|News from June 6-10,
Divided En Banc 5th Circuit Reverses in Veeck v. SBCCI
6/10. The U.S. Court of Appeals (5thCir)
issued it en
banc opinion in Veeck
v. SBCCI, a case involving whether a copyrighted work loses it
protection when adopted into law. The court split 9-6.
Background. The Southern Building Code
Congress International (SBCCI) is a nonprofit organization that develops,
promotes, and promulgates model building codes. Local governments, in turn,
enact its codes into law by reference, in whole, or in part. SBCCI asserts a
copyright in each of its codes. Peter Veeck, who also uses the name Texoma
Regional Web, operates a web site
that contains information about North Texas. Several towns in North Texas have
adopted SBCCI model codes. Veeck purchased from SBCCI CDs with copies of the
building codes. In disregard of the software license and copyright notice, Veeck
copied and published these building codes into his web site.
District Court. Veeck filed a complaint in U.S.
District Court (EDTex) against SBCCI seeking a declaratory judgment that his
actions did not violate the Copyright Act. SBCCI counter claimed for copyright
infringement. The Court ruled on cross motions for summary judgment that Veeck
had infringed valid copyrights, and permanently enjoined Veeck from further
Appeals Court - Three Judge Panel. A divided three judge panel affirmed
in an opinion
issued on February 2, 2001. The majority wrote that "if code writing groups
like SBCCI lose their incentives to craft and update model codes and thus cease
to publish, the foreseeable outcome is that state and local governments would
have to fill the void directly, resulting in increased governmental costs as
well as loss of the consistency and quality to which standard codes aspire. A
second glance at the names of the amici supporting SBCCI's position in this case
provides an idea of the potential sweep of a contrary holding that the authors
of model codes could not enforce copyrights in their works once the ultimate
reason for their very creation is realized." See also, TLJ story, 5th Circuits Affirms
Judgment of Internet Copyright Infringement, February 5, 2001.
Appeals Court - En Banc. A divided en banc panel reversed. Judge Edith
Jones wrote the opinion for the majority of nine.
The Court wrote that "As the organizational author of original works, SBCCI
indisputably holds a copyright in its model building codes. ... The question
before us is whether Peter Veeck infringed SBCCI's copyright on its model codes
when he posted them only as what they became -- building codes of Anna and
Savoy, Texas -- on his regional website. Put otherwise, does SBCCI retain the
right wholly to exclude others from copying the model codes after and only to
the extent to which they are adopted as ``the law´´ of various
First, the Court held that Supreme Court precedents of Banks v. Manchester,
128 U.S. 244, 9 S.Ct. 36 (1888) and Wheaton v. Peters, 33 U.S. (8 Pet.)
591 (1834) support Veeck. Both cases involved claims by reporters to hold
copyrights in their published copies of court opinions. The Supreme Court held
in these cases that judges, as public officials, cannot claim to be authors of
their official opinions for the purpose of copyright protection. The Supreme
Court denied copyright protection to the court reporters.
The Fifth Circuit wrote that it extended this reasoning to the present case. It
wrote that "we hold that when Veeck copied only ``the law´´ of
Anna and Savoy, Texas, which he obtained from SBCCI's publication, and when he
reprinted only ``the law´´ of those municipalities, he did not infringe
SBCCI's copyrights in its model building codes."
Second, the Court held that the Copyright Act and the merger doctrine support
Veeck. The Court wrote that "The statute excludes from copyright protection
ideas, procedures, processes, systems methods of operation, or information in
the public domain. See 17
U.S.C. § 102(b) ... If an idea is susceptible to only one form of
expression, the merger doctrine applies and § 102(b) excludes the
expression from the Copyright Act. ... Veeck copied the building code of the
towns of Anna and Savoy, Texas, based on their adoption of a version of the
SBCCI model code. The codes are ``facts´´ under copyright law. They are the
unique, unalterable expression of the ``idea´´ that constitutes local
Third, the Court wrote that judicial precedent from other supports Veeck. In
particular, the Court distinguished two cases based on similar facts. In CCC
Info. Servs. v. Maclean Hunter Mkt. Reports, Inc., 44 F.3d 61 (2d Cir.
1994), cert. denied, 516 U.S. 817 (1995), the Second Circuit upheld the
copyright of a privately prepared listing of automobile values that states
required insurance companies to use. In Practice Mgt. Info. Corp. v. American
Med. Ass'n, 121 F.3d 516 (9th Cir. 1997), cert. denied, 522 U.S. 933
(1997), opinion amended by 133 F.3d 1140 (9th Cir. 1998), the Ninth
Circuit held that the American Medical Association did not lose the right to
enforce its copyright when use of its promulgated coding system was required by
government regulations. In the present case, the Court distinguished the
legislative act of reference from the legislative act of incorporation.
Dissents. Both Judges Patrick Higginbotham and Weiner wrote dissents.
Higginbotham criticized the opinion of the Court as "federal common
law". He added that "the Congress is best suited" to reach
conclusions such as that of the majority.
