News from August 1-5, 2002

Microsoft Addresses Compliance with Proposed Settlement in Antitrust Case
8/5. Microsoft released a statement regarding its "Microsoft Settlement Program", its name for its efforts to comply with the proposed settlement agreement with the Department of Justice (DOJ) and some of the states which brought antitrust actions against it. The statement addresses several of the requirements imposed upon Microsoft by the proposed settlement agreement, including use by third parties of technology used by server operating system products to interoperate with a Windows operating system product, new uniform licensing terms for original equipment manufacturers (OEMs), and other subjects.
Microsoft entered into a proposed settlement agreement with the DOJ and nine state Attorneys General in November of 2001. The proposed settlement agreement was revised on February 27, 2002. Some non-settling states refused to join in the proposed settlement agreement. The Court has not yet entered final judgment. However, Microsoft has agreed to abide by the agreement pending final resolution. There is an August 6, 2002 deadline in the agreement for compliance with certain requirements of the agreement.
The DOJ Antitrust Division also issued a statement titled "Microsoft Consent Decree Compliance Advisory -- August 5, 2002", which addresses Section III.E. of the proposed settlement agreement.
The DOJ advisory states that "Section III.E. of the Proposed Final Judgment requires Microsoft to make available for use by third parties on reasonable and non-discriminatory terms certain technology used by server operating system products to interoperate with a Windows operating system product. Under the terms of Section III.E., Microsoft must offer this technology for license no later than August 6, 2002. Microsoft has informed the Department that it will begin to offer these licenses and start the process of negotiating the terms with prospective licensees on August 6, and that information concerning the licenses will be available on Microsoft's website on that day."
The DOJ advisory continues that "Microsoft last week provided the Department and representatives of the settling states with drafts of the licenses that it proposes to offer. The licenses are complex and present novel issues that require comprehensive analysis. The Department has not pre-cleared the licenses. The Department is undertaking a careful and thorough review and evaluation of the terms of the proposed licenses to determine whether the licenses comply with the Proposed Final Judgment."
CATO Scholar Opposes DTV Mandates
8/5. Adam Thierer, Director of Telecommunications Studies at the Cato Institute, wrote a essay titled "The HDTV Fiasco Gets Worse: TV Set and Cable Mandates On the Way".
He wrote that "America's 15 year high definition television (HDTV) industrial policy experiment has been a failure by almost any standard. Although this long and miserable history is too long to recall here, suffice it to say, the grand vision of the broadcast industry and public policymakers has become an expensive joke. And just when you think things can't get worse, Congress and the Federal Communications Commission (FCC) are now readying new rules to roll the burden of rolling out a service nobody wants onto the backs of television set manufacturers and cable network providers."
Thierer concluded that "the government's ``damn the consequences´´ HDTV industrial policy has absolutely zero probability of working according to schedule and is likely to derail entirely. Ironically, it will probably be the broadcasters themselves who eventually put an end to it with small rural affiliates recognizing they simply cannot afford to keep up this charade. The real question is, how long do we have to wait before this happens and how many more victims will this industrial policy fiasco claim before policymakers finally admit defeat?"
FTC Takes Action Against Phillips Electronics for False Statements Regarding Rebates
8/5. The Federal Trade Commission (FTC) announced that it filed an administrative complaint [PDF] against Phillips Electronics North America Corporation (Phillips) alleging violation of Section 5(a) of the Federal Trade Commission Act (FTCA) in connection with making false statements regarding rebates on the sale of computer peripheral products.
Section 5(a), codified at 15 U.S.C. § 45, provides, in part, that "Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful."
The FTC and Phillips also entered into an Agreement Containing Consent Agreement [PDF] that provides, among other things, that Phillips "shall not ... misrepresent, in any manner, expressly or by implication, the time in which any rebate in the form of cash or credit towards future purchases will be mailed, or otherwise provided, to purchasers ... fail to provide any rebate in the form of cash within the time specified, or, if no time is specified, within thirty (30) days ..."
Howard Beales, Director of the FTC's Bureau of Consumer Protection, stated in a release that "Rebates that begin as a big draw for consumers often end up as a big drag ... Some companies are quick to offer attractive rebates, but are slow to send them out, and often make them so difficult to redeem that consumers simply give up. ... the Commission alleged that the sellers changed the rules of the game while it was being played. The FTC will use all of its powers -- including its power to allege unfair business practices -- to challenge such conduct."
