TLJ News from July 26-31, 2011

ILECs Submit USF/IC Reform Proposal to FCC

7/29. AT&T, Verizon, CenturyLink, FairPoint, Frontier, and Windstream submitted to the Federal Communications Commission (FCC) a collection of documents titled "America's Broadband Connectivity Plan". It contains proposals of incumbent local exchange carriers (ILECs) for reforming the FCC's Universal Service Fund (USF) and intercarrier compensation regime.

See:

The summary letter asserts that this plan would "directly enable efficient deployment, operation, and enhancement of broadband networks in high-cost areas".

The "Framework of the Proposal" summarizes the plan.

It proposes to create two new programs, a "Connect America Fund" (CAF) and an "Advanced Mobility/Satellite Fund" (AMSF), to subsidize broadband service in high cost areas. This CAF would be limited to "CAF to areas currently served by price cap incumbent LECs", and would be "available only in those high-cost areas in which there is no private sector business case to offer broadband".

In addition, this "plan begins to phase out the support that incumbent price cap LEC Eligible Telecommunications Carriers (ETCs) and competitive ETCs (CETCs) receive from the legacy universal service programs on July 1, 2012, once the CAF begins to disburse broadband funding. The plan eliminates those ETCs’ support from the legacy universal service programs entirely by July 1, 2016, when the CAF is fully funded."

Existing high cost subsidy programs -- Interstate Access Support (IAS), Interstate Common Line Support (ICLS), High Cost Model (HCM), High Cost Loop (HCL), and Local Switching Support (LSS) -- would be phased out by 2016. Also, "If an existing ETC does not participate in the CAF, it may continue to receive legacy support", through 2016.

This framework also states that "the combination of (i) the universal service mechanisms covered by this plan1 and (ii) the universal service mechanisms proposed by the rate-of-return carrier associations is designed to operate within the current size of the high-cost program".

The CAF would provide "$2.2 billion per year to support the provision of broadband service to residential and business service locations in high-cost areas served by price cap incumbent LECs."

"Broadband providers that elect to receive support from the CAF will receive a fixed level of support for a term of ten years from the date on which support is awarded", and "must make available broadband service that provides customers with a minimum actual downstream bandwidth of 4 Mb/s and a minimum actual upstream bandwidth of 768 kb/s, and also provides robust service that is sufficient for households to use education and health care applications specified by the" FCC.

This framework also provides a model to be applied by the FCC in determining what is a high cost area, and then "to calculate a baseline support amount for the supported area".

This framework also provides two sets of procedures for applying to the FCC for CAF subsidies. One applies if the ILEC has already made "substantial broadband investments" there. If not, and there are two or more applicants, then the FCC will proceed with "competitive bidding".

The framework also lists obligations imposed on recipients of CAF subsidies, including buildout and providing service in a minimum number of locations. Those "consumers in locations that the CAF recipient is not required to serve would be able to purchase broadband service directly from a broadband satellite provider", which in turn may receive subsidies under the Advanced Mobility/Satellite Fund program.

The framework of the proposal then addresses intercarrier compensation. It states that "regulated terminating intercarrier compensation rates of all carriers except rate-of-return incumbent LECs are phased down to a uniform default rate of $0.0007 per minute by July 1, 2017".

With respect to intercarrier compensation treatment of VOIP traffic, the framework states that the FCC "will adopt a new rule, effective January 1, 2012, to govern the intercarrier compensation rates applicable to VoIP traffic exchanged between LECs and other carriers. Such traffic will be rated at interstate access rates if the call detail indicates an ``access´´ call, or at reciprocal compensation rates if the call detail indicates a ``non-access´´ call. All ``toll´´ traffic that originates in IP or terminates in IP will be subject to current interstate access rates (regardless of whether it is interstate or intrastate); local termination rates would not be affected. All such traffic is incorporated into the overall transition as rates for terminating interstate access traffic are reduced and eventually unified at $0.0007 pursuant to the comprehensive reform plan described below. Under the plan, intrastate access rates will not be applied to VoIP traffic." (Parentheses in original.)

The framework also calls for lessening "restrictions on incumbent LECs' federal subscriber line charge (SLC) rates", and elaborates on two ways that ILECs could increase SLCs.

It also states that the FCC "must conclude that VoIP services are interstate services, and reaffirm that broadband services are interstate services. The Commission must also preempt any state regulation of those services that is inconsistent with the federal policy of nonregulation."

Walter McCormick, head of the US Telecom, stated in a letter to the FCC that "The United States Telecom Association Board of Directors, comprised of executives representing every facet of the local exchange industry -- companies large and small, urban and rural, operating both as price cap and rate of return carriers -- offers its endorsement of the America's Broadband Connectivity Plan as providing a positive forward-looking framework from which all participants in the broadband ecosystem can work together towards our common goals of achieving expanded broadband deployment, increased broadband investment, and greater stability and predictability in the financial fundamentals of the telecommunications industry."

He continued that "Collectively, USTelecom member companies serve most of rural America – reaching approximately 85% of all Americans living in rural areas. Universal service and intercarrier compensation reform in the very near term are critical to our nation’s broadband future, particularly in sparsely populated regions. In making this endorsement, the USTelecom Board took note of the fact that this plan has been crafted with the input of both price cap and rate-of-return carriers serving rural America, and that it has benefited from consultation with the broader industry – including cable companies, wireless companies, competitive local exchange carriers, voice-over-internet providers, and their associations." See also, US Telecom release.

Reaction to ILEC's USF/IC Reform Proposal

7/29. Numerous persons and entities responded to the release by AT&T, Verizon and other phone companies of their proposal for  reforming the Federal Communications Commission's (FCC) Universal Service Fund (USF) and intercarrier compensation regrime.

Rep. Greg Walden (R-OR) and Rep. Lee Terry (R-NE) stated in a release that "We are encouraged by the growing consensus among stakeholders as developed" by this plan, and "we hope that consensus will continue to grow". They added that "The stakes are high in rural districts across America where access to affordable phone and broadband service is essential for economic growth, job creation and the quality of rural healthcare and education."

Sen. John Rockefeller (D-WV), the Chairman of the Senate Commerce Committee (SCC), stated in a release that "Universal service is a cherished principle. In years past, it has meant that this nation connects every community with basic phone service. But in the years ahead, it must mean that we connect our communities with advanced broadband and wireless service, too."

Sen. Kay Hutchison (R-TX), the ranking Republican on the SCC, stated in a release that the USF and the intercarrier compensation regime "are both in serious need of reform, but such reform must be done in a thoughtful manner that does not cause excessive disruption to the market." She continued that "I am pleased to see such a diverse group of small and large telecommunications providers working together to find consensus".

The National Association of Regulatory Utility Commissioners (NARUC) stated in a release that "Although we applaud the industry for its efforts, albeit through closed-door discussions, it is the FCC's job is to assure that all interests, most importantly consumers, are well served by any effort to reform Universal Service and Intercarrier Compensation." It added that "Legal sustainability should be a hallmark of any plan".

Cathy Sloan of the Computer and Communications Industry Association (CCIA) stated in a release that "Big telecoms are asking the FCC to levy new charges on VOIP applications and traffic that vastly exceed the costs associated with them. It would be unwise for the FCC to reach beyond its authority over wired and wireless telecommunications and tax the most innovative layer of the Internet ecosystem. Furthermore, the USTelecom proposal fails to explain how broadband build-out to high cost areas would be funded."

The National Cable and Telecommunications Association (NCTA) stated in a release that "While we recognize some positive elements in the proposed framework, we have important questions regarding how these principles would be fairly applied during the transition period. We believe these issues deserve to be aired and considered, but more than anything, we hope that our collective interest in change will serve as a springboard to reform that will establish meaningful controls on the size of the high-cost fund, expand broadband to those without access today, and create a new mechanism more attuned to the realities of modern technology and fair competition."

The NCTA also filed with the FCC a notice of ex parte communication on July 29. It states that the FCC should "seek comment on this proposal from a broad group of interested stakeholders, whose perspectives are likely to differ from the incumbent local exchange carriers that developed the proposal".

Daniel O'Connell, head of the Fiber to the Home Council, stated in a release that it "recognizes the importance of reforming the universal service regime and supports efforts of the industry to coalesce on a plan to achieve this objective."

The Information Technology and Innovation Foundation (ITIF) stated in a release that this plan is "bold and significant" and "built on a sound economic model that normalizes intercarrier compensation fees and ends current practices that artificially inflate both costs and prices of rural telephony such as ``traffic pumping´´ and ``phantom traffic.´´"

Derek Turner of the Free Press, a frequent critic of ILECs, stated in a release that this plan "falls short of adequately confronting the real problems with the Universal Service Fund. Worse, it ensures that the inflated profits of telecom companies are protected by shifting the burden of reform to ordinary consumers".

9th Circuit Address Lanham Act and False Advertising on Internet

7/29. The U.S. Court of Appeals (9thCir) issued its opinion [24 pages in PDF] in TrafficSchool.com v. EDriver, a Lanham Act case regarding false advertising on the internet.

The plaintiffs operate web sites that market and sell traffic school and driver's education courses directly to consumers. The defendants are operators of a competing commercial web site that provides information for drivers. They make money by selling sponsored links and collecting fees for referring site visitors to vendors of traffic school courses and other services. Defendant's web site, DMV.org, is confused by some consumers to be operated by a state Department of Motor Vehicles (DMV).

Plaintiffs filed a complaint in the U.S. District Court (CDCal) alleging violation of Section 43(a) of the Lanham Act, which is codified at 15 U.S.C. § 1125(a), and California's unfair competition statute, Cal. Bus. & Prof. Code § 17200. The District Court held that the defendants violated the Lanham Act, and ordered them to place a disclaimer in their web site via a splash screen.

The Court of Appeals first held that the plaintiffs do have standing under the Lanham Act to bring this claim.

The Court of Appeals next affirmed the District Court's holding the the defendants violated the Lanham Act. The Court of Appeals wrote that "To succeed on an Internet false advertising claim, a plaintiff must show that a statement made in a commercial advertisement or promotion is false or misleading, that it actually deceives or has the tendency to deceive a substantial segment of its audience, that it's likely to influence purchasing decisions and that the plaintiff has been or is likely to be injured by the false advertisement."

The Court also wrote that ordering a splash screen disclaimer is "justified so long as it helps to remedy lingering confusion caused by defendants' past deception. But the splash screen will continue to burden DMV.org's protected content".

Hence, "On remand, the district court shall reconsider the duration of the splash screen in light of any intervening changes in the website’s content and marketing practices, as well as the dissipation of the deception resulting from past practices. If the district court continues to require the splash screen, it shall explain the continuing justification for burdening the website’s protected content and what conditions defendants must satisfy in order to remove the splash screen in the future. In the alternative, or in addition, the court may permanently enjoin defendants from engaging in deceptive marketing or placing misleading statements on DMV.org."

The Court of Appeals also affirmed the District Court's denial of damages, but remanded its denial of attorneys fees.

This case is TrafficSchool.com, Inc., et al. v. EDriver Inc., et al., U.S. Court of Appeals for the 9th Circuit, App. Ct. No. 08-56518, an appeal from the U.S. District Court for the Central District of California, D.C. No. 2:06-cv-07561-PA-CW, Judge Percy Anderson presiding. Judge Alex Kocinsky wrote the opinion of the Court of Appeals, in which Judge William Fletcher and Robert Gettleman (USDC/NDIll, sitting by designation) joined.

Obama Withdraws Nomination of Goodwin Liu for 9th Circuit

7/29. President Obama withdrew the nomination of Goodwin Liu to be a Judge of the U.S. Court of Appeals for the 9th Circuit. See, White House news office release.

Senate Republicans filibustered this nomination. Democrats' efforts to end this filibuster failed. On May 19, 2011, the Senate rejected a cloture motion, which requires a supermajority of 60 to pass, by a vote of 52-43. See, Roll Call No. 74.

While the 9th Circuit hears many technology related cases, Republican opposition did not relate to his views on any technology related issues. Rather, they perceived that Liu is very liberal on social issues, such as same sex marriage, education, welfare, and racial quotas, and that his prior statements suggest that he would render opinions in cases involving these issues that are consistent with his views, but inconsistent with statutes.

See also, story titled "Goodwin Liu Cloture Motion Fails" in TLJ Daily E-Mail Alert No. 2,245, May 19, 2011.

Obama Picks Michael Horowitz to Be DOJ Inspector General

7/29. President Obama nominated Michael Horowitz to be Inspector General of the Department of Justice (DOJ). See, White House news office release and release.

If the Congress were to enact HR 1981 [LOC | WW], the data retention bill marked up by the House Judiciary Committee (HJC) on July 27 and 28, 2011, and it were to exceed or violate its authority under this act, or any other surveillance statute, then the only entity to investigate and disclose such conduct might be DOJ's IG.

The DOJ/OIG under the previous IG, Glenn Fine, did investigate and disclose rampant abuse of surveillance powers by the DOJ and its Federal Bureau of Investigation (FBI). See,

These investigations and reports occurred during the tenure of the former IG, Glenn Fine. He left the DOJ in January of this year. See, story titled "Inspector General Fine to Leave DOJ" in TLJ Daily E-Mail Alert No. 2,166, December 2, 2011.

Moreover, Roslyn Mazer, who worked on these investigations, left the DOJ in 2009. See, story titled "Obama Picks Mazer for DHS Inspector General" in TLJ Daily E-Mail Alert No. 2,264, July 20, 2011.

Valerie Caproni, the FBI's General Counsel since 2003, who oversaw the FBI's statutory violations, remains in office, and has not been indicted.

Michael Horowitz works in the Washington DC office of the law firm of Cadwalader Wickersham & Taft.

His Cadwalder biography suggests proximity to the DOJ and its personnel. It states that he handles matters before the DOJ, including DOJ Foreign Corrupt Practices Act (FCPA) and antitrust criminal investigations. Also, he was for a long time employed by the DOJ. He was an Assistant U.S. Attorney in the Southern District of New York from 1991 through 1999. He was then a Deputy Assistant Attorney General and Chief of Staff in the DOJ's Criminal Division.

