Friday, April 16, 2004

° SCO, IBM Battle Over Software Rights

Wednesday, February 4, 2004

° Can CAN-SPAM can spam?

Wednesday, December 17, 2003

° Copyright Wars Come to Boston College

Monday, April 28, 2003

° FTC to Unocal: Do not PassGo, Do not Collect Royalties on RFG Patents.

Tuesday, April 8, 2003

°A World Apart

Monday, March 31, 2003

°The First Amendment and Library Internet Filters: Public Forum or Child Protection?

Wednesday, February 26, 2003

°AIDS In Thailand: A Patent Case For Social Justice

Thursday, December 12, 2002

° Congress v. Courts: Balancing Child Porn and Free Speech

...for earlier Headlines items,see the Search page in our Resources section.


2004 B.C. Intell. Prop. & Tech. F. 041601
SCO, IBM Battle Over Software Rights

by David Giordano, Staff Writer

On March 6, 2003, The SCO Group (formerly called Caldera Systems) filed suit against IBM in the 3rd District Court of Salt Lake City, alleging that IBM misappropriated portions of its Unix operating system and built it into Linux software. SCO’s initial complaint charged IBM with misappropriation of trade secrets, tortious interference, unfair competition, and breach of contract and sought $1 billion in damages. IBM removed the case to the District of Utah in May. SCO amended its complaint in February to add copyright infringement claims and additional breach of contract claims. The amended complaint also withdrew the trade secret misappropriation claims and increased the damages to $5 billion.

Most versions of Unix, including an IBM product called AIX, are based on code invented at AT&T Corp. and now owned and licensed by SCO. Unix has a reputation as one of the most powerful operating systems for heavy-duty computing tasks and is used by many large corporations and universities. When Darl McBride became SCO’s president and CEO in 2002, the company’s revenues were dwindling, partially as a result of the ever-improving and free Linux. When IBM’s software president said he hoped to replace its SCO-derived AIX with Linux, McBride began to wonder how Linux had so quickly changed from a software programmer’s toy to a rival of the heavy-duty Unix code.

In 1991, a computer student in Finland named Linus Torvalds created Linux as an alternative operating system to Microsoft’s Windows and Unix. He put his program online and posted messages asking software programmers around the world to help improve it. Thousands of programmers responded and Torvalds adopted many suggestions into the code. Today, Linux is the fastest-growing operating system in the world, and powers many devices such as Web servers, desktop computers and TiVo digital recorders.

Early versions of Linux paled in comparison to Unix. However, since its inception in 1991, and particularly in the past five years, constant free upgrades have significantly improved Linux. Linux is mostly distributed free over the internet, but paid copies have risen from 1.1M in 2000 to 1.4M in 2003 and now represent 24% of the worldwide market.

Given the rapid pace which Linux seemed to have caught up to Unix, McBride began to wonder whether IBM was donating code from AIX to Linux to make the two operating systems functionally equivalent, and thus bring an end to SCO. McBride said IBM’s license with SCO forbids them from doing this.

McBride ordered SCO’s engineers and outside experts to examine the code. He claims they have uncovered dozens of examples in which IBM took large portions of AIX and incorporated them into Linux. SCO did not disclose which portions of the code were copied until filing the amended complaint in February. IBM has dismissed the lawsuit as a desperate claim from a software company past its prime and countersued in August, charging SCO with patent infringement, breach of contract, deceptive trade practices, unfair competition and violation of the Linux public development and distribution license. IBM further claimed that SCO didn’t have grounds to sue because SCO also distributed Linux.

Linux is “open-source” software, meaning that anyone can get the raw source code of the software and make modifications to it. The GNU General Public License (GPL), on which nearly all open-source software is based, requires that programmers must make their modifications available and accessible to the public. Large companies and the government have been using Linux for years as a low-cost alternative to proprietary systems such as Microsoft’s Windows which cause companies to incur large annual fees. North Carolina-based Red Hat, Inc., which specializes in providing free Linux software while clients pay for service and support, has begun its own fight against SCO, filing suit in federal court seeking a declaratory judgment that it did not violate SCO’s rights. Red Hat claims that SCO is trying to create fear and uncertainty in the company’s business and is seeking an injunction barring SCO from making claims against Red Hat. SCO responded by striking at the heart of the open-source community – asserting in its answer that federal copyright law preempts the GPL.

SCO is also threatening legal action against the companies that use Linux, including Red Hat, and will try to force them to pay millions in licensing fees for parts of the free operating system that SCO claims come from Unix code. In May 2003, SCO sent out letters to 1,500 commercial users of Linux telling them about the lawsuit and saying they were “prepared to take all actions necessary to stop the ongoing violation of our intellectual property or other rights.” The company has already filed suit against DaimlerChrysler and AutoZone, accusing them of using Linux software without permission. SCO has also begun suing Novell, McBride’s former employer and the company that sold Unix to SCO in 1994, alleging that Novell is interfering with SCO’s effort to enforce its copyrights. SCO alleges that Novell improperly filed Unix copyright registrations and made false public statements regarding the ownership of Unix and UnixWare.

In March, EV1Servers, a division of Everyones Internet, Inc., was the first to announce that it had purchased licenses that allow the use of SCO intellectual property on all Linux servers managed by EV1Servers.net in each of its hosting facilities. EV1Servers decided to purchase licenses after believing they would become a target of an SCO lawsuit as another large user of Linux.

Part of the reason for the lawsuit against IBM comes from a failed partnership called Project Monterey where IBM, SCO, and now-extinct Sequent agreed to create a version of Unix for Intel’s Itanium processors. SCO claims that it shared expertise with IBM on how to best run Unix on Intel processors for that project, but IBM canceled its Monterey plans and then appropriated the proprietary information obtained from SCO for its own business.

Over the past year, SCO has been the target of much venom in the software industry, mostly because SCO refused until February to publicly reveal which pieces of its code were copied, leading many to believe the lawsuit was frivolous. Further, people in the open-source community are furious over SCO’s attempt to gain control over Linux and to invalidate the GPL. The SCO Group website also has been targeted by vandals four times in the past year, including the recent Mydoom virus, which sent billions of data requests to the SCO site, apparently knocking it offline.

