News from May 6-10, 2002

Rep. Boucher Advocates Amending DMCA and Shifting Burden of Proof on Fair Use
5/10. Rep. Rick Boucher (D-VA) gave a speech on copyright and fair use. He advocated legislation shifting the burden of proof on fair use from the defendants to plaintiffs and prosecutors. He also said that he will introduce a bill "within the next several weeks" to amend the DMCA to provide that it is "not criminal conduct under any circumstance to be active in furtherance of fair use rights".
Erosion of Fair Use Rights. Rep. Boucher stated that there has been "a consistent erosion over the last few years of the very precious fair use rights." He elaborated that "The fair use doctrine was in fact created by the courts as a way to give substance to First Amendment freedom of speech rights. Simply put, free speech does not mean very much if you have you to get the permission of a copyright owner in order to use words in a series that perhaps, coincidentally, are subject to a copyright. So the fair use doctrine was essential in the view of the American courts in order to give vitality to our precious First Amendment freedom of speech right."
"Today, however, that precious fair use right is under attack as it never has been before in the history of our country. The balance that we have always enjoyed in our law between the rights of the owners of the intellectual property, and the rights of the users of intellectual property is now fundamentally changed. That balance was changed by a number of steps."
He cited several changes, including enactment of the Digital Millennium Copyright Act (DMCA) and the Copyright Term Extension Act (CTEA), the increased use of copy protected CDs and DVDs, the introduction of S 2048 by Sen. Ernest Hollings (D-SC), and the experiences of Professor Felton and the ElcomSoft corporation.
CTEA. Rep. Boucher addressed the Copyright Term Extension Act. He stated that "I am pleased that the U.S. Supreme Court is now examining, to determine whether that latest copyright term is extension is consistent with the limitations on the copyright interest that is stated in the U.S. Constitution. And I am concerned that this shift in the historical balance in favor of the owners of intellectual property will broadly diminish what you are here to discuss today, and that is the public commons of information that is so essential for progress in our society." See, TLJ summary of Eldred v. Ashcroft, a constitutional challenge to the CTEA, now pending before the Supreme Court.
DMCA. Rep. Boucher also spoke at length about the DMCA. He stated that the "Congress in passing the DMCA granted unprecedented rights to the owners of intellectual property, which unless changed, will cede to the intellectual property owner total control over the work. The new rights go well beyond the what is necessary to ensure fair compensation to the intellectual property owner. These new rights go well beyond what is necessary to thwart piracy."
See, full text of the Digital Millennium Copyright Act, a 94 pages PDF document, or 18 page summary by the Library of Congress in PDF.
He continued that "These new rights forecast a time when what is available for free on the library shelf today, and for limited copying for personal use purposes, for free today, will be converted into material available only on a pay per use basis in the future. Total control over the work in ceded through this law to copyright owner. And, we see the copyright owners beginning to exercise that greater degree of control at the present time."
"But the day will come, and granted by the power of this law, when what is available for free today on a library shelf will be available only for pay for use in the future. And that is, I think, one of the great tragedies and harms of this law."
Hollings Bill. Rep. Boucher said, "let me suggest one other thing that troubles me a great deal, and that is the introduction in the Senate of a bill that would serve broadly to restrict fair use rights." See, S 2048, the Consumer Broadband and Digital Television Promotion Act, introduced by Sen. Ernest Hollings (D-SC) and others on on March 21, 2002.
Rep. Boucher added that the Hollings bill "would do a number of other things. It would require that all digital receivers, recorders, and players come equipped with a technology standard that would enable that device to respond to content that contains this government technology standard. Only that content could be played on the device. There is no assurance that even if the device works, which is subject to question, you would be able to convey that content to multiple devices around the home. There is nothing in the legislation to assure that. You have to make individual copies whenever that happens, and this bill basically allows one copy to be made. So, the device wouldn't allow the portability of content to be lawfully acquired for devices within the home."
Rep. Boucher concluded that "The legislation is unnecessary. And, let me just say that it is not going anywhere. Senator Leahy, who has jurisdiction over this matter in his Judiciary Committee, has already said that the bill is not going to pass. And so, we can put our minds at ease that this particular measure is not going to pass, at least for now. But it does bespeak an intent on the part of those who suggested its introduction that technology be saddled with measures that would broadly inhibit what we have all come to understand as basic fair use rights."
Rep. Boucher's Two Legislative Proposals. He stated that "I think that it is time that Congress re-examine the DMCA. And, within the next several weeks, I am going to be introducing a bill that will achieve that purpose." He elaborated that "This bill is going to take a fairly surgical approach. It is going to say that it is not criminal conduct under any circumstance to be active in furtherance of fair use rights."
Rep. Boucher stated that in the longer run he would like to see legislation that shifts the burden of proof on fair use. He said this: "In order to structure a somewhat broader measure, that would create an affirmative right of fair use, and say that individuals have this basic right, extended by the virtue of federal law. A lawyer would say that we are really doing is shifting the burden of proof, one way or the other. But, that burden of proof is important. It is better to have to make whoever is prosecuting or suing you, establish as a part of the case in chief, that you are not exercising a fair use right, than for you to have to offer fair use as a defense. Lawyers will appreciate the difference." See, codification of the affirmative defense of fair use: 17 U.S.C. § 107.
Rep. Boucher was the keynote speaker at a conference titled "Protecting the Information Commons: Asserting the Public Interest In Copyright Law and Digital Infrastructure". It was co-hosted by the New America Foundation and Public Knowledge.
Trade Promotion Authority Moves Closer to Passage in Senate
5/10. Sen. Max Baucus (D-MT) stated in a release [PDF] that "we have reached a compromise on fast track, Trade Adjustment Assistance, Andean trade, and the Generalized System of Preferences, or GSP." He added that "Senator Grassley and I -- along with the Administration -- were able to reach and agreement that I believe will gain very broad bipartisan support."
The House passed its version of the bill, HR 3005, on December 6, 2001. Trade Promotion Authority (TPA), which is also know as fast track, would give the President authority to negotiate trade agreements which the Congress can then approve or reject, but not amend. Sen. Baucus is the Chairman of the Senate Finance Committee, which has jurisdiction over TPA legislation. This Committee passed its version of the TPA bill in December by a vote of 18 to 3.
Sen. Baucus and Sen. Charles Grassley (R-IA), the ranking Republican on the Committee, also released a joint statement [PDF] summarizing the content of the agreement.
The agreement on Trade Adjustment Assistance (TAA) provides assistance on health care insurance. It extends the time period for which TAA pays out income support from 52 to 74 weeks. It expands eligibility to secondary workers. It extends TAA benefits when a U.S. manufacturing plant moves offshore. And, it expands benefits.
Sen. Judd Gregg (R-NH) commented on the compromise in a speech in the Senate on May 10. He addressed the health insurance provisions. "This is a huge, brand new entitlement being put together in the middle of the night -- this one especially in the middle of the night -- which has not been properly vetted and which has significant issues surrounding it."
He concluded: "The trade adjustment language in this bill raises very significant problems, and to hook it to the trade promotion authority raises the question: Is it worth the price of getting trade promotion authority to put in place these types of expansive public policy initiatives which involve huge implications on the expenditure side of our Government?"
