Sununu and Pickering Introduce VOIP Regulatory Freedom Bills

4/5. Sen. John Sununu (R-NH) introduced S 2281, the "VOIP Regulatory Freedom Act of 2004" in the Senate on April 5.. Rep. Chip Pickering (R-MS) introduced HR 4129, also titled the "VOIP Regulatory Freedom Act of 2004", in the House on April 2. The two bills are very similar, but contain several differences in the section dealing with Federal Communications Commission (FCC) authority to regulate connected VOIP applications.

Both bills provide that regulation of voice over internet protocol (VOIP) is an exclusively federal prerogative. Both bills provide that the states cannot tax the offering or provision of a VOIP application. And, both bills provide that the Federal Communications Commission (FCC) has regulatory authority only in enumerated areas: interprovider compensation, universal service contributions, and law enforcement surveillance. However, the bills differ regarding the nature and extent of the FCC's regulatory authority in these categories.

See, full story.

Summary of VOIP Regulatory Freedom Bills

4/5. S 2281, sponsored by Sen. John Sununu (R-NH), and HR 4129, sponsored by Rep. Chip Pickering (R-MS), are both titled the "VOIP Regulatory Freedom Act of 2004". The two bills are very similar in most sections, but contain several differences regarding interprovider compensation, universal service contributions, and law enforcement surveillance.

Both bills provide that regulation of voice over internet protocol (VOIP) is an exclusively federal matter, that states cannot tax the offering or provision of a VOIP application, and that the Federal Communications Commission (FCC) has regulatory authority only over enumerated topics: interprovider compensation, universal service contributions, and law enforcement surveillance. However, the bills differ regarding FCC regulatory authority as to these topics.

The two bills provide the same definitions of VOIP application, and connected VOIP application. Neither builds upon legacy regulatory categories -- such as telecommunications services, cable services, or information services -- or the Titles of the Communications Act.

Definitions. Some of the definitions contained in the bills are fundamental to the operation of the bills, and thus must be addressed at the beginning of an article on these bills.

Both bills provide that "The terms `Voice-over-Internet-protocol application' and `VOIP application' mean the use of software, hardware, or network equipment for real-time 2-way or multidirectional voice communications over the public Internet or a private network utilizing Internet protocol, or any successor protocol, in whole or part, to connect users notwithstanding -- (i) the underlying transmission technology used to transmit the communications; (ii) whether the packetizing and depacketizing of the communications occurs at the customer premise or network level; or (iii) the software, hardware, or network equipment used to connect users."

And, notably, both bills provide that these terms do not include "an application that is used for voice communications that both originate and terminate on the public switched telephone network."

For example, AT&T filed a petition [37 pages PDF] on October 18, 2002 with the FCC seeking a ruling that access charges do not apply to its service in which calls originate and terminate on circuit switched public switched telephone network (PSTN) facilities, but are routed on internet backbone. This is WC Docket No. 02-361. This would fall outside of the bills' definition of "VOIP application".

For a summary of VOIP related petitions at the FCC, see stories titled "Level 3 Files VOIP Petition With FCC" and "Summary of Other VOIP Proceedings at the FCC" in TLJ Daily E-Mail Alert No. 815, January 14, 2004.

Then, both bills provide that a "connected VOIP application" is "a VOIP application that is capable of receiving voice communications from or sending voice communications to the public switched telephone network, or both."

For example, Pulver.com's provides Free World Dialup (FWD). It enables online FWD consumers anywhere in the world to engage in peer to peer communications with other online FWD members. FWD members must have broadband internet access and specialized customer premises equipment or software on their PCs. It is closed. One cannot reach, or be reached by, someone on the PSTN. Thus, FWD would be a "VOIP application", but not a "connected VOIP application".

See, story titled "FCC Rules on Pulver's Free World Dialup VOIP Service" in TLJ Daily E-Mail Alert No. 836, February 13, 2004.

VOIP As A Federal Issue. Both bills provide that the regulation of VOIP applications is exclusively a federal matter. Both bills provide that "Notwithstanding any other provision of law, responsibility and authority to regulate the offering or provision of a voice-over-Internet-protocol application is reserved solely to the Federal Government."

Both bills provide that "No State or political subdivision thereof may enact or enforce any law, rule, regulation, standard, or other provision having the force or effect of law that regulates, or has the effect of regulating, the offering or provision of a VoIP application." Moreover, both bills prevent the federal government from delegating authority to regulate VOIP to the states.

Both bills also provide that "No State or political subdivision shall impose any tax, fee, surcharge, or other charge for the purpose of generating revenues for governmental purposes on the offering or provision of a VoIP application".

Limited FCC Regulatory Authority. Next, the two bills limit the authority of the FCC to regulate VOIP applications to certain enumerated categories. They provide that "Except as specifically provided in this Act and notwithstanding any other provision of law, the Commission shall not impose any rule or regulation on, or otherwise regulate, the offering or provision of a VoIP application."

Both bills enumerate three powers: universal service, interprovider compensation, and law enforcement surveillance, although they differ in the specifics.

Neither bill gives the FCC authority to extend E911 rules to VOIP applications. And, neither bill gives the FCC authority to extend disability rules to VOIP applications. However, both bills provide that the FCC shall appoint a body of industry representatives for purposes of developing "consensus guidelines, protocols, or performance requirements" pertaining to E911, "improving use by the disabled community", "improving reliability", and "ensuring appropriate security".

Significantly, neither bill gives the FCC the authority to regulate prices. And, neither bill gives the FCC authority to extend telecommunications privacy rules to VOIP applications.

Finally, both bills maintain the Federal Trade Commission's (FTC) authority to regulate unfair and deceptive trade practices, but give no new rule making authority to the FTC.

Universal Service Taxes and Subsidies. Both bills provide that the FCC's collection of contributions or taxes that apply in the context of telecommunications, also apply to "connected VOIP applications". However, there are differences between the two bills.

The Sununu bill provides that the FCC "shall ensure that all providers of a connected VOIP application contribute, directly or indirectly, to the preservation and advancement of Federal universal service programs based on a flat fee, which could include a collection methodology based on the assignment of telephone numbers to end users." Thus, things such as Free World Dialup would not contribute to the universal service fund.

The Pickering bill provides that the FCC must promptly conduct a rule making proceeding "to provide a contribution mechanism applicable to connected VoIP applications, which may include a collection methodology based on the assignment of telephone numbers to end users, other methodologies, or any combination thereof. In the proceeding, the Commission shall seek to ensure the preservation, enhancement, and long-term sustainability of universal service by maximizing participation in the support of universal service among the greatest number of providers of connected VoIP applications."

Both bills address contributions or taxes paid to the universal service fund, but not eligibility for discounts or subsidies from the fund.

