News from November 6-10, 2002

House to Take Up Cyber Security Research and Development Act

11/8. The House will likely take up HR 3394, the Cyber Security Research and Development Act, on Tuesday, November 12. The matter will be taken up under suspension of the rules, meaning that it cannot be amended, and requires a two thirds vote for passage. See, Whip Notice.

The House passed its earlier version of the bill on February 7, 2002 by a roll call vote of 400-12. See, Roll Call No. 13. October 16, 2002, the Senate passed its version of the bill, by substituting the language of S 2182, sponsored by Sen. Ron Wyden (D-OR).

Both versions of the bill authorize funding for various new research and education programs pertaining to cyber security at the National Science Foundation (NSF) and the National Institute of Standards and Technology (NIST).

The Senate bill also requires that the NIST "shall develop, and revise as necessary, a checklist setting forth settings and option selections that minimize the security risks associated with each computer hardware or software system that is, or is likely to become, widely used within the Federal government."

FTC Commissioner O'Leary Addresses Antitrust

11/8. Federal Trade Commission (FTC) Commissioner Thomas Leary gave a speech titled "Efficiencies and Antitrust: A Story of Ongoing Evolution" at a bar convention in Washington DC. See, prepared text.

Vertical restraints was one of the many issues that he addressed in this text . For example, he stated that "The Internet has made it possible for producers to communicate directly with ultimate consumers more efficiently than ever before, and this potential presents an obvious threat to intermediaries in the distribution chain. Predictably, these middlemen have responded both with private arrangements and with successful appeals for state legislation, designed to preserve the status quo. Some of the issues raised by these defensive measures relate directly to efficiencies." (Footnote omitted.)

He continued that "Those who seek to preserve the viability of existing middlemen may argue, for example, that the potential efficiencies of Internet sales need to be adjusted downward to account for potential adverse effects in quality and services delivered. (They also may raise health and safety concerns which are difficult to weigh in an efficiencies calculus, but somehow the serious concerns have to be distinguished from the trivial.)" (Parentheses in original.)

European Commissioner Addresses Tech Issues

11/8. Erkki Liikanen, European Commissioner for Enterprise and Information Society, gave a speech titled "The Results of the Trans-Atlantic Business Dialogue" (TABD) in Chicago, Illinois, in which he addressed cyber security, data privacy, and the recently drafted antitrust guidelines.

He stated, "On networked economy, a considerable number of issues remain under consideration. This year, cyber security has become the newest issue that we added. This is of considerable interest to both governments and industry, and close co-operation is foreseen on it. It will be of particular importance to balance the requirements imposed by cyber security with issues such as civil rights, data privacy, and proportionate data retention costs. We also agreed that there is a need for broad awareness of security issues in all sectors of the economy, and the TABD could usefully help by asking its members in all the sectors to report on what is undertaken and what the issues are faced."

He also stated, "On Mergers & Acquisitions, the Guidelines for coordinating future merger reviews between U.S. and EU antitrust agencies have just been finalised. The Guidelines reflect best practices, and the objectives are to enhance cooperation, minimize the risk of divergent outcomes, and reduce the burdens on parties involved in merger investigations. These are of course objectives that correspond well to the TABD's recommendations in this area."

See also, guidelines titled "US-EU Merger Working Group: Best Practices on Cooperation in Merger Investigations".

DOJ and Microsoft File Revised Settlement

11/8. The Department of Justice (DOJ) filed a Third Revised Proposed Final Judgment (TRPFJ) with the U.S. District Court (DC) in the Microsoft antitrust action. This TRPFJ revises the previous settlement agreement to include the language required by the Court's orders of November 1, 2002. The DOJ, Microsoft and nine settling states agreed to this TRPFJ in a stipulation.

In addition, Microsoft announced that its board of directors passed a resolution establishing an Antitrust Compliance Committee, for the purpose of executing the duties of the final judgment related to compliance. The three member committee will be comprised of James Cash, Raymond Gilmartin and Ann Korologos. See, release, with copy of resolution.

State Department Official Addresses IPR in India

11/8. Alan Larson, Under Secretary of State for Economic, Business and Agricultural Affairs, gave a speech in Mumbai, India, regarding intellectual property rights.

He acknowledged that "The India Parliament took a positive step toward greater IP protection this past spring when it amended, for the second time, the 1970 patent law." But, he added that "this was only one step, and more are needed." In the context of the pharmaceutical industry, and encouraged India to provide earlier implementation of strong patent legislation, provide for property rights in data, and improve IPR infrastructure and enforcement.

He stated that "many countries of the developing world that do not have strong IPR regimes remain mired in economic stagnation and worse yet, have suffered the negative effects of the ``brain drain.´´ Talented scientists, engineers, artist and inventors leave their home countries where their work is unprotected and migrate to those countries where it is. While this is certainly a boon for those countries -- like the United States -- that receive these immigrants, this process does little to help the developing world."

