News from April 6-10, 2002
House Passes Digital Technology Corps Act
4/10. The House amended and passed HR 3925, the Digital Technology Corps Act of 2002, on a voice vote. This bill, which is sponsored by Rep. Tom Davis (R-VA), would create an information technology worker exchange program between the federal government and the private sector to promote the development of expertise in IT management.
The bill provides that "On request from or with the agreement of a private sector organization, and with the consent of the employee concerned, the head of an agency may arrange for the assignment of an employee of the agency to a private sector organization or an employee of a private sector organization to the agency".
The House approved approved by voice vote an amendment offered by Rep. Nydia Velazquez (D-NY) to provide that of assignments made under bill from agencies to private sector organizations in each year, at least 20% are to small businesses. The House also approved by voice vote an amendment offered by Rep. Davis to insert clarifying provisions, and to add reporting requirements.
However, the House rejected an amendment offered by Rep. Henry Waxman (D-CA) by a vote of 204-219. this amendment would have inserted provisions providing for protection of trade secrets, and provisions for a Federal Information Technology Training Program. It was rejected on an almost straight party line vote, with all but one Republican, only four Democrats voting to defeat the amendment. See, Roll Call No. 83. Two of the votes against came from Rep. Zoe Lofgren (D-CA) and Rep. Ellen Tauscher (D-CA), both from the Silicon Valley area. A third came from Rep. Jane Harman (D-CA).
House Commerce Committee Approves Dot Kids Bill
4/10. The House Commerce Committee approved HR 3833, the Dot Kids Implementation and Efficiency Act of 2002. The Committee approved an amendment in the nature of a substitute [PDF] by a unanimous voice vote, and then approved the bill as amended by a unanimous voice vote. The bill is sponsored by Rep. John Shimkus (R-IL), Rep. Ed Markey (D-MA), and others.
The bill would require the Department of Commerce's National Telecommunications and Information Administration (NTIA) to operate a .kids second level domain within the .us country code domain. Currently, the NTIA has contracted with NeuStar to act as the registry of the .us country code. The amendment adds new language to ensure that the new .kids.us domain will in fact be safe for children. For example, it prohibits interactive services, such as chat, instant messaging and e-mail, in the new domain, unless the web site operator can certify that such services can be offered in a manner that is consistent with the content standards of the new domain.
Rep. John Dingell (D-MI), the ranking Democrat on the Committee, said in his opening statement that "In recent years there were several unsuccessful attempts to create a kid-friendly top level domain similar to what we are considering today. Unfortunately, these attempts were rebuffed by ICANN, the international group responsible for assigning top level domain names. HR 3833 takes an innovative approach to dealing with ICANN’s recalcitrance. It simply sidesteps the ICANN process by creating a second level domain name under the "dot US" country code which will be entirely under the United States' control."
The bill, as amended, would amend the NTIA Organization Act, 47 U.S.C. § 902, by assigning to the NTIA "responsibility for providing for the establishment, and overseeing operation, of a second- level Internet domain within the United States country code domain in accordance with" the provisions of the bill.
The bill further provides that "The NTIA shall require the registry selected to operate and maintain the United States country code Internet domain to establish, operate, and maintain a second-level domain within the United States country code domain that provides access only to material that is suitable for minors and not harmful to minors".
The bill further provides a series of requirements for the contract between the NTIA and the registry that maintains the new domain. It requires "Rules and procedures for enforcement and oversight that minimize the possibility that the new domain provides access to content that is not in accordance with the standards and requirements of the registry" and "A process for removing from the new domain any content that is not in accordance with the standards and requirements of the registry."
The bill also requires that the registrar to enter into written agreements with registrants "to prohibit two-way and multiuser interactive services in the new domain, unless the registrant certifies to the registrar that such service will be offered in compliance with the content standards ... and does not compromise the safety or security of minors."
However, some of the requirements imposed by the bill would not only tend to assure that the new domain is safe for children, but also would also tend to deter potential web hosts from using the new domain. For example, registrars would be required to enter into written agreements with all users of the new domain "to prohibit hyperlinks in the new domain that take new domain users outside of the new domain." Thus, a user of the new domain could not hyperlink to children's web sites in the .com domain. (Also, the bill does not define the term "hyperlinks".)
Secondly, the bill requires "Procedures and mechanisms to promote the accuracy of contact information submitted by registrants and retained by registrars in the new domain." Thus, parents creating web sites might be deterred from using the new domain, for fear that it would require them to publish their (and their children's) home phone number and address.
House Commerce Committee to Hold Hearing on Digital TV
4/10. Rep. Billy Tauzin (R-LA), the Chairman of the House Commerce Committee, announced that the Committee will hold a hearing on digital television -- probably on April 25. He added that it would be an "educational hearing". He made this announcement at the conclusion of the Committee's mark up of HR 3833, the Dot Kids Implementation and Efficiency Act.
Rep. Jane Harman (D-CA) stated that, "it takes both sides. It takes supply, and it takes demand. And, we do have to deal with this very tough issue of how to protect intellectual property rights, as we think about how to expand supply as well. And getting the balance right is hard. This Committee is good at dealing with hard things. Maybe that too could be the subject of one of these briefings or interactive events."
Rep. Tauzin responded. "There has been discussions -- extensive, bipartisan, round table discussions." He added that "we may end up having to follow up the agreement made by the industry with legislation, both to enforce the agreements, and even to authorize the FCC in some aspects."
Spectrum Auctions 31 and 34
4/10. Tom Sugrue, Chief of the Federal Communications Commission's (FCC) Wireless Telecommunications Bureau, sent a letter [PDF] to Tom Wheeler, P/CEO of the Cellular Telecommunications & Internet Association (CTIA) denying the CTIA's request for an indefinite postponement of the FCC's auction of licenses in the Upper and Lower 700 MHz bands, Auction Numbers 31 and 44.
