Source: http://techlawjournal.com/home/newsbriefs/2004/10f.asp
Timestamp: 2018-01-16 23:04:00
Document Index: 350471125

Matched Legal Cases: ['§ 1125', 'art 15', '§ 254', '§ 7701', '§ 5', '§ 5', '§ 18', '§ 18', '§ 18', '§ 18', '§ 1030', '§ 271', '§ 271', '§ 106', '§ 1201', '§ 1201', '§ 102', '§ 102', '§ 102', '§ 106', '§ 1201', '§ 1201', '§ 101', '§ 106', '§ 107']

TLJ News: October 26-31, 2004.
News from October 26-31, 2004
Donaldson Addresses Why Markets Are More Resilient Today
10/29. William Donaldson, Chairman of the Securities and Exchange Commission (SEC), gave a speech in Detroit, Michigan. He addressed why markets are more resilient today than they were in 1929. One reason, he said, has to do with the internet and greater access to information.
He began by noting that "Today's date, October 29, occupies an ominous place in the annals of America's securities markets. As we all know, it was on this day 75 years ago that the Dow Jones Industrial Average plunged nearly 12 percent, earning it the moniker ``Black Tuesday.´´ On the previous day, the Dow fell nearly 13 percent, and was subsequently named in the history books ``Black Monday.´´"
He then stated that the subject of his speech is to "draw some comparisons between that era and the one we have all lived through, which began in the late 1990s and extended into the new millennium."
He said that one "difference between today and 75 years ago is the greater access to information. With the Internet, rating services, and investigative journalism, information has been democratized and is no longer the province of market insiders. That said, we saw in recent years that the real challenge can be distinguishing good information from bad. It's a constant struggle, remains a source of concern for the SEC, and should be of concern to all in the investing community."
He said that another "difference is that the United States benefits from the existence of many more sophisticated instruments to advance diversification and risk dispersion compared to 75 years ago. Consider derivative contracts, which didn't exist in the 1930s."
For example, he said that "Chairman Greenspan has pointed to the boom and bust in the telecommunications sector as an example of how the financial system is better equipped today than in the past to cope with severe stresses. Because banks have had more capital with which to absorb the pain from telecom bankruptcies, they have been able to distribute the financial risks using a variety of tools unavailable to market participants in decades past, such as loan syndications, pooled asset securitizations, credit default swaps and collateralized debt obligations. These instruments also help to provide additional information to the market, which results in more accurate pricing and assessment of credit risk."
FCC Concurs With Selection of Transition Administrator Team to Oversee Reconfiguration of 800 MHz Band
10/29. The Federal Communications Commission (FCC) released a Public Notice [PDF] regarding its July 2004 Report and Order (R&O) that reconfigured the 800 MHz band to eliminate interference to public safety and other land mobile communication systems operating in the band. This is the Nextel spectrum swap order.
This Public Notice states that in this R&O the FCC "directed that representatives of five major stakeholders in the 800 MHz band, i.e. Nextel Communications, Inc., The Association of Public Safety Communications Officials-International (APCO), The Industrial Telecommunications Association (ITA), Southern LINC; and the United Telecom Council (UTC) to select an independent party, the Transition Administrator (TA), to oversee the reconfiguration of the 800 MHz band. Pursuant to the Report and Order, the five-member Search Committee was to have made a selection by September 20, 2004. However, at the request of the Search Committee, the Public Safety and Critical Infrastructure Division extended the selection date to October 12, 2004. On October 12, 2004, the Search Committee sent a letter to the Chief of the Public Safety and Critical Infrastructure Division stating that it had selected a three-organization team to serve as the Transition Administrator: The team consists of BearingPoint, Squire Sanders Dempsey LLP, and Baseline Telecom, Inc. (Transition Administrator or Bearing Point Team.)." (Parentheses in original. Footnotes omitted.)
The Public Notice concludes that "By this Public Notice, and as specified in the Report and Order, we concur with the Search Committee's selection of the Transition Administrator Team."
This Public Notice is DA-04-3492 in WT Docket No. 02-55. The FCC adopted the R&O at its July 8, 2004 meeting. It is FCC 04-168. See also, FCC's July 8, 2004 release [4 pages in PDF].
FCC to Host Symposium on Numbering System and VOIP
10/29. The Federal Communications Commission's (FCC) Wireline Competition Bureau (WCB) will host a symposium on Thursday, November 4 on the effect of new technologies, such as voice over internet protocol (VOIP), on the North American Numbering System.
The event, which is titled "The Future of Numbering: Will New Technologies, Innovations and Services Affect Number Administration and Optimization", will be held from 1:00 - 4:00 PM. in the FCC's Commission Meeting Room.
Earlier in the day, at 8:30 AM, the North American Numbering Council (NANC) will meet at the same location. See, FCC notice [PDF].
The FCC's notice [PDF] for the afternoon symposium states that "emerging new technologies such as Voice Over Internet Protocol, or VoIP, raise new demand for numbers and new challenges. Among those challenges are ``portable´´ VoIP services that use the same number no matter where the customer is located geographically."
