News Briefs from June 26-30, 2001
Supreme Court Denies Cert in Metro PCS Case
6/29. The Supreme Court of the U.S. denied certiorari in U.S. v. General Wireless Inc. PCS. See, Order List at pages 17-18. General Wireless, which is now named Metro PCS, intends to provide cellular service in several cities using code division multiple access (CDMA) technology. The Supreme Court, without opinion, declined to review a decision of the bankruptcy court allowing Metro PCS to keep 14 personal communications service (PCS) spectrum licenses that it had obtained at an FCC auction, after paying only a part of its auction bids. As in the NextWave case, the FCC had sought to cancel the spectrum licenses, and re-auction the spectrum. (See, Docket No. 00-1621.)
More Supreme Court News
6/29. The Supreme Court of the U.S. denied certiorari in Tuvell v. Microsoft. See, Order List at page 11. See also, "unpublished" opinion of the U.S. Court of Appeals (1stCir). (Docket No. 00-1784.)
6/29. The Supreme Court of the U.S. issued a recess order. It stated that "The Court will take a recess from today until Monday, October 1, 2001." See, Order List at page 20.
DC Circuit Denies Petition for Review in E-911 Case
6/29. The U.S. Court of Appeals (DDC) issued its opinion in U.S. Cellular v. FCC, a petition for review of an FCC order pertaining to deployment of new emergency 911 technologies. Wireless carriers argued that the order contravenes the cost causation principle contained in CompTel v. FCC, is arbitrary and capricious, violates the Regulatory Flexibility Act, and amounts to an unconstitutional taking. The Appeals Court denied the petition.
Financial Privacy
6/29. The FTC sent a letter to the State of North Dakota stating that North Dakota's financial privacy statute is not preempted by the Gramm Leach Bliley Act. The FTC opined that the two statutes are not inconsistent. See, FTC release. See also, North Dakota Disclosure of Customer Information law, N.D. Cent. Code, ch. 6-08.1-01 to 6-08.1-08 (amended 2001), and Subtitle A of Title V of the Gramm Leach Bliley Act, 15 U.S.C. §§ 6801-6809.
More News
6/29. The Information Technology Association of America (ITAA) praised FCC Chairman Michael Powell for writing a letter [PDF] on June 27 to Commerce Secretary Don Evans regarding third generation wireless services. Powell wrote that "additional time is necessary to allow the Commission and the Executive Branch to complete a careful and complete evaluation of the various possible options for making additional spectrum available for advanced wireless services." See, ITAA release.
People
6/29. Peter Doyle was named Chief of the FCC's Mass Media Bureau's Audio Services Division.
6/29. Jim Harper was named an Adjunct Fellow of the Progress and Freedom Foundation (PFF), a Washington DC based non profit organization that studies technology policy. Harper focuses on privacy and e-commerce issues. He is also the principal of the PolicyCounsel.Com consulting firm, and the Editor of Privacilla.org.
Senate CJS Subcommittee Discusses FCC Budget and Policy
6/28. The Senate Appropriations Committee's Commerce, Justice, State, and the Judiciary (CJS) Subcommittee held a hearings on the proposed budgets for FY 2002 for the Federal Communications Commission and Securities and Exchange Commission. See, prepared testimony of FCC Chairman Michael Powell. The hearing served as a forum for discussing several difficult issues facing the FCC, including how to extend the universal service goals of ubiquity and affordability to new communications media (such as broadband Internet access and instant messaging), how to allocate more spectrum for third generation wireless services, and the Bell companies' efforts to rewrite key provisions of the Telecom Act of 1996.
Universal Service and New Technologies
6/28. Sen. Ted Stevens (R-AK), the ranking Republican on the Appropriations Committee, raised the subject of universal service at the CJS hearing. He represents a state with voters widely dispersed over vast rural and remote areas where the cost of communications services is high.
The longstanding policy of promoting universal service for voice telecommunications was codified in Section 254 of the Telecom Act of 1996. Only telecommunications services are subject to universal service support contributions. Also, this section, as interpreted by the FCC, has extended universal service support to schools and libraries for telecommunications, as well as for Internet access and internal wiring costs. Stevens pointed out while new methods of communications, such as broadband Internet access and instant messaging are becoming increasingly important, rural areas are likely to fall behind urban areas without universal service support for these services. He also stated that with only telecommunications services currently contributing, new technologies are also going to have to pay their way. "I continue to be worried about the future of the universal service fund," said Sen. Stevens. "The revenue base of universal service is declining, and the demands are increasing." He suggested that "one solution might be taxing the Internet ... to support the universal service fund." However, he added that he does not support this yet.
Chairman Powell stated that he is committed to the universal service goals of ubiquity and affordability, whatever the architecture of the communications. However, he added that he "reserves judgment" on who should contribute. He pointed out also that the FCC is constrained by a court decision preventing the FCC from tapping intrastate revenues for universal service, and by the language of Section 254. He suggested that a legislative solution may be required.
Tauzin  Dingell Bill
6/28. Sen. Hollings, the Chairman of the Appropriations Committee's CJS Subcommittee (as well as Chairman of the Commerce Committee) ridiculed the Bell companies for lobbying the Congress to pass HR 1542 (the Tauzin Dingell bill). He stated that the Bells are carrying on a "big charade". The Bells seek legislation that would exempt interlata data service (as distinguished from voice service) from the requirements of Section 251 of the Telecom Act of 1996. They assert that when the 1996 Act was being drafted, data communications were not considered, and were not intended to be covered by Section 251. Sen. Hollings, who was intimately involved in negotiations over the drafting of the bill, refuted this claim. He stated that Bell companies were involved in negotiations -- "they wrote the words". He continued that data was referenced over 470 times. He concluded that the Bells are engaged in "a big charade, a big straw man to extend their monopoly."
