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May 30, 2002, 9:00 AM ET, Alert No. 440.
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Annual Wiretap & Electronic Surveillance Report Released
5/23. The Administrative Office of U.S. Courts (AOUSC) released its annual wiretap and electronic surveillance report [11 pages in PDF]. It is titled "Report of the Director of the Administrative Office of the United States Courts on Applications for Orders Authorizing or Approving the Interception of Wire, Oral, or Electronic Communications". See also, AOUSC release [3 pages in PDF].
The report states that the total number of intercepts in 2001 was 1,491, that this represents a 25% increase over 2000, and that drug related matters constitute 78%. The report also states that 83% of intercepts were telephone wiretaps, and 6% were electronic intercepts (which includes e-mail surveillance). The report also states that "no federal wiretap reports indicated that encryption was encountered".
FISA/Terrorism Not Covered. This report covers intercepts concluded between January 1, 2001, and December 31, 2001. The report includes intercepts regulated by Title 18 of the U.S. Code (Crimes and Criminal Procedure). It does not include intercepts regulated by the Foreign Intelligence Surveillance Act of 1978 (FISA), which is codified in Title 50 of the U.S. Code (War and National Defense). See, 50 U.S.C. § 1801 et seq. FISA intercepts are restricted to foreign intelligence information. The FISA extends to "a group engaged in international terrorism". Groups such as Al Qaeda are subject to FISA surveillance. Hence, this report does not reference terrorism, except in the context of stating that the events of September 11, and mail delivery problems, delayed its release by 30 days.
The report states that "The three major categories of surveillance are wire communications, oral communications, and electronic communications. In the early years of wiretap reporting, nearly all intercepts involved telephone (wire) surveillance, primarily communications made via conventional telephone lines; the remainder involved microphone (oral) surveillance or a combination of wire and oral interception. With the passage of the Electronic Communications Privacy Act of 1986, a third category was added for the reporting of electronic communications, which most commonly involve digital display paging devices or fax machines, but also may include some computer transmissions. The 1988 Wiretap Report was the first annual report to include electronic communications as a category of surveillance."
Phone Wiretaps. "Telephone wiretaps accounted for 83 percent (1,171 cases) of intercepts installed in 2001. Of those, 944 wiretaps involved cellular/mobile telephones, either as the only type of device under surveillance (865 cases) or in combination with one or more other types of telephone wiretaps (79 cases)." (Parentheses in original.)
Electronic Surveillance. "The next most common method of surveillance reported was the electronic wiretap, which includes devices such as digital display pagers, voice pagers, fax machines, and transmissions via computer such as electronic mail. Electronic wiretaps accounted for 6 percent (84 cases) of intercepts installed in 2001. Microphones were used in 6 percent of intercepts (88 cases). A combination of surveillance methods was used in 4 percent of intercepts (62 cases)."
Encryption. The report also addresses the use of encryption. It states that "Public Law 106-197 amended 18 U.S.C. 2519(2)(b) in 2000 to require that reporting should reflect the number of wiretap applications granted in which encryption was encountered and whether such encryption prevented law enforcement officials from obtaining the plain text of communications intercepted pursuant to the court orders. In 2001, no federal wiretap reports indicated that encryption was encountered. For state and local jurisdictions, encryption was reported to have been encountered in 16 wiretaps in 2001; however, in none of these cases was encryption reported to have prevented law enforcement officials from obtaining the plain text of communications intercepted."
5th Circuit Affirms in Hugh Symons Group v. Motorola
5/28. The U.S. Court of Appeals (5thCir) issued its opinion in Hugh Symons Group v. Motorola, affirming the District Court's summary judgment in favor of Motorola.
Plaintiff filed a complaint in U.S. District Court (WDTex) against Motorola alleging violation of Texas's Deceptive Trade Practices Act (DTPA) in connection with allegations that Motorola breached an oral contract, and acted fraudulently and with negligent misrepresentation regarding the quality, grade, and characteristics of its MPC 821 microprocessor. Plaintiff had considered using the MPC 821 in the production of a hand held computer. Federal jurisdiction was based upon diversity of citizenship.
The District Court granted summary judgment to Motorola on the grounds that plaintiff was not a consumer within the meaning of the DTPA because it had over $25 million in gross assets (see, § 17.44 of the DTPA), that plaintiff failed to satisfy the statute of frauds, and that the tort claims sounded in contract and failed because there was no breach of contract. The Court of Appeals affirmed.
