Source: http://techlawjournal.com/home/newsbriefs/2012/08d.asp
Timestamp: 2019-04-22 08:27:41+00:00

Document:
TLJ News: August 16-20, 2012.
8/20. Rep. Jerrold Nadler (D-NY) released a discussion draft [9 pages in PDF] of a bill to be titled "Interim Fairness in Radio Starting Today Act of 2012", or the "Interim FIRST Act".
This is another bill regarding copyright law and the performance rights of music recording artists. Rep. Nadler states that he is concerned that recording artists do not have a performance right for their works played by terrestrial radio broadcasters. The bill recites in its findings that this is a problem. However, this bill would not create such a performance right.
This could be accomplished by amending 17 U.S.C. § 106, regarding the exclusive rights of copyright. Section 106(6) extends the performance right for sound recordings only to digital audio transmissions, thus exempting broadcasts by terrestrial radio broadcasters. Section 106(6) currently provides that "the owner of copyright under this title has the exclusive rights to do and to authorize ... in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission".
Bills have been introduced for several Congresses. None have been enacted into law, in significant part because of the opposition of the National Association of Broadcasters (NAB).
For the 111th Congress, see HR 848 [LOC | WW], the "Performance Rights Act", and S 379 [LOC | WW]. Rep. For the 110th Congress, see HR 4789 [LOC | WW] and S 2500, [LOC | WW], both of which were titled "Performance Rights Act". Nadler was a cosponsor of those House bills. See also, story titled "Performance Rights Act Reintroduced" in TLJ Daily E-Mail Alert No. 1,896, February 10, 2009.
Rather, Rep. Nadler's discussion draft would provide some changes to copyright law that Rep. Nadler asserts in a release would be an "interim step until such time as terrestrial radio pays a performance royalty for music airplay". However, nothing in the draft bill would impose any sunset or time limitation.
This bill would amend 17 U.S.C. § 114, regarding exclusive rights in sound recordings, to change the manner of compensation for artists from media that already pay for performances -- satellite, cable and internet radio.
This draft bill recites in its findings that "Under current copyright law, literary works, musical works, dramatic works, pantomimes, choreographic works, motion pictures and other audiovisual works have a full performance right, but sound recordings do not."
Terrestrial broadcasters do not pay artists to play their recordings over the air. (Broadcasters do pay when they also stream over the internet.) In contrast, as the bill recites, "All other radio formats, such as satellite, cable and Internet radio, compensate recording artists and copyright owners for their music."
Rep. Nadler (at right) stated in his release that "Terrestrial radio companies have built into their businesses an exemption from paying a performance right".
He continued that "The lack of a performance royalty for terrestrial radio airplay is a significant inequity and grossly unfair. We can't start a race to the bottom when it comes to royalty rates and compensation for artists. Artists deserve to be paid a market-based rate for their work, just like everyone else. The Interim FIRST Act would provide artists with fair compensation for the valuable creations they share with all of us."
Dennis Wharton of the NAB stated in a release that the "NAB strongly opposes Rep. Nadler's draft bill, which fails to recognize the unparalleled promotional value of local radio airplay and which would kill jobs at America's hometown radio stations. We continue to support private, company-by-company negotiations that are driven by the free market, as was reflected by the recent deal between Clear Channel and Big Machine Label Group. We're pleased that 177 House members and 22 U.S. Senators agree that America's local radio stations should not be subjected to job-killing performance tax legislation that would divert millions of dollars to offshore record labels."
Currently, satellite and cable radio services pay less than internet services such as Pandora. This bill would raise satellite and cable up to the internet level. It would also raise what broadcasters pay for streaming.
