Divided 4th Circuit Affirms in Internet Smut Case, PSINet v. Chapman

3/25. The U.S. Court of Appeals (4thCir) issued its divided opinion [44 pages in PDF] in PSINet v. Chapman, affirming the District Court's opinion that a Virginia state statute banning the dissemination of material that is harmful to minors over the internet is unconstitutional.

The Appeals Court faced three issues. First, did the 4th Circuit's 1989 opinion in American Booksellers Ass’n v. Virginia upholding the pre-internet version of the statute against a First Amendment challenge bar the Court from reviewing the statute a second time after the legislature added the words "electronic file"? Second, if there is no bar, does the statute violate the First Amendment free speech clause? And third, does the statute violate the dormant commerce clause?

Both the District Court, and the majority of the three judge Appeals Court panel held that American Booksellers Ass’n v. Virginia, 882 F.2d 125 (4th Cir. 1989), does not bar the present review, because the Virginia state legislature amended the statute afterwards to include electronic files. Both the District Court and the majority held that the statute, as amended, violates the First Amendment. And both the District Court and the Appeals Court majority held that the statute violates the dormant Commerce Clause. Judge Niemeyer wrote a 23 page dissent. He argued the opposite on all three issues.

This case was decided by a three judge panel. However, only one of the three panel members is a member of the 4th Circuit -- Niemeyer; and he dissented. The other two members of the panel, Judges James Spencer and Andre Davis, are both U.S. District Court Judges sitting by designation. Under these circumstances, the probabilities that a petition for rehearing en banc will be granted, and that an en banc panel will reverse the three judge panel, increase.

Statute. The Commonwealth of Virginia passed a statute that criminalizes the dissemination of material harmful to minors over the internet.

Virginia Code Ann. Stat. § 18.2-391, as amended in 1999, provides, in part, that

"It shall be unlawful for any person knowingly to sell, rent or loan to a juvenile, or to knowingly display for commercial purpose in a manner whereby juveniles may examine and peruse:
  1. Any picture, photography, drawing, sculpture, motion picture film, electronic file or message containing an image, or similar visual representation or image of a person or portion of the human body which depicts sexually explicit nudity, sexual conduct or sadomasochistic abuse and which is harmful to juveniles, or
  2. Any book, pamphlet, magazine, printed matter however reproduced, electronic file or message containing words, or sound recording which contains any matter enumerated in subdivision 1 of this subsection, or explicit and detailed verbal descriptions or narrative accounts of sexual excitement, sexual conduct or sadomasochistic abuse and which, taken as a whole, is harmful to juveniles.
  However, if a person uses services of an Internet service provider or an electronic mail service provider in committing acts prohibited under this subsection, such Internet service provider or electronic mail service provider shall not be held responsible for violating this subsection."

District Court. In December 1999, PSINet and other plaintiffs filed a complaint in U.S. District Court (WDVa) against Warren Chapman, in his capacity as Commonwealth Attorney, alleging that Section 18.2-391 violates the First Amendment and the commerce clause of the U.S. Constitution.

PSI Net, Inc. is a provider of internet access and other services. Other plaintiffs include People for the American Way (PFAW) and science fiction writer Harlan Ellison. In April of 2002, the major U.S. assets of PSINet were acquired by Cogent Communications.

On August 10, 2000, the District Court issued a preliminary injunction. See, order enjoining enforcement of portions of the statute, and memorandum opinion. See also, TLJ story titled "Judge Overturns Virginia Internet Porm Statute", August 12, 2000.

On October 11, 2001, the District Court granted summary judgment to the plaintiffs, and enjoined enforcement of the statute. See, story titled "District Court Grants Summary Judgment in PSINet v. Chapman" in TLJ Daily E-Mail Alert No. 291, October 22, 2001.

Virginia appealed.

On January 28, 2003, the Court of Appeals issued an opinion [20 pages in PDF] in which it certified two questions of state law to the Supreme Court of Virginia. See, story titled "4th Circuit Certifies Questions to State Court in Challenge to Net Smut Statute" in TLJ Daily E-Mail Alert No. 593, January 29, 2003.

On September 12, 2003, the Virginia Supreme Court declined to answer the questions. The present opinion followed.

Court of Appeals. The Court of Appeals affirmed.

First, the majority rejected the argument that American Booksellers Ass’n v. Virginia is binding on the Court. It wrote that "The Virginia legislature's decision to amend section 18.2-391 to include electronic communications was not a redundant act simply including an area already covered by the Act, but was an affirmative step making the Act applicable to Internet communication. Thus the amendment was clearly a purposeful extension of the Act to a new area of communication, and Plaintiffs may facially challenge the Acts constitutionality as reenacted."

Second, the majority held that the statute "unconstitutionally chills free speech and therefore violates the First Amendment."

Third, the majority upheld the District Court "on the separate ground that the statute violates the Commerce Clause".

Article I, Section 8 provides that "The Congress shall have the Power ... To regulate Commerce with foreign Nations, and among the several States ..."

The dormant commerce clause is the judicial concept that the Constitution, by delegating certain authority to the Congress to regulate commerce, thereby bars the states from legislating on certain matters that affect interstate commerce, even in the absence of Congressional legislation. It is applied to block states from regulating in a way that materially burdens or discriminates against interstate commerce. See, Gibbons v. Ogden, 22 U.S. 1 (1824), and Cooley v. Board of Wardens, 53 U.S. 299 (1851). More recent treatments of the concept include Healy v. The Beer Institute, 491 U.S. 324 (1989), and CTS Corp. v. Dynamics Corp. of America, 481 U.S. 69 (1987).

The majority wrote that "Several courts have struck down state statutes similar to Virginia Code section 18.2-391 as unduly burdensome on interstate commerce because they, in effect, restrict commercial electronic materials in all states, not just the state in which the statute was enacted."

The majority opinion noted that Virginia argued that the Court should presume that the legislature did not intend to give its enactments an impermissible extra-territorial operation. The Court responded that "the nature of the Internet itself makes the Commonwealth’s proposed construction nearly impossible. ... Given the broad reach of the Internet, it is difficult to see how a blanket regulation of Internet material, such as section 18.2-391, can be construed to have only a local effect."

The majority concluded that "The content of the Internet is analagous to the content of the night sky. One state simply cannot block a constellation from the view of its own citizens without blocking or affecting the view of the citizens of other states."

Dissent. Judge Neimeyer wrote a long and strenuous dissent, most of which was devoted to the pormography issues. However, he also briefly argued that the statute does not violate the dormant commerce clause.

He argued that there is no dispute that Virginia has a legitimate local public interest in denying juveniles pormography that is deemed harmful to them. He continued that the only question is whether the burden imposed by the statute on interstate commerce is clearly excessive in relation to the putative local benefits. He concluded that it is not.

This case is PSINet, Inc., et al. v. Warren Chapman, et al., U.S. Court of Appeals for the 4th Circuit, App. Ct. No. 01-2352, an appeal from the U.S. District Court for the Western District of Virginia, at Charlottesville, Judge James Michael presiding, D.C. No. CA-99-111-3.

