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databases as intellectual property
``` [See particularly the article about the EU Databases Directive and the implementation of "sui generis" database protection in Austria.]
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Date: Fri, 13 Feb 1998 10:44:17 +0200
From: "William S. Galkin"
=========================================== INTERNATIONAL COMPUTER LAW OBSERVER February, 1998 -- No.3 ===========================================
PLEASE FREELY REDISTRIBUTE THIS ISSUE!!
The International Computer Law Observer (ICLO) is an e-mail report providing monthly coverage of significant legal developments from around the world relating to computers, technology and the Internet. Back issues and a listing of the Editorial Board can be found at http://www.lawcircle.com/observer . The Editor-in-Chief, William S. Galkin, Esq., is with the firm of Meitar Littman & Co., located in Ramat Gan, Israel, and can be reached for comments at wgalkin@lawcircle.com .
To subscribe to the ICLO, simply send an e-mail message to listserv@maelstrom.stjohns.edu with the words "subscribe lawobserver" (without the quotation marks) typed into the message area. To unsubscribe, follow the same procedure, substituting the word "unsubscribe."
======== CONTENTS ========
---Australia--- AUSTRALIAN HIGH COURT INTRODUCES MEDIUM NEUTRAL CITATION SYSTEM AND PARAGRAPH NUMBERING
---Austria--- AUSTRIA IMPLEMENTS DATABASES DIRECTIVE
---Canada--- CANADIAN FEDERAL TASK FORCE WARNS OF YEAR 2000 COMPUTER PROBLEM
---Netherlands--- NEW COMPETITION ACT IN THE NETHERLANDS; MERGER CONTROL
---New Zealand--- INJUNCTION THREAT TO ON-LINE AUCTION
---South Africa--- NO SINGLE ENTITY WILL HAVE EXCLUSIVITY OVER INTERNET ACCESS
---Spain--- A JUDGE ODERS OZU.COM TO STOP USING DOMAIN NAME
---Switzerland--- SWISS ISSUING OFFICE FOR INTERNET CERTIFICATES ESTABLISHED
---United States--- US COURTS ARE TO REVIEW ARBITRATION AWARDS UNDER THE STANDARDS CHOSEN BY THE PARTIES
SOFTWARE PUBLISHERS VINDICATED UNDER CALIFORNIA BUSINESS AND PROFESSIONS CODE
DOC DOMAIN NAME "PRIVATIZATION" PROPOSAL
MICROSOFT SETTLEMENT ENDS CONTEMPT CHARGES
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AUSTRALIA
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[BOTTOM LINE] AUSTRALIAN HIGH COURT INTRODUCES MEDIUM NEUTRAL CITATION SYSTEM AND PARAGRAPH NUMBERING
[WHAT HAPPENED] The High Court of Australia has announced it will incorporate paragraph numbers into the body of judgments from the delivery of the first judgment in 1998. Coupled with this initiative the court will allow the citation of decisions in a new "medium neutral" way.
[WHY IT HAPPENED] Traditional methods of numbering and citing court judgments have significantly reduced the usefulness of unpublished electronic judgments. The current changes have been put in place to overcome two related problems associated with the use of traditional methods of citation in an electronic medium.
The first problem stems from the way page numbers are handled in most electronic files. In an electronic medium page numbering cannot generally be fixed. The resultant page numbers vary according to the software used to view and print the document. Similarly, on the internet, court decisions do not have page numbers but appear as a single continuous page of text.
Without page numbers and an "approve" method of citation, the potential use of a judgment in electronic form on the internet is limited for practitioners, users. and the courts. Practitioners are unable to meaningfully cite unpublished judgments found on the internet without a consistent method to pinpoint citation to specific locations within a judgment. Similarly, the inability of the court to consistently reproduce a judgment in electronic form, has prevented the court from proceeding with initiatives such as the introduction of electronic appeal books. As a result the need arose for the development of an alternative numbering system for court judgments that was both suited to traditionally printed documents as well as documents held in an electronic medium.
The decision by the High Court to incorporate paragraph numbers within court decisions, rather than page numbers, is a real solution to these problems. Unlike page numbers, paragraph numbers are embedded in the body of the document and remain visible regardless of the file format or software used to view the document. A specific location in a judgment can then be referred to regardless of whether the judgment is produced in traditional paper form or in electronic form.
