10th Circuit Rules on Enforcement of FTC Act Injunctions

6/10. The U.S. Court of Appeals (10thCir) issued its en banc opinion in FTC v. Kuykendall, a case regarding the procedures used by the Federal Trade Commission (FTC) to enforce consumer protection laws. Specifically, this case involves the procedures used to enforce a stipulated judgment and injunction signed by violators of the FTC Act and the Telemarketing Sales Rule (TSR).

The FTC attempted to enforce an injunction by filing a motion to show cause why the defendants should not be found in contempt of the injunction. The District Court held an evidentiary hearing, and then held that all of the signatories to the stipulated judgment and injunction had violated the injunction, and held them jointly and severally liable for consumer redress. The Court of Appeals en banc reversed in part.

Defendants are telemarketing who violated the FTC Act and the Telemarketing Sales Rule. The defendants are corporate entities, Diversified Marketing Service Corp., National Marketing Service, Inc., NPC Corporation of the Midwest, Inc., and Magazine Club Billing Service, Inc., as well as individuals officers, H.G. Kuykendall, Sr., C.H. Kuykendall, and H.G. Kuykendall, Jr.

The FTC summarized its complaint in a 1996 release: "the defendants sold their magazine subscriptions packages by placing ``cold´´ sales calls to consumers and making a variety of misrepresentations. Diversified charged consumers from $500 to $800 for a magazine subscription package. The alleged misrepresentations include false claims about the cost of the subscriptions -- for instance, claiming that some subscriptions were free or for longer terms than actually was the case. In addition, the FTC charged that in some cases the defendants misled consumers about the reason for needing their checking account numbers -- in fact, the defendants used the account numbers to process so-called ``demand drafts,´´ or ``phone checks,´´ which, unlike conventional checks, do not require a consumer's signature on a printed document. Finally, the FTC charged that Diversified refused to cancel consumers' subscriptions despite promises that consumers could change their minds, falsely claiming that consumers were bound by contract for multi-year subscriptions."

The Federal Trade Commission (FTC) filed a complaint in U.S. District Court (WDOkla) in 1996 alleging violation of the Section 5 of the Federal Trade Commission Act, which is codified at 15 U.S.C.§ 45, and the Telemarketing Sales Rule, 16 CFR Part 310.

Section 5 provides that "Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful."

Later in 1996, the parties entered into a "Stipulated Final Judgment and Order for Permanent Injunction" which included 24 paragraphs limiting the defendants' future business conduct. It also required defendants to pay $1.5 Million in consumer redress. H.G. Kuykendall, Sr. and C.H. Kuykendall both signed, both individually and as officers of corporate defendants.

The defendants violated this injunction. Hence, in 2002 the FTC filed a motion to show cause why the defendants should not be found in contempt of the permanent injunction. The FTC requested that the District Court award $51 Million in contempt sanctions.

Following an evidentiary hearing, the District Court entered an "Order for Contempt and Modifying the Permanent Injunction". The Court held that defendants had violated the 1996 injunction, found that they had caused at least $39 Million in consumer injury, and held them jointly and severally liable for consumer redress in the amount of $39 Million.

The present appeal followed. On December 11, 2002, a three judge panel of the Court of Appeals issued its opinion affirming the District Court, except for its determination of the amount of monetary sanctions. The three panel remanded to the District Court for a jury trial to determine the appropriate measure of sanctions. This opinion is also reported at 312 F.3d 1329.

Then, the Court of Appeals reheard the case en banc. The en banc panel held that "we agree with the panel and the district court that the underlying proceedings were correctly classified as civil contempt proceedings, but we hold that the panel erred in requiring that damages be proven on remand by clear and convincing evidence before a jury. We also conclude that the district court erred in finding certain individual defendants liable and in failing to adequately explain its determination of damages. We therefore vacate the Panel Opinion, reverse the judgment of the district court in part, and remand the case to the district court for additional proceedings in accord with this opinion."

The en banc panel held that this is a compensatory civil contempt proceedings, that a jury is not required to satisfy due process, and that the District Court "should require proof of contempt by clear and convincing evidence and proof of the amount of compensatory damages by a preponderance of the evidence."

The en banc panel rejected the defendants' claim that they were denied due process when the FTC waited from 1996 until 2002 to initiate a contempt proceeding, and then the District Court held its hearing 28 days later. The en banc panel wrote that "It must also be noted that the defendants, in exchange for the dismissal of the Commission's original claim against them, agreed to the Permanent Injunction. By agreeing to an ongoing court-supervised Permanent Injunction prospective in nature, the defendants were aware they were subjecting themselves to the lowered procedural protections available in the event of contempt proceedings."

The en banc panel also noted that while 28 days left the defendants with little time for discovery, "Most of the evidence in this case involved the defendants' own behavior and their own records."

The en banc panel affirmed the District Court's contempt holding as to defendants DMS and H.G. Kuykendall, Jr. It wrote that the FTC presented ample evidence of violation of the injunction by DMS, and that H.G. Kuykendall, Jr. was the President of DMS at the relevant times.

However, the en banc panel reversed the District Court as to the other corporate defendants. It wrote that "Because the FTC provided no clear evidence that any corporation other than DMS failed to comply with any specific provision of the Permanent Injunction or could have controlled the activities at DMS, they cannot be held vicariously in contempt, and the district court abused its discretion in so holding them."

The en banc panel also reversed the District Court as to the other individual defendants, H.G. Kuykendall, Sr. and C.H. Kuykendall. They had signed the 1996 stipulated judgment and injunction, and continued to hold a majority of the stock of DMS. But, the panel ruled, this is insufficient.

Finally, the en banc panel reversed the District Court's sanction of consumer redress in the amount of $39 Million. The en banc panel concluded that on remand, "The district court may use gross receipts as a baseline for calculating consumer injury on remand if it is satisfied that the FTC has shown by clear and convincing evidence that the defendants engaged in a pattern or practice of contemptuous behavior. The defendants may then put forth evidence offsetting the sanctions alleged. The court should then order the liable defendants to pay the appropriate amount into the registry of the court, and set forth procedures by which the FTC may obtain funds to reimburse injured consumers."

H.G. Kuykendall, Sr. and C.H. Kuykendall were represented in this proceeding by the law firm of Gibson Dunn & Crutcher (GDC). GDC was the long time law firm of Ted Olson, before President Bush appointed him Solicitor General of the United States.

This case is Federal Trade Commission v. H.G. Kuykendall, et al., U.S. Court of Appeals for the 10th Circuit, App. Ct. Nos. 02-6101 and 02-6102, appeals from the U.S. District Court for the Western District of Oklahoma, D.C. No. CIV-96-388-M.

District Court Upholds Constitutionality of § 514 of Uruguay Round Agreements Act

6/10. The U.S. District Court (DC) issued its Memorandum Opinion [21 pages in PDF] in Luck's Music Library v. Ashcroft, a case upholding the constitutionality of the Uruguay Round Agreements Act, which restored copyrights in the U.S. for certain foreign works that had been in the public domain.

Luck's Music Library sells and rents classical orchestral sheet music for works already in the public domain. For example, it sold works published in the former Soviet Union written by Prokofiev, Shostakovich, Stravinsky and others. These works were in the public domain in the U.S.

Moviecraft archives films. Its library included thousands of foreign films in the public domain due to lack of copyright notices.

But then, unfortunately for Luck's and Moviecraft, the Congress passed the Uruguay Round Agreements Act (URAA). Section 514 of the URAA amended the Copyright Act, at 17 U.S.C. § 104A. In particular, the URAA restored the copyrights in the Russian works sold by Luck's, and many of the copyrights in foreign films in Moviecraft's library.

The URAA was HR 5110 in the 103rd Congress. It is now Public Law No. 103-465.

On October 29, 2001 Luck's and Moviecraft filed a complaint in U.S. District Court against John Ashcroft, in his capacity as Attorney General of the U.S., and Marybeth Peters, in her capacity as Register of Copyrights. Luck's and Moviecraft alleged that Section 514 of the URAA is unconstitutional under the intellectual property clause and the First Amendment of the Constitution. They sought declaratory and injunctive relief.

The District Court stayed proceedings to await the Supreme Court's opinion [89 pages in PDF] in Eldred v. Ashcroft, which upheld the constitutionality of the Copyright Term Extension Act, which retroactively extended the maximum duration of copyrights. This opinion was issued on January 15, 2003. It is also published at 537 U.S. 186 (2003). See also, story titled "Supreme Court Upholds CTEA in Eldred v. Ashcroft", in TLJ Daily E-Mail Alert No. 584, January 16, 2003.

