|Senate Committee Holds Hearing on Internet
3/18. The Senate Banking
Committee held a hearing on proposals to regulate illegal internet gambling.
The hearing focused on HR 21 and S 627, both of which would attempt to
bar internet gambling
operations access to the U.S. financial services system by banning the use of
credit cards, wire transfers, or any other bank instrument to fund gambling
transactions. The two bills are not identical.
On March 13, the House Financial
Services Committee approved the House version of the bill,
"Unlawful Internet Gambling Funding Prohibition Act of 2003".
The Senate version of the bill,
S 627, which
is also titled the "Unlawful Internet Gambling Funding Prohibition Act", was
introduced on March 13 by Sen. Jon Kyl
(R-AZ), Sen. Dianne Feinstein (D-CA),
and Sen. Richard Shelby (R-AL). See
also, PDF copy of S 627.
Five Senators participated in the hearing. Sen. Shelby, the Chairman, presided.
Sen. Paul Sarbanes (D-MD),
Sen. Chris Dodd
(D-CT), and Sen. Tom Carper (D-DE) all spoke
and questioned witnesses. Sen. Kyl
is not a member of the Committee, but testified as a witness.
Sen. Shelby said in his opening statement that "regulation of gambling has
traditionally been a matter of state law. As a conservative Republican, I
believe a federal response is appropriate to a social evil only to compliment
state or local enforcement. But clearly, internet gambling poses such a problem.
Off-shore internet casinos continue to proliferate and illegal internet gambling
continues unabated, despite the fact that no state has yet authorized a virtual
casino. The very nature of the internet gambling defies regulation at the state
or local level. ... Clearly, the casinos themselves are out of the reach of even
federal authorities, and can be expected to continue to flaunt U.S. Law. The
only available means of effective interdiction is through the media by which the
gambler and casino interface -- namely, through the internet service provider or
ISP or the payment system provider."
Sen. Sarbanes, the ranking Democrat on the Committee, said in his
opening statement the "Offshore Internet gambling could not attract U.S.
customers without making use of our payments system. Every Internet gambler must
use a credit card, fund transfer, or bank instrument to open and fund an account
from which to gamble on a web site." He added that "I am prepared to work with
the Chairman and other members on legislation to deal comprehensively with this
Sen. Dodd stated that "I think it's wise for Congress to consider banning the
use of credit cards and other financial instruments in furtherance of online
Sen. Sarbanes and Sen. Dodd also discussed what is socially responsible in the
context of the internet. Sen. Sarbanes said that "The fact that new ways to
attract potential gamblers, and facilitate their wagering, are clothed in the
aura of the internet, should not change our ideas of what is lawful or socially
responsible. This technology is being used to, sort of, cloak basic judgments
and considerations of what is appropriate social behavior. So they say, ``well,
you know, it is the internet´´. And all of a sudden, since it is the internet,
somehow, it has some validity. ... It shouldn't change our ideas of what is
wrong or socially responsible."
Sen. Dodd followed up on this. He commented about "this mystical quality,
that if it is the internet it must somehow be good. ... But the idea that
somehow being associated with it is somehow inherently going to be good, or
inevitable, is troubling."
Sen. Kyl (at right) testified in support of his bill, S 627, which he said is
"virtually identical" to the House bill. He said that internet gambling leads to
money laundering and tax evasion. He also said that "anyone who gambles on the
internet is making a sucker bet", referring to non payment of winnings, and
tampering with the odds. See also,
Sen. Kyl's release.
John Malcolm, a Deputy Assistant Attorney General in the
Criminal Division of the Department of Justice
(DOJ), provided testimony that
mirrored the arguments of the Senators who support the bill. He discussed the
problems associated with internet gambling, including gambling by children,
involvement of organized crime, and money laundering. He also expressed concern
about advertising of internet gambling, because it is giving some people the
mistaken view that internet gambling is legal. See,
Sen. Sarbanes later asked Malcolm for the DOJ's position on HR 21 and S 627. He
responded that the DOJ has not yet taken a position, and that it has some concerns
with the legislation. A stunned Sen. Sarbanes asked "When does the Department of
Justice intend to get involved?". Sen. Sarbanes added, "I suggest that the Justice
Department get to work".