FCC Suspends Enforcement of CIPA for Libraries Seeking E-Rate Subsidies
8/5. The Federal Communications Commission (FCC) published a notice in the Federal Register that as of August 5, 2002, it has suspended enforcement against libraries those sections of 47 CFR § 54.520 that were adopted to implement 47 U.S.C. § 254(h)(6). That is, it has suspended enforcement of the Children's Internet Protection Act as it applies to libraries (but not schools).
The Children's Internet Protection Act (CIPA) [PDF] requires schools and libraries receiving e-rate subsidies from the FCC to utilize certain technological protection measures, such as pormography filtering software, on computers with Internet access. The CIPA is codified in Section 254, the universal service section of the Communications Act.
Pending resolution by the courts of a constitutional challenge to the CIPA as it applies to libraries, the FCC has suspended its rules as they apply to libraries. The FCC notice states that "Because the court's decision does not address the constitutionality of the CIPA requirements as they apply to schools, all of the CIPA requirements as codified at sections 254(h)(5) and 254(l) and implemented by the Commission's rules remain in effect for schools."
Specifically, the FCC wrote that "we suspend enforcement of 47 CFR 54.520(c)(2)(i) and (iii), 54.520(c)(3), and 54.520(d) as they apply to all libraries, to the extent that these provisions require any library to filter or certify to such filtering under 47 U.S.C. 254(h)(6). We further suspend enforcement of 47 CFR 54.520(g)(1) as it applies to all libraries."
See, Federal Register, August 5, 2002, Vol. 67, No. 150, at Pages 50602 - 50603.
GAO Releases Report Criticizing Bush's Relaxing of MTOPS Levels for HPC Exports
8/5. The General Accounting Office (GAO) released a report [37 pages in PDF] titled "Export Controls: More Thorough Analysis Needed to Justify Changes in High Performance Computer Controls".
Background. The United States government regulates the export of computers and microprocessors. It imposes export controls on the export of computers and microprocessors based upon an old performance measure -- million theoretical operations per second (MTOPS). Individual computers and microprocessors with an MTOPS rating above a certain level are called "high performance computers" (HPC). Exports of computers and microprocessors with MTOPS ratings above a control threshold to certain countries -- known as Tier 3 countries -- such as Israel, Pakistan, India, China, and Russia, require notice to the Department of Commerce of intent to export.
The National Defense Authorization Act of 1998 (Public Law 106-65, 113 stat. 798) gives the President authority to set the MTOPS level above which computers exported to Tier 3 countries are subject to government regulation, provided that he submits a report to Congress justifying his action. As technology has advanced, the MTOPS threshold level has repeatedly been raised.
On January 2, President Bush announced that the relaxation of certain controls on the export of high performance computers and microprocessors. Specifically, for Tier 3 countries, he raised the threshold from 85,000 MTOPS to 190,000 MTOPS. See, January 2, 2002 letter from Bush to Congressional leaders informing them of the change. See also, White House release and statement by the Deputy Press Secretary.
There has long been controversy in the regulation of computer exports. Defense and intelligence agency hawks, and some members of Congress on the committees which oversee defense and intelligence agencies, have sought to rigorously limit the export of computers and microprocessors. In contrast, some proponents of the high tech industry, and proponents of free trade and economic growth, have sought to relax export controls.
GAO Report. The present GAO study reflects the criticism and opposition within the Congress to relaxing export restraints.
The GAO report states that the President's "report justifying the changes in control thresholds for high performance computers focused on the availability of high performance computers. However, we found that the justification did not fully address the requirements of the National Defense Authorization Act of 1998."
For example, the GAO wrote that the President's report's "prediction that computers capable of performing at the new threshold will be widely available through foreign and domestic companies by early 2002 has not materialized. We found that only 1 of 10 companies cited in the report produces computers with this capability. Other companies do not plan to do so until 2003, or later, and some do not plan to do so at all."
The GAO also wrote that the President's report "contains little relevant analysis of the potential military uses of computers with performance capabilities between the old and new thresholds."
Finally, it concludes that the President's report "does not adequately address what impact computers that perform at levels between the old and new thresholds would have on national security."
The report also assumes that MTOPS remains a reliable measure of computing capability, and that its remains relevant, despite technology for the clustering of multiple computers, because of difficulties encountered by other countries in operating clustered computers.
