Tech Law Journal Daily E-Mail Alert
November 16, 2001, 9:00 AM ET, Alert No. 310.
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Senate Passes Bill to Extend Internet Tax Moratorium
11/15. The Senate passed HR 1552, the Internet Nondiscrimination Act (INDA), without amendment, by a voice vote, on Thursday evening, November 15. This bill extends the moratorium on Internet access taxes, and multiple and discriminatory taxes on Internet commerce, for two years. In 1998 the Congress passed the Internet Tax Freedom Act (ITFA), creating a three year moratorium that expired on October 21, 2001. The INDA amends and extends the ITFA. The House passed the INDA on October 16. President Bush will promptly sign the bill.
The Senate also rejected, on a roll call vote of 57 to 43, an amendment offered by Sen. Mike Enzi (R-WY) and Sen. Byron Dorgan (D-ND), that would have allowed state and local taxing authorities to require out of jurisdiction Internet sellers, and other remote sellers, to collect sales taxes. See, statement by Sen. Enzi.
The U.S. Supreme Court ruled in Quill v. North Dakota, 504 U.S. 298 (1992), that state and local taxing authorities are barred under the Commerce Clause from requiring remote sellers without a substantial nexus to the taxing jurisdiction to collect sales taxes for sales to persons within the jurisdiction. However, the Court added that Congress may extend such authority. Senators and Representatives who favor giving state and local governments authority to require remote sellers to collect sales taxes have sought to use the extension of the ITFA as leverage for passage of their proposals.
Sen. George Allen (R-VA), a supporter of  the ITFA and INDA, stated during the debate that "what is being tried here with the Enzi Dorgan amendment is to abrogate and negate a settled constitutional law from court decisions, whether it was the Quill decision or Bella Hess decision that says there can't be taxation without representation." See, Allen statement. Meanwhile, Rep. Chris Cox (R-CA), the sponsor of HR 1552, stated that "The bottom line is that consumers know that for the next two years, the Internet will not be singled out for unfair tax treatment."
House Holds Hearing on Cyber Security
11/15. The House Commerce Committee's Subcommittee on Commerce, Trade, and Consumer Protection held a hearing titled "Cyber Security: Private Sector Efforts Addressing Cyber Threats". Witnesses testified regarding the nature of cyber threats, and methods for dealing with cyber threats. Some witnesses opposed government interference with the market and government security mandates. Some also advocated passage of legislation to give businesses less disincentive to share information regarding cyber threats, including FOIA and antitrust exemptions. Some witnesses advocated tougher criminal sanctions, more funding for law enforcement, and more funding and tax incentives for education, training and development of new cyber security technologies.
Rep. Cliff Stearns (R-FL), the Chairman of the Subcommittee, presided. He said in his opening statement that "As for cyber terrorism, since September 11th we have learned that determined terrorists do have the wherewithal to undertake the unexpected. Terrorists and their recruits also have grown up in the digital age and thus most probably possess the technical skills to undertake concerted and effective cyber terror attacks. And as the real and virtual worlds have become more closely intertwined, cyber terrorism can potentially engender greater pain and tragedy and thus become more attractive to unscrupulous terrorists."
Howard Schwartz, Chief Security Officer of Microsoft, testified that "I believe we need to let the Internet economy and the information technology industry operate as a market. That means that it must operate without government interference."
Schwartz also testified that "Microsoft strongly supports adding new cyber crime provisions to the anti terrorism laws and the criminal code. We see a need for increased funding for law enforcement personnel, training, and equipment. We support tougher penalties on criminal hackers, such as civil forfeiture of personal property used in committing these crimes, and we seek clear guidance from the Sentencing Commission on how courts should punish these convicted felons. We strongly support greater international cooperation among law enforcers in these time-sensitive investigations. And we want ISPs to have the authority to share information voluntarily with the entire government once they see that life or limb are endangered."
In contrast, Warren Axelrod of Pershing testified that current criminal laws and law enforcement efforts provide no deterrence to illegal cyber attacks. He said the problem is that almost nobody gets caught.
John Casciano, an SVP at SAIC, testified that there are several things that Congress might do, including encouraging industry to "define standards for due diligence in the development and validation of secure software by developers, and its secure implementation and operation by users. In the event these standards were not met they would provide a basis for judicial allocation of liability and compensation." He also suggested "tax subsidies or other incentives for improved cyber protections for certain industries", and federal funding for education and training programs for cyber security skills and for the development of new cyber security technologies.