Sen. Shelby added, "I can't imagine, this Justice Department, under any
circumstances, headed by our former colleague,
John Ashcroft, would
oppose this legislation."
Former Sen. Ashcroft (R-MO) was a co-sponsor of Sen. Kyl's bill,
S 474, the
Internet Gambling Prohibition Act of 1997, in the 105th Congress.
Richard Fisher, an attorney with the law firm of
Morrison & Foerster, also testified. He said
that he has represented financial institutions and payment systems. See,
prepared testimony. He said that "It is no small undertaking for payment
system participants to block Internet gambling transactions even when they can
be identified through coding systems". He added that "any effort to individually
examine transactions would threaten the entire operation of the payment systems
that all U.S. consumers rely on to conduct instantaneous transactions around
town, across the country and throughout the world."
Fisher also said that "Because these systems rely on proper coding by
merchants, the blocking may not be complete, for example, if Internet gambling
operations miscode authorization messages ... Also, ... blocking payment card
transactions may lead to the use of other payment methods and, therefore, may
not solve the problem of illegal Internet gambling. In addition, ... some
Internet gambling transactions will evade even the most sophisticated detection
and blocking mechanisms. For these reasons, any legislation designed to address
illegal Internet gambling by focusing on the responsibilities of payment system
participants to identify and block such Internet gambling transactions must
recognize that mechanisms for achieving this end will not be infallible and that
some transactions inevitably will leak through."
Stewart Baker, a lawyer with the law firm of Steptoe & Johnson, testified on
behalf of the
U.S. Internet Service Provider Association.
He offered several general criticisms. See,
He said that "Internet gambling legislation must not require service
providers to block customer access to Internet gambling sites not residing on
their networks and not under their control. This type of regulatory scheme is
unworkable and will disrupt ecommerce and speech on the Internet."
He also stated that "legislation should contain clear court-ordered notice
and takedown procedures ..." He added that "notice and takedown procedures
should also give websites an opportunity to appear to refute notices for illegal
activity that may not reside on the service providers networks or may not be
He also said that "service providers should be given immunity from liability
for good faith efforts to comply with a notice." Also, "Internet gambling
legislation should contain language that clearly states that no service provider
has any duty or obligation to monitor its networks for illegal activity, or
disable or block customer access to websites not under the service provider's
direct control or residing on its network."
Attorney General of the state of Connecticut, testified on behalf of the
National Association of Attorney Generals.
He said that legislation should "prohibit the use of credit or debit cards and
other financial instruments for Internet gambling". He continued that
legislation should have no exceptions, including any exception for state
sanctioned gambling. See,
William Saum, testified on behalf of the
National Collegiate Athletic Association (NCAA). He said that "We believe that
strong legislation is needed to prohibit gambling over the Internet". See,
Frank Fahrenkopf, P/CEO of the
American Gaming Association, also testified. His group represents brick and
mortar and riverboat casinos. It opposes this legislation. See,
Frank Catania testified on behalf of the Interactive Gaming Council, which
opposes the proposed legislation. See,
|Rosen Addresses Enforcement of Music
3/17. Outgoing Recording Industry Association
of America (RIAA) Ch/CEO Hilary Rosen gave a speech to the National Association of Recording
Merchandisers in Orlando, Florida in which she addressed the RIAA's efforts to
enforce music copyrights.
She began by stating that "The challenges we have faced as an industry with Napster and
its clones are in many ways unprecedented in American commercial history. There
we were rockin’ along, producing and selling great music and producing enough revenue to not just
support everyone, but also to grow the opportunities around the world for a
bigger and bigger business. Then suddenly we wake up one day and everything we
have worked so hard to build is being offered to consumers for free or for a
scant dollar on the street corner. Not 10 percent off. Not reduced interest
rates. Not negotiated payment schedules. Our product is suddenly being
offered to consumers for absolutely nothing."