He also wrote that the majority misinterpreted the Supreme Court's holding in
Banks: "Banks holds that judges, as public employees, cannot have a
financial interest in the fruits of their judicial labors. It is a case about
authorship, about the acquiring of copyrights by public officials, not a case
invalidating the copyrights held by private actors when their work is licensed
by lawmakers." He also rejected the merger argument as mere "word
Weiner wrote a voluminous and adamant dissent joined by five other judges. He
differed with the majority on nearly everything, except its statement of the
facts, which he nevertheless amply amended. He wrote that the majority
misinterpreted Supreme Court precedent, misinterpreted cases from other
Circuits, and misapplied the doctrine of merger. He also wrote at length about
the policy implications.
He wrote that "Today, the trend toward adoption of privately promulgated
codes is widespread and growing, and the social benefit from this trend cannot
be seriously questioned. The necessary balancing of the countervailing policy
concerns presented by this case should have led us to hold that, on these
facts, the copyright protection of SBCCI's privately authored model codes
did not simply evanesce ipso facto, when the codes were adopted by
local governments; rather, they remain enforceable, even as to non-commercial
copying, as long as the citizenry has reasonable access to such publications cum
law -- and subject, of course, to exceptions for implied or express waiver or
consent, fair use, or other recognized exceptions, when applicable. For these
reasons, I cannot join in the majority's inflexible reasoning and unnecessarily
Certiorari. This case may be a likely candidate for review by the Supreme
Court. The Fifth Circuit divided nearly evenly. This opinion arguably creates a
conflict between the Fifth Circuit, and the First, Second and Ninth Circuits.
Finally, the Supreme Court recently demonstrated an interest in the copyright
clause by granting certiorari in Eldred v. Ashcroft.
Supreme Court Denies Certiorari in Trans Union v. FTC
6/10. The Supreme Court denied
certiorari in Trans
Union v. FTC, a case regarding the sale of consumer reports by
credit reporting agencies for marketing purposes, the Fair
Credit Reporting Act (FRCA), and the application of the First Amendment to
Trans Union (TU) is one of the three large
credit reporting agencies. It compiles credit reports about individuals from
credit information that it collects from banks, credit card companies, and other
lenders. Its databases contain information on 190 Million people. It then sells
these credit reports to lenders, employers, and insurance companies. This
practice was not at issue. However, TU also sells target marketing products to
direct marketers. These consist of lists of names and addresses of individuals
who meet specific criteria, such as possession of an auto loan, a department
store credit card, or two or more mortgages. This practice was at issue.
Trade Commission (FTC) has responsibility for enforcing the FCRA. This
statute protects the privacy of credit information by prohibiting credit
reporting agencies from selling "consumer reports", except under the
circumstances enumerated in the Act. The FRCA lists whether to approve an
application for credit, employment, or insurance -- but not direct marketing.
The FRCA defines a "consumer report" as any information provided
"by a consumer reporting agency bearing on a consumer's credit worthiness,
credit standing, credit capacity, character, general reputation, personal
characteristics, or mode of living which is used or expected to be used or
collected in whole or in part for the purpose of serving as a factor in
establishing the consumer's eligibility for (A) credit ..."
The FTC instituted a proceeding against TU in 1992. The FTC first issued a cease
and desist order
in 1994. However, the Court of Appeals granted TU's petition for review, on the
grounds that the FTC had failed to provide evidence that TU's target marketing
products were used by marketers in the issuance of credit. See, Trans Union
Corp. v. FTC, 81 F.3d 228 (DCCir 1996). So, the FTC conducted extensive
discovery, held a month long administrative trial, and documented this
contention. It again ordered TU to stop.
TU again filed a petition for review with the U.S.
Court of Appeals (DCCir). On April 13, 2001, the Appeals Court issued its opinion
upholding the FTC's order that TU must stop selling target marketing lists for
purposes not listed in the Fair Credit Reporting Act (FRCA). The
Appeals Court also upheld the constitutionality of the FRCA.
First, TU argued, among other things, that the FRCA is unconstitutionally vague
under the due process clause of the Fifth Amendment, and that it is an
unconstitutional restraint on free speech. TU sought application of the strict
scrutiny standard. The Appeals Court upheld the FRCA's constitutionality,
applying the reduced constitutional protection standard for commercial speech
articulated by the Supreme Court in Dun & Bradstreet v. Greenmoss, 472 U.S. 749
TU filed a petition for writ of certiorari with the Supreme Court. The Court
denied certiorari. However, two justices, Kennedy and O'Connor, wrote an opinion
[PDF] dissenting from the denial of certiorari. They wrote that "this case
meets the standards for review by this Court. The plurality opinion in Dun
& Bradstreet concluded that a false statement in a credit report was not
speech on a matter of public concern, as that term is used in the context of
defamation law. It is questionable, however, whether this precedent has any
place in the context of truthful, nondefamatory speech. Indeed, Dun &
Bradstreet rejected in specific terms the view that its holding ``eaves all
credit reporting subject to reduced First Amendment protection.´´ ... The
Court of Appeals, nonetheless, relied on Dun & Bradstreet to
denigrate the importance of this speech. A grant of certiorari is warranted to
weigh the validity of this new principle."