All witnesses concurred that the Congress should pass legislation to provide an exemption from the Freedom of Information Act (FOIA) for cyber security information voluntarily shared with the federal government. On September 24, Sen. Bob Bennett (R-UT) introduced S 1456, the Critical Infrastructure Information Security Act (CIISA), a bill to give companies incentives to share information in order to help defend against cyber attacks. It contains both FOIA and antitrust exemptions.
See, prepared testimony of witnesses: Howard Schmidt (Microsoft), John Casciano (SAIC), Christopher Klaus (Internet Security Systems), Mary Ann Davidson (Oracle), David Morrow (EDS), Warren Axelrod (Pershing), Dave McCurdy (EIA), and Mark Doll (Ernst & Young).
Rep. Billy Tauzin (R-LA), the Chairman of the full Committee, submitted a statement for the record. At the conclusion of the hearing Rep. Stearns stated that he hopes "industry will step up to the plate ... if not, obviously, Congress could mandate security standards, which we don't want to do."
DOJ Files Competitive Impact Statement in Microsoft Antitrust Case
11/15. The Department of Justice's Antitrust Division filed its Competitive Impact Statement (CIP) with the U.S. District Court (DDC) in U.S. v. Microsoft, the government's antitrust case. This CIP reviews the background of the case, the allegations contained in the complaints, and the June 28, 2001 opinion of the U.S. Court of Appeals (DCCir). It also explains the provisions of Proposed Final Judgment (PFJ) filed on November 2, 2001. Finally, the CIP explains why the DOJ was justified in agreeing to the terms contained in the PFJ.
The CIP states that "The United States considered a number of alternatives to the Proposed Final Judgment. The United States is satisfied, however, that the requirements and prohibitions contained in the Proposed Final Judgment, supported by strong compliance and enforcement procedures, provide a prompt, certain and effective remedy for the violations Microsoft has committed."
The CIP also points out what would have been the consequences of protracted litigation: "Given the substantial likelihood that Microsoft would avail itself of all opportunities for appellate review of any non consensual judgment, the United States estimated that a litigated result would not become final for at least another two years. The remedies contained in the Proposed Final Judgment are not only consistent with the relief the United States might have obtained in litigation, but they have the advantages of immediacy and certainty."
As for Microsoft's competitors and others who advocated harsher penalties, the CIP points out that "any person who has been injured as a result of conduct prohibited by the antitrust laws may bring suit in federal court to recover three times the damages suffered ..."
DOJ and FTC to Hold Hearing on Antitrust and IPR
11/15. The Antitrust Division and FTC announced that they will jointly hold a hearing on antitrust and intellectual property. The hearing will examine "the importance of the various types of intellectual property to businesses and innovation, the frequency and types of licensing, pooling and other arrangements for transfer or joint use of intellectual property, competition issues in patent settlements and unilateral refusals to deal involving intellectual property." See, DOJ release, FTC release, and FTC notice to be published in Federal Register. The hearings will be held at the FTC headquarters, at 600 Pennsylvania Ave., NW, in Washington DC, and will be open to the public. None of these items states the time or date of the hearing.
Politics, Antitrust and Baseball
11/14. Rep. John Conyers (D-MI) introduced HR 3288, the "Fairness in Antitrust in National Sports Act of 2001". The acronym is the FANS Act. The bill would amend the Clayton Act to make the antitrust laws applicable to the elimination or relocation of major league baseball franchises. It was referred to the House Judiciary Committee, of which Rep. Conyers is the ranking Democrat.
Rep. Conyers submitted a statement for the Congressional Record in which he said that "I was shocked by Major League Baseball's decision just two days later to eliminate two teams as early as December 15th of this year. This is why it is imperative that Congress move quickly on the FANS Act to insure that anti competitive decisions by Major League Baseball concerning the elimination or relocation of teams are subject to the antitrust laws like all other professional sports and businesses."
The bill is also cosponsored by much of the Minnesota delegation. Their state would be impacted by the loss of the Minnesota Twins. Montreal, home of the Expos, the other team likely to be eliminated, has no representation in the Congress.
11/14. Sen. Paul Wellstone (D-MN) introduced S 1704, the Senate version of the FANS Act. It is cosponsored by Sen. Mark Dayton (D-MN).
