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cyberlaw informer #45

Welcome to the 45th issue of the weekly Mishpat Cyberlaw Informer - 

Law on the net newsletter from

This newsletter is sent only to subscribers. If you no longer 

wish to receive the Cyberlaw Informer, follow the unsubscribe 

instructions at the bottom of this newsletter.


In this issue:

1. Introduction

2. ICANN opens up membership to individuals

3. Reverse engineering allowed

4. Cyberlaw resource of the week

5. Computer & Internet law news and updates



1. Introduction


I would like to welcome the many new subscribers who joined the

Cyberlaw Informer this week. 


I have finally graduated from law school at Haifa University (Israel),

first in my class if I may brag, and started my one year internship,

which is compulsory in Israel (one can only take the Bar exam after

the internship). This changes my schedule and I will not be able to

produce a weekly newsletter. Therefore the Cyberlaw Informer will now

be published 2-3 times a month. 

This week's feature article brings a summary of a court ruling that

permits using a practice known as "Reverse engineering" of software

programs, when developing competing compatible programs.

We will also look at a new site by ICANN that allows individual

Internet users to participate in the process of adopting new domain

name policies. As usual you will find the cyberlaw news and the weekly

resource at the end of this newsletter. 

I hope you enjoy reading the newsletter. Comments, tips, and articles

are always welcome. Send them to

The Mishpat Cyberlaw Informer Archive (issues 1-41) is located at:

Feel free to use any of the material, or forward the newsletter to a

friend. Just don't forget to mention that they can subscribe to the

Cyberlaw Informer by visiting 

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2. ICANN opens up membership to individuals


The Internet Corporation for Assigned Names and Numbers (ICANN), the

non-profit, international corporation that oversees the management of

the domain name system (DNS) and the allocation of IP address,

unveiled a web site aimed at luring "at-large" members. The program

was created as a new way for Internet users from all over the globe to

participate directly in the ICANN process and help ensure the smooth

coordination of the Internet's technical infrastructure. 

The "ICANN At-Large Membership" site allows any Internet user that

completes an online membership application, has a valid email address

and a verifiable physical address, to become a tentative at-large

member. The at-large membership is intended to provide the Internet

user community a voice in the ICANN decision making process. Once it

reaches a critical mass, the at-large members will elect an at-large

council, which in turn will nominate nine individuals to serve on

ICANN's board of directors. 

ICANN's target is reaching an at-large membership consisting of no

fewer than 5,000 members. ICANN aims to have the nine board members

chosen and the at-large membership in place by early September. 

Some of the most hardest criticism of ICANN has come from Internet

stake holders who claim that the organization is making key decisions

about Internet governance without consulting the Internet community.

The at-large membership is supposed to provide a voice for those who

have a stake in the disposition of the DNS (i.e. almost all Internet


Thanks to a $200,000 grant ICANN received from the Markle Foundation,

there is no cost to register as an at-large member.

You can register as an ICANN member at:

Note: membership only takes effect after receiving a personal access

code by postal mail, so it might take a couple of weeks to become a

full member.

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3. Reverse engineering allowed


* Background *

Sony Computer Entertainment, Inc. (Sony) produces and markets the Sony

PlayStation console, a small computer with hand controls that connects

to a television console and plays PlayStation games that are inserted

into the PlayStation console on compact discs. Sony also licenses

other companies to make games that can run on the PlayStation. Sony

owns the copyright on the basic input-output system (BIOS), which is

the software program that operates its PlayStation. 

The defendant, Connectix Corporation, makes and sells a software

program called "Virtual Game Station" (VGS). The purpose of the VGS is

to emulate on a regular computer the functioning of the PlayStation

console, so that computer owners who buy the VGS software can play

Sony PlayStation games on their computers. VGS does not contain any of

Sony's copyrighted material. However, in the process of developing the

VGS Connectix repeatedly copied Sony's copyrighted BIOS during a

process of "reverse engineering" that Connectix conducted in order to

find out how the Sony PlayStation worked. 

* The proceedings *

Sony claimed infringement and sought a preliminary injunction. The

district court concluded that Sony was likely to succeed on its

infringement claim and enjoined Connectix from selling the VGS or from

copying or using the Sony BIOS code in the development of VGS.

Connectix appealed to the 9th U.S. Circuit Court of appeals. The

unanimous court reversed the district court's decision and dissolved

the injunction. 

