News Briefs from September 6-10, 2001

California Court Rules on Duty to Defend 43(a) Claims
9/10. The California Court of Appeal (1/5) issued its opinion [PDF], in part, in El-Com Hardware v. Fireman's Fund, a case regarding an insurer's duty to defend and indemnify in Lanham Act Section 43(a) suits. El-Com Hardware and Penn Fabrication make similar products.
Fireman's Fund issued an insurance policy to El-Com Hardware that provided coverage for "Advertising Injury Liability." Penn sued El-Com alleging patent infringement, unfair competition for copying its product's design, and false designation of origin under Section 43(a) of the Lanham Act (15 U.S.C. § 1125) for copying its product. El-Com tendered the defense of the Penn action to Fireman's Fund. It declined to defend.
El-Com then filed a complaint in California Superior Court against Fireman's Fund alleging breach of an insurance contract and breach of the covenant of good faith and fair dealing. El-Com argued that a Section 43(a) claim constitutes an advertising injury covered by the policy. The trial court granted summary judgment to Fireman's Fund. The Court of Appeal reversed.
CPNI and Location Privacy
9/10. The FCC released a document [32 pages in PDF] titled "Clarification Order and Second Further Notice of Proposed Rulemaking." It pertains to maintaining the privacy of personally identifiable information held by telecommunications carriers.
CPNI. CPNI is customer proprietary network information. 47 U.S.C. § 222 provides, in part: "Except as required by law or with the approval of the customer, a telecommunications carrier that receives or obtains customer proprietary network information by virtue of its provision of a telecommunications service shall only use, disclose, or permit access to individually identifiable customer proprietary network information in its provision of (A) the telecommunication service from which such information is derived, or (B) services necessary to, or used in, the provision of such telecommunications service, including the publishing of directories."
E-911 Bill and Location Privacy. The 106th Congress enacted, and President Clinton signed, the Wireless Communications and Public Safety Act of 1999. This bill was S 800, sponsored by Sen. Conrad Burns (R-MT), and HR 438, sponsored by Rep. John Shimkus (R-IL). It designated 911 as the universal emergency service number, and promoted wireless 911 service. The bill also amended § 222 to include cell phone call location information in the definition of CPNI.
New Technologies. § 222 covers only telecommunications carriers. However, with the development of PDAs, in car map and traffic services, wireless tollbooth collection systems, Blackberry e-mail pagers, Bluetooth enabled devices, and anything else that can be embedded with a GPS chip, or other technology, personally identifying data, including location data, is being collected by entities which are not telecommunications carriers.
The FCC adopted rules pursuant to § 222 in its CPNI Order on February 26, 1998. US West and other telecommunications carriers challenged the constitutionality of the order on First Amendment free speech grounds. The 10th Circuit agreed, and vacated that part of the order pertaining to opt in requirements. See, opinion of the U.S. Court of Appeals (10thCir) in U S WEST v. FCC, 182 F.3d 1224 (10th Cir. 1999), cert. denied, 120 S. Ct. 2215 (Jun. 5, 2000).
In this latest document, the FCC seeks "to obtain a more complete record on ways in which customers can consent to a carrier's use of their CPNI." It further requests "comment on whether it is possible for the Commission to implement a flexible opt-in approach that does not run afoul of the First Amendment, or whether opt-out approval is the only means of addressing the constitutional concerns expressed by the 10th Circuit."
The document primarily goes to the 10th Circuit decision. However, the FCC also requests comment on the implications of the E-911 Act. (See, paragraph 22 and footnote 55.)
Comments will be due 30 days after publication in the Federal Register, and reply comments will be due 45 days after publication. See, Docket Nos. 96-115 and 96-149.
DOT Says GPS Is Vulnerable
9/10. The Department of Transportation released a report [113 pages in PDF] titled "Vulnerability Assessment of the Transportation Infrastructure Relying on the Global Positioning System." It concludes that the GPS is susceptible to unintentional disruption from such causes as atmospheric effects, signal blockage from buildings, and interference from communications equipment, as well as to potential deliberate disruption. See, DOT release.
War on Drugs, Technology and Privacy
9/10. A broad range of groups wrote a letter to Sen. Patrick Leahy (D-VT), Chairman of the Senate Judiciary Committee regarding the use of new technologies in the War on Drugs that diminish individual privacy. Specifically, they urged the Committee to examine privacy issues at its hearing on September 11 on the nomination of John Walters to be Director of National Drug Control Policy.
