|FCC Releases Triennial Review Order
8/21. The Federal Communications Commission (FCC) released its
triennial review order [576 pages in PDF]. This is titled "Report and Order
and Order on Remand and Further Notice of Proposed Rulemaking". See especially,
B [HTML], which contains the final rules.
This is the proceedings titled "In the Matter of Review of the
Section 251 Unbundling Obligations of Incumbent Local Exchange Carriers,
Implementation of the Local Competition Provisions of the Telecommunications Act
of 1996, and Deployment of Wireline Services Offering Advanced
Telecommunications Capability", and numbered CC Docket No. 01-338, CC Docket No.
96-98, and CC Docket No. 98-147.
The FCC announced, but did not release, this order six months ago, on February 20,
See, stories titled "FCC Announces UNE Report and Order", "FCC Order
Offers Broadband Regulatory Relief", "FCC Announces Decision on Switching",
"Commentary: Republicans Split On FCC UNE Order", and "Congressional Reaction To
FCC UNE Order" in TLJ Daily E-Mail
Alert No. 609, February 21, 2003.
Editor's Note: The FCC published this order in the
FCC website late on Thursday, August 21. Further coverage of this order will be
published in the Monday, August 25 issue of the TLJ Daily E-Mail Alert.
|Music Publishers File Appeal Brief in P2P
8/18. The National Music Publishers
Association (NMPA), representing Jerry Liebler and other music publishers
and songwriters, and the Recording Industry
Association of America (RIAA) and Motion
Picture Association of America (MPAA), representing MGM and other movie and
record companies, filed appeal briefs with the
U.S. Court of Appeals (9thCir) in
Liebler v. Grokster and MGM v. Grokster.
Metro Goldwyn Meyer (MGM), and other movie companies, and various record
companies, filed a complaint in the District Court against Grokster, Streamcast
and Kazaa alleging copyright infringement, in violation of
17 U.S.C. § 501.
They allege contributory and vicarious infringement. No direct infringers -- the
users of the peer to peer networks -- were not named as defendants in this
In addition, professional songwriters and music publishers filed a class
action complaint against the same defendants alleging contributory and vicarious
infringement. The two actions were consolidated. The parties filed cross motions
for summary judgment regarding the current versions of software provided by Grokster and Streamcast, but not by Kazaa.
On April 25, 2003, the U.S. District
Court (CDCal) issued its
opinion in holding that Grokster's and Streamcast's peer to peer file
copying networks do not contributorily or vacariously infringe the copyrights of
the holders of music and movie copyrights. See also, story titled "District
Court Holds No Contributory or Vicarious Infringement by Grokster or Streamcast
P2P Networks" in
TLJ Daily E-Mail Alert No. 650, April 28, 2003.
The District Court reasoned that to be held contributorily liable, the
defendants must have "knowledge" of the infringing activity. The District Court,
unlike the Appeals Court in the Napster case, found that the defendants
do not possess "knowledge" that their networks or being used to infringe
copyrights. The District Court also wrote that to be held liable vicariously,
the defendants must have the "right and ability to supervise the infringing
conduct". It found that they did not.
Both the NMPA and the MPAA/RIAA appealed to the Ninth Circuit. The Appeals
Court has consolidated the two appeals.
The MPAA/RIAA brief was filed under seal. The NMPA brief is also under seal.
However, the NMPA has released a public
redacted version of its brief [45 pages in PDF].
The NMPA wrote that "This lawsuit is about MusicCity's and
Grokster's knowing operation of illicit commercial businesses that actively
facilitate, materially contribute to, and encourage the wholesale infringement
of Appellants' copyrighted works. Like the now defunct and notorious Napster
service, MusicCity and Grokster operate unlicensed, peer-to-peer Internet
``file-sharing´´ services. Their business model depends upon their millions of
end-users offering a veritable treasure trove of copyrighted music and motion
pictures for downloading by others -- all for free and without any compensation
to the copyright owners."
Knowledge. The NMPA argues in its brief that "The record
indisputably demonstrates that MusicCity and Grokster have actual knowledge of
infringing activity" and are therefore contributorily liable.
