IP Coalition Urges End to Diversion of USPTO Fees

10/3. The 21st Century Intellectual Property Coalition wrote a letter to House Speaker Denny Hastert (R-IL) and other House leaders urging passage of HR1561 the "United States Patent and Trademark Fee Modernization Act of 2003". The bill was introduced on April 2, 2003 by Rep. Lamar Smith (R-TX).

The Subcommittee on Courts, the Internet and Intellectual Property held a hearing on the bill on April 3, 2003. See, story titled "House CIIP Subcommittee Holds Hearing on USPTO Fees" in TLJ Daily E-Mail Alert No. 637, April 4, 2003.

The House Judiciary Committee amended and approved the bill on July 9, 2003. See, story titled "House Judiciary Committee Approves USPTO Fee Bill" in TLJ Daily E-Mail Alert No. 695, July 10, 2003.

The letter advocates "ending diversion of the user fees" that are paid to the U.S. Patent and Trademark Office (USPTO). HR 1561 would end the current practice of diverting user fees to subsidize other government programs.

The letter also addresses patent quality and patent pendency. It concludes that "America’s innovators are prepared to pay out of their own pockets to improve the situation at the PTO, provided the money will go to the agency. We urge you to address the crisis facing the patent and trademark system by endorsing an increase in PTO user fees and the end of the practice of fee diversion, as would be achieved by the passage of H.R. 1561."

The Coalition includes 91 companies and 26 associations, including many leading technology companies (such as AMD, Apple, Dell, IBM, HP, Intel, LSI Logic, Microsoft, Motorola, Network Associates, Oracle, Siemens, StorageTek, Sun Microsystems, TI, Unisys, VeriSign, and Xerox), and telecom companies (such as AT&T, BellSouth, Nortel, MCI, and Sprint).

ICANN Demands That VeriSign Cease Wildcard Feature

10/3. On Friday, October 3, Paul Twomey, P/CEO of the Internet Corporation for Assigned Names and Numbers (ICANN) sent a demand letter to VeriSign in which it state, "please consider this a formal demand to return the operation of the .com and .net domains to their state before the 15 September changes, pending further technical, operational and legal evaluation. A failure to comply with this demand will require ICANN to take the steps necessary under those agreements to compel compliance with them."

Previously, the ICANN had merely requested that VeriSign undo its wildcard feature changes that caused misspelled and/or unassigned domain names with the .com or .org top level domain to be redirected to a VeriSign page. VeriSign calls this its "Site Finder" service.

Twomey added that "VeriSign must suspend the changes to the .com and .net top-level domains introduced on 15 September 2003 by 6:00 PM PDT on 4 October 2003. Failure to comply with this demand by that time will leave ICANN with no choice but to seek promptly to enforce VeriSign's contractual obligations."

He further wrote that "it appears that these changes have had a substantial adverse effect on the core operation of the DNS, on the stability of the Internet, and on the relevant domains, and may have additional adverse effects in the future. These effects appear to be significant, including effects on web browsing, certain email services and applications, sequenced lookup services and a pervasive problem of incompatibility with other established protocols. In addition, the responses of various persons and entities to the changes made by VeriSign may themselves adversely affect the continued effective functioning of the Internet, the DNS and the .com and .net domains. Under these circumstances, the only prudent course of action consistent with ICANN's coordination mission is to insist that VeriSign suspend these changes pending further evaluation and study, including (but certainly not limited to) the public meeting already scheduled by ICANN's Security and Stability Advisory Committee on 7 October in Washington, D.C."

This meeting will be held from 10:00 AM to 4:00 PM at the Center for Strategic and International Studies (CSIS) located at 1800 K Street, NW. See, notice of meeting.

People and Appointments

10/3. President Bush announced his intent to nominate James Comey (at right) to be the Deputy Attorney General, the second highest position at the Department of Justice (DOJ). If confirmed by the Senate, he would replace Larry Thompson, who left in August. Comey is currently the U.S. Attorney for the Southern District of New York. He replaced Mary Jo White in early 2002. Previously, he was Managing Assistant U.S. Attorney in charge of the Richmond Division of the Eastern District of Virginia. Prior to that, he worked in the USAO for the Southern District of New York, including as Deputy Chief of the Criminal Division. He is a graduate of the University of Chicago School of Law. See, White House release. Over the summer, Sen. Charles Grassley (R-IA), a senior member of the Senate Judiciary Committee, had placed holds on President Bush's nominees for top positions at the DOJ because of the DOJ's failure to produce certain records related to Senate oversight of the DOJ and FBI. He has released those holds.

10/3. The Senate confirmed Jack Goldsmith to be Assistant Attorney General in charge of the Office of Legal Counsel (OLC). He replaces Jay Bybee, who was recently confirmed as a Judge of the U.S. Court of Appeals (10thCir). Goldsmith was previously a professor at the University of Chicago School of Law, on leave. See, story titled "Bush Nominates Goldsmith to Head OLC" in TLJ Daily E-Mail Alert No. 677, June 10, 2003. See also, article authored by Goldsmith titled "Against Cyberanarchy". See also, "Against Cyberanarchy, 65 Chi. L. Rev. 1199 (1998); "Regulation of the Internet: Three Persistent Fallacies", 73 Chic.-Kent L. Rev. 1119 (1998); and, "The Internet and the Abiding Relevance of Territorial Sovereignty", 5 Ind. J. Glob. Leg. Stud. 475 (1998). Sen. Grassley had previously placed a hold on this nomination. See, Congressional Record, July 30, 2003, at S10258.

10/3. The Senate confirmed Daniel Bryant be Assistant Attorney General in charge of the Office of Legal Policy (OLP). He replaces Viet Dinh, who has returned to his teaching position at Georgetown University Law Center. The OLP is tasked with making recommendations to the Congress regarding anti-terrorism legislation, such as amendments to the PATRIOT Act. Sen. Grassley had previously placed a hold on this nomination. See, Congressional Record, August 1, 2003, at S10898.

10/3. The Senate confirmed Karin Immergut to be the U.S. Attorney for the District of Oregon.

10/3. The Federal Communications Commission (FCC) named the members of its Localism Task Force. The Co-Chairs are Michele Ellison (Deputy General Counsel, Office of General Counsel), Robert Ratcliffe (Deputy Chief, Media Bureau). The Chief of Staff is Royce Sherlock (Chief, Industry Analysis Division, Media Bureau). The Special Counsel are Eric Bash (Attorney Advisor, Policy Division, Media Bureau), Kimberly Reindl (Attorney Advisor, Office of General Counsel), Elizabeth Valinoti (Attorney Advisor, Industry Analysis Division, Media Bureau), and Harry Wingo (Special Counsel, Office of General Counsel). The other task force members are Simon Wilkie (Chief Economist, Office of Strategic Planning & Policy Analysis), Linda Blair (Deputy Chief, Enforcement Bureau), Richard Diamond (Deputy Director, Office of Media Relations), Jonathan Levy (Deputy Chief Economist, Office of Strategic Planning & Policy Analysis), Renée Licht (Deputy Director, Office of the Managing Director), Kris Monteith (Deputy Chief, Consumer and Governmental Affairs Bureau), Jerry Duvall (Chief, Economic Research, Media Bureau), Mary Beth Murphy (Chief, Policy Division, Media Bureau), Judith Herman (Assistant Chief, Industry Analysis Division, Media Bureau), Roger Holberg (Assistant Chief, Industry Analysis Division, Media Bureau), Marilyn Sonn (Assistant General Counsel, Administrative Law Division, Office of General Counsel), Lori Holy (Attorney Advisor, Office of Legislative Affairs), Janice Wise (Program & Information Specialist, Consumer and Governmental Affairs Bureau). See, FCC release [PDF].

More News

10/3. The Federal Communications Commission's (FCC) Localism Task Force announced that it will hold six public hearing at six locations around the U.S. "to solicit input from consumers, industry, civic organizations and others regarding broadcast localism." See, FCC release [PDF].

10/3. Dane Snowden, Chief of the Federal Communications Commission's (FCC) Consumer & Governmental Affairs Bureau, announced that from Wednesday, October 1, 2003 through 4:00 PM on Friday, October 3, 2003, the FCC received 4,100 inquiries and 1,315 complaints regarding the national telemarketing do not call registry. He stated that "Most of the complaints were submitted by consumers who previously signed up for the do-not-call registry but have received one or more calls since Oct. 1 from telemarketers." See, FCC release [PDF].

10/3. The Office of the U.S. Trade Representative (USTR) published a notice in the Federal Register stating that comments regarding countries that deny adequate and effective protection of intellectual property rights or deny fair and equitable market access to U.S. persons who rely on intellectual property protection are due by 12:00 NOON on October 27, 2003. Section 182 of the Trade Act of 1974 requires the USTR to prepare a report. Section 182, which is codified at 19 U.S.C. § 2242, is also referred to as "Special 301". This is an out of cycle review. The USTR announced that this review will focus on Korea. However, it added that "Additional countries may also be reviewed as a result of the comments received pursuant to this notice, or as warranted by events." See, notice in the Federal Register, October 3, 2003, Vol. 68, No. 192, at Page 57503.

