Tech Law Journal Daily E-Mail Alert
September 12, 2002, 9:00 AM ET, Alert No. 507.
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Senators Introduce MVDDS Licensing Bill
9/10. Sen. Mary Landrieu (D-LA) and others introduced S 2922, the Emergency Communications and Competition Act of 2002 (ECCA). The bill would provide for the licensing, without auction, of Multichannel Video Distribution and Data Services (MVDDS). MVDDS could provide high speed Internet access to unserved and underserved populations.
Sen. Landrieu stated in the Senate that "The ECCA provides that MVDDS applicants will be licensed in the same manner as satellite companies who applied on the same day to share the same spectrum. Currently, the FCC plans to subject only MVDDS applicants to an auction process. This would impose a discriminatory tax on an innovative new technology. Unfortunately, this is more of the same burdensome regulation that I believe has contributed to the collapse of the telecommunications sector."
She added that "We must ensure that our laws and regulations are technologically neutral so that government policies don't replace the role of the marketplace in determining the fate of consumer products and services." See, Cong. Rec., Sept. 10, 2002, at Pages S8463-4.
Sen. Conrad Burns (R-MT) is a sponsor of the bill, stated in the Senate that "unless we pass this legislation, we may never see the deployment of this new service. The FCC has determined that licenses for this new service should be auctioned. I appreciate the FCC's effort to help generate new revenues for the Federal Treasury, but we must never let that consideration override good public policy judgments. The public interest is best served when the spectrum is licensed promptly to applicants that are ready to deploy service."
Sen. Burns continued that "We are now confronted with a case of first impression in which the FCC has determined to issue licenses to both terrestrial and satellite applicants that share the same spectrum. Previously this was thought to be technologically impossible, as I mentioned, the FCC has now determined that the terrestrial based MVDDS can share with satellites. In my judgment, the same Federal resource must be licensed in the same manner to all applicants, regardless of the technology they will employ. To do otherwise is to pick industry winners and losers. This bill corrects this problem." See, Cong. Rec., Sept. 10, 2002, at Page S8468.
The bill would require that the Federal Communications Commission (FCC) "shall assign licenses in the 12.2-12.7 GHz band for the provision of fixed terrestrial services using the rules, policies, and procedures used by the Commission to assign licenses in the 12.2-12.7 GHz band for the provision of international or global satellite communications services in accordance with section 647 of the Open-market Reorganization for the Betterment of International Telecommunications Act (47 U.S.C. 765f)."
Moreover, the bill would require the FCC to grant licenses "not later than six months after the date of the enactment of this Act."
The bill would require licensees to "allocate 4 percent of its capacity for services that promote the public interest ... , such as -- (i) telemedicine; (ii) educational programming, including distance learning; (iii) high speed Internet access to unserved and underserved populations; and (iv) specialized local data and video services intended to facilitate public participation in local government and community life."
In addition, the bill would require that "Each licensee ... shall disseminate Federal, State, and local Emergency Alert System warnings to all subscribers of the licensee". In particular, "Each licensee ... shall provide immediate access for national security and emergency preparedness personnel to the terrestrial services covered by the license ... Whenever the Emergency Alert System is activated [or] Otherwise at the request of the Secretary of Homeland Security."
The bill is also cosponsored by Sen. Trent Lott (R-MS), Sen. Judd Gregg (R-NH), Sen. Barbara Mikulski (D-MD), Sen. Patrick Leahy (D-VT), Sen. Max Baucus (D-MT), Sen. John Kerry (D-MA), and Sen. Chris Dodd (D-CT). The bill was referred to the Senate Commerce Committee.
Rep. Stearns Addresses NextWave Spectrum Auctions
9/9. Rep. Cliff Stearns (R-FL) spoke in the House on September 9 regarding the re-auction of spectrum which NextWave previously obtained in an FCC auction.
