Senate Passes ETI/FSC Repeal Bill

7/15. The Senate amended and passed its version of HR 4520, which the Senate has titled the "Jumpstart Our Business Strength (JOBS) Act". It is a huge tax bill that repeals the ETI tax regime, and includes other technology related provisions. The House has already passed a different version of the bill.

On May 11, 2004, the Senate passed S 1637, which was also titled the "Jumpstart Our Business Strength (JOBS) Act", by a vote of 92-5. The House then passed its version of HR 4520, which it has titled the "American Jobs Creation Act of 2004", by a vote of 251-178 on June 17, 2004. See, Roll Call No. 259. See also, story titled "House Passes Bill to Repeal ETI" in TLJ Daily E-Mail Alert No. 918, June 18, 2004.

The Senate also appointed conferees to work out the differences between the two versions of the bill. They are Senators Grassley, Hatch, Nickles, Lott, Snowe, Kyl, Thomas, Santorum, Smith, Bunning, McConnell, Gregg, Baucus, Rockefeller, Daschle, Breaux, Conrad, Graham (D-FL), Jeffords, Bingaman, Lincoln, Kennedy, and Harkin.

The original purpose of this legislation was repeal the extraterritorial income (ETI) tax regime. These bills accomplishes this.

The impetus for repealing the ETI tax regime is that the World Trade Organization (WTO) ruled that the Foreign Sales Corporation (FSC) tax regime, and its replacement, the ETI tax regime, constitute illegal export subsidies. The WTO authorized the EU to impose up to $4 Billion in retaliatory tariffs. See also, story titled "EU Imposes FSC/ETI Sanctions" in TLJ Daily E-Mail Alert No. 847, March 2, 2004.

However, this legislation has become the vehicle for passing numerous major and minor taxation related provisions.

Many of the these other provisions are technology related. In the version of the bill just passed by the Senate, see for example, Section 494 pertaining to "Treatment of charitable contributions of patents and similar property", Section 706, pertaining to "Deduction for corporate donations of scientific property and computer technology", and Sections 311 and 312, pertaining to "Extension and modification of research credit" and "Expansion of research credit".

Senate Passes US Australia FTA

7/15. The Senate passed HR 4759, the "United States-Australia Free Trade Agreement Implementation Act", by a vote of 80-16. See, Roll Call No. 156. The House passed this bill on July 14 by a vote of 314-109. See, Roll Call No. 375. July 14, 2004.

The agreement includes provisions pertaining to electronic commerce and protection of intellectual property rights. It is supported by many technology related groups and companies. For example, Robert Holleyman, P/CEO of the Business Software Alliance (BSA) stated in a release that "The swift passage of this agreement by both the House and the Senate indicates the firm commitment of lawmakers to not only foster an open and competitive environment for IT exports, but to ensure these agreements contain requirements for robust intellectual property protections globally". See also, American Electronics Association (AEA) release.

See also, stories titled "House Passes US Australia FTA" in TLJ Daily E-Mail Alert No. 938, July 15, 2004, "U.S. and Australia Sign FTA" in TLJ Daily E-Mail Alert No. 901, May 19, 2004, and "US and Australia Conclude FTA with Extensive Info Tech Provisions" in TLJ Daily E-Mail Alert No. 833, February 10, 2004.

House Subcommittee Approves SSN Privacy and Identity Theft Prevention Act

7/15. The House Ways and Means Committee's Subcommittee on Social Security approved HR 2971, the "Social Security Number Privacy and Identity Theft Prevention Act of 2003", by a voice vote.

The bill would restrict the sale and public display of Social Security numbers (SSNs), limit dissemination of SSNs by credit reporting agencies, make it more difficult for businesses to deny services if a customer refuses to provide his SSN, and establish civil and criminal penalties for violations.

Rep. Clay Shaw (R-FL) introduced the bill on July 25, 2003.

On June 15, the Subcommittee on Social Security held a hearing titled "Enhancing Social Security Number Privacy". See, prepared testimony of Howard Beales (Director of the Federal Trade Commission's Bureau of Consumer Protection), prepared testimony of Patrick O'Carroll (Acting Inspector General of the Social Security Administration), prepared testimony of Barbara Bovbjerg (General Accounting Office), and prepared testimony of Lawrence Maxwell (U.S. Postal Inspection Service).

See also, prepared testimony of Patricia Foss (identity theft victim), prepared testimony of Mark Ladd (Property Records Industry Association), prepared testimony of Chris Hoofnagle (Electronic Privacy Information Center), prepared testimony of Brian McGuinness (National Council of Investigation and Security Services), prepared testimony of Mike Buenger (Conference of State Court Administrators), prepared testimony of Fred Cate (University of Indiana -- Bloomington), and prepared testimony of Edmund Mierzwinski (U.S. Public Interest Research Group).

Appeals Court Affirms Conviction of Man Who Stole President Clinton's SSN

7/15. The U.S. Court of Appeals (11thCir) issued its opinion [21 pages in PDF] in US v. Harris, affirming the conviction by the District Court of an Alabama man named Charles Harris for the fraudulent use of a Social Security number with intent to deceive, in violation of 42 U.S.C. § 408(a)(7)(B).

Harris's driver's license was suspended. So, he made a fake driver's license, and other fake identification cards. His fraud was discovered when he was pulled over by a police officer for a traffic violation.

He used former President Bill Clinton's Social Security number in these fake identity documents, and asserted to police that it was his SSN. He did not, however, claim to be President Clinton.

This case is U.S.A. v. Charles Danny Harris, U.S. Court of Appeals for the 11th Circuit, App. Ct. No. 03-12804, an appeal from the U.S. District Court for the Northern District of Alabama, D.C. No. 97-00022 CR-B-S.

President Bush Signs Identity Theft Penalty Enhancement Act

7/15. President Bush signed HR 1731, the "Identity Theft Penalty Enhancement Act". This bill pertains to penalties for "aggravated identity theft", including identity theft that is associated with terrorism crimes and certain enumerated felonies.

