Commerce Department Touts Its Tech Budget
2/5. Department of Commerce (DOC) officials
held a press conference at which they discussed the President's proposed budget
for the DOC for Fiscal Year 2003. Philip Bond, Under Secretary of Commerce for
Technology, stated that "the Bush budget is a pro tech budget". He
cited the proposed budget's 8% increase in research and development funding, 21%
increase funding for the USPTO, increase in funding for basic research at
universities, and increase in information technology spending.
James Rogan, Director of
the U.S. Patent and Trademark
Office (USPTO), stated that the USPTO would receive a 21% increase in
funding. He stated that this increase would be used to hire 950 new patent
examiners, and to "transform trademarks to a fully electronic
operation". He elaborated that the goal of the new hirings is to reduce
patent pendancy. He stated that there are currently 3,200 examiners, and that
the worst shortage is in the area of electrical engineers. He added that "pendancy
is up around three years" in this area.
He was asked about salary increases for patent examiners. He responded that
"I certainly would be open to a market based approach". However, he
added that he is also constrained by federal regulations, and labor agreements.
He added that the current economic recession has made the stability of
government employment more attractive, and reduced turnover.
Nancy Victory, Assistant Secretary for the NTIA,
focused on spectrum management related funding. She stated that the proposed
budget would provide $3.3 Million for spectrum management and telecommunications
research. This includes $2.7 Million to upgrade the NTIA's research facilities
in Colorado that test new technology applications for radio frequency spectrum
use. These funds would also support the NTIA's overhaul of the interagency
process for managing spectrum, and the NTIA's "paperless spectrum
Kenneth Juster, the Under Secretary of Commerce of Export Administration,
discussed a new $20 Million item to create within the Bureau of Export Administration's (BXA's) Critical Infrastructure Assurance Office (CIAO)
a Homeland Security Information Technology and Evaluation Program. This program
would develop initiatives in the next two years for information sharing between
law enforcement agencies and the intelligence community, particularly with
respect to electronic databases, to promote homeland security.
Juster also stated afterwards that the Bush administration strongly supports S 149, the
Export Administration Act of 2001, sponsored by Sen. Mike Enzi (R-WY). The Senate passed the
bill in early September 2001. Juster also stated that the administration hopes
that the House will soon pass a version of the bill similar to that of the
Conrad Lautenbacher, Administrator of NOAA, and Arden
Bement, Director of the NIST, also
participated in the event.
2/5. James Rogan spoke at
the Department of Commerce (DOC) press conference about U.S. Patent and
Trademark Office (USPTO) funding under the President's proposed budget for FY
2003. He stated that "we will get the equivalent of all of the fees that we
The DOC also stated in a release
that "The President's FY 2003 budget request for the United States Patent
and Trademark Office is $1.365 billion. The 21.2% increase allows the agency to
spend a 100% of its statutory fees plus an additional $45 million to hire 950
patent examiners and transform trademarks to a fully electronic system by 2004.
... The budget request also includes a one-time surcharge of $207 million in
order to fulfill the agency's business plan and to meet the President's
James Rogan said "the PTO is one of the few agencies that actually does not
operate off taxpayers' money. It operates off self funding. But, like other
areas of government where fees are collected, those monies all go into the
general fund, and then are disbursed by Congress."
He added that "because of the President's increased funding for our budget,
which I think I have said is going to be over 21 percent of baseline from fiscal
year 2002. The fees will be collected. They will be deposited, I suppose, at the
Treasury, in the general fund, and then will be disbursed. And so, when we get
to disbursement, we will get the President's -- we will get the equivalent of
all of the fees that we collect, we expect to collect for fiscal year 2003. Plus
there is a surcharge -- a one year surcharge that the President is proposing. We
will get an additional 45 million dollars off of that surcharge of, I think, 204
million. The remaining dollars from the surcharge will go to fund homeland
security and the President's economic defense effort." (Editor's Note:
Rogan probably meant to say 207, rather than 204.)
detailed DOC proposal [PDF] states that fees collected in FY 2003 will total
$1,527 Million, and that the proposed FY 2003 appropriation for the USPTO is
$1,365 Million. The DOC statement that the proposal would allow the "agency
to spend a 100% of its statutory fees", and Rogan's statement that "we
will get the equivalent of all of the fees that we collect", would be based
on excluding the $207 Million in additional user fees from the categories of
"statutory fees" and "fees that we collect". Hence, under
the proposed budget, the USPTO is estimated to collect a total fo $1,527 Million
in user fees. Of this, $1,320 Million would come from "statutory
fees", and $207 Million would come from "one time surcharge"
fees. The proposed appropriation to the USPTO of $1,365 would be $45 Million
more than the $1,320 in "statutory fees", but $162 Million less than
total user fees collected by the USPTO. This would leave $162 Million in USPTO
user fees collected pursuant to the "one time surcharge" to be
diverted to other government programs.
CIIP Chairman Visits USPTO
2/5. USPTO Director James Rogan met with Rep.
Howard Coble (R-NC), Chairman of the House Judiciary Committee's
Subcommittee on Courts, the Internet, and Intellectual Property, at the USPTO.
The USPTO stated in a release that
"Chairman Coble was given a demonstration of the agency's award winning
trademark electronic filing system, which is used by more than 25% of the
agency's trademark customers to file their applications. During his visit,
Chairman Coble also saw a presentation of the desk top search systems used by
patent examiners to electronically access nearly 20 million U.S. and
international patents and more than 1,000 non patent data bases. Examiners use
these search systems to find information that will help determine the novelty of
an invention. Patent Examiners performed 10 million electronic searches last
Rep. Coble stated that "I look forward to working with Under Secretary
Rogan and President Bush to secure the necessary funding to help the agency
reach its goals".