Interprovider Compensation. The Sununu bill provides that "The offering or provision of a VOIP application shall not be subject to part 69 of the Commission's rules (47 C.F.R. 69) or successor charges". However, it adds that the FCC may establish an alternative compensation mechanism "for providers of VOIP applications based on -- (A) the mutual recovery of costs through reciprocal obligations; or (B) arrangements that waive mutual recovery (such as bill-and-keep arrangements)." (Parentheses in original.)

In addition, the Sununu bill provides that the FCC "may not impose a compensation mechanism based on the mutual recovery of costs through reciprocal obligations" unless or until the FCC "has established a single unified regime for the sending and receiving of all data and voice communications."

The Pickering bill provides that the FCC must conduct a rulemaking proceeding "to establish a set of rules and standards to provide for appropriate arrangements to compensate providers of facilities and equipment used to transmit communications employing a connected VoIP application".

This bill provides that the FCC shall "provide for an appropriate transition period to allow providers of such facilities and equipment and providers of connected VoIP applications to comply with any rules and standards established" and "consider the unique nature and circumstances relating to the use of such facilities and equipment in varying geographic markets and rural areas".

Surveillance and CALEA. The two bills diverge on the subject of electronic surveillance by law enforcement entities, and extension of the Communications Assistance for Law Enforcement Act (CALEA) to VOIP applications.

Sununu's bill provides simply that the FCC "shall require a provider of a connected VOIP application to provide access to necessary information to law enforcement agencies not less than that required of information service providers."

This should be read in the context of the language of the CALEA, which imposes requirements upon "telecommunications carriers". The CALEA provides that "telecommunications carriers" does not include "persons or entities insofar as they are engaged in providing information services".

The Sununu bill provides no expansion of the CALEA, as is being sought by the Federal Bureau of Investigation (FBI).

In contrast, the Pickering bill contains a long and complex subsection creating statutory requirements for providers of "connected VOIP applications" to "ensure that its equipment, facilities, or services are capable of ... enabling the government to intercept communications transmitted using such application ... delivering such intercepted communications and call-identifying information to the government".

The Pickering bill does not expand the CALEA to include connected VOIP applications. Rather, it creates a new requirement, with a separate statutory basis. But, in the end, it makes the requirements imposed on providers of connected VOIP applications similar to the requirements imposed by the CALEA upon telecommunications carriers.

Indeed, the Pickering bill states that the requirements for connected VOIP applications must be "for the same purposes, to a similar extent, and subject to similar limitations and protections" as are required under the CALEA.

Supreme Court Grants Certiorari in Wire Fraud Case

4/5. The Supreme Court granted certiorari, without opinion, in Pasquantino v. U.S., No. 03-725. See, Order List [10 pages in PDF] at page 2. This case involves the scope of the federal wire fraud statute.

While the Court has agreed to hear this appeal, oral argument will not likely be held until next fall.

Canada and its Province of Ontario place much higher taxes on the sale of alcohol than the U.S. and the state of Maryland. This creates a black market in alcohol that is illegal in Canada. David and Carl Pasquinto and Arthur Hilts purchased large quantities of alcohol in Maryland, trucked it to New York, and then smuggled it across the border into Ontario hidden in cars. They then sold the alcohol in Canada, without paying the required excise taxes, in violation of Canadian law. The defendants made phone calls related to this scheme.

The present case was brought -- not in Canada -- but in federal court in the state of Maryland under U.S. law. Specifically, the defendants were charged with violation of wire fraud statute, which is codified at 18 U.S.C. § 1343.

The statute provides that "Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice, shall be fined under this title or imprisoned not more than five years, or both. If the violation affects a financial institution, such person shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both."

A trial jury of the U.S. District Court (DMd) returned verdicts of guilty, and the District Court entered judgment against the defendants. The defendants appealed. A divided three judge panel of the U.S. Court of Appeals (4thCir) reversed in an opinion reported at 305 F.3d 291. However, an en banc panel of the Court of Appeals then affirmed the convictions in an opinion released on July 18, 2003, and reported at 336 F.3d 321.

This petition for writ of certiorari followed. The defendants/petitioners argue that in light of the common law revenue rule, the U.S. may not bring a wire fraud prosecution against persons who use the wires in this country to defraud a foreign government of tax revenue. The common law revenue rule is the common law doctrine that courts of one sovereign state will not enforce the final tax judgments or unadjudicated tax claims of other sovereign states.

The Solicitor General submitted a brief in which he argued that the Supreme Court should deny certiorari. He wrote that the text of the wire fraud statute "contains no exception based on the identity of the victim of the fraud or the nature of the property that is the object of the fraud. Consistent with the terms of the wire fraud statute, courts have held that the wire fraud statute applies to schemes to defraud foreign governments, foreign corporations, and foreign individuals."

This case is David Pasquantino, Carl Pasquantino, and Arthur Hilts, aka Butch v. U.S.A., Sup. Ct. No. 03-725, a petition for writ of certiorari to U.S. Court of Appeals for the 4th Circuit, App. Ct. Nos. 01-4463, 01-4464, and 01-4465. The appeal to the Court of Appeals came from the U.S. District Court for the District of Maryland, D.C. No. CR-00-202-JFM, Judge Frederick Motz presiding.

Five Indicted for Fraud in Connection with FCC E-Rate Subsidy Program

4/5. The Department of Justice's (DOJ) Antitrust Division announced that a grand jury of the U.S. District Court (EDWisc) returned an indictment charging five people with conspiracy, mail fraud, and money laundering in connection with a scheme to defraud the Federal Communications Commission's (FCC) e-rate subsidy program. See, DOJ release.

The indictment charges Haider Bokhari, his wife, Kelly Bokhari, his mother, Shahida Bokhari, and his brothers Qasim Bokhari and Raza Bokhari. The government arrested all but Raza Bokhari in the U.S. The DOJ stated that he "is believed to be residing in Lahore, Pakistan".

The DOJ stated that the indictment alleges that Haider Bokhari and Qasim Bokhari submitted false invoices and other documents to the FCC's Universal Service Administrative Company (USAC), and that the USAC paid them over $1.2 million dollars for goods and services that were not provided to schools.

The indictment charges various of the defendants with conspiracy to commit mail fraud charge and mail fraud in violation of 18 U.S.C. §§ 371 and 1341, conspiracy to commit money laundering in violation of 18 U.S.C. § 1956(h), and money laundering in violation of 18 U.S.C. § 1956(a).

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 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.

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.

The DOJ's description of the e-rate program is notable. It states that the e-rate "subsidizes the provision of Internet access and telecommunications services, as well as internal computer and communications networks". The FCC does not acknowledge that the e-rate is a subsidy program, or that it is funded by the collection of a tax on carriers. Although, individual persons, such as former FCC Commissioner Harold Furchtgott-Roth, have identified the program in terms of subsidies and taxes.

The DOJ stated that this investigation is being conducted by the Antitrust Division, FBI, IRS Criminal Investigation Division, FCC's Office of the Inspector General, and the U.S. Attorney's Office for the Eastern District of Wisconsin.

