TLJ News from March 1-5, 2006

AT&T and BellSouth Announce Merger

3/5. AT&T and BellSouth announced in releases that the two companies will merge. See, BellSouth release and AT&T release.

The releases state that "Under terms of the agreement, approved by the boards of directors of both companies, shareholders of BellSouth will receive 1.325 shares of AT&T common stock for each common share of BellSouth. Based on AT&T’s closing stock price on March 3, 2006, this exchange ratio equals $37.09 per BellSouth common share. This represents a 17.9 percent premium over BellSouth's closing stock price on March 3, 2006, and a total equity consideration currently valued at approximately $67 billion."

Ed Whitacre, who is currently Ch/CEO of AT&T, will be Chairman, CEO and a member of the Board of Directors of the merged entity. Duane Ackerman, who is currently Ch/CEO of BellSouth, will remain Ch/CEO of BellSouth operations for "a transition period". Three members of BellSouth's Board of Directors will join the AT&T board.

The two companies added that the corporate headquarters for the combined company will remain in San Antonio, Texas, and that Cingular's headquarters will remain in Atlanta, Georgia.

The merger requires regulatory approvals, including by the Department of Justice's Antitrust Division, and the Federal Communications Commission (FCC). It also requires shareholder approvals. However, the two companies stated that the merger "is expected to close within approximately 12 months".

The releases add that "Since AT&T and BellSouth are not actual competitors in the local, long distance and video markets, and because BellSouth is not a significant competitor with AT&T in the enterprise market, the merger will not reduce competition in any of those markets."

AT&T recently merged with SBC. Cingular, a wireless service provider, is a partnership of SBC and BellSouth. The releases state that "One of the most immediate benefits of the transaction will be to streamline and enhance management and operations at Cingular."

The releases state that "the combined company will be better able to speed the convergence of new and improved services for consumers and businesses, and embrace the industry’s shift to Internet Protocol network-based technologies".

The releases also make statements about the benefits of the merger. It will "benefit customers", "promote competition", and be "more innovative".

The release also states that it contains "forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These estimates and statements are subject to risks and uncertainties, and actual results might differ materially from these estimates and statements. Such estimates and statements include, but are not limited to, statements about the benefits of the merger ..."

Gigi Sohn, President of Public Knowledge, stated in a release that "The merger of AT&T and BellSouth makes it imperative that the principles of Net Neutrality be included in any merger approval from government agencies and in any telecommunications legislation passed by Congress."

She added that "Both AT&T and BellSouth have been forthright in their statements about their desire to exert greater control over the Internet. It is up to those who make public policy to make certain that the principles of an open Internet continue through this greater consolidation of the telecommunications industry. It is vitally important that the Internet remains open and accessible to consumers and to service providers and remains the source of innovation it has been over the past two decades."

AEI Paper Urges Quicker SEC Development of XBRL for GAAP

3/3. The American Enterprise Institute (AEI) published a short essay titled "XBRL: Give Them the Tools and They Will Finish the Job", by Peter Wallison of the AEI.

Securities and Exchange Commission (SEC) Chairman Chris Cox has been actively promoting Extensible Business Report Language (XBRL). See, speech of November 7, 2005, in Tokyo, Japan, and speech of November 11, 2005, in Boca Raton, Florida. See also, story titled "SEC Chairman Cox Discusses Use of Interactive Data in Corporate Reporting" in TLJ Daily E-Mail Alert No. 1,250, November 9, 2005. And see, the SEC's February 2005 rule changes that initiated the SEC's XBRL Voluntary Program.

Wallison argued that SEC efforts to incorporate XBRL for Generally Accepted Accounting Procedures (GAAP) into SEC filings is a good thing. The problem, writes Wallison, is that the EU is moving more quickly to develop XBRL for their competing International Financial Reporting Standards (IFRS).

He writes that "In the future, then, companies that want their financial statements to be more accessible to investors and analysts will have another reason, apart from Sarbanes-Oxley, to offer their securities in the EU, particularly London, and to report their financial results in IFRS. And, even worse, in the globalized capital market of today, capital will flow to the companies whose financial statements are most easily analyzed and understood, giving the companies that state their financials in IFRS an important competitive advantage over those that use US-GAAP."

RIM and NTP Settle Blackberry Related Patent Litigation

3/3. Research in Motion (RIM) and NTP announced that they have "signed a definitive licensing and settlement agreement. All terms of the agreement have been finalized and the litigation against RIM has been dismissed by a court order this afternoon. The agreement eliminates the need for any further court proceedings or decisions relating to damages or injunctive relief." See, RIM release.

RIM makes Blackberrys. However, RIM holds patents that pertain to technology for integrating existing e-mail systems with radio frequency (RF) wireless communication networks, to enable mobile users to receive e-mail over a wireless network. NTP filed a complaint in the U.S. District Court (EDVa) against RIM in 2001 alleging infringement of its patents. The District Court entered judgment of infringement for NTP, awarded damages, and enjoined RIM from further infringement. The U.S. Court of Appeals (FedCir) has overturned parts of the District Court's judgment, but let stand others. The Supreme Court has denied certiorari.

The release states that "RIM has paid NTP $612.5 million in full and final settlement of all claims against RIM, as well as for a perpetual, fully-paid up license going forward. This amount includes money already escrowed by RIM to date."

It adds that "The licensing and settlement agreement relates to all patents owned and controlled by NTP and covers all of RIM's products, services and technologies. NTP grants RIM an unfettered right to continue its business, including its BlackBerry related business. The resolution permits RIM and its partners to sell RIM products and services completely free and clear of any claim by NTP, including any claims that NTP may have against wireless carriers, channel partners, suppliers or customers in relation to RIM products or services, (including BlackBerry Connect and Built-In technology), or in relation to third party products and services, to the extent they are used in connection with RIM products and services."

This case is NTP, Inc. v. Research in Motion, Ltd., Sup. Ct. No. 05-763, App. Ct. No. 03-1615, and D.C. No. 3:01CV767.

See also, stories titled "Federal Circuit Issues New Opinion in NTP v. RIM" in TLJ Daily E-Mail Alert No. 1,197, August 17, 2005, and "Supreme Court Denies Certiorari in Blackberry Patent Case" in TLJ Daily E-Mail Alert No. 1,295, Tuesday, January 24.

AEI Brookings Study Criticizes Proposals to Regulate Ratings Companies

3/3. The AEI Brookings Joint Center for Regulatory Studies released a paper [62 pages in PDF] titled "Regulating the Raters: The Law and Economics of Ratings Firms". The authors are Harold Furchtgott-Roth (a former FCC Commissioner), Robert Hahn, and Anne Layne-Farrar.

They conclude that "Despite the finding that many ratings industries are concentrated, our analysis suggests that market forces generally appear to be an effective mechanism for providing consumers and producers with useful ratings. In most cases, such markets do not require government intervention. Moreover, in industries characterized by rapid technological change the government is likely to do more harm than good by intervening."

There are ratings providers in many industry sectors. There are several that are technology or media related, including Arbitron's radio audience ratings, the Entertainment Software Ratings Board (ESRB) categorization of the content of software games, the Motion Picture Association of America's (MPAA) categorization of the content of movies, and Nielsen Media Research's television audience ratings.

The paper concludes that "While the proposed plan for intervening in the media ratings market appears workable in theory, we find that it is unlikely to make economic sense because there is no clear evidence of a market failure and because the probable costs of the regulation would outweigh the probable benefits."

On July 1, 2005, Sen. Conrad Burns (R-MT) and others introduced S 1372, the "Fairness, Accuracy, Inclusivity, and Responsiveness in Ratings Act of 2005" or the "FAIR Ratings Act". This bill would impose regulation of "any system designed to measure the viewing habits of television viewers and to produce commercially usable data based on such measurements".

On July 14, 2005, Rep. Vito Fosella (R-NY) and others introduced HR 3298, the "Television Viewer Consumer Protection Act of 2005", a similar bill.

Neither the Senate, House, Senate Commerce Committee, nor House Commerce Committee have yet approved either of these bills. Although, the SCC held a hearing on July 27, 2005. See, SCC web page with hyperlinks to prepared testimony and video.

