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1/24. President Bush delivered his weekly radio address on Saturday, January 24, 2004. The topic of this address was "five clear steps that Congress can take this year" to address rising health care costs. His fifth step is using more information technology in the health care sector. He stated that "we can control health care costs and improve care by moving American medicine into the information age. My budget for the coming year proposes doubling to $100 million the money we spend on projects that use promising health information technology. This would encourage the replacement of handwritten charts and scattered medical files with a unified system of computerized records. By taking this action, we would improve care, and help prevent dangerous medical errors, saving both lives and money."

Bush Signs Omnibus Appropriations Bill

1/23. President Bush signed into law HR 2673, known as the omnibus appropriations bill, and the consolidated appropriation act. See, White House release. See, full story.

DOJ Files Competitive Impact Statement in USA v. First Data and Concord

1/23. The Department of Justice's (DOJ) Antitrust Division filed a Competitive Impact Statement with the U.S. District Court (DC) in USA v. First Data and Concord EFS.

On October 23, 2003, the DOJ, seven states, and the District of Columbia filed a complaint [28 pages in PDF] in District Court against First Data Corporation and Concord EFS, Inc., alleging that First Data's planned acquisition of Concord would violate Section 7 of the Clayton Act.

The complaint alleges that point of sale (POS) personal identification number (PIN) networks are "telecommunications and payment infrastructure that connects merchants to consumers' demand deposit accounts at banks. These networks enable consumers to purchase goods and services from merchants through PIN debit transactions by swiping their bank card at a merchant's terminal and entering a Personal Identification Number, or PIN. Within seconds, the purchase amount is debited from the customer's bank account and transferred to the retailer's bank."

It further alleges that "Concord operates STAR, the nation's largest PIN debit network. STAR currently handles approximately half of all PIN debit transactions in the United States. First Data owns a controlling interest in NYCE, the nation's third-largest PIN debit network."

"First Data's acquisition of Concord would substantially reduce competition among the PIN debit networks for retail transactions, in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18." And ultimately, the complaint alleges, this would lead to higher prices for consumers.

See, story titled "DOJ Sues to Stop Merger of PIN Debit Networks" in TLJ Daily E-Mail Alert No. 765, October 24, 2003.

On December 15, 2003, the parties settled the case. First Data agreed to divest its entire interest in NYCE Corporation in order to proceed with its proposed acquisition of Concord EFS. See, story titled "DOJ Settles With First Data and Concord EFS" in TLJ Daily E-Mail Alert No. 800, December 16, 2003.

The Competitive Impact Statement, which was filed on January 23, 2004, states that "The proposed Final Judgment's requirement that First Data divest its NYCE Holdings will eliminate the anticompetitive effects in the PIN debit network services market that the transaction would have produced. First Data's divestiture of its NYCE Holdings will prevent the combination of STAR and NYCE, the combination of First Data's and Concord's assets that would have violated Section 7 of the Clayton Act. By preventing the combination of STAR and NYCE, the proposed Final Judgment will ensure that merchants retain their current ability to obtain competitive prices and levels of service from the two networks, either by: (1) dropping, or credibly threatening to drop, STAR and/or NYCE; or (2) taking advantage of least-cost routing opportunities between the two networks."

The Tunney Act, which is codified at 15 U.S.C. § 16, requires that the government prepare this Competitive Impact Statement, and allow at least 60 days preceding the effective date of the proposed Final Judgment within which any person may submit written comments regarding the proposed Final Judgment.

This case is United States of American, et al., v. First Data Corporation and Concord EFS, Inc., U.S. District Court for the District of Columbia, D.C. No. 1:03CV02169, Judge Rosemary Collyer presiding.

EU Publishes Comments Received Regarding Technology Transfer Agreements

1/23. The European Commission's Competition directorate published in its web site copies of the comments that it has received regarding the draft Commission regulation and guidelines on the application of Article 81 of the Treaty establishing the European Community to technology transfer agreements.

See for example, comment [16 pages in PDF] submitted by the American Intellectual Property Law Association (AIPLA) on November 24, 2003, comment [19 pages PDF] submitted by Intel on November 26, 2003, and comment [9 pages PDF] submitted on December 1, 2003 by the Business Software Alliance (BSA).

Intel wrote that it is concerned "that certain aspects of the draft TTBER and Guidelines make strong presumptions of competitive harm that are not grounded in sound economic analysis and are likely to create a significant adverse impact on worldwide licensing activity in the semiconductor industry. In particular, the classification of certain cross-license agreements and various field of use license grants as hardcore restrictions of competition appears to be predicated on broad presumptions that such provisions are virtually certain to cause competitive harm."

Intel added that "these presumptions lack empirical support and are in fact contrary to the experience of the semiconductor industry, which has widely used cross-licenses that include field of use grants to provide design freedom to industry participants. Some blacklisted cross-licensing practices have been at the core of the framework of intellectual property licensing in the semiconductor and IT industries that has enhanced incentives to license patents and has been a pillar that has sustained the innovation for which these industries are renowned."

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1/23. The Federal Communications Commission (FCC) published a notice in the Federal Register announcing and describing its Report and Order adopting service rules for spectrum to be used by millimeter wave technologies in the 71-76 GHz, 81-86 GHz, and 92-95 GHz bands. See, Federal Register, January 23, 2004, Vol. 69, No. 15, at Pages 3257 - 3268. This FCC announced this Report and Order on October 16, 2003. See also, story titled "FCC Announces Rules for Licensing 71-76 GHz, 81-86 GHz, and 92-95 GHz Bands" in TLJ Daily E-Mail Alert No. 761, October 20, 2003. This Report and Order is FCC 03-248, in WT Docket No. 02-146. For more information, contact Jennifer Burton at 202-418-0680 or Jennifer.Burton@fcc.gov.

Abernathy Addresses VOIP Regulation

1/22. Federal Communications Commission (FCC) Commissioner Kathleen Abernathy gave a speech [6 pages in PDF] at a conference at Catholic University in Washington DC. The speech was about the regulatory response to the convergence of technologies. However, she focused in detail on one issue -- regulatory treatment of voice over internet protocol (VOIP). She stated that this should be considered a matter of federal, not state, jurisdiction. She argued for a "light touch", meaning that the FCC should not engage in "economic" regulation of VOIP, such as prices and service quality, but that the FCC should engage in "social policy" regulation, such as E911 and universal service.

Abernathy (at right) began with an explanation of convergence. "Formerly distinct categories of communications services are collapsing into one as voice, data, and video are all transmitted via digital bits over packet-switching networks."

She stated that "convergence demands fresh thinking by regulators". She continued that "It no longer makes sense to place services into distinct regulatory silos depending on the identity of the provider. In a world where different platforms are used to provide functionally equivalent services, regulators must harmonize distinct regulatory frameworks. The challenge is formidable, however, because the statutory framework that guides the FCC was written before this technological explosion."

Then, she referenced VOIP. She said that "In recent months, the most talked-about convergence application has undoubtedly been Voice Over Internet Protocol, or VOIP. VOIP allows anyone with a broadband connection to enjoy a full suite of voice services, often with greatly enhanced functionalities and at a lower cost than traditional circuit-switched telephony. VOIP provided over cable platforms is increasingly creating the robust, facilities-based voice competition that the framers of the 1996 Act envisioned."

She elaborated that "VOIP is simply an application that is provided over a broadband network. So we shouldn’t put the cart before the horse: We should not presuppose that broadband networks will be ubiquitous; in fact, we are not yet close to achieving that goal. It is therefore critical for the FCC continue to work on facilitating the deployment of broadband infrastructure."