In addition, the House Commerce Committee's Subcommittee on Oversight and Investigations has been conducting an investigation of waste, fraud and abuse in the e-rate program. Moreover, the new Chairman, Rep. Joe Barton (R-TX), stated at a press conference on March 4, 2004 that the Oversight Subcommittee will hold hearings. See, story titled "Rep. Barton Plans to Examine E-Rate Subsidies" in TLJ Daily E-Mail Alert No. 850, March 5, 2004.

See also, 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.

SBC and Sage Announce Agreement to Replace UNE-P

4/5. SBC Communications and Sage Telecom announced that "they have reached an historic seven-year commercial agreement for SBC to provide wholesale local phone services to Sage covering all 13 states comprising SBC's local phone territory. The agreement also contains provisions relating to data and internet services." See SBC release and substantially identical Sage release.

SBC is an incumbent local exchange carrier (ILEC), and a regional Bell operating company (RBOC). Sage is a competitive local exchange carrier (CLEC). It is the third largest CLEC in SBC's territory, with more than one-half million local service customers.

The two companies stated that "This is the first such agreement between a Bell operating company and a local competitor in the four weeks since a federal court overturned wholesale rules imposed by the FCC late last year."

Regarding unbundled network elements - platform (UNE-P), SBC and Sage stated that "The seven-year pact will replace the regulatory mandated UNE-P with a private commercial agreement. Given the proprietary nature of the agreement, most terms were not released, but the average monthly price over the life of the contract is expected to be below $25.00 per line."

They added that "SBC has offered to negotiate comparable terms and conditions with any similarly-situated competitor."

SBC and Sage did not release the text of their agreement.

On March 31, 2004, all five of the Commissioners of the Federal Communications Commission (FCC) wrote a letter to telecommunications carriers and trade associations regarding the opinion [62 pages in PDF] of the U.S. Court of Appeals (DCCir) in USTA v. FCC, vacating parts of the FCC's latest rules (contained in the triennial review order) regarding the unbundling requirements of ILECs. The letter states that the FCC will seek an extension of the Court of Appeals' stay of its vacatur. The letter also encourages the incumbent and competitive carriers, and their trade groups, to use this time to negotiate. See, letter [PDF] sent to CompTel, and statement [PDF] released by the FCC. See also, story titled "FCC to Seek Extension of Stay of DC Circuit Vacatur of TRO" in TLJ Daily E-Mail Alert No. 867, April 1, 2004.

The triennial review order (TRO) addresses the Section 251 unbundling obligations of ILECs. Unbundled network elements (UNEs) are those portions of telephone networks that the ILECs, such as SBC, must make available to competing carriers at regulated rates, such as AT&T and MCI WorldCom, seeking to provide telecommunications services.

FCC Chairman Michael Powell (at right) stated in a release [PDF] on April 5 that "This is an encouraging sign that companies have taken the Commission's call for negotiations to heart. And more importantly, this demonstrates that commercial, market-based agreements can be accomplished. I hope this paves the way for further negotiations and contracts -- so that America's telephone consumers have the certainty they deserve."

Similarly, FCC Commissioner Kathleen Abernathy stated in a release [PDF] that "I am extremely pleased by the announcement that SBC Communications and Sage Telecom, a UNE-P provider, have reached a commercial agreement that will govern Sage's use of SBC’s network over the next seven years. I applaud the parties for coming to the bargaining table in good faith."

She added that "This agreement illustrates that searching for compromise is a worthwhile endeavor. I hope that incumbent LECs and competitors will soon reach additional agreements that narrow the range of disputed issues and eliminate the need for continued litigation. Consumers will be the winners if companies devote their resources to competing in the marketplace, rather than in the courtroom."

USTA P/CEO Walter McCormick stated in a release that "This is proof positive that free markets can work in telecommunications as they do throughout the U.S. economy.  Just days after Chairman Powell's call, we have our first agreement. This is real-world evidence that we do not need to spend months and years in court defending the past and putting future telecom investment and job creation on hold. All it takes to move forward constructively for the country is reasonable people sitting down in good faith at the negotiating table." The USTA membership includes ILECs.

CompTel/ASCENT and the Association for Local Telecommunications Services (ALTS) released a proposed framework for negotiations.

Cable Companies Seek Stay of Brand X Mandate

4/5. The National Cable and Telecommunications Association (NCTA), and some cable companies, filed a motion [15 pages in PDF] with the U.S. Court of Appeals (9thCir) in Brand X v. FCC. The motion, which is titled "Cable Intervenor's Motion for Stay of the Mandate", requests the Court "to stay the mandate ... pending the filing of a petition for writ of certiorari in the Supreme Court".

The motion was filed by the National Cable and Telecommunications Association, Charter Communication, Inc., Cox Communications, Inc., Time Warner, Inc., and Time Warner Cable. See also, NCTA release.

On March 14, 2002, the FCC adopted a Declaratory Ruling and Notice of Proposed Rulemaking [75 pages in PDF]. The Declaratory Ruling (DR) component of this item states that "we conclude that cable modem service, as it is currently offered, is properly classified as an interstate information service, not as a cable service, and that there is no separate offering of telecommunications service."

On October 6, 2003, the Court of Appeals issued its opinion [39 pages in PDF] (also published at 345 F.3d 1120) vacating the FCC's declaratory ruling. See, story titled "9th Circuit Vacates FCC Declaratory Ruling That Cable Modem Service is an Information Service Without a Separate Offering of a Telecommunications Service" in TLJ Daily E-Mail Alert No. 754, October 7, 2003.

On April 1, the Appeals Court denied petitions for rehearing en banc. See, story titled "9th Circuit Denies Rehearing in Brand X v. FCC" in TLJ Daily E-Mail Alert No. 868, April 2, 2004.

ICANN Moves to Dismiss Most of VeriSign's Wildcard Complaint

4/5. The Internet Corporation for Assigned Names and Numbers (ICANN) filed a motion and memorandum in support [33 pages in PDF] with the U.S. District Court (CDCal) to dismiss most of Verisign's claims in its suit regarding the ICANN's reaction to Verisign's use of a wildcard.

The ICANN demanded that VeriSign undo its wildcard feature changes that caused misspelled and/or unassigned domain names with the .com or .org top level domain to be redirected to a VeriSign page. VeriSign called this its "Site Finder" service.

The ICANN argues that various of VeriSign's claims, including those for violation of Section 1 of the Sherman Act, for injunctive relief for breach of contract, for damages for breach of contract, for interference with contractual relations, for specific performance of contract, be dismissed for failure to state a claim upon which relief may be granted.

