|Supreme Court Diminishes
|5/21. The Supreme
Court of the United States issued its opinion
[PDF] in Bartnicki v. Vopper, holding that a radio host
cannot be sued for playing an audio recording of a cellular
telephone conversation, despite a federal statute which made
illegal both the interception of the conversation, and its
disclosure by the radio host. The majority reasoned that the
case pitted statutes banning disclosure of illegally obtained
electronic communications against the First Amendment freedom
of speech claims of persons with illegally obtained recordings
to disclose them if their content pertains to a public issue.
U.S.C. § 2511 provides criminal and civil liability for
any person who "intentionally intercepts, endeavors to
intercept, or procures any other person to intercept or
endeavor to intercept, any wire, oral, or electronic
communication" or who "intentionally discloses, or
endeavors to disclose, to any other person the contents of any
wire, oral, or electronic communication, knowing or having
reason to know that the information was obtained through the
interception of a wire, oral, or electronic communication in
violation of this subsection".
Facts: Bartnicki used a cell phone in her car to talk
with Kane. An unidentified person intercepted and recorded
that conversation, in violation of federal wiretapping law.
Vopper, a radio commentator, obtained and played a tape of the
intercepted conversation on his public affairs talk show, also
in violation of the statute. The conversation pertained to
ongoing collective bargaining negotiations between a teachers'
union and the local school board. Bartnicki was the union's
chief negotiator. Bartnicki and Kane filed a complaint in U.S.
District Court for violation of Section 2511. Vopper asserted
his actions constituted constitutionally protected speech.
Majority Opinion: Justice Stevens wrote the opinion of
the Court. He wrote that the recording violated federal
wiretapping law, that Vopper knew this, but that he did not
make the illegal intercept. Stevens reasoned that the
statute's application in this situation would violate Vopper's
free speech rights under the First Amendment. Justice Breyer
wrote a concurring opinion, in which Justice O'Connor joined.
Dissent: Chief Justice Rehnquist wrote a dissenting
opinion, in which Scalia and Thomas joined. "Technology
now permits millions of important and confidential
conversations to occur through a vast system of electronic
networks. These advances, however, raise significant privacy
concerns. We are placed in the uncomfortable position of not
knowing who might have access to our personal and business
e-mails, our medical and financial records, or our cordless
and cellular telephone conversations. In an attempt to prevent
some of the most egregious violations of privacy, the United
States, the District of Columbia, and 40 States have enacted
laws prohibiting the intentional interception and knowing
disclosure of electronic communications. The Court holds that
all of these statutes violate the First Amendment insofar as
the illegally intercepted conversation touches upon a matter
of "public concern," an amorphous concept that the
Court does not even attempt to define. But the Court’ s
decision diminishes, rather than enhances, the purposes of the
First Amendment: chilling the speech of the millions of
Americans who rely upon electronic technology to communicate
|Supreme Court Rules in
Securities Fraud Case
|5/21. The Supreme
Court of the United States issued its opinion
[PDF] in Wharf Holdings v. United International Holdings,
a case construing Section
10b of the Securities Exchange Act of 1934. Wharf is a
Hong Kong firm. United is Colorado based company. In 1991
Wharf prepared a bid to the Hong Kong government to become the
exclusive cable TV operator. Wharf engaged United to help
prepare its application, negotiate contracts, design the
system, and arrange financing. Wharf orally sold United an
option to buy 10% of the stock of the new Hong Kong cable
system. However, it never intended to honor the option. Hong
Kong awarded Wharf the cable TV license. United attempted to
exercise its option. Wharf refused. United filed a complaint
in U.S. District Court (DColo) alleging
securities fraud under § 10b. The jury found in Wharf's
favor, awarding $67 Million in compensatory damages, and $58.5
Million in punitive damages. The U.S. Court of Appeals
(10thCir) upheld. The Supreme Court granted certiorari. Wharf
argued that the was no violation of § 10b because the
contract was oral, and because this was a breach of contract
case not actionable under federal securities law. Justice
Stephen Breyer, writing for a unanimous court, rejected both
|Supreme Court Denies Cert
in Ravens Copyright Case
|5/21. The Supreme Court of the United States denied
certiorari in Baltimore Ravens v. Bouchat, a copyright
infringement case, Docket No. 00-1494. See, May 21, 2001 Order
List [PDF], at page 2.
|Bush Nominates Prost for
|5/21. President Bush nominated Sharon Prost to be
U.S. Circuit Judge for the Federal
Circuit, replacing Jay Plager, who retired. See, release.
