|News from June 16-20,
Senate Judiciary Committee Approves Patent Reexamination Bills
6/20. The Senate Judiciary Committee
approved HR 1866,
a bill to clarify the basis for granting requests for reexamination of patents,
and HR 1886,
a bill to provide for appeals by third parties in certain patent reexamination
HR 1886 affords all participants, including third party requesters, in
reexamination proceedings, judicial review before the U.S. Court of Appeals (FedCir). Currently,
only the patent owner may appeal an adverse determination. The House passed this
bill on September 5, 2001.
HR 1866 is intended to overturn the 1997 opinion of the U.S. Court of Appeals (FedCir) in In Re Portola
Packaging. In that case, the Appeals Court held that the restriction on the
scope of reexaminations to "substantial new questions" precludes the
consideration of prior art that was before the examiner. The key language of the
HR 1866 amends 35 U.S.C. §§ 303(a) and 312(a). It adds the following:
"The existence of a substantial new question of patentability is not
precluded by the fact that a patent or printed publication was previously cited
by or to the Office." The House passed this bill on September 5, 2001.
The Senate Judiciary Committee also approved an amendment in the nature of a
substitute to S 1754,
a bill to authorize appropriations for the U.S.
Patent and Trademark Office (USPTO) for FY 2002 through FY 2007.
House CIIP Subcommittee Holds Hearing on Patent Reexamination
6/20. The House Judiciary Committee's
Subcommittee on Courts, the Internet and Intellectual Property (CIIP) held an
oversight hearing titled "Patent Reexamination and Small Business
Innovation". The House has already passed two bills pertaining to
reexamination -- HR 1886 and HR 1866. Nevertheless, the hearing
addressed these two bills. The hearing also focused on the views of the
independent inventor, open source, and small business communities.
Rep. Howard Coble (R-NC), Chairman of
the Subcommittee, presided. He stated in his prepared testimony
that "Several years ago, an expanded reexamination system was proposed to
permit the fuller participation of third parties. Often, small businesses and
independent inventors are the very entities which cannot afford expensive
federal trial litigation. Yet despite the benefits of such a system and after
much debate, a slimmed down third party reexamination system was enacted. This
system, while attempting to balance all of the concerns of the diverse
interests, lacked some basic features for its use to be acceptable. In fact, it
has only been used once in the several years it has been on the books."
He also referenced HR 1886. He stated that "Last year, the
Subcommittee held two hearings and passed a modest, and badly needed bill to fix
that made the third party reexamination system fair and practical. Specifically,
accountability requires that there is the ability to appeal the decisions of the
PTO to a higher authority."
Rep. John Conyers (D-MI), the
ranking Democrat on the full Committee, expressed support for HR 1886. He
said that when the Congress last amended the reexamination provisions of the
Patent it, "we may have left out one thing." He stated that by
allowing patent owners, but not third party participants, the right to appeal,
"perhaps we have a lopsided system."
Rep. Howard Berman (D-CA), the
ranking Democrat on the CIIP Subcommittee, stated that "I am an advocate
for a more robust post grant patent reexamination procedure." He added that
current procedures "don't allow for effective challenge." He also
stated that HR 1866 and HR 1886 "constitute a good start towards
refining the inter partes reexamination process", but that they "don't
go far enough".
Rep. Berman and Rep. Rick Boucher
(D-VA) are the co-sponsors of two bills pertaining to patent procedure: HR 1333,
the Patent Improvement Act of 2001, pertaining to opposition procedures, and HR 1332,
the Business Method Patent Improvement Act of 2001. Rep. Boucher is also a
member of the CIIP Subcommittee. He did not participate in the June 20 hearing.
Rep. Marty Meehan (D-MA) stated that
"the potential for invalid patents being issued is very high," and
that this leads to uncertainty and litigation. He added that "patent
reexamination provides a low cost alternative" to litigation. However, he
added that there is "a potential for its abuse". He stated that he
supports HR 1886.
The Subcommittee heard from one panel of witnesses. Mark Webbink, VP and General
Counsel of Red Hat, an open source software
and Linux operating system provider, offered an open source community
perspective on patent law.
He stated in his prepared
testimony that "The open source community largely disdains patent
protection of software. The community does so, in part, because of a strong
perception that, by extending patent protection to software, software developers
are provided two bites at the intellectual property apple, one under copyright
and a second under patent. The open source community also believes that patents
on software have actually stifled innovation, rather than promoted it, because
software development occurs at a much more rapid pace than one finds in the
other patent arts. For example, time to market cycles for software are often
measured in months and obsolescence in less than 10 years. By contrast, the time
to market cycle alone for most pharmaceuticals is in excess of 10 years."
Webbink also stated that "the vast majority of open source software is
developed by the collaborative efforts of individuals and small businesses.
These individuals and businesses do not, for the most part, enjoy the same
degree of capitalization or financial freedom to invest in patent protection as
the large proprietary software behemoths. These small companies are at a
distinct disadvantage under the law in protecting themselves from assertions of
Consequently, Webbink concluded that "it is imperative that the patent
system, including the system for seeking reexamination of patents, be as
unburdened as possible for third parties seeking to challenge such patents. Such
steps ensure a level playing field and protect the public interest. To that end,
we endorse" HR 1886.
Nancy Linck, General Counsel of Guilford
Pharmaceuticals and a former Solicitor of the USPTO, also expressed support
for HR 1886 in her prepared
She stated that "litigation could destroy a small company like Guilford
financially, even though it might ultimately prevail." (Guilford's 2001
10-K states that the company, while not yet profitable, spent $54.3 Million on
research and development.)
Linck said that "a strong patent system requires a meaningful way to
challenge invalid patents without prohibitively costly, time consuming
litigation. While the PTO is doing an outstanding job of examining patent
applications, given the large number of applications and the resources they
have, some patents issue that should not. These invalid patents stifle
innovation and thus hurt the public, including patent owners.
She continued that "Making certain changes in our inter partes
reexamination system would provide a fast, fair and effective way to address
patents of questionable validity. I commend the House for taking a first step in
that direction by passing H.R. 1886."
She testified that one of the problems with the current reexamination process is
that "only the patent owner can appeal to the Federal Circuit."
Another problem is that "the third party requester is estopped from later
raising in federal court any issue it raised or could have raised, even though
it has no right to appeal to the Federal Circuit." She also stated that
"if a third party chooses reexamination to attack the validity of a patent
and loses, the third party would have great difficulty defending itself in a
later infringement action against a patent that has been strengthened through
She continued that "there is a perception by third parties that, because
the patentee is considered to be the PTO's customer, the PTO favors the
patentee. In fact, given the time, money and manpower pressures on the PTO, it
has a strong incentive to decide in the patentee's favor, thereby avoiding an
appeal to the Federal Circuit. In addition, if the PTO rules in the patentee’s
favor, there is no threat of reversal by the court. Because of these limitations
and concerns, third parties do not and will not use the 1999 inter partes
reexamination system. Permitting third parties to appeal to the Federal Circuit
would address these limitations and concerns ..."
She also said that "In re Portola Packaging ... should be legislatively
overruled to permit the PTO to rely on art previously in the record". (This
is accomplished by HR 1866.)
Finally, Linck said that "PTO should be required to complete reexamination
in an expeditious manner, for example, within 18 months of the filing of the
The Subcommittee also heard from Paul Heckel, an independent inventor. He stated
that "the courts, especially the Federal Circuit, are strongly biased
against independent inventors". He said that in a study, 13 out of 14
relevant cases in the Federal Circuit went against independent inventors. He
said, "I call this the insider outsider bias."
The Subcommittee also heard colorful testimony
from another independent inventor, Peter Theis. He asserted that
"independent inventors ... are being vilified and demonized, ignored and
expunged from the fabric of American society. We
are being taxed for our inventions, denied a period of exclusivity, and denied
justice by the courts."
He also attacked HR 1886. He stated that "This reexamination act, properly
dubbed The Infringer Protection Act, brings down the cost of defense for
infringers. Reexamination, unlike litigation, eliminates all risk of loss from
an adverse decision. Because an industry can legally gang up against a patentee,
they will succeed in defeating a patentee, at a low cost, by sequentially
raising one reexamination challenge after another." He continued that
"the worst part of the proposed Infringers Benevolent Act is that the
Federal Circuit can review rational reexamination rulings of PTO." He also
accused the Federal Circuit of "Orwellian doublespeak".
Rep. Lamar Smith (R-TX), who is a
member of the Judiciary Committee, but not its CIIP Subcommittee, sat in on the
Librarian of Congress Releases Webcasting Rule
6/20. The Librarian of Congress issued his final rule providing
the terms for the statutory license for eligible nonsubscription services to
perform sound recordings publicly by means of digital audio transmissions, also
known as webcasting, pursuant to 17 U.S.C. § 114, and
to make ephemeral recordings of sound recordings for use of sound recordings
under the statutory license set forth in 17 U.S.C. § 112. The
Librarian followed the recommendations of the Register of Copyrights, rather
than the CARP.
