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News Briefs from April 11-15, 2001

4/14. The ICANN published a notice the schedule and registration information for its next round of meetings, to be held in Stockholm, Sweden, on June 1-4, 2001.
4/13. Twelve movie and entertainment companies settled their copyright infringement action against RecordTV and David Simon. The twelve companies filed a complaint in U.S. District Court (CDCal) on June 15, 2000, against RecordTV and its founder, David Simon, alleging copyright infringement, trademark infringement, unfair competition in violation of the Lanham Act, violation of the Cable Communications Policy Act, unfair competition under California law, and common law unfair competition. RecordTV operated a web site that made unauthorized copies of Plaintiffs' copyrighted TV programs and movies from a Los Angeles area cable TV signal, and then streamed them over the Internet. The District Court entered an injunction against Simon enjoining him from streaming plaintiffs' copyrighted works over the Internet and using plaintiffs' trademarks to advertise his website. Simon must also pay plaintiffs $50,000 for legal fees. However, Plaintiffs did not recover any damages. Jack Valenti, P/CEO of the MPAA, stated that "This settlement should make clear that one cannot create a website that does not respect Copyright Law." See, MPAA release and RecordTV release.
4/13. The Department of Transportation (DOT) announced that it will not prevent Orbitz, an online travel agency being developed by five major airlines, from beginning operations. Nor will it require Orbitz to change its business strategy at this time. See, DOT release. Jeff Katz, CEO of Orbitz, said in a prepared statement that "Orbitz continues moving full-speed toward its June launch following today's release of a DOT letter giving Orbitz the green light. After an exhaustive review of our business plan and corporate documents, the DOT has clearly confirmed our position that Orbitz is pro-competitive and fully compliant with the law." The American Antitrust Institute (AAI), Consumer Federation of America, and other groups had opposed the venture. See, AAI release of April 8. Other groups, including the Association for Competitive Technology (ACT) and the Progressive Policy Institute, supported Orbitz's bid for regulatory approval. See, ACT release.
4/13. The U.S. Court of Appeals (DCCir) issued its opinion in Trans Union v. FTC, a petition for review of an FTC cease and desist order regarding the sale of consumer reports by credit reporting agencies for marketing purposes. The Appeals Court upheld the FTC's order that Trans Union must stop selling target marketing lists for purposes not listed in the Fair Credit Reporting Act (FRCA). The Appeals Court also upheld the constitutionality of the FRCA.
Trans Union (TU) is one of the three large credit reporting agencies. It compiles credit reports about individuals from credit information that it collects from banks, credit card companies, and other lenders. Its databases contain information on 190 Million people. It then sells these credit reports to lenders, employers, and insurance companies. This practice is not at issue. However, TU also sells target marketing products to direct marketers. These consist of lists of names and addresses of individuals who meet specific criteria, such as possession of an auto loan, a department store credit card, or two or more mortgages. This practice at issue.
The FTC has responsibility for enforcing the FCRA. This statute protects the privacy of credit information by prohibiting credit reporting agencies from selling "consumer reports", except under the circumstances enumerated in the Act. The FRCA lists whether to approve an application for credit, employment, or insurance -- but not direct marketing. The FRCA defines a "consumer report" as any information provided "by a consumer reporting agency bearing on a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer's eligibility for (A) credit ..."
This is an ancient proceeding. The FTC has been endeavoring for a decade to stop this practice. The FTC instituted a proceeding against TU in 1992. The FTC first issued a cease and desist order in 1994. However, the Court of Appeals granted TU's petition for review, on the grounds that the FTC had failed to provide evidence that TU's target marketing products were used by marketers in the issuance of credit. See, Trans Union Corp. v. FTC, 81 F.3d 228 (DCCir 1996). So, the FTC conducted extensive discovery, held a month long administrative trial, and documented this contention. It again ordered TU to stop. TU then filed this petition for review.
The Court of Appeals denied the petition for review. First, TU argued that the FTC again failed to provide substantial evidence in support of its findings. The Appeals Court this time held that the FTC had provided substantial evidence that the target marketing lists being sold by TU to marketers were being used as a factor in granting credit, and hence, are "consumer reports" within the meaning of the FRCA. Second, TU argued that the FRCA is unconstitutionally vague under the due process clause of the Fifth Amendment, and that it is an unconstitutional restraint on free speech. TU sought application of the strict scrutiny standard. The Appeals Court upheld the FRCA's constitutionality, applying the reduced constitutional protection standard for commercial speech articulated by the Supreme Court in Dun & Bradstreet v. Greenmoss.
