IRS Announces It Will Cease Its Illegal Collection of Excise Taxes on Phone Service

5/25. The Department of the Treasury, of which the Internal Revenue Service (IRS) is a component, announced in a release that "it is conceding the legal dispute over the federal excise tax on long-distance telephone service."

Five federal circuits, and numerous trial courts, previously held that the IRS could not collect excise taxes on certain telecommunications services.

The DOT added that "The Department of Justice will no longer pursue litigation and the Internal Revenue Service (IRS) will issue refunds of tax on long-distance service for the past three years. Taxpayers will be able to apply for refunds on their 2006 tax forms, to be filed in 2007."

The DOT offered no explanation for why it for so long persisted in collecting a tax that, under the plain meaning of the statute, it could not collect. Nor did it explain its long running defiance of the the authority of the federal courts.

The DOT added the following: "No immediate action is required by taxpayers. Refunds will be a part of 2006 tax returns filed in 2007. Refund claims will cover all excise tax paid on long-distance service over the last three years (time allowed given statute of limitations). Interest will be paid on refunds. The IRS is working on a simplified method for individuals to use to claim a refund on their 2006 tax returns. Refunds will not include tax paid on local telephone service, which was not involved in the litigation." (Parentheses in original.)

Statute. This issue involves 26 U.S.C. § 4251, which imposes a 3 percent excise tax on some, but not all, communications services. This tax is sometimes referred to by its opponents as the "Spanish American War tax", since it was originally imposed to help fund that war.

In addition, John Snow (at left), the Secretary of the Treasury, stated in the DOT release that "In addition to ending the litigation, I would like to call on Congress to terminate the remainder of this antique tax by repealing the excise tax on local service as well." He added that this "marks the beginning of the end of an outdated, antiquated tax that has survived a century beyond its original purpose, and by now should have been ancient history."

The IRS had applied a tortured interpretation to the applicable statutory language. 26 U.S.C. § 4252 contains the relevant definitions.

§ 4251(b) provides that the term ''communications services'' means "(A) local telephone service; (B) toll telephone service; and (C) teletypewriter exchange service". This issue involves "toll telephone service".

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

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

That is, to be taxable, a "toll telephone service" must include a "toll charge which varies in amount with the distance and elapsed transmission time". The key word here is "and". The carriers and taxpayers have long asserted that the word "and" means "and". The IRS long asserted that "and" means "or".

The IRS long collected billions of dollars in taxes where the charge did not vary with distance, in violation of the plain meaning of the statute.

Court of Appeals Opinions. The federal appeals courts uniformly instructed the IRS that the word "and" means "and", and that its tax collections are illegal.

The U.S. Court of Appeals (11thCir) issued its opinion [22 pages in PDF] in ABIG v. IRS on May 10, 2005. See, story titled "IRS Loses Appeal Over 3% Excise Tax on Communications" in TLJ Daily E-Mail Alert No. 1,133, May 11, 2005. This case is American Bankers Ins. Group v. United States, U.S. Court of Appeals for the 11th Circuit, App. Ct. No. 04-10720, an appeal from the U.S. District Court for the Southern District of Florida, D.C. No. 03-21822 CV-PCH. The Court of Appeals opinion is also reported at 408 F.3d 1328. The District Court opinion is also reported at 308 F. Supp. 2d 1360.

The U.S. Court of Appeals (6thCir) issued its opinion [20 pages in PDF] in Office Max v. US on November 2, 2005. See, story titled "IRS Loses Another Appeal Regarding 3% Excise Tax" in TLJ Daily E-Mail Alert No. 1,246, November 3, 2005. This case is Office Max, Inc. v. U.S.A., U.S. Court of Appeals for the 6th Circuit, App. Ct. No. 04-4009, an appeal from the U.S. District Court for the Northern District of Ohio, at Cleveland, D.C. No. 03-00961, Judge Patricia Gaughan presiding. The Court of Appeals opinion is reported at 428 F.3d 583.

The U.S. Court of Appeals (DCCir) issued its opinion [11 pages in PDF] in Amtrak v. US on December 9, 2005. The National Railroad Passenger Corporation is better known as Amtrak. This case is National Railroad Passenger Corp. v. United States, U.S. Court of Appeals for the District of Columbia Circuit, App. Ct. No. 03cv00431, an appeal from the U.S. District Court for the District of Columbia. This case is reported at 431 F.3d 374.

