Source: http://techlawjournal.com/home/newsbriefs/2003/01f.asp
Timestamp: 2019-04-18 14:55:08+00:00

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TLJ News: January 26-31, 2003.
1/31. The U.S. Court of Appeals (DCCir) issued its divided opinion in Wisconsin Project on Nuclear Arms Control v. Department of Commerce, a case involving a Freedom of Information Act (FOIA) request for information contained in export license applications. The Appeals Court held that such information is exempt from disclosure under the FOIA Exemption 3.
The FOIA, codified at 5 U.S.C. § 552, entitles any "person" to request and obtain records from government agencies. However, it contains an exemption for records which a federal statute exempts. The Export Administration Act (EAA) exempted application information from disclosure.
The statutory authority of the BIS to operate this export control regime derives from the Export Administration Act. Congress first passed export control legislation in 1949. It has passed legislation revising the system several times since. However, the most recent statute, the Export Administration Act of 1979, lapsed in 1990. However, Presidents since then have exercised statutory authority to declare that an emergency exists, and, by executive order, extend the export control regime, absent a statute. This has enabled the BIS to continue to license export of dual use items.
She wrote that "The Wisconsin Project contends that the Department may not withhold the data, and the logic of its argument is simple: Exemption 3, by its text, requires that a withholding ``statute´´ be in place; because the EAA was not in effect either when the exporters submitted their application data to the Department or when the Wisconsin Project requested that data from the Department under FOIA, no statute exists to justify the Department's withholding of the requested data. The Wisconsin Project's formalistic logic, however, misses the bigger picture."
Kenneth Juster (at right), the Under Secretary of Commerce in charge of the BIS, stated in a release that "We welcome this decision because the Department’s ability to protect this information is important to our national and economic security. Public disclosure of such information could assist proliferating countries or terrorists in the development of weapons of mass destruction, and could also damage the competitiveness of U.S. business".
"In the end all the majority can come up with is some free-floating congressional intent about the meaning of a statute that no longer exists. Alice once encountered a comparable phenomenon: `` 'Well! I've often seen a cat without a grin,' thought Alice; 'but a grin without a cat! It's the most curious thing I ever saw in all my life!'´´ "
Perhaps also, there is an unstated theme in this case, as in many FOIA cases. That is, for many officials and judges the passage of the FOIA was one of those unfortunate actions taken in the immediate aftermath of the Nixon presidency, the Watergate scandals, the Viet Nam war, and a series of embarrassing disclosures about CIA operations, when there was an strong distrust of executive authority, and an effort to weaken executive branch authority, especially in the areas of intelligence and national defense. Hence, an idealistic Congress passed a FOIA that was far too broad. Many federal judges, particularly those in Washington DC, have been reluctant ever since to accord it the same status as other statutes -- or in the present case, expired statutes.
1/31. The Federal Communications Commission (FCC) and the National Telecommunications and Information Administration (NTIA) announced that they executed a Memorandum of Understanding (MOU) [3 pages in PDF] regarding spectrum coordination. See, NTIA release and FCC release.
The NTIA has spectrum management responsibilities with respect to spectrum allocated for federal government, including military, use. The FCC has spectrum management responsibilities with respect to spectrum allocated for non federal use.
The MOU states that the FCC and NTIA will meet at least twice per year to conduct joint planning. They are obligated by statute to do this.
The MOU makes no reference to spectrum rights, secondary markets for spectrum, unlicensed spectrum, WiFi, Third Generation (3G) wireless services, the FCC Spectrum Policy Task Force's (SPTF) recent report, or many other current spectrum issues. However, the MOU states that the two agencies will discuss "the actions necessary to promote the efficient use of the spectrum, including spectrum management techniques to promote increased shared use of the spectrum that does not cause harmful interference, as a means of increasing commercial access".
For more information, contact Lisa Gaisford at 202-418-7280 or lgaisfor@fcc.gov, or Clyde Ensslin at censslin@ntia.doc.gov or 202 482-7002.
attend ``structural´´ regulation of the broadcast industry, such as the newspaper broadcast ownership rules. The Court added that these rules "merely constrained the newspaper publisher's choice of the community in which to own a radio or television station; it did not prohibit the publisher from broadcasting altogether". In contrast, the RBPA prevents the speaker from broadcasting anywhere, and is thus not merely "structural".
1/30. Verizon filed a motion with the U.S. District Court (DC) in RIAA v. Verizon requesting that the Court stay its order that Verizon comply with a subpoena directing it to provide the Recording Industry Association of America (RIAA) the identity of a subscriber to its internet access service while its appeals to the U.S. Court of Appeals (DCCir). See, Verizon release.
On January 21, the District Court issued its Memorandum Opinion, ruling that copyright holders can obtain subpoenas pursuant to 17 U.S.C. § 512(h) that require Internet Service Providers (ISPs) to reveal the identities of their customers who infringe copyrights on peer to peer filing sharing systems. Verizon had argued unsuccessfully that § 512(h) subpoenas are only available with respect to infringers who store infringing content on the servers of the ISP. See also, TLJ story titled "District Court Rules DMCA Subpoenas Available for P2P Infringers", January 21, 2003.
Verizon stated in a release that "The recording industry brought this case as a 'test case' of its aggressive legal theories. We are seeking a stay so that the Court of Appeals can issue a final ruling on the critical legal issues before we are required to turn over our subscriber's identity."
1/30. Rep. Anna Eshoo (D-CA), Rep. David Dreier (R-CA), and other Representatives wrote a letter to the Financial Accounting Standards Board (FASB) "to express our strong opposition to any proposal which would mandate the expensing of broad-based stock option plans".