GAO Reports Info Security Weaknesses at Corps of Engineers
6/10. The General Accounting Office (GAO)
released a report [PDF]
titled "Information Security: Corps of Engineers Making Improvements, But
The report concludes that "continuing and newly identified vulnerabilities
involving general and application computer controls continue to impair the
Corps' ability to ensure the reliability, confidentiality, and availability of
financial and sensitive data. These vulnerabilities warrant management’s
attention to decrease the risk of inappropriate disclosure and modification of
data and programs, misuse of or damage to computer resources, or disruption of
critical operations. Such vulnerabilities also increase risks to other
Department of Defense (DOD) networks and systems to which the Corps' network is
BIS/BXA Announces NOI Re TSR MTOPS
6/10. The Bureau of Industry and Security
(BIS), formerly known as the Bureau of Export Administration (BXA), published a notice
in the Federal Register regarding a notice of inquiry (NOI) regarding "the
current limit for use of License Exception TSR for exports and reexports of
technology and software on the Commerce Control List (CCL) of the Export
Administration Regulations (EAR) under Export Classification Control Numbers (ECCNs)
4D001 and 4E001".
The notice further states that "These ECCNs control technology and software
that can be used for the development, production, or use of computers. The goal
of this notice of inquiry is to collect information from industry that will
assist BIS in evaluating whether the current TSR eligibility level of 33,000
Millions of Theoretical Operations per Second (MTOPS) for exports and reexports
to most countries should be adjusted, taking into consideration the control
level for the export of computer equipment and the control policies of other
member countries of the Wassenaar Arrangement."
Public comments are due by July 10, 2002. See, Federal Register, June 10, 2002,
Vol. 67, No. 111, at Pages 39675 - 39676.
SEC Files Suit for Misstatement of Financial Results
6/10. The Securities and Exchange Commission
(SEC) filed a civil complaint in
U.S. District Court (DC) against
Kenneth Kurtzman and Brian Bergeron alleging violation of federal securities
laws in connection with the misstatement of Ashford.com's financial results, by
improperly deferred $1.5 Million in expenses under a contract with Amazon.com.
The complaint alleges violation of §§ 10(b), 13(a), 13(b)(2)(A) and 13(b)(5)
of the Exchange Act and Rules 10b-5, 12b-20, 13a-1, 13a-13, 13b2-1 and 13b2-2
thereunder. The complaint seeks civil penalties.
The SEC also announced that "Kurtzman and Bergeron consented, without
admitting or denying the allegations in the Commission's complaint, to pay civil
penalties of $60,000 and $25,000, respectively." See, SEC release.
The SEC also instituted and settled an administrative proceeding against
Kurtzman, Ashford.com, and Amazon.com. See, Order Instituting
Proceedings. The Order alleges that "The Amazon.com employees ...
should have known that the purpose of splitting the settlement into two letters
was to allow Ashford.com to delay the recognition of expenses. Amazon.com's
acquiescence in a settlement documented with two letters facilitated
Ashford.com's improper deferral of expenses." The SEC did not allege a
Section 10 violation by Amazon.
PPI Releases 2002 State New Economy Index
6/10. The Progressive Policy Institute (PPI)
released a report
titled "The 2002 State New Economy Index:
Benchmarking Economic Transformation in the States". This is another in a
series of reports by the PPI on the extent to which each state has embraced the
New Economy. See also, PPI
The report ranks each state according to 21 economic indicators, and provides a
cumulative ranking. This report updates data from the last such report in 1999,
and includes several new indicators, including a measure of broadband Internet
The top five states, in order, are Massachusetts, Washington, California,
Colorado and Maryland. Virginia ranks 8th. New York ranks 10th. Texas ranks
14th. Illinois ranks 17th. The bottom five states are West Virginia,
Mississippi, Arkansas, Alabama and Wyoming. Most of the states in the bottom
half of the ranking are in the south, plains and mountain states.
The index is based upon 21 indicators. Several pertain to the knowledge jobs:
employment of IT professionals; jobs held by managers, professionals, and
technicians; the educational attainment of the entire workforce; and the
education level of the manufacturing workforce. Several indicators pertain to
economic dynamism, including the number of fast growing companies (20% or more
for four straight years), the rate of economic churn, and the value of IPOs.
Other indicators measure digital transformation, including the percentage of the
population online, the number of .com domain name registrations, technology in
schools, the degree to which state and local governments use information
technologies to deliver services, Internet and computer use by farmers, Internet
use by manufacturers, and access by residents and businesses to broadband
The index also includes measures of the number of jobs in technology producing
industries, the number of scientists and engineers in the workforce, the number
of patents issued; industry R&D, and venture capital activity.
