|TLJ News from November 6-10, 2007|
House to Consider Numerous Telecom and Internet Bills
11/9. The House Majority Leader's schedule for the week of November 12, 2007, includes consideration of numerous technology related bills. Some of these bills were not introduced until November 8 or 9, 2007. Some have not been reported by any committee. See, Rep. Hoyers' weekly schedule.
The House is scheduled to consider the following bills:
HR 3403 - 911 Modernization and Safety Act of 2007. Rep. Bart Gordon (D-TN) introduced this bill on August 3, 2007. However, he has endeavored to enact a 911 bill in both the present and 109th Congress.
This bill requires interconnected VOIP service providers to provide 911 and E911 services. The Federal Communications Commission (FCC) already mandated this by rulemaking in 2005. This bill affirms, revises, and further defines the legal framework.
On September 19, 2007, the HCC's Subcommittee on Telecommunications and the Internet (STI) held a hearing. See, prepared testimony [PDF] of Jason Barbour (National Emergency Number Association), prepared testimony [PDF] of Catherine Avgiris (Comcast), prepared testimony [PDF] of Robert Mayer (USTelecom), prepared testimony [PDF] of Christopher Putala (Earthlink and VON Coalition), and letter [PDF] of Craig Donaldson (Intrado).
On October 10, 2007, the HCC/STI approved by voice vote an amendment in the nature of a substitute [13 pages in PDF] offered by Rep. Gordon. The Subcommittee then approved by voice vote the bill as amended.
The full committee marked up the bill on October 30, 2007. It approved a manager's amendment [3 pages in PDF] offered by Rep. Gordon by voice vote. It then approved the bill as amended by voice vote.
For a summary of the bill, see story titled "House Commerce Committee Approves 911 VOIP Bill" in TLJ Daily E-Mail Alert No. 1,667, November 1, 2007.
HR 3919 - Broadband Census of America Act of 2007. This is the House broadband mapping and related grants bill. Rep. Ed Markey (D-MA), the Chairman of the HCC/STI, and others introduced this bill on October 22, 2007.
However, prior to this, on May 17, 2007, the HCC/STI held a hearing on broadband mapping generally. See, prepared testimony [PDF] of Larry Cohen (Communications Workers of America), prepared testimony [PDF] of Ben Scott (Free Press), prepared testimony [PDF] of Kyle McSlarrow (National Cable and Telecommunications Association), prepared testimony [PDF] of Brian Mefford (Connect Kentucky), prepared testimony [PDF] of Steve Largent (CTIA -- Wireless Association), prepared testimony [PDF] of Walter McCormick (US Telecom), and prepared testimony [PDF] of George Ford (Phoenix Center for Advanced Legal and Economic Public Policy Studies).
On October 10, 2007, the HCC/STI approved, without amendment, by voice vote, a committee print [19 pages in PDF] of this legislation.
On October 30, 2007, full committee approved an amendment in the nature of a substitute [22 pages in PDF] offered by Rep. Markey. See also, story titled "House Commerce Committee Approves Broadband Mapping Bill" in TLJ Daily E-Mail Alert No. 1,666, October 31, 2007.
HR 3461 - SAFER NET Act. Rep. Melissa Bean (D-IL) and others introduced this bill on August 4, 2007. Although, she has been working to enact similar legislation since the 109th Congress.
This bill would task the Federal Trade Commission (FTC) with promoting safe online activity, including matters related to e-commerce, protecting financial information and privacy, cybercrime, and threats to juveniles presented by inappropriate online content and predators.
The bill, as amended, would also create at the Department of Commerce's National Telecommunications and Information Administration (NTIA) an Online Safety and Technology working group comprised of representatives of relevant sectors of the business community, public interest groups, and other appropriate groups and federal agencies.
On October 23, 2007, the HCC's Subcommittee on Commerce, Trade and Consumer Protection held a hearing. It then amended and approved the bill. On October 30, 2007, the full committee further amended and approved the bill.
HR 3845 - PROTECT Our Children Act of 2007. Rep. Debbie Schultz (D-FL) introduced this bill back on October 16, 2007. The House Democratic leadership is sending this bill to the floor without waiting for the House Judiciary Committee (HJC) to first approve it.
This is primarily bill to authorize the appropriation of about a billion dollars over eight years to support state and federal government efforts to protect children online. See, story in this issue titled "Rep. Schultz Introduces Bill to Fund Programs Related to Internet Crimes Against Children".
HR 719 - Keeping the Internet Devoid of Sexual Predators Act of 2007. Rep. Earl Pomeroy (D-ND) and others introduced this bill on January 30, 2007.
It would amend the Sex Offender Registration and Notification Act to provide that sex offenders must also register "Any electronic mail address, instant message address, or other similar Internet identifier the sex offender used or will use to communicate over the Internet", and criminalize the failure to do so.
It then requires the Department of Justice to "maintain a system allowing a commercial social networking website to compare the database of registered users of that commercial social networking website to the list of electronic mail addresses, instant message addresses, and other similar Internet identifiers of persons in the National Sex Offender Registry".
And, "the commercial social networking website may screen new users or compare its database of registered users to the list".
This bill would also create a new crime of online age misrepresentation. It would provide that "Any person 18 years or older who knowingly misrepresents their age with the intent to use the Internet to engage in criminal sexual conduct involving a minor, or to facilitate or attempt such conduct" shall be punished.
HR 4120 - Effective Child Pornography Prosecution Act of 2007. Rep. Nancy Boyda (D-KS) and Rep. Judy Biggert (R-IL) introduced this bill on November 8, 2007. It was referred to the HJC, which has not approved it.
It would amend 18 U.S.C. § 2252 and 18 U.S.C. § 2252A, the provisions of the criminal code pertaining to child pornography (CP) and sexual exploitation of minors.
It would remove from the criminal prohibition of sending or receiving CP the requirement that the CP be sent or received interstate. It would also remove from the criminal prohibition of possession of CP the requirement that the CP was sent or received interstate.
HR 4134 - a bill regarding internet safety education grants. Rep. Linda Sanchez (D-CA) introduced this bill on November 9, 2007. It was referred to the HJC, which has not approved it.
HR 4136 - Enhancing the Effective Prosecution of Child Pornography Act of 2007. Rep. Christopher Carney (D-PA) introduced this bill on November 9, 2007. It was referred to the HJC, which has not approved it.
Items Not on the List. While the House Democratic leadership is sending to the floor several bills pertaining to protecting children on the internet, none of these bills would impose new mandates on internet service providers or social networking web sites.
Also, while the list includes several bills approved by the House Commerce Committee on October 30, 2007, it omits some of the bills that were approved at that markup. The list does not include HR 3526 [LOC | WW], a bill to include all banking agencies within the existing regulatory authority under the Federal Trade Commission Act (FTCA) with respect to depository institutions.
Nor does its include HR 2601 [LOC | WW], the "Do-Not-Call Registry Fee Extension Act of 2007". This bill extends the authority of the FTC to collect Do-Not-Call Registry fees to fiscal years after fiscal year 2007. See, story titled "House Commerce Committee Approves Do Not Call Registry Fee Extension Bill" in TLJ Daily E-Mail Alert No. 1,666, October 31, 2007.
Nor does the list include HR 3451 [LOC | WW], the "Do-Not-Call Improvement Act of 2007", See story titled "House Commerce Committee Approves Bill to Preclude Expiration of Do Not Call Registrations" in TLJ Daily E-Mail Alert No. 1,666, October 31, 2007.
House Bill Includes One Year Extension of R&D Tax Credit
11/9. The House passed HR 3996 [LOC | WW], the "Temporary Tax Relief Act of 2007", by a vote of 216-193. See, Roll Call No. 1,081. This bill would adjust the Alternative Minimum Tax (AMT), raise other taxes, and provide short extensions for some technology related and other deductions.
