TLJ News from December 1-5, 2005

NYU Releases Paper on Fair Use

12/5. The New York University law school released a paper [76 pages in PDF] titled "Will Fair Use Survive? Free Expression in the Age of Copyright Control: A Public Policy Report".

This paper, like many of the books, papers, and speeches advocating broader fair use rights, comes from academics. The authors are Marjorie Heins and Tricia Beckles, of the Brennan Center for Justice, at NYU law school.

This paper argues that the Digital Millennium Copyright Act's (DMCA) notice and take down procedure, which is codified at 17 U.S.C. § 512, is widely abused. Some notices involve weak claims of copyright. Others are directed at fair uses of copyrighted works.

The paper similarly argues that copyright holders send aggressive and intimidating cease and desist letters, sometimes based upon weak copyright claims.

The paper argues that, especially in the film industry, there is a "clearance culture".

The paper also complains about the effects of negotiated agreements. In particular, the authors are concerned that universities that purchase or license copyrighted works are bound by the terms to which they have agreed.

The paper states that "Owners' and users' organizations have sometimes negotiated guidelines with specific limits on copying. Frequently used in education, these guidelines offer security to teachers, and near-immunity from suit to the universities that follow them. But they are ringed with arbitrary restrictions. And they ignore the flexibility and equitable nature of fair use." The paper concludes that this can "undermine the educational process".

And all of this, the author argue, has a chilling effect upon expression, creation and education.

Recommendations. The paper offers several recommendations.

First, "Create a clearinghouse on fair use and other free expression issues in IP law, with information that is easily comprehensible and gives practical guidance. Include clear explanations of the DMCA take-down and counter-notice provisions."

Second, "Survey ISPs on their DMCA take-down procedures; then work with them to assure that anyone whose online speech is targeted gets adequate information and help in preparing a counter-notice."

Third, "Create a national legal support backup center, with a network of pro bono attorneys and IP law student clinics, and a clearinghouse of legal pleadings and other resources."

Fourth, "Work with bar associations to assure that educational outreach campaigns deal evenhandedly with fair use. Investigate the possibility of sanctions against lawyers who send frivolous cease and desist letters."

Fifth, "Work with arts service organizations to investigate possibilities for alternative errors and omissions insurance and for statements of best practices."

Sixth, "Investigate opportunities for amending IP law to reduce penalties, to eliminate money damages against anybody who reasonably guesses wrong about a fair use or free expression defense, and to create alternative dispute resolution mechanisms whose decisions, if obeyed, would relieve an accused infringer of money liability."

Trademark. Also, while the title of this paper references copyright, it is about both copyright and trademark. The authors argue that "the free expression problems that arise with overly zealous attempts to enforce trademark rights are similar to the fair use dilemmas in copyright law; and often, companies make both types of claims".

Coincidentally, on the same day that NYU released this paper, the U.S. Court of Appeals (8thCir) issued its opinion [PDF] in Davis v. Disney, affirming the District Court's rejection of a trademark infringement claim, even though the plaintiff had registered its trademark, and the defendant used the mark, verbatim, without license, in a movie. See, following story titled "8th Circuit Rejects Claim that Disney Infringed Trademark".

8th Circuit Rejects Claim that Disney Infringed Trademark

12/5. The U.S. Court of Appeals (8thCir) issued its opinion [PDF] in Davis v. Disney, a trademark infringement case. The Court of Appeals affirmed the District Court's summary judgment for the alleged infringer.

Leslie Davis owns a registered federal trademark for the term "Earth Protector", on books, pamphlets, and other printed material. He is also the founder and President of an environmental advocacy organization named Earth Protector, Inc.

Disney made a children's movie in which a sinister company named "Earth Protectors" tries to use a computer to take over the world.

Davis filed a complaint in U.S. District Court (DMinn) against Disney and others alleging trademark infringement under 15 U.S.C. § 1125. The District Court held that there was no likelihood of confusion, and therefore granted summary judgment to the alleged infringer, Disney. The Court of Appeals affirmed.

