TLJ News from November 6-10, 2006

US and Russia Conduct Negotiations on Russian Accession to the WTO

11/10. The Office of the US Trade Representative (OUSTR) announced in a release that the US and Russia "expect to conclude shortly bilateral negotiations on market access issues related to Russia’s accession to the World Trade Organization (WTO). The two sides hope to sign a bilateral agreement next week at the APEC meetings in Hanoi."

The OUSTR did not release the text of any agreement or draft agreement.

One of the main barriers to US support for Russia's joining the World Trade Organization (WTO) has been Russia's failure to protect intellectual property rights (IPR), and particularly its failure to address internet and digital media piracy of copyrighted works.

Susan SchwabUSTR Susan Schwab (at right) stated that "We have an agreement in principle and are finalizing the details. We are also holding consultations with the Congress and our cleared advisors. This agreement will mark an important step in Russia attaining membership in the WTO ... It is a clear indication of Russia’s efforts to participate fully in and benefit from the rules-based global trading system. We came close to completing our work in July, but needed more time to conclude a strong commercial agreement that will be of benefit to both our countries. Minister Gref and I hope to sign the agreement in Hanoi on the margins of the APEC meeting."

German Gref is Russia's Minister of Economic Development and Trade.

The OUSTR issued a second release that addresses IPR. It states that "Together we agreed to a binding blueprint for actions to address piracy and counterfeiting and improve protection and enforcement of intellectual property rights before Russia completes its accession to the WTO. This agreement sets the stage for further progress with Russia on IPR issues through the next phase of multilateral WTO negotiations so that Russia will fully implement TRIPS upon accession."

It adds that "Russia has agreed to take specific actions, and to enact laws by specific dates, to fight optical disk piracy and internet piracy, and work to enact laws by specific dates to protect pharmaceutical test data, establish tougher criminal penalties for IP crimes, strengthen border enforcement, and bring its IPR legislation into line with international norms. There are specific deadlines built into the agreement."

Finally, it states that "Russia has committed to fully implement the TRIPS Agreement and other IPR-related international agreements upon accession, and to ensure that any changes to its existing legislative regime for IPR, including those made in the context of Part IV of the Civil Code, do not reduce consistency with key international IPR standards."

This release also states that "Russia agreed to provide improved market access for ... financial, telecommunications, fixed satellite, and business services".

Sen. Max Baucus (D-MT), who will likely be the Chairman of the Senate Finance Committee (SFC) in the 110th Congress, stated in a release [PDF] that "Russia maintains unacceptable levels of piracy and counterfeiting, and these must be addressed before Congress can endorse Russia’s WTO membership and grant Permanent Normal Trade Relations status."

Sen. Baucus's release also states that "Before Russia joins the WTO, that nation must pledge to all WTO members to abide by WTO rules, including those regarding the protection and enforcement of intellectual property rights."

Sen. Baucus, like other Senators from beef exporting states, is also concerned about Russia's protectionist barriers to importation of US beef products.

Sen. Orrin HatchSen. Orrin Hatch (R-UT) (at left) is a senior member of both the SFC, which has jurisdiction over trade issues, and the Senate Judiciary Committee (SJC), which has jurisdiction over intellectual property issues. He stated at a May 25, 2005, hearing of the SJC that "before the Congress votes in favor of Russia joining the WTO, many of us will have to be convinced that the Russian government is serious about cracking down on theft of U.S. intellectual property". See, opening statement and story titled "Senate IP Subcommittee Holds Hearing on International IP Piracy" in TLJ Daily E-Mail Alert No. 1,143, May 26, 2005.

The International Intellectual Property Alliance (IIPA) stated in a release [PDF] "Russia is an important market for IIPA members and thus IIPA wants to see Russia join the world trading system and the WTO. We do, however, want to ensure that, before Russia accedes to the WTO as required by WTO rules, that Russia will completely fulfill its obligations to provide TRIPs compliant protection and enforcement of IPR."

The IIPA continued that "At present, Russia is not fully compliant either with the necessary legal reforms nor with its enforcement regime, in particular against optical disc and Internet piracy. As part of the accession process announced today, the U.S. Government received commitments from the Russian Government, and the Russian Government fully understands that there needs to be IPR legal reforms and enforcement improvements before final WTO accession."

The IIPA represents seven copyright related groups: Association of American Publishers (AAP), Business Software Alliance (BSA), Entertainment Software Association (ESA), Independent Film & Television Alliance (IFTA), Motion Picture Association of America (MPAA), National Music Publishers' Association (NMPA), and the Recording Industry Association of America (RIAA).

The US Chamber of Commerce's Daniel Christman stated in a release that "While we are still studying the details, this agreement appears to open the door to Russia's entry into the global trading system on commercially strong terms ... We look forward to completion of the final multilateral agreement."

Rep. Barton to Run for Minority Leader

11/10. Rep. Denny Hastert (R-IL), the current Speaker of the House, announced on November 8 that he will not seek the position of minority leader in the 110th Congress, which meets in January of 2007. Democrats won a majority of seats in the House in the November 7, 2006, elections.

On November 10, Rep. Joe Barton (R-TX), the Chairman of the House Commerce Committee, announced in a release that "I have decided to seek the position of Republican leader".

Rep. Joe BartonRep. Barton (at left) said that Americans "want to be protected from snooping". In addition to "privacy", he advocated lower taxes and less government.

Barton also released a statement on November 8 in which he stated that "It also seems clear that Americans are fed up with our tip-toe-through-the-corporate-tulips approach to personal privacy. It is time to put the privacy of the people ahead of the needs of business. On the wall of my office is a sign that every visitor notices. It says, 'Fear God, Tell the Truth, Make a Profit.' Protecting privacy is about truth, not profit. I believe strongly in both, but truth-telling comes ahead of profit-making for a reason."

He also said in his November 10 release that "We will achieve a net gain of seats in each upcoming election cycle and if we do not regain the majority within three election cycles, I will not seek the position of minority leader in the succeeding session."

Rep. Ralph HallWere Rep. Barton to be elected minority leader, this would leave vacant the position of ranking Republican on the HCC. The member with the most seniority is Rep. Ralph Hall (R-TX) (at right), who is currently Chairman of the Subcommittee on Energy and Air Quality. Other senior members include Rep. Fred Upton (R-MI), who is Chairman of the Subcommittee on Telecommunications and the Internet, Rep. Cliff Stearns (R-FL), who is Chairman of the Subcommittee on Commerce, Trade, and Consumer Protection, and Rep. Paul Gillmor (R-OH), who is Chairman of the Subcommittee on Environment and Hazardous Materials. Another senior member, Rep. Michael Bilirakis (R-FL), retired.

House Republicans are scheduled to meet to elect leaders for the 110th Congress on November 17. Other announced candidates for the position of minority leader include Rep. Mike Pence (R-IN) and Rep. John Boehner (R-OH). See, Rep. Pence's announcement and Rep. Boehner's announcement and letter to House Republicans.

Rep. Nancy Pelosi (D-CA) is set to become Speaker of the House, Rep. John Dingell (D-MI) will likely become Chairman of the HCC, and Rep. Ed Markey (D-MA) will likely be the new Chairman of the Subcommittee on Telecommunications and the Internet.

Rep. Barton will hold a news conference at 12:30 PM on Monday, November 13, 2006, in the Radio/TV Gallery, Room H-321, Capitol Building.

More News

11/10. Chris Cox, Chairman of the Securities and Exchange Commission (SEC) gave a speech to the Securities Industry and Financial Markets Association in which he argued for folding "the member regulation functions of both the NASD and the NYSE into one regulatory body". One of the points that he made was that "our markets are facing increased competition -- not just from other exchanges, but also from electronic communications networks. And that, in turn, has prompted significant shifts in market share away from the primary markets. All of this competition has been a catalyst for innovation ..." He added that "as the two major securities exchanges in this country are reaching across the Atlantic to combine with European exchanges, it is finally time to conclude that SRO regulation must change to keep pace. Unless we act now to remove unnecessary duplication and conflicts of interests in our regulatory structure, we’ll actually impair the ability of America’s capital markets to remain the world's strongest."

11/10. Ben Bernanke, Chairman of the Federal Reserve Board, gave a speech in Frankfurt, Germany, titled "Monetary Aggregates and Monetary Policy at the Federal Reserve: A Historical Perspective". This was a long speech on the history of US monetary policy in the last 80 years. One topic that he addressed was the impact of new technologies on money and banking. He said that "the rapid pace of financial innovation in the United States has been an important reason for the instability of the relationships between monetary aggregates and other macroeconomic variables. In response to regulatory changes and technological progress, U.S. banks have created new kinds of accounts and added features to existing accounts.  More broadly, payments technologies and practices have changed substantially over the past few decades, and innovations (such as Internet banking) continue." (Parentheses in original.)

