TLJ News from April 16-20, 2007

FRB's Mishkin Says Computer Demand Boosted by Vista OS

4/20. Federal Reserve Board (FRB) Governor Frederic Mishkin gave a speech titled "The U.S. Economic Outlook" at Bard College in the state of New York.

Frederic MishkinMishkin (at right) said that "Demand for high-tech equipment appears to have picked up early this year after leveling off in the final quarter of 2006. Demand for computers, which was likely boosted by the introduction of the Windows Vista operating system, seems to be advancing at a healthy pace."

He continued that "Technological innovations -- such as circuitry that boosts computer performance and lowers energy consumption -- appear to be generating demand to upgrade equipment in data centers."

Also, he said that "major U.S. cable companies are forecasting a step-up in capital spending, and telecommunications carriers are planning a further expansion of fiber-optic networks."

Mishkin also discussed productivity. "During the first three years of the current expansion, output per hour in the nonfarm business sector rose 3 percent per year; in the past two years, it has decelerated to 2 percent. I suspect that this slowdown does not represent a fundamental weakening in the longer-run trend, but is rather a normal cyclical transition from an above-trend rate of increase to a more sustainable rate."

He said that "From early 2003 to early 2006, real gross domestic product (GDP) rose at an annual rate of 3-1/2 percent". However, since the spring of 2006 "the expansion of the U.S. economy appears to have been undergoing a transition to a more moderate and sustainable pace." He predicted "a continued moderate rate of economic expansion".

Atkins Discusses IT, Globalization, and Securities Markets

4/20. Commissioner Paul Atkins of the Securities and Exchange Commission (SEC) gave a speech in Washington DC titled "Is Excessive Regulation and Litigation Eroding U.S. Financial Competitiveness?"

He said that "Many global competitive forces will continue to challenge the position of the United States, including the rise of liquidity pools and capital markets in Europe, Russia, China, India, and other places as well. Americans through technology have unprecedented access to these markets. E-Trade, for example, now offers its customers direct access to foreign markets with a click of a computer mouse. With burgeoning foreign capital centers and easy direct access of Americans to those markets, foreign companies no longer have to come here."

Atkins said that "placing blinders on ourselves and ignoring what other countries are doing will not address" securities regulation problems. "To proclaim that our current regulatory structure as superior and dismiss the capital markets of other countries as the ``Wild West´´ or some other pejorative label will not solve the issue either. In a free market economy driven by innovation, our regulatory structure cannot remain static."

He stated that the SEC "has been long dominated by lawyers", who "often are risk averse, seeking to avoid blame for the next Enron rather than laying the groundwork for the next Microsoft or Google." He discussed the regulatory obstacles that Apple's IPO faced in 1980. He concluded that "The Apple situation was one where government bureaucrats made the decision about the value of the offering, not the markets."

He also criticized recent implementation of Section 404 of the Sarbanes Oxley Act. He said that "Audit Standard 2 of the PCAOB has been a failure -- the costs exceed the benefits, especially to smaller companies".

Atkins also discussed "abusive class actions that result in few or imaginary benefits for class members, but for which large cash fees are paid to plaintiffs' attorneys. Such suits add to the global perception that the U.S. legal system operates as a ``lottery-like´´ system of justice. Modeled after the success of the tobacco lawsuits, businesses are now being subjected to various class actions that previously would have previously been thought laughable. There are legitimate purposes for class action tort lawsuits. But the key is to quickly separate those with merit from those without in a timely and cost-efficient manner."

Atkins spoke at a joint American Enterprise Institute (AEI) Brookings Institution event.

People and Appointments

4/20. President Bush named Thomas Bossert to be Special Assistant to the President for Homeland Security and Senior Director for Preparedness Policy. He was previously Director of Infrastructure Protection Policy on the Homeland Security Council. See, White House release.

4/20. President Bush named Elizabeth Dial to be Special Assistant to the President for Intergovernmental Affairs. She was previously Director of Intergovernmental Affairs at the Department of Commerce. See, White House release.

More News

4/20. The Federal Trade Commission (FTC) released a report [10 MB in PDF] titled "The FTC in 2007: A Champion for Consumers and Competition". See also, FTC release.

House Subcommittee Approves SPY ACT

4/19. The House Commerce Committee's (HCC) Subcommittee on Commerce, Trade, and Consumer Protection amended and approved HR 964, the "Securely Protect Yourself Against Cyber Trespass Act", or SPY ACT.

The Subcommittee approved a manager's amendment [4 pages in PDF] offered by Rep. Bobby Rush (D-IL) that makes 26 changes to HR 964 IH [31 pages in PDF] (as introduced on February 8, 2007). For a summary of the bill, see story in this issue titled "Summary of HR 964, the SPY ACT".

Rep. Rush, the Chairman of the Subcommittee, stated that "Too often, the average citizen is unaware of the litany of scams and con-jobs that infest the marketplace. We must stop the scourge of identity theft and related abuse. The Spy Act is a pivotal first step". See, HCC release.

Rep. John Dingell (D-MI), the Chairman of the HCC, wrote in this same release that "As technology advances, it is imperative that the government remain aware and ahead of potentially damaging uses of that technology. Protecting Internet users from dangerous programs that steal consumers’ identities, invade their software or just plain harass them is a top priority".

Rep. Joe Barton (R-TX), the ranking Republican on the HCC, wrote in his prepared statement that "The installation of spyware on your computer without your knowledge and without your consent is a little like sneaking into your home and planting a bug, and it's both widespread and wrong. When that spyware records and inappropriately shares the details of a consumer's life and Internet use, it goes beyond unacceptable and becomes dangerous."

He added that "We will continue an open process and will remain mindful of legitimate business concerns as the bill moves to the House floor."

Rep. Ed Towns (D-NY) introduced this bill on February 8, 2007. The 35 cosponsors include Rep. Mary Bono (R-CA), Rep. Rush, Rep. Dingell, and Rep. Barton. Notably, only two of the sponsors are members of the House Judiciary Committee (HJC), Rep. Rick Boucher (D-VA) and Rep. Anthony Weiner (D-NY). Both members of both the HCC and HJC.

