Tech Law Journal Daily E-Mail Alert
December 10, 2001, 9:00 AM ET, Alert No. 324.
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4th Circuit Upholds 'Carry One Carry All' Rule Against Free Speech Challenge
12/7. The U.S. Court of Appeals (4thCir) issued its opinion in Satellite Broadcasting and Communications Association v. FCC, a case in which direct broadcast satellite (DBS) carriers challenged the constitutionality of the "carry one, carry all" rule of the Satellite Home Viewer Improvement Act of 1999 (SHVIA). The District Court upheld the rule. The Court of Appeals affirmed.
Background. The SHVIA created a statutory copyright license that allows DBS carriers to carry the signals of local broadcast TV stations without obtaining authorization from the holders of copyrights in programs. The SHVIA also imposes a "carry one, carry all" rule, at 47 U.S.C. § 338(a)(1), under which any DBS carriers that choose to take advantage of the statutory copyright license by carrying one broadcast station in a local market to carry all requesting stations in that market.
District Court. The Satellite Broadcasting and Communications Association (SBCA), DirecTV, and EchoStar filed a complaint in the U.S. District Court (EDVa) against the FCC alleging that the "carry one, carry all" rule violates the Copyright Clause, the First Amendment, and the Due Process and Takings Clauses of the Fifth Amendment. The National Association of Broadcasters (NAB) and PBS intervened on the side of the FCC. The District Court granted the FCC's motion to dismiss. See, SBCA v. FCC, 146 F.Supp.2d 803 (E.D. Va. 2001). The District Court held that the "carry one, carry all" rule is a content neutral regulation of the satellite carriers' speech and upheld the rule under intermediate First Amendment scrutiny. In addition, the court rejected the satellite carriers' other arguments. This appeal followed.
First Amendment. The Appeals Court first held that the restriction upon speech imposed by the SHVIA is content neutral, and therefore, intermediate scrutiny, rather than strict scrutiny, applies. The Court reasoned that DBS carriers, like the cable operators discussed by the Supreme Court in Turner Broadcasting System v. FCC, 512 U.S. 622 (1994) (aka Turner I), function primarily as conduits for the speech of others. However, both DBS carriers and cable operators "engage in speech protected by the First Amendment when they exercise editorial discretion over the menu of channels they offer to their subscribers." The Court continued that since the restriction does not follow from government disagreement with the content carried, or the carrier's choice of content, it is a content neutral restriction.
The Appeals Court then held that the restriction on speech imposed by the SHVIA meets the intermediate scrutiny test, as announced by the Supreme Court in U.S. v. O'Brien, 391 U.S. 367 (1968). That is, "it furthers an important or substantial governmental interest; if the governmental interest is unrelated to the suppression of free expression; and if the incidental restriction on alleged First Amendment freedoms is no greater than is essential to the furtherance of that interest." The Court found that the "carry one, carry all" rule advances the goal of preserving a multiplicity of broadcast outlets for over the air viewers.
Copyright Clause. The Appeals Court rejected the DBS carriers' argument that the SHVIA exceeds Congress's authority under the Copyright Clause by playing favorites by using the copyright power to protect the speech of independent local broadcasters. The Appeals Court stated that the "Congress's powers under the clause to grant copyright protection and to define the scope of that protection are very broad". It continued that "The copyright power certainly includes the authority to grant statutory copyright licenses like those created by SHVIA and the Cable Act. These statutory licenses are designed to ensure that the high transaction costs involved in privately acquiring copyright clearances for the retransmission of broadcast programming do not unduly restrict the free flow of information to the public." The Court concluded that "We see no reason why the Copyright Clause would prohibit Congress from conditioning its grant of a statutory copyright license on compliance with the carry one, carry all rule. ... Congress was simply performing its constitutionally assigned task of striking a balance between the interests of authors and the public interest."
The Appeals Court also denied three petitions for review of the FCC's SHVIA order that had been consolidated with this appeal.
