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If you have been reading Legal Bytes regularly, you know that Lois Thomson here at Reed Smith has been one of the primary people supporting my efforts to transform "legal-ese" into understandable English – no trivial task for those of you who are interacting or have ever interacted with lawyers. So it is with great joy that I was not only able to have her write a post for Legal Bytes, but that I also finally got to edit her article. Hopefully she will smile and agree it's been helpful. So, Lois, thank you, and here is your relevant and very timely note for all the world to see:

"I looked at an email I received from my friend, Robert, and wondered why the subject line was a reply regarding an issue of Legal Bytes that I had proofread for Joe Rosenbaum. 'Are you aware that you have been sending these to me?' Robert's message read. 'It seems like that might have been a mistake.'

"Ouch! A mistake indeed! You see, when Joe sends his documents to me to review, I proof them and make my suggested changes. I then simply hit the forward button to return them to him. Now as many of you email-program (e.g., Outlook) users already know, to make life easier (that's ostensibly what technology is supposed to do), once I start to type in "ro," Rosenbaum, Joseph I.'s name should automatically populate the 'To' field. Oops. Not this time. Instead, my friend Robert's name came up, and without looking – as I'm guessing so many of us routinely do – I hit enter and sent it off, pleased I had been so timely and responsive. Unfortunately, I was responding to my friend Robert, who may happily read Legal Bytes, but not, I suspect, the artist's proof!

"Fortunately, Joe and Robert were gracious about the whole thing and in this case, both felt no harm was done. But what if the message had been from your lawyer or doctor or a rabbi or priest, or was some other communication that was not ultimately meant for public consumption. It was a simple but powerful reminder to me (and one that Joe felt was important enough to ask me to pass it on to you), that while automated tools can make routine tasks like 'field completion' simpler, they can also lead to problems if we rely on them without thinking. Hmmmm, now why can't I remember phone numbers anymore – is it because they are all programmed into every device I own, so that I no longer have to think?"

A helpful reminder that while automated tools are great, they are just that – tools. If we aren't careful, the tools can work against us and not for us, and can create embarrassment at best, liability at worst. Thank you Lois (and Robert).

Need to know more? Contact me, Joseph I. Rosenbaum, or any Reed Smith attorney with whom you regularly work. Need proofreading skills? If you don't work for Reed Smith, don't call Lois. She's busy helping us every day. Thanks again, Lois.

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Check out MediaPost’s SearchBlog yesterday (A Dream Cloud Computes The Future), which recounts the conversation Joe Rosenbaum had with reporter and blogger Laurie Sullivan about the future of cloud computing. Need to know more about the legal implications and issues? Call Joseph I. (“Joe”) Rosenbaum or the Reed Smith attorney with whom you regularly work.

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As far back as May 2005, Legal Bytes reported that Europe was becoming a major outsourcing hub for a variety of reasons (Outsourcing Statistics). Well just this week, the law started catching up.

In what is certainly a major ruling and quite possibly the beginning of emboldened plaintiff-customers seeking greater accountability from outsourcing providers, Electronic Data Systems (EDS) has lost a case initiated by British Sky Broadcasting Plc (BSkyB) back in 2004, alleging that EDS, one of the leading outsourcing providers in the world, had misled BSkyB about its capabilities and expertise. For those of you who are legal research hounds, the case is cited as HT-06-311, British Sky Broadcasting v. Electronic Data Systems, although I don’t believe it has been fully published yet. The dispute arose over a services contract that was entered into by EDS and BSkyB in 2000, well before EDS was purchased in 2008 by its current owner, Hewlett-Packard (HP), for slightly more than US$13 billion.

To give you the background, BSkyB selected EDS to develop a new customer relationship management (CRM) system for its call centers in Scotland. After almost two years and failure by EDS to deliver, by March 2002, BSkyB ended the contract and took over the project itself – the frustration and events ultimately leading to the legal proceedings filed in 2004 that alleged EDS lied about its ability to undertake and complete the project. On the other side of the case, in its own court documents, EDS alleged that BSkyB simply “did not know what it wanted,” and wanted the lowest cost possible to accomplish “it.” To highlight the disconnect further, the contract with EDS was for £48 million, but according to court documents filed in the case, with all of the delays, budget over-runs, EDS’ failure to deliver, and BSkyB taking over and completing the project itself, costs had mounted to £265 million.

Justice Ramsey, writing for the British High Court, ruled that EDS misled BSkyB in making false and fraudulent misrepresentations in pitching and marketing its capabilities to BSkyB, giving rise to a claim for damages. Further, the court concluded, to the extent these representations were fraudulent, the limitation of liability clause in the contract that would have otherwise limited EDS’ liability for damages should be set aside and does not apply. While damages have not yet been fixed, in theory, if one includes the differential in costs, lost profits and other damages that are now fair game, EDS could be liable to BSkyB for well in excess of £200 million – that’s more than US$315 million at current exchange rates.

This is a major decision not only in the UK, but also for outsourcing deals around the globe, and if the beginning of a precedential trend, it could signal a radical shift in the way outsourcing deals are bid, negotiated and consummated. There is no question that anyone involved in outsourcing knows that the customer does not always have its specifications and detailed requirements buttoned up when discussions begin. Indeed, outsourcing often presents a singularity at which time enhancements, efficiencies and improvements that might have been difficult or impossible internally, can be effected by moving the operations to a third-party provider. The provider, eager to win a lucrative bid, may over-promise or over-represent its experience and capabilities. Smart negotiators know that forcing both sides to diligently and meticulously work through the "devil in the detail," and making sure expectations, resources and capabilities are clearly set out and unambiguous, is the single most important contribution to be made in avoiding disputes, potential litigation and problems as the work and services unfold. Those of you in marketing know all too well that there is often a fine line between an actual claim and puffery. The former represents actionable representations, the latter . . . well, “you’ve tried the rest, now try the best” on every pizza box in the world.

Are you contemplating a major outsourcing initiative? Are you considering any outsourcing project, even a small one, involving critical operations – customer services, supply chain management, operations, transaction processing? Outsourcing is complicated. Need help? We wrote the book. No really, you can see for yourself: Outsourcing Agreements Line by Line: A Detailed Look at Outsourcing Agreements & How to Change Them to Fit Your Needs, written by none other than yours truly, Joseph I. Rosenbaum. Whether you check out the book or not, if you do need help, our Advertising Technology & Media law team here at Reed Smith has the help you need to make sure that, even if you are right, you can avoid the costly consequences and angst inherent in any legal proceedings between customers and providers. How can we help you? Call me, Joe Rosenbaum, or the Reed Smith attorney with whom you regularly work.

