Tech Issues in Presidential Election Campaign

7/31. The Presidential candidates touched on several technology related issues in recent speeches. They discussed trade, protectionism, outsourcing, and education and training, although in vague terms.

President Bush has been talking about math and science education and high tech jobs. For example, on July 30 he gave a campaign speech in Springfield, Missouri. He said that "This world of ours is changing. The jobs of the future will require greater knowledge and higher level skills. We'll reform our high schools to make sure a high school diploma means something. We will expand math and science education so our young people can compete in a high tech world. We will expand the use of the Internet to bring high-level training into our classrooms. With four more years, we'll help a rising generation gain the skills and the confidence to achieve the American Dream."

This is a component that Bush also repeats in other speeches. See for example, speech in Grand Rapids, Michigan on July 30, speech in Pittsburgh, Pennsylvania on July 31, speech in Cambridge, Ohio on July 31, and speech in Canton, Ohio on July 31..

Bush has also spoken about trade recently. He said in his July 31 speech in Pittsburgh, Pennsylvania that "In order to keep jobs here, in order to make sure this economy continues to grow, we will reject economic isolationism. We will insist on a level playing field when it comes to trade."

He added in his July 31 speech in Canton, Ohio that "I know there's great concern about trade in eastern Ohio. Let me tell you something about trade. I believe that America and Americans can compete with anybody, anyplace, anywhere so long as the rules are fair. We understand what currency valuations can do to manufacturing, particularly in eastern Ohio. We've been working with China to put fair policy in place. Just give us a chance to compete, is all we're asking. We've been enforcing our trade agreements. We're making sure that our workers and our manufacturers are treated fairly."

Sen. John Kerry (D-MA) also alluded to trade and offshore outsourcing. He said in his speech to the Democratic National Convention on July 29 that his plan is to "close the tax loopholes that reward companies for shipping our jobs overseas. Instead, we will reward companies that create and keep good paying jobs where they belong -- in the good old U.S.A." He further referenced international trade. He said that "we will trade and compete in the world. But our plan calls for a fair playing field".

Sen. John Edwards (D-NC) was more specific in his speech to the Democratic National Convention on July 28. He said that "Our plan will stop giving tax breaks to companies that outsource your jobs. Instead, we will give tax breaks to American companies that keep jobs here in America. And we will invest in the jobs of the future -- in the technologies and innovation to ensure that America stays ahead of the competition."

Kerry also said that "our economic plan to build a stronger America" includes "investment in technology and innovation that will create the good-paying jobs of the future". See also, Kerry Edwards website.

More News

7/31. 146 member countries of the World Trade Organization (WTO) adopted a document titled "Draft General Council Decision of 31 July 2004 " that pertains to the Doha round of trade negotiations. It states that "The General Council reaffirms the Ministerial Declarations and Decisions adopted at Doha and the full commitment of all Members to give effect to them. The Council emphasizes Members' resolve to complete the Doha Work Programme fully and to conclude successfully the negotiations launched at Doha. " See also, statement by Sen. Charles Grassley (R-IA), release of the EU, statement by EU Trade Commissioner Pascal Lamy, and US Chamber of Commerce release.

Bush Gives Majoras and Liebowitz Recess Appointments to the FTC

7/30. President Bush announced his intent to give recess appointments to Deborah Majoras and Jon Leibowitz to be Commissioners of the Federal Trade Commission (FTC). Bush intends to designate Majoras as Chairman, replacing Timothy Muris. See, White House release.

Bush nominated Majoras for a Republican position on the FTC on May 11, 2004. This is for the remainder of a seven year term expiring on September 25, 2008. Bush nominated Liebowitz on April 8, 2004 for a Democratic position on the FTC.

On May 11, 2004, Muris wrote in a brief statement that "I plan to leave the Federal Trade Commission this summer." See, story titled "Muris Resigns, Majoras Nominated" in TLJ Daily E-Mail Alert No. 896, May 12, 2004.

The Senate Commerce Committee, which oversees the FTC, held a hearing on both nominees on June 2, 2004. See, story titled "Senate Commerce Committee Holds Hearing on FTC Nominees" in TLJ Daily E-Mail Alert No. 910, June 3, 2004.

The FTC handles many technology related matters. However, Sen. Ron Wyden (D-OR) and Sen. Barbara Boxer (D-CA) oppose the nomination of Majoras for non-technology related reasons. They are engaging in partisan election year posturing on a matter largely unrelated to matters that will be decided by the FTC -- gasoline prices on the West Coast. The FTC has no authority to regulate gasoline prices. Nor does it have authority to impose an industry wide moratorium on oil industry mergers, as Sen. Boxer has requested. Both Sen. Wyden and Sen. Boxer face elections in November.

The Senate Commerce Committee held a meeting to vote on both nominees on July 22. However, Sen. Wyden invoked an arcane Senate procedural rule that prevented the votes from taking place. The Senate then recessed until early September. See, story titled "Sen. Wyden Blocks FTC Nominees" in TLJ Daily E-Mail Alert No. 945, July 26, 2004.

Apple and RealNetworks Dispute Legality of Harmony Technology

7/30. RealNetworks announced a product which it has named "Harmony Technology". RealNetworks describes this as a digital rights management (DRM) translation system that will enable consumers to transfer purchased music to most manufacturers music devices. For example, it would enable someone who has purchased music recordings from Apple iTunes to transfer the recordings to devices other than Apple's iPod and iPod mini. Apple is upset.

RealNetworks stated in a release on July 26 that "Harmony Technology frees consumers from the limitation of being locked into a specific portable device when they buy digital music. Now consumers can build their library of downloads secure in the knowledge that it will play on virtually whatever device they choose."

It added that "With Harmony Technology, RealPlayer Music Store supports more than 70 secure portable media devices, including all 4 generations of the iPod and iPod mini, 14 products from Creative, 14 from Rio, 7 from RCA, 9 from palmOne, 18 from iRiver, and products from Dell, Gateway, and Samsung. Generally speaking, Harmony supports any device that uses the Apple FairPlay DRM, The Microsoft Windows Media Audio DRM, or the RealNetworks Helix DRM, giving RealPlayer Music Store support for more secure devices than any other music store on the Internet."

On July 29 Apple stated in a release that "We are stunned that RealNetworks has adopted the tactics and ethics of a hacker to break into the iPod(r), and we are investigating the implications of their actions under the DMCA and other laws. We strongly caution Real and their customers that when we update our iPod software from time to time it is highly likely that Real's Harmony technology will cease to work with current and future iPods."

The Digital Millennium Copyright Act (DMCA) contains, among other provisions, anti-circumvention provisions.

17 U.S.C. § 1201(a)(1)(A) of the Copyright Act, 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;"

On July 30, Real Networks responded in a release that "Harmony follows in a well-established tradition of fully legal, independently developed paths to achieve compatibility. There is ample and clear precedent for this activity, for instance the first IBM compatible PCs from Compaq. Harmony creates a way to lock content from Real's music store in a way that is compatible with the iPod, Windows Media DRM devices, and Helix DRM devices."

RealNetworks added that "Harmony technology does not remove or disable any digital rights management system. Apple has suggested that new laws such as the DMCA are relevant to this dispute. In fact, the DMCA is not designed to prevent the creation of new methods of locking content and explicitly allows the creation of interoperable software."

It argued that "Consumers, and not Apple, should be the ones choosing what music goes on their iPod."

People and Appointments

7/30. President Bush announced his intent to give a recess appointment to Jonathan Dudas (at right) to be Under Secretary of Commerce for Intellectual Property and Director of the U.S. Patent and Trademark Office (USPTO). He was named Deputy Under Secretary of Commerce for Intellectual Property and Deputy Director of the USPTO in 2002. When the former Director, James Rogan, left in January of 2004, Dudas became the acting Director. Bush nominated Dudas on March 22, 2004 to replace Rogan. The Senate Judiciary Committee held a hearing on his nomination on May 6, 2004. See, story titled "Senate Judiciary Committee Holds Hearing on Nomination of Dudas to Head the USPTO" in TLJ Daily E-Mail Alert No. 894, May 10, 2004. The SJC approved his nomination, without objection, on May 20. See, White House release.