They wrote that "Rapid advances in technology have unfortunately brought with them new opportunities for the invasion of privacy in the form of programs like Carnivore, a system designed to allow the FBI to sift through vast quantities of internet communications, or 'Know Your Customer,' a proposed regulation requiring banks to collect personal financial information about their customers, 'profile' them, and report 'suspicious activities' to the Government. The misguided drug war is often a driving force behind these initiatives."
Among the 63 signatories of the letter are representatives of the Free Congress Foundation (FCF), Center for Democracy and Technology (CDT), ACLU, Eagle Forum, American Conservative Union, and Libertarian Party. See also, FCF release and ACLU release.
Tauzin Dingell Bill
9/10. The Competitive Telecommunications Association (CompTel), a group based in Washington DC that represents competitive local exchange carriers, issued a release regarding HR 1542, the Tauzin Dingell bill. It states that the bill "is likely to come to a floor vote in the next few weeks". It also states that CompTel is not about "to cut a deal" with legislators promoting the bill.
5th Circuit Rules on FCC CALLS Order
9/10. The U.S. District Court (5thCir) issued its opinion in Texas Office of Public Utility Counsel v. FCC, a petition for review of the FCC's CALLS Order. The Appeals Court affirmed in part, and reversed in part.
The CALLS (Coalition for Affordable Local and Long Distance Service) Order, which provides for an irrational interstate access charge and universal service regime, was adopted by the FCC on May 31, 2000, following meetings at the FCC which admitted some, but not all, interested parties. See, text version (without footnotes) and MS Word version. (CC Docket No. 94-129).
These petitioners, Texas Office of Public Utility Counsel (TOPUC), National Association of State Utility Consumer Advocates (NASUCA), and intervenor Consumer Federation of America (CFA), filed a petition for review of the FCC's CALLS Order with the U.S. Court of Appeals. They asserted that the CALLS Order violates the procedural requirements of the Administrative Procedure Act and substantive provisions of the Telecommunications Act of 1996. More specifically, they asserted that the Subscriber Line Charge (SLC) price cap increase violates § 254(b)(1) and § 254(i)'s purported affordability mandate, that it contravenes § 254(k)'s prohibition against unreasonable allocation of joint and common costs, and that the 1996 Act requires the FCC to conduct a comprehensive, forward looking study.
The Court of Appeals affirmed the CALLS Order in most respects, but remanded for further analysis the portions regarding the $650 million Universal Service Fund and the X-Factor.
FCC Enforcement Bureau News
9/10. The FCC hired five new lawyers to work in its Enforcement Bureau on competition enforcement matters. The five attorneys, and the firms from which they were hired, are as follows: Rosemary McEnery (Howrey Simon), Lisa Saks (Howrey Simon), Maureen Del Duca (Jenner & Block), David Janas (Mintz Levin), Hillary De Nigro (Milbank Tweed). See, FCC release [PDF].
9/10. The FCC's Enforcement Bureau released an Order of Forefeiture imposing a $920,000 fine against All American Telephone, Inc. (AAT) for violations of the Communications Act of 1934 and the FCC's anti slamming rules. See also, FCC release.
GAO Releases Report on SEC Information Systems
9/10. The GAO released a report [PDF] titled "Information Systems: Opportunities Exist to Strengthen SEC's Oversight of Capacity and Security." The report assesses "the effectiveness of the Securities and Exchange Commission's (SEC) oversight of capacity planning and security procedures for information systems at the securities and options exchanges and clearing organizations." It concludes that the various components of the SEC’s Automation Review Policy (ARP) program "provide it with a reasonable level of assurance that the SROs address capacity, security, and other information system issues. However, SEC's ARP oversight could be improved." The report was prepared at the request of Rep. John Dingell (D-MI), the ranking Democrat on the House Commerce Committee.
More News
9/10. Paul Roye of the SEC gave a speech to investment advisors in Philadephia. Among the topics that he discussed was electronic record keeping by investment advisors, and the recently promulgated changes to Rule 204-2, implementing the Electronic Signatures in Global and National Commerce Act, also known as the E-SIGN Act. Roye is Director of the SEC's Division of Investment Management. He addressed the National Symposium on Investment Adviser Regulation.
