy_Davis at commerce dot senate dot gov. Location: Room 562, Dirksen Building.
The House will meet at 10:00 AM for legislative business. It will consider, pursuant to a rule, the conference report on HR 2360, the "Department of Homeland Security Appropriations Act for Fiscal Year 2006". See, Republican Whip Notice.
9:30 AM. The Senate Judiciary Committee (SJC) may hold an executive business meeting. The agenda includes consideration of Timothy Flanigan to be the Deputy Attorney General, and Susan Neilson to be a Judge of the U.S. Court of Appeals (6thCir). The agenda also includes numerous bills related to personal data and privacy, including S 1789, the "Personal Data Privacy and Security Act of 2005", and S 751, the "Notification of Risk to Personal Data Act", and S 1326, the "Notification of Risk to Personal Data Act". The agenda also includes two bills pertaining to trademark protection, S 1095, the "Protecting American Goods and Services Act of 2005", and HR 683, the "Trademark Dilution Revision Act of 2005". The agenda also includes S 443, the "Antitrust Criminal Investigative Improvements Act of 2005". The SJC frequently cancels or postpones meetings without notice. The SJC rarely follows its published agenda. Press contact: Blain Rethmeier (Specter) at 202 224-5225, David Carle (Leahy) at 202 224-4242 or Tracy Schmaler (Leahy) at 202 224-2154. See, notice. Location: Room 226, Dirksen Building.
10:00 AM. The Senate Banking Committee will hold a hearing titled "A Review of the CFIUS Process for Implementing the Exon-Florio Amendment". The secretive Committee on Foreign Investments in the U.S. (CFIUS) is the instrument by which the federal government blocks foreign investment in, and acquisition of, certain technology companies. See, notice. Location: Room 538, Dirksen Building.
12:15 PM. The Federal Communications Bar Association's (FCBA) Common Carrier Committee will host a brown bag lunch titled "FCC Wireline Broadband Order". The speakers will be Jack Zinman (SBC Services), Michael Schooler (National Cable & Telecommunications Association), and others. Location: Hogan and Hartson, 555 13th Street, NW, lower level.
1:00 PM. The House Commerce Committee's (HCC) Subcommittee on Oversight and Investigations will hold a hearing titled "FCC’s E-rate Plans to Assist Gulf Coast Recovery: Ensuring Effective Implementation". The hearing will be web cast by the HCC. See, notice. Press contact: Larry Neal (Barton) at 202 225-5735. Location: Room 2123, Rayburn Building.
2:00 PM. The U.S. Court of Appeals (FedCir), sitting en banc, will hear oral argument in Motion Systems Corporation v. George Bush, No. 04-1428. This case involves the authority of the Court of International Trade to review orders of the President. The sua sponte order [PDF] designating en banc hearing requests briefing on the following issues: "(1) Is the President an "officer" under the terms of 28 U.S.C. § 1581(i) and is the President's action under 19 U.S.C. § 2451 subject to judicial review in a suit against the President? See Franklin v. Massachusetts, 505 U.S. 788 (2000); Mississippi v. Johnson, 71 U.S. 475 (1866). (2) Is there any constitutional barrier that would preclude the Court of International Trade from issuing the requested injunctive relief against the President? See Franklin v. Massachusetts, 505 U.S. 788 (2000); Dalton v. Spector, 511 U.S. 462 (1994); Mississippi v. Johnson, 71 U.S. 475 (1866). (3) Should Corus Group PLC v. Int'l Trade Comm'n., 352 F.3d 1351 (Fed. Cir. 2003) be overruled en banc insofar as it holds that § 1581(i) does not authorize relief against the President? (4) Under the terms of § 1581(i) and § 2451, is the relief requested against the United States Trade Representative available in this case?" Location: U.S. Court of Appeals, LaFayette Square, 717 Madison Place, Courtroom 201.
2:30 PM. The Senate Finance Committee's Subcommittee on International Trade will hold a hearing on the U.S.-Bahrain Free Trade Agreement. Location: Room 215, Dirksen Building.
4:30 PM. The House Judiciary Committee's (HJC) Subcommittee on Courts, the Internet, and Intellectual Property (CIIP) will hold an oversight hearing titled "Improving Federal Court Adjudication of Patent Cases". The hearing will be webcast by the HJC. Press contact: Jeff Lungren or Terry Shawn at 202 225-2492. Location: Room 2141, Rayburn Building.