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“If computers of the kind I have advocated become the computers of the future, then computing may someday be organized as a public utility just as the telephone system is a public utility . . . The computer utility could become the basis of a new and important industry.”

                                      — John McCarthy, MIT Centennial, 1961

“Cloud computing” is a term used to describe the use of computer resources not solely as a communications protocol (e.g., the Internet), nor solely as a content or transaction host (World Wide Web), but as an application development and information processing service. To help explain further, to send an email, much like using the telephone, it makes no difference who your provider or host is or which carrier you use. There is a protocol that allows interoperability across networks and processors, and as long as the sender and recipient have an email address and access to an Internet connection, the email gets through. On the web, with access to the Internet and a browser (technology that displays content and functionality hosted at a particular Internet address), you can interact with the website – you can see the material displayed and you can "select" (click) to enable certain features.

Today, as a general rule, if you wanted to create, edit, spell check, save, send or share most content or information with someone, unless you plan on typing and formatting a very long email, you still need word processing, spreadsheet or presentation software programs to create and upload (communicate or store for display), or to see and use content that you might download. In a cloud-computing environment, all of these functions are resident in the "cloud." Imagine that you no longer needed a desktop or laptop computer processor, and all you had were input and display devices (e.g., keyboard, mouse, monitor), which you could either carry or borrow wherever you went. Plug into a universal "outlet," enter your unique pass codes and authentication information, and you have everything you need – where and when you need it. Like telephone, electric or gas service, computing becomes a commodity accessible virtually anywhere and anytime, generally priced by usage, the applications, and the amount and type of storage for which you want and need access.

Cloud-computer services can be sold and paid for using plans not dissimilar to phone service – per call, per minute, unlimited, features, functions – and they disaggregate the user, whether individual or business enterprise, from the procurement, maintenance and operations of the underlying processors and software programs. Clouds can be public – made available to anyone on demand (think Wi-Fi registration based hot spots) or private (large companies can operate or arrange to have someone operate a closed-cloud environment). I summarize the basic characteristics of cloud computing as follows:

• Flexibility – the user can easily modify use, resources, demand, access and virtually every other resource, without the need to purchase or dispose of any equipment or software, other than input and output devices. Increases or decreases in processing, development, storage or other requirements can be managed easily in real time and on an infinitely scalable basis.
• Cost – commodity or utility pricing lowers user costs. Capital expenditures can be eliminated, license fees reduced and access fees managed more efficiently.
• Resources - shared resources enable lower per-user, per-unit pricing, and optimization of peak and non-peak loads across user communities. Resource upgrades and enhancements can be amortized across a broad user base, seamlessly and transparently to the user community. Inter-exchange agreements between cloud providers will enable continuity and recovery, load management, and resource backup capability at optimal prices.
• Independence – time, space and resource constraints become largely irrelevant to the extent Internet or web access is available.
• Interoperability – absent unique or customized requirements that can be managed separately by the user, standardized applications, development tools and protocols are simpler to maintain and operate, debug, update and support. 

While security and privacy is always a concern – more so where data, in addition to processing capability and storage, becomes more concentrated and accessible rather than distributed – more users and businesses will have the potential benefit of stronger security measures than are currently affordable or in use, to the extent cloud providers can develop and implement strong security standards and protocols within their service offerings. 

So who are the actual or prospective players? Well lots of prognosticators and labelers are out there, but here is my list in basic categories:

• Providers are those who procure, create, host and manage cloud resources and then sell access, services, features and functions in a cloud environment – wholesale or retail
• Users are those who need to use and take advantage of cloud services, features and functions, whether individually or as part of a business
• Intermediators are those who create intermediation and aggregation opportunities between and among providers. On the one hand, intermediators can bridge gaps between providers and create interface and sharing environments between or among providers. On the other hand, intermediators may begin finding niches in customizing or aggregating services, features or functions for particular industries or in particular regions.
• Developers and supporters are those who develop utilities, applications, tools, features and functions to enhance the cloud experience, make additional services and applications available, and who maintain and support the efficient functioning of the cloud environment.

There may be others – my list is not intended to be comprehensive or even definitive. I don’t have a crystal ball, so time and experience will determine what we cannot now predict. Four computers, interconnected to respond to the perceived vulnerability of centralized computing, were the origins of the Internet. Distributed computing represented commercial attempts to amortize costs, decentralize institutionalized information, and enable greater redundancy and recovery capability. Networking and web-based computing gave us the ability to communicate, share and store information across multiple processors and devices through share protocols. While it’s still too foggy to tell what the future will bring, cloud computing represents the next big innovative thing in making the power of the computer and the Internet easier to use, more available, more interoperable and more cost-effective.

When the fog starts to lift, we may see clouds on the horizon. Whether they are storm clouds or fluffy wondrous sights of joy, I leave to your imagination. Stay tuned. But no matter what your visions of the future may be, if you see a cloud and you aren’t sure what the legal implications might be, please feel free to contact me, Joseph I. (“Joe”) Rosenbaum, or the Reed Smith attorney with whom you regularly work.

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Yesterday, the Attorney General of the State of Connecticut filed suit against the Connecticut subsidiary of Health Net, charging it with violations of the privacy and security requirements of HIPAA. The action, filed yesterday in the United States District Court in Connecticut, comes on the heels of a security breach involving medical records and Social Security numbers. The suit also names United Health Group Inc. and Oxford Health Plans LLC, who acquired Health Net of Connecticut but who were not involved in the data breach.

If you forgot, last year the Health Information Technology for Economic and Clinical Health Act (HITECH), for the first time authorized individual state attorneys’ general to enforce the security and data privacy regulations under HIPAA, and this appears to be the first such action.

The lawsuit claims that Health Net in Connecticut failed to provide adequate security for the medical and financial records of hundreds of thousands of enrolled individuals, and failed to notify them promptly in connection with the breach. The breach, which took place last May, involved the disappearance of a computer hard drive. Health Net eventually reported the breach, posting a notice on its website and starting a staggered process of mailing letters to consumers November 30, 2009, almost six months after the security breach. For those of you involved in the collection, handling, maintenance, or use of personal, financial and medical information covered by HIPAA, new federal rules under the HITECH Act require "timely" notification of certain breaches, rules that have a compliance deadline of February 22, 2010.