Rep. Bono and Rep. Towns also introduced spyware related bills in the 108th and 109th Congresses that did not become law.

October 5, 2004, the House passed HR 2929 (108th Congress), also titled the "Securely Protect Yourself Against Cyber Trespass Act", or SPY ACT, on a roll call vote of 399-1. See, Roll Call No. 495. HR 2929 was the HCC's spyware bill, and a predecessor to the present bill, HR 964. However, the Senate did not approve HR 2929 (108th). See, story titled "House Passes First Spyware Bill" in TLJ Daily E-Mail Alert No. 991, October 6, 2004.

On January 4, 2005, Rep. Bono and Rep. Towns reintroduced their legislation as HR 29 (109th). This too was titled "Securely Protect Yourself Against Cyber Trespass Act", or SPY ACT. The House approved the bill on May 23, 2005. However, the Senate did not approve it. See also, story titled "House to Vote on Spyware Bills" in TLJ Daily E-Mail Alert No. 1,140, May 23, 2005; story titled "House Commerce Committee Approves Spyware Bill" in TLJ Daily E-Mail Alert No. 1,092, March 10, 2005; story titled "House Subcommittee Marks Up Spyware Bill" in TLJ Daily E-Mail Alert No. 1,080, February 22, 2004; and story titled "House Commerce Committee Holds Hearing on Spyware Bill" in TLJ Daily E-Mail Alert No. 1,064, January 27, 2005.

Rep. Rush also said that "We must pass comprehensive data security legislation this year". On February 8, 2007, Rep. Rush and other members of the HCC introduced HR 958, the "Data Accountability and Trust Act", or DATA. This bill would, among other things, mandate disclosure of data security breaches.

Also, on February 7, 2007, Rep. Lamar Smith (R-TX), the ranking Republican on the HJC, and other HJC Republicans, introduced HR 836, the "Cyber-Security Enhancement and Consumer Data Protection Act of 2007". This bill would, among other things, mandate disclosure of data security breaches.

Summary of HR 964, the SPY ACT

4/19. The House Commerce Committee's (HCC) Subcommittee on Commerce, Trade, and Consumer Protection amended and approved HR 964, the "Securely Protect Yourself Against Cyber Trespass Act", or SPY ACT.

See, HR 964 [31 pages in PDF] as introduced on February 8, 2007, and manager's amendment [4 pages in PDF] approved on April 19, 2007. The following is a section by section summary of key provisions.

1. Introduction. § 1 contains only the title of the bill. HR 964 contains two sets of prohibitions. First, § 2 prohibits deceptive acts or practices related to spyware. Second, § 3 prohibits collection of certain information without notice and consent.

§ 4 provides for enforcement by the Federal Trade Commission (FTC). § 5 provides numerous exceptions. § 6 preempts certain state spyware related laws. (§ 7 of the bill as introduced required an annual FTC report. The manager's amendment deletes it.)

This version of the bill does not regulate the use of cookies. However, § 7 requires the FTC to write a report "regarding the use of cookies, including tracking cookies, in the delivery or display of advertising to the owners and users of computers." § 8 requires the FTC to write a report on information collection programs installed before the effective date. § 9 gives the FTC rule making authority.

§10 contains definitions. § 11 provides the effective date (12 months after enactment), applicability (only to programs installed after the effective date), and sunset date (December 31, 2013) of the bill.

The bill creates no private right of action. The bill contains no criminal prohibitions.

2. Prohibited Acts and Practices. § 2 provides that "It is unlawful for any person, who is not the owner or authorized user of a protected computer, to engage in deceptive acts or practices that involve any of the following conduct with respect to the protected computer:"

§ 2 then lists ten categories of deceptive acts or practices, including taking control of a computer, modifying settings related to a computer's access to the internet, collecting personally identifiable information through keystroke logging, and removing, disabling, or rendering inoperative a security, anti-spyware, or anti-virus technology.

§ 2 also prohibits certain phishing practices. It prohibits "Inducing the owner or authorized user of the computer to disclose personally identifiable information by means of a Web page that -- (A) is substantially similar to a Web page established or provided by another person; and (B) misleads the owner or authorized user that such Web page is provided by such other person."

§ 2 also prohibits "Inducing the owner or authorized user to provide personally identifiable, password, or account information to another person -- A) by misrepresenting the identity of the person seeking the information; or (B) without the authority of the intended recipient of the information."

§ 2 also prohibits "Inducing the owner or authorized user to install or execute computer software by misrepresenting the identity or authority of the person or entity providing the computer software to the owner or user."

3. Prohibition of Collection of Certain Information Without Notice and Consent. § 3(a) provides that "it is unlawful for any person -- (1) to transmit to a protected computer, which is not owned by such person and for which such person is not an authorized user, any information collection program, unless -- (A) such information collection program provides notice in accordance with subsection (c) before downloading or installing of any of the information collection program; and (B) such information collection program includes the functions required under subsection (d)".

Similarly, § 3(a) also provides that it is unlawful "to execute any information collection program installed on such a protected computer unless -- (A) before execution of any of the information collection functions of the program, the owner or an authorized user of the protected computer has consented ..."

§ 3(c) provides extensive detail on the meaning of "notice and consent".

4. FTC Enforcement. § 4 provides for enforcement by the FTC. Violations shall be treated as an unfair or deceptive act or practice violating a rule promulgated under Section 18 of the Federal Trade Commission Act, which is codified at 15 U.S.C. § 57a.

§ 4 provides that for "a person who engages in a pattern or practice that violates section 2 or 3" the FTC may seek penalties of "$3,000,000 for each violation of section 2" and "$1,000,000 for each violation of section 3".

5. Exceptions. § 5 provides numerous exceptions.

   A. Government Spyware. There is a sweeping exception that exempts from liability under this act any state or federal government conduct or order what would otherwise be a violation of the act. This exemption extends not only to law enforcement, agents of law enforcement, and national security. It also extends to any federal or state agency or department, and any court order or legal process.

   B. Good Faith Attempts to Remove Spyware. There is also immunity for any software maker or interactive computer service that acts in good faith to remove spyware. It provides that "No provider of computer software or of interactive computer service may be held liable under this Act on account of any action voluntarily taken, or service provided, in good faith to remove or disable a program used to violate section 2 or 3 that is installed on a computer of a customer of such provider, if such provider notifies the customer and obtains the consent of the customer before undertaking such action or providing such service."

