News from September 11-15, 2003

Amit Yoran Named Head of Cyber Security Division

9/15. Amit Yoran was named Director of the National Cyber Security Division (NCSD) of the Information Analysis and Infrastructure Protection Directorate (IAIP) at the Department of Homeland Security (DHS). See, DHS release.

Yoran was previously VP for Managed Security Services at Symantec. Before that, he founded Riptech, Inc., which provided outsourced information security management and monitoring. Symantec acquired Riptech in 2002 for $145 Million. See, Symantec release.

And before that, Yoran was the Director of the Vulnerability Assessment Program within the Computer Emergency Response Team at the Department of Defense.

In addition, the DHS's IAIP Directorate and Carnegie Mellon University created a joint effort named the "U.S. Computer Emergency Response Team (US-CERT)". The DHS stated in a release that "The US-CERT will begin as a partnership between the National Cyber Security Division (NCSD) within DHS and Carnegie Mellon's CERT®/Coordination Center (CERT/CC)."

The DHS further stated that "The US-CERT will grow to include other partnerships with private sector security vendors and other domestic and international CERT organizations. These groups will work together to coordinate national and international efforts to prevent, protect and respond to the effects of cyber attacks across the Internet. This announcement is the first in a series of upcoming announcements on new partnerships and initiatives within the National Cyber Security Division."

Robert Holleyman, P/CEO of the Business Software Alliance (BSA) stated in a release that "Without cyber security, there is no physical security. And recent events like the Blaster worm have underscored just how important it is for the Department of Homeland Security to have a strong cyber security team in place to work with private industry to investigate and prevent attacks on our critical information infrastructure".

Holleyman added that "We are pleased that Mr. Yoran, a renowned information security expert, has agreed to take on such a vital role. Mr. Yoran has worked extensively in the public and private sectors to prevent and respond to information security breaches. He knows first hand the vast threats that exist today and what needs to be done to quickly identify, assess and mitigate those threats."

Sen. Joe Lieberman (D-CT), the ranking Democrat on the Senate Governmental Affairs Committee, criticized the Bush administration's cyber security policies. He stated in a release that "The Bush Administration has shown insufficient leadership and offered little guidance on the enormous cyber security problems we face ... Instead, it has left the public sector, the private sector and the average computer user at home to fend for themselves."

Sen. Lieberman added that "We have fallen far behind where we should be ... and frankly, we cannot afford it. The numerous computer worms that plagued Internet systems this year -- and the $12 billion in economic losses that accompanied them -- show just how vulnerable we have become. Unless this Administration takes action soon, we will suffer additional losses."

"The Bush Administration issued an extremely vague strategy on cyber security in early February, and has done little since," Lieberman said. "It has shown inadequate attention to the development of a comprehensive and effective plan, much less a timeline for implementing the plan."

Rep. Adam Putnam (R-FL), Chairman of the House Government Reform Committee's Subcommittee on Technology, Information Policy, Intergovernmental Relations and the Census, stated in a release that "This is an important step in the progress that needs to be made by our government in protecting the Nation's computers from cyber attack. It is no longer a question of whether our computer networks will be attacked, but when, how often, and to what degree. I share the concerns of government and private sector experts who have testified before my Subcommittee that the United States is not adequately prepared to ward off a serious cyber attack that could cause severe economic devastation as well as potentially contribute to the loss of life of American citizens."

Federal Circuit Rules in Akamai v. C&W

9/15. The U.S. Court of Appeals (FedCir) issued its opinion [MS Word] in Akamai v. Cable & Wireless, a patent infringement case involving technologies for alleviating internet congestion.

The Massachusetts Institute of Technology (MIT) is the assignee of U.S. Patent No. 6,108,703 titled "Global hosting system" which pertains to methods for decreasing congestion and delay in accessing web pages on the internet. Akamai Technologies, which is based in Cambridge, Massachusetts, is the exclusive licensee.

Cable & Wireless (C&W) is the assignee of U.S. Patent No. 6,185,598 titled "Optimized network resource location", which is directed to similar systems and methods for increasing the accessibility of web pages on the internet. The '598 patent application was filed before the '703 application.

Akamai filed a complaint in U.S. District Court (DMass) against C&W alleging infringement of the '703 patent. C&W asserted that the '703 patent was anticipated by the '598 patent. A trial jury returned a verdict upholding the validity of certain claims, and determining infringement of certain claims. C&W moved for judgment as a matter of law. The District Court denied the motion. This appeal followed.

The Appeals Court held that certain claims are anticipated by the '598 patent, and are therefore invalid, pursuant to  35 U.S.C. § 102. The Appeals Court affirmed as to other claims.

This caes is Akamai Technologies, Inc. and Massachusetts Institute of Technology v. Cable & Wireless Internet Services, Inc. and Kinetech, Inc., No. 03-1007, an appeal from the U.S. District Court for the District of Massachusetts, D.C. No. 00-CV-11851, Judge Rya Zobel presiding.

NIST Publishes Draft of Computer Security Incident Handling Guide

9/15. The National Institute of Standards and Technology's (NIST) Computer Security Division (CSD) released a draft [137 pages in PDF] of NIST Special Publication 800-61, titled "Computer Security Incident Handling Guide".

This draft guide states that "Computer security incident response -- the mitigation of violations of security policies and recommended security practices -- has become an important component of information technology (IT) programs. Security-related threats have become not only more numerous and diverse but also more damaging and disruptive."

This guide states that it "seeks to help both established and newly formed incident response teams" and "will assist organizations in establishing computer security incident response capabilities and handling incidents efficiently and effectively."

This guide addresses organizing a computer security incident response capability, establishing incident response policies and procedures, structuring an incident response team, and handling incidents from initial preparation through the post-incident lessons learned phase.

It also addresses incidents, such as denial of service, malicious code, unauthorized access, inappropriate usage, and multiple component incidents.

This guide was written by Tim Grance, Karen Kent, and Brian Kim.

The NIST seeks public comment. The deadline for public comment is October 15, 2003. Comments may be sent to

Secretary Evans Criticizes PR China on IPR Enforcement

9/15. Secretary of Commerce Donald Evans gave a speech in Detroit, Michigan to the the Detroit Economic Club. He had harsh words for PR China's failure to comply with its World Trade Organization (WTO) obligations regarding enforcement of intellectual property rights and other matters. He reiterated the Bush administration's support for making the research and development tax credit permanent. He advocated reforming class action procedure to reduce the number of "junk lawsuits". He also announced a plan to reorganize all of the trade promotion activities at the Department of Commerce (DOC) into one unit.

