|News from August 1-5,
Microsoft Addresses Compliance with Proposed Settlement in
8/5. Microsoft released a statement
regarding its "Microsoft Settlement Program", its name for its efforts
to comply with the proposed settlement agreement with the Department of Justice (DOJ) and some of the
states which brought antitrust actions against it. The statement addresses
several of the requirements imposed upon Microsoft by the proposed settlement
agreement, including use by third parties of technology used by server operating
system products to interoperate with a Windows operating system product, new
uniform licensing terms for original equipment manufacturers (OEMs), and other
Microsoft entered into a proposed settlement agreement with the DOJ and nine
state Attorneys General in November of 2001. The proposed settlement agreement
was revised on February 27, 2002. Some non-settling states refused to join in
the proposed settlement agreement. The Court has not yet entered final judgment.
However, Microsoft has agreed to abide by the agreement pending final
resolution. There is an August 6, 2002 deadline in the agreement for compliance
with certain requirements of the agreement.
The DOJ Antitrust Division also issued a
"Microsoft Consent Decree Compliance Advisory -- August 5, 2002",
which addresses Section III.E. of the proposed settlement agreement.
The DOJ advisory states that "Section III.E. of the Proposed Final Judgment
requires Microsoft to make available for use by third parties on reasonable and
non-discriminatory terms certain technology used by server operating system
products to interoperate with a Windows operating system product. Under the
terms of Section III.E., Microsoft must offer this technology for license no
later than August 6, 2002. Microsoft has informed the Department that it will
begin to offer these licenses and start the process of negotiating the terms
with prospective licensees on August 6, and that information concerning the
licenses will be available on Microsoft's website on that day."
The DOJ advisory continues that "Microsoft last week provided the
Department and representatives of the settling states with drafts of the
licenses that it proposes to offer. The licenses are complex and present novel
issues that require comprehensive analysis. The Department has not pre-cleared
the licenses. The Department is undertaking a careful and thorough review and
evaluation of the terms of the proposed licenses to determine whether the
licenses comply with the Proposed Final Judgment."
CATO Scholar Opposes DTV Mandates
8/5. Adam Thierer,
Director of Telecommunications Studies at the Cato
Institute, wrote a essay
titled "The HDTV Fiasco Gets Worse: TV Set and Cable Mandates On the
He wrote that "America's 15 year high definition television (HDTV)
industrial policy experiment has been a failure by almost any standard. Although
this long and miserable history is too long to recall here, suffice it to say,
the grand vision of the broadcast industry and public policymakers has become an
expensive joke. And just when you think things can't get worse, Congress and the
Federal Communications Commission (FCC) are now readying new rules to roll the
burden of rolling out a service nobody wants onto the backs of television set
manufacturers and cable network providers."
Thierer concluded that "the government's ``damn the consequences´´ HDTV
industrial policy has absolutely zero probability of working according to
schedule and is likely to derail entirely. Ironically, it will probably be the
broadcasters themselves who eventually put an end to it with small rural
affiliates recognizing they simply cannot afford to keep up this charade. The
real question is, how long do we have to wait before this happens and how many
more victims will this industrial policy fiasco claim before policymakers
finally admit defeat?"
FTC Takes Action Against Phillips Electronics for False
Statements Regarding Rebates
8/5. The Federal Trade Commission (FTC)
announced that it filed an administrative complaint [PDF] against Phillips Electronics North America Corporation
(Phillips) alleging violation of Section 5(a) of the Federal Trade Commission
Act (FTCA) in connection with making false statements regarding rebates on the
sale of computer peripheral products.
Section 5(a), 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 FTC and Phillips also entered into an Agreement Containing
Consent Agreement [PDF] that provides, among other things, that Phillips
"shall not ... misrepresent, in any manner, expressly or by implication,
the time in which any rebate in the form of cash or credit towards future
purchases will be mailed, or otherwise provided, to purchasers ... fail to
provide any rebate in the form of cash within the time specified, or, if no time
is specified, within thirty (30) days ..."
Howard Beales, Director of the FTC's Bureau of Consumer Protection, stated in a release that
"Rebates that begin as a big draw for consumers often end up as a big drag
... Some companies are quick to offer attractive rebates, but are slow to send
them out, and often make them so difficult to redeem that consumers simply give
up. ... the Commission alleged that the sellers changed the rules of the game
while it was being played. The FTC will use all of its powers -- including its
power to allege unfair business practices -- to challenge such conduct."
