News from April 16-20, 2002

FBI Selects Sites for Computer Forensic Labs
4/20. The Federal Bureau of Investigation (FBI) announced the selection of sites for three regional computer forensic laboratories (RCFL): Kansas City, Chicago, and the San Francisco bay area. See, FBI release.
People and Appointments
4/20. Mark Mershon was appointed as Special Agent in Charge of the Federal Bureau of Investigation's (FBI) San Francisco Field Office. See, FBI release.
AEI Panel Advocates "Freeing the Chinese Internet"
4/19. The American Enterprise Institute (AEI) hosted a panel discussion titled "Freeing the Chinese Internet". The speakers stated that the People's Republic of China uses firewalls to block access to certain web sites by Internet users in China. The speakers also asserted that American companies have played a pivotal role in developing the Chinese government's censorship capabilities. Finally, they advocated freeing the Chinese Internet by several means, including the use of technologies designed to evade the blocking by firewalls, industry self restraint, U.S. government oversight of the technology industry's support of Chinese censorship, and shareholder lawsuits against U.S. companies.
The moderator of the AEI discussion was Arthur Waldron (a China scholar at the AEI). The panelists were William Baum (Voice of America), Paul Baranowski (Peekabooty Project), Ethan Gutmann (Project for the New American Century), and Greg Walton (Human Rights in China).
William Baum gave the first presentation. As China Branch Chief for Voice of America (VOA), he has worked to provide news and information in Mandarin and Cantonese through a web site and other media. He stated that the Chinese government blocks access to the VOA web site.
"We have had great difficulty getting through. Their blocking has been quite effective." He said that they have been sending, by e-mail, proxy server information. However, the Chinese government blocks the proxies within hours. "It is very clear that there is a very concerted effort within China to do everything they can to block news," said Baum.
He also pointed out that VOA's proxy servers get many hits from Saudi Arabia. However, he added that the Saudis mostly use the proxies to access pormography rather than news and information.
Baranowski, a young software developer, stated that he is currently working, on his own, and without support, on the Peekabooty application, a peer to peer application that facilities Internet users' ability to avoid the blocking by government firewalls. He also stated that he would welcome either foundation or government financial support for his project.
He added that he is pessimistic for the long run. He stated that "absolute control of the Internet is possible. Most people in the technical industry, in the computer industry, and pretty much, sort of, the general view is that it is not possible to control the Internet. And, and the Chinese have shown so far that it is quite possible to control it. And, eventually they will control it completely. And thus, this program I am writing is only a temporary solution to what is actually a political problem. So, it is just buying us time, I think."
Ethan Gutmann focused especially on the role of U.S. companies in the development of the Chinese Internet. He stated that "American business played a very pivotal in the construction of the construction of the Chinese Internet." In stated that, in addition, "American companies could play a role in freeing the Chinese Internet, or at least stop making the situation worse."
He said that China developed the Internet for several reasons. China did want to be left behind technologically. It wanted to get rich. It wanted to use the Internet for nationalist propaganda. It wanted to used it for surveillance, and the tracking down of dissent. Also, it wanted to develop Internet warfare capabilities.
"How did the Western businesses look at this. Well, they generally underestimated the Chinese leadership," said Gutmann. "For American computer engineers, the Internet architecture itself seemed too clever and too egalitarian ... For U.S. businessmen, the feeling was that our technological lead was just too great; our financial pace is too fast."
Gutmann then offered his assessment of how the Chinese firewall was built. "We know that during construction of the first public access web, Global One in 1996, authorities suddenly became interested in keyword searching. They wanted to look into the packets," said Gutmann. "We know that the Chinese wanted to block forbidden web sites, very early -- western news, democracy sites, Maoist sites, and so on -- but Chinese Internet architecture was not very standardized, because there was so much excitement surrounding the building" of the Internet.
He then addressed the role of Cisco. "Cisco Systems has really been a dominant player -- agreed to build a special firewall box for the Chinese authorities which blocked the forbidden web sites on a national scale." He added that he is not aware of Cisco doing this for any other country.
"They basically solved a great part of the problem for the Chinese government. When you called up a site that was forbidden, and it would just say, the operation timed out, which meant that, basically, your request for the site had been thrown in the electronic equivalent of the trash. Now, we have reason to suspect that Cisco also gave to the PLA and the state security the ability to look into the packets, in exchange for market access."
However, Gutmann said that Cisco was not alone. "On the area of content control, we know the Internet is a dynamic place ... search engines had to be controlled tool." He asserted that Yahoo "disabled search phrases, such as ``China democracy´´ and ``Taiwan independence´´."
"Others, such as Sun Microsystems, Netscape, Sparkice, showed goodwill by supporting an arm of Chinese propaganda, at the time. And AOL, which has been moving into the market very fast, has similar arrangements, and is considering directly informing on dissident's web activity if the PSB, the Public Security Bureau, requests it," said Gutmann.
In addition to censorship by firewalls, Gutmann addressed surveillance. He stated that "There are big players at Internet security trade shows in Beijing -- Motorola, Phillips, DuPont, Siemens -- smaller companies like NetFront and RSA Security subsist by their sales of surveillance technology to the Chinese authorities. And, you know, on the really low end front, but very important front, there are spyware programs, those little programs that embed themselves in your computer after you download something. One is made by Radiate. Another is made by Clicktiluwin. In the U.S. context these report user activity to advertisers. In China, there is every reason to believe that information is also delivered to state security, the security bureau. This is very useful for identifying webmasters ... and ... it identifies users who download proxy servers."
Gutmann also discussed assistance provided by American companies in cyber warfare. He stated that "it is increasingly relevant that Network Associates, that is, McAfee, and Symantec, which is Norton AntiVirus, and Trend Micro, gained entry into the Chinese market by donating 300 live computer viruses to the Public Security Bureau. From the Chinese perspective, this is significant. They have a Cisco built firewall. They five pipelines to the outside world. They can shut those down in a crisis."
The panelists also addressed how to free the Internet in China. Panelists advocated the development and use of proxy servers and applications such as Peekabooty.
Gutmann cautioned, "but we should be aware of the likely Chinese response, which would be, easiest thing to do, is just simply to enlist American companies who are very eager to curry favor in Beijing ... and ask the American companies to develop software allowing the Public Security Bureau to kill any system that we are talking about". Hence, he argued that American companies would have to cooperate in working to free the Internet in China.
Panelists cited only one example of a company that has stood up to the Chinese government's demands -- Microsoft. For example, Gutmann stated that "Chinese authorities at one point ordered Microsoft, and pretty much every company, to surrender their software's underlying source code, their encryption source code. Underneath it all, Microsoft is the one who really chose to fight. They organized a massive coalition of every Chamber of Commerce that you can think of that is relevant to Beijing, and they won. The Chinese authorities backed off."
Gutmann also suggested U.S. government oversight of U.S. company's cooperation with Chinese authorities. He said that "that ideally would be done by the U.S. China Security Review Commission, by the Congressional Executive Commission on China, and by elements of the Administration. The stark choice that would be offered is either to pay penalties, or develop a workable code of conduct." But, he concluded that "oversight can only go so far".
Waldron advocated shareholder litigation. He said that "in my private capacity, I would be perfectly happy to buy a share of Cisco stock" in order to bring a shareholder action.
Waldron waxed philosophically. "It is often said, without reflection, that of course, the result of this new technology is going to be more freedom, even though what Orwell thought, it was going to mean less freedom, and more brain washing. And, I think that there is no better test case of this than the Internet in China ..." He pointed out that in contrast to Orwell, former U.S. Secretary of State Madeline Albright has argued that the Internet will lead to democratization in China.