The agenda includes panels titled "Status of the North American Numbering Plan", "Is there a likelihood of exhausting numbers under the NANP in the foreseeable future?", "New number sources and substitutes for NANP numbers", "New technologies/services that may require numbering resources", and "Numbering resource optimization".
10/29. The Department of Justice's (DOJ) Antitrust Division released its Competitive Impact Statement in U.S. v. Cingular. See also, story titled "DOJ Approves Cingular Acquisition of AT&T Wireless, Subject to Divestitures" and story titled "FCC Approves Cingular's Acquisition of AT&T Wireless" in TLJ Daily E-Mail Alert No. 1,004, October 26, 2004.
6th Circuit Rules in Cyber Squatting Case
10/28. The U.S. Court of Appeals (6thCir) issued its opinion [6 pages in PDF] in DaimlerChrysler v. The Net Inc., affirming the District Court's judgment for DaimlerChrysler (a trademark holder) against cyber squatters, under the Anti-Cybersquatting Consumer Protection Act (ACPA). The Court of Appeals also held that the ACPA does not violate the takings clause of the Constitution, and that in a ACPA case the trademark hold is entitled to an injunction that is broader than the scope of its ACPA claim.
"Dodge" has been a registered trademark of plaintiff DaimlerChrysler since 1939. DaimlerChrysler also used the telephone number 1-800-4-A-DODGE beginning in 1995, and registered the domain 4ADODGE.com in 1995. Defendant Keith Maydeck, while serving time in a federal prison in 1996, had defendant Michael Sussman register the domain name, foradodge.com, in the name of Net Inc. There is no such corporate entity.
Maydeck asserts that he registered this domain name in connection with his plans to offer "dodging" services, such as tax and creditor avoidance. Yet, he also registered numerous other domain names that included corporate trademarks, as well as domain names that mimick the domain name of government agencies. Moreover, the foradodge.com web site contained a hyperlink to a pormography web site.
DaimlerChrysler filed a complaint in U.S. District Court (EDMich) against Maydeck, Sussman, and Net Inc. alleging violation of the ACPA. The District Court granted summary judgment to DaimlerChrysler, ordered the transfer of the domain name, and enjoined the defendants for using the marks DODGE, 4ADODGE, or any variations thereof, not only in registered domains, but in any communications. Defendants brought this appeal, pro se.
The Court of Appeals affirmed in a rather straightforward application of the ACPA, which is codified at 15 U.S.C. S 1125(d).
The Court wrote that "A trademark owner asserting a claim under the ACPA must establish the following: (1) it has a valid trademark entitled to protection; (2) its mark is distinctive or famous; (3) the defendant’s domain name is identical or confusingly similar to, or in the case of famous marks, dilutive of, the owner’s mark; and (4) the defendant used, registered, or trafficked in the domain name (5) with a bad faith intent to profit." The Court held that all five elements were established.
In its analysis of bad faith, the Court applied nine non-exclusive factors enumerated at 15 U.S.C. § 1125(d)(1)(B)(i), and found that eight factors weighed in favor of DaimlerChrysler, while one was neutral -- factor VI.
The sixth bad faith factor is "the person’s offer to transfer, sell, or otherwise assign the domain name to the mark owner or any third party for financial gain without having used, or having an intent to use, the domain name in the bona fide offering of any goods or services, or the person’s prior conduct indicating a pattern of such conduct". There were discussions regarding the sale of the domain name, but the parties disputed the facts regarding who made the first offer regarding sale of the domain name.
One other notable aspect of this ruling is that it addressed the defendants' argument that the ACPA involves a takings clause violation. The Fifth Amendment of the Constitution provides that "nor shall private property be taken for public use without just compensation".
The Court references several District Court opinions on application of the takings clause to the ACPA, and several general takings clause cases. It concluded that "the ACPA does not effect a taking."
The Court also upheld the injunction against using the marks DODGE and 4ADODGE in any communications against a claim that it was too broad. The Court held that "a plaintiff is entitled to an injunction that is somewhat broader than the scope of its ACPA claim in order to protect the reputation and goodwill it has established in its marks and to prevent defendants from infringing on, or otherwise harming, those marks".
This case is DaimlerChrysler v. The Net Inc., et al., No. 03-1950, an appeal from the U.S. District Court for the Eastern District of Michigan at Detroit, D.C. No. 98-74186, Judge Paul Borman presiding. Judge Kennedy wrote the opinion of the Court of Appeals, in which Judges Cook and Joseph Hood joined.
Monti Addresses Competition Policy
10/28. Mario Monti, the outgoing European Commissioner for Competition Policy, gave a speech titled "A reformed competition policy: achievements and challenges for the future" in Brussels, Belgium.
He stated that the EC has "has enforced competition policy independently from national or specific interests" despite "considerable pressures to influence decisions".
Monti (at right) stated that "I have been very conscious of the fact that competition policy influences investment decisions, business acquisitions, pricing policies and economic performance. Therefore, a major trend of this mandate has been to ensure that competition policy is fully compatible with economic learning. Furthermore, competition policy is an instrument to foster economic growth, to promote a good allocation of resources and to strengthen the competitiveness of the European industry for the benefit of the citizens. These objectives would only be randomly achieved, at the expense of numerous errors, if we were to ignore economic thinking and market dynamics."