The report was written by Robert Atkinson,
with research assistance by Rick Coduri.
People and Appointments
6/10. Mary Snapp was named Microsoft's Vice President of Law and
Corporate Affairs, reporting to incoming General Counsel Brad Smith. See, MSFT
6/10. Elias Cortez resigned from his position as Director of the California Department of Information Technology
(DOIT). See, resignation
6/10. The Supreme Court denied certiorari in Visa USA v. Wal-Mart Stores,
No. 01-1464, without opinion. See, Order
List [PDF], at page 9. See also, October 17, 2001, opinion of
the U.S. Court of Appeals (2ndCir).
6/10. The Business Software Alliance (BSA)
stated in a release
that it commissioned a study of international software piracy rates that
concluded that global piracy grew to 40% last year.
6/10. The U.S.
Court of Appeals (5thCir) issued its opinion
De Acero De Mexico v. American International Investment Corp., a
case arising out of a lease of ultrasonic testing pipe inspection equipment used
in the offshore oil industry. There were numerous commercial law issues on
appeal, including application of the Louisiana Uniform Trade Secrets Act (LUTSA).
6/10. Federal Trade Commission (FTC) Chairman
Timothy Muris gave a speech
titled "On the Occasion of the
Celebration of the Twentieth Anniversary of the 1982 Merger Guidelines" at
the Department of Justice in Washington DC.
9th Circuit Interprets Contract to Publish Legal Treatise
6/7. The U.S.
Court of Appeals (9thCir) issued its opinion
[PDF] in Chodos
v. West Publishing Company, a dispute regarding a contract to
publish a legal treatise. The Appeals Court reversed the District Court's
summary judgment for West.
Background. Rafael Chodos is a
software engineer turned attorney who wrote a lengthy book on the law of
fiduciary duty in electronic format. In 1995 Bancroft Whitney Corporation and
Chodos entered into an standard Author Agreement, which provided for no payments
to Chodos prior to publication, and a 15% share of the gross revenues from sales
of the work. The Agreement gave Bancroft "the right in its discretion to
terminate" the publishing relationship after receiving the manuscript and
determining that it is unacceptable.
In 1996 West Publishing Group purchased
Bancroft. West's editors continued to work with Chodos. In 1999 West notified
Chodos that it had decided not to publish the book because it did not "fit
within [West's] current product mix" and because of concerns about its
"market potential." West admitted that the manuscript was of
"high quality" and that its decision was not due to any literary
shortcomings. Chodos's product for West was 1247 pages long. He spent three
years and over 3,000 hours working on it.
Proceedings Below. Chodos filed a complaint in California state court
(Los Angeles Superior Court). West removed the action to the U.S. District Court (CDCal) based upon
diversity of citizenship. Chodos sought recovery in quantum
meruit. The District Court granted summary judgment to West.
Appeals Court. The Appeals Court stated that the issue is whether "a
publisher retains the right to reject an author's manuscript written pursuant to
a standard industry agreement, even though the manuscript is of the quality
contemplated by both parties." The Court held that a publisher does not.
Chodos raised two alternative theories. First, he argued that the contract was
illusory, on the grounds that it violated the doctrine of mutual obligation.
Second, he argued in the alternative, that if the contract is valid, West
The Court held that the contract was not illusory. Applying California law
(pursuant to choice of law clause in the agreement), the Court stated that
"a covenant of good faith and fair dealing is an implied term in every
contract", and that "a court will not find a contract to be illusory
if the implied covenant of good faith and fair dealing can be read to impose an
obligation on each party". The Court held that "because the standard
Author Agreement obligates the publisher to make a judgment as to the quality or
literary merit of the author's work -- to determine whether the work is
``acceptable´´ or ``unacceptable´´ -- it must make that judgment in good
faith, and cannot reject a manuscript for other, unrelated reasons."
Having held the contract to be valid, the Court further held that West breached
it. The Court articulated that Chodos "was induced by an agreement that
permitted rejection of the completed manuscript only for deficiencies in ``form
and content.´´ Chodos thus labored to complete a work of high quality with the
expectation that, if he did so, it would be published. He devoted thousands of
hours of labor to the venture, and passed up substantial professional
opportunities, only for West to decide that due to the vagaries of its internal
reorganizations and changes in its business strategies or in the national
economy or the market for legal treatises, his work, albeit admittedly of high
quality, was for naught. It would be inequitable, if not unconscionable, for an
author to be forced to bear this considerable burden solely because of his
publisher's change in management, its poor planning, or its inadequate financial
analyses at the time it entered into the contract, or even because of an
unexpected change in the market place."
And, the Court held that "to allow a publisher to escape its contractual
obligations for these reasons would be directly contrary to both the language
and the spirit of the standard Author Agreement."
Hence, the Appeals Court reversed, and remanded to the District Court with
instructions to allow Chodos to proceed in quantum meruit if damages are not
determinable under the contract.