Bush stated at a signing ceremony that "We're taking an important step today to combat the problem of identity theft, one of the fastest growing financial crimes in our nation. Last year alone, nearly 10 million Americans had their identities stolen by criminals who rob them and the nation's businesses of nearly $50 billion through fraudulent transactions. The bill I'm about to sign sends a clear message that a person who violates another's financial privacy will be punished." See, transcript.

This act adds a new section to the criminal code titled "Aggravated identity theft". It provides, in part, that "Whoever, during and in relation to any felony violation enumerated in subsection (c), knowingly transfers, possesses, or uses, without lawful authority, a means of identification of another person shall, in addition to the punishment provided for such felony, be sentenced to a term of imprisonment of 2 years." Subsection (c), in turn, enumerates numerous crimes, including bank fraud and wire fraud, and well as numerous crimes relating to immigration, passports, social security, and theft of public funds

This act further provides that "Whoever, during and in relation to any felony violation enumerated in section 2332b(g)(5)(B), knowingly transfers, possesses, or uses, without lawful authority, a means of identification of another person or a false identification document shall, in addition to the punishment provided for such felony, be sentenced to a term of imprisonment of 5 years." 18 U.S.C. § 2332b pertains to terrorism crimes.

FTC Settlement With AspenTech Requires Divestiture of Software Businesses

7/15. The Federal Trade Commission (FTC) released a redacted copy of its Decision and Order [33 pages in PDF] and Decision Containing Consent Order [4 pages in PDF] in its administrative proceeding titled "In the Matter of ASPEN TECHNOLOGY, INC., a corporation". The order requires Aspen Technology, Inc. to divest the overlapping assets that it obtained in its 2002 acquisition of Hyprotech, Ltd.

The FTC filed an administrative complaint [10 pages in PDF] on August 7, 2003, seeking to rescind the acquisition by Aspen Technology, Inc. of Hyprotech. The FTC alleged that the acquisition combined two competing software makers in violation of the FTC Act and the Clayton Act. See, story titled "FTC Files Administrative Complaint Seeking Rescission of Aspen Tech's Acquisition of Hyprotech" in TLJ Daily E-Mail Alert No. 714, August 8, 2003.

The 2003 complaint stated that "AspenTech is a developer and worldwide supplier of manufacturing, engineering, and supply chain simulation computer software, including non-linear process engineering simulation software used by the refining, oil & gas, petrochemical, specialty chemical, air separation, pharmaceutical, fine chemical and other process manufacturing industries and by engineering and construction companies to support those industries." The FTC further alleged that prior to the acquisition, "AspenTech and Hyprotech were direct and actual competitors" in various software markets, and that the acquisition created a worldwide dominant firm in these markets, and is anticompetitive.

This consent order settles this administrative action, subject to final Commission approval, following a 30 day public comment period that expires on August 13, 2004.

David McQuillin, P/CEO of AspenTech, stated in a release [2 pages in PDF] that "Under the agreement, we would be able to continue to sell and develop our comprehensive offering of process industry software products, including key products we acquired with the acquisition of Hyprotech. We believe this settlement is on terms favorable to AspenTech, its customers and its shareholders, and we are eager to move forward to maintain our commitments to customers to provide consistently excellent products, services, support and new innovations."

This AspenTech release further states that "Under the proposed settlement agreement, AspenTech would agree to sell its operator training services business and rights to the Hyprotech product line to an FTC-approved buyer. AspenTech would otherwise retain rights to continue selling and developing all of the engineering software products acquired in its acquisition of Hyprotech, such as the HYSYS family of products, but not including AXSYS. AspenTech would retain all of its other products with the exception of the OTISS product. Additionally, AspenTech has entered into a definitive agreement to sell its assets and business related to the AXSYS product line to Bentley Systems, which is expected to close within the next ten days."

See also, FTC release and document [5 pages in PDF] titled "Analysis of Proposed Settlement Agreement to Aid Public Comment", both released on July 15, 2004. This is FTC Docket No. 9310.

House Committee to Hold Hearing on EMP Attacks

7/15. The House Armed Services Committee (HASC) announced that it will hold a hearing on Thursday, July 22, 2004 on the threat of electromagnetic pulse (EMP) attacks.

The Congress established the Commission to Assess the Threat to the United States from Electromagnetic Pulse Attack in 2000. See, §§ 1401 through 1409 of HR 5408, the "Floyd D. Spence National Defense Authorization Act FY2001", in the 106th Congress. This bill was incorporated in, and passed as a part of, HR 4205, a broad defense authorization bill. It became Public Law 106-398. The sections establishing the Commission are now codified at 50 U.S.C. § 2301 notes.

EMP attacks interfere with and and damage computer, satellite, communications, and other electronic systems. Detonation of thermonuclear devices at high altitude creates wide area EMP damage.

William Graham, the Chairman of the Commission, will testify. See also, 1999 testimony of Graham before the HASC regarding EMP attacks.

People and Appointments

7/15. Pamela Patsley was elected to the Board of Directors of Texas Instruments. She is a Senior Executive Vice President of First Data Corporation, and the President of its subsidiary, First Data International. See, TI release.

7/15. Julie St. John joined the Board of Directors of 3Com Corporation. She will also serve on the audit and finance committee. See, 3Com release.

More News

7/15. The House Judiciary Committee's Subcommittee on Courts, the Internet, and Intellectual Property held an oversight hearing titled "Internet Streaming of Radio Broadcast: Balancing the Interests of Sound Recording Copyright Owners With Those of Broadcasters". See, prepared testimony [35 pages in PDF] of David Carson (General Counsel of the Copyright Office), prepared testimony of Jonathan Potter (Executive Director of the Digital Media Association), prepared testimony [PDF] of Steven Marks (General Counsel of the Recording Industry Association of America), and prepared testimony [PDF] of Dan Halyburton (on behalf of the National Association of Broadcasters).

