Source: http://www.techlawjournal.com/alert/2001/12/03.asp
Timestamp: 2019-04-22 18:44:42+00:00

Document:
TLJ Daily E-Mail Alert No. 319, December 3, 2001.
December 3, 2001, 9:00 AM ET, Alert No. 319.
12/1. The U.S. Bankruptcy Court (NDCal) held a hearing, and issued several orders, on November 30, in the At Home Corporation bankruptcy proceeding. The Court granted At Home's motion to permit it to reject its contracts with cable companies, and hence, terminate broadband Internet access service to cable subscribers. On Saturday, December 1, At Home terminated service to AT&T's cable subscribers.
At Home Corporation, and others, filed a Chapter 11 bankruptcy petition in Bankruptcy Court in San Francisco on September 28, 2001. (See, Case No. 01-32495-TC.) The At Home operates the Excite@Home high speed cable Internet access service.
Court Orders. The Court wrote in its Order Denying Stay Pending Appeal that "On November 30, 2001, the court held a hearing on Debtor's motion to reject certain executory contracts with Cox Communications, Inc. (Cox) and other cable companies. The court granted the motion. Cox then requested that the order be stayed pending appeal. It appearing that (1) appellants are not likely to prevail on appeal; (2) delaying the effect of the order would cause harm to the bankruptcy estate that would be very difficult to measure; (3) rejection need not lead to an immediate cessation of Debtor's operations; and (4) the entire strategy of Cox and the other cable companies in this proceeding has been to delay consideration of Debtor's motion to prevent Debtor from enjoying the benefits of a quickly wasting asset; the motion for a stay pending appeal is denied." See also, Decision Re Debtor's Motion to Reject Executory Contracts, and Order Pursuant to 11 U.S.C. § 365(a) Approving Rejection of Executory Contracts Related to Access Services.
FCC Letter. On December 29, FCC Chairman Michael Powell wrote a letter [PDF] to the Bankruptcy Court regarding the the At Home bankruptcy proceeding. He stated that "It has come to my attention that, in the course of the Excite@Home bankruptcy litigation now before you, you may be asked to permit or perhaps order the service to be discontinued. I write to urge you to balance not just the interest of one debtor and its creditors, but also those of millions of customers and the American public as you consider these requests. In particular, in the event that you permit service to be discontinued, I respectfully urge you, at a minimum, to provide for an orderly transition rather than a precipitous shutdown of Excite@Home, to avoid disrupting broadband service to a significant percentage of U.S. customers."
Powell wrote that "more than 40% of the cable Internet consumers and more than 27% of the total broadband consumers -- are subscribers to cable Internet services jointly provided by cable companies and Excite@Home." He cited no section of the Bankruptcy Code as authority for this. However, he asserted "the proposition that a bankruptcy court acts in equity and can and should consider the interests of consumers and the public at large."
On November 30, At Home issued a release in which it stated that the Bankruptcy Court "granted the Company's motion to reject the master distribution agreements with its cable company customers because the agreements are financially unfavorable to the company. Once rejected, the cable companies must negotiate new agreements acceptable to the company or risk the possibility that the @Home service may be terminated." Then, on December 1, it issued a second release in which it stated that "it was in negotiations with all of its cable company customers other than AT&T regarding arrangements for the continuation of Internet access and related services. After determining that it would not be able to reach agreement with AT&T, the company terminated service to AT&T."
Also on November 30, NCTA P/CEO Robert Sachs issued a release in which he stated that "We are deeply disappointed by the Bankruptcy Court's decision, which failed to take into account the substantial impact it would have on consumers. Most unfortunately, the court's decision is likely to result in temporary disruptions for Excite@Home customers who have enjoyed a service that has seen rapid deployment and produced high customer satisfaction. Cable operators are working around the clock to implement solutions to restore high speed Internet service to Excite@Home customers." The NCTA is a trade groups for cable companies.
11/30. FCC Chairman Michael Powell gave a speech to the ALTS Business Conference 2001 in Crystal City, Virginia. He addressed reducing uncertainty, FCC enforcement, inter carrier compensation, loops and UNE access, special access, and building access and rights of way. He also stated that one of the key proceedings for the upcoming year will be a "Broadband NPRM".