Health Net attributed the delay in reporting to its inability to determine exactly what was on the computer hard drive that disappeared, thus not being sure if a notice was even required. One can only surmise that the mere fact that Health Net didn’t know what information was contained on a removable computer hard drive made its reasoning less than satisfactory to the Connecticut State Attorney General. Although Health Net appears to have conceded that the data was not encrypted, it did indicate that the data should not be visible without the use of specific software. However, Kroll Inc., a computer forensic firm retained by Health Net to investigate the breach, reported the data could be viewable with commonly available software.

Privacy, security and data protection of non-public, personally identifiable and sensitive information (e.g., health, financial data) are increasingly subject to stricter rules and regulations. The use of the Internet and web, making digital information more susceptible to undetected duplication, transmission and access – not to mention the obvious fact that carrying millions of pages of records would be impossible, while walking out with a single hard disk or CD-ROM on which the same data and information has been scanned or stored in digital form – can be virtually undetectable.  

Do you know of any law firm that has a team of privacy and data security, identity theft and data breach legal professionals? A firm that has health care, financial services and insurance specialists, as well as lawyers steeped in digital technology, information security and e-commerce? A firm that has transactional, regulatory compliance and policy-oriented lawyers who can audit current practices and policies, assist in developing mechanisms needed to satisfy regulatory requirements, and provide legal support to help avoid a legal problem, and also regulatory, compliance and litigation professionals who can represent and defend clients if a problem arises? Now you do – Reed Smith. If you need more information, contact me, Joseph I. (“Joe”) Rosenbaum, or Mark Melodia or Paul Bond, or the Reed Smith attorney with whom you regularly work, if you need legal advice, information or support on this subject.

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This post was written by Laura Hicks and Joseph I. Rosenbaum.

Last week, Gerry Sutcliffe, Minister for Sport in the United Kingdom, announced proposals to make significant changes to the existing legislative framework under which remote gambling is regulated. Following a review of the system of online gambling regulation in Great Britain by the Department for Culture, Media and Sport, a consultation is being launched with a view to introducing laws requiring all online operators to apply for a license from the Gambling Commission in order to either advertise or provide gambling services to British consumers. According to the Minister for Sport, the proposed changes were "necessary to ensure the protections in the Gambling Act – to keep gambling crime free, to ensure gambling is fair and open, and to ensure that children and vulnerable people are protected from harm – continue to be afforded to British consumers."

Under the proposals, a license will be required even if the gambling services are offered to British consumers using remote gambling equipment from outside Great Britain. Currently, only operators based and licensed in the UK are allowed to advertise in the UK, unless the country in which they are based is either a member state of the EEA or on the government's "whitelist." More information on the "whitelist" is available on the Department for Culture, Media and Sport website, but to give you some insight, territories currently on the list are Antigua and Barbuda, Tasmania, the States of Alderney and the Isle of Man. "Whitelisting" is the process used by the UK Ministry to assess the regulatory framework for gambling in any jurisdictions outside the EEA that apply for permission to advertise their services within the UK. 

As well as being obliged to share information about suspicious betting patterns with the UK's sports governing bodies and the Gambling Commission, foreign operators would also have to comply with British license requirements concerning the protection of children and vulnerable people, and contribute to the research, education and treatment of problem gambling in the UK.

This appears to be a move by the UK government to close a loophole in the laws that protect online gamblers in the UK, and that more closely mirror the more protectionist regime in the United States. If this extension of the licensing regime is introduced into legislation, it will be interesting to see how the regulator intends to enforce the license scheme against gambling companies with no UK presence. In the United States, enforcement has involved a variety of "indirect" mechanisms, from the Department of Justice's use of the Interstate Wire Act of 1951, which applies to sports betting to assert jurisdiction over online gaming – even though the Fifth Circuit ruled in 2002 that the Wire Act only applies to sports betting – to seizing advertising payments made to broadcast networks by advertisers seeking to promote online gambling considered illegal by the United States. Since 2006, with the enactment of the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA), the United States has sought to seize assets in financial institutions tied to online gambling, based on what it considers illegal activity, money laundering and a variety of other offenses (see, for example, a recent Huffington Post article). It is noteworthy that UIGEA does not make online gambling illegal per se, but rather prohibits any transfer of funds from a financial institution (as defined in the legislation) to an illegal Internet gambling site.

Once you read the UK Sports Ministry's announcement, if you need more information, contact Laura Hicks, an associate in the Media and Technology team, in our London office. Of course, you can always contact me, Joseph I. ("Joe") Rosenbaum in New York, or Gregor Pryor in London, or the Reed Smith attorney with whom you regularly work, if you need legal advice, information or support on this subject.

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Although reports of dissipating smog may be premature, if postings from Google are to be believed, Los Angeles is officially in the cloud. Google’s online email and collaboration cloud, that is! City employees will now use cloud computing for email and working on collaborative projects together. Google hails cloud computing for the city of Los Angeles as something that “will improve the security and reliability of city email, transitioning from servers in the City Hall basement to hosted, secure data centers.”

Los Angeles isn’t the only place to fall in love with clouds. VISI, the largest provider of data-center and managed-hosting services last month (December 2009), announced a public beta of ReliaCloud – a cloud computing service available to users anywhere. Set up an account online, set up computer servers in one of the VISI data centers, and employee-users can access the service from anywhere – anywhere there’s an Internet browser and connection. Cost? Reportedly, the pricing starts at 5 cents an hour! Welcome to fungible, commodity computing. According to VISI, its cloud service was designed to be reliable, affordable and scalable. The beta is targeted at small- to medium-sized commercial users, and businesses can apply at www.reliacloud.com. And VISI anticipates storage and other services to become available over time as part of a suite of offerings. Just one example among many of companies offering and embracing cloud computing.

The United States isn’t the only country where cloud computing environments are springing up. Back in September, the city of Dongying in China announced a strategic initiative with IBM, where the city is hoping to transform its industrial, petroleum-based environment into a service-driven economy. The cloud will be designed to allow start-up companies to do testing and software development through the web, but will also include electronic government services (e.g., e-services). IBM has also set up cloud computing in the Chinese city of Wuxi, and was recently picked to build another cloud computing platform - Quang Trung Software City – in Ho Chi Minh City (Saigon, the former capital of South Vietnam). For you trivia buffs, Quang Trung was an Emperor of Vietnam centuries ago. IBM is another emerging player, along with Microsoft’s Azure, Amazon.com’s EC2, and Google’s AppEngine, to name only a few of the more prominent participants in the growing move to cloud computing environments.

So, if your head is in the clouds or if all of this seems foggy to you, you should consider learning more – especially about the legal implications and issues. And you probably should start doing so BEFORE your IT, Finance, HR, Security, Audit, or Operations people (or maybe even the government regulators), come knocking on the door! Want or need help? Contact me, Joseph I. (“Joe”) Rosenbaum, or the Reed Smith attorney with whom you regularly work. We’ll help get you out of the mist and back on Cloud Nine!

