|FCC Approves News Corp.'s Acquisition of
DirecTV, With Conditions
12/19. The Federal Communications Commission
(FCC) announced that it has approved, by a vote of 3-2, News Corporation's
acquisition of a de facto controlling interest in
Hughes Electronics, and hence, its
subsidiary, DirecTV Holdings, which
provides direct broadcast satellite service (DBS) in the U.S.
The FCC did not release its Memorandum Opinion and Order (MOO). Rather, it released a
[29 pages in PDF] titled "Public Notice" that summarizes the MOO, which is to be
released at an unspecified time. However, this is a very detailed public notice.
The body of the notice is 16 pages. Four FCC Commissioners also released
The three Republicans (Powell, Martin and Abernathy) formed the majority,
while the two Democrats (Copps and Adelstein) dissented.
The Department of Justice (DOJ) also
announced in a
release that "it will not challenge News Corp.'s proposed acquisition of
Hughes Electronics Corp., including its DirecTV subsidiary."
Previously, Echostar had sought to acquire DirecTV. However, the FCC rejected
this proposed transaction. See,
titled "FCC Declines to Approve EchoStar DirectTV Merger", October 10, 2002.
Echostar is also a DBS service provider. Hence, this would have been a
News Corp. is a media business with operations around the world. Hence,
this is a vertical merger.
News Corps.' operations include a U.S.
broadcast network (Fox), numerous television stations, cable networks, a film
studio, a television studio, newspapers (such as the New York Post), cable
programming assets (such as the Fox News Channel, Speedvision, FX, Fox Movie
Channel, and the National Geographic Channel), and interactive technology
On April 9, 2003, General Motors and
Hughes Electronics announced that GM
intended to split off Hughes, and simultaneously sell GM's 19.9 percent economic
interest in Hughes to News Corp. See, story titled "GM, Hughes and News Corps
Announce Directv Deal" in
TLJ Daily E-Mail
Alert No. 643, April 14, 2003.
GM, Hughes and News Corp. submitted their joint application for approval to
the FCC on May 2, 2003. Thus, it took the FCC over seven and one half months to
announce its decision.
See also, stories titled "Murdoch Defends News Corp.'s DirecTV Deal" in
TLJ Daily E-Mail
Alert No. 659, May 12, 2003; and "FCC Sets Deadlines for Comments on News
Corp.'s DirecTV Deal" in
TLJ Daily E-Mail
Alert No. 664, May 19, 2003.
The FCC public notice summarizes the transaction. "This
transaction involves the split-off of Hughes from GM, wherein Hughes will become
a separate and independent company, followed by a series of transactions through
which News Corp., through its majority-held subsidiary, Fox Entertainment Group
("FEG"), will acquire a 34% interest in Hughes. The remaining 66% interest in
Hughes will be held by three GM employee benefit trusts (managed by an
independent trustee), which combined will hold an approximately 20% interest in
Hughes, and by the general public, which will hold an approximately 46% interest
It adds that "As a result, News Corp. will hold the single largest block
of shares in Hughes, thus providing News Corp. with a de facto controlling
interest over Hughes and its subsidiaries, including DirecTV Holdings, LLC
("DirecTV"), a wholly-owned subsidiary of Hughes, which provides DBS
service in the United States, as well as Hughes Network Systems, Inc. ("HNS"),
a facilities-based provider of very small aperture terminal ("VSAT")
network systems, and PanAmSat Corporation ("PanAmSat"), a global
facilities-based provider of geostationary-satellite orbit fixed satellite services
The application to the FCC requests approval of the transfer of licenses
associated with the transaction. The present public notice states that the FCC
consents to the transfer of licenses. However, this proceeding is in the nature of an
antitrust merger review. The FCC approval also imposes numerous conditions upon
This public notice states that the FCC's "primary objective in
reviewing license transfer applications is to promote the interest of the
consumer of video programming -- to maximize the variety, quality and innovation
of available programming and minimize its price where possible. The mechanism of
choice to achieve this goal is generally to encourage a competitive marketplace."
The notice states that the FCC concludes that "The proposed
transaction will shift control of one of the two domestic DBS providers from an
owner who has made no secret of its desire to get out of the business in recent
years to a company that has a proven record of innovation and success in
providing DBS services and in competing with cable distribution systems in other
markets throughout the world. The Commission finds that the potential
improvement in DirecTV's service offerings under News Corp.'s innovative and
aggressively competitive management, while inherently difficult to quantify
precisely, would be a major public interest benefit. Another tangible benefit
that we can ensure will be realized is News Corp.'s commitment to achieve the
important public interest benefit of offering increased local channel service."