Federal Election Commission (FEC) records show that on June 30, 2010, Horowitz gave $1,000 to the election campaign of Sen. Michael Bennet (D-CO).

BEA Reports Sluggish GDP Growth But Jump in Computer Sales

7/29. The Department of Commerce's (DOC) Bureau of Economic Analysis (BEA) released its advance estimate of the U.S. Gross Domestic Product, 2nd Quarter 2011. Overall, growth remains low. However, computer sales grew more rapidly.

The BEA stated that real gross domestic product (GDP) "increased at an annual rate of 1.3 percent in the second quarter of 2011, (that is, from the first quarter to the second quarter) ... In the first quarter, real GDP increased 0.4 percent." (Parentheses in original.)

The BEA termed the change from .4% to 1.3% as "acceleration". It wrote that "The acceleration in real GDP in the second quarter primarily reflected a deceleration in imports, an upturn in federal government spending, and an acceleration in nonresidential fixed investment that were partly offset by a sharp deceleration in personal consumption expenditures."

In addition, the BEA wrote that "Final sales of computers added 0.15 percentage point to the second-quarter change in real GDP after adding 0.08 percentage point to the first-quarter change." See also, story titled "BEA Reports Sluggish Growth in GDP and IT Investment" in TLJ Daily E-Mail Alert No. 2,228, April 28, 2011.

Within the category of "Gross Private Domestic Investment" the category of "Information processing equipment and software" grew from $557.9 Billion in the first quarter (QI) to $571.2 Billion in QII (seasonally adjusted annual rate data).

With the category of "information processing equipment and software", the categories of "Computers and peripheral equipment" grew from $95.6 Billion in QI to $106.2 Billion in QII, and "Software" grew from $265.1 Billion in QI to $270.9 Billion in QII.

9th Circuit Affirms in Dath v. Sony

7/29. The U.S. Court of Appeals (9thCir) issued its brief opinion in Dath v. Sony Computer Entertainment, a copyright infringement case involving computer games in which the Court of Appeals affirmed the District Court's summary judgment for Sony.

The Court of Appeals did not write an opinion. It merely adopted the opinion of the District Court. That opinion addresses at length infringement based upon substantial similarity of works.

Plaintiffs, Jonathan Bissoon-Dath and Jennifer Dath, are the authors of copyrighted works -- two treatments titled "Theseus: A Screenplay Treatment" and "The Adventures of Owen", two screenplays titled "Olympiad Version A" and "Olympiad", and a map.

Defendant Sony Computer Entertainment America sells PlayStation 2 and PlayStation Portable (PSP) video game consoles and related games. Defendant David Jaffe is a Sony employee who developed the game titled "God of War".

The plaintiffs filed a complaint in the U.S. District Court (NDCal) against Sony and Jaffe alleging copyright infringement (based upon substantial similarity), contributory copyright infringement, and unfair business practices in violation of section 17200 of the California Business and Professions Code, in connection with Sony's and Jaffe's alleged use of their works in "God of War".

The District Court granted summary judgment to the defendants, in an opinion that is reported at 694 F. Supp. 2d 1071.

Plaintiffs did not show direct copying. They instead argued substantial similarity. The District Court listed precedents in the 9th Circuit on the issue of substantial similarity, and then compared the plaintiffs' works and the allegedly infringing work. It concluded that "An examination of articulable similarities between the plot, themes, dialogue, mood, settings, pace, characters and sequence of events of God of War and plaintiffs' works reveals far less similarity than would be required to overcome summary judgment, even if plaintiffs had proven access. Plaintiffs have pointed to no persuasive similarity in dialogue or narration that would suggest actual copying."

It wrote that "there is some degree of similarity between the plots at an extremely generalized level", but "No one can own the basic idea for a story. General plot ideas are not protected by copyright law; they remain forever the common property of artistic mankind", particularly "when virtually all of the elements comprising plaintiffs' works are stock elements that have been used in literary and artistic works for years, if not millennia."

This case is Jonathan Bissoon-Dath, et al., v. Sony Computer Entertainment America, Inc., et al., U.S. Court of Appeals for the 9th Circuit, App. Ct. No. 10-15783, an appeal from the U.S. District Court for the Northern District of California, No. C 08-1235 MHP, Judge Marilyn Patel presiding.

Durbin and Conyers Introduce Bills to Permit Cartel States to Tax Out of State Internet Retailers

7/29. Rep. Richard Durbin (D-IL), Sen. Tim Johnson (D-SD), and Sen. Jack Reed (D-RI) introduced S 1452 [LOC | WW], the "Main Street Fairness Act" in the Senate on July 29, 2011. Rep. John Conyers (D-MI), Rep. Peter Welch (D-VT), and Rep. Heath Shuler (R-NC) introduced HR 2701 [LOC | WW], the companion bill in the House, on the same day.

This bill would permit states that join a tax cartel to impose taxes on out of state internet retailers, and other direct sellers. Cartel members are those states that sign and meet the requirements of a document titled the "Streamlined Sales and Use Tax Agreement". The Streamline Sales Tax Governing Board drafted this in 2002, and has repeatedly amended it since.

S 1452 was referred to the Senate Finance Committee (SFC). HR 2701 was referred to the House Judiciary Committee (HJC).

The U.S. Supreme Court ruled in Quill v. North Dakota, 504 U.S. 298 (1992), that state and local taxing authorities are barred under the Commerce Clause from requiring remote sellers without a substantial nexus to the taxing jurisdiction to collect sales taxes for sales to persons within the jurisdiction. However, the Court added that Congress may extend such authority. Legislation is introduced in every Congress that would give states the authority to impose taxes on distant and out of state direct retailers, including web based retailers. None have been enacted.

For example, in the 111th Congress former Rep. Bill Delahunt (D-MA) introduced HR 5660 [LOC | WW], the "Main Street Fairness Act". S 1452 and HR 2701 borrow much language from HR 5660, but are not identical.

Sen. Richard DurbinSen. Durbin (at right) stated in the Senate that "If you are a small business owner in Peoria or Springfield or Alton, you compete against neighboring businesses down the street and, increasingly, with sellers on the internet. The businesses down the street have to collect the same State sales taxes that you do. But, many internet sellers don't. That means internet sellers have a built-in price advantage. That isn't fair, and it's not a level playing field."  (See, Congressional Record, July 29, 2011, at Page S5073.)

He said that "The Main Street Fairness Act would address that. The bill would give Congressional endorsement to the Streamline Sales and Use Tax Agreement, which 45 States and the District of Columbia created years ago to help make it feasible for businesses selling online to collect State and local sales taxes already owed."

Ed Black, head of the Computer and Communications Industry Association (CCIA), stated in a release that "E-commerce has enabled businesses to broaden the scope of their activities beyond traditional geographic limitations. Sadly, this bill seeks to re-impose onto e-commerce businesses the very burdens that innovation has enabled them to overcome, and has given them a chance for success. It would even compound their burden by drafting them into service as remote sales tax collectors navigating the web of multiple tax jurisdictions."

"Penalizing businesses for utilizing technology and innovation is not fairness, but merely a shortsighted targeting of new revenue models, while protecting existing business models at the expense of consumers and growth", said Black. "Innovation and entrepreneurship have always been the engines of our economic growth, and it is counterproductive to add to the administrative burdens of small businesses at the very moment we need them to provide jobs and lead our economic recovery."

People and Appointments

7/29. President Obama nominated Anneila Sargent to be a member of the National Science Foundation's (NSF) National Science Board (NSB) for a term expiring on May 10, 2016. See, White House news office release and release.

7/29. President Obama withdrew the nomination of Michael Mundaca to Assistant Secretary of the Treasury for Tax Policy. See, White House news office release.

More News

7/29. The Department of the Treasury's (DOT) Financial Crimes Enforcement Network (FinCEN) published a notice in the Federal Register that announces, describes, recites, and sets the effective date (September 27, 2011) for, its Bank Secrecy Act (BSA) rules changes regarding money services businesses, prepaid access and stored value. See, Federal Register, Vol. 76, No. 146, Friday, July 29, 2011, at Pages 45403-45420.

7/29. The Government Accountability Office (GAO) released a letter report [33 pages in PDF] regarding "Defense Department Cyber Efforts: Definitions, Focal Point, and Methodology Needed for DOD to Develop Full-Spectrum Cyberspace Budget Estimates". It states that the Department of Defense (DOD) "does not yet have an overarching budget estimate for full-spectrum cyberspace operations including computer network attack, computer network exploitation, and classified funding", although it has provided three different estimates for FY 2012: $2.3, $2.8 and $3.2 Billion.

7/29. The U.S. District Court (SDNY) sentenced Donald Longueuil to serve 30 months in prison following his previous plea of guilty to securities fraud, conspiracy to commit securities fraud and wire fraud, in connection with his participation in a "conspiracy to obtain Inside Information, including detailed financial earnings, about numerous public companies", including Marvell Technology Group, Ltd., NVIDIA Corporation, Fairchild Semiconductor Corporation, Advanced Micro Devices, Inc., Actel Corporation, and Cypress Semiconductor. The U.S. Attorneys Office for the Southern District of New York added in its release that Longueuil "obtained Inside Information -- specifically the nonpublic financial quarterly earnings of Marvell ...and caused the hedge fund where he worked to execute trades in Marvell".

House Judiciary Committee Approves Data Retention Bill

7/28. House Judiciary Committee (HJC) amended and approved HR 1981 [LOC | WW], the data retention bill, at a two day mark up spread over four sessions on July 27 and 28, 2011. The vote on final passage was 19-10. See, table in this issue titled "Roll Call Votes on Data Retention Bill, July 27-28, 2011".

Some things are clear about the bill as amended and passed by the HJC. It contains a data retention mandate. The bill as amended covers wireless providers. The bill as introduced had exempted them. Also, the stated retention period was reduced from 18 months to one year by the managers amendment. But, little else is clear. The bill is unclear regarding what entities are subject to the mandate, what data they must retain, who can access retained data, and even whether retention means collecting data not currently being collected.

The ordinary function of legislation, and particularly legislation on criminal law and procedure, is to provide, in advance, and in writing, with clear meaning, what is prohibited or required of persons within that jurisdiction. It puts people on notice of precisely what the law is. The HJC is usually very good at this.

This bill, however, is a model of statutory obscurity. It is written in carefully worded but vague language that is not susceptible to one understanding or predictable interpretation.

At the mark up on July 27 and 28, HJC members offered wildly different interpretations of several of its key clauses. Nevertheless, the HJC approved no amendments to clarify any of these clauses. Indeed, Rep. Lamar Smith (R-TX), the sponsor the bill, and Chairman of the HJC, spent two days fighting off amendments efforts to give this bill clear meaning.

The HJC has 37 members. (Rep. Debbie Schultz (D-CA), lead cosponsor of the bill, spoke at the opening of the mark up pursuant to a courtesy; she took leave from the HJC in May when she was elected Chairwoman of the Democratic National Committee.) This bill had 19 supporters -- a bare majority. Another 8 did not vote. 5 conservative Republicans took no part at all, even though they were on Capitol Hill both days. 10 voted against the bill.

Rep. Lamar SmithRep. Smith (at right) represented the supporters of the bill almost single handedly during the mark up. Most of the bill's supporters took no part in the debate, and merely voted. Rep. Smith received support in the debate on a few issues from Rep. Dan Lungren (R-CA). Rep. Smith was also supported by a team of staff attorneys, led by Carolyn Lynch.

A bipartisan group from opposite ends of the ideological spectrum was active in opposing the bill, offering amendments, and debating their merits. This group included Rep. James Sensenbrenner (R-WI), Rep. Jason Chaffetz (R-UT), and Rep. Darrell Issa (R-CA) from the right, and Rep. Zoe Lofgren (D-CA), Rep. Mel Watt (D-NC), Rep.Bobby Scott (D-VA), Rep. Jerrold Nadler (D-NY), and Rep. John Conyers (D-MI) from the left.

The key provisions of the bill are found in Sections 4, which mandates data retention, and Section 5 and 6, which provide immunity.

Summary of Data Retention Provisions. This bill adds a broad data retention mandate to 18 U.S.C. § 2703, which is part of the Stored Communications Act (SCA), which in turn is part of the Electronic Communications Privacy Act (ECPA). It requires maintaining data on all internet users, not just those under investigation.

There are already two data retention mandates. Subsection 2703(f) provides that "A provider of wire or electronic communication services or a remote computing service, upon the request of a governmental entity, shall take all necessary steps to preserve records and other evidence in its possession pending the issuance of a court order or other process." Also, 18 U.S.C. § 2258A requires electronic communication services (ECS) and remote computing services (RCS), old SCA terms, to report to the CyberTipline of the National Center for Missing and Exploited Children (NCMEC) any "actual knowledge of any facts or circumstances" that constitute an apparent violation of CP statutes, including either 18 U.S.C. § 2252 and 18 U.S.C. § 2252A. It also requires any ECS or RCS that makes such a report to retain not only data, but also content, for 90 days. See, story titled "Summary of Existing Data Retention Mandates" in TLJ Daily E-Mail Alert No. 2,257, July 13, 2011.

Section 4 of the bill adds a new subsection (h) to Section 2703. The key language of the bill, which is found in the managers amendment, is as follows:

The Section 2703(c)(2) list, which is currently in the statute, is as follows:

The first element of uncertainty is the meaning of "shall retain". Does it require covered entities to collect data that they do not already collect? Or, does it require covered entities to not destroy or delete certain data that they already collect?

Rep. Smith stated that the bill imposes no duty to collect data. Rep. Lofgren and others stated that the bill does require covered entities to collect data.

The second element of uncertainty is the meaning of "enables the identification of the corresponding customer or subscriber information under subsection (c)(2)".

