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September 6, 2004, 9:00 AM ET, Alert No. 970.
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Copyright Office Releases Draft Version of Inducement Bill

9/3. The Copyright Office (CO) released a discussion draft version of S 2560, the "Inducing Infringement of Copyrights Act of 2004", on September 2, 2004. This version was drafted for the purposes of facilitating discussion and comments by interested entities.

Sen. Orrin Hatch (R-UT), Sen. Patrick Leahy (D-VT), and others introduced the original version of S 2560 in the Senate on June 22, 2004. See, story titled "Senators Introduce Bill to Amend Copyright Act to Ban Inducement of Infringement", in TLJ Daily E-Mail Alert No. 925, June 24, 2004.

On July 22, the Senate Judiciary Committee held a hearing on the bill. Sen. Hatch and Sen. Leahy are the Chairman and ranking Democrat. See, story titled "Senate Judiciary Committee Holds Hearing on Inducement Bill" in TLJ Daily E-Mail Alert No. 963, August 20, 2004.

On August 24, a group of opponents of the bill sent a proposed alternative version of the bill to the Committee. See, stories titled "Opponents of the Inducing Infringement of Copyrights Act Submit Alternative Proposal" and "Comparison of Hatch Leahy Inducement Bill and Opponents' Proposal", in TLJ Daily E-Mail Alert No. 966, August 25, 2004.

The original bill, the opponents' proposal, and the Copyright Office's discussion draft, all would add a new subsection (g) to Section 501 of the Copyright Act. Currently, 17 U.S.C. § 501 defines infringement of copyrights. For example, subsection (a) provides, in part, that "Anyone who violates any of the exclusive rights of the copyright owner as provided by sections 106 through 121 or of the author as provided in section 106A(a), or who imports copies or phonorecords into the United States in violation of section 602, is an infringer of the copyright or right of the author, as the case may be."

Section 106, in turn, enumerates the exclusive rights in copyrighted works. These are (1) the right to reproduce, (2) the right to prepare derivative works, (3) the right to distribute copies, (4) the right to perform publicly, (5) the right to display publicly, and (6) for sound recordings, the right to perform by digital audio transmission.

S 2560, as introduced by Sen. Hatch and Sen. Leahy is a short and simple bill. It would amend § 501 by adding the following:

  "(g)(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."

The Copyright Office's (CO) discussion draft maintains the basic provision that intentionally inducing infringement is akin to infringement, but makes several important changes.

Subsections (g)(1) and (2) of the original bill provide a definition of "intentionally induces", using a reasonable person standard, and provide that whoever intentionally induces a violation of § 501(a) is liable as an infringer. Subsection (g)(1) of the CO's discussion draft provides that whoever "intentionally induces another to infringe any of the exclusive rights in Sections 106(3), 106(4), 106(5) or 106(6) under subsection (a) shall be liable as an infringer".

While the original bill refers back to § 501(a), which in turn refers to all of the exclusive rights in §§ 106 through 121, the CO's discussion draft refers back to only subsection (3) through (6) of § 106. For example, Subsection 106(2) provides copyright holders have the exclusive right to prepare derivative works. Intentionally inducing infringement of derivative works would be treated as infringement under the original bill, but not under the CO's discussion draft. Currently, the music and movie industries do not face a serious threat from peer to peer infringement in derivative works.

The CO's discussion draft also adds the element of "overt acts", which is not present in the bill as introduced. It provides that "induces" means "to commit one or more affirmative, overt acts that are reasonably expected to cause or persuade another person or persons to commit any infringement under subsection (a) of this section."

The CO's discussion draft then enumerates five categories of "overt acts" for the purposes of inducement. However, this is not an exhaustive list. The discussion draft states that, "For the purposes of this subsection, ``overt acts´´ constituting inducement may include ..." (Emphasis added.) The discussion draft then enumerates six categories of acts that do not constitute "overt acts" for the purposes of inducement.

Neither the bill as introduced, nor the CO discussion draft references peer to peer systems. However, the list of overt acts includes five acts which are characteristic of currently available peer to peer software that is used to infringe copyrights in music recordings.