Sen. Dan Inouye (D-HI) and Sen. Hollings both asked Chairman Powell for his views on HR 1542. Powell stated that he would not take a position on the bill. Instead, he said there are two competing views of competition in the market for broadband services. One view is that competition exists between different "pipelines". These are currently cable and phone networks, but may in the future may also include wireless and satellite. He said that under this view, it does not matter whether there is competition between providers of the same service; competition is between the different pipelines. This, he said is the view of the proponents of HR 1542. He then said that the other view of broadband competition holds that there must be competition within each technology. Sen. Hollings was unimpressed. He said, "Let me correct that." He proceeded to explain that the intent of Congress in passing the 1996 Act was to require competition in local phone loop.
Spectrum Issues
6/28. Both Sen. Hollings and Sen. Stevens discussed spectrum policy with Chairman Powell at the CJS hearing. The FCC has recently taken very tentative steps towards developing secondary markets for spectrum, and moving towards property rights in spectrum. Sen. Hollings asked, "Who owns the spectrum? Are you and I the trustee" for spectrum? Powell answered that "it is clear that spectrum is the public property of the American taxpayers." Powell added that it is the function of the FCC to put spectrum to its highest and best use. He also stated that the FCC can reclaim licensed spectrum.
3G Wireless. Sen. Stevens focused specifically on third generation (3G) wireless services, which are intended to bring broadband Internet access to portable devices. Currently, the Defense Department is vigorously opposing the reallocation or sharing of any of the spectrum in the 1755 to 1850 MHz band which it now uses, but which has been identified for possible use by 3G services. Sen. Stevens suggested that one solution may be to ask the DOD to be "hard headed about what the really need," and allow the rest to be re-auctioned, with most of the proceeds from the sale of spectrum licenses going back to the DoD to fund new defense technologies. Chairman Powell responded, "I think it is a creative idea."
NextWave. Chairman Powell spoke with reporters after the hearing about the June 22 opinion of the U.S. Court of Appeals (DCCir) in NextWave v. FCC. He stated that "This is a major blow to the legal and regulatory foundation of our auction policy." He declined to state whether the FCC would appeal.
FCC's Lack of Engineering Expertise
6/28. Chairman Powell and Sen. Hollings discussed the FCC's lack of technical expertise at the CJS hearing. The FCC is and agency of lawyers. It lacks staff who can understand the new technologies that the FCC seeks to regulate. The FCC has no trouble attracting the brightest lawyers, because a short stint at the FCC greatly increases the earning capacity of these lawyers. Most go to work for the law firms that represent companies regulated by the FCC, or the companies themselves. There is no comparable payoff for engineers. Moreover, they are asked to work at the lowly levels of GS-5 and GS-7.
Powell stated that "we cannot depend on those we regulate for on-the-job tutorials while we make decisions. Over the last six years, our engineering staff has decreased by more than 20 percent. Within the next four years, 40 percent of our engineering staff will be eligible to retire."
Sen. Hollings asked of the FCC's FY 2002 budget request, "does this take care of the engineers and the lawyers too?" Chairman Powell responded "no, it does not over time take care of it." He added that this budget request, which barely covers cost of living adjustments, "is the first step." He will seek more funding later.
Appeals Court Rules in USA v. Microsoft
6/28. The U.S. Court of Appeals (DCCir) issued its en banc opinion in USA v. Microsoft. This is an antitrust action brought by the Department of Justice's Antitrust Division and by individual states. The Court of Appeals affirmed in part, reversed in part, and remanded in part the District Court's judgment assessing liability. It vacated in full the Final Judgment containing the break up order. Finally, it remanded the case to a different trial judge.
District Court Proceedings. The District Court, Judge Thomas Jackson presiding, determined that Microsoft had maintained a monopoly in the market for Intel compatible PC operating systems in violation of § 2 of the Sherman Antitrust Act; attempted to gain a monopoly in the market for Internet browsers in violation of § 2; and illegally tied two purportedly separate products, Windows and Internet Explorer, in violation of § 1. See, Judge Jackson's Conclusions of Law (April 3, 2000). The District Court then issued a Final Judgment requiring Microsoft to submit a proposed plan of divestiture, with the company to be split into an operating systems business and an applications business. See, Judge Jackson's and Final Judgment (June 7, 2000). Microsoft appealed.
Holding Re Violation of the Sherman Act. The Appeals Court affirmed in part and reverse in part the District Court's judgment that Microsoft violated § 2 of the Sherman Act by employing anticompetitive means to maintain a monopoly in the operating system market. The Appeals Court reversed the District Court's determination that Microsoft violated § 2 of the Sherman Act by illegally attempting to monopolize the internet browser market. The Appeals Court remanded the District Court's finding that Microsoft violated § 1 of the Sherman Act by unlawfully tying its browser to its operating system. The Appeals Court also stated this its holding extends to the District Court's findings with respect to the state law counterparts of the plaintiffs' Sherman Act claims.
