News from March 11-15, 2003

9th Circuit Applies Doctrine of Merger in Copyright Case

3/14. The U.S. Court of Appeals (9thCir) issued its opinion [PDF] in Ets-Hokin v. Skyy, a case involving allegations of infringement of copyrights in photographs of a vodka bottle taken by Ets-Hokin. The District Court, applying the defensive doctrines of merger and scenes a faire, granted summary judgment to Skyy. The Appeals Court affirmed.

The merger doctrine provides that if the idea underlying the work can be expressed only in one way, then the work will not be protected from infringement, because otherwise, there would be a monopoly in the underlying idea.

While this case pertains to pictures of liquor bottles, the precedent relied upon by the Appeals Court included Apple v. Microsoft & HP, 35 F.3d 1435 (9th Cir. 1994). The Appeals Court held in Apple that when similar features of a work are "as a practical matter indispensable, or at least standard, in the treatment of a given idea, they are treated like ideas and are therefore not protected by copyright."

2nd Circuit Vacates Rule 11 Sanction of Law Firm for Submitting False Affidavit in Trademark Case

3/14. The U.S. Court of Appeals (2ndCir) issued its split opinion in In Re Pennie & Edmonds. This is a trademark case. However, this appeal results from the District Court's sua sponte post trial sanction of the law firm of Pennie & Edmonds for violating Rule 11(b)(3) of the Federal Rules of Civil Procedure by submitting a false affidavit of a client. The issue on appeal was the mens rea requirement for such a sanction. Judge Jon Newman, writing for the Appeals Court, wrote that subjective bad faith is required. Judge Underhill dissented, arguing that the test is objective reasonableness.

The District Court concluded that the law firm acted with subjective good faith, but imposed sanction upon the law firm based upon the absence of an objectively reasonable belief as to the truth of the affidavit. The Appeals Court vacated the sanction. The Court wrote that "We conclude that where, as here, a sua sponte Rule 11 sanction denies a lawyer the opportunity to withdraw the challenged document pursuant to the ``safe harbor´´ provision of Rule 11(c)(1)(A), the appropriate standard is subjective bad faith."

Judge Underhill wrote in his lengthy dissent that "Prior to 1983, the imposition of sanctions under Rule 11 required a finding of subjective bad faith. When amending Rule 11 in 1983, however, the drafters abandoned the subjective bad faith standard and adopted a standard of ``reasonableness under the circumstances.´´ Since adoption of the 1983 amendments, the Supreme Court and every court of appeals has held that district courts should apply an objective reasonableness test when deciding whether Rule 11 has been violated. With today's decision, the Second Circuit becomes the first and only court to hold that the 1993 amendments to Rule 11 reverted to the pre-1983 subjective bad faith standard for even a subset of Rule 11 sanctions. The majority bases its holding principally on a single sentence from the Advisory Committee notes to the 1993 amendments and on its own policy analysis. In my view, neither basis can support the weight of today's decision."

More News

3/14. The Federal Trade Commission (FTC) granted in part and denied in part petitions from the Direct Marketing Association (DMA) and the American Teleservices Association (ATA) requesting that the FTC stay enforcement of the Telemarketing Sales Rule. See, FTC letter to counsel for the ATA and letter to counsel for the DMA. See also, FTC release.

3/14. The Federal Communications Commission (FCC) released its biennial regulatory review report [MS Word] for 2002, and the 2002 Biennial Regulatory Review Staff Reports. See, FCC release and the CGB Staff Report, IB Staff Report, OET Staff Report, WCB Staff Report, WTB Staff Report, and WTB Staff Report Appendix.

Senate Committee Approves Technology Grant Program for Minority Serving Institutions

3/13. The Senate Commerce Committee amended and approved S 196, the Digital and Wireless Network Technology Program Act of 2003, by unanimous voice vote. See also, TLJ copy of bill as introduced.

The bill would create a new office at the National Science Foundation (NSF) named the Office of Digital and Wireless Network Technology (ODWNT). The bill would also authorize the appropriation of $250,000,000 for each of the fiscal years 2004 through 2008 for grants to be administered by this new office.

The institutions eligible for grants would include "a historically Black college or university", "a Hispanic-serving institution", and "a tribally controlled college or university".

Grants could be used "to acquire the equipment, instrumentation, networking capability, hardware and software, digital network technology, wireless technology, and infrastructure". Grants could also be used "to develop and provide educational services, including faculty development, to prepare students or faculty ...". Grants could also be used to provide teacher training, and to "implement joint projects and consortia to provide education regarding technology".

The Committee approved an amendment on March 13 that contains several technical changes, and an expansion of the scope of the grant program. It provides that grants may also be used to fund "remote technical support".

Sen. George Allen (R-VA), the sponsor of the bill, spoke in support of the bill at the meeting. He said that the amendment would make it possible for isolated tribal institutions to obtain technical support. He also said that the bill is necessary because historically black colleges and other minority serving institutions "do not have the infrastructure that other educational institutions do". He also emphasized that the bill covers both wire and wireless networking. He said that for some institutions wireless networking may be "a more efficient way of getting broadband to students".

See also, Senate Commerce Committee release, and story titled "Sen. Allen Introduces Bill to Create Technology Grant Program for MSIs", TLJ Daily E-Mail Alert No. 586, January 20, 2003.

This bill is similar to S 414 (107th), which was approved by the Senate Commerce Committee last year, and HR 1034 (107th).

House Committee Approves Internet Gambling Bill

3/13. The House Financial Services Committee approved HR 21, the Unlawful Internet Gambling Funding Prohibition Act of 2003, without amendment, by a non-unanimous voice vote. This bill would attempt to bar Internet gambling operations access to the U.S. financial services system by banning the use of credit cards, wire transfers, or any other bank instrument to fund gambling transactions.

Rep. James LeachRep. James Leach (R-IA), the sponsor of the bill, urged passage. "The American family", said Rep. Leach, "is not always looked upon as the responsibility of the banking committee". But, he argued, gambling is now one of the prime causes of bankruptcy, which is a concern of the Committee.