Prost is a longtime aide to Sen. Orrin Hatch
(R-UT) Chairman of the Senate Judiciary
Committee, the jurisdiction of which includes intellectual
property issues. The Federal Circuit, which is based in
Washington DC, has appellate jurisdiction based on subject
matter, rather than territory. It hears patent, trademark,
customs, and other appeals, and hence, decides many cases of
importance to high tech industries.
|FCC Reports Jump in CLEC
|5/21. The FCC reported
share of all local telephone lines in the U.S. grew 93% in
2000. The FCC stated that "CLECs reported about 16.4
million (or 8.5%) of the approximately 194 million nationwide
local telephone lines in service to end-user customers at the
end of the year 2000, compared to 8.3 million (or 4.4% of
nationwide lines) at the end of 1999. CLEC market share grew
93% over the one-year period of January to December
2000." The FCC also found that "About 60% of CLEC
local telephone lines served medium and large business,
institutional, and government customers. By contrast, almost
20% of incumbent local exchange carrier (ILEC) lines served
medium and large business customers. CLECs served 4.6% of the
residential and small business customers at the end of the
year 2000, compared to 2.3% for the year ago period."
See, FCC release.
seized upon the report to promote their efforts to obtain
regulatory permissions to provide long distance service. (Section
271 of the Telecom Act provides that the incumbent
carriers cannot provide long distance service in a state until
it has opened its networks to competition in that state.)
"The market is open. It is time to let the Bells compete
in long-distance," said Bill McCloskey, Director Media
Relations for BellSouth.
"The results of the FCC's study confirms what millions of
Americans already know: our local markets are fully open and
that competitors are successfully winning customers and
increasing their market share," said Priscilla Ardoin, an
SVP of SBC Communications.
release. See also, Verizon
|Powell Addresses Forrester
|5/21. FCC Chairman Michael Powell spoke and answered
questions at a Forrester Research Telecom Forum in Washington
DC. He addressed the status of local competition, the success
of the Telecom Act of 1996, Alcatel's possible acquisition of
Lucent, legislation pending in Congress regarding broadband
deployment, enforcement of telecom laws, and other issues.
Local Competition. Powell stated that the notion that
100 year old telecom monopolies "were going to be
eviscerated on a five year or six year time horizon" was
"a fantastically naive expectation". He added that
local competition and consumer choice is coming from "new
and advanced and newly differentiated services". He
elaborated that e-mail, instant messaging and cellular
communications all compete with the copper based phone
Alcatel and Lucent. Powell was asked for his view of
Alcatel's possible acquisition of Lucent. He declined to
comment, for two reasons. First, he stated that "I don't
think it is my place to interject into the marketplace without
the record to make a serious evaluation of." Second, he
stated, "I am not so sure this merger will even be
subject to Commission review, because we don't review mergers
unless there is a transfer of licenses that are issued by us.
And if there are not, even mergers that seemingly are
communication related, do not necessarily have an FCC review.
They will have an antitrust review."
Tauzin Dingell Bill. Powell was asked for his view on
HR 1542, sponsored by Rep. Billy Tauzin (R-LA) and Rep. John
Dingell (D-MI), and other legislation pertaining to broadband
deployment and open access. Powell declined to endorse any
particular bill. However, he stated that there are two
competing visions of competition underlying the various
legislative proposals. "One view is this -- that real
competition and choice are going to come to consumers solely
by virtue of major technology differentiated offerings, so
that there will be a wireline alternative on the public
switched telephone network. There will be a cable modem
alternative on the cable infrastructure". He added that
there may be other "pipes", including wireless and
satellite. He also stated that under this vision "choice
and differentiation may be among monopolies or
oligopolies." This is the view which underlies the Tauzin
Dingell approach. The other approach, said Powell, believes
that competition within each pipe is important: "It puts
the heat on the incumbent. And if you believe in that,
strongly, then you are a much bigger proponent of open access
and open systems". Powell did not say which vision of
competition he held.
|The Rat Choice Chairman
|5/21. Powell made several statements at the Forrester Forum
about the conduct of telecom and Internet companies, and
regulation of those companies, that are consistent with a
"Chicago School", or rational choice, view of
economics and regulation. The FCC is a agency of telecom
lawyers, which relies on statutes, voluminous rules, and
countless orders, to attempt to direct the conduct of
regulated companies. Powell stated that, in contrast, "I
just come from antitrust background, economic
background". He also opined on the effectiveness of legal
rule making: "I do not generally, after completing that
review, find myself thinking, gosh, there are just not enough
rules out there. Usually, what I find is where there are
shortcomings, is that there are rules all over the place, and
a lot of the time it is just cost effective to ignore
Powell articulated a rational choice view of the companies
that the FCC regulates: "all of them are self interested
money chasing actors". While comments like this are
sometimes made with critical intent by representatives of the
political left, Powell added that "I don't even mean that
disparagingly." And this view, said Powell, informs how
he regulates. He stated, "if you expect companies to do
anything other than pursue their self interest, I don't know
what planet you come from. They all do. They all will. And I
would rather build that into how we regulate them, than to act
as if people can be pushed out of their self interest".