11/10. The Progress and Freedom Foundation (PFF) released a paper [14 pages in PDF] titled "Patent Reform & Industrial Structure". The author is the PFF's James DeLong. See also, PFF release.

7th Circuit Holds GPL and Open Source Software Do Not Violate Antitrust Law

11/9. The U.S. Court of Appeals (7thCir) issued its opinion [6 pages in PDF] in Wallace v. IBM, Red Hat, and Novell, holding that the GNU General Public License (GPL), and open source software generally, do not violate federal antitrust law.

The Court of Appeals reasoned that while Wallace and others who hope to license competing software derived from Linux may claim that IBM, Red Hat and Novell have conspired to set software prices at zero, there is no predatory pricing claim because there is no chance that IBM, Red Hat and Novell will some day obtain monopoly pricing. They have permanently set prices at zero through through the General Public License (GPL). Hence, consumers cannot be harmed.

The legal issue before the Court of Appeals was the relation of the GPL to antitrust law. The holding is that the GPL does not violate antitrust law. However, the Court of Appeals also stated, in dicta, that "open-source software" generally has "nothing to fear from the antitrust laws".

Frank EasterbrookThis is the first reported appellate opinion in the US upholding the GPL against an antitrust challenge. In addition, Judge Frank Easterbrook (at right) wrote the opinion of the Court of Appeals. He has previously taught courses at the University of Chicago law school on antitrust law. He has also published articles and books on antitrust law.

Background. The plaintiff in the District Court, and appellant before the Court of Appeals, is Daniel Wallace, a programmer who hopes to sell a Berkeley Software Distribution (BSD) operating system to schools. BSD is a variant of Linux. The Linux operating system is free, open source, and subject to the GPL.

The GPL authorizes copying. It also authorizes the creation of derivative works. However, it prohibits charging for the derivative work. The Court of Appeals wrote that the "GPL propagates from user to user and revision to revision: neither the original author, nor any creator of a revised or improved version, may charge for the software or allow any successor to charge."

The Court commented that "Copyright law, usually the basis of limiting reproduction in order to collect a fee, ensures that open-source software remains free: any attempt to sell a derivative work will violate the copyright laws, even if the improver has not accepted the GPL."

The Court of Appeals also summarized Wallace's position. He "would like to compete with Linux -- either by offering a derivative work or by writing an operating system from scratch -- but maintains that this is impossible as long as Linux and its derivatives are available for free. He contends that IBM, Red Hat, and Novell have conspired among themselves and with others (including the Free Software Foundation) to eliminate competition in the operating system market by making Linux available at an unbeatable price." (Parentheses in original.)

International Business Machines Corporation (IBM) sells servers with Linux, as well as support services. Red Hat, Inc. and Novell, Inc. sell media, manuals, and support for the installation and maintenance of Linux. That is, these companies do not sell the Linux software. Rather, their business model is to make money from the sale of the DVDs and other media on which the software is stored, works that explain how to install and use Linux, the machines that run on Linux, and/or support services.

In contrast, Wallace wants to make money by writing and licensing for a fee software that is a derivative work of Linux software. But, by doing so he would violate the GPL. Moreover, any efforts that he made to enforce his copyright would be met with a GPL based defense.

Proceedings Below. Wallace first filed a pro se complaint [PDF] in U.S. District Court (SDInd) against the Free Software Foundation (FSF), which devised the GPL, seeking a "permanent injunction prohibiting the promotion or use of the GNU GENERAL PUBLIC LICENSE by the FREE SOFTWARE FOUNDATION INC. to artificially control the the pricing of computer software programs ..." (sic).

He later filed a second pro se complaint [3 pages in PDF], which is the subject of the present appeal, in U.S. District Court (SDInd) against IBM, Red Hat, and Novell.

He alleged that IBM, Red Hat, and Novell "have used or conspired to promote a copyright licensing scheme employing the GNU GENERAL PUBLIC LICENSE [H.I.] to fix the prices of computer programs. This scheme is implemented nationwide in the sale and promotion of computer software products in the United States. This scheme denies the plaintiff Daniel Wallace an opportunity to earn future revenue in the field of computer programming."

He requested "a permanent injunction prohibiting the promotion or use of section 2(b) of the GNU GENERAL PUBLIC LICENSE by" the defendants.

He also submitted an affidavit [PDF] that attaches a copy of the GNU General Public License.

The District Court dismissed his complaint on the grounds that Wallace did not suffer antitrust injury. That is, he is a competing producer, rather than a harmed consumer. Wallace brought the present appeal.

Holding of Court of Appeals. The Court of Appeals affirmed, with a different analysis.

The Court of Appeals wrote that "Although antitrust law serves the interests of consumers rather than producers, producers, the Supreme Court has permitted producers to initiate predatory-pricing litigation." But, it continued, Wallace's predatory pricing claim is still faulty.

The Court of Appeals elaborated that "Predatory pricing is a three-stage process: Low prices, followed by the exit of producers who can no longer make a profit, followed by monopoly prices. The law’s worry is the final period in which the survivor (or cartel of survivors) recoups losses incurred during the low-price period. When exit does not occur, or recoupment is improbable even if some producers give up the market, there is no antitrust problem." (Parentheses in original.)

"When monopoly does not ensue, low prices remain -- and the goal of antitrust law is to use rivalry to keep prices low for consumers’ benefit. Employing antitrust law to drive prices up would turn the Sherman Act on its head." The Court of Appeals added that "the GPL keeps price low forever and precludes the reduction of output that is essential to monopoly?"

The Court of Appeals concluded that with the GPL there is no prospect for recouping monopoly prices, and hence, there can be no injury to consumers, and no predatory pricing in violation of the antitrust laws.

Extended Discussion of Software Markets, IPR, and Antitrust. However, the Court of Appeals continued its economic and legal analysis of open source and proprietary software.

It wrote that "Software that is not maintained and improved eventually becomes obsolete, and the lack of reward may reduce the resources devoted to maintenance and improvement of Linux and other open-source projects. If that occurs, however, then proprietary software will enter or gain market share. People willingly pay for quality software even when they can get free (but imperfect) substitutes."

The Court of Appeals examined the current state of the market for both open source and proprietary software. "Open Office is a free, open-source suite of word processor, spreadsheet and presentation software, but the proprietary Microsoft Office has many more users. Gimp is a free, open-source image editor, but the proprietary Adobe Photoshop enjoys the lion’s share of the market. Likewise there is a flourishing market in legal treatises and other materials, plus reference databases such as LEXIS and Westlaw, even though courts give away their work (this opinion, for example, is not covered by copyright and may be downloaded from the court’s web site and copied without charge)." (Parentheses in original.)

"And so it is with operating systems. Many more people use Microsoft Windows, Apple OS X, or Sun Solaris than use Linux. IBM, which includes Linux with servers, sells mainframes and supercomputers that run proprietary operating systems. The number of proprietary operating systems is growing, not shrinking, so competition in this market continues quite apart from the fact that the GPL ensures the future availability of Linux and other Unix offshoots."

The Court of Appeals continued that "Intellectual property can be used without being used up; the marginal cost of an additional user is zero (costs of media and paper to one side), so once a piece of intellectual property exists the efficient price of an extra copy is zero, for that is where price equals marginal cost. Copyright and patent laws give authors a right to charge more, so that they can recover their fixed costs (and thus promote innovation), but they do not require authors to charge more. No more does antitrust law require higher prices." (Parentheses in original.)

It added that "Linux and other open-source projects have been able to cover their fixed costs through donations of time; as long as that remains true, it would reduce efficiency and consumers' welfare to force the authors to levy a charge on each new user."

Actually, Wallace does not seek to force authors to charge. Rather, he seeks a court injunction prohibiting others from forcing him not to charge. But, this does not affect the analysis of the Court.

The Court concluded that not only the GPL, but also, "open-source software" has "nothing to fear from the antitrust laws".

Other Legal Arguments. Wallace is a programmer who proceeded on a pro se basis. He may not have effectively argued the antitrust case against the GPL, and may have failed to raise many other legal grounds for challenging the legality or enforceability of the GPL.

See for example, article [42 pages in PDF] by Jason Wacha titled "Taking the Case: Is the GPL Enforceable?", published in the Santa Clara Computer & High Tech Law Journal, at Volume 21, Pages 451-492. Wacha identifies other possible legal challenges, and argues that all are without merit.

And see, pleadings in SCO Group, Inc. v. International Business Machines, Inc., U.S. District Court (DUtah), D.C. No. No. 03-CV-0294.

Counsel and Case Information. Novell is represented by Philip Whistler of Ice Miller. Red Hat is represented by Curtis McCauley of Ice Miller. IBM is represented by Michael Gottschlich and Kendall Millard of Barnes & Thornburg. Wallace proceeded pro se throughout. His number is 317 dash 861 dash 6415.