11/30. Federal Reserve Board Governor Edward Gramlich gave a speech titled "Asset Prices and Monetary Policy" at a Bank of France symposium in Paris. He stated that "the U.S. economy has now slowed very sharply. One factor has been the apparent reconsideration of expected profitability in the high tech sector. This reassessment depressed equity prices for high tech firms, and it has significantly restrained investment in these types of equipment, which had been substantial contributors to the previously rapid rate of economic growth. Slowing investment and a shift from a positive to a negative wealth effect on consumption have significantly damped the growth in aggregate final demand since late last year. The associated inventory correction has accentuated the decline in production. Since the September 11 terrorist attacks, heightened uncertainty and concerns have also weighed on the U.S. economy. These factors, and many others, have informed our decision to shift the stance of monetary policy aggressively and reduce the target federal funds rate by 4-1/2 percentage points since the beginning of the year."
11/27. Federal Reserve Board Governor Laurence Meyer gave a speech titled "Before and After" to the National Association of Business Economics in St. Louis, Missouri. He stated that "As a result of a coincidence of forces, the economy slowed much more steeply than the Fed expected or intended. ... But most important was the shock that hit the economy in late 2000 and early 2001 -- a reassessment of the profitability of producing and owning high tech equipment. This shock was manifest in both the financial markets and in the real economy. It resulted in a sharp correction in equity prices in the technology sector -- the bursting of the technology bubble -- and, at the same time, it led to a sharp retrenchment in the demand for and production of high tech equipment. The economy slowed to the point where real GDP was nearly flat in the second quarter of this year and likely would have been nearly flat in the third quarter, even without the events of September 11."
11/30. In contrast to the Federal Reserve Governor's assessments, the Progressive Policy Institute (PPI), a Democratic think tank, released a paper titled "The Economy is Showing Signs of Recovery". The paper concludes that "the U.S. economy is actually poised for recovery." Moreover, this has policy consequences. Congress is currently considering a massive "stimulus" bill. The PPI report continues that "Congress wants more ``stimulus´´ for two main reasons. First, it feels obliged to do something when times are bad. Second, in a recession, members of Congress can dole out new tax cuts to favored groups for lofty economic reasons, and thereby sidestep the usual, less high minded characterizations of their actions. Making matters worse, NeoReaganites and big government liberals are fanning fears of a deep recession to resurrect economic theories that rightly fell out of favor in the 1990s." The report concludes that "Americans should not allow the ``stimulus´´ bandwagon to get out of control. Neither the 1980s style supply side tax cuts nor the 1970s style fiscal policies of Keynesian liberals will work as a short term economic stimulus, and neither represents a sound long term economic policy." The report was written by Jeff Lemieux.
11/29. Rep. John Dingell (D-MI), the ranking Democrat on the House Commerce Committee, released a statement on Enron. He wrote: "Where was the SEC? Where was FASB? ... This problem is not limited to Enron. There are likely other ticking time bombs out there with smoke and mirror earnings. Our accounting and auditing system and its oversight are seriously broken and need immediate reform."
11/28. The SEC filed a civil complaint in U.S. District Court (CDCal) against Hitsgalore.com, Inc., its former President, Stephen Bradford, Life Foundation Trust (LFT), and its administrator, Jeanette Wilcher, alleging violation of federal securities laws. The complaint alleges that Hitsgalore and Bradford issued three false and misleading press releases regarded purported investments by the LFT in Hitsgalore. The releases made statements regarding a purported $10 Million private placement investment by LFT in Hitsgalore, and an agreement in principle between LFT and Hitsgalore for an additional $100 Million investment. The releases also stated that LFT would be purchasing shares as a long term investor. However, the complaint further alleges that LFT sold its shares within weeks, at a huge profit. The complaint alleges that Hitsgalore and Bradford violated § 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, that the LFT and Wilcher aided and abetted those violations, and that LFT violated the securities registration provisions of §§ 5(a) and 5(c) of the Securities Act of 1933. (D.C. Case No. SACV 01-1133 GLT (ANx).) See, SEC release.
11/29. Rep. Gary Condit (D-CA) entered a statement in the Congressional Record in which he criticized trade promotion authority. He wrote that "Under TPA, Congress cannot remove or amend offensive agricultural provisions, it can only reject the entire WTO negotiated pact. Under these conditions, American agriculture is at risk when negotiators are willing to compromise U.S. producers' interests in exchange for new market access for U.S. telecommunications firms, banks and other service providers in other nations." See, Cong. Record, November 29, 2001, at E2180. The House is scheduled to vote on HR 3005, the Bipartisan Trade Promotion Authority Act of 2001, on December 6.