This immunity could be abused. The manager's amendments addresses this. It adds the following language: "Nothing in this subsection shall be construed to limit the liability of a provider of computer software or of an interactive computer service for any anti-competitive act otherwise prohibited by law."

Similarly, the bill provides that "A manufacturer or retailer of computer equipment shall not be liable under this Act to the extent that the manufacturer or retailer is providing third party branded computer software that is installed on the equipment the manufacturer or retailer is manufacturing or selling."

   C. Monitoring for Security Purposes. There is also a security exemption. That is, the act does not apply to "any monitoring of, or interaction with, a subscriber’s Internet or other network connection or service, or a protected computer, by a telecommunications carrier, cable operator, computer hardware or software provider, or provider of information service or interactive computer service, to the extent that such monitoring or interaction is for network or computer security purposes, diagnostics, technical support, or repair, or for the detection or prevention of fraudulent activities".

   D. Authorization of Use of Software. Nor does the act apply to "discrete interaction with a protected computer by a provider of computer software solely to determine whether the user of the computer is authorized to use such software".

6. Preemption. Section 6 of the bill provides that "This Act supersedes any provision of a statute, regulation, or rule of a State or political subdivision of a State that expressly regulates -- (A) unfair or deceptive conduct with respect to computers similar to that described in section 2(a); (B) the transmission or execution of a computer program similar to that described in section 3; or (C) the use of computer software that displays advertising content based on the Web pages accessed using a computer."

However, the bill also contains several clarifications and exceptions.

People and Appointments

4/19. A grand jury of the U.S. District Court (DColo) returned a verdict of guilty against Joseph Nacchio in the Department of Justice's (DOJ) insider trading case against the former CEO of Qwest Communications. The gist of the allegations is that Nacchio traded shares of Qwest while knowing that the company was unlikely to continue to meet its announced earnings. The jury returned a verdict of guilty of 19 counts of insider trading, but acquitted Nacchio on 23 other counts.

More News

4/19. The Federal Communications Commission's (FCC) Public Safety and Homeland Security Bureau (PSHSB) announced that it will hold an one day event titled "Spectrum Policy and Management: Building Interoperable Public Safety Communications" on Friday, June 1, 2007. See, FCC notice [PDF].

Patent Reform Act of 2007 Introduced

4/18. Rep. Howard Berman (D-CA) and others introduced HR 1908, the Patent Reform Act of 2007 [50 pages in PDF], in the House. Sen. Patrick Leahy (D-VT) and others introduced S 1145, the companion bill in the Senate, the same day.

Rep. Berman, Rep. Lamar Smith (R-TX), Rep. Rick Boucher (D-VA), Sen. Leahy, and Sen. Orrin Hatch (R-UT) held a joint news conference on Wednesday, April 18, 2007, to announce their bill. They argued that their bill is a bipartisan and bicameral compromise that can be enacted into law this year.

Rep. Berman is the Chairman of the House Judiciary Committee's (HJC) Subcommittee on Courts, the Internet and Intellectual Property (SCIIP). Rep. Smith is now ranking Republican on the HJC. In the 109th Congress, he was the Chairman of the SCIIP. Rep. Boucher is a member of the HJC and its SCIIP.

Sen. Leahy is the Chairman of the Senate Judiciary Committee (SJC). Sen. Hatch is a senior member of the SJC. All have been active in efforts to draft patent reform legislation in prior Congresses.

The original cosponsors of S 1145 are Sen. Hatch, Sen. Charles Schumer (D-NY), Sen. Jon Cornyn (R-TX), and Sen. Sheldon Whitehouse (D-RI).

The original cosponsors of HR 1908 are Rep. Smith, Rep. John Conyers (D-MI), Rep. Howard Coble (R-NC), Rep. Boucher, Rep. Bob Goodlatte (R-VA), Rep. Zoe Lofgren (D-CA), Rep. Darrell Issa (R-CA), Rep. Adam Schiff (D-CA), Rep. Chris Cannon (R-UT), and Rep. Sheila Lee (D-TX).

Rep. Conyers is the Chairman of the HJC. Rep. Coble is the ranking Republican on the SCIIP. Rep. Lofgren is a member of the HJC and its SCIIP. She represents a Silicon Valley district. Rep. Issa and Rep. Schiff are also members of the HJC and SCIIP. Both represent Southern California districts.

The bill would change the system of patent priority to the first to file system, provide a post grant review process at the U.S. Patent and Trademark Office (USPTO), permits third parties to submit pre-issuance prior art to the USPTO, limit forum shopping opportunities by changing venue and jurisdiction procedure, and change the rules for the award of damages.

See, related story in this issue titled "Summary of Patent Reform Act of 2007".

However, the bill contains no provision requiring that patent applicants not intentionally misrepresent a material fact or fail to disclose material information to the USPTO. Nor does it contain change the current rules for the award of attorneys fees. Nor does it address the extra-territorial provision in 35 U.S.C. § 271(f).

Sen. Patrick LeahySen. Leahy (at right) wrote a statement, which is also in the Congressional Record (April 18, 2007, at Page: S4685-6), and from which he read at the April 18 news conference. He said that "If we are to maintain our position at the forefront of the world's economy, if we are to continue to lead the globe in innovation and production, if we are to continue to enjoy the fruits of the most creative citizens, then we must have a patent system that produces high quality patents, that limits counterproductive litigation over those patents, and that makes the entire system more streamlined and efficient. This bill is an important step towards that goal."

Rep. Berman said that the problem is "questionable quality business method patents", which lead to "increased litigation" and "uncertainty in the market".

Rep. Boucher stated that the legislative process began six years ago. On October 3, 2000, Rep. Berman and Rep. Boucher introduced HR 5364 (106th Congress), the "Business Method Patent Improvement Act of 2000". See also, Rep. Berman's and Rep. Boucher's 2000 bill summary, and TLJ story titled "Bill Would Change Business Method Patent Process", October 3, 2000.

