10th Circuit Rules on State Approval of Interconnection Agreements

3/5. The U.S. Court of Appeals (10thCir) issued its opinion [32 pages in PDF] in Qwest v. PUC Colorado and PSC Utah, a case regarding state approval of any "interconnection agreement".

47 U.S.C. § 252(e)(1) requires that "Any interconnection agreement adopted by negotiation or arbitration shall be submitted for approval to the State commission". In this consolidated appeal, the Court of Appeals affirmed the judgments of the District Courts that agreements between Qwest and MCImetro are interconnection agreements that must be approved.

Qwest Corporation is a regional Bell operating company (RBOC) and incumbent local exchange carrier (ILEC) in the states of Colorado and Utah.

MCImetro Access Transmission is a competitive local exchange carrier (CLEC) that does business in the states of Colorado and Utah.

47 U.S.C. § 251 requires ILECs to interconnect with CLECs. Then, 47 U.S.C. § 252 requires that when ILECs receive a request for interconnection, they must either negotiate an agreement with the requesting party or submit to arbitration by a state regulatory agency. It further provides that the resulting interconnection agreement must be submitted to the state regulatory agency for approval.

The Public Utilities Commission of the State of Colorado (PUC Colorado) is the relevant state regulatory agency in Colorado. The Public Service Commission of Utah (PSC Utah) is the relevant state regulatory agency in Utah.

Also, 47 U.S.C. § 271 allows the RBOCs to offer long distance telephone service to their customers as long as they comply with certain conditions enumerated in the statute.

This case concerns whether agreements between Qwest and MCImetro are interconnection agreements that must be approved by the PUC Colorado and the PSC Utah pursuant to § 252, whether they are agreements wherein Qwest agrees to provide the services enumerated in § 271, or whether they are both.

The two companies previously negotiated an interconnect agreement covering 14 states that was submitted for approvals and obtained approved from the PUC Colorado and the PSC Utah. This case concerns a subsequent agreement titled "Qwest Master Services Agreement" that covered switching and shared transport.

The Federal Communications Commission (FCC) once had rules that required ILECs to provide these network element, but its Triennial Review Remand Order determined that switching and shared transport are no longer required elements in most instances. (These items remain on the § 271 list.) Hence, Qwest argued that the agreement is not an interconnection agreement within the meaning of § 252 that must be approved by the state regulatory agencies.

The PUC Colorado and PSC Utah both, independently, determined that the agreements must be submitted for approval under § 252. The U.S. District Court (DColo) and the U.S. District Court (DUtah) both affirmed. Qwest brought two appeals, which the Court of Appeals consolidated.

The Court of Appeals affirmed.

This case is Qwest Corporation v. Public Utilities Commission of the State of Colorado, et al., U.S. Court of Appeals for the 10th Circuit, App. Ct. Nos. 06-1132 and 06-4021, appeals from the U.S. District Court for the District of Colorado, D.C. No. 04-CV-2596-WYD-MJW, and the U.S. District Court for the District of Utah, D.C. No. 04-CV-1136-TC.

FCC Releases Text of Video Franchising Order and Further NPRM

3/5. The Federal Communications Commission (FCC) released the text [109 pages in PDF] of its Report and Order and Further Notice of Proposed Rulemaking in its proceeding titled "Implementation of Section 621(a)(1) of the Cable Communications Policy Act of 1984 as amended by the Cable Television Consumer Protection and Competition Act of 1992". This is the FCC's long delayed release of its video franchising order.

The FCC adopted, but did not release, this item on December 20, 2007. See, story titled "FCC Adopts Order Affecting Local Franchising Authorities" in TLJ Daily E-Mail Alert No. 1,510, December 27, 2006.

Also, there were efforts in both the House and Senate in the 109th Congress to enact legislation regarding video franchising. The House approved its bill. The Senate Commerce Committee approved its own bill, but the full Senate took no action.

The order applies only to competitive entrants. It does not extend to incumbent cable operators. However, it tentatively concludes that it should. It requests further comments on this. Also, the FCC promises to complete the rulemaking, and issue its order, within six months. Six months would be September 5, just after the House and Senate return from the August recess.

