2nd Circuit Holds That ISP Did Not Violate ECPA When It Acquired E-Mail of Customer With Terminated Account

1/25. The U.S. Court of Appeals (2ndCir) issued its opinion [13 pages in PDF] in Hall v. Earthlink Network, a dispute regarding an e-mail service provider's termination of service. The District Court granted judgment to Earthlink. The Court of Appeals affirmed.

The Appeals Court held that, for the purposes of the ECPA's prohibition of interception of electronic communications, ISPs do not intercept the e-mail messages of their customers, if they are acting within the ordinary course of their businesses. This might seem like an obvious conclusion. However, the language of the 1986 ECPA, if applied literally, suggests a different conclusion. The Court followed legislative intent, and the principle that absurd results are to be avoided, in applying the statute.

See, full story.

NCTA Picks Kyle McSlarrow to Replace Sachs

1/25. Kyle McSlarrow was named President and Chief Executive Officer of the National Cable & Telecommunications Association (NCTA), effective March 1, 2005. He will replace Robert Sachs. McSlarrow has solid Republican credentials, and ties to the Congressional committees that have jurisdiction over issues of concern to the cable industry.

McSlarrow has been Deputy Secretary of Energy and Chief Operating Officer of the Department Energy (DOE) since 2001. He announced his resignation, effective early February, on January 19. See, DOE release.

At the DOE, McSlarrow (at right) serves under Secretary Spencer Abraham, who was previously a member of the Senate, and its Commerce and Judiciary Committees, both of which deal with cable and technology related issues. He also served with DOE General Counsel Lee Otis, who was previously Judiciary Committee counsel to former Sen. Abraham. Before that, she was the elder Bush's chief judge picker.

Before working at the DOE, McSlarrow was Deputy Chief of Staff and Chief Counsel to former Sen. Bob Dole (R-KS) and current Sen. Trent Lott (R-MS) when each served as Senate Majority Leader. Sen. Lott is now a senior member of the Senate Commerce Committee.

Also, while the DOE handles energy issues, it is important to note that the House Commerce Committee has jurisdiction over not only communications and many e-commerce issues, but also energy. Hence, he has worked with, and testified before, the Committee in recent years.

McSlarrow also ran for Congress, unsuccessfully. Most recently, he ran in Virginia's 8th District in the suburbs of Washington DC against Rep. Jim Moran (D-VA). It was the Republican year of 1994, but McSlarrow still lost 61% to 39%.

See also, NCTA release.

More News

1/25. Lee Jong-wook, Director-General of the World Health Organization and Chairman of the Board of the Global Alliance for Vaccines and Immunization (GAVI), stated in a release that "I salute the Bill and Melinda Gates Foundation and Norway for the announcement, today, of over one billion dollars for global immunization. These large contributions will help save the lives of hundreds of thousands of people and prevent immense suffering and disability over the coming years." The GAVI stated in a release that "The Bill & Melinda Gates Foundation announced a grant of $750 million, and Norway committed $290 million". See also, release of the Bill & Melinda Gates Foundation.

1/25. The Department of Homeland Security (DHS) issued a release and a document describing its use of radio frequency identification technology at U.S. borders as part of the US VISIT program.

1/25. The Federal Communications Commission's (FCC) International Bureau released a report [306 pages in PDF] titled "2003 International Telecommunications Data". This report, which is based upon data from 2003 and before, finds that "In 2003, fifty-seven U.S. facilities-based and facilities-resale ... carriers reported that they billed $8.4 billion for international telephone service, $620 million for private line services and $156 million for international other miscellaneous services, compared to $9.4 billion, $988 million, and $113 million, respectively, in 2002." See also, FCC release [PDF].

1/25. The Federal Communications Commission (FCC) released a notice [4 pages in PDF] that requests public comments to assist it in preparing the report required by Section 208 of the Satellite Home Viewer Extension and Reauthorization Act of 2004 (SHVERA). The SHVERA requires the FCC, within 9 months of passage, to "complete an inquiry regarding the impact on competition in the multichannel video programming distribution market of the current retransmission consent, network nonduplication, syndicated exclusivity, and sports blackout rules, including the impact of those rules on the ability of rural cable operators to compete with direct broadcast satellite industry in the provision of digital broadcast television signals to consumers. Such report shall include such recommendations for changes in any statutory provisions relating to such rules as the Commission deems appropriate." Comments are due by March 1, 2005. Reply comments are due by March 16, 2005. This Public Notice is DA 05-169.

1/25. Sen. Patrick Leahy (D-VT) issued a release in which he stated that he "will serve as the ranking Democratic member of the Intellectual Property Subcommittee of the Senate Judiciary Committee in the coming 109th Congress. Hatch will serve as the subcommittee's chairman." The two also jointly filed an amicus curiae brief with the Supreme Court in MGM v. Grokster.

1/25. The U.S. Patent and Trademark Office (USPTO) released a report titled "Performance and Accountability Report Fiscal Year 2004". See also, USPTO release.

1/25. Securities and Exchange Commission (SEC) Chairman William Donaldson gave a speech in London, United Kingdom, titled "U.S. Capital Markets in the Post-Sarbanes-Oxley World: Why Our Markets Should Matter to Foreign Issuers". He also made a couple of references to the internet and computers. First, he said that "Are there certain situations in which rules should not apply? Or where old rules have been outmoded or are in need of revision? For instance, we have recently proposed reforms to the rules governing the ``quiet period´´ in the weeks preceding initial public offerings, reflecting the advances made in modern communications methods, such as the Internet." See, SEC release of October 26, 2004 and notice [97 pages in PDF] in the Federal Register, November 17, 2004, Vol. 69, No. 221, at Pages 67392 - 67487. He also said that "the fundamental issue for everyone involved in financial markets today, regardless of company or country, must be to maintain high standards -- legal, regulatory, and ethical -- that breed trust and confidence. This becomes increasingly important at a time when money managers can move capital around the globe with a few clicks on a computer."

1/25. Sun Microsystems announced that the source code for the Solaris 10 operating system "will be made available under the OSI (Open Source Initiative) approved Common Development and Distribution License (CDDL)". See, Sun release.

