|News from September
House Telecom Subcommittee to Hold Hearing on Draft DTV Bill
9/20. The House Commerce Committee's
Subcommittee on Telecommunications and the Internet announced that it will hold
a hearing on the transition to digital television on Wednesday, September 25.
The Subcommittee also released a draft of a
proposed bill [16 pages in PDF] and a summary of that
The draft bill requires broadcasters to cease analog service by the end of 2006,
requires the FCC to write rules that mandate that digital devices capable of
receiving a digital signal recognize the use of a broadcast flag by January 1,
2006, prohibits the FCC from imposing dual must carry requirements, and requires
digital television cable compatibility.
The draft bill amends the Communications Act of 1934, at Section 309(j)(14), to
require that television broadcasters are required to cease analog television
service, and operate in digital, by December 31, 2006.
The draft bill also requires the Federal
Communications Commission (FCC) to initiate a rule making proceeding to
write rules to require digital devices capable of receiving a digital signal to
recognize the use of a broadcast flag by January 1, 2006. The purpose of this is
to prevent the unauthorized redistribution of marked digital terrestrial
broadcast television content over the Internet.
The draft bill also provides that cable operators are not required to carry both
the analog and the digital signal during the transition to digital television.
The draft would also require the FCC to promptly initiate another rule making
proceeding to revise its rules "to ensure the nationwide interoperability
with cable systems, and the nationwide portability, of equipment capable of
receiving, recording, or displaying, or navigating among, television signals
that is sold as capable of providing digital television service using a cable
Such rule revisions would, among other things, "require all cable
operators, by July 1, 2005, to transmit signals in accordance with a uniform
family of technical standards accredited by the American National Standards
Institute and prescribed by the Commission, that enable subscribers to receive,
without the need for a separate cable set-top box, at a minimum -- (i) basic and
premium digital television cable programming offered by the cable operator in
both standard and high definition; and (ii) standard definition digital
programming offered on a per program or per channel basis without the use of
integrated bidirectional communications".
Such rule revisions would also "require all cable operators, by July 1,
2005, to make available to subscribers point of deployment modules for use with
digital television receivers that are manufactured in accordance with a uniform
family of technical standards accredited by the [ANSI] and prescribed by the
Industry Reaction. The Consumer Electronics
Association (CEA) stated in a release
that "This draft legislation is a welcome, critical and helpful step toward
driving the digital television transition. ... "We especially appreciate
the draft bill's focus on the single most important issue related to mass market
acceptance of DTV - cable compatibility. The draft legislation would establish
fair, pro-consumer requirements to ensure compatibility between digital cable
and digital television products. Indeed, the draft's guarantees of nationwide
portability and compatibility will finally allow all of America's 70 million
cable households to participate in the DTV transition." The CEA also stated
that "the draft contains many other provisions which require further review
Robert Holleyman, P/CEO of the Business Software
Alliance (BSA), stated in a release
that "An ongoing concern of our industry has been to ensure that whatever
technologies are deployed to protect content do not impede technological
progress, increase the cost of software and computers to consumers, or erode the
performance of computers, ... We commend the Committee for having issued a draft
that seeks to take these considerations into account." He added that
"the draft raises a number of important issues which will require careful
consideration and discussion".
Robert Sachs, P/CEO of the National Cable
Telecommunications Association (NCTA) stated in a release
that "The leadership and staff of the House Energy & Commerce Committee
have devoted considerable time and resources in a very constructive process to
bring industries together and facilitate the transition to digital TV. We look
forward to working with the committee as it considers the staff draft and ways
to resolve the many complex issues involved in the DTV transition. At the same
time, we will continue to work to achieve inter-industry solutions to as many of
these issues as is possible."
Treasury Official Urges Unified Rule Writing Process, But
9/20. Peter Fisher, Undersecretary of the Treasury for Domestic Finance, gave a speech titled
"The Need to Reduce Regulatory Arbitrage" at the Brooklyn Law School
Center for the Study of International Business Law.
He presented a case for a single rule maker for all financial services (similar
regulatory treatment for similar products), but argued that there should remain
separate entities for supervision. He said that this is because while there will
be financial supermarkets, information and communication technology will permit
"small firms to outsource many functions and thereby recapture some of the
advantages previously associated only with economies of scale".
He argued that "there is a compelling case for greater coherence in our
rule writing process for financial services, perhaps even for a
``super-regulator´´. But I draw a sharp distinction between financial regulation
– rule writing -- and financial supervision." (Emphasis in
He stated that "A single rule writer would need to respect two principles:
first, that like products and like services should receive a like regulatory
treatment and, second, that distinct products and distinct services should
receive distinct regulatory treatment."
He continued that "Supervision -- the hands on business of looking over the
shoulders of the financial intermediaries -- will and should remain divided
among a number of different agencies and organizations, focused discretely on
individual firms, products, and different policy objectives."
He also explained his reasoning. He said that "I am skeptical of the view
that the future belongs to large conglomerates operating as financial
``supermarkets.´´ Large financial firms do have some important advantages,
among them greater potential for diversification. Diversification spreads risk
and stabilizes earnings."
However, said Fisher, "Advances in information and communication technology
offset some of the scale and diversification advantages that large institutions
may have. Today, technology permits small firms to outsource many functions and
thereby recapture some of the advantages previously associated only with
economies of scale."
"Thus, I expect that we will have a world in which nimble financial
institutions of varying sizes, including both financial supermarkets and more
focused financial firms, will compete with one another. As a society, we have
– and want to retain – different, competing forms of financial
intermediation, whether based on charter, product, function, or other
form," said Fisher.
BellSouth & SBC File §271 Applications for Florida,
Tennessee and California
9/20. BellSouth filed a Section 271
application with the Federal Communications
Commission (FCC) to provide in region interLATA service in the states of
Florida and Tennessee. Meanwhile, SBC filed a
§271 application for the state of California.
The FCC approved BellSouth's application for the Georgia and Louisiana on May
24. It approved BellSouth's application for Alabama, Georgia, Kentucky,
Louisiana, Mississippi, North Carolina and South Carolina on September 18. If
approved, BellSouth would have authority to offer long distance service in all
of the states within its original territory.
The FCC has already approved SBC's applications for the states of Arkansas,
Kansas, Missouri, Oklahoma, and Texas. See also, FCC web
page summarizing §271 applications and SBC release.
AT&T continues to oppose the granting of §271 applications. An AT&T officer stated in a release condemning
the FCC's September 18 decision that "BellSouth enters the market
controlling virtually all residential service and the lion's share of business
customers. This decision removes BellSouth's incentives to open its markets to
competition. State regulators now must ensure that BellSouth does not squash
what little competition exists."
The FCC has 90 days to act upon these applications. Also, the Department of
Justice's Antitrust Division is required
to first issue its evaluations of these applications.
The FCC also issued a protective
order [PDF] in the Florida and Tennessee proceeding, and a protective
order [PDF] in California proceeding, pertaining to the submission to the
FCC of certain documents. The FCC also issued notice
[PDF] regarding the Florida and Tennessee proceeding, and a notice
[PDF] regarding the California proceeding, that specify various deadlines. The
FCC also assigned docket numbers. The Florida and Tennessee proceeding is WC
Docket No. 02-307; the California proceeding is WC Docket No. 02-306.
The following are key deadlines in these proceedings:
October 9. Deadline to submit comments to the FCC regarding SBC's
October 10. Deadline to submit comments to the FCC regarding BellSouth's
Florida and Tennessee application.
October 25. Deadline for the DOJ to release its evaluation of BellSouth's
Florida and Tennessee application.
October 29. Deadline for the DOJ to release its evaluation of SBC's
November 1. Deadline to submit reply comments to the FCC regarding
BellSouth's Florida and Tennessee application.
November 4. Deadline to submit comments to the FCC regarding SBC's
December 19. Deadline for the FCC to rule on SBC's California
December 19. Deadline for the FCC to rule on BellSouth's Florida and
Microsoft Meets with FCC Re Broadband Regulation
9/20. Representatives of Microsoft held
two meeting with senior Federal Communications
Commission (FCC) officials regarding regulatory classification and treatment
of high speed Internet access services via cable and wireline facilities.