11/30. The Senate Judiciary Committee approved the nomination of James Rogan to be head of the USPTO on November 29, and the full Senate confirmed his nomination on November 30. See, Cong. Record, Nov. 30, 2001, at S12273.
11/29. The Senate Judiciary Committee approved the nominations of eight federal judges: Harris Hartz (to be U.S. Circuit Court Judge for the 10th Circuit), John Bates (U.S. District Court Judge for the District of Columbia), Kurt Engelhardt (Eastern District of Louisiana), Joe Heaton (Western District of Oklahoma), William Johnson (District of New Mexico), Clay Land (Middle District of Georgia), Frederick Martone (Arizona), Danny Reeves (Eastern District of Kentucky), and Julie Robinson (Kansas). The nominees have yet to be confirmed by the full Senate.
11/30. Gov. James Gilmore (R-VA) will step down as head of the Republican National Committee. See, statement by Gov. Gilmore and statement by President Bush.
11/30. President Bush announced his intent to nominate James Comey to be U.S. Attorney for the Southern District of New York. Comey is currently an Assistant U.S. Attorney in Richmond, Virginia. He was a partner at the law firm of McGuire Woods from 1993 to 1996, an Assistant U.S. Attorney for the Southern District of New York from 1983 to 1993, and an associate at the law firm of Gibson Dunn & Crutcher from 1986 to 1987. See, White House release.
11/30. The President nominated Michael Shelby to be a U.S. Attorney for the Southern District of Texas. Shelby is currently an Assistant U.S. Attorney for the District of Arizona, Phoenix Division. He was previously an Assistant U.S. Attorney for the Southern District of Texas. See, White House release and release.
11/30. The Senate confirmed Arden Bement as director of the Commerce Department's National Institute of Standards and Technology (NIST). He succeeds Raymond Kammer, who retired in December 2000. See, DOC release.
11/30. Gov. Gray Davis (D-CA) announced the appointments of Lisa Lench, Luis Lavin, Joe Hilberman, Michael Stern, and Anne Egerton as judges of the Los Angeles County Superior Court. Stern is a litigator who focuses on federal and state civil litigation, including intellectual property. Egerton is the former SVP and General Counsel, West Coast, for NBC. Before joining NBC in 1990, she worked for the law firm of Munger Tolles & Olson from 1983 to 1990. She previously worked in the Washington DC office of the law firm of Wilmer Cutler & Pickering.
11/28. The U.S. Court of Appeals (2ndCir) issued its opinion in Universal City Studios v. Eric Corley, upholding the constitutionality of the Digital Millennium Copyright Act (DMCA), and an injunction issued by U.S. District Court Judge Lewis Kaplan to enforce the DMCA.
Defendant. Defendant Corley publishes a print magazine and the 2600 web site for hackers. In November 1999 he published a copy of the decryption computer program named DeCSS on his web site.
DeCSS. The DeCSS program was written by a Norwegian teenager named Jon Johansen and others to circumvent certain encryption protection for DVDs. DVD is sometimes known as Digital Versatile Disc. CSS is a Content Scrambling System for DVD to protect intellectual property rights by means of encryption. DeCSS is Johansen's decryption tool, which enables a user to copy a DVD's files and place these copies on the user's hard drive. These files can then be played on a non CSS compliant player. They can also be and copied, manipulated, and transferred. Hence, DeCSS can be used to infringe copyrights.
Plaintiffs. The Plaintiffs are Universal City Studios and seven other motion picture studios.
District Court. The plaintiffs filed a complaint in U.S. District Court (SDNY) against Corley and others. Corley raised First Amendment and other arguments. The District Court, Judge Lewis Kaplan presiding, granted plaintiffs injunctive relief under the DMCA. See, Universal City Studios, Inc. v. Reimerdes, 111 F. Supp. 2d 294 (S.D.N.Y. 2000).
DMCA. The DMCA is found at 17 U.S.C. § 1201 et seq. § 1201(a)(1)(A) provides, in part, that "No person shall circumvent a technological measure that effectively controls access to a work protected under this title." § 1201(b)(1) provides that "No person shall manufacture, import, offer to the public, provide, or otherwise traffic in any technology, product, service, device, component, or part thereof, that (A) is primarily designed or produced for the purpose of circumventing protection afforded by a technological measure that effectively protects a right of a copyright owner under this title in a work or a portion thereof; (B) has only limited commercially significant purpose or use other than to circumvent protection afforded by a technological measure that effectively protects a right of a copyright owner under this title in a work or a portion thereof; or (C) is marketed by that person or another acting in concert with that person with that person's knowledge for use in circumventing protection afforded by a technological measure that effectively protects a right of a copyright owner under this title in a work or a portion thereof."
