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December 20, 2006, Alert No. 1,509.
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Bush Signs Bill Extending R&D Tax Credit

12/20. President Bush signed HR 6111, the "Tax Relief and Health Care Act of 2006". This bill expands, and briefly extends, but does not make permanent, the research and development (R&D) tax credit.

See, story titled "Congress Extends R&D Tax Credit" in TLJ Daily E-Mail Alert No. 1,504, December 13, 2006.

President Bush spoke at a signing ceremony in the Eisenhower Building, adjacent to the White House. He said that "to keep our nation leading the world in technology and innovation, we're extending and modernizing the research and development tax credit. By allowing businesses to deduct part of their R&D investments from their taxes, this bill will continue to encourage American companies to pursue innovative products, medicines, and technologies."

The R&D Credit Coalition stated in a release that it "will continue to work to make this strengthened R&D tax credit a permanent part of the tax code so that businesses will be able to plan and invest in U.S.-based R&D with certainty well into the future."

The R&D tax credit now extends until December 31, 2007. Congress and the President continuously extend this credit. This facilitates the use of fiscal smoke and mirrors. Companies have the credit in the short run, and a reasonable expectation that it will be extended in the long run. However, the Congress and President can continuously make revenue and deficit projections based upon the fictitious assumption that tax revenues will increase as soon as the current credit expires.

These short extensions also keep many large corporations in a perpetual state of solicitude towards the Congress and the President, a status which many political actors find useful for fundraising and other political purposes.

1st Circuit Addresses Copyright Preemption

12/15. The U.S. Court of Appeals (1stCir) issued its opinion in Santa Rosa v. Combo Records, a music recording contract rescission case involving Copyright Act preemption. The Court of Appeals affirmed the judgment of the District Court, which dismissed a musician's complaint against his record company. The Court of Appeals held that a claim to rescind a music recording contract is preempted by the Copyright Act. It did not address whether an action to collect damages would be preempted.

Gilberto Santa Rosa [Amazon] is a salsa singer and band leader. Combo Records is a record production company that produced and distributed several music albums of songs sung by Santa Rosa from 1986 through 1989.

Santa Rosa filed a complaint in 2004 in U.S. District Court (DPR) against Combo and others seeking rescission of a contract based on material breach, damages for unjust enrichment, a declaratory judgment of ownership of the recordings, and a declaratory judgment of violation of the Lanham Act. The District Court dismissed the complaint with prejudice.

Santa Rosa brought the present appeal. The Court of Appeals held that the claim for rescission is preempted by the Copyright Act.

17 U.S.C. § 301(a) provides, in part, that "all legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright ... are governed exclusively by this title. Thereafter, no person is entitled to any such right or equivalent right in any such work under the common law or statutes of any State."

The Court of Appeals reasoned that "Because Santa Rosa seeks rescission of his contract, if we were to grant him the relief that he sought, we would be required to determine his ownership rights by reference to the Copyright Act."

The Court of Appeals, relying on Data Gen. Corp. v. Grumman Sys. Support Corp., 36 F.3d 1147 (1st Cir. 1994), continued that "In such a case, there is little question that we would be merely determining whether Santa Rosa was entitled to compensation because of "mere copying" or "performance, distribution or display" of his recordings."

It concluded, therefore, that Section 301 "preempts Santa Rosa's rescission claim. Once it is determined that Santa Rosa's rescission claim is preempted, his only remedy is a claim under the Copyright Act ..."

The Court of Appeals then held that Santa Rosa's claim under the Copyright Act is barred by limitation.

17 U.S.C. § 507(b) provides that "No civil action shall be maintained under the provisions of this title unless it is commenced within three years after the claim accrued."

The Court of Appeals wrote that a claim for declaratory judgment of ownership accrues when the plaintiff knew of the alleged grounds for the ownership claim, which in the present case was "as soon as he finished recording each album". This was more than three years before the filing of the complaint.

This case is Gilberto Santa Rosa v. Combo Records, et al., U.S. Court of Appeals for the 1st Circuit, App. Ct. No.05-2237, an appeal from the U.S. District Court for the District of Puerto Rico, Judge Jay García-Gregory presiding. Judge Torruella issued the opinion of the Court of Appeals, in which Judges Baldock and Stahl joined.

