7/21. The U.S. Court of Appeals (3rdCir) issued its opinion [102 pages in PDF] in CBS v. FCC, overturning the Federal Communications Commission's (FCC) fine of CBS for broadcasting a fleeting and unscripted view of a breast during a halftime show for a football game.

Background. On March 15, 2006, the FCC released a forfeiture order [30 pages in PDF] that fined CBS $550,000 in connection with the disclosure of a breast of a singer named Janet Jackson in a broadcast music performance within a program titled "Super Bowl XXXVIII".

This order is FCC 06-19. See, story titled "FCC Releases Indecency Orders" in TLJ Daily E-Mail Alert No. 1,332, March 20, 2006.

The FCC concluded that CBS violated 18 U.S.C. § 1464. This section provides, in full, that "Whoever utters any obscene, indecent, or profane language by means of radio communication shall be fined under this title or imprisoned not more than two years, or both."

On April 14, 2006, CBS filed with the FCC a Petition for Reconsideration of Forfeiture Order. See, story titled "CBS Challenges FCC's Indecency Actions" in TLJ Daily E-Mail Alert No. 1,351, April 17, 2006.

On May 31, 2006, the FCC released its Order on Reconsideration [18 pages in PDF] denying that petition. That order is FCC 06-68. See, story titled "FCC Denies Petition for Reconsideration of CBS's Breast Broadcast Fine" in TLJ Daily E-Mail Alert No. 1,382, June 1, 2008.

The CBS Corporation and others filed a petition for review of these two FCC orders with the Court of Appeals. Various amicus curiae parties also filed briefs.

The Court of Appeals, in the just released opinion, vacated the FCC's two orders and remanded for further proceedings consistent with this opinion.

The Court of Appeals first held that the FCC's fine was arbitrary and capricious in violation of the scope of review provisions of Administrative Procedure Act (APA), which are codified at 5 U.S.C. § 706.

Fleeting Material. It wrote that "The FCC possesses authority to regulate indecent broadcast content, but it had long practiced restraint in exercising this authority. During a span of nearly three decades, the Commission frequently declined to find broadcast programming indecent, its restraint punctuated only by a few occasions where programming contained indecent material so pervasive as to amount to “shock treatment” for the audience. Throughout this period, the Commission consistently explained that isolated or fleeting material did not fall within the scope of actionable indecency."

The Court added that "At the time the Halftime Show was broadcasted by CBS, the FCC's policy on fleeting material was still in effect."

It concluded that "Like any agency, the FCC may change its policies without judicial second-guessing. But it cannot change a well-established course of action without supplying notice of and a reasoned explanation for its policy departure. Because the FCC failed to satisfy this requirement, we find its new policy arbitrary and capricious under the Administrative Procedure Act as applied to CBS."

The Court also rejected the FCC's argument that its policy applied only to verbal expletives, and not to images or video. It concluded that the FCC had not at the time of the broadcast at issue distinguished between categories of broadcast material such as images and words.

Vicarious Liability. Next, the Court held that the FCC "incorrectly determined CBS’s liability". It wrote that "CBS contends it neither planned Jackson and Timberlake's offensive actions nor knew of the performers' intent to incorporate those actions into their performance. The FCC does not dispute this assertion, but it nevertheless seeks to hold CBS liable for the performers' actions."

The Court went on to reject various theories for holding CBS liable for the actions of Jackson and Timberlake. It rejected a respondeat superior theory of liability, concluding that the two individuals were independent contractors of CBS rather than employees.

The Court also rejected the theory that "CBS may be held vicariously liable for its independent contractors' actions based on its duties as a broadcast licensee".

The Court wrote that "It is a well-established constitutional requirement that in the few areas where the government may lawfully enforce content-based restrictions on speech and expression, liability may not be imposed on a speaker without proof of scienter."

Thus, 18 U.S.C. § 1464 "should be read to include a scienter element".

The Court wrote that "Because the Commission’s proffered ``non-delegable duty´´ theory of CBS's vicarious liability, which functionally equates to strict liability for speech or expression of independent contractors, appears to dispense with this constitutional requirement, it should not be sustained."

However, while the Court held that scienter is an element, it did not at this point of the opinion elaborate on what scienter means in this context. It later clarified (at page 92-93) that "Recklessness would appear to suffice as the appropriate scienter threshold for the broadcast indecency regime", and that "mere negligence in airing indecent material during a restricted time slot would not satisfy the scienter element".

Failure to Take Precautionary Measures. Next, the Court rejected the FCC's failure to take precautionary measures argument.

