Issue 49 July 2001	BYTES IN BRIEF® by Editors: Sharon D. Nelson, Esq. and John W. Simek Associate Editor: Amelia C. Hierholzer Editor Emeritus: G.V. Nelson 9500+ subscribers worldwide © 2001 Sensei Enterprises, Inc./Nelson & Wolfe. All rights reserved. This newsletter may not be reproduced or redistributed in any manner except with consent of the copyright owner. Distributed by Silver Law Inc. under license.

MICROSOFT AGREES TO EUROPEAN PRIVACY PACT

On June 29th, Microsoft agreed to comply with the European Commission Safe Harbor Directive on Data Privacy. The agreement between 15 European nations and the United States prohibits the transfer of personal data to U.S. companies that don't follow specific privacy protection standards. To demonstrate compliance, U.S. companies must tell their customers and employees what personal data is collected, how it's used, and with whom it's shared. U.S. companies must also permit individuals to opt out of sharing personal information with third parties and give them access to their data to ensure that it's correct and updated. Microsoft joins companies such as Intel, which agreed to comply with the Safe Harbor agreement last month, and Hewlett-Packard, which agreed to comply earlier this year. Microsoft's consent to adhere to the agreement made it the 71st company to join the Commerce Department's Safe Harbor list. Registering with the Commerce Department and adhering to the data-protection pact is voluntary. The "Safe Harbor" section of the Commerce Department's web site may be found at http://www.export.gov/safeharbor

HARRODS WINS DOMAIN NAME CASE

A U.S. District Court judge in Alexandria has ruled that Harrods, England's famous department store, has the right to take possession of 60 Harrods-related domain names, even though the current owner has a legal claim to the name "Harrods." Judge Leonie Brinkema found that Harrods (Buenos Aires) Ltd. acted in bad faith when it registered the 60 domain names, including harrodsbank.com, harrodsbanking.com and harrodsamerica.com. Harrods (Buenos Aires) Ltd., based in Argentina, is the former operator of a department store in Argentina that was opened by the owners of Harrods in 1912. The stores ceased their association before 1960, but the South American store used the name until at least 1995. In 1999, the Argentine company registered the 60 names, in 
spite of the fact that, at that time, the company operated nothing more than a parking lot. The ruling further narrows the available "safe harbors" and expands the concept of bad faith under the Anticybersquatting Consumer Protection Act of 1999. Although Harrods (Buenos Aires) Ltd. owns trademarks for the Harrods name in several South American nations, Judge Brinkema rejected the company's claim that it had "reasonable grounds to believe" that the registration of the domain names constituted fair use, especially given the fact that Harrods (Bueno Aires) Ltd. registered names of services that the English company offers and the South American company does not. Harrods (Buenos Aires) Ltd. is expected to appeal the ruling. Further information may be found at http://www.newsbytes.com/news/01/167543.html

BIG BROTHER WATCHES YOU IN TAMPA

On July 2nd, House Majority Leader Dick Armey released a statement blasting the city of Tampa, Florida for its implementation of face-recognition technology on public streets. The city recently installed 36 street level cameras equipped with the technology in its entertainment district in order to identify suspected criminals. Armey's statement said "Placing police officers in a remote control booth to watch the every move of honest citizens isn't going to make us safer." The technology, developed by Visionics Corp, is similar to the system used by law enforcement authorities to scan for criminals and terrorists at the last Super Bowl, also held in Tampa. It automatically scans the faces in the crowd and matches them against a database of known and suspected criminals. No public hearings were held before the program was implemented. Further information may be found at http://www.visionics.com/newsroom/press/PRs/2001/0629.html

BSA OFFERS SOME CITIES A ONE MONTH TRUCE

The Business Software Alliance, which represents some of the world's major software makers, launched a July truce in the cities of Atlanta, Portland, New York, Kansas City and Oklahoma City. The BSA offered free application auditing software on its site and waived copyright infringement penalties for truce participants, excepting those who had already been notified that they were under investigation. Penalties for each violation can cost as much as $150,000. The BSA said global losses from software piracy exceeded $2.6 billion last year. This is the fifth truce program the BSA has run in the U.S. It also had truce programs in other countries, including Mexico, Thailand, the United Kingdom and Denmark. The truce announcement and an example of the radio ads run by BSA may be found at http://www.bsatruce.com/us/indexjuly2001.phtml