The CTIA's Wheeler criticized this FCC decision. He stated in a release that "it is mind boggling that the FCC would deny an auction delay that was requested in the President's budget, assumed by the Senate Budget Committee, and that would help provide better public safety ... Going forward with a June auction severely limits the ability to develop a rational spectrum management policy. Once this valuable block of spectrum had the potential to be part of the solution to the spectrum crisis; this decision just made it part of the problem."
Entities seeking to participate in Auction Nos. 31 and 44 must submit short form applications by May 8, 2002.
House CJS Subcommittee Holds Hearing on FTC Budget
4/10. The House Appropriations Committee's Subcommittee on Commerce, Justice, State, and the Judiciary (CJS) held a hearing on the proposed budget for the Federal Trade Commission (FTC) for FY2003. FTC Chairman Timothy Muris said in his prepared testimony that the FTC requests $176,599,000 and 1,074 full time employees.
This is an an increase over FY2002 of $20,617,000, but no additional full time employees. Muris' testimony outlines the activities of the FTC in both consumer protection and antitrust enforcement.
Privacy. With respect to privacy, Muris stated that "The FTC will pursue law enforcement efforts in the following areas: Enforcing privacy promises, focusing on cases involving sensitive information, transfers of information as part of a bankruptcy proceeding, and the failure of companies to meet commitments made under the Safe Harbor Program to comply with the European Commission's Directive on Data Protection. ... Enforcing the Children's Online Privacy Protection Act (COPPA), which prohibits the collection of personally identifiable information from young children without their parents' consent. ... Bringing actions against fraudulent or deceptive spammers. ... Challenging ``pretexting,´´ the practice of fraudulently obtaining personal financial information, often by calling banks under the pretense of being a customer. ... Enforcing the privacy protections of the Fair Credit Reporting Act, which ensures the integrity and accuracy of consumer credit reports and limits the disclosure of such information to entities that have ``permissible purposes´´ to use the information."
Muris also stated that the FTC is involved in two privacy related rulemaking proceedings -- one involving proposed amendments to the Telemarketing Sale Rule, and the other pertaining to safeguarding consumers' financial information pursuant to the Gramm Leach Bliley Act.
He also stated that the FTC will conduct workshops and other educational activities, including the training of law enforcement officials about identity theft, collecting information about identity theft with the FTC's new ID Theft Affidavit, and continuing "to explore and monitor the privacy implications of new and emerging technologies through workshops, reports, and other public meetings."
Finally, he testified that the FTC "will continue aggressively to monitor the Internet to ferret out frauds and schemes." He added that "A growing number of these high tech schemes exploit the design and architecture of the Internet."
Antitrust: merger enforcement. With respect to the FTC's competition authority, Muris stated in his prepared testimony that "Merger enforcement will continue as a major focus of the competition agenda for FY 2003. Stopping mergers that lessen competition ensures that consumers will have the benefit of lower prices and greater choice in their selections of goods and services." He added that the recently increased Hart Scott Rodino Act (HSR) filing threshold, coupled with economic conditions, have reduced the number of HSR filings by approximately two thirds from their peak.
Antitrust: agreement with Antitrust Division. Muris also stated that the FTC "has been working with the Antitrust Division at the Department of Justice to establish procedures to make the HSR merger review process more efficient and transparent. The FTC has focused on several areas for streamlining". He cited the agreement reached by Muris and Assistant Attorney General for Antitrust Charles James to allocate matters between the two agencies.
Sen. Ernest Hollings (D-SC), the Chairman of the Senate Appropriations Committee's CJS Subcommittee, has opposed this agreement. In addition, two FTC Commissioners submitted testimony criticizing the deal. Commissioner Sheila Anthony stated in her prepared testimony that "I support the Commission's testimony before this Subcommittee, except that part which discusses the clearance procedures for merger investigations. While ``streamlining the merger review process´´ is a laudable goal that deserves our attention, I am not convinced that the approach agreed to by Chairman Muris and Assistant Attorney General Charles James fully maximizes the unique makeup, experience, and institutional assets of the Commission." See also, Commissioner Mozelle Thompson's prepared testimony.
Antitrust: nonmerger enforcement. Muris continued that "The FTC will continue the trend, begun last year, to devote more resources to nonmerger enforcement. In FY 2001, the agency opened 56 nonmerger investigations, more than double the number of such investigations begun in the previous year, when deadline sensitive HSR merger investigations siphoned away resources allocated for nonmerger work. Thus far in FY 2002, the agency has opened 15 nonmerger investigations. The major focus of our nonmerger work will concern activities among competitors, reflecting the broad consensus in antitrust policy that horizontal arrangements that fix prices or restrict output are the ones most likely to harm consumers."
Antitrust: intellectual property. Muris also addressed the FTC's current review of antitrust law and intellectual property. He stated that "Our economy increasingly has become more knowledge based; for some companies, patent portfolios represent far more valuable assets than manufacturing or other physical facilities. Thus, an increasing number of the FTC's competition matters require the application of antitrust law to conduct relating to intellectual property. Both antitrust and intellectual property law share the common purposes of promoting innovation and enhancing consumer welfare. On occasion, however, there have been tensions in how to manage the intersection between the doctrines, as well as questions about how best to spur innovation through competition and intellectual property law and policy. The FTC and DOJ currently are holding a series of hearings on competition and intellectual property law and policy to help understand the interplay between intellectual property and antitrust law. Issues to be addressed in the hearings include standard setting, cross licensing and patent pools, unilateral refusals to deal, proliferation of patents, and the changing scope of patents. In addition to the hearings, we continue to pursue antitrust investigations involving issues concerning intellectual property."