Section 514 of the URAA restores copyright to foreign copyright holders whose works remain protected in their origin country, but entered the public domain in the U.S. due to the failure of the foreign copyright holder to comply with the U.S.'s copyright formalities, absence of prior subject-matter protection such as sound recordings fixed before 1972, or failure of the U.S. to recognize copyrights from that country.

The District Court held that Congress does have the power to restore copyrights, and that Section 514 does not otherwise exceed the authority of the Congress under the intellectual property clause. The Court also rejected the freedom of expression argument. Then, it dismissed the complaint for failure to state a claim upon which relief can be granted.

This case is Luck's Music Library, Inc. and Moviecraft, Inc. v. John Ashcroft and Marybeth Peters, U.S. District Court for the District of Columbia, D.C. No. 01-2220 (RMU), Judge Ricardo Urbina presiding.

District Court Construes Computer Fraud and Abuse Act

6/10. The U.S. District Court (DMass) issued its opinion [6 pages in PDF] in Computer Networks, Inc. v. Sears, Roebuck and Co, a case involving an allegation of violation of the Computer Fraud and Abuse Act (CFAA), which is codified at 18 U.S.C. § 1030.

The plaintiff, Computer Networks, Inc. (CNI), is a tiny internet hosting company in Waltham, Massachusetts. Its e-mail domain is cnetwork.com. The defendant, Sears, Roebuck and Co., is a large retailer. Its e-mail domain is sears.com. E-mail originating from Sears employees and customers migrated to CNI’s server and caused CNI's server to crash.

The Court wrote that "Sears' internal e-mail system used a suffix for its customer care division that incorporated CNI's server address, that is, ``@cnetwork.sears.com.´´ If a sender omitted the ``sears.com´´ suffix, the mail defaulted to CNI's server. CNI has offered no evidence that the misrouted e-mail was caused by anything other than the similarity in addresses, or any evidence that Sears concocted a deliberate plan to access CNI's server."

CNI filed a complaint in District Court against Sears alleging (1) violation of the CFAA, (2) common law trespass and conversion, (3) common law nuisance, (4) intentional interference with advantageous business relations, and (5) violation of a Massachusetts commercial relations statute. The Court granted summary judgment to Sears.

The CFAA provides, in part, at Section 1030(a)(5)(C), that "Whoever ... intentionally accesses a protected computer without authorization, and as a result of such conduct, causes damage; ... shall be punished as provided in subsection (c) of this section."

The Court held that this subsection requires intentional conduct, which was lacking in this case. The Court also granted summary judgment on the trespass and conversion and intentional interference claims for the same reason.

The Court also held that the complaint did not allege facts amounting to a nuisance, and that the Massachusetts commercial relations statute claim is inapplicable because CNI and Sears had no commercial relationship.

CLECs Seek Stay of Court of Appeals Opinion in USTA II

6/10. AT&T and numerous competitive local exchange carriers (CLECs) filed a pleading [68 pages in PDF] with the Supreme Court titled "Application of AT&T Corp. et al., for Stay Pending Resolution of Petition for a Writ of Certiorari to the United States Court of Appeals for the District of Columbia Circuit".

The applicants seek "an order staying the mandate" of the U.S. Court of Appeals (DCCir) in USTA v. FCC. The March 2, 2004, opinion [62 pages in PDF] of the DC Circuit overturned key provisions of the FCC's triennial review order [576 pages in PDF], which addressed the unbundling requirements of incumbent local exchange carriers (ILECs) under 47 U.S.C. § 251.

This opinion is also known as USTA II. It is also reported at 359 F.3d 554. The DC Circuit's 2002 opinion in USTA I overturned the FCC's previous unbundling order. It is also reported at 290 F.3d 415.

Previously, on June 4, 2004, the Court of Appeals denied a request for a stay of the mandate of USTA II. The mandate of the Court of Appeals is schedule to issue on June 16, 2004. Petitions for writs of certiorari are due by June 30, 2004.

The present application asserts that "A stay of this decision is necessary to preserve the status quo and avoid the irreparable harm that would result to state utility commissions and to CLECs if the court of appeals' mandate were to take effect during the brief period required for this Court to review and resolve the petitions for certiorari."

It further asserts that the Appeals Court "holdings conflict both with prior decisions of this Court and with decisions of other courts of appeals. Further, the D.C. Circuit's decision will cripple the administration of the 1996 Act ..."

It also predicts that "four members of this Court are likely to decide to review". The application states that the Supreme Court "has twice granted certiorari when courts of appeals invalidated the FCC's implementing regulations and adversely affected interests of state commissions and CLECs."

However, it is also the case that the Supreme Court denied certiorari the last time that the DC Circuit overturned the FCC's unbundling rules.

Also, the likelihood that the Supreme Court will vote to grant certiorari was lessened on June 9, when the Solicitor General, Ted Olson, announced that he will not appeal in this case. See, story titled "Solicitor General Will Not Seek Supreme Court Review in USTA II" in TLJ Daily E-Mail Alert No. 915, June 10, 2004.

The likelihood that the Supreme Court will grant certiorari was further lessened on June 9 when FCC Commissioner Kevin Martin announced that "Because the Solicitor General decided not to support the FCC's appeal, I no longer support appealing the D.C. Circuit's decision." That is, the majority of the FCC Commissioners now oppose seeking certiorari.

Background on the Certiorari Process. There is no general right of appeal to the Supreme Court. Review by the Supreme Court in this matter lies within the discretion of the Supreme Court. A petition for writ of certiorari is essentially a request to the Supreme Court that it review a lower court, or state court, opinion. The Supreme Court grants certiorari if four out of the nine Justices vote to grant certiorari.

The Supreme Court will shortly go on its summer recess. Its next conference for voting on pending petitions for writ of certiorari is likely to be in late September.

Supreme Court Justices, legal scholars, and attorneys who practice before the Supreme Court have said and written much about the criteria that Justices follow in deciding whether or not to grant certiorari. Among the criteria that have been enumerated are the importance of the case, whether or not there is a split between the circuits, whether the opinion below is contrary to a Supreme Court opinion, and the position taken by the Solicitor General.

For a discussion of the certiorari process, see Chief Justice William Rehnquist's book titled The Supreme Court: How It Was: How It Is [Amazon], at Chapter 11, "Certiorari: Picking the Cases to Be Decided".)

FCC Adopts RO & NPRM Re ITFS/MDS Band

6/10. The Federal Communications Commission (FCC) adopted, but did not release, a Report and Order and Further Notice of Proposed Rulemaking (RO & FNPRM) regarding rules for the 2495-2690 MHz band, which is currently used for Multipoint Distribution Service (MDS) and Instructional Television Fixed Service (ITFS). This is one of many proceedings in which the FCC is seeking to provide more avenues for broadband services.

The FCC issued a short release [3 pages in PDF] that describes this item and provides a band plan chart. Also, each of the five Commissioners issued a statement.

FCC Chairman Michael Powell wrote in his statement [PDF] that "We are witnessing the dawn of a new era for wireless broadband. Today's decision does away with heavy-handed rules that have governed the MDS/ITFS band (“2.5 GHz band”) for far too long. Freed from regulatory shackles, educational institutions will now have the flexibility to utilize their spectrum in the way most advantageous to the students and the public they serve."

Powell (at right) continued that "This Order gives ITFS and the newly named Broadband Radio Service (BRS) licensees new options for developing and deploying innovative technologies including low-power, mobile wireless broadband technologies. These systems will provide a competitive alternative to cable modem and DSL service and will transform the marketplace by expanding broadband rural areas and decreasing the price of current broadband services."

The FCC release summarizes the order. It states that the order "creates a new band plan for 2495-2690 MHz ... which eliminates the use of interleaved channels by MDS and ITFS licensees and creates distinct band segments for high power operations, such as one-way video transmission, and low power operations, such as two-way fixed and mobile broadband applications. By grouping high and low power users into separate portions of the band, the new band plan reduces the likelihood of interference caused by incompatible uses and creates incentives for the development of low power, cellularized broadband operations, which were inhibited by the prior band plan."

The release states that the order "renames the MDS service the Broadband Radio Service (BRS), while maintaining the ITFS label for ITFS licenses and operations."

The FCC release also states that "ITFS licenses in the new band plan will continue to be subject to existing rules that limit eligibility for licensing to qualified educational institutions. The Order also allows ITFS licensees to lease spectrum to BRS providers, provided they comply with existing educational content requirements, and grandfathers all existing MDS-ITFS leases."

Commissioner Michael Copps commented in a separate statement [PDF] that "most importantly, we resolve with finality the question of ITFS eligibility. ITFS licenses are, and will continue to be, reserved for educators. Uncertainty on all these matters has created a confusing environment for too long, and it has held back needed investment."

Commissioner Jonathan Adelstein wrote in his statement [PDF] that "we reaffirm today that there is a continued role for educators in this spectrum band. For forty years, ITFS providers have used this spectrum for educational programming. It would be wrong to phase out the role of educators at the same time we radically change the structure of the band."