The Librarian also released a summary
stating that he "has accepted the recommendation of the Register of
Copyrights and rejected the rates and terms recommended by a Copyright Arbitration Royalty Panel
(CARP) ... The most significant difference between the CARP's determination and
the Librarian’s decision is that the Librarian has abandoned the CARP's two
tiered rate structure of 0.14˘ per performance for ``Internet only´´
transmissions and 0.07˘ for each retransmission of a performance in an AM/FM
radio broadcast, and has decided that the rate of 0.07˘ will apply to both
types of transmission."
The rule takes effect on September 1, 2002.
On February 2, 2002, the CARP released its report [143 pages
in PDF] recommending that both webcasters and commercial broadcasters pay a
performance fee of 0.07˘ per performance, and 9% of performance fees due, for
simultaneous Internet retransmissions of over the air AM or FM radio broadcasts.
It recommended that the performance fee be 0.14˘ per performance and 9% of
performance fees due for all other Internet transmissions.
The CARP further recommended that non commercial broadcasters pay a performance
fee of 0.02˘ per performance for simultaneous Internet retransmissions of over
the air AM or FM radio broadcasts, and 0.05˘ for other Internet transmissions,
including up to two side channels of programming consistent with the public
broadcasting mission of the station.
On May 21 the Librarian of Congress, at the recommendation of the Register of
Copyrights, Marybeth Peters,
issued an order
rejecting the CARP's February 20 determination.
Cary Sherman, President of the Recording Industry
Association of America (RIAA), stated in a release that "The import of
this decision is that artists and record labels will subsidize the webcasting
businesses of multi billion dollar companies like Yahoo, AOL, RealNetworks and
Viacom. The rate, which cannot be squared with the decision of the arbitration
panel, simply does not reflect the fair market value of the music as promised by
the law. This decision will certainly reinforce the steadfast opposition of
copyright owners to compulsory licensing."
John Simson, Executive Director of SoundExchange,
stated in a release that "Today's decision by the Librarian of Congress,
which disregarded voluminous economic and business evidence supporting a
significantly higher rate, means that once again artists and record companies
will not receive fair value for their labors. There is a reason why we have the
expression, ``I can get it for a song´´. It is because we, as a culture,
devalue artistic creation. This is just another example of that cultural
discrimination. Recording artists and sound recording copyright owners should
not be forced to subsidize the growth of webcasting as we've been forced to
subsidize the radio industry for the past 70 years. Fair and equitable royalties
and nothing less should be paid when recordings are used to build these new
USPTO Proposes Fee Increase Legislation
6/20. The U.S. Patent and Trademark Office (USPTO)
legislation [12 pages in PDF] to amend 35 U.S.C. § 41,
regarding increases in patent and trademark fees. See also, USPTO
House Commerce Committee Members Write Evans Re ICANN Reform
6/20. House Commerce Committee
leaders wrote a letter to Commerce Secretary Donald Evans
regarding "reform proposals being discussed June 24-28, 2002 at the Internet Corporation for Assigned Names and Numbers
(ICANN) Board of Directors meeting in Bucharest, Romania."
They wrote that ICANN "was based on four principles: stability,
competition, bottom-up coordination, and representation. However, over the past
four years that ICANN has been in existence, we have seen few of these
principles come to fruition. To the contrary, we believe ICANN now lacks the
legitimacy needed to guide an international consensus body."
The letter was signed by Rep. Billy
Tauzin (R-LA) and Rep. John Dingell
(D-MI), the Chairman and ranking Democrat on the full Committee, and by Rep. Fred Upton (R-MI) and Rep. Ed Markey (D-MA), the Chairman and
ranking Democrat on the Telecom and Internet Subcommittee.
"ICANN's Mission Should be Clearly Defined," wrote the four.
"Regardless of how ICANN decides to spell out its mission, there needs to
be clear, definable, and unalterable lines around the responsibilities of ICANN."
They also stated that "ICANN Must Be Accountable. One of ICANN's greatest
obstacles has been its complete lack of clearly articulated decision-making
processes. Any reform of ICANN must address this lack of accountability. As a
non-governmental body responsible for managing a global Internet resource,
ICANN's operating procedures must be transparent to any and all interested
parties. This means far more than posting decisions on a website. ICANN must
establish rules, not unlike those in the Administrative Procedures Act, that
provide interested parties with predictability. Without defined notice and
comment periods, established decision criteria, and the application of such
criteria to the problem, petitioners are left with an ad hoc process. "
Finally, the letter states that further extensions of the Memorandum
of Understanding between the ICANN and the Commerce Department's National Telecommunications and Information
Administration (NTIA) should be earned. It states that "In November
1998, the Department of Commerce entered into a Memorandum of Understanding (MOU)
with ICANN. Having been extended several times, most recently in September 2001,
the MOU is set to expire on September 30, 2002. After monitoring ICANN's
activities for the last four years, we strongly believe that the Department
should only authorize a short term renewal of the MOU unless and until ICANN can
show that reforms, necessary to limit its authority and provide for
accountability and transparency, have been implemented."
Ridge Testifies on Department of Homeland Security
6/20. The Senate Governmental
Affairs Committee held a hearing to examine the President's proposal to
create a Department of Homeland Security (DHS). Tom Ridge, Director of the
President's Office of Homeland Security addressed many topics in his prepared testimony
[PDF] including the DHS's division for information analysis and infrastructure
Ridge stated that this section "would complement the reforms on
intelligence and information sharing already underway at the FBI and the CIA.
The Department would analyze information and intelligence for the purpose of
understanding the terrorist threat to the American homeland and foreseeing
potential terrorist threats against the homeland."
He continued that the DHS "would comprehensively assess the vulnerability
of America’s key assets and critical infrastructures, including food and water
systems, agriculture, health systems and emergency services, information and
telecommunications, banking and finance, energy (electrical, nuclear, gas and
oil, dams), transportation (air, road, rail, ports, waterways), the chemical and
defense industries, postal and shipping entities, and national monuments and
He concluded that the DHS "would for the first time merge under one roof
the capability to identify and assess threats to the homeland, map those threats
against our vulnerabilities, issue timely warnings, and organize preventive or
protective action to secure the homeland."
See also, opening
statement by Sen. Joe Lieberman
House Commerce Committee Members Write Ridge Re Critical
6/20. Rep. Billy Tauzin (R-LA),
Chairman of the House Commerce
Committee, and other Republican members of the Committee, wrote a letter to
Tom Ridge, Director of the Office of Homeland Security, regarding the
President's proposal to create a new Department of Homeland Security.
They expressed "support for the efforts of the Office of Homeland Security
to coordinate a comprehensive and consistent approach for assessing threats and
vulnerabilities posed by potential terrorist actions to America's critical
infrastructures and manufacturing facilities. These include both publicly and
privately owned assets that are integral to the delivery of telecommunications
and information technology services, the production and distribution of energy,
and the delivery of safe food and drinking water, as well as manufacturing
facilities that may be targets of potential terrorist actions."
They also expressed concern about the environmental reporting requirements of
the Clean Air Act. They wrote that "we must ensure that vulnerability
assessments are never allowed to be used as roadmaps for terrorist action."
The letter was signed by Rep. Tauzin, Rep.
Fred Upton (R-MI), Chairman of the Subcommittee on Telecommunications and
the Internet, and six other members of the House Commerce Committee.
SEC Initiates Rule Making Proceeding
6/20. The Securities and Exchange Commission
(SEC) proposed rules to reform oversight and improve accountability of auditors
of public companies. See, SEC
The proposed rules would establish a system based on Public Accountability
Boards (PAB). The proposed rules would provide, among other things, that the
financial statements of SEC registered companies would not be deemed to comply
with SEC requirements unless the company's outside auditors were members of a
PAB. The SEC would also recognize and oversee PABs. Also, each PAB would be
required to be dominated by persons not associated with the accounting
Chairman of the SEC stated that "The PAB will conduct frequent audit
quality reviews -- every year for at least those firms that audit over 80% of
public companies, which represents well over 90% of our market capitalization.
Moreover, the PAB will discipline individual accountants or whole firms for
unethical or incompetent conduct; and discipline accounting firms lacking
quality control systems that meet or exceed the highest professional standards.
The PAB's disciplinary and remedial arsenal will include fines, censures,
removal from client engagements, limitations on activities and suspension from
auditing SEC clients. Those failing to cooperate could be barred from doing
public audits." See, Pitt
Pitt also said that "Some speculate we are competing with Congress to see
who gets to solve our crisis of confidence. No such rivalry exists -- the only
important thing is that this crisis is resolved. We've said all along, and
proven, that we will work with both Houses of Congress in the development of
legislative solutions to problems we've identified."
Gordon Moore Awarded Presidential Medal Of Freedom
6/20. President Bush announced recipients of the Presidential Medal of Freedom.
The list includes Gordon
Moore, co-founder of Intel. See, White
House release. Moore postulated Moore's Law, which
predicts that the number of transistors that could be placed on a computer chip
will double every couple of years.
