News Briefs from May 6-10, 2001

CompUSA Insider Trading. 5/10. The SEC filed a civil complaint in U.S. District Court (SDNY)  against Alejandro Duclaud and others in connection with possible insider trading in CompUSA stock in violation of federal securities laws. On January 24, 2000, CompUSA, a retailer of computer equipment, peripherals and software, and Grupo Sanborns, S.A. de C.V., a Mexican holding company, announced that Grupo Sanborns would acquire CompUSA. Duclaud is an attorney in the Mexico City law firm of Franck Galicia Duclaud & Robles which represented Grupo Sanborns. The District Court issued a temporary restraining order that prohibits the defendants from obtaining their assets in brokerage accounts in the U.S. or disposing of any assets, wherever held, in a manner that could impair the SEC's ability to recover ill-gotten gains and obtain civil penalties. The complaint alleges violation of § 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and § 14(e) of the Exchange Act, and Rule 14e-3 thereunder. See, SEC release.
5/10. Robert Verrue gave a speech in Washington DC titled "The New Regulatory Framework for Electronic Communications." Verrue is the Director General of the European Commission's Information Society Directorate General (DG XIII).
Spread Spectrum Devices. 5/10. The FCC proposed to revise its rules for spread spectrum systems. It released a Notice of Proposed Rulemaking (NPRM) [PDF]. See also, Trends in Spread Spectrum Devices [PDF], a presentation made by the FCC's Office of Engineering and Technology at the FCC's May 10 meeting. (ET Docket No. 99-231.) See also, FCC release. The FCC's NPRM "proposes to revise the rules for frequency hopping spread spectrum systems operating in the 2.4 GHz band to reduce the amount of spectrum that must be used with certain types of operation, and to allow new digital transmission technologies to operate pursuant to the same rules as spread spectrum systems. It also proposes to eliminate the processing gain requirement for direct sequence spread spectrum systems".
SPAM Hearing. 5/10. The House Judiciary Committee held a hearing on HR 718, the Unsolicited Commercial Electronic Mail Act of 2001, and HR 1017, the Anti-Spamming Act of 2001. HR 718, sponsored by Rep. Heather Wilson (R-NM) and Rep. Gene Green (D-TX), has already been approved by the House Commerce Committee. The Committee heard testimony from business group representatives in opposition to pending anti spam legislation. See, prepared statements of Wayne Crews (Cato Institute), Marc Lackritz (Securities Industry Association), Rick Lane (Chamber of Commerce), Paul Misener (
Crews testified that "Laws supposedly designed to halt spam can do more harm than good." Lackritz testified that "we believe enacting legislation that frustrates the innovative use of the Internet would be bad and misguided public policy. Moreover, it would constitute a severe over-reaction to a problem that can be addressed with a narrowly tailored solution along the lines of HR 1017." Lane testified that "the primary focus of legislation regarding commercial e-mail should center-around combating the sending of fraudulent and deceptive e-mail." Misener testified that HR 718 "makes a good effort to prohibit egregious e-mail practices. Unfortunately, we believe this bill goes too far to limit such practices and would inadvertently constrain legitimate business activities."
Patent Hearing. 5/10. The House Judiciary Committee's Subcommittee on the Courts, the Internet, and Intellectual Property held a hearing titled "Patents: Improving Quality and Curing Defects." See, prepared statements of Rep. Howard Coble (R-NC), James Cottone (National Intellectual Property Researchers Association), Michael Kirk (American Intellectual Property Law Association), Jeffrey Kushan (Powell Goldstein), and David Martin (M•CAM Inc.).
SBC Missouri 271. 5/10. The Antitrust Division of the Department of Justice (DOJ) submitted an analysis to the FCC regarding SBC's Section 271 application to provide long distance service in Missouri. The DOJ recommended that the FCC should independently review the prices that SBC charges its competitors for use of its network. The DOJ stated that many of the prices charged by SBC for the use of "unbundled network elements" are significantly higher in Missouri than in states where SBC has already been permitted to provide long distance service. Also, the DOJ stated that there is limited use of those elements by competitors, and indications that Missouri prices might not be based on forward looking costs. See, DOJ release. SBC SVP Priscilla Ardoin, stated in response that "SBC is confident that it will be able to demonstrate to the FCC that the evidence supports approval of our Missouri long distance application." See, SBC release.
DOJ Nominations. 5/10. The Senate Judiciary Committee held an executive business meeting. The Committee approved the nominations of Charles James to be Assistant Attorney General in charge of the Antitrust Division, Daniel Bryant to be Assistant Attorney General for legislative affairs, and Larry Thompson to be Deputy Attorney General. However, the Committee again delayed its vote on the nomination of Ted Olson to be Solicitor General.
