News from August 6-10, 2002
FCC Releases Order Setting DTV Mandates and Deadlines
8/9. The Federal Communications Commission (FCC) released its Second Report and Order and Second Memorandum Opinion and Order [48 pages in PDF] in the proceeding titled "In the Matter of Review of the Commission's Rules and Policies Affecting the Conversion To Digital Television". This Report and Order requires that most TV sets be built with digital TV tuners by 2007.
This is MM Docket No. 00-39. The FCC announced, but did not release, this Report and Order at its August 8, 2002, meeting. See also, stories in TLJ Daily E-Mail Alert No. 488, August 9, 2002.
DHHS Revises HIPAA Health Privacy Rules
8/9. The Department of Health and Human Services (DHHS) released changes to the regulations setting standards for privacy of individually identifiable health information, promulgated pursuant to the Health Insurance Portability and Accountability Act of 1996 (HIPAA).
See, DHHS release, DHHS summary of changes, and DHHS prepublication of changes to the privacy regulations [MS Word], all released on August 9. See also, DHHS's medical privacy web site.
Congress passed the HIPAA in 1996. It provided that the Congress would enact national patient privacy standards within three years, and that if it did not, then the DHHS would promulgate regulations. The Congress did not enact a health privacy bill. Hence, the DHHS acted. It issued its proposed rule in 1999, and then, on December 28, 2000, in the closing days of the Clinton administration, released its final rule. See, 2000 Rule: Part 1 | Part 2 | Part 3 | Part 4 | Regulation Text Only.
The current release contains changes to the 2000 rule. On August 9, the DHHS released a prepublication of changes to the rule. On August 14 the DHHS will publish the entire rule, as amended, in the Federal Register. The rule will take effect for most covered entities on April 14, 2003.
Secretary of HHS Tommy Thompson stated in a release that "The rule protects the confidentiality of Americans' medical records without creating new barriers to receiving quality health care. It strikes a common sense balance by providing consumers with personal privacy protections and access to high quality care."
Georgetown University's Health Privacy Project issued a release in which it stated that "With these changes, HHS eliminates the patient consent requirement and opens the door for the use of people's medical records for marketing purposes without notice or consent."
Federal Circuit Rules in Patent Case Involving Surfing the Web by Voice
8/9. The U.S. Court of Appeals (FedCir) issued its opinion in In re Thrift, an appeal from a U.S. Patent and Trademark Office (USPTO) Board of Patent Appeals and Interferences (BPAI) decision. The BPAI affirmed a patent examiner's rejection of claims of Philip Thrift and Charles Hemphill in U.S. Patent Application No. 08/419,229, titled "Voice Activated HyperMedia Systems Using Grammatical Metadata." The Appeals Court vacated the BPAI decision on certain claims.
This appeal involves a 1995 patent application that pertains to surfing the web with voice commands. The patent examiner rejected the application, and the BPAI affirmed. The Court of Appeals affirmed as to certain claims contained in the application, but vacated as to others.
Thrift and Hemphill, who have assigned their rights under this patent application to Texas Instruments, filed their '229 application in 1995. In 1996, the patent examiner rejected their claims for obviousness, in light of prior art, pursuant to 35 U.S.C. § 103. Thrift and Hemphill amended their claims, and the examiner again rejected all of their claims for obviousness, in 1997. The BPAI then affirmed the examiner's rejection, as to all claims.
The '229 application included as its first claim "A voice activated Hypermedia system using grammatical metadata, said system comprising: a. a speech user agent; b.  a network browsing module; and c. an information resource located on a computer network wherein said speech user agent facilitates voice activation of said network browsing module to access said information resource."
That it, this claim is comprised of a speech interface that allows users to access information located on a computer network using a network browsing module. The patent examiner rejected this claim, and others that were dependent upon it. This was affirmed by the BPAI, and again by the Court of Appeals.
However, another claim (Claim 11) added the ability to create a grammar, or established set of standard query words. Furthermore, under this claim, each user can construct a grammar and associate its terms with a uniform resource locations (URL), thus allowing users to access URLs by reciting phrases. The patent examiner rejected this claim, and others dependent upon it. This was affirmed by the BPAI. However, the Court of Appeals vacated as to these claims.
The Appeals Court wrote that the BPAI's "rejection is simply inadequate on its face. The Board sustained the examiner's very general and broad conclusion of obviousness based on his finding that ``[t]he use of grammar is old and well known in the art of speech recognition as a means of optimization which is highly desirable.´´"
The Appeals Court continued that "Although this statement is likely true, it fails to address the grammar creation capability limitations of claim 11. While the examiner's statement generally addresses the use of grammar, it does not discuss the unique limitations of extracting, modifying, or processing the grammar to interact with hypermedia sources. The Board's decision is not supported by substantial evidence because the cited references do not support each limitation of claim 11."
The Appeals Court also vacated as to a similar claim (Claim 14) on the basis that its rejection too was "not supported by substantial evidence".
The matter is now remanded to the Patent Office for further proceedings.
Federal Circuit Upholds Validity of Cipro Patent
8/9. The U.S. Court of Appeals (FedCir) issued its opinion in Bayer v. Schein, a patent infringement case involving the drug know as Cipro. The Court found Bayer's patent valid against a Section 102(d) challenge.
Bayer AG is the assignee of U.S. Patent No. 4,670,444 and Reexamination Certificate B1 4,670,444, which are directed towards a class of chemical compounds that includes the broad spectrum antibiotic ciprofloxacin. Bayer filed four complaints in U.S. District Court (DNJ) against Schein Pharmaceuticals and others alleging patent infringement. The District Court consolidated these actions.
Schein raised the affirmative defense of invalidity under 35 U.S.C. § 102(d), which provides that "A person shall be entitled to a patent unless ... (d) the invention was first patented or caused to be patented, or was the subject of an inventor's certificate, by the applicant or his legal representatives or assigns in a foreign country prior to the date of the application for patent in this country on an application for patent or inventor's certificate filed more than twelve months before the filing of the application in the United States".
The District Court held that the '444 patent was entitled to the filing date of its U.S. parent, Application No. 292,560 and thus was not invalid under Section 102(d). The Court granted Bayer's motion for summary judgment on validity.
Schein and other defendants appealed. They argued on appeal that the '444 patent cannot claim the benefit of the parent application because the parent is invalid for failure to satisfy the best mode requirement of 35 U.S.C. § 112.
The Court of Appeals affirmed. However, it split in its analysis of the best mode requirement. Judge Clevenger wrote the opinion of the Court, in which Judge Dyk joined. Judge Rader wrote a concurring opinion.
