News from October 26-31, 2002

Judge Kotelly to Release Rulings in Microsoft Cases on Friday at 4:30

10/31. The U.S. District Court (DC) published a notice [PDF] stating that "At approximately 4:30 p.m. on Friday, November 1, 2002, United States District Court Judge Colleen Kollar- Kotelly will issue Opinions in the Microsoft cases."

The notice adds that "At that time, copies of the Opinions can be downloaded in PDF format from the U.S. District Court's homepage,"

The Department of Justice, nine state plaintiffs, and Microsoft reached a settlement last November of the governments' antitrust case against Microsoft. They submitted a revised settlement agreement in February of this year. Judge Kotelly can either approve or reject this settlement. See, Second Revised Proposed Final Judgment, filed on February 27, 2002. In addition, Judge Kotelly will likely rule on remedies requested by the non-settling state plaintiffs.

FCC Announces Agenda for November 7 Meeting

10/31. The Federal Communications Commission (FCC) announced the agenda for its open meeting on Thursday, November 7. The FCC's Spectrum Policy Task Force (SPTF) will report on its findings and recommendations at this meeting, and the FCC will take up other spectrum related items.

In addition to the SPTF report, four other spectrum related items are on the agenda. The FCC's International Bureau will report on the outcome of the International Telecommunication Union Plenipotentiary Conference. The FCC will consider a Second Report and Order that would allocate spectrum in the 1.7 and 2.1 GHz bands that can be used to provide advanced wireless services (AWS), such as 3G or IMT-2000. The FCC will consider a Notice of Proposed Rulemaking (NPRM) concerning service rules for (AWS) in the 1.7 GHz and 2.1 GHz bands. The FCC will consider a NPRM and Order concerning allocation and service rules for the Dedicated Short Range Communication Services in the 5.850-5.925 GHz band.

The FCC will also consider a Second Report and Order concerning new broadcast and MVPD equal employment opportunity rules and policies.

The meeting will be at 9:30 AM in Room TW-C305 (Commission Meeting Room), 445 12th Street, SW.

DOJ and States Sue to Block Echostar Directv Merger

10/31. The U.S. Department of Justice (DOJ) and numerous states filed a complaint in U.S. District Court (DC) against Echostar Communications, Hughes Electronics, and others, seeking to block the proposed acquisition of Directv by Echostar, pursuant to Section 7 of the Clayton Act, 15 U.S.C. § 18. EchoStar and Hughes both provide direct broadcast satellite (DBS) service via their Dish Network and DirecTV.

Charles James, the Assistant Attorney General in charge of the DOJ's Antitrust Division, stated in a release that “This merger would give Echostar control of the skies for the provision of video programming by satellite, leaving customers to suffer from the resulting reduction in competition ... This merger would create a monopoly in those areas where cable television is not available, thereby eliminating the only competitive choice for millions of households. It would leave tens of millions of households -- for whom DirecTV, DISH Network, and cable now compete to provide multichannel video programming distribution service -- with a reduction from three to two competitive choices".

Charles Ergen, EchoStar Ch/CEO, stated in a release that "I would like to personally thank all those, including our customers, consumers, legislators, employees and numerous others, who during the past year have supported this historic merger proposal. We also thank the regulatory officials at the Department of Justice, FCC and the states who worked diligently to analyze this complex merger and gave us the opportunity to express our views. We continue to believe passionately that the merger of EchoStar and Hughes is the best chance to stop rising cable prices and to bring enhanced services to all Americans, especially those consumers living in rural America. We are obviously disappointed that at this time we have not been able to convince regulatory officials to share our vision. EchoStar will continue to explore all possible means to be allowed to compete against the cable giants and for more choice for all consumers."

The DOJ release also stated that the DOJ "gave serious consideration to the efficiencies and new services that the merging parties claimed would result from the transaction. While recognizing that certain efficiencies could result, the Department concluded the parties could not demonstrate any efficiencies likely to result from the merger were sufficient to outweigh the substantial adverse impact of the transaction on competition and consumers."

The DOJ also stated that it "considered a very recent proposal by the merging parties to restructure the transaction in an attempt to remedy the anticompetitive problems inherent in the merger. The Department concluded that even if the proposed concept could be realized, it was unlikely to become a sufficient replacement for the vigorous competition that now exists between Hughes and Echostar within a reasonable period of time."

The complaint alleges that "The proposed acquisition of Hughes by Echostar would cause significant harm to competition in numerous local markets for MVPD services throughout the country. For millions of households this merger would create a monopoly. For tens of millions of households in the United States, this merger would create a duopoly. The combination of the nation's only two DBS firms would substantially lessen competition in violation of Section 7 of the Clayton Act, 15 U.S.C. § 18. For the roughly 95% of U.S. television households that currently have three or fewer options for MVPD service, this merger would lead to higher prices and lower service quality than would be the case absent its consummation. The United States and the Plaintiff States therefore seek an order permanently enjoining the merger."

The complaint was filed by the DOJ, the states of Missouri, Arkansas, California, Connecticut, Hawaii, Idaho, Illinois, Iowa, Kentucky, Maine, Massachusetts, Mississippi, Montana, Nevada, New York, North Carolina, North Dakota, Oregon, Pennsylvania, Texas, Vermont, Washington, and Wisconsin, and Puerto Rico. The defendants are Hughes Electronics, Echostar Communications, General Motors and Directv Enterprises.

The DOJ request that "the proposed acquisition be adjudged to violate Section 7 of the Clayton Act, 15 U.S.C. §18" and that "the Defendants be permanently enjoined and restrained from carrying out the Agreement and Plan of Merger dated October 28, 2001, or from entering into or carrying out any agreement, understanding, or plan by which Echostar would merge with or acquire Hughes, its capital stock or any of its assets".

This is case number 1:02CV02138. The case has been assigned to Judge Ellen Huvelle.

On October 10, the Federal Communications Commission (FCC), which has authority over license transfers, announced that it has "declined to approve the transfer of licenses from EchoStar Communications Corporation and Hughes Electronics Corporation, a subsidiary of General Motors Corporation, to a new entity". The FCC has assigned the matter for hearing before an administrative law judge. See, TLJ story titled "FCC Declines to Approve EchoStar DirectTV Merger", October 10, 2002.

District Court Enjoins Aimster

10/31. The U.S. District Court (NDIll) issued its Preliminary Injunction Order [4 pages in PDF] in the multidistrict litigation titled "In Re: Aimster Copyright Litigation".

Cary Sherman, President of the Recording Industry Association of America (RIAA), stated in a release that "As Judge Aspen highlighted in his order, the technology to filter copyrighted works exists and should be used. Other unauthorized peer to peer networks should take note of this decision.  Those other companies involved in illegal trafficking of copyrighted works should also take advantage of these technologies and prevent illegal trading of copyrighted works on their systems."

The Order provides that "Aimster is preliminarily enjoined from directly, indirectly, contributorily, or vicariously infringing in any manner any and all sound recordings and musical compositions (or portions thereof) protected by federal or state law, whether now in existence or later created, in which Plaintiffs (and any parents, subsidiaries, or affiliates or Plaintiffs) own or control and exclusive right to reproduce, distribute, or transmit ("Plaintiffs' Copyrighted Works").