Rep. Eshoo (at right) represents a Silicon Valley district. She and 39 others wrote that "We do not wish to set accounting standards. However, in light of the proposed International Accounting Standards Board (IASB) standard that would mandate the expensing of employee stock options, and FASB's close coordination with IASB, we believe it is important to express our strong concerns about an approach that would limit transparency, truthfulness and accuracy in financial reporting, precisely at a time when America and its investors need these qualities the most. The public interest will not be served by an accounting standard that results in the disclosure of inaccurate corporate financial information and a flawed picture of company performance."
The letter continues that "It is apparent to us that a mandatory expensing standard lacks a clear and widely accepted accounting rationale. Accounting experts have vastly divergent views as to whether employee stock options should be accounted for as a cost to be deducted from earnings. Many respected, independent experts find that the "cost" of employee stock options is already accounted for and disclosed to investors through diluted earnings per share. Investors would be better served by full and complete disclosure of this diluted earnings per share number.
The letter also addresses the impact that expensing would have on the economy. It states that "mandatory expensing would effectively destroy broad-based stock option plans, which enhance financial opportunities for workers at all levels, stimulating economic growth and productivity. Broad-based employee stock options plans play a vital role in America's economy, helping employees, shareholders, and companies alike.
The Representatives who signed the letter are David Dreier, Anna G. Eshoo, Darrell Issa , Jay Inslee, Joseph Crowley, Adam Smith, Dennis Moore, Zoe Lofgren, Carolyn McCarthy, Gary Miller, Cal Dooley, Jerry Weller, Pete Sessions, Ron Kind, Jennifer Dunn, Mike Honda, Rick Boucher, Bob Goodlatte, Lamar Smith, Tom Davis, J.D. Hayworth, Jane Harman, Doug Ose, David Wu, Joe Barton, Rick Larsen, Amo Houghton, Dennis Cardoza, Steve Israel, George Nethercutt, Darlene Hooley, John Boehner, Mike Simpson, Greg Walden, Butch Otter, Jeff Flake, Chris Cannon, John Carter, Heather Wilson, and Bob Etheridge.
1/30. The General Accounting Office (GAO) released a series of reports on major executive branch agencies titled "Major Management Challenges and Program Risks". Among the many issues addressed are the export controls pertaining to high performance computers and semiconductors, the FBI's cyber security center, the FBI's antiquated information technology, and threats to critical infrastructures.
The report [34 pages in PDF] regarding the Department of Commerce, which is titled "Major Management Challenges and Program Risks: Department of Commerce", addresses, among other things, the export control regime handled by the Bureau of Industry and Security (BIS).
This report reviews prior GAO reports which have "identified numerous problems in the administration of this system". For example, it states that "Our August 2002 report on high performance computers found that the President’s justification for raising export control thresholds did not fully meet the requirements of law and was based on inaccurate information provided by the computer industry and an inadequate assessment of national security issues. Thus, we concluded that the decision to raise the export control threshold was analytically weak and premature, given market conditions."
The report also states that "U.S. agencies had not conducted the analyses necessary to create a sound basis for its licensing decisions on exports of advanced semiconductor manufacturing equipment to China." It elaborated that "U.S. policies and practices to control the export of advanced semiconductor technology to China are unclear and inconsistent, leading to uncertainty among U.S. industries about the rationale for some licensing decisions. We concluded that the current export control system needs to be reexamined because it has not slowed China’s ability to obtain billions of dollars worth of advanced semiconductor equipment. Consequently, we recommended that the Secretaries of Commerce, Defense, and State reassess, document, and update U.S. policy and practices on exporting semiconductor manufacturing equipment and materials to China."
The GAO's report [54 pages in PDF] regarding the Department of Justice (DOJ) covers, among other things, the FBI's National Infrastructure Protection Center (NIPC), which coordinates the federal government's response to computer based incidents.
This report reviews a prior GAO report, in which the GAO found that "the development of NIPC’s analysis and warning capabilities were limited by multiple factors, including the lack of a comprehensive governmentwide or national framework for promptly obtaining and analyzing information on imminent attacks, a shortage of skilled staff, the need to ensure that NIPC does not raise undue alarm for insignificant incidents, and the need to ensure that sensitive information is protected. We recommended that NIPC develop a comprehensive written policy for establishing analysis and warning capabilities."
This DOJ report also addresses the FBI's "antiquated computer hardware and software and the lack of a fully functional E-mail system" which "hamper the FBI’s ability to share time sensitive information internally and with other intelligence and law enforcement agencies."
The GAO also released a report [34 pages in PDF] titled "High-Risk Series: Protecting Information Systems Supporting the Federal Government and the Nation's Critical Infrastructures".
1/30. Sen. John McCain (R-AZ), the Chairman of the Senate Commerce Committee, introduced The Telecommunications Ownership Diversification Act [25 pages in PDF], a bill that would amend the Internal Revenue Code to provide for a deferral of tax on gain from the sale of telecommunications businesses in specific circumstances or a tax credit and other incentives to promote diversity of ownership in telecommunications businesses.
Sen. McCain (at right) stated that "this bill would encourage ownership by individuals who are currently underrepresented in the ownership of telecommunications companies, including minorities and women, by making carefully crafted changes in the tax code."
He elaborated that "It would provide sellers of telecommunications assets a tax deferral when those assets are bought for cash by certain small businesses. It would also provide investors an incentive to consider certain small businesses by providing a reduction in the tax on gains from investment in these companies." See, McCain statement [PDF].
