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Intellectual Property
Vonage Makes Bid For A New Trial In Verizon Spat
by Andrew Noyes
Internet telephone company Vonage on Wednesday filed its final round of paperwork in a patent-infringement case brought by Verizon Communications. The company's 36-page reply brief to the Federal Circuit Court of Appeals came three weeks before oral arguments are slated to begin.
Verizon sued Vonage last year alleging the firm infringed seven patents. But prior to trial, two claims were dropped. Of the five that remained, the court ruled favorably for Vonage on two claims and left three to be fought over in the appeals court. In April, the court set an expedited schedule for reviewing the case.
In its brief, Vonage asked the court for a new trial because it said it believes the district court erred in its original decision. The company also argued that the Supreme Court's recent ruling in KSR International v. Teleflex, which changed the patenting process's "obviousness" standard, could have changed the case's outcome.
The appeals court denied an earlier retrial request made by Vonage in the wake of the KSR ruling. Analysts with the investment firm Stifel Nicolaus said at the time that they believed Vonage had "not yet made a sufficient argument to justify a new trial."
In Verizon's most recent filing in April, it urged the court to reject Vonage's obviousness challenge, saying KSR did not give the firm "a second bite at the apple." The high-profile Supreme Court case "could not reasonably have blind-sided Vonage," Verizon said.
The high court agreed to hear the case involving rival automobile gas-pedal manufacturers in June 2006 -- about the same time Verizon filed its suit against Vonage. KSR "was fully briefed and argued well before the trial in this case," Verizon said.
Meanwhile, Vonage Chairman Jeffrey Citron told shareholders during a conference call on Tuesday that his company is confident it will overcome the patent spat. Workarounds for two contested patents have been created and a third is in the works, he said.
The already formulated fixes pertain to a pair of patents that would impact an Internet-based phone service's ability to provide features like call waiting and caller identification for transmissions over the public switched telephone network and the public packet data network.
The infringement claim that does not yet have a workaround involves localized wireless gateway systems that link cellular handsets to Internet-based phone services. Citron said finding a solution "will take some time" but rollouts for the other fixes are "under way."
Although the workarounds are not mentioned in Vonage's brief, the firm argued that consumers desire "low-cost, technologically superior telephone services" and an injunction "would not promote the patent system's interest in fostering innovation."
Furthermore, Verizon has not promoted Internet-based telephony as an alternative to its "more profitable traditional landline service," Vonage said.
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Labor
Business Groups Await Changes In Immigration Bill
by Fawn Johnson, CongressDaily
When the Senate returns next week, the business community will watch the immigration debate with trepidation, not wanting to scuttle the bill's movement while at the same time calling for fundamental changes.
Tech firms, upset about the provisions in the bill related to visas for skilled foreign workers, known as H-1Bs, are not yet saying whether they would oppose it.
Instead, they are banking on an amendment to be offered by Sens. Maria Cantwell, D-Wash., John Cornyn, R-Texas, Orrin Hatch, R-Utah, and Judiciary Committee Chairman Patrick Leahy, D-Vt. that would exempt from the H-1B annual cap foreign workers with advanced degrees from U.S. universities or with advanced degrees in science, technology, engineering and math.
The amendment also would add a market escalator to the annual cap on H-1B visas, set at 115,000 in the bill. For foreign workers seeking permanent residency, the amendment would create a parallel track for employer-sponsored green cards that would operate side-by-side with the bill's merit-based point system for green card applicants.
"That's what we're promoting right now. It's building momentum," said Bo Cooper, an immigration attorney at Paul Hastings law firm who advises Compete America, a coalition advocating for access to high-skilled workers. "If this amendment doesn't pass, the bill will not address the talent acquisition crisis that's facing employers," Cooper said.
Asked whether Compete America would oppose the bill if the amendment does not pass, Cooper said, "We don't want to cross that bridge yet."
Another business group that is on the verge of opposing the bill is the HR Coalition for a Legal Workforce, comprised of human resources managers and some tech groups. The HR Coalition is focused solely on Title 3 of the immigration bill, which would establish a mandatory electronic employment verification system for all employers.
"We carefully tried not to attack the effort" in the Senate, said coalition head Mike Aitken, director of government affairs at the Society for Human Resource Management. "But the way Title 3 is currently structured -- we have some real problems with it. We don't think it's going to work. Unless it gets changed, I'm not sure how we can support Title 3."
Coalition members are still trying to strike a positive tone. "We want an effective employment verification system," Aitken said. "We're not trying to get away from our obligations. Just don't saddle us with something that's not going to work."
