News from January 26-31, 2003

Court Holds Export License Application Information is Exempt from FOIA Disclosure

1/31. The U.S. Court of Appeals (DCCir) issued its divided opinion in Wisconsin Project on Nuclear Arms Control v. Department of Commerce, a case involving a Freedom of Information Act (FOIA) request for information contained in export license applications. The Appeals Court held that such information is exempt from disclosure under the FOIA Exemption 3.

The FOIA, codified at 5 U.S.C. § 552, entitles any "person" to request and obtain records from government agencies. However, it contains an exemption for records which a federal statute exempts. The Export Administration Act (EAA) exempted application information from disclosure.

Subsection 552(b) provides, in part, that "This section does not apply to matters that are ... (3) specifically exempted from disclosure by statute (other than section 552b of this title), provided that such statute (A) requires that the matters be withheld from the public in such a manner as to leave no discretion on the issue, or (B) establishes particular criteria for withholding or refers to particular types of matters to be withheld".

There is, however, one significant problem with the Court's analysis. The FOIA exempts records for which there is a statutory exemption. The EAA is not a statute. It was once. But it has lapsed. Hence, while the majority's conclusion may be soundly grounded in Congressional intent, public policy, and homeland security concerns, its statutory analysis is problematic. The dissent mocked the majority's "Alice in Wonderland" logic.

Export Control Regime. The Department of Commerce, and its Bureau of Industry and Security (BIS), which is still often referred to as the Bureau of Export Administration (BXA), issues licenses for dual use items. These are things, including software, encryption products, and high performance computers, that might be used for either civilian or military or terrorist purposes.

The statutory authority of the BIS to operate this export control regime derives from the Export Administration Act. Congress first passed export control legislation in 1949. It has passed legislation revising the system several times since. However, the most recent statute, the Export Administration Act of 1979, lapsed in 1990. However, Presidents since then have exercised statutory authority to declare that an emergency exists, and, by executive order, extend the export control regime, absent a statute. This has enabled the BIS to continue to license export of dual use items.

If the BIS were compelled to disclose the contents of applications for export licenses, this would enable applicants' competitors, even foreign competitors, to obtain vital trade secrets of the applicants. It would put U.S. exporters at a competitive disadvantage. It would also create a disincentive to provide information in export applications. It would also enable foreign requestors, including those from states that support terrorism, to gain access to some of the information which the export control regime is designed to prevent them from obtaining. In short, FOIA disclosure of export license applications would undermine the export control regime.

Legislative Activity.  Congress continues to fund the operations of the BIS. Moreover, many members of Congress have repeatedly tried to pass a new statute.

For example, Sen. Mike Enzi (R-WY) sponsored S 149, the Export Administration Act of 2001, in the 107th Congress. The Senate passed the bill by a vote of 85-14, just prior to the terrorist attacks of September 11, 2001. The bill was also supported by the Bush administration. S 149 would have modernized export control laws. It would have eased restraints on most dual use products, such as computers and software, but increased penalties for violations. It also would have eliminated the use of MTOPS based limits to control the export of high performance computers.

Rep. David Dreier (R-CA) introduced HR 2568, an administration backed bill, in the House, on July 19, 2001. However, it did not pass in the House. Instead, HR 2581, sponsored by former Rep. Benjamin Gilman (R-NY), which is a much different export bill that is not supported by the administration, Rep. Dreier, and Sen. Enzi, passed the House International Relations Committee on August 1, 2001. The House then took no further action on any export control bill.

Rep. Dreier introduced HR 55 on January 7, 2003. It is essentially the Enzi proposal. However, Sen. Enzi has not yet reintroduced his bill in the 108th Congress. A member of Sen. Enzi's staff e-mailed TLJ on January 24 that Sen. Enzi is still working on a revised version of his bill for the 108th Congress, and remains "optimistic".

FOIA Request. The Wisconsin Project on Nuclear Arms Control (WPNAC) is a deceptive name. The group is based on K Street in Washington DC. Moreover, the FOIA request at issue in this case covers more than nuclear technology.

The WPNAC submitted a FOIA request to the BIS requesting "records of all license applications for dual-use commodities that the U.S. Department of Commerce approved, denied, suspended, or returned without action, for export to the People's Republic of China (including Hong Kong), India, Israel, Pakistan, and Russia, for the period beginning January 1, 1995 and extending to the present." (Parentheses in original.)

The BIS responded by providing certain aggregate reports, but asserted that more detailed information was exempt from disclosure under FOIA Exemption 3.

The WPNAC then filed a complaint is U.S. District Court (DC) against the DOC under the FOIA seeking an order compelling the DOC to produce records. The District Court ruled on summary judgment that the requested records are exempt under FOIA Exemption 3. The WPNAC then appealed.

Appeals Court. A three judge panel of the Court of Appeals affirmed, two to one. Judge Judith Rogers, writing for the Court, emphasized the presence of a clear Congressional intent to exempt export license applications from FOIA disclosure.

She wrote that "The Wisconsin Project contends that the Department may not withhold the data, and the logic of its argument is simple: Exemption 3, by its text, requires that a withholding ``statute´´ be in place;  because the EAA was not in effect either when the exporters submitted their application data to the Department or when the Wisconsin Project requested that data from the Department under FOIA, no statute exists to justify the Department's withholding of the requested data. The Wisconsin Project's formalistic logic, however, misses the bigger picture."

She argued that "the touchstone of the Exemption 3 inquiry is whether the statute ``is the product of congressional appreciation of the dangers inherent in airing particular data and incorporates a formula whereby the administrator may determine precisely whether disclosure in any instance would pose the hazard that Congress foresaw.´´" (Citing  American Jewish Congress v. Kreps, 574 F.2d at 624 (DC Cir, 1978).)

She concluded that "Congress's actions throughout the long history of the EAA evince a clear appreciation of the dangers inherent in exposing export application data to public view. Since it was first enacted by Congress, the EAA has always contained a confidentiality provision that permits the Department to withhold export application data."

Judge Stephen Williams joined.

Kenneth JusterKenneth Juster (at right), the Under Secretary of Commerce in charge of the BIS, stated in a release that "We welcome this decision because the Department’s ability to protect this information is important to our national and economic security. Public disclosure of such information could assist proliferating countries or terrorists in the development of weapons of mass destruction, and could also damage the competitiveness of U.S. business".

Dissent. Judge Raymond Randolph wrote a dissenting opinion. He did not contest that if the Export Administration Act were to be re-enacted by Congress, Exemption 3 would bar disclosure. Nor did he dispute that the intent of Congress was to bar disclosure. Nor did he dispute that disclosure would be bad policy. Rather, he argued that judges should merely interpret statutes. And at this task, he had a field day.

He did not go so far as to argue, as might Justice Scalia, that legislative intent is never applicable to judicial interpretation. He merely argued that it is not applicable when there is no underlying statute to interpret. He likened the majority's approach to a scene from Alice in Wonderland. He wrote that "The statute has expired but its legislative history is good law. So say my colleagues, in a most curious opinion."

Randolph continued that "Congress at one time wanted the Commerce Department to keep the information secret, and so it shall remain. No matter that the Freedom of Information Act -- a real law -- expresses Congress's intent to require a statute exempting the documents from disclosure when they are sought or about to be released."

"It never occurred to me, or to the Framers of the Constitution, that the Executive could by the stroke of a pen convert expired legislation into an existing statute," wrote Randolph.

"In the end all the majority can come up with is some free-floating congressional intent about the meaning of a statute that no longer exists. Alice once encountered a comparable phenomenon: `` 'Well! I've often seen a cat without a grin,' thought Alice; 'but a grin without a cat! It's the most curious thing I ever saw in all my life!'´´ "

While the Appeals Court was divided, Supreme Court review is unlikely. It only very rarely grants certiorari in FOIA cases.

Perhaps also, there is an unstated theme in this case, as in many FOIA cases. That is, for many officials and judges the passage of the FOIA was one of those unfortunate actions taken in the immediate aftermath of the Nixon presidency, the Watergate scandals, the Viet Nam war, and a series of embarrassing disclosures about CIA operations, when there was an strong distrust of executive authority, and an effort to weaken executive branch authority, especially in the areas of intelligence and national defense. Hence, an idealistic Congress passed a FOIA that was far too broad. Many federal judges, particularly those in Washington DC, have been reluctant ever since to accord it the same status as other statutes -- or in the present case, expired statutes.

Law Professor Submits Apocalyptic Declaration in RIAA v. Verizon

1/31. Peter Swire, who was Chief Counselor for Privacy in the Office of Management and Budget (OMB) late in the Clinton administration, submitted a sworn declaration in RIAA v. Verizon in support of Verizon. He is now a law professor at Ohio State University.

Swire asserts that "we can expect a large and geometrically growing number of abusive subpoenas" submitted by "fly by night" requestors seeking formation for the purposes of marketing, identity theft, and stalking. However, Swire does not assert in his declaration that any such subpoena has yet been been requested. See also, Swire press release.

On January 21, 2003, the U.S. District Court (DC) issued its opinion ruling that copyright holders can obtain subpoenas pursuant to 17 U.S.C. § 512(h) that require Internet Service Providers (ISPs) to reveal the identities of their customers who infringe copyrights on peer to peer filing sharing systems. Verizon had argued that § 512(h) subpoenas were only available with respect to infringers who stored infringing content on the servers of the ISP. While the Recording Industry Association of America (RIAA) could obtain a subpoena by other means, this holding is significant because § 512(h) provides a fast and efficient means of obtaining subpoenas for ISP's information that identifies infringers. In particular, it requires no notice to, or opportunity to be heard by, the alleged infringer. See, TLJ story titled "District Court Rules DMCA Subpoenas Available for P2P Infringers", January 21, 2003.

Swire's document is a declaration made under penalty of perjury. However, it is essentially legal argument, and speculation as to how people might make use of § 512(h) subpoenas in the future. Also, Professor Swire's timing could be characterized as late. The District Court has already ruled against Verizon, and the appeals process has begun.

Swire stated in his declaration that "Given the minimal showing required for ``good faith´´ subpoenas under Section 512(h), the scope for arguably valid subpoenas increases further. The amicus briefs cite numerous examples of questionable and potentially abusive subpoenas. Other questionable Section 512(h) subpoenas could easily be conceived, such as a person claiming copyright infringement (e.g., of a person's writing or statement) when in fact they are seeking to discover the identity of a person they accuse of defamation. The identity of individuals subject to a defamation claim today must go through the John Doe process, but a critic that cites to some actual text attributed to another person might now be subject to a ``good faith´´ Section 512(h) subpoena."

Swire continued that "The potential for bad faith subpoenas, however, is even more vast. Based on my experience with the Internet, we can expect a large and geometrically growing number of abusive subpoenas that will be impossible to distinguish from legitimate subpoenas from copyright holders. For anyone who wants to reveal a speaker's identity, it will be easy to craft a legitimate looking subpoena that Verizon will be obliged to honor ``expeditiously.´´ Many of these abusive subpoenas will come from individuals in the United States."