NTIA Releases Report on DTV Susceptibility to UWB Interference

3/3. The Department of Commerce's National Telecommunications and Information Administration (NTIA) released a report titled "Interference Potential of Ultrawideband Signals Part 3: Measurement of Ultrawideband Interference to C-Band Satellite Digital Television Receivers".

The NTIA web site contains a web page with hyperlinks to each chapter and appendix of the report. The NTIA also published in one document [11 MB in PDF] the entire report. Michael Cotton, Robert Achatz, Jeffery Wepman, and Roger Dalke wrote the report.

The report states that it "provides results from tests that measured digital television (DTV) susceptibility to ultrawideband (UWB) interference." It adds that the "secondary objective is to determine if DTV susceptibility can be predicted from UWB signal parameters and the bandwidth of the victim receiver as well as band-limited metrics such as BD and BI. The final objective is to determine if continuous and gated Gaussian noise can be used in place of DS and MB signals, respectively, in susceptibility tests."

The introduction to the report offers this brief overview of results. "Results showed that the UWB signals could be categorized into three signal sets of common DTV susceptibility behavior. Interestingly, the categorized signals, band-limited by the DTV receiver filter, also had common characteristics. Set 1 consists of signals whose DTV susceptibility and band-limited signal characteristics resemble Gaussian noise. Set 2 consists of signals more deleterious than Gaussian noise interference. Notably, these signals had a wide range of band-limited signal characteristics and susceptibilities. Set 3 consists of a signal that is relatively benign. Results also showed that measurable band-limited characteristics, e.g., burst duration (BD), burst interval (BI), fractional on-time ..., and peak-to-average ratio (P/A), of the interfering signal are useful for predicting susceptibility. Finally, it was determined that continuous and gated noise signals can be used to emulate the interference effects of DS and MB signals for the DTV victim receiver and operational scenarios tested in this study. This might not be true, however, for testing the susceptibility of other victim receivers operating in narrower bandwidths as indicated by amplitude probability distributions as a function of frequency for MB signals band-limited to relatively narrow bandwidths." (TLJ omitted the mathematical symbol expression of "fractional on-time". It would have appeared differently in different e-mail readers.)

The FCC released its First Report and Order [118 pages in PDF] in the proceeding titled "In the matter of Revision of Part 15 of the Commission’s Rules Regarding Ultra Wideband Transmission Systems" on April 22, 2002. This item is FCC 02-48 in ET Docket 98-153.

Bush Discusses Globalization and Outsourcing

3/3. President Bush gave a speech, and answered questions, at the Indian School of Business in Hyderabad, India. See, transcript. Bush was asked a question about globalization and information technology (IT) outsourcing.

The questioner stated that 'India and China have experienced a lot of growth because of globalization and outsourcing, in general -- IT outsourcing, in particular". She added that in the U.S. "there is a lot of resistance in the media and also in the industry about outsourcing". She asked if the U.S. government has "a political strategy on how to manage, do a balancing act?"

Bush responded that "People do lose jobs as a result of globalization, and it's painful for those who lose jobs. But the fundamental question is, how does a government or society react to that. And it's basically one of two ways. One is to say, losing jobs is painful, therefore, let's throw up protectionist walls. And the other is to say, losing jobs is painful, so let's make sure people are educated so they can find -- fill the jobs of the 21st century. And let's make sure that there's pro-growth economic policies in place. What does that mean? That means low taxes; it means less regulation; it means fewer lawsuits; it means wise energy policy."

He added that he stated in his January 31, 2006, State of the Union address that "the United States of America will reject protectionism. We won't fear competition, we welcome competition, but we won't fear the future, either, because we intend to shape it through good policies."

He concluded that "that's how you deal in a global economy. You don't retrench and pull back. You welcome competition and you understand globalization provides great opportunities. And the class opportunity for our American farmers and entrepreneurs and small businesses to understand, there's a 300-million-person market of middle-class citizens here in India, and that if we can make a product they want, then it becomes -- at a reasonable price -- and then all of a sudden, people will be able to have a market here. And so -- and people in America should, I hope, maintain their confidence about the future."

People and Appointments

3/3. President Bush named Sean O'Hollaren to be Deputy Assistant to the President for Legislative Affairs. He previously worked in government relations for Honeywell International. See, White House release.

3/3. President Bush named Lisa Epifani to be Special Assistant to the President for Economic Policy. She previously worked for the Senate Energy and Natural Resources Committee. She is a lawyer, not an economist. See, White House release.

3/3. President Bush named Brian McCormack to be Special Assistant to the President and Deputy Director of Public Liaison. He previously worked as Special Assistant to the Under Secretary of Defense for Acquisition, Technology and Logistics at the Department of Defense. See, White House release.

More News

3/3. President Bush gave a speech, and answered questions, at the Indian School of Business in Hyderabad, India. See, transcript. Bush was asked a question about U.S. regulation of the export of electronic components to India. The questioner also pointed out that Indian importers acquire the same components from Europe, but at a higher price. Bush then spoke at length, but said little. He did say that "We're constantly reviewing what's called the Export Control List." and that "as this relationship changes, as a strategic partner, the folks involved with the Export Control List will be taking that into account."

3/3. The Government Accountability Office (GAO) released a report [PDF] titled "Electronic Government: Agencies Face Challenges in Implementing New Federal Employee Identification Standard". This report is GAO-06-178.

3/3. The Federal Communications Commission (FCC) announced in a release [PDF] that April 7, 2006, is the deadline to submit applications for participation in the FCC's 2006 Attorney Honors Program. The is an employment recruitment program directed at "graduating law school students and recent law school graduates".

3/3. The Federal Communications Commission (FCC) released the text of its Twelfth Annual Report [PDF] in its proceeding titled "In the Matter of Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming", and numbered MB Docket No. 05-255. The FCC adopted, but did not release, this order at its meeting of February 10, 2006. See, story titled "FCC Describes Annual Report on Video Competition" in TLJ Daily E-Mail Alert No. 1,308, February 13, 2006. The deadline to submit initial comments on this report is April 3, 2006. The deadline to submit reply comments is April 18, 2006.

3/3. The U.S. Court of Appeals (1stCir) issued its opinion in Cipes v. Mikasa, a copyright infringement case involving reuse of photographs, in which the Court of Appeals affirmed the judgment of the District Court for the photographer. This case is Joel Cipes v. Mikasa, Inc., U.S. Court of Appeals for the 1st Circuit, App. Ct. No. No. 05-2402, an appeal from the U.S. District Court for the District of Massachusetts.

Senate Approves Bill to Extend Expiring Provisions of PATRIOT Act

3/2. The Senate approved the conference report [PDF] on HR 3199, the "USA PATRIOT Improvement and Reauthorization Act of 2005", by a vote of 89-10. See, Roll Call No. 29.

The House approved this conference report in December of 2005. See, story titled "House Approves Conference Report on PATRIOT Act Extension Bill" in TLJ Daily E-Mail Alert No. 1,273, Thursday, December 15, 2005.

President Bush will sign the bill. He stated in a release that "I applaud the Senate for voting to renew the Patriot Act and overcoming the partisan attempts to block its passage. The terrorists have not lost the will or the ability to attack us. The Patriot Act is vital to the war on terror and defending our citizens against a ruthless enemy. This bill will allow our law enforcement officials to continue to use the same tools against terrorists that are already used against drug dealers and other criminals, while safeguarding the civil liberties of the American people."

The ten votes against approval were cast by Sen. Patrick Leahy (D-VT), Sen. Russ Feingold (D-WI), Sen. Daniel Akaka (D-HI), Sen. Jeff Bingaman (D-NM), Sen. Robert Byrd (D-WV), Sen. Tom Harkin (D-IA), Sen. Jim Jeffords (I-VT), Sen. Carl Levin (D-MI), Sen. Patty Murray (D-WA), and Sen. Ron Wyden (D-OR).

Sen. Leahy offered his understanding of the legislative history of this bill, and his reasons for voting against it. He said that "Today's vote marks another stage in reauthorizing the USA PATRIOT Act. Our goal has always been to mend the PATRIOT Act, not to end it. To that end we passed a bipartisan bill with better provisions last July after it was unanimously reported by the Judiciary Committee."

