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Issue 67 January 2003 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. NAI ISSUES WEB BUG GUIDELINES On November 26th, the Network Advertising Initiative (NAI) promulgated industry standards that require webmasters to notify site visitors when their sites employ Web bugs or beacons, identifying what they are used for. The rules also require sites to obtain a user’s consent before using the technology to collect and share information that could identify the user. NAI is a group of eight Web advertising technology companies, including DoubleClick and 24/7 Media. Web bugs are hard to detect strings of code placed in 1 by 1 pixel image tags that do such things as track site usage, count the number of visitors to a page or monitor a visitor’s behavior. They are often used in conjunction with cookies, which are more traceable, to track the effectiveness of advertising campaigns or to collect data on the habits of site users, which data is then used to formulate future promotions. NAI, in partnership with 25 other participants, including privacy service Truste and data analysis company Websidestory, said it set the standards to improve awareness about the technology and dispel some of the criticism about its use. The guidelines may be found at http://www.networkadvertising.org/Statement.pdf BUSH SIGNS CYBER SECURITY ACT On November 26th, President Bush signed the Cyber Security Research and Development Act (CSRDA), which will give colleges and universities about $900 million during the next five years to create security centers, recruit graduate students, and pay for research. The Act directs the National Science Foundation to create new cybersecurity research centers, undergraduate program grants, community college grants and fellowships. The National Institute of Standards and Technology would fund academic-industry partnerships and other research incentives. The text of the Act may be found by entering the bill number (H.R. 3394) at http://thomas.loc.gov THE MICROSOFT ANTITRUST CASE: WHO’S LEFT? On November 28th, seven of the states remaining in the Microsoft antitrust case announced that they would accept the settlement reached by the Department of Justice. On the same day, Massachusetts Attorney General Tom Reilly asked a U.S. appeals court to reconsider tougher sanctions against the software company than those in the settlement. On December 2nd, West Virginia announced that it would join Massachusetts in the appeal. The seven settling states plus the District of Columbia plan no additional legal action and say they will focus on ensuring that Microsoft lives up to the terms of the settlement. Microsoft will reportedly pay $25 million in legal reimbursements to be divided among the settling states based on how much they spent. On December 20th, the Computer and Communications Industry Association and the Software and Information Industry Association said they had filed with the U.S. District Court for the District of Columbia, announcing their intention to appeal the settlement ruling, asking the appellate court to find that the settlement does not go far enough to remedy Microsoft’s anti-competitive conduct. Legal documents in the case may be found at http://www.microsoft.com/presspass/legalnews.asp FTC SETTLES DOMAIN NAME CASE On December 3rd, the Federal Trade Commission (FTC) announced that it had reached a settlement with five defendants accused of selling phony domain names. TLD Network Ltd, TLD Networks, Quantum Management Ltd, TBS Industries Ltd and Thomas Goolnik allegedly advertised and sold domains that did not work. Starting in July of 2001, the defendants offered such domains as .usa, .sex, .brit and .scot, charging customers $59 annually to register the names, although they were not accredited domain name registrars and the domain names did not work. Federal authorities filed a false advertising suit against the five parties in March. Under the settlement, the defendants cannot misrepresent the usability of domain names, nor sell their customer lists. The FTC also required them to disclose the limitations or conditions of using their domain names and to provide $300,000 toward redress for consumers worldwide. It is thought that the defendants raised as much as $1 million in registration fees during their nine months of operation. The stipulated final judgment and order may be found at http://www.ftc.gov/os/2002/12/tldnetworkstip.pdf WALL STREET MUST PAY FOR E-MAIL VIOLATIONS Five Wall Street brokerages, Morgan Stanley, Goldman Sachs & Co., Deutsche Bank Securities Inc., U.S. Bancorp Piper Jaffray Inc. and Salomon Smith Barney Holdings Inc., agreed to pay a total of $8.25 million in fines for improperly storing e-mail communications during a three-year period, according to a press release issued by the U.S. Securities and Exchange Commission (SEC) on December 3rd. The SEC, the New York Stock Exchange and the National Association of Securities Dealers Inc. said they each conducted separate investigations of