Rep. Stearns is the sponsor of HR 4738, an untitled bill that would provide that the Federal Communications Commission (FCC) "shall return to the winning bidders of auction 35 the full amount of all deposits and downpayments made by such winning bidders for licenses that the Commission has not by that date delivered to such winning bidders."
NextWave obtained spectrum licenses at FCC auctions in 1996. The FCC permitted NextWave to obtain the licenses, and make payments under an installment plan, thus creating a debtor creditor relationship between NextWave and the FCC. NextWave did not make payments required by the plan, and filed a Chapter 11 bankruptcy petition. The FCC cancelled the licenses. It then proceeding to re-auction the disputed spectrum. The U.S. Court of Appeals (DCCir) ruled in its June 22, 2001, opinion that the FCC is prevented from canceling the spectrum licenses by § 525 of the Bankruptcy Code. The FCC petitioned the Supreme Court for writ of certiorari. The Court granted certiorari. Oral argument is scheduled for October 8. (This is Supreme Court Nos. No. 01-653 and 01-657.)
In addition, the FCC is scheduled to hold an open meeting on Thursday, September 12. The agenda for the meeting published in the FCC web site does not list this matter. However, various recently published news stories, citing no sources, have reported that the FCC may announce that it is providing relief to the winning bidders, such as Verizon Wireless and Deutsche Telekom's T-MobileUSA, in the January 2001 re-auction.
Rep. Stearns stated that "Although the FCC recently returned most of the down payment funds previously deposited by all these successful bidders, it continues to hold, without interest, Mr. Speaker, substantial sums, equal to 3 percent of the total amount of the winning bids. It apparently intends to hold these sums indefinitely."
"Despite the lengthy delay in delivering the licenses, moreover, the FCC takes the position that the successful bidders remain obligated, on a mere 10-day notice, to pay the full amount of their successful bids if and when the FCC, at some unknown future date, establishes its right to deliver those licenses."
Stearns said that "this is grossly unfair" and "adversely affects their capacity to serve the needs of their customers, because they must have this capital always on hand and they cannot use it for long-term benefits for business."
Rep. Stearns offered this explanation of his bill. "First, it requires the FCC promptly to refund to the winning bidders the full remaining amount of their deposits and their down payments. Second, it gives each winning bidder an opportunity to elect, within 15 days after enactment, to relinquish its rights and to be relieved of all further obligations under Auction No. 35. Those who choose to retain their rights and obligations under Auction No. 35 will nonetheless be entitled to a return of their deposits and down payments in the interim period. If and when the FCC is in a position to deliver the license at issue to those who remain obligated, they will be required to pay the full amount of their bid in accordance with the FCC's existing regulations. Those who elect to terminate their rights and obligations under this auction will be free to pursue their business interests without the burdens under which they must labor."
Rep. Stearns' bill has 40 cosponsors, including broad bipartisan support from members of the House Commerce Committee, the committee which oversees the FCC.
Tech Crime Report
9/9. The U.S. Attorney's Office (USAO) for the Central District of California announced that Richard Dopps, a former employee of The Berman Companies, plead guilty in U.S. District Court (CDCal) to "one felony count of obtaining information from a protected computer". The USAO stated in a release that he accessed the computer system of his former employer and read the e-mail messages of company executives for the purpose of gaining a commercial advantage at his new job at a competitor." See also, CCIPS release.
9/9. A grand jury of the U.S. District Court (EDCal) returned an indictment against four individuals involved in a bank fraud scheme. The USAO stated in a release [PDF] that the scheme "involved the use of a computer to create fraudulent checks using account information which was wrongfully obtained from various victims."
