News from February 26-29, 2004

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2/29. Jon Dudas, the acting head of the U.S. Patent and Trademark Office (USPTO), will be in the People's Republic of China from February 29 through March 5 for consultations with officials at China's patent and trademark and other intellectual property agencies. The USPTO stated in a release that one reason for the trip "is to help further the Administration's goals of improving the environment for U.S. companies doing business in China, and addressing widespread counterfeiting and piracy. This year, the Commerce Department, in conjunction with the Office of the U.S. Trade Representative, will conduct a high level Joint Commission on Commerce and Trade (JCCT) on trade issues with China". Dudas' trip "helps pave the way for the April 2004 meeting of the JCCT in Washington, as well as other IPR initiatives in China of the Department of Commerce and other U.S. government agencies."


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2/28. The Department of Commerce's (DOC) National Institute of Standards and Technology (NIST) amended and released its Federal Information Processing Standard (FIPS) 180-2 [83 pages in PDF], titled "Secure Hash Standard". The additional language begins at page 72 of the paper version [PDF page 76].


Senators Introduce Anti-Spyware Bill

2/27. Sen. Conrad Burns (R-MT), Sen. Ron Wyden (D-OR), and Sen. Barbara Boxer (D-CA) introduced S 2145, the "Software Principles Yielding Better Levels of Consumer Knowledge Act". This awkward title yields an approximate acronym -- SPY BLOCK.

Sen. Burns stated that "Spyware refers to software that is downloaded onto users' computers without their knowledge or consent. This sneaky software is then often used to track the movements of consumers online or even to steal passwords. The porous gaps spyware creates in a computer's security may be difficult to close. For example, one popular peer-to-peer file sharing network routinely installs spyware to track users' information and retrieves targeted banner ads and popups." See, Congressional Record, February 26, 2004, at Page S1685.

Sen. Ron WydenSen. Wyden (at right) summarized the problems that the bill addresses. "First, some software, often referred to as ``spyware,创 collects information about the computer user and transmits that information over the Internet to the spyware's author. Second, software sometimes referred to as ``adware创 causes pop-up ads to appear on the user's computer, perhaps based on the user's apparent interests or on the websites he or she visits. Third, some software essentially hijacks the computer's processing and communications capability to forward spam, viruses, or other messages, all without the user's knowledge. Finally, some software changes user settings -- for example, overriding the user's intended choice of homepage." See, Congressional Record, February 26, 2004, at Page S1684.

He then explained that the bill would "establish a clear legal principle that you cannot cause software to be installed on somebody else's computer without that person's knowledge and consent. This general notice and consent requirement could be satisfied by something as simple as an on-screen dialogue box telling the user that clicking ``ok创 will trigger the download of, say, a particular game program. In addition, the bill says that software must be capable of being uninstalled without resorting to extraordinary and highly technical procedures."

The bill contains three prohibitions. First, Section 2(a) provides that "It is unlawful for any person who is not the user of a protected computer to install computer software on that computer, or to authorize, permit, or cause the installation of computer software on that computer, unless ... the user of the computer has received notice ... the user of the computer has granted consent ... and ... the computer software's uninstall procedures satisfy the requirements" of the bill.

The bill then elaborates in detail the requirements for notice, consent and uninstall procedures.

Second, Section 2(b) provides that "It is unlawful for any person who is not the user of a protected computer to install computer software on that computer, or to authorize, permit, or cause the installation of computer software on that computer, if the design or operation of the computer software is intended, or may reasonably be expected, to confuse or mislead the user of the computer concerning the identity of the person or service responsible for the functions performed or content displayed by such computer software." The bill refers to this as the "red herring" prohibition.

Third, the Section 4 provides that "It is unlawful for any person who is not the user of a protected computer to use an information collection, advertising, distributed computing, or settings modification feature of computer software installed on that computer, if ... the computer software was installed in violation of section 2 ... the use in question falls outside the scope of what was described to the user of the computer in the notice provided ... or ... in the case of an information collection feature, the person using the feature fails to establish and maintain reasonable procedures to protect the security and integrity of personal information so collected."

The bill contains several exceptions pertaining to pre-installed software, software resident in temporary memory, and other software.

The bill also contains a subsection providing immunity from liability for passive transmission, web hosting, and hyperlinking.

Finally, the bill addresses enforcement and remedies. There is no private right of action under this bill. Enforcement would be left to the Federal Trade Commission (FTC), other federal agencies, and the states.

On November 18, 2003, the Center for Democracy and Technology (CDT) released a report [14 pages in PDF] titled "Ghosts in Our Machines: Background and Policy Proposals on the ``Spyware创 Problem". See also, story titled "CDT Releases Report on Spyware" in TLJ Daily E-Mail Alert No. 782, November 19, 2003.