9/10. The U.S. Court of Appeals for the District of Columbia Circuit heard oral argument in High Plains Wireless v. FCC, No. 00-1292. Judges Ginsburg, Edwards and Sentelle presided.
9/10. FCC Wireless Telecommunications Bureau (WTB) fees changes go into effect. See, WTB release.
Ferree Addresses Cable and Broadband Regulation
9/9. Kenneth Ferree, Chief of the FCC's Cable Services Bureau, gave a speech at a meeting of the National Association of Telecommunications Officers and Advisors in Miami Beach, Florida, on FCC regulation of cable and broadband services. He argued that people must "disenthrall ourselves from the regulatory answers appropriate for a more static past."
Ferree stated that "it has been suggested that the cable industry missed an entire upgrade cycle in the mid-90s because of rate regulation. ... We cannot therefore help but recognize that there is a trade-off between our desire for lower subscriber rates on one hand and our desire to see broadband services deployed more widely, particularly in rural areas, on the other hand."
He concluded that "as the Cable Services Bureau moves forward into the new broadband world, we will be just as careful not to reduce consumer surplus through imposition of anachronistic regulatory requirements, as we will be vigilant against market failures that may require affirmative government remedies. ... In both instances, we will work in partnership with state and local authorities for common and consistent solutions -- solutions that will be based on the new facts and circumstances, and not necessarily tied to any preconceived notions bound to the past.
Much of his address devoted to a comparison of the evolution of species to technology developments.
10th Circuit Rules on Scienter Requirement of PSLRA
9/7. The U.S. Court of Appeals (10thCir) issued its opinion in Philadelphia v. Fleming Companies, a class action securities action involving application of the Private Securities Litigation Reform Act (PSLRA). Congress passed the PSLRA, 15 U.S.C. § 78u-4, to insulate defendants, and especially info and bio tech companies, from abusive class action law suits. The PSLRA creates both a safe harbor for forward looking statements, and a heightened pleading requirement. Plaintiffs must "state with particularity facts giving rise to a strong inference that the defendant acted with the required state of mind." See, 15 U.S.C. § 78u-4(b)(2). The Appeals Court affirmed the District Court's dismissal. Seven circuits have now addressed the scienter requirement of the PSLRA, but without consensus.
District Court. Plaintiffs filed a complaint in the U.S. District Court (WDOkla) against Fleming Companies, and several of its officers, alleging securities fraud under Section 10b of the Securities Exchange Act of 1934. They sought class action status. Defendants moved to dismiss pursuant to FRCP 12(b)(6). Plaintiffs twice amended their complaint. The District Court dismissed the complaint, stating that the second amended complaint did not meet the pleading requirements for scienter set forth in the PSLRA.
Other Circuits. Six other circuits have previously addressed this issue, reaching various results. See, Janas v. McCracken (In re Silicon Graphics Sec. Litig.), 183 F.3d 970 (9th Cir 1999); Novak v. Kasaks, 216 F.3d 300 (2d Cir); In re Advanta Corp. Sec. Litig., 180 F.3d 525 (3d Cir 1999); Bryant v. Avado Brands, 187 F.3d 1271 (11th Cir 1999); Greebel v. FTP Software, 194 F.3d 185 (1st Cir 1999); and Helwig v. Vencor, (6th Cir 2001).
Holding. However, the 10th Circuit had not previously ruled on this issue. The Appeals Court held that plaintiffs can adequately plead scienter by setting forth facts raising a strong inference of intentional or reckless misconduct. The Court also held that "the most reasonable reading of the PSLRA in regard to motive and opportunity pleadings is the view adopted by the First Circuit in Greebel and the Sixth Circuit in Helwig. The PSLRA was obviously intended to eliminate frivolous securities litigation through its heightened scienter pleading requirements. Allegations of motive and opportunity, with nothing more, could allow potentially frivolous lawsuits to go forward with only minimal allegations of scienter. But evidence of motive and opportunity may be relevant to a finding of scienter, and thus may be considered as part of the mix of information that can come together to create the "strong inference" of scienter required by the PSLRA. When reviewing a plaintiff's allegations of scienter under the PSLRA, a court should therefore examine the plaintiff's allegations in their entirety, without regard to whether those allegations fall into defined, formalistic categories such as "motive and opportunity," and determine whether the plaintiffs' allegations, taken as a whole, give rise to a strong inference of scienter."
