News from January 1-5, 2005

Commerce Committee Holds Hearing on Nomination of Carlos Gutierrez

1/5. The Senate Commerce Committee held a hearing on the nomination of Carlos Gutierrez to be Secretary of Commerce. Senators of both parties praised him, and predicted his rapid confirmation. He encountered no criticism or opposition. See, full story.

DOJ Antitrust Chief Suggest Topics for Study

1/5. Hewitt Pate, Assistant Attorney General in charge of the Department of Justice's (DOJ) Antitrust Division, submitted a comment to the Antitrust Modernization Commission (AMC) in which he suggested topics that the AMC might study. This was one of many comments received by the AMC.

Hewitt PatePate (at right) made a number of recommendations that largely reflect proposals that he or other DOJ officials have made in the past in speeches, papers and prepared testimony.

He suggested in this comment that the AMC might conduct empirical studies of the benefits of antitrust enforcement. He wrote that "Some antitrust commentators contend that there is no empirical foundation for the conviction that antitrust enforcement benefits consumers and the economy". Robert Crandall at Brookings, who has studied antitrust and telecommunications, is one scholar who has made this assertion. Pate suggests that the AMC come up with some evidence to support what the Antitrust Division does.

The Cato Institute also submitted a comment [PDF]. It wrote that "There is a good case to be made that ... the antitrust laws therefore should be scrapped entirely."

Pate also suggested that the AMC study antitrust immunities and exemptions for various industries, as well as the state action doctrine, which exempts state created impediments to competition. The DOJ disfavors exemptions that place entities beyond its regulatory reach.

Pate also suggested that the AMC study state enforcement of federal antitrust laws, civil fines for federal government Sherman Act cases, the availability of treble damages in non-cartel Sherman Act cases, the ability of indirect purchasers to recover damages, the fundamental prohibitions of the Sherman Act, and other topics.

The AMC has also received recommendations from other persons and entities. See especially, comment [PDF] from Sen. Mike DeWine (R-OH) and Sen. Herb Kohl (D-WI), the Chairman and ranking Democrat on the Senate Judiciary Committee's Antitrust Subcommittee.

Sun Microsystems submitted a comment [PDF] in which it suggested that the AMC "should undertake to study whether antitrust law and policy should require standards-setting organizations ("SSOs") to adopt procedures and intellectual property rights ("IPR") policies that require disclosure -- of the intellectual property to be incorporated in a proposed standard and relevant license terms -- early in the standard development process and prior to voting on the standard in question (ex ante adoption). Consideration should also be given to permitting standards development working groups to discuss these matters so that informed decisions can be made on the desirability of incorporating IPRs in the design of the standard." (Footnotes omitted. Parentheses in original.)

The U.S. Telecom Association submitted a comment [PDF] suggesting that the AMC study "the proper role of the states in antitrust enforcement". It suggests limiting certain state authority.

The Association for Competitive Technology submitted a comment [PDF] in which it stated that antitrust is undermining intellectual property rights. It stated that "competitors and some regulators have recently sought to use antitrust suits to force IPR holders to give up control over their protected works, as in the recent Microsoft case where several state Attorneys General proposed that Microsoft be forced to publicly provide the source code to Internet Explorer free of charge. Similarly, European regulators have shown increasing willingness to subject protected works to a compulsory license regime because of alleged competition concerns. The precedents created by these intellectual property seizures will undercut intellectual property rules for ALL successful companies and reduce incentives for research and innovation in the future."

Similarly, the U.S. Chamber of Commerce submitted a comment [PDF] in which it stated that "Holders of intellectual property rights should be free to exploit those rights within their defined scope. Ownership of a patent or copyright should be viewed in the same manner as ownership of any other asset or group of assets, and should not be presumed to confer monopoly power in a relevant antitrust market."

See also, AMC web page containing hyperlinks to comments.

1st Circuit Rules in Dispute Over Damage to Computer During Moving

1/5. The U.S. Court of Appeals (1stCir) issued its opinion in Rational Software v. Sterling, a dispute over damages to a computer that was broken while being moved. The Appeals Court affirmed the District Court's judgment that the owner is not entitled to the value of the computer. The carrier is liable only for the per pound limit stated in the bill of lading.