EFF LAUNCHES EFFORTS TO PROTECT NET PARODY

The Electronic Freedom Foundation announced on July 6th that it will launch a "Chilling Effects Clearinghouse" to help those who are bullied by corporate lawyers and law firms to "cease and desist" engaging in parody on the Net. A letter that EFF received from attorneys representing the children's television program "Barney" motivated the EFF. The letter made reference to an archive of old online magazines collectively known as the Computer Underground Digest (CUD), which EFF has hosted on its web site for several years. In one of the magazines, an author jestingly writes about hating and wanting to kill Barney (a singing purple dinosaur for those who don't have children). The attorneys threatened legal action, asserting that the comments violated their clients' trademark and copyright rights. The EFF said that noncommercial uses of trademarked names are explicitly protected under trademark regulations, and that many such letters are scare tactics intended to frighten people into removing material that companies object to. The clearinghouse, which EFF intends to develop in conjunction with a handful of law schools, will include a Hall of Shame for lawyers and law enforcers that write these broad, unfounded letters to people, according to the EFF. The clearinghouse is intended to educate users about their rights under the law and is planned for a fall launch. Further information may be found at http://www.newsbytes.com/news/01/167701.html

MICROSOFT ASKS FOR A REHEARING

On July 18th, Microsoft petitioned for a rehearing on the issue of whether it illegally bundled code for its Internet Explorer browser with that of its Windows operating systems. The petition stated that "A detailed analysis of the factual record discloses that the district court's finding that Microsoft engaged in unjustified 'commingling' of software code is clearly erroneous." The Department of Justice had already acted to speed up the antitrust case, 
asking the appeals court to end the current phase and to send the case back to the district court to determine whether Microsoft should be broken up. Microsoft asked the court on July 20th to reject the government's request, arguing that the court should first consider its rehearing request. On July 26th, the government said that Microsoft's arguments were "speculative" and "irrelevant" and asked that the appeals court deny the petition for a rehearing. On July 12th, New Mexico's Attorney General, Patricia Madrid, announced that the state had settled its antitrust claims against Microsoft, making it the first of the 19 states involved in the suit to leave the battlefield. Terms of the settlement were not immediately disclosed. Documents in the case may be found at http://www.cadc.uscourts.gov

EPIC, OTHERS, FILE FTC COMPLAINT AGAINST WINDOWS XP, .NET

On July 25th, the Electronic Privacy Information Center (EPIC) and other privacy groups filed a complaint against Microsoft with the Federal Trade Commission (FTC) asking the FTC to force Microsoft to change its practices. The groups are concerned that Microsoft's Passport authentication system, a pivotal part of both .Net and Windows XP, has "the potential to track, profile, and monitor users of the Internet" with severe privacy implications. The complaint charges that Microsoft intends to use XP and .Net to unfairly and deceptively obtain personal information from consumers. Passport encompasses a single log-on system enabling users to gain access to a range of services and web sites with one password. Passport stores names, addresses, ages, phone numbers, e-mail addresses, preferences and payment information for e-commerce. Although Passport allows some user preferences to be set, the personal information is still within Microsoft's control, which the privacy groups object to. According to the complaint, when a user logs on the Internet using Windows XP, it attempts to force users into needlessly signing up for and giving information to Passport. Likewise, under Windows XP, the complaint states that users connecting to the Net receive a dialog box telling them they need Passport to use such features as instant messaging, voice chat, and video. Microsoft also shares user information between sites included in Microsoft Network (MSN) web sites. To counter the privacy concerns, the complainants are asking the FTC to investigate Passport, and to order that Microsoft change procedures so that users are informed that Passport is not needed to go online, to order that Passport not share information with other sites without user consent, to order Microsoft to include anonymizing techniques in Windows XP, and to allow the easy use of other online payment services with Windows XP. A copy of the complaint may be found at http://www.epic.org/privacy/consumer/MS_complaint.pdf

