Source: http://techlawjournal.com/home/newsbriefs/2004/10c.asp
Timestamp: 2019-04-22 08:38:41+00:00

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TLJ News: October 11-15, 2004.
10/15. The Federal Communications Commission (FCC) announced that its Broadband PCS Spectrum Auction, Auction No. 58, that had been scheduled for January 12, 2005, will begin on January 26, 2005. See, notice [3 pages in PDF].
Also on October 15, the FCC adopted and released a Memorandum Opinion and Order [17 page in PDF] in its proceeding titled "In the Matter of Eligibility Restrictions on C Block Licenses in the Broadband Personal Communication Services". The FCC dismissed or denied three petitions or requests to alter or waive the FCC's entrepreneur eligibility rules in connection with it upcoming broadband PCS auction, Auction No. 58. This is RM-11019.
Verizon Wireless had filed a petition seeking reconsideration of a public notice of the FCC's Wireless Telecommunications Bureau (WCB). Second, Dobson Communications Corporation had filed a request for a waiver seeking an extension of the expired entrepreneur eligibility provisions of Section 24.709(a)(5)(i) to allow it and other entities to participate in closed bidding in Auction No. 58.
And third, the Cellular Telecommunications and Internet Association (CTIA) had filed a request for a waiver seeking elimination of the entrepreneur eligibility requirements completely or in the context of Auction No. 58. It argued in its petition that "open bidding is the best means of quickly placing spectrum in the hands of those who are willing and able to put the spectrum to its highest valued use. It also will strengthen competition by allowing robust competitors to acquire needed spectrum to enter the market or fill out their footprints."
After the FCC released its Memorandum Opinion and Order, the CTIA responded in a release that "The wireless industry is disappointed that the FCC has decided to maintain its approach of ‘setting aside’ a significant number of licenses in its upcoming Auction of PCS spectrum for designated entities. The alternative approach of utilizing bidding credits -- which is used in all other spectrum auction contexts -- has a proven track record of success in ensuring that small and minority-owned entities can win and operate spectrum licenses. The track record of set asides, by contrast, has consistently slowed the availability of service to consumers."
10/15. The U.S. Court of Appeals (9thCir) issued its opinion [14 pages in PDF] in Creative Computing v. Getloaded.com, a Section 1030 case in which the Court of Appeals affirmed the District Court judgment against a corporate hacker. In addition, the Court of Appeals affirmed an injunction against visiting the plaintiff's web site. See, full story.
10/15. Julie Erhardt was named Deputy Chief Accountant at the Securities and Exchange Commission (SEC). She will report to Donald Nicolaisen, the SEC's Chief Accountant. See, SEC release.
10/15. The Federal Communications Commission's (FCC) Office of Engineering and Technology (OET) issued a Public Notice [2 pages in PDF] regarding Geophysical Survey Systems, Inc.'s (GSSI) October 13 request for a waiver [7 pages in PDF] of Part 15 of the FCC's rules to permit the higher power operation of ultra-wideband (UWB) non-contact ground penetrating radars (GPRs). The Public Notice describes the request, states that it will be treated, for ex parte purposes, as a permit but disclose proceeding, and sets comment deadlines. Comments are due by November 5, 2004, and reply comments are due by November 22, 2004. This is ET Docket No. 04-374, which is also the docket number for the proceeding on the similar request filed Wavebounce. See also, Geophysical's June 17, 2004 petition [pages in PDF] for partial reconsideration.
10/15. The Federal Trade Commission (FTC) announced that it will host a two day workshop on December 15 and 16, 2004 titled "Peer-to-Peer File Sharing Technology: Consumer Protection and Competition Issues". The topics to be covered include the uses of P2P file sharing technology, the role of P2P file sharing technology in the economy, identification and disclosure of P2P file sharing software risks, technological solutions to protect consumers from risks associated with P2P file sharing software, P2P file sharing and music distribution, and P2P file sharing and its impact on copyright holders. November 15 is the deadline to submit comments or requests to participate. The FTC vote on this item was 4-0-1. Commissioner Jon Leibowitz did not participate. Until recently, he worked for the Motion Picture Association of America (MPAA). See, FTC release and notice [13 pages in PDF] to be published in the Federal Register.
10/15. The Government Accountability Office (GAO) prepared an annual audit [8 pages in PDF] for the Chairmen and ranking Democrats on the House Financial Services Committee, and the Senate Banking Committee, titled "Local Television Act: Status of Spending for Fiscal Year 2003". This audit is required by the Launching Our Communities’ Access to Local Television Act of 2000, Public Law No. 106-553.
Gary Shapiro, P/CEO of the Consumer Electronics Association (CEA), stated in a release that these new rules "will advance the deployment and adoption of broadband ... Market-driven facilities-based competition is a key element in stimulating consumer adoption of broadband. Power lines reach virtually every community, urban and rural, homes and businesses, churches and schools. Because of this reach, Access BPL has great potential to provide 'last mile' broadband service nationwide. Because of the ease of installation and use, Access BPL will advance consumer use of new technologies and products, such as home network systems."