People and Appointments
6/20. Senate Judiciary Committee
held a executive business meeting. It held over the nomination of Lavenski
Smith to be a Judge of the U.S. Court of Appeals (8thCir). The Committee
unanimously approved the nominations of David Cercone to be a Judge of
the U.S. District Court (WDPenn), Morrison England to be a Judge of the
U.S. District Court (EDCal), Kenneth Marra to be a Judge of the U.S.
District Court (SCFl).
6/20. The Federal Communications
Commission (FCC) released a Notice of Apparent
Liability (NAL) proposing a $1,200,000 fine against WebNet Communications
for slamming. The NAL states that "we find that WebNet Communications, Inc.
(WebNet) apparently willfully or repeatedly violated section 258 of the
Communications Act of 1934, as amended (the Act), as well as Commission rules
and orders, by changing the designated preferred carriers of 20 consumers
without their authorization and verification, a practice commonly known as
``slamming.´´ Based upon our review of the facts and circumstances surrounding
the violations, we find WebNet apparently liable for a forfeiture in the amount
of $1,200,000." (Footnotes omitted.) See also, FCC release.
6/20. The National Telecommunications and
Information Administration (NTIA) published in its web site an amendment
to its contract with NeuStar regarding management of the .us top level domain.
6/20. California Governor Gray Davis signed into law Senate
Bill 2061, regarding electronic communications and evidentiary privileges.
The bill revises the law regarding privileges (such as attorney client, doctor
patient, and clergyman penitent) and waiver of privilege. In particular, the
bill provides that "A communication between persons in a relationship
listed in subdivision (a) does not lose its privileged character for the sole
reason that it is communicated by electronic means or because persons involved
in the delivery, facilitation, or storage of electronic communication may have
access to the content of the communication". The bill was sponsored by Sen. Bill Morrow (R -
Sen. Grassley Writes Ridge Re Cyber Security Provisions of DHS
6/19. Sen. Charles Grassley (R-IA)
wrote a letter to Tom Ridge, Director of the Office of Homeland Security,
regarding the President Bush's proposed
legislation to create a new Department of Homeland Security. He asked
several questions pertaining to cyber security, information sharing, and
Sen. Grassley wrote that "The Information Analysis and Infrastructure
Protection Division within the new Department will combine such entities as part
of the National Infrastructure Protection Center
(NIPC) from the FBI, the Critical Infrastructure
Assurance Office (CIAO) from Commerce, and the Federal Computer Incident
Response Center from the General Services
Administration (GSA), among others. How does the Administration perceive
this division working with the other federal infrastructure protection concerns
not brought under the jurisdiction of the new department?"
He also asked "Will the current full time employees dedicated to these
organizations be moved to the new department, i.e, the 795 FBI employees, the 27
Commerce employees, and the 23 GSA employees, in addition to the numerous
Sen. Grassley is a senior member of the Senate Judiciary Committee, which
has oversight jurisdiction regarding the Department
of Justice (DOJ) and Federal Bureau of
Investigation (FBI). Under the President's proposed legislation, this
Committee's jurisdiction would be reduced, for example, by the removal of the
NIPC from the FBI, and by removal of the Immigration
and Naturalization Service (INS) from the DOJ.
Sen. Grassley also asked "What role will the President's Critical
Infrastructure Protection Board (CIPB), the office headed by Richard Clarke,
play in this new division?"
He also asked "What provisions have been made to guarantee the critical
transfer of institutional knowledge, in addition to employees, hardware, and
Sen. Grassley also posed numerous questions regarding intelligence gathering,
sharing and analysis. He asked about "turf issues" involving the new
department and the FBI and Central Intelligence Agency (CIA). He also asked
"Have we gone far enough in this reorganization plan? Should these
organizations also be integrated into the Department of Homeland Security?"
Finally, he inquired about several technology issues. He wrote: "Sharing
this information is important, but what exactly happens to it once it is
received is critical. I'm referring to technology: data mining and link
analysis, in addition to human intelligence. The application of commercially
available software, let alone some proprietary confidential technology, will
surely improve our ability to identify trends, patterns of behavior, and the
precursors of an imminent attack. The proper handling and appropriate
accountability thereof will prevent the mistakes previously made by our
intelligence community. What new techniques does the department propose to
employ that will ensure that intelligence information is handled and analyzed
Sen. Grassley's letter also addresses whistle blowers, agency oversight, fiscal
responsibility and other matters.
House Establishes Select Committee on Homeland Security
6/19. The House passed HRes 449, which establishes a Select Committee on
Homeland Security. The initial members are Rep.
Dick Armey (R-TX), Rep. Tom DeLay
(R-TX), Rep. J.C. Watts (R-OK), Rep. Deborah Pryce (R-OH), Rep. Robert Portman (R-OH), Rep. Nancy Pelosi (D-CA), Rep. Martin Frost (D-TX), Rep. Robert Menendez (D-NJ), and Rep. Rosa DeLauro (D-CT).
Bush Speaks on Department of Homeland Security
6/19. President Bush gave a speech
in Washington DC to the United Brotherhood of Carpenters and Joiners. He spoke
about terrorism and his proposal to create a new Department of Homeland
He stated that "I proposed a new Cabinet department. I want to explain
quickly why I did so. There are over 100 agencies involved with homeland
defense, and they're scattered all throughout Washington. It makes it difficult
to do a job if you're trying to chase down 100 different agencies, because
they're in different departments."
"What we need to do is to bring these agencies under one Cabinet Secretary,
organize it so that information flows freely, organize it so there's
responsibility and authority so we can have accountability, and help change
cultures in agencies to the primary responsibility of the day, which is to
protect the American homeland," said Bush.
"It's going to be a little difficult, because there is a tendency on
Capitol Hill for people to what they call protect their turf. In other words, if
you've got responsibility over funding one agency and that agency is going to be
moved away from you, you might be somewhat resistant. And what I'd like to do is
to call upon Congress -- and I hope you do, as well -- to think first and
foremost about how best to protect the homeland, not how best to protect their
The President concluded that "we've got to match those threats with a new
way of thinking, which means we've got to do a better job of collecting and
President Bush also gave a dinner speech in Washington DC in which he addressed
the new department. He stated that "There are over 100 different agencies
that have something to do with the homeland. And they're scattered everywhere,
which makes it awfully hard to align authority and responsibility." He
urged "the members of Congress to think what's best for the country, not
what's best for their particular committee, and allow us to reorganize a
singular function, all aimed at protecting the American people from
700 MHz Auctions Delayed
6/19. On June 18, the Senate passed HR 4560,
the Auction Reform Act of 2002, which delays most of the 700 MHz auctions. The
House passed the bill on May 7. On June 19, President Bush signed the bill. See,
The Federal Communications Commission (FCC)
had scheduled Auction 44 for
June 19. Earlier this week, it postponed it for one day. On May 24, 2002, the
FCC announced that Auction 31
was postponed until January 14, 2003, but that Auction 44 would proceed on June
19, 2002. See, FCC's May 24 notice
The FCC issued a release on June 19 stating that "Bidders are advised that
Auction No. 44 has been postponed and will not begin on June 20, 2002.
Legislation has been passed by Congress and signed by the President directing
the Commission to postpone the auction of certain spectrum licenses previously
included in the Auction No. 44 inventory, and to commence the auction of the
licenses in the C and D blocks of the Lower 700 MHZ band beginning no earlier
than August 19, 2002, and no later than September 19, 2002."
The bill just enacted provides that "Except as provided in subparagraph
(C), the Commission shall not commence or conduct auctions 31 and 44 on June 19,
2002, as specified in the public notices of March 19, 2002, and March 20, 2002
(DA 02-659 and DA 02-563)." Subparagraph (C) then provides that
"Subparagraph (B) shall not apply to the auction of -- (I) the C-block of
licenses on the bands of frequencies located at 710-716 megahertz, and 740-746
megahertz; or (II) the D-block of licenses on the bands of frequencies located
at 716-722 megahertz." Subparagraph (C) further provides that auctions for
these exempted bands "shall be commenced no earlier than August 19, 2002,
and no later than September 19, 2002".
National Telecommunications and Information
Administration (NTIA) Director Nancy Victory stated in a release that
"I welcome Congress's action last night to delay the pending auctions of
spectrum in the 700 MHz bands. It showed that sound spectrum policy triumphed
over counterproductive deadlines. With the additional time, the FCC, the
broadcasters and the potential bidders for the spectrum should work diligently
to remove the uncertainties regarding when the spectrum can best be put to use
for American consumers. The Administration stands ready to assist in that
The Congressional findings recited in the bill state that "Circumstances in
the telecommunications market have changed dramatically since the auctioning of
spectrum in the 700 megahertz band was originally mandated by Congress in 1997,
raising serious questions as to whether the original deadlines, or the
subsequent revision of the deadlines, are consistent with sound
telecommunications policy and spectrum management principles." The
Congressional findings also recite that "No comprehensive plan yet exists
for allocating additional spectrum for third generation wireless and other
advanced communications services. The Federal Communications Commission should
have the flexibility to auction frequencies in the 700 megahertz band for such
The Cellular Telecommunications and Internet
Association (CTIA) praised passage of the bill. See, release.
