News from May 16-20, 2003

Rep. Upton Criticizes FCC for Failure to Release Triennial Review Order

5/20. Rep. Fred Upton (R-MI), the Chairman of the House Commerce Committee's Subcommittee on Telecommunications and the Internet, criticized the Federal Communications Commission (FCC) for failing to release its Triennial Review Order.

On February 20, 2003, the FCC adopted, but did not release, a report and order regarding the Section 251 unbundling obligations of incumbent local exchange carriers (ILECs). The FCC issued only a short press release [2 pages in PDF] and an attachment [4 pages in PDF]. The FCC has yet to release the actual report and order, which is also known as the "triennial review order".

See also, TLJ Articles on the FCC Report and Order of February 20:
 • FCC Announces UNE Report and Order
 • FCC Order Offers Broadband Regulatory Relief
 • FCC Announces Decision on Switching
 • Commentary: Republicans Split On FCC UNE Order
 • Congressional Reaction To FCC UNE Order

Rep. Fred UptonRep. Upton (at right) stated in a release that "It has been three months, 89 days to be exact, since the Commission approved its Triennial Review decision, but no written order has been forthcoming. The telecommunications industry is the engine that drives our economy, but the uncertainty of the last three months has left the high tech sector twisting in the wind."

He continued that "The telecommunications industry had lost over half a million jobs prior to the February 20th ruling, and countless jobs have been lost since. The UNE-P aspects of the Triennial Review decision in February dealt a serious blow to the American economy, and the three-month standstill has only made things worse. We are in desperate need of economic revitalization, and it is the telecommunications sector that will create jobs and drive economic growth once the cloud of uncertainty is lifted."

Upton concluded that "This is a serious matter with American jobs and technology advancement hanging in the balance. We must take the appropriate steps to stimulate competition in the phone industry, but the order must be released before those steps can be taken. I urge the Commission to promptly complete the Triennial Review order, and release it for public vetting." 

The FCC rarely releases its orders, notice of proposed rulemakings, notices or inquiry, and other items, at the time that it adopts them. However, it typically releases most major items about a week to ten days after adoption.

Adelstein Addresses Media Ownership

5/20. Federal Communications Commission (FCC) Commissioner Jonathan Adelstein gave a speech [7 pages in PDF] to the Media Institute regarding the FCC's review of its media ownership rules.

He said that the public opposes further media consolidation. He also rejected the idea that the development of new technologies for the dissemination of information warrant changing long standing media ownership rules.

Jonathan AdelsteinAdelstein (at right) stated that "Despite the oft-repeated exhortation that technology has changed everything, a simple fact remains. No technological advances have made it possible for every person who wants to broadcast in a local community to do so. We therefore must reaffirm that the public interest is served by promoting all three of the basic principles that form the foundation of American broadcasting system: localism, diversity, and competition -- not just competition alone."

He added that "Neither cable nor the Internet has changed the huge market power granted by federal license to use scarce broadcast spectrum, particularly when that license comes with the requirement to be carried on cable."

He offered several recommendations. "First, we must consider how to hold broadcasters accountable to the public for the benefits they claim will result from consolidation. ... Before allowing media companies to expand into traditionally protected areas, the public should know how it will benefit them. The FCC should then require an annual showing from the consolidated broadcaster that it met its commitments."

"Second", said Adelstein, "diversity concerns stemming from cross-ownership of a broadcast station with other media outlets like newspapers or cable should be addressed based upon a specific showing of the diverse voices available in individual local markets and the power of the proposed combination to undermine diverse viewpoints."

"Third, with respect to the national cap, while I clearly prefer to keep the cap at the 35% level that Congress established, in my opinion, the only other number that makes legal and policy sense is 40%, the number the market is at today."

Rep. Meeks Addresses MCI WorldCom Bankruptcy

5/20. Rep. Gregory Meeks (D-NY) spoke in the House about the MCI WorldCom bankruptcy. He stated that "After recording the largest corporate fraud in United States history, costing thousands of jobs and $176 billion in losses to investors, representing three times that of Enron, WorldCom is back, just rebranding themselves to their former name MCI."

Meeks, who is a member of the House Financial Services Committee, continued that "As a supporter of reforming our bankruptcy laws, I am shocked how MCI or any other company can be rewarded for cooking the books, cheating and stealing, and stand to gain by their criminal behavior. Reorganization under the bankruptcy laws should not apply when the assets are the product of criminal activities. Bankruptcy should not be the vehicle for laundering stolen goods. This is the case with MCI, even though they have changed their name and recently rolled out a new marketing campaign to distance themselves from their ``criminal stigma.´´ What an artificial advantage for MCI, our bankruptcy laws."