Microsoft stated in a disclosure
letter [PDF] to the FCC that "the Microsoft participants discussed the
need for the Commission, regardless of the statutory classification applied to
broadband services, to adopt the safeguards embodied in the connectivity
principles presented by the High Tech Broadband Coalition ..."
The HTBC has filed numerous comments with the FCC in various FCC proceedings
which pertain to broadband regulation. See for example, July
1, 2002 comments [PDF], April 7, 2002 comments
[PDF], June 17, 2002
comments [PDF], July
17, 2002 comments of the HTBC.
Microsoft further stated in its letter that "The content, applications and
devices that have proliferated as the Internet has become a mass market medium
have proliferated in large measure because innovators have been able to rely on
the fact that, in the dial-up world, the provider of the underlying facility
does not -- and indeed cannot -- discriminate against the types of information
traversing its system or the devices that are attached to that system."
Microsoft added that "it is not clear that those norms -- and thus the
benefits that flow from them -- will prevail in the broadband world envisioned
by the Commission's NPRMs."
Microsoft was represented at the meetings by their counsel, Scott Harris of the
law firm of Harris Wiltshire &
Grannis, and by Craig Mundie, Marc Berejka and Pierre De Vries of Microsoft.
They met with Bill Maher (the new Chief of the FCC's Wireline Competition Bureau), Jeffrey
Carlisle (Senior Deputy Bureau Chief), Scott Bergmann (Legal Counsel), Jessica
Rosenworcel (Legal Counsel), Jane Jackson (Associate Bureau Chief), Michelle
Carey, and Brent Olson. They also met separately with Ken Ferree (Chief of the
FCC's Media Bureau), Deborah Klein (Chief
of Staff), Bill Johnson (Deputy Bureau Chief), Barbara Esbin (Associate Bureau
Chief), Peggy Greene (Associate Bureau Chief), Eric Bash and John Norton.
The letter referenced several open FCC proceedings, GN Docket No. 00-185, CS
Docket No. 02-52, CC Docket No. 02-33, and CC Docket Nos. 95-20 and 98-10.
4th Circuit Rules No Recovery Under Privacy Act for Disclosure
of SSNs Without Showing of Actual Damages
9/20. The U.S.
Court of Appeals (4thCir) issued its split opinion [48
pages in PDF] in Doe
v. Chao, holding that a plaintiff must prove actual damages to
recover under the Privacy Act for improper disclosure of Social Security Numbers
by the federal government. See, full story.
DOJ Official Addresses International Competition Network
9/20. William Kolasky gave a speech titled
"The International Competition Network: Guiding Principles for Merger
Review". The International
Competition Network (ICN) is an international entity comprised of about 65
nations' antitrust and competition regulatory authorities, such as the U.S.'s Federal Trade Commission (FTC) and Antitrust Division. The ICN will hold a
meeting on September 28-29.
Kolasky is a Deputy Assistant Attorney General in the Antitrust Division of the
Department of Justice. He spoke to the International Bar Association's Sixth
Annual Competition Conference in Fiesole, Italy.
He said that the ICN is "helping to tame the multinational merger thicket
that has grown up around us as an increasing number of jurisdictions -- roughly
65 at last count -- have enacted merger notification regimes."
"The concept behind ICN was to form a global network of competition
authorities focused exclusively on competition -- ``all antitrust all the time´´
as my boss Charles James put
it. The goal was twofold. First, to provide support for new competition agencies
both in enforcing their laws and in building a strong competition culture in
their countries. Second, to promote greater convergence among these authorities
around sound competition principles by working together, and with stakeholders
in the private sector, to develop best practice recommendations for antitrust
enforcement and competition advocacy that could then be implemented voluntarily
by the member agencies."
He said that while "The spread of merger notification is, of course, a
positive development as a general matter ... These benefits, however, do not
come without cost."
He elaborated that "The first significant cost is the cost of determining
in which jurisdictions a particular transaction must be notified. The second is
the cost and potential delay associated with preparing and filing the required
notifications and then responding to requests for additional information as
multiple agencies review the transaction. The third is the uncertainty created
by the potential for conflicting outcomes, a potential we saw realized last year
"As cross border trade and investment grows, and as more and more
jurisdictions enact antitrust laws, it becomes all the more critical that
antitrust agencies impose no unnecessary bureaucratic roadblocks on the merger
process and that antitrust authorities worldwide continue to achieve greater
convergence. Of course, we do not expect to achieve convergence in the first
year, or even the second or third years. Rather, ICN members expect to maintain
a continuous, collegial, and focused dialogue and to achieve meaningful
improvements in the practice of international antitrust enforcement, one step at
a time, over both the short and long terms. In that way we can hopefully turn
the multinational merger thicket into a well manicured English garden,"
James, Muris, Monti, Others to Speak at International
Competition Network Meeting
9/20. Charles James, the
Assistant Attorney General in charge of the Antitrust Division, and Timothy
Muris, the Chairman of the Federal Trade
Commission (FTC), will participate in, and speak at, the first annual
conference of the International
Competition Network (ICN) in Naples, Italy on September 28-29.
Muris will speak on the morning of the 28th. James will speak on the afternoon
of the 28th. Other speakers will include Mario Monti (Commissioner for
Competition, European Commission), John Vickers (Director General, UK Office of
Fair Trading), Giuseppe Tesauro (Chairman, Italian Competition Authority),
Konrad von Finckenstein (Commissioner, Canadian Competition Bureau), and James
Rill (former Co-Chair, DOJ's International Competition Policy Advisory
See also, DOJ
release, FTC release,
and conference agenda
GAO Reports on Allocation of Export Reviews Between State and
9/20. The General Accounting Office (GAO)
released a report [PDF]
titled "Export Controls: Processes for Determining Proper Control of
Defense Related Items Need Improvement".
The U.S. export control system is divided between one regulatory regime managed
by the Department of State (for defense
items) and a second regulatory regime managed by the Department of Commerce (for dual use items
that have both military and commercial applications, such as certain computers
and software). This GAO report addresses how various export permit applications
are allocated between the two departments.
The GAO report finds that "Determining which department has jurisdiction
over an item and how that item is controlled is fundamental to the proper
implementation of the bifurcated U.S. export control system. Yet over the years,
the U.S. government has experienced interagency disagreements over proper
jurisdiction for items, and companies have been uncertain about which department
controls the export of their items."
The report concludes that "Commerce has improperly classified some State
controlled items as Commerce controlled and has not adhered to regulatory time
frames for responding to requests. Improper classifications have occurred
because Commerce rarely obtains input from State and Defense before making
The report also asserts that "in several instances, Commerce improperly
provided companies with classifications for State controlled items, increasing
the risk of such items being inappropriately exported."
The report also states that "The bifurcated U.S. export control system
seeks to manage risks by balancing national security and foreign policy with
economic interests. Commerce has altered this balance by not implementing the
commodity classification process in a manner that considers other stakeholder
The report was prepared for Rep.
Christopher Shays (R-CT), Chairman of the House Government Reform Committee's
Subcommittee on National Security, Veterans Affairs, and International
9th Circuit Rules in Favor of
Rocky Horror Cybersquatter
9/20. The U.S.
Court of Appeals (9thCir) issued its opinion
[PDF] in Interstellar
Starship Services v. EPIX, a cybersquatting case.
Background. Epix makes and markets
electronic imaging hardware and software products, and provides associated
consulting services. It has registered the mark "Epix" with the USPTO.
Michael Tchou, the sole founder, officer, director, and employee of Intersteller
Starship Services (ISS), registered the domain name www.epix.com. The website associated with this
URL originally promoted Tchou's technical services and digital image processing.
However, it now only promotes a minor production of the Rocky Horror Picture
Show (RHPS). It includes pictures of men in women's underwear.