the firms in determining their failure to properly preserve e-mail from 1999 to at least 2001. Under Section 17(a) of the SEC's Exchange Act, NYSE Rule 440 and NASD Rule 3110, the firms are required to retain e-mail traffic, but "failed to preserve for three years, and/or to preserve in an accessible place for two years, electronic communication (including interoffice memoranda and communications) that related to ... business as a member of an exchange, broker or dealer." Without admitting or denying the charges, the five defendants agreed to pay $1.65 million each and to inform each regulator within 90 days that they have established systems and procedures to comply with the law. The SEC’s press release may be found at http://www.sec.gov/news/press/2002-173.htm BUSH SIGNS ‘DOT.KIDS’ LAW On December 3rd, President Bush signed into law a bill that will create a new ‘kids.us’ domain overseen by the federal government, but administered by NeuStar. Participation under the Dot-Kids Implementation and Efficiency Act will be voluntary. Parents will be able to restrict their child's computer so their child may only visit "dot-kids" addresses. An independent board will set criteria, with the new domain containing only material appropriate for children under 13. The act mandates that Web sites with a kids.us address cannot post hyperlinks to locations outside of the kids.us domain and also prohibits chat and instant messaging features, except in cases where a site operator can guarantee the features adhere to kid-friendly standards developed for the domain. The text of the Act may be found by entering the bill number (H.R. 3833) at http://thomas.loc.gov/ SUIT FILED AGAINST BONZI FOR SECURITY WARNING ADS On November 25th, a class action lawsuit was filed in a Superior Court of Washington State, alleging that Bonzi software generates Web advertisements that masquerade as pop-up security alert windows generated by a user's computer or browser. Millions of users have allegedly been fooled by the ads into clicking onto the Bonzi site. One of the Bonzi banners reads: "Your computer is currently broadcasting an Internet IP Address. With this address someone can immediately begin attacking your computer." If users click on the X to close the banner, they are delivered to Bonzi's Web site. With the ads, Bonzi is promoting its Web site and software, InternetBoost, which is designed to speed up Internet connections, and InternetAlert, built to safeguard computers from technology attacks. The ads have made Bonzi one of the most popular Web sites on the Internet, with approximately 2 million unique visitors in October. The class action seeks to represent everyone in the United States who has received a banner like those from Bonzi. The suit charges the company with violating laws that safeguard against public nuisance and deceptive business practices. It seeks to prohibit Bonzi from sending such ads in the future. It also asks for punitive relief, including $500 for every person who received a deceptive ad from the company. Further information may be found at http://www.lukins.com/bonzi/ WEB FILTERS BLOCK HEALTH SITES Software intended to shield the young from the dark side of the Internet may also prevent them from seeing important health information, including information about sexually transmitted diseases, birth control, depression and suicide. A Henry J. Kaiser Family Foundation study released on December 10th says that filters are particularly troublesome because so many young people look for information on the Internet rather than seeking it from adults, especially when the topics are sensitive. The report, "See No Evil: How Internet Filters Affect the Search for Online Health Information," concluded that the narrower the focus of a filter, the more health information is available. A higher level of filtering, which might include categories such as tobacco, profanity, jokes, games and dating, severely limits access to health information while only slightly increasing protection against pornography. 73 percent of public schools and 43 percent of libraries use some type of filtering. The report was published in the December 11th issue of the Journal of the American Medical Association. Further information may be found at http://www.kff.org/content/2002/20021210a/ AUSTRALIAN COURT FINDS JURISDICTION OVER U.S. WEB SITE On December 10th, Australia’s high court found that Australia had jurisdiction in a libel suit against a U.S. Web site. The Dow Jones news organization will now have to defend a suit brought by an Australian mining magnate in his own country. Because Dow Jones, which published the allegedly libelous material on servers in New Jersey, is a multinational corporation with physical assets in Australia at risk, it really has no choice but to continue fighting the lawsuit in Victoria's Supreme Court. The company had hoped to avoid this because Australia's libel laws are more restrictive and less favorable to publishers than those in the U.S. The court reasoned that jurisdiction turned