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December 23, 2002, 9:00 AM ET, Alert No. 573.
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Where Sen. Frist Stands on Tech Issues
12/23. Sen. Bill Frist (R-TN), who is likely to be the next Senate Majority Leader, has not been active on technology related issues. He is a doctor who has focused more on health, drug, biotech, Medicaid, Medicare, and social security related issues.

However, Sen. Frist (at right) has a voting record on tech related legislation, and has either sponsored, cosponsored, or spoken about a number of other technology related bills. This article examines his tech record. Basically, despite his focus on health issues, he has a record on tech related issues, and it is pro-technology.

Memberships. Sen. Frist currently sits on the Budget Committee, Foreign Relations Committee, and Health, Education, Labor and Pensions Committee. He previously sat on the Senate Commerce Committee, which has jurisdiction over many technology and communications related issues. He was also Chairman of its Subcommittee on Science, Technology and Space.

Sen. Frist is also Co-Chairman of the Forum on Technology and Innovation, a bipartisan organization funded by the Markle Foundation, the MacArthur Foundation, the Sloan Foundation, and the Kellogg Foundation. The other Co-Chair is Sen. Ron Wyden (D-OR). Sen. Jay Rockefeller (D-WV) was previously the Democratic Co-Chair.

Sen. Frist is also a member of the Congressional Internet Caucus.

Local Competition. He gave a speech in the Senate in June of 2001 that may give incumbent local exchange carriers (ILECs) cause for concern. He stated that "We need to ensure that the market opening requirements of the 1996 Act are vigorously implemented". See, Congressional Record, June 20, 2001, at page S6515.

He further stated that "In this uncertain financial climate, it is imperative that we maintain a stable regulatory framework. The 1996 Telecom Act established three pathways to a more competitive local telecommunications marketplace: a new entrant could purchase local telephone services at wholesale rates from the incumbent and resell them to local customers; a competitor could lease specific pieces of the incumbent's network on an unbundled basis, using what the industry calls unbundled network elements; or a competitor could build its own facilities and interconnect them with the incumbent's network. Each of these alternatives must remain available to new entrants. Making fundamental changes to the structure of the 1996 Act will destabilize the already shaky competitive local exchange industry, depriving consumers of even the prospects for meaningful choice."

Broadband Regulation. Sen. Frist has not been active in this area. No bills have come to a vote on the Senate floor. However, several bills have been introduced. Sen. Frist is not one of the 65 cosponsors of S 88, the Broadband Internet Access Act of 2001. This bill, sponsored by Sen. Jay Rockefeller (D-WV), is intended to incent broadband deployment by providing tax credits.

Nor is he one of the dozen cosponsors of S 2430, the Broadband Regulatory Parity Act of 2002. This bill, sponsored by Sen. John Breaux (D-LA), would require the FCC to write "regulations to ensure that (1) all broadband services, and all broadband access services, are subject to the same regulatory requirements, or no regulatory requirements ..."

Diversion of USPTO Fees. Patent based sectors of the economy have reason to celebrate Sen. Frist's likely elevation. He was one of only six Senators to sign a letter criticizing the diversion of U.S. Patent and Trademark Office (USPTO) fees to fund other government programs. On February 9, 2001, he and others wrote to President Bush to state that "underfunding the PTO delays the development of new technologies".

They wrote that "Intellectual property is the currency for the new, high-tech economy. Patent and trademark laws administered by the Patent and Trademark Office (PTO) encourage invention, innovation, and investment. The PTO plays a critical role in promoting the continued development of intellectual property in this country. For established companies, patents improve competitiveness, increase productivity, help bring new products and services to market, and create jobs. For entrepreneurs, patents can make or break a new business."

This diversion is largely the work of the Clinton administration, and the Appropriations Committees in the House and Senate. Technologies companies, and many members of the Judiciary Committees (which have jurisdiction over intellectual property issues) have opposed the diversion, but without success. Sen. Frist's involvement in this issue is notable, because he does not represent a technology intensive state, and he is not a member of the Senate Judiciary Committee.

