Magistrate Judge Orders Microsoft to Comply with Extraterritorial Warrant for E-Mail

4/25. James Francis, a Magistrate Judge of the U.S. District Court (SDNY), issued a Memorandum and Order in the matter styled "In the Matter of a Warrant to Search a Certain E-Mail Account Controlled and Maintained by Microsoft Corporation".

This Magistrate Judge, at the request of the U.S. government, issued a search and seizure warrant that directs Microsoft to produce the contents of one of its customer's e-mail accounts. Microsoft argued that the account data is stored on a server located in Dublin, Ireland, that the U.S. cannot issue extraterritorial search and seizure warrants, and therefore the warrant must be quashed.

The Magistrate Judge, relying upon his interpretation of the Stored Communications Act (SCA), at 18 U.S.C. § 2703, rejected Microsoft's argument, and order it to produce the contents of the e-mail account.

Microsoft released a statement by David Howard, its Deputy General Counsel, announcing that Microsoft will continue to argue this issue before the District Court judge, and if it loses there, it will appeal to the U.S. Court of Appeals (2ndCir).

See, full story.

Ways and Means Committee to Mark Up Bill to Make R&D Tax Credit Permanent

4/25. The House Ways and Means Committee (HWMC) is scheduled to mark up several bills on Tuesday, April 29, 2014, including HR 4438 [LOC | WW], the "American Research and Competitiveness Act of 2014".

Rep. Kevin Brady (R-TX) and others introduced this bill on April 9, 2014. It is one of many bills that would make permanent the tax credit, and revise it. See, story titled "R&D Tax Credit Bills Introduced" in TLJ Daily E-Mail Alert No. 2,521, February 7, 2013.

The credit was first enacted in 1981 as a temporary measure. Since then the Congress has repeatedly extended it for one or a few years. With so many extensions, some companies have come to expect the credit to be continued, and often plan accordingly, even when the credit is allowed to lapse. Extensions have always been retroactive, with the exception of one year 15 years ago.

At end of the 112th Congress, the Congress passed and President Obama signed, a huge bill, HR 8 [LOC | WW], the "American Taxpayer Relief Act of 2013". Section 301 of that bill modified and extended the R&D tax credit, which is codified at 26 U.S.C. § 41, but only through December 31, 2013. See, story titled "R&D Tax Credit Extended" in TLJ Daily E-Mail Alert No. 2,504, January 7, 2013. That is, the credit has once again expired.

HR 4438 would make it permanent, and make the extension retroactive. That is, this bill "shall apply to taxable years beginning after December 31, 2013."

The summary of this bill released by the Joint Economic Committee (JEC) on April 25 states that "The proposal makes permanent the alternative simplified method for calculating the research credit and increases the rate to 20 percent. That is, the research credit is equal to 20 percent of qualified research expenses that exceed 50 percent of the average qualified research expenses for the three preceding taxable years. The rate is reduced to 10 percent if a taxpayer has no qualified research expenses in any one of the three preceding taxable years. The proposal repeals the traditional 20-percent research credit calculation method."

This bill provides that the research tax credit shall be "the sum of (1) 20 percent of so much of the qualified research expenses for the taxable year as exceeds 50 percent of the average qualified research expenses for the 3 taxable years preceding the taxable year for which the credit is being determined, (2) 20 percent of so much of the basic research payments for the taxable year as exceeds 50 percent of the average basic research payments for the 3 taxable years preceding the taxable year for which the credit is being determined, plus (3) 20 percent of the amounts paid or incurred by the taxpayer in carrying on any trade or business of the taxpayer during the taxable year (including as contributions) to an energy research consortium for energy research." (Parentheses in original.)

On April 14, the Information Technology and Innovation Foundation (ITIF) released a paper titled "Why the Tax Reform Act of 2014 Should Expand, Not Cut, the R&D Tax Credit".

It states that "Research and development is a key driver of U.S. productivity growth, innovation and global competitiveness. However, both economic theory and evidence show that relative to societally optimal rates companies underinvest in R&D, which is why since 1954 companies have been able to deduct R&D costs immediately rather than depreciating them, and why since 1981 companies have been able to take a tax credit for R&D expenditures. Since then, however, at least 26 other nations have put in place more generous R&D incentives." (Footnote omitted.)

This ITIF paper also faults another bill, the yet to be introduced "Tax Reform Act of 2014", because it would "disqualify R&D expenditures toward software development from the credit." See, discussion draft.

The ITIF argues that policymakers should care about where U.S. companies perform their R&D for three reasons. First, "because companies do not capture all the economic benefits from their R&D, they will underinvest in R&D relative to societally optimal levels."

Second, "because many other nations provide significantly more generous R&D tax incentives, firms in the United States will at the margin expand R&D faster overseas than in the United States. And that is exactly what we have seen with U.S. corporations expanding their R&D 2.7 times faster overseas than domestically over the last decade." (Footnote omitted.)

Third, "increased domestic R&D leads to significant economic benefits. A 1-percent increase in the stock of research boosts productivity by between 0.23 and 0.3 percent. This is why a cut in R&D tax incentives of approximately $20 billion a year would lead to slower growth in productivity of approximately 0.14 percent, which would reduce U.S. GDP growth by approximately $25 billion annually." (Footnotes omitted.)

The ITIF concludes that "for the U.S. economy to retain -- not continue to lose --its global competitive position, especially in technology-intensive industries, the R&D tax credit should be expanded, not reduced, and software should not be singled out for elimination."

The original cosponsors of the bill are Rep. John Larson (D-CT), Rep. Erik Paulsen (R-MN), Rep. Anna Eshoo (D-CA), Rep. Mike McCaul (R-TX), Rep. Doris Matsui (D-CA), Rep. Sam Johnson (R-TX), Rep. Richard Neal (D-MA), and Rep. Aaron Schock (R-IL).

DOJ's Overton Discusses US v. Bazaarvoice and Application of Clayton 7 to HSR Nonreportables

4/25. Leslie Overton, Deputy Assistant Attorney General for Civil Enforcement in the Department of Justice's (DOJ) Antitrust Division, gave a speech in Chicago, Illinois titled "Non-reportable Transactions and Antitrust Enforcement".

The Hart Scott Rodino (HSR) Act requires reporting of certain transactions, based upon minimum thresholds. Section 7 of the Clayton Act, which is codified at 15 U.S.C. § 18, prohibits any mergers whose effect "may be substantially to lessen competition, or to tend to create a monopoly."

Bazaarvoice's acquisition of PowerReviews in July of 2012 was non-reportable under the HSR Act. But, both companies provided online product ratings and reviews (R&R) platforms. The DOJ filed a civil complaint [21 pages in PDF] in the U.S. District Court (NDCal) under Section 7 to undo the merger. See, story titled "DOJ Sues Bazaarvoice to Force Divestiture of Recently Acquired PowerReviews" in TLJ Daily E-Mail Alert No. 2,507, January 14, 2013.

The District Court issued an opinion [redacted, 114 pages in PDF] on January 8, 2014, ruling in favor of the government on the issue of liability. That case is D.C. No. 13-cv-00133, Judge William Orrick presiding.

The District Court wrote that R&R "is in the dynamic and fast-evolving eCommerce industry, but the consistent testimony of customers and other evidence establish that R&R is critical ... for companies selling product over the internet. It is a separate product market for antitrust purposes. The geographic market is the United States ..."

It continued that "The evidence that Bazaarvoice and PowerReviews expected the transaction to have anticompetitive effects is overwhelming. Bazaarvoice recognized PowerReviews as its only real commercial competitor, and vice versa."