Rep. Smith stated that "we think that it is going to pass", perhaps in the next few months. He added that it may be "massaged", and that there may be "tweaks along the way".

Sen. Orrin HatchSen. Hatch (at right) stated that he hopes that changes will be made to the bill during the legislative process. He cited his desire to change the rules on award of attorneys fees, and to insert inequitable conduct language.

Sen. Hatch and Sen. Leahy introduced S 3818 in the 109th Congress, on August 3, 2006. It was titled the "Patent Reform Act of 2006".

With respect to attorney's fees, S 3818 (but not the just introduced bill) provided that "The court shall award, to a prevailing party, fees and other expenses incurred by that party in connection with that proceeding, unless the court finds that the position of the nonprevailing party or parties was substantially justified or that special circumstances make an award unjust."

With respect to inequitable conduct, S 3818 (but not the just introduced bill) provided that "A court may find that a patent is unenforceable only if the patent owner presents clear and convincing evidence that, with respect to the patent at issue the patentee, or a patentee's agent, or privy before issuance of the patent -- (A) failed to disclose material information, or submitted false material information or statements; and (B) did so with an intent to mislead or deceive" the USPTO.

The HJC's SCIIP will hold a hearing on patent reform on Thursday, April 26, 2007.

The House Small Business Committee (HSBC) held a hearing on March 29, 2007, on the impact of patent reform on small businesses. See, HSBC release.

Reaction to the Patent Reform Act of 2007

4/18. Senators and Representatives introduced HR 1908 and S 1145, identical bills titled the "Patent Reform Act of 2007", on April 18, 2007. Affected industry groups and companies offered their comments. The strongest support for the bill comes from large software, e-commerce, information technology, and financial services companies. Biotech and pharmaceutical companies remain cool towards patent reform proposals.

The Business Software Alliance (BSA) endorsed the bill. Its members include Microsoft, Adobe, Apple, Cisco Systems, Dell, HP, IBM, Intel, McAfee, SAP, Sybase, Symantec, and many other software and other information technology companies.

Robert Holleyman, head of the BSA, stated in a release that "This legislation is critical to modernizing the existing patent system, which will, in turn, promote greater innovation and productivity ... Unfortunately, opportunistic enforcement of patent rights and patent quality issues have become impediments to innovation and continued economic prosperity. The bills introduced today will go along way towards fixing these problems to maintain our global economic competitiveness."

Holleyman continued that "We are excited by the unprecedented bipartisan, bicameral support in Congress and strongly support this important bill".

The Coalition for Patent Fairness (CPF), a group that represents many software, e-commerce, electronics, and financial services companies and groups, stated in a release [PDF] that "The comprehensive changes proposed in the Patent Reform Act of 2007 will strengthen and restore balance to the patent system -- legislative action that has been urgently needed for years."

The CPF also backed S 3818 (109th Congress) in the last Congress.

Its members include other groups, such as the BSA, CCIA, Information Technology Association of America (ITAA) and the Software and Information Industry Association (SIIA). It also includes many large information technology (IT) companies that have been vexed by patent infringement actions, such as Research in Motion, eBay, and Microsoft. Its members also include Oracle, Cisco, Apple, Adobe, Dell, HP, Lenovo, McAfee and Symantec. While its members are mostly IT companies, there are also some financial services sector members, including the Financial Services Roundtable, the Securities Industry and Financial Markets Association, Mastercard and Visa.

The Computer and Communications Industry Association (CCIA) stated in a release that "As questionable patents and opportunistic litigants increasingly besiege the U.S. technology industry, reform is urgently needed."

Eric Thomas, of the Innovation Alliance, stated in a release that "The entrepreneurial technology companies that belong to the Innovation Alliance believe patent quality improvement should be the focus of congressional patent reform efforts ... Improving patent quality will take us a long way toward addressing the root problem driving current concerns about the patent system without pulling the rug out from under smaller, innovative companies that have built a business on patent licensing."

The Innovation Alliance members include Qualcomm, LSI, AmberWave Systems, and other companies.

Solveig Singleton of the Progress and Freedom Foundation (PFF) wrote in a short piece in the PFF web site that "Some computer-related enterprises like eBay and Microsoft support the additional procedures. Others, like Qualcomm, want to move more cautiously. Small inventors, biotech, and pharmaceutical firms like the system as it is. This kind of polarization can bring the process to a grinding halt ..."

Ken Johnson of the Pharmaceutical Research and Manufacturers of America (PhRMA) did not offer support for the bill. He stated in a release that "pharmaceutical research companies rely on a strong and effective patent system to provide the necessary incentives to develop new life-saving medicines and other cutting-edge innovations. Medicines discovered by our industry require anywhere from 10 to 15 years of research and development and cost an average of nearly $1 billion; this innovation is critically important in the never-ending war against disease."

He continued that "Any reform must strike an appropriate balance, and we look forward to working with all other stakeholders to ensure that the patent system is changed in a way that promotes innovation across industries. We welcome a dialogue with members of Congress and other interested parties on these vitally important issues. We believe a reliable and vibrant patent system will continue to foster the innovation of new medicines that help patients live longer, healthier lives, and guarantee America’s economic competitiveness in the 21st century."

The Coalition for 21st Century Patent Reform, a newly formed group, stated in a release that "There should be no doubt that the patent system has served our nation well, but there is a need today to secure the future of innovation with reforms that will improve the examination of patent applications and address issues of cost and uncertainty in patent lawsuits. We are encouraged that the bills that Chairman Leahy and Chairman Berman have introduced will allow the legislative process on needed reforms to advance. However, we are concerned the bills as introduced do not adequately address several critical reforms."

Its members include 3M, Caterpillar, General Electric, Johnson & Johnson, Eli Lilly and Procter & Gamble.

It praised the bill for including first inventor to file language. However, it urged the Congress to enact legislation that also includes other recommendations contained in the 2004 National Academies' Board on Science, Technology, and Economic Policy (STEP) report titled "A Patent System for the 21st Century".

Summary of Patent Reform Act of 2007

4/18. Senators and Representatives introduced HR 1908 and S 1145, identical bills [PDF] titled the "Patent Reform Act of 2007", on April 18, 2007. See, full story.

