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February 15, 2002, 9:00 AM ET, Alert No. 369.
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House Crime Subcommittee Postpones Mark Up of Cyber Security Bill
2/14. The House Judiciary Committee's Crime Subcommittee met to mark up HR 3482, the "Cyber Security Enhancement Act of 2001", sponsored by Rep. Lamar Smith (R-TX). However, a quorum was lacking, so the mark up was postponed. Rep. Smith, who is also the Chairman of the Subcommittee, stated at the hearing that he hoped to mark up the bill after the House returns from its one week recess next week.
Rep. Smith has prepared an amendment in the nature of a substitute that contains additional provisions. However, since the meeting was postponed, this amendment has not yet been offered or approved.
The amendment includes a new Section 108 regarding emergency use of pen registers and trap and trace (PRTT) devices. Currently, under 18 U.S.C. § 3125, law enforcement authorities may use PRTT devices for 48 hours in certain emergency situations, while court authority is being sought. Section 108 would expand the list of situations to include "an immediate threat to a national security interest" and "an ongoing attack on a protected computer that constitutes a crime punishable by a term of imprisonment greater than one year".
The amendment also contains a new section 109 that would raise penalties for illegally intercepting cell phone conversations, and increase penalties for unlawful access to stored communications.
The amendment leaves Section 102 of the bill unchanged. This section would amend 18 U.S.C. § 2702(b), regarding voluntary disclosure of the contents of communications. Currently, the statute provides that "A person or entity may divulge the contents of a communication ... (6) to a law enforcement agency ... (C) if the provider reasonably believes that an emergency involving immediate danger of death or serious physical injury to any person requires disclosure of the information without delay." The bill would allow the disclosure "if the provider, in good faith, believes ..."
Alan Davidson of the Center for Democracy and Technology (CDT) testified against this language at the Subcommittee's hearing on February 12. He also spoke with reporters after the February 14 meeting. He stated Section 102 would create a "a loophole that you can drive a truck through".
Rep. Bob Goodlatte (R-VA) also spoke with reporters after the meeting. He would like the language of his ISP immunity bill, HR 3716, to be added as a further amendment to HR 3482. He stated that he would not have offered it as an amendment at the February 14 meeting. However, he added that "we are still discussing that with the committee". Rep. Goodlatte's bill, titled the "Online Criminal Liability Standardization Act of 2002", would exempt ISPs from criminal liability for third party content stored on their servers.
It provides that "no interactive computer service provider, or corporate officer of such provider, shall be liable for an offense against the United States arising from such provider’s transmitting, storing, distributing, or otherwise making available, in the ordinary course of its business activities as an interactive computer service provider, material provided by another person." The bill further provides that "The liability limitation created by this section does not apply if the defendant intended that the service be used in the commission of the offense."
FTC Brings COPPA Action
2/14. The Federal Trade Commission (FTC) announced that it filed a complaint in U.S. District Court (NDIowa) against American Pop Corn Company (APC) alleging violation of the Children's Online Privacy Protection Act of 1998 (COPPA), and the FTC's Children’s Online Privacy Protection Rule, for collecting personal information from children through its web site, without first obtaining parental consent. The FTC and APC also settled the case, and filed a proposed consent decree [PDF]. Under the terms of the settlement, APC will pay a $10,000 fine, and be enjoined from further violations of the COPPA. This is the fifth civil action filed by the FTC to enforce the COPPA.
House Subcommittee Holds Hearing on Federal Trademark Dilution Act
2/14. The House Judiciary Committee's Subcommittee on Courts, Internet and Intellectual Property held a hearing on the Federal Trademark Dilution Act (FTDA), which was enacted over five years ago by the 104th Congress.
Rep. Howard Coble (R-NC), the Chairman of the Subcommittee, said in his opening statement that the FTDA "sought to create a degree of national uniformity to the law and certainty regarding the protection of trademarks. Dilution refers to that conduct that lessens the distinctiveness and value of a mark It includes several types of conduct such as what is known as “tarnishment” and “blurring,” which may have devastating effects for everyone involved, but most alarmingly, on consumers and the public."