NTIA Reports on Growth of Internet & Computer Use
2/5. The National Telecommunications and
Information Administration (NTIA) published a report
[100 pages in PDF] titled "A Nation Online: How Americans Are Expanding
Their Use of the Internet". See also, executive summary.
This report concludes that "More than half of the nation is now online. In
September 2001, 143 million Americans (about 54 percent of the population) were
using the Internet -- an increase of 26 million in thirteen months. In September
2001, 174 million people (or 66 percent of the population) in the United States
Broadband. The report found growing use of broadband Internet
connections. "Between August 2000 and September 2001, residential use of
high speed, broadband service doubled -- from about 4 to 11 percent of all
individuals, and from 11 to 20 percent of Internet users."
Handheld Devices. The report found that "The vast majority of
Internet users in the United States still access the Internet through a desktop
or laptop computer. Although the number of people using alternative Internet
access devices is increasing ..." It found that 4.8 percent of households
have an Internet enabled cell phone or pager, and 1.8 percent of households have
an Internet enabled personal digital assistant (PDA) or other handheld device.
Internet Indecency. The survey upon which the report is based "asked
for the first time whether parents were more concerned about exposure of
children to material on the Internet or to material on television. On a
nationwide basis, a majority of respondents (68.3 percent) said that they were
more concerned about their children’s exposure to material over the
The report also found both that "The concern about exposing children to
inappropriate online content does not, however, result in lower levels of
Internet use at home" and that "this concern was seldom a factor when
households opted to discontinue an Internet subscription or made the decision
not to subscribe."
This report was based upon data collected in September 2001 by the U.S. Census
Bureau's Current Population Survey, a survey of approximately 57,000 households
and more than 137,000 individuals in the U.S.
What Digital Divide? 2/5. The NTIA's "Nation Online" report marks a shift from similar
reports issued by the NTIA during the Clinton administration. These earlier
reports focused on differences in technology adoption rates based on race,
income and region. These reports labeled these differences "digital
divides". The Clinton NTIA called upon government policy makers to close
these pernicious divides.
In contrast, this most recent report omits the "digital divide"
rhetoric. It focuses instead upon the rapid growth of Internet use by all
categories. It concludes that "Internet use is increasing for people
regardless of income, education, age, race, ethnicity, or gender."
Income. The "Nation Online" report found that "Between
December 1998 and September 2001, Internet use by individuals in the lowest
income households (those earning less than $15,000 per year) increased at a 25
percent annual growth rate. Internet use among individuals in the highest income
households (those earning $75,000 per year or more) increased from a higher base
but at a much slower 11 percent annual growth rate."
Race. The report also found that "Between August 2000 and September
2001, Internet use among Blacks and Hispanics increased at annual rates of 33
and 30 percent, respectively. Whites and Asian American/ Pacific Islanders
experienced annual growth rates of approximately 20 percent during these same
Rural v. Urban. Finally, the report found that "Over the 1998 to
2001 period, growth in Internet use among people living in rural households has
been at an average annual rate of 24 percent, and the percentage of Internet
users in rural areas (53 percent) is now almost even with the national average
The report wraps up with a brief analysis of "inequality". See page 91
[PDF page 95]. It states that "In discussions of changing computer and
Internet use, a common question is whether inequality has been rising or
declining. While previous chapters in this report show that inequality remains,
this chapter shows that inequality has been declining ..." It attributes
this decline to the expanding use of the Internet at schools, work, and
libraries, and to declining prices of computers and Internet access.
The report concludes that "The Internet has become a tool that is
accessible to and adopted by Americans in communities across the nation.
Approximately two million more people become Internet users every month, and
over half of the population is now online. Those who have been the least
traditional users -- people of lower income levels, lower education levels, or
the elderly -- are among the fastest adopters of this new technology. As a
result, we are more and more becoming a nation online".
Hubbard Addresses New Economy Statistics
2/5. Glenn Hubbard, Chairman of the Council
of Economic Advisors, testified before the Joint Economic Committee of the U.S.
Congress. His testimony
addressed, among other topics, ways to improve the collection of economic data
regarding the new economy.
He stated that "the quality of existing statistics is far from perfect and
could be enhanced with further investment. ... A number of steps can be taken to
improve the accuracy and timeliness of economic statistics. One cost effective
measure would be to ease the current restrictions on the sharing of confidential
statistical data among Federal statistical agencies."
Hubbard also stated that "the Administration is proposing new and continued
funding for the development of better and more timely measures to reflect recent
changes in the economy. For example, these resources would allow for tracking
the effects of the growth in e-commerce, software, and other key services, and
for developing better estimates of employee compensation. The latter are
increasingly important given the expansion in the use of stock options as a form
of executive compensation, as well as for tracking the creation and dissolution
of businesses, given the importance of business turnover in a constantly
evolving economy. Improved quality adjusted price indexes for high technology
products are also an important area for future research. As the economy
continues to change and grow, the need persists to create and develop such new
measures, to provide decision makers with better tools with which to track the
economy as accurately as possible."
FTC Announces ID Theft Affidavit
2/5. The Federal Trade Commission (FTC)
released a model ID Theft
Affidavit [PDF] to be used by victims of identity theft to attempt to
restore their reputations. Currently, victims often have to fill out separate
forms for each fraudulent account opened by thieves. The FTC prepared this model
affidavit in conjunction with banks, credit grantors and consumer advocates. See
also, FTC release.
Internet Securities Fraud
2/5. The Securities and Exchange Commission
(SEC) filed a civil complaint in
U.S. District Court (CDCal) against
Alexander Naujoks and others alleging violation of federal securities laws in
connection with misrepresentations regarding purported businesses that provide
an online reservation system and an online competitive sports league.
