The Hacker's Encyclopedia 1998/hackers_encyclopedia.iso/etc/hacklaw/hayes.txt

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<ARTICLE>
Date="05/09/94"
Citation="59 FR 23864"
Group="commerce"
Type="NOTICE"
Department="FEDERAL TRADE COMMISSION"
Agency="FEDERAL TRADE COMMISSION"
Subject="Hayes Microcomputer Products, Inc.; Proposed consent agreement With Analysis to Aid Public Commentg"
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[File No. 922 3332]

Hayes Microcomputer Products, Inc.; Proposed consent agreement
With Analysis to Aid Public Commentg

AGENCY: Trade Commission.

ACTION: Proposed Consent Agreement.
</HEADER>
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[File No. 922 3332]

Hayes Microcomputer Products, Inc.; Proposed consent agreement
With Analysis to Aid Public Commentg

AGENCY: Trade Commission.

ACTION: Proposed Consent Agreement.
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SUMMARY: In settlement of alleged violations of federal law
prohibiting unfair acts and practices and unfair methods of
competition, this consent agreement, accepted subject to final
Commission approval, would prohibit, among other things, a Georgia
manufacturer and distributor of computer communications products
from making certain representations regarding any modem-related
product, unless the respondent possesses and relies upon competent
and reliable substantiating evidence.

DATES: Comments must be received on or before July 8, 1994.

ADDRESSES: Comments should be directed to: FTC/Office of the
Secretary, room 159, 6th St. and Pa. Ave., NW., Washington,
DC 20580.

FOR FURTHER INFORMATION CONTACT:

Linda Badger, FTC/San Francisco Regional Office, 901 Market
St., Suite 570, San Francisco, CA. 94103. [phone].

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and sec 2.34
of the Commission's Rules of Practice (16 CFR 2.34), notice
is hereby given that the following consent agreement containing
a consent order to cease and desist, having been filed with
and accepted, subject to final approval, by the Commission,
has been placed on the public record for a period of sixty (60)
days. Public comment is invited. Such comments or views will
be considered by the Commission and will be available for inspection
and copying at its principal office in accordance with sec 4.9(b)(6)(ii)
of the Commission's Rules of Practice (16 CFR 4.9(b)(6)(ii)).

Agreement Containing Consent Order To Cease and Desist

   In the Matter of: Hayes Microcomputer Products, Inc., a corporation.

   The Federal Trade Commission having initiated an investigation
of certain acts and practices of Hayes Microcomputer Products,
Inc., a corporation (``proposed respondent''), and it now appearing
that the proposed respondent is willing to enter into an agreement
containing an order to cease and desist from the use of the
acts and practices being investigated,
   It is hereby agreed by and between Hayes Microcomputer Products,
Inc., by its duly authorized officer, and its attorney, and
counsel for the Federal Trade Commission that:
   1. Proposed respondent Hayes Microcomputer Products, Inc.,
is a corporation organized, existing and doing business under
and by virtue of the laws of the State of Georgia, with its
office and principal place of business located at 5835 Peachtree
Corners East, in the City of Norcross, State of Georgia.
   2. Proposed respondent admits all the jurisdictional facts
set forth in the draft of complaint here attached.
   3. Proposed respondent waives:
   a. Any further procedural steps;
   b. The requirement that the Commission's decision contain
a statement of findings of fact and conclusions of law; and
   c. All rights to seek judicial review or otherwise to challenge
or contest the validity of the order entered pursuant to this
agreement.
   4. This agreement shall not become part of the public record
of the proceeding unless and until it is accepted by the Commission.
If this agreement is accepted by the Commission, it, together
with the draft of complaint contemplated thereby, will be placed
on the public record for a period of sixty (60) days and information
in respect thereto publicly released. The Commission thereafter
may either withdraw its acceptance of this agreement and so
notify the proposed respondent, in which event it will take
such action as it may consider appropriate, or issue and serve
its complaint (in such form as the circumstances may require)
and decision, in disposition of the proceeding.
   5. This agreement is for settlement purposes only and does
not constitute an admission by the proposed respondent of facts,
other than jurisdictional facts, or of violations of law as
alleged in the draft of complaint here attached.
   6. This agreement contemplates that, if it is accepted by
the Commission, and if such acceptance is not subsequently withdrawn
by the Commission pursuant to the provisions of sec 2.34 of the
Commission's Rules, the Commission may, without further notice
to proposed respondent, (a) issue its complaint corresponding
in form and substance with the draft of complaint here attached
and its decision containing the following order to cease and
desist in disposition of the proceeding and (b) make information
public in respect thereto. When so entered, the order to cease
and desist shall have the same force and effect and may be altered,
modified or set aside in the same manner and within the same
time provided by statute for other orders. The order shall become
final upon service. Delivery by the U.S. Postal Service of the
complaint and decision containing the agreed-to order to proposed
respondent's address as stated in this agreement shall constitute
service. The proposed respondent waives any right it may have
to any other manner of service. The complaint may be used in
construing the terms of the order, and no agreement, understanding,
representation, or interpretation not contained in the order
or the agreement may be used to vary or contradict the terms
of the order.
   7. The proposed respondent has read the proposed complaint
and order contemplated hereby. The proposed respondent understands
that once the order has been issued, it will be required to
file one or more compliance reports showing that it has fully
complied with the order. The proposed respondent further understands
that it may be liable for civil penalties in the amount provided
by law for each violation of the order after it becomes final.