Steve Largent, President & CEO of the Cellular Telecommunications and Internet Association (CTIA), stated in a release that this is "one of the final pieces to the Advanced Wireless Services puzzle". He praised the FCC, and urged the Congress to "pass the Spectrum Relocation Bill”. He added that the bill “is good for wireless consumers, good for the Department of Defense and good for the American taxpayer. We urge Congress to pass this legislation before the end of the year".
It elaborates that "The FCC found that FTTC networks can deliver many of the same benefits as FTTC loops. FTTC networks offer enhanced capability for providing advanced services, including the ability to offer voice, multi-channel video, and high-speed data services. The new rules free companies to choose between FTTH or FTTC networks based on marketplace characteristics, rather than disparate regulatory treatment." See, full story.
10/14. The Federal Communications Commission (FCC) adopted, but did not release, a Notice of Inquiry (NOI) regarding foreign mobile termination rates.
The FCC issued a release [PDF] that states that this NOI "solicits comment on foreign mobile termination payment arrangements and on payment flows between carriers that terminate mobile calls in certain foreign countries. It also requests data and information on foreign mobile termination rates, on the actions taken by foreign regulators with respect to these rates, and on competitive concerns raised in the FCC’s ISP Reform proceeding. Finally, the Notice seeks comment and information on the appropriate framework for evaluating whether foreign mobile termination rates are unreasonably high."
FCC Commissioner Michael Copps (at right) wrote in a separate statement [PDF] that "Increasingly U.S. consumers are facing very high and often unexpected charges when they place international calls to people using mobile phones. In some cases these rates appear to be well above cost. So the FCC has the responsibility to investigate these charges and to determine if we should take action."
Carol Ann Bischoff, of CompTel/ASCENT, stated in a release that "the issue of foreign mobile termination rates must be investigated further to ensure that American consumers are not subsidizing mobile operators in other countries. There is no doubt that the FCC will find significant evidence that the problem of excessive foreign mobile termination rates is growing more pronounced, as more countries now allow for the assessment of mobile termination surcharges or have unjustifiably increased their existing rates.
She sited "Australia, Peru, Switzerland and Germany, where fixed-to-mobile termination rates are 258 percent above cost-based estimates."
The Cellular Telecommunications and Internet Association (CTIA) commented in a release that this NOI "is properly focusing on gathering data in order to examine whether there is a problem with foreign mobile termination rates that could have an adverse effect on U.S. consumers, or on competition in the U.S. telecommunications market. CTIA appreciates the Commissioners' recognition that this is an issue that requires close coordination with foreign regulators, who have been closely examining this issue in the context of their calling party pays regimes."
This NOI is FCC 04-248 in IB Docket No. 04-398.
10/14. The Federal Communications Commission (FCC) released a document [72 pages in PDF] titled "Eligible Services List: Schools and Libraries Support Mechanism For Fund Year 2005". The FCC adopted this item on October 5, 2004. This item is FCC 04-244 in CC Docket No. 02-6.
10/14. The Federal Communications Commission (FCC) deleted from the agenda of its October 14, 2004 meeting two items that it had previous announced would be considered at the meeting. It deleted consideration of an Order on Reconsideration regarding its payphone compensation rules. This proceeding is CC Docket No. 96-128. It also deleted consideration of a notice of proposed rulemaking (NPRM) concerning § 251(h)(2). This pertains to Mid-Rivers Telephone Cooperative, Inc.'s petition that it be declared the incumbent local exchange carrier (ILEC) in a town in the state of Montana. This proceeding is WC Docket No. 02-78.
10/14. The Progress and Freedom Foundation (PFF) released a paper [13 pages in PDF] titled "State Barriers to VoIP Deployment". It argues that "state impediments to VoIP deployment are harmful and unwelcome", and reviews the VOIP related actions by states.
It states that "any regulatory barrier to the proliferation of this new technology would be unfortunate, as there are clear consumer benefits to be had from VoIP’s proliferation. Furthermore, since this is a new technology, we see little rationale for regulating it under the traditional common carriage regime that has historically been used for telecommunications".
This paper, which was written by Raymond Gifford and Kent Lassman, argues that "the competitive pressures of new technologies and services have eroded the basis for the current regulatory classifications and most economic interventions. Likewise, we believe the ``Internet´´ in VoIP services is inherently an interstate, and therefore federal, concern. However, until fundamental changes to the nation’s telecommunications laws are adopted, VoIP regulation will remain chaotic and the states will have their prerogatives. For now, the best we can do is counsel state forbearance from VoIP regulation, where possible."
"At the state level, some two-dozen states have taken formal action related to VoIP." The paper finds that "Approximately half of the states have not taken any action with regard to VoIP. The actions of other states can be grouped into four categories. In order of regulatory interest: First, certain state commissions have sought information on VoIP through workshops or formal investigations; second, some states have asserted authority over VoIP providers and, in turn, sought applications for certificates of convenience and necessity; third, in a category by itself, California has an active rulemaking docket that would subject VoIP services to the full-blown supervision of the California Commission; fourth and finally, Iowa has used its numbering allocation authority to impede VoIP deployment in the state."