This bill would amend 17 U.S.C. § 114(f)(2) to add a new subsection (D) that would provide that "(i) ... in the case of any entity that owns or operates one or more commercial terrestrial broadcast stations that are licensed as such by the Federal Communications Commission, or that is affiliated with an entity that owns or operates one or more such commercial terrestrial stations, and makes transmissions under a statutory license of programming transmitted over-the-air by one or more such commercial terrestrial stations, the royalty rate to be paid by such entity for such transmissions under this section and section 112(e) shall include an additional royalty fee determined by multiplying the rate otherwise applicable under this subsection (f) and section 112(e), regardless of whether such otherwise applicable rate was set by the Copyright Royalty Judges or an agreement as described in paragraph (5), by a factor to be determined by the Copyright Royalty Judges."
Also, "(ii) ... The Copyright Royalty Judges shall establish the factor described in clause (i) so that the additional royalty fee most clearly represents the royalty that would have been negotiated in the marketplace between a willing buyer and a willing seller for the public performance of sound recordings by means of over-the-air nonsubscription broadcast transmissions by affili1ated terrestrial broadcast radio stations, if a sound recording copyright owner had the exclusive right to make and authorize such transmissions of the relevant recordings."
This bill would also provide that "As to any applicable section 112(e) or 114 rate period for which royalty rates and terms have already been set as of the date of enactment of the Interim FIRST Act of 2012, a proceeding under this chapter shall be commenced as soon as practicable after such date of enactment to determine the factor described in section 114(f)(2)(D) for the portion of such period between the date of enactment of the Interim FIRST Act of 2012 and the expiration of such period. For any other section 112(e) or 114 rate period, such factor shall be determined in the proceedings otherwise contemplated by this paragraph."
And, the bill would amend subsection 114(f)(1)(B) to provide that "In establishing rates and terms for preexisting subscription services and preexisting satellite digital audio radio services, the Copyright Royalty Judges shall apply the same standards as applicable under paragraph (2)(B)".
8/20. Acting Secretary of Commerce Rebecca Blank appointed twelve members of the Board of the First Responder Network Authority (FirstNet). See, Department of Commerce (DOC) release and release.
Tim Bryan, CEO of the National Rural Telecommunications Cooperative (and former Nextel executive).
Chuck Dowd, Deputy Chief of the New York City Police Department.
Craig Farrill, a founder and Director of Kodiak Networks (and former Vodafone and AirTouch executive).
Paul Fitzgerald, Sheriff of Story County, Iowa.
Sam Ginn, former wireless executive (Vodafone, AirTouch, and PacTel).
Jeffrey Johnson, CEO of the Western Fire Chiefs Association.
William Keever, retired Vodafone executive.
Kevin McGinnis, North East Mobile Health Services.
Ed Reynolds, former telecommunications executive (AT&T, BellSouth Mobility, and Cingular).
Susan Swenson, retired wireless executive (PacTel, Leap Wireless, Cellular One, and T-Mobile).
Teri Takai, former CIO of Michigan and California.
Wellington Webb, retired, former mayor of Denver, Colorado.
These twelve persons are not particularly political. Webb is a retired career politician, Democrat, and financial contributor to President Obama. On the other hand, Ginn has been a major contributor to Republican candidates and committees. An online search of Federal Election Commission (FEC) contribution records shows that the others have not been major contributors in recent federal election cycles.
Six are mostly retired senior executives of wireless service providers: Bryan, Farrill, Ginn, Keever, Reynolds, Swenson. Three are Vodafone alumni.
Three are current or former law enforcement or fire protection officials: Dowd, Fitzgerald, Johnson.
Rep. Doris Matsui (D-CA) stated in a release that "I am particularly pleased that Teri Takai has been appointed to the Board. As a former CIO of the State of California, Teri will bring unique and critical knowledge and expertise to the process, having worked directly with not only state and local officials, but also with the public safety community."
On February 17, 2012, the House and Senate passed the conference report [270 pages in PDF] on HR 3630 [LOC | WW], the "Middle Class Tax Relief and Job Creation Act of 2012". Title VI of this bill gives the Federal Communications Commission (FCC) authority to conduct incentive auctions. It also reallocates the 700 MHz D Block for an interoperable public safety broadband network, and provides for the creation, governance, and funding of such a public safety network.
