Source: http://www.techlawjournal.com/alert/2008/01/15.asp
Timestamp: 2019-04-20 12:21:05+00:00

Document:
TLJ Daily E-Mail Alert No. 1,700, January 15, 2008.
January 15, 2008, Alert No. 1,700.
1/14. The European Commission announced in a release that it "has decided to initiate two formal antitrust investigations against Microsoft".
The U.S. Department of Justice's (DOJ) Antitrust Division and the Federal Trade Commission (FTC), which possess greater professionalism and expertise than the EC Competition Commission, and whose actions are more guided by economic analysis, have not initiated parallel or similar proceedings in the U.S.
One complaint was submitted to the EC by the European Committee for Interoperable Systems (ECIS), a collection of mostly U.S. companies organized to lobby the EC to regulate Microsoft's software design and business practices.
The ECIS members, which include Adobe, IBM, Oracle, RealNetworks, and SunMicrosystems, seek to gain competitive advantages through the imposition of regulatory burdens on Microsoft.
The EC wrote in its release that the ECIS alleges that Microsoft has "illegally refused to disclose interoperability information across a broad range of products, including information related to its Office suite, a number of its server products, and also in relation to the so called .NET Framework."
The EC added that its examination will "focus on all these areas, including the question whether Microsoft's new file format Office Open XML, as implemented in Office, is sufficiently interoperable with competitors' products."
The second complaint was submitted by Opera, a Norwegian company that makes internet browsing software by the same name. The EC wrote that Opera alleges that Microsoft has "engaged in illegal tying of its Internet Explorer product to its dominant Windows operating system. The complaint alleges that there is ongoing competitive harm from Microsoft's practices, in particular in view of new proprietary technologies that Microsoft has allegedly introduced in its browser that would reduce compatibility with open internet standards, and therefore hinder competition."
The EC adds, without elaboration, that "allegations of tying of other separate software products by Microsoft, including desktop search and Windows Live have been brought to the Commission's attention. The Commission's investigation will therefore focus on allegations that a range of products have been unlawfully tied to sales of Microsoft's dominant operating system."
The EC's actions against technology companies have heretofore mostly involved imposing regulation and fines on U.S. technology companies at the request of rival U.S. technology companies. For example, the EC has acted upon complaints from RealNetworks, IBM, Oracle and others about Microsoft, and complaints from AMD about Intel. This has left the defenders of the EC with the argument that the EC cannot be abusing antitrust authority for the purpose of discriminating against U.S. companies for the benefit of EU companies, because the beneficiaries are U.S. companies.
However, one of the two proceedings announced on January 14 targets a U.S. company for the benefit of a competing EU company -- Opera.
1/15. Thomas Barnett, the Assistant Attorney General in charge of the Department of Justice's (DOJ) Antitrust Division gave a speech in Bonn, Germany, in which he addressed, among other topics, "application of competition law to unilateral conduct".
Barnett did not remind his audience in the prepared text of his speech that this would encompass proceedings in the EC against Microsoft and Intel.
He stated that "Mere size does not demonstrate harm to competition or a violation of the antitrust laws".
He also said that "Mere injury to a particular firm does not itself show that competition has suffered. Indeed, a firm's inability to garner sales may indicate no more than the superiority of its competitors' products. A successful firm should not be penalized for creating a product that is preferred by consumers. Further, the loss of sales can be an important incentive to other firms to improve their efforts to offer new and better products at the lowest possible price."
He also focused on establishing clear safe harbors in the context of single firm conduct.
1/10. The Office of the Attorney General of the state of New York announced in a release that it has "served a wide-ranging subpoena seeking documents and information on Intel Corporation".
Andrew Cuomo, the NY Attorney General, stated in this release that "we have determined that questions raised about Intel's potential anticompetitive conduct warrant a full and factual investigation ... Protecting fair and open competition in the microprocessor market is critical to New York, the United States, and the world."
Cuomo added that "Businesses and consumers everywhere should have the ability to easily choose the best products at the best price and only fair competition can guarantee it. Monopolistic practices are a serious concern particularly for New Yorkers who are navigating an information-intensive economy."