The complaint alleges that Naujoks and companies that he created are selling
stock in "purported online business operations" through cold calling
and a web site, and in so doing, have made numerous material misrepresentations,
in violation of the securities registration provisions of Sections 5(a) and 5(c)
of the Securities Act of 1933, 15 U.S.C. §§ 77e(a) & 77e(c), and the
antifraud provisions of Section 17(a) of the Securities Act, 15 U.S.C. §
77q(a), and Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. §
78j(b), and Rule 10b-5 thereunder, 17 C.F.R. § 240.10b-5. See also, SEC release.
People and Appointments
2/5. Securities and Exchange Commission (SEC)
General Counsel David Becker will leave the SEC. He has not yet accepted
another position. Before going to the SEC he was a partner at the law firm of Wilmer Cutler & Pickering. See, SEC release.
2/5. The National Cable & Telecommunications
Association (NCTA) announced the appointments of Joe Waz of Comcast
Corporation and Christine Levesque of Rainbow Media Holdings as co-chairs
of the NCTA Public Affairs Committee. See, release.
2/5. The Senate confirmed Philip Martinez to be a U.S. District Judge for
the Western District of Texas. See, Cong. Rec., Feb. 5, 2002, at S381.
2/5. President Bush nominated Read Admiral Michael Lohr to be Judge
Advocate General of the U.S. Navy.
2/5. The House Rules Committee adopted
an open rule for
consideration of HR
3394, the Cyber Security Research & Development Act. The bill would
authorize funding for computer and network security research and development and
research fellowship programs. One hour has been allotted for debate. The House
is likely to take up the bill on Thursday, February 7.
2/5. The General Accounting Office (GAO)
released a report [PDF]
titled "Human Services Integration: Results of a GAO Cosponsored Conference
on Modernizing Information Systems". The report states that
"Conference presenters maintained that systems modernization is needed
because there are major gaps in the capabilities of states’ information
systems to meet information needs for administering and overseeing welfare
reform. With its shift in emphasis from income maintenance to self-sufficiency,
welfare reform has a need for greater data sharing and systems capability to
support new partnerships among diverse service providers and variations among
President Bush Releases Proposed Budget for FY 2003
2/4. President Bush released his proposed budget for fiscal year 2003. It
includes large increases for national defense and homeland security related
programs, with modest increases for most other departments and agencies.
However, the President's proposal contains large increases for many tech related
agencies. See, Office of Management and Budget (OMB) web page with links to
various budget documents.
President Bush stated in his budget
message to the Congress that "The 2003 Budget requests the biggest
increase in defense spending in 20 years, to pay the cost of war and the price
of transforming our Cold War military into a new 21st Century fighting force. We
have priorities at home as well -- restoring health to our economy above
He added that "The plan also calls for maintaining low tax rates, freer
trade, restraint in government spending, regulatory and tort reform, promoting a
sound energy policy, and funding key priorities in education, health, and
compassionate social programs." He also stated that his budget "moderat[es]
the growth of spending in the rest of government", but "offer[s]
substantial increases in spending for ... science and technology research
Independent Agencies. The FTC, which has both antitrust and consumer
protection authority, would see its budget increase from $156 Million to $177
Million. The FCC's budget would increase $33 Million to $278 Million. The SEC
budget would grow to $481 Million.
Commerce. There would also be some large increases at the Department of Commerce's tech related offices.
The USPTO's budget would increase 21%; however, total estimated user fees
collected would once again exceed the appropriation. The NTIA's budget would
shrink, due to the proposed elimination of the Technology Opportunity Program
grants. The BXA's budget would grow from $69 Million to $103 Million; however,
this would be due in large part to a $20 Million item for the Critical
Infrastructure Assurance Office for homeland security and information
intelligence. The NIST budget would grow from $321 Million to $402 Million. The
Technology Administration would remain at $8 Million.
Justice. The total budget for the Department
of Justice would be increased 13% to $30.2 Billion. The Antitrust Division
would see an increase from $130 to $142 Million.
FTC Budget Proposal
2/4. The President's proposal provides an operating budget of $177 Million for
the Federal Trade Commission (FTC). The FY
2002 appropriation is $156 Million. The FTC is one agency with responsibility
for enforcing antitrust laws. It also has consumer protection authority, and has
become the lead agency for protecting consumers on the Internet.
The President's proposal
states too that "In 2003, the FTC will expand its contribution to the
Administration’s consumer privacy agenda by helping victims of ID theft,
increasing enforcement and outreach on children’s online privacy, and
increasing enforcement against “spam.” It will also seek to establish a
national “do not call” list that would protect consumers from unwanted and
intrusive telemarketing calls, and bring nationwide consistency to the current
patchwork of lists administered by states and the private sector."
FCC Budget Proposal
2/4. President Bush proposed an FY 2003 budget for the Federal Communications Commission (FCC) of $278
Million, an increase of $33 Million over the FY 2002 appropriation of $245. The
FCC would maintain a proposed staffing level of 1,975 full time equivalents.
2003 Budget Request [2.3 MB in PDF] and links to appendices,
and the President's detailed FCC
proposal for the FCC [PDF].
Bush Budget Addresses Spectrum Policy
2/4. President Bush's proposed budget contains information regarding spectrum
management policy. The President's proposal
states that "In 1993, the President and the Congress gave the FCC authority
to assign spectrum licenses through competitive bidding, which has proven to be
an efficient and effective way to allocate this finite public resource. Upcoming
spectrum auctions are expected to generate more than $25 billion over the next
five years." However, the proposal focuses on the revenue generation side
of auctions. It does not address spectrum sharing, secondary markets for
spectrum, or developing property rights in spectrum.