1/25. Microsoft issued a release regarding future plans to combat the distribution of counterfeit software.

1/25. The Department of Justice, state plaintiffs, and Microsoft filed another periodic pleading with the U.S. District Court (DC) apprising the Court of the status of the governments' antitrust case against Microsoft. This pleading is titled "Joint Status Report on Microsoft's Compliance with the Final Judgments". These cases are U.S. v. Microsoft, D.C. Nos. 98-1232 (CKK) and 98-1233, Judge Colleen Kotelly presiding. The Court will hold a status conference on Tuesday, February 1, 2005 at 10:15 AM.

Petitioners, Solicitor General, & Amici Urge Supreme Court to Reverse in MGM v. Grokster

1/24. The two sets of petitioners and numerous amici curiae, including the Office of the Solicitor General, filed briefs with the Supreme Court in MGM Studios v. Grokster. The District Court and the Ninth Circuit both held 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.

Both opinions relied upon the opinion of the Supreme Court in Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417 (1984), which held that the "sale of video cassette recorders (``VCR´´s) did not subject Sony to contributory copyright liability, even though Sony knew as a general matter that the machines could be used, and were being used, to infringe the plaintiffs' copyrighted works. Because video tape recorders were capable of both infringing and ``substantial noninfringing uses,´´ generic or ``constructive´´ knowledge of infringing activity was insufficient to warrant liability based on the mere retail of Sony’s products."

The respondents' brief is due on February 28, 2005. The Court is scheduled to hear oral argument on March 27, 2005. See, Supreme Court's March calendar [PDF]. The Court would then likely issue an opinion before the end of the term, in May or June.

Proceedings in the District Court. There are two actions. Metro Goldwyn Meyer (MGM), other movie companies, and various record companies, filed a complaint in the U.S. District Court (CDCal) against Grokster, Streamcast and Kazaa alleging copyright infringement, in violation of 17 U.S.C. § 501. These are the Recording Industry Association of America (RIAA) and Motion Picture Association of America (MPAA) plaintiffs.

They alleged contributory and vicarious infringement by the defendants. They did not name any direct infringers -- the users of the P2P networks.

Second, professional songwriters and music publishers filed a class action complaint against the same defendants alleging contributory and vicarious infringement. These are the National Music Publishers Association (NMPA) plaintiffs.

The District Court consolidated the two actions. The parties filed cross motions for summary judgment.

On April 25, 2003, the U.S. District Court (CDCal) issued its opinion holding that Grokster's and Streamcast's P2P file copying networks do not contributorily or vacariously infringe the copyrights of the holders of music and movie copyrights. See also, story titled "District Court Holds No Contributory or Vicarious Infringement by Grokster or Streamcast P2P Networks" in TLJ Daily E-Mail Alert No. 650, April 28, 2003.

The District Court reasoned that to be held contributorily liable, the defendants must have "knowledge" of the infringing activity. The District Court, unlike the Appeals Court in the Napster case, found that the defendants do not possess "knowledge" that their networks or being used to infringe copyrights. The District Court also wrote that to be held liable vicariously, the defendants must have the "right and ability to supervise the infringing conduct". It found that they did not.

Proceedings in the Court of Appeals. Both the NMPA and the MPAA/RIAA appealed to the U.S. Court of Appeals (9thCir). The Appeals Court consolidated the two appeals. See, story titled "Music Publishers File Appeal Brief in P2P Infringement Case" in TLJ Daily E-Mail Alert No. 724, August 22, 2003.

On August 19, 2004 the Ninth Circuit issued its opinion [26 pages in PDF] affirming the District Court. See, story titled "9th Circuit Holds No Vicarious Infringement in Grokster Case" in TLJ Daily E-Mail Alert No. 963, August 20, 2004. The 9th Circuit's opinion is reported at 380 F.3d 1154.

Supreme Court. The plaintiffs then filed a petition for writ of certiorari [46 pages in PDF] with the Supreme Court on October 8, 2004. See, story titled "Movie and Music Industry Entities File Cert Petition in MGM v. Grokster" in TLJ Daily E-Mail Alert No. 994, October 11, 2004.

See also, story titled "Summary of Briefs in MGM v. Grokster" in TLJ Daily E-Mail Alert No. 1,020, November 17, 2004, and story titled "PFF Urges Supreme Court to Grant Certiorari in MGM v. Grokster" in TLJ Daily E-mail Alert No. 1,014, November 9, 2004.

The Supreme Court granted certiorari. See, story titled "Supreme Court Grants Certiorari in P2P Case" in TLJ Daily E-Mail Alert No. 1,036, December 13, 2004. The Supreme Court case number is 04-480.

There are two briefs on the merits submitted by petitioners. First, there is the brief of MGM, other motion picture studios, and recording companies. Second, there is the NMPA brief.

MPAA/RIAA Brief. The MPAA/RIAA brief states that the question presented is "Whether the Ninth Circuit erred in concluding, contrary to long-established principles of secondary liability in copyright law (and in acknowledged conflict with the Seventh Circuit), that the Internet-based ``file sharing´´ services Grokster and StreamCast should be immunized from copyright liability for the millions of daily acts of copyright infringement that occur on their services and that constitute at least 90% of the total use of the services." (Parentheses in original.)

It argues that "The Ninth Circuit broke faith with that central tenet of Sony-Betamax when it held that Grokster and StreamCast bear no legal responsibility for the millions of acts of infringement made possible by their services. The court afforded no protection whatsoever to petitioners' copyrights in the creative works unlawfully reproduced and distributed on respondents' services every day. And the court immunized enterprises that are not engaged in legitimate ``unrelated areas of commerce´´ but thrive on infringement. The Ninth Circuit acted in the misguided belief that respondents' ``market abuses, despite their apparent present magnitude,´´ must be tolerated in order to avoid chilling ``innovation.´´"

It argues that the defendants are liable as both contributory infringers and vicarious infringers.

NMPA Brief. The NMPA brief argues that the defendants should be held liable as both contributory infringers and vicarious infringers under established principles of vicarious liability for copyright infringement.