He added that "many of the abuses could well come from offshore organizations that are beyond the reach of U.S. courts. The actual obtaining and service of such subpoenas could be done by fly-by-night operators in the United States that would open and then close Post Office boxes as quickly as possible. In short, Section 512(h) subpoenas could well become the New Spam, flooding the in-boxes of ISPs, with legitimate and illegitimate subpoenas jumbled together indistinguishably."

He concluded that "The most common use may be by any web site that wants to learn the identity of those who visit its site, just for marketing purposes or for more nefarious reasons, including identity theft, fraud, or stalking. Porm sites, gambling sites or other sites that would cause embarrassment, could track down anonymous surfers and demand payment not to reveal the user's identity under the pretext of enforcing a ``copyright´´ in the content of the site."

§ 512 subpoenas require the submission of a sworn statement. Hence, the bad faith subpoena requests described by Professor Swire would entail perjury by the signer, and probably subornation of perjury by others. Moreover, as Verizon has done, the ISP can seek judicial relief.

FCC and NTIA Execute Memorandum of Understanding Re Spectrum

1/31. The Federal Communications Commission (FCC) and the National Telecommunications and Information Administration (NTIA) announced that they executed a Memorandum of Understanding (MOU) [3 pages in PDF] regarding spectrum coordination. See, NTIA release and FCC release.

The NTIA has spectrum management responsibilities with respect to spectrum allocated for federal government, including military, use. The FCC has spectrum management responsibilities with respect to spectrum allocated for non federal use.

The MOU states that the FCC and NTIA will meet at least twice per year to conduct joint planning. They are obligated by statute to do this.

The MOU makes no reference to spectrum rights, secondary markets for spectrum, unlicensed spectrum, WiFi, Third Generation (3G) wireless services, the FCC Spectrum Policy Task Force's (SPTF) recent report, or many other current spectrum issues. However, the MOU states that the two agencies will discuss "the actions necessary to promote the efficient use of the spectrum, including spectrum management techniques to promote increased shared use of the spectrum that does not cause harmful interference, as a means of increasing commercial access".

For more information, contact Lisa Gaisford at 202-418-7280 or, or Clyde Ensslin at or 202 482-7002.

DC Circuit Adopts "Somewhere Between" Standard in Ruggiero Case

1/31. The U.S. Court of Appeals (DCCir) issued its en banc opinion in Ruggiero v. FCC, a case involving free speech and broadcasting. A divided en banc panel reversed the divided opinion of the three judge panel, which had ruled in favor of Ruggiero.

The specific dispute here -- whether Greg Ruggiero, as a former bandit broadcaster, can get a low power FM license -- is not very important. However, appeals courts are obligated to explain the legal basis of their holdings. Hence, this case was an occasion for the Appeals Court to elaborate on First Amendment free speech limitations upon the Federal Communications Commission's (FCC) authority to regulate broadcast speech. Yet, the en banc panel, like the three judge panel before it, articulated an outcome, but no clear explanation.

The Radio Broadcasting Preservation Act of 2000 (RBPA) permanently prohibits anyone who ever "engaged in any manner in the unlicensed operation of any station in violation of ... the Communications Act of 1934" from obtaining a low power FM radio license from the FCC. Greg Ruggiero is a former pirate broadcaster. He later sought a low power FM license from the FCC. He argued that the statute and the FCC's implementing rules violate his First Amendment rights.

Ruggiero asserts that the FCC's denial constituted a content based restraint on speech, and therefore, the Court should apply an intermediate scrutiny standard, such as that articulated in FCC v. League of Women Voters, 468 U.S. 364 (1984). The FCC asserted that its decision was content neutral, and therefore, the Court should apply a minimal scrutiny standard, such as that articulated in FCC v. National Citizens Committee for Broadcasting, 436 U.S. 775 (1978).

The en banc panel rejected both positions, but remained unclear as to what standard does apply. It wrote that "the appropriate standard of review occupies a ground somewhere between the minimal scrutiny advocated by the Commission and the intermediate scrutiny proposed by Ruggiero".

The Appeals Court did conclude that the restraint in this case is content neutral. That is, applicants such as Ruggiero are rejected because of their prior violation of law, not because of the content of their speech. However, the Court rejected minimal scrutiny. It wrote that "Minimal scrutiny is appropriate to the indirect effect upon speech that may
attend ``structural´´ regulation of the broadcast industry, such as the newspaper broadcast ownership rules. The Court added that these rules "merely constrained the newspaper publisher's choice of the community in which to own a radio or television station; it did not prohibit the publisher from broadcasting altogether". In contrast, the RBPA prevents the speaker from broadcasting anywhere, and is thus not merely "structural".

So, what exactly is the "somewhere between" standard? The Court wrote that "We need not be more precise".

It did add, however, that "because we conclude that the character qualification provision is reasonably tailored to satisfying a substantial government interest, and that is surely enough to uphold a prohibition upon broadcast speech that, although complete within its limited sphere, is in no respect content-based."

Judge Tatel, who wrote the majority opinion for the three judge panel, wrote a lengthy dissent to the en banc opinion. He wrote that "The question presented here is whether unlicensed microbroadcasters, many of whom have already been punished for their misdeeds, may be subjected to a unique and draconian sanction that automatically and forever bars them -- unlike any other violator of the Communications Act or regulations -- from applying for low power licenses regardless of either the circumstances of their offenses or evidence that they can nevertheless operate in the public interest. Because this double standard is indefensible, because the statute's automatic lifetime ban restricts speech, and because the court, though purporting to embrace this circuit's more than minimal scrutiny standard, actually subjects the statute to the minimal scrutiny reserved for non-First Amendment cases, I respectfully dissent."

Judge Randolph wrote a concurring opinion. He argued that Ruggiero lacked standing. Judge Rogers, who had joined in Judge Tatel's opinion on the three judge panel, also wrote a concurring opinion. This time, he agreed with Judge Randolph that Ruggiero lacked standing.

What is clear, absent the unlikely possibilities of either Supreme Court review or a change of heart in the Congress and FCC, is that Ruggiero will not get a low power FM license. And, similarly situated applicants will not get licenses either. But, this is a very small set of people. Perhaps, Ruggiero could develop a web site, and stream, rather than broadcast, his speech. One still does not need an FCC license to webcast.

See also, stories titled "Appeals Court Overturns Ban on Licensing Former Pirate Broadcasters" in TLJ Daily E-Mail Alert No. 365, February 11, 2002; and "DC Circuit Grants Rehearing En Banc in Ruggiero Case" in TLJ Daily E-Mail Alert No. 430, May 13, 2002.

DC Circuit Rules in 21st Century Telesis v. FCC

1/31. The U.S. Court of Appeals (DCCir) issued its opinion in 21st Century Telesis v. FCC, dismissing the petition for review in part, and denying it in part.

The Federal Communications Commission (FCC) canceled 19 broadband licenses held by 21st Century Telesis following its failure to make timely payments on its licenses. 21st Century petitioned for review of FCC orders determining that it was provided adequate notice before cancellation of its licenses, and declining to consider its late filed arguments that the automatic cancellation rule exceeds the FCC's statutory authority and as applied violates due process.

The Court of Appeals ruled that "Because 21st Century's challenges to the automatic cancellation of its C block licenses are either moot or unripe, 21st Century lacks standing to bring those challenges, and we dismiss that part of the petition. Because 21st Century fails to show with respect to its F block licenses either that the Commission abused its discretion under 47 U.S.C. § 405 and 47 C.F.R. § 1.106(f) by declining to consider late filed hearing arguments, thus making it improper for the court to address those contentions, or that the Commission failed to provide sufficient notice of 21st Century's payment obligations, we deny the petition in part."

6th Circuit Rules in APJ v. Philips

1/31. The U.S. Court of Appeals (6thCir) issued its opinion in APJ v. North American Philips, a contract dispute involving the marketing of semiconductor chips. The Appeals Court affirmed the District Court's grant of summary judgment to Philips.

North American Philips (Philips) makes semiconductors. General Motors (GM) purchases semiconductors for use in its cars, for, among other things, cruise control systems. Philips wanted to sell semiconductors to GM. APJ Associates (APJ) is a manufacturers representative firm. Philips contracted with APJ to have APJ assist Philips in developing a business relationship with GM. The contract provided the APJ would receive a commission on sales. The contract also provided that either party could terminate the contract with 30 days notice, and that no commission would be payable after termination of the contract. APJ worked on behalf of Philips for over two years, arranging meetings and acting as a liaison between Philips and GM. Then Philips terminated the contract. Then Philips began selling semiconductors to GM, which have been installed in GM cars, without paying commissions to APJ.

APJ filed a complaint in U.S. District Court (EDMich) against Philips alleging fraudulent inducement, promissory estoppel, and violation of the Michigan Sales Representative Act. The District Court granted summary judgment to Philips, and APJ appealed. The Appeals Court affirmed. APJ's problem was that it negotiated a dumb contract, and Philips took advantage of this. The Court wrote that APJ's "subjective expectations were thwarted by a bad bargain, not by fraud or reliance on an oral contract".

Tech Crime Report

1/31. The U.S. Attorney's Office (NDCal) announced that it filed a criminal complaint against Krsna Lev-Twombly alleging distribution of opium poppy in violation of 21 U.S.C. § 841(a)(1). The USAO stated in a release that Twombly, who has been arrested, sold the opium poppies on the eBay auction web site.

1/31. Robert Keppel was sentenced by the U.S. District Court (WDWash) to a term of incarceration of one year for theft of trade secrets in violation of 18 U.S.C. § 1832(a)(2). Keppel sold "cheat sheet" answers to Microsoft's exams for qualification as a Microsoft Certified Systems Engineer (MCSE) and Microsoft Certified Solution Developer (MCSD). The USAO stated in a release that "When the tests are administered, there are two separate ``banner´´ pages that the test-taker encounters before the test starts.  These ``banner´´ pages require the test-taker to agree to certain terms regarding the test material including an agreement not to copy or release the test material.  By the terms of its contracts with the testing sites, MS does not allow the test material outside of the testing locations for any reason. Consequently, the sale and distribution of KEPPEL's ``cheat-sheets´´ violated Microsoft copyright and constituted a conversion of Microsoft proprietary information for personal gain." The USAO further stated that Keppel received over $750,000 from the sale  of his "cheat sheets" through a web site. It further states that he used the proceeds to buy, among others things, a Ferrari automobile. The court also ordered the forfeiture of the Ferrari.

People and Appointments

1/31. Jo-Anne Barnard was named Chief Financial and Chief Administrative Officer of the U.S. Patent and Trademark Office (USPTO). See, USPTO release.