The second problem addressed by the High Court's initiative is that of finding a valuable method of citing electronic unpublished judgments. To be of real value the electronic version of a decision must be able to be cited in a medium neutral and publisher neutral way. The new citation system enhances publisher and medium neutrality as it refers to a unique court identifier, rather than an approved published law reporter. Regardless of source or medium, the citation of a judgment will be the same.
The High Court's approved citation system is based on the following format:
(the parties)the year(the sequential number of the judgment)
For example, the 99th decision of 1998 might appear as: Smith v Jones [1998] HCA 99 at 17 (paragraph number)
This initiative is of great significance as unpublished judgments on the internet can now be cited to the Australian High Court.
The new citation system is designed to operate in conjunction with, not in lieu of, traditional citation methods. Courts will continue to rely on commercial legal publishers to identify important cases and traditional printed reports and citation methods will continue to operate alongside the medium neutral system.
[THE SIGNIFICANCE] The debate over the merits of incorporating paragraph numbers within court decisions and the application of a medium neutral citation system has been ongoing both in Australia and in the United States and Canada. In August 1996, the American Bar Association (ABA) approved a resolution made by its Special Committee on Citation Issues, which recommended that all US jurisdictions adopt a medium neutral citation system for both paper and electronic court decisions. Additionally, the Committee recommended that each court number the paragraphs in their decisions.
The incorporation of paragraph numbers within the body of judgments, coupled with the development of a truly medium neutral and vendor neutral citation system, has significantly enhanced the functionality and legitimacy of electronic court decisions in Australia. For the first time, court decisions can be placed immediately in the public domain and consistently cited regardless of the medium in which they are presented or the publisher of the decision.
[CONTRIBUTING EDITOR] Gilbert & Tobin - Contact: Simon Pollard spollard@gtlaw.com.au
[INFORMATION SOURCES] http://www.fl.asn.au/speeches/eli/paper.html http://www.hcourt.gov.au/medium.html
---
AUSTRIA
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[BOTTOM LINE] AUSTRIA IMPLEMENTS DATABASES DIRECTIVE
[WHAT HAPPENED] In the last days of December 1997 the Austrian Parliament enacted an implementation of the EC-Databases Directive amending the Austrian Copyright Act. The act entered into force on 1 January 1998. The implementation act consists of an amendment of the Copyright Act modifying the copyright protection already afforded to original databases and providing for protection of non-original databases by introducing a "sui generis" right of protection.
[WHY IT HAPPENED] The EC-Databases Directive compels the memberstates to protect electronic and non-electronic databases according to their qualities in different ways: Databases constituting the author's own intellectual creation by reason of the selection and arrangement of their contents shall be protected by copyright like other works as well. Databases not qualifying for this protection shall be protected by a "sui generis" right, if the obtaining, verification or presentation of their contents was due to a substantial investment, consisting of money or labour. This right is afforded to the "maker" of the database, the person or entity who made the substantial investment. While databases constituting copyright works were protected in the member states before the enactment of the Databases Directive as well, the situation concerning the non-creative databases differed in the various European jurisdictions.
Both the copyright protection and the "sui generis" protection are afforded to databases independently from each other, with the result that a data base can be protected by either of these rights or by both of them. Thus, an original database produced with substantial investment, is protected by both rights.
The Austrian implementation act provides for copyright in databases in a similar way as for such rights in computer programs: As the concept of a "work made for hire" does not exist in Austrian copyright law, as a general rule, works created by employees do not become the intellectual property of the employer, but remain with the employees. Thus, in any case the owner of the copyright will be the employee, but the employer can contract, also in advance, for an exclusive licence to exploit the work. This will in fact transfer the economic value of the work to the employer, while the employee retains certain moral rights. As computer programs and databases are concerned, such a licence to exclusively exploit the work is granted to the employer by operation of law, unless the parties agree otherwise. Therefore, in effect the marketable product accrues to the employer.
The sui generis right is always vested in the person or entity making the investment. Thus, if a database qualifying for this protection, is produced by an employee, the sui generis right will be owned by the employer being the one who made the investment.
In case a database is an original work and also constitutes a substantial investment, the copyright and the sui generis right may conflict as the author may be different from the maker and the licence by operation of law is not granted as the author is not an employee in the strict sense of the maker, but e.g. a free-lance or an independent contractor.
