|News from June 6-10, 2003|
House Passes Internet Gambling Bill
6/10. The House amended and passed HR 2143, the "Unlawful Internet Gambling Funding Prohibition Act", by a vote of 319-104. See, Roll Call No. 255.
This bill does not ban or regulate internet gambling. This remains a matter of state law. However, offshore internet based gambling operations are largely beyond the reach of prosecutors.
Rather, this bill seeks to stop internet gambling by prohibiting the use of bank instruments to conduct gambling transactions that are already illegal. This bill, which was reported by the House Financial Services Committee, attempts to bar internet gambling operations access to the financial services system by banning the use of credit cards, wire transfers, or any other bank instrument to fund illegal gambling transactions.
The House approved by voice vote an amendment [2 pages in PDF], offered by Rep. Sue Kelly (R-NY). It provides that "No provision of this Act shall be construed as altering, limiting, extending, changing the status of, or otherwise affecting any law relating to, affecting, or regulating gambling within the United States."
The House rejected an amendment [2 pages in PDF] offered by Rep. James Sensenbrenner (R-WI) by a vote of 186-237. See, Roll Call No. 254. The bill provides that the term "bets or wagers" does not include "any lawful transaction with a business licensed or authorized by a State." This amendment would strike this exception. This amendment would have remove from the bill the exception that creates a carve out for state approved gambling on horse racing, dog racing, and jai alai.
Another version of this bill, HR 21, also titled the "Unlawful Internet Gambling Funding Prohibition Act of 2003", was reported by the House Judiciary Committee. On May 14, the Judiciary Committee narrowly approved this same amendment. However, the full House took up the Financial Services Committee bill instead.
The House also rejected by voice vote an amendment [2 pages in PDF] offered by Rep. Sheila Lee (D-TX), a member of the House Judiciary Committee. It would have removed credit cards, as well as "credit, or the proceeds of credit", from the list of items that may not be used to fund illegal gambling operations. This would have essentially gutted the bill.
The companion bill in the Senate is S 627. This bill has not yet passed the Senate, or the Senate Banking Committee, which has jurisdiction. However, the Senate has in the past approved legislation pertaining to internet gambling.
Background. See, story titled "Rep. Leach Introduces Internet Gambling Bill" in TLJ Daily E-Mail Alert No. 579, January 9, 2003, and story titled "House Committee Approves Internet Gambling Bill" in TLJ Daily E-Mail Alert No. 623, March 14, 2003. See also, TLJ story titled "Senate Committee Holds Hearing on Internet Gambling Bill", March 18, 2003. See also, stories titled "House Subcommittee Holds Hearing on Internet Gambling Bills" in TLJ Daily E-Mail Alert No. 652, May 2, 2003; "House Crime Subcommittee Approves Internet Gambling Bill" in TLJ Daily E-Mail Alert No. 656, May 7, 2003; "House Judiciary Committee Approves Internet Gambling Bill" in TLJ Daily E-Mail Alert No. 662, May 15, 2003; "House Financial Services Committee Approves Revised Internet Gambling Bill" in TLJ Daily E-Mail Alert No. 666, May 21, 2003; and "House To Take Up Internet Gambling Bill" in TLJ Daily E-Mail Alert No. 677, June 10, 2003.
Ways and Means Committee Holds Hearing on Chile and Singapore FTAs
6/10. The House Ways and Means Committee's Trade Subcommittee held a hearing titled "Implementation of U.S. Bilateral Free Trade Agreements with Chile and Singapore".
Rep. Earl Blumenauer (D-OR) testified in favor of the FTAs. He stated that "Technology remains a mainstay of West Coast economies. In Oregon, the leading industry is high-tech, much of it destined for export. The agreement with Chile represents an opportunity to improve markets at a time of great economic stress." See, prepared testimony.
Rep. Pete Sessions (R-TX) testified in favor also. He stated that the U.S. Singapore FTA is "a modern, forward looking agreement that updates Singapore's intellectual property law and brings it in line with American standards. It updates Singapore’s copyright and patent law to prevent circumvention and to ensure that the creators of new technologies and inventions reap the rewards of their innovation. It updates the country’s trademark regime to reflect the new market realities of branding and product identity building, while enhancing protection for well-known trademarks. All of these enhanced protections will be complimented by a robust enforcement regime that criminalizes the willful infringement of copyrights and imposes tough punishments on piracy." See, prepared testimony.
Jeff Jacobs of Qualcomm testified that "QUALCOMM strongly supports free trade, and the results of the U.S.-Singapore and U.S.-Chile free trade negotiations. Open markets and strong trade rules are critical to QUALCOMM. More than half of QUALCOMM’s revenues are generated outside of North America, with most of our growth resulting from demand in Latin America, East Asia (especially China, Japan and Korea) and India. These trends are not unique to QUALCOMM; the American high-tech sector collectively is the largest source of U.S. merchandise exports, as well as the largest cumulative source of U.S. direct investment overseas." See, prepared testimony.
Joseph Papovich of the Recording Industry Association of America (RIAA) testified that "Growing levels of physical piracy, online piracy and inadequate enforcement of copyright laws internationally are challenging the competitiveness of our industries worldwide. These two FTAs succeed in addressing these challenges in ways that bode well for high levels of protection in Singapore and Chile and for setting critical, essential precedents for future Free Trade Agreements. These agreements provide high standards of copyright protection for the modern digital age, and ensure that protection is meaningful in practice through strong enforcement. Piracy of our works represents the single largest trade barrier we face in markets outside the United States." See, prepared testimony.
See also, prepared testimony of Peter Allgeier (Deputy U.S. Trade Representative), Leon Trammell (on behalf of the U.S. Chamber of Commerce), Keith Gottfried (Borland Software), Bob Haines (Exxon Mobil), David Spence (Air Courier Conference of America), Gawain Kripke (Oxfam America), Thea Lee (AFL-CIO), and John Audley (Carnegie Endowment for International Peace).
