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March 19, 2004, 9:00 AM ET, Alert No. 859.
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EU and Microsoft Fail to Reach Settlement

3/18. The European Union (EU) and Microsoft announced that they have failed to reach a settlement. The EU did not identify what action it may take against Microsoft.

Mario Monti, the EC Commissioner for Competition, wrote in a statement released on March 18, that "a settlement on the Microsoft case has not been possible."

"I therefore intend to propose to my colleagues in the Commission next Wednesday to adopt a decision, which has already received the unanimous backing of Member States", wrote Monti.

Mario MontiMonti (at right) praised the cooperation and professionalism of Microsoft's negotiators, and stated that "We made substantial progress towards resolving the problems which have arisen in the past but we were unable to agree on commitments for future conduct."

"In the end, I had do decide what was best for competition and consumers in Europe. I believe they will be better served with a decision that creates a strong precedent." He concluded that "It is essential to have a precedent which will establish clear principles for the future conduct of a company with such a strong dominant position in the market."

The U.S. Department of Justice's (DOJ) Antitrust Division stated in a release that "It is premature to speculate on the contents or substance of whatever decision, remedies, or penalties the EU may eventually decide to impose."

The DOJ added that the US and EU "enjoy a strong working relationship on matters relating to competition policy and have a shared interest in avoiding divergent enforcement approaches. Our cooperation with the European commission on antitrust issues will continue under the provisions of our 1991 agreement on antitrust cooperation and we will use these channels to address issues as they arise."

The DOJ added that it "will continue the work of enforcing the consent decree entered in its case against Microsoft, which in the Government's view provides the appropriate framework for marketplace competition in this important sector."

Steve Ballmer, CEO of Microsoft, stated in a release that "I believe negotiations between Microsoft and the European Commission broke down because we were unable to agree on a set of consumer driven principles on issues that might arise in the future."

Brad Smith, SVP and General Counsel of Microsoft, stated in another release that "We have to ensure that the law is not just about competitors' complaints about the impact of new features. There needs to be consideration of the needs of consumers for new innovations. Consumers must be part of the equation. Perhaps the courts will provide the clarity that is necessary to resolve these issues ... Today is just another step in what could be a long process."

Ed Black, P/CEO of the Computer & Communications Industry Association (CCIA), an interest group that complains to antitrust enforcement authorities regarding Microsoft, stated in a release that "the decision we can expect from the Commission next week will be a watershed in efforts by competition regulators to reign in the long-standing anti-competitive behavior of Microsoft. It will be a first step to restoring consumer choice and innovation in multiple markets subject to the stranglehold of a monopolist."

More People Write DOJ and FCC Regarding Whether to Seek Cert in TRO Case

3/18. Legislators, state officials, and interest groups continue to write the Department of Justice (DOJ) and Federal Communications Commission (FCC) expressing their views regarding whether or not the DOJ and FCC should file a petition for writ of certiorari with the U.S. Supreme Court seeking review of the Appeals Court opinion overturning parts of the FCC's triennial review order [576 pages in PDF].

On March 2, 2004 the U.S. Court of Appeals (DCCir) issued its opinion [62 pages in PDF] in USTA v. FCC overturning key parts of the FCC's triennial review order (TRO). The opinion leaves largely untouched those portions of the TRO in which the FCC refrained from unbundling next generation broadband facilities. The opinion vacates those portions of the TRO in which the FCC delegated decision making authority to the states to make impairment findings. See, story titled "Appeals Court Overturns Key Provisions of FCC Triennial Review Order", also published in TLJ Daily E-Mail Alert No. 848, March 3, 2004.

On March 17, leaders of the House Commerce Committee wrote a letter to Attorney General John Ashcroft and the Commissioners of the FCC to "strongly urge the Department of Justice not to seek a rehearing or appeal of the D.C. Circuit's sound decision" in USTA v. FCC.

