News from August 16-20, 2004

District Court Holds Rep. McDermott Violated Wiretap Act

8/20. The U.S. District Court (DC) issued its Memorandum Opinion [PDF] in Boehner v. McDermott, a civil case for violation of Wiretap Act. The Court held that Rep. Jim McDermott (D-WA) violated 18 U.S.C. § 2511, and notwithstanding the First Amendment and the Bartnicki case, can be held civilly liable for damages.

Facts. The plaintiff is Rep. John Boehner (R-OH) who is now the Chairman of the House Education and Workforce Committee. The defendant is Rep. McDermott, who is one of the more flamboyant and reckless Members of Congress.

Rep. Boehner participated in a telephone conference call, by cell phone, with several House Republican leaders in December of 1996. He was in the state of Florida at the time. John and Alice Martin, residents of Florida, used a radio scanner to intercept the conversation. They also made an audio recording of the conversation. They delivered a copy of the recording to Rep. Karen Thurman (D-FL), who advised them to delivery it to Rep. McDermott.

The Martins then traveled to Washington DC, and delivered the recording to Rep. McDermott, along with a cover letter that stated that the recording contained "a conference call heard over a scanner", and that they understand that they "will be granted immunity."

Rep. McDermott disclosed the contents of the recording to the New York Times (NYT), and the Atlanta Constitution Journal. The NYT then published a news story based upon the contents of the recorded telephone conversation.

At that time, Rep. McDermott was the ranking Democrat on the House Standards and Official Conduct Committee, which is also known as the House Ethics Committee. However, he resigned a few days latter.

The Martins were promptly charged with, and plead guilty to, criminal violation of the Wiretap Act, and in particular, 18 U.S.C. § 2511.

However, the present case pertains to the civil liability provisions of the Wiretap Act as they pertain to Rep. McDermott.

Relevant Statutes. The Wiretap Act, which was enacted as Title III of the Omnibus Crime Control and Safe Streets Act of 1968, is the principal federal wiretapping statute. It is codified at 18 U.S.C. §§ 2510 et seq. It prohibits the interception of wire, oral, and electronic communications, without a court order.

18 U.S.C. § 2511 provides, in relevant part, that "(1) Except as otherwise specifically provided in this chapter any person who ... (c) provides that "intentionally discloses, or endeavors to disclose, to any other person the contents of any wire, oral, or electronic communication, knowing or having reason to know that the information was obtained through the interception of a wire, oral, or electronic communication in violation of this subsection ... shall be subject to suit as provided in subsection (5)."

Florida Statute § 934.03 provides substantially identical language to the federal § 2511. The District of Columbia's D.C. Code § 23-542 is similar.

Previous Proceedings in This Case. Rep. Boehner filed a complaint in U.S. District Court (DC) against Rep. McDermott alleging violation of 18 U.S.C. § 2511, Florida Statute § 934.03, and D.C. Code § 23-542.

Rep. McDermott moved to dismiss on the grounds that his actions were protected by the First Amendment. In a previous ruling, the District Court granted the motion to dismiss. The U.S. Court of Appeals (DCCir) reversed in a opinion published at 191 F.3d 463 (1999). The Supreme Court of the United States granted writ of certiorari, and vacated the judgment of the Court of Appeals, and remanded the case to the Court of Appeals in light of its decision in Bartnicki v. Vopper, 532 U.S. 514 (2001). See, McDermott v. Boehner, 532 U.S. 1050 (2001). The Court of Appeals then remanded the case to the District Court.

Rep. Boehner and Rep. McDermott then filed cross motions for summary judgment, with Rep. Boehner arguing that the facts of the Bartnicki case are distinguishable from those in the present case.

Bartnicki Case. On May 21, 2001, the Supreme Court issued its opinion [PDF] in Bartnicki v. Vopper, holding that a radio host (Vopper) cannot be sued under 18 U.S.C. § 2511 for playing an audio recording of a cellular telephone conversation, despite a federal statute that made illegal both the interception of the conversation, and its disclosure. The majority reasoned that the case pitted statutes banning disclosure of illegally obtained electronic communications against the First Amendment freedom of speech claims of persons with illegally obtained recordings to disclose them if their content pertains to a public issue.

Justice Stevens wrote the opinion of the Court. He wrote that the recording violated federal wiretapping law, that Vopper knew this, but that he did not make the illegal intercept. He reasoned that the statute's application in this situation would violate Vopper's free speech rights under the First Amendment. See also, story titled "Supreme Court Diminishes Electronic Privacy" in TLJ Daily E-Mail Alert No. 192, May 22, 2001.

The reasoning of the majority in Bartnicki has been criticized by many. For example, the Office of the Solicitor General submitted a brief to the Supreme Court in which it argued that the Appeals Court erred.

Also, Chief Justice William Rehnquist wrote a dissenting opinion, in which Justices Antonin Scalia and Clarence Thomas joined. He wrote that "Technology now permits millions of important and confidential conversations to occur through a vast system of electronic networks. These advances, however, raise significant privacy concerns. We are placed in the uncomfortable position of not knowing who might have access to our personal and business e-mails, our medical and financial records, or our cordless and cellular telephone conversations. In an attempt to prevent some of the most egregious violations of privacy, the United States, the District of Columbia, and 40 States have enacted laws prohibiting the intentional interception and knowing disclosure of electronic communications. The Court holds that all of these statutes violate the First Amendment insofar as the illegally intercepted conversation touches upon a matter of ``public concern,´´ an amorphous concept that the Court does not even attempt to define. But the Court's decision diminishes, rather than enhances, the purposes of the First Amendment: chilling the speech of the millions of Americans who rely upon electronic technology to communicate each day."