The just announced twelve appointments are for this governing body. The Act also provides that the three other members are the Secretary of Homeland Security (currently Janet Napolitano), Attorney General (Eric Holder), and Director of the Office of Management and Budget (Jeffrey Zients is acting Director).
The Act provides that at least 3 of the 12 appointments made by the Secretary of Commerce shall be "individuals who have served as public safety professionals". Blank appointed the statutory minimum.
The Federal Communications Commission (FCC) has no representation on this Board.
8/20. On August 8, 2012, the National Cable & Telecommunications Association's (NCTA) submitted to the Federal Communications Commission (FCC) a Petition for Partial Reconsideration [7 pages in PDF] of the FCC's Report and Order [62 pages in PDF] implementing the Commercial Advertisement Loudness Mitigation Act, or CALM Act.
This Act was S 2847 [LOC | WW] in the 111th Congress. President Obama signed it on December 17, 2010. It is codified at 47 U.S.C. § 621. See, story titled "President Signs CALM Act" in TLJ Daily E-Mail Alert No. 2,181, December 17, 2010.
The FCC adopted and released this R&O on December 13, 2011. It is FCC 11-182 in MB Docket No. 11-93.
The NCTA argues that the FCC incorrectly included promotions of television programming within commercial advertisements.
It also argues that the FCC should "clarify that a cable operator will not be held liable in instances where, after performing spot checks of embedded network advertising, the operator has notified that network and the Commission of the network’s non-compliance".
The NCTA also argues that the FCC should clarify that it will "not prohibit cable operators from contacting program networks when performing spot checks".
Initial comments are due by September 4. Reply comments are due by September 14. See, notice in the Federal Register, Vol. 77, No. 161, August 20, 2012, at Page 50071.
See also, stories titled "House Passes CALM Act" in TLJ Daily E-Mail Alert No. 2,167, December 3, 2010, and "Senate Passes Bill to Regulate Volume of TV Commercials" in TLJ Daily E-Mail Alert No. 2,137, October 1, 2010.
8/20. The Federal Trade Commission (FTC) published a notice in the Federal Register (FR) that announces, describes, recites, and sets the comments deadline for, it proposed rules regarding when a transaction involving the transfer of rights to a patent in the pharmaceutical, including biologics, and medicine manufacturing industry is reportable under the Hart Scott Rodino Act. Comments are due by October 25, 2012. See, FR, Vol. 77, No. 161, August 20, 2012, at Pages 50057-50062.
8/20. The law firm of Proskauer Rose published a paper [20 pages in PDF] titled "Survey: Social Networks in the Workplace Around the World". It is an "informal survey of emerging trends and practices on the use of social media in the workplace", based upon responses from 120 businesses. It also includes "a brief summary of the developing law in relation to social networks and the workplace, which provides a valuable overview of the similarities and differences in different jurisdictions".
8/20. The Government Accountability Office (GAO) released a report [45 pages in PDF] titled "Information Security: Environmental Protection Agency Needs to Resolve Weaknesses".
8/20. The NIST CSD released its draft SP 800-56 A Rev [133 pages in PDF] titled "Recommendation for Pair-Wise Key-Establishment Schemes Using Discrete Logarithm Cryptography". The deadline to submit comments is October 31, 2012.
8/17. The U.S. District District Court (NDCal) issued an order [8 pages in PDF] in Fraley v. Facebook that denies preliminary approval of a proposed settlement of a putative class action arising out of Facebook's use of users' names and likenesses in paid advertisements.
The lawyers who filed the complaint, and who stand to benefit from the settlement, allege violation of California Civil Code §3344, which provides for a right of publicity.
Under the proposed settlement, the members of the class whose names and likenesses Facebook used, would receive nothing, while the lawyers who brought the case would receive up to $10 Million. It also provides for cy pres payments of $10 Million to organizations involved in internet privacy issues.
