Rep. Bono Introduces Spyware Bill

7/25. Rep. Mary Bono (R-CA) and Rep. Edolphus Towns (D-NY) introduced HR 2929 [PDF], the "Safeguard Against Privacy Invasions Act", a bill to prohibit the distribution of certain spyware programs over the internet without notice and consent. See, full story.

Representatives Introduce E911 Implementation Act

7/25. Rep. John Shimkus (R-IL), Rep. Anna Eshoo (D-CA), and others introduced HR 2898, the "E-911 Implementation Act of 2003".

Rep. Eshoo (at right) stated in a release that "In an emergency, when every second counts, most Americans assume they can pick up their cell phone, dial 911, and get immediate help from emergency responders ... But frighteningly, this isn't the case. Today, only 10 percent of our nation's emergency call centers can obtain precise location information from a wireless caller."

HR 2898 is similar to S 1250 the "Enhanced 911 Emergency Communications Act of 2003", sponsored by Sen. Conrad Burns (R-MT) and others. On July 17, 2003, the Senate Commerce Committee (SCC) approved its bill by unanimous voice vote, without amendment. See, story titled "Senate Commerce Committee Approves E-911 Bill" in TLJ Daily E-Mail Alert No. 701, July 18, 2003.

The House bill would require the head of the National Telecommunications and Information Administration (NTIA) to create an "E-911 Implementation Coordination Office" to "facilitate coordination and communication between Federal, State, and local emergency communications systems, emergency personnel, public safety organizations, telecommunications carriers, and telecommunications equipment manufacturers and vendors involved in the implementation of E-911 services".

The bill also would authorize the appropriation of $500 Million in grants over five years, to be administered by the NTIA, to enhance emergency communications services. The bill provides that the NTIA "shall require an eligible entity to certify in its application that -- (A) in the case of an eligible entity that is a State government, the entity -- (i) has coordinated its application with the public safety answering points ... located within the jurisdiction of such entity; ...".

The bill would also penalize states for redirecting E-911 funds collected from consumer's cell phone bills. It would require the Federal Communications Commission (FCC) to review twice a year fees charged to customers for enhancing 911 services. States would be required to certify that no E911 fees are being used for other purposes. The FCC would be required to notify Congress of states that divert E911 funds. Finally, the NTIA would be required to withhold grant funds to states that are found by the FCC to divert E911 funds.

Steve Berry, SVP of Government Affairs for the Cellular Telecommunications & Internet Association (CTIA), stated in a release that "Dozens of states have taken a hammer to their E-911 piggy banks and run-off with these vital tax-payer funds, earmarked for public safety ... This legislation creates powerful incentives for states to end the looting and get to work on upgrading their public safety networks."

Finally, the bill would direct the FCC to study E-911 implementation in rural areas.

The bill was referred to the House Commerce Committee. Both Rep. Shimkus and Rep. Eshoo are members.

DC Circuit Affirms in TransIntel v. FCC

7/25. The U.S. Court of Appeals (DCCir) issued its opinion [15 pages in PDF] in Transportation Intelligence v. FCC, affirming the FCC.

Petitioner, Transportation Intelligence (TransIntel), and intervenor, Highway Information Systems (Highway), both make and sell highway advisory radio systems, which use low power AM radio transmitters to broadcast traffic, emergency, and other information to drivers. Respondent, Federal Communications Commission (FCC), regulates radio frequency devices.

TransIntel filed a complaint with the FCC alleging that Highway made substantial modifications to a low power AM transmitter that the FCC had originally authorized in 1979, without seeking a new equipment certification. TransIntel further alleged that Highway's transmitter caused interference.

Highway then modified its transmitter, and submitted an application to the FCC for a new certification. The FCC's Office of Engineering and Technology (OET) granted the application. TransIntel filed a petition for reconsideration with the OET in which it also asked that Highway's new certification be rescinded. The OET denied this petition. Then, TransIntel petitioned the full FCC for review of the OET's denial. The FCC issued the order, which is the subject of the present Appeals Court opinion, upholding the OET's denial.

The Appeals Court affirmed, "because the FCC's order rested not on a factual dispute but rather on the Commission’s estimation of the relative insignificance of Highway’s infraction, and because that policy judgment was neither arbitrary nor capricious, we have no basis for overturning the decision of the Commission."

People and Appointments

7/25.President Bush nominated Brett Kavanaugh to be a Judge of the U.S. Court of Appeals for the District of Columbia. See, White House release.

7/25.President Bush nominated Janice Brown to be a Judge of the U.S. Court of Appeals for the District of Columbia. See, White House release.

7/25. Emily Willeford, Special Assistant for Legislative and Public Affairs for Federal Communicatons Commission (FCC) Commissioner Kevin Martin, will go to work in the White House Office. She worked at the National Economic Council in the White House Office before joining Martin's staff in November of 2001. Before that, she worked on the Bush Cheney election campaign.

7/25. Bruce Artim was named Chief Counsel and Staff Director of the Senate Judiciary Committee. He has worked for the Committee since 1995. He replaces Makan Delrahim, who was named one of the Deputy Assistant Attorneys General in the Department of Justice's Antitrust Division. See, Sen. Orrin Hatch's (R-UT) release.

SDNY Rules on Cost Shifting in Electronic Pre-Trial Discovery

7/24. The U.S. District Court (SDNY) issued an Opinion and Order [30 pages in PDF] Zubulake v. UBS Warburg, regarding which party should bear the costs of restoration and production of e-mail from backup tapes during pretrial discovery in civil litigation.