Hold Out States Seek Further Remedies Against Microsoft
12/7. Nine states filed a pleading [PDF] titled "Plaintiff Litigating States' Remedial Proposals" with the U.S. District Court (DC) in the Microsoft antitrust case. Most of the 40 page document is comprised of single spaced  text constituting proposed additional language restraining the activities of Microsoft. It requests that the Court enter judgment stating that "Microsoft shall disclose and license all source code for all Browser products and Browser functionality ..." It also requests the Court to compel Microsoft to include Sun Microsystems' version of Java.
The Justice Department and nine states entered into a proposed settlement on November 2. They submitted a revised proposed settlement agreement on November 6. Nine states (California, Connecticut, Florida, Iowa, Kansas, Massachusetts, Minnesota, Utah, and West Virginia) and the District of Columbia have not joined in that settlement.
The nine hold out states condemned the agreement negotiated by the Justice Department and other states. They wrote that "Unlike the previously announced settlement between the Department of Justice ("DOJ") and Microsoft, these remedies create a real prospect of achieving what the DOJ said it intended to accomplish: ``stop Microsoft from engaging in unlawful conduct, prevent any recurrence of that conduct in the future, and restore competition in the software market ...´´ "
Microsoft issued a release in which it stated that the proposals were "extreme and not commensurate with what is left of the case".
Excerpts from Holdout States' Proposed Remedies
The following are excerpts from the "Plaintiff Litigating States' Remedial Proposals" filed in the Microsoft antitrust case on Friday, December 7. These parties request that the Court include in its final judgment the following language:
Ban on Binding. "Microsoft shall not, in any Windows Operating System Product (excluding Windows 98 and Windows 98 SE) it distributes beginning six months after the date of entry of this Final Judgment, Bind any Microsoft Middleware Products to the Windows Operating System unless ..."
Disclosure of APIs. "Microsoft shall disclose to ISVs, IHVs, IAPs, ICPs, OEMs and Third-Party Licensees ... all APIs, Technical Information and Communications Interfaces ..."
"Microsoft shall not take any action that it knows, or reasonably should know, will directly or indirectly, interfere with or degrade the performance or compatibility of any non-Microsoft Middleware when Interoperating with any Microsoft Platform Software ..."
"Microsoft shall not condition the granting of a Windows Operating System Product license, ... on a licensee agreeing to license, promote, distribute, or provide an access point to, any Microsoft Middleware Product."
No Retaliation. "Microsoft shall not take or threaten to take any action adversely affecting any individual or entity that participated in any phase of the antitrust litigation ..."
Default Middleware. "Microsoft shall not, in any Windows Operating System Product ... make Microsoft Middleware the Default Middleware for any functionality unless the Windows Operating System Product (i) affords the OEM or Third-Party Licensee the ability to override Microsoft’s choice of a Default Middleware and designate other Middleware the Default Middleware for that functionality, and (ii) affords the OEM, Third-Party Licensee or non-Microsoft Middleware the ability to allow the end user a ... choice to designate other Middleware as the Default Middleware ..."
Source Code. "Microsoft shall disclose and license all source code for all Browser products and Browser functionality."
Java. "For a period of 10 years from the date of entry of the Final Judgment, Microsoft shall distribute free of charge, in binary form, with all copies of its Windows Operating System Product and Internet Browser (including significant upgrades) a competitively performing Windows compatible version of the Java runtime environment (including Java Virtual Machine and class libraries) compliant with the latest Sun Microsystems Technology Compatibility Kit as delivered to Microsoft ..."
Apple. "Microsoft shall port each new major release of Office to the Macintosh Operating System within 60 days of the date that such version becomes commercially available for use with a Windows Operating System Product ..."