Rep. Smith stated that the bill imposes no duty to collect or save subsection (c)(2) data; only IP numbers must be saved. Rep. Lofgren and others stated that the bill requires covered entities to collect and save all of the data listed in subsection (c)(2).

Rep. Lofgren offered an amendment that would have clarified that the bill means what Rep. Smith states that it means on both of these points. However, Rep. Smith opposed this amendment, and it failed on a roll call vote of 7-16.

The third element of uncertainty is the meaning of "telephone connection records" in subsection (c)(2)(C). Rep. Chaffetz suggested during the markup that GPS data is covered. Rep. Lofgren told TLJ after the mark up that this billl "probably would" entail the collection of wireless device location data.

The fourth element of uncertainty is what entities are covered by the data retention mandate. The bill states that it applies to a "commercial provider of an electronic communication service". It then provides as follows:

It should also be noted that 18 U.S.C. § 2510 also provides that the term "electronic communications system" means "any wire, radio, electromagnetic, photooptical or photoelectronic facilities for the transmission of wire or electronic communications, and any computer facilities or related electronic equipment for the electronic storage of such communications".

The bill does not explain what it means to offer "Internet access capability". Is this, for example, broader than offering internet access service? And, what is the meaning of "commercial" and "for a fee". Rep. Lofgren and others argued that this language would make providers of WiFi access, including airlines, airports and coffee shops, covered entities if they charge a fee for WiFi access, or condition WiFi access on some other payment, such as for a cup of coffee. Moreover, they argued that these coffee shops would be required to collect (c)(2) data from their customers, including names, addresses, bank account numbers, and credit card numbers. Rep. Smith stated that this is not the meaning of the bill.

If this bill were to be enacted as approved by the HJC, there would be no clarity as to whether WiFi access providers are covered, and if so, what their data collection obligations would be.

The fifth element of uncertainty is who can access the data retained pursuant to this bill. To begin with, Rep. Smith and other backers of this bill state that the bill's purpose is to enable law enforcement agencies to obtain the identities of persons who post or view child pornography (CP) on the internet. However, there is no plausible argument to be made from the language of the bill that retained data could be accessed solely for this purpose. Indeed, when Rep. Scott offered an amendment that would have limited access to this purpose, Rep. Smith said that the bill does, and should, allow access for other purposes. Rep. Scott then withdrew that amendment.

However, there is some uncertainly in the language of the bill as to whether access is limited to law enforcement agencies, or whether private litigants obtain retained data. The bill as introduced included no limitation on access. At the July 12 hearing on the bill some members warned that retained data could be accessed by divorce lawyers, and other private civil litigants. The managers amendment then added limiting language, as follows:

Rep. Lofgren, Rep. Scott and others pointed out that in civil litigation between private parties, a party might obtain an order or subpoena from the court directing a service provider to produce data retained pursuant to this bill, and that that process would fall within the meaning of "compelled by any person or other entity that is not a governmental entity".

Thus, it appears that the clarifying language in the managers amendment is merely an illusory protection that will not prevent divorce lawyers and other private parties from gaining access to retained data. However, Rep. Smith made an argument to the contrary at the mark up on July 28. He asserted that a court is not a "government entity".

The sixth element of uncertainty is the meaning of the bill's exception for providers whose service is not "effectively available to the public". The bill does not define this term. This issue was not discussed at the mark up.

The seventh element of uncertainty is the meaning of retaining data for one year. Some of the data retained pursuant to this bill would be associated with a date, which date could toll the beginning of the one year retention period. For example, a temporary IP address may be assigned to a customer on one date. A number would be called on one date. Location data would be associated with dates. However, the bill provides no explanation of what would begin the one year retention period for other data, such as credit card numbers, bank account numbers, and addresses.

Summary of Immunity Provisions. There was considerable debate about the immunity provisions of Sections 5 and 6 of the bill at the mark up. Also, HJC rejected an amendment to these sections.

Section 5 of the bill would amend Section 2703 by inserting the words "retaining records or" into subsection (e). This is the provision that provides immunity for providing law enforcement entities stored information.

As amended, this section would provide as follows:

Section 6 of the bill would amend 18 U.S.C. § 2707 by adding to subsection (e)(1) the phrase "or the requirement to retain records under section 2703(h)".

As amended, this section would provide as follows:

For a further discussion of the implications of these two sections, see subsection titled "Immunity" in story titled "Summary of HR 1981, Data Retention Bill" in TLJ Daily E-Mail Alert No. 2,257, July 13, 2011.

Summary of Administrative Subpoena Provisions. HR 1981 would change the administrative subpoena process for obtaining access to retained data, as well as other records.

But first, the Attorney General, and hence, prosecutors in U.S. Attorneys Offices around the country, already have broad authority to issue administrative subpoenas to investigate child pornography (CP) cases and other cases involving sexual exploitation of children.

Moreover, Section 2703 already provides that "A provider of electronic communication service or remote computing service shall disclose to a governmental entity" Section (c)(2) data "when the governmental entity uses an administrative subpoena".

Section 7 and 11 of the bill as introduced would give administrative subpoena power to the Unites States Marshals Service (USMS) to investigate unregistered sex offenders. The USMS is the unit of the DOJ that protects courts, judicial personnel, and judicial processes, and finds and arrests fugitives. More recently, the Congress has required sex offenders to register. Not all do.

These provisions may not be the most significant parts of this bill. However, Rep. Sensenbrenner adamantly opposed them.

Rep. Sensenbrenner offered an amendment to remove them, which failed on a vote of 10-17. Rep. Sensenbrenner does not want to give administrative subpoena power to the USMS, even if only in connection with the registration of sex offenders.

Rep. Scott also offered an amendment regarding administrative subpoenas. It would have stricken the two sections from the bill as introduced, and added a new section that would have given no new authority to the USMS, but would have given the Attorney General the authority to issue administrative subpoenas in connection with enforcement of the Sex Offender Registration and Notification Act. It failed on a voice vote. There was no roll call vote.

18 U.S.C. § 3486 already provides that "In any investigation of ... a Federal offense involving the sexual exploitation or abuse of children, the Attorney General ... may issue in writing and cause to be served a subpoena requiring the production and testimony" that is "relevant to the investigation".

This section also enumerates the offenses that involve "sexual exploitation or abuse of children". It includes 18 U.S.C. § 2252 and 18 U.S.C. § 2252A, which are the two main sections used to prosecute people who distribute or view child pornography online. Rep. Scott amendment would have expanded this list by adding 18 U.S.C. § 2250 (regarding registration of sex offenders).

HR 1981 would amend 28 U.S.C. § 566, which lists the powers and duties of the USMS, to provide that the USMS shall also "issue administrative subpoenas in accordance with section 3486 of title 18, solely for the purpose of investigating unregistered sex offenders". This bill would also make related amendments to 18 U.S.C. § 3486.

Summary of Online Financial Transactions Provisions. There are two substantive sections of the bill that pertain to financial transactions. Neither was the subject of much debate at the markup.

The bill as introduced adds a new section to the criminal code, to be codified at a new 18 U.S.C. § 1960A, that provides as follows:

The managers amendment approved at the mark up added the following language:

Also, the bill as introduced adds several crimes to the list of predicate offenses for money laundering under 18 U.S.C. § 1956. CP under 18 U.S.C. § 2252A is already on the list. The bill would add the proposed Section 1960A.

These provisions are not rationally related to the stated purpose of the bill of fighting CP. Law enforcement entities, with the assistance of  groups such as the National Center for Missing & Exploited Children (NCMEC) and the Financial Coalition (which includes banks, credit card companies, electronic payment networks, third party payments companies and internet access providers) have all but shut down commercial CP distribution on the internet.

Criminal CP viewing and uploading continues, but via free platforms such as peer to peer file sharing programs and online bulletin boards, which do not involve third party processing of financial transactions.

The debate at the mark up did not disclose why the DOJ or Rep. Smith seek these changes to law.

Many sentences in CP cases include post release bans on use of computers or the internet. The DOJ might use these changes to compel financial intermediaries to stop processing financial transactions in which a registered sex offender attempts to purchase a computer, or seeks to subscribe to a broadband internet access service.

Summary of Non-Technology Related Provisions. HR 1981 also includes some changes to law that do not implicate information or communications technologies. Some of these relate to CP sentencing, and hence, give Rep. Smith support for his argument that this bill is about fighting CP. These provisions, however, are unrelated to data retention, which is the core of this bill.

It would provide for increased prison time. It would raise the maximum prison sentence under both 18 U.S.C. § 2252 and 18 U.S.C. § 2252A for mere viewing of CP online (first time possession with intent to view) to 20 years.

The bill would also direct the U.S. Sentencing Commission to amend its guidelines and policies to cause CP offenders to receive longer prison sentences. The HJC approved an amendment at the mark up that changed this language.

Finally, bill would amend 18 U.S.C. § 1514, which pertains to "Civil action to restrain harassment of a victim or witness". Like the data retention mandate, it could assist the investigation of CP cases, but likely would be used mostly in other situations. See, subsection titled "Non-Technology Related Changes to CP Law" in story titled "Summary of HR 1981, Data Retention Bill" in TLJ Daily E-Mail Alert No. 2,257, July 13, 2011.

Amendment by Amendment Summary of the Mark Up of HR 1981, the Data Retention Bill

7/28. The House Judiciary Committee (HJC) began its mark up of HR 1981 [LOC | WW], the data retention bill, on Wednesday, July 27, 2011. It held two extended sessions, and failed to obtain a quorum for a third session late in the day. It continued and completed its mark up with two extended sessions on Thursday, July 28. The following is an amendment by amendment summary of this mark up on July 27-28.

The mark up began with speeches. Rep. Lamar Smith (R-TX), Chairman of the HJC, and sponsor of HR 1981, read a prepared statement. He argued that this bill is necessary to enable law enforcement entities to identify pedophiles on the internet.

Rep. Debbie Schultz (D-FL), lead cosponsor of the bill, gave a speech in support, in which she focused on the problem of child pornography (CP), rather than the contents of the bill, and then left the room. She took leave of absence from the HJC in May when she was elected Chairwoman of the Democratic National Committee.

Rep. Bobby ScottRep. Bobby Scott (D-VA) (at right) called the bill an "unfunded data retention mandate", that "saddles the industry", and "compromises consumer privacy and individual liberties". He also said the "we still have no idea" whether this bill would add anything to law enforcement efforts to fight CP.

Rep. James Sensenbrenner (R-WI) also spoke in opposition. He is the Chairman of the HJC's Subcommittee on Crime. Rep. Smith brought this bill straight to the full Committee for mark up, without a mark up by the Subcommittee. Rep. Sensenbrenner is also a former Chairman of the HJC who guided the 2001 USA PATRIOT Act and extensions and amendments through the HJC and House. He called HR 1981 a "threat to the privacy of average law abiding citizens". He added that "the decision to store data should be a business decision, not a government decision".

Rep. Zoe Lofgren (D-CA), who represents a Silicon Valley district stated that this bill is "among the most astonishing increases in the power of the federal government ... in the 17 years I have been on the Judiciary Committee".

She also said that there is a hacking problem, and because of the "complete liability relief" in this bill, "there will be less effort to protect this data".

Rep. Jerrold Nadler (D-NY) called the data retention mandate a "dragnet" that requires the collection of information on "millions of innocent people". He added, with reference to News Corporation, that "the more data we keep, the more likely we will have more of these intrusions".

Rep. Smith called up the bill as introduced on May 25, 2011, and a managers amendment. He read another prepared statement.

Rep. Zoe LofgrenRep. Lofgren (at left) noted that the managers amendment exempts non-commercial service providers. She said, "you are essentially saying to the pornographer, go to the library".

She asked Rep. Smith if (1) the "commercial" and "for a fee" language of the managers amendment means that coffee shops that charge are covered by the data retention mandate, (2) service providers must retain all of the data enumerated in Section 2703(c)(2), and (3) private litigants will be able to access retained data if they obtain court order?

Rep. Smith responded that "the answer to all the questions is no".

The HJC then considered several amendments to the managers amendment, before voting on the managers amendment.

Minimum Data Retention Period. Rep. Scott offered a short amendment to the managers amendment that would have shortened the data retention period from "one year" to "180 days". It failed on a roll call vote of 12-14. (See, column 1 of table titled "Roll Call Votes on Data Retention Bill".)

Rep. Scott and Rep. Jason Chaffetz (R-UT) argued that this data retention mandate would impose a burden on small service providers. Rep. Scott said that some "would be put out of business". Rep. Chaffetz expressed concern about the compliance costs for rural ISPs.

Rep. Nadler said that the law enforcement entities "are besieged with data".

Rep. Jason ChaffetzRep. Chaffetz (at right) also spoke at this time about retention of GPS data under the mandate of this bill. He also said that "Americans have a reasonable expectation of privacy" in this data.

Reasonable expectation of privacy is the first prong of the Supreme Court's test for determining whether the 4th Amendment protects people against unreasonable searches and seizures. This test was first announced in opinion in Katz v. U.S. in 1967. It is reported at 389 U.S. 347.

The 4th Amendment and other parts of the Bill of Rights only protect people against government action. One reason that the DOJ and Rep. Smith are pushing a bill that does not expressly mandate data collection may be to provide the legal argument, if a court ever reviews this bill, that there is no government action for the purposes of Constitutional analysis.

Rep. Darrell Issa (R-CA) stated at this time that this bill would require data retention for all purposes, not just CP, and that "this is not about child pornography, never has been".

Access for Child Exploitation Investigations Only. Rep. Scott offered an amendment to the managers amendment that would have limited access data retained pursuant to HR 1981 to CP investigations.

He said, "let's not bait and switch ... law enforcement should not be able to obtain these records for ordinary run of the mill cases". He also pointed out that the DOJ engaged in deception in 2001 when it requested sneak and peak authority for terrorism purposes. A recent AOUSC report revealed that only 3 out of 763 sneak and peak (delayed notice of search) warrants were terrorism related.