[THE SIGNIFICANCE] The practical consequence of the implementation of the Database Directive is that the commercial producers of databases will have better remedies against the copying of such. In order to ascertain the underlying rights and to prevent the emergence of conflicting rights, the producer is well advised to enter into written contracts governing the rights in the database with all contractor he might employ.
The implementation of the Databases Directive is a further step of harmonisation of copyright law and relating rights within the European Union. Its effect on the European computer and communication industry remains to be seen. The European Commission feels that the harmonisation of this field of law fosters the operation of the internal market as databases are concerned.
[SOURCE OF INFORMATION] For the text of Databases Directive see: http://www2.echo.lu/legal/en/ipr/database.html
CONTRIBUTING EDITOR] Dorda, Brugger & Jordis - Contact: Winfried Schwarz dbj@aon.at
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CANADA
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[BOTTOM LINE] CANADIAN FEDERAL TASK FORCE WARNS OF YEAR 2000 COMPUTER PROBLEM
[WHAT HAPPENED] The Federal Government has organized a task force comprised of chief executives from a number of Canada's largest companies. The mandate of the task force is to prepare a report on the preparedness of business on the Year 2000 issue and to increase awareness of the Year 2000 issues facing Canadian business.
[WHY IT HAPPENED] The Year 2000 problem is a programming design flaw in some software, hardware and microchips which could cause havoc with computer systems when the date changes from 1999 to 2000. For example, the year 1998 would be entered as "98" rather than as "1998" which was generally done in order to save expensive computer memory space. Although the cost of storing data is not as big an issue today, a large number of these older systems are still operational.
The Year 2000 problem can result in two major areas of concern. The first is that computers may crash because they are unable to compute the date and the second is that the computer will mistakenly think the date is 1900 as it will not be able to comprehend the number 2000.
[THE SIGNIFICANCE] While the Year 2000 problem is gaining awareness, an increasing number of Canadian businesses are not taking steps to identify and fix the problem. Statistics Canada conducted a recent survey which indicated that of the 2000 companies surveyed, 90 percent were aware of the problem but 50 percent were not doing anything about it.
The Year 2000 problem could impact computer systems involved in transportation, inventory control, banking, data processing and many others systems that are unable to deal with a four digit date. The disruption or impact on a companies business could result from not only a companies own computer system but also from a failure by the companies suppliers to deal with the problem effectively.
In addition to the practical issues associated with a computer failure due to the Year 2000 problem there is the potential for the problem to generate legal activity. Not only are there risks of lawsuits between companies and suppliers for damages, there is significant potential liability for public company directors, particularly in those Canadian jurisdictions that allow class action lawsuits.
The following information sources reference a great deal of information on the Year 2000 problem including checklists for internal risk analysis and practical suggestions on dealing with suppliers.
[INFORMATION SOURCES] http://strategis.ic.gc.ca/SSG/it04370e.html (Federal government information) or http://www.year2000.com (year 2000 information) http://www.y2k.com (year 2000 information)
[Contributing Editor] Russell & DuMoulin attention: James Mutter - e-mail: jzm@rdcounsel.com
---
NETHERLANDS
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[BOTTOM LINE] NEW COMPETITION ACT IN THE NETHERLANDS; MERGER CONTROL
[WHAT HAPPENED]On January 1, 1998 a new Competition Act will enter into force in the Netherlands. This act largely mirrors European Competition law laid down in articles 85 and 86. One of the major changes which this will entail -apart from a prohibition of anti-competitive agreements and abuse of a dominant position- is that the newly established Netherlands Competition Authority (the "NMA") will have to give prior permission for mergers, takeovers and joint ventures of a certain size ("merger control"). This is also of particular importance for the information technology sector, where mergers seem to be happening on an almost daily basis.
A concentration will fall within the scope of the Act if:
[THE SIGNIFICANCE] All concentrations to which the Act applies must be notified to the NMA and may in principle not be realized without a permit. After notification, the NMA has a period of four weeks within which to decide whether a permit is required in order to effect the concentration. This will be the case if in the opinion of the NMA it cannot be ruled out that the concentration will give rise to a dominant position which could significantly impede competition within the Dutch market or any part thereof.
If the NMA decides that a permit is required an application for such permit must be submitted, initiating a further investigation period of thirteen weeks. Within this thirteen weeks period, the NMA must decide whether the permit will be granted. The NMA may attach certain conditions to the permit, such as changes to parts of the intended transaction.