The letter was signed by Rep. Joe Barton (R-TX), the Chairman of the Committee, Rep. John Dingell (D-MI), the ranking Democrat on the Committee, Rep. Fred Upton (R-MI), the Chairman of the Subcommittee on Telecommunications and the Internet, and Rep. Rick Boucher (D-VA), a senior Democrat on the Subcommittee. (Rep. Ed Markey (D-MA), the ranking Democrat on the Subcommittee, did not sign the letter.)

Rep. Joe BartonRep. Barton (at left) and the others wrote that "The Commission's TRO, released in August 2003, was the third and most recent of the Commission’s efforts to implement the unbundling requirement of Section 251 of the Communications Act of 1934, which was added to statute as part of the Telecommunications Act of 1996. The U.S. Supreme Court (once) and the D.C. Circuit (twice) have invalidated Commission rules implementing Section 251 on three successive occasions. It is time for the Commission to recognize that, in a government based upon the rule of law, it cannot adopt regulations that are inconsistent with the statutes enacted by Congress. Further appeals will not affect the outcome when the regulations adopted by the Commission are so completely at odds with the statutory language cited by the courts." (Parentheses in original.)

Charles DavidsonOn March 18, a group state public utilities commission (PUC) members wrote a letter to Ted Olson, the Solicitor General, suggesting that filing a petition for writ of certiorari "would not best serve the nation's consumers". The signers include Florida's Charles Davidson (at right), and some of the other more market oriented PUC commissioners.

They wrote that "Regardless of the ultimate decision rendered, an appeal to the Supreme Court would result in a continued delay of the specific guidance necessary to restore some sense of certainty to the ailing telecommunications sector. It has been eight years since the Telecommunications Act of 1996 was passed, and the D.C. Circuit has, on more than one occasion, sent strong signals regarding the FCC’s responsibilities with respect to the unbundling provisions. Further delay will only serve to keep the industry in a prolonged state of uncertainty and flux."

The signers include members of the PUCs of the states of Florida, Colorado, Connecticut, Missouri, Maryland, North Dakota, District of Columbia. The majority of the PUC commissioners support the FCC's attempt to delegate decision making authority to the states to make impairment findings. Hence, this letter states that "it is frequently represented that the state regulators speak with unanimity on this issue. They do not."

On March 8, the National Association of Regulatory Utility Commissioners (NARUC) wrote a letter [PDF] urging appeal.

Also, the Consumer Federation of America, the Consumers Union, and other interest groups, wrote a letter to FCC Chairman Michael Powell on March 17 urging the FCC "to appeal the court's decision to the Supreme Court".

Also, on March 15, Sen. Ernest Hollings (D-SC) and other Senators on the Senate Commerce Committee, wrote a letter [PDF] to Attorney General John Ashcroft urging him to appeal. See, story titled "Four Senators Urge AG Ashcroft to Appeal in Unbundling Case" in TLJ Daily E-Mail Alert No. 857, March 17, 2004.

FCC General Counsel Submits Letter Brief in Media Ownership Case

2/27. John Rogovin, General Counsel of the Federal Communications Commission (FCC), submitted a letter brief [1 page in PDF] to the U.S. Court of Appeals (3rdCir) in Prometheus Radio Project v. FCC, a case involving the FCC's media ownership rules.

The case has been briefed, and the Court heard oral argument on February 11, 2004.

Rogovin wrote that "this letter is to advise the Court of the decision in Cellco Partnership v. FCC, No. 02-1262 (D.C. Cir. Feb. 13, 2004) (copy attached), upholding the FCC’s interpretation of ``necessary in the public interest´´ under the biennial review provisions of Section 11 of the Communications Act, 47 U.S.C. § 161. The Cellco decision holds, among other things, that the FCC reasonably interpreted the phrase "necessary in the public interest´´ to mean ``advanc[ing] a legitimate regulatory objective´´ and that the FCC may rely on ``predictive judgment or properly-supported inferences in determining to retain a regulation.´´ Slip Op. 12, 16. The decision thus directly supports the FCC’s interpretation of the same statutory phrase in Section 202(h) of the Telecommunications Act of 1996, discussed at pp. 23-27 of the government’s brief in this case."