District Court. ISS filed a complaint in U.S. District Court (DOre)
against Epix seeking declaratory judgment of non-infringement. Epix
counterclaimed for trademark infringement, unfair competition, among other
claims. The District Court, finding no likelihood of confusion, granted summary
judgment to ISS. Epix appealed. The Appeals Court reversed and remanded. On
remand to the District Court, Epix amended its complaint to include a claim of
cybersquatting under the 1999 Anticybersquatting Consumer Protection Act (ACPA),
15 U.S.C. § 1125(d).
Following a bench trial, the District Court held that while ISS's past use of
www.epix.com to promote Tchou's business infringed the Epix trademark, its
present use to display RHPS pictures does not infringe the Epix trademark. The
District Court also found no cybersquatting violation under the ACPA and no
trademark dilution under Oregon law. The District Court refused to transfer the
domain name to Epix.
Appeals Court. The Appeals Court rejected Epix's arguments on appeal that
there is a likelihood of initial interest confusion among consumers, and that
ISS violated the ACPA. Central to the Appeals Court's analysis on both issues
was its conclusion that Tschou acted in good faith.
Affirmed. Tchou gets to keep the domain name.
Groups File Amicus Brief in FISA Appeal
9/20. The Center for Democracy and Technology
(CDT) and other groups filed an amicus
curiae brief [54 pages in PDF] with the U.S. Foreign Intelligence
Surveillance Court of Review in a proceeding titled "In Re Appeal from July
19, 2002 Opinion of the United States Foreign Intelligence Surveillance
Court". The brief supports affirmance.
The brief states that this case "raises the question whether federal law
enforcement officials can use the Foreign Intelligence Surveillance Act ... to
initiate, control or direct surveillances for criminal investigation. In the
court below, the government sought a judicial ruling that FISA can be used where
the primary or even exclusive purpose of surveillance is to gather evidence of
The brief argues that "While FISA now allows coordination, consultation and
information sharing between intelligence and law enforcement officials, it does
not authorize surveillance whose primary or exclusive purpose is law
enforcement. Indeed, expanding the scope of secret surveillance under FISA would
violate the Fourth Amendment and the Due Process guarantees of the Fifth
Amendment, and would jeopardize the First Amendment right to engage in lawful
9/20. The House Commerce Committee's
Subcommittee on Telecommunications and the Internet released a draft of a
proposed bill [16 pages in PDF] regarding the transition to digital
television. The bill would require broadcasters to cease analog service by the
end of 2006, require the FCC to write rules that mandate that digital devices
capable of receiving a digital signal recognize the use of a broadcast flag by
January 1, 2006, prohibit the FCC from imposing dual must carry requirements,
and require digital television cable compatibility. See also, Subcommittee's summary of draft
People and Appointments
9/20. The Senate confirmed Reena Raggi to be a Judge of the U.S. Court of Appeals (2ndCir) by a vote
9/20. The FCC published a notice
in the Federal Register that it seeks further comments to refresh its record
regarding customer proprietary network information (CPNI) implications
when a carrier goes out of business, sells all or part of its customer base, or
seeks bankruptcy protection. This is the FCC's Third Further Notice of Proposed
Rulemaking in CC Docket Nos. 96-115, 96-149 and 00-257. Comments are due October
21, 2002; reply comments are due November 19, 2002. See, Federal Register,
September 20, 2002, Vol. 67, No. 183, at Pages 59236 - 59239.
Senate Commerce Committee Approves Nanotechnology Bill
9/19. The Senate Commerce Committee
approved S 2945, the 21st Century Nanotechnology Research and Development
Act, by a voice vote. The bill was introduced by Sen. Ron Wyden (D-OR), Sen. Joe Lieberman (D-CT), Sen. George Allen (R-VA), and others, on
September 17. See, Committee
Sen. Wyden stated in the Senate on September 17 that "This bill would
authorize a coordinated interagency program that will support long term
nanoscale research and development leading to potential breakthroughs in areas
such as materials and manufacturing, nanoelectronics, medicine and healthcare,
environment, energy, chemicals, biotechnology, agriculture, information
technology, and national and homeland security. Building on the National
Nanotechnology Initiative, the bill would authorize appropriations for research
throughout the government while providing tools for better cross agency
management and coordination." See, Cong. Rec., Sept. 17, 2002, at S8678.
The bill provides that "The President shall establish a National
Nanotechnology Research Program." This Program would establish goals for
nanotechnology research, invest in research and development programs, and
provide interagency coordination.
The bill lists among its many findings that "Nanotechnology will provide
structures to enable the revolutionary concept of quantum computing, which uses
quantum mechanical properties to do calculation. Quantum computing permits a
small number of atoms to potentially store and process enormous amounts of
information. Just 300 interacting atoms in a quantum computer could store as
much information as a classical electronic computer that uses all the particles
in the universe, and today's complex encryption algorithms, which would take
today's best super computer 20 billion years, could be cracked in 30
The bill authorizes the appropriation of $476 Million in FY 2003 and $547
Million in FY 2004. The bill includes in its funding areas the following: "Nanoelectronics,
optoelectronics, and magnetics".
Senate Commerce Committee Approves FTC Reauthorization Bill
9/19. The Senate Commerce Committee
approved S 2946, the Federal Trade Commission Reauthorization Act of 2002,
by a vote of 16-7. The bill was introduced by Sen. Byron Dorgan (D-ND) and Sen. Ernest Hollings (D-SC) on September
17. The bill reauthorizes the Federal Trade
Commission (FTC) for FY 2003, 2004, and 2005.
The bill authorizes the appropriation in FY 2003 of $179 Million with
approximately 1087 full time staff; in FY 2004 it authorizes $207 Million with
approximately 1158 full time staff; and in FY 2005 it authorizes $224 Million
with approximately 1208 full time staff.
The Senate Commerce Committee stated in a release
that "The bill provides the FTC jurisdiction over telecommunications common
carriers, allowing the FTC to use its expertise and enforcement powers to better
protect consumers from the fraudulent advertising and deceptive business
practices in this industry."
Senate Commerce Committee Approves NSF Doubling Act
9/19. The Senate Commerce Committee
approved S 2817,
The National Science Foundation Doubling Act, by a voice vote. The bill was
introduced by Sen. Ted Kennedy (D-MA), Sen. Ernest Hollings (D-SC), and others,
on July 22, 2002.
Among the programs authorized by the bill are Information Technology, Nanoscale
Science and Engineering, Math and Science Partnerships Initiatives, and the
Science, Mathematics, Engineering, and Technology Talent Expansion Program.
The bill provides that the Information Technology program is "An
information technology research program to support competitive, merit based
proposals for research, education, and infrastructure support in areas related
to cybersecurity, terascale computing systems, software, networking,
scalability, communications, and data management."
The bill provides that the nanoscale program is "A nanoscale science and
engineering research and education program to support competitive, merit based
proposals that emphasize research aimed at -- (A) discovering novel phenomena,
processes, materials, and tools that address grand challenges in materials,
electronics, optoelectronics and magnetics, manufacturing, the environment, and
healthcare; and (B) supporting new interdisciplinary centers and networks of
excellence, including shared national user facilities, infrastructure, research,
and education activities on the societal implications of advances in nanoscale
science and engineering."
The Committee also approved by voice vote an amendment [2 pages in PDF]
offered by Sen. Ron Wyden (D-OR) and Sen. Max Cleland (D-GA), that provides for
a ten year retrospective report on and review of National
Science Foundation (NSF) programs to promote participation of women,
minorities, and persons with disabilities in science, mathematics and
Senate Adds Cyber Security Amendment to Homeland Security Bill
9/19. The Senate approved by unanimous consent an amendment to HR 5005,
the Homeland Security Bill, offered by Sen.
Orrin Hatch (R-UT) that pertains to cyber security. It is essentially the
same as HR 3482,
the Cyber Security Enhancement Act, sponsored by Rep. Lamar Smith (D-TX), which
passed the House on July 15, 2002, by a vote of 385-3.
See, story titled "House Passes Cyber Security Enhancement Act" in TLJ Daily E-Mail Alert
No. 470, July 16, 2002, for a section by section summary of the bill. See
also, House Roll
Call No. 296.