The proposal continues that "The Administration will propose legislation to
provide more certainty in upcoming auctions. The legislation will establish a
framework for the FCC to develop regulations that promote clearing the spectrum
in television channels 60–69 (747–762 and 777–792 MHz) for new wireless
services in an effective and equitable manner. Such legislation also would shift
the statutory deadlines for the auction of channels 60–69 from the elapsed
2000 date to 2004 and for the auction of channels 52–59 (698–746 MHz) from
2002 to 2006. Providing more certainty about how and when the spectrum in
channels 60-69 will become available to new entrants and shifting the deadlines
for both auctions would increase expected revenues by $6.7 billion."
It also states that "To facilitate the clearing of analog television
broadcast spectrum and provide taxpayers some compensation for use of this
scarce resource, the Administration will propose legislation authorizing the FCC
to establish an annual lease fee totaling $500 million for the use of analog
spectrum by commercial broadcasters beginning in 2007. Upon return of their
analog spectrum license to the FCC, individual broadcasters will be exempt from
USPTO Budget Proposal
2/4. The President's budget proposal includes a $239 Million, 21% increase, for
the U.S. Patent and Trademark Office (USPTO),
to $1,365 Million. The proposal also includes an increase in patent and
trademark fees of $207 Million; this is described as a "one time
The President's budget proposal estimates that fees collected in FY 2003 will
total $1,527 Million. The proposed FY 2003 appropriation for the USPTO is $1,365
Million. Hence, the proposal would continue the long standing practice of
diverting USPTO user fees to fund other government programs. Opponents of this
practice call it a tax on innovation.
The USPTO stated in a release that
the increased budget will enable the USPTO to "Hire 950 patent
examiners", "Transform trademarks to a fully electronic operation by
2004", and "Implement the President's management agenda, including
e-government, outsourcing, and workforce restructuring." The release also
stated that USPTO's five year business plan, which contains details of the FY
2003 budget, will be released this week.
DOC proposal states that "The 2003 Budget funds a 21-percent increase
(+$239 million) in resources available to the U.S. Patent and Trademark Office (USPTO)
to address the agency’s growing workload in the area of intellectual property.
USPTO issues patents and registers trademarks. It also works to promote the
protection of U.S. intellectual property rights around the world through
international treaties. With the passage of the American Inventors Protection
Act of 1999, USPTO was designated as a “performance based organization,”
which provides the agency additional management flexibilities while ensuring
that senior managers' tenure and compensation are at risk based upon their
achieving organizational performance targets."
The "one time surcharge" is defined in the President's
detailed DOC proposal [PDF] as follows: "Provided further, That there
shall be a surcharge of 19.3 percent, rounded by standard arithmetic rules, on
all fees authorized by 35 U.S.C. 41(a) and (b) and a surcharge of 10.3 percent,
rounded in the same manner, on those fees authorized by 15 U.S.C. 1113 that are
implemented by 37 C.F.R. 2.6(a)(l),(5) and (12): Provided further, That these
surcharges shall be effective on October 1, 2002 and shall expire on September
30, 2003 ..."
NTIA Budget Proposal
2/4. President Bush proposed a reduced budget for the National Telecommunications and Information
Administration (NTIA). However, this is due to the proposal to eliminate the
Technology Opportunities Program (TOP) grants. These were formerly known as
detailed DOC proposal [PDF] states that "Technology Opportunities
Program grants have demonstrated the use of advanced telecommunications
technologies to enhance the delivery of social services, such as education,
health care, and public safety. This program has fulfilled its mission and is
proposed for termination. 2003 funds and use of deobligations and unobligated
balances are requested for monitoring existing grants and close-out costs."
The TOP grant program had detractors on Capitol Hill. In October of 2001, the
NTIA's list of
grant winners included a cyber cafe for gang members in Detroit, a network
of surveillance cameras on California beaches, and a web site containing
pictures of artifacts from Maine. See, TLJ Daily E-Mail Alert
No. 277, Oct. 2, 2001.
DOC proposal also elaborates on other NTIA programs: "The budget
strengthens the spectrum management capabilities of the National
Telecommunications and Information Administration by providing $3 million to
begin the process of spectrum management reform and to upgrade its radio quiet
zone test facility in Colorado. In addition, the Administration will propose
legislation to streamline the current process for reimbursing federal agencies
that must relocate from spectrum auctioned to commercial users."
BXA Budget Proposal
2/4. The President's budget proposal would increase the Bureau of Export Administration (BXA) budget
from $69 Million to $103 Million. The BXA regulates exports of critical goods
and technologies, including dual use items, such as computer and software, in
order to promote national security, foreign policy, and economic interests. $20
Million of this proposed increase would go to the Critical
Infrastructure Assurance Office (CIAO), which works with government agencies
and the private sector in developing a national plan to reduce the exposure to
attack of the nation's critical infrastructures.
The President's proposal states that "Additional funding for the CIAO will
be used to support the Homeland Security Information Technology and Evaluation
Program. The office will work in consultation with the Office of Homeland
Security to implement the Information Intelligence Initiative. This initiative
includes technological and procedural improvements to the process of information
sharing to assure broad access to relevant homeland security information at all
levels of government. The program office is expected to be open for 1 to 2
The President's proposal would also enable the BXA to open field offices in U.S.
port cities, and in foreign countries, including in the Middle East.
More DOC Budget Information
2/4. The National Institute of Standards and
Technology (NIST) would see an increase from $321 Million to $402 Million.
The Technology Administration would see its
budget drop slightly. After rounding, it would remain at $8 Million. See also,
DOJ Budget Proposal
2/4. The President's FY 2003 budget proposal for the Department of Justice (DOJ) is $30.2 Billion, a
13% increase over FY 2002. Attorney General John Ashcroft stated in a release that
"The President's budget supports the Department's reorganization to refocus
law enforcement efforts to fight the war on terrorism."
The President's detailed DOJ
proposal [PDF] provides that the Antitrust
Division's budget would be increased from $130 Million to $142 Million.