Rep. Barney Frank (D-MA), the ranking Democrat on the Committee, opposed the bill on libertarian grounds. Rep. Mel Watt (D-NC) argued that "we are putting a very heavy burden on the financial institutions".

Rep. Brad Sherman (D-CA) argued that "you should have to leave your house to loose your house", and that this bill is necessary to restore the power of states to regulate gambling. Rep. Frank responded that "I don't think it is any of the government's business when you leave your house ..."

The bill provides that "No person engaged in the business of betting or wagering may knowingly accept, in connection with the participation of another person in unlawful Internet gambling (1) credit, or the proceeds of credit, extended to or on behalf of such other person (including credit extended through the use of a credit card); (2) an electronic fund transfer or funds transmitted by or through a money transmitting business, or the proceeds of an electronic fund transfer or money transmitting service, from or on behalf of the other person; (3) any check, draft, or similar instrument which is drawn by or on behalf of the other person and is drawn on or payable at or through any financial institution; ..."

The bill then provides that "The district courts of the United States shall have original and exclusive jurisdiction to prevent and restrain violations of this section by issuing appropriate orders in accordance with this section, regardless of whether a prosecution has been initiated under this section." Proceeding may be initiated by the U.S. or by the attorney general of a state.

The bill also contains language limiting the liability of interactive service providers. It provides that "Relief granted under this subsection against an interactive computer service shall (i) be limited to the removal of, or disabling of access to, an online site violating this section, or a hypertext link to an online site violating this section, that resides on a computer server that such service controls or operates; except this limitation shall not apply if the service is subject to liability under this section pursuant to subsection (e); (ii) be available only after notice to the interactive computer service and an opportunity for the service to appear are provided; (iii) not impose any obligation on an interactive computer service to monitor its service or to affirmatively seek facts indicating activity violating this section; (iv) specify the interactive computer service to which it applies; and (v) specifically identify the location of the online site or hypertext link to be removed or access to which is to be disabled."

The House passed a similar bill, HR 556 (107th), in the last Congress. The Senate did not pass the bill. The Senate Banking Committee will hold a hearing on proposals to regulate illegal internet gambling on Tuesday, March 18.

See also, story titled "Rep. Leach Introduces Internet Gambling Bill", TLJ Daily E-Mail Alert No. 579, January 9, 2003.

Rep. Tauzin Writes Powell Re Waste Fraud & Abuse In E-Rate Program

3/13. Rep. Billy Tauzin, Chairman of the House Commerce Committee, and Rep. James Greenwood, Chairman Subcommittee on Oversight and Investigations, wrote a letter to Federal Communications Commission (FCC) Chairman Michael Powell regarding waste, fraud and abuse in the FCC's e-rate program.

The two wrote that "problems of waste, fraud, and abuse have trailed E-rate throughout its first five years of funding. Targeted audits of funding beneficiaries over the first two years identified more than $10 million in inappropriate funding disbursements. Recently, we learned there are at least 30 active Federal and state investigations of either vendors or recipients of E-rate funds around the United States -- involving, in aggregate, more than $200 million of questionable funding."

Reps. Tauzin and Greenwood also requested that the FCC produce documents pertaining to Universal Service Administrative Company's (USAC) management and oversight of the Schools and Library mechanism of the Universal Service Fund (USF), and waste, fraud, and abuse of program funds.

They also wrote a similar letter to Cheryl Parrino, CEO of the USAC.

NIST Releases Report on Facial Recognition Technology

3/13. The National Institute of Standards and Technology (NIST) released a report titled "Face Recognition Vendor Test 2002". This FVRT report was prepared by the NIST, the Defense Advanced Research Projects Agency (DARPA), NAVSEA, and the Department of Defense (DOD) Counterdrug Technology Development Program Office. See, Overview and Summary [544 KB in PDF], Evaluation Report [4.0 MB in PDF], and Technical Appendices [7.2 MB in PDF].

The report states that it was based on "a large-scale evaluation of automatic face recognition technology. The primary objective of FRVT 2002 was to provide performance measures for assessing the ability of automatic face recognition systems to meet real-world requirements. FRVT 2002 measures performance of the core capabilities of face recognition technology. It provides an assessment of the potential for face recognition technology to meet the requirements for operational applications."

The report further states that is was based upon a "high computational intensity test" of  "121,589 operational images of 37,437 people. The images were provided from the U.S. Department of State’s Mexican non-immigrant Visa archive. From this data, real-world performance figures on a very large data set were computed. Performance statistics were computed for verification, identification, and watch list tasks". (Footnote omitted.)

The report relates several findings. First, the report found that images taken indoors work better that images taken outside.

Second, the report found that performance decreases as the the time increases between the date of the database image and the date of the image presented for comparison. The report states that "performance degraded at approximately 5% points per year".

Third, the report found that performance declines with the size of the database, and with the number of persons on a watch list. The report states that "For the best system, the top-rank identification rate was 85% on a database of 800 people, 83% on a database of 1,600, and 73% on a database of 37,437. For every doubling of database size, performance decreases by two to three overall percentage points. In mathematical terms, identification performance decreases linearly with respect to the logarithm of the database size."

The report also states that "For the best system, the identification and detection rate was 77% at a false alarm rate of 1% for a watch list of 25 people. For a watch list of 300 people, the identification and detection rate was 69% at a false alarm rate of 1%. In general, a watch list with 25 to 50 people will perform better than a larger size watch list."

FCC Announces NPRM To Provide Flexibility To Users of MMDS/ITFS Spectrum

3/13. The Federal Communications Commission (FCC) announced, but did not release, a wide ranging Notice of Proposed Rulemaking and Memorandum Opinion and Order (NPRM & MOO) regarding Multipoint Distribution Service (MDS), Multichannel Multipoint Distribution Service (MMDS), and Instructional Television Fixed Service (ITFS). The FCC issued only a brief press release [MS Word] describing this item. The NPRM asks, among other things, whether ITFS users should be allowed to sell their licenses to commercial users. The FCC release states that this item will "promote competition, innovation and investment in wireless broadband services".

The FCC release states that "As a result of these proposed rule changes, the Commission anticipates that licensees will be afforded an opportunity to provide alternatives for the provision of broadband services to consumers in urban, suburban, and rural areas."