The Order continues that "Aimster shall immediately disable and prevent any and all access by any person or entity ("User") to any of Plaintiffs' Copyrighted Works available on, over, through, or via any website, server, hardware, software, or any other system or service owned or controlled by Aimster  (the "Aimster System and Service"), including, if necessary, preventing any and all access to the Aimster System and Service in its entirety, until such time that Aimster implements measures that prevent any and all copying, downloading, distributing, uploading, linking to, or transmitting of Plaintiff's Copyrighted Works on, over, through, or via the Aimster System and Service."

The Order further requires that "Upon implementing measures to ensure that the Aimster System and Service prevents any and all copying, downloading, distributing, uploading, linking to, or transmitting of Plaintiffs' Copyrighted Works, Aimster may provide public access to the Aimster System and Service except that Aimster shall be enjoined from the following: (a) copying, downloading, distributing, uploading, linking to, or transmitting Plaintiffs' Copyrighted Works; (b) enabling, facilitating, permitting, assisting, soliciting, or encouraging any User to make Plaintiffs' Copyrighted Works available for copying, downloading, distributing, uploading, linking to, or transmitting; (c) enabling, facilitating, permitting, assisting, soliciting, or encouraging any User to copy, download, distribute, upload, link to, or transmit, Plaintiffs' Copyrighted Works."

Finally, the Order mandates that "Aimster shall affirmatively monitor and patrol for, and preclude access to, Plaintiffs' Copyrighted Words (sic) on, over, through, or via the Aimster System and Service, including, without limitations, by employing such technological tools and measures that are reasonably available to carry out such obligations."

Aimster is now also known as Madster.

GAO Reports on Competition Between Cable and DBS

10/31. The General Accounting Office (GAO) issued a report [57 pages in PDF] titled "Telecommunications: Issues in Providing Cable and Satellite Television Services".

The GAO did not address the merits of the proposed merger of Echostar and Directv. Rather, the GAO examined three issues: "(1) whether the availability of cable modem Internet access service appears to be affecting the competitiveness of DBS companies in the provision of video services, (2) whether cable prices and DBS penetration rates appear to be affected in areas where the DBS companies offer local broadcast channels, and (3) whether the two individual DBS companies are technologically capable of expanding local broadcast channel services into all 210 television markets in the United States."

The GAO conducted a telephone survey of consumers. On the first issue, the GAO found that "the availability of Internet access services is important for some consumers -- although not the majority of consumers -- when they are considering various video service providers. In particular, just over half of the respondents to our survey said that when thinking about purchasing television programming service, the availability of cable modem Internet service would not make them more likely to consider cable video service over DBS video service. However, almost one-third of respondents said that when thinking about purchasing television programming service, the availability of cable modem Internet service would make them "moderately more likely" or "much more likely" to consider cable over DBS, and these respondents were more likely to have a higher household income and to be younger than respondents not influenced by the availability of cable modem service. Most respondents (88 percent) said they had never considered satellite Internet service."

The report was prepared for Sen. Herb Kohl (D-WI) and Sen. Mike DeWine (R-OH), the Chairman and ranking Republican on the Senate Judiciary Committee's Subcommittee on Antitrust, Competition, and Business and Consumer Rights.

People and Appointments

10/31. Robert Lamm was named Corporate Secretary and Director of Corporate Governance of Computer Associates International. See, CAI release.

10/31. Jack Krumholtz was named co-chair of CapNet, a Washington DC based group that represents technology companies. He is also Microsoft's Director of Federal Government Affairs and Associate General Counsel. He replaces former Rep. Vic Fazio. Lisa Nelson of AOL Time Warner remains a co-chair.

10/31. Martin Noonen and Michael Vella and were elected partners in the law firm of Morrison & Foerster. Noonen is a patent litigator in the Los Angeles office. Vella is a patent litigator in the San Diego office. See, MoFo release.

More News

10/31. The U.S. Court of Appeals (6thCir) issued its opinion in Telxon v. Federal Insurance, a diversity case involving the obligation of an insurance company to reimburse its insured, a telecom company, for costs of defending of class action securities case. The Court of Appeals affirmed the District Court's summary judgment for the insurance company

10/31. The Federal Communications Commission's (FCC) Wireline Competition Bureau (WCB) issued a Public Notice [PDF] in which it requests comments on AT&T's October 15 Petition for Rulemaking to Reform Regulation of Incumbent Local Exchange Carrier Rates for Interstate Special Access Services [118 pages in PDF]. 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." The ILECs oppose the proposal. Comments are due by December 2, 2002. Reply comments are due by December 23, 2002. This is RM No. 10593.

10/31. The U.S. Court of Appeals (6thCir) issued it opinion in USA v. Tommy Newell, affirming the District Court's imposition of a 27 month sentence for making threatening statements in numerous e-mails, and by telephone, in violation of 18 U.S.C. § 875(c). This is an Internet love gone wrong case. Newall met a woman over the Internet. They subsequently met in person. When her husband was released from prison, she dropped Newell. Upset, he sent her lots of ugly threats by e-mail, but did not harm her. Now, Newell goes to prison.

Powell Addresses Spectrum Policy

10/30. Federal Communications Commission (FCC) Chairman Michael Powell gave a speech titled "Broadband Migration III: New Directions in Wireless Policy". He spoke to the Silicon Flatirons Telecommunications Program at the University of Colorado at Boulder. Powell described the speech as "my thoughts about the next generation of spectrum policy". He stated that consumers "deserve a new spectrum policy paradigm that is rooted in modern day technologies and markets. We are living in a world where demand for spectrum is driven by an explosion of wireless technology and the ever increasing popularity of wireless services." See, full story.

FCC Approves Verizon's Virginia Long Distance Application

10/30. The Federal Communications Commission (FCC) adopted a Memorandum Opinion and Order [192 pages in PDF] granting Verizon's Section 271 application to provide in region interLATA service in the state of Virginia. The FCC found that "Verizon has taken the statutorily required steps to open its local exchange markets in Virginia to competition."

FCC Commissioner Kevin Martin wrote in a concurring statement that "the statute does not require it to evaluate individually the checklist compliance of UNE TELRIC rates on an element by element basis. The Commission concludes that because the statute uses the plural term ``elements,´´ it has the discretion to ignore subsequent reference to prices for a particular ``element´´ in the singular. As I have stated in the past, I disagree."

FCC Commissioner Michael Copps wrote in a concurring statement that "the majority concludes that the statute permits Bell companies in all instances to demonstrate compliance with the checklist by aggregating the rates for non-loop elements. I disagree with the majority’s analysis. I believe the better reading of the statute is that the rate for each network element must comport with Congress' pricing directive."

Copps also wrote that the FCC needs "to institute better follow-up on what happens in a state following a successful application." He continued that "our data on whether competition is taking hold is sketchy and non-integrated. In the next few months, we will be evaluating a number of applications and completing decisions on network elements and on whether to allow the sunset of the separate affiliate requirements for Verizon. These data are important for judging the 271 process and evaluating the options in these other proceedings."