President Bush gave a speech in Columbus, Ohio on May 10 at a Taft for Governor luncheon. He spoke about the Senate trade compromise. He stated that "I'm pleased that the Senate looks like they've got an agreement on a trade bill. This nation ought to be confident. We ought to be opening up markets all around the world to trade. It'll be good for our Ohio farmers to trade, it's good for Ohio small business people to trade. I hope Congress finally gets a trade promotion authority bill to my desk. Confident nations open up markets, they don't build walls around themselves. I'm confident that we're the best producers and innovators in many products, and therefore we ought to be selling our products around the world."
The U.S. High Tech Coalition on Trade Promotion Authority, a coalition of technology industry groups, stated in a release that it "is very pleased with this news and supports this compromise package." Cynthia Johnson, Chair of the Coalition, stated in the release that "This is a huge step toward reaching the goal of passing of TPA and, thus, enabling U.S. negotiators to pursue new agreements to open foreign markets critical to the U.S. high tech industry ... We still have a long way to go and will face some tough battles on amendments."
The Coalition added that it has several trade objectives, including "Tariff elimination on high tech products;  Strong intellectual property protections; Reform in the regulatory practices of our trade partners; Improved market access and non-discriminatory treatment for services; and Promotion of e-commerce."
Tom Donohue, P/CEO of the U.S. Chamber of Commerce, stated in a release that "The compromise made by the Senate and the White House shows that both sides know how important TPA is to our fragile economy.  Although, we would prefer this legislation to be a clean trade bill, we are pleased that we're one step closer to giving the U.S. the tools it needs to compete in the global marketplace. We will continue to work with the Senate to defeat any and all killer amendments to this compromise."
NTIA Director Discusses Spectrum Management
5/10. National Telecommunications and Information Administration (NTIA) Director Nancy Victory gave a speech titled "Telecommunications Challenges: The Telecom Tsunami". She spoke about "spectrum management".
She stated that "One pressing challenge for NTIA is ensuring that spectrum is available to fuel future wireless growth and to provide the increasingly indispensable infrastructure for our military, law enforcement and public safety needs."
She added that "we need to make a concerted effort to eliminate unnecessary government micromanaging of spectrum uses. This means taking a fresh look at legacy rules and restrictions to assess their ability to accommodate emerging technologies or spectrum needs."
She also identified the major spectrum issues. "First, there is the so called allocation for Third Generation wireless services -- the Internet on and off ramps for mobile communications -- better know as 3G. Second, there is the huge cloud of uncertainty hanging over the spectrum that television broadcasters will be surrendering as they migrate to the digital world of High Definition Television -- better known as HDTV or more recently ATV. Third, there is the spectrum currently shared between commercial SMR operators like Nextel, private radio users such as utilities, airlines and other companies, and public safety organizations."
She also told jokes, outlined the responsibilities of the NTIA, and advised her audience that "If Wall Street wants to have an impact on Pennsylvania Avenue, you better speak out and speak out loudly. Otherwise, you will have no one else to blame for being ignored as key policy decisions are being made." She spoke in New York City to the before the 16th Annual Global Communications Conference sponsored by Goldman Sachs.
House Subcommittee Holds Hearing on IPR and Government R&D
5/10. The House Government Reform Committee's Subcommittee on Technology and Procurement Policy held a hearing titled "Intellectual Property and Government R&D for Homeland Security".
Rep. Tom Davis (R-VA), who presided at the hearing, stated that most leading information technology companies refuse to do research for the government because of intellectual property and red tape concerns.
He stated in his prepared testimony that "In an environment where private sector R&D spending accounts for almost three fourths of the total spent in the United States, the Government's role has changed to become a partner in innovation, rather than the sole driving force. Because IP right are the most valued assets of companies, the Government must ensure that its policies and procedures reflect this partnership for innovation."
Richard Carroll, of the Small Business Technology Coalition, testified that the prevailing attitude of the government is "We paid for it. We own it." Carroll said that "for small high tech companies in particular, the government culture of ``we pay for it, we own it´´ has a chilling effect on their interest in innovating for the government. Understand, that these companies are the most likely to bring forth the innovations needed to transform our defense systems, and to meet the needs of homeland defense with rapid, innovative, and affordable solutions. These new ideas represent the heart of their company's assets, and their ability to offer strong competitive alternatives to the status quo is clearly predicated on some level of intellectual property protection. If they lose that intellectual property because the government provides it to their competitors, the very survival of the company is threatened."
See also, prepared testimony [PDF] of Jack Brock of the General Accounting Office titled "Intellectual Property: Industry and Agency Concerns over Intellectual Property Rights".
DC Circuit Grants Rehearing En Banc in Ruggiero Case
5/10. The U.S. Court of Appeals (DCCir) issued an order in Ruggiero v. FCC granting an en banc rehearing. On February 8, a three judge panel of the Court of Appeals issued its split opinion holding unconstitutional the ban on issuance of low power FM radio broadcast licenses to anyone who has previously engaged in an unlicensed operation.
The set of people who have engaged in unlicensed broadcasting who may seek low power FM (LPFM) licenses is a very small and insignificant group. However, this case could have a broader impact. The en banc panel may provide an analysis of the application of the First Amendment to broadcast speech that affects a wider range of speakers.
The three judge panel previously held that the ban was unconstitutional under the First Amendment, but did articulate its rationale with clarity. Notably, it did not even identify the standard of review to apply.
The Federal Communications Commission (FCC) filed a petition for rehearing en banc. The Court granted the petition, without explanation. The Court issued an order that states that "Upon consideration of the respondents' petition for rehearing en banc, the response thereto, and the vote by a majority of the judges of the court in regular, active service in favor of the petition, it is ORDERED that the petition be granted. This case will be reheard by the court sitting en banc."
Background. The Radio Broadcasting Preservation Act of 2000 (RBPA) permanently prohibits anyone who ever "engaged in any manner in the unlicensed operation of any station in violation of ... the Communications Act of 1934" from obtaining a LPFM radio license from the FCC. Greg Ruggiero is a former pirate broadcaster who sought a low power FM license from the FCC. He argues that the statute and the FCC's implementing rules violate his First and Fifth Amendment rights.
Holding. The three judge panel held that the ban was constitutionally impermissible because of the relationship of the ban to the underlying purpose of the statute and implementing regulations. It found that the class of applicants banned from receiving low power FM licenses is under inclusive. It wrote, citing News America, that "we find the character qualification provision so poorly aimed at maximizing future compliance with broadcast laws and regulations as to ``raise[ ] a suspicion´´ that perhaps Congress's ``true´´ objective was not to increase regulatory compliance, but to penalize micro broadcasters' ``message.´´ "
The Court concluded that "we cannot sanction an automatic and permanent restriction on unlicensed broadcasters' future lawful speech without understanding why their misdeeds warrant a penalty so much more severe than that applied to any other misconduct. Yet neither the RBPA itself, nor the legislative history, nor the record in this case provides a satisfactory explanation. We thus have no choice but to declare the statute and the Commission's implementing regulation unconstitutional."
Split. Judge Tatel wrote the opinion. Judge Rogers joined. Judge Karen Henderson wrote a dissent. She wrote: "What could be more reasonable or logical than to suspect that those who ignored the Commission's LPFM broadcast regulations in the past are likely to do so in the future and therefore to head them off. ... I see no reason the legislature cannot permissibly tackle a single part of a perceived problem (including one touching on the First Amendment) through a statute, such as the one here, which is neither overinclusive nor underinclusive."