Donald EvansChina. Evans stated that "the President has made a particular point of saying that we are going to enforce international trade laws to ensure that competition is fair. During our round tables, no country raised more attention as a source of concern than China. Concerns ranged from inadequate access to China's markets to the lack of a level playing field in many areas."

"Manufacturers complained about rampant piracy of intellectual property; forced transfer of technology from firms launching joint ventures in China; trade barriers; and capital markets that are largely insulated from free-market pressures."

Evans recited an example. "Wrigley chewing gum has a 70 percent share of the Chinese market. A Wrigley official told us that the Chinese had pirated their products in the City of Guangzhou. The pirates were selling counterfeit gum. They copied the Wrigley truck. They drove Wrigley’s distribution routes."

Evans also stated that "Under the WTO agreement signed in December of 2001, China agreed to let non-bank entities establish financing arms so their consumers could purchase automobiles. We're still waiting."

And, he said that "They also promised free access to established distribution systems for American goods. We're still waiting."

"But we won't wait idly. We will work to ensure that China honors the commitments it makes", said Evans.

Junk Lawsuits. Evans stated that "We strongly believe that fair competition is at the strategic center of both our success and our economic might. Competition leads to innovation. Innovation improves productivity. Greater productivity expands economic growth. And growth improves the standard of living, leading to a better quality of life for all."

"We strongly advocate free-market principles and sound fiscal and monetary policies", said Evans. "This much is clear: Unless the indirect costs -- junk lawsuits, health care, and energy -- are brought into line, our historical advantages in productivity and innovation won’t be enough to keep American manufacturers competitive."

He quipped that "While manufacturing workers are losing their jobs, the bank accounts of plaintiff attorneys are skyrocketing."

"This country was designed to be a nation of laws -- not a nation of lawsuits. The U.S. tort liability system is the most expensive in the world, more than double the average cost of other industrialized nations." He advocated legislation that contains "common sense class action reforms", but offered no further details.

DOC Reorganization. Evans stated that "We're creating an Assistant Secretary for Manufacturing to focus on the needs of American manufacturers." He elaborated that "Under this new Assistant Secretary, we're also creating a new Office of Industry Analysis to assess the economic impacts of new rules and regulations."

He also stated that "We intend to consolidate all Commerce Department export promotion functions under a new Assistant Secretary for Trade Promotion, who would serve concurrently as the Director General of the Foreign Commercial Service."

"And, finally, creating an Unfair Trade Practices Team, within the International Trade Administration, will allow us track, detect and confront unfair competition", said Evans. "These experts will monitor economic data from our global competitors and vigorously investigate evidence of unfair practices."

Other Issues. Evans also stated once again that President Bush supports making the research and development tax credit permanent. He also stated that "the President launched a Math & Science Partnership to improve science, technology, and mathematics education."

President Bush also traveled to Michigan, but focused on other issues, including energy and the environment. See, speech in Monroe, Michigan.

Ashcroft Says American Library Association Attacks on PATRIOT Act Are Hysteria and Hyperbole

9/15. Attorney General John Ashcroft gave a speech in Washington DC to the National Restaurant Association in which he stated that claims by the American Library Association (ALA) and others that the Federal Bureau of Investigation (FBI) is using the PATRIOT Act to monitor the reading habits of Americans is "hysteria and hyperbole".

rightAshcroft (at right) stated that, "Unfortunately, at this moment, Washington is involved in a debate where hysteria threatens to obscure the most important issues."

"According to these breathless reports and baseless hysteria, some have convinced the American Library Association that under the bipartisan Patriot Act, the FBI is not fighting terrorism. Instead, agents are checking how far you have gotten on the latest Tom Clancy novel."

"Now you may have thought with all this hysteria and hyperbole, something had to be wrong. Do we at the Justice Department really care what you are reading? No", said Ashcroft.

He added that "The law enforcement community has no interest in your reading habits. Tracking reading habits would betray our high regard for the First Amendment. And even if someone in the government wanted to do so, it would represent an impossible workload and a waste of law enforcement resources."

Ashcroft summed up the requirements of the business records language of the PATRIOT Act as follows: "The fact is that our laws are very particular and very demanding. There are strict legal requirements. A federal judge must first determine that there is an existing investigation of an international terrorist or spy, or a foreign intelligence investigation into a non-U.S. person, and that the business records being sought are relevant to that investigation. Without meeting these legal requirements, obtaining business records, including library records, is not even an option."

Section 215. The Patriot Act was enacted in late 2001 after the terrorist attacks of September 11, 2001. Patriot is short for USA PATRIOT Act. This, in turn, is an acronym for the full title of the bill, "Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001". The final version of this bill was numbered HR 3162. It became Public Law 107-56 on October 26, 2001.

When the ALA and other groups complain about monitoring libraries, they are alluding to Section 215 of the bill.

This section amends the Foreign Intelligence Surveillance Act of 1978 (FISA), codified at 50 U.S.C. § 1861 et seq. That is, it is a FISA provision that only applies to foreign powers, and agents of foreign powers, including international terrorists. It does not pertain to Title 18 searches.

Section 215 amends the section of the FISA that provides for "Access to Certain Business Records for Foreign Intelligence and International Terrorism Investigations". It provides, in part, that "The Director of the Federal Bureau of Investigation or a designee of the Director (whose rank shall be no lower than Assistant Special Agent in Charge) may make an application for an order requiring the production of any tangible things (including books, records, papers, documents, and other items) for an investigation to protect against international terrorism or clandestine intelligence activities, provided that such investigation of a United States person is not conducted solely upon the basis of activities protected by the first amendment to the Constitution." (Parentheses in original.)

Section 215 further provides that "Each application under this section ... shall be made to ... a judge of the court ... or ... a United States Magistrate Judge ..."

Also, Section 215 requires that this application "shall specify that the records concerned are sought for an authorized investigation conducted in accordance with subsection (a)(2) to obtain foreign intelligence information not concerning a United States person or to protect against international terrorism or clandestine intelligence activities."