Holding Re Breakup Order. The Appeals Court also vacated the District Court's Final Judgment ordering the break up of Microsoft, on several grounds. First, the Final Judgment was based on a number of liability determinations that the Appeals Court reversed. Second, the District Court erred in failing to hold an evidentiary hearing to address remedies specific factual disputes.
Holding Re Jackson's Appearance of Partiality. Third, the "trial judge engaged in impermissible ex parte contacts by holding secret interviews with members of the media and made numerous offensive comments about Microsoft officials in public statements outside of the courtroom, giving rise to an appearance of partiality. The Appeals Court added that "the actions of the trial judge seriously tainted the proceedings before the District Court and called into question the integrity of the judicial process." The Appeals Court ordered reassignment to another trial judge.
The Appeals Court's slip opinion is 125 on paper, and is available on the USCA web site in a single file. Tech Law Journal converted this file into HTML, and split it into 9 separate files, which are hyperlinked below.
Case Caption, Attorneys, Table of Contents and Summary.
I. Introduction.
   A. Background.
B. Overview.
II. Monopolization.
A. Monopoly Power.
B. Anticompetitive Conduct.
   1. Licenses Issued to Original Equipment Manufacturers.
2. Integration of IE and Windows.
3. Agreements with Internet Access Providers.
4. Dealings with Internet Content Providers, Independent Software Vendors, and Apple Computer.
5. Java.
6. Course of Conduct.
C. Causation.
III. Attempted Monopolization.
IV. Tying.
V. Trial Proceedings and Remedy.
VI. Judicial Misconduct.
VII. Conclusion.
Microsoft Chief Software Engineer Bill Gates said that "The ruling lifts the cloud of breakup over the company, reverses the tying claim, and says clearly that we did not attempt to monopolize the browser market." See, Microsoft release and statement by Bill Gates.
Congressional Reaction To Microsoft Ruling
6/28. Sen. Herb Kohl (D-WI) and Sen. Mike DeWine (R-OH), the Chairman and Ranking Member of the Senate Subcommittee on Antitrust, Business Rights and Competition, issued a joint statement: "The recent DC Circuit court ruling is a split decision that reflects the important balance that must be struck between ensuring competitive markets and allowing businesses room to innovate -- both of which are important for consumers. The court overturned the breakup order, but at the same time confirmed that Microsoft had engaged in illegal monopoly maintenance. Today's decision does not end the Microsoft litigation, and further proceedings will likely continue in the coming months. The full implications of this decision will be known only over time as antitrust law is applied to the entire high technology industry, but it is clear that the antitrust laws must play a key role in ensuring competitive markets in this sector. We will continue to monitor future developments in the case closely but feel strongly that the case must remain above politics. Whatever the outcome of this particular case, we will continue to work to assure that no one company can abuse a dominant market position to the detriment of competition and consumers."
6/28. Rep. Dick Armey (R-TX) stated that "I applaud today's ruling because it’s good for American competitiveness. It sends the message that innovation in America will be rewarded, not punished. Our antitrust laws should not be used to hold our most successful companies back to give the competition a chance to catch up. That kind of tired economic thinking is exactly what our new economy does not need. Government needs to get off the back of our innovators so that high tech America can prosper." See, statement.
Stearns Introduces Bill to Limit State Jurisdiction over Digital Transactions
6/28. Rep. Cliff Stearns (R-FL) and others introduced HR 2421, the "Jurisdictional Certainty Over Digital Commerce Act". The bill would bar states from regulating the sale of digital goods and services over the Internet. It would provide a single legal standard in the U.S. covering the sale of downloaded software, e-books, games, and other products, as well as services.
The bill states that "Responsibility and authority to regulate digital commercial transactions is reserved solely to the Federal Government" and that "No State or political subdivision thereof may enact or enforce any law, rule, regulation, standard, or other provision having the force or effect of law that regulates, or has the effect of regulating, digital commercial transactions." The bills also defines "digital commercial transaction" as "a commercial transaction for a digital good or digital service that is carried out in its entirety by means of the Internet." The bill contains several exceptions, including state regulation pertaining to health, safety, fraud, and crimes. It also exempts telecommunications services.
The bill also contains the findings that "digital commercial transactions in digital goods and digital services are inherently interstate in nature" and that "State regulation of such digital commercial transactions creates significant and harmful burdens on interstate commerce". Rep. Stearns said in a release that "It is important to inject jurisdictional certainty with respect to commercial transaction in digital goods and services. Having 50-plus separate, and at times incongruent, regulations governing interstate commercial transactions poses a substantial burden to interstate commerce in general, and to e-commerce specifically."
E-SIGN Hearing
6/28. The House Financial Services Committee's Subcommittee on Domestic Monetary Policy, Technology and Economic Growth held a hearing titled ESIGN -- Encouraging the Use of Electronic Signatures in the Financial Services Industry. See, opening statement [PDF] of Rep. Peter King (R-NY), the Subcommittee Chairman. See also, prepared testimony [PDF] of witnesses: Eileen Harrington (FTC), Christopher Roe (American Insurance Assoc.), Thomas Crocker (Alston & Bird), Jeremiah Buckley (Electronic Financial Services Council), Louis Rosenthal (Financial Services Roundtable), Margot Saunders (National Consumer Law Center).