He continued that "India itself provides an excellent example to share with the world of how the negative effects of lax IPR regimes can be reversed. Just a few years ago, India was losing a battle to retain the best and brightest of its engineers and computer scientists. The lack of an effective copyright law forced those scientists and technicians to emigrate to countries where their hard work could be protected and kept safe from unfair exploitation by competitors seeking easy advantages. The Indian parliament finally passed a copyright law to protect the hard work and creativity of its computer scientists. The result: a burgeoning high tech industry producing some of the world's most advanced software and employing thousands of workers who might otherwise have left India for greener pastures in other parts of the world."

He also addressed music and movie piracy.

DC Circuit Vacates FCC's Video Description Rules

11/8. The U.S. Court of Appeals (DCCir) issued its opinion in MPAA v. FCC, vacating the Federal Communications Commission's (FCC) video description rules.

Statute. The Congress addressed both closed captioning and video description in the Telecommunications Act of 1996. 47 U.S.C. § 613, at subsection (g), defines video description as "the insertion of audio narrated descriptions of a television program's key visual elements into natural pauses between the program's dialogue".

47 U.S.C. § 613(f) provides that "Within 6 months after February 8, 1996, the Commission shall commence an inquiry to examine the use of video descriptions on video programming in order to ensure the accessibility of video programming to persons with visual impairments, and report to Congress on its findings. The Commission's report shall assess appropriate methods and schedules for phasing video descriptions into the marketplace, technical and quality standards for video descriptions, a definition of programming for which video descriptions would apply, and other technical and legal issues that the Commission deems appropriate."

FCC Rule. The FCC adopted a Report and Order [MS Word] in the proceeding titled "Implementation of Video Description of Video Programming". This is MM Docket No. 99-339. The Report and Order states that "we conclude that we have the authority to adopt video description rules, and require the top broadcast stations and multichannel video programming distributors (MVPDs) to provide programming with video description on the top programming networks." The FCC asserted authority under § 613 and § 151, which is a broad introductory section stating the purpose of the FCC.

In particular, the Report and Order requires that "affiliates of the top four commercial broadcast TV networks in the top 25 TV markets to provide 50 hours per calendar quarter of prime time and/or children’s programming with video description" and that "MVPDs with 50,000 or more subscribers to provide 50 hours per calendar quarter of prime time and/or children’s programming with video description on each of the top five national nonbroadcast networks they carry."

Commissioner Michael Powell dissented. He wrote at the time that the FCC "yet again is extending its reach beyond a specific statutory provision ... Because I find Congress spoke to video description in section 713(f) of the Act, and purposely limited the Commission to studying the issue and reporting to Congress, I dissent to the adoption of video description rules ..."

The Motion Picture Association of America (MPAA) and the National Federation of the Blind (NFB) both filed petitions for review.

Appeals Court. The Appeals Court held that § 613 requires that the FCC promulgate closed captioning regulations, but that it merely write a report regarding video description. Moreover, § 151 provides no authority to promulgate regulations that significantly implicate program content. The FCC's video description rule exceeds its statutory authority, and hence, the rule must be vacated.

The Court wrote that § 613(f) and (g), "the sole subsections dealing with video description -- merely defined ``video description´´ and required the FCC to prepare a report to Congress. 47 U.S.C. § 613(f)-(g). Unlike the provisions covering closed captioning," § 613 "did not authorize the Commission to adopt regulations implementing video descriptions."

The Court also wrote that "There is no doubt that the video description rules regulate programming content. Video description is not a regulation of television transmission that only incidentally and minimally affects program content;  it is a direct and significant regulation of program content. The rules require programmers to create a second script."

It also wrote that § 151 "has not been construed to allow the FCC to regulate programming content is because such regulations invariably raise First Amendment issues."

MPAA v. FCC and Web Pages

11/8. There is nothing in the opinion of the U.S. Court of Appeals (DCCir) in MPAA v. FCC about web pages. The FCC's rule covers broadcasters and MVPDs, but not webcasters. Nor does any other FCC rule mandate web programming practices to make web pages accessible to visually impaired persons.

Also, the Department of Justice (DOJ) has promulgated no related rules. However, the DOJ has asserted that the Americans with Disabilities Act (ADA), 42 U.S.C. §§ 12101, et seq., applies to web pages. (See, DOJ letter of September 9, 1996.)

Hypothetically, if an agency were to write rules regulating web pages, such rules would likely require the creation of content. For example, such rules might require writing text for alt tags for images.

Hence, the opinion in MPAA v. FCC may have some relevance to the question of whether, or the extent to which, the government could regulate web content for purposes related to access by visually impaired persons.

People and Appointments

11/8. Robert Herdman, Chief Accountant of the Securities and Exchange Commission (SEC), resigned.

11/8. The Intellectual Property Owners Association (IPO) elected four new members to its Board of Directors: Mark Costello (Xerox), Andy Gibbs (Patent Café), Sanjay Prasad (Oracle), and Louis Verilli (Unilever).

More News

11/8. WorldCom issued a release in which it stated that "In settlement discussions with the Securities and Exchange Commission (SEC), WorldCom advised the agency that, based on very preliminary reviews of past accounting, it expects an additional restatement of earnings which, when added to WorldCom's past restatements, could total in excess of $9 billion."