Breach of the obligation to notify or obtain a permit results in a void transaction, which means that the concentration and all effects thereof must be reversed. In addition, the NMA can impose administrative sanctions, such as penalties up to a maximum amount of NLG 50,000.
It may be presumed that notification of a concentration will in general take place at the time at which the parties have reached agreement in principle and when (if required) notification is also effected under the SER Merger Code and advice is requested from the relevant works councils. Having regard to the periods mentioned above, it is to be recommended that sufficient time be reserved for the procedure with the NMA.
[INFORMATION SOURCES]Weyer Verloren van Themaat, The Dutch Competition Act of May 22, 1997, European Competition Law Review [1997/6], p. 344,(for information regarding the ECLR: http://www.smlawpub.co.uk/journal/elr/index.html); New Dutch Competition Act, Culture Shock in the Netherlands, Global Competition Review, December 1997/January 1998
[CONTRIBUTING EDITOR] Nauta Dutilh - Ruprecht Hermans hermanr@ams.nautadutilh.nl
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NEW ZEALAND
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[BOTTOM LINE] INJUNCTION THREAT TO ON-LINE AUCTION
[WHAT HAPPENED]Towards the end of 1997 the New Zealand Government announced plans to auction off its 26 GHz broadband radio spectrum over the internet. This valuable frequency can deliver high speed internet access and high-definition digital TV over cellular networks.
BellSouth applied for an injunction to delay the auction which was planned for December 1997 on the basis that insufficient notice had been given and that potential bidders did not have enough time to prepare their bids. Before the injunction could be ordered, the New Zealand Government postponed it for what it said were technical reasons.
Those technical reason are now said to have been addressed and the auction hit the internet on 24 February 1998.
[WHY IT HAPPENED] BellSouth's action indicates the value that Telcos attach to bandwidth. Legal means are being adopted to protect commercial interests in the technology arena.
[THE SIGNIFICANCE] The on-line auction is said to be a world first. But the significance in the action threatened by BellSouth is that it clearly indicates recognition of the importance that a number of players are placing on the ability to deliver high speed and high definition data. It also shows that there are old tools to be used in a new way to protect new and emerging commercial interests in the technology arena, which is a trend predicted to continue.
[INFORMATION SOURCES] Details of the auction can be viewed at www.moc.govt.nz/rsm/auction.
[CONTRIBUTING EDITOR] Russell McVeagh McKenzie Bartleet & Co Contact: Mike Cronin mxc@rmmb.co.nz
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SOUTH AFRICA
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[BOTTOM LINE] NO SINGLE ENTITY WILL HAVE EXCLUSIVITY OVER INTERNET ACCESS
[WHAT HAPPENED] On 14 October 1997 the South African Telecommunications Regulatory Authority (SATRA), established under the Telecommunications Act of 1996 ("the Act"), handed down a ruling that Internet Protocol is to be provided under a Value Added Network Services (VANS) licence. The effect of this is that the provision of Internet access does not fall within the exclusive rights granted to the South African telco Telkom SA Limited ("Telkom") under the Act, to provide Public Switched telecommunications Services (PSTS). Accordingly, Telkom has not been granted a monopoly on the provision of internet access under the Act, and internet access falls within the competitive domain.
[WHY IT HAPPENED] The debate over who should control Internet Protocol in South Africa has been a vexed one. It started in 1996 when the Internet Service Provider's Association (Ispa) lodged a complaint with the Competition Board. Ispa alleged that Telkom was engaged in anti-competitive practices, including cross-subsidisation, predatory pricing and abuse of its privileged access to the national telecommunications network. Telkom subsequently refused to submit itself to a Competition Board probe into the activities of its internet arms - wholesaler South African Internet Exchange (SAIX) and dial-up company Intekom. The dispute was transferred to SATRA after Telkom demanded an exclusive right to provide internet access, effectively postponing the investigation into its competitive practices.
[THE SIGNIFICANCE] The ruling means that no single entity will have exclusivity over internet access in South Africa. Instead, SATRA has recommended that a collectively owned, but neutral, peering point be established. The primary objective of the common peering point is to require internet networks to interconnect, obviating the need to communicate locally via international gateways. This will keep South African traffic within the country and minimise the need for international bandwidth. Telkom has rejected the ruling, and launched an application in the Transvaal Provincial Division of the High Court of South Africa seeking to have the ruling overturned on three issues: that SATRA does not have the jurisdiction to make the pronouncement it did; that there were procedural irregularities and that the judgment was irregular. The application is being argued on 3 February 1998 and will be reported on in the next edition of the ICLO.