She then reviewed recent actions taken by the FCC to promote broadband deployment, such as the issuance of the triennial review order [576 pages in PDF], in which the FCC "decided to refrain from imposing unbundling obligations on next-generation fiber loop facilities." See, stories titled "FCC Releases Triennial Review Order" in TLJ Daily E-Mail Alert No. 724, August 22, 2003, and "Summary of FCC Triennial Review Order" 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.

She also cited actions taken by the FCC to promote wireless broadband, including allocating 90 MHz of spectrum for Third Generation (3G) wireless services, allocating additional unlicensed spectrum for Wi-Fi devices, and "the FCC's efforts to develop secondary markets" for spectrum.

She also cited the FCC's broadband over powerline (BPL) proceeding. She stated that "recognize that amateur radio licensees have raised concerns about harmful interference, and that is something that will have to be addressed before any mass market deployment can occur. But if the engineers can find a technical solution that prevents harmful interference, BPL represents a tremendous advance for consumers, because it could bring broadband to any home that has electricity."

The FCC's BPL proceeding is ET Docket No. 03-104. The FCC adopted its Notice of Inquiry [21 pages in PDF] at its April 23, 2003 meeting. See, stories titled "FCC Announces NOI Regarding Broadband Over Powerlines" in TLJ Daily E-Mail Alert No. 648, April 24, 2003; and "FCC Releases NOI on Broadband Over Power Lines" in TLJ Daily E-Mail Alert No. 656, May 7, 2003.

She also spoke in vague terms about the opinion [39 pages in PDF] of the U.S. Court of Appeals (9thCir) in Brand X Internet Services v. FCC. The 9th Circuit vacated the FCC's declaratory ruling that cable modem service is an information service, and that there is no separate offering as a telecommunications service.

She stated that "the Commission has been considering the appropriate regulatory framework for broadband Internet access services provided over cable and DSL networks. These proceedings have been delayed temporarily as a result of litigation in the Ninth Circuit, but the Commission will continue its efforts this year to harmonize the disparate regulatory regimes and provide as much certainty as possible."

See, story titled "9th Circuit Vacates FCC Declaratory Ruling That Cable Modem Service is an Information Service Without a Separate Offering of a Telecommunications Service" in TLJ Daily E-Mail Alert No. 754, October 7, 2003.

Finally, she discussed regulation of VOIP. She stated the FCC will initiate a rule making proceeding. She argued that it is an interstate service.

She stated that she believes "that VOIP is an inherently interstate service, and thus should be subject to regulation, if at all, primarily at the federal level. Traditionally, regulatory authority was divided between the FCC and state regulatory commissions depending on the jurisdictional nature of a telephone call. The FCC regulated long-distance (or interstate) calls, and states regulated local or (intrastate) calls. The FCC also set certain policies at the national level where a unified approach was needed; for example, the FCC has played a lead role in promoting universal service and assigning telephone numbers, even though both policies touch heavily on local services. This joint system has served us well, and it has usually been relatively clear which services were subject to each jurisdiction."

"But when it comes to VOIP, concepts such as federal vs. state jurisdiction may be obsolete", said Abernathy. "I believe that these inherent technical characteristics of VOIP communications warrant classifying VOIP service as interstate."

She added that "As providers gear up to roll out services regionally or nationally, they should not be burdened with a patchwork of disparate state regulations."

She then discussed how the federal government should regulate VOIP. She said that "we should employ a light touch." She distinguished between economic and social policy regulation.

She stated that she believes that "it is clear that we should avoid imposing any kind of economic regulations. For example, I cannot discern any rationale for regulating VOIP prices or service quality. Such regulations, which we have traditionally imposed on local exchange carriers, have been employed to restrain the market power of monopoly providers. Providers of VOIP services, on the other hand, are new entrants. Rather than reflexively extending our legacy regulations to VOIP providers, we need to take this opportunity to step back and ascertain whether those rules still make sense for any providers, including incumbents."

But, she said, "some regulatory intervention will be necessary ... to achieve other social policy objectives". She hinted that this would include E911 and universal service. However, she did not reference CALEA in the prepared text of her speech.

And, she added this caveat: "we should not assume that any use of IP technology necessarily transforms a circuit-switched service into VOIP. When I talk about creating a new regulatory framework for VOIP, I have in mind services that use Internet protocol over the last mile, at least on one end of the call. By contrast, a call that starts on the PSTN and ends on the PSTN does not necessarily warrant different regulatory treatment from other circuit-switched calls simply because a long distance carrier chooses to use IP technology at some mid-point in the network. Long distance carriers, local carriers, and enhanced service providers all have raised questions about the applicability of our intercarrier compensation rules and other requirements to these phone-to-phone services, and I believe the Commission should provide clarity as soon as possible."

AT&T filed a petition [37 pages PDF] with the FCC on October 18, 2002 seeking a ruling that access charges do not apply to its service in which calls originate and terminate on circuit switched PSTN facilities, but are routed on internet backbone. This is WC Docket No. 02-361. See, stories titled "Level 3 Files VOIP Petition With FCC" and "Summary of Other VOIP Proceedings at the FCC" in TLJ Daily E-Mail Alert No. 815, January 14, 2004.

Four Representatives Write FCC Re Triennial Review Order

1/22. Rep. Billy Tauzin (R-LA), Rep. John Dingell (D-MI), Rep. Fred Upton (R-MI), and Rep. Rick Boucher (D-VA) wrote a letter to Federal Communications Commission (FCC) Chairman Michael Powell, and the other FCC Commissioners, urging the FCC "to take immediate action to resolve certain ambiguities and inconsistencies in the broadband portion of its August 2003 Triennial Review Order".

For example, the four state that while the FCC's triennial review order [576 pages in PDF] (TRO), released on August 21, 2003, provides that fiber to the home (FTTH) and packet-switched network elements are not subject to the unbundling requirements of Section 251, the TRO's interpretation of Section 271 may impose an independent unbundling requirement.

The also state that the TRO should be clarified to provide that "no unbundling obligations apply to new broadband network elements serving customers in multi-unit buildings which are properly classified as mass market rather than enterprise customers". Finally, they state that the TRO "does not differentiate with particularity mass-market customers from enterprise customers".

Rep. Tauzin and Rep. Dingell (at right) are the Chairman and ranking Democrat on the Committee. Rep. Upton is the Chairman of the Subcommittee on Telecommunications and the Internet. Rep. Boucher is a senior member of the Committee.

The FCC released its TRO on August 21, 2003. See, stories titled "FCC Releases Triennial Review Order" in TLJ Daily E-Mail Alert No. 724, August 22, 2003, and "Summary of FCC Triennial Review Order" in TLJ Daily E-Mail Alert No. 725, August 25, 2003. See also, story titled "FCC Announces UNE Report and Order" and related stories in TLJ Daily E-Mail Alert No. 609, February 21, 2003.

The TRO is titled "Report and Order and Order on Remand and Further Notice of Proposed Rulemaking". The proceeding is titled "In the Matter of Review of the Section 251 Unbundling Obligations of Incumbent Local Exchange Carriers, Implementation of the Local Competition Provisions of the Telecommunications Act of 1996, and Deployment of Wireline Services Offering Advanced Telecommunications Capability". The proceeding is numbered CC Docket No. 01-338, CC Docket No. 96-98, and CC Docket No. 98-147.

The TRO addresses the Section 251 unbundling obligations of incumbent local exchange carriers (ILECs). Unbundled network elements (UNEs) are those portions of telephone networks that the ILECs, such as Verizon, BellSouth, SBC and Qwest, must make available to competing carriers, such as AT&T and WorldCom, seeking to provide telecommunications services. The Telecommunications Act of 1996 provides that ILECs must provide access to certain of their network elements at regulated rates.