Tom McCoy, EVP Legal Affairs at AMD, the primary beneficiary of this action, stated in the AMD web site that "New York State�s decision, based on its findings to date, to open a formal investigation of Intel�s anticompetitive business practices is good news for computer buyers in NY and throughout the United States."
On July 27, 2007, the European Commission (EC) announced in a release that it has "has sent a Statement of Objections (SO) to Intel on 26th July 2007. The SO outlines the Commission's preliminary view that Intel has infringed the EC Treaty rules on abuse of a dominant position (Article 82) with the aim of excluding its main rival, AMD, from the x86 Computer Processing Units (CPU) market." See, story titled " European Commission Initiates Proceeding Against Intel Alleging Anticompetitive Behavior" in TLJ Daily E-Mail Alert No. 1,617, July 27, 2007.
Albert Foer, head of the American Antitrust Institute (AAI), stated in a release that "This is an example of the wisdom of having state antitrust laws that replicate the federal law".
Foer added that "When there is a competitive problem that affects consumers, and the federal government is slow to act, the states have the ability -- and responsibility to their citizens -- to fill the vacuum. New York�s citizens, not to mention its government, purchase one heck of a lot of computer equipment containing microchips. They should not have to pay higher prices or be deprived of advantageous innovations because of a dominant firm�s strategies to keep its rival at a low market share."
Foer wrote to the Federal Trade Commission (FTC) last year requesting that it "weigh in" against Intel. See, letter [PDF] dated August 27, 2007. The FTC, which shares antitrust authority with the Department of Justice's (DOJ) Antitrust Division, has taken no action against Intel.
1/14. The U.S. Court of Appeals (5thCir) issued its opinion [19 pages in PDF] in Stroman Realty v. Wercinski, a case regarding state regulation of internet based commerce in timeshares, such as vacation condos.
The Court of Appeals did not reach the merits of the commerce clause claim. Rather, it held that the state of Arizona's regulators cannot be sued in federal court in Texas, the location of the targeted company. This case may be of concern to internet based businesses that find themselves regulated or taxed by numerous distant state regulators. This case stands as authority for the proposition that if internet based business's constitutional or federal statutory rights are violated by distant state regulators or tax collectors, then these businesses cannot obtain personal jurisdiction over the distant regulators in their home states. On the other hand, state regulators and taxers of interstate and internet commerce may celebrate this opinion.
Introduction. The state of Arizona seeks to regulate the commercial activities of a real estate timeshare sales business (Strohman Realty) located in the state of Texas, which does business in part over the internet. Stroman advertises through an internet website, and matches buyers and sellers via an internet access electronic database. Stroman's prospective buyers and sellers are located everywhere, including in the state of Arizona.
Arizona ordered Stroman to cease "all contact with Arizona resident and non-resident owners of real estate located in Arizona ... by mail, telephone, telefax, computer modem or any other means". It later forbade Stroman from advertising properties located in Arizona in its website.
Stroman asserts that Arizona's efforts to regulate its business violates the commerce clause of the U.S. Constitution. It brought suit in federal court in Texas seeking injunctive relief under 42 U.S.C. � 1983. However, this opinion does not address the commerce clause issue, or the Section 1983 claim. Rather, the Court of Appeals held that the District Court lacks personal jurisdiction over the state of Arizona.
The Court of Appeals held that regulating a business in another state, issuing a cease and desist order to that out of state business, and censoring the content of its web site, are not sufficient contacts with that other state to confer jurisdiction upon a federal court in that state.
The holding in this case leads to an anomalous outcome. A state regulator was able to reach across state lines to regulate a business located in another state based upon its interstate and online activities. But, when that out of state business sought protection of its rights in a federal court in its state, that District Court held that it could not reach back across state lines by asserting personal jurisdiction over the other state's regulator.
Background. Stroman Realty, Inc., the plaintiff below and the appellant before the Court of Appeals, is a business located in Conroe, Texas. It is an advertiser and resale broker of timeshare intervals in the secondary resale market.
Timeshare refers to ownership of property that is divided by time. That is, property has multiple owners, each of which is entitled to use and possession for limited periods of time. This case involves timeshares in real property, such as vacation condos and homes. Although, timesharing can be applied to other forms of property, such as aircraft and boats.