Federal Circuit Rules on Federal Jurisdiction in Patent License Disputes
5/29. The U.S. Court of Appeals (FedCir) issued its opinion in Pixton v. B&B Plastics, a case regarding federal jurisdiction in patent disputes.
Dennis Pixton holds U.S. Patent Nos. 5,025,586 and 5,129,175, both of which pertain to plastic fishing lures. Pixton granted B&B Plastics an exclusive license to the patents. The license agreement provided for royalty payments, and that if sales dropped to such a level that the minimum royalty would not be met, B&B could cover the shortfall, and if B&B chose not to cover the shortfall, Pixton could either make the agreement non-exclusive or terminate it. Pixton alleged breach of the agreement, notified B&B of its termination, and demanded that B&B cease infringing activity. B&B argued that the agreement was still in effect.
Pixton filed a complaint in U.S. District Court (SDFl) against B&B and others alleging patent infringement. The District Court dismissed for lack of federal jurisdiction, holding that the complaint sounded in contract law, and did not arise under the patent laws.
The Appeals Court reversed. Relying on Air Products & Chemicals v. Reichhold Chemicals, 755 F.2d 1559, (Fed. Cir. 1985), the Court wrote that "Pixton's well- pleaded complaint expressly sets out an action for patent infringement. The issue is not ownership; this is an action for patent infringement in which the defendant has asserted the defense of license. Jurisdiction in the federal courts is not lost simply because the most efficient approach at trial may be to address the license defense first." The Court of Appeals vacated, and remanded to the U.S. District Court.
Recording Industry Sues Audiogalaxy for Copyright Infringement
5/24. Zomba Records, and other members of the Recording Industry Association of America (RIAA) and National Music Publishers Association (NMPA), filed a complaint [78 pages in PDF] in U.S. District Court (SDNY) against Audiogalaxy and Michael Merhej alleging contributory copyright infringement, vicarious copyright infringement, and other causes of action. See also, RIAA release.
The complaint states that "Like the now enjoined music file copying system and service run by Napster, Defendants have built, maintain, and control an integrated computer system and service, known as Audiogalaxy and accessible through a website,, that they knowingly, willfully and intentionally designed specifically to facilitate and encourage millions of individual anonymous users to copy and distribute infringing copies of copyrighted works by the millions, if not billions."
SEC Sues Operators of Investment Web Site
5/28. The Securities and Exchange Commission (SEC) filed a civil complaint in U.S. District Court (NDGa) against Gold- Ventures Club and Alexander Khamidouline, dba, alleging violation of federal securities laws in connection with the operation of an Internet investment scam.
The complaint states that "Since at least March 2002, the Defendants have offered an investment program through the Gold- Ventures Website, located on the Internet at ( The Defendants' short-term investment program promises an exorbitant 200% return on principal investments of $250.00 to $5000.00 in only 14 days. The Defendants claim to remit a 200% return on the principal invested in a single payment at the end of each 14-day investment term."
The complaint also alleges that defendants used spam to promote their investment scam. The complaint also states that defendants of impersonated an SEC attorney.
The only individual named in the complaint, Khamidouline, is alleged to be a resident of Irkutsk, Russia. The web site is hosted by Earthlink, in Atlanta, Georgia.
The first count of the complaint alleges violation of Sections 5(a) and 5(c) of the Securities Act, 15 U.S.C. §§ 77e(a) and 77e(c). The second count alleges violation of Section 17(a) of the Securities Act, 15 U.S.C. § 77q(a), Section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5.
The complaint seeks an injunction against further violation of federal securities laws, an asset freeze, an accounting, disgorgement, and return of investments. It does not seek take down of the web site, or transfer of domain names.
The SEC also announced that it obtained an ex parte temporary restraining order, asset freeze and other relief. See, SEC release.
Rights of Way Barriers to Broadband Deployment
5/24. The Telecommunications Industry Rights of Way Working Group (I-ROW) wrote a letter [PDF] to the Federal Communications Commission (FCC) regarding the adverse effect of local governments' rights of way permitting on the deployment of broadband networks. The letter also advocates initiation of an FCC proceeding based upon Section 253 of the Communications Act.
I-ROW wrote that "broadband deployment is impeded when the permitting process is undefined and open ended, or worse, is misused to delay construction while the locality seeks to extract from the provider unreasonable, unlawful fees or in-kind compensation, or seeks to impose unlawful third tier local regulation on the provider's business and services. A locality charging fair and reasonable fees on a nondiscriminatory basis has no need to negotiate fees with each provider individually and, therefore, no reason to hold up the construction permitting process while fees or other terms unrelated to actual rights of way management are debated."
