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February 28, 2002, 9:00 AM ET, Alert No. 378.
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House Passes Tauzin Dingell Bill
2/27. The House passed HR 1542, the Internet Freedom and Broadband Deployment Act, also known as the Tauzin Dingell bill, by a vote of 273 to 157. See, Roll Call No. 45.
The Tauzin Dingell bill provides regulatory relief to the Baby Bell phone companies. It provides that "Except to the extent that high speed data service, Internet backbone service, and Internet access service are expressly referred to in this Act, neither the Commission, nor any State, shall have authority to regulate the rates, charges, terms, or conditions for, or entry into the provision of, any high speed data service, Internet backbone service, or Internet access service, or to regulate any network element to the extent it is used in the provision of any such service; nor shall the Commission impose or require the collection of any fees, taxes, charges, or tariffs upon such service."
It would also amend Section 251 to provide that "neither the Commission nor any State shall require an incumbent local exchange carrier to provide unbundled access to any network element for the provision of any high speed data service."
The House approved an amendment in the nature of a substitute [PDF] offered by Rep. Billy Tauzin (R-LA) and Rep. James Sensenbrenner (R-WI), as amended by an amendment [PDF] offered by Rep. Fred Upton (R-MI) and Rep. Gene Green (D-TX) that increases the maximum penalties that may be imposed on phone companies for violations of telecommunications law, and an amendment [PDF] offered by Rep. Steve Buyer (R-IN) and Rep. Adolphus Towns (D-NY) that provides certain guarantees to competitive local exchange carriers.
The House rejected a broader amendment [PDF] offered by Rep. Chris Cannon (R-UT) and Rep. John Conyers (D-MI) by a vote of 173 to 256. See, Roll Call No. 44.
After two years' of hearings, committee mark ups, speeches, and media advertising, the final passage was relatively brief. The House Rules Committee had limited the matters which the House could consider to one amendment in the nature of a substitute, and three further amendments. The Rules Committee also strictly limited time for the debate. Supporters argued that the bill would spur broadband deployment. Opponents argued that it would not. Supporters argued that it would increase competition. Opponents argued that it would not. Finally, much of the argument in the end focused on objections to the Rules Committee's restrictions, and last minute procedural maneuvers to get around them.
Sen. Hollings Criticizes Tauzin Dingell Bill
2/27. While the House was debating the Tauzin Dingell bill, Sen. Ernest Hollings (D-SC) held a press conference to criticize the bill. He called it "blasphemy, a total fraud." He said that "it has nothing to do with broadband; it has nothing to competition." Rather, he said it is an attempt by the Baby Bells to extend their monopolies to long distance.
He also commented on the lobbying and political contributions by the Bells. "It is a cash and carry government," said Sen. Hollings.
Sen. Hollings stated that one way to promote broadband would be to pass legislation giving tax credits for deployment of broadband facilities in rural areas.
"No one can point to a law that prevents broadband," added Hollings. He said that most people could purchase broadband service, if they wanted it. Rather, "it is a lack of demand" that is limiting broadband use. He said that people do not want to pay $50 per month just to get their e-mail more quickly.
Sen. Hollings suggested that dealing with demand issues would promote broadband use. He said that digital rights management must be addressed, so that content providers will make more material available online. The Senate Commerce Committee, which Sen. Hollings chairs, is holding a hearing on this topic on Thursday, February 28, at 9:30 AM.
Sen. Hollings also stated that the Congress must pass a privacy bill. He added that "we are getting close, very close. I think we can get one out this year." If the Senate were to pass a privacy bill, it would then have to pass the House Commerce Committee, which is chaired by Rep. Billy Tauzin (R-LA) -- the blasphemer.
FCC Reports on Local Phone Competition
2/27. The Federal Communications Commission (FCC) released a report [21 pages in PDF] titled "Local Telephone Competition: Status as of June 30, 2001". It states that "Competitive local exchange carriers (CLECs) reported 17.3 million (or 9.0%) of the approximately 192 million nationwide switched access lines in service at the end of June 2001, compared to 14.9 million (or 7.7% of nationwide lines) at the end of the preceding year. This represents a 16% growth in CLEC market size during the first six months of 2001." It also states that "The 72 providers of mobile wireless telephone services that reported data as of June 30, 2001 served about 114 million subscribers." See also, FCC release [2 pages in PDF].
