News Briefs from November 6-10, 2001
PR China Joins WTO
11/10. The World Trade Organization (WTO) announced that the WTO's Ministerial Conference approved "by consensus the text of the agreement for China's entry into the WTO. China will become legally a member 30 days after the WTO receives notification of the ratification of the agreement by China's Parliament." See, WTO release.
The White House Press Office released a statement on November 9 regarding accession of the PR China to the WTO: "Today the President certified that final terms of entry for the People's Republic of China to the World Trade Organization (WTO) are at least equivalent to those agreed to bilaterally between the United States and China in 1999. The 142 members of the WTO who are meeting this week in Doha, Qatar for the WTO Ministerial are expected to decide formally the accessions of both China and Taiwan. The President's certification is required under a law the Congress passed last year authorizing the grant of Permanent Normal Trade Relations (PNTR) status to China. Granting China PNTR status is necessary if the United States is to take full advantage of China's WTO membership, including recourse to the organization's dispute settlement mechanism." See also, Presidential Determinations under § 1106(a) of the Omnibus Trade and Competitiveness Act of 1988.
NTIA Chief Addresses Spectrum Market and 3G
11/9. Nancy Victory, head of the National Telecommunications and Information Administration (NTIA), gave a speech at a conference titled "Practical Steps to Spectrum Markets". She recited a range of policy questions faced by the NTIA and other government entities regarding spectrum management. However, she offered little guidance regarding either her views, or actions likely to be taken by the NTIA.
Victory stated that there "is a growing concern that perhaps our general spectrum management policies are outdated and in need of review. Is the current spectrum allocation approach based upon use too constricting and impractical for today's spectrum environment? Should a more free market approach be used? Should licensees be granted full property rights in their spectrum? These are all intriguing questions that should be fully discussed and considered. We at NTIA are committed to a comprehensive review of spectrum management policies in an effort to find practical and appropriate solutions."
Victory also stated that she will convene a "Spectrum Summit early next year to solicit out of the box ideas". It will address the "merits and details of market based management, property or other rights, spectrum flexibility, trading, auction theory and design, and 'commons approaches.' "
She spoke at the conclusion of a half day program on spectrum management issues jointly hosted by the American Enterprise Institute (AEI) and the Brookings Institute.
Sen. Leahy Complains of Violation of Attorney Client Privilege
11/9. Sen. Patrick Leahy (D-VT), Chairman of the Senate Judiciary Committee, wrote an angry letter to Attorney General John Ashcroft about the Bureau of Prisons interim rule regarding monitoring of attorney client communications of certain terrorism suspects. (The interim rule was published in a notice in the Federal Register, October 31, 2001, Vol. 66, No. 211, at Pages 55061 - 55066.) He complained about this "unilateral executive decision to authorize interception of privileged attorney client communications between detained persons and their lawyers." He added that "I am deeply troubled at what appears to be an executive effort to exercise new powers without judicial scrutiny or statutory authorization."
"Since we provided you with new statutory authorities in the USA PATRIOT Act, I have felt a growing concern that the trust and cooperation Congress provided is proving to be a one-way street. You have declined several requests to appear before the Committee to answer questions and have not responded to requests to provide information on such basic points as the number of people -- according to some Department of Justice reports, more than a thousand -- currently detained without trial and without specific criminal charges under your authority."
Sen. Leahy's letter also propounded seven questions to be answered by the Attorney General, including, how is it that this interim rule is constitutional?, "What statutory authority supports such interceptions?", and "What opportunity for prior judicial authorization and judicial review will there be of the legality of such interceptions?"
Sen. Byrd Opposes TPA, New WTO Round, and Crassitude
11/9. Sen. Robert Byrd (D-WV), one of the leading protectionists in the Senate, gave a long winded speech in the Senate in which he opposed both legislation to give the President trade promotion authority, and a new WTO round.
"How crass. How crass," said Sen. Byrd. "To denominate fast track as 'trade promotion authority' is the acme of crassitude. Hear me down there at the other end of the avenue: The acme of crassitude! To denominate fast track legislation as trade promotion authority, or by its acronym, TPA, is the acme of crassitude. One might better interpret the acronym TPA as standing for 'tactic to prevent amendments' ".
The House Ways and Means Committee passed HR 3005, the Bipartisan Trade Promotion Authority Act of 2001, by a vote of 26 to 13 on October 9. It is sponsored by Rep. Bill Thomas (R-CA), Rep. Cal Dooley (D-CA), and others. Trade promotion authority (TPA), which is also known as fast track, gives the President authority to negotiate trade agreements which can only be voted up or down, but not amended, by the Congress. TPA strengthens the bargaining position of the President, and the U.S. Trade Representative, in negotiations with other nations.
Technology companies that export equipment, software, or services, and that seek greater protection abroad for their intellectual property rights, stand to benefit from enactment of TPA.
Sen. Byrd also stated that "I question whether, in the current international climate, we should even desire to have a new global trade round."
Sen. Byrd is also known for his classical allusions. "I come to bury Caesar, not to praise him," said Sen. Byrd. "Mr. President, I come to bury fast track authority, not to praise it!"
US EU Antitrust Divergence
11/9. William Kolasky, Deputy Assistant Attorney General in the Antitrust Division, gave a speech titled "Conglomerate Mergers and Range Effects: It is a Long Way from Chicago to Brussels". He criticized the EU's rejection of the GE Honeywell merger, and stated that "we view the EU approach to conglomerate mergers as inconsistent with the central tenet of U.S. antitrust policy -- that the antitrust laws protect competition, not competitors."
He stated that there is "a sharp divergence between the U.S. and the EU" in "the reasons we challenge horizontal and vertical mergers". Specifically, "We challenge horizontal mergers because they eliminate a competitor and may thereby enable the merged firm to restrict output and raise price. Similarly, we challenge vertical mergers that eliminate a key supplier or customer where doing so may give the merged firm the ability and incentive to raise its rivals' costs, again allowing them to restrict output and raise price. By contrast, in its conglomerate merger decisions, the EU prohibits mergers because they will make the merged firm a stronger competitor that may ultimately be able to drive rivals from the market. Under this scenario the immediate effect of the merger is to reduce prices and increase output, with the anti competitive effect occurring only if the other competitors cannot match the merged firm's offerings and exit the market."
He said that this divergence is "very troubling for at least three reasons." First, "there are serious externalities", because the EU "denies consumers around the world the benefits the merger might have delivered." Second, this divergence will "increase the transactions costs associated with the merger clearance process. The result may well be to deter mergers that would have been pro competitive and efficiency enhancing." Third, it "undermines the strong political consensus supporting vigorous antitrust enforcement".
SEC Chairman Addresses Securities Regulation and Technology
11/9. Securities and Exchange Commission (SEC) Chairman Harvey Pitt gave a speech regarding securities regulation in Boca Raton, Florida, to the Securities Industry Association annual meeting. He addresses several technology related topics. He advocated planning for terrorist attacks on the communications and computer infrastructures used by the securities industry. He also stated that "new ideas and technology must be confident of prompt and intelligent consideration" by the SEC. Finally, he reiterated his intent to create a CTO position at the SEC.
Critical Infrastructure. Chairman Pitt began by discussing the terrorist attacks of September 11. He enumerated several precautions that should be taken by the securities industry. He stated that "wherever possible, business continuity planning should seek to avoid reliance on single points of failure in critical systems. Single points of failure can occur in ways that are unforeseen, and even odd. The lines of competing telecom providers may all lie side by side in old, obscure conduits. Advanced electronic trading systems may require air conditioning, which is run on city steam in older buildings. These risk exposures must be identified and planned around." He also stated that "critical functions need backup capabilities with fail over functionality allowing rapid recovery. For significant securities firms, these backup facilities should encompass trading and institutional sales operations, as well as back office systems."
Regulatory Response to New Technologies. Pitt also addressed regulatory response to new technologies. He stated that "If government is to perform its critical role, new ideas and technology must be confident of prompt and intelligent consideration, with government taking an active interest in facilitating new ideas, not evidencing fear or uncertainty, leading to institutional paralysis, in resolving the thorny regulatory problems that often arise when we are presented with new products, new technology and new markets."