Rep. Smith argued against the amendment stating that it "would limit the ability of law enforcement officials to investigate other types of crime".

Rep. Scott stated that he had made the point that the purpose of this bill is not to further CP investigations, but to further all criminal and civil investigations. He then withdrew this amendment.

check markCost Study. Rep. Scott offered an amendment to the managers amendment that requires the Department of Justice (DOJ) to conduct one study on the cost to service providers of complying with the data retention mandate. Rep. Smith expressed support, and the HJC passed it by unanimous voice vote.

It provides, that "The Attorney General shall make a study to determine the costs associated with compliance by providers with the requirement of paragraph (1). Such study shall include an assessment of all the types of costs, including hardware, software, and personnel that are involved. Not later then 2 years after the date of the enactment of this paragraph, the Attorney General shall report to the Congress the results of that study."

The reference to "paragraph (1)" is a reference to the data retention mandate. Also, the third word in the last sentence, "then", should be "than".

Small Service Providers. Rep. Scott offered an amendment to the managers amendment regarding small service providers. Rep. Smith stated that he is willing to work with Rep. Scott in drafting similar language. With this commitment, Rep. Scott withdrew this amendment.

Hence, the two will likely continue to work on such an amendment, and if this bill is brought up on the floor, there may be a similar amendment.

This amendment would have exempted from the data retention mandate any "electronic communication service or remote computing service with fewer than 2 million broadband subscribers".

However, it also provided that a provider with fewer that 2 million broadband subscribers could elect to comply with the data retention mandate.

Then, such provider would only be required to disclose retained data to "a governmental entity serving a law enforcement function and acting pursuant to a warrant, court order, consent, or administrative subpoena, ... and only in connection with investigation" with enumerated federal crimes against or involving children, and substantially similar state crimes, and terrorism related crimes.

Also, such a provider would not be required to disclose retained data to "any civil litigant or judicial authority in any matter in which such provider is not a named plaintiff, defendant, or intervenor".

check markVote on Manager's Amendment. The HJC then approved the managers amendment, as amended by Rep. Scott's cost study amendment, on a roll call vote of 19-4. The no votes were cast by Rep. Sensenbrenner, Rep. Chaffetz, Rep. Scott and Rep. Lofgren. (See, column 2 of table.)

The HJC then proceeded to further amendments to the base bill.

check markSentencing Guidelines. Rep. Steve Cohen (D-TN) offered an amendment regarding sentencing guidelines in CP cases. It does not relate to data retention. Nor is it technology related. Rep. Smith expressed support for the amendment, and the HJC passed it by unanimous voice vote.

Rep. Cohen attended parts of the mark up, and participated in discussions, but was absent for the key votes on final passage, and on shortening the retention period to 180 days.

Administrative Subpoenas. Rep. Sensenbrenner offered an amendment regarding administrative subpoenas. It would simply have stricken the two sections related to administrative subpoena powers of the U.S. Marshall's Service. It failed on a role call vote of 10-17. (See, column 3 of table.)

Rep. Smith said that these provisions are "narrowly targeted, just for fugitive offenders". Rep. Watt said that this may be the "next step", to be followed by more steps, that eventually lead to the ultimate result of "big bad government".

Rep. John Conyers (D-MI) supported this amendment. He said the the USMS has been trying to get administrative subpoena power for decades, and that the USMS does not need this power, because the DOJ prosecutors already have administrative subpoena power.

In addition, he was not present at the opening of the mark up, and therefore gave a general speech in opposition to the bill at this point. He said that "what we are doing here is creating a database of all Americans". And, he said that "this bill is mislabeled", and "if you are against child pornography you have got to go along with it even if it doesn't make any sense".

check markDOJ Study on Privacy Standards. Rep. Sheila Lee (D-TX) offered two amendments en bloc. Rep. Smith expressed support. The HJC passed both in a single unanimous voice vote.

The first amendment requires the DOJ to conduct a study. This amendment appears to have been hastily and inartfully drafted. It provides that the DOJ shall conduct one study "of providers affected by section 2703(h)" that includes "the privacy standards and considerations implemented by those providers as they comply with the requirements of section 2703(h)" and "the frequency of any reported breaches of data retained pursuant to section 2703(h)".

check markSense of Congress Regarding Data Breaches. Rep. Lee's second amendment, which was approved in the same voice vote, merely expresses the sense of the Congress regarding data breach notification.

It provides that "It is the sense of the Congress to encourage electronic communications service providers to give prompt notice to their customers in the event of a breach of the data retained pursuant to section 2703(h) of title 18 of the United States Code, in order that those effected can take the necessary steps to protect themselves from potential misuse of private information."

This only expresses the sense of the Congress, and therefore imposes no duty upon any service providers.

Strike the Data Retention Mandate. Rep. Lofgren offered an amendment that would have stricken Section 4 of the bill, the data retention mandate. This amendment would have gutted the bill. It failed on a role call vote of 8-15. (See, column 4 of table.)

Rep. Conyers said that this bill provides for the "creation of a database for everybody in the United States of America".

Rep. Lofgren said that "this is an entirely new mandate for every single ISP in the United States".

She also addressed Rep. Smith's previous answer to her question regarding whether covered providers would be required to retain all of the data listed in Section 2703(c)(2). She said that his answer of "no" was made in good faith, but "a good faith answer does not contradict the plain language of the statute", which mandates retention of (c)(2) data.

She also said that this is "big brother", and that civil litigants will get access to this data too. She added that retention of this data will pose a "threat to domestic violence victims".

Rep. Smith said the the DOJ supports this. Rep. Conyers responded that the fact that the DOJ likes this bill "doesn't cut any water with me".

Rep. Scott said that data retained pursuant to this bill would be used for marketing purposes, and enforcement of intellectual property rights. He added that it would be "cued up for hackers".

More Resources for Child Exploitation Cases. Rep. Scott offered an amendment to provide more financial resource to the DOJ for investigators and prosecutors for child exploitation cases. It failed on a role call vote of 7-11. (See, column 5 of table.)

It provided that "In addition to any other authorization of appropriations in other laws, there are authorized to be appropriated for fiscal year 2012 and each fiscal year thereafter $45,000,000 to provide for 200 additional Federal Bureau of Investigation agents, 30 additional assistant United States attorneys, and 20 additional Federal public defenders who are solely dedicated to working on Federal offenses involving the sexual exploitation or abuse of children under sections 1201, 1591, 2241(c), 2242, 2243, 2251, 2251A, 2252, 2252A, 2260, 2421, 2422, or 2423 of title 18, United States Code, in which the victim is an individual who has not attained the age of 18 years."

Rep. Scott argued that this would be more effective in fighting CP than a data retention mandate.

Statistical Reporting. Rep. Lofgren offered an amendment that would have required covered service providers to report certain data to the Administrative Office of the U.S. Courts (AOUSC), and required the AOUSC to submit annual reports to the Congress containing aggregate data. It failed on a role call vote of 9-15. (See, column 6 of table.)

This amendment would have required service providers to submit copies of demands to the AOUSC, along with other information, including "reimbursable costs associated with complying with it", and "how long the record or information had been retained ... at the time of the receipt of the demand".

This amendment would have required the AOUSC to prepare annual reports that would have disclosed how many demands each government entity makes each year, whether it obtained any court order, "the types of investigations in connection with which the demand was issued", costs, and "the average length of time the record or information had been retained".

Rep. Lungren initially voted for this amendment. However, Carolyn Lynch, Republican counsel to the HJC's Subcommittee on Crime, walked over to him, and said something privately. He then changed his vote to no.

Immunity. Rep. Lofgren offered an amendment regarding immunity. It failed on a role call vote of 7-18. (See, column 7 of table.)

First, it would have replaced Section 5 of the bill with the following: "The provision of information, facilities, or assistance with regard to a log required to be retained under section 2703(h) of title 18, United States Code, shall be, for the purposes of 2703(e) of that title, deemed a provision of information, facilities or assistance under chapter 121 of that title."

Second, it would have replaced Section 6 of the bill with the following: "A record or information contained in a log made under section 2703(h) of title 18, United States Code, shall be, for the purposes of section 2707(e) of that title, deemed to be a record or information to which 2703(c) applies."

Rep. Lofgren argued that the bill without amendment would "attract hackers".

Administrative Subpoenas. Rep. Scott offered an amendment regarding administrative subpoenas. It failed on a voice vote. There was no roll call vote.

It would have stricken the two administrative subpoena sections from the bill, and added a new section that would have given no new authority to the USMS, but would have given the Attorney General the authority to issue administrative subpoenas in connection with enforcement of the Sex Offender Registration and Notification Act.

Data Breach Notification. Rep. Conyers offered an amendment regarding notification of data breaches. It bears attributes of a hastily drafted and incomplete proposal.

Rep. Smith said that "data breach legislation is currently being considered by the" House Commerce Committee (HCC). He said to Rep. Conyers that "we will continue to work together". Rep. Conyers then withdrew the amendment.

See also, story titled "House Commerce Subcommittee Approves SAFE Data Act", and related stories, in TLJ Daily E-Mail Alert No. 2,276, July 23, 2011.

What Data Must Be Retained? Rep. Lofgren offered an amendment regarding (c)(2). It failed on a role call vote of 7-16. (See, column 8 of table.)

This amendment would have added, following the key new subsection 2703(h), a new subsection 2703(i): "RULE OF CONSTRUCTION.--Subsection (h) shall not be construed to require a provider of electronic communication service to associate any information with a particular user or to collect any customer or subscriber information, including information described in subsection (c)(2), that the provider does not already associate or collect for business reasons."

Rep. Smith had previously asserted that the bill does not require the retention of the data listed in subsection (c)(2). So, Rep. Lofgren offered an amendment that would simply have clarified that the bill means what Rep. Smith said that it means.

However, Rep. Smith opposed this amendment. He said that "the amendment is a solution looking for a problem", that it "needlessly confuses the problem", and that it would "threaten the entire data retention program".

What Rep. Smith did not say, but what is apparent from the text of the bill, and the debate at the mark up, is that Rep. Smith persists in offering an explanation of the meaning of the bill that is inconsistent with words of the bill. This lends the appearance that he seeks to win passage of a bill by misrepresenting its contents.

Title of Bill. Rep. Lofgren offered an amendment to change the title of the bill. It failed on a role call vote of 9-18. (See, column 9 of table.)

The bill is titled, quite deceptively, "Protecting Children from Internet Pornographers Act of 2011". Rep. Lofgren proposed, quite sarcastically, that it be titled "Keep Every American's Digital Data for Submission to the Federal Government Without a Warrant Act of 2011".

check markFinal passage. The HJC then passed the bill as amended, on a roll call vote of 19-10. (See, column 10 of table.)

Commentary: How Enactment of HR 1981 Would Benefit Some Service Providers

7/28. Some of the cosponsors of HR 1981 [LOC | WW], the data retention bill, and some members of the House Judiciary Committee (HJC) who voted for HR 1981 on July 28, have a history of advocating the interests of information and communications technology sector companies and users. Moreover, these members have often opposed the Department of Justice (DOJ) and intelligence agencies in doing so.

For example, Rep. Bob Goodlatte (R-VA) voted for the bill, and against efforts to amend it. In the late 1990s, he and Rep. Zoe Lofgren (D-CA) lead the fight in the House for encryption rights. Former Attorney General Janet Reno, the DOJ, the Department of Defense (DOD), Department of Commerce (DOC), and National Security Agency (NSA) all fought against encryption rights, and used of the export control regime in an attempt to regulate domestic encryption products.

Rep. Goodlatte states in his web site biography that he "has made a name for himself as a leader on Internet and high-tech issues. He is Co-Chair of the Congressional Internet Caucus, and Chairman of the House Republican High Technology Working Group. Bob's work to foster innovation in the technology sector ...".

Rep. Bob GoodlatteYet, Rep. Goodlatte (at right), and some other members of the HJC who have endeavored to prevent government agencies from imposing onerous burdens on technology and communications companies and consumers, are now backing this data retention mandate bill.

A reason for this may be that there are many benefits for some of these companies (but not their customers) that would flow from enactment of this bill.

First, this bill has two immunity provisions. Many companies are already retaining data, in part, at the request of the DOJ and other law enforcement agencies. This bill's immunity provisions would broadly limit their potential liability for doing so. Moreover, the companies would likely assert this immunity in a wider range of actions, including those flowing from data breaches.

Second, and related to the first benefit, this bill would preempt and provide exceptions to other state and federal laws that regulate the collection and retention of personally identifiable data under the rubric of promoting privacy and data security.

Many companies have interests in collecting and maintaining databases of information, other than assisting law enforcement and intelligence agencies. These databases may also be used in providing, or collaborating with other companies in providing, location based services, location based advertising, and behaviorial advertising. This bill would enable these companies to collect and retain IP addresses, names, addresses, bank account numbers, credit card numbers, records of phone calls made and received, and location data, notwithstanding federal and state statutes to the contrary.

Third, the bill would enable service providers to offer wide and clandestine support to the DOJ. The DOJ appreciates and reciprocates such support. These companies are in need of a beneficent Washington protector. For example, in the past, companies have provided much support, even when it has subjected them to class action lawsuits alleging illegal warrantless wiretaps. The DOJ has, at the same time, systematically approved numerous telecom mergers that it might not have approved in other industries, lobbied the Federal Communications Commission (FCC) against adopting network neutrality rules, lobbied the Congress for immunity for providing warrantless wiretaps, aggressively asserted the state secrets privilege in lawsuits against companies, and defended the intellectual property interests of these companies.

Fourth, HR 1981 would impose the burden of developing and maintaining databases. This will cost money. However, it will disproportionately impact small and start up companies. It will affect the large service providers; but they will be able to bear the costs more easily. Hence, this bill would create a regulatory based competitive advantage for large incumbent service providers.