Federal Communications Commission (FCC) Chairman Michael Powell stated in a release [PDF] that "Senator John McCain today introduced legislation that uses a tax-based incentive system, designed to encourage and facilitate new entry, including entry by women and minorities, into the telecommunications industry. This legislation is well crafted and much needed. I wholeheartedly support this effort. I again thank Senator McCain for consistently showing leadership in this important effort. Like him, I believe it is essential that we promote greater inclusiveness in our media and communications delivery sectors."
Robert Sachs, P/CEO of the National Cable and Telecommunications Association (NCTA) stated in a release that the cable industry supports Sen. McCain's bill. He stated that "we look forward to working with Senator McCain and others to enact this much needed legislation. As communications media converge, minority and economically disadvantaged businesses should be able to fully participate in this vital sector of our economy."
This enumeration of covered businesses does not expressly include internet service providers, or other internet based businesses. The bill's statement of findings and purposes, however, does reference internet businesses. It states that "Current trends in the telecommunications industry show that there is increasing convergence among various media, including broadcasting, cable television, and Internet-based businesses, that provide news, information, and entertainment."
1/30. The Senate Commerce Committee held a hearing to examine media ownership, focusing on consolidation in the radio industry. The Federal Communications Commission (FCC) is currently reviewing its media ownership rules.
Sen. John McCain (R-AZ), the Chairman of the Committee, said in his opening statement [PDF] that "I continue to believe that anachronistic government regulations that do not reflect today's multimedia marketplace should be thoroughly reviewed by the FCC and repealed or modified wherever appropriate."
He added that "I believe that, wherever possible, we should look to market-based approaches to ensure there is diversity in media ownership. Later today, I will reintroduce the "The Telecommunications Ownership Diversification Act." The bill provides a tax deferral and other market-based incentives designed to ensure that our tax laws do not disadvantage small businesses that may be owned by women and minorities who can help to further viewpoint diversity in media."
Sen. Ernest Hollings (D-SC), the ranking Democrat on the Committee, stated in his opening statement that "the core values of competition, diversity, and localism that have long served as fundamental pillars of our democracy, are today under attack." He complained about "FCC Commissioners who seem intent on relaxing or eliminating many of the existing ownership rules without regard to the tremendous consolidation that has already occurred."
He concluded that "while investors on Wall Street have profited handsomely from these mergers, consumers on Main Street have suffered. Radio consolidation has contributed to a 34% decline in the number of owners, a 90% rise in the cost of advertising rates, a rise in indecent broadcasts, and the replacement of local news and community programming with remote "voice tracking" and syndicated hollering that ill-serves the public interest."
Sen. Russ Feingold (D-WI), who sponsored S 2691, the Competition in Radio and Concert Industries Act of 2002, in the 107th Congress, stated in his opening statement that "the rapid consolidation in ownership of the radio and concert industry has made it difficult for individuals, artists, and organizations to find outlets to express their creativity and promote diversity."
He wrote that "My legislation prohibits those who own radio stations and concert promotion services or venues from leveraging their cross-ownership to hinder competition in the industry. For example, if an owner of a radio station and a promotion service hinders access to the airwaves of a rival promoter or artist, then the owner would be subject to penalties."
Rep. Howard Berman (D-CA) wrote in prepared testimony [14 pages in PDF] for the Committee that "I am deeply concerned that radio industry consolidation and related activities are hurting songwriters, musicians, recording artists, concert promoters, radio listeners, and the music community as a whole. I believe the negative effects of radio industry consolidation merit serious congressional scrutiny, and should spur investigations by the Department of Justice (DOJ) and Federal Communications Commission (FCC)." He represents a southern California district that is home to many members of the music industry.
He said that while the DOJ has taken no action regarding broadcasters, "The Bush DOJ has indicated, through its ongoing investigation of the Pressplay and MusicNet ventures, that it is interested neither the DOJ or FCC have, to my knowledge, conducted investigations. in publicly pursuing a lengthy investigation of speculative antitrust concerns that may be raised by new entities in the as-yet infinitesimally small market for legal online music. If it has such grave concerns about antitrust issues related to the music industry, why isn’t it willing to pursue allegations of actual anticompetitive behavior in the related radio and concert promotion industries?"
Edward Fritts of the National Association of Broadcasters (NAB) stated that "As radio deregulation has moved forward, radio's critics have tended to overstate the effects of industry trends. Compared to other entertainment choices, radio is perhaps the LEAST consolidated sector. The Hollywood movie studios, the record companies, Direct Broadcast Satellite, Cable Systems, newspapers -- even the Internet -- all have more of their revenue share concentrated among the top ten owners than does radio."
See also, prepared testimony of witnesses: Lowry Mays (Ch/CEO of Clear Channel Communications), Edward Fritts (P/CEO of the NAB), Don Henley (singer and songwriter), Robert Short (President of Short Broadcasting), and Jenny Toomey (Executive Director of the Future of Music Coalition).
1/30. The Senate Finance Committee unanimously approved the nomination of John Snow to be Secretary of the Treasury on Thursday morning, January 30. On Thursday evening the full Senate approved the nomination. He replaces Paul O'Neill, who resigned last month.
1/30. Eva Wohn was named head of the Cellular Telecommunications & Internet Association's (CTIA) State Affairs Division, a new department within Government Affairs that will handle state and local government issues. See, CTIA release.
1/30. President Bush formally notified the Congress of his intent to enter into free trade agreements (FTA) with Chile and Singapore. He wrote in his notice regarding Chile that "This is an agreement for the economy of the 21st century. Inventors, performers, authors, and creative enterprises in the United States and Chile will benefit from enhanced copyright, patent, trademark, trade secret, and other intellectual property rights protection. The Agreement also contains state of the art protections for digital products and electronic commerce". See also, President's notice regarding Singapore, the U.S. Trade Representative's (USTR) December 2002 summary [PDF] of the Singapore FTA, and the USTR's December 2002 summary [PDF] of the Chile FTA.