9/9. The U.S. Attorney for the Northern District of California charged Yervant Lepejian by criminal information [7 pages in PDF] with one count of wire fraud in violation of 18 U.S.C. § 1343. Lepejian is a former Ch/CEO of HPL Technologies, a Silicon Valley software maker. The USAO stated in a release that Lepejian "engaged in a scheme to defraud" HPL, its shareholders and the Securities and Exchange Commission (SEC). It further stated that "as part of the scheme the defendant caused false and illusory sales to be recorded as revenue by HPL in violation of Generally Accepted Accounting Principles (``GAAP´´) and HPL's own internal revenue recognition policies; that he made and caused to be made material false statements to HPL's auditors, to the SEC, and the public regarding HPL's revenue and profits; and that he deprived his employer, HPL Technologies, of its right to his honest and faithful services by creating false sales, causing those false sales to be recognized as revenue, and making and causing to be made material false statements to HPL, its auditors, the SEC."
In addition, on September 11, the SEC filed a civil complaint in U.S. District Court (NDCal) against Lepejian alleging violation of §17(a) of the Securities Act (15 U.S.C. § 77q(a)), §10(b) of the Exchange Act (15 U.S.C. §78j(b)) and Rule 10b-5 thereunder, as well as §§13(a), 13(b)(2)(A), 13(b)(2)(B) and 13(b)(5) of the Exchange Act.
9th Circuit Rules on Priority of Security Interests in Unregistered Copyrights
9/11. The U.S. Court of Appeals (9thCir) issued its opinion [PDF] in Aerocon Engineering v. Silicon Valley Bank, a bankruptcy case involving the question of whether federal or state law governs priority of security interests in unregistered copyrights. The Appeals Court's holding (that state law governs), as well as its discussion, may be of interest to lenders who obtain security interests in software copyrights as collateral for their loans.
Background. Three companies which designed and sold products for modifying airplanes obtained financing from the Silicon Valley Bank (SVB). It took a security interest in, among other things, all "copyright rights, copyright applications, copyright registrations, and like protections in each work of authorship and derivative work thereof, whether published or unpublished, now owned or hereafter acquired." SVB perfected its security interest under the California Uniform Commercial Code (UCC). The borrowers did not register the copyrights at issue.
Proceedings Below. The borrowers went into bankruptcy. Another creditor, Aerocon, purchased the copyrights from the bankruptcy trustee. SVB obtained relief from the bankruptcy stay, and foreclosed on the copyrights, pursuant to its state security interest. SVB and Aerocon both claimed priority of security interests in the borrowers' copyrights in the drawings, technical manuals, blueprints, and computer software used to make modifications to civilian aircraft. The Bankruptcy Court ruled, on summary judgment, in favor of SVB. The District Court affirmed. This appeal followed.
Appeals Court. The Appeals Court affirmed. It wrote that "this is a bankruptcy contest over unregistered copyrights between a bank that got a security interest in the copyrights from the owners and perfected it under state law, and a company that bought the copyrights from the bankruptcy trustees after the copyright owners went bankrupt."
The Court concluded, "Regarding perfection and priority of security interests in unregistered copyrights, the California U.C.C. has not stepped back in deference to federal law, and federal law has not preempted the U.C.C. Silicon Valley Bank has a perfected security interest in the debtors' unregistered copyrights, and Aerocon, standing in the bankruptcy trustees' shoes, cannot prevail against it."
The Court first noted that the Copyright Act protects original works of authorship, and provides for registration of copyrights; however, registration is permissive, not mandatory, and in fact, most copyrights are not registered. Moreover, the Act further provides for the transfer of copyright interests, and for priority between conflicting transfers, based upon constructive notice. However, one who obtains a security interest in an unregistered copyright cannot record with the Copyright Office a transfer that would give constructive notice because there is no underlying registration that would provide a title and registration number. And also, the security holder cannot register the copyright, because he is not the author or owner of the copyright. And hence, the holder of a security interest in an unregistered copyright cannot preserve his priority by filing anything at the Copyright Office.
The Court wrote that SVB perfected its security interest under California state law. State law also provides priority to perfected over non perfected security interests. Hence, if state law controls, SVB has priority.
