APPLE SUED OVER IPHONE BRICKING

On October 5, 2007, California resident Timothy Smith filed a class-action lawsuit against Apple, alleging that the iPhone maker violated the state's antitrust law. The suit was filed in California state court on behalf of Smith by Damian Fernandez, an attorney who has been seeking plaintiffs for a class-action case against Apple over iPhone bricking. Specifically, Smith claims that Apple is violating the Cartwright Act, because the company prohibits iPhone consumers from using and purchasing a cell phone service other than AT&T. The suit also asserts that cell phone unlocking is completely legal, citing traditional copyright law as well as the more recent Digital Millennium Copyright Act. In addition, Smith's suit claims that as a result of Apple's unlawful and anti-competitive conduct, consumers continue to pay artificially inflated prices for the iPhone and AT&T's cell phone service. The suit is asking the court to issue an injunction against Apple, which would prevent it from selling the iPhone with any software lock. It also asks that Apple be enjoined from denying warranty service to users of unlocked iPhones and from requiring iPhone users to get their phone service through AT&T. The complaint does not ask for a specific amount in monetary damages, rather the complaint alleges that the plaintiffs are seeking an amount according to proof at trial. At this point, Fernandez is still recruiting plaintiffs, so the size of the suit is undetermined, but the complaint does point out that there are an estimated 1.28 million iPhone owners who are potential plaintiffs. The complaint may be found here

DEJA VU: APPLE SUED OVER IPHONE BRICKING

On October 5, 2007, Paul Holman and Lucy Rivello filed a class-action lawsuit against Apple and AT&T in federal court in California. The Holman-Rivello suit, which was filed the same day as Smith’s suit in state court, accuses the companies of illegally conspiring to tie iPhone customers to the telecom company's wireless network. The suit claims that Apple and AT&T conspired to block all modifications of Apple's iPhone to stymie any attempt by a user or competitors to diminish or tap into the Apple-AT&T revenue stream. Specifically, the suit charges that Apple blocked third-party applications, barred any ring tones but those it sold via iTunes, and disabled unlocked phones with last month's 1.1.1 version update. Apple updated the iPhone's firmware to 1.1.1 after warning users that the upgrade might brick, or disable, their devices. On September 24, 2007, Apple claimed that software hacks that unlocked the iPhone could pose a risk and warned that some of the unauthorized unlocking programs available on the Internet might cause irreparable damage to the iPhone's software. The Holman-Rivello lawsuit asserts that the 1.1.1 update was digital bullying, while the warning of irreparable damage to an iPhone by unlocking was a lie. Like the class-action lawsuit filed in California state court, the federal action seeks damages, although Holman and Rivello's have put a price on their damages totaling no less than $2.6 billion. The suit also wants the court to void any agreement between Apple and AT&T judged unlawful and to bar the companies from any similar moves in the future. The full complaint may be found here.

BEWARE OF E-MAILS CONTAINING MALICIOUS LINKS

According to a report published on September 27, 2007 by MessageLabs, the percentage of threats arriving in e-mails that rely on links to malicious sites, rather than arriving as file attachments, has increased tenfold since the first quarter of the year. The company said that 35% of the e-mail threats it now detects use embedded links to infect computers instead of the more traditional file attachments. In the first quarter of 2007, that number was a mere 3.3%, and in the second quarter, it rose to 20.2%. The links lead unwary users directly to malware downloads or to purposefully-crafted sites that contain malicious java script code. These website-based attacks are becoming more popular because people have learned not to open attachments but still follow links. The report may be found here.

VONAGE PATENT LITIGATION: A LEGAL ROLLERCOASTER

The month of October has been a legal rollercoaster ride for Vonage. On October 8, 2007, Vonage announced that it had settled its patent dispute with Sprint for $80 million and agreed to license Sprint’s Internet-calling technology. According to Vonage, the agreement is valued at $80 million, including $35 million for past use of the license, $40 million for a fully paid future license, and $5 million in prepayment for services. In addition, Sprint agreed to license its voice over Internet, or VoIP technology portfolio to Vonage, which covers more than 100 patents. The settlement came on the heels of a jury verdict ordering Vonage to pay $69.5 million in damages to Sprint for infringing on six of its patents. Initially, the settlement seemed to alleviate concerns that Vonage may be forced out of business. However, just as Vonage seemed to be getting over the hill, it was time for the dip. On October 19, 2007, AT&T filed suit in the U.S. District Court for the Western District of Wisconsin, alleging that Vonage willfully infringed upon a single AT&T patent related to telephone systems that allow people to make VoIP calls using standard telephone devices. But no rollercoaster ride is complete without a loop. On October 25, 2007, Vonage announced that it had settled its patent dispute with Verizon. Vonage has agreed to pay as much as $120 million to settle the dispute it lost in March and to keep the right to use technology vital to its operations. The actual amount Vonage will pay, however, depends on how the Court of Appeals decides Vonage's pending petition for rehearing regarding two of the Verizon patents. If Vonage wins rehearing, the payment will be cut to $80 million, but if the appeals court refuses to revisit the case, Vonage will pay $117.5 million to Verizon and give $2.5 million to charity. Vonage’s announcements may be found here and here.