IPR. "Microsoft shall, within 20 days of request, license to IAPs, ICPs, IHVs, ISVs, OEMs and Third-Party Licensees all intellectual property rights owned or licensable by Microsoft that are required to exercise any of the options or alternatives provided or available to them under this Final Judgment (including without limitation enabling their product(s) to Interoperate effectively with Microsoft Platform Software), on the basis that: a. the license shall be on a royalty-free basis and all other terms shall be reasonable and non-discriminatory; b. the license shall not be conditional on the use of any Microsoft software, API, Communications Interface, Technical Information or service ..."
Standards. If Microsoft publicly claims that any of its products are compliant with any technical standard ("Standard") that has been approved by, or has been submitted to and is under consideration by, any organization or group that sets standards (a "Standard-Setting Body"), it shall comply with that Standard.
Special Master. "... the Court will appoint a special master (the "Special Master") to monitor Microsoft’s obligations under the Final Judgment ..."
Senators Hollings and McCain Condemn NextWave Settlement
12/6. Sen. Ernest Hollings (D-SC) and Sen. John McCain (R-AZ) announced their opposition to the proposed settlement agreement in the NextWave matter. See, transcript of December 6 press conference. On November 27 the FCC released the proposed settlement agreement [PDF] between the Federal Communications Commission (FCC), NextWave, the Department of Justice (DOJ), and the Auction 35 winners. The agreement requires approval by the bankruptcy court, and passage of legislation by Congress.
McCain. Sen. McCain, who is the ranking Republican on the Senate Commerce Committee, which has jurisdiction over telecommunications and the FCC, stated that "We want this issue examined in the proper hearing process. We want the FCC to come forward. We want people to come forward and make their case, so the American people can know what's going to happen to billions of their tax dollars here."
Sen. McCain continued that "The principal defects in this process are secrecy and timing. The settlement negotiations have been ongoing for months, as we all know. The 66 page NextWave settlement agreement and its associated enabling legislation ... were sent to the Congress about one week ago, on November 28th. Remarkably -- remarkably -- the terms of this settlement demand that Congress pass this week old legislation and appropriate $6 billion immediately, no later than December 31st. Remarkable. ... Not only do the settling parties demand the Congress and the president enact their legislation according to their short schedule, they also demand that the Congress and the president enact it without any amendments or changes -- not even a comma. This process shows profound contempt for this legislature ..."
Background. NextWave obtained spectrum licenses at FCC auctions in 1996. The FCC permitted NextWave to obtain the licenses, and make payments under an installment plan, thus creating a debtor creditor relationship between NextWave and the FCC. NextWave did not make payments required by the plan, and filed a Chapter 11 bankruptcy petition. The FCC cancelled the licenses. However, the FCC was blocked by the bankruptcy court, citing § 525 of the Bankruptcy Code. The U.S. District Court (SNDY) affirmed. The U.S. Court of Appeals (2ndCir) issued its order reversing and remanding the case on Nov. 24, 1999; it issued its opinion explaining its reversal in May 2000. The FCC then proceeding to re-auction the disputed spectrum. NextWave next petitioned the FCC to reconsider its cancellation of its licenses. The FCC refused, and NextWave petitioned for review by the Court of Appeals in the District of Columbia. The U.S. Court of Appeals (DCCir) ruled in its June 22, 2001, opinion that the FCC is prevented from canceling the spectrum licenses by § 525 of the Bankruptcy Code. The FCC has petitioned the Supreme Court for writ of certiorari.
Hollings. Sen. Hollings, who is Chairman of the Senate Commerce Committee, was just as critical. However, he has some additional reasons. He agrees with the Second Circuit holding, disagrees with the District of Columbia holding, and wants the FCC to pursue its appeal. His opposition goes to the nature of spectrum licenses. He believes that there are not, and should not be, any property rights in spectrum. He stated that "the public, the people, own the spectrum, and the trustee of the people's spectrum is the Federal Communications Commission. There is no need for legislation. They ought not to be sending legislation; they ought to pursue the appeal. They say it's a 50-50 chance whether or not it will be prevail or not before the Supreme Court. If it doesn't prevail, then we're going to have the court finding that there is an ownership in spectrum, and you can get it ..."