But, he said, "the House-Senate conference was hijacked. Democratic conferees were excluded at the request of the Bush-Cheney administration, and congressional Republicans wrote the bill. I worked to get that process and the bill back on track and, working with Chairman Specter, we were able to make some progress and get some helpful additions and changes. But the conference report that was insisted upon by the Bush-Cheney administration and passed by Republican leaders through the House was still flawed."

He added that "Last December, I worked with a bipartisan coalition of Senators to oppose final passage of that conference report and create some additional opportunities for improvements. That led to the Sununu bill which is in essence an amendment to the conference report." Sen. Leahy voted for Sen. Sununu's bill, S 2271, the "USA PATRIOT Act Additional Reauthorizing Amendments Act of 2006", which the Senate approved on March 1.

However, Sen. Leahy argued that even with the changes to current law in the conference report "falls far too short and impinges too greatly on the liberties of Americans." And, he added that "We now see the Bush-Cheney administration seeking to twist the authorization for use of military force against al-Qaida into a justification for the secret, warrantless wiretapping of Americans' e-mails and telephone calls."

Sen. Feingold stated that the conference report "leaves the Patriot Act's expanded surveillance and law-enforcement powers largely intact. It does not accommodate legitimate concerns raised by both liberals and conservatives about inadequate checks on those powers."

He argued, for example, that the bill "should do away with the automatic, permanent gag orders that allow investigators to hide forever their demands for records from banks, libraries, doctors and other sources."

He continued that "When Congress approved the Patriot Act, it put its trust in prosecutors and investigators to use their expanded powers responsibly. It now appears that trust was misplaced. Authorities have gone on a snooping frenzy since 2001, issuing more than 30,000 secret demands for records per year, according to the Washington Post. And unless the law is changed, no one will ever know whether those records should have been gathered, or what has been done with them."

Sen. Orrin Hatch (R-UT) stated in the Senate that "the PATRIOT Act has helped to protect our homeland from subsequent terrorist attack. Reauthorizing this effective piece of legislation is an important victory in the continued war on terror. The PATRIOT Act safeguards freedoms of American citizens while aggressively curtailing the opportunities terrorists have to strike. We have added many provisions designed to ensure that our civil liberties remain unaffected despite the fact that civil libertarians were completely unable to point to one incident or provide any example of abuses under the original PATRIOT Act."

Rep. James Sensenbrenner (R-WI), the Chairman of the House Judiciary Committee, stated in a release that "Today, the Senate faced a decision whether we continued to wage the war on terror or whether we retreated to a pre-9/11 security approach. Thankfully, the overwhelming majority of the Senate voted to extend the most critical anti-terrorism legislation enacted since 9/11. The 89-to-10 bipartisan vote illustrates an understanding that the PATRIOT Act has kept us safer while protecting the civil liberties we cherish."

Referring to Sen. Feingold, he added that "I remain thoroughly disappointed, though, that one of my state's Senators continued to play political games right until the end. His single-minded obsession with blocking this anti-terror law -- despite over 30 new civil liberty safeguards -- was categorically rejected by 89 Senators who chose to put our national security first."

House Judiciary Committee Approves IP Jurisdiction Bill

3/2. The House Judiciary Committee (HJC) approved HR 2955, the "Intellectual Property Jurisdiction Clarification Act of 2005", by voice vote, with amendments.

This bill addresses the jurisdiction of the federal courts and the U.S. Court of Appeals (FedCir) following the 2002 decision of the Supreme Court in 2002 in Holmes Group v. Vornado Air Circulation, 535 U.S. 826. It seeks to maintain federal control over intellectual property law and cases.

First, HR 2955 would amend 28 U.S.C. § 1338, which provides for jurisdiction in the U.S. District Courts. Currently, 28 U.S.C. § 1338(a) provides that "The district courts shall have original jurisdiction of any civil action arising under any Act of Congress relating to patents, plant variety protection, copyrights and trademarks. Such jurisdiction shall be exclusive of the courts of the states in patent, plant variety protection and copyright cases."

HR 2955 provides that "Section 1338(a) of title 28, United States Code, is amended by striking the second sentence and inserting the following: `No State court shall have jurisdiction over any claim for relief arising under any Act of Congress relating to patents, plant variety protection, or copyrights.´"

Second, HR 2955 would amend 28 U.S.C. § 1295, regarding the jurisdiction of the Federal Circuit. Currently, 28 U.S.C. § 1295(a)(1) provides that "(a) The United States Court of Appeals for the Federal Circuit shall have exclusive jurisdiction -- (1) of an appeal from a final decision of a district court of the United States ... if the jurisdiction of that court was based, in whole or in part, on section 1338 of this title, except that a case involving a claim arising under any Act of Congress relating to copyrights, exclusive rights in mask works, or trademarks and no other claims under section 1338 (a) shall be governed by sections 1291, 1292, and 1294 of this title; ".

HR 2955 provides that "Section 1295(a)(1) of title 28, United States Code, is amended to read as follows: `(1) of an appeal from a final decision of a district court of the United States ... in any civil action in which a party has asserted a claim for relief arising under any Act of Congress relating to patents or plant variety protection;´"

Third, HR 2955 would add a new Section 1454 to Title 28 regarding removal of cases to the U.S. District Court. It provides, in part, that "A civil action in which any party asserts a claim for relief arising under any Act of Congress relating to patents, plant variety protection, or copyrights may be removed to the district court of the United States for the district and division embracing the place where such action is pending".

For a detailed summary and analysis of this bill, see story titled "CIIP Subcommittee to Mark Up Intellectual Property Jurisdiction Clarification Act" in TLJ Daily E-Mail Alert No. 1,162, June 27, 2005.

Rep. Lamar Smith (R-TX), the Chairman of the House Judiciary Committee's Subcommittee on Courts, the Internet, and Intellectual Property (CIIP), introduced this bill on June 16, 2005.

The CIIP Subcommittee held a hearing on this issue on March 17, 2005. The CIIP Subcommittee approved HR 2955 on June 28, 2005. See also, story titled "CIIP Subcommittee to Mark Up Intellectual Property Jurisdiction Clarification Act" in TLJ Daily E-Mail Alert No. 1,162, June 27, 2005.

See also, story titled "8th Circuit Holds That It Has Jurisdiction Over Patent Counterclaims" in TLJ Daily E-Mail Alert No.1,176, July 18, 2005.

House Judiciary Committee Approves Amendment Regarding Jurisdiction of Federal Circuit

3/2. The House Judiciary Committee (HJC) approved HR 2955, the "Intellectual Property Jurisdiction Clarification Act of 2005", on March 2, 2006, by voice vote, with two amendments.

First, the HJC approved a first amendment [PDF] that adds a new Section 1632 to Title 28 that provides, in full, that "When a case is appealed to the Court of Appeals for the Federal Circuit under section 1295(a)(1), and no claim for relief arising under any Act of Congress relating to patents or plant variety protection is the subject of the appeal by any party, the Court of Appeals for the Federal Circuit shall transfer the appeal to the court of appeals for the regional circuit embracing the district from which the appeal has been taken."

Second, the HJC approved a minor second amendment [PDF] that revises the title language that describes the bill. See also, March 6 HJC draft of bill as amended [PDF].

Purpose of HR 2955. This bill is a response to the Supreme Court's opinion in Holmes Group, Inc. v. Vornado Air Circulation Systems, Inc., 535 U.S. 826 (2002). See, story titled "Supreme Court Rules on Appellate Jurisdiction of Federal Circuit" in TLJ Daily E-Mail Alert No. 443, June 4, 2002. In the Holmes case the Supreme Court held that the Federal Circuit's appellate jurisdiction cannot be based solely upon a patent counterclaim. Critics of the Holmes opinion have argued that this reduces federal control over IP cases, reduces uniformity of patent law, and encourages forum shopping. See, story titled "CIIP Subcommittee to Mark Up Intellectual Property Jurisdiction Clarification Act" in TLJ Daily E-Mail Alert No. 1,162, June 27, 2005.