He also stated that "Another important evolution has been an increased use and presentation of competition policy as a tool to foster structural reform and to promote the ``Lisbon agenda´´ strategy: to make of the EU ``the most competitive and dynamic knowledge-based economy in the world´´ by 2010."
He added that "Further to its general contribution to economic growth and competitiveness, competition policy favours the liberalisation of monopolized markets in sectors such as telecommunications ..."
CNET Publishes Tech Related Voting Records of Senators and Representatives
10/28. CNET News published series of articles and tables that list and analyze the voting records of all Senators and Representatives on a range of technology related bills. This series provides individual voting records and overall scores for each Senator and Representative. It also provides party level data.
It concludes that "Senate Republicans scored an average of 61 percent -- 15 points higher than their Democratic counterparts, who on average scored 46 percent. The gap was mirrored in the ratings garnered by their counterparts in the U.S. House of Representatives, where Republicans boast a 68 percent collective score compared with 52 percent for Democrats."
TLJ published a congressional scorecard for second session of the 104th Congress (1998) in January of 1999. This study found that while some Republicans and Democrats in both houses obtained perfect scores, the average score for Republicans was higher than the average score for Democrats in both the House and Senate. TLJ also collected and analyzed data on votes in the first session of the 105th Congress (1999), but did not publish a scorecard. The 1999 scores for individual Senators and Representatives correlated highly with their 1998 scores. Also, the average score for Republicans was higher than the average score for Democrats in 1999.
The CNET study covers the time period 1995 through 2004 for Senators. The Senate roll call votes used include the Communications Decency Act (CDA), the Digital Millennium Copyright Act (DMCA), the original Internet Tax Freedom Act (ITFA) in 1998, the Y2K liability limitation bill in 1999, the bill to modernize the export control regime in 2001, the trade promotion authority bill, a bill that included the research and development (R&D) tax credit, and other bills.
The CNET study covers the time period 1998 through 2004 for Representatives. The House roll call votes used include a bill to increase the number of H1B visas (1998), a Y2K liability limitation bill (1999), an extension of the ITFA (2000), a bill extending permanent normal trade relations (PNTR) status to China (2001), the USA PATRIOT Act (2001), the Tauzin Dingell communications bill (2002), the trade promotion authority bill (2002), the USPTO fee bill (2004), the stock options accounting bill (2004), a bill that includes an extension of the R&D tax credit (2004), and other bills.
The CNET study includes the voting record of Sen. John Kerry (D-MA), the Democratic nominee for President. However, there is no voting record for President George Bush, since he is not a Member of Congress. Hence, no comparison of the two candidates is possible. However, Sen. Kerry scored below the average for his Senate colleagues.
10/28. The Federal Communications Commission (FCC) released the text [86 pages in PDF] of its Report and Order that amends Part 15 of the FCC's rules for broadband over powerline (BPL) systems. The FCC adopted, but did not release, this item at its October 14, 2004 meeting. This item is FCC 04-245 in ET Docket No. 04-37 and ET Docket No. 03-104. See also, story titled "FCC Adopts BPL Report and Order" in TLJ Daily E-Mail Alert No. 997, October 15, 2004.
10/28. Federal Communications Commission (FCC) Commissioners Michael Copps and Jonathan Adelstein announced that they will host an event pertaining to media concentration. It will be held on December 9, 2004 at 7:00 PM at Hamline University in St. Paul, Minnesota. See, release.
10/28. The Federal Communications Commission's (FCC) Enforcement Bureau (EB) released an Order and Consent Decree [8 pages in PDF] that fines TON Services, Inc. $40,000 for violating the universal service reporting and contribution requirements of 47 U.S.C. § 254, and the FCC's rules thereunder. Specifically, this item decrees that TON Services shall make a "voluntary contribution", that TON Services comply with the FCC's construction of the universal service reporting and contribution requirements in the future, and that the FCC dismiss its investigation of TON Services. FCC Chairman Michael Powell stated in a release [PDF] that "We cannot and will not tolerate refusals to comply with our contribution rules. We will continue our strong enforcement in this area to help ensure that telecommunications services are available to all Americans. When carriers contribute their fair share we ensure that the universal service fund remains on a sound footing." TON Services provides services to truck drivers and other travelers. It provides load/equipment posting, freight matching, advertising services, truck insurance, flower bouquet ordering, and other truck driver related services. It also provides access to pre-paid calling cards, payphones, WiFi access and data jacks at truck stops.
10/28. The Department of Homeland Security (DHS) announced that its adopted its first biometric facial recognition standard. The DHS stated in a release that it "will use the standard as technical criteria upon which to design equipment such as cameras and software for facial recognition. The standard supports visual human facial comparison and computer automated comparisons for watch list checks and for computer identification and verification. It also facilitates the interchange of photographs across systems, and will assist in the future development of interoperable biometric applications."
10/28. A grand jury of the U.S. District Court (DNJ) returned indictments charging 19 individuals with various federal crimes in connection with the operation of a website that facilitated the trafficking in stolen identity information and documents, and stolen credit and debit card numbers. See, DOJ release.
