News from February 26-28, 2003

Virginia Court Rules on Duty of Computer Consultant to Placement Agency

2/28. The Supreme Court of Virginia issued its opinion [MS Word] in Williams v. Dominion Technology Partners, an dispute between a computer consultant and a company recruited him for temporary placement with other companies. The Virginia Supreme Court reversed the trial court's award of judgment to the placement company.

Donald Williams is a computer consultant. Dominion Technology Partners (Dominion) is a company that recruits computer consultants and places them with companies on a temporary basis. Dominion also sometimes uses an employment brokerage company to place its consultants.

Dominion hired Williams as an at-will employee, paying him $80 per hour for work performed for Dominion clients. There was no express confidentiality or non-compete agreement between Williams and Dominion. Dominion then contracted with employment brokerage company ACSYS to place Williams; ACSYS, in turn, placed Williams with a company, Stihl, that needed a computer consultant to oversee the installation of a new software package on computer systems. Stihl paid ACSYS $165 per hour for Williams' services. ACSYS paid Dominion $115. Dominion paid Williams $80.

Stihl was satisfied with Williams' work, and continued to contract for his services on other projects. Williams made arrangements to become an employee of ACSYS. Then, he terminated his employment with Dominion, and went to work for ACSYS, for $100 per hour.

Dominion sued Williams, but not ACSYS, in Virginia state court alleging breach of contract, tortious interference with business relationships and prospective business relationships, breach of fiduciary duty, and business conspiracy in violation of Virginia Code §§ 18.2-499 and 18.2-500. Following a jury trial, the trial court awarded judgment to Dominion on three theories of liability: breach of a fiduciary duty, interference with business relationships, and statutory business conspiracy. Williams appealed.

The Supreme Court reversed, and entered judgment for Williams. It wrote that "an employee-at-will, owes a fiduciary duty of loyalty to his employer during his employment", and this includes "the more specific duty that the employee not compete with his employer during his employment." However, "in the absence of a contract restriction regarding this duty of loyalty, an employee has the right to make arrangements during his employment to compete with his employer after resigning his post."

The Supreme Court commented that other types of employee conduct, such as misappropriation of trade secrets, misuse of confidential information, and solicitation of an employer's clients or other employees prior to termination of employment, would constitute breach of fiduciary duty. However, the court wrote that "it cannot be said that Williams' conduct to safeguard his own interests was either disloyal or unfair to Dominion". It added that "Dominion's disappointment that its hopes did not bear the expected additional benefit it might have obtained under a different contractual agreement with ACSYS does not translate into a breach of any fiduciary duty Williams owed to Dominion."

Bush Amends Executive Orders Pertaining to Cyber Security

2/28. President Bush signed an order that constitutes a collection of executive orders, amendments to existing executive orders, and other matters, pertaining to homeland security. The order contains several technology and communications related items.

Section 7 of this order is an amended version of Executive Order 13231, dated October 16, 2001, and titled "Critical Infrastructure Protection in the Information Age". The amended version provides that "It is the policy of the United States to protect against disruption of the operation of information systems for critical infrastructure and thereby help to protect the people, economy, essential human and government services, and national security of the United States, and to ensure that any disruptions that occur are infrequent, of minimal duration, and manageable, and cause the least damage possible. The implementation of this policy shall include a voluntary public-private partnership, involving corporate and nongovernmental organizations."

Section 13 of this order amends Executive Order 13133, dated August 5, 1999, and titled "Working Group on Unlawful Conduct on the Internet". The sole change is adding the Secretary of Homeland Security to the membership of the working group.

Section 46 of this order amends Executive Order 12472, dated April 3, 1984, and titled "Assignment of National Security and Emergency Preparedness Telecommunications Functions".

Section 47 of this order amends Executive Order 12382, dated September 13, 1982, and titled "President's National Security Telecommunications Advisory Committee".

Section 86 of this order provides an exception to the provisions of the Government Employees Training Act for "Those elements of the Department of Homeland Security that are supervised by the Under Secretary of Homeland Security for Information Analysis and Infrastructure Protection through the Department's Assistant Secretary for Information Analysis ..."

People and Appointments

2/28. Stephen Swad was named EVP and CFO of AOL. He was previously EVP of Finance and Administration for Turner Broadcasting System. He will report to AOL Vice Chairman Joseph Ripp. See, AOL release.