Other business interests took a hit last week when the Senate voted to halve a proposed guest worker program to 200,000 foreign workers a year.
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Antitrust
Justice Weighing Merger Between Muzak, DMX
by Andrew Noyes
The Justice Department may have slowed a proposed merger between the nation's two largest providers of commercial environmental music this week by requesting more information on their business plans.
Muzak and DMX announced last month that they were contemplating a future consolidation or combination. The union would be contingent on a sale of the combined entity to an as yet unidentified third party buyer, following clearance by federal regulators, they said.
The government scrutiny precedes a highly anticipated review of a planned merger between Sirius Satellite Radio and XM. The FCC and Justice Department are examining that estimated $13 billion pairing and several congressional hearings have tackled the deal's possible impact on industry and consumers.
A Muzak official said the company, best known for piping "elevator music" into public spaces nationwide, has "been in a dialogue" with Justice Department staff since its Hart-Scott-Rodino notification was filed. Under the 1976 law, parties may not close a deal until they have complied with the agency's requests for additional information.
"While this request will delay our ability to close a transaction we believe the additional information requested will serve to confirm that a merger of the two companies will not adversely affect competition, will result in significant synergies for the combined companies, and will benefit our customers," the official said in a press release.
But antitrust attorney David Balto said the delay raises "serious concerns." Justice officials challenge mergers and require them to be restructured about 40 percent of the time when they issue a request for additional information. "A lot will depend whether or not customers have strong objections to the merger," he said.
Despite their recent enthusiasm to unite, DMX and Muzak have been fierce rivals. Muzak paid DMX $1 million to settle a 2003 lawsuit that accused Muzak of improperly winning a CVS Pharmacy solicitation for music programming. DMX had asked for $3 million and an injunction banning Muzak from selling its services below cost.
The 73-year-old Muzak has lost money and subscribers in recent years so the merger could keep the firm afloat. CEO Steve Villa told the Charlotte Business Journal recently that the company has $438 million in debt that comes due in 2008 that it cannot pay.
In January, Muzak announced a partnership with the Orchard, the world's leading digital distributor and marketer of independent music, and a multiyear music branding deal with Rumblefish. It is unknown how the company's sale could complicate those agreements.
DMX's financial history is tarnished too. The firm relocated to Austin, Texas, from Los Angeles two years ago after emerging from Chapter 11 bankruptcy protection. Private equity firm THP Capstar acquired DMX for approximately $75 million.
For now, Muzak and DMX "will remain independent companies and continue to compete and to provide, without disruption, the highest-quality products and services to their respective clients," Muzak said in a filing earlier this month with the Securities and Exchange Commission.
Muzak's tunes are heard in more than 400,000 locations, including Applebee's restaurants, JC Penney and McDonald's. DMX, which was launched as AEI Music in 1971, provides music for clients such as JW Marriott, Nordstrom and Starwood Hotels.
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Campaigns
Firms Would Like More Focus On Tech From Candidates
by Heather Greenfield
The 2008 presidential candidates are using new technology to reach voters, and collecting money from tech companies as they pay more visits to the early primary state of California, but some observers have lamented the lack of a public discussion of tech issues on the campaign trail.
So those calling for a tech president to emerge are pleased with the visits to Silicon Valley Wednesday by two of the leading presidential candidates, former Sen. John Edwards, D-N.C., and Republican Rudy Giuliani, which resulted in one of biggest mentions yet of tech issues on the campaign trail.
During a visit to Google, Edwards touted a letter he sent to FCC Chairman Kevin Martin Wednesday asking to set aside part of the upcoming spectrum auction for wholesalers and noting "anyone winning rights to this valuable public resource should be required not to discriminate among data and services and to allow any device to be attached to their service."
"We see the statement from John Edwards on the FCC and the public spectrum issue as a welcome step in the right direction," said Micah Sifry of Personal Democracy Forum, a group focused on using technology in politics.
At a conference earlier this month by the forum, the group's founder, Andrew Rasiej, issued the call for a tech president with a six-item platform, which included strong support of net neutrality, a commitment to greater broadband access and the declaration of the Internet as a public good.
Edwards' speech at Google was one of the strongest public statements by a candidate in support of net neutrality, which calls for prohibiting broadband providers from charging preferred content providers more for fast lanes on the Internet.
