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June 24, 2004, 9:00 AM ET, Alert No. 925.
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Senators Introduce Bill to Amend Copyright Act to Ban Inducement of Infringement

6/22. Sen. Orrin Hatch (R-UT) and others introduced S 2560, the "Inducing Infringement of Copyrights Act of 2004". The bill is very short and simple, but, if enacted, would bring about a major change in copyright law. It would create a new cause of action for "intentional inducement of infringement". It would not affect the existing court made law of contributory and vicarious infringement.

The bill does not enumerate any specific technologies. It is technology neutral. However, the wording of the bill suggests, and Sen. Hatch and Sen. Frist stated in the Senate, that the present intended target of the bill is the distributors of the peer to peer systems that are used to infringe copyrighted music.

Nevertheless, the statute does not limit its application to any one technology, and several commentors suggested that it would have application to a range of other activities.

Currently, 17 U.S.C. § 501 addresses infringement of copyright. S 2560 would add a new subsection (g) to this section. This new subsection, provides, in full, as follows:

"(1) In this subsection, the term `intentionally induces´ means intentionally aids, abets, induces, or procures, and intent may be shown by acts from which a reasonable person would find intent to induce infringement based upon all relevant information about such acts then reasonably available to the actor, including whether the activity relies on infringement for its commercial viability.
(2) Whoever intentionally induces any violation identified in subsection (a) shall be liable as an infringer.
(3) Nothing in this subsection shall enlarge or diminish the doctrines of vicarious and contributory liability for copyright infringement or require any court to unjustly withhold or impose any secondary liability for copyright infringement."

Subsection (a) now provides, in part, that "Anyone who violates any of the exclusive rights of the copyright owner as provided by sections 106 through 121 ... or who imports copies or phonorecords into the United States in violation of section 602, is an infringer of the copyright ..."

The bill's list of cosponsors is bipartisan, and includes key leaders of the Senate. The lead sponsor is Sen. Hatch, the Chairman of the Senate Judiciary Committee (SJC), which has jurisdiction over this bill. Sen. Patrick Leahy (D-VT), the ranking Democrat on the SJC, is a cosponsor.

Sen. Lindsey Graham (R-SC), another member of the SJC, and Sen. Barbara Boxer (D-CA), a member of the Senate Commerce Committee, are also cosponsors.

Sen. Bill Frist (R-TN), the Senate Majority Leader, and Sen. Tom Daschle (D-SD), the Senate Minority Leader, are also cosponsors. The Nashville, Tennessee based music industry is in Sen. Frist's state.

Sen. Frist stated in the Senate that this bill "addresses the growing problem of online piracy -- the illegal downloading of copyrighted music. Piracy is devastating the music community and threatening other forms of copyrighted work."

He explained that "When I return home to Nashville and drive down Music Row, my heart sinks as I see the ``For Sale´´ and ``For Rent´´ signs everywhere. The once vibrant music community is being decimated by online piracy. No one is spared. It is hitting artists, writers, record companies, performing rights organizations, and publishers."

He continued that "Every month 2.6 billion music files are illegally downloaded using peer-to-peer networks, and it is not unusual for albums to show up on the Internet before they make it to the record store. The effect of this theft of intellectual property is disastrous to the creative industry. In the end, rampant piracy dries up income and drives away professional musicians. We get fewer artists and less music."

Sen. Frist added that "Online piracy affects more than just the music industry. It affects a broad swath of the creative field, including the movie and software industries. Music, movies, books, and software contribute well over half a trillion dollars to the U.S. economy each year and support 4.7 million workers. When our copyright laws are blatantly ignored or threatened, an enormous sector of our economy and creative culture is threatened."

Sen. Orrin HatchSen. Hatch (at right) stated in the Senate that "This Act will confirm that creative artists can sue corporations that profit by encouraging children, teenagers and others to commit illegal or criminal acts of copyright infringement."

During a lengthy address in the Senate he identified music P2P systems as an intended target of the bill.

However, he also gave a long and scathing criticism of the Supreme Court's decision in Sony v. Universal City Studios, 464 U.S. 417 (1984), which is also known as the Betamax case, and recent federal court opinions that have applied existing concepts of secondary liability to P2P systems. In essence, he argued that the Congress must legislate because the courts have failed in this area.