"The Commission also considers whether, as a result of the
transaction, the post-transaction entity will have an increased incentive and
ability to engage in anticompetitive foreclosure strategies with respect to
broadcast television station signals, regional sports cable programming
networks, national and non-sports regional cable programming networks, and
program-related technologies, including electronic and interactive programming
guides. In several areas, no transaction-specific harms were found. In other
areas, where the record demonstrates that the proposed transaction is likely to
result in anticompetitive harms, the Commission crafted license conditions that
are narrowly targeted to address those harms. The Commission concluded that, on
balance, the potential public interest benefits of the transaction outweigh the
potential harms, as ameliorated by the license conditions."
The notice states that the MOO imposes numerous conditions on
News Corp. For example:
First, by the end of 2004, DirecTV must offer local service
packages in an additional 30 designated market areas (DMAs) beyond what had been
previously funded, projected or planned.
Second, News Corp. must offer its existing and future cable
programming services on a non-exclusive basis and non-discriminatory terms and
conditions, for as long as the FCC's program access rules are in effect.
Moreover, an aggrieved multichannel video programming distributor (MVPD)
may file a program access complaint for any alleged
violation of the program access conditions.
Third, News Corp.'s commitments regarding
nondiscriminatory MVPD access to cable programming is extended to any broadcast
television station that News Corp. owns and operates, or on whose behalf it
negotiates retransmission consent. Also, the good faith and exclusivity
requirements of the 1999 Satellite Home Viewer Improvement Act (SHIVA), due to
sunset at the end of 2005, are extended for as long as the FCC's program access
rules are in effect.
Michael Powell (at right)
wrote in a
statement [PDF] that "This merger with strict conditions ultimately benefits the
American public. News Corporation has a history of taking significant risks and
introducing new and innovative media services. Enhanced competition will
increase pressure to improve service and lower prices for both cable and
satellite television subscribers. This is a particularly compelling public
interest benefit in light of continued cable rate hikes. Increased availability
of local channels over satellite in rural America means access to more local
programming in an additional 30 markets by year end 2004. Consumers are the
He added that "Facilities-based competition among satellite and cable providers
has led to more innovation, more programming and more subscribers. As a result
of this transaction, those trends, competitive prices and better quality of
service will continue for the American public."
FCC Commissioner Kevin
Martin wrote in a
statement [PDF] that "I support the Commission's decision
to approve this transaction. While the merger of News Corp. and DirecTV presents potential
harms and benefits, I believe that, on balance, the merger as
conditioned will benefit consumers, competition, and the public interest."
He wrote separately to express his "disappointment that a majority
of my colleagues is unwilling to grant APTS/PBS’s request to clarify the requirements under the
Satellite Home Viewer Improvement Act ("SHVIA") and specifically require that,
in providing local-into-local service pursuant to SHVIA, DirecTV could not place
certain local broadcast stations on wing satellites."
Michael Copps wrote
statement [PDF] dissenting from "allowing this merger to go forward".
He wrote, "Here we go again. Today the Commission demonstrates how serious
-- and seriously misguided -- it was when it voted on June 2 to eviscerate media
"When is ``Big Media´´ big enough? With spectrum always scarce and diversity
hanging by a thread, where is the logic -- where is the public interest benefit -- of
giving more and more media power to fewer and fewer players? In the end, it all comes back
to this: to putting too much power in one conglomerate’s hands and creating
opportunities for abuse that accompany such concentrated power", stated Copps.
FCC Commissioner Jonathan
Adelstein also wrote a
statement [PDF] in which he expressed his reasons for
dissenting. He wrote that the acquisition "will result in unprecedented
control over local and national media properties in one global media empire. Its
shockwaves will undoubtedly recast our entire media landscape."
He asserted that "With this unprecedented combination, News Corp. could be in a
position to raise programming prices for consumers, harm competition in video
programming and distribution markets nationwide, and decrease the diversity of
This proceeding is MB Docket No. 03-124.
|USTR Complains About Lack of Transparency in
the PR China
12/18. The Office of the U.S. Trade
Representative (USTR) released a
report [73 pages in PDF] titled "2003 Report To Congress On China's WTO
Compliance". It addresses, among other topics, the lack of transparency in
the People's Republic of China. It finds that China has done a tremendous amount
of work in writing and revising its laws and rules, and has made these available
to the public. However, the report criticizes the lack of openness during the
process of writing and revising laws and rules.
See also, story titled "USTR Releases 2nd Annual Report on WTO
Compliance by PR China" in TLJ Daily E-Mail Alert No. 803, December 19, 2003,
which covers the intellectual property rights (IPR) and telecommunications
related portions of the report.
The USTR report also reviews China's obligations regarding
transparency. "China made a number of transparency commitments in its accession
agreement. One of the most important of these commitments concerned the procedures for
adopting or revising laws and regulations affecting trade in goods, services, TRIPS or the
control of foreign exchange, given that China’s accession to the WTO became effective while China
was still in the process of revising its trade-related laws and regulations to become WTO-consistent.