Securities Class Actions. 5/10. The U.S. Court of Appeals (1stCir) issued its opinion in Geffon v. Micrion, a class action securities suit against Micrion and several of its officers. Micrion, which has since merged with FEI Company, produced focused ion beam systems for semiconductor mask repair and device edit applications. The District Court granted defendant's motion for summary judgment on the grounds that there was no genuine dispute of material fact as to whether the statements in question were misleading or fraudulent. (Geffon v. Micrion, 76 F. Supp. 2d 134.) The Court of Appeals affirmed on the grounds that plaintiffs adduced insufficient evidence of defendants' scienter.
Fed Cir Jurisdiction. 5/10. The U.S. Court of Appeals (4thCir) issued its opinion in McCook Metals v. Alcoa, a case regarding appellate jurisdiction over an appeal from a discovery order in a proceeding that is ancillary to a proceeding regarding patent validity and enforceability. The 4th Circuit transferred the appeal to the Federal Circuit. Background: McCook filed a complaint against Alcoa in U.S. District Court (NDIll) alleging interference with customer contracts and prospective business advantage in violation of state law, monopolization of the relevant product market in violation of the Sherman Act, and that two of Alcoa's patents for making high strength aluminum alloy were neither valid nor enforceable. McCook then obtained a third party subpoena from the U.S. District Court (EDVa) directing Reynolds Metals to appear, testify, and produce documents at a deposition. Reynolds refused, citing work product and attorney client privileges. The District Court (EDVa) upheld Reynolds objections. McCook appealed to the Appeals Court (4thCir). Holding: The Appeals Court (4thCir) reasoned that because jurisdiction in the underlying action is based in part on 28 U.S.C. § 1338, which confers jurisdiction upon district courts in patent matters, any review of the ancillary discovery ruling must be sought from the U.S. Court of Appeals for the Federal Circuit under 28 U.S.C. §§ 1292(c) and 1295(a). The Appeals Court then transferred the appeal to the Federal Circuit pursuant to 28 U.S.C. § 1631.
SEC News. 5/10. Rep. Mike Oxley (R-OH), Chairman of the House Financial Services Committee, stated that he welcomes President Bush's statement that he intends to nominate Harvey Pitt to be Chairman of the SEC. He stated that "I look forward to working with him as we use the advantages of modern technology to advance our capital markets in the world’s financial arena and to make the advantages of investing accessible to more and more Americans." See, release.
Commerce Dept. Nominees. 5/10. The Senate Banking Committee approved four of President Bush's nominees: Ken Juster (Undersecretary of Commerce for Export Administration), Grant Aldonas (Undersecretary of Commerce for International Trade), Maria Cino (Asst. Sec. of Commerce and Director General of the U.S. and Foreign Commercial Service), and Glenn Hubbard (Council of Economic Advisers). See, release.
FCC Apppointments. 5/10. FCC Chairman Michael Powell announced that W. Kenneth Ferree will be the new Chief of the Cable Services Bureau, effective May 21, 2001. He replaces Deborah Lathen. Ferree is a partner at Goldberg Godles Wiener & Wright a small Washington DC law office specializing in communications law. He is also an adjunct professor at Georgetown University Law Center, where he teaches communications law and professional responsibility. He is also the author of Communications Law and Regulation. See, FCC release.
5/10. FCC Chairman Michael Powell announced that Julius Knapp will be a Deputy Chief of the Office of Engineering and Technology (OET). Knapp is currently Chief of the Policy and Rules Division in OET and oversees spectrum allocations and technical rules for radio frequency devices as well as coordination of radiofrequency issues with the Federal Government. He has been with the FCC for 26 years.
Fast Track. 5/10. President George Bush sent a cover letter to Congressional leaders in which he stated that "I have placed the enactment of U.S. Trade Promotion Authority at the top of my trade legislative agenda."
Echelon. 5/10. A delegation from the European Union that is in Washington DC to investigate Echelon condemned several federal agencies for not meeting with it. Carlos Coelho, Chairman of the European Parliament's Temporary Committee on the Echelon Interception System, released a statement which included the following: "we are concerned and dismayed that scheduled meetings with the State Department, with the Advocacy Centre of the Department of Commerce were cancelled at the last minute without a satisfactory explanation. We are very disappointed by the last-minute reluctance of the CIA and the NSA to meet our delegation in spite of the advanced preparations that had been made. As a result we are cutting short our visit to Washington and returning to Europe immediately. "
New Bills. 5/10. Rep. Ellen Tauscher (D-CA) and Rep. David Dreier (R-CA) introduced H. Con. Res. 132, a concurrent resolution expressing the sense of Congress on the importance of promoting electronic commerce. It states that the "Secretary of Commerce and the United States Trade Representative should make the promotion of cross-border trade via electronic commerce a high priority." It was referred to the House Ways and Means Committee. See, Dreier release. Sen. Joe Lieberman (D-CT) and Sen. John McCain (R-AZ) introduced the same language in the Senate. See, Lieberman release.
5/10. Rep. Maurice Hinchey (D-NY) introduced HR 1803, a bill to provide for public library construction and technology enhancement. It was referred to the House Committee on Education and the Workforce.