Solicitor General's Brief. The Office of the Solicitor General's (SG) brief urges the Court to reverse. It argues at length that the Court of Appeals misapplied the Sony case. It argues briefly that the Supreme Court might also apply an active inducement of infringement test. The AIPLA brief (see below) argues this point at greater length.

The SG brief states that "Although the Copyright Act does not expressly provide for the imposition of secondary liability for copyright infringement, this Court has recognized that there are ``circumstances in which it is just to hold one individual accountable for the [copyright infringement] of another.´´" (Citation to Sony omitted. Brackets in original.) It continues that "Contributory liability applies to ``one who, with knowledge of the infringing activity, induces, causes or materially contributes to the infringing conduct of another.´´ Gershwin Publishing Corp. v. Columbia Artists Management, Inc., 443 F.2d 1159, 1162 (2d Cir. 1971)."

It continues that "In Sony, the Court stated that a seller of a product that enables copyright infringement may be held liable if the product is not ``capable of commercially significant noninfringing uses.´´ ... The court of appeals held that, even accepting that 90% or more of the uses of respondents' file-sharing networks are infringing, the mere fact that the systems are ``capable´´ of noninfringing transfers precluded liability under Sony, notwithstanding the relatively trivial proportion and commercial significance of such uses. ... The Ninth Circuit's approach would eviscerate the ``effective´´ protection against copyright infringement that Sony demands."

The SG brief argues that "Although Sony did not give precise content to the term ``commercially significant,´´ commercial significance should be evaluated in the context of the particular defendant’s business, as opposed to the technology in the abstract. While P2P technology unquestionably can be employed for a variety of legitimate purposes without giving rise to rampant copyright infringement, the record (read in the light most favorable to petitioners) suggests that respondents have built their particular P2P networks around the ``draw´´ of massive copyright infringement. Respondents therefore cannot evade liability under Sony merely by pointing to other, legitimate, uses of the technology."

The SG brief adds that "The touchstone for liability under Sony is whether the defendant is engaged in a business ``substantially unrelated´´ to copyright infringement."

The Solicitor General's brief offers the second argument that "respondents might also be found liable for their active inducement of the infringement committed by their users. Petitioners' evidence could support a finding that the copyright infringement that takes place on respondents' networks did not simply ``happen´´ but was the result of active and intentional steps on the part of respondents to induce such infringement, which was essential to respondents' business model."

The SG's brief lists the names of many persons involved in submitting the brief. In addition to Department of Justice personnel, it lists David Carson (General Counsel of the Copyright Office), James Toupin (General Counsel of the USPTO) and John Whealan (Deputy General Counsel for Intellectual Property Law at the USPTO).

Hatch Leahy Brief. Sen. Orrin Hatch (R-UT) and Sen. Patrick Leahy (D-VT) filed an amicus brief [20 pages in PDF]. They state that they "have an interest in the proper differentiation of constitutional responsibilities between Congress and this Court. Resolving the question presented by this case -- whether certain distributed file-sharing services should be held secondarily liable for copyright infringement -- necessarily involves the question of whether and how the Court applies this liability doctrine in light of a new technology."

They wrote that the Sony opinion "recognized that principles of secondary liability inhere in the Copyright Act, announced a rule concerning the type of secondary liability at issue there, and decided the case on its merits. In this case, respondents embrace that decision and their understanding of that rule, but incongruously take the position that rendering such a decision in this case is beyond this Court’s authority, and that indeed the Constitution demands that the resolution of such issues belongs solely to Congress. Respondents err in three ways: First, the Court must decide properly presented cases (like this one), while Congress may choose which issues it addresses. Second, Congress has long and properly respected the role of the federal courts in articulating the traditional doctrines of secondary liability, and indeed assumes the continuing force of those doctrines as it legislates in the area of copyright. Third, recent efforts in the Senate to address one species of secondary liability -- inducement to infringe copyright -- can in no way abrogate the courts' authority in this arena."

AIPLA Brief. The American Intellectual Property Law Association (AIPLA) filed a brief [29 pages in PDF] that argues that "``contributory infringement´´ in copyright law includes ``active inducement,´´ much as that concept is known in patent law, and that a showing of ``substantial noninfringing uses´´ is not a defense to ``active inducement.´´ AIPLA further requests that this Court remand the case for a determination as to whether ``active inducement´´ can be established."

This brief states that "this case potentially presents questions not required to be reached in Sony, namely: (1) does Sony’s ``capable of substantial noninfringing uses´´ standard still apply even when the ``primary use´´ of the product at issue is copyright infringement? if so, (2) what does it mean to be ``capable of substantial noninfringing uses´´? and (3) are there circumstances under which there should be secondary liability for the distributor of a product even when that product is ``capable of substantial noninfringing uses´´?"

This brief "focuses on the third question because AIPLA believes that it may lead to the most balanced and harmonized answer to this case."

The AIPLA brief continues that the "patent law ... demonstrates that a showing of ``substantial noninfringing uses´´ (recited in 35 U.S.C. § 271(c)) is not a defense when there is ``active inducement´´ (codified in 35 U.S.C. § 271(b)). A defendant is liable for active inducement when (1) the defendant takes actions which induce (i.e., encourage) acts by another which constitute infringement; (2) the defendant has notice of the infringing nature of those acts; and (3) the defendant has an ``intent to cause the acts which constitute the infringement.´´" (Parentheses in original.) It cites Hewlett-Packard Co. v. Bausch & Lomb, Inc., 909 F.2d 1464, (Fed. Cir. 1990).

It adds that "It is no defense to ``active inducement´´ that the infringing acts were undertaken with a product ``capable of substantial noninfringing uses.´´"

BSA Brief. The Business Software Alliance (BSA) filed a brief that argues that the Court "should reject any arguments that would modify the defense to secondary liability for copyright infringement established in Sony Betamax." In addition, "In reaffirming Sony Betamax, the Court should make clear that customary conduct ancillary to distribution of technology -- like general advertising, product support and upgrades, as well as conveying other information to consumers about the use of a particular technology -- lies within the boundaries of the Sony Betamax defense. The Court should also reaffirm Sony Betamax’s clear holding that products or technologies capable of substantial non-infringing uses lie within the defense, so that there is no requirement to present evidence of current actual commercial non-infringing uses."