Panel Discusses E-Learning
4/10. The Congressional Internet Caucus Advisory Committee hosted a luncheon panel discussion on the use of e-learning. The participants included Sen. Conrad Burns (R-MT) and Rep. Johnny Isakson (R-GA), who focused on the use of e-learning for educational purposes.
Rep. Isakson was the Vice Chairman of the Web-based Education Commission, which issued a report titled "The Power of the Internet for Learning: Moving from Promise to Practice" in December 2000. Former Sen. Bob Kerrey (D-NE) was the Chairman.
Rep. Isakson is also the sponsor of HR 1992, the Internet Equity and Education Act of 2001, a bill that would make it easier to obtain federal financial aid for web based education programs. This bill was approved by the House Education Committee on August 1, 2001. Rep. Isakson is a member of the Committee.
He said that "Most of the insolvable problems of public education in America are within reach of solution by the use of the web and the Internet." He cited examples of Internet based education in Ethiopia, in Bosnia, and in rural Georgia.
"So, the promise of e-learning is great. We in Congress have a lot to do," said Rep. Isakson. "We have got to deliver on database protection. We have got to deliver on copyright laws in a digital world. We have got to deliver on protection of intellectual property, or you won't have anything on the Internet worth a damn, because anything that is worthwhile, without protection for intellectual property rights, would not be rapidly disseminated. But the web offers great promise to us upon the single most important thing for the future of our country and our children, and that is the advancement of education of every single American citizen."
A panel of industry speakers focused on the use of e-learning by corporations and the government to train workers. This panel Rich Moran (Accenture), Daniel Hamburger (Indeliq), Greg Priest (SmartForce), and retired Brig. Gen. Frank Anderson (Defense Acquisition University).
Greg Priest stated that "there are things that could be done that would be very helpful." He cited legislation that provides "for more tax incentives for companies to do learning activities." He also said that Department of Education Title IV regulations with respect to eligibility for federal funds is an issue. He stated that "There are limitations on the ability to get Pell Grants, and those kinds of funds, based on your physical presence on campus." He stated that that "puts inhibitions in the way of degree related material."
Rep. Isakson Addresses E-Learning, IPR and Broadband
4/10. Tech Law Journal spoke with Rep. Isakson following the Congressional Internet Caucus panel discussion on e-learning. He stated that, currently, "the courts are having to interpret laws written for a paper and pencil world in a digital age." Hence, Congress should step in and pass legislation to provide "adequate protection, for maximum dissemination, of quality content. Otherwise, the Internet, and all of its promise, is going to be relegated in large part to pormography, games, office pools on athletic events, and stuff like that." He stated that "until we deal with the intellectual property, and the copyright, and the database protection, you are inhibiting the dissemination of information. And you are inhibiting the full promise of web based learning."
He discussed efforts to date to pass a distance learning bill, such as that sponsored by Sen. Patrick Leahy (D-VT) and supported by Rep. Howard Coble (R-NC), as well as efforts to pass various database protection bills. He stated that "there is a school of thought that we need to deal with this in a comprehensive, rather than a piecemeal manner. And, that may be the reason, but I can't particularly address why the Leahy bill hasn't come up in the House. I can tell you, and this is not a criticism of my colleagues, but this is a general statement, the level of understanding of the importance of dealing with this expeditiously does not exist. Until we deal with the intellectual property, and the copyright, and the database protection, you are inhibiting the dissemination of information. And you are inhibiting the full promise of web based learning."
Sen. Leahy's bill is 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, 2001, by unanimous consent, would extend the distance learning exemption to infringement contained in Section 110 of the Copyright Act to Internet technologies. It was approved by the House Subcommittee on Courts, the Internet and Intellectual Property on July 11 of last year. The full House has not yet voted on it.
Rep. Isakson also elaborated on the need for database protection. He said that "when people currently can transfer data off the web and re-label it and put it on their own site, it is the same thing as breaking in your office and stealing your files. And, in a digital world, we have to be able to provide reasonable protection on the re-use, or the conversion, of information, and the re-branding of it."
Rep. Isakson stated that he has been working with Rep. Coble in an effort to pass a database protection bill. He added that "there are those that think that everything ought to be on the Internet, and everything ought to be free. Well, in the absence of protection right now, about the only protection that an institution like Riverside Publishing, or one of the major educational publishing companies has, is by selling site licenses, a very cumbersome process. There are a number of lawsuits right now ... and law will be established through cases, but I think Congress really ought to move as quickly as it can to put down a framework in law that passes with good debate and good insight."
He said that it would probably be impossible to pass a single comprehensive bill, "because it creates too many opportunities to loose the whole thing over one thing. But, I certainly think we need to have a comprehensive approach. Database protection, copyright, and intellectual property rights are all closely linked, in one way or another."
Rep. Isakson also stated that the absence of widespread broadband Internet access holding back e-learning. He discussed the current regulatory framework affecting cable and phone companies, and then launched into a discussion of broadband via satellite. He stated that "satellite broadband to me is going to be a major solution once they are launched, because that it is wireless broadband, so you don't have the heavy cost of infrastructure. It is cheaper to provide satellite access, as expensive as a satellite and a launch is, than it is to lay cable. And in a state like Montana, or in rural Georgia, you can't get enough subscribers in the rural areas to pay for the cost, or amortize the cost of the cable. But with wireless access, wireless broadband by satellite ... you can take broadband access to the most remote village in Africa. And, I think is a major part of the broadband solution."
Martin and Copps Criticize FCC Media Bureau's EchoStar Two Dish Order
4/10. Federal Communications Commission (FCC) Commissioners Kevin Martin and Michael Copps issued a joint statement criticizing the FCC Media Bureau's April 4 Declaratory Ruling and Order [21 pages in PDF], which declared that EchoStar's two dish plan violates the Satellite Home Viewer Improvement Act of 1999 (SHIVA). They stated, "We fear that the Bureau Order will allow EchoStar to continue its two-dish policy – albeit with better notice – in a manner that continues to make some local broadcast signals inaccessible to consumers as a practical matter."