Commission Michael Copps was more specific in his prepared statement [MS Word]. He wrote that "The NPRM asks whether the Commission should remove the requirement that ITFS licensees use the spectrum entrusted to them for educational purposes. It also asks whether the Commission should allow ITFS licensees to sell their licensees to the highest bidder, where a private company could buy the spectrum and dispense with any educational activity."

He also cautioned that "Such an outcome would threaten this important educational tool. If ITFS becomes just another commercial service, we will have lost the last place on the spectrum reserved specifically for education."

FCC Chairman Michael Powell wrote in a prepared statement [MS Word] that "By today's Notice, the Commission explores ways for the American people to enjoy the full potential of a large parcel of previously underutilized, prime spectrum real estate. The opportunity is monumental -- the MMDS/ITFS band ("2.5 GHz Band") encompasses 190 MHz of contiguous spectrum. This is more than double the 83 MHz that spurred the development of WiFi at 2.4 GHz. It is roughly equal to all spectrum currently devoted to terrestrial, mobile wireless -- a ubiquitous, nationwide service characterized by a high-level of competition, low prices, and constant innovation. But the 2.5 GHz band has not yet delivered similar rewards, in no small part because of the well-intentioned, but ultimately misguided, regulatory decisions of this agency."

Powell added that "The 2.5 GHz band has labored for years under the heavy hand of command-and-control regulation" and that "the time has come chip off the regulatory barnacles encumbering ITFS and MMDS."

Commissioner Kathleen Abernathy wrote in her prepared statement [MS Word] that "some of the spectrum remains underutilized ... Today's NPRM does not inhibit the ability of ITFS incumbents to offer their services as long as they wish. It simply provides a forum for looking at ways to improve the flexibility afforded to all users of the MMDS/ITFS spectrum."

The FCC's release also states that the FCC "commences a comprehensive examination of the rules and policies governing the Services in order to provide greater opportunities for increased access to spectrum [,] establish uniform regulatory policies for similar services and encourage efficient and effective utilization of spectrum."

This item follows the submission of proposal [97 pages in PDF] on October 7, 2002 by a coalition comprised of the the Wireless Communications Association International (WCAI), the National ITFS Association (NIA) and the Catholic Television Network (CTN). These entities represent users in the 2.5 GHz Band.

This is WT Docket No. 02-68, 03-66, and 03-67, and MM Docket No. 97-217. For more information, contact Nancy Zaczek or Charles Oliver at 202 418-0680, nzaczek@fcc.gov or coliver@fcc.gov.

The full title of the proceeding is "Amendment of Parts 1, 21, 73, 74 and 101 of the Commission’s Rules to Facilitate the Provision of Fixed and Mobile Broadband Access, Educational and Other Advanced Services in the 2150-2162 and 2500-2690 MHz Bands, WT Docket No. 03-XX; Part 1 of the Commission’s Rules – Further Competitive Bidding Procedures, WT Docket No. 03-XX; Amendment of Parts 21 and 74 to Enable Multipoint Distribution Service and the Instructional Television Fixed Service Amendment of Parts 21 and 74 to Engage in Fixed Two-Way Transmissions, MM Docket No. 97-127; Amendment of Parts 21 and 74 of the Commission’s Rules with Regard to Licensing in the Multipoint Distribution Service and in the Instructional Television Fixed Service for the Gulf of Mexico, WT Docket No. 02-68, Notice of Proposed Rulemaking and Memorandum Opinion and Order".

FCC Announces NOI Re Receiver Performance Standards

3/13. The Federal Communications Commission (FCC) announced, but did not release, a Notice of Inquiry (NOI) regarding interference immunity performance specifications. This NOI follows the recommendations of the FCC's Spectrum Policy Task Force (SPTF) report [PDF] of November 15, 2002.

FCC Chairman Michael Powell wrote in a prepared statement [MS Word] that "The Spectrum Task Force has offered a number of proposals for refining the FCC's approach to interference and developing better metrics for describing and quantifying the interference environment in particular bands. The development of receiver standards is an integral part of this effort. Spectrum is too critical a resource in our digital economy to allow interference avoidance to be addressed on an ad hoc incremental basis. All factors that contribute to the interference environment and, ultimately, the ability of users to receive clear radio signals, must be taken into account as early in the process as possible."

He added that "our objective is to gather information on the technological landscape -- what is the state-of-the-art in receiver technology and what is deployed in the field. Without baselines, there can be no benchmarks. In developing these baselines, I prefer to rely on market incentives and voluntary industry programs to establish receiver immunity guidelines in the first instance."

Commissioner Kathleen Abernathy wrote in her prepared statement [MS Word] that "the information gathered in this proceeding will form the basis for the interference standards for many of the items we each use on a daily basis including the next generation of digital televisions and AM/FM radios."

Commissioner Michael Copps also supported the item, but cautioned that "we must also understand the costs of designing more robust receivers." See, statement [MS Word].

This proceeding is titled "Interference Immunity Performance Specifications for Radio Receivers; Review of the Commission’s Rules and Policies Affecting the Conversion to Digital Television". This is ET Docket No. 03-65 and MM Docket No. 00-39. While the FCC did not release the NOI, it did issue a short press release [MS Word]. For more information, contact Hugh Van Tuyl of the FCC's Office of Engineering and Technology (OET) at hvantuyl@fcc.gov or 202 418-7506.

The FCC stated in its press release that it seeks public comment on "immunity performance and interference tolerance of existing receivers", "possibilities for improving the level of receiver immunity in the various radio services", "potential positive and negative impacts of receiver standards on innovation and the marketplace", "possible approaches by which desired levels of receiver immunity or tolerances could be achieved, including incentives for improving performance, voluntary industry standards, mandatory standards, or a combination of these or other approaches", and "considerations that should guide the Commission’s approach to these matters in the various licensed radio services".

See also, statement [MS Word] by Commissioner Kevin Martin, and statement [MS Word] of Commissioner Jonathan Adelstein.