S 1552. Sen. Lisa Murkowski (R-AK) is not given to hyperbole. However, she has introduced a bill to modify the access to business records section of the FISA.

On July 31, 2003, Sen. Murkowski introduced S 1552 [21 pages in PDF], the "Protecting the Rights of Individuals Act", or PRI Act. This bill contains numerous changes to the FISA and the Criminal Code to limit the powers of government to conduct searches, seizures, and surveillance. It revises the provisions in the FISA regarding access to business records.

Sen. Murkowski's bill would let stand the basic provisions. However, it would require the FBI to also include in its application to the judge or magistrate "a statement of the facts and circumstances relied upon by the applicant to justify the applicant's belief that the person to whom the records pertain is a foreign power or an agent of a foreign power". Sen. Murkowski's bill would also require the judge or magistrate to find that there is "probable cause to believe that the person to whom the records pertain is a foreign power or an agent of a foreign power". See, Section 4 of S 1552.

See also, story titled "Sen. Lisa Murkowski Introduces Bill to Roll Back Surveillance Provisions of PATRIOT Act", July 31, 2003, also published in TLJ Daily E-Mail Alert No. 712, August 6, 2003.

11th Circuit Applies Antitrust Analysis to Agreements Regarding Patents

9/15. The U.S. Court of Appeals (11thCir) issued its opinion [43 pages in PDF] in Valley Drug v. Geneva Pharmaceuticals. This is a pharmaceutical industry case -- not a technology case. Moreover, pharmaceuticals have their own regulatory framework. However, the issue in this appeal is the application of antitrust principles to agreements regarding patents, which may be of interest to some technology attorneys.

This appeal arising from a collection of private lawsuits brought against pharmaceutical companies alleging violation of Section 1 of the Sherman Act. The complaints allege that two agreements regarding patents constitute contracts in restraint of trade. The case also involves the regulatory framework that is peculiar to the drug industry.

The various actions were consolidated in the U.S. District Court (SDFl). The District Court granted the plaintiffs' motion for summary judgment that the agreement are per se violations Section 1 of the Sherman Act, 15 U.S.C. § 1. This interlocutory appeal followed. The Appeals Court reversed and remanded.

This case is Valley Drug Company et al. v. Geneva Pharmaceuticals, Inc. and Abbott Laboratories, No. 02-12091, an appeal from the U.S. District Court for the Southern District of Florida, D.C. No. 99-01317-MD-PAS.

FCC Releases TELRIC NPRM and Working Paper

9/15. The Federal Communications Commission (FCC) released its notice of proposed rulemaking (NPRM) [75 pages in PDF] regarding the pricing of unbundled network elements (UNEs) and the resale of services by incumbent local exchange carriers (ILECs). The FCC announced, but did not release, this NPRM on September 10. See, FCC release [PDF] of September 10, and TLJ story titled "FCC Announces NPRM To Review TELRIC Rules" in TLJ Daily E-Mail Alert No. 737, September 11, 2003.

This NPRM states that the FCC adopted "its current UNE pricing rules, which base UNE prices on the Total Element Long Run Incremental Cost (TELRIC) of a UNE, in 1996 in the Local Competition Order. The Commission stated at that time that it would continue to review its pricing rules based on the results of state arbitration proceedings and provide additional guidance as necessary. We have not undertaken a comprehensive review of the TELRIC methodology in the seven years since it was adopted, and it is appropriate to conduct such a review at this time."

The FCC has not yet set deadlines for public comment. These will be announced when the FCC publishes its notice in the Federal Register. Comments will be due 60 days after publication in the Federal Register. Reply comments will be due 105 days after publication in the Federal Register.

This is FCC Docket No. WC 03-173. The proceeding is titled "Review of the Commission Rules Regarding the Pricing of Unbundled Network Elements and the Resale of Services by Incumbent Local Exchange Carriers".

Also on September 15, the FCC's Office of Strategic Planning and Policy Analysis (OSP) released a paper [PDF] titled "Dynamic Pricing and Investment from Static Proxy Models".

The abstract of this paper states that it "evaluates the use of static cost proxy models in setting forward-looking prices, such as the prices set according to the FCC's TELRIC methodology. First, it compares the time paths of prices and depreciation under traditional regulatory accounting with the prices and depreciation implied by various versions of TELRIC. When TELRIC prices are recomputed at intervals shorter than asset lives, the firm will generally not earn the target rate of return. In these cases, a correction factor must be applied to the TELRIC price path in order for revenues to exactly recover investment cost, including the target rate of return. Next, the paper considers a firm's cost minimizing investment decisions under two different assumptions about asset obsolescence. In both scenarios, cost minimizing investment paths and implied utilization rates for the firm’s assets are derived under a variety of assumptions about the relevant input parameters. Some implications for TELRIC pricing are then derived."

This is OSP Working Paper No. 40. It was written by David Mandy and William Sharkey.

House to Consider Internet Tax Bill

9/15. The House is scheduled to consider HR 49, the "Internet Tax and Nondiscrimination Act", under suspension of the rules, on Wednesday or Thursday of this week. See, Republican Whip Notice.

This bill would permanently extend the moratorium on internet access taxes and multiple and discriminatory internet taxes that was created by the 1998 Internet Tax Freedom Act (ITFA). It would also eliminate the grandfather provision that allows states that had taxes in 1998 to continue those taxes.

It also contains an amendment offered by Rep. Mel Watt (D-NC) at the House Judiciary Committee mark up on July 16, 2003 that provides that the moratorium applies to telecommunications services, "to the extent such services are used to provide Internet access", thus clarifying that the ban on internet access taxes extends to broadband DSL and wireless services provided by phone companies or others.

The original moratorium lasted for three years. In 2001, the Congress extended the moratorium. It is currently set to expire on November 1, 2003.

The House is scheduled to consider HR 49 under suspension of the rules, meaning that the bill cannot be amended, and that a two thirds majority is required for passage.

See also, story titled "House Judiciary Committee Approves Internet Tax Bill", also published at in TLJ Daily E-Mail Alert No. 700, July 17, 2003; "Senate Commerce Committee Approves Bill to Extend Internet Tax Moratorium" in TLJ Daily E-Mail Alert No. 709, August 1, 2003; and "House Subcommittee Holds Hearing on Bill to Make Internet Tax Moratorium Permanent" in TLJ Daily E-Mail Alert No. 635, April 2, 2003.