7/15. Sen. Charles Grassley (R-IA) gave a speech [4 pages in PDF] titled "Seven Principles of U.S. Trade Policy". He stated that "international trade rules should be about international trade", not about domestic social agendas in areas such as labor and environmental standards, that "protectionism is not free", to the extent that it harms U.S. consumers, and that "free trade lifts all boats". He also argued that "free trade promotes freedom",  that "free trade promotes democratic values", and that "free trade promotes peace". Finally, his seventh principle is that "we must be diligent in protecting past gains from free trade and relentless in our pursuit of open markets".

Powell Praises Broadband Over Powerline

7/14. Federal Communications Commission (FCC) Chairman Michael Powell issued a statement [PDF] regarding broadband over powerline (BPL) technology following a demonstration in Menlo Park, California sponsored by Pacific Gas and Electric Company and AT&T.

He wrote that "Powerline technology holds the great promise to bring high-speed Internet access to every power outlet in America. What I saw today has the potential to play a key role in meeting our goals to expand the availability and affordability of broadband. AT&T and Pacific Gas and Electric are to be applauded for leading the way for this innovative technology. The future is bright for powerline broadband. We'll continue at the FCC to explore ways to support this technology while protecting other services from interference."

In addition, Commissioner Susan Kennedy (at right) of the California Public Utilities Commission attended the demonstration and stated that "Chairman Powell and I are working together, at both the federal and state level, to promote new technologies like BPL -- that will ultimately provide California's consumers with a choice of broadband platforms ... It is essential that Californians have the right tools and the right business climate, if we are to continue leading the nation in innovation and developing next generation technologies."

The FCC issued a notice of proposed rulemaking (NPRM) on BPL on February 12, 2004. See, story titled "FCC Adopts Broadband Over Powerline NPRM" in TLJ Daily E-Mail Alert No. 836, February 13, 2004. The FCC released the text of this NPRM on February 23, 2004.

The extended deadline to submit reply comments was June 22, 2004. See, Order Granting Extension of Time [3 pages in PDF]. This NPRM is FCC 04-29 in ET Docket Nos. 03-104 and 04-37.

9th Circuit Rules in California § 252 Case

7/14. The U.S. Court of Appeals (9thCir) issued its opinion [27 pages in PDF] in AT&T v. PacBell, a case regarding 47 U.S.C. § 252 and state regulation of the prices charged by incumbent local exchange carriers (ILECs) to competitive local exchange carriers (CLECs) for access to their networks.

The Appeals Court upheld in part, the California Public Utilities Commission's (CPUC) determination regarding the rates that Pacific Bell Telephone Company may charge AT&T, WorldCom and other CLECs.

The Appeals Court held that "although the general methodology chosen by the CPUC to calculate a common cost markup was appropriate, the CPUC improperly implemented the methodology by attributing some common costs to wholesale operations that should have been attributed to retail operations. We therefore reverse the decision of the district court with respect to the amount of common costs that Pacific’s competitors must pay for access to Pacific’s network."

This case is AT&T Communications of California, Inc., et al. v. Pacific Bell Telephone Company, California Public Utilities Commission, et al., U.S. Court of Appeals for the 9th Circuit, App. Ct. No. 02-16751 and consolidated cases, appeal from the U.S. District Court for the Northern District of California.

House Commerce Subcommittee Holds Hearing on RFID Technology

7/14. The House Commerce Committee's Subcommittee on Commerce, Trade and Consumer Protection held a hearing titled "Radio Frequency Identification (RFID) Technology: What the Future Holds for Commerce, Security, and the Consumer". See, full story.

House Passes US Australia FTA

7/14. The House passed HR 4759, the "United States-Australia Free Trade Implementation Act", by a vote of 314-109. See, Roll Call No. 375.

Republicans voted 198-24 in favor of the bill. Democrats voted 116-84 in favor of the bill. Almost all members of both parties who are active on technology related issues voted for the bill. The one notable exception was Rep. Rick Boucher (D-VA), a Co-Chair of the Internet Caucus, who voted against the bill.

U.S. Trade Representative (USTR) Robert Zoellick wrote in a statement [PDF] on July 14 that "In addition to freeing trade in industrial goods, the new FTA removes barriers to agricultural products, investment, government procurement, and services while increasing protection for intellectual property and freeing electronic commerce."

USTR Zoellick (at left) added that "The free trade agreements approved today by the House are an important part of the Administration's efforts to expand trade globally, regionally, and bilaterally. We now look forward to swift passage in the Senate."

On July 14 the Senate Finance Committee approved S 2610, the "U.S.-Australia Free Trade Agreement Implementation Act", by a vote of 17-4. Sen. Tom Daschle (D-SD), Sen. Olympia Snowe (R-ME), Sen. Jay Rockefeller (D-WV), and Sen. Kent Conrad (D-ND) voted no.

The agreement includes provisions regarding electronic commerce, patents, trade secrets, trademarks, cyber-squatting, piracy and counterfeiting. See, text of the FTA.

See also, stories titled "U.S. and Australia Sign FTA" in TLJ Daily E-Mail Alert No. 901, May 19, 2004, and "US and Australia Conclude FTA with Extensive Info Tech Provisions" in TLJ Daily E-Mail Alert No. 833, February 10, 2004.

House Passes Resolution Regarding IPR in the PRC

7/14. The House passed HRes 576, a resolution urging People's Republic of China to improve its protection of intellectual property rights, by a vote of 416-3. See, Roll Call No. 374.

This resolution recognizes "the continuing existence of widespread intellectual property rights violations in China and encourages the Chinese Government to take further and immediate steps to improve enforcement of such rights".

It "urges the Chinese Government to undertake a coordinated nationwide intellectual property rights enforcement campaign, to eliminate the high criminal liability threshold and procedural obstacles that impede the effective use of criminal prosecution in addressing intellectual property rights violations, to increase the criminal penalties provided for in its laws and regulations, and to vigorously pursuit counterfeiting and piracy cases".