Michael Petricone of the Consumer Electronics Association (CEA) stated in a release that the "CEA does not believe that mandatory standards for DTV or other receivers are necessary to achieve the goal of spectrum efficiency. ... The marketplace provides ample motivation to ensure that these consumers are well served by DTV products, as it has with analog televisions." He added that "DTV tuner technology continues to move forward. Companies such as Broadcom, ATI and LINX regularly introduce new tuner chips that meet increasing performance levels in multipath, impulse notice, adjacent and co-channel interference. Meanwhile, in venues such as the Advanced Television Systems Committee (ATSC), broadcasters and DTV manufacturers are already engaged in voluntary discussions to ensure the effectiveness of DTV broadcast transmission."

In contrast, Steve Berry of the Cellular Telecommunications & Internet Association (CTIA) stated in a release that "This could be an excellent opportunity to improve the spectrum efficiency of licensees who are not subject to market incentives."

Bush Fills More Tech Positions at DHS

3/13. President Bush announced his intent to appoint Robert Liscouski to be Assistant Secretary for Infrastructure Protection at the new Department of Homeland Security. He is currently the Director of Information Assurances at the Coca-Cola Company, and a member of the Intelligence Science Board. See, White House release.

Also on March 13, President Bush announced his intent to appoint Paul Redmond to be Assistant Secretary for Information Analysis at the DHS. He is a former Central Intelligence Agency (CIA) employee. He has held the positions of Associate Deputy Director for Operations for Counterintelligence, Special Assistant to the Director for Counterintelligence and Security, and Deputy Chief of the D.C.I. Counterintelligence Center. He is currently a consultant to the Director of the CIA.

Separately, on March 13, the Senate Commerce Committee approved the nomination of Charles McQueary to be Under Secretary for Science and Technology at the DHS, by a unanimous voice vote, without debate.  See, Committee release.

McQueary is a recently retired President of General Dynamics, a defense contractor. Before that, he worked for AT&T/Lucent Technologies from 1987 through 1997, as President and Vice President. And before that, he worked for AT&T Bell Laboratories from 1971 through 1987. He is also a former member of the Board of Directors of the National Defense Industrial Association. He has three degrees, in engineering, mechanical engineering, and engineering mechanics, all from the University of Texas.

The Homeland Security Act of 2002, HR 5005 (107th) and Public Law No. 107-296, creates two directorates, both headed by an Under Secretary, that have science and technology responsibilities. First, there is the Title II Directorate for Information Analysis and Infrastructure Protection, which has primary responsibility for information sharing and cyber security matters. Title II also creates the positions of Assistant Secretary for Infrastructure Protection and Assistant Secretary for Information Analysis. See, Section 201(b).

Second, there is the Title III Directorate for Science and Technology, which has primarily responsibility for chemical, biological, radiological, and nuclear threats. However, the responsibilities of the Title III Directorate include supporting the Title II Directorate "by assessing and testing homeland security vulnerabilities and possible threats".

McQueary has been nominated to head the Title III directorate. Liscouski and Redmond have been nominated for the two Title II Assistant Secretary positions.

More People and Appointments

3/13. Federal Communications Commission (FCC) Commissioner Michael Copps announced several changes in his personal staff. Jessica Rosenworcel will become his competition and universal service legal advisor. Jordan Goldstein, who is currently Copps' competition and universal service legal advisor, as well as his senior legal advisor, will shift to media and consumer protection issues. He will remain senior legal advisor. Meanwhile, Alexis Johns, who is currently Copps' media and consumer protection legal advisor, will move to the Consumer and Governmental Affairs Bureau. Paul Margie, who handles spectrum and international issues, is unaffected by these changes. Rosenworcel has worked at the FCC since May of 1999. She is currently legal counsel to the Chief of the Wireline Competition Bureau. Prior to that, she was an attorney in the Policy and Program Planning Division of the Common Carrier Bureau. And prior to that, she was an associate with the law firm of Drinker Biddle & Reath. See, release.

3/13. The Senate Commerce Committee approved a resolution naming the members of its subcommittees. The membership of the Communications Subcommittee is Conrad Burns (R-MT), Ted Stevens (R-AK), Trent Lott (R-MS), Kay Hutchison (R-TX), Olympia Snowe (R-ME), Sam Brownback (R-KS), Gordon Smith (R-OR), Peter Fitzgerald (R-IL), John Ensign (R-NV), George Allen (R-VA), John Sununu (R-NH), Ernest Hollings (D-SC), Daniel Inouye (D-HI), Jay Rockefeller (D-WV), John Kerry (D-MA), John Breaux (D-LA), Byron Dorgan (D-ND), Ron Wyden (D-OR), Barbara Boxer (D-CA), Bill Nelson (D-DL), and Maria Cantwell (D-WA). Burns is the Chairman, and Hollings is the ranking Democrat.

3/13. President Bush nominated David Campbell to be a Judge of the U.S. District Court for the District of Arizona. See, White House release.

More News

3/13. The House Judiciary Committee's Subcommittee on Courts, the Internet and Intellectual Property held a hearing titled "International Copyright Piracy: Links to Organized Crime and Terrorism". See, prepared testimony of witnesses: John Malcolm (Department of Justice), Rich LaMagna (Microsoft), Joan Vidov (Films by Jove), and Jack Valenti (Motion Picture Association of America).

3/13. The Federal Communications Commission (FCC) that it adopted a Report and Order that amends its rules to provide for three new forms for use by multichannel video programming distributors (MVPDs) that allow for electronic filing. See, FCC release.

3/13. The Federal Communications Commission (FCC) compiled an "Accessibility Handbook" for use by FCC staff that provides guidelines, information, and procedures to ensure that the FCC is accessible to individuals with disabilities. See, FCC release and order [PDF].

3/13. The House Government Reform Committee's Subcommittee on Technology, Information Policy, Intergovernmental Relations and the Census will hold a hearing titled "Federal E-Government Initiatives: Are We Headed in the Right Direction?" The witnesses were Mark Forman (Office of Management and Budget), Joel Willemssen (General Accounting Office), David McClure (The Council for Excellence in Government), and Leonard Pomata (webMethods). See, prepared testimony [31 pages in PDF] of Willemssen titled "Electronic Government: Success of the Office of Management and Budget's 25 Initiatives Depends on Effective Management and Oversight".

