TLJ News from March 26-31, 2013

Copyright Office to Hold Hearing on Resale Royalty Right

3/29. The Copyright Office (CO) published a notice in the Federal Register (FR) that announces that it will hold a public hearing regarding creating a resale royalty right (RRR) in the United States.

The hearing will be held on April 23, 2013 from 1:00 to 5:00 PM in the CO Hearing Room, LM-408 of the Madison Building, Library of Congress, 101 Independence Ave., SE. This notice does not state a deadline for requesting to testify. It lists in detail the topics on which the CO seeks "further input". See, FR, Vol. 78, No. 61, March 29, 2013, at Pages 19326-19329.

Outline of this Article:

Introduction. The general concept is that a RRR is a government created rule that the creator of certain works of visual art and other physical things, after he has sold all of his interest in the work, and in the absence of any contract, is nevertheless entitled to receive a portion of the sales price for all subsequent second secondary sales. Moreover, this RRR is inalienable.

In the 112th Congress. Rep. Jerrold Nadler (D-NY) introduced HR 3688 [LOC | WW], the "Equity for Visual Artists Act of 2011" or "EVAA", and former Sen. Herb Kohl (D-WI) introduced S 2000 [LOC | WW], the companion bill in the Senate.

These bills purport to create a resale royalty right (RRR). In fact, they would create a process that would be more accurately described as a tax and subsidy program, in which a small number of high value auction house sales would be heavily taxed, and non-profit museums would be subsidized pursuant to CO regulation and oversight.

Rep. Jerrold NadlerOn May 17, 2012, Rep. Nadler (at right) and Sen. Kohl sent a letter to the CO asking that it "assess how existing law affects and supports visual artists, and how a federal resale royalty provision would affect copyright law, visual artists and those involved in the sale of art work".

The CO issued a notice of inquiry (NOI) in September of 2012. See, notice in the FR, Vol. 77, No. 182, September 19, 2012, at Pages 58175-58179. See also, story titled "Copyright Office Requests Comments on Creating a Resale Royalty Right for Visual Artists" in TLJ Daily E-Mail Alert No. 2,464, October 18, 2012. (This article also addresses in some detail the relevant provisions of the Berne convention, implementation of the RRR in Europe, and the EVAA.)

The CO has published all comments in response to this NOI in its web site. See, CO web page with hyperlinks to comments.

Comments of Artists and Creators. Several groups that represent artists and other creators of visual works submitted comments urging the creation of a RRR, although not the proposal embodied in the EVAA.

The Artists Rights Society (ARS) wrote in its comment [8 pages in PDF] that unlike composers, song writers, playwrights, screenwriters, and actors, "visual artists are the only members of the creative community in the U.S. who do not receive residual payments for their works". Instead, "The benefits derived from the appreciation in their works accrue predominantly to collectors, auction houses, and galleries."

The American Society of Media Photographers (ASMP) wrote in its comment that "fundamental fairness requires some kind of royalty to the creators of visual artworks upon subsequent sales, when the artworks have reached at least a certain value. Factors such as changes in a photographer's stature and reputation and market forces often create significant increases in values between sales of a given work of visual art. Generally, at least part of those increases result from the photographer’s lifetime efforts to build a career -- efforts that are not always directly compensated."

The ASMP also argues that a RRR should "should apply to all categories of visual artworks without limitation", and not just the limited categories identified in the EVAA. It also argues that the price threshold should be $5,000, and that a 5% rate would be reasonable.

The American Society of Illustrators Partnership (ASIP) wrote in its comment [24 pages in PDF] that the Congress should enact legislation that provides "a 7% federal resale royalty right, with half of the royalties collected to be distributed to the artist and half used to promote the interests of living artists by subsidizing museum purchases of contemporary works."

The ASIP continued that the RRR "restores a measure of equity by allowing the artist to share in the increased value of his or her works. It also recognizes the ongoing stake an artist has in the economic value of their work. Royalties received within an artist’s lifetime help sustain a career to continue creating new works. A lifetime spent creating a body of work also means the burden of creating and maintaining an archive. This burden is inevitably passed onto the artist’s estate. A resale royalty stream can help support the considerable work that heirs contribute to the creation and maintenance of an art market, including preservation and cataloguing, promotion, and establishing provenance and authenticity."

See also, in support of creating a RRR, comment of the Graphic Artists Guild, and comment of the American Photographic Artists (APA).

Comments from the Tech Sector. eBay wrote in its comment [4 pages in PDF] that a RRR would undermine the first sale doctrine, and harm the digital economy.

