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December 18, 2010, 9:30 AM, Alert No. 2,182.
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Tax Bill Enacted With R&D Tax Credit Extension

12/16. The Senate passed HR 4853 [LOC | WW], the vehicle for extending certain expiring tax provisions, including the research and development tax credit, on December 15, 2010. The House passed this bill without amendment on December 16, 2010. President Obama signed it on December 17.

This bill includes temporary extensions for the research and development (R&D) tax credit, small business expensing of computer software, the charitable deduction for corporate contributions of computer inventory, and the special expensing rules for certain film and television productions.

It also includes extensions of Bush administration tax cuts.

Section 731 of this huge bill extends the R&D tax credit for two years. This credit, which expired on December 31, 2009, is codified at 26 U.S.C. 41. For decades the Congress has not enacted a permanent R&D tax credit. Rather, it has enacted a series of short term credits, often after the expiration of the previous credit provision.

The bill states that "Subparagraph (B) of section 41(h)(1) is amended by striking `December 31, 2009 and inserting `December 31, 2011."

The bill also states that "The amendments made by this section shall apply to amounts paid or incurred after December 31, 2009." It applies retroactively.

This bill does nothing to revise or expand the R&D credit.

Section 402 of this bill extends the provision allowing for small business expensing of computer software for one year. This provision is codified at 26 U.S.C. 179. The bill states that "Computer Software--Section 179(d)(1)(A)(ii) is amended by striking `2012 and inserting `2013."

Section 742 of this bill extends the special provisions for contributions of computer technology and equipment for educational purposes for one year, to December 31, 2010. These provisions are codified at 26 U.S.C. 170(e)(6). The bill states that "Subparagraph (G) of section 170(e)(6) is amended by striking `December 31, 2009 and inserting `December 31, 2011."

Section 744 of this bill extends the special expensing provisions for certain film and television productions for one year, to December 31, 2010. This provision is codified at 26 U.S.C. 181. The bill states that "Subsection (f) of section 181 is amended by striking `December 31, 2009 and inserting `December 31, 2011."

Walter McCormick, head of the US Telecom, stated in a release that "We congratulate Congress and the White House on passing tax legislation that will help to maintain the predictable environment necessary for economic growth. We are particularly pleased that the final legislation maintains the linkage between dividends and capital gains at low rates, which will help attract the capital needed to sustain continued deployment of broadband infrastructure throughout the nation. The bill will also encourage broadband investment and preserve jobs through its provisions for capital expensing and extension of the R&D tax credit, and its protection of small, family-owned businesses from unreasonable estate taxes."

The National Association of Manufacturers (NAM) stated in a release that "Manufacturers are pleased ... The NAM has been a leader in advocating for these tax extensions, including the R&D credit ..."

House Republicans Urge Genachowski to Put His Unseen BIAS Rules Out for Comment

12/16. Rep. Fred Upton (R-MI), Rep. Greg Walden (R-OR), and Rep. Lee Terry (R-IA) sent a letter to Federal Communications Commission (FCC) Chairman Julius Genachowski urging him to release his proposed rules for broadband internet access service (BIAS), and solicit public comments, before adopting them. See also, Rep. Upton's release.

The three have been selected to be the Chairman of the House Commerce Committee (HCC), Chairman of the HCC's Subcommittee on Communications and Technology (SCT), and Vice Chairman of the HCC's SCT, respectively, in the 112th Congress.

They wrote to "ask that you release the full text of your draft order regulating the Internet". They stated that "the public has not had a realistic and fulsome chance to analyze and comment on the proposal as it now stands".

The three also described the proposed rules as "a moving target", and "likely the most controversial item the FCC has had before it in at least a decade."

They concluded that "The best course of action would be to put the item out for a short comment cycle or to at least give parties an opportunity to meet with the agency and submit feedback on the text of the draft through the ex parte process."

FCC Shuts Down Its Web Site Just Before BIAS Rules Meeting

12/17. The Federal Communications Commission (FCC) shut down its web site on Friday, December 17, 2010. It announced in a release that it will reopen on Monday, December 20.

The FCC is scheduled to adopt a yet to be released order that contains regulations for broadband internet access service (BIAS) on Tuesday, December 21.

The FCC's web site shut down prevents the FCC from making available during the shutdown period the recently filed notice of ex parte communications in its BIAS regulation proceeding. The shut down also prevents interested persons from accessing any comments or notice of ex parte communications in this or other proceedings.