On February 13, 2004, the U.S. Court of Appeals (DCCir) issued its opinion [24 pages in PDF] in Cellco Partnership v. FCC, petitions for review of certain parts of the FCC's biennial regulatory reviews. See, story titled "Appeals Court Addresses Meaning of "Necessary" in FCC Biennial Review Process" in TLJ Daily E-Mail Alert No. 837, February 16, 2004.

The media ownership case is Prometheus Radio Project et al. v. FCC & USA, No. 03-3388, and consolidated actions, U.S. Court of Appeals for the Third Circuit, petitions for review of a final order of the FCC.

The FCC announced its a Report and Order revising its media ownership rules on June 2, 2003. See, story titled "FCC Announces Revisions to Media Ownership Rules" in TLJ Daily E-Mail Alert No. 672, June 3, 2003. The FCC released the Report and Order on July 2, 2003. See, story titled "FCC Releases Media Ownership Order and NPRM" in TLJ Daily E-Mail Alert No. 692, July 7, 2003.

FTC Obtains TRO Against Computer Sales Scam

3/12. The U.S. District Court (CDCal) issued a Temporary Restraining Order [35 pages in PDF] in FTC v. Unicyber Technology.

The Federal Trade Commission (FTC) filed a complaint against Unicyber Technology, Inc. and others on March 9, 2004, alleging that it violated Section 5(a) of the FTC Act, which is codified at 15 U.S.C. § 45 (a), in connection with a fraudulent computer sales scheme.

The complaint alleges that the defendants offered complete computer systems for three payments of $199. However, after the first payment, consumers received only peripherals, such as keyboards. Some consumers then made no further payments, and received no further equipment. Others who made full payment received computer equipment that was salvaged, damaged, did not work, and/or could not run current software.

See also, FTC release. This case is Federal Trade Commission v. Unicyber Technology, Inc. et al., U.S. District Court for the Central District of California, Western Division, D.C. CV04-1569LGB (MANx).

People and Appointments

3/18. Heidi Tringe was named Assistant to the Director for Legislative Affairs at the White House Office of Science and Technology Policy (OSTP), effective Monday, March 22. She will work for John Marburger [PDF]. She has been Communications Director for the House Science Committee. Her new contact information will be and 202 456-6124. Until the Science Committee names a new Communications Director, contact Joe Pouliot, Deputy Communications Director, at and 202 225-6371.

More News

3/17. The Federal Communications Commission (FCC) published a notice in the Federal Register summarizing, and setting comments deadlines for, its notice of proposed rulemaking (NPRM) regarding broadband over powerline systems. Comments are due by May 3, 2004. Reply comments are due by June 1, 2004. The FCC adopted this NPRM on February 12, 2004. See, story titled "FCC Adopts Broadband Over Powerline NPRM" in TLJ Daily E-Mail Alert No. 836, February 13, 2004. The FCC released the text of this NPRM on February 23, 2004. This NPRM is FCC 04-29 in ET Docket Nos. 03-104 and 04-37. See, Federal Register, March 17, 2004, Vol. 69, No. 52, at Pages 12612-12618.

3/18. The Federal Communications Commission (FCC) published a notice in the Federal Register that summarizes, and sets comments deadlines for, its notice of proposed rulemaking regarding whether certain rules should be repealed or modified because they are no longer necessary in the public interest. Comments are due by April 19, 2004. Reply comments are due by May 3, 2004. The FCC released this NPRM on January 12, 2004. This item is FCC 03-337 in WC Docket No. 02-313. See, Federal Register, March 18, 2004, Vol. 69, No. 53, at Pages 12814-12826.