See also, stories titled "ICANN Demands That VeriSign Cease Wildcard Feature" in TLJ Daily E-Mail Alert No. 753, October 6, 2003; "VeriSign Refuses to Suspend Deployment of Wildcard Service" in TLJ Daily E-Mail Alert No. 744, September 23, 2003; and "ICANN Asks VeriSign to Suspend Wildcard Service" in TLJ Daily E-Mail Alert No. 743, September 22, 2003.

This case is Verisign, Inc. v. ICANN, U.S. District Court for the Central District of California, D.C. No. CV 04-1292 AHM (CTx), Judge Howard Metz presiding.

Google's New Free E-Mail Service Starts Privacy Debate

4/5. Google announced on April 1 that it "is testing a preview release of Gmail -- a free search-based webmail service with a storage capacity of up to eight billion bits of information, the equivalent of 500,000 pages of email. Per user." See, Google release. The announcement has initiated discussions of the privacy consequences of its Gmail service.

On another web page Google states that "There are no pop-ups or banner ads in Gmail. Gmail does include relevant text ads that are similar to the ads appearing on the right side of Google search results pages. The matching of ads to content is a completely automated process performed by computers using the same technology that powers the Google AdSense program. This technology already places targeted ads on thousands of sites across the web by quickly analyzing the content of pages and determining which ads are most relevant to them. No humans read your email to target the ads, and no email content or other personally identifiable information is ever provided to advertisers."

While many chat room and discussion thread participants have praised the new service, and Google, some people, such as Simon Davies of Privacy International and Kevin Bankston of the Electronic Frontier Foundation, have complained about privacy implications of computer scanning of the content of e-mail in order to match ads.

Meanwhile, Rob Atkinson of the Progressive Policy Institute (PPI), wrote a essay titled "Google E-mail, What's All the Fuss About?" that defends Google's new service.

Atkinson is the Director of the PPI's Technology and New Economy Project. The PPI is a Washington DC based think tank associated with the New Democrats.

He wrote that "we shouldn't let paranoid rhetoric from privacy advocates stop this or other similar types of consumer-friendly services."

He first reviewed the benefits of free e-mail services. For example, he points out that "For some low-income Americans who access the Internet at places like libraries and community centers, free email allows them an opportunity to have a mail address without paying monthly ISP fees."

Atkinson continued that "The costs of establishing these free email services are not trivial. Companies must pay for servers and software, as well as staff to run the systems -- the anti-spam efforts alone require a small army of workers. These companies provide this expensive service at no cost to the consumer the way other media companies provide expensive services like free over-the-air TV or free neighborhood newspapers: they pay for it with advertising revenue."

"In an all too predictable response the privacy advocates are howling in protest. Oh no, companies will be reading your email!", said Atkinson. "The reality is much simpler. If companies, either ISP's or free email services, wanted to read your email they could. After all the messages go through their servers. The reality is they all have privacy policies stating very clearly they will not read their user's email nor share it with others. Google's service is no different. Their privacy policy states: ``no human reads your mail to target ads or other information without your consent.´´"

Atkinson concluded that "Those that do mind the advertising can choose another service and pay for the storage. If privacy advocates are worried about this, they have a simple choice -- don't sign up for G-mail. But it would be a shame if their paranoid rhetoric shut down Google's new service and denied that choice to the rest of us."

Also, in addition to privacy, some commenters in websites have raised other policy issues. For example, posters to Slashdot have suggested that the huge amount of free storage could be used by some subscribers to facilitate the distribution of digital pormography.

People and Appointments

4/5. Rep. Amo Houghton (R-NY) will not seek re-election to the House, according to reports published by the Associated Press. The Leader, a newspaper published in Corning, New York, states that Houghton will officially announce his decision on Tuesday in Corning. Houghton is a senior member of the House Ways and Means Committee, and Chairman of its Subcommittee on Oversight. Three other Republican members of the Committee will not seek re-election to the House in November. Rep. Jennifer Dunn (R-WA), previously announced that she will retire. Rep. Mac Collins (R-GA) will run for the Senate. Rep. Scott McGinnis (R-CO) will not seek re-election.

4/5. Matthew Well was named Director of the Office of Public Affairs at the Securities and Exchange Commission (SEC). He will be the SEC's principal spokesman. He will report to the Managing Executive for External Affairs, Laura Cox, who is responsible for management of public affairs, legislative and intergovernmental affairs, and investor education at the SEC. Before joining the SEC, Well was Director of Public Affairs at the American Tort Reform Association. See, SEC release.

4/5. John Loiacono was named Executive Vice President of Software at Sun Microsystems, effective immediately. He was previously SVP of the operating platforms group, and was responsible for the strategic direction of the Solaris and Linux platforms, as well as the Java Enterprise System. See, Sun release.

4/5. Michael Dugan will retire from the positions of President and Chief Operating Officer of EchoStar Communications on April 30, 2004. He will join the Board of Directors on May 6, and serve as an advisor. He will replace Peter Dea on the Board of Directors. See, release.

4/5. Four persons were named to the Department of Commerce's (DOC) National Institute of Standards and Technology's (NIST) Visiting Committee on Advanced Technology (VCAT): Donald Keck (formerly with Corning, and now CTO at Infotonics Technology Center), Edward Noha (Chairman Emeritus of CNA Financial Corporation), Thomas Saponas (former SVP and CTO of Agilent Technologies), and James Serum (President of SciTek Ventures).

More News

4/5. The Supreme Court denied certiorari in Skippy v. Lipton Investments, No. 03-1146, a trademark case involving Skippy peanut butter and a once famous cartoon character named Skippy. See, Order List [10 pages in PDF] at page 4.

People and Appointments

4/3. Former Federal Trade Commission (FTC) Chairman Janet Steiger died. She was Chairman from 1989 through 1995, and a Commissioner until 1997. Before that, she was head of the U.S. Postal Rate Commission. See, statement by FTC Chairman Timothy Muris.

WTO Panel Rules Regarding Telecommunications In Mexico

4/2. A dispute settlement panel of the World Trade Organization (WTO) released its report [256 pages in PDF] regarding telecommunications in Mexico. On August 17, 2000, the U.S. complained to the WTO against Mexico regarding trade in basic and value-added telecommunications services.

The panel found for the U.S. on several matters. It found that "Mexico has not met its GATS commitments under Section 2.2(b) of its Reference Paper since it fails to ensure that a major supplier provides interconnection at cost oriented rates to United States suppliers for the cross-border supply, on a facilities basis in Mexico, of the basic telecommunications services at issue".

It also found that "Mexico has not met its GATS commitments under Section 1.1 of its Reference Paper to maintain ``appropriate measures´´ to prevent anti-competitive practices, since it maintains measures that require anti-competitive practices among competing suppliers which, alone or together, are a major supplier of the services at issue".