Fortunately for SCO shareholders, the lawsuit has not had a negative effect on revenues. In fact, the company has seen its revenues rise 25% and its share price rise from $1.89 a year ago to as high as $22 and close at $10.72 on April 5. The SCO Group has $79.3 million in revenues – small for a software company, especially compared to IBM’s $89.1 billion. Critics claim comparing the amount of damages sought to the company’s revenues points to the true motive behind the lawsuit – SCO cannot win in the marketplace, so it will attempt to win in court.

If SCO succeeds in its suit, it will cripple Linux, which has grown to be a major rival to Microsoft’s Windows operating system, and alter the landscape of the open-source community. Proprietary software companies such as Microsoft have sided with SCO, while open-source developers have backed IBM. Some reports have linked Microsoft to venture capital firms that are funding SCO and a recent leaked SCO memo said Microsoft had raised $86 million to help SCO. SCO bolstered its legal team by hiring David Boies of Boies, Schiller and Flexner. Boies is the attorney who prosecuted Microsoft on behalf of the U.S. Justice Department, represented Al Gore in the vote-counting controversy in the presidential election, and represented Napster in its suit against the RIAA.

The outcome is still very much in doubt, but could have far-reaching consequences. IBM has deep pockets and will certainly fight to protect its reputation and the free software community, in which it has invested more than $2 billion. SCO canceled IBM’s AIX license in June and IT departments everywhere are wondering how this legal battle will affect computer systems. If SCO wins, they will begin seeking license fees from all major companies that use Linux-based systems in the range of $699 - $1,399 per computer. Corporate users of Linux must decide whether to risk getting sued by SCO or begin paying licensing fees – the same fees many companies sought to avoid when they decided to use Linux. Many of those companies are presently seeking indemnification from their suppliers, such as Red Hat. Red Hat has not offered indemnification to its customers, and it is unclear if their agreements with its customers cover SCO’s claim. Conversely, Hewlett-Packard customers also received letters from SCO, but HP has agreed to indemnify its customers against claims brought against them by SCO. An SCO victory would not only trigger lawsuits by SCO against corporate users of Linux, but also indemnification suits by those companies against their providers of the software, service, and support. Further, if SCO succeeds in its attempt to subordinate the GPL to its copyright claims, the open-source community would have to wonder whether anyone really has a right to free software.

Whatever the outcome, it is clear that legal teams on all sides will be very busy.



Sources:

Linux Litigation Endangers Future Of The Open-Source Software Movement
By Krysten Crawford, Broward Daily Business Review, March 17, 2004

EV1Servers Understimated Reaction
By Karen Snider, theWHIR.com, March 5, 2004

SCO Sign Intellectual Property License Agreement with Leading Dedicated Server Provider
Press Release, The SCO Group, March 1, 2004

IBM Won’t Oppose SCO’s Copyright Claim
By Alexander Wolfe, internetnews.com, February 26, 2004

The Great Debate: Is Open Source Software the Future or Mere Fantasy?
By Paul Rubell, New York Law Journal, February 24, 2004

Linux Steps Into The Limelight
By Gregg Wallace, The Hilltop, February 17, 2004

Mr. Unpopular
By Hiawatha Bray, The Boston Globe, February 4, 2004

SCO To Expand Its Lawsuit Beyond Linux
By Michael Singer, atnewyork.com, November 19, 2003

SCO Group Vs. Big Blue: The Free-Software Battle, Unix Owner Takes A Swing At Open-Source Software Community
By Jim Barthold, Corporate Legal Times, November 2003

IBM Countersues SCO Over Patents, Linux Distribution
By William M. Bulkeley and David Bank, The Wall Street Journal, August 8, 2003

SCO sues Big Blue over Unix, Linux
By Stephen Shankland, CNET News.com, March 6, 2003

Related Sites:

The SCO v IBM website
http://sco.iwethey.org/

Slashdot
http://www.slashdot.org/

Groklaw
http://www.groklaw.net/

Yahoo! Finance
http://finance.yahoo.com/

Hoover's Online
http://www.hoovers.com/


2004 B.C. Intell. Prop. & Tech. F. 020401
Can CAN-SPAM can spam?

by Lynette Paczkowski, Staff Writer

On any given day, with a single click of your mouse, you can get better car insurance, enhance your anatomical features, win a trip to the Caribbean, and the list goes on.  It’s not that you’ve run an internet search on these topics, but instead that these materials have made their way, uninvited and sometimes even disguised as regular e-mail, into your inbox.  Despite all of the filters and blocks in your settings, spam gets through.  With any luck, not for much longer.

The President recently signed into law Senate bill 877, commonly referred to as the CAN-SPAM Act of 2003.  This first piece of federal anti-spam legislation took effect on January 1, 2004.  Both houses of Congress recently floated around many versions of potential anti-spam legislation (at least 9 bills in this session alone), but the CAN-SPAM Act emerged as the leader of the pack.  Introduced in the Senate on April 10, 2003, the bill passed by a vote of 97-0 on October 22, 2003. On the heels of this unanimous backing, the House and Senate batted the bill back and forth until the two houses finally agreed on the version of the bill that should reach the President’s desk. Both houses felt great pressure to generate results quickly, as Presidential approval of whatever piece of anti-spam legislation ultimately reached his desk was all but certain.

Now in effect, the CAN-SPAM Act allows the federal government, state attorneys general, and Internet Service Providers to prosecute spammers who engage in any of a number of spamming techniques that, under the Act, are now illegal.  The two most prominent features of the new law are that senders of commercial e-mails must now label the e-mails as such, and that recipients of commercial e-mails specifically have the opportunity to "opt-out" of receiving further communications from the sender. Individuals do not, however, have standing to bring lawsuits under the Act.