Stroman advertises in national newspapers, trade magazines, through direct mail publications, and over the internet. The Court of Appeals wrote that "Prospective purchasers can search Stroman�s website for availabilities at condominiums, resorts, or spas, and read about the occupancy conditions of the various timeshare intervals being offered. Interested parties then submit bids through the website or call a Stroman broker. Stroman uses its computer database to match prospective buyers with such variables as location, price range, amenities, and use interval."
Sam Wercinski, the defendant below and appellee before the Court of Appeals, is the current Commissioner of the Arizona Department of Real Estate. His predecessor was Elaine Richardson. They are residents of Arizona.
Arizona regulates real estate brokers. In 2000 Richardson sent a cease and desist letter to Stroman stating that Stroman's agents were not licensed as real estate brokers or salespeople in Arizona, and were therefore violating Arizona law. This letter ordered Stroman to cease "all contact with Arizona resident and non-resident owners of real estate located in Arizona ... by mail, telephone, telefax, computer modem or any other means".
Stroman continued to broker timeshares over the internet. In 2005 Arizona ordered Stroman to stop advertising Arizona properties on its web site.
District Court. Stroman then filed a complaint in U.S. District Court (SDTex) against Richardson pleading violation of 18 U.S.C. � 1983 in connection with the state of Arizona's alleged attempts to exercise regulatory jurisdiction to license timeshare resales in violation of the commerce clause of the U.S. Constitution by discriminatorily and unduly burdening nonresident participation in the interstate secondary timeshare market.
The state of Arizona moved to dismiss the complaint under various theories, including lack of personal jurisdiction over Richardson, and claim preclusion.
The District Court dismissed the complaint under the theories of claim preclusion and abstention (which Arizona did not plead). The District Court did not rule on personal jurisdiction over Richardson (now Wercinski).
Constitution and Statutes. Article I, Section 8, of the Constitution provides that "The Congress shall have Power ... to regulate Commerce with foreign Nations, and among the several States ..."
The doctrine of the dormant commerce clause is that the Constitution, by delegating certain authority to the Congress to regulate commerce, thereby bars the states from legislating on certain matters that affect interstate commerce, even in the absence of Congressional legislation. It is applied to block states from regulating in a way that materially burdens or discriminates against interstate commerce.
Section 1983 provides that "Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress ..."
The Texas long arm jurisdiction statute is codified at TEX. CIV. PRAC. & REM. CODE ANN. � 17.042.
Court of Appeals. Stroman brought the present appeal. The Court of Appeals affirmed the dismissal on other grounds. It held that the District Court lacked personal jurisdiction over Richardson, and did not address the other issues.
Neither the District Court nor the Court of Appeals addressed the underlying merits of Stroman's commerce clause based Section 1983 claim.
The Court of Appeals began by examining the state of Texas' long arm jurisdiction statute, which sets the maximum limits for the exercise of personal jurisdiction by state and federal trial courts in the state of Texas.
Neither the legal precedents on personal jurisdiction in internet related cases, nor the language of state long arm statutes, are easily applied to the facts of this case. State long arm statutes tend to focus on personal jurisdiction in cases in which non-governmental parties are involved in commercial activities. Judicial precedents tend to involve disputes between commercial litigants, and in particular, cases in which a plaintiff in one state asserts that its state has jurisdiction over a distant defendant based upon its internet activities. In the present case, Arizona is not engaged in online commerce that reaches into other states -- it is regulating online commerce in other states.
Hence, when the Court of Appeals examined the Texas statute, it found that Texas asserts jurisdiction over various forms of commercial activity. It noted that Arizona's regulatory activities do not fit the statute's references to "does business in this state", "contracts ... with a Texas resident", or "commits a tort ... in this state". However, the Court of Appeals did not base its ruling on this language of the statute. Yet, it subsequent analysis is affected by its distinction between commercial activities and regulatory activities.
Rather, it applied due process limitations to Texas' exercise of personal jurisdiction. It began with the Supreme Court's ruling in International Shoe v. Washington, 326 U.S. 310 (1945), that the defendant must have such minimum contacts with the forum state as not to violate traditional notions of fair play and substantial justice.