7/30. Lawrence Tu was named SVP and General Counsel of Dell Inc. He replaces Thomas Green, who had been Dell's General Counsel since 1994. Tu was previously EVP and General Counsel of NBC Universal. See, Dell release.

More FCC News

7/30. The Federal Communications Commission (FCC) published a notice in the Federal Register that describes, and sets comment deadlines for, its notice of proposed rulemaking (NPRM) [11 pages in PDF] that proposes to require that television and radio broadcasters retain program recordings for a period of time for purposes of enforcing the statutory prohibition, codified at 18 U.S.C. § 1464, against obscene, indecent, or profane programming. The FCC adopted this item on June 21, 2004 and released it on July 7, 2004. This NPRM is FCC 04-145 MM Docket No. 04-232. See, story titled "FCC Proposes That Broadcasters Retain Recordings To Facilitate Enforcement of Smut Ban" in TLJ Daily E-Mail Alert No. 933, July 8, 2004. Comments are due by August 27, 2004. Reply comments are due by September 27, 2004. See, Federal Register, July 30, 2004, Vol. 69, No. 146, at Pages 45665 - 45668.

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7/30. The Federal Trade Commission (FTC) published a notice in the Federal Register that describes, and states the effective date for, its final rule amending its Telemarketing Sales Rule (TSR) by revising the fees charged to entities accessing the National Do Not Call Registry. The effective date is September 1, 2004. See, Federal Register, July 30, 2004, Vol. 69, No. 146, at Pages 45580 - 45586.

7/30. The General Accounting Office (GAO) released a report [56 pages in PDF] titled "Information Technology: DOD's Acquisition Policies and Guidance Need to Incorporate Additional Best Practices and Controls". The report finds that while the "DOD's revisions to its systems acquisition policies and guidance incorporate many best practices for acquiring business systems", the revised policies and guidance for acquisition of information technology "do not incorporate a number of other best practices, particularly those associated with acquiring commercial component-based business systems."

7/30. Kenneth Rice plead guilty in U.S. District Court (SDTex) to one count of securities fraud in violation of 15 U.S.C. §§ 78j(b) and 78(ff) and 15 C.F.R. §§ 240.10b-5 and 240.10b5-1. Rice was previously CEO of Enron Broadband Services (EBS), a unit the former Enron Corp. See, U.S. Department of Justice (DOJ) release.

3rd Circuit Rules in First Amendment Case

7/29. The U.S. Court of Appeals (3rdCir) issued its opinion [17 pages in PDF] in The Pitt News v. Pappert, a First Amendment challenge brought by a newspaper to a state statute that restrained certain speech -- paid advertising of alcoholic beverages. The Appeals Court held that statute is unconstitutional, but on narrow grounds specific to this restraint. See, full story.

FCC Issues NOI on Violent TV Programming

7/29. The Federal Communications Commission (FCC) released a Notice of Inquiry (NOI) [15 pages in PDF] that seeks public comment on "issues relating to the presentation of violent programming on television and its impact on children."

The FCC seek comments in response to the following questions. "How much violent programming is there, and what are the trends? What are the effects of viewing violent programming on children and other segments of the population? If particular portrayals of violence are more likely to cause deleterious effects than others, what specific kinds of programming should be the focus of any further public policymaking in this area? Should any further public policymaking address all violence or just excessive or gratuitous violence, and how should that be defined? Are the ratings system and the V-chip accomplishing their intended purpose, or are there additional mechanisms that might be developed to control exposure to media violence? Finally, are there legal constraints on either Congress or the Commission to regulate violent programming?"

FCC Commissioner Michael Copps wrote in a separate statement [PDF] that "Hundreds of studies over decades document the harmful impact that exposure to graphic and excessive media violence has on the physical and mental health of our children. The US Surgeon General, the American Academy of Pediatrics, the American Psychological Association, the American Medical Association, and virtually every other leading medical and scientific organization that has studied this issue have reached the same conclusion about the harmful impact of media violence. Yet, the Commission today seems to ignore this wealth of scientific data even going so far as to ask in this Notice whether there are benefits of exposure to televised violence by our children."

This NOI is FCC 04-175 in MB Docket No. 04-261. Public comments are due by September 15, 2004. Reply comments are due by October 15, 2004.

GAO Reports on DOD's Global Information Grid

7/29. The General Accounting Office (GAO) released a report [37 pages in PDF] titled "Defense Acquisitions: The Global Information Grid and Challenges Facing Its Implementation".

The Global Information Grid (GIG) is a planned, internet like, secure network and related information capabilities for Department of Defense (DOD) operations. However, it will be less dependent on ground based and fixed systems and equipment to transmit and route data, and more dependent on space based and mobile ad hoc systems. The GIG will cost at least $21 Billion through 2010. Deployment of core capabilities is scheduled for around 2010, while full deployment is projected for around 2020.

The GAO report states that "To achieve long-term dominance over evolving, sophisticated threats, the Department of Defense (DOD) is seeking to make transformational improvements to military capabilities. The transformation involves achieving information and decision superiority over adversaries, striking with precision, deploying and sustaining military power rapidly, and dominating the “battlespace” on land, at sea, in the air, and in space. DOD has said that a successful transformation hinges largely on disparate weapon systems sharing information seamlessly ..."

The report continues that "A primary difference between the GIG initiative and previous efforts is that it focuses on promoting interoperability by building an Internet-like network for DOD related operations based on common standards and protocols rather than on trying to establish interoperability after individual systems and platforms have been fielded."

The House Armed Services Committee's Subcommittee on Terrorism, Unconventional Threats, and Capabilities requested this report to obtain a summary of the GIG, and to identify challenges facing the GIG.

The report finds that "The most critical challenge ahead for DOD is making the GIG a reality. While DOD has taken steps to define its vision and objectives for the GIG on paper and in policy and is beginning to make a substantial investment in the GIG as well as in systems that will be heavily dependent on the GIG, it is not fully known how DOD will meet these objectives."

See also, DOD Directive No. 8100.1, dated September 19, 2002, and titled "Global Information Grid (GIG) Overarching Policy", and the DOD's GIG website.

More News

7/29. The Office of the U.S. Trade Representative (USTR) published a notice in the Federal Register announcing that the interagency Trade Policy Staff Committee (TPSC) will hold a public hearing on on September 23, 2004 to assist the USTR in preparing its annual report to the Congress on the Peoples Republic of China's compliance with the commitments that it made in connection with its accession to the World Trade Organization (WTO). The USTR seeks comments on, among other issues, intellectual property rights and intellectual property enforcement. Persons wishing to testify orally at the hearing must provide written notification and a copy of their written testimony by 12:00 NOON on September 10, 2004. Written comments are due by 12:00 NOON on September 15, 2004. See, Federal Register, July 29, 2004, Vol. 69, No. 145, at Pages 45369 - 45370.

7/29. Computer Associates International, Inc. announced that its Board of Directors has nominated Laura Unger, a former Commissioner of the Securities and Exchange Commission (SEC), to be an independent Director. She will replace Alex Serge Vieux. Unger worked for the Senate Banking Committee before her appointment to the SEC. See, CAI release.

7/29. The Federal Trade Commission (FTC) wrote a letter [PDF] to Privo, Inc. informing Privo that the FTC has approved its application [1.9 MB in PDF] "to serve as a safe harbor program for purposes of implementing the protections of the Children's Online Privacy Protection Rule", which is codified at 16 C.F.R. Part 312. See also, FTC release.