47 U.S.C. § 251(c)(3) provides that ILECs have "The duty to provide, to any requesting telecommunications carrier for the provision of a telecommunications service, nondiscriminatory access to network elements on an unbundled basis at any technically feasible point on rates, terms, and conditions that are just, reasonable, and nondiscriminatory in accordance with the terms and conditions of the agreement and the requirements of this section and section 252 of this title. An incumbent local exchange carrier shall provide such unbundled network elements in a manner that allows requesting carriers to combine such elements in order to provide such telecommunications service."

47 U.S.C. § 271 deals with the regional Bell Operating Companies' (RBOC) entry into in region interLATA services (also known as long distance services).

On January 22, 2004, the four Representatives wrote that "We applaud the Commission for recognizing that broadband facilities should not be hobbled by regulations governing traditional telephone components of networks. In particular, the Commission's liberation of fiber and packet-switched network elements from the unbundling requirements of Section 251 of the Communications Act (the "Act") has provided a much-needed impetus to broadband investment, and incumbent carriers have begun to increase broadband deployment in reliance upon the Commission’s ruling."

They continued that "Unfortunately, however, a close reading of the Order reveals a number of ambiguities that threaten to undermine much of the progress that the Commission sought to achieve through its decision. In our view, prompt clarification of these ambiguities is essential for wireline carriers to move forward with the work of building out new broadband networks."

They raised three issues. "First, while the Order clearly provides that unbundling under Section 251 is not required for new fiber-optic and packet-switched facilities, a different section of the Order appears to construe Section 271 of the Act to impose independent unbundling obligations even when elements do not meet the unbundling standard under Section 251."

Section 271 is addressed at Paragraphs 649-667 of the TRO. It states that Section 251 is the source of the unbundling requirements for ILECs, but that Section 271 incorporates Section 251 obligations for RBOCs. That is, Section 251(c)(3), quoted above, is on the competitive checklist.

The four Representatives continued that "While this latter portion of the Order does not mention broadband network elements specifically, it nonetheless introduces significant uncertainty as to the scope of any separate obligation under Section 271. If the Order is to achieve its intended purpose, it cannot relieve carriers of Section 251 unbundling obligations for new broadband facilities only to reimpose them under Section 271. The Commission, therefore, should clarify, through a grant of forbearance if necessary, that any access obligation remaining under Section 271 does not require the unbundling of individual fiber and packet-switched network elements."

Second, the letter addresses multi unit dwellings. It states that TRO "raises a troubling policy concern regarding its treatment of customers in multi-unit premises such as large apartment buildings. The Order suggests that certain unbundling obligations that will continue to apply to broadband network elements used to serve the enterprise or large-business market also will apply to customers in multi-unit buildings. This result would have the seemingly unintended, yet perverse, effect of inhibiting broadband deployment to urban areas containing high concentrations of less affluent citizens and the small businesses that serve them."

The four argue that the FCC "must make it clear that no unbundling obligations apply to new broadband network elements serving customers in multi-unit buildings which are properly classified as mass market rather than enterprise customers. In addition, the Commission must make clear that fiber loops that extend to the basement of multi-unit buildings are included in the definition of fiber-to-the-premises loops and therefore qualify for the relief provided by the Commission for such loops."

Third, the four write that the TRO "does not differentiate with particularity mass-market customers from enterprise customers, even though different regulations apply to each category. As a result, the Order is not clear regarding the regulations that apply to many customers that may fall into one category or the other. This obviously presents a significant problem in planning new broadband network deployments. The Commission should adopt an objective, bright line standard for determining which customers are in the mass market category in order to provide regulatory certainty to promote accelerated deployment of new broadband networks."

The four conclude that the FCC should "expeditiously clarify or modify the Order as the Commission decides various petitions for reconsideration and requests for forbearance".

Court Rules on Jurisdiction Over Suit for Breach of Contract by Cell Phone Company

1/22. The U.S. Court of Appeals (7thCir) issued its opinion [10 pages in PDF] in Fedor v. Cingular Wireless, a case regarding whether the federal or state courts have jurisdiction over a claim that a cell phone company breached its contract with its customers as a result of the timing of its billing for certain calls. Cingular Wireless argued that while the complaint pleads breach of contract, the claim is preempted by 47 U.S.C. § 332(c)(3)(A), and hence, may be removed to federal court. The Appeals Court disagreed, and sent the case back to the state court.

James Fedor filed a complaint in state court against Cingular alleging only state causes of action. He also sought class action status. Fedor wants this action to proceed in state court. Cingular wants it to proceed in federal court.

Fedor contracted with Cingular for cellular telephone service under a fixed rate plan. That is, for a fixed monthly rate, he was entitled to use a certain number of minutes. Pursuant to the contract, if he exceeded the maximum number of minutes, he incurred an additional change.

Cingular did bill him additional charges for exceeding the maximum number of minutes allowed under his rate plan. However, Cingular billed Fedor in one month for calls made in another month. Had Cingular only billed Fedor for calls according to the month in which they were made, it would not have billed him for exceeding his monthly time limit.

Federal jurisdiction must be based upon either diversity of citizenship or a federal question. This case lacks diversity of citizenship. Hence, Cingular asserted federal question jurisdiction, on the argument that Fedor's state law contract claim was preempted by Section 332 of the Communications Act.

Cingular removed the action from Illinois state court to the U.S. District Court (NDIll), pursuant to 28 U.S.C. § 1441(b), which provides, in part, that "Any civil action of which the district courts have original jurisdiction founded on a claim or right arising under the Constitution, treaties or laws of the United States shall be removable without regard to the citizenship or residence of the parties".

Fedor then moved to remand the case back to state court. The District Court held that Fedor's claim was preempted by Section 332.

Subsection 332(c)(3)(A) provides that "no State or local government shall have any authority to regulate the entry of or the rates charged by any commercial mobile service or any private mobile service, except that this paragraph shall not prohibit a State from regulating the other terms and conditions of commercial mobile services."

Cingular argued both components -- both "rates changed" and "entry". The Court of Appeals rejected both arguments, reversed the U.S. District Court, and remanded the case to the Illinois state court.

The Appeals Court reasoned that "A state court civil action may be removed to federal court if the claim arises under federal law." In addition, "Under the well-pleaded complaint rule, absent diversity jurisdiction, a case will not be removable if the complaint does not affirmatively allege a federal claim."

"Moreover, the availability of a federal defense to those state claims does not provide a basis for removal." The Appeals Court continued that "Where a federal statute completely preempts the state-law cause of action, the claim, although pleaded in terms of state law, is in reality based on federal law, and therefore the claim is removable under 28 U.S.C. § 1441(b)."

Hence, the Appeals Court concluded that the issue "is whether the complaint actually challenges rates or market entry."

The Court summarized Cingular's argument: "the complaint involves the timing of the billing and the amount billed, and therefore constitutes a challenge to rates. Essentially, Cingular would interpret the preemption provision as covering any claim that touches on the rates charged in any manner. Because the complaint alleges that Fedor’s calls were improperly billed, Cingular asserts that it challenges the rates."

The Court concluded that this "overstates the scope of the preemption" and is inconsistent with judicial and FCC precedent.

