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June 11, 2002, 9:00 AM ET, Alert No. 448.
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Divided En Banc 5th Circuit Reverses in Veeck v. SBCCI
6/10. The U.S. Court of Appeals (5thCir) issued it en banc opinion in Veeck v. SBCCI, a case involving whether a copyrighted work loses it protection when adopted into law. The Court split 9-6.
Background. The Southern Building Code Congress International (SBCCI) is a nonprofit organization that develops, promotes, and promulgates model building codes. Local governments, in turn, enact its codes into law by reference, in whole, or in part. SBCCI asserts a copyright in each of its codes. Peter Veeck, who also uses the name Texoma Regional Web, operates a web site that contains information about North Texas. Several towns in North Texas have adopted SBCCI model codes. Veeck purchased from SBCCI CDs with copies of the building codes. In disregard of the software license and copyright notice, Veeck copied and published these building codes into his web site.
District Court. Veeck filed a complaint in U.S. District Court (EDTex) against SBCCI seeking a declaratory judgment that his actions did not violate the Copyright Act. SBCCI counter claimed for copyright infringement. The Court ruled on cross motions for summary judgment that Veeck had infringed valid copyrights, and permanently enjoined Veeck from further infringement.
Appeals Court - Three Judge Panel. A divided three judge panel affirmed in an opinion issued on February 2, 2001. The majority wrote that "if code writing groups like SBCCI lose their incentives to craft and update model codes and thus cease to publish, the foreseeable outcome is that state and local governments would have to fill the void directly, resulting in increased governmental costs as well as loss of the consistency and quality to which standard codes aspire. A second glance at the names of the amici supporting SBCCI's position in this case provides an idea of the potential sweep of a contrary holding that the authors of model codes could not enforce copyrights in their works once the ultimate reason for their very creation is realized." See also, TLJ story, 5th Circuits Affirms Judgment of Internet Copyright Infringement, February 5, 2001.
Appeals Court - En Banc. A divided en banc panel reversed. Judge Edith Jones wrote the opinion for the majority of nine.
The Court wrote that "As the organizational author of original works, SBCCI indisputably holds a copyright in its model building codes. ... The question before us is whether Peter Veeck infringed SBCCI's copyright on its model codes when he posted them only as what they became -- building codes of Anna and Savoy, Texas -- on his regional website. Put otherwise, does SBCCI retain the right wholly to exclude others from copying the model codes after and only to the extent to which they are adopted as ``the law´´ of various jurisdictions?"
First, the Court held that Supreme Court precedents of Banks v. Manchester, 128 U.S. 244, 9 S.Ct. 36 (1888) and Wheaton v. Peters, 33 U.S. (8 Pet.) 591 (1834) support Veeck. Both cases involved claims by reporters to hold copyrights in their published copies of court opinions. The Supreme Court held in these cases that judges, as public officials, cannot claim to be authors of their official opinions for the purpose of copyright protection. The Supreme Court denied copyright protection to the court reporters.
The Fifth Circuit wrote that it extended this reasoning to the present case. It wrote that "we hold that when Veeck copied only ``the law´´ of Anna and Savoy, Texas, which he obtained from SBCCI's publication, and when he reprinted only ``the law´´ of those municipalities, he did not infringe SBCCI's copyrights in its model building codes."
Second, the Court held that the Copyright Act and the merger doctrine support Veeck. The Court wrote that "The statute excludes from copyright protection ideas, procedures, processes, systems methods of operation, or information in the public domain. See 17 U.S.C. § 102(b) ... If an idea is susceptible to only one form of expression, the merger doctrine applies and § 102(b) excludes the expression from the Copyright Act. ... Veeck copied the building code of the towns of Anna and Savoy, Texas, based on their adoption of a version of the SBCCI model code. The codes are ``facts´´ under copyright law. They are the unique, unalterable expression of the ``idea´´ that constitutes local law."
Third, the Court wrote that judicial precedent from other supports Veeck. In particular, the Court distinguished two cases based on similar facts. In CCC Info. Servs. v. Maclean Hunter Mkt. Reports, Inc., 44 F.3d 61 (2d Cir. 1994), cert. denied, 516 U.S. 817 (1995), the Second Circuit upheld the copyright of a privately prepared listing of automobile values that states required insurance companies to use. In Practice Mgt. Info. Corp. v. American Med. Ass'n, 121 F.3d 516 (9th Cir. 1997), cert. denied, 522 U.S. 933 (1997), opinion amended by 133 F.3d 1140 (9th Cir. 1998), the Ninth Circuit held that the American Medical Association did not lose the right to enforce its copyright when use of its promulgated coding system was required by government regulations. In the present case, the Court distinguished the legislative act of reference from the legislative act of incorporation.
