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April 7, 2003, 9:00 AM ET, Alert No. 638.
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Greenspan Addresses Intellectual Property Laws

4/4. Federal Reserve Board (FRB) Chairman Alan Greenspan gave a speech titled "Market Economies and Rule of Law". He spoke primarily about developing a legal regime for intellectual property that maximizes economic growth. He offered some insights into how to analyze the problem, and asked some rhetorical questions, but offered no specific policy recommendations.

He said that the "more general challenge is to develop a framework that fosters the growth of an economy increasingly dominated by conceptual products."

Greenspan spoke via satellite to a conference titled "2003 Financial Markets Conference -- Business Method Patents and Financial Services". See, conference agenda, with hyperlinks to some of the papers presented at the conference. The conference was hosted by the Federal Reserve Bank of Atlanta, the Center for Banking and Finance, and the University of North Carolina School of Law. The conference was held on April 3-5 in Sea Island, Georgia.

He began with the observation that "Market economies require a rule of law. A society without state protection of individual rights, especially the right to own property, would not build private long term assets, a key ingredient of a growing modern economy. Yet an excess of rules -- in the extreme case, central planning -- has also been shown to stifle initiative and produce economic stagnation."

Alan GreenspanGreenspan (at right) then identified the growing importance of intellectual property, which he usually referred to as "conceptual property". He said that "In recent decades, for example, the fraction of the total output of our economy that is essentially conceptual rather than physical has been rising. This trend has, of necessity, shifted the emphasis in asset valuation from physical property to intellectual property and to the legal rights that inhere in the latter. Though the shift may appear glacial, its impact on legal and economic risk is only beginning to be felt."

"Technological advance is continually altering the shape and nature of our economic processes and, in particular, is promoting the trend toward increasing conceptualization of U.S. GDP."

He next analyzed differences between physical and intellectual property. He said that "in the physical world, the usual situation is that each additional unit of output is more costly to produce than the previous one; that is, production, at least eventually, is characterized by increasing marginal cost. By contrast, in the conceptual world, much of production is characterized by constant, and perhaps even zero, marginal cost."

He continued, "For example, though the set up cost of creating an on-line encyclopedia may be enormous, the cost of reproduction and distribution may be near zero if the means of distribution is the Internet. The emergence of an electronic platform for the transmission of ideas at negligible marginal cost may therefore be an important factor explaining the recent increased conceptualization of the GDP."

He added that "conceptualization is irreversibly increasing the emphasis on the protection of intellectual, relative to physical, property rights. Before World War I, markets in this country were essentially uninhibited by government regulations, but they were supported by rights to property, which in those years meant largely physical property."

"Only in recent decades, as the economic product of the United States has become so predominantly conceptual, have issues related to the protection of intellectual property rights come to be seen as significant sources of legal and business uncertainty. Intellectual property is clearly more difficult to define and, hence, to protect. The physical property of one owner cannot occupy the same space as that of another. Ownership of physical property is capable of being defended by police, the militia, or private mercenaries. Ownership of ideas is far less easily protected."

"Indeed, the nature of intellectual property is importantly different from physical property. In particular, one individual's use of an idea does not make that idea unavailable to others for their own, simultaneous use. Furthermore, new ideas almost invariably build on old ideas in ways that are difficult or impossible to delineate", said Greenspan.

He also stated that "Of particular current relevance to our economy overall is the application of property right protection to information technology. A noticeable component of the surge in the trend growth of the economy in recent years arguably reflects the synergy of laser and fiber optic technologies in the 1960s and 1970s. This synergy has produced very little that is tangible in information technology. Yet the information flow that it facilitates has allowed the creation of vast amounts of wealth."

"The dramatic gains in information technology have markedly improved the ability of businesses to identify and address incipient economic imbalances before they inflict significant damage. These gains reflect new advances in both the physical and the conceptual realms. It is imperative to find the appropriate intellectual property regime for each."