Nor is he a member of the Senate Appropriations Committee. But now, he may be in a better position to deal with this diversion of funds.

R&D Tax Credit. This is a perennial issue in the Congress. Every few years the Congress temporarily extends the credit, which technology companies argue is an important incentive to innovate. In every Congress, bills are introduced that would make the R&D tax credit a permanent part of the Internal Revenue Code; but, they never pass both Houses. The bills which attract the most sponsors are the ones that would simply make the credit permanent.

However, Sen. Pete Domenici (R-NM) has sponsored legislation that would do this, and more. He argues that his proposals would provide greater benefits to start up companies. Sen. Frist has cosponsored Sen. Domenici's legislation. See, for example, S 515, the Private Sector Research and Development Investment Act of 2001.

Sen. Frist has also frequently supported efforts to increase federal spending on research and development.

Trade Issues. Sen. Frist has a voting record on trade issues that is consistent with the position advocated by high tech companies and groups. For example, in the current Congress he supported both trade promotion authority, and the Export Administration Act of 2001.

Sen. Frist supported granting the President trade promotion authority. He voted for final passage of HR 3009, sometimes referred to as the Trade Act of 2002, on May 23, 2002. See, Roll Call Vote No. 130. He also voted favorably on many votes leading up to final passage. The House also passed the bill, and it has become law.

Sen. Frist also voted for S 149, the Export Administration Act, on September 6, 2002. See, Roll Call Vote No. 275. It passed the Senate, but not the House. Sen. Mike Enzi (R-WY), the sponsor of the bill, recently announced that he will reintroduce the bill in the 108th Congress. The bill would ease restraints on most dual use products, such as computers and software, but increase penalties for violations. It is strongly supported by technology companies that export their products.

Copyright. Sen. Frist has not gotten involved in the raging debates over copyright and music on the Internet. He is not a cosponsor of S 2395, the Anticounterfeiting Amendments of 2002. This is Sen. Joe Biden's (D-DE) controversially bill. Nor is he a cosponsor of S 2048, the Consumer Broadband and Digital Television Promotion Act. This is Sen. Ernest Hollings' (D-SC) controversial bill. Neither bill has been voted on by the Senate.

106th Congress (Y2K Act and E-SIGN Act). One can discern more about Sen. Frist's views on technology by examining his record from the last Congress. He voted for, and was active in sponsoring and pushing through the Senate, two technology related bills: S 96, the Y2K Act, and S 761 the digital signatures bill.

S 761 was originally titled the Millennium Digital Commerce Act. However, the bill that was signed into law was titled the Electronic Signatures in Global and National Commerce Act, or E-SIGN Act for short. See also, letter co-authored by Sen. Frist in support of S 761 dated September 29, 1999.

105th Congress (H1B Visas, SLUSA, Internet Taxes, and Encryption). Sen. Frist also has a record worth examining from the 105th Congress.

Sen. Frist supported temporarily increasing the number of H1B visas given to highly skilled technology workers. Technology companies fought for passage of this bill. He voted for S 1723, American Competitiveness Act, on final passage on May 18, 1998. See, Roll Call No. 141.

Sen. Frist also supported S 1260, the Securities Litigation Uniform Standards Act of 1998 (SLUSA). Technology companies sought passage of this bill. They argued that it would limit the number of frivolous class action lawsuits filed against them. Sen. Frist cosponsored the bill, and voted for it on final passage on May 13, 1998. See, Roll Call No. 135.