It wrote that it "opposes barriers to and restrictions on free commerce and defends the free alienability of property that individuals legally acquire. Such free alienability of property is part of the fabric of the U.S. economic system and underlies the common sense understanding that Americans have about the goods they buy, the property they own and how their possessions are affected by the interests of third parties."

eBay added that "as the U.S. moves increasingly towards a digital economy there will be important first sale issues that will arise. It is important that barriers are not erected to impede future innovative e-commerce models focused on the digital economy."

The Internet Association (IA) and Computer and Communications Industry Association (CCIA) wrote in a joint comment [5 pages in PDF] that a RRR is not needed.

"Enacting a federal resale royalty right would significantly erode the first sale doctrine." Moreover, "The first sale doctrine has allowed secondary markets to flourish. Those markets provide consumers with ready access to affordable goods and provide economic incentives for valuable goods unwanted by their initial owners to remain in the stream of commerce."

In addition, the IA and CCIA wrote that creating a RRR would "exacerbate existing unresolved problems with copyright law, such as the lawful exploitation of so-called ``orphan works.´´"

The IA is a newly formed group, or reorganization of an old group, that lists as its members Google, Amazon, eBay, Facebook, LinkedIn, Salesforce.com, and other companies.

It does not list any of its directors or staff in its web site. Erik Stallman signed the comment as counsel for the IA. Other persons associated with the IA include Markham Erickson and Michael Beckerman.

Comments of Auction Houses. Creation of a RRR would affect the operations of auction houses. However, the EVAA targets the art auctions of a handful of major U.S. auction businesses.

Two high end art auction houses, Christie's and Sotheby's, vociferously oppose the EVAA and the creation of a RRR. They submitted two lengthy comments. The first comment [16 pages in PDF] addressed the policy merits.

The second comment [21 pages in PDF] argues that creation of a resale royalty right would violate several Constitutional rights of owners of works of art, if applied retroactively to works that have already been created. This comment argues that retroactivity would violate both the due process and takings clauses.

This comment does not argue that retroactive application of a RRR would violate the intellectual property clause. The clause clearly provides that the purpose of copyright is to incent creation ("To promote the Progress of Science and useful Arts"), and retroactive application would do nothing to incent creation of works that have already been created. However, the Supreme Court rejected a challenge to a retroactive copyright statute in Eldred v. Ashcroft, 537 U.S. 186. See, January 15, 2003 opinion and story titled "Supreme Court Upholds CTEA in Eldred v. Ashcroft" in TLJ Daily E-Mail Alert No. 584, January 16, 2003.

This comment also argues that a RRR that applies only to a few auction houses, such as the EVAA, would constitute an unconstitutional bill of attainder.

What might be most significant is who filed the second comment -- Paul Clement.

Paul ClementClement (at right) is a former Solicitor General of the United States, and one of the premier federal appellate litigators. His filing puts the CO and Congress on notice that if a RRR is enacted into law, it will likely face a formidable challenge in the courts.

Clement long ago clerked for Supreme Court Justice Antonin Scalia. He is now a partner in the Washington DC law firm of Bancroft.

Clement represented states that challenged the constitutionality of the Congressional statute that created the ObamaCare regime. He also represented House Republicans before the Supreme Court in defense of the Defense of Marriage Act (DOMA). Such work has endeared Clement to House Republicans, who it should be recalled, control the House Judiciary Committee (HJC), which will stand in judgment of any RRR bill.

Comments of Museums. Some proposals for creating a RRR in the U.S. provide that some of the "royalties" from covered secondary sales be distributed to museums. However, the Association of Art Museum Directors (AAMD) submitted a comment in which it argued that RRR "systems ultimately do little to help living artists", and that "such a royalty regime will not assist living artists or encourage the creation and dissemination to the public of new works of art".

Moreover, the AAMD raised numerous objections to the EVAA. It wrote that "the bill may in fact have harmful consequences for artists, the museums that exhibit their artwork, and ultimately the public".

Maria Pallante, the Register of Copyright, previously worked for the Guggenheim Museum.

Agenda for CO Hearing. The FR notice states that the CO seeks further input on issues raised by the written comments.

The notice states that hearing "will cover the following topics: (1) The changing legal landscape; (2) portability of the secondary art market; (3) effect on the primary art market and the incentive to create new works; (4) first sale and the free alienability of property; (5) visual artists and sales of works; (6) the Equity for Visual Artists Act; (7) effect on museums; and (8) constitutional concerns."

Portability refers to the possibility that if the U.S. enacted a RRR statute people would take their art works abroad for resale. The CO asks "What factors, other than implementation of a resale royalty right, affect the portability of the art market? What are the experiences in countries following the implementation of a resale royalty where one did not exist previously? For example, if China implements a resale royalty, how would this impact the worldwide market?"

