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September 7, 2001, 9:00 AM ET, Alert No. 263.
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Export Administration Act Passes Senate
9/6. The U.S. Senate passed S 149, the Export Administration Act of 2001, by a vote of 85 to 14. The bill, a major rewrite of the export control regime, would ease restraints on the export of most dual use products, such as computers and software. However, it would raise penalties for violation of remaining prohibitions. It would also repeal provisions of the 1998 National Defense Authorization Act which require the President to use MTOPS to set restrictions on the export of high performance computers. The Senate also approved two amendments.
Sen. Mike Enzi (R-WY), the sponsor of the bill, said afterwards that "I'll continue to keep up pressure on the House so we can send a good bill to the President for his signature." President Bush supports the Senate version of the bill. The House International Relations Committee passed a substantially different version of the bill, HR 2581, on August 1. "I will encourage the House to pass legislation that is identical or nearly so to the version we passed in the Senate today," said Sen. Enzi.
"This bill dramatically enhances our national security needs by increasing penalties, by focusing attention on truly sensitive items, and granting the President new control authority in cases involving national security and terrorists," said Sen. George Allen (R-VA), another co-sponsor of the bill. "At the same time, this legislation will remove unnecessarily burdensome punitive regulatory controls on mass market and readily available foreign technology products that have hindered the competitiveness of U.S. technology industries."
Sen. Robert Bennett (R-UT) also spoke in favor of the bill. He stated that "The borderless economy is a reality of the future. It cannot be turned back. We have to accept this new reality and say the best national security step we can take is to keep American technology firms absolutely in the forefront, and the best way to keep them in the forefront is to give them the opportunity to compete in the largest possible market that they can."
Kyl Amendment. One amendment, offered by Sen. Jon Kyl (R-AZ), adds language to Section 506(g) to give the Secretary of Commerce enhanced authority in responding to a country that refuses to allow post shipment verification of an exported item. It provides: "(3) REFUSAL BY COUNTRY. If the country in which the end-user is located refuses to allow post- shipment verification of a controlled item, the Secretary may deny a license for the export of that item, any substantially identical or directly competitive item or class of items, any item that the Secretary determines to be of equal or greater sensitivity than the controlled item, or any controlled item for which a determination has not been made pursuant to section 211 to all end-users in that country until such post-shipment verification is allowed."
Thompson Amendment. The other amendment, offered by Sen. Fred Thompson (R-TN), tightens the definition of a "directly competitive item" in Section 211, regarding foreign availability and mass market status, and clarifies that an item is not directly competitive if it is "not of comparable quality" as the controlled item. Both amendments were approved by voice votes.
Subcommittee Holds Hearing on Telework
9/6. The House Government Reform Committee's Subcommittee on Technology and Procurement Policy held a hearing titled "Public Service for the 21st Century: Innovative Solutions to the Federal Government's Technology Workforce Crisis." Witnesses related a variety of government related obstacles to telework in both the public and private sectors, including application of the multitude of local tax laws to interjurisdictional telework arrangements, confusing IRS rules for home office deductions, the threat of OSHA regulation, and the lack of residential broadband services.
Rep. Tom Davis (R-VA), the Chairman of the Subcommittee, said in his prepared statement that "Advances in computer and telecommunications technology have facilitated the rapid growth of telework in the private sector. While companies enjoy increased productivity, job satisfaction, and employee morale as a result of telework programs, the Federal government’s success has been inconsistent. " He added that "an aggressive telecommuting policy may help the federal government address the shortage of information technology (IT) workers."
Robert Robertson of the General Accounting Office said in his prepared testimony that there are many obstacles to telework. He stated that "certain federal and state laws and regulations, including those governing taxes, workplace safety, workforce recordkeeping, and liability for home workplace injuries can also act as potential barriers to telecommuting for both the public and private sectors." He also testified that there are management concerns, including "assessing whether the employer has the types of positions and employees suitable for telecommuting; protecting proprietary and sensitive data; and establishing cost-effective telecommuting programs."
Harris Miller, President of the Information Technology Association of America (ITAA), said in his prepared testimony that the slow deployment of broadband Internet access services and security concerns also serve as a barriers to telework. He also cited several regulatory burdens, including a patchwork of over 7,000 taxing jurisdictions, unclear rules for home office deductions, and the specter of OSHA regulation of home offices.
See also, prepared testimony of Teresa Jenkins (Office of Personnel Management), David Bibb (U.S. General Services Administration), Mark Straton (Siemens Enterprise Networks), and Robert Milkovich, (CarrAmerica).