10/3. Alan Davidson of the Center for Democracy and Technology (CDT) wrote a letter to Rep. Lamar Smith (R-TX) and Rep. Howard Berman (D-CA), the Chairman and ranking Democrat on the House Judiciary Committee's Subcommittee on Courts, the Internet and Intellectual Property, raise concerns about HR 2517, the "Piracy Deterrence and Education Act of 2003". The Subcommittee began its mark up of this bill on Thursday, October 2. It is scheduled to resume its mark up at 5:00 PM on Tuesday, October 7, 2003. For example, Davidson states that "Section 3.2, which directs the FBI to facilitate the sharing [of information] among law enforcement agencies, Internet service providers and copyright holders, raises substantial privacy issues for end users." (Brackets in original.)

10/3. A trial jury of the U.S. District Court (DMd) returned a verdict in favor of Lowry's Reports, Inc. (LR) in its copyright infringement action against Legg Mason, which had republished issues of LR newsletters on its corporate intranet. The jury awarded damages of just under $20 Million. See, LR release and Wiley Rein & Fielding (counsel for LR) release. Legg Mason also issued a release. It wrote that "Legg Mason expressed its shock at the extent of the damages awarded to Lowry's by the jury and its belief that those damages are grossly excessive. Legg Mason said that over the course of the next few weeks, it will aggressively pursue all options to protect the interests of its stockholders."

House Subcommittee Approves Internet Tobacco Sales Enforcement Act

10/2. The House Judiciary Committee's Subcommittee on Courts, the Internet, and Intellectual Property amended and approved HR 2824, the "Internet Tobacco Sales Enforcement Act", by unanimous voice votes.

Rep. Lamar Smith (R-TX), the Subcommittee Chairman, stated that this bill is "designed to put teeth into the Jenkins Act, a statute enacted by the Congress more than a half century ago to deal with the twin problems of cigarette smuggling and tax avoidance."

The Jenkins Act, enacted in 1949, does not create a federal tax collection regime. Rather, it established reporting requirements. It requires that any person who sells and ships cigarettes across a state line to a buyer, other than a licensed distributor, to report the sale to the buyer's state tobacco tax administrator. Some states impose vastly higher taxes on the sales of cigarettes than others. The Jenkins Act helps these states enforce their cigarette tax laws. It is codified at 15 U.S.C. §§ 375-378.

Currently, many internet based cigarette sellers are not reporting sales to state tax administrators. Rep. Smith stated that "the Internet's emergence as a means for the commercial distribution of tobacco products and the demand created by consumers who wish to avoid public health inspired tax increases, many of which were recently enacted, have conspired to reveal the Act as a toothless tiger".

Rep. Mark Green (R-WI), Rep. Marty Meehan (D-MA), and others introduced HR 3140 on July 23, 2003. See, story titled "Internet Cigarette Sales Bill Introduced in House" in TLJ Daily E-Mail Alert No. 711, August 5, 2003.

There is also related legislation in the Senate. On June 3, 2003, Sen. Orrin Hatch (R-UT) introduced S 1177, the "Prevent All Cigarette Trafficking (PACT) Act of 2003". This bill would also amend the Jenkins Act, to among other things, expand the reporting requirements of the Act to cover internet sales of cigarettes. See, story titled "Senators Introduce Bill to Regulate Internet Cigarette Sales" in TLJ Daily E-Mail Alert No. 675, June 6, 2003.

On July 31, 2003, The Senate Judiciary Committee amended and approved the PACT Act. See, story titled "Senate Judiciary Committee Approves Bill to Regulate Internet Cigarette Sales" in TLJ Daily E-Mail Alert No. 711, August 5, 2003.

Senators Craig and Dubin Introduce Bill to Modify PATRIOT Act

10/2. Sen. Larry Craig (R-ID), Sen. Richard Durbin (D-IL), Sen. Mike Crapo (R-ID), Sen. Russ Feingold (D-WI), Sen. John Sununu (R-NH), Sen. Ron Wyden (D-OR), and Sen. Jeff Bingaman (D-NM) introduced S 1709, the "Security and Freedom Ensured Act of 2003", or SAFE Act. This is another bill to roll back a few of the more controversial provisions of the USA PATRIOT Act.

The bill would modify several sections of the criminal code, which is codified at Title 18, and the Foreign Intelligence Surveillance Act (FISA), which is codified at 50 U.S.C. § 1861, et seq., to revise changes made by the USA PATRIOT Act. The "Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001" was passed by the 107th Congress as HR 3162. It became Public Law 107-56 on October 26, 2001.

Sen. Craig (at right) stated in the Senate that "the USA PATRIOT Act is not a perfect law". He said that his bill would "make some commonsense changes that help to safeguard our freedoms, without sacrificing our security. It focuses on areas of activity that have been particularly controversial: delayed notice warrants, which are also referred to as ``sneak and peek´´ warrants; wiretaps that do not require specificity as to either person or place; the impact of the new law on libraries; and nationwide search warrants. Our bill would amend, not eliminate these tools or repeal the USA PATRIOT Act in these areas."

Section 501 Business Records. S 1709 would amend Section 501 of the FISA. This is the section of the FISA that provides for "Access to Certain Business Records for Foreign Intelligence and International Terrorism Investigations". The PATRIOT Act, at Section 215, rewrote Section 501. This Section 215 of the PATRIOT is the source of the American Library Association's (ALA) complaints about the PATRIOT Act.

The ALA has complained that this section is harmful to libraries and library users. Attorney General John Ashcroft has responded that the government has never used this section to obtain the records of any library.

See, stories titled "Ashcroft Says American Library Association Attacks on PATRIOT Act Are Hysteria and Hyperbole" in TLJ Daily E-Mail Alert No. 740, September 16, 2003; "Ashcroft and Critics Continue Debate Over Section 215 Access to Business Records" in TLJ Daily E-Mail Alert No. 745, September 24, 2003; and "Ashcroft Addresses Roving Wiretaps and Access to Business Records" in TLJ Daily E-Mail Alert No. 746, September 25, 2003.

To recap, Section 215 of the PATRIOT Act (HR 3162 in the 107th Congress) replaced Sections 501-503 of the FISA with new language designated as Section 501 and 502. Section 501 of the FISA, in turn, is codified in Title 50 as Section 1861. Sen. Craig's bill (HR 1709 in the 108th Congress) provides, at Section 4, further revisions to Section 501 of the FISA.

FISA only applies to foreign powers, and agents of foreign powers, including international terrorists. Section 501 enables the FBI to obtain from a judge or magistrate an order requiring the production business records. While the statute does not expressly include library records, it is not disputed that library records could be obtained.

Currently, Section 501 requires that the application to the judge or magistrate "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 1709 would change this to requires that the application, "shall specify that--
  (A) 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; and
  (B) there are specific and articulable facts giving reason to believe that the person to whom the records pertain is a foreign power or an agent of a foreign power."

Also, currently, Section 501 provides that "Upon an application made pursuant to this section, the judge shall enter an ex parte order as requested, or as modified, approving the release of records if the judge finds that the application meets the requirements of this section."

S 1709 would add a phrase requiring that the judge finds that "there are specific and articulable facts giving reason to believe that the person to whom the records pertain is a foreign power or an agent of a foreign power".

That is, S 1709 adds the requirement that the FBI state to the judge, and the judge must find, that there are facts giving reason to believe that the person to whom the records pertain is a foreign power or an agent of a foreign power. This change, if enacted, might make it a little harder for the FBI to obtain orders under Section 501.

Sen. Durbin, a cosponsor of S 1709, stated in the Senate on October 2 that "The FBI can now seize records on the books you check out of the library or the videos you rent, simply by certifying that the records are sought for a terrorism or intelligence investigation, a very low standard. A court no longer has authority to question the FBI's certification. The FBI no longer must show that the documents relate to a suspected terrorist or spy."

He stated that S 1709 would "Reinstate the pre-PATRIOT Act standard for seizing business records. In order to obtain a subpoena, the FBI would have to demonstrate that it has reason to believe that the person to whom the records relate is a suspected terrorist or spy. The SAFE Act retains the expansion of the business record provision to include all business records, including library records, rather than just the four types of records--hotel, car rental, storage facility and common carrier--covered before the PATRIOT Act."

On the other hand, Attorney General Ashcroft recently stated that "Not a single American's library records has been reviewed under the Patriot Act". He added, "No offense to the American Library Association, but we just don't care." See, September 18 speech.

Libraries As Electronic Communication Service Providers. S 1709 would amend 18 U.S.C. § 2709, which currently requires that "A wire or electronic communication service provider shall comply with a request for subscriber information and toll billing records information, or electronic communication transactional records in its custody or possession made by the Director of the Federal Bureau of Investigation ..." (Section 505 of the PATRIOT Act amended Section 2709 of Title 18.)

S 1709, at Section 5, would insert an exception: "A library shall not be treated as a wire or electronic communication service provider for purposes of this section."

