|Broadcom and Intel Settle
8/8. Broadcom and
they have settled all outstanding litigation between the companies as well as
all litigation involving their affiliates pending in various U.S. federal
courts, and in the U.S. International Trade
They stated that "Under the settlement agreement, all outstanding
claims and counterclaims in those actions will be dismissed with prejudice. The
parties also entered into reciprocal releases covering all patent claims and
certain other claims. In connection with the settlement, Broadcom will pay Intel
$60 million in cash in two equal installments in the third and fourth fiscal
quarters of 2003." See, Intel
release and substantially identical Broadcom
The two companies also stated that "Broadcom and Intel entered into a separate comprehensive
cross-license agreement covering patents owned or controlled by either party or
its subsidiaries, and having a first effective filing date, at any time through
August 7, 2008. Under the agreement, products of each party and its subsidiaries
are licensed under the patents of the other for the respective lives of the
patents. All existing products of each party are licensed by the other. Certain
proprietary products of each party are not licensed to the other, but neither
company believes that the license exceptions are material to its business as
currently conducted or planned. No fees or royalties are payable by either party
with respect to its business as currently conducted or planned."
See, for example,
complaint filed August 30, 2000, in the U.S. District Court (DDel) by Intel,
and TLJ story
titled "Intel Sues Broadcom for Patent Infringement", September 4, 2000.
|FCC Hosts Tutorial on Fiber to the Home
8/7. The Federal Communications Commission
(FCC) hosted a tutorial on August 7 on Fiber to the Home (FTTH) technology.
The primary speaker was Jim Farmer, VP of the
Fiber to the Home Council. Leonard Ray
of the FTTH Council also spoke. Ray stated that as of March of 2003, 110,000
homes were passed by fiber, and that 38,000 are connected, for a take rate of
35%. He added that of the homes passed by fiber, 70% are "over build", as
opposed to "green field".
On February 20, 2003, the FCC asserted that it adopted an order
regarding the Section 251 unbundling obligations of incumbent local exchange
carriers (ILECs). This is also known as the triennial review order. However,
the FCC has not released this order. The FCC has issued only a short
press release [2 pages in PDF] and an
attachment [4 pages in PDF].
The FCC's attachment to its press release briefly addresses FTTH.
It states that "There is no unbundling requirement for new build/greenfield FTTH
loops for both broadband and narrowband services. There is no unbundling
requirement for overbuild/brownfield FTTH loops for broadband services.
Incumbent LECs must continue to provide access to a transmission path suitable
for providing narrowband service if the copper loop is retired." See
stories on the FCC's announcement of it triennial review order.
Farmer stated that one of the advantages of fiber is its "tremendous
information carrying capacity". As an example, he provided estimates for how
long is would take to receive a copy of the movie "Braveheart" by different
technologies. He stated that with a 56 kbps modem, it would take two days to download
With a 128 kbps ISDN line, it would take 20 hours. FedEx could ship a DVD in 12
hours. With a 1 mbps downstream DSL connection, it would take two and a half
hours. With a 2.5 mbps downstream cable modem, it would take 45 minutes. And,
with FTTH, it would take less than one minute.
He listed other advantages of FTTH technology, including that it has few
maintenance problems, it carries a signal a greater distance than electrical
signals, it is easier to provide near symmetric rates with FTTH that with DSL or
cable, its small size makes it easier to fit into
existing crowded ducts, it is not affected by electrical interference, and it
lasts a long time.
Farmer also reviewed the structure of fiber optic cables, the different types
of lasers, single and dual fiber systems, the different wavelengths being used,
and ATM and ethernet transport. He also reviewed FTTH architectures, including
Passive Optical Networks (PONs), Active Node, and Hybrid PONs. He also covered
security, telephony, and other topics.
|Legislators Introduce Bills to Repeal ETI Regime
and Extend R&D Tax Credit
7/28. On July 28, Sen. Orrin Hatch (R-UT)
introduced S 1475,
the "Promote Growth and Jobs in the USA Act of 2003". On July 25,
Rep. Bill Thomas (R-CA) introduced
the "American Jobs Creation Act of 2003". Both bills are large and complex
tax bills with numerous provisions. Two provisions are of particular importance to
technology companies -- the extension and modification of the research and
development tax credit, and repeal of the recently enacted ETI regime.