Technology of Internet Censorship
4/19. The American Enterprise Institute (AEI) panel discussion titled "Freeing the Chinese Internet" addressed the technologies of Internet censorship, and countermeasures used to evade censorship. The following is a brief overview of some of the concepts addressed.
Firewalls. Firewalls may be programs located in a gateway server for a network. They examine each network packet to determine whether to forward it to its destination. Firewalls can be used both to prevent malicious outsiders from accessing private data resources located on the network, and to control what resources outside of the network users will have access to. This latter function is used in nations where governments exercise Internet censorship. First, users are only permitted access to the Internet through government controlled firewalls. Second, the government uses these firewalls to block access to banned web sites, such as foreign news sites. The firewalls store lists of URLs of banned web sites. Then, the firewalls will not forward packets directed to those URLs, thus blocking the user's requests for those web pages.
Proxy Servers. A proxy server is also an intermediary between a network and the Internet. It can be used for many purposes, including caching, administrative control, and security. Proxy servers can be used to evade the effects of government firewalls that block access to censored sites. Rather than directing a request to the censored web site, the user sends his request to the unblocked proxy server. If the requested page is cached at the proxy server, the proxy server can send it to the user. Alternatively, the proxy server, using one of its own IP addresses can request the page from the censored web site, and then forward it on to the user.
Peekabooty. Peekabooty is a distributed or peer to peer application, as are some music sharing applications. However, the function of Peekabooty is to have a large number of computers located in countries other than the ones exercising Internet censorship to act as a network of intermediaries between the users in the censoring countries and the banned web sites which they seek to access. The concept is to have too many computers running Peekabooty in the background for the censoring government to identify, track and block them. Peekabooty is still in development. However, if developed, it could provide several advantages over simple proxy server evasion. First, once launched it would not require organization, maintenance, or funding. Second, it would present a far more difficult target for blocking. Third, there is no central server or control to attack to shut down the system.
Feds Arrest 27 for Counterfeit Microsoft Products
4/19. A grand jury of the U.S. District Court (NDCal) returned 11 indictments against 26 individuals alleging criminal copyright infringement of Microsoft software products. A 27th person was charged by complaint. The U.S. Attorneys Office (NDCal) (USAO) and the Federal Bureau of Investigation (FBI) also announced the arrest of 27 persons, and the service of 10 search warrants.
See for example, indictment [PDF] of Malinda Chang charging criminal copyright infringement in violation of 17 U.S.C. § 506(a)(1) and 18 U.S.C. § 2319(b)(1) and trafficking in counterfeit goods in violation of 18 U.S.C. § 2320 in connection with the sale of counterfeit copies of Microsoft Office 97 and 2000 and Windows NT and 2000.
The arrests and charges were the result of a two year undercover investigation. See also, USAO release and Microsoft release.
FCC Files Petition for Review of Appeals Court Opinion in Fox v. FCC
4/19. The Federal Communications Commission (FCC) filed a Petition for Rehearing En Banc [40 pages in PDF] with the U.S. Court of Appeals (DCCir) in Fox v. FCC. The FCC seeks review of the February 19, 2002, opinion of the Court which held that the FCC's national TV station ownership rule (NTSO) and its cable broadcast cross ownership rule (CBCO) both violate the Administrative Procedure Act (APA) as arbitrary and capricious, and Section 202(h) of the Telecom Act. The three judge panel vacated the CBCO rule, but merely remanded the NTSO rule to the FCC. The current Petition for Rehearing seeks review regarding the standard to be applied to the FCC in challenges to its rules.
The FCC is required by statute to conduct biennial reviews of its ownership rules. The statute requires that it "shall determine whether any of such rules are necessary in the public interest" and repeal those section that are no longer in the public interest. The FCC conducted its first biennial review in 1998, but did not repeal or modify its NTSO or CBCO rules as a result. Various parties, including Fox, filed petitions for review with the Court of Appeals. The Appeals Court applied this statutory language in its plain meaning. The FCC now argues that the term "necessary" should not necessarily be construed to mean "necessary"; and, if it is, this "threatens to impose a continuing and unworkable burden on the agency in carrying out its biennial review responsibilities."
The Statute. The statutory provision at issue was enacted by the Congress in the Telecom Act of 1996. It provides, at Section 202(h), that the FCC "shall review its rules adopted pursuant to this section and all of its ownership rules biennially as part of its regulatory reform review under section 11 of the Communications Act of 1934 and shall determine whether any of such rules are necessary in the public interest as the result of competition. The Commission shall repeal or modify any regulation it determines to be no longer in the public interest."
FCC Argument. The FCC wrote that "The panel held in that decision that under the applicable statutory provision the Commission applied ``too low a standard´´ in conducting its biennial review of media ownership regulations and that under the correct standard set forth in Section 202(h) of the 1996 Telecommunications Act, ``a regulation should be retained only insofar as it is necessary in, not merely consonant with, the public interest.´´ ... This holding, which can be read to require a higher standard to retain an existing rule than to adopt it in the first instance, imposes a substantial and continuing burden on the agency that threatens administrative paralysis. This result is not compelled by the language of the statute or by its legislative history." (Citation to Fox omitted.)
The FCC argues for "A less stringent interpretation of the term ``necessary´´ ". It argues that the Court should construe this word in its "statutory context" rather than "in its most literal sense".
Background. After its 1998 biennial review, the FCC maintained its NTSO rule (47 C.F.R. § 73.3555(e)) and its CBCO rule (47 C.F.R. § 76.501(a)). Fox Television Stations and various other TV networks and cable companies petitioned the Court of Appeals for review of the FCC's decision not to repeal or modify these two rules. The petitioners asserted that these rules violate the Administrative Procedure Act (APA), § 202(h) of the Telecom Act of 1996, and the First Amendment of the Constitution.
The Court rejected the First Amendment argument. However, the Court of Appeals held: "We conclude that the Commission's decision to retain the rules was arbitrary and capricious and contrary to law. We remand the national television station ownership rule to the Commission for further consideration, and we vacate the cable/ broadcast cross ownership rule because we think it unlikely the Commission will be able on remand to justify retaining it."
Chief Judge Douglas Ginsburg, writing for a three judge panel, found that the FCC "has adduced not a single valid reason to believe the NTSO Rule is necessary in the public interest, either to safeguard competition or to enhance diversity. Although we agree with the Commission that protecting diversity is a permissible policy, the Commission did not provide an adequate basis for believing the Rule would in fact further that cause. We conclude, therefore, that the 1998 decision to retain the NTSO Rule was arbitrary and capricious in violation of the APA."
The Court similarly held that the CBCO violates of the APA. It found that the FCC "failed to consider the increased number of television stations now in operation, and it is clear that the Commission failed to reconcile the decision under review with the TV Ownership Order it had issued only shortly before. We conclude, therefore, that the Commission's diversity rationale for retaining the CBCO Rule is woefully inadequate."
Michael Powell, who was a FCC Commissioner in 1998, dissented from the retention of the NTSO and CBCO rules. He is now Chairman of the FCC, and is joined by two other Republican Commissioners, Kevin Martin and Kathleen Abernathy, who are skeptical of ownership rules.
The February 19 Fox opinion is published at 280 F.3d 1027. It is No. 00-1222.
WTO DG Moore Addresses Russian Accession to WTO
4/19. World Trade Organization (WTO) Director General Mike Moore gave a speech in London titled "Russia and the WTO: Reintegration into the World Economy". He said that "Russia's accession is finally entering a decisive and final phase".