She added that "I am tired of those who suggest that because sometimes someone
is a music fan or a technology innovator or even, god forbid, a teenager or a
student that they have a right to steal. They don't. ... Copyright are the rules
of the road that encourage and ensure that creators bring forward new art every
day. The right to decide how and when to reproduce, perform and distribute
Rosen said that the RIAA must act through business
strategies, public education and, targeted enforcement. She addressed
enforcement at length.
She reviewed recent litigation against street piracy, including stores that
sell infringing CDs, flea markets, and those producing pirated CDs. She also
discussed cooperative efforts with law enforcement agencies.
Finally, she addressed RIAA's efforts to fight
illegal downloading occurring on peer-to-peer networks.
First, she said that record companies are engaging in two self help remedies,
spoofing and CD protection technologies.
She elaborated that "Spoofing is the practice of
flooding the peer-to-peer network with bogus files titled the same as the hits. The
goal is to encourage the user to give up in frustration and go to a
legitimate site to get the real thing. While individual companies and not the RIAA
do this, we know that it is having a positive benefit on new releases."
She then said that "While the technology is apparently not quite ready,
there is promise for some protective technologies, which would offer consumers
use of their music on the computer and still prevent uploading onto the
Internet. While there are no specific plans to release such products into
the marketplace at this time, if they are produced, record companies will need
to work closely with retailers to assure that the proper consumer education and
labeling takes place."
Second, she reviewed two pending court cases. "The first is one we have
jointly filed with the Motion Picture
Association of America (MPAA) against Kazaa, Grokster and MusicCity. We are
expecting a ruling from the judge soon about whether we win in summary judgment
or whether we have to go to trial to prove that the provider of these services
are contributing to copyright infringement similar to Napster."
U.S. District Court (CDCal) issued an order and opinion on January 9 in
MGM v. Grokster in which it denied Sharman Network's motion
to dismiss for lack of personal jurisdiction. Sharman, which now owns the key
assets of Kazaa, is organized in the
offshore jurisdiction of
apparently for the purpose of evading the reach of U.S. courts. Sharman provides
free software, known as the Kazaa Media Desktop (KMD), that can be downloaded
and used to search for and exchange digital music, movies, and other mostly
copyrighted works, using FastTrack file sharing technology. See,
Court Squeezes Sharman on Internet Based Personal Jurisdiction", January 9,
Rosen continued that "The second is a case against Verizon. We thought we
had an agreement with the ISPs.
If they help us identify the direct infringer, they won't be liable for infringement
themselves. Verizon has unfortunately turned
this case into a bogus claim to protect their members' privacy rights. Well
first of all, there is no right to commit a crime in private. And second and
more importantly, when you are on one of these p2p systems and have opened your
hard drive and its contents to the network, you have given away your own
The U.S. District Court (DC) issued an
opinion on January 21 in
RIAA v. Verizon, ruling that copyright holders can obtain
subpoenas pursuant to
17 U.S.C. § 512(h) that require Internet Service Providers (ISPs) to reveal
the identities of their customers who infringe copyrights on peer to peer filing
sharing systems. Verizon had argued that 512(h) subpoenas were only available
with respect to infringers who stored infringing content on the servers of the
ISP. See, TLJ
story titled "District Court Rules DMCA Subpoenas Available for P2P
Infringers", January 21, 2003.
|Senate Finance Committee Addresses IT
Modernization at IRS
3/18. The Senate Finance
Committee held a hearing on the nomination of Mark Everson to be
Commissioner of the Internal Revenue Service (IRS).
If confirmed, he will replace Charles Rossotti. One of the issues addressed at
the hearing was information technology.
Sen. Max Baucus (D-MT),
the ranking Democrat on the Committee, said in his
prepared statement [3 pages in PDF] that "the
IRS is still in the technological dark ages". He added that "I realize that
Commissioner Rossotti said it would take 10 years to complete the
modernization projects, but Congress expected that more would be accomplished on
the technology front during his tenure. I would like to know whether the
modernization effort will be complete during your five-year tenure. I would also
like to hear how you intend to keep systems modernization on track and make it a
reality." Sen. Baucus concluded that "We want IRS representatives to have timely
computer access to tax information so taxpayer assistance is quick and accurate.