More News

2/28. The Cato Institute released a paper [17 pages in PDF] titled "Should Congress Repeal Securities Class Action Reform?" The paper examines the effects of the Private Securities Litigation Reform Act of 1995 (PSLRA). Technology companies lobbied for its passage. The paper concludes that "The hard evidence does not support repealing the PSLRA. In fact, securities class actions are being filed at a record pace. And although a higher percentage of these lawsuits is being dismissed now than before the act, the ones that survive lead to larger settlements. ... In short, the PSLRA is working well, although not as well as intended, and there do not appear to be grounds to either repeal or significantly amend it. A better course for reform would be to change the damages remedy in securities fraud class actions to focus on deterrence." The paper was written by Adam Pritchard. See also, executive summary.

2/28. Microsoft announced that it signed an agreement with the China Information Technology Security Certification Center (CNITSEC) to participate in the recently announced Government Security Program (GSP). Microsoft stated in a release that "GSP is a global initiative that provides national governments with controlled access to Microsoft Windows source code and other technical information they need to be confident in the security of the Windows platform." See also, Microsoft release regarding Bill Gates' trip to Beijing.

2/28. EU Trade Commissioner Pascal Lamy will be in Washington DC on March 3 and 4 for meetings with U.S. Trade Representative (USTR) Robert Zoellick, Secretary of the Treasury John Snow, Stephen Friedman (Counsel of Economic Advisors), Secretary of Commerce Donald Evans, Sen. Charles Grassly (R-IA) (Chairman of the Senate Finance Committee), International Monetary Fund (IMF) Managing Director Horst Koehler, Rep. Sandy Levin (D-MI), and Rep. Bill Thomas (R-CA) (Chairman of the House Ways and Means Committee). He will also speak at a Brookings Institute event, and at a Congressional Economic Leadership Institute luncheon. See, TLJ calendar.

2/28. The Office of the U.S. Trade Representative (USTR) published in its web site reports from 31 trade advisory committees regarding the recently completed free trade agreements (FTAs) with Singapore and Chile. The Trade Act of 2002 requires these reports for trade agreements negotiated pursuant to the President's Trade Promotion Authority (TPA). See, USTR release. With respect to the Singapore FTA, see the report [PDF] of the Industry Sector Advisory Committee (ISAC) on Electronics and Instrumentation, report [17 pages in PDF] of the ISAC on Services (which covers e-commerce, telecommunications and information technology services), report [21 pages in PDF] of the Industry Functional Advisory Committee (IFAC) on Intellectual Property Rights, and the report [PDF] of the IFAC on Electronic Commerce. With respect to the Chile FTA, see the report [PDF] of the IFAC on Intellectual Property Rights, report [PDF] of the IFAC on Electronic Commerce, report [PDF] of the ISAC on Services, and the report [PDF] of the ISAC on Electronics and Instrumentation.

2/28. President Bush gave a speech to employees of the Department of Homeland Security at the Ronald Reagan Building and International Trade Center Washington, DC. He stated that "The Department of Homeland Security is also charged with strengthening our defenses against cyber-terrorism and the even greater dangers of biological, chemical or nuclear weapons. We've established a science and technology directorate within the Department so we can apply some of our nation's best minds to the task of protecting our people. I've nominated a good man, Dr. Charles McQueary, to head up this effort." The Senate Commerce Committee has scheduled a confirmation hearing for McQueary for Tuesday, March 4.

2/28. The Office of the U.S. Trade Representative (USTR) submitted to the Congress the 2003 Trade Policy Agenda and 2002 Annual Report of the President of the United States on the Trade Agreements Program. See USTR page with hyperlinks to PDF copies of the components of this submission. See also, USTR release.

2/28. Federal Communications Commission (FCC) Commissioner Kathleen Abernathy gave a speech [PDF] regarding children's television and V-chips.

Rep. Stearns Introduces Media Ownership Bill

2/27. Rep. Cliff Stearns (R-FL) introduced HR 1035, the Broadcast Ownership for the 21st Century Act, a bill to require the Federal Communications Commission (FCC) to relax its media ownership rules.

The bill provides that the FCC "shall modify section 73.3555 of its regulations (47 C.F.R. 73.3555) by eliminating any provisions limiting the granting or renewal of an AM or FM radio or television broadcast station license to any party (including parties under common control) on the basis of the ownership, operation, or control by such party of a daily newspaper."

The bill also affects the network television ownership cap. It provides that "Section 202(c)(1)(B) of the Telecommunications Act of 1996 is amended by striking `35 percent´ and inserting `45 percent´."