Rader wrote that "this court purports to use this easy case to erect a new best mode test. Fortunately, both this court's failure to find a best mode in this case and the wealth of prior case law render this Bayer case mostly dicta". 
USITC Institutes Section 337 Investigation
8/9. The U.S. International Trade Commission (USITC) published a notice in the Federal Register announcing that on August 1, 2002 it instituted an investigation, pursuant to Section 337 of the Tariff Act of 1930, of the importation and sale of electronic dictionaries.
The petitioner is Franklin Electronic Publishers, Inc. It is the assignee of U.S. Patent No. 5,203,705, which is titled "Word spelling and definition educational device". The abstract states that it discloses "An electronic spelling correcting machine compares input term against a list of terms in memory and validates spelling and provides a set of terms which may correspond to the input term if the input term is incorrect. The validated term or suggested term is provided with a locating indicia that permits the user to go to the page in a book where definition of the meaning of the word may be found. Various word games are incorporated. ..."
The respondents are LeapFrog Enterprises, Inc., of Emeryville, California, and Jetta Company, Ltd., of Hong Kong, PRC. The administrative law judge assigned to the case is Paul Luckern. This is Inv. No. 337-TA-475.
See, Federal Register, August 9, 2002, Vol. 67, No. 154, at Pages 51868 - 51869. See also, USITC Notice of Investigation [4 pages in PDF] issued on August 6.
People and Appointments
8/9. William LaFuze and Albert Jacobs were appointed to the U.S. Patent and Trademark Office's (USPTO) Patent Public Advisory Committee. LaFuze is a partner in the law firm of Vinson & Elkins, and co-chair of the firm's Intellectual Property / Technical Litigation Practice; he is also a past president of the American Intellectual Property Law Association. Jacobs is a shareholder in the New York City office of the law firm of Greenberg Traurig, and Chair of its National Intellectual Property Practice.
8/9. President Bush announced his intent to designate Vance Coffman to be Chairman of the President's National Security Telecommunications Advisory Committee (NSTAC). He also announced his intent to designate Duane Ackerman to be Vice Chairman of the NSTAC. Coffman is Ch/CEO of Lockheed Martin. Ackerman is Ch/CEO of BellSouth. The NSTAC, created by Executive Order 12382 in September 1982, provides industry based advice and expertise to the President regarding national security and emergency preparedness communications policy. See, White House release.
More News
8/9. The Office of the U.S. Trade Representative (USTR) proposed opening World Trade Organization (WTO) dispute settlement proceedings to the public. The USTR proposes that the WTO hold open hearings, make briefs available to the public (except in confidential proceedings), provide early public release of panel reports, and adopt rules governing the consideration of amicus curiae submissions. See, USTR release.
Customs Service Loses 2,251 Computers
8/8. Sen. Charles Grassley (R-IA) wrote a letter to Treasury Secretary Paul O'Neill requesting that a report written by the Treasury Department's Office of Inspector General (OIG) regarding the loss of computers and other items by the U.S. Customs Service be made public. Sen. Grassley wrote in this letter that "The report on Customs states that the Customs Service -- an agency whose responsibilities include tracking material -- has managed to lose or have stolen a stunning 2,251 computers."
The OIG report is titled "Protecting the Public: U.S. Customs Control Over Sensitive Property Needs To Be Improved". It is numbered OIG-02-109, and dated August 5, 2002.
Sen. Grassley further wrote that "the U.S. Customs Service (Customs) maintains that the Treasury OIG report is ``Law Enforcement Sensitive´´ and should not be disclosed to the public. Customs' position is simply untenable. I am very concerned that Customs' view is that because information is embarrassing to management that justifies that it be labeled Law Enforcement Sensitive. Management at Customs may be sensitive to a report that shows significant waste of taxpayer money but that does not justify seeking to suppress the information."
Sen. Grassley also suggested that the actual number of lost computers could be higher than 2,251. He wrote that this number "represents approximately 5 percent of total FY 2001 inventory. The situation is so bad at Customs that the IG stated: ``We judged the risk of loss or theft of computers to be high.´´ Even more troubling, the report stated that this number may be low because: `` ... [Customs] lacked reliable property records and physical inventories for computers there was no reasonable assurance that the information on Customs' computer inventory and losses was reliable.´´"
NTIA Announces Agenda for Convergence Roundtable
8/8. The Department of Commerce's (DOC) National Telecommunications and Information Administration (NTIA) announced the agenda and speakers for its Wednesday, August 14, roundtable to address issues relating to the convergence of communications technologies, including the Telephone Number Mapping (ENUM) Protocol.
At 1:00 PM there will be a panel titled "Convergence Technologies -- Their Viability and Utility in a Competitive Marketplace". At 2:45 PM there will be a panel titled "Privacy, Security, Authentication, and other Policy Issues Relating to Convergence Technologies". See, NTIA release and notice in the Federal Register.
FTC Files and Settles Complaint Against Microsoft
8/8. The Federal Trade Commission (FTC) brought and settled an administrative complaint [6 pages in PDF] against Microsoft alleging violation of Section 5(a) of the Federal Trade Commission Act (FTCA) in connection with Microsoft's privacy and security practices. The complaint focuses on Microsoft's sign-on and online wallet services named Passport and Passport Express Purchase. The FTC and Microsoft simultaneously entered into an Agreement Containing Consent Order [8 pages in PDF]. Microsoft admitted to no violations of federal law. Microsoft will pay no fine. However, the agreement, which has a twenty year duration, imposes numerous requirements for Microsoft's information security program. See, full story.
WorldCom Restates Earnings, Again
8/8. WorldCom stated in a release that "its ongoing internal review of its financial statements has discovered an additional $3.3 billion in improperly reported earnings before interest, taxes, depreciation and amortization (EBITDA) for 1999, 2000, 2001 and first quarter 2002."
WorldCom added that "This amount is in addition to the previously reported $3.8 billion in overstated EBITDA in the year 2001 and first quarter 2002. As a result, WorldCom intends to restate its financial statements for 2000. Previously the company announced that it intends to restate its financial statements for 2001 and first quarter 2002."
FCC Mandates DTV Standards and Deadlines
8/8. The Federal Communications Commission (FCC) has required that most TV sets be built with digital TV tuners. Specifically, the FCC announced, but did not release, a Second Report and Order and Second Memorandum Opinion and Order in Media Bureau Docket No. 00-39. However, the FCC issued a press release, and FCC Commissioners and staff described the order at the FCC's meeting on August 8.