See, FCC release and Verizon release. This is WC Docket No. 02-214.

IIPA Submits Special 301 Out of Cycle Recommendations to USTR

10/30. The International Intellectual Property Association (IIPA) filed its recommendations [in PDF] with the Office of the U.S. Trade Representative (USTR) regarding its Special 301 out of cycle reviews for Indonesia, Israel, Mexico, Philippines Poland, and Thailand and on the U.S.'s  Memorandum of Understanding on IPR matters with Paraguay (MOU).

Section 301 is the statutory means by which the United States asserts its international trade rights, including its rights under WTO Agreements. In particular, under the "Special 301" provisions of the Trade Act of 1974, the U.S. Trade Representative identifies trading partners that deny adequate and effective protection of intellectual property or deny fair and equitable market access to U.S. artists and industries that rely upon intellectual property protection.

IIPA recommended that Israel, Indonesia and the Philippines be kept on the Priority Watch List at this time.

It recommended that Mexico be placed on the Special 301 Watch List. The IIPA wrote that "the piracy situation in Mexico has not improved and the government clearly needs to improve its performance in order to provide the kind of effective enforcement required under its international obligations."

The IIPA also recommended that Poland and Thailand be elevated to the Special 301 Priority Watch List.

Finally, the IIPA stated that the MOU with Paraguay should "remain in effect", but that, "Unfortunately, key elements of the 1998 MOU have not yet been effectively implemented. As a result, piracy levels in Paraguay remain high, and estimated losses due to copyright piracy rose to $262 million in 2001."

GAO Reports on Government Use of Personal Information

10/30. The General Accounting Office (GAO) released a report [72 pages in PDF] titled "Information Management: Selected Agencies’ Handling of Personal Information". The GAO examined the collection of personally identifiable information at four federal agencies: the Departments of Agriculture, Education, Labor and State.

It found that "Agencies collected a substantial amount of personal information of a wide variety of types, including personal identifying information (names and Social Security numbers) and demographic, financial, and legal data" and that "The personal information collected was shared extensively with other federal agencies, other government entities (state, local, tribal, and foreign), and private individuals and organizations." (Parentheses in original.)

The report also "identified isolated instances of forms that were not accurate or current, and other forms that did not contain the proper privacy notices." The report addresses in detail information that is collected and how it is shared among agencies.

The report was prepared at the request of Sen. Joe Lieberman (D-CT), Chairman of the Senate Committee on Governmental Affairs.

CDT Releases Paper on ICANN Reform

10/30. The Center for Democracy and Technology (CDT) released a paper titled "Clarifying the Mission and Powers of ICANN: Analysis and Proposed Solutions".

The paper states that "While the current reform documents make significant progress towards establishing a definition of ICANN's powers, they do not yet provide adequate security against the possibility that a future Board, if pressured to do so, could leverage ICANN's authority into new areas of activity for which it was not intended ..."

The CDT argues that "Improving ICANN's mission statement requires attention at two complementary levels. First, effective substantive limits on ICANN's activities are necessary. Second, procedural safeguards for the promotion and enforcement of those limits should be established."

The CDT proposes three types of substantive limits. First, "As security against ICANN engaging ... in some premature or privately motivated policy making, the Board should strengthen its commitment to acting only when necessary."

Second, there "must be a concise definition of what activities ICANN should engage in." The CDT elaborates that "its mission statement should enumerate specific technical goals such as: Stable interoperability of the domain name system; Safety and integrity of registration data; Availability of accurate Whois data; and Resolution of disputes regarding the registration (as opposed to use) of domain names by particular parties." (Parentheses in original.)

Third, the CDT argues for "Explicit prohibition of certain activities." It suggests prohibiting the following: "Activities that impose content regulations on Internet activity; Activities that deprive registrants, operators, or Internet users of their property without adequate due process; Activities that establish new monitoring or surveillance of Internet users; [and] Activities that unreasonably privilege certain Internet users over others on the basis of race, religion, or nationality." (Brackets added.)

The CDT argues that the procedural safeguards should include "Limits on amendment power" and "Enforcement of limitations and rights". The later means that "The decisions of ICANN's Independent Review Panel must be binding on ICANN; The Reconsideration Committee should not be composed only of sitting ICANN Board members; [and] Controls need to be established on the Reconsideration Committee's authority to determine the standing of parties requesting consideration, or to recover costs from requesting parties." (Brackets added.)

IRS Enters Into Agreement with Electronic Tax Preparation Consortium

10/30. The Internal Revenue Service (IRS) and Free File Alliance (FFA) signed a document [7 pages in PDF] titled "Free On-Line Electronic Tax Filing Agreement". The FFA is a consortium of companies in the electronic tax preparation and filing industry, organized as a non-profit corporation to facilitate participation in this agreement.

"We are one step closer to allowing millions of taxpayers free electronic filing of their tax returns," said Treasury Secretary Paul O'Neill in a release. "I look forward to the public launch of the website in January."

The agreement states that "the IRS and the Consortium ... will work together to offer free, on-line tax return preparation and filing services to taxpayers ... . The Consortium will offer Free Services to taxpayers. The IRS will provide taxpayers with links to the Free Services offered by the Consortium. ... During the term of this Agreement, the IRS will not compete with the Consortium in providing free, online tax return preparation and filing services to taxpayers."

However, the agreement also states that "Should the IRS decide to offer Free Services to taxpayers the IRS shall notify the Consortium immediately."

Last April, the Progress and Freedom Foundation (PFF) released a report [13 pages in PDF] titled "Online Tax Preparation: Beyond the Bounds of E-Government". It stated that "While the application of new technologies to the provision of government services is clearly a good thing, it should not be a mechanism for expanding the role of government into new areas better left to the private sector. One area where governments may well be moving beyond their proper role is the provision of online tax preparation services for their residents." The report was written by Thomas Lenard and James Harper.

US and EU Release Best Practices for Merger Reviews

10/30. Two U.S. antitrust regulatory agencies, the Department of Justice's Antitrust Division and the Federal Trade Commission (FTC), and the Commission of the European Union, released a document titled "US-EU Merger Working Group: Best Practices on Cooperation in Merger Investigations".

Charles James, Assistant Attorney General in charge of the Antitrust Division, stated in a release that "The 'best practices' we released today institutionalize important forms of cooperation between the U.S. and EU antitrust authorities on merger reviews and publicly confirm our commitment to cooperate closely with our friends across the Atlantic ... They complement the reforms we made to our own merger processes last fall and are in the interests of both consumers and the business community."

Timothy Muris, Chairman of the FTC, stated in a release that "These best practices demonstrate the commitment of the Federal Trade Commission, the Department of Justice, and the European Commission to make the cross border merger review process work as efficiently and effectively as possible, fostering deeper cooperation and convergence ... Today's action complements bilateral and multilateral measures we have been pursuing in other fora, as well as the workshops the FTC has held to improve our own merger review procedures."