The report was prepared for the Chairmen and ranking members of the Senate Armed Services Committee, the Senate Banking Committee, the House Armed Services Committee, and the House International Relations Committee.
FBI Loses 317 Laptops
8/5. The Department of Justice's (DOJ) Office of the Inspector General (OIG) audited and released a series of reports on the control of laptop computers and weapons at five DOJ components. It found a total of 400 missing laptops, and 775 missing weapons. For the Federal Bureau of Investigation (FBI), it reported 317 missing laptops and 212 missing weapons. Moreover, the OIG found that the FBI does not know if sensitive data has been lost. See, Executive Summary [43 pages in PDF]. See, full story.
People and Appointments
8/5. William Maher began work as the new Chief of the Federal Communications Commission's (FCC) Wireline Competition Bureau.
More News
8/5. The National Intellectual Property Law Enforcement Coordination Council (NIPLECC) published a notice in Federal Register requesting comments regarding its agenda and mission. The NIPLECC is co-chaired by the U.S. Patent and Trademark Office (USPTO) and the Department of Justice (DOJ). See, Federal Register, August 5, 2002, Vol. 67, No. 150, at Pages 50633 - 50634. See also, the NIPLECC's 2000 report.
8/5. President Bush gave a speech at a Mike Fisher for Governor event in Pittsburgh, Pennsylvania, in which he addressed trade promotion authority. He stated that "I also am the first governor -- President -- in a long period of time to have what they call trade promotion authority. It means that we're going to open up markets for U.S. products, markets for the products of Pennsylvania farmers, markets of the products of Pennsylvania high tech companies. A confident nation is a nation willing to trade. And this nation, as a result of the bill I just got and am signing tomorrow, will be a free trading nation."
More News
8/3. President Bush stated that he will sign the trade promotion authority bill on Tuesday, August 6. See, transcript of speech.
FEC Proposes Rules that Exclude Webcasts from Electioneering Communications
8/2. The Federal Election Commission (FEC) released a second Notice of Proposed Rulemaking (NPRM) [67 pages in MS Word] regarding the Bipartisan Campaign Reform Act of 2002 (BCRA), the recently enacted campaign finance reform legislation. This NPRM pertains to "electioneering communications". The proposed rules would exempt webcasts.
These electioneering communications include broadcast, cable and satellite communications that refer to a clearly identified federal candidate within 60 days of a general election or within 30 days of a primary election for federal office, and for candidates for the Senate or House of Representatives, targeted to reach 50,000 or more people within the jurisdiction of a campaign. Those paying for the communications must meet certain disclosure requirements, and cannot use certain funds.
The NPRM states that "Proposed 11 CFR 100.29(b)(2) would define ``broadcast, cable, or satellite communication´´ to mean a communication that is publicly distributed by a television station, radio station, cable television system, or satellite system.  The term ``distribute´´ reflects the legislation's apparent focus on the means of dissemination rather than on the means of receipt."
The NPRM continues that "The definition would exclude ``webcasts´´ or other communications that are distributed only over the Internet, but would include television or radio communications that are simultaneously webcast over the Internet, or archived for listening over the Internet. Internet subscribers would not be included in the calculation of how many persons a communication can reach in a particular district or state. The Commission seeks comment on whether this is an appropriate reading of the statute."
It further states that "The legislative history, which is discussed below, makes it clear that this regulation should be limited to television and radio. The Commission seeks comment to confirm that this interpretation is correct. All other types of communications, such as print media, billboards, telephones, and the Internet, would therefore, not be considered electioneering communications. Consequently, proposed 11 CFR 100.29(c)(1) would specifically list these as exceptions to the definition."
The NPRM states also in a later section that "The Internet is included in the above list of exceptions because, in most instances, it is not a broadcast, cable, or satellite communication, and it is not sufficiently akin to television and radio. During an early debate on the amendment, Senator Snowe was asked whether the definition of electioneering communication would ``apply to the Internet.´´ She replied, ``No. Television and radio.´´ See 144 Cong. Rec. S973 and S974 (daily ed. Feb. 25, 1998)(statement of Sen. Snowe). The Commission seeks comment confirming that this is a correct interpretation of BCRA."
The NPRM does not specifically address the classification of webcasting over a cable or satellite platforms.
The NPRM also announces that the FEC will hold public hearings on this NPRM on August 28-29. Written comments from those who request to testify at the hearing must be received by August 21. All other comments are due by August 29. See also, FEC release.