The bill, as introduced by Rep. Lamar Smith (R-TX), the Chairman of the HJC's Subcommittee on Courts, the Internet and Intellectual Property, on June 16, 2005, contains several provisions intended to ensure the the federal courts maintain control over IP litigation, and that the Federal Circuit maintains control over appeals in patent cases.

However, one amendment approved by the HJC on March 2 has the effect of limiting the jurisdiction of the Federal Circuit. That is, it provides that if there is a case pending before the Federal Circuit, based upon its patent jurisdiction, for which there is no patent claim or counterclaim, the Federal Circuit shall transfer the appeal to the regional circuit in which the case arose. For example, there may have been a case in the District Court involving both patent claims, and non-patent claims. The District Court would have jurisdiction. If the case were appealed to the Federal Circuit, and the patent issues were not raised, or suffered from some other jurisdictional defect, then the case would be moved to a regional circuit.

Purpose of March 2 Amendment. Rep. Smith, the sponsor of HR 2955, wrote in a prepared statement on March 2 that the purpose of this amendment is "to ensure that litigants do not use H.R. 2955 to file frivolous patent suits to avoid adjudicating antitrust disputes in the regional circuits."

He added that due to the broad jurisdiction of the Federal Circuit, and the history of the legislation that created the Federal Circuit, "It is therefore inevitable and appropriate ... that the Federal Circuit handle some non-patent business disputes when related and non-frivolous patent claims are present."

But, he added, "Even so, for cases regarding business disputes that do not involve patents, the Federal Circuit is bound to apply the law of the relevant regional circuit."

Finally, Smith stated that the committee reports from the 1981 legislation that created the Federal Circuit both specifically stated that "immaterial, inferential, and frivolous allegations of patent questions will not create jurisdiction" in the Federal Circuit. He added, "In fact, the Federal Circuit itself has taken this admonition to heart, quoting the text of the Committee Reports in its opinions, when relevant. These safeguards provide a robust deterrent to those litigants wishing to gain access to the Federal circuit by filing frivolous patent claims. That said, the amendment before us will ensure that frivolous patent cases will not find their way to the Federal Circuit."

Perhaps it should be noted that not only can a plaintiff file a frivolous patent claim along with a non-patent claim in the District Court, but, if HR 2955 as amended is enacted into law, then that same plaintiff could file a frivolous appeal of an adverse judgment on it frivolous patent claim. This, then, would preserve the jurisdiction of the Federal Circuit under the language of the just approved amendment. The Federal Circuit could reject the case on basis of the frivolity of the patent claim. But, this would be based upon the legislative history of the bill that created the Federal Circuit, and its precedent, and not on HR 2955 as amended.

Impact of March 2 Amendment. Had the March 2 amendment been in effect in recent years, some of the most important technology related cases decided by the Federal Circuit, would have been decided by one of the regional circuits, rather than by the Federal Circuit.

For example, the Federal Circuit's August 31, 2004 opinion [46 pages in MS Word] in Chamberlain v. Skylink is one of the few opinions involving the anti-circumvention provisions of the Digital Millennium Copyright Act (DMCA), which are codified at 17 U.S.C. § 1201. While the anti-circumvention provision bear some conceptual similarity to patent protection (both provide a right to exclude another from using certain technology), the DMCA is not a part of the Patent Act.

Chamberlain filed a complaint in the U.S. District Court for the Northern District of Illinois. This District is in the 7th Circuit. Chamberlain pled patent infringement, and violation of the anti-circumvention provisions of the DMCA. Chamberlain lost in the District Court on it patent claims. However, it did not raise the patent issues on appeal. The only issue on appeal was application of the DMCA.

The Federal Circuit wrote a detailed analysis of the jurisdictional issue. The Federal Circuit's jurisdiction was based upon 18 U.S.C. § 1295, which provides that the Federal Circuit has exclusive jurisdiction over "an appeal from a final decision of a district court ... if the jurisdiction of that court was based, in whole or in part, on section 1338 ..." In turn, 18 U.S.C. § 1338 provides that the District Court has jurisdiction over patent infringement claims. It reasoned that since Chamberlain pled patent infringement in the District Court, the District Court had jurisdiction. And since the District Court had jurisdiction, the Federal Circuit has appellate jurisdiction.

Had the amendment approved by the HJC on March 2 been in effect in 2004, the Federal Circuit would have transferred the appeal 7th Circuit. Moreover, there is a good chance that the appeal would have been heard by a three Judge panel that included Richard Posner, who then most likely would have written the opinion. Posner is the co-author of the recently published book titled "The Economic Structure of Intellectual Property Law".

Instead, Judge Arthur Gajarsa wrote the opinion for the Federal Circuit. One might speculate that the 7th Circuit too would have affirmed the District Court, but with a different analysis.

See, story titled "Federal Circuit Rejects Anti-Circumvention Claim in Garage Door Opener Case" in TLJ Daily E-Mail Alert No. 971, September 7, 2004.

Another major case that would have been affected had this amendment been in effect was Independent Ink v. Illinois Tool Works. Independent Ink filed a complaint in U.S. District Court for the Central District of California against Trident and Illinois Tool Works. It sought a declaratory judgment of non-infringement and invalidity against Trident's patents. It also alleged that Trident was engaged in illegal tying and monopolization in violation of sections 1 and 2 of the Sherman Act, which are codified at 15 U.S.C. § 1 and § 2. The District Court had jurisdiction because of both the patent claim and the antitrust claims.

However, on appeal, the only issue was antitrust. Nevertheless, the Federal Circuit had jurisdiction under 1295(a)(1) because the District Court had jurisdiction under 1338.

Had HR 2955, as amended on March 2, been in effect, the 9th Circuit, rather than the Federal Circuit, would have heard the appeal.

See also, story titled "Supreme Court Grants Certiorari in Patent Tying Antitrust Case" in TLJ Daily E-Mail Alert No. 1,158, June 21, 2005, and story titled "Supreme Court Vacates in Patent Tying Antitrust Case" in TLJ Daily E-Mail Alert No. 1,321, March 2, 2006.

Summary of the Statutory Language. 28 U.S.C. § 1338, which pertains to the jurisdiction of the U.S. District Courts, currently provides as follows. (The language highlighted in bold would be replaced by HR 2955.)

HR 2955, as introduced, and as approved by the HJC on March 2, amends this. It deletes the second sentence of subsection (a), and replaces it with the following sentence.

This is perhaps the most important part of HR 2955. It prevents state courts from deciding patent or copyright cases, solely because the IP issue were raised by way of counterclaim, rather than in the complaint.

28 U.S.C. § 1295(a)(1), which pertains to the jurisdiction of the Federal Circuit, currently provides as follows. (The language highlighted in bold would be replaced by HR 2955.)

HR 2955, as introduced, and as approved by the HJC on March 2, would change this to the following.

That is, as amended, § 1295(a)(1) no longer references § 1338.

The amendment to HR 2955 approved on March 2 creates, at 28 U.S.C. § 1632, a new section that provides as follows.

Also, HR 2955, as introduced, and as approved by the HJC on March 2, creates, at 28 U.S.C. § 1454, a new section that provides as follows.

Title 28 of the U.S. Code deals with the judiciary and judicial procedure. Part IV of Title 28 deals with jurisdiction and venue. All of the above language pertains to Part IV. The new § 1454 is so numbered because that is the next available sequential number in Chapter 89, which deals with removal jurisdiction of the District Courts. The new § 1632 is so numbered because that is the next available sequential number in Chapter 99, which deals with "General Provisions". The drafter chose not to place this new section in Chapter 83, which deals with the jurisdiction and venue of the Courts of Appeals.

Sen. Wyden Introduces Net Neutrality Bill

3/2. Sen. Ron Wyden (D-OR) introduced S 2360, the "Internet Non-Discrimination Act of 2006", a bill that would impose network neutrality requirements, and rate regulation, on voice, video, and data communications providers.

Sen. Ron WydenSen. Wyden (at right) stated in the Senate that "Rather than let them continue to have the freedom to choose whatever content, applications and services they want, the big network operators want to control the content consumers can access. Allowing the big network operators to discriminate on the Net is bad news for consumers, small businesses, schools, libraries, nonprofits and any other user who enjoys their freedom of access." See, Congressional Record, March 6, 2006, at Page S1651.