Appeals Court. Corley presented several arguments on appeal. His main arguments were that the DMCA as applied to his dissemination of DeCSS violates the First Amendment because computer code is speech, and the DMCA fails to survive the strict scrutiny standard, and that the DMCA violates the First Amendment and the Copyright Clause by unduly obstructing the fair use of copyrighted materials.
The Court affirmed Judge Kaplan's judgment. It declined to apply the strict scrutiny test to the computer code at issue in this case. It further rejected the fair use argument, on several grounds. The Court wrote that "the Appellants do not claim to be making fair use of any copyrighted materials, and nothing in the injunction prohibits them from making such fair use. They are barred from trafficking in a decryption code that enables unauthorized access to copyrighted materials."
Code Can Be Speech. The Court also wrote that "Computer programs are not exempted from the category of First Amendment speech simply because their instructions require use of a computer. ... computer code, and computer programs constructed from code can merit First Amendment protection ..."
11/28. The U.S. District Court (DNJ) announced its opinion from the bench in Felten v. RIAA dismissing this challenge to the anti circumvention provision of the DMCA.
On June 6, 2001, Edward Felten and others filed a complaint against the RIAA, SDMI Foundation, and others, seeking a declaration that the anti circumvention provision of the Digital Millennium Copyright Act is unconstitutional as a violation of free speech. The SDMI Foundation had initially sought to prevent Felton from publishing a paper. It wrote a letter to Felten, an associate professor in the Department of Computer Science at Princeton University, and others, warning them that public release of information concerning the Secure Digital Music Initiative (SDMI) "could subject you and your research team to actions under the Digital Millennium Copyright Act ..."
Cary Sherman, General Counsel of the RIAA, had this reaction: "We are happy that the court recognized what we have been saying all along: there is no dispute here. As we have said time and again, Professor Felten is free to publish his findings."
11/30. Inder Deot plead guilty in U.S. District Court (NDTex) to conspiracy and criminal infringement of a copyright, in violation of 18 U.S.C. §§ 371 and 2319. The Information states that he was involved in a conspiracy to replicate, manufacture, and distribute counterfeit copies Windows 95 and Windows Office 95. This case is being prosecuted by Erin Cox of the Computer Hacking and Intellectual Property (CHIP) Unit of the Dallas United States Attorney's Office (USAO). See, USAO release.
11/30. The Copyright Office published a notice in the Federal Register announcing, pursuant to 17 U.S.C. § 118, a cost of living adjustment of 2.1% in the royalty rates paid by colleges, universities, or other nonprofit educational institutions that are not affiliated with National Public Radio for the use of copyrighted published nondramatic musical compositions. The effective date is January 1, 2002. See, Federal Register, November 30, 2001, Vol. 66, No. 231, at Pages 59698 - 59699.
11/30. Sen. Patrick Leahy (D-VT), Sen. Orrin Hatch (R-UT), and others, introduced S 1754, a bill to authorize appropriations for the USPTO for fiscal years 2002 through 2007.
Sen. Leahy stated that "The costs of running the PTO are entirely paid for by fees collected by the PTO form users, individuals and companies that seek to benefit from patent and trademark protections. However, since 1992 Congress has diverted over $800 million of those fees for other government programs unrelated to the PTO. This bill sends a strong message that Congress should appropriate to the PTO a funding level equal to these fees." See, Cong. Record, November 30, 2001, at S12262.
Sen. Hatch stated that "the USPTO has been under mounting pressure on three fronts, increased filings, increased complexity in the filings, and increased difficulty retaining valuable and experienced examiners in the face of more lucrative offers in the private sector. These pressures, if unaddressed, can lead to delays for applicants of months or years, or to reduced quality and reliability of the determinations that issue from the USPTO. Indeed, the USPTO estimates that the patent pendency period could rise to 38 months by 2006. I hate to think that innovative products could sit on the shelf for more than three years awaiting government review. This is especially troubling when we realize that in many high tech sectors the shelf life of a product is often less than half that time." See, Cong. Record, November 30, 2001, at S12262.
The House will not be in session. The Senate will consider HR 10, the Comprehensive Retirement Security and Pension Reform Act of 2001.
8:00 AM. The U.S. International Trade Commission will begin an evidentiary hearing in its Section 337 investigation regarding importation of certain set top boxes. Administrative Law Judge Paul Luckern will preside. See, notice in Federal Register, and USITC release. This is Investigation No. 337-TA-454. Location: Courtroom B, USITC Building, 500 E Street SW.