FCC Chairman Martin summarized this item in his separate statement. He wrote that this item "finds that an LFA is unreasonably refusing to grant a competitive franchise when it does not act on an application within a reasonable time period, imposes taxes on non-cable services such as broadband, requires a new entrant to provide unrelated services or imposes unreasonable build-out requirements."

FCC Authority to Issue the Order. This order may be challenged on the grounds that the FCC lacks statutory authority. The order states that the FCC "has the authority to adopt rules to implement Title VI and, more specifically, Section 621(a)(1)."

However, the framework provided by Section 621 is that the local franchising authorities (LFAs) have authority over the franchising process, and that applicants for a second franchise who have been refused by the LFA have a right of appeal to the courts. This section contains no express grant of authority to the FCC to write rules, make findings, or give direction to the LFAs.

The FCC's order rests upon the clause in Section 621, "may not unreasonably refuse to award an additional competitive franchise". Opponents of this order argue that this is a limitation upon LFA authority that is enforceable by judicial review. The FCC argues that this clause implies that the FCC has authority to write rules. In effect, the FCC asserts that the Congress, without stating so, gave the states authority to administer the franchising process, but gave the FCC authority to write the states' underlying rules.

Section 621 of the Communications Act of 1934, as amended by the Cable Television Consumer Protection and Competition Act of 1992, is codified at 47 U.S.C. § 541. Subsection (a)(1) provides that "A franchising authority may award, in accordance with the provisions of this subchapter, 1 or more franchises within its jurisdiction; except that a franchising authority may not grant an exclusive franchise and may not unreasonably refuse to award an additional competitive franchise. Any applicant whose application for a second franchise has been denied by a final decision of the franchising authority may appeal such final decision pursuant to the provisions of section 555 of this title for failure to comply with this subsection."

Incumbent cable companies, who face new competition from new video entrants, and local franchising authorities (LFAs), whose powers will be diminished by this FCC order, have both argued that the FCC lacks statutory authority. They argued in comments to the FCC that the judicial review provisions in Sections 621(a)(1) and 635 indicate that Congress gave the Courts exclusive jurisdiction to interpret and enforce Section 621(a)(1), including authority to decide what constitutes an unreasonable refusal to award.

The just released order states that "this argument reads far too much into the judicial review provisions. The mere existence of a judicial review provision in the Communications Act does not, by itself, strip the Commission of its otherwise undeniable rulemaking authority." (See, ¶¶ 53-64.)

The order also rejects arguments that the statute is unambiguous and needs no implementing regulations. The order also rejects the argument that the statute cannot give the FCC authority to regulate the awarding a competitive franchise, as opposed to the denial of a franchise.

The order also concludes that the statute does not reserve to the LFAs authority to determine the meaning of "unreasonably refuse".

The order also concludes that Section 706 of the Telecommunications Act of 1996, which is codified at 47 U.S.C. § 157notes, supports the conclusion that the FCC can write these rules. The FCC's order states that Section 706 "directs the Commission to encourage broadband deployment by utilizing ``measures that promote competition … or other regulating methods that remove barriers to infrastructure investment.´´"

Actually, Section 706 directs the FCC and "each State commission with regulatory jurisdiction" to do this.

The order concludes that "we have clear authority to interpret and implement the Cable Act, including the ambiguous phrase “unreasonably refuse to award” in Section 621(a)(1), to further the congressional imperatives to promote competition and broadband deployment."

It adds that "Section 621(a)(1) prohibits not only an LFA's ultimate unreasonable denial of a competitive franchise application, but also LFA procedures and conduct that have the effect of unreasonably interfering with the ability of a would-be competitor to obtain a competitive franchise, whether by (1) creating unreasonable delays in the process, or (2) imposing unreasonable regulatory roadblocks, such that they effectively constitute an ``unreasonable refusal to award an additional competitive franchise´´ within the meaning of Section 621(a)(1)." (Footnotes omitted from this and other quotations of the FCC order.)