The Appeals Court reasoned that "Fedor asserts that Cingular agreed to provide him with a certain number of minutes of call-time each month, and that calls within that month that exceeded the allotted time would be subject to an additional fee. Fedor does not challenge the reasonableness of those charges, nor does he ask the court to determine whether the services provided were sufficient to justify the charges. Fedor merely argues that Cingular inappropriately attributed calls made in one month to the call-time for a different month, thus assessing charges that were different from the contract terms. A state court analyzing this claim would need to refer to the rates in assessing damages, but would never examine the reasonableness of those rates."

The Court concluded that "these claims address not the rates themselves, but the conduct of Cingular in failing to adhere to those rates. That is precisely the type of state law contract and tort claims that are preserved for the states under § 332 as the ``terms and conditions´´ of commercial mobile services."

Next, the Appeals Court addressed Cingular's argument that Fedor's contract claim challenges "market entry" within the meaning of Section 332.

The Court summarized Cingular's argument: "the claims would necessarily require alterations to its infrastructure because the calls for which billing is delayed are those that involve roaming (calls outside the service territory). Cingular cannot bill for those calls immediately because it must wait for the operators of the cellular towers in those areas to provide the billing information. Accordingly, Cingular argues that success on this complaint would require it to build its own cellular towers in all of those areas, thus mandating changes in its infrastructure and thereby impacting market entry."

The Court was not impressed. It wrote, "That argument stretches the allegations of the complaint beyond recognition."

The Court explained that "The claims merely require Cingular to bill its customers in accordance with the terms of its agreements. That is an accounting problem, not an infrastructure problem, and at most would require Cingular to either (1) adjust its billing system so that the amount owed is calculated based on the minutes remaining and fees applicable to the months in which the call was made or, (2) alter its contract to provide that roaming charges are separately billed under the contract and may be attributed to another month."

This case is James Fedor v. Cingular Wireless Corporation, U.S. Court of Appeals for the 7th Circuit, No. 02-3332, an appeal from the U.S. District Court for the Northern District of Illinois, Eastern Division, No. 01 C 6849, Judge William Hibbler presiding.

SEC Files Complaint Against Former Computer Associates Executive

1/22. The Securities and Exchange Commission (SEC) filed a civil complaint in U.S. District Court (EDNY) against Lloyd Silverstein, a former SVP of finance at Computer Associates International, Inc. (CA), alleging violation of federal securities laws in connection with a practice that resulted in the improper recognition of revenue by CA. Silverstein simultaneously consented to the entry of an injunction, without admitting or denying the allegations in the complaint. See also, SEC release.

The complaint alleges that "CA prematurely recognized revenue from software contracts that had not yet been consummated, in violation of Generally Accepted Accounting Principles".

The complaint elaborates that "Through the conduct of certain members of CA management, including Silverstein, CA engaged in a practice in which CA held its books open after the end of each quarter and improperly recorded, in that elapsed quarter, revenue from contracts that had not been finalized and executed before the expiration of the quarter. CA personnel sometimes concealed this practice by using licensing contracts that falsely bore preprinted signature dates for the last day of the quarter that had just expired, rather than the subsequent dates on which the contracts actually were executed."

And as a result, the complaint alleges, "CA made material misrepresentations and omissions about its revenue and earnings in Commission filings and other public statements".

The complaint alleges violations of §§ 10(b) and 13(b)(5) of the Securities Exchange Act of 1934 (Exchange Act), and Rules 10b-5 and 13b2-1 thereunder. It also alleges that Silverstein is liable for aiding and abetting CA's violations of §§ 10(b), 13(a) and 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, and Rules 10b-5, 12b-20, 13a-1 and 13a-13 thereunder.

CA stated in a release that "CA's Audit Committee preliminarily determined, in its continuing independent investigation, that CA had prematurely recognized revenue in its fiscal year 2000. As a result, the Company demanded Lloyd Silverstein's and two other executives' resignations on October 8, 2003. Furthermore, at the direction of the Audit Committee, counsel for the Audit Committee, Sullivan & Cromwell, and counsel for the Company, Wachtell, Lipton, Rosen & Katz, promptly turned over documentary evidence to government investigators that reflected such improper revenue recognition and directly linked Mr. Silverstein to this practice. Wachtell Lipton also reported to government investigators that Mr. Silverstein had lied to the firm by denying the existence of this practice when he was interviewed in August 2002."

CA added the "The Audit Committee and the Company are continuing their efforts to cooperate with the government's ongoing investigation and are committed to resolving these problems and putting these matters to rest."

This case is SEC v. Lloyd Silverstein, U.S. District Court for the Eastern District of New York, D.C. No. 04 Civ. 255 (I.L.G ).

EPIC Files Complaint Against NASA Seeking Records Regarding Transfer of Passenger Data from Northwest Airlines

1/22. The Electronic Privacy Information Center (EPIC) filed a complaint in U.S. District Court (NDCal) against the National Aeronautics and Space Administration (NASA) seeking to compel the production of records pursuant to the Freedom of Information Act (FOIA), 5 U.S.C. § 552. The EPIC seeks records pertaining to the transfer of passenger data from Northwest Airlines (NWA) to the NASA.

The NASA has already produced copies of some records, which the EPIC has published in its website. These records reflect that there was a meeting on December 10-11, 2001. See, presentation outline [20 pages in PDF] titled "NASA Ames Research Center: Northwest Airlines Briefing: December 10-11, 2001", for NASA's explanation of what NASA intended to do with the passenger data.

NWA participated in the meeting. See, NASA e-mail letter [PDF] to Northwest dated December 19, 2001, and NASA fax letter [PDF] to NWA requesting passenger data. NASA wrote that "We would like to request system-wide Northwest Airlines passenger data from July, August and September 2001."

There is also an undated paper [10 pages in PDF] titled "Near Linear Time Detection of Distance-Based Outliers and Applications to Security" jointly authored by employees of NASA and Stanford University. See, story titled "Northwest Airlines Provided Passenger Data to NASA for Data Mining Study" in TLJ Daily E-Mail Alert No. 819, January 20, 2003.

The EPIC has also submitted an administrative complaint [11 pages PDF] to the Department of Transportation (DOT) that asserts that NWA's transfer of passenger data to the NASA violated NWA's privacy policy, and that this, in turn, constitutes an unfair and deceptive trade practice in violation of 49 U.S.C. § 41712. See, story titled "EPIC Complains to DOT About Transfer of Airline Passenger Data to NASA" in TLJ Daily E-Mail Alert No. 820, January 21, 2004.

However, while the NASA has produced some records, it has withheld others. The complaint filed with the District Court seeks an order compelling the NASA "to disclose the requested records in their entirety and make copies available to" the EPIC.

The complaint does not identify just what these withheld records are. It states that the EPIC requested "Any correspondence between representatives of Northwest Airlines and NASA officials or employees regarding the disclosure of Northwest passenger data to NASA", "Any documents detailing, describing, or concerning the disclosure of Northwest passenger data to NASA" and "Any materials related to negotiations or communications between NASA and other commercial airlines for passenger data".

The complaint then alleges that "Defendant NASA withheld from release an unspecified number of responsive records under 5 U.S.C. § 552(b)(5) as ``inter-agency or intra-agency memorandums or letters which would not be available by law to a party other than an agency in litigation with the agency.´´"

The complaint further alleges that the NASA "withheld from release an unspecified number of responsive records under 5 U.S.C. § 552(b)(4) as ``trade secrets and commercial or financial information obtained from a person and privileged or confidential.´´"

Northwest Airlines issued a statement on January 18, 2003: "In the aftermath of the September 11, 2001 tragedy, NASA had discussions with Northwest Airlines’ Security Department regarding a NASA research study to improve aviation security. In December 2001, NASA requested that Northwest’s Security Department provide it with passenger name record data from the period July, August, and September 2001 for NASA’s exclusive use in its research study. Northwest Airlines agreed to provide that data."

