TLJ Daily E-Mail Alert No. 531, October 21, 2002.

Tech Law Journal Daily E-Mail Alert

October 21, 2002, 9:00 AM ET, Alert No. 531.
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AT&T Files Petition to Re-Regulate Special Access Charges

10/16. AT&T filed a petition [118 pages in PDF] with the Federal Communications Commission (FCC) requesting that it re-regulate special access services. Regional Bell Operating Companies (RBOCs) criticized the proposal.

AT&T requested that the FCC "initiate a rulemaking to reform regulation of price cap incumbent local exchange carrier ("ILEC") rates for interstate special access services. As detailed below, there is now indisputable proof that: (i) large ILECs, and particularly the Bell Operating Companies ("Bells"), retain pervasive market power in the provision of these services, (ii) the large ILECs are abusing that market power with patently unjust and unreasonable rates that impose a multi billion dollar annual overcharge or tax on American businesses and consumers and also severely harm both local and long distance competition, (iii) the Commission’s existing rules are incapable of addressing this worsening crisis, and, indeed, only exacerbate the problem, and (iv) the Commission therefore has a clear legal obligation promptly to reform its regulation to protect the public interest and to put an end to these monopoly abuses."

AT&T stated in a release "the premature removal of price regulations on special access services -- the high capacity local links to buildings that provide businesses with telephone and high speed Internet services -- has allowed the Bells to gouge their customers and competitors to the tune of $5 billion annually, with a resulting deadweight drag on the economy."

SBC stated in a release that "AT&T is clearly thrashing around looking for a way to change the subject from their cynical exploitation of below cost wholesale rates and the damage they are doing to the nation's telecommunications industry. To support its case, AT&T recycles the same losing arguments it raised against pricing flexibility and ignores the reality that the special access market is highly competitive.

SBC continued that "all but nine of the top 100 metropolitan service areas (MSAs) are served by at least three competing fiber networks and competitive special access providers have captured nearly 40 percent of the overall market. In recognition of this robust competition, the Federal Communications Commission (FCC) has removed special access services from price cap regulation throughout many competitive areas. The bottom line is that competition in the special access market is flourishing and has brought numerous benefits to consumers."

BellSouth stated in a release "There is strong competition in special access. AT&T itself offers special access in most of the top 100 markets in the United States. AT&T and other non-Bell companies provide 40% of the special access service in the U.S. Regulation is designed to replicate competition. Competition in special access has long existed. Further regulation is not necessary."

NTIA Director Addresses Wireless Broadband Issues

10/17. National Telecommunications and Information Administration (NTIA) Director Nancy Victory gave a speech at the Global Forum 2002 in Washington DC. She addressed broadband issues, including rights of way obstacles to deployment, Bush administration broadband related policies, and spectrum management policies for promoting wireless broadband.

She did not state a position on rights of way obstacles. Rather, she said that "all sectors of the broadband industry -- Bell Operating Companies, CLECs, cable companies, overbuilders, and wireless providers -- actually share the same point of view! These providers are concerned that restrictions by certain municipalities, states and federal government landowners on accessing public rights of way and tower sites might be inhibiting or at least delaying broadband network construction."

She said that actions taken by the NTIA include meeting "with representatives of localities and their associations to identify means for improving and simplifying current processes where needed, while ensuring sufficient flexibility for municipalities to best serve their citizens." She said that the NTIA has participated in National Association of Regulatory Utility Commissioners (NARUC) discussions to "identify best practices and recommendations to streamline the current process".

Next, she addressed wireless issues. She said that "wireless broadband seems destined to be a part of the broadband future". She identified several spectrum management issues. "First, the U.S. Government agencies involved in spectrum management -- NTIA, FCC and the State Department -- must work collaboratively as ``one spectrum team´´." She also said that "we should develop policies that encourage spectrum efficiency."

Third, she said that "we must establish forward looking policies that enable technological advances and eliminate legacy regulations that stand in the way of innovation. One such promising reform in this area is the FCC's proceeding on creating secondary markets that would permit parties to ``lease´´ their spectrum to others, to put otherwise unused spectrum to its most efficient use. Another is the accommodation of frequency flexible wireless systems, such as those under the 802.11 standard, on an unlicensed basis."

And fourth, she said that "we should ensure that we have policies that assure the deployment of robust wireless networks that are prepared for the worst of crises and able to deliver the very best of services to the American people."