The Court of Appeals continued with a discussion of general and specific jurisdiction. The Court of Appeals also noted that the progeny of International Shoe provide that minimum contacts requires a three part analysis. First, did the defendant purposely direct its activities toward the forum state or purposely avail itself of the privileges of conducting activities there? Second, does the plaintiff�s cause of action arise out of or result from the defendant�s forum related contacts? Third, is the exercise of personal jurisdiction fair and reasonable?
It held that under this test the Arizona regulators do not have the minimum contacts with Texas that would confer personal jurisdiction upon the courts in Texas because the regulators did not purposely avail themselves of the privileges of conducting activities there.
It wrote too that "Courts generally exercise specific jurisdiction over nonresident defendants that are engaged in commercial, profit-oriented enterprise."
The Arizona regulators action specifically targeted a business located in Texas. Nevertheless, the Court of Appeals concluded that the Calder effects test does not confer personal jurisdiction because "Although it may be true that the Commissioner's action against Stroman is based upon conduct which occurred entirely in Texas, we cannot find, as Stroman urges, that the Commissioner has purposefully directed her conduct at Texas."
This is a curious conclusion because the Stroman is a Texas business, and the cease and desist order is directed to, and applies only to, Stroman.
The Court wrote that the Arizona regulator's "intent is to uphold and enforce the laws of Arizona." It added that if it were to find personal jurisdiction under the effects test in this case, then "any state official seeking to enforce her state�s laws -- could potentially be subjected to suit in any state where the validity of her state�s laws were in question. We are unwilling to establish such a broad principle."
This is a tortured interpretation of Calder, but a fine defense state authority and state immunity.
It should also be noted that this is an opinion written by Judge Edith Jones. It is possible that this opinion reflects her animosity to Section 1983 actions, and her advocacy of state authority and immunity, more than her reasoned opinions regarding the commerce clause and internet based commerce. The federal courts are flooded with Section 1983 claims, many of which have little or no merit. Judge Jones is a states rights conservative.
On the other hand, aside from the present opinion, Judge Jones has not demonstrated a bias against internet commerce, or in favor of state regulation of internet commerce. For example, she wrote a concurring opinion, that resembles a dissenting opinion, in Ford v. Texas, 264 F.3d 493 (2001). In that case the Court of Appeals upheld the constitutionality of a protectionist Texas statute backed by car dealerships that prevented the car makers from selling cars over the internet. The Court of Appeals rejected a commerce clause challenge to the statute. However, Judge Jones condemned the existing precedent, argued that the statute harms consumers, and invited the Supreme Court to review the case. See also, story titled "5th Circuit Upholds Protectionist Car Dealership Law" in TLJ Daily E-Mail Alert No. 258, August 28, 2001.
This case is Stroman Realty, Inc. v. Sam Wercinski, U.S. Court of Appeals for the 5th Circuit, App. Ct. No. 06-20095, an appeal from the U.S. District Court for the Southern District of Texas. Judge Jones wrote the opinion of the Court of Appeals, in which Judges Weiner and Barksdale joined.
The House is scheduled to return from recess at 12:00 NOON. Votes will be postponed at least until 6:30 PM. See, Rep. Hoyer's calendar for the week of January 14, and 2008 calendar [4.25 MB PDF].
The Senate will meet momentarily in pro forma session only.
8:15 AM - 12:45 PM. Day two of a two day conference hosted by the Utilities Telecom Council (UTC) titled "2008 Pole Attachment Meeting". On January 15, there will be programs titled "Rate Issues: What Happens to Joint Use?", "Case Study: Arkansas State Certification", "Case Study: Unauthorized Attachments and Code Compliance", and "Case Study: Muni Wireless". See, notice. Location: Marriott Washington, 1221 22nd St., NW.
12:15 - 1:30 PM. The Federal Communications Bar Association's (FCBA) Wireline Committee will host a closed brown bag lunch titled "Forbearance". The speakers will be John Nakahata (Harris Wiltshire & Grannis), Neil Fried (Republican Senior Counsel, House Commerce Committee), Amy Levine (Democratic Legislative Counsel, House Commerce Committee), Genny Morelli (Kelley Drye & Warren), and Bennett Ross (Wiley Rein). See, notice. Location: Wilmer Hale, 1875 Pennsylvania Ave., NW.