FCC Receives Comments Regarding Competition in Video Programming Market

9/15. Thursday, September 11, was the deadline to submit comments to the Federal Communications Commission (FCC) regarding its Notice of Inquiry (NOI) [PDF] that solicits "data and information on the status of competition in the market for the delivery of video programming for our tenth annual report".

Section 628(g) of the Communications Act requires the FCC to report annually to Congress on the status of competition in the market for the delivery of video programming.

Comcast submitted a lengthy comment [part 1; 42 pages in PDF] in which it wrote that "Multichannel video programming is delivered today by cable companies, two national direct broadcast satellite (``DBS´´´) providers (DIRECTV and DISH Network), broadband service providers (``BSPs´´) (.e.g., RCN, Knology, WideOpenWest, StarPower, Altrio, etc), satellite master antenna TV (``SMATV´´) providers, and wireless cable operators -- each of which offers consumers multiple programming packages and service options. Video programming is also available from over-the-air broadcasters, at movie theaters, on videotapes and DVDs (available for purchase or lease), and -- increasingly -- via streaming or downloadable video on the Internet."

Comcast asserted that "Today's multichannel video marketplace looks nothing like the one that Congress felt compelled to address by the combination of regulation and market-opening initiatives in the 1992 Cable Act. With Congress's decision in 1996 to emphasize a pro-competitive and deregulatory approach to the communications marketplace, American consumers have seen a veritable explosion of investment, innovation, channel capacity, new programming networks, and new choices."

Comcast asserted that it faces "significant competition" from DIRECTV and DISH Network, and that "multichannel video programming competition is a marketplace reality."

I recommends that the FCC "should now conclude that Congress' vision of a competitive marketplace is here and that the transition envisioned by the 1992 Cable Act is substantially complete. The state of multichannel video competition provides compelling reasons for Congress to allow the marketplace to work, and for the Commission to continue its efforts to reduce regulation of cable television services."

Cox Communications submitted a comment [27 pages in PDF] stating that "the video programming marketplace is highly competitive and the consumer benefits of that competition are unfolding at an explosive rate across a variety of markets." It notes that Cox competes with DirecTV and Echostar.

Cox adds that "competition in the video programming marketplace has had ripple effects that extend far beyond that marketplace. Cox has invested tens of billions of dollars over the past nine years clustering cable systems and upgrading them into advanced, two-way broadband platforms. As a result of this investment, Cox has been able not only to increase greatly the range of video service options that it offers to consumers; it also has launched new voice and data services that have been enthusiastically embraced in its markets. In fact, in less than six years, Cox has become the nation’s twelfth largest telephone company, with over one million residential access lines."

Cox blames "Soaring programming costs" for price increases.

See also, comment [PDF] of the National Cable & Telecommunications Association (NCTA)

The Satellite Broadcasting and Communications Association (SBCA) submitted a comment [PDF]. It stated that "Satellite delivered television service has grown from a niche market for technophiles to a viable alternative to cable for many consumers. In order for the satellite television providers to continue to offer consumers superior quality and programming, the Commission must craft and enforce regulations that protect and foster the competitive gains that have been made in the last decade. Outstanding issues surrounding the integrity of the DBS spectrum and the formulation of a fair regulatory environment during the transition to digital broadcasting are necessary for DBS to reach its full potential as a competitor to cable in the multichannel video market."

The Broadband Service Providers Association (BSPA) also submitted a comment [58 pages in PDF]. It wrote that "Unfortunately, incumbent cable operators have responded to the early success of BSPs by erecting and/or continuing to maintain significant barriers to entry. Incumbent cable operators continue to leverage vertical relationships and exploit regulatory loopholes to restrict competitive access to programming, and use their buying power to enforce exclusive agreements with unaffiliated programmers."

The BSPA urges the FCC "to begin to develop a broad technology and end-user device neutral perspective regarding access to content, which will ensure the continued development of competitive video and broadband markets."

The BSPA adds that "Other barriers to entry in the multichannel video market created and maintained by incumbent cable operators also remain. These include predatory and discriminatory pricing, exclusive arrangements for access to multi-tenant dwelling units, and outright manipulation of the local regulatory process to thwart competitive entry. At the same time, other barriers to entry and deployment also continue to persist. These include delays in addressing complaints pertaining to access to ILEC and utility poles, conduits, and rights-of-way; unreasonable local and municipal regulation of access to public rights-of-way; and an overly regulated OVS regime."

Qwest Communications, an incumbent local exchange carrier (ILEC) that also provides telephony based video services, also submitted a comment [17 pages in PDF]. Its affiliate, Qwest BSI, provides multi-channel video and high speed internet access service in several markets using VDSL technology, and thus competes with cable providers. It stated that "VDSL has the potential for being a viable alternative to traditional methods of delivering multi-channel video services such as cable television."

Qwest also wrote that "In regulatory terms, however, Qwest currently faces a lose-lose situation. Qwest BSI’s expansion has been slowed by regulatory uncertainty as to whether certain of its services will be regulated as "telecommunications services" under Title II of the Communications Act as well as be regulated as cable services under Title VI. Since cable providers are able to provide telephony services with less regulation, the service packages that Qwest and cable providers use to compete for customers are regulated in a highly disparate manner. Operating under heavier regulatory burdens increases Qwest BSI’s costs and sharply reduces its competitiveness. Qwest BSI also experiences a disadvantage in accessing programming, since it is a new market entrant."

Qwest concluded that the FCC "must resolve the current regulatory uncertainty under which incumbent LEC-affiliated companies like Qwest BSI are operating, reduce the asymmetric regulatory burdens that disadvantage them against their competitors, and take steps to prevent anticompetitive abuses by vertically-integrated cable providers in areas such as programming access."

A&E Television Networks, Inc. and the Courtroom Television Network submitted a comment [22 pages in PDF] in which they stated that "The statutory and regulatory favoritism bestowed upon broadcasters by granting them must carry entitlements and retransmission consent rights disproportionately affects non-favored programmers. To the extent the government seeks to make better decisions about how to ensure a fair and properly functioning market for video programming, it must critically examine the manner in which it confers regulatory advantages upon some market participants, as is the case with must carry mandates."