He reviewed the substantial non-infringing use holding in the Sony (Betamax) case, and then stated that "Unfortunately, Sony also proposed that if this rule proved problematic, Congress should alter it on a technology by technology basis. This proposal was flawed: In 1976, Congress redrafted the Copyright Act to avoid the need to re-adjust copyrights on a technology by technology basis because legislation could no longer keep pace with technological change."

Sen. Hatch continued that 'Returning to this impractical technology based approach would create an endless procession of ``tech-mandate´´ laws that discriminate between technologies Congress deems ``good´´ or ``bad.´´ But technologies are rarely inherently either ``good´´ or ``bad.´´ Most can be used for either purpose; the effect depends on details of implementation impossible to capture -- or predict -- in prospective legislation."

He also stated that "the dysfunctional corrective mechanism that Sony proposed would have become problematic only if the Sony limitation was misunderstood or misapplied by lower courts. Unfortunately, that has now happened. In cases like Napster and Grokster, lower courts misapplied the substantial non-infringing use limitation. These courts forgot about ``balance´´ and held that this limitation radically alters secondary liability. In effect, these cases retained secondary liability's control prong but collapsed its inducement prong. The results of these cases prove this point: Napster imposed liability upon a distributor of copying devices who controlled infringing users; Grokster did not impose liability upon distributors who appeared to induce and profit from users' infringement."

On April 25, 2003, the U.S. District Court (CDCal) issued its opinion holding that Grokster's and Streamcast's P2P 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; and story titled "Music Publishers File Appeal Brief in P2P Infringement Case", August 18, 2003.

Sen. Patrick LeahySen. Leahy (at right) stated that "Our legislation treats those who induce others to violate copyrights as infringers themselves. This is not a novel concept; it is the codification of a long-standing principle of intellectual property law: that infringement liability reaches not only direct infringers but also those who intentionally induce illegal infringement. And while the legal principle is an old one, the problems of inducement for copyright are a relatively new byproducts of the digital age -- an age in which it is easy, and often profitable, to induce others to violate copyrights through illegal downloading from the Internet."

Sen. Leahy also argued that "What the inducement bill does not do is just as important as what it does: It does not target technology. Useful legislation on this topic must address the copyright issue and not demonize certain software. As a practical matter, if a law is targeted at certain software, the designers will simply design around the law and render it useless. And as a matter of effectiveness, if the law addresses only well-understood present threats, it will necessarily be too narrow to encompass future technologies that may pose the same threat to copyrights. A law that deals simply with the copyrights -- and their violation -- is far less likely to be circumvented or out-dated before it can do any good. It will be both broad enough and sufficiently flexible to accommodate situations we cannot foresee."

He also said that "This legislation is also carefully crafted to preserve the doctrine of ``fair use.´´ ... Similarly, the bill will continue to promote the development of new technologies as it will not impose liability on the manufacturers of copying technology merely because the possibility exists for abuse. Finally, the bill will not affect Internet service providers who comply with the safe harbor provisions of the Digital Millennium Copyright Act."

And, Sen. Leahy argued that "the makers of electronic equipment, the software vendors who sell email and other programs, the Internet service providers who facilitate access to the Web -- all of these entities have nothing to fear from this bill. So long as they do not conduct their businesses with the intention of inducing others to break the law -- and I certainly have not heard from anyone who makes that claim -- they should rest easy. The only actors who have anything to fear are those that are already breaking the law; this bill simply clarifies and codifies that long-standing doctrine of secondary liability."

Jack Valenti, President of the Motion Picture Association of America (MPAA), issued a statement praising the bill.

Robert Holleyman, P/CEO of the Business Software Alliance (BSA), also praised the bill in a release. He stated that "BSA applauds Senators Hatch and Leahy for their leadership in introducing an important bill to stem the tide of illicit file sharing which is enabling software piracy and causing substantial harm to our members."