It concluded that "it is probable that Bazaarvoice's acquisition of PowerReviews will have an anticompetitive effect over the next two years absent intervention by the Court."

Overton (at right) said that "Under Section 7, which was enacted decades before the HSR Act, the agencies can challenge transactions, before or after consummation, regardless of whether the transaction is subject to HSR notification."

"Potential harm to consumers can't be measured just in terms of the size of a transaction or the balance sheets of the merging parties." For example, she said that "A non-reportable merger might pose a significant risk of antitrust harm to consumers in local or regional markets", or "the practical impact of relatively small transactions can be magnified where the relevant product is a key input to, or used in the production of, a downstream product."

She warned that HSR non-reportables comprise "close to 20 percent of all the merger investigations opened by the Antitrust Division" and that more than one in four of these investigations results in a challenge. "Merging parties should assume that, even if no HSR filing is required, a deal that presents competitive concerns is unlikely to escape agency attention".

She continued that the District Court opinion in US v. Bizaarevoice "is the latest decision to confirm that standard Section 7 principles apply to consummated deals."

She also commented on the lack of post merger price rises or other anticompetitive effects. "Noting clear evidence that Bazaarvoice was aware of the division's scrutiny of the merger, Judge Orrick concluded that the evidence regarding post-acquisition pricing was reasonably viewed as manipulatable by Bazaarvoice, and therefore entitled to little weight."

But, she added, the presence of post merger anti-competitive effects is important, because this is not the product of manipulation. Hence, "the division gives substantial weight to evidence of observed post-merger price increases or other changes adverse to customers".

Also, "the division often places significant weight on the pre-merger business records of the merging parties as well as other industry participants".

"Company business records helped establish many of the key elements of the government's Section 7 case against Bazaarvoice. Emails, memos and presentations created by the company’s senior executives showed that prior to the transaction, Bazaarvoice viewed PowerReviews as the company’s only significant competitor. They also demonstrated that pre-merger competition between Bazaarvoice and PowerReviews had resulted in lower prices and increased innovation." (Footnote omitted.)

Finally, Overton discussed remedies in HSR non-reportable cases. "The Antitrust Division applies the same remedial principles to consummated merger transactions that we do in all Section 7 cases. We look to remedy an unlawful consummated deal in a fashion that restores competition and deprives the acquirer of unlawfully obtained market power. Our approach is highly matter-specific, based on careful application of legal and economic principles to the particular facts involved." (Footnote omitted.)

Section 7 provides in part that "No person engaged in commerce or in any activity affecting commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital" or "acquire the whole or any part of the assets of another person engaged also in commerce or in any activity affecting commerce, where in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly."

President Obama appointed Judge Orrick in June of 2012. See, story titled "Obama Nominates Two for USDC Northern District of California" in TLJ Daily E-Mail Alert No. 2,397, June 15, 2012. His nomination was particularly controversial for a District Court nominee. See, story "Divided Senate Judiciary Committee Approves Orrick for NDCal Judgeship" in TLJ Daily E-Mail Alert No. 2,530, March 5, 2013. The full Senate confirmed him on May 15, 2013 by a vote of 56-41. See, Roll Call No. 125 and "More Judicial Appointments" in TLJ Daily E-Mail Alert No. 2,562, May 15, 2013.

ICN Adopts Recommended Practices for Antitrust Regulators

4/25. The International Competition Network (ICN) adopted, but did not release, recommended practices for antitrust regulators, at its meeting in Marrakesh, Morocco on April 23-25, 2014.

The Department of Justice's (DOJ) Antitrust Division issued a short news release, and the Federal Trade Commission (FTC) issued a substantially identical release, that offer brief descriptions of this conference. However, neither the ICN, DOJ, nor FTC released these recommendations.

These DOJ and FTC releases state that the ICN "adopted new recommended practices for predatory pricing analysis and competition assessment, and approved new work product on international merger enforcement cooperation, confidentiality protections during investigations, leniency policy and digital evidence gathering".

These releases also state that "An ongoing working group project on agency investigative process aims to identify investigative procedures that promote fair and informed enforcement actions".

Also, "The Advocacy Working Group presented a set of recommended practices on competition assessment, the exercise of evaluating the effects on competition of a proposed or existing law, regulation or policy."

A spokesman for the DOJ stated that the DOJ Office of Public Affairs has no ICN documents to release to TLJ. The FTC did not return a phone call from TLJ regarding this matter.

US and Japan Reach No Agreement on TPP

4/25. President Obama is currently traveling to Japan, Korea, Malaysia and the Philipines. He concluded his visit to Japan on Friday, April 25.

While President Obama and Japan President Abe reached agreement on some matters, they reached no agreement regarding ongoing Trans Pacific Partnership Agreement (TPPA) negotiations.

The obstacles included issues such as agriculture and cars. But, successful conclusion of a TPPA would benefit producers and consumers of information and communications technology (ICT) goods and services.

The Office of the U.S. Trade Representative (OUSTR) maintains a web section on the TPPA.

Background on TPP and FTAs. The US, Japan, Australia, Brunei Darussalam, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam are negotiating a multilateral free trade agreement (FTA) to reduce tariff and non-tariff barriers that would likely have significant overall benefits for the economies and consumers in the participating nations.

Although, some businesses and sectors would be adversely impacted. There is organized opposition to the TPPA in the US and elsewhere. Moreover, US based opponents of the TPPA, and free trade generally, are key members of President Obama's electoral coalition.

There are also other ongoing regional multilateral free trade agreement negotiations, such as the Regional Comprehensive Economic Partnership (RCEP). The People's Republic of China (PRC), Japan, Korea, Australia and New Zealand, but not the US, are a parties to RCEP. The PRC is not a party to TPPA.

Economic analysis suggests that successful conclusion of any Asian Pacific FTA would likely benefit the economies of participating nations (measured by national income gains). But, due to trade diversion effects, an FTA could harm the economy of a non-participating nation. Thus, successful conclusion of RCEP but not TPPA could harm the US economy. See, for example, January 2014 paper [37 pages in PDF] titled "The Relative Significance of EPAs in Asia-Pacific" by Kenichi Kawasaki, of the Research Institute of Economy, Trade and Industry (RIETI).

US Japan TPP Negotiations. The US and Japan released a joint statement at the conclusion of President Obama's visit. It announces no agreement regarding TPPA. Rather, it states, in diplomatic terms, that the two nations are committed to reaching agreement in the future.

It states that "The United States and Japan also coordinate closely in multilateral financial and economic fora to advance trade liberalization and promote economic growth. Our joint efforts are grounded in support for an international economic system that is free, open, and transparent, and embraces innovation. In order to further enhance economic growth, expand regional trade and investment, and strengthen the rules-based trading system, the United States and Japan are committed to taking the bold steps necessary to complete a high-standard, ambitious, comprehensive Trans-Pacific Partnership (TPP) agreement. Today, we have identified a path forward on important bilateral TPP issues. This marks a key milestone in the TPP negotiations and will inject fresh momentum into the broader talks. We now call upon all TPP partners to move as soon as possible to take the necessary steps to conclude the agreement. Even with this step forward, there is still much work to be done to conclude TPP."

President Obama and President Abe also made statements at a joint public appearance when President Obama arrived in Japan in which they did not mention the TPPA.

