Senate Passes PIRATE Act to Enable DOJ to Bring Civil Actions for Copyright Infringement

6/25. The Senate passed S 2237, the "Protecting Intellectual Rights Against Theft and Expropriation Act of 2004" or "PIRATE Act".

This bill would authorize the Department of Justice (DOJ) to bring civil actions for copyright infringement for conduct that already constitutes criminal copyright infringement under 17 U.S.C. § 506. This serves two purposes. First, it would make it easier for the DOJ to prevail, because, among other things, the civil action would have a lower burden of proof. Second, it would provide a less punitive action for youthful peer to peer music pirates.

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

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

Sen. Patrick Leahy (D-VT) and Sen. Orrin Hatch (R-UT) introduced the PIRATE Act on March 25, 2004. See, story titled "Leahy and Hatch Introduce Bill to Give DOJ Authority to Bring Civil Actions for Copyright Infringement" in TLJ Daily E-Mail Alert No. 866, March 30, 2004. The Senate Judiciary Committee unanimously approved the bill on April 29, 2004. See, story titled "Senate Judiciary Committee Approves Four Intellectual Property Bills" in TLJ Daily E-Mail Alert No. 888, April 30, 2004.

There is no companion bill in the House.

Senate Passes ART Act

6/25. The Senate passed S 1932 the "Artists' Rights and Theft Prevention Act of 2003" or "ART Act" by unanimous consent. This bill criminalizes unauthorized recording of motion pictures in a motion picture exhibition facility, such as by sneaking camcorders into theatres. This bill provides for pre-registration of works being prepared for commercial distribution, and allows for infringement actions to be based upon such pre-registrations. This bill makes it easier to prosecute people who put copyrighted works on computer servers where anyone can download them. This bill also authorizes the appropriation of funds to prosecute violations of intellectual property rights.

This bill primarily addresses concerns raised by the movie industry. Indeed, the camcorder provision applies only to audiovisual works. However, the bill would also offer enhanced protections to other copyright industries, including music and software.

Sen. John Cornyn (R-TX), Sen. Dianne Feinstein (D-CA) and others introduced this bill on November 22, 2003. See, story titled "Senators Introduce Bill to Increase Protection of Pre-Released Movies and Other Unpublished Works" in TLJ Daily E-Mail Alert No. 786, November 25, 2003.

The Senate Judiciary Committee (SJC) amended and approved the bill on April 29, 2004. See, story titled "Senate Judiciary Committee Approves Four Intellectual Property Bills" in TLJ Daily E-Mail Alert No. 888, April 30, 2004.

Sen. Cornyn (at right) stated in a release after passage of the bill that "Today, high quality, yet illegal, copies of copyrighted material can be and are distributed easily -- and almost instantly -- via email, peer-to-peer networks and other means to millions of users on a regular basis ... We are now one step closer to making thefts far more difficult, prosecution of criminals much easier, and the protection of consumers and artists much stronger.”

Statutory provisions relating to criminal copyright infringement are found in both Title 18 (criminal code) and Title 17 (copyright act). 17 U.S.C. § 506 contains the criminal prohibition on certain acts of copyright infringement. 18 U.S.C. § 2319 provides penalties for violations of 17 U.S.C. § 506.

The bill would revise both 18 U.S.C. § 2319 and 17 U.S.C. § 506 to make it easier to prosecute, and obtain civil remedies for, certain acts of copyright infringement. This bill especially makes it easier to prosecute and sue pirates who place commercial works on internet servers for anyone to download.

Ban on Movie Theatre Camcorders. This bill would add a new § 2319B that provides, in part, that "Any person who, without the authorization of the copyright owner, knowingly uses or attempts to use an audiovisual recording device to transmit or make a copy of a motion picture or other audiovisual work protected under title 17, or any part thereof, from a performance of such work in a motion picture exhibition facility, shall" be imprisoned and or fined.

The bill recites in its findings that "The use of camcorders and other audiovisual recording devices in movie theaters to make illegal copies of films is posing a serious threat to the motion picture industry."

Changes to 17 U.S.C. § 506. The bill would revise § 506(a), which currently provides that criminal infringement may be based upon either infringement "for purposes of commercial advantage or private financial gain" or "by the reproduction or distribution, including by electronic means, during any 180-day period, of 1 or more copies or phonorecords of 1 or more copyrighted works, which have a total retail value of more than $1,000".

The bill would add a third basis for criminal infringement: "by the distribution of a work being prepared for commercial distribution, by making it available on a computer network accessible to members of the public, if such person knew or should have known that the work was intended for commercial distribution".

Changes to 18 U.S.C. § 2319. The bill would amend the criminal penalties provision of 18 U.S.C. § 2319. That is, § 506(a) contains the criminal prohibition. § 2319 contains the criminal penalties for violation of § 506(a)

Currently, § 2319(b) provides that for the top level of penalties to apply, the prosecution must also show that "the offense consists of the reproduction or distribution, including by electronic means, during any 180-day period, of at least 10 copies or phonorecords, of 1 or more copyrighted works, which have a total retail value of more than $2,500".

The problem with the current wording, the bill's sponsors have argued, is that it is difficult to prove distribution of 10 copies of an item placed on an internet server for downloading.

The bill as approved by the Senate, which on this matter is different from the bill as originally introduced, imposes no "10 copies" requirement for imposing penalties for violation for the new third basis for criminal infringement -- placing a work on a computer network.

Pre-Registration of Copyrights. This bill would amend 17 U.S.C. § 408, which provides for the registration of copyrights with the Copyright Office, to allow for the pre-registration of a work that is being prepared for commercial distribution and has not been published, and to allow for a copyright infringement action to be maintained on the basis of that pre-registration.

The reason for this is that 17 U.S.C. § 411(a) currently provides that "no action for infringement of the copyright in any United States work shall be instituted until registration of the copyright claim has been made" and 17 U.S.C. § 412 provides that "no award of statutory damages or of attorney's fees, as provided by sections 504 and 505, shall be made for -- (1) any infringement of copyright in an unpublished work commenced before the effective date of its registration; or (2) any infringement of copyright commenced after first publication of the work and before the effective date of its registration, unless such registration is made within three months after the first publication of the work".

The problem addressed by the statute is that pirates are stealing pre-release versions of digital works, such as movies, uploading them to an internet server, and causing substantial harm to those involved in the production of those movies. All of this occurs before the work is complete, and a registration is made. Hence, this bill amends §§ 411(a) and 412 to reference both registration and pre-registration.

Currently, the courts extend full copyright protection to unpublished works not intended for publication. See, Salinger v. Random House, 811 F.2d 90 (2nd Cir. 1989) and New Age Publications v. Henry Holt, 873 F.2d 576 (2nd Cir. 1989). The law draws no distinction between unpublished works not intended for publication, and not yet published works that are intended for publication. In contrast, this bill does make a distinction. The pre-registration provisions apply only to works "being prepared for commercial distribution".

House. The bill has not passed the House. There is a related, but not identical, bill in the House, HR 4077, the "Piracy Deterrence and Education Act of 2004". HR 4077 contains a ban on movie theatre camcorders, and similar amendments to 18 U.S.C. § 2319 and 17 U.S.C. § 506.

HR 4077 was introduced on March 31, 2004 by Rep. Lamar Smith (R-TX) and others. It was approved by the Subcommittee on Courts, the Internet and Intellectual Property on March 31, 2004.

Senate Passes CREATE Act to Promote Collaborative Research

6/25. The Senate passed S 2192, the "Cooperative Research and Technology Enhancement Act" or "CREATE Act" by unanimous consent. This is a substantially non-controversial bill to promote collaborative research.

The House passed its version of the bill, HR 2391, on March 10, 2004 by a voice vote. See, story titled "House Passes CREATE Act" in TLJ Daily E-Mail Alert No. 854, March 11, 2004.

Sen. Orrin Hatch (R-UT), the Chairman of the Senate Judiciary Committee (SJC), Sen. Patrick Leahy (D-VT), the ranking Democrat on the SJC, and others, introduced the Senate version of this bill on March 10, 2004.

The SJC unanimously approved the bill on April 29, 2004. See, story titled "Senate Judiciary Committee Approves Four Intellectual Property Bills" in TLJ Daily E-Mail Alert No. 888, April 30, 2004.

The bill would amend Section 103(c) of the Patent Act, which is codified at 35 U.S.C. § 103, to address the August 8, 1997 opinion of the U.S. Court of Appeals for the Federal Circuit in OddzOn Products, Inc. v. Just Toys, Inc., which ruled that derived prior art may serve as evidence of obviousness. This opinion is also reported at 122 F.3d 1396.

§ 103(c) currently provides a safe harbor for inventions that are the product of collaboration involving co-inventors within a single company.

However, scientific research is increasingly being conducted jointly by multiple companies, universities, government labs, and/or other entities. The holding in the OddzOn case threatens to discourage collaborative research where the scientists involved are not employed by the same company or entity.

The Court in OddzOn interpreted § 103(c) to mean that prior art under §§ 102(f) or 102(g) could be used to determine the obviousness of an invention where there is no common ownership or assignment of the invention and information being shared among the collaborators, and the information exchanged is not publicly known.

The CREATE Act amends § 103 to provide that patentability is not precluded in the case of research conducted across entities pursuant to a joint research agreement.

The House Judiciary Committee (HJC) wrote in its report that "Many view the court's ruling as far-reaching. In essence, the court found that secret information that qualifies only under Sec. 102(f) could be combined with other information to make an invention obvious and nonpatentable where there was no common ownership or assignment of the invention and `subject matter' at issue. The court found this even though the information being exchanged was neither publicly known nor publicly available. The court's ruling was arguably required by the language of the statute. Nevertheless, Oddzon represents a significant potential threat to inventors who engage in collaborative research and development projects." See, House Report No. 108-425.

The HJC report continues, "Put another way, the decision created a situation where an otherwise patentable invention may be rendered nonpatentable on the basis of confidential information routinely exchanged between research partners. Thus, parties who enter into a clearly defined and structured research relationship, but who do not (or cannot) elect to define a common ownership interest in or a common assignment of inventions jointly developed, can unwittingly create an obstacle to patent protection by simply exchanging secret information among themselves."

The HJC Report elaborates that "Congress intends to enhance the effectiveness and security of patent protection for inventions that arise from collaborative arrangements between multiple organizations. Specifically, Congress intends that subject matter developed by another person, which qualifies as prior art only under one or more of subsections (e), (f), and (g) of section 102 of title 35, and a claimed invention shall be deemed to be owned by the same person, or subject to an obligation of assignment to the same person, where specific conditions are satisfied. The Act achieves this by eliminating the use of certain information and prior art in obviousness determinations in the circumstances addressed in the legislation."

See also, story titled "Representatives Introduce Patent Bill to Encourage Collaborative Research" in TLJ Daily E-Mail Alert No. 680, June 13, 2003; and story titled "House Judiciary Committee Approves CREATE Act to Promote Collaborative Research" also published in TLJ Daily E-Mail Alert No. 821, January 22, 2004.

People and Appointments

6/25. Jay Keithley was named Deputy Chief for Policy of the Federal Communications Commission's (FCC) Consumer & Governmental Affairs Bureau. He was previously Director of Government Relations and Regulatory Counsel for the Personal Communications Industry Association (PCIA). The FCC stated in a release that his "responsibilities will include oversight of the consumer policy division, the disability rights office and the reference information center. Among the issues those groups deal with are telemarketing rules, slamming rules enforcement, implementation of the Americans with Disabilities Act and ensuring the public has convenient and reliable access to all Commission public documents."

6/25. Erin McGrath was named Assistant Division Chief of the Federal Communications Commission's (FCC) Wireless Telecommunications Bureau's (WTB) Mobility Division. The FCC stated in a release [PDF] that she will be responsible for "the post-auction review process and secondary market transactions". She has worked for the FCC since 2000.

6/25. Dorothy Conway was named Associate Division Chief of the Federal Communications Commission's (FCC) Wireless Telecommunications Bureau's (WTB) Spectrum Management Resources & Technologies Division. The FCC stated in a release [PDF] that she will be responsible for customer support, public forums, trade shows and booth, graphics development, and training for WTB system users. She joined the FCC in 1997.

More News

6/25. Microsoft filed a request for a suspension of the European Commission's remedies with the European Court of First Instance in the EC's antitrust action against Microsoft. See, Microsoft release.

Bush Addresses Technology Issues

6/24. President Bush gave a long speech in which he addressed innovation, information technology, broadband deployment, fiber optic networks, broadband over powerline, taxation of internet access, electronic medical records, Federal Communications Commission regulation, spectrum management, and other tech issues.

He said that "the proper role of government is not to try to be the generator of wealth. The proper role of government is to create the environment so that the entrepreneurial spirit is strong and vibrant and alive and well in America."

Internet Access Taxes. Bush stated that "good tax policy helps innovation. See, if we want to be a nation of innovators, we don't want to over-tax industry and commerce and the entrepreneurial spirit."

He reiterated his opposition to taxes on internet access. He said that "we've got to make sure that broadband access is affordable and, therefore, it should not be taxed. It's essential that we not tax. There has been a federal ban on Internet access taxes."

He added that "the ban has expired, states have started taxing broadband access. And that's going to make access less affordable. If the goal is to spread broadband, it doesn't make any sense to tax it as we're spreading it."

Bush (at left) concluded that "I support -- strongly support reestablishing the ban on Internet access taxes. The Congress needs to act on this."

The original Internet Tax Freedom Act (ITFA) imposed a temporary ban on taxes on internet access, and multiple or discriminatory taxes on e-commerce, subject to a grandfather clause. It expired in 2001. But, the Congress passed the Internet Non-Discrimination Act (INDA) in late 2001. It extended the ban of the ITFA through November 1, 2003. This extension has expired.

The House has passed legislation to extend the ban. Rep. Chris Cox (R-CA) introduced the House bill, HR 49, the "Internet Tax Nondiscrimination Act", on January 7, 2003. See, story titled "Rep. Cox and Sen. Wyden Introduce Bill to Make Permanent Net Tax Ban" in TLJ Daily E-Mail Alert No. 580, January 10, 2003. The House Judiciary Committee's Subcommittee on Commercial and Administrative Law held a hearing on April 1, 2003. See, story titled "House Subcommittee Holds Hearing on Bill to Make Internet Tax Moratorium Permanent" in TLJ Daily E-Mail Alert No. 635, April 2, 2003. The Subcommittee approved the bill on May 22, 2003. The full Committee amended and approved the bill on July 16, 2003. See, story titled "House Judiciary Committee Approves Internet Tax Bill", also published in TLJ Daily E-Mail Alert No. 700, July 17, 2003. The full House passed the bill on September 17, 2003.