11/8. The U.S. Court of Appeals (DCCir) issued its "unpublished" disposition [PDF] in Church of Christ v. FCC, a petition for review of the Federal Communications Commission's (FCC) order approving Fox Television Stations' acquisition of the licenses and assets of ten television stations owned by Chris Craft Industries. It upheld the FCC order.

FCC Announces Report on Spectrum Policy

11/7. The Federal Communications Commission (FCC) announced, but did not release, a report by its Spectrum Policy Task Force at its November 7 open meeting.

Lauren Van Wazer of the SPTF made a brief presentation. Commissioners offered comments. And, the FCC issued a press release [PDF], and a set of PowerPoint slides used by Van Wazer. FCC staff stated that the report itself might be released next week.

The SPTF was formed early last summer by FCC Chairman Michael Powell. It solicited public comments, and received over 200. It also held a series of public workshops in August.

Van Wazer stated at the FCC meeting that one of the findings of the SPTF is that "spectrum access is a much more significant problem than scarcity". She stated that another finding is that spectrum can be parceled in time, space and frequency. She also stated that the SPTF found that new technologies allow systems to be more tolerant of interference. Finally, she said that the SPTF found that spectrum rights and responsibilities are not always clearly defined.

She also stated that the report contains 39 recommendations. She listed a few her presentation. The FCC press release provides a little more elaboration.

First, said Van Wazer, the FCC should evolve its spectrum policy towards a more market oriented approach. Second, the FCC should adopt a new metric, which she called "interference temperature", to quantify and manage interference.

Third, the FCC should implement ways to increase access to spectrum, through the use of the time dimension, in addition to frequency and space. The FCC's release states that the SPTF "found that new technological developments now permit the Commission to increasingly consider the use of time, in addition to frequency, power and space, as an added dimension permitting more dynamic allocation and assignment of spectrum usage rights. This would provide access to unused or underused spectrum through time-sharing of spectrum between multiple users and lead to more efficient use of the spectrum resource."

Finally, the FCC should migrate from its current command and control model of spectrum management. It should also employ exclusive use and commons approaches.

The Commissioners praised the SPTF and the report. However, Commissioner Kathleen Abernathy noted that "the Commission has not endorsed this report". Commissioner Kevin Martin stated that he is concerned about "unlicensed underlays" and interference. He questioned whether a proposal in the report is enforceable in practice.

Chairman Powell also released a statement [PDF]. Also, he gave a speech on October 30 on this subject titled "Broadband Migration III: New Directions in Wireless Policy".

Tom Wheeler, P/CEO of the Cellular Telecommunications & Internet Association (CTIA), stated in a release that "The absence of a national spectrum policy has hurt consumers by denying them new services and creating a competitive imbalance with the rest of the world. Applause can be the only response to the FCC's decision to develop a comprehensive spectrum policy."

The Telecommunications Industry Association (TIA) President Matthew Flanigan stated in a release that "market oriented approaches envisioned by the FCC's Spectrum Policy Task Force promise to bring certainty and stability to our nation's spectrum management processes".

Lauren Van Wazer can be reached at 202 418-0030 or This is ET Docket No. 02-135.

FCC Announces Another EEO Rulemaking for Broadcasters

11/7. The Federal Communications Commission (FCC) adopted, but did not release, a Notice of Proposed Rulemaking (NPRM) regarding equal employment opportunity rules for broadcasters and multi-channel video programming distributors (MVPDs). See, FCC release [PDF].

This is the FCC's third attempt. The last two sets of rules were held unconstitutional by the U.S. Court of Appeals (DCCir). See, opinion in Lutheran Church-Missouri Synod v. FCC. 141 F.3d 344 (1998) and opinion in MD/DC/DE Broadcasters Association v FCC, 236 F.3d 13, reh'g den. 253 F. 3d 732 (2001) pet for cert. Filed, MMTC v MD/DC/DE Broadcasters Association. No. 01-639 (October 17, 2001).

While the NPRM has not been released, FCC Commissioners and staff described it as minimal set of rules requiring outreach, record keeping and reporting. However, it does not include a requirement that licensees submit annual reports on the race and gender make-up of their workforce.

Each of the four Commissioners issued statements. See, statements [in PDF] by Powell, Abernathy, Copps, and Martin. This is MM Docket No. 98-204.

FCC Adopts 3G Order and NRPM

11/7. The Federal Communications Commission (FCC) adopted, but did not release, a Second Report and Order allocating 90 MHz of spectrum for use by advanced wireless services (AWS), including Third Generation (3G) wireless services. The FCC simultaneously adopted, but did not release a Notice of Proposed Rulemaking (NPRM) that proposes licensing and service rules for this spectrum.

The reallocated spectrum is the 1710-1755 MHz band currently being used by the federal government, and the 2110-2155 MHz band currently being used for multipoint distribution services (MDS) and other services.

3G technologies have the potential to bring broadband Internet access to portable devices.