Leahy and Hatch Introduce Bill to Give DOJ Authority to Bring Civil Actions for Copyright Infringement

3/25. Sen. Patrick Leahy (D-VT) and Sen. Orrin Hatch (R-UT) introduced S 2237, the "Protecting Intellectual Rights Against Theft and Expropriation Act of 2004".

The bill has two provisions. First, it would authorize the Department of Justice (DOJ) to bring civil actions for copyright infringement for conduct that already constitutes criminal copyright infringement under 17 U.S.C. § 506.

This would accomplish two things. It would make it easier to prevail, because, among other things, the civil action would have a lower burden of proof. It would also provide a less punitive action for youthful P2P music pirates.

The bill provides that "The Attorney General may commence a civil action in the appropriate United States district court against any person who engages in conduct constituting an offense under section 506. Upon proof of such conduct by a preponderance of the evidence, such person shall be subject to a civil penalty under section 504 which shall be in an amount equal to the amount which would be awarded under section 3663(a)(1)(B) of title 18 and restitution to the copyright owner aggrieved by the conduct."

Second, the bill would establish a training program (and authorize funding of $2,000,000) to educate DOJ and U.S. Attorneys Office personnel in copyright enforcement matters.

Sen. Leahy explained that "For too long, Federal prosecutors have been hindered in their pursuit of pirates, by the fact that they were limited to bringing criminal charges with high burdens of proof. In the world of copyright, a criminal charge is unusually difficult to prove because the defendant must have known that his conduct was illegal and he must have willfully engaged in the conduct anyway. For this reason prosecutors can rarely justify bringing criminal charges, and copyright owners have been left alone to fend for themselves, defending their rights only where they can afford to do so. In a world in which a computer and an Internet connection are all the tools you need to engage in massive piracy, this is an intolerable predicament." See, Congressional Record, March 25, 2004, at Page S3189.

Sen. Leahy added that "This new authority does not supplant either the criminal provisions of the Copyright Act, or the remedies available to the copyright owner in a private suit. Rather, it allows the government to bring its resources to bear on this immense problem, and to ensure that more creative works are made available online, that those works are more affordable, and that the people who work to bring them to us are paid for their efforts."

Sen. Hatch also addressed the bill. He stated that the it "does not expand the scope of the existing powers of the Department of Justice to prosecute persons who infringe copyrights. Instead, our proposal will assist the Department in exercising existing enforcement powers through a civil enforcement mechanism. After considerable study, we have concluded that this is the most appropriate mechanism." See, Congressional Record, March 25, 2004, at Pages S3190-1.

He elaborated that "Peer-to-peer file sharing software has created a dilemma for law-enforcement agencies. Millions of otherwise law-abiding American citizens are using this software to create and redistribute infringing copies of popular music, movies, computer games and software. Some who copy these works do not fully understand the illegality, or perhaps the serious consequences, of their infringing activities. This group of filesharers should not be the focus of federal law-enforcement efforts. Quite frankly, the distributors of most filesharing software have failed to adequately educate the children and young people who use their software about its legal and illegal uses."

"A second group of filesharers consists of those who copy and redistribute copyrighted works even though they do know that doing so violates federal law. In many cases, these are college students or young people who think that they will not get caught. Many of these filesharers are engaging in acts that could now subject them to federal criminal prosecution for copyright piracy", said Hatch.

Sen. Hatch and Sen. Leahy are the Chairman and ranking Democrat on the Senate Judiciary Committee, which has jurisdiction over this bill.

Senate Commerce Committee Holds Hearing on Cable Rates

3/25. The Senate Commerce Committee held a hearing titled "Escalating Cable Rates: Causes and Solutions". Sen. John McCain (R-AZ), the Chairman of the Committee, wrote in a prepared statement that "When it comes to purchasing cable channels beyond the basic tier today, consumers have all the ``choice´´ of a Soviet election ballot. One option -- take it or leave it. You want ESPN? You must buy 40-plus channels of expanded basic."

Sen. McCain (at right) added that "This dearth of choice comes from an industry that has proclaimed its indignation at the injustice of being forced to carry ``unwanted´´ broadcast stations. The cable industry challenged the so-called ``must carry´´ rules of the 1992 Cable Act to the Supreme Court. Today it is arguing at the FCC about the gross inequity that would result from cable systems being forced to carry unwanted digital channels under a ``multicast must carry´´ regime. Well, the current ``must purchase´´ regime for consumers is equally unfair."

Mark Goldstein presented the prepared testimony [25 pages in PDF] of the General Accounting Office titled "Telecommunications: Subscriber Rates and Competition in the Cable Television Industry".

He wrote that "Competition leads to lower cable rates and improved quality." He also wrote that "Adopting an a la carte approach, where subscribers could choose to pay for only those networks they desire, would provide consumers with more individual choice, but could require additional technology and could alter the current business model of the cable network industry wherein cable networks obtain roughly half of their overall revenues from advertising. A move to an a la carte approach could result in reduced advertising revenues and might result in higher per-channel rates and less diversity in program choice." He concluded that it is "difficult to ascertain how many consumers would be better off and how many would be worse off under an a la carte approach."

See also, prepared testimony of James Robbins (P/CEO of Cox Communications), George Bodenheimer (President of ESPN and ABC Sports), Gene Kimmelman (Director of the Consumers Union), Marilyn Praisner (Montgomery County Council) and Rodger Johnson (P/CEO of Knology).

More Congressional Hearings

3/25. The House Appropriations Committee's Subcommittee on Commerce, Justice, and State, the Judiciary, and Related Agencies held a hearing on the proposed budget for the U.S. Trade Representative (USTR). See, prepared testimony [20 pages in PDF] of USTR Robert Zoellick.

3/25. The House Armed Services Committee's Subcommittee on Terrorism, Unconventional Threats and Capabilities held a hearing on President Bush's FY 2005 budget request for Department of Defense science and technology policy programs. See especially, prepared testimony of Anthony Tether (at right), Director of the Defense Advanced Research Projects Agency (DARPA). He addressed, among other things, cognitive computing, MEMS (Microelectronics, photonics, and microelectromechanical systems), and information technology.

3/25. The House Judiciary Committee's (HJC) Subcommittee on Crime, Terrorism, and Homeland Security, and the House Homeland Security Committee's Subcommittee on Intelligence and Counterterrorism, held a joint hearing titled "Progress in Consolidating Terrorist Watchlists -- The Terrorist Screening Center". See, prepared statement of Rep. Howard Coble (R-NC), Chairman of the Subcommittee on Crime, and prepared statement of Rep. Chris Cox (R-CA), Chairman of the Homeland Security Committee. See also, prepared testimony of witnesses: Donna Bucella (Director, Terrorist Screening Center, FBI), Charlie Bartoldus (Director, National Targeting Center, Customs and Border Protection, DHS), James McMahon (Director, Office of Public Security, New York), and Jerry Berman (Center for Democracy and Technology).

3/25. The House Judiciary Committee's (HJC) Subcommittee on the Constitution held a hearing on HRes 568, which expresses the sense of the House that judicial determinations regarding the meaning of the laws of the U.S. should not be based on judgments, laws, or pronouncements of foreign institutions. See, prepared statement of Rep. Steve Chabot (R-OH), the Chairman of the Subcommittee. See also, prepared testimony of witnesses: Jeremy Rabkin (Cornell University), Vicki Jackson (Georgetown Law Center), Michael Ramsey (University of San Diego Law School), and John McGinnis (Northwestern University School of Law).