The report then provides a state by state review of investigations and regulatory proceedings.
10/14. U.S. and French trade officials commented on Congressional legislation that repeals the FSC/ETI tax regime.
On October 11, 2004, the Senate approved the conference report on HR 4520, the "American Jobs Creation Act of 2004", by a vote of 69-17 on October 11, 2004. See, Roll Call No. 211. The House approved this conference report on October 7 by a vote of 280-141. See, Roll Call No. 509. See, full text of conference report [650 pages in PDF], and story titled "House and Senate Approve Tax Bill That Repeals FSC/ETI" in TLJ Daily E-Mail Alert No. 995, October 13, 2004.
The World Trade Organization (WTO) ruled that the foreign sales corporation (FSC) tax regime, and its replacement, the extraterritorial income (ETI) tax regime, constitute illegal export subsidies, and authorized the EU to impose up to $4 Billion in retaliatory tariffs. This bill repeals the FSC/ETI tax regime.
On October 12, EU Trade Commissioner Pascal Lamy stated in a release that "I am pleased that Congress has finally taken this step towards US compliance with the WTO ruling. It vindicates the EU’s patient but firm approach. Our objective throughout has been to obtain the withdrawal of these illegal subsidies by introducing progressively rising countermeasures."
Lamy (at right) added that "We will now carefully study the details in the final compromise between both chambers, in particular regarding transition periods, grandfathering clauses, as well as all other relevant fiscal provisions."
On October 14, U.S. Trade Representative (USTR) Robert Zoellick stated in a release that "We recognize the difficulty and complexity of making tax code changes, and by bringing the United States into compliance with our international obligations, we believe the concerns that prompted the EU to bring this action in 1997 have been addressed satisfactorily. We urge Europe to quickly move to end their tariffs on U.S. exports, so that trade can resume to the mutual benefit of both sides of the Atlantic."
10/14. The Progressive Policy Institute (PPI), a new Democrat think tank, released a report [7 pages in PDF] titled "Unsatisfactory Progress: The Bush Administration's Performance on E-Government Initiatives". It concludes that "As other nations have raced ahead in e-government, the Bush administration has made, at best, halting progress", because "the administration itself has failed to make a serious commitment to transforming the federal government through information technology". This report was written by Robert Atkinson, Director of the PPI's Technology and New Economy Project. See, also PPI summary.
10/13. The U.S. District Court (DC) issued its Memorandum Opinion and Order [6 pages in PDF] in USA v. SBC and BellSouth, modifying the final judgment issued in 2000 that required Cingular Wireless to divest certain spectrum licenses, and thus, allowing Cingular to acquire spectrum licenses of AT&T Wireless.
10/13. The Department of Commerce's Bureau of Industry and Security (BIS/BXA) published a notice in the Federal Register that describes, and sets the comment deadline for, its notice of proposed rulemaking regarding amendments to the Export Administration Regulations (EAR). The BIS proposes to amend its EAR to revise the definition of knowledge to incorporate a reasonable person standard, and to replace the phrase "high probability" with "more likely than not". The BIS also proposes to revise the red flags guidance, and provide a safe harbor from liability arising from knowledge under that definition. Comments are due by November 12, 2004. See, Federal Register, October 13, 2004, Vol. 69, No. 197, at Pages 60829 - 60836.
10/13. The Office of the U.S. Trade Representative (USTR) published a notice in the Federal Register requesting public comments regarding its out of cycle reviews of Malaysia, Poland, and Taiwan, pursuant to Section 182 of the Trade Act of 1974, which is codified at 19 U.S.C. § 2242 (also known as Special 301), which requires the USTR to identify countries that deny adequate and effective protection of intellectual property rights or deny fair and equitable market access to U.S. persons who rely on intellectual property protection. See, notice in the Federal Register, October 13, 2004, Vol. 69, No. 197, at Pages 60928 - 60929. The deadline to submit comments is 12:00 NOON on November 5, 2004.
10/12. The Supreme Court denied certiorari, without opinion, in NARUC v. USTA. See, Order List [14 pages in PDF] at page 3.
This order lets stand the March 2, 2004 opinion [62 pages in PDF] of the U.S. Court of Appeals (DCCir) in USTA v. FCC, overturning key parts of the Federal Communications Commission's (FCC) triennial review order (TRO).
The Appeals Court opinion left largely untouched those portions of the TRO in which the FCC refrained from unbundling next generation broadband facilities. The opinion vacated those portions of the TRO in which the FCC delegated decision making authority to the state to make impairment findings. See, story titled "Appeals Court Overturns Key Provisions of FCC Triennial Review Order" in TLJ Daily E-Mail Alert No. 848, March 3, 2004.