FEDERAL JUDGE STRIKES DOWN OHIO NET CENSORSHIP LAW

On September 24, 2007, U.S. District Judge Walker Herbert Rice issued an injunction enjoining the state of Ohio from enforcing Ohio Revised Code § 2709.31(D)(1) as applied to Internet communications. The plaintiffs, acting under a trade association called the Media Coalition (which includes the National Association of Recording Merchandisers, the American Booksellers Foundation for Free Expression, and the Association of American Publishers), asked the court to enter summary judgment in their favor and permanently enjoin the enforcement of certain provision of the Ohio Code on the grounds that they were unconstitutionally vague, overbroad, and violated the First and Fourteenth Amendments. The provisions at issue include Ohio Revised Code § 2709.31(D)(1) as well as § 2709.01(E) as amended by House Bill 490. The laws were enacted to protect children on the Internet, but according to the plaintiffs, the laws do nothing more than create a censorship regime. The laws generally say that no person shall disseminate or offer to disseminate to a juvenile any material that is "harmful to juveniles." Ohio's House Bill 490 amended § 2709.01(E) to define harmful to juveniles as any material that describes or represents nudity, sexual contact, sexual excitement or sado-masochistic abuse which either appeals to the interest of a juvenile, would be offensive to prevailing standards of what is suitable for juveniles, or has no literary or artistic value. Bill 490 also amended § 2709.31(D) to state that a person electronically disseminates material under this provision if he or she has reason to believe that the person receiving the information is a juvenile. Since one-sixth of the Internet’s users are minors, the plaintiffs argued that for almost any website the operator has reason to believe that some of its users are minors and open to criminal prosecution for any material that meets the definition of "harmful to juveniles." According to Judge Rice, the definition of "harmful to juveniles" does not by itself violate the First Amendment. However, he said that in practice, applying that definition to the Internet on a "has reason to believe" standard is overly broad. In particular, he said, sexually explicit conversations in adult-only chat rooms (where a minor sneaks in) could be prosecuted. It would act as a ban to that segment of speech between adults which is protected by the First Amendment. Consequently, the judge found that § 2709.31(D)(1) was unconstitutionally broad and violated the First Amendment and issued an injunction enjoining the enforcement of it as applied to Internet communications. However, the judge overruled the plaintiff’s constitutional challenges to § 2709.01(E). The court’s full opinion may be found here.

DEFENDANT FOUND GUILTY IN RIAA SUIT FIGHTS BACK

On October 4, 2007, a jury found Jammie Thomas, a single mother of two, guilty of illegally sharing 24 copyrighted songs and ordered her to pay $222,000 in fines. The case is the first time the RIAA has won a jury verdict against an accused file sharer. However, Thomas announced that she plans to appeal based on the federal jury's finding that making songs available online violates copyright. The jury never found that Thomas had downloaded any music but found that she had infringed upon the copyrights by making the music available to others to download. Thomas explained on her blog that most file-sharing suits have been based on a similar theory and that she hopes her appeal will stop the RIAA from using a similar tactic against others. The verdict has given critics of the RIAA a rallying point and helped them organize efforts to stop legal actions enacted by RIAA. In fact, Thomas’ supporters have already donated over $16,000 to help her with her legal fees. More information about Thomas’ legal fight with the RIAA may be found here.

GW STUDENTS ARE THE RIAA’S NEXT TARGETS

On October 11, 2007, a district judge for U.S. District Court for the District of Columbia approved the RIAA’s request to serve immediate subpoenas on George Washington University to uncover the identity of the 19 John Does listed as defendants by the RIAA. The court ordered the university to tell its students, faculty or staff, if they are the ones behind the IP addresses in question, about the existence of the subpoenas within five business days. The court also gave the school and any of the John Does 25 days to respond with a legal motion opposing the subpoena. Unfortunately for the students at GW, the RIAA has no reason to stop its crusade against file-sharing after winning a jury verdict against Jammie Thomas. The court’s order may be found here.