Dissents. Both Judges Patrick Higginbotham and Weiner wrote dissents. Higginbotham criticized the opinion of the Court as "federal common law". He added that "the Congress is best suited" to reach conclusions such as that of the majority.
He also wrote that the majority misinterpreted the Supreme Court's holding in Banks: "Banks holds that judges, as public employees, cannot have a financial interest in the fruits of their judicial labors. It is a case about authorship, about the acquiring of copyrights by public officials, not a case invalidating the copyrights held by private actors when their work is licensed by lawmakers." He also rejected the merger argument as mere "word play".
Weiner wrote a voluminous and adamant dissent joined by five other judges. He differed with the majority on nearly everything, except its statement of the facts, which he nevertheless amply amended. He wrote that the majority misinterpreted Supreme Court precedent, misinterpreted cases from other Circuits, and misapplied the doctrine of merger. He also wrote at length about the policy implications.
He wrote that "Today, the trend toward adoption of privately promulgated codes is widespread and growing, and the social benefit from this trend cannot be seriously questioned. The necessary balancing of the countervailing policy concerns presented by this case should have led us to hold that, on these facts, the copyright protection of SBCCI's privately authored model codes did not simply evanesce ipso facto, when the codes were adopted by local governments; rather, they remain enforceable, even as to non-commercial copying, as long as the citizenry has reasonable access to such publications cum law -- and subject, of course, to exceptions for implied or express waiver or consent, fair use, or other recognized exceptions, when applicable. For these reasons, I cannot join in the majority's inflexible reasoning and unnecessarily overbroad holding."
Certiorari. This case may be a likely candidate for review by the Supreme Court. The Fifth Circuit divided nearly evenly. This opinion arguably creates a conflict between the Fifth Circuit, and the First, Second and Ninth Circuits. Finally, the Supreme Court recently demonstrated an interest in the copyright clause by granting certiorari in Eldred v. Ashcroft.
6/10. The Bureau of Industry and Security (BIS), formerly known as the Bureau of Export Administration (BXA), published a notice in the Federal Register regarding a notice of inquiry (NOI) regarding "the current limit for use of License Exception TSR for exports and reexports of technology and software on the Commerce Control List (CCL) of the Export Administration Regulations (EAR) under Export Classification Control Numbers (ECCNs) 4D001 and 4E001".
The notice further states that "These ECCNs control technology and software that can be used for the development, production, or use of computers. The goal of this notice of inquiry is to collect information from industry that will assist BIS in evaluating whether the current TSR eligibility level of 33,000 Millions of Theoretical Operations per Second (MTOPS) for exports and reexports to most countries should be adjusted, taking into consideration the control level for the export of computer equipment and the control policies of other member countries of the Wassenaar Arrangement."
Public comments are due by July 10, 2002. See, Federal Register, June 10, 2002, Vol. 67, No. 111, at Pages 39675 - 39676. 
Rep. Capuano Writes FCC Re Classification of Cable Modem Service
6/4. Rep. Michael Capuano (D-MA) wrote a letter [PDF] to the Federal Communications Commission (FCC) regarding its notice of proposed rulemaking (NPRM) titled "Appropriate Regulatory Treatment for Broadband Access to the Internet over Cable Facilities".
He wrote that "It is my understanding that on March 15, 2002, the FCC issued a Declaratory Ruling that found cable modem service provided on a cable system should be classified as an ``interstate information service´´. This ruling has broad implications for the ability of local communities to regulate this service."
He argued that "the NPRM will drastically impact the ability of local governments to charge franchise fees based on cable modem service revenues. This creates economic hardship for thousands of cities and towns, many already struggling with revenue shortfalls. In addition, it will also deny these communities the opportunity to recoup the expense of providing right of way for cable companies."
