TLJ News: March 1-5, 2004.

News from March 1-5, 2004

House to Vote on CREATE Act

3/5. The House Republican leadership announced that the House is scheduled to take up HR 2391, the "Cooperative Research and Technology Enhancement (CREATE) Act", under suspension of the rules, on Wednesday, March 10. See, Republican Whip Notice.

The bill would amend Section 103(c) of the Patent Act, which is codified at 35 U.S.C. § 103, to address the August 8, 1997 opinion of the U.S. Court of Appeals for the Federal Circuit in OddzOn Products, Inc. v. Just Toys, Inc., which ruled that derived prior art may serve as evidence of obviousness.

Rep. Lamar Smith (R-TX), the Chairman of the House Judiciary Committee's Subcommittee on Courts, Internet and Intellectual Property (CIIP), introduced HR 2391 on June 9, 2003.

The CIIP Subcommittee held a hearing on the bill on June 10, 2003. See, story titled "Representatives Introduce Patent Bill to Encourage Collaborative Research" in TLJ Daily E-Mail Alert No. 680, June 13, 2003.

The CIIP Subcommittee amended and approved the bill on July 22, 2003. The full Committee amended and approved the bill on January 21, 2004. See, story titled "House Judiciary Committee Approves CREATE Act to Promote Collaborative Research" also published in TLJ Daily E-Mail Alert No. 821, January 22, 2004.

6th Circuit Rules for Domain Name Registrant Who Published Complaint Web Site

3/5. The U.S. Court of Appeals (6thCir) issued its opinion in Lucas Nursery v. Grosse, a dispute over residential yard work that escalated into a federal cybersquatting case. The Appeals Court affirmed the District Court's judgment for the domain name registrant. It held that a consumer who registered a domain name, and established a web site, solely to criticize the business that uses that name, did not meet the "bad faith" requirement of the Anticybersquatting Consumer Protection Act (ACPA).

Lucas Nursery is a business that does yard work. Michelle Grosse has a house with a yard. Grosse hired Lucas Nursery to level a dip in her front yard. Lucas Nursery laid soil and sod to level the dip. However, Grosse was not satisfied.

The Appeals Court opinion does not state whether or not she filed a complaint in state court alleging breach of contract, or other causes of action. But, she did register the domain, www.lucasnursery.com. And, she published a web site devoted to complaining about her landscaping experience.

Neither Lucas Nursery, nor Grosse, registered a trademark in the name "Lucas Nursery".

Lucas Nursery filed a complaint in U.S. District Court (EDMich) alleging violation of the Anticybersquatting Consumer Protection Act, which is codified at 15 U.S.C. § 1125(d). The District Court granted summary judgment to Grosse. Lucas Nursery appealed. The Court of Appeals affirmed.

Subsection 1125(d)(1)(A) provides that "A person shall be liable in a civil action by the owner of a mark, including a personal name which is protected as a mark under this section, if, without regard to the goods or services of the parties, that person --
(i) has a bad faith intent to profit from that mark, including a personal name which is protected as a mark under this section; and
(ii) registers, traffics in, or uses a domain name that --
    (I) in the case of a mark that is distinctive at the time of registration of the domain name, is identical or confusingly similar to that mark;
    (II) in the case of a famous mark that is famous at the time of registration of the domain name, is identical or confusingly similar to or dilutive of that mark; or
    (III) is a trademark, word, or name protected by reason of section 706 of title 18 or section 220506 of title 36."

Subsection 1125(d)(1)(B) then lists the nine factors to be considered by the Court in determining whether a person has a bad faith intent.

The case turned on the Appeals Court's application of the facts of this case to the ACPA's test for bad faith.

It found that some of the enumerated factors worked against Grosse. The first three all cut against her. That is, she held no "trademark or other intellectual property rights ... in the domain name". She did not register a domain name that consists of her name. She had made no prior use of the domain name.

But, the Appeals Court held that the 5th through 8th factors do not suggest bad faith. The Court summarized these factors. "These factors focus on: whether the defendant seeks to divert consumers from the mark holder’s online location either in a way that could harm good will or tarnish or disparage the mark by creating a confusion regarding the sponsorship of the site; whether there has been an offer to transfer or sell the site for financial gain; whether the defendant provided misleading contact information when registering the domain name; and whether the defendant has acquired multiple domain names which may be duplicative of the marks of others."

The Court emphasized that "The paradigmatic harm that the ACPA was enacted to eradicate -- the practice of cybersquatters registering several hundred domain names in an effort to sell them to the legitimate owners of the mark -- is simply not present in any of Grosse's actions." The Court concluded that "None of these factors militates against Grosse."

This opinion stands in contrast to the opinion of the U.S. Court of Appeals (4thCir) in PETA v. Doughney. See, story titled "4th Circuit Affirms Judgment Against Parody Web Site Operator" in TLJ Daily E-Mail Alert No. 256, August 24, 2001.

This case is Lucas Nursery and Landscaping, Inc. v. Michelle Grosse, U.S. Court of Appeals for the 6th Circuit, No. 02-1668, an appeal from the U.S. District Court for the Eastern District of Michigan, at Detroit, D.C. No. 01-73291, Judge Bernard Friedman presiding.

7th Circuit Rules in Indiana Bell v. McCarty

3/5. The U.S. Court of Appeals (7thCir) issued its opinion [29 pages in PDF] in Indiana Bell v. McCarty, a interconnection dispute between Indiana Bell (SBC) and AT&T arising in the state of Indiana.

Incumbent local exchange carrier (ILEC) Indiana Bell and competitive local exchange carrier (CLEC) AT&T failed to reach an agreement regarding interconnection. So, pursuant to 47 U.S.C. § 252, the Indiana Utility Regulatory Commission (IURC) arbitrated.

Indiana Bell then filed a complaint in U.S. District Court alleging that various parts of the IURC order were in violation with the Communications Act. The defendants include AT&T, William McCarty and other IURC Commissioners.

The District Court granted Indiana Bell's request for an injunction, in part. Indiana Bell and AT&T both appealed. The Appeals Court affirmed in part, and reversed in part.

The Appeals Court affirmed the District Court's affirmance of the IURC’s decision to award AT&T the tandem reciprocal compensation rate rather than the lower endoffice rate. The Appeals Court also affirmed the District Court's affirmance of the IURC's determination that Indiana Bell must splice dark fiber for AT&T upon request.

The Court of Appeals affirmed the District Court's finding regarding new combinations of network elements. AT&T had argued that the District Court erred in remanding for further findings the agreement provisions requiring Indiana Bell to provide AT&T with combinations of network elements that Indiana Bell ordinarily combines for itself as well as combinations that it ordinarily does not combine for itself.

The Court of Appeals also affirmed the District Court's finding regarding packet switching. AT&T had argued that the District Court erred in remanding for further findings the IURC’s decision requiring Indiana Bell to unbundle packet switching.

Finally, the Court of Appeals reversed the District Court regarding acceptance testing. AT&T had argued that the District Court erred in enjoining the portion of the interconnection agreement requiring Indiana Bell to perform acceptance testing before opening a loop circuit requested by AT&T.

This case in Indiana Bell Telephone Company, Inc. v. William McCarty, et al., U.S. Court of Appeals for the 7th Circuit, Nos. 03-1123, 03-1122 & 03-1124, appeals from the U.S. District Court for the Southern District of Indiana, Indianapolis Division, D.C. No. 01 C 1690, Judge Larry McKinney presiding.

Donaldson Addresses New Technologies and Market Regulation

3/5. Securities and Exchange Commission (SEC) Chairman William Donaldson gave a speech in Washington DC in which he discussed, among other topics, market regulation issues affected by new technologies.

William Donaldson Donaldson (at right) stated that "Several recent phenomena have created problems in resolving the protection of best price in our trading system. New technologies have made electronic trading platforms much faster and offered greater assurance of execution of a displayed order size compared to slower, floor-based markets. Intervening and uncertain access fees make protection of the best price even more difficult. The critical issue is how best to capture the benefits of speed and certainty of execution, while maintaining the bedrock principle of assuring that all investors are protected so that their better-priced orders are executed. By modernizing the National Market System, we will help our markets retain their position as the deepest and most efficient in the world, which will benefit investors regardless of their size or sophistication."

