News from May 16-20, 2004

Sensenbrenner and Conyers Introduce Bill to Modify Antitrust Law in Reaction to Trinko and Goldwasser Cases

5/20. Rep. James Sensenbrenner (R-WI) and Rep. John Conyers (D-MI), the Chairman and ranking Democrat on the House Judiciary Committee (HJC), introduced HR 4412, the "Clarification of Antitrust Remedies in Telecommunications Act of 2004", a bill that provides that violations of the Telecommunications Act of 1996 may be actionable under antitrust law. It comes in reaction to the Supreme Court's decision in January in the Trinko case.

The bill would amend the Clayton Act to provide that "It shall be unlawful for an incumbent local exchange carrier or an affiliate to create or to preserve (or to attempt to create or to preserve) a monopoly in any part of commerce by using its network (or by providing a service over its network) to engage in an anti-competitive practice (which may include a failure to comply with either section 251(c) or 271 of the Communications Act of 1934 or with any agreement, rule, or order in effect under such section)." (All parentheses in original.)

The bill would further provide that "Whether any agency regulates or is authorized to consider, review, or redress the conduct proscribed by this section shall not affect the applicability of this section, except that conduct required by an agency regulation or rule shall not be construed to create liability under this section."

The bill would affect the availability of antitrust remedies for violation of Telecommunications Act of 1996, as construed in the opinion [22 pages in PDF] of the Supreme Court in Verizon v. Trinko and the opinion of the U.S. Court of Appeals (7thCir) in Goldwasser v. Ameritech.

The Supreme Court held that a claim alleging a breach of an incumbent local exchange carrier's (ILEC) duty under the 1996 Telecom Act to share its network with competitors does not state a violation of Section 2 of the Sherman Act. See, story titled "Supreme Court Holds That There is No Sherman Act Claim in Verizon v. Trinko" in TLJ Daily E-Mail Alert No. 815, January 14, 2004.

Justice Antonin Scalia wrote the opinion of the Court. He reviewed the obligations of ILECs (in this case, Verizon) under 47 U.S.C. § 251. He wrote, "That Congress created these duties, however, does not automatically lead to the conclusion that they can be enforced by means of an antitrust claim."

"Indeed, a detailed regulatory scheme such as that created by the 1996 Act ordinarily raises the question whether the regulated entities are not shielded from antitrust scrutiny altogether by the doctrine of implied immunity" Scalia continued. "Congress, however, precluded that interpretation. Section 601(b)(1) of the 1996 Act is an antitrust-specific saving clause providing that ``nothing in this Act or the amendments made by this Act shall be construed to modify, impair, or supersede the applicability of any of the antitrust laws.´´"

"But just as the 1996 Act preserves claims that satisfy existing antitrust standards, it does not create new claims that go beyond existing antitrust standards; that would be equally inconsistent with the saving clause's mandate that nothing in the Act ``modify, impair, or supersede the applicability´´ of the antitrust laws." Hence, Scalia next examined whether Verizon violated  "pre-existing antitrust standards".

Scalia concluded that pre-existing antitrust standards do not make Verizon's conduct a Sherman Act case. Moreover, wrote Scalia, the Supreme Court should not now add a new standard. He added that "we do not believe that traditional antitrust principles justify adding the present case to the few existing exceptions from the proposition that there is no duty to aid competitors."

On November 19, 2003, the House Judiciary Committee held an oversight hearing titled "Saving the Savings Clause: Congressional Intent, the Trinko Case, and the Role of the Antitrust Laws in Promoting Competition in the Telecom Sector". Rep. Sensenbrenner wrote in his prepared statement that "If Trinko is overturned, the historic role of the antitrust laws in promoting competition in the telecom sector and the clear intent of Congress will be judicially subverted. If this occurs, a swift and decisive legislative correction will be necessary and it will be forthcoming. Everyone can rest assured that the antitrust laws will continue to apply to this industry."

HR 4412 would restore the availability of an antitrust remedy. The House Judiciary Committee issued a release on May 20 that states that "The Telecom Act of 1996 contained a clear and forceful antitrust savings clause to preserve the application of the antitrust laws in this field. This clause has been eroded by erroneous judicial decisions, including the Goldwasser and Trinko cases. H.R. 4412, the “Clarification of Antitrust Remedies in Telecommunications Act of 2004," reaffirms that violations of the Telecom Act may be actionable under the antitrust laws. The Sensenbrenner/Conyers legislation restores the clear meaning of the Telecom Act to ensure that the antitrust laws continue to provide a catalyst to promote competition and consumer choice in the telecommunications marketplace."

Robert McDowell of CompTel/ASCENT, a group that represents competitive local exchange carriers, praised the bill. He wrote in a statement that "The legislation introduced today eliminates the illogical conclusion that a violation of the 1996 Telecommunications Act could serve as a defense against anticompetitive behavior that should be punishable by antitrust laws. This legislation is urgently needed because the Trinko decision, in combination with the Federal Communications Commission's consistent failure to enforce the Telecom Act, has empowered the Bells to believe that they are above the law."

The Congress is in the later part of the second session of the current Congress, with House, Senate and Presidential elections increasing commanding the attention of legislators and others. It is unlikely that a bill of this nature could be enacted at this late stage of the current Congress.

FBI Director Mueller Appears Before Senate Judiciary Committee

5/20. The Senate Judiciary Committee held a hearing titled "FBI Oversight: Terrorism and Other Topics". The only witness was Robert Mueller, Director of the Federal Bureau of Investigation.

Much of the hearing focused on non-technology related topics, such as treatment of prisoners in Iraq and elsewhere, FBI and CIA interrogation practices, and translations and the hiring of linguists by the FBI.

However, the hearing also addressed extension of various provisions of the USA PATRIOT Act, and the use of information technology at the FBI.

Mueller submitted prepared testimony, much of which he read at the hearing.