Regarding the first sale doctrine, the CO asks "To what extent, if any, are the first sale doctrine and a resale royalty right incompatible? Would a resale royalty have a detrimental effect on the initial sale of the artwork? Should the right to claim royalties on secondary sales be waivable and, if so, what effect would that have on initial sales of artwork?"

Regarding the EVAA, the CO notice states that it "is interested in hearing more about what provisions should or should not appear in any resale royalty legislation and, more specifically, views on the following EVAA provisions:" works covered, types of transactions covered, threshold price, percentage assessed, and other things.

Since some proposals would transfer some RRR collections to museums, but the CO received only one comment from a museum or museum group, the CO requests "more about the impact of these grants on museums' purchasing behavior".

Finally, the CO notice states that it is interested in hearing more about the constitutional objections raised by Christie's and Sotheby's: due process, takings, and bill of attainder.

FCC Addresses Cellphone RF Exposure

3/29. The Federal Communications Commission (FCC) released a First Report and Order, Further Notice of Proposed Rulemaking, and Notice of Inquiry [201 pages in PDF] regarding the health and safety of radiofrequency (RF) emissions from radio transmitters.

The R&O portion resolves "several issues regarding compliance with our regulations for conducting environmental reviews under NEPA as they relate to the guidelines for human exposure to RF electromagnetic fields. More specifically, we clarify evaluation procedures and references to determine compliance with our limits, including specific absorption rate (SAR) as a primary metric for compliance, consideration of the pinna (outer ear) as an extremity, and measurement of medical implant exposure. We also elaborate on mitigation procedures to ensure compliance with our limits, including labeling and other requirements for occupational exposure classification, clarification of compliance responsibility at multiple transmitter sites, and labeling of fixed consumer transmitters." (Parentheses in original. The NEPA is the National Environmental Policy Act.)

The FNPRM portion seeks "comment on new proposals developed in the course of this proceeding regarding compliance with our guidelines for human exposure to RF electromagnetic fields. Our proposals reflect an effort to provide more efficient, practical, and consistent application of evaluation procedures to ensure compliance with our guidelines limiting human exposure to RF energy from Commission-regulated transmitters and devices."

The NOI addresses "whether there is a need for reassessment of the Commission radiofrequency (RF) exposure limits and policies. The Inquiry focuses on three elements: the propriety of our existing standards and policies, possible options for precautionary exposure reduction, and possible improvements to our equipment authorization process and policies as they relate to RF exposure."

John Walls of the CTIA stated in a release that the "CTIA welcomes the FCC's focus on cellphones and health effects. In establishing RF emission requirements for wireless devices, the FCC has always been guided by science and the evidence produced by impartial health organizations and the scientific community."

He wrote, "As the GAO stated in its July 2012 report, `Scientific research to date has not demonstrated adverse human health effects of exposure to radio-frequency energy from mobile phone use, but research is ongoing that may increase understanding of any possible effects.´ The U.S. Food and Drug Administration and the National Institutes of Health have reached similar conclusions about the state of the science."

Initial comments in response to the FNPRM and NOI will be due within 90 days of publication of a notice in the Federal Register. Reply comments will be due within 150 days of such publication. The FCC adopted this item on March 27, and released it on March 29, 2013. This item is FCC 13-39 in ET Docket No. 13-84 and ET Docket No. 03-137.

People and Appointments

3/29. Jerry Fishman, CEO of Analog Devices, Inc. (ADI), died. See, ADI release.

3/29. The Department of Commerce (DOC) published a notice in the Federal Register (FR) requesting nominations for membership on its Federal Economic Statistics Advisory Committee. The deadline is April 29, 2013. See, FR, Vol. 78, No. 61, March 29, 2013, at Pages 19191-19192.

Public Knowledge Advocates Permanent Fix for Cell Phone Unlocking

3/28. The Public Knowledge (PK), Electronic Frontier Foundation (EFF) and others sent a letter to the House Judiciary Committee (HJC) and Senate Judiciary Committee (SJC) regarding legislation that would address assertion of the anti-circumvention provisions of the Digital Millennium Copyright Act (DMCA) to prevent unlocking of cell phones.

They argued that "copyright law should not stand in the way of consumers using their own phones with the wireless network of their choice".

They elaborated that "Codifying an unlocking exemption brings the law in line with common sense and will prevent yet another return to a flawed process that creates a perpetual re-lobbying of many settled issues every three years."

S 517 [LOC | WW] and HR 1123 [LOC | WW], both titled the "Unlocking Consumer Choice and Wireless Competition Act", would have the effect of reinstating a unlocking exemption for three years. See, stories titled "Sen. Leahy Introduces Bill to Reinstate Librarian of Congress's Cell Phone Unlocking Exemption" in TLJ Daily E-Mail Alert No. 2,533, March 11, 2013, and House Judiciary Committee Members Introduce Cell Phone Unlocking Bill" in TLJ Daily E-Mail Alert No. 2,536, March 19, 2013.