Attorneys. The plaintiffs are represented by several law firms, including Milberg Weiss, a law firm based in San Diego that specializes in bringing securities class action suits against technology companies. Defendants are represented by several law firms, including Brobeck Phleger.
USTR Zoellick Discusses Trade Promotion Authority
9/7. USTR Robert Zoellick held a press conference in Mexico City at which he addressed progress in the U.S. Congress on passing trade promotion authority (formerly called fast track). See, transcript.
He stated that House Ways and Means Committee Chairman Bill Thomas (R-CA) "will probably try to push forward early in September. He's been having discussions with some of his Democratic colleagues, about how to try to do so in a way that deals with environmental labor as well as trade issues in a positive consentive based fashion, and that will be the process that you will see unfold in the course of September." See, HR 2149.
He also stated that Sen. Bob Graham (D-FL) and Sen. Frank Murkowski (R-AK) have a bill in the Senate, and that Sen. Max Baucus (D-MT) and Sen. Charles Grassley (R-IA), the Chairman and ranking Republican on the Senate Finance Committee, have been "having discussions". See, S 1104.
He concluded that "the President and I, and Secretary Evans, and Secretary Veneman, and our colleagues who will also be spending a lot of time on trying to secure that authority over the course of the next two months. President Bush is the first President not to have that authority from the five prior presidents, and one of the arguments that we made is that frankly in many areas the United States has been falling behind because we don't have that trade negotiating authority."
Also on September 7, Zoellick issued a release in which he stated that "Expanding our access to foreign markets can help ignite economic recovery and expansion by providing American farmers, workers and businesses new opportunities to sell their products overseas. U.S. Trade Promotion Authority is an important part of President Bush's plan for opening markets and promoting American economic prosperity. I look forward to continuing to work with the Congress to get TPA enacted this fall."
USTR Zoellick Addresses PR China Joining WTO
9/7. USTR Robert Zoellick released a statement regarding the PR China's accession to the World Trade Organization (WTO). He stated that "China made commitments on insurance as part of its bilateral accession agreement with the United States. These commitments will be incorporated into China's WTO accession agreement, and therefore would be applicable for all WTO members. We expect China to uphold all of its commitments and obligations."
Intel and Via Technologies in Patent Dispute
9/7. Intel filed a complaint in U.S. District Court (DDel) against Via Technologies (Via) and S3 Graphics alleging patent infringement. Intel alleges that Via's P4X266 and P4M266 chipsets infringe Intel patents. Meanwhile, Via announced that it has filed a complaint with the Taiwan Fair Trade Commission alleging anti competitive behavior by Intel. Via also announced that it would file a patent infringement action against Intel in the U.S. It states that Intel's Pentium 4 infringes its patents. See, Via release.
FTC Approves Chevron Texaco Merger
9/7. The FTC approved a consent order allowing the proposed merger of Chevron and Texaco, with divestiture requirements. See, Agreement Containing Consent Order. See also, Chevron release, Texaco release, and FTC release. These are oil companies, not technology companies. However, the FTC's disposition of this merger may be pertinent to technology companies that are contemplating mergers and other transactions.
NAB Convention
9/7. The National Association of Broadcasters (NAB) held a convention in New Orleans from September 5-7. See, speech by FCC Commissioner Michael Copps, speech by Edward Fritts, P/CEO of the NAB, and speech by Hillary Rosen, P/CEO of the RIAA.
Internet Crime
9/7. A grand jury of the U.S. District Court (NDTex) returned a nine count indictment against David Horne for various crimes related to the distribution of child pornography via an AOL account. See, USAO release.
Federal Circuit Decisions in Patent Cases
9/7. The U.S. Court of Appeals (FedCir) issued its opinion in GFI v. Franklin Corporation, a pair of patent case appeals involving a number of issues, including unenforceability for inequitable conduct, the doctrine of equivalents, obviousness, and waiver of attorney client privilege for testifying at trial. The patent in suit is U.S. Patent No. 5,064,244, which discloses a reclining sofa with push button controls.
9/7. The U.S. Court of Appeals (FedCir) issued its opinion in Schaefer Fan v. J&D Manufacturing, a case in which the Appeals Court upheld a District Court interpretation of a settlement agreement in a patent infringement case.