Rep. Howard Berman (D-CA) said in his prepared statement that the FTDA "appears to have fallen short of achieving its objective of providing a uniform, national dilution law. This failure is due to a significant split among the Circuits over proper interpretation of a key element of the Dilution Act. This split has lead to the undesirable result that, in effect, a different Dilution law applies depending on the judicial circuit in which one is located."
Rep. Berman continued that "the Fourth and Fifth Circuits have interpreted the Dilution Act to require, among other things, demonstration of actual dilution to maintain a case under the Act. The First, Second, Third, and Seventh Circuits, on the other hand, only require demonstration of a likelihood to cause dilution. The Supreme Court has evidenced no inclination to resolve this split." He concluded that "The unresolved split among the Circuits seems to necessitate further legislative clarification."
See also, prepared testimony of Kathryn Park (International Trademark Association), Michael Kirk (American Intellectual Property Law Association), Sherry Jetter (Polo Ralph Lauren), and Ethan Horwitz (Darby & Darby).
The ITA's Park stated that "Inconsistent standards from circuit to circuit make it much more difficult for a famous mark owner to conduct business nationwide. It also leads to forum shopping, something this subcommittee sought to prevent when it drafted the FTDA. To correct this inconsistency and clarify Congress’ original intent, INTA recommends that amendments be incorporated into the Lanham Act that explicitly state that “likelihood of dilution” is the proper standard."
The AIPLA's Kirk stated that the Lanham Act "should be amended to clarify the standard for proving dilution of a "famous" mark. ... The AIPLA supports enactment of a likelihood of dilution standard. In our view, such a standard is more consistent with the policy objectives of dilution law and more accurately reflects the intent of Congress when it enacted" the FTDA.
Securities Related Bills Introduced in Congress
Members of Congress introduced several new securities related bills following Congressional hearings on the bankruptcy of Enron.
Sen. Richard Shelby (R-AL) introduced S 1933, the "Investor Protection Act of 2002", on February 12. This bill would amend the Securities Exchange Act of 1934 and the Securities Act of 1933, to address liability standards in connection with violations of the Federal securities laws. It was referred to the Senate Banking Committee.
Rep. Gary Ackerman (D-NY) introduced HR 3736 on February 13. This bill would amend the Securities Exchange Act of 1934 to require the Securities and Exchange Commission (SEC) to strengthen its auditor independence standards. It was referred to the House Financial Services Committee.
Sen. Carl Levin (D-MI) introduced S 1940, the "Ending the Double Standard for Stock Options Act", on February 13. This bill is cosponsored by Sen. John McCain (R-AZ), Sen. Peter Fitzgerald (R-IL), Sen. Richard Durbin (D-IL), and Sen. Mark Dayton (R-MN).
Sen McCain addressed the bill in the Senate. He stated that this bill "requires companies to treat stock options for employees as an expense for bookkeeping purposes if they want to claim this expense as a deduction for tax purposes. We introduced similar legislation in 1997 during the 105h Congress but unfortunately, the special interest with a vested stake in the status quo prevented this legislation from seeing the light of day. Currently, corporations can hide these multimillion dollar compensation plans from their stockholders or other investors because these plans are not counted as an expense when calculating company earnings. Even the Federal Accounting Standards Board, FASB, recognized that stock options should be treated as an expense for accounting purposes." Cong. Rec., Feb. 13, 2002, at S740-1.
Sen. Levin stated in the Senate that "As another lesson learned from the Enron debacle, this bill addresses a costly and dangerous double standard that allows a company to take a tax deduction for stock option compensation as a business expense while not showing it as a business expense on its financial statement." Cong. Rec., Feb. 13, 2002, at S735.
FEC to Hold Hearing on Campaign Activity on the Internet
2/14. The Federal Election Commission (FEC) published a notice in the Federal Register that it will hold a public hearing on proposed changes to its regulations regarding the status of campaign related Internet activity conducted by individuals, and of hyperlinks and endorsement press releases on Internet Web sites established by corporations and labor organizations. The hearing will be held at 10:00 AM on Wednesday, March 20, 2002. Requests to testify must be received on or before March 1, 2002. See, Federal Register, February 14, 2002, Vol. 67, No 31, at page 6883.
