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December 19, 2006, Alert No. 1,508.
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More Comments on FCC's Consideration of the AT&T BellSouth Merger

12/18. Members of Congress and others continued to offer their comments regarding Federal Communications Commission (FCC) Commissioner Robert McDowell's decision not to participate in the FCC's consideration of the merger of AT&T and BellSouth, and the appropriate nature and outcome of that proceeding.

See also, story titled "McDowell Disqualifies Himself in AT&T BellSouth Merger Proceeding" in TLJ Daily E-Mail Alert No. 1,597, December 18, 2006.

Rep. Joe Barton (R-TX) wrote in a release that "The other commissioners must now complete their review without imposing conditions not rooted in the specifics of the transaction. Unless a commissioner believes that a combined AT&T-BellSouth is the only entity in the market today that should be subject to a particular condition, the proposed condition is clearly not transaction-specific."

Rep. Barton added that "This transaction will create a more competitive video and broadband provider in BellSouth's nine-state region. That is likely one reason why 18 state public utility commissions, three countries and the Department of Justice have approved the AT&T-BellSouth transaction without conditions. The commission should now bring its review to a close rather than delay these consumer benefits."

Rep. Heather Wilson (R-NM), another member of the House Commerce Committee (HCC) and its Subcommittee on Telecommunications and the Internet, stated in a release that "We want public officials that understand the importance of upholding the public trust. This ethical decision strikes the right note, and I'm encouraged by it."

Rep. Wilson is a supporter of imposing a broad network neutrality mandate on broadband service providers. She also supported holding a hearing on the AT&T BellSouth merger. The HCC held no hearing on the merger.

Randall May, head of the Free State Foundation (FSF), wrote in a statement that "it is only because the Commission considers mergers under the indeterminate ``public interest创 standard that commissioners are able to range far afield from concerns related uniquely to the merger and consider matters much more appropriately considered in an industry-wide generic rulemaking. The Commission's handling of this case is Exhibit A (or more correctly probably X, Y, or Z) as to why the merger review process needs to be reformed." (Parentheses in original.)

Josh Silver, head of the Free Press, praised FCC Commissioner Robert McDowell for recusing himself. Silver wrote in a release that "He was under intense pressure to rubber-stamp this deal ... Now the other commissioners can return to the business of making good public policy. We're optimistic that all sides will return to the table for good-faith negotiations on merger conditions that will protect consumers and maintain a neutral and open Internet."

5th Circuit Rules in Copyright Registration Case

12/18. The U.S. Court of Appeals (5thCir) issued its opinion [6 pages in PDF] in Pritchett v. Pound, a case involving copyright registration.

The case involves several issues. For example, it addresses who owns a copyright when an employee of a company authors a work, and there is an employment contract with a works made for hire clause, but the company then registers the copyright, and indicates that the employee is the author, and that the work is not a work made for hire. This case also addresses whether the company is barred by limitations from seeking a declaratory judgment of copyright ownership fourteen years after such registration. While the Court of Appeals designated the winning litigant (the company), the opinion is so brief that it provides only limited guidance to others.

Ronald Pound worked for Pritchett, LP, a business consulting firm, pursuant to an employment contract that provided that should "the Employee produce any written materials in the course of his work with the Employer, then such shall be done for and on behalf of the Employer and all work produced shall be the exclusive property of the Employer".

Pritchett LP also sold handbooks. Pound co-authored two such books, Business as UnUsual and Smart Moves, in 1988 and 1989. Pritchett LP promptly registered both works with the Copyright Office. For the former, it listed Pound as a co-author. For both books it indicated on the registration form that the works were not works made for hire.

Ronald Pound died in 1995. His widow, Nancy Pound, later asserted ownership of the copyrights. Pritchett LP filed a complaint in 2002 in U.S. District Court (EDTex) seeking declaratory judgment that it is the sole owner of the copyrights in the two books. Pound counterclaimed for an accounting and payment of royalties. The District Court granted summary judgment to Pritchett LP, and awarded it attorneys fees.

Pound appealed. The Court of Appeals affirmed. It held that the books were works made for hire, and that Pritchett LP was the sole owner of the copyrights.

The Court of Appeals wrote that "While the registration form, if standing alone, would be evidence of joint ownership, it is not a written agreement changing the employment relationship that the statute requires."

About 14 years transpired between the filing of the first copyright registration and Pritchett LP's filing of its federal lawsuit. The Court of Appeals held that Pritchett LP's action is not barred by limitations. It reasoned that "a defendant who is not seeking any affirmative relief and who asserts a defense only to defeat plaintiff抯 claim is not barred by the Act抯 statute of limitations."