Summary of the Order's Discussion and New Rules. This item finds that "the current operation of the local franchising process in many jurisdictions constitutes an unreasonable barrier to entry that impedes the achievement of the interrelated federal goals of enhanced cable competition and accelerated broadband deployment".

Hence, the FCC makes findings, renders clarifications, give direction, and adopts rules that address each of the problems with the current operation of the franchising process.

The order discusses buildout requirements at length. (See, ¶¶ 82-93.) The order states that "we find that it is unlawful for LFAs to refuse to grant a competitive franchise on the basis of unreasonable build-out mandates. For example, absent other factors, it would seem unreasonable to require a new competitive entrant to serve everyone in a franchise area before it has begun providing service to anyone. It also would seem unreasonable to require facilities-based entrants, such as incumbent LECs, to build out beyond the footprint of their existing facilities before they have even begun providing cable service". The order further addresses what might be unreasonable.

The order discusses franchising fees at length. (See, ¶¶ 94-109.) The order states that "any refusal to award an additional competitive franchise because of an applicant’s refusal to accede to demands that are deemed impermissible below shall be considered to be unreasonable."

The order then states, for example, that "We clarify that any requests made by LFAs unrelated to the provision of cable services by a new competitive entrant are subject to the statutory 5 percent franchise fee cap".

It also states that "We clarify that a cable operator is not required to pay franchise fees on revenues from non-cable services. ... Thus, Internet access services, including broadband data services, and any other non-cable services are not subject to ``cable services´´ fees."

The order also discusses PEG/Institutional Networks. (See, ¶¶ 110-120.) It states that "we tentatively concluded that it is not unreasonable for an LFA, in awarding a franchise, to ``require adequate assurance that the cable operator will provide adequate public, educational and governmental access channel capacity, facilities, or financial support´´ because this promotes important statutory and public policy goals.367 However, pursuant to Section 621(a)(1), we conclude that LFAs may not make unreasonable demands of competitive applicants for PEG and I-Net368 and that conditioning the award of a competitive franchise on applicants agreeing to such unreasonable demands constitutes an unreasonable refusal to award a franchise."

The actual rule changes are short and concise. The order creates a new §76.41 to the FCC's rules titled "Franchise Application Process".

First, subsection (a) of the new rule defines the term "Competitive Franchise Applicant" as "an applicant for a cable franchise in an area currently served by another cable operator or cable operators in accordance with 47 U.S.C. § 541(a)(1)."

Incumbent cable operators remain unaffected. Although, the FCC's forthcoming second order may revise this.

Second, subsection (b) of the new rule provides as follows:

"A competitive franchise applicant must include the following information in writing in its franchise application, in addition to any information required by applicable state and local laws:
  (1) the applicant’s name;
  (2) the names of the applicant's officers and directors;
  (3) the business address of the applicant;
  (4) the name and contact information of a designated contact for the applicant;
  (5) a description of the geographic area that the applicant proposes to serve;
  (6) the PEG channel capacity and capital support proposed by the applicant;
  (7) the term of the agreement proposed by the applicant;
  (8) whether the applicant holds an existing authorization to access the public rights-of-way in the subject f franchise service area as described under subsection (b)(5);
  (9) the amount of the franchise fee the applicant offers to pay; and
  (10) any additional information required by applicable state or local laws."

Third, subsection (c) of the new rule provides that "A franchising authority may not require a competitive franchise applicant to negotiate or engage in any regulatory or administrative processes prior to the filing of the application."

Fourth, subsections (d) and (e) of the new rule impose time limits upon LFA's. The FCC discusses this subsection at length. (See, ¶¶ 66-81.) Some critics refer to this as the "shot clock".

Subsection (d) of the new ruled imposes the time limits. It provides that "When a competitive franchise applicant files a franchise application with a franchising authority and the applicant has existing authority to access public rights-of-way in the geographic area that the applicant proposes to serve, the franchising authority must grant or deny the application within 90 days of the date the application is received by the franchising authority. If a competitive franchise applicant does not have existing authority to access public rights-of-way in the geographic area that the applicant proposes to serve, the franchising authority must grant or deny the application within 180 days of the date the application is received by the franchising authority. A franchising authority and a competitive franchise applicant may agree in writing to extend the 90-day or 180-day deadline, whichever is applicable."

