News from October 21-25, 2002

FCC Approves Transfer of Licenses to Intelsat

10/25. The Federal Communications Commission (FCC) released an Order and Authorization [MS Word] approving the transfer of common carrier and non-common carrier earth station licenses, private land mobile radio (PLMR) licenses, and international section 214 authorizations from Comsat, a subsidiary of Lockheed Martin, to Intelsat. This is IB Docket No. 02-87.

FCC Commissioner Michael Copps wrote in a separate statement [MS Word] that "I am always troubled when the Federal Communications Commission allows foreign government controlled entities to obtain U.S. licenses. As I have stated before, I believe that foreign government control represents a serious potential threat to U.S. consumers and to competition. There is a fundamental difference between companies that operate in a free market and state-run corporations that may act counter to free market forces. Here, foreign governments control -- through government-owned monopoly corporations, holding companies, and other devices -- approximately 30 percent of Intelsat. While the privatization of Intelsat has clearly made great progress, it is still substantially owned by foreign governments."

DC Circuit Rules in Comptel v. FCC

10/25. The U.S. Court of Appeals (DCCir) issued its opinion in Comptel v. FCC, a case regarding the requirement of the Telecommunications Act of 1996 that the incumbent local exchange carriers (ILECs) lease unbundled network elements (UNEs) to competitive local exchange carriers (CLECs). See, 47 U.S.C. § 251(c)(3).

The Competitive Telecommunications Association (Comptel) filed a petition for review of two orders of the Federal Communications Commission (FCC) pertaining CLECs' access to a combination of UNEs known as the enhanced extended link (EEL). EELs are unbundled loops and transport network elements.

The Court of Appeals denied the petition for review.

Herschel Abbott of BellSouth, an ILEC, stated in a release that "This part of the network is highly competitive, as are some others. BellSouth is pleased that the Court recognized the authority of the FCC to permit highly competitive portions of the network to remain competitive and to prevent others from gaming the system."

DOJ Recommends Approval of BellSouth Long Distance Applications for Florida and Tennessee

10/25. The Department of Justice's (DOJ) Antitrust Division releases its evaluation [19 pages in PDF] of BellSouth's Section 271 application with the Federal Communications Commission (FCC) to provide in region interLATA service in the states of Florida and Tennessee. It conditionally recommended approval.

The DOJ wrote that "The Commission should review the concerns expressed in this Evaluation, and if it is satisfied that these concerns have been addressed, the Department recommends that the Commission approve BellSouth’s application." The DOJ expressed concerns regarding several areas of the process through which upgrades to operations support systems (OSS) software are developed and prioritized. It also expressed concerns about the measurements used to track the performance of those systems.

BellSouth has previously obtained Section 271 approvals for the states of Georgia, Louisiana, Alabama, Kentucky, Mississippi, North Carolina, and South Carolina. The deadline for the FCC to decide on this application is December 19. This is WC Docket No. 02-307. See, DOJ release and BellSouth release.

Sniper Capture Spurs Debate over Databases and Privacy

10/25. The use by law enforcement agencies of computerized databases to solve the Washington DC area sniper case has spurred debate over the development, use, and sharing of databases by law enforcement and other government agencies.

For example, Jonathan Alter, Newsweek Senior Editor and columnist, wrote an opinion article published in the MSNBC web site titled "Actually, the Database Is God".

Alter wrote that "Computerized fingerprinting triumphed. It was by matching a print found on a gun catalog at a crime scene in Montgomery, Ala., to one in an INS database in Washington state that the Feds cracked open the case and paved the way for the arrest of the two suspected snipers."

He then criticized arguments that have been advanced by civil libertarians. He wrote: "So if gathering as much as information as possible on databases and then sharing it among law enforcement agencies is so effective, why don’t we see more of both? Part of the explanation is the usual bureaucratic inertia and squabbling, but there's a deeper reason. Even after September 11, privacy concerns still carry plenty of clout in this country. Commonsense reforms -- like printing visa expiration dates on the driver’s licenses of immigrants -- are still resisted by many civil liberties groups. And because it’s always easier to stop a new idea than to implement one, the database approach to preventing terrorism is not moving as quickly as it should. This is one of those cases where civil libertarians and the gun lobby are together on the wrong side."

Alter concluded, " ``Database coordination.´´ It's not much of a campaign slogan, but it might save your life."

In contrast, the Center for Democracy and Technology (CDT) argued in its October 25 CDT Policy Post that "it seems that the case was broken when the alleged sniper (or someone who knew him) called police and gave them crucial information." (Parentheses in original.)

The CDT acknowledged the role of fingerprint databases. It wrote that "The alleged sniper was identified in part because a fingerprint lifted from a Montgomery, Alabama robbery murder was matched with a fingerprint taken by law enforcement authorities from the 17 year old companion of the accused following the youth's arrest in connection with an altercation in Washington state."

However, the CDT added, "But the key point is this: The database at issue (actually now a networked series of databases) is woven through with a series of rules intended to limit its use and protect privacy." (Parentheses in original.)

The Brady Campaign, a pro gun control organization, wrote in its web site that "In the Maryland sniper shootings, police rapidly matched bullet fragments from each victim to prove that the same gun was used in all of the shootings. The technology to match bullets to firearms is known as ``ballistic fingerprinting.´´ It worked and provided police with important crime leads. But what was missing, what police desperately needed, was a nationwide database of the ballistic fingerprint of every gun before it is sold so that police could determine not just that the bullets came from the same gun, but which specific gun -- manufacturer, model, serial number -- the bullets were fired from. That would have helped police trace the sniper after the very first victim." See, item titled "Ballistic Fingerprints Help Solve Crimes".

The National Rifle Association (NRA) opposes maintaining a database of ballistic fingerprints. See, October 17 statement of NRA officers Wayne LaPierre and Chris Cox.