The brief elaborates that "MusicCity and Grokster, however,
claim that they do not ``know´´ about infringements because their services
encrypt the specific content downloaded by users and ``outsource´´ the central
indexing/directory function, enabling MusicCity and Grokster to claim a lack of
awareness of what is being downloaded at any given time. MusicCity's and
Grokster's profession of ignorance rings hollow, particularly where they have
taken deliberate steps to shield themselves from information about the
infringements taking place every day on their services. Because the record
establishes that, at best, MusicCity and Grokster have ``willfully blinded´´
themselves to these infringements, the law deems them to have ``actual´´
knowledge of the infringements occurring on their services."
Sony Betamax. The NMPA brief also argues that "The
District Court ignored relevant evidence in holding that there were substantial
non-infringing uses of MusicCity's and Grokster's services that are commercially
significant", and therefore, "the Sony-Betamax decision is not a defense to
MusicCity's and Grokster's conduct."
The Supreme Court held in
of America v. Universal City Studios, Inc., 464 U.S. 417 (1984), that
the "sale of video cassette recorders (``VCR´´s) did not subject Sony to
contributory copyright liability, even though Sony knew as a general matter that
the machines could be used, and were being used, to infringe the plaintiffs'
copyrighted works. Because video tape recorders were capable of both infringing
and ``substantial noninfringing uses,´´ generic or ``constructive´´ knowledge of
infringing activity was insufficient to warrant liability based on the mere
retail of Sony’s products."
The MPAA brief argues that while the defendants submitted declarations on
this issue, they did not address the extent of non-infringing uses. It argues
that, to the contrary, "Appellants also introduced uncontroverted evidence in
the District Court demonstrating that the overwhelming and primary use of the
services is infringement".
Rationale for Secondary Liability. The MPAA brief next argues that
imposing liability in these cases would be consistent with the rationales behind
secondary liability because MusicCity and Grokster profit from illegal activity.
The brief states that "the District Court's own assessment that MusicCity and
Grokster know that their ``user base in the tens of millions´´ commits millions of
acts of direct infringement, and that they ``may
have intentionally structured their businesses to avoid secondary liability for
copyright infringement,´´ the District Court
concluded that MusicCity and Grokster were not liable as a matter of law. That
result perverts the very meaning and purpose of secondary liability for
"The District Court's Order effectively holds that a defendant may knowingly
create a business that profits from widespread copyright infringement, refuse to
make any effort to stop or limit the infringement, and escape any consequence
for this deliberate conduct. This result makes a mockery of copyright law",
according to the MPAA.
Legislative Balance. Finally, the MPAA brief argues that the District
Court opinion deprives songwriters and publishers of the exclusive rights
granted by the Congress, and threatens to undermine the statutory scheme for
encouraging the creation and dissemination of musical works.
The brief states that "The District Court’s Order upends that
carefully calibrated balance, and thus thwarts Congress’s express mandate. By
acquitting the commercial services that exploit the rampant infringement on
their services for profit, the court’s decision effectively deprives songwriters
and music publishers of the exclusive right that Congress expressly gave them to
exploit their works on the Internet, leaving the thousands of songwriters and
music publishers with no realistic recourse to protect their copyrights. The
Order creates an unprecedented standard for secondary copyright liability that
compels copyright owners to police the conduct of millions of individual users
of MusicCity's and Grokster's Internet services and pursue individual
enforcement actions against private individuals."
The MPAA is represented by Carey Ramos, Aidan Synnott, and Theodore Cheng of
the law firm of Paul Weiss Rifkind Wharton &
Garrison, and by Kelli Sager, Andrew Thomas and Jeffrey Blum of the law firm
of Davis Wright Tremaine.
8/21. The Copyright Office (CO)
notice in the Federal Register describing, and requesting comments on, its
proposed rules regarding rates and terms for the use of sound recordings in
eligible nonsubscription transmissions made by noncommercial licensees, and
for the making of related ephemeral recordings. Comments are due by September
22, 2003. See, Federal Register, August 21, 2003, Vol. 68, No. 162, at Pages
50493 - 50495.