He also said that "To augment our oversight of mutual funds, we have also formed an SEC staff task force that will be drafting the outlines of a new surveillance program. ... I have also asked the task force to examine how new technologies can be used to enhance our oversight responsibilities."

People and Appointments

3/5. Jacquelynn Ruff was named Vice President for Public Policy and International Regulatory Affairs at Verizon. She was previously Assistant Bureau Chief of the Federal Communications Commission's (FCC) International Bureau. She joined the FCC in 1999. Before that, she worked for the law firm of Wilmer Cutler & Pickering. See, Verizon release.

People and Appointments

3/5. President Bush announced his intent to appoint Dennis Carlton, Deborah Garza, Sanford Litvack, and Deborah Majoras to be Members of the Antitrust Modernization Commission for the life of the commission. See, White House release.

FCC Announces Agenda of March 11 Meeting

3/4. The Federal Communications Commission (FCC) released the agenda [3 pages in PDF] for its meeting of Thursday, March 11, 2004.

First, the FCC will consider a notice of proposed rulemaking (NPRM) regarding rules to protect consumers from unwanted mobile service commercial messages under the CAN-SPAM Act, and a further NPRM regarding revisions to the TCPA rules involving the national do-not-call registry. The TCPA is the Telephone Consumer Protection Act of 1991. This is CG Docket No. 02-278.

The Congress passed the S 877, the CAN-SPAM Act (Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003) late last year. President Bush signed the bill on December 16, 2003. It is Public Law No. 108-187.

Section 14 of the CAN-SPAM Act provides that the FCC "in consultation with the Federal Trade Commission, shall promulgate rules within 270 days to protect consumers from unwanted mobile service commercial messages."

It further provides that the FCC rules shall "(1) provide subscribers to commercial mobile services the ability to avoid receiving mobile service commercial messages unless the subscriber has provided express prior authorization to the sender ... (2) allow recipients of mobile service commercial messages to indicate electronically a desire not to receive future mobile service commercial messages from the sender; ..."

The statute further provides that the FCC "shall consider the ability of a sender of a commercial electronic mail message to reasonably determine that the message is a mobile service commercial message."

Second, the FCC will consider a Report and Order to reform existing international regulatory policies governing the relationship between U.S. and foreign carriers in the provision of services over U.S. international routes. This is IB Docket Nos. 02-324 and 96-261.

Third, the FCC will consider a Report and Order and Memorandum Opinion and Order regarding the FCC's rules implementing the Section 272(b)(1) "operate independently" requirement.

Section 272 contains the separate affiliate requirements. Subsection 272(b)(1) pertains to "Structural and transactional requirements". It provides that "The separate affiliate required by this section ... shall operate independently from the Bell operating company".

This is WC Docket No. 03-228, CC Docket Nos. 96-149 and 98-141, CC Docket No. 96-149, and CC Docket No. 01-337.

Fourth, the FCC will consider a NPRM regarding whether the FCC should impose mandatory minimum Customer Account Record Exchange (CARE) obligations on all local and interexchange carriers.

Fifth, and finally, the FCC will consider a notice of inquiry (NOI) regarding the deployment of advanced telecommunications capability for all Americans pursuant to Section 706 of the Telecommunications Act of 1996.

Section 706 of the Act provides that "The Commission shall, within 30 months after the date of enactment of this Act, and regularly thereafter, initiate a notice of inquiry concerning the availability of advanced telecommunications capability to all Americans (including, in particular, elementary and secondary schools and classrooms) and shall complete the inquiry within 180 days after its initiation. In the inquiry, the Commission shall determine whether advanced telecommunications capability is being deployed to all Americans in a reasonable and timely fashion. If the Commission's determination is negative, it shall take immediate action to accelerate deployment of such capability by removing barriers to infrastructure investment and by promoting competition in the telecommunications market." (Parentheses in original.)

The meeting will be held at 9:30 AM on Thursday, March 11 at the FCC, 445 12th Street, SW, in the Commission Meeting Room (Room TW-C305). The meeting will be webcast.

House Commerce Committee Chairman Barton Announces Organizational Changes

3/4. Rep. Joe Barton (R-TX), the new Chairman of the House Commerce Committee, and other Republican members of the Committee, held a press conference to announce the new organization of the Committee, and to discuss their agenda and priorities.

Rep. Joe Barton Rep. Barton (at left) is the new Chairman, replacing Rep. Billy Tauzin (R-LA). Rep. Ralph Hall (R-TX) is the new Chairman of the Subcommittee on Energy and Air Quality. Rep. Barton previously held this post.

All of the other Subcommittee Chairman remain the same. Thus, Rep. Fred Upton (R-MI) remains Chairman of Subcommittee on Telecommunications and the Internet; Rep. Cliff Stearns (R-FL) remains Chairman of the Subcommittee on Commerce, Trade and Consumer Protection; Rep. Jim Greenwood (R-PA) remains Chairman of the Subcommittee on Oversight and Investigations; Rep. Michael Bilirakis (R-FL) remains Chairman of the Subcommittee on Health; and, Rep. Paul Gillmor (R-OH) remains Chairman of the Subcommittee on Environment and Hazardous Materials.

Rep. Barton named Rep. Chip Pickering (R-MS) to be the new Vice Chairman of the full Committee. Previously, Rep. Richard Burr (R-NC) had been Vice Chairman.

Rep. Barton named Rep. John Shadegg (R-AZ) Committee Whip. Rep. Barton stated that "I asked John to take that on because we are going to be moving some various legislative issues, and I think it will be helpful to know where the votes are before we go to markup."

Rep. Barton also stated that "we are working with the Subcommittee Chairmen to have a Subcommittee Whip that works with John."

Rep. Shadegg stated that "whips don't necessarily make friends", but in his new position, "this is largely an issue of communications."

Rep. Barton named Rep. John Shimkus (R-IL) to the new position of Committee Coalition and Outreach Director. Rep. Barton stated that "John is very close to the office of the Speaker of the House, Rep. Hastert of Illinois".

Rep. Barton also announced that Rep. Steve Buyer (R-IN) has been named a member of the Subcommittee on Telecommunications and the Internet.

Rep. Barton also named some new staff members, and introduced them at the press conference. Bud Albright is the new Committee Staff Director. He is currently VP for Federal Relations at Reliant Resources. He was previously Chief Oversight Counsel for the House Commerce Committee when Rep. Barton was the Chairman of the Subcommittee on Oversight and Investigations.

Rep. Barton named Larry Neal Deputy Staff Director for Communications. Neal is currently Associate Director of Communications at the U.S. Census Bureau. Before that he had been press secretary for former Sen. Phil Gramm (R-TX) for 20 years. He replaces Ken Johnson.

Rep. Barton also named Andy Black Deputy Staff Director for Policy. Black has worked in various positions for Rep. Barton for eleven years.

Republicans Discuss House Commerce Committee Agenda

3/4. Rep. Joe Barton (R-TX), the new Chairman of the House Commerce Committee, and other Republican members of the Committee, held a press conference at which they discussed their priorities and agenda for the remainder of this Congress, and for the next.

Telecommunications and Internet. Rep. Fred Upton (R-MI), the Chairman of the Subcommittee on Telecommunications and the Internet, discussed the agenda for the Subcommittee. He stated that he is "looking forward" to having HR 3717, "Broadcast Decency Enforcement Act of 2004", come up for a vote on the House floor "next week".

Rep. Fred Upton Rep. Upton (at right) stated that in the remainder of this Congress the Subcommittee will deal with extending the SHVA, junk faxes, and the transition to digital television.

He also said that the Committee will not conduct a rewrite of the Telecommunications Act in this Congress, but that it will hold hearings that will set the stage for rewriting the Act in the 109th Congress.

Rep. Chip Pickering (R-MS), who is a member of the Subcommittee on Telecommunications and the Internet, added that the agenda also includes universal service reform, and spectrum reform.

Rep. Barton was asked about media ownership. He stated only that he planned to meet with Rep. John Dingell (D-MI), the ranking Democrat on the Committee, later in the day to discuss the issue.

Rep. Barton was asked about spectrum fees. He stated that he has not yet studied the issue.

Rep. Barton also discussed the FCC's e-rate subsidy program. See, following story titled "Rep. Barton Plans to Examine E-Rate Subsidies".