Fifth, this bill might build a revenue stream for service providers. And, the more types of data they retain, and the longer they retain it, the more will be their likely revenues. That is, service providers that collect, retain, retrieve, and organize data for law enforcement agencies may charge for it. There is no provision in this bill regarding compensation from law enforcement agencies. Nor is there any requirement that this information be reported to the Administrative Office of U.S. Courts (AOUSC); hence, there will be no AOUSC annual reports that discloses aggregate data on this revenue source. Rep. Lofgren offered an amendment that would have required reporting to the AOUSC of "reimbursable costs associated with complying", but Rep. Lamar Smith (R-TX) opposed it, and it was defeated.

Wiretaps, Sneak and Peak Warrants, and the Likely Uses of Retained Data

7/28. The Administrative Office of U.S. Courts (AOUSC) collects and reports summary data on court approved use of various types of surveillance. For example, recent AOUSC data shows that 84% of criminal wiretaps and 62% of sneak and peak warrants are drug related.

The AOUSC's table titled "Major Offenses for Which Court-Authorized Intercepts Were Granted Pursuant to 18 U.S.C. § 2519, January 1 Through December 31, 2010" discloses that in 2010, for state and federal courts combined, a total of 3,194 wiretaps were authorized. Of these, 2,675 were for "Narcotics" related offenses.

For federal courts alone, 1,128 out of 1,207 wiretaps, or 93%, were for narcotics related offenses.

Wiretaps for homicide and assault -- which are mostly state cases -- come in a distant second. Other categories of criminal investigations for which more that a few wiretaps are conducted include racketeering, theft, and corruption.

18 U.S.C. § 2519 requires the collection and reporting of data on wiretaps issued pursuant to 18 U.S.C. § 2518. See also, AOUSC web page with hyperlinks to its annual wiretap statistics reports from 1997 through 2010.

When the Congress enacted the "USA PATRIOT Improvement and Reauthorization Act of 2005", Public Law No. 109-177, it includes Section 114, which required any federal or state judge who issues or denies a federal warrant authorizing delayed notice, or an extension of such a warrant, to report to the AOUSC. This requirement is codified at 18 U.S.C. § 3103a(d).

The AOUSC released a report, on July 2, 2009, that contains summary data on these delayed notice, or sneak and peak, warrants. It states that for fiscal year 2008 there were a total of 763. Of these, 474 (62%) were drug related, 53 (7%) were fraud related, and 39 (5%) were weapons related.

Some, including Rep. Bobby Scott (D-VA), have noted that the Department of Justice (DOJ) and others obtained this new sneak and peak authority in the 2001 USA PATRIOT Act after arguing that it was necessary to fight terrorism. But then, this AOUSC report disclosed that only 3 out of 763 warrants were related to terrorism.

It should be noted too that only 12 out of these 763 warrants were related to sex offenses. And, child pornography (CP) cases are just one small part of sex offenses.

This sort of data suggests that if HR 1981 [LOC | WW], the data retention bill, were to become law, then the primary investigatory and prosecutorial uses to which the mandated databases would be put would be drug related crimes, followed by other common crimes, and particularly those involving theft, fraud, racketeering, and corruption.

Investigation of sex crimes generally would likely be only one very minor usage of these databases. Access to these databases for CP related crimes might be insignificant relative to uses for other types of crimes.

This is likely why Rep. Lamar Smith (R-TX), the sponsor of HR 1981, fought off an amendment offered by Rep. Zoe Lofgren (D-CA) that would have required statistical reporting to the AOUSC on data retention. Had Rep. Lofgren's amendment been approved, it would result in reports that contradict and embarrass Rep. Smith as much as the 2009 sneak and peak report contradicted and embarrassed the 2001 proponents of expanded sneak and peak authority.

Possible Uses of Data Retention and Access. Rep. Smith has argued that HR 1981 would require retention of temporary IP addresses, and that this would assist in identifying people who upload or view CP in peer to peer file sharing systems.

IP addresses would also assist in identifying people who upload other types of illegal content, such as copyright infringing works. Hence, the government, as well as the law firms representing movie, record and other content companies, would likely often seek and obtain access to data retained pursuant to HR 1981.

One might speculate that requests in government criminal copyright infringement investigations, and in private civil copyright infringement investigations, would far outnumber CP related requests for retained data.

Rep. Howard Berman (D-CA), perhaps the leading advocate of the copyright interests of the movie and music industries on the HJC, voted for the bill.

HR 1981 might be viewed in tandem with S 968 [LOC | WW], the "Preventing Real Online Threats to Economic Creativity and Theft of Intellectual Property Act of 2011", or "PROTECT IP Act". A companion bill has not yet been introduced in the House.

Sen. Orrin Hatch (R-UT), introduced S 1308 [LOC | WW], which is identical to HR 1918 as introduced, in the Senate on June 30, 2011. The cosponsors, are Sen. Charles Grassley (R-IA), Sen. Amy Klobuchar (D-MN), and Sen. Jeff Sessions (R-AL).

There is overlap in the supporters of data retention legislation and the PROTECT IP Act. Of the four sponsors of S 1308 (the Senate data retention bill), three are also sponsors of the PROTECT IP Act (Hatch, Grassley, and Klobuchar, but Sessions).

Also, while the House version of the PROTECT IP Act has not yet been introduced, several members have already been public and vocal in their support, including Rep. Smith, Rep. Berman, and Rep. Goodlatte. All three voted for data retention bill. On the other hand, it should be noted that Rep. John Conyers supports some form of PROTECT IP Act, but voted against the data retention bill.

Aside from intellectual property related investigations, retention of IP addresses would likely be useful in criminal and private investigations into computer hacking under 18 U.S.C. § 1030.

Retained IP addresses might also be useful in other investigations into the identity of anonymous publishers of information.

Also, while Rep. Smith has emphasized the use of retained data to associate a name with an IP address, databases of retained data could be use to associate a datum in any field with data in other fields. One could use it to associate an address with a name, or vice versa. One could use it to associate a bank account number with a name. One could use it to associate locations visited with a name. And so forth. And this points to a multiplicity of other uses.

Law firms that want to execute upon a judgment, or locate a person for service of process, would find uses for this data. Debt collectors and tax collectors would find it useful in tracking down debtors and assets. Law enforcement officers would find it useful to locate witnesses and track down fugitives.

In the end, databases of retained data would be put to numerous and frequent use, and become a fundamental feature of the criminal and civil justice systems. And, CP cases would likely account for only a tiny fraction of requests for retained data.

Judges, Prosecutors and Data Retention

7/28. The roll call votes during the House Judiciary Committee (HJC) mark up HR 1981 [LOC | WW], the data retention bill, revealed a demographic characteristic of members of the HJC that correlates with support for HR 1981. Former prosecutors support the bill. Former judges are skeptical.

Rep. Dan Lungren (R-CA) is a former Attorney General of the state of California, and hence, its former chief prosecutor. He not only voted for the bill, and against attempts to amend it, he was the only member other than Rep. Smith to repeatedly engage in debate with the bill's opponents.

Pedro Pierluisi (D-RI), the Resident Commission of Puerto Rico, is a former Attorney General of Puerto Rico. Rep. Howard Coble (R-NC) is a former Assistant U.S. Attorney (AUSA). The work of U.S. Attorneys Offices is overwhelmingly prosecution of federal crimes. Rep. Tim Griffin (R-AR) is also a former AUSA. Before that, he worked as a prosecutor for the U.S. Army. Rep. Tom Marino (R-PA) is a former state district attorney and U.S. Attorney.

Some prosecutors come to view judges and juries as inconvenient Constitutional impediments of the important and excellent work of prosecutors. Rep. Trey Gowdy (R-SC) is not only a former federal prosecutor. He states in his biography that he has named his dogs "Judge" and "Jury".

All of these former prosecutors voted for HR 1981.

In contrast, Rep. Hank Johnson (D-GA) is a former judge. He served for 12 years as a Magistrate Judge for the state of Georgia. He voted against HR 1981. He voted for efforts to amend it.

Rep. Louie GohmertRep. Louie Gohmert (R-TX) (at right) is a former judge for the state of Texas. He served mostly as a state District Court Judge, a trial court position, and then briefly as a state court of appeals judge.

Rep. Ted Poe (R-TX) served for over twenty years as a Texas trial court judge. He campaigns on the sentences that he imposed on the felons convicted in his court. He was also a prosecutor for six years before that, but the bulk of his professional experience is as a judge.

Judges Gohmert and Poe both conspicuously abstained from the debate, abstained from voting on every amendment, and abstained from voting on final passage of the bill. Also, TLJ has endeavored, by phone calls and e-mails, to learn their views regarding this bill. Neither office has provided any response to TLJ. Both judges were present on Capitol Hill on July 27 and July 28, and cast roll call votes on the House floor on those days.

One former judge voted for HR 1981, Rep. Sheila Lee (D-TX). However, she only briefly held a minor municipal judgeship before being elected to the Houston City Council. The docket of Houston municipal courts is dominated by traffic cases -- speeding, driving with expired license plates, running stop signs, and other simple cases in which the government does not invoke its powers of surveillance involving information and communications technologies.

Commentary: Why Judges and Prosecutors Might View HR 1981 Differently. There are reasons to expect judges and prosecutors to hold different views on the data retention and access regime of HR 1981.

This bill would not only overturn centuries old principles of the Anglo American criminal justice systems, but it would do so in ways that cut judges out of the process, while enhancing the power of prosecutors. Hence, one should expect to some evidence, such as in the HJC vote on July 28, that judges and prosecutors diverge on this issue.

First, it is a core principle of the American system of criminal justice that there should only be a criminal investigation when there is reason to believe that some specific crime has been or will be committed. And then, the investigation should focus on individuals when there is reason to believe that they have committed or will commit some specific crime.

HR 1981 would overturn this principle by setting up a regime in which everyone is investigated, regardless of the fact that most have committed no crime. Data retention is a form of investigation.

Second, another core principle of American justice is that the powers of criminal investigation are committed to the government -- police and prosecutors.

This bill would overturn this by committing the duty to collect and retain massive databases to private companies. Police and prosecutors take oaths of office to uphold the law and serve the public. Private company employees do not. Moreover, prosecutors, unlike private sector database administrators, are officers of the court, and operate under the constant oversight of judges. This bill, by committing responsibility to ISPs beyond the oversight of the courts, removes judges from oversight of governmental functions.

Third, another core principle of the American system is that the prior approval of a judge is necessary to obtain access to certain things. Judges approve, or reject, requests for wiretap orders, search warrants, pen register and trap and trace orders, and other things.

But, Section 2703(c)(2) makes the databases compelled by HR 1981 accessible to prosecutors by administrative subpoena. Prosecutors do not need a judge's permission to access this data. There is no judicial involvement or oversight.

Finally, yet another core principle of the American system of criminal justice is that certain due process rights are accorded to those being investigated or accused. This requires, in certain circumstances, notice and opportunity to be heard. This means the opportunity to be heard by a judge.

But, the data retention and access process embodied in HR 1981 provides for no due process rights for the individuals whose data is being collected and accessed. This means that the role of the judge in assuring due process is cut out. This completes the process of removing judges from the data retention and access process.

Under the American system of criminal justice, judges serve as a check upon prosecutorial excess, and as guarantors of traditional concepts of fair play, individual freedom, and due process of law. For the new surveillance regime of electronic data retention and access, this bill would take these functions away from judges, and deprive individuals the protection of judges. It should therefore not be unexpected that all of the former prosecutors, but none of the former judges, on the HJC would vote for this bill.

UK Court Rules That British Telecom Must Block Access to Newzbin

7/28. The United Kingdom's High Court of Justice, Chancery Division, issued its Approved Judgment [67 pages in PDF] in Twentieth Century Fox Film v. British Telecommunications.

This judgment states that the Court will issue an order directing British Telecom (BT), the leading British broadband internet access service provider, to block access to the Newzbin web sites, which link to infringing online copies of movies and other works.

Twentieth Century Fox Film and the other movie studio applicants in this proceeding previously won a judgment of copyright infringement against Newzbin.

The Court ordered blocking based upon the blocking regime previously developed to block users' access to child pornography (CP).

The Court ruled that BT must employ internet protocol (IP) address blocking "in respect of each and every IP address from which the said website operates or is available".

Also, BT must employ deep packet inspection (DPI) based blocking "utilising at least summary analysis in respect of each and every URL available at the said website and its domains and sub domains".

UN Human Rights Committee Releases Report That Addresses Internet Freedom of Expression

7/28. The United Nations' (UN) Human Rights Committee (HRC) released a document [15 pages in PDF] regarding "Freedoms of opinion and expression", which addresses, among other topics, internet based expression.

This is "General Comment No. 34 on Article 19", adopted by the HRC at its July 11-29, 2011, meeting in Geneva, Switzerland. See also, the HRC's July 28 release.

Paragraph 3 states that "Freedom of expression is a necessary condition for the realisation of the principles of transparency and accountability that are, in turn, essential for the promotion and protection of human rights."

Paragraph 43 states that "Any restrictions on the operation of websites, blogs or any other internet-based, electronic or other such information dissemination system, including systems to support such communication, such as internet service providers or search engines, are only permissible to the extent that they are compatible with paragraph 3. Permissible restrictions generally should be content-specific; generic bans on the operation of certain sites and systems are not compatible with paragraph 3. It is also inconsistent with paragraph 3 to prohibit a site or an information dissemination system from publishing material solely on the basis that it may be critical of the government or the political social system espoused by the government."

Paragraph 44 states that "Journalism is a function shared by a wide range of actors, including professional full time reporters and analysts, as well as bloggers and others who engage in forms of self-publication in print, on the internet or elsewhere, and general State systems of registration or licensing of journalists are incompatible with paragraph 3. Limited accreditation schemes are permissible only where necessary to provide journalists with privileged access to certain places and/ or events. Such schemes should be applied in a manner that is non-discriminatory and compatible with article 19 and other provisions of the Covenant, based on objective criteria and taking into account that journalism is a function shared by a wide range of actors."