Walter McCormick, P/CEO of the U.S. Telecommunications Association (USTA), stated in a release that "Today's action by the Supreme Court should be the final chapter in this tortured saga of instability for the industry. It's time for the Commission to set clear, lawful unbundling rules to bring certainty and clarity to telecom."
Herschel Abbott, BellSouth's VP for Governmental Affairs, stated in a release that "Consumers have been well served by the Supreme Court's denial of review of the CLECs' appeal. We continue to urge the FCC to meet the commitment of having new permanent rules in place by the end of the year and to ensure that the rules are consistent with the decision of the Appeals Court. After 8-1/2 years of working under unlawful rules, BellSouth believes the quick adoption and implementation of permanent rules is essential to economic recovery and job creation in America's technology sector."
This proceeding is National Association of Regulatory Utility Commissioners v. U.S. Telecommunications Association, et al., No. 04-12, AT&T Corporation, et al. v. U.S.T.A., et al., No. 04-15, and California, et al. v. U.S.T.A., et al., No. 04-18.
10/12. The Supreme Court denied certiorari, without opinion, in RIAA v. Verizon. See, Order List [14 pages in PDF] at page 2.
This lets stand the December 19, 2003 opinion [16 pages in PDF] of the U.S. Court of Appeals (DCCir) in RIAA v. Verizon. The Court of Appeals reversed the District Court, and held that a Section 512(h) subpoena may only be issued to an ISP that is engaged in storing on its servers material that is infringing or the subject of infringing activity.
There are other cases involving Section 512 subpoenas. Hence, this issue may yet be decided by the Supreme Court.
After the Supreme Court released its order, Verizon's Associate General Counsel Sarah Deutsch stated in a release that "Today, the Supreme Court ruled in favor of the personal privacy, First Amendment rights to free speech and free association, and the safety of every Internet user in this country."
While Verizon has sought to portray its opposition to the music industry's use of Section 512 subpoenas as a defense of individual privacy, and it did advance a First Amendment argument in the District Court and the Court of Appeals, the Court of Appeals did not rule on either privacy, First Amendment, or safety grounds. It merely construed the language of the statute.
The Court of Appeals wrote that "The issue is whether § 512(h) applies to an ISP acting only as a conduit for data transferred between two internet users, such as persons sending and receiving e-mail or, as in this case, sharing P2P files. Verizon contends § 512(h) does not authorize the issuance of a subpoena to an ISP that transmits infringing material but does not store any such material on its servers. The RIAA argues § 512(h) on its face authorizes the issuance of a subpoena to an ``[internet] service provider´´ without regard to whether the ISP is acting as a conduit for user-directed communications. We conclude from both the terms of § 512(h) and the overall structure of § 512 that, as Verizon contends, a subpoena may be issued only to an ISP engaged in storing on its servers material that is infringing or the subject of infringing activity."
17 U.S.C. § 512 provides ISPs a safe harbor from liability for infringement based on the activities of their users. There are four specific limitations on liability. § 512(a) pertains to "transmitting, routing, or providing connections for, material through a system or network controlled or operated by or for the service provider, or by reason of the intermediate and transient storage of that material in the course of such transmitting, routing, or providing connections". § 512(b) pertains to "the intermediate and temporary storage of material on a system or network". § 512(c) pertains to "material that resides on a system or network controlled or operated by or for the service provider". And, § 512(d) pertains to "referring or linking users to an online location containing infringing material or infringing activity, by using information location tools, including a directory, index, reference, pointer, or hypertext link".
However, the statute does not expressly limit the availability of 512(h) subpoenas to 512(c) situations.
The music industry seeks to use Section 512 subpoenas to learn the identity of peer to peer infringers. The copyright holders possess only internet protocol (IP) number information on infringers. This does not reveal the identity of the infringers. However, internet service providers (ISPs), such as Verizon Internet Services, which provide internet access for the P2P infringers, possess information that would associate subscriber information with IP number information. That is, obtaining the ISP's information enables the copyright holders to file complaints alleging infringement against the individual infringers that names the individuals. It also enables them to contact the individuals before filing a complaint in court. Without Section 512 subpoenas, copyright holders must file John Doe lawsuits, a more expensive and time consuming procedure, that also sometimes provides out of date information on infringers.
See also, story titled "DC Circuit Reverses in RIAA v. Verizon" in TLJ Daily E-Mail Alert No. 804, December 22, 2003.
This case is Recording Industry Association of America v. Verizon Internet Services, Inc., No. 03-1579, and Verizon Internet Services, Inc. v. Recording Industry Association of America, No. 03-1722.
10/12. The U.S. Court of Appeals (9thCir) issued its opinion [17 pages in PDF] in Qwest v. Portland, a case involving 47 U.S.C. § 253 and local franchise fees on telecommunications carriers. The District Court ruled that 7% municipal rights of way fees in Oregon do not violate Section 253. The Court of Appeals reversed in part, and remanded.
The Congress enacted the Telecommunications Act of 1996. 47 U.S.C. § 253(a), which was enacted as part of the Act, provides that "No State or local statute or regulation, or other State or local legal requirement, may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service."