District Court Holding. In the present Memorandum Opinion the District Court summarized the main issue: "In light of Bartnicki, the issue now squarely before this Court is whether 18 U.S.C. § 2511(1)(c) is unconstitutional under the First Amendment as applied to Defendant in this case. Put another way, the issue is whether the First Amendment shields Defendant's disclosure from liability under the applicable wiretapping statutes."

The District Court held that the facts of this case are distinguishable from those in Bartnicki. In particular, Rep. McDermott's receipt of the tape from the Martins was so closely tied by knowledge and action to the Martins' illegal disclosure that he obtained the information unlawfully. And, since he obtained the illegal recording unlawfully, unlike the defendants in Bartnicki, who received an anonymous package in a mailbox, Rep. McDermott is not shielded by the holding in Bartnicki.

While Rep. McDermott claimed that he did not read the Martin's cover letter, and did not know that the recording had been illegally made, the District Court found that "by the time Defendant disclosed the tape to the media, he knew or had reason to know that the tape had been obtained through the unlawful interception of communications. Upon discovering that the tape presented by the Martins, two private citizens from Florida, contained a recorded telephone conversation among several high level government representatives, Defendant would have every reason to realize that the conversation had been illegally intercepted."

The District Court recited various reasons for finding that Rep. McDermott's testimony was not credible. For example, the New York Times (NYT) story contained the source and method of interception. It further used words that appeared in the Martin's cover letter. Also, Rep. McDermott insisted that the NYT maintain his anonymity, and later he denied being the NYT's source (until the Martin's stated that it was him); this, the District Court wrote, demonstrated that he knew of the impropriety of his actions.

The District Court explained the significance of Rep. McDermott's knowledge. "The Supreme Court noted, however, that whether the First Amendment shields a defendant from liability under that statute substantially depends upon the lawfulness of the manner in which he initially obtained the information. ... Where a defendant unlawfully obtains information, neither Bartnicki nor any other authority shields against liability for subsequent disclosure."

It added that "Bartnicki necessarily stands for the proposition that a defendant who anonymously receives illegally intercepted information without present knowledge of its illegality has obtained it lawfully." For example, a defendant in that case received "an unsolicited tape anonymously placed in his mailbox".

In contrast, in the present case, Rep. McDermott knew both who made the recording, and how it was made.

The District Court also addressed other issues. The Court considered, but rejected, an additional basis for finding that the Bartnicki case does not apply to the present case.

Rep. Boehner argued that United States v. Aguilar, 515 U.S. 593 (1995), applies in this case. That case held that certain disclosures by certain public officials are not protected by the same stringent First Amendment scrutiny as disclosures by ordinary citizens. (In Aguilar a federal judge illegally disclosed the existence of a federal wiretap.) The Court held while Rep. McDermott was the ranking Democrat on the House Ethics Committee, and that the Committee has rules against improper disclosure, Aguilar does not apply because it is not clear that Rep. McDermott was acting in his capacity as the ranking Democrat of the Committee when he released the recording to the NYT.

The District Court also granted summary judgment to Rep. McDermott on the count alleging violation of the Florida statute. Rep. McDermott's acts occurred in the District of Columbia, and it would violated the Due Process and the Full Faith and Credit clauses of the Constitution to give the statute extraterritorial effect.

Related Case. On April 22, 2003 the U.S. Court of Appeals (10thCir) issued its opinion in Quigley v. Rosenthal, a civil case involving application of the federal wiretap act to the monitoring of cordless telephone conversations, as well as defamation, invasion of privacy by intrusion, and false light invasion of privacy. The opinion addresses who can be held liable for illegal interception of wire or electronic communications, and when the First Amendment offers protection to those who make use of such intercepted communications.

The Appeals Court affirmed a District Court civil judgment against the Anti-Defamation League (ADL) for violation of the Wiretap Act, when it had not conducted the monitoring, but rather, had conspired with others who recorded the cordless telephone conversations, and then made use of the recordings.

See, story titled "10th Circuit Rules on Civil Liability for Violation of Wiretap Act" in TLJ Daily E-Mail Alert No. 647, April 23, 2003.

FCC Releases Order and NPRM Re Unbundling Rules

8/20. The Federal Communications Commission (FCC) announced and released an Order and Notice of Proposed Rulemaking [47 pages in PDF] that requests public comments on rules regarding the unbundling obligations of incumbent local exchange carriers (ILECs) pursuant to 47 U.S.C. § 251(c)(3). It also orders a six month freeze.

This states that it requires ILECs "on an interim basis ... to continue providing unbundled access to switching, enterprise market loops, and dedicated transport under the same rates, terms and conditions that applied under their interconnection agreements as of June 15, 2004."

It continues that "These rates, terms, and conditions shall remain in place until the earlier of the effective date of final unbundling rules promulgated by the Commission or six months after Federal Register publication of this Order, except to the extent that they are or have been superseded by (1) voluntarily negotiated agreements, (2) an intervening Commission order affecting specific unbundling obligations (e.g., an order addressing a pending petition for reconsideration), or (3) (with respect to rates only) a state public utility commission order raising the rates for network elements."

It also states that "we set forth transitional measures for the next six months thereafter. Under our plan, in the absence of a Commission holding that particular network elements are subject to the unbundling regime, those elements would still be made available to serve existing customers for a six-month period, at rates that will be moderately higher than those in effect as of June 15, 2004."