President Abe (at right) said that "My administration intends to contribute to regional peace and prosperity more practically than ever, in line with the policy of what I call practical contribution to peace based on the principle on international cooperation. And together with the United States, Japan would like to realize our leading role of the alliance in ensuring a peaceful and prosperous Asia Pacific." See, transcript.

President Obama said that "We represent two of the three largest economies in the world, and we have the opportunity by working together to help shape an open and innovative and dynamic economy throughout the Asia Pacific region." The third member of this trio is the PRC.

He added that "a strong U.S.-Japan relationship is not only good for our countries but good for the world."

Prior to the meeting of Presidents Obama and Abe, the OUSTR released a statement regarding talks between USTR Michael Froman and Japanese Minister of Economic and Fiscal Policy Akira Amari.

It states that "We have spent the past several weeks working to narrow gaps with Japan. The round we just completed was focused but difficult. After more than 20 hours of negotiations, we continue to make progress, and we are now faced with a reasonable number of outstanding issues. These issues are important to both sides and considerable differences remain."

"We have worked to be as creative as possible to address Japan's political sensitivities, while pursuing the overall objective of achieving meaningful access to its market – a goal that all TPP partners share. We look to Japan to make similar efforts."

The OUSTR statement adds that "The economic and strategic importance of TPP is greater now than it has ever been. We stand stronger when we stand together -- on global issues, regional issues, and economic issues."

See also,

• stories titled "Japan May Join TPPA Negotiations" and "Abe Advocates Rules for Trade, Investment and IP" in TLJ Daily E-Mail Alert No. 2,527, February 25, 2013.
• stories titled "Congressional Democrats Express Concern About Japanese Participation In TPP Negotiations", "Acting USTR Marantis Welcomes Japan's Interest in TPP Negotiations", "Donilon Addresses TPP" and "More TPP News" in TLJ Daily E-Mail Alert No. 2,535, March 18, 2013.
• stories titled "Japan Joins TPP Negotiations" and "David Dreier Recommends that PRC Join TPP Negotiations" in TLJ Daily E-Mail Alert No. 2,551, April 17, 2013.
• story titled "OUSTR Seeks Comments on Japan's TPP Participation" in TLJ Daily E-Mail Alert No. 2,560, May 13, 2013.

Supporters of TPP. The U.S. Chamber of Commerce, U.S-Japan Business Council, Keidanren, and Japan-U.S. Business Council released a joint statement on April 21 in which they urged the US and Japan to pursue to conclusion the TPPA "with renewed focus, vigor and purpose".

The BSA Software Association urged President Obama to negotiate "a forward-looking" TPPA "to expand trade in data and information services".

Victoria Espinel (at left), the new head of the BSA, stated in a release that "Software-enabled innovations like cloud computing and data analytics are the new drivers of growth and competitiveness. This trip gives the President an opportunity to modernize trade rules accordingly".

"We need information to flow freely across borders and we can’t have arbitrary requirements on things like where servers must be located", said Espinel. "The TPP brings together countries that account for more than 40 percent of global trade. If they craft a forward-looking agreement that prevents new forms of digital protectionism, they will send a strong signal for the rest of the world to follow."

The National Association of Manufacturers (NAM) stated in an April 23 release that "manufacturers are hopeful that the President and Japanese Prime Minister Shinzo Abe will make meaningful progress towards achieving ambitious and market-opening outcomes in the Trans-Pacific Partnership (TPP) negotiations, and that work will continue during the President’s visit to Malaysia to meet Prime Minister Najib Razak later this week."

The NAM urged "immediate and comprehensive elimination of tariffs and non-tariff barriers, strong protections consistent with U.S. practice on intellectual property and investment for all products, new provisions to permit the movement of data cross border and new disciplines to ensure fair commercial competition with state-owned enterprises. These provisions all must be backed up by state-of-the-art enforcement provisions from state-to-state to investor-state mechanisms. Ultimately a successful, growth-producing TPP agreement will be one that ensure that manufacturers in the United States will be put on a fair and competitive footing in each of the TPP markets."

Reaction to Forthcoming FCC Open Internet NPRM

4/25. Members of Congress, trade groups representatives, and others offered comments on recent disclosures regarding the Federal Communications Commission (FCC) Chairman Tom Wheeler's forthcoming Notice of Proposed Rulemaking regarding regulation of the business practices of broadband internet access service (BIAS) providers.

Rep. Fred Upton (R-MI), the Chairman of the House Commerce Committee (HCC), and Rep. Greg Walden (R-OR), the Chairman of the HCC's Subcommittee on Communications and Technology (SCT), stated in a joint release that "We have said repeatedly that the Obama administration's net neutrality rules are a solution in search of a problem. The marketplace has thrived and will continue to serve customers and invest billions annually to meet Americans' broadband needs without these rules. Chairman Wheeler's approach to regulation seeks to freeze current market practices, which will cast a chill on technological breakthroughs and cause American consumers to lose out."

The two Republicans added that "Further underscoring the needlessness of the rules, Internet service providers have made clear they will continue to adhere to the spirit of the rules that were already struck down by the courts. It is well past time for the commission to focus on areas where its work will foster new innovation, competition, and job creation.”

Rep. Henry Waxman (D-CA), the outgoing ranking Democrat on the HCC, stated in a release that "An open internet is vital to our economy. I spoke with Chairman Wheeler today and he assured me that he is committed to ensuring an open internet and banning any arrangements that hinder innovation and competition or impinge on consumer choice. These are the right goals, and I want to work with him to make sure they are achieved in the final rule."

Rep. Anna Eshoo (D-CA), that ranking Democrat on the HCC's SCT stated in a release that "I fear that the latest round of proposed net neutrality rules from the FCC will not do enough to curtail discrimination of Internet traffic, but rather leave the door open to discrimination under more ambiguous terms. For me to support 'commercially reasonable' agreements between financially liquid online content companies and broadband providers for faster Internet speeds, there must be zero uncertainty left in the minds of consumers, small businesses and innovators that they are competing on a level playing field with their peers. Fundamentally, consumers and businesses must be protected from actions by online gatekeepers that threaten free speech, harm competition or diminish the continued openness of the Internet. I will stringently evaluate the Chairman's proposal to ensure that these core values are elevated by any final net neutrality rules."

Rep. Doris Matsui (D-CA) stated in a release that "The FCC should adopt and enforce strong and clear net neutrality rules. It should not turn back from its responsibility to preserve an open and free Internet that spurs innovation and protects consumers. I am hopeful that through working with various stakeholders in the Internet ecosystem, the Chairman will propose a set of rules that will accomplish this goal."

The National Cable & Telecommunications Association (NCTA) stated in a release that "The cable industry supports an Open Internet and will continue to provide consumers unfettered access to legal content of their choosing. We look forward to participating in the discussion about the best path forward to ensuring that American consumers enjoy a vibrant and open Internet experience while the marketplace encourages continued investment and innovation in our networks."

The American Enterprise Institute (AEI) hosted a news conference at which AEI personnel offers comments. Jeffrey Eisenach (AEI), an economist, stated that the government antitrust agencies should apply antitrust principles to this issue, and the FCC should do nothing.

James Glassman (AEI) said "this is a step in the right direction", but the incentive auction is more important now for the FCC to address. Roslyn Layton (AEI) said that the FCC's 2010 process was not open or public, while in contrast, the FCC deserves credit now for listening to public in the current round. Bret Swanson (AEI) stated that "this is a positive development".

Randy May (Free State Foundation) stated in a release that "there is no need for the FCC to do anything at this point other than engage in watching waiting concerning Internet marketplace developments".