This document addresses procedural matters, but not substantive competition law. It addresses collection and evaluation of evidence, sharing of information, waivers of confidentiality, communication between the reviewing agencies, and remedies and settlements.

This document is not an agreement between the U.S. and the EU. It is merely a statement of "best practices" that may be followed "to the extent consistent with their respective laws and enforcement responsibilities". Furthermore, it states that "nothing in this document is intended to create any enforceable rights". See also, EU release.

More News

10/30. The National Telecommunications and Information Administration (NTIA) announced that it extended "the term of the contract with ICANN for IANA functions for Option Period Two (Item No. 0003) for the six-month period of 10/01/2002 through 03/31/2002". See, document titled "Amendment of Solicitation / Modification of Contract".

10/30. President Bush signed HR 5647, a bill to authorize the duration of the base contract of the Navy Marine Corps Intranet contract to be more than five years but not more than seven years. See, White House release.

10/30. The Securities and Exchange Commission (SEC) voted to propose rules and amendments to implement the Sarbanes Oxley Act and to amend definitions of the term "dealer" in the Securities Exchange Act of 1934. See, SEC release.

10/30. The Copyright Office (CO) published a notice in the Federal Register regarding its proposed rate adjustments, pursuant to 17 U.S.C. § 118, for the noncommercial educational broadcasting compulsory license for the period 2003 - 2007. The CO notice states that the "proposed rate adjustments shall become final unless one or more parties with a significant interest in the rates notifies the Office that it will litigate the rate adjustment before a Copyright Arbitration Royalty Panel (``CARP´´)." Also, it states that Notices of Intent to Participate in a CARP proceeding are due by December 2, 2002. See, Federal Register, October 30, 2002, Vol. 67, No. 210, at Pages 66090 - 66094.

10/30. The NIST announced on October 30 the postponement of the October 29 meeting of the NIST Advanced Technology Program (ATP) Advisory Committee. See, notice in the Federal Register, October 30, 2002, Vol. 67, No. 210, at Page 66125. The NIST further announced that the meeting "will be rescheduled at a later date". The NIST did not state whether this notice will precede the event.

10/30. The U.S. District Court (NDTex) sentenced Henry Wang to six months confinement, and ordered him to pay $41,042 in restitution, following his plea of guilty to one count of computer fraud in violation of 18 U.S.C. § 1030(a)(4). Wang worked as a software developer for J.C. Penney, where he accessed and copied, without authority, proprietary information, including computer files that comprised the source code for the J.C. Penney electronic commerce store. See, USAO release.

DOJ Recommends Approval of SBC Long Distance Application for California

10/29. The Department of Justice's (DOJ) Antitrust Division release its evaluation [19 pages in PDF] of SBC's Section 271 application to the Federal Communications Commission (FCC) to provide in region interLATA service in the state of California. It recommended approval. This is WC Docket No. 02-306.

Charles James, Assistant Attorney General in charge of the Antitrust Division stated in a release that "The available evidence suggests that generally, SBC has succeeded in opening its local telecommunications markets in California ... Competitors have made progress in penetrating the business markets, and the Department believes there are no longer any material non-price obstacles to residential competition."

The DOJ wrote in its evaluation that "SBC’s application demonstrates that it has succeeded in opening its local markets in California to competition in many respects." However, it added that the DOJ "defers to the Commission's ultimate determination of whether the prices supporting this application are appropriately cost-based."

The DOJ also wrote that "According to SBC’s data, SBC and CLECs serve a total of approximately 20,112,000 lines in SBC's California service area as of July 2002. Of the total lines in SBC’s service area in California, 43.5 percent, or approximately 8,745,000, serve businesses, and 56.5 percent, or approximately 11,367,000, serve residential customers. For business and residential customers combined, SBC estimates that CLECs using all modes of entry serve approximately 2,602,000 lines, or approximately 12.9 percent of all lines in SBC’s service area in the state." (Footnotes omitted.)

The DOJ further noted that CLECs serve about 20.8% of business lines, mostly with their own networks, and about 6.9% of residential lines, again, mostly with their own networks. The DOJ wrote that "most CLEC service to residential customers in California is facilities based, provided primarily over the cable television facilities of AT&T Broadband and Cox Communications."

Greenspan Addresses Education, Knowledge, Innovation and Technology

10/29. Federal Reserve Board Chairman Alan Greenspan gave a speech titled "Education" to the Institute of International Education, in New York City. It was a wide ranging and philosophical speech about the nature of knowledge, additions to knowledge, innovation, education and economic success. And, like many of Greenspan's recent speeches, it focused on the causes and consequences of advances in computer and communications technologies.

It was an unusual speech for a federal government official. He praised the U.S. educational system, which is not unusual. But, he said that its excellence is not the result of government funding or guidance. Rather, "it has been influenced importantly by the values of a strong market economy -- competition, risk taking, and innovation."

It is common for elected representative and government officials to advocate the role of government in improving the educational system. Greenspan omitted the role of government from his speech. Instead, he argued, the educational system is good because it imitates, interacts with, and responds to the private sector. Moreover, it works so well because of some of its own institutions, such as its emphasis on research, its peer reviewed journals, and its continuing commitment to the liberal arts and interdisciplinary activities.

According to Greenspan, a nation's economic success is dependant in part on its education system. One of the reasons that the U.S. is prosperous, and the U.S. economy over the years has grown so fast, is the educational system.

It is also common for elected representatives and government officials to address innovation in terms of increasing government spending at agencies or universities that conduct research. It is also common for representatives and officials to advocate changes to the legal framework for protecting innovation -- the intellectual property laws. Although, most of the debate in recent years has focused solely on laws affecting the music and movie industries, which rarely contribute anything to knowledge.

Greenspan made no mention of either R&D spending or IP laws. Instead, he identified various institutions of the U.S. educational system that contribute to technological creation and innovation.

To Greenspan, knowledge is "a deeper understanding of how the world works". Its proper use is "to alter our physical and social environment for the better". He stated, "Especially notable has been our application of both scientific advances and organizational paradigms to raise living standards across most of the population, and, as a consequence, engender marked increases in average longevity and quality of life."

Greenspan then turned to how the U.S. economy has become increasingly knowledge based, and how knowledge is becoming increasingly specialized. He stated that "The share of the nation's output that is conceptual appears to have accelerated after World War II with the insights that led to the development of the transistor and microprocessor. They have spawned remarkable alterations in how we, and many other societies, live."

He continued that "Computers, telecommunications, and satellite technologies have enabled data and ideas -- the ever more important elements of valued output -- to be expeditiously transferred geographically to where they can be put to best use. Thus, these advanced means of communication have added much the same type of value that the railroads added in transporting the more physical goods of an earlier century."

"Here in the United States, we have developed an exceptionally sophisticated stock of capital assets -- fostered by the most conceptual and intangible of all new products -- software. Breakthroughs in all areas of technology -- despite the recent slowdown -- have been continually adding to the growing list of almost wholly conceptual elements in our economic output. These developments are affecting how we produce output and are demanding greater specialized knowledge," said Greenspan.