On the other hand, Aerocon argued that the Copyright Act's recordation and priority scheme exclusively controls perfection and priority of security interests in copyrights, under either of two arguments: the step back provisions of the California UCC, or that the Copyright Act preempts the California UCC on this issue. The Appeals Court rejected both arguments.
Under this analysis, the Appeals Court rejected several District Court opinions that have held that security interests in unregistered copyrights can not be perfected under the UCC, and that perfection can be obtained only by registering the copyrights and recording the security interest with the Copyright Office.
The Court reasoned that "Though Congress must have contemplated that most copyrights would be unregistered, it only provided for protection of security interests in registered copyrights. There is no reason to infer from Congress’s silence as to unregistered copyrights an intent to make such copyrights useless as collateral by preempting state law but not providing any federal priority scheme for unregistered copyrights. That would amount to a presumption in favor of federal preemption, but we are required to presume just the opposite. The only reasonable inference to draw is that Congress chose not to create a federal scheme for security interests in unregistered copyrights, but left the matter to States, which have traditionally governed security interests." (Footnote omitted.)
House Committee Approves Federal Agency Protection of Privacy Act
9/10. The House Judiciary Committee approved and reported HR 4561, the Federal Agency Protection of Privacy Act, by a unanimous voice vote, without amendment.
The bill, which is sponsored by Rep. Bob Barr (R-GA), would require federal agencies to prepare and make available for public comment an initial privacy impact analysis when it proposes new regulations.
TDA Awards e-Learning Grant to China
9/10. The U.S. Trade and Development Agency (TDA) awarded a feasibility study grant for e-learning to the Chinese Ministry of Foreign Trade and Economic Cooperation.
The TDA stated that the grant "provides $417,000 to establish an E-Learning program in China focused on the World Trade Organization (WTO). The project will use E-learning technology combined with traditional teaching methods to facilitate WTO learning via the Internet, enabling government officials at various levels, entrepreneurs and the general public to have a comprehensive understanding of the WTO and its legal instruments." See, State Department release.
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Notices & Disclaimers

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Thursday, September 12
The House will meet at 10:00 AM for legislative business. The House is scheduled to consider HR 5193, the Back to School Tax Relief Act of 2002.
8:00 AM - 5:30 PM. Day one of a two day conference hosted by the International Intellectual Property Institute (IIPI) titled "Specialized Intellectual Property Courts". See, IIPI release and online registration form. Location: George Washington University Law School, Moot Court Room, 2000 H Street, NW.
9:30 AM. The FCC will hold a meeting. The FCC will consider a Notice of Proposed Rulemaking (NPRM) concerning its media ownership rules, pursuant to Section 202(h) of the Telecommunications Act of 1996. It will also consider a NPRM and Memorandum Opinion and Order concerning possible revisions to the rules on unsolicited advertising over the telephone and facsimile machine and the possible establishment of a national do not call list. This is CC Docket No. 92-90. Location: FCC, 445 12th Street, SW, Room TW-C05 (Commission Meeting Room).
10:00 AM. Federal Reserve Board Chairman Alan Greenspan will testify to the House Budget Committee. Location: Room 210, Cannon Building.
10:00 AM. The House Judiciary Committee's Subcommittee on the Constitution will hold an oversight hearing titled "Privacy Concerns Raised by the Collection and Use of Genetic Information by Employers and Insurers". Audio web cast. Location: Room 2237, Rayburn Building.
12:30 - 2:00 PM. The American Society of International Law (ASIL) will host a panel discussion titled "International Cyberspace: Convergence or Conflict?". RSVP by 5:00 PM on September 10 to cborgen@asil.org or by fax to 202 797-7133, attn: Chris Borgen. Lunch will be served. Location: ASIL, 2223 Massachusetts Avenue, NW.
2:00 PM. The Senate Banking Committee will hold a hearing on the nomination of Wayne Abernathy to be Assistant Secretary of the Treasury for Financial Institutions. Location: Room 538, Dirksen Building.
