Tech Law Journal Daily E-Mail Alert
August 7, 2002, 9:00 AM ET, Alert No. 486.
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Dingell Wins Primary Election
8/6. Rep. John Dingell (D-MI), the ranking Democrat on the House Commerce Committee, defeated Rep. Lynn Rivers (D-MI) in the Democratic primary election for the new Michigan 15th congressional district. Rep. Dingell should easily win the general election in this overwhelmingly Democratic district. Had Rep. Dingell lost, Rep. Henry Waxman (D-CA) would have become the ranking Democratic on the Commerce Committee.
Sen. Lieberman Introduces Stock Options Bill
8/1. Sen. Joe Lieberman (D-CT) and Sen. Barbara Boxer (D-CA) introduced S 2877, the "Rank and File Stock Option Act of 2002". The bill would require that stock options be broad based, and that stock option plans be approved by shareholders. It would not require the expensing of stock options. It was referred to the Senate Finance Committee.
The bill would amend Section 162 of the Internal Revenue Code of 1986 to provide for the denial of deduction of stock option plans that discriminate in favor of highly compensated employees.
The bill would also require the Securities and Exchange Commission (SEC) to adopt rules that require that "shareholder approval is required for stock option plans and grants, stock purchase plans, and other arrangements by public companies by which any person may acquire an equity interest in the company in exchange for consideration that is less than the fair market value of the equity interest at the time of the exchange".
The bill also would require the SEC to "conduct an analysis of, and make regulatory and legislative recommendations on, the need for new stock holding period requirements for senior executives, including ... recommendations to set minimum holding periods after the exercise of options to purchase stock and to set a maximum percentage of stock purchased through options that may be sold ..."
However, the bill does not require the expensing of stock options.
Sen. Lieberman said that his bill would provide a "tool in the democratization of capitalism". See, Cong. Rec., August 1, 2002, at page S7942.
Sen. Lieberman elaborated that stock options are a "fundamentally decent idea". He said that "We've discovered over the last ten months that too many companies and executives have been misusing and abusing them. In far too many cases, options have been turned into mere feed in the corporate trough by the greed of corporate executives."
"They can be used well or used poorly. We've seen corporate executives use this hammer to weaken the foundations of their companies, build rickety and top heavy structures ready to collapse, and build themselves nice, secure shelters from the damage. That's unconscionable." said Sen. Lieberman.
He explained that his bill would "correct this abuse by ensuring that the tool of stock options is put in the hands of more and more employees so it can be used as it was initially intended -- to construct wealth, to build fortunes, to strengthen companies, and to incentivize the long term soundness and stability of a company."
Sen. Lieberman added that "The way to fix this problem is not, as some have suggested, to require stock option expensing at the time an option is granted. That would, in fact, make the problem worse. It would disincentive the dissemination of options in the first place -- and in the end, those at the top of the corporate food chain will still take care of themselves. No, the way to fix this problem is to ensure that stock options are more broadly shared by more and more employees of American corporations -- that they truly are the democratizing tool that they can be."
Ashcroft Comments on Loss of 317 Laptops by FBI
8/6. Attorney General John Ashcroft issued a statement regarding the Office of the Inspector General (OIG) report regarding lost laptop computers at the Federal Bureau of Investigation (FBI) and other Department of Justice (DOJ) components.
On August 5 the OIG audited and released a series of reports on the control of laptop computers and weapons at five DOJ components. It concluded that there were a total of 400 missing laptops, and 775 missing weapons. For the FBI, it reported 317 missing laptops and 212 missing weapons. Moreover, the OIG concluded that the FBI does not know if sensitive data has been lost. See, Executive Summary [43 pages in PDF].
AG Ashcroft stated that "The American people expect and deserve absolute accountability from public officials. The Department of Justice's component agencies are essential to the success of the criminal justice system, and we place a high priority on correcting any problems within these components. Last July, I asked Inspector General Glenn Fine to determine where accountability has faltered, especially relating to firearms and information technology resources, and to help the Department design a way to keep this from recurring."
Ashcroft added that "I am also directing all of the Department's component agencies to take specific steps to ensure weapons and laptops computers do not fall into the wrong hands."
Bush Signs Trade Promotion Authority Bill
8/6. President Bush signed into law the Trade Act of 2002, a bill granting the President trade promotion authority. Bush, several members of his cabinet, and U.S. Trade Representative Robert Zoellick, lobbied extensively for passive of the bill.