Delayed Notice of Search Warrants. S 1709, at Section 3, would amend 18 U.S.C. § 3103a to limit the authority to delay notice of search warrants.

Sen. Durbin stated that "The FBI can conduct a ``sneak and peek'' search of your home, not notifying you of the search until after a ``reasonable period,'' a term which is not defined in the PATRIOT Act. A court is now authorized to issue a ``sneak and peek'' warrant where a court finds ``reasonable cause´´ that providing immediate notice of the warrant would have an ``adverse result,'' a very broad standard. The use of ``sneak and peek´´ warrants is not limited to terrorism cases.

He said that S 1709 would "Authorize a court to issue a delayed notification warrant where notice of the warrant would endanger the life or physical safety of an individual, result in flight from prosecution, or result in the destruction of or tampering with the evidence sought under the warrant. It would require notification of a covert search within seven days, rather than an undefined ``reasonable period.´´ It would authorize unlimited additional 7-day delays if the court found that notice of the warrant would continue to endanger the life or physical safety of an individual, result in flight from prosecution, or result in the destruction of or tampering with the evidence sought under the warrant."

Roving Wiretaps. S 1709, at Section 2, would amend Section 105(c) of the FISA, which is codified at 50 U.S.C. § 1805.

Sen. Durbin stated that "The FBI can obtain a ``John Doe´´ roving wiretap, which does not specify the target of the wiretap or the place to be wiretapped. This increases the likelihood that the conversations of innocent people wholly unrelated to an investigation will be intercepted."

He added that S 1709 would "Limit ``John Doe´´ roving wiretaps by requiring the warrant to identify either the target of the wiretap or the place to be wiretapped. To protect innocent people from Government surveillance, it would also require that surveillance be conducted only when the suspect is present at the place to be wiretapped."

The bill also adds several new requirements that the FBI submit reports to the Congress regarding exercise of powers granted or expanded by the PATRIOT Act. It would also provide for the sunsetting of several provisions.

Sen. Lisa Murkowski (R-AK) has also introduced a bill to modify some of the same provisions of the PATRIOT Act. On July 31, 2003 she introduced S 1552 [21 pages in PDF], the "Protecting the Rights of Individuals Act", or PRI Act. See, TLJ story titled "Sen. Lisa Murkowski Introduces Bill to Roll Back Surveillance Provisions of PATRIOT Act", July 31, 2003.

Sen. Feingold Introduces Bill to Limit Delayed Notice Warrants

10/2. Sen. Russ Feingold (D-WI) introduced S 1701, the "Reasonable Notice and Search Act" a bill to limit the use of delayed notice warrants, also know as "sneak and peak" warrants.

Sen. Feingold summarized his bill in the Senate. "This bill addresses the provision of the USA PATRIOT Act that has caused perhaps the most concern among Members of Congress. Section 213 of the PATRIOT Act, sometimes referred to as the ``delayed notice search provision´´ or the ``sneak and peek provision,´´ authorizes the Government in limited circumstances to conduct a search without immediately serving a search warrant on the owner or occupant of the premises that have been searched." See, Congressional Record, October 2, 2003, at S12377-8.

Sen. Feingold's bill would require the government to give notice of the warrant within 7 days, but allow a judge to extend this time period. Section 213 requires notice within an undefined "reasonable period". The bill would also narrow the circumstances in which a delayed notice warrant could be issued. Finally, this bill would provide for the sunsetting of Section 213 at the end of 2005.

The bill was referred to the Senate Judiciary Committee. Sen. Feingold is a member.

DOC's Ben Wu Advocates Appropriate Regulatory Framework for Nanotechnology

10/2. Ben Wu, Deputy Under Secretary of Commerce for Technology, gave a speech on nanotechnology. He said that "uninformed public fear" of nanotechnology could lead to regulation the denies the economic and societal benefits that may flow from nanatechnology.

Wu (at right) stated that "the next big thing is actually very, very small -- it's nanotechnology."

He said that the Bush administration "is committed to having our nation be at the forefront of nanotechnology. The President believes strongly in the economic gains and social advances that nanotechnology can bring to the citizens of the United States and to the rest of the world. This is why the Federal investment in nanotechnology has grown from $116 million in 1997 to more than $700 million in 2003 and President Bush has proposed funding of $849 million for nanotechnology for Fiscal Year 2004."

He also cautioned that "its revolutionary nature will challenge our regulatory systems which may also have to cope with uninformed public fear of potential negative consequences of nanotechnology."

See, for example, article in the April 2000 issue of Wired Magazine titled "Why the future doesn't need us", by Bill Joy, the Chief Scientist at Sun Microsystems.

Wu continued that "If we fail to create appropriate regulatory regimes with the flexibility to adapt to rapidly advancing technologies -- such as nanotechnology -- we will deny ourselves extraordinary economic and societal benefits. And other nations will be sure to step into the vacuum. Comparative advantage will accrue to countries that find the right approach to regulatory oversight -- balancing legitimate societal interests."

He concluded that "If U.S. industry performs well, by successfully seizing the opportunities spawned by public and private nanotechnology research, then our economy and our citizens will prosper. We need to do so in a regulatory environment that is fair, open, and transparent -- a framework that allows good science to overcome overly bureaucratic and burdensome restrictions."

First Circuit Reverses Certification of Defendant Class in Copyright Action

10/2. The U.S. Court of Appeals (1stCir) issued its opinion in Tilley v. TJX, reversing a District Court order certifying a defendant class in a copyright infringement case. The Appeals Court's opinion cautiously reverses the District Court's order on basis that the grounds relied upon by the District Court were inadequate. The Appeals Court left open the possibility that the District Court on remand could certify a defendant class on other grounds.

Rule 23 of the Federal Rules of Civil Procedure, which provides for class actions, is plaintiff/defendant neutral. However, as a practical matter almost all certified classes are plaintiff classes. Typically, the action of one or a group of defendants is asserted to have caused the same injury to a very large body of consumers, shareholders, or others. The situations in which a very large body of people or entities causes the same injury to a single party have heretofore been rare. However, this may be changing in the information economy. For example, the proliferation of computing equipment and internet based applications that facilitate copyright infringement could give rise to a number of scenarios in which copyright holders might seek certification of defendant classes. See, full story.

FCC Announces Creation of Do Not Call Enforcement Team

10/2. The Federal Communications Commission (FCC) created a Do-Not-Call Enforcement Team. It will be headed by Kurt Schroeder, Deputy Chief of the Enforcement Bureau's Telecommunications Consumers Division. It is tasked with enforcing the FCC's Do-Not-Call telemarketing rules, and related telemarketing rules.

David Solomon, Chief of the Enforcement Bureau, stated in a release [PDF] that "This Team will ensure that we devote all the necessary resources to protect the privacy rights of American consumers. Our job has been made more difficult by recent court decisions relating to the Federal Trade Commission’s rules. But telemarketers should make no mistake about it -- the FCC is on the job and we will do everything we can to enforce the FCC's own Do-Not-Call rules and our other telemarketing rules."

Also on October 2, Dane Snowden, Chief of the FCC's Consumer & Governmental Affairs Bureau, reiterated that "To the extent legally permissible, the FCC will continue to vigorously enforce our rules on behalf of the American consumer." See, FCC release [PDF].

Snowden also stated that "Today, as of 4:00 p.m., we had received approximately 1,500 (telephonic and e-mail) inquiries from consumers who want to know how to sign up for the Do-Not-Call registry. This number is up about 300 from yesterday's total for the same period. Our response has been that pending resolution of the court challenges, the FTC has suspended registrations to the list, and the FCC is not able at this time to add people to the list."

He added that "Approximately 425 complaints were received as of 4:00 p.m. today, 175 above the number we received for the same period yesterday. As was the case yesterday, most of the complaints were submitted by consumers who previously signed up for the do-not-call registry but have received one or more calls since Oct. 1 from telemarketers. A small number of the complaints are against telecommunications carriers. However, the majority involve non-carrier entities."

FCC Fines Infinity for Indecent Broadcasts

10/2. The Federal Communications Commission (FCC) released a Notice of Apparent Liability for Forefeiture [21 pages in PDF] that proposes fines totaling $357,500 against Infinity Broadcasting, as licensee of various broadcast radio stations, for broadcasting indecent material in apparent violation of 18 U.S.C. § 1464 and section 73.3999 of the FCC's rules.

18 U.S.C. § 1464 provides that "Whoever utters any obscene, indecent, or profane language by means of radio communication shall be fined under this title or imprisoned not more than two years, or both."

This fine results from an August 15, 2002 broadcast of the "Opie & Anthony Show" which includes a "Sex for Sam" contest. Participants had sex in New York City locations, such as St. Patrick's Cathedral, a zoo, and a toy store.

Infinity has been fined before. For example, on April 4, 2003, the FCC issued a Notice of Apparent Liability (NAL) to Infinity, the licensee of WKRK-FM in Detroit, Michigan, for broadcasting indecent material. (A transcript is in the NAL.)