He also joked, "here is an idea how MCI can market themselves. They can market by saying: MCI stands for massive corporate indiscretions." See, Congressional Record, May 20, 2003, at page H4263.

House Financial Services Committee Approves Revised Internet Gambling Bill

5/20. The House Financial Services Committee (HFSC) approved by voice vote, without amendment, HR 2143, another bill titled the "Unlawful Internet Gambling Funding Prohibition Act". See, HFSC release.

Rep. Spencer BachusThis bill was introduced on Monday, May 19, 2003, by Rep. Spencer Bachus (R-AL) (at left) and others.

The HFSC previously approved HR 21, also titled the "Unlawful Internet Gambling Funding Prohibition Act", on March 13, 2003. The House Judiciary Committee (HJC) just marked up HR 21 on May 14, 2003. Both bills have the same purpose and method, but differ in several significant respects.

HR 2143 contains the same title, the same findings, and relies on the same underlying method to stop illegal internet gambling operations -- barring access to the U.S. financial services system by banning the use of credit cards, wire transfers, and other bank instruments to fund illegal gambling transactions.

HR 2143 would require federal regulators to promulgate regulations "requiring any designated payment system to establish policies and procedures reasonably designed to identify and prevent restricted transactions in any of the following ways: (1) The establishment of policies and procedures that (A) allow the payment system and any person involved in the payment system to identify restricted transactions by means of codes in authorization messages or by other means; and (B) block restricted transactions identified as a result of the policies and procedures developed pursuant to clause (i). (2) The establishment of policies and procedures that prevent the acceptance of the products or services of the payment system in connection with a restricted transaction."

HR 2143, in turn defines "restricted transaction" as "any transaction or transmittal to any person engaged in the business of betting or wagering, in connection with the participation of another person in unlawful Internet gambling, of (A) credit, or the proceeds of credit, extended to or on behalf of such other person (including credit extended through the use of a credit card); (B) an electronic fund transfer or funds transmitted by or through a money transmitting business, or the proceeds of an electronic fund transfer or money transmitting service, from or on behalf of the other person; (C) any check, draft, or similar instrument which is drawn by or on behalf of the other person and is drawn on or payable at or through any financial institution; or (D) the proceeds of any other form of financial transaction as the Federal functional regulators may prescribe by regulation which involves a financial institution as a payor or financial intermediary on behalf of or for the benefit of the other person." This definition mirrors language of HR 21.

However, there are many substantial differences between HR 21 and HR 2143.

HR 21 contains criminal penalties. HR 2143 does not. The change also means that the HJC does not have jurisdiction over HR 2143.

HR 21 provides a civil enforcement role for states. HR 2143 does not.

HR 2143 would rely solely on Federal functional regulators (as defined by Section 509(2) of the Gramm Leach Bliley Act) and the Federal Trade Commission (FTC) for enforcement.

HR 21, as amended and adopted by the HJC on May 14, deleted an exception for internet gambling operations authorized by states. HR 21, as introduced, and as passed by the HFSC on March 13, contains the following exception: "The term ``bets or wagers´´ ... (E) does not include --- (ix) any lawful transaction with a business licensed or authorized by a State." The HJC removed the line "any lawful transaction with a business licensed or authorized by a State".

This may be a killer amendment, that some members supported because they expected that it would kill the bill on the House floor. That is, it will cause the gambling industries that are authorized in some states, such as horse racing, dog racing, and jai alai, to lobby against the bill. HR 2143 puts the exception back in, which puts these gambling interests back on the sidelines.

HR 21 limits the liability of, and remedies available against, interactive service providers. HR 2143 does not contain any special language for these ISPs.

For example, HR 21 provides that "An interactive computer service that does not violate this section shall not be liable under section 1084 of title 18, except this limitation shall not apply if an interactive computer service has actual knowledge and control of bets and wagers and (i) operates, manages, supervises, or directs an Internet website at which unlawful bets or wagers may be placed, received, or otherwise made or at which unlawful bets or wagers are offered to be placed, received, or otherwise made; or (ii) owns or controls, or is owned or controlled by, any person who operates, manages, supervises, or directs an Internet website at which unlawful bets or wagers may be placed, received, or otherwise made or at which unlawful bets or wagers are offered to be placed, received, or otherwise made."

18 U.S.C. § 1084 contains the prohibition of the Wire Act. The Wire Act currently criminalizes the use of "wire communications facilities" in interstate commerce for gambling. The Wire Act does not ban gambling. This is a matter of state law.

Specifically, § 1084 currently provides that "Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers ... shall be fined under this title or imprisoned not more than two years, or both." Since the current statute affects only wire communication facilities, and some internet communications do not involve wires, it leaves open the possibility that some internet gambling may not be illegal under the Wire Act. However, the Department of Justice (DOJ) interprets the Wire Act to encompass internet gambling.