It also found that "Mexico has not met its obligations under Section 5(a) of the GATS Annex on Telecommunications since it fails to ensure access to and use of public telecommunications transport networks and services on reasonable terms to United States service suppliers for the cross-border supply, on a facilities basis in Mexico, of the basic telecommunications services at issue"

Finally, it found that "Mexico has not met its obligations under Section 5(b) of the GATS Annex on Telecommunications, since it fails to ensure that United States commercial agencies, whose commercial presence Mexico has committed to allow, have access to and use of private leased circuits within or across the border of Mexico, and are permitted to interconnect these circuits to public telecommunications transport networks and services or with circuits of other service suppliers."

Also, the panel recommended that "that the Dispute Settlement Body request Mexico to bring its measures into conformity wit h its obligations under the GATS."

However, the panel found for Mexico on several matters. It found that "Mexico has not violated Section 2.2(b) of its Reference Paper, with respect to cross-border supply, on a non-facilities basis in Mexico, of the basic telecommunications services at issue".

It also found that "Mexico has not violated Section 5(a) of the GATS Annex on Telecommunications, with respect to the cross-border supply, on a non-facilities basis in Mexico, of the basic telecommunications services at issue".

Finally, it found that "Mexico has not violated Section 5(b) of the GATS Annex on Telecommunications, with respect to the cross-border supply, on a non-facilities basis into Mexico, of the basic telecommunications services at issue."

Pate Criticizes EC Decision Regarding Microsoft

4/2. Hewitt Pate, the Assistant Attorney General in charge of the Department of Justice's Antitrust Division gave a speech in Washington DC in which discussed the European Commission's decision to fine and obstruct Microsoft. He expressed "deep concern about the apparent basis of this decision and the serious potential divergence it represents."

The EC announced its decision in a brief press release on March 24, 2004. However, the EC has yet to release the actual text of its decision. See, story titled "European Commission Seeks 497 Million Euros and Code Removal from Microsoft" in TLJ Daily E-Mail Alert No. 863, March 25, 2004.

Pate said that the EC decision lacks comity, that it will lead to antitrust forum shopping by parties seeking to benefit from regulation, that it may protect competitors rather than competition, and that it may chill lawful product improvement. He described his criticisms as "frank and constructive dialog".

Pate (at right) stated that "since 1996 the Antitrust Division has devoted substantial effort to a Section 2 case aimed at addressing exclusionary conduct by Microsoft. The ultimate outcome reflected not only considerable analysis and enforcement judgments by the Department and many state attorneys general, but also thorough review of those judgments in the U.S. judicial system. The Final Judgment that emerged from that process provides clear and effective protection for competition and consumers by preventing affirmative misconduct by Microsoft that would inhibit competition in middleware programs."

"That protection applies not only to the web browser that was the original subject of the United States' lawsuit, but also to the media player that is one of the subjects of the EC's decision. Given this significant prior U.S. effort, it is unfortunate that considerations of international comity and deference did not, in the Commission's judgment, carry sufficient weight to avoid the significant divergence that has now occurred. In a system of multiple enforcers, the alternative inevitably leads parties who can benefit from regulatory assistance to seek out the most restrictive regulator, and with respect to global products the effects of that regulator's actions may have effects in all markets", said Pate.

He continued that "the important tasks of eliminating affirmative impediments to the healthy functioning of competitive markets should be achieved without unduly hindering successful competitors or imposing burdens on third parties. This fine balance is reflected in the carefully crafted terms of the Final Judgment entered by the District Court. The EC has pursued a different enforcement approach by imposing a 'code removal' remedy that 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. We are concerned that imposing antitrust liability on the basis of product enhancements, even by "dominant" companies, risks protecting competitors, not competition, in ways that may ultimately harm innovation and the consumers who benefit from it."

Pate also stated that "In the case of simply adding admittedly valuable and functional features to an existing product -- as opposed to the contractual terms and exclusionary manipulations of software that were the issue in the U.S. case and that are now prevented by our remedy -- my concern is that decisions of this type may be interpreted by firms in ways that chill lawful product improvements that benefit consumers. If the result is that a dominant firm simply cannot improve its product by the addition of features until that product becomes sufficiently inferior that its dominance is eroded, then the inconsistency with core principles of U.S. antitrust law is plain. Even if a workable standard could be advanced, the potential for anticompetitive and anticonsumer consequences would remain high, both in a U.S. system in which enforcement is amplified through private treble damages litigation, and in an EC system where the threshold for finding ``dominance´´ appears much lower. Again, our concern is that while certain competitors may well benefit from intervention, consumers and innovation ultimately may not."

He also commented on maintaining a "positive relationship" with the EC. He said that "our ability to engage in a frank and constructive dialog reflects the health of that relationship".

Pate also discussed criminal antitrust enforcement, merger enforcement, the First Data/Concord litigation, the News Corp. DirecTV review, and assuring compliance with the Microsoft consent decree.

He also commented on telecommunications generally. He stated that "the Section 271 process has been completed, signaling the openness to local competition. Exciting new and independent avenues of competition in the form of Voice Over IP and growing wireless substitution continue. The long-expected move toward consolidation in the wireless sector may actually be arriving, and other new combinations and competitive approaches may be on the horizon. We will examine each of these as they come with an eye to the many changes occurring in this dynamic sector."

Microsoft and Sun Microsystems Settle

4/2. Microsoft and Sun Microsystems announced that they have settled all pending litigation between the two companies. See, Microsoft release and Sun release.

Both companies stated that "The agreements involve payments of $700 million to Sun by Microsoft to resolve pending antitrust issues and $900 million to resolve patent issues. In addition, Sun and Microsoft have agreed to pay royalties for use of each other's technology, with Microsoft making an up-front payment of $350 million and Sun making payments when this technology is incorporated into its server products."

They also announced "broad technology collaboration". Scott McNealy, Ch/CEO of Sun, stated a joint press conference with Steve Ballmer, CEO of Microsoft, that "We have Solaris, we have Sun, we have Java, but we also have Windows and .NET. We need to interoperate, we need to make these things happen, and we need to just stop the noise and start the collaboration and cooperation and get it together."

In 1997, Sun filed a complaint in the U.S. District Court (NDCal) against Microsoft regarding Java licensing. Microsoft and Sun entered into a TLDA in 1996 under which Sun licensed its Java technology to Microsoft. The two companies went through extensive litigation, and settled that litigation acrimoniously in 2001. Microsoft had decided to develop its own competing programming language, C#, as an alternative to Java. (This case was D.C. No. 97-CV-20884 and App. Ct. No. 99-15046).

See also, TLJ summary of this case (last updated in 2000), with hyperlinks to pleadings, opinions and orders. Microsoft also has a web page with extension links to pleadings, orders, and opinions in this case, and subsequent litigation between the two companies.

Sun filed another complaint in the U.S. District Court (NDCal) against Microsoft alleging violations of antitrust law, and copyright infringement. It built upon on earlier disputes, but also incorporated antitrust. This was just one of several such antitrust actions filed in the wake of the governments' successful antitrust action against Microsoft. The Judicial Panel on Multidistrict Litigation transferred the action to the U.S. District Court (Maryland).

