News from October 16-20, 2002

District Court Holds ADA Does Not Apply to Web Site

10/18. The U.S. District Court (SDFl) issued its Order Granting Defendant's Motion to Dismiss in Access Now v. Southwest Airlines, holding that the Americans with Disabilities Act (ADA) ban on discrimination in public accommodations does not apply to Southwest's web site. See, full story.

7th Circuit Upholds Mandatory Arbitration Clause in AT&T Consumer Contract

10/18. The U.S. Court of Appeals (7thCir) issued its opinion [PDF] in Boomer v. AT&T, upholding the validity of a mandatory arbitration clause in AT&T's Consumer Service Agreement to prevent an AT&T customer from proceeding with a lawsuit in federal court alleging overcharging for contributions to the FCC's universal service subsidy programs.

District Court. Frank Boomer filed a complaint in U.S. District Court (NDIll) against AT&T alleging that AT&T overcharged its customers for contributions to the federal Universal Services Fund. He sought class action status. AT&T argued that under the terms of a Consumer Service Agreement (CSA), customer class actions are prohibited, and arbitration is mandatory. It moved to dismiss, and to compel arbitration. AT&T also raised the filed rate doctrine. The District Court denied AT&T's motion. AT&T appealed.

Appeals Court. The Court of Appeals reversed. It concluded that AT&T made Boomer an offer to provide long distance services. This included sending him a copy of the CSA which has an arbitration clause, and a no class action clause, in it. Boomer accepted this offer by continuing to use AT&T抯 services. Hence, there is a contract, with the CSA providing the terms.

The Appeals Court wrote that "While Boomer contends that that clause is unconscionable under state law and violates the Illinois Consumer Fraud Act and the Deceptive Business Practices Act, the Communications Act preempts state law challenges to the validity of contractual provisions because the Communications Act seeks to promote the uniformity of rates, terms and conditions, and state law challenges to the legality of contractual provisions would destroy that objective. Accordingly, Boomer cannot challenge the validity of the arbitration clause under state law, and instead must submit to arbitration. "

This case was decided on October 3, but was not published in the 7th Circuit web site until October 18.

7th Circuit Amends Trademark Metatags Opinion

10/18. The U.S. Court of Appeals (7thCir) issued an order [1 page in PDF] amending its August 13, 2002 opinion [PDF] in Promatek v. Equitrak, a trademark case involving HTML metatags, in which the Appeals Court affirmed a District Court injunction.

See, TLJ story titled "7th Circuit Rules on Use of Trademarks in HTML Metatags", August 13, 2002.

The order adds two significant clarifications regarding the use of trademarks in metatags. The Appeals Court wrote that "The problem here is not that Equitrac, which repairs Promatek products, used Promatek抯 trademark in its metatag, but that it used that trademark in a way calculated to deceive consumers into thinking that Equitrac was Promatek." The Appeals Court added that "It is not the case that trademarks can never appear in metatags, but that they may only do so where a legitimate use of the trademark is being made."

People and Appointments

10/18. Archie Dunham, Chairman of Conoco Phillips, was elected chairman of the National Association of Manufacturers (NAM). See, NAM release.

More News

10/18. The Federal Communications Commission (FCC) released its hearing designation order [MS Word] in the EchoStar DirecTV merger review. The document has 299 numbered paragraphs and 5 appendices. It does not designate a hearing date.

10/18. The U.S. District Court (6thCir) issued its opinion in Heritage Broadcasting v. NLRB, a petition for review of a National Labor Relations Board order pertaining to a union decertification vote. Heritage is a TV broadcaster in the state of Michigan. A Heritage employee filed a petition to decertify a union. The majority of votes cast supported decertification. However, the NLRB excluded the votes of news producers, thus reversing the outcome. The NLRB also found that Heritage violated the National Labor Relations Act for refusing to bargain with the union. The Court of Appeals affirmed.

NTIA Director Addresses Wireless Broadband Issues

10/17. National Telecommunications and Information Administration (NTIA) Director Nancy Victory gave a speech at the Global Forum 2002 in Washington DC. She addressed broadband issues, including rights of way obstacles to deployment, Bush administration broadband related policies, and spectrum management policies for promoting wireless broadband.