However, Moore also stated that "To complete Russia's accession, we will need to see the completion of meaningful market access deals in goods and services and a solid legal and administrative framework in Russia -- which will guarantee the implementation of the contracted commitments."
He continued that "Our common objective is to build a balanced package capable of providing Member governments with meaningful access to the Russian market, on multilaterally enforceable terms. In turn, Russia will receive guaranteed and predictable access to the markets of its trading partners. Russia will also take a central place in the management and future development of the world economic system. In this way Russia's reintegration into the world market will be completed. No matter how difficult the outstanding problems may be, I believe there are in Washington, Brussels and Moscow, people with the horsepower, firepower and willpower to make this accession happen."
Moore concluded that "Accessions, in their final phase, always come back to such core issues as ... telecommunications."
USTR Announces IPR Agreement with Argentina
4/19. The Office of the U.S. Trade Representative (USTR) announced that "Intellectual property rights officials from the United States and Argentina, meeting in Buenos Aires, finalized the elements of a joint notification to the World Trade Organization (WTO) regarding intellectual property matters."
The USTR stated that "Argentina clarified how certain aspects of its intellectual property system, such as those related to its import restriction regime, operate in conformance with the WTO Agreement on Trade Related Aspects of Intellectual Property Rights. In addition, Argentina agreed to amend its patent law to provide protection for products obtained from a process patent and to ensure that preliminary injunctions are available in intellectual property court proceedings, among other amendments. Finally, on the outstanding issues that remain, including that of data protection, the United States retains its right to seek resolution under the WTO dispute settlement mechanism." See, USTR release.
Secretary Evans Addresses Trade, Innovation and Entrepreneurship
4/19. Commerce Secretary Donald Evans gave a speech to the American Chamber of Commerce in Japan in Tokyo in which he advocated free trade, innovation, and free enterprise. He said that emerging sectors should not be stymied by new trade barriers. He also reviewed the Bush Administration's policies.
Evans stated that among President Bush's legislative accomplishments for encouraging innovation and entrepreneurship are the recent tax cut, the three year acceleration of capital expense depreciation contained in the economic stimulus package, increased government research and development spending, and education reform. He also stated that the President is advocating personal retirement accounts, and Trade Promotion Authority (TPA).
Evans also advocated free trade. He stated that "We need to lower trade barriers: globally (by working together on the Doha Development Agenda), multilaterally (through APEC), and bilaterally (through our Economic Partnership and other efforts). I would like to see us make an effort to ensure that our new, emerging sectors -- where we stand to see the most gain from our innovations and through our entrepreneurs -- are not stymied through new trade barriers."
Evans also advocated the moral virtues of trade. He said that trade "creates stability and the prospect of a brighter future. Trade compels governments to bring transparency and clarity to their economic decision making, and combats the corruption that impedes progress, entrenches self servers, and perpetuates poverty."
He also stated that "trade is inherently democratic. Economic freedom encourages political freedoms. New enterprises and access to capital lead to the creation of a merchant class. Middle classes demand greater political participation." Evans travels to China after his visit to Japan.
Evans Discusses IPR and China
4/19. Commerce Secretary Donald Evans addressed intellectual property rights (IPR) and the People's Republic of China at a press conference in Tokyo, Japan. See, transcript.
Evans stated that he will next travel to China. He said that "I'll congratulate China for becoming a member of the WTO" and "I will express not only our notes of congratulations, but the importance of compliance. And offer our support to them to assure that they become in full compliance of their WTO obligations. Those include obligations that relate to intellectual property right protection. And so I'm sure the issue will come up as to how important it is that they have strong intellectual property right laws in place, and also make sure that they enforce those laws."
He added that "We have teams of people that are working with them in various areas of the WTO rules so that they will come into compliance as soon as possible."
GAO Reports on PRC Semiconductor Industry
4/19. The General Accounting Office (GAO) released a report [83 pages in PDF] titled "Export Controls: Rapid Advances in China's Semiconductor Industry Underscore Need for Fundamental U.S. Policy Review".
The report found that "U.S. policies and practices to control the export of semiconductor technology to China are unclear and inconsistent", and that while "export regulations restrict certain sales that would make a direct and significant contribution to China's military capabilities, the United States generally approves most exports of semiconductor manufacturing equipment and materials to China."
The U.S. regulates the export of certain dual use technologies, including equipment and materials used to make semiconductors, for national security or foreign policy reasons. The GAO report notes that "Semiconductors, commonly referred to as computer ``chips,´´ are key components in computers, communications equipment, and weapons systems. U.S. policy on the export of such ``dual use´´ items -- goods and technologies that have both civilian and military uses -- is a subject of continuing debate."
The report found that "Since 1986, China's efforts to improve its semiconductor manufacturing capability have narrowed the gap between U.S. and Chinese semiconductor manufacturing technology from between 7 to 10 years to 2 years or less. According to our analysis of information obtained from semiconductor manufacturing facilities in China and industry experts, China’s most advanced commercial manufacturing facilities can produce chips that are only one generation behind current, commercial state of the art technology."
The report also found that "U.S. policies and practices to control the export of semiconductor technology to China are unclear and inconsistent, leading to uncertainty among U.S. industry officials about the rationale for some licensing decisions. Under the Export Administration Regulations pertaining to China, the general licensing policy is to approve applications, except those items that would make a direct and significant contribution to specific areas of China's military. We found that the United States approves most licenses for exports of semiconductor manufacturing equipment and materials to China. Although U.S. practice has been aimed at keeping China at least two generations (about 3 to 4 years) behind global state of the art semiconductor manufacturing capabilities, the regulations make no reference to the level of technology that can be exported to China relative to the current commercial state of the art.
The report further found that "U.S. agencies have not conducted the analyses, such as assessing foreign availability of this technology or the cumulative effects of such exports on U.S. national security interests, necessary to justify such a practice or serve as the basis for licensing decisions. Consequently, the executive branch does not have a sound, well documented basis for making export licensing decisions to China."
The report recommends that the Secretaries of Commerce, Defense and State "reassess and document U.S. export policy on semiconductor manufacturing equipment and materials to China. Specifically, we are recommending that these agencies complete the analyses needed to serve as a sound basis for an updated policy; develop new export controls, if appropriate, or alternative means for protecting U.S. security interests; and communicate the results of these efforts to the U.S. Congress and industry."
The report also notes that the departments involved do not agree with its findings.
The report was prepared at the request of Sen. Fred Thompson (R-TN), the ranking Republican on the Senate Governmental Affairs Committee. Sen. Thompson has a long history of opposing on national security grounds the liberalization of export control laws and regulations pertaining to encryption products, high performance computers, and other dual use software and equipment.
9th Circuit Applies PSLRA Scienter Requirement to Accountants
4/19. The U.S. Court of Appeals (9thCir) issued its opinion in DSAM Global Value Fund v. Altris Software, a class action case involving the Private Securities Litigation Reform Act (PSLRA).
District Court. Plaintiffs filed a complaint in U.S. District Court (SDCal) against Altris Software (now renamed Spescom) and Price Waterhouse Coopers (PWC), the accounting firm hired by Altris to audit its 1996 financial statement, alleging securities fraud. Plaintiffs alleged that PWC botched the audit. The issue is whether this satisfies the heightened pleading requirements of the PSLRA, and the Ninth Circuit's interpretation of the scienter requirements of the PSLRA in In re Silicon Graphics, Inc. Sec. Litig., 183 F.3d 970. The District Court dismissed the complaint as to PWC.
Appeals Court. The Appeals Court affirmed. It held that "the complaint sets out a compelling case of negligence -- perhaps even gross negligence -- but does not give rise to a strong inference that the auditor acted with an intent to defraud, conscious misconduct, or deliberate recklessness, as is required in a securities fraud case."