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5/10. The U.S. Court of Appeals (9thCir) issued its opinion [PDF] in Berkla v. Corel, an appeal involving punitive damages, attorneys fees and costs. The underlying case arises out of a dispute over electronic databases of digital images, and involves claims of copyright infringement, breach of contract, unfair business practices, and breach of confidence. Dennis Berkla designs electronic databases. Corel is a Canadian software company that makes CorelDraw and other applications. The jury awarded Berkla compensatory and punitive damages. The Court then disallowed the jury's award of punitives, and denied both parties' requests for attorneys fees and costs. The Court of Appeals affirmed in part and reversed in part.
House Judiciary Committee Progress on Tech Related Bills
5/9. The House Judiciary Committee dealt with several technology related bills this week. The following is a summary of the action on each bill.
HR 3215, the Combatting Illegal Gambling Reform and Modernization Act. This is Rep. Bob Goodlatte's (R-VA) Internet gambling bill. On Wednesday, May 8, the Committee began mark up. However, it proceeded only as far as opening statements. The Committee has not yet scheduled a continuation of this mark up.
HR 3482, the Cyber Security Enhancement Act of 2001. The Committee amended and approved this bill on Wednesday, May 8.
HR 4623, the Child Obscenity and Pormography Prevention Act of 2002. The Crime Subcommittee held a hearing on the morning of Thursday, May 9, and then amended and approved the bill later in the day. The full Committee is likely to mark up the bill next week. The full House may approve the bill before the Memorial Day recess.
HR 4640, a bill to provide criminal penalties for providing false information in registering a domain name on the Internet. The Crime Subcommittee had scheduled this bill for its hearing and mark up meetings on Thursday, May 9. However, it was removed from the agenda of both meetings.
HR 4658, the Truth in Domain Names Act. The Crime Subcommittee had scheduled this bill for its hearing and mark up meetings on Thursday, May 9. However, it was removed from the agenda of both meetings.
House Crime Subcommittee Reschedules Hearing & Markup of Domain Names Bills
5/9. The House Judiciary Committee's Subcommittee on Crime has rescheduled for Friday, May 17, its meeting to hear testimony, and then mark up, HR 4640 and HR 4658.
HR 4640 is an untitled bill to provide criminal penalties for providing false information in registering a domain name on the Internet. HR 4658 is titled the Truth in Domain Names Act. The Crime Subcommittee had scheduled these bills for its hearing and mark up meetings on Thursday, May 9. However, they were removed from the agenda of both meetings, pursuant to the 24 hour notice rule.
House Research Subcommittee Approves Two Bills
5/9. The House Science Committee's Subcommittee on Research held a hearing on HR 4664, the National Science Foundation Reauthorization Act of 2002. The bill would authorize the doubling the agency's budget in five years. The Subcommittee approved one amendment, renaming the bill the Investing in America's Future Act. The bill, as amended, was then approved by a unanimous voice vote.
The Subcommittee on Research also approved by voice vote at its May 9 meeting HR 3130, the Undergraduate Science, Mathematics, Engineering, and Technology Education Improvement Act, which was introduced under the title, Technology Talent Act of 2001.
This bill would authorize grants to be awarded on a competitive basis to institutions of higher education to increase the number of students studying and receiving associates or bachelor's degrees in science, mathematics, engineering, and technology.
Both bills are likely to be approved by the full Science Committee before the Memorial Day recess. There was no dispute within the Committee over these bills. However, whether the full House will go along is altogether another question.
FRB Vice Chairman Addresses Communications, Information and Terrorism
5/9. Federal Reserve Board Vice Chairman Roger Ferguson gave a speech titled "Implications of 9/11 for the Financial Services Sector". He recommended that financial institutions should seek greater redundancy of telecommunications services through alternative technologies, including Internet, satellite, and wireless services. He spoke at the Conference on Bank Structure and Competition, in Chicago, Illinois.
He first reviewed the affect of the terrorist attack in New York City upon communications. He stated that "The destruction of telecommunications infrastructure supporting lower Manhattan disrupted the telephone connections for several days between the whole nation and financial markets and intermediaries located in the lower Manhattan financial district. This disruption created bottlenecks in the processing of financial transactions and caused a temporary -- but severe -- dislocation of liquidity for financial institutions. The primary markets closed temporarily, to facilitate disaster recovery efforts and to ensure fair and orderly markets, until telecommunications could be restored."
He added that "Banks and other financial intermediaries stayed open. Key wholesale and retail payments system remained operational, like other financial activities, except to the extent that telecommunications disruptions had a temporary or local effect."
He next offered his assessment of why the financial system performed so well following the terrorist attacks. "First, the financial industry incorporated information technology into its business processes many years ago and since then has encouraged innovations in business process to achieve efficiency and security. As a result, industry participants are extremely knowledgeable about technology and the related operations risk."
"Second, financial institutions understand that it is in their best business interest to make business continuity planning an executive management issue, requiring top level involvement and not insignificant investment. Preparations for the century date change gave us a much clearer understanding of the financial system's dependence on technology and on the complexities of managing operations risk", said Ferguson.
"Third, financial institutions have long understood the need for strong internal controls and physical security. As banks increased reliance on information technology, they naturally incorporated measures to ensure the security of information. Moreover, financial institutions recognized immediately that the increasing role of information system networks and the Internet in the financial markets engendered new risks, and they became leaders in addressing cyber protection issues." He then praised the financial industry information sharing and analysis center (ISAC).
Ferguson also offered a few lessons to be learned from September 11. He said that "institutions will need to develop internal business resumption standards and define their recovery targets in a fairly consistent manner." He also stated that "financial institutions should seek greater redundancy of telecommunications services through alternative technologies (Internet, satellite, and wireless) and eliminate potential single points of failure."
FCC Announces Agenda of May 16 Meeting
5/9. The Federal Communications Commission (FCC) announced the agenda for its Thursday, May 16, meeting. See, agenda. It includes approval of the following items.
A Notice of Proposed Rulemaking concerning section 272(f)(l), the sunset of the BOC separate affiliate and related matters.
A Report and Order allowing private cable operators to use frequencies in the 12 GHz band of the Cable Television Relay Service (CARS). (CS Docket No. 99-250; RM-9257).
An Order concerning extension of the October 5, 2001, digital television construction deadline; and a Notice of Proposed Rulemaking on remedial steps for failure to comply with the DTV construction schedule.
A Second Report and Order concerning regulations for spread spectrum systems. (ET Docket No. 99-231).
A Report and Order concerning service rules for the 216-220 MHz, 1390-1395 MHz, 1427-1432 MHz, 1670-1675 MHz, 2385-2390 MHz and the paired 1392-1395 MHz and 1432-1435 MHz Bands. (WT Docket No. 02-8; RM-9267, RM-9692, RM-9797, RM-9854, RM-9882).
House Committee to Hold Hearing and Mark Up of Tech Crime Bills
5/9. The House Judiciary Committee's Subcommittee on Crime is scheduled to hold a hearing, and then a mark up session, for three technology related crime bills, on Thursday, May 9. See, HJC schedule.