See, full story.

Senate Judiciary Committee Holds Business Meeting

5/20. The Senate Judiciary Committee held an executive business meeting to mark up bills and consider nominations.

The Committee approved, without objection, and without debate, the nomination of Jon Dudas to be Director of the U.S. Patent and Trademark Office (USPTO). See, story titled "Senate Judiciary Committee Holds Hearing on Nomination of Dudas to Head the USPTO" in TLJ Daily E-Mail Alert No. 894, May 10, 2004.

The Committee held over, yet again, the nomination of Henry Saad to be a Judge of the U.S. Court of Appeals (6thCir).

The Committee amended and approved S 1933, the "Enhancing Federal Obscemity Reporting and Copyright Enforcement (ENFORCE) Act of 2004". See, following story, titled "Senate Judiciary Committee Approves ENFORCE Act".

The Committee held over S 1635, the "L-1 Visa (Intracompany Transferee) Reform Act of 2003".

The Committee also held over S 2013, the "Satellite Home Viewer Extension Act of 2004".

Senate Judiciary Committee Approves ENFORCE Act

5/20. The Senate Judiciary Committee amended and approved, S 1933, the "Enhancing Federal Obscemity Reporting and Copyright Enforcement (ENFORCE) Act of 2004".

Sen. Orrin Hatch (R-UT), Sen. Dianne Feinstein (D-CA) and Sen. John Cornyn (R-TX) introduced this bill on November 21, 2003. See, story titled "Sen. Hatch Introduces Bill With Numerous Amendments to Copyright Act" in TLJ Daily E-Mail Alert No. 791, December 3, 2003. (This story summarizes this bill in detail.)

The bill contains provisions regarding harmless errors in copyright registration certificates, remedies for copyright infringement, the antitrust exemption for negotiations regarding compulsory licensing, Department of Justice (DOJ) investigation of crimes involving computer hacking and intellectual property, authorization of appropriations for the DOJ, and reporting to Congress.

The Committee approved an amendment at its executive business meeting on May 20 that contains technical changes. There was no debate, discussion, or roll call vote. The amendment, and the bill as amended, were approved without objection.

The amendment changes the title of the bill from ENFORCE Act of 2003 to ENFORCE Act of 2004. In the section regarding harmless errors in registration certificates, it changes the references to "the inaccurate information" to "the inaccuracy of the information".

In the section requiring the DOJ to provide reports to the Congress regarding the number of misdemeanor and felony prosecutions under certain enumerated statutory sections, the amendment adds several statutory sections to the enumeration. It adds 18 U.S.C. §§ 1462, 1464, 1465, 1466, 1466A, and 1470, all of which pertain to obscemity.

Section 1464 criminalizes the broadcasting of obsceme language in a radio broadcast.

Finally, the amendment changes the language in the bill that revises 17 U.S.C. § 115(c)(3)(B), which pertains to the application of antitrust law to negotiations regarding royalties payable under compulsory license. The bill, as amended by the Committee, provides that "Section 115(c)(3)(B) of title 17, United States Code, is amended in the first sentence -- (1) by striking ``under this paragraph´´ and inserting ``under this section´´; and (2) by inserting ``on a nonexclusive basis´´ after ``common agents´´."

House CIIP Subcommittee Holds Hearing on DVD Filtering Technology

5/20. The House Judiciary Committee's Subcommittee on Courts, the Internet and Intellectual Property (CIIP) held a hearing titled "Derivative Rights, Moral Rights, and Movie Filtering Technology".

This hearing addressed DVD filtering technology that enables viewers to play certain movies, with violence, nudity, and/or profanity removed. There is also a pending lawsuit regarding ClearPlay's technology -- Huntsman v. Soderbergh, U.S. District Court for the District of Colorado, D.C. No. 02-1662 (MJW). This case involves legal issues of copyright infringement, derivative works, and Section 43 of the Lanham Act.

Rep. Lamar Smith (R-TX) wrote in his opening statement that "a studio or director should also not be able to use the law to force me or my children to watch a movie in a particular way. And it is unrealistic and impractical to expect parents to monitor their children’s video habits 24 hours a day. They need help and support." He concluded, "ClearPlay the technology does not create derivative works".

Rep. Howard Berman (D-CA), who represents a Los Angeles area district that is home to many people involved in the movie industry, wrote in his opening statement that "I'm not sure any of these issues are ripe for a congressional hearing. The movie studios, directors, and ClearPlay are actively engaged in licensing negotiations to resolve their dispute. As I understand it, those negotiations had been close to a mutually acceptable conclusion. The public posturing and adversarial nature inherent in congressional hearings is bound to set back these negotiations, and thus thwart the stated purpose of this hearing."

Bill Aho, the President of ClearPlay, explained his company's technology in his prepared testimony. He wrote that "
ClearPlay parental controls are a feature available on DVD players, or on any consumer electronics device that plays movies. They work with ClearPlay Movie Filters, which are uniquely created for each movie as it is released on DVD. These filters identify, or tag, frames that have specific content, such as graphic violence, nudity or different kinds of profanity. The customer chooses how to watch the movie -- either with ClearPlay off or with ClearPlay on, using any combination of the 14 ClearPlay Filters, for over 16,000 different potential settings. ClearPlay’s frame-accurate technology seamlessly skips and mutes over objectionable content. It does not dub or add content."

Majorie Heims (Free Expression Policy Project) wrote in her prepared testimony [41 pages in PDF] that "this technology is a bad idea, because it reflects a simplistic and erroneous view of how art affects human beings. It suggests that the way to protect our children and adolescents from controversial or troubling media content is to censor rather than educate them."

See also, prepared testimony of Joanne Cantor (University of Wisconsin) and prepared testimony of Jeff McIntyre (American Psychological Association) regarding the effect of media violence upon children.

