TLJ News: April 1-5, 2006.

TLJ News from April 1-5, 2006

House Subcommittee Approves COPE Act

4/5. The House Commerce Committee's (HCC) Subcommittee on Telecommunications and the Internet amended and approved HR __ [PDF], a committee print of a bill that may be titled the "Communications Opportunity, Promotion, and Enhancement Act of 2006", or COPE Act. The final vote to approve the bill, as amended, was 27-4. The Subcommittee rejected a broad network neutrality mandate by a vote of 8-23. The Subcommittee rejected a build out mandate for nationally franchised cable operators by a vote of 11-22.

The Subcommittee began its mark up session with opening statements by members on Tuesday, April 4, 2006, at 5:00 PM. It proceeding to consideration of amendments on Wednesday, April 5, 2006. It commenced shortly after 10:00 AM, and after one break for votes on the House floor, completed its mark up just before 6:00 PM.

Rep. Joe Barton (R-TX), the Chairman of the HCC, stated that he expected the full Committee to mark up the bill shortly after the House April recess.

The Subcommittee began with consideration of the base bill. This is the Committee Print, or draft, of a bill that has not yet been formally introduced in the House. For a summary of the base bill, see story titled "Summary of COPE Act" and story titled "House Subcommittee on Telecommunications and the Internet Holds Hearing on COPE Act" in TLJ Daily E-Mail Alert No. 1,341, April 3, 2006.

The mark up session was organized by title of the bill. The Subcommittee first considered amendments to Title I, which provides that certain cable operators may obtain a national cable franchise. The Subcommittee then considered amendments to Title II, which provides that the Federal Communications Commission (FCC) is authorized to enforce its August 2005 policy statement [3 pages in PDF] regarding network neutrality through case by case adjudicatory proceedings.

The Subcommittee then considered amendments to Title III, which extends the E-911 regulatory regime to voice over internet protocol (VOIP) service. The Subcommittee then considered amendments to Title IV, which provides that state and local entities may provide any telecommunications, information or cable service.

Finally, the Subcommittee approved an amendment to the bill that provides that service providers cannot condition purchase of broadband service on the purchase of other services. The Subcommittee discussed, but did not approve any amendments regarding universal service, which are beyond the scope of this bill.

Rep. Fred Upton (R-MI), the Chairman of the Subcommittee on Telecommunications and the Internet, presided for almost all of the meeting. Rep. Barton, the full Committee Chairman was also present for most of the meeting, as was Rep. John Dingell (D-MI), the ranking Democrat on the full Committee.

See also stories titled "House Subcommittee Rejects Network Neutrality Amendment" and "Amendment by Amendment Summary of Subcommittee Mark Up of COPE Act", in this issue.

See also, table titled "Summary of Amendments to Communications Opportunity, Promotion, and Enhancement Act of 2006 Offered at the April 5, 2006 Mark Up".

House Subcommittee Rejects Network Neutrality Amendment

Rep. Ed Markey (D-MA), Rep. Rick Boucher (D-VA), Rep. Anna Eshoo (D-CA), and Rep. Jay Inslee (D-WA) offered the amendment. In the vote, these four, and Rep. Heather Wilson (R-NM), Rep. Mike Doyle (D-PA), Rep. Fraink Pallone (D-NJ), and Rep. John Dingell (D-MI) voted for the amendment.

This amendment provides that each "broadband network provider" has the following duties:

   "(1) not to block, impair, degrade, discriminate against, or interfere with the ability of any person to use a broadband connection to access, use, send, receive, or offer lawful content, applications, or services over the Internet;
   (2) to operate its broadband network in a nondiscriminatory manner so that any person can offer or provide content, applications, and services through, or over, such broadband network with equivalent or better capability than the provider extends to itself or affiliated parties, and without the imposition of a charge for such nondiscriminatory network operation;
   (3) if the provider chooses to prioritize data of a particular type, to prioritize all data of that type and without charge for such prioritization;
   (4) to enable a user to attach and use any device to the operator’s network that does not physically damage, make unauthorized use of, or materially degrade other users’ utilization of, the network; and
   (5) to clearly and conspicuously disclose to users, in plain language, accurate information about the speed, nature, and limitations of their broadband connection."