The Court of Appeals decided this case on the briefs. There was no oral argument.

This case is Daniel Wallace v. International Business Machines Corporation, Red Hat, Inc. and Novell, Inc., U.S. Court of Appeals for the 7th Circuit, App. Ct. No. 06-2454, an appeal from the U.S. District Court for the Southern District of Indiana, Indianapolis Division, D.C. No. No. 1:05-cv-678 RLY-VSS, Judge Richard Young presiding. Judge Easterbrook wrote the opinion of the Court of Appeals, in which Judges Kanne and Evans joined.

People and Appointments

11/9. Linda Stiff was named Deputy Commissioner of the Internal Revenue Service (IRS), for Operations Support, effective December 1, 2005. She will be responsible for, among other things, the IRS's troubled information technology offices. She will replace John Dalrymple, who retired. Kevin Brown was named Deputy Commissioner of the IRS, for Services and Enforcement, effective December 1, 2005. He will replace Mark Matthews, who will return to the law firm of Morgan Lewis & Bockius. In addition, Beverly Babers was named Chief of Staff to IRS Commissioner Mark Everson. See, IRS release.

Vietnam to Join WTO

11/8. The World Trade Organization (WTO) General Council approved Vietnam's membership agreement. Vietnam will become a WTO member thirty days after it ratifies the agreement.

This agreement contains numerous commitments regarding copyright protection, patent protection, other intellectual property rights, enforcement of IPR, and civil remedies related to IPR. See, attachment to agreement [MS Word] that addresses, among other things, Vietnam's commitments regarding trade related aspects of IPR, at pages 95-117.

This agreement also contains commitments regarding market access. See, attachment to agreement [MS Word] that addresses, among other things, market access for communications services, internet access services, and e-mail services (see, pages 20-30), financial services, and computer services.

Pascal LamyWTO Director General Pascal Lamy (at right) stated in a release that "Viet Nam has shown how anchoring domestic reforms in the WTO can yield dramatic results. Viet Nam’s economic growth topped 8% last year, foreign direct investment rose steeply to over $6 billion, and exports surged by over 20%. More must surely follow with the new laws, administrative measures, and commitments on goods and services that are in Viet Nam’s membership package." See also, speech by Lamy.

Susan Schwab, head of the Office of the U.S. Trade Representative (OUSTR), stated in a release that "The world will benefit from the inclusion of this rapidly-growing, dynamic economy in the rules-based trading system.  We now call upon Congress to quickly pass Permanent Normal Trade Relations legislation that will permit U.S. businesses, workers and consumers to benefit fully from Vietnam’s accession and to build deeper and stronger bilateral trade ties going forward."

The USTR release also notes that Vietnam "has passed more than 80 laws to implement fully the agreements, including substantial changes to its regime on intellectual property rights protection."

President Bush issued a memorandum to the USTR. He wrote that "Consistent with section 1106(a) of the Omnibus Trade and Competitiveness Act of 1988 (19 U.S.C. 2905(a)) (the "Act"), I determine that state trading enterprises account for a significant share of the exports of the Socialist Republic of Vietnam (Vietnam) and goods that compete with imports into Vietnam. I further determine that such state trading enterprises unduly burden and restrict, or adversely affect, the foreign trade of the United States or the United States economy, or are likely to result in such burden, restriction, or effect."

The memorandum continues, "Vietnam is seeking to become a member of the World Trade Organization (WTO). The terms and conditions for Vietnam's accession to the WTO include Vietnam's commitments that it will ensure that all state trading enterprises within the meaning of section 1106 will make purchases not for governmental use and sales in international trade based solely on commercial considerations (including price, quality, availability, marketability, and transportation) and that U.S. firms will have an adequate opportunity, in accordance with customary business practice, to compete for participation in sales to and purchases from these enterprises on nondiscriminatory terms and conditions. In addition, the Government of Vietnam will not influence, directly or indirectly, commercial decisions on the part of state trading enterprises, including decisions on the quantity, value, or country of origin of any goods purchased or sold, except in a manner consistent with the Marrakesh Agreement Establishing the World Trade Organization (WTO Agreement) and the rights accorded to nongovernmental enterprise owners or shareholders."

Bush's memorandum concludes, "The obligations that Vietnam will assume under the WTO Agreement, including Vietnam's protocol of accession, meet the requirements of section 1106(b)(2)(A) of the Act (19 U.S.C. 2905(b)(2)(A)), and thus my determinations under section 1106(a) do not require invocation of the nonapplication provisions of the WTO Agreement."

People and Appointments

11/8. FCC Commissioner Michael Copps announced temporary changes in his staff. Jessica Rosenworcel, who has been his legal advisor for media issues, is on maternity leave. Bruce Gottlieb, who has been his legal advisor for spectrum and international issues, will temporarily handle media issues. John Branscome, who has been Chief of the Spectrum and Competition Policy Division of the Wireless Telecommunications Bureau, will temporarily be Copps' legal advisor for spectrum and international issues. See, FCC release [PDF].

Commentary: Some Possible Consequences of the 2006 Elections on Federal Technology Law

11/7. This article speculates as to how the federal elections of November 7, 2006, may affect U.S. technology law and policy at the federal level.

Intellectual Property. While there is a strong correlation between party affiliation and roll call voting in many areas of legislative activity, there is little partisanship in many technology related areas, such as most intellectual property rights (IPR) issues.

Also, while members of the House Judiciary Committee (HJC) and Senate Judiciary Committee (SJC) often resort to vicious partisan debate on many issues, they tend to engage in collegial, cooperative, and nonpartisan discussion of many IPR issues. Sen. Orrin Hatch (R-UT) and Sen. Patrick Leahy (D-VT), who will likely resume the Chairmanship of the SJC, have worked together in a nonpartisan manner on copyright, patent, and trademark issues for years.

Similarly, Rep. Lamar Smith (R-TX), and before him Rep. Howard Coble (R-NC), have cooperated with Rep. Howard Berman (D-CA) on the HJC's Subcommittee on Courts, the Internet and Intellectual Property (CIIP).

Rep. Howard BermanRep. Berman (at left), who is likely to become Chairman of the CIIP Subcommittee, represents a Los Angeles area district that is home to many people who work in copyright based industries. For some of Rep. Berman's recent statements regarding the Chairmanship, see story titled "House Judiciary Committee Puts Off Consideration of Copyright Legislation Until Next Year" in TLJ Daily E-Mail Alert No. 1,457, September 27, 2006.

Rep. Rick Boucher (D-VA), who is a copyright minimalist, is next in line to Chair the CIIP Subcommittee. He is the leading advocate of creating a fair use exemption to the DMCA ban on circumvention. See, HR 1201, the "Digital Media Consumers' Rights Act of 2005", and story titled "Reps. Boucher, Doolittle and Barton Reintroduce Digital Media Consumers' Rights Act" in TLJ Daily E-Mail Alert No. 1,111, April 8, 2005.

However, even if he were to become Chairman, he is at one end of the copyright ideological spectrum on the CIIP, and would not be able to control the content industry friendly Democrats and Republicans on the CIIP.

Rep. John Doolittle (R-CA), who cosponsors the fair use bill, won re-election too.

The change in control of the House and Senate may have little effect on stand alone IPR related bills. The Boucher Doolittle fair use bill is as unlikely to pass in a Democratic Congress as in a Republican Congress. The orphan works bill, which has broad bipartisan support, will likely be approved 110th Congress; the same would have been the case with Republican control.

Patent reform and music licensing will also likely be the subject of consideration in the 110th Congress.

Trade and IPR. However, one IPR issue area where there election results may have consequences is trade related aspects of IPR. There is more support among Republicans for free trade, as well as bilateral and multilateral free trade agreements.

In a globalized economy, creators and owners of IP seek protection through trade agreements and foreign laws and enforcement. However, most IPR related provisions are just one part of larger free trade agreements (FTAs)

Trade promotion authority (PTA) expires next summer. The chances for an extension were slim when the Republicans still controlled the House. There is now almost no chance for extending PTA in the short run. And, without trade promotion authority, the Office of the U.S. Trade Representative's ability to negotiate FTAs is substantially diminished.

Other Trade Issues. The partisan shift will also adversely impact the chances for obtaining other trade related technology provisions in FTAs, such as market access provisions for communications companies, and removing barriers to electronic commerce.

Democrats have also been less receptive to both trade agreement provisions, and bills, that make it easier for tech companies to hire foreign tech workers in the U.S., and for tech companies to move their existing personnel across borders.

Democrats have also been more supportive of proposals that would impose protectionist restrictions on offshore outsourcing by U.S. tech companies.