The Court of Appeals applied the 8th Circuit's six factors for evaluating likelihood of confusion, which it summarized as follows: "1) the strength of the plaintiff’s mark; 2) the similarity between the plaintiff’s and defendant’s marks; 3) the degree to which the allegedly infringing product competes with the plaintiff’s goods; 4) the alleged infringer’s intent to confuse the public; 5) the degree of care reasonably expected of potential customers, and 6) evidence of actual confusion."

The Court of Appeals wrote that since Disney appropriated the mark verbatim, the second factor ("the similarity between the plaintiff’s and defendant’s marks") worked in Davis' favor.

In contrast, it wrote that the mark is "descriptive" and hence is entitled to only weak protection.

The Court also held that "the allegedly infringing product" does not compete "with the plaintiff’s goods". That is, Disney's product is movies. Davis does not make movies.

The Court also found that there was no "intent to confuse the public", based upon Disney's not using the mark in its promotion of the movie, and Disney's portrayal of the company named "Earth Protectors" as an evil entity.

This case is Leslie Davis, et al. v. The Walt Disney Company, Disney Channel, and ABC, Inc., U.S. Court of Appeals for the 8th Circuit, App. Ct. No. 05-1999, an appeal from the U.S. District Court for the District of Minnesota, Judge Donovan Frank presiding.

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12/5. The National Telecommunications Cooperative Association's (NTCA) Foundation for Rural Service (FRS) wrote, but did not publicly release, a paper titled "Demystifying VoIP: Rural America’s Connection to the IP -- Enabled National Telecommunications Network". For more information, contact Caitlin Colligan at 703 351-2086 or ccolligan at ntca dot org.

FCC Announces Agenda for December 9 Meeting

12/2. The Federal Communications Commission (FCC) released the agenda [PDF] for its event titled "Open Meeting", scheduled for Friday, December 9, 2005. There are currently two items on the agenda.

First, the FCC will consider a Notice of Proposed Rulemaking (NPRM) pertaining to 47 U.S.C. § 254(b) and the opinion of the U.S. Court of Appeals (10thCir) in Qwest v. FCC, which is also known as Qwest II, and a proposal by Puerto Rico Telephone Company, Inc. that the FCC adopt a non-rural insular mechanism. This proceeding is CC Docket No. 96-45.

On February 23, 2005, the Court of Appeals issued its opinion in Qwest v. FCC, a case regarding the FCC's mechanism for providing universal service support subsidies to non-rural telecommunications carriers under Section 254. This case is Qwest Communications, Inc. v. FCC and USA, et al., U.S. Court of Appeals for the 10th Circuit, App. Ct. Nos. 03-9617, 04-9518, and 04-9519, petitions for review of a final order of the FCC. See also, story titled "10th Circuit Rules in Qwest II" in TLJ Daily E-Mail Alert No. 1,090, March 8, 2005.

Second, the FCC will consider a NPRM and Order regarding modifications to the rules for unsolicited fax advertisements to implement S 714, the "Junk Fax Prevention Act of 2005". The President signed S 714 into law on July 9, 2005. It is now Public Law No. 109-21. It amends 47 U.S.C. § 227. S 714 mandated this rule making proceeding. This is CG Docket No. 02-278.

This event is scheduled for 9:30 AM in the FCC's Commission Meeting Room, Room TW-C305, 445 12th Street, SW. The event will be webcast by the FCC. The FCC does not always take up all of the items on its agenda. The FCC does not always start its monthly meetings at the scheduled time. The FCC usually does not release at its meetings copies of the items that its adopts at its meetings.

People and Appointments

12/2. Federal Communications Commission (FCC) Chairman Kevin Martin selected Fred Campbell to be his legal advisor for wireless issues. He previously was an Attorney Advisor in the FCC's Wireline Competition Bureau (WCB). Before that, he worked for the Washington DC law firm of Harris Wiltshire & Grannis. And before that, he worked for the law firm of Wolfe Snowden. See, FCC release [PDF].