Powell applied a calculus of compliance to the ILECs which
face statutes and FCC rules regarding opening their networks
to competitors. "Self interested profit maximizing
actors, remember. If I tell a phone company, 'You have to have
this kind of operation support system that allows a competitor
to interconnect at an efficient level.' And guess what, that
infrastructure will cost that CEO a billion dollars. If he
doesn't do it, and he gets a fine for a million. And that is
it. What will you do? I think that is an absolutely rational
judgment that often occurs in the marketplace." Powell
added, "And it is not just phones, by the way. You will
see this in a lot of the areas that we regulate."
Powell has stated recently in testimony and correspondence to
the House and Senate that he favors legislation to increase
the maximum fines that the FCC can impose upon ILECs -- from
one to ten million dollars. However, at the Forrester Forum,
Powell also vaguely suggested that there ought to be a treble
damages right of action against ILECs for not complying with
the competition provisions of the Telecom Act. He said,
"the antitrust statutes don't go after every merger in
the economy either. They couldn't possibly. But, I don't think
there is another statute in the federal code that has treble
damages. There is a reason. The theory is simple. It knows
that by being permissive in the marketplace, it has to be
aggressive in the punitive phase, so that the deterrent value
resonates across the economy." He then added that
companies that contemplate mergers "hire extensive
antitrust counsel to work carefully through what they think
the consequences, because your fiduciary duty cannot expose
the company to treble damages". He concluded, "I am
not so sure in telecom we don't need similar." He stopped
in mid sentence, and said nothing further on this subject.
|SEC Web Survey
|5/21. The SEC announced
that it has received an overwhelming response to its web based survey
concerning investor use of electronic media in making
investment decisions. It announced the survey in a May 3,
At that time, it requested responses by July 1. However, as of
May 21, the SEC had received over 3,000 responses. Hence, it
issued a second notice
shortening the response period to terminate on May 25.
|BSA Software Piracy Report
|5/21. The Business Software
Alliance (BSA) released a report
[PDF] titled "Sixth Annual BSA Global Software Privacy
Report." The report, which was conducted for the BSA by
the International Planning and Research Corp. (IPR), estimated
that piracy losses total $11.75 Billion worldwide in 2000.
|Zoeller Talks Trade and FSC
|5/21. USTR Robert Zoellick
held a press
conference at the European Parliament in Strasbourg,
France, in which he addressed trade disputes, including the Foreign
Sales Corporation (FSC) dispute.
|Teligent Files Chapter 11
|5/21. Teligent filed
a Chapter 11 petition in U.S. Bankruptcy Court (SDNY).
Teligent is based in Vienna, Virginia. It provides business
customers local, long distance, high-speed data and dedicated
Internet services. See, release.
|Supreme Court to Decide
Constitutionality of COPA
|5/21. The Supreme Court of the United States granted
certiorari in Ashcroft v. ACLU, Docket No. 00-1293.
See, May 21, 2001 Order
List [PDF], at page 1. This case involves a constitutional
challenge to the Child
Online Protection Act, an act that bans sending to
minors over the web material that is harmful to minors. The
Act also allows web site operators to distribute pormography,
but require those websites which distribute material that is
harmful to children to verify adult status through the use of
credit cards, adult access codes, adult PIN numbers, or other
technologies. The U.S. District Court and U.S. Court of
Appeals (3rdCir) both held that the statute violates the First
Amendment. See also, ACLU
|The House will meet at 9:00 AM for morning hour and
10:00 AM for legislative business. The House may take up HR 1,
the No Child Left Behind Act of 2001 and HR 1836, the Economic
Growth and Tax Relief Reconciliation Act Conference Report.
The Senate will resume consideration of will resume
consideration of S 1, the Better Education for Students &
9:00 AM. The USTR's Industry Sector
Advisory Committee on Services (ISAC-13) will hold a meeting.
The meeting will be open to the public from 9:00 to 9:45 AM,
and closed to the public from 9:45 AM to 12:00 NOON. See, notice
in Federal Register.
