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August 1, 2003, 9:00 AM ET, Alert No. 709.
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Senate Commerce Committee Approves Bill to Extend Internet Tax Moratorium

7/31. The Senate Commerce Committee amended and approved S 150, the "Internet Tax Non-discrimination Act of 2003" by voice vote. See, amendment in the nature of a substitute [4 pages in PDF].

The bill would permanently extend the moratorium on internet access taxes and multiple and discriminatory taxes on electronic commerce. The current moratorium is set to expire on November 1, 2003. The original moratorium was passed in late 1998, and extended in 2001.

The House Judiciary Committee approved the House version of the bill, HR 49, the "Internet Tax Nondiscrimination Act", on July 16. See, TLJ story titled "House Judiciary Committee Approves Internet Tax Bill", July 16, 2003.

Sen. George AllenSen. George Allen (R-VA) introduced S 150 on January 13, 2003. Sen. Allen (at right) stated that "If my measure is passed, once and for all time, prohibition on Internet access and discriminatory taxes will not be held hostage to other issues surrounding sales and use tax collection. This bill would permanently ban such Internet taxes and update the definition of Internet access to include wireless, satellite and new advancements in technology to provide access to Internet services. This is about the individual consumer's ability to access the Internet."

3 Year Phase Out of Grandfather Clause. The bill, as amended, includes a new provision that sunsets the grandfather clause after three years. The original 1998 moratorium provided a grandfather clause for those state and local taxes that existed as of October 1, 1998.

The House version of the bill would immediately repeal the grandfather clause.

Technology Neutrality. The bill, as amended, includes a new provision that would provide for technology neutrality. It provides that "The second sentence of section 1104(5), and the second sentence of section 1101(e)(3)(D), of the Internet Tax Freedom Act (47 U.S.C. 151 note) are each amended by inserting ‘‘, except to the extent such services are used to provide Internet access’’ before the period." (Parentheses in original.)

Subsection 1101(e) lists exceptions to the moratorium. Subsection 1101(e)(3) contains definitions. Subsection 1101(e)(3)(D) defines "Internet access service" as follows: "The term 'Internet access service' means a service that enables users to access content, information, electronic mail, or other services offered over the Internet and may also include access to proprietary content, information, and other services as part of a package of services offered to consumers. Such term does not include telecommunications services."

Section 1104 is the general definitions section. Subsection 1104(5) defines "Internet access" as follows: "The term 'Internet access' means a service that enables users to access content, information, electronic mail, or other services offered over the Internet, and may also include access to proprietary content, information, and other services as part of a package of services offered to users. Such term does not include telecommunications services."

Thus, the existing moratorium provides a ban on internet access taxes, but expressly excepts telecommunications services. In 1998 it was more clear what was "internet access", and what was "telecommunications". Some states now impose a tax on DSL service when it is sold as part of a package with phone service. Thus, internet access, when provided by DSL, is taxed, while other technologies for providing broadband internet access are not taxed. This amendment would clarify "telecommunications services" are covered by the moratorium "to the extent such services are used to provide Internet access".

Steve Berry of the Cellular Telecommunications and Internet Association (CTIA) stated in a release that "Americans access the Internet in a myriad of ways; this legislation ensures that no matter the method, that access will be tax free."

This new language is identical to language that was added to the House bill on July 16.

Universal Service. The bill, as amended, includes a new provision pertaining to universal service. It provides that "Nothing in the Internet Tax Freedom Act shall prevent the imposition or collection of any fees or charges used to preserve and advance Federal universal service or similar State programs authorized by section 254 of the Communications Act of 1934."

This provision is not in the House version of the bill, as approved on July 16.

Further Action. Both the House and Senate bills still require passage by the full House and Senate. Then a conference committee will have to reconcile differences between the two bills, and the House and Senate will have to approve that conference report.

Rep. Chris Cox (R-CA), the sponsor of the House bill, praised the Senate Commerce Committee for approving its bill. He further stated that "we expect movement on the House floor in early September." See, Cox release.

The Bush administration supports the bill. Treasury Secretary John Snow and Commerce Secretary Donald Evans issued a joint release after the Committee approved the bill. They stated that "A permanent moratorium means permanent innovation. Keeping the Internet free of multiple or discriminatory taxes on electronic commerce will help create an environment for innovation and help ensure that electronic commerce remains a vital part of our economy. As policy makers, we need to encourage the roll out of new Internet services and not stifle innovation by imposing new taxes." See, Treasury release.