Gary Shapiro, P/CEO of the Consumer Electronics Association, does not like this bill. He stated in a release that "By establishing this new and vague cause of civil action, it essentially gives content owners another tool in their arsenal to sue legitimate companies over any device, software, home network, programming guide or database drawn from or linked to copyrighted material that they deem objectionable ... This gun hanging over the head of entrepreneurs, large and small, will stifle competition and prevent the introduction of products and technologies we cannot even begin to imagine."

Senate Subcommittee Holds Hearing on P2P Technology

6/23. The Senate Commerce Committee's Subcommittee on Competition, Foreign Commerce, and Infrastructure held a hearing titled "The Future of Peer to Peer (P2P) Technology".

Sen. Gordon Smith (R-OR) presided. He wrote in his opening statement that "It is conceivable that some consumers who first took to the Internet when many services were free may have come to expect that all services over the Internet are, or should be, free. To them, perhaps, P2P is just ``free downloading.´´ To me, it looks a lot more like ``freeloading´´ -- or taking someone else's property without paying for it.

Even more disturbing to me, though, is the amount of pormographic material that I’ve learned is traded over these P2P networks, and the relative ease with which users may obtain it. Additionally, recent studies have shown that computer viruses and software that poses risks to consumers’ privacy and security are also prevalent on P2P networks.

Although I am very concerned about these aspects of P2P, I recognize that there are some businesses using P2P networks to legitimately distribute content, including software and music. Scientists also use P2P networks to aid their collaborative efforts at medical research and global weather prediction – two cases in which P2P helps them access data stored on colleagues’ computers located throughout the world whenever they need it.

Sen. Gordon SmithAt the conclusion of the hearing, Sen. Smith (at right) stated that "clearly, we would rather that technology deal with this problem than legislation. But if necessary, we will do legislation. We cannot stand idly by when there is wanton theft going on. That is not the way free enterprise works. That is the way free loading works. And, we cannot stand by when people, without asking it, are affronted with the most horrendous kinds of pormography under the banners of baseball, or Snow White."

Howard Beales, Director of the Federal Trade Commission's (FTC) Bureau of Consumer Protection, wrote in his prepared testimony that "Downloading and using P2P file-sharing programs, however, sometimes also creates significant risks for consumers. When consumers download P2P file-sharing software programs, they may download other, unwanted, software, including spyware. The Commission recently held a public workshop on spyware. Later this year, the FTC will issue a comprehensive report addressing spyware, including the relationship between P2P file-sharing software and spyware."

He added that "When consumers use P2P file-sharing software programs, they face additional risks. Consumers may inadvertently place files with sensitive personal information in their directory of files to be shared. Consumers may receive files with viruses and other programs that could impair the operation of their personal computers. Consumers may receive or redistribute files that may subject them to civil or criminal liability under laws governing copyright infringement and pormography."

Beales also stated that "Because of the way the files are labeled, individuals, including children, may be exposed to unwanted and disturbing images. The Commission is concerned with the exposure of individuals, especially children, to unwanted pormographic materials through deceptive practices."

See also, prepared testimony of John Rose (The EMI Group), prepared testimony of Michael Weiss (CEO of a company that distributes a P2P product), prepared testimony [MS Word] of Les Ottolenghi (Intent MediaWorks), and prepared testimony of Curt Pederson (Oregon State University).

AT&T and Bells Continue to Debate Unbundling Order

6/23. AT&T announced in a release that "it will stop competing for local and long-distance residential customers in Ohio, Missouri, Washington, Tennessee, Louisiana, Arkansas and New Hampshire". It asserted that "This action is a result of a June 9 decision by the Administration and the FCC not to appeal a recent Federal court decision that overturned FCC wholesale rules put in place to introduce competition in local markets. The reversal of local competition policy by the Administration will permit the Bell companies to raise wholesale rates as early as November. This increase in wholesale rates means that AT&T will likely be unable to economically serve customers with the competitive bundles currently available."

However, the final paragraph of this lengthy release states that AT&T "will continue to serve its existing residential customers in the affected states, and that its announcement today does not affect its enterprise, government and other small- and medium-sized business customers. It will also not affect customers with DSL and cable modem offerings who subscribe to the company's Voice over IP offering".