FCC Commission Michael Copps commented on various European nations' experience with allocating spectrum for 3G services. He said that "I also hope that we will study the European experience with 3G very carefully. Various European countries moved ahead with 3G allocations before we did. Many of these countries allocated large amounts of spectrum to 3G. Despite that, 3G has been less than a success in Europe. What role did government allocations and service rules play? What other factors were at work? We need to know. Those who don't study history are condemned to repeat it."

Tom Wheeler, P/CEO of the Cellular Telecommunications & Internet Association (CTIA), stated in release that "We are very pleased to see the Commission moving ahead with the allocation of additional spectrum for advanced mobile services. Today's action to set aside 90 MHz of harmonized spectrum for these services is the culmination of years of cooperative efforts at the FCC and NTIA. This would not have been possible without the leadership of Commerce Secretary Evans and NTIA administrator Nancy Victory, working with the Administration and the wireless industry. It is gratifying to see these efforts result in an allocation that will help the wireless industry bring innovative services to consumers."

The Telecommunications Industry Association (TIA) President Matthew Flanigan stated in a release that "We commend the commission for acting quickly to allocate the recently identified spectrum for advanced wireless services and for beginning the process of establishing service rules ... These two proceedings will greatly facilitate the introduction of new and innovative wireless product offerings. In addition to the commission, we again thank the Bush administration for its important role in identifying suitable spectrum that will be transferred from exclusive federal use."

The order was issued in ET Docket No. 00-258. For more information about it, contact Jamison Prime at 202 418-7474 or The NPRM was issued in ET Docket No. 00-258 and WT Docket No. 02-353. For more information about it, contact John Spencer at 202 418-1310 or, or Eli Johnson at 202 418-1310 or

FCC Adopts Intelligent Transportation Systems NPRM

11/7. The Federal Communications Commission (FCC) announced, but did not release, a Notice of Proposed Rulemaking (NPRM) proposing rules for Intelligent Transportation Systems (ITS).

Specifically, this NPRM seeks comment on licensing and service rules for the 5.850 - 5.925 GHz band for Dedicated Short Range Communications (DSRC) in the ITS Radio Service. ITS provides wireless communications links between moving surface vehicles, and between vehicles and road side units. It has public safety applications, such as avoiding vehicle collisions, emergency vehicle traffic signal preemption, traffic management, and electronic toll collection.

ITS could also have commercial applications. Nancy Zaczek, an attorney advisor in the FCC's Wireless Telecommunications Bureau (WTB), presented the item to the Commissioners. She stated that "we also seek comments on ITS America's recommendation to allow the 5.9 GHz band to be used, not only for public safety uses, but also for non-public safety uses, such as electronic payment for food, fuel or parking".

Tom Sugrue, Chief of the WTB, stated in a press conference afterwards that "the primary purpose is public safety". However, he also quipped about the possibility of using ITS to order coffee from MacDonalds.

Commission Michael Copps, who worked on ITS during his previous employment at the Department of Commerce (DOC), praised the NPRM, stating that this technology will put "some intelligence into our transportation infrastructure". It was adopted by a 4-0 vote.

This is WT Docket No. 01-90. For more information, contact Nancy Zaczek at 202 418-0680 or

Sixth Circuit Rules in Verizon v. Strand

11/7. The U.S. Court of Appeals (6thCir) issued its opinion in Verizon v. Strand, a challenge to a state public utilities commission order requiring ILECs to offer network elements and services to competitors through published tariffs and to combine UNEs for competitors. The District Court held both invalid. The Appeals Court affirmed as to the tariff requirement, but vacated as to the UNEs requirement.

Background. GTE North, which became Verizon North, upon GTE's merger with Bell Atlantic, is an incumbent local exchange carrier (ILEC) in the state of Michigan. The Michigan Public Services Commission (MPSC) issued an order requiring ILECs to offer network elements and services to competitors through published tariffs and to combine unbundled network elements (UNEs) for competitors. The order used GTE's Total Service Long Run Incremental Cost (TSLRIC) studies to establish the rates at which GTE would be compelled to sell UNEs to its competitors. The order also stated that the Telecommunications Act of 1996 (Act) requirement that GTE allow competitors to access unbundled elements of GTE's local network did not preclude GTE's competitors from requesting access to pre-assembled, fully operational local service platforms.

District Court. GTE North filed a complaint in U.S. District Court (WDMich) against John Strand, Chairman of the MPSC, and other members of the MPSC, seeking a declaratory judgment that the MPSC order is invalid. The District Court held, on summary judgment, that the tariff requirement is invalid, because it would allow competitors to circumvent the negotiation and arbitration process set out in 47 U.S.C. § 252. It further held that requiring incumbents to combine previously unbundled network elements at competitors' request violated the plain language of the Act, which requires incumbents to provide competitors access to network elements "in a manner that allows requesting carriers to combine such elements". The MPSC appealed.