Epilogue. Chodos's book, The
Law of Fiduciary Duty, has been published, but not by a major legal book
6/7. The Customs Service published a notice
in the Federal Register regarding a notice of proposed rulemaking (NPRM) to
amend the Customs Regulations pertaining to the importation of merchandise
bearing a counterfeit mark to clarify the limit on the amount of a civil fine
which may be assessed. Comments are due by August 6, 2002. See, Federal
Register, June 7, 2002, Vol. 67, No. 110, at Pages 39321 - 39322.
6/7. The Federal Communications Commission
(FCC) released its Order
on Reconsideration [PDF] in its preceding titled "In the Matter of
Preemption of Local Zoning Regulation of Satellite Earth Stations",
dismissing nine petitions for reconsideration of the FCC's 1996 Antenna Report
and Order. This order amended FCC rules to create a rebuttable presumption that
local regulations that impose restrictions affecting the installation, use and
maintenance of satellite earth station antennas one meter or less in any area or
two meters or less in commercial or industrial areas, were unreasonable and
would be preempted. Subsequently, the FCC's OTARD Order eliminated provisions
regarding satellite antennas that are one meter or smaller and used to receive
video programming. This is IB Docket No. 95-59.
Commission Holds Hearing on China's Compliance with WTO
6/6. The Congressional Executive
Commission on China held a hearing titled "WTO: Will China Keep its
Promises? Can it?" Participants addressed, among other things, China's
compliance with intellectual property rights (IPR) related obligations
associated with membership in the World Trade
Chris Murck, Chairman of the American
Chamber of Commerce in Beijing, addressed intellectual property rights at
length in his prepared
statement. He stated "We thus see a mixed picture: progress with
respect to IPR law and policy, but continued failure to make enforcement
effective. AmCham China is convinced that this problem will eventually be
brought under control, because there are strong local interests in doing so.
Chinese companies are damaged more than foreign companies by IPR violations and
they know it. The Chinese government finds its economic ambitions hindered by
its IPR environment and it is trying to change it."
He explained that "Intellectual property rights were not recognized in
Chinese law in 1979, and a pattern of rampant violations of copyrights,
trademarks and patents soon became a problem for foreign investors. Pressure
from the United States, the European Union and others had some effect in
changing Chinese policy statements, but these were somewhat grudging and were
not reflected in changes on the ground. In the last three years, however, the
policy debate on this question has been won. A study by the Ministry of Information Industry
identified copyright violations as the single biggest obstacle to the
development of a Chinese software industry. This was followed by State Council
regulations in 1999 requiring all government offices to use legal software and
again in 2000 requiring all entities, including enterprises, to do the same and
demanding enhanced, coordinated enforcement of the law."
"Substantial revisions have been made in copyright, trademark and patent
laws. While further improvements could be suggested, in general the legal
framework is close to international standards and capacity building continues,
often with foreign assistance," wrote Murck.
He continued that "There have been recent court victories in copyright
cases as well, such as a case involving an internet domain name squatter where
the rights of the foreign company were firmly upheld."
He cautioned, however, that "these positive examples do not reflect the
general situation. China is not a single economy; it is a group of large,
disparate regional economies. Although the central government can be described
as authoritarian, its ability to control what happens in local areas is
limited." And, he added, "In response, our member companies are
shifting their focus from the content of the laws to problems of
Murck also stated that "One of the unanticipated consequences of WTO
accession is likely to be an increase in the export of counterfeit goods
manufactured in China to the rest of the world."
Clarke, a Professor of Law, University
of Washington, pointed out in his prepared statement
that "the requirements of the WTO agreements for fairness and transparency
are in fact surprisingly limited." However, he added that "The only
WTO agreement that comes close to a general requirement of fairness in the
operation of the legal system is the TRIPS Agreement.
This agreement does indeed set forth in Part III (``Enforcement of Intellectual
Property Rights´´) a number of requirements for fair judicial proceedings for
the protection of intellectual property rights."
He also stated that "The area of the Chinese legal system that will
probably cause the most difficulty is its present inability to provide, at least
on a consistent basis, truly independent review of administrative actions. The
financial dependence of courts on local government is compounded first by the
lower political status of judges relative to many of the officials whose actions
they will be called upon to judge, and second simply by the tradition of
judicial deference to administration."
Sen. Max Baucus (D-MT), Chairman of the
Commission, said in his prepared statement
that "We are at an early stage in China's process of WTO adherence and
commercial law transformation. Clearly, senior Chinese leaders are committed.
National bodies have begun to reform and adjust thousands of laws, regulations,
and judicial decisions that are not WTO compliant."
However, Sen Baucus added that "there have been mixed signals as to whether
the Chinese government is willing, or able, to adhere to all of the commitments
it has made. For example, while tariffs have been reduced and quotas have been
eliminated in some industries, there are reports that equally protective
non-tariff barriers have been erected in their place. Sanitary and phyto
sanitary standards have still been used in some areas with no scientific basis.