[INFORMATION SOURCES] See http://www.woza.co.za/, http://www.salaw.co.za/intlaw.htm, http://www.netassets.co.za/, Telkom S.A. Limited v Napa Maepe and 2 Others - Case Number 25840/97, High Court of South Africa, Transvaal Provincial Division.
[CONTRIBUTING EDITOR] Lance Michalson - Hofmeyr Herbstein Gihwala & Cluver Inc. Email: lbm@hofmeyr.co.za
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SPAIN
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[BOTTOM LINE] A JUDGE ODERS OZU.COM TO STOP USING DOMAIN NAME
[WHAT HAPPENED] A judge from Bilbao ordered a Spanish company, Ozucom, to stop using its domain name (http://www.ozu.com) as it could be a violation of the trademark rights of Madrid-based Advernet.
[WHY IT HAPPENED] The case was brought to court by Advernet, which registered the Ozu trademark in Spain, as it understands that Ozucom has no right to use the name Ozu for its domain name. Plaintiff and defendant used to work together in the USA providing one of the first Spanish websites directories under the domain Ozu.com. Later, the plaintiff created its own company in Spain, registered the Ozu trademark in Spain and the Ozu.es domain name. Now both have Spanish websites directories under similar domain names, Ozu.com and Ozu.es. Before the final sentence is ready, the judge has decided, in a judicial decree from December 30th, to establish protective measures in order to avoid "serious damages" to the plaintiff. Ozucom will have to stop using its domain name and Advernet will settle a Ptas. 1 Million (US$ 6,666) deposit.
[THE SIGNIFICANCE] One month later, the judicial decree has not yet been executed. As the judge admits, this decree has to be executed in the USA, where there could be different trademark regulations. Besides, Internic, the organisation in charge of .com domain names, has its own internal regulations. The case is made even harder by the fact that the defendant is not the same company that holds the Ozu.com domain name in the Internic registry, though its "administrative contact" is the same. This is actually the first judicial resolution involving domain names in Spain. Its final result could be a precedent for other judicial cases coming in the future because of the registration of domain names without the authorisation of the trademark owner.
[INFORMATION SOURCES] Domain names in Spain: http://www.purplesys.es/users/dibu Ozucom: http://www.ozu.com Advernet: http://www.ozu.es Internic: http://rs.internic.net
[CONTRIBUTING EDITOR] Jose A. del Moral- e-mail: berrinet@bigfoot.com
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SWITZERLAND
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[BOTTOM LINE] SWISS ISSUING OFFICE FOR INTERNET CERTIFICATES ESTABLISHED
[WHAT HAPPENED] December 18, 1997, Swisscom (http://www.swisscom.ch), Telekurs (http://www.telekurs.com) and DigiSigna (http://www.zurichcci.ch/serv04.htm) have established a joint venture called Swisskey (http://www.swisskey.com) that will start offering its services in the second quarter of 1998.
[WHY IT HAPPENED]Telebanking and teleshopping are two examples for the growing sector of electronic commerce. To solve the problem of identifying the partners that are involved in electronic transactions electronic certificates will allow users to be identified and texts to be signed digitally and encoded in such a way that only the recipient can read them.
[THE SIGNIFICANCE]The certificates will enable clear and secure mutual identification and thus lay the foundations for secure electronic commerce on the Internet.
[CONTRIBUTING EDITOR] - Contact: Fridolin M.R. Walther - e- mail: fridolin.walther@yale.edu - http://www.cx.unibe.ch/civpro/short.html
---UNITED STATES---
[BOTTOM LINE] US COURTS ARE TO REVIEW ARBITRATION AWARDS UNDER THE STANDARDS CHOSEN BY THE PARTIES
[WHAT HAPPENED] US District Court in California had refused to review an arbitral award under the review standards (substantial evidence and errors of law) agreed upon by the parties in their contract's arbitration clause, finding that it could review only under the standard set forth in the U.S. Federal Arbitration Act ("FAA") (manifest disregard of the law).
On appeal, in Lapine Technology v. Kyocera, the U.S. 9th Circuit Court of Appeals disagreed saying that the FAA was enacted was to ensure enforcement of private agreements to arbitrate in accordance with the agreements' terms. The Court said that the parties are generally free to structure their arbitration agreements as they see fit including the rules under which that arbitration will be conducted. This 9th Circuit panel stated its agreement with a 1995 decision by the 5th Circuit, Gateway Tech. v. MCI, which reached the same result.