The U.S. Court of Appeals (2ndCir) issued its opinion [PDF] in Fortis v. USA , on April 27, 2006. See also, story titled "2nd Circuit Rules Against IRS on Excise Tax on Phone Service" in TLJ Daily E-Mail Alert No. 1,361, May 1, 2006. This case is Fortis, Inc. v. United States of America, U.S. Court of Appeals for the 2nd Circuit, App. Ct. No. 05-2518-cv, an appeal from the U.S. District Court for the Southern District of New York, D.C. No. 03 Civ. 5137, Judge John Koeltl presiding. The Court of Appeals issued a per curiam opinion of Straub, Sack and Trager.

The U.S. Court of Appeals (3rdCir) issued its opinion [23 pages in PDF] in Reese Brothers v. USA,
on May 9, 2006. See, story titled "IRS Loses Another Frivolous Appeal Regarding Telephone Excise Tax" in TLJ Daily E-Mail Alert No. 1,367, May 10, 2006.

House Judiciary Committee Approves Net Neutrality Bill

5/25. The House Judiciary Committee (HJC) amended and approved HR 5417, the "Internet Freedom and Nondiscrimination Act of 2006".

This is the network neutrality bill sponsored by Rep. James Sensenbrenner (R-WI), Rep. John Conyers (D-MI), Rep. Rick Boucher (D-VA), and Rep. Zoe Lofgren (D-CA). For a summary of the base bill, see story titled "Sensenbrenner and Conyers Introduce Net Neutrality Bill" in TLJ Daily E-Mail Alert No. 1,375, May 22, 2006.

Rep. Sensenbrenner (at left), the Chairman of the HJC, stated that "most Americans are subject to a broadband duopoly while others -- particularly in rural areas -- are subject to a broadband monopoly". He said that "These conditions create an environment ripe for anti-competitive and discriminatory misconduct."

He said that HR 5417 "prohibits anticompetitive conduct in which the network provider fails to provide service and interconnection on nondiscriminatory terms, blocks or impairs lawful content, prohibits users from attaching devices to its network, or fails to inform consumers about the terms of the broadband service."

See, full story.

More Mark Ups of Tech Related Bills

5/25. The House Judiciary Committee (HJC) amended and approved HR 4777, the "Internet Gambling Prohibition Act". This is the HJC bill sponsored by Rep. Bob Goodlatte (R-VA) and others. See also, story titled "House Crime Subcommittee Approves Internet Gambling Prohibition Act" in TLJ Daily E-Mail Alert No. 1,364, May 5, 2006. The HJC approved an amendment in the nature of a substitute offered by Rep. Goodlatte, as amended by an amendment offered by Rep. Chris Cannon (R-UT). The HJC rejected two amendments offered by Rep. Robert Wexler (D-FL), and one offered by Rep. Bobby Scott (D-VA). Rep. Wexler, who represents the state of Florida, sought language that carves out an exception for betting on dog racing, a lawful business in Florida.

5/25. The House Judiciary Committee (HJC) amended and approved HR 4411, the "Unlawful Internet Gambling Enforcement Act of 2006". This is the House Financial Services Committee (HFSC) bill sponsored by Rep. Jim Leach (R-IA). See also, story titled "House Financial Services Committee Approves Internet Gambling Bill" in TLJ Daily E-Mail Alert No. 1,330, March 16, 2006.

5/25. The House Judiciary Committee (HJC) amended and approved HR 4894, a bill "To provide for certain access to national crime information databases by schools and educational agencies for employment purposes, with respect to individuals who work with children".

5/25. The House Judiciary Committee (HJC) amended and approved HR 5318, the "Cyber-Security Enhancement and Consumer Data Protection Act of 2006".

5/25. The House Judiciary Committee (HJC) amended and approved HR 4127, the "Data Accountability and Trust Act".

5/25. The House Science Committee HSC) postponed until June 7, 2006, its mark up of several bills, including HR 5356, the "Early Career Research Act of 2006", HR 5357, the "Research for Competitiveness Act of 2006", and HR 5358, the "Science and Mathematics Education for Competitiveness Act of 2006".