"That is why today I am proposing legislation that will codify the principle of network neutrality. I want consumers, small businesses and every other Internet user to continue to enjoy tomorrow the full array of content, service and applications they enjoy today." Sen. Wyden added that "My legislation, the Internet Non-Discrimination Act of 2006, will establish the principle of network neutrality by requiring the operators of the network to treat all content on the Internet equally."

The bill would impose the network neutrality obligations on network operators, which the bill defines broadly as "any person who owns, operates, controls, or resells and controls any facility that provides communications directly to a subscriber". The bill defines "communications" broadly as "voice, video, or data application or service, regardless of the facilities or technology used".

The bill would give enforcement authority to the Federal Communications Commission (FCC). It provides that "Any aggrieved party may submit a written complaint to the" FCC, which may then a issue cease and desist order.

The bill provides that judicial review shall lie in the "United States district court for the district in which the principle place of business of the aggrieved party is located". A communications provider's practices will likely affect people in many, if not all, judicial districts. Hence, this provision would give a forum selection, or shopping, advantage to opponents of the practices of communications providers.

The bill does not otherwise expressly create a private right of action for violation of its requirements. Nor does the bill give parallel enforcement authority to states.

The bill imposes nine categories of obligations, and provides several exceptions. It also includes some vague language regarding law enforcement activities.

The bill provides that "A network operator shall ... not interfere with, block, degrade, alter, modify, impair, or change any bits, content, application or service transmitted over the network of such operator". Nor shall it "discriminate in favor of itself or any other person, including any affiliate or company with which such operator has a business relationship in (A) allocating bandwidth; and (B) transmitting content or applications or services to or from a subscriber in the provision of a communications".

The bill further provides that a network operator shall "not assess a charge to any application or service provider not on the network of such operator for the delivery of traffic to any subscriber to the network of such operator".

The bill requires network operators to "offer communications such that a subscriber can access, and a content provider can offer, unaffiliated content or applications or services in the same manner that content of the network operator is accessed and offered, without interference or surcharges ... allow the attachment of any device, if such device is in compliance with part 68 of title 47, Code of Federal Regulations, without restricting any application or service that may be offered or provided using such a device ... treat all data traveling over or on communications in a non-discriminatory way".

The bill also imposes rate regulation on network operators. It provides that "A network operator shall ... offer just, reasonable, and non-discriminatory rates, terms, and conditions on the offering or provision of any service by another person using the transmission component of communications".

It also requires network operators to "provide non-discriminatory access and service to each subscriber" and "post and make available for public inspection, in electronic form and in a manner that is transparent and easily understandable, all rates, terms, and conditions for the provision of any communications".

The bill also enumerates several limited exceptions. For example, a network operator may "take reasonable and non-discriminatory measures to protect subscribers from adware, spyware, malware, viruses, spam, pornography, content deemed inappropriate for minors, or any other similarly nefarious application or service that harms the Internet experience of subscribers, if such subscribers -- (i) are informed of the application or service; and (ii) are given the opportunity to refuse or disable any such preventative application or service".

Network operations may also "support an application or service intended to prevent adware, spyware, malware, viruses, spam, pornography, content deemed inappropriate for minors, or any other similarly nefarious application or service that harms the Internet experience of subscribers, if such subscribers -- (i) are informed of the application or service; and (ii) are given the opportunity to refuse or disable any such preventative application or service".

Third, network operators may "take reasonable and non-discriminatory measures to protect the security of the network of such operator, if such operator faces serious and irreparable harm".

Finally, the bill would impose some requirements pertaining to law enforcement and emergency communications. It provides that network operators "shall -- (A) give priority to an emergency communication; (B) comply with any court-ordered law enforcement directive; and (C) prevent any activity that is unlawful or illegal under any Federal, State, or local law."

Ray Gifford, President of the Progress and Freedom Foundation (PFF), responded that this bill "would ultimately harm consumers because it would discourage network buildout and the new entrants in the broadband platform market. The Act would also possibly deny consumers choices based on use, speed and bundling of services. By denying consumers this choice, individuals accessing the Internet sparingly, such as for e-mail access, would be subsidizing those using much more of the available bandwidth for applications such as streaming video.   A market-based alternative, relying on antitrust-like enforcement which looks to consumer welfare harm, would protect consumers from market power abuse while encouraging both network investment and application innovation.

The Progress and Freedom Foundation (PFF) will host a day long conference on Thursday, March 9, titled "The Digital Age Communications Act: Towards a New Market-Oriented Communications Policy in 2006". See, agenda and registration page.

In contrast, the Public Knowledge (PK) praised the bill. Gigi Sohn, head of PK, stated that this bill "will preserve the open character of the Internet by preventing network operators from discriminating in favor of content, applications and services in which they have a financial interest."

Sohn will speak at the PFF's conference on a panel titled "A Regulatory Framework Discussion Panel: Focusing on DACA and Net Neutrality".

CDT Releases Proposed Bill to Limit the FEC's Authority to Regulate Online Speech

3/2. The Center for Democracy and Technology (CDT) released proposed language [2 pages in PDF] for a bill to partially protect internet speech from regulation by the Federal Election Commission (FEC). It is titled the "Internet Free Speech Protection Act of 2005". See also, the CDT's bill summary [PDF] and release.

The House has already considered and rejected one bill, HR 1606, the "Online Freedom of Speech Act", that would protect certain online political speech from FEC regulation. The House rejected HR 1606 on November 2, 2005, by a vote of 225-182. See, Roll Call No. 559.

HR 1606 was considered under suspension of the rules, which meant that a two thirds majority was required for approval. It failed because fewer that two thirds of the members voted for it. See also, stories titled "House Rejects Online Freedom of Speech Act" and "Commentary: Analysis of the Vote on HR 1606" in TLJ Daily E-Mail Alert No. 1,246, November 3, 2005.

In addition, the House Administration Committee held a hearing on September 22, 2005. See, story titled "House Committee Holds Hearing on Regulation of Internet Speech" in TLJ Daily E-Mail Alert No. 1,222, September 27, 2005.

HR 1606 is a very short bill. The CDT's proposed language is only two pages. However, their context requires some elaboration. They are a response to the FEC's implementation of the provisions of the Federal Election Campaign Act (FECA), as amended by the Bipartisan Campaign Reform Act of 2002 (BCRA), which is also known as "McCain Feingold".

McCain Feingold requires, among other things, that the FCC to write rules restricting political speech on the internet. The FECA, and regulations thereunder, nominally regulate political money, such as campaign contributions and expenditures. McCain Feingold requires the FEC to construe individuals' acts of political expression, such as operating blogs, as though expression were a financial transaction. The FEC, in its first attempt to write rules, created an exemption for communications over the internet. Sen. McCain and Sen. Feingold, and two members of the House, challenged this in the U.S. District Court, and won. The Court held that the FEC could not exempt communications over the internet. The FEC is now in the process of writing new rules.

HR 1606 would statutorily instruct the FEC to do what it did in its first attempt to write rules.

The subject of HR 1606 is the definition of "public communication". 2 U.S.C. § 431(22) provides that "The term ``public communication´´ means a communication by means of any broadcast, cable, or satellite communication, newspaper, magazine, outdoor advertising facility, mass mailing, or telephone bank to the general public, or any other form of general public political advertising."

The FEC wrote in its rules that "The term public communication shall not include communications over the Internet." This was codified at 11 C.F.R. § 100.26.

The CDT's John Morris stated in the CDT release that "Although we fully support the spirit of the House measure, we're concerned that the bill is both overbroad and under-inclusive. H.R 1606 deals with only one of the burdens facing individual speakers online. We want to make sure that a blogger won't have to hire a lawyer before commenting on an upcoming election".

Morris and the CDT have long been involved in advocating freedom to engage in online political speech. See, for example, lengthy comment submitted in response to the FEC's 1999 Notice of Inquiry (NOI) regarding internet speech. This NOI was published in the Federal Register, November 5, 1999, Vol.  64, No. 214, at Pages 60360 - 60368. The CDT also wrote a report in 1999 titled "Square Pegs and Round Holes: Applying the Campaign Finance Law to the Internet -- Risks to Free Expression and Democratic Values".