She did not state a position on rights of way obstacles. Rather, she said that "all sectors of the broadband industry -- Bell Operating Companies, CLECs, cable companies, overbuilders, and wireless providers -- actually share the same point of view! These providers are concerned that restrictions by certain municipalities, states and federal government landowners on accessing public rights of way and tower sites might be inhibiting or at least delaying broadband network construction."

She said that actions taken by the NTIA include meeting "with representatives of localities and their associations to identify means for improving and simplifying current processes where needed, while ensuring sufficient flexibility for municipalities to best serve their citizens." She said that the NTIA has participated in National Association of Regulatory Utility Commissioners (NARUC) discussions to "identify best practices and recommendations to streamline the current process".

Next, she addressed wireless issues. She said that "wireless broadband seems destined to be a part of the broadband future". She identified several spectrum management issues. "First, the U.S. Government agencies involved in spectrum management -- NTIA, FCC and the State Department -- must work collaboratively as ``one spectrum team创." She also said that "we should develop policies that encourage spectrum efficiency."

Third, she said that "we must establish forward looking policies that enable technological advances and eliminate legacy regulations that stand in the way of innovation. One such promising reform in this area is the FCC's proceeding on creating secondary markets that would permit parties to ``lease创 their spectrum to others, to put otherwise unused spectrum to its most efficient use. Another is the accommodation of frequency flexible wireless systems, such as those under the 802.11 standard, on an unlicensed basis."

And fourth, she said that "we should ensure that we have policies that assure the deployment of robust wireless networks that are prepared for the worst of crises and able to deliver the very best of services to the American people."

She also briefly addressed recent efforts related to reallocating spectrum for Third Generation (3G) wireless services.

Finally, she said that "We will soon be turning to look at new wireless IP based architectures that are emerging at the unlicensed and user driven level. Traveling below the regulatory radar screen, WiFi has grown from a West Coast coffee shop phenomenon into an emerging mainstream means of broadband access to the Internet and high speed wireless connectivity within campus environments, offices and homes."

House Committee Releases DOJ Responses to Questions About USA PATRIOT Act

10/17. The House Judiciary Committee (HJC) published in its web site answers from the Department of Justice (DOJ) to its questions regarding how the DOJ is implementing the USA PATRIOT Act, which was passed late last year in the wake of the terrorists attacks of September 11, 2001. In the area of new and expanded electronic surveillance powers, the DOJ's responses provided little information in response to key questions.

On June 13, 2002, Rep. James Sensenbrenner (R-WI) and Rep. John Conyers (D-MI), the Chairman and ranking Democrat on the HJC, wrote a letter to Attorney General John Ashcroft which propounded numerous questions regarding the implementation of the USA PATRIOT Act. On July 26, 2002, Assistant Attorney General Daniel Bryant wrote a letter [PDF] which constitutes the response of the DOJ. On October 17, 2002, the HJC published this letter in its web site.

Question No. 13 asked "How many roving pen register and trap and trace orders have been issued under section 216 of the Act? How many ``Armey创 notices, reporting on the details of the installation of roving pen registers or trap and trace devices, have been filed with U.S. courts pursuant section 216 of the Act? How many ``Armey创 notices were related to a terrorism investigation?"

There is no answer to this question in the DOJ letter.

This was a key question. Section 216 of the Act expanded pen register and trap and trace authority from telephone calls to Internet communications. Previously, pen register authority applied to recording the numbers that are dialed or punched into a telephone, while a trap and trace applied to incoming numbers. The Act expanded these concepts to include addressing and routing information. It also provided that a single order shall apply nationwide. This Section 216 serves as the legal authority for technologies that monitor e-mail systems, such as the FBI's Carnivore.

