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November 20, 2006, Alert No. 1,492.
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4th Circuit Rules in CAN SPAM Act Case

11/17. The U.S. Court of Appeals (4thCir) issued its opinion [17 pages in PDF] in Omega World Travel v. Mummagraphics, a case involving the CAN SPAM Act. The Court of Appeals affirmed the judgment of the District Court for the e-mail sender.

This case illustrates that while the Congress enacted the CAN-SPAM Act three years ago, some people who use e-mail remain irate about the messages that they receive. It also shows that amateur attempts to complain and seek redress can be legally hazardous to the recipients. In this case, the alleged spammers sent commercial e-mail messages to an individual with a small business who then complained over the phone, through the mail, and in a web site. The alleged spammers then sued the recipient on a variety of claims and won.

The District Court, and Court of Appeals, also held that the anti-spam statute related counterclaims of the recipient all fail. First, the courts held that the federal statute preempts the state statute. Second, the courts held that the federal cause of action fails because the recipient only received 11 messages, the inaccuracies in these messages were not material, and the recipient attempted to opt-out in a manner not specified by the opt-out language of the statute.

Statute. The Congress enacted the "Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003", or "CAN-SPAM Act", in 2003. It was S 877 in the 108th Congress. It is now codified at 15 U.S.C. §§ 7701-7713.

One of the prohibitions of the CAN-SPAM Act, found at 15 U.S.C. § 7704(a)(1), is as follows: "It is unlawful for any person to initiate the transmission, to a protected computer, of a commercial electronic mail message, or a transactional or relationship message, that contains, or is accompanied by, header information that is materially false or materially misleading."

A similar prohibition, found at subsection (a)(2), prohibits deceptive subject headings. Notably, in both of these prohibitions, the deceptive information must be material. Subsection (a)(1) requires that it be "materially false or materially misleading". Subsection (a)(2) requires that it be "about a material fact regarding the contents or subject matter of the message".

Subsection (a)(3) provides that "It is unlawful for any person to initiate the transmission to a protected computer of a commercial electronic mail message that does not contain a functioning return electronic mail address or other Internet-based mechanism, clearly and conspicuously displayed" that enables the recipient to opt out by sending a reply electronic message.

Subsection (a)(4) then provides that it is unlawful to continue to send commercial electronic mail messages to a recipient who has utilized the opt-out mechanism described in subsection (a)(3).

Background. A defendant below, and appellant on appeal, is Mummagraphics, Inc., dba Webguy Internet Solutions, an Oklahoma based business. It President, Mark Mumma, who is another defendant, does not like to receive unsolicited commercial e-mail.

A plaintiff below, and appellee on appeal, is, Inc. It sent multiple commercial e-mail messages to the Mummagraphics' e-mail address. Mumma telephoned asking to be removed from the mailing list. He also wrote a letter. But, he did not utilize the electronic opt-out mechanism provided in the messages.

Mumma threatened to sue. He also published information on an anti-spam web site alleging that the plaintiffs were "spammers".

District Court. The plaintiffs filed a complaint in U.S. District Court (EDVa) against the Mumma defendants alleging defamation, copyright infringement, trademark infringement, and unauthorized use of likeness.

The Mumma defendants' counterclaims included allegations of violation of the federal CAN-SPAM Act, and the state of Oklahoma's anti-spam statute.

The District Court granted summary judgment to the spammers on all claims and counterclaims, except libel, which may go to trial. It held that the federal CAN-SPAM Act preempted the Oklahoma statute, and that the plaintiffs did not violate the CAN-SPAM Act because the inaccuracies in the e-mail messages were not material, and because the plaintiffs had not violated the opt-out provisions of the Act.

Court of Appeals. Mummagraphics brought this appeal on the spam statute issues only. The Court of Appeals affirmed.

The Court of Appeals wrote that "The CAN-SPAM Act prohibits some material misstatements and imposes opt-out requirements, but it does not make every error or opt-out request into grounds for a lawsuit. The e-mails in this case are not actionable under the Act. Nor can the messages be actionable under Oklahoma’s statutes, because allowing a state to attach liability to bare immaterial error in commercial e-mails would be inconsistent with the federal Act’s preemption text and structure ..."