Antitrust Division Closes Orbitz Investigation

7/31. The Department of Justice's (DOJ) Antitrust Division closed its Orbitz joint venture investigation. Orbitz is owned by several airlines, and sells airline tickets and other travel services online.

Hewitt PateHewitt Pate (at right), Assistant Attorney General in charge of the Antitrust Division, stated in a release that "After an extensive investigation of the available facts, the Antitrust Division concluded that the Orbitz joint venture has not reduced competition or harmed airline consumers. This thorough review involved interviewing numerous interested parties, reviewing many documents that were produced by Orbitz as well as by third parties, engaging in extensive empirical analyses of airline booking data, and examining the analyses suggested by third parties."

Pate added that "The Division considered several theories of harm none of which was ultimately borne out by the information collected by the Antitrust Division. These concerns included whether certain Orbitz contract terms would facilitate coordination among the participating airlines or reduce their incentives to discount resulting in higher fares and whether those contract terms would make the Orbitz joint venture dominant in online air travel distribution. The Division found that those terms did not result in higher fares or make Orbitz dominant in online air travel distribution."

Jeff Katz, P/CEO of Orbitz, stated in a release that "Today's DOJ's decision is consistent with previous government and independent examinations of Orbitz. Previously, the Department of Transportation Inspector General found no evidence of any anti-competitive behavior by Orbitz, and in fact determined that Orbitz provides a valuable service to consumers and promotes competition in the travel marketplace."

FTC Releases Policy Statement on Use of Equitable Remedies of Disgorgement and Restitution in Competition Cases

7/31. The Federal Trade Commission (FTC) released a document titled "Policy Statement on Monetary Equitable Remedies in Competition Cases".

The FTC explained that "Disgorgement is an equitable monetary remedy "designed to deprive a wrongdoer of his unjust enrichment and to deter others" from future violations. Depriving the violator of any of the benefits of illegal conduct has long been accepted as an appropriate, indeed necessary, element of antitrust remedies. ... Restitution is also an equitable remedy, serving different but often complementary purposes. Restitution is intended to restore the victims of a violation to the position they would have been in without the violation, often by refunding overpayments made as a result of the violation. The Commission has sought and obtained disgorgement or restitution in a number of competition cases over the last few decades, most recently in the Mylan and Hearst matters." (Footnotes and citations omitted.)

The FTC stated its policy that "we do not view monetary disgorgement or restitution as routine remedies for antitrust cases. In general, we will continue to rely primarily on more familiar, prospective remedies, and seek disgorgement and restitution in exceptional cases."

The FTC listed three factors that it will consider: "As a general matter, the Commission will consider the following three factors in determining whether to seek disgorgement or restitution in a competition case. First, the Commission will ordinarily seek monetary relief only where the underlying violation is clear. Second, there must be a reasonable basis for calculating the amount of a remedial payment. Third, the Commission will consider the value of seeking monetary relief in light of any other remedies available in the matter, including private actions and criminal proceedings. A strong showing in one area may tip the decision whether to seek monetary remedies. For example, a particularly egregious violation may justify pursuit of these remedies even if there appears to be some likelihood of private actions. Moreover, the pendency of numerous private actions may tilt the balance the other way, even if the violation is clear."

The Commission approved the statement on July 25, but did not publicly release it until July 31. See also, FTC release.

Tauzin and Upton Request Documents From FCC Re MCI WorldCom Avoidance of Paying Access Charges

7/30. Rep. Billy Tauzin (R-LA) and Rep. Fred Upton (R-MI) sent a letter to Federal Communications Commission (FCC) Chairman Michael Powell "to express our serious concern regarding allegations that MCI has engaged in a deliberate effort to avoid paying access charges by disguising the origin and routing of telecommunications traffic".

Rep. Billy TauzinRep. Tauzin (at right) is the Chairman of the House Commerce Committee, while Rep. Upton is the Chairman of its Telecom and Internet Subcommittee.

They continued that "Access charges represent the cornerstone of the relationship between local exchange carriers (LECs) and inter-exchange carriers (IXCs). Without the origination and termination of inter-exchange traffic, long-distance calls would never be connected. Thus, a gross violation of regulations governing the origination and termination of long-distance calls undermines the basic telecommunications system of the United States."

They asked that the FCC keep them apprised of actions that it takes regarding this matter. They also asked for the FCC to produce documents, by August 13, 2003, regarding "actual or alleged violations of the access charge rules by MCI, any of its affiliates, any entity that purchased or was acquired by MCI, or any entity acting in concert with MCI."