China agreed to provide a reasonable period for public comment on these new or
modified laws and regulations before implementing them, except in certain specific instances,
enumerated in China’s accession agreement."
The USTR reports that China's has done a "tremendous amount of work"
in writing and rewriting its laws and rules. Nevertheless, it complains that "China's
ministries and agencies have a poor record of providing an opportunity for public comment
before new or modified laws and regulations are implemented. Although the State
Council issued regulations in
December 2001 addressing the procedures for the formulation of administrative regulations and
rules and expressly allowing public comment, many of China’s ministries and agencies in 2002
continued to follow the practice prior to China’s accession to the WTO, and no notable
progress took place in 2003."
The report elaborates that "Typically, the ministry or agency drafting a new or revised law
or regulation consulted with and submitted drafts to other ministries and agencies, Chinese
experts and affected Chinese companies. At times, it also consulted with select foreign
companies, although it would not necessarily share drafts with them. As a result, as the end of
the second year of China's WTO membership draws near, only a small proportion of new or revised
laws and regulations have been issued after a period for public comment, and even in those
cases the amount of time provided for public comment has generally been too short."
The report also finds that "China's ministries and agencies have
a much better record when it comes to making new or revised laws and regulations
available to the public. ... Indeed, these laws and regulations are often
published not only in official journals, but also on the Internet." However, the
report faults China for lagging in providing English translations.
|Europe Complains About the USA's
12/19. The European Commission (EC) released a
report [85 pages in PDF] titled "Report on United States Barriers to Trade
and Investment, 2003". It complains of lack of protection of certain
intellectual property rights by the U.S. It complaints of market access
barriers, and lack of transparency, in U.S. telecommunications regulation. And,
it complains about U.S. export controls on encryption products, and the
resulting negative impact on electronic commerce.
EU Trade Commissioner
(at right) stated in a
"Although the vast majority of transatlantic trade passes unhindered, we need to
review regularly those obstacles which exist and pursue action to remove them.
This will ensure that business on both sides of the Atlantic benefit from
clearer, more transparent trading conditions."
The report states that "The US Administration has stressed that
its trade policy is based on the values of openness, transparency and respect
for the rule of law." However, it continues that "there remain aspects of US
trade policy which are a source of concern to the EU."
It concludes that "One of the most disquieting aspects of US policy is that
domestic pressure to adopt protectionist measures appears to be stronger than
willingness to seek internationally agreed solutions."
As would be expected, the report complains about many high profile non
technology related protectionist measures, such as the recent steel
quotas, the Helms Burton Act, and various buy America government procurement
policies. But, it also makes numerous assertions regarding trade barriers
involving intellectual property rights (IPR), encryption and e-commerce, and communications.
Intellectual Property. The report states that "Despite a number of
positive changes in US legislation following Uruguay Round commitments, problems remain
due to discrepancies between US legislation and other international commitments. Issues
such as those related to the recognition of ``moral rights´´ to authors or government use
of patents have not been resolved. The continued used of EU geographical indications on
US products, particularly in the wine sector, is the source of considerable frustration
for EU producers. In addition, the US has been condemned in dispute settlement cases
related to US intellectual property legislation: Section 110(5) of the US Copyright
Act (concerning licensing of music works) and Section 211 of the Omnibus
Appropriations Act (on protection of trademarks). Moreover, the co-existence of
fundamentally different patent systems (US first-to-invent system versus
first-to-file system followed in the rest of the world) continues to create
considerable interface problems for EU companies, not to speak of the financial
effects of high administrative and litigation costs in patent matters."
(Parentheses in original.)
Encryption and E-Commerce. The report states that "An
interim final rule was published on 14 January 2000, which amends the Export
Administration Regulations (EAR) to allow the export and re-export of any
encryption commodity or software to individuals, commercial firms and other
non-governmental end users in all destinations. It also allowed export and
re-export of retail encryption commodities to end users in all destinations,
streamlined post-export reporting requirements and incorporated the changes of
the Wassenaar Arrangements (Cryptography Note)." (Parentheses in original.) See,
notice in the Federal Register, January 14, 2000, Vol. 65, No. 10, at Pages
2491 - 2502; and,
Export Administration Regulations.
However, the report continues that "This
rule poses potential problems such as differential treatment for use by on the
one hand government bodies, and on the other Internet and telecommunications
service providers for which existing or new restrictions apply." The report
elaborates on several of these problems.
The report adds that "A combination of the continuing
constraints on the export of strong encryption products and on the
interoperability of systems employing such technology inhibits not only trade in
encryption products but also, more importantly, the effective growth of
e-commerce. Thus, significant barriers to international trade in encryption
products without key recovery continue to exist, despite the fact that EU Member
States, like the USA, are all members of the Wassenaar Arrangement."