The FCC announced its Declaratory Ruling and Notice of Proposed Rulemaking [PDF] at its meeting on March 14. It released the 75 page document on March 15. It addresses the legal classification and the appropriate regulatory framework for broadband access to the Internet over cable system facilities. The vote was three to one. Commissioner Michael Copps wrote strenuous dissent. This is GN Docket No. 00-185 and CS Docket No. 02-52. See also, FCC release.
The FCC concluded "that cable modem service, as it is currently offered, is properly classified as an interstate information service, not as a cable service, and that there is no separate offering of telecommunications service. In addition, we initiate a rulemaking proceeding to determine the scope of the Commission's jurisdiction to regulate cable modem service and whether (and, if so, how) cable modem service should be regulated under the law ..."
The DR & NPRM further states that "The Communications Act does not clearly indicate how cable modem service should be classified or regulated", but nevertheless "conclude[s] that cable modem service as currently provided is an interstate information service, not a cable service, and that there is no separate telecommunications service offering to subscribers or ISPs."
This declaratory ruling is also the subject of petitions for review pending in the U.S. Court of Appeals.
SEC Files Suit for Misstatement of Financial Results
6/10. The Securities and Exchange Commission (SEC) filed a civil complaint in U.S. District Court (DC) against Kenneth Kurtzman and Brian Bergeron alleging violation of federal securities laws in connection with the misstatement of's financial results, by improperly deferred $1.5 Million in expenses under a contract with
The complaint alleges violation of §§ 10(b), 13(a), 13(b)(2)(A) and 13(b)(5) of the Exchange Act and Rules 10b-5, 12b-20, 13a-1, 13a-13, 13b2-1 and 13b2-2 thereunder. The complaint seeks civil penalties.
The SEC also announced that "Kurtzman and Bergeron consented, without admitting or denying the allegations in the Commission's complaint, to pay civil penalties of $60,000 and $25,000, respectively." See, SEC release.
The SEC also instituted and settled an administrative proceeding against Kurtzman,, and See, Order Instituting Proceedings. The Order alleges that "The employees ... should have known that the purpose of splitting the settlement into two letters was to allow to delay the recognition of expenses.'s acquiescence in a settlement documented with two letters facilitated's improper deferral of expenses." The SEC did not allege a Section 10 violation by Amazon.
SEC Official Addresses Internet Advisers Proposal
6/6. Paul Roye, Director of the Securities and Exchange Commission's (SEC) Division of Investment Management gave a speech in New York City in which he addressed many topics related to investment management, including the SEC's Internet advisers proposal.
He stated that "on April 12th, in response to an increasing number of investment advisers providing advice primarily through the Internet, the Commission proposed rule amendments under the Advisers Act that would permit an adviser that conducts substantially all of its advisory business through an interactive Internet website, to register with the Commission rather than registering with all of the states. As you may be aware, under the National Securities Markets Improvement Act's amendments to the Advisers Act, advisers that have $25 million or more in assets under management generally register with the Commission, and advisers that have less than $25 million generally register with the states."
See, SEC's notice of this proposed rule. June 6 was the close of the public comment period. See, electronically filed comments.
Roye continued that, "However, so-called Internet advisers typically do not have ``assets under management´´ because they provide intermittent securities advice rather than ``continuous and regular supervisory or management services.´´ Therefore, most Internet advisers currently do not qualify to register with the Commission. Instead, they potentially must register with all states because, unlike a ``bricks and mortar´´ adviser, Internet advisers cannot predict from which geographic location their clients will come."
"The Commission's proposal was driven in part by the development of Internet technology that was not prevalent in 1997 when the NSMIA split between federal and state registration was implemented. As part of the Chairman's modernization effort, I believe that we should revise our rules, as necessary, in the wake of technological developments in the marketplace," said Roye.
GAO Reports Info Security Weaknesses at Corps of Engineers
6/10. The General Accounting Office (GAO) released a report [PDF] titled "Information Security: Corps of Engineers Making Improvements, But Weaknesses Continue".
The report concludes that "continuing and newly identified vulnerabilities involving general and application computer controls continue to impair the Corps' ability to ensure the reliability, confidentiality, and availability of financial and sensitive data. These vulnerabilities warrant management’s attention to decrease the risk of inappropriate disclosure and modification of data and programs, misuse of or damage to computer resources, or disruption of critical operations. Such vulnerabilities also increase risks to other Department of Defense (DOD) networks and systems to which the Corps' network is linked."