HR 4640, a bill to provide criminal penalties for providing false information in registering a domain name on the internet, was introduced by Rep. Howard Coble (R-NC) and Rep. Howard Berman (D-CA) on May 2. It would provide that "Whoever knowingly and with intent to defraud provides material and misleading false contact information to a domain name registrar, domain name registry, or other domain name registration authority in registering a domain name shall be fined under this title or imprisoned not more than 5 years, or both."
HR 4658, the Truth in Domain Names Act, was introduced by Rep. Mike Pence (R-IN), Rep. Sheila Lee (D-TX), and Rep. Robert Simmons (R-CT) on May 2. It would provide that "Whoever knowingly uses a misleading domain name with the intent to attract a minor into viewing a visual depiction of sexually explicit conduct on the Internet shall be fined under this title or imprisoned not more than 2 years, or both."
Finally, HR 4623, the Child Obscenity and Pormography Prevention Act of 2002, pertains to computer generated images.
People and Appointments
5/9. The Senate confirmed four U.S. District Court Judges: Leonard Davis (Eastern District of Texas), Andrew Hanen (Southern District of Texas), Samuel Mays (Western District of Tennessee), Thomas Rose (Southern District of Ohio).
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5/9. President Bush urged Senate Democrats to stop delaying hearings and confirmations of his judicial nominees. He stated that "We have a vacancy crisis in America. There are too many seats that aren't filled with judges and, therefore, America hurts, America is not getting the justice it needs. Ours is a system that relies upon an independent court system, and when there is vacancies, the American people suffer. And I call upon the Senate to approve -- at least give hearings to people we've sent up to the Senate." See, transcript of press conference, and White House release.
5/9. A jury of the U.S. District Court (NDCal) returned a guilty verdict against Keith Kim on one count of making a material false statement to the Securities and Exchange Commission (SEC), in violation of 18 U.S.C. § 1001. The statement was made during the SEC's investigation into the trading in shares of Meridian Data, Inc., based upon insider information that Meridian and Quantum Corp. were in merger negotiations. See, USAO release.
5/9. The Software & Information Industry Association (SIIA) announced that it acquired the New York New Media Association (NYNMA). See, SIIA release.
EU Investigates Deutsche Telekom for Antitrust Violations
5/8. The European Commission (EC) announced that it sent Deutsche Telekom (DT) "a statement of objections setting out the preliminary conclusion that the German incumbent telecommunications operator has abused its dominant position through unfair pricing regarding the provision of local access to its fixed telecommunications network (local loop)." (Parentheses in original.)
The EC further stated that it "is concerned about DT's practice of charging new entrants higher fees for wholesale access to the local loop than what DT's subscribers pay for retail access. This discourages new companies from entering the market and, therefore, creating new jobs, and reduces the choice of suppliers of telecoms services as well as price competition for consumers."
Competition Commissioner Mario Monti stated that "After four years of complete liberalisation of the telecommunications markets in Europe, competition has come to a critical stage. This is particularly acute in the local loop where many very promising new entrants have already been forced to give up their business. I believe that much can still be done to foster competition in this field and that is clearly one of our priorities now. We have already acted in Italy and Spain to ensure a proper balance between the monthly telephone subscription fees and the call charges, allowing the new entrants in both countries to better compete with the incumbent operators." See, EC release.
House Judiciary Committee Approves Cyber Security Enhancement Act
5/8. The House Judiciary Committee amended and approved the Cyber Security Enhancement Act of 2001. See, HR 3482, as approved by the Committee.
The bill 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.
The Committee approved an amendment in the nature of a substitute offered by Rep. Lamar Smith (R-TX), the sponsor of the bill. The amendment changed the language of Section 102, regarding voluntary disclosures to law enforcement entities, which has been the most controversial section of the bill.
This section would amend 18 U.S.C. § 2702(b), regarding voluntary disclosure of the contents of communications. Currently, the statute provides that "A person or entity may divulge the contents of a communication ... (6) to a law enforcement agency ... (C) if the provider reasonably believes that an emergency involving immediate danger of death or serious physical injury to any person requires disclosure of the information without delay."
The previous version of the bill, which was approved by the Crime Subcommittee on February 26, would have allowed disclosure "to a governmental entity, if the provider, in good faith, believes that an emergency involving danger of death or serious physical injury to any person requires disclosure of the information without delay."
The version just approved by the Judiciary Committee would allow disclosure "to a Federal, State, or local governmental entity, if the provider, in good faith, believes that an emergency involving danger of death or serious physical injury to any person requires disclosure without delay of communications relating to the emergency."
Hence, the bill would lower the standard that ISPs and others must meet before they voluntarily release information -- from "reasonably believes" to "good faith". It also removes the immediacy requirement. It also expands the set of entities to which information can be released -- from "law enforcement agency" to "governmental entity". The change from the subcommittee version, to that just approved by the full committee, is that the full committee version restricts the information disclosed to "communications relating to the emergency".
The Committee also approved two amendments to the amendment in the nature of a substitute. First, the Committee approved an amendment offered by Rep. Bobby Scott (D-VA) that adds to Section 102 a requirement that "a government entity that receives a disclosure under this section shall file, no later than 90 days after such disclosure, a report to the Attorney General ..." It further provides that the Attorney General shall publish all such reports once per year in a report to the Congress.
The Committee also approved an amendment offered by Rep. Melissa Hart (R-PA) that would amend 18 U.S.C. § 3105 to provide that "The presence of an officer is not required for service or execution of a warrant under section 2703 when the provider of electronic communications service or remote computing service produces the information required in the warrant." That is, a law enforcement officer need not personally serve a search warrant on an ISP when the ISP provides the information that is sought in the warrant.
See also, "House Crime Subcommittee Approves Cyber Security Bill," in TLJ Daily E-Mail Alert No. 377, Feb. 27, 2002, and "House Committee Holds Hearing on Cyber Security Enhancement Act", in TLJ Daily E-Mail Alert No. 367, Feb. 13, 2002.
Senate Committee Holds Hearing on Cyber Security Information Sharing
5/8. The Senate Governmental Affairs Committee held a hearing on S 1456, the Critical Infrastructure Information Security Act of 2001, sponsored by Sen. Bob Bennett (R-UT). The bill contains a Freedom of Information Act (FOIA) exemption to encourage the sharing of information regarding cyber security with the federal government, and an antitrust exemption to encourage cooperative efforts.
Deputy Assistant Attorney General John Malcolm stated that "The Justice Department believes that the sharing of private sector security information on critical infrastructure between private sector entities and with the federal government to avert acts that harm, or threaten to harm, our national security is of the utmost importance."
Malcolm also reviewed existing FOIA law in his written testimony. He stated that "Exemption 4 of FOIA protects ``trade secrets and commercial or financial information obtained from a person [that is] privileged or confidential.´´ The exemption affords protection to those business submitters who are required to furnish commercial or financial information to the government, either directly or indirectly, by safeguarding them from the competitive disadvantages that could result from disclosure."
Malcolm added that "It is important to recognize that the courts have regularly rejected any notion that either an information submitter's request for confidentiality, or an agency's promise that submitted information would not be released, by itself, suffices to insulate such information from disclosure under FOIA."