Judge Canby, who delivered the opinion of the appeals court, ruled

that the intermediate copies of the BIOS made and used by Connectix

during the course of its reverse engineering were protected fair use,

necessary to permit Connectix to make its non-infringing VGS function

with PlayStation games. 

* Reverse engineering *

Copyrighted software ordinarily contains both copyrighted and

unprotected elements. The reason is that copyright protection does not

extend to any idea, procedure, process, system, method of operation,

concept, principle, or discovery embodied in the copyrighted work. 

Software engineers designing a product that must be compatible with a

copyrighted product frequently must "reverse engineer" the copyrighted

product to gain access to the functional elements of the copyrighted


Reverse engineering of software products encompasses several methods

of gaining access to the functional elements of a software program.

They include: 

(1) Reading about the program. This method is usually not effective

because software manuals often misdescribe the real product. In some

cases (such as the Sony PlayStation) the manufacturer does not make

such information available.

(2) Observing the program in operation by using it on a computer. In

this method , the reverse engineer is not observing the program code,

but the external visual expression of this code's operation on the


(3) Performing a static or dynamic examination of the individual

computer instructions (code) contained within the program. A program

known as a "disassembler" is used to translate the ones and zeros of

binary machine readable code into the words and mathematical symbols

of source code. This translated source code is similar to the source

code used originally to create the binary code. 

Operation systems, system interface procedures, and other programs

(like the Sony BIOS) are not visible to the user when they are

operating. One method of "observing" the operation of these programs

is to run the program in an emulated environment. In the case of the

Sony BIOS, this meant operating the BIOS on a computer with software

that simulated the operation of the PlayStation hardware; operation of

the program, in conjunction with another program known as a

"debugger," permitted the engineers to observe the signals sent

between the BIOS and other programs on the computer. This method

required copying the Sony BIOS from a chip in the PlayStation onto the

computer every time the engineers booted up their computer, and the

computer copied the program into RAM. 

All of this copying was intermediate; that is, none of the Sony

copyrighted material was copied into, or appeared in, Connectix's

final product, the Virtual Game Station.

* Connectix's actions *

Connectix engineers purchased a Sony PlayStation console and extracted

the Sony BIOS from a chip inside the console. The engineers then

copied the Sony BIOS into the RAM of their computers and observed the

functioning of the Sony BIOS in conjunction with the Virtual Game

Station hardware emulation software, as that emulation software was

being developed by Connectix. The engineers observed the operation of

the Sony BIOS through use of a debugging program that permitted the

engineers to observe the signals sent between the BIOS and the

hardware emulation software. During this process, Connectix engineers

made additional copies of the Sony BIOS every time they booted up

their computer and the Sony BIOS was loaded into RAM. Once they had

developed the hardware emulation software, Connectix engineers also

used the Sony BIOS to "debug" the emulation software. 

* Fair Use *

The machine code of a program may be copyrighted as expression, but it

also contains ideas and performs functions that are not entitled to

copyright protection (As mentioned above, copyright only protects

expressions of ideas, and not the ideas themselves. Copyright

protection does not extend to any idea, procedure, process, system,

method of operation, concept, principle, or discovery embodied in the

copyrighted work). 

Binary machine code cannot be read by humans. The unprotected ideas

and functions of the code therefore are frequently undiscoverable in

the absence of investigation and translation that may require copying

the copyrighted material.

The court followed the Sega precedent which states:

"Where disassembly is the only way to gain access to the ideas and

functional elements embodied in a copyrighted computer program and

where there is a legitimate reason for seeking such access,

disassembly is a fair use of the copyrighted work, as a matter of


The court continued by examining the four statutory fair use factors:

1. Nature of the copyrighted work

Some works are closer to the core of intended copyright protection

than others. Sony's BIOS lies at a distance from the core because it

contains unprotected aspects that cannot be examined without copying.

Therefore the court attached a "lower degree of protection than more

traditional literary works." 

Connectix's copying of the BIOS must have been "necessary" to have

been fair use. The court concluded that it was. Sony BIOS contains

unprotected functional elements. Connectix could not gain access to

these unprotected functional elements without copying the BIOS. The

BIOS is an internal operating system that does not produce a screen

display to reflect its functioning. Consequently, if Connectix was to

gain access to the functional elements of the Sony BIOS it had to be

through a form of reverse engineering that required copying the BIOS.