10/28. William Donaldson, Chairman of the Securities and Exchange Commission (SEC), gave a speech in New York, New York to the International Organization of Securities Commissions. He stated that "The fundamental issue for everyone involved in financial markets today, regardless of company or country, must be to maintain high standards that breed trust and confidence. This becomes increasingly important at a time when investors can -- and do -- move capital around the globe with a few keystrokes on a computer. Recent history has taught us that capital will flee environments that are unstable or unpredictable -- whether that's a function of lax corporate governance, ineffective accounting standards, or a lack of transparency."
10/28. The Recording Industry Association of America (RIAA) announced the filing of yet another round of 750 civil lawsuits against individual John Doe defendants alleging copyright infringement in connection with their use of peer to peer systems. See, RIAA release.
10/28. The Cellular Telecommunications and Internet Association (CTIA) announced the election of directors and officers for 2005. See, CTIA release.
10/28. The U.S. Court of Appeals (4thCir) issued its opinion [12 pages in PDF] in General Technology Applications v. Exro, a case regarding the right to litigation proceeds recovered in a patent infringement lawsuit. The Court of Appeals held that the District Court lacked jurisdiction, vacated the District Court's judgments, and remanded with instructions to remand to the state court. This case is General Technology Applications, Inc. v. Exro, Ltda., et al., U.S. Court of Appeals for the 4th Circuit, App. Ct. No. 03-1860, an appeal from the U.S. District Court for the Eastern District of Virginia, at Alexandria, of two consolidated cases, D.C. Nos. CA-02-1706-A and CA-03-466, Judge Claude Hilton presiding.
Powell Addresses Spectrum Policy and Proceedings
10/27. Federal Communications Commission (FCC) Chairman Michael Powell gave a speech [5 pages in PDF] titled "The Wireless Broadband Express" on October 26. He spoke about the FCC's spectrum related initiatives at a convention hosted by the Cellular Telecommunications and Internet Association (CTIA) in San Francisco, California. Then, on October 27, he gave a speech [5 pages in PDF] in Las Vegas, Nevada titled "WISPs: Bringing the Benefits of Broadband to Rural America".
He advocated "more broadband spectrum", "greater licensing flexibility", allowing "the competitive market to determine the technology standards for mobile broadband", and "pro-competitive and deregulatory policies" in his San Francisco speech. He spoke about the "democratization of communications", "empowerment" and how the FCC's "unlicensed rules have been a hotbed for wireless broadband innovation" in his Las Vegas speech. See, full story.
AOL and Others File Complaints Against Spammers
10/27. America Online (AOL), Microsoft, Earthlink and Yahoo filed complaints in federal courts against spammers alleging violations of the federal CAN-SPAM Act, the federal Computer Fraud and Abuse Act, and various state statutes and common law.
On October 27, AOL filed two complaints in U.S. District Court (EDVa). It filed one complaint [17 pages in PDF] against defendants identified as "John Does 1-20" alleging violation of federal CAN-SPAM Act, the Virginia anti-spam state statute, and state common law, in connection with the defendants' transmitting "millions of deceptive and unsolicited bulk electronic messages through AOL Instant Messenger".
The complaint states that "These unsolicited bulk messages were transmitted through fraudulent means designed to hide the identity of the John Doe Defendants, including the use of stolen or fraudulently created AOL or AIM accounts, and the use of materially false or misleading headers. All the unsolicited bulk messages constitute trespass to chattels under state common law, and the email spam also violates the CAN-SPAM Act of 2003, the Virginia Computer Crimes Act and other laws". See also, AOL release.
The Congress passed S 877, the "Controlling the Assault of Non-Solicited Pormography and Marketing Act of 2003", also known as the "CAN-SPAM Act", late in the first session of the 108th Congress. On December 16, 2003, President Bush signed the bill. It became Public Law No. 108-187. It is codified at 15 U.S.C. § 7701, et seq. See, text of bill [21 pages in PDF].
Count I of AOL complaint alleges violation of § 5(a)(1) of the CAN-SPAM Act for sending spam to protected computers with false information in the From: line of headers.
Count II alleges violation of §§ 5(a)(2), 5(a)(3) and 5(a)(5) of the CAN-SPAM Act for sending spam with false subject headings, no functioning return e-mail address and opt out mechanism, and no notice that the messages are advertising.
Count III alleges sending spam violation of the Virginia Computer Crimes Act, at Va. Code Ann. § 18.2-152.2. Count IV alleges computer trespass in violation of Virginia Computer Crimes Act, at Va. Code Ann. § 18.2-152.3:1(A)(1). Count V alleges theft of computer services in violation of the Virginia Computer Crimes Act, at Va. Code Ann. § 18.2-152.6. Count VI alleges dealing in falsified bulk e-mail software in violation of the Virginia Computer Crimes Act, at Va. Code Ann. § 18.2-152.3:1(A)(2).
Count VII alleges trespass to chattels in violation of Virginia common law. Count VIII alleges common law conspiracy to commit trespass to chattels in violation of federal and Virginia statutes. Count IX alleges unjust enrichment and imposition of a construction trust in favor of AOL, for benefits obtained by defendants at AOL's expense.