FCC Commissioner Michael Copps once again vigorously dissented. He wrote that these NALs "provide no more than a slap on the wrist to Infinity (owned by Viacom) and Clear Channel rather than take serious action to address indecency on our airwaves. Today, the majority proposes a $27,500 fine for each incident of airing what the majority agrees appears to be indecent programming at a time when children likely composed a significant portion of the audience."

He added that "I defy anyone to argue that a $27,500 fine to each of the stations owned by a multi-billion dollar conglomerate is adequate to address this clear violation of federal law. Infinity/Viacom could pay this entire fine by tacking just one more commercial onto one of its prime-time TV shows and probably pocket a profit to boot. Some punishment!"

He concluded that "The message to licensees is clear. Even egregious repeated violations will not result in revocation of a license. Rather, they will result only in a financial penalty that doesn’t even rise to a serious cost of doing business."

7th Circuit Dismisses Appeal in Albert v. Trans Union

10/2. The U.S. Court of Appeals (7thCir) issued an opinion [11 pages in PDF] in Albert v. Trans Union, a class action alleging violation of the FCRA. The Appeals Court dismissed this interlocutory appeal for lack of jurisdiction.

Defendant Trans Union Corporation collects credit information for the purpose of distributing consumer credit reports to third-party credit grantors for use in assessing the creditworthiness of potential customers.

Cynthia Albert and other individuals filed complaints in various U.S. District Courts around the country against Trans Union alleging violation of the Fair Credit Reporting Act (FCRA), which is codified at 15 U.S.C. § 1681 et seq.  This is an appeal from a multi-district litigation panel. While this class action lawsuit addressed many of the same issues previously dealt with by the Federal Trade Commission (FTC), the plaintiffs seek monetary damages and injunctive relief.

The District Court ruled that injunctive relief is not available in FCRA actions brought by non-governmental plaintiffs. Plaintiffs then brought this interlocutory appeal. The Appeals Court did not reach the merits of the appeal. It ruled that it lacked jurisdiction to hear this this interlocutory appeal.

This case is Cynthia Albert, et al. v. Trans Union Corporation, Appeals Court No. 02-3644, an appeal from the U.S. District Court for the Northern District of Illinois, Eastern Division, No. 00 CV 4729, Judge Robert Gettleman presiding.

Sen. Feingold Introduces Bill to Limit Delayed Notice Warrants

10/2. Sen. Russ Feingold (D-WI) introduced S 1701, the "Reasonable Notice and Search Act", a bill to limit the use of delayed notice warrants, also know as "sneak and peak" warrants.

Sen. Feingold summarized his bill in the Senate. "This bill addresses the provision of the USA PATRIOT Act that has caused perhaps the most concern among Members of Congress. Section 213 of the PATRIOT Act, sometimes referred to as the ``delayed notice search provision´´ or the ``sneak and peek provision,´´ authorizes the Government in limited circumstances to conduct a search without immediately serving a search warrant on the owner or occupant of the premises that have been searched." See, Congressional Record, October 2, 2003, at S12377-8.

Sen. Feingold's bill would require the government to give notice of the warrant within 7 days, but allows a judge to extend this time period. Section 213 requires notice within an undefined "reasonable period". The bill would also narrow the circumstances in which a delayed notice warrant could be issued.

Finally, this bill would provide for the sunsetting of Section 213 at the end of 2005.

The bill was referred to the Senate Judiciary Committee. Sen. Feingold is a member.

Senate Judiciary Committee to Hold Hearings on Combatting Terrorism and Protecting Liberties

10/2. Sen. Orrin Hatch (R-UT), the Chairman of the Senate Judiciary Committee (SJC), and Sen. Patrick Leahy (D-VT), the ranking Democrat on the Committee, announced that the SJC  will "hold a new series of oversight hearings on the adequacy of federal laws to help prevent and respond to acts of terrorism in the United States." They added that the "first hearing is tentatively scheduled for October 21."

These hearings will provide an opportunity to examine the proposals contained bills recently introduced by Senators Leahy (S 1695), Craig (S 1709), Feingold (S 1701), and others.

Hatch (at right) and Leahy elaborated that this "inquiry will include a review of how effective the current laws are at protecting America; whether additional tools, reporting obligations and oversight may be needed; and the implications to security, privacy and civil liberties of current laws including the USA PATRIOT Act. Additionally, Senators Hatch and Leahy will request information from the Justice Department on how law enforcement and intelligence agencies are using existing laws to combat terrorism."

Sen. Hatch summarized the purpose of the hearings in a release -- to "get the facts necessary to find out if we are we protecting both our citizens' lives and their liberties."

Sen. Leahy stated that "We need to know more about how the tools we gave the government in the USA PATRIOT Act are being used. Which are working, and how well? Which are not working, and why? Have any struck the wrong balance, threatening the civil liberties of our citizens while doing little or nothing to improve the nation's security? Oversight is an important responsibility of the Congress and our committee, and thorough and constructive oversight makes government work better."

More Capitol Hill News

10/2. The House Judiciary Committee's Subcommittee on Courts, the Internet, and Intellectual Property began its mark up HR 2517, the "Piracy Deterrence and Education Act of 2003". The bill is opposed by some members of the Subcommittee. Several members stated that they have amendments to offer. The mark up was postponed because of consideration by the full House of a bill pertaining to partial birth abortions. Subcommittee Chairman Lamar Smith (R-TX) stated that the mark up will continue on Tuesday or Wednesday of next week.

10/2. The Senate Commerce Committee held yet another hearing on media ownership. See, opening statement of Sen. John McCain (R-AZ), the Chairman of the Committee, prepared testimony of Mark Cooper (Consumer Federation of America), prepared testimony of Victor Miller (Bear Stearns & Co.), prepared testimony of Eli Noam (Columbia Institute for Tele-Information), and prepared testimony of Philip Napoli (Fordham University).

10/2. Rep. Bernie Sanders (S-VT), and others, introduced HR 3228, a short bill that provides that "normal trade relations treatment shall not apply to the products of the People's Republic of China, and normal trade relations treatment may not thereafter be extended to the products of that country." The bill was referred to the House Ways and Means Committee.

People and Appointments

10/2. The Senate confirmed William Hayes to be a Judge of the U.S. District Court (SDCal) by a vote of 98-0. See, Roll Call No. 375.

10/2. The Senate Judiciary Committee approved the nomination of U.S. District Court Judge Charles Pickering to be a Judge of the U.S. Court of Appeals (11thCir). However, Senate Democrats are likely to filibuster the nomination on the Senate floor.

10/2. The Senate confirmed John Houston to be a Judge of the U.S. District Court for the Southern District of California.

10/2. The Senate confirmed Robert Clive Jones to be a Judge of the U.S. District Court for the District of Nevada.

10/2. The Senate confirmed Philip Figa to be a Judge of the U.S. District Court for the District of Colorado.

More News

10/2. The Department of Justice (DOJ) and the Environmental Protection Agency (EPA) brought and settled a civil action in U.S. District Court (EDArk) against ALLTEL Corporation. The DOJ and EPA alleged that ALLTEL violated the Clean Air Act (CAA), the Clean Water Act (CWA), and the Emergency Planning and Community Right-to-Know Act (EPCRA). The DOJ and EPA also announced that ALLTEL "has signed an agreement to carry out cross-cutting environmental compliance audits at its facilities nationwide". In addition, ALLTEL will pay a fine of $1,058,000. See, DOJ release.

10/2. The Department of Commerce's (DOC) National Telecommunications and Information Administration (NTIA) announced the award of Technology Opportunities Program (TOP) grants for FY 2003 totaling $13.95 Million.

House Commerce Committee Approves E-911 Implementation Act

10/1. The House Commerce Committee amended and approved HR 2898, the "E-911 Implementation Act of 2003" by unanimous voice votes. See, amendment in the nature of a substitute [PDF].

The bill, which is sponsored by Rep. John Shimkus (R-IL), Rep. Anna Eshoo (D-CA) and others, would a uthorize the appropriation of $500 Million in grants over five years to upgrade public safety answering point (PSAP) facilities, establish an E-911 Coordination Office at the Department of Commerce's (DOC) National Telecommunications and Information Administration (NTIA) to improve coordination among federal, state and local public safety officials, penalize states for redirecting E-911 funds collected from consumer's cell phone bills, and direct the FCC to study E-911 implementation in rural areas.

Rep. Billy Tauzin (R-LA), the Chairman of the Committee, presided at the hearing. He stated that this bill "sends a clear signal to states to stop raiding E-911 funds. States are delaying E-911 deployment and costing lives by stealing E-911 funds and diverting them to other purposes."

Rep. Tauzin offered an amendment in the nature of a substitute that was approved by a unanimous voice vote. There were no other amendments. The bill, as amended, was then approved by a unanimous voice vote.

Rep. Shimkus spoke with reporters after the hearing. He acknowledged that authorizing an appropriation is not an appropriation, and that the Bush administration opposes the funding language of the bill. However, asserted that the bill has broad bipartisan support, and "I think we could get some dollars out of the appropriators".