Sen. Charles Grassley (R-IA), the Chairman of the Senate Finance Committee, has stated that he intends to hold a hearing on these FTA's later this month.
Rep. Smith Addresses Intellectual Property Rights
6/10. Rep. Lamar Smith (R-TX), the Chairman of the House Judiciary Committee's Subcommittee on Courts, the Internet and Intellectual Property (CIIP), gave a speech in Washington DC regarding intellectual property rights. He spoke at a conference hosted by the Progress and Freedom Foundation (PFF) and the George Mason University Tech Center titled "Promoting Creativity: Copyright in the Internet Age"
Rep. Smith (at right) began with the observation that "There is a good reason why those who wrote the Constitution embraced the concept of intellectual property protection. The Founding Fathers realized that if creators cannot gain from their creations, they won't bother to create."
"In looking for ways to protect both intellectual property and free exchange in the marketplace, there are currently a number of critical issues Congress must consider: piracy, the broadcast flag, patent rights, counterfeiting in the software industry, and a standard of ``fair use´´ that protects consumer rights", said Rep. Smith.
He criticized universities for their inconsistent conduct on intellectual property. He stated, "Look at what is happening on our university campuses. University students illegally download music, sometimes on publicly supported computers. When encouraged to exercise disciplinary measures, too many university administrators react with relative indifference: kids will be kids, they say. Yet these same university administrators pursue research and development projects as champions of a strong patent law. It's a curious inconsistency."
Earlier in the day, Rep. Smith's CIIP Subcommittee held a hearing on Rep. Smith's bill (HR 2391) to amend patent law to protect and encourage collaborative research at universities and elsewhere. A representative of Yale University (Rep. Smith's alma mater) testified at the hearing. See, following story, titled "Representatives Introduce Patent Bill to Encourage Collaborative Research".
He also addressed software piracy. "The software industry is under siege by professional pirates primarily due to the counterfeiting of authentication features on software, like the certificates of authenticity, or COAs. Thieves steal or counterfeit these COAs and affix them to pirated products to deceive consumers into thinking they are getting the real product." However, he did not elaborate on legislative proposals.
Broadcast Flag. Rep. Smith discussed the DTV transition and the broadcast flag. He stated that "We are in the midst of a transition to digital television. As early as 2006, all broadcasts must be aired in digital format. This presents opportunities for American consumers, businesses, and copyright owners. As with many technological advances, the DTV transition has been frustrated by both technological and legal hurdles."
"There is a great danger of massive piracy of unprotected broadcasts once the transition to DTV is complete", said Rep. Smith. "Pirates can easily copy and redistribute millions of digital files in a matter of seconds. In the absence of protection against unauthorized redistribution, it is unlikely that content owners will make high-value programming available to broadcasters."
He added that "Last August, the Federal Communications Commission adopted a notice of proposed rulemaking on digital broadcast copy protection. My Subcommittee has great interest in the FCC's action because the agency might issue rules that impact the Copyright Act and therefore involve my Subcommittee's jurisdiction."
On August 8, 2002, the FCC adopted a Notice of Proposed Rulemaking (NPRM) [15 pages in PDF] in its proceeding titled "In the Matter of Digital Broadcast Copy Protection". This NPRM proposes that the FCC promulgate a broadcast flag rule, and seeks comment on this, and related questions. This is MB Docket No. 02-230. See, stories titled "FCC Issues NPRM on Broadcast Flag" and "FCC Debates Its Authority to Promulgate Broadcast Flag Rule" in TLJ Daily E-Mail Alert No. 489, August 12, 2003.
Fair Use. Rep. Smith continued that "I know controversy continues over what the broadcast flag will and will not do. And whether it will have an adverse affect on the ability of consumers to make ``fair use´´ of copyrighted broadcast television."
"We know fair use is a defense that may limit any of the copyright owner's exclusive rights. The Copyright Act states that fair use of a copyrighted work for purposes such as criticism, comment, news reporting, teaching, scholarship, or research does not constitute infringement. Fair use is determined on a case-by-case basis" said Rep. Smith. "For example, in Sony Corp. v. Universal City Studios, the Supreme Court held that the practice of taping free television broadcasting for later viewing was a fair use." (Sony is reported at 464 U.S. 417.)
He stated that "It is important that the transition to DTV and any implementation of rules requiring the use of the broadcast flag technology does not have an adverse affect on how consumers may legitimately use lawfully acquired entertainment products.
Rep. Smith also addressed fair use rights in the context of licensing restrictions and technological protection measures. He said that "some believe the profitability of intellectual property can be protected using extended private licensing strategies. But we must be careful that such licensing agreements do not improperly assert intellectual property and thus have a negative effect on the markets or consumer interests."
He also stated that "my Subcommittee seeks to ensure that new technologies designed to prevent piracy do not limit the public's ability to make fair use of copyrighted works."
Representatives Introduce Patent Bill to Encourage Collaborative Research
6/10. Rep. Lamar Smith (R-TX) and others introduced HR 2391, the "Cooperative Research and Technology Enhancement (CREATE) Act of 2003", on June 9, 2003. On June 10, the House Judiciary Committee's Subcommittee on Courts, the Internet, and Intellectual Property held a hearing on the bill. See, TLJ copy of HR 2391.
Amendments to the Patent Act. Section 103(c), codified at 35 U.S.C. § 103, pertains to conditions for patentability, and non-obviousness. It currently provides that "Subject matter developed by another person, which qualifies as prior art only under one or more of subsections (e), (f), and (g) of section 102 of this title, shall not preclude patentability under this section where the subject matter and the claimed invention were, at the time the invention was made, owned by the same person or subject to an obligation of assignment to the same person."
HR 2391 would amend Section 103(c) to read "Subject matter developed by another person, which qualifies as prior art only under one or both of subsections (e) and (g) of section 102 of this title, shall not preclude patentability under this section where the subject matter and the claimed invention were, at the time of the earliest filing date for which a benefit is sought under this title, owned by the same person or subject to an obligation of assignment to the same person."