More News

12/2. The U.S. Court of Appeals (2ndCir) issued its opinion [21 pages in PDF] in Omnipoint v. White Plains, a cell tower construction case. The City of White Plains refused Omnipoint permission to build a tower on a golf course. Omnipoint filed a complaint in U.S. District Court (SDNY) against White Plains alleging violation of 47 U.S.C. § 332(c)(7). The District Court, finding that the denial was not based upon substantial evidence, granted summary judgment to Omnipoint. The Court of Appeals reversed. This case is Omnipoint Communications, Inc. v. The City of White Plains, U.S. Court of Appeals for the 2nd Circuit, App. Ct. No. 04-3286-cv, an appeal from the U.S. District Court for the Southern District of New York.

12/2. The International Intellectual Property Alliance (IIPA) submitted comments to the Office of the U.S. Trade Representative (USTR) regarding several of its Special 301 out of cycle reviews. See, comments submitted regarding the reviews of Russia [PDF], Indonesia [PDF], Philippines [PDF], and Canada [PDF].

12/2. The Internet Corporation for Assigned Names and Numbers (ICANN) released the latest issue of its report titled "ICANN Update".

12/2. The Department of Justice (DOJ) filed a Certificate of Compliance with the U.S. District Court (DC) in US v. Ecast and NSM. On September 2, 2005, the DOJ's Antitrust Division announced that it filed a complaint in District Court against NSM Music Group Ltd. and Ecast Inc. alleging violation of federal antitrust law in connection with their agreement under which NSM agreed not to enter the U.S. market with a digital jukebox to compete with Ecast. The DOJ simultaneously announced that it has reached a settlement with NSM and Ecast under which the two companies will terminate their non-compete agreement. See also, story titled "DOJ Requires NSM and Ecast to End Digital Jukebox Non-Compete Agreement" in TLJ Daily E-Mail Alert No. 1,209, September 8, 2005. This is D.C. No. 1:05CV01754.

Companies Write Snow Regarding IRS Disregard for Court Opinions on 3% Excise Tax

12/1. Twenty entities that provide voice communication services, or that represent such providers, wrote a letter to John Snow, the Secretary of the Treasury, regarding the Internal Revenue Service's (IRS) refusal to follow numerous federal judicial opinions interpreting 26 U.S.C. § 4251, which codifies a 3% excise tax on certain communications services.

The IRS continues to collect the 3% excise tax on communications from consumers of communications services that numerous federal courts have ruled are not subject to the tax, even in those circuits where the courts have ruled against the IRS.

§ 4251 imposes a tax on certain "communications services". § 4251(b) provides that the term ''communications services'' means "(A) local telephone service; (B) toll telephone service; and (C) teletypewriter exchange service". These cases concern "toll telephone service".

26 U.S.C. § 4252(b) provides that "toll telephone service" means

"(1) a telephonic quality communication for which
   (A) there is a toll charge which varies in amount with the distance and elapsed transmission time of each individual communication and
   (B) the charge is paid within the United States, and
(2) a service which entitles the subscriber, upon payment of a periodic charge (determined as a flat amount or upon the basis of total elapsed transmission time), to the privilege of an unlimited number of telephonic communications to or from all or a substantial portion of the persons having telephone or radio telephone stations in a specified area which is outside the local telephone system area in which the station provided with this service is located."

(Parentheses in original.)

That is, to be taxable, a "toll telephone service" must include a "toll charge which varies in amount with the distance and elapsed transmission time". The key word here is "and". The IRS asserts that "and" really means "or", and collects taxes on services for which the charge varies either with distance or time. The communications consumers argue, and the federal courts have repeatedly held, that "and" means "and", and therefore the IRS can only collect the tax on services for which the charge varies with distance and time.