On September 30, Theodore Kassinger, the General Counsel of the DOC, and Rosalind Knapp, the Deputy General Counsel of the Department of Transportation (DOT), wrote a letter to Rep. Tauzin regarding HR 2898.

The wrote that "there are significant cost associated with implementing E-911, including the particular costs associated with wireless E-911, which must be dealt with by State and local governments". They added that "the Administration believes Congress should consider more efficient and more cost-effective means to address this issue, rather than establishing a new grant program as outlined in H.R. 2898."

They argued that "There is a range of Federal and private grant programs capable of providing support for E-911 implementation" and that "A number of State and local governments have implemented successful E-911 programs with little or no Federal assistance".

They also suggested that the coordination office be jointly administered by the NTIA and the DOT's National Highway Traffic Safety Administration (NHTSA).

Steve Berry, SVP for Government Affairs at the Cellular Telecommunications and Information Association (CTIA) stated in a release that "Once in place, E9-1-1 location technology will speed delivery of emergency services to people in need. But, too often states facing deficits have looked to their E9-1-1 account in order cover budget shortfalls ... This legislation will protect E9-1-1 funds while simultaneously strengthening statewide coordination and cooperation among local phone companies, wireless carriers and public safety."

Richard Taylor, President of the National Emergency Number Association (NENA), stated in a release that "E9-1-1 refers to the ability to capture precise location data from callers to emergency response centers. At present, roughly 93 percent of call centers have E9-1-1 for wireline callers, but only about 10 percent can locate wireless callers with any precision. Passage of this legislation will improve emergency response overall and ensure that eventually all Americans can be located when calling 9-1-1 from their cell phones."

The related bill in the Senate, S 1250, the "Enhanced 911 Emergency Communications Act of 2003", sponsored by Sen. Conrad Burns (R-MT) and Sen. Hillary Clinton (D-NY), was approved by the Senate Commerce Committee on July 17, 2003. See, story titled "Senate Commerce Committee Approves E-911 Bill" in TLJ Daily E-Mail Alert No. 701, July 18, 2003.

Rep. Shimkus and Rep. Eshoo introduced HR 2898 on July 25, 2003. The House Telecom and Internet Subcommittee held a hearing on September 11, 2003, and approved the bill on September 23, 2003. See, story titled "Representatives Introduce E911 Implementation Act" in TLJ Daily E-Mail Alert No. 707, July 30, 2003.

House Committee Addresses Trade with China

10/1. The House Financial Services Committee's (HFSC) Subcommittee on Domestic and International Monetary Policy, Trade and Technology held a hearing titled "China's Exchange Rate Regime and its Effects on the U.S. Economy?"

Rep. Mike Oxley (R-OH), the Chairman of the full Committee, wrote in his prepared statement [PDF] that "We encourage countries, both through negotiation and example, to leave the seeming security of capital controls and other market restrictions. Embracing free markets means providing freedom for capital to find its most productive home and for markets in goods and services to grow beyond national borders."

John Taylor, Under Secretary of the Treasury for International Affairs, quoted Treasury Secretary John Snow in his prepared testimony [6 pages in PDF]: "the establishment of flexible exchange rates, of a flexible exchange rate regime, would benefit both our nations as well as our regional and global trading partners."

"For nearly ten years now, the Chinese have maintained a fixed exchange rate for their currency, the yuan, relative to the dollar", said Taylor. "To maintain this fixed exchange rate, the central bank of China has had to intervene in the foreign exchange market." He also stated that "China still has significant capital controls. China’s capital controls allow for more inflows than outflows, thus bolstering foreign exchange reserves."

He also stated that an appreciation of the yuan relative to the dollar "would make U.S. exports to China less expensive and it would make U.S. imports from China more expensive."

Grant Aldonas, stated in his prepared testimony [11 pages in PDF] that "China's change from a non-market economy to one that operates fully on market principles is incomplete". He added that "the simple fact is that many of the main drivers of the Chinese economy remain in state hands."

Aldonas also focused on intellectual property rights. "We have considerable challenges in terms of WTO compliance, particularly in areas like the protection of intellectual property that represents the key U.S. competitive edge in many manufacturing industries. In fact, no country raised more attention as a source of concern than China during the roundtable discussions. Our manufacturers complained about rampant piracy of intellectual property; forced transfer of technology from firms launching joint ventures in China; a broad range of trade barriers; and capital markets that are largely insulated from free-market pressures."

Reps. Goodlatte and Boucher Introduce Bill to Limit Business Activity Taxes

10/1. Rep. Bob Goodlatte (R-VA), Rep. Rick Boucher (D-VA), and others, introduced HR 3220, the "Business Activity Tax Simplification Act of 2003", a bill that would limit states' ability to impose business activity taxes (BATs). It would require that a business have a physical presence in the taxing jurisdiction to be subject to a BAT. It was referred to the House Judiciary Committee.

Rep. Goodlatte (at right) stated in a release that "This legislation sets specific guidelines for when an out-of-state business may be charged a tax for doing business in a state ... Just because a website can be accessed by consumers in a certain state, doesn’t mean that state should be able to collect taxes from the website owner. This legislation focuses on allowing the Internet and the commerce that it facilitates to expand, by eliminating excessive taxes that harm on-line growth."

The bill provides that "no taxing authority of a State shall have power to impose, assess, or collect a net income tax or other business activity tax on any person relating to such person's activities in interstate commerce, unless such person has a physical presence in the State during the taxable period with respect to which the tax is imposed."

The bill then proceeds to outline the requirements for "physical presence". It does not, however, reference websites or the internet.

Rep. Boucher stated in a release that "Currently, no clear standard exists to define a ``substantial nexus´´ for the taxation of business activity by the states. This uncertainty has allowed several states to impose unfair taxes onto businesses which have no physical presence in those states and do not benefit from the services provided by the tax revenue. The Business Activity Tax Modernization Act would rectify the unfairness which currently exists by setting a physical presence nexus standard. This standard would ensure that states have the ability to tax businesses which benefit from services provided by the state and businesses which have no physical presence in a state would be exempt from taxation on business activity in that state."

These Congressmen have introduced similar legislation in the past. See, HR 2526 (107th Congress), the "Internet Tax Fairness Act of 2001". See also, story titled "Goodlatte and Boucher Introduce Net Tax Moratorium Bill" in TLJ Daily E-Mail Alert No. 229, July 18, 2001; and "House Subcommittee Approves Bill to Limit Business Activity Taxes" in TLJ Daily E-Mail Alert No. 471, July 17, 2002.

The present bill, HR 3220, unlike HR 2526, lacks specific language pertaining the internet, web sites, communications and intellectual property.

For example, HR 2526 (107th Congress), as introduced in 2001, would have prohibited several internet related BATs, including taxes on "The use of the Internet to create or maintain a World Wide Web site accessible by persons" in the taxing jurisdiction. It would also have prohibited BATs on the use of an ISP, on-line service provider, internetwork communication service provider, or other internet access service provider, or web hosting service. It would also have prohibited BATs on the "use of any service provider for transmission of communications, whether by cable, satellite, radio, telecommunications, or other similar system." Also, it would have prohibited BATs based on the "presence or use of intangible personal property ... including patents, copyrights, trademarks, logos, ... electronic or digital signals, and web pages ..."

Senate Finance Committee Approves FSC/ETI Replacement Bill

10/1. The Senate Finance Committee amended and approved S 1637, the "Jumpstart Our Business Strength Act", or JOBS Act. This bill would replace the current Extraterritorial Income Act (ETI), and its predecessor, the Foreign Sales Corporation (FSC) tax regime.

Most nations have a territory tax regime, by which they tax the income of corporations within their territory. The U.S. has a global tax regime. American corporations are taxed by the U.S. government for their domestic and foreign income.

This puts U.S. corporations at a competitive disadvantage with respect to their foreign competitors when competing in a global economy. Hence, Congress has enacted various exceptions to the general rule, through such methods as the foreign tax credit, the Domestic International Sales Corporation (DISC), the FSC tax regime, and most recently, the ETI.

Sen. Max Baucus (D-MT), the ranking Democrat on the Committee, explained one reason for passing this bill. He stated that a "reason why we act today is to respond to an international tax case that the United States lost in the World Trade Organization (WTO). In a dispute brought by the European Union, the WTO found that the Foreign Sales Corporation (FSC) and Extraterritorial Income Act (ETI) were impermissible export subsidy programs." See, statement [PDF].

See also, statement [PDF] of Sen. Charles Grassley (R-IA), the Chairman of the Committee.

The tax treatment of income from foreign sales is significant to technology companies that sell a large proportion of their goods and services abroad. Also, if this issue is not resolved, the European Union could imposes trade sanctions that would harm technology companies.

There is a competing bill pending in the House, HR 2896, the "American Jobs Creation Act of 2003", sponsored by Rep. Bill Thomas (R-CA), the Chairman of the House Ways and Means Committee. However, the Ways and Means Committee has yet to act on this bill.

The House bill has broader support from software, computer, information technology, and communications companies. Its supporters include AOL Time Warner, Apple, Cisco, Dell, eBay, EDS, HP, IBM, Iomega, Oracle, Sun Microsystems, Telcordia, TI, BellSouth, AT&T, SBC, and Verizon. See, list [PDF].