The CDT report states that "Computer users are increasingly finding programs on their computers that they did not know were installed and that they cannot uninstall, that create privacy problems and open security holes, that can hurt the performance and stability of their systems, and that can lead them to mistakenly believe that these problems are the fault of another application or their Internet provider."

Other spyware related bills have been introduced. On July 25, 2003 by Rep. Mary Bono (R-CA) and Rep. Edolphus Towns (D-NY) introduced HR 2929, the "Safeguard Against Privacy Invasions Act" introduced . This bill would prohibit the distribution of certain spyware programs over the internet without notice and consent. See, story titled "Rep. Bono Introduces Spyware Bill" in TLJ Daily E-Mail Alert No. 706, July 29, 2003.

Also, in the 107th Congress, Sen. John Edwards (D-NC) and Sen. Ernest Hollings (D-SC) introduced S 197 (107th), the "Spyware Control and Privacy Protection Act of 2000".

S 2154 has been referred to the Senate Commerce Committee. All three original cosponsors are members.

Sen. Burns, Sen. Wyden, and Sen. Boxer also introduced S 2131, the "Controlling Invasive and Unauthorized Software Act", on February 26. This bill is almost identical to S 2145. S 2145 makes several minor changes, including the title of the bill. Staff for the sponsors told TLJ that S 2131 is an earlier version of the bill, that was introduced by mistake.

Greenspan Discusses Property Rights in Conceptual Products

2/27. Federal Reserve Board Chairman Alan Greenspan gave a speech titled "Intellectual Property Rights" in Stanford, California. He posed numerous questions, but answered few of them.

Alan GreenspanGreenspan (at right) has no doubt that property rights, and state protection of property rights, are essential to market economies, and economic growth. He also states that these notions apply to conceptual property as well as physical property. But, he did not elaborate on specific details of the best intellectual property rights regime.

"Market economies require a rule of law. A society without state protection of individual rights, especially the right to own property, would not build private long-term assets, a key ingredient of a growing modern economy", said Greenspan. "Economic growth was greatly facilitated by the emergence of civil government, which provided, among other things, consistent and predictable enforcement of property rights."

He contrasted the success of market economies to the states of the former Soviet Union, which suffered from "legal chaos, rampant criminality, and widespread corruption", which led to "massive economic failure".

He also reviewed the historical trends. "Over the past half-century, the increase in the value of raw materials has accounted for only a fraction of the overall growth of U.S. gross domestic product (GDP). The rest of that growth reflects the embodiment of ideas in products and services that consumers value. This shift of emphasis from physical materials to ideas as the core of value creation appears to have accelerated in recent decades."

He also discussed differences between physical and conceptual inputs. "More generally, in the realm of physical production, where scarce resources are critical inputs, each additional unit of output is usually more costly to produce than the previous one; that is, production, at least eventually, is characterized by increasing marginal cost. By contrast, in the realm of conceptual output, much of production is characterized by constant, and perhaps even zero, marginal cost."

"But regardless of its causes, conceptualization is irreversibly increasing the emphasis on the protection of intellectual, relative to physical, property rights", said Greenspan. "Only in recent decades, as the economic product of the United States has become so predominantly conceptual, have issues related to the protection of intellectual property rights come to be seen as significant sources of legal and business uncertainty. In part, this uncertainty derives from the fact that intellectual property is importantly different from physical property. Because they have a material existence, physical assets are more capable of being defended by police, the militia, or private mercenaries. By contrast, intellectual property can be stolen by an act as simple as broadcasting an idea without the permission of the originator", said Greenspan.

"Moreover, one individual's use of an idea does not make that idea unavailable to others for their own simultaneous use. Even more importantly, new ideas -- the building blocks of intellectual property -- almost invariably build on old ideas in ways that are difficult or impossible to trace."

Greenspan rhetorical asked numerous questions. For example, he asked, "are we striking the right balance in our protection of intellectual property rights? Are the protections sufficiently broad to encourage innovation but not so broad as to shut down follow-on innovation? Are such protections so vague that they produce uncertainties that raise risk premiums and the cost of capital? How appropriate is our current system -- developed for a world in which physical assets predominated -- for an economy in which value increasingly is embodied in ideas rather than tangible capital?"

He concluded only that "we must begin the important work of developing a framework capable of analyzing the growth of an economy increasingly dominated by conceptual products."

In this speech Greenspan reiterated some of the same points that he made in speech titled "Market Economies and Rule of Law" that he delivered on April 4, 2003. See, story titled "Greenspan Addresses Intellectual Property Laws", also published in TLJ Daily E-Mail Alert No. 638, April 7, 2003.