This bill would extend the research and development (R&D) tax credit, which expires on December 31, 2007, for one year, to December 31, 2008. This deduction is codified at 26 U.S.C. § 41(h)(1).
This bill would also extend the enhanced deduction for qualified computer contributions, which expires on December 31, 2007, for one year, to December 31, 2008. This deduction is codified at 26 U.S.C. § 170(e)(6).
The Senate has not approved this bill.
Rep. Steny Hoyer (D-MD) stated that "the AMT is outdated and unfair. When it was enacted, it was intended to ensure that wealthy taxpayers paid their fair share. But because it was never indexed for inflation, it threatens today to force millions of middle-income American families to pay more than they otherwise would under the standard income tax system."
Rep. Dave Camp (R-MI) stated that "this bill permanently raises taxes to the tune of $70 billion, all to collect taxes the Federal Government was never intended to get." He added that "This bill will not pass the Senate and the President will not sign it." See, Congressional Record, November 9, 2007, at Page H13449.
Rep. Bob Goodlatte (R-VA) stated in the House that "The permanent tax increases in this bill include job-killing tax hikes on entrepreneurs and risk-takers who invest and create jobs for working families. While these tax increases were written in a way to seemingly affect only wealthy hedge fund executives, much like the ill-conceived AMT, these tax increases would reach much further. The taxes would affect real estate, venture capital, private equity, and retail." See, Congressional Record, November 9, 2007, at Page H13459.
Rep. Phil English (R-PA) complained that extenders, including the one year extension of the R&D tax credit, are being "tied to this dead-on-arrival bill". See, Congressional Record, November 9, 2007, at Page H13449.
The vote broke down along party lines. Democrats voted 216-8 for the bill. Republicans voted 0-185.
Marie Lee, of the AeA, stated in a release that "we are disappointed the extension is only for one year. The lack of a consistent U.S. R&D tax credit makes foreign incentives for R&D much more attractive to companies, and Congress must extend the R&D tax credit for more than one year to add some predictability to the system to help the United States maintain its lead in innovation."
FCC Names Four Members of Public Safety Broadband Licensee Board of Directors
11/9. The Federal Communications Commission (FCC) announced in a Public Notice [PDF] that it has named the American Hospital Association (AHA), the National Fraternal Order of Police (NFOP), the National Association of State 9-1-1 Administrators (NASNA), and the National Emergency Management Association (NEMA) to be the four at large members of the Public Safety Broadband Licensee Board of Directors.
The FCC created this 15 member board in its Second Report and Order regarding the 700 MHz band, adopted on July 31, 2007.
The 700 MHz band (actually 698-806 MHz) is the television broadcast spectrum that is being made available for public safety and commercial wireless services as a result of the digital television (DTV) transition. In addition to providing for the auction of 62 MHz for commercial uses, the R&O also provides for a "Public/Private Partnership". A commercial licensee is to build a nationwide broadband interoperable network for use by public safety entities. However, it would then have preemptible secondary access to the spectrum.
This R&O provides for a single nationwide license, and a single licensee. The R&O also created the board to govern this licensee.
See, story titled "FCC Adopts 700 MHz Band Order" in TLJ Daily E-Mail Alert No. 1,619, July 31, 2007.
This Public Notice is DA 07-4593 in PS Docket No. 06-229.
9th Circuit Rules in ADA Case
11/9. The U.S. Court of Appeals (9thCir) issued its divided opinion [PDF] in Doran v. 7-Eleven, a case brought under the Americans with Disabilities Act (ADA). This case foreshadows some of what internet and technology companies may face if, or when, the federal judiciary extends the ADA to them.
Introduction. The majority opinion carves out an exception to the Constitutional case or controversy requirement, and to the Supreme Court's opinions interpreting the case or controversy requirement, for ADA cases. The opinion further provides that discovery is available in ADA cases, in the absence of any case or controversy, for the purpose of seeking evidence of an unknown violation of the ADA.
Article III of the Constitution limits federal "judicial Power" to "Cases" and "Controversies". The Supreme Court has held over a number of cases that to establish such standing to bring suit, the plaintiff must establish that he or she has (1) suffered an injury in fact, an invasion of a legally protected interest which is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical, (2) which is fairly traceable to the challenged act, and (3) is likely to be redressed by a favorable decision. See, opinion in Sierra Club v. Morton, 405 U.S. 727 (1972), opinion in Bennett v. Spear, 520 U.S. 154 (1997), opinion in Warth v. Seldin, 422 U.S. 490 (1975), and opinion in Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992).
The majority opinion in the present case dispenses with the injury in fact requirement for ADA cases.
The case will strengthen the position of trial lawyers and ADA plaintiffs in the 9th Circuit. It will enable them to pursue discovery unrelated to claims which they have plead, potential claims of which they have no knowledge, and claims for which the plaintiff has suffered no injury.
To the extent that public accommodations like 7-Eleven stores are physical things that are open to the public, much discovery takes place absent formal discovery or discovery orders. However, if the ADA is extended to web sites, software producers, and other technology companies, plaintiffs' lawyers may seek access to the underlying technology, such as software source code. Allowing plaintiffs lawyers free reign to engage in discovery of proprietary information has the potential to wreak havoc in technology sectors.
It should be noted that this is an opinion of the 9th Circuit, which frequently disregards Supreme Court precedent. Its reversal rate, and the respect that other circuits give to these opinions, reflect this disregard. On the other hand, this opinion is now the law in the 9th Circuit, and almost all of the deep pocket technology companies likely to be targeted by ADA suits are subject to the jurisdiction of District Courts within the 9th Circuit.
Background. The plaintiff in this case, Jerry Doran, is a professional ADA plaintiff. The Court of Appeals noted that the 7-Eleven store in question is located "about 550 miles from his home". That is, he drove 550 miles to visit a store in order to have standing under the ADA to bring this suit.
Doran is a frequent ADA plaintiff, and many opinions have been written in his cases. For example, the U.S. District Court (CDCal) wrote in a Memorandum of Decision [20 pages in PDF] in another of his cases, Doran v. Del Taco, D.C. No. 04-046-CJC (ANx), that "He has filed over two hundred disability access lawsuits in federal and state courts throughout California".
The defendant, 7-Eleven, operates convenience stores around the country. The store at issue in the present litigation is located in Anaheim, California. It has parking reserved for handicapped persons, a ramp, and other things to enable access for handicapped persons.
The Court of Appeals wrote that Doran alleged in his deposition that "the striping outlining the disabled parking space was faded", that "the wheelchair ramp was too steep", and that once he entered the store he was not allowed to use the "employees-only restroom".
Doran's lawyers also sent a second person, described by the Court of Appeals as an "expert", who searched for additional alleged violations of the ADA. He prepared a report that asserted that an ATM machine was too high, and that the condiments counter required too long of a reach.
The District Court granted summary judgment to 7-Eleven on all of Doran's claims. It also held that Doran did not have standing to challenge the alleged barriers identified in the expert report because Doran neither encountered nor had personal knowledge of those alleged barriers.
Court of Appeals Majority. The Court of Appeals affirmed the grant of summary judgment as to all of the claims based upon the allegations known to Doran. The Court of Appeals reversed on the issue of standing.
It held that Doran has standing to challenge alleged ADA violations that he did not experience, and of which he had no knowledge.
It also held that he may conduct discovery as to claims that he has not brought. (In contrast, FRCP Rule 26 provides that "Parties may obtain discovery regarding any matter, not privileged, that is relevant to the claim or defense of any party ...")