FCC Suspends Enforcement of CIPA for Libraries Seeking E-Rate
8/5. The Federal Communications Commission
(FCC) published a notice
in the Federal Register that as of August 5, 2002, it has suspended enforcement
against libraries those sections of 47 CFR § 54.520 that were adopted to
implement 47 U.S.C. § 254(h)(6). That is, it has suspended enforcement of the
Children's Internet Protection Act as it applies to libraries (but not schools).
The Children's Internet Protection Act
(CIPA) [PDF] requires schools and libraries receiving e-rate subsidies from the
FCC to utilize certain technological protection measures, such as pormography
filtering software, on computers with Internet access. The CIPA is codified in
Section 254, the universal service section of the Communications Act.
Pending resolution by the courts of a constitutional challenge to the CIPA as it
applies to libraries, the FCC has suspended its rules as they apply to
libraries. The FCC notice states that "Because the court's decision does
not address the constitutionality of the CIPA requirements as they apply to
schools, all of the CIPA requirements as codified at sections 254(h)(5) and
254(l) and implemented by the Commission's rules remain in effect for
Specifically, the FCC wrote that "we suspend enforcement of 47 CFR
54.520(c)(2)(i) and (iii), 54.520(c)(3), and 54.520(d) as they apply to all
libraries, to the extent that these provisions require any library to filter or
certify to such filtering under 47 U.S.C. 254(h)(6). We further suspend
enforcement of 47 CFR 54.520(g)(1) as it applies to all libraries."
See, Federal Register, August 5, 2002, Vol. 67, No. 150, at Pages 50602 - 50603.
GAO Releases Report Criticizing Bush's Relaxing of MTOPS
Levels for HPC Exports
8/5. The General Accounting Office (GAO)
released a report [37
pages in PDF] titled "Export Controls: More Thorough Analysis Needed to
Justify Changes in High Performance Computer Controls".
Background. The United States government regulates the export of
computers and microprocessors. It imposes export controls on the export of
computers and microprocessors based upon an old performance measure -- million
theoretical operations per second (MTOPS). Individual computers and
microprocessors with an MTOPS rating above a certain level are called "high
performance computers" (HPC). Exports of computers and microprocessors with
MTOPS ratings above a control threshold to certain countries -- known as Tier 3
countries -- such as Israel, Pakistan, India, China, and Russia, require notice
to the Department of Commerce of intent to export.
The National Defense Authorization Act of 1998 (Public Law 106-65, 113 stat.
798) gives the President authority to set the MTOPS level above which computers
exported to Tier 3 countries are subject to government regulation, provided that
he submits a report to Congress justifying his action. As technology has
advanced, the MTOPS threshold level has repeatedly been raised.
On January 2, President Bush announced that the relaxation of certain controls
on the export of high performance computers and microprocessors. Specifically,
for Tier 3 countries, he raised the threshold from 85,000 MTOPS to 190,000 MTOPS.
See, January 2, 2002 letter
from Bush to Congressional leaders informing them of the change. See also, White
House release and statement
by the Deputy Press Secretary.
There has long been controversy in the regulation of computer exports. Defense
and intelligence agency hawks, and some members of Congress on the committees
which oversee defense and intelligence agencies, have sought to rigorously limit
the export of computers and microprocessors. In contrast, some proponents of the
high tech industry, and proponents of free trade and economic growth, have
sought to relax export controls.
GAO Report. The present GAO study reflects the criticism and opposition
within the Congress to relaxing export restraints.
The GAO report states that the President's "report justifying the changes
in control thresholds for high performance computers focused on the availability
of high performance computers. However, we found that the justification did not
fully address the requirements of the National Defense Authorization Act of
For example, the GAO wrote that the President's report's "prediction that
computers capable of performing at the new threshold will be widely available
through foreign and domestic companies by early 2002 has not materialized. We
found that only 1 of 10 companies cited in the report produces computers with
this capability. Other companies do not plan to do so until 2003, or later, and
some do not plan to do so at all."
The GAO also wrote that the President's report "contains little relevant
analysis of the potential military uses of computers with performance
capabilities between the old and new thresholds."
Finally, it concludes that the President's report "does not adequately
address what impact computers that perform at levels between the old and new
thresholds would have on national security."
The report also assumes that MTOPS remains a reliable measure of computing
capability, and that its remains relevant, despite technology for the clustering
of multiple computers, because of difficulties encountered by other countries in
operating clustered computers.
The report was prepared for the Chairmen and ranking members of the Senate Armed
Services Committee, the Senate Banking Committee, the House Armed Services
Committee, and the House International Relations Committee.