4/13. The Department of Labor's Employment and Training Administration (ETA) published a notice in the Federal Register regarding the availability of grant funds for skill training programs financed by the H1B Technical Skills Training Grant Program. This program is financed out of the fees paid by employers with H1B visa applications. H1B visas enable high tech companies to hire highly skilled alien workers to fill positions for which there is a shortage of U.S. workers. The purpose of this grant program is to train U.S. workers for high tech occupations. See, Federal Register, April 13, 2001, Vol. 66, No. 72, at Pages 19209 - 19223. See also, ETA's H1B web page.
4/13. Friday was the deadline to submit comments to the FCC in response to its Notice of Proposed Rulemaking (NPRM) in another of its reexaminations of its old CMRS spectrum aggregation limits (Rule 20.6), and restrictions on cellular cross ownership (Rule 22.942). The FCC seeks comment on whether it should modify its limits on the amount of spectrum that any single entity may hold in a market and whether it should modify its restrictions on cross-ownership between cellular telephony providers located in the same market. See, In the Matter of 2000 Biennial Regulatory Review Spectrum Aggregation Limits for Commercial Mobile Radio Services, WT Docket No. 01-14. See also, notice in Federal Register, February 12, 2001, Vol. 66, No. 29, Pages 9798 - 9806. See also, text of 47 CFR 20.6 and 47 CFR 22.942.
The Rural Telecommunications Group and the OPASTCO submitted a joint comment in which they argued that the reasoning behind both rules is outdated given the level of competition, and that both should be eliminated. The National Telephone Cooperative Association (NTCA), which represents small and rural local telephone exchanges, stated in its comment that "if the limits are removed, the public interest will best be served if the Commission were to impose conditions to insure that customers in rural areas will have equal access to advanced services."
Telephone and Data Systems and its subsidiary, U.S. Cellular Corporation, submitted a comment in which they argued that the FCC should retain the spectrum cap, but revise the cellular cross interest rule to allow non-controlling cross interests comparable to those permitted under the spectrum cap. WorldCom, which is a reseller of CMRS, stated in its comment that "The Commission’s spectrum aggregation limits have been critical in achieving a more competitive CMRS market, with at least four facilities-based carriers and a number of resale carriers serving most population centers. ... The elimination of the spectrum cap at this time inevitably will result in further consolidation of the wireless industry and have a significant negative impact on the competitive CMRS market."
4/13. President Bush will nominate Otto Reich to be Assistant Secretary of State for the Western Hemisphere.
4/13. Amy McKennis will join the Cellular Telecommunications & Internet Association (CTIA) as its Senate Director for Government Affairs. See, release. She previously worked for Sen. Fred Thompson (R-TN). Before that she worked for Sen. Kay Hutchison (R-TX). McKennis also co-authors the Fashion Police column for the HillZoo.
4/13. The NIST published a notice in the Federal Register regarding the availability of funds under the Critical Infrastructure Protection Grants Program. See, Federal Register, April 13, 2001, Vol. 66, No. 72, at Pages 19139 - 19142.
4/13. The USTR published a notice in the Federal Register regarding the 2001 Annual GSP Product and Country Eligibility Practices Review. The deadline for submitting petitions is June 13, 2001. See, Federal Register, April 13, 2001, Vol. 66, No. 72, Pages 19278 - 19279.
4/13. The U.S. Court of Appeals (DC Cir) heard oral argument in Telecom Resellers v. FCC, Appeal No. 00-1144.
4/13. The Copyright Office published in the Federal Register a final rule regarding service of a notice of institution of action for infringement and service of complaint in an infringement action where registration has been denied. See, Federal Register, April 13, 2001, Vol. 66, No. 72, at Pages 19094 - 19095.
4/12. President Bush and Secretary of Health and Human Services Tommy Thompson announced that the medical privacy regulations released in the closing days of the Clinton administration will be implemented. See, Bush statement and Thompson statement. The rules, which were promulgated pursuant to the Health Insurance Portability and Accountability Act (HIPAA), were opposed by many health care providers, trade groups and Members of Congress. The rules take effect on April 14, but the health care industry has two years to come into compliance. The HHS Dept. released these rules on December 20, 2000. See, HHS summary, and the entire text of the regulations. The regulations were also published in the Federal Register on December 28, 2000. See also, HHS's HIPAA page.
Sec. Thompson said that "we will immediately begin the process of implementing the patient privacy rule." President Bush stated that "Today, I directed Secretary Thompson to allow a federal rule that will protect the privacy of medical information for millions of Americans to become effective. For the first time, patients will have full access to their medical records and more control over how their personal information will be used and disclosed.  The rule also provides a clear avenue of recourse for those Americans whose medical privacy has been compromised." Bush added, "I have asked Secretary Thompson to recommend appropriate modifications to the rule ..."