On December 23, 2003, the District Court issued its Java must carry injunction. See, opinion [42 pages in PDF] of the District Court, and story titled "District Court Rules Microsoft Must Carry Sun's Java" in TLJ Daily E-Mail Alert No. 574, December 24, 2002.

However, on June 26, 2003, the U.S. Court of Appeals (4thCir) issued its opinion [28 pages in PDF] vacating the portion of the District Court's preliminary injunction that required Microsoft to incorporate in and distribute with every copy of its Windows PC operating system and every copy of its web browser Sun's Java software. This was also known as the "must carry injunction".

But, the Appeals Court upheld the portion of the District Court's preliminary injunction that prohibited Microsoft from distributing any software developments of Java software, other than products licensed to Microsoft by Sun in the 2001 settlement agreement arising out the prior litigation over Microsoft's alleged misuse of Java source code. (This case is D.C. Nos. CA-02-2739-JFM and CA-00-1332-MDL, and App. Ct. No. 03-1116.)

On April 2, 2004, Microsoft and Sun did not release any settlement agreement(s). They stated in their press releases that in addition to settling their U.S. lawsuit, "Sun is also satisfied that the agreements announced today satisfy the objectives it was pursuing in the EU actions pending against Microsoft."

The press releases elaborate on the nature of the collaboration between the two companies. There is a "Technical Collaboration Agreement" that provides that both companies with "access to aspects of each other's server-based technology and will enable them to use this information to develop new server software products that will work better together." This will eventually include Windows, e-mail and database software. For example, "one of the important elements of large scale computing environments is software to manage user identities, authentication and authorization. As a result of this agreement, Sun and Microsoft engineers will cooperate to allow identity information to be easily shared between Microsoft Active Directory and the Sun Java System Identity Server, resulting in less complex and more secure computing environments."

In addition, "Sun has agreed to sign a license for the Windows desktop operating system communications protocols under Microsoft's Communications Protocol Program, established pursuant to Microsoft's consent decree and final judgment".

Also, "Microsoft may continue to provide product support for the Microsoft Java Virtual Machine that customers have deployed in Microsoft's products."

The two companies also stated that "Sun and Microsoft have agreed that they will work together to improve technical collaboration between their Java and .NET technologies."

Finally, the two companies also stated that "The parties have agreed to a broad covenant not to sue with respect to all past patent infringement claims they may have against each other."

Commerce Department Official Warns of Nano Luddites

4/2. Phillip Bond, Under Secretary of Commerce for Technology, gave a speech titled "A Tale of Two Newspapers: Challenges to Nanotechnology Development and Commercialization".

Bond first reviewed a story published on March 29, 2004 in the Washington Post titled "Nanoparticles Toxic in Aquatic Habitat, Study Finds", and a story published on the same day in the Wall Street Journal that argued that public opposition to technology can arrest technological development. Bond cited the example of 19th Century Luddites.

He therefore encouraged persons involved in nanotechnology, including scientists, engineers, business executives, and venture capitalists, to engage in the public arena.

"We know that in our democratic system, the body politic is susceptible to the virus of fear", said Bond. "When the public catches a public policy cold virus, their elected representatives sneeze. Our democratic institutions are designed to be responsive to the public. To keep nanotechnology moving forward, we must prevent fear from taking hold among the public."

He also reviewed numerous governmental bodies that will play important roles in advancing, or impeding, nanotechnology in the U.S.

People and Appointments

4/2. Jonathan Schwartz was named President and Chief Operating Officer of Sun Microsystems. He was previously Sun's executive vice president of Software. See, Sun release.

More News

4/2. The Office of the U.S. Trade Representative (USTR) released the draft text of the U.S. Morocco Free Trade Agreement. See especially, chapters pertaining to telecommunications [PDF], electronic commerce [PDF], and intellectual property rights [PDF], and side letter regarding optical disks.

4/2. Richard Newcomb, Director of the Department of the Treasury's (DOT) Office of Foreign Assets Control (OFAC) wrote a letter [5 page PDF scan] to counsel for the Institute of Electrical and Electronic Engineers (IEEE) stating that the OFAC does not regulate the peer review process, as well as the process of style and copy editing, with respect to scholarly papers submitted by authors in a sanctioned country. Thus, the International Emergency Economic Powers Act (IEEPA) and the Trading with the Enemy Act (TWEA) do not prevent scientific communities in sanctioned countries, such as Iran and Cuba, from publishing their works in U.S. scholarly journals. See, DOT release and IEEE release.

9th Circuit Denies Rehearing in Brand X v. FCC

4/1. The U.S. Court of Appeals (9thCir) denied petitions for rehearing en banc in Brand X Internet Services v. FCC. The Court of Appeals previously vacated the FCC's Declaratory Ruling regarding the regulatory classification of cable modem service. FCC Chairman Powell expressed disappointment, but has not yet stated what the FCC's next action will be.

Background. On March 14, 2002, the FCC adopted a Declaratory Ruling and Notice of Proposed Rulemaking [75 pages in PDF]. The Declaratory Ruling (DR) component of this item states that "we conclude that cable modem service, as it is currently offered, is properly classified as an interstate information service, not as a cable service, and that there is no separate offering of telecommunications service." This item is FCC 02-77 in Docket No. 00-185 and Docket No. 02-52. See also, March 14 FCC release.

Brand X, EarthLink, the State of California, and the Consumer Federation of America filed petitions for review in which they argued that cable modem service is both an information service and a telecommunications service, and is therefore subject to regulation on a common carriage basis. That is, they argue that cable broadband providers must be required to let other internet service providers (ISPs) use their facilities.

On October 6, 2003, a three judge panel of the Court of Appeals issued its opinion [39 pages in PDF] (which is also published at 345 F.3d 1120) vacating the FCC's declaratory ruling that cable modem service is an information service, and that there is no separate offering as a telecommunications service.

The Court of Appeals wrote that its opinion was solely a matter of stare decisis. That is, it wrote that it was bound by its previous opinion in AT&T v. City of Portland, 216 F.3d 871 (2000).

See, story titled "9th Circuit Vacates FCC Declaratory Ruling That Cable Modem Service is an Information Service Without a Separate Offering of a Telecommunications Service" in TLJ Daily E-Mail Alert No. 754, October 7, 2003; and story titled "Reaction to 9th Circuit Opinion in Brand X Internet Services v. FCC" in TLJ Daily E-Mail Alert No. 756, October 9, 2003.

On December 3, 2004, the FCC filed a Petition for Rehearing En Banc [19 pages in PDF] arguing, among other things, that the three judge panel of the Court of Appeals erred by not applying the Chevron doctrine. See, Chevron U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984). See also, story titled "FCC Files Petition for Rehearing En Banc in Brand X Case" in TLJ Daily E-Mail Alert No. 793, December 5, 2003.