Question No. 5 of the HJC letter asked as follows: "Section 203(b) authorizes disclosure of Title III electronic, wire, and oral intercept information consisting of certain foreign intelligence or counterintelligence information to (1) Federal law enforcement; (2) intelligence officials; (3) protective officials; (4) immigration officials; (5) national defense officials; or (6) national security officials. How many times has the Department of Justice made such disclosures under this authority?"

The DOJ did not provide a responsive answer. It wrote, in full, that "The Department has made disclosure to the intelligence community under this authority on two occasions."

Question No. 9 asked as follows: "Section 212 of the Act authorizes any electronic communications service provider to disclose communications if it reasonably believes that an emergency involving immediate danger of death or physical injury to any person requires disclosure. How many times has the Department of Justice received information under this authority? In how many of those cases did the government, not a private person, submit the information suggesting immediate danger of death or physical injury?"

The DOJ response does not state how many times. The DOJ responded as follows: "This important provision of the USA PATRIOT Act has given Internet service providers (ISPs) the legal authority that they need to disclose information in order to save lives. Although we have received anecdotal accounts of its use, there are no statistics detailing the number of times that disclosures have occurred or the basis for such disclosures. However, it has been used on several occasions, including to permit ISPs to disclose records that assisted law enforcement in tracing the source of a kidnapper's communications."

Question No. 14 asked "Since enactment of the Act, how many FISA surveillance order applications certifying under section 218 of the Act that ``a significant purpose创 of the surveillance was the collection of foreign intelligence information could not have certified, pursuant to prior law, that ``the purpose创 was the collection of foreign intelligence information?"

The DOJ's response did not state how many. Rather, the response pertains to why it does not state how many. The DOJ wrote: "Because we immediately began using the new ``significant purpose创 standard after passage of the PATRIOT Act, we had no occasion to make contemporaneous assessments on whether our FISAs would also satisfy a ``primary purpose创 standard. Therefore, we cannot respond to the question with specificity. The ``primary purpose创 standard, however, has had its principal impact not with respect to the government's certification of purpose concerning the use of FISA itself, but rather in the FISC's tolerance of increased law enforcement investigations and activity connected to, and coordinated with, related intelligence investigations in which FISA is being used. Given the courts' approach in this area, the "significant purpose" amendment has the potential for helping the government to coordinate its intelligence and law enforcement efforts to protect the United States from foreign spies and terrorists.

Question No. 17 asked "How many search warrants for electronic evidence have been served under section 220 of the Act in a jurisdiction other than the jurisdiction of the court issuing the warrant?"

The DOJ responded that "the exact number of search warrants for electronic evidence that have been executed outside the issuing district is unknown".

However, it went on to state that "the impact of Section 220 has plainly been significant. In the aftermath of September 11th, districts in which large Internet service providers reside (most notably the Eastern District of Virginia and the Northern District of California) were inundated with search warrant applications, placing a tremendous burden on federal agents and prosecutors and federal magistrates in those districts. The sheer volume of applications relevant to important investigations made it difficult to process them in a deliberate, timely fashion."

The DOJ added that "the improvement in efficiency has proved invaluable in several time sensitive investigations, including one involving tracking a fugitive and another involving a hacker who used stolen trade secrets to extort a company."

Question No. 22 asked as follows: "Section 211 of the Act was intended to clarify what information cable companies could disclose to law enforcement authorities. How has this provision operated in practice?"

The DOJ responded that "Before the enactment of Section 211, when law enforcement sought to compel production of information relevant to a criminal investigation from cable companies that provided telephone or Internet service, the companies confronted a difficult dilemma: comply with the Cable Act and risk liability for violating the Electronic Communications Privacy Act (ECPA), or comply with ECPA and risk liability for violating the Cable Act. Important investigations were brought to a standstill while this conflict was debated by the providers legal counsel or litigated in court. One particularly unfortunate case involved investigation of a suspected pedophile who distributed images of child pormography using a cable Internet connection and bragged that he was sexually molesting a minor girl. Law enforcement agents obtained a court order pursuant to ECPA that commanded the suspect抯 provider to disclose the suspect抯 name and address, but the provider refused to comply with the order, citing the pre-amendment Cable Act. The young girl was left at risk of sexual molestation for more than two weeks before investigators following other leads were able to identify and arrest the suspect. Only after the arrest did the cable company finally turn over the records."