Section 251 contains the unbundling obligations of ILECs. Unbundled network elements (UNEs) are those portions of telephone networks that the ILECs, such as Verizon, must make available to competing carriers, such as AT&T and MCI WorldCom, seeking to provide telecommunications services. The Telecommunications Act of 1996 provides that ILECs must provide access to certain of their network elements at regulated rates. Since passage of the 1996 Act the FCC has been writing unbundling rules, and the federal courts have been overturning them.

The FCC issued its latest unbundling rules one year ago. On August 21, 2003, the FCC released the order known as the triennial review order [576 pages in PDF] on August 21, 2003. See, story titled "Summary of FCC Triennial Review Order" in TLJ Daily E-Mail Alert No. 725, August 25, 2003. See also, stories titled "FCC Announces UNE Report and Order", "FCC Order Offers Broadband Regulatory Relief", "FCC Announces Decision on Switching", "Commentary: Republicans Split On FCC UNE Order", and "Congressional Reaction To FCC UNE Order" in TLJ Daily E-Mail Alert No. 609, February 21, 2003.

On March 2, 2004 the U.S. Court of Appeals (DCCir) issued its opinion [62 pages in PDF] in USTA v. FCC overturning key parts of the FCC's TRO. The opinion leaves largely untouched those portions of the TRO in which the FCC refrained from unbundling next generation broadband facilities. The opinion vacates those portions of the TRO in which the FCC delegated decision making authority to the state to make impairment findings. See, story titled "Appeals Court Overturns Key Provisions of FCC Triennial Review Order", also published in TLJ Daily E-Mail Alert No. 848, March 3, 2004.

This item is FCC 04-179 in WC Docket No. 04-313 and CC Docket No. 01-338. It states that the FCC adopted it on July 21, 2004. Comments will be due 21 days after publication in the Federal Register, which has not yet occurred. Reply comments will be due 36 days after publication.

Michael PowellFCC Chairman Michael Powell wrote in a separate statement [PDF] that "There is no need to fear that consumers will be left with nothing to choose from as UNE-P begins to whither. Consumers are using wireless telephones more than they are using wired telephones today -- many now use their mobile as their primary phone. Cable companies are offering competitive telephone service to residential consumers. VoIP is surging into the marketplace as broadband grows, offering an exciting and new competitive alternative that offers cut-rate prices and futuristic features."

FCC Commissioner Kathleen Abernathy wrote in a separate statement [PDF] that "In the wake of the D.C. Circuit’s decision invalidating many of the Commission’s unbundling rules, we must expeditiously build a record and develop a revised framework. For too long the Commission has given short shrift to the direction provided by the courts in pursuit of a policy of maximum unbundling. Now, we have an opportunity to craft judicially sustainable rules that promote competition in a manner that more fully embraces free-market principles and is less dependent on regulatory micromanagement."

FCC Commissioners Michael Copps, Jonathan Adelstein, and Kevin Martin formed the majority that wrote the unbundling rules that were overturned by the Court of Appeals in March. Copps and Adelstein dissented. Copps wrote in a separate statement [PDF] that the FCC "is on track to butcher the pro-competitive vision of the 1996 Act."

FCC Commissioner Jonathan Adelstein wrote in a separate statement [PDF] that "Through this Order, the Commission adopts an ambiguous approach that is perhaps designed to give a little to everyone but that ultimately grants stability to none. The Order leaves unclear which elements are available to competitors and at what prices they will be available. It is difficult to imagine how either competitors or incumbents will plan for the future, develop business plans, or seek investor support with this foggy vision into the long-term framework. If savvy industry players will be left wondering about the rules of the game, consumers surely will have little guidance about how to choose among the ever-dwindling list of providers."

FCC Commissioner Kevin Martin wrote no separate statement.

BellSouth, an ILEC, released a statement. "BellSouth is pleased that the Commission has finally formally started the process of preparing new rules consistent with the court's mandate. After 8-1/2 years of working under unlawful rules, BellSouth believes the quick adoption and implementation of permanent rules is essential to economic recovery and job creation in America’s technology sector." It added that "To provide a stable environment while that work is finished, BellSouth months ago voluntarily agreed to maintain existing arrangements with competitors through the end of 2004. We are certainly troubled that, despite the court's refusal to stay its March 2004 order, the FCC granted itself the power to maintain the unlawful status quo well into 2005."

Walter McCormick, the P/CEO of the U.S. Telecom Association (USTA), a group that represents the interest of ILECs, released a statement in which he wrote that "For nearly a decade, we have waited for the FCC to put lawful rules in place for the telecom industry. Unfortunately, after four attempts, missed deadlines, instability and delay, we are again forced to ask the court to intervene to bring certainty and clarity to the industry. The Commission must put lawful, permanent rules in place by the end of this year so that all providers can move forward on a competitive basis."

In contrast, Russell Frisby, CEO of CompTel/ASCENT, stated in a release that "While the process that has led to this situation is regrettable, we are gratified that the FCC has acknowledged the critical need to keep existing arrangements in place while permanent rules are drafted. The six-month freeze will provide some stability -- at least in the short-term -- and give carriers additional time to evaluate their on-going business plans."

Frisby added that "the Bells have begun to manipulate rates in an effort to squeeze competitors out of the market. Given these practices, it is imperative that the FCC acts quickly to ensure that competitive providers are able to access monopoly-controlled switching, loops and transport facilities at cost-based rates. The data amassed across the nation provides clear evidence that competition cannot thrive without access to those key portions of the network that are economically and technically difficult to replicate."