3:30 - 5:00 PM. The National Association of Broadcasters (NAB) will host a closed webcast seminar titled "What Every Station Should Know about Political Advertising". The speakers will include Bobby Baker (head of the FCC's Office of Political Programming). See, notice. This event is closed to all but NAB members.
The House will meet at 10:00 AM for legislative business. See, Rep. Hoyer's calendar for the week of January 14, and 2008 calendar [4.25 MB PDF].
8:00 - 9:30 AM. The Northern Virginia Technology Council (NVTC) will host a breakfast program titled "Old Media Meets New Media: Advertising Sales and the Internet". See, notice. The price to attend ranges from $45-$85. Location: Oracle, 1910 Oracle Way, Reston, VA.
10:00 AM. The Supreme Court will hear oral argument in Quanta Computer v. LG Electronics. See also, story titled "Supreme Court to Hear Case Regarding Patent Exhaustion Doctrine" in TLJ Daily E-Mail Alert No. 1,683, December 5, 2007.
12:15 - 1:30 PM. The Federal Communications Bar Association's (FCBA) Young Lawyers and Access to Records Committees will host a brown bag lunch titled "FCCdotgov -- Tips and Tricks to Navigating and Using the FCC Website and Online Databases". For more information, contact Chris Bjornson at crbjornson at mintz dot com, Chris Fedeli at chrisfedeli at dwt dot com or Tarah Grant at tsgrant at hhlaw dot com. Location: Mintz Levin, 701 Pennsylvania Ave., NW.
2:30 - 4:30 PM. The Department of State's (DOS) International Telecommunication Advisory Committee (ITAC) will hold a public meeting to prepare advice for the U.S. on positions for the February 2008 meeting of the working groups of the International Telecommunication Union Council. See, notice in the Federal Register, December 31, 2007, Vol. 72, No. 249, at Page 74402. Location: undislcosed.
The Federal Communications Commission's (FCC) 700 MHz auction (Auction Number 73) is scheduled to commence. See, Public Notice [PDF] (DA 07-3415).
The Information Technology Association of America (ITAA), INPUT, and the Software and Information Industry Association (SIIA) will host an event titled "SaaS/Gov '08". See, ITAA notice. For more information, contact Madeleine Rial at mrial at itaa dot org. Location: Ritz Carlton Hotel.
9:15 AM - 1:30 PM. The AeA will host an event titled "AeA Government-Industry Executive Interchange". The topics to be addressed include "Mobility and Wireless", "Telework" and "Identity Management". See, notice. Location: AeA, 601 Pennsylvania Ave., NW.
2:00 - 4:00 PM. The Department of State's (DOS) International Telecommunication Advisory Committee (ITAC) will meet to prepare for advice for the U.S. on positions for the February 2008 meeting of the Telecommunication Development Advisory Group (TDAG) of the International Telecommunication Union (ITU-D). See, notice in the Federal Register, December 19, 2007, Vol. 72, No. 243, at Page 71992. Location: DOS Main, Room 5804, 2201 C St., NW.
The House may meet at 10:00 AM for legislative business. See, Rep. Hoyer's calendar for the week of January 14, and 2008 calendar [4.25 MB PDF].
8:00 - 9:30 AM. The Northern Virginia Technology Council (NVTC) will host a breakfast program titled "Have it All! Raise Capital to Pursue Government and Commercial Success: FortiusOne and its Investors Tell All". See, notice. The price to attend ranges from free to $85. Location: Price Waterhouse, 1800 Tysons Blvd., 9th floor, McLean, VA.
9:30 AM. The U.S. Court of Appeals (DCCir) will hear oral argument in New Jersey Department of Public Advocacy v. FCC, a petition for review of an Federal Communications Commission (FCC) order pertaining to the rates the local exchange carriers (LECs) charge independent payphone service providers (IPSPs). See, FCC's brief [51 pages in PDF]. This case is numbered App. Ct. No. 07-1020. Location: 333 Constitution Ave., NW.
Martin Luther King's Birthday. See, Office of Personnel Management's (OPM) list of 2008 federal holidays.