Bush stated in a signing speech in Washington DC that "With trade promotion authority, the trade agreements I negotiate will have an up or down vote in Congress, giving other countries the confidence to negotiate with us. Five Presidents before me had this advantage, but since the authority elapsed in 1994, other nations and regions have pursued new trade agreements while America's trade policy was stuck in park."
Bush continued that "With each passing day, America has lost trading opportunities, and the jobs and earnings that go with them. Starting now, America is back at the bargaining table in full force. I will use trade promotion authority aggressively to create more good jobs for American workers, more exports for American farmers, and higher living standards for American families. Free trade has a proven track record for spurring growth and advancing opportunity for our working families."
Bush also extolled the benefits of trade for the world. He said that "Free trade is also a proven strategy for building global prosperity and adding to the momentum of political freedom. Trade is an engine of economic growth. It uses the power of markets to meet the needs of the poor. In our lifetime, trade has helped lift millions of people, and whole nations, and entire regions, out of poverty and put them on the path to prosperity. History shows that as nations become more prosperous, their citizens will demand, and can afford, a cleaner environment. And greater freedom for commerce across the borders eventually leads to greater freedom for citizens within the borders."
Treasury Secretary Paul O'Neill stated in a release that "Trade is a critical component of our economy and TPA will help quicken the pace of our recovery. Trade now represents more than one quarter of our economy and trade has created millions of jobs that pay above average wages.  It has fueled competition and innovation, and helped sustain growth with little inflation. Just as important, it has helped promote the truly global growth and prosperity upon which America抯 own growth and prosperity will ultimately depend."
Microsoft Hires Law Firm to Lobby for Allocation of Unlicensed Spectrum
7/25. The Washington DC law firm of Harris Wiltshire filed a Lobbying Registration form with the Clerk of the U.S. House of Representatives which lists Microsoft as its client, and lists as the specific lobbying issues "Use and allocation of unlicensed spectrum; H.R. 4641 Wireless Technology Investment and Digital Dividends Act of 2002; Future legislation pertaining to spectrum allocation reform." The form was signed by Scott Harris.
HR 4641 was introduced on May 2, 2002 by Rep. Ed Markey (D-MA), the ranking Democrat on the House Telecom Subcommittee. The bill has only two co-sponsors, Rep. Karen McCarthy (D-MO) and Rep. John Larson (D-CT).
The bill would require that the National Telecommunications and Information Administration (NTIA) "shall, not later than January 1, 2003, prepare, make publicly available, and submit to the President, the Congress, and the Commission a report that ... designates a 20-megahertz band of contiguous frequencies located below 2 gigahertz, and a band of between 3 and 500 megahertz of contiguous frequencies above 2 gigahertz and below 6 gigahertz, for reallocation to the public for unlicensed use".
Rep. Markey wrote in his summary of the bill that "An unlicensed area of the airwaves will permit the public, through the use of ``smart创 radio technology and better receiver equipment, to harness the airwaves for countless applications if the government is willing to give back to the public a portion of its own airwaves in such an unlicensed format. From ``wi-fi创 technology and low power ``Bluetooth创 wireless connections, to so-called ``802.11b创 protocols, wireless local area networks and Net connections, utilization of publicly available airwaves can help connect people and businesses in cost effective and spectrum efficient ways. The ``Spectrum Commons创 will also help to propel economic growth and innovation by opening up the airwaves to new marketplace entry by individuals and entities unaffiliated with established network providers."
However, providing for the allocation of unlicensed spectrum is only one small part of Rep. Markey's bill. The bill would also create a new trust fund, to be named the "Digital Dividends Trust Fund". It would be financed with the proceeds from the auction of spectrum licenses. This trust fund would then be used for teacher training, research and development, digitizing content for libraries, and other purposes.
This bill would also require the Federal Communications Commission (FCC) to take action to achieve the timely transition to digital television by establishing rules governing must carry issues, minimum programming and broadcasting requirements, and digital television receiver benchmarks. It would also require the FCC and NTIA to take action to secure additional spectrum for advanced wireless services -- including Third Generation (3G) services.
FTC Takes Action Against Phillips Electronics for False Statements Regarding Rebates
8/5. The Federal Trade Commission (FTC) announced that it filed an administrative complaint [PDF] against Phillips Electronics North America Corporation (Phillips) alleging violation of Section 5(a) of the Federal Trade Commission Act (FTCA) in connection with making false statements regarding rebates on the sale of computer peripheral products.