More News

8/20. National Institute of Standards and Technology (NIST) released its revised Draft NIST Special Publication 800-70 [71 pages in PDF] titled "Security Configuration Checklists Program for IT Products". This publication, which was written by Murugiah Souppaya and John Wack of the NIST, and by Anthony Harris, Paul Johnson, and Karen Kent of Booz Allen, pertains to instructions for configuring information technology products to a particular security level. The deadline for public comments is September 30, 2004. Send comments to checklists@nist.gov.

8/20. Usman Hayat plead guilty in U.S. District Court (WDWash) to one count of transmitting interstate and foreign communications with intent to extort, in violation of 18 U.S.C. § 875(d), in connection with his sending e-mail messages to Eddie Bauer, Inc. in which he demanded payment in return for not making false accusations of use of child labor. Hayat wrote, "I will dedicate my life to defame your brand". Hayat is a resident of Pakistan, and sent his e-mail from Pakistan. He was arrested at Eddie Bauer's offices in Redmond, Washington after he traveled to the U.S., at the request of undercover FBI agents posing as Eddie Bauer executives, to pick up his extortion payment. See, USAO release and plea agreement [10 pages in PDF].

House Judiciary Committee to Hold Hearing on Tech Issues in 9-11 Commission Report and TAPAC Report

8/19. The House Judiciary Committee's Subcommittee on Commercial and Administrative Law and Subcommittee on the Constitution will hold a joint hearing at 10:00 AM on Friday, August 20, 2004 titled "Privacy and Civil Liberties in the Hands of the Government Post-September 11, 2001: Recommendations of the 9/11 Commission and the U.S. Department of Defense Technology and Privacy Advisory Committee".

The National Commission on Terrorist Attacks Upon the United States (9-11 Commission) released its report last month. Two members of the 9-11 Commission will testify, former Rep. Lee Hamilton (D-IN) and former Sen. Slade Gordon (R-WA).

The 9-11 Commission report includes recommendations regarding the use of information technologies, as for example, in the use of computer databases in the Computer Assisted Passenger Prescreening System (CAPPS) by the Department of Homeland Security's (DHS) Transportation Security Administration (TSA). Nuala Kelly, the Chief Privacy Officer of the DHS, will testify.

The Department of Defense (DOD) established the Technology and Privacy Advisory Committee (TAPAC) in February of 2003 in response to Congressional concerns about the data privacy implications of the DOD's Defense Advanced Research Projects Agency (DARPA) Total Information Awareness (TIA) program. On May 17, 2004, this TAPAC released a report [140 pages in PDF] titled "Safeguarding Privacy in the Fight Against Terrorism" regarding data mining by the DOD and the rest of the federal government, the DARPA's Total Information Awareness program, and individual privacy.

It concluded that data mining is an important tool for fighting terrorism, and should be used, but with more concern for the protecting individual data privacy of U.S. persons. See, story titled "DOD Advisory Committee Backs Data Mining, with Attention to Privacy" in TLJ Daily E-Mail Alert No. 900, May 18, 2004. John Marsh of the TAPAC will testify.

The hearing will be held in Room 2141 of the Rayburn Building. It will be webcast by the Committee.

Judge Jackson Fines Journalists $500 Per Day

8/19. The U.S. District Court (DC) issued a Memorandum & Order [13 pages in PDF] in Lee v. DOJ, holding in contempt of court five journalists for failing to provide information about confidential sources to a litigant in a private lawsuit.

The order states that five journalists "are each fined the sum of $500.00 per day, payable to the United States, until he complies therewith". It adds that "the foregoing fines are stayed for thirty (30) days, or until completion of proceedings on a timely appeal herefrom, whichever is the later".

The five journalists are not parties to the case. Rather, this is a civil case brought by an individual against the Department of Justice and Department of Energy alleging that they improperly released information about its investigation of him.

The Judge in this case is Thomas Jackson. He was also the presiding Judge in the government's antitrust case against Microsoft, until he was replaced. Judge Jackson is personally experienced in improperly providing information to journalists. In that case he met with and discussed the merits of the case with journalists including from the New York Times. In the present case, two of the journalists work for the New York Times.

Microsoft later learned of the meetings, and raised this on appeal. The U.S. Court of Appeals (DCCir), in a unanimous, en banc opinion, wrote that Judge Jackson's actions violated the Code of Conduct for United States Judges. It wrote that his violations were "deliberate, repeated, egregious, and flagrant".

The Appeals Court wrote in its June 28, 2001 opinion that "Because he was talking to reporters, the Judge knew his comments would eventually receive widespread dissemination." It added that The public cannot be expected to maintain confidence in the integrity and impartiality of the federal judiciary in the face of such conduct."

The present case is Wen Ho Lee v. Department of Justice, et al., U.S. District Court for the District of Columbia, No. 99-3380-TPJ, Judge Thomas Jackson presiding.

9th Circuit Holds No Vicarious Infringement in Grokster Case

8/19. The U.S. Court of Appeals (9thCir) issued its opinion [26 pages in PDF] in MGM v. Grokster, affirming the District Court holding that Grokster's and Streamcast's peer to peer (P2P) file copying networks do not contributorily or vicariously infringe the copyrights of the holders of music and movie copyrights. See, full story.