on where the article, which appeared in Barron's magazine, was technically published. "In the case of material on the World Wide Web, it is not available in comprehensible form until downloaded on to the computer of a person who has used a Web browser to pull the material from the Web server. It is where that person downloads the material that the damage to reputation may be done," the court wrote. "Ordinarily then, that will be the place where the tort of defamation is committed." Dow Jones unsuccessfully argued that the Barron's article was published online in New Jersey and mining magnate Joseph Gutnick should be required to file his libel lawsuit there, where Dow Jones had last exercised control. Gutnick’s original suit claimed a 7,000-word article that had appeared in Barron's in October 2000 portrayed him as a schemer given to stock scams, money laundering and fraud. The magazine article was also published online. The decision in the case may be found at http://www.austlii.edu.au/au/cases/cth/high_ct/2002/56.html SEC PROPOSES WEB POSTING FOR INSIDER DEALINGS On December 20th, the Securities and Exchange Commission (SEC) proposed rules requiring the Internet posting of company insider stock transactions, a step designed to make it easier and quicker to see who's buying and selling. Companies currently have the choice of providing information either on paper or electronically on stock holdings and trading by company executives and directors and by holders of 10 percent or more of company shares. The new rule will require electronic distribution and the data will be made available on the SEC's Web site, www.sec.gov, and on companies' sites. SEC officials hope to have the requirement in place by the spring of 2003. The proposed rules may be found at http://www.sec.gov/rules/proposed/33-8170.htm AOL WINS FAR REACHING IM PATENT It was reported in December that AOL Time Warner was issued Patent No. 6,449,344 in September, covering much of the technology behind instant messaging services. The patent contains more than 200 claims that give AOL exclusive rights to a "communications system for facilitating locating a user who is connected to a communications network, preferably for the purposes of establishing point-to-point communications." The application for the patent was filed in 1997 by Mirabilis, the Israeli firm that invented the popular ICQ IM system that later was acquired by America Online, at which point ownership of the patent application transferred to AOL. AOL Time Warner could now potentially reach licensing deals with other IM providers that want to continue using the technology, or it could file patent-infringement suits. The company said it hasn't made any decisions on how to exercise its patent rights. Some of the elements of an instant-messaging system protected by AOL's patent include the ability to detect another user's online availability, the concept of the buddy list, the ability to shield one's presence from particular users, and the practice of notifying users when members of their buddy lists log on or off. The patent may be found by entering the patent number (6,449,344) at http://patft.uspto.gov/netahtml/search-bool.html U.S. COURT TOSSES LIBEL SUIT: NO JURISDICTION On December 13th, the 4th Circuit Court of Appeals ruled that two Connecticut newspapers could nott be sued for libel in a Virginia court on the basis of allegedly defamatory articles posted on their Web sites. The decision came down less than a week after Australia’s high court decided a similar case and issued a ruling that an American publisher could be sued for libel in Australia if the libelous content appeared there and caused harm there. In the Virginia case, a three-judge panel unanimously dismissed a Virginia prison warden’s suit against The Hartford Courant and The New Haven Advocate. The court said the key question was whether the newspapers intended "to direct their Web site content, which included certain articles discussing conditions in a Virginia prison, to a Virginia audience," and concluded that they did not. The court ruled that the papers' Web sites were aimed at a Connecticut audience. The papers had published a series of articles and columns on the state's controversial practice of transferring inmates from overcrowded prisons to a prison in Big Stone Gap, Va. Though Warden Stanley Young was not mentioned, his prison was criticized roundly. Young claimed the coverage was defamatory and sued the newspapers, their editors and the reporters in Virginia. The decision may be found at http://pacer.ca4.uscourts.gov/opinion.pdf/012340.P.pdf FEDS BUST MUSIC PIRACY RING Agents from the U.S. Secret Service and record industry investigators raided a New York operation in what they said was the largest seizure of music piracy equipment in the U.S. The Recording Industry Association of America said that approximately 35,000 pirated CDs, 10,000 DVDs and the equivalent of 421 CD burners were confiscated. Three people were arrested in the December 11th raid in the Queens area of