The amendment also contains several exceptions. It provides that:

"Nothing in this section shall prevent a broadband network provider from taking reasonable and nondiscriminatory measures to---
   (1) manage the functioning of its network to protect the security of such network and broadband network services, provided that such management does not depend upon the affiliation with the broadband network provider of the content, applications, or services on the network;
   (2) offer varied service plans to users at defined levels of bandwidth and different prices;
   (3) offer consumer protection services (including services for the prevention of unsolicited commercial electronic messages, parental controls, or other similar capabilities), or offer cable service, so long as a user may refuse or disable such services;
(4) give priority to emergency communications; or
(5) prevent any violation of Federal or State law, or comply with any court-ordered law enforcement directive."

The amendment also provided for Federal Communications Commission (FCC) review of complaints, within 30 days.

The morning of the vote leaders of six large internet companies wrote a letter to Rep. Joe Barton (R-TX), the Chairman of the HCC. They also distributed the letter to members of the Subcommittee, reporters and others. They asked for broader network neutrality language in the bill.

The six who signed the letter were Jeff Bezos (CEO of Amazon.com), Meg Whitman (P/CEO of eBay), Eric Schmidt (CEO of Google), Barry Diller (Ch/CEO of IAC/InterActiveCorp), Steve Ballmer (CEO of Microsoft), and Terry Semel (CEO of Yahoo).

The letter consisted of four short paragraphs, set out in full below.

    "We write to express our concern that the telecommunications legislation being considered by the Committee fails to preserve the longstanding openness of the Internet. Without critical changes, the legislation puts at risk consumer choice, American innovation and global competitiveness.
   Until FCC decisions made last summer, consumers’ ability to choose the content and services they want via their broadband connections was assured by regulatory safeguards. Innovators likewise have been able to use their ingenuity and knowledge of the marketplace to develop new and better online offerings. This “innovation without permission” has fueled phenomenal economic growth, productivity gains, and global leadership for our nation’s high tech companies.
   To preserve this environment, we urge the Committee to include language that directly addresses broadband network operators’ ability to manipulate what consumers will see and do online. It is equally important to pass a bill that fleshes out these consumer freedoms via rules of the road that are both meaningful and readily enforceable.
   We look forward to continuing to work with you and other Members of the Committee to protect millions of Americans’ legitimate expectations in an open Internet, as well as the innovation and competitiveness that it creates."

Supporters of the amendment on the Subcommittee spoke in vague, but apocalyptic language. Rep. Eshoo said that this vote "is about the future of the internet". The bill, without this amendment, will fundamentally change the architecture of the internet, and harm innovation, she said.

Rep. Markey said that "this is an historic moment for the Committee". He asserted that with this bill, the Committee will change the internet, by "succumbing to the whims of those bottleneck industries".

"The sky is not falling", responded Rep. John Shimkus (R-IL), one of 23 members who voted against the amendment.

The vote was overwhelmingly against the amendment. All but one Republican voted against. 6 of 13 Democrats voted against.

Whatever the merits of the proposal, the debate leading up to this bill, and this mark up, may have shown that the large phone companies and cable companies devote more resources to, and are more experienced and more effective at, communicating their policy arguments to members of Congress, their staff, committee staff, writers, reporters, and others, than are large internet companies.

After the vote, Gigi Sohn, head of Public Knowledge, stated in a release that "The Subcommittee missed an opportunity to maintain the free and open Internet that we have come to value over the years. The amendment by Reps. Markey, Boucher, Eshoo and Inslee would have set fair and reasonable boundaries on the conduct of telephone and cable companies which now will have control over the Internet, while guaranteeing the rights of consumers. We hope the full Commerce Committee will revisit the issue after the Easter recess."

Earl Comstock, head of CompTel, wrote in a release that "The draft legislation currently before members of the House Telecom and Internet Subcommittee fails to preserve the Internet as it exists today. The Markey amendment would have protected competition and consumers by ensuring that the Bell and cable companies are not allowed to act as gatekeepers to the Internet. COMPTEL is disappointed that members of the subcommittee chose not to adopt meaningful safeguards that would have ensured that the Internet will remain an innovative, driving force in our nation's economy."