Cato Scholar Decries Spectrum Socialism
2/4. Adam Thierer,
Director of Telecommunications Studies at the Cato
Institute, stated that the current spectrum regulatory regime constitutes
"spectrum socialism". He spoke at a press breakfast in Washington DC.
"Something has to be done about spectrum. Spectrum socialism that we have
lived under for seven decades plus now is creating a real crisis in America. And
there is always going to be this problem of how to get enough spectrum in the
hands of entrepreneurs for the things we need so long as we have an allocation
mechanism process that is so political in character. And, of course, you have a
problem with the Department of Defense and other long time incumbent users of
spectrum, trying to free up a lot of the holdings that they have."
"The broadcasters are the biggest sinners," said Thierer. He
referenced the "squatter right mentality that they have of holding on to
The problem, said Thierer, "is basically the fact that we have no property
rights in wireless ether -- in wireless spectrum -- in America. We only have a
regulatory allocation mechanism which licenses out parcels of spectrum for
specific uses, to specific users, conditioned upon fulfilling certain types of
public interest requirements. All that is a mouthful for saying that we could
have property in wireless technologies".
"We did not choose that regulatory model. It was an option at the time that
spectrum started to become commercialized. But they choose not to go that way.
That has had some very serious and adverse consequences. And there are some
questions about how the telecommunications and technology sector would have
evolved absent that sort of regulatory regime. Nicholas Negroponte at MIT Media Labs posits that there might have
been a switch between technologies, where you would have had nearly all of our
voice and other types of services going -- our communications system -- going
through the air. You would have had data and other types of high intensity
bandwidth uses going through pipes -- and television. Instead we have got
television, this bandwidth hog, up there. And, you have got voice wires, wires
that do basic voice data."
GAO Reports that Treasury Dept Computers are Vulnerable
2/4. The General Accounting Office (GAO)
released a report [PDF]
titled "Financial Management Service: Significant Weaknesses in Computer
Controls Continue". The report found that the computer systems of the FMS,
which disburses trillions of dollars per year, are vulnerable to fraud and
The report states that in FY 2000 the Department of the Treasury’s Financial Management Service (FMS)
"disbursed over $1.9 trillion primarily for Social Security and veterans’
benefit payments, Internal Revenue Service (IRS) tax refunds, federal employee
salaries, and vendor billings. With several exceptions (the largest being the
Department of Defense), FMS makes disbursements for most federal agencies. FMS
is also responsible for administering the federal government’s collections
system. In fiscal year 2000, the government collected over $2 trillion in taxes,
duties, and fines. In addition, FMS oversees the federal government’s central
accounting and reporting systems used to reconcile and keep track of the federal
government’s assets and liabilities."
The GAO report found that the "FMS's overall security control environment
continues to be ineffective in identifying, deterring, and responding to
computer control weaknesses promptly. Consequently, billions of dollars of
payments and collections are at significant risk of loss or fraud, sensitive
data are at risk of inappropriate disclosure, and critical computer based
operations are vulnerable to serious disruptions."
The report goes on to identify many weaknesses in the FMS's data centers,
including "weak network security configurations that allowed us to identify
user names and compromise the associated passwords, which resulted in our
gaining unauthorized access to the mainframe production environment of a key
financial application at one data center, the development environments at
another data center, and an unrelated procurement application at a third data
The report also found that the FMS "granted excessive and powerful systems
privileges to certain users who did not need such access". It also found
that the FMS "did not effectively manage the administration of certain
passwords and user IDs". In addition, it found that the FMS was "not
effectively monitoring and controlling dial-in access to certain local area
networks and the mainframe environments."
Cato Releases List of 12 Worst Tech Bills
2/4. Cato Institute released a study [PDF] titled "The
Digital Dirty Dozen" which ranks and evaluates the authors' list of the
worst high tech legislative proposals of the current Congress. Wayne Crews, Cato's Director of
Technology Studies, and Adam
Thierer, Cato's Director of Telecommunications Studies, authored the report.
The list is as follows:
1. S 1364,
the "Telecom Fair Competition Enforcement Act", sponsored by Sen. Ernest Hollings (D-SC). This bill
would require structural separation of the Region Bell Operating Companies'
retail operations. The Cato report states that "S. 1364 ranks as the single
most destructive digital economy bill of the year for a very simple reason: It
would do more than any other piece of legislation to destroy the foundations
upon which a good portion of the digital economy rests. S. 1364 would set back
telecommunications policy 20 years and constitute possibly the most radical,
proregulatory measure to come along for any American industry in decades."
2. S 792 and
the "Media Marketing Accountability Act of 2001", sponsored by Sen. Joe Lieberman (D-CT) and Rep. Steve Israel (D-NY). These bills
would prohibit the targeted marketing to minors of adult rated media as an
unfair or deceptive practice. Cato calls this "government censorship".
3. S 512 and
HR 1410, the
"Internet Tax Moratorium and Equity Act", sponsored by Sen. Byron Dorgan (D-ND) and Rep. Ernest Istook (R-OK). Cato states
that these bills would "authorize a multi-state tax cartel for the purposes
of collecting sales taxes on electronic commerce transactions".
4. HR 718,
the "Unsolicited Commercial Electronic Mail Act of 2001", sponsored by
Rep. Heather Wilson (R-NM).
5. HR 2724,
the "Music Online Competition Act", or MOCA, sponsored by Rep. Chris Cannon (D-UT) and Rep. Rick Boucher (D-VA). The bill
provides that recording companies that license digital music would be required
to do so on a nondiscriminatory basis, offering similar prices and terms to all.