The letter to Snow states that "To date there have been six decisions issued by various Federal District Courts, two issued by the Federal Court of Claims and two issued by Circuit Courts of Appeals (most recently by the Sixth Circuit Court of Appeals in OfficeMax Inc. v. United States, Case No. 04-4009 (November 2, 2005)), which have held that FET is not applicable to certain long distance services."

See, opinion [20 pages in PDF] of the U.S. Court of Appeals (6thCir) in Office Max v. USA. See also, story titled "IRS Loses Another Appeal Regarding 3% Excise Tax" in TLJ Daily E-Mail Alert No. 1,246, November 3, 2005.

The letter adds that "Only one court decided this issue in favor of the IRS, and that decision was reversed on appeal earlier this year by the Eleventh Circuit Court of Appeals in American Bankers Insurance Group v. United States, Case No. 04-10720 (May 10, 2005). The government did not appeal the American Bankers case to the Supreme Court and there are currently no decisions upholding the IRS' position."

See, opinion [22 pages in PDF] of the U.S. Court of Appeals (11thCir) in ABIG v. US. See also, story titled "IRS Loses Appeal Over 3% Excise Tax on Communications" in TLJ Daily E-Mail Alert No. 1,133, May 11, 2005.

The letter continues that "Notwithstanding the complete absence of judicial support for the IRS' position, on October 20, 2005 (after the American Bankers decision became final but before the OfficeMax case was decided), the IRS issued Notice 2005-79. This Notice sets forth that the IRS plans to continue to litigate this issue and, while doing so, will continue to assess and collect the tax ..."

See, story titled "IRS Announces That It Will Violate Court of Appeals Ruling Regarding Excise Tax on Phone Service", in TLJ Daily E-Mail Alert No. 1,241, October 27, 2005.

The letter requests that Secretary Snow "provide much-needed clarity in this matter by doing two things: First, direct the IRS to cease litigating the "time and distance" issue by not seeking certiorari to the Supreme Court in the OfficeMax case and by dismissing all of the other pending cases. Second, direct the IRS to issue clear guidance indicating that it will follow not only the letter but also the spirit of these decisions, such that only communications services that fit squarely and literally within the statutory definitions will be subject to FET."

It elaborates that "the guidance should provide that the types of communications services which are not subject to tax because they do not satisfy any of the statutory definitions of taxable telephone services include (but are not limited to) long distance services of the type at issue in the OfficeMax and American Bankers cases; long distance services that are sold on the basis of an unlimited number of calls or a bundle of minutes for a flat monthly rate; and "all distance" services, including wireless and VoIP services."

The letter was sent by AT&T, BellSouth, CenturyTel, Cingular Wireless, CTIA, Global Crossing, Level 3 Communications, MCI, PAETEC Communications, Qwest, Sprint Nextel, T-Mobile, The Coalition of Service Industries, Time Warner Cable, Time Warner, TracFone Wireless, USTelecom Association, Verizon, Verizon Wireless, and Virgin Mobile USA.

See also, story titled "IRS Publishes Advance NPRM Regarding Expanding the Excise Tax on Telephones to Include New Technologies" in TLJ Daily E-Mail Alert No. 936, July 6, 2004. And see, story titled "Rep. Cox Urges Bush to Instruct IRS Not to Expand Excise Tax on Phones" in TLJ Daily E-Mail Alert No. 945, July 26, 2004.

FTC Takes Action Against Retailer for Lax Data Security Practices

12/1. The Federal Trade Commission (FTC) filed an administrative complaint [3 pages in PDF] against DSW, Inc., which operates about 190 retail shoe stores, alleging violation of the Federal Trade Commission Act (FTCA) in connection with its failure to provide security for personal information collected at its stores. Hackers stole credit card and other personal information.

The complaint states that "The breach compromised a total of approximately 1,438,281 credit and debit cards (but not the personal identification numbers associated with the debit cards), along with 96,385 checking accounts and driver’s license numbers. To date, there have been fraudulent charges on some of these accounts." (Parentheses in original.)