Senate Judiciary Committee Holds Hearing on Inducement Bill

8/19. The U.S. Court of Appeals (9thCir) wrote in its opinion [26 pages in PDF] in MGM v. Grokster that any extension of protection to copyright holders in the context of peer to peer (P2P) infringement is a matter for the Congress. Several Senators recognize this, and introduced S 2560, the "Inducing Infringement of Copyrights Act of 2004", on June 22, 2004. This bill was drafted with the distributors of these P2P systems mind.

Currently, 17 U.S.C. § 501 addresses infringement of copyright. S 2560 would add a new subsection (g) to this section. This new subsection, provides, in full, as follows:

"(1) In this subsection, the term `intentionally induces´ means intentionally aids, abets, induces, or procures, and intent may be shown by acts from which a reasonable person would find intent to induce infringement based upon all relevant information about such acts then reasonably available to the actor, including whether the activity relies on infringement for its commercial viability.
(2) Whoever intentionally induces any violation identified in subsection (a) shall be liable as an infringer.
(3) Nothing in this subsection shall enlarge or diminish the doctrines of vicarious and contributory liability for copyright infringement or require any court to unjustly withhold or impose any secondary liability for copyright infringement."

Subsection (a) now provides, in part, that "Anyone who violates any of the exclusive rights of the copyright owner as provided by sections 106 through 121 ... or who imports copies or phonorecords into the United States in violation of section 602, is an infringer of the copyright ..."

This bill has an impressive list of cosponsors. The lead sponsor is Sen. Hatch, the Chairman of the Senate Judiciary Committee (SJC), which has jurisdiction over this bill. Sen. Patrick Leahy (D-VT), the ranking Democrat on the SJC, is a cosponsor. Sen. Lindsey Graham (R-SC) and Sen. Barbara Boxer (D-CA), also members of the SJC are cosponsors. Sen. Bill Frist (R-TN), the Senate Majority Leader, and Sen. Tom Daschle (D-SD), the Senate Minority Leader, are also cosponsors.

The bill is also cosponsored by Sen. Hillary Clinton (D-NY), Sen. Lamar Alexander (R-TN), Sen. Debbie Stabenow (D-MI), and Sen. Paul Sarbanes (D-MD).

See, story titled "Senators Introduce Bill to Amend Copyright Act to Ban Inducement of Infringement" in TLJ Daily E-Mail Alert No. 925, June 24, 2004.

On July 22, 2004 the SJC held a hearing on this bill.

Marybeth Peters, the Register of Copyrights, testified that "I believe this bill addresses the most important issue facing our copyright system today: new services that employ peer-to-peer technology to create vast, global networks of copyright infringement. There should be no question that such services should be liable for the copyright infringement they encourage and from which they profit."

She wrote in her prepared testimony that "The Copyright Office supports S. 2560 because it improves the existing law of secondary liability for copyright infringement."

Marybeth PetersPeter (at right) also wrote in her testimony that "In my view, the Grokster decision was wrongly decided, and I hope the Ninth Circuit corrects the errors in the district court's decision. The court employed an unnecessarily cramped view of existing secondary liability doctrines, creating a much narrower test of ``knowledge´´, ``material contribution´´ and ``right and ability to control´´ than any case before it, including the Ninth Circuit's decision in Napster. It also misapplied the Sony decision to an inaccurate characterization of the defendants as mere providers of software, comparing them to a maker of a VCR, when their services were functionally the equivalent of Napster and Aimster. Most importantly, the Grokster decision fails to see the forest for the trees; it essentially ignores defendants' intent to establish and create a network of massive infringement -- by enlisting ordinary consumers to engage in piracy -- upon which they have built their business."

However, on August 19, the Ninth Circuit not only affirmed the District Court, but essentially followed its entire analysis. See, story in this issue titled "9th Circuit Holds No Vicarious Infringement in Grokster Case" TLJ Daily E-Mail Alert No. 963, August 20, 2004.

Sen. Orrin HatchSen. Hatch (at left) wrote in his opening statement that "Research now suggests that these piracy rings -- which call themselves filesharing networks -- will create between 12 and 24 billion infringing copies this year alone. This unprecedented level of piracy fundamentally threatens America's world-leading music, movie and software industries and the future of legitimate Internet commerce."

He explained that S 2560 "provides that the courts can impose secondary liability upon those who intend to induce copyright infringement." He said that the bill has three key attributes.

First, it is "technology neutral: It does not single out peer-to-peer networking technology for punitive regulation just because a few bad actors have misused it." He added that the technology has "intriguing, legitimate uses" that are not targeted by the bill.

Second, S 2560 "uses a proven model for structuring secondary liability. The substantial-noninfringing-use rule that Sony imported from the Patent Act coexists there alongside liability for intent to induce infringement -- a concept that the Patent Act calls active inducement."

Third, S 2560 changes the law "only for a very narrow class of defendants".

He added that this bill preserves the holding in the Sony case. Sen. Leahy also stated that "our bill does not undermine the Sony-Betamax decision, it does not undermine the fair use doctrine, and it does not target or penalize any technology."

Sen. Leahy added that S 2560 "will help companies like Apple who, through their iTunes service and iPod devices, offer legitimate alternatives to illegal downloading. This bill will protect our copyright holders and spur innovation."

Sen. Hatch and Sen. Leahy were the only two Senators to participate in the hearing. This hearing was held just prior to the beginning of the August recess when the Senate was hectic with other activities.

The Committee also heard from several witnesses who lacked the Senators' enthusiasm for the bill.

Gary Shapiro, P/CEO of the Consumer Electronics Association (CEA), said that "this bill would reverse and rewind the Betamax case", which he described as the technology industry's Magna Carta. He also argued that the bill is hopelessly subjective, and would inhibit investment and innovation. See, prepared testimony.