SEC Official Addresses Securities Regulation and the Internet
4/19. Paul Roye, Director of the Securities and Exchange Commission's (SEC) Division of Investment Management gave a speech at the Suffolk University School of Law in Boston, Massachusetts. He discussed, among other topics, securities regulation and the Internet.
He stated that "The Internet has no borders and the growing importance of e-commerce in the financial services area, has made it necessary to reconsider traditional regulatory approaches. As a report of the Internet Task Force to the Technical Committee of the International Organization of Securities Commissions ("IOSCO") noted: ``Electronic communications and interactivity may not fit neatly within the parameters of statutes, regulations and directives originally intended for a telephone and paper based environment, thus creating unnecessary regulatory burdens or unintended regulatory gaps. Moreover, the very qualities that make the Internet a valuable tool for investors and the securities industry may render it a convenient tool to perpetuate securities fraud and other violations. The Internet also provides for instantaneous cross border communication and interactivity, which challenge traditional notions of jurisdiction and territoriality.´´"
He continued that "It is clear that increasing Internet use presents new challenges for securities regulators and self regulatory organizations. Recognizing this, IOSCO created an Internet Task Force to examine and provide guidance on issues relating to the impact of the Internet on securities regulations, providing a report that identified Internet issues that should be addressed by each jurisdiction and providing guidance on how to approach these issues. Efforts like this have been successful in helping shape logical and consistent approaches to issues raised by the Internet."
People and Appointments
4/19. Martin Dunn was named Deputy Director of the Securities and Exchange Commission's (SEC) Division of Corporation Finance (DCF). Dunn joined the DCF in 1988 just out of law school. See, SEC release.
4/19. Frederick Graefe joined the Washington DC office of the law firm of Hunton & Williams' as a senior member of its Government Relations Team. He was formerly a partner in the Washington DC office of the law firm of Baker & Hostetler. His practice focuses on several legislative and regulatory issues, including telecommunications and tax. See, H&W release.
More News
4/19. Microsoft announced that Chairman and Chief Software Architect Bill Gates will testify on Monday, April 22, in the U.S. District Court (DC) proceeding on remedies in the long running antitrust case. See MSFT release.
4/19. The House Judiciary Committee announced that it has rescheduled for Wednesday, April 24, its mark up of several bills, including HR 3482, the Cyber Security Enhancement Act of 2001, HR 3215, the Combatting Illegal Gambling Reform and Modernization Act, and HR 1877, the Child Sex Crimes Wiretapping Act of 2001. These bills had previously been scheduled for mark up on Thursday, April 18.
4/19. The U.S. Patent and Trademark Office (USPTO) released its FY 2001 USPTO Performance and Accountability Report.
4/19. The U.S. Court of Appeals (7thCir) issued its opinion in USA v. Baronia, a case involving use of a PC, scanner and printer to counterfeit U.S. currency. The defendant plead guilty. On appeal he argued that the District Court should not have enhanced his sentence pursuant to § 2B5.1(b)(2) of the U.S. Sentencing Guidelines. He argued that he was not a large scale producer, and his counterfeits were unsophisticated. The Appeals Court affirmed.
4/19. The Securities and Exchange Commission (SEC) published a notice in the Federal Register requesting comments regarding its proposed rule amending the Investment Advisers Act of 1940 to exempt certain investment advisers that provide advisory services through the Internet from the prohibition on SEC registration set out in § 203A of the Act. The amendments would permit these advisers to register with the SEC instead of with state securities authorities. Comments must be received by June 6, 2002. See, Federal Register, April 19, 2002, Vol. 67, No. 76, at Pages 19499 - 19506.
FCC Holds Open Meeting
4/18. The Federal Communications Commission (FCC) held a meeting at which it announced the adoption of several items pertaining to satellite services, subsidies for rural health care providers, and telecommunications relay services. See, agenda.
The FCC announced that it adopted a Report and Order for licensing new satellite services in shared Ku-band frequencies, 10.7 GHz - 14.5 GHz. The FCC also announced that it adopted a Further Notice of Proposed Rulemaking (NPRM) that proposes a methodology for the licensees to demonstrate, in the aggregate, that their systems are within a limit on the total power that can be emitted by the Ku-band NGSO FSS service. The NPRM also seeks comment on whether the definition of in-line interference events adopted in the Order should be adjusted with respect to higher powered transmitters. This is IB Docket No. 01-96. See, FCC release.
The FCC also announced that it adopted a NPRM seeking comment on how to improve the rural health care universal service mechanism, which helps rural health care providers obtain access to telecommunications and information services for medical and health maintenance purposes. This is CC Docket No. 02-60. See, FCC release.
The FCC also announced that it adopted a Declaratory Ruling and Second Further NPRM regarding Telecommunications Relay Services (TRS). The FCC authorized the recovery of all Internet protocol relay costs from the Interstate TRS Fund, and asked for pubic comments on whether the FCC should attempt to devise a method for allocating calls as intrastate or interstate, and, if so, how to accomplish this goal. See, FCC release.
House Judiciary Committee Postpones Mark Up of Tech Bills
4/18. The House Judiciary Committee held a meeting to mark up several bills, including HR 3482, the Cyber Security Enhancement Act of 2001, and HR 3215, the Combatting Illegal Gambling Reform and Modernization Act (the Internet gambling bill). However, it postponed consideration of these two bills.
Senate Judiciary Committee Postpones Mark Up of IPR Bill
4/18. The Senate Judiciary Committee held a meeting to mark up bills and approve nominees. The agenda included consideration of S 2031, Intellectual Property Protection Restoration Act of 2002. This bill would prevent states from recovering damages for infringement of state owned intellectual property, unless they have first waived their 11th Amendment sovereign immunity from suits against them for their infringement of the intellectual property of others. However, this bill was held over, again.
Evans Writes FCC Re Auction Postponement
4/18. Secretary of Commerce Donald Evans wrote a letter to Federal Communications Commission (FCC) Chairman Michael Powell regarding the FCC's decision not to postpone its auctions in the upper and lower 700 MHz bands, Auction Numbers 31 and 44..
He wrote "to urge the Commission to postpone the auctions in the Upper and Lower 700 MHz bands currently scheduled for June 19, 2002. While I applaud your recent ``Proposal for Voluntary Industry Actions to Speed the Digital Television Transition´´ as a call to action that I am hopeful industry will heed, significant uncertainty remains today about the date on which the spectrum in these bands will become available for new wireless services. Until more certainty exists about the means for and timing of such spectrum clearing, an auction of the Upper and Lower 700 MHz bands would be premature and contrary to public interest."
The Cellular Telecommunications and Internet Association (CTIA) praised the Evans letter. It wrote in a release that "The Administration is sounding its message loud and clear -- again. The 700 MHz spectrum auction is simply premature at this point. Commerce Secretary Evans has underscored the reality that conducting this auction now is inconsistent with efficient spectrum management, and with the Administration’s efforts to further spectrum reform. We hope the FCC can read the writing on the wall ..."
Tom Sugrue, Chief of the FCC's Wireless Telecommunications Bureau, sent a letter [PDF] on April 10 to Tom Wheeler, P/CEO of the CTIA denying the CTIA's request for an indefinite postponement.
Meanwhile, several members of the House Commerce Committee may introduce a bill next week to require postponement of the auction.