The Consumer Electronics Association (CEA) submitted a comment [10 pages in PDF] in which it stated that "The over-arching public policy issues related to competition in the video marketplace concern the transition from analog to digital by broadcasters."

Reply comments are due by September 26, 2003. This is MB Docket No. 03-172.

More News

9/15. The Free Expression Policy Project released an updated version of its report titled "The Progress of Science and Useful Arts: Why Copyright Today Threatens Intellectual Freedom". The report was written by Marjorie Heins.

9/15. The U.S. Court of Appeals (9thCir) issued its opinion [14 pages in PDF] in Albingia Versicherungs A.G. and Siemens Components Pte. Ltd. v. Schenker International, Inc., a case involving procedural issues regarding supplemental jurisdiction after removal to federal court and choice of law. The underlying dispute involves liability in a waybill for shipping computer chips made by Siemens, which were stolen. This case is Albingia Versicherungs A.G. and Siemens Components Pte. Ltd. v. Schenker International, Inc., No. 01-16558, an appeal from the U.S. District Court for the Northern District of California, Judge Marilyn Patel presiding, D.C. No. CV-99-02989-MHP.

9/15. Kenneth Juster, Under Secretary of Commerce for Industry and Security, gave a speech titled "Taiwan and China Semiconductor Industry Outlook – 2003". Juster is head of the Department of Commerce's (DOC) Bureau of Industry and Standards (BIS), which is also known as the Bureau of Export Administration (BXA). He spoke in San Jose, California at a conference of the U.S.-Taiwan Business Council and the Fabless Semiconductor Association. He reviewed the history of the U.S. export control regime, export issues involving the People's Republic of China and Taiwan, and the semiconductor industry specifically.

WTO Negotiations Collapse in Cancun

9/14. The Fifth Ministerial Conference of the World Trade Organization (WTO) in Cancun, Mexico concluded without reaching a consensus. It met from September 10-14.

The WTO launched a new round of trade negotiations in Doha, Qatar in 2001. The Cancun ministerial meeting was to have specified the negotiating frameworks for attaining the Doha Development Agenda by 2005.

The U.S. State Department issued a release on September 14 that states that "Five days of talks among trade ministers representing the 148 member countries of the World Trade Organization collapsed September 14 because of an impasse over whether to move ahead on negotiations involving what are called the ``Singapore´´ issues: investment, competition, transparency in government procurement, and trade facilitation."

U.S. Trade Representative (USTR) Robert Zoellick stated in a release that "Whether developed or developing, there were 'can do' and 'won't do' countries here. The rhetoric of the 'won't do' overwhelmed the concerted efforts of the 'can do'. 'Won't do' led to impasse."

rightZoellick (at right) added that "We came ready to work off the first chair's text. Today, we were willing to work off the text prepared by the five facilitators, and we remain willing to work on these items."

"Today we stalled because of the Singapore issues, but the larger lesson of Cancun is that useful compromise among 148 countries requires a serious willingness to focus on work -- not rhetoric -- to attain the fine balance between ambition and flexibility", said Zoellick.

See also, transcript of press briefing by Deputy USTR Josette Shiner.

Chairperson Luis Ernesto Derbez issued a Ministerial Statement that concludes that "Notwithstanding this setback, we reaffirm all our Doha Declarations and Decisions and recommit ourselves to working to implement them fully and faithfully."

Sen. Charles Grassley (R-IA) issued a statement Sunday night. He wrote that "I'm extremely disappointed by this development. The Cancun Ministerial was an historic opportunity to advance the cause of free trade and open markets. Unfortunately, some participants seemed to be more satisfied with hollow rhetoric than real negotiation. As we can see, the WTO process can't subsist on hollow rhetoric."

Sen. Charles GrassleySen. Grassley (at right) continued that "I stand behind the decision of Ambassador Zoellick to remain firm in his pursuit of broad market liberalization on all fronts. Under Ambassador Zoellick's guidance, the United States demonstrated real leadership, both prior to and throughout these negotiations. First, in resolving the question of TRIPS and public health, which will give impoverished developing countries access to life-saving medicines. Then, in seeking to establish a framework agreement with the European Union on agriculture that helped spark deeper discussions on concrete objectives for Cancun. Finally, in seeking to find constructive ways in Cancun to bridge the artificial divides that some nations were intent on creating. At every stage of the process, the United States has been ready, willing, and able to negotiate. I wish I could say the same of some of the other WTO members."

Sen. Grassley also issued a warning. "I'll use my position as chairman of the Senate Finance Committee, which has jurisdiction over international trade policy in the U.S. Senate, to carefully scrutinize the positions taken by many WTO members during this ministerial. The United States evaluates potential partners for free trade agreements on an ongoing basis. I'll take note of those nations that played a constructive role in Cancun, and those nations that didn't."

"This is a sad day for the global economy, for developed and developing countries alike. This is an especially sad day for the least-developed countries, which have the most to gain from the Doha Development Agenda. By insisting on rigid positions, a few nations have put prospects for world economic growth and development on indefinite hold. Their intransigence has squandered an opportunity to raise millions of people out of poverty and improve the lot of farmers, ranchers, workers, and consumers around the world", concluded Sen. Grassley.

GAO Reports That Interior Department Has Limited Capability to Manage its IT Investments

9/12. The General Accounting Office (GAO) released a report [52 PDF] titled "Information Technology: Departmental Leadership Crucial to Success of Investment Reforms at Interior". It concludes that the Department of the Interior (DOI), which spends about $850 Million per year on communications and computing projects and systems, "has limited capability to manage its IT investments".

The report also finds that the DOI "is carrying out few of the activities that support critical foundational processes".

The report continues that "the department has issued a Capital Planning and Investment Control Guide, which describes its approach to IT investment management. However, it has thus far implemented few of the processes described in its own guide. In addition, it has yet to develop an adequate approach to identify existing projects and systems. In order to ensure strong investment management at all levels, the department has also specified a requirement for certifying bureau-level investment processes, but certification has not yet begun. Finally, in order to strengthen the CIO’s ability to manage IT investments at all levels, the Secretary of the Interior has issued an order establishing the authority of the bureau-level CIOs; however, the order has not been fully implemented."

The GAO concludes that "Without a well-defined process improvement plan and controls for implementing it, Interior will continue to be challenged in its ability to make informed and prudent investment decisions."