Laura Zubulake, who is now an unemployed equities trader, filed a complaint in U.S. District Court (SDNY) against UBS Warburg, her former employer, alleging gender discrimination in violation of federal, state and local law. In pre-trial discovery, Zubulake seeks from UBS e-mails that reference her.

The District Court previously ordered UBS to restore and produce certain e-mails from 5 of its 94 backup tapes. UBS had the restoration performed by an outside vendor at a price of over $11,000. The Court's earlier opinion articulated a seven part test for applying the proportionality test Rule 26(b)(2) in the context of inaccessible electronic data.

Zubulake then moved for an order compelling UBS to produce e-mails from all remaining backup tapes at its expense. UBS argued that the cost, which it asserts will be about $273,000, should be shifted to Zubulake.

Rule 26(b), Federal Rules of Civil Procedure, provides, in part, that "Parties may obtain discovery regarding any matter, not privileged, that is relevant to the claim or defense of any party, including the existence, description, nature, custody, condition, and location of any books, documents, or other tangible things and the identity and location of persons having knowledge of any discoverable matter."

However, Rule 26(b) further provides that "The frequency or extent of use of the discovery methods otherwise permitted under these rules and by any local rule shall be limited by the court if it determines that: (i) the discovery sought is unreasonably cumulative or duplicative, or is obtainable from some other source that is more convenient, less burdensome, or less expensive; (ii) the party seeking discovery has had ample opportunity by discovery in the action to obtain the information sought; or (iii) the burden or expense of the proposed discovery outweighs its likely benefit, taking into account the needs of the case, the amount in controversy, the parties' resources, the importance of the issues at stake in the litigation, and the importance of the proposed discovery in resolving the issues."

The Court wrote that "the presumption is that the responding party must bear the expense of complying with discovery requests", but that "requests that run afoul of the Rule 26(b)(2) proportionality test may subject the requesting party to protective orders under Rule 26(c)", including shifting the costs of discovery.

The Court issued an Opinion and Order [39 pages in PDF] on May 13, 2003, that listed seven factors to be considered by the Court:

"1. The extent to which the request is specifically tailored to discover relevant information;
2. The availability of such information from other sources;
3. The total cost of production, compared to the amount in controversy;
4. The total cost of production, compared to the resources available to each party;
5. The relative ability of each party to control costs and its incentive to do so;
6. The importance of the issues at stake in the litigation; and
7. The relative benefits to the parties obtaining the information."

In the present order, the Court applied this seven part test, and concluded that UBS should bear 75% of the cost of restoration, and all of the other costs, such as searching and reviewing the restored e-mails.

This is D.C. No. 02 Civ. 1243 (SAS), Judge Shira Scheindlin presiding.

Representatives Introduce Bill to Protect Children from P2P Smut

7/24. Rep. Joe Pitts (R-PA), Rep. Chris John (D-LA), Rep. John Sullivan (R-OK), Rep. Mike Pence (R-IN), and Rep. Jim DeMint (R-SC) introduced HR 2885, the "Protecting Children from Peer-to-Peer Pormography Act of 2003".

Rep. Pitts stated in a release that "Our legislation gives parents the tools they need to protect their children from pornography and threats to privacy posed by peer-to-peer file trading networks. By working together to protect children, we are building a broad and bipartisan coalition".

The bill recites in its findings that "Peer-to-peer systems are emerging as a conduit for the distribution of pormographic images and videos, including child pormography. Child pormography is easily found and downloaded using peer-to-peer systems."

The bill provides that "It is unlawful for any person to distribute peer-to-peer file trading software, or to authorize or cause peer-to-peer file trading software to be distributed by another person, in interstate commerce in a manner that violates the regulations prescribed under subsection (b)(2)." Subsection (b)(2), in turn, requires the FTC to write regulations that impose eleven requirements.

Parental Consent. For example, it requires that the FTC to "require any person who distributes, or authorizes or causes another person to distribute, peer-to-peer file trading software in interstate commerce to ... obtain verification of majority, or if a recipient is a juvenile obtain verifiable parental consent, before the peer-to-peer file trading software is provided to the recipient ..."

Firewall Circumvention. Subsection (b)(2) also requires that P2P software that is capable of circumventing security measures, such as firewalls, not activate that capability unless the user first receives notice of that capability.

Specifically, it provides that "if the peer-to-peer file trading software has the capability of disabling or circumventing security or other protective software on, or features of, the user's computer or network, including a firewall, software that protects against viruses or other malicious code or a do-not-install beacon or other parental control, ensure that such peer-to-peer file trading software does not exercise that capability unless the user receives clear and prominent notice thereof and thereafter takes affirmative steps to enable that capability;".

Disable and Uninstall Capabilities. Subsection 2(b) also requires the FTC to "ensure that the peer-to-peer file trading software has the capability to be readily disabled or uninstalled by a user thereof, and prominent means to access clear information concerning the availability and use of that capability

The bill would also require the FTC to write rules defining the term peer to peer software. The bill would give enforcement authority to both the FTC and to state attorneys general.

Capitol Hill News

7/24. The House Armed Services Committee's (HASC) Subcommittee on Terrorism, Unconventional Threats and Capabilities Subcommittee held a hearing titled "Cyber Terrorism: The New Asymmetric Threat". See, prepared testimony [36 pages in PDF] of the General Accounting Office, prepared testimony of Robert Lentz (Information Assurance, Department of Defense), prepared testimony of Scott Charney (Microsoft), and prepared testimony [PDF] of Eugene Spafford (Purdue University).