The FCC order mandates technology standards, and sets deadlines for compliance with those standards, for all but the smallest TV sets. The order requires that by 2007 all TV sets with screen sizes larger than thirteen inches and all TV receiving equipment, such as videocassette recorders (VCRs) and digital versatile disk (DVD) players and recorders, include digital television (DTV) reception capability.
The order will require consumers to spend more money for TV sets. Equipment manufacturers are free to produce TV sets with DTV tuners, but very few consumers have chosen to buy these. The FCC order will eliminate this consumer choice.
The order was adopted by a vote of 3-1. Commissioner Kevin Martin dissented.
FCC Chairman Michael Powell wrote in his prepared statement [PDF] that "consumers will expect their television sets to go on working in the digital world just as they do today. This includes the ability to receive broadcast signals. Indeed, the expectation that TV sets receive broadcast signals is so ingrained that consumers simply assume this functionality is incorporated into their television set. That is what today’s Order is all about."
Also, while Powell acknowledged that consumers will have to pay more for TV sets, "economies and efficiencies of scale will drive these costs down."
Commissioner Kathleen Abernathy wrote in her prepared statement [PDF] that "Today's decision is a difficult balancing act between the need to continue to promote the DTV transition and a desire to protect consumers from excessive price increases for television sets." She explained that she opted for the former for several reasons. First, she wrote that "the transition from analog to digital television is statutorily mandated and is not driven by market forces". Second, "the transition remains stalled". Third, "the phaseout of analog only television sets from the market gives consumers access to digital broadcast signals during the transition and protects consumers from disruption of service at the end of the transition". Finally, "consumers necessarily will face additional costs as a result of the transition".
Commissioner Michael Copps wrote in his prepared statement [PDF] that "The bottom line is that we must get the DTV transition back on track."
Phase In Schedule. The FCC order requires that 100% of units with screen sizes over 36 inches must include DTV tuners by July 1, 2005. 100% of units with screen sizes of 25 to 36 inches must include DTV tuners by July 1, 2006. 100% of units with screen sizes of 13 to 25 inches must include DTV tuners by July 1, 2007.
Statutory Authority. The FCC release also addresses its statutory authority for issuing this order. It states that the FCC's authority "is established by the 1962 All Channel Receiver Act (ACRA), which provides the FCC with the ``authority to require´´ that television sets ``be capable of adequately receiving all frequencies´´ allocated by the FCC for ``television broadcasting.´´ The authority provided under the ACRA applies to all devices used to receive broadcast television service, not just those used to receive analog signals."
Kenneth Ferree, Chief of the FCC's Media Bureau, elaborated on statutory authority after the FCC meeting. He said that it is based upon 47 U.S.C. § 303, which provides, in part, that "the Commission from time to time, as public convenience, interest, or necessity requires, shall ... (s) Have authority to require that apparatus designed to receive television pictures broadcast simultaneously with sound be capable of adequately receiving all frequencies allocated by the Commission to television broadcasting when such apparatus is shipped in interstate commerce, or is imported from any foreign country into the United States, for sale or resale to the public".
Broadcasters. Edward Fritts, P/CEO of the National Association of Broadcasters (NAB), praised the FCC's order in a release. He stated that "Today's FCC decisions represent the most important action on digital television since adoption of the DTV standard in 1996. FCC Chairman Powell and the Commission recognized the Congressional imperative to stimulate the DTV marketplace, and deserve enormous credit for taking pro-consumer steps to jump start the transition. Cable carriage and other issues still need attention to ensure that consumers have access to local digital and high definition broadcast signals. Nonetheless, today's FCC action goes a long way towards delivering the digital promise to all Americans."
The NAB also sent a letter [4 pages in PDF] to all members of Congress.
Producers of TVs and other consumer electronics devices are less enthusiastic. The Consumer Electronics Association (CEA) criticized the FCC's order, and stated that it will challenge it in court. See, following story, titled "CEA Will Appeal FCC DTV Order".
CEA Will Appeal FCC DTV Order
8/8. Consumer Electronics Association (CEA) P/CEO Gary Shapiro stated after the Federal Communications Commission's (FCC) meeting on August 8 that the CEA will challenged the FCC's DTV order in court. He did not state when, or in which circuit court, but he stated that "Our board met last week and unanimously authorized us to go forward with a lawsuit on this." Shapiro added that "We don't think there is legal grounds, or policy grounds, for this."
Shapiro spoke to reporters outside the FCC's Commission Meeting Room just after the meeting. He said that "So few Americans are using antennas now. Only -- less than ten percent of American homes rely for their primary -- on antenna. This whole solution has nothing to do with the transition to HDTV. It has to do with a well intentioned but misguided effort to return broadcasters to glory years when there were only three networks and everyone had this big ugly antenna. The fact is, Americans have rejected antennas. ... They want cable. They want satellite. They want prerecorded. And, they want their broadcasting over cable."
Shapiro added that "Broadcasters, despite getting seventy billion dollars worth of spectrum for free from the government" have not provided compelling programming. He continued that "Consumers love HDTV. But, they don't want to want to have to spend extra money to get an over the air signal, when, in reality, ninety percent of them are relying on cable and satellite. So, this so called solution will have nothing to do with the HDTV transition, quite frankly. What we think will happen from this -- it will turn consumers off potentially. If they have to buy something that they know they are not going to use, and they know they are spending a lot of extra money for it, we have great concerns it will start to affect HDTV deployment in a negative way. We think the Commission is very well intentioned. But, the answer here really is, if seventy percent of Americans are relying on cable to get their broadcast signal, then let's set a national plug and play cable standard, as Congress has asked the FCC to do, time and time again. We don't think the Commission has the authority to regulate how TV sets are built, and we intend to challenge this action in court."
One reporter asked, "Are you a little surprised that a Republican dominated Commission would slap a regulation as onerous on you guys?" Shapiro responded, "Well, as the Chairman and a number of the Commissioners indicated, this is government intervention into the marketplace. I think the Chairman used the words, ``industrial policy´´. We believe that the government should not tell consumers what they have to buy. ... But, the fact is, that by forcing every consumer to buy a digital tuner, we are concerned about the repercussions, whether consumers will say, this isn't for me."
Shapiro added that the CEA would not file a petition for review until after the FCC publishes its order in the Federal Register. Then, it would have sixty days to either request reconsideration, or file a petition for review with a Court of Appeal. He did not state whether the CEA would request reconsideration first. Nor did he state in which circuit the CEA would file. He did say that the plaintiff would be the CEA.