Appeals Court. This is the second time this case has been appealed to the Sixth Circuit. See also, GTE North v. Strand, 209 F.3d 909 (6th Cir. 2000). In the present appeal, the Court affirmed the District Court with respect to the tariff requirement, but vacated with respect to the bundling requirement. The District Court had relied upon the reasoning of the U.S. Court of Appeals (8thCir) in Iowa Utilities Board v. FCC, 219 F.3d 744 (8th Cir. 2000). The Supreme Court, during the pendency of this appeal, reversed on that issue.

USPTO Releases Interpretation of Amendments to Section 102 of Patent Act

11/7. The U.S. Patent and Trademark Office (USPTO) released a document [19 pages in PDF] titled "Examination Guidelines for 35 U.S.C. § 102(e), as amended by the American Inventors Protection Act of 1999, and further amended by the Intellectual Property and High Technology Technical Amendments Act of 2002, and 35 U.S.C. § 102(g)".

Section 102 pertains to conditions for patentability. It was amended by the American Inventor's Protection Act of 1999 (AIPA), and again by the DOJ Authorization bill, which President Bush signed last Saturday, October 2.

The 21st Century Department of Justice Appropriations Authorization Act is a huge bill that contains far more than just an authorization for appropriations of the Department of Justice. (It is HR 2215. It is is now Public Law 107-273, 116 Stat. 1758 (2002).)

Title III of HR 2215 pertains to intellectual property. Its Subtitle B is named "Intellectual Property and High Technology Technical Amendments Act of 2002". As a stand alone bill, it was S 320. For example, within this Subtitle B, Section 13204 contains language clarifying the effective date of international applications which may qualify for the provisional rights based on early publication. Section 13205 contains language amending 35 U.S.C. § 102(e) to provide that the USPTO will only rely on information published in the English language in patent applications when it makes the determination of novelty during the examination of a patent application. This limits the evidence from foreign applications that may be considered "prior art".

The document just released by the USPTO provides the USPTO's interpretation of the statute, as amended by the AIPA and the just signed DOJ authorization bill. It is a detailed analysis written for patent practitioners. The USPTO document also interprets prior art rejections based on 35 U.S.C. § 102(g).

The just released document does not address other patent related provisions contained in the DOJ authorization bill, such as amendments affecting reexamination procedure. (See, Section 13202 of the bill.)

People and Appointments

  Matthew Brill

11/7. Federal Communications Commission (FCC) Commissioner Kathleen Abernathy promoted Matthew Brill to the position of Senior Legal Advisor. He has been her Legal Advisor for wireline matters. He can be reached at 202 418-2532. Abernathy also named Carolyn Groves as her Senior Counsel for wireless and international issues, starting December 9. Groves is currently a partner in the Washington DC office of the law firm of Wilkinson Barker & Knauer. John Branscome, an attorney in the Auctions Division of the Wireless Telecommunications Bureau (WTB), has been advising Abernathy on wireless and international issues on an interim basis. He will return to the WTB in December. See, FCC release [PDF].

11/7. Securities and Exchange Commission (SEC) Commissioner Roel Campos commented on SEC Chairman Harvey Pitt's resignation announcement. Campos stated in a release that "Chairman Pitt took the extraordinary step this week of offering his resignation as chairman of the SEC. This is not the time to say goodbye or Godspeed because Chairman Pitt will be with us for an undetermined period of time in the transition. It does seem appropriate to me to memorialize briefly Chairman Pitt's act of courage and sacrifice. ... His resignation is a model of dignity and grace."

11/7. Microsoft hired Maggie Wilderotter as Senior Vice President of Business Strategy, effective November 26. She was previously P/CEO of Wink Communications, an interactive TV company. Before that, she was EVP of national operations at AT&T Wireless Services and CEO of AT&T's Aviation Communications Division. Before that, she worked at U.S. Computer Services Inc./Cable Data. Wink was recently acquired by Liberty Broadband Interactive Television, Inc., which in turn, sold it to OpenTV.

11/7. H.P. Goldfield joined the law firm of Hogan & Hartson as a senior international advisor. He focuses on government affairs and international trade. See, HH release.

11/7. Margaret "Peg" Warner was named head the Washington DC office component of the Trial Department of the law firm of McDermott Will & Emery. See, MWE release.

More News

11/7. William Kolasky, Deputy Assistant Attorney General in the Department of Justice's Antitrust Division, gave a speech in Washington DC titled "Global Competition Convergence and Cooperation: Looking Back and Looking Ahead". He addressed US EU relations, the International Competition Network (ICN), convergence of competition values, and other topics.

11/7. Yervant Lepejian plead guilty in U.S. District Court (NDCal) to one count of wire fraud in violation of 18 U.S.C. § 1343. Lepejian is a former employee of HPL Technologies. He admitted that he caused false and illusory sales to be recorded as revenue by HPL, and made false statements to HPL's auditors and the Securities and Exchange Commission (SEC). See, USAO release.

FTC Commissioner Swindle Addresses Information and Network Security

11/6. The U.S. Council for International Business (USCIB) hosted a meeting titled "Promoting a Culture of Security" at the law offices of Morrison & Foerster (MoFo). Federal Trade Commission (FTC) Commissioner Orson Swindle spoke at the meeting. The meeting was closed to the public.