Walter McCormick, P/CEO of the U.S. Telecom Association (USTA), which represents incumbent local exchange carriers (ILECs), responded in a release that "AT&T is engaged in sleight of hand. It claims it will no longer compete with telephone, cable, wireless companies and other CLECs in offering voice service to residential consumers. But in the very same press release, it announces that it will serve the more profitable business markets and will offer to residential consumers its new, high margin voice-over-Internet product in the same states that it says it is withdrawing from! This appears to be a political statement directed at presidential battleground states, rather than a real business announcement."

BellSouth responded that AT&T's announcement "is more a statement of "how" they intend to compete going forward, than "whether" they intend to compete going forward." It adds that "AT&T's announcement is a political campaign. In reality, this has nothing to do with the Solicitor General's announcement. The seven states covered by the announcement are all seen by political analysts as undecided states in the presidential election. The tone and text of their release are political threats. If AT&T chooses to exit markets in which it finds itself unable to compete due to the robust levels of competition, then so be it. But let's not confuse the issue as a one of consumer protection."

SBC offered the following analysis: "Local phone competition without AT&T is like a fish without a bicycle." See, SBC release.

SBC added that "This cheap PR stunt should be seen for what it is: political grandstanding aimed at intimidating policymakers and elected officials everywhere. Nothing has changed in the market -- AT&T is paying the same price today as it did last month, and will through the end of the year. Moreover, the FCC is in the process of making new lawful rules for the industry. AT&T's political games are transparent. Its customers should ask themselves whether they even want to do business with a company that uses them as pawns in the game of politics."

This debate relates to the opinion of the U.S. Court of Appeals (DCCir) in USTA v. FCC. This March 2, 2004, opinion [62 pages in PDF] overturned parts of the FCC's triennial review order [576 pages in PDF], which addressed the unbundling requirements of ILECs under 47 U.S.C. § 251. See also, story titled "Appeals Court Overturns Key Provisions of FCC Triennial Review Order" in TLJ Daily E-Mail Alert No. 848, March 3, 2004.

On June 9, 2004 the Office of the Solicitor General announced that it would not appeal the case to the Supreme Court. See, story titled "Solicitor General Will Not Seek Supreme Court Review in USTA II" in TLJ Daily E-Mail Alert No. 915, June 10, 2004.

House Commerce Committee to Mark Up Spyware Bill

6/23. The House Commerce Committee is scheduled to mark up HR 2929, the "Safeguard Against Privacy Invasions Act" or "SPY Act" at a meeting beginning at 9:30 AM on Thursday, June 24. This is Rep. Mary Bono's (R-CA) spyware bill.

The Subcommittee on Commerce, Trade, and Consumer Protection approved an amendment in the nature of a substitute [18 pages in PDF] on June 17, 2004. See also, story titled "House Subcommittee Approves Spyware Bill" in TLJ Daily E-Mail Alert No. 922, June 21, 2004.

The Committee has continued its work on the bill since the Subcommittee markup. The full Committee will likely approve a version of the bill with further amendment.

However, some groups still have reservations. For example, Harris Miller, President of the Information Technology Association of America (ITAA) stated in a June 23 letter to Rep. Joe Barton (R-TX) and Rep. John Dingell (D-MI), who are the Chairman and ranking Democrat on the Committee, that the ITAA has reservations about the bill. He wrote that "a regulatory approach to all interactive software could undermine the consumer interest by clinging to technologically obsolete text-based notice formulas, rather than incorporating the benefits of innovation in a rapidly changing field".

Miller continued that "One of the reasons that industry is concerned about newly proposed legislation curtailing technologies known today as spyware is that there exist many good uses of similar technologies, recently termed ``supportware,´´ that could be considered spyware by some definitions. ``Supportware´´ is a term that refers to Internet-based software technologies that update, renew, and monitor programs residing on the computer user’s system to provide a better service to them and to enhance overall computer user satisfaction."

He added that "we believe that the current bill will generate a veritable blizzard of legally mandated pop-up notices that only a lawyer would love. The proposed legislation goes beyond addressing the problem of Spyware to create a new Federal regulatory regime at the Federal Trade Commission for the online software distribution."