Finally, Greenspan addressed how to develop an appropriate intellectual property rights regime. He said that "If our objective is to maximize economic growth, are we striking the right balance in our protection of intellectual property rights? Are the protections sufficiently broad to encourage innovation but not so broad as to shut down follow-on innovation? Are such protections so vague that they produce uncertainties that raise risk premiums and the cost of capital? How appropriate is our current system -- developed for a world in which physical assets predominated -- for an economy in which value increasingly is embodied in ideas rather than tangible capital?" However, he did not provide answers to his questions.

However, he did state that "If the form of protection afforded to intellectual property rights affects economic growth, it must do so by increasing the underlying pace of productivity growth. The bulk of this increase should show up as multifactor productivity, that is, the segment of labor productivity that reflects the impact of conceptualization -- ideas generally -- on economic growth and standards of living. Finding a way to isolate the effect of, say, the length of patents on overall economic growth poses a formidable challenge."

House and Senate Conferees to Meet on Child Protection Bill

4/4. House and Senate conferees announced that they will meet regarding S 151, the "Prosecutorial Remedies and Tools Against the Exploitation of Children Today Act of 2003", also known as the PROTECT Act.

The Senate bill is sponsored by Sen. Orrin Hatch (R-UT), Chairman of the Senate Judiciary Committee. The Senate passed its version of the bill on February 24, 2003 by a vote of 84-0.

The House bill, which was originally numbered HR 1104, and titled "Child Abduction Prevention Act", is sponsored by Rep. James Sensenbrenner (R-WI), the Chairman of the House Judiciary Committee. The House passed its version on March 27. The House version includes a ban on misleading domain names that is not in the Senate version of the bill. Both bills address, with different language, the Supreme Court's April 16, 2002, opinion [PDF] in Ashcroft v. Free Speech Coalition, in which the Court held unconstitutional on First Amendment and overbreadth grounds provisions of the Child Pormography Prevention Act of 1996 (CPPA) banning computer generated images depicting minors engaging in sezually explicit conduct.

Rep. Sensenbrenner stated in a release that "I'm pleased the Senate finally will join the House at the negotiating table on legislation critically important to protecting our kids from kidnappers, molesters, and others that would prey upon them. I am committed to resolving the differences promptly and sending this child protection legislation to President Bush by the Easter recess." Both the House and the Senate plan to begin their recess at the end of this week.

The Senate conferees are Orrin Hatch, Charles Grassley (R-IA), Jeff Sessions (R-AL), Lindsey Graham (R-SC), Patrick Leahy (D-VT), Ted Kennedy (D-MA), and Joe Biden (D-DE). The House conferees are James Sensenbrenner, Howard Coble (R-NC), Lamar Smith (R-TX), Mark Green (R-WI), Melissa Hart (R-PA), John Conyers (D-MI), and Bobby Scott (D-VA).

See also, stories titled "House Passes HR 1104", TLJ Daily E-Mail Alert No. 633, March 31, 2003; "Rules Committee Adopts Rule for HR 1104", TLJ Daily E-Mail Alert No.  631, March 26, 2003; "Rep. Pence Introduces Truth in Domain Names Act", TLJ Daily E-Mail Alert No.  616, March 4, 2003; and "Senate Passes PROTECT Act", TLJ Daily E-Mail Alert No. 611, February 25, 2003.

Federal Claims Court Rules in Cell Phone Lotteries Case

3/28. The U.S. Court of Federal Claims issued its opinion [25 pages in PDF] in Folden v. USA, a case involving cellular license lotteries held in 1989. The plaintiffs, Gene Folden, Coastal Communications Associates and Judith Longshore, submitted applications to the Federal Communications Commission (FCC), but were disqualified. The licenses were awarded to others.

The plaintiffs filed a complaint in the U.S. Court of Federal Claims against the United States alleging that the FCC breached implied in fact contracts with the plaintiffs to award seven cellular licenses by lottery, and violated the takings clause of the First Amendment of the Constitution by abrogating their contract rights without compensation.