Qwest filed a complaint in U.S. District Court (DOre) against Portland seeking a declaration that Portland's franchise and telecommunications ordinances are invalid under 47 U.S.C. § 253. Other municipalities in Oregon intervened.
The District Court granted summary judgment to Portland and the other cities.
It held that Qwest failed to show that the municipalities' revenue based right of way fees, or other franchise requirements, prohibited or had the effect of prohibiting Qwest's provision of telecommunication services under Section 253. It also held that the Act did not categorically prohibit cities from basing public rights of way fees on a company's gross revenues, rather than on actual costs for use of local rights of way.
Qwest brought this appeal. The Court of Appeals reversed in part, and remanded to the District Court because it "failed to conduct an individualized § 253 preemption analysis for each city's ordinances, and misapplied our holding in City of Auburn v. Qwest, 260 F.3d 1160 (9th Cir. 2001)".
See also, April 24, 2004 opinion [PDF] of the 9th Circuit in Auburn v. Qwest.
This case is Qwest Corporation v. City of Portland, et al., App. Ct. No. 02-35473, an appeal from the U.S. District Court for the District of Oregon, D.C. No. CV-01-01005-JE. Judge Johnnie Rawlinson, wrote the opinion of the Appeals Court in which Judges Arthur Alarcón and Warren Ferguson joined. Judge Ferguson also wrote a concurring opinion.
10/12. The Department of Justice (DOJ) released a report [96 pages in PDF] titled "Report of the Department of Justice's Task Force on Intellectual Property".
This is primarily a collection of recommendations regarding enhancing criminal prosecution by the federal government. There is less in this report regarding the intellectual property rights regime and civil enforcement of intellectual property rights by the holders of those rights.
It recommends adding five computer hacking and intellectual property (CHIPs) units to the U.S. Attorneys Offices in the District of Columbia, the Eastern District of California (Sacramento), the Western District of Pennsylvania (Pittsburgh), the Middle District of Tennessee (Nashville), and the Middle District of Florida (Orlando). It also recommends reinforcing certain CHIPs units, and designating CHIPs coordinators in each U.S. Attorneys Office.
It recommends examining "the need to increase resources for the Computer Crimes and Intellectual Property Section of the Criminal Division (CCIPS) at the DOJ headquarters in Washington DC to address intellectual property concerns.
It recommends that the Federal Bureau of Investigation (FBI) "increase the number of Special Agents assigned to intellectual property investigations", and "the number of personnel assigned to search for digital evidence in intellectual property cases".
It recommends more prosecutions of criminal organizations that commit intellectual property crimes.
It recommends more training of prosecutors and law enforcement agents.
This report also contains a recommendation regarding the use of Digital Millennium Copyright Act (DMCA) subpoenas. It recommends that the DOJ should "assist private parties enforcing civil laws that protect intellectual property owners against theft by supporting an effective statutory framework for such enforcement." The report sites only one example of such assistance -- DMCA subpoenas.
The report states "The DMCA allows copyright owners to compel Internet Service Providers to identify alleged infringers by serving a subpoena without having to first file a lawsuit. ... Armed with a subpoena, copyright owners can determine who is unlawfully downloading their copyrighted material using P2P networks ..." The report adds that some ISPs "have resisted DMCA subpoenas by contending that the subpoena provision does not apply to their service because they do not store the copyrighted material, but instead only transmit data. The Justice Department has filed briefs opposing the Internet Service Providers' challenges ..."
ISPs have successfully resisted DMCA subpoenas in RIAA v. Verizon. See, related story in this issue titled "Supreme Court Denies Cert in DMCA Subpoena Case". See also, story titled "DC Circuit Reverses in RIAA v. Verizon" in TLJ Daily E-Mail Alert No. 804, December 22, 2003.
The report also recommends that the DOJ "should support the rights of intellectual property owners to decide independently whether to license their technology to others", without running afoul of antitrust laws.
The report also recommends that the DOJ should "encourage trade associations and other business organizations seeking to establish industry standards for the prevention of intellectual property theft, to use the Justice Department's business review procedure for guidance regarding antitrust enforcement concerns."
For example, it states that "The Digital Media Consumers' Rights Act of 2003 (H.R. 107) would allow the sale of tools and equipment that could be used to circumvent technological safeguards designed to protect copyrighted works."
See, stories titled "Reps. Boucher and Doolittle Introduce Digital Media Consumer Rights Act" and "Summary of the Digital Media Consumer Rights Act" in TLJ Daily E-Mail Alert No. 532, October 4, 2002; and story titled "Reps. Boucher and Doolittle Introduce Digital Fair Use Bill" in TLJ Daily E-Mail Alert No. 582, January 14, 2003. See also, stories titled "House Subcommittee Holds Hearing on Creating Fair Use Exceptions to DMCA" in TLJ Daily E-Mail Alert No. 899, May 17, 2004, and "Chairman Barton Says Commerce Committee Will Mark Up Boucher Doolittle Bill in July" in TLJ Daily E-Mail Alert No. 924, June 23, 2004.