Rep. Meek Introduces Bill to Require Federal Privacy Officers

5/20. Rep. Kendrick Meek (D-FL) and others introduced HR 4414 [21 pages in PDF], the "Strengthening Homeland Innovation to Emphasize Liberty, Democracy, and Privacy Act" or the "SHIELD Privacy Act"

Rep. Meek stated in a release that "It would be a hollow victory to win the War on Terror at the cost of our own democratic values, and that’s why this bill is so important -- it will keep federal agencies focused on civil liberties and ensure that law-abiding citizens’ rights are respected".

Rep. Kendrick MeekRep. Meek (at right) is a member of the House Homeland Security Committee.

The bill provides that "The President shall designate a senior official within the Office of Management and Budget as the Chief Privacy Officer, who shall have primary responsibility for privacy policy throughout the Federal Government."

The bill provides that the responsibilities of this Chief Privacy Officer (CPO) shall include "Assuring that the technologies procured and use of technologies by the Federal Government sustain, and do not erode, privacy protections relating to the use, collection, and disclosure of personally identifiable information."

It also provides that "The head of each department and each independent agency in the executive branch shall appoint a senior official of the department or independent agency, respectively, to assure primary responsibility for privacy policy".

The bill would also require the preparation of privacy impact assessments.

The bill would also create an entity titled "Commission on Privacy, Freedom, and Homeland Security". This commission would have authority to hold hearings, issue subpoenas to federal entities, propound interrogatories, and make recommendations. However, it would not possess any administrative, rulemaking, or adjudicatory authority.

People and Appointments

5/20. The Senate confirmed Raymond Gruender to be a Judge of the U.S. Court of Appeals for the 8th Circuit. by a vote of 97-1. See, Roll Call No. 102.

5/20. The Senate confirmed Franklin Van Antwerpen to be a Judge of the U.S. Court of Appeals for the 3rd Circuit by a vote of 96-0. See, Roll Call No. 103.

5/20. The Senate Finance Committee unanimously approved the nomination of Stuart Levey to be Under Secretary of the Treasury for Enforcement.

5/20. The Senate Finance Committee unanimously approved the nomination of Juan Zarate to be Assistant Secretary of the Treasury (Terrorist Financing and Financial Crimes).

More News

5/20. The Senate Judiciary Committee held a hearing titled "FBI Oversight: Terrorism and Other Topics". The only witness was Robert Mueller, Director of the Federal Bureau of Investigation. The hearing also addressed many topics, including extension of the provisions of the USA PATRIOT Act that are scheduled to sunset, and the use of information technology at the FBI. The next issue of the TLJ Daily E-Mail Alert will contain further coverage.

5/20. Rep. James Sensenbrenner (R-WI) and Rep. John Conyers (D-MI), the Chairman and ranking Democrat on the House Judiciary Committee (HJC), introduced HR 4412, the "Clarification of Antitrust Remedies in Telecommunications Act of 2004", a bill that provides that violations of the Telecommunications Act of 1996 may be actionable under antitrust law. The HJC issued a release that states that the opinion [22 pages in PDF] of the Supreme Court in Verizon v. Trinko and the opinion of the U.S. Court of Appeals (7thCir) in Goldwasser v. Ameritech are "erroneous judicial decisions". The next issue of the TLJ Daily E-Mail Alert will contain further coverage.

5/20. The General Accounting Office (GAO) released a report [pages in PDF] titled "Patents: Information about the Publication Provisions of the American Inventors Protection Act".

House Telecom Committee Holds Hearing on New Technologies

5/19. The House Commerce Committee's Subcommittee on Telecommunications and the Internet held a hearing titled "Competition in the Communications Marketplace: How Convergence Is Blurring the Lines Between Voice, Video, and Data Services". This hearing focused on new technologies, rather than policy. The witnesses largely addressed their companies' products and services. However, several Representatives addressed policy.

See, prepared testimony of witnesses: Jay Birnbaum (Current Communications, which is involved in broadband over poweline), John Burris (Sprint), Jack Jachner (Alcatel), Kevin Leddy (Time Warner Cable), Jonas Neihardt (Qualcomm), and Adriana Rizzo (Verizon).

Verizon's Rizzo talked about Verizon's new iobi service. She also addressed Verizon's deployment of fiber to the premises in the town of Keller, Texas. See, also Verizon release.

Keller is located in the district of Rep. Joe Barton (R-TX), the Chairman of the full Committee. Rep. Barton attended part of the hearing, and submitted a statement for the record. He wrote that the hearing testimony demonstrates that "facilities based competition is here to stay. This competition will greatly benefit consumers through lower prices, more choices and better service".

Rep. Fred UptonRep. Fred Upton (R-MI), the Chairman of the Subcommittee, presided. He said in his opening statement that "In subsequent hearings, we will have a policy discussion about how this convergence -- this blurring of the lines -- should impact our regulatory approach to the marketplace. I, for one, have made no secret of my belief that the legacy stove-pipe regulation perpetrated by the Telecommunications Act of 1996 needs to be revisited given the evolution in technology and the marketplace that was virtually unforeseen at the time of the Act's creation."

Rep. Chip Pickering (R-MS) used his opening statement to advocate HR 4129, the "VOIP Regulatory Freedom Act of 2004". He introduced this bill on April 2, 2004. See, story titled "Sununu and Pickering Introduce VOIP Regulatory Freedom Bills" and story titled "Summary of VOIP Regulatory Freedom Bills", both published in TLJ Daily E-Mail Alert No. 872, April 8, 2004.

Rep. Chris Cox (R-CA) argued that it may be time to terminate the Federal Communications Commission (FCC). See, following story, titled "Rep. Cox Suggests Shutting Down the FCC".