Whether and how the Act will work in practice is a topic of great debate, even among sponsors of the Bill.  For example, some have questioned how quickly Internet users will see results.  Internet users will probably not see a decrease in spam until spammers are caught and prosecuted.  In addition, just how many spammers need to be caught and prosecuted before other spammers get the message and stop spamming is anybody’s guess.  Effectiveness of the Act also assumes the securing of convictions against those prosecuted under the Act.  Spammers prosecuted under the proposed federal law will likely raise 1st Amendment concerns, resulting in potentially lengthy and complex trials.  Nevertheless, such challenges are likely to fail for the reasons that follow.

Commercial speech has historically received less protection under the 1st Amendment than private speech.  Often citing protection of the consuming public, the government has been able to successfully assert compelling interests strong enough to trump businesses’ claims of 1st Amendment protection. This is especially true where the courts are able to find that the asked-for restriction can properly be classified as one of time, place, and manner. That is, the business in question is not prevented from making their communication or sending their message, but instead is simply limited in the manner and method by which such message is conveyed.  Here, businesses are not prevented from offering car insurance, enhancements to anatomical features, or vacation packages; they are simply being told that they must be truthful, and not deceptive or misleading, when making such offers.  This groups the current anti-spam legislation with other "truth-in" initiatives like "truth in advertising" and "truth in lending," initiatives that protect the consumer and further the governmental interest in maintaining an informed and knowledgeable consuming public.

Anti-spam legislation, at its most extreme (which is not the CAN-SPAM Act) has suggested creation of a "Do-Not E-Mail Registry," similar to the nationwide "Do-Not Call Registry."  It is this type of potentially overbroad action that may not be able to withstand 1st Amendment challenges.  Yet even such far-reaching proposals could, with limiting factors such as exempted organizations, overcome challenges, especially if looked at in the context of individuals being able to exert control over their own personal property.  If a person is allowed to post a sign prohibiting vendors from soliciting on their private property, i.e. private home, apartment building, or restaurant, then it is not a far stretch of the imagination or of logic to allow that same person to block those same vendors from invading his phone line or e-mail account.

It is also worth mentioning that some states, especially California, which had very strict anti-spam legislation of its own in place, have long voiced concerns about the passage of a federal anti-spam law. Not only does the federal law preempt the individual state statutes, but it is also weaker than many of those state statutes.  States like California argued that if states can regulate spam on their own, then there is no need for federal legislation.  The federal government, on the other hand, argued that because the Internet poses significant jurisdictional issues, the only way to achieve uniform regulations and penalties and ensure the applicability of these regulations and penalties to the spammer was to enact federal legislation.

The Internet presents many questions for those who want to file suit for Internet-based offenses.  For example, does the offense take place where the sender is located, or where the recipient is located?  Moreover, where are each of those people actually located, i.e. where they live, where they send/receive the e-mail, where the ISP used is located?  The existence of federal law allows lawyers and judges to disregard determinations such as which state law applies to the facts of the particular case. Instead, all spammers are subject to the same regulations and penalties, and all plaintiffs have the same remedies available to them.

With the passage of the CAN-SPAM Act of 2003, the federal government broke ground in efforts to regulate commercial e-mails, and challenges are likely to begin arising shortly.  Only time will tell whether or not the legislation will be successful, but the first step is always the most important, and this infant legislation seems ready for that first step.


Sources and Related Sites:

Antispam Bill Passes Senate by Voice Vote
By Jennifer S. Lee, The New York Times, November 26, 2003

Senate Anti-Spam Bill Introduced
By Brian Morrissey, internetnews.com, April 11, 2003

The Impact of State Anti-Spam Laws
By Douglas J. Wood, GigaLaw.com

Private Property, Free Speech and Spam
By Brad Templeton

Chalking the 1st Amendment
By Fred Showker, 60-Second Windows

The First Amendment, Junk Faxes and Spam
By Anita Ramasastry, GigaLaw.com

Advertising Is Protected by the First Amendment
JLCom Publishing Co., L.L.C.

Another Hang-Up for 'Do Not Call'
By Jube Shiver Jr., Los Angeles Times, September 26, 2003

'Do not call' list unplugged
CNN/Money, September 24, 2003


2003 B.C. Intell. Prop. & Tech. F. 121701
Copyright Wars Come to Boston College

by Beverly Prewitt, Staff Writer

One of the latest skirmishes over file-sharing and copyright infringement on the Internet ended in a draw recently when a Boston College student settled out of court with the Recording Industry of America (RIAA).  The student, who sought to preserve her right to be known as Jane Doe, filed a Motion to Quash that challenged the RIAA subpoena on a number of procedural and constitutional grounds and could have had implications for the Digital Millennium Copyright Act (DMCA). Doe challenged the subpoena from the RIAA to protect her identity and prevent possible liability for copyright infringement.

After successfully quashing a previous subpoena by the RIAA for improper venue, Boston College received a subpoena from the Massachusetts District Court on August 25, 2003 and notified Ms. Doe that she was one of three BC students whose identities were being requested by the RIAA. The subpoena was part of a larger campaign initiated this summer by the RIAA to stem the tide of peer-to-peer file sharing among Internet users. The trade organization claims peer-to-peer file sharing is defrauding its member companies of millions of dollars every year.  The Federal Rules of Civil Procedure only allow a subpoena to be issued pursuant to a pending civil action. The subpoenaed party is then entitled to information about the investigation of which the subpoena is a part. Under § 512(h) of the DMCA, any copyright owner can subpoena the identity of an Internet user from their Internet Service Provider (ISP) by submitting to the clerk of a U.S. District Court a good faith statement asserting that the user is suspected of copyright infringement and a sworn declaration that the subpoena is intended to protect against that infringement. The DMCA, therefore, constitutes a significant relaxation of procedural requirements that has allowed the RIAA to subpoena information about a massive number of users in a very short period of time. In what one critic has referred to as a "blitzkrieg," the RIAA served more than 1,500 subpoenas during the summer of 2003 to ISPs seeking the names of users identified as potential file-sharers. This campaign resulted in the filing of 261 lawsuits in early September, some of which have already been settled.