AOL seeks broad injunctive relief, damages, punitive damages, and other relief.
AOL is represented by Jennifer Archie and Jon Praed of the law firm of Latham and Watkins.
This case is America Online, Inc. v. John Does 1-20 Transmitting Spim, AOL Chat Room Spam & E-Mail Spam, U.S. District Court for the Eastern District of Virginia, No. 04-CV-1302(LMB/TRJ). The case has been assigned to Judge Leonie Brinkema.
AOL's second complaint, also filed in federal court in Alexandria, Virginia, alleges that John Doe defendants transmitted spam in connection with the sale of prescription medicines.
Yahoo filed a complaint in the U.S. District Court for the Northern District of California, at San Jose, against East Coast Exotics Entertainment Group, Inc. and Epoth LLC alleging violation of the federal CAN-SPAM Act, the federal Computer Fraud and Abuse Act, which is codified at 18 U.S.C. § 1030, the California computer crime statute, and the California civil conspiracy law.
Mike Callahan, SVP and General Counsel of Yahoo, stated in a release that "we are holding spammers directly accountable for unlawfully disguising their identity and using this practice to deceive e-mail users ... Consumers trust Yahoo! to provide a safe and secure experience, which is why we take an aggressive, multi-faceted approach to protect e-mail users through legal efforts, industry collaboration and technological enhancements."
Earthlink filed a complaint in U.S. District Court for the Northern District of Georgia against John Doe defendants alleging violation of the federal CAN-SPAM Act, the federal Computer Fraud and Abuse Act, the Georgia Computer Systems Protection Act, and state and federal racketeering laws. This complaint targets mortgage lead spammers and drug spammers.
Les Seagraves, Assistant General Counsel and Chief Privacy Officer of EarthLink, stated in a release that "Enforcement actions against spammers, including litigation and cooperation with our industry peers, continues to be an important component in the fight against spam. ... We remain committed to using the law, along with technical solutions, consumer education and legislative support, to stop the flow of spam and enhance the Internet experience for all users".
Microsoft filed three complaints.
10/27. Carol Ann Bischoff, the Chief Legal Officer of CompTel/ASCENT, will leave her job, effective November 3, 2004, "to focus on raising her two young daughters". See, CompTel/ASCENT release.
10/27. The Electronic Privacy Information Center (EPIC) and other groups published a book titled Litigation Under the Federal Open Government Laws 2004. The 572 page book covers the Freedom of Information Act, Privacy Act, Federal Advisory Committee Act, and Government in the Sunshine Act. The price is $40.00. See, information and online order page.
10/27. The Federal Communications Commission (FCC) released the text [26 pages in PDF] of its Memorandum Opinion and Order regarding the unbundling obligations of regional Bell operating companies (RBOCs) under 47 U.S.C. § 271. The FCC announced, but did not release this item on October 22, 2004. This item is FCC-04-254 in WC Docket No. 01-338, WC Docket No. 03-235, WC Docket No. 03-260, and WC Docket No. 04-48. See also, story titled "FCC Announces Report and Order Regarding Unbundling Obligations Under § 271" in TLJ Daily E-Mail Alert No. 1,005, October 27, 2004.
10/27. The Department of Homeland Security (DHS) issued a release that describes the conference that it co-hosted in Berlin, Germany on October 20-22, 2004 titled "International Cyber Security Cooperation: Watch, Warning, and Incident Response".
Background. The Court of Appeals summarized Lexmark's technology. "Lexmark uses an ``authentication sequence´´ that performs a ``secret handshake´´ between each Lexmark printer and a microchip on each Lexmark toner cartridge. Both the printer and the chip employ a publicly available encryption algorithm known as ``Secure Hash Algorigthm-1´´ or ``SHA-1,´´ which calculates a ``Message Authentication Code´´ based on data in the microchip's memory. If the code calculated by the microchip matches the code calculated by the printer, the printer functions normally. If the two values do not match, the printer returns an error message and will not operate, blocking consumers from using toner cartridges that Lexmark has not authorized."
The SMARTEK chips also include a copy of Lexmark's Toner Loading Program (TLP). The Appeals Court explained. "After the authentication sequence concludes, the Printer Engine Program downloads a copy of the Toner Loading Program from the toner cartridge chip onto the printer in order to Lexmark does not wish to loose its control of the market for replacement cartridges. measure toner levels. Before the printer runs the Toner Loading Program, it performs a ``checksum operation,´´ a ``commonly used technique´´ to ensure the ``integrity´´ of the data downloaded from the toner cartridge microchip. ... Under this operation, the printer compares the result of a calculation performed on the data bytes of the transferred copy of the Toner Loading Program with the ``checksum value´´ located elsewhere on the toner cartridge microchip. If the two values do not match, the printer assumes that the data was corrupted in the program download, displays an error message and ceases functioning. If the two values do match, the printer continues to operate."
The complaint alleged copyright infringement, in violation of 17 U.S.C. § 106, by reproducing the Toner Loading Program on the SMARTEK chip. Second, the complaint alleged violation of the DMCA by selling a product that circumvents access controls on the Toner Loading Program. Third, the complaint alleged violation of the DMCA by selling a product that circumvents access controls on the Printer Engine Program.