FBI Loses 317 Laptops
8/5. The Department of Justice's
(DOJ) Office of the Inspector General (OIG)
audited and released a series of reports on the control of laptop computers and
weapons at five DOJ components. It found a total of 400 missing laptops, and 775
missing weapons. For the Federal Bureau of
Investigation (FBI), it reported 317 missing laptops and 212 missing
weapons. Moreover, the OIG found that the FBI does not know if sensitive data
has been lost. See, Executive
Summary [43 pages in PDF]. See, full story.
People and Appointments
8/5. William Maher began work as the new Chief of the Federal Communications Commission's (FCC) Wireline Competition Bureau.
8/5. The National Intellectual Property Law Enforcement Coordination Council (NIPLECC)
published a notice
in Federal Register requesting comments regarding its agenda and mission. The
NIPLECC is co-chaired by the U.S. Patent and
Trademark Office (USPTO) and the Department of Justice (DOJ). See, Federal
Register, August 5, 2002, Vol. 67, No. 150, at Pages 50633 - 50634. See also,
the NIPLECC's 2000
8/5. President Bush gave a speech
at a Mike Fisher for Governor event in Pittsburgh, Pennsylvania, in which he
addressed trade promotion authority. He stated that "I also am the first
governor -- President -- in a long period of time to have what they call trade
promotion authority. It means that we're going to open up markets for U.S.
products, markets for the products of Pennsylvania farmers, markets of the
products of Pennsylvania high tech companies. A confident nation is a nation
willing to trade. And this nation, as a result of the bill I just got and am
signing tomorrow, will be a free trading nation."
8/3. President Bush stated that he will sign the trade promotion authority bill
on Tuesday, August 6. See, transcript
FEC Proposes Rules that Exclude Webcasts from Electioneering
8/2. The Federal Election Commission (FEC)
released a second Notice
of Proposed Rulemaking (NPRM) [67 pages in MS Word] regarding the Bipartisan
Campaign Reform Act of 2002 (BCRA), the recently enacted campaign finance reform
legislation. This NPRM pertains to "electioneering communications".
The proposed rules would exempt webcasts.
These electioneering communications include broadcast, cable and satellite
communications that refer to a clearly identified federal candidate within 60
days of a general election or within 30 days of a primary election for federal
office, and for candidates for the Senate or House of Representatives, targeted
to reach 50,000 or more people within the jurisdiction of a campaign. Those
paying for the communications must meet certain disclosure requirements, and
cannot use certain funds.
The NPRM states that "Proposed 11 CFR 100.29(b)(2) would define
``broadcast, cable, or satellite communication´´ to mean a communication that
is publicly distributed by a television station, radio station, cable television
system, or satellite system. The term ``distribute´´ reflects the
legislation's apparent focus on the means of dissemination rather than on the
means of receipt."
The NPRM continues that "The definition would exclude ``webcasts´´ or
other communications that are distributed only over the Internet, but would
include television or radio communications that are simultaneously webcast over
the Internet, or archived for listening over the Internet. Internet subscribers
would not be included in the calculation of how many persons a communication can
reach in a particular district or state. The Commission seeks comment on whether
this is an appropriate reading of the statute."
It further states that "The legislative history, which is discussed below,
makes it clear that this regulation should be limited to television and radio.
The Commission seeks comment to confirm that this interpretation is correct. All
other types of communications, such as print media, billboards, telephones, and
the Internet, would therefore, not be considered electioneering communications.
Consequently, proposed 11 CFR 100.29(c)(1) would specifically list these as
exceptions to the definition."
The NPRM states also in a later section that "The Internet is included in
the above list of exceptions because, in most instances, it is not a broadcast,
cable, or satellite communication, and it is not sufficiently akin to television
and radio. During an early debate on the amendment, Senator Snowe was asked
whether the definition of electioneering communication would ``apply to the
Internet.´´ She replied, ``No. Television and radio.´´ See 144 Cong.
Rec. S973 and S974 (daily ed. Feb. 25, 1998)(statement of Sen. Snowe). The
Commission seeks comment confirming that this is a correct interpretation of
The NPRM does not specifically address the classification of webcasting over a
cable or satellite platforms.
The NPRM also announces that the FEC will hold public hearings on this NPRM on
August 28-29. Written comments from those who request to testify at the hearing
must be received by August 21. All other comments are due by August 29. See
also, FEC release.
President Bush to Leave for August Break
8/2. President Bush is scheduled to leave Washington DC on Friday, August 2
until after Labor Day. He heads first to his parents' summer home in
Kennebunkport, Maine. Then he will go to his home in Crawford, Texas.