We want to reduce the paperwork and have more taxpayers filing electronically."
Sen. Charles Grassley (R-IA), the
Chairman of the Committee, stated in his
statement [PDF] that "the Finance Committee
expects progress in modernization".
Everson stated in his
prepared testimony [PDF] that "If confirmed, I will work to support the
information technology modernization efforts which have been underway for some
years. Their success is badly needed in order to establish a more efficient and
effective IRS. I would add that the information technology modernization program
must be supplemented with other business process improvements which will allow
the IRS to redirect scarce resources to operational priorities."
|RIAA Notifies 300 Corporations of P2P
Infringement on Their Networks
3/12. The Recording Industry Association of
America (RIAA) sent a letter
to about 300 corporations in the U.S. notifying
them that their computer networks are being used to distribute copyrighted music
on the internet, via peer to peer networks. The letter requests cessation of
The letter states that "Our recent investigations reveal that Internet Protocol
(``IP´´) addresses assigned to your company have been used to log onto the
FastTrack network (i.e., the online peer-to-peer network hosting KaZaA, Grokster
and iMesh) to offer up copyrighted sound recordings owned by the RIAA's member
companies for others to download for free. In short, your computer network
and resources are being used to illegally distribute copyrighted music on the
Internet." (Parentheses in original.)
The letter threatens that "These acts of infringement
could expose your employees and your company to significant legal damages.
Indeed, federal copyright law imposes stiff penalties for acts of infringement.
For example, copyright owners can collect statutory damages of up to $150,000
per copyrighted work infringed as well as legal costs and attorneys’ fees.
Damages can also include all of the profits earned by an infringer plus the
actual damages suffered by the copyright owner. In addition, infringers risk
relinquishment of any equipment used in manufacturing the infringing copies.
The consequences for not taking action, therefore, can be quite serious."
The letter concludes that "We strongly urge you to take immediate steps to prevent the
continued infringement of our members' sound recordings on your corporate
network. We also encourage you to adopt and fully implement employee policies
and technical measures that prevent copyright infringement on your corporate
network, as we will continue to monitor for infringing conduct and take any
appropriate legal action necessary to protect our rights."
The RIAA did not reveal the names of the companies to which it sent the
letter. However, it stated that "Approximately 20 percent of the letters went to
companies in the medical-related field, 20 percent to manufacturing companies,
and 35 percent to technology firms. The rest went to corporations in a
variety of unrelated sectors."
|People and Appointments
3/18. John Gannon was named Republican staff director for the new
House Select Committee on Homeland Security. Gannon headed the
Bush administration's transition team for the new
Department of Homeland Security's Intelligence
and Infrastructure Protection
Directorate. Prior to that, he was Vice Chairman of
Before that, he was Chairman of the National Intelligence Council, which
produces intelligence estimates for the President on national
security issues and coordinates the work of the intelligence community. From
1998 through 2001, he was the Assistant Director of the
Agency (CIA) for Analysis and Production. From 1995 through 1997 he was Deputy
Director of the CIA for Intelligence. And prior to that, he was an officer in
the U.S. Navy.
3/18. Steven Cash was named Democratic staff director for the new
House Select Committee on Homeland Security. He worked for the
Senate Select Committee on Intelligence from 2001
through 2003. Before that, he worked for the Central
Intelligence Agency (CIA)
as Assistant General Counsel in the Litigation Division, and then as an
Intelligence Officer in the Directorate of Operations.
Before that, he worked in the New York County
District Attorney's Office in New York City as an Assistant District Attorney in
the Investigations Division, Rackets Bureau and the Trial Division from 1988
3/18. Lawrence West was named Associate Director of the
Exchange Commission's (SEC) Division of Enforcement. He has worked for the SEC
since 1994. He replaces William Baker III, who left in November of 2002.
See, SEC release.
3/18. The House Rules Committee adopted a
rule for consideration of
HR 975, the
Bankruptcy Abuse Prevention and Consumer Protection Act of 2003. Sections 231
and 232 of the bill pertain to protection of personally identifiable
information in bankruptcy proceedings. The House will likely take up the
bill on March 19 or 20.