Hacker Gets 4 Months
9/6. Raymond Torricelli was sentenced in U.S. District Court (SDNY) to 4 months imprisonment for various hacking offenses, including unauthorized access to computers, credit card fraud, and password interception.
He illegally intruded into computers used by NASA to perform satellite design and mission analysis concerning future space missions, and by the Jet Propulsion Laboratory's (JPL) Communications Ground Systems Section. He also installed a program name "rootkit" which, when run on the computers, allowed him to gain complete access to all of a computer's functions without having been granted these privileges by the authorized users of that computer. He then proceeded to use the computers to host chat rooms, which he used, among other things, to promote pormographic web sites.
Torricelli also intercepted usernames and passwords traversing the networks of San Jose State University, which he used to gain free Internet access, or to gain unauthorized access to still more computers. See, CCIPS release.
9/5. The U.S. Attorney's Office (SDNY) announced the formation of a Computer Hacking and Intellectual Property (CHIPs) unit, comprised of five Assistant U.S. Attorneys specializing in computer and intellectual property crimes. The unit will focus on computer intrusions, Internet and computer fraud, theft of trade secrets and economic espionage, theft of computer and high tech equipment components, criminal copyright and trademark offenses, and other forms of computer, Internet, and electronic crimes. See, USAO release.
On July 20, 2001, Attorney General John Ashcroft announced that eight CHIPs would be formed. The other locations for new CHIPs units are CDCal (Los Angeles), SDCal (San Diego), NDGa (Atlanta), DMass (Boston), NDTex (Dallas), WDWash (Seattle), and the EDVa (Alexandria, Virginia). The NDCal (San Francisco) already had a CHIPs unit. See, Ashcroft speech.
DOJ Will Not Seek Break Up of Microsoft
9/6. The Antitrust Division of the Department of Justice (DOJ) announced that "it will not seek a break-up of the company in remand proceedings before the U.S. District Court. It also informed the company that it does not intend to pursue further proceedings on the tying count of the original complaint." It also stated that it would not pursue its tying claim. See, DOJ release.
On June 28, the U.S. Court of Appeals (DCCir) issued its en banc opinion in USA v. Microsoft, affirming in part, and reversing in part, Judge Jackson's Final Judgment (June 7, 2000). The Appeals Court vacated Judge Jackson's break up order on several grounds. It also reversed on the tying count. However, the Appeals Court affirmed in part Judge Jackson's  judgment that Microsoft violated § 2 of the Sherman Act by employing anticompetitive means to maintain a monopoly in the operating system market.
On September 6, the Antitrust Division also stated that "In view of the Court of Appeals' unanimous decision that Microsoft illegally maintained its monopoly over PC-based operating systems -- the core allegation in the case -- the Department believes that it has established a basis for relief that would end Microsoft's unlawful conduct, prevent its recurrence and open the operating system market to competition. Pursuing a liability determination on the tying claim would only prolong proceedings and delay the imposition of relief that would benefit consumers."
The Antitrust Division "will seek an order that is modeled after the interim conduct- related provisions of the Final Judgment previously ordered in the case."
The Antitrust Division added that it "will ask the court for a period of expedited discovery to investigate developments in the industry since the trial concluded, and to evaluate whether additional conduct- related provisions are necessary, especially in the absence of a break-up. ..."
Robert Levy, a Senior Fellow at the Cato Institute, a libertarian think tank, offered an analysis. "Today's announcements are not concessions to Microsoft, but to reality. A breakup of Microsoft was effectively rejected by the U.S. Court of Appeals. And the court imposed a much tougher burden of proof if the government wants to prevail on its tying claim." Levy continued that "What's really going on is a declaration by the Justice Department and, significantly, by the attorneys general who are co-plaintiffs, that they will not waste their time with lost causes and hard to prove charges that won't lead to incremental conduct remedies. Instead, the government wants to move ahead aggressively and quickly to restrict Microsoft's behavior and, maybe, to prevent Windows XP from establishing a major toehold in the market." Levy conclude that "The $64,000 question remains: Why is the Bush administration -- supposed champions of free markets -- proceeding with this pitiful lawsuit, which transforms our antitrust laws into a corporate welfare program for Microsoft's rivals."
Jonathan Zuck, President of ACT, a pro Microsoft group, praised the decisions not to seek a break up, and to drop the tying claim. He added, "We invite the European Union to reach similar conclusions." See, ACT release.