1/31. BellSouth filed a complaint in Fulton County Superior Court in Atlanta, Georgia seeking injunctive relief preventing Gary Forsee from taking employment from Sprint. The Court issued an ex parte temporary restraining order (TRO) on January 31. Sprint stated in a release that "William T. Esrey, chairman and chief executive officer, is expected to stay as chairman for a transition period. ... Esrey and Ronald T. LeMay, president and chief operating officer, remain in their current positions with Sprint."

More News

1/31. The Federal Communications Commission (FCC) extended its deadline to submit applications for membership on the FCC's Consumer Advisory Committee. For more information, contact Scott Marshall at 202 418-2809

1/31. Dane Snowden, Chief of the Federal Communications Commission's (FCC) Consumer and Governmental Affairs Bureau, announced that "We expect to release our rules on telemarketing in late spring" and "we will work closely with the FTC to craft rules that protect the privacy of the American consumer without penalizing legitimate telemarketers". See, FCC release [PDF].

1/31. The U.S. Patent and Trademark Office (USPTO) announced that the USPTO and the Patent Office Professional Association (POPA), a union representing 3,500 patent examiners, have reached an agreement regarding the USPTO's telework program. The USPTO stated in a release that "Under the program, approximately 700 senior examiners, representing about 60% of the agency's top-level examiners, are eligible to work from home one day a week. Eligible participants must be performing at the fully successful level and be in full compliance with all of the agency’s ethical, conduct and confidentiality standards."

1/31. The Office of the U.S. Trade Representative (USTR) announced that the Free Trade Area of the Americas (FTAA) Ministerial Meeting will take place on November 20-21, 2003, in Miami, Florida. See, USTR release.

1/31. The California Court of Appeal (6th) issued its opinion [MS Word] in Apple Computer v. County of Santa Clara Assessment Appeals Board, a dispute regarding procedure for claiming overpayment of local property taxes.

Verizon Seeks Stay of Order Regarding RIAA Subpoena

1/30. Verizon filed a motion with the U.S. District Court (DC) in RIAA v. Verizon requesting that the Court stay its order that Verizon comply with a subpoena directing it to provide the Recording Industry Association of America (RIAA) the identity of a subscriber to its internet access service while its appeals to the U.S. Court of Appeals (DCCir). See, Verizon release.

On January 21, the District Court issued its Memorandum Opinion, ruling that copyright holders can obtain subpoenas pursuant to 17 U.S.C. § 512(h) that require Internet Service Providers (ISPs) to reveal the identities of their customers who infringe copyrights on peer to peer filing sharing systems. Verizon had argued unsuccessfully that § 512(h) subpoenas are only available with respect to infringers who store infringing content on the servers of the ISP. See also, TLJ story titled "District Court Rules DMCA Subpoenas Available for P2P Infringers", January 21, 2003.

Verizon stated in a release that "The recording industry brought this case as a 'test case' of its aggressive legal theories. We are seeking a stay so that the Court of Appeals can issue a final ruling on the critical legal issues before we are required to turn over our subscriber's identity."

Representatives Write FASB Re Accounting for Employee Stock Options

1/30. Rep. Anna Eshoo (D-CA), Rep. David Dreier (R-CA), and other Representatives wrote a letter to the Financial Accounting Standards Board (FASB) "to express our strong opposition to any proposal which would mandate the expensing of broad-based stock option plans".

Rep. Anna EshooRep. Eshoo (at right) represents a Silicon Valley district. She and 39 others wrote that "We do not wish to set accounting standards. However, in light of the proposed International Accounting Standards Board (IASB) standard that would mandate the expensing of employee stock options, and FASB's close coordination with IASB, we believe it is important to express our strong concerns about an approach that would limit transparency, truthfulness and accuracy in financial reporting, precisely at a time when America and its investors need these qualities the most. The public interest will not be served by an accounting standard that results in the disclosure of inaccurate corporate financial information and a flawed picture of company performance."

The letter continues that "It is apparent to us that a mandatory expensing standard lacks a clear and widely accepted accounting rationale. Accounting experts have vastly divergent views as to whether employee stock options should be accounted for as a cost to be deducted from earnings. Many respected, independent experts find that the "cost" of employee stock options is already accounted for and disclosed to investors through diluted earnings per share. Investors would be better served by full and complete disclosure of this diluted earnings per share number.

The letter also addresses the impact that expensing would have on the economy. It states that "mandatory expensing would effectively destroy broad-based stock option plans, which enhance financial opportunities for workers at all levels, stimulating economic growth and productivity.  Broad-based employee stock options plans play a vital role in America's economy, helping employees, shareholders, and companies alike.

The Representatives who signed the letter are David Dreier, Anna G. Eshoo, Darrell Issa , Jay Inslee, Joseph Crowley, Adam Smith, Dennis Moore, Zoe Lofgren, Carolyn McCarthy, Gary Miller, Cal Dooley, Jerry Weller, Pete Sessions, Ron Kind, Jennifer Dunn, Mike Honda, Rick Boucher, Bob Goodlatte, Lamar Smith, Tom Davis, J.D. Hayworth, Jane Harman, Doug Ose, David Wu, Joe Barton, Rick Larsen, Amo Houghton, Dennis Cardoza, Steve Israel, George Nethercutt, Darlene Hooley, John Boehner, Mike Simpson, Greg Walden, Butch Otter, Jeff Flake, Chris Cannon, John Carter, Heather Wilson, and Bob Etheridge.

GAO Reports on Government Management Challenges and Program Risks

1/30. The General Accounting Office (GAO) released a series of reports on major executive branch agencies titled "Major Management Challenges and Program Risks". Among the many issues addressed are the export controls pertaining to high performance computers and semiconductors, the FBI's cyber security center, the FBI's antiquated information technology, and threats to critical infrastructures.

The report [34 pages in PDF] regarding the Department of Commerce, which is titled "Major Management Challenges and Program Risks: Department of Commerce", addresses, among other things, the export control regime handled by the Bureau of Industry and Security (BIS).

This report reviews prior GAO reports which have "identified numerous problems in the administration of this system". For example, it states that "Our August 2002 report on high performance computers found that the President’s justification for raising export control thresholds did not fully meet the requirements of law and was based on inaccurate information provided by the computer industry and an inadequate assessment of national security issues. Thus, we concluded that the decision to raise the export control threshold was analytically weak and premature, given market conditions."

The report also states that "U.S. agencies had not conducted the analyses necessary to create a sound basis for its licensing decisions on exports of advanced semiconductor manufacturing equipment to China." It elaborated that "U.S. policies and practices to control the export of advanced semiconductor technology to China are unclear and inconsistent, leading to uncertainty among U.S. industries about the rationale for some licensing decisions. We concluded that the current export control system needs to be reexamined because it has not slowed China’s ability to obtain billions of dollars worth of advanced semiconductor equipment. Consequently, we recommended that the Secretaries of Commerce, Defense, and State reassess, document, and update U.S. policy and practices on exporting semiconductor manufacturing equipment and materials to China."

The GAO's report [54 pages in PDF] regarding the Department of Justice (DOJ) covers, among other things, the FBI's National Infrastructure Protection Center (NIPC), which coordinates the federal government's response to computer based incidents.

This report reviews a prior GAO report, in which the GAO found that "the development of NIPC’s analysis and warning capabilities were limited by multiple factors, including the lack of a comprehensive governmentwide or national framework for promptly obtaining and analyzing information on imminent attacks, a shortage of skilled staff, the need to ensure that NIPC does not raise undue alarm for insignificant incidents, and the need to ensure that sensitive information is protected. We recommended that NIPC develop a comprehensive written policy for establishing analysis and warning capabilities."

This DOJ report also addresses the FBI's "antiquated computer hardware and software and the lack of a fully functional E-mail system" which "hamper the FBI’s ability to share time sensitive information internally and with other intelligence and law enforcement agencies."

The GAO also released a report [34 pages in PDF] titled "High-Risk Series: Protecting Information Systems Supporting the Federal Government and the Nation's Critical Infrastructures".

Sen. McCain Introduces Telecom Diversity Bill

1/30. Sen. John McCain (R-AZ), the Chairman of the Senate Commerce Committee, introduced The Telecommunications Ownership Diversification Act [25 pages in PDF], a bill that would amend the Internal Revenue Code to provide for a deferral of tax on gain from the sale of telecommunications businesses in specific circumstances or a tax credit and other incentives to promote diversity of ownership in telecommunications businesses.

Sen. John McCainSen. McCain (at right) stated that "this bill would encourage ownership by individuals who are currently underrepresented in the ownership of telecommunications companies, including minorities and women, by making carefully crafted changes in the tax code."

He elaborated that "It would provide sellers of telecommunications assets a tax deferral when those assets are bought for cash by certain small businesses. It would also provide investors an incentive to consider certain small businesses by providing a reduction in the tax on gains from investment in these companies." See, McCain statement [PDF].

Federal Communications Commission (FCC) Chairman Michael Powell stated in a release [PDF] that "Senator John McCain today introduced legislation that uses a tax-based incentive system, designed to encourage and facilitate new entry, including entry by women and minorities, into the telecommunications industry. This legislation is well crafted and much needed. I wholeheartedly support this effort. I again thank Senator McCain for consistently showing leadership in this important effort. Like him, I believe it is essential that we promote greater inclusiveness in our media and communications delivery sectors."

Robert Sachs, P/CEO of the National Cable and Telecommunications Association (NCTA) stated in a release that the cable industry supports Sen. McCain's bill. He stated that "we look forward to working with Senator McCain and others to enact this much needed legislation. As communications media converge, minority and economically disadvantaged businesses should be able to fully participate in this vital sector of our economy."

The bill would apply to "telecommunications businesses" which it defines as "a business which, as its primary purpose, engages in electronic communications and is regulated by the Federal Communications Commission pursuant to the Communications Act of 1934, including a cable system ..., a radio station ..., a broadcasting station providing television service ..., a provider of direct broadcast satellite service ..., a provider of video programming ..., a provider of commercial mobile services ..., a telecommunications carrier ..., a provider of fixed satellite service, a reseller of the communications service or commercial mobile service, or a provider of multichannel multipoint distribution service." (Citations omitted.)

This enumeration of covered businesses does not expressly include internet service providers, or other internet based businesses. The bill's statement of findings and purposes, however, does reference internet businesses. It states that "Current trends in the telecommunications industry show that there is increasing convergence among various media, including broadcasting, cable television, and Internet-based businesses, that provide news, information, and entertainment."

Senate Commerce Committee Holds Hearing on Radio Ownership

1/30. The Senate Commerce Committee held a hearing to examine media ownership, focusing on consolidation in the radio industry. The Federal Communications Commission (FCC) is currently reviewing its media ownership rules.