HCC Republicans Request FCC Communications with White House

7/28. Rep. Fred Upton (R-MI), Rep. Greg Walden (R-OR), and Rep. Cliff Stearns (R-FL) sent a letter [PDF] to the Federal Communications Commission (FCC) asking for records related to its adoption of rules in late December of 2010 regulating broadband internet access service (BIAS) providers, and other network neutrality rules.

The letter states that "Agency decisions should be based on law and policy." However, the letter cites allegations that the "FCC's network neutrality proceeding was designed to fulfill a presidential campaign slogan, when it should have been based on an analysis of statutory authority, an economic analysis of the Internet service market, and an examination of the record. If true, it seems the FCC failed to develop an independent conclusion derived from a balanced fact-based record, which is incompatible with proper rule-making."

Hence, the letter announces an investigation of the FCC's decision making process in adopting its BIAS rules, and requests the production of relevant documents by August 10, 2011.

For example, it asks the FCC to produce "all communications (including, but not limited to, emails) from the period June 25, 2009, to December 21, 2010. between or among any FCC Parties relating to the Obama Administration position regarding (a) potential Commission action in the Network Neutrality Dockets or (b) Commission adoption or enforcement of Network Neutrality Rules." (Parentheses in original.)

It also asks for communications between the FCC and the Executive Office of the President, the Executive Office of the Vice President, the Office of Science and Technology Policy, and the Council of Economic Advisors. It also asks for certain FCC records regarding the proposed reclassification of BIAS as a Title II service. It also asks for certain records pertaining to the Comcast NBCU merger review.

See, FCC's Report and Order (R&O) adopted on December 21, 2010, and released on December 23, 2010. This R&O is FCC 10-201 in GN Docket No. 09-191 and WC Docket No. 07-52. See also, stories in TLJ Daily E-Mail Alert No. 2,186, December 22, 2010, and TLJ Daily E-Mail Alert No. 2,188, December 24, 2010.

The letter defines the term "Network Neutrality Rules" to include not only the December 21, 2010 R&O, but also the FCC's 2005 policy statement, and the FCC's Comcast order.

The FCC adopted its "Policy Statement" on August 5, 2005, and released it on September 23, 2005. See, stories titled "FCC Adopts a Policy Statement Regarding Network Neutrality" in TLJ Daily E-Mail Alert No. 1,190, August 8, 2005, and "FCC Releases Policy Statement Regarding Internet Regulation" in TLJ Daily E-Mail Alert No. 1,221, September 26, 2007.

On August 1, 2008, the FCC adopted its Comcast order asserting adjudicatory authority to enforce its 2005 policy statement, and asserting authority to regulate the network management practices of broadband service providers. This is the order which the Court of Appeals has vacated. See, story titled "FCC Asserts Authority to Regulate Network Management Practices" in TLJ Daily E-Mail Alert No. 1,805, August 4, 2008. The FCC released the text of this order on August 20, 2008. It is FCC 08-183 in Docket No. 07-52. The Court of Appeals later overturned that order.

Neither Rep. Henry Waxman (D-CA), nor Rep. Anna Eshoo (D-CA), who urged the FCC to adopt rules regulating BIAS providers, joined in this letter.

Some interest groups that have advocated FCC regulation of BIAS providers criticized this letter. The Public Knowledge (PK) wrote in a release that "This examination should not be a partisan witch hunt." The Free Press (FP) wrote in a release that this is a "partisan fishing expedition", and that it is "wasting taxpayer resources".

NTIA Chief of Staff Addresses Repurposing Radar Spectrum

7/28. Thomas Power, the Chief of Staff of the Department of Commerce's (DOC) National Telecommunications and Information Administration (NTIA), gave a speech at the 12th Annual International Symposium on Advanced Radio Technologies in Boulder, Colorado, regarding repurposing spectrum now used for various radar systems.

He said that "government must use its existing spectrum more efficiently, we must free up more spectrum for new uses, and we must provide the private sector with the incentives to transfer spectrum from current uses to higher-value ones."

"Earlier this year, we selected the next spectrum band to be evaluated for potential repurposing to commercial use. The band we selected with input from other federal agencies, 1755-1850 MHz, is a priority for review based on a variety of factors, including industry interest and the band's potential for commercial use within 10 years. We plan to complete our review of this band by the end of September."

Power continued that "after we complete our review of the 1755-1850 MHz band, where do we look next?" He said, "Our search quickly draws us toward radars and radar spectrum." He then reviewed the various radar systems.

FAA and LightSquared

7/28. The Federal Aviation Administration (FAA) has not released a report titled "LightSquared Aviation Impacts". However, several news publications have reported on such a report, and purported copies have been published in various web sites.

See, for example, July 28, 2011, Wall Street Journal article titled "LightSquared Bid Stirs FAA Worry", and copy of purported report [6 pages in PDF] in Government Executive.

LightSquared's proposed wireless service would use a spectrum band adjacent to that used for GPS.

The above hyperlinked document states that "LightSquared's initial operations at the lower 10 MHz channel even at "reduced" power levels would impact the aviation use of high-precision GPS receivers." It also states that "LightSquared's planned operations would result in the loss of GPS-enabled operational, economic, and public safety benefits across the National Airspace System."

Also, Federal Communications Commission (FCC) Chairman Julius Genachowski sent a letter to Sen. Charles Grassley (R-IA) on July 26, 2011, in response to Sen. Grassley's letter of July 5, regarding LightSquared's proposed wireless service.

Sen. Grassley issued a statement on July 27, in which he wrote that "It's ironic that a communications agency has such a clampdown on its own communications. The issue is whether the FCC will operate voluntarily as an open, transparent institution or whether it will withhold documents from congressional review unless legally forced to comply. Refusing a legitimate request in the public interest should require more justification than `we don’t have to.´ What is the FCC hiding?"

See also, Sen. Grassley's letter of April 27.

Also, the House Science Committee (HSC) is scheduled to hold a hearing titled "Impacts of the LightSquared Network on Federal Science Activities" on August 3, 2011, at 10:00 AM.

People and Appointments

7/28. The Senate Judiciary Committee (SJC) held an executive business meeting at which it held over, or did not consider, all of the judicial nominees on the agenda: Steve Six (to be a Judge of the U.S. Court of Appeals for the 10th Circuit), Morgan Christen (U.S. Court of Appeals for the 9th Circuit), Yvonne Rogers (USDC/NDCal), Richard Andrews (USDC/DDel), Scott Skavdahl (USDC/DWyo), and Sharon Gleason (USDC/DAk). All are again on the agenda for the next executive business meeting on August 4, 2011.

7/28. President Obama nominated Evan Wallach to be a Judge of the U.S. Court of Appeals for the Federal Circuit. See, White House news office release and release. He has been a Judge of the U.S. Court of International Trade since 1995. Before that, he was an attorney for the Nevada Army National Guard. He has also worked for Sen. Harry Reid (D-NV). His published works suggest expertise in the law of war and war crimes. The focus of the Federal Circuit is patent law.

7/28. President Obama nominated Ronnie Abrams to be a Judge of the U.S. District Court for the Southern District of New York. See, White House news office release and release. She works in the New York City office of the law firm of Davis Polk & Wardwell. Before that, from 1998 through 2008, she was an Assistant U.S. Attorney in the Southern District of New York.

7/28. President Obama nominated Rudolph Contreras to be a Judge of the U.S. District Court for the District of Columbia. See, White House news office release and release. He is Chief of the Civil Division of the U.S. Attorneys Office for the District of Columbia.

More News

7/28. The Public Utilities Commission of the State of California adopted an order that contains rules to protect the privacy and security of customer data generated by Smart Meters concerning the usage of electricity that are deployed by Pacific Gas and Electric Company (PG&E), Southern California Edison Company (SCE), and San Diego Gas & Electric Company (SDG&E). These rules regulate access to this data by third parties, data breach notification, data security practices, data minimization, and customer access to data.

7/28. A trial jury of the U.S. District Court (NDGa) returned a verdict of guilty against Charles Ndhlovu on one count of trafficking in counterfeit labels and three counts of criminal copyright infringement. in connection with his participation in a counterfeit DVD and CD enterprise. See, Department of Justice (DOJ) release. Criminal copyright infringement is codified at 17 U.S.C. § 506 and 18 U.S.C. § 2319. Trafficking in counterfeit labels is codified at 18 U.S.C. § 2318.

7/28. The U.S. Court of Appeals (8thCir) issued its opinion in U.S. v. Teague affirming the judgment of conviction of the U.S. District Court (SDIowa) for violation of 18 U.S.C. § 1030. The defendant, an employee of a contractor of the Department of Education (DOE) who had privileged access to the National Student Loan Data System (NSLDS), accessed without authority, the student loan records of President Obama. This case is U.S. v. Sandra Lynn Teague, U.S. Court of Appeals for the 8th Circuit, App. Ct. No. 11-1214, an appeal from the U.S. District Court for the Southern District of Iowa. Judge Bye wrote the opinion of the Court of Appeals, in which Judges Melloy and Laurie Camp (USDC/DNeb sitting by designation) joined.

7/28. Jasper Knabb, former CEO of Pegasus Wireless Corporation, pled guilty in U.S. District Court (NDCal) to conspiracy to commit securities fraud, securities fraud, and maintaining false books and records. The U.S. Attorneys Office for the Northern District of California stated in a release that "he created thirty-one fake promissory notes and other documents representing that Pegasus had outstanding debt. Knabb had Pegasus issue shares to satisfy the debt and then had those shares, or assets from their sale, funneled to himself, family, friends, and associates. Between May 2005 and January 2008, Knabb caused Pegasus to issue more than 490 million shares to satisfy bogus debt." See also, Securities and Exchange Commission's (SEC) 2009 civil complaint against Knabb.

7/28. The Senate Judiciary Committee (SJC) announced that its Subcommittee on Antitrust, Competition Policy and Consumer Rights will hold a hearing titled "The Power of Google: Serving Consumers or Threatening Competition" on September 21, 2011. Sen. Herb Kohl (D-WI) will preside. See, notice.

7/28. The Department of Transportation's (DOT) Research and Innovative Technology Administration (RITA) published a notice in the Federal Register that requests comments regarding Intelligent Transportation Systems (ITS) learning, including "connected vehicle technology that will feature a connected transportation environment among vehicles, the infrastructure, and passengers' portable devices". The deadline to submit comments is August 29, 2011. See, Federal Register, Vol. 76, No. 145, Thursday, July 28, 2011, at Pages 45334-45335.

7/28. The U.S. Court of Appeals (7thCir) issued its opinion in Georgia Pacific v. Kimberly Clark, affirming the judgment of the District Court, in a case "in the rarefied air inhabited by top-rate intellectual property lawyers who specialize in presenting and defending claims of unfair competition and trademark infringement". Georgia-Pacific (GP) "unrolled this suit" in the District Court alleging that Kimberly-Clark's (KC) brands of toilet paper infringed its trademark design. The District Court granted summary judgment to KC. The Court of Appeals affirmed. At bottom, both courts concluded that GP's quilted diamond design is functional and therefore cannot be trademarked. This case is Georgia Pacific Consumer Products LP v. Kimberly-Clark Corporation, et al., U.S. Court of Appeals for the 7th Circuit, App. Ct. No. 10-3519, an appeal from the U.S. District Court for the Northern District of Illinois, Eastern Division, D.C. No. 1:09-cv-02263, Judge Virginia Kendall presiding. Judge Evans wrote the opinion of the Court of Appeals, in which Judges Kanne and Sykes joined.

US and PRC Sign Antitrust MOU

7/27. Representatives of two U.S. antitrust regulators and the People's Republic of China (PRC) antitrust regulator signed a Memorandum of Understanding (MOU) in Beijing regarding cooperation on competition law matters.

The parties to the agreement are the U.S. Federal Trade Commission (FTC), the U.S. Department of Justice's (DOJ) Antitrust Division and the People's Republic of China's (PRC) National Development and Reform Commission, Ministry of Commerce, and State Administration for Industry and Commerce.

The U.S. Federal Communications Commission (FCC), which also conducts antitrust mergers reviews, as with the proposed AT&T acquisition of T-Mobile USA, is not a party to this MOU.

The U.S. signers of this MOU were Jonathan Leibowitz, Chairman of the FTC, and Christine Varney, who is in her final days as Assistant Attorney General in charge of the DOJ's Antitrust Division. The PRC signers were Gao Hucheng, China International Trade Representative and Vice Minister of the Ministry of Commerce (MOFCOM), Peng Sen, Vice Chairman of the National Development and Reform Commission (NDRC), and Zhong Youping, Vice Minister of the State Administration for Industry and Commerce (SAIC).

Varney stated in a release that the relationship between the regulatory agencies "has steadily strengthened", and that this MOU "is a reflection of that relationship, and, by establishing a framework for enhanced cooperation among our agencies, the MOU also allows us to move to the next chapter in our collaboration on competition law and policy matters". See also, speech by Varney.

Jonathan LeibowitzLeibowitz (at right) stated in this release that "In the three years since China’s antimonopoly law came into effect, its enforcement agencies have risen in prominence and have quickly developed many of the important analytical techniques used by leading antitrust agencies around the world ... We look forward to continuing to share our experiences with China’s enforcement agencies as they confront many of the same challenges in implementing their laws that other agencies have faced, and we are confident that China will continue to build its agencies and enforcement mechanisms in positive ways."

The MOU recites that its objectives include "Recognizing the benefit of technical cooperation between the U.S. antitrust agencies and the PRC antimonopoly agencies in order to enhance an environment in which the sound and effective enforcement of competition law and policy supports the efficient operation of markets and economic welfare of the citizens of their respective nations"

This MOU provides that there will be "joint dialogue among all parties to this Memorandum on competition policy at the senior official level" and "communication and cooperation on competition law enforcement and policy between individual U.S. antitrust agencies and PRC antimonopoly agencies"

It states that the "joint dialogue" will involve periodic meeting, alternating in location between the two countries, "in principle once a year". Moreover, the parties "establish ad hoc working groups under the joint dialogue to facilitate discussions on particular issues regarding competition policy and laws".