People and Appointments

5/25. The House Judiciary Committee (HJC) announced that it will hold a hearing on Tuesday, May 30, 2006 titled "Reckless Justice: Did the Saturday Night Raid of Congress Trample the Constitution?". See, notice. Attorney General Alberto Gonzales stated in a release that this was a "search of Congressman Jefferson's office" in an "ongoing public corruption investigation". Rep. William Jefferson's (D-LA) troubles could impact technology related trade legislation. He is a member of the House Ways and Means Committee (HWMC), and its Subcommittee on Trade. Back in 2001 he was one of the Democrats who worked for HWMC and House approval of HR 3005 (107th Congress), the "Bipartisan Trade Promotion Authority Act of 2001", and related bills, which gave the President trade promotion authority (TPA). Republicans held a majority of the seats in the House, and the Republican leadership backed the bill. The Democratic leadership opposed the bill. Some Republican members voted against the bill. Hence, the bill could only have been enacted with the support of Democrats. Rep. Jefferson worked to win Democrats' votes. The key vote on TPA, on December 6, 2001, was 215-214. See, stories in TLJ Daily E-Mail Alert No. 323 , December 7, 2001. TPA expires next year. Support for TPA and free trade agreements has diminished since 2001. It would further diminish with the departure of Rep. Jefferson.

More News

5/25. The Cato Institute published a book titled "Identity Crisis: How Identification Is Overused and Misunderstood". The author is Jim Harper, Cato's Director of Information Policy Studies. The book is available from Cato's Online Bookstore ($22.95 in hardcover and $13.95 in paperback) and from Amazon ($10.74 in paperback).

5/25. Sen. Max Baucus (D-MT), the ranking Democrat on the Senate Finance Committee (SFC), commented on the 3% excise tax on certain phone services. He stated in a release [PDF] that "The telephone excise tax is a prime example of the need to overhaul our telecom laws, and particularly those tax provisions that have been rendered obsolete by the advancement of technology ... Ensuring American competitiveness in the coming decades demands a comprehensive look at U.S. telecommunications law. I’ll be looking for fiscally responsible ways to eliminate antiquated statutes and create new, forward-looking policy that enhances America’s global competitiveness." The tax is codified at 26 U.S.C. § 4251. See also, story titled "IRS Announces It Will Cease Its Illegal Collection of Excise Taxes on Phone Service" in TLJ Daily E-Mail Alert No. 1379, May 26, 2006.

5/25. John White, Director of the Securities and Exchange Commission's (SEC) Division of Corporation Finance gave a speech titled "Section 404: The Need for Input". In addition, on May 17, 2006, Sen. Jim DeMint (R-SC) and other Senators introduced S 2824, the "Competitive and Open Markets that Protect and Enhance the Treatment of Entrepreneurs Act", or COMPETE Act, which would add a "Smaller Public Company Exemption" to Section 404 of the Sarbanes Oxley Act. See also, HR 5404, the companion bill in the House, introduced by Rep. Tom Feeney (R-FL) and others on May 17. See also, story titled "GAO Reports that Section 404 of Sarbanes Oxley Burdens Small Public Companies" in TLJ Daily E-Mail Alert No. 1,366, May 9, 2006. The "Sarbanes-Oxley Act of 2002" was HR 3763 in the 107th Congress. It is now Public Law No. 107-204. Its main sponsors were Sen. Paul Sarbanes (D-MD) and Rep. Mike Oxley (R-OH).

5/25. The National Institute of Standards and Technology (NIST) released its Draft Special Publication 800-85B [149 pages in PDF] titled "PIV Data Model Test Guidelines". PIV is an acronym for Personal Identity Verification. The deadline to submit comments is June 22, 2006, at 5:00 PM.

9th Circuit Attempts to Explain Copyright Preemption

5/24. The U.S. Court of Appeals (9thCir) issued its opinion [21 pages in PDF] in Debra Laws v. Sony Music Entertainment, a case regarding preemption by the federal Copyright Act of state law claims. Debra Laws, a professional recording artist, sued Sony for invasion of privacy for the misappropriation of her name and voice, and misappropriation of her name and voice for a commercial purpose under California Civil Code § 3344. The Court of Appeals affirmed the judgment of the District Court that Laws' claims are preempted by the Copyright Act.

The Copyright Act preemption section, which is codified at 17 U.S.C. § 301, provides, in Subsection (a), that "On and after January 1, 1978, all legal and equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright as specified by section 106 in works of authorship that are fixed in a tangible medium of expression and come within the subject matter of copyright as specified by sections 102 and 103, whether created before or after that date and whether published or unpublished, are governed exclusively by this title. Thereafter, no person is entitled to any such right or equivalent right in any such work under the common law or statutes of any State."