There are two notable aspects of this statement. First, Pritchett LP was the plaintiff in the District Court action, not the defendant. Second, Pritchett LP sought the affirmative relief of a declaratory judgment of copyright ownership.

However, Pound had brought a prior state court action for an accounting. Pritchett LP sought unsuccessfully to have the state case removed to the U.S. District Court, based upon federal question jurisdiction. After losing that jurisdiction battle, Pritchett LP filed an action in the District Court. The Court of Appeals' opinion does not state what became of the state court action. The Court of Appeals' analysis treats the federal action as identical to the state court action, and treats Pritchett LP's federal claim as an affirmative defense to the state court claim of Pound.

The Court of Appeals also affirmed the award of attorneys fees to Pritchett LP.

Hilda Galvan of the Dallas, Texas office of the law firm of Jones Day represented Pritchett LP.

This case is E. Price Pritchett and L.P.Pritchett v. Nancy Pound, individually and as representative of the Estate of Ronald Edward Pound, U.S. Court of Appeals for the 5th Circuit, App. Ct. No. 05-41445, an appeal from the U.S. District Court for the Eastern District of Texas. Judge Reavley wrote the opinion of the Court of Appeals, in which Judges Prado and Jones joined.

House Commerce Committee Democrats Seek Further Information from HP's Mark Hurd

12/12. Rep. John Dingell (D-MI) and Rep. Bart Stupak (D-MI) send a letter [PDF] to Mark Hurd, the P/CEO/Ch of Hewlett Packard Company (HP), regarding his exercise of stock options just prior to HP's public disclosure of pretexting and surveillance activities in its September 6, 2006, filing of a Form 8-K with the Securities and Exchange Commission (SEC).

See, story titled "HP Admits Spying on its Directors via Pretexting to Obtain Confidential Home Phone Records" in TLJ Daily E-Mail Alert No. 1,443, September 6, 2006.

Rep. John DingellRep. Dingell (at right) will become Chairman of the House Commerce Committee (HCC) in the 110th Congress. Rep. Stupak may become Chairman of the HCC's Subcommittee on Oversight and Investigations.

They wrote in their letter to Hurd that "A key issue in the Subcommittee's investigation is how much Hewlett-Packard Co. (HP) management knew about the board-leak investigation, when they knew it, and what actions they took in response. In that regard, it appears from the enclosed chart on HP executive trading, that you voluntarily cashed in $1.37 million worth of options on August 25, 2006, the very same day that you were questioned by Wilson Sonsini attorneys who were ``investigating the investigation.创 This was also before the company filed its September 6, 2006, Form 8-K with the Securities and Exchange Commission (SEC), disclosing the circumstances surrounding the resignation of Thomas Perkins from the Board of Directors and the controversial methods used to obtain phone records and other sensitive information on HP insiders and members of the press."

They continued that "The August 25 transaction does not appear to be part of any prescheduled program; the chart indicates that you exercised options and cashed them out on the same day. Please state whether the chart is accurate. If it is accurate, please explain the reason for this transaction. Continuing revelations about widespread ``backdating创 and ``spring loading创 abuses have raised questions about whether executives are cashing in (``bullet dodging创) while in possession of potentially damaging material facts that shareholders do not know. Please state whether this is or is not the case with your transaction, and further please inform us whether any other HP officers or directors engaged in similar transactions during this period."

The two Representatives requested a response by Thursday, December 21, 2006.

The HCC's Subcommittee on Oversight and Investigations held two days of hearings on HP and pretexting on September 28 and 29, 2006. On October 4, 2006, the state of California brought felony charges against five persons.

See, related stories in TLJ Daily E-Mail Alert No. 1,462, October 5, 2006.
  California Charges Patricia Dunn and Others With Four Felonies
  Cingular Sues Pretexting Firm Involved in HP Scandal
  Verizon Wireless Files John Doe Complaint Against HP's Pretexters
  HP Discloses Terms of Ann Baskins' Resignation Agreement
  Persons Involved in the HP Scandal
  Bibliography for HP Scandal
See also, related stories in TLJ Daily E-Mail Alert No. 1,463, October 6, 2006.
  Summary of Existing Federal Laws Related to Pretexting
  Federal Criminal Statutes Related to Pretexting
  Civil and Administrative Actions by Federal Agencies Related to Pretexting
  Federal Private Rights of Action Related to Pretexting
  FCC License Revocation, Renewal and Transfer Proceedings

People and Appointments

12/18. Chuck Atkins was named Chief of Staff of the House Science Committee (HSC) for the 110th Congress. Atkins is currently both Rep. Bart Gordon's (D-TN) Chief of Staff and the HSC's Democratic Staff Director. Rep. Gordon will become Chairman of the HSC in the 110th Congress. See, release.