Order


Definitions

   For the purposes of this Order, the following definitions
shall apply:
   A. The term Improved Escape Sequence with Guard TIme means
the escape method technology described, among other things,
in United States Patent Number 4,549,302, titled as ``Modem
With Improved Escape Sequence With Guard Time Mechanism.''
   B. The term Time Independent Escape Sequence, or Ties, means
an escape sequence consisting of three escape characters (eg.,
``+++'') followed by a valid AT command, which can be followed
by additional at commands, and ended with another character,
typically a carriage return.
   C. The term modem-related product means any modem, any component
of any modem, or any hardware or software used in the operation
of any modem.

I

   It is ordered that respondent, Hayes Microcomputer Products,
Inc., a corporation, its successors and assigns, and its officers,
and respondent's agents, representatives and employees, directly
or through any corporation, subsidiary, division or other device,
in connection with the manufacturing, labelling, advertising,
promotion, offering for sale, sale, or distribution of products
containing the Improved Escape Sequence with Guard Time, in
or affecting commerce, as ``commerce'' is defined in the Federal
Trade Commission Act, do forthwith cease and desist from representing,
in any manner, directly or by implication, that:
   A. Because a modem does not incorporate the Improved Escape
Sequence with Guard Time, the use of that modem creates a substantial
risk of data destruction;
   B. When incorporated in modems, the ``Time Independent Escape
Sequence'' (``TIES'') creates a substantial risk of data transmission
failure;
   C. The Improved Escape Sequence with Guard Time is the only
escape method that does not create a substantial risk of data
transmission failure; or
   D. The use of any modem that does not incorporate the Improved
Escape Sequence with Guard Time entails a data transmission
problem that can be solved only by replacing it with a modem
that incorporates the Improved Escape Sequence with Guard Time;

unless such representation is true, and at the time of making
such representation, respondent possesses and relies upon competent
and reliable evidence, which when appropriate must be competent
and reliable scientific evidence, that substantiates such representation.
For purposes of this Order, ``competent and reliable scientific
evidence'' shall mean tests, analyses, research, studies or
other evidence based on the expertise of professionals in the
relevant area, that has been conducted and evaluated in an objective
manner by persons qualified to do so, using procedures generally
accepted in the profession to yield accurate and reliable results.

II

   It is further ordered that respondent, Hayes Microcomputer
Products, Inc., a corporation, its successors and assigns, and
its officers, and respondent's agents, representatives and employees,
directly or through any corporation, subsidiary, division or
other device, in connection with the manufacturing, labelling,
advertising, promotion, offering for sale, sale, or distribution
of any modem-related product in or affecting commerce, as ``commerce''
is defined in the Federal Trade Commission Act, do forthwith
cease and desist from representing, in any manner, directly
or by implication, the risk of experiencing data destruction,
data loss or data transmission problems due to any escape method,
unless, at the time of making such representation, respondent
possesses and relies upon competent and reliable evidence, which
when appropriate must be competent and reliable scientific evidence,
that substantiates such representation.

III

   It is further ordered that for five (5) years after the last
date of dissemination of any representation covered by this
Order, respondent, or its successors and assigns, shall maintain
and upon request make available to the Federal Trade Commission
for inspection and copying:
   A. All materials that were relied upon in disseminating such
representation; and
   B. All tests, reports, studies, surveys, demonstrations or
other evidence in its possession or control that contradict,
qualify, or call into question such representation, or the basis
relied upon for such representation including complaints from
consumers.