FTC Releases Documents Pertaining to FTC-ATR Agreement on Clearance Procedures
2/27. The Federal Trade Commission (FTC) published in its web site a collection of documents that pertain to the controversial, and as yet, unimplemented, Memorandum of Agreement [2.3 MB PDF file] negotiated by Timothy Muris, FTC Chairman, and Charles James, Assistant Attorney General in the Department of Justice in charge of the Antitrust Division (ATR). See, FTC release.
See, ABA Antitrust Section Letter [PDF 128KB], Letter from the Business Roundtable, the National Association of Manufacturers and the U.S. Chamber of Commerce [PDF 128KB], Number of Enforcement Actions and Substantial Investigations by DOJ and FTC, by Industry FY1997 - Present [HTML], Clearance Delays [HTML], Initial Recommendations [HTML], and Letters from former antitrust enforcement officials [PDF 774KB].
FRB Chair Greenspan Testifies on Economy
2/27. The House Financial Services Committee held a hearing to receive the testimony of Alan Greenspan, Chairman of the Federal Reserve Board, on monetary policy. He stated in his prepared testimony that "increasing signs have emerged that some of the forces that have been restraining the economy over the past year are starting to diminish and that activity is beginning to firm. ... One key consideration in the assessment that the economy is close to a turning point is the behavior of inventories."
He added that "Inventories, especially among producers and purchasers of high-tech products, did run to excess over the past year, as sales forecasts went badly astray; alas, technology has not allowed us to see into the future any more clearly than we could previously. But technology did facilitate the quick recognition of the weakening in sales and backup of inventories. This enabled producers to respond forcefully, as evidenced by output adjustments that have resulted in the extraordinary rate of inventory liquidation we experienced late last year."
FRB Vice Chair Addresses High Tech and Productivity
2/27. Roger Ferguson, Vice Chairman of the Federal Reserve Board, gave a speech in Canton, Ohio, titled "A Review of Economic Developments in 2001 and the Economic Outlook". He stated that "signs of economic recovery are increasing". He also addressed the affect of information technology on productivity and economic growth.
He stated that "Perhaps the most notable feature of our economy in recent years, however, has been the acceleration in productivity." He continued that "Productivity growth continued over the four quarters of 2001. That it increased is impressive, given the historical tendency of productivity growth to turn negative when the economy enters recession. This performance provides additional evidence that the improvements in productivity growth that we have witnessed since the mid 1990s have been largely structural and will persist for a time."
"But the fundamental factor leading me to be cautiously optimistic that much of the improvement is likely to be sustained is my outlook for the state of technological advancement in the United States," said Ferguson. "Booming investment in the 1990s was due importantly to steep declines in prices of high tech equipment, which largely reflected rapid technical progress. About 1/2 percentage point of the increase in productivity growth in the 1995-99 period can be attributed to this so called capital deepening. Although the extraordinary pace of investment spending in those boom years was not sustainable, I believe that technological progress will continue to drive down the cost of information technology in the coming years, inducing still robust growth of the capital stock. Moreover, businesses have reaffirmed their intentions to improve productivity by substituting cost saving high tech capital for labor."
EPIC Releases Report on Electronic Surveillance and the DOJ Budget
2/27. The Electronic Privacy Information Center (EPIC) released a report [PDF] titled "Paying for Big Brother: A Review of the Proposed FY2003 Budget for the Department of Justice." It states that "Included in the DOJ Budget are many new surveillance and electronic security programs."
The report warns that "the Budget documents released thus far lack adequate transparency and level of detail concerning the Departmentís programs that would allow a fair public evaluation of their necessity, efficacy, and possible risks to civil liberties and Constitutional values."