The CEA also issued a release which quotes Shapiro as stating that "The FCC has just imposed a multi-billion dollar annual TV tax on American consumers".
FCC Chairman Michael Powell anticipated, and rebutted, the CEA's arguments in his written statement [PDF] in support of the DTV order. He noted that the CEA is "vehemently opposed to phasing in DTV tuners in television sets" but is in favor of requiring consumers to purchase an external set-top box. Powell wrote that "This would be a far more expensive proposition for consumers, given that these boxes currently cost about $500. It is incredible that CEA supports an alternative that would cost consumers 150% more than CEA's own cost projections for the DTV tuner ($500 for the set top box vs. $200 for the tuner)."
Powell also argued that the "CEA's claim that a tuner requirement would be an unreasonable burden on television manufacturers is refuted by the willingness of Thomson and Zenith to voluntarily incorporate DTV tuners on a phased-in basis."
Commissioner Martin Dissents from DTV Order
8/8. Federal Communications Commission (FCC) Commissioner Kevin Martin dissented from the adoption of the DTV order. He said that he prefers market based forces to government regulation, and that this order will impose increased costs on all consumers who buy TV sets, while only a small percentage will use mandated tuners to receive over the air broadcasts.
Martin wrote in his dissent that "I prefer market based forces to government regulation, and I am particularly cautious when regulation imposes a cost to consumers or requires consumers to purchase a product they may not use. In such situations, I believe the better course of action usually is to refrain from regulation and instead to provide consumers with a choice. If government intervention is necessary, however, I believe it must be clear that the benefits outweigh the costs."
He continued that "Currently, consumers can choose whether to spend the extra money to purchase a television that includes a digital tuner. This Order sets out deadlines by when television manufacturers must include digital tuners, so that all but the smallest televisions will be able to receive digital broadcast signals "over the air." Today, however, few consumers  receive their video programming only through over the air broadcasting. Instead, the vast majority of consumers receive broadcast programming through their cable or satellite provider. Even as the transition to digital is made, these consumers will probably prefer to continue to receive their video programming through cable or satellite. Thus, taking action on digital broadcast tuners alone, as we do to today, confers a real benefit only on the relatively small percentage of consumers (approximately fifteen percent) who do not rely on cable or satellite for broadcast reception. The costs, however, will be borne by every consumer who buys a television. I therefore fear that the costs of this requirement, as an isolated action, exceed the benefits, and I am not persuaded that it is the right step."
Martin was appointed to the FCC last year by President Bush. He is a Republican who previously worked as a legal advisor to former FCC Commissioner Harold Furcthgott Roth. Of the current set of Commissioners, he is the strongest proponent of free market economics and less regulation.
FCC Issues NPRM on Broadcast Flag
8/8. The Federal Communications Commission (FCC) adopted a Notice of Proposed Rulemaking (NPRM) [15 pages in PDF] in its proceeding titled "In the Matter of Digital Broadcast Copy Protection". This NPRM proposes that the FCC promulgate a broadcast flag rule, and seeks comment on this, and related questions.
This is MB Docket No. 02-230. Public comments are due by October 30, 2002. Reply comments are due by December 13, 2002. See also, FCC release [PDF].
Ken Ferree, Chief of the FCC's Media Bureau, stated that the NPRM "addresses another key hurdle to the DTV transition, the absence of a digital broadcast copy protection mechanism. In the absence of adequate protection, an unlimited number of near perfect copies of digital content can be made in violation of copyright."
The NPRM states that "Without adequate protection, digital media, unlike its analog counterpart, is susceptible to piracy because an unlimited number of high quality copies can be made and distributed in violation of copyright laws. In the absence of a copy protection scheme for digital broadcast television, content providers have asserted that they will not permit high quality programming to be broadcast digitally. 1 Without such programming, consumers may be reluctant to invest in DTV receivers and equipment, thereby delaying the DTV transition."
The NPRM recites the history of negotiations conducted by representatives of the consumer electronics, information technology, motion picture, cable and broadcast industries on copy protection issues. It states that the Copy Protection Technical Working Group's (CPTWG) Broadcast Protection Discussion Subgroup (BPDG) "recently announced a consensus on the use of a ``broadcast flag´´ standard for digital broadcast copy protection. This consensus would require use of the Redistribution Control Descriptor, as set forth in ATSC Standard A/65A (the ``ATSC flag´´), to mark digital broadcast programming so as to limit its improper use."
However, the NPRM continues, "Despite the consensus reached on the technical standard to be implemented, final agreement was not reached on a set of compliance and robustness requirements to be associated with use of the ATSC flag, enforcement mechanisms, or criteria for approving the use of specific protection technologies in consumer electronics devices."
The NPRM seeks comment on whether the FCC should promulgate broadcast flag regulations. It also seeks comment on "whether quality digital programming is now being withheld because of concerns over the lack of digital broadcast copy protection" and "To what extent would the absence of a digital broadcast copy protection scheme and the lack of high quality digital programming delay or prevent the DTV transition?"
The NPRM also seeks comment on "whether broadcasters and content providers should be required to embed the ATSC flag or another type of content control mark within digital broadcast programming, or whether they have sufficient incentive to protect such programming such that a government mandate is unnecessary." It also seeks comment on whether the FCC "should mandate that consumer electronics devices recognize and give effect to the ATSC flag or another type of content control mark", and if so, "whether this mandate should include devices other than DTV broadcast receivers".
The NPRM also seeks comments "on the extent to which broadcast copy protection technologies raise privacy concerns and whether rules are needed to ensure that consumers' privacy interests are protected", and "whether there are First Amendment or any other constitutional issues".
The NPRM finally asks whether the FCC even has authority to conduct this rule making proceeding. See, following story.
FCC Debates Its Authority to Promulgate Broadcast Flag Rule
8/8. The Federal Communications Commission's (FCC) Notice of Proposed Rulemaking (NPRM) in its proceeding titled "In the Matter of Digital Broadcast Copy Protection" also asks for comments on the statutory authority of the FCC to conduct this NPRM.
Simply put, Title 17 of the U.S. Code, which codifies the Copyright Act, gives rule making authority for implementing the Copyright Act to the Library of Congress, not the FCC. Moreover, there is no specific grant of authority to the FCC in Title 47 of the U.S. Code, the Communications Act, to promulgate copyright protection regulations.
Commissioner Michael Copps said in his prepared statement [PDF] at the FCC's August 8 meeting that "there is not a majority here to resolve the issue of the Commission's authority".
If the FCC were to assert authority, it might be based upon Title I of the Communications Act, which contains a general statement regarding protecting against public interest harms. It was, for example, the authority relied upon by the FCC in promulgating Computer I, Computer II and, Computer III.