ADOBE SOFTWARE VULNERABLE TO HACKS

On October 5, 2007, Adobe posted a notice on its website that said it had unknowingly incorporated vulnerabilities into versions 8.1 and earlier of Adobe Reader and Acrobat software that could allow malicious programs to get on to a PC without the user's knowledge. Such malicious software can take control of a machine and steal confidential data, send out tens of thousands of spam e-mails, or infiltrate government computer systems. Adobe said it believes the flaws only affect computers running Microsoft Corp's Windows XP operating system and Internet Explorer 7 Web browser. Some security experts said that what makes the Adobe case disturbing is that it came to light before the company had a solution to fix the problem, which means hackers have an opportunity to exploit the situation. However, on October 22, 2007, Adobe posted an update to the vulnerability and strongly recommended that users upgrade to Adobe Reader 8.1.1 or Acrobat 8.1.1. More information on Adobe vunerability and the update may be found here.

SUPREME COURT LETS CLASS-ACTION AGAINST HP MOVE FORWARD

On October 11, 2007, the U.S. Supreme Court denied an appeal by Hewlett-Packard Co. to dismiss a class-action lawsuit against Compaq Computer Corp., which HP acquired in 2002. The lawsuit was filed in 2003 by Oklahoma residents Stephen and Beverly Grider who claim that Compaq sold them a computer with a defective floppy disk drive and that the company did not replace the faulty drive. In 2005, the District Court of Cleveland County, Oklahoma, allowed the Grider lawsuit to become a nationwide class-action lawsuit. HP appealed that decision all the way to the Supreme Court. Since the Supreme Court refused to intervene in the Oklahoma lawsuit on behalf of HP, the case will go back to an Oklahoma state court. The Supreme Court’s order, which includes its denial of certiorari to HP’s appeal, may be found here.

PA COURT SAYS OFFICIAL CAN’T BE FIRED FOR SEXUAL E-MAILS

On October 15, 2007, the Commonwealth Court of Pennsylvania found that firing Charles Webb for sending e-mails with sexual content was inappropriate. Webb was a senior highway maintenance manager with Pennsylvania's Department of Transportation, or PennDOT, making $84,000 a year. He supervised 156 employees and was the highest-ranking PennDOT official in the York County Maintenance Office. His duties included ensuring that his subordinates followed PennDOT's acceptable use policy for the Internet. However, Webb spent time forwarding sexually explicit e-mails that contained penis jokes, videos of stuffed animals simulating sex, a Microsoft Word document titled "The Benefits of Sex," and a series of photographs (sent to his male subordinates) of women with their breasts exposed or skirts lifted up. Webb was caught when an anonymous voice-mail message to PennDOT's tip line in January 2006 reported that he was frequently absent from the office and was circulating derogatory e-mail messages. The PennDOT technology department subsequently recorded Webb's e-mail correspondence and compiled five CDs of e-mail over a five-week period. At an internal hearing in March 2006, Webb defended sending the messages as a way to boost morale and relieve stress. He was fired a month later for violating the Internet use policy, unauthorized use of PennDOT equipment, and failure to carry out his duties as a manager in a proper and responsible manner. Since Webb was a state employee, he appealed his dismissal under Pennsylvania's Civil Service Act, and the Pennsylvania State Civil Service Commission held three days of hearings on his case over a four-month period. In its final order released in January 2007, the Civil Service Commission agreed that some of the e-mail messages could have been inappropriate but said that firing Webb was inappropriate. Instead, the Civil Service Commission ordered that Webb be reinstated and demoted to assistant highway maintenance manager without back pay. Pennsylvania's Commonwealth Court upheld the Commission's recommendations because the court found that the Commission’s decision was not clearly erroneous or an abuse of discretion in light of the evidence. The court’s opinion may be found here.

FTC FINES INTERNET HIJACKER & MOUSETRAPPER

On October 16, 2007, the FTC announced that a website operator who used more than 5,500 copycat domain names to divert surfers from their intended online destinations to one of his sites, and held them captive while he pelted their screens with a barrage of adult-oriented ads, has agreed to settle FTC charges that he was in contempt of a court order requiring him to halt the practices. The defendant, John Zuccarini, agreed to pay $164,000 for violating the court order. The order barring Zuccarini from registering copycat domain names was entered in May 2002 after the FTC brought charges against Zuccarini for his practices. However, in August 2003, the United States Attorney for the Southern District of New York criminally prosecuted Zuccarini for the misleading use of domain names and possession of child pornography. He was sentenced to 30 months in prison and 36 months of supervised release. But he resumed the domain name registration scam after being released from prison in late 2005. Under the new FTC order, the defendant must give up $164,000 in ill-gotten gains, conform to enhanced compliance and monitoring requirements, and transmit a copy of the new order to his probation officer. The FTC announcement may be found here.