He added that if the FCC "adopts a standard of 'commercially reasonable terms' that is somewhat flexible, rather than 'discrimination,' in assessing the lawfulness of differentiated broadband Internet offerings, this would be far preferable than reliance on the traditional common carrier non-discrimination standard. And if the proposal indicates that the Commission will act on a case-by-case basis in response to individual complaints containing specific allegations of consumer harm, this too would be a positive step. Finally, if the Commission steers clear of applying net neutrality rules to wireless providers, then this also would be positive."

Gary Shapiro, head of the Consumer Electronics Association (CEA), stated in a release that the FCC "needs to ensure that competitive forces preserve the Open Internet. If the Commission does act, then it must give effect to the limits on its authority and take a cautious and factual approach." He added that "we look forward to working with the FCC and the multitude of stakeholders to ensure that the Internet remains free and open."

Craig Aaron, head of the Free Press stated in a release that "With this proposal, the FCC is aiding and abetting the largest ISPs in their efforts to destroy the open Internet. Giving ISPs the green light to implement pay-for-priority schemes will be a disaster for startups, nonprofits and everyday Internet users who cannot afford these unnecessary tolls. These users will all be pushed onto the Internet dirt road, while deep pocketed Internet companies enjoy the benefits of the newly created fast lanes."

Aaron added, with his usual flair for hyperbole, that "This is not Net Neutrality. It's an insult to those who care about preserving the open Internet to pretend otherwise. The FCC had an opportunity to reverse its failures and pursue real Net Neutrality by reclassifying broadband under the law. Instead, in a moment of political cowardice and extreme shortsightedness, it has chosen this convoluted path that won't protect Internet users."

More News

4/25. The Copyright Royalty Judges published a notice in the Federal Register (FR) that announces, describes, recites, and sets the effective dates (April 25, 2014) for, their determination of the rates and terms for two statutory licenses, permitting certain digital performances of sound recordings and the making of ephemeral recordings, for the period beginning on January 1, 2011, and ending on December 31, 2015. See, FR, Vol. 79, No. 80, April 25, 2014, at Pages 23101-23139.

4/25. The House Homeland Security Committee (HHSC) is scheduled to mark up HR 3283 [LOC | WW], the "Integrated Public Alert and Warning System Modernization Act of 2013", on Wednesday, April 30, 2014. The HHSC's Subcommittee on Emergency Preparedness, Response, and Communications amended and approved HR 3283 on March 27. See, HHSC web page with hyperlinks to amendments approved at that mark up. The HHSC approved a similar bill in the 112th Congress. See, HR 3563 [LOC | WW]. The Subcommittee also amended and approved HR 4289 [LOC | WW], the "Department of Homeland Security Interoperable Communications Act" and HR 4263 [LOC | WW], the "Social Media Working Group Act of 2014". Those two bills are not on the full Committee mark up agenda for April 30.

FCC Announces Tentative Agenda for May 15 Meeting

4/24. The Federal Communications Commission (FCC) released a tentative agenda for its event titled "open meeting" scheduled for May 15, 2014. This agenda includes an NPRM regarding open internet rules, two orders related to the upcoming incentive auction, and an order regarding wireless microphones. See, FCC release.

Incentive Auction. The FCC is scheduled to adopt one Report and Order (R&O) that adopts rules and policies for the upcoming broadcast television spectrum incentive auction, and a second R&O that adopts rules and policies regarding the aggregation of spectrum for mobile wireless services through initial licensing and secondary market transactions. The proceedings are WT Docket Nos. 12-268 and 12-269, respectively.

The FCC adopted a Notice of Proposed Rulemaking (NPRM) regarding incentive auctions on September 28, 2012. It released it on October 2, 2012. It is FCC 12-118 in WT Docket Nos. 12-268. See also, story titled "FCC Adopts NPRM on Incentive Auctions" in TLJ Daily E-Mail Alert No. 2,455, October 1, 2012

The FCC released a statement by Chairman Tom Wheeler regarding the contents of this NPRM on April 24.

The FCC also adopted and released a Notice of Proposed Rulemaking (NPRM) [50 pages in PDF] on September 28, 2012 regarding spectrum aggregation. It is FCC 12-119 in WT Docket No. 12-269. See, story titled "FCC Adopts Spectrum Aggregation NPRM" in TLJ Daily E-Mail Alert No. 2,455, October 1, 2012.

FCC released a statement by Chairman Tom Wheeler, and a release, regarding the contents of this NPRM on April 25.

See also, related story in this issue titled "FCC Commissioner Pai Addressess Upcoming Incentive Auction".

Wireless Microphones. The FCC is scheduled to adopt a R&O that provides a limited expansion to the class of wireless microphone users eligible for a license.

Open Internet NPRM. The FCC is scheduled to adopt a Notice of Proposed Rulemaking (NRM) that proposes rules that regulate the business practices of broadband internet access service (BIAS) providers.

See also, story titled "FCC to Consider Open Internet NPRM" in TLJ Daily E-Mail Alert No. 2,645, April 23, 2014.

This event is scheduled for Thursday, May 15, 2014 at 10:30 AM at the FCC headquarters, Room TW-C305, 445 12th Street, SW. It is open to the public. It will be webcast.

Wheeler Describes Next Open Internet NPRM

4/24. Federal Communications Commission (FCC) Chairman Tom Wheeler announced, but did not release, a draft notice of proposed rulemaking (NPRM) to reinstate regulation of the business practices of broadband internet access service (BIAS) providers. Wheeler released a short statement in which he described the draft NPRM.

The Congress has not enacted a bill to regulate BIAS providers, or directing the FCC to regulate BIAS providers. The FCC's last two attempts to regulate BIAS provides, by adjudication and by rulemaking, have failed in judicial review. This will be the FCC's third attempt. It might be recalled that the FCC also went through three long and tortuous rounds on the Section 251 unbundling obligations of incumbent local exchange carriers.

The NYT and WSJ obtained, and reported information about, the draft NPRM last week. Other news media also wrote stories. FCC staff spoke via teleconference with reporters on April 24, criticizing various characterizations of the draft NPRM by news media.

Wheeler (at right) wrote in his April 24 statement that "There has been a great deal of misinformation" in news media coverage.

The Administrative Procedure Act (APA), which applies to this rulemaking proceeding, provides for a notice and comment process. Chairman Wheeler is engaged in a leak and spin process.

Although, he did not disclose whether information about the draft was leaked at his direction, whether the leak was intended to function as a sort of informal notice of inquiry, whether FCC personnel dissatisfied with the contents of the draft leaked information, or whether other motivations were involved.

He wrote in his statement that the draft NPRM "proposes the reinstatement of the Open Internet concepts adopted by the Commission in 2010 and subsequently remanded by the D.C. Circuit. The Notice does not change the underlying goals of transparency, no blocking of lawful content, and no unreasonable discrimination among users established by the 2010 Rule. The Notice does follow the roadmap established by the Court as to how to enforce rules of the road that protect an Open Internet and asks for further comments on the approach."

He continued that the U.S. Court of Appeals (DCCir), in its January 14, 2014 opinion, "made it clear that the FCC could stop harmful conduct if it were found to not be ``commercially reasonable.´´ Acting within the constraints of the Court's decision, the Notice will propose rules that establish a high bar for what is ``commercially reasonable.´´ In addition, the Notice will seek ideas on other approaches to achieve this important goal consistent with the Court’s decision. The Notice will also observe that the Commission believes it has the authority under Supreme Court precedent to identify behavior that is flatly illegal."