This case is Electronic Privacy Information Center v. National Aeronautics and Space Administration, U.S. District Court for the Northern District of California, San Jose Division.

NTIA Official Addresses Rights of Way and Broadband Deployment

1/22. Meridith Attwell, the just hired Special Advisor to Michael Gallagher, the not yet confirmed Administrator of the National Telecommunications and Information Administration (NTIA), gave a speech to the International Rights of Way Association (IRWA) in Washington DC.

With respect to federal rights of way, she stated that "A key to widespread broadband deployment is ensuring that broadband providers have timely and cost-effective access to rights-of-way -- so that they can build out their networks across the Nation. In the broadband context, rights-of-way include access to the conduits, corridors, trenches, tower sites, undersea routes and other locations that broadband networks occupy. These passageways often cross large areas of land owned or controlled by the Federal Government. Thus, effective and efficient federal rights-of-way policies and practices are critical for promoting broadband deployment."

She continued that "To ensure the Federal Government's rights-of-way policies and practices facilitate the aggressive deployment of broadband networks, and to lead by example, the Bush Administration created a Federal Rights-of-Way Working Group in July 2002. The Working Group was composed of representatives of most of the major federal agencies with land management responsibilities. The Working Group's mission was to identify and recommend changes in federal laws, regulations, policies, and practices that would improve the process for obtaining rights-of-way on federally-owned of federally-controlled real property for the deployment of broadband networks."

The Working Group has not released its report. Attwell stated that a draft report is "now circulating for final review by affected agencies. We expect that the process will be completed soon."

She added that the Working Group "looked for ways to streamline and standardize applications", "examined practices that could facilitate timely review" of applications, "studied various fee structures", and "sought examples of remediation and maintenance requirements" to ensure that "broadband providers construct, operate, and maintain rights-of-way as authorized".

With respect to state and local rights of way, Attwell stated that the "NTIA has no jurisdiction over states and municipalities".

See also, January 7, 2004 NTIA release announcing the hiring of Attwell.

FTC Releases Report on Fraud and Identity Theft

1/22. The Federal Trade Commission (FTC) released a report [73 pages in PDF] titled "National and State Trends in Fraud & Identity Theft January -- December 2003". See also, FTC release.

The report states that "The FTC received more than half a million consumer complaints (516,740) during calendar year 2003, up from 404,000 in 2002. These include 301,835 complaints about fraud and 214,905 identity theft reports."

It states that "Internet related fraud accounted for 55% of all fraud reports, up from 45% 2002."

It also states that "42% of all complaints received by the FTC related to ID theft, up from 40% in 2002."

Also, Internet auction fraud accounted for 15% of all complaints. Internet services and computer products fraud accounted for another 6% of all complaints.

CDT Challenges President's Statement on PATRIOT Act

1/22. The Center for Democracy and Technology (CDT) issued a statement in response to President Bush's comments in his January 20, 2003 State of the Union address regarding the sections of the PATRIOT Act that are scheduled to sunset on December 31, 2005.

Bush stated that "we must continue to give our homeland security and law enforcement personnel every tool they need to defend us. And one of those essential tools is the Patriot Act, which allows federal law enforcement to better share information, to track terrorists, to disrupt their cells, and to seize their assets. For years, we have used similar provisions to catch embezzlers and drug traffickers. If these methods are good for hunting criminals, they are even more important for hunting terrorists. Key provisions of the Patriot Act are set to expire next year. The terrorist threat will not expire on that schedule. Our law enforcement needs this vital legislation to protect our citizens. You need to renew the Patriot Act."

The CDT responded that "A dozen PATRIOT Act provisions sunset in December 2005, yet already the campaign to renew them is heating up. The President is acting as if the PATRIOT Act is the centerpiece of the war on terrorism, but it really isn't. Many of the most important aspects of the war against terrorism and the most serious abuses of civil liberties post-9/11 have occurred outside the scope of the Act, while the Act has been used to a large extent in ordinary criminal cases having nothing to do with terrorism."

It added that "The PATRIOT Act, while enacted with the best intentions and in response to a serious threat, passed under intense time pressure and without serious debate. As a result, the Executive Branch was given broad discretionary powers that, in many cases, are not needed in the fight against terrorism and serve only to infringe on Americans' fundamental liberties, making it crucial that Congress carefully re-evaluate the surveillance provisions that are set to expire at the end of 2005. The question will not be about renewal of the authorities -- it will be about checks and balances, oversight and accountability."

Some of the electronic surveillance related provisions of the PATRIOT Act that are set to sunset are § 201 (regarding authority to intercept wire, oral, and electronic communications relating to terrorism), § 202 (authority to intercept wire, oral, and electronic communications relating to computer fraud and abuse offenses), § 203(b) (authority to share electronic, wire and oral interception information), § 206 (roving surveillance authority under the FISA), § 209 (seizure of voice mail messages pursuant to warrants), § 212 (emergency disclosure of electronic communications), § 214 (pen register and trap and trace authority under the FISA), § 215 (access to records and other items under the FISA), § 217 (interception of computer trespasser communications), and § 220 (nationwide service of search warrants for electronic evidence).

However, some of the key technology related sections of the PATRIOT Act are not set to sunset. These include § 216, which extended the existing pen register and trap and trace devices authority to online communications.

See also, story titled "Sen. Leahy Responds to President Bush's Comments on PATRIOT Act" in TLJ Daily E-Mail Alert No. 821, January 22, 2003.

People and Appointments

1/22. Charlene Barshefsky (at right) was elected to the Board of Directors of Intel. She was the U.S. Trade Representative (USTR) from 1997 through 2001. She is also currently a partner in the law firm of Wilmer Cutler & Pickering. See, Intel release and Intel bio.

1/22. President Bush announced his intent to nominate John Young to be Deputy Under Secretary of Defense for Acquisition and Technology. Young is currently Assistant Secretary of the Navy (Research, Development, and Acquisition). Prior to that, he worked for the Senate Appropriations Committee's Subcommittee on Defense. See, White House release.

1/22. Robert van Oordt will not run for re-election to the Board of Directors of Nokia. Nokia stated in a release that he "has reached the Nokia Board's retirement age of 68 years". Nokia added that "The Corporate Governance and Nomination Committee proposes to the Nokia Annual General Meeting on March 25, 2004 that the number of board members remains at nine and that the following persons be re-elected for a term of one year: Paul J. Collins, Georg Ehrnrooth, Bengt Holmström, Per Karlsson, Jorma Ollila, Marjorie Scardino, Vesa Vainio and Arne Wessberg. Moreover, the Committee proposes that Professor John L. Thornton be elected as a new member of the Nokia Board for the next one-year term." John Thornton is a professor at Tsinghua University in Beijing, PR China. He previously was President and  Co-Chief Operating Officer at Goldman Sachs Group, Inc.

More News

1/22. Attorney General John Ashcroft gave a speech in Davos, Switzerland in which he stated that "Information -- or transparency -- is the enemy of corruption. Corruption feeds and breeds from secrecy and ignorance. It cannot thrive under the light spread by an open, informed society." He added that "Today, with the explosive growth of the Internet and 500-channel digital satellite broadcasting, information has never moved more quickly, to more people, with more purpose. As the various financial crises and our effort to deal with the corporate scandals in the United States has confirmed, information is the most therapeutic resource we have in achieving integrity in our markets and in our government."