The House began its August recess on July 27. It is scheduled to return on
September 4. The Senate recessed on August 1 until September 3. The Supreme
Court completed its prior term at the end of June.
People and Appointments
8/2. President Bush announced his intent to nominate Wayne Abernathy to be
Assistant Secretary of the Treasury for Financial Institutions. Abernathy has
worked for the Senate Banking
Committee since 1981. See, White
8/2. EU Trade Commissioner Pascal Lamy
commended the U.S. Congress for passing trade promotion authority legislation.
He stated in a release
that "The jury may have been out for a long time, but it is now back with a
clear decision giving clean negotiating authority to the US administration.
Today's decision removes an important roadblock to the Doha Development Agenda
in particular. Now we have to use this important development to generate real
momentum in these negotiations".
8/2. The Technology Administration (TA)
published a notice
in the Federal Register listing the current membership of the TA's Performance
Review Board (PRB). This PRB reviews performance appraisals, agreements, and
recommended actions pertaining to employees in the Senior Executive Service, and
reviews performance related pay increases for ST-3104 employees. See, Federal
Register, August 2, 2002, Vol. 67, No. 149, at Page 50422.
8/2. The Overseas Private Investment Corporation
(OPIC), an agency of the U.S. government, announced that it will provide
$777,000 in political risk insurance for International Scientific Products Corporation to expand its
optical components manufacturing facility in St. Petersburg, Russia. OPIC stated
that the money will be used for "insurance to cover against risk of
expropriation and political violence for a consignment of equipment and
accessories to be used to increase production and quality control". See, OPIC release.
8/2. A grand jury of the U.S. District Court (CDCal) returned
indictments against Glenn Cazenave and Amaya Marinella alleging that they
unlawfully conspired to enter Commerce One's
computer systems and delete a software package that was being developed for a
foreign client. See, CCIPS release.
DOJ Charges Former WorldCom Executives
8/1. The Department of Justice announced
that Scott Sullivan and David Myers were "charged with seven counts of
securities fraud, conspiracy to commit securities fraud, and filing false
statements with the Securities and Exchange Commission". See, prepared
statement by Attorney General John Ashcroft.
Sullivan is a former Chief Financial Officer of WorldCom. Myers is a former Senior Vice
President and Controller of WorldCom. The DOJ has not obtained any indictments.
DOJ Recommends Approval of Verizon Long Distance Applications
in Delaware & NH
8/1. The Department of Justice (DOJ) issued
[PDF] recommending that the Federal Communications
Commission (FCC) approve the Section 271
application of Verizon to provide in
region interLATA services in the states of Delaware and New Hampshire. See, DOJ release.
A Verizon attorney stated in a release that "The DOJ's recommendation,
which follows FCC approvals in eight of our other states in the Northeast and
Mid Atlantic regions, will help move Verizon into the home stretch to bring the
full benefits of competition to all of our customers. We are confident that the
FCC will approve our long distance application for Delaware and New
Also on August 1, Verizon filed a Section 271 application of provide in region
interLATA services in the state of Virginia. The FCC has 90 days to act on the
FCC Announces Agenda for August 8 Meeting
8/1. The Federal Communications Commission
(FCC) announced the agenda
for its August 8 meeting. First, the FCC will consider of a Notice of Proposed
Rulemaking (NPRM) regarding digital broadcast copy protection.
Second, it will consider a Second Report and Order and Second Memorandum Opinion
regarding its policies and rules for conversion of the broadcast television
service to digital technology. This is MM Docket No. 00-39.
Third, it will consider a Report and Order regarding various Part 22 rules that
have become outdated due to technological change, increased competition in the
Commercial Mobile Radio Service (CMRS), or supervening rules. This is WT Docket
The meeting will be held at 9:30 AM in the Commission Meeting Room. See, FCC
Senate Passes Trade Promotion Authority Bill
8/1. The Senate passed the conference report on HR 3009,
the Andean Trade Preference Act, by a vote of 64-34. See, Senate Roll Call No.
207. The bill also includes trade promotion authority (TPA). The House passed
this conference report on July 27 by a vote of 215-212. See, House
Roll Call No. 370. President Bush will sign the bill.
The House passed its first version of TPA legislation, HR 3005,
the Bipartisan Trade Promotion Authority Act of 2001, on December 6, 2001. The
Senate passed another version, thus requiring differences to be worked out by a
TPA, which is also known as fast track, gives the President authority to
negotiate trade agreements which can then only be voted up or down, but not
amended, by the Congress. TPA strengthens the bargaining position of the
President, and the U.S. Trade Representative
(USTR), in trade negotiations with other nations.