Harvey Pitt Addresses Securities Regulation
11/14. SEC Chairman Harvey Pitt gave a speech in Washington DC in which he stated that securities regulation will have to adapt to both new electronic technologies and differing regulatory and accounting standards around the world. However, he offered no framework for how "the global community could regulate the global marketplace and create a veritable seamless web of interconnectedness".
Pitt said that "We live in a global economy, with global markets, engaged in fierce global competition, with boundaries that are expanding exponentially given the Internet and changing technology. If there ever was a time when we could view the world solely through the prism of U.S. securities regulation, that time is also long past."
He addressed the once "clear boundaries separating categories of investment intermediaries", changes in financial services and investment products, the changing needs and natures of investors, and approaches to full and fair disclosure.
He also stated that "Recent studies show that roughly one out of every two U.S. households invests in securities. While retail investors today have greater access, via electronic technology, to financial information and execution systems, it is an open question whether these same investors have sufficient training and adequate time to use these tools." However, he offered no further elaboration on this point.
Senate Passes Conference Report on CJS Bill
11/15. The Senate agreed to the conference report on HR 2500, the FY 2002 appropriations bill for the Departments of Commerce, Justice, and State, the Judiciary, and related agencies. The House passed this conference report on November 14. This bill includes funding for most of the technology related departments and commissions, including the USPTO, FCC, FTC, DOJ, NTIA, NIST, BXA, and SEC.
Friday, Nov 16
Day two of a three day conference hosted by the Federalist Society titled "Fifteenth Annual National Lawyer's Convention". See, registration form and agenda. Theodore Olson, Solicitor General of the U.S., will speak at 1:45 PM. The Mayflower Hotel, 1127 Connecticut Ave., NW.
10:00 AM. The House Government Reform Committee's Government Efficiency, Financial Management and Intergovernmental Relations Subcommittee will hold a hearing titled Oversight Hearing on National Identification Cards. Location: Room 2154, Rayburn Building.
1:00 PM. The Electronic Privacy Information Center (EPIC) will host an event pertaining to proposals for a national identification card system. The speakers will include Marc Rotenberg (EPIC), Brad Jansen (Free Congress Foundation), and Lori Cole (Eagle Forum). The event will also include a theatrical shredding of simulated national identification cards. Location: East Front House Grass Area next to the Capitol (near Independence and First Streets SE).
Monday, Nov 19
11:00 AM - 12:00 NOON. The American Enterprise Institute (AEI) will host an event titled "Trade Policy Briefing: After Doha - What's Next?" The speakers will be Claude Barfield, Michael Finger, and Sarath Rajaptirana. They will analyze the decisions made at the WTO Ministerial Meeting held November 9-13 in Doha, Qatar. Location: AEI, 12th Floor, 1150 Seventeenth Street, NW.
Tuesday, Nov 20
10:00 AM. The Commerce Department's Technology Administration will hold a public meeting existing public and private high tech workforce training programs. The meeting is being held pursuant to 115(a) and 115(b) of the American Competitiveness in the Twenty-First Century Act of 2000 (Public Law 106-313), which requires the Secretary of Commerce to conduct a study and prepare a report to Congress. Location: Room 4813, Commerce Department. See, notice in Federal Register.
Wednesday, Nov 21
2:00 - 5:00 PM. The National Science Foundation's (NSF) Advisory Committee for Cyberinfrastructure will hold a meeting to develop a plan for the preparation of a report to the NSF concerning advanced cyber infrastructure and the evaluation of the existing Partnerships for Advanced Computational Infrastructure. See, notice in Federal Register.. Location: Room 130, NSF, 4201 Wilson Blvd., Arlington, VA.
More News
11/14. The FCC announced the creation of a Homeland Security Policy Council. FCC Chief of Staff Marsha MacBride will be its Director. The two Deputy Directors will be be Linda Blair and Brad Berry, who are Deputy Chiefs in the Enforcement Bureau. See, FCC release.
11/15. The Senate Judiciary Committee postponed it November 11 business meeting.
11/15. British Telecom (BT) stated that it "received final court approval prior to the demerger of the mmO2 business. The demerger process involves the creation of two new holding companies: one for the BT Group businesses, and one for the mmO2 businesses through a court approved Scheme of Arrangement. The High Court of Justice in England and Wales today completed hearings which sanctioned the Scheme of Arrangement and approved the reduction of the share capital of BT provided for under the Scheme." See, BT release.
11/15. The Court of Appeal of California issued its opinion [PDF] in ComputerXpress v. Lee Jackson, a suit involving the California SLAPP statute.
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