SEC Chief Technology Officer. Finally, Pitt stated: "In the same vein, I believe that we need to create a new position of Chief Technology Officer. As more and more markets reflect wholly electronic communications and interaction, for example, the Commission is in desperate need of the expertise to understand, inspect and review foundational algorithms. You and I both know how far the Commission needs to travel to reach that point of minimal technological competence."
Reports on Bills
11/9. A conference committee issued its conference report HR 2500, the FY 2002 appropriations bill for the Departments of Commerce, Justice, and State, the Judiciary, and related agencies. This includes funding for most of the technology related departments and agencies, including the Antitrust Division, FTC, FCC, NTIA, BXA, SEC, and NIST. See, Report No. 107-278.
USPTO Announcement Re Mail Delays
11/9. The USPTO issued a statement that since October 21, 2001 it "has been experiencing an interruption in delivery of United States Mail sent to our 20231 zip code." The USPTO added that if it "begins to receive this mail in large batches, it may create internal processing delays. These delays may remain in effect until the USPTO is able to eliminate any backlogs which have been created. For time sensitive correspondence (e.g., after final amendments) that were mailed during the last few weeks, it may be desirable to contact the examiner or TC Customer Service Center to determine whether the paper has been received and whether alternative delivery options (e.g., facsimile) should be considered. Under such circumstances, the normal guidance against duplicate papers is not applicable." The announcement also addresses alternative methods of delivery, including express mail, fax, and hand delivery.
Appeals Court Opinions
11/9. The U.S. Court of Appeals (DCCir) issued its opinion in Verizon v. FCC. Local exchange carriers sought review of an order of the FCC holding them liable for violating the unreasonable charge provisions of 47 U.S.C. § 201(b), for wrongfully imposing "End User Common Line fees" on certain independent payphone providers. The Appeals Court denied the petitions for review.
11/9. The U.S. Court of Appeals (DCCir) issued its opinion in AT&T v. FCC. AT&T Wireless Services, Bell South Cellular, SBC Wireless, and Cellco Partnership sought review of an FCC order granting a waiver of 47 C.F.R. § 22.925 for two years to permit AirCell and cellular licensees that had entered into resale agreements with AirCell to provide airborne cellular telephone service. 22.925 provides that "Cellular telephones installed in or carried aboard airplanes, balloons or any other type of aircraft must not be operated while such aircraft are airborne (not touching the ground). When any aircraft leaves the ground, all cellular telephones on board that aircraft must be turned off." The Appeals Court granted the petitions for review, in part.
People
11/9. The law firm of Morrison & Foerster announced the establishment of a new practice group -- Government Business and Technology Group -- and the hiring of three attorneys from the law firm of Piper Marbury Rudnick & Wolfe. Stan Soya and Rick Vacura will join the firm as partners, while Holly Svetz will be of counsel to the firm. They focus on government contracts and dispute representation for defense contractors, telecom and other high technology companies that deal with the federal government. The three will be based in the firm's Northern Virginia office. See, MoFo release.
11/9. The law firm of King & Spalding announced that it has created the position of Chairman, to be held by Walter Driver. It also announced four new Managing Partners, one for each offices in Atlanta, Washington DC, New York, and Houston. Wick Sollers, a former head of the Special Matters Practice, will be Managing Partner of the Washington DC office. Mason Stephenson, a former head of the Real Estate Practice, will be Managing Partner of the Atlanta office. Mark Zvonkovic, a partner in the Corporate Finance Practice, will be Managing Partner of the New York office. Randolph Coley will be Managing Partner of the Houston office. See, KS release.
More News
11/9. The House Government Reform Committee's Government Efficiency, Financial Management, and Intergovernmental Relations Subcommittee held a hearing titled "Have Federal Agencies Failed to Protect Their Computer Systems?" See, prepared testimony [PDF] of Robert Dacey of the GAO titled "Computer Security: Improvements Needed to Reduce Risk to Critical Federal Operations and Assets".
11/9. IBM announced that IBM and the Department of Energy's National Nuclear Security Agency (NNSA) to expand IBM's Blue Gene research project. IBM and NNSA's Lawrence Livermore National Laboratory will jointly design a new supercomputer in the Blue Gene family -- named Blue Gene/L -- that IBM expects to operate at about 200 teraflops (200 trillion operations per second). See, IBM release.
House Subcommittee Considers Market Power and Intellectual Property
11/8. The House Judiciary Committee's Courts, Internet and Intellectual Property Committee held a hearing on market power and intellectual property. The Subcommittee considered whether legislation is necessary to make clear that holding a patent or copyright does not create a presumption of market power for the purposes of antitrust law analysis. Representatives of the IPO and ABA said that such legislation is necessary. Rep. Boucher argued that it is not. Other members of the subcommittee focused on emerging antitrust and intellectual property issues involved in the delivery of music over the Internet.
Rep. Howard Coble (R-NC), the Chairman of the Subcommittee, presided. He summarized the issue: "It is alleged that federal court litigation has resulted in a series of cases and judge made law on the subject of market power that prejudices copyright, patent, and trade secret holders. Market power is defined as the power to control prices or to exclude competition. The issue is whether the courts have promulgated an overly harsh standard regarding the presumption of market power. Some legal observers argue that the situation in courts has worsened since Congress first examined this area more than a decade ago and a legislative remedy is need. Other scholars counter argue that the frustration over the handful of cases on this subject is exaggerated."
He also referenced the Supreme Court's decision in Jefferson Parish v. Hyde, 466 U.S. 2 (1984), in which the five member majority wrote that "if the Government has granted the seller a patent or similar monopoly over a product, it is fair to presume that the inability to buy the product elsewhere gives the seller market power." (See, 466 U.S. at page 16.)
Rep. Coble also observed that "several distinguished members of this Committee, including the late Hamilton Fish, the distinguished gentleman from New York, as well as Chairman Henry Hyde, and I believe, Sen. Leahy as well, have pursued bills to address the issue we explore today."
There is no legislation pending now. Rather, supporters of legislation refer back to bills such as HR 2674, the Intellectual Property Antitrust Protection Act of 1995, from the 104th Congress. This bill, which did not become law, provided that "In any action in which the conduct of an owner, licensor, licensee, or other holder of an intellectual property right is alleged to be in violation of the antitrust laws in connection with the marketing or distribution of a product or service protected by such a right, such right shall not be presumed to define a market, to establish market power (including economic power and product uniqueness or distinctiveness), or to establish monopoly power." (Parentheses in original.) That bill was sponsored by Rep. Henry Hyde (R-IL). Among its cosponsors were Rep. Coble and Rep. James Sensenbrenner (R-WI), the current Chairman of the full committee.
Rep. Howard Berman (D-CA), the ranking Democrat on the Subcommittee, stated at the hearing that "I can see reasonable policy arguments both for and against the continued existence of this presumption. Thus, I remain open to being convinced by our witnesses that legislation is necessary to overturn the presumption."
Rep. Berman also stated that antitrust and intellectual property law are not in conflict. Rather, he stated that they "serve the same goals, namely, promoting competition and benefiting consumers. That is not to say the IP owners may not commit antitrust violations in the course of exploiting their intellectual property rights."
However, he continued that "I know of no reason to believe that antitrust violations by IP owners occur with any greater frequency than similar violations in other industries In fact, IP owners may just as often may be the victims of antitrust violations. Creators of copyrighted works, like film, software, and music and books, must often rely on third parties to distribute, perform, and otherwise find a market for their works. Those distribution channels have a history of consolidation and vertical integration, and may even be owned by competitors. Thus, owners of distribution channels can potentially commit antitrust violations against copyright owners. Similarly, copyright owners may often find themselves relying on third parties, such as device manufacturers, for protection of their copyrighted works. To the extend antitrust law is interpreted to prevent such such third parties from cooperating to protect copyrighted works, it may be straying from the pro consumer and pro competitive goals both antitrust and intellectual property law."
The Subcommittee heard from only two witnesses, Ron Myrick, President of the Intellectual Property Organization (IPO), and Charles Baker, Chairman of the American Bar Association (ABA) section on intellectual property. Both advocated passing legislation.
IPO Testimony. Myrick said that there is a "distressing dilution of intellectual property rights." He argued that mere possession of a patent or other IPR is insufficient to create market power. He elaborated that "In markets for toaster, cameras, and home computers, for example, most products contain patented features but still face vigorous competition from viable substitutes."