It also states that "when a U.S. antitrust and a PRC antimonopoly agency are investigating related matters, it may be in those agencies’ common interest to cooperate in appropriate cases, consistent with those agencies’ enforcement interests, legal constraints, and available resources."

The MOU states that regulators will work together in the following areas: "(a) keeping each other informed of significant competition policy and enforcement developments in their respective jurisdictions; (b) enhancing each agency’s capabilities with appropriate activities related to competition policy and law such as training programs, workshops, study missions and internships; (c) exchanging experiences on competition law enforcement, when appropriate; (d) seeking information or advice from one another regarding matters of competition law enforcement and policy; (e) providing comments on proposed changes to competition laws, regulations, rules and guidelines; (f) exchanging views with respect to multilateral competition law and policy; and (g) exchanging experiences in raising companies’, other government agencies’ and the public’s awareness of competition policy and law."

Gig.U Announces Plans

7/27. A coalition of 28 large U.S. universities, using the name "Gig.U", announced that they are "forming a coalition of leading research universities, in partnership with our local communities, intent on accelerating the deployment of ultra high-speed networks to our communities". See, statement.

The coalition statement adds that "Within the next 90 days we will issue a Request for Information to current and potential service providers regarding new approaches to bringing such networks to our communities. We expect to use the information collected to issue tailored Request for Proposals to enter into agreements to deploy such networks".

Federal Communications Commission (FCC) Commissioner Michael Copps stated in a release that "I applaud today's announcement of GIG-U: The University Community Next Generation Innovation Project. This concept demonstrates the power of creative thinking and the potential for meaningful public-private partnerships to address the key infrastructure challenge of our time. Broadband holds enormous potential to expand educational and research opportunities both on and off the campus. I look forward to watching the seeds of this endeavor take root."

FCC Commissioner Mignon Clyburn stated in a release that "I am pleased that the University Community Next Generation Innovation Project will be working on the broadband America will need in the future. With the leadership of Blair Levin and Elise Kohn, both of whom I greatly respect for their dedication and creative thinking on broadband issues, I know this Project announced today will do great things for our nation."

Walter McCormick, head of the US Telecom, stated in a release that "Our companies value our partnerships with universities and anchor institutions, and welcome new ideas like Gig.U to create test beds for the development of next generation applications that will drive increasing use of broadband connections and emphasize the value of broadband investment to our economy."

Ed Black, head of the Computer and Communications Industry Association (CCIA), stated in a release that "This privately funded project is a perfect example of the type of investment our nation needs to get us back on a path of prosperity.  CCIA commends the GigU project and its ambitious goals."

FCC Imposed Price Cap on XM Sirius Expires

7/27. The Federal Communications Commission's (FCC) Media Bureau (MB) adopted and released a Memorandum Opinion and Order (MOO) [6 pages in PDF] that allows the XM Sirius three year price cap to expire.

XM and Sirius announced their merger plans on February 19, 2007. See, story titled "XM and Sirius Announce Plans to Merge" in TLJ Daily E-Mail Alert No. 1,540, February 20, 2007. They formally submitted the application to the FCC on March 20, 2007.

The FCC did not approve the merger until July 25, 2008. See, story titled "FCC Approves XM Sirius Merger" in TLJ Daily E-Mail Alert No. 1,800, July 25, 2008.

The FCC imposed a three year price cap on certain subscription packages, which, in the FCC's terminology, was a "voluntary commitment" of the parties. That mandate expired on July 28, 2011.

This MOO states that the FCC has received "No specific proposals to extend the price cap", and that "we find no sufficient basis on this record to extend the price cap condition beyond the three-year time period established in the Merger Order".

This MOO is DA 11-1273 in MB Docket No. 07-57.

1st Circuit Affirms Dismissal of Employees' Location Surveillance Complaint Against Verizon

7/27. The U.S. Court of Appeals (1stCir) issued its opinion in Haggins v. Verizon NE, affirming the District Court's dismissal of an employee complaint against Verizon New England alleging violation of state privacy law in connection with location surveillance of employees. However, the outcome turned on preemption under the federal Labor Management Relations Act, rather than the merits of the claim.

Verizon New England, Inc. (Verizon NE) required its field technicians to carry company issued cell phones during work that enabled Verizon NE to conduct location surveillance of these employees.

Robert Haggins and other Verizon employees filed a complaint in state court in Massachusetts, which Verizon removed to the U.S. District Court (DMass), asserting diversity jurisdiction.

Haggins and the others alleged two state law claims: (1) violation of their privacy rights under Article 14 of the Declaration of Rights in the Massachusetts Constitution and Mass. Gen. Laws ch. 214, § 1B, and (2) breach of rights as third party beneficiaries under a contract between Verizon Wireless and Verizon NE.

The Massachusetts statute provides that "A person shall have a right against unreasonable, substantial or serious interference with his privacy." The Massachusetts Constitution provides that "Every subject has a right to be secure from all unreasonable searches, and seizures, of his person, his houses, his papers, and all his possessions."

Haggins and the other plaintiffs are also union members. There is a collective bargaining agreement between Verizon NE and this union.

This District Court held that § 301 of the Labor Management Relations Act (LMRA), which is codified at 29 U.S.C. § 185(a), preempts the plaintiffs' claims. It dismissed.

Haggins brought the present appeal. The Court of Appeals affirmed. It did not reach the merits of the privacy claim.

This case is Robert Haggins v. Verizon New England, Inc., U.S. Court of Appeals for the 1st Circuit, App. Ct. No.10-2196, an appeal from the U.S. District Court for the District of Massachusetts, Judge Michael Ponsor presiding. Judge Lynch wrote the opinion of the Court of Appeals, in which Judges Boudin and Howard joined.

House Judiciary Committee Begins Mark Up of Data Retention Bill

7/27. The House Judiciary Committee (HJC) began its mark up of HR 1981 [LOC | WW], the data retention bill.

Rep. Lamar Smith (R-TX), the Chairman of the HJC, introduced this bill on May 25, 2011. For a summary of the bill as introduced, see story titled "Summary of HR 1981, Data Retention Mandate Bill" in TLJ Daily E-Mail Alert No. 2,257, July 13, 2011.

The HJC held a hearing on the bill on July 12. See, story titled "House Crime Subcommittee Holds Hearing on Data Retention Bill" also in TLJ Daily E-Mail Alert No. 2,257, July 13, 2011.

On July 26 the HJC released a manager's amendment (MA) in advance of the July 27 mark up. For a summary of this MA, see story titled "Summary of Manager's Amendment to Data Retention Bill" in TLJ Daily E-Mail Alert No. 2,271, July 27, 2011.

On July 27 the HJC amended and approved this MA, and recessed until July 28 to continue the mark up.

Rep. Bobby Scott (D-VA) offered four amendments to the MA on July 27, only one of which was approved.

The MA reduces the minimum retention period from 18 to 12 months. The HJC rejected an amendment offered by Rep. Scott that would have further reduced the time period to 180 days. The roll call vote was 12-14. Rep. James Sensenbrenner (R-WI), Rep. Darrell Issa (R-CA), and Rep. Jason Chaffetz (R-UT) all condemned the bill, and voted for this amendment, along with Rep. Scott, and eight other Democrats.

Some proponents of the bill have asserted, with much misrepresentation, that the nature and purpose of the bill is to enable law enforcement authorities to investigate child pornography (CP) cases. Rather, the bill would codify a surveillance regime, based upon mandating the collection and retention of data by internet access service providers about their customers and users, with access by law enforcement authorities, to further the investigation and prosecution of a wide range of crimes.

Hence, Rep. Scott offered an amendment that would have limited access to data collected and retained pursuant to the bill to CP cases, and other cases involving crimes against children. Rep. Smith opposed the amendment on the grounds that retained data must be available in other cases too. Rep. Scott responded that he had exposed the purported purpose of the bill as misleading, and withdrew the amendment.

Rep. Scott offered an amendment that would require the Department of Justice (DOJ) to conduct a study of the costs that would be imposed by the bill. Rep. Smith supported it, and it was approved by unanimous voice vote.

Rep. Scott offered an amendment that would have exempted certain small service providers. Rep. Smith promised to work with Rep. Scott on this issue. Rep. Scott then withdrew the amendment.

The HJC then approved the MA, as amended, by a roll call vote of 19-4. Only Rep. Scott, Rep. Sensenbrenner, Rep. Chaffetz, and Rep. Zoe Lofgren (D-CA) voted no. (Rep. Issa was not present.)

Rep. Cohen offered an amendment to the base bill changing language regarding sentencing guidelines in CP cases. It was approved by unanimous voice vote. This section is in the bill to substantiate the assertion that this bill is about fighting CP. It is not technology related.

The HJC recessed after this vote until 4:00 PM. The HJC returned from this recess at 4:00 PM. However, unable to come close to a quorum by 4:15 PM, Rep. Smith recessed the mark up until 11:00 AM on Thursday, July 28.

Rep. Smith told reporters after the mark up on July 27, stated that "the major amendments are behind us". He also said the he did not know when the full House might take up the bill.

See also, Rep. Smith's opening statement, and statement on his manager's amendment.

Attorneys General From States With Rural Areas Back AT&T T-Mobile Merger

7/27. The Attorneys General of the states of Alabama, Arkansas, Georgia, Kentucky, Michigan, Mississippi, North Dakota, South Dakota, West Virginia and Wyoming sent a letter to the Department of Justice's (DOJ) Antitrust Division and the Federal Communications Commission (FCC) encouraging them to approve AT&T's proposed acquisition of T-Mobile USA.

They wrote that "AT&T has committed to investing more than $8 billion to integrate the two companies' networks and deploy 4G LTE to 97% of the population. This will result in expanded LTE deployment to 55 million more Americans than the pre-merger plans. The faster speeds and higher capacity will put advanced new services and capabilities -- like telemedicine, distance learning, cloud computing, mobile video conferencing and many others -- in the hands of many more of our citizens, students, businesses and civil servants, including those living in small towns and rural and underserved areas."

The also wrote that "The undersigned Attorneys General join 26 Governors; 10 national unions such as the Communications Workers of America, the AFL-CIO and the National Education Association; major high tech companies such as Microsoft, Oracle, Facebook, Nokia, Qualcomm and Research In Motion; prominent venture capital firms such as Kleiner Perkins, Sequoia Capital and Charles River Ventures; and organizations as diverse as the Sierra Club, NAACP, National Black Farmers Association and The National Grange in support of the proposed merger of AT&T Inc. and T-Mobile USA."

They added that "this merger may raise competitive concerns in some discrete local markets", so the DOJ or FCC "may impose targeted remedies".

Utah's Attorney General Mark Shurtleff stated in a release that "Approving the merger will help conquer the digital divide between rural and urban America".

Arkansas's Attorney General Dustin McDaniel stated in a release that "My primary concern is my hope that federal regulators do not require the divestiture of much-needed spectrum capacity."

The Free Press issued a release that states that these Attorneys General have been duped.

The FCC's proceeding is WT Docket No. 11-65.

Senate Confirms Mueller for Two More Years

7/27. The Senate confirmed Robert Mueller for a two year extension of his ten year term as Director of the Federal Bureau of Investigation (FBI) by a vote of 100-0. See, Roll Call No. 118. His term was set to expire on August 2, 2011.

Sen. Patrick Leahy (D-VT) sponsored and worked for enactment of S 1103 [LOC | WW], the bill which enabled this extension. He stated in the Senate on July 27 that "Since taking over as FBI Director just days before the attacks of September 11, 2001, Director Mueller has overseen and guided the Bureau through a major transformation and evolution. Although the transformation has not been without problems, Director Mueller has consistently displayed professionalism and focus in increasing the FBI's national security and counterterrorism efforts, while still carrying out the Bureau’s essential law enforcement responsibilities." See, statement.

By statute, FBI Directors are appointed by the President, and confirmed by the Senate for one ten year term, and "may not serve more than one ten-year term". See, 28 U.S.C. § 532 note. S 1103 enabled the President to extend Mueller's term by two years. All subsequent Directors will have ten year terms.

See also, stories titled:

People and Appointments

7/27. Stuart Goldberg was named Principal Associate Deputy Attorney General, and David O'Neil was named Chief of Staff to the Deputy Attorney General, James Cole. See, Department of Justice (DOJ) release.

More News

7/27. The Internal Revenue Service (IRS) published a notice in the Federal Register that announces, describes, recites, and sets the effective date (July 27, 2011) for, its rules changes relating to the election for claiming the reduced research credit. See, Federal Register, Vol. 76, No. 144, Wednesday, July 27, 2011, at Pages 44800-44802.

7/27. The Federal Communications Commission (FCC) Media Bureau (MB) announced, but did not release, three more staff reports regarding ownership of media. See, FCC release. The titles and authors are:
 • "Media Ownership Study 2, Consumer Valuation of Media as a Function of Local Market Structure", by Scott Savage and Donald Waldman.
 • "Media Ownership Study 8A, Local Media Ownership and Viewpoint Diversity in Local Television News", by Adam Rennhoff and Kenneth Wilbur.
 • "Media Ownership Study 8B, Diversity in Local Television News", by Lisa George and Felix Gee.

7/27. The House Small Business Committee (HSBC) held a hearing titled "Bureaucratic Obstacles for Small Exporters: Is our National Export Strategy Working?". Rep. Sam Graves (R-MO), Chairman of the HSBC, wrote in his opening statement that "One important way to get more small businesses to export is by passing the three pending free trade agreements with Colombia, Panama and South Korea." Suresh Kumar, a political appointee at the Department of Commerce (DOC), wrote in his prepared testimony that "the Obama Administration has encouraged and facilitated SME exports by raising public awareness of export opportunities and available assistance and by directing U.S. export promotion and financing agencies to revamp their services".

7/27. The National Institute of Standards and Technology's (NIST) Computer Security Division (CSD) released is draft SP 800-67 Rev. 1 [35 pages in PDF] titled "Recommendation for the Triple Data Encryption Algorithm (TDEA) Block Cipher". The deadline to submit comments is August 31, 2011.