Regulations that were supposed to be in effect at accession have not been
Susan Westin, of the General Accounting Office
(GAO), provided a report
[PDF] titled "World Trade Organization: Observations on China's Rule of Law
Reforms". The GAO has conducted a survey of U.S. businesses. The report
states that "According to the preliminary results of our survey, U.S.
businesses in China consider rule of law related WTO commitments to be important
to them, especially the consistent application of laws, regulations, and
practices in China, and enforcement of intellectual property rights. However, a
majority of businesses answering our survey anticipated that these rule of law
commitments would be difficult for the Chinese to implement, and they identified
some concerns over specific implementation issues. U.S. businesses told us in
interviews that they expected WTO reforms, including those related to the rule
of law, to be part of a long term process. Nevertheless, they believe the
Chinese leadership is dedicated to living up to their WTO commitments."
Jon Huntsman, Deputy U.S. Trade Representative
(USTR), said in his prepared
testimony that "we have seen China take a good faith approach to its
WTO membership and make significant efforts to implement its commitments. China
has made substantial tariff reductions on industrial and agricultural goods of
importance to U.S. businesses and farmers. It has begun to take concrete steps
to remove non-tariff trade barriers in virtually every product sector. It has
begun to implement far reaching services commitments that should substantially
increase market access for U.S. services suppliers. It has also repealed
hundreds of trade related laws, regulations and other measures and modified or
adopted numerous other ones in an effort to become WTO compliant in areas such
as import and export administration, standards and intellectual property rights,
among many others." However, he added that "There have also been some
bumps in the road", such as biotechnology regulations.
Grant Aldonas, Under Secretary of Commerce for International Trade, said in his prepared statement,
"Yes, I believe that China can and will seek to keep its promises, and we
should do whatever we can to help." He also provided an IPR anecdote. He
said that "We met with representatives of the Shanghai Film Studio, where we were
told that piracy of optical disks was hurting their sales in China. It was
fascinating to discover that we have a new ally in our work to enhance
enforcement of intellectual property rights (IPR) protection in China and
elsewhere. We saw the Shanghai Model Port
Project -- an APEC initiative that demonstrates how Customs officials can
use technology to facilitate trade and protect IPR."
See also, prepared statements of Jeff Fiedler
(Food and Allied Service Trades Department, AFL-CIO), and Rep. Marcy Kaptur
Senate Committee Holds Hearing on Export
Controls in Russia and China
6/6. The Senate Governmental
Affairs Committee's Subcommittee on International Security, Proliferation,
and Federal Services held a hearing titled "Russia and China --
Non-proliferation Concerns and Exports Controls". The hearing addressed how
well Russia and China comply with nonproliferation agreements and enforce export
controls, particularly with respect to weapons of mass destruction.
See, prepared statements in PDF of witnesses: James Wolf
(Assistant Secretary, Bureau of Non-proliferation
Department of State), Matthew Borman
(Deputy Administrator, Bureau of Industry and Security, Department of Commerce),
(Monterey Institute for International Studies), David Albright
(Institute for Science and International Security), and Gary Milholin
(Wisconsin Project for Nuclear Arms Control). See also, opening
statement [PDF] and closing
statement of Sen. Daniel Akaka
Borman stated that "Russia enacted an export control law in 1999. This law
authorizes control over the export of all items (commodities, software, and
technology) on the lists of the four multilateral export control regimes and
chemicals covered by the Chemical Weapons Convention." However, he said
that "Russia's most significant weakness is its ability to enforce its
export control system."
Senate Judiciary Committee To Hold Hearing on FBI
6/6. The Senate Judiciary Committee
will hold an oversight hearing on counter terrorism issues on Thursday morning,
June 6. The scheduled witnesses include Federal
Bureau of Investigation (FBI) Director Robert Mueller, Department of Justice (DOJ) Inspector General
Glenn Fine, and FBI Special Agent Colleen Rowley. See, notice.
The hearing will focus on FBI investigation of terrorism prior to September 11,
2001, including the criticisms contained in Rowley's May 21 letter to Mueller.
However, the hearing may also cover the DOJ's recently released guidelines for
conducting investigations into terrorist, and other, matters. These guidelines
cover many topics, including information systems, data mining, and Internet
On May 30, the DOJ released a memorandum [PDF]
titled "Attorney General's Guidelines: Detecting and Preventing Terrorist
Attacks", and a memorandum
[PDF] titled "Shifting from Prosecution to Prevention: Redesigning the
Justice Department to Prevent Future Acts of Terrorism". See also, Attorney
General John Ashcroft's statement.
On June 4, the Electronic Privacy Information
Center (EPIC), Center for Democracy and
Technology (CDT), and other groups, wrote a letter
[PDF] to Sen. Patrick Leahy (D-VT) and Sen. Orrin Hatch (R-UT), the Chairman and
ranking Republican on the Senate Judiciary Committee. They wrote that "Your
hearing this week provides a critical opportunity to assess the impact of the
Attorney General's new guidelines."