He added that "It should be noted that even Title II regulation (which many have sought and which remains a clear alternative) only bans ``unjust and unreasonable discrimination.´´" (Parentheses in original.)

Finally, he wrote that this NPRM will propose "That all ISPs must transparently disclose to their subscribers and users all relevant information as to the policies that govern their network", "That no legal content may be blocked", and "That ISPs may not act in a commercially unreasonable manner to harm the Internet, including favoring the traffic from an affiliated entity."

His statement does not address wireless broadband.

FCC Commissioner Pai Addresses Upcoming Incentive Auction

4/24. Federal Communications Commission (FCC) Commissioner Ajit Pai gave a speech in Washington DC in which he discussed the upcoming incentive auction, and how forthcoming FCC rules may impede the success of that auction by limiting participation.

Pai (at right) said that "In order for the incentive auctions to succeed, we must have robust competition among wireless carriers for licenses in the forward auction."

"But unfortunately, the plan reportedly on the table appears to go in the opposite direction. It restricts competition. Certain companies selected by the government will be shielded from competing against other companies. Instead of good, old-fashioned competition, the chosen few would have spectrum set aside especially for them."

He continued that "My position on the forward auction is simple: The FCC should not limit carriers’ ability to participate. We should not pick winners and losers. The inevitable effect of a policy that limits participation will be less spectrum for mobile broadband, less funding for national priorities, a higher budget deficit, and an increased chance of a failed auction."

TLJ Commentary: TPP and Obama Administration Trade Policy

4/24. The Obama administration's commitment to free trade is limited, and this diminishes the likelihood of its successful negotiation of free trade agreements (FTAs) such as the Trans Pacific Partnership Agreement (TPPA).

First, it should not go unnoticed that the Obama administration has not concluded a single bilateral FTA.

Second, trade agreements require Congressional approval. A Congressional grant of trade promotion authority (TPA) would enhance the President's ability to obtain Congressional approval, and hence, to negotiate FTAs. Under TPA, Congress can approve or reject, but not amend, FTAs. The Congress gave former President Bush TPA.

Yet, the Congress has not given President Obama this authority, and President Obama has not made a serious effort to obtain it. (He did say in his speech to the Congress on January 28, 2014, "We need to work together on tools like bipartisan trade promotion authority ...")

Third, support for free trade is far stronger among Congressional Republicans than Democrats. President Obama would be heavily dependent upon Republicans in winning approval of any FTA, or TPA. Yet, President Obama has been governing as if there were no Republican majority in the House, and no Republicans in the Senate. This undermines his ability to pursue free trade policy.

Agriculture state members of Congress would be reluctant to back any FTA that includes Japan that does not include significant concessions by Japan on agriculture issues. This is a big block in the Senate. Moreover, agriculture state Democrats are among the few free trade Democrats in the Congress.

Fourth, the Obama administration's analysis of trade is basically that US exports are good, but imports are often bad. Under this analysis, US companies stand to loose sales, US unions stand to loose members and dues, and US workers stand to loose jobs, when things are imported.

The Obama administration's analysis does not consider the considerable benefits of imports on consumption. That is, US consumers buy imported things because they are better and/or cost less. Consumers benefit from this. They also have more disposable income left to spend on other things, which in turn benefits those who make those other things.

But then, industry sectors and labor unions are better organized than consumers. Moreover, consumer groups fail to represent the interests of consumers in trade matters. The Obama administration, like many politicians everywhere, is more responsive to organized interests than consumer welfare.

So, the US protects certain interests that are well organized politically. And, these interests oppose FTAs that threaten to end their protection. For example, US sugar producing, clothing making, car making, and ship building interests do not want to face increased import competition.

President Obama has twice been elected with the support of groups that are fundamentally opposed to free trade. He is responsive to these groups.

The Cato Institute, a group that advocates free trade, has released papers recently that suggest that the Obama administration is failing, and will continue to fail, to promote free trade, in part because of his base of support.

The Cato Institute released a paper by Daniel Pearson on March 17 titled "The Obama Administration's Trade Agenda Is Crumbling".

It states that "The nation has been living with the Obama administration's trade policy for five years, with relatively little to show for it. In the remaining three years, is the executive branch likely to obtain Trade Promotion Authority (TPA) and successfully conclude the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP)? Although free traders very much want all of this to happen, hard-headed experience indicates it's most likely that the administration will accomplish none of this."

This paper also notes that "groups that normally support the Obama presidency -- labor, environment, and various other NGOs -- have been doing a great deal of ``community organizing´´ in opposition to the trade agenda".

Another Cato Institute paper by Daniel Ikenson elaborated that the TPP, TTIP and "obtaining fast-track trade negotiating authority from Congress, have run into a buzz saw of opposition, which has derailed prospects for U.S. trade liberalization for the time being."

That paper states that "What began as the usual objections from the usual suspects -- labor unions blaming trade for manufacturing decline and job loss; environmental groups blaming trade for climate change; anti-globalization activists sparing the developing world from development -- has grown into a populist backlash against the TPP, which is portrayed as a secretive, corporatist plot to circumvent democratic processes and usurp national sovereignty. The nascent TTIP negotiations have been smeared with a similar taint."

People and Appointments

4/24. The Department of Justice (DOJ) named Joseph Klimavicz its new Chief Information Officer (CIO), effective in late May. He will replace Luke McCormack, who left in November of 2013. Kevin Deeley, the DOJ's Deputy CIO, is the acting CIO. He will remain as Deputy CIO. Klimavicz was previously CIO of the National Oceanic and Atmospheric Administration (NOAA).

4/24. The Senate Homeland Security and Government Affairs Committee's (SHSGAC) Subcommittee on Financial and Contracting Oversight released a staff report titled "Investigation into Allegations of Misconduct by the Former Acting and Deputy Inspector General of the Department of Homeland Security". This report finds that Charles Edwards "jeopardized the independence of the OIG. The Subcommittee reached this conclusion after considering related findings. These include Mr. Edwards' inadequate understanding of the importance of OIG independence and his frequent communications and personal friendships with senior DHS officials. Mr. Edwards did not obtain independent legal advice and directed reports to be altered or delayed to accommodate senior DHS officials. Mr. Edwards also did not recuse himself from audits and inspections that had a conflict of interest related to his wife's employment."

More News

4/24. The Federal Communications Commission (FCC) extended the deadlines to submit comments in response to its Public Notice (PN) that requests comments to refresh the record regarding the ability of non-English speakers to access emergency information. This PN is DA 14-336 in EB Docket No. 04-296. The FCC released it on March 11, 2014. See also, notice in the Federal Register, Vol. 79, No. 60, March 28, 2014, at Pages 17490-17493. The deadline to submit initial comments is extended from April 28 to May 28. The deadline to submit reply comments is extended from May 12 to June 12. See, April 24 Public Notice (DA 14-552) extending deadlines.

FCC to Consider Open Internet NPRM

4/23. The Federal Communications Commission (FCC) announced that "FCC Senior Officials" will hold a teleconferenced "Background media briefing on draft Open Internet NPRM" on Thursday, April 24, 2014 to discuss "draft proposed Open Internet rules to protect and promote a free and open Internet".

The FCC further announced that the FCC will consider this Notice of Proposed Rulemaking (NPRM) at its May 15 event titled "open meeting".