The House Judiciary Committee also held a hearing on the settlement last week. The House Commerce Committee has planned a hearing for Tuesday, December 11.
House Committee Passes Bill Authorizing Funding for Info Tech R&D
12/6. The House Science Committee passed HR 3400, the Networking and Information Technology Research Advancement Act, by a unanimous voice vote. This bill, which is sponsored by Rep. Nick Smith (R-MI) and others, would authorize appropriations totaling nearly $7 Billion over five years for information technology research and development.
Most of the funding authorized by this bill would go to the National Science Foundation (NSF), Department of Energy's Office of Science, and National Aeronautics and Space Administration (NASA).
The Committee passed an amendment by unanimous voice vote that was offered by Rep. James Matheson (D-UT) that adds a new section to the bill creating a "Crisis Management Enabling Technology Center."
Rep. John Larson (D-CT) also offered an amendment, which he withdrew. Rep. Sherwood Boehlert (R-NY), the Chairman of the Committee, stated that "we will continue to work together" on this matter. The amendment would add a new section to the bill authoring funding for "Broadband Demonstration Projects."
Federal Reserve Governor Addresses Spread of E-Money
12/5. Federal Reserve Board Governor Laurence Meyer gave a speech at Swarthmore College in Pennsylvania titled "The Future of Money and of Monetary Policy". He stated that while the paper check is still the most widely used method for transferring money by the public, "The next step in the evolution of the nature and transfer of money appears to be the spread of electronic forms of money and payment."
Meyer stated that in the 1990s "a new generation of technology created the possibility of storing monetary value on a silicon chip embedded in a plastic card or in a personal computer. With these developments, the focus of payments development shifted to electronic money -- e-money -- using card based and computer based products (often referred to as stored value cards and network money, respectively) that consumers might use as a general means of payment in both the physical and the virtual worlds." He added that "this first generation of e-money products was not widely adopted in the United States", but pointed out that other technologies, such as the ATM and debit cards took years to catch on.
Meyer reviewed the long history of money over the millennia, and then focused on some recent developments. "Banks and technology providers are attempting to develop new payment methods, in many cases building upon the underlying the automated clearing house (ACH), debit card, and credit card networks to find more convenient and secure ways to make purchases, pay bills, settle debts, and post credits, especially over the Internet. "On-line" banking involves electronic access to information over the Internet about accounts and loans -- including current balances and transactions history -- as well as providing the ability to carry out payment related transactions -- including transfers among accounts, receiving and paying bills, applying for bank credit cards, and reordering checks. Some so-called virtual banks have been set up to service customers exclusively through electronic channels, but an increasing number of traditional "bricks and mortar" banks see the Internet as another delivery channel that improves convenience for some of their customers. Similarly, the emergence of e-money reflects the attempt to develop new payment methods as a more efficient alternative to existing electronic payment means."
Finally, Meyer addressed some of the implications of e-money for financial stability, monetary policy, and the possibility of privately issued currencies.
Insider Trading
12/5. The U.S. District Court (NDCal) sentenced Malcolm Wittenberg on one count of insider trading in violation of Section 10 of the Securities Exchange Act of 1934, 15 U.S.C. § 78j. See, USAO release. The Plea Agreement [PDF] states that Wittenberg learned of a pending merger of Sun Microsystems and Forte Software in the course of his representation of Forte. He then traded in Forte Software stock. Wittenberg admitted that he used material, non public information when he purchased stock in Forte Software. The plea agreement also states that Wittenberg at all relevant times was an attorney and partner in the San Francisco office of the Oakland law firm of Crosby Heafey Roach & May.
FTC Commissioner Addresses Antitrust Law
12/4. FTC Commission Thomas Leary gave a speech on antitrust law to the New York City bar association titled "Three Hard Cases and Controversies: The FTC Looks at Baby Foods, Colas and Cakes". He discussed three recent antitrust cases -- FTC v. H.J. Heinz, PepsiCo / The Quaker Oats Company (Gatorade), and General Mills / Pillsbury. None of these three cases involved technology. However, the antitrust analysis may be pertinent beyond food.