Democratic candidates including Sens. Hillary Rodham Clinton of New York, Chris Dodd of Connecticut and Barack Obama of Illinois as well as New Mexico Gov. Bill Richardson and Republican Mike Huckabee, the former governor of Arkansas, support the idea of keeping the Internet content neutral.
Obama made a statement on his podcast last June 2006, saying he supported net neutrality because he can put out the podcast without paying an extra fee or worrying about censorship. "But the big telephone and cable companies want to change the Internet as we know it. They say that they want to create high-speed lanes on the Internet and strike exclusive contractual agreements with Internet content providers for access to those high speed lanes," Obama said. "Everyone who cannot pony up the cash will be relegated to the slow lanes."
Rasiej said the platform wasn't issued as an ultimatum for a tech candidate, but as a challenge to discuss the issues and offer alternatives.
David All, a new media adviser for conservatives, said he agrees a discussion must begin and generally favors the items in the platform "almost in its entirety" with the exception of the call for the Internet be declared a public good -- "too socialist."
"I hope all the candidates take up and discuss these issues," All said. "Even if they don't agree, it's time to start the debate."
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Campaigns
Online Strategy Key To Grassroots Support, Observers Say
by Heather Greenfield
When Massachusetts Democrat Deval Patrick began his campaign for governor at a Steeples Restaurant in North Adams, Mass., in May 2005, it's uncertain whether any of the 40 people in the room believed they were looking at the next governor.
The rise of the former civil rights and corporate lawyer from a pool of well known candidates including Lt. Gov. Kerry Healey and wealthy businessman Christy Mihos on the Republican side and Attorney General Tom Reilly for the Democrats was a surprise to politics as usual.
Some bloggers and political consultants following the governor's 2006 race when he easily defeated Healey attributed his success to having "a formidable field organization, and a state-of-the-art Internet component of his campaign."
Progressive campaign consultant Jim Spencer, president of The Campaign Network, based in Boston said Patrick "was outspent 2 to 1," but his advantage was Web 2.0 products -- an item he and others say could play a key role in other political campaigns.
Spencer, who consulted on the Patrick campaign, credits the more interactive Internet products with Patrick being able to run a heavily grassroots, almost viral, campaign. But in Patrick's case before attracting those voters, he was lucky to attract the right volunteer tech folks who were passionate about the campaign.
"We never could have build our own [Web 2.0] or paid them for it," Spencer said.
Spencer said Patrick used the software to allow supporters to set up their own fundraising pages and contact their friends to donate or volunteer.
"It's an incredibly powerful mechanism because it's not from the campaign and allows peer-to-peer contact. It's really more powerful than the candidate himself," Spencer said. "It starts to increase democracy."
He said the 2.0 products were custom created by a programmer and creating a similar Web 2.0 system like they had would be time consuming and expensive.
For better or worse, the playing field will be more level now that companies like Near-Time offer off-the-shelf Web 2.0 products that they're willing to sell to Republican or Democratic candidates and the technology is cheap enough to create an even playing field.
Near-Time went commercial a year ago and now a few thousand organizations are using its product in 40 countries from Fortune 500 companies to small businesses. The Campaign Network is Near-Time's first political client.
Near-Time CEO Reid Conrad said a small local campaign or group could start up the technology for about $700.
Spencer describes Near-Time's product, which makes it easier to collaborate and share documents, as "the future of American politics -- the next wave."
"Now we're able to have an Intranet as well as the Internet," Spencer said. "We're using it in seven campaigns now."
Spencer said the new tools with Web 2.0 don't make conference calls obsolete entirely but can cut down on them and make them quicker and more effective as it is easier to collaborate on documents without losing your place or losing a draft of the document.
"All the drafts live online," Spencer said. "It sounds like a little thing, but I can't tell you how big it is."
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E-Government
Rules Lacking Over Access To Executive Branch Info
by Aliya Sternstein
No laws have been established to help Congress obtain internal information, including e-mails, from the executive branch -- and that may not be a bad thing according to some open government advocates and a recent Congressional Research Service report.
But at least one member of Congress says there should be a law forcing executive branch departments to make their electronic records easier to search and retrieve.
An April 23 CRS report obtained by the Federation of American Scientists states, "In general, inter-branch disputes over access to information are political conflicts of the highest order. The federal courts, historically, have been reluctant to review and resolve such 'political questions.'"
But Congress has an arsenal of tools to encourage disclosure or to punish undue secrecy, ranging from unfavorable publicity to adversarial hearings to subpoenas to budget cuts.