Sen. John McCain (R-AZ), the Chairman of the Committee, said in his opening statement [PDF] that "I continue to believe that anachronistic government regulations that do not reflect today's multimedia marketplace should be thoroughly reviewed by the FCC and repealed or modified wherever appropriate."

He added that "I believe that, wherever possible, we should look to market-based approaches to ensure there is diversity in media ownership. Later today, I will reintroduce the "The Telecommunications Ownership Diversification Act." The bill provides a tax deferral and other market-based incentives designed to ensure that our tax laws do not disadvantage small businesses that may be owned by women and minorities who can help to further viewpoint diversity in media."

Sen. Ernest HollingsSen. Ernest Hollings (D-SC), the ranking Democrat on the Committee, stated in his opening statement that "the core values of competition, diversity, and localism that have long served as fundamental pillars of our democracy, are today under attack." He complained about "FCC Commissioners who seem intent on relaxing or eliminating many of the existing ownership rules without regard to the tremendous consolidation that has already occurred."

He concluded that "while investors on Wall Street have profited handsomely from these mergers, consumers on Main Street have suffered. Radio consolidation has contributed to a 34% decline in the number of owners, a 90% rise in the cost of advertising rates, a rise in indecent broadcasts, and the replacement of local news and community programming with remote "voice tracking" and syndicated hollering that ill-serves the public interest."

Sen. Russ Feingold (D-WI), who sponsored S 2691, the Competition in Radio and Concert Industries Act of 2002, in the 107th Congress, stated in his opening statement that "the rapid consolidation in ownership of the radio and concert industry has made it difficult for individuals, artists, and organizations to find outlets to express their creativity and promote diversity."

He wrote that "My legislation prohibits those who own radio stations and concert promotion services or venues from leveraging their cross-ownership to hinder competition in the industry. For example, if an owner of a radio station and a promotion service hinders access to the airwaves of a rival promoter or artist, then the owner would be subject to penalties."

Rep. Howard Berman (D-CA) wrote in prepared testimony [14 pages in PDF] for the Committee that "I am deeply concerned that radio industry consolidation and related activities are hurting songwriters, musicians, recording artists, concert promoters, radio listeners, and the music community as a whole. I believe the negative effects of radio industry consolidation merit serious congressional scrutiny, and should spur investigations by the Department of Justice (DOJ) and Federal Communications Commission (FCC)." He represents a southern California district that is home to many members of the music industry.

He said that while the DOJ has taken no action regarding broadcasters, "The Bush DOJ has indicated, through its ongoing investigation of the Pressplay and MusicNet ventures, that it is interested neither the DOJ or FCC have, to my knowledge, conducted investigations. in publicly pursuing a lengthy investigation of speculative antitrust concerns that may be raised by new entities in the as-yet infinitesimally small market for legal online music. If it has such grave concerns about antitrust issues related to the music industry, why isn’t it willing to pursue allegations of actual anticompetitive behavior in the related radio and concert promotion industries?"

Edward Fritts of the National Association of Broadcasters (NAB) stated that "As radio deregulation has moved forward, radio's critics have tended to overstate the effects of industry trends. Compared to other entertainment choices, radio is perhaps the LEAST consolidated sector. The Hollywood movie studios, the record companies, Direct Broadcast Satellite, Cable Systems, newspapers -- even the Internet -- all have more of their revenue share concentrated among the top ten owners than does radio."

See also, prepared testimony of witnesses: Lowry Mays (Ch/CEO of Clear Channel Communications), Edward Fritts (P/CEO of the NAB), Don Henley (singer and songwriter), Robert Short (President of Short Broadcasting), and Jenny Toomey (Executive Director of the Future of Music Coalition).

People and Appointments

1/30. The Senate Finance Committee unanimously approved the nomination of John Snow to be Secretary of the Treasury on Thursday morning, January 30. On Thursday evening the full Senate approved the nomination. He replaces Paul O'Neill, who resigned last month.

1/30. Eva Wohn was named head of the Cellular Telecommunications & Internet Association's (CTIA) State Affairs Division, a new department within Government Affairs that will handle state and local government issues. See, CTIA release.

1/30. The Senate confirmed Gordon England to be Deputy Secretary of Homeland Security.

More News

1/30. President Bush formally notified the Congress of his intent to enter into free trade agreements (FTA) with Chile and Singapore. He wrote in his notice regarding Chile that "This is an agreement for the economy of the 21st century. Inventors, performers, authors, and creative enterprises in the United States and Chile will benefit from enhanced copyright, patent, trademark, trade secret, and other intellectual property rights protection. The Agreement also contains state of the art protections for digital products and electronic commerce". See also, President's notice regarding Singapore, the U.S. Trade Representative's (USTR) December 2002 summary [PDF] of the Singapore FTA, and the USTR's December 2002 summary [PDF] of the Chile FTA.

1/30. The Cato Institute released a report titled "Free Trade, Free Markets: Rating the 107th Congress" by Daniel Griswold. See, executive summary and full report [PDF]. The study is based on 12 roll call votes in the Senate, and 18 roll call votes in the House on trade barrier and trade subsidy issues. The report also provides scores for Representatives and Senators. The report classifies Representatives and Senators according to whether they are free traders (oppose both trade barriers and trade subsidies), interventionists (favor both barriers and subsidies), internationalists (oppose barriers and support subsidies), or isolationists (support barriers and oppose subsidies). The report concludes that "Despite all the hype about globalization and the supposed universal triumph of free-market policies, governments around the world, including that of the United States, continue to intervene in the flow of goods, services, people, and capital across international borders."

1/30. The Copyright Office (CO) published a notice in the Federal Register regarding a Notice of Proposed Rulemaking (NPRM) relating to proposed regulations that set rates and terms for the use of sound recordings by preexisting subscription services for the period January 1, 2002 through December 31, 2007. The deadline for comments is March 3, 2003. For more information, contact David Carson (General Counsel) or Tanya Sandros (Senior Attorney, Copyright Arbitration Royalty Panel) at 202 707-8380. See, Federal Register, January 30, 2003, Vol. 68, No. 20, at Page 4744-4747.

1/30. The Department of Agriculture's Rural Utilities Service (RUS) published a notice in the Federal Register regarding its final rule establishing the Rural Broadband Access Loan and Loan Guarantee Program as authorized by the Farm Security and Rural Investment Act of 2002 (Public Law 101-171). Section 6103 of the Act provides for loans and loan guarantees to fund the cost of construction, improvement, or acquisition of facilities and equipment for the provision of broadband service in eligible rural communities. This rule takes effect on January 30. For more information, contact Roberta Purcell at 202 720-9554. See, Federal Register, January 30, 2003, Vol. 68, No. 20, at Pages 4684-4692.

FCC Amends Cable Home Wiring Rules

1/29. The Federal Communications Commission (FCC) released its First Order on Reconsideration and Second Report and Order [59 pages in PDF] in its proceeding titled "In the Matter of Telecommunications Services Inside Wiring Customer Premises Equipment In the Matter of Implementation of the Cable Television Consumer Protection and Competition Act of 1992; Cable Home Wiring". This is CS Docket No. 95-184 and MM Docket No. 92-260.

This document pertains to the FCC's rules that are intended to foster opportunities for multichannel video programming distributors (MVPD) to provide service in multiple dwelling unit buildings (MDU) by establishing procedures regarding how and under what circumstances the existing cable home run wiring would be made available to alternative video service providers.

The document states that the FCC now amends its rules "to provide (1) that, in the event of sale, the home run wiring be made available to the MDU owner or alternative provider during the 24-hour period prior to actual service termination by the incumbent, and (2) that home run wiring located behind sheet rock is physically inaccessible for purposes of determining the demarcation point between home wiring and home run wiring."

This document also states that "We decline to restrict exclusive contracts for the provision of video services in MDUs, finding that the record does not demonstrate a need for government intervention with marketplace forces and privately negotiated contracts. Similarly, we decline to ban perpetual contracts for the provision of video services in MDUs or subject such contracts to a fresh look window."

Commissioner Kevin Martin wrote a statement in which he dissented in part. He wrote that "I am not persuaded that we have the statutory authority to regulate ``home run´´ wiring. .. I question whether these general provisions authorize the Commission to regulate the disposition of that part of a cable wire that runs from the demarcation point in a multiple dwelling unit to the point at which the wiring becomes devoted to an individual subscriber. Moreover, the interpretation of these provisions in this item offers no limitation on our authority, and thus I am not sure what this interpretation would not allow us to do."

SEC Files Complaint Against KPMG and Partners Re Xerox Audits

1/29. The Securities and Exchange Commission (SEC) filed a civil complaint in U.S. District Court (SDNY) against KPMG and four KPMG partners, Joseph Boyle, Michael Conway, Anthony Dolanski, and Ronald Safran, alleging securities fraud in connection with their auditing of Xerox's accounting. See also, SEC release.

The complaint alleges that KPMG and "certain KPMG partners permitted Xerox Corporation (``Xerox´´) to manipulate its accounting practices and fill a $3 billion ``gap´´ between actual operating results and results reported to the investing public from 1997 through 2000. The fraudulent scheme allowed Xerox to claim it met performance expectations of Wall Street analysts, to mislead investors and, consequently, to boost the company's stock price. The KPMG defendants were not the watch dogs on behalf of shareholders and the public that the securities laws and the rules of the auditing profession required them to be."

The complaint continues that "Instead of putting a stop to Xerox's fraudulent conduct, the KPMG defendants themselves engaged in fraud by falsely representing to the public that they had applied professional auditing standards to their review of Xerox's accounting, that Xerox's financial reporting was consistent with Generally Accepted Accounting Principles (``GAAP´´) and that Xerox's reported results fairly represented the financial condition of the company. There was no watchdog at Xerox. KPMG's bark sounded no warning to investors; its bite was toothless."

The four count complaint alleges (1) violations of Section 17(a) of the Securities Act and Section 10(b) and Rule 10b-5 of the Exchange Act, (2) violation of Section 10A of the Exchange Act, (3) aiding and abetting violations of Section 13(a) of the Exchange Act and Exchange Act Rules 13a-1, 13a-13, and 12b-20, and (4) aiding and abetting violations of Section 13(b) of the Exchange Act and Exchange Act Rule 13b2-1.

Federal Circuit Rules in Rambus v. Infineon

1/29. The U.S. Court of Appeals (FedCir) issued its split opinion [MS Word] in Rambus v. Infineon, a patent infringement case involving dynamic random access memory (DRAM) products. The Court of Appeals vacated the District Court's judgment of non-infringement, as a matter of claim construction. It also reversed the District Court's denial of a motion to set aside a jury verdict of fraud based on failure to disclose patent and patent application information to a standard setting body.