Ms. Doe, who was represented by Boston law firm Prince, Lobel, Glovsky & Tye and the ACLU, alleged in her motion of September 26, 2003 that the subpoena violated her rights to privacy and due process, as well as the procedural guidelines set out in § 512(h). "We’re not saying the recording industry shouldn’t go after file-sharers, only that they must do so in a way that’s fair," said Christopher Hansen of the ACLU in a press release of September 29th.

In support of her claim of procedural deficiency, Doe pointed out that the subpoena failed to identify the copyrighted material that the RIAA claimed had been improperly shared as well as the owners of that material. In addition, Doe challenged the RIAA’s ability to issue an information subpoena based on files that she downloaded and stored on her personal computer. Doe argued that the DMCA subpoena provisions only applied to requests for user information related to unauthorized files stored on an ISP’s system. Echoing an argument posed by Verizon Communications, Inc. in a case now on appeal in the D.C. Circuit, she cited language in a previous subsection of the DMCA, § 512(c) that stipulates the procedure for serving ISPs with takedown notices. Doe argued that the language pertaining to takedown notices implies that a § 512(h) subpoena may only be issued when files are stored on the ISP’s system and are accessible to the ISP.

Doe also challenged the constitutionality of § 512(h)’s broad subpoena powers. She argued that, under Art. III, § 2 of the Constitution, a subpoena, as a form of judicial process, may not be issued absent a pending or future case. Although § 512(h) does require the subpoena to be accompanied by a good faith declaration of the complaining party that the targeted party is using copyrighted material in an unauthorized manner, the complainant is not required to declare that they intend to prosecute the targeted party in the future.

Finally, Doe alleged that the § 512(h) subpoena compromised her constitutional right to free expression on the Internet by failing to provide adequate procedural protections against unjustified invasions of her anonymity. Several courts have acknowledged the significance of anonymity in fostering free expression among Internet users. Doe argued that before she may be stripped of her anonymity on the Internet, she should receive notice of the RIAA’s compliant and have the opportunity to challenge it. A similar argument was rejected by the D.C. District Court in a second case involving Verizon on the grounds that the activities of Internet users were not entitled to the same degree of protection as speech that is political in nature because those activities were the subject of allegations of copyright infringement. Doe urged the Massachusetts Court to reconsider the validity of the D.C. Court’s findings, pointing out that no determination was made by the court as to whether she was, in fact, infringing upon the rights of the complaining party before that party was authorized to infringe upon her right to remain anonymous. Doe alleged that the relaxation of procedural requirements in § 512(h) has been "an invitation to mistake and misuse" and cited a number of cases where § 512(h) subpoenas have resulted in erroneous lawsuits.

The settlement, which was announced on October 23, came before Doe’s motion was decided, and it remains unclear whether she would have been successful. So far, Verizon has struck out twice with similar arguments in the D.C. circuit’s District Court. One of those cases is still on appeal. There is some reason to believe that Doe may have fared better in her suit however. Thanks to previous federal cases where the court identified user anonymity on the Internet as a crucial element in the medium’s ability to foster free speech, Doe was able to frame her procedural objections to the DMCA as a defense of First Amendment rights. In Doe v. 2theMart.com, the District Court of the Western District of Washington held that the procedural protections of traditional subpoena practice were rigidly enforced where First Amendment rights were at stake. In the absence of conflicting authority, the Massachusetts District Court might have been reluctant to allow the DMCA’s admittedly lax procedural requirements to stand. In the Verizon case currently on appeal, the District Court avoided the question. The court held that a subpoena issued by the clerk of the court was not, in fact, a judicial process within the scope of Article III’s due process protections, a conclusion that seems unlikely to stand, let alone be adopted by the Massachusetts District Court.

It is also unlikely that Doe’s motion to quash will be the last of its kind. The ACLU has indicated that they will resume their opposition with other plaintiffs in the future, and others are continuing to challenge the RIAA and its use of the DMCA. Verizon, who participated in the drafting of the legislation, has been to court twice in the last year to fight RIAA information subpoenas issued pursuant to the DMCA. Verizon is now working to overturn the legislation it lobbied Congress to enact.

The RIAA’s aggressive tactics have also garnered criticism from lawmakers on Capitol Hill. A bill was introduced earlier this month by Sen. Sam brownback (R-Kan.) that would strip the power to issue subpoenas from the DMCA. Although the RIAA maintains that striking the powers of § 512(h) from the DMCA "is basically giving people the right to infringe with impunity," it has acknowledged the mounting criticism and has already shown signs of amending its tactics. In the latest round of subpoenas launched on October 17, users received a warning letter and an offer of amnesty with a 10-day expiration date before the commencement of litigation.

As for Jane Doe, her attorneys have indicated that her decision to settle was motivated by fatigue with the litigation process and a desire to focus on her studies at Boston College. Although the amount of the settlement was undisclosed, it was apparently consistent with others of its kind that the RIAA has reached recently, most of which have settled for under $5,000. Doe revealed her identity to the RIAA in the settlement process, but she did not have to admit or deny any wrongdoing with respect to the allegations of infringement.


Sources:

17 U.S.C.A. § 512

F.R.C.P. 45

Student at BC Settles with Music Industry by Chris Gaither
The Boston Globe, October 23, 2003

Citing Right to Anonymity Online, ACLU Asks Boston Court to Block Recording Industry Subponea
American Civil Liberties Union, Press Release, September 29, 2003

64 Individuals Agree to Settlements in Copyright Infringement Cases
Recording Industry Association of American, Press Release, September 29, 2003

Music Industry Sends Warnings On Alleged Piracy by Ethan Smith
The Wall Street Journal, October 20, 2003

Use of Subpoenas to Name File Sharers Criticized by Frank Ahrens
The Washington Post, September 30, 2003

Jane Doe’s Motion to Quash
American Civil Liberties Union, September 26, 2003


Related Cases:

Columbia Insurance Company v. Seescandy.com, 185 F.R.D. 573 (N.D. Cal. 1999)

Doe v. 2theMart.com, 140 F. Supp. 2d 1088 (W.D. Wash. 2001)

In re Verizon Internet Services, Inc., 240 F. Supp. 2d 24 (D.D.C. 2003)