7/24. The House Judiciary Committee's Subcommittee on Courts the Internet and Intellectual Property (CIIP) held a hearing titled "Patent Quality Improvement". See, prepared testimony of Charles Van Horn (Finnegan Henderson, on behalf of the American Intellectual Property Law Association), prepared testimony of Mark Kesslen (J.P. Morgan Chase, on behalf of the Financial Services Roundtable), prepared testimony [PDF] of David Simon (Intel), and prepared testimony of John Thomas (Georgetown University).

7/24. The The House Judiciary Committee held a hearing titled "Antitrust Enforcement Agencies: The Antitrust Division of the Department of Justice and the Bureau of Competition of the Federal Trade Commission". See, prepared statement of the Federal Trade Commission (FTC), and prepared testimony of Hewitt Pate, Assistant Attorney General in charge of the Department of Justice's Antitrust Division.

7/24. The House Committee on Financial Services (HFSC) amended and approved HR 2622, the "Fair and Accurate Credit Transactions Act", or FACT Act. The bill addresses identity theft protections and establishes permanent national credit reporting standards. See, HFSC release. Wayne Abernathy, Assistant Secretary of the Treasury for Financial Institutions, stated in a release that "This legislation is timely. Virtually every day brings news of the growing scope of identity theft. New estimates suggest that as many as 7 million Americans may have become victims of this crime in the last year. But the real tragedy is the way this crime disrupts the life of each one of its victims. The tools in this legislation will strengthen the fight against identity theft." He added that "We look forward to continuing to work with the Congress in the legislative refinement process as the bill moves on to consideration by the full House of Representatives and by the Senate."

7/24. Rep. Michael Michaud (D-ME) and others introduced HR 2879, a bill to repeal the Bipartisan Trade Promotion Authority Act of 2002. It was referred to the House Ways and Means Committee, where it is not likely to see any action.

More News

7/24. MCI WorldCom filed a motion with the U.S. Bankruptcy Court (SDNY) regarding its acquisition of Digex. It stated in a release that it is "seeking authorization to purchase all outstanding publicly traded common stock of Digex, Incorporated for a total of approximately $18 million dollars." Digex, which is based in Laurel, Maryland, is a provider of enterprise hosting services.

7/24. The Department of Commerce's (DOC) Bureau of Industry and Security (BIS), which is also still known as the Bureau of Export Administration (BXA), updated its website titled "Commercial Encryption Export Controls" to reflect recent changes to its regulations. See also, story titled "BIS Amends EAR Regarding Encryption Products" in TLJ Daily E-Mail Alert No. 683, June 18, 2003, and notice in the Federal Register, June 17, 2003, Vol. 68, No. 116, at Pages 35783 - 35787.

7/24. The Department of Commerce's (DOC) Bureau of Industry and Security (BIS), which is also still known as the Bureau of Export Administration (BXA), published in its website an updated version of its Denied Persons List.

7/24. The Department of Commerce (DOC) held a technology exhibition titled "Technology for all Americans". Phil Bond, Under Secretary for Technology, gave a speech in which he announced Secretary of Commerce Donald Evans' new departmental initiatives to support the development of assistive technologies. He also addressed the National Medal of Technology, which is administered by the DOC. He stated that "IBM, also a National Medal company winner, is here today with their web browser for the blind. Medallist Ray Kurzweil's software is also on display. It is designed to help individuals with learning disabilities read. One last note of pride, in my own Technology Administration, at the National Institute of Standards, NIST has brought their amazing Braille reader, which is actually a tactile display that allows the blind to ``feel´´ electronic images."

7/24. The U.S. District Court (DConn) sentenced Aleksey Vladimirovich Ivanov to serve a term of imprisonment of 48 months, to be followed by 3 years of supervised release. He previously plead guilty to charges of conspiracy, computer intrusion, computer fraud, credit card fraud, wire fraud, and extortion. The Office of the U.S. Attorney (USAO) stated in a release [PDF] that Ivanov "hacked into dozens of computers throughout the United States, stealing usernames, passwords, credit card information, and other financial data, and then extorting those victims with the threat of deleting their data and destroying their computer systems." Ivanov operated from Russia, but was arrested after he was lured into the U.S. for a job interview with an FBI front company. The USAO further stated that Ivanov was responsible for "an aggregate loss of approximately $25 million". Thus, if he serves his full sentence, he will spend one day behind bars for every $17,111 of harm that he caused.

7/24. The American Antitrust Institute filed an amicus curiae brief [38 pages in PDF] with the Supreme Court in Verizon Communications v. Law Office of Curtis V. Trinko, urging that the Court of Appeals be affirmed. See, TLJ story titled "Supreme Court Grants Certiorari in Verizon v. Trinko", March 10, 2003.

People and Appointments

7/24. Federal Trade Commission (FTC) Commissioner Sheila Anthony wrote a letter to President Bush in which she tendered her resignation, effective August 1, 2003.

House Passes CJS Bill With Media Ownership Section

7/23. The House passed HR 2799, the "Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies Appropriations Act for Fiscal Year 2004", by a vote of 400-21. See, Roll Call No. 422.

This bill contains appropriations for most of the technology related executive branch entities, including the Federal Communications Commission (FCC), Federal Trade Commission (FTC), U.S. Patent and Trademark Office (USPTO), Office of the U.S. Trade Representative (USTR), National Telecommunications and Information Administration (NTIA), and National Institute of Standards and Technology (NIST). See, story titled "House to Consider CJS Appropriation Bill" in TLJ Daily E-Mail Alert No. 703, July 22, 2003, for a summary of the funding levels of the various technology related entities covered by the bill. See also, story titled "House Begins Consideration of CJS Bill" in TLJ Daily E-Mail Alert No. 704, July 23, 2003.