Rep. Barton, Rep. Upton, and Rep. Pickering also discussed broad legislation to revise the Telecommunications Act of 1996. See, following story titled "House Commerce Committee Republicans Discuss Rewrite of Telecom Act".

Privacy. Rep. Barton stated that "I believe that the right to privacy is one of the fundamental rights of a democratic society. The right to be safe in your home and your property is a fundamental right. And in the modern internet, everybody giving out your social security for everything they sign up for, age, we have to go extra lengths to protect that right to privacy. And, I don't think that is odd at all. The fact the Congressman Markey and I are on that same side just shows that that is not a partisan issue. It is not a Republican or Democrat issue.

He continued, "Now, having said that, there are 57 members, I think, of this Committee that I chair, so to move privacy legislation, or any kind of bill for that matter, you have to have a consensus, and, you know, I am quoting my press release, but you learn a lot more, according to Sam Rayburn, listening than talking, so I am going to do a lot of listening on that. I think you will see an emphasis on the privacy side of the equation."

Rep. Cliff Stearns (R-FL) was present at the press conference, but did not comment on privacy. He is the Chairman of the Subcommittee on Commerce, Trade and Consumer Protection, which has jurisdiction over most privacy related issues. His approach differs from that of Rep. Barton.

In the last Congress, Rep. Stearns introduced HR 4678 (107th Congress), the "Consumer Privacy Protection Act of 2002". See, story titled "Rep. Stearns Introduces Information Privacy Bill" in TLJ Daily E-Mail Alert No. 428, May 9, 2002. In the current Congress, he is the sponsor of HR 1636, also titled the "Consumer Privacy Protection Act of 2003". Outgoing Chairman Rep. Billy Tauzin (R-LA) is a cosponsor of these bills. Rep. Barton is not.

House Commerce Committee Republicans Discuss Rewrite of Telecom Act

3/4. Republican members of the House Commerce Committee discussed plans to rewrite the Telecommunications Act of 1996 at a press conference on March 4, 2004.

Rep. Fred Upton (R-MI), the Chairman of the Subcommittee on Telecommunications and the Internet, said that the Committee will not conduct a rewrite of the Telecommunications Act in the 108th Congress, which ends later this year.

However, he said that there will be hearings this year. He added that the Subcommittee is "beginning to lay the framework for rewriting that in the next Congress".

Rep. Joe Barton (R-TX), the new Chairman of the full Committee, stated that "We have approximately 50 legislative days left in this Congress. I think it is safe to say that we are not going to rewrite the Telecommunications act this year".

He was asked what changes would be made in the next Congress. He responded, "I am not going answer a question like that". He elaborated that the Committee must hold hearings first.

Rep. Barton was asked about the Tauzin Dingell bill and broadband related legislation. He stated that the bill has not become law, "but the concept that it expresses is still very relevant".

He also said that "I am a cosponsor of the Tauzin Dingell approach. You know that that passed the House, and has never quite gotten out of the Senate. Senators have different views. That is another issue that we will come back and take take a look at, ..." [The remainder of his sentence might have been as follows: "... see if there is not other ways to skin the cat, perhaps."].

Rep. Barton continued that "Most studies that I have seen say that we have one of the worst broadband penetration impacts in the industrialized world. We are behind Japan, we are behind Korea, we are behind western Europe. We need to move forward. Chip Pickering is going to be involved in that."

Rep. Chip Pickering (R-MS) also spoke with reporters after the press conference. He spoke about FCC's regulatory proceedings pertaining to broadband, voice over internet protocol (VOIP), spectrum reform, and revising the Telecommunications Act of 1996.

Rep. Chip Pickering Rep. Pickering (at right) also discussed the March 2, 2004 opinion [62 pages in PDF] of the U.S. Court of Appeals (DCCir) in USTA v. FCC. See, story titled "Appeals Court Overturns Key Provisions of FCC Triennial Review Order", also published in TLJ Daily E-Mail Alert No. 848, March 3, 2003.

He stated that "The FCC regulatory process has addressed many of the issues on broadband. There is some uncertainty with the Court decision yesterday as to the network elements and the UNE-P. Will the FCC appeal that? Will cert be granted? Will they have to adopt rules within 60 days if that doesn't occur. So that is going to be an issue that will play out at the courts and at the FCC. The pricing of the network elements will be soon coming TELRIC."

Rep. Pickering also stated that "The framework of the 96 Act allows for an evolutionary policy, but voice over the internet, if that emerges as quickly as it appears and is predicted, then the support system, the current support system of universal service, will have to be reformed to change -- the new technology, the new applications, and the new competition. So, to the degree that that is a part of the 96 Act, it will be very important."

He discussed spectrum issues. He said, "Spectrum reform. How do you achieve the digital transition? How do you relocate companies and public safety users, possible government use of spectrum, and with wireless quickly replacing old traditional services, that could be part of a major telecom reform. Now, all of these touch on the 96 Act because it changed the core elements of it. You don't necessarily have to change the core principles or objectives or structure of the 96 Act. But it does need to be changed to reflect the competitive and technology forces that have come into play since 1996."

He also discussed VOIP and Universal service. "I think that you do want to see some fair contribution to universal service. And, I think that there is fairly broad consensus on that principle. But, what you do want to do is clarify that the states cannot regulate, that there is a clear preemption of a state's right to regulate voice over internet."

Rep. Barton Plans to Examine E-Rate Subsidies

3/4. Rep. Joe Barton (R-TX), the new Chairman of the House Commerce Committee, discussed the Federal Communications Commission's (FCC) e-rate subsidy program at a press conference on March 4, 2004.

Rep. Barton stated that "We believe that we should have access to the internet for our libraries and our schools. How we fund that is an issue that honorable people can have a discussion on. The way the Clinton administration, and Vice President Gore especially, implemented that part of the Telecommunications Act, at the time was very controversial, and think that even today might be considered to be controversial. So, I think that is something that Chairman Upton will be looking at."

Rep. Barton also stated that "you are going to see us doing some budgetary hearings". Rep. Jim Greenwood (R-PA), the Chairman of the Subcommittee on Oversight and Investigations, elaborated that his Subcommittee will examine possible "spending reductions" in various programs, including the e-rate.

Rep. Greenwood's Subcommittee has already been examining waste, fraud and abuse in the e-rate program. See, stories titled "Reps. Tauzin & Greenwood Request GAO Report on E-Rate Waste, Fraud & Abuse As Prelude to Oversight Hearing" in TLJ Daily E-Mail Alert No. 791, December 3, 2003; House Commerce Committee Requests Information from IBM in E-Rate Fraud Investigation" in TLJ Daily E-Mail Alert No. 698, July 15, 2003; "FCC Inspector General Reports on E-Rate Fraud" in TLJ Daily E-Mail Alert No. 449, June 12, 2002; "Reps. Tauzin & Greenwood Write Powell Re Waste Fraud & Abuse In E-Rate Program" in TLJ Daily E-Mail Alert No. 624, March 17, 2003; and "FCC Announces Order and NPRM Regarding E-Rate Subsidies" in TLJ Daily E-Mail Alert No. 648, April 24, 2003.

The e-rate program was created by the Federal Communication Commission by its Order of May 8, 1997. It is a cross subsidy program. It provides subsidies to schools, libraries, and rural health clinics for various telecommunications services, internet access, and computer networking.

It is loosely based upon the Telecommunications Act of 1996. Section 254 of the Act codified the long standing practice of providing "universal service" support for telephone service in high cost and rural areas. However, the Act also included a subsection that extended universal service support to any school, library and rural health clinic.

The subsidies are funded by charges imposed on telephone carriers, which in turn, pass these charges on to their customers. The FCC also established a Schools and Libraries Corporation, under its control, to administer the program.

There were numerous efforts to terminate, limit, or provide a sunset provision for, the e-rate program in 1998 and 1999. No legislation passed. However, the FCC capped the program at $2.25 Billion per year, and its first President, Ira Fishman, was replaced.

There has been little effort in Congress to change the e-rate program since the 106th Congress, except that the House Commerce Committee has been examining the problem of waste, fraud and abuse in the program.