Greenspan next listed the major determinants of a nation's economic success. Among these is its educational system. He said that the "key determinants of how successful any country will be in transforming its physical and human assets into economic growth" are "openness to trade, a strong institutional infrastructure, disciplined macroeconomic policies, and an effective system of education -- formal or otherwise".

He added that success lies in the interaction of these determinants. For example, "An educated workforce, then, is a necessary ingredient for economic advance, but it is apparently much more powerful when combined with a strong, competitive economic system, where rights of persons and property are protected."

He then turned to the economic advantages held by the U.S. as a result of its educational system.

First, he said, is that "the marketplace work[s] efficiently to guide our educational system, defined in its widest sense, toward the broader needs of our economy." He elaborated that "technological advance has brought with it not only improvements in the capital inputs used in production but also new demands on workers who must interact with that increasingly more complex stock of capital" and "Our educational system responded".

He also said that the U.S. system of higher educational is effective because of competition, both between institutions, and between categories of institutions (such as research universities, liberal arts colleges, and community colleges).

He also addressed the sources of the creativity and innovation at U.S. institutions of higher education. One source is the "promotion of peer reviewed scholarship and the value they place on creativity and risk taking". Another is the "patience and the flexibility to accept that uncertainty, confident that the rigorous effort to explore ideas would eventually lead to discovery."

He also tackled the roots of creative and innovative thinking. He suggested that the liberal arts education and interdisciplinary activity remain essential. "Critical awareness and the abilities to hypothesize, to interpret, and to communicate are essential elements of successful innovation in a conceptual based economy," said Greenspan. Moreover, "the ability to think conceptually is fostered through exposure to philosophy, literature, music, art, and languages. So called liberal education is presumed to spawn a greater understanding of all aspects of living -- an essential ingredient to broaden one's world view. As the President of the University of Pennsylvania, Judith Rodin, put it, such an understanding comes by ``vaulting over disciplinary walls´´ and exploring other fields of study. Most great conceptual advances are interdisciplinary and involve synergies of different specialities."

Or, in Greenspan speak, the liberal arts education is "a means of increasing technical intellectual efficiency".

He then offered the observation that the payoffs have been impressive. "With the emergence of significant centers of commercial innovation and entrepreneurship -- Silicon Valley, the Research Triangle, and the clustering of biotech enterprises in the Northeast corridor -- creative ideas flow freely between local academic scholars and those in industry. Those ventures that succeeded have materially added to our base of knowledge. But even those that failed, as many did, left residual insights that may spark future research."

Greenspan made no pleas for government spending on education or research and development. He made no recommendations for government regulation of education. He commented on no pending legislation.

He offered only one recommendation. He said that "We must ensure that teaching and research continue to supply the creative intellectual energy that drives our system forward. As the conceptual inputs to the value added in our economic processes continue to grow, the ability to think abstractly will be increasingly important across a broad range of professions. Critical awareness and the abilities to hypothesize, to interpret, and to communicate are essential elements of successful innovation in a conceptual based economy." Although, he offered no guidance on how one ensures this, or if the government even plays any role in ensuring this.

He offered only one criticism of the U.S. educational system. He said that "tests of student achievement in mathematics and science suggest that our high schoolers have been falling short of their peers in other countries." However, he added, "I trust that this degradation will prove to be transitory."

US Ambassador Addresses IT in India

10/29. U.S. Ambassador to India Robert Blackwill gave a speech to the Federation of Indian Chambers of Commerce and Industry in New Delhi. He stated that "India's large and talented labor pool makes it possible for it to become yet another ``Asian miracle.´´ Indeed, it already has shown its mettle through the information technology and software accomplishments."

"Virtually every major American IT firm has a presence in southern India", said Blackwill. But, they tend not to sell in the domestic market. Also, there could be much more foreign investment. However, "Americans hesitate to invest in India because of the uncertainty over India's economic reforms." He cited several problems, including that "taxes and tariffs here are still too high, and there remains too much government interference over business decisions". He also stated that "within the US business community there is an erosion of confidence about whether the sanctity of contracts will be honored in India".

"The economic strides India has made in the last decade are notably impressive, and, in the IT industry, India is in the front rank of global competition. But the problem with this argument is that it is entirely retrospective. Alas, foreign investors are not economic historians. They do not care a whit about how far a country's economic policy has come. Instead, they make their investment decisions on the prospects of the present and likely future policy environment in a given country. For India, that present calculus on the part of international investors is obviously not heartening," said Blackwill.

9th Circuit Rules on SLUSA Pre-emption of State Fraud Claims

10/29. The U.S. Court of Appeals (9thCir) issued its opinion [PDF] in Falkowski v. Imation, a class action case involving federal pre-emption under the SLUSA of state law fraud claims regarding employee stock options.

Background. Mark Falkowski, and other plaintiffs, are former employees and contractors of Imation who held stock options. Imation Corporation is a publicly traded company that makes magnetic and optical data storage products. Imation acquired Cemax, a medical information management business, along with its employees, who make up the plaintiffs in this case. A year later Imation sold Cemax to Kodak, and transferred Cemax employees to Kodak.

Plaintiffs had held Cemax stock options. When Imation acquired Cemax the options were amended. When Cemax was sold to Kodak the employees were given 30 days to exercise their options granted under the Cemax plans that had vested; any unvested Cemax options and any new Imation options were deemed forfeited.

Plaintiffs allege that Imation knew at the time of the Imation Cemax merger that there would be a large earnings write off, but concealed it from employees to induce them to stay. The subsequent write off then made the options worth far less at the time of the Imation Kodak deal.

District Court. Plaintiffs filed a complaint in Superior Court in California against Imation and certain executives alleging breach of contract, fraud (fraudulent inducement and negligent misrepresentation), and violation of the California Labor Code. Imation removed to the U.S. District Court (NDCal). The District Court held that the fraud claims were completely preempted by the federal Securities Litigation Uniform Standards Act (SLUSA), and thus that removal was proper. The District Court dismissed the remaining claims without leave to amend because the contracts on their face foreclosed the breach of contract claims and the stock options were not wages under the California Labor Code. The employees then filed an amended complaint with five federal securities fraud claims, which the District Court dismissed as time barred.

Appeals Court. The Appeals Court affirmed in part and reversed in part. It held that state law fraud claims relating to employee stock options are preempted because the alleged fraud took place "in connection with the purchase or sale of a covered security" under the SLUSA.

The Appeals Court also affirmed the dismissal of the state labor law claim. It also affirmed the dismissal of the federal claims, but on different grounds -- that they were not detailed with sufficient particularity. However, the Appeals Court reversed the District Court's dismissal of the state contract claims.

7th Circuit Reverses Judgment Against Cable Pirates

10/29. The U.S. Court of Appeals (7thCir) issued its opinion [15 pages in PDF] in CSC Holdings v. Redisi, reversing and remanding the District Court's judgment against a cable pirate for selling illegal cable television decoders.

Background. CSC is a cable provider that does business in Chicago as Cablevision. Defendents, Redisi, father and son, make and sale of cable television decoders that enable purchasers to view all of CSC's premium or pay per view programming without paying for it.