Broadband Coalition Supports FCC Conclusion on Cable Modem
6/19. The High Tech Broadband Coalition (HTBC) submitted a comment
[PDF] to the Federal Communications Commission
(FCC) in its proceeding regarding the appropriate regulatory classification of
cable modem service.
The HTBC wrote that it "supports the Commission's conclusion that cable
modem service is an interstate information service that does not involve a
separate offering of telecommunications. To the extent that any cable operator
is offering unaffiliated Internet service providers (``ISPs´´) stand alone
transmission service, that offering is private, not common, carriage. Thus,
cable modem service is outside the bounds of Title II regulation, and the
Commission cannot, and should not, require multiple ISP access. Maintaining the
current deregulatory environment for cable modem service will spur continued
investment and innovation in broadband technologies."
The HTBC is a recently formed group composed of the Business Software Alliance (BSA), Consumer Electronics Association (CEA),
Information Technology Industry Council (ITIC), National
Association of Manufacturers (NAM), Semiconductor
Industry Association (SIA), and Telecommunications
Industry Association (TIA). The FCC's proceeding is CS Docket No. 02-52.
FTC Files Administrative Complaint Against Rambus
6/19. The Federal Trade Commission
(FTC) filed an administrative complaint against Rambus
alleging anti competitive behavior in violation of Section 5 of the Federal
Trade Commission Act (FTCA) in connection with its participation in a standard
setting body for dynamic random access memory products. See also, FTC release.
Rambus is a Delaware corporation based in
Los Altos, California, that develops and licenses designs for computer memory
products. Its ticker symbol is RMBS.
The complaint pertains to Rambus's participation in he JEDEC Solid State
Technology Association, which was formerly known as the Joint Electron Device
Engineering Council. JEDEC develops and issues technical standards for a form of
computer memory known as synchronous dynamic random access memory (SDRAM).
The complaint alleges that Rambus "has illegally monopolized, attempted to
monopolize, or otherwise engaged in unfair methods of competition in certain
markets relating to technological features necessary for the design and
manufacture of a common form of digital computer memory, known as dynamic random
access memory, or ``DRAM.´´"
The FTC alleges that Rambus engaged in anticompetitive behavior in violation of
Section 5 of the FTCA by "participating in the work of an industry standard
setting organization, known as JEDEC, without making it known to JEDEC or to its
members that Rambus was actively working to develop, and did in fact possess, a
patent and several pending patent applications that involved specific
technologies proposed for and ultimately adopted in the relevant standards. By
concealing this information -- in violation of JEDEC's own operating rules and
procedures -- and through other bad faith, deceptive conduct, Rambus
purposefully sought to and did convey to JEDEC the materially false and
misleading impression that it possessed no relevant intellectual property
Section 5 of the FTCA, codified at 15 U.S.C. § 45,
provides, in part, that "Unfair methods of competition in or affecting
commerce, and unfair or deceptive acts or practices in or affecting commerce,
are hereby declared unlawful."
The complaint alleges three violations. First, it alleges that "Rambus has
willfully engaged in a pattern of anticompetitive and exclusionary acts and
practices, undertaken over the course of the past decade, and continuing even
today, whereby it has obtained monopoly power in the synchronous DRAM technology
market and narrower markets encompassed therein -- namely, the latency, burst
length, clock synchronization, and data acceleration markets discussed above --
which acts and practices constitute unfair methods of competition in violation
of Section 5 of the FTC Act."
Second, the complaint alleges that "Rambus has willfully engaged in a
pattern of anticompetitive and exclusionary acts and practices, undertaken over
the course of the past decade, and continuing even today, with a specific intent
to monopolize the synchronous DRAM technology market and narrower markets
encompassed therein, resulting, at a minimum, in a dangerous probability of
monopolization in each of the aforementioned markets, which acts and practices
constitute unfair methods of competition in violation of Section 5 of the FTC
Third, the complaint alleges that "Rambus has willfully engaged in a
pattern of anticompetitive and exclusionary acts and practices, undertaken over
the course of the past decade, and continuing even today, whereby it has
unreasonably restrained trade in the synchronous DRAM technology market and
narrower markets encompassed therein, which acts and practices constitute unfair
methods of competition in violation of Section 5 of the FTC Act."
The FTC also set a hearing date of September 18, 2002.
Rambus SVP and General Counsel John Danforth stated in a release
that "We believe we have established that Rambus fully complied with
JEDEC's disclosure policy and that Rambus had no undisclosed patents, or even
applications, during the relevant time period that read on any proposed JEDEC
standard ... At the end of the day, we believe that the FTC process, either at
the administrative level or on appeal, will conclude that our actions were
entirely appropriate and lawful."
The Rambus release also states that "The FTC's complaint stems from the
same facts and the same core allegations as are currently being litigated in
multiple private lawsuits, including the Infineon case, tried last year in
Virginia, for which an appeal was heard before the United States Court of
Appeals for the Federal Circuit on June 3, 2002. Two United States District
Courts -- those hearing the Micron and Hynix cases -- have delayed their cases
pending resolution of the Infineon appeals."
NTIA Director Victory Addresses Obstacles to Broadband
6/19. National Telecommunications and
Information Administration (NTIA) Director Nancy Victory gave a speech
in Washington DC titled "U.S. and European Approaches to the Future of
Broadband". One of the issues which she addressed was "unnecessary
government impediments to broadband competition and deployment"; that is,
state and local government rights of way management.
She stated that "This is one issue where all sectors of the broadband
industry -- Bell Operating Companies, CLECs, cable providers, cable companies,
overbuilders, and wireless providers -- actually share the same point of view.
All participants are concerned that restrictions by certain municipalities and
federal government landowners on accessing public rights of way and tower sites
might be inhibiting or at least delaying broadband network construction."
She continued that "NTIA is working closely with the National Association
of Regulatory Utility Commissioners (NARUC), and particularly its Rights of Way
Study Committee, to help identify best practices and recommendations for state
actions to streamline the current process. NTIA is also meeting with
representatives of the cities and their associations, such as the National
Association of Telecommunications Officers and the National League of Cities, to
identify means for improving and simplifying their current processes, while
ensuring sufficient flexibility for municipalities to best serve their citizens.
NTIA is also launching an initiative to streamline and improve the rights of way
oversight practices of federal government agencies."
She also reviewed other Bush administration policies, current Federal
Communications Commission (FCC) broadband related proceedings, spectrum
management and Third Generation wireless issues, and ICANN governance.
6/19. The Federal Communications Commission
(FCC) approved Verizon's Section 271
application to provide in region interLATA service in the state of Maine. See, FCC
release [MS Word].
6/19. The Federal Communications Commission
(FCC) submitted its annual
report [PDF] to the Congress on progress made in achieving the objectives of
the Open-market Reorganization for the Betterment of International
Telecommunications Act (ORBIT) Act.
6/19. The Senate Commerce Committee's
Subcommittee on Science, and Transportation Communications held a hearing to
examine future sufficiency and stability of the Universal Service Fund. See,
prepared testimony [PDF] of witnesses: Dorothy Attwood
(Chief of the FCC's Wireline Competition Bureau), Nan Thompson
(Chair of the Alaska Public Utilities Commission), William Gregg
(Director of the West Virginia Consumer Advocate Division), Lila Jaber
(Florida Public Service Commission), Don Bond (Public
Service Telephone Company), Margaret Greene
Harker (CFO of MCI Group), and Michael Altschul
(Cellular Telecommunications & Internet Association).
House Judiciary Committee Approves Internet Gambling Bill
6/18. The House Judiciary Committee
amended and approved HR 3215, the
Combating Illegal Gambling Reform and Modernization Act, by a vote of 18-12. The
Committee approved an amendment
in the nature of a substitute offered by the bill's sponsor, Rep. Bob Goodlatte (R-VA), on June
13. The Committee also approved further amending language offered by Rep. Chris Cannon (R-UT) at the June 18
"Gambling on the Internet has exploded into a lucrative business that sucks
billions of dollars out of the U. S. economy each year and costs tens of
thousands of jobs. There are over 2000 illegal, off shore gambling websites,
which are unlicensed, untaxed, and unregulated," said Rep. Goodlatte.
"Illegal gambling sites evade existing anti-gambling laws by operating off
shore, providing a nearly undetectable harbor for criminal enterprises."
On June 18, the Committee rejected by a vote of 12-13 an amendment offered by Rep. Bobby Scott (D-VA) that would have
extended the ban to include individual gamblers, not just gambling businesses.
The Committee also rejected an amendment offered by Rep. Sheila Lee (D-TX) that would
have created an exemption for gambling conducted by certain charitable
institutions exempt from federal taxes under Section 501(c)(3) of the Internal
Revenue Code. (Also, at the June 13 mark up meeting, the Committee rejected an
amendment offered by Rep. Robert Wexler
(D-FL) to create an exemption for jai alai and dog racing.)
Expansion of the Wire Act. HR 3215 would amend 18 U.S.C. §§ 1081
and 1084, which contain the definitions and prohibition, respectively, of the
Wire Act. The Wire Act currently criminalizes the use of "wire
communications facilities" in interstate commerce for gambling. The Wire
Act does not ban gambling. This is a matter of state law. HR 3215 expands
the prohibition to cover all communications between states or with foreign
countries. It maintains the principle that gambling is otherwise a matter of
state law. Hence, under HR 3215, use of the Internet for gambling purposes
would become illegal (if interstate or foreign).