See, summary titled "Implementation of the Schools and Libraries Program", last updated in 1999, See also, Summary of E-rate Bills in 105th Congress, and Summary of E-rate Bills in 106th Congress. See also, TLJ stories on the e-rate program from 1998 and 1999:

• General Accounting Office Reports that SLC is Illegal, 3/31/98.
• Congress Decries Federal Computer Commission, 3/31/98.
• SLC Report to FCC, 5/6/98.
• Senate Holds Hearing on Common Carrier Bureau, 5/7/98.
• FCC Report to Congress of 5/8/98, 5/11/98.
• FCC and CATO Debate Universal Service and SLC, 5/13/98.
• AT&T Announces New Universal Charges, 5/29/98.
• Debate Over "Gore Tax" Heats Up, 6/4/98.
• Schools & Libraries Corp. In Trouble on Capitol Hill, 6/8/98.
• SLC Supporters Fight Back, 6/8/98.
• Clinton Condemns Digital Divide in America, 6/8/98.
• Dept. Education Waits in the Wings to Run E-Rate, 6/8/98.
• Senate Communications Subcommittee Berates FCC, 6/11/98.
• FCC Modifies Schools and Libraries Program, 6/15/98.
• E-Rate Debate Continues, 6/22/98.
• Gingrich Criticizes FCC Management of E-Rate, 7/1/98.
• William Kennard Speech on E-Rate, 7/15/98.
• Senate Hearing On Schools and Libraries Corporation, 7/20/98.
• Tauzin and Burns Introduce E-Rate Reform Bill, 7/24/98.
• Comparison of Schools and Libraries Programs, 7/27/98.
• Riley Attacks Burns-Tauzin Proposal to Reform E-Rate, 7/30/98.
• House Subcommittee Debates E-Rate Funding, 8/5/98.
• E-Rate Divide Follows Partisan Lines, 8/10/98.
• National Taxpayers Union Seeks End to Gore Tax, 8/19/98.
• E-Rate Funds Disbursement to Begin, 11/25/98.
• E-Rate Termination Bill Filed in House, 2/17/99.
• Tauzin and Burns Re-Introduce Bills to Reform E-Rate, 5/12/99.

People and Appointments

3/4. President Bush announced his intent to designate designate Erle Nye to be Chairman of the National Infrastructure Advisory Council (NIAC). See, White House release. President Bush previously named his a member of the NAIC. See, September 18, 2002 release. President Bush created the NIAC on October 16, 2001, by Executive Order 13231, titled "Executive Order on Critical Infrastructure Protection". The NAIC provides the President through the Secretary of Homeland Security with advice on the security of information systems for critical infrastructure supporting other sectors of the economy: banking and finance, transportation, energy, manufacturing, and emergency government services.

3/4. The Department of Justice (DOJ) announced that Attorney General John Ashcroft is "suffering from a severe case of Gallstone Pancreatitis. He was admitted to intensive care for careful monitoring and is being treated with antibiotics." See, DOJ release.

3/4. The Walt Disney Corporation announced in a release that "it is separating the positions of CEO and Chairman. Effective immediately, the Board created the position of Chairman of the Board. The Board has unanimously elected former Sen. George Mitchell to serve in that non-executive position. While making this change in governance, the Board remains unanimous in its support of the Company's management team and of Michael Eisner, who will continue to serve as chief executive officer." (Emphasis added.)

3/4. Kevin Rollins was named Chief Executive Officer (CEO) of Dell by the Board of Directors. The appointment takes effect on July 16, the date of the annual shareholders meeting. He will also be nominated for election to the Board of Directors, replacing Mort Topfer. Michael Dell remains Chairman. See, release.

More News

3/4. The Federal Communications Commission (FCC) Chairman Michael Powell gave a speech [PDF] in Washington DC titled "U.S. Leadership: The Satellite Partnership".

3/4. Rep. Candice Miller (R-MI) and Rep. Joseph Knollenberg (R-MI) introduced HR 3906, a bill to extend normal trade relations treatment to the products of Ukraine. The bill was referred to the House Ways and Means Committee. The U.S. Trade Representative's (USTR) 2003 Special 301 Report lists Ukraine as a "Priority Foreign Country". The USTR found that "there is still substantial traffic in illegal optical disc media, both in street sales to consumers as well as larger distribution to Western Europe, the Baltics, and elsewhere."

3/4. BellSouth announced that it "has signed a definitive agreement with Telefonica Móviles, the wireless affiliate of Telefonica ... to sell its interests in its 10 Latin American operations. The purchase price is based on a total enterprise value of the 10 Latin American companies of $5.85 billion. BellSouth will receive after tax cash proceeds of approximately $4.2 billion and reduce consolidated debt by $1.5 billion." See, BellSouth release.

House Passes USPTO Fee Bill

3/3. The House amended and approved HR 1561, the "United States Patent and Trademark Fee Modernization Act of 2003", by a vote of 379-28. See, Roll Call No. 38.

The bill contains increases in user fees that implement the U.S. Patent and Trademark Office's (USPTO) 21st Century Strategic Plan. It also provides for U.S. outsourcing of patent searches, and an end to the diversion of user fees to subsidize other government programs.

The Senate has yet to pass this, or a similar, bill. See, full story.

House Passes Copyright Royalty and Distribution Act

3/3. The House passed HR 1417, the "Copyright Royalty and Distribution Reform Act of 2003" by a vote of 406-0. See, Roll Call No. 37. This bill would replace copyright arbitration royalty panels (CARPs) with a Copyright Royalty Judge.

The bill was introduced on March 25, 2003 by Rep. Lamar Smith (R-TX), Rep. Howard Berman (D-CA), and Rep. John Conyers (D-MI). The House Judiciary Committee approved the bill on September 24, 2003. See, Report No. 108-408.

The Committee found that CARP decisions are unpredictable and inconsistent, CARP arbitrators lack appropriate expertise to render decisions and frequently reflect either a content or user bias, and the CARP process is unnecessarily expensive.

The Senate has yet to pass this, or a similar, bill.

House Commerce Committee Passes Broadcast Decency Enforcement Act

3/3. The House Commerce Committee approved HR 3717, the "Broadcast Decency Enforcement Act of 2004", and ordered reported, as amended, by a roll call vote of 49-1. See, amendment in the nature of a substitute [PDF] offered by Rep. Fred Upton (R-MI), the sponsor of the bill, and the Chairman of the Subcommittee on Telecommunications and the Internet.

The House Republican leadership announced that HR 3717 has been scheduled for consideration by the full House on Wednesday, March 10, or Thursday, March 11. See, Republican Whip Notice.

The bill would increase the financial penalties that the Federal Communications Commission (FCC) can impose on broadcasters who air obscenity, indecency and profanity on television and radio.

Rep. Wolf Introduces Bill To Transfer USTR Reporting & Enforcement Functions to Commerce

3/3. Rep. Frank Wolf (R-VA) introduced HR 3889, a bill to transfer certain functions from the U.S. Trade Representative (USTR) to the Secretary of Commerce, including the writing of reports pertaining to other nations' failure to protect intellectual property rights, and enforcement against certain violators. One of his goals is to obtain more aggressive enforcement of violations of the rights of intellectual property holders in and by the People's Republic of China.

Rep. Wolf is the Chairman of the House Appropriations Committee's Subcommittee on Commerce, Justice, State and the Judiciary. It writes the appropriations bill that include funding for both the USTR and the Department of Commerce. The bill was referred to the House Ways and Means Committee.

Currently, the USTR is responsible for negotiating trade agreements with other countries. It is also responsible for writing reports about other countries' barriers to U.S. goods and services, and failures to protect intellectual property. It has has enforcement responsibilities.

The bill provides, in part, that "Section 182 of the Trade Act of 1974 (19 U.S.C. 2242) is amended -- (1) in subsection (a) -- (A) by striking `United States Trade Representative´ and inserting `Secretary of Commerce´".

19 U.S.C. § 2242(a) provides, in part, that "the United States Trade Representative ... shall identify --
(1) those foreign countries that -- (A) deny adequate and effective protection of intellectual property rights, or (B) deny fair and equitable market access to United States persons that rely upon intellectual property protection, and
(2) those foreign countries identified under paragraph (1) that are determined by the Trade Representative to be priority foreign countries."