The DOJ continued that "Section 211 clarifies that ECPA, not the Cable Act, governs the disclosure of information regarding communication services provided by cable companies. This amendment ended all litigation on this question, and cable providers now routinely comply with legal process pursuant to ECPA without fear of liability under the Cable Act. Moreover, important investigations, such as that described above, are no longer hampered by this apparent conflict in the law."

SEC Official Addresses Internet Advisor Rule

10/17. Paul Roye, Director of the Securities and Exchange Commission's (SEC) Division of Investment Management, gave a speech titled "Priorities in Investment Management Regulation" in Washington DC. He briefly touched upon the Internet advisor rule.

He stated that "In the investment adviser area, we also are preparing recommendations to the Commission for the adoption of both the Internet adviser rule and Part 2 of Form ADV. The Internet adviser rule would permit those investment advisers that provide advisory services through interactive websites to register with the Commission. These ``Internet advisers创 typically would not otherwise qualify for Commission registration under the Advisers Act, but instead would be required to register with state securities authorities. The rule is intended to alleviate the burden of multiple state registrations for advisers whose business is unconnected with any particular state."

He added that "Part 2 of Form ADV is the principal disclosure document investment advisers use to communicate with their clients. As proposed, Part 2 would be a plain English narrative brochure, rather than the current check-the-box format with additional information provided on schedules. We expect to present our recommendations for both these rules before the year's end."

USTR Submits Comment to WTO Re Trade Remedy Rules

10/17. The Office of the U.S. Trade Representative (USTR) submitted a document [5 pages in PDF] to the World Trade Organization (WTO) titled "Basic Concepts and Principles of the Trade Remedy Rules".

It addresses trade distorting practices, and trade remedies, such as antidumping and countervailing duty rules.

The USTR also wrote that "A critically important component of maintaining confidence in a rules based trading system is a fully effective dispute settlement system capable of settling disputes without adding to or diminishing the rights and obligations of Members as negotiated in the WTO agreements."

The USTR also stated that "it is essential that dispute settlement panels and the Appellate Body, in interpreting obligations related to trade remedy laws, follow the appropriate standard of review and do not impose on national authorities obligations that are not contained in the Agreements." See also, USTR release.

People and Appointments

10/17. Carolyn Williams was named Director of the Federal Communications Commission's (FCC) Office of Communications Business Opportunities (OCBO). See, FCC release [PDF].

More News

10/17. The Federal Communications Commission (FCC) released an order [20 pages in PDF] in its proceeding titled "In the Matter of: Implementation of the Satellite Home Viewer Improvement Act of 1999: Application of Network Non-Duplication, Syndicated Exclusivity, and Sports Blackout Rules To Satellite Retransmissions of Broadcast Signals". This is CS Docket No. 00-2.

10/17. Federal Reserve Board (FRB) Vice Chairman Roger Ferguson gave a speech titled "Should Financial Stability Be an Explicit Central Bank Objective?" He stated that "Economic developments in the United States in the late 1990s were quite favorable. Output growth was unusually strong and, in no small part, that strength seemed attributable to a sizable pickup in the trend growth of labor productivity spurred by the proliferation of new technologies, especially in the computing and telecommunications sectors. Investors read the favorable productivity trends as auguring enhanced profit growth, prompting a substantial runup in equity prices in 1999 and into 2000 that pushed standard valuation measures -- such as price earnings ratios -- well above historical benchmarks." Ferguson spoke to an International Monetary Fund conference in Washington DC titled "Challenges to Central Banking from Globalized Financial Markets".

10/17. The House Commerce Committee's Subcommittee on Commerce, Trade, and Consumer Protection held a hearing titled "ECNs and Market Structure: Ensuring Best Prices for Consumers". Electronic Communications Networks (ECN) are electronic trading systems that automatically match buy and sell orders at specified prices. See, opening statement of Rep. Cliff Stearns (R-FL), the Chairman of the Subcommittee. See also, prepared statements of witnesses: Kevin Foley (CEO of Bloomberg Tradebook), Kevin O'Hara (General Counsel of Archipelago), Robert Gasser (CEO of NYFIX Millennium), William O'Brien (General Counsel of Brut), and Michael Ryan (General Counsel of the American Stock Exchange).

