Source: http://www.techlawjournal.com/alert/2003/06/03.asp
Timestamp: 2019-04-23 09:51:00+00:00

Document:
TLJ Daily E-Mail Alert No. 672, June 3, 2003.
June 3, 2003, 9:00 AM ET, Alert No. 672.
6/2. The Federal Communications Commission (FCC) announced, but did not release, a Report and Order revising its media ownership rules. The vote was 3-2, with the three Republicans (Powell, Martin and Abernathy) supporting the Report and Order, and the two Democrats (Copps and Adelstein) opposing it. The FCC issued a press release [10 pages in PDF] and an attachment [1 page in PDF] describing and commenting upon the Report and Order.
The announced changes maintain, but relax, several rules. The FCC raised the national TV ownership cap from 35% to 45%. The FCC eased both the local TV multiple ownership limits, and radio multiple ownership limits. The FCC also eased the limits on cross ownership of TV stations, radio stations, and daily newspapers.
However, the FCC maintained the dual network ownership prohibition.
The FCC also announced, but did not release, a Notice of Proposed Rulemaking (NPRM) on defining non-Arbitron radio markets.
Dual Network Ownership Prohibition. The FCC release states that the FCC "retained its ban on mergers among any of the top four national broadcast networks." It elaborated that "The FCC determined that its existing dual network prohibition continues to be necessary to promote competition in the national television advertising and program acquisition markets. The rule also promotes localism by preserving the balance of negotiating power between networks and affiliates. If the rule was eliminated and two of the top four networks were to merge, affiliates of those two networks would have fewer networks to turn to for affiliation."
Local TV Multiple Ownership Limit. The FCC release states that "In markets with five or more TV stations, a company may own two stations, but only one of these stations can be among the top four in ratings. In markets with 18 or more TV stations, a company can own three TV stations, but only one of these stations can be among the top four in ratings. In deciding how many stations are in the market, both commercial and non-commercial TV stations are counted."
The release also states that "The FCC adopted a waiver process for markets with 11 or fewer TV stations in which two top-four stations seek to merge. The FCC will evaluate on a case-by-case basis whether such stations would better serve their local communities together rather than separately."
National TV Ownership. The FCC release states that the "FCC incrementally increased the 35% limit to a 45% limit on national ownership." The FCC elaborated that "A company can own TV stations reaching no more than a 45% share of U.S. TV households." It added that "The share of U.S. TV households is calculated by adding the number of TV households in each market that the company owns a station. Regardless of the station's ratings, it is counted for all of the potential viewers in the market. Therefore, a 45% share of U.S. TV households is not equal to a 45% share of TV stations in the U.S."
Finally, "In markets with nine or more TV stations, the FCC eliminated the newspaper-broadcast cross ownership ban and the television-radio cross-ownership ban."
Grandfather Rights. The FCC release also states that "The FCC's new TV and radio ownership rules may result in a number of situations where current ownership arrangements exceed ownership limits. The FCC grand-fathered owners of those clusters, but generally prohibited the sale of such above-cap clusters. The FCC made a limited exception to permit sales of grand-fathered combinations to small businesses as defined in the Order."
The five members of the FCC spoke at the June 2 meeting, and released written statements.
FCC Chairman Michael Powell wrote in a separate statement [2 pages in PDF] that "Today, we complete the most exhaustive and comprehensive review of our broadcast ownership rules ever undertaken. We have done so, obligated by our statutory duty to review the rules biennially and prove those rules are ``necessary in the public interest.´´"
Powell (at right) added that "Keeping the rules exactly as they are, as some so stridently suggest, was not a viable option. Without today’s surgery, the rules would assuredly meet a swift death. As the only member of this Commission here during the last biennial review, I watched first hand as we bent to political pressure and left many rules unchanged. Nearly all were rejected by the court because of our failure to apply the statute faithfully. I have been committed to not repeating that error ..."
See also, separate statement [PDF] Commissioner Kathleen Abernathy and release [3 pages in PDF] of Commissioner Kevin Martin, who joined with Powell to form the majority in support of the Report and Order. Martin wrote that "the media marketplace has changed significantly since our media ownership rules were first adopted." He cited the proliferation of broadcast channels, cable channels, and "thousands of sites on the Internet."
The FCC's two Democrats dissented. Commissioner Michael Copps wrote in a separate statement [23 pages in PDF] that "I dissent because today the Federal Communications Commission empowers America's new Media Elite with unacceptable levels of influence over the media on which our society and our democracy so heavily depend."