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Wishing you health, happiness, prosperity and peace in 2010

In a tradition that started almost 4,000 years ago by the ancient Babylonians – although they celebrated the new year upon seeing the first new moon after the vernal equinox – please enjoy a very happy, safe and joyous new year celebration.  Those of you who look forward to Useless But Compelling Facts can read more about the history of new year celebrations, or how the new year’s festivities, now televised around the world, began in New York’s Times Square.

 
This is the first year we have published in a blog format, and with your feedback – mostly positive and always constructive – and more than 17,000 visitors in slightly less than 11 months, I am grateful and appreciative for your support.  Thank you for reading Legal Bytes.

-  Joe Rosenbaum

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Each year, at the end of the year, I create a Legal Bytes piece intended to be more thoughtful and philosophical than the articles posted during the year. Thank you, in advance, for reading and allowing me to attempt to provide some insight and thoughtfulness to your day, in what I hope is an enlightening and entertaining manner. While my normal postings are designed to bring you news, updates and thoughts about timely events, this is one is longer – and arguably less exciting – and asks you to indulge me in a bit of philosophy, or what passes for an attempt at philosophy about the year past and the year ahead.

This article will contain no hypertext links to distract you; it will not have citations to offer more information about a snippet; nor will it dazzle you with factoids or intrigue you with today's news. It's just me philosophizing, my one chance during the year to ramble about where we've been and where I think we might be headed – without any credentials, qualifications or expertise to do so. 

So loyal Legal Bytes' readers, you don't have to buckle up or fasten any seat belts. Just pull up an easy chair, open your Blackberry, your Kindle, your Droid, your iPhone, PC, Laptop, Netbook, Web-TV, PDA, or whatever your favorite Legal Bytes' reading device might be; pour a glass of tea (or whatever your liquid of choice might be), sit back and enjoy . . . and again, thank you. So here goes.

*****

I'm a Star Trek fan. I've watched all of the television episodes, starting from the day Captain Pike, bound to a wheelchair resulting from his own heroism, is taken to the very first virtual world I can recall being displayed in mass media. I've watched all of the Star Trek movies. I confess to being a victim of an "even number" preference, culminating so far in this last Star Trek – certainly among, if not the favorite of all of them. 

Computers that can search for anything and everything. Touch screens and voice commands. Warp speed and instant communication across multiple languages and without regard to geography or time zones. All that with a bit of humor, a bit of clever philosophy and a social network (crew) that have hugely diverse (one might say inter-planetary) ethnic, cultural and racial characteristics, and at the same time work seamlessly together as a team. More than science fiction, Star Trek is really science within fiction, and a fiction that might just be reality if we close our eyes long enough and hard enough. Most of all, to boldly go where most of us have never gone before isn't really referring to space as the "final frontier," is it?

Now I know not everyone is a Trekkie, and I confess that while I am a big fan, I'm not really obsessed. I don't go to conventions or wear uniforms, nor do I run around screaming "Beam me up," although I do confess to a feeble attempt at a Scottish accent when I respond "I can't do it, Captain." So what is it that makes me able to watch over and over again and relish each scene and each episode, and look forward to each new motion picture? It's not simply because I like science fiction. Nor is it solely because of an ensemble cast, made up of some extraordinarily fine individual actors who work extraordinarily well with each other and with scripts that combine serious science fiction with some tongue-in-cheek individualism, not always in human form.

Let me digress to a personal, but relevant anecdote. Many years ago I had the pleasure of actually meeting Leonard Nimoy. I won't go into detail, but on behalf of a client, I had contacted Phil Gersh, the gentleman (a true gentleman) who represented Mr. Nimoy at the time, and Mr. Gersh must have relayed our conversation to Mr. Nimoy, resulting in a meeting in New York. It was over lunch, very relaxed and informal, but I admit to feeling an amazing sense of excitement, good fortune and privilege at being able to actually sit down and talk with someone I had long admired as an actor, writer, director and producer.

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In 1804, William Wordsworth published what is certainly among the most well known and oft-read poems in the English language – it begins, “I wandered lonely as a cloud that floats on high o'er vales and hills, when all at once I saw a crowd, a host, of golden daffodils.”  Now even back in 1804, Wordsworth, no XML programming guru, was already talking about clouds, crowds and hosts . . . 

So we read recently that NetMass, a Texas company, reached a settlement and had a judgment issued in a federal patent case involving a lawsuit by an inventor, Mitchell Prust, alleging that NetMass infringed some cloud computing and cloud storage patents. Mr. Prust had apparently invented a mechanism to allow web browsers to access application programming – a fundamental aspect of cloud computing. The settlement and judgment entered by the Federal Court in Texas (Mitchell Prust v. Softlayer Technologies, Inc., et al., No. 2:09-cv-236) notes that NetMass had infringed three of Mr. Prust’s patents and enjoins NetMass from continuing to do so in the future. From current published reports, Mr. Prust also has a lawsuit pending in Federal Court in California against Apple.

This may be just the beginning of a wave of intellectual property lawsuits as cloud computing begins to evolve and become part of a commercial operational toolkit around the globe – not much different from those surrounding ATMs, online banking, networking and other once-emergent technology platforms. Stay tuned. You will be hearing more from us about clouds in the year ahead.

In the meantime, if your head is in the clouds (or perhaps just a fog), and you need help, feel free to contact me, Joseph I. (“Joe”) Rosenbaum or the Reed Smith attorney with whom you regularly work.

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This post was written by Craig P. Opperman.

The United States Court of Appeals for the Federal Circuit has just overturned a lower court’s decision to throw out a patent infringement action brought by AsymmetRx against Biocare Medical. Why, you ask? The Appeals Court concluded in AssymetRx, Inc. v. Biocare Medical LLC that the patent owner, Harvard, should have been included in the lawsuit. Why should you care? Bear with me, especially if you are involved in any way in licensing, exploiting or otherwise commercializing technology, inventions or other intellectual property related to colleges and universities – or in litigating related licensing disputes.

Harvard gave AsymmetRx an exclusive license (including the right to enforce its rights) under a fairly standard and typical “university” licensing agreement. AsymmetRx sued Biocare and won. So far, all is right and ‘normal’ with the world. BUT, not so fast. Biocare appealed the decision and – are you ready?- The Appeals Court for the Federal Circuit sent the case right back to the District Court saying, exclusive? Not really. Harvard should have been joined in the infringement action. What, you say? How can this be? Read on.