People and Appointments

10/25. Sen. Paul Sarbanes (D-MD), Chairman of the Senate Banking Committee, said that Securities and Exchange Commission (SEC) Chairman Harvey Pitt should resign, because of the SEC's appointment of William Webster to head the Public Company Accounting Oversight Board (PCAOB). Pitt and fellow Republican SEC Commissioners Cynthia Glassman and Paul Atkins favored Webster, while Democratic Commissioners Harvey Goldschmid and Roel Campos, and Sen. Sarbanes, favored John Biggs, of the TIAA-CREF pension fund. Sen. Sarbanes stated in a release that "Chairman Pitt failed to build a consensus within the Commission, as he publicly promised he would do, for a strong Oversight Board that would command instant respect by the investing public. That the selection process appears to have been shaped by political and industry influences only compounds this failure. The country would be best served if Mr. Pitt stepped down as Chairman of the SEC."

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10/25. The U.S. Court of Appeals (9thCir) issued its opinion in Bank of America v. San Francisco, affirming the summary judgment of the District Court enjoining cities from enforcing city ordinances prohibiting banks from charging ATM fees to non-depositors. The Appeals Court held that the ordinances were preempted by the Home Owners’ Loan Act (HOLA), 12 U.S.C. §§ 1461-1470, and the National Bank Act, 12 U.S.C. § 24. It also held that the Electronic Fund Transfer Act (EFTA), 15 U.S.C. §§ 1693-1693r, does not permit cities to regulate ATM fees as a consumer protection measure.

10/25. The World Intellectual Property Organization (WIPO) announced in a release that the WIPO and Educause, the administrator of the .edu top level generic domain, have signed an agreement which makes the WIPO the sole dispute resolution service provider for the .edu domain. The WIPO stated that "WIPO's Arbitration and Mediation Center will apply the .edu Domain Name Dispute Resolution Policy (eduDRP) -- a modified version of the Uniform Domain Name Dispute Resolution Policy (UDRP) -- a low cost and speedy alternative to litigation, in the drive to resolve ``cybersquatting´´ disputes arising in the .edu domain."

FRB Vice Chairman Addresses Impact of Computer and Software Technology on Productivity Gains

10/24. Federal Reserve Board (FRB) Vice Chairman Roger Ferguson gave a speech at the London Business School titled "Productivity Growth: A Realistic Assessment ". He offered his analysis of why productivity has grown in recent years, and even during the recent economic downturn. His analysis is based in large part on developments in, and adoption of, computer and software technologies. FRB Chairman Alan Greenspan also gave a speech on productivity gains on October 23. See, full story.

Colin Powell Addresses Digital Divide

10/24. Secretary of State Colin Powell gave a speech at the Asia Pacific Economic Cooperation (APEC) Plenary in Los Cabos, Mexico. He made a vaguely worded proposal to "close the digital divide". However, he did not identify what he meant by the phrase "digital divide", and just how he proposes to close it.

Powell stated that "On education, we are taking better advantage of the opportunities created by the information technology revolution to reach out to the peoples of APEC and bridge the digital divide among us. We are developing ``the Asia Pacific Network for Education´´ with the APEC cyber education cooperation consortium. This web portal provides a single entry point for policymakers and teachers to learn about best practices in education throughout the APEC region."

He continued that "U.S. companies are providing computer training to information technology professionals and others from all around the APEC region as part of China's human capacity building promotion program. And the United States has entered into a project with the People's Republic of China to teach English and Chinese using web based technology. Indeed, APEC is increasingly active in connecting our worlds and improving our schools. And by better coordinating our activities, we could realize many more concrete results."

He stated that "I propose that we take our efforts a step further, and ask our officials in APEC to develop a long range strategy on e-learning. The goal would be to help close the digital divide by increasing the number of high quality, low cost educational resources available to the peoples of APEC. The United States will devote time and resources to help the education network develop and implement this strategy. And we would welcome partners in this effort, such as the APEC education foundation."

He concluded that "Teaching people new skills only empowers them, however, if they have the opportunity to use those skills to better their lives. Improved access to financing leads to greater economic well being. In turn, greater economic security allows people to invest in healthcare and to invest in education, and ultimately, in themselves."

EPIC Files Complaint Against DOJ Seeking Records Relating to Implementation of USA PATRIOT Act

10/24. The Electronic Privacy Information Center (EPIC) and others filed a complaint [12 pages in PDF] in U.S. District Court (DC) against the Department of Justice (DOJ) alleging violation of the Freedom of Information Act (FOIA), 5 U.S.C. § 552, in connection with the DOJ's failure to respond to plaintiffs' FOIA request for records pertaining to the DOJ's implementation of the USA PATRIOT Act.

The USA PATRIOT Act was passed late last year in response to the terrorist attacks of September 11. The complaint alleges that "there has been growing public concern about the scope of the Patriot Act and the government’s use of authorities thereunder, particularly in relation to constitutionally protected rights. Plaintiffs seek records that are critical to the public’s ability to evaluate the government’s use of vast new surveillance powers, and whose release can only serve national security, not undermine it."

The EPIC submitted a FOIA request to the DOJ and Federal Bureau of Investigation (FBI) on August 21, 2002. The document requested, among other things, records pertaining to the number of times the government has authorized the use of devices to trace the telephone calls or e-mails of people who are not suspected of any crime and the number of times the government has initiated surveillance of Americans under the expanded Foreign Intelligence Surveillance Act (FISA).

The complaint requests that the Court order the DOJ "immediately to state which records it intends to disclose in response to plaintiffs’ FOIA request" and "immediately to process plaintiffs' FOIA request and to disclose the requested records".

The other plaintiffs are the American Booksellers Foundation for Free Expression (ABFFE), the Freedom to Read Foundation (FTRF), and the American Civil Liberties Association (ACLU). David Sobel of the EPIC signed the complaint. See also, ACLU release.