Statutes. The relevant provisions of the DMCA are codified at 17 U.S.C. § 1201. 17 U.S.C. § 1201(a)(1) provides, in part, that "No person shall circumvent a technological measure that effectively controls access to a work protected under this title."
The words "this title" refer to Title 17 of the U.S. Code, which codifies copyright law. In particular, 17 U.S.C. § 102 defines the subject matter of copyright. 17 U.S.C. § 102(a) provides, in part, that "Copyright protection subsists, in accordance with this title, in original works of authorship fixed in any tangible medium of expression, now known or later developed, from which they can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device."
17 U.S.C. § 102(a)(b) provides that "In no case does copyright protection for an original work of authorship extend to any idea, procedure, process, system, method of operation, concept, principle, or discovery, regardless of the form in which it is described, explained, illustrated, or embodied in such work."
Then, 17 U.S.C. § 106 provides that "the owner of copyright under this title has the exclusive rights ... (1) to reproduce the copyrighted work in copies ..."
17 U.S.C. § 1201(a)(2) provides that "No person shall manufacture, import, offer to the public, provide, or otherwise traffic in any technology, product, service, device, component, or part thereof, that--
17 U.S.C. § 1201(a)(3)(A) provides that "to ``circumvent a technological measure´´ means to descramble a scrambled work, to decrypt an encrypted work, or otherwise to avoid, bypass, remove, deactivate, or impair a technological measure, without the authority of the copyright owner". It also provides that "a technological measure ``effectively controls access to a work´´ if the measure, in the ordinary course of its operation, requires the application of information, or a process or a treatment, with the authority of the copyright owner, to gain access to the work."
The Court wrote that "computer programs may be entitled to copyright protection as ``literary works´´ under 17 U.S.C. § 101 and may be protected from infringement under 17 U.S.C. § 106." The Court found no issue as to whether copying took place. Rather, the issue was rather the Toner Loading Program is entitled to copyright protection as an original expression, or whether, Lexmark seeks protection for an idea.
The Court of Appeals wrote that "Generally speaking, ``lock-out´´ codes fall on the functional-idea rather than the original-expression side of the copyright line. Manufacturers of interoperable devices such as computers and software, game consoles and video games, printers and toner cartridges, or automobiles and replacement parts may employ a security system to bar the use of unauthorized components. To ``unlock´´ and permit operation of the primary device (i.e., the computer, the game console, the printer, the car), the component must contain either a certain code sequence or be able to respond appropriately to an authentication process. To the extent compatibility requires that a particular code sequence be included in the component device to permit its use, the merger and scènes à faire doctrines generally preclude the code sequence from obtaining copyright protection."
The Court also reasoned that the copying appears to fall under the fair use exception of 17 U.S.C. § 107.
The Court of Appeals summarized that the District Court found that the Printer Engine Program's authentication sequence effectively controls access to a work protected under copyright law, because it "relied on a definition in the DMCA saying that a measure ``effectively controls access to a work´´ if, ``in the ordinary course of operation,´´ it ``requires the application of information, or a process or treatment, with the authority of the copyright owner, to gain access to the work.´´ ... Because Congress did not explain what it means to ``gain access to the work,´´ the district court relied on the ``ordinary, customary meaning´´ of ``access´´: ``the ability to enter, to obtain, or to make use of,´´ ... Based on this definition, the court concluded that ``Lexmark’s authentication sequence effectively ‘controls access’ to the Printer Engine Program because it controls the consumer’s ability to make use of these programs.´´" (Statutory and dictionary citations omitted.)
The Appeals Court disagreed. It wrote that "It is not Lexmark's authentication sequence that ``controls access´´ to the Printer Engine Program.... It is the purchase of a Lexmark printer that allows ``access´´ to the program. Anyone who buys a Lexmark printer may read the literal code of the Printer Engine Program directly from the printer memory, with or without the benefit of the authentication sequence, and the data from the program may be translated into readable source code after which copies may be freely distributed. ... No security device, in other words, protects access to the Printer Engine Program Code and no security device accordingly must be circumvented to obtain access to that program code."
Judge Merritt wrote that "I write separately to emphasize that our holding should not be limited to the narrow facts surrounding either the Toner Loading Program or the Printer Engine Program. We should make clear that in the future companies like Lexmark cannot use the DMCA in conjunction with copyright law to create monopolies of manufactured goods for themselves just by tweaking the facts of this case: by, for example, creating a Toner Loading Program that is more complex and ``creative´´ than the one here, or by cutting off other access to the Printer Engine Program. The crucial point is that the DMCA forbids anyone from trafficking in any technology that ``is primarily designed or produced for the purpose of circumventing a technological measure that effectively controls access to a [protected] work.´´ ... The key question is the ``purpose´´ of the circumvention technology. The microchip in SCC’s toner cartridges is intended not to reap any benefit from the Toner Loading Program -- SCC’s microchip is not designed to measure toner levels -- but only for the purpose of making SCC's competing toner cartridges work with printers manufactured by Lexmark." (Citation omitted.)
