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TMT Perspectives

Insight & Commentary on Business, Legal and Policy Developments Affecting the Telecom, Media, and Technology Sectors

FCC Proposes to Fine AT&T Significantly

Posted in FCC, Legal Developments, Net neutrality

Transparency_TMTwebToday the FCC proposes to fine AT&T US$100 million for its practice of selling its customers “unlimited” data plans which it subsequently limited by throttling back data speeds as much as 90% (sometimes, to dial-up levels) without being clear about the extent of the throttling. This proposed fine is based upon the FCC’s “Open Internet Transparency Rule,” which says that companies must communicate clearly about the terms on which they make Internet access available. This is related to, but a little different from, the very controversial “Net Neutrality” rules. The Net Neutrality rules are substantive; the Open Internet Transparency Rule is about clarity (or lack thereof) with which communications companies communicate with their customers and its related concepts: fraud and misrepresentation.

The proposal provides some information about AT&T’s practices, but undoubtedly the story is more complex and we do not currently have all the information. But if we stay at the surface level, the FCC says that AT&T offered to sell a Camry that could run forever and, when it suited AT&T, AT&T remotely shut down five of the six engine cylinders and said, well, “the car can still run forever.” And it is true. The problem is that in reality no one will drive a Camry that can go only 20 miles per hour. So, is that a misrepresentation or not?

Two Republican Commissioners dissented, complaining that the Open Internet Transparency Rule is not very specific, and therefore if the Camry is still capable of running forever, the representations made by AT&T are in fact true, even if the car doesn’t really work for its intended purpose. As lawyers, we have some sympathy for this argument, as it is logic-based. But is it good enough?

Assuming AT&T’s statements are factually accurate, does that make them true? It would seem that we decided that question 50 or more years ago when the legal system dealt with “fitness for purpose” and “implied warranty” questions. And what we concluded was that accurate information about products is not enough when, ultimately, the product was not actually fit for the purpose for which it was sold. In other words, you don’t make a bad product good by describing parts of it accurately.

A broader, more philosophical objection to the dissents is that the main argument against regulation in the communications sector for 15 years has been that highly specific and prescriptive ex ante (before the fact) regulation is outdated; it is more socially useful to develop broad general rules and to enforce them ex post (after the fact). Indeed, that idea is the core of the current Republican ideology against government regulations. And yet here the FCC is applying fairly general rules (requiring transparency) to what appears to be a fairly extreme set of facts. And now the Republican argument is that you shouldn’t establish specific binding ex ante rules, and you can’t enforce fairly general rules because they aren’t specific enough.

If we are right in this analysis, the dissents are not just cynical, they are unprincipled.

Droning On: Comments Are In; Now What?

Posted in Administrative Law, Drones, Legal Developments, Technology

Drone blog photoOn April 24, the comments period ended for the Notice of Proposed Rule Making for the Operation and Certification of Small Unmanned Aircraft Systems (“UASs”). The FAA received 4,556 comments, which have been uploaded to the public docket.

Absent a reopening of the public comment period (which is not anticipated at this time), the FAA will now begin revising the proposed rule into its final form, taking into consideration all of the comments it received. The FAA will also create a supporting statement, which is a more detailed explanation of the rule, and a regulatory economic analysis (“REA”). The REA will detail the costs and benefits of the rule, and how the FAA determined that the rule is both economically and technologically feasible. The FAA then submits the draft final regulations, along with the supporting statement and REA, for departmental clearance, and to the Office of Management and Budget (“OMB”) for further review and analysis. Once OMB’s comments have been addressed, OMB will notify the FAA that the rule can be published in the Federal Register in its final form. The final rule will take effect upon publication or at a specified time thereafter, as determined by the FAA and set forth in the Federal Register.

The FAA has previously stated that this process could last until at least 2017 (not including any legal challenges to the rule, which could extend the time period significantly). In the interim, the only way that a commercial drone operator can fly in the national airspace is under a Section 333 exemption. Since the publication of the Notice of Proposed Rule Making, the FAA has made a number of changes to the Section 333 exemption process designed to streamline it. Continue Reading

FCC Commissioner Pai Asks Congress to Partly Defund Agency

Posted in Antitrust and Competition Policy, FCC, Legal Developments, Net neutrality

100033462Yesterday FCC Commissioner Ajit Pai testified before the House Appropriations Committee, and in his lengthy statement, asked that Congress defund the FCC–or at least that part of the FCC that would implement the FCC’s recent net neutrality decision.