Update on Intel v. Via
9/7. Intel filed a complaint in U.S. District Court (DDel) against VIA Technologies (VIA) and S3 Graphics alleging patent infringement. Intel alleges that VIA's P4X266 and P4M266 chipsets infringe the following patents: U.S. Patent No. 6,145,039 titled "Method and Apparatus for an Improved Interface Between Computer Components", U.S. Patent No. 6,009,477 titled "Bus Agent Providing Dynamic Pipeline Depth Control", U.S. Patent No. 5,761,449 titled "Bus System Providing Dynamic Control of Pipeline Depth for a Multi-Agent Computer", U.S. Patent No. 5,615,343 titled "Method and Apparatus for Performing Deferred Transactions", U.S. Patent No. 5,659,689 titled "Method and Apparatus for Transmitting Information on a Wired-Or Bus".
9/7. September 7 was Gloria Tristani's last day as an FCC Commissioner. See, Tristani's farewell address.
More News
9/7. The ICANN began a round of meetings, that will continue through September 10, in Montevideo, Uruguay. See meeting web site for agenda and other information.
9/7. The U.S. Department of State is hosting a conference from September 5 through 7 titled "NetDiplomacy". See, State Dept. release.
9/7. The U.S. Court of Appeals for the District of Columbia Circuit heard oral argument in Fox v. FCC, No. 00-1222. Judges Ginsburg, Edwards and Sentelle presided. The case is a challenge to the FCC media ownership rules.
9/7. BellSouth released a statement in opposition to S 1364, the Telecommunications Fair Competition Enforcement Act of 2001, introduced by Sen. Ernest Hollings (R-SC) on August 3, 2001.
Senate Judiciary Committee Chairman Comments on Microsoft Case
9/6. Sen. Patrick Leahy (D-VT), the Chairman of the Senate Judiciary Committee, released a statement regarding the Justice Department's (DOJ) announcement that it would not seek the break up of Microsoft. The Committee has both oversight authority over the DOJ and jurisdiction over antitrust legislation.
Sen. Leahy wrote that "This decision avoids lengthy additional trial time and is cause for cautious optimism that this case will be resolved more quickly for the benefit of all consumers. The Department's intention to pursue remedies targeted at Microsoft's conduct may produce more immediate results for consumers, competitors and computer sellers than any structural solution could. But prosecutors should hold to their original intention of securing a remedy that will genuinely rectify the competitive problems revealed through the trial process -- not just for the short term but over the long haul. With the brisk pace of change in the computer and high-tech industries, it will be no easy task to ensure that the remedies proposed will be effective in the competitive environment today as well as tomorrow. ..."
Evans Proposes Legislation to Delay 3G Spectrum Auctions
9/6. Commerce Secretary Donald Evans wrote a letter to Vice President Dick Cheney in which he proposed delaying "auction deadlines for spectrum bands that are candidates for use in connection with third generation (3G) advanced mobile wireless services." He also enclosed a proposed bill to accomplish this purpose. The NTIA, which is a part of the Commerce Department, has management responsibilities for spectrum assigned to government users. The FCC manages spectrum used by the private sector.
Evans elaborated that "While the Federal Government is committed to identifying spectrum for 3G services as expeditiously as possible, the current statutory auction deadline affecting certain of the bands under consideration does not provide sufficient time to conclude the identification process and conduct an auction before September 30, 2002. Accordingly, this legislative proposal shifts the statutory deadlines originally established in the Balanced Budget Act of 1997 for completion of the auctions of and collection of receipts for spectrum licenses in the 1710-1755 MHz and 2110-2150 MHz bands from September 30, 2002, to September 30, 2004."
U.S. Jordan Free Trade Agreement
9/6. Sen. Max Baucus (D-MT) gave a speech in the Senate in which he advocated passage of S 643, a bill sponsored by Sen. Baucus that would implement the U.S. Jordan Free Trade Agreement (FTA) [PDF]. This FTA was negotiated by the Clinton administration last year, but has not yet been ratified by the Senate. Trade with Jordan is minimal. However, controversy has arisen because many see this FTA as a blueprint for future FTAs. The main dispute is whether these FTA's should contain language addressing labor and environmental issues, as does this FTA.
This FTA is also significant because it contains extensive language pertaining to intellectual property and e-commerce. This FTA addresses patents, trademarks, copyright, and enforcement of IPR. It also provides that the parties will not impose new customs duties on electronic transmissions.