More News. 5/10. The Association of Communications Enterprises (ASCENT), AT&T, Competitive Telecommunications Association (CompTel) and McLeodUSA filed a joint petition with the Indiana Utility Regulatory Commission (IURC) seeking the structural separation of SBC/Ameritech Indiana into separate retail and wholesale operations. See, AT&T release, ASCENT release, and CompTel release.
5/10. Xilinx announced that it would appeal the decision of U.S. District Court (NDCal) Judge James Ware in Xilinx v. Altera. See, release. Xilinx filed its complaint against Altera in U.S. District Court (NDCa) in 1993 alleging patent infringement. Xilinx makes programmable logic devices, including integrated circuits, software design tools, and predefined system functions delivered as cores. Altera also produces programmable logic devices.
FCC Dead Sharks. 5/9. NCTA President Robert Sachs gave a speech in Orlando, Florida, in which he addressed FCC regulation of interactive cable services. He stated that "A great deal of our work at NCTA is encouraging public policy that gives technology the free market running room it needs to grow. A case in point is the Notice of Inquiry on Interactive TV which the FCC put out for comment in January. ... But we consider regulation of yet to be developed services to be counter- productive to their very development. There are those, for commercial reasons of their own, who want the government to regulate Interactive Television before it's ever launched. And it's a bit disconcerting that they have gotten as far as an FCC Notice of Inquiry. FCC Chairman Michael Powell recently commented on whether it's wise to start regulating ITV before the market is even visible. As the Chairman put it: 'I don't believe in regulating phantoms.' I couldn’t agree more. And given the Chairman's caution, it's unlikely that this particular effort will get very far." However, Sachs concluded, "It's like finding a dead shark in your swimming pool."
Privacy Commission. 5/9. Sen. Fred Thompson (R-TN) and Sen. Herb Kohl (D-WI) introduced the "Citizens' Privacy Commission Act," a bill to establish an 11 member commission to examine how federal, state, and local 
governments collect and use personal information, and to make recommendations to Congress. See, Thompson release.
Commerce Committee Passes Bell Relief Bill. 5/9. The House Commerce Committee approved HR 1542, a bill to provide regulatory relief to the Baby Bells. The Committee often passes legislation by unanimous voice vote. However, this bill was adopted after an eight and one half hour debate by a roll call vote of 32 to 23. The bill is also known as "Tauzin Dingell," for its lead sponsors, Rep. Billy Tauzin (R-LA) and Rep. John Dingell (D-MI), the Chairman and ranking Democrat on the Committee. Tauzin and Dingell had the votes to pass the bill from the outset. Opponents of the bill used the debate to demonstrate the extent of opposition to the bill, and to attempt (unsuccessfully) to amend the bill to increase the DSL buildout requirements imposed upon the Bells, raise the bits per second rate in the definition of high speech data service, impose reporting requirements on the Bells, give the FCC more authority to enforce the provisions of the bill, and extend the existing line sharing rule to cover fiber. Early in the meeting, Rep. Tauzin offered an amendment in the nature of a substitute, also know as the "manager's amendment," to the version of the bill reported by the Telecom Subcommittee, also known as the "subcommittee print." The committee approved several amendments to this manager's amendment. However, all significant amendments that were opposed by Tauzin and Dingell were either rejected, withdrawn or ruled out of order.
Arguments. Supporters of the bill stated that it will incent the Baby Bells to deploy broadband Internet access services, particularly DSL service. Supporters also argued that the bill will increase the Bells' ability to compete with broadband cable service providers. See, prepared statements of Tauzin and Dingell. Opponents argued that the bill would end competition in local phone markets, revert the Bells to monopoly status, kill off many of the CLECs, and reduce innovation and investment in new technologies and companies. The meeting lasted from 10:00 AM until 6:30 PM, with breaks for two floor votes and one fire alarm.
Rep. Ed Markey (D-MA), an outspoken opponent of HR 1542, added his usual color to the debate. He stated that this bill adds "two new genres for the readers of telecommunications law." He said that it adds "science fiction", referring to the bill's attempt to distinguish between packet switched voice and data traffic. "The Bell Empire is striking back," said Markey. He also said that the bill adds "mystery". That is, "Will competition survive?" He also said of the bill: "It's undigital, it's unnecessary, it's unfair."
Rep. Chip Pickering (R-MS), a young Baptist from Mississippi, and another leader of the opposition, asserted that he is "a lonely prophet in the wilderness." This prompted Tauzin to interject that "Prophets generally have very short lives."