3/13. The General Accounting Office (GAO) released a report [37 pages in PDF] titled "File-Sharing Programs: Peer-to-Peer Networks Provide Ready Access to Child Pornography".

3/13. Sen. Max Baucus (D-MT), the ranking Democrat on the Senate Finance Committee, and Sen. Carl Levin (D-MI), introduced S 624, an untitled bill to authorize the extension of nondiscriminatory treatment, also known as normal trade relations treatment, to the products of the Russian Federation. Also, Rep. Charles Rangel (D-NY), the ranking Democrat on the House Ways and Means Committee, and others, introduced HR 1224, the companion bill in the House.

3/13. The Federal Trade Commission (FTC) filed a Stipulated Order of Preliminary Injunction [20 pages PDF scan] with the U.S. District Court (SDFl) in FTC v. 30 Minute Mortgage, Inc. On January 9, the FTC filed its complaint [20 page PDF scan] in the District Court against 30 Minute Mortgage, Gregory P. Roth and Peter W. Stolz alleging violation of the FTC Act, the Truth in Lending Act, the Gramm Leach Bliley Act, and the FTC's Privacy Rule in connection with a scheme to fraudulently obtain personal financial information from consumers. The defendants sent spam messages to consumers claiming to be a national mortgage lender offering 3.95% 30 year mortgages. The defendants further provided hyperlinks in the spam messages to web pages containing purported mortgage application forms. The defendants then sold the information that they gathered. The District Court entered a preliminary injunction order on March 14. See, FTC release.

3/13. The U.S. District Court (CDCal) granted summary judgment to the Securities and Exchange Commission (SEC) in its civil action against Arash Aziz-Golshani in connection with his manipulation of stock prices by spreading false information on internet message boards. The District Court permanently enjoining him from violations of the antifraud provisions of the federal securities laws and ordering him to pay disgorgement in the amount of $339,392, plus prejudgment interest of $82,696. See, SEC release.

Bush Picks Pate for Antitrust AAG

Hewitt Pate3/12. President Bush announced his intent to nominate Hewitt Pate (at right) to be Assistant Attorney General for the Antitrust Division. He is currently the Acting Assistant Attorney General. He replaces Charles James, who left the Department of Justice to become Vice President and General Counsel of Chevron Texaco Corporation. In July of 2001, Pate was appointed Deputy Assistant Attorney General in charge of regulatory matters. Before that, he was a partner in the litigation, intellectual property and antitrust section of the law firm of Hunton & Williams. See, White House release.

Rep. Thomas Writes Colleagues Re FSC Dispute

3/12. Rep. Bill Thomas (R-CA), Chairman of the House Ways and Means Committee, wrote a Dear Colleague letter to members of the House regarding the FSC/ETI dispute with the EU. The World Trade Organization (WTO) has ruled the Foreign Sales Corporation (FSC) tax regime, its replacement, the Extraterritorial Income (ETI) tax regime, constitute illegal export subsidies. This ruling permits the EU to impose retaliatory tariffs. On February 26, 2003, the EU released a revised list of items that may be subject to retaliatory tariffs. See, EU release.

Rep. Bill ThomasRep. Thomas (at right) wrote that the FSC/ETI dispute "is jeopardizing sales of a wide-range of U.S. industrial and farm exports to Europe. Members need to be aware of the latest development which could affect the livelihood of Americans in every district."

He continued that "Last week the European Commission, consistent with WTO dispute settlement procedures, released a new $4 billion retaliation list for U.S. non-compliance in the FSC/ETI case that includes 1,866 U.S. products such as jewelry, soy, refrigerators, and aluminum products. The Commission had issued a preliminary list in September of 2,781 products covering $13 billion in goods. The new list issued last week is significant because it marks a refined, focused set of products that are the targets for retaliation at any time. This new list is real."

Rep. Thomas also stated that "EU Trade Commissioner Pascal Lamy, earlier this week in a meeting with the Ways and Means Committee, remarked that although he understands this is politically sensitive, the United States must act soon to come into compliance with WTO obligations on FSC. Although he did not give a specific time frame for retaliation, he did express his willingness to hold off as long as the United States continues to make progress in complying with the WTO decision."

The letter does not address proposed legislative solutions.

Leahy Introduces Bill to Limit FOIA Exemption for Critical Infrastructure Information

3/12. Sen. Patrick Leahy (D-VT) and others introduced S 609, the Restoration of Freedom of Information Act, a bill to amend the provisions of the Homeland Security Act of 2002 pertaining to the Freedom of Information Act (FOIA), 5 U.S.C. § 552, exemption for voluntarily shared critical infrastructure information.

Sen. Leahy stated that "the law that was enacted undermines Federal and State sunshine laws permitting the American people to know what their government is doing. Rather than increasing security by encouraging private sector disclosure to the government, it guts FOIA at the expense of our national security and public health and safety."

He asserted that "These provisions, which were eventually enacted in the HSA, shield from FOIA almost any voluntarily submitted document stamped by the facility owner as ``critical infrastructure.´´ This is true no matter how tangential the content of that document may be to the actual security of a facility. The law effectively allows companies to hide information about public health and safety from American citizens simply by submitting it to DHS." See, Sen. Leahy's floor statement, along with numerous inserted items, in the Congressional Record, March 12, 2003, at S3632 et seq. See especially, Sen. Leahy's summary of S 609 and comparison of HR 5005 and S 609.

Title II of the Homeland Security Act, HR 5005 (107th), pertains to "Information Analysis and Infrastructure Protection". Subtitle B of Title II pertains to "Critical Infrastructure Information". It is comprised of Sections 211-215. President Bush signed HR 5005 on November 25, 2002. It then became Public Law No. 107-296.

Section 214 of the bill creates a new FOIA exemption for critical infrastructure information. It provides, in part, "Notwithstanding any other provision of law, critical infrastructure information (including the identity of the submitting person or entity) that is voluntarily submitted to a covered Federal agency for use by that agency regarding the security of critical infrastructure and protected systems, analysis, warning, interdependency study, recovery, reconstitution, or other informational purpose, when accompanied by an express statement specified in paragraph (2) -- (A) shall be exempt from disclosure under section 552 of title 5, United States Code (commonly referred to as the Freedom of Information Act); ..." (Parentheses in original.)