The list of predicate overt acts includes "distributing any dissemination technology that, when used as intended, automatically causes the user of the technology to infringe copyrighted works without the user making a specific, informed decision, for each copyrighted work at issue, about whether to engage in such infringement". It also includes "actively interfering with copyright holders' efforts to detect infringing uses of dissemination technology and enforce their copyright against those uses".

It also includes "distributing a dissemination technology as part of an enterprise that substantially relies on the infringing acts of others for its commercial viability or the revenues of which are predominantly derived from the infringing acts of others."

The CO's discussion draft then lists acts that do not constitute predicate overt acts for the purposes of the bill.

First, it lists "distributing any dissemination technology capable of substantial noninfringing uses knowing that it can be used for infringing purposes, so long as that technology is not designed to be used for infringing purposes".

This relates to the Supreme Court opinion in Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417 (1984), which is also know as the Betamax case. In that case the Court held that Sony was not vicariously liable for infringement by Betamax users because the Betamax was capable of commercially significant noninfringing uses, because consumers used it for time shifting, which is a fair use. Although, the CO discussion draft substitutes the word "substantial" for the Court's words "commercially significant". The CO discussion draft also adds the qualifier, "so long as that technology is not designed to be used for infringing purposes", which is not found in the Supreme Court's opinion.

The CO discussion draft also provides that "Nothing in this subsection shall enlarge or diminish the doctrines of vicarious and contributory liability for copyright infringement, including any defenses thereto or any limitations on rights or remedies for infringement, or the authority of courts to apply or adapt common-law standards."

The CO's discussion draft's enumeration of acts that do not constitute "overt acts" also includes "providing products or services to a distributor of dissemination technology in the same manner that such products or services are provided to other members of the public, including but not limited to financial services, delivery services, advertising services, product reviews or evaluations, library services, real estate services, customer-support services for users of computer software or hardware, utilities and telecommunications services."

The related language in the opponent's proposal is that "providing -- (i) venture capital, financial assistance, payment services, or financial services, (ii) advertising, advertising services, or product reviews, or (iii) information or support to users, including via manuals and user handbooks pertaining to a computer program, assistance or directions for using such a program through a company's online help system or telephone help services, and library services shall not be a basis for liability ..."

Perhaps it is notable that while both lists are long, nobody appears to be interested in exempting lawyers from liability for inducing infringement.

On September 3, 2004, Alan Davidson of the Center for Democracy and Technology (CDT) wrote a letter [2 pages in PDF] to the CO's Jule Sigall regarding the CO's discussion draft.

He wrote that "we believe the draft circulated by the Copyright Office yesterday falls short of the goals put forward by the Committee and raises serious concerns about chilling valuable new technologies for accessing and communicating information in the digital age."

He continued that "our major concern is overbreadth. A broad range of technology developers and service providers, who provide consumers with valuable opportunities to speak and to access information, could credibly be the target of costly and harmful litigation under this draft as written."

Also on September 3, 2004, Mike Godwin of Public Knowledge wrote a letter to Jule Sigall in which he stated that the CO discussion draft "appears to sweep up virtually all communications technology -- from e-mail to web browsers to Internet routers -- then appears to attempt to exclude from liability some types of ``good´´ technology. This approach strikes us as a backwards one that leads to overbreadth of potential liability even as it departs from the useful notion of focusing on potential defendants' intentions."

"Given how little of the discussion draft actually addresses the precise question of infringement-inducing peer-to-peer companies, we are left with a looming question: What is the real focus of the language of the discussion draft?" Godwin added, "Is there some other class of actor or behavior that the discussion draft wishes to target ..."

Public Knowledge supports the opponents' proposal.

Alan Davidson is Associate Director of the CDT. Mike Godwin is the Legal Director of Public Knowledge. Jule Sigall is Associate Register for Policy and International Affairs at the Copyright Office. Richard Phillips and Tom Sydnor are Senate Judiciary Committee staff members involved in discussions regarding S 2560.