FCC Chairman Tom Wheeler wrote in a statement that "There are reports that the FCC is gutting the Open Internet rule. They are flat out wrong. Tomorrow we will circulate to the Commission a new Open Internet proposal that will restore the concepts of net neutrality consistent with the court's ruling in January. There is no 'turnaround in policy.' The same rules will apply to all Internet content. As with the original Open Internet rules, and consistent with the court's decision, behavior that harms consumers or competition will not be permitted."

The FCC has not publicly released a draft of this NPRM. However, some news reports have described its contents. See for example, story by Edward Wyatt in the New York Times titled "In Policy Shift, F.C.C. Will Allow a Web Fast Lane".

This article states that the NPRM will propose "rules that allow companies like Disney, Google or Netflix to pay Internet service providers like Comcast and Verizon for special, faster lanes to send video and other content to their customers".

The Public Knowledge's (PK) Michael Weinberg stated in a release that "The FCC is inviting ISPs to pick winners and losers online. The very essence of a ``commercial reasonableness´´ standard is discrimination. And the core of net neutrality is non discrimination. This is not net neutrality. This standard allows ISPs to impose a new price of entry for innovation on the Internet. When the Commission used a commercial reasonableness standard for wireless data roaming, it explicitly found that it may be commercially reasonable for a broadband ISP to charge an edge provider higher rates because its service is competitively threatening."

The FCC adopted Report and Order (R&O) [194 pages in PDF] on December 21, 2010 that containd rules that regulate the business practices of broadband internet access service (BIAS) providers. These rules are also sometimes referred to as open internet rules or network neutrality rules. The U.S. Court of Appeals (DCCir) issued its opinion on January 14, 2014, in Verizon v. FCC, vacating that 2010 order.

And before that, on August 1, 2008 the FCC issued an order [67 pages in PDF] in an adjudicatory proceeding that asserted authority to regulate the network management practices of BIAS providers. On April 6, 2010, the Court of Appeals issued its opinion [36 pages in PDF] in Comcast v. FCC, vacating that August 2008 order.

The PK's Weinberg added that "The DC Circuit Court opinion made it clear that the only way to achieve net neutrality is to reclassify internet access as a telecommunications service."

Sara Morris of the New America Foundation (NAF) wrote in a release that "We are dismayed to hear reports from multiple sources that the FCC is considering rules that would allow Internet service providers to extract additional fees from content companies for prioritized access to their subscribers. Not only is this simply another way for ISPs to charge additional fees for a service that they are already getting paid to deliver, it also allows those companies to take advantage of their positions as gatekeepers to pick winners and losers online. The beauty of the Internet has always been its ability to serve as an unrestricted platform for all speech, giving users the ability to access the content that they choose without ISP-selected ``fast lanes´´ and ``slow lanes.´´"

FCC Adopts NPRM Regarding 3550-3650 MHz Band

4/23. The Federal Communications Commission (FCC) adopted and released a Further Notice of Proposed Rulemaking [90 pages in PDF] regarding wireless broadband services in the 3550-3650 MHz band.

FCC Chairman Tom Wheeler wrote in his statement that "Not only are we proposing to open up the 3.5 GHz band, but we are also enabling the powerful new concept of spectrum sharing among multiple users on an hierarchical basis."

This FNPRM states that it proposes "rules for a new Citizens Broadband Radio Service in the 3.5 GHz Band".

It states that "The 3.5 GHz Band could be an ``innovation band,´´ where we can explore new methods of spectrum sharing and promote a diverse array of network technologies, with a focus on relatively low-powered applications. If successful, the spectrum sharing model proposed for this band could ultimately be expanded to other spectrum bands and ``transform the availability of a precious national resource -- spectrum -- from scarcity to abundance.´´" (Quotations from the July 20, 2012 report of the President's Council of Advisors on Science and Technology.)

FCC Commissioner Ajit Pai wrote that "federal incumbents aren't the most efficient users. The 3.5 GHz band is a case in point -- relatively minor use of that band along the nation’s coasts has left the majority of this spectrum under-utilized for decades. Now it’s time to put it to work for consumers."

He asked rhetorically, "Can our proposals for the 3.5 GHz band be implemented in the real world? Can consumer products be brought to market in a timely manner? We must approach the 3.5 GHz band from a practical perspective, not merely a theoretical one. When viewed through this lens, today's item is a mixed bag, and I therefore will be voting to concur."

Pai explained that "The foremost problem involves exclusion zones." He also questioned "the proposal to impose a hard, 30 MHz cap on the amount of priority access spectrum that any one entity can hold".

FCC Commissioner Michael O'Reilly wrote in his statement that "the 3.5 GHz Band will be one big experiment in terms of the proposed sharing design and licensing scheme. We place a lot of trust that this novel effort will be successful. But, if it does not meet expectations, we are not precluded from altering it in the future. Accordingly, I will vote in favor today’s further notice ..."

O'Reilly added that "I worry that the proposed exclusion zones are too large to attract adequate interest and investment in this band."

Google stated in a release that it "welcomes the new FCC rules as a major step forward". It stated that "The key idea is that modern database technologies will allow commercial use of spectrum that historically has been dedicated to federal purposes, when and where the government doesn’t have immediate need for it. Additionally, this new model allows flexible commercial use of the spectrum, where the database can mediate between protected operations like cellular LTE, and unprotected operations (which could be WiFi-type devices), without the government having to pick one or the other. The government will also benefit from having commercial devices in their bands. Federal users will be able to buy lower-cost and higher-performance equipment based on consumer smartphone technologies."

Initial comments will be due within 40 days of publication of a notice in the Federal Register (FR). Reply comments will be due within 60 days of such publication. As of the April 24 issue of the FR, this notice had not yet been published. This FNPRM is FCC 14-49 in GN Docket No. 12-354.

Financial News

4/23. Apple announced in a release its "financial results for its fiscal 2014 second quarter ended March 29, 2014. The Company posted quarterly revenue of $45.6 billion and quarterly net profit of $10.2 billion, or $11.62 per diluted share. These results compare to revenue of $43.6 billion and net profit of $9.5 billion, or $10.09 per diluted share, in the year-ago quarter." See also, Apple's April 23 SEC Form 8-K.

4/23. Facebook issued a release regarding its financial results for the first quarter of 2014. Revenue was $2.502 Billion, up from $1.458 Billion in the first quarter of 2013. Facebook also disclosed that "Revenue from advertising was $2.27 billion, an 82% increase from the same quarter last year. Mobile advertising revenue represented approximately 59% of advertising revenue for the first quarter of 2014, up from approximately 30% of advertising revenue in the first quarter of 2013. Payments and other fees revenue was $237 million for the first quarter of 2014." See also, Facebook's April 23 SEC Form 8-K.

4/23. Netflix announced quarterly financial results. See, April 21 release and April 23 SEC Form 10-Q. Google announced financial results on April 16. See, release. AT&T announced first quarter financial results on April 22. See, release.

People and Appointments

4/23. Meredith Baker was named head of the CTIA Wireless Association. She replaces Steve Largent. She was previously SVP of Government Affairs for Comcast NBCU. Before that, she was a Federal Communications Commission (FCC) Commissioner. And before that, she was acting head of the National Telecommunications and Information Administration (NTIA). See, release.

More News

4/23. The Federal Election Commission (FEC) held a meeting on April 23, 2014 at which it discussed, but held over until its next event titled "open meeting", two draft advisory opinions regarding application of the federal election campaign finance regulatory regime to Bitcoins. The FEC released one draft [23 pages in PDF], labeled Draft A of Advisory Opinion AO 2014-02, on April 16. The FEC released another draft [21 pages in PDF], labeled Draft B, late on April 17. See, story titled "FEC to Consider Bitcoin Advisory Opinions" in TLJ Daily E-Mail Alert No. 2,642, April 18, 2014. The FEC's next "open meeting" is scheduled for May 8, 2014.