The FEC is the agency charged with enforcing the Federal Election Campaign Act (FECA), which regulates political contributions and expenditures. While the FEC had previously considered wide ranging regulation of political speech on the Internet, this hearing pertains to a Notice of Proposed Rulemaking (NPRM) that merely proposes to permit certain personal political web sites, and to allow corporations and unions to put certain hyperlinks and press releases in their web sites.
The FEC's NPRM [PDF] proposes three rule changes. First, it would provide that there would be no contribution or expenditure within the meaning of the FECA when individual, without receiving compensation, uses his or her own computer equipment, software, Internet services or domain names to attempt to influence a federal election. Second, it would allow corporations and unions to include hyperlinks to the web sites of candidates and political committees. Third, it would allow corporations and unions to publish in their web sites copies of press releases endorsing candidates.
FCC Addresses Classification of Services, Universal Service, and Ultrawideband
2/14. The The Federal Communications Commission (FCC) announced that it has adopted several notices of proposed rulemaking (NPRMs) and an Order at its February 14 meeting. As is the FCC's practice, it announced its actions, but did not release copies of the NPRMs or orders. Rather, it issued a series of press releases.
The FCC stated that one NPRM will examine both the regulatory classification of "telephone based broadband Internet access services", and "whether facilities based broadband Internet access providers should be required to contribute to support universal service".
The FCC stated that a second universal service fund (USF) related NPRM will examine whether the FCC should "assess USF contributions based on the number and capacity of connections, rather than on the interstate revenues they earn".
The FCC also stated that it adopted a "First Report and Order that permits the marketing and operation of certain types of new products incorporating ultra-wideband" technology.
FCC to Address Regulatory Classification of Services
2/14. The FCC issued a press release that is associated with its NPRM regarding classification of services. This release states that this NPRM "is poised to resolve outstanding issues regarding the classification of telephone based broadband Internet access services and the regulatory implications of that classification". It further states that the "the FCC tentatively concluded the wireline broadband Internet access services -- whether provided over a third party's facilities or self-provisioned facilities -- are information services, with a telecommunications component, rather than telecommunications services. Information services include such services as voice mail and e-mail, which ride over telecommunications facilities." This is CC Docket 02-33.
Chairman Michael Powell wrote a separate statement in which he stated, "I vigorously support adoption of this Notice." However, he provided little clarification of the content of the NPRM. Commissioner Kathleen Abernathy also supported the NPRM. Commissioners Michael Copps and Kevin Martin both dissented in part, for different reasons.
Copps wrote that "I will concur in one section of this Notice, simply to ensure that the universal service questions have sufficient support to be raised." However, he objected to the component of the NPRM that would examine the "statutory classification of telecommunications, telecommunications services, and information services". He stated that "This is an enormously far reaching decision and I, for one, am nowhere near ready to go there, even tentatively."
The Communications Act of 1934, as amended, provides for different regulatory treatment for different industries, as they existed at the times of enactment of the various statutory provisions. For example, there are separate regulatory regimes for telecommunications (old fashioned phone service), cable (one way programming delivered over cable), and broadcasting (programming delivered via radio or TV). The Communications Act has no statutory regime for regulating Internet or information services, and until recently, these have remained largely untouched by the FCC.
However, the deployment of new services that were not contemplated at the time when the statutory provisions were written, and the convergence of services, have raised questions about which regulatory category, if any, should apply to many new and/or converged services.
Nancy Victory, Director of the National Telecommunications and Information Administration (NTIA), commended the FCC for announcing this NPRM. See, NTIA release.
FCC Announces That It May Tax Internet Access
2/14. The Federal Communications Commission's (FCC) Notice of Proposed Rulemaking (NPRM) regarding regulatory classification of services also addresses the FCC's universal service programs. Under this NPRM the FCC will also consider whether broadband Internet access providers should be taxed to support the FCC's telecommunications subsidy programs.