Rational Software owned a 1540 pound, $250,000 disk array. Rational Software hired Sterling Corporation to move it. Sterling dropped it, and broke it. Rational Software had frequently hired Sterling, and in each instance the bill of lading provided that "Unless A Different Value Is Declared, The Shipper Hereby Releases The Property To A Value Of $.60 Per Pound Per Article". This sixty cent per pound limitation was also stated in Sterling's Commodity Rate Tariff, filed with the Massachusetts Department of Telecommunications and Energy. However, Sterling did not present the bill of lading for this shipment until after the damage.

Rational Software filed a complaint in U.S. District Court (DMass) against Sterling alleging negligence under state law, and seeking to recover the value of the computer. Federal jurisdiction was based upon diversity of citizenship. Sterling did not dispute its negligence, or the value of the computer. The District Court awarded Rational Software a judgment in the amount of $924, based upon the 60 cents per pound limit.

The Appeals Court affirmed, based upon the state statute, and the parties' prior course of dealing. The Court applied the pertinent provision of the Uniform Commercial Code, as enacted by the state of Massachusetts. It provides that "Damages may be limited by a provision that the carrier's liability shall not exceed a value stated in the document if the carrier's rates are dependent upon value and the [shipper] by the carrier's tariff is afforded an opportunity to declare a higher value or a value as lawfully provided in the tariff, or where no tariff is filed he is otherwise advised of such opportunity."

This case is Rational Software Corporation v. Sterling Corporation, U.S. Court of Appeals for the 1st Circuit, App. Ct. No. 04-1607, an appeal from the U.S. District Court for the District of Massachusetts, Judge Joseph Tauro presiding.

EPIC Seeks Congressional Hearing and FTC Workshop on Data Products and FCRA

1/5. ChoicePoint wrote a letter to the Federal Trade Commission (FTC) and the Electronic Privacy Information Center (EPIC) in which it responded to the EPIC's letter to the FTC regarding database design, data products and the Fair Credit Reporting Act of 1970 (FCRA). The FTC has responsibility for enforcing the FCRA. The EPIC wrote back urging the Congress to hold hearings, and the FTC to conduct a workshop.

The EPIC argued in its December letter that data aggregation companies, such as ChoicePoint, are now selling data products that they assert fall outside of the protections contained in the FCRA, even though they have "similar data elements and descriptions" to FCRA covered products. The EPIC asserted that data aggregation companies, which are regulated by the FCRA, are now structuring their electronic databases, and data products, to fall outside of the scope of the FCRA, thereby threatening individual privacy, and the policy goals underlying the FCRA.

See also, story titled "EPIC Urges FTC to Open Investigation on Data Products and FCRA" in TLJ Daily E-Mail Alert No. 1,042, December 22, 2004.

ChoicePoint wrote that this "is yet another inaccurate, misdirected, and misleading attack by EPIC". It stated that "ChoicePoint fully complies with the FCRA, including the new Fair and Accurate Credit Transactions Act (FACTA), where they apply to our products and services."

It continued that the EPIC's "charge that the FCRA is inappropriately narrow is simply a disagreement on the public policy choices made by Congress and state legislatures. As you know, Congress clearly intended to limit the scope of the FCRA to specific types of reports for specific transactions. It was not meant to be omnibus privacy legislation. Information used for investigative, law enforcement, or governmental purposes is not regulated in the same manner as is the information used to make decisions related to credit, insurance, or employment."

ChoicePoint's letter added that "The topic of the responsible use of information is a vital one to our society. Like ChoicePoint chairman and CEO Derek Smith, in his recently published book, Risk Revolution, we support a national debate on this very topic."  See, Risk Revolution: Real Threat Facing America & the Promise of Technology for a Safer Tomorrow [Amazon], published in July of 2004.

Douglas Curling, P/COO of Choicepoint, signed ChoicePoint's December 29, 2004 letter. Then, Marc Rotenberg, Executive Director of the EPIC, wrote a reply letter to ChoicePoint, the FTC, and certain members of Congress, on January 5, 2005.

Rotenberg stated that "We would welcome a public hearing in Congress with balanced representation between those in the information broker industry and those in the consumer protection field, including state attorneys general, to discuss the scope and application of the Fair Credit Reporting Act to the dossiers on American consumers now being sold by companies such as yours." He also suggested "a similar public workshop before the Federal Trade Commission".