The FTC complaint alleges that DSW's failure to provide reasonable data security constitutes an unfair practice in violation of Section 5 of the Federal Trade Commission Act (FTCA), which is codified at 15 U.S.C. § 45.

Subsection 45(a)(1) provides that "Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful."

The FTC and DSW simultaneously executed an Agreement Containing Consent Order [8 pages in PDF].

This agreement requires DSW to "establish and implement, and thereafter maintain, a comprehensive information security program that is reasonably designed to protect the security, confidentiality, and integrity of personal information collected from or about consumers".

The agreement also requires DSW to obtain independent third party reports on its security program every two years for twenty years.

The agreement also states that it "does not constitute an admission by proposed respondent that the law has been violated as alleged in the draft complaint, or that the facts as alleged in the draft complaint, other than the jurisdictional facts, are true".

See also, FTC release of December 1, 2005, and DSW release of April 18, 2005, announcing the theft of data.

AAI President Criticizes Antitrust Modernization Commission

12/1. Albert Foer, President of the American Antitrust Institute (AAI), wrote a paper [28 pages in PDF] titled "Half-Time at the Antitrust Modernization Commission", in which he criticizes the AMC. He wrote that the Antitrust Modernization Commission (AMC) is "dominated by people whose recent backgrounds strongly suggest a defense orientation". He complained that there is no representation of the "plaintiffs' bar".

He stated that while the AMC has been holding public hearings, "very little if any ``new´´ information has thus far been provided at the hearings. They are primarily occasions for well-informed advocates to promote previously developed positions relating to the matters before them."

He noted that this is merely a commission, and that "The history of blue ribbon antitrust commissions in general does not suggest that the AMC's final report will generate immediate legislative action."

However, he reviewed what some of the major recommendations might be.

He suggested that the AMC might recommend changes regarding the authority of states. He wrote that "Based on questioning by Commissioners, one could surmise that most at risk may be the States' jurisdiction over mergers that impact on more than one State, which is to say, most mergers."

He also expressed concern regarding awards of treble damages in private antitrust actions. He wrote that "Among the ideas on the table of the AMC are reduction of the circumstances under which treble damages are mandatory (e.g., applying them only to hard core per se cases such as horizontal price fixing; allowing the court to decide after trial whether to multiply damages); whether to eliminate joint and several liability and the no-contribution rule (thereby reducing plaintiffs' leverage to gain favorable settlements); and whether to seek fee-shifting, so that the loser will pay the attorneys' fees for both sides (as opposed to the current rule that the liable defendant pays the plaintiffs’ attorneys fees)." (Parentheses in original.)

Foer also addressed what the AMC might recommend regarding merger reviews. He wrote that "While not taking on major questions about the purpose or effectiveness of the anti-merger laws or even whether industrial concentration itself should still be the basis of legal presumptions, the Commission appears to be particularly interested in matters of process and administration. One major philosophical question may sneak in, however: the question of what role should be played by efficiencies in a merger antitrust case."

Foer also stated that the AMC might make recommendations regarding single firm conduct. He wrote that "Section 2 of the Sherman Act deals with monopolization and attempted monopoly. In recent years, a variety of cases, headed by the Microsoft litigation and the Supreme Court’s decision in Trinko, have inspired much conversation and literature concerning the question of what strategies by a single firm, acting alone, should be considered illegitimate. While it seems unlikely that the AMC will propose legislative revisions, it could attempt to provide expert guidance to courts and enforcers on standards for applying Section 2." (Footnote omitted.)

Also, on November 28, 2005, the Department of Justice's (DOJ) Antitrust Division and the Federal Trade Commission (FTC) announced that they will hold a series of joint hearings on the implications of single firm conduct. See, story titled "Antitrust Division and FTC to Hold Hearings on Single Firm Conduct" in TLJ Daily E-Mail Alert No. 1,262, November 30, 2005.

The AMC is scheduled to hold another in its series of hearings at 1:00 PM on Monday, December 5, 2005 at the Federal Trade Commission Conference Center. The topic will be "Antitrust in Regulated Industries". The witnesses will be Scott Alvarez, Ellen Hanson, Rob McKenna, Mark Cooper, Harold Furchtgott-Roth, Diana Moss, and John Thorne.