EchoStar, which is also known as the Dish Network, provides direct broadcast satellite (DBS) television service. EchoStar has placed some local stations in particular markets on "wing slot" satellites. As a result, some EchoStar subscribers are required to use a second satellite dish antenna to receive and view these local stations.
The SHVIA grants EchoStar, and other DBS carriers, a royalty free copyright license that enables them to make secondary transmissions of a broadcast station's signals into that station's local designated market area (DMA) without obtaining authorization from copyright holders. In exchange, the SHIVA requires that if a satellite carrier carries one local broadcast station in a local market pursuant to this license, it must carry all qualified local broadcast stations in the market upon request. This is the "carry one, carry all" rule.
The SHIVA also provides, at 47 U.S.C. § 338(d), that "the satellite carrier shall retransmit the signal of the local television broadcast stations to subscribers in the stations' local market on contiguous channels and provide access to such station's signals at a nondiscriminatory price and in a nondiscriminatory manner on any navigational device, on-screen program guide, or menu."
Martin and Copps wrote that "In passing SHVIA, Congress ensured that a satellite carrier choosing to offer any local broadcaster would be required to carry all local stations in a nondiscriminatory fashion. The Bureau Order found that EchoStar’s actions discriminated against some signals, in violation of the statutory nondiscrimination requirement. Yet the Bureau Order also found that more effective notice of this discrimination would be sufficient to remedy EchoStar’s actions and bring its two-dish plan into compliance.  We believe the nondiscrimination requirements of the statute, Congressional intent, and Commission rules all demand more."
USTR Zoellick Addresses IPR and IT in China
4/10. U.S. Trade Representative (USTR) Robert Zoellick held a press conference in Beijing, China, in which he addressed intellectual property rights (IPR), information technology, and other topics. See, transcript.
Regarding IPR, he had this to say. "But there's still a long way to go. One of the other points I've tried to make in this -- and this gives you a feel for the conversations I'm trying to have with people -- is that IPR is critically linked to investment because most companies coming in these days are now in knowledge industries. So, if you want to continue to be a location that draws foreign investment -- and that's the other thing you can see how they're using foreign business participation to help increase competitiveness -- it's in their own interest to do this. And then on top of that you take a society like China where I suspect that its intellectual property development is going to be pretty high, whether it be in software or other areas, and it's in their own interest. So, the idea is to share how it's in their self-interest to take action, but obviously to recognize that this is a problem that still needs a lot of work."
He also stated that "China has been trying to become a member of the Information Technology Agreement and it's very close to doing so. They had some restrictions on the ability to import IT products through requirements for end-user approval. We think we can work those out."
Antitrust and Intellectual Property
4/10. Sen. Orrin Hatch (R-UT) and Sen. Charles Schumer (D-NY) introduced S 2082, the Playwrights Licensing Relief Act of 2002, a bill to modify the application of the antitrust laws to permit collective development and implementation of a standard contract form for playwrights for the licensing of their plays. It was referred to the Senate Judiciary Committee, of which Sen. Hatch is the ranking Republican, and Sen. Schumer is a member.
The bill would provide that "the antitrust laws shall not apply to any joint discussion, consideration, review, action, or agreement for the express purpose of, and limited to, the development of a standard form contract containing minimum terms of artistic protection and levels of compensation for playwrights by means of (1) meetings, discussions, and negotiations between or among playwrights or their representatives and producers or their representatives; or (2) joint or collective voluntary actions for the limited purposes of developing a standard form contract by playwrights or their representatives."
Sen. Hatch explained his bill in the Senate. "This bill is necessary both to ensure the continued vitality of American live theater and to protect the intellectual property and artistic rights of playwrights. ... Playwrights and their voluntary peer membership organization, the Dramatists Guild, operate under the shadow of the antitrust laws, and substantially without the ability to coordinate their actions in protecting their interests. This has impeded playwrights' ability to act collectively in dealing with highly organized and unionized groups, such as actors, directors, and choreographers, on the one hand, and the increasingly consolidated producers and investors on the other." See, Cong. Rec., April 10, 2002, at S2486.
Gateway to Campaign Against Hollings Bill
4/10. Computer maker Gateway announced that it will wage a publicity campaign against S 2048, the Consumer Broadband and Digital Television Promotion Act, a copy protection bill sponsored by Sen. Ernest Hollings (D-SC) and others. Gateway stated that it will "take a stand with consumers on the digital music debate, launching the first mainstream marketing campaign by a technology company supporting consumers' right to enjoy digital music legally." Gateway added that is will employ TV, radio, web and in store advertising. See, Gateway release.
DOC Official Addresses Tech Policy
4/10. Bruce Mehlman, Assistant Secretary for Technology Policy at the Commerce Department, gave a speech titled "Our Digital Future" to the European American Business Council Digital Economy Workshop in Brussels, Belgium. He advocated the benefits of new technologies, reviewed Bush administration policy initiatives, and discussed pending technology related policy debates.
He stated that "IT brings a history of minimal regulation, robust competition, rapid innovation, market driven economics and falling prices. Telecom has traditionally been heavily regulated, monopolistic, slow to change, heavily subsidized and often marked by high prices. While convergence of information technology and telecom creates wonderful innovations and new services for consumers, it's giving regulators and policy leaders fits."
He then recited some of the issues that are giving regulators fits, such as "how to protect privacy without hindering innovation when data is so easily captured, manipulated and transmitted; how to ensure security in the face of distributed and multinational hackers; and how to pursue law enforcement when wrong doers may live offshore or conceal their communications".