The DOJ report takes no position on S 2560, the "Inducing Infringement of Copyrights Act of 2004", which would create a new civil cause of action for inducement of infringement. However, it does state that "The law should provide a remedy against those who intentionally induce infringement." It adds that copyright owners should have a remedy against "networks and other businesses, to the extent that they depend upon and intend for their customers to violate the owner's copyright". The report does not state whether this remedy should be created by a new statute, or whether the courts should recognize such a remedy as a matter of interpretation of existing theories of vicarious liability.
The report takes no position on giving the DOJ authority to bring civil suits against copyright infringers.
The report takes no position on fully funding the U.S. Patent and Trademark Office (USPTO), or ending the diversion of USPTO fees to subsidize other government programs.
One of the DOJ's task force members is Laura Parsky, Deputy Assistant Attorney General of the Criminal Division. She is also involved in the DOJ's efforts to expand the authority of the DOJ with respect to the regulation of broadband internet access services and voice over internet protocol (VOIP), under the rubric of the Communications Assistance for Law Enforcement Act (CALEA).
10/12. Kenneth Juster (at right), head of the Department of Commerce's (DOC) Bureau of Industry and Security (BIS), gave a speech titled "Cybersecurity: A Key to U.S.-India Trade" in New Delhi, India. He said that cybersecurity "is one of the keys to unlocking the full potential of the trade and technology relationship between the United States and India. All levels of society today -- from individuals, to companies, to governments -- rely on information technology and information networks in their daily lives -- to communicate, to manage activities, to transact business, and to provide essential services to the public." He added that "consumers and corporations will seek to ensure that their personal information and business proprietary data are secure, and that information services are reliable and protected. Without an adequate level of security, we run the risk of backlash among consumers and loss of confidence among business people, which could severely limit progress in our trade and technology relationship."
10/12. The Federal Communications Commission (FCC) issued a Public Notice [2 pages in PDF] regarding its "equipment authorization requirements for electronic musical instruments, recorders, amplifiers, and other sound creation and enhancement devices that are intended for or are capable of use with a personal computer." The notice states that musical equipment, digital recording devices and amplifiers are being "improperly marketed and imported into the US pursuant to our Verification procedures, despite associated instructions and marketing materials that clearly indicate that they contemplate a connection to a personal computer via a USB port or other connection". This Public Notice is DA 04-2253.
10/12. The Supreme Court announced that it "will take a recess from Monday, October 18, 2004, until Monday, November 1, 2004." See, Order List [14 pages in PDF] at page 14.
10/12. The Federal Communications Commission (FCC) released a Notice of Apparent Liability for Forefeiture (NAL) [29 pages in PDF] to the licensees of 169 Fox Television Network stations for apparently broadcasting indecent material on the TV program titled "Married By America". The FCC proposes to fine each licensee $7,000, for a total fine of $1,183,000. The NAL relates that this program covered bachelor and bachelorette parties that featured strippers. This NAL is FCC 04-242. See also, FCC release [PDF].
10/11. The Senate approved the conference report on HR 4520, the "American Jobs Creation Act of 2004", by a vote of 69-17 on October 11, 2004. See, Roll Call No. 211. The House approved this conference report on October 7 by a vote of 280-141. See, Roll Call No. 509. See, full text of conference report [650 pages in PDF].
This is a huge tax bill. The original purpose of the bill was to repeal the FSC/ETI tax regime. Title I of the bill, at pages 7-24, accomplishes this.
The World Trade Organization (WTO) ruled that the foreign sales corporation (FSC) tax regime, and its replacement, the extraterritorial income (ETI) tax regime, constitute illegal export subsidies, and authorized the EU to impose up to $4 Billion in retaliatory tariffs. U.S. technology companies have benefited from the FSC and ETI tax regimes. On the other hand, U.S. technology companies that sell products and services abroad are harmed by trade tariffs, trade barriers and trade wars.
Sen. Charles Grassley (R-IA), the Chairman of the Senate Finance Committee, summarized the conference report in the Senate on October 9. See, transcript [9 pages in PDF].
He said that "the WTO has ruled that FSC-ETI is an illegal export subsidy and has authorized up to $4 Billion a year of sanctions against U.S. exports. Those sanctions began in March. They now are at 12% and increase 1% for each month that we don't repeal FSC-ETI. By November, they will be at 13%. Senator Frist rightly called these sanctions Euro Taxes on our exporters."
This bill repeals the FSC/ETI tax regime, but adds transition relief, including allowing U.S. multinational corporations to repatriate foreign profits on a one time basis at a five percent tax rate.
Harris Miller, President of the Information Technology Association of America (ITAA), stated in a release that "This repatriation provision will channel large amounts of investment capital into the build out of American companies, product and service offerings, jobs and communities. This is particularly important to IT companies-companies that often generate 50 percent or more of their revenues from sales overseas".
