Court Issues TRO Against Sales of Beatles Music “Simulation”

Ars Technica reports that on November 5, a Central District of California judge issued a temporary restraining order (TRO) against BlueBeat.com, a website offering 25-cent downloads and free streaming of thousands of copyrighted songs, most notably including the entire Beatles catalog. The order is part of a suit filed on November 3 by Capitol, EMI, Priority, and Virgin Records, claiming copyright infringement and various state law violations. In its ill-received opposition to the TRO, BlueBeat asserted in part that the sound recordings it sells were not copied from the originals, but instead were “independently developed” through a “psycho-acoustic simulation” process.

New York Files Suit Against Intel

New York Attorney General Andrew Cuomo filed an antitrust lawsuit against Intel on November 4, The New York Times and The Washington Post report. The complaint focuses on Intel’s relationships with Dell, Hewlett-Packard, and IBM, asserting that the company has used what amounts to coercion and bribery to ensure the use of its chips over those of its main competitor, Advanced Micro Devices. This is the second antitrust action taken against Intel in the U.S — the first, an FTC administrative complaint, was filed in 1998 and later settled. Since 2005, however, Intel has battled and lost antitrust disputes in the EU, Japan, and South Korea.

Anti-Net Neutrality Bill Introduced in House

On October 30, Rep. Marsha Blackburn (R-TN) introduced a House bill that would ban the FCC from issuing “any regulations regarding the Internet,” PCMag.com reports. The bill came eight days after the FCC issued its proposed net neutrality rulemaking, and a week after Sen. John McCain introduced a similar bill in the Senate. Blackburn framed the bill as an effort to preserve the Internet as “the last truly open public marketplace”; supporters of FCC regulation counter that the proposed nondiscrimination rule is necessary to preserve that openness.

EU Court Advisor Supports Google Keyword Searches in Trademark Suit

On September 22, Reuters reported that an advocate general to the European Court of Justice, the EU’s highest court, stated that Google did not infringe trademark rights of luxury goods maker Louis Vuitton (LVMH). Google sells keywords that use the company’s trademarks, but Advocate General Poiares Maduro concluded that trademark protections do not extend to search advertising keywords because they are not considered a product sold to the public. ZDNet’s Richard Koman argues that this decision does not account for brand confusion arising from keyword searches, and demonstrates the court’s “misunderstanding of the Web as something tangential to ‘real’ commerce.” Although the Luxembourg-based court follows the opinions of its advocates general in most cases, the judges will give their final judgment at a later date.

Facebook Shuts Down Beacon Ad Software as Part of Lawsuit Settlement

Ars Technica reports that on September 18, Facebook announced it will shut down its controversial Beacon ad software as part of a settlement for a class-action privacy suit. The Beacon software, launched in November 2007, allowed off-Facebook activities to be published in users’ news feeds without their explicit consent. After over a year of legal disputes regarding the software, Facebook decided to settle with complaining users, agreeing to discontinue Beacon and offering $9.5 million to create a foundation that would “fund projects and initiatives that promote the cause of online privacy, safety, and security.” Facebook’s director of policy communications said that the company has “learned a great deal from the experience.” The settlement proposal still awaits a district court judge’s approval.

FCC Proposes Net Neutrality Rules for Internet Service Providers

The New York Times reports that on September 12, the chairman of the Federal Communications Commission proposed new regulations regarding net neutrality for Internet service providers. The proposal would bar providers from blocking or slowing Internet traffic on the basis of content. Consumer advocates of the policy say networks should not be able to deter users from accessing lawful Internet content or applications by restricting bandwidth. Wired’s Dylan Tweeny warns that the proposed rules may be difficult to enforce, stifle overall service due to capacity limitations, and decrease innovation in a market that has flourished without government intervention. The rules will formally be proposed in an open FCC meeting in October.

Paris Hilton Obtains Small Victory in Ninth Circuit

WSJ Blogs reports that the Ninth Circuit gave Paris Hilton the green light on August 31 to proceed in her lawsuit against Hallmark for its use of her image and the phrase “That’s Hot” in a birthday greeting card. The court made note of the similarities between the card and Hilton’s appearance on the television show “The Simple Life.” In support of Hilton, the court stated that she “has at least some probability of prevailing on the merits before a trier of fact.” The case name is Hilton v. Hallmark Cards.