Section 102(f), codified at 35 U.S.C. § 102, pertains to conditions for patentability, and novelty and loss of right to patent. It currently provides, in part, that "A person shall be entitled to a patent unless ... (f) he did not himself invent the subject matter sought to be patented".
HR 2391 would amend Section 102(f) by inserting after the word "patented" the following: "‘except that subject matter under this subsection shall not be considered prior art or as evidence of obviousness under section 103 of this title".
Rep. Smith's Explanation. Rep. Smith, the Chairman of the Subcommittee, explained the context of this bill in a prepared statement. He stated that "Congress enacted a series of Patent Law Amendments in 1984. One of these amendments, codified at 35 USC § 103 (c), created a ``safe harbor´´ for inventions that were the product of a collaboration involving co-inventors within a single company. The amendment changed the U.S. patent system to reflect the manner in which companies actually conduct their internal research activities." (Emphasis in original.)
Rep. Smith continued that "The legislative history makes clear that Congress intended to discourage individuals from attempting to use nonpublic information, also known as ``secret prior art,´´ to challenge the issuance or validity of a patent where co-inventors voluntarily exchanged confidential information concerning a prior invention developed by one or more of the research partners."
"What the legislative history leaves unclear and significantly, what we are here to explore today, are the arguments for and against expanding the secret prior art exception to collaborations involving researchers at more than one organization."
"Unlike 1984, today's biotech, pharmaceutical, and nano-technology companies conduct much of their research with partners such as universities or other public or private organizations."
Rep. Smith stated that the bill's purposes are "to promote communication among ``team researchers´´ located at multiple organizations", "to discourage those who would use the discovery process to harass co-inventors who voluntarily collaborated on research resulting in a patentable invention", "to increase public knowledge", and "to accelerate the commercial availability of new inventions."
Witness Testimony. John Thomas of the Georgetown University Law Center wrote in his prepared testimony that this bill "provides that prior art available under 35 U.S.C. § 102(f) may not be considered as evidence of obviousness under 35 U.S.C. § 103. The effect of the Act is to overturn the 1997 holding of the U.S. Court of Appeals for the Federal Circuit in OddzOn Products, Inc. v. Just Toys, Inc., which ruled that derived prior art may serve as evidence of obviousness." See, August 8, 1997 opinion of the U.S. Court of Appeals (FedCir), reported at 122 F.3d 1396.
Jon Soderstrom, Director of Technology Transfer at Yale University, elaborated in his prepared testimony regarding the significance of the OddzOn case for collaboration research.
He wrote that "In spite of the trend toward scientific collaboration and the economic and practical necessity for such collaborations," the OddzOn case "threatens to discourage such collaborative activity."
He continued that "In OddzOn, the Federal Circuit interpreted subsection 103(c)of the Patent Act to hold that prior art under subsections 102(f) or (g) could be used to determine the obviousness of an invention in situations where: (a) there was no common ownership or assignment of the invention and information being shared among the collaborators, and (b) the information exchanged was not publicly known."
"Prior to the OddzOn decision, it was uncertain whether information under 102(f) and (g) of the U.S. Patent Act (35 U.S.C.) that was shared among collaborators, but was not published or generally known, would qualify as prior art in determining whether an invention was obvious under section 103. Thus, there was some doubt as to whether courts would interpret 103(c) to distinguish collaborations involving one entity from those involving more than one entity."
Soderstrom called OddzOn a "a wake-up call to the patent community that information under 102(f) or (g) could invalidate a patent in the circumstances of a collaborative research effort. The OddzOn decision creates a significant threat for the loss of intellectual property rights for inventors who engage in joint research and development projects with scientists not employed by the same company or institution."
He concluded that "The OddzOn decision creates significant problems due to the very nature of collaborative research and development projects among universities, government labs, and industry. The unhindered flow of information among researchers within these collaborations is essential to the conduct of research and crucial to a successful outcome. Laws and policies that have the effect of impeding the flow of information among researchers will, for obvious reasons, have a stifling effect on the progress and success of such projects. We support efforts that will help to remedy undesirable impediments to collaborative research created by the OddzOn decision. This could readily result in more efficient development of products utilizing tax supported research results, and an increase in the transfer of technology for the public good."
See also, prepared testimony of other witnesses: Eric Steffe (Sterne Kessler Goldstein & Fox) and Jeffrey Kushan (Sidley Austin, for Genentech).
Cosponsors. The bill is has broad bipartisan support on the Subcommittee. It is cosponsored by Rep. Howard Berman (D-CA), the ranking Democrat on the Subcommittee, and Rep. John Conyers (D-MI), the ranking Democrat on the full Committee. It is also cosponsored by Rep. Rick Boucher (D-VA), Rep. Bob Goodlatte (R-VA), Rep. Howard Coble (R-NC), Rep. Mark Green (R-WI), Rep. Tammy Baldwin (D-WI), Rep. Melissa Hart (R-PA), Rep. Zoe Lofgren (D-CA), and Rep. Robert Wexlar (D-FL).
DC Circuit Addresses Standing to Challenge FCC Orders
6/10. The U.S. Court of Appeals (DCCir) issued its opinion [PDF] in Rainbow/PUSH Coalition v. FCC, a petition for review of an FCC order approving TV license transfers. The issue on appeal was whether an interest group has standing to challenge a final order of the FCC approving a broadcast license transfer. The Appeals Court dismissed for lack of standing. It held that there is no "automatic audience standing" to challenge broadcast license transfers. Notably, to reach this conclusion, the Court critiqued the theory that underlies the FCC's duopoly rule.
Sullivan Broadcast Holdings applied to the Federal Communications Commission (FCC) for approval to transfer licenses in connection with the sale of five television stations, pursuant to 47 U.S.C. § 310(d). The Rainbow/PUSH Coalition (RPC) petitioned the FCC to deny the original, and revised, applications to transfer licenses. The RPC stated that it had members who reside in the broadcast markets affected by these transactions. The RPC raised the FCC's duopoly rule. The FCC approved license transfers, without holding a hearing.