Rep. Greg Walton (R-OR) discussed broadband over powerline and interference with ham radio and aircraft communications. Current Communications' Jay Birnbaum argued that the power levels are very low, so the portion that leaks off the wire is low, and attenuates quickly. He asserted that interference concerns are unfounded.

He also said that Current's technology involves notching, and that it does not use ham radio frequency. He also argued that Current's technology does not pose the hazards that the National Telecommunications and Information Administration (NTIA) raised in its BPL Phase 1 Report, released on April 27, 2004. The full title of this report is "Potential Interference from Broadband over Power Line (BPL) Systems to Federal Government Radio Communications at 1.7 - 80 MHz - Phase I Study".

The Federal Communications Commission (FCC) adopted a NPRM regarding broadband over powerline systems on February 12, 2004. The deadline to submit reply comments is June 1. Current has participated in this proceeding. See, comment [32 pages in PDF] filed on May 3, 2004.

The FCC adopted this NPRM on February 12, 2004. See, story titled "FCC Adopts Broadband Over Powerline NPRM" in TLJ Daily E-Mail Alert No. 836, February 13, 2004. The FCC released the text of this NPRM on February 23, 2004. This NPRM is FCC 04-29 in ET Docket Nos. 03-104 and 04-37. See also, notice in the Federal Register, March 17, 2004, Vol. 69, No. 52, at Pages 12612-12618.

Walter McCormick, P/CEO of the U.S. Telecom Association (USTA), did not testify at the hearing, but released a statement afterwards. He stated that "There is abundant evidence that heavy regulations cannot keep pace with rapid innovation. This hearing was an important foundation for efforts to catch the laws up with our lives and to unleash the full potential of American innovation and free markets in the new communications marketplace."

Rep. Cox Suggests Shutting Down the FCC

5/19. Rep. Chris Cox (R-CA) suggested abolishing the Federal Communications Commission (FCC) because it was created to regulate communications markets characterized by scarcity and lack of competition -- conditions which no longer exist.

Rep. Cox said that rather than rewriting the Communications Act, the Congress should recognize that there is now competition in communications, declare victory, and shut down the FCC. He spoke at the House Commerce Committee's Subcommittee on Telecommunications and the Internet's May 19 hearing titled "Competition in the Communications Marketplace: How Convergence Is Blurring the Lines Between Voice, Video, and Data Services".

Rep. Cox is a senior member of the House Commerce Committee, and its Subcommittee on Telecommunications and the Internet. He is also the Chairman of the House Homeland Security Committee. See, full story.

Sen. Wyden Places Hold on Majoras Nomination

5/19. Sen. Ron Wyden (D-OR) announced in a release his intent to place a hold on the nomination of Deborah Majoras to become Chairman of the Federal Trade Commission (FTC). The hold is not technology related. Sen. Wyden stated that he wants to "protect consumers from high gasoline prices". He added that he has "received no indication from Majoras that under her leadership the agency would take any steps to end numerous and well-documented anti-competitive practices that drive up gasoline prices nationwide and particularly in the Northwest."

Sen. Ron WydenSen. Wyden also spoke at greater length in the Senate about gasoline prices and Majoras. He concluded by stating that "It is my intention to continue to object to Senate consideration of the nominee to head the Federal Trade Commission until that agency is willing to tell the people of our State and the people of this country that there are going to be some changes and there is going to be some competition again in the gasoline markets of our country." See, Congressional Record, May 19, 2004, at Page: S5736-8.

See also, story titled "Muris Resigns, Majoras Nominated" in TLJ Daily E-Mail Alert No. 896, May 12, 2004.

11th Circuit Addresses Loss of Use Damages for Severance of Fiber Optic Cable

5/19. The U.S. Court of Appeals (11thCir) issued its opinion [11 pages in PDF] in MCI v. Mastec, a case regarding the availability of loss of use damages following severance of an underground fiber-optic cable. Rather than decide the case, the Appeals Court certified two questions of law to the Florida Supreme Court.

Mastec severed one of MCI's underground fiber optic cables. MCI was able to reroute traffic on its facilities. MCI filed a complaint in U.S. District Court (SDFl), under diversity jurisdiction, against Mastec. MCI sought to recover for loss of use of the cable for the time that it remained severed. Since this is a diversity case, the applicable law is that of the state, Florida, where the case arose.

The District Court held that MCI was not entitled to loss of use damages. The Appeals Court held that this case involves unsettled issues of Florida state law, and certified two questions to the Supreme Court of Florida.

First, "Is a telecommunications services carrier entitled to damages for the loss of use of a fiber-optic cable damaged by a defendant when the carrier intended to have the full capacity of the damaged cable available for its use should the need have arisen, but the carrier was able to accommodate within its own network the telecommunications traffic carried by the damaged cable and the carrier presented no evidence that it suffered loss of revenue or other damages during the time the cable was unavailable?"

Second, "If the telecommunications carrier is entitled to loss of use damages, does the pre-injury value of the damaged cable establish a limit to those damages, or should the fair market rental value of an equivalent replacement cable for the time reasonably necessary to make repairs serve as the measure of loss of use damages?"

This case is MCI WorldCom Network Services, Inc. v. Mastec, Inc., App. Ct. No. 03-13022, an appeal from the U.S. District Court for the Southern District of Florida, App. Ct. No. 03-13022, D.C. No. 01-02059-CV-ASG.

FRB's Bies Addresses Role of Info Tech in Corporate Governance

5/19. Federal Reserve Board Governor Susan Bies gave a speech titled "Corporate Governance: Where Do We Go From Here?", in which she talked about the role of information technology in corporate governance.

Susan BiesBies (at right) spoke at a conference of the Institute of Internal Auditors Financial Services in Arlington, Virginia on May 19, 2004.