He continued that "Lexmark would have us read this statute in such a way that any time a manufacturer intentionally circumvents any technological measure and accesses a protected work it necessarily violates the statute regardless of its ``purpose.´´ Such a reading would ignore the precise language -- ``for the purpose of´´ -- as well as the main point of the DMCA -- to prohibit the pirating of copyright-protected works such as movies, music, and computer programs. If we were to adopt Lexmark's reading of the statute, manufacturers could potentially create monopolies for replacement parts simply by using similar, but more creative, lock-out codes. Automobile manufacturers, for example, could control the entire market of replacement parts for their vehicles by including lock-out chips. Congress did not intend to allow the DMCA to be used offensively in this manner, but rather only sought to reach those who circumvented protective measures ``for the purpose´´ of pirating works protected by the copyright statute. Unless a plaintiff can show that a defendant circumvented protective measures for such a purpose, its claim should not be allowed to go forward."
FCC Reports 4th Straight Decline in Telephone Subscribership
10/26. The Federal Communications Commission's (FCC) Wireline Competition Bureau's (WCB) Industry Analysis and Technology Division (IATD) released its report [52 pages in PDF] titled "Telephone Subscribership in the United States (Data Through July 2004)". Telephone subscribership continues to decline.
The report states that the percentage of households subscribing to telephone service is 93.8%. This data is based upon a question asked by the Census Bureau: "Is there a telephone in this house/apartment?". The last report [53 pages in PDF], for data through March of 2004, reported subscribership at 94.2%. The November 2003 survey reported 94.7%. The July 2003 survey reported 95.2%. The March 2003 survey reported 95.5%.
This data is based upon a question asked by the Census Bureau: "Is there a telephone in this house/apartment?". In addition, these declines are statistically significant because the large sample sizes of Census Bureau surveys. The Census Bureau surveys 50,000 to 60,000 households for each survey.
The report states that the data is not seasonally adjusted. However, since this trend has prevailed for over one year, the decline does not reflect seasonal variations in subscribership.
The report does not attempt to explain this trend. Nor does it supply data that provides an explanation. Notably, the report does not contain data on fungible services that consumers might substitute for traditional telephones. There is no data in the report on e-mail, instant messaging, broadband internet access, VOIP applications, pagers, blackberries, or other wireless devices with internet access.
The report contains extensive demographic data. It breaks down telephone subscribership by income level, race, and state. Notably, the trend of declining telephone subscribership holds across income and age groups. There have been three straight declines in telephone subscribership for households in the top income category.
The report asserts that "The number and percentage of households that have telephone service represent the most fundamental measures of the extent of universal service." Perhaps this downward trend forebodes an impending obsolescence of telephone subscribership as a measure of the universality of access to communications technologies.
See also, story titled "FCC Reports Another Decline in Telephone Subscribership" in TLJ Daily E-Mail Alert No. 959, August 16, 2004.
FRB Vice Chairman Addresses Business Investment in Info Tech
10/26. Roger Ferguson, Vice Chairman of the Federal Reserve Board, gave a speech at The Citadel, in Charleston, South Carolina titled "Factors Influencing Business Investment". Business investment includes spending on computers, software and information technology. He discussed trends in spending on information technology, the rate of technological advancement in information technology, a possible high tech capital overhang, and the possible effect of the tax code on investment in information technology.
He predicted that "the prospects for business investment over the next few quarters are, on balance, relatively positive." But, he said, "the news is also troubling".
Ferguson (at right) said that one "factor that complicates the outlook for investment is the state of the computer sector. About 12 percent of business spending on equipment and software is for computer gear. Some of that spending is to equip new plants and new employees, but a large share of it is to replace old machines and outdated technology."
He continued that "Over the past few decades, we have seen technology advance rapidly, and businesses have purchased a large amount of high-tech equipment. More recently, the growth rate of business spending on computers has slowed -- from about 40 percent last year to less than half that pace, on average, in the first two quarters of this year."
"One possible explanation is that we are seeing a deceleration in the pace of technical advancement. Technological progress affects business investment in primarily two ways. First, it changes how businesses organize their operations. Second, even innovations that do not spur an entirely new way of doing business can encourage equipment spending because some firms will choose to retire obsolete equipment more rapidly than they otherwise would. Accordingly, if the pace of progress slows, increases in business investment, particularly of high-tech goods, may also slow", said Ferguson.
He said that "we cannot directly measure the pace of technological progress, but we can look at some indicators to help us judge", such as "quality-adjusted prices". He explained that "Over time, these quality-adjusted prices tend to fall, as computers and related equipment become more and more powerful. Between 1992 and 2002, the quality-adjusted price of new computers fell at an annual rate of 18 percent. The speed at which these prices fall reflects mainly the pace of technological progress. Unfortunately, over the past several quarters, the rate of price decline slowed from that experienced during the preceding decade: Computer equipment prices fell just 9 percent at an annual rate in 2003 and the first half of 2004."
He concluded that "some of this deceleration may represent some slowing in the rapid pace of technological improvement." He also noted that "the number of new PC models introduced this year has fallen markedly from the pace posted in the preceding few years, suggesting that the pace of innovation, at least in this one market, has slowed."