The appellate panel also noted that, while the arbitration was contractually agreed to be held under the rules of the ICC which provide for finality of the arbitration award and waiver of judicial review, a contrary provision in the contract overrides those rules.
[WHY IT HAPPENED] The FAA was enacted to counter the historic unwillingness of the federal courts to enforce parties' agreements to arbitrate. It sets rules and standards for such review which this decision and others hold to be default standards only. (It should be noted that the FAA does not create jurisdiction for review of arbitral awards in the federal courts. The courts may review awards only if they would have had jurisdiction over the parties and the dispute absent arbitration.)
[THE SIGNIFICANCE] Parties to licenses and other contracts often are unsure about the type of judicial review they can obtain in the United States and may forego use of arbitration as a result. This appellate decision makes it clear that federal courts should honor whatever standard of review the parties agreed was best suited to their contract. In the absence of any agreement, the courts will apply the minimal standard of the FAA: that an award will be upheld unless (as the Supreme Court stated) it is "completely irrational."
[INFORMATION SOURCES]: For the 9th Circuit's Opinion in Lapine Technology Corp. v. Kyocera Corp., see: http://www.vcilp.org/Fed-Ct/Circuit/9th/opinions/9615319.htm For the 5th Circuit's Opinion in Gateway Tech. v. MCI, see: http://www.ca5.uscourts.gov/Opinions/Pub/93/1000/93-01101-cv0.htm
[CONTRIBUTING EDITOR] Chadbourne & Parke, Contact: Barry Nemmers barry.nemmers@chadbourne.com
---UNITED STATES---
[BOTTOM LINE] SOFTWARE PUBLISHERS VINDICATED UNDER CALIFORNIA BUSINESS AND PROFESSIONS CODE
[WHAT HAPPENED] On Friday, January 23, 1998, the San Francisco Superior Court, the Honorable Judge Ernest A. Goldsmith presiding, sustained the demurrers of nine software publisher defendants, and dismissed with prejudice a complaint alleging that the publishers had violated the provisions of California Business and Professionms Code Section 12606, California's slack-fill packaging statute, by selling software that was contained in boxes which were substantially larger than their contents. The dismissal order resolves two years of heavily contested litigation, which included claims against some of the best known consumer software publishers in the United States, including Mindscape, Corel Corporation, Xerox, Sierra On-Line and Vertisoft.
[WHY IT HAPPENED] In the United States, as all over the world, consumer software is sold on store shelves in boxes which contain the media on which the software resides (floppy disks or CD ROMs) and any related documentation. California, like most states, has a statute (B&P Code Section 12606) which prohibits the sale of packages which are substantially larger than their contents; these statutes are typically enacted as part of the legislature's attempt to control accurate weights and measures of commodities. These and similar other states' statutes were enacted in response to the Federal Fair Packaging and Labeling Act ("FPLA"), 15 U.S.C. 1451 et seq., and prohibit the sale of commodities in "slackfill" packaging (generally defined (at least under California law) as being a package which is substantially larger than its contents). Their purpose is to protect the consumer from misrepresentative or fraudulent packaging.
In 1996, Intervention Corporation sued 9 different software publishers in nine different actions, alleging that each had violated the terms of California's slackfill packaging statute. All 9 cases were ordered coordinated by the Chief Justice of the California Supreme Court, sitting in his capacity as head of the states Judicial Coordination Council.
The defendants moved to dismiss the complaints (by demurrer) on the ground that Section 12606 is a weights and measure statute, and that as such, it was never intended to be applied to products not sold by weight or measure, such as software. The defendants also pointed out that, in October 1997, the California state legislature had amended Section 12606 to expressly exempt software from its scope. The plaintiff argued that the amendment was not retroactive, and that in all events the exemption did not cover the defendants, since their packaging allegedly contained false side-walls or other "false" panels.
The Court sustained the defendants' demurrers, holding that Section 12606, in its original and amended forms, does not apply to consumer software.
[THE SIGNIFICANCE] Since the initation of this suit two years ago, numerous states and consumers groups have been watching this case to determine the extent to which the courts will subject consumer software to the sort of packaging limitations and constraints associated with consumer products that are sold be weight or other "measure." Since all states have these slack-fill statutes, the consumer software industry has been concerned that overzealous attorneys general or others will use these statutes to assess civil fines or damages against publishers of these allegedly "oversize" boxes. The order issued in this case will in all likelihood severely affect the future of such suits.