9:45 AM. FTC Commissioner Thomas Leary will participate in a
panel discussion titled Securing Private Data - How to
Assure the Customer, at a conference titled Trust in
the Internet: Required Technology and Policy Solutions
Conference. Location: Hilton Washington Dulles Airport,
13869 Park Center Road, Herndon, Virginia.
10:00 AM. The Senate
Judiciary Committee's Subcommittee on Technology,
Terrorism and Government Information will hold a hearing
titled Challenges in Cybercrime: The National
Infrastructure Protection Center. Sen. Jon Kyl (R-AZ) will
preside. Location: Room 366, Dirksen Building.
10:00 AM. The House
Judiciary Committee's Subcommittee on Courts, the Internet
and Intellectual Property will hold a meeting to mark up HR
1866 and HR
1886, both of which pertain to patent reexamination.
Location: Room 2141, Rayburn Building.
2:00 PM. The House
Commerce Committee's Subcommittee on Commerce, Trade, and
Consumer Protection will hold a hearing on Impediments to
Digital Trade. The scheduled witnesses include Bonnie
Richardson (Motion Picture Association of America), George
Vradenburg (AOL/Time Warner), Debra Waggoner (Corning Inc.),
and Barbara Wellbery (Morrison and Foerster). Location: Room
2322, Rayburn Building.
2:00 PM. The House
Judiciary Committee will hold a hearing HR
1698, the "American Broadband Competition Act of
2001," and HR
1697, the "Broadband Competition and Incentives Act
of 2001." Location: Room 2141, Rayburn Building.
2:00 PM. The Senate
Judiciary Committee might hold a hearing on competition in
the pharmaceutical marketplace, focusing on the antitrust
implications of patent settlements. Location: Room 226,
Dirksen Building. This hearing has been noticed for both May
22 and 24.
|Wednesday, May 23
|10:00 AM. The House
Commerce Committee's Subcommittee on Commerce, Trade, and
Consumer Protection will hold a hearing titled On-line
Fraud and Crime: Are Consumers Safe? Location: Room 2123,
10:00 AM. The House
Commerce Committee's Subcommittee on Oversight and
Investigations will hold a hearing titled "How Secure Is
Private Medical Information? A Review of Computer Security at
the Health Care Financing Administration and Its Medicare
Contractors." The scheduled witnesses include Michael
McMullan and Jared Adair (Health Care Financing
Administration), Joseph Vengrin and Ed Meyers (Department of
Health and Human Services), and Michael Neuman (En Garde
Systems, Inc.). Location: Room 2322, Rayburn Building.
10:00 AM. The House
Judiciary Committee will hold a mark up session. The
agenda includes HR 718, the Unsolicited Commercial Electronic
Mail Act of 2001. Location: Room 2141, Rayburn Building.
12:15 PM. The Federal
Communications Bar Association's Online Committee will
host a brown bag luncheon. The speaker will be Cliff Sloan, VP
and General Counsel of the Washington Post-Newsweek
Interactive. RSVP to Diane
Hinson. Location: Lampert & O'Connor, Suite 600, 1750
K Street, NW, Washington DC.
1:00 - 4:30 PM. The SEC will host
a roundtable on issues related to relationships between
broker-dealers and Internet web sites. The roundtable will
address several questions, including: What is happening
outside of the financial services area on the Internet? What
is happening in the financial services area on the Internet?
How do broker-dealer web sites and other financial web sites
differ? What role do the NASD rules play? When is a web site
operator is a broker? What are the investor protection issues?
What are the alternatives to broker-dealer registration? See, agenda.
Location: Room 1C30, SEC, 450 Fifth Street, NW, Washington DC.
Deadline to submit nominations for the Electronic Tax
Administration Advisory Committee to the IRS. The ETAAC provides an
organized public forum for discussion of electronic tax
administration issues in support of the goal that paperless
filing should be the preferred and most convenient method of
filing tax and information returns. See, notice
in the Federal Register, April 23, 2001, Vol. 66, No. 78, at
Pages 20525 - 20526.
Deadline to file comments with the FCC in response to its Notice
of Proposed Rulemaking (NPRM) regarding revisions to the
method of subsidizing schools and libraries under its e-rate
program when there is insufficient funding to support all
requests. See, Federal Register, May 8, 2001, Vol. 66, No. 89,
at Pages 23204 - 23208.
|About Tech Law Journal
|Tech Law Journal is a free access web site
and e-mail alert that provides news, records, and analysis of
legislation, litigation, and regulation affecting the computer
and Internet industry. This e-mail service is offered free of
charge to anyone who requests it. Just provide TLJ an e-mail
Number of subscribers: 1,579.
Contact: 202-364-8882; E-mail.
P.O. Box 15186, Washington DC, 20003.
Copyright 1998 - 2001 David Carney, dba Tech Law Journal. All