4/23. The Government Accountability Office (GAO) released a report [45 pages in PDF] titled "Telecommunications: Projects and Policies Related to Deploying Broadband in Unserved and Underserved Areas".

6th Circuit Holds Refusal to Allow Telecommuting Can Violate ADA

4/22. The U.S. Court of Appeals (6thCir) released its divided opinion [32 pages in PDF] in EEOC v. Ford Motor Company, a case regarding telecommuting and the Americans with Disabilities Act (ADA).

The Court of Appeals reversed the District Court's grant of summary judgment to the employer, Ford, on the EEOC's claims of employment discrimination and retaliation. This opinion holds that employers may be required to allow employees who cannot because of a disability make it to the worksite to telecommute instead, even on an unfixed schedule to be determined by the employee, and even for jobs that the employer determines must be performed at the workplace or other designated locations.

Introduction. Telecommuting can provide benefits to businesses through lower costs and greater worker productivity. It can provide benefits to employees who will spend less time commuting, and may prefer to work at home for family or other reasons. It also provides positive externalities through lower congestion on roads and rails, and less pollution. However, federal, state and local governments have often created disincentives to telecommuting in the private sector.

With this opinion, the 6th Circuit finds that the federal government can impose telecommuting on businesses under the rubric of enforcement of the Americans with Disabilities Act (ADA), enacted in 1990.

See, full story.

More FCC News

4/22. The Federal Communications Commission (FCC) adopted and released a Report and Order [17 pages in PDF] that eliminates the effective competitive opportunities (ECO) test that applies to international section 214 applications and cable landing license applications filed by foreign carriers or their affiliates that have market power in countries that are not members of the World Trade Organization (WTO). This R&O adds that the FCC "will consider such applications using a significantly less burdensome application filing and review procedure". This R&O is FCC 14-48 in IB Docket No. 12-299.

4/22. The Federal Communications Commission (FCC) extended the deadlines to submit comments in response to its Further Notice of Proposed Rulemaking (NPRM) regarding whether to eliminate or modify the network non-duplication and syndicated exclusivity rules. The FCC adopted and released this FNPRM on March 31, 2014. It is FCC 14-29 in MB Docket No. 10-71. See, notice in the Federal Register, Vol. 79, No. 69, April 10, 2014, at Pages 19849-19860 setting the original deadlines of May 12 and June 9. See also, April 22 Public Notice (DA 14-525) extending deadlines to June 26 and July 24.

4/22. Federal Communications Commission (FCC) Commissioner Mignon Clyburn gave a speech regarding women studying and working in science, technology, engineering and math (STEM) fields.

People and Appointments

4/22. Sen. Tom Carper (D-DE), the Chairman of the Senate Homeland Security and Governmental Affairs Committee, announced staff changes. Bill Ghent is promoted to Chief of Staff; he was Legislative Director. Emily Spain is promoted to Legislative Director, Ghent; she was Communications Director. See, release.

Supreme Court to Hear Oral Argument in Aereo Case

4/21. The Supreme Court will hear oral argument on Tuesday, April 22 in ABC v. Aereo, a case involving copyright and entertainment video programming. At issue is whether a company publicly performs, within the meaning of 17 U.S.C. § 106 and 17 U.S.C. § 101, a copyrighted television program when it retransmits a broadcast of that program to paid subscribers. The reasoning of Supreme Court could also impact cloud computing.

The U.S. Court of Appeals (2ndCir) ruled 2-1 in its April 1, 2013 opinion that Aereo's service is not a public performance within the meaning of the Copyright Act, and hence, does not infringe the exclusive rights of broadcasters. See, story titled "2nd Circuit Affirms in Aereo Copyright Cases" in TLJ Daily E-Mail Alert No. 2,544, April 2, 2013. See also, Sup. Ct. No. 13-461.

Key to the opinions of both the District Court and the Court of Appeals was the fact that Aereo's service retransmits using a large number of antennas.

ABC and the other petitioners produce, market, distribute, and broadcast television programming. They own copyrights in much of this. Aereo, the respondent, provides a service to consumers for a monthly fee that enables them to watch television programs, including those in which the petitioners hold copyrights. Aereo does not have petitioners' authorization or license.

Aereo's system is engineered to facilitate the assertion that it is not providing a public performance. Its system relies upon a multitude of individual antennas, each about the size of a dime, arranged on large antenna boards. When a paying subscriber selects a television program, a centralized server temporarily assigns one of the individual antennas to that user and tunes the assigned antenna to the appropriate channel.

Section 106 sets forth the exclusive rights of copyright. Subsection 106(4) provides that a copyright owner has the exclusive right "to perform the copyrighted work publicly".

Section 101's relevant definitions, which were added by the Copyright Act of 1976, before development of the IT based technologies at issue in this and other recent cases, provides that the term "perform" means "to recite, render, play, dance, or act it, either directly or by means of any device or process".

Also, the term "publicly" means to "to perform ... it at a place open to the public or at any place where a substantial number of persons outside of a normal circle of family and its social acquaintances is gathered" or "to transmit or otherwise communicate a performance ... of the work to a place" specified by the previous clause, "or to the pubic, by means of any device or process, whether the members of the public capable of receiving the performance ... receive it in the same place or in separate places and at the same time or at different times".

Arguments for Reversing the Court of Appeals. ABC and the other petitioners argued in their brief that the Court of Appeals incorrectly applied the Copyright Act to Aereo's service, and it should be reversed.

They wrote that "Aereo has built a business out of retransmitting broadcast television to members of the public without seeking authorization from or paying compensation to copyright holders. That is precisely the kind of unauthorized exploitation of copyrighted content that Congress enacted the transmit clause to prevent. Indeed, Aereo derives its competitive advantage in large part from the fact that its competitors pay for the rights to retransmit ``live TV´´ to the public -- as they must to avoid liability for copyright infringement -- while Aereo does not."

"But nothing about Aereo’s convoluted scheme of miniature antennas and gratuitous copies exempts its commercial retransmission service from the same rules that govern all others. Aereo's unauthorized retransmission of broadcast television to the public is obvious and unambiguous copyright infringement. Both the transmit clause and common sense foreclose any other conclusion."

The Office of the Solicitor General (OSG) has sided with the broadcasters. It wrote in its amicus brief that under the Copyright Act, "a company that retransmits copyrighted broadcast television programs must obtain a license". It continued that Aereo's "unauthorized Internet retransmissions violate these statutory requirements and infringe petitioners’ public-performance rights under 17 U.S.C. 106(4)."

The OSG added that "a decision rejecting respondent’s infringing business model and reversing the judgment below need not call into question the legitimacy of innovative technologies that allow consumers to use the Internet to store, hear, and view their own lawfully acquired copies of copyrighted works."

The National Association of Broadcasters (NAB) wrote in its amicus brief in support of the petitioners that "Quality broadcast television, delivered for free over the air by local stations, is a public good, as Congress has long recognized. But free over-the-air television is not cost-free and cannot be taken for granted. Aereo seeks to subvert a carefully constructed legal framework with a technological gimmick."