R&D Tax Credit. The R&D tax credit has become a perennial issue in
Congress. The credit was first enacted in 1981 as a temporary measure. It has
been extended repeatedly since then. Under the current scheme, corporations
receive a 20% tax credit for qualified research and development expenditures (QREs)
in excess of a calculated base amount.
HR 2896 and S 1475 would once again amend
Section 41 of the Internal Revenue Code to extend the R&D tax credit. It is
currently set to expire on June 30, 2004. Sen. Hatch's bill, at Section 301,
would permanently extend the credit. Rep. Thomas' bill, at Section 1011, would extend
the credit until
December 31, 2007.
Rep. Thomas' bill would also amend Section 41
regarding the alternative simplified credit for qualified research expenses.
Rep. Thomas issued a
release that states that this change "is of particular benefit to military
manufacturers and other manufacturers that make significant R&D expenditures but
receive a relatively small credit under current law."
Sen. Hatch's bill would increase the rates of the alternative incremental
credit, and provide an alternative simplified credit for qualified research
expenses. Sen. Hatch stated at a press conference on July 25 that his bill
"would extend permanently the research credit, which is one of the most
important incentives we can offer to keep innovation in this country. This issue
is clear. R&D is vital to a nation's long-term economic health. If we don't
provide a strong incentive for companies to keep this research here, our trading
partners will lure it away." See,
Sections 301-303 of Sen. Hatch's bill are substantially the same as a stand
alone bill introduced by Sen. Hatch, Sen.
Max Baucus (D-MT) and others on March 19, 2003 --
S 664, the
Investment in America Act of 2003. S 664, in turn, is the companion bill to
introduced by Rep. Nancy Johnson
(R-CT) and others on January 29, 2003.
See also, story titled "Representatives Introduce Bills to Make R&D Tax
Credit Permanent" in
TLJ Daily E-Mail
Alert No. 596, February 3, 2003.
FSC/ETI. Both bills would repeal the Extraterritorial Income Exclusion Act of 2000 (ETI),
which the Congress enacted as a replacement for the Foreign Sales Corporation (FSC)
The World Trade Organization (WTO)
has ruled that both the FSC and ETI tax regimes constitute illegal export subsidies,
and authorized the European Union (EU) to impose retaliatory tariffs. The U.S.
unsuccessfully argued to the WTO that the U.S. has a global tax system, while
European nations have territorial tax systems, that this puts U.S. exporters at
a competitive advantage, and that tax regimes such as ETI and FSC that exempt
certain foreign source income from taxation merely level the playing field.
companies that sell software or equipment abroad have benefited from FSC/ETI.
Also, the EU has indicted that if it takes retaliatory measures, it may target
certain technology sectors.
Rep. Thomas' release states that his bill "takes necessary steps to repeal
the FSC-ETI regime that has been found illegal -- four times -- by the World
Trade Organization (WTO). Absent legislative action, the European Union (EU) has
announced it will begin imposing $4 billion in sanctions against U.S. products
by January 1, 2004. This legislation will not only prevent retaliation, but also
make U.S. companies and workers more competitive and productive than they are
today by reforming our antiquated corporate tax system."
Sen. Hatch stated that "our bills are quite different in many respects". He
stated that his bill "would repeal the FSC/ETI rules, but would give generous
transition relief -- a 3-year phaseout starting in 2004." He added that "it
includes the most comprehensive set of international tax reform provisions ever
considered by Congress. It would offer significant relief from double taxation
in the context of the foreign tax credit, as well as rationalize the rules
governing how U.S. companies structure their global operations."