President Bush to Leave for August Break
8/2. President Bush is scheduled to leave Washington DC on Friday, August 2 until after Labor Day. He heads first to his parents' summer home in Kennebunkport, Maine. Then he will go to his home in Crawford, Texas.
The House began its August recess on July 27. It is scheduled to return on September 4. The Senate recessed on August 1 until September 3. The Supreme Court completed its prior term at the end of June.
People and Appointments
8/2. President Bush announced his intent to nominate Wayne Abernathy to be Assistant Secretary of the Treasury for Financial Institutions. Abernathy has worked for the Senate Banking Committee since 1981. See, White House release.
More News
8/2. EU Trade Commissioner Pascal Lamy commended the U.S. Congress for passing trade promotion authority legislation. He stated in a release that "The jury may have been out for a long time, but it is now back with a clear decision giving clean negotiating authority to the US administration. Today's decision removes an important roadblock to the Doha Development Agenda in particular. Now we have to use this important development to generate real momentum in these negotiations".
8/2. The Technology Administration (TA) published a notice in the Federal Register listing the current membership of the TA's Performance Review Board (PRB). This PRB reviews performance appraisals, agreements, and recommended actions pertaining to employees in the Senior Executive Service, and reviews performance related pay increases for ST-3104 employees. See, Federal Register, August 2, 2002, Vol. 67, No. 149, at Page 50422.
8/2. The Overseas Private Investment Corporation (OPIC), an agency of the U.S. government, announced that it will provide $777,000 in political risk insurance for International Scientific Products Corporation to expand its optical components manufacturing facility in St. Petersburg, Russia. OPIC stated that the money will be used for "insurance to cover against risk of expropriation and political violence for a consignment of equipment and accessories to be used to increase production and quality control". See, OPIC release.
8/2. A grand jury of the U.S. District Court (CDCal) returned indictments against Glenn Cazenave and Amaya Marinella alleging that they unlawfully conspired to enter Commerce One's computer systems and delete a software package that was being developed for a foreign client. See, CCIPS release.
DOJ Charges Former WorldCom Executives
8/1. The Department of Justice announced that Scott Sullivan and David Myers were "charged with seven counts of securities fraud, conspiracy to commit securities fraud, and filing false statements with the Securities and Exchange Commission". See, prepared statement by Attorney General John Ashcroft.
Sullivan is a former Chief Financial Officer of WorldCom. Myers is a former Senior Vice President and Controller of WorldCom. The DOJ has not obtained any indictments.
DOJ Recommends Approval of Verizon Long Distance Applications in Delaware & NH
8/1. The Department of Justice (DOJ) issued its evaluation [PDF] recommending that the Federal Communications Commission (FCC) approve the Section 271 application of Verizon to provide in region interLATA services in the states of Delaware and New Hampshire. See, DOJ release.
A Verizon attorney stated in a release that "The DOJ's recommendation, which follows FCC approvals in eight of our other states in the Northeast and Mid Atlantic regions, will help move Verizon into the home stretch to bring the full benefits of competition to all of our customers. We are confident that the FCC will approve our long distance application for Delaware and New Hampshire."
Also on August 1, Verizon filed a Section 271 application of provide in region interLATA services in the state of Virginia. The FCC has 90 days to act on the application.
FCC Announces Agenda for August 8 Meeting
8/1. The Federal Communications Commission (FCC) announced the agenda for its August 8 meeting. First, the FCC will consider of a Notice of Proposed Rulemaking (NPRM) regarding digital broadcast copy protection.
Second, it will consider a Second Report and Order and Second Memorandum Opinion regarding its policies and rules for conversion of the broadcast television service to digital technology. This is MM Docket No. 00-39.
Third, it will consider a Report and Order regarding various Part 22 rules that have become outdated due to technological change, increased competition in the Commercial Mobile Radio Service (CMRS), or supervening rules. This is WT Docket No. 01-108.
The meeting will be held at 9:30 AM in the Commission Meeting Room. See, FCC release.
Senate Passes Trade Promotion Authority Bill
8/1. The Senate passed the conference report on HR 3009, the Andean Trade Preference Act, by a vote of 64-34. See, Senate Roll Call No. 207. The bill also includes trade promotion authority (TPA). The House passed this conference report on July 27 by a vote of 215-212. See, House Roll Call No. 370. President Bush will sign the bill.