Kevin McGuinness, of the NetCoalition, also testified in opposition. He wrote in his prepared testimony [13 pages in PDF] that "S 2560 is much broader in scope than described by its proponents and open to multiple interpretations. As a result, it would have severe repercussions on Internet companies, products, and services; jeopardize the introduction of new technologies; and trigger a flood of litigation."

Several of the opponents of the bill argued that it would lead to frequent litigation. McGuiness quipped that the technology industry did not want "to sit idly by watching legislation go forward that is based upon the presumption of good intentions for ever of lawyers from the entertainment industry. It is a little troubling, they would never never ever ever use the statute for economic benefit."

Gigi Sohn, President of Public Knowledge, Gene Kimmelman (Consumers Union), and Mark Cooper (Consumer Federation of America) did not testify, but submitted joint written testimony for the record. They wrote that "Because S 2560 in its current form will chill innovation -- and in so doing limit consumer choice -- by putting technology makers and vendors at greater risk of expensive litigation, our consumer-advocacy organizations must oppose it."

Andrew Greenberg of the Institute of Electrical and Electronics Engineers (IEEE) also testified. He enumerated a number of criticisms of the bill as written, in his prepared testimony. He also suggested alternative language. He wrote that the bill should instead provide that "Whoever actively and knowingly induces infringement of a copyrighted work by another with the specific and actual intent to cause the infringing acts shall be liable as an infringer."

Mitch Bainwol, Ch/CEO of the Recording Industry Association of America (RIAA), testified in support of the bill. See, prepared testimony.

Robert Holleyman, P/CEO of the Business Software Alliance (BSA), offered limited support for the bill. He said that many elements are necessary to deal with P2P piracy, including market solutions, criminal prosecution, public education, and technology. He wrote in his prepared testimony [PDF] that "If the Committee determines that an additional cause of action, such as S. 2560, is necessary to address the problem of online piracy, we urge that any such bill be carefully crafted and properly balanced to curtail irresponsible and harmful practices while avoiding adverse unintended consequences for legitimate technology companies."

He offered some specific recommendations, including that,
 • "the bill should state clearly that the Supreme Court’s decision in the Betamax case is unaffected",
 • "it should be made clear that to meet the intent standard of the bill an actor must be shown to have engaged in conscious, recurring, persistent and deliberate acts demonstrated to have caused another person to commit infringement", and
 • "mere knowledge by a developer of a technology or a provider of a service of the actual or potential infringing acts of another person using that technology or service does not demonstrate intent to induce copyright infringement".

Sen. Hatch suggested at the end of the hearing that "I suspect that we are going to try to resolve this over the month of August". He added that he wants to pass legislation this year.

Whether this bill will be enacted is another matter. Not only are there legislators, companies and groups that oppose it, there are legislative proposals to accomplish just the opposite -- to weaken copyright protection. See for example, HR 107, the "Digital Media Consumers' Rights Act of 2003", cosponsored by Rep. Rick Boucher (D-VA) and Rep. John Doolittle (R-CA). It now has 21 sponsors in the House.

See also, stories titled "Reps. Boucher and Doolittle Introduce Digital Media Consumer Rights Act" and "Summary of the Digital Media Consumer Rights Act" in TLJ Daily E-Mail Alert No. 532, October 4, 2002; story titled "Reps. Boucher and Doolittle Introduce Digital Fair Use Bill" in TLJ Daily E-Mail Alert No. 582, January 14, 2003; and story titled "Chairman Barton Says Commerce Committee Will Mark Up Boucher Doolittle Bill in July" in TLJ Daily E-Mail Alert No. 924, July 23, 2004. (No House Committee has yet approved this bill.)

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8/19. The Department of Justice (DOJ) announced that Richard Gibson plead guilty in U.S. District Court (WDWash) to wrongful disclosure of individually identifiable health information for economic gain in violation of the health information privacy provisions of the Health Insurance Portability and Accountability Act (HIPAA). In the scope of his employment he obtained a patient's name, date of birth and social security number, and used that information to engage in identity theft. He obtained and used credit cards in that patient's name. See, U.S. Attorneys Office release.

8/19. The Department of Justice (DOJ) announced that Gayle Spence Luacaw plead guilty in U.S. District Court (DNH) to one count of conspiracy to commit securities fraud and wire fraud. The DOJ stated in a release that she participated "in a fraudulent transaction with a China-based company known as Ariel, which allowed Enterasys to improperly report approximately $3.5 million in revenue for the quarter ended Sept. 1, 2001." The DOJ also stated that she is a "former executive of Enterasys Network Systems, Inc., a computer hardware and software corporation previously headquartered in Rochester, New Hampshire".

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8/18. The National Institute of Standards and Technology (NIST) published a notice in the Federal Register stating that it requests nominations for its Information Security and Privacy Advisory Board (ISPAB). See, Federal Register, August 18, 2004, Vol. 69, No. 159, at Page 51235.

8/18. The Federal Communications Commission (FCC) released a public notice [23 pages in PDF] that requests comments on behalf of the Federal-State Joint Board on Universal Service regarding the high-cost universal support mechanisms for rural carriers and the appropriate rural mechanism to succeed the five-year plan adopted in the Rural Task Force Order. This public notice is FCC 04J-2 in Docket No. 96-45. The FCC released its Rural Task Force Order on June 28, 2004. It is FCC 04-125 in Docket No. 96-45. Comments are due by October 15, 2004. Reply comments are due by December 14, 2004.