It added that "localities should be charging an amount calculated to: (1) administer the permitting process and any other actual and direct costs incurred by the locality directly resulting from the provider's use of the right of way; and (2) encourage, not deter broadband deployment."
I-ROW also wrote that "broadband and the underlying telecommunications networks necessary for these services are key economic drivers; thus, Congress recognized in enacting Section 253 as part of the 1996 Act that local, parochial interests should not be allowed to delay or unduly burden telecom deployment.  For this reason, Section 253 was written to preserve traditional local authority to manage the physical occupation of the public rights of way, and to collect fair and reasonable, non-discriminatory fees to offset the cost of that management, while empowering the Commission to preempt local requirements that exceed those bounds."
It concluded that the FCC should "commence a proceeding to address governmental practices and fees that constitute barriers to entry under Section 253(a), including (1) delays in granting permits that prevent providers from providing service, particularly those related to refusals to issue permits in an effort to extract above-cost fees and other concessions unrelated to rights-of-way management; and (2) the level of compensation that local governments may require consistent with the "fair and reasonable compensation" standard in Section 253(c), which the Commission would later apply in resolving Section 253(d) petitions and to guide the courts."
47 U.S.C. § 253 provides in part that "No State or local statute or regulation, or other State or local legal requirement, may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service."
It also provides that "If, after notice and an opportunity for public comment, the Commission determines that a State or local government has permitted or imposed any statute, regulation, or legal requirement that violates subsection (a) or (b) of this section, the Commission shall preempt the enforcement of such statute, regulation, or legal requirement to the extent necessary to correct such violation or inconsistency."
Martin Stern, an attorney with the law firm of Preston Gates, and a member of I-ROW, is one of the two signers of the letter. He is also scheduled to speak at a Congressional Internet Caucus Advisory Committee panel discussion titled "Speeding Broadband Deployment By Balancing of Rights of Way Interests" today at noon. See, calendar.
I-ROW has submitted similar comments in FCC and NTIA proceedings. FCC and NTIA officials have also addressed rights of way issues in public speeches. For example, on February 12, 2002, NTIA Director Nancy Victory gave a speech titled "Together on the Right Track: Managing Access to Public Roads and Rights of Way" to the National Association of Regulatory Utility Commissioner's (NARUC) Committee on Telecommunications. She stated that "we are concerned that constraints on accessing public rights of way might be inhibiting broadband network construction."
Similarly, on October 25, 2001, FCC Chairman Michael Powell gave a speech on broadband policy at a NARUC convention. He listed several areas where regulatory barriers might be removed. He stated: "Another example is the regulations that govern rights of way, zoning, and building codes. I often hear venture capitalists and broadband providers complain that these local restrictions are some of the most vexing problems in bringing new services to consumers. No town likes a cell tower nestled among the fall foliage. Few cities welcome trenches through their streets during rush hour. Nonetheless, governments -- principally state and local -- control the terms and conditions of local upgrades and can be more pro-active in facilitating deployment in their community, if they initiate broadband initiatives that encompass judgments about these rules."
See also, October 26, 2001, speech by Bruce Mehlman, Assistant Secretary of Commerce for Technology Policy.
JEC Releases Cyber Security Report
5/29. The Joint Economic Committee released a report [134 pages in PDF] titled "Security in the Information Age: New Challenges, New Strategies". The report was produced at the request of Sen. Bob Bennett (R-UT). Sen. Bennett also sent a copy of the report, and a letter, to Tom Ridge, Director of the Office of Homeland Security, urging that cyber security must be a part of national security. See also, Bennett release and JEC release.
BSA Releases Survey of Attitudes on Software Piracy
5/29. The Business Software Alliance (BSA) announced that it commissioned a survey of Internet software piracy attitudes and experiences. The BSA stated that "The results uncover a disturbing consumer trend toward piracy and the use of ``situational ethics´´ in determining whether or not to download pirated software."
The BSA stated that the survey shows that "95 percent of Internet users agree that software developers deserve to be rewarded for their efforts" and that "85 percent of users agree that intellectual property rights must be protected so companies continue to invest in research and development". Yet, the BSA stated that the survey found that 25% of Internet users never pay for downloaded software, and 32% seldom pay.
Robert Holleyman, P/CEO of BSA, stated in a release that "This is the first time we've identified end user attitudes about online theft, ... And what we found is a disturbing behavioral trend that violates copyright laws and costs billions of dollars and hundreds of thousands of jobs every year."
