The class action lawsuit hinges on shareholder complaints concerning upper-management communications between August, 2005 and May, 2006 and insider trades made in December, 2005 and January, 2006.

The plaintiff in the case, Stephan Dennis, alleges that top executives at Midway knew of a primary investor’s intentions to relenquish ownership of the company and sold out before the stock price took a hit.

Dennis and other shareholders are joining with at least nine other law firms around the country in response to the millions of dollars lost by investors as Midway’s stock plummeted 75 percent to $6 per share recently.  Stock prices were around $22 per share at the time of the alleged insider trading.

Media tycoon Sumner Redstone, the beneficial owner of more than 89 percent of Midway Games, Inc, turned over majority control and almost 33 million shares of the company to his daughter, Shari Redstone, on December 28, 2005.

“Insiders knew [Mr. Redstone’s involvement] was the only thing propping up the stock,” said Kenneth Vianale, a lawyer with Florida-based Vianale & Vianale LLP. Vianale’s firm joined the class action suit on Monday.

The case against the videogame company alleges that insiders knew Redstone was planning to give control over to National Amusements Inc., a Massachusetts-based movie theater company controlled by his daughter.

Ms. Redstone is the president of both National Amusements, Inc. and Sumco, Inc. Together, these two companies control almost 75 percent of Midway.

But less than two weeks before Mr. Redstone relinquished his direct control, the President and CEO of Midway Games, David Zucker, began to unload 550,000 of his own Midway shares.  At the time, Midway stock was trading at a six year high, reaching a peak of $23.26 per share in mid-December.  By January 6, he had pocketed more than $9 million before taxes.  Zucker had never before sold Midway stock.

Mr. Zucker was not alone. Thomas Powell, Executive Vice President and CFO of Midway, sold 40,500 shares on December 20, just eight days before Redstone’s deal. The same day, Miguel Iribarren, Midway’s vice president of finance sold 15,000 shares.  Assistant Treasurer James Boyle sold 15,000 shares the next day.  Chief Marketing Officer Steven Allison sold 21,250 the day after that.  These five men are the defendants in the class action suit.

Two months after the Redstone deal went into effect, stock prices for Midway had dropped more than 50 percent to $9.91 per share.

In order to be successful, attorneys for the plaintiffs will have to prove Midway executives intentionally withheld knowledge of the Redstone deal and knew that executing trades on that knowledge was illegal, said Mitch Herr, a former chief trial council for the southeast region of the U.S. for the SEC.

Plaintiffs must also show that withholding information about the Redstone deal constituted an omission or misrepresentation of the company's financial prospects, and that they have been damaged. 

At this time there is no reason to believe the Redstone family was a part of the allegedly illegal activity, Vianale says.

A spokesperson for Midway Games, Inc. was not available for comment.

Shares of Midway Games, Inc. were up 7 cents to $6.07 per share in afternoon trading Wednesday.  Midway shares are down nearly 29 percent from a year ago.

The bill also implements a first-to-file standard consistent with international practice.

"Intellectual property industries not only drive a significant part of the American economy, but also provide millions of Americans with well-paying jobs," bill co-sponsor Lamar Smith (R-Texas) said in a statement. "The Patent Reform Act protects intellectual property by addressing critical weaknesses in the current law and eliminating the legal gamesmanship that rewards lawsuit abuses over creativity."

The bill now goes before the full U.S. House for an as yet unscheduled floor vote. Similar legislation is pending before the Senate Judiciary Committee, which has a vote scheduled on the bill Thursday.

Since the legislation was first introduced in April, the pharmaceutical, bio-technology and manufacturing companies have lined up to oppose the key portions of the legislation.

Wednesday, though, that opposition seemed to be lessening.

"The leadership and several members of the committee recognized that changes to the bill are still necessary and we look forward to working with them to further improve the bill," 3M's Gary Griswold, representing the Coalition for 21st Century Patent Reform, said in a statement. "While there is still much work to do before the coalition can support the legislation, we are encouraged by the incremental progress made during today's mark-up."

Griswold added that while the group, which includes Eli Lilly, General Electric, Johnson & Johnson and Proctor & Gamble, still has "serious concerns" about the bill, amendments to it approved Wednesday were a "positive step." The amendments narrow the "second window" of post-grant reviews.

Last week, the Senate Judiciary Committee approved much the same amendments.

According to Sen. Patrick Leahy, infringement damages would be limited, "unless the claimant shows that the patent's specific contribution over the prior art is the predominant basis for market demand for an infringing product or process."

Sen. Arlen Specter (R-Penn.) added an amendment that seeks to eliminate the popular practice of "forum shopping" by limiting venues for patent-infringement cases.

"Few issues are as important to the economic strength of the United States as our ability to create and protect intellectual property," Smith said. "The Patent Reform Act of 2007 updates current law to better protect intellectual property, enhance patent quality and increase public confidence in the integrity of patents."

Reta was sentenced to 40 years in prison by Judge Joe Lopez immediately after he entered the plea, which could have brought a sentence of up to 99 years.

Reta's attorney, Eduardo Pena, said the American teen, who was born in Houston but grew up in Laredo, decided to plead guilty — with the right to appeal — after a statement he signed was admitted into evidence over Pena's objections. In the statement, he admitted being the driver of the car used in the murder of Noe Flores.

"Under the circumstances, it was the best we could do," Pena said of the plea.

A witness testified Wednesday that Rosalio "Bart" Reta was among three men in an organized cell paid $15,000 to kill Flores in January 2006.

Prosecutors say Reta and two other accused hit men were actually supposed to kill the half brother of Flores but mistakenly killed Flores instead. Flores was shot at least seven times from the back while standing in front of a Laredo home.