This was a split opinion. The two judge majority reached a conclusion regarding standing that cannot be reconciled with the opinions of the Supreme Court. In this case, the 9th Circuit is defying Supreme Court precedent in order to carve out an exception to the standing requirement for ADA cases.
The three judge panel split according to circuits. Judges Jerome Farris and Ronald Gould, who joined in a two judge per curiam majority opinion, are both Judges of the 9th Circuit. Judge Kevin Duffy, who dissented, is a Judge of the U.S. District Court for the Southern District of New York, which is in the 2nd Circuit. (The panel also broke down along party lines. Judge Gould was appointed by former President Bill Clinton. Judge Farris is a senior status Judge who was appointed by former President Jimmy Carter. Judge Duffy is a senior status Judge who was appointed by former President Richard Nixon.)
The majority, perhaps recognizing their opinion's deficiency on the issue of standing, went to great lengths to rationalize it. However, rather that applying Supreme Court precedent, they relied upon "prudential", "judicial economy", and "practical concerns". They announced their broad conclusions regarding discovery without discussion of discovery standards.
With respect to standing, the majority wrote that "when a disabled individual knows that a facility is noncompliant with the ADA in at least some respects but does not know the full extent of the noncompliance, he or she is likely to be deterred from returning to that facility, even if some of the violations are corrected, until he or she can get more information about the extent of the violations."
The majority continued that "Reinforcing that an ADA plaintiff has standing because of deterrence from returning in the face of uncertainty, it is prudent to eliminate that uncertainty through the judicial device of discovery, thus allowing the plaintiff to obtain by formal means the information about the scope of the defendant's violations that he or she was unable to ascertain personally because of those same violations."
The majority's opinion holds that "where a disabled person has Article III standing to bring a claim for injunctive relief under the ADA because of at least one statutory violation of which he or she has knowledge and which deters access to a place of public accommodation, he or she may conduct discovery to determine what, if any, other barriers affecting his or her disability existed at the time he or she brought the claim."
It concluded that "So long as there is an actual or imminent injury from a barrier encountered or about which a person had knowledge, deterring use of the public accommodation, the disabled person has standing to enter our court system. The scope of discovery and claims should then naturally permit challenge to any barriers to use related to that person's disability."
Court of Appeals Dissent. The dissenting opinion states that "The majority's approach compromises longstanding constitutional principles for the sake of convenience, and ignores the fact that no one -- not even Congress -- can preempt the Constitution and confer standing to a party for things that have not injured him."
It added that "Standing is indispensable; it cannot be disregarded because it is inefficient, or because to do otherwise might, as the majority opines, not pragmatically ``make sense.´´"
The dissenting opinion states that "the majority's approach gives ADA plaintiffs a carte blanche, an invitation to bring litigation even outside the presence of a real live case or controversy".
Abusive ADA Litigation. The majority opinion of the Court of Appeals in the present case is quite favorable to Doran and his attorneys. Not all courts have been so gracious with Doran. For example, in Doran v. Del Taco, the District Court addressed the potential for abuse of the ADA generally, and Doran individually.
As for Doran, the Court wrote that "In order to prevail on his disability access claims against Del Taco, Mr. Duran had to convince the Court that he actually visited the Del Taco restaurant in Mission Viejo and encountered architectural barriers there prior to the date that he filed his complaint. Mr. Doran has not been successful in this regard. There were too many inconsistencies and inaccuracies" in his deposition testimony.
As for abusive ADA litigation, the Court wrote that "Despite the important mission of the ADA, there are those individuals who would abuse its private cause of action provision by filing lawsuits solely with intent to profit financially. The potential for abuse of the ADA has been well documented in the Central District of California and in other districts throughout the country. ... Courts have referred to this proliferation of ADA lawsuits as a ``cottage industry´´ and have labeled the plaintiffs who file these lawsuits as ``professional plaintiffs,´´ ``serial plaintiff,´´ and ``professional pawns.´´"
"This ability to profit from ADA litigation has led some law firms to send disabled individuals to as many businesses as possible in order to have them aggressively seek out all violations of the ADA." The Court continued that "Then, rather than informing the businesses of the violations and attempting to remedy them, lawsuits are filed and damage awards are requested."
"The consequences of this abuse of the ADA are severe: businesses and insurers are harmed, the integrity of the bar is called into question, and the public's confidence in the courts is impaired."
"Most significant, however, is the adverse effect this type of abusive litigation has on disabled individuals themselves. These lawsuits denigrate the important purpose behind the ADA and create a backlash against those disabled persons who rely on the ADA as a means of achieving equal access." The Court concluded that "Indeed, businesses may become fearful of disabled patrons, thereby leading to more misunderstanding, isolationism, and discrimination. Simply put, this litigation abuse of the ADA results in the exact harmful consequences that Congress sought to eradicate by passing the ADA."
Commentary: Significance for Technology Companies. This case has no consequences for the question of whether or not the ADA applies to e-commerce sites, advertising supported web sites, software applications, and other new technologies. However, if the ADA is extended to new technologies, then this opinion could be significant to technology companies.
The plain language of the ADA does not reach these new technologies.
Title III of the ADA pertains to "public accommodations". (Title I deals with disability based discrimination in employment. Title II deals with disability access to public services.) Title III is codified at 42 U.S.C. §§ 12181-12189. This is the title that requires the removal of access barriers for persons with physical disabilities.
Section 12181 provides definitions for Title III. Subsection 12181(7) enumerates twelve categories of "public accommodations". It includes such things as "inn, hotel, motel", "restaurant", "motion picture house", "grocery store", "bank", and "terminal, depot, or other station used for specified public transportation". The entire list is physical places. Nothing in the statute enumerates or suggests that it applies to web sites or software.
Section 12182 provides that "No individual shall be discriminated against on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation by any person who owns, leases (or leases to), or operates a place of public accommodation". (Parentheses in original.)
Section 12188 provides a private right of action.
The U.S. District Court (SDFl) held in Access Now v. Southwest Airlines that the ADA does not apply to web sites. Access Now alleged violation of Title III of the ADA on the basis that Southwest Airlines had not made its web site accessible to blind persons using a screen reader. The District Court dismissed the complaint for failure to state a claim, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure (FRCP). The Court wrote that this was a case of first impression, and reached its decision on the basis of statutory construction. It held that "the plain and unambiguous language of the statute and relevant regulations does not include Internet websites among the definitions of ``places of public accommodation´´".
See, October 18, 2002, Order Granting Defendant's Motion to Dismiss, which is also published at 227 F.Supp.2d 1312, and story titled "District Court Holds ADA Does Not Apply to Web Site" in TLJ Daily E-Mail Alert No. 538, October 30, 2002. Then, on September 24, 2004, the U.S. Court of Appeals (11thCir) issued its opinion [PDF] dismissing the appeal, without addressing the merits of the case, on the basis that the "none of the issues on appeal are properly before us". The District Court case number is 02-21734 CV-PAS. The Court of Appeals case number is 02-16163.
However, there are now several cases pending in District Court that urge the courts to extend the ADA to web sites. Perhaps the most notable of these is National Federation of the Blind v. Target, D.C. No. C 06-01802 MHP, is pending in the U.S. District Court (NDCal). See, September 5, 2006, Memorandum and Order [26 pages in PDF] denying motion to dismiss. See also, story titled "District Court Issues Ruling in Case Involving Claim That Web Site Violates the ADA" in TLJ Daily E-Mail Alert No. 1,657, October 18, 2007.
Moreover, the Department of Justice (DOJ), which has authority to enforce the ADA, has taken some action towards extending the ADA to new technologies. See, story titled "DOJ Applies ADA Public Accommodations Status to Online Educational Service" and story titled "Commentary: Extending ADA Public Accommodations Treatment to Online Activities" in TLJ Daily E-Mail Alert No. 1,649, October 2, 2007.