FTC Stops Deceptive Claims by Security Software Maker

9/1. The Federal Trade Commission (FTC) filed an administrative complaint [6 pages in PDF] against Bonzi Software, Inc., it owners and officers, Joe Bonzi and Jay Bonzi, alleging violation of Section 5(a) of the FTC Act in connection with their deceptive marketing and sale of software named "InternetALERT". The FTC and the respondents also entered into an Agreement Containing Consent Decree [7 pages in PDF].

Section 5(a) of the FTCA is codified at 15 U.S.C. § 45. It provides, in relevant part, that "Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful."

The complaint states that "InternetALERT is software that monitors Internet traffic entering a consumer's computer and provides alerts when an attacker attempts to access the computer from the Internet without the consumer’s knowledge or permission", and that it is sold for $49 for a one year subscription.

It further alleges that "respondents have represented, expressly or by implication, that InternetALERT significantly reduces the risk of unauthorized access into computers and the data stored in them."

The complaint describes what the software actually does. It "monitors and provides alerts to consumers on certain communications ports concerning attempts to gain unauthorized access into computers. Prior to October 2003, InternetALERT automatically monitored up to eleven communications ports. Since October 2003, it has automatically monitored up to twenty-one communications ports. Consumers also may be able to manually select additional ports for monitoring by InternetALERT."

The complaint adds that "If an automatically selected port or manually selected port is closed at the time that InternetALERT is installed, the software will open the closed port to monitor it and provide alerts" and "If an automatically selected port or manually selected port is open at the time that InternetALERT is installed, InternetALERT will not monitor it".

The complaint concludes, that "In truth and in fact, InternetALERT does not significantly reduce the risk of unauthorized access into computers and the data stored in them. InternetALERT does not significantly reduce the risk of unauthorized access into computers because it provides only limited protection against intrusion into computers ... Moreover, InternetALERT does not provide other security features that can significantly reduce the risk to data stored in computers, such as features that prevent personally identifiable information stored in a computer from being sent over the Internet without a consumer’s knowledge or consent, or that provide computer virus protection."

The respondents simultaneously settled the matter. They agreed not to make any further misrepresentations regarding the extent to which their products will reduce the risk of unauthorized access into computers, or protect privacy and personally identifiable information.

The agreement also requires the respondents to notify by e-mail consumers who purchased their software that they are entitled to refunds, and to make refunds to consumers who so request. See also, FTC release.

WTO Arbitrator Allows Sanctions for Byrd Amendment

8/31. The World Trade Organization (WTO) released arbitrator decisions permitting Europe and seven other countries to impose retaliatory trade sanctions upon the U.S. for violating provisions of the WTO agreements on anti-dumping and subsidies. See, WTO web page with links to decisions. See also, EU release.

On January 16, 2003, the WTO Appellate Body upheld a panel finding that the US Continued Dumping and Subsidy Offset Act of 2000, which is also known as the CDSOA, or the Byrd Amendment, violates WTO agreements. The just released decisions allow various countries to impose sanctions for this violation of up to $150 Million. See, story titled "WTO Appellate Body Holds Byrd Amendment Inconsistent With WTO Agreements" in TLJ Daily E-Mail Alert No. 585, January 17, 2003.

Sen. Charles Grassley (R-IA), the Chairman of the Senate Finance Committee, stated in a release [PDF] that "the Byrd amendment was slipped into an appropriations conference report without full debate in the Senate. The Finance Committee, as the committee of jurisdiction, never had a chance to review the amendment. I’m not surprised that a bill that was never considered by the committee of expertise or even the full Senate was found to violate our international commitments. That’s why we have committees -- to help make sure things like that don’t happen."

Sen. Charles GrassleySen. Grassley (at right) added that "Aside from the WTO ruling, there are a number of other problems with the way the Byrd amendment operates. For example, earlier this year the Congressional Budget Office issued a report in which it found that, regardless of the economic harm that can be caused by retaliation, the Byrd amendment is detrimental to the overall economic welfare of the United States. An earlier report issued by the Department of Treasury’s Inspector General found that the Bureau of Customs and Border Protection made $25 million in overpayments when disbursing Byrd amendment funds."