The order explains that "We find that unreasonable delays in the franchising process deprive consumers of competitive video services, hamper accelerated broadband deployment, and can result in unreasonable refusals to award competitive franchises. Thus, it is necessary to establish reasonable time limits for LFAs to render a decision on a competitive applicant’s franchise application."

Subsection (e) of the new rule addresses the consequence of LFA failure to act within the time limits. It provides that "If a franchising authority does not grant or deny an application within the time limit specified in subsection (d), the competitive franchise applicant will be authorized to offer service pursuant to an interim franchise in accordance with the terms of the application submitted under subsection (b)."

Fifth, subsection (f) of the new rule addresses the effects of LFA denial of an application. It provides that "If after expiration of the time limit specified in subsection (d) a franchising authority denies an application, the competitive franchise applicant must discontinue operating under the interim franchise specified in subsection (e) unless the franchising authority provides consent for the interim franchise to continue for a limited period of time, such as during the period when judicial review of the franchising authority’s decision is pending. The competitive franchise applicant may seek judicial review of the denial under 47 U.S.C. § 555."

Finally, subsection (g) of the new rule provides that "If after expiration of the time limit specified in subsection (d) a franchising authority and a competitive franchise applicant agree on the terms of a franchise, upon the effective date of that franchise, that franchise will govern and the interim franchise will expire."

Tentative Conclusion and Further NPRM. The order states that "We tentatively conclude that the findings in this Order should apply to cable operators that have existing franchise agreements as they negotiate renewal of those agreements with LFAs." (¶ 140)

The order notes that the "statutory provisions do not distinguish between incumbents and new entrants or franchises issued to incumbents versus franchises issued to new entrants."

Hence, the NPRM portion seeks comment on this tentative conclusion, the statutory authority for it, and "what effect, if any, the findings in this Order have on most favored nation clauses that may be included in existing franchises."

The FNPRM also addresses LFA mandates that video franchises provide customer service data on a franchise by franchise basis. The order states that "we tentatively conclude that we cannot preempt state or local customer service laws that exceed the Commission’s standards, nor can we prevent LFAs and cable operators from agreeing to more stringent standards. We seek comment on this tentative conclusion."

The order also states that the FCC "will conclude this rulemaking and release an order no later than six months after release of this Order."

Reaction. Rep. Joe Barton (R-TX), the ranking Republican on the House Commerce Committee (HCC), stated in a release that "The bipartisan work we did last Congress on cable franchising reform is already starting to bear fruit with statewide reform in some areas, and now the FCC is doing what it can on the municipal side, as well. This is good news, because the FCC's decision says we were right that the antiquated, city-by-city franchise process denies people the benefits of more video competition. Just about everybody realizes that now, and I'm happy to see that the FCC does, too. It's a shame that this job is getting done piecemeal, however, because Congress can't manage to pass comprehensive federal reform, but piecemeal is better than nothing."

However, Rep. Barton added that "I was disappointed to see that the FCC granted relief to new entrants like the phone companies, but not also to existing cable companies, large and small. By contrast, our legislation would have extended regulatory relief to cable operators, as well, once a phone company entered their markets. Only when all providers are set loose to compete against each other will consumers get the lower prices and higher quality that real competition always generates in a free market. My hope is that the FCC will remedy this inequity quickly in its ongoing proceeding."

Joe Savage, head of the Fiber to the Home (FTTH) Council, stated in a release that "We enthusiastically support the FCC's effort to fix the outdated and anti-competitive video franchising process ... This Order will help speed up the process of bringing consumers more choice, lower rates, and access to much higher-speed broadband networks."

He added that "The more fiber that is deployed, the more choices consumers will have in their home entertainment. ... And, given fiber's huge bandwidth advantages, today's FCC Order paves the way for a faster rollout of next-generation broadband throughout the country."