7:00 PM. The National Press Club's (NPC) Photography Committee will host a panel discussion titled "Copyright and the Internet -- What You Can Use and How to Protect Your Work". The speakers will be Sherrese Smith (Washington Post attorney), Lorraine Woellert (Business Week journalist), Stephen Brown (photojournalist), and Joy Chambers (attorney). The event is free, but reservations are required. Phone 202 662-7501. For more information, contact Joy Chambers at 703 864-1945 or Marshall Cohen at 202 364-8332. Location: White Room, NPC, 529 14th St. NW, 13th Floor.
Day one of a two day conference titled "Identity Management: Creating A Trusted Identity" hosted by the Information Technology Association of America (ITAA). See, notice. For more information, contact Jennifer Kerber at jkerber at itaa dot org. Location: Hyatt Regency, Crystal City, VA.
Deadline to submit reply comments to the Federal Communications Commission (FCC) in response to its notice of proposed rulemaking (NPRM) regarding off-axis equivalent isotropically radiated power (EIRP) method for reviewing earth station applications in the fixed satellite service (FSS). See, notice in the Federal Register, June 8, 2005, Vol. 70, No. 109, at Pages 33426 - 33429. This NPRM is FCC 05-62 in IB Docket No. 00-248.
The House will meet at 9:00 AM for legislative business. It will consider, pursuant to a rule, HR 3893, the "Gasoline for America's Security Act of 2005". See, Republican Whip Notice.
9:00 AM - 5:00 PM. The National Institute of Standards and Technology (NIST) will hold a workshop on the security of electronic voting systems. See, notice in the Federal Register, September 9, 2005, Vol. 70, No. 174, at Pages 53635 - 53636. Location: NIST, Building 820, Room 152, Gaithersburg, MD.
9:30 AM. The U.S. Court of Appeals (DCCir) will hear oral argument in Sabre v. Department of Transportation, No. 04-1073, a case regarding wether the DOT can expand its regulatory authority to include computer reservation systems (CRS). See, amicus curiae brief [25 pages in PDF] of the Competitive Enterprise Institute and the Progress and Freedom Foundation (PFF) in support of Sabre. Judge Rogers, Brown and Williams will preside. Location: Prettyman Courthouse, 333 Constitution Ave., NW.
10:00 AM. The Senate Committee on Homeland Security and Governmental Affairs will hold a business meeting to consider the nomination of Julie Myers to be an Assistant Secretary of Homeland Security. See, notice. Location: __.
12:00 NOON. The Federal Communications Bar Association's (FCBA) Wireless Telecommunications Practice Committees will host a lunch titled "CMRS Issues". The price to attend is $15. Registrations and cancellations are due by 5:00 PM on Tuesday, October 5, 2005. See, registration form [PDF]. Location: Sidley Austin, 1501 K Street, NW., 6th Floor.
Day two of a two day conference titled "Identity Management: Creating A Trusted Identity" hosted by the Information Technology Association of America (ITAA). See, notice. For more information, contact Jennifer Kerber at jkerber at itaa dot org. Location: Hyatt Regency, Crystal City, VA.
The Federal Communications Commission (FCC) and other federal offices will be closed for Columbus Day. See, Office of Personnel Management's (OPM) list of federal holidays.
Deadline to submit comments to the Internet Corporation for Assigned Names and Numbers (ICANN) regarding its proposed amendment to the .NET Registry Agreement. See, notice.
1:30 - 4:30 PM. The Department of Homeland Security's (DHS) National Infrastructure Advisory Council (NIAC) will meet. The agenda includes presentations by John Chambers (Ch/CEO of Cisco Systems) and Thomas Noonan (P/CEO of Internet Security Systems). See, notice in the Federal Register, September 2, 2005, Vol. 70, No. 170, at Pages 52420 - 52421. Location: National Press Club, 529 14th St. NW, 13th Floor.
Day one of a two day conference hosted by the National Institute of Standards and Technology (NIST) and the Open Web Application Security Project regarding the OWASP. See, notice and conference web site. Location: NIST, Green Auditorium, 100 Bureau Drive, Gaithersburg, MD.
Deadline to submit comments to the National Institute of Standards and Technology (NIST) regarding proposed changes to Federal Information Processing Standard (FIPS) Publication 201, titled "Standard for Personal Identity Verification of Federal Employees and Contractors. See, notice in the Federal Register, September 8, 2005, Vol. 70, No. 173, at Pages 53346 - 53347.
Day two of a two day conference hosted by the National Institute of Standards and Technology (NIST) and the Open Web Application Security Project regarding the OWASP. See, notice and conference web site. Location: NIST, Green Auditorium, 100 Bureau Drive, Gaithersburg, MD.

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