"The trend reported by some EU Member States of the US denying
the export of certain dual-use items to EU Member States is especially worrying,
given the high non-proliferation commitment of the EU Member States", the report
report also states that "the EU remains concerned about the considerable
barriers that EU and foreign-owned firms wishing to get access to the US market
still face (e.g. investment restrictions, lengthy proceedings, conditionality of
market access, and reciprocity-based procedures). EU-based satellite
communications operators in particular have experienced difficulties accessing
the US market." (Parentheses in original.)
|Commentary: Process and Transparency
12/19. Three documents were publicly released on Thursday, December 18 or
Friday December 19 that pertain to the transparency of laws and rules
affecting technology and communications. The
U.S. Trade Representative (USTR) released a
report [73 pages in PDF] that thoroughly criticizes the People's Republic of China
for acting in a non-transparent manner in writing and re-writing its laws and rules.
The USTR argues that this lack of transparency violates
World Trade Organization (WTO) obligations. Second,
the European Commission released a
report [85 pages in PDF] that states that the
Federal Communications Commission (FCC) has not acted in
a transparent manner with respect to European satellite operators. Third, the FCC released
notice [29 pages in PDF] announcing its approval News Corp.'s acquisition of
direct broadcast satellite (DBS) service provider DirecTV. The FCC's News Corp.
DirecTV proceeding is not about transparency; rather, it serves as useful
starting point for a case study into the extent of the FCC's transparency.
The comment that is offered here is that while the U.S. has just released
another in a series of comprehensive reports on lack of transparency abroad,
there are also transparency issues in the U.S., as reflected by the EC's report
that complains about FCC transparency, and the analysis in this article of FCC
transparency in the merger review process.
See also, separate stories in this issue, titled "Europe Complains About
the USA's Trade Barriers" and "USTR Complains About Lack of Transparency in
the PR China", and "FCC Approves News Corps.' Acquisition of DirecTV, With
The U.S. has just complained about China's lack of transparency. Various
representatives of the U.S. have complained many times in the past about China's
lack of transparency. Moreover, the USTR now regularly seeks to include
transparency provisions in both multilateral and bilateral trade negotiations.
The just released USTR report finds that China has done a tremendous amount of
work in writing and revising its laws and rules, and has made these available to the
public. That is, it satisfies the first and most fundamental notion of transparency --
written rules. However, the report criticizes China on another aspect of
transparency -- openness during the process of writing and revising laws and rules.
The EC has
just accused the FCC of a lack of transparency. Although, the EC does have a
record of asserting tenuous claims regarding U.S. trade related policies.
This EC report states that "European satellite operators have encountered
serious difficulties in serving the US market". In particular, "These
cases show that proceedings by the FCC on spectrum allocation and
licensing are not always carried out in an objective, transparent, timely and
non-discriminatory manner, and they have raised concerns regarding their
compatibility with US WTO commitments."
This TLJ commentary examines the extent of the FCC's transparency in the
case of merger reviews, such as the News Corp. DirecTV matter.
The first fundamental aspect of transparency is the notion that governments
must have rules, that are reduced to writing, that are made available to everyone,
and that are binding upon the public and government alike.
For example, on December 8, 2003, FCC Commissioner
speech [3 pages in PDF] in Geneva, Switzerland, in
which she stated that "I believe that transparency is best achieved through the
creation and publication of clear rules. However, for the regulatory regime to
be successful, these rules must also be strictly enforced."
Hence, the first question in an analysis of transparency of merger reviews is
to what extent there are written rules.
The starting point is the applicable statute. The FCC's decision in major
merger reviews is based upon an application of competition or antitrust
analysis to a proposed merger of companies. So then, what is the underlying statute
that instructs the FCC to conduct merger reviews of companies and apply competition
analysis, and sets out the standards as to which mergers are subject to review
and the competition or antitrust principles to be applied?
Simply put, there is no such statute.
While the FCC has license transfer authority under Titled 47, the FCC
conducts these proceedings as though it also has antitrust authority under
Chapter 1. But, it is not bound by the provisions of Title 15.
The second point in the analysis is the FCC's rules. That is, what
regulations have the FCC promulgated to identify which mergers are
subject to antitrust merger review analysis, the standards of competition
analysis to be applied, and so forth.
Simply put, there no such regulations.
The Department of Justice (DOJ) and
Federal Trade Commission (FTC), which
statutory authority to apply competition analysis in merger reviews, have issued
detailed guidelines. See, for example,
Merger Guidelines (1984),
Guidelines for the Licensing of Intellectual Property (1995),
Guidelines (1997), and
Guidelines for Collaborations Among Competitors (2000).