In re Verizon Internet Services, Inc., 257 F. Supp. 2d 244 (D.D.C. 2003)


2003 B.C. Intell. Prop. & Tech. F. 042801
FTC to Unocal: Do not Pass Go, Do not Collect Royalties on RFG Patents>

by Cameron Luitjens, Staff Writer

The Federal Trade Commission (FTC) on March 4 voted unanimously to issue an administrative complaint charging that the Union Oil Company of California (Unocal) violated Section 5 of the FTC act by committing fraud and illegally obtaining monopoly power during negotiations with the California Air Resources Board (CARB). The complaint alleges that Unocal manipulated the standard setting process of the CARB by persuading it to adopt certain clean burning reformulated gasoline (RFG) standards while at the same time discreetly pursuing and eventually obtaining five patents on formulations that substantially overlapped with those standards. The FTC is seeking injunctive relief preventing Unocal from enforcing its RFG patents.

In the late 1980s, CARB was charged with the responsibility of coming up with cleaner burning fuel standards to combat California's growing air pollution problem. In order to ensure that it promulgated standards that were technologically feasible CARB consulted with leading gasoline producers, including Unocal. During these consultations, Unocal actively promoted standards that comported with the results of its research. While it did not hide these results, the complaint alleges that Unocal materially misrepresented its interest in the research, leading CARB and the other fuel producers to believe that it would not exercise proprietary rights over its research. However, while publicly disavowing any interest in enforcing proprietary rights to its research, Unocal was simultaneously pursuing RFG patents based on this research that would allow it to charge substantial royalties to other companies using those formulations. The United States Patent and Trademark Office (USPTO) notified Unocal in 1992 that most of its claims would be allowed and Unocal obtained its first patent in 1994. Unocal announced its patent in 1995 and demanded royalties from several competing refiners for the use of its patents after they had already invested heavily in equipment that would allow them to produce RFG.

Unocal is confident that the FTC complaint will be dismissed, and it has history is on its side. In 1995 several competing refiners sued Unocal in the Central District of California District Court, seeking to invalidate its patent on the grounds of insufficient written description and anticipation. Unocal countersued for patent infringement. A jury upheld Unocal's patents and ordered the competing refiners to pay damages of 5.75 cents per gallon. The verdict was upheld on appeal with the appellant refiners claiming obviousness in addition to insufficient written description and anticipation; the Supreme Court denied certiorari.

The FTC has taken similar actions against other companies in the recent past. In 1998, the FTC filed a complaint against VISX Corp. in connection with its laser eye surgery equipment and technology patents. The complaint alleged that VISX and another company violated antitrust law by pooling patents rather than competing with each other and also that VISX committed fraud on the USPTO by failing to disclose relevant prior art in connection with its patents. In 1999, an FTC judge dismissed the patent pooling complaint, and the FTC subsequently dropped the fraud charge in 2001. In 2002, the FTC filed a fraud complaint against Rambus very similar to the complaint filed against Unocal. The FTC charged that Rambus manipulated pending patent applications to comply with standards it pushed through during a standard-setting process in the dynamic RAM industry and that it failed to disclose its pending patent applications to the standard-setting body. The case is still pending but Rambus vigorously denies any wrongdoing. Together these cases illustrate an increasing willingness on the part of the FTC to take on anticompetitive behavior in the intellectual property field.

What does all this mean for the average California gasoline consumer? If the FTC complaint fails and Unocal is allowed to exercise its monopoly power, other fuel companies would be required to pay substantial licensing fees to use its proprietary RFG formulations. By some estimates, this would raise gasoline prices for Californians by five cents per gallon and potentially cost them several hundred million dollars per year. Not exactly free parking, to be sure.


Sources:

FTC Charges Unocal with Anticompetitive Conduct Related to Reformulated Gasoline
FTC Press Release, March 4, 2003

Unocal: FTC seeking to apply hindsight to CARB rulemaking
Unocal Press Release, March 4, 2003

FTC Alleges Unocal Used "Patent Ambush" To Gain Monopoly Power In Reformulated Gasoline Markets
Kilpatrick Stockton LLP Antitrust Legal Alert, March 2003

FTC: Unocal duped state
By Dale Kasler, Sacramento Bee, March 5, 2003

FTC votes to take Unocal to court
By Jayne O'Donnell, USA Today, March 4, 2003


Prior Judicial History:

Union Oil Co. of California v. Atlantic Richfield Co., 34 F.Supp.2d 1208

Union Oil Co. of California v. Atlantic Richfield Co., 208 F.3d 989


2003 B.C. Intell. Prop. & Tech. F. 040801
A World Apart

by Tan Pham, Headlines Editor

The internet has been creeping into the very foundations of law over the past years. Recently, cyberspace found its footing in personal jurisdiction in the case of Young v. New Haven Advocate and the Dow Jones & Co., Inc. v. Gutnick case in Australia. While covering basically the same issue of personal jurisdiction in the internet age, the two courts were a world apart in their rulings.

The New Haven case revolved around the fact that a Connecticut-based newspaper had posted on its website a story about the harsh living conditions and treatment of Connecticut inmates that were sent to Virginia prisons because of Connecticut's over-populated facilities. Specifically, the New Haven Advocate stated that the prison warden, Stanley Young, had displayed Civil War memorabilia in his office.

Under the claim of libel, Young filed a lawsuit against the newspaper charging that this story painted him as a racist amongst other things. However, the New Haven Advocate countered that the U.S. District Court did not have proper personal jurisdiction because the New Haven Advocate had no connections with Virginia. They did not have offices there. They did not have employees there. They did not even have any subscribers there. Nor did any of their reporters even go to Virginia. Yet, the District Court still found that it had personal jurisdiction to pull in the New Haven Advocate; the court decided that since this story was published on the website with a potential "worldwide audience," New Haven Advocate should have predicted that Virginians would also view this story that could damage Young's reputation.