This legislation has grown considerably over time, and now includes many tax provisions unrelated to FSC/ETI and the WTO. It is 650 pages.
Section 251 pertains to exclusion of incentive stock options and employee stock purchase plan stock options from wages.
Section 882 pertains to treatment of charitable contributions of patents and similar property. See, following story titled "House and Senate Approve Tax Bill That Limits Deductions for IP Contributions".
Related TLJ Stories. See, stories titled "Grassley and Baucus Organize Meeting on FSC/ETI Issue" in TLJ Daily E-Mail Alert No. 511, September 18, 2002; "Deputy Treasury Secretary Addresses FSC/ETI and WTO Rulings" in TLJ Daily E-Mail Alert No. 526, October 9, 2002; "Rep. Thomas Writes Colleagues Re FSC Dispute" in TLJ Daily E-Mail Alert No. 622, March 13, 2003; "WTO Authorizes FSC/ETI Related Tariffs" in TLJ Daily E-Mail Alert No. 657, May 8, 2003; "Legislators Introduce Bills to Repeal ETI Regime and Extend R&D Tax Credit" in TLJ Daily E-Mail Alert No. 715, August 11, 2003; "Senate Finance Committee Approves FSC/ETI Replacement Bill" in TLJ Daily E-Mail Alert No. 753, October 6, 2003; "Sen. Grassley Meets with Lamy Re FSC/ETI" in TLJ Daily E-Mail Alert No. 771, November 4, 2003; "EU Imposes FSC/ETI Sanctions" in TLJ Daily E-Mail Alert No. 847, March 2, 2004; and "House Ways and Means Committee Approves Tax Bill that Repeals ETI" in TLJ Daily E-Mail Alert No. 918, June 15, 2004. See also, TLJ news analysis titled "The FSC Tax Bill and Technology Exporters", November 17, 2000.
10/11. The conference report on HR 4520, the "American Jobs Creation Act of 2004", which the House approved on October 7, and the Senate approved on October 11, includes a section that limits the deduction available under Section 170 of the Internal Revenue Code for contributions of intellectual property, such as contributions of patents to universities.
See, Section 882 of the conference report [650 pages in PDF], at pages 562-572. Or, see Section 882 [HTML], titled "Treatment of Charitable Contributions of Patents and Similar Property".
26 U.S.C. § 170 addresses charitable contributions and gifts. Subsection 170(e) addresses "contributions of ordinary income and capital gain property".
Sen. Grassley (at right) issued a release [PDF] that offers this explanation of the new restrictions. "The proposal provides that if a taxpayer contributes a patent or other intellectual property to a charitable organization, the taxpayer’s initial charitable deduction is limited to the lesser of the taxpayer’s basis in the contributed property or the fair market value of the property. In addition, the taxpayer is permitted to deduct, as a charitable deduction, certain additional amounts in the year of contribution or in subsequent taxable years based on a specified percentage of the qualified donee income received or accrued by the charitable donee with respect to the contributed property. This means a taxpayer won’t be able to claim deductions for donations that don’t earn money for the charity."
The Joint Committee on Taxation (JCT) issued a report [12 pages in PDF] titled "ESTIMATED BUDGET EFFECTS OF THE CONFERENCE AGREEMENT FOR H.R. 4520, THE ``AMERICAN JOBS CREATION ACT OF 2004´´, Fiscal Years 2005 - 2014". It predicts that the IRS will collect an additional $3,653,000,000 in taxes over ten years as a result of this provision.
10/11. The House and Senate adjourned until November 16, 2004, without approving either S 2560, the "Inducing Infringement of Copyrights Act of 2004", or HR 2391, the "Intellectual Property Protection Act" (IPPA).
On October 7, 2004, the Senate Judiciary Committee amended and approved the IPPA. This bill, HR 2391, which was originally only a patent bill known as the CREATE Act, is now titled the "Intellectual Property Protection Act of 2004" or "IPPA". It includes versions of the "EnFORCE Act" (originally S 1933), the "PIRATE Act" (originally S 2237), the "Home Movie Act" (§ 112 of HR 4007 EH), and the "Piracy Deterrence and Education Act" (HR 4077 EH).
As amended, the IPPA also includes several less controversial bills, including the "National Film Preservation Act of 2004", "National Film Preservation Foundation Reauthorization Act of 2004, and the "Preservation of Orphan Works Act". And, it includes the collaborate research bill, the "CREATE Act", which is the original HR 2391.
See, text of IPPA [44 pages in PDF], and text of IPPA [HTML], as approved by the Committee on October 7. See also, story titled "Senate Judiciary Committee Approves Large Collection of Copyright Bills" in TLJ Daily E-Mail Alert No. 994, October 11, 2004.
McCain Places Hold on IPPA Because of ClearPlay Language. Sen. John McCain (R-AZ) spoke in the Senate on October 11, 2004 regarding the IPPA. He said that he has placed a hold on the bill. He stated that his objection pertains to the Family Home Movie Act, which is also known as the ClearPlay bill.