The House passed its first version of TPA legislation, HR 3005, the Bipartisan Trade Promotion Authority Act of 2001, on December 6, 2001. The Senate passed another version, thus requiring differences to be worked out by a conference committee.
TPA, which is also known as fast track, gives the President authority to negotiate trade agreements which can then only be voted up or down, but not amended, by the Congress. TPA strengthens the bargaining position of the President, and the U.S. Trade Representative (USTR), in trade negotiations with other nations.
The Bush administration, and supporters of the bill in the House and Senate, made numerous concessions in order to win majority support for passage. The bill requires the USTR to adhere to several principal negotiating objectives. The bill requires the administration to engage in specified prior consultations with the Congress. The bill also extends Trade Adjustment Assistance (TAA) for five years, provides for secondary worker benefits, provides for health care tax credits, and extends the duration of TAA benefits.
President Bush released a statement after the Senate vote. He wrote that "The Senate's bipartisan passage of Trade Promotion Authority completes an accomplishment that has eluded Congress since 1994 and is a major victory on behalf of working Americans. With TPA, we will open markets to create high paying jobs and provide new opportunities for America's farmers and workers. I thank the House and Senate for passing TPA so that we can work together to advance America's free trade agenda. With this important tool, we will promote prosperity in the United States, progress in our hemisphere, and freedom throughout the world."
The final vote correlated with party affiliation. Almost all of the 34 votes against TPA were cast by Democrats. However, Sen. Strom Thurmond (R-SC), Sen. Jeff Sessions (R-AL), Sen. Richard Shelby (R-AL), Sen. Conrad Burns (R-MT), and Sen. Ben Campbell (R-CO) voted against the bill. In contrast, Sen. Max Baucus (D-MT), the Chairman of the Senate Finance Committee, was one of the leaders of the effort to pass the bill.
President Bush, Sen. Baucus, Sen. Charles Grassley (R-IA), and Sen. Trent Lott (R-MS) held a telephone conference after the vote. See, transcript. Sen. Baucus stated that "I think this legislation is going to help restore American trade prestige worldwide. Something we desperately needed. It also will help give the economy a boost."
Technology companies that sell products or services abroad will benefit from TPA. Hence, the groups that represent tech companies lobbied vigorously for passage of TPA.
Robert Holleyman, P/CEO of the Business Software Alliance (BSA) stated in a release that "Today's vote will help American companies gain access to new markets in real time, which is critical for reviving our sluggish economy. This legislation is particularly important to the high tech sector, which already this year has lost 243,000 jobs and nearly 40 percent of its market value. TPA will help America's high tech industry turn the tide and benefit the U.S. economy, its workforce and its trading partners for generations to come."
David McCurdy of the Electronics Industry Association (EIA) stated in a release that "The passage of TPA will allow the U.S. to quickly wrap up free trade negotiations with Chile and Singapore and move ahead on Free Trade Area of the Americas and World Trade Organization talks. The President's authority to efficiently settle trade agreements will drive opportunities around the world for high tech manufacturers, whose markets are increasingly global. The current WTO talks include an Information Technology Agreement, which would greatly benefit our sector by tearing down tariff barriers."
Telecommunications Industry Association (TIA) President Matthew Flanigan stated in a release that "The telecommunications industry has lost $2 trillion in market value and 500,000 jobs in the United States over the past two years. The Trade Act of 2002 offers hope to our industry by giving the Bush Administration the credibility it needs to negotiate new trade agreements and provide new market opportunities that are critical to our member companies.”
See also, American Electronics Association (AEA) release.
Thomas Donohue, P/CEO of the U.S. Chamber of Commerce stated in a release that "Passing the trade bill is the easy part ... Now U.S. negotiators must create trade deals that promote our products, help our farmers and workers, and get our economy back on track."
McCain Introduces Consumer Broadband Bill
8/1. Sen. John McCain (R-AZ) introduced S 2863 [17 pages in PDF], the "Consumer Broadband Deregulation Act". The bill would add a new title to the Communications Act of 1934, titled "Consumer Broadband Services". It would provide that "neither the Commission, nor any State, shall have authority to regulate the rates, charges, terms, or conditions for the retail offering of consumer broadband service." See, full story.
Sen. Cleland Introduces Bill to Limit Online Collection of Information About Children
8/1. Sen. Max Cleland (D-GA) introduced S 2839, the Children's Electronic Access Safety Enhancement (CEASE) Act. This is a bill to regulate the collection and use of information about children by Internet content management service providers, such as companies which provide filtering technologies to schools and libraries.