Ferguson also discussed the concept of an information technology "capital overhang". That is, "As the high-tech boom of the nineties was ending, many observers claimed that companies had been overly optimistic and had purchased too many PCs and peripherals and laid too much fiber optic cable, resulting in an actual capital stock that exceeded the desired level for business." This, then, can curtail investment spending.
He offered no firm conclusions. Rather, he said that "Determining whether a capital overhang exists is difficult, and estimates of the size of overhangs are subject to considerable error. First, capital stocks are hard to measure; although we know the amount of new capital goods purchased, we can only roughly estimate the rate of economic depreciation and obsolescence. Consequently, we cannot know with certainty the level of the existing capital that is still available to be used. Second, we do not know how much capital firms would ideally like to employ because their expectations and production processes are always changing."
Finally, he discussed the possible effects of changes in tax law on business investment. He said that "Currently, the partial-expensing provision in the tax law allows a firm to subtract a large fraction of the cost of new capital equipment from profits right away, rather than depreciating the cost over time, and thereby to lower its taxes. The partial-expensing provision, which provides an incentive to invest in new capital goods, will expire at the end of this year. The impending expiration is probably boosting investment spending in the second half of this year as firms rush to take the tax advantage before it disappears; however, at this point the evidence is not conclusive."
See also, The Citadel's transcript.
FCC Releases NOI on Foreign Mobile Termination Rates
10/26. The Federal Communications Commission (FCC) released the text [56 pages in PDF] of its Notice of Inquiry (NOI) regarding foreign mobile termination rates.
This NOI states that it "seeks to inquire whether U.S. customers have adequate information and alternatives with regard to foreign mobile termination rates and surcharges, and whether such charges raise consumer concerns."
"To that end, we solicit data, information, comments, and analyses on mobile termination arrangements and foreign mobile termination rates and on actions taken by foreign national regulatory authorities with respect to these rates. We also seek comment on the impact of these rates and actions on competition in the U.S.-international telecommunications market and, in particular, on U.S. telecommunications services customers."
The FCC seeks comment on "foreign mobile termination rate payment flows and the relevant regulatory regimes." The NOI further states that "We then seek input, analyses, and comments on the concerns raised by parties in the ISP Reform proceeding and on actions taken by foreign national regulatory authorities to address mobile termination rates within their respective jurisdictions. We ask for factual information and data on foreign mobile termination rates. Finally, we seek comment on the appropriate framework by which we can analyze whether foreign mobile termination rates are unreasonably high."
The FCC adopted, but did not release, this item at its October 14, 2004 meeting. This NOI states that this is FCC 04-247 in IB Docket No. 04-398. In contrast, the FCC issued a release on October 14 that identified this item as FCC 04-248.
Comments will be due 60 days after publication of a notice in the Federal Register, and reply comments will be due 90 after such publication. This notice in the Federal Register has not yet been published.
See also, story titled "FCC Issues NOI on Foreign Mobile Termination Rates" in TLJ Daily E-Mail Alert No. 998, October 18, 2004.
European Commission Clears Oracle Acquisition of PeopleSoft
10/26. The European Commission announced that it has approved Oracle's proposed acquisition of PeopleSoft. The EC stated in a release that it "concluded that even though the proposed merger reduced the number of big players from three to two, with SAP remaining the largest player in the sector and the relevant markets, the markets would remain competitive."
The EC also stated that it "reached this conclusion after analysing hundreds of HR and FMS bids launched by large and complex enterprises over the last couple of years. The Commission also carried out various econometric tests with this data which revealed that Oracle's bidding behaviour was not particularly affected by the specific identity of the rival bidders in the final rounds of a given bidding contest, i.e., the presence of PeopleSoft or SAP as rival did not necessarily give rise to more aggressive discounting compared to Oracle's behaviour vis-à-vis other bidders."
The U.S. Department of Justice's (DOJ) Antitrust Division had sought to block the proposed acquisition, but Oracle refused to back down. See, story titled "Antitrust Division Sues Oracle to Enjoin Its Proposed Acquisition of PeopleSoft" in TLJ Daily E-Mail Alert No. 846, March 1, 2004. Oracle prevailed in a trial by the U.S. District Court (NDCal). See, story titled "DOJ Loses Oracle Case" in TLJ Daily E-Mail Alert No. 974, September 10, 2004. The U.S. DOJ decided not to appeal the District Court's judgment.
10/26. The Federal Communications Commission (FCC) released an announcement regarding the fifth international meeting of the International Telecommunication Union -- Radiocommunication Sector (ITU-R) Task Group (TG) 1/8 on compatibility between ultrawideband (UWB) and radiocommunication services, to be held in San Diego, California on May 18-27, 2005. The FCC stated that "Parties who wish to participate in the meeting as a member of the United States delegation to the meeting should contact Mr. Ron Chase, the chairman of United States TG 1/8, by telephone at (202) 418-1378 or by email at Ron.Chase@fcc.gov." See, FCC release.
10/26. The Cellular Telecommunications and Internet Association (CTIA) announced that the Inter-Carrier Multi-Media Messaging Services (MMS) Working Group has "established a set of guidelines that will allow wireless carriers to phase-in photo and video messaging services over time". See, CTIA release.
Go to News from October 21-25, 2004.