For example, the report states that "The Department Justice plans a large scale Identification Systems Integration (ISI) that would greatly increase the sharing and compilation of personal information held by federal agencies. The FY2003 Budget requests a total increase in funding of $23.5 million. There is no information in the budget materials provided to the public that indicate privacy or security issues have been considered in the development of ISI."
Senate Commerce Committee Holds Hearing on Digital Divide
2/27. The Senate Commerce Committee's Subcommittee on Science, Technology and Space, held a hearing on S 414, the NTIA Digital Network Technology Program Act, and a bill to remedy various "digital divides". This bill would authorize $250 Million per year for five years for a grant program for digital network technologies.
S 414 is sponsored by Sen. Max Cleland (D-GA), Sen. Ernest Hollings (D-SC), and ten other Senators. It would establish a grant program for educational institutions to be administered by the Department of Commerce's National Telecommunications and Information Administration (NTIA).
The entities that could receive grants under this bill include historically black colleges and universities, Hispanic serving institutions, tribally controlled colleges and universities, Alaska Native serving institutions, Native Hawaiian serving institutions, and other institutions that have "enrolled a substantial number of minority, low income students".
Sen. Ron Wyden (D-OR), the Chairman of the Subcommittee, stated that "the debate about the digital divide is whether this country is going to tolerate an information aristocracy or not." He added that this is not a partisan issue.
Sen. George Allen (R-VA) concurred that this should not be a partisan issue. He also used the hearing to promote S 488, the Education Opportunity Tax Credit Act. This bill would provide a $1000 per child tax credit for families purchasing "computer technology or equipment". Sen. Allen is the sponsor.
The Subcommittee heard from two panels of witnesses, all of whom represent groups that would receive grants provided by this bill. All expressed their support for the bill. The panel of witnesses did not include a representative of the NTIA. Sen. Byron Dorgan (D-ND) also participated in the hearing.
Senate Judiciary Committee Holds Hearing on Sovereign Immunity and IPR
2/27. The Senate Judiciary Committee held a hearing on sovereign immunity and the protection of intellectual property. Sen. Patrick Leahy (D-VT), the Chairman of the Committee, introduced S 1611, the Intellectual Property Protection Restoration Act of 2001, on November 1, 2001.
The bill states that one of its purposes is to "help eliminate the unfair commercial advantage that States and their instrumentalities now hold in the Federal intellectual property system because of their ability to obtain protection under the United States patent, copyright, and trademark laws while remaining exempt from liability for infringing the rights of others".
Sen. Leahy also sought unsuccessfully to pass similar legislation in the last Congress, while Sen. Orrin Hatch (R-UT) was Chairman of the Senate Judiciary Committee. In addition, Rep. Howard Coble (R-NC) and Rep. Howard Berman (D-CA) introduced HR 3204, the companion bill to S 1611 in the House. Reps. Coble and Berman are the Chairman and ranking Democrat on the House Judiciary Committee's Courts, Internet and Intellectual Property Subcommittee.
Waiver of Sovereign Immunity. The purpose of these bills is to prevent states from infringing patents, copyrights and trademarks. The bills would, among other things, prevent states from recovering damages for infringement of state owned intellectual property, unless they have first waive their 11th Amendment sovereign immunity from suits against them for their infringement of the intellectual property of others.
Abrogation under the 5th or 14th Amendments. The two bills would also provide that states that violate intellectual property rights "in a manner that deprives any person of property in violation of the fourteenth amendment of the United States Constitution, shall be liable to the party injured in a civil action in Federal court for compensation for the harm caused by such violation." The bills contain similar language for violations which constitute takings under the 5th Amendment.
Ex Parte Young Doctrine. Finally, these bills would codify the Ex parte Young doctrine, which permits injunctions against state officials. See, 209 U.S. 123 (1908).
Supreme Court Opinions. The problem addressed by these bills arose in 1996 when the Supreme Court of the U.S. ruled in Seminole Tribe of Florida v. Florida that the Congress lacks authority under Article I of the Constitution to abrogate the States' 11th Amendment immunity from suit in federal courts. See also, the 1999 opinions of the Supreme Court in Florida Prepaid Postsecondary Education Expense Board v. College Savings Bank (invalidating the Patent and Plant Variety Protection Remedy Clarification Act) and College Savings Bank v. Florida Prepaid Postsecondary Education Expense Board (invalidating the Trademark Remedy Clarification Act).