The Senate passed a bill, S 150, on April 29, 2004 that would nominally extend the ban through November 1, 2005. However, it would also allow a range of new taxes that could be imposed by state and local governments.

Regulatory Proceedings: FTTH. Bush said that "Taxes can stop the spread of broadband, and so can burdensome regulations. And sometimes government has a way of imposing burdensome regulations. And we look forward to working with industry, investors and entrepreneurs as to how to get rid of those burdensome regulations that defeat the goal of spreading broadband."

For example, Bush stated that "our regulations for the telephone were established years ago. And I don't think those regulations should apply to a 21st century technology. I thought the Federal Communications Commission did a smart thing, in a recent decision, by telling communications companies they don't have to give away use of their fiberoptic broadband lines. I thought that was a smart thing."

"In this case, the FCC provided regulatory certainty, and by doing so created incentives for communication companies to build out their fiberoptic broadband lines to more homes. It's a good decision. I think the decision will benefit American consumers, as well."

Bush referred to the Federal Communications Commission's (FCC) triennial review order [576 pages in PDF], which was announced on February 20, 2003, and released on August 21, 2003.

The FCC adopted a rule that provides that for new builds, "An incumbent LEC is not required to provide nondiscriminatory access to a fiber-to-the-home loop on an unbundled basis when the incumbent LEC deploys such a loop to a residential unit that previously has not been served by any loop facility."

For overbuilds, the rule provides that "An incumbent LEC is not required to provide nondiscriminatory access to a fiber-to-the-home loop on an unbundled basis when the incumbent LEC has deployed such a loop parallel to, or in replacement of, an existing copper loop facility," with certain exceptions.

The ILEC must maintain the existing copper loop connected to the particular customer premises after deploying the FTTH loop and provide nondiscriminatory access to that copper loop on an unbundled basis unless the ILEC retires the copper loop, in which case, the ILEC must "provide nondiscriminatory access to a 64 kilobits per second transmission path capable of voice grade service over the fiber-to-the-home loop on an unbundled basis."

See also, stories titled "FCC Announces UNE Report and Order", "FCC Order Offers Broadband Regulatory Relief", "FCC Announces Decision on Switching", "Commentary: Republicans Split On FCC UNE Order", and "Congressional Reaction To FCC UNE Order" in TLJ Daily E-Mail Alert No. 609, February 21, 2003; and story titled "Summary of FCC Triennial Review Order" in TLJ Daily E-Mail Alert No. 725, August 25, 2003.

Regulatory Proceedings: Rights of Way. Next, Bush stated that "Another issue we face is that broadband providers have trouble getting across federal lands. And that's why I signed an order to reduce the regulatory red tape for laying fiberoptic cables and putting up transmission towers on federal lands. You see, if you can't put up towers and lay cable, you can't get broadband to all corners of America by 2007. And so hopefully we've reduced that regulatory burden. If we haven't reduced the regulatory burden enough, we need to hear from those who are stymied. We want to meet the goal. There's a practical reason why we want to meet the goal: It'll improve the lives of our fellow citizens."

The Department of Commerce's (DOC) National Telecommunications and Information Administration (NTIA) released a report titled "Improving Rights-of-Way Management Across Federal Lands: A Roadmap for Greater Broadband Deployment Report by the Federal Rights-of-Way Working Group" on April 26.

It contains numerous recommendations regarding the application and permitting process. These recommendations pertain to access to information, application procedures, timeliness of reviews, review procedures, and assessment of fees. However, nothing in this report proposes guaranteeing any broadband service provider access to any federal land, limiting fees that can be charged, or setting fixed decision making deadlines.

Bush also released a memorandum for the heads of executive departments and agencies on April 26, 2004 titled "Improving Rights-of-Way Management Across Federal Lands to Spur Greater Broadband Deployment". It directs federal entities to follow the recommendations of the NTIA report.

Also, in his June 24 speech, Bush did not address the larger issue of the rights of way related obstacles to broadband deployment presented by state and local governmental authorities.

Regulatory Proceedings: Broadband Over Powerline. Bush continued that "we want to help consumers find more ways to obtain affordable broadband access."

"Most people who have broadband access now obtain it through a cable wire or telephone wire. A small percentage obtain it through a satellite", said Bush. "We need to get broadband to more Americans and so, therefore, I want to talk about two other ways to get broadband to the consumer. We need to use our power lines better. They go everywhere. It seems to make sense, doesn't it, if what you're looking for is avenues into the home. Well, electricity goes into the home. And so one great opportunity is to spread broadband throughout America via our power lines."

He continued. "And one of the problems we've got here is that the Commerce Department has had to develop technical standards that will make sure that our broadband can go across power lines without unnecessary interference. So it's a technological problem. It's a technological issue. It turns out that sometimes the competition of broadband and electricity just doesn't go too good across one line. And so -- if I could put it in simple vernacular. And so, therefore, the Commerce Department is helping to sort through these issues so that broadband access will be available through -- by our power companies."

Bush said that "our job in government is to help facilitate the use of electricity lines by helping with the technological standards that will make this more possible. And I want to thank those in the Commerce Department who have worked hard to do this."

In addition to the Commerce Department's activity on this issue, the FCC, on February 12, 2004, adopted a NPRM regarding BPL. See, story titled "FCC Adopts Broadband Over Powerline NPRM" in TLJ Daily E-Mail Alert No. 836, February 13, 2004.

Regulatory Proceedings: Wireless Broadband. Bush next stated that "The other promising new broadband technology is wireless. The spectrum that allows for wireless technology is a limited resource.

He elaborated that "one of things we need to do is unlock the spectrum's value -- economic value and entrepreneurial potential without -- without, by the way, crowding out important government functions. And we can do both. ... And so we're helping to promote new wireless technologies without crowding out the Defense Department's capacity to defend America."

"There are two kinds of wireless technology. One is called wi-fi. It works with a regular broadband connection. If you use that kind of connection, someone from their home or their office can set up a wireless network that covers the home or the office."

He continued that "the problem with this kind of technology is that we can actually interfere with government uses, like radar. We want to make sure our radars work well. And so we took the necessary steps to make sure these wireless broadband applications could work within the same spectrum as the government functions, without interference. It took some awfully smart people to figure that out. But you know something? Our government employs awfully smart people. And for those of you who have been working on this project, I want to thank you very much. It took some innovation."

"Another kind of wireless broadband would be more wide-ranging. It would be based on mobile wireless. It wouldn't depend on a physical connection to an existing cable or telephone modem as wi-fi does."

"The problem is, it requires a spectrum that is not now available. And so Congress needs to make the spectrum available. If we want to -- if we want to achieve the goal of broadband in every corner of the country by 2007, and shortly thereafter, people will have more options and more choice, we need to -- we need to make more spectrum available", said Bush.

He added that "There's a bill called the Commercial Spectrum Enhancement Act. It is a bill where we can take spectrum that is currently allocated to the government and auction it off to the private sector without diminishing our responsibilities in government. In other words, it will be an auction process. Taxpayers will not only benefit because broadband has been expanded, the taxpayers will benefit because we're not going to give the spectrum away. We'll let them pay."

This bill is HR 1320. The House passed its version of HR 1320 on June 11, 2003. See, stories titled "House Subcommittee Holds Hearing On Commercial Spectrum Enhancement Act" in TLJ Daily E-Mail Alert No. 631, March 26, 2003; "House Subcommittee Approves Spectrum Relocation Fund Bill" in TLJ Daily E-Mail Alert No. 641, April 10, 2003; "House Commerce Committee Passes Spectrum Relocation Bill" in TLJ Daily E-Mail Alert No. 653, May 1, 2003; and "House Passes Commercial Spectrum Enhancement Act" in TLJ Daily E-Mail Alert No. 679, June 12, 2003.

The Senate Commerce Committee passed its version of HR 1320 on June 26, 2003. However, the full Senate has yet to pass a bill. See, story titled "Senate Commerce Committee Approves Commercial Spectrum Enhancement Act" in TLJ Daily E-Mail Alert No. 689, June 27, 2003.

Litigation Reform. Bush said that "we've got to have good legal policy. Frivolous and junk lawsuits make it awfully hard for people to feel comfortable risking capital."

He said that "We need tort reform. And Washington, D.C. is a good place to start with tort reform. We need class-action reform, asbestos reform, and medical liability reform now."

Electronic Medical Records. "But one of the things we can do is use our technology in a better way to promote cost savings and quality of health care by the utilization of personal electronic medical records.

"And so, therefore, I laid out a plan to ensure that most Americans have got electronic health records within the next 10 years so that our system is more cost effective, so we take out needless overhead costs and, at the same time, promote better quality medicine in America."

"To achieve the goal of Tommy Thompson's outfit, the Health and Human Services has developed a language, a common language, so that health care providers can now speak more clearly across the Internet. We've developed new standards. We're funding demonstration projects. We're using programs such as Medicare and the veterans health -- the veterans hospitals to promote a better use of information technology to make sure that health care is a -- adopts the habits of the 21st century."

Kerry Addresses Tech Issues

6/24. Sen. John Kerry's (D-MA) presidential campaign office released a campaign position paper [9 pages in PDF] that addresses many issues related to innovation, science and technology.

R&D Tax Credit. The paper states that "John Kerry will work with the Congress to find a way to pay for extending the Research and Experimentation tax credit with the goal of making it permanent."

The R&D tax credit is scheduled to expire at the end of this month. The ETI repeal bills currently being considered by the Congress would extend the credit through the end of 2005.

Broadband Tax Credits. The paper states that Sen. Kerry "will provide a 10 percent tax credit for investments in today’s broadband technology in rural and inner city areas. Investments in the next-generation of high-speed broadband anywhere in the country would be eligible for a 20 percent tax credit ..." It adds that "These tax credits would be in effect for five years ..."

USPTO Funding. The paper states that Sen. Kerry supports "Ensuring that the Patent and Trademark Office (PTO) has the resources it needs to review a growing number of new patent applications and issue high-quality patents by ending the diversion of patent fees."

The paper does not identify whether or not Sen. Kerry (at right) supports HR 1561, the "United States Patent and Trademark Fee Modernization Act of 2004", which is also known as the USPTO fee bill.

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

The House passed the bill on March 3, 2004 by a vote of 379-28. See, Roll Call No. 38. See also, story tiled "House Passes USPTO Fee Bill" in TLJ Daily E-Mail Alert No. 849, March 4, 2004. The Senate Judiciary Committee approved this bill, without amendment, on April 29, 2004. See, story titled "Senate Judiciary Committee Approves Four Intellectual Property Bills" in TLJ Daily E-Mail Alert No. 888, April 30, 2004. The full Senate has yet to vote on the bill.

PR China and Intellectual Property. The paper states that Sen. Kerry "will vigorously crack down on unfair trade practices, such as piracy of our intellectual property and China's discriminatory policies towards semiconductors and other technological products. In addition, he will work to ensure that China honors its World Trade Organization (WTO) accession agreement to stop forced technology transfers as a prerequisite for doing business in China."

Export Controls. The paper states that Sen. Kerry supports "Shifting the emphasis of computer export controls from attempting to control widely available business computers, to controlling the availability of classified software created for applications such as weapons development."

Communications Law and FCC Proceeding. The Kerry paper also touches on several communications issues and proceedings at the Federal Communications Commission (FCC). For example, the paper states that "The Kerry plan will complete the transition to digital television ..." However, it does not identify what the "Kerry plan" is.

It also states that Sen. Kerry "will also provide shared access to unassigned TV channels where this will not interfere with television reception."

On May 13, 2004, the FCC adopted a Notice of Proposed Rulemaking (NPRM) [38 pages in PDF] regarding use by unlicensed devices of broadcast television spectrum where that spectrum is not in use by broadcasters. See, story titled "FCC Adopts NPRM Regarding Unlicensed Use of Broadcast TV Spectrum" in TLJ Daily E-Mail Alert No. 898, May 14, 2004; and story titled "FCC Releases NPRM Regarding Unlicensed Use of TV Spectrum" in TLJ Daily E-Mail Alert No. 905, May 26, 2004.

The paper also contains this statement. "Competition will also help promote an ``open´´ Internet -- an Internet in which individuals can be producers as well as consumers of information, an Internet in which new ideas for content and applications can emerge from individuals and small companies and spread rapidly, and an Internet that allows ``many to many´´ communication." (Internal quotes in original.)

This is a vague statement. Also, the paper does not attribute the quotations, "open" and "many to many". However, recently FCC Commissioner Michael Copps has used the term "open" in advocating network neutrality. See, Copps speech of March 26, 2004. Similarly, law professors Lawrence Lessig (Stanford) and Timothy Wu (University of Virginia) submitted a comment [17 pages in PDF] to the FCC on August 22, 2003 urging that it adopt a network neutrality rule.

Federal Spending. The paper states that "John Kerry will boost support for the physical sciences and engineering by increasing research investments in agencies such as the National Science Foundation (NSF), the National Institutes of Health (NIH), the Department of Energy, the National Institute of Standards and Technology (NIST), and the National Aeronautics and Space Administration (NASA)."

It also states that "John Kerry believes IT research can lead to the jobs and industries of the future and therefore supports recommendations of the President’s Information Technology Advisory Committee that call for an increase in long-term IT research. More research is needed, for example, to make high-productivity information systems that are dependable, reliable, and resistant to cyber-attacks."

House Commerce Committee Approves Junk Fax Bill

6/24. The House Commerce Committee amended and approved HR 4600, the "Junk Fax Prevention Act of 2004". This bill would amend 47 U.S.C. § 227 to preserve the "established business relationship" exception to the general ban on unsolicited faxes.

Rep. Fred Upton (R-MI), Rep. Ed Markey (D-MA), and others introduced the bill on June 16, 2004. The Subcommittee on Telecommunications and the Internet held a hearing on the bill on June 15, 2004. See, prepared testimony [PDF] of Dane Snowden, Chief of the Federal Communications Commission's (FCC) Consumer & Governmental Affairs Bureau.