9th Circuit Affirms Dismissal of Data Breach Case Where Data Had Not Been Misused

12/14. The U.S. Court of Appeals (9thCir) issued a for publication opinion [9 pages in PDF] and a not for publication opinion [5 pages in PDF] in Krottner v. Starbucks, a case regarding data breaches.

The two opinions, taken together, hold that in an action for negligence and breach of implied contract (state law claims) based upon a data breach, when the complaint alleges no misuse of the data, but increased risk of identity theft, the plaintiffs have standing under Article III of the Constitution, but have not pled a cognizable claim under Washington state law.

Starbucks lost a laptop computer that contained the unencrypted names, addresses, and social security numbers of approximately 97,000 Starbucks employees. However, none of that data has been misused. Krottner and other plaintiffs are current or former employees of Starbucks. Nevertheless, the plaintiffs asserted that they face increased risk of identity theft.

They filed complaints in the U.S. District Court (WDWash) against Starbucks alleging negligence and breach of implied contract. The District Court dismissed. It held that the plaintiffs have standing under Article III but had failed to allege a cognizable injury under Washington law. The plaintiffs appealed.

The published opinion only addresses the issue of standing. The Court of Appeals affirmed on that issue. It held that plaintiffs whose personal information has been stolen but not misused have suffered an injury sufficient to confer standing under Article III, Section 2 of the U.S. Constitution.

The unpublished opinion affirmed the dismissal of the state law claims of negligence and breach of implied contract for failure to state a cognizable claim. Under Washington law, a negligence cause of action includes actual loss or damage, and not the mere danger of future harm. Also, the plaintiffs did not adequately plead the existence of an implied contract under Washington law.

This case is Laura Krottner, et al. v. Starbucks Corporation, U.S. Court of Appeals for the 9th Circuit, App. Ct. No. No. 09-35823, an appeal from the U.S. District Court for the Western District of Washington, Judge Richard Jones presiding, D.C. No. 2:09-cv-00216-RAJ. Judge Milan Smith wrote the opinion of the Court of Appeals, in which Judges Alex Kozinski and Sidney Thomas joined.

Copyright Royalty Judges Release Webcasting III Order

12/14. The Library of Congress's (LOC) Copyright Royalty Judges (CRJ) issued their Initial Determination of Rates and Fees [137 pages in PDF] in their proceeding titled "In the Matter of Digital Performance Right in Sound Recordings and Ephemeral Recordings".

This is the CRJ's Webcasting III order, setting the sound recordings compulsory license rates for commercial and non-commercial webcasters for the term January 1, 2011, through December 31, 2015.

The CRJ initiated this proceeding on January 5, 2010. See, notice in the Federal Register, January 5, 2009, Vol. 74, No. 2, at Pages 318-319.

For commercial webcasters, this order sets an upfront annual minimum fee of $500 per station or channel. Also, "For the five-year period beginning 2011, the per play rate applicable to each year of the license for Commercial Webcasters is: $0.0019 for 2011, $0.0021 for 2012, $0.0021 for 2013, $0.0023 for 2014 and $0.0023 for 2015."

The SoundExchange is a performance rights organization that collects statutory royalties from satellite radio, internet radio, cable TV music channels and other platforms for streaming sound recordings. See, its summary of the new rates.

Lee Knife, is head of the Digital Media Association (DiMA), whose members include Amazon, Apple, Live365, Microsoft, RealNetworks, Rhapsody, Slacker, YouTube, and others.

He stated in a release that "DiMA and our member companies are pleased that the Copyright Royalty Board did not adopt the extremely high rates proposed by SoundExchange. Over the past 10 years, webcasters have experienced a near three-fold increase in the rate they pay SoundExchange for use of sound recordings. These dramatic increases have made it difficult for many webcasters to continue delivering the innovative services that millions of Internet radio fans have come to rely on."

However, he continued that "We remain dissatisfied with the process used for setting Internet radio royalty rates, which are by law based on marketplace deals. Under current rules, SoundExchange was able to unilaterally prevent the Board from considering numerous agreements -- negotiated by SoundExchange itself -- that contained rates that more fairly reflected the needs of both RIAA member companies and webcasters to operate in a reasonable business environment."

He added that "We are hopeful that in 2011 Congress will address problems in the rate-setting structure, and ultimately develop a system that enables all music radio services -- internet, cable and satellite to operate and pay royalties according to the same standard, applied under a fair set of rules."