They elaborated that "We are particularly concerned about elements of the
guidelines that appear to give the FBI the authority to search through
electronic databases without satisfying any legal standard or requiring any
After the hearing, Jerry Berman, Executive Director of the CDT, will hold a
press teleconference to discuss the hearing, and the new guidelines for FBI
investigations. See, calendar.
9th Circuit Rules on Discovery in U.S. to Support EC Antitrust
6/6. The U.S.
Court of Appeals (9thCir) issued its opinion
[PDF] in AMD
v. Intel, holding that discovery is available in the U.S.
pursuant to 28 U.S.C.
§ 1782 for a complainant in an Article 82 antitrust matter before the
Advanced Micro Devices (AMD) filed a complaint
with the Directorate
General - Competition of the European Commission alleging
that Intel violated Article
82 of the EC Treaty, which prohibits "abuse by one or more undertakings
of a dominant position within the common market." AMD then sought discovery
from Intel under 28
U.S.C. § 1782, which provides that "The district court of the district
in which a person resides or is found may order him to give his testimony or
statement or to produce a document or other thing for use in a proceeding in a
foreign or international tribunal ..."
AMD sought documents from Intel pertaining to another antitrust action in the
U.S. against Intel (Intergraph case). Intel objected. AMD sought to compel
discovery in the U.S. District Court (NDCal). The
District Court held that the EC action was not a proceeding within the meaning
of Section 1782. AMD appealed.
The Court of Appeals stated that Section 1782 is broad and inclusive and
includes quasi judicial and administrative bodies, and preliminary
investigations leading to judicial proceedings. It held that "the EC is an
administrative body and that the investigation being conducted by its
Directorate is related to a quasi- judicial or judicial proceeding. AMD has the
right to petition the EC to stop what it believes is conduct that violates the
EC Treaty, to present evidence it believes supports its allegations, to have the
EC evaluate what it presents and to have the resulting action (or inaction)
reviewed by the European courts. Although preliminary, the process qualifies as
a ``proceeding before a tribunal´´ within the meaning of 28 U.S.C. §
Moreover, the Appeals Court held that Section 1782 does not "require a
threshold showing on the party seeking discovery that what is sought be
discoverable in the foreign proceeding." The Appeals Court reversed and
remanded to the District Court.
SEC Official Addresses Internet Advisers Proposal
6/6. Paul Roye, Director of the Securities and
Exchange Commission's (SEC) Division of Investment
Management gave a speech
in New York City in which he addressed many topics related to investment
management, including the SEC's Internet advisers proposal.
He stated that "on April 12th, in response to an increasing number of
investment advisers providing advice primarily through the Internet, the
Commission proposed rule amendments under the Advisers Act that would permit an
adviser that conducts substantially all of its advisory business through an
interactive Internet website, to register with the Commission rather than
registering with all of the states. As you may be aware, under the National
Securities Markets Improvement Act's amendments to the Advisers Act, advisers
that have $25 million or more in assets under management generally register with
the Commission, and advisers that have less than $25 million generally register
with the states."
See, SEC's notice of
this proposed rule. June 6 was the close of the public comment period. See, electronically filed
Roye continued that, "However, so-called Internet advisers typically do not
have ``assets under management´´ because they provide intermittent securities
advice rather than ``continuous and regular supervisory or management services.´´
Therefore, most Internet advisers currently do not qualify to register with the
Commission. Instead, they potentially must register with all states because,
unlike a ``bricks and mortar´´ adviser, Internet advisers cannot predict from
which geographic location their clients will come."
"The Commission's proposal was driven in part by the development of
Internet technology that was not prevalent in 1997 when the NSMIA split between
federal and state registration was implemented. As part of the Chairman's
modernization effort, I believe that we should revise our rules, as necessary,
in the wake of technological developments in the marketplace," said Roye.
Commerce Department Amends Encryption Export Rules
6/6. The Department of Commerce's (DOC) Bureau of Industry and Security (BIS),
formerly known as the Bureau of Export Administration (BXA), published a notice
in the Federal Register of an interim final rule that contains numerous
amendments to the Export Administration Regulations (EAR) pertaining to
encryption export controls.
The BIS stated that "As a result of the revisions made by this rule, mass
market encryption commodities and software with symmetric key lengths exceeding
64 bits may be exported and reexported to most destinations without a license,
following a 30-day review by the Bureau of Industry and Security. In addition,
this rule expands License Exception ENC eligibility to authorize exports and
reexports of information security test, inspection, and production equipment
controlled under ECCN 5B002. Finally, this rule updates and clarifies the
notification, review, licensing, and post-export reporting requirements that
apply to certain encryption items."
The text of the rule changes are contained in the notice. See, Federal Register,
June 6, 2002, Vol. 67, No. 109, at Pages 38855 - 38869.
Agenda of June 13 FCC Meeting
6/6. The Federal Communications Commission
(FCC) released the agenda
for its Thursday, June 13, open meeting. The FCC will consider the following:
(1) a Report and Order concerning the possible sunset of Section 628(c)(2)(D).