The bill was referred to the Senate Judiciary Committee, of which Sen. Leahy is the ranking Democrat.

Proponents of the critical infrastructure information provision in the Homeland Security Act include many technology companies and the trade groups that represent them. This FOIA exemption has long been supported by Sen. Robert Bennett (R-UT). See for example, story titled "Sen. Bennett Promotes Cyber Security Bill", TLJ Daily E-Mail Alert No. 290, October 19, 2001.

Rep. Tancredo Introduces Bill to End FCC Schools and Libraries Program

3/12. Rep. Tom Tancredo (R-CO) introduced HR 1252, the E-Rate Termination Act. The bill would amend 47 U.S.C. § 254, the universal service section of the Communications Act, to eliminate the language which the Federal Communications Commission (FCC) has relied upon as authority for creating its cross subsidy program for schools and libraries known as the e-rate.

The e-rate program subsidizes telecommunications services, internet access, and internal wiring for public and private secondary schools, libraries, and rural health clinics. HR 1252 would remove language providing universal service support for schools and libraries. However, it would retain support for health clinics.

Rep. Tancredo has long been the leading critic of the schools and libraries program in the House, and has introduced related legislation in the past. The bill was referred to the House Commerce Committee. The bill has no original cosponsors.

While the e-rate enjoys wide support in the Congress, it is also plagued with problems of fraud and abuse. Rep. Bobby Rush (D-IL), a leading supporter of the e-rate program, used the February 26 hearing of the House Commerce Committee's Telecom and Internet Subcommittee on the FCC's forthcoming triennial review order to urge the FCC Commissioners to solve the e-rate fraud problem.

Also, on March 13, Rep. Billy Tauzin, Chairman of the Commerce Committee, wrote a letter to FCC Chairman Michael Powell regarding waste, fraud and abuse in the FCC's e-rate program. He asked the FCC to produce numerous relevant records.

Rep. Dreier Introduces Bill to Shorten Tech Depreciation Periods

3/12. Rep. David Dreier (R-CA) introduced HR 1232, the Technology Investment Incentive Act of 2003, a bill to amend the Internal Revenue Code to provide for the expensing of, or shorter depreciation periods for, certain computer software and technology equipment.

Rep. David DreierRep. Dreier (at right) stated in a release that "If we can provide an incentive for businesses to invest in new products, we will stimulate the kind of economic activity that will create jobs and enhance overall business expansion. My bill is geared toward the technology industry because it has proven itself to be a real engine of economic growth. This industry is currently hurting, but if brought back to life, it can lead the way toward a stronger, more vibrant economy."

The bill includes a provision creating a three year depreciation period for certain wireless telecommunications equipment, advanced services equipment, and network or network system equipment, and a three year amortization period for research expenses for software development.

The bill would also provide a one year depreciation schedule for "qualified technological equipment", which is currently a five year depreciation schedule, and all software purchases, which is currently a three year depreciation schedule.

A different, but related bill, HR 1411 (107th), the Expensing Technology Reform Act of 2001, was introduced in the 107th Congress by Rep. Jerry Weller (R-IL). See also, HR 2597 (107th), the Broadband Deployment and Telework Incentive Act of 2001, which was introduced in the 107th Congress by Rep. Scott McGinnis (R-CO).

Rep. Dreier's bill was referred to the House Ways and Means Committee. Rep. Dreier is Chairman of the House Rules Committee.

Rep. Conyers Introduces Bill to Delay Internet Gambling Legislation

3/12. Rep. John Conyers (D-MI), Rep. Chris Cannon (R-UT), Rep. Shelley Berkley (D-NV), and Rep. Joe Baca (D-CA) introduced HR 1223, the Internet Gambling Licensing and Regulation Commission Act. The bill would delay Congressional consideration of legislation pertaining to internet gambling while a commission studies internet gambling.

The bill would establish a five member entity titled the "Internet Gambling Licensing and Regulation Study Commission". Four of its five members would be picked by Congressional leaders. These four would then pick a fifth member to chair the commission.

This commission would be tasked with conducting "a comprehensive study of the existing legal framework governing Internet gambling and the issues involved with the licensing and regulation of Internet gambling", and then proposing "changes to Federal laws and regulations to provide for the licensing and regulation of Internet gambling in the United States".

However, the bill specifies the content of these legislative recommendations. These recommendations shall "preserve the prerogatives of States with respect to intrastate gambling and wagering within their borders", but "include measures to discourage, prohibit, or prevent United States citizens from wagering with unlicensed Internet gambling operations outside of the United States".

These recommendations shall also provide "measures to prevent minors from gambling online" and "measures to prevent the use of Internet gambling as a money laundering channel for terrorists and criminal enterprises".

The recommendations must also "provide for the appropriate taxation of Internet gambling enterprises", but otherwise, "consider and, where possible, remain consistent with the goals, principles, and obligations of the United States in other international negotiations governing electronic commerce".

These recommendations must also "preserve tribal sovereignty with respect to gaming and Internet gaming".

The bill was referred to three House committees, Judiciary, Commerce and Financial Services. Rep. Conyers is the ranking Democrat on the Judiciary Committee. Rep. Cannon is also a member. Neither Rep. Berkley nor Rep. Baca sits on any of the Committees with jurisdiction.

Rep. John Conyers

Rep. Conyers (at right) stated in a release [PDF] that "You might remember a failed experiment the U.S. government tried in the 1920s called Prohibition. Today, Congress is rushing to pass a similar ill-conceived prohibition of Internet gambling. Gaming prohibitionists believe they can stop the millions of Americans who gamble online by prohibiting the use of credit cards to gamble on the Internet. Just as outlawing alcohol did not work in the 1920s, current attempts to prohibit online gaming will not work, either."