She said that "I would also like to add that internal auditors are the eyes and ears of the audit committee around the organization. As the complexity of financial products and technology has grown, the financial services industry has increased its reliance on vendors and third-party service providers for a host of technological solutions. Be mindful that these outsourcing arrangements may pose additional types of risks for the organization, such as security or data privacy risks. Internal auditors should remain vigilant in identifying risks as the organization changes or new products are delivered to the marketplace."

She continued that "Operations risk was a primary focus of Y2K preparations a few years ago. Identification of critical computer-reliant systems and infrastructures gave us a much clearer understanding of the financial system's dependence on technology and of the complexities of managing operations risk. Once institutions understood the considerable business risks that would result if they could not serve customers, they moved the management of Y2K preparations out of the back office and onto the desks of product-line and senior managers -- where it belonged."

Moreover, she said that "it became clear that financial institutions needed to plan for the possibility that an external threat -- a failure in the critical infrastructure or by a major service provider or material counterparty -- might severely impact a financial institution's business operations. There was an increased understanding of the interdependencies across market participants and of how credit, liquidity, and operations risks at one organization could have a cascading impact on other financial institutions."

People and Appointments

5/19. The U.S. Court of Appeals (6thCir) issued its opinion in US v. Traficant, affirming the criminal conviction of former Rep. James Traficant (D-OH). He was a member of the House of Representatives from 1985 through 2002.

More News

5/19. The House Government Reform Committee's Subcommittee on Technology, Information Policy, Intergovernmental Relations and the Census held a hearing titled "Federal Enterprise Architecture: A Blueprint for Improved Federal IT Investment & Cross-Agency Collaboration and Information Sharing".

5/19. The Senate Commerce Committee postponed its hearing titled "From Public Service to Private Sector: Spinning the Revolving Door for Personal Gain". The hearing has not yet been rescheduled.

5/19. The Federal Communications Commission (FCC) held a day long event titled "Wireless Broadband Forum". See, notice and agenda [PDF].

5/19. Microsoft published in its web site an opinion piece titled "Patents Pending: A vital engine of the U.S. economy needs a tune-up". The piece states that "By enabling inventors to profit from their creativity, patents became a powerful engine for progress." It adds that there is now a backlog of patent applications, and therefore, the Congress should pass the USPTO fee bill. The House passed this bill, HR 1561, the "United States Patent and Trademark Fee Modernization Act of 2004", on March 3, 2004 by a vote of 379-28. See, story titled "House Passes USPTO Fee Bill" in TLJ Daily E-Mail Alert No. 849, March 4, 2004. The Senate Judiciary Committee (SJC) unanimously approved this bill on April 29, 2004. The full Senate has yet to act. The bill contains increases in user fees that implement the U.S. Patent and Trademark Office's (USPTO) 21st Century Strategic Plan. It also provides for U.S. outsourcing of patent searches, and an end to the diversion of user fees to subsidize other government programs.

Bush Will Renominate Alan Greenspan

5/18. President Bush announced his intent to nominate Alan Greenspan to be Chairman of the Board of Governors of the Federal Reserve System for a term not to exceed four years. Greenspan has been Chairman since 1987. He is also Chairman of the Federal Open Market Committee.

Bush stated in a White House release that "Sound fiscal and monetary policies have helped unleash the potential of American workers and entrepreneurs and America's economy is now growing at the fastest rate in two decades. Alan Greenspan has done a superb job as Chairman of the Board of Governors of the Federal Reserve System, and I have great confidence in his economic stewardship".

Alan Greenspan

Greenspan has spoken and testified many times about the role of information technology, communications, and innovation in the economy.

He argued that the U.S. should focus on the education and retraining of U.S. workers, not on protectionist barriers to outsourcing in a speech on February 20, 2004. See, story titled "Greenspan Addresses Outsourcing" in TLJ Daily E-Mail Alert No. 841, February 23, 2004.

Greenspan generally advocates policies of free trade, free enterprise, and protection of property rights. See for example, prepared testimony of April 4, 2002 for the Senate Finance Committee, and story titled "Greenspan on Trade" in TLJ Daily E-Mail Alert No. 159, April 5, 2001; and speech of December 11, 2003, and story titled "Greenspan Addresses Trade, Jobs, Info Tech, and Creative Destruction" in TLJ Daily E-Mail Alert No. 798, December 12, 2003.

Education is a frequent theme in his speeches -- particularly its effect upon innovation. See, speech of October 29, 2002, and story titled "Greenspan Addresses Education, Knowledge, Innovation and Technology" in TLJ Daily E-Mail Alert No. 540, November 1, 2002.

Greenspan has given several speeches in which he has addressed intellectual property, which he often calls "conceptual property". He has noted the growing importance of conceptual property, but has refrained from taking positions in current debates over what should be the scope of legal protection of intellectual property. See, speech of February 27, 2004, and story "Greenspan Discusses Property Rights in Conceptual Products" in TLJ Daily E-Mail Alert No. 846, March 1, 2004; and speech of April 4, 2003, and story titled "Greenspan Addresses Intellectual Property Laws" in TLJ Daily E-Mail Alert No. 638, April 7, 2003.

He has often addressed the role of information technology on economic productivity. For example, he gave a speech on October 23, 2002 in which he argued that "the pickup in productivity growth since 1995 largely reflects the ongoing incorporation of innovations in computing and communications technologies into the capital stock and business practices." See, story titled "Greenspan Addresses Productivity Gains and Technological Innovation" in TLJ Daily E-Mail Alert No. 543, October 24, 2002.

He has frequently spoken about the impact of information technologies on the financial services sector, such as enabling new products, and better assessment of risks. He has also frequently spoken about the impact of information technology on businesses ability to manage inventory, and quickly identify changes in sales.

U.S. and Australia Sign FTA

5/18. The U.S. and Australia signed a free trade agreement (FTA). Robert Zoellick, the U.S. Trade Representative (USTR), and Mark Vaile, the Australian Minister of Trade, signed the FTA in Washington DC. See, USTR release [PDF] and Australia release.