GOVERNMENT CRACKDOWNS ON BLOGGERS INCREASING

On October 16, 2007, Reporters Without Borders released its 2007 Worldwide Press Freedom Index which indicates that government repression in some countries has shifted from journalists to bloggers, with the vitality of the Internet triggering a more focused crackdown as blogs increasingly take the place of mainstream news media. According to the report, countries such as Egypt and Jordan, that were not sentencing journalists to prison terms anymore, have been doing exactly that recently to bloggers . Currently, Egypt is ranked 146th and Jordan 122nd in press freedom among the 169 countries for which data was available. Reporters Without Borders said major industrialized countries, including the United States, made slight progress, moving up several notches, with the exception of Russia. Iceland topped the list for press freedom in the survey, and Eritrea ranked last. Although North Korea and Turkmenistan ranked second and third from the bottom, the group claims that Eritrea deserves to be at the bottom because Eritrean President Isaias Afwerki has banished privately owned press outlets and jailed the few journalists who have dared criticize the government. Most democracies, however, improved their ranking, with the United States moving up to 48th place from last year's 53rd. The reason the United States did not make the top 30 is because videographer and blogger Josh Wolf spent almost eight months in jail for not turning over video footage of a demonstration in San Francisco and because the confidentiality of sources is under continued attack. In addition, Cameraman Sami al-Hajj, from al-Jazeera satellite television, is still being held without charges at the U.S. detention facility at Guantanamo Bay, Cuba, and journalist Chauncey Bailey was killed in Oakland, California, after his coverage made him a target. According to the report, no region, outside of Europe, has been spared censorship or violence toward journalists. The report may be found here.

PORNOGRAPHIC SPAMMERS SENTENCED TO FIVE YEARS

On October 12, 2007, the U.S. Department of Justice announced that Jeffrey A. Kilbride, 41, of Venice, California and James R. Schaffer, 41, of Paradise Valley, Arizona, had been sentenced to 72 months and 63 months in prison, respectively, for running an international pornographic spam ring that took in more than $1 million. Kilbride received a longer sentence because the court found that he had obstructed justice by trying to deter a government witness from testifying in the case. However, both defendants were fined $100,000, ordered to pay $77,500 to AOL, and will forfeit more than $1.1 million in illegal proceeds from their spam operation. The Department of Justice claims the trial, which concluded in June, was the first to include obscenity charges under the Can-Spam Act. Kilbride and Schaffer began spamming in 2003, sending out millions of spam messages advertising hard-core porn sites. The messages contained graphic images that were visible to whoever opened the e-mail. Later in 2003, the two men began using servers in Amsterdam to make messages they were sending from Phoenix appear to be coming from outside the United States. On June 25, 2007, a federal jury in Phoenix convicted the two men of sending spam messages with forged headers and domain names, conspiracy, fraud, money laundering, and obscenity charges. The Department’s announcement may be found here.

MICROSOFT BOWS TO EU

On October 24, 2007, Microsoft Corp. dropped a nearly decade-long legal battle with European regulators, agreeing to key parts of an antitrust ruling that has already led to hundreds of millions in fines. The world's largest software company will slash the royalty fees it charges rivals for critical interoperability information needed to make programs work smoothly with Microsoft's ubiquitous Windows. It will broaden access for open source developers that the EU said are now virtually the only alternative for users. Microsoft said it would not appeal the EU Court of First Instance decision on September 17, 2007 that rejected its challenge to a 2004 European Commission order that found it guilty of monopoly abuse. Microsoft has now agreed to substantial changes for server software, giving greater access to data it previously said was secret and valuable. For example, the company will now charge a one-time fee of 10,000 euros ($14,310) to any developer, including those working on open source systems such as Linux, for complete and accurate technical information to help make software compatible with Microsoft's Windows desktop operating system. It had previously demanded a percentage of future sales. Developers, such as IBM Corp. and Sun Microsystems Inc. which sell software based on Linux, will pay a worldwide patent fee of 0.4 percent of revenues for Microsoft's data compared to Microsoft's original rate of 5.95 percent. Furthermore, Microsoft will now charge for only 31 server protocols under patent instead of the 154 originally offered for licensing. If the software maker does not keep to the terms of the deal, competitors will be able to take the company to Britain's High Court to seek damages. Microsoft’s announcement may be found here and a press release from the EU Competition Commission may be found here.