This case was appealed to the Fourth Circuit who later found that the District Court was wrong. Central to the Appellate Court's ruling was the application of other personal jurisdiction cases to the present case. For instance, the court first looked to Int'l Shoe Co. v. Washingtonto establish the notion of sufficient minimum contacts. Int'l Shoe Co. v. Washington, 326 U.S. 310. In addition, the court turned to Calder v. Jones as the basis of the long-standing libel suit and personal jurisdiction along with the more recent ALS Scan v. Digital Serv. Consultants internet case in reasoning that Young did not establish sufficient personal jurisdiction. Calder v. Jones, 465 U.S. 783; ALS Scan v. Digital Serv. Consultants, Inc., 293 F.3d 707. In Calder, the court ruled that in a libel suit, the harm must be expressly aimed at the forum state and also that the harm would also be felt in the forum state. ALS Scan stands for the proposition that in the internet medium, just as in Calder, must be directed also at the forum state. In the present case, the New Haven Advocate intended its audience to be readers in Connecticut and directed the content on its website accordingly. The New Haven Advocate did not intend nor direct their content to Virginia thus falling below the standard under Calder and ALS Scan.

In Dow Jones v. Gutnick, the plaintiff was a wealthy Australian businessman who claimed that Barron's Online, a subsidiary of Dow Jones, had published a defamatory paper against him hinting that he was a money-launderer. Similar to New Haven Advocate, Dow Jones argued that it had neither employees nor any offices in Australia. Further, ninety nine percent of its subscribers are in the U.S. Thus, it is not directing its content to Australia (or the equivalent argument of no sufficient minimum contacts). However, the Australian court rejected Dow Jones' case. The Australian court then questioned where the libel occurred. They ruled that libel did occur in Australia against the arguments from Dow Jones. In its reasoning, the court explained that publication on the internet readily confers publication in Australia when the internet story is read in Australia. It is first sent in digital format from the web servers in New Jersey to a readable form when accessed by computer in Australia.

Alternatively, Dow Jones put forth the simple publication rule argument. Under the simple publication rule, Dow Jones would concede that the article was published in Australia; however, since it was on the web, it was simultaneously published around the world. Thus, the proper forum for a lawsuit would be where Dow Jones had directed its content: the U.S. This argument was also rejected by the Australian court. Rather, the court stated that it would keep a traditional approach: each publication can bring about its own lawsuit. The court further explained in their opinion that, to date, internet cases can still be tried on the traditional approaches to law, and there does not need to be a new set of law in place. The court reasoned that if a party does publish on the internet, the party should fully understand that the publication can be effectively unbounded by geography. If the party wants to limit internet publication, it should come up with some effective measure to do so.

Unlike the U.S. decision, this Australian decision could potentially cause fervor over forum shopping. It would be predicted that U.S. websites would use only U.S. sources and stay in the U.S because their first amendment right to free speech is protected against any foreign jurisdiction. It is hard to predict with certainty how international companies will begin dealing with this issue. For now, it seems that if the world were to follow the Australian court's reasoning, there could be a lawsuit in every country that can receive publication; each publication would have to take into account each country's laws on defamation and libel where the publication could potentially be accessed. And technology was supposed to make our lives simpler?


Sources:

Federal Litigator
18 No.2 FEDLIT 32

Australia To Dow Jones: Stay Awhile
By Ari Weinberg, Forbes.com, December 10, 2002

LDRC MediaLawLetter, Dec. 2002, pg. 5-10.
http://www.ldrc.com/index2.html
(membership required)

Young v. New Haven Advocate
Press Release, Newspaper Association of America

4th Circuit Rules in Internet Jurisdiction Case
Tech Law Journal, December 13, 2002

Dow Jones v Gutnick: Australian Court on a very slippery slope to totalitarianism?
Press Release, SRiMedia, December 16, 2002


2003 B.C. Intell. Prop. & Tech. F. 033101
The First Amendment and Library Internet Filters: Public Forum or Child Protection?

by David Petrini, Site Editor

On March 5th, the lawsuit United States v. American Library Association, et al, which contests the Children's Internet Protection Act (CIPA), was argued before the U.S. Supreme Court. The American Libraries Association (ALA) and American Civil Liberties Union (ACLU) brought suit to challenge the constitutionality of CIPA, which was signed into law in 2000. A federal court struck down the law in May, a ruling which the government has appealed.

CIPA denies some federal funding to libraries that do not adopt an acceptable-use policy and implement a safety technology, e.g. filtering software, to blockaccess to internet content that has been deemed "harmful to minors." Specifically, libraries are no longer eligible for funding for computers or internet access under the Library Services and Technology Act (LSTA). Additionally, non-compliant libraries would no longer receive discounts on Universal Service fees, part of the cost of internet service. In 2001 alone, libraries received $217 million in discounted service and other grants.

Exactly how to employ "safety technology" is at the heart of the issue because Internet filters are notoriously imprecise. Some filters block non-objectionable content as well as obscene material, which the ALA and ACLU claim violates the First Amendment because libraries are public forums, and interference with their protected content is censorship. The United States counters that adults are granted unrestricted access only children are affected by the filtering which protects them from obscene material.

The ALA and ACLU cite studies show that filtering software misses as much as 20% of the objectionable content while overzealously blocking some mundane websites. An ALA member in New Jersey pointed to the Middlesex County, NJ website that was blocked by some software because it contained the word "sex" embedded in it. Other examples of errantly blocked websites were those with information concerning a Christian orphanage in Honduras and the Knights of Columbus.

The Family Research Council in Washington, which filed an amicus brief for the appellate challenge, counters that the funds provided by Congress are currently being used for a "taxpayer-funded peep show," however. They contend that parents are concerned with the content freely available at public libraries. Librarians are not deaf to their pleas, but urge that parents take direct responsibility in protecting young children from such Internet material as hate groups, pornography, or more adult topics like genocide rather than rely on blocking software.

CIPA is the third attempt by Congress to regulate what children have access to on the Internet. In 1996, the Communications Decency Act (CDA) attempted to criminalize the posting of "offensive" or "indecent" material in chat rooms where children might encounter it. In Reno v. ACLU, the Supreme Court ruled two key sections of the CDA were unconstitutional and effectively altered the content that was available to adults to a level suitable for children. Earlier this year, the Supreme Court extended a block on the enforcement of the 1998 Child Online Protection Act (COPA) while the Third Circuit considers its constitutional validity.