Build Out Requirements. The Committee spent much of the meeting debating language that would mandate deployment of broadband service. While the underlying premise of the bill is that the regulatory relief which it offers to the Bells will incent them to deploy DSL service, even its sponsors conceded that the bill also needs to actually require the Bells to deploy DSL service. The debate was over whether to adopt a modest amendment [PDF] offered by Rep. Tom Sawyer (D-OH) and Rep. Bobby Rush (D-IL), and backed by Tauzin and Dingell, or a more stringent amendment [PDF] offered by Rep. Bart Stupak (D-MI). The Sawyer amendment sets year by year requirements for the deployment of DSLAMs in central offices (COs). The Stupak amendment would have measured deployment beyond that what has already been deployed. Stupak argued that the levels set by the Sawyer amendment for the next few years have already been met by most Bells, and hence, impose no real requirement. The Stupak amendment also would have measured buildout based upon all local loops of up to 150,000 feet, while the Sawyer amendment would cover only those of up to 15,000 feet. Stupak argued that most customers in urban areas are within 15,000 feet of their COs, but that in rural districts, such as his, many customers are far beyond 15,000 feet. The bill, as amended by the Sawyer amendment, would impose no obligation to deploy DSL service to customers who are beyond 15,000 feet from their COs. The committee rejected the Stupak amendment by a vote of 17 to 37, and then approved the Sawyer amendment by a voice vote.
Line Sharing. The Committee narrowly rejected, by a vote of 27 to 27, an amendment [PDF] offered by Rep. Bill Luther (D-MN) that would have extended the line sharing requirement to include fiber and remote terminals. The Tauzin manager's amendment contained language providing for line sharing, but only over copper lines. Tauzin said that "this strikes at the heart of the bill." Dingell derided it as a "killer amendment".
Definition of High Speed. The Committee also rejected, by a vote of 18 to 33, an amendment [PDF] offered by Rep. Tom Davis (R-VA) that would have defined "high speed data service" as at least 1.5 million bits per second downstream, and at least 128 thousand bps upstream. Tauzin's manager's amendment defined it as only 384 thousand bps in one direction (presumably downstream). Harman and Largent cosponsored the amendment. Rep. Markey spoke in support: "They are promising us a superhighway, but we are only going to get a bike path." He added that the Bells will charge monopoly prices for it.
Reporting Requirements. Rep. Anna Eshoo (D-CA) offered an amendment [PDF] that would have required the Bells to submit certain data regarding the quality of their service to the FCC. She described it as a consumer protection provision. Tauzin and Dingell opposed it, and it went down to defeat, 18 to 27.
The main defenders of the bill throughout the day were Tauzin and Dingell, but they received frequent support from Green, Stearns, Sawyer, Rush and others. Upton made all of the procedural objections to various proposed amendments to the bill. The most vocal opponents were Markey, Largent, Wilson, Davis, and Stupak, with support from McCarthy, DeGette, and Harman. Rep. Chris Cox (R-CA), who is an opponent of the bill, is now embroiled in partisan and ideological maneuvering over President Bush's effort to put him on the U.S. Court of Appeals for the 9th Circuit. He voted against the bill, but was not active in the debate.
Ken Johnson, spokesman for Chairman Tauzin, stated that "we will pass it out of the House" but that "bill's chances are much more problematic in the Senate." The Judiciary Committee has also asked to be given jurisdiction over the bill. Johnson said that Speaker Hastert was unlikely to do this.
Related Issues. 5/9. Enforcement. Rep. Fred Upton (R-MI) introduced HR 1765 on May 8. It would enhance the FCC's authority to enforce the Telecom Act of 1996, by increasing penalties, and lengthening the statute of limitations on certain forefeiture actions against phone companies. This bill was not offered as an amendment to HR 1542. Tauzin stated that the Committee would hold a hearing on the bill, but that there would be no attempt to move the bill through committee or to the floor. Rather, it would be offered as an amendment to HR 1542 on the floor. HR 1765, asserted Tauzin, is not germane to HR 1542; and, he will ask the Rules Committee to waive the germaneness rule. Davis offered an amendment to HR 1542 that would have given the FCC enforcement authority for violation of its provisions. It was rejected on a voice vote.
Open Access. The markup of HR 1542 was also used a forum to discuss and debate several other Internet and telecommunications issues that are not addressed in HR 1542. Rep. Rick Boucher (D-VA) spoke in favor of mandating open access. Tauzin stated that this is "a very appropriate subject matter for hearings of our committee." Boucher offered no amendment.
Nondiscrimination. Boucher did offer an amendment [PDF] that would require that volume discounts by phone companies to ISPs be offered on a nondiscriminatory basis. Tauzin promised to work with Rep. Boucher on this issue, and Boucher then withdrew his amendment.
Right of Way Fees. Wilson offered, but withdrew, an amendment [PDF] that would require the Bureau of Land Management, and other government agencies, when granting rights of way, to charge on the basis of either footage or cost of management, rather than on the basis of the capacity or content of the line. Tauzin expressed support for the idea. He said that right of way fees based upon content amount to an "Internet tax."
Analysis of Vote on HR 1542. 5/9. The votes on amendments and final passage did not break down on party or ideological lines. Although, there was some correlation between party and vote, with Republicans more likely than Democrats to support the bill. See, roll call votes. However, several other factors were predictors of votes -- prior record of support for the Internet, gender, region, and seniority. Techies, women, westerners and junior members tended to oppose the bill.