However, Title I has served as the basis for not subjecting "information services" to regulation under other Titles of the Communications Act (such as those pertaining to cable and common carrier), rather than as the basis for subjecting to FCC rulemaking a subject committed to another federal agency, and historically addressed by the Congress or the Copyright Office.
The NPRM also seeks comment on "the jurisdictional basis for Commission rules dealing with digital broadcast television copy protection. Is this an area in which the Commission could exercise its ancillary jurisdiction under Title I of the Act? We ask commenters to identify provisions of the Act that provide the Commission with authority to implement its ancillary jurisdiction. If the Commission has ancillary jurisdiction over digital broadcast copy protection, are there any limits upon its scope? For example, does the Commission have authority to mandate the recognition of the ATSC flag in consumer electronics devices? We also ask commenters to identify any statutory provisions that might provide the Commission with more explicit authority to adopt digital broadcast copy protection rules. For example, do Sections 336(b)(4) and (b)(5) impact upon the Commission’s ability to adopt digital broadcast copy protection regulations?"
Commissioner Kathleen Abernathy stated at the August 8 meeting that "I also want to emphasize that there are some very real jurisdictional questions that need to be addressed in the first instance".
Commission Kevin Martin stated that there are two issues, "whether the Commission has jurisdiction over this copy protection issue" and "whether we should exercise that authority".
Commissioner Copps, in contrast, stated that "I believe a strong case can be made that the statute provides us with such authority." However, he did not set out the case.
FCC to Sunset Cellular Analog Requirements
8/8. The Federal Communications Commission (FCC) announced, but did not release, a Report and Order modifying Part 22 of its rules that cover cellular phone service. It did, however, issue a press release [3 pages in PDF]. This Report and Order eliminates certain outdated rules that were more applicable when all cellular service was analog. For example, it eliminates after fives years the requirement that service providers that have converted to digital service continue to also provide analog service.
The Report and Order is FCC 02-229. This proceeding is titled "Year 2000 Biennial Review -- Amendment of Part 22 of the Commission's Rules to Modify or Eliminate Outdated Rules Affecting the Cellular Radiotelephone Service and Other Commercial Mobile Radio Services". It is numbered WT Docket No. 01-108.
While the Report and Order makes numerous rule changes, most of the discussion and debate at the FCC meeting of August 8 on this item was devoted to the elimination of the cellular analog requirement.
Roger Noel, Deputy Chief of the Commercial Wireless Division, stated at the FCC meeting that the Report and Order provides that the cellular analog requirement will sunset after five years. However, he further stated the caveat that the Report and Order also requires CMRS carriers to file reports after three and four years, and that the FCC will then determine whether to extend the sunset.
FCC Commissioner Michael Copps approved in part, and dissented in part. He objected to changing the cellular analog rule. He also dissented from the elimination of cellular anti trafficking rules. He also stated that he objects to "the elimination of the requirement that cellular applicants demonstrate their financial ability to operate their system at a time when bankruptcies are threatening consumers". See, statement [PDF].
Commissioner Kevin Martin said in his statement [PDF] that ultimately, the FCC "must ensure the availability of digital phones that are compatible with hearing aids and cochlear implants. Fixing the digital compatibility problem, rather than relegating the hearing disabled community to analog phones, is the real solution."
While FCC staff and the other Commissioners focused on the impact of eliminating the cellular analog rules for persons using analog hearing aids, it was left to FCC Chairman Michael Powell to explain the underlying purpose. There is a shortage of spectrum for current cellular services, not to mention future Third Generation wireless services. Spectrum that is still allocated for analog cellular service is underused, inefficiently used, and preventing its use for digital cellular services, as well as future services.
This is what Powell had to say at the meeting: "I would just like to make one point of interest. One might listen to the overview of this item, and fail to see the concomitant public interest benefit, like the very real and important returns associated with hearing aid compatibility. But, the overwhelming number of Americans in country who subscribe to digital services increasingly have service and quality disruption problems as a consequence of spectrum shortages. One of the huge consumers of spectrum is the continued requirement for the provision of analog services, much of which goes underutilized."
Powell continued that "A logical transition path, a pretty significant period of time, is a way of demonstrating a course toward a world in which spectrum can be moved efficiently to higher and better uses that are concomitant with the public's interest, and what they continue to demand in terms of new and wireless services. I don't think that the Commission has trivialized the importance of an important segment of the hearing disabled community, and it has made adequate precautions to ensure that should those requirements not be complied with, in the context of that order, one has to trust a Commission committed to the public interest will act in response to impending sunset. I certainly believe that I, and any successors of interest of ours will do that. But, I do think that it is important for the market, for consumers, to keep trying to push spectrum in ways that are a higher and better use, to improve service quality, to improve the viability of service that everyone understands is continuing to strain under a spectrum shortage."
Nancy Victory, Director of the National Telecommunications and Information Administration (NTIA), stated in a release that "The Administration supports the Commission's decision to eliminate the outdated analog cellular requirement over five years ... As a result of this action, spectrum will be managed more efficiently and carriers will have more flexibility to create innovative new services for consumers. I also commend the Commission for helping to meet the needs of the hearing assisted community and the telematics industry by establishing a reasonable transition period and committing to monitor the success of that transition."
Tom Wheeler, P/CEO of the Cellular Telecommunications & Internet Association (CTIA), stated in a release that "This is a matter of good spectrum management ... We are in a serious spectrum crunch and analog is an outdated technology that makes poor use of scarce spectrum. Digital technology increases cell site capacity and it allows better security, quality and new services for customers. Wireless users generally replace their phones every 18 months, so the five year transition period allows analog subscribers and their service providers more than three product cycles to upgrade to digital technology."
FCC to Eliminate Anti Trafficking and Other Cellular Rules
8/8. The Federal Communications Commission (FCC)'s Report and Order modifying Part 22 of its rules that cover the cellular phone service addresses other topics, in addition to analog cellular requirements. For example, it also eliminates the cellular anti trafficking rule.
Anti Trafficking. The Report and Order also provides for the elimination of the cellular anti trafficking rule. Commissioner Michael Copps (at right) said in his prepared statement [PDF] that "Our rules also currently protect consumers against the dangers of speculation and the trafficking of cellular licenses. There is a danger to American consumers when speculators obtain licenses with the intention of ``flipping their license´´ for a quick profit rather than providing service. The spectrum is a public resource. Congress entrusted the Commission with the duty to manage the spectrum intending that we work to assign it to people who will promote the public interest. Our anti trafficking rules require cellular licensees to provide service for one year before selling their license. This furthers Congress's goal, and does not seem too much to ask of those privileged to hold a cellular license. Nonetheless, the Commission eliminates this rule today."