The CDT's just released proposal also addresses the definition of "public communication". It provides that "Such term shall not include any communication made over the Internet, other than: (i) one or more communications placed by a person on another person's or persons' websites for amounts exceeding an annual aggregate amount of $5,000, (ii) a communication made by a State, district, or local committee of a political party described in section 323(b), (iii) a communication made by any political committee, or (iv) a communication made by any person described in section 316 (other than a corporation described in such section whose principal purpose is operating an online discussion forum or disseminating social or political ideas or commentary through operation of a website, web log, podcast, or other similar forms of Internet communication and which is not established, financed, maintained or controlled by a labor organization or by another corporation without such a principal purpose.)"

The CDT's proposal would also exempt certain internet communications by individuals from the reporting and disclosure requirements of the FECA. This exemption would only apply to speech quantified at less than $5,000.

The CDT's proposal would also add the phrase "or over the Internet" to the FECA's definition of news media. (The FECA contains exemptions for news stories.)

Disclosure. TLJ publishes information via e-mail and the web regarding, among other things, past and future candidates for federal office. This issue references nine: Leahy, Hatch, Sununu, Smith, McCain, Feingold, Stevens, Inouye, Ensign, and Barton. The FEC's rules, and Congressional legislation, may affect TLJ. Readers may wish to take this into consideration when assessing the reliability and objectivity of any TLJ stories on this topic.

Microsoft Accuses EC of Secret Collaboration with Microsoft Adversaries

3/2. Microsoft submitted its Supplemental Response [16 pages in PDF] to the European Commission's December 21, 2005 Statement of Objections.

Microsoft filed its initial response on February 15, 2006, and published it in its web site on February 23. See, Microsoft web page with hyperlinks to the various components of the February 15 response.

Microsoft filed this Supplemental Response because it asserts that the EC withheld from Microsoft copies of relevant ex parte communications with the competitors of Microsoft that have complained to and assisted the EC in this proceeding. Microsoft alleges that the EC withheld from Microsoft certain documents until two days before Microsoft's deadline to respond, and continues to withhold certain other documents, thereby denying Microsoft the ability and right to defend itself.

The factual allegations made by Microsoft in this supplemental response, if true, would indicate that by U.S. legal standards, the EC has been conducting this proceeding without allowing Microsoft fundamental elements of due process of law.

In March of 2004, the EC announced its decision mandating that Microsoft remove certain code from its products sold in the Europe, and that it license certain proprietary technology and intellectual property rights to its competitors. The EC also fined Microsoft 497 Million Euros in 2004. The EC asserted that Microsoft leveraged its near monopoly in the market for PC operating systems onto the markets for work group server operating systems and for media players. See, stories titled "European Commission Seeks 497 Million Euros and Code Removal from Microsoft" in TLJ Daily E-Mail Alert No. 863, March 25, 2004, and "European Commission Releases Microsoft Decision" in TLJ Daily E-Mail Alert No. 883, April 23, 2004.

On December 22, 2005, the EC released its Statement of Objections asserting that Microsoft had failed to comply with the March 2004 decision. The EC demanded more money and disclosures from Microsoft. The EC stated in a release that it might fine Microsoft "€2 million per day".

See, story titled "EU Seeks More Money and Disclosures from Microsoft" in TLJ Daily E-Mail Alert No. 1,279, December 23, 2005.

The U.S. Department of Justice's (DOJ) Antitrust Division has frequently criticized the EC's 2004 decision. The US and the EC take vastly different approaches to the application of competition law to single firm conduct. See, for example, September 10, 2004 speech in Tokyo, Japan, by former Assistant Attorney General Hewitt Pate titled "Securing the Benefits of Global Competition". See also, stories titled "Pate Criticizes EC Decision Regarding Microsoft" in TLJ Daily E-Mail Alert No. 869, April 5, 2004; "Pate Addresses US EU Differences on Antitrust, Microsoft, and IPR" in TLJ Daily E-Mail Alert No. 913, June 8, 2004; and "Pate Addresses US Competition Law And Differences With EU" in TLJ Daily E-Mail Alert No. 975, September 13, 2004.

Microsoft alleges in its March 2 Supplemental Response that the EC has been conducting this proceeding "in secret collaboration with Microsoft adversaries". It further alleges that the EC, "the Trustee, and Microsoft’s adversaries were actively collaborating throughout the Fall of 2005 in a manner inconsistent with the Commission’s role as neutral regulator and the Trustee’s role as independent monitor."

Microsoft wrote that "Contacts between the Commission and competitors of the company under investigation, and between the Commission and its outside experts are frequently the practice in competition cases. But the contacts disclosed by the documents in this case are entirely inappropriate for two basic reasons."

"First, these contacts are inappropriate given the ostensibly impartial roles of the Trustee and the OTR Group (``OTR´´) in this case. The Statement of Objections relies heavily on the reports of the Trustee and OTR as evidence of Microsoft’s alleged failure to comply with its obligations under the 2004 Decision. In relying on these reports, the Commission casts the Trustee and OTR in the role of independent, impartial experts. However, the Commission’s encouragement of secret contacts between Microsoft’s adversaries and the Trustee and OTR, and the undocumented communications that resulted, is entirely inconsistent with any attempt to portray the Trustee and OTR as independent and impartial experts. By encouraging and facilitating these communications to occur in the dark, and without any record of the content of the communications apparently being kept, the Commission has prevented Microsoft from knowing whether the content of the communications was distorted or accurate."

"Second, these contacts violate both the letter and spirit of the Commission’s own Decision of 28 July 2005 on the Monitoring Trustee, not to mention fundamental principles of due process", wrote Microsoft.

The March 2 filing also alleges that "Further heightening due process concerns is the incompleteness of the 13 February disclosure. Even a cursory review of the documents disclosed reveals that there are others that have not been disclosed. E-mail chains are not finished, questions are left unanswered, and documents are mentioned that are not disclosed."

The copy of this filing published in the Microsoft web site does not include a signature page, or page containing a verification or oath.

Microsoft Denies Vista Will Include Back Door for Government Agencies

3/2. Niels Ferguson published a statement in the Microsoft Developers Network's (MSDN) System Integrity Team Blog (SITB) regarding backdoors in Microsoft's forthcoming operating system named Vista.

He responded to a story titled "UK holds Microsoft security talks" in the BBC News web site, published on February 16, 2006, and authored by Ollie Stone-Lee. The story states that "UK officials are talking to Microsoft over fears the new version of Windows could make it harder for police to read suspects' computer files."

The BBC story summarizes testimony given to a Parliamentary Committee by Ross Anderson, a professor at Cambridge University. The story states that "Professor Anderson said people were discussing the idea of making computer vendors ensure ``back door keys´´ to encrypted material were made available."

Microsoft's Ferguson responded, "Over my dead body."

Ferguson identified himself in this statement as a "developer & cryptographer". In an earlier entry in SITB he stated that "You might not have heard about the System Integrity group. We used to be called NGSCB, which was always a temporary name but it took more than 2 years before we got around to changing it. We are part of Windows Security; our charter is to provide Integrity for the Windows platform."

Ferguson elaborated. "Well, maybe not literally---I’m not ready to be a martyr quite yet---but certainly not in any product I work on. And I'm not alone in that sentiment. The official line from high up is that we do not create back doors. And in the unlikely situation that we are forced to by law we'll either announce it publicly or withdraw the entire feature. Back doors are simply not acceptable. Besides, they wouldn't find anybody on this team willing to implement and test the back door."

Microsoft stated in its latest release on Vista, that it will be "broadly available in the second half of 2006". See also, Microsoft's Vista web site and web page titled "Windows Vista Beta 2 BitLocker Drive Encryption Step-by-Step Guide".

Ferguson added that "We are of course talking to various governments; we want them to buy Vista and use BitLocker for their own security. We get the typical questions you always get: ease of use, performance, security, etc. We also get questions from law enforcement organizations. They foresee that they will want to read BitLocker-encrypted data, and they want to be prepared. Like any security technology BitLocker has its avenues of attack and law enforcement should know about them. For example, if they search a house and find a computer, they should also take all USB thumb drives, as these might contain a BitLocker key. This information is not secret; our users need to have the same information when they make the security vs. convenience tradeoff of choosing a key-protection option (TPM only, USB key, TPM + USB key, etc.) We plan on having a KB article with the details when Vista ships."