Greenspan was the keynote dinner speaker at a conference sponsored by the Stanford Institute for Economic Policy Research (SIEPR), a research institute at Stanford University. The conference did not focus on intellectual property issues.

GAO Reports on Competitive Sourcing by Federal Agencies

2/27. The General Accounting Office (GAO) released a report titled "Competitive Sourcing: Greater Emphasis Needed on Increasing Efficiency and Improving Performance". The report was prepared for several members of the House and Senate Government Reform Committees, and for Sen. Robert Byrd (D-WVA).

The report first explains the nature of competitive sourcing. "Agencies increasingly rely on a range of technical and support services to meet mission objectives. It is important for agencies to decide how best to acquire and deliver such services, including whether to obtain services in-house or through private sources. One way to inform this decision is to use competitive sourcing, a strategy under which agencies open the government抯 commercial activities to competition among public and private sector sources."

The GAO report notes too that "In 2001, the administration identified competitive sourcing as one of five governmentwide initiatives in the President抯 Management Agenda." [64 pages in PDF]

The report finds that "Each of the agencies we reviewed has laid the foundation for its competitive sourcing program. The Department of Defense (DOD) has had an extensive competitive sourcing program in place since the mid-1990s, and all of the civilian agencies we reviewed have created a basic infrastructure for their competitive sourcing programs since the President announced competitive sourcing as a governmentwide initiative in August 2001. In creating these infrastructures, agencies have established offices, appointed officials, hired staff and consulting contractors, issued guidance, and conducted training."

It also finds that "Although agencies have made progress, they cited several challenges in implementing their competitive sourcing programs. Key among these challenges is developing workforce inventories that identify commercial and inherently governmental full-time equivalent (FTE) positions. Agencies reported difficulty in classifying positions as inherently governmental or commercial ..." It adds that "Agencies also have been challenged to ensure they have adequate personnel with the skills needed to run a competitive sourcing program."

FCC General Counsel Submits Letter Brief in Media Ownership Case

2/27. John Rogovin, General Counsel of the Federal Communications Commission (FCC), submitted a letter brief [1 page in PDF] to the U.S. Court of Appeals (3rdCir) in Prometheus Radio Project v. FCC, a case involving the FCC's media ownership rules.

The case has been briefed, and the Court heard oral argument on February 11, 2004.

Rogovin wrote that "this letter is to advise the Court of the decision in Cellco Partnership v. FCC, No. 02-1262 (D.C. Cir. Feb. 13, 2004) (copy attached), upholding the FCC抯 interpretation of ``necessary in the public interest创 under the biennial review provisions of Section 11 of the Communications Act, 47 U.S.C. 161. The Cellco decision holds, among other things, that the FCC reasonably interpreted the phrase "necessary in the public interest创 to mean ``advanc[ing] a legitimate regulatory objective创 and that the FCC may rely on ``predictive judgment or properly-supported inferences in determining to retain a regulation.创 Slip Op. 12, 16. The decision thus directly supports the FCC抯 interpretation of the same statutory phrase in Section 202(h) of the Telecommunications Act of 1996, discussed at pp. 23-27 of the government抯 brief in this case."

On February 13, 2004, the U.S. Court of Appeals (DCCir) issued its opinion [24 pages in PDF] in Cellco Partnership v. FCC, petitions for review of certain parts of the FCC's biennial regulatory reviews. See, story titled "Appeals Court Addresses Meaning of "Necessary" in FCC Biennial Review Process" in TLJ Daily E-Mail Alert No. 837, February 16, 2004.

The media ownership case is Prometheus Radio Project et al. v. FCC & USA, No. 03-3388, and consolidated actions, U.S. Court of Appeals for the Third Circuit, petitions for review of a final order of the FCC.

The FCC announced its a Report and Order revising its media ownership rules on June 2, 2003. See, story titled "FCC Announces Revisions to Media Ownership Rules" in TLJ Daily E-Mail Alert No. 672, June 3, 2003. The FCC released the Report and Order on July 2, 2003. See, story titled "FCC Releases Media Ownership Order and NPRM" in TLJ Daily E-Mail Alert No. 692, July 7, 2003.

More News

2/27. The Internal Revenue Service (IRS) announced in a release that "Through February 20, overall e-filing reached 29 million returns, an increase of more than 2 million, or 8 percent, over the same period last year. More than 6.6 million taxpayers have e-filed from their personal computers, a 23 percent increase."