He also asked rhetorically, "How do we protect intellectual property rights in an online world with peer to peer technologies, without strangling innovation in products and services?" He also identified two other troublesome issues: spectrum management, and providing widespread access to new technologies.
Mehlman also listed the areas where the Bush administration has adopted policies. He stated that "the President has proposed aggressive investments in research & development. Our 2002 budget crossed the $100 billion mark for the first time (at $103B), and we have proposed $112 billion for 2003 -- the largest R&D commitment in our nation's history. We're also asking Congress to make the R&D tax credit permanent, to reflect the importance of private investments in R&D, which are twice as large as government's. We're seeking to strengthen intellectual property protection -- both by devoting far more resources to the U.S. Patent & Trademark Office (21% more in 2003), and by enforcing IPR aggressively at home and abroad. Additionally, the President has asked Congress to devote another $200 million to improving math and science teaching at the K-12 level".
He listed the President's tax initiatives, including tax cuts, and accelerated depreciation schedules. He also stated that the administration is supporting legislation to give the President trade promotion authority, and legislation "to reform the Export Administration Act to make it less burdensome for our technology companies to export new tech equipment consistent with national security concerns."
He also stated that "the President's technology priorities include hardening the nation's defenses, especially critical infrastructure protection and cyber security".
People and Appointments
4/10. AT&T announced the election of Frank Herringer and Tony White to its board of directors. Herringer is Chairman of Transamerica Corporation, a financial services company. White is Chairman, President and CEO of Applera Corporation, formerly PE Corporation, a provider of products, services and information in life sciences. See, AT&T release.
House to Vote on Digital Tech Corps Bill
4/9. The House Rules Committee adopted a rule for consideration of HR 3925, the Digital Tech Corps Act of 2002. It adopted an open rule that provides for one hour of debate.
This bill would create an information technology worker exchange program between the federal government and the private sector in order to promote the development of expertise in IT management. It provides that "On request from or with the agreement of a private sector organization, and with the consent of the employee concerned, the head of an agency may arrange for the assignment of an employee of the agency to a private sector organization or an employee of a private sector organization to the agency".
FBI's Internet Fraud Data
4/9. The Department of Justice's (DOJ) Federal Bureau of Investigation (FBI) issued a press release in which it stated that its Internet Fraud Complaint Center (IFCC) has written a statistical report on Internet fraud complaints.
The FBI stated that the top five categories of complaints are auction fraud (43% of all complaints), non deliverable merchandise and non payment (20.3%), Nigerian letter fraud (15.5%), credit and debit card fraud, and confidence fraud. See, FBI release.
These finding differ from those of a similar report released by the Federal Trade Commission (FTC) on January 23, 2002. The FTC ranking the top ten categories of consumer complaints to the FTC: Identity Theft (42%), Internet Auctions (10%), Internet Services and Computer Complaints (7%), Shop at Home and Catalog Offers (6%), Advance Fee Loans and Credit Protection (5%), Prizes/ Sweepstakes/ Gifts (4%), Business Opportunities and Work at Home Plans (4%), Foreign Money Offers (4%), Magazines and Buyers Clubs (3%), Telephone Pay Per Call/ Information Services (2%). See, FTC release.
The FTC report is based upon 204,000 consumer complaints of all kinds submitted in 2001. The FBI report is based upon 49,711 Internet related complaints in 2001.
The IFCC web site states that it is a "partnership" and "venture" of the FBI and the National White Collar Crime Center (NW3C). The NW3C web site states that it is funded by the DOJ.
USTR Zoellick Addresses Chinese History, Globalization, and WTO
4/9. U.S. Trade Representative (USTR) Robert Zoellick gave a speech at the Chinese University of Finance and Economics in Beijing, China. He spoke about Chinese history, globalization, and China's entry into the World Trade Organization (WTO).
He stated that "As a WTO member, China is supposed to greatly reduce tariff and non-tariff barriers. It will need to improve protection and enforcement of intellectual property rights. It needs to allow companies engaged in telecommunications, computer services, banking, securities, insurance, freight forwarding, and wholesale and retail distribution to invest in China, providing services of value and spurring domestic competition.
He added that "As a result, China's membership in the WTO will mean lower prices, greater consumer choice, greater enterprise efficiency, enhanced productivity, higher wages, new jobs, and more opportunity. Our goal now should be to work together to assure that China's commitments are implemented faithfully and on schedule, and to assure that China, in turn, can utilize WTO rules to prevent other countries from closing their markets unfairly to Chinese goods. I want to repeat a key phrase -- we should work together."
Zoellick also offered his advice regarding the requirements for a successful modern economy, including: "A transparent system of laws and regulations that are enforced fairly, eliminating opportunities for corruption and favoritism. Protection of property rights, so that people can keep the fruits of their labor and build for the future for themselves and their children. A pricing system reflecting supply and demand of individual consumers and businesses, not state imposed diktats. Competition, so people are inspired to give their best, to improve, to reach within themselves to tap their full potential."
Zoellick is on a trip to China and Japan on April 8-11.
IPR News
4/9. The U.S. Patent and Trademark Office (USPTO) published a notice in Federal Register stating that it will hold a public hearing on May 16 on its proposed plan to eliminate the paper patent and trademark registration collections from its public search facilities, and to transition to electronic patent and trademark information collections. The USPTO is seeking public comment on issues related to this proposal. The USPTO is also seeking input on whether any governmental entity or non-profit organization is interested in acquiring the paper patent and trademark registration collections to be removed from the USPTO's public search facilities. The deadline to submit requests to speak at the public hearing is April 30. See, Federal Register, April 9, 2002, Vol. 67, No. 68, at Pages 17055 - 17060.