[INFORMATION SOURCES] The San Francisco Recorder, Monday, January 26, 1998, page 3; or contact "recorder@counsel.com." [In re Intervention Corporation Cases, San Francisco Superior Court, Judicial Council Coordination Proceeding No. 4006, Friday, January 23, 1998.]
[CONTRIBUTING EDITOR] Fenwick & West - Claude Stern CMS@fwpa.com
---UNITED STATES---
[BOTTOM LINE] DOC DOMAIN NAME "PRIVATIZATION" PROPOSAL
[WHAT HAPPENED] On January 30, 1998, the U.S. Department of Commerce (DOC) released a draft proposal to privatize the management of Internet names and addresses through the creation of a new, not-for-profit, private U.S. corporation with a board of directors from around the world. The new corporation would (1) set policy for and direct the allocation of number blocks to regional number registries for the assignment of Internet addresses; (2) oversee operation of an authoritative root server system; (3) set policy for determining the circumstances under which new top-level domains are added to the root system; and (4) coordinate development of other technical protocol parameters as needed to maintain universal connectivity on the Internet.
By September 30, 1998, the new corporation is expected to assume the operational responsibilities of the Internet Assigned Number Authority (IANA), currently performed by the Information Sciences Institute at the University of Southern California, as well as management of the root system and appropriate databases, which Network Solutions, Inc. currently operates under a five-year agreement with the National Science Foundation. To assure stability, the U.S. government, coordinated by the DOC, will engage in policy oversight with a gradual phase out of their participation of no later than September 30, 2000. The new corporation is expected to be funded by domain name registries and regional IP registries.
The DOC strongly supports making domain name registration competitive and market driven. The DOC also supports "limited experimentation" with competing registries. During transition to private management, the DOC intends to permit the addition of up to five new registries limited to single, top-level domains, to create competition among registries while limiting any destabilization of the Internet. Ultimately, the DOC expects to create competition among different generic top-level domains (gTLDs) and among registrars competing to register clients into the top-level domains. Note that administration of existing national registries will continue to be the same unless changed by the registries administering them or their national governments.
Ultimately, NSI must separate and maintain a clear division between its registry and registrar business. NSI is expected to continue to operate the .com, .net and .org domain names on a fully shared-registry basis and to transfer .edu to a not-for-profit entity. All registries and registrars, including NSI, will be expected to comply with certain requirements proposed in Appendix 1 of the draft proposal.
To respond to concerns about trademark/domain name disputes and to ensure transparency and guarantee a dispute resolution mechanism with resort to a court system, DOC is recommending that each name registry must establish minimum dispute resolution and other procedures as proposed in Appendix 2 of the draft proposal. Registries could establish additional trademark protection and dispute resolution mechanisms beyond those minimums as a form of competition. DOC also proposes that a study be performed on the effects of adding new gTLDs and related dispute resolution procedures on trademark and intellectual property right holders. DOC also proposes that registries must indemnify the new corporation for costs incurred in connection with trademark disputes.
[WHY IT HAPPENED] The Internet was primarily developed through investments by the U.S. government through the Defense Advanced Research Projects Agency, the National Science Foundation, and other U.S. agencies. Recently, the Internet has rapidly become a global medium for communications and commercial commerce. With this change, the U.S. government no longer believes it appropriate to fund the Internet; industry is clamoring for competition in domain name registration, for more accountability in adding new top-level domains, and for a more formal, stable Internet management structure; and finally, Internet participants beyond the boundaries of the United States would like to be able to have more input regarding the structure of the Internet.
Correspondingly, in July of 1997, the Clinton Administration released the "Framework for Global Electronic Commerce" which directed the Department of Commerce to examine methods to privatize, increase competition in and promote international participation in the domain name system. The DOC promptly issued a Request for Comments, received 403 comments, and drafted the proposed rule released in January of 1998.