Hollings Introduces Bill to Regulate Online Information Practices
4/18. Sen. Ernest Hollings (D-SC) introduced S 2201, the Online Personal Privacy Act 2002, a bill that would impose broad regulation of ISPs, online service providers, and commercial web site operators in their collection and dissemination of information. See, Sen. Hollings' section by section summary, and statement in the Senate.
The provides that before an Internet service provider, online service provider or commercial website operator could collect or disclose an individual's sensitive personally identifying information (including health information, race or ethnicity, political party affiliation, religion, social security number, or financial information) it would have to first get affirmative consent from the individual.
The bill also requires that individuals be given access to their personally identifying information.
The bill preempts related state laws.
The bill gives civil enforcement authority to the Federal Trade Commission (FTC). The bill also allows lawsuits by states and individuals for injunctive relief and monetary damages.
The bill is cosponsored by nine other Senators, who are mostly Democrats, and mostly members of the Senate Commerce Committee. The initial cosponsors are Conrad Burns (R-MT), John Kerry (D-MA), Ted Stevens (R-AK), Jay Rockefeller (D-WV), Daniel Inouye (D-HI), John Breaux (D-LA), Max Cleland (D-GA), Bill Nelson (D-FL), and Jean Carnahan (D-MO).
The Hollings bill was quickly condemned by technology and business groups. Harris Miller, President of the Information Technology Association of America (ITAA), stated in a release that "The Hollings bill is a static solution to a problem that is constantly changing. Such an approach might work if good guys and bad guys all agreed to play by the same privacy and security rules and the technology itself never changed. None of these things will ever happen. Instead, this bill would force online businesses to operate with rules different from their brick and mortar counterparts and, in the process, creates the best kind of target to shoot at: one that stands still."
Ed Black, President of the Computer & Communications Industry Association (CCIA) stated that "this legislation continues to advocate unworkable, unwise, and extremely onerous policies that would significantly transform the Internet and e-commerce as we know it. We also object to the discriminatory nature of the legislation, in that it subjects Internet companies and websites to harsher treatment than offline collectors of information".
Bruce Josten, EVP of the U.S. Chamber of Commerce, stated in a release that "We must not legislate privacy laws that are ineffective or hinder the growth of online commerce ... This proposal is nothing more than a solution in search of a problem."
Sen. Hollings, who is Chairman of the Senate Commerce Committee, has scheduled a hearing on his bill before his Committee for Thursday, April 25 at 9:30 AM.
NTIA Director Addresses Spectrum Management
4/18. National Telecommunications and Information Administration (NTIA) Director Nancy Victory gave a speech in which she addressed government management of spectrum. She reviewed comments made at a spectrum summit hosted by the NTIA on April 4-5. She also spoke vaguely about "issue areas that should figure prominently" in the NTIA agenda.
Victory advocated "trust, collegiality and cooperation" among federal agencies involved in spectrum management. She also advocated "modernizing spectrum policies" and "forward looking policies". She also stated that "We need to remove the clouds over spectrum availability" and that the NTIA will continue to study possible bands for use by 3G services.
She spoke at a conference titled "The Response to Terror: New Laws, Rules and Strategies for IT and Telecom" that was hosted by the Computer Law Association and the Federal Communications Bar Association (FCBA) in Washington DC.
USPTO Director Addresses Copyright
4/18. U.S. Patent and Trademark Office (USPTO) Director James Rogan gave a speech in Washington DC titled "Digital Online Content: Creating a Market that Works".
Rogan stated that "To realize the potential of e-commerce for the distribution of all sorts of information products, from entertainment to education, from business software to databases for scientific research, providers must be confident that their products are safe from piracy." He continued that "Providing this security requires both technological and legal means to enable copyright owners to protect their works. It also means that these same technologies and laws need to recognize that fair use means that some uses that might otherwise be infringing will be permitted."
Section 109. Rogan also addressed proposals to amend 17 U.S.C. § 109. He stated that "It has been proposed that one who lawfully acquires a digital version of a copyrighted work should be permitted to pass that copy, without making another, on to a second person just as that person may now do with a ``hard´´ copy of a work under the first sale doctrine, codified in Section 109 of the Copyright Act. We concur in principle with this interpretation of Section 109. There is, however, a significant difference between traditional acts of distribution and acts of digital distribution."
He continued that "In a traditional distribution, the work is reproduced and only subsequently distributed. In a digital distribution, the act of reproduction is an intrinsic part of the act of distribution. Because of the present limitations of digital technology and the difficulties in ensuring that the transmitting party had erased or otherwise destroyed the copy resident in the sending computer, I have serious reservations about the prudence of amending Section 109 to grant a blanket exception to digital distribution."
Copy Protection. Rogan also addressed proposed copy protection legislation. Sen. Ernest Hollings (D-SC) introduced S 2048, the Consumer Broadband and Digital Television Promotion Act, on March 21.
Rogan stated that "Negotiations are presently underway among hardware manufacturers and content owners to develop improved means for protecting on-line content, which I believe would encourage creativity and promote the development of a broader range of services for consumers in the Internet and broadband technologies. Before Congress rushes into the imposition of a legislative solution, I hope its Members will grant more time for the free market to find its own middle ground."
People and Appointments
4/18. The Senate Judiciary Committee approved several pending judicial nominations, including that of Jeffrey Howard to be a Judge of the U.S. Court of Appeals (1stCir). The Committee also approved Percy Anderson (U.S.D.C., Central District of California), John Walter (U.S.D.C., Central District of California), Michael Baylson (U.S.D.C., Eastern District of Pennsylvania), William Griesbach (U.S.D.C., District of Wisconsin), Joan Lancaster (U.S.D.C., District of Minnesota), and Cynthia Rufe (U.S.D.C., Eastern District of Pennsylvania). These nominees still require confirmation by the full Senate.
4/18. The Senate confirmed Legrome Davis to be a judge of the U.S. District Court (EDPenn).
More News
4/18. The Federal Trade Commission (FTC) sent a warning letter to fifty companies that have made questionable gas saving and other energy related advertising claims in their web sites. The letter states that "We have not yet determined whether your advertising violates the FTC Act. We have, however, copied and preserved your online advertising because it contains specific gas savings claims. If your website misrepresents the benefits of your product, makes claims that lack credible scientific substantiation, or is otherwise deceptive or fraudulent, you should stop making those claims or revise them appropriately right away. Otherwise, you may be subject to legal action that could require you to stop your advertising and to pay money back to consumers."
4/18. The U.S. District Court (NDCal) unsealed a criminal information [PDF] charging Gary Jones with wire fraud in violation of 18 U.S.C. §§ 1343 and 1346. The information states that Jones defrauded his employer, software company Sagent Technology, by creating bogus software sales contracts with federal government agencies, including the Department of Justice (DOJ), for which he received commissions from Sagent. The Information was filed on March 25, 2002. The DOJ's Federal Bureau of Investigation (FBI) arrested Jones on April 17.
4/18. Rep. Ed Markey (D-MA) introduced HR 4513, a bill regarding the sale and purchase of Social Security numbers. It was referred to the House Commerce Committee and the House Ways and Means Committee.
4/18. The Bureau of Export Administration (BXA) was renamed the Bureau of Industry and Security (BIS). This bureau has historically handled export licensing for dual use items, including computers and software. Recently, however, it has taken on new responsibilities pertaining to cyber security; it now includes the Critical Infrastructure Assurance Office (CIAO). Kenneth Juster, the Under Secretary of Commerce in charge of this bureau, stated in a release that "The new name better reflects the breadth of the Bureau's activities in the spheres of national, homeland, economic, and cyber security".