Finally, however, there is an issue where Sen. Frist took an anti-technology position -- Internet taxes. The Congress passed the Internet Tax Freedom Act in late 1998. Its final passage came a part of a huge omnibus appropriations bill. However, just prior to that, the Senate passed it as a stand alone bill, S 442. The vote for final passage was overwhelming, and Sen. Frist voted for it. However, the critical votes came earlier while the Senate was considering amendments that shaped the bill. One such key vote was on the duration of the moratorium. Sen. John McCain (R-AZ) offered an amendment to extend the duration of moratorium on new or discriminatory Internet taxes. Strong supporters of the moratorium generally voted yes, while others generally voted no. It failed by a vote of 45-52. Sen. Frist voted no. That is, from the perspective of some tech interests, he was on the wrong side. See, Roll Call No. 305, October 7, 1998.

The Senate also never voted on legislation pertaining to encryption rights. Nevertheless, it was a huge issue at the time for the technology sector. One way to determine a Senator's support for encryption rights is to examine the lists of cosponsors of pro-encryption rights bills. Two bills would identify a Senator's support.

First, there is S 377, the Promotion of Commerce On-Line in the Digital Era (Pro-CODE) Act of 1997, sponsored by Sen. Conrad Burns (R-MT). It had 22 cosponsors. Sen. Frist was not one of them. Second, there was S 2067, the Encryption Protects the Rights of Individuals from Violation and Abuse in CYberspace (E-PRIVACY) Act, sponsored by former Sen. John Ashcroft (R-MO). It had ten cosponsors. Sen. Frist was not one of them.

More Bills in the 107th Congress. The technology related bills sponsored by Sen. Frist in the 107th Congress include S 461, the Mathematics and Science Education Partnership and Teacher Recruitment Act of 2001; S 722, the Telemarketer Identification Act of 2001; and, S 2902, the Mathematics and Science Education Excellence Act.

The technology related bills cosponsored by Sen. Frist in the 107th Congress include S 1445, the Internet Equity and Education Act of 2001; S 1549, the Technology Talent Act; and, S 2760, the Stock Option Fairness and Accountability Act. The purpose of S 1445 is to make it easier for Internet based education to qualify for student loans. The Tech Talent Act authorizes the National Science Foundation (NSF) to award competitive grants to institutions of higher education to increase the number of students studying science, mathematics, engineering, and technology. The Tech Talent Bill was eventually enacted into law as part of a larger NSF related bill.

More Statements by Sen. Frist. There are two significant statements that Sen. Frist read at subcommittee hearings that relate to his views and interests regarding technology. First, there is his opening statement [2 pages in PDF] on "Telemedicine Technologies", at a hearing before the Senate Commerce Committee's Subcommittee on Science Technology and Space, on September 15, 1999. Second, there is his opening statement [3 pages in PDF] titled "The Role of Standards in the Growth of Global Electronic Commerce", at a hearing before the Senate Commerce Committee's Subcommittee on Science Technology and Space, on October 28, 1999.

TLJ Analysis. One might draw several conclusions about Sen. Frist from the foregoing. First, technology has not been his main interest; health has been.

Second, he has not gotten involved in many of the highest profile technology related issues today involving telecom regulation, broadband deployment, and music on the Internet.

Third, he has taken a keen interest in promoting technological innovation in the long term. There are several things that the government can do to promote technological innovation, and Sen. Frist has been involved in all of them. The government can establish a thorough patent rights regime, and an entity to efficiently issue quality patents. Sen. Frist has been one of the few Senators to criticize the diversion of USPTO fees. The government can fund research and development. Sen. Frist has supported more funding. The government can give tax credits for private sector research and development. Sen. Frist has supported making the R&D tax credit permanent. Finally, the government can fund education in fields that are related to innovation. Sen. Frist supports efforts to provide more funding for math, science and technology education.

Fourth, while Sen. Frist has not focused on technology issues related to music or broadband, he has focused on some of the uses of the Internet that may in the long run provide real social benefits. That is, whatever happens with music and movies and copyrights on the Internet, it is all just entertainment. Moreover, the debates over broadband regulation now largely pit DSL providers against cable modem service providers; both technologies today provide asymmetric service at speeds that facilitate faster web browsing and music downloads -- entertainment uses. In contrast, to the extent that Sen. Frist has focused on broadband, it has been in the context of Internet based education and telemedicine. Both of these require more advanced technologies. And both have the potential to provide real social benefits.