Sen. Max BaucusIt should be noted, however, that Sen. Max Baucus (D-MT) (at right) will likely be the next Chairman of the Senate Finance Committee, which has jurisdiction over most trade related issues. He is a generally a free trade advocate.

Moreover, due to the two Senators per state provision in the Constitution, and the circumstance that many small population states are export dependent, the Senate is more supportive of free trade, than the House, where representation varies with population.

Communications Reform Legislation. Both the House and Senate have made substantial efforts to enact comprehensive communications reform legislation in the current Congress. The House enacted its bill. The Senate Commerce Committee (SCC) reported its bill.

There is a correlation between party membership and voting on some of the issues involved, such as imposing network neutrality mandates, imposing build out requirements on broadband service providers, and extending many common carrier type rules to new information services. Democrats are more likely than Republicans to support these various mandates.

Chairmanship of the House Commerce Committee (HCC) will shift from Rep. Joe Barton (R-TX) to Rep. John Dingell (D-MI), while chairmanship of the Subcommittee on Telecommunications and the Internet will shift from Rep. Fred Upton (R-MI) to Rep. Ed Markey (D-MA).

Chairmanship of the SCC will likely shift from Sen. Ted Stevens (R-AK) to Sen. Dan Inouye (D-HI). These two have worked in close cooperation. However, the members of the SCC, and the SCC staff, have displayed more partisanship.

One consequence of the change in control is that it appears unlikely that the House would approve a bill that contains the provisions sought by the cable and telephone companies in the current bill, or that the Senate would approve the related provisions in the current SCC bill.

In a related matter, it is difficult to discern any causal effect of voting on the communications bills, and re-election results. Sen. Conrad Burns (R-MT) and Sen. George Allen (R-VA), both members of the SCC, lost their race, but there is much to suggest that this was not the result of their involvement in SCC passage of the communications reform bill.

Sen. Olympia Snowe (R-ME) and several Democratic members of the SCC, voted for the network neutrality mandate, without any apparent adverse consequence. Sen. Snowe easily won re-election.

Rep. Heather Wilson (R-NM), a member of the HCC, supported network neutrality, and barely won re-election. However, she has close elections every two years.

Several HCC Democrats actively worked with Republicans to enact the HCC communications reform bill. Rep. Bobby Rush (D-IL) won re-election with 85% of the vote. Rep. Charles Gonzalez (D-TX) and Rep. Gene Green (D-TX) also won with huge margins.

Rep. Charles GonzalezRep. Gonzalez (at left) represents a San Antonio, Texas, district that is home to many employees of AT&T. He and Rep. Markey are likely to disagree on many communications issues.

Rep. Charles Bass (R-NH), a member of the HCC, lost, as did a large number of other northern Republican incumbents. In both the House and Senate, a disproportionate number of the Republican loses occurred in the north -- states north of the Ohio and Potomac Rivers.

Sen. Allen, who is a member of the SCC, lost his election. This had consequences for control of the Senate. In addition, Sen. Allen was one of a small group of Senators who are both informed on a wide range of communications and internet issues, and advocated a minimal regulatory and taxation environment for such services.

His departure may leave Sen. John Sununu (R-NH) and Sen. Jim DeMint (R-SC) to argue for free markets in the tech sectors. One might have once placed Sen. Ron Wyden (D-OR) in this category. He remains in the Senate, but previously gave up his seat on the SCC for a seat on the Senate Finance Committee (SFC). He also now advocates network neutrality mandates.

Federal Communications Commission. The President appoints Commissioners, subject to Senate confirmation, and designates the Chairman. Three members come from the President's party, and two from the other. The change of the control of the Congress does not affect the 3-2 balance on the FCC.

One of the consequences of the difficulty of enacting legislation in any Congress is that the FCC is placed in the position of engaging in quasi legislative acts under the guise of rule making. The Congress was unable to enact comprehensive communications reform legislation in the 109th Congress. It is unlikely to do so in the 110th Congress. The FCC will be pressured to address many issues not resolved by the Congress. It would have been in this position regardless of which party won control of the Congress.

The 2008 Presidential election will be significant for the FCC, and the output of the FCC.

Government Electronic Surveillance. There is some partisan variation on some issues related to government electronic surveillance, such as telephone wiretaps, pen register and trap and trace devices, access to e-mail addressing information, access to phone company and internet service provider records, access to stored communications, PATRIOT Act amendment and extension, and mandatory data retention.

Republicans have been more friendly to government requests to expand and extend various powers related to electronic surveillance.

There are Republicans who have opposed or questioned legislative requests from President Bush or the Department of Justice (DOJ). They were not harmed by the elections. Sen. John Sununu (R-NH), Sen. Lisa Murkowski (R-AK), and Sen. Larry Craig (R-ID) were not up for re-election. Rep. Jeff Flake (R-AZ) ran unopposed. Rep. Ron Paul (R-TX) won easily. Rep. Butch Otter (R-ID) will not return, but only because he was elected Governor of the state of Idaho instead.

Rep. Diana DeGetteThere are also surveillance friendly Democrats. They fared well in the elections too. For example, Rep. Diana DeGette (D-CO) (at right), who offered a data retention mandate amendment during the House Commerce Committee's (HCC) markup of its communications reform bill, won re-election with 79% of the vote.

Rep. Melissa Bean (D-IL) barely won re-election. She represents the seat previously held by former Rep. Phil Crane (R-IL). She won, in part, by voting like a Republican on many issues, including electronic surveillance.

Internet Censorship, DOPA and Mandatory Web Site Labeling. The new Democratic majority will likely be less inclined to push legislation that censors internet expression.

For example, HR 5319, the "Deleting Online Predators Act of 2006", or DOPA would censor use of the internet by expanding the requirements of the Children's Internet Protection Act (CIPA) to include chat rooms and commercial social networking web sites. While this bill was approved by the full House by a vote of 410-15 (see, Roll Call No. 405), it is a Republican initiative. The DOPA is sponsored by Rep. Michael Fitzpatrick (R-PA), and most of its 39 cosponsors are Republicans. Also, all 15 votes against were cast by Democrats.

The election results in several races may provide further encouragement for opponents of this bill. Rep. Fitzpatrick lost. The cosponsors who lost include Rep. Charles Bass (R-NH), Rep. Curt Weldon (R-PA), Rep. JD Hayworth (R-AZ), Rep. Sue Kelly (R-NY), and Rep. Jeb Bradley (R-NH). Also, Rep. Mark Kennedy (R-MN) ran for Governor of Minnesota and lost.

See also, stories titled "House Approves DOPA", "Senate Appropriations Committee Approves Website Labeling Mandate", and "CDT Argues That Social Networking and Web Site Labeling Bills Threaten Free Speech" in TLJ Daily E-Mail Alert No. 1,426, August 7, 2006.

Sarbanes Oxley Act and Section 404. Small technology companies are aggrieved by the Sarbanes Oxley Act, and particularly by implementation of its Section 404. Both Sen. Paul Sarbanes (D-MD) and Rep. Mike Oxley (R-OH) are retiring.

Had Republicans remained in control of the Congress, proponents of reform might have sought, or threatened to seek, legislative changes to Section 404. However, the prospects for enactment of any such legislation in a Democratic Congress are much diminished.

Proponents of reform may focus all of their efforts on the Securities and Exchange Commission (SEC). The new Chairman, former Rep. Chris Cox (R-CA), is probably the most tech friendly Chairman that Bush could have appointed.

Litigation Reform. There is a strong partisan divide in the Congress on general litigation reform. Democrats are more supportive of the plaintiffs trial lawyers, and hence, oppose reform. Rep. Rick Boucher (D-VA) is an exception.

Any efforts at general litigation reform at the federal level would appear to be over unless Republicans regain control of the Congress, and retain control of the Presidency. Litigation reform advocates may find that working with state legislatures, and the judiciary, is more productive.

Although, narrowly targeted, subject matter specific, bills, such as the HR 5418, sponsored by Rep. Darrell Issa (R-CA) and Rep. Adam Schiff (D-CA), may fare better. This is an untitled bill that would establish a ten year pilot program in a least five U.S. District Courts to develop expertise in judges and court staff in patent and plant variety cases.

The House approved this bill, but the Senate did not. See, stories titled "Reps. Issa and Schiff Introduce Bill to Create Pilot Program for Specialized Patent Judges" in TLJ Daily E-Mail Alert No. 1,376, May 23, 2006, and "Status of Intellectual Property Bills" in TLJ Daily E-Mail Alert No. 1,459, October 2, 2006.

There is also HR 2955, the "Intellectual Property Jurisdiction Clarification Act of 2005". The HJC approved this bill on March 2, 2006, and reported it on April 4, 2006. See, Report No. 109-407. See also, story titled "House Judiciary Committee Approves Amendment Regarding Jurisdiction of Federal Circuit" in TLJ Daily E-Mail Alert No. 1,325, March 8, 2006. It is likely to be reintroduced in the 110th Congress.