The BSA stated that Ipsos Public Affairs conducted the survey. The BSA stated that Ipsos conducted an "online survey of 1,026 Internet users" that was "conducted among a national cross- section of U.S. households". However, neither the BSA's report [2 pages in PDF] nor release asserted that the respondents were randomly selected by the surveyor. Also, neither document produced the text of the questions posed to respondents.
People and Appointments
5/29. Alan Scrime was named Chief of the Office of Engineering and Technology's (OET) Policy and Rules Division (PRD) at the Federal Communications Commission (FCC). The PRD is responsible for promulgating rules pertaining to the allocation of spectrum and technical issues pertaining to radio equipment and electronic devices. The PRD also handles the coordination of all spectrum issues with other federal government entities. See, FCC release [PDF].
More News
5/28. The Cellular Telecommunications and Internet Association (CTIA) wrote a letter to the Office of Management and Budget (OMB) containing its comments on the OMB's Draft Report to Congress on the Costs and Benefits of Federal Regulations. The letter lists regulations that the CTIA argues should be eliminated, such as those pertaining to wireless local number portability. The letter was sent from Michael Altschul, SVP and General Counsel of the CTIA, to John Morrall of the OMB's Office of Information and Regulatory Affairs. See also, CTIA release.
5/29. The Federal Trade Commission (FTC) published a notice in the Federal Register that it has issued a Notice of Proposed Rulemaking (NPRM) to amend its Telemarketing Sales Rule (TSR). The new rule would impose user fees on telemarketers, and their seller or telemarketer clients, for their access to the national do  not call registry, if one is implemented. Comments are due by June 28, 2002. See, Federal Register, May 29, 2002, Vol. 67, No. 103, at Pages 37362 - 37369. See also, FTC release.
5/29. The National Telecommunications and Information Administration (NTIA) published a notice in the Federal Register requesting comments on the effectiveness of Internet blocking and filtering technologies. § 1703 of the Children's Internet Protection Act (CIPA) [PDF] directs NTIA to initiate a notice and comment proceeding to evaluate whether currently available Internet blocking or filtering technology protection measures and Internet safety policies adequately address the needs of educational institutions. It also directs NTIA to make recommendations to Congress on how to foster the development of technology protection measures that meet these needs. Comments are due by August 27, 2002. See, Federal Register, May 29, 2002, Vol. 67, No. 103, at Pages 37396 - 37398.
Thursday, May 30
The House is in recess until Tuesday, June 4.
The Senate is in recess until Monday, June 3.
9:00 AM - 5:30 PM. The FCC's Public Safety National Coordination Committee will hold a series of meetings. The Interoperability Subcommittee will meet from 9:00 - 11:30 AM. The Technology Subcommittee will meet from 12:30 - 3:00 PM. The Implementation Subcommittee will meet from 3:00 - 5:30 PM. Location: FCC, Commission Meeting Room, 445 12th St., SW.
POSTPONED. 9:30 AM. The Broadband Alliance will hold a press conference. For more information, contact Dan Rene at 202 496-1000 x244.
12:00 NOON. The Congressional Internet Caucus Advisory Committee will host a panel discussion titled "Speeding Broadband Deployment By Balancing of Rights of Way Interests". The speakers will be Marilyn Praisner (Montgomery County Council), Robert Nelson (Michigan PSC), Martin Stern (I-ROW), and Sandy Wilson (Cox Enterprises). Lunch will be served. RSVP to rsvp or call Danielle at 202 638-4370. Location: Room HC-5, Capitol.
Friday, May 31
8:30 AM - 4:00 PM. The National Science Foundation's (NSF) Advisory Committee for Computer and Information Science and Engineering will hold an open meeting. For more information, contact Gwen Blount at 703 292-8900. See, notice in Federal Register. Location: 4201 Wilson Blvd., Room 1235, Arlington, VA.
9:30 AM - 12:30 PM. The FCC's Public Safety National Coordination Committee will hold a General Membership meeting. Location: FCC, Commission Meeting Room, 445 12th St., SW.
Monday, June 3
The Senate will meet at 1:00 PM.
10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in Rambus v. infineon Technologies, No. 01-1449, an appeal from the U.S. District Court (EDVa) in a patent infringement case involving semiconductor memory devices. At issue is the existence and scope of the patent disclosure obligations that arise as a result of participation in a standard setting body. This is D.C. No. 3:00CV524; the District Court opinion of August 9, 2001 is at 2001 WL 913972. Location: LaFayette Square, at 717 Madison Place, NW.