The FCC stated in its release the NPRM seeks comment "on whether facilities based broadband Internet access providers should be required to contribute to support universal service." The release also states that the FCC seeks comment on "whether the Computer Inquiry network access requirements should be modified or eliminated".
The FCC and its subsidiary corporations run a collection of cross subsidization programs for the purpose of making telecommunications services more available in high cost and low income areas. Also, the more recently developed e-rate program provides telecommunications services, computer networking, and Internet services to schools and libraries under the rubric of universal service. Under the various universal service programs, business customers subsidize residential customers, urban customers subsidize rural customers, and all phone customers subsidize schools.
Section 254(d) of the Telecom Act of 1996 defines the obligation to contribute to universal service programs. It provides that "Every telecommunications carrier that provides interstate telecommunications services shall contribute, on an equitable and nondiscriminatory basis, to the specific, predictable, and sufficient mechanisms established by the Commission to preserve and advance universal service."
The statute does not tax other regulated communications industries, such as cable and broadcasting. Nor is the unregulated Internet industry required by the statute to pay.
One of the four Commissioners dissented. Kevin Martin wrote in his separate statement that "I dissent from this item's discussion of universal service obligations of providers of broadband Internet access. In particular, I object to its determination that we will consider imposing what is essentially an Internet access tax, extending universal service contribution obligations to non-wireline broadband Internet access providers, such as wireless, cable, and satellite providers. Unlike wireline providers, these providers have not been required to make universal service contributions on the basis of their broadband services."
The FCC also announced that it has adopted a second, less controversial, Further NPRM regarding universal service contributions. The FCC issued a release that states that it will examine "Whether to assess USF contributions based on the number and capacity of connections, rather than on the interstate revenues they earn. Under this proposal, local exchange carriers, interexchange carriers, and wireless providers would contribute $1 per month for each connection to a public network for residential users (paging providers would contribute 25 cents per connection). Business connection assessments would be based on the maximum available capacity, or bandwidth, of a connection."
FCC Permits Certain Ultrawideband Uses
2/14. The Federal Communication Commission (FCC) also stated that it adopted a First Report and Order permitting the marketing and operation of certain types of new products incorporating ultrawideband (UWB) technology.
UWB devices, which use very narrow pulses with very wide bandwidths, have potential applications in both radar and communications technologies. Proponents of its use have argued that UWB devices can use large portions of already allocated spectrum with minimal or no interference to incumbent users. Companies, such as Intel, have argued that UWB is a very promising technology for enabling short distance, high data rate connections that can support new and innovative applications. Incumbent spectrum users have opposed UWB.
The FCC stated in a release that "UWB technology holds great promise for a vast array of new applications that have the potential to provide significant benefits for public safety, businesses and consumers in a variety of applications such as radar imaging of objects buried under the ground or behind walls and short-range, high-speed data transmissions."
The release further states that the FCC's Order "includes standards designed to ensure that existing and planned radio services, particularly safety services, are adequately protected. The FCC will act vigorously to enforce the rules and act quickly on any reports of interference."
The releases also states that the Order "Provides for use of a wide variety of other UWB devices, such as high speed home and business networking devices ... subject to certain frequency and power limitations. The devices must operate in the frequency band 3.1-10.6 GHz. The equipment must be designed to ensure that operation can only occur indoors or it must consist of hand held devices that may be employed for such activities as peer to peer operation."
FCC Commissioner Kevin Martin wrote in a separate statement that "Consumers also stand to benefit from enhanced laptops, phones, video recorders, and personal digital assistants that can wirelessly send and receive streams of digital video, audio and data. Most importantly, ultrawideband challenges the notion that use of particular frequencies or bands is necessarily mutually exclusive. In defiance of our traditional allocation paradigm that often forces us to pick “winners and losers” in the face of competing demands, this technology seems to allow more winners all around."
He added that "I am disappointed that we did not, at this time, adopt more flexible limits that may have allowed for even more widespread use of this technology."
In contrast, FCC Commissioner Michael Copps wrote in a separate statement that "Because the effects of widespread use of UWB are not yet fully known, and interference could impact critical spectrum users, I will support, albeit somewhat reluctantly, the ultra- conservative ultra- wideband step we take today."