This case is Omega World Travel, Incorporated, et al. v. Mummugraphics, Inc., et al., U.S. Court of Appeals for the 4th Circuit, App. Ct. No. 05-2080, an appeal from the U.S. District Court for the Eastern District of Virginia, Alexandria Division, D.C. No. CA-05-122, Judge Leonie Brinkema presiding. Judge Wilkinson wrote the opinion of the Court of Appeals, in which Judges Duncan and Voorhees joined.

SEC Releases Annual Report

11/15. The Securities and Exchange Commission (SEC) released a report [109 pages in PDF] titled "2006 Performance and Accountability Report". This report addresses many technology related topics, including interactive data, e-proxy rules, information technology (IT) security at the SEC, e-authentication, upgrading equipment and software in forensics lab to improve the recovery of data store on electronics devices, teleworking by SEC employees, and use of IT in examinations and enforcement.

Interactive Data. SEC Chairman Chris Cox wrote in a cover letter to the report that "The SEC’s Interactive Data initiative has paved the way for the imminent conversion of our public company disclosure regime to a global system of financial information exchange built on ``smart data´´. In 2006, we awarded three separate contracts totaling $54 million to transform the agency's 1980s-vintage public company disclosure system from a form-based electronic filing cabinet to a dynamic real-time search tool with interactive capabilities."

The body of the report states that "The SEC continued to build upon a voluntary program initiated in FY 2005 that allows registrants to use eXtensible Business Reporting Language in their financial disclosure filings. In early 2006, an interactive data test group was launched to explore how new Internet-based reporting technologies can improve the financial reporting process for investors, financial intermediaries, the SEC, and companies themselves. The pilot program enables participant companies to determine the benefits of using interactive data and provide feedback to the SEC, and enables investors and analysts to assess new technologies for analyzing interactive data reports submitted to the SEC in XBRL format."

See also, the SEC's February 2005 rule changes that initiated the SEC's XBRL Voluntary Program, and its web page summary of the program.

E-proxy Rules. Cox wrote that "We proposed e-proxy rules, to further advance our goal of tapping the enormous power of technology and the Internet to simplify and improve disclosure."

See also, story titled "SEC Proposes to Allow Internet Delivery of Proxy Materials" in TLJ Daily E-Mail Alert No. 1,263, December 1, 2006.

Telework. The report states that the SEC has increased its telework participation rate to 34% of SEC employees. The report adds that the SEC is one of the few federal agencies that does not exclude certain job functions or groups of employees from teleworking.

The report states that "In FY 2006 the SEC purchased and deployed new technology that allows employees to access their files via the Internet at any time or location, thereby facilitating more telework without compromising the security of the SEC’s information. Also, the SEC continued its pilot ``virtual workforce´´ project in the Division of Corporation Finance, in which an initial group of 10 employees works from home full-time."

IT Security. The report states that during the past year "the SEC implemented a wide variety of new policies and procedures governing the assessment and management of information security risk. These procedures include comprehensive approaches for identifying security risk; configuring, testing, and monitoring information systems; incident response; remedial action tracking; and many other areas. The SEC also completed the certification and accreditation of its major systems, and conducted awareness training for 99 percent of SEC staff. In addition, the agency also established and tested its disaster recovery and business continuity plans in accordance with recommendations from previous years."

The report continues that the SEC will "refine and extend the procedures and management controls put in place during FY 2006 to reduce the residual risk. The most important of these will be improvements in the processes for controlling changes to the technical environment, strengthening the management of user accounts and passwords, and measures to tighten the physical perimeter around sensitive areas of the SEC’s premises. In addition, the agency will remediate a number of specific technical issues in such areas as patch management, data security, and intrusion detection systems."