Eleventh Amendment. "The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State."
James Rogan, Director of the U.S. Patent and Trademark Office (USPTO) stated in his prepared testimony at the February 27 hearing that "Intellectual property owners view the current situation as inequitable. In their view, State institutions profit from federally protected intellectual property and are permitted to bring suit to protect their own intellectual property, but are shielded from monetary damages as defendants. This inequity skews our system of intellectual property protection, because the penalties in place to discourage infringement do not apply to State entities. The Administration shares some of these concerns."
Rogan added that "The Commerce Department supports the objective of ensuring that owners of intellectual property rights have a proper remedy when a State infringes upon those intellectual property rights. As such, we believe that a legislative answer to the questions raised by the Florida Prepaid cases is appropriate."
Rogan also pointed out that "Although a State would be required to waive its sovereign immunity in infringement suits involving all types of federally protected intellectual property in order to obtain patent, trademark, or copyright damages, it is not clear under the current draft bill that a State owner of a semiconductor chip design or plant variety would be required to waive immunity in order to obtain damages for infringement of this intellectual property." He suggesting adding appropriate language to address this matter.
Marybeth Peters, the Register of Copyrights, stated in her prepared testimony that S 1611 is a "carefully balanced bill. It provides copyright owners with effective tools to restore their ability to obtain appropriate remedies for infringement by States while remaining, I believe, within Congress' constitutional authority. The Copyright Office supports enactment of S 1611."
Michael Kirk, Executive Director of the American Intellectual Property Law Association, expressed support for S 1611 in his opening statement. He also stated that the recent Supreme Court decisions render the U.S. vulnerable to World Trade Organization (WTO) determinations that it is in violation of the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS).
William Thro, an attorney for the state of Virginia, opposed S 1611 in his prepared testimony. He said that it is bad policy, and unconstitutional. He asserted that "By forcing the States to choose between waiving sovereign immunity and being able to enforce their own intellectual property rights, it violates the doctrine of unconstitutional conditions." He also asserted that "States are not engaged in a widespread practice of abusing intellectual property rights".
Keith Shraad, of the National Information Consortium, testified regarding an egregious violation of intellectual property rights in software by the state of Georgia, and its abuse of sovereign immunity. See, prepared testimony. See also, prepared testimony of Paul Bender, a professor at the Arizona State University College of Law, in support of S 1611.
Ways & Means Committee Holds Hearing on WTO Tax Rulings
2/27. The House Ways and Means Committee held a hearing on the World Trade Organization's (WTO) extraterritorial income decision.
The WTO has ruled that the U.S. Extraterritorial Income Exclusion Act (ETI), and its predecessor, the Foreign Sales Corporation Act (FSC), constitute illegal export subsidies. These tax regimes greatly benefit U.S. companies that export their products, including high tech exporters such as Microsoft, Cisco and Motorola. The U.S. unsuccessfully argued to the WTO that the U.S. has a global tax system, while European nations have territorial tax systems, that this puts U.S. exporters at a competitive advantage, and that tax regimes such as ETI and FSC that exempt certain foreign source income from taxation merely level the playing field.
Rep. Bill Thomas (R-CA), the Chairman of the Committee, stated in his opening statement, that "Four times the WTO has sent the United States this same clear message -- our tax system as it is currently constituted violates international trade rules.  In the opinion of the Chairman of this committee, the time has come for us to listen. Our corporate tax structure is in need of major restructuring, not another attempt at a short term fix. More fundamental reform is required."
Rep. Jim Ramstad (D-MN) stated in his opening statement that "we must begin to examine whether the foundations of our worldwide tax system are sustainable if American businesses are to remain competitive in our global economy. We already have too many examples of former U.S. companies that now are headquartered overseas because of our burdensome international tax system. The WTO's most recent decision and the resulting sanctions facing our businesses is another wake-up call for reform."