Cato calls this "compulsory licensing". However, Cato's objection to
this bill focuses solely on the bills requirements regarding nondiscriminatory
music licensing. Cato does not address the bill's proposed changes to copyright
law pertaining to the in store exemption, consumer back up copies, buffer
copies, and ephemeral copies. See also, Rep. Boucher's summary of the
6. The "Security Systems Standards and Certification Act", a bill
which has not yet been introduced. This bill, which may be introduced by Sen.
Ernest Hollings (D-SC) would mandate that digital devices contain copy
protection technology, or digital rights management (DRM) tools, to protect
intellectual property rights. The bill would also make it illegal to remove or
disable the DRM technology.
7. S 927 and
the "Mobile Telephone Driving Safety Act and Call Responsibly and Stay
Healthy (CRASH) Act", sponsored by Sen.
Jon Corzine (D-NJ) and Rep. Gary
Ackerman (D-NY). These bills would require states to prohibit cell phone use
8. S 88 and HR 267, the
"Broadband Internet Access Act", sponsored by Sen. Jay Rockefeller (D-WV) and Rep. Phil English (R-PA). These bills
would provide tax credits to incent deployment of broadband Internet access
facilities in rural and underserved areas. The Cato authors concede that this
legislation is likely to pass.
9. HR 1697
and HR 1698,
the "Broadband Competition and Incentives Act" and the "American
Broadband Competition Act", sponsored by Rep. John Conyers (D-MI) and Rep. Chris
Cannon (R-UT), respectively. These bills would increase antitrust oversight of
the telecom sector.
10. HR 237,
the "Consumer Internet Privacy Enhancement Act", sponsored by Rep. Anna Eshoo (D-CA).
11. HR 556,
the "Unlawful Internet Gambling Funding Prohibition Act", sponsored by
Rep. James Leach (R-IA), and HR 3215, the
"Combating Illegal Gambling Reform and Modernization Act", sponsored
by Rep. Bob Goodlatte (R-VA). Both
bills would, among other things, attempt to prevent the use of credit cards for
12. HR 1531,
the "Cell Phone Service Disclosure Act", sponsored by Rep. Anthony Weiner (D-NY).
The Cato report concluded that "there is good evidence that policymakers --
whether through conscious design or not -- are adopting the telecom regulatory
paradigm for the tech sector. It appears that the tech sector may be pigeonholed
into that paradigm simply because it offers a familiar set of rules and a bank
of regulatory agencies that can be activated on command. If that happens, it
will be a grave blow to the Internet sector. Policymakers would be wise to
reject this paradigm and instead let the Internet and cyberspace evolve with
minimal federal intrusion and regulatory interference."
People and Appointments
2/4. Thomas Navin was named Deputy Chief of the Federal Communications
Commission's (FCC's) Common Carrier Bureau's
Policy and Program Planning Division. See, FCC
2/4. Michael Yoshii joined the Tokyo office of the law firm of Latham & Watkins as a partner. He previously
worked for the law firm of White & Case.
He focuses on venture capital and technology transactions. See, LW release.
2/4. Megan Gray joined the Washington DC based Electronic Privacy Information Center (EPIC) as
Senior Counsel, and director of an intern program for law students. She focuses
on litigation involving anonymous free speech. For example, she represented an
anonymous plaintiff in Aquacool v. Yahoo. See, complaint
and TLJ story.
She will begin work in April 2002. She was previously an associate with the law
firm of Baker and Hostetler.
2/4. The Senate confirmed Callie Granade to be a U.S. District Judge for
the Southern District of Alabama. See, Cong. Rec., Feb. 4, 2002, at S309.
2/4. The Federal Communications Commission (FCC) set comment deadlines in the
matter of Ambient's application for a determination that it is an exempt
telecommunications company. It is an electric power company that also provides
broadband Internet access and related information services over power lines to
electrical outlets in residences. Comments are due by February 19, 2002. Reply
comments are due by February 26, 2002. See, FCC
2/4. The Bureau of Export Administration (BXA)
published in its web site a report
titled "Export Administration Annual Report; Fiscal Year 2001". See
summary [10 pages in PDF].
2/4. Monday, February 4, was the deadline to submit petitions and comments to
the FCC's Cable Services Bureau regarding
the applications of Hughes Electronics Corporation and EchoStar Communications
Corporation to the FCC requesting consent to the transfer of control of licenses
and authorizations involved in the EchoStar DirecTV merger. See, FCC notice [MS Word].
Oppositions and responses are due by February 25, 2002. This is CS Docket No.
01-348. See, the FCC's Search for Filed
9th Circuit Rules on Trademark Infringement in Web Pages and
2/1. The U.S.
Court of Appeals (9thCir) issued its opinion
[PDF] in PEI
v. Welles, a case involving claims of trademark infringement and
dilution in a web site, and its meta tags. The Appeals Court largely affirmed
the District Court's summary judgment for the web site defendants.
Background. Terri Welles was Playboy's Playmate of the Year in
1981. More than twenty years later, she is still posing for the camera,
although, no longer for Playboy Enterprises, Inc. (PEI). Her body of work is
now published in her own web site, which bears her name -- "Terri Welles".
Her web site also carries the subtitle "Playboy Playmate of the Year
1981". The web site also includes similar information in meta tags. That
is, the source code, which is read by some search engines, includes the
following: <META NAME="description" CONTENT="Playboy Playmate
Of The Year 1981 ... ">. Her web site also prominently displays the
disclaimer that the web site is not endorsed or sponsored by PEI; it also lists
terms that are trademarked by PEI, including "Playboy", and
"Playmate of the Month". Welles' web site also uses the term PMOY,
which is not trademarked by PEI, as a watermark.
District Court. Playboy Enterprises, Inc. (PEI) filed complaints in U.S.