On March 13, the House Financial Services Committee approved HR 21, the Unlawful Internet Gambling Funding Prohibition Act of 2003. This bill would attempt to bar internet gambling operations access to the U.S. financial services system by banning the use of credit cards, wire transfers, or any other bank instrument to fund gambling transactions. See story titled "House Committee Approves Internet Gambling Bill" in TLJ Daily E-Mail Alert No. 623, March 14, 2003.

Also, the Senate Banking Committee will hold a hearing at 10:00 AM on Tuesday, March 18 on proposals to regulate illegal internet gambling. See, notice.

Rep. Berkley, who represents the city of Las Vegas, stated in a release that "Regulating web based gaming is difficult at best. ... Gaming technology is still a moving target, and before we try again this year to pin governing legislation on it, it is appropriate that we fully understand its size and shape."

RIAA Notifies 300 Corporations of P2P Infringement on Their Networks

3/12. The Recording Industry Association of America (RIAA) sent a letter to about 300 corporations in the U.S. notifying them that their computer networks are being used to distribute copyrighted music on the internet, via peer to peer networks. The letter requests cessation of infringing activity.

The letter states that "Our recent investigations reveal that Internet Protocol (``IP´´) addresses assigned to your company have been used to log onto the FastTrack network (i.e., the online peer-to-peer network hosting KaZaA, Grokster and iMesh) to offer up copyrighted sound recordings owned by the RIAA's member companies for others to download for free. In short, your computer network and resources are being used to illegally distribute copyrighted music on the Internet." (Parentheses in original.)

The letter threatens that "These acts of infringement could expose your employees and your company to significant legal damages. Indeed, federal copyright law imposes stiff penalties for acts of infringement. For example, copyright owners can collect statutory damages of up to $150,000 per copyrighted work infringed as well as legal costs and attorneys’ fees. Damages can also include all of the profits earned by an infringer plus the actual damages suffered by the copyright owner. In addition, infringers risk relinquishment of any equipment used in manufacturing the infringing copies. The consequences for not taking action, therefore, can be quite serious."

The letter concludes that "We strongly urge you to take immediate steps to prevent the continued infringement of our members' sound recordings on your corporate network. We also encourage you to adopt and fully implement employee policies and technical measures that prevent copyright infringement on your corporate network, as we will continue to monitor for infringing conduct and take any appropriate legal action necessary to protect our rights."

The RIAA did not reveal the names of the companies to which it sent the letter. However, it stated that "Approximately 20 percent of the letters went to companies in the medical-related field, 20 percent to manufacturing companies, and 35 percent to technology firms. The rest went to corporations in a variety of unrelated sectors."

People and Appointments

3/12. The Senate approved the nomination of William Quarles to be a Judge of the U.S. District Court for the District of Maryland by a vote of 90-0. See, Roll Call No. 50.

More News

3/12. The U.S. Court of Appeals (9thCir) issued an order [4 pages in PDF] in ACS v. GCI. In this action, Alaska Communications System (ACS) seeks declaratory and injunctive relief against the enforcement of interconnection contracts arbitrated and approved by the Regulatory Commission of Alaska (RCA) at the request of GCI Communication Corporation (GCI) pursuant to 47 U.S.C. § 251. The present order addresses whether the individuals who are members of the RCA may be substituted for the RCA. The Court of Appeals held that "the federal courts have jurisdiction under 28 U.S.C. § 1331 to entertain such a suit against the commissioners. ... The district court is directed to reinstate the individual commissioners as parties and proceed to a determination of the merits." However, the Appeals Court added that "We do not need to decide the Eleventh Amendment immunity issue as against RCA ..."

Bush Signs Do Not Call Implementation Act

3/11. President Bush signed HR 395, the Do-Not-Call Implementation Act. 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. See, White House release.

Tauzin Writes Powell Re Cable Modem Service NPRM

3/11. Rep. Billy Tauzin (R-LA), Chairman of the House Commerce Committee, wrote a letter to Federal Communications Commission (FCC) Chairman Michael Powell regarding the FCC's cable modem service NPRM, and in particular, its impact on local government revenues derived from franchise fees.

The FCC adopted this Declaratory Ruling and Notice of Proposed Rulemaking [75 pages in PDF] at its March 14, 2002 meeting. See also, March 14 FCC release. This is Docket No. 00-185 and Docket No. 02-52.

This NPRM addresses the legal classification and the appropriate regulatory framework for broadband access to the Internet over cable system facilities. It states that "we conclude that cable modem service, as it is currently offered, is properly classified as an interstate information service, not as a cable service, and that there is no separate offering of telecommunications service. In addition, we initiate a rulemaking proceeding to determine the scope of the Commission's jurisdiction to regulate cable modem service and whether (and, if so, how) cable modem service should be regulated under the law ..." (Parentheses in original.)

Rep. Billy TauzinRep. Tauzin (at right) wrote that "The Federal Communications Commission (``Commission´´) has before it a Notice of Proposed Rulemaking concerning the regulatory implications of its determination last spring that cable modem service should be classified as interstate information service, outside the reach of Title VI of the Communications Act. Included in this decision was the determination that revenue from cable modem service should not be used in computing the franchise fees paid to local governments. Parishes in Louisiana have contacted me about their primary concern with this decision, namely its impact on local government revenues derived from franchise fees."

Rep. Tauzin continued that "After the Commission's correct ruling on these two issues, certain cable companies have informed parishes that they are no longer going to pay that portion of revenue derived from delivery of cable modem service. Should the Commission determine it appropriate to exercise its jurisdiction under section 622 to resolve the issue of previously collected franchise fees based on cable modem service revenues, I urge the Commission to further clarify that its decision is prospective and effects only contracts signed after the issuance of its ruling. Otherwise, local governments will be exposed to future claims and significant risk."

House Subcommittee Holds Hearing on HR 1161

3/11. The House Judiciary Committee's Crime Subcommittee held a hearing on including HR 1161, the Child Obscenity and Pormography Prevention Act, which addresses, among other topics, computer generated images. The Subcommittee heard testimony on the bill, but did not mark up the bill, as had been previously announced.