While the just released opinion in Doran v. 7-Eleven says nothing about applying the ADA to new technologies, it could have several consequences for technology companies if the ADA is extended to them.
First, it should be noted that this is a 9th Circuit opinion that contradicts Supreme Court precedent. If it is not overturned on en banc review, or by the Supreme Court, other circuits may follow the long line of Supreme Court cases, rather than this opinion.
Brick and mortar public accommodations located in other circuits may not be subject to the jurisdiction of the courts in the 9th Circuit, and hence, may not be affected by this opinion. However, online businesses and software companies sell to customers in the 9th Circuit. Hence, in whatever circuit they may be located they might be subject to suit in the 9th Circuit, and hence, to this opinion.
Second, even under this opinion, the plaintiff must allege some violation of the ADA. For brick and mortar public accommodations that means that the disabled plaintiff must visit the stores, restaurants, and other public accommodations. It takes time to travel and inspect. Doran had to drive 550 miles to visit the 7-Eleven in order to bring the present lawsuit.
In contrast, if the ADA is extended to new technologies, Doran and his attorneys will be able to search for litigation targets by surfing the web.
Third, if the ADA is extended to new technologies, then the discovery component of the majority's opinion will impact these new technologies more severely than brick and mortar public accommodations.
Discovery in cases against actual public accommodations is inherently simple, easy, and non-burdensome. Accommodations are physical places. Much discovery takes place by visiting the premises. Moreover, public accommodations are open to the public, which includes tort lawyers and plaintiffs. There is little if any disruption to the business operations of 7-Eleven stores when tort mills send their attorneys or staff around to measure the width of handicap parking spaces.
In contrast, discovery from web site operators and software sellers would be fundamentally different, and vastly more disruptive and damaging.
The targeted operations of these businesses exist in their source code for software, hardware, and network designs, which are mostly non-public, secret, and protected by copyright law and trade secret law.
This is valuable proprietary information the disclosure of which could cause harm to the target of ADA actions. Tech companies may be reluctant to disclose such information to persons who possess the ethical luster of California tort lawyers.
Tech companies might make settlement payments in meritless ADA actions to avoid disclosing proprietary information during pretrial discovery. In turn, plaintiffs' lawyers may target tech companies with ADA suits in District Courts in the 9th Circuit in anticipation that they will make payments to avoid disclosures.
If the ADA is to be extended to tech companies, then the present opinion deprives tech companies of some of the legal tools for ending frivolous suits, including summary judgment and dismissal for lack of standing. In the present case, the majority affirmed the summary judgment against Doran on all of the claims that he could articulate, yet the majority allowed the suit to continue, with discovery into things that caused him no harm.
Doran's attorneys can now conduct discovery at the store regarding such things as the height of the ATM machine. The burden on 7-Eleven is limited. In contrast, giving plaintiffs' lawyers free reign to examine source code would be a considerable burden.
SEC Releases Information on Mandatory XBRL Tagging Programs
11/9. The Securities and Exchange Commission (SEC) announced in a release that SEC Chairman Chris Cox "concluded a week of bilateral discussions with securities regulators from Japan, China, Korea, Canada and Australia focused, among other things, on timetables for implementation of interactive data initiatives for financial reporting."
The SEC has an interactive data program for which participation is voluntary. The release points out that, in contrast, some other nations are converting to mandatory filing of electronic statements with data tagged using eXtensible Business Reporting Language (XBRL).
Cox (at left) has been actively promoting interactive data. However, he has not yet publicly proposed making the use of interactive data in SEC filings mandatory.
Also, Cox gave a speech in Tokyo, Japan, in which he did not discuss interactive data.
The SEC release states that "Japan has mandated public company reporting using XBRL for the full financial statements of all listed companies beginning with quarterly reporting in the second quarter of 2008."
It also states that the People's Republic of China (PRC), which is "the first country in the world to mandate XBRL reporting, is requiring interactive data filing for the full financial statements of all listed companies in quarterly, half-year and annual reports under rules of both the CSRC and the Shanghai Stock Exchange."
It adds that "Beginning with only 50 companies voluntarily reporting using XBRL in 2003, the program has grown to now include more than 800 companies. In addition to the XBRL taxonomy for listed companies, a taxonomy for fund companies in China has also been developed."
In comparison, the SEC reported on September 20, 2007, that participation in the SEC's voluntary program is only up to "more than 40 companies". See, release. The SEC's web site listed 46 companies as of November 13, 2007, that are participating in its voluntary program.
The SEC release also states that Korea has taken "steps toward adopting XBRL for regulatory reporting. The FSS established a voluntary XBRL filing program in 2006. Beginning in October 2007, all publicly held companies were required to file financial statements using XBRL". Moreover, "the system allows interested non Korean-speaking investors to view and analyze a company's financial statements in English."
The SEC release also notes that Canada's XBRL program remains voluntary.
11/9. The Department of the Treasury's (DOT) Office of the Comptroller of the Currency
(OCC), DOT's Office of Thrift Supervision (OTS), Board of Governors of the Federal Reserve
System (FRB), Federal Deposit Insurance Corporation (FDIC), National Credit Union
Administration (NCUA), and Federal Trade Commission (FTC) published a
notice in the Federal Register that announces, describes, recites, and sets
effective dates for their joint rules and guidelines regarding identity theft
red flags. The joint final rules and guidelines are effective January 1,
2008. The mandatory compliance date for this rule is November 1, 2008.
See, Federal Register, November 9, 2007, Vol. 72, No. 217, at Pages 63717-63775.
11/9. The Copyright Royalty Board published a notice in the Federal Register that announces, describes, recites, and sets the comment deadline (December 10, 2007) for, the Copyright Royalty Judges proposed regulations that set the rates and terms for the use of sound recordings in transmissions made by new subscription services and for the making of ephemeral recordings necessary for the facilitation of such transmissions for the period commencing from the inception of the new subscription service through December 31, 2010. See, Federal Register, November 9, 2007, Vol. 72, No. 217, at Pages 63532-63535.
11/9. The U.S. Patent and Trademark Office (UPPTO) announced in a release that the USPTO, European Patent Office (EPO), and Japan Patent Office (JPO) signed a Memorandum of Understanding (MOU) "to coordinate work sharing; develop a means to improve quality of applications; coordinate electronic business developments; harmonize or standardize search strategies, tools and procedures; and promote dissemination of patent information." See, USPTO release.
11/9. Securities and Exchange Commission (SEC) Commissioner Annette Nazareth gave a speech in Boca Raton, Florida. She stated, among other things, that "The telecommunications revolution has created a world in which borders have almost no relevance. After all, computers know nothing of borders -- and money flows without regard to geography. In a fully electronic trading world, one can appreciate the difficulty of maintaining high national standards in a borderless trading environment." She also stated that "Our securities regulatory regime has constrained, to some degree, the ability of our investors to access foreign markets and foreign securities seamlessly and cost effectively."
Rep. Velázquez Calls for Delay of SOX 404(b) Implementation
11/8. Rep. Nydia Velázquez (D-NY) stated in a release that "I call on the SEC to delay implementation of SOX 404(b) until the needs of small ventures are taken into account".
Her statement follows the release by the U.S. Chamber of Commerce of a report [17 pages in PDF] titled "Cost of SOX Survey". Also, the House Small Business Committee, which she chairs, will hold a hearing on Wednesday, November 14, 2007, on this subject.
The Chamber conducted an on-line survey to compile data on the projected costs of Section 404 of the Sarbanes Oxley Act and its impact on small businesses. See also, Chamber release.