That is, the bill would transfer the writing of Special 301 reports from the USTR to the Commerce Department.

The bill also transfers certain enforcement responsibilities enumerated in 19 U.S.C. § 2411 from the USTR to the Secretary of Commerce.

Rep. Wolf stated that "I believe this change is necessary because of the entry of the People's Republic of China into the WTO in December 2001 and the growing allegations from U.S. businesses that China, now our fourth largest trading partner, is not living up to its trade agreements." See, transcript.

"China has broken its promise", said Rep. Wolf, "To stop using its tax policies on U.S. imports into China therefore discriminating against the import of our goods. For example, our semiconductor companies and our fertilizer producers state that China's practice of rebating more than 80 percent of its value-added tax (VAT) to domestic firms puts foreign suppliers, our companies, at a huge disadvantage in the Chinese market."

He continued that "China also has a complete disregard for U.S. intellectual property rights. The Chinese market also continues to be dominated by piracy of copyrighted material. Some U.S. sources charge that American businesses have lost billions in revenue due to China's copyright piracy and other intellectual property rights violations."

"But the United States has not brought an intellectual property rights case against China since Beijing's entry into the WTO. Not one case."

Rep. Wolf elaborated that "I know the Office of the USTR has hard-working people whose goal is to give U.S. businesses the opportunity to flourish in the global economy. But I believe it is being stretched too thin under its current operation of having the same people who negotiate trade agreements be the same people who determine whether or not countries are living up to their obligations."

He concluded that "Enforcement is being shortchanged and U.S. companies are not being well served. I believe our nation's business community and our trade policy would be better served by having the Department of Commerce as the trade law enforcer."

Senators Introduce Children's Listbroker Privacy Act

3/3. Sen. Ron Wyden (D-OR), Sen. Ted Stevens (R-AK), and Sen. Lisa Murkowski (R-AK) introduced S 2160, the "Children's Listbroker Privacy Act'', a bill to prohibit the sale of databases containing personal information of children, with exceptions.

The bill provides that "It is unlawful (1) to sell personal information about an individual the seller knows to be a child; (2) to purchase personal information about an individual identified by the seller as a child, for the purpose of marketing to that child; ..."

The bill provides an exception to the general prohibition where a parent of the child has granted express consent.

The bill also provides an exception where "the purchaser certifies to the seller, electronically or in writing, before the sale is completed (A) the purpose for which the information will be used by the purchaser; and (B) that the purchaser will neither (i) use the information for marketing that child; nor (ii) permit the information to be used by others for the purpose of marketing to that child."

The bill also provides that it is unlawful "for a person who has provided a certification ... in connection with the purchase of personal information about an individual identified by the seller as a child, to engage in any practice that violates the terms of the certification."

The bill defines "child" as "an individual under the age of 16".

The bill gives civil enforcement authority to the federal government -- primarily the Federal Trade Commission (FTC) -- and to state attorneys general. The bill does not create a private right of action. The bill contains no preemption clause.

Sen. Ron Wyden Sen. Wyden (at right) stated in the Senate that "The bill's premise is simple: Trafficking in data on very young children for the purpose of commercial marketing should not be permitted in our country. Specifically, the bill bans the selling or purchasing of personal information about people that the seller and purchaser know to be very young. There would be an exception for cases where the parent is given express consent, provided that the parent had notice of what he or she was consenting to and was not required to grant consent as a condition of obtaining a desired product or service." See, Congressional Record, March 3, 2004, at pages S2106-7.

He continued that "There would also be an exception for the sale of information for nonmarketing purposes as long as the purchaser certifies it will neither use the information for marketing nor allow others to do so. This exception would allow, for example, health care officials to still use available data to track the spread of a disease or for students, of course, to get information about various academic activities. The list buyers would have to certify that lists are not being purchased or resold for marketing; otherwise they will be in violation of the law.

He added that "The bill's enforcement provisions track those of the Children's Online Privacy Protection Act."

Sen. Stevens stated that "I was shocked to learn that presently there is no law that restricts companies from purchasing databases which contain information about children. In fact, websites have been brought to my attention that actually sell lists of children as young as pre-school. The thought of companies acquiring lists of information about kids that are barely past the toddler stage is appalling." See, Congressional Record, March 3, 2004, at page S2106-8.

The bill was referred to the Senate Commerce Committee. Both Sen. Wyden and Sen. Stevens are members.

In the past, Sen. Wyden and Sen. Stevens have differed on a number of issues, including on the necessity of online privacy legislation.

House Commerce Committee Considers Database Bills

3/3. The House Commerce Committee approved HR 3872, the "Consumer Access to Information Act of 2004". It ordered the bill reported, without amendment, by voice vote. Rep. James Greenwood (R-PA) voted against this bill.

The Committee also voted against HR 3261, the "Database and Collections of Information Misappropriation Act". It ordered that the bill be reported unfavorably, without amendment, by voice vote. Again, Rep. Greenwood voted against this action.

HR 3872, which is sponsored by Rep. Cliff Stearns (R-FL), would give the Federal Trade Commission (FTC) a very limited authority to initiate a civil enforcement action, under the general prohibition of unfair and deceptive trade practices in interstate commerce, against certain misappropriators of hot news data.

HR 3261, which the House Judiciary Committee amended and approved on January 21, 2004, provides some protections for some developers and owners of collections of data. The Commerce Committee has a sequential referral which expires on March 12, 2004.

It is unlikely that there is anyone who actually wants HR 3872 to become law -- even its sponsors. Rather, it has been introduced, and moved by the Committee, as part of a legislative strategy to defeat HR 3261.

There are Commerce Committee members, and constituent groups of the Commerce Committee, who have long sought to prevent a meaningful database protection bill from becoming law. In contrast, many Judiciary Committee members, and constituent groups of the Judiciary Committee, have long sought a database protection bill.

See, story titled "House Commerce Subcommittee Approves Alternative Database Bill" also published in TLJ Daily E-Mail Alert No. 844, February 26, 2004, and TLJ news analysis titled "House Commerce and Judiciary Committees Vie for High Tech Leadership", June 15, 1999.

The strategy is to present the House Rules Committee, and the House Republican leadership, with two competing database related bills. The hope is that with only about fifty legislative days left in the 108th Congress, and many other pressing issues to address, the Rules Committee and leadership will not schedule floor time for debate on either of these bills in the present Congress.

Commerce Committee members successfully employed this strategy successfully late in the 106th Congress also.

At the beginning of the 107th Congress Rep. James Sensenbrenner (R-WI), the Chairman of the Judiciary Committee, and Rep. Bill Tauzin (R-LA), the then Chairman of the Commerce Committee, began a process to develop a compromise bill. HR 3261 is the product of that process. Rep. Tauzin, Rep. Greenwood and many members of the Judiciary Committee are sponsors of that bill. However, most members of the Commerce Committee are not.

Rep. Joe Barton (R-TX), the new Chairman of the Commerce Committee, spoke about database bills at a press conference on March 4. He said that the Commerce Committee's passage of its own bill reflects the change in the Chairmanship.

See also, story titled "House Judiciary Committee Approves Database Protection Bill", also published in TLJ Daily E-Mail Alert No. 822, January 23, 2004.

Rep. Rick Boucher (D-VA) argued in favor of the Commerce Committee bill, and against the Judiciary Committee bill. He argued that HR 3261 is "a solution in search of a problem". He argued that database owners already have adequate remedies. He also argued that Europe's experience with its database directive should serve as a warning to the U.S.

Rep. Janice Schakowsky (D-IL) asserted that HR 3261 "would turn facts into property".

Rep. John Dingell (D-MI) read a prepared statement. He said that "I am pleased that we have developed a bipartisan product. Like H.R. 3261, which was reported by the Committee on the Judiciary, the Print gives the proponents of database legislation what they have been calling for, a federal misappropriation bill. Unlike H.R. 3261, the Print is narrowly tailored to provide protection to databases only in circumstances that would substantially reduce the incentive to produce the original database."

He added that "Electronic commerce has prospered in the United States in part because of our basic information policy -- that facts, the building blocks of all information products, cannot be owned. They do not owe their origin to an act of authorship, and it is important that we do not legislate in a way that would restrict the public’s access to facts."