2/27. The Federal Communications Commission (FCC) and the Department of Commerce's National Telecommunications and Information Administration (NTIA) both announced that FCC Chairman Michael Powell and acting Administrator of the NTIA Michael Gallagher met to discuss "spectrum policy issues". See, FCC release and substantially identical NTIA release. The two also posed for a picture with a revised, but out of date, US Frequency Allocation Chart [PDF].


Antitrust Division Sues Oracle to Enjoin Its Proposed Acquisition of PeopleSoft

2/26. The U.S. and seven states filed a complaint in U.S. District Court (NDCal) against the Oracle Corporation  alleging that Oracle's proposed acquisition of PeopleSoft, Inc. would lessen competition substantially in interstate trade and commerce in violation of Section 7 of the Clayton Act, which is codified at 15 U.S.C. 18. The plaintiffs seek an injunction of the proposed acquisition. Oracle promptly announced that it will litigate this claim.

Hewitt PateHewitt Pate (at right) is the the Assistant Attorney General in charge of the Department of Justice's Antitrust Division. He stated in a release that "We believe this transaction is anticompetitive -- pure and simple ... Under any traditional merger analysis this deal substantially lessens competition in an important market. Blocking this deal protects competition that benefits major businesses, as well as government agencies that depend on competition to get the best value for taxpayers' dollars."

Jim Finn of Oracle stated in a release on February 26 that "The Department of Justice decision follows an aggressive lobbying campaign by PeopleSoft management ... It is inconsistent with the overwhelming evidence of intense competition in the markets we serve, and we believe it is without basis in fact or in law. A combined Oracle/Peoplesoft will significantly benefit all customers and shareholders involved."

The complaint alleges that "Unless it is enjoined, Oracle's proposed acquisition of PeopleSoft will substantially increase already high concentration among vendors that sell high function Human Resource Management (HRM) software and high function Financial Management Services (FMS) software purchased by organizations for use in the United States and abroad. More specifically, the proposed transaction will eliminate aggressive head-to-head competition between Oracle and PeopleSoft".

It adds that "Such a reduction in competition is likely to result in higher prices, less innovation and decreased support for these high function integrated software applications."

The complaint asserts very narrow definitions of the relevant markets. It alleges that "High function HRM and high function FMS software are lines of commerce and distinct markets under Section 7 of the Clayton Act." It further alleges that there are only three companies that compete in these markets, Oracle, PeopleSoft, and SAP. The complaint thus alleges that this would be a three to two merger.

Moreover, the complaint elaborates that "Each enterprise customer that needs high function HRM software solutions and high function FMS software solutions to satisfy its functional requirements has a unique end use for these products. The purchase of the relevant products is conducted through a procurement process that demonstrates that the software can be configured to meet the unique end use of the individual customer. The price of the software is set based on the circumstances presented by each transaction, and vendors can price discriminate against individual customers. Other means to support human resources and financial management functions are not sufficiently substitutable for enterprise customers to discipline a small but significant increase in the price for high function HRM and FMS software."

The complaint also alleges that "Although Oracle asserts that the merger would produce substantial efficiencies, it cannot demonstrate merger-specific and cognizable efficiencies that would be sufficient to offset the merger's anticompetitive effects."

Oracle issued a second release on February 26 in which it stated that "its Board of Directors has met and decided to vigorously challenge the Justice Department's lawsuit to block Oracle's merger with PeopleSoft. The Department's claim that there are only three vendors that meet the needs of large enterprises does not fit with the reality of the highly competitive, dynamic and rapidly changing market. Oracle has always been an innovator in the industry and led the way to reducing total cost of ownership and believes that the combined company will be able to offer products and services at even lower prices."

Oracle's Jim Finn stated in this second release that "We believe that the government's case is without basis in fact or in law, and we look forward to proving this in court".

Oracle added that "Since the litigation will extend beyond the PeopleSoft Stockholders' meeting on March 25, 2004, Oracle is withdrawing the slate of independent directors and will not be soliciting proxies for use at the meeting. In addition, Oracle has extended its previously announced tender offer for all of the common stock of PeopleSoft, Inc. to midnight EDT on Friday, June 25, 2004." It added that "The tender offer was previously set to expire at midnight EST on Friday, March 12, 2004. As of the close of business on Thursday, February 26, 2004, a total of 5,294,574 shares had been tendered in and not withdrawn from the offer."

Craig Conway, P/CEO of PeopleSoft stated in a release that "Now that the antitrust day of reckoning has arrived and the Justice Department has announced its decision to sue to block the transaction, it is time for Oracle to abandon its efforts to acquire the Company. Both companies should now devote all of their energy to competing in the marketplace to provide better products and services for customers. That's the PeopleSoft way of creating greater value for our stockholders."