Sen. Hatch (at right) said in a statement
in the Senate that "one of the many important tasks of the new Department
of Homeland Security will be protecting our country's computer infrastructure
from cyber attacks. Computer technology is at the heart of our country's economy
and has improved every aspect of our lives. Terrorists and others who wish to
harm our country recognize that cyber attacks on our vital computer and related
technological systems can have a devastating impact on our country, our economy
and the lives of our people." However, the amendment would pertain to cyber
crimes generally, not just those committed by terrorists.
Sen. Hatch continued that "The amendment will strengthen our criminal laws
and provide greater flexibility to communications providers and law enforcement
when necessary to prevent and protect against devastating cyber attacks.
Specifically, the amendment would increase the criminal penalty in Section 1030
of Title 18 of the United States Code for a cyber attack to a maximum of 20
years imprisonment where such an attack causes serious bodily injury, and life
imprisonment where such an attack causes death. Currently, Section 1030 provides
a maximum punishment of only 10 years imprisonment for a cyber attack which
results in serious bodily injury or death."
Sen. Hatch also commented that "it is not difficult to imagine an assault
on a computer system which might cause death or serious bodily injury. For
example, a hacker who infiltrates a hospital database to erase records may
thereby cause a patient to be deprived of necessary medication or treatment. As
another example, consider the possibility of a cyber attack on a natural gas
distribution pipeline that opens safety valves and releases fuel or gas. Attacks
on sophisticated control systems, such as those involving natural gas, oil,
electric power and water, which typically use automated supervisory control and
data acquisition (SCADA) systems, would have a far reaching effect."
Senate Subcommittee Holds Hearing on Antitrust Enforcement
9/19. The Senate Judiciary Committee's
Antitrust Subcommittee held an oversight hearing on enforcement of the antitrust
laws. Charles James
(Assistant Attorney General for the Antitrust Division) and Timothy Muris (FTC
Chairman) both testified.
statement of Sen. Herb Kohl (D-WI),
Chairman of the Subcommittee, opening
statement of Sen. Mike DeWine
(R-OH), the ranking Republican on the Subcommittee, and opening
statement of Sen. Orrin Hatch (R-UT).
James addressed a wide range of topics in his prepared
testimony, including criminal enforcement, merger reviews, gun jumping, the
Microsoft case, the American Airlines case, and the case against software makers
MathWorks and Wind River Systems. He also addressed globalization and
coordination with the European Union. Finally, he covered recent Department of
Justice (DOJ) analysis of intellectual property issues, remedies in merger
enforcement, and coordinated effects.
Microsoft. James reviewed the post judgment history of the case,
including settlement. He stated that "the proposed consent decree
represents a complete and fully successful resolution of the case, in that it
enjoins the conduct found to be unlawful, prevents recurrence of that conduct,
and takes proactive steps to restore lost competition. Moreover, it provides for
immediate relief, in that Microsoft agreed to be bound by the decree’s terms
upon signature. Consequently, Microsoft has already modified its licensing
practices to permit computer manufacturers to substitute competing middleware
products for those provided as part of its operating system, modified its new XP
operating system, and begun to release important interfaces and protocols that
will enable third-parties to develop products and services that will
interopperate with Windows."
FTC DOJ Clearance Agreement. James also touched on the ill fated
clearance agreement between the FTC and DOJ, which was abandoned when Sen. Ernest Hollings (D-SC) threatened to
cut budgets. James stated that "During its brief life, the agreement had
reduced clearance to a one-day process, and for the first time in decades
eliminated all pending clearance disputes. ... Much to our disappointment, the
agreement had to be voided in May of this year due to the threat of budgetary
reprisals against the agencies."
Intellectual Property. James also addressed IPR and antitrust, and the
joint hearings held earlier this year by the FTC and DOJ. He stated that
"In recent years intellectual property issues have arisen with increased
frequency in our merger and civil conduct investigations and enforcement
actions. While intellectual property and antitrust law share the common purpose
of promoting dynamic competition and thereby enhancing consumer welfare, issues
at the intersection of intellectual property and antitrust can be murky. More
than ever before, the creation and dissemination of intellectual property is the
engine driving economic growth.
"Consequently," said James, "as antitrust law addresses the
competitive implications of conduct involving intellectual property, and as
intellectual property law addresses the nature and scope of intellectual
property rights, care must be taken to maintain proper incentives for the
innovation and creativity on which our national economy depends."
He added that "Both we and FTC believed that a thorough review of the
issues in this important area should be undertaken" and that "We
expect to publish a report in 2003".
Muris also addressed intellectual property in his opening
statement. He stated that "The continuing development of ``high tech´´
industries and the significance of intellectual property rights influence our
antitrust agenda. The U.S. economy is more knowledge based than ever. While the
fundamental principles of antitrust do not differ when applied to high tech
industries, or other industries in which patents or other intellectual property
are highly significant, the issues are often more complex, take more time to
resolve, and require different kinds of expertise. To address these needs, we
now have patent lawyers on staff, and we sometimes hire technical consultants in
areas such as electrical engineering or pharmacology."
B2Bs. Muris also addressed business to business electronic market places.
He stated that "the Commission has not formally taken enforcement action
against any B2Bs since it closed its investigation of Covisint in September
2000, but we stand ready to take such action if an appropriate case
He added that the FTC "views positively the development of B2Bs because of
their potential to generate significant efficiencies for our economy, winning
for customers lower prices, improved quality and greater innovation. At the same
time, we are aware of B2Bs’ potential to inflict competitive harm. By their
nature, B2Bs either bring together competitors in a collaborative environment,
or constitute vertical collaborations between suppliers and purchasers in an
industry or market. These arrangements may facilitate anticompetitive conduct,
either in the markets for the goods and services traded on B2Bs (or derived from
those traded on B2Bs), or in the market for marketplaces themselves."
(Parentheses in original.)
Muris also discussed the FTC's Internet Task Force, and the Internet Competition
House Committees Hold Hearing on SS Numbers and Identity Theft
9/19. The House Judiciary Committee's
Subcommittee on Immigration, Border Security, and Claims, and the House Ways and Means Committee's
Subcommittee on Social Security held a joint oversight hearing titled
"Preserving the Integrity of Social Security Numbers and Preventing Their
Misuse by Terrorists and Identity Thieves".
See, prepared testimony of witnesses: James
Lockhart (Deputy Commissioner of Social Security), Charisse
Phillips (State Department), Robert
Bond (Secret Service), Grant
Ashley (Federal Bureau of Investigation), James
Huse (Social Security Administration), Matthew
Reindl, and Chris
Hoofnagle (Electronic Privacy Information Center).
NTIA Extends ICANN Contract for One Year
9/19. The Commerce Department's National
Telecommunications and Information Administration (NTIA) amended and
extended its memorandum of understanding (MOU) with International Corporation for Assigned Names and
Numbers (ICANN) for the management of the the domain name system (DNS). See,
titled "Memorandum of Understanding Between the U.S. Department of Commerce
and the Internet Corporation for Assigned Names and Numbers: Amendment 5".
The original MOU was executed in November of 1998. The current MOU was set to
expire on September 30, 2002.
Recently, there has been wide dissatisfaction with the performance of the ICANN.
See, story titled "Senate Subcommittee Holds Hearing on ICANN", TLJ Daily E-Mail Alert
No. 450, June 13, 2002.
The NTIA also issued a statement
critical of the ICANN. The statement provides that the ICANN "must be
globally and functionally representative, operate on the basis of open and
transparent processes, and possess robust, professional management".
It further stated that the NTIA "views the one year term of this extension
to be a critical period for ICANN to make substantial progress on the remaining
transition tasks. Indeed, the tasks themselves have been revised and augmented
to highlight areas where both ICANN and the Department agree that ICANN's
attention needs to be focused. During this one year term of the MOU extension,
the Department will be closely monitoring ICANN's efforts, particularly through
a quarterly reporting mechanism, and expects to see significant
The NTIA statement elaborated that the "ICANN should not be ``the
government of the Internet.´´ Particularly, as the registry and registrar
markets become increasingly competitive, the Department believes that market
forces should play a greater role and that ICANN's involvement in policy making
in this area should be correspondingly narrow."