People and Appointments
6/10. Mary Snapp was named Microsoft's Vice President of Law and Corporate Affairs, reporting to incoming General Counsel Brad Smith. See, MSFT release.
More News
6/10. The Supreme Court denied certiorari in Visa USA v. Wal-Mart Stores, No. 01-1464, without opinion. See, Order List [PDF], at page 9. See also, October 17, 2001, opinion of the U.S. Court of Appeals (2ndCir).
6/10. The Business Software Alliance (BSA) stated in a release that it commissioned a study of international software piracy rates that concluded that global piracy grew to 40% last year.
6/10. The U.S. Court of Appeals (5thCir) issued its opinion in Tubos De Acero De Mexico v. American International Investment Corp., a case arising out of a lease of ultrasonic testing pipe inspection equipment used in the offshore oil industry. There were numerous commercial law issues on appeal, including application of the Louisiana Uniform Trade Secrets Act (LUTSA).
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Notices & Disclaimers
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Tuesday, June 11
The House will meet at 12:30 PM for morning hour and 2:00 PM for legislative business. No votes are expected before 6:30 PM. The House will consider a number of measures under suspension of the rules.
The Supreme Court is on recess until Monday, June 17.
Day two of a two day seminar titled Managing Trade Compliance In Today's Environment. The seminar is offered by the U.S. Department of Commerce's Bureau of Industry and Security (formerly BXA). The price to attend is $325. See, information page. Location: Marriott at Metro Center, 775 12 Street NW.
Day three of a three day conference hosted by George Mason University titled Networked Economy Summit. See, event web site. Location: Hyatt Regency Reston, Reston, VA.
7:00 AM - 4:00 PM. Day one of a two day conference titled Current and Emerging Solutions to Public Safety Communications Interoperability hosted by the NTIA and the Public Safety Wireless Network (PSWN) Program. Audio webcast. See, agenda. See also, notice in the Federal Register. Location: Ronald Reagan International Trade Center, 1300 Pennsylvania Avenue, NW.
9:00 AM - 4:00 PM. Day one of a three day meeting of the NIST's Computer System Security and Privacy Advisory Board. See, notice in Federal Register. Location: National Security Agency's National Cryptologic Museum, Colony 7 Road, Annapolis Junction, MD.
9:00 AM - 2:00 PM. The American Enterprise Institute (AEI) will host a conference titled The Future of Telecom Regulation. See, agenda and registration page. Location: AEI, 12th floor, 1150 17th St., NW.
9:30 AM. The Senate Commerce Committee's Subcommittee on Communications will hold a hearing titled Spectrum Management. Press contact: Andy Davis 224-6654. Location: Room 253, Russell Building.
2:00 PM. There will be a press conference to release a report titled International Music Piracy Report 2002. For more information, contact Amanda Collins at 202 857-9625 or acollins Location: National Press Club, Murrow Room, 529 14th St. NW, 13th Floor.
Wednesday, June 12
The House will likely consider a motion to go to conference on HR 3005, the Bipartisan Trade Promotion Authority Act of 2002.
7:00 AM - 3:30 PM. Day two of a two day conference titled Current and Emerging Solutions to Public Safety Communications Interoperability hosted by the NTIA and the Public Safety Wireless Network Program. Audio webcast. See, agenda. See also, notice in the Federal Register.
8:30 AM - 4:00 PM. Day two of a three day meeting of the NIST's Computer System Security and Privacy Advisory Board. See, notice in Federal Register.
9:00 AM - 1:00 PM. The President's Council of Advisors on Science and Technology (PCAST) will hold a public meeting. The agenda includes four items: (1) the science and technology of combating terrorism, (2) policies and technologies to improve energy efficiency, (3) the federal investment in science and technology research and development, and (4) demand issues that can speed the deployment of a 21st Century broadband infrastructure. See, notice in Federal Register. Location: Colonial Room, Renaissance Mayflower Hotel, 1127 Connecticut Ave., NW.
10:00 AM. The FCC's Technological Advisory Council will hold a meeting. See, FCC notice [PDF]. Location: FCC, Commission Meeting Room, 445 12th St., SW.