The Federal Communications Commission (FCC) currently conducts proceedings related to the mergers of some companies that hold FCC licenses that are redundant of the merger review proceedings of the DOJ or FTC. One of the witnesses, Furchtgott-Roth, is a former FCC Commissioner who opposed such proceedings during his tenure on the FCC. See for example, TLJ story titled "Commissioner Says FCC Extorts Companies with Non-existent Merger Review Authority", July 23, 1999.

See also, AMC notice and notice in the Federal Register, November 16, 2005, Vol. 70, No. 220, at Page 69511.

People and Appointments

12/1. Ann Mather was named to Google's Board of Directors. See, Google release.

12/1. The Consumer Electronics Association (CEA) announced the selection of its 2006 TechHome Division Board. Jay McLellan (President of Home Automation Inc.) was named Chairman, and David Epstein (President of Sound Solution) was named Co-chairman. See, CEA release for other Board members.

More News

12/1. December 1, 2005, was the deadline to submit initial comments to the Copyright Office (CO) in response to its notice of inquiry (NOI) regarding exempting certain classes of works from the prohibition against circumvention of technological measures that control access to copyrighted works. The relevant statute, which is codified at 17 U.S.C. § 1201(a), requires the CO to conduct this proceeding every three years. The CO published copies of comments in its web site for its proceedings concluded in 2000 and 2003. The CO has not yet published comments in the current proceeding. Reply comments are due by February 2, 2006. See also, notice in the Federal Register, October 3, 2005, Vol. 70, No. 190, at Pages 57526 - 57531.

12/1. The Government Accountability Office (GAO) released a letter [12 pages in PDF] titled "Potential Spectrum Interference Associated with Military Land Mobile Radios". The letter is addressed to Rep. Todd Platts (R-PA), Chairman of the House Government Reform Committee's Subcommittee on Government Management, Finance, and Accountability. The letter primarily addresses interference with unlicensed devices operating under Part 15 of the Federal Communications Commission's (FCC) rules in the 380 MHz-399.9 MHz spectrum band. In other words, consumers' garage door openers do not always open garage doors that are located near certain military bases. The letter recommends that the military engage in more "community outreach", so that consumers will not buy new garage door openers when they experience interference related malfunctions.

12/1. The Copyright Office published a notice in the Federal Register that recites, explains, and sets the effective date (January 3, 2006) for its rule changes regarding cost of living adjustment for performance of musical compositions by colleges and universities. See, Federal Register, December 1, 2005, Vol. 70, No. 230, at Page 72077.

12/1. The Bureau of Industry and Security (BIS) published a notice in the Federal Register that recites, explains, and sets the effective date (December 1, 2006) for its rule changes regarding removing the requirement to obtain an Import Certificate in support of an export or reexport license when the ultimate consignee or purchaser is a foreign government or agency of Bulgaria, Czech Republic, Hungary, Poland, Romania, Slovakia, and India. See, Federal Register, December 1, 2005, Vol. 70, No. 230, at Pages 72073 - 72074.

12/1. Attorney General Alberto Gonzales gave a speech in New York City in which he discussed in broad strokes those sections of the USA PATRIOT Act that are scheduled to sunset at the end of this month. He said that "The PATRIOT Act has given investigators additional authorities they need to help stop terrorists before they can hurt Americans and harm our way of life" by "improving our ability to track and investigate terrorist activity in the United States." He added that "Sixteen key provisions of the Act are scheduled to expire at the end of this year. For several months, Congress has debated these provisions. It is good in a democracy like ours that we discuss and analyze the wisdom of every law -- particularly those that, if abused, would infringe your civil liberties. We have done that. Now, Congress must act to reauthorize the PATRIOT Act by sending the President a bill of which all Americans can be proud."

Go to News from November 26-30, 2005.