It also stated that the NTIA has been "disappointed that ICANN's progress
on the MOU tasks has moved so slowly", and that the MOU was extended in
part because of the "uncertainty that would be generated by a drastic
change in direction on DNS management".
NTIA Director Nancy Victory
said in a release
that "Although the MOU tasks have been augmented, ICANN should be a
technical coordination body whose policy making role is limited ... ICANN should
not be the government of the Internet."
The Center for Democracy and Technology (CDT)
stated that "The new MOU imposes some new tasks on ICANN regarding improved
accountability, transparency, and overall security of the Internet's Domain Name
System, but fails to provide guidance on what the appropriate limits on ICANN's
power should be."
GAO Reports on USPTO
9/19. The General Accounting Office (GAO)
released a report [PDF]
titled "Intellectual Property: Information on the U.S. Patent and Trademark
Office's Past and Future Operations".
The report states that "As the U.S. economy depends increasingly on new
innovations, the need to patent or trademark quickly the intellectual property
resulting from such innovations becomes more important."
The report details U.S. Patent and Trademark
Office (USPTO) statistics: "Patent activity grew substantially from
fiscal year 1990 through 2001. The numbers of patent applications filed and
patents granted nearly doubled, and the inventory of patent applications more
than tripled; patent pendency increased from slightly over 18 months to nearly
25 months; and the number of patent examiners increased by about 80
percent," according to the report. Also, "Between fiscal years 1999
and 2001, fee collections increased from $887 million to $1.085 billion
The report also reviews and contrasts the USPTO Business Plan, released
February 2002, and The 21st Century Strategic Plan, released in June,
2002, both of which cover FY 2003 through 2007.
The report was prepared for Rep. Jim
Saxton (R-NJ), the Chairman of the Joint Economic Committee, and Rep. Lamar Smith (R-TX), a member of
the House Judiciary Committee.
Rep. Smith stated in a release
that "It is critically important that the USPTO become more efficient,
accurate and productive in its duties so that innovators aren't stifled by delay
nor encumbered by red tape. When the process fails, American intellectual
property and our economy suffer."
9/19. Rep. Mike Ferguson (R-NJ) and
Rep. Harold Ford (D-TN) introduced HR 5414.
The Congressional Record describes this as "A bill to facilitate check
truncation by authorizing substitute checks, to foster innovation in the check
collection system without mandating receipt of checks in electronic form, and to
improve the overall efficiency of the Nation's payments system". It was
referred to the House Committee on
9/19. Rep. Lamar Smith (R-TX), Rep. George Gekas (R-PA), Rep. John Conyers (D-MI), and Rep. Jane Harman (D-CA) introduced HR
5424. The Congressional Record describes this as "A bill to prevent the
crime of identity theft [and] mitigate the harm to individuals victimized by
identity theft". It was referred to both the House Judiciary Committee and the House Financial Services Committee.
People and Appointments
9/19. Jonathan Sokobin was named Deputy Chief Economist of the Securities and Exchange Commission's (SEC) Office
of Economic Analysis. He was previously a member of the faculty at Southern Methodist University (SMU). See, SEC release.
9/19. The House Commerce
Committee's Subcommittee on Oversight and Investigations authorized the
issuance of subpoenas in connection with the Committee's investigation into
Global Crossing, Qwest and related entities. The subcommittee adopted a
resolution, by a vote of 11-0, that provides, "the Chairman of the
Committee on Energy and Commerce, with the concurrence of the Ranking Minority
Member, may authorize and issue subpoenas to testify and subpoenas duces tecum
to any person or entity in respect of matters involved in, relating to, or
arising from the Committee’s investigation of Global Crossing Ltd., Qwest, and
9/19. Michael Powell,
Chairman of the Federal Communications Commission
(FCC) gave a speech
[PDF] to the National Summit on Emerging Tribal Economies in Phoenix, Arizona.
He discussed, among other topics, telecommunications in Indian Country, and the
benefits of broadband. He stated that " With a sufficient technology
infrastructure, Indian Country can take advantage of many of the economic
realities of rural life to become competitive in any number of technology
industries. Independent professional workers working from reservations via
broadband facilities could constitute an attractive workforce for both tribal
and non-tribal companies. Broadband infrastructure deployed to support tribal
entrepreneurs will allow them to gain access to business information once
reserved only to the largest multinational corporations."
9/19. The House Judiciary Committee's
Subcommittee on Courts, the Internet, and Intellectual Property held a hearing
on HR 5119,
the Plant Breeders Equity Act of 2002. See, opening statement of Rep. Howard Coble (R-NC), Chairman of the
Subcommittee. See also, prepared testimony of witnesses: James Toupin (USPTO),
(American Intellectual Property Law Association), Craig Regelbrugge
(American Nursery & Landscape Association), and Peter DiMauro
(International Center for Technology Assessment).
FCC Commissioner Addresses Government Role in Broadband
9/18. Federal Communications Commission (FCC)
Commissioner Kevin Martin
gave the opening address at a half day conference hosted by the Alliance for Public Technology (APT) and the High
Tech Broadband Coalition (HTBC) titled "From Debate to Deployment: Making
Broadband Competition Work for All Americans".
Martin stated that broadband deployment will spur economic growth and provide
the benefits of distance learning, public safety and emergency response,
telemedicine, and rural medicine. He advocated moving quickly on pending
broadband related proceedings, promoting facilities based competition, and
removing financial and regulatory obstacles to broadband deployment.
Martin outlined four principles. (Martin also discussed these principles in a speech on
October 26, 2001, titled "Framework for Broadband Deployment".) First,
the government should establish a "stable, reliable and fast regulatory
He stated that "Broad proceedings that remain pending for extended periods
will contribute to uncertainty. More protracted uncertainty can prolong
financial difficulty. Regulatory uncertainty and delay can function as entry
barriers" and limit investment, thereby "impeding deployment of new
He said that "I believe that it is time for the Commission to take action
on these various proceeding involving broadband competition, including the UNE
triennial, performance measures, and the broadband proceedings that are
currently before us." He elaborated that the FCC should act first on the
UNE triennial, and that it should act this year.
Martin's second principle is that "the Commission needs to focus more on
facilities based competition."
"In the past, the Commission has adopted a framework that may have
discouraged facilities based competition by allowing competitors to use every
piece of an incumbent's network at super efficient prices," said Martin.
"Under such a regime, new entrants have little incentive to build out
facilities, since they can use the incumbent's cheaper and more quickly. And
incumbents have less incentives to build new facilities, since they must share
them with their competitors at regulated prices."
Martin's third principle is that governments should reduce the financial burden
they impose on broadband. He state that "Currently, at every level of
government, we often, we too often see broadband deployment and
telecommunications as a potential revenue stream."
He continued that "from federal and state excise taxes, the
kind of taxes that have traditionally been reserved for decreasing demand for
certain products, such as alcohol and tobacco, to local franchise fees, which
are sometimes designed to recoup more than the cost that the government bears
for allowing services to be deployed, such as repairing streets, governments
impose taxes that actually discourage demand, and therefore discourage the
deployment of broadband telecommunications services."
He also stated that "I do not support the FCC's proposal to extend
universal service contribution obligations to the providers of broadband
Internet access. In my view, the contribution requirement ... would be
essentially an Internet access tax that represents an unnecessary financial
burden on such Internet service providers and actually creates a barrier to
Martin's fourth principle is that governments should remove regulatory barriers
to broadband deployment. He stated that "For competitive carriers, many of
these regulatory hurdles occur at the state and local level. These include local
rights of ways, permits for zoning and tower citing".
Martin also briefly touched on various proposals for Congressional legislation.
He said that "There are several different legislative proposals for
providing direct and indirect financial incentives for broadband
deployment." He said that "more targeted relief" such as
"reform and modernization of depreciation schedules can actually help spur
deployment." However, he concluded that "even more important than
providing direct relief right now, I believe the government should first commit
itself to exercising self restraint by placing additional financial burdens on
In responses to questions from the audience, he further elaborated the FCC's UNE
remand proceeding. He does not know if the FCC will file a petition for writ of
certiorari from the U.S. Court of Appeals (DCCir). He hopes that the FCC will
act this year. He also addressed universal service.