Commissioner Swindle, Thomas Niles (President of the U.S. Council for International Business), Joseph Alhadeff (VP/CPO of Oracle), and others spoke with reporters after the meeting.

Dewie the TurtleThey announced no new developments. Instead, they advocated the development of a culture of security; they promoted the Organization of Economic Co-operation and Development's (OECD) July 2002 guidelines [30 pages in PDF] titled "OECD Guidelines for the Security of Information Systems and Networks: Towards a Culture of Security"; and, they promoted Dewie (at right), the FTC's spokes-turtle on security issues. Said Swindle, "I hope he will become as famous as Smokey the Bear".

Reporters asked questions about the role of accountability, regulation, and legal liability in promoting information and network security. In particular, the OECD guidelines state, without elaboration, that "All participants are responsible for the security of information systems and networks. Participants depend upon interconnected local and global information systems and networks and should understand their responsibility for the security of those information systems and networks. They should be accountable in a manner appropriate to their individual roles."

Niles said only that "I think the market will decide liability there in a sense. If you produce a product that is vulnerable, then your customer base will probably disappear."

Swindle stated that "I think to assign liability in a frivolous way would do a lot to deter the development of new innovative products." He added that "I think it is going to be a combination of government oversight. We have a couple of laws that enable us to correct things that are wrong, in violation of the law. Industry, as we said, the market place is going to react. You don't want a lousy product out there."

He concluded that, "Probably the worst solution, we would come up with some sort of regulatory regime that would be punitive, when it is almost impossible to get all this stuff right all of the time."

Niles also stated that "a partnership between government, for example, the FCC, and business, and users around the world, is essential. It is the only way this is going to work. And finally, we are dealing here with a technology that is changing with blinding speed on a daily basis. And as consequence, we really don't see the possibility here for regulating security on the Internet, the same way for example you can regulate automobile security, or security in buildings. The moment you write your regulations the Internet has changed in ways that you hadn't anticipated. Your regulations become a burden, rather than a benefit." He added that what is needed is a flexible set of guidelines, such as those provided by the OECD.

Microsoft Offers Legislative Recommendations to Congress

11/6. Microsoft published in its web site a short article titled "An Agenda for Innovation: New ideas can strengthen the economy".

It offers the following legislative recommendations to the new Congress:
(1) "improve education, especially in math, science and engineering".
(2) "use tax incentives and other policies to encourage investment in research and development".
(3) "strengthening penalties for cyber-crime. We hope the Senate will approve the Cyber Security Enhancement Act".
(4) "consider expansion in the funding and tools available for the FBI and other law-enforcement agencies to fight theft of intellectual property".
(5) "consider establishing civil and criminal penalties for trafficking in counterfeit certificates of product authenticity".

Sen. Grassley to Pursue Solution of FSC/ETI Dispute

11/6. Sen. Charles Grassley (R-IA), the ranking Republican on the Senate Finance Committee, who will likely soon be the Committee Chairman, issued a release [PDF] that lists his "early priorities". He wrote that "I’ll also continue to work toward a bipartisan solution to the foreign sales corporation dispute so American companies can better function in the global marketplace."

Sen. Grassley and Sen. Max Baucus (D-MT), the current Chairman, who just won re-election, have not diverged on this issue. See, for example, joint letter [PDF] of August 12 of Sen. Baucus and Sen. Grassley to U.S. Trade Representative (USTR) Robert Zoellick.

The World Trade Organization (WTO) held that the Foreign Sales Corporation (FSC) tax regime constitutes an illegal export subsidy. So, Congress passed replacement legislation, the Extraterritorial Income Exclusion Act (ETI), which the WTO also held to constitute an illegal export subsidy. On August 30, the WTO issued a Decision of the Arbitrator [46 pages in PDF] which authorizes the EU to impose $4 Billion in countermeasures, or retaliatory tariffs.

On September 13, the European Union published a document that identified a list of products which could be subject to retaliatory tariffs. The list includes many electronics products.

The U.S. can avoid the imposition of EU retaliatory tariffs by repealing the ETI. Rep. Bill Thomas (R-CA), the Chairman of the House Ways and Means Committee, introduced HR 5095, the American Competitiveness and Corporate Accountability Act of 2002, on July 11, 2002, to address the WTO's rulings regarding the FSC and ETI. See also, Rep. Thomas' summary of HR 5095. However, no action has been taken on the bill. There is no replacement legislation pending in the Senate.

Sen. Grassley also stated that "I'll push to make last year's tax cuts permanent."

FCC Does Not Require AT&T and Comcast to Publicly Disclose ISP Agreement With AOL

11/6. The Federal Communications Commission (FCC) released an Order [PDF] denying the motion of the Consumer Federation of America (CFA) and Earthlink to require that AT&T and Comcast file with the FCC copies of several documents, including the AOL ISP Agreement, in the FCC's proceeding on the AT&T Comcast merger.