The Committee approved an amendment in the nature of a substitute offered by Rep. Upton, Rep. Markey, and Rep. John Dingell (D-MI), by a unanimous voice vote. Rep. Dingell, who is the ranking Democrat on the full Committee, stated that the amendment "strikes the proper balance between protecting consumers from unwanted faxes and permitting legitimate business communications". The Committee then approved the bill, as amended, by a unanimous voice vote.

Also, on June 23, Sen. Olympia Snowe (R-ME) introduced a related bill in the Senate, S 2569, the "Junk Fax Prevention Act of 2004", in the Senate. It was referred to the Senate Commerce Committee.

The Congress passed its original junk fax bill in 1991. The statute gave the FCC rule making and enforcement authority.

Sen. Snowe explained the reason for the legislation. She stated that "the FCC has long recognized an exception to this general ban on unsolicited faxes when the parties sending and receiving the fax have an established business relationship. Businesses of all shapes and sizes regularly conduct their transactions via facsimile, such as real estate agents, wholesalers and distributors, travel agents, and those in the convention industry. In our modern economy, companies that are often hundreds or thousands of miles away from each other do business together, often with the same or greater frequency as with those just up the street. And the reality of business is that sometimes you need to communicate in writing, and it needs to get there right away."

She continued that "The established business relationship exemption recognized this reality, and ensured that government was not placing an undue hardship on business owners. Yet inexplicably, on June 26, 2003 the FCC issued a new rule that eliminated the established business relationship. Under this new rule--which is set to take effect on January 1, 2005--the sender of a fax would have to acquire, in writing, the permission of the recipient to receive an unsolicited fax before the fax could be sent, even if the recipient made a verbal request that the information be faxed."

House Commerce Committee Approves Spyware Bill

6/24. The House Commerce Committee amended and approved HR 2929, the "Safeguard Against Privacy Invasions Act" or "SPY Act" on a roll call vote of 45-4.

Rep. Mary Bono (R-CA) and Rep. Edolphus Towns (D-NY) introduced this bill on July 25, 2003. See, story titled "Rep. Bono Introduces Spyware Bill" in TLJ Daily E-Mail Alert No. 706, July 29, 2003.

The Subcommittee on Commerce, Trade, and Consumer Protection approved an amendment in the nature of a substitute [18 pages in PDF] offered by Rep. Clifford Stearns (R-FL), the Chairman of the Subcommittee, by unanimous voice vote, on June 17, 2004. See, story titled "House Subcommittee Approves Spyware Bill" in TLJ Daily E-Mail Alert No. 922, June 21, 2004.

On June 24 the full Committee approved an amendment in the nature of a substitute offered by Rep. Stearns. It was approved on a voice vote. The Committee then approved the bill, as amended, on a roll call vote. All members present voted yes, except Rep. Anna Eshoo (D-CA), Rep. Darrell Issa (R-CA), Rep. Ted Strickland (D-OH), and Rep. Bart Stupak (D-MI).

Summary of the Amendment. The bill contains two sets of prohibitions. First, Section 2 prohibits deceptive acts or practices related to spyware. It provides that "It is unlawful for any person, who is not the owner or authorized user of a protected computer, to engage in deceptive acts or practices in connection with any of the following conduct with respect to the protected computer". Section 2 then enumerates nine categories of such deceptive acts or practices, including taking control of a computer, modifying settings related to a computer's access to the internet, and collecting personally identifiable information through keystroke logging.

Second, Section 3 prohibits the collection of certain information without notice and consent. Sections 2 and 3 remain largely unchanged from the Subcommittee's version of the bill, which is summarized in detail in the June 21 TLJ story.

The amendment approved on June 24 made numerous changes to the bill. These changes include, but are not limited to, the following.

It changes the keystroke logging language in Section 2.

It adds a ban of phishing.

It adds a security exemption. This new language, found at Section 5(a), provides that "Nothing in this Act shall apply to any monitoring or, or interaction with, a subscriber's Internet or other network connection or service by a telecommunications carrier, cable operator, or provider of information service or interactive computer service for network security purposes, diagnostics or repair in connection with a network or service, or detection or prevention of fraudulent activities in connection with a service or user agreement."

It adds a limitation on liability for certain providers of software or interactive computer services that attempt to remove programs that violate Sections 2 or 3.

It expands the "Law Enforcement" exception. The bill had provided an exception to only Section 3. The new language provides an exception to both Sections 2 and 3, and broadens the exception. This exception would be more accurately described as a governmental, or state action, exception, rather than a law enforcement exception.

It revises the language pertaining to preemption of state laws.

It changes the effective date of the date from 180 days after enactment to one year after enactment.

It changes the sunset date from December 31, 2008 to December 31, 2009.

It adds a new exception for currently installed software. It provides that Section 3, regarding notice and consent, "shall not apply to an information collection program installed on a protected computer before the effective date ..."

It changes the definition of personally identifying information to reference "living individual".

It authorizes the Federal Trade Commission (FTC) to give advisory opinions.

Committee Debate. On most matters, the House Commerce Committee conducts its public hearings and mark ups with considerable civility. It strives for consensus on its legislative output. It seeks to present a common position on bills reported to the full House. Votes are often unanimous. Dissenters often do not cast votes in opposition.

The final vote was lopsidedly in favor. However, there were nevertheless two major sources of opposition to the bill, or aspects of the bill. First, some members opposed the procedure used to move this bill. Second, some members opposed the bill's failure to protect legitimate uses of software, for purposes such as network security, detecting fraud, and monitoring and updating installed software.

No one expressed opposition to enacting legislation that prohibits harmful uses of technologies for spying on computer users. The debate was over how not to also prohibit legitimate uses of the same underlying technologies.

Several members voted for the bill, but stated that it still needs further amendment. For example, Rep. Rick Boucher (D-VA), who is also a Co-Chair of the Congressional Internet Caucus, stated that some people have expressed concerns that the bill suffers from "overbreadth", and that "these do deserve our continued attention in future steps of the process".

Similarly, Rep. Edolphus Towns (D-NY) stated that "we want to target the bad actors, and not impede network security". He added that "I have some remaining concerns that we have excluded some worthy security concerns from the carve out".

Many members complained about procedure. While Rep. Bono and Rep. Towns introduced the bill in July of 2003, the original bill was essentially a rough draft. The Committee then took no action until April 29, 2004 when the Subcommittee on Commerce, Trade, and Consumer Protection held a hearing. Then, in the course of just over one week, the Committee released an extensive redrafting of the bill, the Subcommittee approved that amendment, the Committee released an further redrafting of the bill, and the Committee approved that amendment.

Members complained that it was not until just before midnight on June 23 that the Committee e-mailed to them the 21 page bill to be approved at 9:30 AM on June 24. For example, Rep. Strickland said that "many of us have not had the opportunity to study the manager's amendment".

Rep. Eshoo complained that while the Committee held a meeting for members and staff on June 23, her office was not invited.

When Rep. Issa attempted to offer amendments to Rep. Stearn's amendment in the nature of a substitute, or to the base bill, Rep. Stearns objected, citing the Committee's procedural rules. The Chairman appropriately ruled the amendments out of order. But, the claims of the bill's proponents that the Committee followed an open process were further undermined.

Rep. Eshoo, who represents a Silicon Valley district, spoke at length about her concerns about the bill. She said that "I just don't think that there has been sufficient opportunity to fully consider the implications of this bill."

She said that "these are not easy issues. The technology is complicated. The privacy issues are difficult. And, the different business models at stake are really varied and complex. And, I don't think that this is something that we should rush through."

"I think that we should take the time to really get this thing right. And with all do respect, I think that this thing has been rushed. There are many legitimate processes that are enabled by monitoring web usage, such as protecting consumers against fraud, providing customer support, permitting personalization of content, and targeting advertising that will be of most interest to the user. There is a very long list of companies and organizations that I would like to mention that have problems with one thing or another with the bill.

She named "Dell, Microsoft, eBay, Yahoo, America Online, Amazon, the Business Software Alliance, the Center for Democracy and Technology, the Electronic Frontier Foundation, the Information Technology Association of America, the Information Technology Industry Council, and the Software and Information Industry Association. That is a handful of problems. I mean, we have got to work some of these things out."

She added, "I may not agree with all of the reasons that all of these organizations and companies have weighed in. But I think that that is a pretty broad group".

She gave examples. "Yahoo might monitor for personalization accuracy"; "eBay, they monitor ... people on their website for fraud"; "Microsoft analyzes users to see what security patches are needed, and to see how the software is functioning."

She then asked rhetorically, "How does this bill affect that? Do it cut it off? Does it damage that? These are very legitimate uses. So what I am suggesting Mr. Chairman, is, I don't know what the rush is. I think that rushed legislation, that is so complex and far reaching, has to be, when in doubt, a bit better."

She concluded, "I don't think that it is ready for prime time."

No amendments to the Rep. Stearn's amendment were considered. Rep. Eshoo pointed out that she couldn't offer amendments, because to do so would first require an understanding to the manager's amendment, which was not sent to her until about midnight the night before the markup. Rep. Eshoo is normally a non-confrontational conciliatory legislator. Yet, on this occasion her exchanges with Rep. Stearns were combative and heated.

Rep. Issa did attempt to offer two amendments.

Section 2 prohibits deceptive acts or practices, and begins with the language that "It is unlawful for any person, who is not the owner or authorized user of a protected computer, to engage in deceptive acts or practices in connection with any of the following conduct with respect to the protected computer".

Rep. Issa's first amendment would have replaced this language with the following: "It is unlawful for any person, who is not the owner or authorized user of a protected computer, to engage in any of the following conduct with respect to a protected computer with an intent to deceive:"

That is, the bill prohibits certain conduct, but contains no mental state requirement. Rep. Issa proposed adding an "intent to deceive" element.

His second amendment would have provided that "It is unlawful for any person, who is not the owner or authorized user of a protected computer, to engage in intentionally deceptive acts or practices in connection with  any of the following conduct with respect to a protected computer."

Section 2 of the bill enumerates certain acts, such as taking control of a computer and keystroke logging, and prohibits "deceptive acts or practices in connection with any" of these acts. Rep. Issa's first amendment, but not his second amendment, would have applied the prohibition to the acts themselves, but not to acts "in connection with".

Further Consideration of HR 2929. Several members of the Committee stated that the House Judiciary Committee has also sought a referral of this bill. Any such referral would delay consideration by the full House.

Also, the House is about to recess for its Independence Day break. It will meet for several weeks in July. However, little legislative activity will take place after that, because of the political conventions, primaries, and general election campaigns.

Moreover, the Senate must pass a bill. No companion bill has yet been introduced in the Senate.

Given the membership of the Senate Commerce Committee, the other body is more likely to consider in more detail how this legislation would impact legitimate use of technologies. Three of the six west coast Senators hold seats on the Committee. Sen. Maria Cantwell (D-WA) will be concerned with how this bill affects Microsoft and other Washington state tech companies. Washington has not been represented on the House Commerce Committee since former Rep. Rick White lost his bid for re-election in 1998. Sen. Barbara Boxer (D-CA) will be attentive to the interests of her Silicon Valley constituents. Sen. Ron Wyden (D-OR) also sits on the Committee.

In addition, several of the Republican Senators on the Committee, including Sen. George Allen (R-VA) and Sen. John Sununu (R-NH), have a history of opposing regulation that might inhibit innovation and growth in the tech sector.

Hence, the bill faces enormous obstacles to being enacted into law in the little remaining time of the 108th Congress. The efforts by the House Commerce Committee may merely serve as a prelude to the rewriting and enactment of a spyware bill in the 109th Congress.

4th Circuit Denies Rehearing En Banc in Chapman v. Virginia Following Procedural Flukes

6/24. The U.S. Court of Appeals (4thCir) issued its order [6 pages in PDF] denying Virginia's motion for rehearing en banc in PSINet v. Chapman. This lets stand the three judge panel's split opinion [44 pages in PDF] that affirmed the District Court's opinion that held unconstitutional a statute enacted by Virginia in 1999 that criminalizes the dissemination of material harmful to minors over the internet.

That is, Virginia's attempt to regulate online smut has been struck down.

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

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

This statute was not written from scratch in 1999. Rather, the legislature merely amended it to add reference to electronic media.

The earlier version of the statute was upheld against a constitutional challenge in American Booksellers Ass’n v. Virginia, 882 F.2d 125 (1989).

District Court. Several parties, including PSINet and People for the American Way filed a complaint in U.S. District Court (WDVa) against Warren Chapman, in his capacity as Commonwealth Attorney, alleging that Section 18.2-391 violates the First Amendment and the commerce clause of the U.S. Constitution.

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

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

Three Judge Panel. On March 25, 2004, a three judge panel of the U.S. Court of Appeals (4thCir) issued its divided opinion [44 pages in PDF] affirming the District Court's opinion that the statute banning the dissemination of material that is harmful to minors over the internet is unconstitutional.

First, the majority rejected the argument that American Booksellers Ass’n v. Virginia is binding on the Court. Second, the majority held that the statute "unconstitutionally chills free speech and therefore violates the First Amendment." And third, the majority upheld the District Court "on the separate ground that the statute violates the Commerce Clause".

See, story titled "Divided 4th Circuit Affirms in Internet Smut Case, PSINet v. Chapman" in TLJ Daily E-Mail Alert No. 864, March 26, 2004.

Petition for Rehearing En Banc. And now the Fourth Circuit, en banc, has denied hearing. The Court's order states, "On the poll requested by a member of the court on the petition for rehearing en banc, Judges Widener, Niemeyer, Luttig, and Duncan voted to grant rehearing en banc, and Judge Michael voted to deny rehearing en banc. Chief Judge Wilkins, and Judges Wilkinson, Williams, Motz, Traxler, King, Gregory, and Shedd disqualified themselves from participating in this case."

The order adds that "The petition for rehearing is denied, and, because the poll on rehearing en banc failed to produce a majority of judges in active service in favor of rehearing en banc, the petition for rehearing en banc is also denied. Judge Niemeyer wrote an opinion dissenting from the denial of rehearing en banc."

Judge Niemeyer, who dissented on the three judge panel, and was one of the four judges voting for en banc review, wrote a livid opinion, dissenting from the denial of en banc review. He wrote that the two judges sitting by designation incorrectly ignored, and effectively reversed, the 4th Circuit's precedent in American Booksellers. He wrote that the two judges incorrectly applied Supreme Court precedent. He wrote that the two judges relied "on propositions that are unsupported by the record or that are irrelevant to a determination of the scope of the statute".