The FCC release also states that the order "lifts all non-statutory eligibility restrictions on BRS spectrum, including those applicable to cable operators. However, the cable/BRS cross-ownership restriction prohibiting cable operators from providing multichannel video programming distribution (MVPD) services using BRS licenses, which is mandated by statute, will remain in effect."

The FCC release also states that the order "establishes simpler and more flexible rules for licensees, including geographic area licensing and the ability to employ the technology of their choice. In addition, the new rules allow for spectrum leasing under the FCC’s secondary market rules, but grandfather all existing leasing arrangements between MDS and ITFS licensees."

The release further states that the order "establishes a mechanism for transition from the existing band configuration to the new band plan. BRS and ITFS providers will have a three-year period during which they may propose transition plans for relocating existing facilities of all other licensees within the same Major Economic Area (MEA) to new spectrum assignments in the revised band plan. Plan proponents must notify all licensees in the MEA and file their plans with the Commission. This will trigger a 90-day Transition Planning Period during which licensees negotiate and coordinate their transition with other licensees in the MEA. Transitions to the new band plan must be completed within 18 months of the conclusion of negotiations."

Commissioner Adelstein (at left) wrote that "I am disappointed, though, that the Order moves forward with a transition process that is based on major economic areas (MEAs). The BRS and ITFS services are local services, and I believe that broadband deployment for the foreseeable future will be rolled out on a relatively localized basis. I am concerned that the obligation to transition an entire MEA will make it exceedingly difficult for proponents to effectuate transitions in their particular market."

The release states that the further NPRM portion of this item requests public comments on "alternative transition options for markets in which no transition plan is proposed within the initial three-year period", including "whether to accomplish the transition in such markets by offering existing licensees tradable instruments that they can use to bid for spectrum at auction".

Commissioner Kevin Martin wrote in a separate statement [PDF] that "I am optimistic that this spectrum will provide a home for last-mile broadband applications, providing competition to telephone and cable lines."

Commissioner Kathleen Abernathy wrote in her statement [PDF] that "These new policies will promote greater flexibility for the newly named Broadband Radio Service (BRS) licensees so that they can deploy new products, such as a third broadband pipe to the home, a mobile solution, a broadcast alternative, or some other service, as driven by the market. In addition, this order grants the educational community the same flexibility as commercial users in order to ensure that our nation’s educators have access to the most innovative technologies and services."

The rules announced in this item follow a proposal made by the Wireless Communications Association (WCA). See also, story titled "FCC Announces NPRM To Provide Flexibility To Users of MMDS/ITFS Spectrum" in TLJ Daily E-Mail Alert No. 624, March 17, 2003.

This item is FCC 04-135 in WT Docket 03-66.

FCC Adopts RO and NPRM Regarding Spectrum Sharing in the 1.6 and 2.4 GHz Bands

6/10. The Federal Communications Commission (FCC) adopted, but did not release, a Report and Order, Fourth Report and Order and Further Notice of Proposed Rulemaking regarding spectrum sharing in the 1.6 and 2.4 GHz bands.

The FCC issued only a brief release [PDF] describing this item. It states that this item provides that, in the 1.6 GHz or L-band, "mobile-satellite service (MSS) operators with satellite systems that utilize code division multiple access (CDMA) and time division multiple access (TDMA) technologies will share 3.1 megahertz of spectrum at 1618.25–1621.35 MHz. Previously, only CDMA MSS operators had access to this spectrum."

In the 2.4 GHz or S-band, "the Commission allocated the 2495-2500 MHz band to fixed and mobile except aeronautical mobile services, in order to provide additional spectrum to the 2500-2650 MHz band to accommodate the relocation of MDS channels 1 and 2 under a band plan adopted today in a companion item in WT Docket No. 03-66 (FCC 04-135)."

See, preceding story on WT Docket 03-66 titled "FCC Adopts RO & NPRM Re ITFS/MDS". The FCC release [3 pages in PDF] that describes that yet to be released ITFS order states that that order "expands the original MDS-ITFS band by adding to it five megahertz of additional spectrum from below 2500 MHz, which increases the total size of the band to 194 megahertz. This will provide room for the future relocation of MDS Channels 1 and 2, which are presently located in the 2.1 GHz band."

The FCC release continues, "As a result, the Commission moved the band in which S-band MSS operators may provide ancillary terrestrial component (ATC) operations from 2492.5-2498 MHz to 2487.5-2493 MHz. CDMA MSS will continue to be permitted to operate in the 2495-2500 MHz band on a shared basis."

The FCC release also states that the further NPRM explores "whether CDMA and TDMA MSS operators feasibly could share an additional 2.25 megahertz of spectrum at 1616.0-1618.25 MHz."

This item is FCC 04-134 in IB Docket No. 02-364 and ET Docket No. 00-258.

FCC Adopts NOI For Annual Report to Congress on Video Programming

6/10. The Federal Communications Commission (FCC) adopted, but did not release, a Notice of Inquiry (NOI) seeking information and comments for its 11th annual report to the Congress on the status of competition in the market for the delivery of video programming.

The Communications Act, as amended by the 1992 Cable Act, requires these annual reports. See, 47 U.S.C. § 548 (g). The FCC released its 10th annual report [146 pages in PDF] on competition in video markets on January 28, 2004.

The FCC issued a release describing this NOI. It states that the FCC seeks "comments and information on video distributors in the market for the delivery of video programming including those using both wireline and wireless technologies". It also states that the FCC seeks information regarding "horizontal concentration in the video marketplace, vertical integration between programming distributors and programming services, and other issues relating to the programming available to consumers". It also states that the FCC seeks "information on technical issues, including equipment and emerging services" and "comments regarding developments in foreign markets, as they may contribute to the FCC’s understanding of domestic markets".

FCC Commissioner Jonathan Adelstein wrote in a separate statement [PDF] that "last year that our Report suffered from both limited data and inadequate analysis", and that this NOI will provide for "a more pro-active and comprehensive information gathering effort".

FCC Commissioner Michael Copps wrote in a separate statement [PDF] that "I’m particularly pleased that we have a section that focuses on pertinent issues facing rural and smaller markets. It's also appropriate that the Commission branch out and report on the vertical integration between programmers and all major media companies."

This NOI is FCC 04-136 in MB Docket No. 04-227.

FCC Releases Quarterly Report on Informal Consumer Complaints and Inquiries

6/10. The Federal Communications Commission (FCC) released a quarterly report [22 pages in PDF] on informal inquiries and complaints that were processed by the FCC's Consumer & Governmental Affairs Bureau (CGB) during the fourth quarter of calendar year 2003.

There were a total of 174,708 complaints, pursuant to the FCC's current methodology for counting complaints.

The overwhelming majority of the complaints -- 146,268 -- pertained to obscenity and indecency on radio and television.

There is limited usefulness in comparing this report to prior quarterly reports. First, two types of consumer complaints reflect new rules -- those regarding the National Do Not Call Registry, and number portability. Second, the FCC has not counted broadcast indecency and obscenity complaints with a consistent methodology.

The FCC did not provide a breakdown of radio and TV complaints that includes subcategories for complaints about media consolidation, and localism. Nevertheless, there could not have been many complaints about these subjects, because there were only 135 other complaints pertaining to TV and radio.

There were 20,423 complaints pertaining to wireline services. 13,791 of these pertained to the Telephone Consumer Protection Act (TCPA). The TCPA subcategory includes complaints about junk faxes, violation of the Do Not Call rules, and time of day violations; however, the FCC report provided no further breakdown.

1,369 of the wireline services complaints addressed slamming, or the unauthorized switching of long distance carriers. 4,077 complaints pertained to billing and rates.

There were 8,512 complaints regarding wireless services. 2,940 were about billing and rates. 3,447 were about number portability. It should be noted that the counting of these complaints did not begin until late November of 2003, which was well into the quarter.

There were only 185 complaints pertaining to cable services.

The FCC also provided data on consumer inquiries. The most numerous were in the subcategories of slamming and the TCPA.

More FCC News

6/10. The Federal Communications Commission (FCC) adopted, but did not release, a Notice of Proposed Rulemaking (NPRM) that proposes to establish mandatory electronic filing of all international telecommunications service submissions. The FCC issued a release [PDF] describing this NPRM. It states that the proposed rules would apply to "all accounting rate changes, requests for assignment of data network identification codes, foreign carrier notifications, applications related to section 214 authorizations, applications related to submarine cable landing licenses, requests for recognized operating agency status, requests for assignment of an international signaling point code and other associated filings." This NPRM is FCC 04-133 in IB Docket 04-226.

