FCC Approves XM Sirius Merger

7/25. The Federal Communications Commission (FCC) issued a short release on Friday night, July 25, 2008, announcing the FCC's "approval of the XM-Sirius Merger this evening by a 3-2 vote". See, full story.

FCC Denies Forbearance Petitions

7/25. The Federal Communications Commission (FCC) adopted and released a Memorandum Opinion and Order (MOO) [39 pages in PDF] in which its denied four petitions for forbearance submitted by Qwest Communications.

Qwest requested that the FCC forbear from applying its loop and transport unbundling rules, promulgated pursuant to 47 U.S.C. § 251(c) and 47 U.S.C. § 271(c)(2)(B)(ii), in Denver, Colorado, Minneapolis St. Paul, Minnesota, Phoenix, Arizona, and Seattle, Washington.

Section 10(c) of the Communications Act, which is codified at 47 U.S.C. § 160(c), provides, in part, that "Any telecommunications carrier, or class of telecommunications carriers, may submit a petition to the Commission requesting that the Commission exercise the authority granted under this section with respect to that carrier or those carriers, or any service offered by that carrier or carriers. ... The Commission may grant or deny a petition in whole or in part and shall explain its decision in writing."

Section 160(a) provides that the FCC "shall forbear from applying any regulation or any provision of this chapter to a telecommunications carrier or telecommunications service, or class of telecommunications carriers or telecommunications services, in any or some of its or their geographic markets, if the Commission determines that --- (1) enforcement of such regulation or provision is not necessary to ensure that the charges, practices, classifications, or regulations by, for, or in connection with that telecommunications carrier or telecommunications service are just and reasonable and are not unjustly or unreasonably discriminatory; (2) enforcement of such regulation or provision is not necessary for the protection of consumers; and (3) forbearance from applying such provision or regulation is consistent with the public interest."

The FCC concluded that "the record evidence does not satisfy the section 10 forbearance standard with respect to any of the forbearance Qwest seeks".

FCC Chairman Kevin Martin wrote in his accompanying statement that "As competition in these markets continues to develop, I am happy to reevaluate these markets based on updated market facts."

FCC Commissioner Michael Copps (at right) wrote in his concurring statement that these denials "should hopefully send a signal to those considering similar requests that the Commission is cautious, even skeptical, of granting this kind of hurried and ill-considered relief. I support the denial of these petitions because to do otherwise would result in less competition and higher prices -- to the clear detriment of consumers".

This MOO is FCC 08-174 in WC Docket No. 07-97.

See also, story titled "House Subcommittee Holds Hearing on FCC Forbearance Procedures" in TLJ Daily E-Mail Alert No. 1,799, July 24, 2008.

FCC and Comcast

7/25. The Federal Communications Commission (FCC) has scheduled an event for 10:00 AM on Friday, August 1, 2008, titled "Open Commission Meeting".

The FCC's agenda [pages in PDF] states that it will "consider a Memorandum Opinion and Order addressing a complaint and other filings concerning Comcast’s network management practices."

The word "consider" is not descriptive of the FCC's meeting procedure. The Commissioners formally vote on items to which a majority has already agreed. The Commission does not bring up items only to reject them. Although, items are frequently withdrawn from the published agenda prior to the meeting. Moreover, at these events the Commissioners do not debate, revise or amend. They read prepared statements.

On July 25, 2008, Gigi Sohn, head of the Public Knowledge, and one of the complainants who initiated this proceeding, stated in a release that the FCC "has apparently voted to punish Comcast for violating the Commission's open Internet principles. This is good news for consumers and Internet users. Comcast knowingly blocked lawful Internet use and denied it."

She added that "The fact that the Commission is willing to stand up for its principles and for Internet users is a good sign that the concept of Net Neutrality is alive and well in Washington."

Randolph May, head of the Free State Foundation (FSF), stated in a release that "The reports that an FCC majority may be about to sanction Comcast for last November's BitTorrent incident are very disturbing. This would mean the agency is embarking on a course likely leading to more intrusive regulation of broadband Internet services."

He continued that "It may be at the end of the day the FCC does, in fact, have so-called ``ancillary´´ authority to regulate some practices of Internet service providers. But whatever authority the FCC possesses is much better left untested in this particular instance in light of the changed circumstances since the complaint was filed. Comcast immediately changed its network management disclosure practices after the controversy arose, even though it had not violated any existing FCC precedent or rule. And, collaborating with BitTorrent and many other industry players, Comcast is moving towards a protocol-agnostic network management regime by the end of this year. So, this is not a good case for the FCC to go out on a limb and test its legal authority to regulate the Internet."

On November 1, 2007, the Public Knowledge and Free Press (FP) filed with the FCC a document [48 pages in PDF] captioned "Formal Complaint of Free Press and Public Knowledge Against Comcast Corporation For Secretly Degrading Peer-to-Peer Applications".

See, 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.