8/18. The Department of Justice's (DOJ) Antitrust Division published a notice in the Federal Register regarding amendment of the final judgment in US v. SBC and BellSouth, the action brought in 2000 regarding the then proposed joint venture between SBC and BellSouth to form Cingular Wireless. The final judgment required the divestiture of licenses and assets in certain markets, and preventing the reacquisition of divested assets. AT&T Wireless acquired some of these divested assets. Earlier this year, Cingular announced an agreement to acquire AT&T Wireless. The DOJ filed a memorandum with the U.S. District Court (DC) stating that competitive conditions have changed, and that therefore the final judgment's prohibition on reacquiring assets is no longer necessary. The relevant licenses are in Los Angeles, California and Indianapolis, Indiana. Comments are due within 30 days. See, Federal Register, August 18, 2004, Vol. 69, No. 159, at Pages 51327 - 51328. This case is U.S. v. SBC Communications, Inc. and BellSouth Corporation, U.S. District Court for the District of Columbia, D.C. No. 1:00CV02073.

District Court Refuses to Block Arch Coal Merger

8/17. On August 16, 2004 the U.S. District Court (DC) issued its Memorandum Opinion and Order [97 pages in PDF] in FTC v. Arch Coal, denying the Federal Trade Commission's (FTC) motion for a preliminary injunction of Arch Coal's acquisition of Triton Coal Company.

This case involves open pit coal mining in the state of Wyoming, but the competition law principles involved are pertinent to other industry sectors. The statutory provision at issue is Section 7 of the Clayton Act, which is codified at 15 U.S.C. § 18. It prohibits a merger between two companies "where in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition ... may be substantially to lessen competition, or tend to create a monopoly."

On August 17, 2004 the FTC filed an emergency motion under seal with the U.S. Court of Appeals (DCCir) seeking both injunctive relief and an expedited appeal process. See, redacted copy [23 pages in PDF]. It is titled "Emergency Motion of the Federal Trade Commission and Plaintiff States for an Injunction Pending Appeal and to Expedite Appeal". See also, FTC release.

This case is FTC v. Arch Coal, Inc., et al., No. 04-0534 (JDB), and State of Missouri, et al. v. Arch Coal, Inc., et al., No. 04-0535 (JDB), consolidated, U.S. District Court for the District of Columbia, Judge John Bates presiding.

GAO Reports on DHS Enterprise Architecture

8/17. The General Accounting Office (GAO) released a report [91 pages in PDF] titled "Homeland Security: Efforts Under Way to Develop Enterprise Architecture, but Much Work Remains".

The report states that an enterprise architecture is "a blueprint that defines, both in logical terms (including interrelated business processes and business rules, integrated functions, applications, systems, users, work locations, and information needs and flows) and in technical terms (including hardware, software, data, communications, and security), how an organization's information technology systems operate today, how they are to operate in the future, and a road map for the transition." (Parentheses in original.)

The report finds that the Department of Homeland Security's (DHS) "initial enterprise architecture provides a partial basis upon which to build future versions. However, it is missing most of the content necessary to be considered a well-defined architecture. Moreover, the content in this version was not systematically derived from a DHS or a national corporate business strategy; rather, it was more the result of an amalgamation of the existing architectures that several of DHS's predecessor agencies already had, along with their respective portfolios of system investment projects."

The report adds that the "DHS does not yet have the architectural content that it needs to effectively guide and constrain its business transformation efforts and the hundreds of millions of dollars it is investing in supporting systems. Without such content, DHS runs the risk that its investments will not be well integrated, will be duplicative, will be unnecessarily costly to maintain and interface, and will not effectively optimize mission performance."

Federal Circuit Affirms in PMT v. Siemens

8/17. The U.S. Court of Appeals (FedCir) issued its opinion [MSWord] in Power Mosfet Technologies v. Siemens, a patent infringement case involving semiconductor power devices. The Court of Appeals affirmed the District Court's judgment of non-infringement.

Power Mosfet Technologies (PMT) is the owner of U.S. Patent No. 5,216,275 titled "Semiconductor Power Devices with Alternating Conductivity Type High-Voltage Breakdown Regions."

In 2000, PMT filed a complaint in U.S. District Court (EDTex) against Infineon Technologies, International Rectifier, and STMicroelectronics (ST) alleging patent infringement.

The District Court entered judgment that the patent was not infringed by defendants, and denied PMT's motion for a new trial. PMT appealed. In addition, Infineon and ST conditionally cross appealed the District Court's judgment that the patent was not anticipated by U.S. Patent No. 4,754,310, and ST conditionally cross appealed the District Court's judgment that the patent was not anticipated by U.S. Patent No. 3,171,068.

This case is Power Mosfet Technologies, LLC., et al. v. Siemens AG, et al., U.S. Court of Appeals for the Federal Circuit, Nos. 03-1083, 03-1469, 03-1470, and 03-1471, appeals from the U.S. District Court for the Eastern District of Texas, at Marshall, Judge David Folsom presiding. Judge Gajarsa wrote the opinion of the Court, in which Judges Michel and Prost joined.

People and Appointments

8/17. Rachel Cohen was named Director of Public Policy and External Affairs at Comcast Corporation. She previously worked on the election campaigns of John Street (Philadelphia Mayor) and Joe Torsella (a Congressional candidate). She has also worked for the law firms of Buchanan Ingersoll and Mesirov Gelman. See, Comcast release.