Sen. Hatch also stated that "Like the bill Chairman Thomas is introducing, my
legislation is not revenue neutral. I have targeted it to have a net cost of
about $200 billion. Some of you may be wondering if I think I can get another
tax cut bill of $200 billion through the Senate. Probably not, but enactment of
my entire bill this year is not my primary goal." He elaborated that he wants
"to highlight the importance of complying with our WTO obligations this year",
"expand the options on the table", and "make the final bill more beneficial to
U.S. domestic and U.S.-based multinational companies and their workers".
See, stories titled "WTO Authorizes FSC/ETI Related Tariffs" in
TLJ Daily E-Mail
Alert No. 657, May 8, 2003; "Rep. Thomas Writes Colleagues Re FSC Dispute"
in TLJ Daily E-Mail
Alert No. 622, March 13, 2003; "Deputy Treasury Secretary Addresses FSC/ETI
and WTO Rulings" in
TLJ Daily E-Mail Alert No. 526, October 9, 2002; "Sen. Baucus Calls WTO
Dispute Settlement Process a ``Kangaroo Court´´" in
TLJ Daily E-Mail
Alert No. 519, September 30, 2003; and, "Grassley and Baucus Organize
Meeting on FSC/ETI Issue" in
TLJ Daily E-Mail
Alert No. 511, September 18, 2002. See also,
TLJ news analysis
titled "The FSC Tax Bill and Technology Exporters", November 17, 2000.
Rep. Thomas is the Chairman of the
House Ways and Means Committee, which has jurisdiction over his bill. Sen.
Hatch is a senior member of the Senate
Finance Committee, which has jurisdiction over his bill.
|Business Software Alliance Estimates
Software Piracy In Each State
8/5. Business Software Alliance (BSA)
released a study
[14 pages in PDF] titled "U.S. Software State Piracy Study". The study
estimates that the software piracy rate for the nation dropped from 25.1% in
2001 to 22.8% in 2002. The study also estimates that there were over $6 Billion
in retail sales losses in 2002 due to piracy.
The states with the highest piracy rates were Mississippi (41.7), Wyoming
(40.3), Alabama (39.5), Montana (37.6), and West Virginia (36.8). The study
concluded that "The regions with the lowest population density tend to have the
highest piracy rates".
The states with the lowest piracy rates were Illinois (13.5), Michigan
(13.9), Indiana (14.5), New York (15.4), and Wisconsin (15.6).
The piracy rate in California is 19.6%. In Washington state, it is 19.0%.
The study explains its methodology. It is based on "comparing
two sets of data, the demand for new software applications, and the legal supply
of new software applications." The study elaborates that "PC shipments by state
were estimated from a detailed review of the employment and population of each
state and market research that surveyed the PC penetration rate of each state.
On this basis, estimates of PC shipments could be made for each state."
"To estimate software demand, IPR developed ratios for the
amount of software installed on each PC. This was developed from market research
on the U.S. market." And, the study states, "To estimate the supply of legal
software by state, IPR relied on detailed industry sales data. BSA member
companies volunteer their proprietary shipment data to the study under
non-disclosure agreements for the purpose of constructing an accurate estimate
of the software industry’s 2002 shipments."
This study was conducted for the BSA by the International Planning and
Research Corporation (IPR). See also, BSA
|Monday, August 11
The House is in recess until September 3. Senate is in recess until
September 2. The Supreme Court is in recess.
2:00 - 3:30 PM. The American Enterprise
Institute (AEI) will host a panel discussion titled "Trade
Agreements and Capital Controls". The speakers will be John Taylor
(Treasury Department) and Jagdish Bhagwati (Columbia University). See,
Location: AEI, 12th Floor, 1150 17th Street, NW.
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.
|Tuesday, August 12
Deadline to submit comments, or requests to speak at the September 2, 2003
public hearing, on the Treasury Department's
and the Internal Revenue Service's (IRS) notice of
proposed rulemaking (NPRM)
regarding regulations that "affect certain taxpayers who participate in the
transfer of stock pursuant to the exercise of incentive stock options and the
exercise of options granted pursuant to an employee stock purchase plan
(statutory options)." See,
notice in the Federal Register, June 9, 2003, Vol. 68, No. 110, at Pages 34344 - 34370.
|Wednesday, August 13
10:00 AM - 12:00 PM. The Federal
Communications Commission's (FCC) Wireless Telecommunications Bureau (WTB)
will hold a public forum to present the new application search interfaces that
will be available for the public to access Multipoint Distribution
Service/Instructional Television Fixed Service (MDS/ITFS) Application data.
notice [PDF]. Location: Room 4-B-516, 4th Floor, FCC, 445 12th Street, SW.