That complaint alleged that Comcast interferes with its subscribers use of applications like BitTorrent. However, Comcast reached an agreement with BitTorrent in March. Both companies also agreed that there is no need for government intervention.

See, story titled "Comcast and BitTorrent Reach Accord on Network Management Practices" in TLJ Daily E-Mail Alert No. 1,738, March 27, 2008. See also, story titled "Comcast and Pando Networks to Create P2P Bill of Rights and Responsibilities" in TLJ Daily E-Mail Alert No. 1,747, April 15, 2008.

The FCC, which eschews transparency, has announced no decision in this proceeding.

More News

7/25. The Center for Democracy and Technology (CDT) released a paper titled "Security and Privacy Issues Associated With Federal RFID-Enabled Documents". It states that Department of State (DOS) and Department of Homeland Security (DHS) have developed two new alternative ID cards for U.S. citizens without a passport, the passport card and the Enhanced Driver's License (EDL). The CDT argues that "Both of these cards carry a long-range radio frequency identification (RFID) chip that presents a privacy nightmare for American citizens." It continues that "These insecure chips, containing traveler data, could be read from long distances by anyone, without the cardholder's knowledge or consent, and could be used to track and profile the movements and activities of innocent Americans. Moreover, access to a traveler's ``unique ID number´´ could be used to further access sensitive personal information held by the government ..."

7/25. The Federal Trade Commission (FTC) published a notice in the Federal Register that announces, describes, recites, and sets the effective date (October 1, 2008) for, its amendments to its Telemarketing Sales Rule (TSR). This updates the fees charged to entities accessing the National Do Not Call Registry so that they conform to the fee structure specified in S 781 [LOC | WW], the "Do-Not-Call Registry Fee Extension Act of 2007", which became Public Law No. 110-188 on February 15, 2008. See, Federal Register, July 25, 2008, Vol. 73, No. 144, at Pages 43354-43355.

7/25. The National Institute of Standards and Technology's (NIST) Computer Security Division (CSD) released its SP 800-68 Rev. 1 [125 pages in PDF] titled "Guide to Securing Microsoft Windows XP Systems for IT Professionals: A NIST Security Configuration Checklist (DRAFT)". The deadline to submit comments is Friday, August 29, 2008.

7/25. The National Institute of Standards and Technology's (NIST) Computer Security Division (CSD) released a document [22 MB .zip file] titled "NIST Windows Security Baseline Database Application v0.2.7 (Beta)". The deadline to submit comments is Friday, August 29, 2008.

People and Appointments

7/24. Juniper Networks announced that Kevin Johnson will become its Chief Executive Officer and a member of the Board of Directors, in September. He previously worked for Microsoft as head of its Platforms & Services Division. See, Juniper release.

7/24. The Bureau of Industry and Security (BIS), which regulates exports, published a notice in the Federal Register stating that it seeks public sector members for its six technical advisory committees (TACs). One of these is the Information Systems TAC, which advises the BIS on controls related to electronics, computers, telecommunications, and information security. See, Federal Register, July 24, 2008, Vol. 73, No. 143, at Pages 43209-43210.

More News

7/24. The World Trade Organization (WTO) issued a release regarding the status of Doha round trade negotiations currently underway in Geneva, Switzerland, as of July 24, 2008. Pascal Lamy (at right), Director General of the WTO, stated that "positions still remain too far apart". This release also addresses intellectual property rights issues, including wine and spirits geographical indications, and proposals to require patent applicants to disclose the origin of genetic material and traditional knowledge".

Bush Extends Export Control Regime

7/23. President Bush issued a notice and a Message to the Congress stating that due to a continuing national emergency he is maintaining in effect the export regulations of the Department of Commerce's (DOC) Bureau of Industry and Security (BIS). He has issued a similar notice every year since 2001.

These regulations affect, among other things, exports and "deemed exports" of dual use items, such as computers, software, and encryption products. These regulations also regulate some employment practices.

These regulations implement the Export Administration Act of 1979. However, that out of date Act expired in 2001. The International Emergency Economic Powers Act gives the President the power to declare this national emergency.

The emergency is that Congress will not pass a new Export Administration Act (EAA). There were serious efforts in both the House and Senate until 2002 to pass a new act that would both update and extend the old act.

See, for example, stories titled "Export Controls" in TLJ Daily E-Mail Alert No. 119, February 8, 2001, "Sen. Enzi Advocates Export Administration Act" in TLJ Daily E-Mail Alert No. 282, October 9, 2001, "House Votes to Extend Export Administration Act" in TLJ Daily E-Mail Alert No. 316, November 28, 2001, and "Sen. Enzi Plans to Reintroduce Export Administration Act in 108th Congress" in TLJ Daily E-Mail Alert No. 566, December 12, 2002.