Rep. Billy Tauzin (R-LA), House Commerce Committee, which has jurisdiction over this matter, released a statement in which he said that "Given the many legitimate concerns raised at our recent hearing, it's critically important for Secretary Thompson to immediately begin the process of amending and improving the new privacy rules. In addition to being too costly and too complex, the regulations fail to fully protect the privacy of all Americans. In some respects, the new privacy rules could even weaken - not improve - the confidential nature of certain medical records." The Commerce Committee's Subcommittee on Health held a hearing on March 22.
The Consumers Union released a statement in which it praised Bush's and Thompson's decision. CU's Frank Torres stated that "much of the criticism against these rules is nothing more than scare tactics concocted by businesses that make money from data sharing."
4/12. Bush released a statement on relations with the PRC in which he said that "China's decision to prevent the return of our crew for 11 days is inconsistent with the kind of relationship we have both said we wish to have. As we move forward, the United States and China will, no doubt, again face difficult issues and fundamental disagreements. We disagree on important basic issues such as human rights and religious freedom. At times, we have different views about the path to a more stable and secure Asian-Pacific region. We have different values, yet common interests in the world. We agree on the importance of trade and we want to increase prosperity for our citizens." See also, State Dept. release.
4/12. The Federal Election Commission (FEC) released a draft advisory opinion regarding the use of web sites to authorize payroll deductions for political actions committees. Morgan Stanley Dean Witter submitted a Request for Advisory Opinion [26 pages in PDF] to the FEC on March 6 requesting an opinion that it is permissible, pursuant to the E-SIGN Act, to use electronic signatures to authorize payroll deductions for the MSDW political action committee. MSDW wrote: "Given the near-ubiquitous use of computer and Internet technology in the workplace today, MSDWPAC would like to solicit its restricted class members via the Internet and accept their payroll deduction authorizations in a form other than the traditional, written signature on a hard copy. Specifically, MSDWPAC intends to establish an Internet website which would enable its restricted class members to authorize payroll deductions via electronic signature. To ensure that only restricted class members have access to this website, it will be password protected." The draft opinion states that what MSDW plans to do is permissible. However, the FEC reached this conclusion on the basis of federal election law, without applying or construing the E-SIGN Act, except to say, in a footnote, that "the Commission's approach here is similar to that prescribed in the E-Signatures Act". The FEC will consider this draft advisory opinion at its meeting on Thursday, April 19, 2001. Public comments are due by 12:00 NOON ET, April 18.
4/12. The U.S. District Court (CDCal) denied NetZero's motion for a preliminary injunction against Juno. NetZero filed a complaint on December 26, 2000, against Juno alleging patent infringement. NetZero, an ISP and web marketer, asserts that it is the exclusive licensee of U.S. Patent No. 6,157,946, which applies to a process that enables an ISP to display ads or messages through a window that is separate from the browser, and that Juno, a competing ISP, has infringed this patent. The District Court granted NetZero a temporary restraining order on January 5. This latest ruling lifts that TRO. Juno General Counsel Richard Buchband stated that "by denying NetZero's request for a preliminary injunction, the court sends an important signal that it has doubts that the '946' patent will stand up at trial." See, Juno release.
4/12. BellSouth filed an Section 271 application with the North Carolina Utilities Commission (NCUC) for permission to provide long distance telephone service in North Carolina. If the application is approved, BellSouth will then submit an application for permission from the FCC. See, BellSouth release.
4/12. Verizon filed another regulatory plan with the Massachusetts Department of Telecommunications and Energy regarding its efforts to obtain permission to provide long distance service in Massachusetts. See, Verizon release.
4/12. The World Intellectual Propoerty Organization (WIPO) released an interim report [203 pages in PDF] titled "The Recognition of Rights and the Use of Names in the Internet Domain Name System." The report addresses abusive registration of domain names in relation to personal names, trade names, names and acronyms of international intergovernmental organizations, geographical indications (such as for wines), and International Nonproprietary Names for pharmaceutical substances. The WIPO also seeks public comment. The WIPO will also hold a series of public hearings around the world, including one in Washington DC on May 29, 2001. See also, WIPO release.
4/12. The Ministry of Justice of the People's Republic of China granted the Seattle based law firm of Perkins Coie authorization to open an office in Beijing. See, release.
4/12. The GAO published a report [71 pages in PDF] titled "DOD INFORMATION TECHNOLOGY: Software and Systems Process Improvement Programs Vary in Use of Best Practices."
4/12. The GAO released a report [172 pages in PDF] titled "Record Linkage and Privacy: Issues in Creating New Federal Research and Statistical Information."
4/12. The NTIA published a notice in the Federal Register of its intent to award a .edu management contract to EDUCAUSE. See, Federal Register, April 12, 2001, Vol. 66, No. 71, at Pages 18913 - 18914. The NTIA also published a copy of this notice in its web site on April 11.