House Commerce Committee Leaders Ask FCC to Revise TELRIC Pricing Rules

7/29. Rep. Billy Tauzin (R-LA), Rep. John Dingell (D-MI) and Rep. Fred Upton (R-MI) sent a letter to Federal Communications Commission (FCC) Chairman Michael Powell regarding current TELRIC pricing rules. They argue that the rules undermine investment, and that the FCC should promptly amend its pricing rules that apply when incumbent local exchange carriers (ILECs) are required to provide network elements to competitive local exchange carriers (CLECs) on an unbundled basis.

They requested that the FCC conduct a rule making proceeding to reform its pricing rules for unbundled network elements, and to complete it by the end of 2003. They also requested the the FCC "make clear at the time it initiates this proceeding that it will no longer base prices on hypothetical, imaginary networks, but rather will base prices on real-world networks that are used to provide unbundled elements", and that the FCC "will require the states to re-calculate the existing UNE rates using the modified pricing methodology promptly after the new rules are adopted."

Finally, the three Commerce Committee leaders stated that the FCC "should move immediately to take interim steps to begin to limit the most harmful effects of its existing rules, including the effects of the arbitrage created by applying the current pricing rules to the UNE-P. It should stop applying the TELRIC rules to the UNE-P, and make clear that the resale-pricing standard prescribed by Congress provides the price floor."

Rep. John DingellRep. Tauzin is the Chairman of the House Commerce Committee, Rep. Dingell (at right) is the ranking Democrat, and Rep. Upton is the Chairman of its Telecom and Internet Subcommittee.

The argument that they advanced in support of these requests is one that they have made many times in the past. They made the economic argument that "firms will invest in new facilities only to the extent that they believe that the financial return over time from those facilities exceeds the cost".

They elaborated that "The primary problem is that the Commission's TELRIC pricing rules are based on hypothetical, ideally efficient networks rather than real-world network elements that must be provided to CLECs on an unbundled basis. By their very nature, the current rules discourage investment by incumbent telephone companies, which cannot recover their investment under the TELRIC methodology. The rules similarly discourage investment by competing carriers, who have little reason to invest when they can lease the existing network at artificially low prices and when any investment they do make can be undercut by other carriers who provide service leasing the incumbent's facilities at TELRIC rates."

They added that "This problem is made much worse by the fact that the same pricing rules are applied when other carriers provide service entirely over the incumbent's existing network using what is referred to as the ``unbundled network element platform´´ (UNE-P). Of course, the 1996 Act did not impose this requirement. Rather, the 1996 Act allowed other carriers to provide services using the incumbent's entire local network exclusively under a separate resale pricing standard. It was the Commission that created the UNE-P after the Act was passed, and it was the Commission that decided to apply its TELRIC rules rather than the resale pricing standard mandated by Congress. By doing so, the rules have created a classic case of regulatory arbitrage."

Treasury Secretary Addresses Internet Based Identity Theft

7/31. The Senate Banking Committee held a hearing on measures to enhance the operation of the Fair Credit Reporting Act. Secretary of the Treasury John Snow addressed internet based identity theft in his prepared testimony. He wrote that "Perhaps the most serious threat to financial consumers today is identity theft. Identity thieves are clever, adaptable, and heartless. Indeed, many identity thieves specifically target the most vulnerable members of society -- families of the recently deceased, seniors, hospital patients, and men and women serving our nation overseas."

John SnowSnow (at right) described one scheme. "Using a $100 commercially available keystroke logging program, an identity thief in New York stole over 450 online banking passwords during a two year period. The scam began with the thief installing a keyboard sniffing program on public Internet terminals at thirteen locations scattered throughout Manhattan. Unwitting customers using the terminals then had their keystrokes logged as they accessed information. With username and password information in hand, the thief then used the victims' personal and financial information to open new accounts under their names and transferred money from the victims' legitimate accounts into the new, fraudulent ones."

He added that "Many Americans have worked hard for years to build and keep good credit histories. In today’s information driven economy, one of your most important personal assets is your reputation, your credit history. The statistics are there -- and have been cited by many. For example, a recent study reports that identity theft has been seriously under-reported and asserts that 7 million Americans were victims of identity theft last year alone."