Connectix employed several methods of reverse engineering (observation

and observation with partial disassembly) each of which required

Connectix to make intermediate copies of copyrighted material. The

court ruled that neither of these methods renders fair use protection


The court rejected Sony's, that Connectix infringed the Sony copyright

by repeatedly observing the BIOS in an emulated environment, thereby

making repeated copies of the BIOS. The court reasoned that the

"necessity" requirement is the necessity of the method, i.e.,

disassembly, not the necessity of the number of times that method was

applied. Judge Canby noted that the interpretation advanced by Sony,

focusing on the number of copies made, would be a poor criterion for

fair use. Most of the intermediate copies of the BIOS were made by

Connectix engineers when they booted up their computers and the BIOS

was copied into RAM. But if Connectix engineers had left their

computers turned on throughout the period during which they were

observing the BIOS, they would have made far fewer copies. Such a rule

could be easily manipulated. Furthermore, the rule urged by Sony would

require that a software engineer, faced with two engineering solutions

that each require intermediate copying of protected and unprotected

material, often follow the least efficient solution, if  it required

the fewest number of intermediate copies.


2. Amount and substantiality of the portion used

Connectix disassembled parts of the BIOS and copied the entire BIOS

multiple times. This factor therefore weighs against Connectix. But in

a case of intermediate infringement, when the final product does not

itself contain infringing material, this factor is of very little


3. Purpose and character of the use

The fact that Connectix's copying of the Sony BIOS was for a

commercial purpose is a factor that weighs against a finding of fair

use. However, the court found that Connectix's VGS is modestly

transformative. The VGS creates a new platform, the personal computer,

on which consumers can play games designed for the Sony PlayStation.

This innovation creates opportunities for playing in new environments,

specifically anywhere a Sony PlayStation console and television are

not available, but a computer with a CD-ROM drive is. The VGS itself

is a wholly new product, notwithstanding the similarity of uses and

functions between the Sony PlayStation and the VGS. Therefor the court

ruled that the third factor favors Connectix.

4. Effect of the use upon the potential market

Whereas a work that merely supplants or supersedes another is likely

to cause a substantially adverse impact on the potential market of the

original, a transformative work is less likely to do so. Because the

VGS is transformative, and does not merely supplant the PlayStation

console, the VGS is a legitimate competitor in the market for

platforms on which Sony and Sony-licensed games can be played. For

this reason, some economic loss by Sony as a result of this

competition does not compel a finding of no fair use. The court

concluded that this factor favors Connectix.

Three of the factors favor Connectix. One factor favors Sony, and it

is of little weight. Accordingly, the court ruled that Connectix's

intermediate copying of the Sony BIOS during the course of its reverse

engineering of that product was a fair use.

The full text of Sony v. Connectix can be found at the Ninth Circuit

Court of Appeals site:


(Copy and paste both lines of the URL).

* Sony's response *

Sony has already filed a new suit alleging patent infringement by

Connectix. After loosing the copyright suit, Sony now claims it owns

11 patents needed to make the  PlayStation. Sony claims that Connectix

is illegally using those patents to make the VGS.


5. Resource of the week


This week's resource is The Office for Harmonization in the Internal

Market (Trade marks and Designs) at

OHIM is the body is responsible for registering community trade marks

in the EU. The Community trade mark grants its proprietor a uniform

right valid in all member states of the European Union by means of one

procedural system.

The OHIM trademark database can be searched online for free at:

You can learn more about the legal aspects of community trademarks at:

If you would like to recommend an Internet legal resource, please send

the details to Full credit is given to


You can also recommend resources at the online bulletin board

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5. Cyberlaw news and updates


Each week Mishpat Cyberlaw Informer brings you the latest news about

online and computer law, with links to the full reports available

on the web.

Top news


* EU and U.S. Reach Tentative Data Privacy agreement  *

The Wall Street Journal reported that European Union (EU) and U.S.

government officials have reached a tentative plan to resolve a data

privacy dispute that could have halted e-commerce between companies

and individuals in the U.S. and EU. At issue is the EU Privacy

Directive that gives EU member country citizens the right to know

about their personal data being held online, the right to correct any

information that is inaccurate, to delete any information that was

collected illegally and to receive compensation for any damage

suffered as a result of illegal data processing. 