The report was prepared for the House Appropriations Committee's Subcommittee on Interior and Related Agencies

ILECs Seek Stay of FCC's Triennial Review Order

9/12. The U.S. Telecom Association (USTA), a group that represents incumbent local exchange carriers (ILECs), and ILECs BellSouth, Qwest, SBC and Verizon filed a motion for stay of the Federal Communications Commission's (FCC) triennial review order with the U.S. Court of Appeals (DCCir).

Larry Sarjeant, VP and General Counsel of the USTA, stated in a release that "the FCC appears unwilling to place a hold on ill-conceived and unlawful regulations. A stay is necessary to help secure the long-term viability of the nation’s communications infrastructure. We are now forced to ask the Courts to intervene and delay the implementation of these rules before permanent damage is done to the communications industry and the manufacturers and suppliers whose future depends on this critical sector of the economy." See also, SBC release.

The USTA, BellSouth, Qwest, SBC and Verizon previously filed petitions for writ of mandamus and petitions for review.

On September 3 and 4, 2003, they filed several petitions for review. See, Nos. 03-1263, 03-1264, and 03-1267. See also, story titled "ILECs File Petitions for Review of FCC Triennial Review Order" in TLJ Daily E-Mail Alert No. 734, September 8, 2003.

On August 28, they filed petitions for writ of mandamus seeking a stay of parts of the FCC's order. See, story titled "ILECs File Petitions for Writ of Mandamus Challenging Triennial Review Order" in TLJ Daily E-Mail Alert No. 730, September 2, 2003.

The FCC announced its triennial review order [576 pages in PDF] on February 20, 2003, but did not release the text until August 21, 2003. See, TLJ story titled "Summary of FCC Triennial Review Order", also published in TLJ Daily E-Mail Alert No. 725, August 25, 2003. See also, stories titled "FCC Announces UNE Report and Order", "FCC Order Offers Broadband Regulatory Relief", "FCC Announces Decision on Switching", "Commentary: Republicans Split On FCC UNE Order", and "Congressional Reaction To FCC UNE Order" in TLJ Daily E-Mail Alert No. 609, February 21, 2003.

On September 2, 2003, the FCC published a notice in the Federal Register that recites and describes the FCC's new rules regarding the unbundling requirements of incumbent local exchange carriers (ILECs). See, Federal Register: September 2, 2003, Vol. 68, No. 169, at Pages 52275 - 52306. This notice further states that these rules take effect on October 2, 2003. See also, story titled "FCC Publishes Notices Regarding Triennial Review Order" in TLJ Daily E-Mail Alert No. 731, September 3, 2003.

FCC Releases Quarterly Report on Informal Consumer Inquiries and Complaints

9/12. The Federal Communications Commission's (FCC) Consumer & Governmental Affairs Bureau (CGB) released a report [18 pages in PDF] regarding inquiries and complaints processed during the second quarter of 2002.

The report states that the FCC received 273 complaints regarding cable services, 724 complaints regarding radio and television broadcasting, 3,901 complaints regarding wireless communications, and 10,418 complaints regarding wireline telecommunications.

Of the wireline complaints, 4,190 pertained to billing and rates. Another 3,342 pertained to the Telephone Consumer Protection Act of 1991 (TCPA). This includes complaints regarding unsolicited junk faxes, violation of a do not call request, artificial or prerecorded messages, and time of day violations.

The report states that the FCC received 4,818 inquiries regarding cable services, 6,014 inquiries regarding radio and television broadcasting, 13,983 inquiries regarding wireless communications, and 50,249 inquiries regarding wireline telecommunications. The report states that the FCC received 7,279 inquiries regarding TCPA issues.

The report summed up complaint activity as follows: "Complaint activity within the top categories was generally lower during the second quarter. Radio & Broadcasting complaints were an exception: they increased from 439 in the first quarter to 724 during the second quarter. The increase was spurred by increases in indecency complaints, and disability complaints received in connection with a write-in campaign that urged television stations in Richmond, Virginia, to provide real-time closed captioning of live news broadcasts. Cable complaints fell from 308 during the first quarter to 273 in the second quarter, with most Cable categories experiencing modest declines. Wireless complaints dropped from 4,119 to 3,901 due to modest declines in four of the top five Wireless categories. Contract-Early Termination complaints ran counter to the downward trend, rising from 481 to 504. Meanwhile, Wireline complaints dropped from 13,502 to 10,418. Complaint counts in all five top Wireline categories fell sharply."

3rd Circuit Rules on Section 211 and Filed Rate Doctrine

9/12. The U.S. Court of Appeals (3rdCir) issued its opinion [11 pages PDF] in WorldCom v. GraphNet. The Appeals Court reversed the District Court's dismissal of a complaint brought by one communications carrier against another for failure to make payments under a pair of contracts. The Appeals Court ruled that the District Court erred in it application of Section 211 of the Communications Act, and regulations thereunder, and the filed rate doctrine.

WorldCom (now known as MCI) is a large telecommunications company. Graphnet provides communications services and network products. WorldCom and Graphnet entered into a contract under which WorldCom provided two-way telex transmissions between their respective networks for telex traffic originating on each other's networks. Graphnet failed to pay Worldcom pursuant to the contract. Graphnet also failed to pay for over three hundred thousand dollars for additional telecommunications equipment and services provided pursuant to second contract. WorldCom did not file either of these contracts with the Federal Communications Commission (FCC).

WorldCom filed a complaint in U.S. District Court (EDVa) against Graphnet alleging breach of contract and unjust enrichment. The action was transferred to the District of New Jersey. Graphnet sought to avoid judgment by raising a number of issues, including jurisdiction, statute of limitations, and an alleged prior settlement agreement. However, the noteworthy aspect of this case is Graphnet's affirmative defense of failure to state a claim, arising out of WorldCom's not having filed the contracts at issue with the FCC.

The District Court held that Worldcom could not recover under any of the contracts at issue because they were never filed with the FCC. It held that 47 U.S.C. § 211 requires the filing of all contracts with the FCC, and that failure to do so bars any recovery, even under the theory of unjust enrichment. It further held that WorldCom's claims are barred by the filed rate doctrine.

The Appeals Court reversed. First, it held that the District Court misread Section 211.

Section 211 provides, at subsection (a), that "Every carrier subject to this chapter shall file with the Commission copies of all contracts, agreements, or arrangements with other carriers, or with common carriers not subject to the provisions of this chapter, in relation to any traffic affected by the provisions of this chapter to which it may be a party."