Afterwards Martin spoke with reporters outside the conference room. He discussed
primary video, must carry, the FCC's likely timing in the UNE remand and
broadband related proceedings, and E-911.
TLJ transcribed extended excerpts from Martin's speech, responses to questions
from the audience, and responses to questions from reporters outside the event.
The transcription was made from TLJ's audio recording of the event. The quality
of the audio recording was poor, and Commissioner Martin spoke over a noisy
breakfast audience. Hence, this transcript includes many omissions, and is
certain to contain errors. Nevertheless, for whatever it may be worth, the transcript is in
the TLJ web site.
FCC Approves BellSouth Long Distance Application
9/18. The FCC approved BellSouth's application under Section 271 to provide
in region interLATA services in the states of Alabama, Kentucky, Mississippi,
North Carolina, and South Carolina.
BellSouth Ch/CEO Duane Ackerman stated in a release that "The approval of
this application by the FCC, the first approval of five states at one time,
proves that BellSouth is in compliance with the Telecom Act of 1996, that our
markets are open to local competition, and that millions of additional customers
in our operating region will now experience the benefits of increased
competition for long-distance services". He added that "We will be in
the marketplace in these five states on September 27 with the competitive long
distance offers and packages our customers want." Ackerman is also
scheduled to speak at a Federal Communications
Bar Association (FCBA) luncheon in Washington DC on Thursday, September 26.
The FCC approved BellSouth's Section 271 application for Georgia and Louisiana
in May of this year. The FCC's docket number for this five state application is
WC 02-150. For more information, contact Aaron Goldberger of the FCC's Wireline
Competition Bureau at 202 418-1591.
FCC Releases Order With Competition Analysis of Radio
9/18. The Federal Communications Commission
(FCC) released a Hearing
Designation Order [18 pages in PDF] in its proceeding on the application to
assign the license of radio station WAAM(AM), in Ann Arbor, Michigan, from
Whitehall Enterprises to Clear Channel.
While the license involved in this proceeding (MB Docket No. 02-284) is not
significant, the order includes the FCC's interim public interest analysis, and
competition analysis, in a subject that is currently the subject of several
pending Notice of Proposed Rulemaking (NPRM) proceedings.
The FCC order states that "we are unable to make the required finding that
the public interest, convenience and necessity will be served by granting the
subject application in light of the questions raised in the context of our
competition analysis." Accordingly, the FCC assigned this matter for a
People and Appointments
9/18. Scott Taub was named Deputy Chief Accountant of the Securities and Exchange Commission (SEC). He
previously worked in Andersen's Professional Standards Group in Chicago,
Illinois. See, SEC release.
9/18. The Treasury Department released its notice [39
pages in PDF] to be published in the Federal Register which contains and
explains its final rule regarding information sharing among financial
institutions and federal government law enforcement agencies. The USA PATRIOT
Act, at Section 314, required the Treasury Department to promulgate regulations
"to encourage further cooperation among financial institutions, their
regulatory authorities, and law enforcement authorities, with the specific
purpose of encouraging regulatory authorities and law enforcement authorities to
share with financial institutions information regarding individuals, entities,
and organizations engaged in or reasonably suspected based on credible evidence
of engaging in terrorist acts or money laundering activities."
9/18. The Federal Communications Commission
(FCC) released its Notice
of Proposed Rulemaking and Memorandum Opinion and Order [50 pages in PDF]
pertaining to telemarketing rules. The FCC announced, but did not release, this
NPRM and MOO at its September 12 meeting.
9/18. Brown University's Taubman Center for Public Policy released a study [27 pages in PDF]
of 1,265 state and federal websites. It ranked a select group of 59 federal web
sites. The Federal Communications Commission's
(FCC) web site was ranked first. The Commerce
Department web site was rated eleventh. The White House was rated thirteenth. The Federal Trade Commission (FTC) was
nineteenth, and the Department of Justice
(DOJ) was twentieth. The thirteen judicial branch web sites rated by the study
received the thirteen lowest rankings. See, FCC
9/18. Research in Motion (RIM) filed a
complaint in U.S. District Court (DDel) against Handspring alleging patent infringement.
RIM makes wireless handheld communications products, including the Blackberry
line. Handspring makes PDAs, including the Treo Organizers and Treo
Communicators. RIM stated in a release that the
complaint alleges that the Treo k180, Treo 270 and Treo 300 "infringe the
claims of a patent associated with unique keyboard features implemented in RIM's"
9/18. A grand jury of the U.S. District
Court (NDOhio) returned a three count indictment against Steve Wisdom. The
indictment includes two counts of criminal infringement of copyrighted computer
software in violation of 18 U.S.C. § 2319(b)(1)
and 17 U.S.C. § 506(a),
and one count of trafficking in counterfeit labels affixed or designed to be
affixed to unauthorized or counterfeit copies of copyrighted computer programs
in violation of 18
U.S.C. § 2318(a). See, CCIPS release.
Senators Introduce Nanotechnology R&D Bill
9/17. Sen. Ron Wyden (D-OR), Sen. Joe Lieberman (D-CT) and Sen. George Allen (R-VA) introduced the 21st
Century Nanotechnology Research and Development Act. See, joint release and
In addition, the Senate Commerce
Committee's Subcommittee on Science, Technology, and Space held a hearing on
nanotechnology. See, prepared testimony of witnesses in PDF: Richard Russell
(Office of Science and Technology Policy), Mark
Modzelewski (NanoBusiness Alliance), Stan Williams
(Hewlett Packard), and Nathan Swami
(Initiative for Nanotechnology, Commonwealth of Virginia).
The Commerce Committee is scheduled to mark up the bill on Thursday, September
SEC Official Addresses Smart Routing Technologies
9/17. Lori Richards, Director of the Securities
and Exchange Commission's (SEC) Office of Compliance Inspections and
Examinations gave a speech
titled "Key Issues in SEC Examinations of Broker Dealers". She
discussed a wide range of issues, including sales practices, supervision,
internal controls, money laundering, the IPO process, and analysts' conflicts of
interest. She also touched on smart routing technologies, and identity theft.
She stated that "We are continuing to focus on execution practices of
broker dealers and advisers. ... Now retail order routing firms have a new tool
to measure and monitor execution quality -- all firms should be using the new
market quality data required to be provided by market centers under Rule
"Order routing decisions must be made based on the ability to get the best
possible execution, not on order routing inducements," said Richards.
She continued that "Many firms are using ``smart routing technology´´
that allows them to instantaneously route individual customer orders to the
market posting the best price or best size (or both), with algorithyms that also
factor in past fill rates and price improvement rates. Certainly, ``smart
routers´´ go a long way to ensuring that customers are getting the best
possible price at any given moment during the trading day." (Parentheses in
She also addressed identity theft. "Regulation S-P requires that firms have
adequate safeguards to protect customer information from unauthorized access or
use. As such, we are currently conducting a sweep of broker-dealers and
investment company complexes to evaluate their policies and procedures for
protecting customer records and information from people seeking to commit
identity theft frauds."
Richards spoke to the Legal and Compliance Division of the Securities Industry
Association at the Union League Club in New York, NY.
CEA CEO Criticizes Record and Movie Companies on Copyright
9/17. Consumer Electronics Association (CEA)
P/CEO Gary Shapiro gave a speech titled
"The Campaign to Have Copyright Interests Trump Technology and Consumer
Rights" at the Optical Storage Symposium, in San Francisco, California. He
bluntly criticized the copyright related actions and arguments of the movie and
record companies, and their supporters in the Congress and Justice Department. See,
Bush Campaigns on Judicial Appointments
9/17. President Bush gave a speech
in Nashville, Tennessee, at a Lamar Alexander for Senate event. He repeated his
argument that voters should elect Republican Senators so that his judicial
nominees will get confirmed.
He stated that "I appreciate the fact that I'll be able to work with Lamar
on making sure the good people who I nominate to our federal benches will not
only get a fair hearing, but a speedy hearing, and will get approved. The
country got to see what happens when the Senate gets so politicized that they
won't give people a fair hearing when it comes to judicial nominees."