Some privacy advocates complain that agreement fails to address

several important issues. It does, however, require U.S. companies

that trade, or want to trade with people in EU countries, to adhere to

strict data privacy regulations. The Federal Trade Commission (FTC)

and other U.S. regulatory agencies will enforce the rules on behalf of

the EU. In return, the EU will allow U.S. companies to trade

relatively freely in the EU territories.

* Professor Bernstein can post his crypto code online *

The U.S. Department of Commerce said its new encryption export policy

permits University of Illinois professor Daniel Bernstein to post

source code for his encryption program. A U.S. Court of Appeals ruled

last year that the former policy was an unconstitutional violation of

Bernstein's freedom of speech.,1283,34550,00.html

* Yahoo! Host racist sites *

The Anti Defamation League (ADL) claims that Yahoo! is breaking its

own terms of service by hosting dozens of sites promoting the hate

groups. The ADL said more than a dozen hate groups can be found in the

category "White Pride and Racialism". Yahoo's terms of service

agreement says, "You agree to not use the service to: upload, post,

email or otherwise transmit any content that is unlawful, harmful,

threatening, abusive, harassing, tortious, defamatory, vulgar,

obscene, libelous, invasive of another's privacy, hateful, or

racially, ethnically or otherwise objectionable..."

Privacy and Consumer protection


* Michigan AG adds to DoubleClick's trouble *

Michigan's attorney general took steps to file a consumer protection

lawsuit against the online ad firm DoubleClick. Michigan AG Jennifer

Granholm accuses New York-based DoubleClick of violating Michigan's

Consumer Protection Act. "We wouldn't insist on an Internet-wide

solution," said Tracy Sonneborn, Michigan's assistant attorney

general. "We're only concerned about Michigan consumers. DoubleClick

says it can target people geographically, and that's what we're

concerned about." 

Last year, DoubleClick acquired Abacus Direct, a firm that owns a

large consumer purchasing database. This gave DoubleClick the ability

to connect data it collects about online activities with a large

consumer database.

The firm is already facing six lawsuits, some of which have gained

class-action status. The Federal Trade Commission (FTC) has also

opened an informal inquiry into DoubleClick's consumer profiling


* DoubleClick retreats from previous plans *

Meanwhile. DoubleClick's  CEO pledged not to merge offline consumer

data with information about Internet surfers' habits until the U.S.

government and industry agree on standards.,1151,12563,00.html

* Spammers in Colorado will have to tell the truth *

A Colorado legislative committee has passed a bill that would require

spammers to add a special note in the email subject line of

unsolicited email messages. Under the proposed bill, senders of

unsolicited email will be required to use the characters 'ADV:' as the

first four characters in the subject line of the messages. The

legislation specifies further requirements such as enabling the

recipient to "opt out" of future mailings from the sender.,1283,34458,00.html

* Software glitch exposes sensitive financial information *

H&R Block's online tax filing service exposed some customers'

financial records to other customers, prompting the company to shut

down the site for a few days. The company's web-based tax preparation

service experienced a technical glitch that accidentally switched some

tax filers' records. When users signed on to the service to work on

their tax returns, they instead received someone else's filing

including  sensitive private information.

Domain names


* Law firms sue alleged cybersquatter *

Law firms and accounting firms sued Michael Moore for violating the

Anti-Cybersquatting Consumer Protection Act.  According to the suit,

Moore registered their names in July 1999 through one of his

companies. Moore then offered to sell the names for $1,000 each. The

suit also charges Moore of using the firms' recognized names to

attract business for Dig Dirt Inc., one of Moore's services which

claims the ability to get any information anytime about anyone.

* CBS looses domain dispute *

The Network Network company, a small computer training, consulting and

systems networking organization, has won its fight to retain its

rights to keep its website address, after a two year battle

with CBS and The Nashville Network, CBS's country music cable company.

CBS claimed that the domain name was rightfully theirs because users

of the Internet would go to the website and confuse it with

The Nashville Network. CBS also claimed that TNN was a famous mark

used exclusively to identify The Nashville Network. U.S. District

Judge, Nora M. Manella, did not accept CBS's argument and ruled in

favor of The Network Network.