6/10. The Federal Communications Commission (FCC) adopted, but did not release, a Report and Order, Order on Reconsideration and Further Notice of Proposed, regarding the provisions, regulations, and compensation of telecommunications relay service (TRS) for persons with hearing and speech disabilities. This item is FCC 04-137 in CC Docket Nos. 90-571, 98-67, and 03-123.

6/11. Federal offices are closed on Friday, June 11. See, calendar. The Federal Communications Commission (FCC) added that "All filings, paper and electronic, due on June 11, 2004, will be accepted as timely on the next official business day. In addition, June 11, 2004 does not count in computing periods that are less than seven days. See C.F.R. Section 1.4(g)." See, FCC release.

Secretary Ridge Testifies Regarding Homeland Security

6/9. The Senate Judiciary Committee held a hearing titled "DHS Oversight: Terrorism and Other Topics". Secretary of Homeland Security Tom Ridge testified regarding numerous subjects, including extending the provisions of the PATRIOT Act that are scheduled to sunset, and cyber security.

He wrote in his prepared testimony that "I so strongly support the President’s call for Congress to renew those provisions of the Patriot Act that will otherwise expire next year. These tools are important as we build more integrated and coordinated homeland security, intelligence, and law enforcement communities."

He also identified "which targets might be most attractive to terrorists". These include "key resources and sectors such as the Internet, telecommunications, nuclear and chemical facilities, water, energy, and transportation systems, banks and financial centers, and national -- or natural -- monuments, icons, and treasures."

On the subject of cyber security, he stated that "just last month, we discovered a critical vulnerability in some of the routers that control much of the global Internet infrastructure. If exploited, this security gap could have caused a large-scale disruption to the operation of the Internet, impacting the economy and security of the United States and nations around the world. However, DHS, in cooperation with several private sector firms and government agencies, was able to quickly disseminate a warning and patch for this vulnerability through the U.S. Computer Emergency Readiness Team -- or U.S. CERT. In this case, we reduced a global security risk in a matter of hours."

Solicitor General Will Not Seek Supreme Court Review in USTA II

6/9. The Federal Communications Commission (FCC) stated in a release [PDF] that "The Office of the Solicitor General has informed the Commission that it has decided not to appeal the D.C. Circuit decision vacating the Commission's local telephone unbundling rules."

The Solicitor General (SG) is Ted Olson (at right).

In addition, FCC Commissioner Kevin Martin released a brief statement: "The Solicitor General has decided not to appeal the D.C. Circuit decision eliminating the Commission's rules requiring incumbent telephone carriers to open their voice networks to competition. Because the Solicitor General decided not to support the FCC's appeal, I no longer support appealing the D.C. Circuit's decision."

Finally, the acting administrator of the National Telecommunications and Information Administration (NTIA), Michael Gallagher, issued a statement in which he announced that the SG's decision is "Consistent with the Administration's views".

To the extent that the views of the SG influence the decisions of the Supreme Court Justices regarding whether or not to vote to grant a petition for writ of certiorari, this SG announcement diminishes the likelihood that the Supreme Court will grant certiorari in this case, and hence, increases the likelihood that the opinion of the DC Circuit will stand.

See, full story.

EPIC Sues TSA And FBI Under FOIA For Records Related to CAPPS II Debate

6/9. The Electronic Privacy Information Center (EPIC) filed a complaint [16 pages in PDF] in U.S. District Court (DC) against the Department of Homeland Security (DHS), the Transportation Security Administration (TSA), and the Department of Justice (DOJ) alleging violation of the Freedom of Information Act (FOIA), which is codified at 5 U.S.C. § 552, and seeking expedited processing and release of records of the TSA and Federal Bureau of Investigation (FBI).

The EPIC has submitted several requests for records, pursuant to the FOIA, to the TSA and the FBI regarding these agencies' efforts to obtain airline passenger records, and their use of those records. The TSA is now a component of recently created DHS. The FBI is a component of the DOJ.

The complaint alleges failure to process these requests for records, and failure to grant requests for expedited processing of these requests for records.

The EPIC seeks the records to obtain information that may be relevant to the public policy debates surrounding the TSA's implementation of the CAPPS II program.

CAPPS II. CAPPS II is a forthcoming TSA program that will use computer databased information to assist in identifying high risk airline passengers for additional screening. The EPIC is pursuing these records because of its privacy concerns about the computer databasing of personal information by the government.

CAPPS is an acronym for Computer Assisted Passenger Prescreening System. Before the terrorist attacks of September 11, 2001, the airlines conducted passenger screening, and administered the CAPPS I, subject to federal guidelines. In late 2001, the Congress passed the Aviation and Transportation Security Act, which created the Transportation Security Administration (TSA) as a unit of the Department of Transportation (DOT). This Act gave the TSA responsibility for airport passenger screening. In late 2002, the Congress passed the Homeland Security Act, which, among other things, created the Department of Homeland Security (DHS), and transferred the TSA from the DOT to the new DHS.

The new CAPPS II, the next generation passenger screening system, will be a government (TSA) run system that replaces CAPPS I.

The DHS submitted prepared testimony at a Senate Commerce Committee hearing on November 5, 2003. This states that "CAPPS II is yet another layer in our system of systems to address a continuum of security threats with minimal impact on airline customers and operations. CAPPS II is intended to identify terrorists and other high-risk individuals before they board commercial airplanes. CAPPS II will conduct a risk assessment of each passenger using national security information and information provided by passengers during the reservation process -- including name, date of birth, home address and home phone number, and provide a ``risk score´´ to TSA. The ``risk score´´ includes an ``authentication score´´ provided by running passenger name record (PNR) data against commercial databases to indicate a confidence level in each passenger’s identity. CAPPS II will be a threat-based system under the direct control of the Federal Government and will represent a major improvement over the decentralized, airline-controlled system currently in place."

See also, story titled "Senate Commerce Committee Holds Hearing on Aviation Security & CAPPS II" in TLJ Daily E-Mail Alert No. 773, November 6, 2003.

In addition, James Loy described and discussed the CAPPS II program in prepared testimony before the Senate Commerce Committee on September 9, 2003. At that time, he was the Administrator of the TSA. He is now Deputy Secretary of Homeland Security. See also, story titled "Senate Commerce Committee Holds Hearing on Transportation Security" in TLJ Daily E-Mail Alert No. 736, September 10, 2003.

For a more detailed description of the CAPPS II program, see the DHS's second Privacy Act notice, published in the Federal Register, August 1, 2003, Vol. 68, No. 148, at Pages 45265 - 45269.

Congressional Restrictions on CAPPS II. October 1, 2003. President Bush signed HR 2555, the "Department of Homeland Security Appropriations Act, 2004." The bill contains language prohibiting the use of funds for the CAPPS II program until the General Accounting Office (GAO), which is an arm of the Congress, issues a report to the appropriations committees of the Congress in which it finds that the CAPPS II program meets certain specified criteria set out in the bill.

However, while this language is in the bill, and the President signed the bill, the President wrote in a separate signing statement that this language is ineffective under the Supreme Court's opinion in INS v. Chadha. Bush wrote that while the language is mandatory, he will construe it as merely advisory. See, stories titled "Bush Signs Homeland Security Appropriations Bill", "TSA Receives Comments In CAPPS II Privacy Proceeding", and "Homeland Security Appropriations Bill Purports to Restrict Use of Funds for CAPPS II" in TLJ Daily E-Mail Alert No. 751, October 2, 2003.

Also, the GAO issued a report in February, finding that the TSA has not met the criteria set out in the bill. See, story titled "GAO Report Finds CAPPS II Fails to Meet Congressional Criteria" in TLJ Daily E-Mail Alert No. 836, February 13, 2004.

JetBlue Airways. The EPIC seeks records pertaining to, among other things, JetBlue Airways Corporation, which has disclosed passenger record information to the government and contractors.

The EPIC has requested records pertaining to JetBlue, Acxiom Corporation, Torch Concepts, Inc., and SRS Technologies.

On September 22, 2003, the EPIC submitted a complaint to the Federal Trade Commission (FTC) in which it alleged that JetBlue and Acxiom Corporation violated Section 5 of the Federal Trade Commission Act (FTCA), codified at 15 U.S.C. § 45(a)(1), in connection with the disclosure of consumer personal information to Torch Concepts Inc. See, story titled "EPIC Submits Privacy Complaint To FTC Regarding JetBlue" in TLJ Daily E-Mail Alert No. 744, September 23, 2003. See also, story titled "DHS Finds No Privacy Act Violation In Connection With JetBlue Transfer of Passenger Data" in TLJ Daily E-Mail Alert No. 841, February 23, 2004.

American Airlines. The EPIC also seeks records pertaining to American Airlines and Airline Automation Inc. See, story titled "American Airlines Gave Passenger Data to TSA and Others" in TLJ Daily E-Mail Alert No. 874, April 12, 2004.