1/30. The Cato Institute released a report titled "Free Trade, Free Markets: Rating the 107th Congress" by Daniel Griswold. See, executive summary and full report [PDF]. The study is based on 12 roll call votes in the Senate, and 18 roll call votes in the House on trade barrier and trade subsidy issues. The report also provides scores for Representatives and Senators. The report classifies Representatives and Senators according to whether they are free traders (oppose both trade barriers and trade subsidies), interventionists (favor both barriers and subsidies), internationalists (oppose barriers and support subsidies), or isolationists (support barriers and oppose subsidies). The report concludes that "Despite all the hype about globalization and the supposed universal triumph of free-market policies, governments around the world, including that of the United States, continue to intervene in the flow of goods, services, people, and capital across international borders."
1/30. The Copyright Office (CO) published a notice in the Federal Register regarding a Notice of Proposed Rulemaking (NPRM) relating to proposed regulations that set rates and terms for the use of sound recordings by preexisting subscription services for the period January 1, 2002 through December 31, 2007. The deadline for comments is March 3, 2003. For more information, contact David Carson (General Counsel) or Tanya Sandros (Senior Attorney, Copyright Arbitration Royalty Panel) at 202 707-8380. See, Federal Register, January 30, 2003, Vol. 68, No. 20, at Page 4744-4747.
1/30. The Department of Agriculture's Rural Utilities Service (RUS) published a notice in the Federal Register regarding its final rule establishing the Rural Broadband Access Loan and Loan Guarantee Program as authorized by the Farm Security and Rural Investment Act of 2002 (Public Law 101-171). Section 6103 of the Act provides for loans and loan guarantees to fund the cost of construction, improvement, or acquisition of facilities and equipment for the provision of broadband service in eligible rural communities. This rule takes effect on January 30. For more information, contact Roberta Purcell at 202 720-9554. See, Federal Register, January 30, 2003, Vol. 68, No. 20, at Pages 4684-4692.
1/29. The Federal Communications Commission (FCC) released its First Order on Reconsideration and Second Report and Order [59 pages in PDF] in its proceeding titled "In the Matter of Telecommunications Services Inside Wiring Customer Premises Equipment In the Matter of Implementation of the Cable Television Consumer Protection and Competition Act of 1992; Cable Home Wiring". This is CS Docket No. 95-184 and MM Docket No. 92-260.
This document pertains to the FCC's rules that are intended to foster opportunities for multichannel video programming distributors (MVPD) to provide service in multiple dwelling unit buildings (MDU) by establishing procedures regarding how and under what circumstances the existing cable home run wiring would be made available to alternative video service providers.
The document states that the FCC now amends its rules "to provide (1) that, in the event of sale, the home run wiring be made available to the MDU owner or alternative provider during the 24-hour period prior to actual service termination by the incumbent, and (2) that home run wiring located behind sheet rock is physically inaccessible for purposes of determining the demarcation point between home wiring and home run wiring."
This document also states that "We decline to restrict exclusive contracts for the provision of video services in MDUs, finding that the record does not demonstrate a need for government intervention with marketplace forces and privately negotiated contracts. Similarly, we decline to ban perpetual contracts for the provision of video services in MDUs or subject such contracts to a fresh look window."
Commissioner Kevin Martin wrote a statement in which he dissented in part. He wrote that "I am not persuaded that we have the statutory authority to regulate ``home run´´ wiring. .. I question whether these general provisions authorize the Commission to regulate the disposition of that part of a cable wire that runs from the demarcation point in a multiple dwelling unit to the point at which the wiring becomes devoted to an individual subscriber. Moreover, the interpretation of these provisions in this item offers no limitation on our authority, and thus I am not sure what this interpretation would not allow us to do."
1/29. The Securities and Exchange Commission (SEC) filed a civil complaint in U.S. District Court (SDNY) against KPMG and four KPMG partners, Joseph Boyle, Michael Conway, Anthony Dolanski, and Ronald Safran, alleging securities fraud in connection with their auditing of Xerox's accounting. See also, SEC release.
The complaint alleges that KPMG and "certain KPMG partners permitted Xerox Corporation (``Xerox´´) to manipulate its accounting practices and fill a $3 billion ``gap´´ between actual operating results and results reported to the investing public from 1997 through 2000. The fraudulent scheme allowed Xerox to claim it met performance expectations of Wall Street analysts, to mislead investors and, consequently, to boost the company's stock price. The KPMG defendants were not the watch dogs on behalf of shareholders and the public that the securities laws and the rules of the auditing profession required them to be."
The complaint continues that "Instead of putting a stop to Xerox's fraudulent conduct, the KPMG defendants themselves engaged in fraud by falsely representing to the public that they had applied professional auditing standards to their review of Xerox's accounting, that Xerox's financial reporting was consistent with Generally Accepted Accounting Principles (``GAAP´´) and that Xerox's reported results fairly represented the financial condition of the company. There was no watchdog at Xerox. KPMG's bark sounded no warning to investors; its bite was toothless."
The four count complaint alleges (1) violations of Section 17(a) of the Securities Act and Section 10(b) and Rule 10b-5 of the Exchange Act, (2) violation of Section 10A of the Exchange Act, (3) aiding and abetting violations of Section 13(a) of the Exchange Act and Exchange Act Rules 13a-1, 13a-13, and 12b-20, and (4) aiding and abetting violations of Section 13(b) of the Exchange Act and Exchange Act Rule 13b2-1.