House Speaker Denny Hastert (R-IL) issued a statement [PDF] on October 2. "Chairman Bill Thomas has developed tax reform legislation that replaces the current FSC-ETI tax benefit with tax proposals that provide additional support for manufacturing and jobs in the United States. The Chairman's bill uses the opportunity provided by the WTO-mandated decision to terminate current FSC-ETI benefits to create a better tax structure for U.S. manufacturers competing against foreign companies. I support Chairman Thomas expeditiously moving forward with this legislation."

Secretary of the Treasury John Snow had this to say: "I applaud Senate Finance Committee Chairman Grassley, Ranking Member Baucus and the Committee for their hard work in moving the FSC/ETI legislation forward. The Administration's top priority is getting a bill enacted that complies with the WTO ruling and avoids triggering $4 billion in EU trade sanctions. The EU has stated the Congress needs to pass bills out of both houses by the end of the year to avoid such sanctions. We encourage Congress to replace ETI in a way that improves the competitiveness of America's manufacturers and other job creators. It is critically important that we continue to work together to get legislation enacted." See, statement.

Bush Signs Homeland Security Appropriations Bill

10/1. President Bush signed HR 2555, the "Department of Homeland Security Appropriations Act, 2004." The Department of Homeland Security (DHS) wrote in a summary of the bill that "Overall, the Department's FY 2004 budget authority totals $37.6 billion: $30.4 billion provided by the Congress plus an additional $7.2 billion in fees."

The bill does not specify how much is appropriated for the National Cyber Security Division (NCSD) of the Information Analysis and Infrastructure Protection Directorate (IAIP).

It does state, "For salaries and expenses of the immediate Office of the Under Secretary for Information Analysis and Infrastructure Protection and for management and administration of programs and activities, as authorized by title II of the Homeland Security Act of 2002 (6 U.S.C. 121 et seq.), $125,000,000."

The bill also states, "For expenses for information analysis and infrastructure protection as authorized by title II of the Homeland Security Act of 2002 (6 U.S.C. 121 et seq.), $714,300,000, to remain available until September 30, 2005." These two items total $839,300,000.

In addition, the DHS summary states that of this $839.3 Million for the IAIP, there is "$84.2 million for infrastructure vulnerability and risk assessment, which will develop and maintain a complete, accurate, and prioritized mapping of the nation's critical infrastructures and key assets including agriculture, food, water, public health, emergency services, government, defense industrial base, information and telecommunications, energy, transportation, banking and finance, chemical and hazardous materials, postal and shipping, and monuments and icons."

The DHS also stated that there is "$141 million for the National Communications System, which includes the emergency notification system, back-up dial-tone, government emergency telecommunications network, and wireless priority service."

President Bush gave a speech at a signing ceremony. However, while he broadly referenced protecting critical infrastructures, he did not mention cyber security. He said that "DHS experts help the public and private sectors to identify and address vulnerabilities in our power grids, chemical plants, communications systems and transportation networks. ... More than $900 million in this bill will go to science and technology projects, including a major effort to anticipate and counter the use of biological weapons. With more than $800 million, we will assess the vulnerabilities in our critical infrastructures, we'll take action to protect them."

The bill also restricts the use of appropriated funds for the Computer Assisted Passenger Prescreening System (CAPPS II), at the DHS's Transportation Security Administration. See, story titled "Homeland Security Appropriations Bill Purports to Restrict Use of Funds for CAPPS II", below.

Homeland Security Appropriations Bill Purports to Restrict Use of Funds for CAPPS II

10/1. President Bush signed HR 2555, the "Department of Homeland Security Appropriations Act, 2004." The bill contains language prohibiting the use of funds for the Computer Assisted Passenger Prescreening System (CAPPS II) program until the General Accounting Office (GAO), which is an arm of the Congress, issues a report to the Congress in which it finds that the CAPPS II program meets certain specified criteria set out in the bill. However, while this language is in the bill, and the President signed the bill, the President wrote in a separate signing statement that this language of the bill is ineffective under the Supreme Court's opinion in INS v. Chadha. Bush wrote that while the language is mandatory, he will construe it as merely advisory. See, full story.

TSA Receives Comments In CAPPS II Privacy Proceeding

10/1. September 30 was the extended deadline to submit comments to the Transportation Security Administration (TSA) regarding the Privacy Act ramifications of its proposal to establish a new system of records to support the development of the Computer Assisted Passenger Prescreening System (CAPPS II).

David Sobel and Marcia Hoffman submitted a comment [18 pages in PDF] on behalf of the Electronic Privacy Information Center (EPIC).

The comment states that CAPPS II "is a secret, classified system that the agency will use to conduct background checks on tens of millions of airline passengers. The resulting ``risk assessments´´ will determine whether individuals will be subject to invasive searches of their persons and belongings, or be permitted to board commercial aircraft. TSA will not inform the public of the categories of information contained in the system. It will include information that is not "relevant and necessary" to accomplish its stated purpose of improving aviation security. Individuals will have no judicially enforceable right to access information about them contained in the system, nor to request correction of information that is inaccurate, irrelevant, untimely or incomplete. In short, it is precisely the sort of system that Congress sought to prohibit when it enacted the Privacy Act of 1974."

The EPIC argues that "TSA must revise its Privacy Act notice for the CAPPS II system to 1) ensure greater transparency through the establishment of a non-classified system; 2) provide individuals enforceable rights of access and correction; 3) limit the collection of information to only that which is necessary and relevant; and 4) substantially limit the routine uses of collected information. Further, development of the system should be suspended until TSA prepares a final Privacy Impact Assessment, discloses it to the public and receives public comments. Finally, the agency should not acquire personal information, even for testing purposes, until it has revised its Privacy Act notice as suggested above."

James Dempsey and Lara Flint of the Center for Democracy and Technology (CDT), and Michael DeSanctis and Robin Meriweather of the law firm of Jenner & Block, submitted a comment [17 pages in PDF] on behalf of the CDT.

The CDT comment offers the following conclusions: "TSA's proposed uses of CAPPS II go far beyond aviation security, representing ``mission creep´´ even before CAPPS II becomes operational. These additional uses of the system unlawfully extend TSA's activities beyond the Congressional grant of authority to TSA in the Aviation and Transportation Security Act. Other uses of the system set out in the Interim Notice would violate the Privacy Act. Many terms and proposed uses articulated in the Notice are so vague and undefined that they threaten the fundamental effectiveness of CAPPS II and jeopardize the public’s confidence in TSA’s ability to implement CAPPS II in a way that respects important privacy concerns. TSA’s reliance on unspecified government databases of uncertain accuracy to evaluate whether passengers are risks to aviation security remains a leading cause for concern."

Former Rep. Bob Barr (R-GA) also submitted a comment. He stated in a release on September 30 that CAPPS II "would establish a vast computer database, against which all airline travelers would be subject to review before being given a color-coded score allowing them to travel, being subject to further searches, or detained and possibly arrested." He asserts that it would be unconstitutional.

The EPIC has also sought records from the government to assist it and others in preparing comments for the TSA. On September 4, it filed a complaint in U.S. District Court (DC) under the Freedom of Information Act (FOIA) seeking the expedited processing and release of agency records concerning the CAPPS II. Specifically, the EPIC sought a "Capital Asset Plan and Business Case" and any "Privacy Impact Assessments" prepared for the CAPPS II project. See, the EPIC's Memorandum in Support of Plaintiff's Motion for Temporary Restraining Order and Preliminary Injunction [16 pages in PDF].

On September 5, the TSA filed a pleading [2 page PDF scan] titled "Praecipe" with the District Court that states that the TSA and EPIC agreed that the TSA "will complete its processing of the FOIA request" by September 25. On September 25, 2003, the TSA sent a letter [2 pages in PDF] to the EPIC in which it stated that the documents sought by the EPIC are exempted from disclosure.

See, related stories: "TSA and EPIC Reach Agreement Regarding Production of Documents Regarding CAPPS II" in TLJ Daily E-Mail Alert No. 734, September 8, 2003, and "EPIC Files FOIA Suit For CAPPS II Records" in TLJ Daily E-Mail Alert No. 733, September 5, 2003.

The TSA published a Privacy Act notice and request for comments in the Federal Register on January 15, 2003 in which it proposed to establish a new system of records to support the development of the new version of the CAPPS. See, Federal Register, January 15, 2003, January 15, 2003, Vol. 68, No. 10, at Pages 2101 - 2103.

The TSA published a second Privacy Act notice and request for comments in the Federal Register on August 1, 2003, in which it announced that it received "substantial comments ... in response to the prior notice", and that "significant changes have been made to date to the proposed CAPPS II system and to the CAPPS II Privacy Act notice in light of these comments".

This second notice further states that "Additional comments are sought on the modifications to this Privacy Act notice". This second notice sets a September 30, 2003 deadline for public comments. See, Federal Register, August 1, 2003, Vol. 68, No. 148, at Pages 45265 - 45269.