US Complains to WTO About PR China's Tax Preference for Domestic Producers of Integrated Circuits

3/18. The U.S. filed a complaint with the World Trade Organization (WTO) against the People's Republic of China stating that the PRC's preferential tax treatment of integrated circuits produced in the PRC is discriminatory, and a violation of the PRC's WTO obligations.

U.S. Trade Representative (USTR) Robert Zoellick stated in a release [PDF] that "U.S. manufacturers of semiconductors and other products have a right to compete on a level playing field with Chinese firms ... As a WTO member, China must live up to its WTO obligations; it cannot impose measures that discriminate against U.S. products. We have been pressing these and other concerns with the Chinese. These discussions will continue because we prefer compliance rather than litigation. However, the bottom line is that China is discriminating against key U.S. technology products, it’s wrong, and it’s time to pursue a remedy through the WTO."

The USTR release explains the tax preference. "U.S. exports of integrated circuits to China are subject to a 17 percent value-added tax (VAT), costing approximately $344 million. However, China taxes domestic products significantly less, by allowing firms producing integrated circuits in China to obtain a partial refund of the 17 percent VAT. As a result of the refund policy, the effective VAT rate on domestic products can be as low as 3 percent. China also allows for a partial refund of VAT paid on integrated circuits designed in China but manufactured abroad."

Sen. Charles Grassley (R-IA) praised the USTR. "I fully support the Administration's decision to get tough with China. Last week I chaired a hearing of the Finance Committee on the Administration's trade agenda. Ambassador Zoellick testified that we might need to bring a case against China. It's apparent that discussions with the Chinese over their blatant discriminatory tax policy have gone nowhere. So, we're forced to take the next step. I commend Ambassador Zoellick for his stand to assert our rights in the WTO."

Sen. Charles GrassleySen. Grassley (at right) continued: "Now, there's no question the United States has already benefited from China's membership in the WTO. But we can do better. It's been over two years since China joined the WTO. The honeymoon's over. The time for excuses is over. The message here is simple. China has to comply with its international trade obligations. This discriminatory tax is only one of a host of issues we have with the Chinese. They need to do a better job of enforcing intellectual property rights. They need to ensure that sanitary and phytosanitary measures are not used as disguised barriers to trade. And they need to avoid using technical commercial standards to exclude foreign participation in their economy. By that I'm referring to China's wireless encryption standard that's due to take effect in June."

The Semiconductor Industry Association (SIA) is pleased that the U.S. has acted. George Scalise, President of the SIA, stated in a release that the "SIA has been working in cooperation with USTR for more than a year to resolve our problems with China’s discriminatory Value Added Tax regime on semiconductors ... The USTR and the U.S. semiconductor industry believe in resolving this dispute through diplomacy.  Once it became clear that continued discussions had not been productive, it became necessary to begin the formal consultation process of the dispute resolution procedures provided for in the WTO."

The PR China joined the WTO in 2001. This is the first complaint that has been submitted to the WTO against the PR China.

Washington Tech Calendar
New items are highlighted in red.
Friday, March 19

9:30 AM. Phil Bond, of the Department of Commerce's Technology Administration, will speak on "the importance of math and science education" at the FIRST (For Inspiration and Recognition of Science and Technology) Robotics Competition. Location: Naval Academy, Annapolis, MD.

12:00 NOON. Jon Dudas, the acting head of the U.S. Patent and Trademark Office (USPTO) will give a luncheon address on "the importance of intellectual property to the business community" at the Eighth Annual Alexandria Technology Achievement Week. The price is $40. For more information, call 703 549-1000 ext. 207. Location: Radisson Hotel Old Town, 901 North Fairfax Street, Alexandria, VA.

2:30 - 4:30 PM. 9:00 AM - 1:00 PM. The DC Bar Association will host a continuing legal education (CLE) program titled "How Electronic Filing is Changing Litigation". Prices vary. For more information, call 202 737-4700. Location: Ronald Reagan Building and International Trade Center, 1300 Pennsylvania Ave., NW.