1/29. The U.S. Court of Appeals (FedCir) issued its split opinion [MS Word] in Rambus v. Infineon, a patent infringement case involving dynamic random access memory (DRAM) products. The Court of Appeals vacated the District Court's judgment of non-infringement, as a matter of claim construction. It also reversed the District Court's denial of a motion to set aside a jury verdict of fraud based on failure to disclose patent and patent application information to a standard setting body.
In addition to claim construction issues, this case involves Rambus's participation in what was known as the Joint Electron Device Engineering Council (JEDEC). This body developed and issued technical standards for a form of computer memory known as synchronous dynamic random access memory (SDRAM), and later, double data rate (DDR) SDRAM. Rambus attended meetings for years, but did not disclose that it had pending patent applications that, when granted, might contain claims that would be infringed by devices made pursuant to the standards being developed. A trial jury of the District Court returned a verdict of fraud against Rambus based upon this non-disclosure conduct. The opinion of the Court of Appeals overturns this. However, Rambus still faces a Federal Trade Commission (FTC) administrative complaint, based upon essentially the same facts, but which alleges violation of antitrust law. See, full story.
1/29. The House Commerce Committee approved by unanimous voice vote, without amendment, HR 395, the Do-Not-Call Implementation Act. The bill is sponsored by Rep. Billy Tauzin (R-LA), the Chairman of the Committee, and Rep. John Dingell (D-MI), the ranking Democrat.
This bill authorizes the Federal Trade Commission (FTC) to collect fees for the implementation and enforcement of its "do-not-call" registry. The FTC released its amended Telemarketing Sales Rule (TSR) on December 18, 2002, which included creation of the do-not-call registry. This allows consumers to opt out of receiving unwanted telephone solicitations. It also prohibits telemarketers from calling those telephone numbers listed on the registry.
While the final vote was unanimous, opposition was voiced during debate. For example, Rep. Ted Strickland (D-OH) argued that telemarketing provides jobs for people who work in call centers, and this bill threatens those jobs. He added that with decreasing costs for international calls, these jobs are already being threatened by foreign based call centers.
Also, Rep. Joe Barton (R-TX) offered, but then withdrew, two proposed amendments. One would have provided that no category of calls would be automatically exempted. The other would have reduced the fine for violations from $11,000 per incident to $1,000 per incident. He acknowledged that his amendments lacked support on the Committee.
Rep. Tauzin responded that by including an exemption for political solicitations, the rule will be less likely to be overturned by the Courts as a violation of the First Amendment.
1/29. Rep. Billy Tauzin (R-LA), Chairman of the House Commerce Committee, spoke with reporters after the Committee's mark up session on January 29. He discussed possible legislation related to broadband and the transition to digital television.
He was asked whether another "Tauzin Dingell bill" would be introduced in the 108th Congress. He responded that "before we file any bills, we are trying to see just how far the FCC will go, and how much they will complete. And, we are getting a better sense of that as we move along."
Rep. Tauzin (at right) added that "the industry has a number of other issues besides broadband. And, the industry, long distance, local, the whole kit and caboodle of them, are attempting to find some consensus for us on several of the key issues. We give them a chance to do that. I have given them until February 15th to report to my Committee on any consensus they reach in these areas, to see if we can, and possibly add those consensus features to whatever bill we file. But, we will be, in all likelihood, filing another bill."
Rep. Tauzin also stated that "I will be consulting with Sen. McCain, obviously. He has offered broadband bills in the past." He elaborated that "I want to go back and examine those, and meet with him, and discuss with him, what of those provisions are still important, and which he is interested in. He is a strong deregulator, as I am, and I think we will find a lot of common ground before we begin moving. John Dingell is again committed to work with me to see if we can pass these in the House."
He was also asked whether the House Commerce Committee would request the FCC Commissioners to testify on matters such as the pending triennial review. He responded that "We are getting a good feel for that without formal hearings. And we are learning from them and their staffs what they are doing and what they think they might. I frankly want to get a good read on what they are likely to be able to do before we proceed. Once I know that I will feel comfortable enough to proceed."
He added that he speaks with FCC Chairman Michael Powell and the other Commissioners. "We stay in close touch. And our staffs are also staying in touch."
He was also asked about the digital television transition. He stated that "It is still very very controversial here. My compliments to all the players, however. I mean, we made great progress in the last year."
"But, it still remains controversial in a number of key points, and they still need to work out a number of things. What we will do this year is, with some degree of patience, to continue to press them forward on their own negotiations. But, at some point, recognizing that if we don't legislate before August, we are not likely to be able to legislate. At some point in the next several months we may in fact want to legislate in those areas were it is clear they are not going to be able to reach an agreement. I would be delighted to find out that that is not necessary. And we will be pushing to that end."
He also discussed the timeline for any DTV related legislation. He said that he has not given the parties involved in negotiations a deadline, "other than the fact that they know we reached the point last year where we forwarded out some, a draft piece of legislation, in order to give them a look a what legislation would look like, if in fact they reached final agreement. That alone prompted a number of agreements, as you know, as you saw. There was some real progress made between the time we left Congress last year and the time we convened again -- some of it very positive. And, I continue to get good reports. So, I don't know that we need to give any hard deadlines yet, except , I think that all of the players know that I am working under some very tight time constraints in terms of what we can have time to pass into law before we get into a Presidential year cycle. They know that. I know that. So, without stating a time limit, everybody knows that we are under the gun to get something done."