Texas Obtains Permanent Injunction Against Sony BMG

12/19. The State of Texas and Sony BMG Music Entertainment filed an Agreed Final Judgment and Permanent Injunction [34 pages in PDF] with the District Court of Travis County, 126th Judicial District.

Texas sued Sony BMG in late 2005 alleging violation of the Texas Consumer Protection Against Consumer Spyware Act and the Texas Deceptive Trade Practices-Consumer Protection Act in connection with Sony BMG's sale of music CDs that install software on purchasers' computers, without notice to purchasers. Some of this software is related to content protection. However, it also degraded the consumers' PC performance, and exposed PCs to certain virus threats, without disclosure to consumers.

See also, story titled "Texas Sues Sony BMG Alleging Violation of Texas Spyware Statute" in TLJ Daily E-Mail Alert No. 1,258, November 22, 2005, and story titled "Texas Amends Spyware Complaint Against Sony BMG" in TLJ Daily E-Mail Alert No. 1,280, December 29, 2005.

Greg Abbott, the Attorney General of Texas, stated in a release that "Texans deserve to be protected from harmful, hidden files that threaten their privacy or the integrity of their computer systems ... Our first-in-the-nation action against Sony BMG shows that consumer privacy will be vigorously protected. Today抯 settlement removes harmful products from the marketplace, compensates consumers for any harm they have suffered, and sets best practices that we hope will lead to reforms across the industry."

This release states that in 2005 Sony BMG distributed "millions of copies" of 52 CDs with the copy protection technology at issue in the action. The titles are listed in an appendix to the Judgment. Texas' release states that "When consumers inserted the discs into their computers, a pop-up window prompted them to enter into a licensing agreement consenting to the installation of a proprietary audio player. Sony BMG represented that accepting the agreement was the only way a consumer could listen to its CDs on a computer."

However, the release states, during installation, "the software also installed components of its XCP technology in Microsoft Windows folders. When these files are downloaded onto a computer, they ``cloak创 or hide themselves, making it almost impossible for a consumer to detect and remove them. The cloaking technique used by XCP and MediaMax undermines the computer抯 data integrity by rendering it more susceptible to hackers."

The Judgment provides that "SONY BMG shall not manufacture, distribute, or otherwise place into the stream of commerce any CD containing DRM or other software, designed for installation on the hard drive of the user's computer, that employs any technology or any method to hide or cloak any files, directories, or registry entries in such a manner that a user cannot locate them through standard and ordinary methods available on the computer operating system."

It further provides that "On future CDs that SONY BMG manufactures, distributes, or otherwise places in the stream of commerce, SONY BMG shall not include DRM software that is downloaded or copied to the hard drive unless the software" complies with conditions enumerated in the Judgment.

It further provides that "SONY BMG shall not manufacture, distribute, or otherwise place into the stream of commerce CDs containing XCP software".

It further provides that "SONY BMG shall not manufacture any additional CDs containing MediaMax software" and that "As to existing MediaMax CDs currently in wholesale stock, SONY BMG shall destroy such CDs."

This judgment also provides for restitution to consumers computers damaged by Sony BMG. The judgment also provides that Sony BMG must pay $750,000 to Texas.

This case is State of Texas v. Sony BMG Music Entertainment LLC, District Court of Travis County, 126th Judicial District, Texas, No. GV505065.

Also, on November 27, the Copyright Office (CO) concluded its third triennial rulemaking proceeding to designate exemptions to the anti-circumvention provisions of the Digital Millennium Copyright Act (DMCA). One of these exemptions is relevant to this proceeding.

The Copyright Office's new rule creates an exemption for any "Sound recordings, and audiovisual works associated with those sound recordings, distributed in compact disc format and protected by technological protection measures that control access to lawfully purchased works and create or exploit security flaws or vulnerabilities that compromise the security of personal computers, when circumvention is accomplished solely for the purpose of good faith testing, investigating, or correcting such security flaws or vulnerabilities."

The CO published a notice in the Federal Register (FR) that announces, describes, recites, and sets effective dates, for this rule. It remains in effect until October 27, 2009. See, FR, November 27, 2006, Vol. 71, No. 227, at Pages 68472-68480. See also, story titled "Copyright Office Releases DMCA Anti-Circumvention Exemptions" in TLJ Daily E-Mail Alert No. 1,494, November 27, 2006.

Washington Tech Calendar
New items are highlighted in red.
Tuesday, December 19

The House and Senate will next meet at 12:00 NOON on Tuesday, January 4, 2007. See, HConRes 503.