However, there has been little effort since 2002, although bills continue to be introduced. See for example, S 2000 [LOC | WW], the "Export Enforcement Act of 2007"

President Bush wrote in his notice that "On August 17, 2001, consistent with the authority provided to me under the International Emergency Economic Powers Act (50 U.S.C. 170l et seq.), I issued Executive Order 13222. In that order, I declared a national emergency with respect to the unusual and extraordinary threat to the national security, foreign policy, and economy of the United States in light of the expiration of the Export Administration Act of 1979, as amended (50 U.S.C. App. 2401 et seq.). Because the Export Administration Act has not been renewed by the Congress, the national emergency declared on August 17, 2001, must continue in effect beyond August 17, 2008. Therefore, in accordance with section 202(d) of the National Emergencies Act (50 U.S.C. 1622(d)), I am continuing for 1 year the national emergency declared in Executive Order 13222."

People and Appointments

7/23. Federal Communications Commission (FCC) Commissioner Robert McDowell named Nick Alexander (at right) to be his Legal Advisor for wireline issues. Alexander has worked for the FCC since 2005 on universal service issues, antitrust merger reviews (including the AT&T BellSouth merger), and VOIP and 911 regulation. Most recently, he was acting Deputy Chief of the Wireline Competition Bureau's (WCB) Telecommunications Access Policy Division (TAPD). He was FCC Chairman Kevin Martin's acting advisor for wireline issues in early 2007. Before joining the FCC, he worked for the law firm of Akin Gump. He is also a former infantry officer of the U.S. Army. John Hunter, who was previously McDowell's Special Counsel on wireline issues and Chief of Staff, was named Deputy Chief of the WCB's Pricing Policy Division (PPD). See, FCC release [PDF].

7/23. President Bush nominated Marco Hernandez to be a Judge of the U.S. District Court for the District of Oregon. See, White House release.

7/23. President Bush nominated Eric Melgren to be a Judge of the U.S. District Court for the District of Kansas. See, White House release.

More News

7/23. Sen. Charles Grassley (R-IA) issued a statement regarding World Trade Organization (WTO) Doha round trade negotiations currently underway in Geneva, Switzerland. He wrote, "if other countries don't match the U.S. level of ambition, this week’s ministerial will grind to a halt, and fast. After almost seven years of the Doha round, it would be a shame to waste this opportunity." Sen. Grassley is the ranking Republican on the Senate Finance Committee, which has jurisdiction over international trade. He represents a farm state, and hence, does not wish to see the U.S. reduce its protection of the U.S. farm sector without comparable concessions from other nations.

7/23. The Federal Communications Commission (FCC) filed its brief [redacted, 62 pages in PDF] with the U.S. Court of Appeals (DCCir) in Verizon v. FCC, a petition for review of the FCC's December 5, 2007, order denying Verizon's six petitions to forbear, pursuant to 47 U.S.C. § 160, from applying its rules regarding unbundling, and leasing to competitors, of certain network elements in six markets -- New York, Philadelphia, Boston, Pittsburg, Providence, and Virginia Beach. At issue is application of the FCC's rules implementing the 47 U.S.C. § 251(c)(3) loop and transport The FCC argues that its denial was reasonable. This case is Verizon Telephone Companies, v. FCC and USA, U.S. Court of Appeals, App. Ct. No. 08-1012, a petition for review of a final order of the FCC.

7/23. Dennis Wharton of the National Association of Broadcasters (NAB) commented on the possibility that the Federal Communications Commission (FCC) will soon give its approval, by a 3-2 vote, of the merger of XM and Sirius. He stated in a release that "Historians will view this satellite radio giveaway as an irrational departure from 118 years of antitrust law wisely founded on the unassailable reality that competition serves consumers better than monopolies. NAB thanks Commissioners Copps and Adelstein -- along with consumer groups, 80 bipartisan members of Congress, and scores of labor, minority and antitrust organizations -- who stood against this wrongheaded monopoly. Given such overwhelming opposition, we're not convinced the final chapter of this book has been written." On March 24, 2008, the Department of Justice's (DOJ) Antitrust Division announced that it will not challenge the merger of XM and Sirius. The Antitrust Division, unlike the FCC, has both economic expertise and statutory authority to conduct antitrust mergers reviews. See, story titled "DOJ Won't Challenge XM Sirius Merger" in TLJ Daily E-Mail Alert No. 1,736, March 25, 2008.

7/23. The U.S. District Court (DOre) sentenced Jeremiah Joseph Mondello to serve four years in prison following his plea of guilty to criminal copyright infringement, aggravated identity theft and mail fraud. The Department of Justice (DOJ) explained the copyright infringement charge in a release: "Mondello initiated thousands of separate online auctions, using more than 40 fictitious usernames and online payment accounts to sell copies of counterfeit software". It also explained that the identity theft arose out of use of a keystroke logger program: "Mondello acquired victims' names, bank account numbers and passwords by using a computer keystroke logger program. The keystroke logger program installed itself on victims' computers and recorded the victim's name and bank account information as the information was being typed. The program then electronically sent the information back to Mondello which he then used to establish the online payment accounts." The Software & Information Industry Association (SIIA) began the investigation of Mondello, and then provided information to the DOJ. The SIIA's Keith Kupferschmid stated in a release [PDF] that "there are hundreds more like him running illegal operations on eBay and other sites. The Mondello case demonstrates that these pirates won’t simply get a slap on the wrist when caught -- they very well may end up doing serious time in federal prison."