People and Appointments

1/5. President Bush named Claude Allen Assistant to the President for Domestic Policy. He will replace Margaret Spellings, who has been nominated to be Secretary of Education. Allen is currently Deputy Secretary of Health and Human Services. President Bush had previously nominated Allen to be a Judge of the U.S. Court of Appeals (4thCir). However, Senate Democrats obstructed consideration of this and other nominations. President Bush announced a list of 20 renominations for 109th Congress on December 23, 2004. Allen was not on the list. See, story titled "Bush to Renominate 20 for Federal Judgeships" in TLJ Daily E-Mail Alert No. 1,044, December 27, 2004.

1/5. President Bush named Daniel Bartlett Counselor to the President. He is currently Assistant to the President for Communications. President Bush also named Nicolle Devenish Assistant to the President for Communications. See, White House release.

1/5. Sen. Ted Stevens (R-AK) announced the senior staff for the Senate Commerce Committee for the 109th Congress. Lisa Sutherland will be Chief of Staff. She previously worked for Sen. Stevens on the Senate Appropriation Committee staff. David Russell will be Chief Counsel. He was previously Chief of Staff in Sen. Stevens' personal office. Christine Kurth will be Deputy Chief of Staff. She was previously Deputy General Counsel on the Appropriations Committee. Melanie Alvord will be Press Secretary. She has previously been the Press Secretary in Sen. Stevens' personal office and for the Appropriations Committee. Counsel for the Communications Subcommittee have not yet been announced.

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1/5. The National Institute of Standards and Technology (NIST) published a notice in the Federal Register that describes, and provides the application deadlines for, various NIST grant programs, including the Electronics and Electrical Engineering Laboratory (EEEL) Grants Program. The EEEL covers semiconductors, electronic instrumentation, radio frequency (RF) technology, optoelectronics, magnetics, video, electronic commerce as applied to electronic products and devices, the transmission and distribution of electrical power, national electrical standards, and law enforcement standards. Applications for EEEL program grants, and all related materials, must be received by 5:00 PM on September 30, 2005. See, Federal Register, January 5, 2005, Vol. 70, No. 3, at Pages 781 - 789.

1/5. The Office of Personnel Management (OPM) published a notice in the Federal Register that describes, and sets the comment deadline (March 7, 2005) for, its notice of proposed rulemaking (NPRM) regarding various pay and work schedule issues. Among the subjects addressed in this NPRM is the e-Payroll initiative. See, January 5, 2005, Vol. 70, No. 3, at Pages 1067 - 1110.

1/5. The Federal Communications Commission's (FCC) Wireline Competition Bureau (WCB) released its annual report [80 pages in PDF] titled "Biennial Regulatory Review 2004". The proceeding is WC Docket No. 04-179.


4th Circuit Rules BellSouth Employees Do Not Have to Wear Uniform with CWA Logo

1/4. The U.S. Court of Appeals (4thCir) issued its opinion [PDF] in Lee v. NLRB, holding that BellSouth employees cannot be compelled to wear uniforms with the logo of the labor union, the Communications Workers of America (CWA) on it.

Gary Lee and James Auburn, employees of BellSouth, but not members of the CWA, petitioned for review of the National Labor Relations Board's (NLRB) dismissal of their complaint against BellSouth and the CWA alleging that the agreement between BellSouth and the CWA that requires them to wear uniforms with the CWA logo violates their rights under labor labor and the First Amendment. The policy is mandatory for all employees in specified job categories, whether the employees are members of the union or not.

The Court of Appeals held that the agreement between BellSouth and the CWA violates the petitioners rights under Section 7 of the National Labor Relations Act (NLRA), which is codified at 29 U.S.C. § 157. The Court did not address the First Amendment freedom of speech issue. The Court vacated the order, and remanded to the NLRB.

Section 7 provides that "Employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection, and shall also have the right to refrain from any or all of such activities except to the extent that such right may be affected by an agreement requiring membership in a labor organization as a condition of employment as authorized in section 158(a)(3) of this title."