He lamented that "the law of the Fourth Circuit is now written solely by two district judges who were designated to sit on the three-judge panel, and not by any circuit judge". He concluded that what has transpired is "a procedural injustice worked by the rules of judicial assignments", and "a substantive injustice for the people of Virginia, who have carefully crafted legislation to regulate commercial pormography on the Internet for the safety and well being of the juveniles in the Commonwealth without denying such material to adults."

Judicial Politics and Judicial Assignments. How the court got to this point warrants review. The 4th Circuit includes many judges who are, relative to judges on other circuits, more deferential to legislative bodies, more supportive of states rights, and more reluctant to overturn criminal statutes on constitutional grounds. The makeup of this court was long influenced by former Sen. Strom Thurmond (R-SC), a former member and Chairman of the Senate Judiciary Committee, and other Republicans, such as former Sen. Jesse Helms (R-NC).

In contrast, the makeup of the 3rd Circuit has been influenced more by Democratic Senators, and Sen. Arlen Specter (R-PA). The U.S. District Court (EDPa) and the 3rd Circuit are forums of choice for those bringing First Amendment challenges to federal statutes, where venue is not restricted to any locality. However, since the present case involves a Virginia state statute, the plaintiffs could not file this case in the 3rd Circuit.

This case received an unusual assignment of judges to the three judge panel assigned to hear the appeal. It was comprised of only one member of the 4th Circuit (Niemeyer). The two other members of the panel were District Court Judges sitting by designation (James Spencer and Andre Davis). Spencer and Davis joined together to form a two judge majority to overturn the Virginia statute. Niemeyer wrote a vigorous dissent.

Then, Virginia petitioned for rehearing en banc. Then, an unusual number of judges -- eight -- disqualified themselves from participating. The remaining five members of the 4th Circuit voted 4-1 to rehear the case. However, because the 4th Circuit's Local Rule 35(b) provides that an en banc rehearing requires a vote of a majority of the judges who are in regular active service, the four judges did not constitute a majority.

A review of the opinion of the three judge panel, and the names of the eight judges who disqualified themselves, would lead a casual observer of the 4th Circuit to conclude that, but for the disqualifications, there would have been enough votes for en banc review.

Unless the Supreme Court overturns the 4th Circuit, PSINet v. Chapman will remain the law of the 4th Circuit. The Supreme Court has not identified anomalies in judicial assignments, disqualifications or recusals as criteria for granting certiorari.

Finally, if Virginia were to tweak and re-enact its statute once again, for example, by adding a clause regarding peer to peer networks, this statute would likely be challenged. Appellate review would then test Judge Niemeyer's commitment to the doctrine of stare decisis.

House and Senate Committees Take Up US Australia FTA Implementation Act

6/24. On June 23, the House Ways and Means Committee approved HR __, the "United States-Australia Free Trade Agreement Implementation Act".

On June 24, the Senate Finance Committee (SFC) voted against favorably reporting its version of the U.S. Australia Free Trade Agreement Implementation Act, by a vote of 7-14.

On June 23 the SFC approved an amendment offered by Sen. Kent Conrad (D-SD) to protect South Dakota and other cattle ranchers from competition from imported Australian beef. The amendment directs the U.S. Trade Representative (USTR) to obtain approvals from the House Ways and Means Committee and the Senate Finance Committee for any waiver of the beef safeguard provisions contained in the FTA. Sen. Charles Grassley (R-IA), the Chairman of the SFC, stated that this amendment is unconstitutional in light of the holding of the Supreme Court opinion in INS v. Chadha, 462 U.S. 919 (1983).

Sen. Grassley voted against favorably reporting the bill (as amended by the Conrad amendment). He expressed his strong support for the FTA. And, he urged the Senate to approve the House version of the bill (which does not contain the Conrad amendment). See also, Sen. Conrad's release.

Bills Introduced in the Senate

6/24. Sen. Hillary Clinton (D-NY) introduced S 2577, the "Broadband Rural Research Investment Act of 2004". This bill would authorize the appropriation of $25 Million per year for the National Science Foundation (NSF) to conduct research on "enhancing or facilitating the availability of broadband telecommunications services in rural areas and other remote areas" and "facilitating or enhancing access to the Internet through broadband telecommunications services". The bill was referred to the Senate Commerce Committee.

6/24. Sen. Hillary Clinton (D-NY) introduced S 2578, "Broadband Expansion Grant Initiative of 2004". This bill would authorize the appropriation of $100 Million per year for the Department of Commerce (DOC) to provide grants and loans "to facilitate the deployment by the private sector of broadband telecommunications networks and capabilities (including wireless and satellite networks and capabilities) to underserved rural areas". (Parentheses in original.) The bill was referred to the Senate Commerce Committee.

6/24. Sen. Hillary Clinton (D-NY) introduced S 2582, an untitled bill to authorize the appropriation of $50 Million for grants to higher education institutions, state and local government entities and non-profit economic development organizations for "broadband-based economic development". The bill provides that the purposes of the grants shall be "(1) to assess the telecommunications infrastructure of a region; (2) to assess the telecommunications demand in a region; and (3) to organize programs to boost the supply of high-speed telecommunications to a region, including demand aggregation programs." The bill was referred to the Environment and Public Works Committee.

6/24. Sen. Gordon Smith (R-OR), Sen. George Allen (R-VA), Sen. Ernest Hollings (D-SC), and Sen. John Sununu (R-NH) introduced S 2603, the "Junk Fax Prevention Act of 2004". It was referred to the Senate Commerce Committee.

More Capitol Hill News

6/24. The House Science Committee's Subcommittee on Environment, Technology, and Standards held a hearing titled "Testing and Certification for Voting Equipment: How Can the Process Be Improved?" See, prepared tesimony [PDF] of Hratch Semerjian (acting Director of the National Institute of Standards and Technology), prepared testimony [PDF] of Carolyn Coggins (SysTest Laboratories), and prepared testimony [PDF] of Michael Shamos (Carnegie Mellon University).

6/24. The House Judiciary Committee's Subcommittee on Courts, the Internet, and Intellectual Property held a hearing titled "Patent Quality Improvement: Post-Grant Opposition". See, prepared testimony [6 pages in PDF] of James Toupin (General Counsel of the U.S. Patent and Trademark Office), prepared testimony [PDF] of Jeffrey Kushan (outside counsel for Genentech), prepared testimony of Michael Kirk (Executive Director of the American Intellectual Property Law Association), and prepared testimony [PDF] of Karl Sun (Google).

6/24. The Senate Judiciary Committee held a business meeting at which it began consideration of the nomination of Claude Allen to be a Judge of the U.S. Court of Appeals for the 4th Circuit. During the course of its consideration, the Committee lost a quorum of members. Further consideration of this nomination was continued until the next business meeting, on July 8 at 9:30 AM.

6/24. The Senate Judiciary Committee held over its consideration of S 1635, the "L-1 Visa (Intracompany Transferee) Reform Act of 2003".

FCC Issues Public Notice on Use of Small Antennas for Unlicensed Wi-Fi and Other Devices

6/24. The Federal Communications Commission's (FCC) Office of Engineering and Technology (OET) issued a public notice [3 pages in PDF] regarding "the use of unlicensed devices, including customer antennas, especially in the context of a variety of multi-tenant environments (MTEs). MT environments encompass venues such as hotels, conference and convention centers, airports, and colleges and universities."

This notice states that questions have arisen about the role of the FCC in addressing and resolving radio interference (RFI) issues. In addition, "questions have arisen about the ability of homeowners associations, landlords, and other third parties to prohibit customer use of small antennas when consumers install and operate them as unlicensed devices."

This public notice states that "the FCC has exclusive authority to resolve matters involving radio frequency interference [RFI] when unlicensed devices are being used, regardless of venue. We also affirm that the rights that consumers have under our rules to install and operate customer antennas one meter or less in size apply to the operation of unlicensed equipment, such as Wi-Fi access points -- just as they do to the use of equipment in connection with fixed wireless services licensed by the FCC."

This public notice is DA 04-1844.

NTIA Releases Reports on Spectrum Management

6/24. The Department of Commerce's (DOC) National Telecommunications and Information Administration (NTIA) released two reports pertaining to government management of the use of spectrum. See, NTIA release.

The first report is titled "Spectrum Policy for the 21st Century -- The President's Spectrum Policy Initiative: Report 1". It is subtitled "Recommendations of the Federal Government Spectrum Task Force". It contains the views of the administration's task force.

The second report is titled "Spectrum Policy for the 21st Century -- The President's Spectrum Policy Initiative: Report 2". It is subtitled "Recommendations from State and Local Governments and Private Sector Responders".

The first report, which represents the administration's task force's views, contains numerous recommendations. These recommendations address actions to be taken by the NTIA and other government agencies. That is, this report addresses continued government control of, and management of, the use of spectrum resources. There are no recommendations in this report that users obtain rights in spectrum, or that markets for spectrum be developed.

The second report, which is based in part upon views of "the private sector developed through the public meetings and written comments submitted to the Department of Commerce", does reference limited rights and markets.

It recommends first that "The Administration should continue to encourage Congress to enact legislation that provides the FCC with permanent authority to conduct spectrum auctions for licenses and to collect fees for spectrum use. This proposed legislation would support incentives for efficient use of the spectrum. The Administration should also continue to support legislation that would establish a spectrum relocation fund that would streamline the process for reimbursing government spectrum users to facilitate their relocation to comparable spectrum." This is recommendation 5(a).

This is a reference to HR 1320. The House passed its version of HR 1320 on June 11, 2003. See, stories titled "House Subcommittee Holds Hearing On Commercial Spectrum Enhancement Act" in TLJ Daily E-Mail Alert No. 631, March 26, 2003; "House Subcommittee Approves Spectrum Relocation Fund Bill" in TLJ Daily E-Mail Alert No. 641, April 10, 2003; "House Commerce Committee Passes Spectrum Relocation Bill" in TLJ Daily E-Mail Alert No. 653, May 1, 2003; and "House Passes Commercial Spectrum Enhancement Act" in TLJ Daily E-Mail Alert No. 679, June 12, 2003. The Senate Commerce Committee passed its version of HR 1320 on June 26, 2003. However, the full Senate has yet to pass a bill. See, story titled "Senate Commerce Committee Approves Commercial Spectrum Enhancement Act" in TLJ Daily E-Mail Alert No. 689, June 27, 2003.

The second report continues that "Once enacted into law, the FCC and NTIA should use the statutory authorities described in (a) to develop increased economic incentives for efficient spectrum use.  In addition to market-based incentives, like auctions and lease fees, the FCC should consider expanding the application of secondary markets across services."

Finally, the second report recommends that "NTIA, in conjunction with the FCC should, through appropriate rulemaking processes, examine the possibility of modifying spectrum rights as a means to encourage the deployment of spectrally efficient technologies. These rulemakings should consider, among other things: (i) granting access to new bands of spectrum to users deploying demonstrably non-interfering technology; and (ii) limiting the interference protection afforded to incumbents using inefficient technologies."

The Federal Communications Commission (FCC) has already been moving towards the establishment of limited markets in certain contexts. For example, FCC Chairman Michael Powell formed a Spectrum Policy Task Force (SPTF) in June of 2002. See, story titled "Powell Creates Task Force to Conduct Spectrum Inquiry" in TLJ Daily E-Mail Alert No. 446, June 7, 2002.

The FCC announced the report of its SPTF on November 7, 2002. See, story titled "FCC Announces Report on Spectrum Policy" in TLJ Daily E-Mail Alert No. 545, November 8, 2002. The SPTF released its Report [73 pages in PDF] on November 15, 2002. One of the many topics addressed by the report is moving towards markets. The report recommends that "spectrum policy must evolve towards more flexible and market oriented regulatory models."

The FCC has also released papers on this subject, and conducted rule making proceedings on this subject.

FCC Chairman Michael Powell praised the NTIA reports in vague terms. He wrote in a statement [PDF] that "I applaud the Administration for undertaking a review of these timely spectrum issues. I look forward to analyzing the recommendations contained in these reports and working together with NTIA to improve spectrum management in the United States." He added that "At the FCC, we have worked hard over the last two years to identify and implement significant spectrum management reforms and to make our policies more flexible and market driven. Together we can craft spectrum policies that deliver wireless broadband for the American people."

3rd Circuit Rules in Media Ownership Case

6/24. The U.S. Court of Appeals (3rdCir) issued its opinion [213 pages in PDF] in Prometheus Radio Project v. FCC, overturning some of the Federal Communications Commission's (FCC) media ownership rules.

On June 2, 2003, the FCC announced its Report and Order and Notice of Proposed Rulemaking [257 pages in PDF] amending its media ownership rules. See, story titled "FCC Announces Revisions to Media Ownership Rules" in TLJ Daily E-Mail Alert No. 672, June 3, 2003.

The Court summarized its holding as follows: "Though we affirm much of the Commission's Order, we have identified several provisions in which the Commission falls short of its obligation to justify its decisions to retain, repeal, or modify its media ownership regulations with reasoned analysis. The Commission’s derivation of new Cross-Media Limits, and its modification of the numerical limits on both television and radio station ownership in local markets, all have the same essential flaw: an unjustified assumption that media outlets of the same type make an equal contribution to diversity and competition in local markets. We thus remand for the Commission to justify or modify its approach to setting numerical limits. We also remand for the Commission to reconsider or better explain its decision to repeal the FSSR. The stay currently in effect will continue pending our review of the Commission’s action on remand, over which this panel retains jurisdiction."

FCC Chairman Michael Powell issued a statement [PDF]. He said that "Today's decision perversely may make it dramatically more difficult for the Commission to protect against greater media consolidation. It sets near impossible standards for justifying bright-line ownership limits. The fear is realized in the opinion itself. The court rejected the Commission’s effort to limit further radio consolidation. It also upheld the elimination of the newspaper cross-ownership rule, while rejecting our efforts to place reasonable limits on those combinations. This is deeply troubling and hampers the flexibility of the agency to protect the American public, as this agency is charged to do."