The Court granted the government's motion to dismiss the implied-in-fact contract claim for failure to state a claim, because the plaintiffs failed to establish the existence of an implied-in-fact contract. The Court also granted the government's motion to dismiss for lack of subject matter jurisdiction, because this Court lacks authority to review FCC licensing decisions. The Court also granted the government's motion to dismiss the takings clause claim, because the plaintiffs do not hold a property interest that is protected by the Fifth Amendment.

Judge Marion Horn [PDF] wrote the opinion.

People and Appointments

4/3. Greg Garcia joined the Information Technology Association of America (ITAA) as VP for Information Security Policy and Programs. He previously worked for the House Science Committee's Subcommittee on Research. Before that, he was Director of Global Government Relations and head of the Washington office for 3Com Corporation. See, ITAA release.

More News

4/4. The U.S. Patent and Trademark Office (USPTO) published a notice in the Federal Register announcing that May 12, 2003 is the deadline to submit nominations for members of the Patent Public Advisory Committee and the Trademark Public Advisory Committee. See, Federal Register, April 4, 2003, Vol. 68, No. 65, at Pages 16480 - 16481.

4/4. The National Institute of Standards and Technology (NIST) released its second draft [2.60 MB in PDF] of Special Publication 800-50 titled "Building an Information Technology Security Awareness and Training Program". The publication provides guidance on designing, developing, implementing, and maintaining an awareness and training program within an agency's IT security program. The deadline for public comments is May 2, 2003. Submit comments to Mark Wilson at

4/4. The Electronic Privacy Information Center (EPIC) published in its web site copies of more documents that it has received from the federal government regarding the Total Information Awareness (TIA) project. The EPIC has submitted Freedom of Information Act (FOIA) requests to, and filed complaints in U.S. District Court against, the Department of Defense. See, page with hyperlinks to PDF copies of recently obtained documents.

4/3. The American Electronics Association (AEA) wrote a letter to leaders of the House and Senate tax committees urging the Congress to make permanent the research and development tax credit. The AEA also stated that "The credit also should be strengthened so that it provides an incentive for even more businesses engaged in significant research to invest in R&D in the United States. An increase in the Alternative Incremental Research Credit (AIRC) rates and a new elective alternative credit formula, as proposed in H.R. 463 and S. 664, would provide such an incentive." The letter was sent to Rep. Bill Thomas (R-CA), Rep. Charles Rangel (D-NY), Sen. Charles Grassley (R-IA), and Sen. Max Baucus (D-MT), the Chairman and ranking Democrats on the House Ways and Means Committee and the Senate Finance Committee.

AOL Time Warner Petitions FCC for Relief From Instant Messaging Restriction

4/2. AOL Time Warner submitted a petition [58 pages in PDF] to the Federal Communications Commission (FCC) requesting relief from the FCC's January 22, 2001 Memorandum Opinion and Order (MOO) approving the merger of AOL and Time Warner, and imposing conditions upon AOL Time Warner regarding instant messaging services.

Specifically, AOL Time Warner seek relief from the condition restricting its ability to offer internet users streaming video advanced Instant Messaging based high speed services (AIHS) via AOL Time Warner broadband facilities.

The FCC adopted this MOO on January 11, 2001, and released it at a later date. This proceeding is Cable Services Bureau Docket No. 00-30. The MOO is numbered FCC 01-12. The FCC has published the MOO in its electronic comment filing system (ECFS). It is published in six parts as PDF scans. Each part takes an extraordinarily long time to download. See, parts 1, 2, 3, 4, 5, and 6. It is also published at 16 FCC Rcd 6547.

The MOO provides that "AOL Time Warner may not offer an AIHS application that includes the transmission and reception, utilizing an NPD over the Internet Protocol path of AOL Time Warner broadband facilities, of one- or two-way streaming video communication using NPD (``Names and Presence Database创) protocols -- including live images or tape -- that are new features, functions, and enhancements beyond those offered in current offerings such as AIM 4.3 or ICQ 2000b, unless and until AOL Time Warner has successfully demonstrated it has complied with one of the following grounds for relief." (Parentheses in original.)