The Network Network press release:

* Honda goes after *

A Web designer who currently drives his third Honda, registered the

domain name in 1996 to develop a search engine and link site

for fans of the auto maker. Now Honda's lawyers are trying to get the

domain name. The company's U.S. arm, is suing the designer for

trademark infringement, and cyberpiracy.,1367,34546,00.html

* Volkswagen won domain name *

Car maker Volkswagen managed to take control of the domain name

from U.S. Internet service provider Virtual Works. Virtual Works

claims that Volkswagen's action were  "reverse domain name hijacking"

since the domain Name has been in use in good faith since 1996.

Virtual Works said it will appeal the decision.

Intellectual Property


* iCrave TV caves in *, the online television broadcaster, agreed to stop

transmitting on the Internet in return for the withdrawal of three

Canadian and U.S. lawsuits against it. iCraveTV's president said the

company will try to negotiate licenses with copyright holders. The

settlement comes three weeks after a U.S. judge hit Toronto-based

iCraveTV with a preliminary injunction that prohibited the company

from broadcasting its signals into the United States for 90 days. That

effectively shut down iCraveTV because it did not have technology that

could limit its signals to Canada.

* Pirates offer Windows 2000 *

When Microsoft launched Windows 2000 last week, pirates in Moscow

(Russia) were already offering pirated versions on a CD-ROM for less

than $3. The copies are based on test versions earlier released by

Microsoft. Microsoft says Windows 2000 contains new anti-piracy

measures, but Moscow consumers seem to know they are buying pirated

software, and do not seem to mind.,1367,34422,00.html

* Microsoft sues software pirates *

Microsoft said it had filed piracy lawsuits against five companies in

Alabama and Mississippi. Microsoft alleges the companies violated

copyright and trademark rights by distributing counterfeit software.,1283,34518,00.html

* Microsoft looses Windows trademark in Korea *

Microsoft has lost an attempt to get a 1980 Korean trademark for

"Window" overturned in the Patent Court. The trademark is held by

diary and stationery producer Yangji Total Stationery Co of Seoul. The

company is the country's largest diary producer, and has the Window

diary concession for 2002 World Cup merchandise. Microsoft's problems

in Korea were that the prior trademark was both earlier and not used

in bad faith. Microsoft may now find itself faced with a damages suit,

and may have to stop using the name Windows in South Korea.

* Yahoo! Looses Yahu Trademark in China *

Yahoo! has failed to receive exclusive rights for the mark 'Yahu' in

China. China's State Trademark Bureau (STB) approved the application

submitted in May 1997 by Suzhou Yilong Electronics to register Yahu.

The STB concluded that the two trademarks (Yahoo and Yahu) are aimed

at different segments of consumers and that the companies' separate

market functions and methods will not cause any confusion among


* BroadVision and Art Technology settle patent suit *

Electronic business software company BroadVision Inc. said it had

settled its patent infringement suit against Art Technology Group. Art

Technology will pay a $15 million licensing fee to BroadVision.

BroadVision's patent consists of 49 claims covering an e-commerce


* Diamond threatens to sue SuperRio over Rio trademark *

Diamond Multimedia warned SuperRio that it will sue if SuperRio

doesn't stop using the Super Rio name for their products and in their

domain name. Both companies produce MP3 music players. Diamond holds a

trademark for the name Rio.

* California court stops commercial copying of photos *

The 2nd District Court of Appeal in Los Angeles ruled that U.S.

federal copyright law does not prevent someone from seeking damages in

state court if their likenesses are appropriated without their

permission. The suit was filed by KNB Enterprises after defendant Greg

Matthews copied 417 erotic photographs from Usenet, where KNB

displayed them, and put them on his  own site which charges a monthly

membership fee.  KNB, which had been assigned rights to the photos by

the models, sued under a law which prevents a person's name, voice,

signature, photograph or likeness from being used commercially without

his or her consent.

* MTVi in Net radio dispute with record companies *

MTV's Interactive Group, MTVi, has disclosed that it is in a licensing

dispute with two major record companies over its Net radio business.

MTVi said the companies demand that MTVi cease using their music on

the Net radio and pay for past use.

* Fox goes after Buffy sites * 

20th Century Fox which owns the rights to the TV show Buffy the

Vampire Slayer, is threatening fan sites that include copyrighted

material such as sound clips and pictures.,1367,34563,00.html

* settles with * an online community for U.S. Hispanics announced  the

settlement of a lawsuit brought against by, a site providing information about San Francisco

area bars and nightclubs. agreed that the two names

are not confusingly similar (they have the same meaning in different

languages).'s press release:

Cyber crime


* Hacker sent Aastrom stock up *

A computer hacker broke into the web site of Aastrom Biosciences Inc.,

a biotechnology firm listed on Nasdaq, and posted news of a phony

merger with Geron. The computer manipulation sent Aastrom's stock up

40%.  The stock lost most of its gains when the Aastrom alerted the

Nasdaq stock exchange.