The bill provides, at Section 624, that "None of the funds in this Act may be used to grant, transfer or assign a license for a commercial TV broadcast station to any party (including all parties under common control) if the grant, transfer or assignment of such license would result in such party or any of its stockholders, partners, members, officers or directors, directly or indirectly, owning, operating or controlling, or having a cognizable interest in TV stations which have an aggregate national audience reach, as defined in 47 C.F.R. 73.3555, exceeding thirty-five (35) percent." (Parentheses in original.)

This section has the effect of preventing the FCC from fully implementing, during FY 2004, the national TV ownership provisions of its June 2, 2003 Report and Order and Notice of Proposed Rulemaking [257 pages in PDF] amending its media ownership rules. See, story titled "FCC Announces Revisions to Media Ownership Rules" in TLJ Daily E-Mail Alert No. 672, June 3, 2003.

On July 23, FCC Chairman Michael Powell released a statement [PDF] in which he advocated the merits of the FCC's Report and Order. He stated that "We created enforceable rules that reflect the realities of today’s media marketplace. The rules will benefit Americans by protecting localism, competition and diversity." He added that "It would be irresponsible to ignore the diversity of viewpoints provided by cable, satellite and the Internet."

On July 23 the Senate Commerce Committee held a hearing to examine the "public interest and localism". See, opening statement of Sen. John McCain (R-AZ), prepared testimony of FCC Commissioner Michael Copps, prepared testimony of Robert Corn-Revere (Davis Wright Tremaine), prepared testimony [PDF] of Barry Faber (Sinclair Broadcasting Group), prepared testimony of Dave Davis (WPVI-DT), prepared testimony of Martin Kaplan (Annenberg School for Communication), and prepared testimony of Brent Bozell (Media Research Center).

On July 22, FCC Commissioner Jonathan Adelstein gave a speech titled "The Impact of Media Ownership Rules on Minority Broadcasting". He stated that "I believe the recent changes to the FCC’s media ownership rules are a disaster for smaller and new entrants. Small and start-up broadcasters are the big losers -- and that spells trouble for minority ownership. It is no exaggeration to say that the ruling reduces the free and full exchange of diverse ideas and opinions on which a healthy democracy depends."

House Approves Singapore and Chile FTAs

7/23. The House passed HR 2739, the "United States Singapore Free Trade Agreement Implementation Act",  by a vote of 272-155. See, Roll Call No. 432. The House also passed HR 2738, the "United States Chile Free Trade Agreement Implementation Act", by a vote of 270-156. See, Roll Call No. 436.

Rep. Jim Moran (D-VA) stated that "In my congressional district, for example, and there are many such suburban technology oriented districts like mine across the country, it is going to have a very significant positive impact for the high-tech community. High technology trade between the United States and Singapore represents about half of the total two-way trade. In 2002, the U.S. exported nearly $6 billion in high-tech goods to Singapore. The technology sector is the largest merchandise exporter in the United States, and that is the sector that is going to benefit most from the free trade agreement with Singapore."

Rep. Moran continued that "With respect to intellectual property rights, the U.S.-Singapore Free Trade Agreement contains protections to ensure that a rich, diverse, and competitive marketplace will be maintained throughout Asia. Singapore is our key gateway to the rest of Asia; so it is very important that they are going to grant our inventors, our writers, our artists, our business people strong enforceable property rights over the fruits of their creations." See, Congressional Record, July 23, 2003, at H7497-8.

Rep. Jennifer Dunn (R-WA) stated that "For our high tech firms, this FTA means strengthening intellectual property standards. I represent Microsoft's corporate campus and the software industry loses $12 billion annually due to counterfeiting and piracy. In this FTA, the Singaporean government will implement tough penalties against piracy and counterfeiting." See, Congressional Record, July 23, 2003, at H7508.

U.S. Trade Representative (USTR) Robert Zoellick stated in a release that "The Trade Act of 2002 renewed presidential Trade Promotion Authority after an eight-year lapse, and today's vote demonstrates that President Bush and Congress will work together to make good use of TPA to open markets around the world for American businesses, workers, and farmers."

Zoellick added that "These cutting-edge agreements eliminate tariffs, tackle non-tariff barriers, open services markets, strengthen the intellectual property protections for our knowledge industries, and enhance labor and environmental protections".

On July 17, the Senate Finance Committee unanimously approved legislation implementing the Chile FTA (S 1416) and the Singapore FTA (S 1417). The Senate Judiciary Committee, which has jurisdiction over the visa provisions, also approved the bills on July 17. These bills still require approval by the full Senate.

See also, texts of the U.S. Singapore Free Trade Agreement and the U.S. Chile Free Trade Agreement.

Security of Electronic Voting Machines Debated

7/23. Four computer scientists released a paper [pages in PDF] titled "Analysis of an Electronic Voting System". They analyzed the source code for a version of the software used in Diebold Inc.'s AccuVote-TS voting terminal. The four concluded that "we discovered significant and wide-reaching security vulnerabilities". More generally, the paper is a criticism of software based voting systems, as opposed to paper ballot systems.

Diebold released a statement in which it said that "We respectfully disagree with the researchers' fundamental conclusions". It also stated that "We currently have more than 50,000 electronic voting units installed throughout the United States". See also, Diebold's Technical Response To The Johns Hopkins Study On Voting Systems.

The four computer scientists found that "voters can easily program their own smartcards to simulate the behavior of valid smartcards used in the election. With such homebrew cards, a voter can cast multiple ballots without leaving any trace. A voter can also perform actions that normally require administrative privileges, including viewing partial results and terminating the election early. Similar undesirable modifications could be made by malevolent poll workers (or even maintenance staff) with access to the voting terminals before the start of an election."

