Tech Law Journal Daily E-Mail Alert
April 5, 2001, 8:00 AM ET, Alert No. 159.
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Breaking News
4/5. The Wall Street Journal writes in its Thursday edition that the FCC is expected to approve Deutsche Telekom's acquisition of VoiceStream as early as Friday. See, full story. (Subscription web site.)
4/4. The House Commerce Committee's Telecom Subcommittee held a hearing titled the E-Rate and Filtering: A Review of the Children's Internet Protection Act. Last year, the Congress passed, and President Clinton signed, legislation containing the CIPA. The statute requires schools and libraries receiving e-rate subsidies to use filtering technologies on computers with Internet access that are used by children. The ACLU and American Library Association have filed lawsuits challenging the constitutionality of the CIPA as applied to libraries.
Hearings on legislation are usually held before legislation is enacted. Nevertheless, this hearing gave proponents and opponents of the CIPA another opportunity to state their views. Rep. Chip Pickering (R-MS) and Rep. Steve Largent (R-OK) argued that the statute is necessary to protect children, and that it is constitutional. On the other hand, Rep. Jane Harmon (D-CA) said that "I am not sure that these tools should be mandated by the government." Rep. Roy Blount (R-MO) said that "there are good arguments on both sides."
Marvin Johnson of the ACLU verbally sparred with Reps. Pickering and Largent. He testified that the statute is unconstitutional, that filtering does not work, and that pormography does not harm children. One librarian (Laura Morgan of the Chicago Public Library) testified in support of the bill, and argued that men who view pormography at the public libraries create a hostile environment for the women who work in or use the libraries. Another librarian (Carolyn Caywood of Virginia Beach's library system) testified that local libraries, not the federal government, should set Internet access policies. Two representatives of companies that provide filtering software testified that filtering does work, as did Bruce Taylor, of the National Law Center for Families and Children.
FCC Reform
4/4. Rep. John Dingell (D-MI), the Ranking Member of the House Commerce Committee, gave an address in Washington DC in which he advocated FCC reform and passage of the Tauzin Dingell bill. "The FCC must be transformed to meet the needs of the Information Age," said Dingell. "Too often the FCC is hamstrung by dint of its antiquated design. Separate bureaus assigned to each segment of the industry may have worked well enough in days gone by. But today the FCC's fiefdom mentality is simply a relic ill-equipped to handle the convergence of technology that is at the heart of this modern industry." He added that "It makes no sense for broadband services offered by a cable company to be regulated differently than broadband services offered by a telephone company, wireless provider, or any other communications company for that matter. That is why Chairman Tauzin and I introduced HR 2420 last Congress" and "intend to re-introduce broadband regulatory reform legislation shortly after the Spring recess".
3G Spectrum
4/4. Telephone and Data Systems filed a comment [PDF] with the FCC in support of Verizon Wireless's petition to the FCC [PDF] of March 27 to defer action on ITFS and MDS applications. "TDS agrees with Verizon Wireless that the FCC should not now take actions which may preclude use of the 2500-2690 MHz band for 3G purposes." TDS continued that "it is, at present, difficult to discern a clear path to an adequate allocation of spectrum for 3G purposes. Yet the public interest requires that a path to an adequate frequency allocation for 3G must somehow be found. Such a path may involve innovative forms of spectrum sharing or segmentation or new types of frequency pairing. And, given the Defense Department's adamant opposition to giving up many of the frequencies it uses, the FCC may have to consider reallocation or sharing of some of the MDS/ITFS frequencies, if there is to be a 3G allocation. Thus, TDS believes Verizon Wireless to be entirely correct that the FCC's Mass Media Bureau should not now grant the pending two-way applications."
Privacy & Security
4/4. The House Veterans' Affairs Committee's Oversight and Investigations Subcommittee held a hearing on information technology. See, prepared testimony of witnesses: Richard Griffin (Inspector General, Department of Veterans Affairs), David McClure (General Accounting Office), Ken Brandt (Tiger Testing), Scott Sherman (EMC2 Corporation), Karl Ware (BioNetrix Systems Corporation), and Anthony Principi (Secretary, Department of Veterans). McClure testified that "the department has encountered numerous and consistent challenges associated with managing IT, including ... ineffective computer security management." In addition, House Speaker Dick Armey (R-TX) submitted a statement for the record, in which he stated that the VA "is not the only agency with such a poor track record." He cited the Horn subcommittee report on agency computer security, and last year's GAO report that found that 97% of federal agency web sites failed to meet the privacy standards recommended by the FTC for private sector web sites. He concluded by condemning "the Clinton Administration's eleventh hour imposition of new regulations addressing medical privacy issued under the Health Insurance Portability and Accountability Act (HIPAA)" for "putting even more private, personally identifiable medical information in the hands of health care bureaucrats."