Fox v. FCC and the Meaning of Necessary. Commissioner Kevin Martin also addressed the legal controversy regarding the meaning of the word "necessary". He wrote in his prepared statement [PDF] that under the biennial review process, the FCC must "review its regulations for providers of telecommunications service every two years and to ``determine whether any such regulation is no longer necessary in the public interest as the result of meaningful economic competition between providers of such service.´´" Then, it "shall repeal or modify any regulation it determines to be no longer necessary in the public interest." See, 47 U.S.C. § 161.
Martin wrote in his prepared statement that "I am concerned by the Order’s failure to discuss the meaning of the term ``necessary´´". This is also at issue in Fox v. FCC, in which the FCC seeks review of the February 19, 2002, opinion of the U.S. Court of Appeals (DCCir). The FCC argued in its Petition for Rehearing En Banc [40 pages in PDF] that the term "necessary" should not necessarily be construed to mean "necessary"; and, if it is, this "threatens to impose a continuing and unworkable burden on the agency in carrying out its biennial review responsibilities."
See, story titled "FCC Files Petition for Review of Appeals Court Opinion in Fox v. FCC" in TLJ Daily E-Mail Alert No. 415, April 22, 2002, and story titled "DC Circuit Vacates Cable Broadcast Cross Ownership Rule" in TLJ Daily E-Mail Alert No. 372, February 20, 2002.
Martin argued that the term should be "read in accordance with its plain meaning", and that the FCC should have tackled this issue in this Report and Order. However, he did not raise this in his oral remarks at the FCC meeting on August 8.
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8/8. The Department of Commerce's Bureau of Industry and Security (BIS), formerly known as the Bureau of Export Administration (BXA), updated its web site regarding Commercial Encryption Export Controls.
8/8. The Intellectual Property Owners Association (IPO) filed an amicus curiae brief [28 pages in PDF] with the Supreme Court in Eldred v. Ashcroft, a case involving a constitutional challenge to the Copyright Term Extension Act (CTEA). The IPO argues that the CTEA should be upheld, either under the copyright clause, or the commerce clause, of the Constitution.
8/8. Qwest announced its financial results for the second quarter of 2002. See, Qwest release.
8th Circuit Rules on PSLRA
8/7. The U.S. Court of Appeals (8thCir) issued its split opinion [45 pages in PDF] in In re K-tel International, Inc. Securities Litigation, a class action securities case involving the heightened pleading requirements of the PSLRA.
Pasquale Migliaccio and others filed a complaint in U.S. District Court (DMinn) against K-Tel International, and some of its officers and directors, alleging securities fraud in violation of Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b5 thereunder. Plaintiffs alleged failure to make certain accounting adjustments in compliance with Generally Accepted Accounting Principles (GAAP), and failure to make a timely disclosure regarding a NASDAQ delisting letter.
The District Court dismissed the complaint for failure to state a claim, pursuant to Rule 12(b)(6) of the FRCP. The Court held that plaintiffs' complaint failed to allege with sufficient particularity either material misrepresentations or facts giving rise to a strong inference of scienter, under the requirements of the Private Securities Litigation Reform Act. The Appeals Court affirmed, 2-1.
FCC Fines Junk Faxer $5,379,000
8/7. The Federal Communications Commission (FCC) released a Notice of Apparent Liability (NAL) [19 pages in PDF] finding that "Fax.com is apparently liable for forfeiture in the amount of $5,379,000."
The NAL states that Fax.com characterizes itself as a "fax broadcaster". The NAL states that it sends unsolicited commercial fax messages in violation of the Telephone Consumer Protection Act of 1991 (TCPA).
The TCPA amended the Communication Act of 1934. It is codified within 47 U.S.C. § 227. Section 227(b)(1), which pertains to "Restrictions on use of automated telephone equipment", provides, in part, that "It shall be unlawful for any person within the United States ... (C) to use any telephone facsimile machine, computer, or other device to send an unsolicited advertisement to a telephone facsimile machine". See also, Section 64.1200(a)(3) of the FCC's rules implementing this statute.
The FCC found that Fax.com is apparently liable for $11,000 for each of the 489 fax violations, for a total proposed fine of $5,379,000.
FCC Commissioner Kathleen Abernathy wrote a separate statement. She wrote that "I strongly support this Notice of Apparent Liability and hope that other fax broadcasters will take notice that the Commission will strictly enforce the Telephone Consumer Protection Act. As set forth in detail in the NAL, Fax.com appears to have founded its business on the practice of sending unsolicited faxes in flagrant violation of the TCPA."
This action was taken by the FCC's Enforcement Bureau. The FCC adopted the NAL on August 2, 2002, but did not release it until August 7. The proceeding is titled "In the Matter of Fax.com, Inc. Apparent Liability for Forfeiture. This is File No. EB-02-TC-120. See also, FCC release.
AG Ashcroft Addresses Liberty, Order, and Electronic Surveillance
8/7. Attorney General John Ashcroft gave a speech to the Eighth Circuit Judges Conference in Duluth, Minnesota. He spoke philosophically about the nature of liberty and order. He also addressed Internet and communications surveillance.
Ashcroft stated that "Our post September 11 policies have been carefully crafted to prevent terrorist attacks while protecting the privacy and civil liberties of Americans. We have, for example, sought to close the technology gap between terrorists and law enforcement by updating the law. Congress passed the USA Patriot Act which allows us to monitor communications in the digital, as well as the analog world."
He continued that "I have also revised guidelines for FBI agents to allow them to conduct online searches on the same terms and conditions as the rest of the public. But with every reform, we have been careful not to alter the important, substantive legal predicates that exist to preserve the privacy of law abiding citizens. We have also enhanced the capacity of law enforcement to gather and analyze intelligence on terrorist activity. The Patriot Act broadened our ability to share intelligence between and among government agencies."
He compared the work of the Department of Justice in fighting terrorism to the Nuremberg tribunal. He stated that "It is now as it was then. A calculated, malignant and devastating evil has arisen in our world. Civilization cannot ignore the wrongs that have been done. America will not tolerate their being repeated."
He quoted former Justice Robert Jackson twice. He also cited Benjamin Franklin, George Washington, Learned Hand, George Orwell, and Randy Barnett. He did not cite former Justice Louis Brandeis.