The Court wrote that "Section 7 not only protects employees' right to engage in union activities such as wearing union insignia, it also protects those employees who choose not to participate in union activities. It follows then, that if there is a presumptive right to wear union insignia as part of engaging in union activity under Section 7, there is a reciprocal Section 7 right contained in that section’s "right to refrain" language to choose not to wear union insignia."

BellSouth and the CWA argued that there were special circumstances that warranted the mandatory uniform policy, including promoting the public image of BellSouth. The three judges, who reside in BellSouth territory, did not accept this argument. The opinion states that "the public may view the union logo with suspicion and associate it with service disruptions and labor disputes".

This case is Gary Lee and James Auburn v. National Labor Relations Board, respondent, and Communications Workers of America, and BellSouth Telecommunications, Inc., intervenors, U.S. Court of Appeals for the 4th Circuit, App. Ct. No. 01-2075, a petition for review of a final order of the NLRB. Judge Widener wrote the opinion of the Court, in which Judges Michael Luttig and Henry Herlong (District Judge for the District of South Carolina) joined.

8th Circuit Holds RIAA Cannot Use 512(h) Subpoenas on ISPs for Info on P2P Infringers

1/4. The U.S. Court of Appeals (8thCir) issued its split opinion [PDF] in RIAA v. Charter Communications, reversing the District Court, and holding that a DMCA Section 512(h) subpoena may not be issued to an ISP that is merely acting as a conduit for the P2P infringement of copyright protected music files.

The Appeals Court followed the reasoning contained in the opinion [16 pages in PDF] of the U.S. Court of Appeals (DCCir) in an almost identical case, RIAA v. Verizon. That case is also reported at 351 F.3d 1229. There is also a pending petition for writ of certiorari in that case. See also, story titled "DC Circuit Reverses in RIAA v. Verizon" in TLJ Daily E-Mail Alert No. 804, December 22, 2003. See, full story.

FCC Moves to Dismiss Petition for Writ of Mandamus

1/4. The Federal Communications Commission (FCC) and the Department of Justice (DOJ) filed with the U.S. Court of Appeals (DCCir) a motion [4 pages in PDF] to dismiss the petition for writ of mandamus filed by the U.S. Telecom Association (USTA) and others. This is in the consolidated proceedings pertaining to challenges to the FCC's rules regarding the Section 251 unbundling requirements of incumbent local exchange carriers (ILECs).

The FCC and DOJ argue that dismissal is now appropriate because the FCC just adopted new unbundling rules, as required by the Court of Appeals in its March 2, 2004 opinion [62 pages in PDF] in USTA v. FCC.

The motion states that "The Commission’s adoption of final rules in response to the USTA II decision has obviated any need for further proceedings on the mandamus petition. That petition concerns interim requirements that the new rules will supersede."

The FCC adopted its Order on Remand at its December 15, 2004 meeting. See, story titled "FCC Adopts Unbundling Order" in TLJ Daily E-Mail Alert No. 1,039, December 16, 2004. However, the FCC has yet to release this order, and the rules therein. The FCC approved a press release on December 15. The FCC's just filed motion adds that "The Commission expects to release its order promulgating the new rules within approximately one month."

District Court Issues Preliminary Injunction Against Spyware Distributor

1/4. The U.S. District Court (DNH) issued a stipulated preliminary injunction order [9 pages in PDF] in FTC v. Seismic Entertainment Productions, Inc. This is a civil action alleging unfair and deceptive trade practices, in violation of Section 5(a) of the FTC Act, in connection with fraudulent dissemination of spyware. The defendants admit no wrongdoing, but are enjoined from continuing their allegedly unlawful practices, pending trial.

On October 6, 2004, the Federal Trade Commission (FTC) filed a civil complaint [14 pages in PDF] in District Court against Seismic Entertainment Productions, Inc.,, Inc., and Sanford Wallace.

The complaint alleges deceptive marketing by the defendants of purported anti-spyware software named "Spy Wiper" and "Spy Deleter", that is actually spyware. It states that "Defendants, in numerous instances, have exploited particular vulnerabilities in certain versions of the Microsoft Internet Explorer web browser (“IE web browser”) to reconfigure consumers’ computers by installing software code onto their computers without their knowledge or authorization. The software code, among other things, (a) changes the IE web browser’s home page; (b) modifies the IE web browser’s search engine; and (c) downloads and installs various advertising and other software programs ... ; and (d) causes an incessant stream of pop-up advertisements to be displayed."