The Bush administration, and supporters of the bill in the House and Senate,
made numerous concessions in order to win majority support for passage. The bill
requires the USTR to adhere to several principal negotiating objectives. The
bill requires the administration to engage in specified prior consultations with
the Congress. The bill also extends Trade Adjustment Assistance (TAA) for five
years, provides for secondary worker benefits, provides for health care tax
credits, and extends the duration of TAA benefits.
President Bush released a statement
after the Senate vote. He wrote that "The Senate's bipartisan passage of
Trade Promotion Authority completes an accomplishment that has eluded Congress
since 1994 and is a major victory on behalf of working Americans. With TPA, we
will open markets to create high paying jobs and provide new opportunities for
America's farmers and workers. I thank the House and Senate for passing TPA so
that we can work together to advance America's free trade agenda. With this
important tool, we will promote prosperity in the United States, progress in our
hemisphere, and freedom throughout the world."
The final vote correlated with party affiliation. Almost all of the 34 votes
against TPA were cast by Democrats. However, Sen. Strom Thurmond (R-SC), Sen. Jeff Sessions (R-AL), Sen. Richard Shelby (R-AL), Sen. Conrad Burns (R-MT), and Sen. Ben Campbell (R-CO) voted against
the bill. In contrast, Sen. Max Baucus
(D-MT), the Chairman of the Senate
Finance Committee, was one of the leaders of the effort to pass the bill.
President Bush, Sen. Baucus, Sen. Charles
Grassley (R-IA), and Sen. Trent Lott
(R-MS) held a telephone conference after the vote. See, transcript.
Sen. Baucus stated that "I think this legislation is going to help restore
American trade prestige worldwide. Something we desperately needed. It also will
help give the economy a boost."
Technology companies that sell products or services abroad will benefit from TPA.
Hence, the groups that represent tech companies lobbied vigorously for passage
Robert Holleyman, P/CEO of the Business Software
Alliance (BSA) stated in a release
that "Today's vote will help American companies gain access to new markets
in real time, which is critical for reviving our sluggish economy. This
legislation is particularly important to the high tech sector, which already
this year has lost 243,000 jobs and nearly 40 percent of its market value. TPA
will help America's high tech industry turn the tide and benefit the U.S.
economy, its workforce and its trading partners for generations to come."
David McCurdy of the Electronics Industry
Association (EIA) stated in a release
that "The passage of TPA will allow the U.S. to quickly wrap up free trade
negotiations with Chile and Singapore and move ahead on Free Trade Area of the
Americas and World Trade Organization talks.
The President's authority to efficiently settle trade agreements will drive
opportunities around the world for high tech manufacturers, whose markets are
increasingly global. The current WTO talks include an Information Technology
Agreement, which would greatly benefit our sector by tearing down tariff
Telecommunications Industry Association
(TIA) President Matthew Flanigan stated in a release
that "The telecommunications industry has lost $2 trillion in market value
and 500,000 jobs in the United States over the past two years. The Trade Act of
2002 offers hope to our industry by giving the Bush Administration the
credibility it needs to negotiate new trade agreements and provide new market
opportunities that are critical to our member companies.”
See also, American Electronics Association
Thomas Donohue, P/CEO of the U.S. Chamber of Commerce stated in a release
that "Passing the trade bill is the easy part ... Now U.S. negotiators must
create trade deals that promote our products, help our farmers and workers, and
get our economy back on track."
McCain Introduces Consumer Broadband Bill
8/1. Sen. John McCain (R-AZ) introduced S 2863 [17
pages in PDF], the "Consumer Broadband Deregulation Act". The bill
would add a new title to the Communications Act of 1934, titled "Consumer
Broadband Services". It would provide that "neither the Commission,
nor any State, shall have authority to regulate the rates, charges, terms, or
conditions for the retail offering of consumer broadband service." See, full story.
Sen. Cleland Introduces Bill to Limit Online Collection of
Information About Children
8/1. Sen. Max Cleland (D-GA) introduced
S 2839, the Children's Electronic Access Safety Enhancement (CEASE) Act.
This is a bill to regulate the collection and use of information about children
by Internet content management service providers, such as companies which
provide filtering technologies to schools and libraries.
Section 1 of the bill is its title.