Amendment by Amendment Summary of Subcommittee Mark Up of COPE Act

4/5. The House Commerce Committee's (HCC) Subcommittee on Telecommunications and the Internet amended and approved HR __ [PDF], the "Communications Opportunity, Promotion, and Enhancement Act of 2006", or COPE Act. The Subcommittee approved many amendments. Many amended were offered, but rejected or withdrawn. Many of the withdrawn amendments, particularly those related to consumer protection issues, were withdrawn under commitments from the manager to work with the sponsor on appropriate language. Finally, one approved amendment may be removed at the full Committee mark up. The following is an amendment by amendment summary of the mark up. See, full story.

Reps. Boucher and Berman Introduce Patent Reform Bill

4/5. Rep. Rick Boucher (D-VA) and Rep. Howard Berman (D-CA) introduced HR 5096 [22 pages in PDF], the "Patents Depend on Quality Act of 2006", or PDQ Act.

This is a revised version of a bill introduced in 2004 by Rep. Boucher and Rep. Berman. Late in the last Congress, on October 8, 2004, the two introduced HR 5299 (108th), the "Patent Quality Assistance Act of 2004". See, story titled "Berman and Boucher Introduce Bill to Provide for Post Grants Reviews of Patents" in TLJ Daily E-Mail Alert No. 999, October 19, 2004.

The just introduced bill creates a new post grant opposition procedure at the U.S. Patent and Trademark Office (USPTO). See, Section 2, at pages 2-15.

Section 3, at pages 15-16, addresses "Publication of Patent Applications". Section 4 of the bill, at pages 16-17, titled "Submission by Third Parties", permits third parties to submit prior art to the USPTO within six months of publication of a patent application.

Section 5, at pages 17-18 addresses "Inter Partes Reexamination". Section 6, at pages 18-21, addresses "Willful Infringement".

Section 7, at pages 21-22, is a venue provision. It provides that the District Court "shall" transfer a case to another district when certain enumerated connections to the district in which the complaint is filed are absent. It would limit forum shopping by patent plaintiffs, and reduce the patent caseload of the Eastern District of Texas.

Section 8, at page 22, is perhaps the most important provision. It limits the availability of injunctive relief in patent cases. 35 U.S.C. § 283 currently provides that "The several courts having jurisdiction of cases under this title may grant injunctions in accordance with the principles of equity to prevent the violation of any right secured by patent, on such terms as the court deems reasonable.

The bill would add the following: "In determining equity, the court shall consider the fairness of the remedy in light of all the facts and the relevant interest of the parties associated with the invention. Unless an injunction is entered pursuant to a nonappealable judgment of infringement, a court shall stay the injunction pending an appeal upon an affirmative showing that the stay would not result in irreparable harm to the owner of the patent and that the balance of hardships from the stay does not favor the owner of the patent."

See also, Boucher release.

Senate Democrats Introduce Call Center Location Disclosure Bill

4/5. Sen. John Kerry (D-MA), Sen. Ted Kennedy (D-MA), Sen. Patrick Leahy (D-VT), and Sen. Russ Feingold (D-WI) introduced S 2553, the "Call Center Consumer's Right to Know Act of 2006 ".

This bill provides that "A United States corporation or its subsidiaries that utilizes a call center to initiate telephone calls to, or receive telephone calls from, individuals located in the United States, shall require each employee in the call center to disclose the physical location of such employee at the beginning of each telephone call so initiated or received."

The bill would give the Federal Trade Commission (FTC) rulemaking and civil enforcement authority.

The bill was referred to the Senate Commerce Committee. Sen. Kerry is a member.

More News

4/5. The House Judiciary Committee's (HJC) Subcommittee on Courts, the Internet and Intellectual Property held a hearing titled "Patent Quality Enhancement in the Information-Based Economy". See, prepared testimony [7 pages in PDF] of Jon Dudas (Director of the U.S. Patent and Trademark Office), prepared testimony [10 pages in PDF] of Robert Stewart (UBS AG), prepared testimony [21 pages in PDF] of Jim Balsillie (Chairman of Research in Motion, which last month paid $612.5 Million to NTP to settle a patent lawsuit involving its Blackberries), and prepared testimony [PDF] of Mark Lemley (Stanford Law School). Balsillie wrote that "RIM's experience in the NTP case demonstrates that there are significant undesirable social and economic costs contrary to promoting the useful Arts when patents are treated as an absolute property right".