The bill also revises the FCC rule regarding local television multiple ownership. It requires the FCC "to permit a person or entity to directly or indirectly own, operate, or control two television stations in the same designated market area if (1) the grade B contours of such stations do not overlap; or (2) the grade B contours of such stations do overlap and at least 6 independent broadcast or cable television voices would remain in the designated market area after the transfer of ownership, operation, or control of the license of the stations in question." It also specifies how the FCC is to determine the number of independent voices.

The bill was referred to the House Commerce Committee, of which Rep. Stearns is a senior member. HR 1035 is a revised version of a bill that Rep. Stearns introduced in the 107th Congress -- HR 2536.

Senate Commerce Committee Examines E911 Implementation

2/27. Sen. Ernest Hollings (D-SC), the ranking Democrat on the Senate Commerce Committee, wrote a letter [PDF] to Federal Communications Commission (FCC) Chairman Michael Powell to "express my ongoing concern regarding the Commission's efforts to ensure swift, nationwide deployment of wireless E911 technology."

Sen. Hollings wrote that "At present, over a third of all 911 calls are made on wireless phones. But in the future, as the number of wireless minutes increases and as more Americans begin to rely on a mobile phone as their only phone, the need to locate individuals who may be unaware of their surroundings or unable to communicate them to emergency personnel will only grow more acute."

He stated that "over the past six years, the FCC has changed its rules, extended its deadlines, and granted waivers to almost every carrier in the nation. Because continued delay will only put more lives at risk, the Commission must redouble its efforts to enforce its E911 rules aggressively and to see that wireless carriers act expeditiously to implement this life-saving technology."

Sen. Hollings' letter also requested the production of documents.

Last week, several Senators and Representatives formed an E911 Caucus. See, release of Sen. Conrad Burns (R-MT).

The Commerce Committee's Communications Subcommittee is scheduled to hold a hearing on E911 on Wednesday, March 5. The first group of witnesses will include three co-chairs of the E911 Caucus: Sen. Hillary Clinton (D-NY), Rep. John Shimkus (R-IL), and Rep. Anna Eshoo (D-CA). The fourth co-chair is Sen. Burns. However, as Chairman of the Communications Subcommittee, he will preside at the hearing.

The next panel will include FCC Commissioners Kathleen Abernathy and Jonathan Adelstein. Finally, the Subcommittee will hear from Jenny Hanson (State of Montana), John Melcher (National Emergency Number Association), Thera Bradshaw (International Associated Public Safety Communications Officials), Michael Amarosa (TruePosition, Inc.), and Mark Tuller (Verizon Wireless).

Sen. Craig Introduces Bill to Block Hynix Chips

2/27. Sen. Larry Craig (R-ID) introduced S 492, an untitled bill to require a cash deposit of 80 percent on DRAM semiconductors made by Hynix Semiconductor that are imported into the U.S.

The bill states in its findings that "The Government of Korea and the banks that it owns and controls have provided over $16 billion in financial assistance to Hynix Semiconductor" and that "Hynix Semiconductor is essentially a bankrupt entity that would not be able to obtain loans from commercial sources".

The bill provide that "Congress hereby directs the Secretary of Commerce and the United States Customs Service to immediately suspend liquidation on entries into the United States of dynamic random access memory (DRAM) semiconductors produced or imported by Hynix Semiconductor and to impose a cash deposit of estimated countervailing duties in the amount of 80 percent ad valorem on all such imports."

Micron Technology is based in the state of Idaho, which Sen. Craig represents. He stated in a release that "It is hard for me to be dispassionate about this issue, when I think of the 1,100 Micron workers who were laid off last week. It is infuriating that this happened because a foreign government is pursuing a calculated agenda to dump their product in this country long enough to drive our domestic producers out of business ... I am becoming convinced that the Korean government absolutely will not stop this unrelenting, illegal campaign of subsidization until Micron has been driven out of business. If they are successful, they will increase prices to ridiculous levels and tighten their chokehold on the U.S. high-tech equipment industry. I, for one, will not sit by and watch this happen without taking action."

Also on February 27, Sen. Mike Crapo (R-ID) introduced SConRes 11, which expresses "the sense of Congress regarding the Republic of Korea's continuing unlawful bailouts of Hynix Semiconductor Inc., and calling on the Republic of Korea, the Secretary of Commerce, the United States Trade Representative, and the President to take actions to end the bailouts."