Data Privacy. House Democrats may seek more restrictive data privacy legislation in the 110th Congress than the Republican sponsored bills that were not enacted in the 109th Congress.

Rep. Cliff Stearns (R-FL), the current Chairman of the House Commerce Committee' (HCC) Subcommittee on Commerce, Trade and Consumer Protection, won re-election, but will no longer be Chairman.

Internet Gambling. After many years of effort, the Congress enacted its internet gambling legislation just before recessing for the elections. Regardless of the outcome of the elections, there was likely to be little effort to enact any further legislation in the short run.

However, it should be noted that the three main longtime proponents of this legislation were Rep. Jim Leach (R-IA), who lost, and Rep. Bob Goodlatte (R-VA) and Rep. Jon Kyl (R-AZ), are now relegated to the minority.

Rep. Barney FrankIn contrast, Rep. Barney Frank (D-MA) (at right), who will likely become Chairman of the House Financial Services Committee, has long taken a libertarian approach to regulation of internet gambling.

Also, there is a possibility that as a result of World Trade Organization (WTO) decisions the Congress may find itself in the position of revisiting internet gambling related statutes.

R&D Tax Credit. Congress continually enacts temporary extensions of the research and development tax credit. However, there is an absence of roll call votes on stand alone bills with which to assess partisan support. Tech sector trade groups, and many members of both parties, advocate permanent extension. The lack of transparency in this process makes it hard to assess how the change of control of the Congress may affect this subject.

Federal Spending on R&D. Similarly, leaders and many members of both parties advocate more federal spending on research and development.

Judicial Appointments. Regaining control of the Senate will make it easier for Senate Democrats to defeat or delay President Bush's judicial nominees. However, other than in his appointments to the U.S. Court of Appeals (FedCir), Bush has appointed few judges with any substantial background in any technology related areas of law.

One nominee whose chances for confirmation may have diminished with the change in party control is Peter Keisler. Bush nominated him for a seat on the U.S. Court of Appeals (DCCir) earlier this year. He is currently Assistant Attorney General in charge of the Civil Division. Before that he worked for the law firm of Sidley Austin, where he represented AT&T.

Deval Patrick Elected Governor of Massachusetts

11/7. Deval Patrick was elected Governor of the state of Massachusetts. While he was Assistant Attorney General in charge of the Department of Justice's (DOJ) Civil Rights Division (CRD) during the Clinton administration, he asserted that web sites are subject to the ADA, but can comply by also producing braille and audio copies.

His opinion letter remains in the DOJ web site. Were the DOJ to enforce the opinion contained in this letter, millions of web sites would be compelled to shut down. However, both the Clinton and Bush Justice Departments have substantially ignored Patrick's determination.

Deval Patrick, wrote a letter on September 9, 1996 to Sen. Tom Harkin (D-IA) in which he stated that "The Americans with Disabilities Act (ADA) requires ... places of public accommodation to furnish appropriate auxiliary aids and services where necessary to ensure effective communication with individuals with disabilities ... Covered entities under the ADA are required to provide effective communication, regardless of whether they generally communicate through print media, audio media, or computerized media such as the Internet. Covered entities that use the Internet for communications regarding their programs, goods, or services must be prepared to offer those communications through accessible means as well."

Patrick wrote that web site operators could comply by providing audio tapes and braille copies of their web sites.

TLJ has met with, telephoned, and e-mailed persons in the DOJ's CRD and Office of Public Affairs many times since requesting information about the status and/or enforcement of this letter. The DOJ has not provided any information other than to confirm the authenticity of the letter, and to assert Patrick's authorship.

TLJ has also requested, without response, information about other technology related issues, such as the DOJ's assessment of how the interactive computer service immunity provision of 47 U.S.C. § 230(c)(1) affects the DOJ's efforts to enforce the ADA, and other civil rights statutes, against operators of interactive computer services.

The DOJ's CRD released a report titled "Access for All: Five Years of Progress" on October 5, 2006. This report notes that persons with disabilities are less likely to have internet access than persons without disabilities. However, it does not address application of civil rights laws to web sites or services. TLJ again requested information, records, and interviews. The DOJ has not responded.

NCTA Seeks Delay of Integration Ban

11/7. On October 31, 2006, Kyle McSlarrow, head of the National Cable Telecommunications Association (NCTA), wrote a letter to Carlos Guitierrez (Secretary of Commerce), John Kneuer (acting head of the National Telecommunications and Information Administration), and the five Commissioners of the Federal Communications Commission (FCC) regarding the NTIA administered voucher program for the transition to digital television, and the FCC's integration ban.

McSlarrow still does not like the integration ban.

He argued in this letter that it is unjust when one government entity imposes the integration ban on cable companies, thus raising their costs, while another government entity subsidizes converters for over the air television only households. He argued that this injustice, and the forthcoming availability of downloadable security technology, warrant a delay of the integration ban, to as late as the end of 2009.

He wrote that "the greatest number of analog televisions are in cable households ... often that second or third television in a kitchen or bedroom."

He also wrote that it is necessary that "all owners of ``over the air´´ televisions who so choose, can purchase a device that converts a digital signal to analog, and do so at the least expense".

He argued that "there is no principled justification for granting eligibility for such vouchers to one class of television owners -- in ``over the air´´ households -- and denying eligibility to another class of ``over the air´´ television owners who also happen to have cable or satellite service on another TV in their home." He added that "we do not agree with those who would deny eligibility of vouchers to cable customers".

He concluded that one alternative would be "to make all cable households eligible for the NTIA voucher program. But that would either add enormously to the cost of the NTIA program and to the U.S. Treasury, or, since the current budgetary authority for this program is limited, severely diminish the financial support that is provided for those who are deemed eligible."

McSlarrow then discussed at length the integration ban, an FCC rule that precludes cable operators from offering set-top converter boxes that bundle both security functions, such as descrambling, and non-security functions, such as channel selection, in a single device.

This is required by Section 304 of the Telecommunications Act of 1996, which is codified at 47 U.S.C. § 549. It is implemented by FCC rules.

Section 76.1204(a)(1) provides that "A multichannel video programming distributor that utilizes navigation devices to perform conditional access functions shall make available equipment that incorporates only the conditional access functions of such devices. Commencing on July 1, 2007, no multichannel video programming distributor subject to this section shall place in service new navigation devices for sale, lease, or use that perform both conditional access and other functions in a single integrated device."

See, Second Report and Order [37 pages in PDF], adopted and released on March 17, 2005. This order is FCC 05-76 in CS Docket No. 97-80. This proceeding is titled "In the Matter of: Implementation of Section 304 of the Telecommunications Act of 1996 Commercial Availability of Navigation Devices". See also, story titled "FCC Again Delays Deadline for Integrating Navigation and Security Functionalities in Cable Set Top Boxes" in TLJ Daily E-Mail Alert No. 1,099, March 21, 2005. And see, August 18, 2006, opinion [22 pages in PDF] of the U.S. Court of Appeals (DCCir) in Charter Communications v. FCC, and story titled "DC Circuit Upholds FCC Order Re Separable Security for Cable Set-Top Boxes" in TLJ Daily E-Mail Alert No. 1,434, August 18, 2006.

McSlarrow wrote that "This rule requires that, by July 1, 2007, cable operators must reengineer the cable boxes they lease so that these boxes use an insertable security card (a ``CableCARD´´) that performs the same ``security´´ and ``descrambling´´ functions that current “integrated´´ boxes already perform. The additional cost of these cards and the reengineered box components amounts to a $72-$93 price increase for the box above the cost of an integrated box that performs exactly the same functions. That translates into a price increase of $2-$3 per month per box for consumers using these boxes."

He added that "This requirement is all the more puzzling since there is a newer technology on the near-term horizon -- downloadable security -- which is a more efficient, less costly and more consumer-friendly option than the CableCARD for separating security in both cable-supplied leased boxes and ``cable ready´´ devices purchased at retail."

McSlarrow argued that it is incomprehensible that while the Congress is providing $40 subsidy for digital-to-analog converters, the FCC "should simultaneously force consumers to pay $2-$3 per month per box more for leased set-top boxes that will help facilitate the digital transition for millions of viewers without any government subsidy."

He argued for a delay of the integration ban.

In addition, on November 2, 2006, 11 cable programming companies sent a letter to the FCC arguing that money spent complying with the integration ban will not be spent on programming or deploying new services. These companies support the NCTA's request for a delay.

In an item related to the voucher program, the NTIA published a notice in the Federal Register that announces that it "will be holding individual meetings with interested parties on November 14-15, 2006 in connection with its digital-to-analog converter box coupon program described in the July 25, 2006 ``Request for Comment and Notice of Proposed Rules to Implement and Administer a Coupon Program for Digital-to-Analog Converter Boxes'' (NPRM). All interested parties are invited to schedule an individual meeting." See, Federal Register, November 8, 2006, Vol. 71, No. 216, at Page 65476.