District Court. CSC filed a complaint in U.S. District Court (NDIll) against the Redisis, alleging violation of the Cable Communications Policy Act of 1984, 47 U.S.C. § 553. The District Court granted CSC a judgment that included a restraining order, asset freeze, and an award of over $29 Million in damages. The Redisis appealed.

Appeals Court. The Appeals Court reversed and remanded, on the issues of statute of limitations, calculation of damages, and discovery. For example, the Redisis, notorious cable pirates, asked for CSC's customer lists in pre-trial discovery. The District Court ruled that CSC need not produce them. The Appeals Court reversed. Diane Wood wrote the opinion.

People and Appointments

10/29. Samuel Palmisano was elected Chairman of the Board of Directors of IBM, effective January 1, 2003. He will succeed Louis Gerstner. See, IBM release.

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10/29. Jonathan Beck plead guilty in U.S. District Court (NDCal) to insider trading in the stock of Critical Path in violation of 15 U.S.C. § 78j(b), 15 U.S.C. § 78 ff(a), and 17 C.F.R.§ 240.10b-5. Beck is a former VP of Critical Path, a San Francisco based technology company. See, USAO release.

NIST Releases Guidelines for Federal Cyber Security

10/28. The National Institute of Standards and Technology (NIST) released a draft publication [78 pages in PDF] titled "Guidelines for the Security Certification and Accreditation of Federal Information Technology Systems".

Phillip Bond, the Department of Commerce's Under Secretary for Technology, stated in a release that "Once final, these guidelines will serve as a critical computer security tool and will further the President's commitment to a safe and secure cyberspace ... This is a very significant step toward making the federal government's computer systems more secure. It gives agencies a comprehensive, yet flexible way to ensure that their computers are as safe as they should be".

The publication states that "This special publication establishes a standard process, general tasks and specific subtasks to certify and accredit IT systems supporting the executive branch of the federal government. It provides a new approach to certification and accreditation (C&A) that uses the standardized process to verify the correctness and effectiveness of security controls employed in an IT system to ensure adequate security is maintained."

This is NIST Special Publication 800-37. It was written by Ron Ross and Marianne Swanson in the NIST's Information Technology Laboratory's Computer Security Division, with input from others.

The deadline to submit comments to the NIST is January 31, 2003. Send comments to

Microsoft Discusses Regulatory Treatment of Internet Services with FCC

10/28. Representatives of Microsoft met with officials of the Federal Communications Commission's (FCC) Office of Plans and Policy (OPP) and Office of Engineering and Technology (OET) to discuss several FCC proceedings pertaining to regulatory treatment of high speed access to the Internet.

Scott Harris, attorney for Microsoft, wrote in an ex parte communications filing [PDF] that Microsoft "pointed out that the Internet has been characterized -- and its growth fueled -- by the ability of consumers to reach an unprecedented array of content, services, and applications through an ever-increasing diversity of electronic devices. Microsoft urged the Commission to prevent the essence of the Internet from being lost in the transition to broadband. Specifically, Microsoft indicated that the Commission, in these proceeding, must use its authority to ensure that consumers can continue to access the content and applications of their choosing through devices of their choosing."

Rep. Boucher Writes AG Ashcroft In Support of Echstar Directv Merger

10/28. Rep. Rick Boucher (D-VA) wrote a letter to Attorney General John Ashcroft regarding the Department of Justice (DOJ) Antitrust Division's pending review of the proposed merger of Echostar and Directv.

Rep. Rick BoucherRep. Boucher (at right), who is a member of the House Commerce Committee, and its Telecom Subcommittee, wrote "to ask that the Department of Justice favorably examine the revisions to the proposed merger between EchoStar Communications Corporation and Hughes Electronics Corporation. The applicants have recently proposed major revisions, including structural remedies to address competitive concerns, and I would ask that the Department consider seriously these revisions given the potential for increased benefits to consumers, particularly in rural communities and small media markets."

Rep. Boucher focused on "increased access to local broadcast stations". He wrote that "The more efficient use of spectrum that will result from the merger is likely the only way to affect the goals of SHVIA for all 210 designated market areas (DMAs)."

The Federal Communications Commission (FCC), which has responsibility for deciding upon applications for transfer of licenses associated with the proposed merger, has already declined to approve the transaction, and referred the matter to an administrative law judge for an evidentiary hearing. See, TLJ story titled "FCC Declines to Approve EchoStar DirectTV Merger", October 10, 2002.

Rep. Boucher also addressed the parties' efforts to restructure the proposal to meet regulatory concerns. He stated that "It is my understanding that revisions proposed by EchoStar and DirecTV include the divestiture of spectrum to Rainbow DBS, a facilities based DBS competitor. With the addition of these channels, Rainbow DBS proposes to provide expanded service to consumers, maintaining a competitive environment in the post merger DBS market."

In the past, Rep. Boucher has advocated approval of the proposed merger on the basis that it would facilitate the provision of broadband Internet access services in rural areas via satellite. In this letter he stated merely that "the merger proponents promise ... universal access to broadband services". See also, story titled "EchoStar DirecTV Merger and Broadband Internet Access" in TLJ Daily E-Mail Alert No. 321, December 5, 2001.

Cato Criticizes High Tech Pork

10/28. The Cato Institute published a paper [28 pages in PDF] titled "Birth of the Digital New Deal: An Inventory of High Tech Pork Barrel Spending".

The report states that "Just as policymakers proposed a litany of New Deal programs and spending initiatives during the Great Depression era, lawmakers today are devising many new federal programs aimed at solving the supposed emergencies or disasters that will befall the telecommunications industry without government assistance."

Adam Thierer, Wayne Crews, and Thomas Pearson, the paper's authors, wrote that "The new communications, cyberspace, and Internet related spending initiatives that policymakers are considering or have already implemented can be grouped into four general categories: (1) broadband deployment; (2) digital education, civic participation, and cultural initiatives; (3) cybersecurity; and (4) research and development. Dozens of new federal programs have been proposed in these areas during the 107th Congress. And dozens of other assistance programs already exist."

The paper argues that "Washington subsidy and entitlement programs typically have a never ending lifespan and often open the door to increased federal regulatory intervention. That kind of political meddling could also displace private sector investment efforts or result in technological favoritism by promoting one set of technologies or providers over another. Moreover, subsidy programs are unnecessary in an environment of technological competition, characterized by both proliferating consumer choices and uncertain market demand for new services. Finally, perhaps the leading argument against the creation of a Digital New Deal is that by inviting the feds to act as a market facilitator, the industry runs the risk of becoming more politicized over time.

It recommends that "Before high tech sector leaders become too comfortable in Washington circles, they should ask themselves if they want their future to be so closely tied to the whims of federal legislators and regulators."

Appeals Court Affirms Dismissal of Class Action Antitrust Suit Against MSFT & OEMs

10/28. The U.S. Court of Appeals (4thCir) issued its opinion [41 pages in PDF] in Gravity v. Microsoft, affirming the District Court's dismissal of a class action antitrust suit against Microsoft and several original equipment manufacturers (OEMs).