People and Appointments
12/20. Sen. Trent Lott (R-MS) announced that he will step down as the Republican leader in the Senate. He released a short statement: "In the interest of pursuing the best possible agenda for the future of our country, I will not seek to remain as Majority Leader of the United States Senate for the 108th Congress, effective January 6, 2003. To all those who offered me their friendship, support and prayers, I will be eternally grateful. I will continue to serve the people of Mississippi in the United States Senate."

12/20. Alaska Gov. Frank Murkowski appointed Lisa Murkowski (at right) to serve the remaining two years of his U.S. Senate term. Frank Murkowski represented Alaska in the Senate from 1980 until his election as Governor of Alaska in November. He had two years remaining in his Senate term. Under Alaska law the Governor has authority to appoint a replacement to the vacant Senate seat. Lisa Murkowski, his daughter, was the House Majority Leader in the Alaska legislature. Her father will also name her replacement in the state House. She previously practiced law in Anchorage, Alaska.

12/19. Ron Dick, Director of the FBI's National Infrastructure Protection Center (NIPC) announced his retirement, effective December 28, 2002. See, NIPC release.

12/18. Intel named Cary Klafter VP of Legal and Government Affairs and Director of Corporate Affairs. Intel stated in a release that he will oversee "legal activities for the corporation's financial matters, including SEC filings, investments, mergers and acquisitions and investor relations, and also is responsible for corporate governance and board of directors matters".

12/17. Qualcomm name Raymond Dittamore to its Board of Directors. He replaces Neil Kadisha. Dittamore retired in June 2001 from Ernst & Young after working there for 35 years. See, Qualcomm release.

CCIA and SIIA Seek to Appeal as Amici in Microsoft Case
12/20. The Computer & Communications Industry Association (CCIA) and the Software and Information Industry Association (SIIA) filed a motion and memorandum [25 pages in PDF] with the U.S. District Court (DC) in the Microsoft antitrust case seeking leave to appeal the November 12, 2002 Final Judgment. Neither the CCIA nor the SIIA are parties to the case.

The motion is titled "Joint Motion by Amici Curiae CCIA and SIIA for Leave to Intervene for Purposes of Appeal". The CCIA and SIIA also filed a proposed order and a memorandum in support. The CCIA and SIIA assert that they represent a broad cross section of the computer and communications industries, that the settlement of the Microsoft case is not in the public interest, and that they should be permitted to appeal the case so that the Court of Appeals might overturn the judgment containing the settlement.

The motion lists Robert Bork, Ken Starr (Kirkland & Ellis) and Glenn Manishen (Kelley Drye & Warren) as attorneys for the CCIA and SIIA. See also, CCIA release and SIIA release.

The Association for Competitive Technology (ACT) responded in a release that the CCIA and SIIA represent Microsoft's largest competitors. ACT President Jonathan Zuck stated that the "CCIA and SIIA must have just gotten their Christmas bonuses from Sun, Oracle and AOL, with a note attached that read 'What have you done for me lately.' As always, CCIA and SIIA have chosen to ignore the true interests of the industry they purport to represent."

Divided 11th Circuit Denies Rehearing En Banc in Covad v. BellSouth
12/20. The U.S. Court of Appeals (11thCir) issued its order denying a petition for rehearing en banc in Covad v. BellSouth, a case involving antitrust and telecommunications law. Three judges dissented from the denial. In addition, Judge Tjoflat wrote an lengthy opinion explaining his dissent. See, order and dissenting opinion. The majority wrote no opinion.