The report states that "Fifty-nine percent of respondents when asked ``to what extent do you expect compliance with SOX 404 will allow your company and your company’s auditors to detect and prevent material fraud?´´ indicated ``very little at all´´."
The report also states that 89% of respondents "expect costs will ``greatly exceed´´ or ``moderately exceed´´ the benefits of SOX 404 compliance."
The report also covers expected costs of compliance.
The report states that the survey was sent by e-mail to 5,000 contacts "that could potentially be affected by the implementation of SOX Section 404". However, it received only 177 responses. That is, its response rate was only 3.5 percent.
Rep. Velázquez stated that "I am disappointed that the SEC has chosen to ignore small firms, failing to perform even the most basic analysis to understand the consequences for entrepreneurs ... This data confirms what many in the small business community have suspected and feared -- that small firms will incur heavy costs due to these onerous regulations. This is a burden that small firms cannot and should not be forced to bear."
Her release adds that "The survey showed that the cost of compliance would amount to more than 3 percent of net income for nearly half of non-accelerated filers. Additionally, with SOX 404(b) over a year away, nearly 60 percent of firms said they have already engaged an outside auditor to handle compliance."
Senate Commerce Committee Holds Hearing on Media Localism, Diversity and Ownership
11/8. The Senate Commerce Committee (SCC) held a hearing titled "Localism, Diversity and Media Ownership".
Sen. Daniel Inouye (D-HI), the Chairman of the SCC, wrote in his opening statement that "I am very troubled by efforts at the FCC to allow greater consolidation of our media. As we know from recent history, this is an area that requires tremendous caution. Four years ago, the FCC substantially relaxed the rules that govern media ownership in this country. Millions of Americans contacted the FCC to complain. The United States Senate voted to support a 'resolution of disapproval' in response to the FCC decision. Next, the courts got involved, and the Third Circuit shipped the agency’s handiwork right back to the FCC."
He added that "The FCC is poised to review its media ownership rules yet again, and may take some action before the end of this year."
He advised that "rather than rushing to judgment on new rules, regardless of whether they are a broad set of new rules or modest changes, the FCC should focus on completing pending proceedings on localism and public interest obligations that have long languished for lack of attention."
Sen. Ted Stevens (R-AK), the ranking Republican on the SCC, talked about new media technologies. He said in his opening statement that "we need to understand that those platforms are changing. Just Tuesday, the latest numbers reveled the number of print subscriptions to most newspapers continue to decline. Meanwhile, internet advertising is soaring."
He continued that "I don’t think we know yet where that change is going to go and what it’ll mean for people who communicate, nor what it means for people who try to find ways to own the entities who provide the information stream. It's my hope that our Committee and the Federal Communication Commission will look at all of the ways we need to pursue to preserve localism and diversity, and as much as possible, I’ll try to understand the changes in the marketplace."
See, also prepared testimony [PDF] of Alex Nogales (National Hispanic Media Coalition), prepared testimony [PDF] of Jim Goodmon (P/CEO of Capitol Broadcasting Company), prepared testimony [PDF] of Tim Winter (Parents Television Council), prepared testimony [PDF] of Frank Blethen (Publisher and CEO of the Seattle Times), prepared testimony [PDF] of John Lavine (Dean of the Medill School at Northwestern University).
More Capitol Hill News
11/8. The House approved HR 3688 [LOC | WW], the "United States-Peru Trade Promotion Agreement Implementation Act", by a vote of 285-132. See, Roll Call No. 1060. This is the only free trade agreement (FTA) that the House has approved in the Democratic controlled 110th Congress. There are also FTAs with Korea, Columbia, and Panama that await Congressional approval. The AeA's Robert Mulligan stated in a release that "While Peru might be a small market for U.S. high-tech products, we have a significant tech trade surplus with Peru". Ed Black, head of the Computer and Communications Industry Association (CCIA), stated in a release that "As the leading export industry of the U.S., the high-tech sector benefits greatly from expanded trade. Today's bipartisan vote of 285-132 stands in contrast to the party-line votes on recent FTAs such as CAFTA and Oman ... We hope that this step will lead to a long-awaited return to bipartisanship on trade issues." See also, statement by President Bush.
11/8. The Senate Judiciary Committee (SJC) held an executive business meeting. It began consideration of S 2248 [LOC | WW], the "Foreign Intelligence Surveillance Act of 1978 Amendments Act of 2007". However, Sen. Arlen Specter (R-PA), the ranking Republican on the SJC, exercised his option to hold over further consideration for one week. Sen. Patrick Leahy (D-VT), Sen. Specter, Sen. Orrin Hatch (R-UT), Sen. Dianne Feinstein (D-CA), Sen. Russ Feingold (D-WI), Sen. Jeff Session (D-AL), and Sen. Sheldon Whitehouse (D-RI) all made long opening statements. Sen. Leahy, the Chairman of the SJC, said that this bill will be the first item on the agenda for the business meeting of Thursday, November 15, 2007.
11/8. The Senate Judiciary Committee (SJC) held an executive business meeting. It held over consideration of four judicial nominees: Joseph Laplante (to be a Judge of the U.S. District Court for the District of New Hampshire), Reed O'Connor (U.S.D.C., Northern District of Texas, Dallas Division), Thomas Schroeder (U.S.D.C., Middle District of North Carolina), and Amul Thapar (U.S.D.C., Eastern District of Kentucky). Sen. Jon Kyl (D-AZ) said that all four are unopposed. Sen. Patrick Leahy (D-VT), the Chairman of the SJC, said that consideration was held over for one week at the request of a member of the SJC. He added that the four will be on the agenda for the November 15, 2007, meeting and that he will vote for all four nominees.
11/8. The Senate Judiciary Committee (SJC) held an executive business meeting. It held over consideration of S 352 [LOC | WW], the "Sunshine in the Courtroom Act of 2007". This bill is on the SJC's agenda for its next executive business meeting, on Thursday, November 15, 2007.
People and Appointments
11/8. The Senate confirmed Michael Mukasey to be Attorney General by a vote of 53-40. See, Roll Call No. 407.
11/8. President Bush nominated Patricia Haslach to be United States Senior Coordinator for the Asia-Pacific Economic Corporation (APEC) forum. See, White House release.
11/8. Ken Ferree was named President of the Progress & Freedom Foundation (PFF). The PFF is a Washington DC based free market oriented think tank that focuses on communications, information technologies, and intellectual property. Ferree was Bureau Chief of the Federal Communications Commission's (FCC) Media Bureau from 2001 through 2005. See, PFF release.
11/8. The Federal Communications Commission (FCC) released the text [PDF] of its Report and Order, Declaratory Ruling, Order on Remand, and Notice of Proposed Rulemaking that, among other things, extends the FCC's local number portability (LNP) rules to interconnected voice over internet protocol (VOIP) providers and the telecommunications carriers that obtain numbers for them. The FCC adopted this item on October 31, 2007. See, story titled "FCC Extends LNP Requirements to Interconnected VOIP" in TLJ Daily E-Mail Alert No. 1,668, November 2, 2007. Initial comments in response to the NPRM will be due within 30 days of publication of a notice in the Federal Register. Reply comments will be due within 60 days. As of the November 9, 2007, issue of the Federal Register, this publication had not taken place.
11/8. Federal Communications Commission (FCC) Commissioner Deborah Tate released a statement [PDF] regarding early termination fees of wireless service providers. She stated that "I was pleased to see two announcements this week, one by Sprint Nextel and one by T-Mobile, in which these carriers described plans to prorate Early Termination Fees (ETFs) for wireless consumers. This news, along with earlier announcements of similar policies by AT&T and Verizon Wireless, means that the vast majority of Americans subscribing to wireless services will have even more choices in the wireless market."