The Antitrust Division filed this case in the Northern District of California. Oracle is a Delaware corporation based in Redwood Shores, California. PeopleSoft, which is not a party to this action, is a Delaware corporation, based in Pleasanton, California. The Antitrust Division filed in the San Francisco Division, rather than the San Jose Division.

This case is United States of America, State of Texas, State of Hawaii, State of Maryland, Commonwealth of Massachusetts, State of Minnesota, State of New York, and State of North Dakota v. Oracle Corporation,  U.S. Court of Appeals for the Northern District of California, D.C. No. C 04 0807 (JCS).

7th Circuit Rules in Interconnection Case

2/26. The U.S. Court of Appeals (7thCir) issued its opinion [9 pages in PDF] in Indiana Bell Telephone Company v. Indiana Utility Regulatory Commission.

Indiana Bell Telephone Company, Inc. (which is now SBC Indiana), is both an incumbent local exchange carrier (ILEC), and a regional Bell operating company (RBOC). SBC Indiana sought permission to provide in region interLATA services in the state of Indiana, pursuant to 47 U.S.C. 271. It initiated a proceeding before the Indiana Utility Regulatory Commission (IURC) to have it evaluate its compliance with Section 271.

However, in evaluating SBC Indiana's compliance with Section 271, the IURC also set up a process that allowed the competitive local exchange carriers (CLECs) to participate.

Several of the CLECs presented the IURC with proposed "performance assurance" or "remedy" plans to ensure SBC's performance toward the competing carriers and to provide for enforcement of the plan through liquidated damages payable to the competing carriers and assessments payable to Indiana. The participants reached no agreement, but, the IURC entered an order adopting a remedy plan of its own.

The IURC order provided that it was stand-alone document, that the IURC asserted was available to new entrants into the local service market, independent of the Ё 251 and 252 interconnection agreement process.

SBC Indiana filed a complaint in U.S. District Court (SDInd) against the IURC, and its commissioners, alleging that the IURC order conflicted with and was preempted by 47 U.S.C. Ё 251, 252, and 271 and that the order exceeds the IURC's authority under Indiana law.

The IURC argued that Indiana law gave it the authority to adopt the plan and to issue orders regarding the quality of service SBC provided.

The District Court granted summary judgment to SBC Indiana. The IURC, its commissioners, and AT&T and WorldCom (as intervenor), brought this appeal. The Appeals Court affirmed. It held that Section 251 and 252 preempt the IURC order.

It wrote that "What the IURC has done is to make an end run around the Act. By issuing its freestanding order, the IURC set up baselines for interconnection agreements. The order interferes with the procedures set out in the Act, which require that the agreements be negotiated between private parties, and only when that fails are they subject to mediation by state agencies. We find that the order of the IURC is preempted by sections 251 and 252 of the Act."

The Court relied upon its recent opinion [18 pages in PDF] in Wisconsin Bell v. Bie. See, "7th Circuit Holds State Cannot Substitute Tariff Filings for Negotiations to Set Prices and Terms for Interconnection" in TLJ Daily E-Mail Alert No. 717, August 13, 2003.

This case is Indiana Bell Telephone Company, Inc. v. Indiana Utility Regulatory Commission, et al., U.S. Court of Appeals for the 7th Circuit, No. 03-1976, an appeal from the U.S. District Court for the Southern District of Indiana, D.C. No. 02 C 1772, Judge Larry McKinney presiding.

US and EU Release Statement on GPS/Galileo Negotiations

2/26. The US and EU released a joint statement on negotiations regarding the Global Positioning System (GPS) and Galileo, the EU's satellite radio navigation system. See, US release and EU release.

They wrote that "The United States and the European Commission, joined by the European Union Member States, held a successful round of negotiations in Brussels on 24-25 February 2004. The delegations built upon progress made in The Hague and in Washington and were able to reach agreement on most of the overall principles of GPS/Galileo cooperation, including,

 • Adoption of a common baseline signal structure for their respective open services
 • Confirmation of a suitable baseline signal structure for the Galileo Public Regulated Service (PRS)
 • A process allowing optimization, either jointly or individually, of the baseline signal structures in order to further improve performances
 • Confirmation of interoperable time and geodesy standards to facilitate the joint use of GPS and Galileo
 • Non-discrimination in trade in satellite navigation goods and services
 • Commitment to preserve national security capabilities
 • Agreement not to restrict use of or access to respective open services by end-users
 • Agreement to jointly finalize associated documents after which the agreement will be presented for signature"

The US and EU added that "The delegations will continue to work diligently to resolve the few remaining outstanding issues which concern primarily some legal and procedural aspects."