4/5. The House approved HRes 541, which honors Roy Glauber, John Hall, and Theodor Hansch for being awarded the Nobel Prize in Physics for 2005. The Nobel Foundation stated that they won this prize for "their contributions to the development of laser-based precision spectroscopy, including the optical frequency comb technique". Rep. Vern Ehlers (R-MI), the manager of this resolution, stated that "I am particularly honored to offer congratulations to Dr. Jan Hall for his commendable contributions to the field of laser-based precision spectroscopy. His careful and dedicated work has resulted, among other things, in improved accuracy in vital navigation systems such as GPS."

4/5. The Government Accountability Office (GAO) released a report [53 pages in PDF] titled "Telecommunications: Weaknesses in Procedures and Performance Management Hinder Junk Fax Enforcement". The report states that the "FCC has procedures for receiving and acknowledging the rapidly increasing number of junk fax complaints, but the numbers of investigations and enforcement actions have generally remained the same. In 2000, FCC recorded about 2,200 junk fax complaints; in 2005, it recorded over 46,000. Using its procedures to review the complaints, FCC’s Enforcement Bureau (EB) issued 261 citations (i.e., warnings) from 2000 through 2005. EB has ordered six companies to pay forfeitures for continuing to violate the junk fax rules after receiving a citation. The six forfeitures totaled over $6.9 million, none of which has been collected by the Department of Justice for various reasons. EB officials cited competing demands, resource constraints, and the rising sophistication of junk faxers in hiding their identities as hindrances to enforcement."

Reps. Inslee and Blackburn Introduce White Space Bill

4/4. Rep. Jay Inslee (D-WA), Rep. Marsha Blackburn (R-TN), Rep. Tammy Baldwin (D-WI), Rep. Paul Gillmor (R-OH), and Rep. Rick Boucher (D-VA) introduced HR 5085, the "American Broadband for Communities Act".

The bill would amend the Communications Act to provide that "Any unused broadcast television spectrum in the band between 54 and 698 megaHertz, inclusive, other than spectrum in the band between 608 and 614 megaHertz, inclusive, may be used by unlicensed devices, including wireless broadband devices."

The bill would also require the Federal Communications Commission (FCC) to write rules within 180 days of enactment.

The FCC adopted a notice of proposed rulemaking (NPRM) on May 13, 2004, regarding use by unlicensed devices of broadcast television spectrum where the spectrum is not in use by broadcasters. However, the FCC has not yet issued any rules in this proceeding.

See, full story.

New York State Sues Spyware Distributor

4/4. The state of New York filed a complaint [PDF] in state court in New York City against DirectRevenue LLC and several individuals alleging violation of New York law in connection with their installation of computer spyware and adware without consent of the computer owners.

The complaint was filed in the Supreme Court for the State of New York (a trial court) in the County of New York. It names as defendants Direct Revenue LLC, which is a Delaware corporation based in New York, and several individuals who are its founders, directors or owners.

The complaint alleges that "Since 2002, DirectRevenue has installed more than 150 million ad-serving programs (also know as ``spyware´´ or ``adware´´), directly from its own servers onto consumers' computers. During most of this period, it has rarely obtained consumers' consent to perform these installations, or given consumers anything approaching reasonable or conspicuous notice that spyware was being installed. Through these downloaded programs, Direct Revenue has then deluged consumers with streams of pop-up ads, for which its own advertisers have paid it millions of dollars." (Parentheses in original.)

The complaint states that "In most cases, these spyware installations were instigated when Direct Revenue (or one of its distributors or sub-distributors) advertised to consumers ``free´´ programs, such as screensavers or games. Once the consumers agreed to download these ``free´´ applications, a small string of code was placed onto consumers' computers, which in turn instructed Direct Revenue's servers to silently install its spyware onto users' desktops." (Parentheses in original.)

"As a general rule, at no time during this process were consumers given reasonable or conspicuous notice that Direct Revenue would download its spyware -- neither by Direct Revenue, nor its distributors." Notice in some, but not all cases, came in the form of small print in a large document accessible only by clicking on a hyperlink.