The criminal prohibition of the Wire Act, 18 U.S.C. §§ 1084,
currently provides that "Whoever being engaged in the business of betting
or wagering knowingly uses a wire communication facility for the transmission in
interstate or foreign commerce of bets or wagers ... shall be fined under this
title or imprisoned not more than two years, or both." Since the current
statute affects only wire communication facilities, and some Internet
communications do not involve wires, it leaves open the possibility that some
Internet gambling may not be illegal under the Wire Act.
HR 3215 provides that "whoever, being engaged in a gambling business,
knowingly (1) for the transmission in interstate or foreign commerce ..."
or between the U.S. and abroad "... of bets or wagers ... shall be fined
under this title or imprisoned not more than five years, or both." Hence,
it pertains to all communications, not just wire communications. Moreover, the
maximum penalty for violation is increased from 2 to 5 years.
Also, HR 3215 would amend 18 U.S.C. § 1081,
which currently defines ''wire communication facility'' as "any and all
instrumentalities, personnel, and services (among other things, the receipt,
forwarding, or delivery of communications) used or useful in the transmission of
writings, signs, pictures, and sounds of all kinds by aid of wire, cable, or
other like connection between the points of origin and reception of such
transmission." As amended, it would provide that "communications
facility" means "any and all instrumentalities, personnel, and
services (among other things, the receipt, forwarding, or delivery of
communications) used or useful in the transmission of writings, signs, pictures,
and sounds of all kinds by aid of wire, cable, satellite, microwave, or other
like connection (whether fixed or mobile) between the points of origin and
reception of such transmission."
Cannon Amendments. The Committee approved on June 18 two amendments
offered by Rep. Cannon.
The first amendment removed Section 1084(d) from the amendment in the nature of
a substitute. This subsection contained a number of exceptions to the general
prohibition of Section 1084, such as "a gambling business [that] is in
compliance with Federal law relating to gambling" and certain gambling
pursuant to the Indian Gaming Regulatory Act. This Cannon amendment replaced the
deleted subsection with the following language: "(d) Nothing in subsection
(c) or (d) shall allow the use of a communication facility for the transmission
of bets or wagers involving the purchase of a chance or opportunity to win a
lottery, or the use of a communication facility for the transmission of
information assisting in the placing of bets or wagers involving the purchase of
a chance or opportunity to win a lottery, except that communication facilities
may be used for the transmission of such bets or wagers and the transmission of
information assisting such bets or wagers as long as such bets or wagers are
placed on the premises of a retail outlet that is open to the public and
licensed by the State in which it is located to sell chances or opportunities to
win a lottery."
The second Cannon amendment adds a new subsection to Section 1084 that provides
that "Nothing in this section allows the use of a communication facility
for the purpose of placing a bet or wager or the use of a communication facility
for the purpose of transmitting information assisting in the placement of bets
or wagers that was illegal as of June 6, 2002."
Enforcement. In addition to criminal penalties, HR 3215 would allow
federal, state, local, and tribal law enforcement agencies to obtain injunctions
against violation of the act. It also provides that "any common carrier,
subject to the jurisdiction of the Federal
Communications Commission" may be enjoined from providing service to
entities in violation of the act, and gives such carriers immunity from suit for
discontinuing such service.
Internet Service Providers. The amendment in the nature of a substitute
offered on June 13 changed the bill on the matter of ISPs, or interactive
computer services. The language is as follows: "Relief granted under
paragraph (1) against an interactive computer service (as defined in section
230(f) of the Communications Act of 1934) shall -- (A) be limited to the removal
of, or disabling of access to, an online site violating this section, or a
hypertext link to an online site violating this section, that resides on a
computer server that such service controls or operates; except this limitation
shall not apply if the service is violating this section or is in active concert
with a person who is violating this section and receives actual notice of the
relief; (B) be available only after notice to the interactive computer service
and an opportunity for the service to appear are provided; (C) not impose any
obligation on an interactive computer service to monitor its service or to
affirmatively seek facts indicating activity violating this section; (D) specify
the interactive computer service to which it applies; and (E) specifically
identify the location of the online site or hypertext link to be removed or
access to which is to be disabled."
The bill contains a notice and take down provision, which enables law
enforcement authorities to obtain a court order compelling an ISP to take down a
gambling web site, and a hyperlink to gambling web site. Rep. Cannon questioned
this language at the June 18 mark up. First, he pointed out that while the bill
allows law enforcement authorities to take action to break hyperlinks in web
sites, it would do nothing affecting bookmarks stored in gamblers' browsers.
Second, Rep. Cannon questioned whether the ISP language would place a
disproportionate economic burden small ISPs which lack the legal resources of
large ISPs. He said that this would give a "competitive advantage to larger
ISPs" such as AOL. Rep. Goodlatte disagreed.
History. Rep. Goodlatte and Sen. Jon Kyl
(R-AZ) have been trying to pass a bill for three Congresses. This bill was
introduced on November 1, 2001. See, bill as introduced [PDF].
(See, TLJ Daily
E-Mail Alert No. 300, November 2, 2001.) The Subcommittee on Crime amended
and approved the bill on March 11. (See, TLJ Daily E-Mail Alert
No. 387, March 13, 2002.) On May 8, the full Judiciary Committee began its
mark up, but only heard opening statements. The Committee held a mark up session
on June 13, and completed its mark up on June 18.
House Financial Services Committee. The bill next goes to the House Financial Services Committee,
because the bill also contains provisions pertaining to illegal gambling
funding. It criminalizes "the transmission of a communication in interstate
or foreign commerce ... which entitles the recipient to receive money or credit
as a result of bets or wagers, or for information assisting in the placing of
bets or wagers".
Also, like HR 556,
the Unlawful Internet Gambling Funding Prohibition Act, sponsored by Rep. James Leach (R-IA), HR 3215
would prohibit the use of credit, electronic funds transfers, and checks in
connection with illegal gambling. The Financial Services Committee approved HR
556 on October 31, 2001. (See, TLJ Daily E-Mail Alert
No. 299, November 1, 2001.)
Prospects for Passage. In the 106th Congress, the Judiciary Committee
approved another Internet gambling bill sponsored by Rep. Goodlatte. The full
House then considered it under a suspension of the rules, meaning that it could
not be amended, and required a 2/3 majority for passage. It fell just short of a
2/3 majority. The Senate has also twice passed Internet gambling bills.
House Judiciary Committee Supports Ban on Computer Generated
6/18. The House Judiciary Committee
amended and all but approved HR 4623, the
"Child Obscenity and Pormography Prevention Act of 2002." This bill is
a reaction to the Supreme Court's April 16 opinion
[PDF] in Ashcroft v. Free Speech Coalition, in which the Court held
unconstitutional on First Amendment and overbreadth grounds provisions of the
Child Pormography Prevention Act of 1996 (CPPA) banning computer generated
images depicting minors engaging in sezually explicit conduct.
The vote on final passage was 16-2, which fell just short of a reporting quorum.
Hence, Committee Chairman James
Sensenbrenner (R-WI) eviscerated the vote until such time as a reporting
quorum is present.
The bill, as approved but not reported, maintains the ban on certain computer
generated images, but narrows the scope of the prohibition, and provides an
affirmation defense that no child was involved in the alleged offense.
The CPPA expanded the federal prohibition on child pormography to encompass new
technologies. 18 U.S.C.
§ 2256, the section containing definitions, was amended to provides that
child pormography means "any visual depiction, including any photograph,
film, video, picture, or computer or computer- generated image or picture,
whether made or produced by electronic, mechanical, or other means, of sezually
explicit conduct, where (A) the production of such visual depiction involves the
use of a minor engaging in sezually explicit conduct; (B) such visual depiction
is, or appears to be, of a minor engaging in sezually explicit conduct; (C) such
visual depiction has been created, adapted, or modified to appear that an
identifiable minor is engaging in sezually explicit conduct; or (D) such visual
depiction is advertised, promoted, presented, described, or distributed in such
a manner that conveys the impression that the material is or contains a visual
depiction of a minor engaging in sezually explicit conduct;"
Justice Kennedy wrote the opinion of the Court in Ashcroft v. FSC. He wrote that
the CPPA, to the extent that it extends the federal prohibition against child
pormography to sezually explicit images that appear to depict minors but were
produced without using any real children, is substantially overbroad and
violates the First Amendment.
He elaborated that the prohibited conduct is not obscene under the standard
announced in Miller
v. California, 413 U.S. 15 (1973), and it is not child pormography under the
standard announced in New York v.
Ferber, 458 U.S. 747 (1982).
Rep. Lamar Smith (R-TX) is the
sponsor of the bill. Rep. Adam Schiff
(D-CA) was also active in the debate at the June 18 mark up session. He stated
that the Supreme Court's ruling leaves prosecutors unable to prosecute child
pormography that involves the use of children, because it is nearly impossible
to prove that a photograph is not computer generated.