1st Circuit Addresses Probative and Substantial Similarity in Copyright Infringement Case

12/15. The U.S. Court of Appeals (1stCir) issued its opinion in  Quaglia v. Bravo Networks, a copyright infringement case involving television programs. The Court of Appeals affirmed the summary judgment of the District Court for the defendant. The key section of the opinion addresses probative and substantial similarity.

Frank Quaglia is the creator and copyright holder of the film titled "The Ultimate Audition". The Bravo Network and others made a series of television programs titled "The It Factor".

Quaglia filed a complaint in U.S. District Court (DMass) against Bravo and others alleging copyright infringement, breach of confidentiality and breach of implied contract. The District Court granted summary judgment to the Bravo Network.

The Court of Appeals affirmed. It wrote that to prevail on a claim of copyright infringement, a plaintiff must demonstrate ownership of a valid copyright, and copying of constituent elements of the work that are original. The parties did not dispute Quaglia's copyright ownership. However, copying was at issue.

The Court of Appeals stated that "Since there is usually no evidence of actual copying, a plaintiff may prove that wrongful copying occurred by showing that defendants had access to the copyrighted work and that the allegedly infringing work has ``probative similarity´´ to the copyrighted work."

The Court of Appeals continued that probative similarity exists where two works are "so similar that the court may infer that there was factual copying." Then, the plaintiff must prove that the copying of the copyrighted work was so extensive that it rendered the infringing and copyrighted works substantially similar.

The Court of Appeals concluded that "Quaglia's claim fails on the issue of probative and substantial similarity. After viewing both works, we conclude that, essentially for the reasons stated by the district court in its March 21, 2006, opinion, no reasonable juror could find substantial similarity of expression, even taking the evidence in the light most favorable to plaintiff. To the extent that there are similarities, many of them relate to stock characters and scènes à faire, which are not subject to copyright protection."

The Court of Appeals held that it was appropriate to grant summary judgment. It also affirmed the summary judgment as to the remaining issues, with little discussion.

This case is Frank Quaglia v. Bravo Networks, et al., U.S. Court of Appeals for the 1st Circuit, App. Ct. No. 06-1864, an appeal from the U.S. District Court for the District of Massachusetts, Judge Rya Zobel presiding. The Court of Appeals issued a per curiam opinion by Judges Torruella, Selya and Howard.

People and Appointments

12/20. Howard Waltzman will join the law firm of Mayer Brown Rowe & Maw. He is currently chief counsel of the House Commerce Committee's (HCC) Subcommittee on Telecommunications and the Internet. Before joining the HCC, he was general counsel to Sen. Sam Brownback (R-KS). The HCC stated in a release that Waltzman "authored numerous communications laws, including the Auction Reform Act, the Commercial Spectrum Enhancement Act and the Digital Television Transition and Public Safety Act" and that he "was also the architect of Energy and Commerce Committee's recent telecommunications reform legislation, the Communications Opportunity, Promotion, and Enhancement Act", which was approved by the House, but not the Senate.

More News

12/20. The Copyright Office published a notice in the Federal Register announcing receipt of a notice of intent to audit 2005 statements of account concerning the eligible nonsubscription transmissions of sound recordings made by under statutory licenses. See, Federal Register, December 20, 2006, Vol. 71, No. 244, at Pages 76375-76376.

12/20. A grand jury of the U.S. District Court (SDFl) returned a ten count indictment that charges Christian Sapsizian, a former Alcatel CIT executive, with, among other things, conspiring to make over $2.5 Million in bribe payments to officials of the government of Costa Rica to obtain a telecommunications contract, in violation of the Foreign Corrupt Practices Act (FCPA), which is codified at 15 U.S.C. § 78dd-1. See, Department of Justice (DOJ) release.

12/13. The Progress and Freedom Foundation (PFF) published a paper titled "Solutions for Software Patents: Notes From Under My Desk". The author is the PFF's Solveig Singleton.