* A third of Internet usernames in Qatar were stolen *

More than 6,000 Qataris Internet access usernames and passwords were

being sold on CDs over the past several weeks. Many of the usernames

and passwords apparently belonged to corporate accounts of several

ministries, major companies, and even the Emiri (Royal) Court. The

affected accounts total about one third of Internet users in Qatar.,1283,34515,00.html

* Canadian court convicts hacker for the first time *

A Quebec court convicted Pierre-Guy Lavoie, 22, of hacking the

computers of government and corporate institutions. Lavoie, the first

Canadian convicted of computer hacking, was sentenced to 12 months of

community service and placed on 12 months of probation.

* Chinese portal attacked by hackers *, a Chinese Internet portal, suffered a hacker attack around

the same time several popular sites (including Yahoo! And

were under "denial of service" attacks. Hackers flooded Sina's free

electronic mail service with countless messages, bringing its servers

down for several hours.

* FBI site under attack *

The FBI acknowledged that electronic vandals shut down its own

Internet site for more than three hours last week in the same type of

attack that disrupted some of the Internet's major commercial sites.

The FBI noted that its computers weren't broken into, and that its

affected Internet site is separate from all its internal systems,

including investigative files.

* Online broker under hacker attack *

NDB, an online broker, was cut off for more than an hour because of

what it said was an attack by computer vandals that was similar to

those against several prominent web sites during February.  NDB has

200,000 customers and 75 percent of its trades are made online.

(Free registration with NY Times required)

* Offshore gambling operator convicted in the U.S. *

For the first time, a  U.S federal jury convicted a man for running an

offshore online sports gambling operation. Jay Cohen, 33, a co-owner

of World Sports Exchange based in Antigua, was convicted by a

Manhattan federal jury for operating a sports betting business that

accepted bets and wagers on sporting events from Americans over the

Internet and telephones. Cohen was convicted under the federal Wire

Wager Act which makes it a crime to use telephone lines in interstate

or foreign commerce to place sports bets. Prosecutors allege that the

defendants have tried to skirt U.S. law by running their operations

from jurisdictions that allow gambling. Cohen and 21 other defendants

were indicted in 1998 for their involvement in offshore sports betting

operations. Ten of the defendants previously pleaded guilty in the

case and seven are still fugitives.,4586,2452956,00.html

* FBI shuts down presidential copycat site *

The FBI shut down a web site collecting political contributions for

U.S. presidential candidate Senator John McCain. The site, run by a

California based Internet services firm, copied McCain's online

campaign contribution page, without permission and with no official

affiliation to the McCain campaign. Visitors to the site had no idea

they weren't directly donating to the McCain campaign. Site operators

claim the site wasn't fraud but an attempt to help McCain's campaign

and had collected only $180.,4586,2444145,00.html

* Student accused of hacking U.S. government computers *

Ikenna Iffih, 28, a Northeastern University student, was charged with

hacking into federal U.S. government computers. Iffih allegedly seized

control of a NASA Web server and was able to read, delete and alter

files, as well as intercept and save login names. The compromised

server did not contain any classified or sensitive information and was

not involved with the command or control of satellites. Using the NASA

computer as a platform, Iffih allegedly attacked the Interior

Department's Web server, defacing the agency's Web page.

* Expedia and Amazon hit by credit card scam *

Online travel agency will  set aside $4 million to $6

million to compensate for fraudulent purchases on its site made by an

apparently organized and professional credit card fraud ring.  In a

separate incident, has also recently been victimized by

fraudsters. Roustam Kamilievich Mingazov, 22, has been charged with

scheming with other Russians to defraud Amazon and other merchants out

of more than $70,000 in goods, using 63 different credit card numbers.

* Credit card thieves hit *, is the latest online business being hit by a security

breach. About 2,000 records were taken at SalesGate, including credit

card numbers and other personal information.