Secretary of Commerce Donald Evans said "I applaud Chairman Powell and today's Federal Communications Commission action on ultrawideband technology. This balanced approach will promote innovation, stimulate economic growth, create jobs, and enhance public safety. To remain the world leader, we must continue to encourage deployment of important new technologies while protecting those that already exist." See, Department of Commerce (DOC) release. The DOC's National Telecommunications and Information Administration (NTIA) has conducted studies of UWB and interference.
Friday, Feb 15
The House will not be in session.
Day three of a three day conference titled Biometric Consortium Conference. See, conference web site. Location: Hyatt Regency Crystal City, Arlington, VA.
8:00 AM - 2:00 PM. The National Science Foundation's (NSF's) Advisory Committee for Cyberinfrastructure will hold an open meeting. See, notice in Federal Register, February 4, 2002, Vol. 67, No. 23, at Pages 5136 - 5137. Location: Room 1150, NSF, 4201 Wilson Blvd., Arlington, VA.
9:30 AM. The U.S. Court of Appeals (DCCir) will hear oral argument in New World Radio v. FCC, No. 1110. Judges Henderson, Randolph and Rogers will preside.
12:00 NOON. Deadline to submit comments to the Office of the U.S. Trade Representative (USTR) regarding foreign countries that deny adequate and effective protection of intellectual property rights or deny fair and equitable market access to U.S. persons who rely on intellectual property protection. The USTR requests comments pursuant to its duties under § 182 of the Trade Act of 1974, 19 U.S.C. § 2242, which is better known as the "Special 301" provisions. See, notice in the Federal Register, December 26, 2001, Vol. 66, No. 247, at Pages 66492 - 66493.
Extended deadline to file reply comments with the FCC in its proceeding regarding cross ownership of broadcast stations and newspapers. This is MM Docket No. 01-235. See, notice in Federal Register, January 8, 2002, Vol. 67, No. 5, at Pages 828 - 829.
Monday, Feb 18
Presidents' Day. The FCC will be closed. The House and Senate will be in recess February 18 through 22.
Tuesday, Feb 19
4:00 PM. Deadline to submit grant applications to the Department of Labor's Employment and Training Administration for funds for skills training programs. These grants are financed by user fees paid by employers in the H-1B visa program. See, notice in Federal Register, January 10, 2002, Vol. 67, No. 7, at Page 1368. This notice changes a deadline of February 12 contained in a previous notice in the Federal Register, December 14, 2001, Vol. 66, No. 241, at Page 64859 - 64872.
Extended deadline to submit reply comments to the FCC in response to its Further Notice of Proposed Rulemaking regarding its cable horizontal and vertical ownership limits. See, original notice [PDF] in Federal Register of October 11, 2001, and extension Order [PDF] of January 29, 2002. The NCTA requested the extension.
Deadline to submit comments to the Federal Trade Commission (FTC) regarding its proposed settlement with Eli Lilly (which accidentally disclosed the e-mail addresses of 669 subscribers to a Prozac e-mail list). The proposed settlement requires Eli Lilly to establish a security program. See, notice in the Federal Register, February 1, 2002, Vol. 67, No. 22, at Pages 4963 - 4964.
Deadline to submit comments to the Federal Communications Commission (FCC) in the matter of Ambient's application for a determination that it is an exempt telecommunications company. It is an electric power company that also provides broadband Internet access and related information services over power lines to electrical outlets in residences. See, FCC release [PDF].
Wednesday, Feb 20
9:00 AM - 4:30 PM. The Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice (DOJ) will hold the third in a series of joint hearings on antitrust and intellectual property. There will be two sessions (9:00 AM - 12:30 PM and 2:00 - 4:30 PM) titled "Economic Perspectives on Intellectual Property, Competition and Innovation". See, FTC release and DOJ release. Location: Room 432, FTC, 600 Pennsylvania Ave., NW, Washington DC.