District Court (SDCal) against Welles, Terri Welles, Inc., and others,
alleging trademark infringement, dilution, false designation of origin, and
unfair competition. PEI objected to the following: (1) use of the trademarked
terms in metatags, (2) use of trademarked terms in the masthead of the web site,
(3) use of trademarked terms in banner ads placed in other web sites, and (4)
use of "PMOY 81" as a watermark on pages of her web site. The District
Court granted Welles' motion for summary judgment.
Court of Appeals. A three judge panel of the 9th Circuit, following the
precedent set in New
Kids On The Block v. New America Publishing, 971 F.2d 302 (9th Cir. 1992),
held that Welles' uses of PEI's trademarks in headlines, banner ads, and meta
tags, are permissible, nominative uses. The Court held in New Kids that
to be a permissible use of a trademark, based upon nominative use, the use must
satisfy the following three part test: "First, the product or service in
question must be one not readily identifiable without use of the trademark;
second, only so much of the mark or marks may be used as is reasonably necessary
to identify the product or service; and third, the user must do nothing that
would, in conjunction with the mark, suggest sponsorship or endorsement by the
However, the Appeals Court held that Welles' use of "PMOY 81" is not
nominative and remanded for a determination of whether it infringes on a PEI
The Appeals Court also affirmed on the trademark dilution claims. It stated that
"nominative uses, by definition, do not dilute the trademarks."
Trademark Law and the Free Flow of Information on the Internet. The
Appeals Court's analysis of the first prong of the New Kids test in the
context of meta tags may be noteworthy. "Forcing Welles and others to use
absurd turns of phrase in their metatags, such as those necessary to identify
Welles, would be particularly damaging in the internet search context. Searchers
would have a much more difficult time locating relevant websites if they could
do so only by correctly guessing the long phrases necessary to substitute for
trademarks. We can hardly expect someone searching for Welles' site to imagine
the same phrase proposed by the district court to describe Welles without
referring to Playboy -- ``the nude model selected by Mr. Hefner's
organization . . . .´´ Yet if someone could not remember
her name, that is what they would have to do. Similarly, someone searching for
critiques of Playboy on the internet would have a difficult time if internet
sites could not list the object of their critique in their metatags."
The Court concluded that "There is simply no descriptive substitute for the
trademarks used in Welles' metatags. Precluding their use would have the
unwanted effect of hindering the free flow of information on the internet,
something which is certainly not a goal of trademark law." However, the
Court stopped short of stating that promoting the free flow of information on
the Internet is a goal of trademark law.
8th Circuit Rules in Antitrust Case
2/1. The U.S.
Court of Appeals (8thCir) issued its opinion [PDF] in
v. Radio Shack, a price fixing antitrust case involving the
marketing of satellite TV services. Affirmed.
Facts. Ozark Heartland Electronics was a retail electronics store in
Missouri affiliated with Radio Shack, a
retail electronics chain. Primestar provided satellite television service.
Primestar distributed the satellite television service to consumers through its
Partner Affiliate Distributors (PADs). Primestar has since been acquired by DirecTV.
Radio Shack entered into a marketing agreement with Primestar under which Radio
Shack and its affiliated stores would promote Primestar's satellite TV service
to consumers on behalf of Primestar's PADs. The agreement authorized
participating Radio Shack stores to display the Primestar service, solicit
subscribers, answer customer inquiries, and collect from subscribers a
prepayment on the local PADs' installation fee. Primestar suggested a prepayment
fee of $149.
Ozark participated in this Radio Shack marketing campaign. However, it only
charged a $99 prepayment fee, to undercut competitors' prices. Radio Shack then
stripped Ozark of its authority to sign new Primestar subscribers.
District Court. Ozark and Boone filed a complaint in U.S. District Court (WDMO) against Radio
Shack, Primestar, and others alleging resale price maintenance, in violation of
the Sherman Act, 15 U.S.C.
§ 1, and breach of contract and tortious interference with contract
under Missouri state law. The District Court granted summary judgment to
Court of Appeals. The 8th Circuit affirmed. It wrote that "The
Sherman Act imposes liability on manufacturers who fix the minimum price at
which buyers must resell their products. ... But this rule does not apply when a
manufacturer directs his agent to sell at a particular price." It found
that Ozark was Primestar's agent, and hence, there was no antitrust violation.
FCC Commissioner Martin Addresses Spectrum Management
2/1. FCC Commissioner Kevin
Martin gave a speech to the Federal Communications Bar Association in
Washington DC. Among the issues which he addressed were spectrum management and
Spectrum Management. He stated that "recent technological changes
allow us to take sharing to new levels. Satellite and terrestrial sharing
scenarios, once believed impossible, are now becoming more realistic.
Sophisticated ultrawideband technology -- promising to deliver data at faster
speeds and lower power – can potentially co-exist with spectrum users in any
frequency. Software defined radios allow quick modification to transmit and
receive on any frequency and in any desired transmission format. Priority access
capability allows for flexibility for a higher valued use some of the time,
without having to dedicate specific frequencies to those uses all of the time.
And DoD's “XG” program -- which focuses on Next Generation communications
devices to support military deployment -- seeks to produce even further advances
in spectrum sharing technology through dynamic assignment of frequency, time and
Martin continued that "Our spectrum management objective should be to
create incentives for the efficient utilization of this valuable resource at
every given point in time, by both established users and new entrants. What the
Commission can do now to further these goals is set policies that make sharing
easier, and even desirable. For example, a robust secondary market for spectrum
and flexible allocations can create strong incentives for making use of excess
Copy Protection. Marting stated that "The movie studios,
broadcasters, cable industry, and consumer electronics industry need to reach an
agreement on how digital content will be protected, and what rights consumers
will retain to make personal recordings. With Ken Ferree and Rick Chessen's
leadership, we've had several industry wide meetings on this issue that I
understand brought the sides closer together. But they’re not there yet, and
the lack of progress is seriously impeding the availability of digital content
-- and thwarting any progress in the transition. If further progress is not made
soon, the Commission may need to become more directly involved."