FTC Official Addresses Merger Enforcement

10/24. Joseph Simons, Director of the Federal Trade Commission's (FTC) Bureau of Competition, gave a speech in Santa Monica, California titled "Merger Enforcement at the FTC". He addressed the continuity of merger policy, the level of merger activity, vertical mergers, including the Synopsis merger, and international merger review coordination.

He also discussed at length the FTC's October 4, 2002 cruise line decisions. See also, FTC release, closing letter [PDF] to Royal Caribbean, closing letter [PDF] to Carnival, closing letter [PDF] to Princess Cruises, statement of the FTC, and dissenting statement of FTC Commissioners Sheila Anthony and Mozelle Thompson.

Simons gave the keynote address to the Tenth Annual Golden State Antitrust and Unfair Competition Law Institute, hosted by the Antitrust and Unfair Competition Law Section of the State Bar of California.

People and Appointments

10/24. The Securities and Exchange Commission (SEC) named William Webster to be Chairman of the Public Company Accounting Oversight Board (PCAOB). The PCAOB was created by the Sarbanes Oxley Act of 2002 to oversee the audits of the financial statements of public companies. The SEC also named Kayla Gillan, Daniel Goelzer, Willis Gradison, and Charles Niemeier to be members of the PCAOB. Webster is a former judge of the U.S. District Court (EDMO) and U.S. Court of Appeals (8thCir), and a former Director of the Federal Bureau of Investigation (FBI) and Central Intelligence Agency (CIA). He is currently a partner in the law firm of Milbank Tweed. See, SEC release, with biographies of appointees.

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10/24. The Office of the U.S. Trade Representative (USTR) announced that USTR Robert Zoellick and Thai Minister of Commerce Adisai Bodharamik "signed a bilateral agreement today to promote the liberalization of trade and investment between the two countries. The Trade and Investment Framework Agreement (TIFA) creates a Joint Council to further facilitate and liberalize trade and investment, including such areas as intellectual property, information technology, biotechnology policy, and capacity building, as well as coordination in the APEC and the WTO." See, USTR release [PDF]. The USTR has not yet published the agreement in its web site.

Greenspan Addresses Productivity Gains and Technological Innovation

10/23. Federal Reserve Board Chairman Alan Greenspan gave a speech in Washington DC in which he addressed recent gains in productivity, the nature of productivity growth, and the role played by technological innovation, including advances in computing, networking, and communications.

He began by noting that there was a huge increase in productivity (aka increase in nonfarm business output per hour) in the past year, even though overall economic growth was modest. He said that the FRB and others are "struggling to account for so strong a surge". He used this speech to offer some explanation. In so doing, he referred to the role of computing, networking and communications.

Alan GreenspanOne point he made was that some companies have increased their productivity by acquiring equipment from failed dot-coms. He stated that "with margins under pressure, businesses effectively have been reorganizing work processes and re-allocating resources so as to use them more productively. Moreover, for capital with active secondary markets, such as computers and networking equipment, productivity may also have been boosted by a reallocation to firms that could use the equipment more efficiently. For example, healthy firms reportedly have been buying equipment from failed dot-coms."

Greenspan also focused on the role of innovation in productivity gains. He said that "Our nation has had previous concentrated bursts of technological innovation. In those instances, business practices slowly adapted to take advantage of the new technologies. The result was an outsized increase in the level of productivity spread over a decade or two, with unusually rapid growth rates observed during the transition to the higher level."

He continued that "Arguably, the pickup in productivity growth since 1995 largely reflects the ongoing incorporation of innovations in computing and communications technologies into the capital stock and business practices."

He also suggested that technological related productivity gains are likely to continue. He said that "the transition to the higher permanent level of productivity associated with these innovations is likely not yet completed. Surveys of purchasing managers in recent quarters consistently indicate that an appreciable share reports that their firms still have a considerable way to go in achieving the desired efficiency from the application of technology to supply management."

He also said that "Further evidence that firms still have not fully adapted their operations to the latest state of technology also is provided in a recent study that attempts to measure the ``technological gap´´ -- that is, the difference between the productivity of leading -- edge capital and the average productivity embodied in the current capital stock. This gap is estimated to be quite wide currently, which suggests that there are still significant opportunities for firms to upgrade the quality of their technology and with it the level of productivity."

USTR Offers Recommendations to Japan

10/23. The Office of the U.S. Trade Representative (USTR) presented a document [49 pages in PDF] to Japan titled "Annual Reform Recommendations from the Government of the United States to the Government of Japan under the U.S. -- Japan Regulatory Reform and Competition Policy Initiative". The report offers detailed recommendations in a wide range of policy areas, including wireless communications, wireless services, broadband deployment, e-commerce, intellectual property protection, and privacy protection.

The report states that its recommendations are "designed to facilitate a return to sustainable growth and open markets in Japan." See also, USTR release.

While the report was presented to Japanese Senior Vice Minister for Foreign Affairs Toshimitsu Motegi by Deputy USTR Jon Huntsman, it has very little to do with traditional trade issues. Rather, it covers a wide range of regulatory issues. Also, some of the policy recommendations have either not yet been adopted in the U.S., are still hotly debated in the U.S., or are subject to pending legal challenges within the U.S.

E-Commerce. The document states that "Although Japan’s e-commerce market is one of the largest in the world, its tremendous potential for growth remains unfulfilled because the IT sector is fettered by regulatory and other barriers."

The USTR offers several recommendations, such as: "Remove existing barriers that impede B-to-B and B-to-C e-commerce; allow non-attorneys to provide mediation and arbitration services for profit; ensure that Japanese Government e-commerce guidelines remain flexible and appropriate for evolving changes in technology and the marketplace; increase private sector input at all stages of the IT policy making process."

Intellectual Property. The USTR also offers recommendations regarding protection of intellectual property rights: "Extend Japan's terms of copyright protection and strengthen the enforcement system against infringement; provide security for commerce in the digital age through strong anti- circumvention measures; implement an effective Government wide software asset management system."