Republicans Assigned to House Judiciary Committee

12/15. Nine additional Republicans were assigned to the House Judiciary Committee (HJC) for the 112th Congress. Most are new members.

  • Rep. elect Sandy Adams (R-FL).
  • Rep. elect Steve Chabot (R-OH). Rep. Chabot previously served on the HJC. He was defeated in the 2008 election, but won his seat back in the November 2, 2010, election.
  • Rep. elect Tim Griffin (R-AR).
  • Rep. elect Trey Gowdy (R-SC).
  • Rep. elect Tom Marino (R-PA).
  • Rep. Mike Pence (R-IN). Rep. Pence previously served on the HJC. He is also a former journalist. Moreover, he has been active in sponsoring legislation to protect journalists, and promote the free flow of information. He is likely to be involved in efforts to revise the Espionage Act, to address internet based dissemination, such as by WikiLeaks.
  • Rep. elect Ben Quayle (R-AZ), son of former Representative, Senator, and Vice President Dan Quayle, was elected to the seat currently held by the retiring Rep. John Shadegg (R-AZ).
  • Rep. Tom Reed (R-NY). He was first elected on November 2, and promptly sworn to office, because his was a special election to fill the seat of former Rep. Eric Massa (D-NY), who had resigned. Rep. Reed stated in a release that "Protection of intellectual property being developed by various manufacturing companies in the district is an additional area of focus for Reed on Judiciary". Rep. Reed represents the seat long held by former Rep. Ammo Houghton (R-NY).
  • Rep. elect Dennis Ross (R-FL).

See, HJC release of December 15. Rep. Lamar Smith (R-TX), who will be the Chairman of the HJC, stated in this release that the HJC "will focus on efforts to strengthen national security, protect intellectual property, prevent frivolous lawsuits and keep children safe from Internet sex predators".

The HJC may consider legislation in the 112th Congress on numerous technology related topics, such as:

  • extending the sunsets on expiring provisions of surveillance law
  • reforming the Electronic Communications Privacy Act (ECPA)
  • revising the Patent Act, either with a comprehensive bill, or by individual topic
  • revising the fee and funding mechanisms for the U.S. Patent and Trademark Office (USPTO)
  • revising the Espionage Act to address activities of entities such as WikiLeaks
  • revising copyright law to give the Department of Justice (DOJ) increased authority to seize domain names and obtain injunctive relief against financial and other intermediaries of online businesses dedicated to infringing activities
  • revising copyright law with a performance rights act

The HJC may also be involved in oversight of federal agencies in numerous technology related areas, such as:

  • overseeing the surveillance activities of the Federal Bureau of Investigation
  • overseeing the activities and operations of the USPTO and Copyright Office, and the intellectual property enforcement activities of the DOJ, Department of Homeland Security, and other agencies
  • overseeing the antitrust merger review activities of the Department of Justice's (DOJ) Antitrust Division and the Federal Trade Commission (FTC) in information and communications technology (ICT) related transactions
  • overseeing the DOJ's implementation of the Americans with Disabilities Act (ADA) in the context of ICT (the DOJ is currently writing rules)
In This Issue
This issue contains the following items:
  Tax Bill Enacted With R&D Tax Credit Extension
  House Republicans Urge Genachowski to Put His Unseen BIAS Rules Out for Comment
  FCC Shuts Down Its Web Site Just Before BIAS Rules Meeting
  9th Circuit Affirms Dismissal of Data Breach Case Where Data Had Not Been Misused
  Copyright Royalty Judges Release Webcasting III Order
  Republicans Assigned to House Judiciary Committee
  Republicans Assigned to House Intelligence Committee
  Republicans Assigned to House Ways and Means Committee
  Republicans Assigned to House Oversight and Government Reform Committee
  More Capitol Hill Appointments
  Senate Confirms Four Judicial Nominees
Washington Tech Calendar
New items are highlighted in red.
Saturday, December 18

The House will not meet.

The Senate will meet at 9:00 AM.

Monday, December 20

The House will not meet.

EXTENDED TO JANUARY 31. Deadline to submit initial comments to the Library of Congress's (LOC) Copyright Office (CO) in response to its Notice of Inquiry (NOI) regarding federal coverage of sound recordings fixed before February 15, 1972. See, notice in the Federal Register, November 3, 2010, Vol. 75, No. 212, at Pages 67777-67781. This proceeding is LOC Docket No. 2010-4. See also, story titled "Library of Congress Issues NOI on Extending Copyright Act to Pre 1972 Sound Recordings" in TLJ Daily E-Mail Alert No. 2,150, November 8, 2010. See also, extension notice in the Federal Register, December 1, 2010, Vol. 75, No. 230, at Pages 74749-74750.