Both items were referred to the Senate Finance Committee.

Senate Finance Committee Passes Trade Bill

2/27. The Senate Finance Committee approved the Miscellaneous Trade and Technical Corrections Act of 2003, a collection of individual bills organized as a single package. Title III of the bill pertains to intellectual property rights (IPR).

Sen. Charles Grassley (R-IA), Chairman of the Committee, wrote in a summary [5 pages in PDF] of the bill that there are three IPR provisions. First, there is "Harmonizing the intellectual property rights criteria for eligibility in the Andean Trade Preference Act/Andean Trade Promotion and Drug Eradication Act, the Generalized System of Preferences, the Caribbean Basin Economic Recovery Act/Caribbean Basin Trade Partnership Act trade preference programs to that found in other U.S. trade laws, specifically Special 301."

Second, there is "Establishing a more formalized petition process to ``ensure a timely review and disposition´´ of such petitions by the USTR. The change would generally conform the process by which the eligibility of a country can be challenged under our preference programs to that already applicable for similar trade benefit programs such as the Generalized System of Preferences."

Third, the bill affects IPR by "Correcting a technical deficiency in the time frame for bringing and concluding WTO/TRIPS cases against countries subject to trade action under Special 301."

See also, release [2 pages in PDF] of Sen. Max Baucus (D-MT), the ranking Democrat on the Committee.

Sen. Grassley Outlines Tech Agenda for Senate Finance Committee

2/27. Sen. Charles Grassley (R-IA), Chairman of the Senate Finance Committee, gave a speech [2 pages in PDF] to the Tax Council Policy Institute's 4th Annual Tax Policy Symposium in which he identified tax issues that will be addressed by the Committee. This agenda includes several tech related items, such as the FSC/ETI tax regime, state taxation of internet sales, and EU value added taxes.

He stated that one "important issue is the WTO decision on FSC-ETI. Our bipartisan bicameral working group has continued throughout the fall. We are working hard to reach agreement on this issue. We are committed to getting it done this year, but addressing the economy comes first. We will turn to FSC-ETI once we have completed action on a jobs and stimulus package. Yesterday, the EU announced that it has finalized its FSC-ETI sanctions list." See, EU release regarding sanctions.

Sen. Charles GrassleySen. Grassley (at right) continued that "Threats to impose sanctions will not change our timetable for getting this done. The Europeans need to understand that major changes to our tax code do not happen overnight. I am concerned that EU moves on trade sanctions will only inflame passions, delay the legislative process, and lead to slower economic growth in both Europe and the United States."

He also stated that "The federal moratorium on state taxation of Internet transactions expires this year. I know that this conference focuses on the taxation of Internet and catalog sales, which, of course, concerns state business taxes. The Streamlined Sales Tax Project has completed the first part of its work -- adopting an agreement that seeks to bring order and clarity to sales and use tax in multiple jurisdictions. Now begins the hard part of having state legislatures pass into law the agreement that has been forged. I will certainly be monitoring the actions of the states as the Finance Committee revisits the moratorium this year."

There has been a lot of talk of the budget concerns facing the states. Many will argue that taking action here is one possible option the states have to address questions of revenue. With more state and private sector cooperation, federal action in this area will become less and less important."

See also, S 52, the Internet Tax Nondiscrimination Act, a bill to permanently extend the moratorium enacted by the Internet Tax Freedom Act, sponsored by Sen. Ron Wyden (D-OR).

Finally, Sen. Grassley addressed the EU value added tax. He said that "There is an international Internet matter that I want to address. The European Community recently directed that U.S. businesses are subject to EU value-added taxes when a citizen of the EU downloads a digital product from a U.S. business’s Web site. This is a disturbing development. The EU is imposing VAT taxes on U.S. companies that have never stepped foot inside the EU. I recently learned that some U.S. companies have been forced to set up offices and move employees to Europe to comply with the EU VAT directive. This rule also is designed to discriminate against U.S. vendors by possibly forcing them to impose a higher VAT rate than EU vendors may impose. Dragging jobs out of the U.S., subjecting U.S. companies to EU taxes, and discriminating against U.S. vendors is intolerable. This is an unjust rule and I would like to see it challenged."