RUSSIAN PROGRAMMER ARRESTED UNDER DMCA

On July 16th, Russian programmer Dmitry Sklyarov was arrested by the FBI in Las Vegas for allegedly publishing a program that removed security measures from Adobe's eBook files in violation of the Digital Millennium Copyright Act. He was arrested on a criminal complaint filed by the U.S. Attorney for the Northern District of California. Sklyarov is one of the authors of Advanced eBook Processor, software which strips security measures from Adobe's eBook format, a function that his Russian employer, Elcom, says is necessary to permit backups required under Russian law, but which Adobe says is software piracy. Sklyarov's arrest came three weeks after Adobe sent notices requesting that Elcom stop selling the program and asked Verio, Elcom's Internet service provider, tp pull the plug on Elcom's site. Verio suspended service on June 26th and Adobe requested an investigation into Elcom's activities. This is just the second case to be filed under the criminal provisions of the DMCA. On July 23rd, Adobe joined with the Electronic Frontier Foundation in calling for Sklyarov's release and withdrawing its support from the criminal complaint. Adobe noted that the software in question is no longer available in the U.S. and said the prosecution of this one individual "is not conducive to the best interests of any of the parties involved or the industry." Further information is available at http://www.adobe.com/aboutadobe/pressroom/pressreleases/ 200107/20010723dcma.html

DOJ CREATES 10 NEW CHIP UNITS

Attorney General John Ashcroft announced on July 20th that the Department of Justice is creating 10 "specialized prosecutorial units." The Computer Hacking and Intellectual Property (CHIP) units will be located in nine U.S. cities, with two in New York. The units will consist of special teams of attorneys trained to prosecute people on charges of computer intrusion, electronic copyright violations, fraud and other Internet crimes. The units are being created in cities with high concentrations of technology firms and strong FBI investigative resources. The CHIP units will be located in Atlanta, Alexandria, Va., Boston, Dallas, Los Angeles, New York, San Diego, San Francisco and Seattle. The San Francisco unit has been operating as a prototype for some time. The Attorney 
General's remarks may be found at http://www.usdoj.gov/criminal/cybercrime/chipagsp.htm

PUBLISHING RIGHTS DO NOT INCLUDE E-BOOKS

On July 11th, the U.S. District Court for the Southern District of New York denied publisher Random House an injunction, saying that e-books do not fall within the company's exclusive right to publish written works. In Random House, Inc. v. Rosetta Books, Random had argued that it could not be prohibited from publishing works by such authors as William Styron and Kurt Vonnegut in digital form. Rosetta had contracted with the authors to publish 
their works digitally but was sued by Random House for copyright infringement and tortious interference with contracts. The court drew a number of distinctions between print books and e-books and also noted that many specific types of publication rights were enumerated in the Random House contracts which would not have been necessary if the underlying phrase "in book form" encompassed all types of books. The court called e-books a "new use" and said that "electronic digital signals sent over the Internet – is a separate medium from the original use – printed words on paper." Finally, the court noted that Random House had failed to meet the standards for the granting of a preliminary injunction. Further information may be found at http://www.law.com/cgi-bin/gx.cgi/AppLogic+FTContentServer?pagename=law/View&c=Article&cid=ZZZQLR7R1PC&live=true&
cst=1&pc=0&pa=0&s=News&ExpIgnore=true&showsummary=0

SEC SETTLES EMULEX SUIT

The Securities and Exchange Commission announced on July 25th that it had settled its suit against Mark Jakob, who allegedly manipulated the stock price of Emulex last year by promulgating bogus press releases and netting profits from the resulting price swings. Under the agreement, Jakob will return the $241,000 he made trading the Emulex stock, plus $97,000 with interest, representing the prospective trading losses he tried to avoid by sending Emulex' stock plummeting. He will also pay a penalty of $102,642.00, the amount frozen by the government after his arrest in August of 2000. That sum will be paid to defrauded investors, who have filed a class action suit in New York. The SEC believes that Jakob's phony press releases defrauded investors out of $110 million. A federal court in California approved the agreement. Jakobs consented to the order without admitting or denying the government's allegations. In December, 2000, Jakob pleaded guilty to wire and securities fraud and is scheduled to be sentenced on August 6th. He could receive as much as four years in prison and millions in fines and restitution. Further information may be found at http://www.sec.gov/litigation/litreleases/lr17079.htm