See, story titled "FTC Files Complaint Against Spyware Con Artists" in TLJ Daily E-Mail Alert No. 994, October 11, 2004.

The District Court issued a temporary restraining order (TRO) on October 21, 2004. The present preliminary injunction replaces and supercedes that TRO.

This case is FTC v. Seismic Entertainment Productions, Inc., et al., U.S. District Court for the District of New Hampshire, D.C. No. 04-377-JD, Judge Joseph Diclerico presiding.

There is currently no spyware specific statute. The House, but not the Senate, approved two spyware related bills late last year. On October 5, 2004, the House approved HR 2929, the "Securely Protect Yourself Against Cyber Trespass Act", or SPY ACT, by a vote of 399-1. See, Roll Call No. 495. On October 7, 2004, the House approved HR 4661, the "Internet Spyware (I-SPY) Prevention Act of 2004", by a vote of 415-0. See, Roll Call No. 503.

HR 2929 is the House Commerce Committee's spyware bill. It prohibits certain conduct with respect to spyware, and gives the FTC civil enforcement authority. HR 4661 is the House Judiciary Committee's spyware bill. It amends Title 18 to provide criminal penalties for three of the most egregious uses of spyware.

Rep. Mary Bono (R-CA), the sponsor of HR 2929 in the 108th Congress, introduced HR 29 on January 4, 2005, the first day of the 109th Congress. It is a reintroduction of last year's bill. The original cosponsors include Rep. Joe Barton (R-TX), the Chairman of the House Commerce Committee.

People and Appointments

1/4. President Bush formally nominated eight people to serve in his cabinet. He had previously announced his intent to make each of these nominations. The nominees are Samuel Bodman (to be Secretary of Energy), Alberto Gonzales (Attorney General), Carlos Gutierrez (Secretary of Commerce), Mike Johanns (Secretary of Agriculture), Michael Leavitt (Secretary of Health and Human Services), Jim Nicholson (Secretary of Veterans Affairs), Condoleezza Rice (Secretary of State), and Margaret Spellings (Secretary of Education). See, White House release.

1/4. Rep. Denny Hastert (R-IL) was re-elected Speaker of the House of Representatives. Rep. Tom DeLay (R-TX) was again selected as the Majority Leader, and Rep. Nancy Pelosi (D-CA) was again selected to be the Minority Leader. Rep. Roy Blunt (R-MO) will again be the Majority Whip, and Rep. Steny Hoyer (D-MD) will again be the Minority Whip.

1/4. The House approved HRes 6, which names Rep. David Dreier (R-CA) as the Chairman of the House Rules Committee. The other Republican members of the Committee are Rep. Lincoln Diaz-Balart (R-FL), Rep. Doc Hastings (R-WA), Rep. Pete Sessions (R-TX), Rep. Adam Putnam (R-FL), Rep. Shelley Capito (R-WV), and Rep. Rob Bishop (R-UT).

1/4. The World Trade Organization (WTO) stated in a release that there are four nominees to succeed the current WTO Director-General, Supachai Panitchpakdi, whose term of office expires on August 31, 2005. The four are Pascal Lamy of France, who was until recently the European External Trade Commissioner, Carlos Pérez del Castillo of Uruguay, Jaya Krishna Cuttaree of Mauritius, and Luiz Felipe de Seixas Corrêa of Brazil.

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1/4. The Securities and Exchange Commission (SEC) filed a civil complaint in U.S. District Court (DC) against TV Azteca S.A. de C.V., and three of its officers and directors, alleging violation of federal securities laws in connection with an alleged scheme to conceal Chairman of the Board Ricardo Salinas's role in a series of transactions through which he personally profited by $109 Million. The complaint alleges Section 10b fraud, and other violations. See, SEC release. TV Azteca produces of Spanish language television programming, and operates two television networks (Azteca 13 and Azteca 7) through 315 owned and operated stations in Mexico. This case is SEC v. TV Azteca, Ricardo Salinas Pliego, Pedro Padilla Longoria, and Luis Echarte Fernandez, U.S. District Court for the District of Columbia, D.C. No. 1:05-CV-00004.