The MOO also provided three grounds from relief from this condition. One of these grounds -- the one now asserted by AOL Time Warner -- is changed circumstances. AOL Time Warner now argues that the assumptions and predictions made by the FCC in 2001 have proven to be incorrect.

AOL Time Warner states in its petition that the condition was based upon the assumptions that "AOL was the dominant provider of IM services and, absent interoperability, the ``strong 'network effects'创 associated with IM would cause AOL's unassailable lead in text-based IM to ``swell创 over time", and that "AOL's dominance in the text-based IM would afford the merged company an anti-competitive first-mover advantage in streaming video AIHS, creating barriers to entry and foreclosing competition".

AOL Time Warner further asserts that now, "AOL is not dominant in the provision of IM services today and there is no danger of ``network effects创 causing AOL's share to ``swell创", and that "As Microsoft and Yahoo! have each independently introduced streaming video AIHS, AOL does not have -- and cannot obtain -- a ``first mover创 advantage in this area".

Public comments are due by May 5, 2003. Reply comments are due by May 20, 2003.

Monday, April 7

The House will meet at 12:30 PM for morning hour and at 2:00 PM for legislative business. Votes will be postponed until 6:30 PM. The House will consider several non technology related items under suspension of the rules. The Senate will meet at 3:00 PM.

The Intellectual Property Owners Association (IPO) will hold a Committee Leadership Meeting and Board of Directors Meeting. For more information, call 202 466-2396. Location: Ronald Reagan International Trade Center.

DEADLINE EXTENDED TO APRIL 17. Deadline to submit comments to the Federal Communications Commission (FCC) in response to its Notice of Inquiry (NOI) [MS Word] regarding "Additional Spectrum for Unlicensed Devices Below 900 MHz and in the 3 GHz Band". Unlicensed devices would include, among other things, 802.11. See, notice in Federal Register, January 21, 2003, Vol. 68, No. 13, at Pages 2730-2733. See also, story titled "FCC Announces Notice of Inquiry Re More Spectrum for Unlicensed Use" in TLJ Daily E-Mail Alert No. 566, December 12, 2002. For more information, contact Hugh Van Tuyl in the FCC's Office of Engineering & Technology at or 202 418-7506. This is OET Docket No. 02-380. See, notice of extension [PDF].

Deadline to submit comments to the Office of the U.S. Trade Representative (USTR) regarding the establishment of a petition process to review eligibility of countries for the benefits of the Andean Trade Preference Act. See, notice in Federal Register, February 4, 2003, Vol. 68, No. 23, at Pages 5542-5545.

Tuesday, April 8

The House will meet at 10:30 AM for morning hour and at 12:00 NOON for legislative business. The House will consider several non technology related items under suspension of the rules.

9:30 AM. The U.S. Court of Appeals (DCCir) will hear oral argument in Public Service Commission of Colorado v. FCC, No. 02-1163. Judges Rogers, Garland and Silberman will preside. Location: 333 Constitution Ave., NW.

9:30 AM. The Senate Rules and Administration Committee will hold an oversight hearing on the Library of Congress and the Congressional Research Service. Location: Room 301, Russell Building.

12:30 PM. Ted Turner will give a luncheon speech. Location: Ballroom, National Press Club, 529 14th St. NW, 13th Floor.

2:00 PM. House and Senate conferees will meet regarding S 151, the "Prosecutorial Remedies and Tools Against the Exploitation of Children Today Act of 2003", also known as the PROTECT Act. The House version of this bill includes a ban on misleading domain names, and provisions relating to computer generated images.

4:00 PM. Ellen Goodman will present a draft paper titled "Spectrum Rights in the Telecosm to Come". For more information, contact Robert Brauneis at 202 994-6138 or Location: George Washington University Law School, Faculty Conference Center, Burns Building, 5th Floor, 720 20th Street, NW.

Wednesday, April 9

The House will meet at 10:00 AM.