Rep. Honda Introduces Nanotech Bill

10/16. Rep. Mike Honda (D-CA) introduced HR 5669, the Nanoscience and Nanotechnology Advisory Board Act of 2002. Rep. Honda issued a release [PDF] which states that the bill would "establish an independent advisory board, comprised of leaders from industry and academia, to advise the President of the United States and Congress on research investment strategy, policy, objectives, and oversight related to the federal government抯 National Nanotechnology Initiative (NNI)."

Rep. Honda stated that "The federal government抯 nanotechnology strategy must have clear goals and metrics to assess our country抯 progress. Additionally, nanotechnology will give rise to a host of novel social, ethical, philosophical, and legal issues. It will be important to have a group in place to predict and work to alleviate anticipated problems."

The bill was referred to the House Science Committee.

McCain & Feingold Propose Vouchers for Broadcast Political Ads

10/16. Sen. John McCain (R-AZ), Sen. Russ Feingold (D-WI), and Sen. Richard Durbin (D-IL) introduced S 3124, the Political Campaign Broadcast Activity Improvements Act, a bill to amend the Communications Act of 1934 to create a Federal Communications Commission (FCC) run voucher program for the broadcast of political ads.

The FCC would disperse up to $650 Million in vouchers to candidates and up to $100 Million to parties, starting in 2004. The amounts would be adjusted upwards to account for inflation in future years.

The program would be funded by a tax on broadcast spectrum. The bill provides that "The Commission shall assess, and collect annually, a spectrum use fee based on a percentage of a broadcasting station's gross revenues in an amount necessary to carry out the provisions of this section." However, the bill exempts public broadcasting stations.

The bill would require that broadcast stations "broadcast at least 2 hours per week of candidate centered programming or issue centered programming during each of the 6 weeks preceding a Federal election, including at least 4 of the weeks immediately preceding a general election" and "not less than 1 hour of such programming was broadcast in each of those weeks during the period beginning at 5:00 p.m. and ending at 11:35 p.m. ..."

The bill would also revise and expand the lowest unit cost provision applicable to political campaign broadcasts.

Sen. Feingold stated that the bill requires "broadcast stations to devote a reasonable amount of air time to election programming. It would also direct the FCC to create a voucher system in which candidates and parties would receive vouchers they could use for paid radio or TV advertising time financed by a broadcast spectrum usage fee. Candidates would qualify for vouchers based on a ratio matched to the amount of small dollar donations they raise." See, Congressional Record, October 16, 2002, at S10586.

The bill was referred to the Senate Commerce Committee. A copy of the bill is in the Congressional Record, October 16, 2002, at S10583-6.

Fed Circuit Rules in Patent Case Involving LED Display

10/16. The U.S. Court of Appeals (FedCir) issued its opinion in Texas Digital Systems v. Telegenix, a patent infringement case that involves controlling the color of pixels in a LED display. The Appeals Court affirmed in part and reversed in part.

Texas Digital Systems (TDS) holds the four patents at issue in this case: U.S. Patent No. 4,845,481, 4,965,561, 4,734,619, and 4,804,890. All are directed to methods and devices for controlling the color of pixels in a light emitting diode (LED) display. Telegenix makes display systems.

TDS filed a complaint in U.S. District Court (NDTex) against Telegenix alleging that Telegenix抯 Colorgraphix devices infringed its patents. Following a jury verdict in favor of TDS, the District Court entered judgment of infringment. The District Court found that the claims were not invalid. It also found willful infringement. It awarded damages of $6 Million, enhanced damages of $6 Million, and interest. It also enjoined Telegenix from further infringement. This appeal followed.

The Appeals Court affirmed in part, and reversed in part. The Appeals court held that the District Court erroneously construed certain disputed claim limitations, but correctly construed other claim limitations.