The appellate court ruled that reading all the terms and conditions of the standard university license altogether, AsymmetRX didn’t really have the equivalent of full ownership of the patent or the subject matter – exclusive license notwithstanding. So Harvard, the owner, must be a party to the action for any determination on the merits. Specifically, the Court stated: “When viewing the retention of the right to sue in conjunction with all of the other rights retained by Harvard, it is clear that Harvard conveyed less than all substantial rights under the patents. While any of these restrictions alone might not have been destructive of the transfer of all substantial rights, their totality is sufficient to do so.”

In other words, since Harvard, under the terms of its license, still kept a significant amount of control over the patent rights, AsymmetRx as a licensee did not have enough of an interest in the patents to sue without joining Harvard – even though the license terms purported to give AsymmetRx the right to do so. Hmmmm.

Who cares? First of all, universities may now end up having to be joined in every intellectual property infringement action or disputes over intellectual property rights – even though it/they may have given an exclusive license, including the right to bring an action in its own name, to someone else. Are the litigators seeing dollar signs, and are university officials seeing legal costs and additional expenses, in the licensing process?

Just as significantly, if you are a transactional or intellectual property lawyer (or if you are involved in the licensing process from a transactional, contractual or licensing point of view), it gets more complicated. Universities have crafted standard licensing terms which, with rare exceptions, are used in virtually all of their licensing arrangements. So do you change the terms and conditions of these license agreements, relinquishing a greater degree of control – in which case the contract might look more like an ‘assignment’ than a ‘license’ – OR do colleges and universities start gearing up for being involved in more and more intellectual property infringement and rights disputes and lawsuits? If so, does the license agreement specifically need to state that the university is willing or amenable to being joined in the action? What if it’s not? What if it wants to decide on a case-by-case basis? What if the Court decides the university must be joined anyway? What if . . .?

So, are you a licensee? An investor? A university? A rights holder? Doing due diligence? Negotiating licensing agreements? Representing any of these folks? You can do nothing and hope for the best, or you can contact Reed Smith’s Craig P. Opperman. In uncertain times, no one may have all the answers, but at least you will have an informed basis to make some decisions from lawyers who know.

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Earlier today, Julius Genachowski, Chairman of the Federal Communications Commission (FCC), telegraphed the Commission’s plans to open a formal rule-making process on the issue of “net neutrality.” It’s likely the specifics regarding hearings and a timetable for any proposed rulemaking procedures will be on the agenda for the FCC's October meeting.

While many of the major carriers – including wireless carriers who have typically been out of the fray when it comes to the Web – have argued against both the need and the wisdom of competitive regulation amongst carriers, open Internet advocates, many of whom were ardent campaign contributors and supporters of President Obama, have been aggressively pushing for regulation. Companies such as Amazon.com and Google, have long argued for rules that would prohibit carriers from denying their right to give consumers complete freedom of choice when it comes to both the content they receive and the devices they use to receive it. While not necessarily quibbling with what appears, on its face, to be a reasonable and market driven approach, opponents point out that the government stay away from intervening in yet another major marketplace – this time one, they argue, that isn’t broken. Further, and perhaps more significantly, companies such as ATT and Verizon, now joined by ATT Wireless, Verizon Wireless, Sprint (Sprint Nextel) and T-Mobile (Deutsche Telekom) argue that forcing carriers to open up their networks without corresponding economic counterbalances in place will force them to either raise consumer prices to keep up with virtually unrestricted broadband demand, but may require them to limit availability and accessibility for capacity and technological reasons. Wireless carriers may have special reasons to be concerned given current pricing models and the technological limits of current bandwidth capacity. That said, the major cable television, fiber optic and DSL-based Internet providers have long had to cope with government regulation and requirements.

Back in the days following the breakup of AT&T’s telephone monopoly (anyone remember Judge Green and his landmark 1983 rulings?), the regional and local companies spawned by carving up the nations’ previously regulated monopoly – the so-called ‘Baby Bells’ - worried about long-distance carriers (including the remaining long distance carrier, AT&T) making deals for preferential treatment over interconnections. Thus the principle of equal (“neutral”) treatment for interconnectivity arose. When cable companies started offering Internet service – previously the domain of phone-line intensive telephone companies (remember dial-up?) – they tried to convince everyone that neutrality didn’t apply to them. They carried information, and weren’t, after all, common carriers.

OK. Fast forward to the market response. Phone companies decided to get into the content business! Cable companies are offering Internet and VOIP services, telephone companies are offering entertainment, programming and information services, wireless phone services stream video content and provide messaging of news, sports scores and applications galore (oh, they do still carry voice traffic when you need to make a call).

So back to 2009 and the future. According to Commissioner Genachowski: "This is not about government regulation of the Internet," adding that "We will do as much as we need to do, and no more, to ensure that the Internet remains an unfettered platform for competition, creativity, and entrepreneurial activity." That said, his proposal would add a fifth principle to the FCC’s existing four that relate to the Internet. To wit, that carriers will not be permitted to be selective about the content they carry (subject, of course, to their continued ability to block illegal content) and will be required to be transparent about how they are managing the carriage of content across their networks. Violations and allegations of discriminatory practices would still be reviewed by the FCC as and when the facts of each specific case arise. You can read or download the complete statement of Commissioner Genachowski’s prepared statement today, entitled “Preserving a Free and Open Internet: A Platform for Innovation, Opportunity, and Prosperity,” right here.

Clearly if you are a small Internet application provider or software developer that has traditionally had to pay for access through a carrier, open, non-discriminatory access would prove a major boon. Then again, Internet carriers – wired and wireless - have invested huge amounts of capital in building their own proprietary networks. Since there is no evidence that there is a lack of competition, why should the government tell any of them what they should or should not carry on their networks? Indeed, since the early 1990s, when the Web evolved from a glimmer in the eye of Tim Berners-Lee, to a reality, there have been so few real complaints (and so few complaints from consumers, even as competitors bash each other about), why fix something that doesn’t appear to be or have been broken for almost two decades?

Confused as to how the FCC proceedings might or might not affect your business? Thinking about participating in the dialog or submitting comments to the FCC? Let Reed Smith help you. To stay informed, keep your mouse tuned to Legal Bytes, and if you need to know more, please feel free to call me or the Reed Smith attorney with whom you regularly work.

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This post was written by Andrew Boortz and Joseph Rosenbaum.