1/29. Twenty-two members of the House Commerce Committee wrote a letter [5 page PDF scan] to the Federal Communications Commission (FCC) regarding unbundled network elements.
They wrote that "The '96 Act prescribed three methods of competitive entry for CLECs: reselling an ILEC's service, using a CLEC's facilities exclusively, and using a CLEC's facilities in combination with an ILEC's facilities through the purchase of unbundled network elements from the ILEC. However, the FCC distorted the '96 Act's requirements to manufacture a fourth method of entry by creating the unbundled network element platform or UNE-P -- in essence a back-door way of forcing the ILECs to resell the entire local phone service. To further exacerbate the problem, the FCC developed a pricing model for the UNE-P that is based on a hypothetical cost model rather than on actual operating costs."
"As a result," the Congressmen wrote, "the FCC created a regulatory fiction that provided CLECs with a disincentive to invest in their own facilities. No competing carrier has an incentive to risk capital and invest in its own facilities when it can simply lease an ILEC's network elements at below-cost prices and resell the service."
They argued that "the UNE-P is a regulatory fiction that must be eliminated." They also argued that "in the context of the Triennial Review, the FCC must produce a sensible national policy regarding which network elements meet the '96 Act's stringent ``necessary and impair´´ analysis and, therefore, must be provided on an unbundled basis. Delegation of that determination to the states would be a gross abdication of the FCC's statutory responsibility and a clear violation of the law."
They also listed several "elements that should not have to be provided on an unbundled basis", including "circuit switching" and "fiber loops and subloops used to transmit packet-based services".
The letter was signed by Billy Tauzin (R-LA), John Dingell (D-MI), Fred Upton (R-MI), Joe Barton (R-TX), Nathan Deal (R-GA), Richard Burr (R-NC), John Shimkus (R-IL), Vito Fossella (R-NY), Roy Blunt (R-MO), Steve Buyer (R-IN), Mary Bono (R-CA), Lee Terry (R-NE), Charles Bass (R-NH), Greg Walden (R-OR), George Radanovich (R-CA), Rick Boucher (D-VA), Edolphus Towns (D-NY), Bobby Rush (D-IL), Al Wynn (D-MD), Eliot Engel (D-NY), Gene Green (D-TX), and Chris John (D-LA).
1/29. Jule Sigall was named the Copyright Office's Associate Register for Policy and International Affairs, effective February 10. He was previously an attorney in the Intellectual Property and Technology practice group of the law firm of Arnold & Porter. Before that, in 1997-1998, he worked in the Copyright Office's Office of Policy and International Affairs.
1/29. Ted Turner will step down as Vice Chairman of AOL Time Warner, effective at the Annual Shareholders Meeting in May. See, release.
1/29. The Wall Street Journal wrote an article stating that William Esrey, Sprint's Ch/CEO, will step down, and that Gary Forsee, currently at BellSouth, "is expected to succeed him." Sprint stated in a release that "Sprint has declined to comment on media speculation regarding management succession." BellSouth's biography of Forsee states that he is Vice Chairman, and is "responsible for all of BellSouth's domestic operations". He also previously worked for Sprint.
1/29. Richard Smith was named acting Chief of the Policy Division of the Federal Communications Commission's (FCC) Consumer & Governmental Affairs Bureau (CGB). Nancy Stevenson was named Acting Deputy Chief. The appointments are effective during the time that Michele Walters, Chief of the Policy Division, is on parental leave. See, FCC release [MS Word].
1/29. Under Secretary of the Treasury for Enforcement Jimmy Gurulé will leave his position on February 10. See, Treasury release and resignation letter.
1/29. President Bush nominated six people to be U.S. District Court Judges: Richard Bennett (Maryland), Louise Flanagan (Eastern District of North Carolina), Leon Holmes (Eastern District of Arkansas), James Selna (Central District of California), Philip Simon (Northern District of Indiana), and Theresa Springmann (Northern District of Indiana). See, White House release. Judge Selna is a former O'Melveny & Myers partner who focused on antitrust law. He was appointed to the Superior Court of the State of California for Orange County in 1998. See, Court bio [PDF].
1/29. The Department of Commerce's (DOC) Bureau of Industry and Security (BIS) released its 2003 Foreign Policy Report. The BIS, which is still also referred to as the Bureau of Export Administration (BXA), announced in this report that it extends its foreign policy export controls to January 20, 2004. The report covers, among many topics, high performance computers (at Chapter 9) and encryption products (at Chapter 10).
1/29. The Federal Trade Commission (FTC) published a notice in the Federal Register containing its final amended Telemarketing Sales Rule (TSR), and its Statement of Basis and Purpose. The FTC announced its amended TSR last month. This notice sets effective dates. The amended rule will become effective March 31, 2003. However, full compliance with the caller identification transmission provision is required by January 29, 2004. Also, the FTC will announce later the date by which full compliance with the ``do-not-call´´ registry provision will be required. See, Federal Register, January 29, 2003, Vol. 68, No. 19, at Pages 4579-4679. See also, FTC release.
1/29. The U.S. Court of Appeals (7thCir) issued its split opinion [9 pages in PDF] in AT&T Broadband v. IBEW, holding that the Norris LaGuardia Act, 29 U.S.C. §§ 101-15, forbids a District Court from enjoining the arbitration of a labor dispute. The International Brotherhood of Electrical Workers (IBEW) contended that AT&T Broadband had failed to negotiate in good faith to reach agreements covering three bargaining units. It demanded arbitration under a master agreement between AT&T and the IBEW. AT&T argued that the master agreement called for mediation rather than arbitration. The IBEW called upon the presiding neutral of a standing arbitral body. AT&T then filed a complaint in U.S. District Court (NDIll) seeking an injunction of the arbitration.