Gravity filed a complaint in U.S. District Court (DC) against Microsoft, Compaq, Dell, and Packard Bell NEC in 1999 alleging violation of federal antitrust laws. It sought class action status. This is one of the many class action antitrust suits filed against Microsoft in the wake of the federal government's action against Microsoft. The Judicial Panel on Multidistrict Litigation transferred this action to the U.S. District Court (DMd) where it was coordinated with about 64 other antitrust actions against Microsoft. The other antitrust actions were consolidated. However, this action was not, because it was the only action that alleged claims against OEMs.

The Appeals Court summarized the complaint as "alleging a ``hub- and- spoke´´ conspiracy between Microsoft and the OEM Defendants to restrain trade, in violation of § 1 of the Sherman Act, and a conspiracy to maintain Microsoft’s alleged monopolies in the sale of operating systems, word processing, and spreadsheet software, in violation of § 2 of the Sherman Act. [and] ... that the OEM Defendants and Microsoft violated the Sherman Act by entering into licensing agreements with the following anticompetitive provisions: (1) a prohibition against removing icons, folders, or Start menu entries from the Windows desktop; (2) a prohibition against modifying the initial Windows boot sequence; (3) the integration of Internet Explorer (IE), Microsoft’s Internet browser software, and other application software with Microsoft’s operating software; and (4) the inclusion of long-term distribution contracts, exclusive dealing distribution arrangements, and perprocessor license fees."

The District Court dismissed the complaint pursuant to FRCP 12(b)(6) for failure to state a claim. This appeal followed. A divided three judge panel of the Fourth Circuit affirmed the District Court. Judge Williams wrote for the majority. Judge Gregory wrote a dissent (beginning at page 29).

Commerce Department Official Addresses IT Issues

10/28. Deputy Secretary of Commerce Samuel Bodman gave a speech on cyber security at a US EU Information Security Forum in Brussels, Belgium. Bodman also gave a broader speech on electronic commerce, information security, protection of digital intellectual property, broadband deployment, and spectrum management.

Information Security. He stated in his speech on security that "Information security is a critical component of the homeland security equation. As the world is increasingly connected by the Internet, we are also more vulnerable from different directions ... the cyber world has no borders. Just last week, this vulnerability was evidenced by the ``distributed denial of service´´ attack launched against the Internet root servers. While this attack did not significantly impact Internet users, it does remind us of the constant threat that cyber attacks pose."

He continued that "we must strike the right balance between private sector leadership and government involvement. President Bush has consistently advocated a policy agenda that promotes market based solutions and encourages competition ... and which regulates, when absolutely necessary, in a transparent and unobtrusive manner."

He also stated that "Information security is -- and should be -- incorporated into the fabric of doing business ... it must be an integral part of a company's strategic planning and operations, just like marketing or product development. Companies must institutionalize the process of identifying critical assets, assessing their vulnerabilities, and managing the risks associated with these vulnerabilities."

E-Commerce. In his broader speech, Bodman reiterated President Bush's commitment to "to pursue an e-commerce agenda that promotes market based solutions". He stated that "the private and public sectors must communicate and collaborate to remove barriers to e-commerce and to strengthen the security of our information and communication networks."

Intellectual Property. He said that "Respecting and enforcing IP rights is necessary for innovation to flourish. The digital marketplace presents us with difficult challenges, however. The same avenues that provide unprecedented opportunities to distribute content also enable widespread piracy. And, we've seen that technological solutions that promise protection for digital content raise legitimate concerns for innovators and consumers."

He continued that "I understand the complexities of a digital rights management system, but I don't see how not developing a solution, or delaying implementation benefits anyone in the long run ... I know that some of you are legitimately concerned that efforts to ``fix´´ these new vulnerabilities will eviscerate consumers' fair use rights, curtail innovation in other areas, or inappropriately prevent business model evolution. In other words, that the cure could be worse than the disease ... these issues are valid, but I would also counter that not taking action entails substantial risks and could be extremely costly in the long-run."

He concluded that "Government should continue to do its part ... enforcing the law to make piracy an elusive and ineffective competitor to legitimate digital content, facilitating industry progress, and engaging and educating consumers. But, I have confidence that the market has the wisdom to deliver an effective solution to digital rights management ..."

Broadband. Bodman stated that "Governments need to create the right environment for further investment in broadband and enabling technologies by supporting research and development, promoting e-government, promoting innovative approaches like broadband demand aggregation, and educating consumers."

Spectrum. He briefly touched on spectrum management. He said that "will be making available 90 megahertz of radio spectrum for advance wireless telecommunications services. Making additional spectrum available will allow industry to meet the anticipated demand for 3G wireless services while spurring the development of innovative new wireless applications."

GAO Reports on Monitoring of Employee Computer Use

10/28. The General Accounting Office (GAO) released a report [PDF] titled "Employee Privacy: Computer Use Monitoring Practices and Policies of Selected Companies".

The GAO "conducted interviews with officials from 14 Fortune 1,000 private sector companies". It found that "All 14 companies we reviewed store their employees’ electronic transactions: e-mail messages, information of Internet sites visited, and computer file activity."

It also found that "These companies reported they collect this information to create duplicate or back-up files in case of system disruptions; to manage computer resources such as system capacity to handle routine e-mail and Internet traffic; and to hold employees accountable for company policies."

"Eight of these companies reported that they would read and review these electronic transactions if they receive other information that an individual may have violated company policies. When such circumstances arise, these employers can review employees' electronic transactions to find if violations of company computer-use policies such as visits to sites containing offensive or disruptive material and improper protection of proprietary information have occurred. On the other hand, 6 companies we contacted routinely analyzed their employees’ transactions to find possible inappropriate uses of company computer resources."

The report also addressed employee notification. It stated that "all of the companies we contacted had policies that contained most of the elements experts agreed should be included in company computer-use policies. For example, all company policies affirmed their rights to review employee use of company computer assets, described appropriate employee uses of these assets, and detailed penalties for misuse. We also found that all companies disseminated information about these policies, although in a variety of ways. For example, 8 companies require new employees to attend training that includes the review of companies’ computer-use policies. Some companies required employees to complete on-line training while others used videotapes."

Finally, the report "found that none of the companies we studied had changed any of their employee computer-use policies or monitoring practices after the September 11 terrorist attacks."

The report was prepared for the late Rep. Patsy Mink (D-HI), formerly the ranking Democrat on the House Education and Workforce Committee's Subcommittee on 21st Century Competitiveness.

USPTO Schedules Roundtables on Small Business Views on Foreign Patent Challenges

10/28. The U.S. Patent and Trademark Office (USPTO) published a notice in the Federal Register that sets tentative dates for a series of roundtable meeting in Los Angeles, Chicago and Washington DC regarding small business views on foreign patent challenges. The notice also requests, and sets deadlines for submitting, comments.

Comments are due by December 19, 2002. Requests to participate in round table meetings are due by November 22, 2002. The round table meetings are tentatively scheduled for December 2 in the Los Angeles area, December 4 in the Chicago area, and December 19 in the Washington DC area. See, Federal Register, October 28, 2002, Vol. 67, No.208, at Pages 65786 - 65787.