CEA Files Bi-Directional Digital Cable Compatibility Proposal with FCC

11/7. The Consumer Electronics Association (CEA) filed a letter [4 pages in PDF] with the Federal Communications Commission (FCC) on November 7, 2006, that contains a "comprehensive proposal to achieve bi-directional digital cable compatibility".

This filing reflects that there is consensus among a large group of consumer electronics (CE) and information technology (IT) companies, but that they remain in conflict with cable and content companies.

The CEA seeks rule changes in the FCC's proceeding to implement the Telecommunications Act of 1996's requirement regarding the competitive availability of navigation devices. However, the filing goes beyond this. It pertains to a wide range of digital consumer devices that work on cable systems. But in addition, the proposal goes to the networking of devices, and use made of content accessed via cable systems.

The CEA advances arguments and proposals regarding intellectual property rights.

Overview of the CEA Proposal. The CEA letter asserts that the proposal "will allow CE and IT manufacturers to compete fairly with cable providers for customers seeking access to interactive digital cable services. And more to the point, the Proposal will allow consumers to enjoy the benefits of competition as Congress and the Commission have long intended."

The CEA proposes that competitive manufacturers be allowed, but not obligated, to include OpenCable Application Platform (OCAP) in devices that access basic interactive services, including switched digital, electronic program guide (EPG), video on demand (VOD), and impulse pay per view (IPPV).

The CEA further proposes that competitive manufacturers must implement OCAP to access advanced interactive services -- "perhaps on-line games, email and ‘play-along’ interaction coordinated with specific video content. Rather than absorbing all the cost and uncertainty associated with OCAP, competitive manufacturers would be permitted to offer functionally equivalent bi-directional products that build on existing digital cable compatibility technologies."

The CEA further proposes that competitive manufacturer be allowed to develop and deploy their own user interface, and to "innovate in the areas of navigation, parental controls, accessibility to users with disabilities, use of consumer-produced content ..., and interaction with third-party applications".

Also, representatives of Dell, Hitachi, Intel, Microsoft, Mitsubishi, Philips, Sharp, Sony, Toshiba, and other CE and IT companies filed a letter in support [12 pages in PDF]. The two letters contain much of the same language.

This letter states that "We believe that this proposal, if implemented, will substantially increase consumer choice by quickly and effectively bringing a wide variety of two-way ``plug-and-play´´ devices to market. As the Commission is well aware, more than two years of negotiations between the cable, CE and IT industries have not yielded a mutual agreement on a bi-directional specification. In addition to frustrating the goals of Section 629 of the Communications Act, this delay has harmed both the cable and CE and IT industries and, most importantly, consumers. Cable customers who wish to obtain even the simplest interactive digital services presently have no alternative to leasing a cable operator-supplied box and relying on multiple remote controls and devices. Consumers deserve an easier, more elegant, option: a single, integrated device that displays and allows them to navigate among the interactive video services of their choice."

These letters provide overviews of the proposal and policy arguments. The CEA sets forth more specifically what it wants the FCC to do in attachments to its letter. See, Attachment A [6 pages in PDF] titled "Access to Basic Interactive Services: Technical Requirements", and Attachment B [4 pages in PDF] titled "Access to Basic and Advanced Interactive Services: Regulatory, Licensing and Testing Requirements".

The CEA wants the FCC to amend Part 76 of its rules. The proposals would affect a wide range of electronic devices that enable access to interactive digital cable services, and the networking of those devices.

The CEA proposes that cable operators be required to support Unidirectional Digital Cable Receiver (UDCR) and Open Cable Unidirectional Receiver (OCUR), also known as Unidirectional Devices, by maintaining access to all linear broadcast digital cable audio/video content and services in parity with the availability of those same services on leased devices.

The CEA's proposals would limit the contract terms that cable operators could negotiate. The proposals would also limit the intellectual property rights, including patent and copyrights, of cable operators.

Appendix A states that "Cable providers shall not, by contract, agreement, patent right, intellectual property right or otherwise, prevent Unidirectional Devices compliant with both Section 76.1203 (incidence of harm) and Section 76.1209 (theft of service) of the Commission’s Rules from accessing the same linear broadcast digital cable audio/video content offering available to subscribers having cable provider leased devices."

It further proposes that "Manufacturers of Unidirectional Devices are permitted to create new navigation devices that ... have upstream transmission capability. This upstream transmission capability would permit limited interaction with the cable provider distribution network to allow the host device to provide access to SD, VOD, and IPPV content."

Moreover, it proposes that "Cable providers are prohibited from, by contract, agreement, patent right, intellectual property right or otherwise, imposing a requirement that a manufacturer implement in any hardware or software specific to any one particular network vendor. If network-specific hardware or software is necessary for attachment, navigation and reception of digital audio/video programming, it should be incorporated and confined within the cable provider conditional access technology."

The authority that the CEA cites for the proposition that the FCC has authority to limit intellectual property rights is a September 18, 2000, declaratory ruling [MS Word] of the FCC, in this same proceeding. See, FCC 00-341, and especially paragraphs 14-32.

Digital Freedom Initiative. On October 25, 2006, the CEA and other groups announced and launched a campaign titled "Digital Freedom Campaign" or DFC. The speakers asserted that consumers should be allowed to use legally acquired digital content as they choose.

Gary Shapiro, the head of the CEA, stated at that event that "new technologies, and consumers' right to use these technologies, and their fair use rights are under attack by some very big companies and associations." See, story titled "CEA and Others Announce Digital Freedom Campaign" in TLJ Daily E-Mail Alert No. 1,476, October 26, 2006.

The CEA's November 7 FCC filing argues that "Consumers should be able to view, move, store, and access cable content that they legally obtain without restriction, other than as necessary to protect theft of service, electronic or physical harm to the network, and in accordance with reasonable content protection requirements." This is also one of the DFC's assertions. Although, the DFC's mission goes beyond cable content.

Statute, Regulations, and FCC Docket. The CEA filed these items in the FCC's CS Docket No. 97-80. This is the FCC's long running preceding regarding the implementation of 47 U.S.C. § 549.

47 U.S.C. § 549 pertains to "Competitive availability of navigation devices". It was enacted as part of the Telecommunications Act of 1996. It is also known as Section 304 (of the Telecommunications Act of 1996) and Section 629 (of the Communications Act of 1934).

Subsection (a) provides that "The Commission shall, in consultation with appropriate industry standard-setting organizations, adopt regulations to assure the commercial availability, to consumers of multichannel video programming and other services offered over multichannel video programming systems, of converter boxes, interactive communications equipment, and other equipment used by consumers to access multichannel video programming and other services offered over multichannel video programming systems, from manufacturers, retailers, and other vendors not affiliated with any multichannel video programming distributor. Such regulations shall not prohibit any multichannel video programming distributor from also offering converter boxes, interactive communications equipment, and other equipment used by consumers to access multichannel video programming and other services offered over multichannel video programming systems, to consumers, if the system operator’s charges to consumers for such devices and equipment are separately stated and not subsidized by charges for any such service."

Subsection (b) provides that "The Commission shall not prescribe regulations under subsection (a) of this section which would jeopardize security of multichannel video programming and other services offered over multichannel video programming systems, or impede the legal rights of a provider of such services to prevent theft of service."

Part 76 of the FCC's rules pertain to "Multichannel Video and Cable Television Service".

Section 76.640 [3 pages in PDF] pertains to "Support for unidirectional digital cable products on digital cable systems". The CEA proposes that the FCC amend this section.

NCTA Reaction. Neal Goldberg, General Counsel of the National Cable Telecommunications Association (NCTA), stated in a release that "The cable industry has encouraged CE companies to manufacture digital TVs and other devices so that consumers can access cable's advanced services without a set-top box.  The more 'cable ready' products available to consumers, the more consumers will choose cable over our video competitors. In fact, CableLabs has published technical specifications and related agreements that facilitate the development and deployment of two-way digital cable ready TV sets by CE manufacturers. A number of CE manufacturers have signed these agreements with CableLabs, and at least one, Samsung, demonstrated a working two-way digital cable ready TV set at the 2006 Consumer Electronics Show."

He continued that "To expedite delivery of more two-way devices to the marketplace, NCTA submitted to the FCC 11 months ago a deregulatory proposal that would establish straightforward technical specifications for use by any manufacturer wanting to build these devices. However, the FCC has yet to submit cable's proposal for public comment."

He concluded that "To the extent that CE companies -- for the first time -- have developed a consensus proposal for bringing two-way devices to the marketplace, this new proposal should be discussed at the continuing inter-industry discussions that have been underway since 2003. Cable will continue to support a minimal regulatory approach that leverages existing marketplace solutions rather than looking to the government to micromanage and potentially harm the evolution of a thriving retail environment."