IV

   It is further ordered that respondent shall notify the Commission
at least thirty (30) days prior to the effective date of any
proposed change in the respondent that may effect compliance
obligations under this Order such as dissolution, assignment,
or sale resulting in the emergence of successor corporation(s),
the creation or dissolution of subsidiaries, or any other change
in the corporation(s).

V

   It is further ordered that respondent shall, within ten (10)
days from the date of service of this Order upon it, distribute
a copy of this Order to each of its officers, agents, representatives,
independent contractors, and employees involved in the preparation
and placement of advertisements or promotional materials, to
all company executives, and to all marketing and sales managers;
and for a period of three (3) years, from the date of issuance
of this Order, distribute a copy of this Order to all of respondent's
future such officers, agents, representatives, independent contractors,
and employees.

VI

   It is further ordered that respondent shall, within sixty
(60) days from the date of service of this Order upon it, and
at such other times as the Commission may require, file with
the Commission a report, in writing, setting forth in detail
the manner and form in which it has complied with this Order.

Analysis of Proposed Consent Order To Aid Public Comment

   The Federal Trade Commission has accepted an agreement, subject
to final approval, to a proposed consent order from respondent
Hayes Microcomputer Products, Inc., (``Hayes'') a Georgia corporation.
   The proposed consent order has been placed on the public
record for sixty (60) days for reception of comments by interested
persons. Comments received during this period will become part
of the public record. After sixty (60) days, the Commission
will again review the agreement and the comments received and
will decide whether it should withdraw from the agreement and
take other appropriate action or make final the agreement's
proposed order.
   Hayes manufactures and distributes products for computer
communications, including modems, local area networks, and software.
This matter concerns a patented ``escape sequence'' which Hayes
developed for use in its modems, and licenses to other companies.
An escape sequence is a mechanism by which modems end a data
transmission. The name of the Hayes escape sequence at issue
is the ``Improved Escape Sequence with Guard Time.'' The Commission's
complaint charges that respondent's advertising contained false
representations that the use of other escape methods creates
a substantial risk of experiencing data transmission problems.
For example, the complaint charges that Hayes made false representations
regarding the Time Independent Escape Sequence (``TIES''), an
escape method developed by several of Hayes' competitors. Specifically,
the complaint alleges that the respondent falsely represented
that:
   (1) Because a modem does not incorporate the Improved Escape
Sequence with Guard Time, the use of that modem creates a substantial
risk of data destruction;
   (2) When incorporated in modems, the ``Time Independent Escape
Sequence'' (``TIES'') creates a substantial risk of data transmission
failure;
   (3) The Improved Escape Sequence with Guard Time is the only
escape method that does not create a substantial risk of data
transmission failure; and
   (4) The use of any modem that does not incorporate the Improved
Escape Sequence with Guard Time entails a data transmission
problem that can be solved only by replacing it with a modem
that incorporates the Improved Escape Sequence with Guard Time.
   The proposed consent order contains provisions designed to
remedy the violations charged and to prevent the respondent
from engaging in similar acts and practices in the future. Part
I of the proposed order would prohibit the company from making
any of the false claims delineated above, unless they are true,
and at the time of making them, the respondent possesses and
relies upon competent and reliable evidence, which when appropriate
must be competent and reliable scientific evidence.
   Part II of the proposed order includes fencing-in relief,
prohibiting the company from making representations relating
to any modem-related product, regarding the risk of experiencing
data loss, data destruction, or data transmission problems due
to any escape method, unless, at the time of making such representations,
the company possesses and relies upon a reasonable basis, which
when appropriate, must include competent and reliable scientific
evidence. It is to be noted that this fencing-in provision relates
to any method used to switch a modem to the command mode-this
would include out-of-band escape sequences as well as in-band
escape sequences such as TIES or Hayes' Improved Escape Sequence
with Guard Time.
   The proposed order also requires the respondent to maintain
materials relied upon to substantiate claims covered by the
order; to provide a copy of the consent agreement to all employees
or representatives involved in the preparation and placement
of the company's advertisements, as well as to all company executives
and marketing and sales managers; to notify the Commission of
any changes in corporate structure that might affect compliance
with the order; and to file one or more reports detailing compliance
with the order.
   The proposed of this analysis is to facilitate public comment
on the proposed order. It is not intended to constitute an official
interpretation of the agreement and proposed order or to modify
in any way their terms.

Donald S. Clark,
Secretary.

[FR Doc. 94-11108 Filed 5-6-94; 8:45 am]
BILLING CODE 6750-01-M


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The Contents entry for this article reads as follows:

Prohibited trade practices:
  Hayes Microcomputer Products, Inc., 23864
</ARTICLE>