The complaint was signed by Marcia Hoffman, David Sobel, and Marc Rotenberg of the EPIC.

This is not the EPIC's first FOIA lawsuit pertaining to CAPPS II. See, story titled "EPIC Files FOIA Suit For CAPPS II Records" in TLJ Daily E-Mail Alert No. 733, September 5, 2003; and "TSA and EPIC Reach Agreement Regarding Production of Documents Regarding CAPPS II" in TLJ Daily E-Mail Alert No. 734, September 8, 2003.

FCC Revises Agenda for June 10 Meeting

6/9. The Federal Communications Commission (FCC) announced that it has deleted one item from the agenda for its meeting of Thursday, June 10. It will not consider an order on reconsideration regarding requests from BellSouth and Sure West to reconsider and/or clarify the unbundling obligations, under 47 U.S.C. § 251, of incumbent local exchange carriers (ILECs) relating to multiple dwelling units and the network modification rules.

See, FCC release. This is CC Docket No. 01-338, CC Docket No. 96-98, and CC Docket No. 98-147.

Perhaps the most anticipated item remains in the agenda -- the item pertaining to the 2500-2690 MHz Band and ITFS/MDS. The FCC will consider a RO and further NPRM regarding the eligibility, licensing and service rules for the 2500-2690 MHz band. This band is currently used by Instructional Television Fixed Service (ITFS), Multipoint Distribution Service (MDS), and Multichannel Multipoint Distribution Service (MMDS). See also, FCC web page titled "ITFS & MDS Radio Services".

The meeting will be held at 9:30 AM at the FCC, 445 12th Street, SW, in Room TW-C05, the Commission Meeting Room. The meeting is open to the public, and will be webcast by the FCC.

Clear Channel Settles With FCC

6/9. The Federal Communications Commission (FCC) released a Consent Decree [11 pages in PDF] (and order approving the Consent Decree) with Clear Channel Communications, and its subsidiaries, that resolves all pending Notices of Apparent Liability, FCC Enforcement Bureau investigations, and third party complaints, pertaining to the broadcast of obscene, indecent or profane material.

The Consent Decree recites that "Clear Channel represents that it has adopted, and is currently in the process of implementing, a company-wide compliance plan for the purpose of preventing the broadcast of material violative of the Indecency Laws."

The Consent Decree also states that "Clear Channel admits, solely for the purpose of this Consent Decree and for FCC civil enforcement purposes ... that the broadcast material at issue in the NALs and certain of the broadcast material at issue in the Inquiries is indecent in violation of 47 C.F.R. § 73.3999 ..."

Finally, the Consent Decree provides that "Clear Channel shall make a voluntary contribution to the United States Treasury in the amount of ... $1,750,000 ..." See also, FCC release [PDF].

FCC Chairman Michael Powell wrote in a separate statement that this is "the highest enforcement-related payment to the Treasury by a broadcaster in Commission history".

Rep. Joe Barton (R-TX), the Chairman of the House Commerce Committee stated in a release that "Clear Channel deserves praise for recognizing the problem of indecency on the public airwaves and for moving to deal with it convincingly. The recent settlement with the FCC is significant, and it demonstrates that at least one media company is taking its obligation to serve the public interest seriously." He added that "I hope that other media companies will take note and act appropriately."

DOD and NIST Enter Into MOU Re Defense Technology

6/9. The Department of Commerce's (DOC) Technology Administration (TA) and the Deputy Under Secretary of Defense for Advanced Systems and Concepts entered into a Memorandum of Understanding (MOU) [PDF] "for the purpose of piloting focused, collaborative efforts to support the U.S. warfighter's technology superiority".

The TA stated in a release that this MOU "will help small manufacturers tap into DoD technologies and expertise" through the Manufacturing Extension Partnership (MEP), a program managed by TA's National Institute of Standards and Technology (NIST).

The DOD's Advanced Systems & Concepts Office (ASCO) is a component of the Defense Threat Reduction Agency (DTRA). The ASCO web site states that it "stimulates, identifies and executes high-impact seed projects to encourage new thinking, address technology gaps and improve the operational capabilities of DTRA, DOD and other government agencies in response to weapons of mass destruction (WMD) threats." However, while the focus of the ASCO is WMD, this MOU also references information technologies, including radio frequency identification (RFIC) and cyber security.

The MOU states that the "DoD's focus ... is to ... Establish direct relationships, where feasible between DoD and DoC director and program manager level staff ..." and "Identify defense emerging technology needs and related critical manufacturing processes needed domestically for defense production capabilities ..."

The MOU also states that "DoC's focus to better utilize NIST ... is to ... Provide a professional detail assignment to facilitate the collaborative efforts with specific programs/laboratories such as DoD's Technology Transfer Initiative ..." and "Support the development and deployment of a set of specific defense performance-based commercial standards for high-tech defense manufacturing processes and supply chain interactions (i.e., UID/RFID, cyber security, Homeland Defense, etc.) ..." (Parentheses in original.)

The MOU was signed by the TA's Phil Bond and the DOD's Sue Peyton.

Capitol Hill News

6/9. The Senate Commerce Committee held a hearing titled "Completing the Digital Television Transition". See, opening statement of Sen. John McCain (R-AZ), the Chairman of the Committee. See also, prepared testimony of Rep. Jane Harman (D-CA) regarding public safety and interoperability. See also, prepared testimony of Kenneth Ferree (Chief of the Federal Communications Commission's Media Bureau), prepared testimony of John Lawson (Association of Public Television Stations), prepared testimony of Michael Calabrese (New America Foundation), prepared testimony of Patrick Gelsinger (Intel), and prepared testimony [MS Word] of Thomas Hazlett (Manhattan Institute).

6/9. The Senate Foreign Relations Committee held a hearing titled "Evaluating International Intellectual Property Piracy". See, opening statement [2 pages in PDF] of Sen. Richard Lugar (R-IN), the Chairman of the Committee, and opening statement [2 pages in PDF] of Sen. Joe Biden (D-DE), the ranking Democrat on the Committee. See also, prepared testimony [13 pages in PDF] of Jack Valenti (Motion Picture Association of America), prepared testimony [12 pages in PDF] of Mitch Bainwol (Recording Industry Association of America), prepared testimony [8 pages in PDF] of Robert Holleyman (Business Software Alliance), and prepared testimony [11 pages in PDF] of Douglas Lowenstein (Entertainment Software Association).

Ashcroft Testifies Before Senate Judiciary Committee

6/8. The Senate Judiciary Committee held a hearing titled "DOJ Oversight: Terrorism and Other Topics". Attorney General John Ashcroft spent over three hours testifying, answering questions, and listening to Senators.

All but two of the 19 members of the Committee participated in at least part of the hearing. Senators spent a majority of the time on issues related to custodial interrogation in the war on terrorism, and executive branch memoranda pertaining to interrogation and torture. Republicans generally praised Ashcroft and the Department of Justice (DOJ). Democrats repeatedly asked Ashcroft to provide the Committee with copies of executive branch memoranda, and condemned Ashcroft for not providing such memoranda. Many significant technology related issues at the DOJ either were not discussed, or were little discussed.

There was considerable discussion of some electronic surveillance laws, extension of the provisions of the USA PATRIOT Act that are scheduled to sunset, and the SAFE Act. See, related story, titled "Ashcroft Testifies Regarding PATRIOT Act" in TLJ Daily E-Mail Alert No. 914, June 9, 2004.

Ashcroft addressed, in a prepared statement, peer to peer file sharing systems and pornography. Ashcroft also addressed in a prepared statement the use of information technology at the DOJ.

Issues Not Addressed. There was no discussion of the DOJ's Antitrust Division, the European Commission's recent action against Microsoft, mergers involving tech companies, or any other issues involving competition law.

There was no discussion of the DOJ's Computer Crimes and Intellectual Property Section (CCIPS), cyber security, cyber terrorism, prosecution of cyber crimes, or legislative proposals to expand DOJ authority with respect to cyber crimes.

There was no discussion of the DOJ's enforcement of intellectual property laws, or pending legislation that would expand the authority of the DOJ with respect to enforce intellectual property.

There was no mention of the DOJ's petition [PDF] to the Federal Communications Commission (FCC) regarding expanding the scope of the Communications Assistance for Law Enforcement Act (CALEA) to cover information services, such as VOIP. This is the FCC's RM 10865. See also, story titled "Summary of DOJ Petition for Rulemaking to Expand the CALEA to Cover Information Services" in TLJ Daily E-Mail Alert No. 873, April 9, 2004.