She also briefly addressed recent efforts related to reallocating spectrum for Third Generation (3G) wireless services.

Finally, she said that "We will soon be turning to look at new wireless IP based architectures that are emerging at the unlicensed and user driven level. Traveling below the regulatory radar screen, WiFi has grown from a West Coast coffee shop phenomenon into an emerging mainstream means of broadband access to the Internet and high speed wireless connectivity within campus environments, offices and homes."

Commerce Officials Address Role of Government in Nanotech

10/11. The Commerce Department's Philip Bond gave a speech on October 9 in which he affirmed President Bush's committment to fund nanotech research. The Commerce Department's Bruce Mehlman gave a speech on October 11 in which he outlined ten elements of the government's role in nanotech research, development and commercialization.

Bond is Under Secretary of Commerce for Technology, and Chief of Staff to Commerce Secretary Donald Evans. His speech was titled "Nanotechnology; opportunities for Texas, the US and the world, and demands on education and the workforce".

He stated that "nanotechnology is a priority of President Bush. Even as we struggle to meet funding priorities across government against the backdrop of our war on terrorism and need to bolster homeland security, President Bush has proposed a record $111.8 billion Federal investment in R&D for FY2003, an 8 percent increase over last year’s spending. In particular, the President has proposed a 17 percent increase in NNI funding in FY2003 -- to more than $700 million in fiscal year."

He also stated that "these powerful technologies can be put to inappropriate uses and may create moral and ethical dilemmas beyond those we struggle with today. In the hands of terrorists, these technologies could be used to injure or kill millions. They could be used to pierce our privacy monitoring our communications, movements and associations. They could render all current encryption technologies powerless to protect national secrets or our personal privacy." He added that "These are issues that we cannot afford to wait to deal with. Our social and governmental institutions do not react quickly to change. So we have to start thinking about them now."

Bond also discussed recent information technology nanotech developments. He referenced IBM's transistor made from a carbon nanotube, Intel's planned TeraHertz transistor, and HP's announcement that "it had figured out how to use a chemical process to make grids of nanowires a few atoms thick, how to place molecules at the intersections of the wires, and how to manipulate the molecules to function like a microprocessor." Bond concluded that "As a result of developments like these, policymakers in Washington are beginning to understand what you already know: intelligence may be embedded everywhere."

Mehlman stated that "The federal government does indeed have an important and critical role in nanotech. Yet just because VCs aren't willing or able to fund every would be nano entrepreneur with an idea it does not mean government should. Nor could it. I would suggest the government's role in the research, development, and commercialization of nanotechnology includes 10 core elements."

He listed these as "Funding long term basic research ... Coordinating efforts among federal and university research, to leverage synergies and avoid redundancies ... Monitoring global developments and competitiveness implications ... Helping everyone maintain realistic expectations ... Helping ensure consideration of the social, legal and ethical implications ... Aggressively protecting intellectual property while also ensuring protections do not stifle research ... Supporting academic access to the best and brightest students and researchers from around the world while protecting national security and encouraging more American students to pursue careers in technology ... Working to improve nanotech networks ... Purchasing goods and services where appropriate and needed ... Ensuring reliable information in the markets so efficient investments can be made."

Mehlman is Assistant Secretary for Technology Policy. He spoke at the Foresight Conference in Bethesda, Maryland. His speech was titled "The Federal Government's Role in Nanotechnology Research, Development & Commercialization".

7th Circuit Upholds Mandatory Arbitration Clause in AT&T Consumer Contract

10/18. The U.S. Court of Appeals (7thCir) issued its opinion [PDF] in Boomer v. AT&T, upholding the validity of a mandatory arbitration clause in AT&T's Consumer Service Agreement to prevent an AT&T customer from proceeding with a lawsuit in federal court alleging overcharging for contributions to the FCC's universal service subsidy programs.

District Court. Frank Boomer filed a complaint in U.S. District Court (NDIll) against AT&T alleging that AT&T overcharged its customers for contributions to the federal Universal Services Fund. He sought class action status. AT&T argued that under the terms of a Consumer Service Agreement (CSA), customer class actions are prohibited, and arbitration is mandatory. It moved to dismiss, and to compel arbitration. AT&T also raised the filed rate doctrine. The District Court denied AT&T's motion. AT&T appealed.