Rep. Greenwood was the sole proponent of the Judiciary Committee bill. He argued that "the Stearns bill does not support the hard work of database compilers."

Disclosure. TLJ develops and maintains, but does not publish or sell, various collections of data. Readers may wish to consider this in assessing the objectivity of any TLJ stories about database protection legislation.

Northwest Airlines Answers Privacy Complaint Re Transfer of Passenger Data to NASA

3/3. Northwest Airlines (NWA) submitted a document [41 pages in PDF] titled "Answer of Northwest Airlines, Inc." to the Department of Transportation (DOT) in response to the complaint submitted by the Electronic Privacy Information Center (EPIC).

On January 20, 2004, the EPIC submitted a complaint [11 pages PDF] to the DOT that asserts that NWA's transfer of passenger data to the National Aeronautics and Space Administration (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.

NWA has stated that it did transfer the data to NASA. It 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."

The EPIC previously obtained records from the NASA in response to z request made under the Freedom of Information Act (FOIA). Also, the EPIC has published copies of documents in its web site. See, story titled "Northwest Airlines Provided Passenger Data to NASA for Data Mining Study" in TLJ Daily E-Mail Alert No. 819, January 20, 2004.

And, the EPIC continues to seek further records from the NASA. See, story titled "EPIC Files Complaint Against NASA Seeking Records Regarding Transfer of Passenger Data" in TLJ Daily E-Mail Alert No. 825, January 28, 2004.

The EPIC alleges in its complaint that NWA violated its privacy policy. The EPIC alleges that "NWA assures passengers that they will be in ``complete control of ... the use of information [they] provide to Northwest Airlines.´´ The airline further assures customers that it has ``put in place safeguards to ... prevent unauthorized access or disclosure´´ of the information it collects."

The relevant statute (49 U.S.C. § 41712) provides that "On the initiative of the Secretary of Transportation or the complaint of an air carrier, foreign air carrier, or ticket agent, and if the Secretary considers it is in the public interest, the Secretary may investigate and decide whether an air carrier, foreign air carrier, or ticket agent has been or is engaged in an unfair or deceptive practice or an unfair method of competition in air transportation or the sale of air transportation. If the Secretary, after notice and an opportunity for a hearing, finds that an air carrier, foreign air carrier, or ticket agent is engaged in an unfair or deceptive practice or unfair method of competition, the Secretary shall order the air carrier, foreign air carrier, or ticket agent to stop the practice or method."

NWA wrote in its answer that "The research opportunity presented to Northwest Airlines by NASA's Ames Research Center in the wake of the worst terrorist attacks in national history (attacks which are not even referenced in EPIC's complaint) was an appropriate instance of industry and government cooperation that was necessary and widespread in response to the terrorism of September 11. The complaints are disturbingly lacking in context, and the legal claims are meritless. Northwest Airlines categorically denies that its actions were ``unfair,´´ ``deceptive,´´ or in any manner violated 49 U.S.C. § 41712". (Parentheses in original.)

"Passengers have no inherent right or expectation of total privacy in the information provided when traveling on commercial airlines-particularly after September 11. The only relevant basis for privacy protection is Northwest Airlines' privacy policy". But, NWA asserts, "The plain meaning of the policy is an assurance that customer information will not be commercially exploited and that it is secure from hackers. Northwest Airlines fulfilled those promises, but it did not promise that it would not share information with the government."

NWA also argues that the EPIC "should not have standing to wage public policy battles through the formal complaint process by alleging only hypothetical injuries. The Secretary should not automatically delegate his discretion to initiate formal proceedings to any group that wishes to complain about the practices of the airline industry. Only persons alleging actual, concrete injury should be permitted to file formal complaints and compel a docketed proceeding."

Northwest is represented by Jay Lefkowitz of the Washington DC office of the law firm of Kirkland & Ellis.

People and Appointments

3/3. Steve Koenig was named senior manager of industry analysis at the Consumer Electronics Association (CEA). He previously was an analytic consultant for comScore Media Metrix. He was also a senior editor at CMP Media's former Computer Retail Week. See, CEA release.

More News

3/3. Rep. Tom Davis (R-VA) and Rep. Henry Waxman (D-CA) introduced HR 3880, the "Internet Pharmacy Consumer Protection Act". The bill would amend the Federal Food, Drug, and Cosmetic Act to establish requirements for the sale of prescription drugs over the internet. The bill was referred to the House Commerce Committee.

3/3. The House Financial Services Committee's Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises held a hearing on HR 3574, the "Stock Option Accounting Reform Act". Most witnesses testified in support of HR 3574, which would require the expensing of stock options for top executives only, and in support of broad based employee stock option plans. See, prepared testimony of witnesses: Karen Kerrigan (Small Business Survival Committee), Mark Heesen (National Venture Capital Association), Reginald Reed (Cisco Systems), and Arthur Coviello (RSA Security). In contrast, Robert Merton (Harvard Business School) testified that all stock options should be expensed.

Appeals Court Overturns Key Provisions of FCC Triennial Review Order

3/2. The U.S. Court of Appeals (DCCir) issued its opinion [62 pages in PDF] in USTA v. FCC, overturning key parts of the Federal Communications Commission's (FCC) triennial review order (TRO).

The opinion leaves largely untouched those portions of the TRO in which the FCC refrained from unbundling next generation broadband facilities. The opinion vacates those portions of the TRO in which the FCC delegated decision making authority to the states to make impairment findings.

Commissioners Kevin Martin, Michael Copps, and Jonathan Adelstein issued a joint statement [PDF] in which they wrote that "We have instructed our General Counsel to seek a stay and to appeal the D.C. Circuit decision to the Supreme Court". See, full story.

Reaction to the Appeals Court Opinion in USTA v. FCC

3/2. Numerous groups, companies, and government officials have commented on the opinion [62 pages in PDF] of the U.S. Court of Appeals (DCCir) in USTA v. FCC overturning key parts of the Federal Communications Commission's (FCC) triennial review order [576 pages in PDF] (TRO).

Sen. Ernest Hollings (D-SC), the ranking Democrat on the Senate Commerce Committee, and a leading CLEC proponent, stated in a release "Today, the D.C. Circuit leveled a staggering blow to the benefits of local telephone competition. Within a few short months, tens of millions of Americans could face higher prices and fewer choices as competitive alternatives are eliminated due to the meddling of an activist court."

Sen. Ernest Hollings Sen. Hollings (at right), who is not running for re-election, added that, "While regrettable, the outcome here is not surprising given this Court's consistent hostility to the pro-competitive provisions of the 1996 Act. Fortunately, the D.C. Circuit has been overturned in the past by the Supreme Court on these important issues, and I expect it will be again. I look forward to working with the Commission to achieve that end."

Similarly, Russell Frisby, CEO of the CompTel/ASCENT wrote in a release that "Unfortunately, the D.C. Circuit's decision turns back the clock to the days when monopoly control of the marketplace gave consumers nothing more than poor service, high prices and little choice."

Frisby added that "It is the ultimate responsibility of the FCC and states to protect consumers, encourage economic development, and ensure that competition is allowed to develop, rather than being quashed by a deregulated monopoly. Today a federal appeals court has usurped that responsibility. Unless the FCC takes the necessary action and seeks Supreme Court review, we fear that consumers and our nation's economy will bear the brunt of the court's decision."

Sprint also issued a release. It stated that "Sprint laments the fact that the decision will inevitably prolong the regulatory uncertainty that has existed since the Telecommunications Act of 1996 was signed into law more than eight years ago. The court's decision will make it more difficult to foster local competition -- particularly in the mass market -- through the use of incumbent local carrier network elements at cost-based prices, contrary to what Sprint believes Congress intended in the '96 Act. Sprint has always favored full and fair competition in all markets and will continue to use its expanding local metropolitan area networks and its nationwide, state-of-the-art wireless and fiber optic networks to bring a full range of all-distance services to consumers and to business of all sizes."

Mark Cooper of Consumer Federation of America (CFA) wrote that "In 60 days, phone bills could go up because the court has eliminated the rules on which 75 percent of those offering competitive service use to offer alternative service, unless the courts reinstate the rule or the FCC comes up with an alternative to promote competition. There is no doubt that the billions of dollars of savings will start to disappear as competitors are forced to shut down their operations".