AAI Questions HP Compaq Merger
9/5. The American Antitrust Institute released a statement regarding the proposed merger of HP and Compaq in which it asserted that "The proposed merger threatens to lessen competition in a number of ways. First, it will altogether eliminate competition between two of the three largest firms. Second, there is widespread speculation that the remaining firms in the industry will for strategic reasons seek merger partners to offset the combined HP/Compaq's new power with retailers and suppliers. If there is likelihood that this gigantic merger event will trigger a rapid consolidation of the industry, then the government should intervene."
Senate Judiciary Committee Approves Prost for Federal Circuit
9/6. The Senate Judiciary Committee unanimously approved the nomination Sharon Prost to be a judge of the U.S. Court of Appeals for the Federal Circuit. Prost is a long time staff assistant to Sen. Orrin Hatch (R-UT), the ranking Republican on the Committee.  
Muris Names Executive Assistant
9/6. FTC Chairman Timothy Muris appointed Christine Wilson to be his Executive Assistant. She previously was an associate in the antitrust practice group in the Washington DC office of the law firm of Howrey Simon. Prior to that, she worked at Collier Shannon. See, FTC release.
EPIC Condemns Monitoring of Computers of Judiciary
9/6. Marc Rotenberg, Executive Director of the Electronic Privacy Information Center (EPIC), sent a letter to the Administrative Office of the United States Courts regarding the electronic monitoring of the employees of the federal judiciary. He wrote: "I strongly urge the Judicial Conference to end the practice of monitoring the computer terminals of employees of the federal judiciary."
Rotenberg also stated that "the practice of logging the web sites that are viewed by members of the judiciary and their staff, without prior notice, could be a violation of the Electronic Communications Privacy Act of 1986, 18 USC § 2510 et seq., and that the use of this information in a disciplinary proceeding would be in violation of the Act." See, 18 U.S.C. Chapter 119.
The Judicial Conference of the United States is scheduled to meet on September 11 to consider a report [PDF] by its Committee on Automation and Technology.
Securities Fraud
9/6. The SEC announced that it filed a civil complaint in the U.S. District Court (NDCal) against M&A West, Inc. (MAWI) and four individuals alleging violations of federal securities laws, including fraud and sale of unregistered securities. MAWI is a self proclaimed "Internet incubator" engaged in developing Internet related technology companies. See, SEC release.
9/6. The U.S. Attorneys Office (NDCal) announced the unsealing of an 82 count indictment [PDF] charging two of the individuals associated with MAWI, Thomas Eck and Zahra Gilak, with stock manipulation and money laundering. See, USAO release.
More News
9/7. The ICANN began a round of meetings, that will continue through September 10, in Montevideo, Uruguay. See meeting web site for agenda and other information.
9/6. The U.S. House of Representatives approved HJRes 51 and HR 2833, regarding the bilateral trade agreement between Viet Nam and the U.S. that was negotiated last year by the Clinton administration.
9/7. The U.S. Department of State is hosting a conference from September 5 through 7 titled "NetDiplomacy". See, State Dept. release.
9/6. The U.S. Court of Appeals for the District of Columbia Circuit heard oral argument in Verizon v. FCC, No. 00-1207.
9/6. The U.S. Court of Appeals for the District of Columbia Circuit heard oral argument in National Association of Broadcasters v. FCC, No. 00-1054.
Friday, Sept 7
9:30 AM. The U.S. Court of Appeals for the District of Columbia Circuit will hear oral argument in Fox v. FCC, No. 00-1222. Judges Ginsburg, Edwards and Sentelle will preside. Location: 333 Constitution Ave., NW, Washington DC.
POSTPONED. 9:30 AM. The House Commerce Committee's Subcommittee on Telecommunications and the Internet has scheduled a hearing titled "Area Code Exhaustion: Management of Our Nation’s Telephone Numbers." Location: Room 2123, Rayburn Building.
9:30 AM - 12:00 Noon. The FCC's Office of Engineering and Technology (OET) will host the first of two tutorials on new spectrally efficient techniques. Location: FCC, Commission Meeting Room, 445 12th Street, Room TW-C305, Washington DC.
1:30 - 3:00 PM. The FCC's Office of Engineering and Technology (OET) will host the second of two tutorials on new spectrally efficient techniques. Location: FCC, Commission Meeting Room, 445 12th Street, Room TW-C305, Washington DC.
Deadline to submit comments to the USPTO in response to its notice of proposed rulemaking regarding elimination of continued prosecution application practice as to utility and plant patent applications. The notice stated that the AIPA enacted provisions for the continued examination of a utility or plant application at the request of the applicant, and therefore, "there no longer appears to be a need for continued prosecution application (CPA) practice as to utility and plant applications. Thus, the Office is proposing to eliminate CPA practice as to utility and plant applications. An applicant for a utility or plant patent may also continue to effectively obtain further examination of the application by filing a continuing application under section 1.53(b). Since RCE practice does not apply to design applications, CPA practice will remain in place for design applications." See, Federal Register, July 9, 2001, Vol. 66, No. 131, at Pages 35763 - 35765.