He does not object to creating an exception to the exclusive rights of copyright for skipping content, such as violence and indecency. What he objects to is the language in the bill that does not extend the exception to technology that skips advertising.
Sen. McCain (at right) said that "I believe that one part of this broad legislation, the Family Movie Act, may actually harm consumers while appearing to help them. To be clear, I support the stated goal of the Act’s authors: immunizing from legal challenges a technology that enables parents to skip offensive material from prerecorded copies of films and television. While I applaud the merits of their stated intent, I fear that the very exemption designed to achieve this laudable goal simultaneously creates an implication that certain basic practices that consumers have enjoyed for years -- like fast-forwarding through advertisements -- would constitute criminal copyright infringement. I note that Consumers Union and Public Knowledge, as well as a host of others parties interested in protecting consumers, share my concerns."
Sen. McCain added that "Americans have been recording TV shows and fast-forwarding through commercials for more than thirty years. Do we really expect to throw people in jail in 2004 for behavior they've been engaged in for more than a quarter century?" Sen. McCain, who is the Chairman of the Senate Commerce Committee, is not a member of the Senate Judiciary Committee.
§ 212 of the IPPA adds a new ¶ 11 to 17 U.S.C. § 110 (which provides exceptions to the exclusive rights of copyright). It creates an exception for "the making imperceptible, by or at the direction of a member of a private household, of limited portions of audio or video content of a motion picture, during a performance in or transmitted to that household for private home viewing, from an authorized copy of the motion picture, or the creation or provision of a computer program or other technology that enables such making imperceptible and that is designed and marketed for such use at the direction of a member of a private household, if (A) no fixed copy of the altered version of the motion picture is created by such computer program or other technology; and (B) no changes, deletions or additions are made by such computer program or other technology to commercial advertisements, or to network or station promotional announcements, that would otherwise be performed or displayed before, during or after the performance of the motion picture."
Leahy Criticizes Bush Administration Over PIRATE Act. Sen. Patrick Leahy (D-VT) spoke in the Senate on October 8 regarding S 2237, "Protecting Intellectual Rights Against Theft and Expropriation Act of 2004", or "PIRATE Act". In addition to being a stand alone bill, a version of it was added to HR 2391, the IPPA. It is now Title III of the IPPA. Sen. Leahy criticized the Bush administration for doing nothing to enact the PIRATE Act.
The PIRATE Act has two provisions. First, § 302 would authorize the Department of Justice (DOJ) to bring civil actions for copyright infringement for conduct that already constitutes criminal copyright infringement under 17 U.S.C. § 506. This would accomplish two things. It would make it easier to prevail, because, among other things, the civil action would have a lower burden of proof. It would also provide a less punitive action for youthful P2P music pirates.
Second, § 303 would establish a training program (and authorize funding of $2,000,000) to educate DOJ and U.S. Attorneys Office personnel in copyright enforcement matters.
The Senate has yet to approve the IPPA. However, it has approved the PIRATE Act as a stand alone bill.
Sen. Leahy (at right) said that "the Bush administration, which likes to talk a good game, is apparently not interested in having the tools it needs to do the job. This administration has done nothing, as far as I know, to help enact important intellectual property legislation. As a consequence, congressional Republicans are holding up and resisting important legislation.
Sen. Leahy continued that "The Protecting Intellectual Rights Against Theft and Expropriation Act, S. 2237, allows United States Attorneys' Offices to bring a civil action against a large-scale copyright infringer. For some unimaginable reason, the Justice Department, which cannot issue enough press releases about its newly-minted Intellectual Property Task Force, has taken no interest in or action on this legislation. Apparently, the Ashcroft Justice Department rejects having the law enforcement authority to stop large-scale infringers and protect America's intellectual property from piracy. A Justice Department that has reinterpreted treaties and contorted the law to claim vast and unfettered authorities for this executive has little interest in assembling legislatively enacted tools for copyright protection and to stop piracy."
"For a number of reasons having to do with law enforcement priorities, resources and other considerations, prosecutors rarely decide to bring criminal charges even against flagrant infringers." Sen. Leahy added that "the PIRATE Act would afford the Government a civil law route and civil law remedies. There are times when civil proceedings and remedies are more appropriate. Until we enact the PIRATE Act, they are unavailable."
He concluded, "I urge the Bush administration to get with the program. If you want to talk the talk and pretend to support the protection of intellectual property rights, then walk the walk and work to clear the Republican opposition so that Congress can enact the PIRATE Act." See, Congressional Record, October 08, 2004, at Pages S10822-3.
Sen. Leahy's comments anticipated the Department of Justice's (DOJ) October 12 release of its report [96 pages in PDF] titled "Report of the Department of Justice's Task Force on Intellectual Property". It contains numerous recommendations, but does not recommend that the Congress pass legislation to authorize the DOJ to bring civil actions against infringers. See, following story titled "DOJ IP Task Force Issues Recommendations".
Go to News from October 6-10, 2004.

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