OECD Adopts Information Security Guidelines
8/7. The Organization for Economic Cooperation and Development (OECD) announced that "OECD governments have drawn up" a set of "guidelines" pertaining to information security. See, document [16 pages in PDF] titled "OECD Guidelines for the Security of Information Systems and Networks: Towards a Culture of Security". See also, OECD release.
The OECD Guidelines state that "As a result of increasing interconnectivity, information systems and networks are now exposed to a growing number and a wider variety of threats and vulnerabilities. This raises new issues for security. For these reasons, these Guidelines apply to all participants in the new information society and suggest the need for a greater awareness and understanding of security issues and the need to develop a ``culture of security´´."
The document states that it was "adopted as a Recommendation of the OECD Council at its 1037th Session on 25 July 2002." These guidelines are non-specific, non-controversial, and non-binding.
The nine guidelines are as follows: 1. "Participants should be aware of the need for security of information systems and networks and what they can do to enhance security." 2. "All participants are responsible for the security of information systems and networks." 3. "Participants should act in a timely and co-operative manner to prevent, detect and respond to security incidents." 4. "Participants should respect the legitimate interests of others." 5. "The security of information systems and networks should be compatible with essential values of a democratic society." 6. "Participants should conduct risk assessments." 7. "Participants should incorporate security as an essential element of information systems and networks." 8. "Participants should adopt a comprehensive approach to security management." 9. "Participants should review and reassess the security of information systems and networks, and make appropriate modifications to security policies, practices, measures and procedures."
The fifth principle, regarding democratic society, further provides that "Security should be implemented in a manner consistent with the values recognised by democratic societies including the freedom to exchange thoughts and ideas, the free flow of information, the confidentiality of information and communication, the appropriate protection of personal information, openness and transparency."
Philip Reeker, Deputy Spokesman of the U.S. State Department, released a statement. He said that "These new OECD guidelines, which replace the original guidelines published in 1992, provide a set of principles to help ensure the security of today's interconnected communications systems and networks. They are applicable to all, from those who manufacture, own, and operate information systems to those individual users who connect through home PCs. Importantly, the guidelines call for new ways of thinking and behaving when using information systems.
The Business Software Alliance (BSA) praised the guidelines. Robert Holleyman, P/CEO of the BSA, stated in a release that "These guidelines build on our continuing efforts to educate businesses and governments around the world about the need for an aggressive and cooperative effort to protect our crucial networks from the growing threat of cyber attacks".
The OECD is an international organization of 30 industrialized, market economy countries.
Bush Talks About Judge Picking
8/7. President Bush gave a speech at a Pickering for Congress event in Jackson, Mississippi. Rep. Chip Pickering (R-MS) is a member of the House Commerce Committee and its Telecom and Internet Subcommittee. Bush stated that "it's important that you're represented by this good man. He is what we call and up and comer."
Bush also used the occasion to advocate the election to Republican Senators, to enable him to obtain Senate confirmation of his judicial appointments. The Democratic controlled Senate Judiciary Committee rejected Bush's nomination of Rep. Pickering's father to be a Judge on the U.S. Court of Appeals (5thCir).
Bush said this: "And I want to say something as clearly as I can about why we need to control the United States Senate. I put a good man up named Judge Pickering for a higher court and the people who control the Senate maligned this good man's character. They didn't treat him right. It's not good for America to have this kind of politics -- take a good person and not treat him well, not give him the benefit of the doubt. We need to change the United States Senate, so that we end this kind of politics on the judiciary and allow good people, good, honorable judges to serve our nation. The Senate did wrong by Judge Pickering. I did right by naming him to the bench."
RIAA to Appeal Webcasting Rule
8/7. The Recording Industry Association of America (RIAA) announced its intent to file with the U.S. Court of Appeals (DCCir) a petition for review of the June 20, 2002, final rule of the Librarian of Congress on royalty rates for webcasting music. See, RIAA release.
Hilary Rosen, Ch/CEO of the RIAA stated in the release that "The Librarian's decision was based on a misguided reading of the record. Not only was improper weight given to the testimony of Yahoo! but some 140 separate licensing deals were thrown out by the Librarian. The end result significantly undervalued the music used by Internet radio companies."
On June 20, 2002, 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.
IRS Buys Computers
8/7. Hewlett Packard (HP) announced that the Internal Revenue Service (IRS) will purchase more than 12,300 Compaq desktop computers and more than 11,000 Compaq laptop computers for a total of more than $35 Million. See, HP release.
HP stated that the IRS will purchase Compaq Evo D500 desktops. The HP web site states that individual units sell for as low as $954. HP stated that the IRS will purchase Compaq Evo N800 laptops. The HP web site states that individual units sell for as low as $1,719.
The taxpayers will pay, on average, about $1,500 per computer for the IRS.
Meanwhile, the Treasury Inspector General for Tax Administration (TIGTA) released a report on November 29, 2001, titled "Management Advisory Report: Review of Lost or Stolen Sensitive Items of Inventory at the Internal Revenue Service". This report stated that "For the past 3 years, the IRS reported approximately 2,300 missing computers". The report did not estimate the number of missing computers, the loss of which went unreported.
See also, letter of January 7, 2002, from Sen. Charles Grassley (R-IA) to Office of Management and Budget (OMB) Director Mitch Daniels, and story titled "Sen. Grassley Condemns IRS for 2,300 Missing Computers" in TLJ Daily E-Mail Alert No. 342, January 9, 2002.
People and Appointments
8/7. Lynne Hunt was named Assistant Director of the Inspection Division of the Federal Bureau of Investigation (FBI). The Inspective Division's mission is to provide independent oversight of all FBI investigative and administrative operations. Hunt is a long time FBI employee. See, FBI release.
8/7. BT appointed Hanif Lalani Chief Financial Officer of BT Wholesale. He replaces Russ Houlden, who left to become finance director at the Lovells law firm. See, BT release.
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8/7. The International Intellectual Property Alliance (IIPA) commented on President Bush's signing of the Trade Act of 2002, which gives the President trade promotion authority. IIPA President Eric Smith stated in a release [PDF] that "For America’s copyright industries to remain successful in global markets, it is essential that the President, in consultation with Congress and the private sector, have effective and credible authority to negotiate bilateral, regional and multilateral trade agreements ... We can now move forward more effectively in our joint efforts to achieve strong intellectual property rights protection and, particularly, enforcement worldwide and to secure non-discriminatory market access for all U.S. creative products ... The copyright industries in the IIPA look forward to obtaining these results in the Free Trade Agreement negotiations now ongoing with Singapore and Chile, in new FTAs now being planned, and with all countries in the Americas in the Free Trade Area of the Americas (FTAA), now that TPA is in place."