A three judge panel of the Court of Appeals issued its opinion on August 2, 2002. It is reported at 299 F.3d 1272. On the petition for rehearing en banc, six judges opposed rehearing (Edmondson, Black, Carnes, Barkett, Marcus, and Wilson), three judges dissented (Tjoflat, Anderson, and Birch), and two recused themselves (Dubina and Hull).

The following excerpts from Judge Tjoflat's opinion summarize his objection. "Covad is the CLEC in this case; BellSouth is the ILEC. Covad is in the business of providing DSL service -- primarily through the use of BellSouth's physical plant. BellSouth and Covad entered into an interconnection agreement -- ultimately approved by the Georgia PSC -- pursuant to 47 U.S.C. § 252. Covad claims that BellSouth has not fulfilled its obligations under the 1996 Act and the BellSouth/Covad interconnection agreement. Specifically, Covad argues the following: BellSouth should have provided UNEs more promptly; BellSouth did not sufficiently provide space so that Covad could ``collocate´´ its equipment on BellSouth's premises; BellSouth engaged in a ``price squeeze´´ by pricing its UNEs too high while selling its DSL services to consumers at retail prices that are too low; and BellSouth understaffed its wholesale division. The basic theory, then, is that Covad needs BellSouth's local loop to compete, and BellSouth has done a poor job of turning it over. Covad wants access, and it wants access more promptly and on less costly terms than BellSouth presently provides."

Tjoflat continued that "The district court granted a dismissal, pursuant to Fed. R. Civ. P. 12(b)(6), based upon the reasoning of the Seventh Circuit in Goldwasser v. Ameritech Corp., 222 F.3d 390 (7th Cir. 2000). A three judge panel of this Court reversed, concluding that the obligations of ILECs under the 1996 Act and the Sherman Act are essentially coterminous, and therefore Covad's complaint alleges harms that, if proved, are cognizable under the antitrust laws. See Covad Communications Co. v. BellSouth Corp., 229 F.3d 1271 (11th Cir. 2002). Specifically, the panel found that BellSouth's alleged failure to promptly turn over its network would, if proved, give rise to liability under the essential facilities doctrine and the refusal-to-deal doctrine. The panel also held that BellSouth's allegedly high wholesale prices for its DSL UNEs, in conjunction with low retail prices on DSL service, states a ``price squeeze´´ claim under Section 2 of the Sherman Act. This court declined to reconsider the panel’s decision en banc."

Tjoflat concluded: "I dissent because the panel's holding has troubling implications for telecommunications law and, indeed, antitrust law as a whole. The panel decision took a turn that is bad policy, undermines Congress's regulatory scheme, and usurps regulatory power that belongs to the FCC under the 1996 Act by placing it in the hands of federal courts."

Court Rules No Duty to Defend/Indemnify in Patent Case Based on Advertising Injury Clause
12/20. The U.S. Court of Appeals (3rdCir) issued its opinion [PDF] in Green Machine v. Zurich American Insurance, a case regarding an insurer's duty to defend and indemnify its insured in a patent infringement action.

Zurich American's predecessor issued an insurance policy to Green Machine. Chiuminatta filed a complaint against Green Machine alleging patent infringement. Green Machine filed a separate complaint in state court against Zurich American seeking a declaratory judgment that Zurich American had a duty to defend and indemnify Green Machine under the advertising injury clause in the insurance policy. Zurich American removed the later action to the U.S. District Court (EDPenn).

The District Court granted summary judgment to Zurich American. Green Machine appealed. The Court of Appeals affirmed. It held that the complaint in the underlying lawsuit, alleging patent infringement, did not allege an advertising injury, and hence, Zurich American had no duty to defend.

GAO Reports on E-Government Initiatives
12/20. The General Accounting Office (GAO) released a report [70 pages in PDF] titled "Electronic Government: Selection and Implementation of the Office of Management and Budget's 24 Initiatives".