They also found that "the protocols used when the voting terminals communicate with their home base, both to fetch election configuration information and to report final election results, do not use cryptographic techniques to authenticate the remote end of the connection nor do they check the integrity of the data in transit. Given that these voting terminals could communicate over insecure phone lines or even wireless Internet connections, even unsophisticated attackers can perform untraceable ``man-in-the-middle´´ attacks."

They also found that "Cryptography, when used at all, is used incorrectly. In many places where cryptography would seem obvious and necessary, none is used. More generally, we see no evidence of rigorous software engineering discipline." They added that "We also saw no evidence of any change-control process that might restrict a developer’s ability to insert arbitrary patches to the code. Absent such processes, a malevolent developer could easily make changes to the code that would create vulnerabilities to be later exploited on Election Day. We also note that the software is written entirely in C++. When programming in an unsafe language like C++, programmers must exercise tight discipline to prevent their programs from being vulnerable to buffer overflow attacks and other weaknesses. Indeed, buffer overflows caused real problems for AccuVote-TS systems in real elections."

Diebold offered several criticisms of the report. It stated that "the study did not use our current software code".

It stated that "The code was also analyzed without knowledge of the voting machine hardware in which it is used in actual elections, which caused them to draw many incorrect inferences."

Diebold also wrote that "It is also important to note that the clinical research focused almost solely on software code, and overlooked the total system of software, hardware, services and election processes that have made Diebold electronic voting systems so effective in real-world implementations. For example, the study cites Microsoft Windows communications weaknesses which have been widely publicized over the past several years. These weaknesses only apply if the voting terminals are connected to the Internet or some other public network. This is NEVER the case. As the terminals are not connected to such a network, there are no opportunities to exploit these weaknesses even if they exist. In addition, many of the published weaknesses have to do with Internet browsers, e-mail programs and other Internet related applications. No Diebold elections terminals use any of these applications."

The paper was written by Aviel Rubin (professor in the Department of Computer Science at Johns Hopkins University), Tadayoshi Kohno (Johns Hopkins University Information Security Institute), Adam Stubblefield (Johns Hopkins University Information Security Institute), and Dan Wallach (professor in the Department of Computer Science at Rice University).

Diebold is based in North Canton, Ohio. It provides ATMs and other self service solutions, physical and electronic security, electronic voting technologies, essential services and support, and card based systems.

People and Appointments

7/23. The Senate confirmed Pamela Harbour to be a Commissioner of the Federal Trade Commissioner (FTC) for the term of seven years from September 26, 2002.

7/23. John Thornton was elected to Intel's Board of Directors. On July 1 he retired as President and Co-Chief Operating Officer of Goldman Sachs Group Inc., and as a member of that firm's Board of Directors. See, Intel release.

More News

7/23. Federal Reserve Board (FRB) Governor Ben Bernanke gave a speech titled "An Unwelcome Fall in Inflation?" at the University of California at San Diego. He stated, among other things, that "during the late 1990s, economists worked hard to explain the combination of an unusually low unemployment rate and stable inflation". He cited as one of several possible contributing factors the "improved matching between workers and jobs, facilitated by increased access to the Internet". He added that "Many of these forces continue to operate in today's economy, conceivably with greater force than in the late 1990s. In addition, measured labor productivity has continued to increase rapidly since early 2001 -- remarkably so, considering that productivity tends to be strongly procyclical -- raising the possibility that we have underestimated the degree to which innovation and better use of existing resources have increased potential output."

7/23. The U.S. International Trade Commission (ITC) determined that "a U.S. industry is materially injured or threatened with material injury by reason of imports of DRAMs and DRAM Modules from Korea that the U.S. Department of Commerce has determined are subsidized. ... As a result of the Commission's affirmative determination, the U.S. Department of Commerce will issue a countervailing duty order on imports of DRAMs and DRAM Modules from Korea." See, USITC release.

California Court Rules in Unsolicited Fax Case

7/22. The California Court of Appeal issued its opinion [MS Word] in Kaufman v. ACS Systems, a case involving private causes of action filed in state court under the Telephone Consumer Protection Act for unsolicited fax messages. This case addresses only faxes. However, the Court's analysis may be relevant to the current debate over how an e-mail spam bill should be drafted.

Barry Kaufman and David Amkraut are Californians who complain of unsolicited fax messages sent by ACS Systems and Fax.com. They filed two separate complaints in the Superior Court of Los Angeles County alleging violation of the Telephone Consumer Protection Act of 1991 (TCPA), Public Law No. 102‑243, which bans unsolicited faxes. They sought class action status.

The Court "informally coordinated" the two actions. Both of the junk faxers argued that the plaintiffs have no private right of action under the TCPA, that if such a right exists, it is unconstitutional, and that claims under the TCPA cannot be brought as class actions.

The trial court ruled that the plaintiffs could not pursue a TCPA claim in state court because the California Legislature had not enacted a statute expressly permitting such a claim. The trial court also ruled that the TCPA is constitutional and that TCPA claims may be brought as a class action.

This appeal followed. The Court of Appeal affirmed on the constitutional and class action issues. It reversed on the remaining issue. A TCPA action may be maintained in a state court because the California legislature has not prohibited such suits.

This is Barry Kaufman v. ACS Systems, Inc., Super. Ct. No. BC222588, and David Amkraut v. Fax.com, Inc., Super. Ct. No. BC240573, appeal numbers B155804 and B156082, appeals from the Superior Court of Los Angeles County, Judge Ann Kough presiding.