People and Appointments

2/27. The Senate Judiciary Committee held a business meeting at which it approved the nominations of Deborah Cook (to be a Judge of the U.S. Court of Appeals  for the Sixth Circuit), John Roberts (DC Circuit), and Jay Bybee (Ninth Circuit). Some Democrats on the Committee had sought to further delay consideration of Cook and Roberts. The nominations still require approval by the full Senate. Meanwhile, Senate Democrats have been filibustering the Miguel Estrada nomination (DC Circuit) in the full Senate for three weeks. President Bush, on February 26, gave another speech in which he condemned Senate Democrats for delaying a vote on Estrada. Bush stated that "his nomination is being delayed and stalled by Democratic senators. His nomination has been stalled for two years. They're blocking the vote on this good man for purely political reasons." See also, prepared statement of Sen. Patrick Leahy (D-VT), the ranking Democrat on the Committee.

More News

2/27. The Federal Communications Commission (FCC) held a field hearing in Richmond, Virginia regarding its review of its broadcast ownership rules. FCC Chairman Michael Powell offered this summary in a prepared statement [PDF]: "Every two years, the Commission is required by statute to review the broadcast ownership rules. And when it does, it is legally required to presume each rule is no longer needed unless we find otherwise.  Unless we can re-justify each broadcast ownership rule under current market conditions, the rule goes away. Under this new standard of review, courts have become far more skeptical of FCC rationales for imposing limits on broadcast ownership. Five times in the past two years we have defended our ownership rules in court. Five times we have lost." Commissioner Michael Copps said in his prepared statement [9 pages in PDF] that "I'm frankly concerned about consolidation in the media, and particularly concerned that we are on the verge of dramatically altering our nation’s media landscape without the kind debate and analysis that these issues so clearly merit." See, also prepared statement [PDF] of Commissioner Kathleen Abernathy and prepared statment [PDF] of Dane Snowden, Chief of the FCC's Consumer & Governmental Affairs Bureau.

2/27. The National Aeronautics and Space Administration (NASA) published a notice in the Federal Register stating that Circuit Avenue Netrepreneurs "has applied for a partially exclusive license to practice the invention described and in NASA Case No. ARC-14480-1, entitled ``An Approach to Automating the Manipulation of Information,´´ ..." The deadline to submit written objections to the prospective grant of a license to the Ames Research Center is March 14, 2003. See, Federal Register, February 27, 2003, Vol. 68, No. 39, at Page 9097.

2/27. Lucent stated in a release that it "reached an agreement in principle with the staff of the Securities and Exchange Commission, which would resolve the commission's investigation of the company. The agreement is subject to final approval of the commission. ... Under the agreement in principle, the company would pay no fines or penalties and would not be required to make any financial restatements. The settlement would conclude the SEC's investigation of Lucent."

2/27. The Electronic Privacy Information Center (EPIC) published in its web site PDF scans of 180 pages of records that it obtained from the Department of Defense (DOD) regarding the Defense Advanced Research Projects Agency's (DARPA) Total Information Awareness (TIA) project. The EPIC has submitted requests for records pursuant to the Freedom of Information Act (FOIA), 5 U.S.C. § 552, and filed complaints against the DOD in the U.S. District Court (DC) alleging failure to comply with the FOIA. See, records obtained by the EPIC: Part 1 [5.6 MB], Part 2 [6.4 MB], Part 3 [5.0 MB], and Part 4 [3.5 MB].

2/27. The Progress and Freedom Foundation (PFF) released a paper [PDF] titled "Intellectual Property in the Internet Age: The Meaning of Eldred". On January 15, 2003, the Supreme Court issued its opinion [89 pages in PDF] in Eldred v. Ashcroft, upholding the constitutionality of the Copyright Term Extension Act, which retroactively extended the maximum duration of copyrights. The PFF concluded that "Eldred is a useful addition to the oeuvre of copyright law, important because it repelled what could have been a serious challenge to fundamental premises. It also left the gate open for arguments that the Internet Age, with its fantastic promise for reducing transaction costs, makes the protection of property rights more important, not less, and that the true interest of consumers lies in developments based on this principle, not on a vague ethos of fuzzy communitarianism." See also, TLJ story titled "Supreme Court Upholds CTEA in Eldred v. Ashcroft", January 15, 2003.