"Compounding this invasive fraud, Direct Revenue designed its spyware so that, once downloaded, it was extremely difficult for users to detect and remove." The complaint further alleges that some of Direct Revenue's spyware was installed by "drive by downloads" through "malicious code that exploited security vulnerabilities in Microsoft's web browser and operating system" as result of the consumer visiting certain web sites.

The complaint also alleges harm to consumers. It states that "Direct Revenue's spyware is extremely invasive and burdensome to consumers. It generates a persistent stream of pop-up advertisements. Even worse, it allows Direct Revenue permanent, stealth ``backdoor´´ access to consumers' computers. Worse still, Direct Revenue has used this backdoor to install even more sophisticated versions of its spyware onto users' desktops, and to install other spyware programs."

The complaint ads that this software "displays a persistent stream of pop-up ads. These ads are often delivered less than a minute apart ..."

The complaint also alleges that the "spyware monitors the websites users visit, as well as information they type into web forms, such as search engines ..."

The complaint alleges violation of the New York state statute that bans deceptive acts or practices in the conduct of business (General Business Law § 349), violation of the New York state statute that bans false advertising (GBL § 350), violation of the New York state criminal statute than bans tampering with computers (New York Penal Law § 156.20), and trespass to chattels and negligent supervision under New York state common law.

The complaint seeks injunctive relief, disclosure of information, an accounting, and civil monetary penalties.

Eliot Spitzer Elliot Spitzer (at right), Attorney General of New York, stated in a release that "Surreptitiously installed spyware and adware harm consumers and businesses, and my office will continue to prosecute these practices aggressively ... These applications are deceptive and unfair to consumers, bad for businesses that rely on efficient networks to do their jobs, and bad for online retailers that need consumers to trust and enjoy their online experience. We will continue to side with consumers in their fight for control of their desktops."

Ari Schwartz, Deputy Director of the Center for Democracy and Technology (CDT), stated in a release that "The practice of forcing consumers into downloading software they neither want nor need has threatened the essential trust that lies at the heart of Internet communication. Aggressive law enforcement is an essential component in the ongoing fight to stem the tide of unwanted spyware. We applaud Attorney General Spitzer for attacking this problem at its source and for sending a message that years of illegal behavior will not go unanswered."

This case is People of State of New York v. Directrevenue LLC, Joshua Abram, Allan Murray, Daniel Kaufman and Rodney Hook, Supreme Court of the State of New York, County of New York.

In November of 2005 the state of Texas filed a spyware related lawsuit against Sony BMG. See, story titled "Texas Sues Sony BMG Alleging Violation of Texas Spyware Statute" in TLJ Daily E-Mail Alert No. 1,258, November 22, 2005, and story titled "" in TLJ Daily E-Mail Alert No. 1,280, December 29, 2005.

Martin Discusses Newspaper Broadcast Cross Ownership Rule

4/4. Federal Communications Commission (FCC) Chairman Kevin Martin gave a speech [PDF] to the Newspaper Association of America in which he argued that the FCC's newspaper broadcast cross ownership rule is obsolete with the proliferation of the internet and other new media.

He stated that "the rule prohibiting a newspaper from owning a broadcast property in the same market has not changed since it was put in place in 1975. Much has changed since the days of disco and leisure suits, including the media marketplace. Over the last 30 years, we have seen an explosion in media outlets and other sources of news and information. The rule that is in place today was based on a market structure that bears little resemblance to the current environment. That rule was adopted in an era with little cable penetration, no local cable news channels, fewer broadcast stations, and no Internet."

Martin elaborated that "the Internet as we know it today did not even exist in 1975, whereas more than 180 million Americans last year turned to the Internet for their news and information. Companies like Microsoft, Google and Yahoo! -- companies that did not even exist in 1975 -- operate some of the most visited sites."

He also said the the number, circulation, and stock prices of city newspapers have all declined, with "the proliferation of the Internet and other new media, this downward trend shows no sign of abating."

He added that "In 2003, the Commission finally eliminated this rule, replacing it with a general cross-media ownership limit. But as you all know, the Third Circuit overturned our order, finding that the Commission's actions were not fully justified. ... While the Third Circuit affirmed our decision to eliminate the newspaper/broadcast cross-ownership prohibition, it overturned the Commission's new cross-media ownership limit and sent it back to us. As a result, we now need to start the regulatory process all over again."