* Ruling close in Microsoft trial *

The formal part of the federal Microsoft antitrust trial ended last

week after oral arguments. Both sides are now waiting for Judge

Jackson's final ruling. While the trial moved forward, ongoing

negotiations continued in Chicago, led by Judge Richard Posner, who

heads the U.S. Court of Appeals for the 7th Circuit. The talks, which

so far have proceeded slowly, could pick up in intensity following

final oral arguments.

* Microsoft denies agreement to opening Windows code *

Microsoft denied that Bill Gates said he would be willing to open the

Windows operating system source code to competitors to settle the

antitrust suit with the Justice Department. News service Bloomberg

quoted Gates as saying, "Microsoft Corp. would be willing to open the

source code for Windows software to competitors to settle the

antitrust case filed by the U.S. Department of Justice." Windows

accounts for about 40 percent of Microsoft's revenues.,1282,34440,00.html?tw=wn20000218

* Sun - Microsoft Java dispute moves closer to trial *

U.S. District Judge Ronald Whyte rejected Microsoft's request, in the

Sun v. Microsoft Java technology dispute, for summary judgment

regarding the independent development of Java. Whyte also dismissed a

Sun counter motion.  The judge denied both motions, stating that the

issue will have to be determined at trial as both sides offered

plausible interpretations of the Java licensing contract. 

Microsoft licensed Java from Sun in 1995 and has since built its own

runtime environment for use in its Windows operating systems and its

Internet Explorer. Sun claims that the Microsoft Virtual Machine is

incompatible with Sun's reference implementation of Java, and causes

developers to build Java programs that only operate on Microsoft's

Windows, defeating Sun's "write once, run anywhere" goal and violating

Sun's Java licensing agreement.



* Alberta Securities Commission closes off shore stock market *

The Alberta Securities Commission (ASC) shut down the World Stock

Exchange (WSE), a controversial pseudo stock market that had hoped to

bypass local securities laws by operating on the Internet from

Antigua. The ASC said that WSE's lack of regulation made it a threat

to prospective investors, and its business contrary to the public

interest. The ASC panel found it had jurisdiction over WSE's

activities because the WSE had links to Alberta. ASC officials noted

that "If you are involving Alberta investors, our view is, regardless

of how you are planning to put up your For Sale sign, you still have

to comply with our Act."

* Law students settle stock manipulation charges *

The U.S. Securities and Exchange Commission (SEC) settled with four

people accused of making money from a site that manipulated stock

prices. was set up by a law student to recommend

low-priced, thinly traded stocks and drive up their short-term prices.

The site operator along with his mother, a Colorado city council, and

two other law students, made more than $345,000 in profits by buying

the stocks before they were recommended on the web site and then

selling them after Fast-Trades subscribers bought shares.,1367,34705,00.html

* SEC sues online trading firms *

The U.S. Securities and Exchange Commission (SEC) sued two day-trading

firms and charged them with lending too much money to their respective


* SEC approves new electronic exchange *

The U.S. Securities and Exchange Commission (SEC) approved a proposal

for a new, all electronic stock options exchange, the New York-based

International Securities Exchange (ISE). This is the first approval

granted by the SEC since 1973.

Online Jurisdiction


* Massachusetts' Tobacco rules don't apply online *

A Massachusetts federal court ruled that Massachusetts' new tobacco

and cigar regulations do not apply to Internet-based advertising of

cigarettes and cigars. The new regulations prohibit advertisements

visible from areas likely to be frequented by minors.  Chief  Judge

William G. Young ruled that cigar advertisements in magazines or other

print media that are truly national in distribution (and not limited

to the state of  Massachusetts) don't have to comply to he

regulations. Since Internet-based advertising is targeted at no state

in particular, the rules do not apply on this form of advertising.

* Single online beer sale doesn't establish jurisdiction *

Lynda Butler, from Alabama, sued Beer Across America, an Illinois

corporation, under the Alabama Civil Damages Act, which provides for a

civil action by the parent of a minor against anyone who knowingly and

illegally sells liquor to the minor. Butler's son, using a credit card

issued in his name, placed an order for 12 bottles of beer through

Beer Across America's Internet site. The U.S. District Court for the

Northern District of Alabama concluded that the sale of beer occurred

in Illinois and held that the single sale was insufficient minimum

contact to establish personal jurisdiction over the defendant.