Section 5(a), codified at 15 U.S.C. 45, provides, in part, that "Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful."
The FTC and Phillips also entered into an Agreement Containing Consent Agreement [PDF] that provides, among other things, that Phillips "shall not ... misrepresent, in any manner, expressly or by implication, the time in which any rebate in the form of cash or credit towards future purchases will be mailed, or otherwise provided, to purchasers ... fail to provide any rebate in the form of cash within the time specified, or, if no time is specified, within thirty (30) days ..."
Howard Beales, Director of the FTC's Bureau of Consumer Protection, stated in a release that "Rebates that begin as a big draw for consumers often end up as a big drag ... Some companies are quick to offer attractive rebates, but are slow to send them out, and often make them so difficult to redeem that consumers simply give up. ... the Commission alleged that the sellers changed the rules of the game while it was being played. The FTC will use all of its powers -- including its power to allege unfair business practices -- to challenge such conduct."
Ninth Circuit Rules on Use of Thermal Imaging Devices
8/6. The U.S. Court of Appeals (9thCir) issued its opinion [PDF] in USA v. Huggins, a criminal case involving application of the Fourth Amendment to the use of thermal imaging devices.
On June 11, 2001, the Supreme Court of the U.S. issued its opinion [PDF] in Kyllo v. U.S., holding that the thermal imaging of a home to detect lamps used for growing marijuana constitutes a search within the meaning of the Fourth Amendment. The Supreme Court further held that such searches are unreasonable under the Fourth Amendment unless supported by probable cause and authorized by a warrant.
In USA v. Huggins, a Drug Enforcement Administration (DEA) agent obtained a federal warrant to conduct a thermal imaging scan of a house and two barns on property occupied by two defendants. Probable cause was based upon several items, including a tip, one of the defendants having a prior drug related conviction, use of multiple alias names, and electricity consumption far greater than nearby residents and prior residents of the same property. The thermal imaging scan then heat radiation in the middle of the night consistent with indoor cultivation. The DEA then obtained a further warrant for a physical search of the property. The DEA found hundreds of marijuana plants, and related equipment, and evidence of related operations at other locations.
Defendants sought to suppress evidence, in part, based upon the use of the thermal imaging device. The trial court denied the motion. The Appeals Court affirmed.
More News
8/2. The Overseas Private Investment Corporation (OPIC), an agency of the U.S. government, announced that it will provide $777,000 in political risk insurance for International Scientific Products Corporation to expand its optical components manufacturing facility in St. Petersburg, Russia. OPIC stated that the money will be used for "insurance to cover against risk of expropriation and political violence for a consignment of equipment and accessories to be used to increase production and quality control". See, OPIC release.
8/1. Sen. John Edwards (D-NC) and Sen. Charles Schumer (D-NY) introduced S 2846, a bill to establish a commission to evaluate investigative and surveillance technologies. It was referred to the Senate Judiciary Committee, of which both Sen. Edwards and Sen. Schumer are members. Sen. Edwards issued a release which states that "In the wake of the terrorist attacks last year, the Federal Bureau of Investigation and local police departments have increased experimentation with video and Internet surveillance, X-ray screening, facial identification and other investigative tools", and that the bill would "establish a bipartisan commission to study these surveillance tools and find the ways to enhance security without compromising privacy".
8/6. Political Money Online, a web site that collects and organizes Federal Election Commission (FEC) filings, and other materials, reported that "Jack Grubman, telecommunications security analyst for Citigroup抯 Salomon Smith Barney, donates $100,000 to the Dem Senatorial Campaign Cmte on 6/27, the same day he was subpoenaed by the House Financial Services Cmte, and the day after the SEC filed charges against Worldcom." (Abbreviations and emphasis in original.)
Wednesday, August 7
10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in Honeywell International v. Hamilton Sundstrand, No. 02-1005. This is an appeal from the U.S. District Court (DDel) in a patent infringement case involving aircraft turbine engines in which the Court found Honeywell's patents valid, and awarded $46 Million in damages. Location: 717 Madison Place, NW, Courtroom 402.
Thursday, August 8
Day one of six of the American Bar Association's annual meeting. See, TLJ's complete listing of technology law related events. Location: various hotels across Washington DC.
9:00 AM. Qwest Communications will release its second quarter 2002 results at approximately 6:00 AM EDT. It will host a conference call at 9:00 AM EDT. The participants will include Ch/CEO Richard Notebaert and  VCh/CFO Oren Shaffer. The event will be web cast. See, Qwest release.