Subsection (b) then provides exceptions.

Section 301(a), on its face, gives rise to considerable uncertainty. For example, this section uses undefined and unexplained terms. What is an "equivalent"? What does it mean to "come within the subject matter of copyright"? Both are issues in the present case. The statute leaves other questions unanswered, and the exceptions create further confusion. Moreover, the courts have added to the body of law on this subject, without substantially increasing the clarity. The opinion in the present case provides an outcome for the parties, but adds little to others' understanding of copyright preemption. In particular, it may be difficult to reconcile the holding in this case on the subject matter issue with the holdings in other court opinions.

Perhaps the most significant part of this opinion is the Court's lengthy analysis of the subject matter component of copyright preemption.

Debra Laws entered into an agreement with Elektra/Asylum Records which gave Elektra "sole and exclusive right to copyright such master recordings". However, it also provided that "we shall not, without your prior written consent, utilize or authorize others to utilize the Masters in any so-called ‘audio-visual’ or ‘sight and sound’ devices intended primarily for home use", and "we or our licensees shall not, without your prior written consent, sell records embodying the Masters hereunder for use as premiums or in connection with the sale, advertising or promotion of any other product or service."

Laws recorded a song titled "Very Special" back in 1981, pursuant to this agreement with Elektra. Elektra copyrighted it. In 2002, Electra licensed Sony Music Entertainment to use a sample from Laws' "Very Special" in a song titled "All I Have", which was performed by two recording artists who use the names Jennifer Lopez and L.L. Cool J. And, Sony sold CDs titled "This is Me ... Then" [Amazon], that included the song "All I Have". It included about ten seconds from Laws' "Very Special". See also, music CD [Amazon] titled "Very Special". [Amazon has short sound clips from both songs.]

Laws then filed a complaint in state court in California against Sony alleging invasion of privacy for the misappropriation of her name and voice, and misappropriation of her name and voice for a commercial purpose under California Civil Code § 3344. Sony removed the case to U.S. District Court (CDCal), based upon diversity of citizenship. (The Court of Appeals opinion does not involve copyright infringement or breach of contract claims.) The District Court dismissed the case on the grounds that these state law claims are barred by the federal Copyright Act.

One of the 9th Circuit's leading cases on copyright preemption is the September 13, 2001, opinion [27 pages in PDF], in Downing v. Abercrombie & Fitch, which is reported at 265 F.3d 994. See also, story titled "Ninth Circuit Rules in Downing v. Abercrombie" in TLJ Daily E-Mail Alert No. 268, September 14, 2001.

The Court of Appeals quoted from Downing: "We have adopted a two-part test to determine whether a state law claim is preempted by the Act. We must first determine whether the ``subject matter´´ of the state law claim falls within the subject matter of copyright as described in 17 U.S.C. §§ 102 and 103. Second, assuming that it does, we must determine whether the rights asserted under state law are equivalent to the rights contained in 17 U.S.C. § 106, which articulates the exclusive rights of copyright holders." (Footnotes omitted.)

The Court of Appeals first held that the subject matter of Laws's state law claims is within the subject matter of the Copyright Act. That is, Sony copied ten seconds from the sound recording "Very Special", which is copying from a copyrighted medium. The Court of Appeals wrote that the result might have been different if Sony only had a license to the song, and not the sound recording featuring Laws's voice, citing the Bette Midler case. In that case the defendant had license to use the song, and then used someone who could imitate Midler's voice to sing the Midler song. See, Midler in Waits v. Frito-Lay, Inc., 978 F.2d 1093 (9th Cir. 1992).

On the other hand, in the Downing case, the defendant was sued under the state law theory of violation of right to publicity for publishing photographs, when it had purchased the copyrights to those photographs from the photographer. Yet, the Court of Appeals held that that claim was not within the subject matter of copyright, and that the Copyright Act did not preempt the state law claim.

The Court of Appeals explained that in the Downing case, the defendant placed the photographs within a larger work, and identified the plaintiffs. But, Sony did both of these in the present case. In Downing the Court reasoned that this amounted to using a person's name, and suggesting endorsement, while in the present case the Court reasoned that this amounted to "attribution".