FCC Announces Agenda for August 4 Meeting

7/28. The Federal Communications Commission (FCC) released the agenda for its meeting of Wednesday, August 4, 2004. The agenda includes a Notice of Proposed Rulemaking (NPRM) and Declaratory Ruling (DR) regarding the Department of Justice's (DOJ) request that the FCC administratively amend the CALEA statute to cover information services, such as VOIP. The agenda also includes consideration of various applications for certification of digital output protection technologies and recording methods under the FCC's broadcast flag rule.

The agenda also includes an order regarding wireless spam, a Report and Order (R&O) regarding network outage reporting, a R&O regarding DTV conversion, and an item on fraud in the FCC's e-rate subsidy program.

The agenda also includes a Notice of Inquiry on the Emergency Alert System, and an order on reconsideration regarding BellSouth's and SureWest's petition regarding the triennial review order. In addition, the meeting will include a report presentation by the FCC's Homeland Security Policy Council.

Expansion of CALEA to Cover Information Services. The FCC will consider a Notice of Proposed Rulemaking (NPRM) and Declaratory Ruling (DR) regarding the Department of Justice's (DOJ) March 10, 2004 petition for rulemaking [83 pages in PDF] regarding requiring broadband service providers, voice over internet protocol (VOIP) application providers, and others, to design and modify their networks, hardware, software, and equipment in a manner that enables the DOJ and other government agencies to more conveniently intercept VOIP and other internet based communications.

The DOJ seeks the ability to access internet based communications the way it has long been able to wiretap the old public switched telephone network (PSTN). The DOJ has authority, which it regularly uses, to intercept internet communications. The USA PATRIOT expanded and clarified this authority. This proceeding is about forcing the information technology industry to design its products so that they are more susceptible to easy government interception.

The DOJ has petitioned the FCC to interpret and implement the Communications Assistance for Law Enforcement Act (CALEA), which is codified at 47 U.S.C. § 1001, et seq. The CALEA requires that a "telecommunications carrier" must design its network to facilitate wiretapping. However, it only applies to a "telecommunications carrier". The DOJ asks that the FCC, by administrative fiat, expand the scope of the statute to apply to information services, such as broadband internet access services, and VOIP applications that use broadband internet connections. This is the FCC's RM 10865.

See also, story titled "Summary of DOJ Petition for Rulemaking to Expand the CALEA to Cover Information Services" in TLJ Daily E-Mail Alert No. 873, April 9, 2004.

Broadcast Flag Certifications. The FCC will consider an Order responding to various applications for certification of digital output protection technologies and recording methods under the FCC's broadcast flag rule. This proceeding is titled "Digital Output Protection Technologies and Recording Method Certifications". The proceeding numbers are MB Docket Nos. 04-55, 04-56, 04-57, 04-58, 04-59, 04-60, 04-61, 04-62, 04-63, 04-64, 04-65, 04-66, and 04-68.

On November 4, 2003, the FCC adopted and released its Report and Order and Further Notice of Proposed Rulemaking [72 pages in PDF] in its proceeding titled "In the Matter of Digital Broadcast Content Protection". This item is FCC 03-273 in MB Docket No. 02-230.

This item promulgated rules that include a broadcast flag mandate. A broadcast flag is digital code embedded into a digital broadcasting stream. It signals digital television (DTV) reception equipment to limit redistribution. For it to be effective, DTV equipment must give effect to a broadcast flag. Hence, this report and order contains technology mandates for equipment manufacturers. See, story titled "FCC Releases Broadcast Flag Rule" in TLJ Daily E-Mail Alert No. 772, November 5, 2003.

Subsequently, equipment makers submitted various applications to the FCC, pursuant to the interim approval process for digital output protection technologies and recording methods established by the broadcast flag rule, for certification of their technologies. See, for example, application [45 pages in PDF] of TiVo in MB Docket No. 04-63.

CAN SPAM Act and Wireless Devices. The FCC will consider an Order implementing the CAN-SPAM Act (Controlling the Assault of Non-Solicited Pormography and Marketing Act of 2003. The Congress passed the S 877, the CAN-SPAM Act late last year. President Bush signed the bill on December 16, 2003. It is Public Law No. 108-187.

The CAN-SPAM Act give primary rulemaking authority to the Federal Trade Commission (FTC). However, the Act also gives the FCC authority with respect to "unwanted mobile service commercial messages".

The Act directs the FCC to write rules that "provide subscribers to commercial mobile services the ability to avoid receiving mobile service commercial messages unless the subscriber has provided express prior authorization to the sender", and "allow recipients of mobile service commercial messages to indicate electronically a desire not to receive future mobile service commercial messages from the sender".

This Order is in the proceeding titled "Rules and Regulations Implementing the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003" and numbered CG Docket No. 04-53, and in the proceeding titled "Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991" and numbered CG Docket No. 02-278.

See, story titled "FCC Announces Rulemaking on Wireless Provisions of CAN-SPAM Act" TLJ Daily E-Mail Alert No. 855, March 15, 2004.

Network Outage Reporting RO. The FCC will consider a Report and Order regarding the reporting of service disruptions by telecommunications services providers. On February 12, 2004, the FCC adopted a notice of proposed rulemaking (NPRM) regarding network outage reporting. This item is FCC 04-30 in ET Docket No. 04-35. The FCC issued a release [PDF] that states that it "proposes to require wireless, wireline, cable, and satellite telecommunications providers to report information electronically to the Commission about significant disruptions to their communications systems."

Conversion to DTV. The FCC will consider a Report and Order regarding the conversion to digital television. This proceeding is titled "Second Periodic Review of the Commission’s Rules and Policies Affecting the Conversion to Digital Television". It is MB Docket No. 03-15 and RM-9832.

The FCC adopted its Notice of Proposed Rulemaking (NPRM) [MS Word] on January 15, 2004, and released it on January 27. See also, story titled "FCC Announces Digital TV NPRM" in TLJ Daily E-Mail Alert No. 592, January 28, 2003.

E-Rate Fraud. The FCC will consider a Fifth Report and Order and Order regarding measures to protect against waste, fraud and abuse in the administration of the schools and libraries program, which is also known as the e-rate program. This is CC Docket No. 02-6.

Emergency Alert System. The FCC will consider a Notice of Inquiry (NOI) regarding the examination of the Emergency Alert System as an effective mechanism for warning the American public during an emergency.

BellSouth/SureWest Petition. The FCC will consider an Order on Reconsideration that addresses, in part, the petitions filed by BellSouth and SureWest regarding the FCC's Triennial Review Order (TRO) regarding the unbundling obligations of incumbent local exchange carriers (ILECs).

Homeland Security Presentation. The FCC's Homeland Security Policy Council will present a report regarding the FCC's regulatory, outreach, and partnership initiatives in support of homeland security.

The meeting will be held on Wednesday, August 4, 2004 at 9:30 AM. It will be held in the FCC's Commission Meeting Room (Room No. TW-C305), at 445 12th Street, SW. The meeting is open to the public, and will be webcast by the FCC.

The FCC does not always commence its meetings at the scheduled time. The FCC does not always consider all of the items on its agenda. The above summary does not list the items in the same order in which they will be considered by the FCC.

District Court Enters Final Order in FTC Case Against Defendants Who Exploited Microsoft Messenger to Display Pop Up Ads

7/28. The U.S. District Court (DMd) approved a Stipulated Final Order [15 pages in PDF] in FTC v. D Squared Solutions LLC, Dinesh Dhingra and Jeffrey Davis, which orders the defendants to cease sending pop up ads to computers using Windows Messenger. See, FTC release.

The Federal Trade Commission (FTC) filed a complaint [11 pages in PDF] last fall alleging unfair trade practices in violation of Section 5 of the Federal Trade Commission Act (FTCA) in connection with the exploitation of the Microsoft Windows Messenger Service to send to computers frequent and unwarranted pop up ads that offered for sale software that stops the ads.