2:30 PM. The Senate Commerce Committee's Subcommittee on Science, Technology, and Space Subcommittee will hold a hearing to examine S 2537, the Dot Kids Implementation and Efficiency Act of 2002, and HR 2417, the Dot Kids Domain Name Act of 2001. These bills would facilitate the creation of a new second level Internet domain within the U.S. country code domain that would provide a safe online environment for children. The House has already passed another version -- HR 3833. Location: Room 253, Russell Building.
Deadline to submit comments to the FCC regarding WorldCom's August 8, 2002, petition for a declaratory ruling pursuant to 47 C.F.R.§ 1.2, that requesting carriers are entitled to access ILEC Line Information Database data at cost based rates when they use such data to provide interexchange and exchange access service. This is CC Docket No. 01-338. See, FCC notice [PDF].
Friday, September 13
The House will meet at 9:00 AM for legislative business. No votes are expected past 2:00 PM.
9:00 AM - 5:00 PM. Day two of a two day conference hosted by the International Intellectual Property Institute titled "Specialized Intellectual Property Courts". See, IIPI release and online registration form. Location: Markey National Courts Bldg., 717 Madison Place, NW.
10:45 AM. Press conference associated with the International Intellectual Property Institute's conference titled "Specialized Intellectual Property Courts". Location: Court Room 203, Markey National Courts Bldg., 717 Madison Place, NW.
10:00 AM. The FCC's Network Reliability and Interoperability Council (NRIC) will hold a meeting. Location: FCC, 445 12th Street, SW, Commission Meeting Room.
Deadline to submit comments to the FTC regarding its proposed consent agreement with MSC Software Corporation. See, Agreement Containing Consent Order [22 pages PDF]. See, notice in Federal Register.
Monday, September 16
Yom Kippur.
Deadline to submit comments and notices of intention to participate to the Copyright Office in response to its notice in the Federal Register directing "all claimants to royalty fees collected in 1999, 2000 and 2001 for the distribution of digital audio recording devices and media to submit comments as to whether a controversy exists as to the distribution of the royalty fees in the 1999, 2000 and 2001 Musical Works Funds."
Deadline to register for the FCC's September 18 auction seminar for Auction No. 46. This is for the 1670-1675 MHz band auction, scheduled for October 30, 2002. See, notice with registration form [PDF].
Tuesday, September 17
9:00 AM - 5:00 PM. Day one of a three day meeting of the Computer System Security and Privacy Advisory Board (CSSPAB). The agenda includes (1) discussion of a CSSPAB privacy report, (2) discussion of a CSSPAB baseline standards report, (3) updates on computer security legislation, (4) an update by the OMB on privacy and security issues, (5) an agency briefing on compliance with the Government Paperwork Elimination Act (GPEA), (6) and a discussion of DMCA issues. Location: General Services Administration, 7th and D Streets, SW, 5700.
9:00 AM. The Bureau of Industry and Security's (BIS) Regulations and Procedures Technical Advisory Committee (RPTAC) will hold a partially open meeting. The agenda for the open portion of the meeting includes a presentation of papers or comments by the public, an update on pending regulations, a discussion of TSR MTOP limit comments, a discussion of the Unverified List, a review of SNAP 2002 status, a discussion of AES regulations & SED recordkeeping requirements, a discussion on implementation of CCL User Friendliness recommendations, and updates from working groups. See, notice in the Federal Register. Location: Room 3884, Department of Commerce, 14th Street between Constitution and Pennsylvania Avenues, NW.
9:30 AM. The U.S. Court of Appeals (DCCir) will hold an en banc hearing in Ruggiero v. FCC, No. 00-1100. On February 8, a three judge panel issued its split opinion holding unconstitutional the ban on issuance of low power FM radio broadcast licenses to anyone who has previously engaged in an unlicensed operation. The set of people who have engaged in unlicensed broadcasting who may seek low power FM licenses is a very small and insignificant group. However, this case could have a broader impact. The en banc panel may provide an analysis of the application of the First Amendment to broadcast speech that affects a wider range of speakers. Location: Courtroom 20, 333 Constitution Ave., NW.