The Office of the U.S. Trade Representative (USTR) issued a statement which states that "Today's determination will not affect the ability of the United States to continue enforcing its trade laws to impose duties on countries that sell unfairly dumped or subsidized products in the U.S. market. The Byrd Amendment simply deals with how the funds collected from such duties are disbursed by the Treasury."

The Byrd amendment is a protectionist measure that was backed by members of the U.S. steel industry. It provides for the distribution of the anti-dumping and countervailing duties to the companies that brought or supported the complaints. Hence, it incents U.S. companies to pursue protectionist barriers. It also undermines claims by the U.S. that it is committed to free trade and to a rules based international trading system. This, in turn, harms efforts to obtain the benefits of free trade for other sectors, such as technology, that export products and services.

Washington Tech Calendar
New items are highlighted in red.
Monday, September 6

The House and Senate are in recess.

Labor Day. The Federal Communications Commission (FCC) and other federal offices will be closed. See, Office of Personnel Management's (OPM) list of federal holidays.

Tuesday, September 7

The House and Senate will return from the August recess.

The House will meet at 2:00 PM for legislative business. It will consider several non-technology related items under suspension of the rules. Votes will be postponed until 6:30 PM. See, Republican Whip Notice.

1:00 PM. Secretary of Homeland Security Tom Ridge will speak. Location: National Press Club, 529 14th St. NW, 13th Floor.

Deadline to submit reply comments to the Federal Communications Commission (FCC) in response to its notice of proposed rulemaking (NPRM) regarding the process for designation of eligible telecommunications carriers (ETCs) and the FCC's rules regarding high-cost universal service support. This NPRM is FCC 04-127 in Docket No. 96-45. See, notice in the Federal Register, July 7, 2004, Vol. 69, No. 129, at Pages 40839 - 40843.

Deadline to submit reply comments to the Federal Communications Commission (FCC) in response to its notice of proposed rulemaking (NPRM) regarding the rechannelization of portions of the 17.7-19.7 GHz band. This NPRM is FCC 04-77 in WT Docket No. 04-143. See, notice in the Federal Register, July 7, 2004, Vol. 69, No. 129, at Pages 40843 - 40850.

Deadline to submit comments to the Copyright Office (CO) in response to its notice of proposed rulemaking (NPRM) regarding amendments to the CO's regulations to permit the Library of Congress to record unpublished radio and other audio and audiovisual transmission programs. The CO stated that "regulations already provide for the Library of Congress to obtain copies of unpublished television transmission programs, either by recording fixations or by demanding copies in the form of a transfer, loan or sale at cost. This revised regulation makes similar provisions for audio transmission programs and includes transmission programs made available by radio broadcasts and by digital communications networks such as the Internet." See, notice in the Federal Register, August 5, 2004, Vol. 69, No. 150, at Pages 47396 - 47399.

Wednesday, September 8

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

10:00 AM. The House Judiciary Committee will meet to mark up several bills, including HR 4661, the "Internet Spyware (I-SPY) Prevention Act of 2004", and HR 4077, the "Piracy Deterrence and Education Act of 2004". HR 4661 is the spyware bill sponsored by Rep. Bob Goodlatte (R-VA), Rep. Zoe Lofgren (D-CA), and Rep. Lamar Smith (R-TX), of the Judiciary Committee. The House Commerce Committee has already approved its spyware bill, HR 2929, the "Safeguard Against Privacy Invasions Act" or "SPY Act", sponsored by Rep. Mary Bono (R-CA). See, story titled "House Commerce Committee Approves Spyware Bill" in TLJ Daily E-Mail Alert No. 926, June 25, 2004. The markup is scheduled to continue on Thursday, September 9 at 10:00 AM. Location: Room 2141, Rayburn Building.

10:00 AM. The Senate Judiciary Committee will hold a hearing on judicial nominations. Press contact: Margarita Tapia at 202 224-5225. Sen. Orrin Hatch (R-UT) will preside. See, notice. Location: Room 226, Dirksen Building.

10:00 AM. The House Financial Services Committee will hold a hearing titled "Protecting our Financial Infrastructure: Preparation and Vigilance". The witness will include Robert Liscouski (Department of Homeland Security) and Wayne Abernathy (Department of the Treasury). Location: Room 2128, Rayburn Building.