7/23. The U.S. Patent and Trademark Office (USPTO) stated in a notice in the Federal Register that "the export of subject matter abroad pursuant to a license from" the USPTO, "such as a foreign filing license, is limited to purposes related to the filing of foreign patent applications. Applicants who are considering exporting subject matter abroad for the preparation of patent applications to be filed in the United States should contact the Bureau of Industry and Security (BIS) at the Department of Commerce for the appropriate clearances". See, Federal Register, July 23, 2008, Vol. 73, No. 142, at Page 42781.

3rd Circuit Holds COPA Unconstitutional

7/22. The U.S. Court of Appeals (3rdCir) issued its opinion [57 pages in PDF] in ACLU v. Mukasey, a long running challenge to the constitutionality of the Child Online Protection Act (COPA), which is codified at 47 U.S.C. § 231. The Court of Appeals affirmed the judgment of the District Court, which held that the COPA facially violates the First and Fifth Amendments of the Constitution, and permanently enjoined enforcement of the COPA.

This relates back to efforts by the Congress in the 1990s to impose broad federal regulation of internet content. The Congress's first attempt was the Communications Decency Act (CDA), which was made a part of the Telecommunications Act of 1996. The Supreme Court promptly, and unanimously, held that it was unconstitutional in 1997. See, opinion in Reno v. ACLU, 521 U.S. 844.

The Congress reacted with a more tailored approach in 1998 with the COPA.

The COPA bans sending to minors over the web material that is harmful to minors. The COPA also allows web site operators to distribute pornography, but requires those web sites which distribute material that is harmful to children to verify adult status through the use of credit cards, adult access codes, adult PIN numbers, or other technologies.

Litigation commenced in 1998, and enforcement of the statute has been enjoined pending outcome of the litigation, which has dragged on for nearly a decade.

See, full story.

House Subcommittee Holds Hearing on FCC Forbearance Procedures

7/22. The House Commerce Committee's (HCC) Subcommittee on Telecommunications and the Internet held a hearing titled "Issues in Telecommunications Competition". This hearing also addressed HR 3914 [LOC | WW], the "Protecting Consumers through Proper Forbearance Procedures Act".

Section 10(c) of the Communications Act, which is codified at 47 U.S.C. § 160(c), provides, in part, that "Any telecommunications carrier, or class of telecommunications carriers, may submit a petition to the Commission requesting that the Commission exercise the authority granted under this section with respect to that carrier or those carriers, or any service offered by that carrier or carriers. ... The Commission may grant or deny a petition in whole or in part and shall explain its decision in writing."

Section 160(a) provides that the FCC "shall forbear from applying any regulation or any provision of this chapter to a telecommunications carrier or telecommunications service, or class of telecommunications carriers or telecommunications services, in any or some of its or their geographic markets, if the Commission determines that --- (1) enforcement of such regulation or provision is not necessary to ensure that the charges, practices, classifications, or regulations by, for, or in connection with that telecommunications carrier or telecommunications service are just and reasonable and are not unjustly or unreasonably discriminatory; (2) enforcement of such regulation or provision is not necessary for the protection of consumers; and (3) forbearance from applying such provision or regulation is consistent with the public interest."

The forbearance process became controversial in 2006. See, story titled "FCC Announces that Verizon Petition for Forbearance is Deemed Granted" in TLJ Daily E-Mail Alert No. 1,334, March 22, 2006.

Rep. John Dingell (D-MI), the Chairman of the HCC, stated that "This provision is dangerous and bad policy because it allows agency action to take effect without any formal vote or supporting record. Consumers and companies then have no right or recourse when the lack of enforcement harms consumers."

He continued that "We are familiar with the episode in 2006 when a four-member Commission was evenly divided on the merits of a forbearance petition and was therefore unable to act. Because the deadline passed with no Commission action, the petition was deemed granted and a host of regulations were tossed aside. Making matters worse, the Commission failed to issue an Order explaining the scope of relief granted, which prevented Congress from conducting appropriate oversight and precluded meaningful judicial review."

He also noted that "Too often, industry petitioners have rigged the process, by filing amended petitions late so that opposing parties have no meaningful opportunity to respond."

See, prepared testimony [PDF] of Larissa Herda (TW Telecom, Inc.), prepared testimony [PDF] of Matthew Salmon (Comptel), prepared testimony [PDF] of Carl Grivner (XO Communications), prepared testimony [PDF] of Cathy Avgiris (Comcast), and prepared testimony [PDF] of Jonathan Banks (U.S. Telecom Association).

