JOLT Digest

By Geng Chen

DOJ Defends Expansive Interpretation of Computer Fraud and Abuse Act

NPR reports that Richard Downing, deputy chief of the Computer Crime and Intellectual Property Section at the Department of Justice, testified before a House Judiciary subcommittee on the DOJ’s proposal to broaden its reading of the Computer Fraud and Abuse Act (“CFAA”). An advance copy of Downing’s written statement, obtained by CNET, advocated for criminal prosecutions based on violations of Web sites’ “terms of service” policies or any “similar contractual agreement with an employer or provider.” As reported by the WSJ, at the hearing, Professor Orin Kerr of George Washington Law School criticized the vague and broad statutory language of the CFAA that would permit such prosecutions and expressed concern that the DOJ’s new interpretation would criminalize routine violations such as lying about one’s physical attributes on Internet dating sites. Though Downing verbally reassured lawmakers that these were “unsubstantiated fears”, given the government’s limited time and resources, he did not repudiate the government’s authority to pursue such cases.

Rambus Loses Antitrust Case Against Micron and Hynix

The Washington Post reports that after five months of deliberations, a California jury has found against Rambus in its antitrust case against Micron and Hynix for conspiracy to fix memory chip prices and interference with its business relationship with Intel. As reported by Bloomberg, though Intel initially collaborated with Rambus to implement its proprietary RDRAM technology, Rambus alleged that Micron and Hynix conspired to artificially raise prices of chips incorporating RDRAM and drove Intel away from adopting RDRAM as an industry standard. A Reuters article, relying on an anonymous source within the jury, indicates that the jury was not convinced that a lone Micron email adequately proved conspiracy and was swayed by the testimony of a former Intel executive that described the souring of the Rambus-Intel relationship as unrelated to pricing. Rambus is considering an appeal, based on grounds that the judge disallowed from evidence certain facts from a Department of Justice price-fixing investigation in 2005.

PhoneDog Sues Former Employee for His Twitter Account

Ars Technica reports developments in the case of a former employee of PhoneDog, an “interactive mobile news and reviews web resource,” who was sued for misappropriation of trade secrets, interference with economic advantage, and conversion over his Twitter account. Noah Kravitz amassed 17,000 followers as “@PhoneDog_Noah” but changed his handle to “@noahkravitz” after leaving the company. The trial judge dismissed PhoneDog’s interference claim but allowed the trade secrets and conversion claims to go forward. According to Forbes, Kravitz says that his employer never asked him to create the account and that he always used it for personal as well as business purposes. The damages of $2.50 per follower claimed by PhoneDog may be complicated by the additional 4,000 followers that Kravitz has accumulated since his resignation. An official statement by PhoneDog, as reported by Computerworld, argues that the company’s Twitter account naming convention establishes company ownership of the account, but does not mention any implied or express contract with Kravitz specifically regarding this particular account.

By Adam Lewin

Damages Reinstated by First Circuit in Tenenbaum / RIAA Suit

The United States Court of Appeals for the First Circuit reinstated a $675,000 jury verdict entered against Joel Tenenbaum for copyright infringement of 30 sound recordings accomplished using file-sharing software. At trial, the jury determined that Tenenbaum was guilty of willful infringement and awarded the plaintiff record companies statutory damages of $22,500 for each song as permitted under 17 U.S.C. § 104(c). Judge Nancy Gertner of the United States District Court for the District of Massachusetts reduced that amount by a factor of ten to $67,500, holding that anything more would be unconstitutionally excessive. The First Circuit reinstated the original jury verdict because Judge Gertner had failed to consider a motion for remittitur prior to reaching the constitutional issues. The case has been remanded to the District of Massachusetts for reconsideration of the motion for remittitur.

FCC Publishes New Net Neutrality Rules

When the FCC attempted to enforce its net neutrality rules, the United States Court of Appeals for the District of Columbia Circuit ruled that it had not adequately established its regulatory authority to promulgate them in the first place. Ars Technica reports that the FCC has finalized new net neutrality rules in response to this ruling and published them in the Federal Register. Verizon and MetroPCS are expected to renew their challenges to this set of regulations, with the support of some Congressional Republicans, who have vowed to overrule the new rules by legislation.