Monday, Sept 10
9:30 AM. The U.S. Court of Appeals for the District of Columbia Circuit will hear oral argument in High Plains Wireless v. FCC, No. 00-1292. Judges Ginsburg, Edwards and Sentelle will preside. Location: 333 Constitution Ave., NW, Washington DC.
9:30 AM. Brown University will host a press conference titled "Report Card on E-Government." For more information, contact Mark Nickel at 401-863-2476. Location: National Press Club, Murrow Room.
11:00 AM. Several groups will hold a press conference on the War on Drugs and its impact on privacy and other civil liberties. The groups will urge the Senate Judiciary Committee to examine these issues at its hearing on September 11 on the nomination of John Walters to be Director of National Drug Control Policy. The speakers will be Bradley Jansen (Free Congress Foundation), Tom DeWeese (American Policy Center), Eric Sterling (The Criminal Justice Policy Foundation). Location: J.W. Marriott Hotel, Salons J&K Ballroom level, 1331 Pennsylvania Ave., NW, Washington DC.
First day of a two day conference hosted by the International Trademark Association (INTA) and the National Bar Association (NBA) titled "Basics of Trademark Law Forum". See, INTA brochure [PDF] for regisration information, prices, and agenda. Location: Grand Hyatt Washington, 1000 H Street NW, Washington DC.
FCC Wireless Telecom. Bureau (WTB) fees changes go into effect. See, WTB release.
Deadline to submit comments to the FCC regarding SBC's Section 271 application to provide interLATA service in the states of Arkansas and Missouri. (CC Docket No. 01-194.) See, FCC notice [PDF].
Tuesday, Sept 11
TIME? The Judicial Conference of the U.S., which makes policy for the federal courts, will meet to consider the recommendations contained in the report [PDF] titled "Report on Privacy and Public Access to Electronic Case Files." This report was prepared by the Administrative Office of U.S. Courts' Committee on Court Administration and Case Management. It recommends that most civil and bankruptcy cases should be made available in electronic format, with redactions of some personal data identifiers, but that criminal cases should not be made available. See also, AOUSC release [PDF].
Second day of a two day conference hosted by the International Trademark Association (INTA) and the National Bar Association (NBA) titled "Basics of Trademark Law Forum". See, INTA brochure [PDF] for regisration information, prices, and agenda. Location: Grand Hyatt Washington, 1000 H Street NW, Washington DC.
9:00 AM - 5:00 PM. The Computer System Security and Privacy Advisory Board (CSSPAB) will hold the first session of a three day meeting. The CSSPAB advises the Secretary of Commerce and the Director of NIST on security and privacy issues pertaining to federal computer systems. All sessions will be open to the public. See, notice in Federal Register, August 27, 2001, Vol. 66, No. 166, at Pages 45009 - 45010. Location: National Security Agency's National Cryptologic Museum, Colony 7 Road, Annapolis Junction, Maryland.
10:30 AM. The Senate Judiciary Committee will hold a hearing on the nomination of John Walters to be Director of National Drug Control Policy. Several groups which advocate privacy rights have urged the Committee to examine the impact of the War on Drugs on privacy rights. Sen. Joe Biden (D-DE) will preside. Location: Room 226, Dirksen Building.
2:00 PM. The Senate Commerce Committee will hold a hearing on E-911 issues. Location: Room 253, Russell Building.
2:00 PM. The Congressional Internet Caucus Advisory Committee will host three panel presentations on e-learning, an e-learning technology fair, and a cocktail reception. RSVP to or Danielle at 202-637-4370. Location: Room 902, Hart Building, Washington DC. The schedule is as follows:
  • 2:00 PM. Grades K-12 Panel.
  • 3:00 PM. Higher Education Panel.
  • 4:00 PM. Workforce Training Panel.
  • 5:00 PM. Cocktail Reception and E-Learning Technology Fair.
6:00 - 8:00 PM. The Federal Communications Bar Association (FCBA) will host a reception for new NTIA chief Nancy Victory. The price to attend is $35 for private sector people, and $20 for government employees and students. RSVP to Wendy Parish at by Friday, September 7, at 10:00 AM. Location: Capital Hilton Hotel, 16th & K Streets NW, Washington DC.
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