9:30 AM - 12:00 NOON. The FCC's Office of Engineering and Technology will host a tutorial by the TDD Coalition on Time Division Duplex (TDD) Technology. Location: FCC, 445 12th Street SW, Room TW-C305.
The House will meet at 12:30 PM for morning hour and 2:00 PM for legislative business. No recorded votes are expected before 7:00 PM. The House will consider several measures under suspension of the rules.
LOCATION CHANGE. 9:00 AM - 5:00 PM. There will be an interagency public workshop on Gramm Leach Bliley (GLB) Act privacy notices. A joint announcement states that the "workshop will provide a forum to identify successful GLB Act privacy notices, discuss strategies for communicating complex information, and encourage industry self regulatory efforts and consumer and business education." The participating agencies are the FTC, Board of Governors of the Federal Reserve System, CFTC, Treasury Department, Comptroller of the Currency, Office of Thrift Supervision, FDIC, National Credit Union Administration, and the SEC. See, also FTC page on workshop. FTC Chairman Timothy Muris will give opening remarks at 9:00 AM. FTC Commissioner Mozelle Thompson will speak at 12:00 NOON. New location: Ronald Reagan Building and International Trade Center, Pennsylvania Avenue and 13½ Street, NW.
9:00 AM. Bureau of Export Administration's (BSA) Regulations and Procedures Technical Advisory Committee (RPTAC) will hold a meeting. It will be partly open and partly closed. The open agenda includes an update on Wassenaar Arrangement and a review of encryption regulations. See, notice in Federal Register. Location: Room 3884, Herbert Hoover Building, 14th Street between Constitution and Pennsylvania Avenues, NW.
9:00 AM - 5:00 PM. Day one of a three day meeting of NIST's Computer System Security and Privacy Advisory Board (CSSPAB). See, notice in Federal Register. Preregistration is required to attend; to register, contact Elaine Frye by November 30, 2001, at elaine.frye@nist.gov or 301 975-2819. Location: NIST, Administration Building, Lecture Room B, in Gaithersburg, MD.
10:00 AM. The Senate Judiciary Committee will hold another hearing in its ongoing series of hearings titled "DOJ Oversight: Preserving Our Freedoms While Defending Against Terrorism." This hearing began on December 28. It is scheduled to continue at 2:00 PM, and again at 10:00 AM on December 6. This hearing will focus on military tribunals, and will be chaired by Sen. Charles Schumer (D-NY). Location: Room 226, Dirksen Building.
10:00 AM. The Senate Finance Committee will meet to mark up S 1209, to amend the Trade Act of 1974 to consolidate and improve the trade adjustment assistance programs, to provide community based economic development assistance for trade affected communities. Location: Room 215, Dirksen Building.
2:00 PM. The House Commerce Committee's Subcommittee on Telecommunications and the Internet will hold a hearing titled The Status of Competition in the Multi Channel Video Programming Distribution Marketplace. Location: Room 2123, Rayburn Building.
2:00 AM. The Senate Judiciary Committee will hold another hearing in its ongoing series of hearings titled "DOJ Oversight: Preserving Our Freedoms While Defending Against Terrorism." This hearing began on December 28. It is scheduled to continue 10:00 AM on December 6. This hearing will focus on detainees, and will be chaired by Sen. Russ Feingold (D-WI). Location: Room 226, Dirksen Building.
9:00 AM - 5:00 PM. Day two of a three day meeting of NIST's Computer System Security and Privacy Advisory Board (CSSPAB). See, notice in Federal Register. Preregistration is required to attend; to register, contact Elaine Frye by November 30, 2001, at elaine.frye@nist.gov or 301 975-2819. Location: NIST, Administration Building, Lecture Room B, in Gaithersburg, MD.
10:00 AM. The House Commerce Committee's Subcommittee on Commerce, Trade, and Consumer Protection will hold a hearing titled Electronic Communications Networks in the Wake of September 11th. Room 2123, Rayburn Building.
10:00 AM. The FCC's Technological Advisory Council will hold a meeting. See, notice in Federal Register. Location: FCC, 445 12th St. SW, Room TW-C305.
2:00 - 5:00 PM. Day one of a two day business meeting of the U.S. National Commission on Libraries and Information Science. See, notice in Federal Register. Location: Conference Room, NCLIS Office, 1110 Vermont Ave., NW, Suite 820.

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