11/8. Federal Communications Commission (FCC) Chairman Kevin Martin gave a speech [2 pages in PDF] at a FCC event titled "Digital Television Consumer Education Workshop Focusing on Seniors".
11/8. Securities and Exchange Commission (SEC) Chairman Chris Cox gave a speech in Tokyo, Japan, titled "Learning from the Shogun -- Toward IOSCO's Vision of A Global Market". He stated that "Today's securities swindlers use technology to devise ever-more sophisticated means of robbing investors of their savings, and to make it harder for regulators and prosecutors to catch them." He referenced identity theft, phishing scams and spam e-mails with stock tips. He also said that "Our growing reliance on electronics is also making us vulnerable to network outages -- both accidental and malicious. And as the world saw when America's markets closed on 9-11, our growing interconnectedness can result in problems in one country causing customers and institutions around the world to question their own markets' reliability. The potential for a loss in market confidence to spread instantly, and worldwide, is another byproduct of instant global communication." He also argued that national securities regulators "need to harmonize, recognize, and standardize." He said that the SEC "is getting ready next week to consider a final rule that would allow issuers who use International Financial Reporting Standards in their home countries to also use IFRS in their filings with the SEC, without any longer having to reconcile that to U.S. Generally Accepted Accounting Principles. And it's why we're considering the concept of offering that same option to U.S. domestic issuers."
HOTI Urges FCC to Review Comcast Actions Affecting BitTorrent
11/7. Hands Off the Internet (HOTI) sent a letter to Federal Communications Commission (FCC) Chairman Kevin Martin regarding "Request for FCC Review of Comcast actions involving BitTorrent".
The Free Press, Public Knowledge, and other groups that advocate government imposed network neutrality mandates, filed a complaint [48 pages in PDF] with the FCC on November 1, 2007, regarding Comcast.
The complaint alleges that Comcast is "degrading peer-to-peer protocols" by inserting forged reset packets into communications between peers in peer to peer (P2P) communications that terminate those communications. This, the complaint alleges, interferes with Comcast's subscribers' use of applications like BitTorrent. The complaint alleges that this violates a FCC's 2005 policy statement [3 pages in PDF].
See also, story titled "Free Press Files Complaint with FCC Alleging that Comcast Is Violating 2005 Policy Statement" in TLJ Daily E-Mail Alert No. 1,669, November 5, 2007.
The HOTI letter states that "The FCC must determine if any of its four principles have in fact been violated".
The HOTI letter also asserts that the FCC has "clear authority" under Title I to enforce the four principles listed in the policy statement.
The HOTI's list of members includes AT&T, Alcatel-Lucent, and other telecom sector companies. However, it also includes the National Association of Manufacturers (NAM), American Conservative Union (ACU), and Citizens Against Government Waste (CAGW). Cable companies and their trade groups are not members of the HOTI.
The HOTI opposes government network neutrality mandates.
Its web site lists its address as a Post Office box in Arlington, Virginia.
Mike McCurry, press secretary to former President Bill Clinton, is a Co-Chair of HOTI. The other Co-Chair is Christopher Wolf. Wolf is also a partner in the Washington DC office of the law firm of Proskauer Rose.
Rep. Danny Davis Introduces Government Telework Bill
11/7. Rep. Danny Davis (D-IL) and others introduced HR 4106 [LOC | WW], the "Telework Improvements Act of 2007", a bill to promote teleworking at federal executive agencies.
This bill provides that within 180 days every agency "shall establish a policy under which employees may be authorized to telework. Authorized employees shall be allowed to telework at least 20 percent of the hours worked in every 2 administrative workweeks".
However, this is subject to the limitation, "without diminishing employee performance or agency operations".
There are also exemptions for employees with "daily access to classified information" and with responsibilities that "require daily face-to-face contact with members of the public or other persons, or the use of equipment, at the employee's regular place of employment".
It was referred to the House Oversight and Government Reform Committee.
There are other bills related to telework pending in the House and Senate. The Senate Homeland Security and Government Affairs Committee (SHSGAC) has scheduled a meeting to consider bills on Wednesday, November 14, 2007. The agenda includes S 1000 [LOC | WW], the "Telework Enhancement Act of 2007".
On November 1, the House Judiciary Committee's (HJC) Subcommittee on Commercial and Administrative Law held a hearing on HR 3359 [LOC | WW], the "Mobile Workforce State Income Tax Fairness and Simplification Act of 2007". This bill is primarily directed at mobile workers. However, it would also affect state taxation of teleworkers. See also, story titled "Summary of Teleworker and Mobile Worker Protection Bills" in TLJ Daily E-Mail Alert No. 1,665, October 30, 2007.
Douglass Lindholm of the Council On State Taxation wrote in his prepared testimony [PDF] on November 1 that "The problem addressed by H.R. 3359 can be simply stated: every business day thousands of employees across the country are sent by their employers to work in nonresident states. The vast majority of these trips are temporary in nature, whereby the employee conducts business in the nonresident state for a short period of time and then returns to his/her resident state. Unfortunately, states that impose a personal income tax have diverse rules relating to the obligation of the nonresident employee to file a personal income tax return and to the commensurate employer withholding deductions."
Senators Leahy and Cornyn Introduce Intellectual Property Enforcement Act
11/7. Sen. Patrick Leahy (D-VT) and Sen. John Cornyn (R-TX) introduced S 2317 [PDF | [LOC | WW], the "Intellectual Property Enforcement Act".
This is an enforcement bill, regarding civil actions by intellectual property rights (IPR) holders, criminal actions by the government, civil actions by the government, and the activities and operations of the Department of Justice (DOJ) and its Federal Bureau of Investigation (FBI). It does not create or alter any rights in intellectual property. It pertains primarily to copyright, but also reaches trademark and economic espionage.
It contains numerous provisions. It would, among other things:
Sen. Cornyn stated in a release that "gives the law enforcement community the additional tools needed to meet the growing threat to America's innovation economy posed by intellectual property pirates and counterfeiters".
There are other bills pending in the House and Senate that relate to enforcement of intellectual property rights. The DOJ has its own proposals. Sen. Leahy stated in the Senate that this bill "will start the process of considering how to ensure that our enforcement laws are up to the task, and that the necessary resources are in place to enforce them."
See also, Sen. Leahy's and Sen. Cornyn's section by section summary.
See, full story.
FCC Releases 2nd Report and Order and NPRM on Hearing Aids and Wireless Handsets
11/7. The Federal Communications Commission (FCC) released its Second Report and Order and Notice of Proposed Rulemaking [MS Word] regarding hearing aid compatibility mandates for wireless handsets.
This item concludes that "the current record does not support expanding the mandate for in-store demonstrations to independent retailers at this time." It also decides "not to narrow or otherwise change at this time the de minimis rule that exempts service providers and manufacturers with small product lines from the hearing aid compatibility regime".
The NPRM portion of this item seeks "renewed comment on these two issues". Initial comments will be due within 30 days of publication of a notice in the Federal Register. Reply comments will be due within 45 days. This publication had not taken place as of the November 8, 2007, issue of the Federal Register.
This item is FCC 07-192 in WT Docket Nos. 07-250 and 01-309.
More Capitol Hill News
11/7. The Public Knowledge (PK) and other groups wrote a letter to members of the Senate expressing support for the Senate version of the patent reform bill. The Senate Judiciary Committee (SJC) amended and approved S 1145 [LOC | WW], the "Patent Reform Act of 2007", on July 19, 2007. The House passed a different patent reform bill, HR 1908 [LOC | WW], also titled the "Patent Reform Act of 2007", on September 7, 2007. However, the full Senate has taken no action on either bill. The other groups that signed the letter are the Electronic Frontier Foundation (EFF), Consumer Federation of America, Consumers Union, Knowledge Ecology International, and US Public Interest Research Group.