30th Nation Accedes to WIPO Copyright Treaty
12/6. The nation of Gabon acceded to the World Intellectual Property Organization (WIPO) Copyright Treaty (WCT). Gabon is only the 30th nation to do so. However, this accession means that the WCT will enter into force in three months -- on March 6, 2002. The other nations which have acceded are Argentina, Belarus, Bulgaria, Burkina Faso, Chile, Colombia, Costa Rica, Croatia, Czech Republic, Ecuador, El Salvador, Gabon, Georgia, Hungary, Indonesia, Japan, Kyrgyzstan, Latvia, Lithuania, Mexico, Panama, Paraguay, Peru, Republic of Moldova, Romania, Saint Lucia, Slovakia, Slovenia, Ukraine, and U.S. See, WIPO release and State Department release.
Monday, Dec 10
The House will meet at 2:00 PM in pro forma session. The Senate will meet at 3:00 PM, and will consider S 1731, the Agriculture, Conservation, and Rural Enhancement Act of 2001.
9:00 AM. The National Telephone Cooperative Association (NTCA) will host a press breakfast at which it will discuss the various technologies currently deployed by NTCA members, including broadband based applications. RSVP to Donna Taylor at 703 351-2086 or Location: NTCA Headquarters, Conference Room, 4121 Wilson Blvd., 10th floor, Arlington, VA.
12:15 PM. The Federal Communications Bar Association's (FCBA) Legislative Practice Committee will host a discussion of the Congressional budget process and its influence on spectrum policy. The speakers will be Jim Hearn (Senate Budget Committee staff) and David Moore (Congressional Budget Office). RSVP to Liz Henderson. Location: Wilmer Cutler & Pickering, 2400 N St. NW.
1:30 - 3:30 PM. The American Enterprise Institute (AEI) will host a panel discussion titled "Should the WTO Determine U.S. Tax Policy?" The speakers will be Michael Finger (AEI), Gary Hufbauer (Institute for International Economics), Dave Brumbaugh (Congressional Research Service), John Meagher (PriceWaterhouse Coopers), and Kevin Hassett (AEI). See, online information and registration page. Location: Wohlstetter Conference Center, AEI, 1150 17th Street, NW.
Tuesday, Dec 11
The House will meet at 12:30 PM for morning hour and at 2:00 PM for legislative business. No recorded votes are expected before 6:30 PM. The House will consider a number of measures under suspension of the rules.
Day one of a two day conference hosted by the Information Technology Association of America (ITAA) titled Developing Cyber Security Solutions in the e-Gov Era. This is an invitation only event. For information, contact Shannon Kellogg at The press contact is See, agenda. Location: Executive Briefing Center, Computer Sciences Corporation, 3170 Fairview Park Drive, Falls Church, VA.
11:45 AM - 12:45 PM. Ken Feree, Chief of the FCC's Cable Services Bureau, will be the luncheon speaker at the Power Line Communications Conference. Location: Troutman Sanders, Washington DC.
POSTPONED TO DECEMBER 18. 12:15 PM. The Federal Communications Bar Association's (FCBA) Young Lawyers Committee will host a brown bag lunch. The speakers will be Commissioner Michael Copps' Legal Advisors: Jordan Goldstein, Paul Margie, and Susanna Zwerling. For more information contact Chris Moore at 202 224-9584 or or Yaron Dori at 202 637-5458 or
3:00 PM. The House Commerce Committee's Subcommittee on Telecommunications and the Internet will hold a hearing for on the proposed settlement between the U.S. and Nextwave over spectrum licenses. Room 2123, Rayburn Building.