11:00 AM. The Cato Institute will host a panel discussion titled Digital Copy Protection: Mandate It? Ban It? Or Let the Market Decide?. The speakers will be Rick Lane (News Corporation), Jonathan Potter (DiMA), Sarah Deutsch (Verizon), Stewart Verdery (Vivendi Universal), and Jonathan Zuck (ACT). Lunch will follow. Webcast. See, online registration page. Location: Cato, 1000 Massachusetts Avenue, NW.
12:30 PM. The FCBA's Global Telecommunications Development Committee and the International Practice Committee will host a luncheon seminar titled Three Principles for the Liberalization of Telecommunications in Latin America: Competition, Competition and Competition. The speakers will be Henoch Aguiar, a former Secretary of Telecommunications of Argentina. This program is free and lunch will be provided. RSVP by faxing or e-mailing your name, affiliation, and contact information to Javier Miguel Tizado at 202 639-9355 or jtizado by Monday, June 10th. Location: White & Case, 601 13th St., NW, Suite 600.
POSTPONED. 2:30 PM. The Senate Judiciary Committee's Subcommittee on Technology, Terrorism, and Government Information Subcommittee will hold a hearing on S 2541, the Identity Theft Penalty Enhancement Act. Press contact: Mimi Devlin at 202 224-9437.
2:30 PM. The Senate Commerce Committee's Subcommittee on Science, Technology, and Space Subcommittee will hold a hearings to examine the ICANN. Press contact: Andy Davis at 202 224-6654. Location: Room 253, Russell Building.
Thursday, June 13
The House will meet at 10:00 AM for legislative business. No votes are expected after 6:00 PM. The House will likely consider HR 4019, the Permanent Marriage Penalty Relief Act of 2002.
8:30 AM - 3:00 PM. Day three of a three day meeting of the NIST's Computer System Security and Privacy Advisory Board. See, notice in Federal Register. Location: National Security Agency's National Cryptologic Museum, Colony 7 Road, Annapolis Junction, MD.
9:30 AM. The FCC will hold a meeting. See, agenda. Location: FCC, 445 12th Street, SW, Room TW-C05 (Commission Meeting Room).
10:00 AM. The House Ways and Means Committee will hold a hearing on the extraterritorial income regime. Location: Room 1100, Longworth Building.
10:00 AM. The House Judiciary Committee has scheduled a meeting to mark up several bills, including HR 4598, the Homeland Security Information Sharing Act, 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. Location: Room 2141, Rayburn Building.
2:00 - 4:00 PM. The American Enterprise Institute (AEI) will host a panel discussion titled The Future of the Distribution of Video Programming. The speakers will be Harold Furchtgott Roth (AEI), James Ramo (Movielink), Jerald Fritz (Albritton Communications), Michael Kupinski (A.G. Edwards), Jonathan Potter (DiMA), and Donald Whiteside (Intel). See, agenda and registration page. Location: AEI, 12th floor, 1150 17th St., NW.
2:00 PM. The Senate Judiciary Committee will hold a hearing on pending judicial nominations. See, notice. Press contact: Mimi Devlin at 202 224-9437. Location: Room 226, Dirksen Building.
2:30 PM. The House Judiciary Committee's Subcommittee on Courts, the Internet, and Intellectual Property will hold an oversight hearing on titled Copyright Arbitration Royalty Panel Structure and Process. Location: Room 2141, Rayburn Building.
Friday, June 14
Flag Day.
CANCELLED. The FCC's Network Reliability and Interoperability Council (NRIC) will hold a meeting. Location: FCC, 445 12th Street, SW, Commission Meeting Room. The next meeting of the NRIC will be on Friday, September 13. See, cancellation notice [PDF].
Saturday, June 15
Deadline for the FCC to submit its annual report to Congress regarding progress made in achieving the objectives of the Open Market Reorganization for the Betterment of International Telecommunications Act (ORBIT Act), 47 U.S.C. § 646. See, FCC notice [PDF]. 
Monday, June 17
The Supreme Court will return from recess.
2:00 - 3:30 PM. The FCC's International Bureau will hold a public forum to discuss issues and policies pertaining to the international satellite network coordination process and the domestic regulatory aspects of the International Telecommunication Union's satellite network filing process. Location: FCC, 445 12th Street, SW, Commission Meeting Room.
Deadline to submit comments to the FCC regarding its Notice of Proposed Rulemaking regarding the consequences of the FCC's classification of cable modem service as an information service. This is CS Docket No. 02-52. See, FCC release [PDF] and notice in Federal Register.