The letter continues that "While some Congressional proposals would return this decision to the Library of Congress, more permanent proposals from Senators Wyden and Klobuchar ensure that solutions to this problem will be lasting. We urge the Congress to remove wireless unlocking from this bureaucratic treadmill and enact language similar to the proposals from these legislators."

Actually, these two bills are quite different.

Sen. Ron Wyden's (D-OR) S 467 [LOC | WW], the "Wireless Device Independence Act of 2013", would provide a permanent change in the DMCA. See, story titled "Sen. Wyden Introduces Bill to Amend DMCA to Create an Exemption for Unlocking" in TLJ Daily E-Mail Alert No. 2,533, March 11, 2013.

Sen. Amy Klobuchar's (D-MN) S 481 [LOC | WW | PDF], the "Wireless Consumer Choice Act", would direct the Federal Communications Commission (FCC) to write regulations. See, story titled "Sen. Klobuchar Introduces Bill to Authorize FCC to Direct Wireless Device Unlocking", also in TLJ Daily E-Mail Alert No. 2,533, March 11, 2013.

The PK letter also states that "These proposals enact sound public policy that can be made consistent with our existing international agreements. To the extent that a perceived conflict may exist between them and any free trade agreements, Congress can instruct the U.S. Trade Representative to renegotiate any such ill-advised provisions and ensure that our trade agreements reflect our domestic law and policy."

CEI Sues EPA Under FOIA for Instant Messages

3/28. The Competitive Enterprise Institute (CEI) and American Tradition Institute (ATI) filed a complaint [21 pages in PDF] in the U.S. District Court (DC) against the Environmental Protection Agency (EPA) that alleges violation of the federal Freedom of Information Act (FOIA) in connection with the EPA's failure to produce copies of instant messages (IM) sent or received by the accounts of three senior EPA officials.

This complaint also states that the EPA created a "false identity email account for its then-Administrator Lisa Jackson".

The complaint alleges that the "EPA has never produced an Instant Message in response either to a request under FOIA, or in response to a congressional oversight request, despite numerous requests from both for ``records´´ or ``electronic records´´."

This complaint asserts that IMs are "agency records" within the meaning of the FOIA, which is codified at 5 U.S.C. § 552.

The plaintiffs seek a judgment declaring that the EPA must produce the requested IMs.

The CEI stated in a release that "Based on information we have obtained, it seems we have uncovered another major transparency scandal in that either EPA is destroying instant messages against the law, or it is withholding them in defiance of its legal obligations to produce." The CEI also mocked the Obama administration's "most transparent administration" claims.

The CEI and ATI, however, are exaggerating. Many federal agencies, under both Democratic and Republican administrations, systematically violate the plain language of the FOIA. They are able to do this because the federal courts provide only occasional and limited relief to FOIA plaintiffs, and because these agencies encourage, rather than punish, violations.

This case is CEI and ATI v. EPA, U.S. District Court for the District of Columbia, C.A. No. 13-406.

FCC Releases Tentative Agenda for April 18 Meeting

3/28. The Federal Communications Commission (FCC) released a tentative agenda for its event on April 18 titled "Open Meeting".

First, the FCC is scheduled to adopt a Second Report and Order pertaining to foreign ownership of common carrier radio licensees and certain aeronautical radio licensees.

Second, the FCC is scheduled to adopt a Notice of Proposed Rulemaking and Notice of Inquiry (NPRM and NOI) on expanding direct access to telephone numbers  by IP based providers. The FCC is also scheduled to adopt an Order to allow a limited trial of direct access to numbers for VOIP providers.

Third, staff of the FCC's Consumer and Governmental Affairs Bureau will make a presentation on the status of billing alerts to customers of wireless service providers.

The FCC adopted an NPRM back in 2010, but wrote no rules. See, story titled "FCC Adopts Bill Shock NPRM" in TLJ Daily E-Mail Alert No. 2,142, October 19, 2010. That NPRM is FCC 10-180 in CG Docket No. 10-207 and CG Docket No. 09-158.

However, in October of 2011, the CTIA and participating wireless service providers announced a voluntary program for sending free alerts on subscribers' voice, data, messaging and international service usage as part of the CTIA Consumer Code for Wireless Service.

The FCC may meet at 10:30 AM on Thursday, April 18, 2013 in the Commission Meeting Room, TW-C305, 445 12th St.,  SW.

NIST Issues Cyber Security NOI

3/28. The Department of Commerce's (DOC) National Institute of Standards and Technology (NIST) published a notice in the Federal Register (FR) that initiates a notice of inquiry (NOI) regarding the cyber security regulatory regime initiated by executive order last month.