See, story titled "FTC Files Complaint Against Company Exploiting Microsoft Messenger to Display Pop Up Ads" and "FTC Action Creates Uncertainty Regarding Application of FTCA to Internet Communications and Advertising" in TLJ Daily E-Mail Alert No. 774, November 7, 2003.

The District Court issued a Temporary Restraining Order and Order to Show Cause [12 pages in PDF] on October 30, 2003. The present order permanently bars the defendants from sending Windows Messenger Service pop-up advertisements, selling Windows Messenger Service pop-up blocking software, and selling Windows Messenger Service pop-up sending software.

The order also contains provisions pertaining to compliance monitoring, compliance reporting, and record keeping.

However, the defendants did not admit any wrongdoing or liability.

Moreover, the order imposes no fine. It does not require payment of restitution to persons who gave money to defendants. Nor does it require disgorgement of ill gotten gains. The order merely directs the defendants to stop doing what they had been doing.

The FTC and defendants agreed to settle this case early. There are no judicial opinions that might serve as precedent on the application of the FTC Act to unfair business practices online. The final order contains no conclusions of law regarding application of the FTC Act to online business activity.

Section 5 of the FTC Act, which is codified at 5 U.S.C. § 45(a), is broad and vague statute. The provides that "Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful." It does not reference any online business practices. Moreover, the FTC has not promulgated any regulations in this area.

This settlement has not brought any clarity to this area of law. See also, story titled "FTC Action Creates Uncertainty Regarding Application of FTCA to Internet Communications and Advertising" in TLJ Daily E-Mail Alert No. 774, November 7, 2003.

This case is FTC v. D Squared Solutions LLC, Dinesh Dhingra and Jeffrey Davis, U.S. District Court for the District of Maryland, Baltimore Division, D.C. No. AMD 03 CV 3108, Judge Andre Davis presiding.

4th Circuit Addresses Filed Rate Doctrine and Consumer Protection Statutes

7/28. The U.S. Court of Appeals (4thCir) issued its split opinion [20 pages in PDF] in Bryan v. BellSouth, a case regarding federal question jurisdiction in which the Appeals Court addressed the filed rate doctrine and universal service taxes.

Bryan filed a complaint in state court against BellSouth alleging, among other things, violation of a state consumer protection law in connection with BellSouth's line item billing of FCC universal services charges. The District Court, and the dissenting Judge on appeal, argued that this case arose under state law, and that there is therefore no federal question jurisdiction. The majority on appeal held that pursuant to the filed rate doctrine federal question jurisdiction exists. It reversed and sent the case back to the U.S. District Court.

Coincidentally, on July 27, 2004, the U.S. Court of Appeals (9thCir) issued its opinion [22 pages in PDF] in Verizon v. Covad, another case regarding the filed rate doctrine. See, story titled "9th Circuit Rules in Verizon v. Covad" in TLJ Daily E-Mail Alert No. 947, July 28, 2004.

Filed Rate Doctrine. The filed rate doctrine requires that common carriers and their customers adhere to tariffs filed and approved by appropriate regulatory agencies. It is a 19th Century principle that was developed to address the practices of railroad monopolies, such as price discrimination. It was based upon the assumption the market competition and the law of contract failed to operate effectively in this context. In 1934, principles for regulating railroad common carriers, including the filed rate doctrine, were transplanted into the Communications Act for the purpose of regulating telecommunications common carriers.

The 4th Circuit majority opinion, and the 9th Circuit opinion, offered different descriptions of the filed rate doctrine. The 4th Circuit opinion states that "The doctrine's purpose is twofold: to prevent discrimination among consumers and to preserve the rate-making authority of federal agencies." The Court continued that "authorizing a court to award damages that would effectively impose a rate different from that dictated by the tariff would usurp the FCC's authority to determine what rate is reasonable."

In contrast, Judge Noonan, writing for a unanimous panel of the 9th Circuit, wrote that "the filed rate doctrine now functions in the telecommunications field as an anomaly. It is a relict, open to repudiation by the FCC."

Judge Noonan regretted that there remains a statute that prevents the Court from ignoring the doctrine.

Universal Service. Pursuant to Federal Communications Commission (FCC) rules, which implement 47 U.S.C. § 254, BellSouth collects universal service fund revenues from its customers by placing a line item charge on monthly bills. Universal service includes a number of FCC administered subsidy programs that are funded by taxes collected by interstate telecommunications carriers. One of these programs is known as the schools and libraries program, and as the e-rate.

There was substantial debate in the House and Senate, mostly in 1998, regarding legislation that would have required phone companies to provide further information about the e-rate charges on monthly bills. Proposed legislation would have required phone companies to disclose that customers were being billed to subsidize a federal program. Some of the supporters were likely motivated by a desire to undermine public support for the e-rate program, while some of the opponents were likely motivated by a desire to prevent an undermining of support for the program. See for example, TLJ web page titled "S 1618, S 771, HR 3888, and HR 4018: Anti-Slamming, Anti-Spamming, and Truth in Billing Bills". However, in the end, neither the Congress, nor the FCC, required phone companies to disclose information about the e-rate charges.

District Court. In the 4th Circuit case, the plaintiff (Tomi Bryan) filed a complaint in state court in North Carolina alleging that the defendant (BellSouth) violated a state consumer protection statute in its billing, collection and disposal of universal service charges. She sought class action status.

BellSouth removed the case to the U.S. District Court (MDNC). At issue before the Appeals Court was whether this case arose under federal law (filed tariff), or state law (state unfair trade practices statute).

Nominally, this case is about subject matter jurisdiction of federal courts, based upon claims arising under federal law. However, in order to analyze the jurisdictional issue, the District Court, as well as the Court of Appeals, delved deeply into the nature of, and relationship between, the filed rate doctrine, and state consumer protection laws.

Bryan alleged that the amounts that BellSouth billed customers exceeded the amounts that BellSouth transferred to the FCC, that BellSouth failed to disclose certain information pertaining to the line item charges required by the North Carolina's unfair trade practices law, and that the BellSouth's line item charges were misleading. She plead violation of the North Carolina unfair trade practices law (based upon BellSouth's failure to disclose that the charges were excessive, how the charges were calculated, and that the charges also covered administrative expenses, costs, and profits), unjust enrichment (based upon excessive charges), and breach of covenant of good faith and fair dealing (for excessive charges). These are all state law claims.

BellSouth argued that all of the claims are barred by the filed-rate doctrine because they challenged BellSouth's filed tariff or, in the alternative, that they should be heard first by the FCC under the doctrine of primary jurisdiction.

The District Court dismissed the unjust enrichment and breach of covenant of good faith and fair dealing counts. The District Court also remanded to the state court the state unfair trade practices count, based upon its conclusion that the District Court lacked federal question jurisdiction. BellSouth appealed this remand.

Appeals Court. The Court of Appeals vacated and remanded the case to the District Court. Judge Robert King wrote the opinion of the Court, in which Judge Roger Gregory joined. Judge Michael Luttig wrote a thrashing dissent.

The Appeals Court majority held that the North Carolina unfair trade practices claim actually arises under federal law. The federal law is this case is the filed tariff.

While Bryan did not appeal the dismissals of the unjust enrichment and breach of covenant of good faith and fair dealing counts, the Appeals Court wrote, in dicta, that "Because only the FCC may decide what charge is lawful, it is beyond dispute that the court was correct to exercise jurisdiction and dismiss Bryan’s claims complaining that the FUSC was excessive."

The Appeals Court then addressed the main issue, which it summarized as whether the unfair trade practices count "of the Complaint would require the court to determine a reasonable rate for the" federal universal service charge "thereby presenting a substantial question of federal law and contravening the filed-rate doctrine."

It also stated the test as follows: whether the state count "effectively challenges the reasonableness of BellSouth's filed rate, giving rise to federal question jurisdiction and requiring dismissal pursuant to the filed-rate doctrine."