11/7. The Senate Judiciary Committee (SJC) held a hearing titled "Examining U.S. Government Enforcement of Intellectual Property Rights". See, opening statement of Sen. Patrick Leahy (D-MA), the Chairman of the SJC. See also, prepared testimony of Sen. Evan Bayh (D-IN), prepared testimony of Chris Israel (the Department of Commerce's U.S. Coordinator for International Intellectual Property Enforcement), prepared testimony of Chris Moore (Department of State's Deputy Assistant Secretary for Trade Policy and Programs), and prepared testimony of Kevin O'Connor (Department of Justice's Task Force on Intellectual Property).
11/7. Sen. Joe Lieberman (D-CT), Sen. Susan Collins (R-ME), and Sen. Thomas Carper (D-DE) introduced S 2321 [LOC | WW] "E-Government Reauthorization Act of 2007", a bill to amend the E-Government Act of 2002, which is Public Law No. 107-347. It was referred to the Senate Homeland Security and Government Affairs Committee (SHSGAC), which has scheduled a meeting to consider this bill on Wednesday, November 14, 2007.
11/7. The U.S. Court of Appeals (6thCir) issued its divided opinion [12 pages in PDF] in US v. Garner, a criminal case in which it reversed the conviction. The issue on appeal was access to cell phone records. There was a car jacking and robbery in which the multiple perpetrators used the cell phone of the victim. The FBI obtained the cell phone records around the time of the crime from Nextel pursuant to a subpoena. These records listed numbers for incoming and outgoing calls, but not names associated with those numbers. The prosecution had time before trial to investigate these numbers. It introduced these records at trial, over objections. The prosecution did not provide the records to defense counsel until the beginning of trial. Defense counsel was not able to investigate prior to trial. The District Court denied a motion for continuance. A codefendant, who had already pled guilty, identified the defendant. The Court of Appeals reversed. It reviewed the circumstances and concluded that the codefendant had incentive to lie about the identity the second perpetrator, and that the call records were relevant to who that person was, and the credibility of the testimony against the defendant. The Court of Appeals wrote that "The cell phone records are material because the person or persons who attacked Kareem Dotson and took his truck also had his cell phone, which was taken from Dotson's pocket during the attack. The cell phone was used to make and receive calls during the time it was out of Dotson's possession, presumably by the person or persons who attacked Dotson and took his truck. The failure of the government to turn over the records within a time frame that would allow Garner's counsel to investigate them prejudiced defendant."
11/7. Federal Reserve Board (FRB) Governor Kevin Warsh gave a speech in New York titled "The End of History?". He said that "During the past several years, the cause of economic freedom and the culture of capitalism have appeared firmly on the march. Founding ideologies aside, countries' economies are more connected by virtue of increased trade of products and services. Free markets, technological innovation, and instant communications are the watchwords of the global economy."
11/7. The Federal Trade Commission (FTC) held a news conference, and published a web page, announcing the filing of six civil complaints in U.S. District Courts against, and six settlements with, companies and individuals accused of violating the requirements of the National Do Not Call Registry. The FTC's web page contains hyperlinks to the complaints and settlements. FTC Chairman Deborah Majoras stated in a release that "By bringing enforcement actions, like those announced today, we will ensure that the small number of bad actors pay a price for not adhering to the law and respecting consumers’ privacy requests."
House Commerce Committee Republicans Seek Hearing on Google DoubleClick Merger
11/6.The twelve Republican members of the House Commerce Committee's (HCC) Subcommittee on Commerce, Trade and Consumer Protection sent a letter [PDF] to Rep. Bobby Rush (D-IL), the Chairman of the Subcommittee, requesting that he schedule a hearing on the proposed merger of Google and DoubleClick.
The Senate Judiciary Committee (SJC) held a hearing on the merger on September 27, 2007. See, prepared testimony of David Drummond (Google), prepared testimony of Brad Smith (Microsoft), prepared testimony of Tom Lenard (Progress & Freedom Foundation), prepared testimony of Scott Cleland, and prepared testimony of Marc Rotenberg (Electronic Privacy Information Center).
The twelve Republicans wrote that that hearing focused on the "competitive impact of the proposed merger", and that "more questions arose than were answered regarding the privacy implications of the merger."
They wrote that "Many companies possess search engines and track consumer habits. These companies may amass consumer information into databases, the likes of which have never before been seen in the history of commerce. One focus of this hearing could be on how this information is used and what could be done to better protect consumer privacy. Google and DoubleClick would have one of the largest search query databases with one of the world's largest online user behavioral profile databases. The privacy implications of such a merger are enormous and without an in-depth examination, we and the American public will not fully understand what all of those implications may be."
Rep. Joe Barton (R-TX), the ranking Republican on the HCC, stated in a release that "the more I know about the Google-DoubleClick merger, the more I realize that that the personal privacy of computer users doesn't seem to be much of a priority. Google is an information colossus already, but add on DoubleClick's marketing power and you produce a single commercial entity that can know more about you and me than nearly everybody but mom and the IRS. It looks like the old saw, `I know where you live,´ is only the start. They’ll know where we go, who and what we see, and what we buy, too. And they’ll know it forever."
Rep. Barton continued that "They say they just want their ads to match our behavior, but I wonder if the intentional collection and coordination of all that personal data about us is such a good idea". He added that "policymakers should know more about Google's intentions than we do, and a serious hearing to get at the facts looks like a very good idea."
AAI Paper Argues FTC Should Block Google DoubleClick Merger
11/6. The American Antitrust Institute (AAI) released a paper [13 pages in PDF] titled "Google Acquisition of DoubleClick: Antitrust Implications". It argues that the Google DoubleClick merger presents antitrust issues that cannot be resolved by imposing conditions; therefore, it should be blocked.
It argues that there are relevant online advertising markets, and that while the two companies provide different services, they are starting to provide competing services in these markets, so there is a horizontal competition issue. It argues that the two companies are starting to compete in the market for distributing online advertising space of third party non-search web sites, and in the market for publisher ad serving tools.
It argues that the Federal Trade Commission (FTC), which is reviewing the merger, should consider a "potential competition theory".
The AAI is a Washington DC based group that advocates the interests of the plaintiffs' antitrust bar. It states in its web site that it supports "a more aggressive antitrust agenda".
The AAI paper first addresses what are the relevant markets. It asserts that "online advertising is sufficiently distinct that a monopolist in the sale of online advertising would be able to increase prices a small but significant amount without losing so many sales to offline sources to make the price increase unprofitable."
It adds that "Online advertising offers features -- particularly targeting, performance-based pricing, and measurability -- that other types of advertising cannot match."
And, it states that "if radio and newspaper advertising are each relevant markets because advertisers find value in their unique attributes, as the Justice Department has contended, then there can be little question that online advertising is a separate relevant market." (Footnote omitted.)
The paper continues that "the foregoing is just a starting point for the analysis. For advertisers, there may be narrower relevant markets within the online advertising market based on the type of ads (e.g., search, contextual, profiling) or based on services used by advertisers in connection with buying ads. Likewise, for online publishers selling ads, there may be distinct markets based on the type of ads sold by the publishers and the services used by publishers in selling (or “monetizing”) their ad space."
Google has argued that it does not compete with DoubleClick, and that there can be no antitrust issue.
For example, David Drummond, Chief Legal Officer of Google, wrote in his prepared testimony for the Senate Judiciary Committee (SJC) hearing on September 27, 2007, that "our purchase of DoubleClick does not raise antitrust issues because of one simple fact: Google and DoubleClick are complementary businesses, and do not compete with each other. DoubleClick does not buy ads, sell ads, or buy or sell advertising space. All it does is provide the technology to enable advertisers and publishers to deliver ads once they have come to terms, and provide advertisers and publishers statistics relating to the ads."