FCC Announces Agenda for April 25 Meeting

4/18. The Federal Communications Commission (FCC) released an agenda [5 pages in PDF] for its event on Wednesday, April 25, 2006, titled "Open Meeting".

This agenda includes adoption of rules and a further NPRM regarding wireless licenses in the 700 MHz band. This agenda also includes many items that are of types not usually taken up at Commission meetings.

700 MHz Band Rules. The agenda includes adoption Report and Order (R&O) and Further Notice of Proposed Rulemaking (FNPRM) regarding rules governing wireless licenses in the 698-806 MHz Band currently used by television broadcasters in channels 52-69 and which is to be made available for wireless services. This item also addresses the applicability of E-911 and hearing-Aid compatibility rules.

The FCC's agenda adds, with respect to this item only, the fourth on the agenda, that the FCC is "waiving the sunshine period prohibition contained in section 1.1203 of the Commission’s rules, 47 C.F.R. § 1.1203, until 5:30 pm, Monday, April 23, 2007. Thus, presentations with respect to item #4 will be permitted until that time."

The FCC associates numerous long running proceeding, and one new proceeding, with this agenda item. The titles and numbers of these proceedings are as follows: "Service Rules for the 698-746, 747-762 and 777-792 MHz Bands (WT Docket No. 06-150); Revision of the Commission's Rules to Ensure Compatibility with Enhanced 911 Emergency Calling Systems (CC Docket No. 94-102); Section 68.4(a) of the Commission's Rules Governing Hearing Aid-Compatible Telephones (WT Docket No. 01-309); Biennial Regulatory Review - Amendment of Parts 1, 22, 24, 27, and 90 to Streamline and Harmonize Various Rules Affecting Wireless Radio Services (WT Docket No. 03-264); Former Nextel Communications, Inc. Upper 700 MHz Guard Band Licenses and Revisions to Part 27 of the Commission's Rules (WT Docket No. 06-169); Implementing a Nationwide, Broadband, Interoperable Public Safety Network in the 700 MHz Band (PS Docket No. 06-229); Development of Operational, Technical and Spectrum Requirements for Meeting Federal, State and Local Public Safety Communications Requirements Through the Year 2010 (WT Docket No. 96-86)."

DTV Transition Items. The agenda also contains three items pertaining to the transition from analog to digital television (DTV).

The agenda includes adoption of a 2nd R&O regarding the labeling of television equipment in connection with the DTV transition. This proceeding is MB Docket No. 03-15 and RM-9832.

The agenda includes adoption of a NPRM regarding procedures and rule changes related to the DTV transition.

The agenda includes adoption of a 2nd FNPRM regarding mandatory cable carriage of digital broadcast television signals after the conclusion of the DTV transition. This proceeding is CS Docket No. 98-120.

Other Agenda Items. The agenda includes adoption of a R&O and FNPRM regarding processing and service rules for the 17/24 GHz Broadcasting Satellite Service (BSS). This proceeding is IB Docket No. 06-123.

The agenda includes adoption of a Fourth Order on Reconsideration (OR) regarding requests for reconsideration of the FCC's service specific and technology specific numbering overlay requirements. This is CC Docket Nos. 99-200, 96-98, and 95-116.

The agenda includes adoption of an Order of Forfeiture regarding violations of the FCC's Do-Not-Call rules by Dynasty Mortgage, LLC.

The agenda includes adoption of a Memorandum Opinion and Order (MO&O) and 3rd OR regarding petitions for reconsideration against the Reexamination of the Comparative Standards for Noncommercial Educational Applicants. This proceeding is MM Docket No. 95-31.

The agenda includes adoption of a MO&O regarding the petitions for reconsideration filed by Jose Arzuago, dba Ocean Communications, concerning FM broadcast stations in Puerto Rico. This proceeding is MM Docket No. 00-123 and RM-9903.

This event is scheduled for 9:30 AM on Wednesday, April 25, 2006 in the FCC's Commission Meeting Room, Room TW-C305, 445 12th Street, SW. The event will be webcast by the FCC. The FCC does not always consider all of the items on its published agenda. The FCC sometimes adds items to the agenda without providing the "one week" notice required 5 U.S.C. § 552b. The FCC does not always start its events at the scheduled time, or at all. The FCC usually does not release at its events copies of the items that it adopts at its events. The FCC has not always written the items that it adopts at its events.

People and Appointments

4/18. Anne Petera was named Assistant Secretary for Intergovernmental Programs at the Department of Homeland Security (DHS). See, DHS release.

4/18. Mark Everson, the Commissioner of the Internal Revenue Service (IRS), will go to work for the American Red Cross. See, statement by Henry Paulson, Secretary of the Treasury.

More News

4/18. The Federal Communications Commission (FCC) released its Notice of Proposed Rulemaking (NPRM) [53 pages in PDF] in its proceeding titled "In the Matter of Assessment and Collection of Regulatory Fees for Fiscal Year 2007". This NPRM is FCC 07-55 in MD Docket No. 07-81. The deadline to submit initial comments is May 3, 2007. The deadline to submit reply comments is May 11, 2007.

4/18. The Federal Communications Commission (FCC) published a notice in the Federal Register that announces, describes, and sets the comment deadlines for its notice of proposed rulemaking (NPRM) regarding exclusive contracts for the provision of video services to multiple dwelling units (MDUs) and other real estate developments. The FCC adopted this item at its March 22, 2007, meeting. It released the text [19 pages in PDF] of this NPRM on March 27, 2007. See, stories titled "FCC Adopts MDU Forced Access NPRM" in TLJ Daily E-Mail Alert No. 1,556, March 26, 2007, and "FCC Releases MDU NPRM" in TLJ Daily E-Mail Alert No. 1.557, March 27, 2007. Initial comments are due by June 18, 2007. Reply comments are due by July 18, 2007. See, Federal Register, April 18, 2007, Vol. 72, No. 74, at Pages 19448-19453. This item is FCC 07-33 in Docket 07-51.