4/9. The Recording Industry Association of America (RIAA) announced that it "reached an out of court settlement for $1 million with Integrated Information Systems, Inc. (IIS), a high tech company that ran a dedicated server permitting its employees to access and distribute thousands of infringing MP3 files over the corporate network." See, RIAA release.
4/9. The Recording Industry Association of America (RIAA) announced "a $3.2 million settlement with DOCdata USA, a CD manufacturing facility, to resolve claims of copyright infringement." See, RIAA release.
Sen. Baucus Introduces Rural Spectrum Bill
4/9. Sen. Max Baucus (D-MT) and Sen. Tim Johnson (D-SD) introduced S 2075, the Rural Electromagnetic Spectrum Access Act of 2002 (RESA), a bill to facilitate the availability of electromagnetic spectrum for the deployment of wireless based services in rural areas. The bill was referred to the Senate Commerce Committee.
It would amend 47 U.S.C. § 309j by providing that "In order to facilitate the deployment of wireless based services in rural areas, the Commission shall, when more than one license is available (as determined by the Commission) within a single block of the electromagnetic spectrum, award at least one license in such block of spectrum for a rural service area (RSA) or similarly sized geographic area." (Parentheses in original.)
Sen. Baucus spoke about his bill in the Senate. He stated that "Wireless communications is revolutionizing the way we communicate. It allows us to place calls from anywhere in the world to anywhere in the world. We can check our favorite websites, and even stay in touch with family and friends through email, all without a phone line."
He continued that "Due to the way the FCC distributes spectrum, rural America is finding it more and more difficult to get quality wireless service. The current system distributes spectrum on very large geographic areas, which in effect, inhibits certain carriers from participating in wireless auctions. Since the geographic licensing areas are so large and the price for the spectrum is equally as large, rural carriers often find it difficult bidding on the spectrum. My legislation will correct this inequity."
He concluded that "RESA requires the Federal Communications Commission, in future auctions, to distribute spectrum on smaller geographic levels. It does not favor one type of carrier over another, or pick which carrier can serve which areas. Rather, it simply allows carriers to bid on spectrum that they find difficult under today's system." See, Cong. Rec., April 9, 2002, at S2414.
People and Appointments
4/9. AOL Time Warner announced that Barry Schuler, who has been Chairman and CEO of America Online, "will lead a new division that will develop digital services for AOL Time Warner platforms. Mr. Schuler, who will relinquish his responsibilities as head of America Online, will continue to report to AOL Time Warner COO-elect Bob Pittman. Mr. Pittman, who ran America Online's operations before the AOL Time Warner merger, will take over Mr. Schuler's operating responsibilities at AOL. Mr. Pittman will also continue to fulfill his responsibilities as COO-elect of AOL Time Warner." See, AOLTW release.
More News
4/9. The Commodity Futures Trading Commission's (CFTC) published a notice in Federal Register stating that its Technology Advisory Committee will hold a public meeting on April 24 on technology related issues in the financial services and commodity markets, including cyber security. See, Federal Register, April 9, 2002, Vol. 67, No. 68, at Page 17060.
4/9. The Cato Institute announced that it will host a panel discussion titled "A Progress Report on the HDTV Transition" on May 1. The scheduled speakers are Mark Cuban (HDNet), Thomas Hazlett (Manhattan Institute), Rick Chessen (FCC), David Donovan (Association for Maximum Service Television), Michael Calabrese (New America Foundation), and Richard Wiley (Wiley Rein and Fielding). See, agenda and online registration page.
4/9. The World Trade Organization (WTO) and Cambridge University Press (CUP) launched a new scholarly journal named the World Trade Review. WTO Director General Mike Moore stated that "The mission of this Journal is to publish peer reviewed articles which contribute to public discussion and debate about the multilateral trading system". See, WTO release.
4/9. A grand jury of the U.S. District Court (NDCal) returned an indictment against Tse Thow Sun, alleging one count of theft of trade secrets in violation of 18 U.S.C. § 1832 and one count of interstate transportation of stolen property in violation of 18 U.S.C. § 2314. The government alleges that Defendant Sun contacted the President of Language Line Services in Monterey, California, in March, 2002, and offered to sell to him proprietary information of Language Line Service's chief competitor, Online Interpreters. The government further alleges that it set up a sting operation at which Sun exchanged trade secrets for money. See, CCIPS release.
Silicon Valley Representatives Seek More Funding for Chip Research
4/8. Rep. Anna Eshoo (D-CA), Rep. Zoe Lofgren (D-CA), and Rep. Michael Honda (D-CA), who represent three Silicon Valley districts, wrote a letter to Rep. Jerry Lewis (R-CA) and Rep. John Murtha (D-PA), the Chairman and ranking Democrat on the House Appropriations Committee's Subcommittee on Defense, asking that Defense Advanced Research Projects Agency's (DARPA) Focus Center Research Program (FCRP) be funded at the level of $10 Million in FY 2003.
The DARPA's web site states that the FCRP is a collaborative effort between the DARPA, the Office of the Deputy Undersecretary of Defense for Science & Technology, and the Microelectronics Advanced Research Corporation to establish centers in "Materials, Structures & Devices" and "Circuits, Systems & Software" at U.S. institutions of higher education.
The trio of Congressmen wrote that "Continuing microelectronics technology advances are increasingly difficult to make. As semiconductors become ever denser, faster, and cheaper, they approach physical limits that will prevent further progress with current chip making processes." They added that "The research conducted in this program is long range (typically eight or more years out) and is essential for the timely development of replacement technology for the current chip making process."
SEC Official Addresses Privacy and Information Security
4/8. Lori Richards of the Securities and Exchange Commission (SEC) gave a speech titled "Furthering Good Compliance: Current Areas of Focus in SEC Examinations". Richards is Director of the SEC's Office of Compliance Inspections and Examinations. She spoke at the National Regulatory Services, 17th Annual Spring Compliance Conference, in Miami Beach, Florida.