Section 1 of the bill is its title.
Section 2 of the bill provides, in part, that "A provider of Internet content management services shall, before entering into a contract or other agreement to provide such services to or for an elementary or secondary school or library, notify the local educational agency or other authority with responsibility for the school, or library, as the case may be, of the policies of the provider regarding the collection, use, and disclosure of information from or about children whose Internet use will be covered by such services." The bill also covers the form of the notice, and modifications of policy.
Section 3 of the bill both prohibits the collection of information of about children, and regulates the collection of such information. First, it provides that "A provider of Internet content management services to or for an elementary or secondary school or library may not collect through such services personal information from or about a child who is a student at that school or a user of that library." Then, it provides that if a provider of Internet content management services collects such information, it shall provide notice to the school and the Federal Trade Commission (FTC), and treat such information in a manner that is consistent with the Children's Online Privacy Protection Act of 1998 (COPPA).
The COPPA provides, in part, that "It is unlawful for an operator of a website or online service directed to children, or any operator that has actual knowledge that it is collecting personal information from a child, to collect personal information from a child in a manner that violates the regulations prescribed under" the Act. See, 15 U.S.C. § 6502.
Section 4 of the bill would amend the definitions section of the COPPA.
Cleland's bill would amend the definitional section of the COPPA, 15 U.S.C. § 6501, by adding a new paragraph that would include Internet content management services within the meaning of web site operator for the purposes of the COPPA.
Sen. Cleland explained his bill in a statement in the Senate. First, he said that "the bill requires an Internet filtering government contractor to disclose its treatment of collected information to the school or library with which it is contracting. Additionally, if changes to these policies are made, the filtering company must inform the school or library of these changes. If adequate notice is not provided, the entity has the option to cancel the contract. Armed with such information about the company's practices, the school or library officials can make an informed decision of whether it wishes to contract with a particular company." See, Cong. Rec., August 1, 2002, at page S7905.
He continued that "The Children's Online Privacy Protection Act, COPPA, which passed Congress and was signed into law in 1998, prohibits the collection of personal information about children on commercial websites. In the second section of my legislation, a similar COPPA prohibition would extend to Internet content management services at schools and libraries. If personal information is collected on a child, the provider is required to inform the school or library and the Federal Trade Commission and to indicate how it will treat this information so that it will not be disclosed or distributed. When children go to schools and libraries, these environments are supposed to be safe."
Sen. Cleland argued that "Parents and guardians should not have to worry about how their children's personal information may be compromised, especially by a company that markets itself to protect children and in some cases facilitate learning. I believe my legislation will help put to rest such concerns."
Sen. Kerrey Introduces Bill for Relief of NextWave Re-Auction Winners
8/1. Sen. John Kerry (D-MA) and Sen. Sam Brownback (R-KS) introduced S 2869, a bill pertaining to the auction of spectrum currently tied up in the NextWave litigation. It was referred to the Senate Commerce Committee, of which both Sen. Kerry and Sen. Brownback are members.
Sen. Kerry explained his bill in a statement in the Senate. He said that "due to the uncertain legal status of licenses related to that FCC Auction No. 35, several companies have contingent liabilities in the millions or billions of dollars. These contingent liabilities are damaging the companies' ability to acquire additional spectrum to meet the urgent needs of wireless consumers and to roll out new and innovative services to consumers. The affected providers are the successful bidders for wireless spectrum that the Federal Communications Commission auctioned in Auction No. 35. Some of the spectrum had previously been licensed to companies, including NextWave Personal Communications Inc., whose bankruptcy filings and subsequent failure to pay amounts due to the FCC for their licenses led to the cancellation of those licenses." See, Cong. Rec., August 1, 2002, at page S7939.
Sen. Kerry continued that the bill would require "the FCC promptly to refund to the winning bidders the full remaining amount of their deposits and down payments. In addition, it gives each winning bidder an opportunity to elect, within 15 days after enactment, to relinquish its rights and to be relieved of all further obligations under Auction No. 35. Those who choose to retain their rights and obligations under Auction No. 35 will nonetheless be entitled to the return of their deposits and down payments in the interim. If and when the FCC is in a position to deliver the licenses at issue to those who remain obligated, they will be required to pay the full amount of their bid in accordance with the FCC's existing regulations. Those who elect to terminate their rights and obligations under Auction No. 35 will be free to pursue other opportunities to acquire spectrum and serve consumers."