Members from districts with new technology companies, or who have been advocates of the Internet, tended to oppose the bill. For example, Reps. Eshoo (Silicon Valley), Davis (Northern Virginia), and Markey (suburban Boston) all represent tech heavy districts, and were leaders of the opposition to the bill. The one notable exception was Rep. Rick Boucher (D-VA), a Co-chair of the Internet Caucus, who supported the bill, and voted for the Tauzin Dingell position on every vote in subcommittee and full committee.
Another good predictor of support for the bill was gender. Of the eight women on the Committee, six voted no (Eshoo, Wilson, DeGette, Harman, Capps, and McCarthy), only one voted yes (Bono), and one was absent (Cubin).
Region was also a predictor of support for the bill. Westerners were more likely than members as a whole to oppose the bill. Of the seven Californians, five voted no (Eshoo, Cox, Waxman, Capps, and Harman), and two voted yes (Bono and Radanovich). The mountain state representatives -- Shadegg (AZ), DeGette (CO), and Wilson (NM) -- all voted no. The upper midwest representatives -- Luther (MN) and Barrett (WI) -- voted no. Also, representatives from districts with widely dispersed populations (including many beyond the 15,000 foot range of DSL service) tended to oppose the bill. Notably, Stupak (upper Michigan), Strickland (Appalachian Ohio), and Largent (who represents Tulsa, but seeks to become governor of Oklahoma) were vocal opponents of the bill. Also, Shadegg, Wilson, and DeGette (who represent urban Phoenix, Albuquerque, and Denver) are from states with many citizens who live in sparsely populated areas. Also, if the vote is broken down by the territories of the original Regional Bell Operating Companies, representatives from PacBell and US West tended to oppose the bill, while representatives from SBC, Ameritech, BellSouth, Bell Atlantic, and Nynex tended to support the bill.
Seniority on the Committee also correlated positively with support for the bill. For example, the seven Republicans with the most seniority all supported the bill. There are 31 Republicans on the Committee. Of the Republicans from the top half in seniority, 13 voted yes, 2 voted no, and 1 was absent. Of the bottom half in seniority, 8 voted yes, 6 voted no, and 1 was absent. These junior members include all members appointed to the committee since 1998, when Wilson got a seat following her special election. On the Democratic side, the telling statistic is that 8 of the 9 most junior members voted no.
Party membership was also a predictor of a member's vote. The Republicans split 21 in favor, 8 against, and 2 absent. The Democrats split 11 in favor and 15 against.
People. 5/9. Deborah Lathen announced her resignation as Chief of the Cable Services Bureau at the FCC, effective May 18, 2001.
5/9. Troup Coronado was named Assistant Vice President for Federal Relations in BellSouth's Washington DC Governmental Affairs office. Previously, he was Director of Government Relations with Sinclair Broadcast Group. He has also worked for Sen. Orrin Hatch (R-UT). See, release.
5/9. The FCC released its Memorandum Opinion and Order on Reconsideration [PDF] In the Matter of Interconnection and Resale Obligations Pertaining to Commercial Mobile Radio Services (CMRS). The FCC denied the petition for reconsideration filed by the Association of Communications Enterprises (ASCENT) of the Fourth Report and Order in this proceeding. The FCC reaffirmed that facilities-based CMRS providers are not required to interconnect with resellers' switches. The MOO was adopted on May 1, and released on May 9. (See, CC Docket No. 94-54.)
New Bills. 5/9. Rep. Jerry Weller (R-IL), Rep. James Moran (D-VA), and others introduced HR 1769, a bill to amend the Internal Revenue Code of 1986 to allow a credit against income tax for information technology training expenses. It was referred to the House Ways and Means Committee. The bill would allow a tax credit equal to "100 percent of information technology training program expenses" of up to $1,500 per employee, and $2,000 per employee in specified cases. To qualify, the expenses must be paid in connection with course work and certification testing, and must "lead to an industry-accepted information technology certification".
5/9. Rep. Don Manzullo (R-IL) introduced HR 1782, a bill to amend the Trade Act of 1974 to provide for the position of Assistant USTR for Small Business. The bill was was referred to the House Ways and Means Committee. Manzullo published a statement in the Congressional Record in which he stated that "With the growth of the Internet economy, more small businesses are able to export overseas but sometimes face difficult obstacles in completing a sale." He added that small business needs representation in trade talks. He stated that "trade talks could have positive benefits for small business exporters, primarily in the area of trade facilitation. Topics of discussion under this umbrella are streamlining trade dispute resolution procedures; reforming the documentation and filing procedures for patent and trademark protection; opening the public procurement process by foreign governments to small businesses; enhancing transparency in international tax, finance, customs procedures, and trade rules; and exploring means to internationalize the recognition of technical certification of professionals."
Antitrust. 5/9. The FTC published a notice in the Federal Register that it is amending the Antitrust Improvements Act Notification and Report Form and the accompanying Instructions for Certain Mergers and Acquisitions which must be completed and submitted by persons required to report mergers or acquisitions pursuant to § 7A of the Clayton Act. The interim rule takes effect on July 1, 2001. However, the FTC requests comments, by June 8, 2001, regarding the effective date. See, Federal Register, May 9, 2001, Vol. 66, No. 90, at Pages 23561 - 23587.