Rep. Phil Crane (R-IL), Chairman of the Trade Subcommittee, once again stated that the solution is to abolish the corporate income tax altogether.
See, prepared testimony of witnesses: Peter Davidson (General Counsel, United States Trade Representative), Barbara Angus (Department of the Treasury), Gary Hufbauer (Institute of International Economics), Peter Merrill (Price Waterhouse), and Stephen Shay (Ropes & Gray).
Thursday, Feb 28
9:30 AM. The Senate Commerce Committee will hold a hearing titled Protecting Content in a Digital Age -- Promoting Broadband and the Digital Television Transition. Sen. Ernest Hollings (D-SC) will preside. The scheduled witnesses are Michael Eisner (Ch/CEO of Disney), Peter Chernin (P/COO of News Corp.), Leslie Vadasz (EVP of Intel), Andreas Bechtolsheim (Cisco), James Meyer (Thomson Multimedia), Robert Perry (Mitsubishi Digital Electronics). Location: Room 253, Russell Building.
10:00 AM. The Senate Judiciary Committee is scheduled to hold a business meeting. Location: Room 226: Dirksen Building.
12:15 PM. The FCBA's Transactional Practice Committee will host a brown bag lunch on mass media transactions. RSVP to Sue Fischer at 202 776-2000. Location: Dow Lohnes & Albertson, 1200 New Hampshire Ave., NW.
1:00 - 5:00 PM. The FCC's Wireless Telecommunications Bureau will hold a public forum addressing issues related to the acquisition and analysis of data on the state of competition in the commercial mobile radio services industry for the 7th Annual CMRS Competition Report. Location: FCC, 445 12th Street, SW, Room TW-C305.
3:00 PM. Rep. Bob Goodlatte (R-VA) and Rep. Rick Boucher (D-VA) will host a media roundtable on the Congressional delegation trip to Europe last week to promote the Internet, intellectual property rights, and electronic commerce. The delegation met with members of the Russian Duma, Czech Parliament, German Bundestag, and European Parliament. This event had been scheduled for February 27, but was postponed because of votes on the Tauzin Dingell bill. Location: Office of Rep. Goodlatte, Room 2240, Rayburn Building.
4:00 PM. Adam Mossoff (Professor at Northwestern Univ. School of Law) will give a lecture titled "The Relevance of Natural Rights in Intellectual Property Today". For more information, contact Prof. Robert Brauneis at rbraun @main.nlc.gwu.edu or 202 994-6138. Location: George Washington Univ. Law School, 2000 H Street, NW.
6:30 - 8:30 PM. FCC Commissioner Michael Copps will speak at a FCBA reception on "the value of mentoring in building a career." Location: Kelley Drye & Warren, 1200 19th Street, NW.
Day two of a two day conference titled "Combatting Cyber Attacks on Your Corporate Data". See, conference information page. Location: Omni Shoreham Hotel.
Friday, March 1
The House will not be in session.
Deadline to submit public comments to the FTC regarding the use of disgorgement as a remedy for competition violations, including those involving the Hart Scott Rodino Premerger Notification Act, FTC Act, and Clayton Act. See, FTC release and Federal Register notice.
Deadline to file comments with the FCC in response to its notice of proposed rulemaking regarding the appropriate regulatory requirements for incumbent local exchange carriers' provision of broadband telecommunications services. The FCC adopted this NPRM at its December 12 meeting. This is CC Docket No. 01-337. See, notice in the Federal Register.
Deadline to submit reply comments to the FCC regarding Verizon's Section 271 application to provide in region interLATA services in the state of Vermont. See, FCC notice [PDF]. This is CC Docket No. 02-7.
Monday, March 4
9:30 AM. The U.S. Court of Appeals (DCCir) will hear oral argument in ACS Anchorage Inc v. FCC, 01-1059. Judges Edwards, Randolph and Williams will preside. Location: 333 Constitution Ave. NW.