Sen. Baucus noted that the "Bush Administration supports it and has no intention or renegotiating a new agreement. The Jordanian Parliament ratified the Agreement last May. Our colleagues in the House have already approved the implementing legislation for the agreement." (See, HR 2603.) He urged swift passage without amendment.
DOJ Will Not Seek Break Up of Microsoft
9/6. The Antitrust Division of the Department of Justice (DOJ) announced that "it will not seek a break-up of the company in remand proceedings before the U.S. District Court. It also informed the company that it does not intend to pursue further proceedings on the tying count of the original complaint." It also stated that it would not pursue its tying claim. See, DOJ release.
On June 28, the U.S. Court of Appeals (DCCir) issued its en banc opinion in USA v. Microsoft, affirming in part, and reversing in part, Judge Jackson's Final Judgment (June 7, 2000). The Appeals Court vacated Judge Jackson's break up order on several grounds. It also reversed on the tying count. However, the Appeals Court affirmed in part Judge Jackson's  judgment that Microsoft violated § 2 of the Sherman Act by employing anticompetitive means to maintain a monopoly in the operating system market.
On September 6, the Antitrust Division also stated that "In view of the Court of Appeals' unanimous decision that Microsoft illegally maintained its monopoly over PC-based operating systems -- the core allegation in the case -- the Department believes that it has established a basis for relief that would end Microsoft's unlawful conduct, prevent its recurrence and open the operating system market to competition. Pursuing a liability determination on the tying claim would only prolong proceedings and delay the imposition of relief that would benefit consumers."
The Antitrust Division "will seek an order that is modeled after the interim conduct- related provisions of the Final Judgment previously ordered in the case."
The Antitrust Division added that it "will ask the court for a period of expedited discovery to investigate developments in the industry since the trial concluded, and to evaluate whether additional conduct- related provisions are necessary, especially in the absence of a break-up. ..."
Robert Levy, a Senior Fellow at the Cato Institute, a libertarian think tank, offered an analysis. "Today's announcements are not concessions to Microsoft, but to reality. A breakup of Microsoft was effectively rejected by the U.S. Court of Appeals. And the court imposed a much tougher burden of proof if the government wants to prevail on its tying claim." Levy continued that "What's really going on is a declaration by the Justice Department and, significantly, by the attorneys general who are co-plaintiffs, that they will not waste their time with lost causes and hard to prove charges that won't lead to incremental conduct remedies. Instead, the government wants to move ahead aggressively and quickly to restrict Microsoft's behavior and, maybe, to prevent Windows XP from establishing a major toehold in the market." Levy conclude that "The $64,000 question remains: Why is the Bush administration -- supposed champions of free markets -- proceeding with this pitiful lawsuit, which transforms our antitrust laws into a corporate welfare program for Microsoft's rivals."
Jonathan Zuck, President of ACT, a pro Microsoft group, praised the decisions not to seek a break up, and to drop the tying claim. He added, "We invite the European Union to reach similar conclusions." See, ACT release.
Export Administration Act Passes Senate
9/6. The U.S. Senate passed S 149, the Export Administration Act of 2001, by a vote of 85 to 14. The bill, a major rewrite of the export control regime, would ease restraints on the export of most dual use products, such as computers and software. However, it would raise penalties for violation of remaining prohibitions. It would also repeal provisions of the 1998 National Defense Authorization Act which require the President to use MTOPS to set restrictions on the export of high performance computers. The Senate also approved two amendments.
Sen. Mike Enzi (R-WY), the sponsor of the bill, said afterwards that "I'll continue to keep up pressure on the House so we can send a good bill to the President for his signature." President Bush supports the Senate version of the bill. The House International Relations Committee passed a substantially different version of the bill, HR 2581, on August 1. "I will encourage the House to pass legislation that is identical or nearly so to the version we passed in the Senate today," said Sen. Enzi.
"This bill dramatically enhances our national security needs by increasing penalties, by focusing attention on truly sensitive items, and granting the President new control authority in cases involving national security and terrorists," said Sen. George Allen (R-VA), another co-sponsor of the bill. "At the same time, this legislation will remove unnecessarily burdensome punitive regulatory controls on mass market and readily available foreign technology products that have hindered the competitiveness of U.S. technology industries."