Robert ZoellickZoellick (at right) stated at the signing ceremony that this FTA is a "state of the art agreement". He said that "In addition to freeing trade in industrial goods, the new FTA removes barriers to agricultural products, investment, government procurement, and services while increasing protection for intellectual property and freeing electronic commerce."

He said that "this FTA will speed planes and ships and megabytes across the Pacific". See, transcript [4 pages in PDF].

To become effective, the U.S. Congress and the Australian Parliament must approve the FTA. Pursuant to trade promotion authority, the Congress can either approve or reject, but not amend, this FTA.

The USTR also released the text [267 pages in PDF] of the FTA. The agreement includes extensive provisions regarding electronic commerce, patents, trade secrets, trademarks, cyber-squatting, piracy and counterfeiting. See, story titled "US and Australia Conclude FTA with Extensive Info Tech Provisions" in TLJ Daily E-Mail Alert No. 833, February 10, 2004.

Commerce Department Releases Report on Standards and Trade Barriers

5/18. The Department of Commerce (DOC) released a report [35 pages in PDF] titled "Standards and Competitiveness -- Coordination for Results".

Donald EvansSecretary of Commerce Donald Evans (at right) spoke about the report at an event at the DOC. He stated that "Standards and related technical regulations affect an estimated 80% of world commodity trade. One thing is clear -- the market benefits from fair and equitable standards: They foster international trade; They encourage competition; They spread new technologies; They protect consumers from unsafe or substandard products; and They enable compatibility among products and systems."

But, Evans said, "But, standards can be crafted to close markets and give unfair advantages that tilt a fair, competitive playing field." See, transcript.

The report states that "Standards are a critical issue for manufacturing competitiveness in global markets, as they can facilitate international trade, or they may impede access to foreign markets. Many in U.S. industries view standards as the principal non-tariff barriers in markets around the world."

It summarizes DOC standards related activities and provides numerous recommendations regarding future DOC activities.

The report addresses the use of standards as trade barriers in the PR China. It states that "Input from industry clearly showed significant concern with China and its development and promotion of domestic standards. Industry representatives reported that China’s rulemaking and standards development process lacks transparency. Additionally, a 2004 U.S. General Accounting Office survey of American companies with a presence in China found that standards and certification issues ranked first in importance on a list of specific China WTO implementation commitment areas, above customs procedures, tariffs, and intellectual property rights."

See, GAO report [61 pages in PDF] titled "World Trade Organization: U.S. Companies' Views on China's Implementation of Its Commitments".

The report states that "These results suggest a growing awareness in the business community of standards as a key trade issue for U.S. exporters to China. The Department should expand on current programs relating to standards in China, including initiatives announced by the Secretary in Beijing in October 2003."

National Association of Manufacturers (NAM) President Jerry Jasinowski stated that "Incompatible standards and unfair barriers to testing and certification not only drive up the cost of world trade, but also are absolute trade barriers that keep smaller companies out of world markets as surely as quotas or prohibitive tariffs."

Rep. Eshoo Addresses E-911

5/18. Rep. Anna Eshoo (D-CA) spoke in the House regarding E-911 calls. The House passed HR 2898, the "E-911 Implementation Act of 2003" last November. She called upon the Senate to pass the bill.

Rep. Anna EshooRep. Eshoo (at right) said that "every day in America there are over 150,000 911 calls made from a cell phone. This represents more than 25 percent of all 911 calls made in our country. Each one of these calls is singly one of the most important ones that an individual will make."

"Yet most Americans would be shocked to learn that the majority of our country's Public Safety Answering Points still do not have Enhanced 911, or E-911, technology needed to track the location of the emergency caller on their mobile phone. This is unacceptable. Most, if not all, mobile phone users buy them for the added security of knowing that if they need to make a 911 call, help will be on the way shortly", said Rep. Eshoo.

"I am proud that the House, supported by the E-911 Caucus, passed legislation providing Federal grants to enhance our emergency communications system and make E-911 a reality. Now it is time for the other body to act." See, Congressional Record, May 17, 2004 at Page H3096.

Rep. John Shimkus (R-IL), the sponsor of the bill, spoke in the House on May 5. He too urged the Senate to pass the bill. See, Congressional Record, May 5, 2004, at Pages H2551-2.

On November 4, 2003, the House passed HR 2898, the "E-911 Implementation Act of 2003", by unanimous voice vote. The bill, which is sponsored by Rep. Shimkus, Rep. Eshoo and others, would authorize the appropriation of $500 Million in grants over five years to upgrade public safety answering point (PSAP) facilities, establish an E-911 Coordination Office at the Department of Commerce's (DOC) National Telecommunications and Information Administration (NTIA) to improve coordination among federal, state and local public safety officials, penalize states for redirecting E-911 funds collected from consumer's cell phone bills, and direct the FCC to study E-911 implementation in rural areas.

See also, stories titled "Representatives Introduce E911 Implementation Act" in TLJ Daily E-Mail Alert No. 707, July 30, 2003; and "House Commerce Committee Approves E-911 Implementation Act" in TLJ Daily E-Mail Alert No. 751, October 2, 2003; and "House Passes E-911 Implementation Act" in TLJ Daily E-Mail Alert No. 773, November 6, 2003.

The full Senate has not yet passed a bill. On July 17, 2003, the Senate Commerce Committee (SCC) approved a similar bill, S 1250, the "Enhanced 911 Emergency Communications Act of 2003 ", by unanimous voice vote. See, story titled "Senate Commerce Committee Approves E-911 Bill" in TLJ Daily E-Mail Alert No. 701, July 18, 2003.

People and Appointments

5/18. The Senate confirmed Marcia Cooke to be a Judge of the U.S. District Court for the Southern District of Florida.