Tuesday, December 21

The House will meet at 10:00 AM for legislative business. The House might take up HR 5116 [LOC | WW], the "America COMPETES Reauthorization Act of 2010" and/or HR 3082 [LOC | WW], an omnibus appropriations bill.

10:30 AM. The Federal Communications Commission (FCC) will hold an event titled "open meeting". The agenda [PDF] includes adoption of two items: broadband internet access service (BIAS) rules and a 911 notice of inquiry (NOI). See, story titled "FCC Releases Agenda for December 21 Meeting" in TLJ Daily E-Mail Alert No. 2,179, December 15, 2010. Location: FCC, Commission Meeting Room, 445 12th St., SW.

12:00 NOON - 2:00 PM. The DC Bar Association will host an event titled "False Patent Marking: Now What?". The speakers will be Elizabeth Winston (Catholic University law school), Robert Shaffer (Finnegan), Maureen Browne (Covington & Burling). See, 35 U.S.C. 292, regarding false marking. See also, the December 28, 2009, opinion [16 pages in PDF] of the U.S. Court of Appeals (FedCir) in The Forest Group, Inc. v. Bon Tool Company construing Section 292. See also, HR 4954 [LOC | WW]], an untitled bill, and HR 6352 [LOC | WW], the "Patent Lawsuit Reform Act of 2010"; both would amend Section 292; the House has passed neither. And see, story titled "Representatives Introduce Bill to Amend Patent Act Regarding Remedies for False Markings" in TLJ Daily E-Mail Alert No. 2,067, March 30, 2010. The price to attend ranges from $40 to $55. For more information, contact 202-626-3463. See, notice. Location: DC Bar Conference Center, B-1 Level, 1250 H St., NW.

Wednesday, December 22

No events listed.

Thursday, December 23

No events listed.

Friday, December 24

Christmas Day (observed). This is a federal holiday. See, Office of Personnel Management's (OPM) web page titled "2010 Federal Holidays".

Monday, December 27

Deadline to submit initial comments to the Federal Communications Commission (FCC) in response to its notice of proposed rulemaking (NPRM) regarding regulating the billing and notice practices of mobile service providers. The FCC adopted and released this NPRM on October 14, 2010. It is FCC 10-180 in CG Docket Nos. 10-207 and 09-158. See, notice in the Federal Register, November 26, 2010, Vol. 75, No. 227, at Pages 72773-72777. See also, story titled "FCC Adopts Bill Shock NPRM" in TLJ Daily E-Mail Alert No. 2,142, October 19, 2010.

Deadline to submit comments to the Copyright Office (CO) in response to its notice of proposed rulemaking (NPRM) regarding notices of termination of certain grants of transfers and licenses of copyright under 17 U.S.C. 203. See, notice in the Federal Register, November 26, 2010, Vol. 75, No. 227, at Pages 72771-72773.

Deadline to submit comments to the Department of Transportation's (DOT) Intelligent Transportation Systems Program Advisory Committee (ITSPAC) in advance of its meeting on January 6-7, 2011, in Oakland, California. See, notice in the Federal Register, December 14, 2010, Vol. 75, No. 239, at  Page 77955.

Republicans Assigned to House Intelligence Committee

12/17. Six additional Republicans were assigned to the House Intelligence Committee (HIC) for the 112th Congress. See, Rep. Boehner's release. The returning Republican members will be:

  • Rep. Mike Rogers (R-MI), Chairman.
  • Rep. Mac Thornberry (R-TX).
  • Rep. Sue Myrick (R-NC).
  • Rep. Jeff Miller (R-FL).
  • Rep. Mike Conaway (R-TX).
  • Rep. Peter King (R-NY).

The new Republican members will be:

The HIC has jurisdiction over intelligence authorization bills and amendments to the Foreign Intelligence Surveillance Act (FISA), including matters relating to wiretaps, seizure of e-mail and stored data, and other technology related issues.

Three surveillance provisions of the FISA expire on February 28, 2011: (1) roving wiretap order authority, (2) FISA surveillance of individuals, and (3) easy access under FISA to business records, including library, phone, ISP and other business records. Hence, the Congress is likely to take up extension legislation as soon as the 112th Congress meets in January.