4/11. A grand jury of the U.S. District Court (NDCal) returned an indictment [PDF] against Yong Ho Ko (aka James Ko), Yong Uk Ko (aka Paul Ko), and Jungah Choi (aka Joanne Choi) alleging tax fraud and conspiracy in connection with their operation of a circuit board manufacturing business. The indictment alleges that Yong Ho Ko, the sole owner of Twin Technology, a San Jose corporation that assembles printed circuit boards for computer manufacturers, his brother Yong Uk Ko, who is the VP of the company, and Jungah Choi, who is a company sales representative, received money from an electronics scrap material recycling business and failed to report that income on their federal income tax returns. David Callaway is the AUSA who is prosecuting the case. See also, USAO release.
4/11. The Commerce Department's NTIA announced its intent to enter into an agreement with EDUCAUSE for the management of the .edu Internet domain name space. This contract will be awarded for a 5 year period, and will be renewed indefinitely upon satisfactory performance. The contract will be at no cost to the U.S. government, and EDUCAUSE will only recover its cost of administering the .edu domain services. See, NTIA release, Educause release, and notice to be published in the Federal Register.
4/11. The US and EU reached an agreement to their long standing dispute over trade in bananas. The EU currently gives preferences to bananas imported from certain former European colonies, to the detriment of Chiquita bananas from Latin America. The US successfully challenged this arrangement before the WTO, and then imposed retaliatory tariffs on some EU exports to the US. Under the agreement, the EU will provide a transition to a tariff only system by 2006, and the US will terminate is retaliatory tariffs. See, USTR release, State Dept. release, and EU release.
4/11. Guenter Burghardt, head of the European Commission delegation to the US, gave a speech in Chicago, Illinois, titled "Recent Political and Economic Developments in the EU: Implications for the Transatlantic Relationship."
This dispute, like a similar dispute over European trade barriers to imported beef, threatens US high tech companies. First, the EU retaliated for the US's challenges to Europe's beef and bananas trade barriers by bringing its own challenge to the US's Foreign Sales Corporation (FSC) tax regime. FSC benefits US exporters, including software and hardware producers with significant sales abroad, such as Microsoft, Cisco, and Motorola. The WTO ruled that the FSC regime is an illegal export subsidy. Late last year the Congress passed replacement legislation, which is now under challenge before the WTO. Second, ongoing disputes over beef, bananas, FSC, and other matters, have the potential to lead to an escalating trade war. The EU has indicated that if this were to occur it would target US high tech exporters for retaliatory tariffs. Hence, removing disputes over bananas and other agricultural products is in the interest of US high tech companies that export to Europe. For background see, TLJ News Analysis: The FSC Tax Bill and Technology Exporters, Nov. 17, 2000.
4/11. Sen. Charles Grassley (R-IA) addressed trade with the PRC and the taking of hostages. He stated: "Having personally pushed for strong trade relations with China, I'm frustrated and hurt by China's decision to detain the crew members for 11 days. China's action has called into question their commitment to join an international forum governed by the rule of law, and I hope we see a clear signal that the reformers, and not the military, are in charge in Beijing. That is critically important to China's ability to pursue normal commercial ties with the United States." Sen. Grassley is Chairman of the Senate Finance Committee, which has trade related jurisdiction.
4/11. Former FCC Chairman Reed Hundt will join the Board of Directors of Intel. Hundt was a prep school classmate of Al Gore, a law school classmate of Bill Clinton, and an FCC Chairman from 1993 through 1997. Hundt already holds many other private sector positions. He is an advisor on information industries at the management consulting firm McKinsey & Company, an advisor to the private equity firm Blackstone Group, a venture partner at Benchmark Capital, and a director at other corporations. See, Intel release. See also, Hundt's controversial account of his partisan and stormy FCC years: You Say You Want a Revolution: A Story of Information Age Politics (Amazon).
4/11. The PTO Fee Coalition, a group which opposes the diversion of USPTO user fees to fund other government programs, held a meeting at the Washington DC offices of the National Association of Manufacturers.
4/11. The Internal Revenue Service ruled that AT&T's proposed split off of Liberty Media Corporation, which will own all of the assets reflected in the Liberty Media Group, qualifies as tax free for AT&T, Liberty Media and their shareowners. AT&T acquired Liberty Media through its acquisition of Tele-Communications, Inc. (TCI) in March 1999. See, AT&T release.
4/11. Thomas Reilly, Attorney General of Massachusetts, submitted a comment [PDF] to the FCC in which he urged it to withhold approval of the Supplemental Application by Verizon for authority to provide in-region interLATA service in Massachusetts pursuant to Section 271 of the Telecommunications Act of 1996.
4/11. Clark Lackert and Keith Sharkin have joined the New York City office of the law firm of King & Spalding as partners. They will establish a Trademark Practice Group there. They both were previously at Nims, Howes, Collison, Hansen & Lackert. See, release.

Go to News Briefs from April 6-10, 2001.

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