Forensics Lab. The report states that during FY 2006 the SEC's Division of Enforcement "implemented a new forensic lab equipped with state-of-the-art equipment and software. The lab allows Enforcement to retrieve data stored on electronic devices like personal computers, servers and laptops. Since such data is volatile, subject to damage, and requires special processing and handling, the forensic lab has created special protocols that are essential to the preservation and authentication of this data."

The report adds that "Enforcement has also trained a team of examiners who are able to perform forensic-related activities such as recovering deleted data and analyzing email and other relevant artifacts. The forensics program has fundamentally transformed Enforcement’s ability to receive, process, and analyze electronic storage devices."

Examinations and Enforcement. The report states that the management information systems used for examinations and enforcement programs "are antiquated and do not provide the kind of high-quality information capture and reporting that is required for such large programs. The SEC began a multiyear initiative to upgrade or replace these systems in 2006 ..."

The report continues that the SEC "has historically not invested sufficiently in its administrative systems infrastructure, which has been a contributing factor to the internal controls issues discussed elsewhere in this report. The agency began to address these issues in 2006 with an upgrade to the core accounting system and other investments in procurement and budgeting systems; over the next three years, additional upgrades are planned."

The report also states that the SEC's Office of Information Technology "certified and accredited eight major applications; recertified the agency's accounting and general support systems because of major upgrades; and completed 14 electronic authentication risk assessments. E-authentication is a review process at the transaction level designed to help agencies ensure that authentication processes provide the appropriate level of assurance."

The report is vague in its description of IT programs used to facilitate enforcement and examination. For example, it describes some of its IT projects underway simply as "Upgrade analytical tools available to examiners" and "Redesign the enforcement case management system to improve management of penalties and disgorgement".

House Judiciary Committee Holds Hearing on Caller ID Spoofing

11/15. The House Judiciary Committeee (HJC) held a hearing on HR 5304, the "Preventing Harassment through Outbound Number Enforcement (PHONE) Act". This bill would criminalize the modification of caller ID information with intent to mislead.

Rep. Tim Murphy (R-PA), the sponsor of the bill, wrote in his prepared testimony that "A criminal could try to obtain personal financial information from individuals by using a bank's phone number, ... An ex-spouse could harass a former wife or husband who has blocked calls from the ex-spouse’s phone line, ... A pedophile could stalk a child by stealing a school phone number or the phone number of a friend of the child".

Phil Kiko, Chief of Staff and General Counsel of the HJC, wrote in his prepared testimony that caller ID spoofing "creates two categories of victims: 1) the person who receives a telephone call identified as coming from someone other than the actual caller; and 2) the person whose caller identification is used fraudulently to disguise the true identity of the caller."

He continued that "I fall into the second category, because without my knowledge or consent, my caller identification (``ID´´) was used hundreds, if not thousands, of times to mask the true identity of a fraudulent caller. As a result, my family and I have received up to 20 telephone calls a day from angry people who fall into category one, who were either: returning the telephone call of the fraudulent caller; asking me to stop calling them; or asking me to take them off the telemarketing list."

He added that caller ID information is "circulated to other fraudulent callers", and that "The only effective way to end being victimized is to change one’s telephone number".

James Martin (The 60 Plus Association) wrote in his prepared testimony that "have not received what you might consider an alarming number of complaints on this issue. But it’s only a matter of time. This is a stink that's coming and we want to be proactive."

On June 6, 2006, the House approved HR 5126, the "Truth in Caller ID Act of 2006", by voice vote. The House Commerce Committee (HCC) amended and approved the bill on May 24, 2006.

The Senate has not approved HR 5126. However, the Senate Commerce Committee's (SCC) stalled communications reform bill does include a section titled "Truth in Caller ID" that is similar to HR 5126. It was offered by Sen. Bill Nelson (D-FL) and Sen. Olympia Snowe (R-ME).

Rep. Murphy also testified that "I also included an amendment to prompt the FCC to address the practice of caller ID fraud in H.R. 5672, the Fiscal Year 2007 Science, State, Justice, Commerce Appropriations Act. Still, I believe my bill, H.R. 5304, appropriately goes further by amending criminal law to fully protect Americans from the practice of caller ID fraud."