Judge Awards Motorola $4,265,793,811.32 From Turkish Telecom Deadbeats

7/31. The U.S. District Court (SDNY) issued its Opinion and Order [172 pages in PDF] in Motorola and Nokia v. Uzan, holding defendants liable for common law fraud, promissory fraud, and civil conspiracy to defraud, and awarding Motorola Credit Corporation (MCC) over $4 Billion in compensatory damages, punitive damages, and interest.

The District Court, Judge Jed Rakoff presiding, concluded that the "defendants -- in particular, the members of the Uzan family -- have perpetrated a huge fraud." He summed up the case as follows: "Under the guise of obtaining financing for a Turkish telecommunications company, the Uzans have siphoned more than a billion dollars of plaintiffs' money into their own pockets and into the coffers of other entities they control. Having fraudulently induced the loans, they have sought to advance and conceal their scheme through an almost endless series of lies, threats, and chicanery, including, among much else, filing false criminal charges against high level American and Finnish executives, grossly diluting and weakening the collateral for the loans, and repeatedly disobeying the orders of this Court."

On January 28, 2002, MCC and Nokia Corporation filed a complaint in District Court against Kemal Uzan, other members of the Uzan family, and corporations controlled by the Uzan family, regarding cellular communications deals in the nation of Turkey.

The complaint states that the defendants, who are politically well connected in Turkey, were awarded a Global System for Mobile Telephony (GSM) license by the Turkish government. Motorola then provided defendants loans to obtain base stations from Motorola, and Nokia provided loans to obtain switching equipment from Nokia. This equipment was then used to build a GSM and 2.5G wireless telecommunications system in Turkey. However, Motorola and Nokia did not get paid up front.

The complaint states that the defendants borrowed from Motorola and Nokia, and then intentionally and illegally diluted the value of stock pledged as collateral for the loans. The complaint also alleges that defendants manufactured transactions to transfer assets from the debtor companies.

The complaint alleges numerous causes of action. In the present opinion and order they prevail on fraud and constructive trust theories. However, they also plead RICO, fraud in connection with computers in violation of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030(a)(4), interception of electronic communications in violation of the Electronic Communications Privacy Act, 18 U.S.C. § 2511(1)(a), and unlawful access to stored electronic communications in violation of the Electronic Communications Privacy Act, 18 U.S.C. § 2701(a)(2). See also, story titled "Motorola & Nokia Sue Turkish Cellular Company for RICO Violations and Computer Hacking" in TLJ Daily E-Mail Alert No. 357, January 30, 2002.

On July 31, 2003, the Court held that "MCC is entitled on its fraud claims, taken jointly and severally, to an award of compensatory damages from the defendants, jointly and severally, in the amount of $1,803,089,316.57 plus interest", which he found to be $329,807,589.09 through July 31, 2003, thus brining total compensatory damages to $2,132,896,905.66. The Court also awarded punitive damages in an equal amount, for a total award of $4,265,793,811.32.

The Court also found for the plaintiffs on their constructive trust claim. The Court therefore held that "As plaintiffs have prevailed on their constructive trust claim relating to the original value of their collateral that defendants stole from them, plaintiffs are hereby converted into the equitable owners of Telsim shares that are the functional equivalent of the original collateral, that is, Telsim shares held by any one or more of the entities controlled by the Uzans that collectively constitute 73.5% of the ownership, control, and share value of Telsim."

The Court further held that "Since Nokia has no meaningful remedy for the fraud perpetrated upon it other than the constructive trust imposed herein on its behalf, therefore, in light of the defendants’ past contempts, if defendants now fail to transfer or cause to be transferred the requisite Telsim shares to the Court’s registry on behalf of Nokia within one week from the entry of judgment, the Court hereby orders that judgment will automatically then enter requiring defendants (jointly and severally) to pay to Nokia two times the full amount outstanding on the loans extended by Nokia to Telsim (i.e., $711,000,977.23), plus pre-judgment interest in the amount of $142,706,661.90, for a total of $853,707,639.13."

Given the defendants conduct of fraud, deception, lies to the court, failure to appear at any depositions or trial, and violations of Court orders, the Court opined that "monetary sanctions will not suffice to bring defendants into compliance with this these orders." So, the Court ordered that "that unless and until defendants purge their contempts, the individual defendants, if found within the jurisdiction of the United States, will be immediately arrested and held in confinement until such time as they comply with the" Court's directives.