Powell added that "This is the second time a court has put aside exhaustive efforts by the expert agency to set numerical limits. This has created a clouded and confused state of media law. The chaotic results demonstrate the wisdom of Chief Judge Scirica's nearly 100 page dissent, where he says that ``the Court has substituted its own policy judgment for that of the FCC and upset the ongoing review of broadcast media regulation mandated by Congress ...´´"

FCC Commissioner Michael Copps, who has opposed the FCC's rule changes all along, also issued a statement [PDF]. He wrote that "We have now heard from the American people, Congress, and the courts. The rush to media consolidation approved by the FCC last June was wrong as a matter of law and policy. The Commission has a second chance to do the right thing. We must immediately move forward and redesign our media policy."

He continued that "the FCC should immediately take three steps. First, we should issue a notice confirming that until new rules are adopted, we will continue to apply the limits that were in effect prior to the June 2, 2003 decision. Second, I call upon the Commission to schedule a series of hearings across the country ..." And third, wrote Copps, "we need independent research studies on media concentration in a variety of markets so that we can make a decision that has a more solid foundation. Clearly, the court found that the FCC’s previous studies were inadequate and lacked credibility."

See also, Adelstein statement [PDF]. He wrote that "The court largely undid what would have been the most destructive rollback of media ownership protections in the history of American broadcasting."

People and Appointments

6/24. The Senate confirmed Dora Irizarry to be a Judge of the U.S. District Court for the Eastern District of New York.

6/24. The Senate confirmed Peter Hall to be a Judge of the U.S. Court of Appeals for the 2nd Circuit.

6/24. The Senate confirmed William Benton to be a Judge of the U.S. Court of Appeals for the 8th Circuit.

6/24. The Senate confirmed George Schiavelli to be a Judge of the U.S. District Court for the Central District of California.

6/24. The Senate confirmed Robert Bryan Harwell to be a Judge of the U.S. District Court for the District of South Carolina.

6/24. The Senate confirmed Diane Sykes to be a Judge of the U.S. Court of Appeals for the 7th Circuit by a vote of 70-27. See, Roll Call No. 152.

More News

6/24. Federal Communications Commission (FCC) Commissioner Kathleen Abernathy gave a speech [PDF] at an annual meeting of the Federal Communications Bar Association (FCBA).

Senate Subcommittee Holds Hearing on P2P Technology

6/23. The Senate Commerce Committee's Subcommittee on Competition, Foreign Commerce, and Infrastructure held a hearing titled "The Future of Peer to Peer (P2P) Technology".

Sen. Gordon Smith (R-OR) presided. He wrote in his opening statement that "It is conceivable that some consumers who first took to the Internet when many services were free may have come to expect that all services over the Internet are, or should be, free. To them, perhaps, P2P is just ``free downloading.´´ To me, it looks a lot more like ``freeloading´´ -- or taking someone else's property without paying for it.

Even more disturbing to me, though, is the amount of pormographic material that I’ve learned is traded over these P2P networks, and the relative ease with which users may obtain it. Additionally, recent studies have shown that computer viruses and software that poses risks to consumers’ privacy and security are also prevalent on P2P networks.

Although I am very concerned about these aspects of P2P, I recognize that there are some businesses using P2P networks to legitimately distribute content, including software and music. Scientists also use P2P networks to aid their collaborative efforts at medical research and global weather prediction – two cases in which P2P helps them access data stored on colleagues’ computers located throughout the world whenever they need it.

At the conclusion of the hearing, Sen. Smith (at right) stated that "clearly, we would rather that technology deal with this problem than legislation. But if necessary, we will do legislation. We cannot stand idly by when there is wanton theft going on. That is not the way free enterprise works. That is the way free loading works. And, we cannot stand by when people, without asking it, are affronted with the most horrendous kinds of pormography under the banners of baseball, or Snow White."

Howard Beales, Director of the Federal Trade Commission's (FTC) Bureau of Consumer Protection, wrote in his prepared testimony that "Downloading and using P2P file-sharing programs, however, sometimes also creates significant risks for consumers. When consumers download P2P file-sharing software programs, they may download other, unwanted, software, including spyware. The Commission recently held a public workshop on spyware. Later this year, the FTC will issue a comprehensive report addressing spyware, including the relationship between P2P file-sharing software and spyware."

He added that "When consumers use P2P file-sharing software programs, they face additional risks. Consumers may inadvertently place files with sensitive personal information in their directory of files to be shared. Consumers may receive files with viruses and other programs that could impair the operation of their personal computers. Consumers may receive or redistribute files that may subject them to civil or criminal liability under laws governing copyright infringement and pormography."

Beales also stated that "Because of the way the files are labeled, individuals, including children, may be exposed to unwanted and disturbing images. The Commission is concerned with the exposure of individuals, especially children, to unwanted pormographic materials through deceptive practices."

See also, prepared testimony of John Rose (The EMI Group), prepared testimony of Michael Weiss (CEO of a company that distributes a P2P product), prepared testimony [MS Word] of Les Ottolenghi (Intent MediaWorks), and prepared testimony of Curt Pederson (Oregon State University).

House Commerce Committee to Mark Up Spyware Bill

6/23. The House Commerce Committee is scheduled to mark up HR 2929, the "Safeguard Against Privacy Invasions Act" or "SPY Act" at a meeting beginning at 9:30 AM on Thursday, June 24. This is Rep. Mary Bono's (R-CA) spyware bill.

The Subcommittee on Commerce, Trade, and Consumer Protection approved an amendment in the nature of a substitute [18 pages in PDF] on June 17, 2004. See also, story titled "House Subcommittee Approves Spyware Bill" in TLJ Daily E-Mail Alert No. 922, June 21, 2004.

The Committee has continued its work on the bill since the Subcommittee markup. The full Committee will likely approve a version of the bill with further amendment.

However, some groups still have reservations. For example, Harris Miller, President of the Information Technology Association of America (ITAA) stated in a June 23 letter to Rep. Joe Barton (R-TX) and Rep. John Dingell (D-MI), who are the Chairman and ranking Democrat on the Committee, that the ITAA has reservations about the bill. He wrote that "a regulatory approach to all interactive software could undermine the consumer interest by clinging to technologically obsolete text-based notice formulas, rather than incorporating the benefits of innovation in a rapidly changing field".

Miller continued that "One of the reasons that industry is concerned about newly proposed legislation curtailing technologies known today as spyware is that there exist many good uses of similar technologies, recently termed ``supportware,´´ that could be considered spyware by some definitions. ``Supportware´´ is a term that refers to Internet-based software technologies that update, renew, and monitor programs residing on the computer user’s system to provide a better service to them and to enhance overall computer user satisfaction."

He added that "we believe that the current bill will generate a veritable blizzard of legally mandated pop-up notices that only a lawyer would love. The proposed legislation goes beyond addressing the problem of Spyware to create a new Federal regulatory regime at the Federal Trade Commission for the online software distribution."

Judiciary Committee Members Introduce Spyware Bill

6/23. Rep. Bob Goodlatte (R-VA), Rep. Zoe Lofgren (D-CA), and Rep. Lamar Smith (R-TX) introduced HR 4661 the "Internet Spyware (I-SPY) Prevention Act of 2004". It would add a new Section 1030A to the Criminal Code titled "Illicit indirect use of protected computers" to create two narrow criminal prohibitions related to some of the more egregious forms of spyware.

The bill was referred to the House Judiciary Committee. Rep. Smith is the Chairman of the Subcommittee on Courts, the Internet and Intellectual Property (CIIP). Rep. Goodlatte and Rep. Lofgren are also members of the CIIP Subcommittee. See, full story.

Rep. Kleczka Introduces RFID Bill

6/23. Rep. Jerry Kleczka (D-WI) introduced HR 4673, the "Opt Out of ID Chips Act".

This bill pertains to the use of radio frequency identification (RFID) tags used on products that are sold at retail. The bill does not prohibit the use of RFID tags. It provides that products sold at retail with RFID tags must contain warning labels, and that the purchasers have the right to have the RFID tags removed or disabled at the time of purchase.

The bill defines an RFID tag as "a device that acts as a transponder and enables data to be transmitted through a radio signal to a receiver and that is placed in a product to provide identification, tracking, or other information about the product or the consumer of the product."

The bill was referred to the House Commerce Committee.

Rep. Kleczka stated in a release that "RFIDs are valuable tools for businesses, enabling them to keep the most in-demand products on the shelves and reducing costs due to loss or theft ... However, the possibility for abuse of this technology is great, especially when consumers are not informed of its presence.  This bill will require that consumers are well-informed before purchasing a product that contains an RFID, and are able to have it disabled or removed."

The bill would give rulemaking and civil enforcement authority to the Federal Trade Commission (FTC). The FTC held a one day workshop on RFID technology on June 21, 2004. See, FTC web page with hyperlinks to prepared statements of speakers.

Senators Address Impending Expiration of R&D Tax Credit

6/23. Sen. Charles Grassley (R-IA), the Chairman of the Senate Finance Committee (SFC), Sen. Max Baucus (D-MT), the ranking Democrat on the SFC, and Sen. Orrin Hatch (R-UT), a senior member of the SFC, issued a statement regarding the impending expiration of the research and development tax credit. The credit is scheduled to expire on June 30, 2004.

Both the House and Senate bills to repeal the extraterritorial income (ETI) tax regime, to comply with World Trade Organization (WTO) rulings, would also extend the R&D credit through December 31, 2005. The House has passed its bill, HR 4520, the "American Jobs Creation Act of 2004", last week. The Senate has passed its bill, S 1637, the "Jumpstart Our Business Strength (JOBS) Act", in May. However, the two bills have not yet been reconciled.

The three Senators stated that "We want to take this opportunity to remind our colleagues of the importance of research and development to the growth of our economy and to improvements in our future standard of living. Research and development has a proven track record of creating jobs. If we want to keep these high-paying R and D jobs in America, we need to bolster the research tax credit by extending and expanding it. Furthermore, many of the things that we benefit from now -- life-saving drugs and life-sustaining medical treatments; computers and software that make us more productive in the workplace; advances that make transportation safer and more energy efficient; and technologies that enable our military to effectively and safely carry out its responsibilities -- are the direct result of long-term, high-risk investments in research and development made by American businesses."

They added that "The research tax credit helped make many of those long-term investments financially feasible. It must be extended expeditiously and seamlessly. We must fill in any lapse between expiration of the credit and enactment of an extension, so that companies that have planned research projects while counting on the research credit can continue those projects with confidence. It is our intention to work in conference for a provision effective retroactively to the date of the credit's expiration. In the JOBS Act, the Senate voted unanimously not only to extend the credit, but also to strengthen it. We need a stronger credit signed into law so that the American economy, American workers, and American citizens can benefit from the additional research activities made possible by a strong research tax credit."

AT&T and Bells Continue to Debate Unbundling Order

6/23. AT&T announced in a release that "it will stop competing for local and long-distance residential customers in Ohio, Missouri, Washington, Tennessee, Louisiana, Arkansas and New Hampshire". It asserted that "This action is a result of a June 9 decision by the Administration and the FCC not to appeal a recent Federal court decision that overturned FCC wholesale rules put in place to introduce competition in local markets. The reversal of local competition policy by the Administration will permit the Bell companies to raise wholesale rates as early as November. This increase in wholesale rates means that AT&T will likely be unable to economically serve customers with the competitive bundles currently available."

However, the final paragraph of this lengthy release states that AT&T "will continue to serve its existing residential customers in the affected states, and that its announcement today does not affect its enterprise, government and other small- and medium-sized business customers. It will also not affect customers with DSL and cable modem offerings who subscribe to the company's Voice over IP offering".

Walter McCormick, P/CEO of the U.S. Telecom Association (USTA), which represents incumbent local exchange carriers (ILECs), responded in a release that "AT&T is engaged in sleight of hand. It claims it will no longer compete with telephone, cable, wireless companies and other CLECs in offering voice service to residential consumers. But in the very same press release, it announces that it will serve the more profitable business markets and will offer to residential consumers its new, high margin voice-over-Internet product in the same states that it says it is withdrawing from! This appears to be a political statement directed at presidential battleground states, rather than a real business announcement."

BellSouth responded that AT&T's announcement "is more a statement of "how" they intend to compete going forward, than "whether" they intend to compete going forward." It adds that "AT&T's announcement is a political campaign. In reality, this has nothing to do with the Solicitor General's announcement. The seven states covered by the announcement are all seen by political analysts as undecided states in the presidential election. The tone and text of their release are political threats. If AT&T chooses to exit markets in which it finds itself unable to compete due to the robust levels of competition, then so be it. But let's not confuse the issue as a one of consumer protection."

SBC offered the following analysis: "Local phone competition without AT&T is like a fish without a bicycle." See, SBC release.

SBC added that "This cheap PR stunt should be seen for what it is: political grandstanding aimed at intimidating policymakers and elected officials everywhere. Nothing has changed in the market -- AT&T is paying the same price today as it did last month, and will through the end of the year. Moreover, the FCC is in the process of making new lawful rules for the industry. AT&T's political games are transparent. Its customers should ask themselves whether they even want to do business with a company that uses them as pawns in the game of politics."

This debate relates to the opinion of the U.S. Court of Appeals (DCCir) in USTA v. FCC. This March 2, 2004, opinion [62 pages in PDF] overturned parts of the FCC's triennial review order [576 pages in PDF], which addressed the unbundling requirements of ILECs under 47 U.S.C. § 251. See also, story titled "Appeals Court Overturns Key Provisions of FCC Triennial Review Order" in TLJ Daily E-Mail Alert No. 848, March 3, 2004.

On June 9, 2004 the Office of the Solicitor General announced that it would not appeal the case to the Supreme Court. 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.

More Capitol Hill News

6/23. The House Commerce Committee's Subcommittee on Telecommunications and the Internet held a hearing titled "Protecting Homeland Security: A Status Report on Interoperability Between Public Safety Communications Systems". See, prepared testimony of David Boyd (Department of Homeland Security), prepared testimony of Gary Grube (Motorola), prepared testimony of Robert Legrande (District of Columbia), and prepared testimony of John Muleta (Chief of the Federal Communications Commission's Wireless Telecommunications Bureau).

6/23. The House Judiciary Committee amended and approved HR 338, the "Defense of Privacy Act", a bill to require that when agencies write rules, they take into consideration the impact of these rules on the privacy of individuals.

6/23. The House Judiciary Committee amended and approved HR 3632, the "Anti-Counterfeiting Amendments of 2003".