Sensitive to the balance between the need to preserve content for adults and parents' concerns, some libraries have already implemented safety measures that differentiate between child and adult computer users through their library ID. Others have explored "smart card " technology, but more expensive solutions are often beyond the financial means of many libraries.

Given the recent string of decisions preventing circumscription of First Amendment rights on the internet, it is likely this indirect intrusion will be held unconstitutional as well. On the other hand, the Court may hold that filtering software which can be disabled for adults upon request does not prohibit access to contitutionally protected material. A ruling is expected from the Supreme Court in late June.


Coverage:

Can we protect children online without library software filters?
By Julie Hilden, FindLaw/CNN, February 19, 2003

The Supreme Debate
By Cynthia L. Webb, The Washington Post, March 5, 2003

Court to decide if U.S. can regulate public library computer access
CNN, May 30, 2003

Supreme Court to Hear CIPA Case
Slashdot.org, November 12, 2003


Court Materials:

Appellant's (U.S.) brief

Appellee's (ALA, et al) brief

Official transcript of oral arguments


Parties' Information:

American Library Association (ALA)

American Civil Liberties Union


2003 B.C. Intell. Prop. & Tech. F. 022601
AIDS In Thailand: A Patent Case For Social Justice

by Lindsey Repose, Staff Writer

The battle between pharmaceutical giants and AIDS activists is approaching a pivotal point in Thailand, raising the potential for drastic changes in Thailand's patent system and paving the way for making essential drugs more affordable in impoverished countries.

AIDS activists in Thailand have been pushing the government to strip bristol-Myers Squibb (BMS) of their patent rights to the antiretroviral drug didanosine (ddI) which is used to treat HIV/AIDS patients. BMS markets ddI under the trade name "Videx". ddI was first developed in the United Statesin 1989 by the National Institutes of Health. NIH subsequently licensed the marketing rights of ddI to BMS. NIH's formulation of ddI required that it be administered with a separate antacid because stomach acid reduces the potency of the drug. BMS improved upon NIH's formulation creating a single tablet that contained ddI combined with the appropriate amount of antacid.

BMS filed its first patent application for the ddI formulation in 1991. All claims were rejected for obviousness and the application was abandoned. The patent examiner stated that combining ddI with the optimal amount of antacid was already well known and within the ordinary skill level in the art. BMS filed a second application in 1997 and all claims were once again rejected for obviousness. This time the examiner explained that the combination of ddI with an antacid was obvious but failed to deem obvious the optimization of the amount of antacid. BMS argued that the claims were based on their system of optimizing the amount of antacid which itself is unobvious. The examiner finally accepted the claims after requiring an amendment limiting the invention to specific ingredients and proportions. In 1992, BMS filed a patent application for the ddI formulation in Thailand containing the same claims as those rejected in the second U.S. application. The patent was granted however, giving BMS exclusive marketing rights to ddI tablets in Thailand.

Videx costs between $2.56 and $4.11 per dose. While this price may not seem high in the wealthier countries of the world, it is exorbitant in Thailand where the daily minimum wage is $3.84. Affordability of brand name drugs has been an ongoing problem; however, Thailand's Government Pharmaceutical Organization (GPO) has been able to produce generics at half the price of their brand name equivalents. The GPO began to do its own research on ddI and has been successful in producing a powder form which it sells at a relatively low price. BMS' patent is blockading the production of ddI in tablet form which are more convenient, easier to ingest and have fewer side effects. So AIDS activists are pushing the Thai government to restrict BMS' rights and allow the GPO to produce generic ddI tablets.

On May 9, 2001, two Thai AIDS patents and AIDS ACCESS foundation filed suit in Thailand's Central Intellectual Property and International Trade Court to limit BMS' exclusive right to produce ddI tablets. On October 1, 2002 the court ordered BMS and the Department of Intellectual Property (DIP) to amend BMS' patent, limiting BMS' exclusive rights only to doses of five to one hundred milligrams. In effect, this ruling would allow the GPO to produce generic tablets in doses greater than one hundred milligrams without infringing on BMS' patent.

Although seen as a landmark case, the effects of the ruling have yet to be realized because there are still more legal battles ahead. In December of 2002, BMS and DIP filed an appeal. In response, the GPO sought temporary court immunity to allow them to produce the tablets and avoid liability while the appeal is pending. DIP and BMS both requested deferral of enforcement of the ruling so they can resume producing tablets at any dosage. AIDS activists have been pressuring government officials to withdraw the deferral request. The court's decisions on these requests and the appeal will weigh much more heavily in determining BMS' fate in the ddI market.

Even if BMS is successful on appeal, they still have bigger problems to contend with. On October 9, 2002, shortly after the court's first ruling, AIDS activists filed another suit seeking to completely invalidate the BMS patent challenging the patent on the grounds of improper patent application and patent office procedures. They claim there were no real product patent laws in place in Thailand at the time the patent was granted and that there are no drug or chemical experts on the committee that reviews pharmaceutical patent applications. Further, they claim that the patent should have never been granted because the ddI formulation lacks "significant inventive steps or novelty". This argument mirrors the reasons for the rejection of the original claims of the U.S. patent application. If BMS did not really contribute any great innovation, then public policy does not support protection of its patent. After all, the United States government was the original inventor of ddI, so enforcement of the patent seems like a windfall for BMS who did not have to invest much capital in research and development of the drug.

Although the AIDS activists may have public policy and the U.S. patent system supporting their arguments, they have quite a large disadvantage - time. Even if they are successful in limiting or completely eliminating BMS'exclusive rights to ddI, it could take as long as ten years for the GPO to get permission to start marketing a generic version. Sadly, although the future prospects are promising, those suffering from HIV/AIDS today are left with limited options.