SEC 10b Complaint. 5/9. The SEC filed a civil complaint in U.S. District Court (DMass) against Arcangelo Capozzolo and Market Traders alleging violation of federal securities laws. Capozzolo is the operator of a stock recommendations web site. Market Traders is his company. The complaint alleges that the defendants violated § 10(b) of the Securities Exchange Act and Rule 10b-5 thereunder by making false and misleading statements on in the web site, and in bulk e-mail. In addition, the defendants agreed, without admitting or denying the allegations, to the entry of a permanent injunction and to the imposition of a civil penalty against Market Traders.
More News. 5/9. The Recording Industry Association of America. (RIAA) published a report [PDF] titled 2000 Yearend Piracy Statistics. See also, RIAA release.
5/9. A grand jury of the U.S. District Court (NDCal) returned an indictment [PDF] against Robert Gordon, a former Cisco Systems employee, charging two counts of wire fraud in violation of 18 U.S.C. § 1343. Gordon, who is a former Vice President and Director of Business Development, is alleged to have transfered stock owned by Cisco to himself, and to fraudulently induced Cisco to provide $15 Million to Spanlink, a Cisco affiliated start-up company, so that he could fraudulently obtain $5 Million from Spanlink. See, release.
5/9. The Electronics Industry Alliance (EIA) wrapped up its three day conference in Washington DC. See, EIA conference web site and agenda.
5/9. The U.S. Court of Appeals (DC Cir) heard oral argument in Qwest v. FCC, Appeal No. 00-1376.
Public Opinion on Privacy. 5/8. The House Commerce Committee's Subcommittee on Commerce, Trade, and Consumer Protection held a hearing titled Opinion Surveys: What Consumers Have To Say About Information Privacy. Rep. Cliff Stearns (R-FL), the Chairman of the Subcommittee, presided. He stated that "If the public opinion polls suggest one thing, it is that the American public's encounter with the issues of information privacy is as complex as the issue itself."
Frank Newport of Gallup testified that "Our conclusion is that this is an issue which is of significant potential concern, but one which has not yet moved to the point where it is a currently front-burner problem to many Americans who regularly use the Internet." Harrison Rainie testified that Internet users "would like the presumption of privacy when they are online; they want to be asked before information is gathered or disseminated. They want rules, but they have no clear preference for government standards or industry self-regulation." See, prepared statements of witnesses: Frank Newport (Gallup Poll), Harrison Rainie (Pew Internet & American Life Project), Alan Westin (Columbia University), Humphrey Taylor (Harris Interactive), and Sandra Bauman (Wirthlin Worldwide).
Costs of Complying with Privacy Legislation. 5/8. Robert Hahn, Director of the AEI-Brookings Joint Center for Regulatory Studies, presented a study [PDF] titled "An Assessment of the Costs of Proposed Online Privacy Legislation" at a luncheon on Capitol Hill hosted by the Association for Competitive Technology (ACT). Hahn estimated the costs of some aspects of proposed online privacy legislation and concluded that the costs to online businesses of complying "could be in the billions, if not tens of billions of dollars." He also argued that "further regulation of online privacy is premature for three reasons. First, the costs could be substantial. Second, I am not aware of any good quantitative estimates of the benefits of such regulation. Third, the market is reacting to ensure that at least some of the consumer concerns related to online privacy are being addressed." Hahn conceded that over time compliance costs could decrease. He also stated that it is possible that the electronic economy is being held back by individuals' fears of loss of privacy. See also, summary of study and ACT release.
Privacy Commission. 5/8. The House Reform Committee's Subcommittee on Government Efficiency, Financial Management adopted HR 583, the Privacy Commission Act, by a voice vote. The bill would create a 17 member commission to study privacy issues, and then issue a report within 18 months. It is sponsored by Rep. Asa Hutchinson (R-AR), Rep. James Moran (D-VA), and others.
HR 1542 is one of two major bills that would change the regulatory environment in which the Baby Bells operate. The other bill, HR 1698, is sponsored by Rep. Chris Cannon (R-UT) and Rep. John Conyers (D-MI), who are both members of the House Judiciary Committee. Sponsors and supporters of both bills assert that their bills would promote the deployment of broadband Internet access services.
Trademark. 5/8. The U.S. Court of Appeals (6thCir) issued its opinion in Allard v. Advanced Programming Resources, an appeal from a judgment in a trademark infringement case on a number of issues. Both parties claim the exclusive right to use the mark "APR". The Appeals Court concluded that the District Court did not err in granting a new trial but did err in permitting defendants to amend their counterclaim to request cancellation of plaintiff's federal registration. The Appeals Court reversed the cancellation of plaintiff's registration. The Appeals Court affirmed the conclusion that defendants have the exclusive right to use the mark in central Ohio. The Appeals Court remanded to evaluate the parties' rights to use the mark on the Internet, throughout Ohio and throughout the U.S.