The Court noted that the FCC found CBS directly liable for a forfeiture penalty for "failing to take adequate precautionary measures to prevent potential indecency during the Halftime Show".

Following a lengthy discussion of the forfeiture statute, the Court concluded that "further clarification from the FCC is necessary before it may be determined whether the agency correctly concluded that CBS’s actions constituted a “willful” violation of the indecency provisions." Furthermore, the Court concluded that the record is unclear whether the FCC correctly determined that CBS’s conduct satisfied the willfulness standard.

Summary of Holding. The Court then wrote this summary of its holding. "In finding CBS liable for a forfeiture penalty, the FCC arbitrarily and capriciously departed from its prior policy excepting fleeting broadcast material from the scope of actionable indecency. Moreover, the FCC cannot impose liability on CBS for the acts of Janet Jackson and Justin Timberlake, independent contractors hired for the limited purposes of the Halftime Show, under a proper application of vicarious liability and in light of the First Amendment requirement that the content of speech or expression not be penalized absent a showing of scienter. And the FCC's interpretation and application of 47 U.S.C. § 503(b)(1) are not sufficiently clear to permit review of the agency's determination of CBS's direct liability for a forfeiture penalty based on broadcast indecency. ... Accordingly, we will vacate the orders of the FCC and remand for further proceedings consistent with this opinion.

Judge Rendell wrote a short opinion, concurring that the FCC acted in an arbitrary and capricious manner, but dissenting as to the remand. He would have merely reversed.

Ken Ferree, head of the Progress & Freedom Foundation (PFF), stated in a release that "Perhaps it is time to read the handwriting on the wall: the guardians of our First Amendment freedoms in the courts are not going to allow the FCC to play the role of media supernanny. A free and vibrant, even if occasionally coarse, marketplace of speech is the cornerstone of a free society. We allow government to meddle in that marketplace at our peril."

Chris Hansen of the ACLU stated in a release that "The FCC's vague and shifting standards highlight the fundamental First Amendment problem with allowing the government to censor speech based upon its own notions of what is `decent,´ ... The government does not have that power for books and magazines and it should not have that power for television and radio."

This case is CBS Corporation, et al. v. FCC and USA, U.S. Court of Appeals for the 3rd Circuit, App. Ct. No. 06-3575, a petition for review of a final orders of the FCC.

7/21. E-Gold Ltd., Gold & Silver Reserve Inc., and Douglas Jackson pled guilty in U.S. District Court (DC) to conspiracy to engage in money laundering in violation of 18 U.S.C. § 1956, and operating an unlicensed money transmitting business in violation of 18 U.S.C. § 1960. Barry Downey and Reid Jackson pled guilty to operating a money transmitting business without a license.

The government criminally prosecuted these defendants because they enabled people to engage in anonymous online financial transactions.

The Department of Justice (DOJ) stated in a release that "the E-Gold operation provided digital currency services over the Internet through two sites ... Several characteristics of the E-Gold operation made it attractive to users engaged in criminal activity, such as not requiring users to provide their true identity, or any specific identity".

The U.S. Attorney for the District of Columbia, Jeffrey Taylor, added in this release that "digital currency providers everywhere are now on notice that they must comply with federal banking laws or they will be subject to prosecution".

E-Gold's Douglas Jackson, one of the defendants, stated in a release in the E-Gold web site that there were "design flaws in the account creation and provisioning logic that led to the unfortunate consequence of vulnerability to criminal abuse".

He continued that this "resolution of the criminal case however provides for a second chance, an opportunity to address the flaws embedded in the e-gold system and to transform" the business.

He added that "In harmony with this transformation, we acknowledge that e-gold is indeed a Financial Institution or Agency as defined in US law and should be regulated as a Financial Institution. E-gold Ltd. has submitted an application to FinCEN to be registered as a Money Services Business and will be seeking licensure in all states that require it. Most importantly, working in conjunction with US government agencies, we will be exerting every effort to bring e-gold into compliance with US law and regulation as quickly as possible."

Sentencing is scheduled for November 20, 2008. See also, April 27, 2007, DOJ release announcing indictment.