However, subsection 211(b) qualifies this. It provides that "The Commission shall have authority to require the filing of any other contracts of any carrier, and shall also have authority to exempt any carrier from submitting copies of such minor contracts as the Commission may determine."

The Appeals Court wrote that "The district court erred by concluding that Worldcom was required to file the contracts at issue. This complex issue could not be resolved at this stage in the litigation. The fact that there was no filed tariff does not itself violate the FCA. Under the FCA, a carrier may conduct its business either by tariff or by contract."

The Court continued that if a common carrier chooses to conduct business by contract, it is required file copies of all contracts with other common carriers. However, it added that subsection 211(b) empowers the FCC to exempt carriers from filing certain contracts. Moreover, the FCC has promulgated regulations exempting certain contracts.

The relevant regulation, 47 C.F.R. § 43.51, provided, at the relevant time, in part, that "(a) Any communications common carrier engaged in domestic or foreign communication, or both, which has not been classified as non-dominant pursuant to Section 61.12(e) of the Commission's Rules, 47 C.F.R. § 61.12(e), is not treated under the regulatory forbearance policies established by the Commission, and which enters into a contract with another carrier must file with the Commission, within thirty (30) days of execution, a copy of each contract, agreement, concession, license, authorization or other arrangement to which it is a party ..."

The Appeals Court wrote that "this language exempts non-dominant carriers from the filing requirement", and hence, "the district court erred by finding that Worldcom was required to file the contracts at issue." However, the Court added that "At this stage in the litigation, it cannot be determined that Worldcom was so required." The District Court must, on remand, determine whether "Worldcom was, in fact, non-dominant in the national long distance field at the time and that the contracts at issue involved national long distance services."

The Court also addressed what would be the consequences of a finding that the WorldCom Graphnet contracts are covered by the filing requirements of subsection 211(a), and are not exempted by subsection 2119b) and FCC regulations.

The Appeals Court wrote that "the district court held that if a party fails to file a contract under section 211, it will suffer a complete and total forfeiture. It erroneously relied on the inapposite ``filed rate doctrine´´ in reaching this conclusion. We find nothing in either the FCA, the decisions of the Common Carrier Bureau or in the caselaw from the federal courts that would support such an extreme penalty for failing to file a contract. In fact, relevant authority is to the contrary."

The Court reasoned that "section 211 says nothing about any penalty for failing to file a contract. Other sections of the FCA, however, specifically lay out penalties for violation of their provisions. ... If Congress intended the extraordinary penalty that Graphnet advocates, we would expect it to say so explicitly."

Hence, the Court concluded that "Absent an express statutory statement to the contrary, we conclude that a violation of section 211’s filing requirement does not require that Worldcom forfeit any right to be compensated for services and equipment provided to Graphnet pursuant to an unfiled contract."

Finally, the Appeals Court held that the filed rate doctrine does not apply to this situation. "The filed rate doctrine forbids charging or collecting rates for services that vary with the rates scheduled for those services in a filed tariff", wrote the Court. "Here, however, no filed tariff appears to have covered the services provided pursuant to the contracts at issue. The doctrine is therefore inapposite because there is no filed tariff with which the contracts conflict."

The Court added that "If Worldcom was required to file the contracts at issue, its failure to do so would not by itself preclude Worldcom from recovering under those contracts. If the contracts are not enforceable for some other reason, Worldcom could still recover the value of its services under a theory of unjust enrichment. The district court erred by concluding otherwise."

This case is WorldCom, Inc. v. GraphNet, Inc., an appeal from the U.S. District Court for the District of New Jersey, D.C. No. 00-cv-05255, Judge William Walls presiding.

More News

9/12. The AEI Brookings Joint Center for Regulatory Studies released a paper [53 pages in PDF] titled "Ideological Voting on Federal Courts of Appeals: A Preliminary Investigation". The paper finds that for some types of cases, but not all, a judge's ideology (as measured by the appointing President) affects that judge's vote on three judge panels. The paper is based upon an examination of 4,488 opinions in 13 categories of cases. The paper examined cases in areas such as abortion, capital punishment, and criminal appeals. But, the paper did not examine cases in the areas of patents, copyrights, communications, or other technology related areas. The paper was written by Cass Sunstein, David Schkade, and Lisa Michelle Ellman.

9/12. Matthew Thomas Guevara plead guilty in U.S. District Court (NDIll) to wire fraud in violation of 18 U.S.C. § 1343. The U.S. Attorneys Office (WDWash) stated in a release that Guevara "operated a scheme to defraud customers of the Microsoft Network (MSN). He first created false email accounts with the Internet Service Provider Hotmail and an unauthorized website with the address through the Internet Service Provider Yahoo! GUEVARA then sent MSN customers email messages, purporting to come from MSN, that directed the customers to the fraudulent website and asked them to verify their accounts by providing their name, MSN account and credit card information. Each time a customer entered the information, the website automatically forwarded it to one of GUEVARA's false Hotmail accounts. GUEVARA used the stolen credit card information himself and provided it to another person as well." See also, Microsoft release.

FTC Sues VeriSign for Deceptive Trade Practices

9/11. The Federal Trade Commission (FTC) filed a complaint in U.S. District Court (DC) against Network Solutions, Inc., doing business as VeriSign Registrar, alleging deceptive or unfair acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).

The complaint states that Network Solutions serves as an Internet Corporation for Assigned Names and Numbers (ICANN) accredited registrar of second level domain names for generic top level domains (gTLDs), such as .com, .net, and .org. Prior to 1999 it was the only registrar for gTLDs, but now has competition from over 100 other companies.

The complaint states that "Network Solutions mailed to consumers solicitations that appeared to be expiration notices/invoices from the consumers' then current registrars." The complaint states that these notices and invoices referenced "Expiration notice" and "EXPIRATION DEPARTMENT", and included reply dates.

The complaint further alleges that "In some instances, the listed reply dates on defendant's materials were unrelated to the actual expiration dates for consumers' domain name registrations, which may have been many months or even years in the future." Also, "In many instances, defendant's expiration notices/invoices failed to disclose clearly and conspicuously, or in some instances, completely failed to disclose, the actual expiration dates for consumer's domain names."