More Capitol Hill News

11/14. The House Judiciary Committee's (HJC) Subcommittee on Commercial and Administrative Law held a hearing titled "The Administrative Law, Process and Procedure Project for the 21st Century". Morton Rosenberg of the Library of Congress's (LOC) Congressional Research Service (CRS) wrote in his prepared testimony [9 pages in PDF] that "innovations in technology and science" appear to require a fresh look at old administrative process issues. He wrote, for example, that "the exploding use of the Internet and other forms of electronic communications presents extraordinary opportunities for increasing government information available to citizens and, in turn, citizen participation in governmental decisionmaking through e-rulemaking. A number of recent studies has suggested that if the procedures used for e-rulemaking are not carefully developed, the public at large could be effectively disenfranchised rather than enhancing public participation." He also referenced "the continued issue of avoidance by the agencies of notice and comment rulemaking by means of ``non-rule rules.´´" See also,  prepared testimony [16 pages in PDF] of Curtis Copeland (CRS), and prepared testimony [10 pages in PDF] of TJ Halstead (CRS).

11/14. The Senate Judiciary Committee (SJC) held a hearing titled "Competition in Sports Programming and Broadcasting: Are Consumers Winning". See, opening statement of Sen. Patrick Leahy (D-VT). See, also prepared testimony of Jeffrey Pash (National Football League), prepared testimony of Daniel Fawcett (Directv), and prepared testimony of Landel Hobbs (Time Warner).

Washington Tech Calendar
New items are highlighted in red.
Monday, November 20

The House will next meet on Tuesday, December 5, 2006, at 10:00 AM. See, Republican Whip Notice. See also, HConRes 496.

The Senate will next meet on Monday, December 4, 2006. See also, HConRes 496.

10:00 AM. The Center for Democracy and Technology (CDT) will hold a news conference to identify bills that threaten the internet and civil liberties during the final days of the 109th Congress. To participate by teleconference, call 800-377-8846. The passcode is 92713123#. For more information, contact David McGuire at 202-637-9800x106. Location: CDT, 11th Floor, 1634 I St., NW.

5:00 PDT. Deadline to submit comments to the Internet Corporation for Assigned Names and Numbers (ICANN) regarding Global Name Registry Ltd.'s (GNR) proposal for the limited release of two character names. See, notice.

Deadline to submit initial comments to the Federal Communications Commission (FCC) regarding Autotel's petition for preemption of the jurisdiction of the Arizona Corporation Commission with respect to its decisions to dismiss Autotel’s request for arbitration of an interconnection agreement with Citizens Utilities Rural Company, Inc. and Autotel’s request for termination of the rural exemption under section 251(f) of the Act. See, FCC Public Notice [PDF] (DA 06-2083). This proceeding is WT Docket No. 06-194.

Tuesday, November 21

12:00 NOON - 1:15 PM. The DC Bar Association will host a seminar titled "50 Hot Technology Tips, Tricks & Web Sites for Lawyers". The speaker will be Reid Trautz. The price to attend ranges from $15 to $20. For more information, call 202-626-3463. See, notice. Location: D.C. Bar Conference Center, 1250 H Street NW, B-1 Level.

12:15 PM. The Federal Communications Bar Association's (FCBA) Common Carrier Committee will host a brown bag lunch. This is a planning meeting. RSVP to Myra Creeks at Myra dot Creeks at att dot com. Location: AT&T, 2nd floor, 1133 21st Street, NW.

EXTENDED TO DECEMBER 21. Deadline to submit reply comments to the Federal Communications Commission (FCC) in response to its Further Notice of Proposed Rulemaking (FNPRM) regarding its media ownership rules. The FCC adopted this FNPRM on July 21, 2006, and released the text [36 pages in PDF] on July 24, 2006. See also, story titled "FCC Adopts FNPRM on Rules Regulating Ownership of Media" in TLJ Daily E-Mail Alert No. 1,397, June 22, 2006. This FNPRM is FCC 06-93 in MB Docket No. 02-277, MM Docket No. 01-235, MM Docket No. 01-317, MM Docket No. 00-244, and MB Docket Nos. 06-121. See, order [PDF] extending deadlines.