Senate Antitrust Panel Holds Hearings on Google with Chairman Eric Schmidt

As the New York Times reports, a Senate antitrust panel heard testimony last week from Google’s Chairman, Eric Schmidt. Because of its size and dominance in online search, Google has come under antitrust scrutiny. Perhaps motivated by complaints from Google’s competitors, the Senate panel focused on whether Google was leveraging its power in search to promote its newer or less popular products by artificially ranking them higher. Schmidt, for his part, emphasized that Google is faced with intense competition in many of its products, including search, and that it maintains its market position by offering superior products rather than through anticompetitive behavior. Google has outlined its positions in its “Guide to the Senate Judiciary Hearing.”

Righthaven May Face Bankruptcy

So-called copyright troll Righthaven’s model of buying rights to sue from copyright holders is under siege. Earlier in the summer, the United States District Court for the District of Nevada dismissed a Righthaven suit, holding that one cannot acquire “a bare right to sue” without any ownership rights in a copyright. Citizen Media Law Project reports that in separate litigation, Righthaven was defeated and ordered to pay attorneys fees of approximately $34,000. But it is now asking for a stay of judgment pending appeal, lest it fall into bankruptcy. Ars Technica speculates that the copyright troll business model may have been doomed from the beginning.

By Andrew Crocker

AT&T/T-Mobile Merger Blocked by Justice Department

The New York Times reports that the Justice Department is seeking to prevent the proposed merger between AT&T and T-Mobile, which are respectively the second and fourth largest mobile carriers in the United States.  In a suit filed in the U.S. District Court for the District of Columbia, the Justice Department stated that the merger would “substantially lessen competition” in the wireless marketplace and lead to price increases.  According to Bloomberg News, in the event the merger does not go through, Deutsche Telekom, which owns T-Mobile, is contractually entitled to $7 billion in “breakup fees” and other concessions, which would provide AT&T with a significant incentive to fight the government intervention in court.  The Washington Post points out that a court battle will also have high stakes for the Justice Department, which has been criticized for taking a weak approach to possible antitrust issues in recent high-profile mergers, including Comcast’s acquisition of NBC earlier this year.

EFF Challenges Dismissal of NSA Wiretapping Suits

Appearing before a panel of the Ninth Circuit, the Electronic Frontier Foundation (EFF) has challenged the dismissal of a number of lawsuits focusing on the National Security Agency’s alleged illegal mass wiretapping of Internet traffic through backdoor access to major telecommunications companies, Wired reports.  EFF brought suit against AT&T and other telecoms, but the suits were dismissed after the NSA invoked the state secrets doctrine and Congress passed a law that allowed the President to grant the companies retroactive immunity.  A parallel suit against the NSA itself was dismissed for lack of standing.  According to EFF, allowing the President to grant the telecoms immunity is a violation of the Constitution’s separation of powers, suggesting that the suits should be allowed to proceed on their merits.

Unredacted Wikileaks Files Available Online

A quarter-million U.S. State Department cables contained in an encrypted file belonging to the whistleblower organization Wikileaks are currently available on the web in unredacted form, according to Ars Technica.  The diplomatic cables contain the names of informants and confidential sources, whom the State Department argues may be put in danger by the publication.  Wired reports that Wikileaks, which has before removed potentially sensitive information from documents it leaks to the public, blames its contacts at the British newspaper the Guardian for publishing a book that contained the password to the unredacted file.  However, Der Spiegel reports that the Guardian responded by blaming Wikileaks founder Julian Assange for his own allegedly lax security procedures, a charge also made by Daniel Domscheit-Berg, an ex-spokesman for Wikileaks.

Written by Mehdi Eddebbarh & Jack Burns
Edited by Albert Wang
Editorial Policy

I. Introduction

Patent law strives to stimulate innovation by awarding inventors a temporary monopoly over patented inventions.  Antitrust law seeks to ensure efficient competition, in part by restricting monopolistic behavior.  Perhaps the most scrutinized area of intersection between patent law and antitrust law is the proper treatment of “reverse payments,” also referred to as “pay-for-delay” settlements.  Arkansas Carpenters Health and Welfare Fund v. Bayer AG, 625 F.3d 779, 780 (2d Cir. 2010) (Pooler, J., dissenting).  These are settlement agreements in patent infringement litigation in which a patent holder pays the alleged infringer to concede the validity of the patent and refrain from entering the market.  Henry N. Butler & Jeffrey Paul Jarosch, Policy Reversal on Reverse Payments: Why Courts Should Not Follow the New DOJ Position on Reverse-Payment Settlements of Pharmaceutical Patent Litigation, 96 Iowa L. Rev. 57, 60 (2010).