2/27. The Federal Trade Commission (FTC) announced that it filed, and settled, complaints against Hershey Foods Corporation and Mrs. Fields Famous Brands alleging violation of the Children's Online Privacy Protection Act (COPPA) and the Children's Online Privacy Protection Rule by operating web sites targeted at children that collected personal information from children without first obtaining parental consent. See, complaint filed in the U.S. District Court (MDPenn) against Hershey, and Consent Decree. See also, complaint filed in U.S. District Court (CDUtah) against Mrs. Fields, and Consent Decree. The two companies agreed to fines of $85,000 and $100,000, respectively. See also, FTC release.

House Commerce Committee Holds Hearing on FCC Triennial Review Order

2/26. The House Commerce Committee's Telecom and Internet Subcommittee held a lengthy hearing. All five Commissioners of the Federal Communications Commission (FCC) explained and defended their positions in the divided Triennial Review Order which the FCC announced last week. Key members of the Subcommittee condemned the UNE-P portion of the order, and predicted its eventual reversal by the courts. See, full story.

Hearing On Triennial Review Order Serves As Forum For Other Issues

2/26. The House Commerce Committee's Telecom and Internet Subcommittee hearing on February 26 on the Federal Communications Commission's (FCC) Triennial Review order regarding the Section 251 unbundling obligations of incumbent local exchange carriers (ILECs) also served as a forum for the discussion of other communications and technology related issues. Members of the Subcommittee raised the FCC's media ownership rules, e-rate subsidies for schools and libraries, telemedicine at rural health clinics, E911, internet taxes, and other issues. See, full story.

Rep. Stearns Introduces Bill to Preempt State Regulation of Digital Commercial Transactions

2/26. Rep. Cliff Stearns (R-FL), Rep. Adolphus Towns (D-NY), Rep. Charles Bass (R-NH), Rep. Nathan Deal (R-GA), and Rep. Greg Walden (R-OR), introduced HR 945, the Jurisdictional Certainty Over Digital Commerce Act. The bill provides that "Responsibility and authority to regulate digital commercial transactions is reserved solely to the Federal Government". It also preempts state rules, and bans delegation of authority to the states.

The bill provides that "No State or political subdivision thereof may enact or enforce any law, rule, regulation, standard, or other provision having the force or effect of law that regulates, or has the effect of regulating, digital commercial transactions." It also provides that "Any responsibility or authority to regulate digital commercial transactions that, pursuant to subsection (a), is retained by the Federal government may not be delegated, by any Federal agency or officer, to any State or political subdivision thereof."

Rep. Cliff StearnsRep. Stearns (at right) addressed this issue at a hearing on September 26, 2002. He stated then that "It is essential that the growth of e-commerce is not stymied by laws and or regulation that were enacted or promulgated before the full scope of e-commerce was understood." See, TLJ story titled "House Subcommittee Holds Hearing on State Impediments to E-Commerce", September 26, 2002.

Rep. Stearns and other introduced a substantially similar bill in the 107th Congress. See, HR 2421 (107th), introduced on July 16, 2001. HR 945 has been referred to both the House Committee Commerce and the House Judiciary Committee.

Rep. Pence Introduces Truth in Domain Names Act

2/26. Rep. Mike Pence (R-IN) introduced HR 939, the Truth in Domain Names Act. The bill would amend the criminal code to provide that "Whoever knowingly uses a misleading domain name with the intent to attract a minor into viewing a visual depiction of sexually explicit conduct on the Internet shall be fined under this title or imprisoned not more than 2 years, or both."

Rep. Mike PenceRep. Pence (at right) spoke in the House in support of his bill. He stated that "the Internet can be a force for good, but it can also be a force for evil." See, Cong. Record, Feb. 26, 2003, at H1363. See also, Pence release.

"The reality is that there is also the worst of the Internet, equally accessible to our children. The Internet can actually be used to deceive children into viewing inappropriate material. According to a survey conducted in the year 2000 by the Crimes Against Children Research Center, they found that 71 percent of teenagers had accidentally come across inappropriate sexual material on the Internet", said Rep. Pence.

This bill is substantially similar to a bill introduced by Rep. Pence in the 107th Congress. See, HR 4658 (107th). That bill had 38 cosponsors, but was not reported out of Committee. HR 939 (108th), like HR 4658 (107th), was referred to the House Judiciary Committee. Rep. Pence is a member.

USTR Testifies On Administration Trade Agenda

2/26. U.S. Trade Representative (USTR) Robert Zoellick testified before the House Ways and Means Committee about the administration's trade agenda. See, prepared testimony.