Tuesday, March 5
9:00 AM - 5:00 PM. The National Institute of Standards and Technology's (NIST) Computer System Security And Privacy Advisory Board (CSSPAB) will meet to discuss computer security legislation, privacy issues, critical infrastructure protection, the USPS's electronic postmark products, and other matters. The CSSPAB advises the Secretary of Commerce and the Director of NIST on security and privacy issues pertaining to federal computer systems. This is the first day of a three day meeting. See, notice in Federal Register. Location: General Services Administration, 7th and D Streets, SW, Room 5700.
10:00 AM. The Senate Appropriations Subcommittee's Subcommittee on Commerce, Justice, State, and the Judiciary will hold a hearing regarding the Department of Justice (DOJ) budget request for Fiscal Year 2003. Location: Room 138, Dirksen Building.
10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in Marketel International v. Priceline.com, No. 01-1279, an appeal from the U.S. District Court (NDCal). Marketel filed a complaint against Priceline alleging misappropriation of trade secrets, misappropriation of business model, conversion, false advertising, and entitlement to a correction of inventorship of Priceline's U.S. Patent No. 5,794,207. Marketel appeals the District Court's dismissal of some of its claims. Location: Courtroom 203, LaFayette Square, 717 Madison Place, NW.
10:30 AM - 4:30 PM. The President's Council of Advisors on Science and Technology (PCAST) will hold a meeting to discuss the science and technology of combating terrorism, federal spending on science and technology research and development, demand issues related to deployment of broadband infrastructure, and other topics. See, notice in Federal Register. Location: Board Room, American Institute of Architects, 1735 New York Ave., NW.
6:00 - 8:15 PM. The FCBA will host a CLE seminar titled "U.S. Spectrum Policy: Convergence or Co-Existence?" This is Part I of a two part series. Part II will be on April 16. See, program agenda.
Wednesday, March 6
9:00 AM - 5:00 PM. The NIST's Computer System Security And Privacy Advisory Board (CSSPAB) will meet to discuss computer security legislation, privacy issues, critical infrastructure protection, the USPS's electronic postmark products, and other matters. The CSSPAB advises the Secretary of Commerce and the Director of NIST on security and privacy issues pertaining to federal computer systems. This is the second day of a three day meeting. See, notice in Federal Register. Location: General Services Administration, 7th and D Streets, SW, Room 5700.
10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in NeoMagic v. Trident MicroSystems, No. 01-1631, an appeal from the U.S. District Court (DDel) in a patent infringement and antitrust case involving embedded memory semiconductors. The District Court granted summary judgment of non infringement to Trident MicroSystems. Location: Courtroom 201, LaFayette Square, 717 Madison Place, NW.
10:00 AM - 4:00 PM. The SEC will hold a roundtable meeting to examine proposals for better protecting investors by reforming financial disclosure and auditor oversight. The morning session (10:00 AM - 12:00 NOON) will focus on financial disclosure. The afternoon session (2:00 - 4:00 PM) will focus on auditor oversight. See, SEC notice. Location: Douglas Room, Basement, SEC.
10:30 AM. The Senate Judiciary Committee's Subcommittee on Antitrust, Competition, and Business and Consumer Rights will hold a hearing titled "Dominance in the Sky: Cable Competition and the Echostar Direct TV Merger". Sen. Herb Kohl (D-WI) will preside. Location: Room 226, Dirksen Building.
12:15 PM. The FCBA's Online Committee will host a brown bag lunch. The speaker will be Anthony Rutkowki, VP Internet Strategy, Verisign. He will address "Broadband, When? -- Verisign's' View." RSVP to Scott Harris at sharris @harriswiltshire.com. Location: Lampert & O'Connor, 5th Floor, 1750 K Street, NW.
2:30 PM. The Senate Commerce Committee's Subcommittee on Communications will hold a hearing on wireless communications infrastructure. Location: Room 253, Russell Building. 
People and Appointments
2/27. The Securities and Exchange Commission (SEC) named Carol Stacey Chief Accountant of the SEC's Division of Corporation Finance. See, SEC release.
2/26. Novell named Christopher Stone to the newly created position of Vice Chairman. See, Novell release.
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