Copps (at right) wrote that "This morning we are at a crossroads -- for the Federal Communications Commission, for television, radio, and newspapers, and for the American people. The decision we five make today will recast our entire media landscape for years to come. At issue is whether a few corporations will be ceded gatekeeper control over the civil dialogue of our country; content control over our music, entertainment and information; and veto power over the majority of what we and our families watch, hear and read."
See also, separate statement [10 pages in PDF] of Commissioner Jonathan Adelstein. He wrote that "This is a sad day for me, and I think for the country. I'm afraid a dark storm cloud is now looming over the future of the American media. This is the most sweeping and destructive rollback of consumer protection rules in the history of American broadcasting."
6/2. The Federal Communications Commission's (FCC) announcement of its Report and Order revising its media ownership rules was accompanied by a outpouring of praise, criticism and commentary on Capitol Hill, and elsewhere in Washington DC. Much of reaction broke down along party lines, with Republicans expressing support for the FCC's revisions, and Democrats expressing opposition.
Rep. Billy Tauzin (R-LA), the Chairman of the House Commerce Committee, which has jurisdiction over telecommunications, stated in a release that "the FCC has finally done what both Congress and the courts have asked it to do, and our free speech society needs it to do. It has adopted new broadcast ownership rules that are enforceable, based on empirical evidence and reflective of today’s 21st century marketplace. The FCC, in affect, has taken a big step toward removing the regulatory muzzle from American broadcasters."
Rep. Tauzin (at right) continued that "The new suite of rules recognize and reflect the explosive growth in the number and variety of media outlets in the market, as well as the significant efficiencies and public interest benefits that can be obtained from common ownership. At the same time, the rules correctly reflect the continuing goals of ensuring diversity and localism and guarding against undue concentration in the marketplace."
Sen. John McCain (R-AZ), the Chairman of the Senate Commerce Committee, stated in a release that "Congress and the federal courts have required the FCC to conduct a biennial review of its media ownership rules. These rules have a critical impact on our society -- we must ensure that they serve the public interest. The Commerce Committee, therefore, will immediately begin its oversight of this decision by hearing from the five FCC Commissioners this Wednesday."
Sen. Ernest Hollings (D-SC), the ranking Democrat on the Senate Commerce Committee, stated at a press conference that "This concentration is absolutely in opposition to the interests of the public itself. And there's no ground for it, there's no reason for it other than greed."
Sen. Hollings (at right) is also the ranking Democrat on the House Appropriations Committee's Subcommittee on Commerce, Justice, State and the Judiciary. This Subcommittee has jurisdiction over the FCC's annual appropriation. Sen. Hollings has a history of using the appropriations process to obtain oversight goals.
This may be a more viable option for him, in the Senate, because Sen. Ted Stevens (R-AK), the Chairman of the full Appropriations Committee, shares some of Sen. Hollings' view on media ownership. For example, Sen. Stevens is the sponsor of S 1046, the "Preservation of Localism, Program Diversity, and Competition in Television Broadcast Service Act of 2003". Sen. Hollings is a cosponsor.
Sen. Hollings stated that "And I'm convinced, just noodling around, that we can get a majority vote and report that bill out and get some action on the floor of the Senate. Otherwise, we do have an appropriations bill. We never like to put those communications riders on, but this is such a disastrous proceeding and finding and rule by the commission itself this morning that I'm convinced that we've got to weigh-in in the Congress." See also, Hollings release.
Similarly, Rep. John Dingell (D-MI), the ranking Democrat on the House Commerce Committee, stated in a release that "With today's decision, the FCC's regulatory arrogance has delivered a body blow to democracy. The weakening of the FCC media ownership rules will hurt localism, will reduce diversity, and will allow media monopolies to flourish. Moreover, the FCC avoided open debate, ignored decades of judicial precedent and arbitrarily rejected the views of hundreds of thousands of concerned citizens."
He added that "The battle for a reasoned approach to ownership will now return to the courts, which hopefully will reject this arbitrary action, and to the Congress where a bipartisan coalition has already formed and is prepared to move forward. I look forward to working with my colleagues on both sides of the aisle to enact a national policy that will restore diversity and competition to the media marketplace."
Rep. Ed Markey (D-MA), the ranking Democrat on the House Commerce Committee's Subcommittee on Telecommunications and the Internet, also condemned the FCC's announcement. He stated in a release [PDF] that it is "unwarranted".