President Obama issued an Executive Order (EO) titled "Improving Critical Cybersecurity Infrastructure" on February 13, 2013. See, story titled "Obama Signs Cyber Security Order and Policy Directive" in TLJ Daily E-Mail Alert No. 2,525, February 19, 2013. That EO tasked the NIST will writing cyber security standards for the private sector.

The Congress has not enacted legislation giving the President general authority to regulate cyber security related business practices. Hence, the EO is cloaked in the terminology of voluntary conduct and partnerships. Nevertheless, government compulsion underlies the regime created by the EO. Hence, while this NOI propounds numerous questions, many pertain to how the government might incentivize, or compel, compliance.

Comments are due by April 29, 2013. See, FR, Vol. 78, No. 60, March 28, 2013, at Pages 18954-18955.

Amazon to Acquire Goodreads

3/28. Amazon announced in a release that it has reached an agreement to acquire Goodreads, a web site for book reviews and information about books. Amazon did not disclose the terms of the agreement.

Both Amazon and Goodreads enable users to publish their reviews of books. However, unlike Amazon, Goodreads neither sells new books, nor provides a secondary market for books.

Goodreads stated in a release that "With the reach and resources of Amazon, Goodreads can introduce more readers to our vibrant community of book lovers and create an even better experience for our members." Also, "Now we're looking forward to bringing Goodreads to the most popular e-reader in the world, Kindle".

Goodreads added that "Amazon supports us continuing to grow our vision as an independent entity, under the Goodreads brand and with our unique culture."

Scott Turow, head of the Authors Guild, stated in a release that "Amazon's acquisition of Goodreads is a textbook example of how modern Internet monopolies can be built".

Turow continued that "The key is to eliminate or absorb competitors before they pose a serious threat. With its 16 million subscribers, Goodreads could easily have become a competing on-line bookseller, or played a role in directing buyers to a site other than Amazon. Instead, Amazon has scuttled that potential and also squelched what was fast becoming the go-to venue for on-line reviews, attracting far more attention than Amazon for those seeking independent assessment and discussion of books. As those in advertising have long known, the key to driving sales is controlling information."

More News

3/28. Microsoft announced in a release that it now provides an online service titled "Microsoft Patent Tracker". Microsoft states that this "tool that provides a list of all of the patents Microsoft owns. Through the Patent Tracker, users can obtain the list in two forms: (1) an online list that is searchable by patent number, patent title, country and whether the patent is held by Microsoft or a subsidiary, and (2) a CSV file containing the entire list that is downloadable and searchable in Microsoft Excel". Microsoft added that "transparency regarding patent ownership is an important part of a well-functioning patent system".

3/28. Google released a statement titled "Open Patent Non-Assertion Pledge" or "OPN Pledge". Google stated in a release that it wants this pledge to "serve as a model for the industry". It stated in a second release that it has floated this pledge because it wants to "decrease patent threats around open-source software (OSS)". Google elaborated that this "is a response to recent developments in the patent marketplace, whereby companies that increasingly seek the benefits of OSS in their own businesses nonetheless launch attacks against open source products and platforms as it suits their fancy. The OPN is also an encouragement to those patent holders who support OSS, but refrain from entering OSS licenses with patent provisions out of concern they might be giving away too many rights and leaving themselves vulnerable."

SoftBank Sprint Will Not Use Huawei Products

3/27. Rep. Mike Rogers (R-MI), the Chairman of the House Intelligence Committee (HIC), released a statement regarding Softbank's planned acquisition of Sprint, and the use of Huawei products.

Rep. Mike RogersRep. Rogers (at right) stated that "I have met with SoftBank and Sprint regarding this merger and was assured they would not integrate Huawei in to the Sprint network and would take mitigation efforts to replace Huawei equipment in the Clearwire network. I expect them to make the same assurances before any approval of the deal in the CFIUS process. I am pleased with their mitigation plans, but will continue to look for opportunities to improve the government's existing authorities to thoroughly review all the national security aspects of proposed transactions."

Huawei is based in the People's Republic of China (PRC). The HIC has found that the use of Huawei equipment and software in critical infrastructure creates national security risks. See, story titled "House Intelligence Committee Report Finds Huawei and ZTE Could Undermine US National Security" in TLJ Daily E-Mail Alert No. 2,461, October 15, 2012.)

CFIUS is the Committee on Foreign Investment in the United States.

Sprint Nextel Corporation and SoftBank announced on October 15, 2012, that they have entered into agreements that will give SoftBank a 70% stake in Sprint Nextel. See, story titled "SoftBank to Acquire 70% Stake in Sprint Nextel" in TLJ Daily E-Mail Alert No. 2,462, October 16, 2012.