This bill, which Rep. Schiff states will pass constitutional muster, would amend
§ 2256(8)(B) to read "such visual depiction is a computer image or
computer- generated image that is, or is nearly indistinguishable ... from, that
of a minor engaging in sezually explicit conduct". However, the bill would
also provide that "it shall be an affirmative defense to a charge of
violating this section that the alleged offense did not involve the use of a
minor or an attempt or conspiracy to commit an offense under this section
involving such use."
This language would shift the burden of proving that an image is computer
generated to the defendant. Opponents of the bill, such as Rep. Bobby Scott (D-VA), stated that this
burden shifting is unconstitutional. Rep. Schiff disputed this. He further cited
the concurring opinion of Justice Clarence Thomas in Ashcroft v. FSC. Thomas
wrote that "technology may evolve to the point where it becomes impossible
to enforce actual child pornography laws because the Government cannot prove
that certain pornographic images are of real children. In the event this occurs,
the Government should not be foreclosed from enacting a regulation of virtual
child pornography that contains an appropriate affirmative defense or some other
narrowly drawn restriction. ... The Court does leave open the possibility that a
more complete affirmative defense could save a statute's constitutionality
The Committee rejected an amendment offered by Rep. Scott that would have gutted
the bill. The Committee also rejected an amendment offered by Rep. Sheila Lee (D-TX) that would
have toughened the standard for child pormography cases by requiring that
prosecutors must also meet the obscenity test of Miller v. California.
The Committee approved an amendment offered by Rep. Melissa Hart (R-PA) pertaining to the
use of administrative subpoenas. The Committee also approved a lengthy amendment
offered by Rep. Smith. It adds congressional findings identifying the
government's compelling interest. It also narrows the definition of child
Editor's Note. TLJ Daily E-Mail Alert is delivered by e-mail. Some
subscribers receive their copies via e-mail servers that run e-mail filtering
software that blocks the TLJ Daily E-Mail Alert if it contains certain words.
TLJ intentionally misspells certain words, such as pormography, to circumvent
DC Circuit Rules in Verizon v. FCC
6/18. The U.S.
Court of Appeals (DCCir) issued its opinion
v. FCC, consolidated petitions for review of a Federal Communications Commission (FCC) order
implementing the Section
251 requirement that incumbent local exchange carriers (ILECs) make
available to competitive local exchange carriers (CLECs) on their premises
"physical collocation of equipment necessary for interconnection or access
to unbundled network elements". The Appeals Court denied the petitions for
FCC Fines AT&T $100,000 for E911 Violations
6/18. The Federal Communications Commission
(FCC) released an Order
and Consent Decree in a proceeding titled "In the Matter of AT&T
Wireless Services, Inc." terminating an investigation into possible
violations by AT&T Wireless of the enhanced 911 Phase II provisions of
Section 20.18 of the Commission's Rules with respect to its Time Division
Multiple Access (TDMA) network. The order covers the manner in which AT&T
Wireless agrees to comply with the E911 Phase II rules.
In addition, the order states that "AT&T Wireless agrees to make a
voluntary contribution to the United States Treasury in the amount of One
Hundred Thousand Dollars ($100,000)". Moreover, the order provides that if
AT&T Wireless fails to comply with the order, it "will make a voluntary
contribution to the United States Treasury in the amount of $300,000 for the
first missed benchmark, $600,000 for the second missed benchmark and $1,200,000
for the third missed benchmark". See also, FCC release.
USPTO Awards Contracts for E-Filing Patent Applications
6/18. The U.S. Patent and Trademark Office (USPTO)
announced the award of no cost contracts to five companies for the electronic
filing of patent applications. The five companies are Aspen Grove, AutoDocs, First to File, LegalStar, and LexisNexis.
USPTO Director James Rogan
stated that "Two weeks ago when I unveiled our 21st Century Strategic Plan,
I indicated that we would be leveraging outside resources to assist us in moving
toward a full paperless patent process by the end of 2004. That is precisely
what these partnerships will do. This endeavor also fully supports President
Bush's e-commerce goals by utilizing the private sector's business expertise to
provide better, more efficient and less costly government services to our
citizens." See, USPTO release.
Bush Specifies Information Analysis and Infrastructure
Protection Section of Department of Homeland Security
6/18. President Bush sent to the Congress proposed
legislation to create a Department of Homeland Security (DHS). The bill
would, among other things, create an Under Secretary for Information Analysis
and Infrastructure Protection. The bill defines this section's responsibilities,
lists existing entities to be transferred to it, gives it broad authority to
obtain information from other federal entities, and creates a broad Freedom of
Information Act exemption for information provided voluntarily to it by non
See also, White House section by section analysis
of the Homeland Security Act of 2002, and Bush's message
Units to Be Transferred. The existing federal government entities to be
transferred to the DHS include all operations of the Federal Bureau of Investigation's (FBI) National Infrastructure Protection Center
(NIPC), except for NIPC's Computer Investigations and Operations Section, the Department of Defense's (DOD) National
Communications System, the Department of Commerce's
(DOC) Critical Infrastructure Assurance Office,
the National Institute of Standards and
Technology's (NIST) Computer
Security Division, the Department of Energy's
Infrastructure Simulation and Analysis Center, and the General Service Administration's (GSA) Federal Computer Incident Response Center
Responsibilities. The President's proposed legislation provides that this
part of the DHS would be given primary responsibility for "receiving and
analyzing law enforcement information, intelligence, and other information in
order to understand the nature and scope of the terrorist threat to the American
homeland and to detect and identify potential threats of terrorism within the
It would further be primarily responsible for "comprehensively assessing
the vulnerabilities of the key resources and critical infrastructures in the
United States" and "integrating relevant information, intelligence
analyses, and vulnerability assessments (whether such information, analyses, or
assessments are provided or produced by the Department or others) to identify
protective priorities and support protective measures by the Department, by
other executive agencies, by State and local government personnel, agencies, and
authorities, by the private sector, and by other entities". (Parentheses in
Its responsibilities would also include "developing a comprehensive
national plan for securing the key resources and critical infrastructures in the
It would also be responsible for "taking or seeking to effect necessary
measures to protect the key resources and critical infrastructures in the United
States, in coordination with other executive agencies and in cooperation with
State and local government personnel, agencies, and authorities, the private
sector, and other entities".
Finally, it would be responsible for "public threat advisories" and
making policy recommendations regarding sharing of intelligence and information.
Access to Information. The proposed legislation would also give the DHS
broad access to information collected by other federal entities, such as the CIA
and FBI. It provides, in part, that "The Secretary shall have access to all
reports, assessments, and analytical information relating to threats of
terrorism in the United States and to other areas of responsibility described in
section 101(b), and to all information concerning infrastructure or other
vulnerabilities of the United States to terrorism, whether or not such
information has been analyzed, that may be collected, possessed, or prepared by
any executive agency, except as otherwise directed by the President. The
Secretary shall also have access to other information relating to the foregoing
matters that may be collected, possessed, or prepared by an executive agency, as
the President may further provide."
Freedom of Information Act Exemption. The proposed legislation would also
create a Freedom of Information Act exemption. It provides that
"Information provided voluntarily by non-Federal entities or individuals
that relates to infrastructure vulnerabilities or other vulnerabilities to
terrorism and is or has been in the possession of the Department shall not be
subject to section 552 of title 5, United States Code." Several bills
pending in the House and Senate contain similar proposals.
EPIC Comments on Privacy Implications of Classification of
Cable Modem Service
6/18. The Electronic Privacy Information Center
(EPIC) submitted a comment
[PDF] to the Federal Communications Commission
(FCC) in its proceeding regarding the appropriate classification of cable modem
services. It wrote that "the Commission reached the correct result in its
Declaratory Ruling that cable modem service is included in the category of
``other services´´ as defined by section 631 of the Cable Communications
Policy Act. This determination makes cable modem service operators subject to
the privacy mandates of the Act, which meets the Commission's responsibility to
protect the privacy interests of those using the Nation’s cable services and
uphold the Congressional intent of Section 631 which was to protect consumer
privacy in the interactive network environment."
The EPIC continued that "Many consumers would be understandably concerned
if cable operators begin to monitor Americans' use of cable system viewing
preferences, or for other services such as telecommunications services,
including broadband access to Internet via cable modems. Citizens have a
legitimate and significant expectation of privacy with respect to sensitive
personal information such as services subscribed to and web browsing habits. In
addition, customers have a right to personally determine how those cable service
providers in possession of their personal information shall use this
People and Appointments
6/18. Mark Grady, Dean of the George Mason University School of Law,
joined the Board of Directors of the Progress
& Freedom Foundation. See, PFF release. James Miller
became an emeritus board member. See, PFF release.
6/18. The U.S.
Court of Appeals (8thCir) issued its opinion [PDF] in
v. Summit and Ernst & Young, a federal securities fraud case.