7/27. The National Institute of Standards and Technology's (NIST) Computer Security Division (CSD) released its draft NIST IR-7275 Rev. 4 [77 pages in PDF] titled "Specification for the Extensible Configuration Checklist Description Format (XCCDF) Version 1.2". The deadline to submit comments is August 16, 2011.

FCC Requests Comments on Regional Sports Network Access and Carriage

7/26. The Federal Communications Commission's (FCC) Media Bureau released a Public Notice that requests comments regarding regional sports network (RSN) access and carriage. The FCC's 2006 order approving the purchase of Adelphia Communications Corporation's cable systems by Time Warner Cable (TWC) and Comcast imposed conditions regarding RSN access and carriage requirements.

The FCC adopted its Adelphia Memorandum Opinion and Order (MOO) [179 pages in PDF] on July 13, 2006, and released the text on July 21, 2006. It is FCC 06-105 in MB Docket No. 05-192.

That MOO adopted program access conditions preventing TWC and Comcast from entering into any exclusive distribution agreements with existing and future affiliated RSNs and unduly or improperly influencing the sale of the programming of those RSNs to unaffiliated multichannel video programming distributors (MVPD). The MOO also required TWC and Comcast to provide the programming of affiliated RSNs to all MVPDs pursuant to non-discriminatory terms and conditions. The MOO also applied the program access rules applicable to satellite delivered, cable affiliated programming to all of TWC's and Comcast's affiliated RSNs, regardless of the method of delivery. The MOO partially exempted Comcast's SportsNet Philadelphia from these requirements.

The Public Notice asks, "What effect, if any, have marketplace and the 2007 and 2010 program access rules revisions had on MVPDs’ ability to gain access to RSN programming? Similarly, what impact have regulatory and marketplace changes since the Adelphia Order had on the ability of unaffiliated RSNs to gain carriage on MVPD systems?"

It also asks, "Since the release of the Adelphia Order has there been an increase in the delivery of RSNs by terrestrial means? In addition, has the number of RSNs affiliated with a cable operator changed since the release of the Adelphia Order? If there has been a change, how does this number compare with the overall number of RSNs in the marketplace? Are there examples since the release of the Adelphia Order involving the withholding of an RSN and what impact has this had on the MVPD marketplace? Further, has there been a change in the number of exclusive deals involving MVPDs and unaffiliated RSNs since the release of the Adelphia Order?"

The deadline to submit initial comments is September 9, 2011. The deadline to submit reply comments is September 26, 2011. See also, notice in the Federal Register, Vol. 76, No. 148, Tuesday, August 2, 2011, at Pages 46295-46296. This Public Notice is DA 11-1238 in MB Docket No. 11-128.

2nd Circuit Affirms on TradeComet v. Google

7/26. The U.S. Court of Appeals (2ndCir) issued its opinion [PDF] in TradeComet v. Google, affirming the judgment of the U.S. District Court (SDNY).

TradeComet operates a search engine web site named "SourceTool" that serves businesses seeking to buy or sell products and services to other businesses.

Google's provides web search capability. It also provides an advertising platform named "AdWords". This enables advertisers to have their ads appear when internet users perform searches containing specified search terms using Google's web search.

TradeComet participated in Google's AdWords program to drive traffic to its SourceTool web site.

An agreement between Google and its AdWords customers includes a forum selection clause that requires suit to be brought in federal or state court in Santa Clara County, California.

TradeComet.com filed a complaint in the District Court in New York against Google alleging violation of the Sherman Act, 15 U.S.C. §§ 1 and 2, in connection with the prices Google charged TradeComet.

Google filed a motion to dismiss pursuant to Rules 12(b)(1) and 12(b)(3) of the Federal Rules of Civil Procedure for lack of subject matter jurisdiction and improper venue. The District Court granted the motion.

TradeComet argued that a 12(b) dismissal was inappropriate, and that Google should have pursued a motion to transfer pursuant to 28 U.S.C. § 1404(a). The Court of Appeals affirmed the judgment of the District Court.

It wrote that "a district court is not required to enforce a forum selection clause only by transferring a case pursuant to § 1404(a) when that clause specifies that suit may be brought in an alternative federal forum. Rather, in such circumstances, a defendant may seek to enforce a forum selection clause under Rule 12(b)."

This opinion does not address any antitrust issues.

This case is TradeComet.com LLC v. Google, Inc., U.S. Court of Appeals for the 2nd Circuit, App. Ct. No. 10-911-cv, an appeal from the U.S. District Court for the Southern District of New York. Judge Debra Ann Livingston wrote the opinion of the Court of Appeals, in which Judges Winter and Sack joined.

Sen. Franken Urges DOJ and FCC to Reject AT&T T-Mobile Merger

7/26. Sen. Al Franken (D-MN) sent a letter [24 pages in PDF] to the Department of Justice (DOJ) and the Federal Communications Commission (FCC) encouraging them to reject AT&T's proposed acquisition of T-Mobile USA.

Sen. Franken is a member of the Senate Judiciary Committee (SJC), which oversees the DOJ and its Antitrust Division.

Last week, Sen. Herb Kohl (D-WI) sent a similar letter. See, stories titled "Sen. Kohl and Sen. Lee Split on DOJ and FCC Reviews of AT&T Acquisition of T-Mobile", "Reps. Conyers, Eshoo & Markey Condemn AT&T's Acquisition of T-Mobile", and "Commentary: Due Process of Law in Antitrust Merger Reviews" in TLJ Daily E-Mail Alert No. 2,265, July 21, 2011.

Sen. Al FrankenSen. Franken (at left) wrote that "The merger of AT&T and T-Mobile would be a major step towards the creation of an entrenched duopoly in the wireless industry. It would concentrate enormous power over the entire telecommunications sector in the hands of only two companies, and it would incentivize AT&T and Verizon to coordinate prices to the detriment of consumers. I also fear it would only be a matter of months before Sprint is so marginalized that it becomes an acquisition target."

He also wrote that "Thirty-three million Americans have made the decision to purchase wireless service from T-Mobile rather than AT&T. ... Unfortunately, competing for customers has never been AT&T's preferred method of acquiring customers. Instead, it has acquired most of its customers both in the wired and wireless markets through mergers and exclusive agreements." (Footnote omitted.)

He urged the DOJ and FCC to focus on the proposed merger's effect upon the national market, rather than its impact upon local and regional markets. He argued that this merger would undermine competition in the "national, postpaid services that support both data and voice".

He argued that it would create an "effective duopoly" in the national wireless market, and that AT&T and Verizon would then be able to exclude competitors from that market.

He further argued that this merger would harm consumers by leading to higher prices, worse customer service, less innovation in wireless devices, services and operating systems.

He wrote that the merger would result in a loss of jobs in the combined entity.

He also wrote that the merger would undermine "net neutrality".

The DOJ's Antitrust Division filed a comment with the FCC in 2007 in which it expressed opposition to net neutrality regulation. The comment states that "The FCC should be highly skeptical of calls to substitute special economic regulation of the Internet for free and open competition enforced by the antitrust laws. Marketplace restrictions proposed by some proponents of "net neutrality" could in fact prevent, rather than promote, optimal investment and innovation in the Internet, with significant negative effects for the economy and consumers." See also, story titled "Antitrust Division Opposes Network Neutrality" in TLJ Daily E-Mail Alert No. 1,647, September 27, 2007.

He also argued that allowing AT&T to acquire more spectrum would serve the public interest. He argued that AT&T does not need more spectrum to deploy its LTE in rural America, and that it should use that spectrum that it has more efficiently.

Finally, he argued that imposing conditions would not eliminate the flaws in the proposed merger.

Summary of Manager's Amendment to Data Retention Bill

7/26. The House Judiciary Committee (HJC), which is scheduled to begin a three day mark up of bills on July 27, 2011. The first item on the agenda is HR 1981 [LOC | WW], the "Protecting Children from Internet Pornographers Act of 2011", also know as the data retention bill. The HJC released a manager's amendment on July 26, 2011.

The bill as introduced would create a mandate that all "electronic communication service" (ECS) and "remote computing service" (RCS) providers retain for 18 months "the temporarily assigned network addresses the service assigns to each account". For a summary of the bill as introduced, see story titled "Summary of HR 1981, Data Retention Bill" and "Summary of Existing Data Retention Mandates" both also in TLJ Daily E-Mail Alert No. 2,257, July 13, 2011.

The manager's amendment makes numerous significant changes. It reduces the minimum retention period from 18 to 12 months. It deletes the exemption for wireless service providers. It adds exemptions for not for a fee providers, such as coffee shops and libraries that offer free wireless connections. It adds an exemption for service not offered to the public. It clarifies that only internet access service providers are covered. It broadly expands the types of data that must be retained. It limits who can gain access to the data retained under the bill's mandate. It allows covered services providers six months to come into compliance with the data retention mandate.

The mark up session is scheduled to begin at 11:15 AM on Wednesday, July 27. The HJC usually takes up items in the order in which they are listed on the agenda.

Rep. Lamar Smith (R-TX), the Chairman of the HJC, introduced this bill on May 25, 2011. The HJC held a hearing on July 12, 201l. See, story titled "House Crime Subcommittee Holds Hearing on Data Retention Bill" in TLJ Daily E-Mail Alert No. 2,257, July 13, 2011.

The bill, even as amended by this manager's amendment, is full of undefined phrases and words, and fraught with vague meanings. Yet, it does not bear the attributes of hasty or inexpert authorship. Rather, it appears to be a careful and thoughtful work, drafted with calculated uncertainty, to give law enforcement authorities and prosecutors maximum interpretational leeway, and leverage over service providers.

See, full story.

People and Appointments

7/26. Rep. David Wu (D-OR) announced that he will resign from the House of Representatives. See also, story titled "Rep. Wu to Face Ethics Committee Investigation" in TLJ Daily E-Mail Alert No. 2,270, July 26, 2011.

7/26. President Obama signed into law S 1103 [LOC | WW], an untitled bill that makes Robert Mueller eligible for nomination for a two year extension of his ten year term (which expires on August 2, 2011) as Director of the Federal Bureau of Investigation (FBI). See, White House news office release. President Obama then promptly nominated Mueller for this two year term. See, White House news office release. Sen. Patrick Leahy (D-VT) stated in a release that "I am pleased the President has signed the bill to extend the FBI Director’s term and sent the nomination of Robert Mueller to the Senate. I urge Senate leaders to promptly schedule a vote on the nomination. There is no time to waste to ensure that there is no lapse in leadership at the FBI."

7/26. The Senate confirmed Paul Engelmayer to be a Judge of the U.S. District Court (SDNY) by a vote of 98-0. See, Roll Call No. 117.

More News

7/26. The Federal Communications Commission (FCC) set the deadline (August 22, 2011) to comment on petitions for reconsideration of the FCC's Report and Order and Order on Reconsideration [144 pages in PDF] regarding pole attachments. That order is FCC 11-50 in WC Docket No. 07-245 and GN Docket No. 09-51. The FCC adopted and released it on April 7, 2011. The National Cable & Telecommunications Association (NCTA), COMPTEL, and tw telecom filed a petition for reconsideration on June 8, 2011. The Coalition of Concerned Utilities also filed a petition for reconsideration on June 8, 2011. See, June 20, 2011 Public Notice and notice in the Federal Register, Vol. 76, No. 143, Tuesday, July 26, 2011, at Pages 44495-44496.

7/26. The U.S. Court of Appeals (7thCir) issued its opinion in Nova Design Builds v. Grace Hotels, an architectural design copyright case. The District Court granted summary judgment to the defendant on the grounds that the plaintiff's designs were insufficiently original to qualify for copyright protection. The Court of Appeals affirmed. This case is Nova Design Builds, Inc. v. Grace Hotels LLC, et al., U.S. Court of Appeals for the 7th Circuit, App. Ct. No. 10-1738, an appeal from the U.S. District Court for the Northern District of Illinois, Eastern Division, D.C. No. 08 C 2855, Judge Samuel Der-Yeghiayan presiding. Judge Frank Easterbrook wrote the opinion of the Court of Appeals, in which Judges Kanne and Wood joined.

7/26. The Software and Information Industry Association (SIIA) released a paper [27 pages in PDF] titled "Guide to Cloud Computing for Policymakers". It argues that "to provide for the safe and rapid growth of cloud computing, there is no need for cloud-specific legislation or regulations, and in fact, such actions could impede the potential of cloud computing." It adds that "There are currently a number of existing and proposed policies that could hurt the development of cloud computing. These include such things as requirements for the location of computer facilities in particular jurisdictions or restrictions of cross-border data flows."

7/26. Sen. Amy Klobuchar (D-MN), Sen. Tom Udall (D-NM), and Sen. Jeanne Shaheen (D-NH) introduced S 1419 [LOC | WW], the "Anti-Cash Smuggling Act of 2011", a bill pertaining to the regulation of prepaid or stored value cards. It was referred to the Senate Banking Committee (SBC).

7/26. The House Commerce Committee's (HCC) Subcommittee on Oversight and Investigations held a hearing titled "Cybersecurity: An Overview of Risks to Critical Infrastructure". See, opening statement of Rep. Cliff Stearns (R-FL), opening statement of Rep. Fred Upton (R-MI), prepared testimony of Bobbie Stempfley (acting head of the DHS's Office of Cyber Security and Communications) and Sean McGurk (Director of the DHS's National Cybersecurity and Communications Integration Center), and prepared testimony of Gregory Wilshusen (Government Accountability Office).

7/26. Rep. Ed Markey (D-MA) and Rep. Joe Barton (R-TX) sent a letter to Groupon regarding the July 11, 2011, article in the Washington Post titled "Groupon changes privacy policy to collect, share more information". The letter propounds numerous interrogatories to be answered by August 10, 2011. See also, Rep. Markey's release.

Go to News from July 21-25, 2011.