Softbank (Sofutobanku Kabushiki-gaisha) is based in Tokyo, Japan. It provides wireline and wireless telecommunications services, broadband internet access service, and numerous e-commerce and online financial, media, and technology services.

See also, stories titled:

DDOS Attacks Slow Internet Service

3/27. Spamhaus, which provides lists of spammers that enable others to weed out spam e-mail messages, has been the target of escalating and broadening distributed denial of service (DDOS) attacks that have slowed internet access service in some regions.

Spamhaus stated in a release that it "experienced a large-scale DDoS attack over the past weekend and extending into this week. Although this site and our mail were knocked down for awhile, our data systems continued to work normally throughout the attack".

Spamhaus states in its website that its "mission is to track the Internet's spam operations and sources, to provide dependable realtime anti-spam protection for Internet networks, to work with Law Enforcement Agencies to identify and pursue spam gangs worldwide, and to lobby governments for effective anti-spam legislation".

Spamhaus recently added Cyberbunker, a Dutch company that provides services to spammers, to its lists. Others use Spamhaus's lists to weed out spam e-mail messages. As of the writing of this article, TLJ's efforts to access the URL for Cyberbunker's home page produced only error messages.

The New York Times published an article on March 26 by John Markoff and Nicole Perlroth titled "Firm Is Accused of Sending Spam, and Fight Jams Internet". It suggests that the attacks are retaliation for listing Cyberbunker as a spammer.

CloudFlare, a company that provides internet security services, including for Spamhaus, wrote a description of the evolution of the tactics used by the attackers, how the attacks worked, and how various entities mitigated their effects.

The attackers first targeted Spamhaus, then CloudFlare, then the Tier 2 providers and internet exchanges (IXs) to which CloudFlare connects, and finally, Tier 1 providers.

CloudFlare wrote that "we have been told by one major Tier 1 provider that they saw more than 300Gbps of attack traffic related to this attack. That would make this attack one of the largest ever reported."

It also wrote that "Over the last few days, as these attacks have increased, we've seen congestion across several major Tier 1s, primarily in Europe where most of the attacks were concentrated, that would have affected hundreds of millions of people even as they surfed sites unrelated to Spamhaus or CloudFlare. If the Internet felt a bit more sluggish for you over the last few days in Europe, this may be part of the reason why."

Adam Benson of the Digital Citizens Alliance stated in a release on March 27 that "this is more than just an inconvenience slowing down your computer. Cyberbunker is showing just how much damage they can do to the Internet economy by slowing and in some cases disabling businesses with these attacks on the web. This is an effort to threaten and intimidate creators and online businesses like we saw from the Mafia when they took control of neighborhoods in American cities. It's deplorable and as citizens we can't let them get away with it."

NAF Wants to End Regulatory Capture at FCC

3/27. The New America Foundation (NAF), Free Press (FP) and other interest groups sent a letter to President Obama regarding the appointment of a new Chairman of the Federal Communications Commission (FCC).

They wrote that that the Obama administration "must recognize the severe mismanagement and lack of progress that occurred under Chairman Julius Genachowski and choose a strong advocate for the public interest."

They want the next Chairman to promote "unlocked mobile devices". See, story titled "Obama Administration Urges Creation of DMCA Anti-Circumvention Exemption for Unlocking Cell Phones" in TLJ Daily E-Mail Alert No. 2,530, March 5, 2013. See also, story titled "Cell Phone Unlocking Bills Introduced" and related stories in TLJ Daily E-Mail Alert No. 2,533, March 11, 2013.

They also want "open wireless platforms", "strong open Internet rules", "media diversity", and the "information needs of communities", among other things.

They wrote that "After decades of industry-backed chairmen, we need a strong consumer advocate and public interest representative at the helm. It's time to end regulatory capture at the FCC and restore balance to government oversight."

People and Appointments

3/27. The U.S. Patent and Trademark Office (USPTO) announced in a release the 2013 inductees to the National Inventors Hall of Fame. The inductees, and the subjects of their inventions, include:

More News

3/27. The Office of Management and Budget (OMB) released a memorandum [11 pages in PDF] for the heads of executive departments and agencies titled "Fiscal Year 2013 PortfolioStat Guidance: Strengthening Federal IT Portfolio Management".

Appropriation Act Limits Federal Government Acquisitions of PRC IT

3/26. President Obama signed into law HR 933 [LOC | WW], the "Consolidated and Further Continuing Appropriations Act, 2013". This bill limits the use of funds appropriated for four federal departments and agencies for acquiring information technology (IT) systems made by entities that are owned, directed or subsidized by the People's Republic of China (PRC).