FCC Releases BPL Order

11/7. The Federal Communications Commission (FCC) released the text [18 pages in PDF] of its Memorandum Opinion and Order (MOO) that declares that broadband over power line (BPL) enabled internet access service is an information service.

The FCC adopted, but did not release, this MOO at its November 3, 2006, meeting.

The MOO states that "we classify Broadband over Power Line (BPL)-enabled Internet access service to be an information service under the Communications Act of 1934, as amended (Communications Act or Act). Additionally, we find that the transmission component underlying BPL-enabled Internet access service is ``telecommunications,´´ and that the offering of this telecommunications transmission component as part of a functionally integrated, finished BPL-enabled Internet access service offering is not a ``telecommunications service.´´ Further, we find that neither the Communications Act nor relevant precedent mandates that broadband transmission be a ``telecommunications service´´ when provided to an Internet service provider (ISP) as a wholesale input for the ISP's own BPL-enabled Internet access service offering, but that the BPL provider may choose to offer it as such." (Parentheses in original. Footnote omitted.)

The MOO also states that "we deny requests from commenters either to condition the information service classification or to place additional requirements on BPL-enabled Internet access services."

The MOO concludes that the issues of "interference and pole attachment access" are "outside the scope of this proceeding and are better addressed in other proceedings pending before the Commission."

See also, story titled "FCC Declares that BPL is an Information Service" in TLJ Daily E-Mail Alert No. 1,482, November 3, 2006.

This MOO is FCC 06-165 in WC Docket No. 06-10. This proceeding is titled "United Power Line Council’s Petition for Declaratory Ruling Regarding the Classification of Broadband over Power Line Internet Access Service as an Information Service".

Mandelson Discusses IPR and Market Access in PR China

11/7. Peter Mandelson, the European Trade Commissioner, gave a speech at Tsinghua University, in Beijing, PR China. He once again called for increased market access and intellectual property rights (IPR) protection in China.

He said that "there is also a growing perception in Europe -- and I hope Chinese leaders will not ignore this -- that China and Europe do not trade on genuinely reciprocal, equal, terms. That China does not always trade fairly. That European companies, goods and investment are too often unfairly blocked from the Chinese market by various non-tariff barriers. When I went to Shenzhen earlier this year I was struck by the fact that for every four containers leaving China for Europe, three were returning empty. And, to be frank, I don’t think European entrepreneurialism is the problem."

He said that Europe's strategy is to demand "improved market access", as well as "social and political freedoms, intellectual property rights and fair trade."

He stated that "Five years after its accession to the WTO, despite a lot of implementation work, China has still not fulfilled some of its commitments and the EU will push to see these met. China can still do more to open its markets and liberalise trade in services and investment."

He continued that "Europe also needs to see tougher action on counterfeiting in China, which is a ball and chain on EU competitiveness and a growing problem for China itself. Last month China overtook Germany to become the world’s fifth biggest filer for patents. So increasingly the Chinese government is seeing a joint interest in fighting this illegal activity - but we need to see more enforcement of the law."

He also said that Europe and PR China should act in partnership, and that this will "help ensure China's own internal stability".

Finally, Mandelson conceded that "We have to take on our own protectionists, because we cannot demand openness from China from behind barriers of our own."

People and Appointments

11/7. Jason Oxman joined the Consumer Electronics Association (CEA) as VP of Communications. He recently worked for Comptel. Before that he worked for Covad, and for the Federal Communications Commission (FCC). See, CEA release.

More News

11/7. The Federal Communications Commission (FCC) released the text [40 pages in PDF] of its Notice of Proposed Rulemaking (NPRM) in its proceeding titled "In the Matter of the Effects of Communications Towers on Migratory Birds". This NPRM is FCC 03-187 in WT Docket No. 03-187. The FCC adopted, but did not release, this NPRM at its November 3, 2006, meeting. The FCC has not yet set comment deadlines. Initial comments will be due 60 days after publication of a notice in the Federal Register. Reply comments will be due 90 days after such publication.

More News

11/7. Attorney General Alberto Gonzales, Secretary of Homeland Security Michael Chertoff, Secretary of State of the German Federal Ministry of the Interior August Hanning, Minister of Justice of Finland Leena Luhtanen, Minister of the Interior of Finland Kari Rajamaki, and Vice President of the European Union Franco Frattini held a joint news conference in Washington DC on November 7, 2006. They discussed international information sharing to fight terrorism. However, Hanning also commented on surveillance of the internet. He said that the "Internet is so very important. Internet is an important platform for recruiting of terrorists, as a communication platform. And therefore, we want to stress the surveillance of Internet as one of the most important points of our presidency." He did not elaborate. Germany's Bundesministerium des Innern, or Federal Ministry of the Interior, is responsible for interior security. Before joining this ministry, Hanning was President of the Bundesnachrichtendienst, the Federal Intelligence Service.

3rd Circuit Reverses in DirecTV v. Leto

11/6. The U.S. Court of Appeals (3rdCir) issued its opinion [12 pages in PDF] in DirecTV v. Leto. This is a direct broadcast satellite signal piracy case. However, the facts of the case are not important to this appeal. At issue are the bizarre procedural decisions of the U.S. District Court (WDPenn), Judge Gary Lancaster presiding.

DirecTV filed a timely complaint in the District Court against Garry Bloch, and seven other individual defendants, including Bennie Leto. The defendants moved to severe the cases. Judge Lancaster did so. He wrote that "As to each of the other defendants, the case shall proceed as a separate action under a separate civil action number upon payment by plaintiff of the requisite filing fee as to each defendant." Lancaster later ruled that his severance order constituted a dismissal with prejudice, and that the new actions were filed beyond the statute of limitations.

Of course, the Court of Appeals reversed. It wrote that "when a court ``severs´´ a claim against a defendant under Rule 21, the suit simply continues against the severed defendant in another guise. ... The statute of limitations is held in abeyance, and the severed suit can proceed so long as it initially was filed within the limitations period." The Court of Appeals added that while the order was a severance, it would have been improper, and an abuse of discretion, to dismiss the case.

Lancaster is better known for the reversal of his dismissal in U.S. v. Extreme Associates, a criminal obscenity case involving internet downloads, and mail distribution of DVDs and videos. The Court of Appeals bluntly wrote in its December 8, 2005, opinion [30 pages in PDF] that Lancaster "improperly set aside applicable Supreme Court precedent". See also, Department of Justice (DOJ) release.

The present case is DirecTV, Inc. v. Bennie Leto, U.S. Court of Appeals for the 3rd Circuit, App. Ct. No. 05-3908, an appeal from the U.S. District Court of the Western District of Pennsylvania, D.C. No. 04-cv-00020, Judge Gary Lancaster presiding. Judge Ambro wrote the opinion of the Court of Appeals, in which Judges McKee and Nygaard joined.

Cato Paper Assesses WTO Proceeding on Internet Gambling

11/6. The Cato Institute released a short paper titled "U.S. Response to Gambling Dispute Reveals Weak Hand". The author is the Cato's Sallie James.

Antigua and Barbuda have complained to the World Trade Organization (WTO) that various U.S. laws, including the Wire Act, and laws affecting international money transfers and payments, violate the U.S.'s treaty obligations.

James argues in this paper that "the results so far in a landmark World Trade Organization dispute over Internet gambling support Antigua and Barbuda's claim that it is being unfairly treated by U.S. policies".

Last month President Bush signed into law a port security bill. It includes the Unlawful Internet Gambling Enforcement Act. James states that this legislation provides exemptions for "transactions made in accordance with the Interstate Horseracing Act (for example, intrastate online bets made on domestic and some overseas horseracing through U.S. sites such as and remote gambling conducted by Native American tribal groups". (Parentheses in original.)

She argues that "Those exemptions would seem to back the claim by Antigua and Barbuda that the U.S. laws are aimed at discriminating against foreign Internet gambling interests rather than at restricting gambling in general."

James adds that "eBay was a chief proponent of the new act that prohibits online gambling and monetary transfers to pay for it. PayPal, a subsidiary of eBay, has already promised lawmakers that it will bar its customers from using PayPal accounts for Internet gambling and other ``adult-oriented´´ goods and services. Having excluded itself from the market for those types of money transfers, PayPal will gain from this act to the extent that it prevents competitors from gaining market share." (Footnote omitted.)

See also, June 7, 2006, Cato paper by Radley Balko titled "Federal Ban on Internet Gambling Marches On" June 7, 2006, and June 11 piece titled "eBay Invites Internet Regulation, Backs Online Gambling Ban".