1/29. Federal Trade Commission (FTC) announced that it filed an administrative complaint against Educational Research Center of America, Inc. and Student Marketing Group, Inc., as well as two individual officers and directors, alleging violation of the Federal Trade Commission Act. The complaint states that "respondents have collected personal information from high school and middle and junior high school students through surveys ..." It further states that "respondents have represented, expressly or by implication, that information collected from students through the Surveys is shared only with colleges, universities, and other entities providing education-related services. ... In truth and in fact, information collected from students through the Surveys is shared not only with colleges, universities, and other entities providing education-related services, but also with commercial entities for marketing purposes." The FTC and respondents also entered into an Agreement Containing Consent Order which bars future misrepresentation, requires disclosure of how information will be used, and requires destruction of certain data already collected. However, there is no fine. See also, FTC release.
1/28. Sen. Charles Grassley (R-IA), the Chairman of the Senate Finance Committee, prepared, but did not deliver, a speech to the Tax Council. A staff member read the speech in his place. The speech covered the Foreign Sales Corporation (FSC) tax regime (and its replacement, the Extraterritorial Income tax regime), both of which have been held by the World Trade Organization (WTO) to constitute prohibited export subsidies.
Sen. Grassley's speech stated that "Another important issue is the WTO decision on FSC-ETI. Our bipartisan bicameral working group has continued throughout the fall. I think we can reach an agreement on this issue, if all parties interested in FSC-ETI are reasonable and the EU shows some restraint. We showed restraint on beef and bananas. The EU should allow us time to enact legislation before even considering sanctions."
Sen. Grassley's speech also covered extending the moratorium contained in the Internet Tax Freedom Act. It expires latter this year. The speech stated that, "In other business, the present federal moratorium on the states' ability to tax Internet transactions expires this year. There are several other provisions that will expire this year."
In addition, Pam Olson (at right), Assistant Secretary of the Treasury for Tax Policy, has given two speeches recently in which she addressed FSC/ETI and other globalization related tax issues in more detail.
On January 27 she gave a speech to the USC Law School Tax Institute. She stated that "With the World Trade Organization having recently declared a feature of our international tax regime an export subsidy illegal under the WTO rules and the burst of corporate inversion transactions in the last couple of years, we find ourselves in a position where significant change to our international tax rules seems inevitable." She added that "From the vantage point of an increasingly global marketplace, our tax rules appear outmoded, at best, and punitive of U.S. economic interests, at worst. ... our international tax policy seems to have been based on the principle that if we have a competitive advantage, we should tax it!" On January 25 she gave a speech to the ABA Tax Section. This speech overlapped her January 27 speech.
1/28. The U.S. Court of Appeals (1stCir) issued its opinion in EF Cultural Travel v. Zefer and Explorica, upholding a District Court preliminary injunction prohibiting use of a "scraper tool" to collect pricing information from a web site. The Court's analysis involved application of the ban on unauthorized access to a computer contained in 18 U.S.C. § 1030.
Background. EF Cultural is a student travel business. It maintains a web site that contains price information. Explorica is also a student travel business; it was formed by several former EF employees. Zefer Corporation built a scraper tool that collected two years of pricing data from EF's web site. This computer program accessed price information contained in the HTML source code in the files stored on EF's web server, and then placed this price information in an Excel spreadsheet. Explorica then used this data to set its prices just below those of EF.
EF's access had been facilitated by use of confidential information obtained in violation of a broad confidentiality agreement signed by EF's former employees. Specifically, Zefer was able develop this program, including the ability to circumvent EF's security, with the assistance of an Explorica VP who was previously VP for information strategy at EF. This VP had signed a confidentiality agreement with EF. However, Zefer signed no confidentiality agreement.
Statute. Subsection 1030(a)(4) provides, in part, that "Whoever ... knowingly and with intent to defraud, accesses a protected computer without authorization, or exceeds authorized access, and by means of such conduct furthers the intended fraud and obtains anything of value, unless the object of the fraud and the thing obtained consists only of the use of the computer and the value of such use is not more than $ 5,000 in any 1-year period ... shall be punished as provided in subsection (c) of this section."
Subsection 1030(e)(6) defines "exceeds authorized access" as "to access a computer with authorization and to use such access to obtain or alter information in the computer that the accesser is not entitled so to obtain or alter."
Title 18 is the Criminal Code. However, Subsection 1030(g) creates a private right of action.
Section 1030 is also sometimes referred to as the Computer Fraud and Abuse Act, and the CFAA.
EF 1. EF filed a complaint in U.S. District Court (DMass) against Explorica, several of its employees, and Zefer, alleging copyright infringement, and violation of Section 1030.
Previously, EF obtained an injunction against Explorica, which the First Circuit upheld. See, December 17, 2001 opinion and story titled "Court Upholds Injunction Under CFAA Against Use of Scraper Program" in TLJ Daily E-Mail Alert No. 330, December 18, 2001.
However, that injunction relied upon the confidentiality agreement. That opinion did not address Zefer, because it was protected by a bankruptcy stay.
EF 2. Zefer is now out of bankruptcy, and EF seeks to have the injunction extended to Zefer. The District Court granted the injunction, based upon its reasoning that lack of authorization can be inferred from the circumstances using a reasonable expectations test.
The Appeals Court affirmed, but on different, and narrower grounds. It upheld the injunction solely because "an injunction properly issued against a named party means that anyone else with notice is precluded from acting to assist the enjoined party from violating the decree or from doing so on behalf of that party".