There is a certain irony here. Commissioner Pai’s objection to the net neutrality decision stemmed from his concern that politics played too large a part in the decision. His specific objection is that the decision was reached five months after President Obama issued a public statement calling for bright-line open Internet rules.

There can be no question that Obama’s statement influenced the FCC’s decision. But of course, so did the 4 million comments filed by Americans from every corner of the country.

It would appear from Commissioner Pai’s request that Congress partly defund the FCC, that he does not have a principled objection to politics influencing FCC actions.

Target Escapes Consumer Data Breach Case for US$10 Million

Posted in Lawsuits, Privacy and Data Security

In November 2013 Target was hit by a massive data breach resulting in the theft of a reported 110 million customer data records. A host of suits by consumers anCybersecurityd financial institutions followed. After more than a year of litigation, Target reached a settlement to dispose of at least a portion of the cases.

The Road to Settlement: In December, the Minnesota District Court nixed Target’s bid to dismiss the consumer claims (see earlier post). In the wake of that failed bid, this week, Target agreed to a settlement of the consumer complaints. Today, the court entered an order granting preliminary approval of the settlement. The financial institution cases are not part of the settlement.

Key Settlement Terms: Continue Reading

What is Net Neutrality All About (a Brief Refresher)

Posted in Legal Developments, Net neutrality

100033462At its core, net neutrality is very simple. Should the Internet be open? By that we mean, should consumers be able to access content of their choice without restriction? In our capacity as consumers, each of us would surely say yes.

Second question: Do transmission companies (e.g., cable and telco) and content companies (e.g., Google, Facebook and Netflix) agree with that? The clear answer to this is no.

Content Companies. The content companies know that your experience on the Internet is dependent upon choices they make, such as the technology or algorithms they deploy. Their challenge is to run their businesses in the way that best suits them and which annoys their customers the least. Choices by the content companies are restrained by the fierce competition they face. Do I prefer to get my financial information from Google or Yahoo? That question doesn’t matter to anyone other than Google or Yahoo, because I can easily switch from one to the other depending upon my sense of how good a job they are doing. Or, I can purchase a Wall Street Journal subscription. It’s all up to me.

Transmission Companies. The transmission companies know that your experience on the Internet is dependent upon the choices they make with regard to (a) regular network management practices, and (b) their own business goals. Transmission companies are not particularly restrained by competition due to the limited choice of other providers who can serve your needs, the high costs of changing, and to the fact that to a significant extent, the limited competition means that the transmission companies often do not feel keen pressure to differentiate their services. Largely, they march in line.

Probably, you do not object to the transmission companies reasonably managing their networks. Like the electric utilities, they must make the Internet work, and they do.

It is a different story with regard to whether you would knowingly accept your experience on the Internet being altered due to the transmission companies’ individual business goals. Probably if a company said that it is up to them what websites you could access on the Internet (and how), you would disagree. This is because the Internet is our key source of knowledge and the basis for much of today’s commerce.

Net neutrality is about the last issue. The fact is that the transmission companies have, in fact, said that it is their absolute right to determine your experience on the Internet. They have said that the transmission lines are theirs, and therefore what happens over those lines is up to them.

(It may sound like we are making this up, but incredibly Verizon has gone so far as to argue in court that its ability to determine what you see when you fire up your browser is a matter of Verizon’s own First Amendment (free speech) rights.)

Not About How Much Internet Access Costs. It is important to understand that net neutrality is not about how much Verizon and AT&T can charge you for Internet access. They can charge you, their customer, anything they want. What AT&T and Verizon want is to be able to charge you for Internet access, and also to charge the rest of the web when you desire to reach that part of the web. For example, if you want to access your WSJ subscription online, they would like to be able to say to the WSJ that they will not permit that unless the WSJ pays them. And much about that negotiation will be unseen by you. You will have no way of knowing if Verizon throttles the speed to the WSJ or alters your experience in other ways.

Last Thought: Internet as Utility. A key question for anyone is how do you conceive of the Internet? Is access to it necessary in today’s life, or is it optional? If optional, then net neutrality doesn’t matter. If you think it is necessary, then requirements that the Internet be neutral matter a lot.