The RPC filed a petition for review with the Court of Appeals. The Court did not reach the merits of the RPC's petition. It dismissed for lack of standing. However, in analyzing the issue of standing, the Court addressed the FCC's duopoly rule.
The Court applied the three part test (injury-in-fact, causation, and redressability) stated in Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992). It found that the RPC failed to produce evidence that either the RPC or any of its members suffered the injury-in-fact required for standing.
The Court wrote that the RPC "seems to argue that our cases establish a per se rule that a person has standing to protect the ``public interest´´ by challenging any decision of the Commission regulating (or, as in this case, declining to regulate) a broadcaster in whose listening or viewing area the person lives." (Parentheses in original.) The Court rejected this argument.
The Court reasoned that the RPC's claim of injury, namely, deprivation of program service in the public interest, is not sufficiently concrete and particularized to pass constitutional muster.
The Court noted that one of RPC's arguments was that "increased concentration in the ownership of broadcast stations results in fewer voices being heard and therefore in decreased diversity in content; ergo, the public interest automatically suffers when two formerly independent stations come under common ownership."
The Court wrote that this "theory has an intuitive appeal, and indeed something very like it underpins the Commission's duopoly rule." It continued that "While it is reasonable for the Commission, however, to assume that a greater concentration of ownership may decrease the diversity of voices on the airwaves, and to erect a prophylactic regulation in order to avert that possibility, ... it does not follow that common control of two licenses in the same market necessarily or even probably affects their programming. Absent a showing that Sinclair's assumption of control of KOKH or KRRT resulted in some actual effect upon the programming of those or of the commonly controlled stations in their markets, Rainbow's fears of decreased diversity remain purely speculative."
On June 2, 2003, the FCC announced a Report and Order revising its media ownership rules. This order maintains, but relaxes, the FCC's local TV broadcast ownership rules. See, story titled "FCC Announces Revisions to Media Ownership Rules" in TLJ Daily E-Mail Alert No. 672, June 3, 2003.
Sen. Schumer Introduces Wireless Number Portability Bill
6/10. Sen. Charles Schumer (D-NY) introduced S 1221, the "Wireless Telephone Number Portability Act of 2003", a bill to require certain wireless carriers to provide number portability -- that is, to provide consumers the ability to keep their phone numbers when switching carriers.
The bill would provide that "Commencing not later than six months after the date of the enactment of this Act, or November 24, 2003, whichever is earlier, the Federal Communications Commission shall require each wireless telephone service provider offering service in one of the 100 largest Metropolitan Statistical Areas (MSA), as defined by the Bureau of the Census, to provide consumers with the option to port telephone numbers between wireless telephone service providers by implementing wireless telephone number portability throughout the networks of wireless telephone service providers in each of such 100 largest Metropolitan Statistical Areas."
Also, in smaller MSAs, in which there are three or more wireless telephone services providers, the FCC be required to mandate wireless number portability within 18 months.
The bill was referred to the Senate Commerce Committee. Sen. Schumer is not a member.
People and Appointments
6/10. MCI WorldCom announced the resignations of Michael Salsbury, EVP and General Counsel, and Susan Mayer, SVP and Treasurer. See, release.
6/10. The House passed HR 1086, the "Standards Development Organization Advancement Act", by voice vote. This is bill to encourage the development and promulgation of voluntary consensus standards by providing relief under the antitrust laws to standards development organizations.
6/10. The National Telecommunications and Information Administration (NTIA) filed a reply comment with the Federal Communications Commission (FCC) in its proceeding regarding the international emergency distress frequency of 406.025 MHz. The NTIA wrote that it "supports extending interference protection to the emergency distress frequency of 406.025 MHz. ... The proposed extension of the frequency limits for interference protection to 405.925 - 406.176 MHz should not impact cable television service operations since the nearest video carriers are at 403.25 MHz and 409.25 MHz, and the nearest aural carrier is at 407.75 MHz." This proceeding is titled "In the Matter of Amendment of Part 76 of the Commission's Rules To Extend Interference Protection to the Marine and Aeronautical Distress and Safety Frequency 406.025 MHz. This is MB Docket No. 03-50.
Bill Would Task DHS's IAIPD With National Parks Protection Responsibilities
6/9. Sen. Hillary Clinton (D-NY) introduced S 1212, an untitled bill to amend the Homeland Security Act of 2002 regarding the protection of National Park Service sites, including Mount Rushmore and the Statute of Liberty.
What is significant about the bill, from a technology standpoint, is that it would amend Section 201 of the Act. This is the section that created the Information Analysis and Infrastructure Protection Directorate (IAIPD). See, Homeland Security Act of 2002, HR 5005 (107th), Public Law No. 107-296. The Act created the Department of Homeland Security (DHS). Title II of the Act creates the IAIPD, which has primary responsibility for protecting critical infrastructures, such as computer and communications systems.
For example, Section 201 provides that the responsibilities of the IAIPD include developing "a comprehensive national plan for securing the key resources and critical infrastructure of the United States, including power production, generation, and distribution systems, information technology and telecommunications systems (including satellites), electronic financial and property record storage and transmission systems, emergency preparedness communications systems, and the physical and technological assets that support such systems." (Parentheses in original.)
Sen. Clinton's bill would define "key resources", as used in Section 201, to include certain "National Park Service sites". Thus, the governmental entity responsible for protecting against cyber attacks, would be required to devote resources to studying terrorist threats to Mount Rushmore and other tourist destinations.
In a related matter, on June 6, the DHS announced the creation of a National Cyber Security Division (NCSD), located in the DHS's IAIPD. Information technology groups expressed disappointment that the head of the NCSD will be three levels below the Secretary. For example, Harris Miller, President of the Information Technology Association of America (ITAA), stated in a release the "position was not given the rank within the Administration that we believe it merits". See, story titled "DHS Creates Cyber Security Division" in TLJ Daily E-Mail Alert No. 676, June 9, 2003.
