|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spectrum management policies are outdated and in need of review.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
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
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
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
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
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
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
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
11/9. The U.S.
Court of Appeals (DCCir) issued its opinion
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.
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
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.
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
House Subcommittee Considers Market Power and Intellectual
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
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
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
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
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
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
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
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
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
Hollings Tauzin Bill Would Ban Foreign Government Control of
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.
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
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
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).
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
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 Tech Is Foundation of Long Term Growth
11/8. Federal Reserve Board Vice
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
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)
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.
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
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
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
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
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
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
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
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
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
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
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
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
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
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
Anti Dumping and Countervailing Duties Resolution Adopted by
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
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.
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.
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
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
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
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
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
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.
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.
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.
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
11/6. The U.S.
Court of Appeals (DCCir) issued its opinion
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.