Bush and Singh Release Statements Re Trade, IPR and Innovation

3/2. President Bush traveled to India, where he met with Indian Prime Minister Manmohan Singh. The two released statements regarding trade negotiations, intellectual property rights (IPR), and promoting innovation.

President Bush and Prime Minister Singh issued a U.S.-India Joint Statement on Trade. It first states that "We fully share the goal of completing the WTO Doha Development Agenda (DDA) before the end of 2006, and agree to work in partnership to help achieve this outcome."

The trade statement also addresses bilateral negotiations, and intellectual property rights specifically. It states that "While working for a successful Doha Round, we also reaffirm our commitment to strengthen and deepen bilateral trading ties."

"We agree to promote innovation, creativity and technological advancement by providing a vibrant intellectual property rights regime. As two dynamic economies with many complementary interests, the U.S. and India will seek to enhance bilateral trade and investment ties by expanding private sector contacts, dismantling barriers to trade, building trade capacities and strengthening trade-promoting institutions."

Bush and Singh also released a longer U.S.-India Joint Statement that includes a section on "Innovation and the Knowledge Economy". First, it announces "the establishment of a Bi-National Science and Technology Commission which the U.S. and India will co-fund. It will generate collaborative partnerships in science and technology and promote industrial research and development."

Second, it states that the U.S. and India will "work together to promote innovation, creativity and technological advancement by providing a vibrant intellectual property rights regime, and to cooperate in the field of intellectual property rights to include capacity building activities, human resource development and public awareness programs."

Third, it states that the U.S. and India "continue exploring further cooperation in civil space, including areas such as space exploration, satellite navigation, and earth science. The United States and India committed to move forward with agreements that will permit the launch of U.S. satellites and satellites containing U.S. components by Indian space launch vehicles, opening up new opportunities for commercial space cooperation between the two countries."

Finally, the statement welcomes "the U.S. Department of Commerce's plan to create a license exception for items that would otherwise require an export license to end-users in India engaged solely in civilian activities."

People and Appointments

3/2. Matthew Broderick, Director of the Department of Homeland Security's (DHS) Operations Directorate, announced his resignation, effective March 31, 2006. See, DHS release.

3/2. The Senate Judiciary Committee reported favorably the nominations of Jack Zouhary (to be a Judge of the U.S. District Court for the Northern District of Ohio), Stephen Larson (USDC, Central District of California).

3/2. The Senate Judiciary Committee held over consideration of the nomination of Steven Bradbury to be Assistant Attorney General in charge of the Office of Legal Counsel at it March 2 meeting. The agenda for the March 8 meeting includes consideration of Bradbury.

More News

3/2. Scott Hammond, presented a paper titled "Charting New Waters in International Cartel Prosecutions" at a conference in San Francisco, California. Hammond is the Deputy Assistant Attorney General for Criminal Enforcement in the Department of Justice's (DOJ) Antitrust Division.

3/2. The House Judiciary Committee (HJC) approved HR 4709, the "Law Enforcement and Phone Privacy Protection Act of 2006", by voice vote, without amendment.

3/2. The Senate Judiciary Committee approved, without amendment, S 2178, the "Consumer Telephone Records Protection Act of 2006".

3/2. The Federal Communications Commission (FCC) issued an order [6 pages in PDF] extending its relief plan to assist victims of Hurricane Katrina through targeted universal fund (USF) support. See also, FCC release [PDF]. This order is FCC 06-23 in CC Docket No. 96-45, and other dockets.

Supreme Court Vacates in Patent Tying Antitrust Case

3/1. The Supreme Court issued its opinion [20 pages in PDF] in Illinois Tool Works v. Independent Ink, a patent tying antitrust case in which the Court vacated the judgment of the U.S. Court of Appeals (FedCir) and remanded.

The Court of Appeals held in January of 2005 that "a rebuttable presumption of market power arises from the possession of a patent over a tying product". The Supreme Court concluded that "Congress, the antitrust enforcement agencies, and most economists have all reached the conclusion that a patent does not necessarily confer market power upon the patentee. Today, we reach the same conclusion, and therefore hold that, in all cases involving a tying arrangement, the plaintiff must prove that the defendant has market power in the tying product."

See, full story.

USTR Releases 2005 Trade Report

3/1. The Office of the U.S. Trade Representative (USTR) released its annual report to the Congress titled "2006 Trade Policy Agenda and the 2005 Annual Report of the President of the United States on the Trade Agreements Program".

See, hyperlinks to PDF copies of the components of the report:

See also, USTR release.

The report, at Section I, states that "The Administration has focused on tangible progress on the bilateral, regional, and multilateral levels to expand trade opportunities. Our new and comprehensive agreements are tailored to reflect a world of high technology, complex new intellectual property standards", and other considerations.

The report states that "The Administration will continue to use all available tools to ensure that our trading partners live up to their obligations as WTO Members and FTA partners." In cites as an example that "the United States prevailed in a case involving unfair subsidies provided to a Korean semiconductor maker by the Korean government. In that case, the United States won the right to maintain countervailing duties on the illegally-subsidized semiconductors."

The report also states that "The Administration will also continue its Strategy Targeting Organized Piracy (STOP!) initiative, in which nine U.S. government agencies work together and reach out to trade partners in Europe, Singapore, Hong Kong, Japan, and South Korea in an effort to work together to confront the global scourge of intellectual property theft."

The report acknowledges that "There is concern that the U.S.-China trade relationship lacks balance in ... the protection of intellectual property".

It adds that "Intellectual property theft, counterfeiting, and copyright infringement in China continue to be a source of serious concern for the Administration. Chinese officials have made some progress to protect intellectual property, but the United States will continue to work with the Chinese government to demonstrate more reliable and consistent progress in this area."

The report, in Section V, addresses the success in getting China to remove its discriminatory tax on semiconductors.

This section continues that "IPR protection and enforcement in China remained a top priority of the Administration's trade policy in 2005. USTR carried out an OCR in 2005 to evaluate China’s implementation of various IPR commitments, including those made at the 15th annual Joint Commission on Commerce and Trade (JCCT) meeting held April 2004. The OCR revealed that China had not resolved critical deficiencies in IPR protection and enforcement and, as a result, infringements remain at unacceptably high levels. Based on information collected in the OCR, the United States concluded that China had not achieved its key commitment at the April 2004 JCCT meeting to significantly reduce IPR infringements throughout China."

The report outlines other actions that the U.S. has taken with respect to the lack of IPR protection and enforcement in China.

Section V also reviews IPR related actions pertaining to other nations. For example, with respect to Russia, the report states that "The 2005 Special 301 Report noted that Russia remained on the Priority Watch List due to serious and continuing concerns with Russia’s IPR regime, including weak IPR enforcement, rampant production of pirated optical media products, and an increasing problem with Internet piracy of copyrighted works. USTR announced in April 2005 that it would conduct an" out of cycle review (OCR).

It adds that "We are continuing to work with other governments, and consult with U.S. industry, to develop the best strategy to address Internet piracy. An important first step in the fight against Internet piracy was achieved at WIPO when it concluded two copyright treaties in 1996: the WIPO Copyright Treaty (WCT) and the WIPO Performances and Phonograms Treaty (WPPT) ..." And now, "We are also seeking to heighten standards of protection for intellectual property by incorporating standards of the WIPO Internet Treaties as substantive obligations in the bilateral and regional trade agreements that we negotiate. Our proposals in the on-going our FTA negotiations will continue to include up-to-date copyright and enforcement obligations to reflect the technological challenges we face today as well as those that may exist at the time negotiations are concluded."

The report, at Annex I, includes some statistics on trade. It states that "U.S. trade (exports and imports of goods and services, and the receipt and payment of earnings on foreign investment) increased by over 15 percent in 2005 to a value of approximately $4.3 trillion." (Footnote omitted. Parentheses in original.)