"Congress can use its 'power of the purse' to leverage its information access demands," according to the report, which the federation released on Tuesday. "In view of the American separation of powers model of government, such conflicts are neither unexpected nor necessarily destructive."
Rep. Tom Davis of Virginia, the ranking Republican on the House Oversight and Government Reform Committee, said that laws are not likely to enhance the gathering of emails and internal communications sought in congressional investigations, such as those associated with the student loan and U.S. attorney firing scandals.
The committee's request for electronic records regarding conditions at Walter Reed Army Medical Center has hit a wall because the Defense Department estimates it will take many months and several million dollars to crawl through back-up tapes just for an initial cull, he said on Thursday.
"While no statutory inter-branch production scheme is likely to produce much or withstand serious constitutional scrutiny, Congress has the power to make it worth agencies' while -- or make it painful if they don't -- to keep and index key records in a way that is accessible to Congress and the public."
Congress should find a way to make federal departments conform to the same strict corporate records management structure dictated by the 2002 Sarbanes-Oxley corporate accounting law, Davis added.
Steven Aftergood, with the Federation of American Scientists, said legislation is probably too blunt an instrument to resolve the perennial inter-branch conflicts.
He noted that out-of-court negotiation has been successful, but "what is essential, and what has been largely missing in recent years, is a sense of assertiveness on the part of Congress. If you don't ask, you can be sure you will not get what you need."
But Meredith Fuchs with the nonprofit research institute National Security Archive said present procedures for soliciting information from the Bush administration are flawed.
"Think of the scandals of the last few years -- warrantless wiretapping, flawed intelligence about [weapons of mass destruction], the firing of U.S. attorneys for political reasons -- and how important it has been to have a Congress willing to fight for information," she said. "There should be easier ways for members of Congress or the minority to get information than the backlogged Freedom of Information Act system that they sometimes have to rely on."
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Today's Feature:
State Roundup
Score another one for the telephone industry. Iowa Gov. Chet Culver, a Democrat, on Tuesday signed into law a measure that will allow video service providers to enter his state's market in one step.
Every Thursday, read the State Roundup by Michael Martinez.
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E-briefs
Telecom: The FCC on Thursday will consider tightening its requirements for measuring how accurate telecom carriers are at transmitting geographic locations when cellphone users dial 911. So-called enhanced 911 service available on mobile phones is supposed to provide this data to emergency dispatchers at public safety answering points, or PSAPs. The agency has established accuracy thresholds, but doesn't specify how to measure compliance. As a result, some carriers gauge accuracy by state or service area, but critics say those findings can be skewed. For example, problematic E911 calls in a major city might not stand out if averaged with successful emergency calls throughout an entire state. In Thursday's action, the FCC will consider a proposal by a public safety group to measure compliance at the PSAP level. Under the approach, accuracy would have to be more uniform. The item was supposed to be considered at a 9:30 a.m. public meeting, but it was postponed until early Thursday afternoon. Editor's Note: See Tech Daily's AM Edition on Friday for full coverage of the meeting.
Security: Lawmakers who support giving states the power to pass and enforce chemical security laws that are stricter than federal regulations may have lost one battle last week, but are far from giving up their cause. A provision that would grant states such authority was originally inserted into the emergency supplemental spending bill for the Iraq war, but it was removed from the final version before President Bush signed it into law. Lawmakers who support the provision say they are now eyeing the fiscal 2008 Homeland Security appropriations bill as another legislative vehicle for the language. Democrats on the House Homeland Security Appropriations Subcommittee have already inserted such a provision into their version of the spending bill. Republicans have vowed to oppose it, though, as the bill moves through a full committee markup next month and then to the House floor. The chemical industry has heavily opposed any such legislation.
E-Government: Five companies have been selected to provide up to $20 billion in telecommunications services to federal agencies through the General Services Administration’s Networx enterprise contract, GovExec.com reported Thursday. AT&T, Level 3 Communications, MCI Communications, Qwest, and Sprint were awarded slots on the contract and will have the opportunity to bid for voice, wireless, Internet protocol and satellite service contracts under the program, GSA announced Thursday. "We at GSA are committed to our customers, and award of the Networx Enterprise contracts today provides them superior telecommunications services from the best American companies at the best prices available in the marketplace," said GSA Administrator Lurita Doan. Two of the awardees -- AT&T and Qwest -- also are providers on the complementary Networx universal contract, which offers comprehensive telecom services. The enterprise contract, in contrast, is a boutique-style award that lets companies offer smaller or more selective service packages at potentially lower prices.
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