2:00 - 3:30 PM. The FTC's Bureau of Competition will hold a public workshop on merger investigation best practices. This is the first workshop of a seven part, five city, series. This event will focus on electronic records. See, FTC release. Location: FTC, Room 332, 600 Pennsylvania Ave., NW.
Extended deadline to submit reply comments to the FCC (FCC) in response to its Notice of Proposed Rulemaking titled "In the Matter of Appropriate Framework for Broadband Access to the Internet over Wireline Facilities". This is CC Docket No. 02-33. See, Order [PDF] extending deadline from May 14 to June 3. See also, original notice in Federal Register.
Tuesday, June 4
The House will meet at 2:00 PM for legislative business. No recorded votes are expected before 6:00 PM. The House will consider a number of measures under suspension of the rules.
POSTPONED TO JUNE 5. 10:00 AM. The House Commerce Committee's Subcommittee on Telecommunications and the Internet will hold a hearing titled "The FCC's UWB Proceeding: An Examination of the Government's Spectrum Management Process."
10:00 AM. The Senate Health, Education, Labor, and Pensions Committee will hold a hearing on legislation to authorize funding for the National Science Foundation. Location: Room 430, Dirksen Building.
10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in Insight Development v. Hewlitt Packard, No. 01-1459, an appeal from the U.S. District Court (NDCal) in a patent infringement case involving web imaging technology. Location: LaFayette Square, at 717 Madison Place, NW.
2:00 - 4:00 PM. The FCC's Advisory Committee for the 2003 World Radiocommunication Conference (WRC-03 Advisory Committee) will meet. See, notice and agenda [PDF]. Location: FCC, Commission Meeting Room, Room TW-C305, 445 12th Street, SW.
4:00 PM. The House Judiciary Committee's Subcommittee on Crime will hold a hearing and a mark up session for HR 4598, the Homeland Security Information Sharing Act, sponsored by Rep. Saxby Chambliss (R-GA). Audio webcast. Location: Room 2141, Rayburn Building.
Wednesday, June 5
10:00 AM. The House Commerce Committee's Subcommittee on Telecommunications and the Internet will hold a hearing titled "The FCC's UWB Proceeding: An Examination of the Government's Spectrum Management Process." Webcast. Press contact: Ken Johnson or Jon Tripp at 202 225-5735. Location: Room 2123, Rayburn Building.
2:00 PM. The House Judiciary Committee's Subcommittee on Courts, the Internet and Intellectual Property will hold a hearing titled "DRM: The Consumer Benefits of Today's Digital Rights Management Solutions." Audio webcast. Location: Room 2141, Rayburn Building.
Extended deadline to submit reply comments to the FCC in response to its notice of proposed rulemaking regarding its unbundling analysis under § 251 of the Communications Act and the identification of specific unbundling requirements for incumbent local exchange carriers. See, notice in the Federal Register. The FCC again extended the deadline for filing reply comments in its Order [PDF] adopted on April 30. This is CC Docket No. 01-338.
Thursday, June 6
10:00 AM. The House Judiciary Committee will meet to mark up several bills, including HR 3215, the Combatting Illegal Gambling Reform and Modernization Act (Goodlatte Internet gambling bill), and HR 4623, the Child Obscenity and Pormography Prevention Act of 2002. Audio Webcast. Press contact: Jeff Lungren or Terry Shawn at 202 225-2492. Location: Room 2141, Rayburn Building.
TIME? The Senate Commerce Committee's Subcommittee on Communications will hold a hearing titled Universal Service Fund. Press contact: Andy Davis 224-6654. Location: Room 253, Russell Building.
8:00 AM - 5:00 PM. The Institute for International Research (IIR) and ComCare will host a conference titled e-SAFETY: Delivering Communications & Information Technology Solutions for 21st Century Public Safety. Sen. Conrad Burns (R-MT) will give a keynote address at 8:30 AM. The price to attend is $695. See, IIR notice. Location: Ronald Reagan Building, 1300 Pennsylvania Ave., NW.
Deadline to submit comments to the SEC regarding its proposed rule amending the Investment Advisers Act of 1940 to exempt certain investment advisers that provide advisory services through the Internet from the prohibition on SEC registration set out in § 203A of the Act. The amendments would permit these advisers to register with the SEC instead of with state securities authorities. See, notice in the Federal Register.
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