The Order is a victory for AT&T and Comcast, whose proposed merger is pending before the FCC. It means that they will not have to publicly disclose the terms under which AOL broadband Internet access service would be made available on AT&T Comcast cable systems. It also avoids one source of delay of the FCC's merger proceeding.

The Order is also notable for its comparison and contrasting of the FCC's and Antitrust Division's parallel merger review proceedings.

This Order was issued in the FCC's license transfer proceeding associated with the merger of AT&T and Comcast. The name of this proceeding is "In the Matter of Applications for Consent to the Transfer of Control of Licenses From Comcast Corporation and AT&T Corp., Transferors, To AT&T Comcast Corporation, Transferee". It is MB Docket No. 02-70.

The FCC explained the nature of the records at issue in this Motion and Order. It wrote that AT&T and Comcast (aka Applicants) "proposed a means of insulating and ultimately divesting AT&T’s interest in Time Warner Entertainment, L.P. (``TWE´´). After filing the TWE Proposal, the Applicants reached an agreement with AOL Time Warner, Inc. (``AOLTW´´), to restructure TWE (the ``TWE Restructuring Agreement´´). In connection with the TWE Restructuring Agreement, the Applicants and AOLTW reached a ``three-year non-exclusive agreement´´ under which AOL broadband Internet access service would be made available on AT&T Comcast cable systems (the ``AOL ISP Agreement´´). If the proposed merger has not closed by March 1, 2003, and all other conditions to closing the TWE restructuring have been met or waived, AT&T and AOLTW have agreed to enter into an ISP agreement, ``substantially identical to the AOL ISP Agreement, that would govern the provision of AOLTW's high-speed Internet services on AT&T's cable systems´´ (the AOL-AT&T ISP Agreement´´). A copy of the TWE Restructuring Agreement was filed with the Commission on August 23, 2002.  The exhibits and certain other documents referenced in the agreement (collectively, the ``Exhibits´´), including the AOL ISP Agreement, were not filed with TWE Restructuring Agreement." (All parentheses in original. Footnotes omitted.)

AT&T and Comcast have filed the TWE Restructuring Agreement with the FCC, but not certain other documents, including the AOL ISP Agreement. AT&T and Comcast argued that these are irrelevant to the FCC's review, and are commercially sensitive. FCC staff, which has had access to the documents, agreed. That is, AT&T and Comcast provided the documents at issue to the Department of Justice's (DOJ) Antitrust Division pursuant to its request for records in its Hart Scott Rodino (HSR) review of the AT&T Comcast merger. FCC staff reviewed the documents at the DOJ.

The CFA and Earthlink then filed a motion with the FCC to compel AT&T and Comcast to make the documents a part of the record in the FCC's license transfer proceeding. This would allow the CFA, Earthlink, and the public to learn the contents.

The FCC Order denies this motion. The Order concludes that the documents at issue are not relevant to the FCC's public interest review.

In reaching this conclusion, the Order illustrates the differences between the merger related reviews conducted simultaneously by the DOJ and the FCC. The DOJ's is a closed proceeding, while the FCC is open and subject to public comment. The DOJ handles records confidentially, while the FCC's record is public. The Order also addresses different laws and standards that are applied, and how these affect which records are relevant in each proceeding.

FCC Commissioner Michael Copps (at right) dissented. He wrote that "I believe it would have been better as a matter of procedure to put the requested material into the record pursuant to a protective order and allow Petitioners an opportunity to comment on it."

Copps continued that AT&T and Comcast "have pointed to the accelerated deployment of facilities-based high-speed internet service, digital video, and other broadband services, particularly to residential customers, as one of the major public interest benefits of the proposed merger. [They] have also pointed to their existing agreements with unaffiliated Internet service providers as evidence of their willingness to offer consumers choices with respect to the Internet service they receive over Applicants’ systems. [CFA and Earthlink] thus contend that [AT&T and Comcast] have placed matters pertaining to Internet access into issue in this proceeding." (Brackets inserted by TLJ.)

Copps continued that the Communications Act "contemplates that interested members of the public will have a full opportunity to challenge license transfer applications. In addition, the Commission has recognized, in its policy governing the treatment of confidential information, that petitioners to deny generally must be afforded access to ``all information submitted by licensees that bear upon their applications.´´ Under this policy, even confidential information must be produced, pursuant to a protective order, with an opportunity for petitioners to comment."

EPIC Urges Universities Not to Monitor P2P Networks for Piracy

11/6. The Electronic Privacy Information Center (EPIC) wrote a letter to university presidents regarding "copyright infringement and peer-to-peer (P2P) file trading networks". It states that "While network monitoring is appropriate for certain purposes such as security and bandwidth management, the surveillance of individuals' Internet communications implicates important rights, and raises questions about the appropriate role of higher education institutions in policing private behavior."

The letter was written in response to a letter [4 pages in PDF] written on October 3 by the Recording Industry Association of America (RIAA), and other entertainment content groups, to university presidents stating that "students are using university networks to engage in online piracy of copyrighted creative works".