The Committee is also scheduled to mark up HR 4600, the "Junk Fax Prevention Act of 2004", and several non-technology related bills, at the same meeting.

Washington Tech Calendar
New items are highlighted in red.
Thursday, June 24

The House will meet at 10:00 AM. See, Republican Whip Notice.

POSTPONED. 9:00 AM. The Senate Governmental Affairs Committee will hold the second part of its hearing titled "Buyer Beware: The Danger of Purchasing Pharmaceuticals Over The Internet". See, notice. Location: Room 342, Dirksen Building.

9:30 AM. The House Commerce Committee will meet to mark up several bills, including HR 4600, the "Junk Fax Prevention Act of 2004" and HR 2929, the "Safeguard Against Privacy Invasions Act" or "SPY Act". This is Rep. Mary Bono's (R-CA) spyware bill. The meeting will be webcast by the Committee. See, notice. The Subcommittee on Commerce, Trade, and Consumer Protection approved an amendment in the nature of a substitute [18 pages in PDF] on June 17, 2004. See, story titled "House Subcommittee Approves Spyware Bill" in TLJ Daily E-Mail Alert No. 922, June 21, 2004. The meeting will be webcast by the Committee. Press contact: Larry Neal or Samantha Jordan at 202 225-5735. Location: Room 2123, Rayburn Building.

9:30 AM. The Senate Judiciary Committee will hold a business meeting. See, notice. Press contact: Margarita Tapia (Hatch) at 202 224-5225 or David Carle (Leahy) at 202 224-4242. Location: Room 226, Dirksen Building.

12:15 - 2:00 PM. The DC Bar Association's Arts, Entertainment and Sports Law Section will host a lunch titled "Indecent Exposure: Broadcast Standards and the First Amendment". The speakers will be Lee Carosi (Majority Counsel, Senate Commerce Committee) Thomas Carpenter (American Federation of Television and Radio Artists), Robert Corn-Revere (Davis Wright & Tremaine), Kelly Zerzan (Majority Counsel, House Commerce Committee), and John Davis Malloy. Prices vary. See, notice. For more information, call 202-626-3463. Location: Jenner & Block, 601 13th Street, NW, Concourse Level.

12:30 PM. The Federal Communications Bar Association (FCBA) will hold its Annual Meeting and Luncheon. The speaker will be Federal Communications Commission (FCC) Commissioner Kathleen Abernathy. Location: J.W. Marriott, 1331 Pennsylvania Ave., NW.

2:00 - 4:00 PM. The House Science Committee's Subcommittee on Environment, Technology, and Standards will hold a hearing titled "Testing and Certification for Voting Equipment: How Can the Process Be Improved?" Location: Room 2318, Rayburn Building.

4:00 PM. The House Judiciary Committee's Subcommittee on Courts, the Internet, and Intellectual Property will hold a hearing titled "Patent Quality Improvement: Post-Grant Opposition". The hearing will be webcast by the Committee. Press contact: Jeff Lungren or Terry Shawn at 202 225-2492. Location: Room 2141, Rayburn Building.

Deadline to submit comments to the Federal Trade Commission (FTC) to assist it in preparing its report (which is required by the Fairness to Contact Lens Consumers Act, 15 U.S.C. § 7601 et seq.) on the strength of competition in the sale of prescription contact lenses. See, notice in the Federal Register, April 22, 2004, Vol. 69, No. 78, at Pages 21833 - 21836.

Deadline to submit reply comments to the Federal Communications Commission (FCC) in response to its notice of proposed rule making (NPRM) regarding expanding the disruption reporting requirements beyond wireline carriers. See, notice in the March 26, 2004, Vol. 69, No. 59, at Pages 15761 - 15774.

Friday, June 25

The House will meet at 9:00 AM. See, Republican Whip Notice.

5:45 - 8:00 PM. The Federal Communications Bar Association (FCBA) Cable Committee and Legislation Committee will hold a joint brown bag lunch. The speakers will be majority and minority counsel for the House Commerce Committee. RSVP to Wendy Parish at Location: Willkie Farr & Gallagher, 1875 K Street, NW.