Moreover, the BSA brief argues that "the Court should reject the modifications to that defense proposed by Judge Posner in In re: Aimster Copyright Litigation". It asserts that "The Aimster approach is unsuited for application by courts, which would be placed in the position of assessing untested alternative technologies and hypothesizing about their costs and benefits" and because "that approach can be applied only after a product has been introduced to the marketplace, leaving product designers with no reliable basis upon which to predict their liability".

On June 30, 2003, the U.S. Court of Appeals (7thCir) issued its opinion [23 pages in PDF] in In Re Aimster Copyright Litigation. Judge Richard Posner discussed the Sony case at length. He wrote, for example, that "We also do not buy Aimster's argument that since the Supreme Court distinguished ... between actual and potential noninfringing uses, all Aimster has to show in order to escape liability for contributory infringement is that its file-sharing system could be used in noninfringing ways, which obviously it could be. Were that the law, the seller of a product or service used solely to facilitate copyright infringement, though it was capable in principle of noninfringing uses, would be immune from liability for contributory infringement. That would be an extreme result, and one not envisaged by the Sony majority."

However, the BSA brief also argues that "Because the Ninth Circuit incorrectly applied the standard for contributory liability to the evidence in the record of this case, the decision below should be vacated and remanded to the Ninth Circuit for further proceedings."

DiMA Brief. Digital Media Association (DiMA), NetCoalition, Center for Democracy and Technology (CDT), and Information Technology Association of America (ITAA) filed a brief [37 pages in PDF] that urges the Court to vacate the opinion of the Court of Appeals. It states that they participate as amici "to apprise the Court of the dangers to technological innovation, free expression, and democratic values online that are posed by petitioners' position." They want to preserve the Sony standard, but suggest that Grokster may be liable under this standard.

The brief continues that "All technologies that enable the distribution of information -- from the typewriter to the tape recorder, copy machine, VCR, and cellular phone -- may be used to infringe copyrighted works. In the digital world, too, computer operating systems, programs for recording and playing music, e-mail programs, compact discs, and peer-to-peer technology may be used to infringe copyrights. At the same time, all of these technologies have important and far-reaching legal uses, the full extent of which is inherently unpredictable."

"Copyright law must therefore strike a careful balance between protecting copyright owners and shielding innovative companies from secondary liability resulting from the misuse of their novel technologies", the brief states. It concludes that the Supreme Court "struck that balance correctly" in Sony. Nevertheless, it argues that "Grokster’s conduct in this case may well give rise to liability".

IPO Brief. The Intellectual Property Owners Association (IPO) filed a brief [PDF] that states that the IPO "wants to preserve the patent law doctrine of contributory infringement from unintended effects of a decision in this case. Because the Court in" the Sony case "relied in part on the patent law standard for contributory infringement to inform the copyright rule on secondary liability, any re-examination of the copyright rule could indirectly affect patent law."

The IPO brief states that "Copyright law imposes responsibility for another's infringement through doctrines of vicarious liability and contributory infringement. One aspect of contributory infringement is inducement. Just as it did in Sony, the Court should again look to the patent law to inform interpretation of copyright principles. Codified in 35 U.S.C. § 271(b), inducement applies where the supplied product, even if useful for some non-infringing purposes, has been actively promoted as an aid to infringement. In the copyright context, because the necessary element of intent may be proved by circumstantial evidence, inducement can capture those whose obvious aim is to abet illegal reproduction and distribution, leaving unaffected the honest innovator of content distribution systems."

"The Court ruled in Sony that secondary liability may not result from merely providing a staple article of commerce -- that is, a product capable of substantial non-infringing uses. That ruling drew from patent law, which places important reliance on the clearly defined protection of the staple article of commerce doctrine. The Court’s ruling in this case should confirm that a staple article embraces potential uses, and that the Sony standard is met by a use that is non-trivial. Because the case can be resolved through the doctrine of inducement, there is no need to reconsider the definition of a staple article of commerce."

The IPO, which was written by James Pooley and others at Millbank Tweed, concludes that "the opinion of the Ninth Circuit should be vacated and the case remanded to the district court".

PFF Brief. The Progress and Freedom Foundation (PFF) brief [21 pages in PDF], written by James DeLong and Solveig Singleton, cites as many works on game theory and rational choice theory as it does court opinions. It urges the Supreme Court to reverse the Court of Appeals on the basis of a game theoretical concept known as the prisoner's dilemma.

The PFF brief states that "Consumers have two strong interests: (1) Avoiding inhibitions on technological progress; and (2) Fostering the production of content by providing incentives to creators". Moreover, "These are complementary, not conflicting, because each is necessary to the other. Technological devices are useless without content, and content is pointless without means of delivery. But they must be reconciled, because each, taken to the limit of its logic, can do serious harm to the other."

The gist of the PFF argument is that "Consumers face a collective action problem of the type known as Prisoner's Dilemma, the name applied to situations in which the immediate incentives operating on each individual work to undermine the interests of the whole group. In the context of music, each consumer is better off if he or she has total access to unauthorized file-sharing while every other consumer pays for the music. But if everyone responds to this calculus of personal interest, the whole system collapses and everyone loses."

The PFF asserts that "A crucial function of legal rules is to avoid such results." But, it cites no legal authority for this proposition. It then continues that "the Ninth Circuit failed to recognize that no group of consumers, interested in solving its Prisoner’s Dilemma problem and maximizing its long-term enjoyment of music, would select a legal regime that allows the untrammeled operation of Grokster and similar programs. Such a regime would quickly distribute the existing stock of music, but would provide no incentives for future production, and would destroy any hope for the creation of legitimate Internet distribution systems that can provide continuing incentives to the creative community.