Cable Companies No Longer Capped at 30% Market Share

The Washington Post reports that on August 28, the Court of Appeals for the D.C. Circuit in Comcast v. FCC invalidated an FCC rule that capped the market share of cable companies at 30%. The FCC supported the rule because it believed that cable companies with market share larger than 30% would harm consumers. The court rejected the FCC’s rule in part because it failed to show how consumers would be harmed by the large cable companies in the current market, given the competition between cable, satellite, and fiber optic providers.

Texas Links DNA to Criminal Records

WSJ Blogs reports that on September 1, a new law took effect in Texas will link DNA evidence to sexual assault suspects’ criminal records. The link will be maintained regardless of whether the statute of limitations has passed or the suspect has been tried. The law’s supporters want to ensure harsher penalties to these suspects should they face legal troubles in the future, as the record would be available to parole boards and prosecutors. Critics of the law, including the ACLU, fear the potential abuse of due process rights.

Florida Bar Wants Access to Certain Applicant Facebook Profiles

The Florida Board of Bar Examiners will now be requesting access to the Facebook profiles of certain applicants on a case-by-case basis. The Board has identified a number of categories of applicants that it will require access from, including persons with a history of certain types of legal experience or substance abuse. The Citizen Media Law Project notes many of the privacy concerns related to the Bar’s decision.

Marine Corps Bans Social Networking Sites

In a directive issued Monday, the U.S. Marine Corps banned the use of social networking sites on its Marine Corps Enterprise Network, Wired and InformationWeek report. Characterizing these sites — including Facebook, MySpace, and Twitter — as “a proven haven for malicious actors and content,” the Corps hopes the ban will protect the network from cyberattacks and keep adversaries from acquiring user-generated information leaks. The directive does not limit Marines’ access to social networking sites on non-military networks, and a follow-up press statement encouraged the use of social media by Marines on their own ISPs.

Senate Hears Debate on Radio Performance Rights

The Senate Judiciary Committee heard debate Tuesday on the proposed Performance Rights Act, which would compel terrestrial radio stations to pay royalties recording artists, Ars Technica reports. Under current copyright law, webcasters and satellite radio stations pay royalties to both a song’s writer and its performer, while terrestrial stations are only obliged to pay songwriters. The debate pits two powerful interest groups, among others, against each other: the National Association of Broadcasters (NAB) staunchly opposes the bill, while the Recording Industry Association of America (RIAA) has voiced its strong support.

FTC Takes New View of Online Privacy

The Wall Street Journal and The New York Times report new FTC consumer protection head David Vladeck plans to shift the agency’s approach to online privacy protection. In a New York Times interview, Vladeck states he hopes to address the “notice and consent” framework that he considers “no longer sufficient” online, as it has resulted in privacy disclosures that are rarely read or understood. He also plans to consider not only economic harm, but also the “dignity interest” that arises in online information collection. Though no new rulemaking is yet planned, updated FTC privacy guidelines are expected next summer.

Law Enforcement Using Cell Phone Data During Investigations, Privacy Laws Yet to Catch Up

On July 5, The New York Times posted an analysis of the use of cell phone forensics by law enforcement. According to the article, major cell phone service providers receive hundreds of requests each month from law enforcement agencies for data that can be used to track a user’s cell phone. Many of these requests are not backed by search warrants that require a showing of probable cause that a crime has been committed. The article reported that since September 12, 2001, federal prosecutors in New Jersey alone have used cell phone data without search warrants in 98 investigations, resulting in 83 prosecutions. The article also reports that civil liberties groups such as the ACLU are concerned about the loss of privacy caused by modern cell phone technology in combination with the failure of federal privacy law to properly catch up and regulate cell phone tracking.

RIAA Seeks Order Requiring Harvard Professor to Remove “Unauthorized and Illegal” Recordings From Website

On July 6, Wired.com reported that the Recording Industry Association of America (RIAA) is seeking a court order requiring Harvard Law School Professor Charles Nesson to remove recordings of depositions and telephone conversations regarding an ongoing music piracy lawsuit from his blog. The RIAA argues that the recordings are “unauthorized and illegal,” but Professor Nesson insists that the privacy laws that allegedly prevent him from posting the recordings are “outrageously unconstitutional.” Professor Nesson had previously failed to obtain permission to broadcast a live webcast of the trial.