1/22. The Senate passed the conference report on HR 2673, the omnibus appropriations bill, by a vote of 65-28. See, Roll Call No. 3. First, the Senate passed a motion to invoke cloture (that is, end a Democratic filibuster) by a vote of 61-32. See, Roll Call No. 2. The House passed this conference report on December 8, 2003.

House Judiciary Committee Approves Database Protection Bill

1/21. The House Judiciary Committee amended and approved HR 3261, the "Database and Collections of Information Misappropriation Act" by a roll call vote of 16-7. This bill codifies a cause of action for misappropriation of certain databases. See, full story.

House Judiciary Committee Approves CREATE Act to Promote Collaborative Research

1/21. The House Judiciary Committee amended and approved HR 2391, the "Cooperative Research and Technology Enhancement (CREATE) Act of 2003", which amends Section 103(c) of the Patent Act. See, full story.

House Commerce Committee Takes Up Broadcast Indecency

1/21. Rep. Fred Upton (R-MI), Rep. Ed Markey (D-MA), Rep. Billy Tauzin (R-LA), Rep. John Dingell (D-MI), and others introduced HR 3717, the "Broadcast Decency Enforcement Act of 2004". Also on January 21, Rep. Chip Pickering (R-MS) and others introduced HRes 500, a related resolution. The House Commerce Committee's Subcommittee on Telecommunications and the Internet will hold a hearing on broadcast indecency on Wednesday, January 28, at 10:00 AM.

HR 3717 bill would amend 47 U.S.C. § 503(b)(2) to increase the maximum monetary penalties that the Federal Communications Commission (FCC) can impose upon broadcasters for broadcasting obscene, indecent, or profane language. The bill would allow the FCC to impose a fine of up to $275,000 per violation, or each day of a continuing violation.

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."

The introduction of this bill follows the imposition of several fines by the FCC for particularly egregious broadcasts that some Commissioners have described as an insufficient deterrent, but nevertheless, the maximum statutory fine.

For example, on December 8, 2003, the FCC released a Forfeiture Order [11 pages in PDF] in its proceeding titled "In the Matter of Infinity Broadcasting Operations, Inc. Licensee of Station WKRK-FM Detroit, Michigan". This order fines Infinity $27,500, the maximum fine for a single utterance in violation of 18 U.S.C. § 1464 and section 73.3999 of the FCC's rules. Commissioner Michael Copps wrote in a separate statement [PDF] that "a fine of $27,500 is not even a slap on the wrist to Infinity". See, story titled "FCC Fines Infinity for Broadcasting Garbage" in TLJ Daily E-Mail Alert No. 795, December 9, 2003.

See also, stories titled "FCC Fines Infinity for Indecent Broadcasts" in TLJ Daily E-Mail Alert No. 752, October 3, 2003, and "FCC Fines Broadcaster for Indecency, Threatens Revocation" in TLJ Daily E-Mail Alert No. 637, April 4, 2003.

This bill also follows the FCC's October 3, 2003 Memorandum Opinion and Order in its proceeding titled "In the Matter of Complaints Against Various Broadcast Licensees Regarding Their Airing of the `Golden Globe Awards´ Program". The FCC did not impose a fine in this matter. It concluded that the broadcasters that aired the Golden Globe Awards program on January 19, 2003, did not violate the law. (A rock music performer who goes by the name "Bono" used an obscene word.)

The bill provides, in part, that "if the violator is (i) a broadcast station licensee or permittee, or (ii) an applicant for any broadcast license, permit, certificate, or other instrument or authorization issued by the Commission, and the violator is determined by the Commission under paragraph (1) to have broadcast obscene, indecent, or profane language, the amount of any forfeiture penalty determined under this section shall not exceed $275,000 for each violation or each day of a continuing violation, except that the amount assessed for any continuing violation shall not exceed a total of $3,000,000 for any single act or failure to act."

It was referred to the House Commerce Committee. The bills' sponsors include the Chairman and ranking Democrat on both the full Committee and the Telecommunications Subcommittee, as well as twenty-two other Representatives, most of whom are members of the Commerce Committee. Support for this bill is bipartisan.

Meanwhile, Rep. Chip Pickering (R-MS) (at right) and a group of Republican Representatives introduced HRes 500, "Expressing the sense of the House of Representatives that the Federal Communications Commission should vigorously enforce indecency and profanity laws pursuant to the intent of Congress in order to protect children in the United States from indecent and profane programming on broadcast television and radio."

The findings recited in this resolution include this. The FCC "has not used all of its available authority to impose penalties on broadcasters that air indecent material even when egregious and repeated violations have been found ..."

This resolution states that the FCC should reverse the Enforcement Bureau's decision in the Golden Globe Awards proceeding, "in light of the public policy considerations of protecting children from indecent and profane material".

This resolution also states that the FCC should "return to vigorously and expeditiously enforcing the indecency and profanity statute pursuant to its declaratory order In the Matter of a Citizen's Complaint Against Pacifica Foundation Station WBAI(FM), 56 F.C.C.2d 94 (1975), which was affirmed by the United States Supreme Court", in FCC v. Pacifica Foundation, 438 U.S. 726 (1978).

This resolution was also referred to the House Commerce Committee. Rep. Pickering is a member.

HRes 500 is very similar, but not identical, to SRes 283, introduced on December 9, 2003 by Sen. Jeff Sessions (R-AL) and others.

On Wednesday, January 28, the House Commerce Committee's Subcommittee on Telecommunications and the Internet will hold a hearing titled "Can you say that on TV?': An Examination of the FCC's Enforcement with Respect to Broadcast Indecency".

Sen. Hatch Announces Amended Version of PACT Act

1/21. Sen. Orrin Hatch (R-UT) spoke in the Senate regarding S 1177, the "Prevent All Cigarette Trafficking (PACT) Act of 2003. The bill would amend the Jenkins Act of 1949, 15 U.S.C. §§ 375-378, to, among other things, expand the reporting requirements of the Act to cover internet sales of cigarettes and smokeless tobacco.

While the Senate passed an earlier version of the bill late last year, Sen. Hatch stated that he now has a "managers amendment" that "makes the PACT Act even stronger". See, Congressional Record, January 21, 2004, at pages S104-5.

Sen. Hatch and Sen. Herb Kohl (D-WI) introduced the S 1177 on June 3, 2003. See, story titled "Senators Introduce Bill to Regulate Internet Cigarette Sales" in TLJ Daily E-Mail Alert No. 675, June 6, 2003.

It was referred to the Senate Judiciary Committee, which amended and approved the bill on July 31, 2003. See, story titled "Senate Judiciary Committee Approves Bill to Regulate Internet Cigarette Sales" in TLJ Daily E-Mail Alert No. 711, August 5, 2003. The full Senate amended and passed the bill on December 9, 2003.

The Jenkins Act and Internet Sales. The Jenkins Act requires that any person who sells and ships cigarettes across a state line to a buyer, other than a licensed distributor, report the sale to the buyer's state tobacco tax administrator. The rule is significant, because some states impose vastly higher taxes on the sales of cigarettes than others. The Jenkins Act helps states enforce their cigarette tax laws.

Currently, many Internet based cigarette sellers are not reporting sales to state tax administrators. On August 13, 2002, the General Accounting Office (GAO) released a report [60 pages in PDF] titled "Internet Cigarette Sales: Giving ATF Investigative Authority May Improve Reporting and Enforcement". This GAO report identified 147 web site addresses for internet cigarette vendors based in the U.S. It also concluded that most do not comply with the Jenkins Act reporting requirements. See also, story titled "GAO Reports on Internet Cigarette Sales" in TLJ Daily E-Mail Alert No. 491, August 14, 2002.