In addition to claim construction issues, this case involves Rambus's participation in what was known as the Joint Electron Device Engineering Council (JEDEC). This body developed and issued technical standards for a form of computer memory known as synchronous dynamic random access memory (SDRAM), and later, double data rate (DDR) SDRAM. Rambus attended meetings for years, but did not disclose that it had pending patent applications that, when granted, might contain claims that would be infringed by devices made pursuant to the standards being developed. A trial jury of the District Court returned a verdict of fraud against Rambus based upon this non-disclosure conduct. The opinion of the Court of Appeals overturns this. However, Rambus still faces a Federal Trade Commission (FTC) administrative complaint, based upon essentially the same facts, but which alleges violation of antitrust law. See, full story.

Bill Would Require the Government to Create a National Electronic File Format

1/29. Rep. Tom Petri (R-WI) and others introduced HR 490, the Instructional Materials Accessibility Act of 2003, a bill relating to educational materials that would create a standard electronic file format, incent its use by publishers, and provide increased protection from copyright infringement liability.

The bill would do several things. First, it would require the federal government to create a national electronic file format. Second, it would require schools receiving certain federal funds to enter into contracts with publishers that require the use of this format. Third, it would amend copyright law to exempt from liability for infringement certain publishers that make materials available in this format.

The bill states that its purpose is "to improve access to printed instructional materials used by blind persons, or other persons with print disabilities, in elementary schools and secondary schools through the creation of a coordinated and efficient system for acquisition and distribution of instructional materials in the form of electronic files suitable for conversion into a variety of specialized formats."

Rep. Petri stated in the House that "It often takes months for a blind student to have the same materials as his or her sighted peers because of the cumbersome process needed to translate a textbook into Braille or other specialized format. This legislation will eliminate these delays by putting in place standards to assist States and school districts in delivering instructional materials to blind students." See, Cong. Record, Jan. 29, 2003, at H231.

National Standard. The bill requires the Department of Education to write "Instructional Materials Accessibility Standards" that "shall (A) define the specific technical parameters of the national electronic file format to be used by publishers of instructional materials in the preparation of electronic files suitable for efficient conversion into specialized formats; and (B) be consistent with and based upon existing and emerging standards relating to electronic publishing and translation technology used to produce specialized formats."

The bill defines "national electronic file format" as "a well-organized, structured, and marked-up electronic file that is suitable for efficient conversion into specialized formats ..." Then, it provides that "specialized format" means "Braille, synthesized speech, digital text, digital audio, or large print".

The bill extends to "instructional materials", which the bill defines as "printed textbooks and related core materials that are written and published primarily for use in elementary school and secondary school instruction ..."

Use of Format. Rep. Petri issued a release that states that the bill "requires publishers to provide a copy of each textbook in the national electronic file format". Technically, the bill requires that all schools that receive federal subsidies under the Individuals with Disabilities Education Act shall "enter into a written contract with the publisher of the materials to prepare, in conjunction with the provision of such materials, electronic files containing the contents of the materials in the national electronic file format ..."

Copyright Law. The bill also would change copyright law. There is a already an exemption to infringement in the Copyright Act for publication of copyrighted material in braille. Codified at 17 U.S.C. S 121, it provides that "Notwithstanding the provisions of section 106, it is not an infringement of copyright for an authorized entity to reproduce or to distribute copies or phonorecords of a previously published, nondramatic literary work if such copies or phonorecords are reproduced or distributed in specialized formats exclusively for use by blind or other persons with disabilities."

An ''authorized entity'', in turn, is currently defined as "a nonprofit organization or a governmental agency that has a primary mission to provide specialized services relating to training, education, or adaptive reading or information access needs of blind or other persons with disabilities".

HR 490 would provide that "A publisher that provides instructional materials to a State educational agency or local educational agency in the national electronic file format prescribed under section 3(a), shall, for such purposes, be considered an authorized entity within the meaning of section 121". Hence, the bill expands the class of items covered by the Section 121 exemption to include materials published in the national electronic file format. It also expands the class of entities exempt under Section 121.

Rep. George Miller (D-CA) is the lead cosponsor of the bill. The bill was referred to the House Education and Workforce Committee.

House Commerce Committee Passes Do Not Call Registry Bill

1/29. The House Commerce Committee approved by unanimous voice vote, without amendment, HR 395, the Do-Not-Call Implementation Act. The bill is sponsored by Rep. Billy Tauzin (R-LA), the Chairman of the Committee, and Rep. John Dingell (D-MI), the ranking Democrat.

This bill authorizes the Federal Trade Commission (FTC) to collect fees for the implementation and enforcement of its "do-not-call" registry. The FTC released its amended Telemarketing Sales Rule (TSR) on December 18, 2002, which included creation of the do-not-call registry. This allows consumers to opt out of receiving unwanted telephone solicitations. It also prohibits telemarketers from calling those telephone numbers listed on the registry.

While the final vote was unanimous, opposition was voiced during debate. For example, Rep. Ted Strickland (D-OH) argued that telemarketing provides jobs for people who work in call centers, and this bill threatens those jobs. He added that with decreasing costs for international calls, these jobs are already being threatened by foreign based call centers.

Also, Rep. Joe Barton (R-TX) offered, but then withdrew, two proposed amendments. One would have provided that no category of calls would be automatically exempted. The other would have reduced the fine for violations from $11,000 per incident to $1,000 per incident. He acknowledged that his amendments lacked support on the Committee.

Rep. Tauzin responded that by including an exemption for political solicitations, the rule will be less likely to be overturned by the Courts as a violation of the First Amendment.

Rep. Tauzin Discusses Possible Legislation

1/29. Rep. Billy Tauzin (R-LA), Chairman of the House Commerce Committee, spoke with reporters after the Committee's mark up session on January 29. He discussed possible legislation related to broadband and the transition to digital television.

He was asked whether another "Tauzin Dingell bill" would be introduced in the 108th Congress. He responded that "before we file any bills, we are trying to see just how far the FCC will go, and how much they will complete. And, we are getting a better sense of that as we move along."

Rep. Billy TauzinRep. Tauzin (at right) added that "the industry has a number of other issues besides broadband. And, the industry, long distance, local, the whole kit and caboodle of them, are attempting to find some consensus for us on several of the key issues. We give them a chance to do that. I have given them until February 15th to report to my Committee on any consensus they reach in these areas, to see if we can, and possibly add those consensus features to whatever bill we file. But, we will be, in all likelihood, filing another bill."

Rep. Tauzin also stated that "I will be consulting with Sen. McCain, obviously. He has offered broadband bills in the past." He elaborated that "I want to go back and examine those, and meet with him, and discuss with him, what of those provisions are still important, and which he is interested in. He is a strong deregulator, as I am, and I think we will find a lot of common ground before we begin moving. John Dingell is again committed to work with me to see if we can pass these in the House."

He was also asked whether the House Commerce Committee would request the FCC Commissioners to testify on matters such as the pending triennial review. He responded that "We are getting a good feel for that without formal hearings. And we are learning from them and their staffs what they are doing and what they think they might. I frankly want to get a good read on what they are likely to be able to do before we proceed. Once I know that I will feel comfortable enough to proceed."

He added that he speaks with FCC Chairman Michael Powell and the other Commissioners. "We stay in close touch. And our staffs are also staying in touch."

He was also asked about the digital television transition. He stated that "It is still very very controversial here. My compliments to all the players, however. I mean, we made great progress in the last year."

"But, it still remains controversial in a number of key points, and they still need to work out a number of things. What we will do this year is, with some degree of patience, to continue to press them forward on their own negotiations. But, at some point, recognizing that if we don't legislate before August, we are not likely to be able to legislate. At some point in the next several months we may in fact want to legislate in those areas were it is clear they are not going to be able to reach an agreement. I would be delighted to find out that that is not necessary. And we will be pushing to that end."

He also discussed the timeline for any DTV related legislation. He said that he has not given the parties involved in negotiations a deadline, "other than the fact that they know we reached the point last year where we forwarded out some, a draft piece of legislation, in order to give them a look a what legislation would look like, if in fact they reached final agreement. That alone prompted a number of agreements, as you know, as you saw. There was some real progress made between the time we left Congress last year and the time we convened again -- some of it very positive. And, I continue to get good reports. So, I don't know that we need to give any hard deadlines yet, except , I think that all of the players know that I am working under some very tight time constraints in terms of what we can have time to pass into law before we get into a Presidential year cycle. They know that. I know that. So, without stating a time limit, everybody knows that we are under the gun to get something done."

House Commerce Committee Members Write FCC in Opposition to UNE-P

1/29. Twenty-two members of the House Commerce Committee wrote a letter [5 page PDF scan] to the Federal Communications Commission (FCC) regarding unbundled network elements.

They wrote that "The '96 Act prescribed three methods of competitive entry for CLECs: reselling an ILEC's service, using a CLEC's facilities exclusively, and using a CLEC's facilities in combination with an ILEC's facilities through the purchase of unbundled network elements from the ILEC. However, the FCC distorted the '96 Act's requirements to manufacture a fourth method of entry by creating the unbundled network element platform or UNE-P -- in essence a back-door way of forcing the ILECs to resell the entire local phone service. To further exacerbate the problem, the FCC developed a pricing model  for the UNE-P that is based on a hypothetical cost model rather than on actual operating costs."

"As a result," the Congressmen wrote, "the FCC created a regulatory fiction that provided CLECs with a disincentive to invest in their own facilities. No competing carrier has an incentive to risk capital and invest in its own facilities when it can simply lease an ILEC's network elements at below-cost prices and resell the service."

They argued that "the UNE-P is a regulatory fiction that must be eliminated." They also argued that "in the context of the Triennial Review, the FCC must produce a sensible national policy regarding which network elements meet the '96 Act's stringent ``necessary and impair´´ analysis and, therefore, must be provided on an unbundled basis. Delegation of that determination to the states would be a gross abdication of the FCC's statutory responsibility and a clear violation of the law."

They also listed several "elements that should not have to be provided on an unbundled basis", including "circuit switching" and "fiber loops and subloops used to transmit packet-based services".

The letter was signed by Billy Tauzin (R-LA), John Dingell (D-MI), Fred Upton (R-MI), Joe Barton (R-TX), Nathan Deal (R-GA), Richard Burr (R-NC), John Shimkus (R-IL), Vito Fossella (R-NY), Roy Blunt (R-MO), Steve Buyer (R-IN), Mary Bono (R-CA), Lee Terry (R-NE), Charles Bass (R-NH), Greg Walden (R-OR), George Radanovich (R-CA), Rick Boucher (D-VA), Edolphus Towns (D-NY), Bobby Rush (D-IL), Al Wynn (D-MD), Eliot Engel (D-NY), Gene Green (D-TX), and Chris John (D-LA).

People and Appointments

1/29. Jule Sigall was named the Copyright Office's Associate Register for Policy and International Affairs, effective February 10. He was previously an attorney in the Intellectual Property and Technology practice group of the law firm of Arnold & Porter. Before that, in 1997-1998, he worked in the Copyright Office's Office of Policy and International Affairs.