Walter McCormick, head of the USTelecom, stated in a release that the order "is a critical step forward in bringing consumers greater choices, exciting new services and vibrant video competition. Across the country, large and small telecom service providers are spending billions of dollars investing in new infrastructure to deliver high-speed Internet and innovative video services to their communities."

In contrast, Ben Scott of the Free Press stated in a release that "We have serious concerns about the authority of the FCC to issue these rules. ... Despite these unresolved questions of its legal authority, the FCC has issued this order with little regard for maintaining the public services that local governments have long protected. It is irresponsible to grant a blanket franchise without protections for public access TV and a reasonable build-out requirement to ensure that all households in a community enjoy the benefits of competition."

This item is FCC 06-180 in MB Docket 05-311. The FCC adopted a Notice of Proposed Rulemaking (NPRM) [26 pages in PDF] on November 3, 2005. The FCC released the text of this NPRM on November 18, 2005. It is FCC 05-189. See also, story titled "FCC Adopts NPRM Regarding Local Franchising of Video Services" in TLJ Daily E-Mail Alert No. 1,247, November 4, 2005.

The FCC will shortly also publish a notice in the Federal Register. The petitions for review of this order will then be filed with the U.S. Courts of Appeals.

Supreme Court Rules on Doctrine of Forum Non Conveniens

3/5. The Supreme Court issued its opinion [16 pages in PDF] in Sinochem International v. Malaysia International Shipping, a case involving the common law doctrine of forum non conveniens and personal jurisdiction. It concerns proceedings in the U.S. and the People's Republic of China (PRC) in an admiralty dispute between a state owned Chinese company and a Malaysian shipping company.

(The doctrine of forum non conveniens is codified at 28 U.S.C. § 1404 for transfers between two U.S. District Courts.)

Sinochem is a PRC state owned importer. It contracted with Triorient Trading to import steel coils from the U.S. Triorient subchartered a vessel owned by Malaysia International Shipping, a Malaysian company, to transport the coils to China.

Sinochem filed a petition, and then a complaint, against Malaysia International in the Guangzhou Admiralty Court in China alleging, among other things, that backdating of a bill of lading resulted in unwarranted payment for the coils. The Chinese court ordered the arrest of a vessel.

Malaysia International then filed a complaint in U.S. District Court (EDPenn) alleging that Sinochem's petition to the Chinese court negligently misrepresented the vessel's fitness and suitability to load its cargo.

The District Court concluded that it had subject matter jurisdiction under the federal admiralty statute, but lacked personal jurisdiction over Sinochem. However, it conjectured that discovery might disclose facts that would give the court personal jurisdiction. Nevertheless, it dismissed, without discovery, under the doctrine of forum non conveniens.

Malaysia International appealed. The U.S. Court of Appeals (3rdCir), in a divided opinion [53 pages in PDF], held that the "District Court could not dismiss the case under the forum non conveniens doctrine unless and until it determined definitively that it had both subject-matter jurisdiction over the cause and personal jurisdiction over the defendant." This opinion is also reported at 436 F. 3d 349.

The Supreme Court granted certiorari. There were also conflicting opinions from different circuits regarding whether a forum non conveniens motion can be decided prior to matters of jurisdiction.

The Supreme Court reversed the judgment of the Court of Appeals (3rdCir). It held that "a district court has discretion to respond at once to a defendant's forum non conveniens plea, and need not take up first any other threshold objection. In particular, a court need not resolve whether it has authority to adjudicate the cause (subject-matter jurisdiction) or personal jurisdiction over the defendant if it determines that, in any event, a foreign tribunal is plainly the more suitable arbiter of the merits of the case." (Parentheses in original.)

This case is Sinochem International v. Malaysia International Shipping, Sup. Ct. No. 06-102, a petition for writ of certiorari to the U.S. Court of Appeals (3rdCir).