The report recommends that Japan "Clarify the scope of anti- circumvention rules to provide a sufficient level of security for digital content."

The report recommends extending copyright terms "to life of the author plus seventy years for works generally, and to 95 years from publication for works for which the term is not based on a human life."

The report also recommends that Japan "Strengthen the enforcement system against intellectual property infringement by adopting a statutory damage system that will act as a deterrent against infringing activities, ensure that right holders are fairly compensated for the losses suffered by infringement, and free judicial resources from the costly and difficult burden of having to establish and calculate actual damages."

Privacy. The USTR recommends a "self-regulatory framework for privacy".

The report also contains six pages of itemized recommendations regarding telecom policy. The report also covers other industry sectors, including financial services, energy, medical, and healthcare. It also addresses competition policy.

Treasury Official Praises Korea's Policies and Tech Driven Economy

10/23. Under Secretary of the Treasury John Taylor gave a speech in Seoul, South Korea titled "The United States and the World Economy: Current Situation and Prospects". He praised Korean policies.

He stated that "Korea is an example of what other countries can achieve with the right policies. ... As Central Bank Governor Park Seung noted recently in a speech in Washington, DC, Korea has adopted a new economic paradigm: an open economy -- driven by knowledge and technology driven companies, and supported by a sound financial system. This is seen in the government’s reduced role in the financial sector, increasing unwillingness to intervene on behalf of inefficient corporations, efforts to improve the insolvency regime, and increasing openness to foreign investment."

He also stated that "History and experience provide ample evidence of the kinds of policies that deliver higher productivity growth and higher living standards. Sound fiscal policies and low inflation monetary policies are, of course, essential. But they are not enough. Pro growth legal and regulatory policies encourage business investment, innovation, and entrepreneurship." He also said the other important policies include "Investments in health and education", "lower marginal tax rates", "strong rule of law and intolerance of corruption", and "Free trade".

Taylor also addressed the ailing Japanese economy in a speech in Tokyo, Japan on October 22. He stated that "I see no reason why -- with the right policies -- Japan could not return to the ``3 percent plus´´ economic growth of the 1970s and 1980s. Getting monetary policy and banking policy right is essential to restoring economic growth in Japan, and that is why I want to concentrate on them today." He said that "non-performing loans problems at the banks are still a serious problem and must be quickly addressed".

Bush Advocates Senate Passage of Bill Regarding Computer Generated Images

10/23. The White House press office issued a release that states that President Bush "called on the Congress to pass the Child Obscenity and Pormography Prevention Act. This bill, which has already passed the House, makes it illegal for child pormographers to disseminate obscene, computer generated images of children." The release also states that "the Bush Administration is working aggressively to fight child exploitation and child pormography on the Internet."

Other administration officials have announced the administration's support for this bill in the past. See, for example, the prepared text of a speech by Attorney General John Ashcroft on October 2. See also, prepared testimony of Michael Heimbach, Unit Chief for the FBI's Crimes Against Children Unit, for a House Crime Subcommittee hearing on May 1, 2002.

The House passed this bill, HR 4623, on June 25 by a vote of 413-8. See, Roll Call No. 256.

However, the Democratic led Senate has not passed the bill. Sen. Patrick Leahy (D-VT), the Chairman of the Senate Judiciary Committee, derided the bill at hearing earlier this month as a "quick fix" that will not withstand constitutional scrutiny. See, opening statement.

The next election is twelve days away.

This bill, which is sponsored by Rep. Lamar Smith (R-TX), is a reaction to the Supreme Court's April 16, 2002, opinion [PDF] in Ashcroft v. Free Speech Coalition, in which the Court held unconstitutional on First Amendment and overbreadth grounds provisions of the Child Pormography Prevention Act of 1996 (CPPA) banning computer generated images depicting minors engaging in sezually explicit conduct.

The CPPA expanded the federal prohibition on child pormography to encompass new technologies. 18 U.S.C. § 2256, the section containing definitions, was amended to provide that child pormography means "any visual depiction, including any photograph, film, video, picture, or computer or computer- generated image or picture, whether made or produced by electronic, mechanical, or other means, of sezually explicit conduct, where (A) the production of such visual depiction involves the use of a minor engaging in sezually explicit conduct; (B) such visual depiction is, or appears to be, of a minor engaging in sezually explicit conduct; (C) such visual depiction has been created, adapted, or modified to appear that an identifiable minor is engaging in sezually explicit conduct; or (D) such visual depiction is advertised, promoted, presented, described, or distributed in such a manner that conveys the impression that the material is or contains a visual depiction of a minor engaging in sezually explicit conduct;"

This bill amends § 2256(8)(B) to read "such visual depiction is a computer image or computer- generated image that is, or is nearly indistinguishable ... from, that of a minor engaging in sezually explicit conduct". However, the bill also provides that "it shall be an affirmative defense to a charge of violating this section that the alleged offense did not involve the use of a minor or an attempt or conspiracy to commit an offense under this section involving such use."

That is, the bill shifts the burden of proving that an image is computer generated to the defendant. The distinction is critical. DOJ officials have stated that prosecutors often cannot prove beyond a reasonable doubt that images are not computer generated, thus enabling defendants to escape conviction.

See also, story titled "House Subcommittee Holds Hearing on Computer Generated Porm" in TLJ Daily E-Mail Alert No. 423, May 2, 2002, and story titled "House Judiciary Committee Supports Ban on Computer Generated Child Porm" in TLJ Daily E-Mail Alert No. 454, June 19, 2002.

Editor's Note: TLJ intentionally misspells words that have caused subscribers' e-mail filtering systems to block delivery of the TLJ Daily E-Mail Alert.