Consider electricity? Is it necessary in today’s life, or is it optional?

Chadbourne Client Savi Technology Wins Global Award for Sensor Technology and Analytics

Posted in Technology

Savi_Logo_2_Color_Final_RGBYesterday Frost & Sullivan announced its 2015 global Best Practices Awards.

The Awards honor “companies that are predicted to provide significant growth in their industries, have identified emerging trends, or have created advanced technologies that will catalyze and transform industries in the near future.”

Chadbourne client, Savi Technology, which is a pioneer in sensor technology and sensor analytics solutions, won the global “Company of the Year Award” in the Sensor Analytics field.

Sensor analytics refers to the ability to digest and transform massive amounts of sensor and other machine-generated data in order to create actionable intelligence.

Sensors are commercially used in many contexts. Most recently they are associated with the Internet of Things (“IOT”), which is the phenomenon whereby previously “dumb” devices are connected to the Internet. The burgeoning Internet of Things phenomenon is among the hottest areas in technology globally.

We congratulate the Savi family on its remarkable achievement.



Drone Regulatory Framework and Exemption Process

Posted in Administrative Law, Drones, Legal Developments

Chadbourne_DroneAdvertWe have been getting a lot of questions from clients about the current state of play of the federal laws and regulations that apply to unmanned aerial vehicles (i.e., drones).  Contrary to popular belief, there are FAA rules that apply to drones; they are the same rules that apply to 747s and Cessnas.

The practical answer when trying not to get on the FAA’s bad side is to be smart.  When in doubt, play it safe, pack it in and take your drone home for the day.

Here is a brief summary of what you need to think about when deploying your drone fleet.

Current FAA Position/Regulatory Framework

The FAA currently takes the position that existing commercial aircraft regulations apply to unmanned aviation systems (i.e., drones) used for commercial purposes.

Further, they believe that drones cannot comply with the existing regulations, as they require an onboard pilot to be able to see and avoid obstacles. That means that the FAA believes businesses are foreclosed from using drones without a specific exemption.

That being said, it typically does not bring enforcement actions against drone operators unless they are flying in a manner that is unsafe, although it still often notifies drone operators of the rules.  Other law enforcement agencies, such as homeland security, sometimes get into the notification game.

Exemption Process

While drones are not permitted under the current regulatory framework, drone operators may apply for a Section 333 (of the FAA Modernization and Reform Act of 2012) Exemption from the general commercial aircraft regulations in order to operate a drone in the national airspace. The exemption petition process is fairly straight-forward, but time consuming. The process is detailed here.

Drone operators also need a Certificate of Waiver or Authorization (COA) which informs FAA air traffic control of the proposed drone operations.

The exemption petition must include:

  • A broad description of proposed activities, including a description of the location in which operations will occur (e.g., whether the area is closed to the public and the population density).
  • Explanation of why the operations minimize risk to other aircraft and people and property on the ground.
  • Flight experience/training/qualifications of operator.
  • Drone inspection procedures to ensure safe flight.
  • The radio frequency (RF) spectrum to be used to operate the drone.
  • Explanation of lack of national security risks.

Drone operators need to be licensed pilots under the existing framework, so any exemption request for an operator that is not a commercial pilot should detail why the person’s operation of the drone does not increase risk to the public.  Prior exemptions granted have required pilot certification.

Under the current regulatory framework, the FAA considers the planned operating environments and requires certain conditions and limitations to assure the safe operation of the vehicle in the national airspace. For example, the FAA requires that all drone operations have both a pilot and a visual observer, and the pilot must have at least an FAA Private Pilot Certificate and a current medical certificate. Additionally, among numerous other restrictions, exemptions issued to date have required drones to remain below 400 feet and within the visual line of sight of the operator at all times during operations.

As of February 3, 2015, the FAA has granted 24 exemptions from 342 requests for exemptions. The rate of requests is exploding.  The FAA received 128 additional requests between January 6 and February 3, 2015.

The exemption approval process typically takes four to six months, but given the recent increase in applications, the timelines could be expected to vary from this. The exemption lasts two years, but can be renewed.