Bush Calls PCs Energy Vampires
6/28. President Bush gave a speech at the Department of Energy in Washington DC in which he described certain electronic equipment, such as PCs, as energy "vampires". He stated that "I want to talk about what's called vampires, and announce to the nation the new vampire slayer, and that's the Secretary of Energy, Spence Abraham. Because of our desire for instant convenience, many of the appliances in our homes carry unnecessarily high energy costs. Because we're used to a computer coming on instantly or a TV snapping on as a result of a remote switch, common day appliances eat enormous amounts of energy.
The Consumer Electronics Association was not amused. It issued a release in which it stated that "to refer to our products as energy monsters is misleading and inaccurate." It continued that "In many cases, our products are part of the solution to the energy debate. Many home networking products help save energy by providing increased control over home heating, cooling and lighting systems. Information technology and telecommunications products allow teleworking and remote access to information and entertainment content, both of which save fuel and reduce smokestack emissions. Consumers who stay home and enjoy a movie on their home theater also help save fuel and reduce air pollution. A few of our products (such as calculators, watches and radios) rely on solar power." It concluded that "encouraging the adoption of unnecessary and more restrictive energy consumption criteria threatens a manufacturers ability to provide competitively priced products with compelling features that meet consumer demand for performance. In short, asking the public to pay more for less disregards consumers' interests. Consumers who seek energy efficient products can find them in the marketplace today."
Dot Kids Domain Bill Introduced
6/28. Rep. John Shimkus (R-IL) and Rep. Ed Markey (D-MA) introduced HR 2417, the "Dot Kids Domain Name Act of 2001." The bill would the Secretary of Commerce to enter into agreements with the ICANN for the addition of a new top-level Internet domain to the root system as a location of any material that is harmful to minors.
Another Broadband Bill Introduced
6/28. Rep. John McHugh (R-NY) introduced HR 2401, the "Rural America Digital Accessibility Act". The bill provides for grants and loan guarantees to bring broadband telecommunications services to underserved rural areas.
Gallup Conducts Poll on Online Privacy
6/28. The Gallup Organization released the results of a poll of e-mail users regarding online privacy. Gallup stated that 66% of respondents "think the government should pass more laws to ensure online privacy". Gallup also stated that "Frequent Internet users - those who spend 15 hours or more online each week - are more likely to favor the passage of new laws (75%) than are infrequent users (63%). Also, Democrats (73%) are more likely than Republicans (60%) to favor more privacy laws." See, release.
More News
6/28. The Copyright Office published a notice in the Federal Register that it has completed its annual review of Copyright Office regulations and adopted several non- substantive amendments to clarify, update and correct the text of the regulations. See, Federal Register, June 28, 2001, Vol. 66, No. 125, at Pages 34372 - 34374.
6/28. The U.S. Court of Appeals (7thCir) issued its opinion in USA v. Walton. This is a criminal case in which an employee of Perdue University used a networked workstation to download pictures from the Internet, and store them on a network server. He was charged, convicted, and sentenced for possession of child pormography in violation of 18 U.S.C. § 2252(A)(a)(5)(B), and receiving child pormography in violation of 18 U.S.C. § 2252A(a)(2). He appealed on several issues, all of which the Appeals Court rejected.
6/28. The House Judiciary Committee issued its reports on HR 1866 (Report 107-120) and HR 1886 (Report 107-121), both of which pertain to patent reexaminations. Both bills were approved by the Committee on June 20 by unanimous voice votes.
House Holds Hearing on the TEACH Act
6/27. The House Judiciary Committee's Subcommittee on Courts, the Internet, and Intellectual Property held a legislative hearing on S 487, the Technology, Education, and Copyright Harmonization Act of 2001, also known as the TEACH Act. This bill, which passed the Senate on June 7 by unanimous consent, would extend the distance learning exemption to infringement contained in Section 110 of the Copyright Act to Internet technologies.
Rep. Howard Coble (R-NC), the Subcommittee Chairman, and Rep. Howard Berman (D-CA), the ranking member, both advocated passage of S 487, as passed by the Senate, without further amendment. Rep. Coble stated that "it is my preference to move S 487 expeditiously and without amendment through the Committee and to the House floor." All witnesses advocated passage of S 487, as passed by the Senate. Register of Copyrights Marybeth Peters testified that the "Copyright Office strongly supports the carefully negotiated compromise reflected in S 487 as passed by the Senate." Allan Adler of the Association of American Publishers, and John Vaughn of the Association of American Universities, also testified in support of S 487.
Non Profit Libraries. There is a second version of the bill, HR 2100, the Twenty-First Century Distance Learning Enhancement Act, that is sponsored by Rep. Rick Boucher (D-VA) and Rep. Darrell Issa (R-CA). It has one major difference. It would add nonprofit libraries to the covered entities. The Senate bill covers educational institutions, but not libraries. The difference is significant. The original version of S 487 was opposed by content owners who feared that the original version would have allowed abuse of the exemption. Under the direction of the bill's cosponsors, Sen. Orrin Hatch (R-UT) and Sen. Patrick Leahy (D-VT), representatives of affected groups negotiated for several weeks to produce a compromise version of the bill. The Boucher version ignores that compromise, and the consensus that it built. Neither Rep. Boucher nor Rep. Issa attended the hearing, and no other member of the Subcommittee advocated their version of the bill.
Anti Circumvention Provisions. Rep. Zoe Lofgren (D-CA) had a different concern with the language of the bill. The bill requires that educational institutions "not engage in conduct that could reasonably be expected to interfere with technological measures used by copyright owners to prevent such retention or unauthorized further dissemination". She does not want the bill to prevent professors from presenting papers on encryption at academic conferences. She suggested that this language may warrant further clarification.