12:00 NOON - 4:30 PM. The Cato Institute will host an event titled "The Supreme Court: Past and Prologue. A Look at the October 2001 and October 2002 Terms". Location: 1000 Massachusetts Avenue, NW.
Wednesday, September 18
9:00 AM - 5:00 PM. Day two of a three day meeting of the Computer System Security and Privacy Advisory Board (CSSPAB). The agenda includes (1) discussion of a CSSPAB privacy report, (2) discussion of a CSSPAB baseline standards report, (3) updates on computer security legislation, (4) an update by the OMB on privacy and security issues, (5) an agency briefing on compliance with the Government Paperwork Elimination Act (GPEA), (6) and a discussion of DMCA issues. Location: GSA, 7th and D Streets, SW, 5700.
9:00 AM. FCC Commissioner Kevin Martin will speak at an Alliance for Public Technology event. Location: Loew's L'Enfant Plaza Hotel.
9:30 AM - 1:00 PM. The FCC will hold an auction seminar for Auction No. 46 applicants. This is for the 1670-1675 MHz band auction, scheduled for October 30, 2002. See, notice with registration form [PDF]. Registration starts at 9:30 AM. The seminar begins at 10:00 AM. Location: FCC, 445 12th Street, SW, Room 8-C245.
10:00 AM - 3:00 PM. The FCC's Technological Advisory Council will hold a meeting. See, notice in Federal Register. Location: FCC, 445 12th St., SW., Room TW-C305.
10:00 AM. The Senate Judiciary Committee will hold a hearings to examine pending judicial nominations. Location: Room 226, Dirksen Building.
12:15 PM. The FCBA's Transactional Practice Committee will host a brown bag lunch. The topic will be FBI and CFIUS issues that arise in telecommunications transactions. The scheduled speakers are Richard Salgado (FBI) and Gay Sills and Jack Dempsey (CFIUS). RSVP to wendy@fcba.org. Location: FCC, 445 12th Street, SW, Room 8-B411.
6:00 - 8:00 PM. The FCBA will host a CLE seminar titled "The Wake-Up Call -- Telecommunications Policies One September Later". The scheduled speakers include Marsha MacBride (FCC Chief of Staff ), Howard Waltzman (Counsel to House Commerce Committee), Owen Wormser (DOD), Mike Gallagher (NTIA), Jeffery Goldthorp (FCC). For more information contact Laura Phillips at 202 842-8891 or Lauren Van Wazer at 202 418-0030. RSVP to wendy @fcba.org. Location: Sidley Austin, Conference Room 6-E, 1501 K Street NW.
6:00 - 8:00 PM. The FCBA's Young Lawyers Committee will host an event titled Career Night.
TIME? The Trade Policy Staff Committee (TPSC) will hold a hearing on China's compliance with the commitments it made in connection with its accession to the WTO. See, USTR's notice in the Federal Register.
TIME? The FTC has scheduled a hearing in the matter of its administrative complaint against Rambus alleging anti competitive behavior in violation of Section 5 of the Federal Trade Commission Act (FTCA) in connection with its participation in a standard setting body for dynamic random access memory products. See also, FTC release. Location: FTC.
Day one of a two day Homeland Security Technology Expo hosted by the Department of Commerce's Technology Administration and Bureau of Industry and Security. See, BIS notice. For more information contact Cheryl Mendonsa at 202 482-8321 or cheryl.mendonsa @ta.doc.gov. Location: D.C. Armory.
Deadline for the FCC to act on BellSouth's application to provide in region interLATA services in the states of Alabama, Kentucky, Mississippi, North Carolina, and South Carolina.