FCC Denies 36 Indecency Complaints

1/24. The Federal Communications Commission (FCC) released a Memorandum Opinion and Order (MOO) [11 pages in PDF] that denies 21 complaints filed by the Parents Television Council (PTC) against various television broadcast licensees alleging violations the Communications Act and the FCC's rules regarding the broadcast of indecent material.

The PTC complained about, among other things, the broadcast of "Austin Powers: The Spy Who Shagged Me".

The FCC adopted this MOO on December 8, 2004, but did not disclose it until 7 weeks later, January 24, 2005. The FCC also released a second Memorandum Opinion and Order [11 pages in PDF], also adopted back on December 8, 2004, that denies 15 more complaints submitted by the PTC.

Tim Winter, Executive Director of the PTC, responded in the PTC web site that "The FCC had 36 individual opportunities to provide clarity and direction -- both to families and to broadcasters, but they chose not to do so. Instead, the FCC abandoned its public interest responsibility by lumping all 36 complaints into one great mish-mash of imprecision. Furthermore, it took the FCC over three years to rule on at least one complaint and almost two years to rule on several others. That's unacceptable. The FCC should be able to determine and rule within six months time whether a broadcaster has crossed the line."

Winters also commented on Powell's resignation. He said that "We must have an FCC Chairman who will take this issue seriously and we believe such a candidate exists with FCC Commissioner Kevin Martin. We strongly recommend the President nominate him to be Chairman of the FCC".

The FCC also issued a release [PDF] that states as follows: "Commissioner Martin issuing a statement at a later date".

FCC Commissioner Michael Copps wrote that "In these two Orders, the Commission combines 36 unrelated complaints with no apparent rhyme or reason other than that they concern television broadcasts. The Commission then denies these complaints with hardly any analysis of each individual broadcast, relying instead on generalized pronouncements that none of these broadcasts violates the statutory prohibition against indecency on the airwaves. I believe that some of these broadcasts present a much closer call."

These two MOOs are FCC 04-279 and FCC 04-280.

4th Circuit Rules that Commerce Clause Trumps Younger Doctrine in Case Against PSC

1/24. The U.S. Court of Appeals (4thCir) issued its opinion [16 pages in PDF] in Harper v. PSC of West Virginia, a case regarding the commerce clause and the Younger abstention doctrine.

This case is a victory for interstate commerce, unregulated by state regulators, and the local interests that seek protection from interstate competition.

This facts of this case do not involve communications or technology. Rather, this case is about garbage. Yet, the legal principles articulated in this case may be pertinent to some future disputes involving state regulation of communications and technology.

James Harper has a garbage collection business based in the state of Ohio. The Public Service Commission of West Virginia regulates common carriers. Its regulatory reach under West Virginia statute extends to garbage carriers. It effectively denied Harper's request for a certificate of convenience and necessity -- to carry trash. Instead, it provides monopolies for the incumbent franchisees. Harper nevertheless entered into a contract with a town in West Virginia to collect and dispose of its garbage. The garbage monopolists complained to the PSC, which ordered Harper to cease and desist from competing with its monopolists.

Harper filed a complaint in U.S. District Court (SDWVa) against the PSC, and its Commissioners, alleging violation of the commerce clause of the U.S. Constitution. The District Court abstained from deciding the case pursuant to Younger v. Harris, 401 U.S. 37 (1971). The District Court's opinion is reported at 291 F. Supp. 2d 443.

Harper appealed. The Court of Appeals reversed. Judge Harvie Wilkinson wrote the opinion of the unanimous three judge panel.

The Appeals Court held that the District Court erred in abstaining from ruling on the significant Commerce Clause challenge, and remanded the case for determination on the merits.

The Court of Appeals wrote that for abstention to be appropriate, under Younger and its progeny, three things must be present: (1) the state proceedings must constitute an ongoing state judicial proceeding, (2) the proceedings must implicate important state interests, and (3) there must be an adequate opportunity in the state proceedings to raise constitutional challenges.

The Court of Appeals opinion focused solely on the second item -- important state interests. There is no sentence or paragraph of black letter law in this opinion that establishes what an important state interest is for the purpose of the Younger doctrine. Rather, Wilkinson wrote a wide ranging essay on various aspects of state importance, and what are the things that "make a state a state", and "lie at the heart of state sovereignty".

Wilkinson wrote, for example, that "Federal courts thus do not hesitate to recognize as ``important´´ under Younger those state interests which reflect the inalienable attributes of sovereignty retained by American states."

He did suggest that some of the areas where an important state interest may be at stake include criminal law, education, family relations, property, land use, zoning, public health, and corporations. On the other hand, he made no mention of regulation of telephone communications, internet protocol services, or electronic commerce.

Then, he stated that "Because the interest advanced here is one that by its very nature serves to impede interstate commerce, we must evaluate the effect of the dormant Commerce Clause upon the decision to abstain."

He elaborated, "The commerce power plays a role in abstention analysis quite different from many of the other provisions of the Constitution. The dormant Commerce Clause demonstrates a difference of kind, not merely of degree. By its very nature, it implicates interstate interests. It protects all states by ensuring that no state erects the kind of barriers to trade and economic activity that threatened the survival of a fledgling country under the Articles of Confederation. Recognizing that there is a peculiarly national interest -- and therefore, more limited state interest -- in no way threatens the kind of comity that has always underpinned the Younger doctrine. No state’s dignity could be offended by acknowledging the obvious point that the Framers consciously withdrew interstate commerce from the vast collection of interests that remain the primary responsibility of the states."

"When there is an overwhelming federal interest -- an interest that is as much a core attribute of the national government as the list of important state interests are attributes of state sovereignty in our constitutional tradition -- no state interest, for abstention purposes, can be nearly as strong at the same time." He concluded that "In short, the commerce power itself justifies a narrower view of state interests in the abstention context."

Supreme Court News

1/24. The Supreme Court issued four opinions, none of which are technology related.

The Court also issued an Order List [97 pages in PDF]. This is unusually long. However, the first 87 pages are devoted cases related to U.S. v. Booker, a case regarding application of the Federal Sentencing Guidelines. See, the Supreme Court's January 12, 2005 opinion in U.S. v. Booker [124 pages in PDF]. The Supreme Court granted certiorari in numerous pending criminal cases, vacated the judgments of the Courts of Appeals, and remanded for further proceedings in light of U.S. v. Booker.