District Court Enjoins Insider Traders

10/23. The U.S. District Court (NDIll) entered an Order of Permanent Injunction against Joseph Sidoryk, Gary Camp, Todd Camp, and Thomas Siska. On July 23, 2002 the Securities and Exchange Commission (SEC) filed a civil complaint against the four alleging insider trading in the stock of Three Five Systems in violation of federal securities laws. Sidoryk is Director of Strategic Accounts at Three Five and primary liason to Motorola. Three Five designs, develops and manufactures display systems employing liquid crystal display (LCD) and liquid crystal on silicon (LCoS) microdisplay technology.

The Order permanently enjoins Sidoryk, Gary Camp, Todd Camp, and Siska from future violations of § 17(a) of the Securities Act of 1933, § 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The Order also requires payment of disgorgement, interest and civil penalties. See, SEC release.

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10/23. The Federal Communications Commission (FCC) stated in a release [PDF] that it has released revised instructions for completing the FCC Form 471 application for e-rate subsidies. Forms are available at the Schools and Libraries Forms page. However, the latest Form 471 instructions is still the one dating from November 2001.

10/23. The Internet Corporation for Assigned Names and Numbers (ICANN) published in its web site the October 23 draft of its "Proposed New Bylaws Recommended by the Committee on ICANN Evolution and Reform".

10/23. EMC Corporation announced in a release that the U.S. District Court (MDNC) issued a permanent injunction against Triangle Technology Services "prohibiting the company from using certain EMC copyrighted software and trade secrets related to EMC's service business. Triangle was using EMC's copyrighted maintenance software, training materials, engineering documents and other EMC intellectual property, without EMC's authorization."

10/23. Bruce Mehlman, of the Commerce Department's Technology Administration, gave a speech titled "Developing Digital Content & Rights Management". He spoke at a Heritage Foundation panel discussion titled "Pirates and Posses: The Battle Over Digital Copyright". He stated that "We need to pursue and punish violations of copyright that are clearly illegal. Here government needs to work aggressively to take down piracy rings, shut down illegal web sites and stop the most prolific file traders, as the Department of Justice is trying to do. We should actively tip the scales in the battle between ``free but illegal´´ content and legitimate services."

10/23. The Federal Trade Commission (FTC) announced that it settled two actions pending U.S. District Courts against deceptive spammers for violating of Section 5 of the Federal Trade Commission Act. See, FTC release. See also, Stipulated Judgment and Order for Permanent Injunction [PDF] in FTC v. Sonya Lockery (U.S.D.C, DConn), and Stipulated Judgment and Order for Permanent Injunction [PDF] in FTC v. Richard Scott (U.S.D.C., EDCal). Both documents were filed in early October. The FTC made its announcement on October 23.

DC Circuit Largely Affirms FCC's Massachusetts 271 Approval

10/22. The U.S. Court of Appeals (DCCir) issued its opinion in WorldCom v. FCC, a petition for review of the FCC's approval of Verizon's application to provide long distance services in Massachusetts.

WorldCom, AT&T and others challenged the Federal Communications Commission's (FCC) April 16 order approving Verizon's Section 271 application to provide in region interLATA services in the state of Massachusetts. The petitioners argued that the FCC's conclusion that Verizon's rates for unbundled network elements (UNEs) complied with the TELRIC standard (total element long run incremental cost). The Appeals Court concluded that it had already upheld the practices of the FCC in two prior challenges to § 271 approvals, Sprint v. FCC, 274 F.3d 549 (D.C. Cir. 2001), and AT&T v FCC, 220 F.3d 607 (D.C. Cir. 2000).

The Court also rejected petitioners' argument that Verizon failed to satisfy checklist item No. 14 (47 U.S.C. § 271(c)(2)(B)(xiv)) because as of the date of its application, it was not offering CLECs DSL and other advanced services at wholesale rates. Verizon was in compliance by the time the FCC issued its approval. The Court rejected this argument in an earlier opinion. However, the opinion, but not the mandate, preceded the date of Verizon's application, and the FCC relied upon this distinction. In its final analysis, the Court concluded that "no matter whether the issue is a matter of standing, mootness or both, we are sure that the complete want of effect in the real world deprives us of jurisdiction over the intriguing question of how the distinction between opinion and mandate might play out in this context."

However, the Appeals Court did remand one issue to the FCC. Petitioners argued that the FCC failed to consider their claim that the ILEC's UNE rates would create a price squeeze -- that is, prices for CLECs' inputs so high as to largely disable them from competing profitably in the local market with the ILEC, the supplier of those inputs. The Court wrote that "Because of the range of TELRIC compliant UNE rates, a set of fully compliant rates might -- under some analyses and policy judgments, not addressed by the Commission in this record -- impede local competition enough to render a § 271 approval in contravention of the ``public interest.´´ Accordingly, we remand the case for further consideration in the light of" the Sprint case."

Federal Circuit Rules in Patent Infringement Case

10/22. The U.S. Court of Appeals (FedCir) issued its opinion [MS Word] in Schumer v. Laboratory Computer Systems, vacating the District Court's judgment in a patent infringement case involving tablets.

Background. Alfred Schumer of Redmond, Washington holds U.S. Patent No. 5,768,492 titled "Digitizer interface". Digitizers are computer peripherals that translate a user’s hand motions or instructions into digital coordinates for use by a computer system. Laboratory Computer Systems (LCS) creates and distributes software drivers to be used with various brands of digitizers distributed by third parties. Wacom makes graphic tablets and interactive pen displays; it is a distributor of digitizers. Wacom was a licensee of LCS software drivers.

District Court. Schumer filed a complaint in 1999 in the U.S. District Court (WDWash) against LCS alleging patent infringement. Wacom then filed a complaint against Schumer seeking a declaratory judgment that its products did not infringe the claims of the ’492 patent and that the asserted claims of the ’492 patent were invalid. The two suits were consolidated. The District Court granted summary judgment to LCS and Wacom. It granted summary judgment of noninfringement of claims 1-10; it also granted summary judgment of invalidity of claims 13 and 14 on the basis of anticipation under 35 U.S.C. § 102(b). Schumer appealed.