More News

3/25. Comcast Corporation announced in a release that it has "signed an agreement with Vulcan Programming Inc. to acquire TechTV, Inc. Upon closing, Comcast will merge TechTV with G4, the Comcast-owned television network devoted to video games and the gamer lifestyle."

3/25. The Federal Communications Commission (FCC) held a meeting titled "Emergency Communications and Homeland Security -- Working with the Disability Community". FCC Chairman Michael Powell gave a speech [3 pages in PDF]. He discussed "the need for Congress, the FCC, the communications industry, and the disability community to work together cooperatively to ensure access to communications services, especially during emergencies." He reviewed prior actions of the FCC, but made no proposals for future action.

3/25. Sen. Ernest Hollings (D-SC) introduced S 2235, the "Domestic Workforce Protection Act". This bill would rename the Department of Commerce (DOC) the Department of Trade and Commerce. It would transfer the Office of the U.S. Trade Representative (USTR) to the DOC. It would transfer the responsibilities of the U.S. International Trade Commission (USITC) to the DOC. It would create an Assistant Attorney General for Trade. It would also make several changes to the Internal Revenue Code pertaining to offshore production, earnings of controlled foreign corporations, and deductions for certain offshore royalty payments. The bill was referred to the Senate Finance Committee.

Supreme Court Reverses in Nixon v. Missouri

3/24. The U.S. Supreme Court issued its opinion [PDF] in Nixon v. Missouri Municipal League, a case regarding 47 U.S.C. § 253(a) and state statutes that prohibit political subdivisions from offering telecommunications services. It reversed the U.S. Court of Appeals (8thCir).

Summary. Missouri passed a state statute that bans local governments in Missouri from offering telecommunications services. The local governments, represented by the Missouri Municipal League, want the Federal Communications Commission (FCC) to preempt this statute, under Section 253, which provides that states cannot ban "any entity" from providing telecommunications services. It has always been clear that Section 253 means that states cannot bar any company from providing telecommunications services. The question is, does Section 253 also include local governments. The FCC said no. The 8th Circuit said yes. The Supreme Court said no.

Of course, this does not mean that states must bar local governments from providing telecommunications services. This opinion only stands for the proposition that states may bar local governments from providing telecommunications services.

The consequence is that in states, such as Missouri, that bar local governments from providing telecommunications services, the commercial providers will not face competition from local governments. These entities may have competitive advantages over the local exchange carriers, such as public subsidies, as well as regulatory authority. On the other hand, in some more remote and rural areas, local governments might be the only entities prepared to provide certain services -- particularly broadband services.

See, full story.

European Commission Seeks 497 Million Euros and Code Removal from Microsoft

3/24. The European Commission (EC) announced, but did not release the text of, a decision that imposes a record fine upon Microsoft of 497.2 Million Euros, orders Microsoft to make changes to its software sold in Europe, and orders Microsoft to disclose certain information to its competitors.

The EC issued a short press release describing its decision. It states that "Microsoft is required, within 120 days, to disclose complete and accurate interface documentation which would allow non-Microsoft work group servers to achieve full interoperability with Windows PCs and servers."

The decision also addresses Microsoft's Windows Media Player (WMP), which allows users to, among other things, play music and video on their computers. The EC release states that "Microsoft is required, within 90 days, to offer to PC manufacturers a version of its Windows client PC operating system without WMP."

The EC asserted that the basis for these actions is that Microsoft "broke European Union competition law by leveraging its near monopoly in the market for PC operating systems (OS) onto the markets for work group server operating systems and for media players".

The EC also issued a second press release.

Ed Black, President of the Computer & Communications Industry Association (CCIA), an anti-Microsoft interest group, praised the EC decision. He stated in a release that "The European Commission's decision today is another confirmation of Microsoft's anti-competitive and illegal business tactics."

He added a criticism of the U.S. Department of Justice. "The past has shown all to well that many authorities lack the sustained will to effectively check the abuses of such a powerful firm. It is with this dubious past in mind that we look towards the enforcement process as a key to restoring the competitive landscape to the software market."

Microsoft announced that it will challenge the decision in the European Court of First Instance. See, following story, titled "Microsoft Will Challenge EC Decision in Court".

The U.S. Department of Justice, which has already sued and settled with Microsoft, issued a statement that is critical of the EC decision. See, following story, titled "US Antitrust Chief Says EU's Microsoft Decision Could Harm Innovation and Consumers".

US Antitrust Chief Says EU's Microsoft Decision Could Harm Innovation and Consumers

3/24. Hewitt Pate, the Assistant Attorney General in charge of the U.S. Department of Justice's (DOJ) Antitrust Division, issued a statement criticizing the action taken by the European Commission against Microsoft. He stated that the code removal requirement "risks protecting competitors, not competition, in ways that may ultimately harm innovation and the consumers that benefit from it". He also criticized the fine, stating that "For this fine to surpass even the fines levied against members of the most notorious price fixing cartels may send an unfortunate message about the appropriate hierarchy of enforcement priorities."

Pate (at right) first reviewed the history of the US antitrust action against Microsoft. He then wrote that "The United States' Final Judgment provides clear and effective protection for competition and consumers by preventing affirmative misconduct by Microsoft that would inhibit competition in 'middleware' programs, such as the web browser that was the subject of the United States' lawsuit and the media player that is the subject of the EC's action today. The Final Judgment, for example, prohibits the use by Microsoft of exclusive contracts or other provisions that inhibit competition, prohibits anticompetitive manipulation of icons and default settings, and requires Microsoft to provide information to allow 'interoperability' of competitors' software. The United States continues to be active in its enforcement of Microsoft's compliance with the Final Judgment, and this work has resulted in substantial changes to Microsoft's business practices."

In contrast, wrote Pate, "The EC has today pursued a different enforcement approach by imposing a 'code removal' remedy to resolve its media player concerns. The U.S. experience tells us that the best antitrust remedies eliminate impediments to the healthy functioning of competitive markets without hindering successful competitors or imposing burdens on third parties, which may result from the EC's remedy. A requirement of 'code removal' was not at any time -- including during the period when the U.S. was seeking a breakup of Microsoft prior to the rejection of that remedy by the court of appeals -- part of the United States' proposed remedy."

Pate continued that "Imposing antitrust liability on the basis of product enhancements and imposing 'code removal' remedies may produce unintended consequences. Sound antitrust policy must avoid chilling innovation and competition even by 'dominant' companies. A contrary approach risks protecting competitors, not competition, in ways that may ultimately harm innovation and the consumers that benefit from it. It is significant that the U.S. district court considered and rejected a similar remedy in the U.S. litigation."

He then criticized the fine. "While the imposition of a civil fine is a customary and accepted aspect of EC antitrust enforcement, it is unfortunate that the largest antitrust fine ever levied will now be imposed in a case of unilateral competitive conduct, the most ambiguous and controversial area of antitrust enforcement. For this fine to surpass even the fines levied against members of the most notorious price fixing cartels may send an unfortunate message about the appropriate hierarchy of enforcement priorities."