See also, HR 6429 [ LOC | WW], a bill that would simply extend the three sunsets for one more year. And see, story titled "Rep. Hoekstra Introduces Bill to Extend Sunset Date for Three FISA Surveillance Provisions" in TLJ Daily E-Mail Alert No. 2,160, November 19, 2010.

The HIC also oversees the intelligence activities and operations of numerous federal agencies, including the National Security Agency (NSA), as well as the Foreign Intelligence Surveillance Court and the Foreign Intelligence Surveillance Court of Review.

Rep. Rogers, the incoming Chairman, is a former FBI agent. The members of the HIC and Senate Intelligence Committee (SIC) are more focused than the members of the Judiciary Committees on providing the intelligence agencies with authority and tools to conduct their activities. In contrast, the member of the Judiciary Committees are more focused than the members of the Intelligence Committees on defending the Constitution and protecting privacy and liberty interests in the context of government surveillance.

The members of both sets of committees become involved in surveillance related debates.

Rep. Rogers stated in a release on December 15 that he will "provide our nation's intelligence professionals with the tools and support they need. It is a great honor to serve with the brave men and women of the intelligence community who work every day around the globe to keep America safe from terrorists and foreign nations who seek to harm America and her interests."

Republicans Assigned to House Ways and Means Committee

12/9. Rep. Dave Camp (R-MI), who will be the Chairman of the House Ways and Means Committee for the 112th Congress, announced in a release that ten additional Republicans will be assigned to the HWMC:

The HWMC has jurisdiction over trade related matters.

Republicans Assigned to House Oversight and Government Reform Committee

12/17. Rep. Darrell Issa (R-CA), who will be the Chairman for the House Oversight and Government Reform Committee (HOGRC) in the 112th Congress, named Rep. Jason Chaffetz (R-UT) Chairman of the Subcommittee on National Security, Homeland Defense and Foreign Operations, Rep. Jim Jordan (R-OH) Chairman of the Subcommittee on Regulatory Affairs, Stimulus Oversight and Government Spending, and Rep. Patrick McHenry (R-NC) Chairman of the Subcommittee TARP, Financial Services and Bailouts of Public and Private Programs. See, release.

Rep. Issa has yet to name the Chairman of the Subcommittee on Information Policy, Census and National Archives, which has responsibilities with respect to federal information technology and cyber security.

It is inherent in the nature of an oversight committee that it becomes more active and assertive when the President is a member of a different political party than the majority of the members of the oversight committee. For this reason, the HOGRC may take on added significance with the transition to the 112th Congress.

On December 16, Rep. Issa announced the new Republican member of the HOGRC for the 112th Congress. See, list.

More Capitol Hill Appointments

12/17. Rep. Eddie Johnson (D-TX) was selected to be the ranking Democrat on the House Science Committee (HSC) for the 112th Congress. She represents a District in Dallas, Texas. Rep. Bart Gordon (D-TN), the outgoing Chairman of the HSC, did not run for re-election to the 112th Congress.

12/17. The House Democratic Caucus selected Rep. Elijah Cummings (D-MD) to be the ranking Democrat on the House Oversight and Government Reform Committee (HOGRC). Rep. Carolyn Maloney (D-NY) and Rep. Dennis Kucinich (D-OH) had also sought the spot. The Chairman in the 111th Congress has been Rep. Ed Towns (D-NY), who now has a troubled relationship with Rep. Nancy Pelosi (D-CA). Rep. Towns did not seek the position in the 112th Congress, and has demanded back his old seat, and seniority, on the House Commerce Committee (HCC). President Obama and Rep. Pelosi will expect Rep. Cummings to defend the Obama administration as the incoming Chairman, Rep. Darrell Issa (R-CA), launches investigations, conducts hearings, and issues subpoenas.

12/15. Rep. Hal Rogers (R-KY), who will be the Chairman of the House Appropriations Committee in the 112th Congress, announced several HAC Republican staff hires. See, release.

Senate Confirms Four Judicial Nominees

12/16. The Senate confirmed four persons to be U.S. District Court Judges. See, Congressional Record, December 16, 2010, at Page S10419.

The nominations of 34 other persons to be federal judges will lapse at the end of the 111th Congress. However, President Obama may renominate many of them.

The key judicial nominees who have been approved by the Senate Judiciary Committee (SJC), and who are on the Senate's Executive Calendar, as of December 18, 2010, and awaiting Senate confirmation, include:

See also, Sen. Patrick Leahy's (D-VT) speech in the Senate on December 17 complaining about the failure to confirm more judicial nominees.

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