Zoellick addressed the rulings by the World Trade Organization (WTO) holding that the U.S. Foreign Sales Corporation (FSC), and replacement, tax regimes constitute illegal export subsidies. He wrote that "The United States should also live up to its obligations under WTO rules. In particular, the Administration needs the assistance of the Congress to come into compliance in cases dealing with the FSC / ETI law ..."

Also on February 26, the European Union, which has long complained about the FSC and ETI tax regimes, announced a revised draft list of products that could be subject to countermeasures -- that is, retaliatory tariffs. See, EU release.

Zoellick also addressed electronic commerce. He wrote that "The United States is actively engaged in the work program on electronic commerce, now being conducted under the auspices of the WTO's General Council. In 2002, two meetings were dedicated to e-commerce and focused on classification and fiscal implications of electronically transmitted products. As the work progresses, the United States will push for a set of objectives to form the basis for a positive statement from the WTO about the importance of free-trade principles and rules to the development of global e-commerce."

He also addressed PR China's compliance with its WTO commitments. He wrote that "Overall, during the first year of its WTO membership, China made significant progress in implementing its WTO commitments. It gained ground by making numerous required systemic changes and by implementing specific commitments, such as tariff reductions, the removal of numerous non-tariff barriers, and the issuance of regulations to increase market access for foreign firms in a variety of services sectors. Nevertheless, we have serious concerns about areas where implementation has not yet occurred or is inadequate -- particularly agriculture, intellectual property rights enforcement, and certain services sectors."

DOJ Seizes Web Site In Copyright Case

2/26. The Department of Justice (DOJ) announced that it seized an internet domain name pursuant to a plea agreement with David Rocci. He had used the domain,, in connection with his violation of criminal copyright laws.

The DOJ has now published a notice at this web address that states, in part, as follows: "The domain and web site were surrendered to U.S. law enforcement pursuant to a federal prosecution and felony plea agreement for conspiracy to violate criminal copyright laws."

The notice continues that "David Rocci, a.k.a ``krazy8,´´ pled guilty in the United States District Court for the Eastern District of Virginia on December 19, 2002, to conspiring with others to violate federal copyright laws by illegally importing, marketing, and selling modification, or ``mod,´´ chips. Mod chips illegally circumvent built-in security protections and allow individuals to play pirated games on game consoles, such as the Microsoft Xbox and the Sony Playstation2. Rocci and his co-conspirators used as the exclusive outlet to market and sell their mod chips to individuals in the illegal warez scene. As a result, the iSONEWS website is now the property of the United States government. Individuals involved in this conduct face up to five years in federal prison and a fine of $500,000 for each count charged." See also, DOJ release.

DOJ Withholds Support for SBC's Long Distance Application

2/26. The Department of Justice's (DOJ) Antitrust Division issued its evaluation [25 pages in PDF] to the Federal Communications Commission (FCC) in which it stated that it is unable to support SBC's application under Section 271 to provide in region interLATA services in the state of Michigan.

Hewitt Pate, acting Assistant Attorney General in charge of the Antitrust Division, stated in a release that "SBC has made significant strides in opening its Michigan markets, as demonstrated by the levels of entry achieved to date ... Serious concerns remain in several areas that may affect whether the current state of competition is irreversible, however, and these concerns merit the FCC's careful attention."

The DOJ wrote in its evaluation that "in-region, interLATA entry by a regional BOC should be permitted only when the local markets in a state have been ``fully and irreversibly´´ opened to competition." The DOJ added that "The Department believes that SBC has made significant strides in opening its Michigan markets, as demonstrated by the levels of entry achieved to date. Nevertheless, serious concerns, suggesting that the progress made may not be irreversible, remain at this time. These concerns preclude the Department from supporting this application based on the current record. The Department does not, however, foreclose the possibility that the Commission may be able to determine that these concerns have been adequately addressed prior to the conclusion of its review."

One of the issues raised by the DOJ evaluation is line splitting and DSL service. It wrote that "AT&T raises several issues concerning SBC's provision of line-splitting service. Two of these issues merit the Commission's consideration. AT&T has entered into a partnership with Covad that could provide significant competition to the combination of voice and DSL services now offered by and through the incumbent local telephone companies. On the same split line AT&T provides voice service via UNE-platform, while Covad provides DSL service. AT&T has, however, encountered several obstacles to implementing the partnership’s combination of services in SBC’s Michigan service area." (Footnote omitted.)

SBC submitted this application on January 16, 2003. February 26 was the extended deadline for the DOJ's evaluation. The FCC must rule on the application within 90 days of January 16. This is WC Docket No. 03-16.