Appeals Court. The Court of Appeals reversed. It concluded that AT&T made Boomer an offer to provide long distance services. This included sending him a copy of the CSA which has an arbitration clause, and a no class action clause, in it. Boomer accepted this offer by continuing to use AT&T’s services. Hence, there is a contract, with the CSA providing the terms.

The Appeals Court wrote that "While Boomer contends that that clause is unconscionable under state law and violates the Illinois Consumer Fraud Act and the Deceptive Business Practices Act, the Communications Act preempts state law challenges to the validity of contractual provisions because the Communications Act seeks to promote the uniformity of rates, terms and conditions, and state law challenges to the legality of contractual provisions would destroy that objective. Accordingly, Boomer cannot challenge the validity of the arbitration clause under state law, and instead must submit to arbitration. "

This case was decided on October 3, but was not published in the 7th Circuit web site until October 18.

7th Circuit Amends Trademark Metatags Opinion

10/18. The U.S. Court of Appeals (7thCir) issued an order [1 page in PDF] amending its August 13, 2002 opinion [PDF] in Promatek v. Equitrak, a trademark case involving HTML metatags, in which the Appeals Court affirmed a District Court injunction.

See, TLJ story titled "7th Circuit Rules on Use of Trademarks in HTML Metatags", August 13, 2002.

The order adds two significant clarifications regarding the use of trademarks in metatags. The Appeals Court wrote that "The problem here is not that Equitrac, which repairs Promatek products, used Promatek’s trademark in its metatag, but that it used that trademark in a way calculated to deceive consumers into thinking that Equitrac was Promatek." The Appeals Court added that "It is not the case that trademarks can never appear in metatags, but that they may only do so where a legitimate use of the trademark is being made."

Fed Circuit Rules in Patent Case Involving LED Display

10/16. The U.S. Court of Appeals (FedCir) issued its opinion in Texas Digital Systems v. Telegenix, a patent infringement case that involves controlling the color of pixels in a LED display. The Appeals Court affirmed in part and reversed in part.

Texas Digital Systems (TDS) holds the four patents at issue in this case: U.S. Patent No. 4,845,481, 4,965,561, 4,734,619, and 4,804,890. All are directed to methods and devices for controlling the color of pixels in a light emitting diode (LED) display. Telegenix makes display systems.

TDS filed a complaint in U.S. District Court (NDTex) against Telegenix alleging that Telegenix’s Colorgraphix devices infringed its patents. Following a jury verdict in favor of TDS, the District Court entered judgment of infringment. The District Court found that the claims were not invalid. It also found willful infringement. It awarded damages of $6 Million, enhanced damages of $6 Million, and interest. It also enjoined Telegenix from further infringement. This appeal followed.

The Appeals Court affirmed in part, and reversed in part. The Appeals court held that the District Court erroneously construed certain disputed claim limitations, but correctly construed other claim limitations.

SEC Official Addresses Internet Advisor Rule

10/17. Paul Roye, Director of the Securities and Exchange Commission's (SEC) Division of Investment Management, gave a speech titled "Priorities in Investment Management Regulation" in Washington DC. He briefly touched upon the Internet advisor rule.

He stated that "In the investment adviser area, we also are preparing recommendations to the Commission for the adoption of both the Internet adviser rule and Part 2 of Form ADV. The Internet adviser rule would permit those investment advisers that provide advisory services through interactive websites to register with the Commission. These ``Internet advisers´´ typically would not otherwise qualify for Commission registration under the Advisers Act, but instead would be required to register with state securities authorities. The rule is intended to alleviate the burden of multiple state registrations for advisers whose business is unconnected with any particular state."

He added that "Part 2 of Form ADV is the principal disclosure document investment advisers use to communicate with their clients. As proposed, Part 2 would be a plain English narrative brochure, rather than the current check-the-box format with additional information provided on schedules. We expect to present our recommendations for both these rules before the year's end."

People and Appointments

10/17. Carolyn Williams was named Director of the Federal Communications Commission's (FCC) Office of Communications Business Opportunities (OCBO). See, FCC release [PDF].

10/16. June Taylor was named Assistant Bureau Chief and Chief of Staff of the Federal Communications Commission's (FCC) Consumer & Governmental Affairs Bureau. She replaces Barbara Douglas, who was named Director of the FCC's Office of Workplace Diversity (OWD). See, FCC release [PDF].