Freedom of speech and filtering


* Judge says school violated student's free speech *

A federal judge in Seattle ordered a school district to temporarily

refrain from punishing a student who created an "unofficial" web site

for his school. Chief Judge Coughenour concluded that the school's

five-day suspension of the student likely violated his right to free

speech.  The site featured mock obituaries of some of the student's

friends.  The judge found that the school district had not

demonstrated that the mock obituaries "were intended to threaten

anyone, did actually threaten anyone, or manifested any violent

tendencies whatsoever." 

A press release by the ACLU and court documents can be found at:

* Michigan Town votes not to install library web filters *

Voters in Holland, Michigan, voted 4,379 to 3,626 against the

installation of filters on computers at the city's public library. The

passage of the ordinance would have cut off funding to the library

unless officials installed computer programs that deny access to

certain web sites. Opponents argued that such filters are ineffective

and could have prevented library patrons from accessing legitimate


* Utah requires Internet filters for libraries *

The Utah Senate approved a bill that would withhold state funding from

libraries that fail to filter web sites featuring obscene material

from children younger than 18.

Open Access


* Open Access wins round in Florida  *

U.S. District Judge Donald Middlebrooks, dismissed most of Comcast's

lawsuit challenging Broward County (Florida) requirement that cable

companies share their cable TV lines with competitors offering

high-speed Internet access. Judge Middlebrooks dismissed six of the

seven counts raised by Comcast's Cablevision against Broward County.

He ruled that the company lacked legal standing to bring the claims,

which asserted that the county's access rule impaired contracts,

usurped federal powers violated due process. The remaining claim

argues that the open-access rule violates cable companies' First

Amendment free speech rights by limiting availability of their

facilities and forcing them to  participate in others' speech.,7407,2438729,00.html

* AOL Time Warner commit to open access *

America Online and Time Warner announced plans to open their

high-speed cable lines to outside ISPs. Consumers will be able to

subscribe to any ISP, even if the access provider has no affiliation

with AOL.

Misc. cyberlaw news


* eBay stops auction of human kidney *

eBay, the largest Internet auction site said it had stopped an auction

of a human kidney on its German website which drew a bid of 200,000


* Democratic Internet primary approved in Arizona *

Arizona Democrats will be allowed to vote by computer in the

presidential primary, the first election for public office in the U.S.

using the Internet. In a letter to party officials, the Justice

Department said that Attorney General Janet Reno had no objections.

The party still faces another hurdle -- a lawsuit alleging that voting

by computer would discriminate against minorities and the poor.

* Virginia approves Model Net Law *

The Uniform Computer Information Transactions Act (UCITA) was approved

by the Virginia Legislature. Though Virginia is the first legislature

to approve UCITA, the measure also has been introduced in Hawaii,

Illinois, Maryland and Oklahoma. UCITA is intended to provide a

uniform law for software and other computer information contracts.

* Via to fight Intel in court *

Via Technologies announced it will fight a patent infringement suit

brought against it by Intel. Intel filed patent infringement suits

against Via and a number of other chip-set makers.,7407,2440118,00.html

* More class-action suits against AOL *

America Online (AOL) faces two more class-action lawsuits. The suits

allege that the latest version of AOL's Internet software changes

customers' PCs in ways that make it hard, if not impossible, for them

to connect to alternative Internet service providers.,1151,12527,00.html

* MCI WorldCom, Cable & Wireless

MCI WorldCom, the giant long-distance phone company, will pay $200

million to U.K. Cable & Wireless, to settle a lawsuit about handing

over customers from its Internet business that the U.K. company bought

for $1.75 billion last year.

* McGraw-Hill sues *

McGraw-Hill has filed a lawsuit against, alleging the

company misappropriated confidential and proprietary business

information and engaged in unfair business practices. McGraw-Hill said

that a sales manager of, obtained confidential and

proprietary business information and trade secrets from McGraw-Hill's

Sweet's division. McGraw-Hill said, a provider of

information to the construction industry, competes directly with

* Travel agents file complaint against airlines' online travel service


U.S. travel agents requested a Justice Department review of plans by a

consortium of major airlines to set up an Internet travel service,

saying it would violate antitrust laws. The American Society of Travel

Agents claims the service would boycott its members and lead to price

fixing. Traditional travel agents have already been squeezed as

airlines slashed commissions, aggressively sold tickets through their

corporate sites and partnered with existing online travel sites.

That is all for this week,

Yedidya (Didi) M. Melchior 



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