Sen. Hatch. Sen. Orrin Hatch (R-UT) (at right), the Chairman of the Committee, presided. He addressed the PATRIOT Act in his opening statement, which he largely read at the outset of the hearing. He stated that "This legislation was a measured attempt to help protect Americans from terrorist attacks and is consistent with our traditional civil liberties. Despite the negative predictions of some, the Patriot Act has not eroded the civil liberties that we Americans hold dear."

"As I understand it, the Department's Inspector General has consistently reported in three semi-annual reports that it has received no complaints alleging misconduct by DOJ employees in their use of substantive provisions of the Patriot Act. Let me repeat -- no complaints. Nevertheless, if we can improve and fine tune the Patriot Act, we should do so", said Sen. Hatch.

On January 27, the DOJ's Office of the Inspector General (OIG) submitted a report to Congress titled "Report to Congress on Implementation of Section 1001 of the USA PATRIOT Act". The DOJ/OIG is required to submit this report twice per year regarding "complaints alleging abuses of civil rights and civil liberties" by DOJ employees. There is nothing in the report regarding wiretaps, pen registers and trap and trace devices, surveillance of internet communications, CALEA, or any of the technology related provisions of the PATRIOT Act. See, story titled "DOJ Submits Report on Complaints Regarding Abuses of Civil Rights and Civil Liberties" in TLJ Daily E-Mail Alert No. 827, February 2, 2004.

Sen. Leahy. Sen. Patrick Leahy (D-VT) read a long litany of complaints and criticisms about the DOJ in his opening statement. For example, he complained that "Osama Bin Laden remains at large" and the anthrax case has yet to be solved. He all but ignored technology related issues in both his opening statement, and in his rounds of questions for Ashcroft.

He referenced the PATRIOT Act. He said that "you have spent much of the past two years increasing secrecy, lessening accountability and touting the Government’s intelligence-gathering powers under the PATRIOT Act. I and others here in Congress from both sides of the aisle worked together in unparalleled cooperation to pass the PATRIOT Act shortly after September 11."

"But now I must ask, to what end? The threshold issue really is: What good is having intelligence if we cannot use it intelligently? Identifying suspected terrorists is only a first step. To be safer, we must follow through. Instead of declining tough prosecutions, we need to bring the people seeking to do us harm to justice. That is how our system works. Instead, your practices seem to be built on secret detentions and overblown press releases. Our country is made no safer through self-congratulatory press conferences when we face serious security threats", said Sen. Leahy.

P2P and other Online Pornography. Ashcroft provided the Committee with two written statements. First, there was his formal prepared statement, which he did not read. Second, there was his oral testimony, which he did read to the Committee. Ashcroft used the former to address pornography on P2P systems, and the DOJ's adoption of information technologies.

Ashcroft addressed "child exploitation offenses, including child pornography". He wrote that "At the Department of Justice we understand that effective prevention requires more than the imprisonment of individual child predators. We are finding and destroying the perverse underworld that provides a market for and a prelude to crimes against children."

"We recently saw the first results of this strategy in our ongoing investigation and prosecution of peer-to-peer computer file sharing of child pornography. Thanks to coordinated efforts of the Justice Department, the FBI, U.S. Immigration and Customs Enforcement, and 39 local Internet Crimes Against Children Task Forces, we have executed hundreds of searches nationwide", wrote Ashcroft. "At last count, we had identified 3,371 suspect computers distributing child pornography through the use of peer-to-peer software over the Internet."

He also wrote that "Child predators often open websites with a slight misspelling or variation in the spelling of innocent, child-friendly websites in order to expose children to indecent material. We have responded to this repugnant tactic by initiating a false domain-name program. This program locates and shuts down websites that expose children to sexual exploitation and pornographic images by using misleading web names."

DOJ Information Technology. Ashcroft wrote in his prepared testimony that "Effective information technology is critical for both the fight against terrorism and the efficient delivery of services to the public. That is why we have revitalized our Information Technology organization. With the appointment of a new Chief Information Officer, or CIO, the new tech team is leveraging the leadership of experienced executives and managers to implement an Information Technology strategy that is on the cutting edge."

He continued that the DOJ "Published the first Department Information Technology Strategic Plan in 2002. This means we turned fragmented, stand-alone plans into a single, cohesive Department-wide strategy for effective technology deployment in the future."

He also wrote that the DOJ has "Begun designing a single enterprise architecture. This means we will have a technology plan that promotes communication interoperability, and information sharing, with core business functions."

Finally, he wrote that "We have initiated the first ever Law Enforcement Information Sharing (LEIS) strategy to coordinate information sharing across the law enforcement community, from the small-town sheriff to the director of the FBI."

Ashcroft Testifies Regarding PATRIOT Act

6/8. The Senate Judiciary Committee held a hearing titled "DOJ Oversight: Terrorism and Other Topics". Attorney General John Ashcroft was the sole witness. The one technology related subject discussed in detail at this hearing by Senators and Ashcroft was the surveillance related provisions of the USA PATRIOT Act, and proposals to expand the PATRIOT Act.

Ashcroft (at right) wrote in his prepared statement that "We will continue to fight terrorism using all the tools at our disposal. As the Committee is aware, however, key provisions of one such critical tool -- the Patriot Act -- are currently scheduled to ``sunset´´ at the end of 2005. In our view, it is imperative that this ``sunset´´ not be allowed to take place. Instead, these provisions need to be renewed."

"The Justice Department and the American people have benefitted tremendously in preventing terrorism, thanks to the Patriot Act. This important bipartisan legislation removed the bureaucratic wall between law enforcement and intelligence."

The hearing included discussions of sunsetting generally, roving wiretaps, delayed notice of search warrants (also known as sneak and peak), and access to business records under the Foreign Intelligence Surveillance Act (FISA).

However, there was no discussion of the PATRIOT Acts's treatment of libraries as electronic communications service providers, or extending the provisions regarding pen register and trap and trace devices to electronic communications, such as e-mail.

The hearing also covered various legislative proposals, including those pertaining to lone wolf FISA orders, terrorism hoaxes, and administrative subpoenas.

Also, while Ashcroft spoke in general terms about terrorists' use of new communications technologies, there was no discussion of specific technologies, such as voice over internet protocol (VOIP) communications, push to talk, or encryption.

See, full story.

2nd Circuit Rules Public Has First Amendment Right of Access to Court Dockets

6/8. The U.S. Court of Appeals (2ndCir) issued its opinion [33 pages in PDF] in Hartford Current v. Pelligrino, a case regarding the right of the public and press under the First Amendment to access sealed court docket sheets.

The plaintiffs are newspapers. The defendants are the Chief Court Administrator and Chief Justice of the state of Connecticut's court system. This state court system has a longstanding practice of widespread sealing docket sheets, as well as entire case files. The newspapers seek access. The newspapers filed a complaint in U.S. District Court (DConn) against the two defendants, in their administrative capacities, alleging violation of 42 U.S.C. § 1983. The District Court dismissed the complaint. This appeal followed.

The Court of Appeals vacated the dismissal, and remanded. It held that "the press and public possess a qualified First Amendment right of access to docket sheets". It added that "if the materials at issue were sealed administratively, the named defendants have the authority to grant access. As we are unable to discern, on the face of the minimal record before us, whether the materials were sealed in accordance with judicial orders or statutes, we vacate the judgment dismissing the action and remand the matter to the district court to ascertain, at the very least, an answer to this question."

The Court of Appeals reasoned that this case involves the right of access to the courts, which was addressed by the Supreme Court in Richmond Newspapers, Inc. v. Virginia, 448 U.S. 555 (1980), and in the progeny of Richmond Newspapers. The Court of Appeals also reviewed the history of openness of state court records. It concluded that "docket sheets enjoy a presumption of openness and that the public and the media possess a qualified First Amendment right to inspect them".

But, it added that this presumption is rebuttable upon a demonstration that suppression is essential to preserve higher values and is narrowly tailored to serve that interest.

In Richmond Newspapers, the Court held that the holder of the right under the First Amendment is "the public". In the present case, the Court held that the holder of the right is "the public" or "the public and press". Implicit in these holdings is the notion that the First Amendment's clause, "Congress shall make no law ... abridging the freedom of speech, or of the press", creates no rights for an institutional press that are not also guaranteed for any person. Federal administrative law, particularly Federal Communications Commission (FCC) and Federal Election Commission (FEC) law, diverges from this notion.

This case is Hartford Current Company, et al. v. Pelligrino, et al., U.S. Court of Appeals for the 2nd Circuit, No. 03-9141, an appeal from the U.S. District Court for the District of Connecticut, Judge Gerard Goettel presiding.

People and Appointments

6/8. Julie Kearney was named Senior Director of Regulatory Affairs at the Consumer Electronics Association (CEA). She will represent the CEA before the Federal Communications Commission (FCC) and other government entities. She previously worked as Associate Counsel in MCI's International Affairs group. Before that, she was an associate at Haley Bader & Potts (now Garvey Schubert Barer). See, CEA release.