The Court noted that the class size court be around 100 Million people, making individual payments logistically difficult, and payment amounts very small.
Under Section 3344, the minimum award is $750 per violation. Hence, hypothetically, a jury award could run into the billions.
8/17. The Securities and Exchange Commission (SEC) filed a complaint [23 pages in PDF] in the U.S. District Court (WDNC) against Rex Venture Groups LLC and Paul Burks alleging unregistered offer and sale of securities in violation of Sections 5(a) and 5(c) of the Securities Act, and securities fraud in violation of Section 17 of the Securities Act and Section 10b of the Exchange Act, in connection with the operation of the zeekler.com web site and ZeekRewards program.
The complaint alleges that defendants operate a penny auction web site at zeekler.com, and sell participation in associated "ZeekRewards" programs named "Retail Profit Pool" and "Matrix". But, the SEC alleges, these amount to the sale of unregistered securities in a massive ponzi and pyramid scheme.
The complaint alleges that "Approximately 98% of ZeekRewards' total revenues, and correspondingly the purported share of ``net profits´´ paid to current investors, are comprised of funds received from new investors."
The SEC added in a release that "Last month, ZeekRewards brought in approximately $162 million while total investor cash payouts were approximately $160 million."
The SEC also announced that "Burks has agreed to settle the SEC's charges against him without admitting or denying the allegations, and agreed to cooperate with a court-appointed receiver."
The zeekler.com web site now contains a notice that states that "Zeek Rewards is currently unavailable".
8/17. The Public Knowledge (PK) and Free Press (FP), recurrent critics of communications and broadband companies, complained in releases about an AT&T announcement regarding use of Apple's bandwidth intensive FaceTime software on devices connected to AT&T's wireless network.
FaceTime is a software application that runs on recent versions of the Apple iPhone, and certain other recent Apple devices, but not non-Apple devices. Currently, it is available via Wi-Fi connection. However, Apple has announced that it will be available on new devices via mobile networks. FaceTime enables device to device simultaneous voice and video calling over internet protocol.
AT&T will allow its wireless customers to use FaceTime if they subscribe to one of its Mobile Share data plans. This announcement does not affect AT&T's wireline broadband customers. Nor does it not affect AT&T wireless customers when they use a Wi-Fi connection. See also, AT&T's "Mobile Share" data plans web page.
The PK's John Bergmayer asserted in a release that AT&T has violated the Federal Communications Commission's (FCC) rules that regulate the business practices of broadband internet access service (BIAS) providers.
Bergmayer wrote that "By blocking FaceTime for many of its customers, AT&T is violating the FCC's Open Internet rules. These rules state that mobile providers shall not 'block applications that compete with the provider's voice or video telephony services.' Although carriers are permitted to engage in 'reasonable network management,' there is no technical reason why one data plan should be able to access FaceTime, and another not. 'Over-the-top' communications services like FaceTime are a threat to carriers' revenue, but they should respond by competing with these services and not by engaging in discriminatory behavior."
The FP's Matt Wood stated in a release that "It's not supposed to be this way. The Net Neutrality protections in place today for wireless are too weak, but at least prevent carriers from blocking these types of apps. The FCC's rules prohibit such blatantly anti-competitive conduct by wireless companies."
There is a substantial likelihood that the U.S. Court of Appeals (DCCir) will vacate these rules.
These rules treat wireless and fixed broadband differently.
First, the ban on unreasonable discrimination in transmitting lawful network traffic applies only to fixed.
Second, the FCC's rules impose more stringent requirements regarding application blocking on fixed than on wireless service providers.
The rule for fixed is this. A fixed BIAS provider "shall not block lawful content, applications, services, or non-harmful devices, subject to reasonable network management."
The rule for wireless is this. A wireless BIAS provider "shall not block consumers from accessing lawful websites, subject to reasonable network management" or "block applications that compete with the provider's voice or video telephony services, subject to reasonable network management".