FCC Official Addresses Broadband Policy
4/17. Scott Marcus, Senior Advisor for Internet Technology at the Federal Communications Commission's (FCC) Office of Plans and Policy gave an address titled "Broadband, When? -- A View from OPP". He stated that the rate at which broadband services are being adopted by consumers compares favorably with the historical adoption rates of many other technologies, such as personal computers, cell phones, and CD players. However, it is being adopted more slowly than television was adopted.
Marcus also stated that the appropriate role for government is creating a framework for innovation and investment that eliminates barriers and disincentives. He stated that the role of government is "not to impose legacy regulations upon new and emerging services." However, he added that "at the same time, there are bottlenecks that need to be addressed."
He suggested that government should "structure regulation to emphasize facilities based competition and encourage new entrants". He also said government should defer the development of universal service obligations for new services.
Marcus spoke at a luncheon meeting of the Federal Communications Bar Association's (FCBA) Online Communications Committee.
Commerce Department Official Addresses Broadband Policy
4/17. The Commerce Department's Chris Israel gave a speech titled "Prometheans in Alaska -- Education and Technology, the Foundation of our Future". He spoke at the Educause Networking 2002 Conference in Washington DC.
He praised the use of broadband technologies in education, such as by the Chugach School District in Alaska, which recently won a Commerce Department Baldridge Award. He also addressed government policies designed to promote broadband deployment.
He stated that "At the federal level, there are several steps we are already taking. We have proposed accelerating the depreciation schedules for business investment in capital equipment, such as broadband equipment, to improve the business case for investing. We continue to urge Congress to make the R&D tax credit permanent to incent further investments in cutting edge technologies, such as broadband enabling technologies, and we pushed to extend the Internet tax moratorium to support development and adoption of e-commerce applications."
He continued that "The President has also made e-government a top management priority for his Administration, and we're trying to lead by example in the use of broadband e-government applications to leverage our resources and better serve our constituents."
Israel also addressed state and local regulation affecting broadband deployment. He stated that "The localities that create the most broadband friendly environments may be like the localities that attracted railroads in the last century, while the localities that are not broadband friendly may end up like the towns by-passed by the railroads. Availability of bandwidth should be prioritized with other considerations such as rights of way, taxes and application fees, tower siting, zoning, building and construction codes, building access, franchise agreements, historic preservation and environmental protections."
Israel is Deputy Assistant Secretary for Technology Policy at the Technology Administration of the Department of Commerce.
WTO DG Moore Addresses New Round of Trade Negotiations
4/17. Mike Moore, Director General of the World Trade Organization (WTO) gave a speech titled "To Doha and beyond: a roadmap for successfully concluding the Doha Development Round" in Montreux, Switzerland.
He stated that the "Success in Doha brought to an end the uncertainty created by the failure at Seattle. We are back in business. And our business is trade liberalisation. The momentum since Doha has been equally impressive. Members have established a Trade Negotiations Committee to oversee the negotiations. They have appointed the Director-General ex-officio to chair this body. The structure of the negotiations has been determined and chairpersons of all the individual negotiating bodies decided upon."
He added, "I believe we can conclude the round within the three year timeframe agreed by Ministers."
Greenspan Sees Recovery in Some Forms of High Tech Investment
4/17. Federal Reserve Board Chairman Alan Greenspan testified before the Joint Economic Committee regarding monetary policy and the economic outlook. See, prepared testimony.
He concluded that "The U.S. economy has displayed a remarkable resilience over the past six months in the face of some very significant adverse shocks. But the strength of the economic expansion that is under way remains to be clarified. ... Still, there can be little doubt that prospects have brightened."
He stated, among other things, that "Improved profit margins over time and more assured prospects for rising final demand would likely be accompanied by a decline in risk premiums from their current elevated levels toward a more normal range. With real rates of return on high tech equipment still attractive, the lowering of risk premiums should be an additional spur to new investment. Reports from businesses around the country suggest that the exploitation of available networking and other information technologies was only partially completed when the cyclical retrenchment of the past year began. Many business managers still hold the view, according to a recent survey of purchasing managers, that less than half of currently available new and, presumably profitable, supply chain technologies have been put into use."
Greenspan continued that "Recent evidence suggests that a recovery in at least some forms of high tech investment is under way. Production of semiconductors, which in the past has been a leading indicator of computer production, turned up last fall. Expenditures on computers rose at a double digit annual rate in real terms in the fourth quarter. But investment expenditures in the communications sector, where overcapacity was substantial, as yet show few signs of increasing, and business investment in some other sectors, such as aircraft, hit by the drop in air travel, will presumably remain weak in 2002. On balance, the recovery this year in overall spending on business fixed investment is likely to be gradual."
Wyden Introduces Cyber Security Bill
4/17. Sen. Ron Wyden (D-OR) introduced S 2182, the Cyber Security Research and Development Act, a bill to authorize funding for computer and network security, research and development, and research fellowship programs. This is the Senate companion bill to HR 3394, which the House passed on February 7 by a vote of 400 to 12.
Sen. Wyden stated in the Senate that "This legislation, which has the widespread support of the Nation's technology sector, would significantly increase the amount of cyber security research in this country by creating important new research programs at the National Science Foundation, NSF, and National Institute of Standards and Technology, NIST. The NSF program would provide funding for innovative research, multidisciplinary academic centers devoted to cyber security, and new courses and fellowships to educate the cyber security experts of the future. The NIST program likewise would support cutting edge cyber security research, with a special emphasis on promoting cooperative efforts between government, industry, and academia." See, Cong. Rec., April 17, 2002, at S2832-2833.
See also, story titled "House Passes Cyber Security Research & Education Bill" in TLJ Daily E-Mail Alert No. 364, February. 8, 2002.
People and Appointments
4/17. Carolyn Fleming was named Acting Director of the Federal Communications Commission's (FCC) Office of Communications Business Opportunities (OCBO). See, FCC release [PDF].
4/17. Dwight Adams was named head of the FBI Laboratory. He is a career FBI special agent who is a biologist with a background in DNA analysis. See, FBI release.
More News
4/17. The Federal Communications Commission (FCC) published a notice in the Federal Register regarding its Notice of Proposed Rulemaking (NPRM) regarding the consequences of the FCC's classification of cable modem service as an information service. The notice sets deadlines for comments. Comments are due by June 17, 2002. Reply comments are due by July 16, 2002. This is CS Docket No. 02-52. See, Federal Register, April 17, 2002, Vol. 67, No. 74, at Pages 18848 - 18854.
4/17. Hewlett Packard (HP) announced that "the preliminary vote tally from the March 19 special meeting of HP shareowners affirms that the proposal was approved. The preliminary vote tally, prepared by the independent inspectors of election, shows that HP shareowners voted in favor of the merger by a margin of approximately 45 million shares. Moreover, shareowners not affiliated with the Hewlett and Packard families and their foundations voted for the merger by a margin of roughly 2:1. Votes ``FOR´´ the merger totaled approximately 837.9 million. Votes ``AGAINST´´ the merger totaled approximately 792.6 million, of which almost half were affiliated with the Hewlett and Packard families and foundations. An insignificant number of votes cast remain unresolved." See, HP release.
4/17. The House Appropriations Committee's Subcommittee on Commerce, Justice, State, and the Judiciary  held a hearing on the proposed budget for FY 2003 for the Federal Communications Commission (FCC). FCC Chairman Michael Powell stated in his prepared testimony [PDF] that "the FCC has requested $278,092,000 and 1,975 FTEs for Fiscal Year 2003." Powell's written statement outlines the major activities and proceeding being conducted by the FCC.
4/17. The House Appropriations Committee's Subcommittee on Commerce, Justice, State, and the Judiciary hold a hearing on the proposed budget for FY 2003 for the Securities and Exchange Commission (SEC).