Christopher Galvin, Ch/CEO of Motorola, stated in a release that "We are extremely pleased with the Court's strong ruling and we look forward to recouping the billions of dollars that were diverted by the Uzans and returning it to the rightful owners -- Motorola's shareholders. Today's ruling is a landmark decision concerning the massive global fraud that has been perpetrated against Motorola by the Uzans, and the latest in a series of court judgments throughout the world against the Uzans."

Olli-Pekka Kallasvuo, CFO of Nokia, stated that "Today's judgment confirms our belief of wrong-doing against Nokia and proves the activities against us were fraudulent and intentional ... We will now use this ruling as part of our continued effort of recovering the funds."

This case is Motorola Credit Corporation and Nokia Corporation v. Kemal Uzan, et al., D.C. No. 02 CV 666.

Pacific Bell Internet Services Sues RIAA Over DMCA Subpoenas

7/30. Pacific Bell Internet Services (PBIS) filed a complaint in U.S. District Court (NDCal) against the Recording Industry Association of America (RIAA) seeking declaratory and injunctive relief regarding the validity of subpoenas issued by the U.S. District Court (DC), pursuant to Section 512 of the DMCA, that directs ISPs to provide information about subscribers alleged to be engaging in P2P copyright infringement over the ISPs networks. The complaint seeks to relitigate many of the issues raised by Verizon in a case in the District of Columbia. (Verizon lost on these issues.) However, the complaint also raises new issues regarding the form of the subpoenas, the manner in which they are served, and whether the recipient is entitled to compensation for compliance.

Background. The RIAA represents music companies whose copyrights are being infringed by people using peer to peer file sharing systems. The RIAA possesses only Internet Protocol (IP) number information on infringers. This does not reveal the identity of the infringers. However, internet service providers, which provide internet access for the P2P infringers, possess information that would associate subscriber information with IP number information. That is, by obtaining the ISP's information, the RIAA, or its members, would be able to file complaints alleging infringement against the individual infringers. The RIAA cannot sue these ISPs for infringement, because of the safe harbor provisions of the Digital Millennium Copyright Act (DMCA).

The RIAA has obtained numerous subpoenas from the Clerk of the Court of the U.S. District Court for the District of Columbia, pursuant to § 512(h), and served them upon many ISPs. In August of 2002, Verizon filed a complaint in the District Court challenging some of the first of these subpoenas. This matter has been thoroughly litigated in the District of Columbia, the RIAA has prevailed in the District Court, and the Appeals Court has declined to issue a stay.

See, stories titled "RIAA Seeks to Enforce Subpoena to Identify Anonymous Infringer" in TLJ Daily E-Mail Alert No. 499, August 27, 2002; "Verizon and Privacy Groups Oppose RIAA Subpoena" in TLJ Daily E-Mail Alert No. 501, September 4, 2002; "District Court Rules DMCA Subpoenas Available for P2P Infringers" in TLJ Daily E-Mail Alert No. 588, January 22, 2003; "Law Professor Submits Apocalyptic Declaration in RIAA v. Verizon" in TLJ Daily E-Mail Alert No. 596, February 3, 2003; "DOJ Files Brief in Support of RIAA in Verizon Subpoena Matter" in TLJ Daily E-Mail Alert No. 646, April 22, 2002; "District Court Rules That A DMCA § 512(h) Subpoena for the Identity of an P2P Infringer Does not Violate the Constitution" in TLJ Daily E-Mail Alert No. 649, April 25, 2003; and "Court of Appeals Denies Stay in RIAA v. Verizon" in TLJ Daily E-Mail Alert No. 674, June 5, 2003.

Much of the PBIS's complaint essentially seeks to relitigate issues already decided by the District of Columbia Court. Of course, the District Court for the Northern District of California is not bound by the opinion of the District Court for the District of Columbia.

However, the PBIS also raises several new issues regarding the form of subpoenas, the manner in which they are served, and whether the recipient is entitled to compensation for compliance.

Statute. § 512 provides ISPs a safe harbor from liability for infringement based on the activities of their users. There are four specific limitations on liability. § 512(a) pertains to "transmitting, routing, or providing connections for, material through a system or network controlled or operated by or for the service provider, or by reason of the intermediate and transient storage of that material in the course of such transmitting, routing, or providing connections". § 512(b) pertains to "the intermediate and temporary storage of material on a system or network". § 512(c) pertains to "material that resides on a system or network controlled or operated by or for the service provider". And, § 512(d) pertains to "referring or linking users to an online location containing infringing material or infringing activity, by using information location tools, including a directory, index, reference, pointer, or hypertext link".