And in addition, the complaint alleges that "In many instances, consumers did not realize that by returning the expiration notices/invoices along with payment to ``renew´´ their domain name registrations they were, in fact, transferring their domain name registrations from their then-current registrars to Network Solutions -- often at significantly higher prices."

The one count of the complaint alleges that this was "false and misleading and constituted deceptive acts or practices in violation of Section 5(a) of the FTC Act".

The FTC wants the Court to permanently enjoin Network Solutions from further violation of the FTC Act, and to require that Network Solutions return money to consumers and rescind contracts.

This case is FTC v. Network Solutions, Inc. doing business as VeriSign Registrar, D.C. No. 03-CV-01907. The complaint was signed by Stephen Cohen and Eric Wenger of the FTC General Counsel's office.

See also, story titled "VeriSign Sued Over Domain Name Marketing" in TLJ Daily E-Mail Alert No. 439, May 29, 2002.

Senate Foreign Relations Committee Holds Hearing on PR China

9/11. The Senate Foreign Relations Committee held a hearing titled "U.S. China Relations". The State Department's James Kelly testified regarding trade issues. Amnesty International's T. Kumar testified regarding internet censorship in the People's Republic of China.

Trade Issues. James Kelly, Assistant Secretary of State for East Asian and Pacific Affairs, wrote in his prepared testimony [14 pages in PDF] that "China has implemented market-oriented reforms over the past two decades and unleashed individual initiative and entrepreneurship. While substantial development challenges remain, the result has been the largest reduction of poverty and one of the fastest increases in income levels ever seen."

He stated that the U.S. has a trade deficit with China, and is working to eliminate "unfair trade practices" and to get China to "open its markets further". He further commented that "Maintaining domestic support for open markets to China will become increasingly difficult without demonstrated support in China for open markets to U.S. goods and services."

James KellyKelly (at right) also discussed China membership in the World Trade Organization (WTO). He stated that "China's full and timely implementation of its WTO commitments is key to expanding market opportunities for U.S. firms in China and ultimately creating more jobs for American workers and farmers. We are working with our Chinese counterparts to hasten that process, and believe China's WTO implementation will accelerate China's economic reform through the creation of a more rules-based and market-driven economy. While China has made great strides in reforming its economy and moving toward a market-based economy, lowering tariffs in the process, we still believe more needs to be done."

He added that "We have serious concerns with China's WTO compliance in certain areas -- particularly in agriculture, intellectual property rights, the services sector, and the cross-cutting issue of transparency -- and are insisting that the Chinese address these concerns."

Internet Censorship. T. Kumar, Advocacy Director for Asia & Pacific at Amnesty International USA, testified regarding the "vast scope of human rights violations", including internet related restrictions. He stated in his prepared testimony [18 pages in PDF] that the "groups targeted for repression include ... people using the Internet to disseminate information deemed to be ``politically sensitive.´´"

Kumar elaborated that "In China, individuals can be sentenced to death for publishing information on the internet that the government considers a ``state secret´´. Scores of people have been imprisoned in China for using the internet; of those arrested at-least three have died as a result of torture by police."

"With the introduction of the Internet, news reaches China from a multiplicity of sources enabling people to form opinions, analyze and share information and to communicate in ways previously unknown in China. Lively on-line debate flourished in China. However, the potential of the Internet to spread new ideas has led the authorities to take measures to control its use", said Kumar.

Kumar added that "The Chinese government has introduced numerous regulations, closed Internet cafes, and blocked e-mails, search engines, foreign news and politically sensitive websites. Recently, it has introduced filtering systems for web searches and has even created a special ``internet police´´ to enforce these restrictions. The Ministry of State Security has reportedly installed tracking devises on Internet service providers to monitor individual email accounts and all internet cafes are required to register and inform the police about their customers."

Finally, he stated that "The Chinese government has also forced Internet companies to take on the responsibility of policing the web. A ``Public Pledge on Self-Discipline´´ was introduced in August 2002 requiring internet companies to agree not to allow the posting of ``pernicious´´ information that may ``jeopardize state security, disrupt social stability, contravene laws and spread superstition and obscenity´´. Yahoo also signed to this pledge to police internet users. After a fire in an internet cafe in Beijing last year, authorities closed thousands of internet cafes and demanded that those allowed to re-open do so only after installing filtering software to block web sites considered ``politically sensitive´´ or ``reactionary´´. The software prevents access to 500,000 various websites."

See, related stories titled "AEI Panel Advocates Freeing the Chinese Internet" and "Technologies of Internet Censorship" in TLJ Daily E-Mail Alert No. 416, April 23, 2002.

See also, the "Global Internet Freedom Act". It is sponsored by Rep. Chris Cox (R-CA), Rep. Tom Lantos (D-CA), and others. It was introduced in the 107th Congress as HR 5524. It was re-introduced in the current Congress as HR 48. The Senate version in the 107th Congress was S 3093, sponsored by Sen. Ron Wyden (D-OR) and Sen. Jon Kyl (R-AZ).

More News

9/11. The General Accounting Office (GAO) released its prepared testimony [PDF] titled "Information Technology: Effective Patch Management is Critical to Mitigating Software Vulnerabilities". This testimony was prepared for the September 10 hearing of the House Government Reform Committee's Subcommittee on Technology, Information Policy, Intergovernmental Relations and the Census titled "Worm and Virus Defense: How Can We Protect the Nation's Computers from These Serious Threats?"

9/11. The House Commerce Committee's Subcommittee on Telecommunications and the Internet held a hearing on HR 2898, the "E-911 Implementation Act of 2003". See, prepared testimony of John Muleta (Bureau Chief of the FCC's Wireless Telecommunications Bureau), prepared testimony of Tim Berry (Indiana State Treasurer), prepared testimony of Anthony Haynes (Tennessee Emergency Communications Board), and prepared testimony of Terry Addington (P/CEO of First Cellular of Southern Illinois).

9/11. The Tribune Company filed a petition for review with the U.S. Court of Appeals (DCCir) of the Federal Communications Commission's (FCC) media ownership order. The Tribune, which owns newspapers and radio and TV stations, seeks seeks review of the broadcast ownership rules. This is just one of many petitions for review of this order that have been filed. This is Tribune Co. v. FCC, No. 03-1278.

Go to News from September 6-10, 2003.