He continued that the U.S. Court of Appeals (DCCir) interpreted Exemption 4 in Critical Mass Energy Project v. NRC, 975 F.2d 871 (1992) (en banc), cert. denied, 113 S. Ct. 1579 (1993). He stated that this case held that "commercial information information that is required to be furnished to the Government can be withheld primarily to the extent that the Government can demonstrate that its disclosure would result in ``substantial competitive harm.´´ However, where information is ``voluntarily´´ submitted to the government, such information is protected to the extent that it is not ``customarily´´ disclosed to the public by the submitter, a considerably easier standard to satisfy. It is our expectation that most information regarding critical infrastructure vulnerabilities will fall into the ``voluntarily´´ submitted category and will, therefore, readily qualify for Exemption 4 protection under the DC Circuit’s Critical Mass decision."
However, Malcolm added that "business submitters are aware that this D.C. Circuit Court precedent might not come to be accepted in all other judicial circuits, which gives rise to reasonable concerns. ... Were the decision in Critical Mass a definitive legal principle decided by the United States Supreme Court, concerns regarding protection of this information would be greatly reduced.  Since that is not the case, the Department recognizes that the broad protection afforded such information by the District of Columbia appellate court does not provide the complete assurances to the submitters of private sector infrastructure that they seek."
Harris Miller of the Information Technology Association of America (ITAA) endorsed S 1456. He stated that "corporate counsels advise their clients not to share voluntarily the details of computer attacks with government agencies because the risk that such data could ultimately be divulged through the Freedom of Information Act (FOIA) -- even over the agency's objections -- is unacceptably high."
David Sobel of the Electronic Privacy Information Center (EPIC) testified in opposition to creating a new cyber security information FOIA exemption. He said in his prepared testimony that "this exemption approach is fundamentally inconsistent with the basic premise of the FOIA ... the Freedom of Information Act has worked extremely well over the last 25 years, ensuring public access to important information while protecting against specific harms that could result from certain disclosures. After monitoring the development of critical infrastructure protection policy for the last several years, I have heard no scenario put forth that would result in the detrimental disclosure of information under the current provisions of the FOIA."
See, prepared testimony of witnesses: Ronald Dick (Director, FBI's National Infrastructure Protection Center), John Malcolm (Deputy Assistant Attorney General, Criminal Division, U.S. Department of Justice), John Tritak (Director, Critical Infrastructure Assurance Office), Michehl Gent (P/CEO, North American Electric Reliability Council), Harris Miller (President, ITAA), Alan Paller (Director of Research, The SANS Institute), Ty Sagalow (Board Member, Financial Services ISAC), David Sobel (General Counsel, EPIC), Rena Steinzor (Professor, University of Maryland School of Law).
Rep. Stearns Introduces Information Privacy Bill
5/8. Rep. Cliff Stearns (R-FL), Chairman of the House Commerce Committee's Subcommittee on Commerce, Trade & Consumer Protection, and others, introduced HR 4678, the Consumer Privacy Protection Act of 2002.
The bill, which is 33 pages long on paper, would require both online and offline "data collection organizations" to provide a clear notice of what information about consumers is collected, and how that information will be used. The bill also contains opt out language. It would also mandate information security policies. Enforcement would be handled by self regulatory programs, backed up by the Federal Trade Commission (FTC). The bill creates no private right of action, or state right of action. The bill would also preempt state laws. The bill exempts government entities and certain non profits and small businesses.
A bipartisan group of Representatives held a joint press conference in the Capitol Building to announce the introduction of the bill. The participants included, in addition to Rep. Stearns, Rep. Billy Tauzin (R-LA), Rep. Rick Boucher (D-VA), Rep. Anna Eshoo (D-CA), Rep. Lee Terry (R-NE), and Rep. Jim Moran (D-VA). Rep. Tauzin is the Chairman of the House Commerce Committee, which has jurisdiction over the bill.
Rep. Stearns said that the "underlying principal that anchors this bill is DO NO HARM. Our economy is a consumer based economy, where some two thirds of all economic activity is driven by consumer spending. Historically, consumer information has played an important role in our economic growth. The free flow of consumer information has served all of us, as American consumers, well throughout our modern economic history. Any federal law or regulation that unduly burdens such information sharing activity, may bring about a substantial and negative impact upon our economy."
Rep. Eshoo said that "privacy is a right that the American people really cherish. ... We don't want anyone -- either big browser, or big government -- coming after it." Rep. Moran said that "this is responsible balanced legislation that goes a long way towards protecting people's privacy" while also protecting technology companies.
Rep. Boucher said that "many companies will offer higher level of protection than the statute provides". He added that "this measure serves as a floor, not a ceiling."
The bill's backers touted its chances for passage. Rep. Eshoo stated that "I think that because this is so bipartisan that we have a good shot at it." Rep. Moran said that "it stands a good chance of enactment."
Rep. Tauzin and Rep. Stearns both stated that the next step is for the House Commerce Committee's Subcommittee on Commerce, Trade & Consumer Protection to hold hearings on the bill. Rep. Tauzin added that the bill is "a good statement of the consensus" on privacy, but it is still a work in progress.
Notice. The bill requires that a "data collection organization shall establish a privacy policy with respect to the collection, sale, disclosure for consideration, or use of the personally identifiable information of consumers". This privacy policy must be "clear and conspicuous and written in plain language" and "accessible". It must disclose, among other things, "The identity of each data collection organization, or a description of each class or type of data collection organization, that may collect or use the information", "The types of information that may be collected, sold, disclosed for consideration, or used", "How the information may be used", and "Whether the consumer is required to provide the information in order to do business with the data collection organization". See, Section 102.
Moreover, the data collection organization must provide notice to consumers, which, in the case of a website, may be a hyperlink to another page. See, Section 101.
Opt Out Provision. The bill provides that "A data collection organization shall provide to the consumer, without charge, the opportunity to preclude any sale or disclosure for consideration of the consumer’s personally identifiable information, that may be used for a purpose unrelated to a transaction with the consumer, to any data collection organization that is not an information- sharing partner of the data collection organization providing such opportunity." See, Section 103.
Information Security Policy. The bill also requires data collection organizations to maintain security policies. It states that "A data collection organization shall prepare, revise as necessary, and implement an information security policy that is applicable to the information security practices and treatment of personally identifiable information maintained by the data collection organization, in order to prevent the unauthorized disclosure or release of such information." See, Section 105.
FTC Civil Enforcement. The bill provides that violation of the provisions of the bill would constitute an unfair or deceptive act or practice in violation of Section 5 of the FTC Act, 15 U.S.C. § 45(a)(1). Civil penalties under the FTC Act would be limited to $500,000 for all related violations by a single violator. See, Section 107.
Self Regulatory Programs. The bill also contemplates that the much of the enforcement would be conducted by private self regulatory programs that are approved by the FTC. To give companies an incentive to join such programs, the bill provides that "A data collection organization that participates in a self-regulatory program ... shall not be liable for a civil penalty arising out of a violation ... unless such violation results from willful noncompliance with the guidelines, procedures, requirements, or restrictions of the program." See, Section 106.
Existing Federal Privacy Laws. The provides that "To the extent that personally identifiable information protected under this title is also protected under a provision of Federal privacy law", such as the Gramm Leach Bliley act, a "data collection organization that complies with the relevant provision of such other Federal privacy law shall be deemed to have complied with the corresponding provision of this title." See, Section 109.