Subsection 512(h) then provides, in part, that "A copyright owner or a person authorized to act on the owner's behalf may request the clerk of any United States district court to issue a subpoena to a service provider for identification of an alleged infringer in accordance with this subsection." The statute then provides that the requester should also provide a copy of the 512(c)(3) notice, a proposed subpoena, and a sworn declaration.

Subsection 512(h)(5) then provides, in part, that "Upon receipt of the issued subpoena, ... the service provider shall expeditiously disclose to the copyright owner or person authorized by the copyright owner the information required by the subpoena, notwithstanding any other provision of law and regardless of whether the service provider responds to the notification."

Conduit Functions. The District Court (DC) previously held that copyright holders can obtain subpoenas pursuant to § 512(h) that require ISPs to reveal the identities of their customers who infringe copyrights on peer to peer filing sharing systems. Verizon had argued in the District Court (DC), unsuccessfully, that Section 512(h) subpoenas are only available with respect to infringers who stored infringing content on the servers of the ISP

In the present case, PBIS argues that "The DMCA does not authorize the issuance of subpoenas or DMCA notices to a service provider such as PBIS based on services it provides when performing the ``conduit´´ functions described in 17 U.S.C. § 512(a)."

Issuance of Subpoenas in the Absence of a Case. The District Court (DC) previously held that that issuance of the DMCA subpoena does not violate the justiciability requirements of Article III by authorizing federal courts to issue binding judicial process outside a pending case or controversy.

In the present case, PBIS argues that "Issuance and enforcement of a subpoena pursuant to the DMCA seeking information identifying the customers of a service provider such as PBIS, in the absence of a pending case or controversy arising under federal law, violates Article III of the Constitution."

Free Speech Rights. The District Court (DC) previously held that the issuance of a DMCA subpoena does not violate the First Amendment. It wrote that "Section 512(h) merely allows a private copyright owner to obtain the identity of an alleged copyright infringer in order to protect constitutionally recognized rights in creative works; it does not even directly seek or restrain the underlying expression (the sharing of copyrighted material). Thus, the DMCA does not regulate protected expression or otherwise permit prior restraint of protected speech. It only requires production of the identity of one who has engaged in unprotected conduct -- sharing copyrighted material on the Internet." (Parentheses in original.)

In the present case, PBIS argues that "Issuance and enforcement of a subpoena seeking information identifying the customers of a service provider such as PBIS violates the rights guaranteed to PBIS subscribers by the First Amendment and the Due Process Clause of the Fifth Amendment of the United States Constitution."

Form and Service of Subpoenas. The PBIS complaint goes into considerable detail on the technical elements of the subpoenas, including the entity named in the subpoenas, the address at which they were served, the manner in which they were served, and the District Court which issued the subpoenas. The complaint alleges that various subpoenas are defective for various technical reasons. The fourth and fifth counts of PBIS's complaint raise a number of issues under the DMCA and Rule 45 of the Federal Rule of Civil Procedure

For example, the complaint states that "Pacific Bell Internet Services" (PBIS), which is the plaintiff in this case, is a California corporation, with its principal place of business in San Francisco, California. The complaint states that PBIS provides Internet access services and high-speed Internet connections to its subscribers. It further states that some of the subpoenas ask for information about PBIS subscribers.

The complaint further states that "SBC Internet Communications, Inc.", which is named in many of the RIAA's subpoenas, is a holding company that does not provide Internet access services, and does not have the required custody and control over the subscriber information sought by the subpoenas. The complaint states that SBC Internet Communications, Inc. is not a "service provider" within the meaning of term as used in 17 U.S.C. § 512.

Thus, PBIS argues that these subpoenas are defective because they name the wrong party.

Similarly, the RIAA served many subpoenas in San Antonio, Texas, the principal place of business of SBC Communications, Inc. and SBC Internet Communications, Inc. PBIS argues that these subpoenas should have been served in San Francisco, where PBIS is located.

PBIS also argues that subpoenas are defective under Rule 45. This rule provides, in part, that "a subpoena may be served at any place within the district of the court by which it is issued, or at any place without the district that is within 100 miles of the place of the deposition, hearing, trial, production, or inspection specified in the subpoena or at any place within the state where a state statute or rule of court permits service of a subpoena issued by a state court of general jurisdiction sitting in the place of the deposition, hearing, trial, production, or inspection specified in the subpoena."