7/21. Attorney General Michael Mukasey gave a speech at the American Enterprise Institute (AEI) in Washington DC. He primarily spoke about detention of enemy combatants and the Supreme Court's June 12, 2008, opinion [PDF] in Boumediene v. Bush. He reviewed the opinion, and urged the Congress "to pass legislation to ensure that the proceedings mandated by the Supreme Court are conducted in a responsible and prompt way. However, he also touched on Congressional passage of HR 6304 [114 pages in PDF], the "Foreign Intelligence Surveillance Act of 1978 Amendments Act of 2008". He said that "One of my most solemn obligations, especially as we look ahead to the post-2001 transition is to try along with others in our government to make sure that our efforts in this conflict are put on a sound institutional footing so that the next attorney general and the new administration have in place what they need to assure the nation safety. One success in that category occurred just two weeks ago when the President signed into law the most significant reform of our surveillance statutes in a generation. Bipartisan legislation that will give our intelligence professionals critical, long-term authorities to monitor foreign intelligence targets located overseas." See, transcript.

7/17. The Senate Commerce Committee (SCC) reported S 2507 [LOC | WW] the "DTV Border Fix Act of 2007".

7/16. The Copyright Office published a notice in the Federal Register that announces, describes, and sets comment deadlines for, it notice of proposed rulemaking regarding the scope and application of the Section 115 compulsory license to make and distribute phonorecords of a musical work by means of digital phonorecord deliveries. Initial comments are due by August 15, 2008. Reply comments are due by September 2, 2008. See, Federal Register, July 16, 2008, Vol. 73, No. 137, at Page 40802-40813.

7/15. The Copyright Royalty Judges published a notice in the Federal Register announcing "the commencement of a proceeding to determine the Phase I distribution of 2004 and 2005 royalties collected under the cable statutory license". The deadline to file a Petition to Participate and the accompanying $150 filing fee is August 14, 2008. See, Federal Register, July 15, 2008, Vol. 73, No. 136, at Pages 40623-40624.

7/15. The National Institute of Standards and Technology (NIST) published a notice in the Federal Register requesting nominations of persons to be members of eight NIST federal advisory committees, including the Information Security and Privacy Advisory Board (ISPAB), Technology Innovation Program Advisory Committee (TIPAC), and Visiting Committee on Advanced Technology (VCAT). This notice sets no time deadlines. See, Federal Register, July 15, 2008, Vol. 73, No. 136, at Pages 40502-40507.

6/25. The Progress & Freedom Foundation (PFF) released a report [9 pages in PDF] titled "Wireless Consumer Protection: Who Decides?" It argues that the Federal Communications Commission (FCC), but not states or courts, should regulate early termination fees (ETFs) of wireless carriers' consumer contracts. This paper concludes that "rather than have wireless service policy set inconsistently by hundreds of courts across the nation, or by twenty different state regulatory agencies, wouldn’t it be better to have a few appropriately balanced federal rules, developed through the notice and comment rulemaking process and in consultation with all major stakeholders, to guide industry practices where necessary?" The author is the PFF's Barbara Esbin.

The House will meet at 12:30 PM for morning hour, and at 2:00 PM for legislative business. Votes will be postponed until 6:30 PM. The House will consider numerous items under suspension of the rules, including HR 6362 [LOC | WW], an untitled bill to provide that the Secretary of Commerce, in consultation with the Director of the U.S. Patent and Trademark Office (USPTO), shall appoint administrative patent judges and administrative trademark judges. See, Rep. Hoyer's schedule for week of July 21 and schedule for July 22.

The Senate will meet at 10:00 AM. It will resume consideration of the motion to proceed to S 3268 [LOC | WW], the "Stop Excessive Energy Speculation Act of 2008".

8:30 AM - 5:00 PM. Day two of a three day conference hosted by the Department of Justice's (DOJ) National Institute of Justice (NIJ) titled "2008 NIJ Conference". At 3:30 PM there will be a panel titled "Taking the Information Highway Beyond the Next Interchange", which will address use of the internet in community policing. See, agenda. Location: Marriott Crystal Gateway, 1700 Jefferson Davis Highway, Arlington, VA.

12:30 - 1:30 PM. The DC Bar Association will host a panel discussion titled "Will Orphan Works Finally Find a Home". The topic is HR 5889 [LOC | WW], the "Orphan Works Act of 2008". The speakers will be Allan Adler (Association of American Publishers), Gigi Sohn ( Public Knowledge), Victor Perlman (American Society of Media Photographers), Joe Keeley (Arent Fox), and Maria Pallante (Copyright Office). See also, Joe Keeley's web site OrphanWorks.net. The price to attend ranges from $20 to $30. For more information, contact 202-626-3463. See, notice. Location: DC Bar Conference Center, B-1 Level, 1250 H St., NW.