The Court reasoned that the complaint "nowhere purports to seek any form of damages other than a refund of some portion of the" line item universal services charge. Hence, "the only plausible reading of the Complaint is that" it "seeks a refund of a portion of the" line item universal service charge.

The Court concluded that because the amount of the line item charge is determinatively set forth in BellSouth's filed tariff, and because this tariff carries the force of federal law, "an action seeking to alter that rate presents a federal question". It held that the District Court erred in remanding the claim to the state court, and that the "claim must be dismissed pursuant to the filed-rate doctrine".

Luttig Dissent. Judge Luttig clashed sharply with the majority on jurisdiction.

Luttig gave a lengthy analysis and application of the Supreme Court precedent on arising under jurisdiction. In the end, he concluded that "the majority's analysis ... fails to heed even the most basic tenets of the Supreme Court's or this court's direction on the subject, adopting a standard drawn from a possible federal defense to plaintiff's claim" rather than from the plaintiff's right to relief.

He wrote that it a claim arising under federal law in only two circumstances. First, a claim arises under federal law where there is complete preemption, which exists when federal law so completely sweeps away state law that any action brought under state law is transformed into a federal action. Second, a claim arises under federal law where a well-pleaded complaint establishes that the plaintiff's right to relief under state law necessarily depends on resolution of a substantial question of federal law.

Luttig concluded that neither of these two circumstances is present in this case. Rather, he wrote that the majority opinion "adopts instead the different standard of whether a complaint ``effectively challenges´´ a filed rate".

Judge Luttig continued that "It is one thing to provide that ``arising under´´ jurisdiction exists in that narrow class of cases where the plaintiff's right to relief necessarily depends on the resolution of a substantial federal question or Congress has preempted state court jurisdiction. It is quite another to provide that jurisdiction is present so long as the plaintiff’s request for relief constitutes an ``effective challenge´´ to the rate set by federal law. Indeed, as this case demonstrates, a claim can easily be characterized as an ``effective challenge" to rates set in a tariff filed with a federal agency, even though the adjudication of the claim itself would require the court to decide no federal issues whatsoever."

Luttig added that BellSouth can raise the filed rate doctrine as a defense in a state court action. Of course, this is a class action lawsuit. It was likely brought in state court because the plaintiff's counsel anticipated that the state court would provide a forum more favorable for the plaintiffs. Also, federal judges are more likely to to give more weight to the federal filed rate doctrine than state court judges, and North Carolina state court judges are likely to give more weight to North Carolina consumer protection laws than federal judges.

Luttig's argument, if it were law, would weaken the impact of the filed rate doctrine, by slightly limiting the ability of phone companies to hide behind the filed rate doctrine to avoid liability for state fraud, breach of contract or violation of consumer protection laws. Nevertheless, he did not question the merits of the filed rate doctrine in an age when competitive markets and consumer protection laws are increasingly replacing price regulation by government agencies.

In contrast, in the 9th Circuit's opinion in roundly condemned the filed rate doctrine.

Judge Noonan would like to see the Congress to pound a wooden stake through the heart of the filed rate doctrine, while Judge Luttig merely wants the judiciary to give trial lawyers the ability to wield the cross of state jurisdiction to ward off some of the filed rate doctrine maneuvers of phone company lawyers in consumer protection cases.

Related Cases. On January 17, 2002, the U.S. Court of Appeals (9thCir) issued its opinion [12 pages in PDF] in Brown v. MCI WorldCom. William Brown filed a class action complaint in the U.S. District Court (CDCal) against MCI WorldCom alleging overcharging for phone services. The District Court dismissed his complaint, holding that his suit was barred by the filed rate doctrine. The Appeals Court reversed, on the grounds that Brown's complaint only sought to enforce an existing tariff approved by the FCC. This case is William Brown v. MCI WorldCom Network Services, Inc., No. 00-56171, an appeal from the U.S. District Court for the Central District of California, Judge Gary Feess presiding, D.C. No. CV-99-11522-GAF. This case is also reported at 277 F.3d 1166.

See also, California Court of Appeal opinion in Lovejoy v. AT&T, and story titled "California Court Rejects Filed Rate Doctrine Defense in Slamming Case" in TLJ Daily E-Mail Alert No. 262, September 6, 2001

DOJ Announces Annual Awards

7/28. The Department of Justice (DOJ) held a ceremony at Constitution Hall in Washington DC at which it announced its annual Attorney General's Awards. Some of the many awards were related to information technology and communications.

The DOJ gave an award titled the "John Marshall Award for Providing Legal Advice" to a group of lawyers in the Antitrust Division. The DOJ wrote in a release that "These recipients, through their leadership, dedication, and exceptionally detailed and sound advice to the Federal Communications Commission, have played a crucial role in helping to develop an environment conducive to the development of competition as envisioned by Congress in passing the Telecommunications Act of 1996."

The DOJ listed the winners of this award: "From the Telecommunications and Media Section -- Nancy M. Goodman, Chief, Laury E. Bobbish, Supervisory Trial Attorney, Luin P. Fitch, Jr., Carl Willner, Brent E. Marshall, and Lauren J. Fishbein, Trial Attorneys; from the Legal Policy Section -- Frances E. Marshall, Attorney Advisor; and from the Foreign Commerce Section -- Cynthia Lewis Lagdameo, Trial Attorney."

The DOJ also gave an award titled "Attorney General's Award for Excellence in Information Technology" to a large group of people who work with information technology at the DOJ. The DOJ stated in a release that this award "recognizes achievements in applying information technology to improve operations and productivity, reduce or avoid costs, and solve problems". The DOJ added that the winners "upgraded technological infrastructure and business systems". The winners includes David Zeppieri, the Chief Information Officer.

Attorney General John Ashcroft was on hand to present awards. Also, on June 9, 2004 he testified before the Senate Judiciary Committee. One of the issues that he addressed in his prepared testimony was information technology at the DOJ.

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

For example, he wrote that the DOJ has "Published the first Department Information Technology Strategic Plan in 2002. This means we turned fragmented, stand-alone plans into a single, cohesive Department-wide strategy for effective technology deployment in the future." He also wrote that the DOJ has "Begun designing a single enterprise architecture. This means we will have a technology plan that promotes communication interoperability, and information sharing, with core business functions."

The DOJ also gave many awards to teams of lawyers and others who handled complex investigations and prosecutions of terrorists, drug dealers, criminal gangs, and assorted other bad guys. In addition, the DOJ gave an award titled the "John Marshall Award for Trial of Litigation" to the team that handled the case McConnell v. Federal Election Commission.

The case was a constitutional challenge to the McCain Feingold political campaign regulation bill. The name plaintiff was Sen. Mitch McConnell (R-KY).

Sen. McConnell is also a member of the Senate Appropriation Committee, and its Subcommittee on Commerce, Justice, State and the Judiciary. That is, he is involved in writing the DOJ's annual appropriation.

Chasser to Leave USPTO

7/28. Anne Chasser announced that she will leave the U.S. Patent and Trademark Office (USPTO) on September 1, 2004. She is the Commissioner for Trademarks. She went to work at the USPTO as special advisor in September 1999. She was confirmed by the U.S. Senate as Assistant Commissioner for Trademarks in November 1999. In March 2000 she was appointed Commissioner for Trademarks. Before working at the USPTO she was Director of Trademarks and Licensing Services at Ohio State University. See, USPTO release and biography.

Before former President Clinton nominated her to be Assistant Commissioner for Trademarks, Chasser (at right) had testified before the Senate Judiciary Committee and House Judiciary Committee's Subcommittee on Courts and Intellectual Property, in her capacity as President of the International Trademark Association, urging the Congress to pass legislation curbing the practice of cyber squatting. The 106th Congress passed the Anticybersquatting Consumer Protection Act (ACPA), which is now codified at 15 U.S.C. § 1125(d). See, testimony of July 22, 1999 and testimony of July 28, 1999.