New York City and charged with trafficking in counterfeit labels and criminal copyright infringement. The RIAA said that the pirates had the potential to cost the industry some $90 million a year. Further information may be found at http://www.riaa.org/PR_Story.cfm?id=592 NOT GUILTY VERDICT IN ELCOMSOFT CASE On December 17th, a federal jury in California acquitted the Russian software company ElcomSoft of criminal copyright charges brought after it sold a program that can crack antipiracy protections on electronic books. The suit was brought under the provisions of the Digital Millennium Copyright Act (DMCA), a controversial law designed to extend copyright protections into the electronic age. The company faced four charges related to directly designing and marketing software that could be used to crack eBook copyright protections, plus an additional conspiracy charge. The jury acquitted the company of all charges. Jury foreman Dennis Strader said the jurors agreed ElcomSoft's product was illegal but acquitted the company because they believed the company didn't mean to violate the law. Because both the defense and prosecution agreed that ElcomSoft sold software designed to crack copyright protections, the case turned on ElcomSoft's state of mind while it was offering the software. Further information may be found at http://www.bayarea.com/mld/mercurynews/business/4764685htm AOL AWARDED NEARLY $7 MILLION AGAINST SPAMMER On December 16th, a Virginia federal court awarded America Online nearly $7 million against a spamming company. The decision was handed down on October 25th in the U.S. District Court of the Eastern District of Virginia, but the documents in the case had been sealed until recently. CN Productions and its owner, Jay Nelson, had been charged with sending unsolicited and deceptive e-mail to AOL members for more than four years. The ruling is one of the first in which damages were awarded under an amended Virginia antispam statute, which mandates that offenders pay $25,000 for each day of sending junk mail in violation of the rule. This is the largest award yet for AOL in its ongoing battle against spammers. AOL was awarded the damages after CN Productions violated a court injunction set in 1999 barring it from sending AOL members deceptive, unsolicited e-mail, which accounted for up to 25 percent of the bulk mail sent through AOL. AOL had originally filed suit against CN in 1998 and won a permanent injunction against the defendant a year later. Further information may be found at http://zdnet.com.com/2102-1106-978019.html ICANN APPROVES NEW TOP LEVEL DOMAIN NAMES On December 15th, the Internet Corporation for Assigned Names and Numbers (ICANN) unanimously approved a proposal to introduce a limited number of top-level domain names. The new domains will probably be reserved for specific industries or professions. ICANN did not stipulate how many new domains would be implemented and no timeline was set for making the new domains available. With respect to governance reforms, the ICANN board will remove seats now occupied by board members who won Internet-wide elections, as part of a general reorganization. The move is designed to restore harmony to the controversial current governance, but critics of the plan say it would cut the public out of Internet policy decision-making. The board instead will create an advisory council to encourage organized public participation in Internet management. Documents from ICANN’s Committee on ICANN Evolution and Reform may be found at http://www.icann.org/committees/evol-reform/links.htm RANDOM HOUSE AND ROSETTABOOKS SETTLE SUIT Random House has settled a lawsuit against e-book publisher RosettaBooks, which was selling digital versions of Kurt Vonnegut's "Cat's Cradle" and seven other popular titles. Under the terms of the settlement, announced on December 4th, there is no financial payment by either party. The parties have agreed to enter into licensing agreements in which Random House will grant to RosettaBooks the exclusive rights to publish e-book editions of mutually agreed-upon titles. For each of the titles it publishes, RosettaBooks will pay an advance and a royalty to the authors and the publisher. Each electronic license will be for three years, with RosettaBooks having the option to renew for an additional three years. The settlement leaves unresolved the issue of whether authors or publishers control e-rights to books when the contract has no specific language about the electronic format. Further information may be found at http://www.rosettabooks.com/pages/RB_RH_Release.html UK: COURT RULES ON NET GAMING PATENT JURISDICTION A United Kingdom Court of Appeal upheld the lower court’s decision in Menashe Business Mercantile v. William Hill, a closely watched case involving the jurisdictional reach of an interactive gaming patent. William Hill, a well-known bookmaking firm, argued that its server was located outside the UK and therefore the plaintiff’s patent was unenforceable against it. The appellate court held that it did