Network Management Company Tells Canadian Agency Net Neutrality Doesn’t Exist; Regulations Inevitable

On July 6, the CBC reported that the Canadian Radio-television and Telecommunications Commission held hearings during which representatives from industry and consumer advocacy groups offered their views on the proper way to regulate how internet service providers (ISPs) can manage network traffic. Sandvine, a company that sells traffic management technology to ISPs, said that network congestion disproportionately affects certain types of internet services, and that traffic management could potentially alleviate the inequality. Sandvine argued that net neutrality does not exist because of these inequalities in network traffic, and that network traffic should be managed by ISPs to prioritize certain types of packets. The Public Interest Advocacy Centre stated that packet inspection of the type made possible by Sandvine raises privacy concerns because it allows ISPs to identify the type of applications used by their customers in addition to other personal information. The group warned “there will be abuse” if such prioritization is allowed.

FTC Ready to Regulate Blogs

On June 21, The Washington Post reported that revised FTC advertising guidelines, set to be approved late this summer, will explicitly include blogs within their scope. The guidelines make clear that bloggers must disclose any compensation they receive for product endorsements and that they may be held liable for false claims made in those endorsements. According to the Post, while some bloggers worry about potential chilling effects, others believe that the guidelines will lead to more trust within the blogosphere and increased advertiser comfort with blogs.

City Removes Requirement that Job Applicants Disclose Social Networking Passwords

On June 22, the City Commission of Bozeman, Montana, rescinded a requirement that city job applicants disclose their usernames and passwords for websites such as Facebook, YouTube, and MySpace, the Billings Gazette reports. The requirement was part of Bozeman’s background check consent and release form. The commission’s decision came less than a week after a Montana television station discovered and reported on the policy, which quickly provoked additional coverage and criticism from tech media and legal blogs.

Google’s Italian Court Date Set Back

The AP reports that on June 23, the Italian trial of four Google executives for defamation and privacy law violations was postponed until September due to the absence of an interpreter. Italian prosecutors brought the case seeking to hold Google liable for allowing a video of an autistic child being beaten by his classmates to be posted on YouTube. Though an E.U. law similar to the U.S.’s 47. U.S.C. §230 immunizes internet service providers from liability based on third-party content, the suit was brought under an Italian penal statute which holds content providers responsible for user-generated material, according to the Proskauer Privacy Law Blog. Alessandro del Ninno, an expert on Internet law, says the case is the first of its kind in Europe.

By Andrew Jacobs – Edited by Ezra Pinsky
Nat’l Cable & Telecomm. Association v. Fed. Commc’ns Comm’n, May 26, 2009, No. 08-1016
Slip opinion

On May 26, 2009, the Court of Appeals for the District of Columbia Circuit upheld the Federal Communications Commission’s (“FCC”) ban on future and existing exclusivity agreements between cable companies and the owners of apartment buildings and multi-unit developments (“MUDs”). Writing for a unanimous court, Judge Tatel held that the ban was both “well within the bounds” of the FCC’s statutory authority and in full accordance with the requirements of the Administrative Procedure Act (“APA”). The National Cable & Telecommunications Association (“NCTA”), a cable industry group, opposed the regulation.

Matthew Lasar summarizes the case while pointing out that this decision is “a victory for telcos like AT&T and Verizon.” However, he notes that many “MDU-like dwellings,” such as time share units and school dorms, are not subject to the ban. The Blog of Legal Times and Blawgletter also provide summaries of the case.

The FCC argued that the ban fell under section 628(b) of the Communications Act, which prohibits cable operators from “engag[ing] in … unfair or deceptive acts or practices, the purpose or effect of which is to hinder significantly or to prevent any multichannel video programming distributor [MPVD] from providing satellite cable programming or satellite broadcast programming to subscribers or consumers.”

The court agreed, using the two-step Chevron test to guide its analysis. First, it found that the statute does not “unambiguously foreclose[] the Commission’s interpretation.” Most importantly, the court reasoned, the ban falls within a literal reading of the statute: Exclusivity contracts prevent competing cable operators, which are considered MPVDs, from providing service, and thus programming, to consumers. The court rejected the NCTA’s argument that since the provision’s original purpose was merely to prevent cable companies from halting the flow of programming to competitors, indirect regulation on programming through broad regulation of service is unlawful. The court concluded that “while the statute’s text, structure, and history do support the proposition that Congress was, in fact, principally concerned with program hoarding,” it does not limit the FCC to regulating programming delivery in ways tailored to that problem alone. Proceeding to Chevron’s second step, the court found that whatever ambiguity section 628 did possess was reasonably resolved by the FCC’s interpretation.