Neither the PK nor FP identified an AT&T application or service offering that competes with FaceTime.
The FCC's rules also provide that "Any person may file a formal complaint alleging a violation of the rules". Neither the PK nor FP filed a complaint with the FCC.
8/17. The U.S. District Court (DC) sentenced John M. Harris to serve six months in prison. He pled guilty to criminal copyright infringement in May in connection with his reproducing motion pictures onto DVDs without the permission and then distributing them to vendors in the District of Columbia. Office of the U.S. Attorney for the District of Columbia stated in a release that Harris "admitted selling the DVDs he created to vendors at the Florida Avenue/D.C. Farmer’s Market, in the 500 block of Neal Place NW. In an interview with law enforcement, Harris acknowledged burning between 600 and1,000 movies a weekend and delivering them to the Farmer’s Market. According to Harris, he charged 60 cents per DVD for the pirated movies."
8/16. The Securities and Exchange Commission (SEC) filed a civil complaint [PDF] in the U.S. District Court (NDCal) against Oracle alleging violation of the Foreign Corrupt Practices Act (FCPA).
The complaint does not allege that Oracle paid any bribes to foreign officials. It merely alleges that one of Oracle's subsidiaries, Oracle India Private Limited, created "the potential for bribery or embezzlement".
The SEC asserts that Oracle "failed to implement or maintain a system of effective internal accounting controls to prevent improper side funds in violation of the FCPA". Hence, both counts allege violation of the books and records and internal controls provisions of the FCPA.
The SEC also announced in a release that Oracle, without admitting wrongdoing, consent to entry of judgment against it, and payment of a fine of $2 Million.
This case is SEC v. Oracle Corporation, U.S. District Court for the Northern District of California, Santa Clara Division, D.C. No. 12-4310-CRB.
8/16. The U.S. Patent and Trademark Office (USPTO) published notices in the Federal Register (FR) on August 16 and July 26 that announce that the USPTO will hold a public roundtable, and that announce proposed changes to its rules of practice and proposed changes to its examination guidelines, regarding implementation of the first inventor to file provisions of the Leahy Smith America Invents Act.
The roundtable will be held from 1:30 to 4:30 PM on September 6 in the USPTO's Madison Building Auditorium. The deadline for written comments is October 5.
The "Leahy-Smith America Invents Act", or AIA, was HR 1249 [LOC | WW] in the 112th Congress. President Obama signed it into law on September 16, 2011. It is now Public Law No. 112-29.
One of its key changes is switching the US from a first to invent system to a first inventor to file system.
On July 26 the USPTO published a notice in FR that announces, describes, and recites proposed changes to its rules of practice in patent cases to implement the changes to the conditions of patentability, to implement the first inventor to file system, and to eliminate the provisions pertaining to statutory invention registrations. See, FR, Vol. 77, No. 144, July 26, 2012, at Pages 43742-43759.
Also on July 26, the USPTO published a second notice in FR that announces, describes, and recites proposed changes to its examination guidelines to implement the first inventor to file system provisions of the AIA. See, FR, Vol. 77, No. 144, July 26, 2012, at Pages 43759-43773.
On August 16 the USPTO published a notice in the FR of its public roundtable. See, FR, Vol. 77, No. 159, August 16, 2012, at Pages 49427-49428.
David Kappos, head of the USPTO, stated in a release that "The first-inventor-to-file provision of the America Invents Act, one of its hallmarks, brings greater transparency, objectivity, predictability, and simplicity in patentability determinations ... At the same time, the provision brings the United States closer in harmonizing our patent law with those in other countries around the globe."
Section 3 of the AIA, which includes the first inventor to file provisions, takes effect on March 16, 2013.
8/16. The Department of Justice's (DOJ) Antitrust Division and state of New York filed a complaint [19 pages in PDF] in the U.S. District Court (DC) against Verizon, Verizon Wireless, Comcast, Time Warner Cable, Cox Communications, and Bright House Networks that alleges violation of Section 1 of the Sherman Act in connection with a series of agreements between Verizon and cable companies.