7/22. The Office of Management and Budget (OMB) issued a release regarding the draft policy titled "Draft E -- E-Authentication for Federal Agencies". On July 11, 2003, the General Services Administration's (GSA) Office of Electronic Government and Technology published a notice in the Federal Register regarding electronic authentication. The notice attaches, and requests comments on, the draft policy. The OMB supported the GSA in writing the draft policy. Comments are due by August 11, 2003.

The OMB states that it is "is improving identity validation and security online as well as reducing the time citizens wait to access government services on the internet".

In addition, Mark Forman, Administrator of E-Gov and Information Technology at OMB, states in the release that "The E-Authentication E-Gov initiative will enable citizens to securely and easily engage government online. It helps citizens and businesses have confidence in the protection of electronic transactions with the federal government".

The Center for Democracy and Technology (CDT) stated in its web site that "Authentication can involve everything from passwords to biometrics. The issue of online authentication has many implications for privacy and security. For example, it may affect whether citizens can communicate with the government anonymously. It can also facilitate linking of data from online interactions." See, CDT web page titled "Identity, Authentication & Digital Certificates".

See, Federal Register, July 11, 2003, Vol. 68, No. 133, at Pages 41370 - 41374. See also, story titled "GSA and OMB Release Draft E-Authentication Policy" in TLJ Daily E-Mail Alert No. 697, July 14, 2003.

House Begins Consideration of CJS Bill

7/22. The House began its consideration of HR 2799, the "Commerce, Justice, State, and the Judiciary Appropriations, 2004", the CJS bill. The House is likely to pass the bill on Wednesday, July 23. The bill has become a vehicle for addressing the Federal Communications Commission's (FCC) recently announced changes to its media ownership rules.

This bill contains appropriations for most of the technology related executive branch entities. See, story titled "House to Consider CJS Appropriation Bill" in TLJ Daily E-Mail Alert No. 703, July 22, 2003, for a summary of the funding levels of the various technology related entities covered by the bill.

However, most of the debate on July 22 focused on policy, rather than funding levels. Some of the policies debates pertain to rules of the FCC. The House rejected an amendment that would have limited funding for the FCC to implement it recently announced changes to its media ownership rules. However, backers of the FCC's rules changes offered no amendment to remove the item that was added to the bill by the House Appropriations Committee (HAC) that prohibits the use of funds to grant licenses for a commercial TV broadcast station if the granting of that license would result in such party having an aggregate national audience reach exceeding 35%. The House removed, on points of order, two items in the bill that prohibit any FCC or Federal Trade Commission (FTC) employees from accepting payment of travel expenses from non federal entities to attend conventions.

Media Ownership Rules. The HAC, which approved the CJS appropriations bill on July 16, added an amendment that prohibits the use of funds to grant licenses for a commercial TV broadcast station if the granting of that license would result in such party having an aggregate national audience reach exceeding 35%.

The bill provides, at Section 624, that "None of the funds in this Act may be used to grant, transfer or assign a license for a commercial TV broadcast station to any party (including all parties under common control) if the grant, transfer or assignment of such license would result in such party or any of its stockholders, partners, members, officers or directors, directly or indirectly, owning, operating or controlling, or having a cognizable interest in TV stations which have an aggregate national audience reach, as defined in 47 C.F.R. 73.3555, exceeding thirty-five (35) percent." (Parentheses in original.)

This amendment would have the effect of preventing the FCC from fully implementing, during FY 2004, the national TV ownership provisions of its June 2, 2003 Report and Order and Notice of Proposed Rulemaking [257 pages in PDF] amending its media ownership rules. See, story titled "FCC Announces Revisions to Media Ownership Rules" in TLJ Daily E-Mail Alert No. 672, June 3, 2003.

Opponents of this provision did not offer any amendments on the House floor to remove it. Opponents could still seek to have the amendment removed by the conference committee that reconciles the differences between the House and Senate versions of the bill. Alternatively, President Bush could veto the bill.

However, Rep. Maurice Hinchey (R-NY) offered an amendment that prohibits the use of funds to grant, transfer or assign certain broadcast licenses, unless certain ownership conditions are met.

The amendment would have the effect of preventing the FCC from fully implementing, during FY 2004, the newspaper broadcast cross ownership and local TV multiple ownership rule provisions of its Report and Order and Notice of Proposed Rulemaking [257 pages in PDF] amending its media ownership rules.

It failed by a vote of 174-254. See, Roll Call No. 407. The vote correlated with party affiliation. 34 Republicans voted for the amendment, and 194 voted against. 139 Democrats voted for the amendment, and 60 voted against.

Points of Order Regarding FCC & FTC Travel Expenses. Rep. Fred Upton (R-MI), the Chairman of the House Commerce Committee's Subcommittee on Telecommunications and the Internet, raised two points of order against two provisions in the bill. First, he objected to the provision regarding travel expenses of FCC Commissioners and employees on the grounds that it constitutes legislation in an appropriations bill. The point of order was sustained.

It read, "Provided further, That, notwithstanding section 1353 of title 31, United States Code, no Commissioner or employee of the Federal Communications Commission may accept, nor may the Commission accept, payment or reimbursement from a non-Federal entity for travel, subsistence, or related expenses for the purpose of enabling a Commissioner or employee to attend and participate in a convention, conference, or meeting when the entity offering payment or reimbursement is a person or corporation subject to regulation by the Commission, or represents a person or corporation subject to regulation by the Commission, unless the person or corporation is an organization exempt from taxation pursuant to section 501(c)(3) of the Internal Revenue Code of 1986."

Second, Rep. Upton raised a point of order against a similarly worded restriction on Commissioners and employees of the FTC. That point of order was also sustained.