New Proposed Drone Regulations

The FAA recognizes that the exemption process is not a viable long-term solution (and Congress has directed the FAA to find alternative ways to integrate drones into the national airspace). To that end, the FAA published proposed regulations specific to drones on February 15, 2015 that would do away with the requirement for an exemption in certain cases.  We have our own thoughts on these regulations, but for now, we are telling it like it is.

The drone operator would not be required to hold a private pilot or commercial pilot license, and a visual observer would not be required. Obtaining a private or commercial pilot license is an expensive process, requiring 40 and 250 flight hours respectively.  The FAA believes knowledge gained in obtaining these licenses is not completely applicable to drone operations. Nevertheless, a drone operator will be required to pass a flight knowledge test, be vetted by TSA and obtain a special drone pilot license.

The proposed rules would still require the operator to maintain a visual line of sight with the drone at all times. That means that autonomous flight would not be permitted (at least not yet, without a specific Section 333 Exemption). The FAA estimates that the cost of compliance under the new rules will be roughly $6,000.

Operation in certain zones of the US airspace would be permitted as long as these rules were followed. Other zones would require prior FAA/air traffic approval and some zones (like above 18,000 feet or over Area 51) would be completely off limits.

The rules are not effective until they are finalized, which could take over a year to occur. There is a sixty-day comment period for these proposed rules. After that period lapses, the FAA may hold a hearing and will review the comments and make revisions as needed to the rules. It can then issue another version of proposed rules or issue the final regulations. We are happy to support the NYC Drone Film Festival on March 7, 2015.  Come say hello.

Just Do It: Air Jordan, Raging Bull, and Resurrecting Copyright Infringement Claims

Posted in Intellectual Property, Lawsuits, Legal Developments

A new copyright lawsuit against Nike may signal a new wave of claims for infringement that began decades in the past. Last week, more than 30 years after he created the iconic image of  Michael Jordan elegantly soaring through the air, photographer Jacobus Rentmeester sued Nike for using that image as the logo for the “Air Jordan” brand without Rentmeester’s permission. The photograph first appeared in Life magazine in a photo essay featuring Olympians set to compete in  the 1984 Summer Games in Los Angeles. Ironically, Jordan was wearing Converse sneakers in the photo.

Rentmeester Photo

Rentmeester Photo

According to the complaint filed in federal court in Oregon, Nike used Rentmeester’s photo to produce a nearly identical photo, which it then used on billboards as part of an ad campaign for Air Jordan shoes. Although Nike paid Rentmeester US$15,000 in 1985 for continued use of the copied photo, that right was limited to two years and only for posters and billboards. Rentmeester alleges that Nike went well beyond those rights in building a multi-billion-dollar brand centered around the Jordan “Jumpman” logo. Despite being aware of the alleged infringement for nearly 30 years without taking action, Rentmeester now seeks to recoup monetary damages from Nike.

Nike Air Jordan Photo

Nike’s Allegedly Infringing Photo

Continue Reading

U.S. Supreme Court Clarifies Standard of Review for Appeal of Patent Claim Construction

Posted in Intellectual Property, Lawsuits, Legal Developments

In a 7-2 decision handed down on January 20th, the U.S. Supreme Court held that while the ultimate determination of what a patent claim means is still a question of law subject to de novo review at the Federal Circuit, a district court’s resolution of subsidiary factual findings made during claim construction should be set aside only if those findings are clearly erroneous. This decision modifies long-standing Federal Circuit precedent requiring that all aspects of claim construction be reviewed de novo on appeal and may lead to heated battles between litigants over drawing the line between law and fact. The case is Teva Pharmaceuticals v. Sandoz, Inc.

Teva sued Sandoz for infringing a patent covering the manufacturing method for Copaxone, a drug used to treat multiple sclerosis. Sandoz argued that the patent was invalid because the term “molecular weight” appearing in the claims was indefinite. According to Sandoz, it was not clear which of several definitions of “molecular weight” the claims were referring to. Both Teva and Sandoz presented expert witnesses and evidence on this point. The district court sided with Teva’s expert. On appeal, the Federal Circuit reviewed the district court’s findings on claim construction de novo. The Supreme Court held that the district court’s finding as to the definition of “molecular weight” was a factual finding, and that the Federal Circuit should have accepted the district court’s finding unless it was clearly erroneous. For more information, please see our Client Alert.