Section 2 of the bill provides, in part, that "A provider of Internet
content management services shall, before entering into a contract or other
agreement to provide such services to or for an elementary or secondary school
or library, notify the local educational agency or other authority with
responsibility for the school, or library, as the case may be, of the policies
of the provider regarding the collection, use, and disclosure of information
from or about children whose Internet use will be covered by such
services." The bill also covers the form of the notice, and modifications
Section 3 of the bill both prohibits the collection of information of about
children, and regulates the collection of such information. First, it provides
that "A provider of Internet content management services to or for an
elementary or secondary school or library may not collect through such services
personal information from or about a child who is a student at that school or a
user of that library." Then, it provides that if a provider of Internet
content management services collects such information, it shall provide notice
to the school and the Federal Trade Commission (FTC), and treat such information
in a manner that is consistent with the Children's Online Privacy Protection Act
of 1998 (COPPA).
The COPPA provides, in part, that "It is unlawful for an operator of a
website or online service directed to children, or any operator that has actual
knowledge that it is collecting personal information from a child, to collect
personal information from a child in a manner that violates the regulations
prescribed under" the Act. See, 15 U.S.C. § 6502.
Section 4 of the bill would amend the definitions section of the COPPA.
Cleland's bill would amend the definitional section of the COPPA, 15 U.S.C. § 6501, by
adding a new paragraph that would include Internet content management services
within the meaning of web site operator for the purposes of the COPPA.
Sen. Cleland explained his bill in a statement in the Senate. First, he said
that "the bill requires an Internet filtering government contractor to
disclose its treatment of collected information to the school or library with
which it is contracting. Additionally, if changes to these policies are made,
the filtering company must inform the school or library of these changes. If
adequate notice is not provided, the entity has the option to cancel the
contract. Armed with such information about the company's practices, the school
or library officials can make an informed decision of whether it wishes to
contract with a particular company." See, Cong. Rec., August 1, 2002, at
He continued that "The Children's Online Privacy Protection Act, COPPA,
which passed Congress and was signed into law in 1998, prohibits the collection
of personal information about children on commercial websites. In the second
section of my legislation, a similar COPPA prohibition would extend to Internet
content management services at schools and libraries. If personal information is
collected on a child, the provider is required to inform the school or library
and the Federal Trade Commission and to indicate how it will treat this
information so that it will not be disclosed or distributed. When children go to
schools and libraries, these environments are supposed to be safe."
Sen. Cleland argued that "Parents and guardians should not have to worry
about how their children's personal information may be compromised, especially
by a company that markets itself to protect children and in some cases
facilitate learning. I believe my legislation will help put to rest such
Sen. Kerrey Introduces Bill for Relief of NextWave Re-Auction
8/1. Sen. John Kerry (D-MA) and Sen. Sam Brownback (R-KS) introduced S
2869, a bill pertaining to the auction of spectrum currently tied up in the
NextWave litigation. It was referred to the Senate Commerce Committee, of which
both Sen. Kerry and Sen. Brownback are members.
Sen. Kerry explained his bill in a statement in the Senate. He said that
"due to the uncertain legal status of licenses related to that FCC Auction
No. 35, several companies have contingent liabilities in the millions or
billions of dollars. These contingent liabilities are damaging the companies'
ability to acquire additional spectrum to meet the urgent needs of wireless
consumers and to roll out new and innovative services to consumers. The affected
providers are the successful bidders for wireless spectrum that the Federal
Communications Commission auctioned in Auction No. 35. Some of the spectrum had
previously been licensed to companies, including NextWave Personal
Communications Inc., whose bankruptcy filings and subsequent failure to pay
amounts due to the FCC for their licenses led to the cancellation of those
licenses." See, Cong. Rec., August 1, 2002, at page S7939.
Sen. Kerry continued that the bill would require "the FCC promptly to
refund to the winning bidders the full remaining amount of their deposits and
down payments. In addition, it gives each winning bidder an opportunity to
elect, within 15 days after enactment, to relinquish its rights and to be
relieved of all further obligations under Auction No. 35. Those who choose to
retain their rights and obligations under Auction No. 35 will nonetheless be
entitled to the return of their deposits and down payments in the interim. If
and when the FCC is in a position to deliver the licenses at issue to those who
remain obligated, they will be required to pay the full amount of their bid in
accordance with the FCC's existing regulations. Those who elect to terminate
their rights and obligations under Auction No. 35 will be free to pursue other
opportunities to acquire spectrum and serve consumers."