Likewise, Chris Murray of the Consumers Union wrote that "Today's decision effectively pulls the plug on tens of millions of consumers who have chosen competition. Carriers offering those consumers competition will now be subject to death by a thousand cuts from local telephone monopolies who no longer have to offer competitors a turn-key wholesale bundle".

In contrast, Commissioner Charles Davidson of the Florida Public Services Commission stated in a release that "The FCC clearly had a legal obligation not to add unbundled network elements to the national list unless, after the appropriate analysis, the FCC finds impairment. The FCC did not fulfill that obligation in the TRO, opting instead to punt the issue to the states."

Charles Davidson Davidson, who is one of the more market oriented state regulators, added that "The ruling returns the decision to the FCC -- where many of us thought it belonged from the start ... There is no question that the issues to be addressed in the Triennial Review proceeding are vital to ensuring sustainable, economic competition in the telecommunications industry and should be addressed from a national perspective."

Walter McCormick, P/CEO of the U.S. Telecom Association (USTA), wrote in a statement that "All along USTA has argued that where real competition exists, government-managed competition on such heavily subsidized terms as UNE-P amounts to nothing short of corporate welfare for companies that make little or no investments of their own in the local communities where they turn a profit."

He added that "It is our hope that this decision marks the last gasp of outdated 20th century economic regulations that have no business governing the future of technology and innovation and its promise to consumers and to our economy."

Randolph May of the Progress & Freedom Foundation (PFF) wrote that "The court's decision is another strong judicial rebuke to the FCC's seven-year adherence to an excessive unbundling regime. The court's clear holding on the Commission's delegation of decision-making authority to the state commissions is particularly noteworthy. And, the court's repeated recognition that excessive unbundling stifles infrastructure investment, contrary to one of the 1996 Act's paramount goals, is key. With the ball back in the FCC's court, that agency is once again at a crucial crossroads. This time, it must heed what the courts have been telling it for years, and put in place a lawful and less regulatory facilities-sharing regime."

Steve Davis, an SVP at ILEC Qwest wrote in a release that "We applaud the court’s decision, which allows companies like Qwest to put their full focus on meeting the needs of customers. Today’s decision will soon free customers of mandates that force them to subsidize the operations of Qwest’s competitors. We look forward to working with the FCC on new rules that benefit all telecommunications customers."

House Rules Committee Adopts Rule for Consideration of USPTO Fee Bill

3/2. The House Rules Committee adopted a rule for consideration of HR 1561, the "United States Patent and Trademark Fee Modernization Act of 2003". This bill would raise fees collected by the U.S. Patent and Trademark Office (USPTO), and end the practice of diversion of fees to subsidize other government programs.

The rule provides for consideration of the bill as reported by the House Judiciary Committee.

It provides that three amendments shall be in order. First, the rule makes in order an amendment [5 page PDF scan] offered by Rep. James Sensenbrenner (R-WI), the Chairman of the House Judiciary Committee. It addresses fee diversion and other issues.

The fee diversion language is similar, but not identical, to the language of an amendment that he offered back on February 10, 2004.

The key language of the Sensenbrenner amendment, as approved for consideration by the Rules Committee on March 2, provides that "There is established in the Treasury a Patent and Trademark Fee Reserve Fund. If fee collections by the Patent and Trademark Office for a fiscal year exceed the amount appropriated to the Office for that fiscal year, fees collected in excess of the appropriated amount shall be deposited in the Patent and Trademark Fee Reserve Fund. After the end of each fiscal year, the Director shall make a finding as to whether the fees collected for that fiscal year exceed the amount appropriated to the Patent and Trademark Office for that fiscal year. If the amount collected exceeds the amount appropriated, the Director shall, if the Director determines that there are sufficient funds in the Reserve Fund, make payments from the Reserve Fund to persons who paid patent or trademark fees during that fiscal year. The Director shall by regulation determine which persons receive such payments and the amount of such payments, except that such payments in the aggregate shall equal the amount of funds deposited in the Reserve Fund during that fiscal year, less the cost of administering the provisions of this paragraph."

The rule also makes in order an amendment [4 page PDF scan] offered by Rep. Don Manzullo (R-IL), the Chairman of the House Small Business Committee, that establishes an inflation adjusted freeze on all fees for micro-entities, which are defined as firms or independent inventors with up to 15 employees and net worth not exceeding $2 Million.

The rule also makes in order an amendment [PDF] offered by Rep. Sheila Lee (D-TX) regarding outsourcing. It provides that "the Director shall ensure that a substantial number of searches by qualified search authorities that are commercial entities are conducted by persons that -- (i) if individuals, are United States citizens; and (ii) if business concerns, are organized under the laws of the United States or any State, or are small business concerns, minority-owned business concerns, or business concerns that are owned by women."

See also, related stories:
• "House Scheduled to Take Up USPTO Fee Bill" in TLJ Daily E-Mail Alert No. 846, March 1, 2004.
• "House Delays Consideration of USPTO Fee Bill" in TLJ Daily E-Mail Alert No. 835, February 12, 2004.
• "House to Vote on Bill to End USPTO Fee Diversion" in TLJ Daily E-Mail Alert No. 832, February 9, 2004.
• "House Intellectual Property Caucus Advocates Ending USPTO Fee Diversion" in TLJ Daily E-Mail Alert No. 762, October 21, 2003.
• "House Judiciary Committee Approves USPTO Fee Bill" in TLJ Daily E-Mail Alert No. 695, July 10, 2003.
• "House CIIP Subcommittee Holds Hearing on USPTO Fees" in TLJ Daily E-Mail Alert No. 637, April 4, 2003.

House Subcommittee Holds Hearing On Civil Rights Division

3/2. The House Judiciary Committee's Subcommittee on the Constitution held an oversight hearing on the Department of Justice's (DOJ) Civil Rights Division (CRD).

The sole witness at the hearing was Rene Acosta, the Assistant Attorney General in charge of the CRD. He did not raise any technology related issues in his oral testimony. Nor did any members of the Subcommittee raise any technology related issues. Democrats focused on redrawing of Congressional boundaries in the state of Texas. Republicans focused on access to physical public facilities. Rep. Tom Feeney (R-FL) expressed concern that the ADA is "endowing the trial lawyers" rather than facilitating disabled access.

The CRD occasionally takes actions that affect technology, such as asserting that the American's with Disabilities Act (ADA), which is codified at 42 U.S.C. §§ 12101, et seq., applies to web sites, and that interactive computer services may be held liable for violation of various civil rights statutes for statements posted by others, notwithstanding 47 U.S.C. § 230(c)(1).

Rene Acosta Acosta (at right) did make one statement is his prepared testimony that referenced "information technology". He wrote that "As one of his first acts, the President ordered the Executive branch to live up to the promises the laws have made to Americans with disabilities. The New Freedom Initiative harnesses the resources and energy of all of the Executive Branch agencies whose programs affect the lives of people with disabilities. It advances accessibility and opportunity in numerous areas including employment, public accommodations, commercial facilities, information technology, telecommunications services, housing, schools, and voting."

The then Assistant Attorney General in charge of the Civil Rights Division, Deval Patrick, wrote a letter on September 9, 1996 to Sen. Tom Harkin (D-IA) in which he stated that "The Americans with Disabilities Act (ADA) requires ... places of public accommodation to furnish appropriate auxiliary aids and services where necessary to ensure effective communication with individuals with disabilities ... Covered entities under the ADA are required to provide effective communication, regardless of whether they generally communicate through print media, audio media, or computerized media such as the Internet. Covered entities that use the Internet for communications regarding their programs, goods, or services must be prepared to offer those communications through accessible means as well." Patrick wrote that web site operators could comply by providing audio tapes and braille copies of their web sites.

The Subcommittee on the Constitution held a hearing four years ago on web sites and the ADA. See, story titled "Do Web Sites Violate the Americans with Disabilities Act?", February 10, 2000.

The application of the ADA to web sites is also the subject of private litigation. On October 18, 2002, the U.S. District Court (SDFl) issued its Order Granting Defendant's Motion to Dismiss in Access Now v. Southwest Airlines, holding that the Americans with Disabilities Act (ADA) ban on discrimination in public accommodations does not apply to Southwest's web site. The plaintiff complained that blind people cannot read web pages. See, story titled "District Court Holds ADA Does Not Apply to Web Site" also published in TLJ Daily E-Mail Alert No. 538, October 30, 2002.