It also "recommends that the Chinese Government implement more effective customs and border measures to prevent the massive exportation of pirated goods into the United States and other countries".

It also "encourages the Chinese Government to fully and comprehensively implement a legal framework and effective enforcement mechanisms that would protect not only intellectual property rights held by United States and foreign business enterprises with or without investments in China, but also Chinese intellectual property rights holders, which is crucial to China's own economic development and technological advancement".

House Passes Resolution Regarding WTO's Disparate Treatment of Taxes

7/14. The House passed HRes 705, urging the President to resolve the disparate treatment of direct and indirect taxes presently provided by the World Trade Organization (WTO), by a vote of 423-1. See, Roll Call No. 372.

The resolution states that the "World Trade Organization does not permit direct taxes, such as the corporate income tax, to be rebated or reduced on exports", but "indirect taxes, such as a value added tax, can be and are rebated on exports in other countries".

It further states that the WTO's distinction "between direct and indirect taxation is arbitrary and may induce economic distortions among nations with disparate tax systems", and that "United States firms pay a high corporate tax rate on their export income and many foreign nations are allowed to rebate their value added taxes, thereby giving exporters in nations imposing value added taxes a competitive advantage over American workers".

The non-binding resolution requests that the President report annually to the Congress "on progress in pursuing multilateral and bilateral trade negotiations to eliminate the barriers described in section 2102(b)(15) of the Trade Act of 2002; and ... on (A) proposed alternatives to the disparate treatment of direct and indirect taxes presently provided by the World Trade Organization; and (B) other proposals for redressing the tax disadvantage to United States businesses and workers, either by changes to the United States corporate income tax or by the adoption of an alternative, including -- (i) assessing the impact of corporate tax rates, (ii) a system based on the principal of territoriality, and (iii) a border adjustment for exports such as is already allowed by the World Trade Organization for indirect taxes."

Draft Bills Implementing US Morocco FTA Approved by Committees

7/14. The Senate Finance Committee approved proposed legislation implementing the U.S. Morocco Free Trade Agreement by a vote of 20-1. Sen. Jay Rockefeller (D-WV) vote no.

Also, on July 14, the House Ways and Means Committee approved a draft bill implementing the US Morocco FTA. See, release.

See, text of the FTA, and especially, intellectual property rights chapter [PDF], electronic commerce chapter [PDF], and telecommunications chapter [PDF]. See also, story titled "USTR Releases US-Morocco FTA and Report of Advisory Committees" in TLJ Daily E-Mail Alert No. 874, April 12, 2004.

U.S. Trade Representative (USTR) Robert Zoellick wrote in a statement [PDF] on July 14 that "We also have to work with the Congress in the coming weeks to advance the U.S. -- Morocco FTA toward final passage."

More News

7/14. The Center for Democracy and Technology (CDT) released a paper [20 pages in PDF] titled "ICANN and Internet Governance: Getting Back to Basics".

DOJ Releases Report Touting Benefits of PATRIOT Act

7/13. The Department of Justice (DOJ) released a document [31 pages in PDF] titled "Report from the Field: The USA PATRIOT Act at Work".

Attorney General John Ashcroft released it at an event on Capitol Hill. He argued in his prepared statement that allowing the sunsetting provision of the PATRIOT Act to expire "would be paramount to unilateral disarmament against al Qaeda. To take away the smart bombs, advanced night-vision equipment, and 21st Century communications capabilities from our soldiers, sailors, airmen and Marines would gut their ability to hunt and destroy al Qaeda terrorists. To let the Patriot Act's laser-guided tools sunset would be to disarm the FBI and rollback our ability to target terrorists here at home, and would return us to the vulnerabilities we faced before September 11, 2001."

Ashcroft (at right) said that "The Patriot Act is al Qaeda's worst nightmare when it comes to disrupting and disabling their operations here in America. Our law enforcement and intelligence teams have never before been so integrated and coordinated, and technologically-equipped, to target the 21st Century threat of global terror."

The report is a collection of mostly unidentified anecdotes about how certain sections of the PATRIOT Act have been employed to catch or thwart criminals or terrorists. It also contains brief discussions of the language and application of certain sections of the PATRIOT Act.

It is a polemic piece that praises the Act. It is released at a time when critics seek to insert amendments in various annual appropriations bills or other end of the session legislation to limit various provisions of the PATRIOT Act.

It provides defenders of the Act with a collection of talking points to use in debates and public speeches.

For example, the report discusses the PATRIOT Act's provisions regarding extension of pen register and trap and trace devices authority from obtaining incoming and outgoing phone numbers used in telephone communications to obtaining internet routing and addressing information.

The report states that "When Congress first enacted the law governing the use of pen/trap devices in 1986, however, it could not have anticipated the dramatic expansion in electronic communications that has occurred since then. The statute therefore did not expressly apply to the full range of communications media, such as the Internet. Moreover, the original statute did not address the increasingly mobile nature of communications, and therefore limited the effect of a pen/trap order to the territorial boundaries of the federal district in which it was issued. In Section 216 of the USA PATRIOT Act, Congress amended the pen/trap statute to authorize a district court to issue an order that is valid throughout the United States, and it clarified that the pen/trap provisions in criminal investigations apply to communications via means other than telephones, such as the Internet."

The report then addresses how unidentified investigators have made use of the pen register and trap and trace devices authority in the Act. It states that "Investigators recently used section 216 and other USA PATRIOT Act authorities to combat credit card fraud perpetrated over the Internet. In this case, customers of an Internet service provider were being target by ``phishers.´´" The report then continues with an explanation of what phishing is.

The report then states that "Because fraudulent e-mail accounts and websites go up and down quickly, the use of USA PATRIOT Act authorities by investigators was critical to the identification and prosecution of one of the phishers. Investigators used section 216 to obtain pen/traps for Internet service providers located in another state, used section 210 to issue subpoenas to Internet service providers, and used section 220 to obtain search warrants for e- mail content from out-of-district Internet service providers. These USA PATRIOT Act authorities allowed investigators both to apprehend the phishers and to identify retailers who had been defrauded. One defendant has already pleaded guilty to charges as a result of this investigation, which would never have been successfully brought without the authorities contained in the USA PATRIOT Act."