In addition to upholding the regulation’s statutory authority, the court also rejected the argument that the FCC’s reversal of its 2003 decision allowing exclusivity contracts was arbitrary and capricious. The court pointed out that the FCC is allowed to change its position as long as it provides “a reasoned analysis,” and in this case their reasoning was “more than equal to our forgiving standard of review.” In particular, the court noted that the earlier decision to allow exclusivity contracts was explicitly based on the lack of a fully developed record regarding the effect that these contracts have on competition. However, the FCC’s extensive analysis since that decision is sufficient enough to support a reversal of their original position.

Finally, the court upheld the ban’s effect on existing exclusivity contracts. Petitioners had argued that the FCC’s actions violated “the APA’s requirements that ‘legislative rules … be given future effect only,’ or, alternatively, to agency action with harmful, secondarily retroactive effects that the Commission failed to consider.” The court responded that the FCC’s ban only affects the current situation, and does not act retroactively. Additionally, “the Commission did expressly consider the relative benefits and burdens of applying its rule to existing contracts and, after extensive analysis, concluded that banning enforcement of existing contracts was essential.”

Though Senior Circuit Judge Silberman “fully agree[d]” with Judge Tatel’s opinion, he wrote separately to highlight NCTA’s implicit reliance on Holy Trinity Church v. United States, 143 U.S. 457 (1892), the seminal case endorsing purpose-based, rather than plain-language, statutory interpretation.

The FCC hopes that as a result of the ban, “triple play” service—whereby video, telephone, and internet service are sold as a bundled package—will be more readily available in apartment buildings and other multi-unit dwellings. They found that triple play competition between telephone and cable companies will “spur[] deployment of advanced technology, and facilitate[] efficiency and simplicity in the market.”

Tafas v. Doll
Federal Circuit, March 20, 2009, No. 2008-1352
Opinion

On March 20th, the Federal Circuit affirmed in part and vacated in part a decision by the United States District Court for the Eastern District of Virginia in a suit that challenged rules proposed by the U.S. Patent and Trademarks Office (USPTO). Tafas, the plaintiff, contested the USPTO’s proposed rules that limited the number of continuation applications petitioners may file and the number of claims they can include within each application. Judge Prost, writing on behalf of the Federal Circuit, held that the new rules were procedural and thus “within the scope of the USPTO’s rulemaking authority.” However, the case was remanded to determine if the rules should be invalidated on other grounds. The court’s decision confirmed that USPTO does have the power to change its rules and restrict the way patent applications may be filed.

Patent Docs summarizes the case and outlines the Federal Circuit decision. Patently-O highlights and explains the proposed changes to USPTO rules 78 (Continuations), 114 (Requests for Continued Examinations), and 75 and 265 (Claims). Bnet Pharma discusses the potential effect of the decision on drug companies who rely heavily on their ability to patent chemicals.

The conflict arose in 2007 when, in an effort to decrease the backlog of patent applications, the USPTO proposed rules that would limit patent applications to 5 unique claims and 25 total claims per invention. The proposed rules would also limit the number of requests to reconsider patent applications as well as requests for continuations, thereby curbing the number of chances to amend a patent application.  In a summary judgment hearing in May 2007, the District Court for the Eastern District of Virginia blocked implementation of the new rules, finding the changes to be substantive and beyond the scope of the USPTO’s authority.

On appeal, the Federal Circuit first addressed the rulemaking authority of the USPTO.  35 U.S.C. § 2(b) provides USPTO with procedural and not “general substantive rulemaking power.” The court refused to grant Chevron deference to the USPTO with regard to substantive rulemaking. However the court did grant Chevron deference to the USPTO’s interpretation of “statutory provisions that relate to the exercise of delegated authority.”

The court then looked to the proposed rules offered by the USPTO, which it found to be procedural and thus within the scope of the USPTO’s rulemaking authority. However, it found that one of the proposed final rules, Rule 78, conflicts with 35 U.S.C. § 120 and is therefore invalid. Thus, the Federal Circuit affirmed the summary judgment with regard to invalidating Rule 78, but it vacated the ruling for Rules 75, 114, and 265.