The plaintiffs in Downing may not have wanted their names and likenesses associated with Abercrombie & Fitch products. But, many recording artists would not want their names and voices associated with Jennifer Lopez and L.L. Cool J.

This case is Debra Laws v. Sony Music Entertainment, dba Epic Records, U.S. Court of Appeals for the 9th Circuit, App. Ct. No. 03-57102, an appeal from the U.S. District Court for the Central District of California, D.C. No. CV-03-02038-LGB, Judge Lourdes Baird presiding. Jay Bybee wrote the opinion of the Court of Appeals, in which Judges Jerome Farris and Ferdinand Fernandez joined.

House CIIP Subcommittee Approves Orphan Works Act of 2006

5/24. The House Judiciary Committee's (HJC) Subcommittee on Courts, the Internet and Intellectual Property (CIIP) approved HR 5439 [PDF], the "Orphan Works Act of 2006", by voice vote. See, Copyright Office's report [133 pages in PDF] titled "Report on Orphan Works", upon which the bill is based. See also, story titled "Rep. Smith Introduces Orphan Works Act of 2006" in TLJ Daily E-Mail Alert No. 1,377, May 24, 2006.

Rep. Howard Berman (D-CA) praised the bill, but also expressed concern for the rights of photographers and other visual artists. He said that he would like to see changes made before full Committee mark up.

Rep. Zoe Lofgren (D-CA) also expressed support for the bill. This is significant because she had previously introduced a bill with a vastly different approach to orphan works. On June 25, 2004, Rep. Zoe Lofgren (D-CA) and Rep. John Doolittle (R-CA) introduced HR 2601 (108th Congress), the "Public Domain Enhancement Act", a bill to allow abandoned copyrighted works to enter into the public domain after fifty years. See also, story titled "Representatives Introduce Public Domain Enhancement Act" in TLJ Daily E-Mail Alert No. 688, June 26, 2003.

Rep. Lamar Smith (R-TX) told TLJ that he expects the bill to be marked up by the full Committee at the first mark up session after the Memorial Day recess.

More Mark Ups of Tech Related Bills

5/24. 10:00 AM. The House Financial Services Committee (HFSC) amended and approved HR 4127, the "Data Accountability and Trust Act". The HFSC approved by voice vote an amendment in the nature of a substitute offered by Rep. Spencer Bachus (R-AL). Rep. Darlene Hooley (D-OR) offered, but withdrew, an amendment.

5/24. The House Commerce Committee (HCC) amended and approved  3997, the "Financial Data Protection Act of 2006". The House Financial Services Committee had previously reported this bill on March 16, 2006. The HCC approved an amendment in the nature of a substitute [PDF] offered by Rep. Cliff Stearns (R-FL). The vote on final approval was 42-0.

5/24. The House Commerce Committee (HCC) amended and approved and HR 5126, the "Truth in Caller ID Act of 2006". The HCC approved an amendment in the nature of a substitute [PDF] offered by Rep. Joe Barton (R-TX).

5/24. The House Judiciary Committee's (HJC) Subcommittee on Courts, the Internet and Intellectual Property (CIIP) approved HR 5440, the "Federal Courts Jurisdiction Clarification Act". The is a non-technology related bill. There is a different bill, with a similar title, HR 2955, the "Intellectual Property Jurisdiction Clarification Act of 2005". The HJC approved the bill on March 2, and reported the bill on April 4 (see, Report No. 109-407). See, story titled "House Judiciary Committee Approves Amendment Regarding Jurisdiction of Federal Circuit" in TLJ Daily E-Mail Alert No. 1,325, March 8, 2006. However, this bill has not gone to the House floor. TLJ spoke with Rep. Lamar Smith (R-TX), Rep. Howard Berman (D-CA), and staff, who stated that there is nothing delaying this bill, and that it should come up soon on the House floor on the suspension calendar. HR 2955 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.

People and Appointments

5/24. Barbara Kelly was named Vice President and Executive Director of Development at the Progress and Freedom Foundation (PFF). She was previously Director of Development of the National Center for State Courts (NCSC). See, PFF release.