Senators Introduce Cell Phone Users Bill of Rights
6/9. Sen. Charles Schumer (D-NY) and Sen. Barbara Boxer (D-CA) introduced S 1216, the "Cell Phone Users Bill of Rights".
The bill contains the wireless number portability provisions of S 1221. See, story titled "Sen. Schumer Introduces Wireless Number Portability Bill" in TLJ Daily E-Mail Alert No. 681, June 16, 2003.
The bill would also require the Federal Communications Commission (FCC) to promulgate regulations mandating the form and content of wireless telephone service providers' publications regarding charges, minutes, contract terms and taxes and surcharges.
The bill would also require that each "wireless telephone service provider shall make available a map showing the wireless telephone service area of such provider. Each such map shall contain the maximum practicable level of granularity."
The bill would also require the FCC to "monitor the quality of wireless telephone service" and prepare semiannual reports.
The bill also contains a very broad definition of the term "wireless telephone service". It encompasses not only current cell phone service, broadband PCS, and SMR, but also "any successor service to such service (including so-called next generation or third generations service)." (Parentheses in original.) The bill does not reference IP number or URL portability.
The bill was referred to the Senate Commerce Committee.
Supreme Court News
6/9. The Supreme Court denied certiorari, without opinion, in Swartz v. USPTO, No. 02-1565. See, Order List [8 pages in PDF] at page 2.
6/9. After releasing several non technology related opinions on Monday, June 9, the Supreme Court announced that "The Court will take a recess from today until Monday, June 16, 2003." See, Order List [8 pages in PDF] at page 8.
Bush Nominates Goldsmith to Head OLC
6/9. President Bush nominated Jack Goldsmith to be an Assistant Attorney General in charge of the Office of Legal Counsel. Bush announced his intent to nominate Goldsmith back in April. If confirmed, he will replace Jay Bybee, whom President Bush nominated to be a Judge of the U.S. Court of Appeals for the Tenth Circuit, and the Senate confirmed in March. Goldsmith clerked for Judge Harvie Wilkinson (U.S. Court of Appeals for the 4th Circuit) and Justice Anthony Kennedy (Supreme Court). He was briefly an associate at the law firm of Covington & Burling. He then taught at the University of Virginia School of Law. He is currently a professor at the University of Chicago School of Law, on leave. See, White House release.
He is the author of "Against Cyberanarchy". See also, "Against Cyberanarchy, 65 Chi. L. Rev. 1199 (1998). His publications also include "Regulation of the Internet: Three Persistent Fallacies", 73 Chic.-Kent L. Rev. 1119 (1998), and "The Internet and the Abiding Relevance of Territorial Sovereignty", 5 Ind. J. Glob. Leg. Stud. 475 (1998).
The Office of Legal Counsel has a history of serving as a stepping stone to higher office in Republican administrations. Other former heads of the OLC include Chief Justice William Rehnquist, Justice Antonin Scalia, former Attorney General William Barr, 10th Circuit Judge Jay Bybee, and 4th Circuit Judge Mike Luttig. Some press accounts list now list Luttig as a possible future Supreme Court nominee by President Bush.
More People and Appointments
6/9. President Bush nominated Phillip Figa to be a Judge of the U.S. District Court for the District of Colorado. He is litigation attorney, and partner, in the law firm of Burns Figa & Will, in Engelwood, Colorado. If confirmed, he will replace Judge Richard Matsch, who has gone on senior status. See, White House release.
6/9. President Bush nominated Robert Clive Jones to be a Judge of the U.S. District Court for the District of Nevada. He is a Judge of the U.S. Bankruptcy Court. See, White House release.
6/9. President Bush nominated Christopher Wray to be an Assistant Attorney General in charge of the Department of Justice's (DOJ) Criminal Division. Bush announced his intent to nominate Wray back in April. If confirmed, he will replace Michael Chertoff, whom President Bush has nominated to be a Judge of the U.S. Court of Appeals for the Third Circuit. Wray is part of the Georgia contingent at the DOJ. He previously worked for the law firm of King & Spaulding. The DOJ's Computer Crimes and Intellectual Property Section (CCIPS) is a part of the Criminal Division. See, White House release.
6/9. Federal Trade Commission (FTC) Chairman Timothy Muris issued a statement regarding the Department of Homeland Security's (DHS) announcement on June 6 that it will create a cyber security division. He stated that "I commend Secretary Ridge and the Department of Homeland Security for creating the National Cyber Security Division to help protect our critical infrastructure. The National Cyber Security Division represents a consolidated, highly organized team of information security experts, which will surely make a significant and immediate contribution toward the protection of our nation’s critical cyber assets. Information technology has become a vital, inseparable component of daily business transactions and consumer activities. Practicing safe computing, from the family room to the board room, will minimize vulnerabilities and ensure that the United States remains a paradigm of technical innovation. The National Cyber Security Division at DHS will play an integral role in monitoring current trends, identifying weaknesses, and initiating education campaigns." See also, story titled "DHS Creates Cyber Security Division" in TLJ Daily E-Mail Alert No. 676, June 9, 2003.
6/9. The Federal Communications Commision (FCC) published a notice in the Federal Register regarding its Second Memorandum Opinion and Order, adopted on February 3, 2003, regarding fixed satellite and terrestrial systems in the Ku-Band. This order is effective August 8, 2003. This is ET Docket No. 98-206. See, Federal Register, June 9, 2003, Vol. 68, No. 110, at Pages 34336 - 34339.
House To Take Up Internet Gambling Bill
6/9. The House Rules Committee adopted a structured rule for consideration of HR 2143, the "Unlawful Internet Gambling Funding Prohibition Act". The House is scheduled to take up the bill on Tuesday, June 10. The rule makes in order only three amendments.
The 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 illegal gambling transactions. The bill does not ban gambling. This is a matter of state law.