Over the last several months, France’s Parliament has been focusing on the issue of Internet piracy. In May, both houses of the French parliament passed the so-called “three strikes” law which would have given an independent body the ability to disconnect file-sharers from their ISPs. In June, the law was declared unconstitutional by the Constitutional Council because, under French law, the power to force such disconnection could only come through issuance of a court order. In response, French President Nicolas Sarkozy gave the first Presidential speech to the French Parliament in 150 years and passionately defended regulation of Internet piracy. 

After President Sarkozy's speech, the French Senate drafted and passed a modified version of the “three strikes” law which would allow alleged infringers to present their case to a French court, prior to losing their Internet connection. Judges in these hearings would have the power to: (1) order disconnection of the alleged infringer's Internet access; (2) fine the alleged infringer up to €300,000; and/or (3) sentence the alleged infringer to a two-year prison term. Just yesterday (September 15^th), the French National Assembly gave preliminary approval to the measure by a vote of 285-225 and now, a joint committee will unify the Senate and Assembly versions and present a final bill to both houses for a vote on September 22^nd.

In looking back over the piracy-related events of this year, it may well turn out that 2009 will be remembered as a watershed year in the struggle between Internet pirates and rights holders.  With the Jammie Thomas and Joel Tenenbaum verdicts in the States, the pseudo-shuttering of the Pirate Bay in Sweden, the implementation of a self-imposed, self-regulatory “three strikes” policy by Ireland’s largest ISP (created under threat of massive litigation) and now France’s revised and revitalized new “three strikes” law, the global community is indeed tilting towards greater sanctions and regulation of Internet piracy.

This raises questions for technology innovators. For example, Facebook, which according to a CNN report out today has a social network population nearly as large as the population of the United States, will soon launch a voice chat feature.  Most likely, the feature could be used to stream media across the globe as well as the nation? Would Facebook be liable for creation and distribution of such a feature, which is similar to that which created liability for the Pirate Bay creators for their torrent-tracking website?

Need help? Confused by the torrent of information, technology and legal rights?  Need to know more? Contact Andrew (“Drew”) Boortz, in our Washington, D.C. office, call me or contact the Reed Smith attorney with whom you regularly work.

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Earlier today the Federal Trade Commission announced details of the first of a series of Public Roundtables being held to deal with continuing efforts to examine, evaluate and determine if, and to what extent, regulation may be needed in connection with consumer privacy. In its announcement, the FTC specifically cites its intention to review privacy practices related to social networking, cloud computing, online behavioral advertising, mobile marketing, and the collection and use of information by retailers, data brokers and third-party applications.

The FTC’s announcement acknowledges the beneficial uses of information and technological innovation, while seeking to balance those against the need to protect consumer privacy. The first full-day session will be held Monday, December 7, 2009, at the FTC Conference Center at 601 New Jersey Avenue, N.W., Washington, D.C., and no registration is required. Those who cannot attend in person are welcome to go to FTC.gov and will be able to view the proceedings as a webcast.

The FTC has invited individuals and organizations to participate and/or to suggest topics. To participate, your request can be submitted directly to the FTC by email sent to privacyroundtable@ftc.gov on or before October 30^th, and comments surrounding the issues to be discussed can be submitted on or before November 6^th. The FTC has prepared a list of specific questions it intends to use in opening the dialog at this first in its series of public roundtable discussions and has invited written comments, as well as research submissions. Details can be found at the Privacy Roundtable Workshop page of the FTC’s website. Comments can be mailed to the FTC, or you can check the FTC website for instructions as to submitting comments electronically. Of course, Reed Smith stands ready to assist clients in preparing comments or providing representation, and if we can be of assistance, don’t hesitate to contact us. If you need to know more, please feel free to call me or the Reed Smith attorney with whom you regularly work.

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It was 1998 and identity theft had not yet hit the radar screens as heavily as it would during the course of the next decade. Who could predict? So when I received a call from Albert J. Marcella, Jr. Professor of Management in the School of Business and Technology, Department of Management, at Webster University in St. Louis, who said he was putting together an "audit oriented" publication for The Institute of Internal Auditors to guide professionals who were becoming increasingly concerned about online identity theft, I naturally wondered what I could contribute to that effort.

So we spent a great deal of time collaborating about what we knew, speculated about what we did not know, and tried to put the work in context—specifically, guidance for corporate auditors and security management professionals on what they needed to know as sensitive, personally identifiable information migrated online. The result, of which my contribution played only a small part, was a book entitled www.STOPTHIEF.net, Protecting Your Identity on the Web, published in November 1999 by The Institute of Internal Auditors.

Identity theft, not a brand new crime even then, had a new face in our online, digital interconnected world. And, it was growing and pervasive, and its implications—if for no other reason than the sheer magnitude of the potential risks and the speed at which they would materialize on or through the Internet—were unprecedented and were becoming global.

I now know what I could not have known then—that more than 40 states have passed identity theft statutes and that the Privacy Rights Clearinghouse website, which takes pride in cataloging such things, estimates that as of a day or two ago, 263,247,398 records containing sensitive personal information were involved in security breaches in the United States since January 2005—six years after the publication became available.

To appreciate the foresight and to learn about those audit guidelines and benchmarks, you have to buy the book. But to read my personal piece of that collaborative effort—an end-piece summary of the legal implications entitled "Technology, the Internet and Cyberspace: Challenges to National and International Privacy", you just have to read Legal Bytes.

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Last month, we brought you information about outsourcing—a topic making news daily. This month, we bring you smaller news with potentially bigger implications.

In the biblical prophecy of Isaiah, the wolf lives with the lamb, the leopard lies down with the kid and a little child shall lead them. You can draw your own conclusions as to who are lions, lambs and the little child, but a few days ago, the unthinkable occurred. Sun Microsystems and Microsoft reached peace by dropping most claims, cross-claims and the vitriolic debate raging since 1997 when Sun sued Microsoft alleging violations of its Java license terms. With a trail of litigation which includes U.S. and European antitrust regulators, the announcement is nothing short of astounding. Yes, it remains to be seen whether years of mistrust will dissipate and lead to true cooperation, but this is not simply a truce between two rivals. The Wall Street Journal quotes Tony Scott, Chief Technology Officer for General Motors, as saying “What we try to do is educate them on the real pain customers go through when you have multiple incompatible standards and technologies.” Instead of customers being forced to figure out (and pay for) solutions to interoperability and compatibility problems, vendors are now being pressured to do so. Is this the beginning of a trend? Too soon to tell, but this truce is a big deal—Mr. Scott represents a customer!