10/15. The Securities and Exchange Commission's (SEC) Division of Corporation Finance (DCF) announced that Gerald Laporte has been appointed Chief of the DCF's Office of Small Business Policy. Laporte was previously an attorney with the law firm of Hogan & Hartson. See, SEC release.

More News

10/18. The Federal Communications Commission (FCC) released its hearing designation order [MS Word] in the EchoStar DirecTV merger review. The document has 299 numbered paragraphs and 5 appendices. It does not designate a hearing date.

10/18. The U.S. District Court (6thCir) issued its opinion in Heritage Broadcasting v. NLRB, a petition for review of a National Labor Relations Board order pertaining to a union decertification vote. Heritage is a TV broadcaster in the state of Michigan. A Heritage employee filed a petition to decertify a union. The majority of votes cast supported decertification. However, the NLRB excluded the votes of news producers, thus reversing the outcome. The NLRB also found that Heritage violated the National Labor Relations Act for refusing to bargain with the union. The Court of Appeals affirmed.

10/17. The Federal Communications Commission (FCC) released an order [20 pages in PDF] in its proceeding titled "In the Matter of: Implementation of the Satellite Home Viewer Improvement Act of 1999: Application of Network Non-Duplication, Syndicated Exclusivity, and Sports Blackout Rules To Satellite Retransmissions of Broadcast Signals". This is CS Docket No. 00-2.

10/17. Federal Reserve Board (FRB) Vice Chairman Roger Ferguson gave a speech titled "Should Financial Stability Be an Explicit Central Bank Objective?" He stated that "Economic developments in the United States in the late 1990s were quite favorable. Output growth was unusually strong and, in no small part, that strength seemed attributable to a sizable pickup in the trend growth of labor productivity spurred by the proliferation of new technologies, especially in the computing and telecommunications sectors. Investors read the favorable productivity trends as auguring enhanced profit growth, prompting a substantial runup in equity prices in 1999 and into 2000 that pushed standard valuation measures -- such as price earnings ratios -- well above historical benchmarks." Ferguson spoke to an International Monetary Fund conference in Washington DC titled "Challenges to Central Banking from Globalized Financial Markets".

10/15. The General Accounting Office (GAO) released a report [73 pages in PDF] titled "Electronic Transfers: Use by Federal Payment Recipients Has Increased but Obstacles to Greater Participation Remain".

10/15. The National Institute of Standards and Technology (NIST) published a notice in the Federal Register stating that it has "approved changes to Federal Information Processing Standard (FIPS) 186-2, Digital Signature Standard (DSS). These changes extend the transition period for the implementation of FIPS 186-2 to December 2002 and clarify that a private sector algorithm (PKCS 1, version 1.5 or higher) may be used during the extended transition period." These changes are effective October 15, 2002. See, Federal Register, October 15, 2002, Vol. 67, No. 199, at Pages 63621 - 63622.

Monday, October 21

8:00 - 11:00 AM. Equity International is hosting a briefing on homeland security financing issues. For more information, contact Carrie Brown at 202 756-2244 or cbrown @equityintl.us. Location: National Press Club, First Amendment Lounge, 529 14th Street, NW.

Deadline to submit comments to the FCC regarding its request to refresh its record regarding customer proprietary network information (CPNI) implications when a carrier goes out of business, sells all or part of its customer base, or seeks bankruptcy protection. This is the FCC's Third Further Notice of Proposed Rulemaking in CC Docket Nos. 96-115, 96-149 and 00-257. See, notice in the Federal Register.

Deadline to submit reply comments to the FCC in response to it Public Notice [7 pages in PDF] regarding relief for the Auction No. 35 winners. The FCC asks for public comments regarding two possible scenarios for providing relief to the winning bidders in the January 2001 re-auction of spectrum previously auctioned to NextWave: full refund and option to dismiss all pending applications, and selective opt out for pending applications. See also, notice in Federal Register.

Tuesday, October 22

11:00 - 11:45 AM. The FCBA's International Communications Committee, and others, will host a fee based teleconference titled "The ITU Plenipotentiary 2002: What Happened and How it affects You". The scheduled participants include David Gross (State Department), Clovis Baptista (Executive Director of CITEL), Andrei Makarof (Russian telecom consultant), and Valerie d'Costa (Singapore). Susan Ness (former FCC Commissioner) will moderate. The price is $15 or $20. For more information, contact Norma Rosado at 202 662-1727 or rosadon @staff.abanet.org.