Pate did not offer any criticism of the interoperability remedy, which requires Microsoft to license technologies used by Microsoft server software to communicate with other Microsoft software on a network, at this time.

Microsoft Will Challenge EC Decision in Court

3/24. Steve Ballmer, CEO of Microsoft, stated at a press conference regarding the European Commission's announcement that "the legal review process begins". Brad Smith, SVP and General Counsel of Microsoft, added that "we now will move forward with the legal process in Europe. We will file our appeal in accordance with the timetable set by the European Court of First Instance, and we will ask the court to suspend many or perhaps all of the sanctions that the European Commission ordered today." See, transcript.

Smith (at right) added that "We will definitely ask the court to suspend a number of the sanctions, including the code-removal sanction that was addressed in the Media Player decision today."

Smith offered his assessment of the US and EC antitrust actions. "We think that today's decision is a step in the wrong direction. It's an unfortunate step and it's an unnecessary step. The U.S. government spent over five years addressing these issues, and at the conclusion of that process it put in place the consent decree that addresses these issues, including Windows Media Player. The Department of Justice put in place a regime that created new opportunities for our competitors and new opportunities for PC manufacturers to install competing media players, and change the default setting on PCs, and even remove end-user access if they wish to our Windows Media Player."

"In contrast," said Smith, "the code-removal approach that the commission pursued today is an approach that in our view will help a small number of competitors -- at least that is its theory -- at the expense not only of our innovation but at the expense of consumers as well. And it's worth noting that the same competitors that have sought this outcome in Europe also sought it in the United States. They encouraged the states' attorneys general to ask the District Court in Washington, D.C. in 2002 to issue a code-removal remedy. And the District Court in D.C. listened to over 60 days of testimony from witnesses, and then issued a very considered opinion. The court rejected the precise code-removal remedy that the commission has endorsed.

Smith then recited three quotes from the District Court: "innovation would be stifled"; "this would disrupt the industry, harming independent software vendors and consumers"; and "clear and certain harm to the entire personal computer ecosystem".

He continued that "So our competitors had their day in court, and it's unfortunate that after that day came and went they simply chose to move across the Atlantic to try to have a day in another court. And we think it's especially unfortunate that the European Commission today embarked on a remedy that shows so little regard for the work and decision-making of the U.S. government, and so little regard for the comity proceedings or processes that are established under the commission's 1991 treaty with the Department of Justice. This is a case that started in the United States. Microsoft is an American company. The complainant companies are American companies. The software is designed in the United States, and the U.S. government dealt with the issues thoroughly. There was no need for the commission to disrupt that regime with this conflicting approach in which it's embarked today."

4th Circuit Affirms That Section 230 Immunity Extends to Federal Civil Rights Action

3/24. The U.S. Court of Appeals (4thCir) issued its opinion [2 pages in PDF] in Noah v. AOL, affirming the District Court's opinion that Section 230 of the Communications Act immunizes AOL from claims that it violated the Civil Rights Act of 1964 when it provided chat rooms in which subscribers mocked Noah's religious beliefs.

The interactive computer service immunity clause, which is codified at 47 U.S.C. § 230, was enacted as a part of the Communications Decency Act. Since then, AOL and other interactive computer services have prevailed in numerous cases by invoking Section 230.

However, this case is significant, because most earlier cases involved state law tort claims of defamation or negligence. In the present case, the District Court held, and the Appeals Court affirmed, that Section 230 immunity extends to claims under federal statutes.

See, full story.

Evans Opposes Isolationist Response to Outsourcing

3/24. Secretary of Commerce Donald Evans testified before a House Commerce Committee hearing titled "The State of U.S. Industry". He argued that isolationism is not the appropriate policy response to the outsourcing of jobs to other countries. He also addressed federal research and development spending, protection of intellectual property rights, piracy in the PR China, extending the internet tax moratorium, voice of internet protocol, broadband over powerline, and other technology related issues.

Free Trade. Evans (at right) wrote in his prepared testimony that "New foreign investments occur regularly, although they do not seem to attract the attention devoted to investment offshore. But foreign investments made here are creating many times more jobs than are being offshored from the United States."

He continued that "jobs are at risk if this country begins to engage in the isolationism that would cause us to close down global labor markets. America cannot turn back from a global marketplace of goods and services. Engagement with the world adds jobs and growth, while a policy of economic isolation destroys them."

"It is important to have the facts: according to the Bureau of Labor Statistics, only one percent of job losses in large layoffs are associated with overseas relocation, with another two percent due to import competition", said Evans. "IBM, for example, recently won a contract from Nokia, the Finnish telecommunications company, worth over $5 billion. Alone, this contract equals almost one-third of the entire Indian information technology software and services industry in 2003."

Research and Development Spending. Evans also addressed R&D spending. "We will spend a record $126 billion on federal R&D this year, and the President has proposed $132 billion next year."

He added that "the Administration continues to support the unique capabilities of national labs and universities, including establishing cooperative research programs for the benefit of small and medium-sized businesses. In addition, this Administration is promoting the process of manufacturing technology transfer to ensure that the benefits of R&D are diffused broadly throughout the manufacturing sector, particularly to small and medium-sized enterprises."

Intellectual Property and Piracy. Evans wrote that "Business leaders emphasize the importance of adequately and effectively protecting intellectual property rights, and the corrosive effect of the failure of some of our trading partners to enforce these rights. Intellectual property protection is essential in ensuring the virtuous cycle of innovation that raises our productivity and meets the needs of consumers around the world. That is why the Department of Commerce continues to strengthen the Patent and Trademark Office, enhancing intellectual property protection and increasing the availability of new products and services."

He also focused on IPR theft in the People's Republic of China. He stated that "Nothing hurts innovation like having your ideas stolen from you. We are working hard to make sure that does not happen. The World Trade Organization (WTO) has agreements barring the theft of intellectual property. Piracy by foreign businesses, particularly in China, for example, is a chronic problem for many American firms. Last fall, I led a mission to China and highlighted China's lack of IPR enforcement. I met with high-ranking Chinese officials and reiterated our continuing concern; that effective IPR protection requires that criminal penalties for intellectual property theft and fines are large enough to be a deterrent rather than a business expense."

"I believe in the strong enforcement of our trade laws, especially intellectual property protection, and we are taking proactive measures to combat piracy. I have tasked Commerce agencies, such as the Patent and Trademark Office and the new Office of Investigations and Compliance, to coordinate their efforts to vigorously pursue allegations of IPR violations wherever they occur, especially in China."

Finally, he testified that "The Administration is committed to exercising the legal remedies available under the WTO and under U.S. law when clear violations occur. As a matter of fact, the United States Trade Representative announced the filing of a case at the WTO regarding China's discriminatory tax rebate policy for integrated circuits." (See, story titled "US Complains to WTO About PR China's Tax Preference for Domestic Producers of Integrated Circuits", March 18, 2004.)

Other Issues. He advocated passage of the Internet Non-Discrimination Act. He stated that President Bush "urges the Congress to make the moratorium permanent". (For a summary of this bill and related bills, see story titled "Sen. Alexander Introduces Bill Regarding Internet Tax Moratorium", February 12, 2004.)