10:00 AM. Kyle McSlarrow, head of the National Cable & Telecommunications Association (NCTA) will hold a "Media teleconference to highlight cable's 2006 public policy activities". The dial in number is 1-888-384-9090. The passcode is 210074. Press contact: Rob Stoddard or Brian Dietz at 202-222-2350.

TIME CHANGE. 1:00 - 4:00 PM. 9:00 AM - 1:00 PM. The President's National Security Telecommunications Advisory Committee (NSTAC) will hold a partially closed meeting. At 1:00 PM  11:00 AM - 1:00 PM, the NSTAC will meet in public to receive comments from government agencies, to discuss the work of the NSTAC's Emergency Communications and Interoperability Task Force (ECITF), and to discuss the work of the Telecommunications and Electric Power Interdependency Task Force (TEPITF). At 3:00 PM 9:00 AM - 11:00 PM, the NSTAC will meet in secret to discuss the Global Infrastructure Resiliency (GIR) Report. See, original notice in the Federal Register, December 4, 2006, Vol. 71, No. 232, at Pages 70413, and revised notice in the Federal Register, December 18, 2006, Vol. 71, No. 242, at Page 75764. Location: U.S. Chamber of Commerce, 1615 H St., NW.

2:30 - 4:30 PM. The Department of Labor's Labor Advisory Committee for Trade Negotiations and Trade Policy will hold a meeting. See, notice in the Federal Register: December 15, 2006, Vol. 71, No. 241, at Page 75584. Location: USTR Annex Building, Rooms 1 and 2, 1724 F St., NW.

5:00 - 7:00 PM. The Free Press will host a party to promote the book titled "The Case Against Media Consolidation: Evidence on Concentration, Localism and Diversity" [no Amazon listing]. The book is an anthology of essays by Larry Blosser, Mark Cooper, Steven Cooper, Marjorie Heins, Jeannine Kenney, Gene Kimmelman, Glenn Manishin, Philip Napoli, Ben Scott and Derek Turner, advocating government regulation of media. RSVP to Jen Howard at 202-265-1490 x22 or jhoward at freepress dot net. Location: Free Press, 1st Floor Conference Room, 501 3rd Street, NW.

Wednesday, December 20

RESCHEDULED FROM DECEMBER 14. 9:30 AM. The Federal Communications Commission (FCC) will hold a meeting. See, agenda [PDF]. The event will be webcast by the FCC. Location: FCC, 445 12th Street, SW, Room TW-C05 (Commission Meeting Room).

Deadline to submit initial comments to the Federal Communications Commission (FCC) regarding the petition for declaratory ruling filed by One Stop Financial, Inc., Group Discounts, Inc., 800 Discounts, Inc., and Winback & Conserve Program, Inc. pertaining to the AT&T tariff at issue, and "any other issues left open by the D.C. Circuit抯 Opinion in AT&T Corp. v. FCC", 394 F.3d 933. This proceeding is WC Docket No. 06-210. See, FCC Public Notice [3 pages in PDF] (DA 06-2360).

Thursday, December 21

10:00 AM. The Federal Communications Commission's (FCC) Advisory Committee on Diversity for Communications in the Digital Age will meet. See, notice in the Federal Register: December 6, 2006, Vol. 71, No. 234, Page 70766. Location: FCC, Room 7-C753, 445 12th St., SW.

EXTENDED TO JANUARY 16. Extended 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 also, original notice in the Federal Register, August 9, 2006, Vol. 71, No. 153, at Pages 45511-45515, order [PDF] extending deadlines, and order [PDF] further extending reply comment deadline.

Friday, December 22

Deadline to submit comments to the National Institute of Standards and Technology's (NIST) Computer Security Division regarding its Draft Special Publication 800-82 [164 pages in PDF], titled "Guide to Supervisory Control and Data Acquisition (SCADA) and Industrial Control Systems Security".

Deadline to submit reply comments to the Federal Communications Commission (FCC) on the Supporters of the Missoula Plan's proposed interim process to address phantom traffic issues. See, FCC Public Notice [PDF] (DA 06-2294).

5:00 PM. Deadline to submit requests to the Department of Commerce's (DOC) Bureau of Industry and Security's (BIS) Deemed Export Advisory Committee (DEAC) to speak at the DEAC's meeting of January 22-23, 2007, in Santa Clara, California. See, notice in the Federal Register, December 11, 2006, Vol. 71, No. 237, Page 71508-71509.

Monday, December 25

Christmas.

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

Tuesday, December 26

Deadline to submit reply comments to the Federal Communications Commission (FCC) regarding the National Aeronautics and Space Administration's (NASA) request for a waiver of the FCC's Calling Party Number rules. This proceeding is CC Docket No. 91-281. See, notice in the Federal Register, November 29, 2006, Vol. 71, No. 229, at Pages 69094-69096.

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