DHS Officials Defend Automated Targeting System

12/19. Stewart Baker, the Department of Homeland Security's (DHS) Assistant Secretary for Policy, gave a speech in Washington DC on December 19, 2006, in which he defended the DHS's program titled "Automated Targeting System", or "ATS".

He said that the ATS has the "capacity to find hidden links".

Baker said that "the border is our last, best chance to identify and turn away terrorists. Once they're in the country, they're much harder to find and much harder to stop. We need the best possible information on the hundreds of millions of people who cross the border every year. ATS helps us marshal that information. It helps us protect Americans from terrorism".

He did not disclose new details about the program. He described an ATS program that is narrower than the same ATS program described by the DHS in a recent Privacy Act notice in the Federal Register. See, Federal Register, November 2, 2006, Vol. 71, No. 212, at Pages 64543-64546, and story titled "DHS Discloses Some Details of Electronic Database of Personal Information" in TLJ Daily E-Mail Alert No. 1,497, December 1, 2006.

Baker stated that "There are calls to abolish it or restrict how DHS uses it. Those calls are wrong".

Sen. Patrick Leahy (D-VT), who will become Chairman of the Senate Judiciary Committee in the 110th Congress, has spoken harsh words about the ATS. He said at a hearing on December 7, 2006, that the Bush administration "has been compiling secret dossiers on millions of unwitting, law-abiding Americans who travel across our borders".

Sen. Leahy added that "It is simply incredible that the Administration is willing to share this sensitive information with foreign governments and even private employers, while refusing to allow U.S. citizens to see or challenge the so-called terror score that the government has assigned them based on their travel habits and schedules." See, story titled "FBI Director Mueller Testifies Before Senate Judiciary Committee" in TLJ Daily E-Mail Alert No. 1,500, December 7, 2006.

See also, Cato Institute paper [12 pages in PDF] titled "Effective Counterterrorism and the Limited Role of Predictive Data Mining", and story titled "Cato Paper Criticizes Use of Predictive Data Mining to Fight Terrorism" in TLJ Daily E-Mail Alert No. 1,503, December 12, 2006.

Baker began his speech by stating that a person who later proved to be a terrorist was denied entry to the US at Chicago O'Hare Airport because "data in the DHS computer system flagged him as someone who ought to get a bit more scrutiny than the usual passenger".

He also offered a cursory explanation of the program: "Here's how it works. When people buy plane tickets, they give the airline some information -- names, passport numbers, frequent-flyer numbers, credit cards, and so on. DHS collects this information from the airlines and uses ATS to do screening for dangerous people. ATS runs the travelers' names against lists of known or suspected terrorists. It can also do a quick link analysis, looking for travelers who gave the airline a phone number that's also used by a known terrorist."

Baker also argued that "ATS does not pose a threat to privacy. First, ATS is not exactly a dossier of our most intimate secrets. It contains travel reservation data -- flight numbers and destinations and traveling companions. Travelers have already chosen to give it to" their airline.

Baker also said that the 9/11 Commission recommended this program, and that the Congress has been appropriating funds for it.

In addition, Michael Chertoff, Secretary of Homeland Security, gave a speech on December 14, 2006, in which he touched on this program, among other topics.

He said that "Having the ability to collect and analyze this kind of targeting information was one of the principal recommendations of the 9/11 Commission".

"Now, of late, people have seemed to take notice of this". Chertoff continued that "they've raised concerns that somehow by looking at things like the credit card used to buy a ticket, or the contact number, that were violating privacy laws, or were violating constitutional rights. My answer is, far from it. What we are doing is a sensible, totally constitutional and privacy right-respecting effort to make sure that we don't inconvenience the rights of most travelers, so that we can focus more sensibly and in a more risk-managed fashion on those people that do potentially pose a threat."

Washington Tech Calendar
New items are highlighted in red.
Wednesday, December 20

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

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’s 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

11:00 AM - 12:30 PM. The National Science Board Commission on 21st Century Education in Science, Technology, Engineering, and Mathematics will hold a meeting. See, notice in the Federal Register, December 20, 2006, Vol. 71, No. 244, at Page 76376. Location: Room 1235, National Science Foundation, Arlington, VA.

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


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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