And now, number 2. Perhaps we have become less concerned about providing information to “friendly sites,” but Yahoo! has introduced a “paid inclusion” product which allows advertisers to guarantee their sites will show up in searches—although payments do not change the order in which results are displayed. Not to be outdone, Google’s new “G-mail” will have context-based advertising derived from—are you ready—a scan of key words in G-mail received by subscribers, which customizes advertising based on information in the e-mail. G-mail a friend about bowling and you may see a pop-up coupon for a local bowling alley. Marketing professionals and advertisers point to the fact that G-mail is an opt-in service and consumers have shown they are willing to give up privacy to obtain greater levels of convenience.

For the record, cookies were invented to allow you to have a shopping cart and accumulate items when going web shopping. Fast-forward past cookies to
spammers, phishing, pop-ups, invisible GIFs, web bugs, intelligent bots and spyware to this latest announcement. Google can now accumulate a detailed
dossier of individual consumer preferences and the contents of e-mails. No one is suggesting Google would abuse such information or that subscribing is not
truly voluntary, but not only do we know what you did last summer, soon we may also be able to tell you what you are planning next summer.

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Not a day goes by that outsourcing isn’t in the news. Not just news, but NEWS. The Wall Street Journal, Information Week, The New York Times, Financial Times, CIO Magazine, American Banker. “Press 1 for Delhi, 2 for Dallas,” “Prove It’s Secure: Legislators Want CIOs and Service Providers to Show that Customer Data Sent Overseas is as Safe as it is at Home,” “Global Talk Gets Cheaper—Outsourcing Abroad Becomes Even More Attractive as Cost of Fiber-Optic Links Drop,” “Offshore Outsourcing: How to Safeguard Your Data in a Dangerous World,” “Weighing the Benefits of Offshore Outsourcing,” “Big-Bank Perspectives on Offshore Outsourcing,” “Lesson in India: Not Every Job Translates Overseas,” “Business Coalition Battles Outsourcing Backlash,” “More Work is Outsourced to U.S., Than Away From It, Data Show,” “Offshoring Can Generate Jobs in the United States”—well, you get the picture. Senator Liz Figueroa (D-Calif.) is seeking legislation prohibiting consumer medical and financial data from being sent overseas without assurances of strong privacy safeguards (remember the U.S. position on the European personal data directive?). Even Alan Greenspan has weighed in, cautioning, “These alleged cures would make matters worse rather than better.”

Both providers and customers consistently articulate several key themes. Many third-party providers can do it cheaper, faster and at higher quality - processing is their business - not yours. Third-party providers survive by keeping up with technology, training personnel and responding to changes quickly and efficiently - often a secondary priority and a headache for other companies. Further, companies are recognizing that allowing a third-party to perform functions and assist in providing services rarely requires relinquishing control or responsibility - in fact, proper management increases, and almost always in a positive way.

Like it or not, outsourcing is likely to remain a significant weapon in management’s arsenal of choices in managing business—an alternative available for consideration as requirements change. Although perhaps obvious, an outsourcing transaction should take into account the following key issues:

• All or Some?—Assess needs, evaluate priorities, costs and requirements, and understand which functions, process or operations should be outsourced and which retained. Outsourcing is a tool, not an end in itself.
• Control, Flexibility & Cost—A delicate balance considering the difficulty and implications—especially when entrusted to a third party, or if you are a third-party provider. Agreements must address varying objectives, priorities, customers and suppliers—hardly a trivial exercise.
• Human Resource—Outsourcing affects employees: seniority, pensions and benefits, decisions involving termination, changes in salary, and even relocation. Immigration issues arise when moving people around—even for temporary training or other assignments.
• Performance Standards—Defining and prioritizing standards is difficult enough internally and fixing accountability in a contract even more so.
• Corporate Compliance, Privacy & Security—These issues require careful examination. Functions can be outsourced, but rarely can the responsibility.
• Relationship Management—Customer and provider must develop a solid working relationship—in operation and spirit. From shifting priorities to changing performance standards—there is no substitute for a strong, effective team approach.
• International—Global outsourcing gives rise to issues relating to currency fluctuations, differing intellectual property protections, privacy and transborder data flow, surveillance and security, governing law, dispute resolution, and interpretation and enforcement of contracts in local courts; and
• Insourcing—Sometimes forgotten, no decisions are permanent. Leave room to re-evaluate or move functions from one service provider to another in an amicable transition process. Businesses, operations, requirements and costs change—don’t lose flexibility.

Did you know Reed Smith has significant experience in handling sourcing transactions—near, offshore, strategic and otherwise? Did you know Reed Smith may be the only law firm with attorneys here and abroad who have handled major international and multinational outsourcing transactions for financial institutions, airlines, health care providers, telecommunications and manufacturing companies, to name a few? Did you know Reed Smith lawyers are adept at looking at both the purely legal and contractual issues, as well as counseling clients for success and guiding clients through the process?

Whether understanding sensitivities of internal employee concerns, or preparing RFPs and negotiating and managing these complex contracts, Reed Smith lawyers understand and handle risks and issues new and unknown to many organizations—a host of human resource and performance issues, assignment, immigration and employment, warranty, insurance, indemnity and liability questions, growth, change control, customer service and termination issues. How to handle a migration plan? What about our people? What if I can’t get the service I need? What if my needs, my systems, my operations or my processes or my business changes?

The implications are large, the risks enormous and the complexity overwhelming—don’t skimp on retaining people with the right expertise, including lawyers. Want to know more? Want to schedule a customized in-house seminar? Contact Joe Rosenbaum in the U.S. at jrosenbaum@reedsmith.com and let us help you.

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In April 1995, Datapro Reports on Information Security published a Disaster Avoidance brief (IS38-200-101) entitled “Avoiding a Legal Disaster: Business Continuity Planning for Multinationals.” In that paper, the author analogizes a famous 1932 “technology” case decided by the Second Circuit Court of Appeals in the United States, to the growing potential liability of users in managing their technology and information security resources. Specifically, the article states that “In 1932, a famous case entitled The T.J. Hooper (60 F.2d 737; 2nd Circuit, 1932) held that the failure to take advantage of existing and available technology—even though it was not in widespread or common use—was not evidence that the defendant’s duty to take reasonable care had been fulfilled. By analogy, when a disaster occurs, it will not be a defense to argue that a recovery or security system or preventive measure is not commonly in use, especially if using it would have averted the disaster or minimized the loss.”

The article, which focuses on what organizations can do to minimize risk, goes on to note that, “The more reliant business and operations become on technology, the more available preventive and risk management tools become, the less excusable a failure to implement meaningful measures and exercise due diligence over company assets will become to government, employees, customers, suppliers, and shareholders—all potential plaintiffs.”