She stated that "Regulation S-P, the SEC's new privacy rules, became effective last July. During our exams, we're placing particular focus on that part of the rule known as the ``safeguard rule,´´ which requires firms to have safeguards over the security of information. Our information technology staff are reviewing firms' information technology systems, including firewalls, encryption and other protections."
The SEC promulgated Regulation S-P, 17 CFR Part 248, pursuant to Section 504 of the Gramm Leach Bliley Act.
Challenges to Source Code Copyright Registration & the Doctrine of Primary Jurisdiction
4/8. The U.S. Court of Appeals (9thCir) issued its opinion [PDF] in Syntek Semiconductor v. Microchip Technology, a case in which an alleged infringer sought a declaratory judgment from the U.S. District Court that a copyright registration of computer source code is invalid. The District Court granted summary judgment to the copyright holder. The Appeals Court vacated. It held that, pursuant to the doctrine of primary jurisdiction, the case should be dismissed without prejudice, so that the infringer may seek an administrative remedy at the Copyright Office.
Background. Microchip Technology is a Delaware corporation based in Chandler, Arizona. It designs, manufactures, and sells micro controllers. Micro controllers are integrated circuits used to control a particular system or process in an electronic product. The operation of micro controllers is dictated by low level programming micro instructions called micro code, which are fixed in storage. Microchip manufactures and sells the PIC 16C5x micro controllers, which contain the PIC 16C5x micro code.
Microchip registered its PIC 16C5x micro code with the U.S. Copyright Office. However, the Appeals Court explained that "Microchip did not have in its possession the original PIC 16C5x source code when it registered its program with the Copyright Office; so Microchip deposited source code that it had decompiled from the object code embedded in the PIC 16C5x computer chip. Microchip informed the Copyright Office of the nature of its deposit". The Copyright Office then registered the copyright.
Syntek Semiconductor is a Taiwan corporation that also designs, manufactures, and sell micro controllers. Microchip asserts that Syntek products have infringed its copyright.
Taiwanese Actions. Microchip has twice presented its findings to the public prosecutor in Taiwan that Syntek has produced and sold products that infringe its copyright. In a 1993 proceeding, Syntek was indicted, but later settled with Microchip. More recently, the Taiwan prosecutor again indicted Syntek and two of its senior officers for criminal copyright infringement. The Taiwan criminal court found Syntek's officers guilty of criminal copyright infringement in April of 1999. Syntek appealed that decision.
District Court. Syntek filed a complaint in March of 1999 in U.S. District Court (DAriz) against Microchip seeking a declaratory judgment that Microchip's U.S. copyright registration of the PIC 16C5x micro code is invalid. Syntek alleges that Microchip, by depositing source code that it had decompiled from object code, did not comply with the applicable regulations when registering its program. The District Court granted summary judgment to Microchip.
Appeals Court. The Court of Appeals raised the question of primary jurisdiction, sua sponte. It vacated the judgment of the District Court and remanded with instructions to dismiss the action without prejudice pursuant to the primary jurisdiction doctrine in order that the parties may pursue appropriate administrative remedies before the Copyright Office.
The Appeals Court wrote that "Primary jurisdiction is not a doctrine that implicates the subject matter jurisdiction of the federal courts. Rather, it is a prudential doctrine under which courts may, under appropriate circumstances, determine that the initial decisionmaking responsibility should be performed by the relevant agency rather than the courts." It added that "The doctrine of primary jurisdiction is not equivalent to the requirement of exhaustion of administrative remedies."
The Appeals Court followed a four part test announced by the Ninth Circuit in U.S. v. General Dynamics Corp., 828 F.2d 1356 (9th Cir 1987). The Appeals Court wrote in the present appeal that "Although the question is a matter for the court's discretion, courts in considering the issue have traditionally employed such factors as (1) the need to resolve an issue that (2) has been placed by Congress within the jurisdiction of an administrative body having regulatory authority (3) pursuant to a statute that subjects an industry or activity to a comprehensive regulatory authority that (4) requires expertise or uniformity in administration."
The Court analyzed each of these four factors. On the first factor, it wrote that "Congressional intent to have national uniformity in copyright laws is clear." On the second factor, it wrote that "the question of whether decompiled object code qualifies for registration as source code under the Copyright Act and regulations is an issue of first impression. It also involves a complicated issue that Congress has committed to the Register of Copyrights."
On the third prong, the Appeals Court noted that Syntek seeks, not a declaratory judgment that the copyright in invalid, but rather a declaration that the registration is invalid. The Appeals Court wrote, "Thus, resolution of the question at hand requires an analysis of whether the agency acted in conformance with its own regulations when it granted the registration. Accordingly, referral to the agency for consideration of these issues in the first instance is particularly appropriate."
Fourth, and finally, the Court reasoned that while Syntek plead that it seeks a declaration of registration invalidity, this is indistinguishable from the administrative remedy of copyright registration cancellation. Hence, it already has an administrative remedy.
The Court concluded that all four factors are met, and hence, that dismissal pursuant to the doctrine of primary jurisdiction is appropriate.
The Court's ruling addresses only the doctrine of primary jurisdiction. The Appeals Court did not address the question of whether decompiled object code qualifies for registration as source code under the Copyright Act and regulations. Nor did it address whether a private right of action exists for cancellation of a copyright registration.
Finally, the Appeals Court added that "we need not decide ... whether remedies are available under 17 U.S.C. § 701(e)". This section pertains to the general responsibilities of the Copyright Office. See also, 17 CFR § 201.7, regarding cancellation of completed registrations by the Copyright Office.