11:00 AM. The House Commerce Committee's Subcommittee on Telecommunications and the Internet will hold a hearing titled "Law Enforcement Access to Communications Systems in a Digital Age". On August 9, 2004 the Federal Communications Commission (FCC) released a Notice of Proposed Rulemaking and Declaratory Ruling (NPRM & DR) [100 pages in PDF] regarding imposing Communications Assistance for Law Enforcement Act (CALEA) obligations upon broadband internet access services and voice over internet protocol (VOIP) services. See, notice of hearing. Location: Room 2322, Rayburn Building.

12:15 PM. The Federal Communications Bar Association's (FCBA) Mass Media Practice Committee will host a brown bag lunch. William Freedman, Deputy Chief of the Federal Communications Commission's (FCC) Enforcement Bureau's (EB) Investigations and Hearings Division, will discuss the FCC's policies and procedures for enforcement of indecency related complaints. No RSVP is required. Location: National Association of Broadcasters (NAB), 1771 N Street NW, Conference Rooms A&B.

5:30 - 6:45 PM. The American Enterprise Institute (AEI) will host a lecture by Sam Peltzman (University of Chicago) titled "Regulation and the Natural Progress of Opulence". He will argue that some regulations make matters worse because of offsetting personal or market behavior, and discuss why some counterproductive regulations remain in place while others are repealed. The lecture will be followed by a reception. See, notice. Location: AEI, Twelfth floor, 1150 17th St., NW.

Deadline to submit comments to the Federal Communications Commission (FCC) in response to its further notice of proposed rulemaking (FNPRM) to determine whether mobile satellite service (MSS) operators using different technologies could share additional spectrum in the 1610-1626.5 MHz band (L-band). This FNPRM is FCC 04-134 in IB Docket No. 02-364 and ET Docket No. 00-258. See, notice in the Federal Register, August 9, 2004, Vol. 69, No. 152, at Pages 48192 - 48194.

Thursday, September 9

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

9:30 AM. The Federal Communications Commission (FCC) will hold a meeting. See, agenda [4 pages in PDF]. The event will be webcast. Location: FCC, 445 12th Street, SW, Room TW-C05 (Commission Meeting Room).

9:30 AM. The Senate Judiciary Committee will hold an executive business meeting. Press contact: Margarita Tapia at 202 224-5225. See, notice. Location: Room 226, Dirksen Building.

2:00 - 4:30 PM. The Federal Communications Commission (FCC) will hold an event titled "Discussion on the Debt Collection Improvement Act Rules and Rules Governing Applications or Other Request for Benefits by Debtors". See, original notice [PDF] and rescheduling notice [PDF]. Location: FCC, Commission Meeting Room, 445 12th Street, SW.

2:00 - 4:00 PM. The American Enterprise Institute (AEI) will host a demonstration titled "How NASDAQ's Electronic Market Works". The speakers will be Frank Hatheway and Peter Marlyn (NASDAQ) and Peter Wallison (AEI). See, notice. Location: AEI, Twelfth floor, 1150 17th St., NW.

Deadline to submit comments to the National Institute of Standards and Technology (NIST) regarding its notice in the Federal Register that it intends to withdraw Federal Information Processing Standard (FIPS) 46–3, which specified the Data Encryption Standard (DES), and the associated FIPS 74 and FIPS 81. The NIST has determined that "the strength of the DES algorithm is no longer sufficient to adequately protect Federal government information". See, Federal Register, July 26, 2004, Vol. 69, No. 142, at Pages 44509 - 44510. Send comments to

Friday, September 10

8:00 AM - 5:30 PM. The George Mason School of Law's (GMULS) Journal of Law, Economics and Policy will host a one day symposium titled "The Economics of Self Help and Self Defense in Cyberspace". See, event brochure [PDF]. The event is free, but requires pre-registration. Location: GMUSL, 3301 Fairfax Drive, Arlington, VA.