The Supreme Court also issued a minor order in the Brand X case. It wrote that "The motion of the Acting Solicitor General to dispense with printing the joint appendix is granted." See, Order List [97 pages in PDF] at page 88.

The Supreme Court denied certiorari, without opinion, in Fogerty v. MGM, a copyright infringement case involving a song for a James Bond movie. See, Order List [97 pages in PDF] at page 89. See also, August 3, 2004 opinion of U.S. Court of Appeals (6thCir). This case is Frank Fogerty, et al. v. MGM Group Holdings Corp., et al., Sup. Ct. No. 04-598, a petition for writ of certiorari to the U.S. Court of Appeals for the 6th Circuit, App. Ct. No. 03-5498

The Supreme Court also denied certiorari, without opinion, in Phonecards R Us, Inc., et al. v. South Carolina, et al., No. 04-665. See, Order List [97 pages in PDF] at page 89.

And, the Supreme Court is in recess until February 22, 2005.

More Court Opinions

1/24. The U.S. Court of Appeals (8thCir) issued its opinion [11 pages in PDF] in Wyeth v. Natural Biologies, Inc., a misappropriation of a trade secrets case, brought under the Minnesota Uniform Trade Secrets Act. The District Court held that Natural Biologics misappropriated Wyeth's trade secret process for producing bulk natural conjugated estrogens used in the development of Premarin, a hormone replacement therapy drug. The District Court also permanently enjoined Natural Biologics from using or disclosing any information it obtained related to Wyeth’s process. The Court of Appeals affirmed. This case is App. Ct. Nos. No. 03-3651 and 03-3652, appeals from the U.S. District Court for the District of Minnesota.

1/24. The U.S. Court of Appeals (9thCir) issued its opinion [4 pages in PDF] in Nevada Bell v. PacWest Telecomm, Inc. The body of the opinion consists of one sentence: "The judgment of the district court is AFFIRMED." This case is App. Ct. No. 01-15790, an appeal from the U.S. District Court for the District of Nevada.

People and Appointments

1/24. The Senate confirmed Carlos Gutierrez to be Secretary of Commerce by a voice vote.

1/24. President Bush announced his intent to nominate Michael Jackson to be Deputy Secretary of Homeland Security. If confirmed by the Senate, he will replace James Loy. Jackson is currently Chief Operating Officer of AECOM Technology Corporation's Government Services Group. Before that, he was Deputy Secretary of Transportation at the Department of Transportation. He has also worked at Lockheed Martin IMS and Transportation Systems and Services. See, White House release.

1/24. Under Secretary of Homeland Security for Border and Transportation Security Asa Hutchinson (at right) announced his resignation, effective March 1, 2005. See, statement by Secretary Tom Ridge.

1/24. The Department of Justice hosted a farewell ceremony for outgoing Attorney General John Ashcroft. The Senate Judiciary Committee is scheduled to consider his replacement, Alberto Gonzales, on Wednesday, January 26, at 9:30 AM.

More News

1/24. The National Telecommunications and Information Administration (NTIA) announced that it "experienced a catastrophic failure of its webserver". The NTIA added the material now in the web site is "from an older backup copy of the website". It is long out of date.

1/24. The Securities and Exchange Commission (SEC) filed a civil complaint [PDF] in U.S. District Court (SDNY) against Penthouse International, and others, alleging violation of federal securities laws in connection with Penthouse's premature recognition of income on a five year contract for managing a web site, which should have been amortized over the five year life of the contract. The complaint also alleges that a Penthouse Form 10-Q was materially misleading because it bore an unauthorized electronic signature of Robert Guccione, the principal executive officer. See also, SEC release.

1/24. The American Society of Composers, Authors and Publishers (ASCAP) announced in a release that it filed 24 separate complaints against nightclubs, bars, and restaurants alleging copyright infringement in connection with the public performance of  the copyrighted musical works of ASCAP’s songwriter, composer and music publisher members without receiving permission.

FCC Chairman Powell Announces Resignation

1/21. Federal Communications Commission (FCC) Chairman Michael Powell announced that he sent a letter to President Bush stating that he will "step down ... some time in March".

Powell (at right) issued a statement [PDF] in which he wrote that "Today, I sent a letter to the President thanking him for the incredible privilege of chairing the Federal Communications Commission during his first term. With a mixture of pride and regret I informed him of my intention to step down as a commissioner and chairman some time in March."

Powell continued that "Having completed a bold and aggressive agenda, it is time for me to pursue other opportunities and let someone else take the reins of the agency. During my tenure, we worked to get the law right in order to stimulate innovative technology that puts more power in the hands of the American people, giving them greater choices that enrich their lives. Evidence of our success can be seen increasingly in the offices, the automobiles and the living rooms of the American consumer."

"The seeds of our policies are taking firm root in the marketplace and are starting to blossom. The use of cell phones, digital televisions, personal video recorders, and digital music players, is exploding.  These devices are increasingly connected anytime, anywhere by a wide variety of broadband networks enabling a host of competitive services and new applications", said Powell.

The FCC also released a document [5 pages in PDF] titled "Policy Highlights of Michael K. Powell's FCC Tenure".

Powell did not indicate what he plans to do in the future. President Bush has made no announcement regarding replacements. President Bush will nominate, subject to Senate confirmation, a Republican Commissioner to replace Powell. In addition, Commission Michael Copps' term will expire shortly. Bush could elevate either of the two remaining Republican Commissioners to Chairman, or name someone new to the position.

Republican FCC Commissioner Kevin Martin praised Powell in a statement [PDF] as "an advocate of new technologies". Republican Commissioner Kathleen Abernathy was more specific. "His myriad accomplishments are highlighted by his vigorous promotion of the digital migration across all industry segments. Thanks to his vision we now benefit from the deployment of new broadband networks that use fiber optics, powerlines, and various licensed and unlicensed wireless technologies. He has also led the charge to advance the digital television transition and recognized the importance of developing pro-innovation and pro-investment policies for Voice over IP."