As a legislative report, it is thin of substance. It is a collection of anecdotes, with few comprehensive statistics. For example, the report does not state how many pen register and trap and trace device orders have been obtained each year, and how many have been used to obtain internet routing and addressing information.

Also, while the report states that the PATRIOT Act has been used, it does not address the technologies used by law enforcement entities and service providers. For example, it does not address the technologies used to capture internet addressing and routing information. Nor does the report address the costs imposed upon services providers to comply requests from law enforcement entities.

Also, the DOJ report reviews some sections of the PATRIOT Act, such as Section 216, but leaves out reference to some of the most debated and/or important sections of the Act. For example, it does not address the PATRIOT Act's provisions regarding delayed notice of search warrants, which critics describe as sneak and peak. Nor does it address Section 215 of the Act and access to business records. This is the section that has been criticized by library groups.

Also, the anecdotes contained in the report are mostly unidentified. That is, with the discussion of Section 216, as with all other anecdotes in the report, there is no reference to any case number, case name, court, or prosecuting attorney. While some of the anecdotes reference the names of famous defendants, and reference locations, most anecdotes in the report lack sufficient information to enable the reader to look up further information about the case in other research sources. The report does not enable readers to pursue copies of indictments, plea agreements, and court orders and opinions, and obtain contact information on prosecuting and defense attorneys. The report does not enable the reader to either locate further information, or verify the report's assertions.

Also, the DOJ report does not list any court opinions issued under pre PATRIOT Act provisions, or opinions issued since enactment of the PATRIOT Act. Nor does it list any pending cases challenging provisions of the Act.

Also, the report does not identify the various proposals to amend the PATRIOT Act -- either those supported or opposed by the DOJ.

Also, the report does not discuss implementation of the PATRIOT Act by the DOJ and other federal agencies. There is no information about the promulgation of implementing regulations. There is nothing on any agency's interpretations, policies or opinions. Nor is there any information on staffing levels, or personnel responsible for implementing various parts of the Act.

Finally, the report does not identify its author(s), or the section(s) of the DOJ in which the author(s) is employed.

Attorney General Ashcroft released the report on Capitol Hill. But, while the Congress is in session, he did not appear at an oversight hearing. That is, members of the oversight committees had no opportunity to question the Attorney General or other DOJ personnel about this report or the PATRIOT Act generally.

However, while the DOJ may not be volunteering of the PATRIOT Act, many members of the House and Senate are not exercising effective oversight of the DOJ.

For example, Attorney General Ashcroft and FBI Director Mueller rarely testify before Congressional oversight committees. But, they both testified for hours before the Senate Judiciary Committee recently. This Committee includes many members, in both parties, who oppose certain provisions in the PATRIOT Act. Yet many members (but not all) used their appearances at the hearing to engage in partisan attacks on the Bush administration on issues largely unrelated to the DOJ. They squandered their opportunities to engage either Ashcroft and Mueller on PATRIOT Act issues.

See, story titled "Ashcroft Testifies Before Senate Judiciary Committee" and story titled "Ashcroft Testifies Regarding PATRIOT Act" both published in TLJ Daily E-Mail Alert No. 914, June 9, 2004. See also, story titled "FBI Director Mueller Appears Before Senate Judiciary Committee" in TLJ Daily E-Mail Alert No. 904, May 24, 2004.

Finally, while the report is identified as a report on the PATRIOT Act, it addresses generally how terrorists and criminals are using new technologies, and how law enforcement entities are dealing with these new technologies.

The report states, for example, that "Prior to the USA PATRIOT Act, law enforcement had been operating at a technological disadvantage in the war against terrorism. Agents often were forced to use outdated legal authorities to fight terrorists who were using modern technology. In short, we were waging a 21st century war with mid-20th century weapons. Thankfully, however, the Act has modernized and strengthened key tools needed to accomplish the Department’s now-central mission: preventing acts of terrorism before they take place."

Nevertheless, the report is silent on the continuing deployment of newer technologies, and how these may be affecting law enforcement entities' missions. There is no discussion of voice over internet protocol (VOIP) services, or any of the pending bills pertaining to regulation of, and law enforcement surveillance of, VOIP.

Nor does the report contain any discussion of the Communications Assistance for Law Enforcement Act (CALEA), the Department of Justice's petition [PDF] to the Federal Communications Commission (FCC) regarding expanding the requirements of the CALEA, or the FCC's pending CALEA proceeding. See, FCC RM 10865.

EPIC Files Appeal Brief in FOIA Case Regarding DOJ Lobbying Over PATRIOT Act Amendment

7/13. The Electronic Privacy Information Center (EPIC) filed its appeal brief [35 pages in PDF] with the U.S. Court of Appeals (DCCir) in EPIC v. DOJ, a Freedom of Information Act (FOIA) case regarding expedited processing of a request for records pertaining to the lobbying efforts of United States Attorneys to oppose a legislative proposal to limit investigative authority granted by the PATRIOT Act.

On September 10, 2003 the EPIC submitted a FOIA request to the DOJ requesting records related to an August 14, 2003 memorandum from Guy Lewis, of the DOJ's Executive Office for United States Attorneys, regarding an amendment offered in the House by Rep. Butch Otter (R-ID).

Rep. Otter offered an amendment last summer to HR 2799, the Commerce, Justice, State and the Judiciary, and Related Agencies Appropriations Act for FY 2004. This was House Amendment 292. The House approved this amendment by a vote of 309-118 on July 22, 2003. See, Roll Call No. 408. This amendment pertained to the PATRIOT Act's provisions regarding delayed notice of search warrants, which provisions are also referred to as sneak and peak.

The EPIC also sought expedited processing of the DOJ's usual glacial pace in responding to FOIA requests.