TIME? The Oracle Corporation and the George Washington University Law School will host a symposium titled "Willful Patent Infringement". The event is free, and open to the public, but registration is required. See, event web site. For more information, contact Laura Heymann at or 202 994-0420. Location: Jacob Burns Moot Court Room, GWU Law School, 2000 H Street, NW.

Deadline for state and local law enforcement agencies to submit applications to the Department of Justice's (DOJ) Office of Juvenile Justice and Delinquency Prevention (OJJDP) to participate in the Internet Crimes Against Children Task Force Program. See, notice in the Federal Register, February 3, 2004, Vol. 69, No. 22, at Pages 5187 - 5193.

Saturday, March 20

Deadline to submit comments to the National Institute of Science and Technology's (NIST) Computer Security Division (CSD) regarding its draft publication [58 pages in PDF] numbered "DRAFT Special Publication 800-30, Rev A" and titled "Risk Management Guide for Information Technology Systems". This publication updates Special Publication 800-30 to reflect the results of the FISMA Implementation Project, to improve internal consistency within the document, and generally improve the document readability. Comments should be addressed to

Deadline to submit comments to the National Institute of Science and Technology's (NIST) Computer Security Division (CSD) regarding its draft publication [33 pages in PDF] numbered "DRAFT Special Publication 800-27 Rev A" and titled "Engineering Principles for Information Technology Security (A Baseline for Achieving Security)". It was written by Gary Stoneburner, Clark Hayden, and Alexis Feringa. Comments should be addressed to

Monday, March 22

The Supreme Court will return from the recess that it began on March 8.

9:00 AM - 12:00 NOON. The Federal Communications Commission's (FCC) Office of Engineering and Technology (OET) will host a tutorial on recent field studies of digital TV (DTV) translators. Location: FCC, 445 12th Street, SW, Room TWC305 (Commission Meeting Room).

Tuesday, March 23

10:00 AM. The Senate Committee on Aging will hold a hearings to examine the impact of internet fraud on seniors. Location: Room 628, Dirksen Building.

10:30 AM. The Senate Appropriations Committee's Subcommittee on Commerce, Justice, State, and the Judiciary will hold a hearing on the transformation of the Federal Bureau of Investigation (FBI), focusing on information technology, management and training. Location: Room 116, Dirksen Building.

2:30 PM. The Senate Judiciary Committee will hold a hearing regarding counterfeiting and theft of tangible intellectual property. Location: Room 226, Dirksen Building.

Wednesday, March 24

9:30 AM. The Senate Foreign Relations Committee will hold a hearing on intellectual property piracy issues. Location: Room 419, Dirksen Building.

10:00 AM. The Senate Judiciary Committee will hold a hearing on the nomination of Paul Diamond to be Judge of the U.S. District Court for the Eastern District of Pennsylvania. Location: Room 226, Dirksen Building.

2:30 PM. The House Government Reform Committee's Subcommittee on Technology, Information Policy, Intergovernmental Relations and the Census will hold a hearing titled "Electronic Government: A Progress Report on the Successes and Challenges of Government-wide Information Technology Solutions". Location: Room 2154, Rayburn Building.

Deadline to submit comments to the Copyright Office (CO) regarding its proposed rules governing the service of complaints, summonses, subpoenas and other legal process on the CO and its employees in their official capacities. See, notice in the Federal Register, February 23, 2004, Vol. 69, No. 35, at Pages 8120 - 8126.

Thursday, March 25

8:00 - 9:30 AM. The Republican Technology Council and the U.S. Chamber of Commerce will host a panel discussion titled "Global Competitiveness: Countering Economic Isolationism". The speakers will include Sen. Bob Bennett (R-UT), Rep. Darrell Issa (R-CA), and Robert Goodman (Kentron Technologies). RSVP by March 23 to 202 467-4424 or See, notice. Location: American Gas Association, 400 North Capital Street.

9:00 AM - 5:00 PM. The Federal Communications Commission (FCC) will host a meeting title "Emergency Communications and Homeland Security -- Working with the Disability Community". See, notice [PDF]. Location: FCC, 445 12th Street, SW.