This bill is very similar to a bill passed by the House in the 107th Congress. Rep. Lamar Smith (R-TX) introduced, and the House passed, HR 4623, the Child Obscenity and Pormography Prevention Act of 2002. The final vote was 413-8. See, Roll Call No. 256. However, the Senate passed a much different bill. Rep. Smith's bill reacts to the Supreme Court's April 16, 2002, opinion [PDF] in Ashcroft v. Free Speech Coalition, in which the Court held unconstitutional on First Amendment and overbreadth grounds provisions of the Child Pormography Prevention Act of 1996 (CPPA) banning computer generated images depicting minors engaging in sexually explicit conduct.

Daniel Collins, Associate Deputy Attorney General, testified in support of the bill. See, prepared testimony. He stated that "As the Administration supported H.R. 4623 last year, we continue fully to support H.R. 1161 this year. The Senate, for its part, recently enacted a revised and substantially strengthened bill, S. 151, which also received the Administration’s full support. The two bills overlap very significantly in approach, if not always in wording. We are confident that the relatively modest differences between the two bills can be readily resolved to produce a final bill that is the best that can be achieved."

Collins addressed the problem created by the Supreme Court opinion in Ashcroft v. FSC. He stated that "By invalidating these important features of the 1996 Act, the Court's decision leaves the Government in an unsatisfactory position that the Department believes warrants a prompt legislative response. Already, defendants often contend that there is “reasonable doubt” as to whether a given computer image -- and most prosecutions involve materials stored and exchanged on computers – was produced with an actual child or as a result of some other process. There are experts who are willing to testify to the same effect on the defendants’ behalf. Moreover, as computer technology continues its rapid evolution, this problem will grow increasingly worse: trials will increasingly devolve into jury-confusing battles of experts arguing over the method of generating an image that, to all appearances, looks like it is the real thing. The end result would be that the Government may be able to prosecute effectively only in very limited cases, such as those in which it happens to be able to match the depictions to pictures in pornographic magazines produced before the development of computer imaging software or in which it can establish the identity of the victim."

See also, prepared testimony of John Feldmeier of the FSC. See also, prior issues of the TLJ Daily E-Mail Alert containing stories regarding legislation related to computer generated images: No. 423, May 2, 2002; No. 454, June 19, 2002; and No. 534, October 24, 2002.

Zoellick Announces Appointments at USTR

3/11. U.S. Trade Representative (USTR) Robert Zoellick announced several appointments at the Office of the USTR. See, USTR release.

John Veroneau was named the new General Counsel, effective April 1, 2003, replacing Peter Davidson. Veroneau was previously the Assistant U.S. Trade Representative (AUSTR) for Congressional Affairs. Before joining the USTR in March 2001, he was Assistant Secretary of Defense for Legislative Affairs. Before that he worked for former Sen. William Cohen (R-ME), Sen. Susan Collins (R-ME), and Sen. Bill Frist (R-TN).

Matt Niemeyer was named to replace Veroneau as the AUSTR for Congressional Affairs, effective April 1. Lisa Coen was named as Deputy AUSTR for Congressional Affairs.

James Mendenhall was named AUSTR for Services, Investment and Intellectual Property, replacing replaces Joe Papovich, who retired from the USTR. Mendenhall was previously Deputy General Counsel. Before joining the USTR in September 2001 he was a partner in the Atlanta, Georgia based law firm of Powell Goldstein Frazer & Murphy, where he focused on World Trade Organization (WTO) litigation, international arbitration, and trade policy.

Meredith Broadbent was named AUSTR for Industry, Market Access and Telecommunications, effective April 1. She will replace Florizell Liser, who was named AUSTR for African Affairs. Broadbent has been a staffer for the House Ways and Means Committee's Subcommittee on Trade for twenty years.

Ashley Wills was named AUSTR for South Asian Affairs, effective in June. He is currently U.S. Ambassador to Sri Lanka.

Ross Wilson was named Senior Negotiator for the Free Trade Area of the Americas (FTAA), effective June 23. He is currently the U.S. Ambassador to Azerbaijan.

More People and Appointments

3/11. President Bush announced his intent to nominate Joe Whitley to be General Counsel of the new Department of Homeland Security. He is currently a partner in the law firm of Alston & Bird. He was previously U.S. Attorney for both the Northern and Middle Districts of Georgia. See, White House release.

3/11. President Bush nominated Elizabeth Courtney to be a Member of the Board of Directors of the Corporation for Public Broadcasting for the remainder of the term expiring January 31, 2004. See, White House release.

3/11. Joseph Papovich was named SVP, International of the Recording Industry Association of America (RIAA). He previously worked for the Office of the U.S. Trade Representative (USTR) as Assistant USTR for Services, Investment and Intellectual Property. James Mendenhall replaced him at the USTR. See, RIAA release and USTR release.

More News

3/11. Nancy Victory, Director of the National Telecommunications and Information Administration (NTIA), gave a speech titled "Transitioning from an Analog Past to a Digital Future" at the annual meeting of the Advanced Television Systems Committee (ATSC). She said "teamwork" is necessary. Robert Sachs, P/CEO of the National Cable Television Association (NCTA) gave a speech [6 pages in PDF] at the same event. Edward Fritts, P/CEO of the National Association of Broadcasters (NAB), also gave a speech at the event.

3/11. The Federal Communications Commission (FCC) released its Report and Order [68 pages in PDF] amending its rules for low power operations in the 450-470 MHz band. This proceeding is titled "In the Matter of Amendment of Part 90 of the Commission's Rules and Policies for Applications and Licensing of Low Power Operations in the Private Land Mobile Radio 450-470 MHz Band". This is WT Docket No. 01-146. The FCC announced, but did not release, this Report and Order on February 14.

3/11. The U.S. Court of Appeals (6thCir) issued its opinion in American Council of Certified Podiatric Physicians and Surgeons v. American Board of Podiatric Surgery. This is a case involving state and federal antitrust and tortious interference claims against an association that provides professional certification services. The District Court granted summary judgment to the defendant on the Sherman Act Section 2 claim. The Appeals Court affirmed.

3/11. Rep. Robert Andrews (D-NJ) introduced H. Con. Res. 88, a concurrent resolution expressing the sense of Congress that the Children's Internet Protection Act (CIPA) is constitutional as it applies to public libraries.

Go to News from March 6-10, 2003.