(This is the matter titled Implementation of the Cable Television Consumer
Protection and Competition Act of 1992; Development of Competition and Diversity
in Video Programming and Distribution: Section 628(c) of the Communications Act;
Sunset of the Exclusive Contract Prohibition. CS Docket No. 01-290.)
(2) a Notice of Proposed Rulemaking and Order concerning cable television rate
(3) a Notice of Inquiry seeking information and comment for the Ninth Annual
Report to Congress on the status of competition in the market for the delivery
of video programming.
(4) a Seventh Report concerning the status of competition with respect to
Commercial Mobile Services.
(5) a Notice of Proposed Rulemaking concerning service rules for the 71-76 GHz,
81-86 GHz and 92-95 GHz.
(6) an Order modifying section 54.507(a) of FCC rules pertaining to unused
funding. (This is titled Schools and Libraries Universal Service Support
Mechanism. CC Docket No. 02-6.)
Finally, the Wireline Competition Bureau and Office of Engineering &
Technology and the National Communications System will report on the
Telecommunications Service Priority program and related outreach efforts.
FCC Creates a 271 Compliance Review Program
6/6. The Federal Communications Commission's
(FCC) Enforcement Bureau announced the
establishment of a "Section 271 Compliance Review Program" for the
Regional Bell Operating Companies (RBOCs) whose Section 271
applications to provide in region interLATA services have been approved by the
The FCC stated in a FCC
release [PDF] that a new "Section 271 Compliance Review Team will now
monitor on a more structured and systematic basis the companies' compliance with
the market opening conditions of section 271 of the Telecommunications Act of
The FCC further stated that this team "will scrutinize BOC performance data
and other pertinent information to determine whether such documentation
indicates that a BOC is continuing to meet its section 271 obligations. This
process will include regular compliance reviews six and 12 months after approval
... The Team members will also serve as a point of contact for state
commissions, competitive carriers, and other interested persons who may wish to
report informally any perceived instances of noncompliance with section 271.
Finally, if the Team determines a BOC may not be in compliance, it will initiate
an investigation and, if warranted, take or recommend appropriate enforcement
FCC Chairman Michael Powell
stated in a release
[PDF] that "Through this program, the Commission continues to demonstrate
its commitment to ensuring that the Bell Operating Companies do not abuse their
local market dominance once they receive long distance authority."
Powell Creates Task Force to Conduct Spectrum Inquiry
6/6. The Federal Communications Commission
(FCC) released a document
[7 pages in PDF] titled "Public Notice" which states that
"Chairman Powell has formed a Spectrum
Policy Task Force charged with conducting a systemic evaluation of existing
spectrum policies and with making recommendations as to possible
The Public Notice requests public comments in response to 28 spectrum related
questions. Many questions are compound and/or contain subparts. It posses questions regarding moving towards market
oriented allocations of spectrum, such as "What specific policy and rule
changes are needed to migrate from current spectrum allocations to more market
oriented allocations?" Other questions pertain to interference, efficiency use of spectrum, public safety communications,
and international issues.
Public comments are due by July 8. Reply comments are due by July 23. The Public
Notice also states that the task force will conduct public workshops in July and
August. Finally, the Public Notice states that it will issue a report in October
Chairman Michael Powell
announced in this Public Notice that Paul Kolodzy, Senior Spectrum Policy
Advisor in the Office of Engineering and
Technology (OET), will be in charge of the task force. Lauren Van Wazer,
Special Counsel to the Chief of the OET will be the Deputy Director. Michael
Marcus, Associate Chief for Technology of the OET, will be Senior Technical
Advisor. Maureen McLaughlin, Senior Counsel in the Office of General Counsel, will be Special
The Public Notice solicits public comments in response to questions, sets
deadlines for original and reply comments, and states that the task force will
then issue a report. It describes a proceeding that bears a strong resemblance
to a Notice of Inquiry (NOI) proceeding. However, unlike a NOI proceeding, it is
noticed by the Chairman, rather than by the full Commission, and the report will
be prepared by a task force appointed by the Chairman, and not approved by the
Two Commissioners are not pleased with this procedure. Kevin Martin and Michael Copps released a joint
statement [PDF]. They wrote that "Spectrum management is one of the
Commission's most important functions. It requires full Commission attention
every step of the way. Instead, in this proceeding, a newly created task force
is seeking comment on formulating policy on fundamental spectrum management
issues without direct input or oversight by the Commission. Task forces ... must
always be responsible to the full Commission as their work proceeds. These are
critically important issues, and we believe they would be better addressed in a
Notice of Inquiry issued by the Commission."
People and Appointments
6/6. David Krone will join the National
Cable & Telecommunications Association (NCTA) as Executive Vice
President, effective July 1. See, NCTA
6/6. Dan Moloney, Motorola's SVP
and General Manager of the IP Systems Group for the Broadband Communications
Sector (BCS), will become EVP and President of BCS. He will replace Dave
Robinson. See, Motorola
Go to News from June 1-5, 2002.