More News

6/8. The Senate Appropriations Committee's Subcommittee on Commerce, Justice, State, and the Judiciary cancelled its hearing on intellectual property rights, which had been scheduled for June 8 at 10:00 AM.

6/8. The U.S. Court of Appeals (DCCir) issued its opinion [11 pages in PDF] in PanAmSat v. FCC, a case involving PanAmSat's requests to the Federal Communications Commission (FCC) for partial refunds of the satellite regulatory fees that it paid for FY 1995, 1997, and 1999. The FCC exempted COMSAT from satellite regulatory fees during these years. The Court of Appeals previously held that this was impermissible. In the present matter, the Appeals Court held that "the FCC violated no law and engaged in no arbitrary or capricious action in denying PanAmSat’s refund requests for fiscal years 1995, 1997, and 1999", and denied the petition for review. This case is PanAmSat Corporation v. FCC, respondent, and Lockheed Martin Corporation and COMSAT Corporation, intervenors, U.S. Court of Appeals for the District of Columbia, Nos. 03-1133 and 03-1134, a petition for review and appeal of a final order of the FCC.

6/8. Alan Greenspan, Chairman of the Federal Reserve Board, gave a speech via satellite to the International Monetary Conference in London, England. He said that the economy has been growing, but companies have not, until recently, been hiring many workers, because they have instead been getting more productivity out of their existing workers, by learning how to use the software and IT equipment that they purchased in the boom of the late 90s. Specifically, in Greenspan-speak, he said that "One of the defining characteristics of the recent business expansion in the United States has been the evident reluctance of corporate managers to expand spending and hiring aggressively in response to and in anticipation of continued cyclical growth. ... The exceptional reluctance to expand payrolls also appears to have waned this year, and businesses are once again hiring with some vigor. But for nearly three years prior, managers sought every avenue to forestall new hiring despite rising business sales. Their ability to boost output without adding appreciably to their workforces, appears to have reflected a backlog of unexploited capabilities to enhance productivity with minimal capital investment, a delayed effect of the capital goods boom of the 1990s."

Pate Addresses US EU Differences on Antitrust, Microsoft, and IPR

6/7. Hewitt Pate, the Assistant Attorney General in charge of the Antitrust Division of the Department of Justice, gave a speech in Brussels, Belgium titled "Antitrust in a Transatlantic Context: From the Cicada's Perspective".

Cicadas are noisy bugs, currently buzzing about Washington DC, that emerge once every 17 years. The gist of Pate's speech was that while Mario Monti and the European Commission erred in their recent action against Microsoft, when the cicadas re-emerge in 17 years, Monti's tenure will not look so bad.

See, Commission Decision [302 pages in PDF]. The EC announced this decision on March 24, 2004. The Decision is dated March 24, 2004. However, the EC did not release the Decision until April 22, 2004.

The EC fined Microsoft 497,196,304 Euros, and ordered it to sell Windows without Media Player and make certain intellectual property available to competitors.

The Decision provides that "Microsoft Corporation shall, within 90 days of the date of notification of this Decision, offer a full-functioning version of the Windows Client PC Operating System which does not incorporate Windows Media Player". It also provides that Microsoft shall, within 120 days, "make the Interoperability Information available to any undertaking having an interest in developing and distributing work group server operating system products and shall, on reasonable and non-discriminatory terms, allow the use of the Interoperability Information by such undertakings for the purpose of developing and distributing work group server operating system products".

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; and story titled "European Commission Releases Microsoft Decision" in TLJ Daily E-Mail Alert No. 883, April 23, 2004.

Pate did not go into the details of the Microsoft case in his June 7 speech. Rather, he stated that "I have expressed our concerns about that specific case elsewhere."

For example, on April 2, 2004, Pate gave a speech in Washington DC in which he expressed "deep concern about the apparent basis of this decision and the serious potential divergence it represents." 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. See, story titled "Pate Criticizes EC Decision Regarding Microsoft" in TLJ Daily E-Mail Alert No. 869, April 5, 2004.

See also, Pate's statement of March 24, 2004, and story titled "US Antitrust Chief Says EU's Microsoft Decision Could Harm Innovation and Consumers" in TLJ Daily E-Mail Alert No. 863, March 25, 2004.

Pate concluded in his June 7 speech in Brussels with the statement that "My prediction is that in 2021, when the cicadas reemerge in Washington, it will be easy to look back and see the enduring significance of Mario Monti's tenure as Competition Commissioner in the context of a positive, strong, and mature transatlantic antitrust enforcement relationship."

Pate offered no prediction regarding how Microsoft will look at the next emergence of the cicadas.

Pate said that "there has been positive movement in the direction of convergence" of competition law, and reviewed some of these positive developments.

He then reviewed some of the major differences between the EU and US. For example, he discussed the absence of private antitrust litigation in the EU. He said that "My own view is that the American focus upon private litigation and its relative absence in Europe has up to now been the single most important difference between our systems."

He continued that "Our experience has shown that private enforcement complements public enforcement as an additional deterrent to anticompetitive conduct. It allows private parties to obtain compensation for harm suffered as a result of unlawful conduct. Decentralization of antitrust decision-making likewise has many positive aspects. The establishment of our courts as the basic arbiters of development in the law and the dispersal of enforcement authority has allowed antitrust largely, though certainly not completely, to take place outside of partisan political debate and to focus more upon sound development of doctrine through legal argumentation and economic research.

He also discussed divergence on unilateral conduct. He stated that "unilateral conduct remains the area of greatest separation between the general approaches of the US and the EU. At the broadest level, we in the United States might be said -- in words suggested by Judge Posner at a recent Antitrust Division event -- to have a more Darwinian view of the competitive process. Over here, as a DG Comp economist has put it during the same program, there is a greater emphasis on requiring that dominant firms limit themselves to ``gentlemanly´´ competition."

He added that "Differences in this overall view of unilateral conduct are reflected in many aspects of specific application. Thresholds for finding that a firm has a ``dominant position,´´ for example, have been lower than for the analogous finding of monopoly power in the United States. Our approaches to pricing practices, including discounting and fidelity rebates are quite different, and approaches in Europe are more likely to be characterized by per se rules."

Pate also addressed divergence on mandated intellectual property (IP) licensing. The EC has mandated IP licensing in its Microsoft proceeding.

Pate said that "The area of mandated licensing of intellectual property is another related one where there is the continued potential for divergence between the US and the EC. This is a point on which there was much less practical divergence in the Microsoft case, with much greater overlap and complementarity between the US and EC remedies on server interoperability. We imposed these aspects of our remedy as part of the settlement of our case involving affirmative anticompetitive conduct in related markets. Whether the refusal to provide access would itself support a determination of liability was not a question we were required to face. Combining the approach to claimed duties of assistance to competitors reflected in Trinko with precedents against unilateral licensing duties in American IP law indicates that liability for unadorned refusals to license is not part of our system. There has been much attention to this question in the wake of the recent IMS decision on this side of the Atlantic, and we will watch with interest for further developments."

Pate continued that "it cannot possibly make sense for intellectual property law to recognize as its most valued creation a patent describing an invention essential to the creation of a valuable commercial product, and for competition law to then step in and say that the owner will be required to relinquish exclusive ownership of the patent because it is essential to the creation of a valuable commercial product."

However, he added that "given the significant attention to possible reforms to the patent system now under discussion in the United States, the intellectual property community must recognize that if it does not address possible areas for reform, then it should not be surprised to see competition law trying to do so, even if not very well."

Supreme Court Denies Certiorari in Section 230 Immunity Case

6/7. The Supreme Court denied certiorari, without opinion, in Batzel v. Smith, a case regarding the application of California's Anti-SLAPP statute to a suit alleging defamation on an internet listserv. See, Order List [8 pages in PDF] at page 2.

The District Court denied a defendant's motion to dismiss under the Anti-SLAPP statute. The U.S. Court of Appeals (9thCir), relying upon the federal interactive computer service immunity provision of 47 U.S.C. § 230(c)(1), vacated and remanded. See, Appeals Court opinion [41 pages in PDF] of June 24, 2003.

The three judge panel of the Court of Appeals issued its opinion on June 24, 2003. See, story titled "9th Circuit Construes Section 230 Immunity in Suit Against Listserv Operator" in TLJ Daily E-Mail Alert No. 687, June 25, 2003. This opinion is also reported at 333 F.3d 1018.

On December 3, 2003, the Appeals Court issued an order [16 pages in PDF] denying the petition for rehearing and the petition for rehearing en banc. See, story titled "9th Circuit Denies Petition for Rehearing En Banc in Section 230 Immunity Case" in TLJ Daily E-Mail Alert No. 792, December 4, 2003.