4/17. The Federal Communications Commission (FCC) approved Verizon's Section 271 application to provide in region interLATA services in the state of Vermont. See, FCC release [PDF]. This is CC Docket No. 01-07.
Senate Commerce Committee Holds Hearing on TA, NIST and ATP
4/16. The Senate Commerce Committee held a hearing on the Technology Administration and the National Institute of Standards and Technology (NIST), including the Advanced Technology Program.
Sen. Ernest Hollings (D-SC), the Chairman of the Committee, said in his opening statement that "we continue to be embroiled in an annual tug of war on funding for the Advanced Technology Program, known as ATP. I am encouraged that Secretary Evans and Deputy Secretary Bodman want to stabilize this program."
Samuel Bodman, Deputy Secretary of the Commerce Department, addressed the ATP in his prepared testimony. He stated that "our review concluded that some reforms are needed", including "Offering universities increased incentive to participate in developing commercially relevant technologies by allowing them to negotiate with joint venture partners over the rights to hold the intellectual property that results from research".
Bodman also addressed several NIST computer technology initiatives. For example, he stated that "NIST is proposing to increase the resources devoted to its Program for Accelerating Critical Information Technologies. This increase in emphasis will support the development of networked systems of embedded devices (``EmNets´´) to detect, prevent, and respond to natural and human caused disasters. As computing device costs decline and capabilities increase, devices and sensors will be embedded in buildings, office spaces, manufacturing floors, transportation medians, and appliances and will be interconnected using wired or wireless networks."
Bodman also addressed NIST's Computer Security Expert Assist Team. He stated that this team "assists other Federal agencies on a cost reimbursable basis. Federal agencies are taking action to improve security, but most do not understand what actions to take or in what order. NIST staff includes world leaders in all aspects of information security."
See also, prepared testimony of other witnesses, Anne Armstong (Virginia's Center for Innovative Technology), Lewis Branscomb (Harvard), and Scott Donnelly (General Electric).
House Judiciary Committee to Mark Up Tech Bills
4/16. The House Judiciary Committee announced that it will hold a meeting on Thursday, April 18, to mark up several bills, including HR 3482, the Cyber Security Enhancement Act of 2001, and HR 3215, the Combatting Illegal Gambling Reform and Modernization Act.
Cyber Security. HR 3482, sponsored by Rep. Lamar Smith (R-TX), contains provisions relating to sentencing guidelines for computer hacking crimes, authority of Internet service providers (ISPs) and others to voluntarily disclosure the content of communications to law enforcement and other government entities, appropriations for the National Infrastructure Protection Center (NIPC), the creation of an Office of Science and Technology at the Department of Justice (DOJ), and other topics.
The bill further amends several sections of the criminal code that were just recently amended by the USA PATRIOT Act, which is also known as the anti terrorism bill. On February 26, the House Crime Subcommittee adopted amendment in the nature of a substitute, and a further amendment offered by Rep. Sheila Lee (D-TX). See also, article on the subcommittee markup in TLJ Daily E-Mail Alert No. 337, Feb. 27, 2002, and article on the subcommittee hearing in TLJ Daily E-Mail Alert No. 367, Feb. 13, 2002.
Internet Gambling. HR 3215 is Rep. Bob Goodlatte's (R-VA) latest attempt to pass legislation limiting Internet gambling. It would amend 18 U.S.C. §§ 1081 and 1084, which contain the definitions and prohibition, respectively, of the Wire Act. The Wire Act currently criminalizes the use of "wire communications facilities" in interstate commerce for gambling. The Wire Act does not ban gambling. This is a matter of state law. HR 3215 expands the prohibition to cover all communications between states or with other foreign countries. It maintains the principle that gambling is otherwise a matter of state law. Hence, under HR 3215, use of the Internet for gambling purposes would become illegal (if interstate or foreign).
The criminal prohibition of the Wire Act, 18 U.S.C. §§ 1084, currently provides that "Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers ... shall be fined under this title or imprisoned not more than two years, or both." Since the current statute affects only wire communication facilities, and some Internet communications do not involve wires, it leaves open the possibility that some Internet gambling may not be illegal under the Wire Act.
HR 3215 provides that "whoever, being engaged in a gambling business, knowingly (1) for the transmission in interstate or foreign commerce ..." or between the U.S. and abroad "... of bets or wagers ... shall be fined under this title or imprisoned not more than five years, or both." Hence, it pertains to all communications, not just wire communications.
Also, HR 3215 would amend 18 U.S.C. § 1081, which currently defines ''wire communication facility'' as "any and all instrumentalities, personnel, and services (among other things, the receipt, forwarding, or delivery of communications) used or useful in the transmission of writings, signs, pictures, and sounds of all kinds by aid of wire, cable, or other like connection between the points of origin and reception of such transmission." As amended, it would provide that "communications facility" means "any and all instrumentalities, personnel, and services (among other things, the receipt, forwarding, or delivery of communications) used or useful in the transmission of writings, signs, pictures, and sounds of all kinds by aid of wire, cable, satellite, microwave, or other like connection (whether fixed or mobile) between the points of origin and reception of such transmission."
HR 3215 would also criminalize "the transmission of a communication in interstate or foreign commerce ... which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers".
HR 1877, the Child Sex Crimes Wiretapping Act of 2001, is also scheduled for mark up on April 18. This bill would amend 18 U.S.C. § 2516(1)(c) to provide that that certain sezual crimes against children are predicate crimes for the interception of communications.
Landrieu Introduces Bill to Create Top Level Domain and Require E-Mail Labeling
4/16. Sen. Mary Landrieu (D-LA) introduced S 2137, the Family Privacy Protection Act. The bill would require the Internet Corporation for Assigned Names and Numbers (ICANN) to create a new top level domain for pormographic web sites. It would also require that e-mail advertisements containing sezually oriented material be clearly labeled as such. Finally, it would criminalize the use of a camera or similar recording device to record another individual for a lewd or lascivious purpose without that person's consent. The bill was referred to the Senate Commerce Committee.
Sen. Landrieu explained her bill in the Senate. She stated that "This bill will make it a Federal crime to film someone in these circumstances without their consent. The bill provides exceptions for legitimate purposes such as police investigations and security; but the bottom line is that this legislation would hold these individuals responsible for their actions."
She continued that "The video voyeurism component, while important, is only one part of this bill. This bill also contains a provision to protect children from Internet websites with pormographic material." She elaborated that "My legislation would instruct the Internet Corporation for Assigned Names and Numbers to set up a new domain name for pormographic websites. The owners of these sites would have 12 months to move their sites to the new domain. This is a very simple yet effective method of protecting our children from these sites. A new domain would make ``filter´´ programs, which screen out these pormographic sites, much more effective. It would eliminate mistakes like the whitehouse dot-gov, dot-com, problem".
As for labelling of e-mail, she added that "I just want to add that I am hopeful that, in the future, we can take even stronger steps to address the problem of pormographic e-mails. However, at the moment, this bill will at least ensure that Internet users, particularly children, know that an e-mail contains sezually oriented material before opening it."
She added, "this bill passes First Amendment tests for freedom of speech." See, Cong. Rec., April 16, 2002, at S2729-2730.
Sen. Landrieu is in a tight race for re-election to the Senate from the state of Louisiana.
FTC Commissioner Anthony Addresses Deceptive Sales Via the Internet
4/16. Federal Trade Commission (FTC) Commissioner Sheila Anthony gave a speech titled "Combating Deception in Dietary Supplement Advertising" to the Food and Drug Law Institute 45th Annual Educational Conference in Washington DC.