Dingell Wins Primary Election
8/6. Rep. John Dingell (D-MI), the ranking Democrat on the House Commerce Committee, defeated Rep. Lynn Rivers (D-MI) in the Democratic primary election for the new Michigan 15th congressional district. Rep. Dingell should easily win the general election in this overwhelmingly Democratic district. Had Rep. Dingell lost, Rep. Henry Waxman (D-CA) would have become the ranking Democratic on the Commerce Committee.
Ninth Circuit Rules on Use of Thermal Imaging Devices
8/6. The U.S. Court of Appeals (9thCir) issued its opinion [PDF] in USA v. Huggins, a criminal case involving application of the Fourth Amendment to the use of thermal imaging devices.
On June 11, 2001, the Supreme Court of the U.S. issued its opinion [PDF] in Kyllo v. U.S., holding that the thermal imaging of a home to detect lamps used for growing marijuana constitutes a search within the meaning of the Fourth Amendment. The Supreme Court further held that such searches are unreasonable under the Fourth Amendment unless supported by probable cause and authorized by a warrant.
In USA v. Huggins, a Drug Enforcement Administration (DEA) agent obtained a federal warrant to conduct a thermal imaging scan of a house and two barns on property occupied by two defendants. Probable cause was based upon several items, including a tip, one of the defendants having a prior drug related conviction, use of multiple alias names, and electricity consumption far greater than nearby residents and prior residents of the same property. The thermal imaging scan then heat radiation in the middle of the night consistent with indoor cultivation. The DEA then obtained a further warrant for a physical search of the property. The DEA found hundreds of marijuana plants, and related equipment, and evidence of related operations at other locations.
Defendants sought to suppress evidence, in part, based upon the use of the thermal imaging device. The trial court denied the motion. The Appeals Court affirmed.
Bush Signs Trade Promotion Authority Bill
8/6. President Bush signed into law the Trade Act of 2002, a bill granting the President trade promotion authority. Bush, several members of his cabinet, and U.S. Trade Representative Robert Zoellick, lobbied extensively for passive of the bill.
Bush stated in a signing speech in Washington DC that "With trade promotion authority, the trade agreements I negotiate will have an up or down vote in Congress, giving other countries the confidence to negotiate with us. Five Presidents before me had this advantage, but since the authority elapsed in 1994, other nations and regions have pursued new trade agreements while America's trade policy was stuck in park."
Bush continued that "With each passing day, America has lost trading opportunities, and the jobs and earnings that go with them. Starting now, America is back at the bargaining table in full force. I will use trade promotion authority aggressively to create more good jobs for American workers, more exports for American farmers, and higher living standards for American families. Free trade has a proven track record for spurring growth and advancing opportunity for our working families."
Bush also extolled the benefits of trade for the world. He said that "Free trade is also a proven strategy for building global prosperity and adding to the momentum of political freedom. Trade is an engine of economic growth. It uses the power of markets to meet the needs of the poor. In our lifetime, trade has helped lift millions of people, and whole nations, and entire regions, out of poverty and put them on the path to prosperity. History shows that as nations become more prosperous, their citizens will demand, and can afford, a cleaner environment. And greater freedom for commerce across the borders eventually leads to greater freedom for citizens within the borders."
Treasury Secretary Paul O'Neill stated in a release that "Trade is a critical component of our economy and TPA will help quicken the pace of our recovery. Trade now represents more than one quarter of our economy and trade has created millions of jobs that pay above average wages.  It has fueled competition and innovation, and helped sustain growth with little inflation. Just as important, it has helped promote the truly global growth and prosperity upon which America’s own growth and prosperity will ultimately depend."
Ashcroft Comments on Loss of 317 Laptops by FBI
8/6. Attorney General John Ashcroft issued a statement regarding the Office of the Inspector General (OIG) report regarding lost laptop computers at the Federal Bureau of Investigation (FBI) and other Department of Justice (DOJ) components.
On August 5 the OIG audited and released a series of reports on the control of laptop computers and weapons at five DOJ components. It concluded that there were a total of 400 missing laptops, and 775 missing weapons. For the FBI, it reported 317 missing laptops and 212 missing weapons. Moreover, the OIG concluded that the FBI does not know if sensitive data has been lost. See, Executive Summary [43 pages in PDF].
AG Ashcroft stated that "The American people expect and deserve absolute accountability from public officials. The Department of Justice's component agencies are essential to the success of the criminal justice system, and we place a high priority on correcting any problems within these components. Last July, I asked Inspector General Glenn Fine to determine where accountability has faltered, especially relating to firearms and information technology resources, and to help the Department design a way to keep this from recurring."
Ashcroft added that "I am also directing all of the Department's component agencies to take specific steps to ensure weapons and laptops computers do not fall into the wrong hands."
SEC Files Alleges Fraud in Sale of Securities in IP Telephony Companies
8/6. The Securities and Exchange Commission (SEC) filed a series of civil complaints against defendants engaged in "unregistered securities offerings and fraudulently diverted the proceeds to pay exorbitant, undisclosed commissions to telemarketers and other unregistered brokers who solicited the investors." See, SEC release.
In one of these actions, the SEC filed a complaint in the U.S. District Court (EDNY) against Ephone, Inc., Webphone, LLP, Newera Communications, LLP, and others alleging violation of federal securities laws in connection with the fraudulent offer and sale of securities in companies purportedly formed to establish long distance telephone service through the Internet. See, SEC release regarding Ephone.
People and Appointments
8/6. John Collingwood, the Federal Bureau of Investigation's (FBI) Assistant Director for the Office of Congressional and Public Affairs, will retire. See, release.
8/6. Jonathan Miller was named Chairman and Chief Executive Officer of AOL Time Warner Inc.'s America Online, Inc. division. He was formerly President and CEO of USA Interactive's USA Information and Services. See, release.
8/6. The U.S. Bankruptcy Court (SDNY) approved the appointment of former Attorney General Richard Thornburgh as Examiner in the WorldCom bankruptcy cases. See, DOJ release.
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8/6. Political Money Online, a web site that collects and organizes Federal Election Commission (FEC) filings, and other materials, reported that "Jack Grubman, telecommunications security analyst for Citigroup’s Salomon Smith Barney, donates $100,000 to the Dem Senatorial Campaign Cmte on 6/27, the same day he was subpoenaed by the House Financial Services Cmte, and the day after the SEC filed charges against Worldcom." (Abbreviations and emphasis in original.)

Go to News from August 1-5, 2002.