Reaction. FCC Commissioner Michael Powell released a statement [PDF]. "I am disappointed that the Court declined to address the merits of the Commission's policy that was carefully developed over the past several years."

"The Commission has worked tirelessly to advance economic growth and investment in high-speed Internet networks. By standing on a prior decision, this court, as Judge O'Scannlain noted in October, ``effectively stops a vitally important policy debate in its tracks.´´" Powell (at right) added that "This decision also prolongs uncertainty to the detriment of consumers. That is why we will study our options and explore how to continue to advance broadband deployment for all Americans."

In contrast, FCC Commissioner Michael Copps stated in a release that "This is a good day for consumers and Internet entrepreneurs. I look forward to the start of a fresh dialogue on broadband service at the FCC."

Dave Baker, EarthLink VP of Law and Public Policy, stated in a release that "Yesterday’s decision by the Ninth Circuit confirms what EarthLink has been saying for over five years now, that cable modem service contains a telecommunications service. As the Court noted in its decision last October, ‘The practical result of such a classification is that cable broadband providers would be required to open their lines to competing ISPs.' Cable modem users deserve choice in high-speed Internet providers. Yesterday's ruling is another step towards finally affording them that choice."

FCC Alternatives. The FCC could seek review by the U.S. Supreme Court. The 9th Circuit has the highest reversal rate of all of the circuits.

Alternatively, the FCC might simply ignore the 9th Circuit. Judge Diarmuid O'Scannlain, who was a member of the three judge panel, wrote in a concurring opinion that "Given the importance of the regulatory classification of broadband internet service, one wonders whether our decision today will prompt the FCC to follow the example of the Social Security Administration, the National Labor Relations Board, and the Internal Revenue Service, among other federal agencies, in adopting a policy of ``nonacquiescence´´ in the face of court rulings with which the agency disagrees."

Ignoring the 9th Circuit is made easier by the 9th Circuit's own frequent disregard of federal statutes, other circuits, and even the Supreme Court.

Abernathy Addresses Telecommunications Security

4/2. Federal Communications Commission (FCC) Commissioner Kathleen Abernathy gave a speech titled "Telecommunications Security: Key Issues Affecting the Public and Private Sectors" at the 7th Annual Midwestern Telecommunications Conference. She briefly reviewed recent security related actions, and ongoing proceedings, at the FCC.

She began with the observation that "We used to worry about things like earthquakes and ice storms, and perhaps teenage computer hackers, but terrorism was not a major concern. Of course, 9-11 changed all of that -- it propelled security issues into the forefront".

Abernathy (at right) also stated that "the FCC’s ongoing rulemakings on broadband services and voice over IP have focused on security issues -- something that probably would not have occurred before 9-11."

One of the points that she made was that "the FCC recently revised its rules concerning the universal service subsidy mechanism for rural health care clinics, and one of our primary objectives in doing so was to ensure that regional hospitals and rural clinics are interconnected in the event of a bioterrorism incident."

This is a reference to the FCC's "Order, Order on Reconsideration, and Further Notice of Proposed Rulemaking" in WC Docket No. 02-60, announced on November 13, 2003, and released on November 17. In the entirety of this 69 page report and order [PDF], the word "bioterrorism" appears in only one footnote. The report and order also gives brief reference to "biological" attacks, but only as one possible scenario in the broader category of natural disasters and public health emergencies.

Commission Michael Copps mentioned "bio-terrorism" in his separate statement [PDF], and Commissioners Michael Powell and Jonathan Adelstein referenced biological attacks in their statements. But, Commissioner Abernathy did not mention this issue in her separate statement [PDF].

See also, story titled "FCC Expands Universal Service Support for Rural Clinics and Telemedicine" in TLJ Daily E-Mail Alert No. 779, November 14, 2003.

Senators Bash FASB Stock Options Proposal and Class Action Lawyers

4/1. Sen. John Ensign (R-NV), Sen. George Allen (R-VA), and Sen. John Warner (R-VA) and  spoke in the Senate in support of S 1890, the "Stock Option Accounting Reform Act", a bill that would require expensing of stock options for only the CEO and the next four highest paid officers of a company.

On March 31, 2004, the Financial Accounting Standards Board (FASB) released a document titled "Exposure Draft, Share-Based Payment, an Amendment of FASB Statements No. 123 and 95" that proposes that companies must expense stock option plans for all employees.

The FASB summarized its report in a release. It wrote that "The exposure draft covers a wide range of equity-based compensation arrangements. Under the Board’s proposal, all forms of share-based payments to employees, including employee stock options, would be treated the same as other forms of compensation by recognizing the related cost in the income statement. The expense of the award would generally be measured at fair value at the grant date. Current accounting guidance requires that the expense relating to so-called fixed plan employee stock options only be disclosed in the footnotes to the financial statements."

The FASB's comment period for the exposure draft ends June 30, 2004. See, story titled "FASB Proposes Expensing of Stock Options" in TLJ Daily E-Mail Alert No. 867, April 1, 2004.

Sen. Ensign (at right) stated that "Trial lawyers are gearing up for the biggest windfall of the 21st Century. They will be the only winners in this misguided action. FASB's proposed rule would allow companies to either use Black Scholes or a Binomial method to expense options. Both are flawed models and will yield very different and certainly inaccurate results." See, Congressional Record, April 1, 2004, at Page S3562.

He elaborated that "There is no question that market capital will be destroyed when these flawed numbers hit financial statements. Because companies have to choose the method they use to expense, and the inputs that feed into that flawed model, they will most certainly be barraged by class action lawsuits from greedy trial lawyers who will exploit the difficult decisions that FASB is going to force companies to make."

He added that "individual investors will now have absolutely no ability to make meaningful comparisons between companies. Different companies using different flawed valuation models will confuse and mislead the very people FASB purports to help."

Sen. Ensign also made the point that "This move represents a tremendous threat to our global competitiveness. Communist China has, as a part of their 5 year plan, the use of stock options. They are setting out to duplicate the success of our very own Silicon Valley and stock options are at the very heart of the Chinese government plan."

Sen. Allen picked up on this point. He continued that "This news is sure to be greeted with joy by our competitors in the Pacific Rim. Entrepreneurs in Taiwan, Singapore and China will not just continue to focus on software development or gene sequencing there. They will create global competitors there which will be listed on those stock markets. They will be free to offer stock options without the burden of expensing and our most talented people will flock there, just as they flocked to the Silicon Valley and Virginia when our technology industries were built. I find it distressing that a communist country, the People's Republic of China, has companies attracting entrepreneurial people and customers with stock options. Meanwhile, here in America an unelected, prejudicial board wishes to stop such employee ownership, motivation and success to Americans. This proposal will harm the ability of innovative American companies to successfully compete."

Sen. Warner also spoke in the Senate about the FASB proposal. He stated that the FASB action "will unequivocally impede economic growth and stifle the economic recovery of our high-tech sector as well as other industries."