Mankiw to Replace Hubbard at Council of Economic Advisors

2/26. Glenn Hubbard, the current Chairman of the Council of Economic Advisors (CEA), announced his resignation. President Bush announced his intent to nominate Gregory Mankiw to be a Member of the CEA, and upon confirmation, to designate him as Chairman. He is currently a professor of economics at Harvard. He is also the author of several textbooks, including Macroeconomics (Amazon sales rank 65,947), Principles of Microeconomics, and Principles of Macroeconomics. He is also a research associate with the National Bureau of Economic Research, an advisor to the Federal Reserve Bank of Boston, and an advisor to the Congressional Budget Office (CBO). See, White House release.

Mankiw wrote an opinion piece for Fortune Magazine (May 29, 2000) titled "The Sensible Way to Dismember Microsoft". He wrote that the "real-world remedy is to make Microsoft release the source code for Windows. If Windows were in the public domain (as Linux is), new companies could offer their own improved versions. Microsoft would lose the profits from its past innovations -- a penalty for its past sins. The company would remain intact, however, and could revise its version of Windows without restriction. Bill Gates would keep his highly touted ``right to innovate.´´ Of course, he and other Microsoft shareholders would be a lot poorer. But, heck, that's the cost of losing."

On the other hand, he wrote in another piece (May 15, 2000) that "Economists are divided about the merits of the Microsoft case. Some think the government is protecting upstarts like Netscape from a big, bad monopoly. Others (like me) think the government is taking the new economy away from the scientists and engineers who created the prosperity and handing it over to the nation's lawyers."

More News

2/26. The House Judiciary Committee's Subcommittee on Courts, the Internet and Intellectual Property held a hearing titled "Peer to Peer Piracy on University Campuses". Rep. Lamar Smith (R-TX), the new Chairman of the Subcommittee, presided. He wrote in his prepared statement that "The ready access to file-sharing sites and the ease with which files can be downloaded by broadband connections has emboldened American university students to engage in piracy. This is a serious problem that seeks to undermine the protections provided by the Constitution." Rep. Howard Berman (D-CA) remains the ranking Democrat on the Subcommittee. See also, prepared testimony of witnesses: Hilary Rosen (Ch/CEO of the Recording Industry Association of America), Graham Spanier (President of Pennsylvania State University), Molly Broad (President of the University of North Carolina), and John Hale (Center for Computer Security, University of Tulsa).

2/26. The U.S. Patent and Trademark Office (USPTO) announced its list of the top ten patenting universities in the U.S. in 2002. The top ten are: University of California (all campuses combined), Massachusetts Institute of Technology, California Institute of Technology, Stanford University, University of Texas, Johns Hopkins University, University of Wisconsin, State University of New York, Pennsylvania State University, and Michigan State University.

2/26. The U.S. Patent and Trademark Office (USPTO) published a notice [9 pages in PDF] in its web site titled "Claiming the Benefit of a Prior-Filed Application under 35 U.S.C. §§ 119(e), 120, 121, and 365(c)".

2/26. The World Intellectual Property Organization (WIPO) announced in a release that WIPO Director General Kamil Idris and Spanish Vice-Minister for Education, Culture and Sport Mariano Zabía Lasala signed of a memorandum of understanding (MOU) regarding intellectual property rights. The WIPO stated that the two "agreed on the growing economic and cultural importance of copyright and related rights industries. They further stressed the need to generate greater public awareness of and respect for copyright and related rights at a time when digital technologies have boosted cross-border exploitation of protected works."

2/26. The National Telecommunications and Information Administration (NTIA) published a notice in the Federal Register reminding interested parties that the deadline to submit comments in its proceeding regarding exceptions to the E-SIGN Act is March 31, 2003. The Electronic Signatures in Global and National Commerce (E-SIGN) Act provides, at Section 101, for the acceptance of electronic signatures in interstate commerce, with certain enumerated exceptions. The Act also requires the NTIA to review, evaluate and report to Congress on each of the exceptions. See, Federal Register, February 26, 2003, Vol. 68, No. 38, at Pages 8877.

2/26. The U.S. Court of Appeals (3rdCir) issued its opinion [PDF] in Montgomery County v. Microvote, a dispute involving the sale of direct recording electronic voting machines, a central computer system, computer software, and support services. The Court of Appeals affirmed the District Court.

Go to News from February 21-25, 2003.