4/18. The Federal Trade Commission (FTC) announced that it will host a two day event on July 11-12, 2007, titled "Spam Summit: The Next Generation of Threats and Solutions". The deadline to submit requests to participate as panelists is May 18, 2007. Requests should be sent to SpamSummit at ftc dot gov. The deadline to submit written comments on the topics to be addressed at the summit is May 18, 2007. See, FTC notice and Spam Summit web page. The event will be held at the FTC's satellite building conference center, 601 New Jersey Ave., NW.

Supreme Court Rules in Global Crossing v. Metrophones

4/17. The Supreme Court of the U.S. issued its opinion [40 pages in PDF] in Global Crossing v. Metrophones, upholding the Federal Communications Commission's (FCC) rules that require long distance carriers to compensate payphone operators when a caller uses a payphone to obtain free access to the carrier's lines.

The Supreme Court also held that a payphone operator may bring a federal action against a carrier that refuses to make the payments required by the FCC's rules.

In this case, Metrophones Telecommunications, Inc. is a payphone operator, and Global Crossing Telecommunications, Inc., is a long distance carrier. Metrophone sought compensation from Global Crossing for each time a user of its payphones obtained free access to Global Crossing's lines. Global Crossing refused, and Metrophones filed a complaint in U.S. District Court.

47 U.S.C. § 201 provides in part that "It shall be the duty of every common carrier engaged in interstate or foreign communication by wire or radio to furnish such communication service upon reasonable request therefor".

Subsection (b) then provides in part that "All charges, practices, classifications, and regulations for and in connection with such communication service, shall be just and reasonable, and any such charge, practice, classification, or regulation that is unjust or unreasonable is declared to be unlawful".

47 U.S.C. § 207 then provides in full that "Any person claiming to be damaged by any common carrier subject to the provisions of this chapter may either make complaint to the Commission as hereinafter provided for, or may bring suit for the recovery of the damages for which such common carrier may be liable under the provisions of this chapter, in any district court of the United States of competent jurisdiction; but such person shall not have the right to pursue both such remedies."

The Telecommunications Act of 1996 instructed the FCC to write regulations establishing a plan to compensate payphone operators. The FCC wrote rules that required carriers to compensate payphone operators at a rate of 24 cents per call. The FCC also declared that a carrier's failure to comply with the payphone compensation regulation is unlawful under §201(b) as an "unjust or unreasonable" practice. The FCC also declared that there is a private right of action for this failure.

The Supreme Court, applying Chevron deference, held that "the FCC's application of §201(b) to the carrier's refusal to pay compensation is a reasonable interpretation of the statute; hence it is lawful. ... And, given the linkage with §207, we also conclude that §207 authorizes this federal-court lawsuit."

Justice Scalia wrote in his dissent that "I would hold that a private action to enforce an FCC regulation under §§201(b) and 206 does not lie unless the regulated practice is "unjust or unreasonable" in its own right and apart from the fact that a substantive regulation of the Commission has prohibited it. As the practice regulated by the payphone-compensation regulation does not plausibly fit that description, I would reverse the judgment of the Court of Appeals."

Justice Thomas wrote in his dissent that "§201 does not reach the conduct at issue here. Failing topay is not a "practice" under §201 because that section regulates the activities of telecommunications firms intheir role as providers of telecommunications services. As such, §201(b) does not reach the behavior of telecommunication firms in other aspects of their business."

This case is Global Crossing Telecommunications, Inc. v. Metrophones Telecommunications, Inc., Sup. Ct. No. 05–705, a petition for writ of certiorari to the U.S. Court of Appeals for the 9th Circuit. Justice Breyer wrote the opinion of the Supreme Court, in which Justices Stevens, Roberts, Alito, Ginsburg, Souter and Kennedy joined. Justices Scalia and Thomas dissented.

Kimmitt Discusses U.S. Japan Trade

4/17. Deputy Secretary of the Treasury Robert Kimmitt gave a speech on the U.S. Japan Economic Relationship on Capitol Hill in Washington DC. He urged Japan to continue its economic reforms, to deregulate its communications sector, to allow the free flow of capital, and to address protection of its agricultural sector.

He said that "Japan is now experiencing the longest economic expansion in its post-war history, thanks in part to the reforms launched by former Prime Minister Koizumi." He added that "We welcome Prime Minister Abe's commitment to press forward with economic reform in Japan that seeks to raise productivity growth; create new investment opportunities; stimulate competition; and foster a stronger business climate."

Kimmitt then offered recommendations regarding these reforms. For example, he stated that "To raise productivity, the government of Japan should encourage competition, the entry of new firms, and the introduction of new technologies and products. We are all familiar with manufactured products in which Japanese technology leads the world. Yet some Japanese industries maintain surprisingly low levels of productivity relative to their foreign counterparts. In many cases, these are industries with extensive regulations on entry, products, and technologies."

He added that "communications" is one industry that should be deregulated, and opened to new entry and competition.

He also discussed trade and protectionism in Japan and the U.S. He said that the two countries are "natural partners in advancing the fundamental principles of a healthy world economy: free and fair trade; flexible exchange rates set in open, competitive markets based on underlying fundamentals; and the free flow of capital across borders, based on open investment policies. But we must also confront the threat of growing protectionist sentiment and new obstacles to trade and investment."

Kimmitt continued that "We often discuss protectionism in the context of trade. But since investment flows are many times larger than trade flows, we must also pay close attention to cross-border capital flows and maintaining open investment policies. We must come together to make clear on both sides of the Pacific that we are open to investment and trade, and actively reject the rise of investment protectionism across the Pacific or elsewhere in the world."

He also discussed Doha round trade negotiations. He said that "Both Japan and the United States would benefit from an agreement, and, in some sectors, Japan has even more to gain from global trade liberalization than the United States."

However, he added that "domestic opposition to agricultural reform has prevented Japan from playing a leading role in the Doha Round negotiations and in other international trade liberalization efforts." He urged Japan to reduce subsidies and protection, and singled out conditions imposed upon U.S. beef as an example. He did not address the U.S.'s agricultural subsidies and protectionism.

FTC and DOJ Release Report on IPR and Antitrust

4/17. The Federal Trade Commission (FTC) and the Department of Justice (DOJ) released a report [217 pages in PDF] titled "Antitrust Enforcement and Intellectual Property Rights: Promoting Innovation and Competition". See also, FTC release. See, full story.