Bush continued: "I named a fabulous woman out of Texas, named Priscilla
Owen to the 5th Court. And they distorted her record. She had the highest
ranking from the ABA, and yet having listened to the rhetoric coming out of a
highly politicized and polarized committee, you never would have realized how
qualified she is. She was turned down for purely political purposes. For the
sake of a federal judiciary that is strong and solid, we need United States
senators like Lamar Alexander who will be fair and reasonable and realistic, and
will not play politics with the President's judicial nominees."
CO Seeks Comment on Broadcasters' Motion for Stay of Rule
9/17. The Copyright Office (CO)
published a notice
in the Federal Register requesting public comments on the motion for stay filed
by various broadcasters of the CO's final rule that provides that transmissions
of a broadcast signal over a digital communications network are not exempt from
copyright liability under 17 U.S.C. § 114(d)(1)(A).
The comment period is very short. The notice states that "Oppositions
are due no later than Tuesday, September 24, 2002. Replies are due no later than
Friday, September 27, 2002."
See, Federal Register, September 17, 2002, Vol. 67, No. 180, at Pages 58550 -
58551. See also, copy of the notice [3
pages in PDF] in the CO web site. This is the CO's Docket No. RM 2000-3C.
On December 11, 2000, the Copyright Office issued its final rule providing that
the transmission of a sound recording as part of a retransmission of an AM/FM
broadcast signal over a digital communications network, such as the Internet, is
subject to the limited digital performance right provided by 17 U.S.C. § 106(6),
and is not exempt under § 114(d)(1)(A) -- the provision that specifically
exempts a nonsubscription broadcast transmission. See, notice
in Federal Register, December 11, 2000, Vol. 65, at Pages 77292 - 77302.
On January 25, 2001, Bonneville International, Clear Channel Communications, Cox
Radio, Emmis Communications, Entercom Communications, Susquehanna Radio, and the
National Association of Broadcasters filed a complaint
in U.S. District Court (EDPenn)
against the Copyright Office seeking a declaration that the CO's final rule is
inconsistent with 17 U.S.C. § 114(d)(1)(A). This case is also known as NAB v.
On August 1, 2001, the District Court issued its Memorandum
and Order granting summary judgment to the Copyright Office. The
broadcasters have filed an appeal in the U.S.
Court of Appeals (3rdCir), which is pending. See, Appeal No. 01-3720.
9/17. Lynn Booker plead guilty in U.S.
District Court (EDCal) to checking kiting via ATMs and unauthorized computer
transactions through computer home banking. Check kiting is a fraudulent scheme
in which a bank customer utilizes the time it takes for checks to clear to
create artificially high balances of nonexistent funds through a systematic
exchange of checks among accounts.
The U.S. Attorneys Office described Booker's scheme in a release [PDF]:
"One account belonged to her and the other belonged to another person for
which she was originally a co-signer, but was subsequently removed from the
account. Investigators learned that defendant BOOKER forged checks on the other
person's account and deposited the forged checks into her account. BOOKER
then deposited checks drawn on her account to the other person's account to
sustain the check ``kite´´. BOOKER used Co-Op ATMs which provided additional
float time for the check ``kite,´´ since they were not proprietary ATMs of the
original credit union. On a number of occasions, BOOKER also conducted
unauthorized computer transactions through computer home banking, and
transferred funds between the two accounts. At the time of the transactions,
BOOKER had no authority to make these transactions on the other person's
People and Appointments
9/17. Hank Brown resigned as a Director of Qwest Communications. He had been a director of
Qwest and its predecessor, U S WEST since 1998. He is also a former
U.S. Senator and Representative from Colorado. See Qwest
9/17. A grand jury of the U.S. District Court (NDCal)
returned an indictment against Dennis Baker charging one count of criminal
copyright infringement in violation of 17 U.S.C. § 506(a)(1)
and 18 U.S.C.§
2319(b)(1). The U.S. Attorneys Office (USAO) for the Northern District of
California stated in a release
that Baker "operated a website in 1996 through which he made pirated copies
of business and game software available for sale ... that had a retail value of
approximately $2.4 million." The USAO further stated that Baker fled to
Malaysia after he learned of earlier charges against him. However, the FBI
tracked him, the State Department revoked his passport, and Malaysia revoked his
authorization to remain and put him on a plane back to the U.S. He is being held
9/17. California Gov. Gray Davis signed AB 2238,
sponsored by Assemblymember Dick Dickerson (R-Redding). The provides, in part,
that "No person shall knowingly post the home address or telephone number
of any elected or appointed official, or of the official's residing spouse or
child on the Internet knowing that person is an elected or appointed official
and intending to cause imminent great bodily harm that is likely to occur or
threatening to cause imminent great bodily harm to that individual."
9/17. AT&T stated in a release that
"The waiting period under the Hart Scott Rodino Antitrust Improvements Act
(the HSR Act) applicable to the combination of Comcast Corporation and AT&T
Broadband has expired. At this time, the HSR Act no longer prohibits the parties
from closing the proposed transaction." AT&T added that "The
parties are still awaiting certain other regulatory approvals and consents and
continue to expect that the transaction will close in the fourth quarter of
9/17. The U.S. Court of Appeals (DCCir)
held an en banc hearing in Ruggiero v. FCC, No. 00-1100. On February 8, a three
judge panel issued its split opinion
holding unconstitutional the ban on issuance of low power FM radio broadcast
licenses to anyone who has previously engaged in an unlicensed operation.
9th Circuit Applies Fair Use Exemption to News Video Footage
9/16. The U.S.
Court of Appeals (9thCir) issued its opinion
[PDF] in LANS
v. CBS, a copyright infringement case involving news video
footage in which the court examined evidentiary and fair use issues.
Background. The Los Angeles News Service (LANS) shot videos in 1992 of a
riot in Los Angeles from its helicopter, including one of the beating of
Reginald Denny. LANS registered copyrights with the Copyright Office. LANS
alleges that a video news service that was then a part of Westinghouse Electric
(a Viacom company, like CBS) distributed LANS's video footage, without license,
to its subscribers, including television stations. LANS further alleges that
Court TV was one of those subscribers who used copyrighted footage.
District Court. LANS filed a complaint in U.S. District
Court (CDCal) against Westinghouse Electric and others alleging copyright
infringement. The District Court granted summary judgment to defendants. The
District Court's judgment for CBS was based upon its exclusion of all of LANS's
evidence probative of distribution of the copyrighted video. The judgment for
CourtTV was based upon fair use. LANS brought this appeal.
Appeals Court. The Appeals Court reversed the grant of summary judgment
to CBS Broadcasting, and remanded. The Appeals Court affirmed the grant of
summary judgment to CourtTV. Following a detailed analysis under the four prong
fair use standard of 17
U.S.C § 107, it held that CourtTV's very short take from the video fell
within the fair use exception.
Court Rules on Appointment of Lead Plaintiff in Class Action
Securities Suit Against Tech Company
9/16. The U.S. Court of Appeals (9thCir) issued its opinion
[30 pages in PDF] in In
Re Cavanaugh, a case regarding the standard under the 1995 PSLRA
for appointing the lead plaintiff in a class action securities fraud lawsuit.
Background. This case arising out of the decline in the stock price of
Copper Mountain Networks, a supplier of digital subscriber line (DSL) products.
The usual flood class action securities fraud lawsuits followed. One of the many
law firms to file was Milberg Weiss, a
firm that specializes in bringing class action securities fraud suits against
high tech companies.
District Court. The District Court consolidated the actions, and
appointed Quinn Barton, a self employed investor represented by the law firm of
Beatie & Osborn, as lead plaintiff. However, the lead plaintiffs proposed by
Milberg Weiss, which included David Cavanaugh, had the largest cumulative
financial stake in the controversy. Milberg Weiss brought this petition for writ
Appeals Court. The Appeals Court outlined and applied the controlling
provisions of Rule 23, Federal Rules of Civil Procedure, and the Private
Securities Litigation Reform Act (PSLRA), 15 U.S.C. § 78u-4, pertaining to
appointment of lead plaintiff in class action securities cases. It held that the
District Court did not follow the statutory framework, and hence, granted the
petition, and vacated the order appointing Barton lead counsel.