On October 15, 2003, the EPIC filed a complaint [7 pages in PDF] in U.S. District Court (DC) against the Department of Justice (DOJ) alleging violation of the FOIA, which is codified at 5 U.S.C. § 552. See, story titled "EPIC Files FOIA Suit Seeking DOJ Records Regarding Lobbying Over PATRIOT Act Amendment" in TLJ Daily E-Mail Alert No. 763, October 22, 2003.

On December 22, 2003, the District Court, Judge James Robertson presiding, issued its memorandum opinion [11 pages in PDF] holding that the EPIC is not entitled to expedited processing. He wrote that "I cannot conclude upon my review of the record that EPIC has established ``widespread and exceptional´´ media interest".

This appeal followed. Oral argument is scheduled for January 13, 2005.

This case is EPIC v. DOJ, U.S. Court of Appeals for the District of Columbia, App. Ct. Nos. 04-5063 and 04-5072, appeals from the U.S. District Court for the District of Columbia.

11th Circuit Rules U.S. Courts Have Subject Matter Jurisdiction Over Foreign Infringer Who Sends Copies Into the U.S.

7/13. The U.S. Court of Appeals (11thCir) issued its opinion [11 pages in PDF] in Palmer v. Braun, a case involving subject matter jurisdiction of a U.S. District Court in a copyright infringement case brought against an individual residing in France.

Harry Palmer authored course materials for a course of instruction on how to explore and master one's own consciousness. He does business, and maintains a web site, under the name of Avatar.

Palmer's web site states that these courses provide "experiential exercises that enables you to rediscover your self and align your consciousness with what you want to achieve". Apparently, this stuff is copyrightable subject matter, under 17 U.S.C. § 102.

Eldon Braun who had been one of Palmer's instructors, quit, went to France, infringed Palmer's works, and sold copies over the internet.

Palmer filed a complaint in U.S. District Court (MDFl) against Braun alleging, among other things, copyright infringement. The District Court entered judgment for Palmer. Braun brought this appeal. While he raised numerous issues in this appeal, the Appeals Court only addressed the subject matter jurisdiction at length. It also briefly disposed of the personal jurisdiction and improper venue appeal issues.

The Appeals Court wrote that "federal copyright law has no extraterritorial effect, and cannot be invoked to secure relief for acts of infringement occurring outside the United States. ... Thus, it is only where an infringing act occurs in the United States that the infringement is actionable under the federal Copyright Act, giving the federal courts jurisdiction over the action."

However, it continued that "Where a person imports an infringing work into the United States, the federal courts have jurisdiction over the action for infringement because" 17 U.S.C. § 106 gives authors the exclusive right to, among other things, import copies of their copyrighted works.

In the present case, while Braun was in France, he sold copies of the infringing work over the Internet, and mailed them to persons inside of the U.S. The Court wrote that "the importation of the infringing work is an infringing act occurring in the United States." Hence, the Appeals Court held that the U.S. District Court has subject matter jurisdiction.

Braun also raised on appeal questions of improper venue and personal jurisdiction. These might have been interesting appellate issues, had Braun asserted them with greater expertise before the District Court. However, he did not, and the Appeals Court therefore was able to quickly reject these appeal points.

Braun raised the issue of personal jurisdiction for the first time on appeal. The Appeals Court held that he had waived it.

Second, he argued both in the District Court, and on appeal that venue was improper in the Middle District of Florida. 28 U.S.C. § 1400(a) provides that a civil suit to enforce the Copyright Act may be brought in any district "in which the defendant or his agent resides or may be found." The Appeals Court wrote that "A defendant ``may be found´´ in a district in which he could be served with process; that is, in a district which may assert personal jurisdiction over the defendant."

The Court continued that "Here, Braun appeared before the district court without contesting the court's jurisdiction over his person or his amenability to process in the district. By his consent to personal jurisdiction, Braun was ``found´´ in the Middle District of Florida for purposes of § 1400(a) venue."

This case is Harry Palmer, Stars Edge, Inc. v. Eldon Braun, U.S. Court of Appeals for the 11th Circuit, App. Ct. No. 03-13963, an appeal from the U.S. District Court for the Middle District of Florida, D.C. No. 00-01662 CV-ORL-31-JGG.

2nd Circuit Addresses Copyright Protection for Electronic Compilations of Data

7/13. The U.S. Court of Appeals (2ndCir) issued its opinion [13 pages in PDF] in MyWebGrocer v. HomeTown Info, a case regarding copyright protection for compilations of data in electronic format. The Appeals Court affirmed the District Court's denial of a motion for preliminary injunction. The Appeals did not hold that the data (a large collection of grocery product descriptions) lacks copyright protection. Rather, it gave the District Court guidance on evaluating the copyright issues upon trial on the merits.

MyWebGrocer developed in electronic format grocery product descriptions for online grocery shopping. It also registered this with the U.S. Copyright Office.

MyWebGrocer had a contract with D'Agostino Supermarkets to operate an online grocery store. D'Agostino's later terminated its relationship with MyWebGrocer and contracted with its competitor, HomeTown Info, to operate its online grocery store. HomeTown copied MyWebGrocer's copyrighted work, without authorization, and used it in the web site that it operated for D'Agostino's.

MyWebGrocer filed a complaint in U.S. District Court (DVt) against HomeTown Info and two individuals, alleging copyright infringement, false designation of origin, tortious interference with prospective business relations, a RICO claim, unfair competition, and trespass. HomeTown alleged various counterclaims, and sought a declaratory judgment that MyWebGrocer's copyright was void. MyWebGrocer moved for a preliminary injunction.

This District Court only decided the question of whether or not to grant a preliminary injunction. It denied the request on the grounds that MyWebGrocer's copyrighted product was not sufficiently creative to be copyrightable. This interlocutory appeal followed.

The Appeals Court concluded that MyWebGrocer could not satisfy one of the requisite elements for issuance of a preliminary injunction in the 2nd Circuit, a "showing either of likelihood of success on the merits or of fair grounds for litigation and a balance of hardships tipping decidedly in its favor."