The NAB argued that "If the Court were to hold that Aereo's deliberately wasteful and inefficient system can successfully circumvent the plain meaning and purpose of the Copyright Act, it would strike a serious blow to the institution of free and innovative broadcast television. The Court should instead hold that Aereo's claimed loophole in the law does not exist."

The American Intellectual Property Law Association (AIPLA) filed an amicus brief in support of petitioners.

Arguments for Affirming the Court of Appeals. Aereo argued in its brief that the Court of Appeals correctly applied the Copyright Act, and it should be affirmed.

One source of opposition to the broadcasters' position is providers and proponents of cloud computing. An entertainment service may involve transmissions from a computer network to individual users via individual antennas. Cloud computing too involves transmissions from a computer network to users via the internet. Aggregating Aereo's transmissions to find a public performance would impose copyright liability upon Aereo. Analogous aggregation of transmissions of copyrighted works might similarly impose copyright liability upon cloud service providers. Hence, cloud service providers are concerned with this case.

The Computer and Communications Industry Association (CCIA) wrote in its amicus brief that "Adoption of petitioners' position would threaten one of the most important emerging industries in the U.S. economy: cloud computing. Cloud computing -- ubiquitous, on-demand network access to shared computing resources -- offers benefits for businesses and consumers."

The CCIA added that "The dramatic expansion of the cloud computing sector, bringing with it real benefits previously imagined only in science fiction, depends upon an interpretation of the Copyright Act that allows adequate breathing room for transmissions of content."

The BSA Software Alliance (which previously used the name Business Software Alliance), while stating that its amicus brief is in support of neither side, also wrote that the Court's opinion could adversely impact cloud computing. It wrote that "adopting petitioners' argument would impose substantial burdens on cloud computing".

A collection of groups (including the Center for Democracy and Technology, CTIA Wireless Association, US Telecom, and others) also submitted a amicus brief in support of neither party that addresses cloud computing. They urge the Supreme Court not to take an approach that would harm cloud computing.

The American Cable Association (ACA), which represents small and medium sized cable operators that provide video, broadband internet and phone services, raised a different issue -- retransmission consent.

It wrote in its amicus brief that the Court of Appeals should be affirmed. It argued that "the exclusive right to perform a work publicly does not encompass a right to limit who can be in the audience, or to veto technologies used to gain reception of the licensed performance."

It reasoned that "Even though free, over-the-air broadcasts are a viable alternative to cable television, ACA members welcome the development of new technologies that allow their customers to have better reception of free over-the-air local television broadcasts, thereby creating a modest safety-valve against what smaller cable companies consider to be unfair and oppressive retransmission consent rates extracted by threat of blackouts that would leave customers with a “dark” channel unless untoward price demands are met."

The Consumers Union and Consumer Federation of America wrote in their amicus brief that "The public policy of the United States copyright regime strongly favors protecting consumer sovereignty and consumer choice. Aereo's technology empowers consumers with an individual remotely located antenna and digital video recorder (DVR) accessible over the Internet. It is a cloud-computing tool that allows consumers to access and record free over-the-air (OTA) television broadcasts and enables time- and place-shifting of broadcast programming."

People and Appointments

4/21. There are six nominees for federal appeals courts who have been approved by the Senate Judiciary Committee, (SJC) and are on the Executive Calendar of the full Senate: Michelle Friedland (9thCir), Nancy Moritz (10thCir), David Barron (1stCir), Robin Rosenbaum (11thCir), Gregg Costa (5thCir), and Cheryl Krause (3rdCir). Friedland is scheduled for consideration when the Senate returns from recess on Monday, April 28, 2014.

4/21. There are 25 nominees for U.S. District Courts who have been approved by the Senate Judiciary Committee, (SJC) and are on the Executive Calendar of the full Senate: Sheryl Lipman (WDTenn), Stanley Bastian (EDWash), Manish Shah (NDIll), Daniel Crabtree (DKan), Cynthia Bashant (SDCal), Jon Levy (DMaine), Theodore Chuang (DMd), George Hazel (DMd), Indira Talwani (DMass), James Peterson (WDWisc), Nancy Rosenstengel (SDIll), Steven Logan (DAriz), John Tuchi (DAriz), Diane Humetewa (DAriz), Rosemary Marquez (DAriz), Douglas Rayes (DAriz), James Soto (DAriz), Mark Mastroianni (DMass), Bruce Hendricks (DSCar), Tanya Chutkan (DC), Hannah Lauck (EDVa), Leo Sorokin (DMass), Richard Boulware (DNev), Salvador Mendoza (EDWash), and Staci Yandell (SDIll).

4/21. The National Science Foundation (NSF) published a notice in the Federal Register (FR) requesting nominations for membership on its various advisory committees, including its Advisory Committee for Computer and Information Science and Engineering and its Advisory Committee for Cyberinfrastructure. See, FR, Vol. 79, No. 76, April 21, 2014, at Pages 22166-22167.

More News

4/21. Microsoft announced in a release "a patent licensing agreement" with Motorola Solutions. Microsoft added that "The license provides worldwide coverage under Microsoft's patent portfolio for Motorola Solutions' devices running the Android platform and Chrome OS operating system."

4/21. Nokia announced in an April 21 release that "it expects the transaction whereby the company will sell substantially all of its Devices & Services business to Microsoft to close on April 25, 2014. The transaction is now subject only to certain customary closing conditions." It announced in a April 9 release that the PRC's MOFCOM approved the transaction. The U.S. Department of Justice (DOJ) and the European Commission (EC) previously approved the transaction.

4/21. Netflix announced its opposition to the merger of Comcast and Time Warner on April 21, 2014. The gist of Netflix's contention is that there is a "lack of sufficient interconnectivity" by some broadband internet access service (BIAS) providers, such as Comcast. See also, story titled "Netflix's Hastings Complains About Lack of Interconnectivity" in TLJ Daily E-Mail Alert No. 2,635, March 24, 2014. Comcast responded in a release that "Netflix's opposition to our Time Warner Cable transaction is based on inaccurate claims and arguments. There has been no company that has had a stronger commitment to openness of the Internet than Comcast and we are the only ISP in the country that is currently legally bound by the FCC’s vacated Net Neutrality rules." Comcast added that "Internet interconnection has nothing to do with net neutrality; it's all about Netflix wanting to unfairly shift its costs from its customers to all Internet customers, regardless of whether they subscribe to Netflix or not."

4/21. Sen. Charles Grassley (R-IA), a senior member of the Senate Finance Committee (SFC), sent a letter to the Internal Revenue Service (IRS) complaining about it failure to address rampant tax return identity theft.

4/21. The National Institute of Standards and Technology's (NIST) Computer Security Division (CSD) released its second draft of SP 800-90 A Rev. 1 [112 pages in PDF] titled "Recommendation for Random Number Generation Using Deterministic Random Bit Generators". The deadline to submit comments is May 23, 2014.

4/21. Securities and Exchange Commission (SEC) Commissioner Luis Aguilar gave a speech titled "Looking at Corporate Governance from the Investor's Perspective" in which he addressed, among other things, electronic shareholder meetings. He stated that "One innovation that has the potential to increase engagement by retail shareholders is the use of electronic shareholder forums. To that end, in January 2008, the Commission adopted rules to facilitate the use of this tool by public companies and their shareholders. The intent was to facilitate shareholder communications and uphold shareholder rights by encouraging experimentation, innovation, and greater use of the Internet. Unfortunately, however, reports suggest that only a small minority of U.S. domestic issuers take advantage of this innovation. The Commission should investigate this and determine whether our rules should be amended." (Footnotes omitted.)