Banks (US Telecom) wrote that "Our member companies view forbearance as one of the important tools created by Congress in the 1996 Act to ensure that outdated regulations that are no longer in the public interest are removed from the FCC's regulatory playbook. Section 11 of the Act shares a similar aim of removing outdated regulations, requiring the FCC to conduct a biennial review of communications regulations and to jettison those that no longer serve the public interest. Unfortunately, section 11 has been all but read out of the statute, increasing the importance of maintaining a viable and speedy forbearance process."

In contrast, Salmon (Comptel) wrote that "Section 10 of that Act has been really troubling. This small section actually has the ability to undue all of the good that the rest of the Act seeks to accomplish."

He added that "Section 10 has opened the door for companies to leap-frog over the FCC’s normal rulemaking procedures and actually dictate the Commissions time and resources to fulfill one particular company’s anti-competitive goals."

Doha Round Trade Negotiations Continue in Geneva

7/22. Trade negotiators, including U.S. Trade Representative (USTR) Susan Schwab, began another Doha round meeting in Geneva, Switzerland, on July 21, 2008.

See, July 21 opening statement of Pascal Lamy, Director General of the World Trade Organization. See also, July 21 WTO release and July 22 WTO release.

Schwab stated at a July 21 news conference in Geneva that "To have a meaningful development outcome to this round, the Doha development agenda, to have a meaningful outcome we know that we have to secure meaningful new market access in agriculture, in manufacturing and in services, and that is particularly true when it comes to the interests of the developing countries involved and of the rapidly emerging markets that are so key to this negotiation in terms of their involvement and in terms of the contribution that they can make to a successful outcome."

She added that "We know we’re going to need to make further contributions than the many contributions we already have on the table." See, transcript [4 pages in PDF].

See also, Schwab statement [2 pages in PDF] of July 22.

She stated at a news conference in Washington DC on July 17 that "We are going to Geneva with the intent and hope and expectation that there is a deal to be had. We know that a breakthrough, so-called modalities breakthrough certainly is not the end of the Doha Round. It’s not the end of the Doha negotiation. But we also know that it is a necessary, as in necessary but not sufficient condition, to get to a successful conclusion to the round."

This has been a high priority for this administration and of this President for quite some time." See, transcript [14 pages in PDF].

Sen. Charles Grassley (R-IA), the ranking Republican on the Senate Finance Committee (SFC) stated in a release on July 22 that "Ambassador Schwab put forth a major proposal to kick-start these negotiations into high gear, offering to reduce our allowable support from $48 billion down to $15 billion. But according to one press report, India's response is that it doesn’t pass the `laugh test.´ I have yet to see India make a constructive proposal that will actually advance these negotiations. This is not a laughing matter. We all stand to gain from increased trade. But to achieve that, we need to see meaningful reductions in tariff and non-tariff barriers to trade -- from all sides. If India is going to stand in the way of opening up new trade flows, the negotiators might as well pack up and head home early."

Peter Mandelson, the European Trade Commissioner, stated on July 17 that a Doha agreement "will create new trade, and lock in existing openness to trade, as an insurance against future protectionism. It would strip out some of the distortions in the global trading system that hurt developing countries. It would help lower prices for imports for consumers and businesses, necessary to counter inflation. Doha would strengthen trade rules and boost trade facilitation." See, transcript.

He also commented on the US. He said that "I can say two things about the US Farm Bill. One, it takes US farm support and their trade-distorting subsidies up. An secondly, and given the two thirds support in Congress for this farm bill, the only way to supplant that Farm Bill and get alternative policies in place in to invite that Congress to endorse a Doha deal. Agreed multilaterally ... That is one among many very good reasons for getting a Doha deal".

Orphan Works Bills Discussed

7/22. Five participants in ongoing debates over pending legislation to limit remedies for infringement of certain copyrighted works held a panel discussion in Washington DC.

The topic was HR 5889 [LOC | WW], the "Orphan Works Act of 2008", and S 2913 [LOC | WW], the "Shawn Bentley Orphan Works Act Of 2008".

The Senate Judiciary Committee (SJC) approved its version of the bill on May 15, 2008. See, story titled "Senate Judiciary Committee Amends and Approves Orphan Works Bill" in TLJ Daily E-Mail Alert No. 1,767, May 15, 2008.

The House Judiciary Committee's (HJC) Subcommittee on Courts, the Internet and Intellectual Property (SCIIP) amended and approved HR 5889 on May 7, 2008. Rep. Howard Berman (D-CA) and others have since been working on revisions to the bill. (TLJ's requests to attend meeting between members, staff, and representatives of interested groups have been rejected.)