Summit is a Minneapolis, Minnesota company that provides clinical outcomes
medical database software and related products and services. Lee and other
shareholders filed a complaint in U.S. District Court (DMinn) against Summit,
some of its officers and directors, and its auditor, Ernst & Young, alleging
violation of federal securities laws. The District Court dismissed the claims
against Ernst & Young for lack of standing. The Appeals Court reversed and
FCC Receives Comments on Classification and Regulation of
Cable Modem Services
6/17. June 17 was the deadline to submit comments to the Federal Communications Commission (FCC) regarding
its Notice of Proposed Rulemaking (NPRM) regarding the consequences of the FCC's
classification of cable modem service as an information service. The FCC
received, and published in its web site, nunerous comments that it received.
Providers of cable modem services generally supported the FCC's declaratory
ruling that cable modem service is an information service, rather than a cable
or telecommunications service. They also opposed the imposition of forced access
requirements. In contrast, state and local entities generally opposed the
information service classification, and advocated the right of local
governmental entities to impose open access requirements, collect fees from
cable modem service providers, and regulate cable modem service.
This is CS Docket No. 02-52. See, FCC
release [PDF] and notice
in Federal Register, April 17, 2002, Vol. 67, No. 74, at Pages 18848 - 18854.
The National Cable Telecommunications Association
(NCTA) submitted a comment
[59 pages in PDF] in which it stated that the FCC's "determination that
cable modem service is an interstate information service provides a sound basis
for allowing marketplace forces to propel the continued investment in and
deployment of affordable broadband Internet access service throughout the
nation. The Communications Act neither requires nor authorizes the Commission to
impose a mandatory multiple ISP access requirement on cable modem service. Such
a requirement would impose substantial costs and burdens on the Commission, on
cable operators, and -- most importantly -- on consumers without providing any
The NCTA continued that "state and local governments have no basis -- in
Title VI of the Act or anywhere else -- for imposing access requirements or
otherwise regulating the provision of this interstate service. Cable operators
have already been granted the right to use public rights of way within their
cable franchise areas. No additional franchise or permission is necessary -- nor
may any such permission be required -- for the provision of cable modem service
over the same rights of way. Moreover, the Act precludes state and local
governments from imposing fees attributable to the provision of services that,
like cable modem service, are not a ``cable service.´´"
The NCTA concluded that "This is as it should be. There is, as Congress has
recognized, a vibrantly competitive marketplace for Internet services --
including broadband Internet access. The public interest is best served, as
Congress also recognized, when that competitive marketplace is allowed to
develop ``unfettered by Federal or state regulation.´´ The Commission should,
in this proceeding, make clear that this is precisely what follows from its
determination that cable modem service is neither a cable service nor a
telecommunications service but an interstate information service."
AT&T submitted a comment
[58 pages in PDF] in which it stated that "the Commission should again
decline to impose cable forced access regulation but should affirmatively
preempt state and local regulation of cable Internet services".
AT&T wrote that the FCC should "affirmatively choose not to regulate
ISP access to cable facilities on the basis that market forces will far better
guarantee efficient, customer friendly arrangements between cable operators and
ISPs (and, indeed, are already doing so). Moreover, the Commission can, and
should, declare that state and local authorities cannot impose various forms of
arbitrary and anticompetitive assessments and regulations that threaten the
continued growth and development of interstate cable Internet services."
AT&T elaborated that "Regulation of cable Internet services is
unwarranted because cable operators have clear incentives to maximize usage of
broadband services and to reach commercially reasonable deals with any ISPs that
might improve the customer experience. By contrast, continued regulation of
wireline broadband services is necessary because the Bells have substantial
market power and are strongly influenced by the reality that broadband services
compete with their legacy monopolies."
AT&T also argued that "At least four categories of state and local laws
and regulations are inconsistent with Title VI and thus should be declared to be
preempted and superseded: (1) franchising authority regulations imposing open
access requirements on cable Internet access; (2) state and local laws assessing
franchise fees on cable modem service; (3) local franchising authorities.
regulation of the terms and conditions for cable Internet services; and (4)
state and local laws restricting a cable provider's right to collect or disclose
its customers. personally identifiable information to market its services."
BellSouth provides DSL service, not
cable modem service. However, it submitted a comment
[12 page in PDF] anyway. It wants deregulation of DSL service.
It wrote that "The action that the Commission takes regarding broadband
services must focus not only on the appropriate regulatory treatment of cable
modem services, but on the appropriate regulatory treatment of the entire market
for broadband services that provide access to the Internet. This market includes
both broadband Internet services provided by cable modem as well as broadband
services that utilize other technologies and network architectures, e.g.,
wireline facilities utilized by ILECs to provide service. The regulatory
treatment of the entire market must be not only consistent, it must be
identical. Any other approach will result in asymmetric regulation that will
have an anticompetitive effect, distort the market and impede competition."
BellSouth added that it "supports the decision of the Commission to
categorize cable modem service as an information service. BellSouth also
supports the tentative conclusion that, as an information service, cable modem
service should not be subject to Title II, and to the attendant obligations and
requirements. This same approach must be applied to wireline broadband services
for precisely the same reasons that support the above referenced conclusions.
The restrictions on the provision of broadband Internet services by ILECs must
be removed in this and related dockets, so that there will be appropriately
consistent treatment of all services offered in this competitive market."
However, BellSouth added the caveat that if the FCC does not deregulate its DSL
services, "then there is only one way to ensure regulatory symmetry and
avoid anti- competitive consequences: Title II obligations must, in that event,
be imposed upon the providers of cable modem service."
The state of California and the California Public Utilities Commission submitted
[43 pages in PDF] in which they urged the FCC "to adopt an open access
regime for cable modem service. California further urges the FCC not to forbear
from regulating the transport component of cable modem service as common
carriage under Title II of the Act. The adoption of an open access regime and
the regulation of cable modem transport under Title II are essential to meet the
core policies of the 1996 Act -- enhanced consumer choice of services at lower
prices, and the offering of services on just, reasonable, and nondiscriminatory
The state of Texas submitted a comment
[6 pages in PDF] also. It first questioned the FCC's conclusion that cable modem
services are information services. It wrote that "We agree that while this
may arguably be one conclusion, it is not a complete conclusion and does not
fully address other important issues which are relevant to meeting the
Commission's previously and widely stated goal of advancing high speed access to
the internet regardless of the platform used."
Texas elaborated that "The categorization of services as either
telecommunications services, cable services, or information services are not
mutually exclusive, contrary to the statement in ¶41 of the Notice of
Proposed Rulemaking. A cable modem service provider could easily be selling
its regular cable programming, an information service through an ISP, and also
providing voice over IP telephony and/or local exchange services, which are
arguably telecommunications services. It would be fundamentally unfair to allow
cable modem service providers to offer telecommunications services to customers
without also obligating them to meet the regulatory requirements applicable to
other providers of the identical services, the most important of these
requirements being open access."
It added that "Cable modem service is fundamentally both an information
service, the ISP element, AND a high speed transport for the data which is the
source of the information. This is seen most obviously by the fact that ISP
services are offered through dial-up, wireline broadband and cable modem. The
internet service remains the same and this is the ``information service´´
component focused upon by the Commission in its tentative conclusion. These
services are therefore not easily or correctly categorized as one type, but a
hybrid of all three."
Texas concluded that "Cable modem services are not in and of themselves
information services as they are really just a means of providing high speed
transport of the ISP information to the customer. Because of the inherent
duality of the nature of these services it is incumbent upon the Commission to
proceed cautiously and to avoid an absolute reclassification of these services
as purely information services to which few common carrier or consumer
protection obligations attach."
Texas also argued that "The following current telecommunications service
provider requirements must apply to cable modem service providers: 1.Open access
requirements; and 2.Consumer protection requirements."
The ACLU also submitted a comment
[PDF] in which it urged the FCC to adopt open access requirements. It also
argued that the FCC "was mistaken when it classified cable modem service as
an information service".
Rep. Smith Addresses Piracy in Cyberspace
6/17. Rep. Lamar Smith (R-TX),
Chairman of the House Judiciary Committee's Crime Subcommittee, published an essay
titled "Piracy in Cyberspace" in his Congressional web site.
He compared pirates of intellectual property today to the buccaneers of the 17th
and 18th Centuries who "wrecked havoc on the high seas". He also
stated that "Pirates affect not only our economic security, they affect our
national security. Their profits fund other illegal activities, including
He also said that "I will introduce legislation to update and strengthen
the federal criminal code, which currently makes it a crime to traffic in
counterfeit labels or copies of certain forms of intellectual property, but not
authentication features. My legislation will also criminalize trafficking in
counterfeit music, movies and other audiovisual works and it will give victims
of intellectual property theft an opportunity to recover damages in federal
Deputy Commerce Secretary Bodman Addresses IPR
6/17. Deputy Secretary of Commerce Samuel
Bodman gave a speech
in Washington DC to the U.S. India Business Council Annual Meeting in which he
addressed intellectual property rights protection.
Bodman stated that "Intellectual property protection is one of the most
powerful instruments for economic development, export growth, and diffusion of
new technologies. Technology based firms rely on intellectual property
protection to maintain their competitive market share. Intellectual property
rights serve important functions in fostering domestic technology based
industries, and in the development and marketing of cutting edge products."