The RIAA letter states that "The educational purpose for which these networks were built is demeaned by such illegal behavior and is inconsistent with the ethical principles underlying the university community."

The RIAA letter continues that "The students and other users of your school's network who upload and download infringing copyrighted works without permission of the owners are violating Federal copyright law. ``Theft´´ is a harsh word, but that it is, pure and simple. As Deputy Assistant Attorney General John Malcolm recently stated, ``Stealing is stealing is stealing, whether it's done with sleight of hand by sticking something in a pocket or it’s done with the click of a mouse.´´ It is no different from walking into the campus bookstore and in a clandestine manner walking out with a textbook without paying for it." (See, Malcolm speech of August 20, 2002.)

Finally, the RIAA letter asks that universities "Inform students of their moral and legal responsibilities to respect the rights of copyright owners", "Specify what practices are, and are not, acceptable on your school’s network", "Monitor compliance", and "Impose effective remedies against violators".

The EPIC rebuttal focuses on two words in the RIAA letter -- "Monitor compliance". EPIC argues that "Network monitoring can have a chilling effect on the marketplace of ideas".

EPIC elaborates that "Monitoring the content of communications is fundamentally incompatible with the mission of educational institutions to foster critical thinking and exploration. Monitoring chills behavior, and can squelch creativity that must thrive in educational settings.  Furthermore, in order to monitor at the level desired by the copyright industry -- to detect file transfers ``without authorization´´ -- institutions would have to delve into the content and intended uses of almost every communication.  Such a level of monitoring is not only impracticable; it is incompatible with intellectual freedom."

EPIC also argues that network monitoring "can become systems of surveillance. Once installed on an institution's network, they could be used for copyright control today, and the control of ideas tomorrow."

The EPIC letter was signed by Marc Rotenberg, Chris Hoofnagle, Adam Kessel, and Ruchika Agrawal.

The RIAA letter was signed by Hillary Rosen of the RIAA, Jack Valenti of the Motion Picture Association of America (MPAA), Edward Murphy of the National Music Publishers' Association (NMPA), and Rick Carnes of the The Songwriters Guild of America.

See also, letters [3 pages in PDF] of October 8 to colleges and universities from David Ward of the American Council on Education, Nils Hasselmo of the Association of American Universities, David Warren of the National Association Independent Colleges and Universities, George Boggs of the American Association of Community Colleges, Constantine Curris of the American Association of State Colleges and Universities, and Peter Magrath of the National Association of State Universities and Land Grant Colleges.

People and Appointments

11/6. William Kolasky will return to the law firm of Wilmer Cutler & Pickering as a partner in the firm's antitrust practice group, effective December 1. He is currently Deputy Assistant Attorney General in the Department of Justice's Antitrust Division, with responsibility of international matters. During his short tenure at the DOJ he has worked on convergence of antitrust principles, improving relations between US and EU antitrust regulators following the GE Honeywell matter, and building the International Competition Network. He has given numerous speeches that are collected in the DOJ website. See also, WCP release [PDF].

11/6. Rep. Dick Gephardt (D-MO), the current House Minority Leader, will not seek the position of House Minority Leader in the 108th Congress.

11/6. Novell named Thomas Plaskett to its Board of Directors. He was previously the Ch/P/CEO of Pan Am Corp, and P/CEO of Continental Airlines. See, Novell release.

11/6. Martin Gold will join the legislative practice group of the law firm of Covington & Burling, effective January 1, 2003. He focuses on sports law, health care, antitrust, communications, and taxation. See, CB release [PDF].

More News

11/6. The Federal Communications Commission (FCC) released a Forfeiture Order in the amount of $133,000 against Callais Cablevision of Grand Isle, Louisiana, for violations of 47 C.F.R. §§ 76.605(a)(12), 76.611(a) and 76.612, which protect aeronautical safety communications from interference caused by leakage from cable systems and violation of 47 C.F.R. §11.11, which requires cable systems to install the Emergency Alert System (EAS) equipment needed to transmit national emergency messages. Cable signal leakage from Callais Cablevision's cable   systems interfered with the Federal  Aviation  Administration's (FAA) Remote Communication Air  Ground (RCAG)  facility in Grand  Isle, Louisiana. See also, FCC release.

11/6. The Securities and Exchange Commission (SEC) voted to propose rules implementing provisions of the Sarbanes Oxley Act that prescribe "minimum standards of professional conduct for attorneys appearing and practicing before the Commission in any way in the representation of issuers." See, SEC release.

11/6. Securities and Exchange Commission (SEC) Commissioner Cynthia Glassman stated in a release that "I am sad and disappointed that Chairman Pitt has resigned. His departure will be a loss for the investing public, the SEC, and me personally. Despite the controversies during his tenure, under Harvey's leadership, the Commission did outstanding work on behalf of American investors."

11/6. Ericsson issued a release in which it stated that "On November 6, the Swedish police have taken three individuals into custody, suspected of espionage or corporate espionage. The three individuals are employed by or have been employed by Ericsson. The three individuals are suspected to have handed over top secret information to a foreign power."

Go to News from November 1-5, 2002.