9:30 AM. The FCC will hold a meeting. The agenda includes three items: (1) consideration of a NPRM regarding digital broadcast copy protection; (2) consideration of a Second Report and Order and Second Memorandum Opinion regarding its policies and rules for conversion of the broadcast television service to digital technology; this is MM Docket No. 00-39; and (3) consideration of a Report and Order regarding various Part 22 rules that have become outdated due to technological change, increased competition in CMRS, or supervening rules; this is WT Docket No. 01-108. Press contact: Maureen Peratino or David Fiske at 202 418-0500. See, FCC release.
9:45 AM. The U.S. District Court (DC) will hold a conference hearing in EPIC v. DOJ, D.C. No. 2002 cv 0063. The EPIC filed a complaint against the Justice Department and Treasury Department, pursuant to the under the Freedom of Information Act (FOIA), seeking records pertaining to the federal government's purchase of personal information of individuals from private sector database companies. Judge Colleen Kotelly will preside. Location: 333 Constitution Ave. NW, Courtroom 11.
Deadline to submit comment to the FCC regarding the NTIA's July 23 document titled "An Assessment of the Viability of Accommodating Advanced Mobile Wireless (3G) Systems in the 1710-1770 MHz and 2110-2170 MHz Bands". The FCC has incorporated this viability assessment into its Advanced Wireless Services proceeding in ET Docket No. 00-258. See, public notice [PDF].
Friday, August 9
Day two of six of the American Bar Association's annual meeting. See, TLJ's complete listing of technology law related events. Location: various hotels across Washington DC.
9:00 AM - 3:00 PM. The FCC's Spectrum Policy Task Force will hold a public workshop titled "Spectrum Rights and Responsibilities". First, Thomas Krattenmaker (Mintz Levin) will give an historical view of spectrum rights and responsibilities. Second, there will be a panel titled "New Technologies and Spectrum Usage Rights". The moderators will be Charla Rath (Verizon Wireless) and Paul Kolodzy (FCC); the panelists will be David Farber (University of Pennsylvania), David Siddall (Paul Hastings), Peter Pitsch (Intel), Victor Tawil (MSTV), Steve Sharkey (Motorola), Bruce Fette (General Dynamics), and Gee Rittenhouse (Lucent). Third, there will be a panel titled "Modeling Licensed and Unlicensed Spectrum Usage Rights". The moderators will be Michele Farquhar (Hogan & Hartson) and David Furth (FCC); the panelists will be Martin Cave (Warwick Business School), Tom Hazlett (Manhattan Institute), Steve Stroh (Focus On Broadband Wireless Internet Access), Michael Calabrese (New America Foundation), Larry Miller (LMCC/ AASHTO), David Wye (AT&T Wireless), Michael Kurtis (Kurtis & Associates), Jennifer Warren (Lockheed Martin), and Joe Gatusso (NTIA). See, FCC notice [PDF]. Webcast. Location: FCC, Commission Meeting Room, 445 12th Street, SW.
Saturday, August 10
Day three of six of the American Bar Association's annual meeting. See, TLJ's complete listing of technology law related events. Location: various hotels across Washington DC.
Sunday, August 11
Day four of six of the American Bar Association's annual meeting. See, TLJ's complete listing of technology law related events. Location: various hotels across Washington DC.
Monday, August 12
Day five of six of the American Bar Association's annual meeting. See, TLJ's complete listing of technology law related events. Location: various hotels across Washington DC.
Deadline to submit reply comments to the Federal Communications Commission (FCC) in response to its Notice of Proposed Rule Making (NPRM) "regarding the sunset of the statutory requirements under section 272 imposed on Bell Operating Companies (BOCs) when they provide in-region, interLATA services and seeks comment on whether, and if so, under what conditions, the structural and nondiscrimination safeguards established in section 272 should be extended by the Commission either generally or with respect to specific states." See, notice in the Federal Register, June 21, 2002, Vol. 67, No. 120, at Pages 42211 - 42215.
Tuesday, August 13
Day six of six of the American Bar Association's annual meeting. See, TLJ's complete listing of technology law related events. Location: various hotels across Washington DC.
10:00 AM - 12:00 NOON. The State Department's International Telecommunication Advisory Committee (ITAC) will meet. See, notice in Federal Register. Location: Room 1105, State Department.
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