But, simply put, the FCC has no such guidelines.
The third point in the analysis is the FCC's procedural rules governing
merger reviews. That is, what are the rules that cover procedural matters such as
what to file, when to file it, deadlines, the decision making process, and so forth.
These rules do not exist.
To be sure, the FCC has engaged in some activities that possess some of
the attributes of a
transparent rule making proceeding. For example, while the FCC has promulgated
no substantive or procedural rules governing merger reviews, it has conducted an
informal, off the books, non-public process.
The FCC has held a series of meetings with affected companies, and their
lawyers and consultants in recent years in which it has received verbal comments
regarding merger reviews, and offered verbal guidance.
At one of these meetings, on March 1, 2000, the FCC did release a short,
informal, and non-binding
statement of the FCC's
merger review process.
See also, TLJ
transcript of statement by then FCC General Counsel, Chris Wright. However,
the last time that this writer attempted to attend one of these FCC meetings, an
FCC lawyer instructed this writer to leave the room. The meeting was
not noticed in the Federal Register, it was not webcast, and the FCC has
published no transcript or record of the meeting. And, since this writer was
ejected, there was no story in the TLJ Daily E-Mail Alert.
Thus, the FCC has no statute, substantive rules, guidelines, or procedural
rules. The next point in the analysis is the body of court made case law. But,
there is nothing here either. The U.S. Courts of Appeals have authority to hear
petitions for review of final orders of the FCC, such as the final orders
adopting rules. But, the FCC has adopted no rules, so there have been no rules
to challenge in the Courts, and hence, no Court opinions regarding those rules.
The Courts might also hear challenges to denials of merger requests. But,
with only one notable exception (Echostar-DirecTV), the FCC has always approved
the major mergers, albeit with conditions attached. Hence, the parties to the
merger are not challenging denials of their requests.
The final source of written law would be the actual orders of the FCC
granting or denying merger requests. In the present proceeding, the FCC issued
"Public Notice" that states that the FCC has adopted a "Memorandum
Opinion and Order". A final order could be the subject of a petition for
reconsideration at the FCC. It could be subject to judicial review. It would also, in
principle, be binding upon the FCC. But, the FCC has not issued an order. It has
issued only a "Public Notice". A public notice is not written law.
Hypothetically, the FCC could release the order tomorrow. Sometimes
the lag time between the announcement of an order and its release is only
one day. On the other hand, in some important matters, the dead
time has been months. For example, the FCC announced its triennial review order on
February 20, 2003, but did not release the order until August 21, 2003 -- six
Moreover, orders in merger review proceedings have limited value as written
law. For example, these orders only instruct the parties to the merger.
Similarly or identically situated parties, who did not happen to go through a
license transfer, are not affected by the order.
So, there is little that one can cite in support of the proposition that the
FCC has written rules governing merger reviews. In contrast, the U.S. is
vociferously complaining about China, while all along conceding that the Chinese
government has written rules, and is making them available to the public. (There
is an issue regarding the availability to English translations.) The complaint,
generally, goes to the process by which the Chinese adopt rules (that is, notice
and opportunity to submit comments). And in the case of intellectual property,
there is also the complaint that the rules are not enforced.
Analyzing the fairness of the procedure employed by the FCC in writing its
rules is problematic, because the FCC has no rules in the area of merger
reviews. Moreover, to the extent that the FCC has engaged in informal
proceedings that provide some opportunity for comment, and some feedback, these
proceedings possess some of the deficiencies cited by the USTR in its report.
And of course, this analysis goes only to transparency at the FCC in merger
reviews. Case studies of some other areas would reveal a much higher degree of
|DC Circuit Reverses in RIAA
12/19. The U.S. Court of Appeals
(DCCir) issued its
[16 pages in PDF] in RIAA v. Verizon, reversing the District Court, and
holding that a Section 512(h) subpoena may only be issued to an ISP that is engaged
in storing on its servers material that is infringing or the subject of infringing
This opinion deprives the RIAA and copyright holders of an expeditious and
inexpensive means for acquiring the names of P2P infringers from their ISPs. Other
more time consuming and expensive procedures remain available to the music industry.
However, since the number of P2P infringers is huge, the opinion is a significant
setback for the RIAA and the music industry in their efforts to protect copyrighted
material from online infringement.
Background. The Recording Industry
Association of America (RIAA) represents music companies whose copyrights
are being infringed by people using peer to peer (P2P) file sharing systems.