Preemption of State Laws. The bill provides that it "preempts any statutory law, common law, rule, or regulation of a State, or a political subdivision of a State, to the extent such law, rule, or regulation relates to or affects the collection, use, sale, disclosure, or dissemination of personally identifiable information in commerce. " See, Section 109.
No State Right of Action. States could not bring actions to enforce this bill. It states that "No State, or political subdivision of a State, may take any action to enforce this title." See, Section 109.
No Private Right of Action. The bill does not provide any private right of action. "No private civil action relating to any act or practice governed under this title may be commenced or maintained in any State court or under State law (including a pendent State claim to an action under Federal law)." (Parentheses in original.) See, Section 108.
Entities Not Covered by the Bill. The bill would exempt government entities, non-profit entities ("to the extent that personally identifiable information is not used for a commercial purpose"), and certain small businesses (a business which has fewer than 25 employees, which has annual gross revenue less than $1,000,000, which "collects or uses personally identifiable information from fewer than 1,000 consumers for a purpose unrelated to a transaction with the consumer", which "does not process personally identifiable information of consumers", and which "does not sell or disclose for consideration such information to another person"). See, Section 401.
Identity Theft. The bill also addresses identity theft, such as through requiring the FTC "to take such action as necessary to solicit the acceptance and acknowledgement of standardized Identity Theft Affidavit ..." (See, Title II.)
Bruce Josten of the U.S. Chamber of Commerce stated in a release that "Business has heard the call from consumers that security and privacy are high priorities, and they have responded", and business "has taken the lead in developing transparent ways to empower and protect consumers." Hence, said Bruce Josten, "The Chamber strongly cautions Congress to think twice before enacting unnecessary laws that could stifle the emerging Internet economy."
Jonathan Zuck, President of the Association for Competitive Technology (ACT) stated in a release that "While this is great step forward from previous proposals, it just isn't 'there' yet. ... On privacy policies, the bill only seems to codify existing business practices. This could prevent ebusinesses from changing their privacy policies to meet consumer demands while imposing costs on those businesses as they try to meet the letter of the law from the new regulations."
Local Radio Ownership Rules and the Internet
5/8. The Minority Media and Telecommunications Council (MMTC) submitted a reply comment [61 pages in PDF] to the Federal Communications Commission (FCC) in its proceeding titled "In the Matter of Rules and Policies Concerning Multiple Ownership of Radio Broadcast Stations in Local Markets" (MM Docket No. 01-317). The MMTC argued that "Some commenters urged that the Internet has already obviated the need for multiple radio ownership. Perhaps that will happen someday, but Internet radio has hardly become a substitute for the real thing. ... At some level, the Internet is a substitute for radio. But it is a poor substitute."
In contrast, Viacom submitted a reply comment [PDF] in which it stated that the FCC "has maintained a local radio ownership rule in one form or another for over 60 years based on the hypothesis that the rule is necessary to promote public access to diverse viewpoints. ... The average American suffers not from a lack of access to media outlets, but from news and information overload."
People and Appointments
5/8. President Bush announced his intent to nominate Ben Bernanke to be a Member of the Board of Governors of the Federal Reserve System. He is Chairman of the Department of Economics at Princeton University. He has been picked for a seat which has only two years remaining in its term. See, WH release.
5/8. President Bush announced his intent to nominate Donald Kohn to be a Member of the Board of Governors of the Federal Reserve System. Kohn is a long time advisor to Alan Greenspan. He will serve the remainder of a fourteen year term expiring on January 31, 2016. See, WH release.
5/8. Lisa Nelson was named Co-Chair of CapNet. She is VP of External Relations for AOL Time Warner. She replaces George Vradenburg, who is an advisor to AOL Time Warner. The other Co-Chair remains former Congressman Vic Fazio of Clark & Weinstock. See, CapNet release.
5/8. Michael Willner, P/CEO of Insight Communications, was re-elected for a second term as Chairman of the Board of Directors of the National Cable & Telecommunications Association (NCTA). See, NCTA release.
5/8. Marc Signorino was named Counsel for Technology Policy at the American Electronics Association. See, release.
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5/8. The Securities and Exchange Commission (SEC) announced that it "approved proposed changes to the rules of the National Association of Securities Dealers and the New York Stock Exchange to address conflicts of interest that are raised when research analysts recommend securities in public communications. These conflicts can arise when analysts work for firms that have investment banking relationships with the issuers of the recommended securities, or when the analyst or firm owns securities of the recommended issuer." See, SEC release.
5/8. The Federal Election Commission (FEC) fined the Friends of Jane Harman $12,000 for failure to file 48 hour reports. Rep. Jane Harman (D-CA) is a member of the House Commerce Committee and its Telecom and Internet Subcommittee. See, FEC release.
5/8. Lori Richards, Director of the Securities and Exchange Commission's (SEC) Office of Compliance Inspections and Examinations, gave a speech titled "Analysts Conflicts of Interest: Taking Steps to Remove Bias". She spoke to the Financial Women's Association in New York, New York.
Rep. Levin Addresses TPA
5/7. Rep. Sander Levin (D-MI), the ranking Democrat on the House Ways and Means Committee's Subcommittee on Trade, gave a speech regarding trade promotion authority (TPA) at the Center for Strategic and International Studies (CSIS). He stated that "U.S. trade policy is following no coherent course at all." He also criticized the administration and Republicans for adopting a "whatever its takes" approach to passing TPA legislation that "results in a minimization of the substantive issues of trade policy and does not offer sound guiding principles for the future."
Levin also addressed the current nature of trade negotiations. "We have now moved beyond even the challenges of many basic non-tariff barriers and have entered an era in which ``trade policy´´ includes the full range of policy, laws and regulations that used to be considered exclusively or primarily ``domestic policy´´ -- including domestic agriculture programs, antitrust law, food safety, telecommunications, natural resources conservation, labor standards, insurance regulation, and the intersection of effective protection of intellectual property rights with health policy. Trade policy has become domestic policy and vice versa in ways that have far reaching implications for how we negotiate trade agreements and legislate domestic rules."
The House passed its TPA bill, HR 3005, in December of 2001. The Senate Finance Committee passed its version of the bill later in December. The full Senate has yet to vote on the bill.
NSF Authorization Bill Introduced
5/7. Rep. Sherwood Boehlert (R-NY) and others introduced HR 4664, the National Science Foundation  Authorization Act of 2002. The bill would authorize 15% increases in appropriations for each of fiscal years 2003, 2004 and 2005 for the National Science Foundation (NSF). The bill includes increases in funding for networking and information technology research, nanoscale science and engineering, mathematical sciences, and major research instrumentation.
Rep. Boehlert, the Chairman of the House Science Committee, stated that "NSF funds research that is of critical importance to the future of the nation's economy -- including such areas as Information Technology and Nanotechnology, which the Administration has emphasized in its budget proposal. NSF funds research that is of critical importance to the nation's security -- including work on such vital areas as cybersecurity. NSF funds research that is of critical importance to the nation's health and well-being -- including genomics research and climate change research. And last, but far from least, NSF funds research and educational activities that are of critical importance to the nation's students; from the kindergarten classroom to the post doctoral laboratory, NSF is the agency that ensures that we are improving math, science and engineering education."