4/4. The GAO released a report [PDF] titled Information Security: Safeguarding of Data in Excessed Department of Energy Computers. It stated that the "DOE does not have standardized instructions, verification procedures, or training for agency and contract employees on how to properly clear excessed computers. DOE also does not ensure that procedures used to remove all software, information, and data from systems are effective. As a result, some of the excessed computers we inspected at DOE headquarters had information still stored on the hard drives."
4/4. The NTIA published in its web site electronic comments that it has received regarding the benefits and burdens of requiring consumer consent to receive information electronically. On April 3 the NTIA and FTC held a public workshop on this topic. These agencies are required by the E-SIGN Act, passed last year, to conduct a study. See, comments from United Parcel Service, Federal Express Corporation,, and Household Bank.
Business Method Patents
4/4. The House Judiciary Committee's Subcommittee on Courts, Internet, and Intellectual Property held a hearing on business method patents. Rep. Howard Coble (R-NC), the Chairman of the Subcommittee, defended business method patents in his opening statement. He stated that "intellectual property and the Internet are compatible. In fact, there is a long history of method patents and software enabled inventions." Rep. Howard Berman (D-CA) and Rep. Rick Boucher (D-VA) advocated legislation to reform the business method patents process. On April 3 they introduced HR 1333, the Business Method Patent Improvement Act of 2001. Rep. Zoe Lofgren (D-Silicon Valley) and Rep. Asa Hutchison (R-AR) also attended, but did not speak. Rep. John Conyers (D-MI), the Ranking Member of the full committee, did not attend, but submitted a statement for the record.
Rep. Berman stated two concerns about business method patents in his opening statement. First, "Should patent protection be granted to processes for achieving a business objective when such processes involve no physical transformation, physical element, technological innovation, or industrial application? Put another way, should an abstract idea for conducting or organizing business operations receive patent protection?" He continued that "My second set of concerns involves the quality of some business method patents issued by the PTO in recent years." See also, April 3 statement in the Congressional Record.
Rep. Boucher stated that "something is fundamentally wrong with a system that enables individuals to get patents for doing the seemingly obvious. Some examples. Priceline today is utilizing a business method patent on a reverse auction, name your own price system, on the Internet. This patent was awarded even though the market economy of the western world, and the entire theory of microeconomics, is predicated on individuals setting the price at which they are willing to purchase something." He added that the awarding of business method patents results in "the restriction of competition, and the lessening of innovation, precisely the opposite of the result that the patent laws are designed to achieve."
Nicholas Godici, the acting head of the USPTO, reviewed the "Business Methods Patent Initiative," a program intended to improve the process. The USPTO is establishing partnerships with affected industries so that they can educate patent examiners, establishing "Electronic Information Centers" which provide examiners with access to over 900 databases, giving patent examiners authority to ask for information that may be necessary to examine a patent application, and instituting a second level review of allowed business method patent applications. He stated that the result of the initiative has been a decrease in the allowance rate.
Michael Kirk, Exec. Dir. of the American Intellectual Property Law Association (AIPLA), and Ronald Myrick, President of the Intellectual Property Owners Association (IPO) both stated their opposition to any legislation in the area of business method patents.
Andrew Steinberg, General Counsel of Travelocity, was the sole witness to oppose business method patents. He said that "we believe that the proliferation of these patents represents a serious threat to the growth of electronic commerce and, if left unchecked, could impede the ability of many businesses to adapt to the Internet. We urge Congress to take prompt action to prevent this from occurring." He also expressed support for the Berman Boucher bill.
Diversion of USPTO Fees
4/4. Rep. Coble stated at the hearing on business method patents that "My number one priority in Congress is to work to ensure that the PTO can retain all of its fees to improve the quality of examination to be as high as humanly possible." On April 3, Reps. Berman and Boucher introduced H.Res. 110, a resolution that would accomplish this. Rep. Conyers suggesting in his statement that one of the root problems with business method patents is that the diversion of fees deprives the USPTO of the funds necessary to modernize. The IPO's Myrick, and the AIPLA's Kirk, both stated their support for ending the diversion. However, the Kirk noted that under President Bush's budget, $200 Million may be diverted in FY 2002.