Background. S 487 would extend the exemption for distance learning to cover the Internet and other digital delivery media. The bill is of immediate concern to rural schools, where students are dispersed, and colleges that are offering online courses to distant students and busy adults who cannot attend their brick and mortar classroom sessions. The bill may also facilitate a shift from face to face classroom based models of education to online teaching models. When Congress amended copyright law in 1976 to create the distance learning exemption, the hot new technology was analog closed circuit TV. That statute did not reference the Internet. Also, the 1976 law did not address the copying of files from one computer to another that is an inherent part of the operation of the Internet. S 487 would exempt "work produced or marketed primarily for performance or display as part of mediated instructional activities transmitted via digital networks", provided that several conditions are met. One of these conditions is that it be "made by, at the direction of, or under the actual supervision of an instructor as an integral part of a class session offered as a regular part of the systematic mediated instructional activities of ... an accredited nonprofit educational institution".
Rep. Coble Comments on NYT v. Tasini
6/27. Rep. Howard Coble (R-NC), the Chairman of the House Courts, Internet and Intellectual Property Subcommittee, spoke with reporters after the TEACH Act hearing about the Supreme Court's June 25 opinion [PDF] in New York Times v. Tasini, a case regarding the application of copyright law to the republication of the articles of free lance writers in electronic databases. He stated that "I don't disagree with that opinion." However, he added, "Let us examine that in detail." He also stated that no groups have contacted him regarding legislation to change the outcome of NYT v. Tasini. Justice Stevens wrote in his dissent to that 7-2 opinion that "congressional action may ultimately be necessary".
eBay's Whitman Visits Congress
6/27. eBay P/CEO Meg Whitman spoke at a Congressional Internet Caucus luncheon. She was joined at the head table by Sen. Conrad Burns (R-MT), Sen. Bob Bennett (R-UT), Rep. Bob Goodlatte (R-VA), Jerry Berman and Todd Cohen (eBay Director of Public Policy). She advocated "anti spam legislation, including an e-mail anti harvesting prohibition". She elaborated that "what we see is robots come to the site ... who steal the e-mail addresses off of the site." This, she said, upsets eBay customers, and violates their privacy. However, she also stated that she is opposed to online privacy legislation at this time. She stated that "self regulation has a pretty good chance of succeeding." She also stated that the Internet shakeout has left fewer companies. These companies are stronger, and are in business for the long run, and hence, are less apt to commit privacy violations.
Whitman also advocated passage of "strong database protection". In the 106th Congress (1999-2000) the House Judiciary Committee and the House Commerce Committee passed vastly different database protection bills. Neither was considered on the House floor. Todd Cohen predicted that the House will pass a database protection bill in this Congress, because both committees now have new chairmen, Rep. James Sensenbrenner (R-WI) and Rep. Billy Tauzin (R-LA), who are committed to working together to pass a bill.
Whitman also advocated "increased cyber security penalties and enforcement." She said that "eight or ten times a day someone will try to hack the site." She also backed an "extension of the Internet tax moratorium."
Several Representatives attended the luncheon, including Sue Myrick (R-NC), Vern Ehlers (R-MI), Jeff Flake (R-AZ), Jane Harman (D-CA), Adam Smith (D-WA), and Lamar Smith (R-TX).
Brownback Introduces ILEC Relief Bills
6/27.  Sen. Sam Brownback (R-KS) introduced S 1126 [PDF] and S 1127 [PDF] in the Senate. S 1126 is titled the "Broadband Deployment and Competition Enhancement Act of 2001". S 1127 is titled the "Rural Broadband Deployment Act of 2001". Both are intended to incent the local phone companies to deploy of DSL services. Both follow the regulatory relief approach of the Tauzin Dingell bill, HR 1542. S 1126 would remove certain requirements imposed on incumbent local exchange carriers (ILECs) by Section 251 of the Telecom Act of 1996 when providing broadband services. S 1127 would provide further regulatory relief to ILECs, but applies only to rural areas.
"My singular objective, in both bills, is high-speed Internet access for everybody in America by 2007," said Sen. Brownback in a statement [PDF] in the Senate. "New approaches will be needed to achieve universal broadband availability. Some of my colleagues have introduced legislation consisting of tax incentives or loan subsidies. Programs such as these can help to deliver on the commitment to make broadband universally available, but these proposals alone will not achieve that goal. Deregulation has a key role to play in this effort." He continued that "The broadband market, distinct from the local telephone market, is new. Yet, federal and State regulators are placing local telephone competition regulations on broadband-specific facilities deployed by incumbent local exchange carriers (ILECs) – the only regulated broadband service providers – as if they were part and parcel of their local telephone service. This is simply not the case. The local telephone market is not synonymous with the broadband market. The disparate regulatory treatment of phone companies deploying broadband and all other broadband service providers is serving to deny broadband to many rural communities."
InterTrust Amends Patent Infringement Complaint
6/27. Intertrust Technologies filed an amended complaint [PDF] in U.S. District Court (NDCal) against Microsoft alleging infringement of U.S. Patents Nos. 6,185,683 and 6,253,193. The complaint was amended to include a claim of infringement of the '193 patent, which was issued on June 26. It discloses systems and methods for secure transaction management and electronic rights protection. The patent abstract states that "Electronic appliances such as computers equipped in accordance with the present invention help to ensure that information is accessed and used only in authorized ways, and maintain the integrity, availability, and/or confidentiality of the information." The '683 patent also pertains to digital rights management. The two count complaint seeks declarations that Microsoft has infringed, has induced others to infringe, and has contributorily infringed, both patents; it also seeks preliminary and injunctive relief, and damages.