More News

6/23. The U.S. Court of Appeals (11thCir) issued its opinion [PDF] in Rolling Greens MHP v. Comcast SCH Holdings, L.L.C. The sole issue in this opinion is what is the citizenship of a limited liability company for the purpose of determining whether a federal court has jurisdiction based upon diversity of citizenship of the parties. The Appeals Court held, "The federal appellate courts that have answered this question have all answered it in the same way: like a limited partnership, a limited liability company is a citizen of any state of which a member of the company is a citizen. We join them in this holding." Rollings Greens MHP had appealed the summary judgment against it. The Appeals Court addressed the jurisdictional issue sua sponte. This case is Rolling Greens MHP v. Comcast SCH Holdings, L.L.C., U.S. Court of Appeals for the 11th Circuit, App. Ct. No. 03-15917, an appeal from the U.S. District Court for the Middle District of Florida, D. C. No. 03-00022-CV-OC-10GRJ.

6/23. Pascal Lamy, the EC Commissioner for Trade, gave a speech in Brussels, Belgium at a conference on the 10th anniversary of the World Trade Organization (WTO) Trade Related Aspects of Intellectual Property Agreement (TRIPs).

6/23. The Securities and Exchange Commission (SEC) filed a civil complaint in the U.S. District Court (CDCal) against Gemstar-TV Guide International, Inc. alleging violation of federal securities law in connection with its alleged material overstatement of its revenues by nearly $250 Million. The SEC and Gemstar also announced that they settled the case. Gemstar did not admit the allegations, but agreed to pay a $10 Million fine. See, SEC release. This case is SEC v. Gemstar-TV Guide International, Inc., Case No. CV 04- 04-4506 RGK (CTx).

Chairman Barton Says Commerce Committee Will Mark Up Boucher Doolittle Bill in July

6/22. Three members of the House of Representatives and a collection of interest groups held a press conference to describe and promote HR 107, the "Digital Media Consumers' Rights Act of 2003". Rep. Rick Boucher (D-VA) and Rep. John Doolittle (R-CA), who are the original sponsors of the bill, and Rep. Joe Barton (R-TX), the Chairman of the House Commerce Committee (HCC), praised the bill, and predicted that the HCC will approve the bill in July.

Rep. Barton (at right) stated that "I am here to strongly endorse the Boucher Doolittle bill. We hope that we can mark that up in the very near future." He added later that "It is my hope to have a markup sometime in July."

Rep. Doolittle said that "unfortunately we now have a law on the books that tilts the balance", and the balance needs to be restored. He said that if it is not, innovation will be constrained. He also asserted that the Digital Millennium Copyright Act (DMCA) is "nearly destroying the fair use rights of consumers".

"The time has come to pass this much needed measure", said Rep. Boucher. He added that "fair use rights in the digital era depend upon the enactment of this bill."

"The DMCA holds the potential for the complete extinguishment of the exercise of fair use rights with regards to digital media. And, so in putting this measure forward we are acting in the effort to save the right of consumers to use digital media in pursuit of their fair use rights in the way that is most convenient to them", said Rep. Boucher.

Summary of HR 107. The primary purpose of HR 107 is to amend the anti-circumvention provisions of the DMCA, which are codified at 17 U.S.C. § 1201. See also, the Copyright Office's summary [18 pages PDF] of the DMCA, and the full text [96 pages in PDF] of the DMCA.

§ 1201(a)(1)(A), which was added in 1998 by the DMCA, provides that "No person shall circumvent a technological measure that effectively controls access to a work protected under this title."

Then, § 1201(a)(2)( A) provides that "No person shall manufacture, import, offer to the public, provide, or otherwise traffic in any technology, product, service, device, component, or part thereof, that --- (A) is primarily designed or produced for the purpose of circumventing a technological measure that effectively controls access to a work protected under this title;"

Furthermore, § 1201(b)(1)(A) provides that "No person shall manufacture, import, offer to the public, provide, or otherwise traffic in any technology, product, service, device, component, or part thereof, that --- (A) is primarily designed or produced for the purpose of circumventing protection afforded by a technological measure that effectively protects a right of a copyright owner under this title in a work or a portion thereof".

HR 107 would amend § 1201(c)(1), which currently provides that "Nothing in this section shall affect rights, remedies, limitations, or defenses to copyright infringement, including fair use, under this title."

HR 107 bill would add to this sentence the following phrase: "and it is not a violation of this section to circumvent a technological measure in connection with access to, or the use of, a work if such circumvention does not result in an infringement of the copyright in the work".

Also, the bill would add to § (c) the following new subparagraph: "(5) It shall not be a violation of this title to manufacture, distribute, or make noninfringing use of a hardware or software product capable of enabling significant noninfringing use of a copyrighted work."

The bill would also add to both § 1201(a)(1)(A) and § 1201(b)(1)(A) an exception for scientific research. Specifically, the bill provides that "Subsections (a)(2)(A) and (b)(1)(A) ... are each amended by inserting after ‘‘title’’ in subsection (a)(2)(A) and after ‘‘thereof’’ in subsection (b)(1)(A) the following: ‘‘unless the person is acting solely in furtherance of scientific research into technological protection measures’’."

While these proposed substantive provisions do not expressly reference "fair use", it is the intent of drafters, as revealed by their statements upon introduction, at the HCC's May 12, 2004 hearing, and at the June 22 event, to provide that circumvention of copy protection measures for the purpose of exercising fair use rights protected by 17 U.S.C. § 107 is not a violation of the anti-circumvention provisions of the DMCA.

The consequences of providing this fair use exception would be to enable circumvention for fair use purposes, and to enable circumvention for infringing purposes. The speakers at the June 22 event stressed only the former consequence.

That is, once copy protection technology is circumvented, there is no technology that can limit the number of copies that can be produced from the original. Nor is there any technology that can distinguish between a fair use circumvention and an infringing circumvention. Thus, the practical effect of HR 107 would be not only to protect fair use circumvention of copy protection measures, but also to undermine the effectiveness of the DMCA's anti-circumvention provisions.

Witnesses who testified in opposition to HR 107 at a May 12, 2004 hearing argued that HR 107 would effectively nullify § 1201, or swallow the rule. See, story titled "House Subcommittee Holds Hearing on Creating Fair Use Exceptions to DMCA" in TLJ Daily E-Mail Alert No. 899, May 17, 2004.

See also, and stories titled "Reps. Boucher and Doolittle Introduce Digital Media Consumer Rights Act" and "Summary of the Digital Media Consumer Rights Act" in TLJ Daily E-Mail Alert No. 532, October 4, 2002; and story titled "Reps. Boucher and Doolittle Introduce Digital Fair Use Bill" in TLJ Daily E-Mail Alert No. 582, January 14, 2003.

Prospects for passage. This June 22 event was organized, in part, to demonstrate support for the bill. Rep. Boucher, in particular, also used the occasion to argue that the prospects for passage of the bill are good.

He stated that "The passage of this measure is within our reach during the course of this Congress. And even if we take another year or two beyond this Congress, we are establishing tremendous momentum this year, with the movement forward of this bill in the House." He noted it took eight years to pass the Telecommunications Act of 1996, and six years to pass the DMCA.

"So, it might, yes, take us a couple of years beyond the current Congress in order to achieve this result. But, we are making tremendous progress as we move this measure forward." He added that "I believe potentially we can achieve passage this year."

Rep. Boucher also addressed committee consideration. He said that "The way that the rules of the House operate, a committee that has secondary jurisdiction may not, through inaction or negative action, prevent the bill from going to the floor. Under the current House rules, there is a referral to a committee primarily, and there may be subsequent sequential referrals that are secondary in nature."

He continued that "In the case of HR 107, the committee of primary jurisdiction is the House Energy and Commerce Committee. That is the committee that will act on this measure. A secondary sequential referral will be made to House Judiciary. It will be time limited. That committee will have an opportunity to propose amendments, if it chooses to do so. Those amendments can then be considered by the House Rules Committee which will decide on the order of proceeding on the floor. And the Rules Committee may or may not make the Judiciary Committee's amendments in order."

Rep. Boucher also said that "Judiciary is undoubtedly going to have a slightly different view than I have, or that I think that a majority of the Commerce Committee members will have. And Judiciary will have its opportunity to construct amendments to the bill. Those potentially could be made in order for floor debate. But if they are, I think that our position will prevail on the floor, because I think that the House Energy and Commerce Committee is more nearly reflective of the broad membership of the House than is the House Judiciary Committee on matters such as this."

No companion bill has yet been introduced in the Senate. However, Rep. Boucher said that he believes that a companion bill in the Senate would be referred to the Senate Commerce Committee, not the Senate Judiciary Committee.

He also said that he has been talking to Senators about introducing a bill, but would not say who they are.

Supporters of HR 107. The event on June 22 also announced and introduced a coalition of companies and groups named the Personal Technology Freedom Coalition (PTFC) that supports HR 107.

Members of the PTFC include the four incumbent local exchange carriers (ILECs), BellSouth, Qwest, SBC, and Verizon, and their trade association, the U.S. Telecom Association (USTA).

The PTFC is a newly formed group. Its website went online on June 22. The Whois database records that the PTFC's domain is registered to, and administered by, a BellSouth subsidiary.

Herschel Abbott, a BellSouth VP, spoke at the event. He advocated consumer rights. He added in a written statement that "Our customers do not want us to be the Internet Police and we don't want that either."

He did not articulate what business reason the ILECs have for supporting this legislation. Nor did he provide any examples of how the ILECs have been involved in the enforcement of the anti-circumvention provisions of the DMCA.

Although, Verizon has been involved in extensive litigation with the Recording Industry Association of America (RIAA) over another section of the DMCA -- § 512(h), pertaining to subpoenas to ISPs to obtain the identities of infringers. See, story titled "DC Circuit Reverses in RIAA v. Verizon" in TLJ Daily E-Mail Alert No. 804, December 22, 2004.

The PTFC membership also includes Sun Microsystems, Gateway, Intel, and Philips Consumer Electronics North America. It also includes several library groups.

While most of the discussion at the June 22 event focused on consumer fair use rights, some members of the PTFC advanced other arguments in support of HR 107.

Gary Shapiro, the P/CEO of the Consumer Electronics Association (CEA), which is a member of the PTFC, stated in a release that "Innovators are blocked from bringing legitimate competitive products to the market, even where no exploitation of a copyrighted work is involved".

Ed Black, President of the Computer and Communications Industry Association (CCIA), who spoke at the event, argued that the anti-circumvention provisions of the DMCA threaten national security by "exposing computer security researchers to possible litigation for merely searching computer products for vulnerabilities that real criminals and terrorists could exploit".

Judiciary Committee Leaders Allege Jurisdictional Power Grab

6/22. Rep. James Sensenbrenner (R-WI), Rep. John Conyers (D-MI), Rep. Lamar Smith (R-TX), and Rep. Howard Berman (D-CA) released a statement on June 22, attacking both the substance of HR 107 and the procedure being used to attempt to pass the bill.

Rep. Sensenbrenner and Rep. Conyers are the Chairman and ranking Democrat of the House Judiciary Committee. Rep. Smith and Rep. Berman are the Chairman and ranking Democrat of the Subcommittee on Courts, the Internet and Intellectual Property.

Rep. Berman (at left) represents a southern California district, and has a long history of advocating the copyright interests of the entertainment industries. Rep. Conyers represents a Detroit, Michigan district, and has long advocated the interests of music companies and artists.

The four stated that "We strongly oppose the substance of H.R. 107. This legislation would eviscerate a key provision of the Digital Millennium Copyright Act (DMCA), which is successfully protecting copyrighted works and providing consumers access to more digital content than ever before. In fact, a DVD player is now as common a household item as the VCR was 15 years ago precisely because of the DMCA. H.R. 107 would undo a law that is working and destroy the careful balance in copyright law between consumers' rights and intellectual property rights."

They continued, "Furthermore, our strong objections to the substance of H.R. 107 are matched by our objections to what appears to be a bold jurisdictional power grab. The Judiciary Committee has -- and has long had -- exclusive jurisdiction over copyright law. Rest assured, we will wholeheartedly oppose this move in a bipartisan fashion, as we would expect Energy and Commerce Committee leaders to do if we attempted to write energy legislation."

Rep. Rick Boucher (D-VA), the lead sponsor of HR 107, has exercised great legislative skill so far in using the procedural rules of the House, his drafting of the bill, and the ruling of the Parliamentarian, to set the House agenda in the manner that is most favorable for passage of the bill by the House.

However, there remains substantial opposition. First, there is the membership of the House Judiciary Committee, who not only oppose the bill, but oppose Commerce Committee encroachment upon both their jurisdiction and expertise.

Moreover, the House Republican leadership has few legislative days remaining on which to schedule floor debates. Hence, they may not wish to devote some of the little remaining time to a bill upon which two committees are divided, and which has not even been introduced in the Senate.

There is also the matter of the powerful groups that are actively opposing this bill. These include the Motion Picture Association of America (MPAA), Recording Industry Association of America (RIAA), Business Software Alliance (BSA), other trade groups that represent copyright based industries, and the copyright based companies.

Rep. John Doolittle (R-CA), the lead co-sponsor of HR 107, noted at the event on June 22 that Jack Valenti, the President of the MPAA, has been visiting members of Congress to discuss this bill.

House Commerce Committee's Primary Jurisdiction Over HR 107

6/22. The Library of Congress' summary of HR 107, the "Digital Media Consumers' Rights Act of 2003", states that this bill was "Referred to the Committee on Energy and Commerce, and in addition to the Committee on the Judiciary, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned".

Moreover, this bill has also been referred to the House Commerce Committee's (HCC) Subcommittee on Commerce, Trade and Consumer Protection. It has also been referred to the House Judiciary Committee's (HJC) Subcommittee on Courts, the Internet and Intellectual Property.

This article addresses how this referral to the HJC came about.

The House rules address the jurisdiction of committees, and the referral of bills. House Rule X, which defines the jurisdiction of the various committees of the House, provides that the HJC has jurisdiction over "Patents, the Patent and Trademark Office, copyrights, and trademarks".

Rule X also provides that the HJC has jurisdiction over "The judiciary and judicial proceedings, civil and criminal". That is, it has jurisdiction over crime bills. The DMCA criminalizes certain conduct.