He stated that "small companies and start-ups, which depend on employee stock options to attract the smartest and brightest, will be dealt a detrimental blow. The costs associated with the implementation of this new rule will inhibit small business growth. In a time when the United States is struggling to keep more jobs in America, this proposal undermines U.S. competitiveness. Talented and skilled U.S. workers will be forced to look to our competitors, countries such as Taiwan and Singapore, for high paying technology based employment.

S 1890 is sponsored by Sen. Mike Enzi (R-WY), and 16 other Senators. The related bill in the House is HR 3574, also titled the "Stock Option Accounting Reform Act". It is sponsored by Rep. Richard Baker (R-LA), Rep. Anna Eshoo (D-CA), Rep. David Dreier (R-CA), and 98 other Representatives.

The majority of the cosponsors of these bills are Republicans. However, there are Democratic sponsors from states that are home to technology industries.

In California, both Senators, Boxer and Feinstein, are cosponsors. The entire Silicon Valley delegation, Democrats all, are cosponsors -- Rep. Eshoo, Rep. Lofgren, Rep. Tauscher, and Rep. Honda. Other California Democrats who support this bill include Pelosi, Sanchez, Dooley, Filner, and Harmon

From Oregon, Democratic Representatives Wu and Hooley are cosponsors. From Washington, there is Rep. Inslee and Rep. Adam Smith. Finally, from Virginia, there is Rep. Boucher and Rep. Jim Moran. These Democrats are frequently involved in technology related issues.

California Court Rules on Recording of Phone Conversations

4/1. The California Court of Appeal (1/2) issued its opinion [20 pages in PDF] in Kearney v. Solomon Smith Barney, a class action lawsuit alleging illegal recording of telephone conversations by an out of state stock brokerage.

California residents Kelly Kearney and others filed a complaint in Superior Court for San Francisco County, California against an Atlanta, Georgia based stock broker, Solomon Smith Barney (SSB), alleging violation of California state law in connection with SSB's recording of conversations in telephone calls made by the plaintiffs in California to agents of SSB in Georgia.

California Penal Code section 632 (section 632) and Business and Professions Code section 17200 (section 17200) would require the plaintiffs' consent. Georgia state law requires consent of only one party to the conversation. The defendant consented. The recordings were made in Georgia. The trial court sustained the defendant's demurer (that is, SSB prevailed). The Court of Appeal affirmed.

This case is Kelly Kearney, et al. v. Solomon Smith Barney, California Court of Appeal, First Appellate District, Division Two, App. Ct. No. A101477,  an appeal from the San Francisco County Superior Court, Sup. Ct. No. 412197.

People and Appointments

4/1. David Higbee was named Chief of Staff and Deputy Assistant Attorney General for the Antitrust Division of the Department of Justice. Previously, Higbee briefly was a Special Assistant to the President, advising the President on senior appointments and management issues at the Departments of Justice, Department of Homeland Security, Federal Trade Commission (FTC) and other agencies. Before that, he was briefly Deputy Associate Attorney General at the DOJ. Before that he was briefly a Counsel at the DOJ, working on matters involving the Antitrust Division, Tax Division, U.S. Trustee program, Corporate Fraud Task Force, and international issues. He worked for the law firm of Miles & Stockbridge from 1998 through 2001. He was a tax consultant at Deloitte & Touche from 1996 through 1998. He graduated from law school in 1996. He worked in brief stints at the Senate Judiciary Committee in 1996 and at the FTC in 1995-1996. He graduated from Brigham Young University, in the state of Utah, in 1993. Sen. Orrin Hatch (R-UT), is the Chairman of the Senate Judiciary Committee, which oversees the Antitrust Division. See, DOJ release.

4/1. Jeff Clarke was named Executive Vice President and Chief Financial Officer of Computer Associates International, Inc. (CA). He replaces Douglas Robinson as CFO, who has served on an interim basis for six months. Robinson will continue at CA as SVP for Finance, and will report to Clarke. See, CA release. CA's accounting practices have attracted the attention of the Securities and Exchange Commission (SEC). On January 12, 2004, CA announced in a release that it "received a ``Wells Notice´´ from the staff of the SEC. The Wells Notice notifies the company that the SEC staff is considering recommending that the SEC bring a civil enforcement proceeding against CA for possible violations of the federal securities laws arising from CA's premature recognition of revenue from software license contracts in CA's fiscal year ending March 31, 2000, including revenue from contracts that were not fully executed or otherwise finalized until after the quarter in which the revenue associated with such contracts had been recognized." See also, story titled "SEC Files Complaint Against Former Computer Associates Executive" in TLJ Daily E-Mail Alert No. 823, January 26, 2004.

More News

4/1. A trial jury of a trial court in Erie County, in the state of New York, returned a verdict of guilty against Howard Carmack on charges of identity theft and falsifying business records in connection with sending hundreds of millions of spam e-mail messages with forged header information. The NY Attorney General's office stated in a release that this case is the first prosecuted by the Attorney General's office under New York's identity theft statute.

4/1. The Computer & Communications Industry Association (CCIA) filed an amicus curiae brief [27 pages in PDF] with the U.S. Court of Appeals (FedCir) in Chamberlain v. Skylink regarding the anti-circumvention provisions of the DMCA (17 U.S.C. § 1201) and interperability. The CCIA brief states that "In this case, Chamberlain attempts to use Section 1201 of the DMCA to thwart competition between its transmitters and the Model 39 transmitters manufactured by Skylink Technologies. Chamberlain argues that in order to communicate commands to Chamberlain garage door openers, Skylink’s transmitters circumvent a technological protection measure designed to prevent non-Chamberlain transmitters from interacting with the software in Chamberlain receivers. Chamberlain asserts that by manufacturing transmitters capable of this circumvention, Skylink has violated 17 U.S.C.§ 1201(a)(2)." The CCIA concludes that "Interoperability is critical to competition in the computer industry. In turn, reverse engineering and subsequent use of the interface specifications learned through reverse engineering are critical to achieving interoperability. Congress inserted Section 1201(f) into the DMCA to insure that the prohibition of circumvention of technological protection measures did not interfere with interoperability." The brief was written by Jonathan Band and Matthew Schruers of the Washington DC office of the law firm of Morrison & Foerster (MoFo). This case is The Chamberlain Group, Inc. v. Skylink Technologies, Inc., U.S Court of Appeals for the Federal Circuit, App. Ct. No. 04-1118, an appeal from the U.S. District Court for the Northern District of Illinois, D.C. No. 02-CV-6376).

4/1. The Dow Jones & Company announced that "American International Group Inc., Pfizer Inc., and Verizon Communications Inc. will replace AT&T Corp., Eastman Kodak Co. and International Paper Co. in the Dow Jones Industrial Average, effective with the opening of trading on April 8". See, release.

Go to News from March 26-31, 2004.