Abernathy continued in her statement [PDF] that "When it comes to managing this country's valuable spectrum resource, Michael Powell was the first Chairman to engage in a comprehensive reform of outdated spectrum allocation rules. He implemented rule changes that are already yielding more efficient and productive uses of this critical resource. He has also undertaken several tremendously successful consumer initiatives, including the national do-not-call registry and wireless local number portability. Finally, he has worked tirelessly to improve public safety communications and strengthen homeland security."

Democratic Commissioner Michael Copps issued a statement [PDF] in which he praised Powell's knowledge, enthusiasm and honor, without commenting upon his policies, except to say that "he and I have had some differences on issues". Democratic Commissioner Jonathan Adelstein issued a statement [PDF] praising Powell that "I appreciate his commitment to facilitating the ``digital migration.´´"

Sen. Ted Stevens (R-AK), the Chairman of the Senate Commerce Committee, stated in a release that "I am saddened that Mike Powell will not be FCC Chair as we start the review of the '96 Act." He said that "Powell's vision of blending progress in technology with reduced Federal influence over the marketplace was a good approach."

Sen. Stevens added that "He always had an open mind to views expressed by oversight committees. And, he often invited me to attend sessions held at the FCC for the expression of views by persons involved in various aspects of communications -- sessions which I not only enjoyed but from which I learned more about the industries involved in regulated communications. It was those sessions, which led me to decide to hold similar ``listening sessions´´ as we start to review the '96 Act."

Sen. John McCain (R-AZ), the previous Chairman of the Senate Commerce Committee, wrote that "Powell has spent the last eight years revolutionizing the telecommunications industry by championing new technologies and advocating competition."

Sen. McCain added that "Under his stewardship, the Commission's deregulatory decisions have increased investment in the telecommunications sector, allowing this segment of the economy to grow exponentially."

Praise from Free Market Groups. Adam Theier of the Cato Institute wrote that Powell "is the rarest of species -- a rational regulator who genuinely believes in the superiority of markets over mandates and capitalism over central planning".

"Powell worked hard to translate his market principles into action, occasionally meeting with some success, but more often being greeted by overt hostility from special interests and other status quo-oriented policymakers. One area where Powell’s vision yielded tangible results was spectrum policy where his leadership helped give rise to a veritable public policy revolution at the FCC. Powell formed a Spectrum Policy Task Force that issued an amazing report containing a sweeping indictment of the agency's past record. As a result, remarkable changes are underway at the agency that will unleash the wireless sector from the shackles of the command-and-control central planning techniques that have hindered it for over seven decades."

The Progress and Freedom Foundation (PFF) wrote that Powell "championed the principles of the free market in the digital age".

The PFF's Kyle Dixon, who was previously a legal advisor to Powell, stated that "Michael's greatest contribution since he took office in 1997 is that he made us understand the importance of the migration to digital communications ... Michael led the charge in promoting investment and innovation in Wi-Fi and wireless, Internet voice, broadband and other technologies that became critical to consumers and the economy."

Comments from Powell's Critics. Russell Frisby, CEO of the CompTel/ASCENT, a group that has differed with Powell on the Section 251 unbundling obligations of incumbent local exchange carriers, stated in a release that his organization "looks forward to working with the Chairman's successor". Frisby will soon leave the CompTel/ASCENT.

Gigi Sohn, President of Public Knowledge, a frequent critic of copyright protection, stated in a release that her group "has very mixed feelings about the resignation of Michael Powell ..."

Her group opposed, and has joined in a petition for review of, the FCC's broadcast flag order. She wrote that "However, as in the case of the hyper-regulatory ``broadcast flag,´´ he some times allowed politics to get in the way of his pro-tech and deregulatory philosophy. To the extent that we expect the next chair to share Mr. Powell’s philosophy, we hope that he or she will apply that philosophy consistently, even at the risk of angering large, powerful media companies." See, petitioners' brief [63 pages in PDF].

See also, Report and Order Further Notice of Proposed Rulemaking [72 pages in PDF] and story titled "FCC Releases Broadcast Flag Rule" in TLJ Daily E-Mail Alert No. 772, November 5, 2003. This item is FCC 03-273 in MB Docket 02-230. The U.S. Court of Appeals (DCCir) is scheduled to hear oral argument in this case, American Library Association v. FCC, No. 04-1037, on February 22.

Howard Stern said that Powell's departure is "a great thing". Stern's web site published excerpts from Stern's broadcast radio program of January 21. The FCC has imposed fines for violation of the provisions of the Communications Act and FCC rules regarding broadcast of indecent material.

Stern stated that "Michael Powell resigning is a great thing because he did not deserve the job in the first place. He was appointed because of his father."

He asserted that "Michael Powell then said let's put all the power into the hands of a couple of companies with radio and television." He condemned Powell for "fining me unbelievable amounts of money". Stern added that "that made him the hero of the religious right and the liberal left, who were all looking to win favor with the public by making it look like they were cleaning up the airwaves …"

He accused Powell of "ruining the first amendment, going back on his own words about how the market place should determine. Putting the radio stations in the hands of the few…and he forced radio stations, blackmailed radio stations into bowing to his will by telling them secretly, you are not going to any court! You are going to have your licenses held up! Shame on him! Shame on the FCC! Thank God he's gone, but God help us with what's next."

Comments from Trade Groups and Companies. Gary Shapiro, P/CEO of the Consumer Electronics Association (CEA), stated in a release Powell "has been a true friend of technology". Shapiro added that "Chairman Powell knows that competition governed by fewer government rules benefits consumers and encourages progress. Governed by this philosophy, his legacy will include his commitment to and success in accelerating the nation's transition to digital television and broadband deployment. We also praise his efforts to free up wireless spectrum to allow for the development and deployment of exciting new products and technologies."

Steve Largent, P/CEO of the CTIA, stated in a release that "Consumers were always Michael’s top priority and he knew instinctively that they were best served when free and competitive markets were permitted to function. Michael did not allow the flawed policies of the past to burden our future ..."