8/21. The Bureau of Industry and Security
(BIS), which is also still known as the Bureau of Export Administration (BXA), published a
notice in the Federal Register that describes and recites a final rule
amending the Export Administration Regulations (EAR). The notice states that
this rule amends the EAR "to to add references to the Automated Export System
(AES) and to conform the EAR to certain provisions of the Foreign Trade
Statistics Regulations (FTSR) including provisions related to AES promulgated on July 17,
2003. It also conforms some terminology in part 758 to that found elsewhere in
the EAR and updates references to another government agency to reflect a name
change." This rule takes effect on September 22, 2003. See, Federal Register,
August 21, 2003, Vol. 68, No. 162, at Pages 50470 - 50474.
|People and Appointments
President Bush announced his intent to nominate Michael Gallagher
(at left) to be Assistant Secretary of Commerce for Communications and Information. This
is the title of the person who heads the Department of Commerce's (DOC)
Telecommunications and Information Administration (NTIA). Nancy Victory
resigned from this position on August 15, 2003. Frederick Wentland was
named the Acting Assistant Secretary for Communications and Information.
Gallagher is currently Deputy Chief of Staff at the DOC. Before that, he was
Deputy Assistant Secretary for the NTIA. He has also worked for AirTouch
Communications, former Rep. Rick White (R-WA) (who is now CEO of
TechNet), and the law firm of
Perkins Coie. See, White House
|Abernathy Praises FCC Broadcast Localism
8/21. Federal Communications Commission
(FCC) Commissioner Kathleen
Abernathy released a statement in which she expressed support for the FCC's
broadcast localism initiative. On August 20, FCC Chairman
Michael Powell announced the initiative, which includes creating a localism
task force, issuing a notice of inquiry on localism, and speeding the activation
of low power FM stations.
Abernathy (at right) stated that "I
applaud Chairman Powell for taking positive and substantive steps to ensure
that broadcasters continue to further the goal of localism in their
communities. Regardless of who owns a station -- a local ``mom and pop´´ or a
large media company -- each licensee has an obligation to serve its local
community. Recently, concerns have been raised about whether certain practices
do indeed serve local interests, and whether the Commission can do more to
promote localism in television and radio. Thus, I am pleased that the
Commission will consider whether changes in our rules, consistent with First
Amendment principles, are appropriate and needed. I look forward to working
with the Localism Task Force, my colleagues, public interest groups, and the
industry to see how we can together advance this important goal."
FCC release [3 pages in PDF], story titled "Powell Announces Localism in
Broadcasting Initiative" in TLJ Daily E-Mail Alert No. 722, August 20, 2003,
and story titled "Copps Criticizes Powell's Localism in
Broadcasting Initiative" in TLJ Daily E-Mail Alert
No. 723, August 21, 2003.
Meanwhile, the Media Access Project
(MAP), stated in a
release [PDF] that "Chairman Powell couldn't
ignore the public outcry any longer. As a result, he is taking some very welcome
steps, none of which offer the slightest reason to change our complete
opposition to his June 2 decision decimating the FCC’s media ownership
The MAP stated that "We certainly applaud the Chairman's efforts
to expedite the creation of more low power FM stations. Now that the
Congressionally mandated engineering study has vindicated what low power
advocates have said for years, it is high time for the Commission to break up
the logjam of existing applications and start the process of expanding the low
power service." See also, MAP
statement [PDF] on LPFM.
The MAP added that "The idea that ownership rules are unrelated
to localism is absurd. Companies like Clear Channel and Sinclair Broadcasting
have already exploited prior rule changes to eliminate locally originated news
programming in favor of fake local newscasts beamed from thousands of miles
|Shumaker Pleads Guilty to Criminal Copyright
8/21. Mark Shumaker plead guilty in U.S. District Court
(EDVa) to one count of criminal copyright infringement, in violation of
17 U.S.C. §506(a)(1) and
18 U.S.C. §2319 (b)(1),
in connection with his distribution over the internet of copyrighted music, movies,
software and games. See,
Plea Agreement [13 pages in PDF].