Day one of a three day conference hosted by the
American Intellectual Property Law Association
(AIPLA) titled "2003 Practical Patent Prosecution Training for New Lawyers".
notice [PDF]. Location: Arlington, VA.
|Thursday, August 14
Deadline to submit comments to the National
Institute of Standards and Technology (NIST) regarding its
document [12 pages in PDF] titled "Draft Federal Information Processing
Standard (FIPS) 199 on Standards for Security Categorization of Federal
Information and Information Systems". The NIST states that this document
"defines requirements to be used by Federal agencies to categorize information
and information systems, and to provide appropriate levels of information
security according to a range of risk levels." For more information,
contact Ron Ross at 301 975-5390 or
notice in the Federal Register, May 16, 2003, Vol. 68, No. 95, at
Pages 26573 - 26574.
8/8. The Federal Communications Commission
(FCC) published a
notice in the Federal Register describing and reciting its rule changes to
its rule implementing the Children's Internet Protection Act (CIPA). The FCC
released its Order on July 24, 2003. The CIPA requires schools and libraries
receiving e-rate subsidies from the FCC to certify that they have internet
safety policies and technology protection measures. This is part of Docket No.
96-45. See, Federal Register, August 8, 2003, Vol. 68, No. 153, at Pages 47253 -
8/8. Oracle announced in a
that "it has extended its previously announced tender offer for all of the
common stock of PeopleSoft, Inc. to
midnight EDT on Friday, September 19, 2003.
... The tender offer was previously set to expire at midnight EDT on Friday,
August 15, 2003."
8/6. SBC Communications announced plans to
deploy over 20,000 WiFi hot spots
in 6,000 locations in hotels, airports, convention centers and other sites in
its 13 state territory. It stated that it plans to provide an integrated WiFi
and third generation (3G) wireless service. SBC further stated that "SBC
companies will use their various assets to deploy the Wi-Fi hot spots. Where
possible, the companies plan to use their public telephone infrastructure to
establish access points and use SBC DSL or T1 service to transport data from the
access point to the network." See, SBC
8/8. The U.S. District Court (SDNY)
ruled in Motorola v. Uzan on defendants' motion to stay the
court's $4.26 Billion judgment against the Uzans pending appeal. Motorola stated
release that the Court "agreed to stay execution of the judgment pending
appeal until August 15, 2003, and thereafter, only if the Uzans post a $1
billion bond by that date." On July 31, 2003, the Court
Opinion and Order [172 pages in PDF] 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. See, story titled "Judge Awards Motorola
$4,265,793,811.32 From Turkish Telecom Deadbeats" in TLJ Daily E-Mail Alert No.
709, August 1, 2003.
8/5. DirecTV stated in a
release that "DIRECTV, Inc. and NDS Group plc announced today that they have
agreed to stay the litigation between them pending in the U.S. District Court in
Los Angeles, Calif. The stay will continue until the anticipated closing of the
acquisition by NDS' parent company, The News Corporation Limited, of 34 percent
of DIRECTV's parent company, Hughes Electronics Corporation. The acquisition is
currently undergoing regulatory review and is expected to close by year-end,
upon which the litigation and all claims and counterclaims alleged therein, will
be dismissed with prejudice. The companies further announced that DIRECTV will
begin deploying a new conditional access viewing card, known as the D1 card,
which contains technology contributed by both DIRECTV and NDS. NDS and DIRECTV
have also agreed to discuss plans for future generations of conditional access
viewing cards to be used by DIRECTV. In connection with their agreement to stay
the litigation, the parties have entered into specified commercial arrangements,
which include resolving outstanding payment issues with respect to the P4 and D1
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