NTIA Reports on Spectrum Use by Energy, Water and RR
2/1. The National Information and
Telecommunications Administration (NTIA) released a report [93
pages in PDF] titled "Current and Future Spectrum Use by the Energy, Water,
and Railroad Industries".
This NTIA report states that "the energy, water, and railroad industries
use spectrum between 20 megahertz (MHz) and 25 gigahertz (GHz). Although they
use numerous frequencies in a variety of bands, all three industries agreed and
informed NTIA that spectrum currently used is either congested or quickly
approaching critical mass, thus leading to problems of interference."
Moreover, industry commenters assert that "additional spectrum is
However, the report continues that since it was "based predominantly on
comments received from the industry and public, and information from federal
agencies with oversight or regulatory authority over these industries, NTIA is
unable to validate specific requirements and issues highlighted herein, such as
exclusivity and congestion. However, NTIA suggests some of these issues may be
addressed or mitigated with the use of advanced communications technology or
newly allocated frequency bands, such as the 700 MHz guard bands.
The FCC is responsible for managing the spectrum used by the private sector
industries, as well as state and local governments. Hence, the NTIA can only
report recommendations to the FCC in this area. The NTIA report recommends that
"it is of utmost importance that the Federal Communications Commission
revisit these critical issues in order to accommodate the increasing role these
industries play in maintaining quality of life."
AAI Seeks to Enjoin Microsoft Settlement
2/1. The American Antitrust
Institute (AAI) filed a motion [PDF] for a
preliminary injunction with the U.S.
District Court (DC) in the case AAI
v. Microsoft and DOJ. See also, memorandum in support.
On January 24, the AAI filed a complaint [PDF]
against Microsoft and the Department of Justice (DOJ) seeking declaratory
relief pursuant to 15
U.S.C. § 16(b), which is also known as the Tunney Act. In the complaint,
the AAI seeks to compel Microsoft and the DOJ to disclose further information
about their Proposed
Final Judgment (PFJ), which the AAI opposes. In the motion for a preliminary
injunction, the AAI seeks to enjoin the DOJ "from closing the period which
public comments may be submitted to and considered by the Justice Department
under the Tunney Act pending this Court’s ruling on the merits of AAI's
The Tunney Act provides, in part, that "Any proposal for a consent judgment
submitted by the United States for entry in any civil proceeding brought by or
on behalf of the United States under the antitrust laws shall be filed with the
district court before which such proceeding is pending and published by the
United States in the Federal Register at least 60 days prior to the effective
date of such judgment."
The Act further provides that "the United States shall file with the
district court ... a competitive impact statement which shall recite (1) the
nature and purpose of the proceeding; (2) a description of the practices or
events giving rise to the alleged violation of the antitrust laws; (3) an
explanation of the proposal for a consent judgment, including an explanation of
any unusual circumstances giving rise to such proposal or any provision
contained therein, relief to be obtained thereby, and the anticipated effects on
competition of such relief; (4) the remedies available to potential private
plaintiffs damaged by the alleged violation in the event that such proposal for
the consent judgment is entered in such proceeding; ..."
The AAI complaint asserts that the DOJ's competitive impact statement must be
amended "(1) to include an explanation of why certain remedies previously
pursued by the Justice Department were abandoned; (2) to include an explanation
of the Justice Department’s evaluation and comparison of the remedies
that are being pursued in the PFJ and the various alternative remedies that are
not; and (3) to include an explanation of how the PFJ will affect private
Jonathan Zuck, President of the Association
for Competitive Technology (ACT), offered this reaction to the AAI's motion:
"We hope that Judge
Kotelly rules on this Oracle funded
legal stunt quickly, so that she can dismiss it and go back to concentrating on
the real legal issues before her. These continued efforts to delay settlement
are only harming the industry and consumers."
2/1. The Federal Trade Commission (FTC)
published a notice
in the Federal Register regarding its settlement with Eli Lilly. Eli Lilly accidentally disclosed
the e-mail addresses of 669 subscribers to a Prozac related e-mail list. The
settlement requires Eli Lilly to establish a security program. This notice sets
a deadline of February 19, 2002 for public comments on the proposed consent
agreement. See, Federal Register, February 1, 2002, Vol. 67, No. 22, at Pages
4963 - 4964.
People and Appointments
2/1. BT announced the appointment of Ian Livingston as group finance
director. He previously worked as Finance Director at Dixons Group plc. See, BT
2/1. The FCC now has a web page for its
Homeland Security Policy Council (HSPC).
2/1. The U.S.
Court of Appeals (8thCir) issued its opinion [PDF] in
Green v. Ameritrade, a case involving preemption and jurisdiction
under the Securities Litigation Uniform Standards Act (SLUSA).
2/1. The Copyright Office published
in the Federal Register listing the arbitrators eligible for service on a
Copyright Arbitration Royalty Panel (CARP) during 2002 and 2003. See, Federal
Register, February 1, 2002, Vol. 67, No. 22, at Pages 5000 - 5001.
2/1. The World Trade Organization (WTO)
announced that its Trade
Negotiations Committee (TNC) reached an agreement on the structure of the
negotiations launched at Doha, Qatar. The WTO stated in a release that
"The TNC agreed there should be seven negotiating bodies, on agriculture,
services, non-agricultural market access, rules, trade and environment,
geographical indications for wines and spirits under the agreement on Trade
Related Intellectual Property and reform of the Dispute Settlement
Understanding. Negotiations on agriculture, services, environment, TRIPS, and
the DSU reform will all be conducted in Special Sessions of the regular
committees and councils where these issues are discussed. New negotiating groups
will be created for negotiations in non-agricultural market access and