The House is scheduled to be in session. Votes will be postponed at least until 6:30 PM. See, Rep. Hoyer's 2008 calendar [4.25 MB PDF].
The Senate is scheduled to return from recess.
TIME? The Federal Communications Commission (FCC) will hold a mock spectrum auction in advance of its Auction Number 73, which is scheduled to begin on January 24, 2008. This is the 700 MHz band auction. See also, story titled "FCC Adopts 700 MHz Band Order" in TLJ Daily E-Mail Alert No. 1,619, July 31, 2007, and the FCC's Public Notice [122 pages in PDF] dated October 5, 2007, and numbered DA 07-4171.
9:00 - 10:30 AM. The Information Technology and Information Foundation (ITIF) will host an event titled "Framing a National Broadband Policy". The speakers will be Blair Levin (Stifel Nicolaus) and Robert Atkinson (ITIF). Breakfast will be served. See, notice. Location: ITIF, Suite 200, 1250 Eye Street, NW.
12:15 - 2:00 PM. The Federal Communications Bar Association's (FCBA) Wireless Practice Committee will host lunch. The topic will be "Hot Topics in the CMRS Industry for 2008". The speakers will be Brian Fontes (VP, AT&T Services Inc.), Lawrence Krevor (VP -- Spectrum, Sprint Nextel), Grant Spellmeyer (Director -- Regulatory Affairs, US Cellular), and Thomas Sugrue (VP, T-Mobile USA). The price to attend is $15. See, notice and registration page. Location: Sidley Austin, 1501 K St., NW.
12:15 - 1:30 PM. The Federal Communications Bar Association's (FCBA) Intellectual Property Practice Committee will host a brown bag lunch. The topic will be "Cable and Satellite Content Protection Technologies". The event is free. See, notice and registration page. Location: Dow Lohnes, 1200 New Hampshire Ave, NW.
Effective date of the Copyright Royalty Judges' final regulations that set the rates and terms for the use of sound recordings in transmissions made by new subscription services and for the making of ephemeral recordings necessary for the facilitation of such transmissions for the period commencing from the inception of the new subscription service through December 31, 2010. See, notice in the Federal Register, December 20, 2007, Vol. 72, No. 244, at Pages 72253-72256.
Extended deadline to submit reply comments to the Federal Communications Commission (FCC) in response to its Notice of Proposed Rulemaking (NPRM) regarding its program access and retransmission consent rules and whether it may be appropriate to preclude the practice of programmers to tie desired programming with undesired programming. The FCC adopted this NPRM on September 11, 2007, and released the text [144 pages in PDF] on October 1, 2007. It is FCC 07-169, in MB Docket No. 07-198. See also, story titled "FCC Adopts R&O and NPRM Regarding Program Access Rules" in TLJ Daily E-Mail Alert No. 1,640, September 17, 2007. The original comments deadlines were November 30 and December 17, 2007. See, original notice in the Federal Register, October 31, 2007, Vol. 72, No. 210, at Pages 61590-61603. See, also notice of extended deadlines, Federal Register, December 28, 2007, Vol. 72, No. 248, at Pages 73744-73745.
1/14. The Supreme Court denied certiorari in U.S. Fax Law Center v. iHire. See, Orders List [pages in PDF] at page 5.
This is a case regarding standing to bring actions seeking damages for unsolicited faxes under the Telephone Consumer Protection Act (TCPA).
47 U.S.C. � 227(b)(1)(C) provides, in part, that "It shall be unlawful for any person within the United States, or any person outside the United States if the recipient is within the United States ... to use any telephone facsimile machine, computer, or other device to send, to a telephone facsimile machine, an unsolicited advertisement ..."
The U.S. Court of Appeals (10thCir) affirmed the dismissal of complaints for lack of standing. The denial of certiorari lets stand the February 7, 2007, opinion of the Court of Appeals. See also, Supreme Court docket.
This case is U.S. Fax Law Center, Inc. v. iHire, Inc., et al., U.S. Supreme Court, Sup. Ct. No. 06-1634, a petition for writ of certiorari to the U.S. Court of Appeals for the 10th Circuit, App. Ct. Nos. 05-1325, 05-1441, 05-1447, 05-1465, 05-1521, and 05-1523.

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