More Supreme Court News

3/5. The Supreme Court issued an order in Leegin Creative Leather Products v. PSKS, an antitrust case regarding minimum resale price maintenance by manufacturers and intermediate distributors. The case could impact the way some consumer electronics products are marketed. The Supreme Court granted certiorari on December 7, 2006. See, story titled "Supreme Court Grants Certiorari in Antitrust Cases" in TLJ Daily E-Mail Alert No. 1,501, December 8, 2006. The just released order states 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 New York State, et al. for leave to participate in oral argument as amici curiae and for divided argument is granted." See, Order List [10 pages in PDF] at page 3. The Supreme Court's docket states that the question presented is "This Court has held that antitrust ``per se rules are appropriate only for conduct that ... would always or almost always tend to restrict competition.´´ Modern economic analysis establishes that vertical minimum resale price maintenance does not meet this condition because the practice often has substantial competition enhancing effects. The question presented is whether vertical minimum resale price maintenance agreements should be deemed per se illegal under Section 1 of the Sherman Act, or whether they should instead be evaluated under the rule of reason." The CTIA -- Wireless Association submitted an amicus brief [31 pages in PDF] urging the Supreme Court to grant certiorari, and reverse the Court of Appeals. This case is Leegin Creative Leather Products, Inc. v. PSKS, Inc., Sup. Ct. No. 06-480, a petition for writ of certiorari to the U.S. Court of Appeals for the 5th Circuit, App. Ct. No. 04-41243. The Court of Appeals heard an appeal from the U.S. District Court (EDTex).

3/5. The Supreme Court issued an order in Credit Suisse First Boston v. Billing, an antitrust immunity case. The Supreme Court granted certiorari on December 7, 2006. See, story titled "Supreme Court Grants Certiorari in Antitrust Cases" in TLJ Daily E-Mail Alert No. 1,501, December 8, 2006. The just released order states 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 respondent Milton Pfeiffer for divided argument is denied. The Chief Justice took no part in the consideration or decision of these motions." See, Order List [10 pages in PDF] at pages 2-3. The Supreme Court's docket states that the question presented is "Whether, in a private damages action under the antitrust laws challenging conduct that occurs in a highly regulated securities offering, the standard for implying antitrust immunity is the potential for conflict with the securities laws or, as the Second Circuit held, a specific expression of congressional intent to immunize such conduct and a showing that the SEC has power to compel the specific practices at issue." This case is Credit Suisse First Boston Ltd., et al. v. Glen Billing, et al., Sup. Ct. No. 05-1157, a petition for writ of certiorari to the U.S. Court of Appeals for the 2nd Circuit, App. Ct. Nos. 03-9284 and 03-9288.

People and Appointments

3/5. Sen. Ted Stevens (R-AK) was named Senate Republican Co-Chair of the E-911 Caucus. The other Co-Chairs are Sen. Hillary Clinton (D-NY), Rep. Anna Eshoo (D-CA), and Rep. John Shimkus (R-IL). See also, E-911 Institute web site.

3/5. Fred Wentland joined Freedom Technologies, Inc. as Senior Vice President. Wentland is a former Associate Administrator for the National Telecommunications and Information Administration's (NTIA) Office of Spectrum Management. The founder and President of FTI is Janice Obuchowski, who was head of the NTIA during the administration of the first President Bush.

3/5. James Freis was named Director of the Department of the Treasury's Financial Crimes Enforcement Network (FinCEN). He is currently Deputy Assistant General Counsel for Enforcement & Intelligence. See, Treasury release.

More News

3/5. The U.S. Patent and Trademark Office (USPTO) released a report [PDF] titled "Filesharing Programs and ``Technological Features to Induce Users to Share´´". Jon Dudas, head of the USPTO, stated in a release that "Computer programs that can cause unintended filesharing contribute to copyright infringement, and they threaten the security of personal, corporate, and governmental data".

3/5. The Department of Commerce's (DOC) National Telecommunications and Information Administration's (NTIA) Public Telecommunications Facilities Program (PTFP) released a notice the announces, describes, and sets the application deadline for FY 2007 PTFP grants. The deadline is 5:00 PM on Friday, April 6, 2007. The PTFP added that it will publish a notice in the Federal Register on March 7, 2007.