He also said that exclusive intellectual property rights create incentives for innovators and investors, particularly in the high tech industry. This incentive, said Myrick, "is significantly reduced or undermined if the reward for innovation and disclosure simultaneously saddles the innovator with a presumption of market power."
Myrick continued that "The possibility that a presumption of market power will deter innovation has become even more likely in light of the Ninth Circuit's decision in Image Technical Services, Inc. v. Eastman Kodak Co., 125 F.3d 1195 (1997), which held that, when a seller has market power, his mere refusal to license a patented product to a competitor can violate section 2 of the Sherman Act." He acknowledged that other courts have reached different results, but added that "the decisions of the Ninth Circuit affect the legal rights of over 50 million people living in nine western states -- an area that includes much of our nation's high tech industries ..."
Myrick also addressed the Microsoft antitrust case. He stated that the courts "have continued to misunderstand intellectual property rights. In United States v. Microsoft, for example, the Court of Appeals for the District of Columbia compared an intellectual property owner's exercise of the right to exclude with tortious use of a baseball bat."
ABA Testimony. Charles Baker of the ABA also testified in favor of legislation. In 1990 the ABA adopted a resolution stating that it "favors in principal legislation ... which provides that intellectual property rights shall not be presumed to define a market or to establish market power in actions under the antitrust laws". See, prepared testimony.
He said that "such presumptions are arbitrary, ignoring real world facts, they have no basis from the point of view of either intellectual property or antitrust law, and they lower incentives created by intellectual property law to invest in new jobs and new industrial facilities based on technological advances."
ATR/FTC Guidelines. The subcommittee did not hear testimony from any representative of the Copyright Office, USPTO, Antitrust Division, or FTC. However, in 1995 the Antitrust Division and FTC adopted Guidelines for the Licensing of Intellectual Property which provide that "The Agencies will not presume that a patent, copyright, or trade secret necessarily confers market power upon its owner. Although the intellectual property right confers the power to exclude with respect to the specific product, process, or work in question, there will often be sufficient actual or potential close substitutes for such product, process, or work to prevent the exercise of market power."
Rep. Boucher's Opposition. In sharp contrast to the testimony of Myrick and Baker, Rep. Rick Boucher (D-VA) argued that their legislative proposals are unnecessary. He stated: "I am a little bit perplexed about why we need to pass the bill. ... Let me start by asking just a baseline question. Would you agree that in the seminal Supreme Court treatment of this subject, which is the Jefferson Parish decision of 1984, that the Court basically said that this presumption of market power only arises when there is a showing that there is no alternative source for the product?" He continued that "Joel Klein, representing the Justice Department was here in 1996 when this same bill had been placed before the Committee. ... He said, 'In addition to case law, the vast majority of antitrust scholars and commentators for many years have concluded that the mere existence of a mere patent, copyright or trade secret does not necessarily confer market power upon its owner.' And then he went on to say, and he concluded his testimony by saying, 'So strong is the consensus on this point that it raises the question as to whether this bill is really necessary.' "
Rep. Boucher also stated that "It would appear to me that the Supreme Court's decision in 1984 basically said that unless the plaintiff can demonstrate no alternative source for the product, there is no presumption of market power merely by virtue of the presence of an intellectual property interest." Rep. Boucher continued that there has been no case law since 1984 holding that there is a presumption of market power in the absence of a showing of no alternative source.
"I really don't perceive a need to adopt this legislation," Rep. Boucher concluded. "I am concerned that if we pass this, in the absence of a clear need to do it, it is a change to the nation's antitrust laws. We make those changes very sparingly, and for good reason, because when we make a change it is going to be interpreted by the courts to mean something. And, if the Supreme Court, which already says that there is no presumption in the absence of a showing of lack of substitutable product, sees that we have gone ahead and made this change anyway, I am just concerned about how our action is going to be interpreted, and whether, for example, it is going to make it more difficult to establish market power in appropriate cases, where it really does exist. That will now become a burden upon the plaintiff in those instances. And, I am also concerned about what effect this change might have on collateral, well settled, antitrust policy, such as, for example, the abuse intellectual property concept."
PressPlay and MusicNet. Rep. Chris Cannon (R-UT) began by stating that "owners of intellectual property should have the inherent right to control how that property is used." He then launched into a discussion of antitrust and intellectual property issues associated with online music.
He said this: "While I recognize that the purpose of this hearing is to address patent issues, I would like to take a moment to delve into the related topic of copyright in this context. The music industry is struggling with these issues as we speak. I have heard the collaboration among the major record labels to create two entities to address online music sales and distribution, known as PressPlay and MusicNet. These two ventures will control approximately 80% of the digital music content available online by cross licensing each others' content. Recently, Vivendi CEO Edgar Bronfman explained how he hoped their candidate, PressPlay, will work. He said 'PressPlay has what we call an affiliate model, where we determine the price and we offer a percentage of that price to the retailing partner, in this case, either Microsoft or Yahoo or MP3. The reason we have chosen that, frankly, is because we are concerned that the continuing devaluation of music will proceed unabated unless we do something about it. If you allow an AOL or a RealNetwork or a Microsoft or others who have very different business models to use music to promote their own business model, and simply pay the artists and the record companies the minimums, they can advantage themselves on the back of the music industry in a way which continues to devalue music. We don't want to see that happen.' The end of his quote. Do you see antitrust concerns in such an environment where two collaborative efforts are able to control 80% of the market to prevent the so called price devaluation that Mr. Bronfman intends?"
Rep. Cannon and Rep. Boucher are the sponsors of HR 2724, the Music Online Competition Act (MOCA), which deals with this topic. Myrick ducked the question by promising to submit further written testimony later. However, he said that tradition section one Sherman Act analysis would suffice. Baker said that "I think the Congress has got to study this and keep the right balance between the rights" of owners and the public.
Rep. Bob Goodlatte (R-VA) attempted to question the witnesses about what affect the "traditional definition of market power has in the digital environment" and whether there is a "multiplier effect" in "a world where communications are in a network". The witnesses had no answers.
Senate Bill Includes Tax Credits for Broadband Deployment
11/8. The Senate Finance Committee passed the Economic Recovery and Assistance for American Workers Act of 2001, by a party line vote of 11 to 10. See, full text [240 pages in PDF] and one page committee summary [PDF]. This bill is described by Democrats, who voted for it, as the "economic stimulus bill".
This version of the bill includes the language of S 88, the Broadband Internet Access Act of 2001, which offers tax credits to incent the deployment of broadband Internet access facilities in rural, underserved, and residential areas. S 88 was introduced by Sen. Jay Rockefeller (D-WV) early this year, and now has 63 cosponsors in the Senate.
Specifically, it provides a tax credit of 10% of expenditures related to deployment of Internet access facilities that provide transmission of signals at a rate of at least 1,000,000 bits per second (bps) to the subscriber and at least 128,000 bps from the subscriber, when service is provided to rural or underserved subscribers. It provides a tax credit of 20% of expenditures related to deployment of Internet access facilities that provide transmission of signals at a rate of at least 22,000,000 bps to the subscriber and at least 5,000,000 bps from the subscriber, when service is provided in rural, underserved, or residential subscribers. See, Section 902 of the bill, at pages 214 - 232.
Secretary of Commerce Don Evans had this reaction to the bill in general: "The bill passed by the Senate Finance Committee is a spending bill, not a stimulus bill. We must do better. The President's plan recognizes and respects different viewpoints and offers a balanced approach that provides short term relief for those who have lost their job and the promise of a long-term recovery. Congress needs to act." See, DOC release.
The Telecommunications Industry Association (TIA) praised the bill. It stated that "TIA estimates that its broadband provisions would have a stimulative impact to the economy of about $2 billion in increased investment. The accelerated broadband deployment in turn would have further economic reverberations through increases, for example, in electronic commerce and sales of computer hardware and software." TIA release.
Hollings Tauzin Bill Would Ban Foreign Government Control of U.S. Telecoms
11/8. Rep. Billy Tauzin (R-LA) introduced HR 3268 in the House. Sen. Ernest Hollings (D-SC) introduced S 1668 in the Senate. These are companion bills titled the "Foreign Government Ownership Act of 2001". Both bills would prevent companies controlled by foreign governments from obtaining any FCC license. They would have the effect of preventing companies such as Deutsche Telekom from acquiring U.S. telecommunications companies.