The Appeals Court concluded, based upon its analysis of copyright law, and the facts not in dispute, that MyWebGrocer has shown fair grounds for litigation, but has not shown likelihood of success upon the merits. Moreover, since the balance of hardships is even, MyWebGrocer is not entitled to a preliminary injunction.

MyWebGrocer may yet prevail on its copyright infringement claim following trial on the merits by the District Court.

The Appeals Court's reasoning regarding the copyright issues involved provides guidance for the District Court, and is otherwise noteworthy.

The Appeals Court began by quoting from the 1991 opinion of the Supreme Court in Feist Publications, Inc. v. Rural Telephone Service Co., which is also reported at 499 U.S. 340. The Appeals Court wrote that "A compilation of non-protectible facts is copyrightable if it ``features an original selection or arrangement of facts,´´ ... so that the selection or arrangement ``possesses at least some minimal degree of creativity´´."

The Appeals Court continued that "``Selection implies the exercise of judgment in choosing which facts from a given body of data to include in a compilation.´´ Key Publ’ns, Inc. v. Chinatown Today Publ’g Enters., Inc., 945 F.2d 509, 513 (2d Cir. 1991). We recently held that ``if the selection process imbues a compilation with the requisite creative spark, the compilation may be protected so long as there are indicia that principles of selection (other than all-inclusiveness) have been employed.´´ Silverstein v. Penguin Putnam, Inc., 368 F.3d 77, 83 (2d Cir. 2004)

The Appeals Court reasoned that "HomeTown is correct that the idea of using a manufacturer’s factual identification of a grocery product is not a sufficient exercise of creativity and that the facts in a description of a product's brand, manufacturer, or name are not copyrightable. But some aspects of the MyWeb descriptions may involve original selection, and if so, they are protected at least from wholesale verbatim copying. The parties have not agreed that the record is complete with regard to creativity and perhaps other issues, that is to say, a full trial would involve more evidence. When the record is complete, a trier of fact might conclude that the various providers have different concepts of the most attractive and useful product description -- brevity versus completeness, bare physical essentials versus essentials plus puffery, full product names versus abbreviations, for example. A trier might conclude that MyWeb made creative choices about what to include or exclude in its product descriptions -- e.g. advertising slogans, sub-brands, product colors, and phrases from product packaging -- for the purpose of facilitating and encouraging online shopping."

The Appeals Court also offered the District Court guidance on the merger doctrine and scenes a faire.

But, since the Appeals Court concluded that "it is not clear that MyWeb is likely to succeed on the merits", and that MyWebGrocer has only presented fair grounds for litigation, "it is not entitled to a preliminary injunction unless the balance of the hardships tips decidedly in its favor. However, the balance of hardships is, viewing the facts in the light most favorable to MyWeb, equal." Hence, the Appeals Court affirmed the denial of the preliminary injunction.

This case is MyWebGrocer, LLC v. HomeTown Info, Inc., d/b/a Grocery Shopping Network, et al., U.S. Court of Appeals for the 2nd Circuit, App. Ct. No. 03-7909, an appeal from the U.S. District Court for the District of Vermont, Judge William Sessions presiding. Judge Ralph Winter wrote the opinion for the three judge panel, in which Judges Straub and Lay joined.

The Appeals Court cited Supreme Court and 2nd Circuit cases. Recent cases in which courts in other circuits have not extended copyright protection to databases include Warren Publishing, Inc. v. Microdos Data Corp., 115 F.3d 1509 (11th Cir. 1997), Mid America Title Co. v. Kirk, 59 F.3d 719 (7th Cir. 1995), and Skinder-Strauss Assocs. v. Massachusetts Continuing Legal Edu., Inc., 914 F. Supp. 665 (D. Mass. 1995).

Disclosure. TLJ develops and maintains, but does not publish or sell, various collections of data. Readers may wish to consider this in assessing the objectivity of any TLJ stories about legislation or litigation regarding legal protection of collections of data.

People and Appointments

7/13. Daniel Caprio was named Chief Privacy Officer of the Department of Commerce (DOC). He joined the DOC last month as Deputy Assistant Secretary for Technology Policy. Before that, he was Special Assistant and Chief of Staff to Federal Trade Commission (FTC) Commissioner Orson Swindle. See, DOC release.

7/13. Harry Yoo was named Chief Financial Officer of Oracle. He previously worked for Accenture. He will replace Jeffrey Henley. See, Oracle release.

7/13. Charles Giancarlo was named Chief Technology Officer at Cisco Systems. Cisco also announced several other personnel changes. See, Cisco release.

More News

7/13. The Library of Congress published a notice in the Federal Register that describes, and sets a comment deadline for, its notice of proposed rulemaking (NPRM) regarding amendments to its regulations to provide for the reporting of uses of sound recordings performed by means of digital audio transmissions pursuant to statutory license for the period October 28, 1998, through March 31, 2004. Comments are due by August 12, 2004. See, Federal Register, July 13, 2004, Vol. 69, No. 133, at Pages 42007 - 42010.

7/13. The Library of Congress published a notice in the Federal Register that describes, and sets comment deadlines for, its notice of proposed rulemaking (NPRM) regarding continuation, with a few modifications, of the procedures adopted by the Copyright Office in 1995 that permit copyright applicants to request reconsideration of decisions
to refuse registration of copyrights. Comments are due by September 13, 2004. Reply comments are due by October 26, 2004. See, Federal Register, July 13, 2004, Vol. 69, No. 133, at Pages 42004-42007.

7/13. The Office of the U.S. Trade Representative (USTR) published a notice in the Federal Register requesting public comments pertaining to its Special 301 out of cycle review of Israel and other nations. Comments are due by August 6, 2004. Section 182 of the Trade Act of 1974, which is codified at 19 U.S.C. § 2242, requires the USTR to identify countries that deny adequate and effective protection of intellectual property rights or deny fair and equitable market access to U.S. persons who rely on intellectual property protection. This is also referred to as the Special 301 provision. See, Federal Register: July 13, 2004, Vol. 69, No. 133, at Pages 42077-42078.