Although, at this July 22 discussion panelists stated that a revised version of the bill would carve out an exception to the bill's limitation on remedies for "useful articles", such as shower curtains. Sohn also stated that another carve out might be for "secret assignation of rights". She added that this is being advocated by the Motion Picture Association of America (MPAA).

Four members of the panel were proponents of pending legislation: Allan Adler (Association of American Publishers), Gigi Sohn ( Public Knowledge), Victor Perlman ( American Society of Media Photographers), Joe Keeley (Arent Fox), and Maria Pallante (Copyright Office).

Victor Perlman (American Society of Media Photographers) stated that "For creators of visual materials, most of the orphan works legislation has looked more like a choice between the disastrous and the disastrous. The current version of the House bill finally reached the level of protections that the two largest photo trade associations could support."

There were no academic experts on copyright law on the panel. Also, some members of the audience used the question and answer portion of the program to express critical comments regarding pending legislation.

None of the bills' sponsors, or their staff, participated. The discussion disclosed little about whether, or when, the House Judiciary Committee might mark up HR 5889, or the Congress might enact a bill.

However, the CO's Maria Pallante stated that "the orphan works problem is not going to go away".

She also mentioned the European Commission's recently released paper [22 pages in PDF] and request for comments on copyright, which has a section on orphan works. See, story titled "EC Releases Paper and Request for Comments on Exceptions and Limitations to Copyright" in TLJ Daily E-Mail Alert No. 1,798, July 23, 2008.

This panel discussion was conducted under the aegis of, and within the offices of, the DC Bar Association.

See also, Joe Keeley's web site OrphanWorks.net.

People and Appointments

7/22. The Senate confirmed Cathy Seibel to be a Judge of the U.S. District Court for the Southern District of New York. See, Congressional Record, July 22, 2008, at Page S7088.

7/22. The Senate confirmed Glenn Suddaby to be a Judge of the U.S. District Court for the Northern District of New York. See, Congressional Record, July 22, 2008, at Page S7088.

7/22. Linda Woolley was named EVP Government Affairs at the Direct Marketing Association (DMA) effective August 11, 2008. She was previously the principal of LegisLaw, a public affairs and government relations consulting firm that she founded in 1999.

More News

7/22. HR 6362 [LOC | WW], an untitled bill to provide that the Secretary of Commerce, in consultation with the Director of the U.S. Patent and Trademark Office (USPTO), shall appoint administrative patent judges and administrative trademark judges, had been on the House suspension calendar for July 22, 2008. However, the Democratic leadership removed this bill from the calendar.

7/22. Federal Communications Commission (FCC) Commissioner Deborah Tate gave a speech at an event titled "Cox Communications’ 3rd Annual Internet Safety Summit" in Washington DC. She said that "cable and Internet providers also have a responsibility to assist families in educating children about the dangers of the Internet, especially the potential dangers of online chatting and posting personal information on blogs and social networking sites."

7/22. Federal Communications Commission (FCC) Commissioner Deborah Tate wrote a short piece [5 pages in PDF] titled "U.S. Spectrum Policy: Bringing the Digital Dividend to All Americans" in which she offered a cursory summary of recent FCC spectrum auctions, including the AWS and 700 MHz auctions, and upcoming auctions. She also touched on broadband penetration metrics and extending universal service subsidies to broadband services.

7/22. The U.S. Patent and Trademark Office (USTPO) announced in a release that it "will begin a two-year pilot Law School Clinical Certification Program this Fall semester allowing law students to practice intellectual property law before the agency under the strict guidance of a law school clinical faculty supervisor". The USPTO added that six law schools are participating: American University law school, University of Connecticut law school, John Marshall Law School, University of Maine School of Law, Vanderbilt Law School, and William Mitchell College of Law.

7/22. The U.S. District Court (WDWash) sentenced Robert Alan Soloway to serve 47 months in prison following his plea of guilty to various charges, including violation of 18 U.S.C. § 1037(a), regarding "Fraud and related activity in connection with electronic mail", in connection with his operation of a spam e-mail business. Section 1037 codifies the criminal prohibitions in Section 4 of the CAN-SPAM Act of 2003, which was S 877 (108th Congress), and is now Public Law No. 108-187. The May 23, 2007, indictment [24 pages in PDF] also charged Soloway with mail fraud, wire fraud, aggravated identity theft and money laundering. The Office of the U.S. Attorney for the Western District of Washington stated in a release that Assistant U.S. Attorney Kathryn Warma wrote in her sentencing memorandum that Soloway "is known world-wide for the volume and markedly malicious nature of his criminal spamming activity, the fraudulent ``spam promotion´´ sales scheme associated with it and for brazen and even boastful claims that he is above the law". See also, March 14, 2008, release regarding his guilty plea. This case is USA v. Robert Alan Soloway and Newport Internet Marketing Corporation, U.S. District Court for the Western District of Washington, D.C. No. CR07-0187.