Specifically, these bills would amend Title 47 by adding a new section 715 that would provide that "no license, permit, or operating authority under this Act may be granted to or held by a corporation, joint venture, partnership, other business organization, trust, or other entity ... if that corporation, joint venture, partnership, other business organization, trust, or other entity is directly or indirectly controlled by a foreign government or its representative ..."
These bills then define "directly or indirectly controlled" as either "more than 25 percent of the ownership, voting rights, capital stock, or other interest in that corporation", "a foreign government or its representatives has the authority to approve or disapprove the appointment or employment of any officer of the corporation", or "a foreign government or its representative has the authority to exercise control over such corporation, joint venture, partnership, other business organization, trust, or other entity in any other manner".
These bills are revisions of a bill Sen. Hollings introduced in the 106th Congress -- S 2793.
Sen. Hollings stated that his bill would "bar outright the transfer or issuance of telecommunications licenses to providers who are more than 25 percent owned by a foreign government. It would also bar the transfer of such licenses to companies controlled by a foreign government. My reasons for introducing this legislation have not changed from last year. Nevertheless the events of the past year confirm more than ever my conviction that foreign governments should not be permitted to own U.S. telecommunications licenses." See, Congressional Record, November 8, 2001, at page S11625.
FCC to Phase Out CMRS Spectrum Cap
11/8. The Federal Communications Commission (FCC) announced that it adopted a Report and Order eliminating the 45 megahertz (MHz) cap on Commercial Mobile Radio Services (CMRS) spectrum aggregation. The cap is raised to 55 MHz immediately. The cap will be eliminated altogether on January 1, 2003. See, FCC release. (WT Docket No. 01-14.)
The FCC also announced that it is immediately eliminating the cellular cross interest rule in Metropolitan Statistical Areas (MSAs), but retaining the rule in Rural Service Areas (RSAs).
The FCC's spectrum cap rule prevents any entity from holding an attributable interest in a total of more than 45 MHz of licensed cellular, broadband personal communications service, and specialized mobile radio spectrum regulated as CMRS in any geographic area; however, there is currently an exception in areas designated by the FCC as RSA's, where licensees may hold attributable interests in a total of no more than 55 megahertz.
Commissioner Michael Copps released a statement dissenting from the decision of the majority. He wrote that "We have not adequately analyzed spectrum exhaustion scenarios in the short or near term. We have not adequately evaluated the prospects for economic concentration and the potential for wireless monopolies. We have not performed the extensive public interest evaluation required by statute and expected by Congress and which would include impacts upon small business, rural consumers, ownership diversity, efficient use of the spectrum and the encouragement of new technologies. Instead we simply remove the cap."
Rep. Cliff Stearns (R-FL), the Vice Chairman of the House Commerce Committee's Telecommunications Subcommittee, responded to the FCC's announcement. He stated in a release that "The current 45 MHz spectrum cap hampers innovation and competition in the wireless industry and should be repealed. Raising the cap to 55 MHz is a tentative step in the right direction, but the cap should be repealed now instead of waiting until 2003."
Rep. Stearns is also the sponsor of HR 2535, the Spectrum Resource Assurance Act. It would amend 47 U.S.C. 332(c) to provide that "The Commission shall not impose any limitation on spectrum aggregation for licenses for commercial mobile radio services."
Rep. Stearns stated that "The cap also results in the continued lag of U.S. companies behind Europe and Japan in deploying Third Generation wireless technologies. I will continue to push for repeal of the cap so industry can meet the growing demands for existing services and can deploy advanced services." Third Generation (3G) wireless services are intended to bring broadband wireless access to portable devices.
In contrast, on November 6, Rep. Ed Markey (D-MA), Sen. Ernest Hollings (D-SC), and Sen. Daniel Inouye (D-HI) wrote a letter [PDF] to Chairman Powell stating that "we see no pressing need to make changes to the spectrum cap." They also addressed 3G. They wrote that "some have argued that the cap needs to be eliminated or adjusted upwards so that companies can consolidate their spectrum resources within markets in order to launch new services, such as so-called "3G" services. As you know, in the vast majority of markets wireless companies are not currently constrained by the spectrum cap. Some companies are also offering advanced wireless services using their existing spectrum. Addressing additional spectrum needs for 3G or other services however, is a separate policy question from proposals regarding a rule ensuring competition in the marketplace. If additional spectrum is made available for auction or licensing, the cap can be adjusted without adversely affecting the current number of competitors in the marketplace."
Tom Wheeler, P/CEO of the Cellular Telecommunications & Internet Association (CTIA) praised the decision. He said in a prepared statement that "The decision to eliminate the spectrum cap is an important down payment on overcoming the current spectrum shortage. Unfortunately, the decision delays that down payment by thirteen months. We salute the Bush Administration and the over a dozen key members of Congress who urged the FCC to eliminate the cap immediately."
FCC Announces NPRM on Local Competition
11/8. The FCC announced that it adopted a Notice of Proposed Rulemaking (NPRM) to establish a core set of national performance measurements and standards for incumbent local exchange carriers (ILECs). See, FCC release and separate statements of Chairman Powell and Commission Copps. (CC Docket Nos. 98-56, 98-147, 98-147, 96-98, and 98-141.)
FCC Chairman Michael Powell stated that "With the adoption of this important Notice, the Commission begins a second phase in its implementation of the local competition provisions of the Telecommunications of 1996."
See also, reaction from the USTA, CompTel, and ALTS [PDF].
House Committees Hold Hearing on Identity Theft
11/8. The House Financial Services Committee's (HFSC) Oversight and Investigations Subcommittee and the House Ways and Means Committee's (HWMC) Social Security Subcommittee held a joint hearing titled "Preventing Identity Theft by Terrorists and Criminals".
See, prepared statements of Rep. Clay Shaw (R-FL), Chairman of the HWMC's Subcommittee on Social Security, Rep. Sue Kelly (R-NY), Chairman of the HFSC's Subcommittee on Oversight and Investigations, and Rep. Benjamin Cardin (D-MD). See also, witness statement of Marc Rotenberg, Executive Director of EPIC.
SEC Chairman Pitt Addresses E-Disclosure
11/8. Securities and Exchange Commission (SEC) Chairman Harvey Pitt gave a speech in New York City to the PLI 33rd Annual Institute on Securities Regulation in which he addressed, among other things, corporate disclosures via electronic communications.
He discussed "the order the Commission issued in connection with a proposed variable annuity offering by American Life. The concept proposed by American Life was that investors could only subscribe to the new investment via the Internet. Before being allowed to subscribe, they must agree to take access to corporate disclosures only via the Internet, in return for which the cost savings of eliminating paper are passed on to investors. In accelerating the effectiveness of this registration statement, we recognized that the passage of a new law, commonly referred to as the E-Sign legislation, necessitates our taking a fresh look at our prior guidance concerning the Internet. We are anxious to undertake and complete this fresh look very quickly. As electronic communications become easier and more widespread, our regulations must keep apace with investor demands."
Chairman Pitt also addressed a future CTO position at the SEC. He stated that "The Commission also has much to do to join the current millennium. Among other things, we are seeking to create a new position of Chief Technology Officer, who can assist us, and those subject to our regulations, in making use of technology to achieve greater clarity for, and accessibility to, corporate information."
Information Tech Is Foundation of Long Term Growth
11/8. Federal Reserve Board Vice Chairman Roger Ferguson gave a speech in which he stated that the "longer term prospects for the U.S. economy remain sound, just as they were before September 11. Our flexible markets, entrepreneurial spirit, well educated work force, and major advances in information technology provide a sound foundation for the long term growth of productivity, employment, and standards of living." He spoke in Washington DC to the American Institute of Certified Public Accountants National Conference on Banks and Savings Institutions. The title was "Certified Public Accountants: Partners in Financial Stability."