Sen. Hatch's Statement. Sen. Hatch (at right) stated on January 21 that "The PACT Act as modified by the manager's amendment also clarifies that the bill will not affect existing tribal compacts relating to tobacco tax collection on tribal lands and allows Native American Tribes to maintain enforcement authority over their own excise tax laws."

He also discussed the basic provisions of the bill. He said that "Internet sales of cigarettes and smokeless tobacco are an impediment States face in their collection of tobacco excise taxes. A recent General Accounting Office report indicates Internet tobacco sellers rarely comply with requirements under the Jenkins Act".

He continued that "By ensuring the collection of state excise taxes from all tobacco retailers, the PACT Act will neither inconvenience nor hinder smokers and smokeless tobacco users in their ability as consumers to purchase the tobacco products of their choice over the Internet. This legislation merely removes any uncertainty regarding the scope of the Jenkins Act by explicitly mandating Internet tobacco retailers also comply with existing requirements under the Jenkins Act. This strong vehicle with which to collect taxes from Internet tobacco retailers will allow States to finally claim their rightful revenue and level the playing field for all tobacco retailers."

HR 2824. There is another bill working its way through the House. On July 23, 2003, Rep. Mark Green (WI), Rep. Marty Meehan (D-MA) and others introduced HR 2824, the "Internet Tobacco Sales Enforcement Act", a bill to amend the Jenkins Act to aide states in collecting taxes on internet tobacco sales. It was referred to the House Judiciary Committee. See, story titled "Internet Cigarette Sales Bill Introduced in House" in TLJ Daily E-Mail Alert No. 711, August 5, 2003.

The Subcommittee on Courts, the Internet, and Intellectual Property amended and approved the bill by unanimous voice votes on October 2, 2003. See, story titled "House Subcommittee Approves Internet Tobacco Sales Enforcement Act", in TLJ Daily E-Mail Alert No. 752, October 3, 2003.

The House Judiciary Committee held a meeting to mark up numerous bills on Wednesday, January 21, 2004. HR 2824 was on the agenda. However, the Committee did not complete its agenda. Rep. James Sensenbrenner (R-WI), the Chairman of the Committee, stated at the conclusion of the January 21 meeting that the Committee would meet again at 10:00 AM on Wednesday, January 28 to complete the agenda.

Senators Introduce Satellite Home Viewer Extension Act

1/21. Sen. Orrin Hatch (R-UT), Sen. Patrick Leahy (D-VT), Sen. Mike DeWine (R-OH), and Sen. Herb Kohl (D-WI) introduced S 2013, the "Satellite Home Viewer Extension Act of 2004". This is a very short bill. It merely extends for five years the statutory license for satellite carriers to make secondary transmissions of distant network and superstation television programs.

The bill was referred to the Senate Judiciary Committee. Sen. Hatch is the Chairman. Sen. Leahy is the ranking Democrat. Sen. DeWine is the Chairman of the Antitrust Subcommittee. Sen. Kohl is the ranking Democrat of the Antitrust Subcommittee.

This bill would amend 17 U.S.C. § 119, which codifies the Satellite Home Viewer Act of 1994, as amended by the Satellite Home Viewer Improvement Act of 1999.

Sen. Hatch stated that "The current section 119 license permits satellite carriers to provide subscribers that reside in unserved households with network programming from distant television markets. This section is set to expire at the end of 2004. The extension of this statutory license for an additional five years would continue to serve the many interests that the section 119 license seeks to advance. Most importantly, it assures that television viewers incapable of receiving local network stations off the air retain access to network programming via satellite. This is particularly important for viewers who live in rural areas and may be unserved by either local stations or cable carriers." See, Congressional Record, January 21, 2004, at page S118.

Sen. Hatch continued that "The limited extension also recognizes, however, that satellite carriers are still in the process of making local signals available to their subscribers, an important development for viewers and local broadcasters, as well as for the satellite carriers themselves. The Satellite Home Viewer Improvement Act of 1999, which I was proud to help draft, authorized for the first time the retransmission of local signals to satellite subscribers residing in those local markets. The roll-out of ``local-into-local'' service by satellite carriers continues at a substantial rate, giving subscribers more choices than ever and further strengthening the competition between cable and satellite carriers. In light of these continuing changes, an additional extension of the Section 119 license is warranted pending further developments in this area."

Sen. Leahy (at right) stated that "Of special importance is the fact that the Satellite Home Viewer Improvement Act permits the satellite transmission of ``local-into-local´´ programming, so that satellite companies can retransmit local broadcast signals to subscribers who actually live in the local market, but cannot receive the broadcast signal. Providing the news and local interest programming that is so vital to the creation and maintenance of a healthy and involved community has been the most gratifying result of the passage of that act." See, Congressional Record, January 21, 2004, at page S118.

He added that "this license enhances competition by placing providers of satellite television programming on an equal footing with cable operators, which enjoy the benefits of their own statutory licenses."

S 2013 provides that "Section 119 of title 17, United States Code, is amended by adding at the end the following: `(f) This section shall cease to be effective after December 31, 2009.'."

RIAA Shifts to John Doe Lawsuits Against P2P Infringers

1/21. The Recording Industry Association of America (RIAA) has modified its strategy for litigating against people that it alleges are using peer to peer (P2P) file sharing systems to infringe the copyrights of its member music companies. This follows the Court of Appeals' ruling in RIAA v. Verizon. The RIAA previous used expeditious Section 512(h) subpoenas to obtain personally identifying information about infringers from ISPs, and then file lawsuits against the individuals so named. Now, the RIAA is using the more laborious process of filing "John Doe" lawsuits against unnamed infringers, and then obtaining subpoenas in those actions.

On December 19, 2003, the U.S. Court of Appeals (DCCir) issued its opinion [16 pages in PDF] in RIAA v. Verizon, reversing the District Court, and holding that a Section 512(h) subpoena may only be issued to an ISP that is engaged in storing on its servers material that is infringing or the subject of infringing activity. See, story titled "DC Circuit Reverses in RIAA v. Verizon" in TLJ Daily E-Mail Alert No. 804, December 22, 2003.

Previously, when the RIAA and others failed to obtain orders from courts enjoining producers of decentralized P2P programs, they adopted a strategy of pursuing individual infringers. One obstacle that the RIAA faces is obtaining the identities of the individuals it believes are infringers. The RIAA initially possesses only Internet Protocol (IP) numbers. However, internet service providers (ISPs) that provide internet access for the P2P infringers possess information that would associate subscriber information with IP numbers. That is, obtaining the ISP's information enables the RIAA, or its members, to file complaints alleging infringement against the individual infringers that names the individuals. It also enables the RIAA to contact the individuals before filing a complaint in court.

ISPs, including Verizon, have opposed the efforts of the RIAA to use Section 512(h) subpoenas before bringing lawsuits. The RIAA had obtained subpoenas from the Clerk of the Court of the U.S. District Court, pursuant to 17 U.S.C. § 512(h), and served them upon ISPs. However, this ended with the December 19 opinion in RIAA v. Verizon.

On January 21, 2004, the RIAA announced that it filed "John Doe" complaints against 532 individuals. The RIAA published a sample complaint [PDF] in its website.

Cary Sherman, President of the RIAA, stated in a release that "Our campaign against illegal file sharers is not missing a beat ... The message to illegal file sharers should be as clear as ever -- we can and will continue to bring lawsuits on a regular basis against those who illegally distribute copyrighted music."