Evans stated that "The Administration also supports policies that will ensure that Voice-over-Internet Protocol is also free from unnecessary economic regulation."

He also stated that "The Administration is working to ensure that Broadband-over-Power Lines can be beneficially deployed as quickly as possible."

Bills Introduced

3/24. Sen. Olympia Snowe (R-ME) introduced S 2230, the "Workers Equity Act". This bill would amend the Trade Act of 1974 to include shifts in production, for purposes of trade adjustment assistance, to countries to which the U.S. has extended permanent normal trade relations. It provides that "Section 222(a)(2)(B)(ii)(II) of the Trade Act of 1974 (19 U.S.C. 2272(a)(2)(B)(ii)(II)) is amended by inserting before the semicolon the following: `or a country to which the United States has extended permanent normal trade relations'." The bill was referred to the Senate Finance Committee.

3/24. Rep. Ron Paul (R-TX) introduced HR 4024, the "TV Consumer Freedom Act". This bill would repeal the must carry requirements of the Communications Act of 1934, codified at 47 U.S.C. §§ 338, 534, and 535. This bill would also provide that "No cable system or other multichannel video programming distributor shall retransmit the signal of a broadcasting station, or any part thereof, except with the express authority of the station". The bill was referred to the House Commerce Committee. Rep. Paul is not a member.

3/24. Rep. Chip Pickering (R-MS) and Rep. Gene Green (D-TX) introduced HR 4026, the "Local Emergency Radio Service Preservation Act of 2004". This bill provides that the Federal Communications Commission (FCC) "shall revise section 25.144 of its regulations (47 C.F.R. 25.144) to provide that (1) digital audio radio satellite service licensees shall not, using any capability either on a satellite or in a radio receiver, provide services that are locally differentiated or that result in programming being delivered to consumers in one geographic market that is different from the programming that is delivered to consumers in any other geographic market; and (2) digital audio radio satellite service repeaters shall be restricted to simultaneously retransmitting the programming transmitted by satellite directly to digital audio radio satellite service subscribers' receivers, and may not be used to distribute any information not also transmitted to all subscribers' receivers." The bill was referred to the House Commerce Committee.

3/24. Rep. Diane Watson (D-CA), Rep. Tom Lantos (D-CA), and Rep. Henry Hyde (R-IL) introduced HRes 576, a resolution urging the government of the People's Republic of China to improve its protection of intellectual property rights. For examples, it "urges the Chinese Government to undertake a coordinated nationwide intellectual property rights enforcement campaign, to eliminate the high criminal liability threshold and procedural obstacles that impede the effective use of criminal prosecution in addressing intellectual property rights violations, to increase the criminal penalties provided for in its laws and regulations, and to vigorously pursuit counterfeiting and piracy cases". The resolution was referred to the House International Relations Committee.

More News

3/24. The House passed HR 1768, the "Multidistrict Litigation Restoration Act of 2004" by a vote of 418-0. See, Roll Call No. 79.

3/24. The Senate Foreign Relations Committee postponed its hearing on intellectual property piracy issues, which had been scheduled for Wednesday, March 24.

3/24. The House Government Reform Committee's Subcommittee on Technology, Information Policy, Intergovernmental Relations and the Census held a hearing titled "Electronic Government: A Progress Report on the Successes and Challenges of Government-wide Information Technology Solutions". See, prepared testimony [71 pages in PDF] of Linda Koontz (General Accounting Office) titled "Electronic Government: Initiatives Sponsored by the Office of Management and Budget Have Made Mixed Progress", and prepared testimony [PDF] of Karen Evans (Office of Management and Budget) titled "Federal Government's Efforts to Safeguard our Information and Systems".

Senate Communications Subcommittee Holds Hearing on Spyware Bill

3/23. The Senate Commerce Committee's Subcommittee on Communications held a hearing on spyware and S 2145, the "Software Principles Yielding Better Levels of Consumer Knowledge Act", or "SPY BLOCK Act". Sen. Conrad Burns (R-MT) introduced S 2145 on February 27, 2004. See, full story.

Sen. Biden Introduces Anticounterfeiting Bill

3/23. Sen. Joe Biden (D-DE), Sen. Ernest Hollings (D-SC), Sen. Patti Murray (D-WA), Sen. Gordon Smith (R-OR), and Sen. George Allen (R-VA) introduced S 2227, the "Anticounterfeiting Act of 2004", a bill pertaining to trafficking in counterfeit labels, illicit authentication features, or counterfeit documentation or packaging.

The bill amends 18 U.S.C. § 2318, regarding trafficking in counterfeit labels and documentation. The bill would criminalize "illicit authentication features", and create a private right of action for copyright owners.

Sen. Biden sponsored a similar bill in the 107th Congress. See, S 2395, the "Anticounterfeiting Amendments of 2002". The bill was approved by the Senate Judiciary Committee, but the full Senate did not act on the bill. However, by re-introducing this bill in late March of a Presidential election year, it will be difficult to obtain passage in this Congress.

See, stories titled "Biden Bill Would Ban Illicit Authentication Features" in TLJ Daily E-Mail Alert No. 423, May 2, 2002; "Senate Judiciary Committee Approves Anti Counterfeiting Bill" in TLJ Daily E-Mail Alert No. 473, July 19, 2002; and "Sen. Allen Opposes Sen. Biden's Anticounterfeiting Bill" in TLJ Daily E-Mail Alert No. 503, September 6, 2002.

Sen. Biden (at right) explained the problem that his bill addresses. He said that "Counterfeiters of software, music CDs and motion pictures are now tampering with authentication features. Holograms, certificates of authenticity, watermarks and other security features allow the copyright owners to distinguish genuine works from counterfeits. But now, highly sophisticated counterfeiters have found ways to tamper with these features to make counterfeit products appear genuine and to increase the selling price of genuine products and licenses. Put another way, not only do crooks illegally copy American intellectual property, they also now illegally fake or steal the very features property owners use to prevent that theft." See, Congressional Record, March 23, 2004, at Pages S3001-2

He elaborated that "The criminal code has not kept up with the counterfeiting operations of today's high-tech pirates, and it's time to make sure that it does. The Anticounterfeiting Act of 2004 updates and strengthens the Federal criminal code, which currently makes it a crime to traffic in counterfeit labels or copies of certain forms of intellectual property, but not authentication features. For example, we can currently prosecute someone for trafficking in fake labels for a computer program, but we cannot go after them for faking the hologram that the software maker uses to ensure that copies of the software are genuine."

He also explained the private right of action. "In addition, many actions that violate current law go unprosecuted in this day and age when priorities, such as the fight against terrorism and life-threatening crimes, necessarily take priority over crimes of property, be they intellectual or physical. Moreover, the victims of this theft often do not have a way to recover their losses from this crime. For this reason, the Anticounterfeiting Act of 2004 also provides a private cause of action, to permit the victims of these crimes to pursue the criminals themselves and recover damages in federal court.

He added that "Current law criminalizes trafficking in counterfeit documentation and packaging, but only for software programs. The Anticounterfeiting Act of 2003 updates and expands these provisions to include documentation and packaging for phonorecords, motion pictures, other audiovisual works, and copies of other copyrighted works.