Representatives Back TPA
11/8. Rep. John Linder (R-GA) spoke in the House in support of TPA. He stated that "Trade promotion authority allows trade agreements to be considered as congressional executive agreements. These agreements represent procedural compromises. The President forgoes his ability to single handedly negotiate treaties and, instead, agrees to consult closely with the Congress to ensure that congressional priorities are heard. Congress, in turn, commits to an up or down vote, but waives the right to offer amendments. Some of my colleagues seem to think that our inability to offer amendments is too great a sacrifice. What then is the alternative? Without TPA, the President would unilaterally negotiate a treaty which would then be presented solely to the Senate for ratification. This obviously begs the question where is the House. The answer, absent. Without TPA we have no role, no authority, and no voice in trade agreements. This is the people's House. Do not let our voice be silenced. Support TPA." See, Congressional Record, November 8, 2001, at pages H7913-4.
11/8. Rep. Ken Calvert (R-CA) spoke in the House in support of trade promotion authority. He stated that "Software publishers, broadcasting and telecommunications services employ another 130,000 people in California, a number which would grow if new trade agreements that would reduce barriers to services and tariffs on industrial products and agriculture are signed. The services sector needs successful trade negotiations that expand substantially opportunities for U.S. trade in services. Trade negotiating authority plays a crucial role in our country's ability to negotiate, and implement, these negotiations; and so we need to move these negotiations along." See, Congressional Record, November 8, 2001, at pages H7914.
11/8. Rep. Sam Graves (R-MO) spoke in support of TPA, on agricultural grounds. See, Congressional Record, November 8, 2001, at page H7915.
Rep. Cubin Introduces Bill to Limit Right of Way Costs
11/8. Rep. Barbara Cubin (R-WY) introduced HR 3258, the Reasonable Right of Way Fees Act of 2001. The bill would amend the Federal Lands Policy and Management Act of 1976 with respect to determining the value of rights of way. The bill states that its purpose is "to prevent unreasonable increases in certain costs in connection with the deployment of communications and other critical infrastructure."
More Bills Introduced
11/8. Rep. Earl Blumenauer (D-OR) introduced HR 3257, a bill to limit the antitrust exemption applicable to broadcasting agreements made by professional sports leagues. It was referred to the House Judiciary Committee.
11/8. Rep. Lynn Rivers (D-MI) introduced HR 3266, a bill to amend Title 18 (criminal code) to prohibit unauthorized trafficking in personal DNA information. It was referred to the House Judiciary Committee.
People and Appointments
11/8. President Bush announced three nominations for the U.S. Court of Appeals for the Sixth Circuit: David McKeague, Susan Neilson, and Henry Saad. See, White House release. McKeague is a U.S. District Court Judge for the Western District of Michigan in Lansing. Nelson is a Judge on the 3rd Circuit Court, State of Michigan, in Detroit. Saad is a Judge on the Michigan Court of Appeals.
11/8. The Senate confirmed Jay Stephens to be Associate Attorney General.
More News
11/8. The Software & Information Industry Association (SIIA) released a paper [PDF] titled "Stretching the Fabric of the Net: Examining the Present and Potential of Peer to Peer Technologies." Adam Ayer and Anne Griffith are the primary authors.
11/8. The Senate Judiciary Committee postponed until next week its consideration of S 986, a bill to allow media coverage of court proceedings. This bill had been scheduled for mark up on November 8.
11/8. The U.S. District Court (DDC) issued an order [PDF] regarding further procedures and deadlines in the the Microsoft antitrust case.
11/8. The Senate Judiciary Committee issued its report on S 1319, a bill to authorize appropriations for the Department of Justice for FY 2002. See, Report No. 107-96.
NDCal: French Court Order Restricting Internet Speech is Unenforceable in U.S.
11/7. The U.S. District Court (NDCal) issued its Order Granting Motion for Summary Judgment [PDF] in favor of Yahoo in the case Yahoo v. LICRA. The case, which concerns a French court order limiting speech on Yahoo servers located in the U.S., involves constitutional and procedural issues raised by Internet speech. The District Court rejected the French defendants' procedural arguments that the U.S. District Court should not address the merits of the motion for summary judgment, and then held that the judgment of the French court is rendered unenforceable in the U.S. by the First Amendment.
French Action. Last year two French groups, LICRA and UEJF, obtained a judgment from a French court ordering Yahoo to "render impossible" access by persons in France to certain content on servers located in the United States. The French judgment pertained to Nazi related content. The French court issued the following order: "We order the Company YAHOO! Inc. to take all necessary measures to dissuade and render impossible any access via Yahoo.com to the Nazi artifact auction service and to any other site or service that may be construed as constituting an apology for Nazism or a contesting of Nazi crimes."
U.S. Action. Yahoo, which is a Delaware corporation based in San Jose, California, then filed a complaint in U.S. District Court (NDCal) seeking a declaratory judgment that the judgment the French court is unenforceable in the U.S. as contrary to the U.S. Constitution, and in particular, the First Amendment.
French Motion to Dismiss Previously Denied. The French defendants, who asserted French jurisdiction over Yahoo in their suit in France, asserted that the U.S. Court did not have jurisdiction over them in Yahoo's suit against them. They filed a Rule 12(b)(2) motion to dismiss the complaint in the U.S. District Court for lack of personal jurisdiction. The District Court issued its Order Denying Motion to Dismiss [PDF] on June 7. It held that it had personal jurisdiction over the defendants under California's long arm jurisdiction statute, which permits a court to exercise jurisdiction to the full extent authorized by the Due Process Clause of the Constitution. The Court stated that the purposeful availment requirement was met because defendants had written a demand letter to Yahoo in California, used U.S. Marshals in California to serve papers on Yahoo, and sought an order of the French court directing Yahoo's operations in California.
Substantial Controversy. Much of the District Court's 24 page November 7 opinion is devoted to the various procedural objections raised by the French defendants. The District Court wrote that "The threshold question in any declaratory action thus is whether 'there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.' " (Citation omitted.) The French defendants argued that the actual controversy requirement was not met in this case. They argued that Yahoo could yet appeal in French court, that the French court had not yet fixed a penalty, and that Yahoo, by removing certain Nazi items from its servers, was now in substantial compliance with the French court order. The U.S. District Court rejected these arguments.
The French defendants also argued that the District Court should decline to rule because of the abstention doctrine. The argued that Yahoo was forum shopping, and trying to relitigate an issue already decided by the French court. The District Court rejected this argument. It stated that "the French court has determined that Yahoo's auction site and website hosting on Yahoo.com violate French law." In contrast, "the purpose of the present action is to determine whether a United States court may enforce the French order without running afoul of the First Amendment. The actions involve distinct legal issues ..." Similarly, the District Court also rejected the argument of the French defendants that the French court order poses no real or immediate threat to Yahoo of violation of its First Amendment rights. It also rejected a comity argument.
Discovery. Finally, the District Court rejected the argument that it should delay its ruling while defendants conducted further discovery.
Underlying Issue. The Court began by stating the legal issue before the Court: "This is not a case about the moral acceptability of promoting the symbols or propaganda of Nazism. ... Nor is this case about the right of France or any other nation to determine its own law and social policies. A basic function of a sovereign state is to determine by law what forms of speech and conduct are acceptable within its borders. ... What is at issue here is whether it is consistent with the Constitution and law of the United States for another nation to regulate speech by a United States resident within the United States on the basis that such speech can be accessed by Internet users in that nation."
Holding. With little further explanation, the District Court held that the First Amendment precludes enforcement within the United States of a foreign court order intended to regulate the content of speech over the Internet.
House Subcommittee Holds Hearing on FTC
11/7. The House Commerce Committee's Subcommittee on Commerce, Trade and Consumer Protection held a hearing titled "Challenges Facing the Federal Trade Commission". Timothy Muris, the recently appointed FTC Chairman, was the only witness. He used the occasion to outline his plans for the FTC. Subcommittee members stated their views on various FTC related issues.
Rep. Ed Markey (D-MA) stated that "we must pass online privacy legislation." He elaborated that "The FTC recently announced that it was no longer going to recommend that Congress pass a law to protect the privacy and freedom of Americans on the Internet. Instead, the agency announced that it would attempt, yet again, to get more of the online industry to take voluntary actions to protect personal privacy comprehensively. The Commission also indicated that it would step up its enforcement action."