[THE SIGNIFICANCE] The U.S. Government has taken a significant step to remove itself from management and supervision of the Internet and to address concerns about registries, registrars and trademark disputes. At least on the surface, DOC's proposal is intended to be pro-competitive and responsive to market-place concerns. However, many industry participants are dissatisfied with the idea of setting up a new monopoly that may be even less accountable to the international public and that actually, under the guise of encouraging Internet stability, be even more regulatory. Congress is also interested in examining the issue of domain names and is expected to hold hearings later this year, especially in the area of trademark protection. Ultimately, this draft proposal moves the debate forward quickly and will most likely be the framework for the final solution, unless others in industry or involved in Internet issues elsewhere can either propose an alternative workable solution with strong industry-wide support or use political pressure to delay the Administration from taking action.
[INFORMATION SOURCES] DOC's "A Proposal to Improve Technical Management of Internet Names and Addresses Discussion Draft 1/30/98", comments on the Discussion Draft, DOC's July 1997 Request for Comments, as well as the 430 comments received on the RFC may be obtained from DOC's National Telecommunications and Information Administration's Website (http://www.ntia.doc.gov). In February or March, the Federal Register (http://www.access.gpo.gov/su_docs/aces/aces140.html) will publish the proposed rule and establish the official deadline for the acceptance of public comment on the proposed rule. For additional commentary, see Internet Domain Names Privatization, Competition and Freedom of Expression (http://www.cato.org/pubs/briefs/bp-033.html) and IAHC/POC/CORE/ITU/ISOC/WIPO Memorandum of Understanding (http://www.gtld-mou.org/).
[CONTRIBUTING EDITOR] Preston Gates Ellis & Rouvelas Meeds - Contact: Amy Carlson amyc@prestongates.com.
---UNITED STATES---
[BOTTOM LINE] Microsoft Settlement Ends Contempt Charges
[WHAT HAPPENED] On January 22, 1998, the Department of Justice (DOJ) and Microsoft announced that a settlement had been reached on the allegations that Microsoft had willfully violated the court's order to remove a pre-installed version of Internet Explorer web browser (the "IE Browser") from Microsoft Windows 95 by offering an inoperable version of the software. Under the terms of the settlement, Microsoft has agreed to immediately provide its Original Equipment Manufacturers (OEMs) with the most current version of Windows 95 without the Internet Explorer desktop icon. The settlement would also permit OEMs to offer a version of Windows 95 that does not have the IE Browser pre-installed. Microsoft is now offering OEMs two new licensing choices: One is to offer Windows 95 after the Add/Remove utility of the operating system has removed the IE icon and various files. The other is to remove only the IE icon from the software. The DOJ called the decision a victory for the government, stating that competing products would now have the ability to compete on their own merits. Microsoft stated that the settlement terms allow it to comply with the court order while preserving full internet accessibility in Windows 95.
[WHY IT HAPPENED] In a petition filed in October 1997, the DOJ had requested that Microsoft be required to remove all IE files which were bundled with every version of Windows 95, and to inform end users of the product how to remove IE from their computer's operating system. Microsoft's argument was that the IE files were an "integral" portion of the operating system, and their removal would cause the software to become inoperative.
[THE SIGNIFICANCE] By agreeing to settle, Microsoft has successfully avoided contempt charges . Although the removal of IE files from Windows 95 could represent a victory for Microsoft competitors, the real battle will be centered around Windows 98, due to be released in the second quarter of 1998. At issue is whether the 1995 consent decree's language with respect to "successor versions" of Windows 95 also applies to Windows 98. If it does, it could delay the product's release, since it is rumored that Window 98 integrates the IE functions into the operating system to a greater degree than Windows 95.
Microsoft appealed the court's preliminary injunction, but the underlying injunction still remains in place. The issues raised by the injunction were obscured by the contempt petition, but address important questions, such as whether IE is a "separate product" under antitrust law, and the legal significance of integrating such a separate product into the operating system. Although at present it appears that web browsing software is a different product than operating system software, the software market changes rapidly, and that distinction may no longer be valid in the near future. Many features that are today considered an integral part of operating system software were once sold as separate products, such as screen savers and file editors. It is also unclear whether Microsoft can produce two versions of Windows 98, one which contains the IE files and one without the files. However, since Microsoft has now established a precedent that they can deliver operating system software without the IE files, it may be difficult for them to convince a judge that they cannot deliver such a system in future with Windows 98.
[INFORMATION SOURCES] For a full text of the settlement, see http://www.news.com/SpecialFeatures/0,5,18396,00.html.
[CONTRIBUTING EDITOR] Asymetrix - Contact: Diana Jimenez dianaj@Asymetrix.com ```
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