This case is Ellen Batzel v. Robert Smith, Netherlands Museum Association, Mosler Inc., and Tom Cremers, U.S. Court of Appeals for the Ninth Circuit, Nos. 01-56380 and 01-56556, appeals from the U.S. District Court for the Central District of California, Judge Stephen Wilson presiding.

Supreme Court Denies Cert in Ranger Cellular

6/7. The Supreme Court denied certiorari in Ranger Cellular v. FCC. The Court wrote that "The motion of petitioners for partial remand for consideration of settlement agreement is denied. The petition for a writ of certiorari is denied.". See, Order List [8 pages in PDF] at page 6.

On November 14, 2003, the U.S. Court of Appeals (DCCir) issued its opinion [13 pages in PDF] in Ranger Cellular v. FCC (No. 02-1155), an appeal from an order of the Federal Communications Commission (FCC) rejecting Ranger Cellular's and Miller Communication's (appellants) challenge to four licenses issued by the FCC to provide cellular phone service in rural markets. See, story titled "DC Circuit Rules on Appeal in Ranger Cellular v. FCC" in TLJ Daily E-Mail Alert No. 780, November 17, 2003.

On July 1, 2003, the Appeals Court issued its opinion [12 pages in PDF] in Ranger Cellular v. FCC (No. 02-1093), denying petitions for review of the FCC's award of the cellular licenses. See, story titled "DC Circuit Rules in Ranger Cellular v. FCC" in TLJ Daily E-Mail Alert No. 693, July 8,2003.

Circuit Courts Rule in Counterfeiting Cases

6/7. Various U.S. Courts of Appeal have recently issued opinions in counterfeiting cases.

On June 7, the U.S. Court of Appeals (9thCir) issued its opinion [24 pages in PDF] in In Re Lorillard Tobacco Company a civil case involving counterfeit cigarettes. The issue in this case is narrow, but may have applicability in other types of counterfeiting cases.

The issue on appeal is whether a seizure order authorized under 15 U.S.C. § 1116(d), which pertains to civil actions arising out of use of counterfeit marks, is an injunction, and whether an interlocutory order denying seizure is thus appealable under 28 U.S.C. § 1292(a)(1). The Court of Appeals held that there is no appealable denial of ultimate injunctive relief, and that therefore, it lacks jurisdiction.

This holding is contrary to that of the Third Circuit in Vuitton v. White, 945 F.2d 569 (1991).

The present case is In Re Lorillard Tobacco Company, U.S. Court of Appeals for the 9th Circuit, No. 03-16553, an appeal from the U.S. District Court for the District of Nevada, D.C. No. CV-03-00775-LRH/PAL.

On June 4, the U.S. Court of Appeals (4thCir) issued its opinion [9 pages in PDF] in USA v. Farmer, a criminal case involving trafficking in counterfeit clothing. One of Farmer's arguments on appeal was that the District Court should have dismissed the indictment because it did not also allege violation of the federal criminal trademark infringement statute, which is codified at 18 U.S.C. § 2320. The Appeals Court held that this was not required, and affirmed the conviction.

Nike and Hilfiger do not manufacture their t-shirts and sweatshirts. They contract with independent companies to do so. Farmer purchased blank t-shirts and sweatshirts from various mills that were manufacturing apparel for Nike and Hilfiger, and then hired companies to sew labels into the shirts, and either screen-print or embroider logos on them. He then sold these to retailers.

Farmer's argument was that he affixed Nike's and Hilfiger's trademarked logos only to shirts that had been manufactured for the respective trademark holders, and hence, he did not confuse consumers about the source of his goods. He argued that his unauthorized placement of the trademarked logos did not constitute criminal trademark infringement.

The Court rejected this argument. First, Farmer was purchasing irregular or defective t-shirts and sweatshirts, and was therefore deceiving consumers by selling inferior goods. Second, "One of the rights that a trademark confers upon its owner is ``the right to control the quality of the goods manufactured and sold´´ under that trademark." (Citations omitted.)

This case is USA v. William Haskell Farmer, U.S. Court of Appeals for the 4th Circuit, No. 03-4428, an appeal from the U.S. District Court for the District of South Carolina, D.C. No. CR-00-385.

On June 7, the U.S. Court of Appeals (4thCir) issued its opinion [7 pages in PDF] in USA v. Habegger, a criminal case involving trafficking in counterfeit goods in violation of 18 U.S.C. § 2320. This is another case involving clothing. However, in this case, the Appeals Court reversed the conviction on the grounds that there was insufficient evidence to establish the trafficking element of this offense. The clothing seized in this case was samples provided by Habegger to a retailer, without payment, in the hope that the retailer would place an order for more.

This case is USA v. Larry Fricke Habegger, U.S. Court of Appeals for the 4th Circuit, No. 03-4473, an appeal from the U.S. District Court for the Middle District of North Carolina, D.C. Nos. CR-01-465 and CR-02-351.

On March 23, 2004, Sen. Joe Biden (D-DE) and others introduced S 2227, the "Anticounterfeiting Act of 2004", a bill pertaining to trafficking in counterfeit labels, illicit authentication features, or counterfeit documentation or packaging. See, story titled "Sen. Biden Introduces Anticounterfeiting Bill" in TLJ Daily E-Mail Alert No. 866, March 30, 2004.

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

Sen. Biden also sponsored a similar bill in the 107th Congress -- S 2395, the "Anticounterfeiting Amendments of 2002". That bill was approved by the Senate Judiciary Committee, but not by the full Senate. See, stories titled "Biden Bill Would Ban Illicit Authentication Features" in TLJ Daily E-Mail Alert No. 423, May 2, 2002; "Senate Judiciary Committee Approves Anti Counterfeiting Bill" in TLJ Daily E-Mail Alert No. 473, July 19, 2002; and "Sen. Allen Opposes Sen. Biden's Anticounterfeiting Bill" in TLJ Daily E-Mail Alert No. 503, September 6, 2002.

The Senate Foreign Relations Committee has scheduled a hearing for Wednesday, June 9 at 9:30 AM titled "Evaluating International Intellectual Property Piracy". The witnesses will be Jack Valenti (Motion Picture Association of America), Mitch Bainwol (Recording Industry Association of America), Robert Holleyman (Business Software Alliance), and Douglas Lowenstein (Entertainment Software Association).

Sen. Biden is the ranking Democrat on the Foreign Relations Committee. He is also a senior member of the Judiciary Committee.

Microsoft Appeals European Commission Decision

6/7. Microsoft filed an appeal with the European Union's Court of First Instance of the March 24 ruling of the European Commission. This is case number T-201/04. See, Microsoft release.

On April 22, 2004, the European Commission released its Commission Decision [302 pages in PDF] regarding Microsoft. This document provides the language of the EC's mandate that Microsoft remove certain code from its products sold in the Europe, and that it license certain proprietary technology and intellectual property rights to its competitors. The EC announced this decision on March 24, 2004. However, the EC did not release the Decision until April 22, 2004. See, story titled "European Commission Releases Microsoft Decision in TLJ Daily E-Mail Alert No. 883, April 23, 2004.

See also, related stories: "EU and Microsoft Fail to Reach Settlement" in TLJ Daily E-Mail Alert No. 859, March 19, 2004; "European Commission Seeks 497 Million Euros and Code Removal from Microsoft", "US Antitrust Chief Says EU's Microsoft Decision Could Harm Innovation and Consumers" and "Microsoft Will Challenge EC Decision in Court" in TLJ Daily E-Mail Alert No. 863, March 25, 2004; "U.S. Legislators Criticize EU Action Against Microsoft" in TLJ Daily E-Mail Alert No. 866, March 30, 2004; and "Pate Criticizes EC Decision Regarding Microsoft" in TLJ Daily E-Mail Alert No. 869, April 5, 2004.

More News

6/7. The Supreme Court announced that "The Court will take a recess from today until Monday, June 14, 2004." See, Order List [8 pages in PDF] at page 8.

6/7. The U.S. Court of Appeals (1stCir) issued its opinion in Venegas-Hernandez v. Sonolux Records, a music copyright infringement case involving the statutory damages provision codified at 17 U.S.C. § 504(c). This case is Maria Venegas-Hernandez, et al. v. Sonolux Records, et al., U.S. Court of Appeals for the 1st Circuit, App. Ct. Nos. 03-2014, 03-2015, appeals from the U.S. District Court for the District of Puerto Rico.

6/7. Federal Communications Commission (FCC) Commissioner Kathleen Abernathy gave a speech titled "Overview of FCC Initiatives to Protect Critical Infrastructure and Homeland Security" in which she provided a brief overview of the FCC's efforts to promote network reliability and security. She said 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".

Go to News from June 1-5, 2004.