A WTO panel may issue a report at any time regarding whether the U.S. is in compliance with its original ruling. James writes that if the panel finds that the U.S. is not in compliance, "Antigua and Barbuda is reportedly planning to ask for permission to allow intellectual property rights violations against U.S. firms to occur unabated on its territory".

See, WTO's July 7, 2006 notice of Antigua and Barbuda's request for a compliance panel.

See also, stories titled "WTO Panel Instructs Congress to Amend Wire Act to Legalize Internet Gambling" in TLJ Daily E-Mail Alert 1,016, November 11, 2004; "WTO Appellate Body Upholds U.S. Laws Affecting Internet Gambling" in TLJ Daily E-Mail Alert No. 1,111, April 8, 2005; and "Allgeier Addresses Trade Agreements and Internet Gambling" in TLJ Daily E-Mail Alert No. 1,118, April 19, 2006.

OUSTR Moves Indonesia From Priority Watch List

11/6. The Office of the U.S. Trade Representative (OUSTR) released a statement in which it announced that it has completed it out of cycle review of Indonesia, and decided "to improve Indonesia's standing on the Special 301 Watch List". This statement adds that "sustained efforts and continued progress on key IPR issues will be essential to avoid a future return to the Priority Watch List."

The USTR's 2006 Special 301 Report placed Indonesia on the Priority Watch List [PDF]. That report stated that "Indonesia will remain on the Priority Watch List in 2006, but the United States will conduct an Out-of-Cycle Review to monitor Indonesia’s progress on IPR issues. The United States commends Indonesia for its progress in strengthening its IPR enforcement regime in 2005, particularly with respect to fighting retail piracy and taking steps to implement its optical disc regulations to combat pirate production in optical disc factories. The United States also commends Indonesia for the re-establishment earlier this year of a Ministerial-level National IP Task Force as a focal point for future work to coordinate protection and enforcement of IPR. The United States urges Indonesia to build on this momentum by enforcing its IPR laws effectively and in a deterrent manner against piracy and counterfeiting, including through raids on pirate optical disc factories; by conducting seizures of pirated goods and the machinery used to make them; by arresting and prosecuting IPR infringers; and by ensuring that courts impose jail sentences for IPR crimes and that offenders actually serve such sentences. The United States will assess Indonesia’s progress on these issues during the Out-of-Cycle Review. In addition, the United States will continue to use the bilateral Trade and Investment Framework Agreement process to work with Indonesia to improve its IPR enforcement regime."

The OUSTR's November 6 release states that "throughout 2006, Indonesia bolstered implementation of its regulations designed to stop illegal production of pirated optical discs such as CDs and DVDs by controlling the licensing of factories and conducting raids against pirate optical disc production facilities. Indonesia’s authorities also conducted numerous raids on retail outlets selling pirated goods. During this period, the Indonesian Government activated its minister-level National Intellectual Property Task Force and its working groups to coordinate IPR enforcement strategy among agencies as well as to conduct public awareness campaigns. Indonesia also passed a new Customs Law that clarifies the authority for Customs officers to seize goods that infringe on IPR."

FCC Releases Order on Remand Regarding Broadcast Indecency

11/6. The Federal Communications Commission (FCC) issued an Order [36 pages in PDF] on remand regarding complaints that four broadcast television programs contained indecent and/or profane material. The Order concludes that comments made by Nicole Richie during "The 2003 Billboard Music Awards" and by Cheryl LaPiere during the "The 2002 Billboard Music Awards" were indecent and profane. The Order concludes that material on the "The Early Show" was neither indecent nor profane. Finally, the Order dismisses on procedural grounds the complaints involving "NYPD Blue". See also, FCC release [PDF].

FCC Commissioner Jonathan Adelstein wrote in his statement [4 pages in PDF] that "It was my hope that the Commission would use this remand to clarify and rationalize our indecency regime, but regulatory convenience and avoidance have prevailed instead." (Footnote omitted.) He concurred in part and dissented in part.

FCC Chairman Kevin Martin stated in a release that "I am pleased the Commission acted with appropriate deliberation in responding to the Court's limited remand. The Commission has always held that the use of certain words could be indecent. Consistent with that precedent, this order affirms that the use of the F and S words in the 2002 and the 2003 Billboard Music awards was indeed indecent. Hollywood continues to argue they should be able to say the F-word on television whenever they want. Today, the Commission again disagrees."

He added that "It is oftentimes difficult to distinguish between true news programming and infotainment. While I found the interview with a contestant on ``Survivor: Vanuatu´´ to be extremely close to that line, I believe the Commission's exercise of caution with respect to news programming was appropriate in this instance."

This order is FCC 06-166.

FTC Sues Spammer Under CAN-SPAM Act for Blocking Opt Out Reply Messages

11/6. The Federal Trade Commission (FTC) filed a complaint [PDF] in U.S. District Court (NDCal) against Yesmail, Inc. alleging violation of CAN-SPAM Act in connection with its bulk commercial e-mail practices. See also, FTC release.

The complaint states that Yesmail provides e-mail marketing services to its business clients. The CAN-SPAM Act requires certain commercial e-mailers must allow recipients to opt-out of receiving further messages. The complaint further states that Yesmail both sends e-mail, and processes opt-out messages. However, Yesmail configured its own e-mail filters to block these opt out messages.

The complaint is dated October 24, 2006. The FTC also announced that it has entered into a Stiputated Final Order [PDF] that bars further violation of the CAN-SPAM Act, requires Yesmail to pay a "civil penalty" of $50,717, and imposes reporting and record keeping requirements on Yesmail.

The CAN-SPAM Act is the "Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003". It was S 877 in the 108th Congress. It is now Public Law No. 108-187. It is codified at 15 U.S.C. § 7701-7713.

This case is USA v. Yesmail, Inc. dba @Once Corporation, U.S. District Court for the Northern District of California, D.C. No. C 06 6611.

More News

11/6. President Bush continues to give speeches on behalf of Republican candidates for office in the November 7 elections. He continues to campaign on differences between Republicans and Democrats on the National Security Agency's (NSA) electronic surveillance program. See, November 2 speech in Elko, Nevada, November 2 speech in Billings, Montana, November 3 speech in Springfield, Missouri, November 6 speech in Topeka, Kansas, and November 5 speech in Grand Island, Nebraska. Bush has also discussed partisan differences on judicial appointments, and especially Sam Alito and John Roberts.

11/6. NTP, Inc. filed a complaint in U.S. District Court (EDVa) against Palm alleging patent infringement. Palm stated in a release that "The NTP lawsuit claims that certain Palm products infringe seven NTP patents. All seven of the patents asserted are being re-examined by the U.S. Patent and Trademark Office (PTO) and have been rejected by the re-examiners as invalid. Palm also noted that the NTP patents disclose a pager-based email service that has nothing in common with the mobile-computing devices invented by Palm." Palm added that "Palm has been in occasional contact with NTP concerning a license to these patents. When Palm last communicated with NTP many months ago, however, each of the patents already was the subject of re-examination proceedings by the PTO. Palm is disappointed that, after many months of silence and repeated rejections of NTP's claims by the PTO, NTP has chosen to sue on patents of doubtful validity." NTP previous sued RIM, the maker of Blackberry devices, with success. RIM paid NTP $612.5 Million to settle that case. See, story titled "RIM and NTP Settle Blackberry Related Patent Litigation" in TLJ Daily E-Mail Alert No. 1,323, March 6, 2006.

11/6. The Supreme Court issued an order in Bell Atlantic v. Twombly. It wrote that "The motion of the Solicitor General for leave to participate in oral argument as amicus curiae and for divided argument is granted. The motion of respondents for divided argument is denied." See, Order List [8 pages in PDF] at page 2. Oral argument is scheduled for Monday, November 27. This case pertains to whether a complaint against a regional bell operating company (RBOC) that alleges parallel or similar behavior, and conspiracy to limit competition, but includes no allegations in support other than the similar or parallel conduct, is sufficient to survive a motion to dismiss. See also, amicus brief of the Office of the Solicitor General and story titled "Supreme Court Grants Cert in Bell Atlantic v. Twombly" in TLJ Daily E-Mail Alert No. 1,399, June 26, 2006. See also, Supreme Court docket. This is Sup. Ct. No. 05-1126.

11/6. The International Telecommunications Union (ITU) began its conference titled 2006 ITU Plenipotentiary Conference in Antalya, Turkey. See, ITU release. The U.S. State Department's David Gross gave a speech on November 6. He said that "It is the responsibility of all governments to ensure that their domestic policies foster an enabling environment conducive to the deployment of these technologies, and to ensure the ability of their citizens to access and use them." He added that it is "essential that we establish enabling environments that foster predictable, transparent, pro-competitive regulatory policies for telecommunication to advance global economic development. We also place great emphasis on promoting institutional reform, preserving the role of the private sector".

Go to News from November 1-5, 2006.