Appeals Court. The Appeals Court vacated and remanded. It wrote that "Summary judgment of noninfringement of claims 1-10 should not have been granted because the district court erred in construing the language of the claims. Summary judgment of invalidity of claims 13 and 14 should not have been granted because claim 13 was not shown to be invalid by clear and convincing evidence, and dependent claim 14 was never separately addressed."

Powell Addresses DTV

10/22. Federal Communications Commission (FCC) Chairman Michael Powell gave a speech at the Association for Maximum Television's DTV Update Conference.

Michael Powell Powell stated that "In the five years that I have been on the Commission, I have heard a great deal of grumbling about the DTV transition: ``It is a great government give away;´´ ``Consumers do not want it;´´ ``It is an unnecessary industrial policy;´´ and ``It’s too expensive with little return.´´ The cold truth, however, is that we have no choice -- not just because Congress has mandated it (which is reason enough) but because the trends in technology and the forces of change will ultimately demand it of any provider that hopes to be relevant in the digital future." (Parentheses in original.)

He continued that "We recognized last April that the transition had to be driven forward -- to satisfy the wishes of Congress, to meet the expectations of consumers, and, most importantly, to advance free television's future -- perhaps even to ensure its survival."

He stated that "We began working with Congressman Tauzin and other key members of Congress to re-energize the dialog around solutions that would move things faster. Subsequently, we crafted a voluntary plan to speed the transition and I am proud to say that industry has responded. We called on the top four networks and HBO and Showtime to provide consumers with high definition or value added DTV programming during prime time. We called on broadcast licensees to pass through and promote network DTV programming. We asked cable operators and DBS operators to carry more digital programming services and to market those services, and to allow consumers to access that content. And we called on the equipment manufacturers and retailers to produce the devices that will allow consumers to view digital programming.

He added that "We have used our offices to keep pressure on all segments of the industry to find solutions to clearing DTV roadblocks. We are actively and aggressively engaged in matters involving equipment compatibility, copyright protections, and carriage obligations, just to name a few. Moreover, we have used our power to mandate change when an industry could not -- or would not -- come to a solution."

"There is no turning back and no retreat." said Powell. "At the FCC, we will lead guided by pragmatism, but backed up by regulatory action that we will not hesitate to employ where necessary."

FCC Releases UWB Study

10/22. The Federal Communications Commission (FCC) released a report [110 pages in PDF] titled "Measured Emissions Data For Use In Evaluating The Ultra-Wideband (UWB) Emissions Limits in the Frequency Bands Used By The Global Positioning System". See also, FCC public notice [3 pages in PDF].

UWB devices, which use very narrow pulses with very wide bandwidths, have potential applications in both radar and communications technologies. Proponents of its use have argued that UWB devices can use large portions of already allocated spectrum with minimal or no interference to incumbent users. Companies, such as Intel, have argued that UWB is a very promising technology for enabling short distance, high data rate connections that can support new and innovative applications. Incumbent spectrum users have opposed UWB.

On February 14, 2002 the FCC adopted its First Report and Order in ET Docket No. 98-153 to amend Part 15 of the FCC Rules to permit the marketing and operation of certain types of new products incorporating ultra wideband technology.

The FCC seeks comment on this latest report by November 22, 2002. Comments should be filed in ET Docket No. 98-153.

The report was prepared by Stephen Jones of the FCC's Office of Engineering and Technology. He can be contacted at 301 362-2054 or

DOJ Recommends Approval of Qwest Long Distance Application

10/22. The Department of Justice's (DOJ) Antitrust Division filed with the Federal Communications Commission (FCC) its evaluation [23 pages in PDF] of Qwest's application under Section 271 to provide in region interLATA services in the states of Colorado, Idaho, Iowa, Montana, Nebraska, North Dakota, Utah, Washington, and Wyoming. The DOJ recommends approval.

Qwest previously withdrew two applications because of concerns of regulators. In the present application, the DOJ concluded that "With respect to most of the issues about which the Department previously had expressed concern, Qwest’s re-filed application demonstrates improvement. The Department reiterates its deference to the Commission's determination whether Qwest’s pricing is appropriately cost based and whether Qwest complies with Section 272."

However, the DOJ also criticized Qwest for possibly withholding information from regulators. It wrote that "finds troubling an affidavit filed by AT&T in which a former Qwest employee declares that Qwest personnel ``diminish[ed] the visibility´´ of certain information to Commission staff who were visiting the Qwest CLEC Coordination Center. The former employee states that a Mechanized Loop Test (``MLT´´) was run routinely as part of the provisioning process for hot-cut loops but that this fact was hidden from regulators. At that time, CLECs were requesting pre-order access to Qwest's MLT capabilities in order to pre-qualify loops for DSL service and also were expressing concerns that Qwest had collected MLT information that it had not loaded into its Raw Loop Data Tool, to which CLECs submit pre-qualification queries."

The DOJ stated that "The affidavit suggests that Qwest, in its eagerness to protect its position, sought to limit the information available to regulatory decision makers. Qwest has disputed this account ... The Department recommends that the Commission assure itself that it has full and accurate information with regard to this allegation before proceeding to address the remainder of the issues raised by Qwest's re-filed application." (Footnotes omitted.)

This is the FCC's WC Docket No. 02-314. See also, Qwest release.

BIS Announces ISTAC Meeting

10/22. The Commerce Department's Bureau of Industry and Security (formerly known as the Bureau of Export Administration) announced that its Information Systems Technical Advisory Committee (ISTAC) will meet on November 13 & 14. The ISTAC advises the BIS on technical questions that affect the level of export controls applicable to information systems equipment and technology.

The meeting will be partly open, and partly closed. The agenda for the open portion of the meeting includes a presentation on China's high performance computing market and a presentation on semiconductor manufacturing trends. The agenda for the closed portion of the meeting is secret.