President Signs Defense Appropriations Bill, With Total Information Awareness Ban

10/1. President Bush signed HR 2658, the "Department of Defense Appropriations Act, 2004". Section 8131 of the bill prohibits, subject to certain classified exceptions, funds from being used to support the Defense Advanced Research Projects Agency's (DARPA) Terrorism Information Awareness (TIA) Program.

Section 8131(a) provides that "Notwithstanding any other provision of law, none of the funds appropriated or otherwise made available in this or any other Act may be obligated for the Terrorism Information Awareness Program: Provided, That this limitation shall not apply to the program hereby authorized for Processing, analysis, and collaboration tools for counterterrorism foreign intelligence, as described in the Classified Annex accompanying the Department of Defense Appropriations Act, 2004, for which funds are expressly provided in the National Foreign Intelligence Program for counterterrorism foreign intelligence purposes."

Subsection (b) provides that "None of the funds provided for Processing, analysis, and collaboration tools for counterterrorism foreign intelligence shall be available for deployment or implementation except for: (1) lawful military operations of the United States conducted outside the United States; or (2) lawful foreign intelligence activities conducted wholly overseas, or wholly against non-United States citizens."

President Bush issued a signing statement in which he addressed the exceptions contained in the Classified Annex. He criticized this as "secret law".

He wrote that "Sections 8082, 8091, 8117, and 8131 of the Act make clear that the classified annex accompanies but is not incorporated as a part of the Act, and therefore the classified annex does not meet the bicameralism and presentment requirements specified by the Constitution for the making of a law. Accordingly, the executive branch shall construe the classified annex references in sections 8082, 8091, 8117, and 8131 as advisory in effect. My Administration continues to discourage any efforts to enact secret law as part of defense funding legislation and encourages instead appropriate use of classified annexes to committee reports and joint statements of managers that accompany the final legislation."

For more on recent legislative activity pertaining to the TIA program, see the following stories:

 • "Senators Write AG Ashcroft Re Data Mining by DOJ" and "Groups Write House Armed Service Committee Re Total Information Awareness" in TLJ Daily E-Mail Alert No. 584, January 16, 2003.
 • "DARPA States FBI Is Involved in Total Information Awareness Program" in TLJ Daily E-Mail Alert No. 588, January 22, 2003.
 • "Senate Approves Total Information Awareness Amendment" in TLJ Daily E-Mail Alert No. 590, January 24, 2003.
 • "House and Senate Pass FY 2003 Appropriation Package With TIA Amendment" in TLJ Daily E-Mail Alert No. 604, February 14, 2003.
 • "Tether States that DARPA's Total Information Awareness Project Does Not Data Mine" and "Tether Addresses TIA and Other Defense Info Tech Projects" in TLJ Daily E-Mail Alert No. 633, March 31, 2003.
 • "DARPA Releases TIA Report" in TLJ Daily E-Mail Alert No. 666, May 21, 2003.
 • "House Passes Defense Appropriations Bill" in TLJ Daily E-Mail Alert No. 694, July 9, 2003.
 • "Poindexter Writes About Uses of Information Technology to Fight Terrorism" in TLJ Daily E-Mail Alert No. 719, August 15, 2003.

Sen. Leahy Introduces Bill to Expand List of Surveillance Provisions of PATRIOT Act to Be Sunsetted

10/1. Sen. Patrick Leahy (D-VT) and others introduced S 1695, the "PATRIOT Oversight Restoration Act". It pertains to the sunsetting of various provisions of the USA PATRIOT Act. This Act was passed by the 107th Congress as HR 3162 shortly after the terrorist attacks of September 11, 2001. It became Public Law 107-56 on October 26, 2001. The original PATRIOT Act provides that some of its provisions sunset, or cease to have effect, on December 31, 2005. Sen. Leahy's bill provides for the sunsetting of more provisions.

Title II of the PATRIOT, which addresses electronic surveillance, provides, at Section 224, for the sunsetting of many of the provisions of Title II. It provides, in part, that "this title and the amendments made by this title (other than sections 203(a), 203(c), 205, 208, 210, 211, 213, 216, 219, 221, and 222, and the amendments made by those sections) shall cease to have effect on December 31, 2005." (Parentheses in original.)

The table at the end of this article lists all of the sections of Title II, offers a brief description, and identifies whether that section would be sunsetted under the PATRIOT Act, under Sen. Leahy's bill, and under Sen. Larry Craig's (R-ID) bill. See, story titled "Senators Craig and Dubin Introduce Bill to Modify PATRIOT Act" in TLJ Daily E-Mail Alert No. 753, October 6, 2003.

Sen. Leahy's bill provides for the sunsetting of, "In title II, all sections other than sections 201, 202, 204, 205, 208, and 221, and the first sentence of section 222."

Sen. Leahy's bill also provides for the sunsetting of sections in other titles, such as Title III (regarding money laundering) and Title IV (regarding border protection). However, those provisions are not addressed in this article, or in the table below.

Sen. Leahy (at right) offered this summary of the surveillance related provisions of his bill: "The PATRIOT Oversight Restoration Act would extend PATRIOT's sunset provision to other enhanced surveillance provisions in title II of the act. These include subsections (a) and (c) of section 203, which authorize the disclosure of grand jury information to foreign enforcement, intelligence and immigration officials; sections 210 and 211, which broaden the types of information that law enforcement may obtain, upon request, from electronic communication service providers and cable service operators; section 213, which authorizes so-called ``sneak and peak'' -- delayed notification -- search warrants; sections 216 and 222, which significantly expand when, where, and how law enforcement can obtain a pen register or trap and trace order; and section 219, which authorizes judges to sign search warrants for properties located outside their districts." See, Congressional Record, October 1, 2003, at S12283.

The status of many sections of Title II of the PATRIOT Act would not be altered by either the Leahy bill or the Craig bill. The status of some of the less critical sections would be changed. And, the status of some sections containing major changes to law would be changed by either or both of the Leahy and Craig bill.

The original co-sponsors of the Leahy bill are Sen. Larry Craig (R-ID), Sen. Richard Durbin (D-IL), Sen. Harry Reid (D-NV), and Sen. John Sununu (R-NH).

Pen Register and Trap and Trace Devices. Both the Leahy and Craig bills would sunset Section 216, regarding internet communications, including the expansion of the concept of pen register and trap and trace devices (PR&TTD) to online communications.

PR&TTD are telephone industry concepts. Pen registers are used to obtain outgoing phone numbers. Trap and trace devices are used to obtain incoming numbers. Before passage of the PATRIOT Act, the relevant statute referenced "wire" communications.

The PATRIOT Act provides that the concept of a pen register is expanded from merely capturing phone numbers, to capturing routing and addressing information in any electronic communications, including internet communications. It similarly expands the concept of trap and trace devices. The Act also provides that a single order shall apply nationwide.

PR&TTD orders do not authorize a LEA to obtain the content of communications. Court orders authorizing PR&TTD devices do not require a showing of probable cause, as is the case for wiretaps, which enable LEAs to obtain the content of communications.

Boucher Goodlatte Amendment. The Leahy bill would sunset a part of Section 222. Neither the PATRIOT Act, nor the Craig bill, would sunset any part of this section. While almost all of Title II pertains to the expansion of surveillance authority, Section 222 imposes limits of government authority.

Section 222 of the PATRIOT Act, which is titled "Assistance to Law Enforcement Agencies", provides, in full, that "Nothing in this Act shall impose any additional technical obligation or requirement on a provider of a wire or electronic communication service or other person to furnish facilities or technical assistance. A provider of a wire or electronic communication service, landlord, custodian, or other person who furnishes facilities or technical assistance pursuant to section 216 shall be reasonably compensated for such reasonable expenditures incurred in providing such facilities or assistance."

The Leahy bill would sunset the second of the two sentences. That is, the Leahy bill, would not sunset the ban on technology mandates; however, it would sunset the requirement that LEAs compensate ISPs for expenses incurred in providing PR&TTD assistance.

This section derives from an amendment offered by Rep. Bob Goodlatte (R-VA) and Rep. Rick Boucher (D-VA) at the House Judiciary Committee's markup of the PATRIOT Act on October 3, 2001. See, story titled "No Technology Mandates" in TLJ Daily E-Mail Alert No. 279, October 4, 2003.

They explained their reasons for offering this amendment. They were concerned about the history of the Communications Assistance for Law Enforcement Act (CALEA). Congress passed this Act in 1994 to enable LEAs to maintain their existing wiretap capabilities in new telecommunications devices. The Congress had cell phones in mind. It provides that wireline, cellular, and broadband PCS carriers must make their equipment capable of certain surveillance functions. However, the FBI has since sought an implementation of CALEA that expands surveillance capabilities beyond those provided in the statute. Moreover, the FCC, which has written implementing rules, has largely backed the FBI. This has imposed considerable burdens and costs upon service providers, and their customers.

Sneak and Peak. Both the Leahy and Craig bills would provide for the sunsetting of Section 213, which provides authority for delaying notice of the execution of a warrant. The PATRIOT Act does not sunset this provision, which is also sometimes referred to as "sneak and peak".