House Commerce Committee to Mark Up Dot Kids Bill
4/8. The House Commerce Committee has scheduled a meeting to mark up HR 3833, "Dot Kids Implementation and Efficiency Act of 2002". The Subcommittee on Telecommunications and the Internet approved the bill on March 7 without amendment by a unanimous voice vote. It is sponsored by Rep. John Shimkus (R-IL), Rep. Ed Markey (D-MA), and others.
This bill provides that "The NTIA shall require the registry selected to operate and maintain the United States country code Internet domain to establish, operate, and maintain a second level domain within the United States country code domain that provides access only to material that is suitable for minors and not harmful to minors".
ACT Comments on Digital Music Copyright Issues
4/8. The Association for Competitive Technology (ACT) wrote a letter [PDF] to several members of the House Judiciary Committee, and its Court, Internet and Intellectual Property Subcommittee, regarding digital music copyright issues. It stated that "We strongly believe that the marketplace, without the assistance of additional legislation or regulation, is in the best position to respond to the demands of consumers and copyright holders."
ACT wrote that "we remain steadfast in opposing government mandated and managed technology standards". It stated that "The government should not pick winners and losers through its certification process; especially while the IT industry is working to achieve an open DRM standard." It also stated that "These standards will ``freeze´´ technology by requiring government approval of design changes. Instead of real time innovation, we could easily end up with a one size fits all standard."
ACT also commented on HR 2724, the Music Online Competition Act (MOCA), sponsored by Rep. Rick Boucher (D-VA) and Rep. Chris Cannon (R-UT). ACT wrote that "MOCA's nondiscriminatory licensing provision is tantamount to compulsory licensing. ... We believe that compulsory licensing schemes erode intellectual property rights and act as a disincentive to innovate."
However, ACT recommended that the Congress amend 17 U.S.C. § 117. It wrote that "Section 117 permits the owner of a copy of a computer program to make an additional copy of the program where the making of such a copy is an essential step in the utilization of the computer program conjunction with a much and that it is used in no other matter. Given that temporary or ``buffer´´ copies are a characteristic of most forms of streaming digital content, there is a question as to whether these copies should be precluded from liability. ACT feels that language should be added to section 117 to remove any uncertainty in this regard as it will aid in the creation of robust DRM solutions for streaming content."
SEC Official Addresses Regulation of Internet Advisors
4/8. Paul Roye, Director of the Securities and Exchange Commission's (SEC) Division of Investment Management gave a speech titled "Priorities in Investment Adviser Regulation" in Washington DC.
He stated that the SEC "will hold an open meeting this Thursday to consider whether to propose a new rule under the Advisers Act that would permit certain investment advisers that provide advisory services through interactive Internet websites to register with the Commission, even if they do not have $25 million in assets under management. The staff's recommendation is driven, in part, by the development of Internet technology that was not prevalent in 1997 when NSMIA was implemented."
He added that SEC Chairman Harvey Pitt has stated that the SEC is committed to reviewing and modernizing all of the federal securities regulations. "This means that we have to analyze and revise our rules, as necessary, in the wake of technological developments in the marketplace," said Roye.
He concluded that "Now is an exciting time to be involved in the regulation of investment advisers. Adviser regulation has entered the electronic age through the IARD; adviser registration information now is available to the public with just the click of a mouse rather than a laborious search of microfiche; and adviser regulations currently are the subject of a top to bottom review."
FRB Governor Addresses Banking and Technology
4/8. Federal Reserve Board (FRB) Governor Edward Gramlich gave a speech titled "Community Reinvestment Act at Twenty Five" at the Consumer Bankers' Association Community Reinvestment Act Conference, in Arlington, Virginia.
"The financial services landscape has altered dramatically over the past twenty five years," said Gramlich. In particular, "advances in technology have redefined nearly every aspect of the industry -- from loan underwriting to product delivery -- with computers revising the role of staff and facilities in ways that were unimaginable two decades ago. Credit scoring models have provided a mechanism for realizing loan processing and production efficiencies as well as for engaging in systematic risk based pricing. The Internet has enabled the collection of deposits and the disbursement of loans without bricks and mortar premises."
IBM Touts Its DRM Software
4/8. IBM announced "new software that enables customers to digitally protect and secure copyrighted and digital content for content management, distribution and e-commerce applications. The new Electronic Media Management (EMMS) software now includes support for open standards and can secure all types of digital media, including audio, text, video, and streaming media."
IBM further asserted that with its software "Hollywood and entertainment content creators can share digital assets and assign rights to a broader range of content. In healthcare, a provider can transfer digitized patient records between doctors, without compromising the security of these protected records. Similarly, banks and financial institutions that process requests from consumers for mortgages and loans can use EMMS to protect this personal information and allow status updates and approvals to be accessed only by authorized individuals. Government agencies that generate video from surveillance technology or scanned satellite images can benefit from EMMS's rights management capability, which may be used to prevent theft, unauthorized use and access, and ensure authenticity of the content." See, IBM release [PDF].
Delaware Court Denies HP Motion to Dismiss
4/8. The Delaware Chancery Court denied Hewlett Packard's (HP) motion to dismiss Walter Hewlett's complaint regarding the merger of HP and Compaq. HP issued a release in which it stated that "We remain optimistic we will be able to complete the merger on our current schedule. HP continues its progress in integration planning and looks forward to the receipt of the certified vote result from the HP shareowner meeting, which is expected within a few weeks."
People and Appointments
4/8. Robert Mirelson was named Deputy Chief of the Federal Communications Commission's (FCC) Consumer and Governmental Affairs Bureau (CGB). His area of responsibility will be consumer outreach. He previously worked for Booz Allen Hamilton. Before that, he served for 29 years in the U.S. Army.

Go to News Briefs from April 1-5, 2002.