Senators Chuck Grassley and Herb Kohl recently introduced legislation in Congress that would create a presumption that pay-for-delay deals in the pharmaceutical industry are illegal.  Additionally, there is currently a circuit split over the proper standard for determining whether reverse payment settlements are improper.  The Supreme Court has not spoken on the issue, and recently denied a petition for certiorari by the Plaintiffs-Appellants in Arkansas Carpenters Health and Welfare Fund v. Bayer AG challenging the reverse payment settlement in that case.  Amicus curiae supporting the petitioners included 32 state Attorneys General and the American Antitrust Institute.

This commentary will explain why Congress and the judiciary should continue to allow pioneer patent holders and firms challenging those patents to use reverse payment settlements to settle their disputes.  To that end, this commentary will explain the importance of recognizing the right to exclude granted by patent laws and discuss the judicial policy in favor of settlements.  Some courts have referred to this as the “exclusionary zone of the patent,” and have essentially found that because patents provide a monopoly, any anticompetitive effects stemming from the exclusion of generic manufacturers through settlements should be recognized as a valid outgrowth of rights inherent in the patent grant.

While recognition of those underlying policies provides significant deference to patent holders, it also provides an incentive for patent holders to conduct sham litigation to eliminate threats to the validity of weak patents.  Thus, Congress should amend the current regime to clarify that where a reverse payment is challenged, some scrutiny of the patent’s validity is necessary.  Further, Congress should amend the 180-day exclusivity period, currently granted only to the first generic firm to challenge a pioneer patent, to give a subsequent challenger the same benefit where the first challenger settles.  (more…)

By Nathan Lovejoy

Lime Wire Damages Limited To One Statutory Damage Award Per Work

Judge Kimba Wood ruled on March 10th that the statutory damages provision of the Copyright Act authorizes only one damage award per work infringed rather than one award for every infringement. Wood noted that had she adopted the record industry plaintiff’s interpretation the potential damages against the file-sharing software company would be “more money than the entire recording industry has made since Edison’s invention of the phonograph in 1877.” Wood granted summary judgment against Lime Wire in May, and issued an injunction in October which required Lime Wire to cease distribution of its popular program. The trial for damages is set for May 2nd.

AT&T’s Acquisition of T-Mobile May Face Serious Scrutiny

An FCC official indicated to the Wall Street Journal that AT&T’s planned acquisition of T-Moble — which would make the company the largest mobile phone service, surpassing Verizon — would undergo serious scrutiny, saying “[i]t will be a steep climb.” This likely comes as no surprise to AT&T, as the WSJ notes elsewhere that “AT&T seems to understand what it’s up against.” The acquisition deal was announced last week.

Netflix’s Customer Data Practices Challenged

Five plaintiffs have alleged that Netflix has violated the Video Privacy Protection Act (“VPPA”) through its practice of collecting and retaining records of streaming and rental activity of its customers. The VPPA mandates that video rental companies destroy old records that contain personally identifiable information. This law was passed in the wake of Judge Robert Bork’s Supreme Court nomination hearings, during which his video rental history was published.

Righthaven Lawsuit Dismissed On Fair Use Grounds

At a hearing last week, U.S. District Judge James Mahan said that he would dismiss a copyright infringement claim brought by the private enforcement outfit Righthaven on behalf of the Las Vegas Review Journal (“LVRJ”). After the Oregon-based non-profit Center for Intercultural Organizing posted a full-text copy of a LVRJ article on their website, Righthaven filed suit last August without any prior contact or take-down requests. In November, Judge Mahan requested that the parties brief the fair use issue. Righthaven’s for-profit approach to copyright enforcement has been heavily criticized; Mahan’s ruling was welcomed by critic EFF, who represent defendants in other Righthaven cases. Righthaven has filed 250 lawsuits since March 2010, and has suffered one other loss on a fair use claim.