Rule X provides that the HCC has jurisdiction over "Interstate and foreign commerce generally", as well as "Consumer affairs and consumer protection".

Also, House Rule XII, which is titled "Receipt and Referral of Measures and Matters", addresses primary jurisdiction of committees, and sequential referrals. See also, Congressional Research Service (CRS) report [2 pages in PDF] titled "House Committee Jurisdiction and Referral: Rules and Practice".

Rule X also gives the HCC jurisdiction over "Regulation of interstate and foreign communications". No one is arguing that HR 107 is a communications bill. However, this grant means that the HCC has jurisdiction over federal regulation of telecommunications.

This makes carriers, such as BellSouth, Qwest, SBC and Verizon, which have long been hostile to copyright protection in a variety of legislative debates, a part of the constituency of the HCC. And because the HCC writes telecommunications legislation, and oversees the Federal Communications Commission (FCC), these companies have come to have closer relationships, and more influence, with members of the HCC than with the members of other committees.

Similarly, since the HJC has jurisdiction over copyright, the copyright based industries, such as movies, music, games, and software, are part of the constituency of the HJC. They have closer relationships, and more influence, with members of the HJC. See also, story titled "House Commerce and Judiciary Committees Vie for High Tech Leadership", June 15, 1999.

The telecommunications companies have simply taken their request for legislation to the committee with which they have more influence.

The primary purpose of HR 107 is to amend the Digital Millennium Copyright Act (DMCA), which contains within its title the word "Copyright". The anti-circumvention provisions, which are found in § 1201, make numerous reference to copyrights and infringement.

§ 1201 is also a part of Title 17 of the U.S. Code, which codifies copyright law. The placement of § 1201 within Title 17 is not the result of a compiler's decision. The DMCA, which was HR 2281 in the 105th Congress, provided that "Title 17, United States Code is amended by adding at the end the following new chapter: ``CHAPTER 12—COPYRIGHT PROTECTION AND MANAGEMENT SYSTEMS´´." Also, this new Chapter 12 included § 1201, which the bill titled "Circumvention of copyright protection systems".

Moreover, the West Group has designated 17 U.S.C. § 1201 a part of the "Copyright Act of 1976".

And furthermore, proponents of HR 107 describe their bill in terms of "copyright" and "fair use". The key section title and subsection title of HR 107 use the term "fair use". There is also the number of the bill -- 107. § 107 is the fair use section. Rep. Boucher specifically requested the assignment of this number.

Yet, Rep. Rick Boucher (D-VA) has successfully convinced the House Parliamentarian that HR 107 is not a copyright bill.

He drafted the bill carefully with jurisdiction in mind. He did several things to support the argument that this is not a copyright bill. First, he presented the bill as a measure to protect consumers. The HCC has jurisdiction over consumer protection. For example, he added language to the bill giving the Federal Trade Commission (FTC) authority, under its power to protect consumers, to regulate the labelling of DVDs. This provision has gone almost unmentioned at events such as the one on June 22, and the HCC's hearing on May 12. However, this provision is fundamental to Rep. Boucher's case that the HCC should have jurisdiction.

Second, Rep. Boucher (at right) has presented this bill as a measure to regulate interstate commerce. The HCC has jurisdiction over interstate commerce. The bill states that "The Congress finds ... The limited introduction into commerce of `copy protected compact discs´ has caused consumer confusion ..."

Third, while the section and subsection titles in HR 107 reference "fair use", the substantive provisions of the bill carefully avoid any reference to either "fair use" or § 107. That is, key provisions of the bill do not provide, for example, that "fair use circumvention is permissible". Rather, these key provisions are drafted in a complex double negative that omits the terms fair use.

For example, the bill does provide that "it is not a violation of this section to circumvent a technological measure in connection with access to, or the use of, a work if such circumvention does not result in an infringement of the copyright in the work". § 107 provides that "the fair use of a copyrighted work ... is not an infringement of copyright", and this is the section that, if HR 107 is passed, will be asserted. But, by drafting this section of the bill with language that does not actually use the words "fair use", Rep. Boucher bolstered his argument that HR 107 is not a copyright bill, and hence, that the HCC should have jurisdiction.

The drafting of HR 107 sought to avoid HJC jurisdiction by omitting substantive reference to fair use. However, there was no way to draft a statute amending the DMCA that did not reference the DMCA. Hence, to avoid HJC jurisdiction, Rep. Boucher has also had to argue that the DMCA is not a copyright statute.

TLJ spoke with Rep. Boucher this subject after the event on June 22. He first summarized his argument. "Well, you see, it doesn't amend the Copyright Act. You see, that is one of the key considerations here. That is a mistake that many people make. The DMCA is not a copyright statute. It is incorrectly named ``Digital Millennium Copyright Act´´. But is not a copyright statute. It does not amend the copyright title. It does not create any new copyright rights."

He elaborated that "What it does is create a crime of circumvention for people who bypass technology in order to access a copyrighted work. But, it technically is not a copyright statute. That is way the clause in the dag gone bill, that says that the defense of fair use is in no way affected by this statute, is ineffective, because that defense is only a defense in the law only to a charge of copyright infringement. It is not a defense in the law to the separate crime created in the DMCA of circumvention. If it were we wouldn't be doing this."

Rep. Boucher continued that "The Commerce Committee has jurisdiction because of the totality of what is contained in this. Bear in mind that when the DMCA was passed, the Commerce Committee had a secondary referral and offered fair use amendments that were made a part of the final law. And that is what set up this process over at the Copyright Office that they go through now and sort of try and define categories of works where the fair use rights of users would be inhibited by the DMCA."

Rep. Boucher's statement referred to 17 U.S.C. § 1201, at subsections (C) and (D). See also, the Copyright Office's web section addressing its rulemaking on the classes of works subject to the exemption from the prohibition against circumvention.

Rep. Boucher added, "But, it has been a total failure, and in fact we only got a tenth of a loaf at the time we were negotiating those particular amendments in further stages of the process. And they got whittled down from what the Commerce Committee had proposed."

He concluded, "And so, I mention that only by example to show you that the DMCA itself was referred only sequentially to the Commerce Committee last time. This time we have a different bill. It is written in a different way. It is written in a way that persuaded the Parliamentarian that the primary jurisdiction should be with the Commerce Committee."

Senators Introduce Bill to Amend Copyright Act to Ban Inducement of Infringement

6/22. Sen. Orrin Hatch (R-UT) and others introduced S 2560, the "Inducing Infringement of Copyrights Act of 2004". The bill is very short and simple, but, if enacted, would bring about a major change in copyright law. It would create a new cause of action for "intentional inducement of infringement". It would not affect the existing court made law of contributory and vicarious infringement.

The bill does not enumerate any specific technologies. It is technology neutral. However, the wording of the bill suggests, and Sen. Hatch and Sen. Frist stated in the Senate, that the present intended target of the bill is the distributors of the peer to peer systems that are used to infringe copyrighted music.

Nevertheless, the statute does not limit its application to any one technology, and several commentors suggested that it would have application to a range of other activities. See, full story.

Bush Signs Standards Development Organization Advancement Act

6/22. President Bush signed HR 1086. Title I of this bill is the "Standards Development Organization Advancement Act of 2004'". See, White House release.

This bill amends the National Cooperative Research and Production Act of 1993 (NCRPA), which is codified at 15 U.S.C. § 4301, et seq.

Government standards setting bodies are not subject to antitrust lawsuits. Also, the NCRPA already affords certain protections to joint ventures.

HR 1086 recites in its findings antitrust litigation is a threat to private bodies that develop voluntary consensus standards. It states that "Private developers of the technical standards that are used as Government standards are often not similarly protected, leaving such developers vulnerable to being named as codefendants in lawsuits even though the likelihood of their being held liable is remote in most cases, and they generally have limited resources to defend themselves in such lawsuits."

It further states that "if relief from the threat of liability under the antitrust laws is not granted to voluntary consensus standards bodies, both regarding the development of new standards and efforts to keep existing standards current, such bodies could be forced to cut back on standards development activities at great financial cost both to the Government and to the national economy."

HR 1086 extends certain protections to a "standards development organization", which it defines as "a domestic or international organization that plans, develops, establishes, or coordinates voluntary consensus standards using procedures that incorporate the attributes of openness, balance of interests, due process, an appeals process, and consensus .." However, the definition excludes "the parties participating in the standards development organization".

HR 1086 is now Public Law No. 108-237.

In addition, on June 24, 2004, the Federal Trade Commission (FTC) and the Department of Justice's (DOJ) Antitrust Division issued a joint release.

Hew Pate (at right), the Assistant Attorney General in charge of the Antitrust Division, stated in this release that "Standards development organizations develop technical standards that are essential to the efficient functioning of our national economy. Congress has determined that the threat of treble damages pressures SDOs to restrict their standards development activities at a great cost to the United States. The Standards Development Organization Advancement Act of 2004 relieves SDOs from certain antitrust concerns and facilitates the development of pro-competitive standards

This release also summarizes the bill, and addresses the proper way for standards development organizations to submit their notices to the FTC and DOJ.

Bush Signs Antitrust Criminal Penalty Enhancement and Reform Act

6/22. President Bush signed HR 1086. Title II of this bill is the "Antitrust Criminal Penalty Enhancement and Reform Act of 2004". See, White House release.

Subtitle A of this act, among other things, increases the maximum penalties for antitrust violations under Sections 1, 2 and 3 of the Sherman Act, which are codified at 15 U.S.C. §§ 1, 2, and 3.

Subtitle B amends the Tunney Act, which addresses public notice of consent decrees in antitrust proceedings, competitive impact statements, public comments, and public interest determinations by the Court. It is codified at 15 U.S.C. § 16.

HR 1086 provides that "Nothing in this section shall be construed to require the court to conduct an evidentiary hearing or to require the court to permit anyone to intervene". It also provides that the DOJ does not need to publish all of the comments in the Federal Register in all matters.

HR 1086 also revises Subsection 16(e), regarding public interest determinations by the Court. The statute previously listed two categories of items that the Court "may" consider. HR 1086 provides that the Court "shall" consider these items.

HR 1086 also revises these two items. For example, the second item to be considered in the public interest determination previously was "the impact of entry of such judgment upon the public generally and individuals alleging specific injury ...". HR 1086 changes this to the "impact of entry of such judgment upon competition in the relevant market or markets ..."

HR 1086 is now Public Law No. 108-237.

More News

6/22. The Federal Communications Commission (FCC) published a notice in the Federal Register that summarizes, and sets comment deadlines for, its public notice (DA 04-1690) requesting public comments on constitutionally permissible ways for the FCC to identify and eliminate market entry barriers for small telecommunications businesses and to further opportunities in the allocation of spectrum-based services for small businesses and businesses owned by women and minorities. Comments are due by July 22, 2004. Reply comments are due by August 6, 2004. See, Federal Register, June 22, 2004, Vol. 69, No. 119, at Pages 34672 - 34673.

6/22. The Copyright Office published a notice in the Federal Register that summarizes, and states the effective date (June 22, 2004), of its final rule "amending its regulations governing the content and service of certain notices on the copyright owner of a musical work. The notice is served or filed by a person who intends to use a musical work to make and distribute phonorecords, including by means of digital phonorecord deliveries, under a compulsory license." See, Federal Register, June 22, 2004, Vol. 69, No. 119, at Pages 34578 - 34585.

6/22. Pascal Lamy, the EU Trade Commissioner, gave a speech at Sophia University in Tokyo, Japan titled "Globalisation and Trade: How to make sure there is space for development?"

6/22. Sen. Jeff Bingaman (D-NM) and Sen. Joe Lieberman (D-CT) introduced S 2556, an untitled bill that would "direct the establishment of a technology assessment capability in the General Accounting Office". It was referred to the Senate Governmental Affairs Committee.

Supreme Court Affirms 9th Circuit in Intel v. AMD

6/21. The Supreme Court issued its opinion [36 pages in PDF] in Intel v. AMD, a case regarding the availability of a discovery order from a U.S. District Court, pursuant to 28 U.S.C. § 1782, for a complainant in an antitrust matter before the European Commission. The Supreme Court held that § 1782 authorizes, but does not require, discovery assistance.

Proceedings Below. Advanced Micro Devices (AMD) is a U.S. company, based in the U.S., that makes microprocessors. Intel is another U.S. company, based in the U.S., that makes microprocessors. They have a history of competing, both in the market place, and in the courts. Consistent with the current trend of international forum shopping in antitrust disputes, AMD filed a complaint with the Directorate General - Competition of the European Commission alleging that Intel violated Article 82 of the EC Treaty. This Article prohibits "abuse by one or more undertakings of a dominant position within the common market."

AMD then returned to a U.S. forum to avail itself of discovery allowed in U.S. courts. It sought discovery from Intel pursuant to 28 U.S.C. § 1782, which provides that "The district court of the district in which a person resides or is found may order him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal ..."

AMD sought documents pertaining to another the antitrust action between Intel and Intergraph. Intel objected. AMD filed a motion to compel discovery in the U.S. District Court (NDCal). The District Court held that the EC action was not a proceeding within the meaning of Section 1782, and denied AMD's request. AMD appealed.

On June 6, 2003 the U.S. Court of Appeals (9thCir) issued its opinion [10 pages in PDF] holding that discovery is available in the U.S. pursuant to 28 U.S.C. § 1782 for a complainant in an Article 82 antitrust matter before the European Commission. See also, story titled "9th Circuit Rules on Discovery in U.S. for EC Antitrust Proceeding" in TLJ Daily E-Mail Alert No. 446, June 7, 2002.

Supreme Court. Intel petitioned for writ of certiorari. The Supreme Court granted certiorari. See, story titled "Supreme Court Grants Certiorari in Intel v. AMD" in TLJ Daily E-Mail Alert No. 776, November 11, 2003. See also, brief [46 pages in PDF] of Intel, brief [59 pages in PDF] of AMD, and reply brief [35 pages in PDF] of Intel. The Supreme Court heard oral argument on April 20, 2004. See, transcript [57 pages in PDF].