Access Now has appealed to the U.S. Court of Appeals (11thCir). Oral argument was held on November 6, 2003. This is App. Ct. No. 02-16163-BB. See also, amicus brief of the American Association of People with Disabilities, and other disabilities groups, urging reversal. See also, amicus brief [PDF] of the US Chamber of Commerce urging affirmance, and amicus brief of the World Wide Web Consortium (W3C).

See also, Rendon v. ValleyCrest, in which the U.S. Court of Appeals (11thCir) held that ABC and its production company, ValleyCrest, violated the ADA when they used a telephone screening process to select contestants for a TV program titled "Who Wants to Be a Millionaire". The plaintiffs had hearing impairments or upper body mobility disabilities that affected their ability to use telephones. The Appeals Court issued its opinion on June 18, 2002 holding that ValleyCrest's telephone selection process was a "place of public accommodation" under the ADA.

The DOJ's CRD is not a party to these actions. However, the CRD did recently bring an internet related housing discrimination action. See, story titled "DOJ Settles Case Against Interactive Computer Service" in TLJ Daily E-Mail Alert No. 808, December 31, 2003.

More News

3/2. Federal Reserve Board Chairman Alan Greenspan gave a speech titled "Current Account" to the Economic Club of New York, in New York City. One subject that he discussed was "home bias", or the "inclination to invest a disproportionate percentage of domestic savings in domestic capital assets, irrespective of their differential rates of return". He stated that "The decline in home bias probably reflects an increased international tendency for financial systems to be more transparent, open, and supportive of strong investor protection. Moreover, vast improvements in information and communication technologies have broadened investors' vision to the point that foreign investment appears less exotic and risky. Accordingly, the trend of declining home bias and expanding international financial intermediation will likely continue."

EU Imposes FSC/ETI Sanctions

3/1. The European Union (EU) announced in a release that it imposed retaliatory tariffs on the US pursuant to World Trade Organization (WTO) rulings regarding the US FSC and ETI tax regimes.

The WTO previously ruled that the US Foreign Sales Corporation (FSC) tax regime, and its replacement, the Extraterritorial Income (ETI) tax regime, constitute illegal export subsidies. The WTO also authorized the EU to impose up to $4 Billion in retaliatory tariffs on US exports.

The EU announced that the actual tariffs are "well below the US $4 billion level authorized by the WTO".

Also on March 1, Sen. Charles Grassley (R-IA), the Chairman of the Senate Finance Committee, announced in a release that "Midweek, the Senate likely will begin debate on the FSC/ETI legislation." Sen. Grassley is the lead sponsor of the bill, S 1637, the "Jumpstart Our Business Strength (JOBS) Act".

Sen. Grassley added that "The Majority Leader is seeking a unanimous consent agreement to limit amendments. Expect debate and votes to continue into Friday, but it is not anticipated the Senate will reach final passage this week."

The EU elaborated on its retaliatory tariffs. "Countermeasures on the selected products consist of an additional customs duty of 5% to be enforced from today, followed by automatic monthly increases of 1% up to a ceiling of 17% to be reached on 1 March 2005, if compliance has not happened in the meantime."

EU Trade Commissioner Pascal Lamy (at right) stated that "Despite waiting for more than two years, the US has not brought its legislation in line with WTO rules. We are therefore left with no choice but to impose countermeasures. The name of the game is not retaliation but compliance: countermeasures will be lifted the day the FSC is repealed. We now need to turn our attention to the post-March 1 period. In my recent trip to Washington, I have discussed this issue with the US administration and congressional leaders and I am encouraged that progress can be rapidly achieved to adopt legislation repealing the FSC."

Supreme Court Denies Cert in Cleveland v. Viacom

3/1. The Supreme Court denied certiorari, without opinion, in Cleveland v. Viacom, an antitrust case involving movie video rentals. See, Order List [10 pages in PDF] at page 3.

Ronald Cleveland, who does business as Lone Star Videotronics, is an independent video retailer. He competes with Blockbuster, Inc., which is a subsidiary of Viacom, Inc.

Blockbuster entered into a contract with the movie studios that provides it with more new release copy depth, thus improving its ability to provide its customers with movie videos on a timely basis.

Cleveland and other independent video retailers filed a complaint in U.S. District Court (WDTex) against Viacom, Blockbuster, and the home video affiliates of the seven major US movie studios, alleging violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, and price discrimination in violation of the Robinson Patman Act, 15 U.S.C. § 13, and the California Unfair Trade Practices Act.

On the Sherman Act claim, the plaintiffs argued that there was a a horizontal conspiracy among the studios that was orchestrated by Blockbuster. They argued that at Blockbuster's instigation, the studio defendants conspired with each other to exclude independents from enjoying pricing terms similar to those provided to Blockbuster. They also argued that Blockbuster's separate agreements with the individual studio defendants constitute a series of vertical conspiracies to exclude independents from enjoying favored pricing arrangements.

The District Court granted summary judgment to defendants. The Appeals Court affirmed. And now, the Supreme Court has denied certiorari. See, 5th Circuit opinion [7 pages in PDF].

This case is Ronald Cleveland, et al. v. Viacom Inc., et al., No. 03-917, a petition for writ of certiorari to the U.S. Court of Appeals for the 5th Circuit.

House Scheduled to Take Up USPTO Fee Bill

3/1. The House of Republican leadership has again scheduled HR 1561, the "United States Patent and Trademark Fee Modernization Act of 2003", for consideration by the full House. See, Republican Whip Notice. The House had scheduled this bill for consideration three weeks ago, on Wednesday, February 11, but withdrew it.

The bill, as reported by the House Judiciary Committee, would raise fees collected by the U.S. Patent and Trademark Office (USPTO), but end the practice of diversion of fees to subsidize other government programs.

Currently, funding for the USPTO is set by bills reported by the House Appropriation Committee and the Senate Appropriations Committee. The appropriation is less than the amount of fees collected, with the remainder being used to subsidize other government programs. Some intellectual property owners, groups that represent them, and technophiles in the Congress, oppose the process of fee diversion.

On February 10, representatives of the Judiciary Committee, which has long opposed the diversion of USPTO fees, and representatives of the Appropriation Committee, which has long passed appropriations bills that divert USPTO fees, reached an agreement regarding compromise language pertaining to the diversion of fees.

Rep. James Sensenbrenner (R-WI), the Chairman of the House Judiciary Committee, prepared an amendment. The key language is as follows: "There is established in the Treasury a Patent and Trademark Fee Reserve Fund. If estimated fee collections by the Patent and Trademark Office for a fiscal year exceed the amount appropriated to the Office for that fiscal year, fees collected in excess of the appropriated amount shall be deposited in the Patent and Trademark Fee Reserve Fund. After the end of each fiscal year, the Director shall, if the Director determines that there are sufficient funds in the Reserve Fund, make payments from the Reserve Fund to persons who paid patent or trademark fees during that fiscal year. The Director shall by regulation determine which persons receive such payments and the amount of such payments, except that such payments in the aggregate shall equal the amount of funds deposited in the Reserve Fund during that fiscal year, less the cost of administering the provisions of this paragraph."

However, there are other controversial issues. The House Rule Committee is scheduled to decide on Tuesday, March 2 what amendments may be offered.

The bill, as reported by the Judiciary Committee would allow the USPTO to outsource patent searches. Three weeks ago Rep. Marcy Kaptur (D-OH) and Rep. John Conyers (D-MI) submitted a proposed amendment to the Rules Committee that would prevent the outsourcing of patent searches.

In addition, Rep. Sheila Lee (D-TX) submitted a proposed amendment three weeks ago that would permit outsourcing, but require that some of the outsourcing go to minority or women owned businesses in the U.S.

Rep. Don Manzullo (R-IL), the Chairman of the House Small Business Committee, offered an amendment three weeks ago that would keep fees paid by small businesses constant, with increases based upon increases in the consumer price index.

Rep. Howard Berman (D-CA), the ranking Democrat on the Subcommittee on Courts, the Internet and Intellectual Property, offered two amendments three weeks ago that would sunset certain of the fee increases contained in the bill after five years.