She stated the the FTC's "law enforcement plate is very full as a result of the explosion in growth of the dietary supplement industry." She added that one of the reasons for this is that "The Internet has made it easier for snake oil salesmen to sell their products because it allows marketers, both large and small, to go global."
She continued that "One of the ways the Commission attempts to deal with that is through our ``surfs.´´ Our staff, together with other law enforcement agencies, conducts Internet surfs by searching for specific disease claims. When we find a site making dubious therapeutic claims, we send an email advisory to the website alerting it to the questionable nature of certain claims. The email also provides links to resources to help the site determine if it is in compliance with the law. Later, staff checks back and finds one of three things: the site is gone, the site modified its claims, or the site has ignored us. In some cases, those that have ignored our warning become law enforcement targets."
State Department Official Addresses International Broadband Deployment
4/16. David Gross, a Deputy Assistant Secretary of State, gave a speech titled "Broadband: An International Perspective" at the luncheon hosted by The Media Institute in Washington DC.
He stated that "In the areas of the Internet and broadband, we stress the importance of creating open and competitive global telecom regimes during all of our bilateral and multilateral activities." He added that "one clear component to broadband penetration is a national regulatory environment that rewards innovation and encourages private sector competition. This is a critical ingredient for sustainable telecommunications development, including broadband."
He also reviewed the State Department's activities at recent and upcoming international meetings and conferences, including the recent meetings of the World Trade Organization (WTO) in Doha and the International Telecommunication Union (ITU) meeting. He also reviewed at length the status of broadband deployment in other countries, such as Korea, Canada, the United Kingdom, and India.
FTC To Hold Workshops on Merger Investigation Best Practices
4/16. The Federal Trade Commission's (FTC) Bureau of Competition announced that it will hold a series of public workshops on merger investigation best practices in June and July. See, FTC release.
The workshops will be held in Washington DC (June 3, June 27, and July 10), San Francisco (June 5), Los Angeles (June 25), Chicago (June 18), and New York City (June 12). There will be five workshops with a general agenda, and two with specialized agendas: electronic records, and accounting and financial data.
Supreme Court Upholds Speech Rights of Child Pormographers
4/16. The Supreme Court issued its opinion [44 pages in PDF] in Ashcroft v. FSC, a case involving a constitutional challenge to the Child Pormography Prevention Act of 1996 (CPPA). The Supreme Court ruled that provisions of the statute banning computer generated images depicting minors engaging in sezually explicit conduct is overbroad, and violates the First Amendment.
Statute. The CPPA expanded the federal prohibition on child pormography to encompass new technologies. 18 U.S.C. § 2256, the section containing definitions, was amended to provides that child pormography means "any visual depiction, including any photograph, film, video, picture, or computer or computer- generated image or picture, whether made or produced by electronic, mechanical, or other means, of sezually explicit conduct, where (A) the production of such visual depiction involves the use of a minor engaging in sezually explicit conduct; (B) such visual depiction is, or appears to be, of a minor engaging in sezually explicit conduct; (C) such visual depiction has been created, adapted, or modified to appear that an identifiable minor is engaging in sezually explicit conduct; or (D) such visual depiction is advertised, promoted, presented, described, or distributed in such a manner that conveys the impression that the material is or contains a visual depiction of a minor engaging in sezually explicit conduct;" (Words misspelled by TLJ.)
Proceedings Below. A trade association of purveyors of pormography, the Free Speech Coalition (FSC), filed a complaint in U.S. District Court challenging the constitutionality of the CPPA. The District Court granted summary judgment to the government. However, the U.S. Court of Appeals (9thCir) reversed. Four other circuits had upheld the constitutionality of the CPPA.
Supreme Court. Justice Kennedy wrote the opinion of the Court. He wrote that the CPPA, to the extent that it extends the federal prohibition against child pormography to sezually explicit images that appear to depict minors but were produced without using any real children, is substantially overbroad and violates the First Amendment.
He elaborated that the prohibited conduct is not obscene under the standard announced in Miller v. California, 413 U.S. 15 (1973), and it is not child pormography under the standard announced in New York v. Ferber, 458 U.S. 747 (1982).
Justice O'Connor wrote a separate opinion, concurring in part, and dissenting in part, in which Chief Justice Rehnquist and Justice Scalia joined. Rehnquist also wrote a separate dissent in which Scalia joined. Justice Thomas wrote a concurrence.
Attorney General John Ashcroft commented on the Supreme Court's opinion. He stated that the Court "made our ability to prosecute those who produce and possess child pormography immeasurably more difficult." See, statement.
Editor's Note: Tech Law Journal intentionally misspells certain words, such as "porm" and "sez". The reason is that some subscribers' e-mail servers block delivery of the TLJ Daily E-Mail Alert if these words are spelled correctly.
FCC Arrests Man for Unlicensed Speech
4/16. Agents of the Federal Communications Commission (FCC), U.S. Marshals Service, and Office of the U.S. Attorney for the Eastern District of New York arrested one Paul Dorleans for engaging in unlicensed speech in violation of Section 301 of the Communications Act, 47 U.S.C. § 301.
Dorleans broadcast speech in the FM band without an FCC license. The FCC stated in a release [PDF] that Dorleans "may be subject to criminal sanctions, including fines and imprisonment ($100,000 and up to one year)." (Parentheses in original.)
The Supreme Court does not extend the same level of First Amendment protection to broadcast speakers that it does to child pormographers. Contrast, for example, National Broadcasting Company v. United States, 319 U.S. 190 (1943) and Red Lion v. FCC, 395 U.S. 367 (1969), upholding the Communications Act against First Amendment challenges, to Ashcroft v. FSC (S.C.U.S., April 16, 2002), overturning part of the Child Pormography Prevention Act of 1996 on First Amendment grounds.
FCC Cross Ownership Rules and the Internet
4/16. The Media Access Project (MAP) submitted a comment [21 pages in PDF] to the Federal Communications Commission (FCC) in response to its Notice of Proposed Rule Making (NPRM) regarding media cross ownership rules, and the appropriateness of either retaining or eliminating entirely the newspaper broadcast cross ownership rule." The comment addresses, in part, the role of Internet media.
MAP's comment states that "There is no evidence to indicate that the Internet and cable pose a competitive threat to independently produced local news and public affairs content. National cable channels (e.g., ESPN and CNN) and Internet services (e.g., MSN and Slate) compete for audiences for non-local content and non-local advertising dollars. At the local level, the Internet and cable mainly function as delivery systems for existing suppliers of local content."
The comment was written by Andrew Calabrese of the University of Colorado at Boulder. This is MM Docket No. 01-235.
People and Appointments
4/16. Marlene Dortch has been named Secretary of the Federal Communications Commission (FCC), effective April 18, 2002. See, FCC release [PDF].
4/16. The Software & Information Industry Association (SIIA) named Karen Billings Vice President of its the Education Division. See, SIIA release.
More News
4/16. The U.S. Court of Appeals (3rdCir) issued its opinion in USA v. $734,578.82, a case involving a forfeiture of funds seized from an offshore illegal gambling operation. The District Court granted summary judgment to the government, pursuant to 18 U.S.C. § 1955, and issued a civil order of forfeiture. The Appeals Court affirmed.
4/16. The General Accounting Office (GAO) wrote a letter [PDF] to Rep. Steve Horn (R-CA), Chairman of the House Government Reform Committee's Subcommittee on Government Efficiency, Financial Management and Intergovernmental Relations regarding federal departments' and agencies' information security programs.

Go to News Briefs from April 11-15, 2002.