3/5. Securities and Exchange Commission (SEC) Commissioner Paul Atkins gave a speech in Washington DC. He addressed, as he often does, the "flawed implementation" of Section 404 of the Sarbanes Oxley Act. He said that "The more that companies spend on things like internal controls, the less they can invest in developing and marketing products, hiring and retaining talent, and embracing new technologies. Some companies have avoided new acquisitions, delayed or cancelled upgrading their computer systems, or not added a new product line lest they set off a new flurry of internal control documentation. This does not mean that internal controls and other organizational costs are not important. They are, but there must be a balance."

More Court Opinions

3/2. The U.S. Court of Appeals (6thCir) issued its divided opinion [13 pages in PDF] in USA v. Rice, affirming the judgment of the District Court, suppressing the fruits of an Article III wiretap in a criminal prosecution. This case is USA v. Reginald Santez Rice, et al., U.S. Court of Appeals for the 6th Circuit, App. Ct. No. 06-5245, an appeal from the U.S. District Court for the Western District of Kentucky, at Louisville, D.C. No. 04-00083, Judge Thomas Russell presiding. Judge Moore wrote the opinion of the Court of Appeals, in which Judge Clay joined. Judge Robert Bell, sitting by designation, wrote a dissent.

3/2. The U.S. Court of Appeals (1stCir) issued its opinion in Watson v. Trans Union and New Cingular Wireless Services. Charles Watson is a pro se plaintiff who does not know how to draft a complaint. He alleges that he is a victim of identity theft. Trans Union is a credit reporting agency. New Cingular Wireless Service is a phone company. Watson filed a complaint in U.S. District Court (DMaine) against Trans Union and New Cingular Wireless Services alleging violation of Fair Credit Reporting Act (FCRA), which is codified at 15 U.S.C. §§ 1681 - 1681x. The District Court dismissed his complaint. The Court of Appeals affirmed. Perhaps Watson would not have been able to prove his claim; perhaps he did not have a claim upon which relief could be granted; or, perhaps he is a nut. But, the court dismissed without reaching any of these questions. Section 1681n puts a cap of $1,000 on statutory damages. Actual damages are lacking or hard to prove in many cases involving identity theft or violation of the FCRA. Many FCRA claimants are unable to afford counsel, or find that the expected recovery is less than expected attorneys fees. This case illustrates that federal courts, unlike many state courts, offer little recourse or leeway to small claimants, and pro se civil litigants. This leaves some parties with a cause of action under federal statutory regimes unable to avail themselves of the remedies provided by those statutes. This case is Charles Watson v. Trans Union LLC and New Cingular Wireless Services, Inc., U.S. Court of Appeals for the 1st Circuit, App. Ct. Nos. 05-2289 and 05-2360, appeals from the U.S. District Court for the District of Maine, Judge Gene Carter presiding.

AG Gonzales Discusses Extradition in Software Piracy Case

3/1. Attorney General Alberto Gonzales gave a speech in San Diego, California, in which he discussed the Department of Justice's (DOJ) enforcement of intellectual property laws, including its recent extradition from Australia to the U.S. of a leader of internet software piracy ring.

He said that "we are protecting investments in innovation by protecting intellectual property rights. From movies and music to business software, pharmaceuticals, and other hard goods, intellectual property is the engine of our economy. And where IP is stolen, business suffers."

Gonzales (at right) continued that "we have increased the resources devoted to protecting IP and correspondingly have increased prosecutions in this area. But in addition to prosecutions, we are also conducting outreach to prevent IP crimes from occurring in the first place."

He also discussed the DrinkOrDie prosecutions. He said that "last week, in one of the first ever extraditions for an intellectual property offense, the leader of one of the oldest and most renowned Internet software piracy groups was extradited to the United States from Australia."

Gonzales added that "The indictment against this individual, Raymond Griffiths, charges him with violating the criminal copyright laws of the United States as the leader of an organized criminal group known as DrinkOrDie, one of the oldest software piracy groups on the Internet."

The DOJ stated in a release on February 20, 2007, that a grand jury of the U.S. District Court (EDVa) returned an indictment back in 2003 that charges Griffiths with conspiracy to commit criminal copyright infringement and criminal copyright infringement.