Now this fact and the author would probably be relegated to obscurity but for an interesting article on I.T. Litigation that has just appeared in the February 1, 2004 issue of CIO Magazine, entitled “Courts Make Users Liable for Security Glitches.” The author notes that an interesting turning point arose in the wake of 9/11 when, in October 2001, Hartford Insurance removed computer damages from its general commercial liability policy coverage. The article goes on to cite three recent cases which are beginning to look a lot like a legal trend in this area. First, a case in which Verizon asked a court to order the State of Maine to refund money because Verizon wasn’t using Maine’s network while Verizon was “down” because of the “Slammer” worm. Verizon had not implemented a Slammer patch and last April the Court ruled that while one may not be able to control a worm attack, they are foreseeable—no refund (Maine Public Utilities Commission v. Verizon).

In Cobell v. Norton, the U.S. Department of the Interior’s website and computer security became an issue in a case involving benefits allegedly and to American Indians. The Court was sufficiently irritated by the Department’s conduct related to security audits, that the Judge actually commenced contempt proceedings! Finally, in the last case cited by the article, the American Civil Liberties Union hoped to avoid liability for accidentally publishing donor information by pleading it had outsourced its security to a third-party vendor. Although the case settled, it is doubtful such a defense would have worked and it is almost certain regulated companies will not be able to escape accountability for compliance by outsourcing regulated activities—the responsibility will remain theirs!

There appears to be an increasing, and not-so-subtle, shift away from the notion that programming errors related to security breaches, computer viruses, worms, logic bombs and other malicious code or hacker and denial of service attacks are somehow equivalent to unpredictable natural disasters like earthquakes or fires—thus not subject to a “fault” analysis, but more appropriately covered by ‘accident’ insurance. Indeed, these and other cases arising in the courts treat breaches of security as fair game for negligence lawsuits—especially where damage has been done to a consumer (e.g., identity theft) or where the assets of a company—tangible or intellectual property—have been compromised. As noted in the 1995 article, liability for failure to implement available security is likely to increasingly hold both providers and users of technology liable where negligence can be shown—or even reckless disregard where safety or the protection of assets are concerned. You can read the CIO Magazine article here and, by the way, the obscure author of the 1995 Datapro article can be reached at jrosenbaum@reedsmith.com should anyone wish to see a copy or discuss the issues raised—then or now!

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In a world increasingly dependent on information, technology and intellectual property rights, contract indemnities—especially if you are an innocent third party—can be critical. “Innocent” means you are a licensee or user of technology (e.g., software, database information) from a provider or licensor and a third party claims that your provider or licensor has wrongfully furnished you with intellectual property that belongs to them. While space doesn’t allow us to go into the finer points of contributory infringement, third-party claims and the distinctions between insurance, breach of representation, and warranty or contract claims and an indemnity, there is enough space to alert you to the fact that a third-party indemnity claim—even if you, the user/licensee, have not knowingly done anything wrong—is disruptive and unnerving at best and at worst can lead to damage claims. For example, the third-party, if successful, will require a new license agreement with you and new license fees (remember those license fees you already paid your current licensor/provider?). Caveat emptor (or, in this case, caveat licensor)!

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Federal Commercial E-Mail Legislation Takes Effect A major change in the law that affects privacy and commercial e-mail on the Internet took effect on January 1, 2004. The CAN-SPAM Act of 2003 doesn’t simply establish an “opt-out” framework for commercial e-mail, it completely pre-empts state law. Although an individual consumer doesn’t have the right to sue an offender under the Act, the Federal Trade Commission, along with the Attorneys General of each state, do. So what should you know?

First, the Act only applies to commercial e-mail—an e-mail whose primary purpose is promoting a commercial product or service. Although the FTC has not yet promulgated any regulations under the Act, simply because an e-mail has a URL link to a commercial website or refers to product or service doesn’t make it commercial e-mail. There are, of course, certain obvious exemptions built into the law. Product safety recall information or e-mails notifying you about changes or important notices concerning your subscriptions, memberships, purchase confirmations, accounts or e-mail related to your employment—all of these are so-called “transactional relationship messages” where the main purpose is communication related to a commercial transaction, rather than promotion or advertising.

Second, what does the law require. Starting January 1, 2004, all commercial e-mail (even if an existing business relationship exists and whether or not the e-mail was solicited or not) must contain a clear and conspicuous notice that a consumer can opt out of future e-mails and provide a web-based means to do so. A consumer’s request to opt out must be honored within 10 business days and marketers can’t sell or share the e-mail addresses of those who have opted out. The e-mail must also clearly identify itself as an advertisement—unless a consumer has specifically asked to receive commercial e-mail from a particular commercial entity. Third, the e-mail must contain a postal, physical address of the sender. Although it is not yet clear if a post office box is enough, the less-risky approach is to have a street address.

The Act has a number of other requirements related to labeling—for example, the subject (header) must accurately reflect the body or content of the message and the sender (the sponsor of the promotion) must be identified. Although the Act preempts state commercial e-mail laws, beware of the fact that state fraud, trespass and certain consumer protection laws can still apply.

Violations of the CAN-SPAM Act are criminal offenses and involve both fines and potential jail time upon conviction. As with most Federal crimes, aggravating factors increase the penalties and implementing good faith and reasonable measures to attempt to comply with the Act can lessen them. These penalties can be serious—jail-time of up to five years, $250 per e-mail up to $2 million in fines (which can be tripled up to $6 million if aggravating factors are present) and all computers and software used in the commission of the crime can be forfeit.

Although the primary purpose of Legal Bytes is to enlighten and inform you, it obviously does promote Reed Smith and encourages you to call us when you need legal support. Accordingly we will always give you the opportunity to opt out of receiving our publication by email and when we send you an e-mail, it will be clear as to what it is and who is sending it. This is not just the law, it’s good practice.

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The best Court Order in recent years can be found in the Citizens Coal Council v. Babbitt case (Civil Action No. 00-0274 (D.D.C. May 2, 2001)):

The recent heated exchange between plaintiffs and intervenor on the subject of whether or not the [National Mining Association] should have filed a statement of material facts pursuant to Rule 56.1 or not, whether the Court has granted plaintiff’s motion for leave to file supplemental authority or not, whether the Court’s own previous order is “authority” or not, etc., betrays a startling lack of sense of humor, or sense of proportion, or both, especially since it appears to be agreed that the facts relevant to this case are all in the administrative record. It is…ORDERED that NMA’s Rule 56.1 statement is not “rejected,” that it will remain of record, and that it may remain as “context” for NMA’s arguments. And it is FURTHER ORDERED that the parties lighten up.

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