During her tenure, the USPTO expanded its telework program for trademark examiners, and its Trademark Electronic Application System (TEAS).

Court Opinions

7/28. The U.S. Court of Appeals (3rdCir) issued its opinion [PDF] in Lolillard v. Bison Food, a case regarding the availability of ex parte orders from the U.S. District Court directing the seizure from retailers of allegedly counterfeit goods under the Trademark Counterfeiting Act of 1984, which is codified in relevant part at 15 U.S.C. § 1116(d). The District Court refused to issue ex parte seizure orders. The appeals Court affirmed. This case is Lolillard Tobacco Company v. Bison Food Corp., et al., App. Ct. No. 03-3151, and consolidated cases, appeals from the U.S. District Court for the District of New Jersey.

7/28. The U.S. Court of Appeals (9thCir) issued its opinion [11 pages in PDF] in Cellular 101 v. Channel Communications, a Chapter 11 bankruptcy case filed by Cellular 101. At issue in this appeal is Channel Communications' administrative expense claim, filed pursuant to 11 U.S.C. § 503(b), based upon Cellular 101's agency agreement with Channel Communications and John Price that afforded it the right of first refusal if Price sold his stock or substantially all of Channel Communications' assets. The Bankruptcy Court granted the administrative expense claim. This District Court affirmed. In this opinion, the Appeals Court affirmed. This case is Cellular 101, Inc. v. Channel Communications, Inc. and John Price, U.S. Court of Appeals for the 9th Circuit, App. Ct. No. 02-56772, an appeal from the U.S. District Court for the Central District of California, D.C. No. CV-01-00715-AHS, Judge Alicemarie Stotler presiding. Judge Melvin Brunetti wrote the opinion of the Court of Appeals, in which Judges Betty Fletcher and Harry Pregerson joined.

More News

7/28. SBC announced that it filed a complaint in Superior Court for the state of California against the City of Stockton alleging that its ordinance assessing a tax on telephone customers to fund an E-911 program is illegal. See, SBC release.

People and Appointments

7/28. Robert Acker was named VP of the RealPlayer Business at RealNetworks, Inc. He was a founding member of the XM Satellite Radio team. Aref Matin was named VP for Carrier and System Software. He previously worked for Juniper Networks and Siemens. See, release.

Dallas Computer Guys Indicted for Supporting HAMAS

7/27. Attorney General John Ashcroft and other government officials held a press conference to announce the unsealing of an indictment [39 pages in PDF] returned by a grand jury of the U.S. District Court (NDTex) against an organization and six individuals, alleging that they provided material support to HAMAS, which is on the State Department's list of designated foreign terrorist organizations. See, DOJ release and USAO release.

This is one in a series of related Department of Justice (DOJ) criminal indictments and Department of Commerce (DOC) proceedings involving the Elashi family and their Dallas area computer business, Infocom.

The present indictment states that "In or around 1988, The Holy Land Foundation For Relief and Development ("HLF") was created by, among others, the defendants Shukri Abu-Baker, Mohammad El-Mezain and Ghassan Elashi, to provide financial and material support to HAMAS." It continues that "In 1992, the HLF relocated to Richardson, Texas", which is a suburb of Dallas.

The indictment states that the HLF, which is a named defendant, "sponsored orphans and needy families in the West Bank and Gaza. While the program was mantled with a benevolent appearance, the HLF specifically sought orphans and families whose relatives had died or were jailed as a result of furthering HAMAS' violent campaign, including suicide bombings."

One of the individual defendants is Ghassan Elashi. Elashi family members, including Ghassan, have been involved in computer equipment sales companies in the Dallas, Texas area. They have also been the object of many actions by the DOC's Bureau of Industry and Security (BIS/BXA), which regulates the export of computers, and the DOJ, both for their export of computer equipment to the Middle East, and for their association with terrorists.

See, for example, story titled "Indictment Alleges Dallas Computer Business Was Funded by Middle Eastern Terrorist" in TLJ Daily E-Mail Alert No. 571, December 19, 2002.

A December 2002 indictment [PDF] states that "Infocom was and is engaged in the business of selling computer systems, networking, telecommunications and Internet services. The defendant Infocom also exported computers and computer components to customers primarily located in the Middle East."

The present indictment states that Elashi "was the original Treasurer and became the Chairman of the Board of the HLF in 1999." It further states that he "is related by marriage to HAMAS Deputy Political Bureau Chief and Specially Designated Terrorist Mousa Abu Marzook. The defendant Ghassan Elashi was an organizer and leader of the criminal activity involving his co-defendants' activities through the defendant HLF."

Another defendant, Shukri Abu-Baker, was involved in the same Dallas area computer business as the Elashis. The indictment states that he "was the President, Secretary and Chief Executive Officer of the HLF".

The 42 count indictment alleges one count of conspiracy to provide material support to a foreign terrorist organization in violation of 18 U.S.C. § 2339B(a)(1), and 11 counts of providing material support to a foreign terrorist organization in violation of 18 U.S.C. § 2339B(a)(1). These charges are new.

Some of the other counts of the complaint are similar to charges brought in earlier indictments. The indictment also alleges conspiracy to deal in the property of a specially designated terrorist in violation of 50 U.S.C. §§ 1701-1706, dealing in the property of a specially designated terrorist in violation of 50 U.S.C. §§ 1701-1706), conspiracy to commit money laundering in violation of 18 U.S.C. § 1956(h), and money laundering in violation of 18 U.S.C. § 1956(a)(2)(A).

Finally, the indictment alleges conspiracy to impede and impair the Internal Revenue Service and to file false return of organization exempt from income tax in violation of 18 U.S.C. § 371, and filing false returns of organization exempt from income tax in violation of 26 U.S.C. § 7206(1).

The other defendants named in the indictment are Haitham Maghawri, Akram Mishal, and Mufid Abdulgader.

9th Circuit Rules in Verizon v. Covad

7/27. The U.S. Court of Appeals (9thCir) issued its opinion [22 pages in PDF] in Verizon v. Covad, a case regarding the filed rate doctrine. The Appeals Court affirmed a District Court holding that the filed rate doctrine prevents an ILEC from suing a CLEC under theories of state law misrepresentation and unfair business practices in a billing dispute arising out of interpretation of an interconnection agreement. However, the Appeals Court added that the parties to an interconnection agreement can sue to enforce what they have filed.

The filed rate doctrine is a 19th Century principle that was developed to address the practices of railroad monopolies, such as price discrimination. It was based upon the assumption the market competition and the law of contract failed to operate effectively in this context. Much later, principles for regulating railroad common carriers, including the filed rate doctrine, were transplanted into the Communications Act for the purpose of regulating telecommunications common carriers.

The doctrine requires that common carriers and their customers adhere to tariffs filed and approved by appropriate regulatory agencies. For the purposes of the present case, the filed tariffs are the interconnection agreements negotiated by the incumbent phone companies and their competitors, and filed with the state regulatory agencies.

While the doctrine limited the perceived unfair practices of railroads, it is also now used by phone companies as a shield to insulate them from lawsuits by customers and consumers.

The Telecommunications Act of 1996 gave the Federal Communications Commission (FCC) broad authority to forbear from regulation in certain situations. See, 47 U.S.C. § 160. However, the 1996 Act also excluded 47 U.S.C. § 251(c) from FCC forbearance authority.

Verizon Delaware and other Verizon subsidiaries are the plaintiffs. They are incumbent local exchange carriers (ILECs), and therefore have obligations under 47 U.S.C. § 251 to lease access to their networks to competitors, such as Covad, a defendant in this case, and to enter into interconnection agreements that set forth rates, terms and conditions. Verizon and Covad entered into and filed interconnection agreements.