The first amendment, the Kelly amendment [2 pages in PDF], offered by Rep. Sue Kelly (R-NY) of the House Financial Services Committee, provides that "No provision of this Act shall be construed as altering, limiting, extending, changing the status of, or otherwise affecting any law relating to, affecting, or regulating gambling within the United States."
Second, there is the Lee amendment [2 pages in PDF] offered by Rep. Sheila Lee (D-TX), a member of the House Judiciary Committee. It would remove credit cards, as well as "credit, or the proceeds of credit", from the list of items that may not be used to fund illegal gambling operations. This would essentially gut the bill.
Third, there is the Sensenbrenner Cannon Conyers amendment [2 pages in PDF]. The bill currently provides that the term "bets or wagers" does not include "(ix) any lawful transaction with a business licensed or authorized by a State." This amendment would strike this exception.
This amendment would remove from the bill the exception that creates a carve out for state approved gambling on horse racing, dog racing, and jai alai. Hence, it would expand the prohibition of the bill. However, passage of this amendment would cause the horse racing, dog racing, and jai alai industries, and their supporters to oppose the bill.
See also, stories titled "House Subcommittee Holds Hearing on Internet Gambling Bills" in TLJ Daily E-Mail Alert No. 652, May 2, 2003; "House Crime Subcommittee Approves Internet Gambling Bill" in TLJ Daily E-Mail Alert No. 656, May 7, 2003; House Judiciary Committee Approves Internet Gambling Bill" in TLJ Daily E-Mail Alert No. 662, May 15, 2003; and "House Financial Services Committee Approves Revised Internet Gambling Bill" in TLJ Daily E-Mail Alert No. 666, May 21, 2003.
GAO Reports on DHS's Visa Entry/Exit Info Tech
6/9. The General Accounting Office (GAO) released a report [57 pages in PDF] titled "Information Technology: Homeland Security Needs to Improve Entry Exit System Expenditure Planning". The report finds that the Immigration and Naturalization Service (INS), which is now a part of the Department of Homeland Security (DHS), "has not yet satisfied two OMB requirements -- having a system security plan and assessing the system's impact on the privacy of individuals -- both of which are critical to understanding system requirements and ensuring that acquired system capabilities satisfy these requirements."
The report also states that "INS's preliminary plans for the entry exit system show that it intends for the system to have functional and performance capabilities that the Congress specified in law. These capabilities include being able to collect and match alien arrival and departure data electronically, being accessible to the border management community, and being able to read tamper-resistant documents with biometric identifiers. However, we also observed that this first expenditure plan does not adequately disclose material information about the system, such as what system capabilities and benefits are to be delivered, by when, and at what cost. Without sufficiently detailed information on system plans and progress, the Congress will be impeded in its oversight efforts for the system."
The report was prepared for Sen. Thad Cochran (R-MS), Sen. Robert Byrd (D-WV), Rep. Harold Rogers (R-KY), and Rep. Martin Sabo (D-MN), the Chairman and ranking Democrats on the Appropriations Committees' Homeland Security Subcommittees.
FCC Announces NPRM Regarding Communications Facilities and the National Historic Preservation Act
6/9. The Federal Communications Commision (FCC) released a notice of proposed rulemaking (NPRM) [7 pages in PDF] regarding communications facilities and the National Historic Preservation Act (NHPA). The FCC also issued a short release [2 pages in PDF] summarizing the NPRM.
This NPRM seeks public comment on the draft Nationwide Agreement [28 pages in PDF] of the FCC, the Advisory Council on Historic Preservation, and the National Conference of State Historic Preservation Officers, regarding undertakings for communications facilities, including communications towers and antennas, under the NHPA. Section 106 of the NHPA, which is codified at 16 U.S.C. § 470 et seq., requires federal agencies to consider the effects of federal undertakings on historic properties.
FCC Chairman Michael Powell wrote a separate statement [PDF]. He wrote that "The proposed agreement seeks to clarify the regulatory muddle and delay that has beset many tower-construction proposals by defining key terms, establishing public-participation standards and describing how to submit projects to State Historic Preservation Officers. Our goal is to identify promptly those proposed sites that do impact historic sites and develop mitigation plans or alternative siting plans that allow services to be deployed in those areas. The proposed agreement will also serve to allow those sites that do not have any potential historic impact to move forward without regulatory delay."
The FCC adopted this NPRM on May 27, but did not release it until June 9, 2003. It is titled "In the matter of Nationwide Programmatic Agreement Regarding the Section 106 National Historic Preservation Act Review Process". It is WT Docket No. 03-128. For more information, contact Frank Stilwell at 202 418-1892 or email@example.com.
Comments are due by August 8, 2003. Reply comments are due by September 8, 2003.
Treasury Department Announces Rules for Incentive Stock Options
6/9. The Treasury Department and the
Internal Revenue Service (IRS) published a
notice in the Federal Register announcing a notice of proposed rulemaking (NPRM)
regarding regulations that "affect certain taxpayers
who participate in the transfer of stock pursuant to the exercise of incentive stock options and the exercise of options granted pursuant to an employee stock purchase plan (statutory options)." (Parentheses in original.) See, Federal Register, June 9, 2003, Vol. 68, No. 110, at Pages 34344 - 34370.
The notice further states that "Written and electronically submitted comments and requests to speak, with outlines of topics to be discussed at the public hearing scheduled for September 2, 2003, must be received by August 12, 2003."
The Treasury Department stated in a release that incentive stock options (ISO) "provide employees with the ability to acquire employer stock without realizing income when the option is exercised. If the employee holds the stock a required period, any gains on sale of the stock are capital. The exercise price for an ISO must be no less than the fair market value of the stock when the option is issued. An ISO plan must be approved by shareholders, and the amount of ISOs that can be granted to an employee is limited. The employer does not get a deduction."
The Treasury Department added that "Taxpayers may rely on these proposed regulations for any ISO granted after June 9, 2003."