The Appeals Court wrote in the instant opinion that "The district court thought that a lack of authorization could also be inferred from the circumstances, using ``reasonable expectations´´ as the test; and it said that three such circumstances comprised such a warning in this case: the copyright notice on EF's homepage with a link directing users to contact the company with questions; EF's provision to Zefer of confidential information obtained in breach of the employee confidentiality agreements; and the fact that the website was configured to allow ordinary visitors to the site to view only one page at a time."
The Court continued that "We agree with the district court that lack of authorization may be implicit, rather than explicit. After all, password protection itself normally limits authorization by implication (and technology), even without express terms. But we think that in general a reasonable expectations test is not the proper gloss on subsection (a)(4) and we reject it."
The Court reasoned that "Our basis for this view is not, as some have urged, that there is a ``presumption´´ of open access to Internet information. The CFAA, after all, is primarily a statute imposing limits on access and enhancing control by information providers. Instead, we think that the public website provider can easily spell out explicitly what is forbidden and, consonantly, that nothing justifies putting users at the mercy of a highly imprecise, litigation-spawning standard like ``reasonable expectations.´´ If EF wants to ban scrapers, let it say so on the webpage or a link clearly marked as containing restrictions."
The Court added that "This case itself illustrates the flaws in the ``reasonable expectations´´ standard. Why should the copyright symbol, which arguably does not protect the substantive information anyway, Feist Publ'ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 344-45 (1991), or the provision of page-by-page access for that matter, be taken to suggest that downloading information at higher speed is forbidden."
So, EF gets its injunction, but the Court did so on the basis of facts (use of confidential information) that will not be present in most other "scrapper" cases.
1/28. The U.S. Court of Appeals (1stCir) issued its opinion in Destek v. New Hampshire PUC, a case involving federal court jurisdiction to review state public utility commission determinations under 47 U.S.C. § 252(e)(6).
Verizon and the University of New Hampshire (UNH) entered into an agreement under which Verizon contracted to provide asynchronous transfer mode (ATM) cell relay service to the UNH within New Hampshire. Verizon also submitted a petition with the New Hampshire Public Utilities Commission (NHPUC) seeking approval of the agreement as a special contract pursuant to N.H. Rev. Stat. Ann. § 378:18.
Destek Networking Group, a networking company, sought to intervene in the NHPUC proceedings and opposed the approval of the agreement. It argued that special contracts pursuant to this state statute are discriminatory and minimize competition. The NHPUC approved the proposed special contract.
Destek filed a complaint in U.S. District Court (DNH) against the NHPUC, its Commissioners, and Verizon seeking judicial review pursuant to § 252(e)(6). It also alleged violation of 42 U.S.C. § 1983 by Verizon.
The District Court concluded that the NHPUC did not make a § 252 determination, and hence, it lacked subject matter jurisdiction. The Court also held that the Commissioners are immune, both in the official or individual capacities. Finally, it held that Verizon is not liable under § 1983. The Appeals Court affirmed on all points.
1/28. The U.S. Court of Appeals (4thCir) issued an opinion [20 pages in PDF] in PSINet v. Chapman, a case regarding the constitutionality of an Internet porm statute. The Court certified two questions of state law to the Supreme Court of Virginia.
The underlying federal case is a constitutional challenge to a 1999 amendment to a Virginia state statute regulating material that is deemed harmful to minors. The amendment adds language referring to any "electronic file or message containing an image". Internet service providers, People for the American Way, and others filed a complaint in the U.S. District Court (WDVa) against Warren Chapman and James Chambloss (who were sued in their capacity as attorneys for Virginia) challenging the statute's constitutionality under the First Amendment and the dormant commerce clause. The District Court granted summary judgment to the plaintiffs, and enjoined enforcement of the electronic component of the statute.
This appeal followed. However, the Appeals Court has not yet reached the merits of the appeal. In the present opinion, the Court merely certifies two questions of state law to the Virginia Supreme Court, namely: "A. Would the use of any of the technological access controls identified by the Attorney General of Virginia preclude conviction under Virginia Code § 18.2-391 as amended in 1999?" and "B. Does the prohibition against knowingly displaying pornographic materials that are ``harmful to juveniles´´ apply to displays made only in connection with the sale, rental, or loan of such materials? If not, what must the government establish to prove that a defendant has knowingly displayed such materials ``for commercial purpose´´?"
1/28. The U.S. Court of Appeals (9thCir) issued its opinion in Brother Records v. Jardine, a trademark infringement dispute involving use of the name "Beach Boys". Nearly forty years ago, Al Jardine, Mike Love, Brian Wilson, Carl Wilson, and Dennis Wilson formed a band named the The Beach Boys. They soon incorporated Brother Records Inc. (BRI) to, among other things, hold the intellectual property of The Beach Boys. Carl Wilson is dead. Brian Wilson no longer tours. And, some of the others do not want to tour together. Nevertheless, Jardine has toured, and used the trademarked name "Beach Boys", without license from BRI. BRI filed a complaint in U.S. District Court (CDCal) against Jardine alleging trademark infringement. Jardine asserted the defenses of fair use, laches, estoppel, and unclean hands. He also counterclaimed for breach of employment agreement, breach of license agreement, and for a declaratory judgment that he could tour as the "Beach Boys Family and Friends." The Court granted summary judgment to BRI. The Court of Appeals affirmed.
1/27. The Supreme Court issued its opinion [34 pages in PDF] in FCC v. NextWave Personal Communications, holding that the Federal Communications Commission's (FCC) attempt to revoke NextWave's spectrum licenses violated Section 525 of the Bankruptcy Code. See, full story.
Go to News from January 21-25, 2003.

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