They dispute the billing for trouble shooting in connection with customer complaints about connections. Verizon argues that Covad issued false trouble shooting tickets to Verizon. For example, it alleges that Covad signed customers up for service, even where DSL service was not yet available, and then sent trouble shooting tickets to Verizon, and that it sent trouble shooting tickets to Verizon for connection problems arising from Covad's equipment.

Verizon filed a complaint in U.S. District Court (NDCal) against Covad alleging California state law claims for intentional misrepresentation, negligent misrepresentation, and unfair competition in violation of Cal. Bus. & Prof. Code § 17200. Covad raised the filed rate doctrine, and alleged three counterclaims -- intentional misrepresentation, negligent misrepresentation, and unfair competition.

The District Court granted summary judgment to Covad on Verizon's state law claims, pursuant to the filed rate doctrine. It also dismissed Covad's counterclaims. The District Court opinion is reported at 232 F. Supp. 2d 1066.

Verizon appealed, and Covad cross-appealed. The Appeals Court affirmed in part, reversed in part, and remanded.

Judge John Noonan wrote the opinion of the Court, in which Judges Stephen Reinhardt and Richard Paez joined. The Court held that the filed rate doctrine prevents the recovery of any charge not specified in the relevant tariff -- in this case, the interconnection agreement. But, the Court also held that this does not prevent Verizon from suing to enforce what it has filed.

Judge Noonan had no kind words for the filed rate doctrine, but wrote that he was constrained by Congressional statutes.

47 U.S.C. § 160(a) provides that "the Commission shall forbear from applying any regulation or any provision of this chapter to a telecommunications carrier or telecommunications service, or class of telecommunications carriers or telecommunications services, in any or some of its or their geographic markets, if the Commission determines that (1) enforcement of such regulation or provision is not necessary to ensure that the charges, practices, classifications, or regulations by, for, or in connection with that telecommunications carrier or telecommunications service are just and reasonable and are not unjustly or unreasonably discriminatory; (2) enforcement of such regulation or provision is not necessary for the protection of consumers; and (3) forbearance from applying such provision or regulation is consistent with the public interest."

But, 47 U.S.C. § 160(d) provides that "Except as provided in section 251(f) of this title, the Commission may not forbear from applying the requirements of section 251(c) or 271 of this title under subsection (a) of this section until it determines that those requirements have been fully implemented."

Judge Noonan wrote that "The filed rate doctrine is a tough and durable barrier to any effort by a regulated carrier to collect more for its services than what is set by the public, filed tariff."

Nonetheless, he wrote, "the filed rate doctrine now functions in the telecommunications field as an anomaly. It is a relict, open to repudiation by the FCC. The tariffs that are filed are not filed federally but with state agencies. Should not the law of the particular state govern each IA’s enforcement? It is tempting to believe that, in Congress’s new perspective, a suit for fraud of the kind before us should be allowed to proceed."

Nevertheless, he concluded that the Court is constrained by the language of Section 160. "With the creation of the exception to forbearance and to the rule of contract, the market and state remedies, Congress preserved a niche where the filed rate doctrine appears to remain alive. The last phrase of the statutory exception -- ``until it determines that those requirements have been fully implemented´´ -- is obscure. But we need not explore its meaning. No one contends that the FCC has made such a determination. Therefore, there is no forbearance."

The Court also ruled on dismissal of Covad's counterclaims.

This case is Verizon Delaware, Inc. et al. v. Covad Communications Company and Dieca Communications, Inc., U.S. Court of Appeals for the 9th Circuit, App. Ct. Nos. 03-15453 and 03-15557, appeals from the U.S. District Court for the Northern District of California, D.C. Nos. CV-01-20524-JF and CV-01-20524-JF, Judge Jeremy Fogel presiding.

GAO Reports on Critical Infrastructure Information Sharing

7/27. The General Accounting Office (GAO), an arm of the Congress, released a report [69 pages in PDF] titled "Critical Infrastructure Protection: Improving Information Sharing with Infrastructure Sectors".

The report states that "Federal policy and law, including the Homeland Security Act of 2002, call for critical infrastructure protection (CIP) activities intended to enhance the security of the cyber and physical, public, and private infrastructures that are essential to national security, national economic security, or national public health and safety. Federal policy, evolving since the mid-1990s, has encouraged the voluntary creation of information sharing and analysis centers (ISAC) to facilitate the private sector's participation in CIP by serving as mechanisms for gathering and analyzing information and sharing it among the infrastructure sectors and between the private sector and government."

The report addresses many different types of infrastructure, including cyber and telecommunications. The report also addresses information sharing by the private sector, and by government agencies.

One of the more controversial issues leading up to the passage of the Homeland Security Act was whether, and if so how, to create a new Freedom of Information Act (FOIA) exemption for sharing critical infrastructure information with the government. The exemption, which was included in the Act, was vigorously supported by many information technology companies and their trade groups. The relevant statutory provisions are at §§ 211-215 of HR 5005 (107th Congress). These sections are collectively named that "Critical Infrastructure Information Act of 2002".

The report states that "much of the reluctance by ISACs to share information has focused on concerns over potential government release of that information under the Freedom of Information Act, antitrust issues resulting from information sharing within an industry, and liability for the entity that discloses the information. However, our recent discussions with the ISACs -- as well as the consensus of the ISAC Council -- identified additional factors that may affect information sharing by both the ISACs and the government."

The report also notes that the "DHS recently issued the interim rule for submitting protected critical infrastructure information, which provides restrictions on the use of this information and exempts it from release under the Freedom of Information Act. However, it remains to be seen whether these protections will encourage greater private-sector trust and information sharing with the federal government."

On February 20, 2004, the Department of Homeland Security (DHS) published a notice [PDF] in the Federal Register that summarizes, discusses and recites its interim rule implementing the Critical Infrastructure Information Act of 2002 {PDF]. See, Federal Register, Vol. 69, No. 34, February 20, 2004, at Pages 8074-8089.

See also, story titled "DHS Begins Rulemaking Proceeding on FOIA Exemption for Critical Infrastructure Information" in TLJ Daily E-Mail Alert No. 645, April 16, 2003, and and story titled "DHS Announces Adoption of Rules Implementing the Critical Infrastructure Information Act" in TLJ Daily E-Mail Alert No. 840, February 19, 2004. See also, the DHS's web page titled "Protected Critical Infrastructure Information (PCII) Program"

The report discusses some of these additional factors affecting information sharing. "These included the sensitivity of the information (such as law enforcement information), legal limits on disclosure (such as Privacy Act limitations on disclosure of personally identifiable information), and contractual and business limits on how and when information is disclosed (e.g., the Financial Services ISAC does not allow any governmental or law enforcement access to its database). But the Council also emphasized that perhaps the greatest barriers to information sharing stem from practical and business considerations in that, although important, the benefits of sharing information are often difficult to discern, while the risks and costs of sharing are direct and foreseeable. Thus, to make information sharing real, it is essential to lower the practical risks of sharing information through both technical means and policies, and to develop internal systems that are capable of supporting operational requirements without interfering with core business. Consequently, the technical means used must be simple, inexpensive, secure, and easily built into business processes."

The report begins with two broad and vague recommendations. It states that the "DHS can take two key actions to improve the effectiveness of its information-sharing efforts with the ISACs and others. First, a number of challenges have been identified by the ISAC community that could be addressed with the development of an information-sharing plan that, among other things, defines the roles and responsibilities of the various stakeholders and establishes criteria for providing the appropriate incentives to address the challenges. In addition, DHS's ability to gather, analyze, and disseminate information could be improved by developing information sharing-related policies and procedures for its components."

The report was prepared for the Chairmen and ranking Democrats of two of the House Homeland Security Committee's subcommittees.

Zywicki To Leave FTC

7/27. Maureen Ohlhausen will be become the acting Director of the Federal Trade Commission's (FTC) Office of Policy and Planning (OPP). She will replace Todd Zywicki, who will depart on July 29. He will return to the George Mason University School of Law. Although, he will be a visiting professor at Georgetown University Law Center during the 2004-5 academic year. See, FTC release.