2:00 PM. The House Commerce Committee's (HCC) Subcommittee on Telecommunications and the Internet will hold a hearing titled "Issues in Telecommunications Competition". This hearing will also address HR 3914 [LOC | WW], the "Protecting Consumers through Proper Forbearance Procedures Act". The witnesses will be Larissa Herda (TW Telecom, Inc.), Matthew Salmon (Comptel), Carl Grivner (XO Communications), Cathy Avgiris (Comcast), and Jonathan Banks (U.S. Telecom Association). The HCC will webcast this hearing. Location: Room 2123, Rayburn Building.

2:00 PM. The House Education and Labor Committee will hold a hearing titled "Innovation in Education through Business and Education STEM Partnerships". Location: Room 2175, Rayburn Building.

The House will meet at 10:00 AM for legislative business. See, Rep. Hoyer's schedule for week of July 21.

9:00 AM - 3:30 PM. Day three of a three day conference hosted by the Department of Justice's (DOJ) National Institute of Justice (NIJ) titled "2008 NIJ Conference". At 10:45 AM there will be a panel titled "Verifying Identity with Technology". At 2:00 PM there will be a panel titled "New Tools to Stop Child Exploitation over the Internet". See, agenda. Location: Marriott Crystal Gateway, 1700 Jefferson Davis Highway, Arlington, VA.

9:00 AM. Day one of a two day meeting of the Bureau of Industry and Security's (BIS) Information Systems Technical Advisory Committee. The agenda for July 23 includes "Computational Photography", "3B001 Commerce Control List Review", "Control Parameters for High-Performance Converters", and a "Discussion of Wassenaar Proposals for 2009". 3B001 relates to equipment for the manufacturing of semiconductor devices or materials, and specially designed components and accessories therefor. See, Category 3.B of the export administration regulations. The July 23 portion of the meeting is open to the public. See, notice in the Federal Register, July 7, 2008, Vol. 73, No. 130, at Pages 38395-38396. Location: Hoover Building, Room 3884, 14th Street between Constitution and Pennsylvania Aves. NW.

10:00 AM. The House Commerce Committee (HCC) will meet to mark up HR  6357, the "Protecting Records, Optimizing Treatment, and Easing Communication through Healthcare Technology Act of 2008". The HCC will webcast the meeting. Location: Room 2123, Rayburn Building.

10:00 AM. The Senate Judiciary Committee (SJC) will hold a hearing titled "Courting Big Business: The Supreme Court's Recent Decisions on Corporate Misconduct and Laws Regulating Corporations". A SJC notice lists two opinions to be addressed at this hearing: Exxon Shipping v. Baker and Stoneridge Investment Partners  v. Scientific-Atlanta. See, January 15, 2008, opinion [33 pages in PDF] in Stoneridge, a securities fraud case involving stock in Charter Communications, a cable television provider, and the liability of secondary actors Scientific Atlanta and Motorola. This opinion limits the ability of class action law firms to sue vendors or purchasers of companies that are alleged to have committed securities fraud. See also, story titled "Supreme Court Rules in Stoneridge v. Scientific Atlanta" in TLJ Daily E-Mail Alert No. 1,701, January 16, 2008. The SJC will webcast this hearing. Location: Room 226, Dirksen Building.

10:00 AM - 12:00 NOON. The House Intelligence Committee will hold a closed hearing titled "Cyber Security". Location: Room H-405, Capitol Building.

10:15 AM. The House Judiciary Committee (HJC) will hold a hearing titled "Oversight of the U.S. Department of Justice". The HJC will webcast this hearing. Location: Room 2141, Rayburn Building.

12:00 NOON. The Cato Institute will host a panel discussion titled "The FBI Turns 100". The speakers will be John Fox (Historian, Federal Bureau of Investigation), Athan Theoharis (author of the book [Amazon] titled "The FBI & American Democracy"), John Kelly, author of the book [Amazon] titled "Tainting Evidence: Inside the Scandals at the FBI Lab", and Tim Lynch (Cato). See, notice and registration page. Location: Cato, 1000 Massachusetts Ave., NW.

2:00 PM. The Senate Judiciary Committee (SJC) will hold a hearing on several Department of Justice (DOJ) nominations, including that of Patrick Rowan to be Assistant Attorney General (AAG) in charge of the National Security Division. Rowan is currently the acting AAG. See, notice. Location: Room 226, Dirksen Building.

6:00 - 8:00 PM. The DC Bar Association will host an event titled "Young Lawyers' Summer Networking Event -- Famous Wine & Beer Trademark Cases". The speaker will be Roger Schechter (George Washington University law school). The price to attend is $15. For more information, contact 202-626-3463. See, notice. Location: Science Club, 1136 19th St., NW.

The House will meet at 10:00 AM for legislative business. See, Rep. Hoyer's schedule for week of July 21.