1/29. Ted Turner will step down as Vice Chairman of AOL Time Warner, effective at the Annual Shareholders Meeting in May. See, release.

1/29. The Wall Street Journal wrote an article stating that William Esrey, Sprint's Ch/CEO, will step down, and that Gary Forsee, currently at BellSouth, "is expected to succeed him." Sprint stated in a release that "Sprint has declined to comment on media speculation regarding management succession." BellSouth's biography of Forsee states that he is Vice Chairman, and is "responsible for all of BellSouth's domestic operations". He also previously worked for Sprint.

1/29. Richard Smith was named acting Chief of the Policy Division of the Federal Communications Commission's (FCC) Consumer & Governmental Affairs Bureau (CGB). Nancy Stevenson was named Acting Deputy Chief.  The appointments are effective during the time that Michele Walters, Chief of the Policy Division, is on parental leave. See, FCC release [MS Word].

1/29. Under Secretary of the Treasury for Enforcement Jimmy Gurulé will leave his position on February 10. See, Treasury release and resignation letter.

1/29. President Bush nominated six people to be U.S. District Court Judges: Richard Bennett (Maryland), Louise Flanagan (Eastern District of North Carolina), Leon Holmes (Eastern District of Arkansas), James Selna (Central District of California), Philip Simon (Northern District of Indiana), and Theresa Springmann (Northern District of Indiana). See, White House release. Judge Selna is a former O'Melveny & Myers partner who focused on antitrust law. He was appointed to the Superior Court of the State of California for Orange County in 1998. See, Court bio [PDF].

More News

1/29. The Department of Commerce's (DOC) Bureau of Industry and Security (BIS) released its 2003 Foreign Policy Report. The BIS, which is still also referred to as the Bureau of Export Administration (BXA), announced in this report that it extends its foreign policy export controls to January 20, 2004. The report covers, among many topics, high performance computers (at Chapter 9) and encryption products (at Chapter 10).

1/29. The Federal Trade Commission (FTC) published a notice in the Federal Register containing its final amended Telemarketing Sales Rule (TSR), and its Statement of Basis and Purpose. The FTC announced its amended TSR last month. This notice sets effective dates. The amended rule will become effective March 31, 2003. However, full compliance with the caller identification transmission provision is required by January 29, 2004. Also, the FTC will announce later the date by which full compliance with the ``do-not-call´´ registry provision will be required. See, Federal Register, January 29, 2003, Vol. 68, No. 19, at Pages 4579-4679. See also, FTC release.

1/29. The U.S. Court of Appeals (7thCir) issued its split opinion [9 pages in PDF] in AT&T Broadband v. IBEW, holding that the Norris LaGuardia Act, 29 U.S.C. §§ 101-15, forbids a District Court from enjoining the arbitration of a labor dispute. The International Brotherhood of Electrical Workers (IBEW) contended that AT&T Broadband had failed to negotiate in good faith to reach agreements covering three bargaining units. It demanded arbitration under a master agreement between AT&T and the IBEW. AT&T argued that the master agreement called for mediation rather than arbitration. The IBEW called upon the presiding neutral of a standing arbitral body. AT&T then filed a complaint in U.S. District Court (NDIll) seeking an injunction of the arbitration.

1/29. Federal Trade Commission (FTC) announced that it filed an administrative complaint against Educational Research Center of America, Inc. and Student Marketing Group, Inc., as well as two individual officers and directors, alleging violation of the Federal Trade Commission Act. The complaint states that "respondents have collected personal information from high school and middle and junior high school students through surveys ..." It further states that "respondents have represented, expressly or by implication, that information collected from students through the Surveys is shared only with colleges, universities, and other entities providing education-related services. ... In truth and in fact, information collected from students through the Surveys is shared not only with colleges, universities, and other entities providing education-related services, but also with commercial entities for marketing purposes." The FTC and respondents also entered into an Agreement Containing Consent Order which bars future misrepresentation, requires disclosure of how information will be used, and requires destruction of certain data already collected. However, there is no fine. See also, FTC release.

1/29. BellSouth filed a complaint in U.S. District Court (NDGa) against Glenayre Technologies and Call Sciences alleging  infringement of its U.S. Patent No. 5,764,747 titled "Personal Number Communication System". BellSouth stated in a release that the defendants "are infringing on BellSouth's patent on call routing technology, which is commonly used for ``one number service´´ offerings". In response, Eric Doggett, P/CEO of Glenayre stated in a release that "BellSouth's allegations are without merit". He raised two issues. First, he stated that "none of our products or technologies infringe upon the BellSouth patent". Second, he questioned the "validity" of the patent in suit.

1/29. Thomas Sanderson plead guilty in U.S. District Court (EDVa) to a criminal information charging one count of exceeding authorized access to a computer. The USAO stated in a release [PDF] that "beginning in February 2002 he offered numerous items for sale on the Internet website eBay and in e-mail messages directed at eBay bidders. Sanderson, however, never owned the items. These items included a ``Sarah Hughes Signed Figure Skate´´ and a ``US Flag Signed by 3 Shea Generations,´´ both of which had been offered for sale through eBay by the charity Olympic Aid. Sanderson, using his access to eBay's computers, contacted disappointed bidders in the Olympic Aid auctions, claimed that the high bidders had ``backed out´´ and offered to sell the items for the winning bid price. In order to appear to be an Olympic Aid official, Sanderson registered the domain name ``´´ and sent his messages from addresses such as ``FrankO’´´"

Sen. Grassley Identifies Pending Tax Issues

1/28. Sen. Charles Grassley (R-IA), the Chairman of the Senate Finance Committee, prepared, but did not deliver, a speech to the Tax Council. A staff member read the speech in his place. The speech covered the Foreign Sales Corporation (FSC) tax regime (and its replacement, the Extraterritorial Income tax regime), both of which have been held by the World Trade Organization (WTO) to constitute prohibited export subsidies.

Sen. Grassley's speech stated that "Another important issue is the WTO decision on FSC-ETI. Our bipartisan bicameral working group has continued throughout the fall. I think we can reach an agreement on this issue, if all parties interested in FSC-ETI are reasonable and the EU shows some restraint. We showed restraint on beef and bananas. The EU should allow us time to enact legislation before even considering sanctions."

Sen. Grassley's speech also covered extending the moratorium contained in the Internet Tax Freedom Act. It expires latter this year. The speech stated that, "In other business, the present federal moratorium on the states' ability to tax Internet transactions expires this year. There are several other provisions that will expire this year."

Pam OlsonIn addition, Pam Olson (at right), Assistant Secretary of the Treasury for Tax Policy, has given two speeches recently in which she addressed FSC/ETI and other globalization related tax issues in more detail.

On January 27 she gave a speech to the USC Law School Tax Institute. She stated that "With the World Trade Organization having recently declared a feature of our international tax regime an export subsidy illegal under the WTO rules and the burst of corporate inversion transactions in the last couple of years, we find ourselves in a position where significant change to our international tax rules seems inevitable." She added that "From the vantage point of an increasingly global marketplace, our tax rules appear outmoded, at best, and punitive of U.S. economic interests, at worst. ... our international tax policy seems to have been based on the principle that if we have a competitive advantage, we should tax it!" On January 25 she gave a speech to the ABA Tax Section. This speech overlapped her January 27 speech.

1st Circuit Addresses Scraper Robots and Section 1030

1/28. The U.S. Court of Appeals (1stCir) issued its opinion in EF Cultural Travel v. Zefer and Explorica, upholding a District Court preliminary injunction prohibiting use of a "scraper tool" to collect pricing information from a web site. The Court's analysis involved application of the ban on unauthorized access to a computer contained in 18 U.S.C. § 1030.

Background. EF Cultural is a student travel business. It maintains a web site that contains price information. Explorica is also a student travel business; it was formed by several former EF employees. Zefer Corporation built a scraper tool that collected two years of pricing data from EF's web site. This computer program accessed price information contained in the HTML source code in the files stored on EF's web server, and then placed this price information in an Excel spreadsheet. Explorica then used this data to set its prices just below those of EF.

EF's access had been facilitated by use of confidential information obtained in violation of a broad confidentiality agreement signed by EF's former employees. Specifically, Zefer was able develop this program, including the ability to circumvent EF's security, with the assistance of an Explorica VP who was previously VP for information strategy at EF. This VP had signed a confidentiality agreement with EF. However, Zefer signed no confidentiality agreement.

Statute. Subsection 1030(a)(4) provides, in part, that "Whoever ... knowingly and with intent to defraud, accesses a protected computer without authorization, or exceeds authorized access, and by means of such conduct furthers the intended fraud and obtains anything of value, unless the object of the fraud and the thing obtained consists only of the use of the computer and the value of such use is not more than $ 5,000 in any 1-year period ... shall be punished as provided in subsection (c) of this section."

Subsection 1030(e)(6) defines "exceeds authorized access" as "to access a computer with authorization and to use such access to obtain or alter information in the computer that the accesser is not entitled so to obtain or alter."

Title 18 is the Criminal Code. However, Subsection 1030(g) creates a private right of action.

Section 1030 is also sometimes referred to as the Computer Fraud and Abuse Act, and the CFAA.

EF 1. EF filed a complaint in U.S. District Court (DMass) against Explorica, several of its employees, and Zefer, alleging copyright infringement, and violation of  Section 1030.

Previously, EF obtained an injunction against Explorica, which the First Circuit upheld. See, December 17, 2001 opinion and story titled "Court Upholds Injunction Under CFAA Against Use of Scraper Program" in TLJ Daily E-Mail Alert No. 330, December 18, 2001.

However, that injunction relied upon the confidentiality agreement. That opinion did not address Zefer, because it was protected by a bankruptcy stay.

EF 2. Zefer is now out of bankruptcy, and EF seeks to have the injunction extended to Zefer. The District Court granted the injunction, based upon its reasoning that lack of authorization can be inferred from the circumstances using a reasonable expectations test.

The Appeals Court affirmed, but on different, and narrower grounds. It upheld the injunction solely because "an injunction properly issued against a named party means that anyone else with notice is precluded from acting to assist the enjoined party from violating the decree or from doing so on behalf of that party".

The Appeals Court wrote in the instant opinion that "The district court thought that a lack of authorization could also be inferred from the circumstances, using ``reasonable expectations´´ as the test; and it said that three such circumstances comprised such a warning in this case: the copyright notice on EF's homepage with a link directing users to contact the company with questions; EF's provision to Zefer of confidential information obtained in breach of the employee confidentiality agreements; and the fact that the website was configured to allow ordinary visitors to the site to view only one page at a time."

The Court continued that "We agree with the district court that lack of authorization may be implicit, rather than explicit. After all, password protection itself normally limits authorization by implication (and technology), even without express terms. But we think that in general a reasonable expectations test is not the proper gloss on subsection (a)(4) and we reject it."