While Zywicki was the OPP Director, the FTC released two technology related reports. First, there is the March 29, 2004 report [61 pages in PDF] titled "Possible Anticompetitive Barriers to E-Commerce: Contact Lenses".

Second, there is the July 3, 2003 report [139 pages in PDF] titled "Possible Anticompetitive Barriers to E-Commerce: Wine". See, story titled "FTC Report Concludes That Allowing Direct Sales of Wines Would Enhance Consumer Welfare" in TLJ Daily E-Mail Alert No. 692, July 7, 2003. This report concluded that consumer welfare would be enhanced by allowing direct shipment of wines.

He also testified regarding this report and this issue at an October 30, 2003 hearing of the House Commerce Committee's Subcommittee on on Commerce, Trade, and Consumer Protection titled "E-Commerce: The Case of Online Wine Sales and Direct Shipment". See, story titled "House Subcommittee Holds Hearing on Internet Wine Sales" in TLJ Daily E-Mail Alert No. 761, October 31, 2003.

Zywicki also cosigned a letter [15 pages in PDF] on March 31, 2004 to the several members of the New York Assembly and Senate regarding direct wine sales. See, story titled "" in TLJ Daily E-Mail Alert No. 867, April 1, 2004.

Zywicki also gave a speech [PDF] titled "Competition Policy and Regulatory Reform: Means and Ends" in Tokyo, Japan on November 20, 2003.

More People and Appointments

7/27. Richard Nottenburg was named Chief Strategy Officer of Motorola. Motorola stated in a release that he "will oversee corporate strategy, mergers and acquisitions, Motorola Ventures, business intelligence and new initiatives. He will report directly to Ed Zander, Motorola's chairman and chief executive officer."

7/27. Daniel Ostergaard was named Executive Director of the Department of Homeland Security's (DHS) Homeland Security Advisory Council (HSAC). He previously worked for Florida Governor Jeb Bush. Before that, he served on active duty in the U.S. Coast Guard. See, DHS release.

7/27. The National Telecommunications Cooperative Association (NTCA) hired Erica Ferri and Brian O'Hara as government affairs representatives. Ferri previously worked for Rep. Amo Houghton (R-NY), who has announced that he will not run for re-election. See, NTCA release.

More News

7/27. The Federal Communications Commission (FCC) adopted and released an Order that adopted a Consent Decree with the Verizon Telephone Companies resolving two FCC investigations into whether Verizon violated certain accounting safeguards and non-discrimination requirements under 47 U.S.C. § 272. Verizon will pay a $300,000 fine. See, FCC release.

7/27. Several groups filed an amicus curiae brief [29 pages in PDF] with the U.S. Court of Appeals (DCCir) in support of the Electronic Privacy Information Center (EPIC) 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. The EPIC filed its brief [35 pages in PDF] on July 13, 2004. See, story titled "EPIC Files Appeal Brief in FOIA Case Regarding DOJ Lobbying Over PATRIOT Act Amendment" in TLJ Daily E-Mail Alert No. 937, July 14, 2004. The amici curaie are the Reporters Committee for Freedom of the Press (RCFP), National Security Archive (NSA), American Society of Newspaper Editors (ASNE), Society of Professional Journalists (SPJ), and American Civil Liberties Union. See also, RCFP release.

7/27. The Federal Communications Commission (FCC) announced the award of 154 Multichannel Video Distribution and Data Service MVDDS licenses following the completion of Auction No. 53, review of the applications, and receipt of payments. See, FCC Public Notice [PDF], and Attachment A [PDF], the list of granted applications.

Microsoft Rejects Japanese FTC Recommendation Regarding OEM Licensing Agreements

7/26. Microsoft responded to the July 13, 2004 recommendation [6 pages in PDF] of the Japanese Fair Trade Commission (JFTC) that its Windows licensing agreements violate Japan's anti-monopoly and unfair trade practices statutes. Microsoft rejected the recommendation. The next step is for the JFTC to initiate a hearing procedure.

Microsoft stated in a release that "After careful examination of the contents of the Recommendation, Microsoft has decided that it is unable to accept the demands of the Recommendation, and has today informed the JFTC of this decision."

It added that "Microsoft believes that the licensing contracts concerned are not in violation of any of the Antimonopoly Act, and as such has decided not to accept the JFTC's Recommendation."

The JFTC recommendation states that "Microsoft, when licensing Windows OS to personal computer manufacturers ... has concluded agreements with PC manufacturers containing certain provisions that a licensee covenants not to sue, bring, prosecute, assist or participate in any judicial, administrative or other proceedings of any kind against Microsoft, its subsidiaries, or other licensees for infringement of the licensee's patents. Such conduct by Microsoft shall be construed as dealing with PC manufacturers on conditions which unjustly restrict their business activities, which the JFTC concluded correspond to the Subsection 13 of the Unfair Trade Practices, violating the section 19 of the Antimonopoly Act."

The July 13 recommendation set a response deadline of July 26. It further notified Microsoft that "If the recommendation is accepted, the JFTC will issue a decision, a legally binding order with the same elimination measures as those in this recommendation. Otherwise, the JFTC will initiate a hearing procedure."

People and Appointments

7/26. Kyle Dixon will join the Progress and Freedom Foundation (PFF) in August. He will direct the PFF's Federal Institute for Regulatory Law and Economics. He is currently Deputy Chief of the Federal Communications Commission's (FCC) Media Bureau and Special Counsel for Broadband Policy to FCC Chairman Michael Powell. See, FCC release [PDF] of July 16, 2002. He joined the FCC as an attorney-advisor in the Policy Division of the Common Carrier Bureau. He later became a legal advisor to Commissioner Powell. Before that he worked in the Washington DC office of the law firm of Hogan & Hartson. See, PFF release.

7/26. George Dillon was named Assistant Bureau Chief of the Federal Communications Commission's (FCC) Enforcement Bureau (EB). He is currently the EB's Engineering Advisor. He also is a member of, and will continue on, the FCC's Spectrum Policy Task Force (SPTF). He has worked for the FCC since 1977. Before that, he worked for the NASA as a control system engineer on the Apollo and Apollo-Soyuz launch vehicles. Finally, while the FCC is dominated by lawyers, Dillon has a degree in electronics engineering. See, FCC release.

7/26. President Bush announced his intent to name Kenneth Rapuano to be Deputy Assistant to the President for Homeland Security. See, White House release.

More News

7/26. The Department of Commerce's (DOC) National Telecommunications and Information Administration (NTIA) has published in its web site a section titled "Federal Rights-Of-Way For Telecommunications Projects".

7/26. The U.S. Court of Appeals (1stCir) issued its opinion in Flynn v. AK Peters, a dispute between a co-author of a second edition of book and her publisher regarding the publisher's accepting revisions from a co-author without her consent, and giving a third person co-authorship credit. The author alleged Lanham Act, contract and state statutory claims. The District Court granted judgment to the publisher. The Appeals Court affirmed. The book is Mobile Robots: Inspiration to Implementation [Amazon]. This case is Anita Flynn v. AK Peter, Ltd., U.S. Court of Appeals for the 1st Circuit, App. Ct. Nos. 03-1676, 03-2294, and 03-2348, appeals from the U.S. District Court for the District of Massachusetts.

7/26. The Copyright Office published a notice in the Federal Register that "directs all claimants to royalty fees collected for calendar year 2002 under the cable statutory license to submit comments as to whether a Phase I or Phase II controversy exists as to the distribution of those fees and announces the deadline for the filing of Notices of Intention to Participate in a royalty distribution proceeding concerning those royalty fees." Comments and Notices of Intention to Participate are due by August 25, 2004. See, Federal Register, July 26, 2004, Vol. 69, No. 142, at Pages 44548 - 44549.

Go to News from July 21-25, 2004.