Commerce Department Releases Report on TeleHealth

2/26. The Department of Commerce released a report [118 pages in PDF] titled "Innovation, Demand, and Investment in Telehealth".

The report states that "Tens of thousands of Americans are accessing healthcare remotely from medically underserved areas such as Arctic villages, Native American reservations, prisons, and rural communities. Many more are being diagnosed, treated and monitored from ships at sea, battlefields, urban centers, and homes. However, only a fraction of the potential for technology to increase access to, improve quality of, and reduce the cost of the nation抯 healthcare has been realized to date."

The report states that "The market for telehealth technology (products and services) is relatively small and has historically been considered a technical specialty separate from traditional medicine. One of the most important challenges to (and opportunities for) telehealth providers is the integration of technology with clinical medicine." (Parentheses in original.)

The report finds that "Telehealth innovation, adoption and deployment have been impeded by legal, financial and regulatory barriers." It also finds that "progress in addressing public policy issues is often limited by insufficient coordination among stakeholder groups and organizations."

The report identifies some of these barriers. For example, it states that "The issue of state licensure continues to play a role in limiting a national market for and in dampening user acceptance of telehealth technologies, with some suggesting it is less restrictive to sell technologies and services into foreign markets than into a neighboring state."

The report elaborates that "Providers practicing in the field of medicine have traditionally been subject to licensure by state medical and nursing "boards" in the state or other jurisdiction in which the provider抯 practice is located. Each state, territory, and the District of Columbia independently determines its own requirements for health care providers to practice in their jurisdiction. Executives interviewed for this report suggested that telehealth has been an enigma to the boards because it extends the practice of medicine into a different jurisdiction. State boards have restricted the practice by out-of-state telehealth providers in a variety of ways, from prohibition to permitting reciprocity to declining to take a position at all."

The report also identifies liability issues. It states that "Issues such as protection of healthcare and telecommunications entities from undue liability arising out of the use of telehealth have not yet been addressed."

The report also addressed intellectual property rights. It finds that "Additional innovation may be stimulated through greater use of ``fast track创 protection of intellectual property." That is "Additional innovation may be stimulated through "fast track" protection of intellectual property. A good portion of innovation in telehealth occurs locally as a result of improvements in currently operating programs and lessons learned. Innovators in this field, however, tend to be small companies or individuals that often choose not to pursue intellectual property protection for financial reasons, among them the time and possible expense of seeking exclusive rights. As a result, the disclosure of significant advancements in tele health may be delayed. Reducing the time for granting patents by encouraging inventors to use existing ``fast track创 processes would allow innovative technologies to reach the marketplace and healthcare consumer sooner."

The primary authors of the report are David Brantley and Karen Cummings of the DOC's Technology Administration's Office of Technology Competitiveness, and Richard Spivack of the National Institute of Standards and Technology's Advanced Technology Program.

Phil Bond, the Under Secretary of Commerce for Technology, presented the report at an event on Capitol Hill hosted by the Steering Committee on Telehealth and Healthcare Informatics.

Corrections

2/26. TLJ corrects three errors in the story titled "Sen. Alexander Introduces Bill Regarding Internet Tax Moratorium" in TLJ Daily E-Mail Alert No. 838, February 17, 2004.

First, in paragraph 27, the words "the bill" should have appeared after the word "passed". That is, the sentence is corrected to read as follows: "The full House passed the bill on September 17, 2003." (Emphasis added.)

Second, in paragraph 35, sentence 2, the word "not" should have appeared after the word "has". That is, the story first states that the House passed HR 49, and the Senate Commerce Committee passed S 150. Then, the following sentence is corrected to read as follows: "However, the full Senate has not passed either this bill, or the House version." (Emphasis added.)

Third, the description of the grandfather language of S 150 was incorrect. Paragraph 37 incorrectly stated that "S 150 sunsets the grandfather clause of the 1998 ITFA after three years." This sentence is corrected to read as follows: "S 150 expands the scope of the grandfather provision, and sunsets it after three years". Also, in paragraph 48 (which is part of the discussion of the grandfathering language of S 2084) the following sentence is added: "S 150 contains similar language."

That is, the original Internet Tax Freedom Act (ITFA) grandfathered existing taxes that were "generally imposed and actually enforced" in 1998. HR 49 deletes this grandfather clause. S 150 expands the scope of the grandfather provision, but also sunsets it after three years. S 2084 also expands the scope of the grandfather provision, with language similar to that of S 150. However, it does not sunset it. The TLJ story was incorrect to the extent that it did not identify that S 150, like S 2084, includes language that expands the scope of the grandfather provision.