7/13. The U.S. Department of Justice (DOJ) filed its post trial brief [61 pages in PDF, redacted] with the U.S. District Court (NDCal) in U.S. v. Oracle. The DOJ asserts that it has proven its case that Oracle's proposed acquisition of PeopleSoft would substantial lessen competition in the market for high function HRM and FMS software. Hence, the DOJ argues that the Court should enjoin the acquisition pursuant to Section 7 of the Clayton Act.

7/13. Rep. Lamar Smith (R-TX), the Chairman of the House Judiciary Committee's Subcommittee on Courts, the Internet and Intellectual Property, was named Legislator of the Year by the Intellectual Property Owners Association. See, Rep. Smith's release.

7/13. Sen. Max Baucus (D-MT), the ranking Democrat on the Senate Finance Committee, gave a speech [5 pages in PDF] titled "Looking Forward on Trade -- The Agenda for 2005".

9th Circuit Rules Federal Courts Lack Jurisdiction Over Suit by Homeowners Association Against a Condo Owner for Placement of Satellite Dish

7/12. The U.S. Court of Appeals (9thCir) issued its opinion [17 pages in PDF] in Opera Plaza v. Hoang, a case involving federal jurisdiction over disputes regarding the placement of satellite dishes. The Appeals Court affirmed the District Court's dismissal of a claim brought by a homeowners association seeking to enforce its dish policy.

The Opera Plaza Residential Parcel Homeowners Association (Opera Plaza) is a homeowners association that adopted a policy prohibiting the placement of satellite dishes in common areas of the condominium complex. Tuan and Betty Hoang own a condo within the premises of Opera Plaza. They installed a satellite dish on the exterior of their condo in a common area.

Opera Plaza filed complaint in U.S. District Court (NDCal) against the Hoang's in which they alleged three causes of action. First, they sought declaratory relief that the Opera Plaza satellite dish policy is valid. Second, they sought injunctive relief requiring the Hoangs to remove their dish. Third, they sought damages for breach of contract.

Diversity of citizenship is lacking. Thus, Opera Plaza asserted that there exists federal question jurisdiction. Specifically, it cited § 207 of the Telecommunications Act of 1996, which gave the Federal Communications Commission (FCC) authority to regulate over the air reception devices, including satellite dishes.

The District Court dismissed the complaint for lack of subject matter jurisdiction. This appeal followed. The Appeals Court affirmed.

The Congress enacted the Telecommunications Act of 1996 (Public Law No. 104-104) with language pertaining to over the air reception devices (OTARD). § 207 of the Act provides that "Within 180 days after the date of enactment of this Act, the Commission shall, pursuant to section 303 of the Communications Act of 1934, promulgate regulations to prohibit restrictions that impair a viewer's ability to receive video programming services through devices designed for over-the-air reception of television broadcast signals, multichannel multipoint distribution service, or direct broadcast satellite services." This section is codified at 47 U.S.C. § 303 notes.

In addition, § 205 of the Act amends 47 U.S.C. § 303 (which lists the powers of the Commission), to add a new subsection 303(v). It provides that the FCC shall "Have exclusive jurisdiction to regulate the provision of direct-to-home satellite services. As used in this subsection, the term ``direct-to-home satellite services´´ means the distribution or broadcasting of programming or services by satellite directly to the subscriber's premises without the use of ground receiving or distribution equipment, except at the subscriber's premises or in the uplink process to the satellite."

The FCC promptly promulgated, and has since amended, its implementing regulation. It is codified at 47 C.F.R. § 1.4000. The FCC also maintains a shorter summary in its web site titled "Fact Sheet: Over-the-Air Reception Devices Rule".

The Appeals Court held that "§ 207 of the Telecommunications Act of 1996 ... does not confer jurisdiction on the federal courts to hear a routine suit by a condominium homeowners association to enforce its rules against the placement of a satellite television dish in common areas."

It further held that "no sufficient federal question exists as to any of Opera Plaza's three causes of action, and as a result affirm the district court’s conclusion that Opera Plaza’s complaint did not raise substantial questions of federal law sufficient to confer federal jurisdiction."

The Court reasoned that neither the statute nor the FCC's implementing regulation creates a private right of action. Moreover, all three of Opera Plaza's claims are state law claims. § 207 of the Act, and the FCC's regulation, are not raised by the complaint. Rather, they might be asserted by the Hoang's as defenses; but, this is insufficient to provide federal question jurisdiction.

The Court also wrote that Opera Plaza's remedy is to bring suit in state court.

Hypothetically, the Appeals Court might have reached the opposite determination if the Hoangs had filed the complaint in federal court. That is, if Opera Plaza had removed the Hoang's dish, fined the Hoangs, or otherwise prompted the Hoangs to file suit, then they might have plead that any action taken by Opera Plaza was in reliance upon a state law that was preempted by §§ 205 and 207 the Telecommunications Act, and that Opera Plaza violated the FCC OTARD regulation. If this had been the nature of the case, then the Court might have found that the complaint did raise a substantial question of federal law, and ruled that the federal court did possess subject matter jurisdiction.

Perhaps there is another unwritten rationale underlying the decisions of both the District Court and the Appeals Court. That is, federal courts do not want to devote their resources and talents to resolving nickel and dime disputes involving pots, pans, and dishes.

This case is Opera Plaza Residential Parcel Homeowners Association v. Tuan Hoang and Betty Hoang, U.S. Court of Appeals for the 9th Circuit, App. Ct. No. 02-16682, an appeal from the U.S. District Court for the Northern District of California, D.C. No. CV-02-01084-WHA, William Alsup presiding. Judge Barry Silverman wrote the opinion of the three judge panel, in which Judges Jay Bybee and Michael Hawkins joined.

Go to News from July 6-10, 2004.