Deadline to submit reply comments to the Federal Communications Commission (FCC) in response to its notice of proposed rulemaking (NPRM) regarding presubscribed interexchange carrier (PIC) change charge policies. This NPRM is FCC 04-96 in CC Docket No. 02-53. See, notice in the Federal Register, May 26, 2004, Vol. 69, No. 102, at Pages 29913 - 29917.

Monday, June 28

The House and Senate will not meet on June 28 through July 5.

The Supreme Court will return from the recess that it began on June 21.

1:00 PM. The Center for Democracy and Technology (CDT) will host a telephone press conference to discuss the Supreme Court's opinion in Ashcroft v. ACLU, a challenge to the constitutionality of the Child Online Protection Act (COPA). If the Supreme Court does not issue the opinion on this date, then the CDT will reschedule this conference for the next likely date for the issuance of the opinion -- June 28. To participate, call 334 260-2557 and provide security code 36991.

Deadline to submit reply comments to the Federal Communications Commission (FCC) in response to its notice of proposed rulemaking (NPRM) [97 pages in PDF] regarding issues relating to services and applications utilizing internet protocol (IP). This NPRM is FCC 04-28 in WC Docket No. 04-36. See, notice in the Federal Register, March 29, 2004, Vol. 69, No. 60, at Pages 16193 - 16202. See also, story titled "FCC Adopts NPRM Regarding Regulation of Internet Protocol Services" in TLJ Daily E-Mail Alert No. 837, February 16, 2004.

Deadline to submit comments to the Federal Communications Commission (FCC) in response to its notice of proposed rulemaking (NPRM) regarding changes to the FCC Form 477 local competition and broadband data gathering program. This NPRM is FCC 04-81 in WC Docket No. 04-141. See, notice in the Federal Register, May 27, 2004, Vol. 69, No. 103, at Pages 30252 - 30277.

Tuesday, June 29

2:00 - 4:00 PM. There will be a meeting of the WRC-07 Advisory Committee, Informal Working Group 5: Regulatory Issues. See, FCC notice [PDF]. Location: The Boeing Company, 1200 Wilson Blvd., Arlington, VA.

3:00 - 5:00 PM. The American Enterprise Institute (AEI) will host a panel discussion titled "Terror, Torts, and Teleco: The Supreme Court's 2003-2004 Term". The speakers will be Viet Dinh (Georgetown University Law Center), Richard Garnett (Notre Dame Law School), Edward Warren (Kirkland & Ellis), and Michael Greve (AEI). See, notice and registration page. Location: AEI, Twelfth floor, 1150 17th St., NW.

The Defense Science Board Task Force on Global Positioning System will hold a closed meeting to discuss Galileo and other future radio navigation satellite systems. See, notice in the Federal Register, May 18, 2004, Vol. 69, No. 96, at Pages 28125 - 28126. Location: Strategic Analysis Inc., 3601 Wilson Boulevard, Arlington, VA.

Wednesday, June 30

12:15 PM. The Federal Communications Bar Association's (FCBA) Mass Media Practice Committee will host a brown bag lunch. The speaker will be Ken Ferree, Chief of the Federal Communications Commission's (FCC) Media Bureau. Location: 8th Floor Conference Room, Dow Lohnes & Albertson, 1200 New Hampshire Ave., NW.

2:00 PM. The Japan International Transport Institute and the Ministry of Land, Infrastructure and Transport will host a conference titled "Aviation Security of Tomorrow". There will be a technology demonstration from 1:00 - 7:00 PM that will feature an IPv6-based secure peer-to-peer communication service platform, information secrecy management solutions using a multi-purpose smartcard, and radio frequency tags. The speakers will include Asa Hutchinson, Under Secretary for Border and Transportation Security at the U.S. Department of Homeland Security. Masayuki Nomura (NTT Communications Corporation) will give a technology demonstration. There will be a reception from 5:30 - 7:00 PM. See, notice and registration page. Registration is required by June 25. Location: Grand Hyatt Washington, 1000 H Street, NW.