SCO And Novell Continue Argument Over Rights in UNIX Operating System
6/6. The SCO Group (SCO), also known as Caldera, reasserted that it is "the owner of the UNIX operating system", and that "all rights to the UNIX and UnixWare technology, including the copyrights, were transferred to SCO as part of the Asset Purchase Agreement between Novell and SCO dated September 19, 1995."
Background. On March 6, 2003, Caldera (SCO) filed a complaint in state court in Utah against IBM alleging misappropriation of trade secrets, tortious interference, unfair competition and breach of contract in connection with IBM's alleged use of Caldera's proprietary UNIX code. The complaint did not assert copyright or patent infringement.
IBM filed its answer [17 page PDF scan] on April 30, 2003. It asserted that "contrary to Caldera's allegations, by its lawsuit, Caldera seeks to hold up the open source community (and development of Linux in particular) by improperly seeking to assert proprietary rights over important, widely used technology and impeding the use of that technology by the open source community." (Parentheses in original.)
SCO wrote a letter to Linux customers on May 12, 2003. It asserted that "SCO holds the rights to the UNIX operating system software originally licensed by AT&T to approximately 6,000 companies and institutions worldwide (the ``UNIX Licenses´´). The vast majority of UNIX software used in enterprise applications today is a derivative work of the software originally distributed under our UNIX Licenses."
On May 28, 2003, Novell entered the fray. It wrote a letter to SCO in which it stated that "SCO continues to say that it owns the UNIX System V patents, yet it must know that it does not. A simple review of U.S. Patent Office records reveals that Novell owns those patents."
Novell added that "SCO is not the owner of the UNIX copyrights. Not only would a quick check of U.S. Copyright Office records reveal this fact, but a review of the asset transfer agreement between Novell and SCO confirms it. To Novell's knowledge, the 1995 agreement governing SCO's purchase of UNIX from Novell does not convey to SCO the associated copyrights. We believe it unlikely that SCO can demonstrate that it has any ownership interest whatsoever in those copyrights."
SCO responded in a statement which claims that "SCO owns the contract rights to the UNIX operating system. SCO has the contractual right to prevent improper donations of UNIX code, methods or concepts into Linux by any UNIX vendor." It added that "Copyrights and patents are protection against strangers. Contracts are what you use against parties you have relationships with. From a legal standpoint, contracts end up being far stronger than anything you could do with copyrights ... SCO's lawsuit against IBM does not involve patents or copyrights. SCO's complaint specifically alleges breach of contract, and SCO intends to protect and enforce all of the contracts that the company has with more than 6,000 licensees."
Amendment No. 2. In the latest exchange, SCO asserted that "Any question of whether the UNIX copyrights were transferred to SCO under the Asset Purchase Agreement was clarified in Amendment No. 2 to the Asset Purchase Agreement dated October 16, 1996."
SCO asserted that this Amendment No. 2 provides that, "A. With respect to
Schedule 1.1(b) of the Agreement, titled "Excluded Assets", Section V,
Subsection A shall be revised to read:
All copyrights and trademarks, except for the copyrights and trademarks owned by Novell as of the date of the Agreement required for SCO to exercise it rights with respect to the acquisition of UNIX and UnixWare technologies. However, in no event shall Novell be liable to SCO for any claim brought by any third party pertaining to said copyrights and trademarks." See, June 6 SCO release.
Novell responded that "Amendment #2 to the 1995 SCO-Novell Asset Purchase Agreement was sent to Novell last night by SCO. To Novell's knowledge, this amendment is not present in Novell's files. The amendment appears to support SCO's claim that ownership of certain copyrights for UNIX did transfer to SCO in 1996. The amendment does not address ownership of patents, however, which clearly remain with Novell." See, Novell's June 6 release.
See also, stories titled "Novell Asserts Intellectual Property Rights in UNIX Technology" and "German Software Group Threatens to Sue SCO Over Linux Claims", in TLJ Daily E-Mail Alert No. 670, May 30, 2003; and "Microsoft Licenses Technology at Issue in Caldera v. IBM", in TLJ Daily E-Mail Alert No. 669, May 29, 2003.
Oracle Makes Hostile Bid for PeopleSoft
6/6. Oracle made a hostile bid for PeopleSoft on June 6, following PeopleSoft's and J.D. Edwards' June 2 announcement that PeopleSoft would acquire J.D. Edwards.
On June 2, PeopleSoft announced in a release [4 pages in PDF] "a definitive agreement for PeopleSoft to acquire J.D. Edwards, creating the world’s second largest enterprise applications software company. Under the terms of the agreement, stockholders will receive 0.860 PeopleSoft common shares for each outstanding J.D. Edwards common share. Based on the closing price of PeopleSoft stock on May 30, 2003 and J.D. Edwards’ shares outstanding, the transaction is valued at approximately $1.7 billion." See also, J.D. Edwards release.
On June 6, Oracle announced in a release [PDF] that it will "commence a cash tender offer to purchase all of the outstanding shares of PeopleSoft ... for $16 per share, or approximately $5.1 billion." See also, Oracle document [PDF] titled "Frequently Asked Questions Document".
On June 6, Craig Conway, P/CEO of PeopleSoft stated in a release that Oracle's offer is "atrociously bad behavior from a company with a history of atrociously bad behavior. Obviously it is a transparent attempt to disrupt the acquisition of J.D. Edwards by PeopleSoft announced earlier this week".
PeopleSoft's release added that "PeopleSoft and its Board of Directors is required by law to review all cash tenders regardless of intent, and will provide a definitive recommendation to shareholders shortly thereafter. In the meantime, PeopleSoft advises it shareholders to take no immediate action."
Either transaction is conditioned upon expiration of the applicable Hart Scott Rodino Act waiting period.
DC Circuit Upholds FCC's Number Portability Rules for Wireless Carriers
6/6. The U.S. Court of Appeals (DCCir) issued its opinion [19 pages PDF] in CTIA v. FCC, in which it rejected a challenge to the Federal Communications Commission's (FCC) number portability rules for wireless carriers.