The U.S. Attorneys Office (USAO),
the Department of Justice's (DOJ)
Crimes and Intellectual Property Section (CCIPS), and Shumaker also
submitted to the Court a
Statement of Facts [6 pages in PDF] which states that Shumaker participated
"in the so-called ``warez scene,´´ in particular his membership in the warez
group Apocalypse Crew (``APC´´) and his support of the warez group Drink Or Die.
APC was a warez organization that specialized in the unauthorized distribution
of copyrighted music over the Internet. Among other things, APC sought to
acquire digital copies of songs and albums before their commercial release in
the United States; these songs or albums would then be distributed by APC
members, in MP3 format, to Internet sites worldwide. The supply of such
prerelease music was most often provided by music industry insiders, such as
radio DJs or employees of music magazine publishers, who frequently receive
advance copies of songs prior to their commercial release."
The Statement of Facts also recites that Shumaker "performed a number of
important functions for APC and was among its core leadership. He operated the
group's closed, invite-only IRC channel where members discussed group business
and other warez scene activities; he served as a ``site op´´ for several FTP
sites, where he and the other APC members had the administrative authority to
add and remove authorized users of the site; and he acted as a ``courier´´ for
APC, uploading and downloading pirated music, games, software, and movies to and
from private warez FTP sites throughout the Internet."
Sentencing is scheduled for November 7, 2003.
John Malcolm, the Deputy Assistant Attorney General in charge of
the CCIPS, stated in a USAO
[PDF] that "The conviction of Mark Shumaker is another example of the Department
of Justice's aggressive attack against high-level Internet piracy groups that
initiate the illegal distribution of copyrighted works over the Internet ...
Music piracy, no less than software or movie piracy, is a crime and its victims
are real; musicians deserve to be paid for their creativity and work."
Cary Sherman, President of the Recording Industry
Association of America (RIAA), stated in a release that "We applaud
Attorney General Ashcroft and the
Department of Justice's enforcement against Mark Shumaker. The theft of music on
the Internet is a serious crime, and this action shows that the Justice
Department means business. Those who egregiously distribute music on the
Internet should take note -- federal prosecution and jail time are real
|Friday, August 22
The House is in recess until September 3. Senate is in recess until
September 2. The Supreme Court is in recess until October 6.
Deadline to submit comments to the
Department of Homeland Security's (DHS) Bureau of Customs and Border
Protection (CBP) regarding its proposed rule to require that CBP must receive,
by electronic data interchange system, information pertaining to cargo before
the cargo is either brought into or sent from the U.S. by any mode of
commercial transportation. See,
notice in the Federal Register, July 23, 2003, Vol. 68, No. 141, at Pages
43573 - 43606.
|Monday, August 25
10:00 AM - 4:00 PM. The Commerce Department's National Medal of Technology
Nomination Evaluation Committee will hold a closed meeting to discuss the
relative merits of persons and companies nominated for the medal. See,
notice in the Federal Register, July 24, 2003, Vol. 68, No. 142, at Page
43716. Location: Room 4813, U.S. Department of Commerce, 1401 Constitution
10:00 AM. Several groups will hold a press briefing regarding the new
Computer Assisted Passenger Pre-screening System (CAPPS II). The
participants will include James Dempsey (Center for Democracy and Technology),
Laura Murphy (ACLU), former Rep. Bob Barr (R-GA), David Keene (American
Conservative Union), Grover Norquist (Americans for Tax Reform), and Hilary
Shelton (NAACP). Location: Lisagor Room, National Press Club, 529 14th St. NW,
|Thursday, August 28
10:00 - 11:45 AM. The American Enterprise Institute
(AEI) will host a panel discussion titled "Is There Any Development in the Doha
Development Agenda?" The speakers will be Michael Finger (AEI), Arvind Panagariya
(University of Maryland), and Sarath Rajapatirana (AEI). See,
Location: AEI, 12th Floor, 1150 17th Street, NW.
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