When the RIAA and others failed to obtain orders from courts enjoining
producers of decentralized P2P programs, they adopted a strategy of pursuing
The RIAA possesses only Internet Protocol (IP) number information on
infringers. This does not reveal the identity of the infringers. However,
internet service providers (ISPs), such as Verizon Internet Services, which
provide internet access for the P2P infringers, possess information that would
associate subscriber information with IP number information. That is, obtaining
the ISP's information enables the RIAA, or its members, to file complaints
alleging infringement against the individual infringers that names the
individuals. It also enables them to contact the individuals before filing a
complaint in court.
ISPs, such as Verizon, that provide broadband internet access, derive
considerable revenues from people who subscribe to their services, in whole or
in part, to be able to use P2P systems to obtain copyrighted music without
paying for it. These ISPs have opposed the efforts of the RIAA.
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 subpoenas from the Clerk of the Court of the U.S.
District Court for the District of Columbia, pursuant to
17 U.S.C. § 512(h),
and served them upon ISPs.
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.
The 512(c)(3) notice must include, among other things, an "Identification of
the material that is claimed to be infringing or to be the subject of infringing
activity and that is to be removed or access to which is to be disabled, and
information reasonably sufficient to permit the service provider to locate the
material." (See, 512(c)(3)(a)(iii).)
However, the statute does not expressly limit the availability of 512(h)
subpoenas to 512(c) situations.
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."
District Court. In August of 2002, Verizon filed a complaint in the
District Court challenging some of the first of these subpoenas. See,
stories titled "RIAA Seeks to Enforce Subpoena to Identify Anonymous Infringer"
in TLJ Daily E-Mail
Alert No. 499, August 27, 2002; and "Verizon and Privacy Groups Oppose RIAA
Subpoena" in TLJ
Daily E-Mail Alert No. 501, September 4, 2002.
The District Court has issued two major opinions in this case. First, on
January 21, 2003, the District Court issued its
opinion ruling that copyright holders can obtain subpoenas pursuant to
17 U.S.C. § 512(h)
that require internet service providers (ISPs) to reveal the identities of their
customers who infringe copyrights on peer to peer filing sharing systems.
Verizon had argued that 512(h) subpoenas were only available with respect to
infringers who stored infringing content on the servers of the ISP.
See, story titled "District Court Rules DMCA Subpoenas Available for P2P
Infringers" in TLJ
Daily E-Mail Alert No. 588, January 22, 2003. This opinion is also reported
at 240 F. Supp. 2d 24.
Second, on April 4, 2003, the District Court issued an
opinion [58 pages in
PDF] holding that the issuance of a subpoena by a Clerk of the District Court
pursuant to § 512(h) to obtain the identity of an anonymous peer to peer
infringer from his ISP does not violate either the First Amendment of the
Constitution, or the justiciability requirements of Article III.
See, story titled "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. This opinion is also reported at
257 F. Supp. 2d 244.
Court of Appeals. Verizon appealed both decisions to the Court of
Appeals, raising three issues. The Court summarized these three arguments as
follows: "(1) § 512(h) does not
authorize the issuance of a subpoena to an ISP acting solely as a conduit for
communications the content of which is determined by others; if the statute does
authorize such a subpoena, then the statute is unconstitutional because (2) the
district court lacked Article III jurisdiction to issue a subpoena with no
underlying ``case or controversy´´ pending before the court; and (3) § 512(h)
violates the First Amendment because it lacks sufficient safeguards to protect
an internet user’s ability to speak and to associate anonymously."
The Court of Appeal accepted Verizon's first argument regarding statutory
construction, and therefore reversed. It did not decide the other two issues,
regarding justiciability and the First Amendment.
The Court wrote that "The issue is whether § 512(h) applies to an
ISP acting only as a conduit for data transferred between two internet users, such
as persons sending and receiving e-mail or, as in this case, sharing P2P files.
Verizon contends § 512(h) does not authorize the issuance of a subpoena to an
ISP that transmits infringing material but does not store any such material on its
servers. The RIAA argues § 512(h) on its face authorizes the issuance of a
subpoena to an ``[internet] service provider´´ without regard to whether the ISP is
acting as a conduit for
user-directed communications. We conclude from both the terms of § 512(h) and
the overall structure of § 512 that, as Verizon contends, a subpoena may be
issued only to an ISP engaged in storing on its servers material that is
infringing or the subject of infringing activity."
The Court reasoned that "Section 512 creates four safe harbors,
each of which immunizes ISPs from liability for copyright infringement under
certain highly specified conditions."
It recited each of the four safe harbor provisions of
512(a)-(d), and then observed that "Notably present in §§ 512(b)-(d), and
notably absent from § 512(a), is the so-called notice and take-down provision.