He also addressed IPR in India. He said that "there is more to do --
particularly in terms of developing and maintaining key components of India's
economic infrastructure. India has a significant number of IPR-intensive sectors
including the pharmaceutical, software, and film industries. But, the
government's protection of intellectual property rights needs improvement."
Bodman continued that "India has realized the benefits of strong
intellectual property protection in the area of copyright legislation and has a
growing domestic software industry as a result. And, we know that India has just
enacted an amendment to its patent law. We will be analyzing it further ... we
are concerned that it does not bring India's laws into full WTO compliance. We
encourage the Indian government to pass laws inline with its obligations -- and
we hope that you will join us in that effort."
He also addressed IPR enforcement. "To further grow its successful software
sector and others, India must aggressively enforce its IP laws to prevent
violators from free riding on the investment and innovation of others."
"Adequate intellectual property protection in India will attract foreign
direct investment and will permit technology transfer. It also means more
exports of advanced products. This, of course, translates into jobs
creation," concluded Bodman.
7th Circuit Criticizes But Follows Brulotte
6/17. The U.S.
Court of Appeals (7thCir) issued its opinion
[PDF] in Scheiber
v. Dolby Laboratories, a case involving enforcement of a patent
licensing agreement that provides for royalty payments beyond the expiration of
a patent term. The District Court declined to enforce the agreement. The Appeals
Court reluctantly affirmed, citing the Supreme Court's decision in Brulotte v.
Thys. However, Judge
Richard Posner thoroughly criticized the Brulotte case.
Brulotte and Patent Misuse. The Supreme Court held in Brulotte v. Thys
Co., 379 U.S. 29 (1964) that a patent holder's attempt to collect royalties
beyond the term of the patent constituted misuse of the patent. Judge Posner,
writing for a three judge panel, stated that "we have no authority to overrule a Supreme Court decision no matter how
dubious its reasoning strikes us, or even how out of touch with the
Supreme Court's current thinking the decision seems." While applying the
Brulotte decision in this case, he went on to explain at length why Brulotte is
such an awful precedent.
Background. Scheiber is a musician turned inventor who held U.S. and
Canadian patents on the audio system known as "surround sound". The
last of these patents expired in 1993 and 1995. Dolby
Laboratories makes audio equipment. These parties reached a settlement to a
1983 patent infringement suit that included a patent license agreement that
provided for the payment of royalties beyond the expiration of a patent term.
Following expiration of the patent, Dolby refused to make further payments.
District Court. Scheiber filed a complaint in U.S. District Court
(SDInd) against Dolby for enforcement of the licensing agreement. Dolby
relied upon Brulotte. The District Court granted summary judgment to Dolby.
Appeals Court. The Appeals Court noted that the facts in Brulotte were
"just like this case; the two cases are indistinguishable." Hence, the
Appeals Court affirmed.
"The decision has, it is true, been severely, and as it seems to us, with
all due respect, justly, criticized, beginning with Justice Harlan's
dissent", wrote Posner. "The Supreme Court’s majority opinion
reasoned that by extracting a promise to continue paying royalties after
expiration of the patent, the patentee extends the patent beyond the term fixed
in the patent statute and therefore in violation of the law. That is not true.
After the patent expires, anyone can make the patented process or product
without being guilty of patent infringement. The patent can no longer be used to
exclude anybody from such production. Expiration thus accomplishes what it is
supposed to accomplish."
And because of this, Posner elaborated that if the parties negotiate an
agreement that provides that royalties will be paid beyond the term of the
patent, then amount of the royalty payment will reflect this fact, and the
payment will be lower.
He wrote that "charging royalties beyond the term of the patent does not
lengthen the patentee's monopoly; it merely alters the timing of royalty
payments. This would be obvious if the license agreement between Scheiber and
Dolby had become effective a month before the last patent expired. The parties
could have agreed that Dolby would pay royalties for the next 100 years, but
obviously the royalty rate would be minuscule because of the imminence of the
Federal Circuit. The U.S. Court of
Appeals (FedCir), which has jurisdiction over appeals from patent cases, has
also stated that it views the misuse doctrine with disfavor, and will apply it
only in clear cases, such those matching the facts of Brulotte.
In contrast, some academics have argued for an expansion of the reasoning of
Brulotte, by analogy, to copyright law. For example, Brulotte could be the basis
of a court imposed limitation upon the anti circumvention rights created by the
Digital Millennium Copright Act (DMCA), 17 U.S.C. § 1201.
7th Circuit Jurisdiction. This case was heard by the Seventh Circuit,
rather than the Federal Circuit. Judge Posner noted that "Federal
jurisdiction over the suit is based on diversity of citizenship, because a suit
to enforce a patent licensing agreement does not arise under federal patent
Supreme Court News
6/17. The Supreme Court returned
from recess, and issued several non technology related opinions. The Court also
announced decisions on numerous petitions for writ of certiorari. The Court then
recessed until Thursday, June 20.
The Supreme Court denied certiorari in Satellite Broadcasting and
Communications Association v. FCC, No. 01-1332. See, Order
List [PDF] at page 4. This case pertains to the FCC's carry one, carry all
rule for satellite broadcasters. This is a petition for writ of certiorari to
the U.S. Court of
Appeals (4thCir), No. 01-1818, et seq.
The Supreme Court denied certiorari in Celtronix Telemetry, Inc. v. FCC,
No. 01-1504. See, Order
List [PDF] at page 4. This is a petition for writ of certiorari to the U.S.
Court of Appeals (DCCir), Nos. 00-1400 and 00-1401, pertaining to FCC
Interactive Video and Data Service licenses. See, opinion
of the Court of Appeals.
NTIA Releases Rule on Spectrum Reallocation Costs
6/17. The National Telecommunications and
Information Administration (NTIA) published a notice
in the Federal Register containing a final rule regarding reimbursement of costs
for federal to commercial spectrum reallocation.
The notice states that the NTIA has adopted rules "governing reimbursement
to Federal entities by the private sector as a result of reallocation of
frequency spectrum. This rule implements provisions of the Strom Thurmond
National Defense Authorization Act for Fiscal Year 1999 (NDAA 99) which
authorized Federal entities to accept compensation payments when they relocate
or modify their frequency use to accommodate non- Federal users of the spectrum.
By this action, spectrum that has been identified for reallocation can be
provided to the private sector for future commercial wireless service, and the
Federal Government will be compensated for the costs incurred in making that
reallocated spectrum available."
These rules are effective June 17, 2002. See, Federal Register, June 17, 2002,
Vol. 67, No. 116, at Pages 41182 - 41196. See also, NTIA
RIAA Settles with AudioGalaxy
6/17. The Recording Industry Association of
America (RIAA) announced that a settlement has been reached in Zomba Records
v. Audiogalaxy.com and Michael Merhej. Last month the RIAA and the National Music Publishers' Association (NMPA)
filed a complaint
[78 pages in PDF] in U.S. District Court (SDNY) against Audiogalaxy.com on behalf of members of
the RIAA and NMPA. The complaint alleges vicarious and contributory copyright
infringement in connection with the operation of a Napster like peer to peer
music copying service.
The RIAA stated in a release
that the settlement "would allow Audiogalaxy to operate a ``filter-in´´
system, which requires that for any music available, the songwriter, music
publisher, and/or recording company must first consent to the use and sharing of
the work. The other key provision of the agreement is for Audiogalaxy to pay the
music publishers and recording industry a substantial sum based on Audiogalaxy's
assets and interest in resolving this case quickly."
6/17. The Interior Department's National
Indian Gaming Commission published a notice
in the Federal Register announcing the adoption of a final rule that includes
changes in the definitions of "electronic, computer or other technologic
aid" and "electronic or electromechanical facsimile." See,
Federal Register, June 17, 2002, Vol. 67, No. 116, at Pages 41166 - 41174.
6/17. XO Communications filed a Chapter 11
bankruptcy petition in the U.S.
Bankruptcy Court (SNDY). See, XO
6/17. Sen. Tom Daschle (D-SD) and Sen. Robert Torricelli (D-NJ),
introduced S 2629, a bill to provide for an agency assessment, independent
review, and Inspector General report on privacy and data protection policies of
federal agencies. It was referred to the Senate Committee on Governmental
6/17. Ihsan Elashyi, aka Sammy Elashi, plead guilty in U.S. District Court
(NDTex) to exporting computer equipment to Saudi Arabia in violation of a
Department of Commerce Temporary Denial Order. Elashyi plead guilty to violation
of 50 U.S.C. § 1701, et seq. and accompanying sections of Title 15 of the Code
of Federal Regulations, for shipping in violation of a Temporary Denial Order.
He also plead guilty to access device fraud, money laundering, and wire fraud.
release and BIS release.
6/16. Joseph Nacchio resigned his positions as Chairman and CEO of Qwest Communications. The Board of Directors
elected Richard Notebaert, a former Chairman and CEO of Ameritech, to
replace him. Philip Anschutz resigned as non-executive Chairman of the
Board, but remains a Director and Chairman of the Executive Committee of the
Board. See, Qwest
Go to News from June 11-15, 2002.