Deadline to submit initial comments to the Federal Communications Commission (FCC) in response to National LambdaRail's petition for reconsideration or clarification of the FCC's Order establishing a rural telehealth and telemedicine pilot subsidy program. See, FCC Public Notice (DA 06-2279). The FCC's order is FCC 06-144 in WC Docket No. 02-60.

Wednesday, November 22

Deadline to submit comments to the Department of Commerce's Bureau of Industry and Security (BIS) regarding its annual review of the foreign policy based controls in its Export Administration Regulations (EAR), which are implemented pursuant to section 6 of the Export Administration Act of 1979, as expired. These rules regulate, among other things, the export of certain encryption and software products. The BIS states that it seeks comments on many topics, including "The likelihood that such controls will achieve the intended foreign policy purpose, in light of other factors, including the availability from other countries of the goods, software or technology proposed for such controls". See, notice in the Federal Register, October 23, 2006, Vol. 71, No. 204, at Pages 62065-62067.

Thursday, November 23

Thanksgiving Day.

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

Monday, November 27

9:30 - 11:30 AM. The Federal Communications Commission's (FCC) WRC-07 Advisory Committee's Informal Working Group 4: Broadcasting and Amateur Issues will meet. See, notice [PDF]. Location: Pillsbury Winthrop Shaw Pittman, Conference Room 1G, 2300 N Street, NW.

10:00 AM. The Supreme Court will hear oral argument in Bell Atlantic v. Twombly, Sup. Ct. No. 05-1126. This case pertains to whether a complaint against a regional bell operating company (RBOC) that alleges parallel or similar behavior, and conspiracy to limit competition, but includes no allegations in support other than the similar or parallel conduct, is sufficient to survive a motion to dismiss. See also, amicus brief of the Office of the Solicitor General and story titled "Supreme Court Grants Cert in Bell Atlantic v. Twombly" in TLJ Daily E-Mail Alert No. 1,399, June 26, 2006. See also, Supreme Court docket. Location: 1 First St., NW.

Deadline to submit reply comments to the Federal Communications Commission (FCC) in response to it further notice of proposed rulemaking (FNPRM) regarding maritime Automatic Identification Systems (AIS). The FCC adopted this item on July 20, 2006, and released it on July 24, 2006. It is FCC 06-108 in WT Docket No. 04-344. See, notice in the Federal Register, October 12, 2006, Vol. 71, No. 197, at Pages 60102-60106.

Tuesday, November 28

10:00 AM. The Supreme Court will hear oral argument in KSR International v. Teleflex, Sup. Ct. No. 04-1350. See also, amicus brief of the Office of the Solicitor General, and story titled "Supreme Court Grants Cert in Patent Obviousness Case" in TLJ Daily E-Mail Alert No. 1,399, June 26, 2006. See also, Supreme Court docket. Location: 1 First St., NW.

12:00 NOON - 1:30 PM. The Federal Communications Bar Association's (FCBA) Enforcement Practice Committee will host a brown bag lunch titled "Telemarketing Enforcement -- TCPA, CAN-SPAM, Do-Not-Call, Junk Fax and More". The speakers will be Kris Monteith (Chief of the FCC's Enforcement Bureau) and Lydia Parnes (Chief of the FTC's Bureau of Consumer Protection). For more information, contact Christi Shewman by November 27 at christi dot shewman at fcc dot gov. Location: Arnold & Porter, Paul Porter Room, 10th Floor, 555 12th Street, NW.

12:00 NOON - 1:30 PM. The DC Bar Association will host a panel discussion titled "Music Industry: Sound Recordings and Public Performance Rights". The speakers will include Gary Greenstein (SoundExchange), Daryl Friedman (Recording Academy), Jay Rosenthal (Recording Artists’ Coalition), and John Simson (SoundExchange). The price to attend ranges from $25 to $35. For more information, call 202-626-3463. See, notice. Location: D.C. Bar Conference Center, 1250 H Street NW, B-1 Level.