3/18. The House Judiciary
the Child Abduction Prevention Act, by a vote of 18-2. This wide ranging bill
includes the "Amber Alert" bill. Section 201 would
amend 18 U.S.C. §
2516 to expand the list of predicate offenses that may serve as the basis
for the issuance of a wiretap order. Each new predicate relates to
sexual exploitation crimes against children. Section 201 is similar to
(107th Congress) which passed the House on May 21, 2002 by a vote of 396-11.
Roll Call No. 175. The Senate did not pass the bill.
3/18. The General Accounting Office (GAO)
released its February 14, 2003 letter
[PDF] to Rep. Tom Davis (R-VA), the
Chairman of the House Government Reform
Committee, regarding federal contracting for information technology services.
The letter concludes that "Federal spending on IT services almost doubled from fiscal years
1997 to 2001, increasing from $9 billion to more than $17 billion. While the
Department of Defense (DOD) remained the single largest purchaser of IT services
throughout the period, spending on IT services through the General Services
Administration (GSA) greatly increased, mostly the result of spending by GSA’s Federal
Technology Service on behalf of other agencies. Spending on IT services through GSA’s
federal supply schedule program grew from about $405 million to $4.3 billion.
The distribution of IT services spending in fiscal year 2001 was 14 percent to small
businesses, 21 percent to medium-size businesses, and 62 percent to large businesses."
|Wednesday, March 19
The House will meet at 10:00 AM for legislative business. The Supreme
Court is in recess until March 23.
Day three of a three day conference titled "Open Source for National and
Local eGovernment Programs in the U.S. and EU". See,
agenda. For more
information, contact Tony Stanco at 202 994-5513 or
Stanco@seas.gwu.edu. Location: George
Washington University, The Marvin Center Grand Ballroom, 800 21st Street, NW.
9:00 AM - 12:00 NOON. Day two of a two day meeting of the
National Institute of Standards and Technology's
(NIST) Visiting Committee on Advanced Technology. Pre-registration is
notice in the Federal Register, March 4, 2003, Vol. 68, No. 42, at Pages
10205-10206. Location: Employees Lounge, Administration Building, NIST,
9:00 AM - 5:00 PM. The Federal
Communications Commission (FCC) North American Numbering Council will
meet. Location: FCC, Room TW-C305 (Commission Meeting Room), 445 12th Street,
9:00 - 9:30 AM. Commerce Secretary
Donold Evans, Under
Secretary of Commerce for International Trade
and Under Secretary of Commerce for Technology
Phil Bond will host an event
to announce "an eight-point ``Standards Action Plan´´ aimed at creating greater
competition in the global marketplace and better coordination of Commerce
standards programs and training". See,
more information, contact Trevor Francis at 202 482-4883. Location: Department
of Commerce, 14th & Constitution, Secretary's Conference Room, 5th floor.
9:00 - 11:00 AM. The Corporation for Public
Broadcasting (CPB) will host an event to release and discuss a study
titled "Connected to the Future," which documents internet use by American
children over the last two years. RSVP to Jeannie Bunton at
firstname.lastname@example.org or 202 879-9687.
Location: CPB, 401 9th Street, NW.
10:00 AM. The House Science
Committee will hold a hearing on
the Nanotechnology Research and Development Act of 2003. The scheduled
witnesses included Sen. George Allen
(R-VA), Sen. Ron Wyden (D-OR), Richard
Russell (Associate Director for Technology at the Office of Science and
Technology Policy), Thomas Theis (IBM Research Division), James Roberto (Oak
Ridge National Laboratory), Carl Batt (Nanobiotechnology Center at Cornell
University), and Alan Marty (JP Morgan Partners). Location: Room 2318, Rayburn Building.
11:30 AM. The Center for Democracy and
Technology (CDT) will hold a press conference via telephone conference
call to announce and discuss a report titled "Why Am I Getting All of This
Spam?". To participate, call 334 260-2557. The security code is 98704. The
report will be published in the CDT web site.
|Thursday, March 20
The House will meet at 10:00 AM for legislative business.