More News

5/18. Rep. Carolyn Maloney (D-NY), and others from New York City or nearby, introduced HR 4386. The bill states that its title is "9/11 Can You Hear Me Now Act". It would require the federal Department of Homeland Security (DHS) to buy communications equipment for the New York City Fire Department. The bill was referred to the House Commerce Committee. None of the original sponsors (Maloney, Shays, Rangel, Nadler, and McNulty) are members of this Committee. None of the NYC area members of the Committee (Engel, Towns, and Fosella) are original sponsors of the bill. The bill would require that the DHS "shall, by not later than 1 year after the date of the enactment of this Act, procure development and provision of a communications system for the New York City Fire Department, including appropriate radios for the entire department and upgrades to the critical information dispatch system of the department."

5/18. The Department of Justice filed its witness list for the trial in U.S. v. Oracle.

5/18. The U.S. District Court (CDCal) issued its Order Dismissing Complaint Without Prejudice [14 pages in PDF] in VeriSign v. ICANN., dismissing count one, which alleges violation of Section 1 of the Sherman Act. The order does not affect the various state law claims plead by VeriSign. This case is VeriSign v. Internet Corporation for Assigned Names and Numbers, U.S. District Court for the Central District of California, D.C. No. CV 04-1292AHM(CTx), Judge Howard Matz presiding.

SEC Files Complaint Against Lucent

5/17. The Securities and Exchange Commission (SEC) filed a civil complaint [34 pages in PDF] in U.S. District Court (NJ) against Lucent Technologies, and ten individual executives and employees, alleging violation of federal securities laws, in connection with alleged fraudulent and improper overstatement of income. The SEC simultaneously settled with Lucent and some of the individual defendants.

The complaint alleges that "Lucent fraudulently and improperly recognized approximately $1.148 billion dollars of revenue and $470 million in pre-tax income in violation of Generally Accepted Accounting Principles ("GAAP") during its fiscal year 2000 (October 1, 1999 to September 30, 2000). As a result, Lucent improperly overstated its pre-tax income for its fiscal year 2000 by 16 percent. $511 million of revenue and $91 million in pre-tax income were recognized prematurely in quarterly results during Lucent's fiscal year 2000. The remaining $637 million in revenue and $379 million in pre-tax income should not have been recognized at all during Lucent’s fiscal year 2000."

The complaint further alleges that "Lucent's violations of GAAP were due to the fraudulent and reckless actions of the defendants and were also the result of deficient internal controls that led to numerous accounting errors by others."

The six count complaint alleges violations of Section 10(b) of the Securities Exchange Act of 1934, codified at 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5, thereunder. It also alleges various violation of Sections 13(a), 13(b)(2)(A), 13(b)(2)(B), and 13(b)(5) of the Securities Exchange Act of 1934, and rules promulgated thereunder.

The SEC announced in a release that it has reached a settlement with Lucent and three of the individual defendants. The SEC stated that "Lucent has consented to the entry of a judgment that enjoins it from violations of the anti-fraud, reporting, books and records and internal control provisions of the federal securities laws ... Lucent will also pay a $25,000,000 civil penalty".

Patricia Russo, Ch/CEO of Lucent, stated in a release that "We are closing this chapter in our history, putting it behind us and focusing on moving our business forward."

This case is SEC v. Lucent, et al., U.S. District Court for the District of New Jersey, D.C. No. 04-2315 (WHW).

DOD Advisory Committee Backs Data Mining, with Attention to Privacy

5/17. The Technology and Privacy Advisory Committee (TAPAC) released a report [140 pages in PDF] titled "Safeguarding Privacy in the Fight Against Terrorism" regarding data mining by the Department of Defense (DOD) and the rest of the federal government, the DARPA's Total Information Awareness program, and individual privacy.

It concludes that data mining is an important tool for fighting terrorism, and should be used, but with more concern for the protecting individual data privacy of U.S. persons.

The report was written in March, but not released to the public until May 17. The TAPAC is a federal advisory committee that advises the Secretary of Defense. See, TAPAC Charter [PDF].

The Department of Defense (DOD) established this committee in February of 2003 in response to Congressional concerns about the data privacy implications of the DOD's Defense Advanced Research Projects Agency (DARPA) Total Information Awareness (TIA) program, which has since been terminated. See, story titled "DOD Establishes Technology and Privacy Advisory Committee" in TLJ Daily E-Mail Alert No. 620, March 11, 2003.

The report concludes that "TIA was a flawed effort to achieve worthwhile ends. It was flawed by its perceived insensitivity to critical privacy issues, the manner in which it was presented to the public, and the lack of clarity and consistency with which it was described. DARPA stumbled badly in its handling of TIA".

It also concludes that "Data mining is a vital tool in the fight against terrorism, but when used in connection with personal data concerning U.S. persons, data mining can present significant privacy issues."

It continues that "when data mining involves the government accessing personally identifiable information about U.S. persons, it also raises privacy issues. The magnitude of those issues varies depending upon many factors, including: the sensitivity of the data being mined, the expectation of privacy reasonably associated with the data, the consequences of an individual being identified by an inquiry, and the number (or percentage) of U.S. persons identified in response to an inquiry who have not otherwise done anything to warrant government suspicion."

The report also concludes that "Existing legal requirements applicable to the government’s many data mining programs are numerous, but disjointed and often outdated, and as a result may compromise the protection of privacy, public confidence, and the nation’s ability to craft effective and lawful responses to terrorism."

The report also offers several recommendations for the DOD. The DOD should safeguard privacy of U.S. persons when using data ming. The DOD should "establish a regulatory framework applicable to all data mining" by the DOD, including "a written finding by agency heads authorizing data mining; minimum technical requirements for data mining systems (including data minimization, data anonymization, creation of an audit trail, security and access controls, and training for personnel involved in data mining); special protections for data mining involving databases from other government agencies or from private industry; authorization from the Foreign Intelligence Surveillance Court before engaging in data mining with personally identifiable information concerning U.S. persons or reidentifying previously anonymized information concerning U.S. persons; and regular audits to ensure compliance."