The meeting will be held at 9:00 AM each day in Room 3884, Hoover Building, 14th Street between Pennsylvania and Constitution Avenues, NW. See, notice in the Federal Register, October 22, 2002, Vol. 67, No. 204, at Page 64868.

GAO Reports on Grants Funded by H1B Visa Fees

10/22. The General Accounting Office (GAO) released a report [PDF] titled "Hill Skill Training: Grants from H-1B Visa Fees Meet Specific Workforce Needs, but at Varying Skill Levels".

Recent legislation raised the annual limits on the number of high skilled foreign workers who may obtain H1B visas to work in the U.S. High tech companies had argued that there was a shortage of U.S. workers. The Congress also required employers to pay a $1,000 fee for every foreign worker for whom they applied for an H1B visa. These funds were designated for training of U.S. workers for these jobs. This GAO report examines these educational programs.

The report states that "Fifty-five percent of the funds are provided to the Department of Labor for technical skill grants to increase the supply of skilled workers in occupations identified as needing more workers. Labor awards the skill grants to local workforce investment boards, created under WIA to establish local workforce development policies, thereby linking the skill grant program with the workforce system. The boards use the funds to provide training to employed and unemployed people. The National Science Foundation (NSF) receives 22 percent of the funds to distribute as scholarship grants to post secondary schools that distribute the funds as scholarships for low income students in computer science, engineering, and mathematics degree programs. As of July 1, 2002, about $197 million has been awarded through the skill grant program; as of May 1, 2002, about $72 million has been awarded through the scholarship grant program."

As for the Labor Department grants, the GAO report found that "Information on participants and training outcomes is limited because Labor has not collected consistent data on individual programs."

As for the NSF grants, the GAO report found that "Finding students eligible for the scholarship grant program has proven to be a challenge, as some schools have struggled to fill open slots".

The report was prepared for Rep. James Barcia (D-MI) and Rep. Lynn Rivers (D-MI).

Legislators Introduce Tech Related Bills

10/22. Representatives and Senators introduced many technology related bills last week. However, the Congress is not likely to pass many more bills in the 107th Congress. The new 108th Congress will meet in January 2003, at which time bills may be re-introduced.

On October 16, Rep. Ed Markey (D-MA), Rep. Henry Waxman (D-CA), Rep. John Dingell (D-MI), Rep. Howard Berman (D-CA), and Rep. Michael Capuano (D-MA) introduced HR 5646, a bill pertaining to the privacy of individually identifiable health information. The bill was referred to the House Commerce Committee, the House Ways and Means Committee, and the House Education and Workforce Committee.

On October 16, Rep. Dave Camp (R-MI) and Rep. Benjamin Cardin (D-MD) introduced HR 5658, a bill to amend the Internal Revenue Code of 1986 to provide an alternative simplified credit for qualified research expenses. It was referred to the House Ways and Means Committee.

On October 16, Rep. Chris John (D-LA) introduced HR 5671, a bill to promote the secure sharing of information and communications within the Department of Homeland Security. It was referred to the House Government Reform Committee.

On October 16, Rep. James Sensenbrenner (R-WI) introduced HR 5685, a bill to prohibit the Federal Communications Commission (FCC) from requiring digital television tuners in television receivers. It was referred to the House Commerce Committee.

On October 16, Rep. Diane Watson (D-CA) introduced HR 5689, a bill to authorize the appropriation of $1 Million for a contribution to the World Intellectual Property Organization (WIPO) for projects intended to promote the integration of developing countries into the global intellectual property system. The bill was referred to the House International Relations Committee.

Supreme Court Tech News

10/22. The Supreme Court denied certiorari in two technology cases -- TechSearch v. Intel, patent infringement case involving microchip technology, and Hugh Symons Group v. Motorola, a state deceptive trade practices act case involving microprocessors. The Court also invited the Solicitor General to submit a brief in Micrel v. Linear Technology, a patent infringement case involving the on sale bar.

On October 21, the Supreme Court denied a petition for writ of certiorari in TechSearch v. Intel, No. 02-262, a patent infringement case arising in the U.S. District Court (NDCal) involving TechSearch's U.S. Patent No. 5,574,927, titled "RISC Architecture Computer Configured for Emulation of the Instruction Set of a Target Computer". On April 11, 2002, the U.S. Court of Appeals (FedCir) issued its opinion affirming the District Court's judgment of non-infringement. See, Supreme Court Order List [PDF], October 21, 2002, at page 12.

On October 15, the Supreme Court denied a petition for writ of certiorari in Hugh Symons Group v. Motorola, No. 02-313. See, Supreme Court Order List [PDF], October 15, 2002, at page 3.

Plaintiff filed a diversity complaint in U.S. District Court (WDTex) against Motorola alleging violation of Texas's Deceptive Trade Practices Act (DTPA) in connection with allegations that Motorola breached an oral contract, and acted fraudulently and with negligent misrepresentation regarding the quality, grade, and characteristics of its MPC 821 microprocessor. Plaintiff had considered using the MPC 821 in the production of a hand held computer.

The District Court granted summary judgment to Motorola on the grounds that plaintiff was not a consumer within the meaning of the DTPA because it had over $25 million in gross assets (see, § 17.44 of the DTPA), that plaintiff failed to satisfy the statute of frauds, and that the tort claims sounded in contract and failed because there was no breach of contract. On May 28, 2002 the U.S. Court of Appeals (5thCir) issued its opinion affirming the District Court.

On October 15, the Supreme Court invited the Office of the Solicitor General to submit a brief in Micrel v. Linear Technology, a patent infringement case involving the on sale bar. This is No. 02-39. See, Supreme Court Order List [PDF], October 15, 2002, at page 1.