9:30 AM. The Senate Judiciary
Committee will hold an executive business meeting. See,
Location: Room 226, Dirksen Building.
10:00 AM. The Senate
Appropriations Committee's Subcommittee on Commerce, Justice, State, and
the Judiciary will hold a hearing on the President's budget request for fiscal
year 2004 for the Department of Commerce.
Location: Room S-146, Capitol Building.
10:00 AM. Dane
Snowden, Chief of the Federal Communications
Commission's (FCC) Consumer &
Governmental Affairs Bureau, will hold a media briefing to
discuss the work of the bureau, including telemarketing reform, slamming
rules, disability issues, tribal issues, and consumer outreach. RSVP to
Rosemary Kimball at 202 418-05111 or
email@example.com. Location: Conference
Room CY B-511.
10:30 AM. The House
Appropriations Committee's Subcommittee on Homeland Security will hold a
the Secretary of Homeland Security, will testify. Location: Room 2359, Rayburn
12:00 NOON - 1:30 PM. The
Congressional Internet Caucus Advisory Committee will host a luncheon
panel discussion titled "Government Pattern Analysis: Securing Terrorists
While Preserving Privacy?" Peter Swire
of Ohio State University will moderate. RSVP to
firstname.lastname@example.org or 202 638-4370.
Location: Room HC-5, Capitol Building.
|Friday, March 21
10:00 AM. The
Committee's Subcommittee on Commerce, Justice, State, and the Judiciary
will hold a hearing on President Bush's budget request for fiscal year 2004
for the Department of Commerce (DOC).
Location: Room S-146, Capitol.
12:15 PM. Jim Bird (head of the Federal Communications Commission's
Office of General Counsel's
Transactional Team), Don
Stockdale (FCC's Office of Strategic Planning
and Policy Analysis), Walt Strack (FCC's Wireless
Telecommunications Bureau), and Jim
Barker (Latham & Watkins) will speak at a
luncheon on FCC antitrust merger reviews. The Federal
Association's (FCBA) web site states that "This meeting will be off the
record". For more
information, contact Lauren Kravetz at 202 418-7944 or
email@example.com. This event had
originally been scheduled for February 19, but was postponed due to snow.
Location: Willkie Farr & Gallagher, 1875
K St., NW.
|Monday, March 24
The Supreme Court will return from recess.
4:00 PM. Polk Wagner
(University of Pennsylvania Law School) will present a draft
paper titled "Is the Federal Circuit Succeeding? An Empirical Look at Claim Construction".
For more information, contact
at 202 994-6138 or
firstname.lastname@example.org. Location: George Washington University Law
School, Faculty Conference Center, Burns Building, 5th Floor, 720 20th Street,
Deadline to submit applications to the National
Institute of Standards and Technology (NIST) for financial assistance for
FY 2003 for its 2003 Summer
Undergraduate Research Fellowships (SURF) in several areas, including
electronics and electrical engineering and information technology. See,
notice in the Federal Register, February 20, 2003, Vol. 68, No. 34, at Pages
|Tuesday, March 25
10:00 AM. The
Committee's Subcommittee on Homeland Security
will hold a hearing on the proposed budget for FY 2004 for the Department of
Homeland Security. Location: Room 106, Dirksen Building.
|About Tech Law Journal
|Tech Law Journal publishes a free access web site and
subscription e-mail alert. The basic rate for a subscription
to the TLJ Daily E-Mail Alert is $250 per year. However, there
are discounts for subscribers with multiple recipients. Free one
month trial subscriptions are available. Also, free
subscriptions are available for journalists,
federal elected officials, and employees of the Congress, courts, and
executive branch. The TLJ web site is
free access. However, copies of the TLJ Daily E-Mail Alert are not
published in the web site until one month after writing. See, subscription
Contact: 202-364-8882; E-mail.
P.O. Box 4851, Washington DC, 20008.
Copyright 1998 - 2003 David Carney, dba Tech Law Journal. All