Wednesday, October 23

12:00 NOON - 1:30 PM. The Heritage Foundation will host a panel discussion titled "Pirates and Posses: The Battle Over Digital Copyright". The speakers will be Bruce Mehlman (Commerce Department's Technology Administration), Gary Shapiro (Consumer Electronics Association), Alec French (Minority Counsel, House Judiciary Committee's Subcommittee on Courts, the Internet and Intellectual Property), James Delong (Competitive Enterprise Institute), and James Gattuso (Heritage). See, notice. Location: 214 Massachusetts Ave NE.

Thursday, October 24

12:15 PM. The FCBA's Cable Practice Committee will hold a brown bag lunch. The speaker will be Susan Eid, Legal Advisor to FCC Chairman Michael Powell. RSVP to Wendy Parish. Location: NCTA, 1724 Mass Ave., NW.

12:15 PM. The FCBA's Young Lawyers Committee will hold a brown bag lunch. The topic will be "The Role of Industry Associations in Advocacy at the FCC and Congress". The speakers will include Mike Altschul (CTIA), Dan Brenner (NCTA), and others. RSVP to rwallach @willkie.com. Location: Willkie Farr & Gallagher, 1875 K St., NW, 2nd Floor.

3:00 PM. Jessica Litman (Wayne State University Law School) will present a draft of a paper titled "Digital Networks in the Public Domain". The lecture is sponsored by the George Washington University (GWU) Law School's Dean Dinwooodey Center for Intellectual Property Studies. For more information, contact Prof. Robert Brauneis at 202 994-6138 or by email. Location: GWU Law School, Burns Building, 5th Floor, Faculty Conference Center, 720 20th St., NW.

3:30 PM. Gideon Parchomovsky will give a lecture titled "Toward an Integrated Theory of Intellectual Property". For more information, contact Prof. Julie Cohen at jec@law. georgetown.edu. Location: Georgetown University Law Center, Faculty Lounge, 600 New Jersey Ave., NW.

6:00 - 8:00 PM. The FCBA's will host an Oktoberfest reception featuring the FCC's Bureau Chiefs.

Friday, October 25

8:00 AM - 3:15 PM. The National Science Foundation's Advisory Committee for Computer and Information Science and Engineering will hold a meeting. For more information, contact Gwen Blount at 703 292-8900. See, notice in Federal Register, October 8, 2002, Vol. 67, No. 195, at Page 62834. Location: Hilton Arlington and Towers, Master Ballroom, 950 N. Stafford Street, Arlington, VA.

10:00 AM - 12:30 PM and 2:00 - 4:00 PM. The FTC and the DOJ's Antitrust Division will hold the final workshops in their joint series titled "Competition and Intellectual Property Law and Policy in the Knowledge Based Economy" on October 25 and 30 and November 6. The October 25 event is titled "Competition, Economic, and Business Perspectives on Patent Quality and Institutional Issues: Competitive Concerns, Prior Art, Post Grant Review, and Litigation". Location: FTC, Room 432, 600 Pennsylvania Ave., NW.

Deadline for the DOJ's Antitrust Division to release its evaluation of BellSouth's Section 271 application with the FCC to provide in region interLATA service in the states of Florida and Tennessee. This is WC Docket No. 02-307.

Deadline to submit reply comments to the FCC in response to Qwest Communications' Section 271 application to provide in region interLATA service in the states of Colorado, Idaho, Iowa, Montana, Nebraska, North Dakota, Utah, Washington and Wyoming. This is WC Docket No. 02-314. See, FCC release [PDF].

USTR Submits Comment to WTO Re Trade Remedy Rules

10/17. The Office of the U.S. Trade Representative (USTR) submitted a document [5 pages in PDF] to the World Trade Organization (WTO) titled "Basic Concepts and Principles of the Trade Remedy Rules".

It addresses trade distorting practices, and trade remedies, such as antidumping and countervailing duty rules.

The USTR also wrote that "A critically important component of maintaining confidence in a rules based trading system is a fully effective dispute settlement system capable of settling disputes without adding to or diminishing the rights and obligations of Members as negotiated in the WTO agreements."

The USTR also stated that "it is essential that dispute settlement panels and the Appellate Body, in interpreting obligations related to trade remedy laws, follow the appropriate standard of review and do not impose on national authorities obligations that are not contained in the Agreements."