Reta, a baby-faced teen with dimples, was only facing charges in Flores' death this week, but he is separately charged in another Laredo killing, also allegedly carried out on the orders of the cartel.

Assistant District Attorney Jesse Guillen said that trial would likely start soon and would give authorities another chance to add time to the teen's sentence. Laredo investigators believe Reta began killing for the cartel in Mexico and was moved to Laredo when the cartel began placing operations on the U.S. side.

Despite Reta's youth and his 5-foot-2 stature, "he's a cold-blooded killer," Guillen said. "There's no doubt about it."

During testimony Wednesday, Laredo police Detective Robert Garcia laid out a pattern of phone records that connected Reta to two other members of his cartel-controlled group and suppliers of the car and guns used in the Flores killing.

The accused ring leader in the Flores killing, Jesus "Jesse" Gonzales, fled to Mexico after making bail. The third member of the group, Gabriel Cardona, pleaded guilty and is serving an 80-year sentence.

Microsoft has been hit with a new class action lawsuit alleging that the company's Xbox 360 console damages game discs.

"Microsoft improperly and/or negligently manufactured the Xbox 360 console in a manner that causes the expensive game discs ... to be scratched, rendering the games unusable," the suit alleges.

The complaint was filed Monday in the U.S. District Court for Southern California by two residents of the state: Christine Moskowitz and Dan Wood. The suit is seeking not less than $5 million in damages for Xbox 360 buyers affected by the alleged glitch.

Microsoft was slapped with a similar action last week in a Florida court.

In the California court filing, Moskowitz says that in March 2006 she purchased for her son an Xbox 360, along with the popular games Gears of War, Crackdown, and Saints Row. Within a few months, the games bore circular scratch marks and wouldn't work properly, Moskowitz claims. Wood says he purchased an Xbox 360 last December and the unit soon damaged his copy of Tom Clancy's Splinter Cell.

Both plaintiffs claim that the Xbox 360 console damaged their discs and that Microsoft refused to replace the ruined games or pay for them.

Earlier this month, Microsoft acknowledged that a hardware defect in the console was leading to what the company called "an unacceptable number" of general hardware failures. To deal with the problem, Microsoft said it would extend the warranty period on the units by three years, at a cost of between $1.05 billion and $1.15 billion.

The company made no mention of a disc scratching problem, however.

On Tuesday, Microsoft announced that Xbox division head Peter Moore was leaving the company to take a position at games publisher Electronic Arts.

In their lawsuit, Moskowitz and Wood argue that Microsoft's scramble to get a next-generation video game system into the market to compete with those from rivals Sony and Nintendo is at the root of the Xbox 360's problems. "Microsoft's rush to market, while positive for Microsoft, was detrimental to consumers because the Xbox 360 suffered from numerous hardware defects," the suit claims.

Responding to the Florida lawsuit, a Microsoft spokesman told InformationWeek that the company has not received a significant number of complaints about scratched discs, despite the fact that "there are millions of Xbox consoles in use."

The market was relatively small at the time the regulations were established in the 1930s.

But it has grown exponentially in recent years, with more than $2,400bn in municipal securities outstanding – more than the gross domestic product of China, according to the SEC.

Last year alone, more than $430bn in new municipal bonds were issued, about the size of the US defence budget.

Up to another third of the market is held indirectly through money market funds, mutual funds, and closed-end funds.

Yet the SEC's authority is limited to enforcing the anti-fraud provisions of US securities laws in the trading of munis.

Unlike in the corporate bond and other securities markets, the regulator's remit does not extend to assessing disclosures by muni bond issuers to ensure they are transparent.

Last year the city of San Diego was sanctioned by the SEC for having hidden billions of dollars in projected pension and healthcare liabilities to investors in its municipal bonds in the biggest case of such fraud since the late 1990s.

Saying there was an "urgent need" to improve the quality and the availability of disclosure documents, Mr Cox said: "One would think, given the size and importance of this market, and the prevalence of individual investors and older Americans in muni trading and investing, that investors in municipal bonds can rest assured that their interests are fully protected by the same high standards that operate everywhere else in the US capital markets. Not exactly. And not even close."

"The fact is, even large issuers of municipal securities generally don't have policies and procedures to ensure accurate disclosure," Mr Cox told a town hall meeting in Los Angeles.

He suggested that legislation establish a "limited regulatory regime" that would provide that the offering the offering documents and periodic reports provided to investors contain information similar to what they were accustomed to seeing for other securities they own.

It could also mandate that issuers of municipal bonds use US Gaap accounting standards, and give the SEC oversight of the Governmental Accounting Standards Board (GASB).

"A cornerstone of reform in this area would be to ensure that private companies who access the municipal market indirectly by using municipal issuers as conduits will meet the same requirements that municipal issuers themselves must meet," Mr Cox said.

The move is the latest example of attempts by US regulators to update rules governing securities issuance in place since the 1930s. Such rules are among a host of issues blamed for holding back the competitiveness of the US capital markets.

Vito Fossella, a republican congressman from New York, welcomed Mr Cox's initiatives, saying: "The quality and timely disclosure of the financials of muni issuers has been lacking. There needs to be greater transparency to protect investors, stop fraud and prevent a recurrence of the near defaults we've seen in recent years."

Total losses from the subprime mortgage meltdown may be in the order of $50bn to $100bn, according to estimates cited by Ben Bernanke in testimony to Congress on Thursday.

The Fed chairman said:"There clearly will be some significant financial losses associated with defaults and delinquencies on these mortgages."

Mr Bernanke also cautioned Congress against legislating narrowly on China's exchange rate, rather than addressing this in combination with the need for structural reform.

He said the exchange rate was "not a subsidy in the legal sense" but rather the cause of distortions in the Chinese economy that channel resources towards exports rather than production for domestic demand.