4/3. The FTC and Microsoft and Hewlett Packard (HP) reached agreements regarding their marketing of handheld computers. These matters concern the "Can Your Palm Do That?" ads for the HP Jornada Pocket PC. The two companies agreed that they "shall not misrepresent, in any manner, expressly or by implication, the ability of such product to access the Internet or email accounts, or any performance characteristic of such product affecting access to the Internet or email accounts." Specifically, the FTC filed an administrative complaint [PDF] against HP, and simultaneously entered into an agreement to settle the matter. The FTC also filed an administrative complaint [PDF] against Microsoft, and simultaneously entered into an agreement to settle the matter. Pocket PC users must purchase and carry additional equipment such as a modem to get mobile access to the Internet and e-mail, a fact not clearly disclosed in the joint Microsoft-HP advertising campaign. See also, FTC release.
Computer Crime
4/4. A grand jury of the U.S. District Court (NDCal) returned an indictment against Geoffrey Osowski and Wilson Tang charging one count of conspiracy to commit computer and wire fraud in violation of 18 U.S.C. 371, one count of computer fraud in violation of 18 U.S.C. 1030(a)(4), and three counts of wire fraud in violation of 18 U.S.C. 1343. The indictment states that defendants used their positions as accountants at Cisco to illegally obtain Cisco stock; they exceeded their authorized access to computer systems at Cisco in order to enter a computer system used by the company to manage stock option disbursals, used their unauthorized access to identify control numbers to track authorized stock option disbursals, created forged forms purporting to authorize disbursals of stock, faxed the forged requests to the company issuing Cisco stock, and directed that stock be placed in their brokerage accounts. The total value of these shares was about $2.3 Million. Joseph Sullivan of the USAO Computer Hacking and Intellectual Property Unit is prosecuting the case. See, FBI affidavit. See also, USAO release.
More News
4/4. The Senate Judiciary Committee's Antitrust, Business Rights, and Competition Subcommittee held a hearing to examine competitive choices concerning cable and video. Sen. Mike DeWine (R-OH) presided. See, prepared testimony of witnesses: Eddy Hartenstein (DIRECTV Global), Robert Sachs (National Cable Television Association), Jerry Kent (Charter Communications), Robert Currey (RCN Corporation), and Gene Kimmelman (Consumers Union).
4/3. The U.S. Court of Appeals (2ndCir) issued its opinion in Davis v. The Gap, a case regarding damages in copyright infringement actions, and the fair use doctrine. Affirmed in part, vacated in part, and remanded.
4/4. SBC submitted a Section 271 petition to the FCC for permission to offer long distance service in Missouri. On March 6 the Missouri Public Service Commission endorsed SBC's application. See, SBC release.
4/4. President Bush nominated Theodore Kassinger to be General Counsel of the Department of Commerce. See, release.
4/4. The House passed HR 8, a bill to phase out the estate and gift tax over a 10 year period by a vote of 274 to 154, and then recessed until April 24, for the traditional Easter break. The Senate will recess later this week when it completes its consideration of President Bush's budget.
Greenspan on Trade
4/4. The Senate Finance Committee held a hearing titled International Trade and the American Economy. The witnesses were Alan Greenspan and Mickey Kantor. Greenspan said in his prepared testimony that "there is also no doubt that this transition to the new high-tech economy, of which rising trade is a part, is proving difficult for a large segment of our workforce ... . This is most evident in the rising fear of job skill obsolescence that has induced a marked increase in experienced workers going back to school -- often community colleges -- to upgrade their skills for a rapidly changing work environment. While major advances in standards of living are evident among virtually all nations that have opened their borders to increased competition, the adjustment trauma resulting from technological advances as well as globalization has also distressed those who once thrived in industries that were once at the cutting edge of technology but that have become increasingly noncompetitive." He added, "Yet the protectionist propensity to thwart the process of the competitive flow of capital, from failing technologies to the more productive, is unwise and surely self-defeating." See also, prepared statement [PDF] of Chairman Charles Grassley (R-IA).