These errors have been corrected in the TLJ web site.

Japanese FTC Investigates Microsoft

2/26. Microsoft stated in a release that "The Japanese Fair Trade Commission (JFTC) sent officers to Microsoft's offices in Tokyo today to collect information regarding a patent-related provision in Microsoft's Windows and WinCE OEM contracts with PC and device manufacturers."

Microsoft described the provision under review. "This patent-related provision provided that OEMs who took a license to Microsoft's Windows operating system products, including Microsoft's patents on Windows, should not later sue each other, or Microsoft, on claims that Windows violates their patents."

The Computer & Communications Industry Association (CCIA), a Washington DC based interest group that is devoted in significant part to complaining about Microsoft's business practices, offered an alternative description. It wrote in a release that "Japan is currently investigating the ``non-assertion创 clauses Microsoft employs against computer manufactures. If a computer manufacturer wants to license Microsoft's Windows, they are forced into agreeing they will not assert any patent license fees against Microsoft."

Microsoft further stated that "This specific provision was reviewed and passed muster under a competition law assessment conducted by the European Commission in 2001. The U.S. Department of Justice reviewed the provision in the mid-1990s. More recently, information concerning the provision was presented to the U.S. District Court of the District of Columbia in connection with the remedies phase of the antitrust lawsuit brought by the U.S. Department of Justice and various states."

The CCIA further stated that "For a monopolist to withhold its monopoly product in order to coerce compliance is unconscionable."

Panitchpakdi Addresses Doha Round, Multilateralism and Outsourcing

2/26. Supachai Panitchpakdi, Director General of the World Trade Organization (WTO), gave a speech at the National Press Club (NPC) in Washington DC. He advocated free trade, multilateralism, and the Doha round of negotiations. He also addressed the political debate in the US over outsourcing.

Supachai PanitchpakdiPanitchpakdi (at right) stated that "The United States, more than any single country, created the world trading system. The US has never had more riding on the strength of that system. And US leadership -- especially in the current Doha trade talks -- is indispensable to the system's success."

"The Doha Round is a crucial test", said the Director General. "But what is at stake in these talks is more than the economic benefits that would flow from a successful deal. The real issue is the relevance of the multilateral trading system."

He said that "Advancing the Doha agenda would confirm the WTO as the focal point for global trade negotiations, and as the key forum for international economic cooperation. The credibility of the institution would be greatly enhanced. But if the Doha negotiations stumble, doubts may grow, not just about the WTO's effectiveness, but about the future of multilateralism in trade."

He argued that the US has two interests in the Doha negotiation. First, "the US is now integrated with the world economy as never before". And second, "strengthening the world trading system is essential to America's wider global objectives. Fighting terrorism, reducing poverty, improving health, integrating China and other countries in the global economy -- all of these issues are linked, in one way or another, to world trade."

He then discussed the debate in the US over outsourcing of services. He said that "We especially need to inject some clarity -- and facts -- into the current debate over the outsourcing of services jobs. Over the next decade, the US is projected to create an average of more than 2 million new services jobs a year -- compared to roughly 200,000 services jobs that will be outsourced."

He continued that "I am well aware that this issue is the source of much anxiety in America today. Many Americans worry about the potential job losses that might arise from foreign competition in services sectors. But it's worth remembering that concerns about the impact of foreign competition are not new. Many of the reservations people are expressing today are echoes of what we heard in the 1970s and 1980s."

"But people at that time didn't fully appreciate the power of American ingenuity", said Panitchpakdi. "Remarkable advances in technology and productivity laid the foundation for unprecedented job creation in the 1990s and there is no reason to doubt that this country, which has shown time and again such remarkable potential for competing in the global economy, will not soon embark again on such a burst of job-creation."

"America's openness to service-sector trade -- combined with the high skills of its workforce -- will lead to more growth, stronger industries, and a shift towards higher value-added, higher-paying employment. Conversely, closing the door to service trade is a strategy for killing jobs, not saving them. Americans have never run from a challenge and have never been defeatist in the face of strong competition. Part of this challenge is to create the conditions for global growth and job creation here and around the world."

He concluded by stating that "It would be a tragic mistake if the Doha Round, which offers the world a once in a generation opportunity to eliminate trade distortions, to strengthen trade rules, and open markets across the world, were allowed to founder. We need courage and the collective political will to ensure a balanced and equitable outcome."

"What is the alternative? It is a fragmented world, with greater conflict and uncertainty", said Panitchpakdi.

Lamy Addresses Doha Agenda

2/26. EU Trade Commissioner Pascal Lamy gave a speech titled "Moving the Doha Development Agenda Forward". He spoke to the European-American Business Council (EABC) in Washington DC.