NTIA and FTC Release Report on E-SIGN Consumer Consent Provision
6/27. The NTIA and FTC released a report on the consumer consent provisions of the E-SIGN Act. Last year, the Congress passed, and President Clinton signed, the Electronic Signatures in Global and National Commerce (ESIGN) Act, a bill intended to promote electronic commerce by providing for the acceptance of electronic signatures and records in interstate commerce. The Act required this report.
The report concluded that "the benefits of the consumer consent provision of ESIGN outweigh the burdens of its implementation on electronic commerce. The provision facilitates e-commerce and the use of electronic records and signatures while enhancing consumer confidence. It preserves the right of consumers to receive written information required by state and federal law. The provision also discourages deception and fraud by those who might fail to provide consumers with information the law requires that they receive. The consumer consent provision in Section 101(c)(1)(C)(ii) appears to be working satisfactorily at this stage of the Act's implementation." See also, NTIA release and FTC release.
Eileen Harrington, Associate Director of Marketing Practices at the FTC's Bureau of Consumer Protection, will testify regarding the report to the House Financial Services Committee's Subcommittee on Domestic Monetary Policy, Technology and Economic Growth at 9:30 AM on Thursday, June 28.
Powell Proposes 3G Delay
6/27. FCC Chairman Michael Powell wrote a letter [PDF] to Commerce Secretary Donald Evans regarding the timetable for identifying additional spectrum for use by third generation (3G) wireless services. 3G services are intended to bring broadband Internet access to portable devices. The Department of Commerce previously released a plan  suggesting the completion of a 3G allocation proceeding by the end of July. Chairman Powell wrote that "As July draws near, however, it is apparent that additional time is necessary to allow the Commission and the Executive Branch to complete a careful and complete evaluation of the various possible options for making additional spectrum available for advanced wireless services." He concluded that "the public interest would be best served by additional time for informed consideration, even if this results in some delay in reaching allocation decisions."
DOJ Requires Thomson to Divest Computer Based Testing Assets
6/27. The U.S. Department of Justice, Antitrust Division, reached an settlement agreement in which it approved Thomson Corporation's acquisition of Harcourt General Inc. businesses from Reed Elsevier subject to Thomson's sale of certain overlapping products and services resulting from the acquisition. Thomson will sell certain college textbook products and portions of Assessment Systems, Inc., a computer based testing business. To put this agreement into effect, the DOJ filed a complaint and proposed consent decree in U.S. District Court (DDC). See, DOJ release, Thomson release, and Reed Elsevier release.
Charles James, the recently appointed Assistant Attorney General in charge of the Antitrust Division, stated that "Without these divestitures, college students would likely have paid higher prices for a variety of important textbooks. In addition, both professional organizations that offer computer based tests, and candidates seeking to take those tests, would likely have faced higher prices and diminished innovation for such services."
Rep. Armey Addresses Privacy
6/27. House Majority Leader Dick Armey (R-TX) gave a speech to the Federalist Society on privacy. He stated that "We shouldn't allow ourselves to be distracted by false notions of privacy that encourage more government control over our lives. Instead, conservatives must embrace privacy -- but on our terms, not theirs. For privacy, properly understood, is about reining in the most intrusive force in the lives of Americans. Today, that force is the federal government."
FTC and Netpliance Reach Consent Agreement
6/27. The FTC filed a complaint [PDF] in U.S. District Court (WDTex) against Netpliance alleging violation of Section 5 of the Federal Trade Commission Act (FTCA), the Truth in Lending Act (TILA), and the FTC's Mail Order Rule. Netpliance is a Delaware corporation based in Austin, Texas, that sells i-opener, a basic Internet access device, and Internet access service. The FTC simultaneously filed a proposed consent decree [PDF] settling the matter.
Complaint. Count I of the complaint alleges that Netpliance engaged in deceptive advertising in violation of § 5 of the FTCA by claiming that the i-opener provides access to all of the Internet's content and by claiming that the i-opener is equivalent to a personal computer with respect to its Internet related performance. Count II alleges that Netpliance misrepresented the price of the i-opener, in violation of § 5 of the FTCA. Count III alleges that Netpliance failed to disclose that i-opener users must use Netpliance's ISP to access the Internet, in violation of § 5 of the FTCA. Count IV and V allege deceptive billing practices and unauthorized charging of debit and credit card numbers, in violation of § 5 of the FTCA. Count VI - VIII alleges violations of the TILA or Mail Order Rule.
Consent Decree. Under the terms of the proposed consent decree, Netpliance is enjoined from further deceptive advertising, required to reimburse consumers for improperly billed charges, and fined $100,000. This settlement is subject to court approval.
NIST Approves PIPS 140-2
6/27. The National Institute of Standards and Technology (NIST) published a notice in the Federal Register announcing its approval of Federal Information Processing Standard (FIPS) 140-2, Security Requirements for Cryptographic Modules. FIPS 140-2 supersedes FIPS 140-1, and is compulsory and binding on federal agencies for the protection of sensitive unclassified information. This standard is effective November 25, 2001. See, Federal Register, June 27, 2001, Vol. 66, No. 124, at Pages 34154 - 34155.