8:30 AM - 4:30 PM. Day one of a two day public workshop hosted by the Department of Homeland Security (DHS) titled "Implementing Privacy Protections in Government Data Mining". See, notice in the Federal Register, June 25, 2008, Vol. 73, No. 123, at Pages 36093-36094. Location: Hilton Washington, International Ballroom East, 1919 Connecticut Ave., NW.

9:00 AM. Day two of a two day meeting of the Bureau of Industry and Security's (BIS) Information Systems Technical Advisory Committee. The July 24 portion of the meeting is closed to the public, and its agenda is not disclosed. See, notice in the Federal Register, July 7, 2008, Vol. 73, No. 130, at Pages 38395-38396. Location: Hoover Building, Room 3884, 14th Street between Constitution and Pennsylvania Aves. NW.

10:00 AM. The House Ways and Means Committee's Subcommittee on Heath will hold a hearing titled "Promoting the Adoption and Use of Health Information Technology". See, notice. Location: Room 1100, Longworth Building.

12:00 - 2:00 PM. The DC Bar Association will host a program titled "The ABCs of IP: A Primer on Patent, Copyright, and Trademark Law". Janet Fries (Drinker Biddle & Reath) will review copyright law. Gary Krugman (Sughrue Mion) will review trademark law. Steven Warner (Fitzpatrick Cella Harper & Scinto) will review patent law. Maureen Browne (Heller Ehrman) will moderate. For more information, contact 202-626-3463. See, notice. Location: DC Bar Conference Center, B-1 Level, 1250 H St., NW.

1:00 - 5:00 PM. The Department of Health and Human Services' (DHHS) Office of the National Coordinator for Health Information Technology's (ONCHIT) American Health Information Community Confidentiality, Privacy, & Security Workgroup will hold a meeting. See, notice in the Federal Register, June 20, 2008, Vol. 73, No. 120, at Page 35139. Location: Switzer Building, Conference Room 1114, 330 C St., SW.

The House will meet at 9:00 AM for legislative business. See, Rep. Hoyer's schedule for week of July 21.

8:30 AM - 12:30 PM. Day one of a two day public workshop hosted by the Department of Homeland Security (DHS) titled "Implementing Privacy Protections in Government Data Mining". See, notice in the Federal Register, June 25, 2008, Vol. 73, No. 123, at Pages 36093-36094. Location: Hilton Washington, International Ballroom East, 1919 Connecticut Ave., NW.

10:00 AM - 12:00 NOON. The House Intelligence Committee's (HIC) Subcommittee on Oversight and Investigations will hold a closed hearing titled "Department of Justice Office of the Inspector General". Location: Room H-405, Capitol Building.

Extended deadline to submit initial comments to the Federal Communications Commission (FCC) in response to its further notice of proposed rule making (FNPRM) regarding service rules for licensed fixed and mobile services, including Advanced Wireless Services (AWS), in the 1915-1920 MHz, 1995-2000 MHz, 2155-2175 MHz, and 2175-2180 MHz bands. This FNPRM is FCC FCC 08-158 WT Docket Nos. 07-195 and 04-356. See, original notice in the Federal Register, June 25, 2008, Vol. 73, No. 123, at Pages 35995-36013, and notice of extension in the Federal Register, July 14, 2008, Vol. 73, No. 135, at Pages 40271-40272.

12:00 - 2:00 PM. The DC Bar Association will host a panel discussion titled "MySpace, Facebook, and the Workplace". The speakers will be Micah Salb (Lippman Semsker & Salb), Michael Songer (Crowell & Moring), Lily Garcia (Washington Post columnist), and Anne Donohue (SRA International, Inc.). The price to attend ranges from $20 to $30. For more information, contact 202-626-3463. See, notice. Location: DC Bar Conference Center, B-1 Level, 1250 H St., NW.

The U.S. International Trade Commission's (USITC) is scheduled to transmit its report for the House Ways and Means Committee regarding government policies affecting trade with the People's Republic of China (PRC). The USITC is examining, among other sectors, semiconductors and telecommunications. See, notice in the Federal Register, July 31, 2007, Vol. 72, No. 146, at Pages 41773-41774, and USITC release. This proceeding is titled "China: Government Policies Affecting U.S. Trade in Selected Sectors" and numbered Inv. No. 332-491.

RESCHEDULED TO AUGUST 13. The Federal Communications Commission (FCC) will commence Auction 78, the AWS-1 and Broadband PCS auction. See, Public Notice (DA 08-1090) and notice in the Federal Register, May 29, 2008, Vol. 73, No. 104, at Pages 30919-30938.

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