Sen. Mike DeWine (R-OH) and Sen. Herb Kohl (D-WI), the Chairman and ranking Democrat of the Senate Judiciary Committee's Subcommittee on Antitrust, stated in a joint release that "We have serious reservations with the FCC's decision today to substantially lift media ownership limits, and will be shortly conducting a hearing at the Antitrust Subcommittee to examine its implications for competition. We continue to believe that only diversity of ownership can preserve the diversity of news, information and entertainment sources essential to our democracy. A wide range of voices must be maintained in order to ensure a thriving and vibrant marketplace of ideas. Accordingly, we will be scrutinizing future media mergers at the Antitrust Subcommittee to examine their impact on the marketplace of ideas."
The two Senators, who typically act together on antitrust matters, added that "Now that the FCC has significantly relaxed its media ownership limits, many expect a renewed wave of mergers and acquisitions throughout the media sector. The antitrust agencies must enforce the antitrust laws vigorously to protect against excessive media concentration. We will expect the Justice Department and FTC to scrutinize media mergers and acquisitions closely. We urge both agencies to stand guard to prevent deals which will substantially injure competition in these industries that are so vital in providing the news and information relied upon by millions of Americans."
Secretary of Commerce Don Evans stated in a release that "I commend the FCC for its action on media ownership today. The FCC has answered the call of Congress and the Courts to modernize its rules."
Adam Thierer, of the libertarian Cato Institute, stated in a release that the FCC's rule changes represent only "a modest tweaking of existing regulations and standards." He added that "The real question now is whether the courts will accept these changes or strike down these archaic media ownership rules as regulatory relics. In revising such rules before, the courts have recognized that the changes in the media marketplace have given citizens a diversity of news, information, and entertainment options that undercuts the rationale behind many of the current regulations. Considering the dismal state of media competition and diversity just 20 to 30 years ago, today's world is characterized by information abundance, not scarcity."
"Moreover, as courts have found, the First Amendment remains of paramount importance when considering such restrictions of media. Limiting the size of the soapbox that media owners hope to build to speak to the American people is offensive to the free speech rights we hold sacred in this country."
Theier added that "Information and entertainment cannot be monopolized, especially in an age of breakneck technological change."
Randolph May, of the Progress and Freedom Foundation, a free market oriented group that focuses, in part, on communications and information technology issues, stated in a release that "Today the FCC took long overdue steps to relax its outdated media ownership restrictions. There are now vastly more media outlets and sources of news and information than there were when the rules were adopted 30 or 40 years ago. These rules were put in place before 85 percent of the American households subscribed to 300-channel cable and satellite television systems and before the Internet revolutionized information dissemination. At the time the rules were put in place, ‘channel surfing’ had not entered our lexicon, and ‘surfing the web’ was not even a dream."
In contrast, Andrew Schwartzman, of the Media Access Project, stated in a release [PDF] that "The bad news is that the FCC has acted with disdainful regard for hundreds of thousands of Americans who don’t want more media concentration. The good news is those hundreds of thousands of Americans have learned that FCC Chairman Michael Powell doesn’t care about what they think, and they will be angry."
Similarly, Gene Kimmelman of the Consumers Union stated in a release that "In one sweeping move, three FCC political appointees are dramatically worsening the nation's media landscape for decades to come. Like the wolf in sheep's clothing fable, these three Commissioners are saying their "modest" changes to media ownership rules are necessary to reflect today's abundant new media choices. But in reality their action is masking a much more cynical and dangerous plan."
6/2. The Supreme Court denied certiorari, without opinion, in Tax & Accounting Software v. U.S., a case regarding when expenses of a software company may qualify for the research and development tax credit. See, Order List [8 pages in PDF], at page 2.
The Tax and Accounting Software Corporation (TAASC) develops and markets software for use by tax and accounting professionals. It claimed research and development expenses for the development of these software products, pursuant to 26 U.S.C. § 41. The Internal Revenue Service (IRS) disallowed these tax credits. The U.S. District Court (NDOkla) granted summary judgment in favor of the software developer. The U.S. Court of Appeals (10thCir) issued its opinion reversing the District Court's summary judgment, on the grounds that its expenses were not for "qualified research". The Supreme Court's action lets stands the opinion of the Tenth Circuit.
See, TLJ story titled "10th Circuit Disallows R&D Tax Credit for Software Development Costs", August 20, 2002. This is S.C. No. 02-1291, A.C. No. No. 00-5196, and D.C. No. 98-CV-363.