People and Appointments

4/17. Michael Mullaney was named Chief of the Department of Justice's (DOJ) National Security Division's (NSD) Counterterrorism Section. Kenneth Wainstein remains the Assistant Attorney General in charge of the NSD.

4/17. Deborah Garza was named Deputy Assistant Attorney General for Regulatory Matters at the Department of Justice's (DOJ) Antitrust Division. She will oversee, among other things, telecommunications matters. She previously chaired the Antitrust Modernization Commission (AMC), which has issued its final report. See, story titled "Antitrust Modernization Commission Releases Report", story titled "AMC Addresses Innovation" and story titled "AMC Seeks End to Duplicative FCC Antitrust Merger Reviews" in TLJ Daily E-Mail Alert No. 1,560, April 4, 2007. She previously worked for the law firms of Covington & Burling and Fried Frank. Thomas Barnett remains the Assistant Attorney General in charge of the Antitrust Division.

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4/17. The House Appropriations Committee's (HAC) Subcommittee on Financial Services and General Government held a hearing on the FY 2008 budget for the Federal Communications Commission (FCC). See, prepared testimony [PDF] of FCC Chairman Kevin Martin. Afterwards, Brian Dietz of the National Cable & Telecommunications Association (NCTA) stated in a release that "Its unfortunate that Chairman Martin continues to promote government-mandated a la carte when the vast majority of evidence shows it would raise prices for most consumers and harm diversity in programming. The Canadian example that Chairman Martin cites has nothing to do with the U.S. market and actually offers fewer benefits than portrayed. U.S. cable and satellite providers currently offer their customers the most diverse selection of programming found anywhere in the world. A mandated a la carte system is a lose-lose proposition -- it would jeopardize the broad diversity in programming that American consumers enjoy while raising prices for less choice."

4/17. The Federal Communications Commission (FCC) released a Public Notice [4 pages in PDF] that requests comments regarding the "status of children's television programming, and compliance with the Children's Television Act" and the FCC Commission's rules. Initial comments will be due 30 days after publication of a notice in the Federal Register. Such publication has not yet occurred. Reply comments will be due 45 days after such publication. This Public Notice is DA 07-1716 in MM Docket No. 00-167.

4/17. The Copyright Royalty Board published a notice in the Federal Register that announces, describes, recites, and sets the comment deadline for its proposed rules setting certain royalty rates. Comments are due by May 17, 2007. See, Federal Register, April 17, 2007, Vol. 72, No. 73, at Pages 19138-19144.

4/17. Securities and Exchange Commission (SEC) Commissioner Kathleen Casey gave a speech in New York, New York titled "The Euro and the Dollar: Pillars in Global Finance". She stated that "As technology and innovation continue to dismantle geographic barriers, and issuers and investors increasingly seek out cross-border investment opportunities, regulators and policymakers have come under increasing pressure to harmonize regulatory frameworks and remove unnecessary regulatory impediments to the free flow of capital."

Supreme Court Requests Solicitor General Brief in Patent Case

4/16. The Supreme Court of the United States (SCUS) requested that the Office of the Solicitor General (OSG) file a brief "expressing the views of the United States" in Quanta Computer v. LG Elecronics.

The SCUS has not yet decided whether or not to grant Quanta Computer's petition for writ of certiorari. See, Order List [18 pages in PDF] at page 2, and SCUS docket.

This is a patent infringement case related to personal computer technology. The District Court granted summary judgment of noninfringement. The U.S. Court of Appeals (FedCir) issued its opinion [31 pages in PDF] on July 7, 2006. It affirmed in part, reversed in part, vacated in part, and remanded to the District Court.

This case is Quanta Computers, Inc., et al. v. LG Electronics, Inc., Sup. Ct. No. 06-937, a petition for writ of certiorari to the U.S. Court of Appeals for the Federal Circuit, App. Ct. Nos. 05-1261, 05-1262, 05-1263, 05-1264, 05-1302, 05-1303, and 05-1304. Judge Mayer wrote the opinion of the Court of Appeals, in which Judges Michel and Newman joined. The Court of Appeals heard appeals from the U.S. District Court for the Northern District of California, Judge Claudia Wilkin presiding.

Copyright Office Announces Notice of Inquiry Regarding Cable and Satellite Statutory Licenses

4/16. The Copyright Office (CO) published a notice in the Federal Register that announces, describes and sets comment deadlines for a Notice of Inquiry (NOI) regarding the operation of, and continued necessity for, the cable and satellite statutory licenses under the Copyright Act.

See, Federal Register, April 16, 2007, Vol. 72, No. 72, at Pages 19039-19055. Written comments are due by July 2, 2007. Reply comments are due by September 13, 2007.

The CO is required to make recommendations to the Congress by the Satellite Home Viewer Extension and Reauthorization Act of 2004 (SHVERA), which was enacted into law as part of HR 4818 (108th Congress), the Consolidated Appropriations Act of 2004. This is now Public Law No. 108-447. The SHVERA requires the CO to offer its legislative recommendations by June 30, 2008.

The CO also announced in this notice that it will "hold hearings on matters raised in this NOI later this year to further supplement the record".

There are three statutory licenses in the Copyright Act that govern the retransmission of distant and local broadcast station signals.

There is a cable statutory licensed, which is codified at 17 U.S.C. § 111, that permits a cable operator to retransmit both local and distant radio and television signals to its subscribers who pay a fee for such service. There is a satellite carrier statutory license, which is codified at 17 U.S.C. § 119, that permits a satellite carrier to retransmit distant television, but not radio, signals to its subscribers for private home viewing as well as to commercial establishments. There is also a satellite carrier statutory license, which is codified at 17 U.S.C. § 122, that permits satellite carriers to retransmit local television, but not radio, signals into the stations' local market on a royalty free basis.

Section 109 of the SHVERA requires the CO to provide to the two Judiciary Committees its "findings and recommendations on the operation and revision" of these three statutory licenses.

The SHVERA requires the CO to make "A comparison of the royalties paid by licensees under such sections, including historical rates of increases in these royalties, a comparison between the royalties under each such section and the prices paid in the marketplace for comparable programming."