The DOJ release states that "DrinkOrDie was founded in Russia in 1993 and expanded internationally throughout the 1990s. The group was dismantled by the Justice Department and U.S. Immigration and Customs Enforcement as part of Operation Buccaneer in December 2001, with more than 70 raids conducted in the U.S. and five foreign countries, including the United Kingdom, Finland, Norway, Sweden, and Australia. To date, Operation Buccaneer has resulted in 30 felony convictions and 10 convictions of foreign nationals overseas. Prior to its dismantling, DrinkOrDie was estimated to have caused the illegal reproduction and distribution of more than $50 million worth of pirated software, movies, games and music."

The text of Gonzales' March 1 speech and the February 20 DOJ release overlap.

Gonzales also touched on the DOJ's Antitrust Division's prosecutions related to DRAM price fixing. He said that the DOJ is "preserving the integrity of the marketplace and protecting fair competition by prosecuting cartels that try to fix prices, rig bids, and allocate markets. The division operates on the philosophy that the activity of cartels has no plausible justification -- that it is a direct assault on the competitive process and as such undermines the very foundation of our free market."

He elaborated that "we recently prosecuted four companies for fixing prices on the world’s most commonly used semiconductor memory product for computers. These companies were fined over $700 million -- the second largest amount of fines ever imposed in a single U.S. criminal antitrust investigation."

DHS Proposes Rules Implementing REAL ID Act

3/1. The Department of Homeland Security (DHS) released a notice [162 pages in DF] to be published in the Federal Register, that announces and describes a notice of proposed rulemaking regarding rules implementing the REAL ID Act, a bill that federalized state identification systems. See, full story.

People and Appointments

3/1. The Senate Judiciary Committee (SJC) approved the nomination of John Preston Bailey to be a Judge of the U.S. District Court for the Northern District of West Virginia.

3/1. The Senate Judiciary Committee (SJC) approved the nomination of Otis Wright to be a Judge of the U.S. District Court for the Central District of California.

3/1. The Senate Judiciary Committee (SJC) approved the nomination of George Wu to be a Judge of the U.S. District Court for the Central District of California.

More News

3/1. The Department of the Treasury announced that Secretary of the Treasury Henry Paulson will travel to Tokyo, Seoul, Beijing and Shanghai during the week of March 5, 2007. See, release.

3/1. The House Commerce Committee's (HCC) Subcommittee on Telecommunications and the Internet held a hearing titled "Digital Future of the United States: Part I -- The Future of the World Wide Web". See, prepared testimony [9 pages in PDF] of Tim Berners-Lee. He wrote that "The success of the World Wide Web, itself built on the open Internet, has depended on three critical factors: 1) unlimited links from any part of the Web to any other; 2) open technical standards as the basis for continued growth of innovation applications, and; 3) separation of network layers, enabling independent innovation for network transport, routing and information applications." He added that "The lesson from the proliferation of new applications and services on top of the Web infrastructure is that innovation will happen provided it has a platform of open technical standards, a flexible, scalable architecture, and access to these standards on royalty-free ($0 fee patent licenses) terms."

3/1. The U.S. Court of Appeals (8thCir) issued its opinion [8 pages in PDF] in USA v. Alvarez, affirming a sentence that contains the special condition that the defendant not have internet access at his residence and that he have internet access in other locations only with prior approval of the probation office. The underlying conviction related to child pornography (CP). The Court of Appeals wrote that a criminal sentence that includes a complete ban on internet access is reasonably related to the statutory purposes of deterring criminal conduct and protecting the public from further crimes of the defendant where the defendant is guilty of offenses involving repeated viewings of CP over the internet. Nothing in the opinion authorizes District Courts to ban internet access in cases not involving CP or child abuse. This case is USA v. Calvin Milo Alvarez, U.S. Court of Appeals for the 8th Circuit, App. Ct. No. 06-2805, an appeal from the U.S. District Court for the Western District of Arkansas, Judge Jimm Larry Hendren presiding.

Go to News from February 26-28, 2007.