FCC Publishes Notices For Rules and FNPRM Regarding Children's Programming Obligations of DTV Broadcasters

1/3. The Federal Communications Commission (FCC) published a notice in the Federal Register that describes and sets comment deadlines for its Further Notice of Proposed Rulemaking (FNPRM) regarding the children's programming obligations of digital television broadcasters. Comments are due by March 1, 2005. Reply comments are due by April 1, 2005.

The FCC adopted its Report and Order and FNPRM at its September 9, 2004 meeting. It released the text on November 23, 2004. This item is FCC 04-221 in MM Docket 00-167. See, Federal Register, January 3, 2005, Vol. 70, No. 1, at Pages 63-68. See also, story titled "FCC Adopts Report and Order Re Children's Programming Obligations of DTV Broadcasters" in TLJ Daily E-Mail Alert No. 975, September 13, 2004.

The FCC published a separate notice in the Federal Register that describes, recites, and sets the effective dates for the final rules adopted in the Report and Order portion of this item. Some provisions take effect on February 1, 2005. Others take effect on January 1, 2006. The effective dates for some provisions have not yet been set. See, Federal Register, January 3, 2005, Vol. 70, No. 1, at Pages 25-38.

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1/3. The Federal Communications Commission (FCC) released a Memorandum Opinion and Order in which it denied A-O Broadcasting Corporation's petition for reconsideration of the FCC's Forefeiture Order of December 29, 2003. The FCC fined A-O, the former licensee of FM radio station KTMN in Cloudcroft, New Mexico, $25,000 for failure to comply with radio frequency radiation maximum permissible exposure limits, failing to have Emergency Alert System equipment installed, and other violations. See also, FCC release.

1/3. The Office of the U.S. Trade Representative (USTR) published a notice in the Federal Register that states the February 11, 2005 at 5:00 PM is the deadline for submitting comments regarding countries that deny adequate and effective protection of intellectual property rights or deny fair and equitable market access to U.S. persons who rely on intellectual property protection. This is for the USTR's Special 301 review, pursuant to 19 U.S.C. § 2242. See,  Federal Register, January 3, 2005, Vol. 70, No. 1, at Page 134.

1/3. The Office of the U.S. Trade Representative (USTR) published a notice in the Federal Register that states that January 10, 2005 is the suggested deadline for submitting comments to the USTR regarding the European Community's complaint to the World Trade Organization (WTO) regarding the Jobs Act, which replaced the Foreign Sales Corporation (FSC) and Extraterritorial Income (ETI) tax regimes. See, Federal Register, January 3, 2005, Vol. 70, No. 1, at Pages 135-136. HR 4520 (108th Congress), the American Jobs Creation Act of 2004, was a huge tax bill that included FSC/ETI repeal. President Bush signed it on October 22, 2004. It is now Public Law No. 108-357.

1/3. Robert Sachs, P/CEO of the National Cable & Telecommunications Association (NCTA), sent a letter [PDF] to Michael Powell, Chairman of the Federal Communications Commission (FCC), urging Powell to "convene and host a discussion between several business and technical representatives from the cable and consumer electronics industries ... to clarify a number of issues" regarding set top boxes and the separate security requirement. Sachs proposes that Powell preside over a meeting with about five representatives from the cable industry and five from the consumer electronics industry. This relates to CS Docket No. 97-80.

People and Appointments

1/1. Rep. Bob Matsui (D-CA) died. He represented a Sacramento, California district in the House since 1978. He had a more technology friendly voting record than most Democrats in the House. He was also the third ranking Democrat on the House Ways and Means Committee, which has jurisdiction over tax, social security and trade issues. Rep. Charles Rangel (D-NY) is the ranking Democrat. Rep. Fortney Stark (D-CA) is second. And, Rep. Sander Levin (D-MI) is now the third ranking Democrat. Rep. Matsui was also the ranking Democrat on the Social Security Subcommittee.

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1/1. The Office of the U.S. Trade Representative (USTR) issued a release [PDF] on the occasion of the U.S. Australia Free Trade Agreement going into effect.

Go to News from December 26-31, 2004.