Rep. Markey continued: "I salute the laudable efforts of certain sectors of the industry in trying to develop so called self regulatory solutions to some of the privacy concerns that many have expressed. These undertakings are critical to increasing consumer confidence and trust in the medium, and will be an important component in any comprehensive set of privacy protections for consumers. Relying solely upon voluntary industry efforts, however, will not suffice"
He concluded that "I do not accept the notion that the Internet is too complex, and technology changing too rapidly to develop enforceable privacy protections for consumers. As technologies change, and business plans for online commerce adjust, consumers' privacy protections remain a constant. Again, consumers can negotiate in the market place for better privacy protection if they can get it, but no consumer should be without basic privacy protection, or without recourse to redress grievances for harms caused by privacy invasions."
Rep. John Dingell (D-MI), the ranking Democrat on the full Committee, also used the hearing to advocate legislation to protect privacy. He argued that it is necessary to protect against identity theft. He stated that "Existing laws and government resources simply cannot restrict broad access to the personal information of consumers. ... Alone, neither industry self regulation nor government can fully protect the public against identity theft. The most effective weapon against identity theft is to empower consumers with control over their personal information, and how that information is collected and disseminated. Armed with effective, enforceable legal rights, the individual consumer would be able to manage access to his or her personally identifiable information more responsibly than government or industry."
Rep. Billy Tauzin (R-LA) submitted a prepared statement in which he addressed privacy. He commended Muris for his "thoughtful examination of this complex issue, as demonstrated by his recent speech in Cleveland, which focused on rededicating the FTC's attention and resources to enforcement issues, specifically actions related to consumer privacy. Chairman Muris' focus on enforcement is right on target." However, Rep. Tauzin continued that "I do see a need to explore additional legislative efforts that will help address an apparent failure in the marketplace to protect consumers' privacy. Perhaps there are some additional tools we can provide that will bring confidence to consumers and the industry without unnecessarily interfering with good business practices."
Rep. John Shimkus (R-IL) used the occasion to discuss European Union's decisions "to deny mergers that, in essence, we have approved here, and, in essence, a competitive disadvantage placed upon the United States and a lot of our fine companies because of the EU application process, and the barriers that they are able to drop without, in essence, a negotiation. We are then at a competitive disadvantage."
Rep. Steve Buyer (R-IN) tied together the antitrust law and cable TV rates. He blamed the professional sports antitrust exemption for high cable rates. "What is occurring today is, with baseball as an example, Congress gives baseball an antitrust exemption. The baseball owners then pay these outrageous salaries to athletes, pay $250 Million to a short stop. And people go, 'how can an owner do that?' An owner can do that because he takes those costs and passes them off to the programmers. And then people don't know why their cable rates are going up. They think cable rates are going up, Mr. Chairman, because of infrastructure upgrades. Cable rates are going up because sports programmers are taking advantage of consumers all across the country. And, that Act is something that really concerns me."
FTC Chairman Muris Testifies Before House Committee
11/7. Muris submitted detailed prepared testimony to the House Commerce Committee's Subcommittee on Commerce, Trade and Consumer Protection which outlined FTC goals in various technology related areas, including competition policy, the relation between antitrust and intellectual property law, online privacy, and online fraud.
Competition Policy. Muris stated that "Our competition mission will continue to reflect the following widely shared consensus: (1) the purpose of antitrust is to protect consumers; (2) the mainstays of antitrust enforcement are horizontal cases - cases involving the business relations and activities of competitors; (3) in light of recent judicial decisions and economic learning, appropriate monopolization and vertical cases are an important part of the antitrust agenda; and (4) case selection should be determined by the impact on consumers, guided by sound economic and legal analysis, and made with careful attention to the facts." He added that "Although there has been much speculation about how the new Commission will regard merger cases, this area is yet another in which continuity, not change, will be the norm."
Intellectual Property. He stated that "In past decades, our economy has become more knowledge based; for some companies, patent portfolios represent far more valuable assets than manufacturing or other physical facilities. Thus, an increasing number of the FTC's competition matters require the application of antitrust law to conduct relating to intellectual property. Both antitrust and intellectual property law share the common purposes of promoting innovation and enhancing consumer welfare. On occasion, however, there have been tensions in how to manage the intersection between the doctrines, as well as questions about how best to spur innovation through competition and intellectual property law and policy. These issues may well merit broader and more in-depth study. In addition, we continue to pursue investigations involving intellectual property."
He also discussed the FTC's recent action against Dell. He stated that "An example of our objectives in this area is to ensure that patent holders do not improperly withhold critical information from industry standard setting groups to delay the creation of a standard or raise the price of admission to its use."
Online Fraud. Muris stated that "The FTC will continue to monitor rapidly evolving technologies used by scam artists. The FTC has brought a number of cases involving scams that depend on the special nature of technology."
Online Privacy. Muris reiterated that "A majority of the Commission does not support online privacy legislation at this time." However, his prepared testimony reviewed existing laws regarding privacy that are being enforced by the FTC, such as the Children's Online Privacy Protection Act.
Senate Judiciary Committee Holds Hearing on Rogan Nomination
11/7. The Senate Judiciary Committee held a hearing on the nomination of James Rogan to be Director of the U.S. Patent and Trademark Office (USPTO).
Sen. Orrin Hatch (R-UT), the ranking Republican on the Committee, praised Rogan, and said he would work for his confirmation. Sen Hatch also criticized the current practice of diverting USPTO user fees. He stated that "The resources that support the Patent and Trademark Office come entirely from user fees. But a large portion of those user fees have been siphoned off to serve other governmental purposes. This is a practice that I have worked against together with Chairman Leahy over the years."
Rogan responded that "I can't tell you how the administration is going to come down on this subject. What I can tell you is that administration is committed to ensuring, one way or another, that the USPTO has the appropriate funds to do the job. So that, as you so rightly say, that the examining members will be able to do their job, and help move us into the 21st Century."
Sen. Dianne Feinstein (D-CA) stated that the number of patent and trademark applications and issues is increasing. She added that it is now taking about 14 months to process a patent applications, and 6 months to process a trademark registration request. She asked, "How do you intend to address that situation, which some have characterized as an impending crisis?"
Rogan responded, "I think that the first thing that the next Director should do is deal with this exactly as you have just said -- an impending crisis. In fact from the information that I have seen from the Commerce Department, and from the Patent and Trademark Office, paints even a more bleaker picture than what you have just described. I think the average pendency right now is about two and a half years, and by 2006 they expect that pendency rate to go to three and one half years. That makes it very very difficult for entrepreneurs, for investors, and for particularly, those that are investing resources in high tech patents, to basically sit and wait and and see if their investment is going to pay off. In a large way we are a victim of our technological successes. Because, as we move to more high tech patents, the examination process becomes far more complex."
Rogan elaborated: "I read that one patent that was sent over to the USPTO with background materials that filled up twelve disks. It would be the equivalent of six million pages of supporting material. These are very very technical issues, and on top of that, we went into the problem of losing a very highly trained examination corps to the private sector. Whoever has the privilege of being confirmed by this body, and to that position, is going to have to work hard first to see that we have the resources to hire to retain qualified examiners, and to find ways that we can give them more flexibility in reviewing the materials that they have to go to, so that we can turn out a quality product."
Tech Law Journal also spoke with Rogan after the hearing about the Administration's position on USPTO funding. He stated that "my understanding is that they are still studying the issue, and the way in which they come down on it is still a matter for discussion. I know that the President and the Secretary of Commerce have committed to making sure that the PTO is appropriately funded, so that the examiners can do their job. My record in Congress was one that felt the way to do that was from ending the diversion, and leaving it as intended -- a fee based institution. I will be having a number of discussions with the administration officials on that if I am confirmed."
Sen. Feinstein suggested that Rogan's experience in the House "would put you in a rather unique position to do the necessary lobbying for the funds you might require." Rogan responded, "Yes and no. Madame Chairwoman, I think, had I never served in the House, I would have perhaps approached the job with the illusion that it would be easy to talk to appropriators, to give up their power."
The hearing on Rogan's nomination was combined with a hearing on several nominees to be U.S. District Court Judges. Sen. Feinstein presided. Sen Hatch was the only other member to participate in the part of the hearing dedicated to the Rogan nomination. Sen. Patrick Leahy (D-VT), the Chairman of the Committee, left before the Committee took up the Rogan nomination. However, he did say in his opening statement for the hearing that "I had a productive meeting with Mr. Rogan a few weeks ago and have spoken with Secretary Evans about this nomination. Senator Feinstein and I both know the importance of intellectual property to our economy and look forward to working with the new Under Secretary in the days and months ahead."