9:30 - 11:00 AM. The Progressive Policy Institute (PPI) will host a panel discussion titled "Telecommunications Reform: Is the “Network Layers” Approach the Right One?". The speakers will be Rick Whitt (Senior Director of Global Policy and Planning at WorldCom), Link Hoeing (Assistant Vice President, Issues Management and Technology Policy at Verizon), and Rob Atkinson (Director of the PPI's Technology and New Economy Project). Free. Breakfast will be served. Location: PPI, 600 Pennsylvania Ave., SE, Suite 400.

12:00 NOON. Dane Snowden, Chief of the Federal Communications Commission's (FCC) Consumer & Governmental Affairs Bureau, will hold a press briefing. RSVP to Rosemary Kimball at 202 418-0511 or Location: FCC, 445 12th St., SW, Hearing Room B/Conference Room, TW A-402/A-442.

Extended deadline to submit comments to the Federal Communications Commission (FCC) in response to its public notice (DA 04-1690) requesting public comments on constitutionally permissible ways for the FCC to identify and eliminate market entry barriers for small telecommunications businesses and to further opportunities in the allocation of spectrum-based services for small businesses and businesses owned by women and minorities. See, original notice in the Federal Register, June 22, 2004, Vol. 69, No. 119, at Pages 34672 - 34673; and, notice of extension [PDF].

Deadline to submit requests to testify at the September 23 public hearing of the Office of the U.S. Trade Representative (USTR) regarding the USTR's annual report to the Congress on the Peoples Republic of China's compliance with the commitments that it made in connection with its accession to the World Trade Organization (WTO). Requesters must also submit a copy of their written testimony. See, notice in the Federal Register, July 29, 2004, Vol. 69, No. 145, at Pages 45369 - 45370.

People and Appointments

9/3. Jonathan Liebowitz was sworn in as a Commissioner of the Federal Trade Commission (FTC). He replaces Mozelle Thompson. Liebowitz was previously VP for Congressional Affairs of the Motion Picture Association of America (MPAA). Before that, he was a long time staff assistant to Sen. Herb Kohl (D-WI). See, FTC release.

More News

9/3. The U.S. Patent and Trademark Office (USPTO) announced that "The Official Gazette notice, published on August 24, 2004 entitled "All Electronic Copies of Patent Application Records Will Now Be Provided as Certified Copies in Electronic Form" (1285 Off. Gaz. Pat. Off, August 24, 2004) is hereby rescinded. The USPTO is reinstating, until further notice, the procedures in effect prior to July 30, 2004 for providing certified copies of patent application records with paper certification statements. The USPTO will also offer electronic certified copies of patent application records at the requester's option." See, USPTO release.

8/26. The U.S. District Court (CDCal) issued it Order Dismissing Antitrust Claim with Prejudice and Declining to Exercise Supplemental Jurisdiction Over Remaining State Law Claims [16 pages in PDF] in VeriSign v. ICANN. This case is VeriSign, Inc. v. Internet Corporation for Assigned Names and Numbers, U.S. District Court for the Central District of California, D.C. No. CV-01-1292 AHR(CTx), Judge Howard Matz presiding.

8/25. The Department of Justice's (DOJ) Antitrust Division filed a complaint in U.S. District Court (DC) against Syngenta AG, AstraZeneca PLC, Koninklijke Cooperatie Cosun U.A., and Advanta B.V. alleging violation of U.S. antitrust laws in connection with an agreement under which Syngenta purchased all of the assets of Advanta, a seed company that sells sugar beet seeds in the U.S. The complaint alleges violation of Section 7 of the Clayton Act, which is codified at 15 U.S.C. § 18. The DOJ and the defendants simultaneously consented to the entry of a Final Judgment that requires Syngenta's divestiture of Advanta's sugar beet seed business. See also, Hold Separate Stipulation and Order. This case is United States v. Syngenta AG, AstraZeneca PLC, Koninklijke Cooperatie Cosun U.A., and Advanta B.V., U.S. District Court for the District of Columbia, D.C. No. 1:04CV01442, Judge Reggie Walton presiding.

8/23. Hewitt Pate, Assistant Attorney General in charge of the Department of Justice's (DOJ) Antitrust Division gave a speech titled "Competition and the End of Geography".

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