The Court reasoned that "Our basis for this view is not, as some have urged, that there is a ``presumption´´ of open access to Internet information. The CFAA, after all, is primarily a statute imposing limits on access and enhancing control by information providers. Instead, we think that the public website provider can easily spell out explicitly what is forbidden and, consonantly, that nothing justifies putting users at the mercy of a highly imprecise, litigation-spawning standard like ``reasonable expectations.´´ If EF wants to ban scrapers, let it say so on the webpage or a link clearly marked as containing restrictions."

The Court added that "This case itself illustrates the flaws in the ``reasonable expectations´´ standard. Why should the copyright symbol, which arguably does not protect the substantive information anyway, Feist Publ'ns, Inc. v. Rural Tel. Serv. Co., 499 U.S. 340, 344-45 (1991), or the provision of page-by-page access for that matter, be taken to suggest that downloading information at higher speed is forbidden."

So, EF gets its injunction, but the Court did so on the basis of facts (use of confidential information) that will not be present in most other "scrapper" cases.

Postscript. EF now has a detailed Terms of Use page in its web site that provides, in part, that "You may not without the prior written permission of EF use any computer code, data mining software, "robot," "bot," "spider," "scraper" or other automatic device, or program, algorithm or methodology having similar processes or functionality, or any manual process, to monitor or copy any of the web pages, data or content found on this site or accessed through this site."

First Circuit Rules on Section 252(e)(6) Jurisdiction

1/28. The U.S. Court of Appeals (1stCir) issued its opinion in Destek v. New Hampshire PUC, a case involving federal court jurisdiction to review state public utility commission determinations under 47 U.S.C. § 252(e)(6).

Verizon and the University of New Hampshire (UNH) entered into an agreement under which Verizon contracted to provide asynchronous transfer mode (ATM) cell relay service to the UNH within New Hampshire. Verizon also submitted a petition with the New Hampshire Public Utilities Commission (NHPUC) seeking approval of the agreement as a special contract pursuant to N.H. Rev. Stat. Ann. § 378:18.

Destek Networking Group, a networking company, sought to intervene in the NHPUC proceedings and opposed the approval of the agreement. It argued that special contracts pursuant to this state statute are discriminatory and minimize competition. The NHPUC approved the proposed special contract.

Destek filed a complaint in U.S. District Court (DNH) against the NHPUC, its Commissioners, and Verizon seeking judicial review pursuant to § 252(e)(6). It also alleged violation of 42 U.S.C. § 1983 by Verizon.

The District Court concluded that the NHPUC did not make a § 252 determination, and hence, it lacked subject matter jurisdiction. The Court also held that the Commissioners are immune, both in the official or individual capacities. Finally, it held that Verizon is not liable under § 1983. The Appeals Court affirmed on all points.

4th Circuit Certifies Questions to State Court in Challenge to Net Smut Statute

1/28. The U.S. Court of Appeals (4thCir) issued an opinion [20 pages in PDF] in PSINet v. Chapman, a case regarding the constitutionality of an Internet porm statute. The Court certified two questions of state law to the Supreme Court of Virginia.

The underlying federal case is a constitutional challenge to a 1999 amendment to a Virginia state statute regulating material that is deemed harmful to minors. The amendment adds language referring to any "electronic file or message containing an image". Internet service providers, People for the American Way, and others filed a complaint in the U.S. District Court (WDVa) against Warren Chapman and James Chambloss (who were sued in their capacity as attorneys for Virginia) challenging the statute's constitutionality under the First Amendment and the dormant commerce clause. The District Court granted summary judgment to the plaintiffs, and enjoined enforcement of the electronic component of the statute.

This appeal followed. However, the Appeals Court has not yet reached the merits of the appeal. In the present opinion, the Court merely certifies two questions of state law to the Virginia Supreme Court, namely: "A. Would the use of any of the technological access controls identified by the Attorney General of Virginia preclude conviction under Virginia Code § 18.2-391 as amended in 1999?" and "B. Does the prohibition against knowingly displaying pornographic materials that are ``harmful to juveniles´´ apply to displays made only in connection with the sale, rental, or loan of such materials? If not, what must the government establish to prove that a defendant has knowingly displayed such materials ``for commercial purpose´´?"

Representatives Introduce Bill to Block FCC Digital TV Tuner Mandates

1/28. Rep. James Sensenbrenner (R-WI) and others introduced HR 426, the TV Consumer Choice Act of 2003, a bill to prohibit the FCC from requiring digital television tuners in TVs.

On August 8, 2002, the Federal Communications Commission (FCC) announced an order that requires that most TV sets be built with digital TV tuners. Specifically, the FCC announced a Second Report and Order and Second Memorandum Opinion and Order [49 pages in PDF] in Media Bureau Docket No. 00-39. This is FCC No. 02-230.

This 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.

Kenneth Ferree, Chief of the FCC's Media Bureau, spoke with reporters on August 8, 2002, after the FCC meeting at which the order was announced. He stated that the statutory authority for the order is 47 U.S.C. § 303. It 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".

The Consumer Electronics Association (CEA) filed a petition for review of this order on October 11, 2002, with the U.S. Court of Appeals (DCCir).

HR 426 provides that the FCC lacks authority to mandate DTV tuners. It provides that "Neither section 303(s) of the Communications Act of 1934 (47 U.S.C. 303(s)) nor any other provision of such Act shall be construed to authorize the Federal Communications Commission to require, or prescribe any schedule for the implementation of, digital television reception capability in television broadcast reception equipment."

This bill further provides that "The requirements and schedule established by the Commission for the implementation of digital television reception capability in television broadcast reception equipment as contained in section 15.117(i) of the Commission's regulations (47 CFR 15.117(i)) as modified in FCC 02-230 (August 8, 2002), shall not be effective except as expressly hereafter provided by Act of Congress."

The bills original cosponsors are Rep. Jeff Miller (R-FL), Rep. Ron Paul (R-TX), Rep. Chris Cox (R-CA), and Rep. Barney Frank (D-MA). The bill was referred to the House Commerce Committee. Rep. Cox is a senior member of the Committee, and its Telecom and Internet Subcommittee.

See also, story titled "FCC Mandates DTV Standards and Deadlines", TLJ Daily E-Mail Alert No. 488, August 9, 2002.

More News

1/28. The U.S. Court of Appeals (9thCir) issued its opinion in Brother Records v. Jardine, a trademark infringement dispute involving use of the name "Beach Boys". Nearly forty years ago, Al Jardine, Mike Love, Brian Wilson, Carl Wilson, and Dennis Wilson formed a band named the The Beach Boys. They soon incorporated Brother Records Inc. (BRI) to, among other things, hold the intellectual property of The Beach Boys. Carl Wilson is dead. Brian Wilson no longer tours. And, some of the others do not want to tour together. Nevertheless, Jardine has toured, and used the trademarked name "Beach Boys", without license from BRI. BRI filed a complaint in U.S. District Court (CDCal) against Jardine alleging trademark infringement. Jardine asserted the defenses of fair use, laches, estoppel, and unclean hands. He also counterclaimed for breach of employment agreement, breach of license agreement, and for a declaratory judgment that he could tour as the "Beach Boys Family and Friends." The Court granted summary judgment to BRI. The Court of Appeals affirmed.

1/28. Rep. Patrick Kennedy (D-RI) withdrew as a cosponsor of HR 107 [PDF], the Digital Media Consumer Rights Act (DMCRA). This is Rep. Rick Boucher's (D-VA) bill to, among other things, create a fair use exemption to the anti-circumvention provisions of the Digital Millennium Copyright Act (DMCA). See, Cong Record, Jan. 28 at H195.

DOJ Files Antitrust Complaint Against Newspaper and Web Site Publishers for Allocation of Markets

1/27. The Department of Justice's (DOJ) Antitrust Division (ATR) filed a complaint in U.S. District Court (NDOhio) against NT Media, LLC (which publishes the New Times weekly city newspapers and web sites) and the Village Voice Media, LLC (which publishes the Village Voice weekly city newspapers and web sites) alleging violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. The two count complaint alleges both per se and rule of reason violations of Section 1.

The two companies entered into an agreement to allocate markets. NT agreed to shut down a newspaper in Los Angeles, and in return, Village Voice agreed to shut down a newspaper in Cleveland. The complaint alleges that "The agreements contained essentially identical ``Non-Competition´´ clauses in which each Defendant agreed not to publish an alternative newsweekly in the other Defendant's market for at least ten years. Each Defendant also agreed not to solicit or attempt to induce advertisers to advertise in a competing publication over the next decade."

The parties also agreed to use the web sites of the closed publications to redirect Internet traffic to the web sites of the former competitors. The complaint alleges that "The written agreements further required each Defendant to redirect traffic on its closed newsweekly's website to the other Defendant's website for one year, and to state prominently on its website that its alternative newsweekly was no longer in circulation."

Hewitt Pate, the Acting Assistant Attorney General in charge of the ATR, stated in a release that "Rather than letting the marketplace decide the winner, these companies chose to corrupt the competitive process by swapping markets, thereby guaranteeing each other a monopoly and denying consumers in Los Angeles and Cleveland the continued benefits of competition ... The Sherman Act clearly prohibits these types of allocation schemes between competitors."

The DOJ and the publishers also agreed to a proposed consent decree, which, if approved by the Court, would settle the lawsuit. See, Hold Separate Stipulation and Order and proposed Final Judgment.

The next step is for the DOJ to file a Competitive Impact Statement (CIS) with the Court. Then, the DOJ will publish this CIS and proposed Final Judgment in the Federal Register, and elsewhere. The public then has sixty days to submit comments to the DOJ, after which time, the DOJ files with the Court and publishes in the Federal Register the comments and its responses. Then, the DOJ may ask the Court to enter final judgment. See, the procedural requirements of 15 U.S.C. § 16. See also, the United States' Explanation of Consent Decree Proceedures.

The states of California and Ohio also filed, and simultaneously settled, state antitrust actions.

The federal case has been assigned to Judge Dan Polster.

Rep. Chabot Introduces Federal Agency Privacy Bill

1/27. Rep. Steve Chabot (R-OH) introduced HR 338, the Defense of Privacy Act, a bill to require that federal agencies, in promulgating rules, take into consideration the impact of such rules on the privacy of individuals.

This bill would amend 5 U.S.C. § 553 to provide that "Whenever an agency is required by section 553 of this title, or any other law, to publish a general notice of proposed rulemaking for any proposed rule, or publishes a notice of proposed rulemaking for an interpretative rule involving the internal revenue laws of the United States, the agency shall prepare and make available for public comment an initial privacy impact analysis. Such analysis shall describe the impact of the proposed rule on the privacy of individuals."