Sen. Feinstein recited the many offices that Rogan has held, including California prosecutor, judge, and Assemblyman, and Majority Leader of the Assembly, as well as Member of the U.S. House of Representatives, and its Judiciary Committee, and Courts and Intellectual Property Subcommittee. Rogan responded, "Of all those qualities that you have articulated, the one that you left out is that I never showed incredibly poor judgment of running for the U.S. Senate against you. As you ponder my nomination, I hope you will keep that in the back of your mind." She "warmly welcome[d]" him to the hearing.
Anti Dumping and Countervailing Duties Resolution Adopted by House
11/7. The House passed HConRes 262 by a vote of 410 to 4. See, Roll Call No. 262. This is a concurrent resolution expressing the sense of the Congress "that the President, at the WTO round of negotiations to be held at Doha, Qatar, from November 9-13, 2001, and at any subsequent round of negotiations of the WTO, should    (1) preserve the ability of the United States to enforce rigorously its trade laws, including the antidumping and countervailing duty laws, and avoid agreements which lessen the effectiveness of domestic and international disciplines on unfair trade, especially dumping and subsidies, in order to ensure that United States workers, agricultural producers, and firms can compete fully on fair terms and enjoy the benefits of reciprocal trade concessions; and (2) ensure that United States exports are not subject to the abusive use of trade laws, including antidumping and countervailing duty laws, by other countries." The resolution was introduced on November 6 by Rep. Phil English (R-PA) and others.
DOJ Restricts Deliveries of HSR Premerger Filings
11/7. The U.S Department of Justice's Antitrust Division announced interim restrictions on the delivery of Hart Scott Rodino Premerger Filings. The DOJ announced that it will only accept documents hand delivered by employees of law firms or in house counsel. It cited security as the reason. See, notice.

 

3rd Circuit Rules on 11th Amendment and Telecom Act
11/7. The U.S. Court of Appeals (3rdCir) issued its opinion in MCI v. Bell Atlantic, a case regarding the 11th Amendment immunity of state public utilities commissions from suits brought under the Telecom Act of 1996. The Appeals Court concluded that the Pennsylvania Public Utility Commission (and its Commissioners) are not entitled to Eleventh Amendment immunity from suit brought in U.S. District Court under the Telecom Act of 1996; the state has waived its sovereign immunity by regulating local telephone service in Pennsylvania within the confines of the 1996 Act. The Appeals Court affirmed in part, and reversed in part, the District Court's decision regarding interconnection agreements. Judge Roth wrote the opinion of the Appeals Court. Judge Ambro concurred on the 11th Amendment issue, but dissented on a separate issue pertaining to the collocation of remote switching modules.
11/7. The U.S. Court of Appeals (3rdCir) issued its opinion in Bell Atlantic v. Pennsylvania PUC, another case involving the intersection of 11th Amendment immunity and state PUC regulation of telecom interconnection agreements. The Appeals Court, relying upon its decision in MCI v. Bell Atlantic, denied the defense of sovereign immunity under the 11th Amendment. It further held that it had no jurisdiction over the PUC's other claims on appeal, and dismissed and remanded.
The Eleventh Amendment of the U.S. Constitution provides: "The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State."
Fed Circuit Rules in Novartis Drug Patent Case
11/7. The U.S. Court of Appeals (FedCir) issued its opinion in Novartis v. Ben Venue Laboratories. Novartis owns U.S. Patent No. 4,711,880, for crystalline formulations of the drug pamidronate disodium. Novartis filed a complaint in the U.S. District Court (DNJ) against Ben Venue Laboratories and Bedford Laboratories alleging infringement. The District Court granted summary judgment of noninfringement to defendants. The Appeals Court affirmed.
More News
11/7. Sprint announced in a release that it "plans to convert its existing digital circuit switched network to a packet switched network beginning in January 2003." Rep. Bob Goodlatte (R-VA), a Co-Chair of the Internet Caucus, praised the announcement. He stated that "Sprint LTD currently serves nearly 8.3 million customers, many in my Congressional district. This conversion from the existing switched network to a packet switched network will improve competition and lower prices by giving consumers in rural areas a greater choice of high speed Internet, phone service, and other telecommunications products and services. Sprint's announcement will hasten the delivery of quality high speed telecommunications services to the Shenandoah and Roanoke Valleys."
11/7. The U.S. International Trade Commission (USITC) began its Section 337 evidentiary hearing regarding the importation of certain integrated circuits. The complainants are United Microelectronics Corp., UMC Group (USA), and United Foundry Service, Inc. The respondents are Silicon Integrated Systems Corp. and Silicon Integrated Systems Corp. This investigation pertains to U.S. Patents No. 5,559,352 and 6,117,345. See, Investigation No. 337-TA-450. Administrative Law Judge Sidney Harris is presiding.
Nine States Join in Microsoft Settlement
11/6. Microsoft, the Department of Justice, and nine states filed a Stipulation and Revised Proposed Final Judgment with the U.S. District Court in the antitrust case against Microsoft. These states are New York, Ohio, Illinois, Kentucky, Louisiana, Maryland, Michigan, North Carolina and Wisconsin.
Seven states and the District of Columbia have not joined in the settlement. These states are California, Florida, Kansas, Massachusetts, Minnesota, Utah and West Virginia.
Tom Riley, Attorney General of Massachusetts, stated that "The agreement reached by the U.S. Department of Justice and Microsoft is fundamentally flawed. It has enormous loopholes and may prove to be more harmful than helpful to competition and to consumers. We will show the utmost respect for the court and the process while at the same time conveying our problems with this agreement. This company has a long and consistent pattern of violating the law and not playing by the rules. The original goals of this suit were to restore competition and prevent a return of illegal and abusive conduct. This agreement is license for Microsoft to use its dominance and power to crush its competition. We all lose if that happens." See, release.
Microsoft Chairman and Chief Software Architect Bill Gates said in a prepared statement that "We made every effort to reach a compromise to address the states' concerns and allow everyone to move forward. Yesterday, at the request of the states, we made some additional revisions to clarify the proposed decree and better capture the intent of the parties. We hope that the remaining states will join in this agreement, so that everyone can focus on the future and avoid the unnecessary costs and delays of further litigation."
Ken Wasch, President of the Software & Information Industry Association, an anti Microsoft group, stated on November 6 that "We commend the state attorneys general for their steadfast pursuit of justice. The harm has been demonstrated, innovation has been impeded, and competition has been thwarted. The settlement agreement is not in the public interest. It should be rejected by the state attorneys general and the federal district court." See, release.
Judge Kotelly to Hold Status Conference in Microsoft Case
11/6. U.S. District Court Judge Colleen Kotelly will hold a status conference in USA v. Microsoft, the government's antitrust law suit against Microsoft. On Friday, November 2, the Department of Justice (DOJ) and Microsoft announced a settlement, and filed a Stipulation and Proposed Final Judgment.
Judge Kotelly's Scheduling Order [PDF] of November 2 provides that "at the November 6, 2001, status conference, the parties in Civil Action No. 98-1233 shall report the status of their settlement negotiations". District Court Case No. 98-1233 is the law suit filed by various states against Microsoft; it was consolidated with D.C. No. 98-1232, the law suit filed by the DOJ. The Order further provides that "if a settlement is not reached with regard to all of the parties in Civil Action No. 98-1233 by November 6, 2001, the non-settling parties shall be prepared to proceed with the litigation schedule set forth in the Court's Scheduling Order dated September 28, 2001".
RIAA Chief Addresses Online Music and Copyright
11/6. Hillary Rosen, P/CEO of the Recording Industry Association of American (RIAA), gave a speech at the O'Reilly Peer to Peer and Web Services conference regarding peer to peer technologies and copyright.