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6/27. Rep. John Dingell (D-MI) wrote a "Dear Colleague" letter [PDF] to members of Congress urging them to support HR 1542, the Tauzin Dingell bill.
6/27. The Metropolitan Washington Council of Governments gave the USPTO an award for its Trademark Work at Home Program. 90 out of 400 trademark examining attorneys telecommute from home using workstations supplied by the USPTO. See, USPTO release.
6/27. Rep. Bob Goodlatte (R-VA) and Rep. Rick Boucher (D-VA) introduced the Class Action Fairness Act.
6/27. The U.S. Court of Appeals (FedCir) issued its opinion in Durel v. Osram Sylvania, a patent infringement case involving electro- luminescent phosphor particles used to illuminate watches and instrument panels in cars. Reversed.
Subcommittee Holds Hearing on Internet Taxes
6/26. The House Judiciary Committee's Subcommittee on Commercial and Administrative Law held a hearing on HR 1552 and HR 1675, both of which are titled the "Internet Tax Nondiscrimination Act." These two bills would prevent state and local governments from imposing taxes on Internet access. HR 1552 would also extend the existing ban on multiple or discriminatory taxes on electronic commerce for five years, while HR 1675 would make it permanent. Gov. Tommy Engler and Democrats on the Subcommittee also advocated allowing states to impose sales taxes on e-commerce.
In late 1998 the Congress passed, and President Clinton signed, the Internet Tax Freedom Act (ITFA). It imposed a three year moratorium on multiple or discriminatory taxes on e-commerce, and Internet access taxes. This ban expires on October 21 of this year. At the Subcommittee hearing there was no debate over whether the existing moratorium should be extended, either temporarily or permanently. Instead, the debate focused on whether, and if so how, the Congress should also address the question of allowing state and local governments to impose sales taxes on remote sellers -- both catalogue and Internet.
Rep. Mel Watt (D-NC) stated that he is concerned about "the unlevel playing field between retailers who sell over the Internet and retailers who have fixed locations within the state." He added that "those problems will only get worse, not better, over time." Rep. John Conyers (D-MI), the ranking Democrat on the Judiciary Committee, and Rep. Anthony Weiner (D-NY), expressed similar concerns.
Rep. Chris Cox (R-CA), sponsor of the ITFA in 1998, as well as HR 1552 and 1675, testified regarding the various tax plans to "shake down the Net" that the ITFA precluded. Rep. Cox. stated that "the questions of sales tax simplification are important" but "are intellectually separable from" the extension of the ITFA moratorium. He stated that since "time is of the essence", the Congress should pass legislation extending the existing ban. See also, prepared statement of Rep. Cox.
Gov. James Gilmore (R-VA) testified in favor of passage of HR 1552 or 1675. Gov. Tommy Engler (R-MI) recommended that Congress "enact legislation giving the states the authority to collect and remit sales taxes and uses taxes". He also stated that there should be a uniform and simplified sales and use tax system. Robert Comfort testified on behalf of Amazon.com. He advocate passed of either HR 1552 or 1675.
Trade Promotion Authority Bill Introduced
6/26. Sen. Bob Graham (D-FL) and Sen. Frank Murkowski (R-AK) introduced a bill to provide the President with trade promotion authority, formerly known as fast track authority. Graham and Murkowski stated that the bill includes "worker rights, environment, information technologies, and compliance and enforcement to standard list of principal negotiating objectives." See, Graham release and Murkowski release. See also, State Department release.
Sen. Phil Gramm (R-TX), who is a cosponsor, stated in a release that "The president, without fast-track authority, has been helplessly sidelined in terms of trying to expand American markets through major trade negotiations. This bill gives us a very effective way to get America back in the game -- a game that we are experts at playing and a game that we can win. This bill allows trade agreements, under fast-track procedures, to include clearly trade-related labor and environmental concerns. But it does it in a very restrained and careful way so that no president can go out and negotiate in a trade agreement provisions that write domestic law."
Sen. Byrd Opposes Trade Promotion Authority
6/26. Sen. Robert Byrd (D-WV) spoke in the Senate against granting the President trade promotion authority. He stated that it would be "a wholesale surrender of Congress' constitutional authority over foreign commerce, as well as the evisceration of the normal rules of procedure for the consideration of Presidentially negotiated trade agreements." Sen. Byrd's speech was a reaction to the introduction in the Senate of S 1104 by Sen. Bob Graham (D-FL), Sen. Frank Murkowski (R-AK), and others.
Sen. Byrd also spoke on the importance of Roman history to the present debate over trade negotiations. "First, Sulla became dictator in 82 B.C. He was dictator from 82 to 80. Then he walked away from the dictatorship, and he became counsel in 79. He died in 78 B.C., probably of cancer of the colon," explained Sen. Byrd.
4th Circuit Rules on Class Action Certification
6/26. The U.S. Court of Appeals (4thCir) issued its opinion in Lienhart v. Dryvit Systems, a case regarding standards for granting a petition to appeal class certification under Federal Rule of Civil Procedure 23(f). The Appeals Court adopted a five factor sliding scale test to guide the consideration of such petitions. It followed, with elaboration, the test adopted by the 11th Circuit in Prado-Steiman v. Bush, 221 F.3d 1266 (2000). It also granted the petition in the present case, and held that certification of the class was inappropriate.