The Supreme Court affirmed the 9th Circuit. Justice Ginsburg wrote for the seven Justice majority. The Court held that "the District Court had authority under §1782(a) to entertain AMD's discovery request. The statute, we rule, does not categorically bar the assistance AMD seeks: (1) A complainant before the European Commission, such as AMD, qualifies as an ``interested person´´ within §1782(a)'s compass; (2) the Commission is a §1782(a) ``tribunal´´ when it acts as a first-instance decisionmaker; (3) the ``proceeding´´ for which discovery is sought under §1782(a) must be in reasonable contemplation, but need not be ``pending´´ or ``imminent´´; and (4) §1782(a) contains no threshold requirement that evidence sought from a federal district court would be discoverable under the law governing the foreign proceeding."

Ginsburg added that, "We caution, however, that §1782(a) authorizes, but does not require, a federal district court to provide judicial assistance to foreign or international tribunals or to ``interested person[s]´´ in proceedings abroad. Whether such assistance is appropriate in this case is a question yet unresolved."

Justice Scalia wrote a brief concurring opinion, arguing, as he has so many times before, that legislative history is irrelevant to judicial interpretation of statutes. Justice O'Connor did not participate.

Dissent. Justice Breyer dissented. He wrote that "This case itself suggests that an American firm, hoping to obtain information from a competitor, might file an antitrust complaint with the European antitrust authorities, thereby opening up the possibility of broad American discovery -- contrary to the antitrust authorities' desires."

Breyer also wrote that many foreign nations allow persons to file actions in their courts, for which the courts do not actually function in the nature of judicial tribunals.

He also noted that Section 1782, as interpreted by the majority would allow discovery in situations where the foreign tribunal would not allow the discovery, and where, had the action been brought in the U.S., the District Court would not have allowed the discovery under the Federal Rules of Civil Procedure.

This is all important, Breyer argued, because "discovery and discovery-related judicial proceedings take time, they are expensive, and cost and delay, or threats of cost and delay, can themselves force parties to settle underlying disputes."

None of the other Justices joined in Breyer's dissent.

Amicus Briefs. This case also attracted amicus briefs. See, amicus brief on the merits submitted by the Department of Justice (DOJ). It argued that "Section 1782 authorizes, but does not require, a federal district court to provide judicial assistance in this case and that the Court should remand the case for the district court to determine whether such assistance is appropriate."

See also, amicus brief [24 pages in PDF] of the U.S. Chamber of Commerce arguing that "Under the Ninth Circuit’s ruling, any company that operates abroad can obtain nearly unlimited access to the business documents and competitive plans of its business rivals by filing a complaint with the European Commission and then seeking discovery under 28 U.S.C. § 1782. Under the Ninth Circuit’s decision, the company is allowed this discovery without taking on any costs or risks of litigation, even though the discovery is not necessary to the decisionmaking of the Commission."

Supreme Court Upholds Statute Compelling Identification

6/21. The Supreme Court issued its opinion [25 pages in PDF] in Hiibel v. Sixth Judicial District of Nevada, upholding the conviction of Larry Dudley Hiibel, over 4th and 5th Amendment challenges, for the crime of delaying a police officer, pursuant to Nev. Rev. Stat. § 199.280, in connection with his refusal to identify himself when asked by a police officer.

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

As Justice Stevens noted in his dissent, "A person's identity obviously bears informational and incriminating worth, ``even if the [name] itself is not inculpatory.´´ ... A name can provide the key to a broad array of information about the person, particularly in the hands of a police officer with access to a range of law enforcement databases. And that information, in turn, can be tremendously useful in a criminal prosecution. It is therefore quite wrong to suggest that a person's identity provides a link in the chain to incriminating evidence ``only in unusual circumstances.´´" (Citations to U.S. v. Hubbell, 530 U.S. 27 (2000) omitted.)

Justice Kennedy, writing for the five Justice majority of the Court, first rejected Hiibel's argument that the Nevada statute violates the 4th Amendment of the U.S. Constitution, which protects "against unreasonable searches and seizures".

"Asking questions is an essential part of police investigations. In the ordinary course a police officer is free to ask a person for identification without implicating the Fourth Amendment", wrote Kennedy. "Knowledge of identity may inform an officer that a suspect is wanted for another offense, or has a record of violence or mental disorder. On the other hand, knowing identity may help clear a suspect and allow the police to concentrate their efforts elsewhere."

Second, Kennedy rejected Hiibel's argument that the Nevada statute violates the 5th Amendment, which provides, "nor shall any person be compelled in any criminal case to be a witness against himself". Kennedy, citing Hubbell, wrote that for the 5th Amendment to be implicated, "a communication must be testimonial, incriminating, and compelled".

Kennedy concluded that Hiibel "refused to identify himself only because he thought his name was none of the officer's business. ... the Fifth Amendment does not override the Nevada Legislature’s judgment to the contrary absent a reasonable belief that the disclosure would tend to incriminate him."

"The narrow scope of the disclosure requirement is also important. One's identity is, by definition, unique; yet it is, in another sense, a universal characteristic. Answering a request to disclose a name is likely to be so insignificant in the scheme of things as to be incriminating only in unusual circumstances", wrote Kennedy.

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

See also, brief [50 pages in PDF] of the state of Nevada, brief [58 pages in PDF] of Hiibel, amicus brief of the Department of Justice, amicus brief [PDF] of the Cato Institute, and amicus brief [PDF] of the Electronic Privacy Information Center (EPIC). The EPIC website includes a page that contains numerous hyperlinks to other pleadings and materials related to this case.

More Supreme Court News

6/21. The Supreme Court denied certiorari in Avery Dennison Corp. v. 3M Innovative Properties Co., a patent case involving adhering commercial graphics to surfaces. See also, opinion of the U.S. Court of Appeals (FedCir). This case is No. 03-1461. See, Order List [9 pages in PDF], at page 3.

6/21. The Supreme Court denied certiorari Passport Video v. Elvis Presley Enterprises, a copyright infringement case involving application of the four prong fair use test of 17 U.S.C. § 107. See, Order List [9 pages in PDF], at page 3. This order lets stand the split opinion [22 pages in PDF] of the U.S. Court of Appeals (9thCir), which affirmed the U.S. District Court's (CDCal) rejection of the fair use defense. In this case, Passport Video incorporated video clips, photographs, and music into a 16 hour video biography about Elvis Presley without permission from the copyright owners. The clips range in length from a few seconds to over one minute, and in some cases comprise a substantial part of copyrighted appearances on TV shows by Elvis Presley. This case is No. 03-1547.

6/21. The Supreme Court announced that "The Court will take a recess from today until Thursday, June 24, 2004." See, Order List [9 pages in PDF], at page 3.

4th Circuit Rules in CoStar v. LoopNet

6/21. The U.S. Court of Appeals (4thCir) issued its split opinion [26 pages in PDF] in CoStar v. LoopNet, a case involving a claim of copyright infringement by an ISP, Loopnet, arising from the publication of copyrighted photographs by its subscribers. The Appeals Court affirmed the District Court's summary judgment for the ISP, and in so doing, addressed direct infringement, the Netcom case, the DMCA, and the impact of the DMCA on Netcom.

The Court held that the safe harbor provisions of Section 512 in the DMCA do not supplant or preempt the Netcom opinion. This case involved pictures of real estate. However, this holding will have far reaching consequences for copyrighted content producers, such as movie, record, software and game companies, as they attempt to enforce their copyrights in actions against ISPs that are used by their subscribers to infringe copyrights.

CoStar holds copyrights in numerous photographs of commercial real estate. LoopNet is an internet service provider (ISP) that also maintains a commercial real estate web site. It allows its real estate broker customers to publish listings of commercial real estate. CoStars' subscribers published photographs owned by CoStar on the LoopNet web site.

CoStar filed a complaint in U.S. District Court (DMd) in 1999 against LoopNet alleging direct copyright infringement, under 17 U.S.C. §§ 106 and 501 (and other claims that are not at issue in the present appeal). The District Court, relying on the Netcom case, granted summary judgment to LoopNet. The District Court's opinion is also reported at 164 F. Supp.2d 688.

See, November 21, 1995 opinion of the U.S. District Court (NDCal) in Religious Technology Center v. Netcom On-Line Communications Services, Inc., which held that an ISP serving as a passive conduit for copyrighted material is not liable as a direct infringer.

This opinion is also published at 907 F. Supp. 1361. See also, article by Eugene Burcher and Anna Hughes titled "Internet Service Providers: The Knowledge Standard for Contributory Copyright Infringement and The Fair Use Defense" published in the Richmond Journal of Law and Technology, July 15, 1996.

Subsequent to the 1995 Netcom opinion, the Congress enacted, in 1998, the Digital Millennium Copyright Act (DMCA). The DMCA was HR 2281 in the 105th Congress. In particular, the DMCA added a new § 512 to the Copyright Act regarding "Limitations on liability relating to material online".

§ 512(c) provides, in part, that "A service provider shall not be liable for monetary relief, or, ... for injunctive or other equitable relief, for infringement of copyright by reason of the storage at the direction of a user of material that resides on a system or network controlled or operated by or for the service provider, if the service provider --
   (A)(i) does not have actual knowledge that the material or an activity using the material on the system or network is infringing; (ii) in the absence of such actual knowledge, is not aware of facts or circumstances from which infringing activity is apparent; or (iii) upon obtaining such knowledge or awareness, acts expeditiously to remove, or disable access to, the material;
   (B) does not receive a financial benefit directly attributable to the infringing activity, in a case in which the service provider has the right and ability to control such activity; and
   (C) upon notification of claimed infringement as described in paragraph (3), responds expeditiously to remove, or disable access to, the material that is claimed to be infringing or to be the subject of infringing activity."

CoStar asserted that the DMCA codified and supplanted the Netcom opinion. It argued that LoopNet is strictly liable for infringement under § 106 because any immunity for the passive conduct of an ISP must come from the safe harbor immunity provision of the DMCA. CoStar further argued that since LoopNet could not meet the conditions for immunity under the DMCA, it is liable for direct copyright infringement.

The Court of Appeals first reviewed the Netcom opinion and concluded that it "made a particularly rational interpretation of § 106 when it concluded that a person had to engage in volitional conduct -- specifically, the act constituting infringement -- to become a direct infringer. As the court in Netcom concluded, such a construction of the Act is especially important when it is applied to cyberspace. There are thousands of owners, contractors, servers, and users involved in the Internet whose role involves the storage and transmission of data in the establishment and maintenance of an Internet facility. Yet their conduct is not truly ``copying´´ as understood by the Act; rather, they are conduits from or to would-be copiers and have no interest in the copy itself."

It then rejected the argument that the DMCA supplanted the Netcom opinion.

It noted that § 512(l) provides that "The failure of a service provider's conduct to qualify for limitation of liability under this section shall not bear adversely upon the consideration of a defense by the service provider that the service provider's conduct is not infringing under this title or any other defense."

It concluded that this section means that ISPs can rely upon prior case law in addition to the various safe harbor provisions of § 512. It wrote that "in enacting the DMCA, Congress did not preempt the decision in Netcom nor foreclose the continuing development of liability through court decisions interpreting §§ 106 and 501 of the Copyright Act."

The Court further concluded that "It is clear that Congress intended the DMCA’s safe harbor for ISPs to be a floor, not a ceiling, of protection. Congress said nothing about whether passive ISPs should ever be held strictly liable as direct infringers or whether plaintiffs suing ISPs should instead proceed under contributory theories. The DMCA has merely added a second step to assessing infringement liability for Internet service providers, after it is determined whether they are infringers in the first place under the preexisting Copyright Act. Thus, the DMCA is irrelevant to determining what constitutes a prima facie case of copyright infringement."

The Court added that "At bottom, we hold that ISPs, when passively storing material at the direction of users in order to make that material available to other users upon their request, do not "copy" the material in direct violation of § 106 of the Copyright Act. Agreeing with the analysis in Netcom, we hold that the automatic copying, storage, and transmission of copyrighted materials, when instigated by others, does not render an ISP strictly liable for copyright infringement under §§ 501 and 106 of the Copyright Act. An ISP, however, can become liable indirectly upon a showing of additional involvement sufficient to establish a contributory or vicarious violation of the Act. In that case, the ISP could still look to the DMCA for a safe harbor if it fulfilled the conditions therein."

Judge Niemeyer wrote the opinion of the Court, in which Judge Michael joined. Judge Gregory dissented.

This case is Costar Group v. Loopnet, Inc., U.S. Court of Appeals for the No. 03-1911, an appeal from the U.S. District Court for the District of Maryland, Judge Deborah Chasanow presiding, D.C. No. CA-99-2983-DKC.

The case also attracted amicus curiae participation. Record and movie companies supported the copyright holder, CoStar. Phone companies BellSouth and Verizon, internet and e-commerce companies Amazon, eBay, Google, and Yahoo, and several internet trade groups filed an amicus brief [39 pages in PDF] in support of the ISP, LoopNet.

People and Appointments

6/21. The National Cable & Telecommunications Association (NCTA) announced that its P/CEO, Robert Sachs, "has informed the NCTA Board of Directors that he will not seek to renew his current contract with the Association." See, NCTA release.

6/21. Rodger Woock was named Division Chief of the Federal Communications Commission's (FCC) Wireline Competition Bureau's (WCB) Industry Analysis and Technology Division.

More News

6/21. The Center for Democracy and Technology (CDT) and the Heritage Foundation released a paper [11 pages in PDF] titled "Biometric Technologies: Security, Legal, and Policy Implications", and written by Paul Rosenzweig, Alane Kochems, and Ari Schwartz. This paper concludes that "Rather biometrics (in one layer, or many) are simply another tool in a layered approach to security. They are not a panacea -- but they can play an important role in protecting America and should not be demonized as unacceptable technology."

6/21. The U.S. Patent and Trademark Office (USPTO) published a notice in the Federal Register that further explains the USPTO's interpretation of one of the patent term adjustment provisions of its rules of practice. See, Federal Register, June 21, 2004, Vol. 69, No. 118, at Pages 34283 - 34284.

6/21. The European Community announced in a release that it "is submitting today to the World Intellectual Property Organization (WIPO) in Geneva its instrument of accession to the Madrid Protocol on the international registration of trademarks. It is the first time that the EC as such accedes to a WIPO treaty. This link will allow businesses to benefit from the advantages of the Community Trademark through the Madrid Protocol system and vice-versa, which will simplify procedures, reduce the costs for international protection and make administration easier."

6/21. The Office of the U.S. Trade Representative (USTR) released a draft of the U.S. Bahrain Free Trade Agreement.

Go to News from June 16-20, 2004.