Notably, the case was ultimately remanded back to the lower court to determine “whether any of the Final Rules, either on their face or as applied in any specific circumstances, are arbitrary and capricious; whether any of the Final Rules conflict with the Patent Act in ways not specifically addressed in this opinion; whether all USPTO rulemaking is subject to notice and comment rulemaking under 5 U.S.C. § 553; whether any of the Final Rules are impermissibly vague; and whether the Final Rules are impermissibly retroactive.”

The Federal Circuit acknowledged that these new rules assign a large amount of power to the USPTO to grant or reject petitions: “[W]e are mindful of the possibility that the USPTO may in some cases attempt to apply the rules in a way that makes compliance essentially impossible and substantively deprives applicants of their rights.” However, the court emphasized that judicial review will be available under 5 U.S.C. § 706, so petitioners may appeal to courts on a case-by-case basis to overturn results.

Judge Rader notably dissented, stating that he would affirm the decision of the district court, holding that the rules were substantive: “Because the Final Rules drastically change the existing law and alter an inventor’s rights and obligations under the Patent Act, they are substantive and the PTO exceeded its statutory rulemaking authority.”

This case was followed closely by multiple industries that rely heavily on patents such as the drug and tech industries. Some larger companies including IBM and Apple favored the new rules, claiming that they will increase efficiency and thereby improve patent quality and remove unnecessary paperwork for the USPTO. Critics of the rules largely include biotech and pharmaceutical companies, since they tend to accrue large numbers of patent claims and continually amend their applications as their research develops.

Federal Reserve Board
Department of the Treasury 
Federal Register Notice

On November 12, 2008, the Department of Treasury and the Federal Reserve Board, in consultation with the Department of Justice, jointly published final rule 12 C.F.R. Part 233, implementing the Unlawful Internet Gambling Enforcement Act (“UIGEA”) of 2006.   The UIGEA prohibits gambling businesses from knowingly accepting payments in connection with unlawful Internet gambling, including payments made through credit cards, electronic transfers, and checks.  The final rule requires U.S. financial firms participating in certain payment systems to establish and implement written due diligence policies and procedures that are reasonably designed to prevent transactions in connection with unlawful Internet gambling.  The Treasury Department has said that “unlawful Internet gambling” generally covers making a bet that involves use of the Internet and is unlawful under applicable federal or state laws in the jurisdiction where the bet is initiated, received, or otherwise made.  The rule is effective as of January 19, 2009, and compliance by companies is required by December 1, 2009.

The Department of the Treasury has issued a press report on the final rule. 

Reuters suggests that Republican lawmakers, who controlled Congress in 2006, passed the UIGEA in hopes of having a rule issued before Bush leaves office in January, and notes that its passage cost Europe’s online gambling companies billions in lost market value as they had to withdraw from providing service to the U.S., one of their most lucrative markets. The Associated Press reports that the final regulation drew criticism from Democrats who believe financial services companies will be burdened. 

Poker News Daily likewise criticizes the regulations as “midnight rule-making” by the Bush Administration, arguing that the final rule leaves unclear which gaming activities are legal and which are not. The Poker Players Allinace (PPA), a poker grassroots advocacy group, agrees the rule failed to clarify the differences between legal and illegal gambling activities. 

The final rule provides a non-exclusive sample list of possible policies and procedures reasonably designed to prevent restricted transactions.  These include, for example, due diligence procedures in establishing new commercial customer accounts and relationships, implementing a mandatory transaction code system that may be used to identify restricted transactions, and establishing procedures to ensure compliance with the Act upon receiving actual knowledge that a customer has engaged in an Internet gambling transaction.

During the public notice and comment period preceding the issuance of the final rule, financial institutions opposed the regulations. They argued that these rules impose an unreasonable burden, reduce the competitiveness of the U.S. payments system, and suggesting that responsibility for enforcing gambling laws should remain with federal and state authorities.  Commenters had also complained that the proposed rule does not define “unlawful Internet gambling” with sufficient clarity, making compliance more burdensome.  

In formulating the final rule, the agencies acknowledged the challenge financial institutions face in trying to prevent restricted transactions without burdening lawful transactions, but suggested that the flexible due diligence procedures permitted by the regulations adequately balance the interests involved.  The agencies further noted that because states have taken different approaches to regulating gambling, the resulting patchwork legal framework did not lend itself to a single regulatory definition.  Finally, they declined to explicitly clarify, as some commenters had requested, that the definition of “unlawful Internet gambling” excludes games of skill, concluding instead that characterization of each gaming activity is case-specific and should be resolved by reference to the applicable federal and state gambling laws.