FTC COMPLAINT LODGED AGAINST SEARCH ENGINES

Watchdog group Commercial Alert, founded by Ralph Nader, lodged a complaint with the Federal Trade Commission on July 16th, asking it to investigate eight major search engines. The complaint attacks the search engines' use of "paid inclusion," which permits advertisers to pay to have their ads appear higher in their rankings, skewing the algorithm's objective results and deceiving users who believe the rankings are in fact objective. The complaint was filed against the search engines of Altavista, AOL Time Warner, Ask Jeeves' Direct Hit Technologies, iWon, LooksSmart, Microsoft, and Terra Lyco. Further information and a copy of the complaint may be found at http://www.commercialalert.org/releases/searchenginerel.html

SUIT CHARGES .BIZ LOTTERY BY DOMAIN OPERATOR

A class action lawsuit filed in Los Angeles Superior Court on July 23rd charges that the operator of the new .biz domains is conducting an illegal lottery by charging customers for the chance to register a .biz name. Neulevel, the operator, charges for the chance to obtain a .biz name, and then randomizes registrations for the same name before choosing one. Applicants have no guarantee that they will get their chosen .biz names once they go "live" in October. 
Named as co-defendants were the Internet Corporation for Assigned Names and Numbers (ICANN) as well as several domain name registrars which have been licensed to sell .biz domains, including VeriSign and Register.com. Neulevel charges registrars $2 for each registration they submit, with the registrars passing that cost on to customers who participate in the .biz "lottery." The lawsuit argues that the "lottery" is not only illegal but inequitable because those with deeper pockets can buy multiple chances to get their desired names. The suit seeks an injunction to halt the process. Further information may be found at http://www.zdnet.com/zdnn/stories/news/0,4586,2798854,00.html?chkpt=zdnnp1tp02

AIMSTER SUED AGAIN, AGAIN, AGAIN

File-swapping service Aimster must be empathizing with Napster now that it is facing a multiplicity of similar suits. Songwriters and music publishers filed a class action suit in Manhattan federal court against the New York based Aimster, whose service piggybacks on AOL's instant messaging software and allows users to swap files with people on their "buddy lists." They were promptly followed by Columbia, Disney, MGM, Paramount, Sony, 20th Century Fox and Universal Studios, which filed suit in a federal court in Los Angeles. The suits charge that Aimster promotes itself as an even more efficient, peer-to-peer music sharing service than Napster. Aimster is also being sued by the Recording Industry Association of America and AOL Time Warner, which alleges that Aimster is illegally using AOL's registered AIM trademark. Further information may be found at http://www.nmpa.org/pr/aimster.html

NAPSTER SETTLES WITH DR. DRE AND METALLICA

Napster announced on July 12th that it had settled its lawsuits with Dr. Dre and Metallica, both of whom had helped lead the fight to close Napster down. The settlement requires Napster to block files that the artists do not wish to share. Dr. Dre and Metallica, for their part, agreed to make their music available on Napster "from time to time when an acceptable model is in place" for payment to artists. No further settlement terms will be made public. Further information may be found at http://www.napster.com/pressroom/pr/010712-metallica.html

E-GOVERNMENT ACT INTRODUCED IN HOUSE

The E-Government Act of 2001 was introduced in the House of Representatives on July 13th, having been introduced in the Senate in May. The act is intended to promote the federal government's use of technology to serve citizens and make government more efficient. It calls for the naming of a federal chief information officer to implement government information policy, facilitate coordination between federal agencies, set standards and protocols, and oversee procurement and funding. It would shore up the Federal CIO Council, established in 1996 to assist executive branch agencies in sharing IT ideas and policy recommendations by specifying its responsibilities and authority by statute. The act also would create an e-government fund of $200 million per year, a single government portal and a federal IT training center. The text of the bill may be found by entering the bill number (H.R.2458.IH) at http://thomas.loc.gov