Other Amendments. The House approved, by voice vote, an amendment offered by Rep. Dave Weldon (R-FL) that prohibits funds from being used to issue patents on claims directed to or encompassing a human organism.

The House considered an amendment offered by Rep. Steve King (R-IA) to restrict the use of funds from being used to engage in negotiations respecting a trade agreement with another country which creates or expands a nonimmigrant visa category authorizing the temporary entry of professionals into the U.S. He withdrew the amendment.

House Science Committee Approves MSI Technology Grant Bill

7/22. The House Science Committee approved, by voice vote, HR 2801, the "Minority Serving Institution Digital & Wireless Network Technology Opportunity Act of 2003".

HR 2801 was introduced on July 21, 2003, by Rep. Randy Forbes (R-VA), Rep. Edolphus Towns (D-NY) and others. It revises HR 2183, a bill by the same title introduced by Rep. Forbes on May 21. These bills are companion to S 196, which was introduced by Sen. George Allen (R-VA) on January 17, 2003. The Senate passed S 196 on April 30, 2003 by a vote of 97-0.

These bills would authorize the appropriation of $250,000,000 for each of the fiscal years 2004 through 2008 for grants to minority serving institutions ("a historically Black college or university", "a Hispanic-serving institution", and "a tribally controlled college or university") to acquire "networking capability, hardware and software, digital network technology, wireless technology, and infrastructure".

One significant difference between the bills is that HR 2801 would place the newly created "Minority Serving Institution Digital and Wireless Technology Opportunity Program" in the Department of Commerce's (DOC) Technology Administration. HR 2183 and S 196 would place the program at the National Science Foundation (NSF). The change would have consequences for the grant review process.

The Committee also adopted by voice vote an amendment offered by Rep. Sherwood Boehlert (R-NY), the Chairman of the Committee, that provides that the technology could be used to educate teachers in science, math, engineering, and technology.  The Committee also approved, by voice vote, an amendment offered by Rep. E.B. Johnson (D-TX) that acknowledges the achievements and contributions of African American scientists, mathematicians, and inventors.

See also, stories titled "Sen. Allen Introduces Bill to Create Technology Grant Program for MSIs" in TLJ Daily E-Mail Alert No. 586, January 20, 2003; "Senate Committee Approves Technology Grant Program for Minority Serving Institutions" in TLJ Daily E-Mail Alert No. 623, March 14, 2003; "Senate Passes Technology Grant Bill" in TLJ Daily E-Mail Alert No. 655, May 5, 2003; "Rep. Forbes Introduces Bill to Provide Grants for Digital and Wireless Technology for MSIs" in TLJ Daily E-Mail Alert No. 669, May 29, 2003; and "House Science Committee Holds Hearing on MSI Tech Grant Bill" in TLJ Daily E-Mail Alert No. 695, July 10, 2003.

Senate Judiciary Committee Holds Hearing on WorldCom Bankruptcy

7/22. The Senate Judiciary Committee held a hearing "Bankruptcy and Competition Issues in relation to the WorldCom Case".

Sen. Orrin Hatch (R-UT), the Chairman of the Committee, wrote in his opening statement that "Some have raised fairness concerns that WorldCom will be able to emerge from bankruptcy with much of the fruits of its widespread fraudulent conduct intact. They argue that it will emerge from Chapter 11 with an enhanced market position relative to its competitors, giving it not only a fresh start but a head start. They believe that, in view of the WorldCom case, our bankruptcy system is set up to make crime pay."

He added that "Others contend that the MCI which will emerge from bankruptcy is a new entity with new leadership. They point to the extraordinary measures it has taken to prevent the recurrence of past misdeeds. They further argue that MCI will not have a meaningful competitive advantage from its Chapter 11 reorganization. And, they argue that our bankruptcy laws appropriately are not designed to punish, but rather to permit a company to reorganize and emerge from bankruptcy as a viable entity."

Sen. Patrick Leahy (D-VT), the ranking Democrat on the Committee, wrote in his opening statement that "I understand that there are significant concerns about the competitive landscape as WorldCom emerges from bankruptcy. As a result of the bankruptcy proceeding, WorldCom may have less debt than some of its competitors. Lowered debt ratios are a serious concern and one that bankruptcy courts handle frequently. If, as we move forward, there is some reason to believe the bankruptcy system is breaking down, we are ready to step in and take appropriate action.

William Barr, who was an Attorney General in the first Bush administration, and is now EVP and General Counsel of Verizon, lashed out. He wrote in his prepared testimony that "The federal government’s response to date to the massive fraud committed by MCI is one of the most shameful episodes I have witnessed in Washington since starting my career in public service more than 25 years ago. MCI committed the largest securities fraud in American history, falsely manufacturing more than $11 billion in income. Investors lost roughly $180 billion -- more than three times the losses in Enron -- and MCI’s brazen scheme dramatically deepened the crisis of confidence in corporate America, imposing incalculable costs across the whole economy. In response, the federal government has taken several affirmative steps -- not to punish MCI, or to strip away the gains from its fraud, or to ensure that full restitution is paid to the tens of thousands of pensioners and companies victimized by the fraud -- but to resuscitate the company from its self-inflicted wounds by giving it a series of artificial advantages over law abiding competitors."