Sen. Robert Bennett (R-UT) also spoke in favor of the bill. He stated that "The borderless economy is a reality of the future. It cannot be turned back. We have to accept this new reality and say the best national security step we can take is to keep American technology firms absolutely in the forefront, and the best way to keep them in the forefront is to give them the opportunity to compete in the largest possible market that they can."
Kyl Amendment. One amendment, offered by Sen. Jon Kyl (R-AZ), adds language to Section 506(g) to give the Secretary of Commerce enhanced authority in responding to a country that refuses to allow post shipment verification of an exported item. It provides: "(3) REFUSAL BY COUNTRY. If the country in which the end-user is located refuses to allow post- shipment verification of a controlled item, the Secretary may deny a license for the export of that item, any substantially identical or directly competitive item or class of items, any item that the Secretary determines to be of equal or greater sensitivity than the controlled item, or any controlled item for which a determination has not been made pursuant to section 211 to all end-users in that country until such post-shipment verification is allowed."
Thompson Amendment. The other amendment, offered by Sen. Fred Thompson (R-TN), tightens the definition of a "directly competitive item" in Section 211, regarding foreign availability and mass market status, and clarifies that an item is not directly competitive if it is "not of comparable quality" as the controlled item. Both amendments were approved by voice votes.
Subcommittee Holds Hearing on Telework
9/6. The House Government Reform Committee's Subcommittee on Technology and Procurement Policy held a hearing titled "Public Service for the 21st Century: Innovative Solutions to the Federal Government's Technology Workforce Crisis." Witnesses related a variety of government related obstacles to telework in both the public and private sectors, including application of the multitude of local tax laws to interjurisdictional telework arrangements, confusing IRS rules for home office deductions, the threat of OSHA regulation, and the lack of residential broadband services.
Rep. Tom Davis (R-VA), the Chairman of the Subcommittee, said in his prepared statement that "Advances in computer and telecommunications technology have facilitated the rapid growth of telework in the private sector. While companies enjoy increased productivity, job satisfaction, and employee morale as a result of telework programs, the Federal government’s success has been inconsistent. " He added that "an aggressive telecommuting policy may help the federal government address the shortage of information technology (IT) workers."
Robert Robertson of the General Accounting Office said in his prepared testimony that there are many obstacles to telework. He stated that "certain federal and state laws and regulations, including those governing taxes, workplace safety, workforce recordkeeping, and liability for home workplace injuries can also act as potential barriers to telecommuting for both the public and private sectors." He also testified that there are management concerns, including "assessing whether the employer has the types of positions and employees suitable for telecommuting; protecting proprietary and sensitive data; and establishing cost-effective telecommuting programs."
Harris Miller, President of the Information Technology Association of America (ITAA), said in his prepared testimony that the slow deployment of broadband Internet access services and security concerns also serve as a barriers to telework. He also cited several regulatory burdens, including a patchwork of over 7,000 taxing jurisdictions, unclear rules for home office deductions, and the specter of OSHA regulation of home offices.
See also, prepared testimony of Teresa Jenkins (Office of Personnel Management), David Bibb (U.S. General Services Administration), Mark Straton (Siemens Enterprise Networks), and Robert Milkovich, (CarrAmerica).
EPIC Condemns Monitoring of Computers of Judiciary
9/6. Marc Rotenberg, Executive Director of the Electronic Privacy Information Center (EPIC), sent a letter to the Administrative Office of the United States Courts regarding the electronic monitoring of the employees of the federal judiciary. He wrote: "I strongly urge the Judicial Conference to end the practice of monitoring the computer terminals of employees of the federal judiciary."
Rotenberg also stated that "the practice of logging the web sites that are viewed by members of the judiciary and their staff, without prior notice, could be a violation of the Electronic Communications Privacy Act of 1986, 18 USC § 2510 et seq., and that the use of this information in a disciplinary proceeding would be in violation of the Act." See, 18 U.S.C. Chapter 119.
The Judicial Conference of the United States is scheduled to meet on September 11 to consider a report [PDF] by its Committee on Automation and Technology.
Securities Fraud
9/6. The SEC announced that it filed a civil complaint in the U.S. District Court (NDCal) against M&A West, Inc. (MAWI) and four individuals alleging violations of federal securities laws, including fraud and sale of unregistered securities. MAWI is a self proclaimed "Internet incubator" engaged in developing Internet related technology companies. See, SEC release.