NET PORN LAW CHALLENGE WILL GO TO TRIAL

On July 26, a three judge panel from the 3rd Circuit Court of Appeals denied the government's request to dismiss a challenge to the Children's Internet Protection Act of 2000. Three dozen plaintiffs, spear-headed by the American Library Association and the American Civil Liberties Union, filed suit in March, alleging that the law violates the First Amendment. The Act cuts off federal funding for schools and libraries that do not install software to block access to pornographic materials. The plaintiffs argued that the software impedes the right of adults to access protected materials and the government argued that the law does not restrict free speech but merely imposes conditions on libraries accepting federal monies. Chief Judge Edward Becker said that the constitutional questions raised by the case were too numerous and complex to be considered without a full blown trial, now tentatively scheduled for February 14, 2002. Further information may be found at http://news.cnet.com/news/0-1005-202-6690184.html

4TH CIRCUIT: JURISICTION MAY BE BASED ON WEB SITE LOCATION

On July 26th, the Fourth Circuit Court of Appeals issued its opinion in Christian Science Board of Directors v. Nolan, holding that personal jurisdiction may be based upon maintaining a web site in the jurisdiction where the suit is filed. The Christian Science Board of Directors had filed a complaint in U.S. District Court for the Western District of North Carolina against David Nolan and others alleging trademark infringement under the Lanham Act. Nolan was a resident of California. However, Nolan maintained a web site in North Carolina, the content of which was the subject of the lawsuit. Nolan contracted with a co-defendant in North Carolina to operate the web site for him and periodically sent content to North Carolina to be added to the web site. The plaintiff obtained a default judgment against Nolan enjoining him from using the contested marks. He violated this injunction. When he was ordered to appear in response to a civil contempt notice he asserted that the default judgment was void for lack of personal jurisdiction. The court rejected that argument and he appealed. The Appeals Court affirmed, reasoning that the exercise of jurisdiction over Nolan by the District Court in North Carolina was consistent with the North Carolina long arm jurisdiction statute, and did not violate the due process requirement of "minimum contacts." The opinion may be found at http://pacer.ca4.uscourts.gov/cgi-bin/getopn.pl?OPINION=002270.P

NEW JERSEY SETS STANDARDS FOR UNMASKING POSTERS

On July 11th, in a pair of rulings, a New Jersey appeals court set forth a four step process to be used by litigants trying to learn the identify of defamatory anonymous online posters. In Dendrite International Inc. v. John Doe No. 3, the appellate court affirmed Morris County, N.J., Superior Court Judge Kenneth MacKenzie's refusal to allow limited, expedited discovery into the identities of two of four defendants who had posted messages on a Yahoo message board devoted to Dendrite, a Morristown, N.J.-based supplier of sales force software products and support services to the pharmaceutical industry. Dendrite appealed only as to Doe No. 3, who used the pseudonym "xxplrr" to post comments the company called defamatory and violative of trade secrets. Some of them accused the company of inflating earnings by changing the way it recognized revenue. Others claimed that the president was unsuccessfully shopping the company because of poor performance. MacKenzie, applying a de facto summary judgment standard, found that Dendrite failed to establish it was harmed by Doe No. 3's statements, since it had not shown that the postings caused fluctuations in the price of its stock. Dendrite filed an interlocutory appeal. In order to unmask anonymous online posters, the court set forth four requirements. First, the court must require the plaintiff seeking disclosure to try to notify the "John Doe" by posting a notice in the same forum that contained the posting complained of in the suit and allowing time for the poster to oppose disclosure of their identity. Second, the plaintiff must specify the exact statements that are thought to be actionable. Third, the plaintiff must be able to withstand a motion to dismiss for failure to state a claim and must provide evidence supporting the claim. Fourth, the court must weigh First Amendment rights against the strength of the prima facie case and the necessity for the disclosure to allow the plaintiff to proceed. Further information about Dendrite International Inc. v. John Doe No. 3 and Immunomedics v. Jean Doe may be found at http://www.law.com/cgi-bin/gx.cgi/AppLogic+FTContentServer?pagename=law/View&c
=Article&cid=ZZZ6M9S5APC&live=true&cst=1&pc=0&pa=0

JUST FOR FUN: MICROSOFT PULLS RACY EUROPEAN AD

If you read "beach books" on your summer vacation, think of this as the news equivalent. On July 23rd, Microsoft Switzerland released an erotic 30 second Office XP advertisement on its web site. It disappeared from view the next day, no doubt after someone in management had a coronary. Just imagine this ad on the U.S. evening news. Warning: it will take a while to download: http://www.w2knews.com/rd/rd.cfm?id=072401MSX