He also stated that "The existing provision with regard to counterfeiting addresses certain items of intellectual property, including motion pictures, software, and phonorecords. The Anticounterfeiting Act of 2004 updates the coverage of this statute to include other copyrighted works, such as books. As published books and ebooks begin to be subject to the piracy already witnessed by motion picture, software and recording industries, they need the same protection."

GAO Finds That FBI's IT Transformation is Over Budget and Behind Schedule

3/23. The Senate Appropriations Committee's Subcommittee on Commerce, Justice, State, and the Judiciary  held a hearing on the transformation of the Federal Bureau of Investigation (FBI) information technology (IT). The Congress's General Accounting Office (GAO) testified that the FBI's Trilogy project to modernize its IT is $120 Million over budget, and 21 months behind schedule. Nevertheless, the GAO also found that the "FBI has made substantial progress".

Laurie Ekstrand and Randolph Hite of the GAO wrote in their prepared testimony [40 pages in PDF] that the "FBI's longstanding approach to managing IT is not fully consistent with the structures and practices of leading organizations. A prime example of the consequences of not employing these structures and practices is the cost and schedule shortfalls being experienced on Trilogy, the centerpiece project to modernize infrastructure and case management applications."

They elaborated that "To date, the FBI's management of Trilogy has resulted in multiple cost overruns and schedule delays." Specifically, they found that "the project's components have collectively experienced cost overruns and schedule delays totaling about $120 million and at least 21 months, respectively."

They also explained that the Trilogy project is the FBI's "centerpiece project to (1) replace its system infrastructure (e.g., wide area network) and (2) consolidate and modernize key investigative case management applications. The goals of Trilogy include speeding the transmission of data, linking multiple databases for quick searching, and improving operational efficiency by replacing paper with electronic files." (Parentheses in original.)

They further found that "Over the last several years, the FBI has not sustained IT management leadership. Specifically, the bureau's key leadership and management positions, including the CIO, have experienced frequent turnover. For instance, the CIO has changed five times in the past 24 months."

"In addition, the FBI has not provided its CIO with bureauwide IT management authority and responsibility. Rather, the authority and responsibility for managing IT is diffused across and vested in the bureau's divisions. As our research and work at other agencies has shown, managing IT in this manner results in disparate, stove-piped environments that are unnecessarily expensive to operate and maintain", wrote Ekstrand and Hite.

NCTA's Sachs Addresses Cable Programming, Decency, and Parental Controls

3/23. Robert Sachs, P/CEO of the National Cable & Telecommunications Association (NCTA), gave a speech in Washington DC titled "Cable Puts You in Control".

"Congress, the FCC, and the American public are revaluating what Americans are watching on TV and seeing and hearing in the media", said Sachs. "They've put media companies under the spotlight, to examine the value and impact of TV content, and to size up our efforts to help consumers manage the tremendous flow of entertainment and information into their homes."

But, he stated that cable is "a medium that offers parents and caregivers control over the TV programming that flows into their homes. Through parental controls, channel blocking devices, the V-chip, and the TV ratings system, cable households, unlike broadcast only households, can enjoy enriching family entertainment while screening or otherwise blocking out programming they may not want to see."

He added that "we're a medium that educates our customers and viewers about their viewing options."

Another proposal for providing parents more control is to require cable and direct broadcast satellite companies to offer their customers the option of purchasing only those channels that they want. Proponents of this call it "a la carte". However, neither the cable nor the DBS industry provide this option. Proponents also tout this as a means giving consumers more control over their monthly bills.

The Senate Commerce Committee will hold a hearing on Thursday, March 25, at 9:30 AM on cable pricing. Gene Kimmelman of the Consumers Union will testify. He is a leading proponent of cable a la carte.

Kimmelman wrote in his prepared testimony [PDF] for a hearing of the House Judiciary Committee on May 6, 2003 that "Congress should require cable and satellite operators to offer consumers the right to select the channels they want to receive at a fair price – in other words, require an a la carte program offering from all video distributors. Since the average household watches only about a dozen channels of video programming, this requirement could empower consumers to help discipline excesses in cable (or satellite) pricing, and could possibly spur more competition." (Parentheses in original.)

On March 8, 2004, he wrote a letter to Senators while the Senate Commerce Committee was considering S 2056, the "Broadcast Decency Enforcement Act". He argued that "As the Senate Commerce Committee looks for solutions to stem the increase of violence, indecency and obscenity on television ... we ask that you consider a range of amendments that would give communities and consumers the most effective means of controlling the programming that comes into their homes." One of his recommendations was "give consumers the ability to select and pay for only those cable channels they want in their homes via an ``a la carte´´ option".

The NCTA's Sachs also addressed legislative activity. He stated in his March 23 speech that "Legislation to significantly increase the fines for indecency violations by free over-the-air broadcasters has been approved by the House. A similar, but not identical, bill emerged two weeks ago from the Senate Commerce Committee and could be taken up by the full Senate within several weeks. An amendment to give the FCC authority to impose comparable fines on cable and DBS was just narrowly rejected. Meanwhile Senate Commerce Chairman John McCain is considering introducing legislation to require a la carte pricing for all basic cable networks."

Sachs is not scheduled to testify at the March 25 hearing. However, James Robbins, P/CEO of Cox Communications, is scheduled to testify.

AEA Opposes Protectionist Response to Outsourcing

3/23. The American Electronics Association (AEA) released a paper [24 pages in PDF] titled "Offshore Outsourcing in an Increasingly Competitive and Rapidly Changing World: A High-Tech Perspective".

The paper finds that offshore outsourcing is occurring, but that there is no systematic data. The paper argues that the technology jobs that are being outsourced are "lower-end technology services jobs", while most higher end technology jobs are remaining in the U.S.

It further finds that there has been a decline in high tech jobs, but this is also the result of a weak domestic economy, a weak world economy, and productivity improvements. The paper states that "The decline of the world's economy, the end of the high-tech bubble, and dramatically improving productivity rates are the largest factors" in the decline of high tech jobs. The paper also projects that in the longer term the number of high tech jobs in the U.S. will grow.

It argues too that offshore outsourcing is in the long term competitive interest of the U.S. The paper recommends against protectionist responses. It states that one consequence would be retaliation, and that "No sector is more threatened or more in jeopardy from retaliation should the United States pass protectionist laws than high tech."

The AEA paper instead offers a set of alternative recommendations.

It states that "Worker retraining programs need to be expanded to include not just manufacturing but also displaced services workers, particularly software programmers."

It states that the U.S. secondary education system "is failing", and that "It is not possible for the United States to retain its intellectual and business leadership in the world without improving math and science at the K-12 level."

It states that the U.S. should make the research and development tax credit permanent.

It states that "While federally funded R&D has increased slightly, virtually all of that increase was in the life sciences. University-based R&D in the physical sciences MUST be increased."

Finally, it states that "Given that some 50 percent of doctoral and master's engineering, math, and science degrees awarded in the United States are to foreign nationals who now have a greater incentive to return to their home countries, we need to provide incentives to these foreign nationals to stay in the United States, and to contribute their brain power and intellectual property in creating jobs in the Unites States. One way to do this is to give them a Green Card upon graduation."