The House Science Committee has scheduled a hearing on this bill for Thursday, May 9.
FCC Reports on Consumer Complaints
5/7. The Federal Communications Commission's (FCC) Consumer and Governmental Affairs Bureau (CGB) released a report [PDF] titled "Quarterly Report on Informal Consumer Complaints and Inquiries Received." The report covers the first quarter of 2002. The vast majority of the complaints were about wireline telecommunications services.
167 complaints pertained to cable services. And of these 167 complaints, only 11 were broadband related.
270 complaints pertained to radio and television broadcasting. Most of these complaints -- 242 -- pertained to indecent or obscene programming.
2,978 complaints pertained to wireless telecommunications, with 1,850 of these pertaining to billing and rates.
7,204 complaints pertained to wireline telecommunications. 3,350 of these pertained to billing and rates. The FCC did not report statistics on the number of complaints that pertained to DSL service. See also, FCC release.
House Passes Bill to Delay Spectrum Auctions
5/7. The House passed HR 4560, the Auction Reform Act of 2002, by a voice vote. The bill states that the FCC "shall not commence or conduct auctions 31 and 44 on June 19, 2002, as specified in the public notices of March 19, 2002, and March 20, 2002 (DA 02-659 and DA 02-563)."
The bill was introduced on April 24 by Rep. Billy Tauzin (R-LA) and Rep. John Dingell (D-MI), the Chairman and ranking Democrat on the House Commerce Committee, and by most of the membership of the Committee. It was approved by the Committee on May 2.
Rep. Tauzin explained the bill on the House floor. He stated that "There are clearly two conflicting mandates in statute. The Balanced Budget Act of 1997 and the Consolidated Appropriations Act for FY 2000 mandate that the 700 MHz band, both the upper and lower parts of that band, must be auctioned by dates certain."
"However, Section 309(j)(3)(E)(ii) of the Communications Act requires the Commission to include safeguards in auctions that, among other things, 'ensure that, in scheduling of any competitive bidding under this subsection, an adequate period is allowed ... to ensure that interested parties have a sufficient time to develop business plans, assess market conditions, and evaluate the availability of equipment for the relevant services.'"
Tauzin continued that "When there is such a clear conflict in statute, the Commission has considerable discretion to determine whether to move forward with the auction. In 2000, when the Commission originally delayed the 700 MHz auction, the agency concluded that '[i]n complying with conflicting statutes, and resolving those directives as we proceed toward an auction, we believe the Commission's primary goal should be to conduct an auction that is fair, efficient, puts the spectrum to the best use, and thereby best serves the public interest.' The Commission also concluded that a delay was appropriate so that bidders would have an adequate time to develop business plans and assess market conditions."
"The reasons that existed in 2000 for the Commission's delay of the auction still exist today. Potential bidders cannot develop business plans when there is no certainty concerning when the 700 MHz band will be vacated by broadcasters occupying Channels 52-69. It is also impossible to assess market conditions before it is clear when the band will be available for new services and whether other spectrum will be made available for third-generation services. And it is impossible to evaluate if and when mobile communications equipment will be available for use in the 700 MHz band when manufacturers have no idea when the band will be vacated by the broadcasters," said Rep. Tauzin.
Sen. John Ensign (R-NV) introduced S 2454, the companion bill in the Senate, on May 2. No action has yet been taken on that bill. Secretary of Commerce Donald Evans has announced his support for a postponement of the auctions.
FCC Files Brief with Supreme Court in Nextwave Case
5/7. The Federal Communications Commission (FCC) filed its brief [71 pages in PDF] with the Supreme Court of the U.S. in FCC v. NextWave.
NextWave obtained spectrum licenses at FCC auctions in 1996. The FCC permitted NextWave to obtain the licenses, and make payments under an installment plan, thus creating a debtor creditor relationship between NextWave and the FCC. NextWave did not make payments required by the plan, and filed a Chapter 11 bankruptcy petition. The FCC cancelled the licenses. It then proceeding to re-auction the disputed spectrum. The U.S. Court of Appeals (DCCir) ruled in its June 22, 2001, opinion that the FCC is prevented from canceling the spectrum licenses by § 525 of the Bankruptcy Code. The FCC petitioned the Supreme Court for writ of certiorari. The Court granted certiorari.
The FCC argues in its brief that § 525 of the Bankruptcy Code "does not displace the FCC's exclusive regulatory authority over spectrum licensing and the license allocation mechanism established in 47 U.S.C. § 309(j)." The FCC's brief relies on cases dating back to the first half of the 20th Century.
The FCC's brief quotes the Communications Act of 1934, at 47 U.S.C. § 301, which provides "for the use of such channels, but not the ownership thereof, by persons for limited periods of time, under licenses granted by Federal authority". It also quotes 47 U.S.C. § 309(a), which gives the FCC authority to issue licenses in the "public interest, convenience, and necessity." The FCC brief then argues that "Because of that delegation of authority, ``it is the Commission, not the courts, which must be satisfied that the public interest will be served´´ by authorizing an applicant to use scarce radio spectrum. FCC v. WOKO, Inc., 329 U.S. 223, 229 (1946). Consequently, ``no court can grant an applicant an authorization which the Commission has refused,´´ Scripps- Howard Radio, Inc. v. FCC, 316 U.S. 4, 14 (1942) ..."
People and Appointments
5/7. Rep. Tom Sawyer (D-OH) was defeated in the Democratic primary election in his newly drawn Ohio congressional district. He is a member of the House Commerce Committee and its Telecom and Internet Subcommittee and Trade and Consumer Protection Subcommittee. These committees handle much of the technology related issues in the House.
5/7. Rep. Steve Buyer (R-IN) won his Republican primary election in his newly drawn Indiana congressional district. He is a member of the House Commerce Committee.
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5/7. The U.S. Patent and Trademark Office (USPTO) published a notice in the Federal Register regarding a proposed rule that would adjust fees. See, Federal Register, May 7, 2002, Vol. 67, No. 88, at Pages 30634 - 30637.
5/7. The Department of Justice filed a brief in EPIC v. Office of Homeland Security, a Freedom of Information Act (FOIA) suit, in which it argues that the Office of Homeland Security is not an agency within the meaning of the FOIA, 5 U.S.C. § 552, and therefore, not subject to its requirements. The Electronic Privacy Information Center (EPIC) filed its complaint [PDF] on April 2, 2002.
5/7. The Electronic Privacy Information Center (EPIC) and Junkbusters filed an objection [PDF] to the proposed settlement in the case In re Doubleclick Privacy Litigation. They argue that "The proposed settlement does not provide any significant benefit to class members that was not previously agreed to by Doubleclick as part of its earlier agreement with the Federal Trade Commission under the terms of the Network Advertising Initiative". Moreover, they argue that "the monetary reward will be provided only to the attorneys for the private litigants; no funds from the settlement will be distributed to any members of the class ..." This is D.C. No. 00-CIV-0641 (NRB) pending in the U.S. District Court (SNDY).
5/7. Bruce Mehlman, Assistant Secretary for Technology Policy at the Commerce Department, gave a speech titled "Innovation in America 2002: What's the Role for Our Federal Labs?". He spoke to the Federal Lab Consortium in Little Rock, Arkansas. He said that "Knowledge development and technology commercialization are the new drivers of economic growth, both in the U.S. and around the world. Our ability to create new innovations and harness their power will directly impact our national prosperity, security and global influence."