It makes a condition of the ISP's protection from liability for copyright
infringement that ``upon notification of claimed infringement as described in [§
512](c)(3),´´ the ISP ``responds expeditiously to remove, or disable access to,
the material that is claimed to be infringing.´´"
"The RIAA's notification identifies absolutely no material
Verizon could remove or access to which it could disable, which indicates to us
that § 512(c)(3)(A) concerns means of infringement other than P2P file sharing",
concluded the Court. "In sum, we agree with Verizon that § 512(h) does not by
its terms authorize the subpoenas issued here. A § 512(h) subpoena simply cannot
meet the notice requirement of § 512(c)(3)(A)(iii)."
This opinion prevents the RIAA and other persons and entities asserting
copyright infringement from using the relative simple and streamlined Section
512(h) process to obtain subpoenas directed to ISPs to obtain subscriber information,
in most situations. It does not prevent the use of other legal procedures to compel
ISPs to produce subscriber information, such as the filing of lawsuits against
infringers whose names are not known (also know as John Doe lawsuits), and then
seeking production of ISP information with a
Rule 45 subpoena.
Nor does this opinion in any way limit or dispute earlier opinions that have
held that the individuals who use P2P systems to copy copyrighted works, without
Douglas Ginsburg wrote the opinion of the Court, in which Judges
This case is Recording Industry Association of America (RIAA) v. Verizon
Internet Services, U.S. Court of Appeals for the District of Columbia, Nos.
03-7015 and 03–7053, appeals from
the U.S. District Court for the District of Columbia, D.C. Nos. No.
02ms00323 and 03ms00040, Judge
John Bates presiding.
Cary Sherman, President of the RIAA, stated in a release that "This is a
disappointing procedural decision, but it only changes the process by which we
will file lawsuits against online infringers. This decision in no way changes
our right to sue, or the fact that those who upload or download copyrighted
music without authorization are engaging in illegal activity. We can and will
continue to file copyright infringement lawsuits against illegal file sharers."
He added that "This decision is inconsistent with both the views of Congress
and the findings of the district court. It unfortunately means we can no longer
notify illegal file sharers before we file lawsuits against them to offer the
opportunity to settle outside of litigation. Verizon is solely responsible for a
legal process that will now be less sensitive to the interests of its
subscribers who engage in illegal activity."
Consumer Electronics Association (CEA) P/CEO
Gary Shapiro stated in a
that this "ruling is an important victory for privacy, free expression, and
technological innovation. The tactics of the copyright holders, now blocked by the
Circuit Court, created an Orwellian world of privacy invasion, secret police and no
judicial oversight. Generally, under the initial ruling, anyone claiming to be a
copyright owner could obtain the identity of Internet users without any prior legal
determination that the user had engaged in an illegal activity."
|GAO Finds Inconsistencies, Inaccuracies and
Omissions in the DOD IT Budget Submission for FY 2004
12/19. The General Accounting Office (GAO)
released a report [PDF]
titled "Information Technology: Improvements Needed in the Reliability of
Defense Budget Submissions". See,
The information technology (IT) budget for the
Defense (DOD) accounts for about half of the about $59 Billion government-wide
IT budget in fiscal year 2004.
The GAO report found that the "DOD's
fiscal year 2004 IT budget submission includes inconsistencies, inaccuracies,
and omissions that limit its reliability. For example, the Capital Investment
Reports, which provide detailed information on each major IT initiative, are
inconsistent with DOD’s IT budget summary report. In particular, 15 major
initiatives that appear in the budget summary report do not appear in the
Capital Investment Reports, and discrepancies exist between the amounts that the
two types of reports included for 73 major initiatives. These discrepancies
total about $1.6 billion." (Footnote omitted.)
The report was prepared for Rep. Jim Saxton
Rep. Marty Meehan (D-MA), the Chairman
and ranking Democrat on the House Armed Services
Committee's Subcommittee on Terrorism, Unconventional Threats, and Capabilities.
|People and Appointments
12/19. Wayne Carlin, Regional Director of the
Securities and Exchange Commission's (SEC)
Northeast Regional Office, will leave the SEC in January. He will become a
partner in the law firm of Wachtell Lipton Rosen
& Katz. See, SEC
Marsha MacBride (at right) was named Executive Vice President of the
National Association of Broadcasters' (NAB) Legal
and Regulatory Affairs Department. She was Chief of Staff to
Federal Communications Commission (FCC) Chairman
Michael Powell from 2001 to
September 2003. See, NAB
12/15. Sen. Max Baucus (D-MT), the
ranking Democrat on the Senate Finance
Committee, named Russ Sullivan Democratic Staff Director. He has been
Democratic Chief Tax Counsel since 1999. From 1995 through 1999 he was Tax Counsel
and Legislative Director for Sen. Bob Graham (D-FL). Before that, he worked for the
law firm of Vinson & Elkins. Sen. Baucus also named Bill Dauster Deputy
Staff Director. He has worked for the Committee as Democratic General Counsel since
April of 2003. Sen. Baucus also named Patrick Heck Chief Tax Counsel.