More News

5/24. The U.S. District Court (EDMich) unsealed indictments returned by a grand jury of the District Court that charge Douglas A. Benit and Mary Ann Elam Benit with federal program fraud, wire fraud, mail fraud, and other crimes, in connection with their alleged defrauding of the Federal Communications Commission's (FCC) e-rate subsidy program of almost $7.3 Million. Also charged were companies under control of the Benits. See, DOJ release. The program is plagued with waste, fraud, abuse, and mismanagement. This is one of many criminal actions associated with the e-rate program.

People and Appointments

5/23. President Bush nominated Clifford Sobel to be Ambassador to Brazil. Sobel was previously the Chairman of Net 2 Phone, Inc., an voice over internet protocol (VOIP) company. He is currently P/Ch of SJJ Investment Corporation. See, White House release and release. Federal Election Commission (FEC) filings show that Sobel has been a major financial contributor to Republican entities in recent years. Back in 2001, Bush appointed Sobel Ambassador to the Netherlands. See, 2001 White House release.

5/23. Vice President Dick Cheney gave a speech in San Diego, California, at an event for former Rep. Brian Bilbray (R-CA), who is again running for Congress. Cheney said that the people who advocate "surrender in Iraq" are "also the crowd that objects to the terrorist surveillance program". Cheney was speaking of the National Security Agency (NSA) surveillance program disclosed by the New York Times in December of 2005, and not the NSA program disclosed by USA Today in May of 2006. Cheney said that "the President authorized a surveillance program to intercept a certain category of terrorist-linked international communications. Let me emphasize that because on occasion you will hear the press or our opponents talk about domestic surveillance. This is not domestic surveillance. One end has to be outside the United States, and therefore international, one end has to be affiliated in some fashion with al Qaeda. It's hard to think of any category of information that could be more important to the safety of the United States. The program is a wartime measure ..."

5/23. The U.S. Court of Appeals (11thCir) issued its opinion [44 pages in PDF] in CBS v. Echostar, a case regarding the compulsory statutory license for direct satellite broadcasters, and the retransmission of copyrighted distant network programming to households already able to receive network over the air broadcasts via rooftop antennas. This opinion affirms in part, and reverses in part, the judgment of the District Court. This case is CBS Broadcasting, Inc., et al. v. Echostar Communications Corp., et al., U.S. Court of Appeals for the 11th Circuit, App. Ct. No. 03-13671, an appeal from the U.S. District Court for the Southern District of Florida, D.C. No. 98-02651-CV-WPD. David Rehr, P/CEO of the National Association of Broadcasters (NAB) stated in a release that "NAB is pleased with the unanimous 11th Circuit Court decision. This opinion affirms the importance of localism in television, and vindicates an eight year effort by TV broadcasters to stop EchoStar's blatant and massive abuse of copyright law."

5/23. The National Institute of Standards and Technology (NIST) released its Draft Special Publication 800-96 [169 pages in PDF] titled "PIV Card / Reader Interoperability Guidelines". The deadline to submit comments is June 13, 2006, at 5:00 PM.

Rep. Smith Introduces Orphan Works Act of 2006

5/22. Rep. Lamar Smith (R-TX) introduced HR 5439 [PDF], the "Orphan Works Act of 2006". This bill is based upon the Copyright Office's report [133 pages in PDF] titled "Report on Orphan Works".

The bill was referred to the House Judiciary Committee (HJC). It is on agenda for the HJC's Subcommittee on Courts, the Internet and Intellectual Property (CIIP) mark up session scheduled for 4:00 PM on Wednesday, May 24. Rep. Smith is the Chairman of the CIIP Subcommittee.

Rep. Smith (at right) stated in a release that "The orphan works issue arises when someone who wants to use a copyrighted work cannot find the owner, no matter how diligently they search ... The owner may have moved several times, died, or in the case of businesses, changed their name or gone bankrupt. For example, a local civic association may want to include old photographs from the local library archive in their monthly newsletter, but there are no identifying marks on the photo".

He added that "Under current law, the civic association must locate the owner to ask permission and in many cases may not be able to find the owner. Under the Orphan Works Act, they could follow guidelines posted by the Copyright Office as a show of due diligence to reduce the threat of litigation for simply doing the right thing."

The bill is supported by representatives of libraries, museums, and universities. It is also supported by the trade groups that represent the major copyright industries, including the music, movie, book, and software industries. All would be net beneficiaries of the bill. While the bill would weaken the protection afforded to creators, it would primarily harm individuals and very small businesses. Representatives of those who create works in photography, illustration, and the visual arts have adamantly opposed the Copyright Office's proposal.