not matter where the server was located. Moreover, the court found that the relevant issue was where the gaming system was being used, which it held was at the location of the bettor in the UK. The decision in the case may be found at http://www.bailii.org/ew/cases/EWCA/Civ/2002/1702.html VA JUDGE RULES THAT E-MAIL MEETING VIOLATES FOIA On December 13th, Fredericksburg Circuit Court Judge John W. Scott, Jr. ruled that a series of e-mails between three City Council members discussing committee assignments constituted a "meeting" under the Virginia Freedom of Information Act. Accordingly, he found that the meeting, which was designed to reach consensus among the participating parties, was held in violation of FOIA’s prohibition against non-public meetings except in special circumstances. Two other "e-mail meeting" counts were dismissed because the judge found that the e-mails in question were for purposes of information gathering rather than making decisions. Further information may be found at http://fredericksburg.com/News/FLS/2002/122002/12132002/1039803800 CNN WINS LARGEST UDRP CASE On December 16th, Cable News Network (CNN) successfully obtained the transfer of 325 domain names containing the CNN trademark, the largest ever ICANN Uniform Domain Name Dispute Resolution Policy decision. The three-member National Arbitration Forum panel ruled that the Channel News Network used the sites to take advantage of consumer confusion over the domains. The decision may be found at http://www.arb-forum.com/domains/decisions/117876.htm UK CHILD PORN RAID NETS DOZENS OF ARRESTS The largest crackdown against child pornography by London police took place on December 16th as part of a national initiative against users of Internet pedophilia sites. As part of Operation Ore, more than 1300 arrests were made throughout the United Kingdom, including 50 police officers, as part of the crackdown. The nine-month-old probe identified some 7,000 suspects. Further information may be found at http://ca.news.yahoo.com/021217/5/qwcr.html W3C RELEASES FINAL DISABILITY GUIDELINES On December 17th, the World Wide Web Consortium released final guidelines for building browsers and media players that would work better for people with disabilities. The guidelines are part of a five-year project designed to enhance web accessibility. They urge designers to make a number of accommodations for disabled users. For example, the guidelines suggest that designers make commands executable through the keyboard, as well as the mouse. The guidelines ask that designers make their applications work smoothly with so-called assistive technologies, like screen readers or refreshable Braille output. The guidelines may be found at http://www.w3.org/TR/2002/REC-UAAG10-20021217/ STUDENT SUSPENDED FOR WEB SITE GETS COURT VICTORY In late November, U.S. District Judge Patrick Duggan ruled that the Waterford School District violated a student’s right to free speech and due process when it suspended him for posting "intimidation and threats" on the Internet. According to the student’s attorney, he was suspended after a hearing in which he wasn't allowed to cross-examine witnesses and could not be represented by an attorney. A portion of the student’s site (known as Satan’s Web page) read: "Stab someone for no reason then set them on fire throw them off of a cliff, watch them suffer and with their last breath, just before everything goes black, spit on their face." The site applauded drug use and encouraged viewers to wreak as much havoc as possible, including raping people and joining the Ku Klux Klan. It included lists of people the creators thought were cool and another of "people I wish were dead." There were disclaimers on the site, saying it was just for fun. It also warned users not to go out killing people and then blaming the authors of the site. Further information may be found at http://www.washingtonpost.com/wp-dyn/articles/A19744-2002Dec20.html SUN WINS LATEST ROUND AGAINST MICROSOFT On December 23rd, U.S. District Judge J. Frederick Motz ruled that Microsoft must include Sun’s version of Java with its Windows operating system. The ruling is part of ongoing litigation that Sun is waging against Microsoft, alleging that it violated antitrust laws in its efforts to halt market acceptance of Sun's Java platform. In a preliminary injunction, Judge J. Frederick Motz found that Microsoft deliberately engaged in conduct to undermine Java's cross-platform interoperability. "Though pretending to embrace the goal of compatibility, Microsoft intentionally took steps to defeat that goal," Motz wrote. Motz said the ruling is designed to "prevent Microsoft from obtaining future advantage from its past wrongs and to correct the distortion in the marketplace that its violations of the antitrust laws have caused." Microsoft said it would appeal the decision. The opinion in the case may be found at http://www.mdd.uscourts.gov/Opinions152/Opinions/SunPI1202.pdf Copyright ©  2001 Nelson & Wolfe/Sensei Enterprises, Inc. All rights reserved.