12/18. Intel announced the appointment of
14 new Vice Presidents:
(VP of the Technology and Manufacturing Group and director of Fab Capital
(Sophia) Lee Fang
Chew (VP of the Sales and Marketing Group and general manager of the
Reseller Channel Operation),
(VP of the Desktop Platforms Group and director of Marketing and Strategic
Davis (VP of the Intel Communications Group and general manager of the
Network Processor Division),
(VP of Finance and Enterprise Services and assistant treasurer and director of
Timothy Hendry (VP of the Technology and Manufacturing Group and plant
manager of Fab 11X),
Holzhammer (VP of the Desktop Platforms Group and co-general manager of the
Platform Architecture and Solutions Division),
Renee James (VP
of the Sales and Marketing Group and general manager of the Microsoft Program
John Johnson (VP of Finance and Enterprise Services and director of
Information Technology Customer Services),
MacDonald (VP of the Sales and Marketing Group and director of Worldwide
Branding and Campaigns),
Macdonald (VP of the Enterprise Platforms Group and general manager of the
Advanced Components Division),
(VP of the Technology and Manufacturing Group and general manager of Systems
Babak Sabi (VP of the Technology and Manufacturing Group and co-director of
the Corporate Quality Network), and
Shane D. Wall
(VP of the Corporate Technology Group and director of the Systems Technology
Lab). See, Intel
The TLJ Daily E-Mail Alert will not be published on Wednesday, December 24,
Thursday, December 25, or Friday, December 26.
|Washington Tech Calendar
New items are highlighted in red.
|Monday, December 22
The House is in adjournment.
The Senate is in adjournment. (It will convene on January 20, 2004.)
Supreme Court is in recess. (It will return on January
Deadline to submit initial comments to the
Copyright Office (CO) in response
to its Notice of Inquiry (NOI) regarding notice and recordkeeping for use of
sound recordings under statutory license. The CO published a
notice in the Federal Register stating that it "is requesting public
comment on the adoption of regulations for records of use of sound recordings
performed pursuant to the statutory license for public performances of sound
recordings by means of digital audio transmissions between October 28, 1998,
and the effective date of soon-to-be-announced interim regulations." See,
Federal Register: October 8, 2003, Vol. 68, No. 195, at Page 58054.
|Thursday, December 25
Christmas. Executive branch agencies will be closed.
|Friday, December 26
Executive branch agencies will be closed. See,
Deadline to submit reply comments to the Federal
Communications Commission (FCC) in response to its notice of proposed
rulemaking (NPRM) regarding digital low power television and television
translator stations. This is FCC 03-198, in MB Docket No. 03-185. See,
notice in the Federal Register, September 26, 2003, Vol. 68, No. 187, at
Pages 55566 - 55573.
|Monday, December 29
Deadline to submit comments to the Federal
Communications Commission (FCC) regarding its notice of proposed rulemaking
(NPRM) pertaining to promoting spectrum based services in rural areas. See,
notice in the Federal Register summarizing this NPRM, and story titled "FCC
Announces NPRM Regarding Regulations Affecting the Use of Spectrum in Rural
Areas" in TLJ Daily
E-Mail Alert No. 739, September 15, 2003. This NPRM is FCC 03-222 in WT
Docket Nos. 02-381, 01-14, and 03-202. The FCC adopted this NPRM on September
10, 2003, and released it on October 6, 2003. See, Federal Register, November
12, 2003, Vol. 68, No. 218, at Pages 64050-64072.
|Wednesday, December 31
Deadline to submit a paper or panel proposal for
the National Institute of Standards and Technology's
(NIST) Spam Technology Workshop to be held on February 27, 2004. For more
information, contact Joan Hash at 301 975-3357. See,
notice in the Federal Register, November 25, 2003, Vol. 68, No. 227, at
Pages 66075 - 66076.
|Thursday, January 1
News Years Day.
|Friday, January 2
Communications Commission's (FCC) new broadcast flag mandate takes effect. The
FCC announced and released its
and Order Further Notice of Proposed Rulemaking [72 pages in PDF] on
November 4, 2003. This item is FCC 03-273 in MB Docket 02-230. See,
notice in the Federal Register (December 3, 2003, Vol. 68, No. 232, at
Pages 67599 - 67607) summarizing and stating the effective date of
these rules. For more information, contact
Rick Chessen email@example.com or Susan Mort at
firstname.lastname@example.org or 202-418-7200. See also,
stories titled "FCC Releases Broadcast Flag Rule" in TLJ Daily E-Mail Alert
No. 772, November 5, 2003; and "FCC Publishes Notices Regarding Broadcast Flag
Proceeding" in TLJ Daily E-Mail Alert No. 794, December 8, 2003.
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