10:00 AM. The House Commerce Committee will hold a hearing titled "The State of U.S. Industry". Secretary of Commerce Donald Evans will testify. The hearing will be webcast. Press contact: Larry Neal or Jon Tripp at 202 225-5735. Location: Room 2123, Rayburn Building.

12:00 NOON. The Progress and Freedom Foundation (PFF) will host a debate between Stanford Law School Professor Lawrence Lessig and PFF Fellow James DeLong. Lessig will also release his latest book, titled Free Culture: How Big Media Uses Technology and the Law to Lock Down Culture and Control Creativity [Amazon order page]. The PFF notice states that "Those interested in attending should register by contacting Brooke Emmerick at 202-289-8928 or Members of the media should contact David Fish at 202 289-8928 or Location: First Amendment Lounge, National Press Club, 529 14th St. NW, 13th Floor.

12:00 NOON. The Federal Communications Bar Association's (FCBA) Common Carrier Practice Committee will host a brown bag luncheon titled "Distribution of Universal Service Support to High Cost Areas: Reflections on the Joint Board 'Portability' Proceeding". The speakers will be Matthew Brill (Senior Legal Advisor to Commissioner Kathleen Abernathy), Karen Brinkmann (Latham & Watkins), Joel Lubin (AT&T), David Sieradzki (Hogan & Hartson). RSVP to Cecelia Burnett at 202-637-8312 or Location: Hogan & Hartson, 555 13th St., NW, Lower Level.

2:00 PM. The House Appropriations Committee's Subcommittee on Commerce, Justice, and State, the Judiciary, and Related Agencies will hold a hearing on the proposed budget for the U.S. Trade Representative (USTR). USTR Robert Zoellick is scheduled to testify. Location: Room H-309, Capitol Building.

2:00 PM. The House Armed Services Committee's Subcommittee on Terrorism, Unconventional Threats and Capabilities will hold a hearing on the President's FY 2005 budget request for Department of Defense science and technology policy programs. The witnesses will be Ronald Sega (Director, Defense Research and Engineering), Anthony Tether (Defense Advanced Research Projects Agency), Thomas Killion (Deputy Assistant Secretary of the Army for Research and Technology), Rear Admiral Jay Cohen (Chief of Naval Research), and James Engle (Deputy Assistant Secretary of the Air Force for Science, Technology and Engineering). Location: Room 2212, Rayburn Building.

4:00 PM. Joseph Scott Miller (Lewis and Clark Law School) will present a paper titled "Roles and Rules for Dictionaries in the Patent Office and the Courts". For more information, contact Robert Brauneis at 202 994-6138 or Location: George Washington University Law School, Faculty Conference Center, Burns Building, 5th Floor, 716 20th Street, NW.

Friday, March 26

9:00 AM - 4:00 PM. The Federal Communications Commission's (FCC) Consumer Advisory Committee will hold a meeting. See, agenda [PDF]. Location: FCC, Room TW-C305, 445 12th Street, SW.

9:30 AM. The Consumer Federation of America (DFA) will host an event titled "Network Neutrality for the Broadband Internet". The speakers will include Federal Communications Commission (FCC) Commissioner Michael Copps, Lawrence Lessig (Stanford University), and Vinton Cerf (MCI WorldCom). To attend, contact Mark Cooper (CA) at or 301 384-2204. Location: an undisclosed room on Capitol Hill.

12:15 PM. The Federal Communications Bar Association's (FCBA) Young Lawyers Committee will host a brown bag lunch regarding emerging technologies. The speakers will be Jeff Campbell (Cisco), Mark Murphy (Ericsson), Bill Lane (FCC Office of Strategic Planning), Kenneth Carter (FCC Office of Strategic Planning). For more information, contact Ken Carter at or Pam Slipakoff at Location: Willkie Farr & Gallagher, 1875 K Street, NW.

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