Pascal LamyLamy (at right) stated that "here we are in early 2004, with the Round officially coming out of its post-Cancun swoon. And this time round, the prediction that I keep hearing is that it is completely hopeless to try to make progress in 2004, because, they all tell me, the US never moves on trade in an election year. Well let me tell you, I find these kinds of statements pretty annoying. And I imagine that Bob Zoellick does, too. Because, if that it is true, both of us have wasted the best part of two months flying just about everywhere to push the case for the Doha Development Agenda [DDA], and we aren't alone in that."

"Do not assume that 2004 is a year for the dogs on the Doha Round." He continued; "what can we achieve in 2004? Answer: significant progress across the board. Sort of between half and two-thirds of the way to the end of the Round."

Adelstein Addresses Broadband Issues

2/26. Federal Communications Commission (FCC) Commissioner Jonathan Adelstein gave a wide ranging speech [5 pages in PDF] titled "Preserving the Public Interest in a Dynamic Telecommunications Industry".

One point that he made is that governors and state officials "are concerned about losing control" as a result of broadband deployment. "The days of easy-to-track point-to-point transmissions -- which enabled us to distinguish easily between intrastate and interstate services -- appear to be numbered, as tomorrow's digital packets will be routed dynamically through overlapping networks."

He also said that broadband is making possible "the outsourcing of jobs overseas", and that "Here within our borders, similar ``outsourcing创 is shifting work from high-cost areas, often urban areas, to areas with lower costs of doing business, often less populated areas. I imagine that puts pressure on you to keep your tax rates and business climate as friendly as possible to remain competitive."

Adelstein also addressed universal service, voice of internet protocol, and the Pulver.com declaratory ruling.

Finally, he addressed the FCC's triennial review order. He said that he is "hopeful" that it will be upheld by the U.S. Court of Appeals (DCCir), and that he is "committed to defending the order strongly."

Adelstein spoke at a meeting of the National Governors Association in Washington DC.

More Capitol Hill News

2/26. Rep. Joe Barton (R-TX), the new Chairman of the House Commerce Committee, scheduled, and then cancelled an event to announce a new Committee structure. He stated in a short release that "I will have additional announcements as to new committee structure and placements next week, and look forward to continuing an active agenda."

2/26. The House Financial Services Committee's Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises scheduled a hearing for Wednesday, March 3 on HR 3574, the "Stock Option Accounting Reform Act", sponsored by Rep. Richard Baker (R-LA), Rep. Anna Eshoo (D-CA), Rep. David Dreier (R-CA), and 43 others. This is the House companion bill to S 1890, sponsored by Sen. Mike Enzi (R-WY), Sen. Harry Reid (D-NV) and others. These bills would require the expensing of stock options, but only for the top executives of companies, with exemptions for small businesses and start ups.

People and Appointments

2/26. Bert DuMars was named Director, Electronic Tax Administration, at the Internal Revenue Service (IRS). He previously worked for Trend Micro, Inc. He has also worked for Intel and Dell. He replaces Terry Lutes, who was named Associate Chief Information Officer for IRS Information Technology Services. See, IRS release.

More News

2/26. The House Commerce Committee's Subcommittee on Telecommunications and the Internet held another hearing on HR 3717, the "Broadcast Decency Enforcement Act of 2004". The witnesses at this hearing were broadcasters. See, prepared testimony of Alex Wallau (President, ABC Television Network), Gail Berman (President of Entertainment, Fox Broadcasting Company), Alan Wurtzel (National Broadcasting Company), Bud Paxson (Ch/CEO of Paxson Communications Corporation), John Hogan (P/CEO of Clear Channel Radio), and Harry Pappas (Ch/CEO of Pappas Telecasting Companies).

2/26. VeriSign filed a complaint in the U.S. District Court (CDCal) against the Internet Corporation for Assigned Names and Numbers (ICANN). See, VeriSign release alleging violation of antitrust laws. VeriSign has a contract with the ICANN to operate the .com and .net top level domains. VeriSign asserts that the ICANN exceeding its federal charter to be a technical coordination body, by attempting to regulate the domain name system. See, stories titled "ICANN Asks VeriSign to Suspend Wildcard Service" in TLJ Daily E-Mail Alert No. 743, September 22, 2003; "VeriSign Refuses to Suspend Deployment of Wildcard Service" in TLJ Daily E-Mail Alert No. 744, September 23, 2004; and "ICANN Demands That VeriSign Cease Wildcard Feature" in TLJ Daily E-Mail Alert No. 753, October 6, 2003.


Go to News from February 21-25, 2004.