Deadline to submit comments to the Financial Accounting Standards Board (FASB) regarding its document titled "Exposure Draft, Share-Based Payment, an Amendment of FASB Statements No. 123 and 95", in which it proposes to that companies must expense employee stock option plans.

Deadline to submit applications to the Department of Homeland Security (DHS) for grants for homeland security related information technology demonstration projects. See, DHS release.

The research and development tax credit provision of the Internal Revenue Code expires. Both the House and Senate bills to repeal the ETI tax regime would extend the R&D credit through December 31, 2005. The House has passed its bill, HR 4520, the "American Jobs Creation Act of 2004". The Senate has passed its bill, S 1637, the "Jumpstart Our Business Strength (JOBS) Act". However, the two bills have not been reconciled.

Senators Address Impending Expiration of R&D Tax Credit

6/23. Sen. Charles Grassley (R-IA), the Chairman of the Senate Finance Committee (SFC), Sen. Max Baucus (D-MT), the ranking Democrat on the SFC, and Sen. Orrin Hatch (R-UT), a senior member of the SFC, issued a statement regarding the impending expiration of the research and development tax credit. The credit is scheduled to expire on June 30, 2004.

Both the House and Senate bills to repeal the extraterritorial income (ETI) tax regime, to comply with World Trade Organization (WTO) rulings, would also extend the R&D credit through December 31, 2005. The House has passed its bill, HR 4520, the "American Jobs Creation Act of 2004", last week. The Senate has passed its bill, S 1637, the "Jumpstart Our Business Strength (JOBS) Act", in May. However, the two bills have not yet been reconciled.

The three Senators stated that "We want to take this opportunity to remind our colleagues of the importance of research and development to the growth of our economy and to improvements in our future standard of living. Research and development has a proven track record of creating jobs. If we want to keep these high-paying R and D jobs in America, we need to bolster the research tax credit by extending and expanding it. Furthermore, many of the things that we benefit from now -- life-saving drugs and life-sustaining medical treatments; computers and software that make us more productive in the workplace; advances that make transportation safer and more energy efficient; and technologies that enable our military to effectively and safely carry out its responsibilities -- are the direct result of long-term, high-risk investments in research and development made by American businesses."

They added that "The research tax credit helped make many of those long-term investments financially feasible. It must be extended expeditiously and seamlessly. We must fill in any lapse between expiration of the credit and enactment of an extension, so that companies that have planned research projects while counting on the research credit can continue those projects with confidence. It is our intention to work in conference for a provision effective retroactively to the date of the credit's expiration. In the JOBS Act, the Senate voted unanimously not only to extend the credit, but also to strengthen it. We need a stronger credit signed into law so that the American economy, American workers, and American citizens can benefit from the additional research activities made possible by a strong research tax credit."

More News

6/23. The House Commerce Committee's Subcommittee on Telecommunications and the Internet held a hearing titled "Protecting Homeland Security: A Status Report on Interoperability Between Public Safety Communications Systems". See, prepared testimony of David Boyd (Department of Homeland Security), prepared testimony of Gary Grube (Motorola), prepared testimony of Robert Legrande (District of Columbia), and prepared testimony of John Muleta (Chief of the Federal Communications Commission's Wireless Telecommunications Bureau).

6/23. The U.S. Court of Appeals (11thCir) issued its opinion [PDF] in Rolling Greens MHP v. Comcast SCH Holdings, L.L.C. The sole issue in this opinion is what is the citizenship of a limited liability company for the purpose of determining whether a federal court has jurisdiction based upon diversity of citizenship of the parties. The Appeals Court held, "The federal appellate courts that have answered this question have all answered it in the same way: like a limited partnership, a limited liability company is a citizen of any state of which a member of the company is a citizen. We join them in this holding." Rollings Greens MHP had appealed the summary judgment against it. The Appeals Court addressed the jurisdictional issue sua sponte. This case is Rolling Greens MHP v. Comcast SCH Holdings, L.L.C., U.S. Court of Appeals for the 11th Circuit, App. Ct. No. 03-15917, an appeal from the U.S. District Court for the Middle District of Florida, D. C. No. 03-00022-CV-OC-10GRJ.

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