Another bill, S 1701, the "Reasonable Notice and Search Act", introduced by Sen. Russ Feingold (D-WI) on October 2, would also sunset Section 213.

Section 219. Both the Leahy and Craig bills would provide for the sunsetting of Section 219, which provides for single-jurisdiction search warrants for terrorism.

Section 215 and Library Records. The American Library Association (ALA) and others have complained about FBI use of Section 215 to obtain library records. However, Attorney General John Ashcroft recently announced that the FBI has not yet used Section 215 to obtain any records.

The PATRIOT Act provides for the automatic sunsetting of this provision. Both the Leahy and Craig bills also provide for the sunsetting of Section 215.

Powell Writes Direct Marketers Regarding Do Not Call List

10/1. Federal Communications Commission (FCC) Chairman Michael Powell wrote a letter [PDF] to the Direct Marketing Association (DMA), regarding the telemarketing do not call registry.

He wrote that "recent court decisions have introduced confusion and uncertainty to the legal landscape. While the FCC has legal authority to enforce our Do-Not-Call rules, certain practical difficulties exist because of court decisions involving the FTC's rules. The FCC's Do-Not-Call rules incorporate a single federal do-not-call database, created and implemented by the FTC. As you are aware, recent court decision may prevent the FCC from obtaining the database and related information necessary for enforcement directly from the FTC."

Consequently, Powell requested "that the Direct Marketing Association voluntarily provide the FCC with materials that will promote telemarketers' compliance with the national Do-Not-Call registry, promote consumer choice and enhance the FCC's ability to enforce its rules concerning the national registry. More specifically, I request that the DMA provide, first, a copy of the nation Do-Not-Call registry database and, second, a listing of each DMA member that, to DMA's knowledge, has downloaded the national Do-Not-Call database, including, if known, the date of each download. This information will promote the FCC's ability to protect residential telephone subscribers throughout the United States from unwanted telemarketing initiated by all entities that have already downloaded the list, which I believe is our common goal."

SEC Files Complaint Against JP Morgan for IPO Allocation Practices

10/1. The Securities and Exchange Commission (SEC) filed a civil complaint in U.S. District Court (DC) against J.P. Morgan Securities Inc. (JPMSI), a subsidiary of J.P. Morgan Chase & Co., alleging violation of Rule 101 of Regulation M in connection with its initial public offering (IPO) allocation practices.

The complaint alleges that from March 1999 through August 2000 JPMSI was the lead underwriter for nine oversubscribed and hot IPOs: Rowecom, Valley Media, Genentech, Hoover's Online, IPIX, Vicinity Corp., The Medicines Company, Dyax, and Large Scale Biology Corp.

It alleges that JPMSI provided allocations of stock to institutional customers in the hot IPOs that it underwrote. It further alleges that JPMSI attempted to induce certain customers to place orders for shares in the aftermarket for IPOs, in violation of Rule 101 of Regulation M, which is codified at 17 C.F.R. § 242.101.

The two count complaint also alleges violation of NASD Conduct Rule 2110.

The SEC and JPMSI simultaneously settled the lawsuit. The SEC announced in a release that "J.P. Morgan has consented, without admitting or denying the allegations of the complaint, to a final judgment that would permanently enjoin J.P. Morgan from violating Rule 101 of the Commission's Regulation M and NASD Conduct Rule 2110, and order it to pay a $25 million civil penalty. The settlement terms are subject to approval by the court."

Antonia Chion, Associate Director of the SEC's Division of Enforcement, stated in this release that "The IPO market must operate free from artificial influences ... Any abusive allocation practices -- from extracting explicit agreements about aftermarket purchases to attempting to induce purchases in the aftermarket -- will not be tolerated."

This case is Securities and Exchange Commission v. J.P. Morgan Securities Inc., U.S. District Court for the District of Columbia, D.C. No. 1:03CV0208 (ESH), Judge Ellen Huvelle presiding.

DOJ Files Amicus Brief Re Section 8 of Clayton Act

10/1. The Department of Justice's (DOJ) Antitrust Division filed an amicus curiae brief with the U.S. District Court (SDNY) in Reading International v. Oaktree Capital Management, in which it argued that a business may violate Section 8 of the Clayton Act, codified at 15 U.S.C. § 19, when its deputizes representatives to serve simultaneously as directors or officers of competing corporations.

Section 8 of the Clayton Act provides in part that "No person shall, at the same time, serve as a director or officer in any two corporations (other than banks, banking associations, and trust companies) that are -- (A) engaged in whole or in part in commerce; and (B) by virtue of their business and location of operation, competitors, so that the elimination of competition by agreement between them would constitute a violation of any of the antitrust laws; if each of the corporations has capital, surplus, and undivided profits aggregating more than $10,000,000 ..."

The DOJ argues that "Oaktree's contrary position -­ that a corporation, acting through its agents, may achieve precisely the coordinated management of competing firms that the statute is designed to outlaw -­ is inconsistent with the statutory language, the statutory purpose, legal precedent, and the longstanding interpretation of the United States." This is D.C. No. 03-CV-1895 (GEL) (THK).

People and Appointments

10/1. President Bush nominated Charlotte Lane to be a Member of the U.S. International Trade Commission for a term expiring December 16, 2009. She currently holds a recess appointment. See, White House release.

10/1. President Bush nominated Daniel Pearsonto be a Member of the U.S. International Trade Commission for the term expiring June 16, 2011. He currently holds a recess appointment. See, White House release.

10/1. President announced his intent to nominate several people to be Members of the National Commission on Libraries and Information Science:  Jose Antonio Aponte, Sandra Ashworth, Edward Bertorelli, Carol Diehl, Allison Druin, Beth Fitzsimmons, Patricia Hines, Colleen Huebner, Stephen Kennedy, Herman Lavon Totten, Bridget Lamont, and Mary Perdue. See, White House release.

More News

10/1. The Federal Communications Commission (FCC) and SBC Communications entered into a Consent Decree that fines SBC $1.35 Million, and terminates the FCC's investigation into whether SBC provided interLATA services prior to its receiving Section 271 approval from the FCC. SBC does not admit facts, wrongdoing or liability. The Consent Decree defines the $1.35 Million transfer as "a voluntary contribution to the United States Treasury". The FCC approved its order adopting this Consent Decree on September 26, 2003. It announced and released this Consent Decree on October 1, 2003. This is FCC 03-299. See also, FCC release.

10/1. The Federal Communications Commission (FCC) issued a notice in which it requests public comments regarding SBC Communications's application to provide in region interLATA services in the states of Indiana and Ohio. Specifically, the FCC seeks comment on an ex parte communication [19 page PDF scan] submitted by SBC on September 29, 2003. The FCC notice states that "This ex parte filing contains two Accessible Letters made available to competitive LECs in Indiana and Ohio regarding recurring charges for collocation direct current (DC) power. Specifically, the Accessible Letters allow competitive LECs in Indiana and Ohio to amend their existing interconnection agreements with SBC to include new recurring charges for DC power, and inform them of SBC’s policy of fusing DC power leads at 125 percent of the capacity requested by a competitive LEC. The FCC seeks public comment on these ... by October 7, 2003." This is WC Docket No. 03-167

10/1. The House Homeland Security Committee held a hearing on fraudulent identification and the threat posed to homeland security. Rep. Chris Cox (R-CA), the Chairman of the Committee, stated that "Recently, the GAO sent three undercover agents into separate offices of the California DMV -- each with false identification, purportedly from Texas, which they had manufactured themselves on a desktop computer using PhotoShop.  According to the GAO, the documents should have been easily identified as forgeries. To make it especially easy for the California DMV to stop the fraud, each of the three undercover agents used the same fake name. Yet California cheerfully issued California driver's licenses to all three of them -- all based on the same poor quality forged documents, and all using exactly the same name." See, prepared testimony [PDF] of General Accounting Office (GAO) titled "SECURITY: Counterfeit Identification Raises Homeland Security Concerns".

10/1. The House Judiciary Committee's Subcommittee on Commercial and Administrative Law held a hearing titled "The Streamlined Sales Tax Agreement: States’ Efforts to Facilitate Sales Tax Collection from Remote Vendors". See, opening statement of Rep. Chris Cannon (R-UT), the Chairman of the Subcommittee, prepared testimony of Colorado Governor Bill Owens, prepared testimony of Maureen Riehl (National Retail Federation), prepared testimony of George Isaacson (Direct Marketing Association), and Attachment 1 and Attachment 2, and prepared testimony of Jack VanWoerkom (Staples).

10/1. Directv, Inc. and EchoStar Satellite Corporation filed a complaint in state court in Raleigh, North Carolina against the State of North Carolina's Department of Revenue alleging that the state's 5% sales tax on direct broadcast satellite services violates the Commerce Clause of the U.S. Constitution. The plaintiffs assert that the tax is discriminatory because the state does not also tax cable services. See, Directv release. The plaintiffs have also recently brought similar suits against other states.

Go to News from September 26-30, 2003.