5/30. The U.S. Court of Appeals (7thCir) issued its opinion [PDF] in Denius v. Dunlap, a Section 1983 case involving confidentiality of records. The Court of Appeals affirmed the District Court.
Since 1994, Ronald Denius, a retired Air Force Sergeant, has taught in an eighteen month program that uses military training methods to teach "life skills" and GED courses to teenage high school dropouts. His employer has required him, as a condition for continued employment, to sign various "authorizations" in which he would authorize the release of various records. These have covered medical records, attorney client privileged records, criminal records, credit records, financial records, veterans records, employment records, and other records. He refuses to sign these.
Instead, he filed a complaint in U.S. District Court (CDIll) against Wayne Dunlap (formerly the Director of his employer) and others alleging violation of 42 U.S.C. § 1983, claiming violations of his constitutional rights under the First, Sixth, and Fourteenth Amendments.
This is the second time this case has come before the Court of Appeals. See also, Denius v. Dunlap, 209 F.3d 944 (7th Cir. 2000). In the present appeal, the Court of Appeals affirmed the District Court's granting of judgment as a matter of law to Denius.
6/2. President Bush nominated Josette Shiner to be a Deputy U.S. Trade Representative (aka, duster). See, White House release. Bush announced his intent to nominate Shiner back on March 31, 2003. See, White House release.
6/2. Richard Crandall, founder of Comshare, and Wayne Mackie, formerly with Arthur Andersen, were named to Novell's board of directors, effective June 2, 2003. See, Novell release.
6/2. After releasing several opinions, the Supreme Court announced that it will take a recess until Monday, June 9, 2003. See, Order List [8 pages in PDF], at page 8.
6/2. The Supreme Court issued its opinion [18 pages in PDF] in Dastar v. Twentieth Century Fox, reversing the opinion of the U.S. Court of Appeals (9thCir), which had upheld a District Court judgment of violation of the Lanham Act.
In another sense, this is a case in which a plaintiff/producer is passing off a copyright claim as a Lanham Act claim. The plaintiff alleges that its work of authorship has been copied (which can be actionable under the Copyright Act), but instead proceeds on the legal theory of violation of the Lanham Act's false designation of origin provision.
Scalia elaborated on attempts to use trademark law in areas reserved for copyright or patent law. "Federal trademark law ``has no necessary relation to invention or discovery´´", citing Trade-Mark Cases, 100 U. S. 82 (1879). Rather, trademark law reduces customers' costs of shopping and making purchasing decisions, and prevents an imitating competitor from reaping the benefits of a desirable product.
Finally, Scalia observed that interpreting "origin" to require attribution of uncopyrighted materials would be difficult to implement. For example, what would be the "origin" of a movie, which was based on a musical, which was based on an opera, which was based novel. As another example, Scalia pointed out, requiring attribution would create potential liability, if the credit is regarded as implying sponsorship or approval.
The Court did not address the issue of damages under the Lanham Act, because it found no underlying violation of the Lanham Act.
The House will meet at 10:30 AM for morning hour, and at 12:00 NOON for legislative business. The House will consider HR 2143, the "Unlawful Internet Gambling Funding Prohibition Act" under suspension of the rules. That is, it cannot be amended, and it requires a two thirds majority to pass. See, Republican Whip Notice.
10:00 AM. The House Financial Services Committee's Capital Markets Subcommittee will hold a hearing titled "Accounting Treatment of Employee Stock Options". See also, HR 1372, the "Broad-Based Stock Option Plan Transparency Act", sponsored by Rep. David Dreier (R-CA) and Rep. Anna Eshoo (D-CA). The witnesses will include Rep. Dreier, Rep. Eshoo, Deborah Nightingale (Sun Microsystems), Robert Herz (Chairman of the Financial Accounting Standards Board), Paul Volcker (former Chairman of the Federal Reserve Board), Craig Barrett (CEO of Intel), Roderick Hills (former Chairman of the SEC), James Glassman (American Enterprise Institute). See, notice. Press contact: Peggy Peterson or Brookly McLaughlin at 202 226-0471. Location: Room 2128, Rayburn Building.
1:00 PM. Rep. Sherwood Boehlert (R-NY), the Chairman of the House Science Committee (HSC), will host a pen and pad briefing on HSC matters for reporters. Press contact: Heidi Tringe at Heidi.Tringe @mail.house.gov or 202 225-4275. Location: Room 2318, Rayburn Building.
The House will meet at 10:00 AM for morning hour. It will consider several non tech related items under suspension of the rules. See, Republican Whip Notice.

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