Rule 23(f) provides that "A court of appeals may in its discretion permit an appeal from an order of a district court granting or denying class action certification under this rule if application is made to it within ten days after entry of the order. An appeal does not stay proceedings in the district court unless the district judge or the court of appeals so orders."
ASCENT v. FCC
6/26. The U.S. Court of Appeals (DCCir) issued its opinion in ASCENT v. FCC, a petition for review of an FCC order. In 1999 the FCC issued an order in which it determined that the discount for resale provision of Section 251(c)(4) applies when an ILEC offers DSL service to an end user, but not when it offers DSL service to an ISP. ASCENT filed a petition for review of the FCC order, claiming that it is contrary to the Communications Act, and unreasonable. The Appeals Court denied the petition.
Gart v. Logitech
6/26. The U.S. Court of Appeals (FedCir) issued its opinion in Gart v. Logitech, a patent infringement case involving computer mouses. Samuel Gart holds U.S. Patent 4,862,165 which relates to ergonomically shaped computer mouses for reducing muscle fatigue. Gart filed a complaint against Logitech, a producer of mouses and other computer input devices, in U.S. District Court (CDCal) alleging infringement of this patent. On cross motions for summary judgment, the District Court determined that Logitech did not infringe the patent either literally or under the doctrine of equivalents. The District Court also determined on a motion for summary judgment the starting dates for accrual of damages pursuant to 35 U.S.C. § 287(a). Gart then brought this appeal. The Appeals Court vacated the grant of summary judgment of no infringement, either literally or under the doctrine of equivalents, and remanded for further proceedings. The Appeals Court also reversed in part the § 287 determination.
Privacy News
6/26. The Center for Digital Democracy released a report [PDF] on interactive television (ITV) and privacy. The report is titled "TV That Watches You: The Prying Eyes of Interactive Television." It concludes that "technology is now being put into place with the goal of collecting information from individual consumers and families. This information will be harvested in data profiles, which will then be used to target individual consumers with personalized advertising. The same technologies that threaten privacy on the Internet, including data mining, user modeling, and intelligent agents are now being adopted by the U.S. television industry."
6/26. The Association for Competitive Technology (ACT) released information regarding a public opinion poll on attitudes regarding privacy. The ACT stated that "76% of consumers feel that privacy protection is a priority, but not a top priority. Consumers put the issue of strengthening privacy protections behind improving education, fighting crime and drug abuse, reforming health care, dealing with the energy problem, protecting the environment and reforming Social Security and Medicare. Privacy was ranked 7th out of nine issues of social concern." See, ACT release and summary. The ACT did not publish the poll questions.
What Digital Divide?
6/26. The Progressive Policy Institute (PPI), a Democratic think tank, released a report [PDF] titled "Clear Thinking on the Digital Divide". The reports states that "there is no compelling rationale for the government to subsidize computer purchases and Internet access for individuals. Broad subsidization is not warranted at a stage when many non-users could afford to become users if they wished to." The report concludes that "It's easy to forget that the Internet and the World Wide Web are still in their infancy -- a decade ago, there were less than 50 Web sites in existence. At such an early stage, we would expect differential rates of takeup by different groups of Americans. But that doesn't mean that public policy should not work to increase Americans' access to these key technologies. We believe that the best way to do this for now is to help expand community access, especially by leveraging private sector funding, leadership, and volunteers." Andrew Leigh and Robert Atkinson wrote the report. See also, PPI release.
Digital Rights Management Patent
6/26. The U.S. Patent and Trademark Office issued U.S. Patent No. 6,253,193 to InterTrust Technologies Corp. InterTrust, which is based in Santa Clara, California, provides digital rights management software. The patent discloses systems and methods for secure transaction management and electronic rights protection. The patent abstract states that "Electronic appliances such as computers equipped in accordance with the present invention help to ensure that information is accessed and used only in authorized ways, and maintain the integrity, availability, and/or confidentiality of the information." See, Intertrust release.
The bill is cosponsored by Rep. Howard Coble (R-NC), Chairman of the House Courts, Internet, and Intellectual Property Subcommittee.
More News
6/26. FCC Commissioner Kathleen Abernathy hired Matthew Brill to be her common carrier Legal Advisor. He previously worked at the law firm of Wilmer Cutler & Pickering in its Communications Group. He has represented AOL, other ISPs, and wireline and wireless carriers in proceedings before the FCC and in federal courts of appeals. See, release.
6/26. The House Science Committee's Subcommittee on Research held a hearing titled Reinventing the Internet: Promoting Innovation in IT. The witnesses were Eric Benhamou (3Com), Anita Jones (Univ. of Virginia), Alfred Berkeley (Nasdaq), and Cita Furlani (National Coordination Office for Information Technology R&D).
6/26. EU Competition Commissioner Mario Monti gave a speech in Brussels on antitrust cooperation between the U.S. and E.U.
People
6/26. Annette Elinger joined the Seattle office of the law firm of Preston Gates & Ellis as of counsel in the firm's Business Department and, the emerging growth company and venture capital practice group. Her practice emphasizes business transactions and general corporate matters, particularly private and public equity financings, venture capital transactions, mergers and acquisitions, and strategic transactions for emerging and developing entities, including technology and intellectual property agreements. See, release.
6/26. David Ogden joined the Washington DC office of the law firm of Wilmer Cutler & Pickering as a partner. He was previously Assistant Attorney General for the Civil Division of the U.S. Department of Justice. See, release.

Go to News Briefs from June 21-25, 2001.