It states that total estimated exports of goods in 2005 was $893.8 Billion. The subcategory of "High Technology" was $214.3 Billion. In contrast, estimated exports of "Agriculture" goods amounted to a comparatively smaller $65.4 Billion. Yet, it is disputes over agricultural trade that dominate many trade negotiations.

On the services side, the report states that "U.S. exports of services grew roughly 11 percent in 2005 to $380 billion", and that "Services imports by the United States increased in 2005 by 9 percent to $323 billon". That is, the U.S. is a net exporter of services.

The report also provides data on trade in services. It states that estimated U.S. exports of services in 2005 in "computer and information services" amounted to $8.5 Billion. In contrast, estimated imports of "computer and information services" amounted to $5.8 Billion.

This data may be significant for several reasons. Importation of services in the category of "computer and information services" is one measure of IT outsourcing, which has been the subject of much debate in Washington DC. Yet, the U.S. is a net exporter of services in the category. Hence, protectionist policies implemented in the U.S., if reciprocated abroad, could impact U.S. exports more than U.S. imports. Moreover, the total amount of imports in this category constitutes less that 2% of all imports. ($5.8 Billion divided by $323 Billion.)

Senate Approves S 2271

3/1. The Senate approved S 2271, the "USA PATRIOT Act Additional Reauthorizing Amendments Act of 2006"., by a vote of 95-4. See, Roll Call No. 25.

The Senate also approved an amendment (SA  2895) that provides that "At the end of the bill add the following: This Act shall become effective 1 day after enactment."

The Senate first held several roll call votes that terminated dilatory tactics employed by just over a dozen opponents of the language contained in S 2271, and the conference report on HR 3199.

The Senate approved a motion titled "Motion to Proceed to Consider the Motion to Reconsider the Vote by which the Motion to Invoke Cloture on the Conference Report to Accompany H.R. 3199 was Not Agreed To" by a vote of 86-13. See, Roll Call No. 26.

The Senate approved a motion titled "Motion to Reconsider the Vote by Which Cloture was Not Invoked on the Conference Report to Accompany H.R. 3199" by a vote of 85-14. See, Roll Call No. 27.

And, the Senate approved a motion to invoke cloture, and terminate debate, on the conference report on HR 3199 by a vote of 84-15. See, Roll Call No. 28.

The Senate has yet to approve the conference report [PDF] on HR 3199, the "USA PATRIOT Improvement and Reauthorization Act of 2005". It is scheduled to resume consideration of this conference report on Thursday, March 2, 2006.

See also, floor statement by Sen. Patrick Leahy (D-VT).

Internet Companies Write House Commerce Committee Regarding Net Neutrality

3/1. Sixty-four companies, interest groups and others sent a letter [2 pages in PDF] to Rep. Joe Barton (R-TX) and Rep. John Dingell (D-MI), the Chairman and ranking Democrat on the House Commerce Committee, to urge that any telecommunications and internet reform legislation include a "meaningful and enforceable net neutrality requirement".

The entities that joined in the letter include Amazon, eBay, Google, Microsoft, Pulver.com, Ticketmaster, Skype, Ticketmaster and Yahoo. The entities also include CompTel, the Consumer Electronics Association, and the Public Knowledge.

The letter is short, but states that "the Internet is at risk of losing" its "openness" and its "end-to-end design". The letter is vague as to how "net neutrality" should be preserved by statutory language. The letter mainly serves to identify supporters of a net neutrality mandate.

Library of Congress Comments Section 108 Exemptions and Book Scanning

3/1. TLJ Daily E-Mail Alert No. 1,318, February 27, 2006, included a story on the Library of Congress's (LOC) Section 108 Study Group, and the LOC's notice in the Federal Register requesting public comments, and announcing public hearings. On March 1, 2006, Mary Rasenberger, Policy Advisor for Special Programs at the U.S. Copyright Office, wrote to TLJ that this story was "very misleading".

Rasenberger added that "Google's Print for Libraries program does not fall under the current section 108 exceptions".

Google has pled Section 108 as an affirmative defense to allegations of copyright infringement in pending litigation pertaining to its Print for Libraries program. Google announced this program in a release on December 14, 2004. Both book publishers and the Authors' Guild filed lawsuits late last year. See also, story titled "Google, Publishers and Authors Debate Google's Print for Libraries Program" in TLJ Daily E-Mail Alert No. 1,239, October 25, 2005.

The TLJ story in the February 27 issue stated, at paragraph 4, that "17 U.S.C. § 108, titled ``Limitations on exclusive rights: Reproduction by libraries and archives´´, provides exemptions from liability for infringement for libraries and archives. Section 108 applies to ``libraries and archives´´ and employees acting within the scope of their employment. Neither Section 108, nor Section 101, the definitional section of the Copyright Act, define either ``library´´ or ``archive´´."

The TLJ story also stated, at paragraphs 20 through 24, as follows:

The LOC's Rasenberger wrote in an e-mail response that the Section 108 Study Group "is not addressing Google's activities."

She continued that "Google is not a library or archive for purposes of Section 108, nor is it acting as an outsourcing agent in the case of Google Print for Libraries, as you suggest in your article. Rather, Google is acting on its own behalf, under agreement with libraries, yes, but NOT as an outsourcing agent for the libraries. Indeed, Google's Print for Libraries program does not fall under the current section 108 exceptions or any proposal currently on the table in the Section 108 group."

She added that "the article does a disservice to the members of the group who have been working extremely hard on the mission given them, as well as to the public and members of Congress who are interested in the actual work of the group -- that is, updating the copyright exceptions for libraries and archives in light of digital media. Creating a false association with Google's activities may arouse more interest in the work of the group, but will only cause confusion on all sides -- to no one's benefit."

The LOC notice in the Federal Register identified Rasenberger and Chris Weston, Attorney-Advisor, Copyright Office and Office of Strategic Initiatives of the LOC. See, notice in the Federal Register, February 15, 2006, Vol. 71, No. 31, at Pages 7999-8002.

Prior to publication of the story, TLJ spoke with the Chris Weston. He refused to answer questions regarding the relationship between the LOC's notice in the Federal Register and Google Print for Libraries. TLJ also called Mary Rasenberger prior to publication. She promptly terminated the conversation. Hence, the story related the language contained in the LOC's notice in the Federal Register regarding the LOC's Section 108 Study Group, and not the LOC's attorneys' understanding of the mission of the Section 108 Study Group.

Also, while Rasenberger wrote to TLJ that "Google's Print for Libraries program does not fall under the current section 108 exceptions", this is an as yet unresolved legal issue in pending litigation. The October 19, 2005, complaint [35 pages in PDF] in McGraw Hill v. Google raises the subject of Google's and libraries' Section 108 exemption in the context of Google's Print for Libraries.

The book publishers' complaint alleged that "Neither (a) the fair use provisions of 17 U.S.C. § 107 nor (b) the narrow provisions of 17 U.S.C. § 108, which in very different circumstances would allow a library but, in no event, Google, to make digital copies of these works in a library's collection, excuse Google's wholesale unauthorized copying." See, complaint, at page 4.

This case is McGraw Hill Companies, Inc., Pearson Education, Inc., Penguin Group (USA) Inc., Simon & Schuster, Inc. and John Wiley & Sons, Inc. v. Google Inc., U.S. District Court for the Southern District of New York, D.C. No. 05-CV-8881.

In contrast, Google has pled Section 108 as an affirmative defense. See, for example, November 30, 2005, Google's answer [10 pages in PDF] in Author's Guild v. Google, at page 7. Google asserted that "Google's use of and activities with respect to books that are subject to copyright are subject to one or more of the limitations on 17 U.S.C. § 106 set forth in 17 U.S.C. §§ 107-122." This case is U.S.D.C., S.D.N.Y., D.C. No. 05 CV 8136 (JES).

More News

3/1. The Office of the U.S. Trade Representative (USTR) announced in a release that "The United States and Ukraine have concluded bilateral negotiations on market access issues related to Ukraine’s World Trade Organization (WTO) accession. Trade Minister Arseniy Yatsenyuk will join U.S. Trade Representative Rob Portman in Washington on March 6, 2006 to formally sign the agreement."

Go to News from February 26-28, 2006.