12:30 - 5:00 PM. The U.S. Chamber of Commerce will host an event titled "Next Steps for the American Trade Agenda". The speakers will include Susan Schwab (U.S. Trade Representative), former Rep. Cal Dooley (D-CA), and former USTR Clayton Yeutter. The U.S. Chamber notice states that the topics covered will include "What are the prospects for extension of Trade Promotion Authority and completion of additional free-trade agreements in the 110th Congress? What is the future of the multilateral trading system, the Doha Development Agenda, and the WTO's dispute settlement system? How can U.S. international economic policy confront the emerging challenge posed to international business by divergent views of antitrust and intellectual property law?" The price to attend ranges from $50 to $70. For more information, contact Maria Medrano at mmedrano at uschamber dot com or 202-463-5384. See, registration page. Location: U.S. Chamber 1615 H St., NW.

2:00 - 4:00 PM. The Federal Communications Commission's (FCC) WRC-07 Advisory Committee's Informal Working Group 3: IMT-2000 and 2.5 GHz Sharing Issues will meet. See, notice [PDF]. Location: FCC, 4th Floor South Conference Room (4-B516), 445 12th Street, SW.

Deadline to submit reply comments to the Federal Communications Commission (FCC) in response to National LambdaRail's petition for reconsideration or clarification of the FCC's Order establishing a rural telehealth and telemedicine pilot subsidy program. See, FCC Public Notice (DA 06-2279). The FCC's order is FCC 06-144 in WC Docket No. 02-60.

People and Appointments

11/16. The Defense Information Systems Agency's (DISA) Performance Review Board published a notice in the Federal Register announcing that Marilyn Quagliotti, Diann McCoy, John Garing, and John Penkoske have been appointed members of the Board for one year terms. See, Federal Register, November 16, 2006, Vol. 71, No. 221, at Page 66757.

11/20. The Business Software Alliance (BSA) gave its annual Cyber Champion Awards to Sen. Gordon Smith (R-OR) and Rep. Adam Schiff (D-CA). The BSA cited Sen. Smith long time support for free trade, and Rep. Schiff for his anti-piracy efforts.

More News

11/17. The Federal Communications Commission (FCC) published a notice in the Federal Register that announces, describes, and sets the effective date (December 18, 2006) for the Report and Order (R&O) portion of its R&O and Further Notice of Proposed Rulemaking (FNPRM) regarding the use of TV white space by unlicensed devices. See, Federal Register, November 17, 2006, Vol.  71, No. 222, at Pages 66876-66878. This proceeding is titled "Unlicensed Operation in the TV Broadcast Bands". The R&O and FNPRM is FCC 06-156 in ET Docket Nos. 04-186 and 02-380. The FCC adopted this item at an October 12, 2006, meeting, and released it on October 18, 2006. See also, story titled "FCC Adopts Order and FNPRM Regarding TV White Space" in TLJ Daily E-Mail Alert No. 1,467, October 12, 2006. The deadline to submit initial comments to the FCC in response to the FNRPM portion of this item is January 31, 2007. The deadline to submit reply comments is March 2, 2007. See, notice in the Federal Register, November 17, 2006, Vol. 71, No. 222, at Pages 66897-66905.

11/13. The Electronic Privacy Information Center (EPIC) released a short item that is critical of Robert Cresanti, Chief Privacy Officer of the Department of Commerce (DOC), and the DOC generally. One issue of concern to the EPIC is the export of communications surveillance equipment to the People's Republic of China. The EPIC wrote that Cresanti "had more than 25 meetings with business lobbyists across the country during a two-month period in 2006 even though he was unable to attend 1 pre-scheduled meeting with privacy advocates in Washington, DC." The EPIC stated in a separate release that it is concerned about the DOC's failure to restrict the export to PR China of "high-tech equipment that is used for communications surveillance and censorship". The Export Administration Act (EAA), as expired, and the implementing regulations, authorize the DOC's Bureau of Industry and Security (BIS) to regulate exports to protect US national security.

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