Export Controls. 5/8. The U.S. Court of Appeals (DCCir) issued its opinion in USA v. Hitt, a criminal case involving allegations of fraudulent misrepresentations made to the Department of Commerce in connection with the sale by McDonnell Douglas to the People's Republic of China of machinery that was subject to export controls. The District Court ruled that the charges were barred by the statute of limitations. The Appeals Court affirmed.
Stock Options. 5/8. The U.S. Court of Appeals (9thCir) issued its opinion in Scribner v. WorldCom, a case construing the meaning of the words "termination without cause" mean in the context of a stock option contract between an employer and employee.
Fast Track. 5/8. USTR Robert Zoellick testified before the House Ways and Means Committee's Trade Subcommittee. He advocated fast track trade negotiating authority. He stated: "The Bush Administration's top trade priority is for the Congress to enact U.S. Trade Promotion Authority by the end of the year. Under this authority, the executive branch would be bound by law to consult regularly and in detail with members of Congress as trade agreements are being negotiated. But once that long and exhaustive process of consultations is completed, and the painstaking negotiations have ended in an agreement, our trading partners have the right to know that Congress will vote on the agreement up or down. Indeed, in the absence of Trade Promotion Authority, which expired in 1994, other countries have been reluctant to close out complex and politically sensitive trade agreements with the United States." See, prepared testimony.
See also, statements of Rep. James Moran (D-VA) and ERep. Ellen Tauscher (D-CA), and prepared testimony of other witnesses: Loren Yager (GAO), Richard Fisher (former Deputy USTR), John Sweeney (AFL/CIO), Franklin Vargo (NAM), Daniel Price (U.S. Council for International Business), William Gambrel (U.S. Chamber of Commerce), Marta Lucía Ramirez de Rincón (Minister of Foreign Trade, Colombia), Ana Maria Solares (Vice-Minister of Trade and Economics, Bolivia), Carlos Moore (American Textile Manufacturers Institute), Stephen Lamar (American Apparel and Footwear Association).
E-Rate. 5/8. The FCC published a Notice of Proposed Rulemaking (NPRM) in the Federal Register regarding revisions to the method of subsidizing schools and libraries under its e-rate program when there is insufficient funding to support all requests. Comments are due by May 23, 2001. Reply comments are due by May 30, 2001. See, Federal Register, May 8, 2001, Vol. 66, No. 89, at Pages 23204 - 23208.
People. 5/8. Four lawyers, Ann Ford, Mark Tidman, Lisa Trovato, and Emily Sexton, joined the Washington DC office Piper Marbury in its intellectual property practice group. All four previously worked in the Washington DC office of the law firm of Baker & Hostetler. Ford practices in the areas of international trademark and copyright law, including the the use of intellectual property on the Internet. Tidman practices in the areas of trademark, trade dress and unfair competition practice and prosecution. Trovato handles drafting and negotiating intellectual property licensing, joint venture and e-commerce related agreements as well as counseling clients with respect to trademark, copyright and domain name matters. Saxton handles trademark prosecution and enforcement, copyright counseling and enforcement, and domain name infringement actions. See, release.
More News. 5/8. The Federal Trade Commission held the second day of two day workshop on competition issues that arise in connection with business to business (B2B) and business to consumer (B2C) e-commerce. See, release.
5/8. The Senate Judiciary Committee postponed its hearing on patents relating to genetics and biotechnology. No future date has been scheduled. The Committee is also scheduled to hold a hearing on May 15 titled "High Technology Patents I: Business Methods and the Internet."
5/8. The FCC announced that it adopted a Notice of Proposed Rulemaking (NPRM) Notice of Proposed to explore ways to reform the existing universal service fund (USF) subsidy system. See, release.
Pitt to Chair SEC, 5/7. President Bush will nominate Harvey Pitt to be Chairman of the SEC. He will replace Arthur Levitt, who departed in February. Laura Unger has been Acting Chairman since February. Pitt is a partner in the Washington DC and New York City offices of the law firm of Fried Frank. His clients include the New York Stock Exchange and Lloyd's of London. He worked at the SEC in the 1970s, culminating as General Counsel from 1975 - 1978. Pitt is a co-author of several treatises on the securities industry and law, including Securities in the Electronic Age (2000) and The Law of Financial Services (1988).
FCC Enforcement. 5/4. FCC Chairman Michael Powell sent a letter to the leaders of the Senate and House Commerce and Appropriations Committees in which he requested increased authority in enforcement actions against incumbent local exchange carriers (ILECs) for violation of local competition provisions of the 1996 Telecom Act. He stated that "in some cases, CLECs may have been stymied by practices of incumbent local exchange carriers that appear designed to slow the development of local competition."
Powell wants legislation increasing the maximum fine from $1.2 Million to $10 Million. He wrote: "Currently, under 47 U.S.C. § 503(b)(2)(B), the Commission's forfeiture authority against common carriers for any single continuing violation of the Act or the Commission's rules is limited $1.2 million, including inflationary adjustments. Given the vast resources of many of the nation's ILECs, this amount is insufficient to punish and to deter violations in many instances. Congress should consider increasing the forfeiture amount to at least $10 million in order to enhance the deterrent effect of Commission fines.