Linear Technology filed a complaint in U.S. District Court (NDCal) against Micrel alleging infringement of U.S. Patent No. 4,755,741, which pertains to adaptive transistor drive circuitry used in telecommunications, cell phones and computers. The District Court held the patent invalid due to the on-sale bar. 35 U.S.C. § 102(b) provides that "A person shall be entitled to a patent unless ... (b) the invention was patented or described in a printed publication in this or a foreign country or in public use or on sale in this country, more than one year prior to the date of the application for patent in the United States". On December 28, 2001, the U.S. Court of Appeals (FedCir) issued its opinion reversing the District Court.

People and Appointments

10/22. The Consumer Electronics Association (CEA) elected Kathy Gornik, President of Thiel Audio Products, to be Chair of the CEA's Board of Directors and Executive Board, effective January 1, 2003. Loyd Ivey, Ch/CEO of Mitek Corporation, was elected Vice Chair. Jerry Kalov, of Kay Associates, was re-elected as Industry Executive Advisor. See, CEA release for other selections.

FCC Receives Comments Regarding CPNI

10/21. Monday, October 21 was the deadline to submit comments to the FCC regarding its request to refresh its record regarding customer proprietary network information (CPNI) implications when a carrier goes out of business, sells all or part of its customer base, or seeks bankruptcy protection. The FCC also sought comment on the Federal Bureau of Investigation's (FBI) request that the FCC regulate foreign storage of CPNI. Telecom companies submitted comments opposing new regulations.

In contrast, the Electronic Privacy Information Center (EPIC) submitted a comment [7 pages in PDF] urging new regulation. It stated that "Considering the current wave of bankruptcies within the telecommunications industry, EPIC urges the Commission to protect the privacy rights of American consumers by implementing an opt-in approach towards telecommunications carriers' use of CPNI, pursuant to section 222 of the Communications Act of 1996, when a carrier goes out of business, or seeks to sell CPNI as an asset."

The FCC has also received substantially identical letters from consumers stating, in part, that "I strongly urge you and the Commissioners to protect my privacy by requiring phone companies to obtain my approval before they sell my customer records."

The Cellular Telecommunications Industry Association (CTIA) submitted a comment [16 pages in PDF]. It opposed the FBI proposal. It wrote that "Section 222 does not require it and indeed permits transfer of CPNI, in the United States or otherwise, for purposes of providing telecommunications services. The FBI and other law enforcement agencies, contrary to their assertions, will not be hindered in gaining access to such CPNI under existing law."

The CTIA also wrote that it "opposes further CPNI rules and restrictions regarding transfer of CPNI as part of a business transaction such as a merger, sale, acquisition, or in bankruptcy. Such rules are unnecessary because CPNI does not lose its character upon such transfers and the Commission has adequate enforcement powers to protect against improvident disclosures."

Nextel submitted a comment [9 pages in PDF]. "First, regarding the FBI’s suggestion for additional Commission regulation of foreign storage of and access to CPNI, such regulation would not significantly improve law enforcement capabilities. Yet, it would prevent companies from pursuing the most cost effective business solutions to serving their customers. Geographic boundaries have little if any relevance in today’s Internet world. The proposed geographic limitations, while interfering with carriers’ efficient operation, would add little protection against entities in cyberspace seeking unauthorized database access."

Nextel also wrote that "with regard to the CPNI implications when a carrier goes out of business, customers’ privacy interests are fully protected by the existing CPNI rules, which would apply to any acquiring carrier to the same extent as to the exiting carrier. The adoption of additional CPNI rules would harm the public interest by imposing unnecessary regulatory costs on the telecommunications industry, particularly the wireless industry, while it is struggling for survival under precarious economic conditions."

Verizon likewise submitted a comment [7 pages in PDF] opposing both regulation regarding foreign storage and new regulations regarding carriers that are going out of business. It wrote that "It is not necessary for the Commission to adopt any new regulations" regarding CPNI or customer proprietary information.

Verizon also submitted a Petition for Reconsideration of the Third Report and Order [26 pages in PDF] in which it requested that the FCC "reconsider it order to make clear that all state regulations of customer proprietary network information (``CPNI´´) that are inconsistent with the federal CPNI rules, including any state rules that adopt an opt-in requirement, are preempted."

In contrast, the Florida Public Service Commission submitted a comment [5 pages in PDF] in which it argued that the states have a separate authority to regulate CPNI, and that the FCC should not preempt this authority.

See also, USTA comment  [6 pages in PDF] and Qwest comment [40 pages in PDF];

This is the FCC's Third Further Notice of Proposed Rulemaking in CC Docket Nos. 96-115, 96-149 and 00-257. See, notice in the Federal Register, September 20, 2002, Vol. 67, No. 183, at Pages 59236 - 59239.

People and Appointments

10/21. Greg Jenner was named Deputy Assistant Secretary for Tax Policy. He has been acting Deputy Assistant Secretary since July 8, 2002. Pam Olson remains the Assistant Secretary for Tax Policy. Jenner previously was a partner in the Tax and Legislative Groups at Venable Baetjer Howard & Civiletti. Before that he worked for Price Waterhouse Coopers. During the first Bush administration he worked for the Assistant Secretary for Tax Policy. Before that, he worked for the Senate Finance Committee. See, Treasury release.

More News

10/21. Ericsson Wireless Communications, Lucent Technologies, Motorola, and Nortel Networks each signed contracts with China United Telecommunications Corporation (aka China Unicom) to supply code division multiple access (CDMA) 2000 1x equipment. Commerce Secretary Don Evans stated in a release that "These signings are a tangible example of the vital trade relationship between the United States and China ... We believe that these projects in petrochemicals, telecommunications, energy, and other sectors will help enhance U.S. China trade relations and the well-being of people in both countries." See also, Ericsson release, Lucent release, Motorola release, and Nortel release.

10/21. The Department of Justice's Antitrust Division published a notice in the Federal Register regarding the Proposed Final Judgment and Competitive Impact Statement in U.S. v. Mathworks and Wind River Systems. See, Federal Register, October 21, 2002, Vol. 67, No. 203, at Pages 64657 - 64666.

Go to News from October 16-20, 2002.