Related Links:

HIV/AIDS - Bid to Quash Property Rights on all Doses of Antiviral
By Aphaluck Bhatiasevi, Bangkok Post, October 10, 2002

Thai AIDS activists Score Victory Over Pharmaceutical Giant
By Dennis Coday, National Catholic Reporter, November 29, 2002

Thai AIDS Activists Demand Government Drop Support for bristol-Myers Patent
Agence France-Presse, January 14, 2003


Information on BMS's ddI Patent:

Patent History

U.S. Patent


2002 B.C. Intell. Prop. & Tech. F. 121201
Congress v. Courts: Balancing Child Porn and Free Speech

by Bethany White, Staff Writer

Congress and the courts cannot seem to agree on how to curb child pornography on the Internet. The new Child Pornography Prevention Act ("CPPA") of 2002 provides that child pornography would include "such visual depiction [as] a computer image or computer-generated image that is, or appears virtually indistinguishable from, that of a minor engaging in sexually explicit conduct." In June, the U.S. House of Representatives voted 413 to 8 for a bill that would outlaw "morphed" or virtual child pornography. The Senate is considering a similar bill but has not voted on it. These steps come after a preceding 1996 congressional bill – also called the Child Pornography Prevention Act – was ruled unconstitutional by the U.S. Supreme Court in April 2002, namely for First Amendment arguments.

Congress has made other attempts at such a law. For example, Congress passed the Communications Decency Act ("CDA") of 1996, which was Congress' first attempt to censor speech online. The CDA prohibited posting indecent materials in a public forum on the Internet. In 1997, the Supreme Court unanimously ruled that the CDA would unconstitutionally restrict speech on the Internet. The CDA was followed by the Child Online Protection Act ("COPA") of 1998. Both Acts were designed mainly to protect children from viewing explicit material on the Internet. While the 1998 version is narrower than its predecessor, it still contains much of the same unconstitutional restrictions. The case against COPA is currently on remand in the Third Circuit to consider possible restrictions on constitutionally protected speech.

Additional attempts at protecting children from exposure to pornography have also proven problematic. The most common effort – often imposed by organizations offering public access to computers and the Internet, such as libraries – is through filtering software. Under the Children's Internet Protection Act ("CIPA") of 2001, which was ultimately ruled unconstitutional, public libraries were forced to install filtering software or lose federal funding. Filtering software bars the user from viewing "restricted" Web sites through an automated text classification system. Thus, the blocked Web sites may contain pornography; however, they also may contain innocuous information on topics such as breast cancer. A public library in Ohio can attest to the inaccuracies of filtering after recently finding itself blocked on its own system after installing net filtering software. The Flesh Public Library had its own site blocked after the program blocked sites with the word "flesh." However, rather than considering the implications of the software, the library simply changed the name of the site.

Already this year the Supreme Court has ruled that Congress' 1996 attempt at banning virtual porn – via the CPPA– violated the First Amendment. "[T]he speech ban is not narrowly drawn. The objective is to prohibit illegal conduct, but this restriction goes well beyond that interest by restricting the speech available to law-abiding adults," Justice Kennedy said in the majority opinion. The Court also argued that even Hollywood movies could fall under the provisions of the statute, including popular films such as "American Beauty" and "Traffic." According to the Court, both movies "explore themes within the wide sweep of the statute's prohibitions."

In the Oscar-winning film "American Beauty," a teenage girl engages in sexual relations with her teenage boyfriend, and another yields herself to the gratification of a middle-aged man. The film also contains a scene where, although the movie audience understands the act is not taking place, one character believes he is watching a teenage boy performing a sexual act on an older man. Likewise, in "Traffic," a 16-year-old girl's drug addiction leads her to a filthy room to trade sex for drugs.

The Court went on to say that anyone in possession of either film "would be subject to severe punishment without inquiry into the work's redeeming value. This is inconsistent with an essential First Amendment rule: The artistic merit of a work does not depend on the presence of a single explicit scene." Ultimately, the Court held that the language of the 1996 Act – namely 18 U.S.C. §§2256(8)(B) and 2256(8)(D) – was overbroad and unconstitutional.

In response to the ruling, Congress has amended the 2002 Act by striking §2256(8)(D) and by changing the wording of §2256(8)(B). According to the 2002 Act, computer images of child pornography must be "virtually indistinguishable" from those of real images, whereas the 1996 act only required that the computer images "appear" to be those of real images.

Whether such changes – should they be passed into law – are narrow enough to satisfy free speech protected under the First Amendment remains to be seen. However, it is doubtful that the slight changes made by Congress for the 2002 bill are enough to satisfy the courts. As the use of the Internet continues to grow, the courts have no choice but to analyze issues of children, the Internet, and free speech. See United States v Am. Library Association (ruling the CIPA unconstitutional on First Amendment grounds). The courts are reluctant to prohibit speech that may be protected by the Constitution, and many of the recent rulings fall in favor of First Amendment rights. While Congress' intention of protecting children is noble, it will have to work harder to express that intention without inhibiting constitutionally protected speech.


Related Links:

President Increases Federal Efforts to Promote Online Safety
Remarks by the President on Children's Online Safety, October 23, 2002

Bush urges ban on "morphed" porn
By Declan McCullagh, CNET News.com, October 23, 2002

Bush Urges Congress to Pass New Bill on Virtual Child Porn
GigaLaw.com, October 24, 2002

The First Amendment and "Virtual" Child Pornography
By Michael Landau, GigaLaw.com


The CPPActs:

1996 Child Pornography Prevention Act

Child Obscenity and Pornography Prevention Act of 2002

Child Pornography Prevention Act
By Jean Goodwin, Northwestern University, February 6, 2001

Subject: Virtual child pornography, 1st Amendment
By Alissa Havens, Northwestern University

Children's Online Privacy Protection Act of 1998

Child Online Protection Act (COPA) - Overview
Center for Democracy & Technology

The Child Online Protection Act of 1998 would Suppress Free Speech among Adults
By Bill Boushka, The Minnesota Libertarian, July 1998

Library Filters Ban the Library

United States v Am. Library Ass'n, 2002 U.S. Lexis 8330.


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