The bill cites the "risk of cyber-espionage or sabotage" by the PRC as the reason for the limitation. However, the bill also references PRC officials with "direct involvement with violations of human rights".

The four federal entities covered by this bill are the Department of Commerce (DOC), Department of Justice (DOJ), National Aeronautics and Space Administration (NASA), and the National Science Foundation (NSF).

The DOC includes numerous components, including the U.S. Patent and Trademark Office (USPTO), National Institute of Standards and Technology (NIST), and National Telecommunications and Information Administration (NTIA).

The DOJ includes the Federal Bureau of Investigation (FBI).

Section 516(a) of the act provides that "None of the funds appropriated or otherwise made available under this Act may be used by the Departments of Commerce and Justice, the National Aeronautics and Space Administration, or the National Science Foundation to acquire an information technology system unless the head of the entity involved, in consultation with the Federal Bureau of Investigation or other appropriate Federal entity, has made an assessment of any associated risk of cyber-espionage or sabotage associated with the acquisition of such system, including any risk associated with such system being produced, manufactured or assembled by one or more entities that are owned, directed or subsidized by the People's Republic of China."

Section 516(b) provides that "None of the funds appropriated or otherwise made available under this Act may be used to acquire an information technology system described in an assessment required by subsection (a) and produced, manufactured or assembled by one or more entities that are owned, directed or subsidized by the People's Republic of China unless the head of the assessing entity described in subsection (a) determines, and reports that determination to the Committees on Appropriations of the House of Representatives and the Senate, that the acquisition of such system is in the national interest of the United States."

In addition, Section 535 of the act provides that "None of the funds made available by this Act may be used for the National Aeronautics and Space Administration (NASA) or the Office of Science and Technology Policy (OSTP) to develop, design, plan, promulgate, implement, or execute a bilateral policy, program, order, or contract of any kind to participate, collaborate, or coordinate bilaterally in any way with China or any Chinese-owned company unless such activities are specifically authorized by a law enacted after the date of enactment of this Act."

This section adds that this limitation "shall not apply to activities which NASA or OSTP has certified -- (1) pose no risk of resulting in the transfer of technology, data, or other information with national security or economic security implications to China or a Chinese-owned company; and (2) will not involve knowing interactions with officials who have been determined by the United States to have direct involvement with violations of human rights."

DOJ Business Review Letter Declines to State Intentions on IPXI Patent Licensing Proposal

3/26. The Department of Justice's (DOJ) Antitrust Division sent a business review letter (BRL) to counsel for the Intellectual Property Exchange International regarding its planned exchange of unit license rights (ULRs) to a defined set of patents. However, this letter merely concludes that the DOJ "declines to state its present enforcement intentions" regarding this proposal.

William BaerWilliam Baer (at right), the recently confirmed Assistant Attorney General in charge of the Antitrust Division, signed the letter, addressed to Garrard Beeney of the New York City office of the law firm of Sullivan & Cromwell, counsel for the Intellectual Property Exchange International, which also uses the near acronym of IPXI.

The IPXI states in its web site that it is "the world's first financial exchange that facilitates non-exclusive licensing and trading of intellectual property (IP) rights with market-based pricing and standardized terms. The result is an exchange that operates under two core principles: transparency and efficiency. The initial product traded on IPXI is a Unit License Right (ULR) contract."

The DOJ stated in a release that "IPXI proposes to create a proprietary market for patent licenses. To do so, the company intends to obtain exclusive patent licenses that it will then sublicense through the sale of tradable instruments called ULRs, which are standardized licenses for defined sets of patents and uses under terms and conditions set jointly with patent holders. As part of the process, IPXI will review the patent rights at issue by examining validity, current infringement and other issues, and determine market interest to license those patents."

The DOJ continued that "IPXI may become the exclusive licensor of patents or patent bundles that might otherwise compete. IPXI has proposed certain procedures that might mitigate the likelihood that anticompetitive effects will materialize."

However, the DOJ release states, "because IPXI cannot predict in advance the patents or markets that might be at issue, the department is unable to engage in the fact-intensive analysis necessary to assess the likely competitive effects of the proposal. In addition, given the novelty of IPXI’s proposal, it is possible that other potential competitive concerns may later emerge once IPXI’s platform is operational."

The BRL states that "IPXI's proposed exchange potentially could generate efficiencies for the IP marketplace and encourage innovation through increased licensing efficiency, sublicense transferability, and greater transparency."

However, it also states that "In addition to the efficiencies it may generate, IPXI’s request raises antitrust issues that include (1) the pooling of patents from multiple patent holders, (2) the listing of competing ULRs, and (3) the sharing of competitively sensitive information. Given the nature of IPXI’s novel business model, the Department also recognizes that other potential competitive concerns may later emerge once it is operational."