Background. NextWave obtained
spectrum licenses at FCC auctions in 1996. The FCC permitted NextWave to obtain
the licenses, and make payments under an installment plan, thus creating a
debtor creditor relationship between NextWave and the FCC. NextWave did not make
payments required by the plan, and filed a Chapter 11 bankruptcy petition. The
FCC cancelled the licenses. It then proceeding to re-auction the disputed
spectrum. The U.S. Court of Appeals (DCCir)
ruled in its June 22, 2001 opinion
that the FCC is prevented from canceling the spectrum licenses by § 525 of the
The FCC petitioned the Supreme Court
for writ of certiorari. The Court granted certiorari. The Supreme Court will
hear oral argument on Tuesday, October 8, 2002, in FCC v. Nextwave, Case
No. 01-653, and Arctic Slope Corp. v. Nextwave, Case No. 01-657.
Sen. Lieberman Introduces Stock Options Bill
8/1. Sen. Joe Lieberman (D-CT) and Sen. Barbara Boxer (D-CA) introduced S 2877,
the "Rank and File Stock Option Act of 2002". The bill would require
that stock options be broad based, and that stock option plans be approved by
shareholders. It would not require the expensing of stock options. It was
referred to the Senate Finance
The bill would amend Section 162 of the Internal Revenue Code of 1986 to provide
for the denial of deduction of stock option plans that discriminate in favor of
highly compensated employees.
The bill would also require the Securities and
Exchange Commission (SEC) to adopt rules that require that "shareholder
approval is required for stock option plans and grants, stock purchase plans,
and other arrangements by public companies by which any person may acquire an
equity interest in the company in exchange for consideration that is less than
the fair market value of the equity interest at the time of the exchange".
The bill also would require the SEC to "conduct an analysis of, and make
regulatory and legislative recommendations on, the need for new stock holding
period requirements for senior executives, including ... recommendations to set
minimum holding periods after the exercise of options to purchase stock and to
set a maximum percentage of stock purchased through options that may be sold ..."
However, the bill does not require the expensing of stock options.
Sen. Lieberman said that his bill would provide a "tool in the
democratization of capitalism". See, Cong. Rec., August 1, 2002, at page
Sen. Lieberman elaborated that stock options are a "fundamentally decent
idea". He said that "We've discovered over the last ten months that
too many companies and executives have been misusing and abusing them. In far
too many cases, options have been turned into mere feed in the corporate trough
by the greed of corporate executives."
"They can be used well or used poorly. We've seen corporate executives use
this hammer to weaken the foundations of their companies, build rickety and top
heavy structures ready to collapse, and build themselves nice, secure shelters
from the damage. That's unconscionable." said Sen. Lieberman.
He explained that his bill would "correct this abuse by ensuring that the
tool of stock options is put in the hands of more and more employees so it can
be used as it was initially intended -- to construct wealth, to build fortunes,
to strengthen companies, and to incentivize the long term soundness and
stability of a company."
Sen. Lieberman added that "The way to fix this problem is not, as some have
suggested, to require stock option expensing at the time an option is granted.
That would, in fact, make the problem worse. It would disincentive the
dissemination of options in the first place -- and in the end, those at the top
of the corporate food chain will still take care of themselves. No, the way to
fix this problem is to ensure that stock options are more broadly shared by more
and more employees of American corporations -- that they truly are the
democratizing tool that they can be."
Federal Circuit Issues Split Decision in Inventorship Case
8/1. The U.S.
Court of Appeals (FedCir) issued its split opinion in Trovan
v. Sokymat, a patent infringement case involving the issue of
Trovan is the owner of U.S.
Patent No. 5,281,855 titled "Integrated circuit device including means
for facilitating connection of antenna lead wires to an integrated circuit
die". That is, it involves passive transponders. The patent lists Leonard
Hadden and Glen Zirbes as inventors.
Trovan filed a complaint in U.S.
District Court (CDCal) against Sokymat alleging patent infringement. Sokymat
argued that one Ake Gustafson is a co-inventor and co-owner of the patent, and
that the patent is invalid and unenforceable because Gustafson was omitted as a
co-inventor with deceptive intent. The District Court held that Gustafson is not
a co-inventor and co-owner.
The Appeals Court vacated and remanded. Judge Linn wrote the opinion of the
Court. Judge Michel dissented.
More Federal Circuit Opinions
8/1. The U.S.
Court of Appeals (FedCir) issued its opinion in Honeywell
v. Victor, a patent infringement case involving Honeywell's U.S.
Patent No. 4,425,501, titled "Light Aperture for a Lenslet
Photodetector Array," which relates to autofocus cameras. The Appeals
Court reversed in part, affirmed in part, and remanded.
8/1. The U.S.