Number portability is the ability of phone service customers to keep their phone numbers when they switch carriers. The FCC promulgated regulations requiring wireless carriers to provide number portability. Its Report and Order was released in 1996. The FCC set a compliance date of June 30, 1999. The Cellular Telecommunications and Internet Association (CTIA), a group that represents wireless carriers, requested that the FCC forbear from enforcement of its wireless portability rules. Verizon Wireless also sought forbearance. On July 26, 2002, the FCC denied Verizon's forbearance petition, but extended the enforcement deadline to November 24, 2003.
The CTIA and Verizon filed a petition for review of the FCC's order denying permanent forbearance with the U.S. Court of Appeals (DCCir) in August of 2002. They challenged the statutory authority of the FCC to promulgate a wireless number portability rule, and the FCC's failure to forebear.
The Court of Appeals dismissed the petition for review as to the challenge to the statutory authority of the FCC. A petition for review must be filed within 60 days. The petitioners waited several years before filing. The Court of Appeals denied the petition for review for failing to forbear.
Tom Wheeler, P/CEO of the CTIA stated in a release that "We are disappointed in the court's decision ... This decision increases the pressure on the FCC to do what they have yet to do -- define the implementation of number portability. There are only 24 weeks between now and the portability deadline, but the basic 'how tos' have yet to be addressed. If there is to be number portability in November, the FCC must announce final rules by Labor Day or consumers will find chaos in the market."
DHS Creates Cyber Security Division
6/6. The Department of Homeland Security (DHS) announced the creation of a National Cyber Security Division (NCSD), located in the DHS's Information Analysis and Infrastructure Protection Directorate (IAIPD).
The DHS stated in a release that the NCSD will "identify, analyze and reduce cyber threats and vulnerabilities; disseminate threat warning information; coordinate incident response; and provide technical assistance in continuity of operations and recovery planning. The NCSD builds upon the existing capabilities transferred to DHS from the former Critical Infrastructure Assurance Office, the National Infrastructure Protection Center, the Federal Computer Incident Response Center, and the National Communications System."
Robert Liscouski, the Assistant Secretary of Homeland Security for Infrastructure Protection, will oversee NCSD. However, the DHS has yet to name the person who will head the NCSD.
The Homeland Security Act of 2002, HR 5005 (107th) and Public Law No. 107-296, at Title II, creates the IAIPD, which has primary responsibility for information sharing and cyber security matters. Frank Libutti is the Under Secretary for Information Analysis and Infrastructure Protection.
Title II of the Homeland Security Act also creates the positions of Assistant Secretary for Infrastructure Protection and Assistant Secretary for Information Analysis. Liscouski holds the former position, and reports to Libutti. The head of the newly created NCSD will be beneath Lisouski. This places the head of the Cyber Security Division at least three levels below Tom Ridge, the Secretary of Homeland Security.
See also, TLJ story titled "DHS and NIST to Collaborate" May 22, 2003; story titled "Bush Fills More Tech Positions at DHS" in TLJ Daily E-Mail Alert No. 623, March 14, 2003; and story titled "Bush Picks Frank Libutti for Key Tech Position at DHS" in TLJ Daily E-Mail Alert No. 628, March 21, 2003.
Harris Miller, President of the Information Technology Association of America (ITAA), stated in a release "While the Director position was not given the rank within the Administration that we believe it merits, the fact that Assistant Secretary for Infrastructure Protection Bob Liscouski has agreed to build an organization under him that coordinates the cyber security activities of the various offices within DHS and other agencies, and serves as the central point of contact for the private sector, shows his resolve to address cyber security challenges head-on. We look forward to helping identify the strongest candidates for the job and working with the new cyber czar to get the job done."
Robert Holleyman, P/CEO of the Business Software Alliance (BSA), stated in a release that "This is a welcome move by the Department, and industry looks forward to working closely with this important new unit of DHS ... Over the past two years, the United States has made significant strides in improving our country's physical security. But without cyber security, there is no physical security. Study after study indicates we remain ill-prepared to defend against threats to our critical information networks -- meaning a major virus or cyber attack could wreak havoc on our communications, transportation, utility, financial or other vital information infrastructure."
US and Chile Sign FTA
6/6. Robert Zoellick, the U.S. Trade Representative (USTR), and Soledad Alvear, the Chilean Foreign Minister, signed the U.S. Chile Free Trade Agreement (FTA) in Miami, Florida. See, USTR release.
On May 6, President Bush and Singapore Prime Minister Goh Chok Tong signed the U.S. Singapore FTA at a ceremony at the White House. Singapore has been more supportive of U.S. anti terrorism efforts than Chile. See, story titled "Bush and Goh Sign US Singapore FTA" in TLJ Daily E-Mail Alert No. 656, May 7, 2003.
The U.S. Chile FTA addresses several technology related topics. See, Chapter 13 (pertaining to telecommunications), Chapter 15 (electronic commerce), Chapter 17 (intellectual property), and Chapter 21 (transparency).
This FTA still requires Congressional approval. However, under the trade promotion authority granted to the President last year, the Congress can approve or reject, but not amend, these FTAs.
Sen. Charles Grassley (R-IA), the Chairman of the Senate Finance Committee, announced in a release that he "hopes" to schedule hearing on the Chile and Singapore FTAs "later this month".
Dave McCurdy of the Electronic Industries Alliance (EIA) stated in a release that "Free trade is one of the electronics industry's highest priorities, particularly since more than a third of U.S. jobs in the computer and electronics manufacturing sector are supported by exports ... U.S. high-tech goods and services exported to Chile totaled $865 million in 2001, and it is critical that we keep our manufacturers on a level playing field as others, such as the EU, implement their own FTAs with Chile."
6/6. The Commerce Department's National Telecommunications and Information Administration (NTIA) published in its website a document titled "NTIA Spectrum News". It summarizes recent NTIA actions related to spectrum policy reform, the appointment of Janet Obuchowski as WRC ambassador, spectrum for Third Generation (3G) wireless systems, and wireless access systems at 5GHz.
Go to News from June 1-5, 2003.