In rebuttal, Nicholas Katzenbach, who was an Attorney General in the Johnson administration, and is now a Director of MCI WorldCom, defended the actions of the bankruptcy court. He wrote in his prepared testimony that "I’d like to begin by asking those who would inflict further pain on MCI: Who is it, exactly, whom you intend to punish? Is it the 55,000 employees of MCI, who have already seen their jobs put at risk and their retirement savings driven toward oblivion? Or is it the creditors of the company, who have already seen the value of their investment plummet? Or is it the victims of WorldCom’s fraud who – because of our settlement with the SEC – now have a stake in the future success of MCI? Or is it the nation’s long-distance telephone customers, who would surely see their phone bills rise and see their service suffer if MCI were to be driven out of business? Nothing that MCI’s opponents suggest would hurt the already-departed and already-disgraced senior management of WorldCom, who were ousted and replaced after the fraud was discovered. The draconian punishment advocated by MCI’s opponents would, at best, be a futile gesture – and, at worst, would inflict further pain on the innocent."

See also, prepared testimony of other witnesses: Richard Thornburgh (Bankruptcy Examiner, Kirkpatrick & Lockhart), Marcia Goldstein (Weil Gotshal & Manges), Morton Bahr (President of the Communications Workers of America), Douglas Baird (Vice-Chair of the National Bankruptcy Conference), and Mark Neporent (COO of Cerberus Capital Management).

More Capitol Hill News

7/22. The House Rules Committee adopted a closed rule for the consideration of HR 2738, the "U.S.-Chile Free Trade Agreement Implementation Act", and HR 2739, the "U.S.-Singapore Free Trade Agreement Implementation Act".

7/22. The House Homeland Security Committee held a hearing titled "Putting the “R” Back into “R&D”: The Importance of Research in Cybersecurity and What More Our Country Needs to Do". See, prepared testimony of witness [in MS Word]: Daniel Wolf (Director for Information Assurance, National Security Agency), Shankar Sastry (Chair and Professor of Department, EE/CS, University of California Berkeley), and Steve Bellovin (AT&T).

7/22. The House Judiciary Committee and the House Homeland Security Committee held a joint hearing titled "The Terrorist Threat Integration Center (TTIC) and its Relationship with the Departments of Justice and Homeland Security". See, prepared testimony of witness [in MS Word]: John Brennan (Director of the TTIC), Larry Mefford (Federal Bureau of Investigation), Jerry Berman (Center for Democracy and Technology), William Parrish (Acting Assistant Secretary for Information Analysis in the Information Analysis and Infrastructure Protection Directorate).

More News

7/22. The U.S. Patent and Trademark Office (USPTO) announced that the USPTO and the World Intellectual Property Organization (WIPO) "held a seminar on July 14-18, 2003, for 16 supreme and appellate court judges from the Asia-Pacific region. The program exposed the judges to a wide range of policy considerations and challenges that their national court systems face in implementing the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)." See, USPTO release.

House to Consider CJS Appropriation Bill

7/21. The House Rules Committee adopted an open rule for consideration of HR 2799, the "Commerce, Justice, State, and the Judiciary Appropriations, 2004", also known as the CJS bill. On July 16, the House Appropriations Committee (HAC) approved the CJS appropriations bill. This bill contains appropriations for most of the technology related executive branch entities.

It provides $1.24 Billion for the U.S. Patent and Trademark Office (USPTO), and continues the practice of diverting user fees to subsidize other government programs.

It provides $183 Million for the Federal Trade Commission (FTC), which is $6 Million above the FY 2003 appropriation.

It provides $841 Million for the Securities and Exchange Commission (SEC), which is the same as the President's request, and $95 Million above the FY 2003 appropriation.

It provides $42 Million for the Office of the U.S. Trade Representative (USTR).

It provides 14.6 Million for the National Telecommunications and Information Administration (NTIA), $15.4 Million for information infrastructure grants, and $2.5 Million for public telecommunications facilities, planning and construction. It provides $7.8 Million for the Office of Technology Policy (OTP). It provides $357.9 for the National Institute of Standards and Technology (NIST), $62.6 for the construction of research facilities, and $39.6 Million for the NIST's Manufacturing Extension Partnership.

It provides $279 Million for the Federal Communications Commission (FCC), which is $2 Million below the President's request and $8 Million above the FY 2003 appropriation.

The HAC also added a rider offered by Rep. David Obey (D-WI), that prohibits the use of funds to grant licenses for a commercial TV broadcast station if the granting of that license would result in such party having an aggregate national audience reach exceeding 35%.

The bill provides, at Section 624, that "None of the funds in this Act may be used to grant, transfer or assign a license for a commercial TV broadcast station to any party (including all parties under common control) if the grant, transfer or assignment of such license would result in such party or any of its stockholders, partners, members, officers or directors, directly or indirectly, owning, operating or controlling, or having a cognizable interest in TV stations which have an aggregate national audience reach, as defined in 47 C.F.R. 73.3555, exceeding thirty-five (35) percent." (Parentheses in original.)

The amendment would have the effect of preventing the FCC from fully implementing, during FY 2004, the national TV ownership provisions of its Report and Order and Notice of Proposed Rulemaking [257 pages in PDF] amending its media ownership rules.

USTR to Hold Hearing on PR China's Compliance with WTO Obligations

7/21. The U.S. Trade Representative's (USTR) interagency Trade Policy Staff Committee (TPSC) will hold a hearing to assist it in preparing its annual report to the Congress on the People's Republic of China's compliance with the commitments that it made in connection with its accession to the World Trade Organization (WTO).

The USTR also seeks written comments on numerous issues, including intellectual property rights, and intellectual property enforcement.

The hearing will be held on September 18, 2003 in Room 1, 1724 F Street, NW, and will continue from day to day until completed. Written comments are due by 12:00 NOON on September 10. Person wishing to testify must submit a written request, along with their written comments, by 12:00 NOON on September 5. See, notice in the Federal Register, July 21, 2003, Vol. 68, No. 139, at Pages 43247 - 43248.

Go to News from July 16-20, 2003.