Court of Appeals (FedCir) issued its opinion in Allen
Engineering v. Bartell Industries, a patent infringement case
involving riding trowels. The Appeals Court addressed the issues of claim
construction, the on sale bar, and inequitable conduct before the Patent and
Trademark Office. This case pertains to U.S.
Patent No. 5,108,220, which related to riding trowels, which are machines
used to smooth the surface of freshly poured concrete. The Appeals Court
reversed the District Court's judgment of infringement, and remanded.
People and Appointments
8/1. The Senate confirmed David Gross to be Deputy Assistant Secretary of
State for International Communications and Information Policy in the Bureau of
Economic and Business Affairs, and U.S. Coordinator for International
Communications and Information Policy.
8/1. The Senate confirmed Kathie Olsen and Richard Russell to be
Associate Directors of the Office of Science and
8/1. The Senate confirmed the following judicial nominees: Henry Autrey
(to be a Judge of the U.S. District Court for the Eastern District of Missouri),
Richard Dorr (U.S.D.C, Western District of Missouri), David Godbey
(U.S.D.C for the Northern District of Texas), Henry Hudson (U.S.D.C. for
the Eastern District of Virginia), Timothy Savage (U.S.D.C. for the
Eastern District of Pennsylvania), Amy St. Eve (U.S.D.C. for the Northern
District of Illinois), David Cercone (U.S.D.C. for the Western District
of Pennsylvania), and Morrison England (U.S.D.C. for the Eastern District
8/1. President Bush nominated Rosemary
Collyer to be a Judge of the U.S.
District Court (DC) for the District of Columbia. She is a partner in the
Washington DC office of the law firm of Crowell
& Moring, where she specializes in labor and employment law. See, White
8/1. President Bush nominated Richard Holwell to
be a Judge of the U.S. District Court (SDNY).
He is a partner in the New York City office of the law firm of White & Case. He is a trial lawyer who
focuses on securities, antitrust, bankruptcy and financial market matters. See, White
8/1. President Bush nominated Gregory Frost to be a Judge of the U.S.
District Court (SDOhio). See, White
8/1. President Bush nominated Mark Fuller to be a Judge of the U.S.
District Court (MDAla). See, White
8/1. President Bush nominated Jose Linares to be a Judge of the U.S. District Court
(NJ). See, White
8/1. President Bush nominated Freda Wolfson to be a Judge of the U.S. District Court
(NJ). See, White
8/1. President Bush announced his intent to nominate Carol Lam to be U.S.
Attorney for the Southern District of California. Lam has been a Judge of the
California Superior Court for San Diego County since 2000. Prior to that, she
was an Assistant U.S. Attorney in the Southern District of California. See, White
8/1. The Senate approved the nominations of Ben Bernanke and Donald
Kohn to be Governors of the Federal
Reserve Board, by voice vote. The Senate
Banking Committee approved their nominations on July 31.
8/1. The Senate Finance Committee
approved the nomination of Charlotte Lane to be a Commissioner of the U.S. International Trade Commission. However,
there may be a hold in the Senate on her nomination. Lane is from the steel
producing state of West Virginia. Farm state Senators want a Commissioner from a
8/1. The Senate Finance Committee
approved the nomination of Pamela Olson
to be Assistant Secretary of the Treasury for Tax Policy. She is currently
Deputy Assistant Secretary. She was previously a partner in the Washington DC
office of the law firm of Skadden Arps.
8/1. The Securities and Exchange Commission
(SEC) announced that it is soliciting "suggestions of individuals who meet
the statutory requirements" for appointment to the Public Company
Accounting Oversight Board, which was created by HR 3763,
the Public Company Accounting Reform and Investor Protection Act of 2002, also
known as the Sarbanes Oxley bill. The deadline to submit suggestions is
September 2, 2002. See, SEC
8/1. Sen. John Edwards (D-NC) and Sen. Charles Schumer (D-NY) introduced S
2846, a bill to establish a commission to evaluate investigative and
surveillance technologies. It was referred to the Senate Judiciary Committee, of
which both Sen. Edwards and Sen. Schumer are members. Sen. Edwards issued a release which
states that "In the wake of the terrorist attacks last year, the Federal
Bureau of Investigation and local police departments have increased
experimentation with video and Internet surveillance, X-ray screening, facial
identification and other investigative tools", and that the bill would
"establish a bipartisan commission to study these surveillance tools and
find the ways to enhance security without compromising privacy".
8/1. The Senate decided to postpone consideration of the Homeland Security Act
until it returns from recess on September 3. This is the bill to create a new
Department of Homeland Security. The House passed the bill on July 26 before it
went on recess for the month of August.
Go to News from July 26-31, 2002.