It also requires "An analysis of the differences in the terms and conditions of the licenses under such sections, an analysis of whether these differences are required or justified by historical, technological, or regulatory differences that affect the satellite and cable industries, and an analysis of whether the cable or satellite industry is placed in a competitive disadvantage due to these terms and conditions."

It also requires "An analysis of whether the licenses under such sections are still justified by the bases upon which they were originally created."

It also requires "An analysis of the correlation, if any, between the royalties, or lack thereof, under such sections and the fees charged to cable and satellite subscribers, addressing whether cable and satellite companies have passed to subscribers any savings realized as a result of the royalty structure and amounts under such sections."

Finally, it requires "An analysis of issues that may arise with respect to the application of the licenses under such sections to the secondary transmissions of the primary transmissions of network stations and superstations that originate as digital signals, including issues that relate to the application of the unserved household limitations under section 119 of title 17, United States Code, and to the determination of royalties of cable systems and satellite carriers."

Trade Officials Discuss Doha Round Negotiations

4/16 Numerous government officials responsible for trade and commerce issues attended meeting, issued statements, and gave speeches regarding Doha round trade negotiations in the past four days.

Susan Schwab, the head of the Office of the U.S. Trade Representative (OUSTR), traveled to India to promote Doha round trade negotiations. Negotiations stalled last year, in part over continuing insistence by developing nations, including India, in protecting their agricultural sectors.

Schwab gave a speech [5 pages in PDF] in New Dehli on April 13, 2007, in which she acknowledged the importance of India to conclusion of successful negotiations. She argued that India has much to gain from free trade in all sectors.

She also praised India's recent action regarding telecom foreign direct investment (FDI). She said that "The Indian Government recently announced its guidelines for increasing FDI in the telecommunications sector to 74% -- opening the way for partnerships with U.S. companies and fueling the continued growth of India’s telecommunications infrastructure."

Schwab also met with her counterpart, Kamal Nath, India's Minister of Commerce and Industry. See also, USTR release.

Nath then traveled to the People's Republic of China (PRC), where he met with Bo Xilaio, the PRC's Minister of Commerce. On April 16, the two issued a Joint Ministerial Statement regarding Doha round trade negotiations.

It states that "the major issue holding back and impeding the progress in Round is the lack of movement by the developed countries in terms of early removal of distortions, caused by huge subsidies and significant market access barriers in developed countries. They were categorical that unless the outcome of the negotiations upholds the proposals of developing countries resulting in real and effective reduction of trade distorting domestic support coupled with meaningful disciplines, substantial improvement in market access by developed countries and eliminations of all form of export subsidies the aspirations of the developing countries, as built in the mandate, will not be fulfilled."

Meanwhile, on April 16, Hu Xiaolian, Deputy Governor of the People's Bank of China, in Washington DC for World Bank and International Monetary Fund meetings, stated that "With trade protectionism pressures growing, measures taken by certain countries -- under the pretext of righting global imbalances -- will hinder the trade liberalization process". She added that nations should "resolutely oppose protectionism, promote progress in the Doha Round". See, PRC Ministry of Commerce release.

On April 15, Henry Paulson, the Secretary of the Treasury, issued a statement at the World Bank Development Committee Meeting in Washington DC. He wrote that "We need to continue pushing forward on the trade agenda, including a successful Doha Round of negotiations, to keep all our economies growing. The case for trade liberalization is clear and compelling. And if we want more people to support it, we need to ease anxieties and help more people realize the benefits of trade. The Aid for Trade agenda launched at the Hong Kong Ministerial can help allay these fears."

Pascal LamyPascal Lamy (at right), Director General of the World Trade Organization (WTO), gave a speech at the International Monetary and Financial Committee (IMFC) Meeting in Washington DC on April 15.

He said that "The decision by WTO Members in February to resume the Doha trade negotiations across the board has not yet led to the incisive breakthrough needed in order to bring the Round to a successful conclusion by the end of this year." He argued that "Failure of the Round would strip the global economy of one of its most powerful and enduring sources of strength and stability."

He added that "Sending out a message that the Doha Round cannot be completed would undermine the system and weaken the ability of member governments, individually and collectively, to stand firm against trade protectionism."

See also, Lamy's April 15, 2007, speech to the World Bank Development Committee Meeting in Washington DC.

People and Appointments

4/16. The Federal Trade Commission (FTC) issued a release that announces several recent appointments and promotions. The FTC previously announced some of these appointments and promotions. The FTC again stated that Karen Grimm was appointed Assistant General Counsel for Policy Studies in the Office of General Counsel (OGC). She previously worked for the law firm of Sutherland Asbill & Brennan. She specialized in antitrust and ATM and other payment system networks. Shira Minton was promoted to Assistant General Counsel for Ethics in the OGC. Suzanne Michel was promoted to Assistant Director of the Bureau of Competition's (BOC) Office of Policy and Coordination (OPC). She has worked on intellectual property issues. James Mongoven was promoted to Deputy Assistant Director of the OPC. Norman Armstrong was appointed Counsel to the Director of the BOC; he was previously a staff attorney in the Mergers I Division. Sarah Friedman was appointed Counsel to the Director of the BOC; she was previously a staff attorney in the Mergers IV Division. Patricia Bak was appointed Counsel to the Director of the Bureau of Consumer Protection (BCP). Thomas Pahl was appointed Assistant Director in the BCP's Division of Financial Practices.

More News

4/16. The U.S. Patent and Trademark Office (USPTO published a notice in the Federal Register that announces, describes, recites, and sets the effective date (May 16, 2007) for, its revisions to its rules of practice relating to ex parte and inter partes reexamination. See, Federal Register, April 16, 2007, Vol. 72, No. 72, at Pages 18892-18907.

4/16. The U.S. Patent and Trademark Office (USPTO published a notice in the Federal Register that announces, describes, recites, and sets the effective date (May 16, 2007) for, its revision to its rules of practice to change the address for correspondence with the USPTO's Madrid Processing Unit. See, Federal Register, April 16, 2007, Vol. 72, No. 72, at Pages 18907-18909.

Go to News from April 11-15, 2007.