Under these agreements, Verizon Wireless agreed to acquire unused Advanced Wireless Services (AWS) spectrum licenses from several cable companies, and Verizon and Verizon Wireless and cable companies agreed to market each other's services. Also, subsequently Verizon Wireless conditionally agreed to sell 700 MHz A and B block licenses to T-Mobile USA.
Nominally, the complaint seeks court injunction of the agreements. However, the parties simultaneously announced that they have settled this action. Verizon Wireless will acquire the AWS spectrum. The cross marketing agreements are allowed, but must be amended, and be of limited duration -- four years. See, Stipulation and Order and proposed Final Judgment.
8/16. Federal Communications Commission (FCC) Chairman Julius Genachowski stated in a release that "I will be circulating a draft order to my colleagues" that will provide for FCC approval of the agreements between several cable companies and Verizon and Verizon Wireless, subject to concessions.
He stated that the concessions include build out and roaming obligations for Verizon Wireless. However, the FCC has publicly released nothing but a short publicity statement by Genachowski.
In it he states that "Verizon Wireless has undertaken an unprecedented divestiture of spectrum to one of its competitors, T-Mobile, and has committed to accelerate the build-out of its new spectrum and enhance its roaming obligations. In addition, the companies' commercial agreements will be modified to, among other things, preserve Verizon's incentives to build out FiOS, increase wireless competition, and ensure that the proposed IP venture is pro-consumer and that its products cannot be used in anti-competitive ways."
The FCC has statutory authority to conduct license transfer reviews. It also often leverages this authority to conduct de facto antitrust reviews, in large part redundant of those conducted by the Department of Justice (DOJ), albeit without statutory authority under the antitrust laws. However, the FCC does not sue to block license transfers, and its does not issue final orders with a finding of violation of antitrust law. Rather, it delays and investigates, mainly for the purpose of extracting concessions.
Geoffrey Manne of the Tech Freedom stated in a release that "the DOJ and FCC have appropriately divided their review of the deal, with the DOJ considering the competitive effects of the commercial agreements and the FCC assessing whether the spectrum license transfers are in the public interest. Congressional leaders and many self-appointed consumer advocates had demanded that the FCC evaluate the commercial agreements. But doing so would violate Section 310(d), which authorizes the agency to evaluate only license transfers".
8/16. The nation of Ecuador granted political asylum to Julian Assange, who founded WikiLeaks in 2006. He is currently in the United Kingdom (UK), hiding from UK authorities in the Ecuadoran embassy, to evade efforts by Sweden to extradite him pursuant to a warrant issued in connection an investigation of sexual assault allegations against him. UK Foreign Secretary William Haig stated at a news conference that UK remains obligated under law to extradite Assange to Sweden, and will not grant him safe passage out of the UK. See also, story titled "Wikileaks Is Running Out of Money" in TLJ Daily E-Mail Alert No. 2,409, July 18, 2012.
8/16. The U.S. District Court (DC) sentenced Brenda L. Jones, a former employee of XM Satellite Radio (now Sirius XM Radio), to serve 15 months in prison for violation of federal law in connection with her embezzlement of more than $900,000 from her former employer, XM Satellite Radio. The Office of the U.S Attorney for the District of Columbia stated in a release that Jones worked at XM from July 2005 until July 2006 "as an administrator in the Accounts Payable Department, a branch of the controller’s office. Jones’s duties included responsibility for payments to commercial vendors. From 2005 until at least 2008, Jones and a coordinator in the Accounts Payable Department, Valencia Person, embezzled nearly $909,000 from the company. They secretly diverted at least 26 payments, which were supposed to go to XM vendors, to bank accounts held by Jones. They covered up the activities by altering data in the company’s accounting system. Jones then gave a portion of the monies to Person."
Go to News from August 11-15, 2012.

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