Background. 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 Supreme Court will hear oral argument on Tuesday, October 8, 2002, in FCC v. Nextwave, Case No. 01-653, and Arctic Slope Corp. v. Nextwave, Case No. 01-657.
Sen. Lieberman Introduces Stock Options Bill
8/1. Sen. Joe Lieberman (D-CT) and Sen. Barbara Boxer (D-CA) introduced S 2877, the "Rank and File Stock Option Act of 2002". The bill would require that stock options be broad based, and that stock option plans be approved by shareholders. It would not require the expensing of stock options. It was referred to the Senate Finance Committee.
The bill would amend Section 162 of the Internal Revenue Code of 1986 to provide for the denial of deduction of stock option plans that discriminate in favor of highly compensated employees.
The bill would also require the Securities and Exchange Commission (SEC) to adopt rules that require that "shareholder approval is required for stock option plans and grants, stock purchase plans, and other arrangements by public companies by which any person may acquire an equity interest in the company in exchange for consideration that is less than the fair market value of the equity interest at the time of the exchange".
The bill also would require the SEC to "conduct an analysis of, and make regulatory and legislative recommendations on, the need for new stock holding period requirements for senior executives, including ... recommendations to set minimum holding periods after the exercise of options to purchase stock and to set a maximum percentage of stock purchased through options that may be sold ..."
However, the bill does not require the expensing of stock options.
Sen. Lieberman said that his bill would provide a "tool in the democratization of capitalism". See, Cong. Rec., August 1, 2002, at page S7942.
Sen. Lieberman elaborated that stock options are a "fundamentally decent idea". He said that "We've discovered over the last ten months that too many companies and executives have been misusing and abusing them. In far too many cases, options have been turned into mere feed in the corporate trough by the greed of corporate executives."
"They can be used well or used poorly. We've seen corporate executives use this hammer to weaken the foundations of their companies, build rickety and top heavy structures ready to collapse, and build themselves nice, secure shelters from the damage. That's unconscionable." said Sen. Lieberman.
He explained that his bill would "correct this abuse by ensuring that the tool of stock options is put in the hands of more and more employees so it can be used as it was initially intended -- to construct wealth, to build fortunes, to strengthen companies, and to incentivize the long term soundness and stability of a company."
Sen. Lieberman added that "The way to fix this problem is not, as some have suggested, to require stock option expensing at the time an option is granted. That would, in fact, make the problem worse. It would disincentive the dissemination of options in the first place -- and in the end, those at the top of the corporate food chain will still take care of themselves. No, the way to fix this problem is to ensure that stock options are more broadly shared by more and more employees of American corporations -- that they truly are the democratizing tool that they can be."
Federal Circuit Issues Split Decision in Inventorship Case
8/1. The U.S. Court of Appeals (FedCir) issued its split opinion in Trovan v. Sokymat, a patent infringement case involving the issue of inventorship.
Trovan is the owner of  U.S. Patent No. 5,281,855 titled "Integrated circuit device including means for facilitating connection of antenna lead wires to an integrated circuit die". That is, it involves passive transponders. The patent lists Leonard Hadden and Glen Zirbes as inventors.
Trovan filed a complaint in U.S. District Court (CDCal) against Sokymat alleging patent infringement. Sokymat argued that one Ake Gustafson is a co-inventor and co-owner of the patent, and that the patent is invalid and unenforceable because Gustafson was omitted as a co-inventor with deceptive intent. The District Court held that Gustafson is not a co-inventor and co-owner.
The Appeals Court vacated and remanded. Judge Linn wrote the opinion of the Court. Judge Michel dissented.
More Federal Circuit Opinions
8/1. The U.S. Court of Appeals (FedCir) issued its opinion in Honeywell v. Victor, a patent infringement case involving Honeywell's U.S. Patent No. 4,425,501, titled "Light Aperture for a Lenslet Photodetector Array," which relates to autofocus cameras. The Appeals Court reversed in part, affirmed in part, and remanded.
8/1. The U.S. Court of Appeals (FedCir) issued its opinion in Allen Engineering v. Bartell Industries, a patent infringement case involving riding trowels. The Appeals Court addressed the issues of claim construction, the on sale bar, and inequitable conduct before the Patent and Trademark Office. This case pertains to U.S. Patent No. 5,108,220, which related to riding trowels, which are machines used to smooth the surface of freshly poured concrete. The Appeals Court reversed the District Court's judgment of infringement, and remanded.