The Appeals Court wrote that the PSLRA provides that the presumptive lead
plaintiff is the one who meets the requirements of Rule 23 and "has
the largest financial interest in the relief sought by the class". However,
the PSLRA also provides that the District Court may appoint another prospective
lead plaintiff, if he can demonstrate "a reasonable basis for a finding
that the presumptively most adequate plaintiff is incapable of adequately
representing the class."
The District Court had found that the Cavanaugh group of plaintiffs were the
presumptively "most adequate plaintiff" because it had the largest
stake; however, it also found that Barton rebutted the presumption by showing
"significant differences in potential attorney fees" that "cannot
be rationally explained by intangible factors such as the well recognized brand
name in securities litigation of" Milberg Weiss.
The Appeals Court wrote that the PSLRA instructs the District Court to select as
lead plaintiff the one "most capable of adequately representing the
interests of class members." The PSLRA, in turn, defines "most
capable" as the one who "has the largest financial interest in the
relief sought by the class" and "otherwise satisfies the requirements
of Rule 23".
"In other words," the Appeals Court wrote, "the district court
must compare the financial stakes of the various plaintiffs and determine which
one has the most to gain from the lawsuit. It must then focus its attention on that
plaintiff and determine, based on the information he has provided in his
pleadings and declarations, whether he satisfies the requirements of Rule 23(a),
in particular those of ``typicality´´ and ``adequacy.´´ If the plaintiff
with the largest financial stake in the controversy provides information that
satisfies these requirements, he becomes the presumptively most adequate
plaintiff. If the plaintiff with the greatest financial stake does not satisfy
the Rule 23(a) criteria, the court must repeat the inquiry, this time
considering the plaintiff with the next largest financial stake, until it finds
a plaintiff who is both willing to serve and satisfies the requirements of Rule
23." (Emphasis in original. Footnotes omitted.)
The Appeals Court continued that the District Court "started on the right
foot by identifying the Cavanaugh group and each of its members as the
plaintiffs with the largest financial stake in the litigation. The court quickly
went off the statutory track, however, by failing to give effect to the
presumption that the Cavanaugh group would be lead plaintiff unless it failed to
satisfy Rule 23(a)'s typicality or adequacy requirement. ... The court
discounted the significance of the statutory presumption based on its
understanding that ``the presumption was an effort by Congress to encourage the
involvement of institutional investors in securities class actions.´´"
Judge Kozinsky, who wrote the opinion of the Appeals Court, added that
"This, of course, was error. Congress enacts statutes, not purposes, and
courts may not depart from the statutory text because they believe some other
arrangement would better serve the legislative goals."
Judge Wallace wrote a concurring opinion. He expressed his concerns arising out
of the fact that this case was before the Court of Appeals on a petition for
writ of mandamus, rather than as an appeal of an interlocutory order. He also
addressed the implications of this for the Appeals Court's scope of review at
this stage, and the affect upon review of final judgment.
Grassley and Baucus Organize Meeting on FSC/ETI Issue
9/16. Sen. Max Baucus (D-MT) and Sen. Charles Grassley (R-IA) wrote a letter [PDF]
to Rep. Bill Thomas (R-CA), Rep. Charles
Rangel (D-NY), USTR Robert Zoellick,
and Assistant Treasury Secretary Kenneth Dam inviting them to a legislative
executive working group meeting on September 24 on the Foreign Sales Corporation
(FSC) and Extraterritorial Income Exclusion Act (ETI) issue.
Baucus and Grassley are the Chairman and ranking Republican on the Senate Finance Committee, which has
jurisdiction of tax and certain trade matters. They wrote that "We firmly
believe that resolution of this issue will require a long term collaborative
effort, involving tax and trade policy makers in Congress and the
Administration. At the September 24 meeting, we expect to give directions to our
respective staffs to meet on a regular basis, with the goal of developing
specific recommendations that can win support from the Congress and the
Rep. Thomas and Rep. Rangel are the Chairman and ranking Democrat on the House Ways and Means Committee, which
has jurisdiction in the House on this issue.
The proposed meeting will be at 5:30 PM on September 24 in Room 211 of the
Dirksen Building, but will be closed to the public.
The World Trade Organization (WTO) held that
the FSC tax regime constitutes an illegal export subsidy. So, Congress passed
replacement legislation, the ETI, which the WTO also held to constitute an
illegal export subsidy. On August 30, the WTO issued a Decision of the
Arbitrator [46 pages in PDF] which authorizes the EU to impose $4 Billion in
countermeasures, or retaliatory tariffs.
Last Friday, September 13, the European Union published a document
[14 pages in PDF] titled "Notice relating to the WTO Dispute Settlement
proceeding concerning the United States tax treatment of Foreign Sales
Corporations (FSC) -- Invitation for comments on the list of products that could
be subject to countermeasures", which identified a list of products which
could be subject to retaliatory tariffs. The list includes many electronics
The U.S. can avoid the imposition of EU retaliatory tariffs by repealing the ETI.
Rep. Thomas introduced HR 5095,
the American Competitiveness and Corporate Accountability Act of 2002, on July
11, 2002, to address the WTO's rulings regarding the FSC and ETI. See also, Rep.
of HR 5095. However, no action has been taken on the bill. There is no
replacement legislation pending in the Senate.
Representatives Write Powell Re UNE Pricing
9/16. Rep. Billy Tauzin (R-LA), Rep. John Dingell (D-MI), and 102 other
member of the House of Representatives signed a letter [8
pages in PDF] to Federal Communications Commission
(FCC) Chairman Michael Powell
regarding unbundled network element (UNE) pricing.
The letter states that "The current system of federal pricing and
unbundling rules and state regulatory orders is eroding investment in
telecommunications networks, threatening the development of innovative new
services and retarding the development of full scale facilities based
competition envisioned by the Act. At the heart of this regulatory regime is the
requirement that Regional Bell Operating Companies provide elements of their
network, particularly combinations of elements, to other telecommunications
companies at prices far below their actual cost."
The letter argues that "While Congress prescribed the unbundled network
element form of competition, in no way did it intend to establish, nor even
foresee the possibility of establishing, a system that forces companies to
provide network elements at prices far below their cost. Such a regime
undermines the Act's goal of promoting facilities based competition by
discouraging telecommunications companies competing with the Bells from
investing in their own new networks. It simply makes no economic sense for these
companies to spend the billions of dollars necessary to invest in their own
networks if they can instead rent access to Bell company networks and resell
their service at an enormous profit."
Moreover, "The current regulatory system has also caused dramatic
reductions in capital spending by the Bell companies, who have neither the
incentive nor the financial ability to make investments in their networks that
end up subsidizing their direct competitors."
The letter concludes that "It is important for the FCC to address the
wholesale pricing issue in a manner that restores the proper incentives for
investment in the telecommunications sector."
Rep. Tauzin and Rep. Dingell are the Chairman and ranking Democrat on the House Commerce Committee, which
oversees the FCC. The bipartisan list of signatories includes many other members
of the Committee.
9/16. Treasury Secretary Paul O'Neill gave a speech in Portland,
Maine, regarding the economy. He said that "We've suffered through a
bursting stock market bubble, terrorist attacks on New York and Washington, and
discoveries of corporate fraud." However, "today it looks like we are
on the road to recovery -- a bumpy road, but the right road nonetheless. The
latest indicators look good." He cited, as an example, that "Capital
spending on equipment and software rose in the second quarter for the first time
in seven quarters and looks even better for the third quarter." He added
that "the most recent major step forward for our nation's prosperity is
passage of Trade Promotion Authority, which the President will use to open
international markets to US exports, creating jobs here at home."
9/16. World Trade Organization (WTO) Director
General Supachai Panitchpakdi gave a speech
in Geneva, Switzerland, regarding the report
by the UK Commission on Intellectual Property Rights titled "Integrating
Intellectual Property Rights and Development Policy".
Go to News from September 11-15, 2002.