PBIS points out, for example, that San Antonio, which is where many subpoenas were served, is more than 100 from Washington DC, where the subpoenas were issued. It further points out that service in San Francisco is also outside the 100 mile limit.

PBIS's statements in its complaint regarding service are inconsistent with statements that it has made to the U.S. Copyright Office. For example, on June 11, 2003 "SBC Internet Communications, Inc." filed a document [PDF] with the Copyright Office titled "Amended Interim Designation of Agent to Receive Notification of Claimed Infringement". In this document, "SBC Internet Communications, Inc." lists itself as a "service provider". In this document "SBC Internet Communications, Inc." further lists "Pacific Bell Internet Services" in the category of "Alternative Name(s) of Service Provider (including all names under which the service provider is doing business)". Finally, this document states that service should be made in San Antonio, Texas upon the General Counsel of "SBC Internet Communications, Inc."

However, whatever the disposition of these claims turns out to be, these claims are at best delaying tactics. The RIAA can obtain new subpoenas, and obtain service in a manner that satisfies any requirements imposed by the Court.

Compensation for Compliance. However, PBIS's claim regarding compensation may have long term ramifications.

PBIS states in its complaint that "Under Fed. R. Civ. P. 45(c)(3)(B)(iii), the proponent of a subpoena must ``reasonably compensate[]´´ the recipient of a subpoena for its expenses. Similarly, Fed. R. Civ. P. 45(c)(2)(B) provides that the Court ``shall protect any person any person who is not a party or an officer of a party from significant expense resulting from the inspection and copying commanded.´´ Defendants have made no provision to compensate PBIS for responding to the subpoenas issued pursuant to the purported authority of the DMCA. The subpoenas therefore fail to comply with Fed. R. Civ. P. 45."

PBIS concludes that "PBIS must be compensated for any compliance with subpoenas issued under the DMCA and, in the alternative, that if the provisions of the DMCA do not require compensation of recipients of subpoenas, then those provisions are unconstitutional."

Subsection 512(h) of the DMCA provides that "the procedure for issuance and delivery of the subpoena, and the remedies for noncompliance with the subpoena, shall be governed to the greatest extent practicable by those provisions of the Federal Rules of Civil Procedure governing the issuance, service, and enforcement of a subpoena duces tecum." This subsection does not establish a blanket rule that Rule 45 applies. Rather, it enumerate situations in which Rule 45 does apply, such as "issuance" and "delivery". It does not enumerate "procedure for compliance" or "compensation".

The District Court's stamps on the complaint indicate that the case has been assigned the number C 03 3560 JL. JL is a reference to Magistrate Judge James Larson.

PBIS is represented by the law firm of Kekker & Van Nest. The complaint was signed by Ragesh Tangri. The complaint also lists as counsel Mark Lemley. He is of counsel to the firm, and a professor of law at Boalt Hall School of Law, at the University of California at Berkeley.

Monday, August 4

The Senate is scheduled to begin its August recess.

Tuesday, August 5

10:00 AM - 12:00 NOON. The Department of State's (DOS) International Telecommunication Advisory Committee (ITAC) will meet to prepare for the meeting of the International Telecommunications Union's ITU-D, Study Groups 1 and 2, in Geneva, Switzerland on September 2-11, 2003. See, notice in Federal Register, July 22, 2003, Vol. 68, No. 140, at Page 43413. Location: DOS, Room 2533-A.

Wednesday, August 6

9:30 AM. The Federal Communications Commission (FCC) will hold a meeting. Location: FCC, 445 12th Street, SW, Room TW-C05 (Commission Meeting Room).

Deadline to submit comments to the Federal Communications Commission (FCC) in response to its Notice of Inquiry [21 pages in PDF] in its proceeding titled "In the Matter of Inquiry Regarding Carrier Current Systems, including Broadband over Power Line Systems". See, notice in the Federal Register, May 23, 2003, Vol. 68, No. 100, at Pages 28182 - 28186. See also, story titled "FCC Announces NOI Regarding Broadband Over Powerlines" in TLJ Daily E-Mail Alert No. 628, April 24, 2003, and story titled "FCC Releases NOI on Broadband Over Power Lines" in TLJ Daily E-Mail Alert No. 656, May 7, 2003.This is ET Docket No. 03-104. For more information, contact Anh Wride at 202 418-0577 or

POSTPONED. The Federal Communications Commission (FCC) will hold an auction of Direct Broadcast Satellite (DBS) Service Licenses. This is Auction No. 52. See, notice of postponement in Federal Register, June 20, 2003, Vol. 68, No. 119, at Page 36989.