This report is a response to a request from Sen. Joe Lieberman (D-CT) and retiring Sen. Fred Thompson (R-TN), the Chairman and ranking Republican on the Senate Governmental Affairs Committee, that the GAO review 24 e-government initiatives of the Office of Management and Budget's (OMB). The GAO reviewed the information and documentation related to the selection and implementation of each of the e-government initiatives identified within OMB's e-government strategy.

The report found that "The business cases, work plans, and funding plans obtained by OMB all contained at least some of the key information that we identified as necessary to select and oversee the initiatives. However, we also reported that OMB did not collect complete business case information before making its selection of 24 e-government initiatives. Specifically, despite the importance that OMB attached to collaboration and customer focus in its e-government strategy, fewer than half of the initiatives’ initial business cases addressed these topics. In addition, the May 2002 work and funding plans provided OMB with insufficient information to monitor the status of its 24 e-government initiatives. Without addressing these issues, OMB increases the risk that the initiatives will not meet the President’s goal of a citizen centric electronic government that seeks to enhance the federal government’s value to its citizens."

Associate USTR Addresses Free Trade, FTAs and Technology
12/20. Associate U.S. Trade Representative (USTR) Josette Shiner gave a speech [PDF] to the The International Environment Forum in which she advocated free trade.

She also explained why free trade agreements (FTAs) with small developing economies are so important. She said that "FTAs can serve as models for global negotiations by establishing new standards, especially to deal with fresher topics on the globalization agenda -- such as ecommerce, intellectual property in a digital economy, labor and environmental cooperation, and an expanding services trade."

And, she pointed out, "A free and open trading system is critical to many of the most competitive sectors of the U.S. economy. ... America's dynamic high-tech sector depends on exports, with $189 billion in foreign sales last year. Software producers earn over half of all their revenue overseas."

Tech Crime Report
12/20. The U.S. Attorneys Office (EDCal) announced that Alyn Waage and James Webb were extradited from San Jose, Costa Rica, to Sacramento, California, on charges of conspiracy, mail fraud, wire fraud, securities fraud and money laundering in connection with an alleged Internet based investment fraud scheme. See, USAO release [PDF].
More News
12/20. The Copyright Office (CO) published a notice in the Federal Register regarding its notice of proposed rulemaking (NPRM) regarding the form, content, and manner of service of notices of termination under Section 203 of the Copyright Act. 17 U.S.C. § 203 pertains to the termination of transfers and licenses granted by the author. Comments are due by February 3, 2003; reply comments are due by March 5, 2003. For more information, contact David Carson, CO General Counsel, at 202 707-8380. See, Federal Register, December 20, 2002 Vol. 67, No. 245, at Pages 77951 - 77955.

12/20. The Federal Elections Commission (FEC) announced that it fined the Dreier for Congress Committee $650 for not filing a 12 Day Pre-Primary report in 2002. See, FEC release. However, Rep. David Dreier (R-CA), who is Chairman of the House Rules Committee, had no opposition in the March 5, 2002 primary election. See, California Elections Division election results [23 pages in PDF].

Monday, December 23
Deadline to submit reply comments to the Federal Communications Commission's (FCC) Wireline Competition Bureau (WCB) regarding AT&T's October 15 Petition for Rulemaking to Reform Regulation of Incumbent Local Exchange Carrier Rates for Interstate Special Access Services [118 pages in PDF]. This is RM No. 10593.

Deadline to submit notices of intent to participate to the Copyright Office regarding its request for "written comments and proposals for the scheduling of Copyright Arbitration Royalty Panel (CARP) proceedings to adjust royalty rates and terms under provisions of the Copyright Act governing ephemeral recordings and digital transmissions of performances of sound recordings, as well as notices of intent to participate in the CARP to set rates and terms under the statutory license for eligible nonsubscription services to make certain digital audio transmissions of sound recordings for the 2003-2004 period." See, notice in the Federal Register.

Tuesday, December 24
Christmas Eve.
Wednesday, December 25
Thursday, December 26
No events are scheduled.
Friday, December 27
No events are scheduled.
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