Dingell and Upton Write to FCC About Broadcast Auxiliary Services

3/23. Rep. John Dingell (D-MI), the ranking Democrat on the House Commerce Committee, and Rep. Fred Upton (R-MI), the Chairman of the Subcommittee on Telecommunications and the Internet, wrote a letter [4 pages in PDF] to Federal Communications Commission (FCC) Chairman Michael Powell regarding Broadcast Auxiliary Services (BAS).

They wrote that "The proceeding at issue would establish a new procedure for removing local stations from a portion of the band now used for" BAS. The FCC released its report and order in this proceeding on November 7, 2003. This is ET Docket No. 95-18.

The two Congressmen wrote that this item, "if left unaltered may seriously impair the ability of local television stations to provide the communities they serve with live, local coverage of emergencies as well as routine news events."

Under the FCC's plan, some of the spectrum previously allocated for BAS channels, will be reallocated for Advanced Wireless Service (AWS). That is, it will be used for broadband connections for portable devices.

9th Circuit Considers Genetic Privacy

3/23. An en banc panel of the U.S. Court of Appeals (9thCir) heard oral argument in U.S. v. Kincade, a case regarding whether a parolee can be required to provide a DNA sample for the FBI's national DNA database.

This case pits the facilitation of law enforcement against the protection of individual privacy. The three judge panel of the Court of Appeals held that the DNA Analysis Backlog Elimination Act of 2000, which is codified at 42 U.S.C. § 14135a, violates the Fourth Amendment of the Constitution's prohibition of unreasonable searches and seizures.

On October 3, 2003 the three judge panel of the Court of Appeals issued its split opinion [40 pages in PDF].

This case is U.S.A. v. Thomas Cameron Kincade, U.S. Court of Appeals for the Ninth Circuit, App. Ct. No. 02-50380, an appeal from the U.S. District Court for the Central District of California, D.C. No. CR-93-00714-RAG-01.

See also, amicus brief [25 pages in PDF] submitted by the Electronic Privacy Information Center (EPIC). The EPIC argues that DNA analysis provides information about intimate aspects of person and his relatives, including susceptibility to particular diseases and legitimacy of birth. The EPIC argues that this information, in the hands of insurers, employers, banks, or others, could be used for genetic discrimination.

The EPIC's concern that sensitive personal information contained in law enforcement databases could be obtained by private companies, was underscored the day after the Court of Appeals' oral argument, when Rep. Robert Andrews (D-NJ) and Rep. Jim Saxton (R-NJ) introduced HR 4022, the "Private Security Enhancement Act". This bill would enable private security services companies to access the criminal history records and fingerprints of the National Crime Information Center for persons employed by, or seeking employment with, these companies.

E-Mail Threatens Financial Viability of USPS

3/23. House Government Reform Committee and the Senate Governmental Affairs Committee held a joint hearing on U.S. Postal Service (USPS) reform issues. Witnesses stated that the USPS's financial viability is in jeopardy, in part because paper mail is being replaced by electronic mail.

David Walker of the General Accounting Office (GAO) wrote in his prepared testimony [PDF] that "Comprehensive postal reform is urgently needed. The Postal Service's financial viability is at risk because its business model -- which relies on mail volume growth to cover the costs of its expanding delivery network -- is not aligned with 21st century realities. Financial, operational, governance, and human capital challenges threaten the Service's ability to remain self-supporting while providing affordable, high-quality, and universal postal service."

Rep. Tom Davis (R-VA), the Chairman of the House Government Reform Committee, wrote in a prepared statement that "the current legal framework under which the Postal Service operates is outdated and unsuited for today's economy."

John Snow, the Secretary of the Treasury, wrote in his prepared testimony [6 pages in PDF] that "It is widely acknowledged that the current business model of the Postal Service is not sustainable going into the 21st century. Electronic diversion of mail volumes has caused a substantial and likely irreplaceable decline in first class mail. This trend is expected to continue."

John Potter, Postmaster General of the USPS, wrote in his prepared testimony [PDF] that "Mail volume has declined in each of the last three years, dropping more than five billion pieces from its peak in 2000, representing $4.5 billion less in revenue. During the same three-year period, the number of addresses we served increased by 5.4 million. This combination of factors -- declining mail volume contrasted with the costs of a still-growing service network, resulted in a net loss in three of the last four years.

"Electronic communications are increasingly being used for transactions that, in the past, have almost universally taken place through the mail", said Potter. "But electronic diversion will continue to occur -- and at a more rapid rate than we are experiencing today. Even the most carefully constructed price cap will result in rate increases that will accelerate the decline in overall mail volume."

David Fineman, Chairman of the USPS Board of Governors, wrote in his prepared testimony [12 pages in PDF] that "the Postal Service faces a major structural change in the way Americans conduct business. Electronic alternatives to hard copy mail are becoming increasingly acceptable to the public and will continue to divert significant portions of the mail stream away from the Postal Service and onto the Internet. Significant amounts of business correspondence have been diverted from the mail stream, and the bills, payments and other financial transactions that constitute the bulk of First-Class Mail volume remain vulnerable to further diversion."

More Hearings on Capitol Hill

3/23. The Senate Committee on Aging held a hearing to examine the impact of internet fraud on seniors. See, prepared testimony of witnesses in PDF: Dave Nahmias (Deputy Assistant Attorney General, Criminal Division, Department of Justice), Lawrence Maxwell (Assistant Chief Inspector, US Postal Inspection Service), Howard Beales (Director, Bureau of Consumer Protection, Federal Trade Commission), Tanya Solov (North America Securities Administrators Association), David Jevans (Anti-Phishing Working Group), and Jeffrey Groover (Inmate, Federal Correctional Institute, Yazoo City, Mississippi).

3/23. The House Judiciary Committee's (HJC) Subcommittee on Crime, Terrorism, and Homeland Security held a hearing on HR 1731, the "Identity Theft Penalty Enhancement Act", and HR 3693, the "Identity Theft Investigation and Prosecution Act of 2003". See, opening statement of Rep. Howard Coble (R-NC), the Chairman of the Subcommittee. See also, prepared testimony of witnesses: Timothy Coleman (Department of Justice, Criminal Division), Larry Johnson (U.S. Secret Service), and Robert Ryan [PDF] (TransUnion).

3/23. The Senate Judiciary Committee held a hearing titled "Counterfeiting and Theft of Tangible Intellectual Property: Challenges and Solutions". See, prepared statement of Sen. Orrin Hatch (R-UT), the Chairman of the Committee, and prepared statement of Sen. Patrick Leahy (D-VT), the ranking Democrat on the Committee. See also, prepared testimony of Jon Dudas (acting Director of the U.S. Patent and Trademark Office), prepared testimony of Christopher Wray (Assistant Attorney General in charge of the Criminal Division), prepared testimony of James Mendenhall (Assistant U.S. Trade Representative for Intellectual Property), prepared testimony of Earl Anthony Wayne (Assistant Secretary of State for Economic and Business Affairs), prepared testimony of Richard Willard (SVP of the Gillette Company), prepared testimony of Brad Buckles (Recording Industry Association of America), prepared testimony of Vanessa Price (Burton Snowboards, Vermont), and prepared testimony of Timothy Trainer (International AntiCounterfeiting Coalition).