8:00 AM - 6:00 PM. The Federal Communications Bar Association (FCBA) and Georgetown University Law Center (GULC) will co-host a CLE program titled "FCC Speaks". FCC Chairman Michael Powell will speak on "The Path to the Digital Broadband Migration" at 8:30 AM. FCC Commissioners Abernathy, Copps, and Martin will participate in a panel discussion at 4:20 PM. The program will also include panels titled "National Broadband Policy", "Competition Policy Panel", "Spectrum Allocation Policy", "Media Ownership Working Group", "Digital Television Task Force", and "Homeland Security Council". See, full schedule. The price to attend is $795, $745 (GULC alumni), $695 (FCBA members), $595 (government employees). Location: GULC, Moot Courtroom, 600 New Jersey Ave., NW, Washington DC.
Thursday, Feb 21
9:30 AM. The U.S. Court of Appeals (DCCir) will hear oral argument in Unity Broadcasting v. FCC, No. 01-1148. Judges Henderson, Randolph and Rogers will preside.
The Federal Communications Bar Association's (FCBA) Young Lawyers Committee will hold a brown bag lunch. RSVP to Yaron Dori at ydori Location: Hogan & Hartson, 555 13th Street, NW, Room 13E-407 (use East Tower elevators).
BellSouth Refiles Section 271 Application for Georgia and Louisiana
2/14. BellSouth again submitted an application to the Federal Communications Commission (FCC), pursuant to Section 271 of the Telecom Act, requesting permission to provide in region interLATA services in the states of Louisiana and Georgia. BellSouth withdrew its last request to provide long distance service in these states on December 20, 2001. See, BS release.
People and Appointments
2/14. The Senate confirmed David Bunning to be a U.S. District Court judge for the Eastern District of Kentucky. It also confirmed James Gritzner to be a U.S. District Court judge in Iowa. Bunning is 35 years old, and the son of a Sen. Jim Bunning (R-KY).
2/14. Frank Cavaliere joined the staff of Sen. George Allen (R-VA) as legislative assistant for technology policy. He will focus on broadband, telecom and privacy issues. He previously worked for CapNet.
2/14. The Securities and Exchange Commission's (SEC) Office of the Chief Accountant named four Professional Accounting Fellows for two year terms beginning in June 2002. They four are Douglas Alkema (Deloitte & Touche, Seattle office), Gregory Faucette (Ernst & Young, New York office), Randolph Green (Andersen, Atlanta office), and Eric Schuppenhauer (KPMG, New York office). They will join the current Professional Accounting Fellows, Michael Thompson and Carina Canedo, and will replace outgoing Professional Accounting Fellows Scott Blackley, Travis Gilmer, David Kane, and Michael Pierce. They will be involved in the study and development of rule proposals, liaison with the professional accounting and auditing standards setting bodies, and consultation with registrants on accounting and reporting matters. See, SEC release.
2/14. Trey Smith was named EVP of Operations for AT&T Broadband. See, AT&T release.
More News
2/14. The Securities and Exchange Commission (SEC) announced that it filed a civil complaint in U.S. District Court (DSCar) against Clif Goldstein and others alleging violation of federal securities laws. The complaint states that the "defendants engaged in a fraudulent scheme through which they raised not less than $1.1 million from twenty five investors in twelve states and three foreign countries by marketing fictitious high yield investment contracts promising as much as 100% profit per week. This common but sophisticated fraud is known as a prime bank scam." The defendants used the Internet, and other means, to promote this scheme. The complaint alleges violations of Sections 17(a)(1) and 17(a)(2) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b5 thereunder. It seeks injunctive relief, disgorgement of ill gotten gains, and civil penalties. (This is D.C. No. 302048517.)
2/14. The United States filed a submission with the World Trade Organization (WTO) challenging the amount of trade sanctions claimed by the European Union in the Foreign Sales Corporation (FSC) tax regime dispute. The EU wants $4 Billion; the U.S. asserts that sanctions should not exceed $956 million. See, USTR release.
2/14. The FBI's National Infrastructure Protection Center (NIPC) published the February 11 issue of Cybernotes [PDF] in its web site.
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