PRC Trade
4/4. Rep. Duncan Hunter (R-CA) introduced a bill to revoke normal trade relations status for the People's Republic of China. He stated that "A favored trading partner with our country would follow proper protocol and not continue to hold our service men and women, along with our equipment, after being asked for their return. The fact is, while we trade with China, they prepare for war. The Communist regime is producing long-range ballistic missiles, which are targeted at U.S. military bases and American cities. They have engaged in espionage activities in which U.S. military secrets were stolen and they have developed weapon systems that threaten the U.S. and its allies." See, Hunter release. The bill would revoke the trade status that the U.S. extends to the PRC on an annual basis. Last year the U.S. extended permanent normal trade relations status (PNTR) to the PRC. However, that only takes effect when the PRC joins the World Trade Organization. The negotiations over PRC ascension to the WTO drag on.
More New Bills
4/3. Rep. Johnny Isakson (R-GA) introduced HR 1349, a bill to repeal the 50% limitation on courses offered through telecommunications for student financial assistance programs. It was referred to the Committee on Education and the Workforce.
4/4. Rep. Mike Rogers (MI) introduced HR 1408, a bill intended to stop financial fraud by creating a new computerized network that would link together the anti-fraud databases of various financial regulators and law enforcement agencies. Rep. Michael Oxley (R-OH), Chairman of the House Financial Services Committee, is an original cosponsor. See, release.
4/3. Rep. Marge Roukema (R-NJ) introduced HR 1365, a bill to amend title III of the Elementary and Secondary Education Act of 1965 to provide for digital education partnerships. It was referred to the Committee on Education and the Workforce.
4/4. The Senate Judiciary Committee's Immigration Subcommittee held a hearing on immigration policy. Sen. Sam Brownback (R-KS), the new Chairman of the Subcommittee, presided. See, statement of Sen. Pat Leahy (D-VT), Ranking Member of the full committee.
9:00 AM. The USITC will hold a Section 337 evidentiary hearing regarding the importation of semiconductor chips with minimized chip package size. (Inv. No. 337-TA-432.) See, notice of investigation. Judge Sidney Harris will preside. Location: Courtroom B, ITC Building, 500 E Street SW, Washington DC.
9:30 AM. The House Commerce Committee's Subcommittee on Oversight and Investigations will hold a hearing titled "Protecting America's Critical Infrastructures: How Secure are Government Computer Systems?" Location: Room 2322, Rayburn Building. The committee will observe a cyber security penetration test demonstration by Glenn Podonsky (U.S. Department of Energy). Then the following witnesses will testify:
  Ron Dick (FBI's National Infrastructure Protection Center).
  Sallie McDonald (GSA).
  John Tritak (Department of Commerce).
  Robert Dacey (General Accounting Office).
  Tom Noonan (Internet Security Systems, Inc).
10:00 AM. The Senate Judiciary Committee will hold a hearing on the nominations of Larry Thompson to be Deputy Attorney General and Theodore Olson to be Solicitor General. Sen. Orrin Hatch (R-UT) will preside. Location: Room 226, Dirksen Building.
10:00 AM. The Senate Finance Committee will hold a hearing titled "Taxpayer Beware: Schemes, Scams and Cons" that will examine tax avoidance scams that are promoted via the Internet. Location: Room 215, Dirksen Building. The scheduled witnesses are:
  Aaron Bazar (former seller of tax scams).
  JJ MacNab (American Bar Association).
  Robert Sommers (attorney).
  Jay Adkisson (financial adviser).
  Joseph Hodges (American Bar Association).
  Charles Rossotti (Commissioner, Internal Revenue Service).
  Hugh Stevenson (FTC Bureau of Consumer Protection).
  Michael Brostek (GAO).
10:00 AM. Sen. Tom Daschle (D-SD) and Rep. Richard Gephardt (D-MO) have scheduled an event to release the "Democrats' High Tech Agenda." See, PPI release.
11:00 AM. Lawrence Grossman (former President of NBC News and PBS), Newton Minow (frmr. chairman of the FCC and PBS), and representatives from high tech corporations and non-profit groups will hold a press conference at the National Press Club to release a report. They will advocate an "Educational Initiative Equal in Magnitude to the Historic Land-Grant Colleges Act to Deliver the Marvels of our Nation's Libraries, Colleges and Museums to Every Home, School and Workplace through the Innovative Use of Technology." Location: Murrow Room, National Press Club, 13th Floor, 529 14th St. NW, Washington DC.
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