More News

3/23. The Recording Industry Association of America (RIAA) announced in a release that "on behalf of the major record companies, brought a new round of legal action against individual computer users offering substantial amounts of copyrighted music files for free on peer-to-peer networks, including illegal file sharers at 21 different universities."

3/23. Pascal Lamy, the European Union's Trade Commissioner, gave a speech in Brussels, Belgium on "What role for fair trade in EU Policies?"

3/23. BellSouth issued a release regarding its contracts with competitive local exchange carriers (CLECs) for access to its network. The release, quoting various BellSouth officers, states that "Three times the mandated unbundling rules that govern our current arrangements have been found illegal by federal courts. It is inevitable that the below-cost rates we now charge will go away and that true market-based rates will replace them. What we are offering is in keeping with a call for a transition period which was issued by Federal Communications Commission Chairman Michael Powell." See, March 10 speech [PDF] by Michael Powell, and story titled "Powell Offers Timetable for FCC's Fourth Attempt to Write Unbundling Rules" in TLJ Daily E-Mail Alert No. 854, March 11, 2004. BellSouth added that it is offering CLECs "predictable rates and a 42-month transition with modest increases phased in beginning January 1, 2005 ... The offer bridges our regulatory past with our anticipated free market future."

3/23. The U.S. and Colombia announced that free trade negotiations between the two countries will begin on May 18. See, USTR release [PDF].

3/23. A grand jury of the U.S. District Court (CDCal) returned an indictment of Larry Lee Ropp on a single count of endeavoring to intercept electronic communications, in connection with his allegedly installing a keystroke logger, an electronic device on a company computer that recorded all of the computer keyboard keystrokes made by an employee of a company where he had previously worked. See, DOJ release.

Supreme Court Returns from Recess

3/22. The Supreme Court returned from recess that it began on March 8. It heard oral argument in Hiibel v. Sixth Judicial District Court of Nevada, denied certiorari in Hogarth v. Burroughs, and issued no new opinions.

Supreme Court Hears Oral Argument in Identification Case

3/22. The Supreme Court heard oral argument in Hiibel v. Sixth Judicial District Court of Nevada, a criminal case regarding whether police may compel a person to identify himself.

Larry Dudley Hiibel was convicted in the state of Nevada of the crime of delaying a police officer, pursuant to Nev. Rev. Stat. § 199.280, in connection with his refusing to identify himself when asked by a police officer.

This is a criminal case involving the 4th Amendment of the U.S. Constitution (which protects "against unreasonable searches and seizures") and the 5th Amendment (which provides "nor shall any person be compelled in any criminal case to be a witness against himself").

This case implicates technology to the extent that divulging a name (or a unique identifier) to a police officer can enable that officer to then obtain from various electronic databases other information associated with that name (or identifier) contained in the databases, and to add data to electronic databases.

See, brief [50 pages in PDF] of the state of Nevada, and brief [58 pages in PDF] of Hiibel.

The Department of Justice argued in its amicus brief on the merits that "Requiring the subject of an investigative detention to identify himself infringes neither the Fourth Amendment nor the Fifth Amendment privilege against compelled self-incrimination."

See also, amicus brief [PDF] of the Cato Institute, and amicus brief [PDF] of the Electronic Privacy Information Center (EPIC). The EPIC website includes a page that contains numerous hyperlinks to other pleadings and materials related to this case.

This case is Hiibel v. Sixth Judicial District Court of Nevada, Sup. Ct. No. 03-5554, on writ of certiorari to the Supreme Court of Nevada. The Nevada case is reported at 59 P.3d 1201.

Supreme Court Denies Cert in Copyright Case

3/22. The Supreme Court denied certiorari, without opinion, in Hogarth v. Burroughs, a copyright case. See, Order List [20 pages in PDF] at page 4.

The U.S. Court of Appeals (2ndCir) issued its opinion [37 pages in PDF] on August 29, 2003. It addresses the issues of the work for hire doctrine as applied to an independent contractor, the significance of incorrect information in applications for registration filed with the Register of Copyrights, and the doctrine of laches.

This case is Estate of Burne Hogarth, at al. v. Edgar Rice Burroughs, Inc., Sup. Ct. No. 03-1009, on petition for writ of certiorari to the U.S. Court of Appeals for the 2nd Circuit, App. Ct. No. 02-73112.

Senators DeWine and Kohl Urge Solicitor General to Seek Cert in USTA v. FCC

3/22. Sen. Mike DeWine (R-OH) and Sen. Herb Kohl (D-WI) wrote a letter to Attorney General John Ashcroft and others urging the Department of Justice (DOJ) to "support the Federal Communication Commission's motion to stay and to appeal to the U.S. Supreme Court" the Appeals Court's opinion in the triennial review order case. They expressed "no opinion as to the wisdom of the specifics of the FCC rules", but rather argued that the Court should take the case because of its importance.

Sen. DeWine and Sen. Kohl are the Chairman and ranking Democrat on the Senate Judiciary Committee's Antitrust Subcommittee. They sent the letter to AG Ashcroft, Solicitor General Ted Olson (at right), and Assistant Attorney General in charge of the Antitrust Division Hew Pate.

The Supreme Court has the discretion to hear, or refuse to hear, petitions for writ of certiorari, which are also sometimes referred to as appeals. The recommendation of the Solicitor General regarding whether or not to grant certiorari carries considerable weight with the Court.

Other Senators and Representatives, and others, have also written to the DOJ, FCC, and President Bush, to argue in favor of, or against, seeking certiorari.

The two Senators wrote that "This case vacated the FCC's Triennial Review rulemaking setting forth the rules under which the incumbent phone companies must interconnect their networks with competitive local exchange carriers pursuant to the Telecommunications Act of 1996. This decision has vital national public policy implications because the final form taken by the interconnection rules will dictate how the market for local phone service will develop and to what extent businesses and consumers will reap the benefits of competition in that market."

They continued that "While we express no opinion as to the wisdom of the specifics of the FCC rules or the DC Circuit rejection of those rules, we believe that these matters-issues which have been subject to eight years of litigation and dispute among the expert agency, the many industry players, and the appellate court-are of such fundamental importance to national telecommunications competition policy and to consumers that the Department of Justice should seek their final resolution at the Supreme Court."

They added that "The D.C. Circuit's ruling also implicated important administrative law issues related to an administrative agency's power to delegate certain types of decision-making authority to the states as well as the deference that a court should accord a regulatory agency's decisions. These issues deserve Supreme Court consideration as well."

On March 2, 2004. 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. See, story titled "Appeals Court Overturns Key Provisions of FCC Triennial Review Order" in TLJ Daily E-Mail Alert No. 848, March 3, 2004.

People and Appointments

3/22. President Bush formally nominated Jonathan Dudas to be Under Secretary of Commerce for Intellectual Property and Director of the U.S. States Patent and Trademark Office (USPTO). Bush previously announced that he would make this nomination. See, White House release.

Go to News from March 16-20, 2004.