The RIAA release adds that "Because of the nature of the ``John Doe´´ litigation process, the RIAA will no longer be able to pre-notify illegal file sharers and give them an opportunity to settle in advance of the formal filing of the lawsuit. Nonetheless, Sherman said the recording industry wants to go "the extra mile" to develop a variation of the program that has so far been successful. After learning the identity of an illegal file sharer through a ``John Doe´´ lawsuit, but prior to amending the complaint to reflect the infringer's name and address, the RIAA would offer the opportunity to settle the case before proceeding further with the litigation.

Sen. Leahy Responds to President Bush's Comments on PATRIOT Act

1/21. Sen. Patrick Leahy (D-VT), the ranking Democrat on the Senate Judiciary Committee, released a statement regarding provisions of the USA PATRIOT Act that are scheduled to sunset. He responded to comments made by President Bush in his January 20, 2003 State of the Union address.

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 has introduced a bill that would sunset more provisions of the Act.

Bush stated that "Inside the United States, where the war began, we must continue to give our homeland security and law enforcement personnel every tool they need to defend us. And one of those essential tools is the Patriot Act, which allows federal law enforcement to better share information, to track terrorists, to disrupt their cells, and to seize their assets. For years, we have used similar provisions to catch embezzlers and drug traffickers. If these methods are good for hunting criminals, they are even more important for hunting terrorists. Key provisions of the Patriot Act are set to expire next year. The terrorist threat will not expire on that schedule. Our law enforcement needs this vital legislation to protect our citizens. You need to renew the Patriot Act."

Sen. Leahy (at right) responded. "I welcome the President's call to revisit our homeland security laws, but rather than blindly reauthorize the sweeping legislation without a much-needed review, it is important to conduct a vigorous, bipartisan examination of the PATRIOT Act, focused on balancing the need to address the threat of terrorism and the need to protect our constitutional freedoms."

Sen. Leahy introduced introduced S 1695, the "PATRIOT Oversight Restoration Act" on October 1, 2003. This bill pertains to the sunsetting of various provisions of the USA PATRIOT Act. See, story titled "Sen. Leahy Introduces Bill to Expand List of Surveillance Provisions of PATRIOT Act to Be Sunsetted" in TLJ Daily E-Mail Alert 757, October 14, 2003.

This TLJ article also includes a table listing the electronic surveillance related provisions of the PATRIOT Act, and for each section, indicates whether the Act provides for sunsetting. This table also identifies, for each such section, whether the bill introduced by Sen. Leahy, and a separate bill introduced by Sen. Larry Craig (R-ID), would provide for sunsetting. See also, 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 added in his January 21, 2004 statement that "The very purpose of the sunset was to provide Congress the opportunity to revisit these new laws and learn from the experiences and public debate that was sure to follow PATRIOT’s passage. So far, the Administration has resisted full oversight of how it is using these laws. Oversight questions from the Senate Judiciary Committee have sometimes gone unanswered for not days or weeks or months, but more than a year."

He concluded that "I'm hopeful the President’s desire to revisit the PATRIOT Act represents a genuine interest in a full and open debate on these important privacy and security issues and not a political calculation in his re-election campaign."

People and Appointments

1/21. Rep. Ralph Hall (R-TX) resigned as a member of the House Democratic Caucus. See, Congressional Record, January 20, 2004, at page H2. Earlier this month, he switched his party affiliation. See, story titled "Rep. Hall Becomes a Republican" in TLJ Daily E-Mail Alert No. 809, January 5, 2004. Rep. Hall had also been a member of the House Commerce Committee and House Science Committee. He currently has no committee assignments. Rep. Charles Gonzalez (D-TX) was appointed to the House Commerce Committee. See, HRes 495, approved by the House on January 21, 2004. Rep. Gonzalez resigned as a member of the House Financial Services Committee, House Select Committee on Homeland Security, and House Small Business Committee. Rep. Gonzalez replaces Rep. Hall. Rep. Bart Gordon (D-TN) was named ranking Democrat on the House Science Committee. He replaces the former ranking Democrat, Rep. Hall.

1/21. Ann Malester, Deputy Director of the Federal Trade Commission's (FTC) Bureau of Competition (BOC), is leaving the FTC and joining the Washington DC office of the law firm of Weil Gotshal & Manges (WGM) as a partner in its antitrust practice. She has worked at the FTC for 26 years. Steven Bernstein, another senior FTC/BOC attorney, will is also joining WGM. See, FTC release and WGM release.

1/21. Intel Corporation's Board of Directors has elected two new corporate vice presidents, Anand Chandrasekher and David Perlmutter. Chandrasekher is a co-general manager of Intel's Mobile Platforms Group. He oversees the design, development and marketing of Intel's solutions for the mobile computing segment. Perlmutter is also a co-general manager of the Mobile Platforms Group. He is jointly responsible for the design, development and marketing of Intel's solutions for the mobile computing segment. See, Intel release.

More News

1/21. The House Judiciary Committee did not consider all of the bills on the agenda for its mark up session of January 21. The Committee will continue its mark up session on Wednesday, January 28, 2003 at 10:00 AM. The agenda for this continuation meeting includes mark up of HR 2824, the "Internet Tobacco Sales Enforcement Act". The Committee amended and approved HR 3261, the "Database and Collections of Information Misappropriation Act" by a roll call vote of 16-7, after a lengthy debate, and consideration of numerous amendments. There will be a TLJ story on this bill in the next issue of the TLJ Daily E-Mail Alert.

1/21. The National Institute of Science and Technology's (NIST) Computer Security Division (CSD) released a draft publication [58 pages in PDF] numbered "DRAFT Special Publication 800-30, Rev A" and titled "Risk Management Guide for Information Technology Systems". This publication updates Special Publication 800-30 to reflect the results of the FISMA Implementation Project, to improve internal consistency within the document, and generally improve the document readability. The NIST requests public comments on this draft publication by March 20, 2004. Comments should be addressed to gary.stoneburner@nist.gov.

1/21. The National Institute of Science and Technology's (NIST) Computer Security Division (CSD) released a draft publication [33 pages in PDF] numbered "DRAFT Special Publication 800-27 Rev A" and titled "Engineering Principles for Information Technology Security (A Baseline for Achieving Security)". It was written by Gary Stoneburner, Clark Hayden, and Alexis Feringa. The NIST requests public comments by March 20, 2004. Comments should be addressed to gary.stoneburner@nist.gov.

1/21. The Federal Communications Commission (FCC) published a notice in the Federal Register describing and setting comment deadlines for its Notice of Inquiry and Notice of Proposed Rulemaking (NOI & NPRM) [31 pages in PDF] regarding the interference temperature method of quantifying and managing interference among different services. See, Federal Register, January 21, 2004, Vol. 69, No. 13, at Pages 2863 - 2870. This NOI/NPRM is FCC 03-289 in ET Docket No. 03-237. See also, story titled "FCC Announces NOI/NPRM on Interference Temperature Model" in TLJ Daily E-Mail Alert No. 779, November 14, 2003, and "FCC Releases NOI/NPRM on Interference Temperature Approach" in TLJ Daily E-Mail Alert No. 789, December 1, 2003. Comments are due by April 5, 2004. Reply comments are due by May 5, 2004.

1/21. The Federal Communications Commission (FCC) published a notice in the Federal Register describing and setting comment deadlines for its request that parties refresh the record regarding reconsideration of rules adopted in the 1999 access reform docket. This is CC Docket Nos. 96-262, 94-1, 98-157, and CCB/CPD File No. 98-63, adopted August 5, 1999, and released August 27, 1999. See, Federal Register, January 21, 2004, Vol. 69, No. 13, at Pages 2862 - 2863. Comments are due by February 20, 2004. Reply comments are due by March 8, 2004.

Go to News from January 16-20, 2004.