The BRL concludes that the DOJ "cannot prospectively determine that there will be no adverse competitive effects from the operation of IPXI’s proposed exchange. Therefore, though the proposal could potentially produce certain efficiencies, the Department withholds judgment at this time and declines to state its enforcement intentions."

Gerard Pannekoek, P/CEO of IPXI, stated in a release that "We believe this letter from the Department of Justice confirms our long-standing view that IPXI is innovative and promotes efficiencies. With this review complete, we anticipate announcing very soon the official launch of the marketing period for our first offerings that will pave the way for trading on the Exchange."

He added that "those few practices that the Department identified as potential 'risks' are largely practices in which IPXI will not engage. We are confident that when our Exchange is in full operation, we will meet the most stringent of any test under the competition laws".

The DOJ Antitrust Division's rules governing its business review process are codified at 28 C.F.R. § 50.6.

Also, the FTC issues advisory opinions on competition issues. Its rules are codified at at 16 CFR §§ 1.1-1.4. See also, story titled "FTC Releases Guidance on Requesting Advisory Opinions on Competition Issues" in TLJ Daily E-Mail Alert No. 2,252, June 30, 2012.

House Commerce Committee Republicans Write FCC Regarding Growth, Waste and Abuse in Lifeline Subsidy Program

3/26. Rep. Fred Upton (R-MI), Rep. Greg Walden (R-OR) and four other senior Republican members of the House Commerce Committee (HCC) sent a letter to Federal Communications Commission (FCC) Chairman Julius Genachowski regarding the "growth, waste, and abuse that has occurred in the Universal Service Fund's Lifeline program".

The HCC's Subcommittee on Communications and Technology, which Rep. Walden chairs, will hold a hearing on this topic on April 25, 2013.

The FCC's Lifeline program, subsidizes monthly telephone service for certain low income users, is one of the FCC's universal service programs funded by taxes on consumers collected via their communications bills.

This letter states that this "program nearly tripled in size from $800 million in 2009 to $2.2 billion per year in 2012.

The letter ask if the program should be "frozen", "put on a budget", or "placed under a cap". It also asks if "the waiver allowing carriers offering pre-paid service to receive funding even if they deploy no facilities of their own" should be reconsidered.

The six Republicans also sent a letter to Rep. Henry Waxman (D-CA) and other senior Democrats on the HCC.

They also sent a letter to the National Association of Regulatory Utility Commissioners (NARUC). They ask the NARUC, for example, "What innovative steps and best practices are States taking to combat waste, fraud and abuse in the Lifeline program that might be a model for other States or the FCC?".

They also ask, "Which States designate and recertify wireless and prepaid eligible telecommunications carriers and which one leave that to the FCC?".

They also ask, "Are the recent FCC reforms adequate to address waste, fraud and abuse in the fund?".

The letter to the FCC notes that "While reforms the FCC adopted starting in 2011 may be slowing growth, they do not appear to be containing the absolute size of the fund."

The FCC initiated a rulemaking proceeding in March of 2011. See, Notice of Proposed Rulemaking (NPRM) [139 pages in PDF]. The FCC adopted this NPRM on March 3, 2011, and released the text on March 4, 2011. It is FCC 11-32 in WC Docket Nos. 11-42 and 03-109, and CC Docket No. 96-45.

The FCC released a Report and Order and Further Notice of Proposed Rulemaking [339 pages in PDF] in February of 2012 that contains the "reforms" referred to in the just released letter to the FCC. The FCC adopted this item on January 31, 2012 and released the text on February 6, 2012. It is FCC 12-11 in WC Docket Nos. 11-42, 03-109, and 12-23, and CC Docket No. 96-45.

People and Appointments

3/26. Sen. Tim Johnson (D-SD) announced in a release that he will not run for re-election to the Senate in 2014. See also, statement by President Obama.

3/26. President Obama nominated Julia Pierson to be Director of the Department of Homeland Security's (DHS) Secret Service. See, White House news office release, and DHS release. She is a career Secret Service employee.

More News

3/26. The Department of Justice's (DOJ) Antitrust Division filed with the U.S. District Court (DC) its Motion and Supporting Memorandum to Entry of Final Judgment [4 pages in PDF] in US v. Verizon Communications. This is the action that the US and the state of New York brought on August 16, 2012, in conjunction with the approval of the Verizon cable deals. See, complaint [19 pages in PDF] and story titled "DOJ Approves Verizon Cable Deals" in TLJ Daily E-Mail Alert No. 2,429, August 15, 2012. This case is USA and State of New York v. Verizon Communications, Inc., et al., U.S. District Court for the District of Columbia, D.C. No. Case 1:12-cv-01354 (RMC).

Go to News from March 21-25, 2013.