The report also recommends that the DOD should create a "policy-level privacy officer" and "a panel of external advisors" to advise on informational privacy issues. It also recommends that the DOD create oversight mechanisms, and "work to ensure a culture of sensitivity to, and knowledge about, privacy issues".

Finally, the report contains recommendations for all government entities. For example, it recommends that "The Secretary should recommend that Congress and the President establish one framework of legal, technological, training, and oversight mechanisms necessary to guarantee the privacy."

The TAPAC is chaired by Newton Minow (Northwestern University). Its other members include Floyd Abrams (Cahill Gordon & Reindel), Zoe Baird (President of the Markle Foundation), Griffin Bell (King & Spalding), Gerhard Casper (Stanford University Law School), William Coleman (Chief Customer Advocate of BEA), and Lloyd Cutler (Wilmer Cutler & Pickering).

European Commission Adopts Decision on Airline Passenger Data

5/17. The European Commission announced that it "adopted a formal Decision that will bring on stream shortly new commitments by the US Government, guaranteeing protection in the US for the personal data of transatlantic air passengers. The Decision indicates that the Commission considers that the data on air passengers transferred to the US authorities enjoys the ``adequate protection´´ required under the EU's data protection Directive for data sent to countries outside the EU." See, EC release.

Frits BolkesteinEuropean Commissioner Frits Bolkestein (at right) stated that "A negotiated solution is never perfect, especially when you are up against a law adopted by the US Congress in the understandable conviction that it is vital to protect the US against terrorism. But US Homeland Security Secretary Tom Ridge was very constructive and we came up with a balanced solution, which the Member States have supported."

Bolkestein added that "The European Parliament has taken a different view, but the Commission considers that the negotiated solution will improve the situation for EU citizens and airlines by bringing on stream important guarantees from the US on the respect of data protection rights and enhanced legal certainty."

The White House also issued a release. It states that "The Department of Homeland Security applauds today’s announcement from the European Commission that it has issued an ``adequacy finding´´ for the transfer of airline passenger name record (PNR) data to the Department of Homeland Security. This decision was the result of over a year of negotiations between the United States and the European Commission."

The White House release adds that "The use of this data is critical in combating and preventing terrorism and serious trans-national criminal activity. The European Commission made its decision based on the fact that this measure not only improves the security of air travel between the United States and Europe, but also adequately protects the privacy of individual air passengers. This is a momentous decision for our international cooperative efforts."

Rep. Capuano Introduces Visas Mantis Bill

5/17. Rep. Michael Capuano (D-MA) introduced HR 4373, the "Furthering Education and Research through Mantis Improvements Act", or "FERMI Act".

Rep. Mike CapuanoRep. Capuano (at left) represents a university district. It includes Cambridge, Somerville, and MIT.

The bill recites in its findings that "Individuals wishing to come to the United States as nonimmigrants to study or work temporarily in the life sciences, physical sciences, or engineering are required to undergo and pass a security check known as a Visas Mantis, which is designed to protect against illegal transfers of sensitive technology."

The bill makes several changes to the Visas Mantis security check program.

The bill was referred to the House Judiciary Committee. Rep. Capuano is not a member.

Supreme Court News

5/17. The Supreme Court denied certiorari in Los Angeles News Service v. Reuters Television, a case arising out of the Los Angeles News Service's (LANS) enforcement of its copyrights in video of the 1992 Los Angeles riots. This is Sup. Ct. No. 03-965. See, Order List [14 pages in PDF], at page 2. See also, story titled "9th Circuit Issues Another Opinion in LANS v. Reuters" in TLJ Daily E-Mail Alert No. 728, August 28, 2004.

5/17. The Supreme Court denied certiorari in Phonometrics v. Hospitality Franchise, a patent case. This is Sup. Ct. No. 03-1255. See, Order List [14 pages in PDF], at page 2.

5/17. The Supreme Court released several non-technology related opinions, and announced that it "will take a recess from today until Monday, May 24, 2004". See, Order List [14 pages in PDF], at page 14.

People and Appointments

5/17. President Bush announced his intent to nominate Duane Ackerman (Ch/CEO of BellSouth), and Patricia Russo (Ch/CEO of Lucent) to the President's National Security Telecommunications Advisory Committee. See, White House release.

5/17. President Bush nominated Michael Schneider to be a Judge of the U.S. District Court for the Eastern District of Texas. See, White House release.

5/17. Clyde Wayne Crews joined the Competitive Enterprise Institute as Vice President for Policy and Director of Technology Studies. He previously worked at the Cato Institute.

More News

5/17. Linda Koontz, Director of Information Management Issues at the General Accounting Office (GAO), wrote a letter [17 pages in PDF] to Rep. Steve Buyer (R-IN), Chairman of the House Veterans Affairs Committee's Subcommittee on Oversight and Investigations, regarding "Computer-Based Patient Records: Subcommittee Questions Concerning VA and DOD Efforts to Achieve a Two-Way Exchange of Health Data".

5/17. The Federal Communications Commission (FCC) published a notice in the Federal Register that describes, and sets comment deadlines for, the FCC's notice of proposed rulemaking (NPRM) regarding digital audio broadcasting (DAB). The FCC adopted this NPRM on April 15, 2004. This item is FCC 04-99 in MM Docket No. 99-325. Comments are due by June 16, 2004. Reply comments are due by July 16, 2004. See, Federal Register, May 17, 2004, Vol. 69, No. 95, at Pages 27874 - 27885. See also, story titled "FCC Announces FNPRM and NOI Regarding Digital Audio Broadcasting" in TLJ Daily E-Mail Alert No. 878, April 16, 2004.

Go to News from May 11-15, 2004.