The bill does not mandate privacy practices. Rather, it requires a privacy impact analysis that discloses information about privacy related practices. The privacy impact analysis must contain "A description and assessment of the extent to which the proposed rule will impact the privacy interests of individuals, including the extent to which the proposed rule (i) provides notice of the collection of personally identifiable information, and specifies what personally identifiable information is to be collected and how it is to be collected, maintained, used, and disclosed; (ii) allows access to such information by the person to whom the personally identifiable information pertains and provides an opportunity to correct inaccuracies; (iii) prevents such information, which is collected for one purpose, from being used for another purpose; and (iv) provides security for such information."

This is a reintroduction of HR 4561, the Federal Agency Protection of Privacy Act, which was sponsored by former Rep. Bob Barr (R-GA) in the 107th Congress. It passed in the House Judiciary Committee on September 10, 2002, and the full House on October 7, 2002, under suspension of the rules. The companion bill in the Senate, S 2492, was sponsored by former Sen. Max Cleland (D-GA). It saw no action.

Rep. Steve ChabotRep. Chabot (at right) is a member of the House Judiciary Committee.

This bill will again go to the House Judiciary Committee, and its Subcommittee on Commercial and Administrative Law. In the 107th Congress, Rep. Barr chaired this subcommittee. Rep. Chris Cannon (R-UT) was just selected to chair this Subcommittee for the 108th Congress. He was a cosponsor of HR 4561 in the 107th Congress.

See also, story titled "House Subcommittee Holds Hearing on Federal Agency Privacy", TLJ Daily E-Mail Alert No. 423, May 2, 2002.

DOJ Recommends Approval of Verizon Long Distance Applications in MD, WV & DC

1/27. The Department of Justice's (DOJ) Antitrust Division (ATR) submitted its Evaluation to the Federal Communications Commission (FCC) in which it recommends that the FCC approve the Section 271 applications of Verizon to provide in region interLATA services in the states of Maryland and West Virginia, and in the District of Columbia.

Hewitt Pate, the Acting Assistant Attorney General in charge of the ATR stated in a release that "The available evidence suggests that generally, Verizon has succeeded in opening its local telecommunications markets in Maryland, Washington, D.C., and West Virginia to competition ... In particular, competitors have made progress in penetrating the business markets in those three jurisdictions. However, questions remain about Verizon's pricing and directory listings processes that merit close review by the FCC."

David Sibley Named Head of Economic Analysis at Antitrust Division

1/27. David Sibley was named Deputy Assistant Attorney General for Economic Analysis in the Department of Justice's (DOJ) Antitrust Division (ATR). Sibley has worked for the DOJ on the Microsoft antitrust case. Since 1991 he has been a professor in the Department of Economics at the University of Texas at Austin.

He specializes is industrial organization, including telecommunications policy, the theory of tying and bundling, and vertical relationships. Before going to the University of Texas, he was head of the Economics Research Group at Bell Communications Research. And before that, he was a researcher at Bell Laboratories. See, DOJ release.

PM KeyPoint. Sibley is also a Principal of PM KeyPoint LLC, a firm that provides economic research and consulting services, specializing in antitrust, finance, intellectual property, and regulation. His PM KeyPoint biography states that "During the last twenty years, Professor Sibley has carried out extensive research in the areas of regulation, industrial organization, and microeconomic theory. He is co-author of the textbook The Theory of Public Utility Pricing, now in its fourth printing. He currently serves as Associate Editor of the Journal of Regulatory Economics. He has testified on a variety of antitrust and regulatory matters. He served as a consultant to the U.S. Department of Justice in the Microsoft antitrust case and to the Federal Trade Commission in the proposed merger of Barnes & Noble and Ingram Book Company."

His PM KeyPoint bio further states that he works with the computer hardware, software, and telecommunications industries.

The corporate clients of PM KeyPoint have included Airtouch Communications, Ameritech, AT&T, Atmel, Bell Atlantic, Bell Canada, BellSouth, Dell Computer, Digital Equipment, Electronic Data Systems, Fujitsu, GTE Service, Hewlett Packard, Intergraph, Network Associates, Octel Communications, Pacific Bell, Pacific Telesis Group, Packard Bell Electronics, Qualcomm, RSA Data Security, Seiko Epson, Sharper Image, Silvaco Data Systems, Southwestern Bell, Storage Technology, and Telecom Italia. It list of law firm clients reads like a who's who of large law firms that represent telecom and technology companies in antitrust matters. See, client list.

Selected Writing of Sibley. On May 14, 2002, he participated in a panel on titled "Antitrust Analysis of Specific Intellectual Property Licensing Practices: Bundling, Grantbacks and Temporal Extensions" at the Federal Trade Commission and Department of Justice joint hearing on antitrust and intellectual property law. See, prepared text [PDF].

He also submitted testimony to the U.S. District Court (DC) in the Microsoft case, both in 1998 and 2002. See, Declaration dated February 27, 2002, submitted in the Tunney Act phase of US v. Microsoft.

Sibley's book, The Theory of Public Utility Pricing, currently has an Amazon sales rank of 748,709.

Supreme Court Rules in NextWave Case

1/27. The Supreme Court issued its opinion [34 pages in PDF] in FCC v. NextWave Personal Communications, holding that the Federal Communications Commission's (FCC) attempt to revoke NextWave's spectrum licenses violated Section 525 of the Bankruptcy Code. See, full story.

FCC Announces Digitial TV NPRM

1/27. The Federal Communications Commission (FCC) released a Notice of Proposed Rulemaking (NPRM) [MS Word] titled "In the Matter of Second Periodic Review of the Commission’s Rules and Policies Affecting the Conversion To Digital Television".

This NPRM states that "In the Commission's DTV proceeding (MM Docket No. 87-268), we stated our intention to hold periodic reviews of the progress of the digital conversion and to make any adjustments necessary to our rules and policies to ``ensure that the introduction of digital television and the recovery of spectrum at the end of the transition fully serves the public interest.´´ In our first DTV periodic review, begun in March 2000, we addressed a number of issues important to the transition. In this second periodic review, we revisit, as we indicated we would, several issues addressed in the first periodic review, and also seek comment on a number of additional issues that we consider essential to resolve in order to ensure continued progress on the digital transition."

This NPRM addresses transition progress in specific areas, channel elections, replication and maximization for in-core channels, and interference protection of analog and digital television service in TV channels 51-69. It also addresses pending DTV construction permit applications, noncommercial educational television stations, simulcasting, and other issues.

Comments are due by April 14, 2003. Reply comments are due by May 14, 2003. This is MB Docket No. 03-15, RM 9832, and MM Docket Nos. 99-360, 00-167, and 00-168. See also, FCC release.

Sen. Grassley Addresses Trade Agenda

1/27.Sen. Charles Grassley (R-IA), Chairman of the Senate Finance Committee, gave a speech regarding the Committee's trade agenda to Consumers for World Trade.

He stated that "we will continue our efforts to encourage freedom through trade. This year, the Finance Committee is likely to take up legislation to implement free trade agreements with Chile and Singapore. We will continue our strong oversight over trade negotiations to make sure that new negotiations are conducted in the way Congress intended when we passed Trade Promotion Authority last year. And we will work to make sure that we practice what we preach -- that we too follow the golden rule -- that we do unto other nations as we would have them do unto us."

He also stated that "we may have to make changes to our laws when trade decisions go against us, including bringing our tax system and other laws into compliance with WTO rules. We also hope to take care of some unfinished business from the last Congress, such as the miscellaneous trade bill and confirmation of some International Trade Commission nominees."

He also discussed the NAFTA and trade in conflict diamonds.

People and Appointments

1/27. The Department of Justice's (DOJ) Antitrust Division (ATR) filed a motion (and memorandum in support) for the appointment of Edward Stritter as the third Member of the Technical Committee provided for in Section IV.B.3.b of the Final Judgment in the government's antitrust case against Microsoft. See also, Stritter bio.

1/27. Shelley Parratt was named to the new position of second Deputy Director of the Securities and Exchange Commission's (SEC) Division of Corporation Finance. She will be responsible for disclosure operations. See, SEC release.

1/27. Paula Dubberly was named Associate Director (Legal) of the Securities and Exchange Commission's (SEC) Division of Corporation Finance. She will oversee the Offices of Chief Counsel and Rulemaking, and the Division's Enforcement liaison program. See, SEC release.

More News

1/27. The Supreme Court denied certiorari in Mattel v. MCA Records, a trademark and defamation case involving Mattel's Barbie doll. Aqua, a Danish techno pop band, wrote a song titled "Barbie Doll" for its 1997 album titled "Aquarium". MCA Records, and other companies, produced, marketed and sold the music. Mattel makes and sells Barbie dolls for girls. Judge Alex Kozinski, who wrote the opinion [PDF] for the U.S. Court of Appeals (9thCir), described this case as "Speech-Zilla meets Trademark Kong". In the end, speech won. See, Order List [8 pages in PDF] at page 2. See also, story titled "9th Circuit Addresses Trademarks and Parody" in TLJ Daily E-Mail Alert No. 477, July 25, 2002.

1/27. The Supreme Court denied the motion of appellees for divided argument in USA v. American Library Association, No. 02-361. See, Order List [8 pages in PDF] at page 1.

1/27. The Supreme Court denied certiorari in Arrow Communication Labs v. Eagle Comtronics, No. 02-800, a patent case involving the doctrine of equivalents. See, opinion of the U.S. Court of Appeals (FedCir).

1/27. Broadcom filed a complaint in the U.S. District Court (NDCal) against Microtune alleging patent infringement. Broadcom alleges that tuners, power amplifiers and Bluetooth products made by Microtune infringe its U.S. Patent No. 6,445,039B1, titled "System And Method For ESD Protection", U.S. Patent Nos. 5,682,379 titled "Wireless Personal Local Area Network" and U.S. Patent No. 6,359,872 titled "Wireless Personal Local Area Network." Last summer Broadcom filed a complaint in U.S. District Court (EDTex) against Microtune alleging infringement of its U.S. Patent No. 6,377,315 titled “System And Method For Providing A Low Power Receiver Design.” See, Broadcom release.

1/27. The National Association of State Utility Consumer Advocates (NASUCA) released a report pertaining to the Federal Communications Commission's (FCC) review of rules regarding unbundled network elements (UNEs). This report states that "Many of the popular residential service plans that new local service competitors have introduced, such as those with unlimited local and long distance calling, are now threatened by a proceeding currently before the FCC that would deny competitive carriers the right to access the full functionality of the incumbent phone company’s local network. Competitive carriers rely upon this access as the only economically feasible means of providing competitive services while building enough market share to justify investing in their own facilities. Without the “UNE-P” serving arrangement, entrants' share of the residential local service market could drop by as much as 77% in some states, effectively killing any nascent local residential competition that presently exists, harming competition in the long distance market, and paving the way for the eventual remonopolization of the local and long distance residential telephone business by the incumbent phone companies."

1/27. The House returned from its two week adjournment.

Go to News from January 21-25, 2003.