DOJ Obtains Guilty Pleas in E-Gold Case

7/21. E-Gold Ltd., Gold & Silver Reserve Inc., and Douglas Jackson pled guilty in U.S. District Court (DC) to conspiracy to engage in money laundering in violation of 18 U.S.C. § 1956, and operating an unlicensed money transmitting business in violation of 18 U.S.C. § 1960. Barry Downey and Reid Jackson pled guilty to operating a money transmitting business without a license.

The government criminally prosecuted these defendants because they enabled people to engage in anonymous online financial transactions.

The Department of Justice (DOJ) stated in a release that "the E-Gold operation provided digital currency services over the Internet through two sites ... Several characteristics of the E-Gold operation made it attractive to users engaged in criminal activity, such as not requiring users to provide their true identity, or any specific identity".

The U.S. Attorney for the District of Columbia, Jeffrey Taylor, added in this release that "digital currency providers everywhere are now on notice that they must comply with federal banking laws or they will be subject to prosecution".

E-Gold's Douglas Jackson, one of the defendants, stated in a release in the E-Gold web site that there were "design flaws in the account creation and provisioning logic that led to the unfortunate consequence of vulnerability to criminal abuse".

He continued that this "resolution of the criminal case however provides for a second chance, an opportunity to address the flaws embedded in the e-gold system and to transform" the business.

He added that "In harmony with this transformation, we acknowledge that e-gold is indeed a Financial Institution or Agency as defined in US law and should be regulated as a Financial Institution. E-gold Ltd. has submitted an application to FinCEN to be registered as a Money Services Business and will be seeking licensure in all states that require it. Most importantly, working in conjunction with US government agencies, we will be exerting every effort to bring e-gold into compliance with US law and regulation as quickly as possible."

Sentencing is scheduled for November 20, 2008. See also, April 27, 2007, DOJ release announcing indictment.

3rd Circuit Overturns FCC's Breast Broadcast Fine

7/21. The U.S. Court of Appeals (3rdCir) issued its opinion [102 pages in PDF] in CBS v. FCC, overturning the Federal Communications Commission's (FCC) fine of CBS for broadcasting a fleeting and unscripted view of a breast during a halftime show for a football game.

Background. On March 15, 2006, the FCC released a forfeiture order [30 pages in PDF] that fined CBS $550,000 in connection with the disclosure of a breast of a singer named Janet Jackson in a broadcast music performance within a program titled "Super Bowl XXXVIII".

This order is FCC 06-19. See, story titled "FCC Releases Indecency Orders" in TLJ Daily E-Mail Alert No. 1,332, March 20, 2006.

The FCC concluded that CBS violated 18 U.S.C. § 1464. This section provides, in full, that "Whoever utters any obscene, indecent, or profane language by means of radio communication shall be fined under this title or imprisoned not more than two years, or both."

On April 14, 2006, CBS filed with the FCC a Petition for Reconsideration of Forfeiture Order. See, story titled "CBS Challenges FCC's Indecency Actions" in TLJ Daily E-Mail Alert No. 1,351, April 17, 2006.

On May 31, 2006, the FCC released its Order on Reconsideration [18 pages in PDF] denying that petition. That order is FCC 06-68. See, story titled "FCC Denies Petition for Reconsideration of CBS's Breast Broadcast Fine" in TLJ Daily E-Mail Alert No. 1,382, June 1, 2008.

The CBS Corporation and others filed a petition for review of these two FCC orders with the Court of Appeals. Various amicus curiae parties also filed briefs.

The Court of Appeals, in the just released opinion, vacated the FCC's two orders and remanded for further proceedings consistent with this opinion.

The Court of Appeals first held that the FCC's fine was arbitrary and capricious in violation of the scope of review provisions of Administrative Procedure Act (APA), which are codified at 5 U.S.C. § 706.

Fleeting Material. It wrote that "The FCC possesses authority to regulate indecent broadcast content, but it had long practiced restraint in exercising this authority. During a span of nearly three decades, the Commission frequently declined to find broadcast programming indecent, its restraint punctuated only by a few occasions where programming contained indecent material so pervasive as to amount to “shock treatment” for the audience. Throughout this period, the Commission consistently explained that isolated or fleeting material did not fall within the scope of actionable indecency."

The Court added that "At the time the Halftime Show was broadcasted by CBS, the FCC's policy on fleeting material was still in effect."

It concluded that "Like any agency, the FCC may change its policies without judicial second-guessing. But it cannot change a well-established course of action without supplying notice of and a reasoned explanation for its policy departure. Because the FCC failed to satisfy this requirement, we find its new policy arbitrary and capricious under the Administrative Procedure Act as applied to CBS."

The Court also rejected the FCC's argument that its policy applied only to verbal expletives, and not to images or video. It concluded that the FCC had not at the time of the broadcast at issue distinguished between categories of broadcast material such as images and words.