10:00 AM. The House Commerce Committee's Subcommittee on Telecommunications and the Internet will meet to mark up HR 1320, the Commercial Spectrum Enhancement Act. The event will be webcast. Location: Room 2123, Rayburn Building.

10:00 AM - 12:00 NOON. The House Science Committee will hold a hearing titled "The Societal Implications of Nanotechnology". The event will be webcast. Location: Room 2318, Rayburn Building.

10:00 AM. The House Judiciary Committee's Task Force on Antitrust will hold a hearing on HR 1086, the "Standards Development Organization Advancement Act of 2003". The event will be webcast. Location: Room 2141, Rayburn Building.

10:00 AM. The U.S. Court of Appeals (FedCir) will hold oral argument in First Graphics v. M.E.P. CAD, No. 02-1469, an appeal from the U.S. District Court (NDIll). Location: Courtroom 402, 717 Madison Place, NW.

10:00 AM. The House Appropriations Committee's Subcommittee on Commerce, Justice and the Judiciary (CJS) will hold a hearing on the budget for the Supreme Court. Location: Room H-309, Capitol Building.

10:00 AM. The House Appropriations Committee's Subcommittee on Commerce, Justice and the Judiciary (CJS) will hold a hearing on the budget for the Federal Trade Commission (FTC). Location: Room H-309, Capitol Building.

6:00 - 8:00 PM. The Federal Communications Bar Association (FCBA) will host a continuing legal education (CLE) seminar titled "The World Radio Conference 2003: How Does It Work? What Will It Mean?". The price is $60 for FCBA members, $50 for government, academic and law student members, and $80 for non-members. RSVP to Wendy Parish at Location: Capital Hilton Hotel, 16th & K Sts. NW, Senate Room.

Thursday, April 10

The House will meet at 10:00 AM.

10:00 AM. The House Appropriations Committee's Subcommittee on Homeland Security will hold a hearing on the budget for science and technology at the Department of Homeland Security. Location: Room 2359, Rayburn Building.

10:00 AM. The Senate Appropriations Committee's Commerce, Justice, State, and the Judiciary Subcommittee will hold a hearing on the proposed budget for fiscal year 2004 for the Federal Bureau of Investigation (FBI). Location: Room S-146, Capitol Building.

10:00 AM. The House Appropriations Committee's Subcommittee on the VA, HUD and Independent Agencies will hold a hearing on the budget for the National Science Foundation. Location: Room H-143, Capitol Building.

2:00 PM. The Senate Appropriations Committee's Homeland Security Subcommittee will hold a hearing on the proposed budget for fiscal year 2004 for science and technology. Location: Room 192, Dirksen Building.

The Progress & Freedom Foundation (PFF), a Washington based think tank that focuses on technology and communications issues, will hold its 10th anniversary celebration. Mitch Daniels, Director of the Office of Management and Budget (OMB), will be the after dinner speaker. FCC Chairman Michael Powell and FTC Chairman Timothy Muris will also be present. For more information, contact Jane Creel at 202 289-8928 or See, PFF notice. Location: Renaissance Mayflower Hotel.

Day one of a two day conference hosted by the American Association for the Advancement of Science (AAAS) titled "Colloquium on Science and Technology Policy". See, notice and agenda [PDF]. Location: Washington Plaza Hotel, 10 Thomas Circle, 14th and M Streets, NW.

Friday, April 11

The House will meet at 10:00 AM.

9:30 AM. The U.S. Court of Appeals (DCCir) will hear oral argument in Unity Broadcasting v. FCC, No. 02-1101. Judges Edwards, Randolph and Tatel will preside. Location: 333 Constitution Ave., NW.

Day long meeting of the Federal Communications Commission's (FCC) Consumer Advisory Committee.

Day two of a two day conference hosted by the American Association for the Advancement of Science (AAAS) titled "Colloquium on Science and Technology Policy". See, notice and agenda [PDF]. Location: Washington Plaza Hotel, 10 Thomas Circle, 14th and M Streets, NW.

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