Thursday, August 7

10:00 AM. The U.S. Court of Appeals (FedCir) will hear oral argument in Microsoft v. Multi-Tech Systems, No. 03-1138, and Multi-Tech Systems v. Net2Phone, No. 03-1139. This is an appeal from the U.S. District Court (DMinn) in a patent infringement case involving data communications technology. Location: Courtroom 201, 717 Madison Place, NW.

10:00 AM - 12:00 NOON. The Federal Communications Commission (FCC) Office of Engineering and Technology (OET) will sponsor a tutorial titled "Fiber to the Home Technology". Location: FCC, 445 12th Street, SW, Room TW-C05 (Commission Meeting Room). See, notice [PDF].

Friday, August 8

Deadline to submit comments to the Federal Communications Commision (FCC) in response to its notice of proposed rulemaking (NPRM) [7 pages in PDF] regarding the draft Nationwide Agreement [28 pages in PDF] of the FCC, the Advisory Council on Historic Preservation, and the National Conference of State Historic Preservation Officers, regarding undertakings for communications facilities, including communications towers and antennas, under the National Historic Preservation Act (NHPA). This proceeding is titled "In the matter of Nationwide Programmatic Agreement Regarding the Section 106 National Historic Preservation Act Review Process". It is WT Docket No. 03-128. For more information, contact Frank Stilwell at 202 418-1892 or See, story titled "FCC Announces NPRM Regarding Communications Facilities and the National Historic Preservation Act" in TLJ Daily E-Mail Alert No. 677, June 10, 2003. See also, notice in the Federal Register, July 9, 2003, Vol. 68, No. 131, at Pages 40876 - 40887.

Sunday, August 11

Deadline to submit comments to the General Services Administration's (GSA) Office of Electronic Government and Technology regarding its draft policy titled "Draft E -- E-Authentication for Federal Agencies". See, notice in the Federal Register, July 11, 2003, Vol. 68, No. 133, at Pages 41370 - 41374.

People and Appointments

7/31. The Senate confirmed Frank Montalvo to be a Judge of the U.S. District Court (WDTex) by a vote of 95-0. See, Roll Call No. 321.

7/31. The Senate confirmed James Cohn to be a Judge of the U.S. District Court (SDFl) by a vote of 96-0. See, Roll Call No. 320.

7/31. The Senate Finance Committee favorably reported, by unanimous votes, the nominations Josette Shiner to be a Deputy U.S. Trade Representative, James Jochum to be an Assistant Secretary of Commerce, and Robert Nichols to be an Assistant Secretary of the Treasury.

7/31. The Senate Judiciary Committee favorably reported the nominations of Steven Colloton (U.S. Court of Appeals for the Eighth Circuit), James Browning (District of New Mexico), Brent McKnight (Western District of North Carolina), David Proctor (Northern District of Alabama), Kevin Castel (Southern District of New York), Sandra Feuerstein (Eastern District of New York), Richard Holwell (Southern District of New York), Stephen Robinson (Southern District of New York), Rene Acosta to be an Assistant Attorney General in charge of the Civil Rights Division, and Daniel Bryant to be an Assistant Attorney General in charge of the Office of Legal Policy.

7/30. Secretary of Commerce Donald Evans appointed three new members of the Patent Public Advisory Committee, Rick Nydegger, Andrew Dillon, and Howard Klein. Nydegger is an attorney with the Utah law firm of Workman Nydegger & Seeley. He is also the President-Elect of the American Intellectual Property Law Association (AIPLA). Dillon in an attorney in the Austin, Texas office of the law firm of Bracewell & Patterson. He focuses on intellectual property matters in the electronics and software industries. Klein is a lawyer in Irvine, California who specializes in intellectual property law. See, USPTO release.

7/30. Secretary of Commerce Donald Evans appointed three new members of the Trademark Public Advisory Committee, Jeffrey Samuels, Maury Tepper, and Joseph Welch. Samuels is a law professor at the University of Akron. Tepper is a partner in the law firm of Womble Carlyle. Welch is a partner in the law firm of Pattishall McAuliffe. See, USPTO release.

More News

7/30. The Federal Communications Commission (FCC) released a Notice of Inquiry (NOI) which solicits "data and information on the status of competition in the market for the delivery of video programming for our tenth annual report". Comments are due by September 11, 2003. Reply comments are due by September 26, 2003.

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