Vicarious Liability. Next, the Court held that the FCC "incorrectly determined CBS’s liability". It wrote that "CBS contends it neither planned Jackson and Timberlake's offensive actions nor knew of the performers' intent to incorporate those actions into their performance. The FCC does not dispute this assertion, but it nevertheless seeks to hold CBS liable for the performers' actions."

The Court went on to reject various theories for holding CBS liable for the actions of Jackson and Timberlake. It rejected a respondeat superior theory of liability, concluding that the two individuals were independent contractors of CBS rather than employees.

The Court also rejected the theory that "CBS may be held vicariously liable for its independent contractors' actions based on its duties as a broadcast licensee".

The Court wrote that "It is a well-established constitutional requirement that in the few areas where the government may lawfully enforce content-based restrictions on speech and expression, liability may not be imposed on a speaker without proof of scienter."

Thus, 18 U.S.C. § 1464 "should be read to include a scienter element".

The Court wrote that "Because the Commission’s proffered ``non-delegable duty´´ theory of CBS's vicarious liability, which functionally equates to strict liability for speech or expression of independent contractors, appears to dispense with this constitutional requirement, it should not be sustained."

However, while the Court held that scienter is an element, it did not at this point of the opinion elaborate on what scienter means in this context. It later clarified (at page 92-93) that "Recklessness would appear to suffice as the appropriate scienter threshold for the broadcast indecency regime", and that "mere negligence in airing indecent material during a restricted time slot would not satisfy the scienter element".

Failure to Take Precautionary Measures. Next, the Court rejected the FCC's failure to take precautionary measures argument.

The Court noted that the FCC found CBS directly liable for a forfeiture penalty for "failing to take adequate precautionary measures to prevent potential indecency during the Halftime Show".

Following a lengthy discussion of the forfeiture statute, the Court concluded that "further clarification from the FCC is necessary before it may be determined whether the agency correctly concluded that CBS’s actions constituted a “willful” violation of the indecency provisions." Furthermore, the Court concluded that the record is unclear whether the FCC correctly determined that CBS’s conduct satisfied the willfulness standard.

Summary of Holding. The Court then wrote this summary of its holding. "In finding CBS liable for a forfeiture penalty, the FCC arbitrarily and capriciously departed from its prior policy excepting fleeting broadcast material from the scope of actionable indecency. Moreover, the FCC cannot impose liability on CBS for the acts of Janet Jackson and Justin Timberlake, independent contractors hired for the limited purposes of the Halftime Show, under a proper application of vicarious liability and in light of the First Amendment requirement that the content of speech or expression not be penalized absent a showing of scienter. And the FCC's interpretation and application of 47 U.S.C. § 503(b)(1) are not sufficiently clear to permit review of the agency's determination of CBS's direct liability for a forfeiture penalty based on broadcast indecency. ... Accordingly, we will vacate the orders of the FCC and remand for further proceedings consistent with this opinion.

Judge Rendell wrote a short opinion, concurring that the FCC acted in an arbitrary and capricious manner, but dissenting as to the remand. He would have merely reversed.

Ken Ferree, head of the Progress & Freedom Foundation (PFF), stated in a release that "Perhaps it is time to read the handwriting on the wall: the guardians of our First Amendment freedoms in the courts are not going to allow the FCC to play the role of media supernanny. A free and vibrant, even if occasionally coarse, marketplace of speech is the cornerstone of a free society. We allow government to meddle in that marketplace at our peril."

Chris Hansen of the ACLU stated in a release that "The FCC's vague and shifting standards highlight the fundamental First Amendment problem with allowing the government to censor speech based upon its own notions of what is `decent,´ ... The government does not have that power for books and magazines and it should not have that power for television and radio."

This case is CBS Corporation, et al. v. FCC and USA, U.S. Court of Appeals for the 3rd Circuit, App. Ct. No. 06-3575.

More News

7/21. Attorney General Michael Mukasey gave a speech at the American Enterprise Institute (AEI) in Washington DC. He primarily spoke about detention of enemy combatants and the Supreme Court's June 12, 2008, opinion [PDF] in Boumediene v. Bush. He reviewed the opinion, and urged the Congress "to pass legislation to ensure that the proceedings mandated by the Supreme Court are conducted in a responsible and prompt way. However, he also touched on Congressional passage of HR 6304 [114 pages in PDF], the "Foreign Intelligence Surveillance Act of 1978 Amendments Act of 2008". He said that "One of my most solemn obligations, especially as we look ahead to the post-2001 transition is to try along with others in our government to make sure that our efforts in this conflict are put on a sound institutional footing so that the next attorney general and the new administration have in place what they need to assure the nation safety. One success in that category occurred just two weeks ago when the President signed into law the most significant reform of our surveillance statutes in a generation. Bipartisan legislation that will give our intelligence professionals critical, long-term authorities to monitor foreign intelligence targets located overseas." See, transcript.

Go to News from July 16-20, 2008.