These USPTO roundtables follow a recent General Accounting Office (GAO) report [PDF] titled "Federal Action Needed to Help Small Businesses Address Foreign Patent Challenges". This report was released on August 22, 2002. See also, story titled "GAO Reports Foreign Patent Challenges Facing Small Businesses" in TLJ Daily E-Mail Alert No. 497, August 23, 2002. The GAO report recommended that the USPTO conduct hearings to receive input from small businesses.

The GAO found that "Foreign patent costs are the most significant impediment that small businesses face in trying to protect their inventions abroad, according to the small businesses and patent attorneys GAO contacted. The minimum cost to a small business to obtain and maintain a relatively simple patent in the United States for 20 years could be about $10,000, based on a scenario that GAO developed. However, extending this patent to nine other countries, which could be a typical small business foreign patent strategy, could cost between $160,000 and $330,000 ..."

The report was prepared at the request of Sen. Christopher Bond (R-MO), the ranking Republican on the Senate Small Business Committee, and Rep. Donald Manzullo (R-IL), Chairman of the House Small Business Committee.

The USPTO notice states that "The USPTO requests that interested parties submit comments and/or recommendations on achieving additional harmonization of patent laws. It is suggested that this input be categorized as follows: (1) Cost and fee related issues. (2) Procedural and administrative issues. (3) Substantive patent law issues. (4) Enforcement issues. (5) Miscellaneous issues.

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10/28. The Federal Communications Commission (FCC) published a notice in the Federal Register regarding its third biennial review of its broadcast ownership rules pursuant to § 202 of the Telecommunications Act of 1996. The FCC seeks comments on the national television multiple ownership rule, the local television multiple ownership rule, the radio television cross ownership rule, and the dual network rule. The FCC announced this Notice of Proposed Rulemaking (NPRM) at its meeting on September 12. See, story titled "FCC Announces Broad Review of Media Ownership Rules" in TLJ Daily E-Mail Alert No. 509, September 16, 2002. This notice sets deadlines for comments. Comments are due by December 2, 2002. Reply comments are due by January 2, 2003. See, Federal Register, October 28, 2002, Vol. 67, No. 208, at Pages 65751 - 65776. This is MB Docket No. 02-277.

10/28. Qwest stated in a release that it "has concluded that its policies and practices for determining the value of the various elements of the fees earned in connection with the sales of optical capacity assets for cash did not support the accounting treatment. As a result, the company concluded that it should defer the $531 million of revenue previously recognized on such sales over the life of the underlying agreements."

10/28. A grand jury of the U.S. District Court (CDCal) returned a two count indictment of Tony Minh Nguyen on October 23 charging that he manufactured and trafficked in counterfeit Compaq computer memory modules. The U.S. Attorneys Office (USAO) announced that he was arrested on October 28. The USAO explained the scheme in a release: "Nguyen directed sales and production at Dynasty Memory, Inc., a Santa Ana computer supply company. The two count indictment alleges that Nguyen directed Dynasty employees to purchase out-of-date Compaq memory components. Then, Dynasty employees would remove the Compaq labels and, under Nguyen’s direction, they would re-adhere the Compaq labels to non-Compaq memory components, creating a product that would be substantially indistinguishable from genuine Compaq products. Nguyen then directed that these counterfeit parts be sold as the genuine article."

APEC Forum Produces Digital Economy Statement

10/27. The Asia Pacific Economic Cooperation (APEC) Plenary in Los Cabos, Mexico agreed to a Statement to Implement APEC Policies on Trade and the Digital Economy. It addresses electronic commerce, tariffs on information technology products, protection of digital intellectual property, education and universal access, and other issues.

The Statement begins with the observation that "The exponential growth in Internet connectivity and use of electronic commerce as a channel for international business require the development of trade policies that promote a networked world." It continues that APEC members "need to make constructive efforts to liberalize the trading environment with effective trade rules for the digital economy where products and services can be exchanged using electronic networks free of tariffs and other barriers."

The Statement provides that "The digital economy should continue to flourish in a liberal and open trade environment, which will lead to greater development of e-commerce and economic growth." Also, "Where legitimate policy objectives require domestic regulations that affect trade in products and services using electronic networks, such regulations should be transparent, non-discriminatory and least restrictive on trade, taking Economies' international commitments into account."

It also states that the APEC "Economies support a long term moratorium on customs duties on electronic transmissions."

The Statement also addresses the Information Technology Agreement, and provides that APEC economies will work towards "eliminating tariffs on additional information technology products at the broadest level possible".

The Statement also recites that "APEC Economies identified and exchanged information on the following services related to electronic commerce: telecommunications and value added services, subscription video services (including via cable or satellite and excluding broadcasting), computer and related services, advertising, distribution (including products distributed electronically), express delivery, and video rental/leasing (including online rentals)." (Parentheses in original.)

It continues that "For services it identifies as critical to electronic commerce, each Economy will: (a) reduce progressively or eliminate limitations on the number of suppliers permitted to supply such services; (b) reduce progressively or eliminate limitations on ownership and control that: (i) prevent significant foreign investment in the supply of telecommunications services; and (ii) prevent majority ownership or control of suppliers of other services; and (c) otherwise accord market access and national treatment with a minimum of exceptions."

Intellectual Property. The Statement provides that the APEC "Economies will fully implement and enforce the WTO Agreement on Trade Related Aspects of Intellectual Property Rights" and "will ratify and fully implement the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty as soon as possible."

It also provides that "Economies will ensure through adequate oversight mechanisms that their government entities use only legal software or other content." Finally, it provides that each economy "to the largest extent possible ensure that the internet and e-commerce does not facilitate trade in infringing and counterfeit goods, and will put into place appropriate regulatory and enforcement systems aimed at curtailing these activities."

Education and Access. In a separate agreement titled "APEC Economic Leaders' Declaration", the APEC countries wrote that "We noted the contribution of the e-APEC Strategy, the Beijing Initiative on Human Capacity Building and the APEC Human Capacity Building Strategy for the New Economy as an effective response to the need for transforming the digital divide into a digital opportunity. We welcomed the expansion of cyber education and called for more activities aimed at improving teacher quality, promoting language study and facilitating more use of distance learning. We also welcomed significant progress in the revitalization of the APEC Education Foundation and expansion of the Consortium for APEC Cyber Education Cooperation."

It also states that "We reiterated our commitment to realizing our goal of universal access by the year 2010 and we recognized the importance of focusing on further action on connectivity for rural areas; micro, small and medium enterprises; women; youth; and the disabled." See, text.

The APEC forum was established in 1989 to promote economic cooperation and integration in the Pacific region. The  APEC countries that participated in this meeting were Brunei Darussalam, Hong Kong China, Indonesia, Japan, Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, The Philippines, Singapore, Chinese Taipei, Thailand, United States, and Vietnam. This APEC meeting also addressed other issues, such as terrorism, and North Korean nuclear weapons.

Go to News from October 21-25, 2002.