See also, story titled "House CIIP Subcommittee Holds Hearing on Orphan Works" in TLJ Daily E-Mail Alert No. 1,326, March 9, 2006, and story titled "Copyright Office Recommends Orphan Works Legislation" in TLJ Daily E-Mail Alert No. 1,302, February 2, 2006.

This bill would amend the Copyright Act by adding a new Section 514 titled "Limitation on remedies in cases involving orphan works".

The bill would limit the remedies available to copyright owners in actions for infringement brought under Sections 502-505, but not for actions brought under Sections 512, 1201, or 1202(b), where the infringer, before infringing, "performed and documented a reasonably diligent search in good faith to locate the owner of the infringed copyright".

See, full story.

BSA Releases Estimates of Piracy Rates and Loses in 97 Nations

5/22. The Business Software Alliance (BSA) released its annual report [21 pages in PDF] that estimates software piracy rates among nations. The report estimates that the global piracy rate did not change between 2004 and 2005. While there are declines in the PR China, Russia and the Ukraine, piracy rates went up in most of the nations of Central and South America. See also, BSA release.

The report provides piracy rates for 97 nations, including the U.S. (21%), Germany (27%), United Kingdom (27%), Japan (28%), Canada (33%), South Korea (46%), France (47%), Italy (53%), India (72%), Russia (83%), Ukraine (85%), PR China (86%), and Indonesia (87%).

Piracy is lowest in the nations of northern Europe (excluding France), as well as in the U.S., Canada (33%), Australia (31%), New Zealand (23%), and Japan. Rates are higher in Mediterranean and Eastern European nations. Piracy rates are higher still in Latin American, African, Middle Eastern nations, with a few exceptions: South Africa (36%), UAE (34%), and Israel (32%). Piracy rates in Russia and other nations that were once a part of the Soviet Union are 83% or higher, with the exception of the Baltic states, which have piracy rates ranging from 54% to 57%. There is considerable variation among the Asian Pacific nations.

The BSA report also lists estimates for piracy rates in the two previous years, 2003 and 2004. It also estimates the loss, measured in dollars, from piracy.

PR China's piracy rate has declined from 92% to 86% in two years. However, since the Chinese economy is growing so rapidly, the estimated losses show a slight increase over two years. The report states that "Visitors to the country can readily find pirated software for consumers, but within the government and business sectors piracy is decreasing. Earlier this year the government mandated that PC manufacturers supplying China ship only PCs with legitimately licensed operating systems, a move which could decrease piracy further."

The Ukraine's piracy rate has declined from 91% to 86%. Russia's has decreased from 87% to 83%.

Piracy rates, and estimated loses, have grown in Latin American nations. Notably, piracy in Venezuela has grown from 72% to 82% in two years, while piracy in Argentina has grown from 71% to 77%.

The BSA study was conducted by IDC. It attempted to measure piracy among "all software that runs on personal computers, including desktops, laptops and ultraportables. The categories include operating systems, systems software such as databases and security packages, and applications software such as office automation packages, finance and tax packages, PC computer games and industry-specific applications."

5/22. The U.S. Court of Appeals (9thCir) issued its revised opinion [10 pages in PDF] in Sprint v. La Canada Flintridge, a cell tower construction case. The Court of Appeals issued its original opinion [14 pages in PDF] on January 17, 2006. That opinion reversed the District Court's summary judgment for the city. See also, story titled "9th Circuit Rules in Cell Tower Case" in TLJ Daily E-Mail Alert No. 1,294, January 23, 2006. The revised opinion also reverses the District Court. In addition, the three judge panel denied a motion for rehearing, and the Court of Appeals denied a motion for rehearing en banc. This case involves an unusual set of facts for a 47 U.S.C. § 332(c)(7) case. The city's denial of the construction permit was based upon a city ordinance that is preempted by state law. This case is Sprint PCS Assets, et al. v. City of La Canada Flintridge, et al., U.S. Court of Appeals for the 9th Circuit, App. Ct. No. 05-55014, an appeal from the U.S. District Court for the Central District of California, D.C. No. CV-03-00039-DOC, Judge David Carter presiding. Judge Diarmuid O'Scannlain wrote both the original and revised opinions of the Court of Appeals, in which Judges Cynthia Hall and Richard Paez joined.

Go to News from May 16-20, 2006.