People and Appointments
8/1. The Senate confirmed David Gross to be Deputy Assistant Secretary of State for International Communications and Information Policy in the Bureau of Economic and Business Affairs, and U.S. Coordinator for International Communications and Information Policy.
8/1. The Senate confirmed Kathie Olsen and Richard Russell to be Associate Directors of the Office of Science and Technology Policy.
8/1. The Senate confirmed the following judicial nominees: Henry Autrey (to be a Judge of the U.S. District Court for the Eastern District of Missouri), Richard Dorr (U.S.D.C, Western District of Missouri), David Godbey (U.S.D.C for the Northern District of Texas), Henry Hudson (U.S.D.C. for the Eastern District of Virginia), Timothy Savage (U.S.D.C. for the Eastern District of Pennsylvania), Amy St. Eve (U.S.D.C. for the Northern District of Illinois), David Cercone (U.S.D.C. for the Western District of Pennsylvania), and Morrison England (U.S.D.C. for the Eastern District of California).
8/1. President Bush nominated Rosemary Collyer to be a Judge of the U.S. District Court (DC) for the District of Columbia. She is a partner in the Washington DC office of the law firm of Crowell & Moring, where she specializes in labor and employment law. See, White House release.
8/1. President Bush nominated Richard Holwell to be a Judge of the U.S. District Court (SDNY). He is a partner in the New York City office of the law firm of White & Case. He is a trial lawyer who focuses on securities, antitrust, bankruptcy and financial market matters. See, White House release.
8/1. President Bush nominated Gregory Frost to be a Judge of the U.S. District Court (SDOhio). See, White House release.
8/1. President Bush nominated Mark Fuller to be a Judge of the U.S. District Court (MDAla). See, White House release.
8/1. President Bush nominated Jose Linares to be a Judge of the U.S. District Court (NJ). See, White House release.
8/1. President Bush nominated Freda Wolfson to be a Judge of the U.S. District Court (NJ). See, White House release.
8/1. President Bush announced his intent to nominate Carol Lam to be U.S. Attorney for the Southern District of California. Lam has been a Judge of the California Superior Court for San Diego County since 2000. Prior to that, she was an Assistant U.S. Attorney in the Southern District of California. See, White House release.
8/1. The Senate approved the nominations of Ben Bernanke and Donald Kohn to be Governors of the Federal Reserve Board, by voice vote. The Senate Banking Committee approved their nominations on July 31.
8/1. The Senate Finance Committee approved the nomination of Charlotte Lane to be a Commissioner of the U.S. International Trade Commission. However, there may be a hold in the Senate on her nomination. Lane is from the steel producing state of West Virginia. Farm state Senators want a Commissioner from a farm state.
8/1. The Senate Finance Committee approved the nomination of Pamela Olson to be Assistant Secretary of the Treasury for Tax Policy. She is currently Deputy Assistant Secretary. She was previously a partner in the Washington DC office of the law firm of Skadden Arps.
More News
8/1. The Securities and Exchange Commission (SEC) announced that it is soliciting "suggestions of individuals who meet the statutory requirements" for appointment to the Public Company Accounting Oversight Board, which was created by HR 3763, the Public Company Accounting Reform and Investor Protection Act of 2002, also known as the Sarbanes Oxley bill. The deadline to submit suggestions is September 2, 2002. See, SEC release.
8/1. Sen. John Edwards (D-NC) and Sen. Charles Schumer (D-NY) introduced S 2846, a bill to establish a commission to evaluate investigative and surveillance technologies. It was referred to the Senate Judiciary Committee, of which both Sen. Edwards and Sen. Schumer are members. Sen. Edwards issued a release which states that "In the wake of the terrorist attacks last year, the Federal Bureau of Investigation and local police departments have increased experimentation with video and Internet surveillance, X-ray screening, facial identification and other investigative tools", and that the bill would "establish a bipartisan commission to study these surveillance tools and find the ways to enhance security without compromising privacy".
8/1. The Senate decided to postpone consideration of the Homeland Security Act until it returns from recess on September 3. This is the bill to create a new Department of Homeland Security. The House passed the bill on July 26 before it went on recess for the month of August.

Go to News from July 26-31, 2002.