Wednesday, Dec 12
9:00 AM. - 2:30 PM. The American Enterprise Institute (AEI) will host a program titled "Telecommunications Policy as Trade Policy: Negotiations with Japan over Interconnection Pricing". See, online information and registration page. Location: Wohlstetter Conference Center, AEI, 1150 17th Street, NW.
9:30 AM. The FCC will hold a meeting. The agenda includes the following: (1) a Notice of Proposed Rule Making (NPRM) initiating a comprehensive examination of the appropriate regulatory framework for incumbent local exchange carriers' (ILECs') provision of broadband services; (2) a NPRM to initiate the FCC's triennial review of the definitions of and rules concerning access to ILEC unbundled network elements; (3) an order in regarding the FCC's plans for nationwide thousands block number pooling (CC Docket No. 96-98 and CC Docket No. 99-200); (4) a second NPRM concerning new equal employment opportunity rules for broadcast licensees and cable entities; (5) a Report and Order concerning allocation and service rules to reallocate television channels 52-59; and (6) a First Report and Order to provide for new ultra wideband (UWB) devices (ET Docket No. 98-153). Location: Commission Meeting Room, FCC, 445 12th Street, SW, Room TWC305.
Location Change. 10:00 AM. The Senate Judiciary Committee will hold a hearing on the future of the Microsoft settlement. Location: Room 106, Dirksen Building.
TIME? The House Judiciary Committee's Subcommittee on Courts, the Internet and Intellectual Property will hold the first part of a hearing on proposed changes to the Copyright Act.
Thursday, Dec 13
Day one of a two day conference titled the "19th Annual Institute on Telecommunications Policy & Regulation". Location: International Trade Center.
9:15 AM - 4:30 PM. The International Trademark Association will host a CLE program titled "Trademark Trial and Appeal Board (TTAB) Practice for Advanced Practitioners Forum." The price to attend is $395. See, brochure and agenda. Location: Crystal Gateway Marriott, 1700 Jefferson Davis Highway, Arlington, VA.
10:00 AM. The Senate Judiciary Committee will hold a business meeting. Location: Room 226, Dirksen Building.
TIME? The House Judiciary Committee's Subcommittee on Courts, the Internet and Intellectual Property will hold the second part of a hearing on proposed changes to the Copyright Act.
6:00 PM. The Federal Communications Bar Association (FCBA) will hold its 15th Annual FCBA Chairman's Dinner. The reception begins at 6:00 PM; dinner begins at 7:30 PM. Location: Washington Hilton & Towers, 1919 Connecticut Ave., NW.
Friday, Dec 14
8:30 - 10:00 AM. The American Enterprise Institute (AEI) will host a press breakfast on "The Role of the FCC in Restricting the Ownership of Licenses". Harold Furchtgott Roth and other AEI scholars will speak. RSVP to Veronique Rodman at 202 862-4871 or Location: AEI, 1150 17th Street, NW, 11th Floor Conference Room.
Day two of a two day conference titled the "19th Annual Institute on Telecommunications Policy & Regulation". Location: International Trade Center.
More News
12/7. The FCC's Common Carrier Bureau released a notice [PDF] titled "Proposed First Quarter 2002 Universal Service Contribution Factor". (CC Docket No. 96-45.)
12/5. Matthew Flanigan, President of the Telecommunications Industry Association (TIA), wrote a letter [PDF] to FCC Chairman Michael Powell regarding a national broadband policy.
12/6. The House passed HR 3008, a bill to reauthorize the trade adjustment assistance program under the Trade Act of 1974, by a vote of 420 to 3. See, Roll Call No. 477.
12/7. President Bush made a statement regarding the implementation of the U.S. Jordan Free Trade Agreement [PDF].
12/7. The FBI's National Infrastructure Protection Center (NIPC) published the December 7 issue of Highlights [PDF] in its web site. It also published the December 3 issue of CyberNotes [PDF]; this is a bi-weekly summary of cyber vulnerabilities, malicious scripts, information security trends, virus information, and other critical infrastructure related best practices. (Issue No. 2001-24.)
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