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8/17. President Bush signed the HR 4842, the US-Morocco Free Trade Agreement Implementation Act. See, White House release. See also, stories titled "House Passes US Morocco FTA Bill" in TLJ Daily E-Mail Alert No. 944, July 23, 2004, and "US Morocco FTA Bill Moves in Congress" in TLJ Daily E-Mail Alert No. 943, July 22, 2004.

8/17. The Federal Communications Commission (FCC) published a notice in the Federal Register that describes and set comment deadlines for it notice of proposed rulemaking (NPRM) regarding Amateur Radio Service rules. The FCC adopted this NPRM on March 31, 2004, and released it on April 15, 2004. This NPRM is FCC 04-79 in WT Docket No. 04-140. Comments are due by September 16, 2004, and reply comments are due by October 1, 2004. See, Federal Register, August 17, 2004, Vol. 69, No. 158, at Pages 51028 - 51034.

8/17. The Department of Commerce's (DOC) Technology Administration (TA) published a notice in the Federal Register regarding information collection practices. Many federal agencies collection information of many sorts. The Paperwork Reduction Act of 1995 imposes requirements upon these agencies, including the publication of a notice in the Federal Register. TLJ rarely reports on these notices. However, this one pertains to the TA's collection of information, on a voluntary basis, from producers of Global Positioning System (GPS) equipment. See, Federal Register, August 17, 2004, Vol. 69, No. 158, at Pages 51070 - 51071.

8/17. CompTel/Ascent wrote a letter [2 pages in PDF] to Secretary of Commerce Donald Evans asking him to encourage the Federal Communications Commission (FCC) to adopt interim unbundling rules.

NTIA Submits Comments to FCC on Temperature Interference Model

8/16. The National Telecommunications and Information Administration (NTIA) submitted a comment to the Federal Communications Commission (FCC) in response to its Notice of Inquiry and Notice of Proposed Rulemaking (NOI/NPRM) regarding the temperature interference method of quantifying and managing interference among different services.

This proceeding is titled "In the Matter of Establishment of an Interference Temperature Metric to Quantify and Manage Interference and to Expand Available Unlicensed Operation in Certain Fixed, Mobile and Satellite Frequency Bands". This NOI/NPRM is FCC 03-289 in ET Docket No. 03-237. See also, story titled "FCC Announces NOI/NPRM on Interference Temperature Model" in TLJ Daily E-Mail Alert No. 779, November 14, 2003.

The FCC has published in its web site 83 items in this proceeding. To retrieve the NOI/NPRM, comments, and other filings, go to the Search for Comments page, and enter the docket number, 03-237, in the first box.

The NTIA states that it "agrees with the Commission regarding the significant benefits that could be gained by increasing the spectrum access opportunities for unlicensed devices. The implementation of the interference temperature model and the use of interference mitigation techniques such as DFS and geo-location represent a shift in interference management from the transmitter to the receiver."

The NTIA comment continues that "The NOI identifies many technically challenging issues that must be addressed before the interference temperature model can be implemented in a frequency band. These technical issues include, but are not limited to, the development of radio service specific reference receiver parameters, the development of radio service specific maximum permissible interference limits and operational scenarios, and measurement of the existing RF signal environment in order to establish a proper baseline. Until these technical issues and the rights and responsibilities of licensed and unlicensed spectrum users have been resolved, wide spread implementation of the interference temperature model will not possible."

It concludes that "Because of the sensitive nature of the operations in the restricted frequency bands, implementing the interference temperature model would be difficult if not impossible. However, if the initial implementation of the interference temperature model were limited to specific bands, for example, bands which have been transferred from the federal government, many of the technical issues listed above could be addressed and possibly resolved with minimal impact to incumbent commercial and federal government users. NTIA believes that active interference mitigation techniques such as DFS and geo-location hold great promise for facilitating sharing between licensed and unlicensed spectrum users. However, these techniques should not be employed until the supporting technical studies examining the specific characteristics of the licensed radio services and the unlicensed device applications have been completed."

The following are some of the filings in this proceeding, arranged in alphabetical order, by the party submitting the comments.

People and Appointments

8/16. Deborah Majoras took the oath of office to become Chairman of the Federal Trade Commission (FTC). President Bush previously gave Majoras and Jonathan Liebowitz recess appointments. See, FTC release. See also, story titled "Bush Gives Majoras and Liebowitz Recess Appointments to the FTC" in TLJ Daily E-Mail Alert No. 950, August 2, 2004, and story titled "Senate Commerce Committee Holds Hearing on FTC Nominees" in TLJ Daily E-Mail Alert No. 910, June 3, 2004.

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8/16. The U.S. Court of Appeals (9thCir) issued its opinion [11 pages in PDF] in China National v. Apex, an appeal from a District Court order affirming an arbitration award in a dispute involving the import of DVD players from PR China to the U.S. The contract between the parties provided that disputes would be arbitrated before the China International Economic and Trade Arbitration Commission (CIETAC). Apex asserted that China National was in breach of the contract because many of the DVD players that it shipped to Apex were defective and because it had failed to pay intellectual property royalties for technology employed in the players. Apex withheld payment. The CIETAC panel ruled in favor of China National. The District Court affirmed. And now, the Court of Appeals affirmed. This case is China National Metal Products Import/Export Company v. Apex Digital, Inc., No. 03-55231, an appeal from the U.S. District Court for the Central District of California, D.C. No. CV-02-00631-RT, Judge Robert Timlin presiding. Judge Jay Bybee wrote the opinion of the Court.

Go to News from August 11-15, 2004.