9/6. The U.S. Attorneys Office (NDCal) announced the unsealing of an 82 count indictment [PDF] charging two of the individuals associated with MAWI, Thomas Eck and Zahra Gilak, with stock manipulation and money laundering. See, USAO release.
Internet Crime
9/6. Costa Rican law enforcement authorities arrested Alyn Waage and James Webb in San Jose, Costa Rica, pursuant to United States arrest warrants for mail fraud and securities fraud issued in connection with an Internet based investment fraud scheme that allegedly netted the defendants more that $50 Million. Defendants have been charged by criminal complaint filed in the U.S. District Court (EDCal). See, CCIPS release.
Hacker Gets 4 Months
9/6. Raymond Torricelli was sentenced in U.S. District Court (SDNY) to 4 months imprisonment for various hacking offenses, including unauthorized access to computers, credit card fraud, and password interception.
He illegally intruded into computers used by NASA to perform satellite design and mission analysis concerning future space missions, and by the Jet Propulsion Laboratory's (JPL) Communications Ground Systems Section. He also installed a program name "rootkit" which, when run on the computers, allowed him to gain complete access to all of a computer's functions without having been granted these privileges by the authorized users of that computer. He then proceeded to use the computers to host chat rooms, which he used, among other things, to promote pornographic web sites.
Torricelli also intercepted usernames and passwords traversing the networks of San Jose State University, which he used to gain free Internet access, or to gain unauthorized access to still more computers. See, CCIPS release.
Federal Circuit Decisions in Patent Cases
9/6. The U.S. Court of Appeals (FedCir) issued its opinion in Ecolab v. Envirochem, an appeal from a pair of opinions in a patent infringement case. The Appeals Court reversed the opinion finding literal infringement, and affirmed the opinion finding that neither estoppel nor laches precluded the plaintiff from obtaining an injunction.
9/6. The U.S. Court of Appeals (FedCir) issued its opinion in Kustom Signals v. Applied Concepts, affirming a grant of summary judgment of non infringement in a suit involving makers of radar devices for traffic police. The patent in suit is U.S. Patent No. 5,528,246, titled "Traffic Radar with Digital Signal Processing".
Senate Judiciary Committee Approves Prost for Federal Circuit
9/6. The Senate Judiciary Committee unanimously approved the nomination Sharon Prost to be a judge of the U.S. Court of Appeals for the Federal Circuit. Prost is a long time staff assistant to Sen. Orrin Hatch (R-UT), the ranking Republican on the Committee.  
Muris Names Executive Assistant
9/6. FTC Chairman Timothy Muris appointed Christine Wilson to be his Executive Assistant. She previously was an associate in the antitrust practice group in the Washington DC office of the law firm of Howrey Simon. Prior to that, she worked at Collier Shannon. See, FTC release.
9/6. The law firms of Latham & Watkins (LW) and Stibbe Paris announced that they will combine, giving the firm 95 lawyers in Paris and over 200 attorneys throughout Europe. Olivier Delattre will be the Managing Partner of LW's Paris office. The office will focus on mergers and acquisitions, capital markets, project finance, banking and finance, intellectual property and information technology, European Union competition, labor and tax. See, LW release.
9/6. Gregory Jenner joined the Venable law and lobbying firm as a partner in the firm's Tax and Legislative and Regulatory groups, the firm announced today. Mr. Jenner is a former partner in the Price Waterhouse Coopers national office where he was the national office leader for InfoComm. See, release.
More News
9/6. The U.S. House of Representatives approved HJRes 51 and HR 2833, regarding the bilateral trade agreement between Viet Nam and the U.S. that was negotiated last year by the Clinton administration.
9/6. People for the American Way, a liberal group based in Washington DC, released a report titled "John Ashcroft's First Six Months at the Justice Department: The Right Wing Dream Team Takes Over." While the report harshly criticizes Attorney General Ashcroft on numerous old social issues, such as abortion, school prayer, gun control, and capital punishment, it contains no criticism on new technology related issues, such as electronic privacy, encryption rights, CALEA, and intellectual property rights.
9/6. The U.S. Court of Appeals for the District of Columbia Circuit heard oral argument in Verizon v. FCC, No. 00-1207.
9/6. The U.S. Court of Appeals for the District of Columbia Circuit heard oral argument in National Association of Broadcasters v. FCC, No. 00-1054.

Go to News Briefs from September 1-5.