She stated in the prepared text of her speech that "the music community has recognized the amazing opportunities offered by the Internet. They have been obvious. Our traditional promotion and marketing efforts have been choked holed at radio and retail for some time". She added that "the question isn’t whether music is going to be commercially available online. It is and it will continue to grow. It must -- because it's great for consumers, and I fervently believe it is still good opportunity for the multitude of entrepreneurs and technology developers who share a passion for serving this important need. The question isn't whether peer to peer or any other particular technology is good or bad either. The question is whether they're going to be used -- whether they’ll respect what artists create just like we in the recording business respect what the business sponsors and software developers in this audience create."
Peer to Peer Technology. "In the public’s mind, peer to peer technology is all about stealing music and increasingly stealing movies", said Rosen. She continued that "The problem with peer to peer is not the technology, but how it is used. The multiple exciting applications for P to P that are being discussed over these few days show the limitless potential of the technology in multiple ways." She also cited other harmful uses of P to P technology, included "security concerns", "the spread of viruses that endanger national computer network infrastructure", and "child pormography".
Napster Law Suit. Rosen stated that "People have often asked me over the last two years why record companies took Napster to court instead of just licensing them. Well, the reason we were and still are in court is because they have taken the legal position that they don't need a license. So do many of their counterparts. After all, you tell me -- can a legitimate, licensed company, one that's paying royalties, compete on a level playing field with those who aren't?"
Intellectual Property Laws. She stated that "You also may hear and think that copyright law stifles technology. In fact, we have the most thriving economy in the world and we have it precisely because we have found the right balance between innovation and protection. The hue and cry from some corners of the world suggesting the dismantling of intellectual property protection are, in my view, short term thinkers looking for a popular cause."
Opposition to Legislation. Rosen stated that the music industry has been slow to make music available online, but this does not warrant government intervention. She elaborated that "It is clear that record companies haven’t been as quick as some have hoped to get online. Maybe that encouraged piracy -- not excused it, to be sure, -- but encouraged it by not filling the vacuum of consumer demand. But I hope you’ll acknowledge this as well: Building a legitimate business model from scratch -- one that involves literally hundreds of millions of copyrights and interlocking creative rights, navigating incompatible DRM's and players and building customer service and ease of use that music fans have always enjoyed -- isn't quite as easy as people might think. Some have argued for government intervention. I think that would be ill advised. The pace of the marketplace is too fast to accommodate such regulation. And who would want to dictate a "one size fits all" business model? The proposals being circulated for legislative action would stifle innovation, competition and consumer choice."
MOCA. Rep. Rick Boucher (R-VA), a sponsor of HR 2724, the Music Online Competition Act of 2001, is scheduled to speak at the same conference on Wednesday, November 7. See also, March 6, 2001 address by Rep. Boucher regarding proposals for changes to the fair use doctrine in the context of digital and Internet media.
House Passes USPTO Authorization Bill
11/6. The House passed HR 2047, the Patent and Trademark Office Authorization Act of 2002. This bill authorizes, but does not appropriate, funding for the USPTO. Specifically, it provides that "There are authorized to be appropriated to the United States Patent and Trademark Office for salaries and necessary expenses for fiscal year 2002 an amount equal to the fees collected in fiscal year 2002". Hence, it authorizes the ending of the diversion of USPTO user fees to other government programs.
Ever year members of the House and Senate Judiciary Committees, and other pro technology legislators, seek to end the process of diverting USPTO fees. And every year they are opposed by members of the House and Senate Appropriations Committees. The Clinton administration also supported the diversion. The Bush Administration has not yet taken a position on this issue.
Several members of the House Judiciary Committee, and others, used the time for debating HR 2047 to argue against the diversion of USPTO fees. Rep. Lamar Smith (R-TX) said that "This extra funding will speed up the processing of patent applications that now takes an average of nearly 27 months. If these fees continue to be diverted, pendency -- the time from filing to granting of a patent -- may increase to 38 months by 2006. In recent years, the number of technology and biotechnology patents has increased. Now more than ever, it's important to ensure that the PTO has adequate funding through its own fee mechanisms. The PTO must produce high quality patents on a timely basis. It is struggling to keep up with the workload and lacks new technology that is desperately needed to do its job."
Rep. Barney Frank (D-MA) stated that "It should be noted that we raised patent fees a few years ago. When we raised them, the assumption, the implicit promise, was these fees would go to improving the patent process. To take fees from people seeking patents and diverting them to other purposes is a grave error. We ought to be maximizing our ability to service the innovators in this economy, and we do that by allowing these fees to stay here."
Rep. John Conyers (D-MI), the ranking Democrat on the Judiciary Committee, stated that "The PTO cannot hire or retain qualified patent examiners with advanced scientific degrees; they prefer the more lucrative salaries in the private sector. The PTO also cannot update its computer systems to thoroughly search databases of information and determine whether patent applications really disclose new and nonobvious inventions; this makes it that more likely for the PTO to issue a bad patent."
Rep. Howard Coble (R-NC), the Chairman of the House Courts, Internet and Intellectual Property Subcommittee, Rep. James Sensenbrenner (R-WI), the Chairman of the full Committee, and Rep. James Moran (D-VA), also spoke in favor of the bill.
Trade Promotion Authority News
11/6. Rep. David Bonior (D-MI) spoke in the House against granting the President trade promotion authority, which is also know as fast track. He stated that "fast track is the wrong issue at the wrong time for the American people, and I hope my colleagues will see to it, it never reaches this floor." See, Congressional Record, November 6, 2001, at pages H7782-3.
11/6. Rep. Don Manzullo (R-IL) stated in the House that "renewing Trade Promotion Authority for the President is vitally important for small business exporters." He is Chairman of the House Small Business Committee. See, Congressional Record, November 6, 2001, at page H7728.
11/6. Rep. Sherrod Brown (D-OH) also spoke in the House on trade promotion authority. He stated that "The fact is, Western business investors want to go to China, they want to go to Indonesia; they want to go to countries which are dictatorships, which have docile work forces, authoritarian governments and they are very predictable for Western investors. They do not go to India, they do not go to Taiwan, not to South Korea; they do not want to stay in this country many times because we have strong environmental laws, because labor unions can organize and bargain collectively, because good wages are paid, and because we have free elections. ... Fast track should be defeated again in Congress this year. Congressional Record, November 6, 2001, at page H7783-4.
Legislators Introduce INS Reform Bill
11/6. Reps. James Sensenbrenner (R-WI) and Rep. George Gekas (R-PA) introduced the Immigration Reform and Accountability Act, a bill to restructure the Immigration and Naturalization Service (INS) into two separate federal agencies. One agency would handle border enforcement; the other would handle immigration services. The bill would also provide for the creation of an Internet based system that would permit people with applications filed with the INS to access online information about the status of the application. See, Sensenbrenner release and Gekas release.
Bills Introduced
11/6. Rep. Sherrod Brown (D-OH) introduced HR 3235, a bill to provide for compulsory licensing of certain patented inventions relating to health care emergencies. It was referred to the House Judiciary Committee.
11/6. Sen. Max Baucus (D-MT) introduced S 1636, Taiwan Free Trade Agreement Act of 2001, a bill to authorize the negotiation of a Free Trade Agreement with Taiwan, and to provide for fast track congressional consideration of such an agreement. The bill was referred to the Senate Finance Committee, or which he is the Chairman.
People and Appointments
11/6. The Senate confirmed Christina Armijo to be a U.S. District Court Judge for the District of New Mexico by a vote of 100 to 0. See, Roll Call No. 325.
11/6. The Senate confirmed Karon Bowdre to be a U.S. District Court Judge for the District of Alabama by a vote of 98 to 0. See, Roll Call No. 326.
11/6. The Senate confirmed Stephen Friot to be a U.S. District Court Judge for the District of Oklahoma by a vote of  98 to 0. See, Roll Call No. 327.
11/6. Nina Shafran was named Deputy Chief of the FCC's Mass Media Bureau's Audio Services Division. She previously worked for the law firm of Dow Lohnes & Albertson. Prior to that, she worked in the Washington DC office of the law firm of O'Melveny & Myers, and in the Washington DC office of the law firm of Weil Gotschal & Manges. See, FCC release [PDF].
More News
11/6. The U.S. Court of Appeals (DCCir) issued its opinion in American Bioscience v. Thompson, a case regarding the FDA's approval process for generic drugs, and patent law. Vacated and remanded.
11/6. The USPTO published the November issue of the USPTO Pulse in its web site.

Go to News Briefs from November 1-5, 2001.