Drummond argued that "The simplest way to look at this is by way of analogy. DoubleClick is to Google what FedEx or UPS is to Amazon.com."
In contrast, the AAI paper argues that "Google and DoubleClick have recently introduced products that make the companies direct competitors in the markets for distributing third-party websites’ online advertising space (or ``inventory´´) and for ad serving services provided to web publishers, and their traditional products compete (albeit somewhat indirectly) in the online advertising distribution market." (Parentheses in original.)
It first explains its online advertising distribution argument. "From a publisher perspective, Google’s AdSense and DoubleClick's DART for Publishers offer alternative solutions for publishers to monetize their ``white space.´´ Google’s contextual-based text ads and DoubleClick's profiling-based display ads are different techniques for targeting ads to consumers, which many advertisers apparently see as substitutes."
It also states that "DoubleClick recently introduced its Advertising Exchange, which competes directly with Google's AdSense network in distributing online advertising inventory of third-party (non-search) web sites. That “intermediation” market includes integrated ad networks such as AdSense (which combine ad serving services with distribution), unintegrated ad networks such as Advertising.com, and other exchanges such as Yahoo’s recently acquired Right Media exchange and Microsoft’s recently acquired AdECN exchange." (Parentheses in original. Footnote omitted.)
The paper then addresses publisher ad serving. It states that "With Google's recent introduction of an ad serving product (apparently in beta form) similar to DoubleClick’s DART for Publishers, Google and DoubleClick also compete directly in the market for publisher-side ad servers and related services. That market also appears to be relatively concentrated, with DART for Publishers the market leader". Although, the AAI paper concedes that "Google’s ad server apparently has a negligible current market share". (Parentheses in original.)
The paper argues that this merger should be viewed "through the lens of potential competition doctrine."
It argues that "Under the non-horizontal merger guidelines, such a merger should be challenged if the markets at issue are concentrated, the firm already in the market has a significant market share, entry is difficult, and efficiencies are not likely to reverse the merger’s potential to harm consumers. As discussed above, the markets at issue appear to be concentrated, Google and DoubleClick appear to have significant market shares in those markets, and entry by others is likely to be difficult." (Footnotes omitted.)
The paper also argues that this merger does not appear likely to result in appreciable merger specific efficiencies. It adds that this merger, viewed as vertical integration, may have exclusionary effects.
It concludes that "The upshot of the merger may be higher costs for web publishers to sell their advertising space, which ultimately may affect the diversity and richness of content available on the Internet".
It also concludes that there is a "a risk of significant foreclosure effects from Google’s control over DoubleClick’s publisher and advertiser tools and integration of those tools with Google’s dominant search engine and contextual advertising network. If foreclosure were the only issue, it might be resolved by placing conditions on the merger, even though there are costs involved in enforcing a regulatory decree. But unless the horizontal concerns are rebutted, AAI believes that the prudent course is for the FTC to block the merger." (Footnote omitted.)
House Committee Grills Yahoo Executives
11/6. The House Foreign Affairs Committee (HFAC) held a hearing titled "Yahoo! Inc.’s Provision of False Information to Congress". The witnesses were Jerry Yang (CEO of Yahoo) and Michael Callahan (General Counsel of Yahoo).
Rep. Tom Lantos (D-CA) called Yahoo a "spineless and irresponsible" company, whose General Counsel, Michael Callaghan, provided "false information to this Committee" at a hearing in 2006.
Rep. Lantos' criticism was twofold. First, it misled the HFRC about its assistance to the government of the People's Republic of China (PRC) in identifying a user of Yahoo China. Second, he argued that the underlying assistance to the PRC was abhorrent.
Rep. Lantos is also pushing legislation, HR 275 [LOC | WW], the "Global Online Freedom Act of 2007". Rep. Chris Smith (R-NJ) is the sponsor, and Rep. Lantos is a cosponsor. The HFAC approved an amendment in the nature of a substitute [29 pages in PDF] on October 23, 2007. However, the full House has not taken up the bill.
See also, story titled "House Committee Approves Global Online Freedom Act" in TLJ Daily E-Mail Alert No. 1,662, October 25, 2007.
See, full story.
Martin Praises Open Handset Alliance Announcement
11/6. Federal Communications Commission (FCC) Chairman Kevin Martin commented on the Open Handset Alliance's (OHA) project named Android.
He said in a release [PDF] that "I was pleased to hear the announcement by the Open Handset Alliance of the plans to introduce an open platform for mobile devices. As I noted when we adopted open network rules for our upcoming spectrum auction, I continue to believe that more openness -- at the network, device, or application level -- helps foster innovation and enhances consumers’ freedom and choice in purchasing wireless service."
The FCC adopted its 700 MHz Second Report and Order on July 31, 2007, and released the text [PDF] on August 10, 2007. See also, story titled "FCC Adopts 700 MHz Band Order" in TLJ Daily E-Mail Alert No. 1,619, July 31, 2007.
Also, Steve Largent, head of the CTIA Wireless Association, stated in a release that "If ever there was evidence that so-called `net neutrality´ rules were not needed, today's news is it. Because the government has never dictated a single technology or business model, companies big and small are constantly entering the wireless marketplace to put forward innovative mobile products and services that consumers want and need."
He added that because of the OHA's announcement, "it appears that wireless users will soon have yet another mobile operating system to choose from, not to mention an ever-expanding number of applications, providers and handsets."
See also, story titled "Open Handset Alliance Announces Android and New Members" in TLJ Daily E-Mail Alert No. 1,670, November 6, 2007.
People and Appointments
11/6. The Senate Judiciary Committee (SJC) approved the nomination of Michael Mukasey by a vote of 11-8. The full Senate has not yet voted on this nomination. President Bush stated in a release that "The Justice Department is crucial to both our law enforcement and national security missions, and so we look forward to a vote in the full Senate to confirm Judge Mukasey, allowing us to move to filling the senior leadership positions at the Justice Department."
11/6. President Bush gave a speech in Washington DC regarding trade, free trade agreements, and the Doha round. He articulated basic reasons for supporting trade: "Free trade helps provide American consumers with better choices at better prices" and "Trade is also one of the driving forces behind the strength of our economy." He also discussed trade negotiations. He said that "We will work with Congress to open up new markets for American goods, and services, and farm products", and that "Congress needs to open new markets for trade and investment by approving free trade agreements with Peru, Colombia, Panama, and South Korea." He also said that "The best way to advance new opportunities for trade and investment is through the Doha Round of trade talks. Doha gives us the opportunity to lower trade barriers across the world for America's goods and services." He added that his administration "will continue working to bring the Doha Round of trade negotiations to a successful conclusion."
11/6. The Federal Communications Commission (FCC) released the text [PDF] of its second order on video franchising. This is its Second Report and Order in its proceeding titled "In the Matter of 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". The FCC adopted, but did release, this item on October 31, 2007. See, story titled "FCC Adopts 2nd Report and Order on Video Franchising" in TLJ Daily E-Mail Alert No. 1,668, November 2, 2007. This item is FCC 07-190 in MB Docket No. 05-311.
11/6. The Progress & Freedom Foundation (PFF) released a short paper titled "Racketeering Enterprises on Campus". It pertains to copyright infringement by students on an intra-campus network at the University of Maryland. The author is the PFF's Tom Sydnor.
People and Appointments
11/6. Dana Shaffer, Michelle Carey, and Monica Desai were appointed to the Federal Communications Commission's (FCC) Performance Review Board (PRB). See, notice in the Federal Register, November 6, 2007, Vol. 72, No. 214, at Page 62648.
Go to News from November 1-5, 2007.