5/7. Alltel announced that its audit committee appointed Price Waterhouse Coopers as the company's independent auditors to replace Arthur Andersen. See, release.
CDT Files Amicus Brief in Yahoo v. LICRA Internet Speech Case
5/6. The Center for Democracy and Technology (CDT) filed an amicus curiae brief [45 pages in PDF] with the U.S. Court of Appeals (9thCir) in Yahoo v. LICRA, a case involving a French court order that Yahoo "render impossible" access by persons in France to certain content on servers located in the United States.
The CDT argues that "The French judgment that prompted this appeal places our tradition of free expression in jeopardy. It represents a direct attempt by a foreign nation to apply its law extraterritorially to restrict the freedom of expression of U.S. based online speakers who are protected by the First Amendment."
In 2000 two French groups, LICRA and UEJF, obtained a judgment from a French court ordering Yahoo to "render impossible" access by persons in France to Nazi related content on servers located in the United States. The French court issued the following order: "We order the Company YAHOO! Inc. to take all necessary measures to dissuade and render impossible any access via to the Nazi artifact auction service and to any other site or service that may be construed as constituting an apology for Nazism or a contesting of Nazi crimes."
Yahoo, which is a Delaware corporation based in San Jose, California, then filed a complaint in U.S. District Court (NDCal) seeking a declaratory judgment that the judgment of the French court is unenforceable in the U.S. as contrary to the U.S. Constitution, and in particular, the First Amendment.
The French parties have sought to evade an adverse ruling by the U.S. Courts by raising a wide range of procedural issues, while at the same time down playing the First Amendment issue. They filed a Rule 12(b)(2) motion to dismiss the complaint for lack of personal jurisdiction. The District Court issued its Order Denying Motion to Dismiss [PDF] on June 7, 2001. On November 7, 2001, the District Court issued its Order Granting Motion for Summary Judgment [PDF] in favor of Yahoo. The District Court rejected the French parties' arguments regarding substantial controversy, actual controversy, comity, forum shopping, substantial compliance with the French order, and pre-trial discovery.
The District Court held that "What is at issue here is whether it is consistent with the Constitution and law of the United States for another nation to regulate speech by a United States resident within the United States on the basis that such speech can be accessed by Internet users in that nation." Then, with little further explanation, the District Court held that the First Amendment precludes enforcement within the United States of a foreign court order intended to regulate the content of speech over the Internet. The French parties appealed to the Court of Appeals, again, focusing on precedural issues.
The CDT, along with many other speech related groups, filed the present amicus brief in support of Yahoo. They seek to focus the Appeals Court's attention on the First Amendment. Amici argue that "The French judgment that prompted this appeal places our tradition of free expression in jeopardy. It represents a direct attempt by a foreign nation to apply its law extraterritorially to restrict the freedom of expression of U.S. based online speakers who are protected by the First Amendment. It does so because the Plaintiff, Yahoo! ..., has chosen the Internet as its means of communication.
Amici continue that "The French court's order is but one example of the sort of judgment that this and other American courts can expect to see with increasing frequency as Internet use expands throughout the world. It is a predictable consequence of the global character of the Internet and the conflicts that inevitably will arise concerning speech protected by the U.S. Constitution but forbidden by repressive laws elsewhere."
Trademarks, Gripe Sites, and Free Speech
5/6. The American Civil Liberties Union (ACLU) filed an amicus curiae brief [33 pages PDF] with the U.S. Court of Appeals (6thCir) in Taubman Company v. Mishkoff. The case involves trademark, anti cybersquatting, and First Amendment law in the context of registering domain names that include trademarks, for the purpose of criticizing the trademarks' holders.
The plaintiff, Taubman Company, owns shopping malls. It holds trademarks. The defendant, Henry Mishkoff, registered domain names containing trademarks registered by Taubman. He then published criticism of Taubman in web sites located at these URLs. See, for example,
Taubman filed a complaint in U.S. District Court (EDMich) against Mishkoff alleging Eastern District of Michigan for trademark infringement, unfair competition, and violation of the Anti Cybersquatting Protection Act (ACPA), 15 U.S.C. § 1125(d). The District Court issued a preliminary injunction against Mishkoff.
On appeal, the ACLU sides with Mishkoff. It asks that the preliminary injunction be vacated on the grounds that it constitutes a prior restraint of protected speech in violation of the First Amendment. The ACLU argues that "there are a growing number of cases in which trademark owners have tried to use these remedies to stifle legitimate criticism and speech protected by the First Amendment." The ACLU also argues that Mishkoff's actions do not constitute infringement or a violation of the ACPA.
EU to Impose Tax on Downloaded Products
5/6. The European Commission issued a release in which it stated that the EU's Council of Economics and Finance Ministers will meet on Tuesday, May 7, to impose a new tax on products that are downloaded electronically. The rule will require U.S. companies to charge a value added tax (VAT) on sales into the European Union (EU).
The release states that "The Council is due to adopt definitively, without discussion, a Directive and a Regulation to modify the rules for applying value added tax (VAT) to certain services supplied by electronic means as well as subscription- based and pay- per- view radio and television broadcasting. The new rules, based on Commission proposals of 7 June 2000 (see IP/00/583 and MEMO/00/31), will create a level playing field for the taxation of digital e-commerce in accordance with the principles on the taxation of e-commerce agreed at a 1998 OECD Ministerial Conference. The rules will ensure that when these services are supplied for consumption within the European Union, they will be subject to EU VAT, and that when they are supplied for consumption outside the EU, they will be exempt from VAT. The changes modernise the existing VAT rules to accommodate the emerging electronic business environment and to provide a clear and certain regulatory environment for all suppliers, located within or outside the EU. The rules also contain a number of facilitation and simplification measures aimed at easing the compliance burden for business. Member States must implement the new measures by 1 July 2003." (Hyperlinks added.)
People and Appointments
5/6. Lawrence Harris was named Chief Economist of the Securities and Exchange Commission (SEC), effective July 1. He is currently a professor at the Marshall School of Business at the University of Southern California. He will replace Acting Chief Economist William Atkinson, who is retiring in July. See, SEC release.
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5/6. The U.S. Court of Appeals (7thCir) issued its opinion in In re Brand Name Prescription Drugs Litigation, a Sherman Act price fixing case involving prescription drugs. Plaintiffs are retail sellers of prescription drugs. The defendants/ appellees are their suppliers. The District Court granted summary judgment to defendants. The Appeals Court affirmed.
5/6. The U.S. Court of Appeals (9thCir) issued its opinion [PDF] in Barcamerica v. Tyfield Importers, a trademark case involving abandonment by naked licensing. This is a dispute over who may use the "Leonardo Da Vinci" trademark for wines. Barcamerica registered the mark with the USPTO. It later sued Tyfield and others for trademark infringement. However, Barcamerica had engaged in naked licensing of the mark. That is, it failed to exercise adequate quality control over the licensees, with the trademark ceasing to function as a symbol of quality and controlled source. The District Court thus ruled that the mark had been abandoned. The Appeals Court affirmed.
5/6. Openwave and IBM announced "a 10-year alliance". See, IBM release.

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