Powell also asked for a longer statute of limitations for forfeiture actions against common carriers. It is currently set at one year from the date of the alleged violation. He also asked that the FCC be given authority to award punitive damages, attorneys fees and costs in formal complaint cases filed under § 208.
Free Trade & the Internet. 5/7. President George Bush gave a speech to the Council of the Americas at the State Department in Washington DC in which he made the case for free trade. He stated that "Americans are the world's pre-eminent inventor of new technology and the world's biggest foreign investor. We're the world's most efficient food producer, and the world's leading source of information and entertainment. For our farmers and our inventors, for our artists and for ordinary savers, open trade pays off in the form of higher incomes and higher returns." He then added that "Open trade is not just an economic opportunity, it is a moral imperative. Trade creates jobs for the unemployed. When we negotiate for open markets, we are providing new hope for the world's poor. And when we promote open trade, we are promoting political freedom. Societies that open to commerce across their borders will open to democracy within their borders, not always immediately, and not always smoothly, but in good time."
Secretary of State Colin Powell also gave a speech to the Council of the Americas. He stated that "In Quebec, we were all excited by the possibilities of closing the digital divide to make sure that nobody's child, nobody's school, nobody's society, is left behind from the power of the information and technology revolution, so that the poorest and most disadvantaged members of society get that same access. ... But we can't deny youngsters the opportunity to learn, to have the world come into their world, have their lives changed by this power. And by so doing we would increase economic integration, bring the poor and marginalized into fuller participation in their own democratic systems. As I say, I hope you and the business community will use your energies and creativity to help make the Internet a force for prosperity and for democracy."
The Council of the Americas is a New York City based business group that promotes free trade in the Western Hemisphere. See also, USTR Robert Zoellick's speech, and Assistant Secretary for Western Hemisphere Affairs Peter Romero's speech.
5/7. The U.S. Court of Appeals (FedCir) issued its opinion in Intellectual Property Development v. TCI, a case involving standing to sue in a patent infringement matter. The case involves U.S. Patent No. 4,135,202, which pertains to wired broadcasting systems with fiber optic lines. The District Court (CDCal) granted the motion filed by Intellectual Property Development to dismiss its complaint against TCI with prejudice and to dismiss TCI's counterclaims without prejudice. The Appeals Court affirmed.
5/7. The U.S. Court of Appeals (FedCir) issued its opinion in Robotic Vision Systems v. View Engineering, a patent infringement case involving the on sale bar. 35 U.S.C. § 102(b) provides that "A person shall be entitled to a patent unless ... the invention was ... on sale in this country, more than one year prior to the date of the application for patent in the United States." Robotic is the assignee of U.S. Patent 5,463,227, which discloses a method of scanning the leads on integrated circuit devices that are arranged in rows and columns on a multi-pocketed tray. The application for the '227 patent was filed on June 24, 1992, thus making June 24, 1991 the critical date for the purpose of applying § 102(b). As soon as the patent was granted, Robotic filed a complaint in the U.S. District Court (CDCal) against View alleging that its three dimensional scanning machines infringed the patent '227 patent. View filed a motion for summary judgment on the grounds that the patent was invalid under the on sale bar. The District Court held that claim 1 of the '227 patent is invalid. The District Court applied the Supreme Court's two part test in Pfaff v. Wells Electronics, 525 U.S. 55 (1998); the invention was (1) the subject of a commercial offer for sale before the critical date, and (2) ready for patenting before the critical date, and hence, the patent was invalid. The Appeals Court affirmed.
5/7. Paul Rogers and Ross Meador joined the San Francisco office of the law firm of Preston Gates & Ellis as partners in the firm's business and technology practices. See, release.
5/7. The SEC published in the Federal Register a guidance on the operation of its rule permitting electronic storage of broker- dealer records in light of the recently enacted Electronic Signatures in Global and National Commerce Act of 2000 (E-SIGN Act). See, Federal Register, May 7, 2001, Vol. 66, No. 88, at Pages 22916 - 22921.
5/7. The Federal Trade Commission held the first day of a two day workshop on competition issues that arise in connection with business to business (B2B) and business to consumer (B2C) e-commerce. See, release. The workshop continues on May 8.
5/7. The Electronics Industry Alliance (EIA) began a three day conference in Washington DC. See, EIA conference web site and agenda.
5/6. Laura Unger, Acting Chairman of the SEC, gave a speech Los Angeles regarding investing, securities regulation and the Internet in which she addressed the SEC's new Order Execution and Routing Disclosure Rules, whether financial portals should register as broker- dealers, Regulation FD, potential conflicts of analysts, and Internet fraud.
5/6. Napster released a statement in Q&A format about "acoustic fingerprinting", a technology for blocking the copying of copyrighted music files.

Go to News Briefs from May 1-5.