AT&T Files Petition to Re-Regulate Special Access Charges

10/16. AT&T filed a petition [118 pages in PDF] with the Federal Communications Commission (FCC) requesting that it re-regulate special access services. Regional Bell Operating Companies (RBOCs) criticized the proposal.

AT&T requested that the FCC "initiate a rulemaking to reform regulation of price cap incumbent local exchange carrier ("ILEC") rates for interstate special access services. As detailed below, there is now indisputable proof that: (i) large ILECs, and particularly the Bell Operating Companies ("Bells"), retain pervasive market power in the provision of these services, (ii) the large ILECs are abusing that market power with patently unjust and unreasonable rates that impose a multi billion dollar annual overcharge or tax on American businesses and consumers and also severely harm both local and long distance competition, (iii) the Commission抯 existing rules are incapable of addressing this worsening crisis, and, indeed, only exacerbate the problem, and (iv) the Commission therefore has a clear legal obligation promptly to reform its regulation to protect the public interest and to put an end to these monopoly abuses."

AT&T stated in a release "the premature removal of price regulations on special access services -- the high capacity local links to buildings that provide businesses with telephone and high speed Internet services -- has allowed the Bells to gouge their customers and competitors to the tune of $5 billion annually, with a resulting deadweight drag on the economy."

SBC stated in a release that "AT&T is clearly thrashing around looking for a way to change the subject from their cynical exploitation of below cost wholesale rates and the damage they are doing to the nation's telecommunications industry. To support its case, AT&T recycles the same losing arguments it raised against pricing flexibility and ignores the reality that the special access market is highly competitive.

SBC continued that "all but nine of the top 100 metropolitan service areas (MSAs) are served by at least three competing fiber networks and competitive special access providers have captured nearly 40 percent of the overall market. In recognition of this robust competition, the Federal Communications Commission (FCC) has removed special access services from price cap regulation throughout many competitive areas. The bottom line is that competition in the special access market is flourishing and has brought numerous benefits to consumers."

BellSouth stated in a release "There is strong competition in special access. AT&T itself offers special access in most of the top 100 markets in the United States. AT&T and other non-Bell companies provide 40% of the special access service in the U.S. Regulation is designed to replicate competition. Competition in special access has long existed. Further regulation is not necessary."

USTR to Hold Hearing on Central American FTA

10/16. The Office of the U.S. Trade Representative (USTR) announced that it will hold a hearing, and receive public comments, to assist it in amplifying and clarifying negotiating objectives for the proposed free trade agreement (FTA) with five central American nations. The USTR seeks comment on, among other things, "trade related intellectual property rights issues that should be addressed in the negotiations" and "Existing barriers to trade in services between the United States and Central America that should be addressed in the negotiations."

The hearing will be on November 19, 2002 in Washington DC. Written comments are due by December 2. Persons wishing to testify at the hearing must provide written notification of their intention, as well as their testimony, by November 12.

See, notice in the Federal Register, October 16, 2002, Vol. 67, No. 200, at Pages 63954 63955.

More Trade News

10/16. President Bush provided a notice to the U.S. Congress, pursuant to section 2104(a)(1) of the Trade Act of 2002 (19 U.S.C. 3804(a)(1)), of "my intention to enter into negotiations on a Free Trade Agreement with the five member countries of the Southern African Customs Union (Botswana, Lesotho, Namibia, South Africa, and Swaziland)". (Parentheses in original.)

10/16. The White House Office of the Press Secretary issued a statement on the Israeli economy. It states that "Since the U.S. Israel Free Trade Agreement came into effect in 1985, Israel has become one of the top destinations for U.S. high technology investment ..."

People and Appointments

10/16. June Taylor was named Assistant Bureau Chief and Chief of Staff of the Federal Communications Commission's (FCC) Consumer & Governmental Affairs Bureau. She replaces Barbara Douglas, who was named Director of the FCC's Office of Workplace Diversity (OWD). See, FCC release [PDF].

Go to News from October 11-15, 2002.