See also, story titled "FCC Announces Revisions to Media Ownership Rules" in TLJ Daily E-Mail Alert No. 672, June 3, 2003. On June 24, 2004, the U.S. Court of Appeals (3rdCir) issued its opinion [213 pages in PDF] in Prometheus Radio Project v. FCC. See, story titled "3rd Circuit Rules in Media Ownership Case" in TLJ Daily E-Mail Alert No. 930, July 1, 2004. This opinion is reported at 373 F.3d 372 (3d Cir. 2004). The Supreme Court denied certiorari.

He also argued that "allowing cross-ownership may help to forestall the erosion in local news coverage by enabling companies to reduce duplicative costs and amortize their news products across multiple platforms."

People and Appointments

4/4. Rep. Tom DeLay (R-TX) gave a speech in which he announced that "I am announcing my intention to resign my seat in the House. I will make that resignation effective sometime before mid-June, but largely dependent on the congressional calendar."

GAO Releases Privacy Analysis of Government Use of Information Resellers

4/3. The Government Accountability Office (GAO) released a report [93 pages in PDF] titled "Personal Information: Agency and Reseller Adherence to Key Privacy Principles".

The report addresses how four government agencies, the Department of Justice (DOJ), Department of Homeland Security (DHS), Department of State (State), and the Social Security Administration (SSA), make use of personal information obtained through contracts with information resellers.

The report states that "Justice, DHS, State, and SSA reported using personal information from information resellers for a variety of purposes, including law enforcement, counterterrorism, fraud prevention, and debt collection. Taken together, approximately 91 percent of planned spending on resellers reported by the agencies for fiscal year 2005 was for law enforcement (69 percent) or counterterrorism (22 percent). For example, components of the Department of Justice (the largest user of resellers) made use of such information for criminal investigations, location of witnesses and fugitives, research of assets held by individuals of interest, and detection of fraud in prescription drug transactions. Examples of uses by the DHS include immigration fraud detection and border screening programs. SSA and State acquire personal information from information resellers for fraud detection and investigation, identity verification, and benefit eligibility determination."

Second, the report addresses the extent to which five information resellers (ChoicePoint, LexisNexis, Acxiom, Dun & Bradstreet, and West) that provided personal information to these four government agencies have policies and practices in place that reflect the Fair Information Practices (FIP).

The report states that these five data aggregators "have practices in place to protect privacy, but these measures are not fully consistent with the Fair Information Practices." It adds that "the nature of the information reseller business is largely at odds with the principles of collection limitation, data quality, purpose specification, and use limitation."

Third, the report addresses the extent to which these four government agencies have policies and practices in place for the handling of personal data from resellers that reflect FIP.

The report finds that their "practices for handling personal information acquired from information resellers reflected the principles of the Fair Information Practices in four cases and in the other four did not. ... Specifically, agencies did not always have practices in place to fully address the purpose specification, individual participation, openness, and accountability principles with regard to use of reseller information."

For example, it states that "some agencies lack robust audit mechanisms to ensure that use of personal information from information resellers is for permissible purposes", thereby violating the accountability principle.

FCC Reports on Broadband Penetration

4/3. The Federal Communications Commission's Wireline Competition Bureau's (WCB) Industry Analysis and Technology Division (FCC) released a report [26 pages in PDF] titled "High-Speed Services for Internet Access: Status as of June 30, 2005".

The FCC continues to use a minimalist definition of high speed service, "200 kbps in at least one direction". Although, it now also provides data on service with 200 kbps in both directions.

The report states that high speed lines connecting homes and businesses to the internet increased by 13% during the first half of 2005, from 37.9 Million to 42.9 Million lines in service. For year ending June 30, 2005, the number of high speed lines increased by 32%.

The report states that 55.8% of the high speed lines as of June 30, 2005 were cable modem, 37.7% were asymmetric DSL, 2.1% were symmetric DSL or traditional wireline, 2.0% were fiber to the end user premises, and 2.3% used other technologies.

The report also estimates that "high-speed DSL connections were available to 76% of the households to whom ILECs could provide local telephone service, and that high-speed cable modem service was available to 91% of the households to whom cable system operators could provide cable TV service."