Robert Sachs, P/CEO of the National Cable & Telecommunications Association (NCTA), stated in a release that Powell has been a "true champion of competitive market forces. ... Whether jump starting the digital TV transition or creating a regulatory environment that has allowed broadband Internet services to flourish, Michael Powell has been a major force in bringing the benefits of new technology to the American people."

See also, statement of Walter McCormick, P/CEO of the USTA, statement by Richard Notebaert, Ch/CEO of Qwest, and statement of Sprint.

Stevens Addresses Organization of Senate Commerce Committee

1/21. Sen. Ted Stevens (R-AK), the new Chairman of the Senate Commerce Committee (SCC), stated that he has been meeting with Republican members of the Committee, and that Sen. Daniel Inouye (D-HI) has been meeting with Democratic members, to complete the reorganization of the Committee, including creation of new subcommittees, and assignment of subcommittee Chairmen, ranking Democrats, and members. He stated that there will be a new high tech subcommittee.

Sen. Stevens met with Alaska reporters on Friday, January 21. His staff provided the transcript which is quoted in this article.

Sen. Stevens (at right) stated that "We are busy trying to complete the reorganization of the Commerce Committee and I have had meetings now with all members, except one on our side, and I hope to finish that today or Monday. And, we hope to have a meeting sometime early next week to organize the Committee and ask members to choose their Subcommittees. We will, at Senator Inouye’s request, have a tenth Subcommittee. As part of the Subcommittee process, we will do two things. One, we will make a Subcommittee out of the High Technology Task Force we've had in the past and also have a Subcommittee that deals with the National Ocean Policy Study as we did until about three Congresses ago."

There is a Senate Republican High Tech Task Force. It was chaired in the 108th Congress by Sen. John Ensign (R-NV). It was chaired in the 107th Congress by Sen. George Allen (R-VA). Both are members of the SCC. See, story titled "Sen. Ensign Addresses Senate Republican High Tech Task Force and Tech Related Bills" in TLJ Daily E-Mail Alert No. 979, September 20, 2004.

Stevens continued that "We will announce the names and the subject matter of the Subcommittees as soon as I finish my consultation with all members, and I known that Senator Inouye has completed his consultation with the members on his side." He added that he has consulted with all of the Republican members, except Sen. John McCain (R-AZ).

Stevens also predicted that the Committee will operate on a bipartisan basis. He said that "because we do have a bipartisan approach, we are trying to do the best we can of bringing together our staff work so we can have joint review on the staff level of issues and not end up by having competing papers, which really cause issues between the members of the Committee before we really have a chance to try to work them out on the staff level. Senator Inouye will be known as the Co-Chairman of our Committee and we intend to follow the same process we have in the Appropriations area to try and assure, to the maximum extent possible, that the work product of our Committee will be bipartisan." Sen. Stevens was previously Chairman of the Senate Appropriations Committee, but could not continue in that position because he was term limited under Republican rules.

Stevens next discussed, in broad terms, the agenda for the Committee. He said that "the first issue I hope we can get the Committee to agree to address is the bills that were on the Calendar at the close of the last Congress that were delayed because of objections of one sort or another. They are bills that were reported out of the Full Committee almost unanimously and died because of the end of the Congress. Senator Inouye and I want to do our best to get those bills back to the floor and on the Calendar and see if we can satisfy those who had holds and move them forward. If we can’t get them satisfied, I will ask the Leader to allow me to make a motion to take them up so that we can have a debate on the motion to proceed and we’ll find out why people are holding up our legislation."

He also said that the Committee will address reauthorization bills, including bills for the Federal Communications Commission (FCC) and the Technology Administration (TA), which includes the National Institute of Standards and Technology (NIST), the Office of Technology Policy (OTP), and other units.

He also addressed the work to be done by subcommittees. He said that "A lot of that is going to be determined by Subcommittees and the Chairmen and Ranking Members of Subcommittees because we intend that the Subcommittees will be proactive and they will hold hearings, they will bring to us -- the Full Committee -- legislation for mark-up based upon Subcommittee approval."

Sen. Stevens said that since he is now Chairman of the SCC, and Chairman of subcommittee of the Senate Appropriations Committee, he is barred under Senate Republican rules from holding another subcommittee chairmanship. Hence, he said that since there are twelve Republicans on the SCC, and there will be ten subcommittees, he and one other Republican will not get a SCC subcommittee chairmanship. He did not say who this would be, but Sen. David Vitter (R-LA) and Sen. Jim DeMint (R-SC) have the least seniority.

People and Appointments

1/21. President Bush announced his intent to nominate John Thomas Schieffer to be Ambassador to Japan. He is currently the U.S. Ambassador to Australia. Schieffer is a Texan who once worked for the Texas Rangers Baseball Club as Partner-in-Charge of Ballpark Development, President and General Partner. See, White House release.

1/21. Tracy Henke was named acting Assistant Attorney General in charge of the Department of Justice's (DOJ) Office of Justice Programs (OJP).

More News

1/21. The Federal Communications Commission's (FCC) Wireless Telecommunications Bureau (WTB) announced that it "has initiated the development of an automated feature in its Universal Licensing System (ULS) to identify licenses that have terminated automatically for failure to meet construction or coverage requirements." See, Public Notice [PDF], DA 05-137.

1/21. The Copyright Office published a notice in the Federal Register stating that beginning on February 14, 2005, it will begin issuing newly formatted copyright registration certificates, but only for registration of motion pictures and other audiovisual works registered in class PA. See, Federal Register, January 21, 2005, Vol. 70, No. 13, at Pages 3231 - 3232.

1/21. Jonathan Schwartz, P/COO of Sun Microsystems, wrote a letter to Sam Palmisano, Ch/CEO of IBM, in which he stated that IBM is "withholding support" for Sun's Solaris 10 operating system, and that this is a "vendor lock-in strategy" designed to trap customers into using only IBM's proprietary Power5 platform. See, Schwartz's company blog.

Go to News from January 16-20, 2005.