John Malcolm, Deputy Assistant Attorney General in charge of the Computer Crimes and Intellectual Property Section (CCIPS) of the DOJ, testified against the ISP provision in HR 21 at a hearing before the HJC's Crime Subcommittee on April 29, 2003.

He wrote in his prepared testimony that "the Justice Department opposes Section 3(c)(4)(B) of H.R. 21, which provides, in essence, that interactive service providers that are not liable under H.R. 21 shall not be liable under Section 1084 of Title 18, United States Code, unless the ISP has actual knowledge of the bets and wagers and owns, controls, operates, manages, supervises, or directs a website at which unlawful bets or wagers are offered, placed, or received. This provision constructively amends Section 1084, an existing federal criminal statute, and weakens its application by imposing a far higher standard of liability than traditional aiding and abetting liability, which applies to everyone else who must comply with the law. While the Department does not believe that ISPs should be singled out for particularly harsh treatment (and our “track record” bears this out), we do not believe that ISPs should be singled out for uniquely favorable treatment either."

More Information on HR 21. See, story titled "House Judiciary Committee Approves Internet Gambling Bill" in TLJ Daily E-Mail Alert No. 662, May 15, 2003; TLJ story titled "House Crime Subcommittee Approves Internet Gambling Bill", May 6, 2003; and story titled "House Subcommittee Holds Hearing on Internet Gambling Bills" in TLJ Daily E-Mail Alert No. 654, May 2, 2003. The HFSC, which has jurisdiction over HR 21 along with the HJC, approved it on March 13. See, story titled "House Committee Approves Internet Gambling Bill" in TLJ Daily E-Mail Alert No. 623, March 14, 2003. See also, story titled "Rep. Leach Introduces Internet Gambling Bill" in TLJ Daily E-Mail Alert No. 579, January 9, 2003. The companion bill in the Senate is S 627. See, TLJ story titled "Senate Committee Holds Hearing on Internet Gambling Bill", March 18, 2003.

4th Circuit Rules on Relation of Telecom Act to Antitrust Law

5/20. The U.S. Court of Appeals (4thCir) issued its split opinion [27 pages in PDF] in Cavalier Telephone v. Verizon Virginia, another appellate opinion addressing alleged violations of the interconnection provisions of the Telecom Act of 1996, and violations of Section 2 of the Sherman Act. See also, the Goldwasser and Trinko cases. This issue is now before the Supreme Court. It granted certiorari in the Trinko case in March.

Background. Cavalier Telephone, a competitive local exchange carrier (CLEC), entered into an interconnection agreement with Verizon Virginia, an incumbent local exchange carrier (ILEC). Interconnection is mandated by 47 U.S.C. § 251. Cavalier alleges that Verizon implemented interconnection in a manner to prevent Cavalier from competing.

District Court. Cavalier filed a complaint in U.S. District Court (EDVa) against Verizon alleging, among other things, that Verizon monopolized or attempted to monopolize the relevant telecommunications market, in violation of § 2 of the Sherman Act, 15 U.S.C. § 2. The District Court dismissed the antitrust claim for failure to state a claim upon which relief may be granted. This appeal followed.

Appeals Court. The Court of Appeals affirmed.

It reasoned that "When enacting the Telecommunications Act, Congress could well have elected to rely only on the antitrust laws to create competition in local telecommunications markets by simply implementing the Supremacy Clause to preempt State laws that granted exclusive franchises in local markets. But foreseeing the inefficiency of that approach, Congress opted to take the proactive approach of creating new duties under the Telecommunications Act. By ``jump-starting´´ and ``accelerating´´ the creation of competition in the local markets through enactment of §§ 251 and 252 of the Telecommunications Act, Congress imposed more dramatic obligations on the local monopolies than would have been imposed simply by subjecting them to preexisting antitrust liability. This was necessary because the antitrust laws alone do not require legitimate monopolies to give up their monopolies or to help competitors."

"In furtherance of its intent to jump-start or accelerate competition in local markets through means independent of the antitrust laws, Congress enacted §§ 251 and 252 of the Telecommunications Act to impose entirely new duties, which were in addition to the duties imposed by § 2 of the Sherman Act", wrote the Appeals Court. "These obligations exceed the duties imposed by the antitrust laws, and failure to fulfill them would not have supplied the foundations of a monopoly claim."

"Thus, it appears that Congress wished to have both acts further competition in local telecommunications services markets through independent means. Stated otherwise, Congress intended that even as it imposed new duties through enactment of the Telecommunications Act that would fall outside the parameters of the antitrust laws, it intended that the duties imposed by the antitrust laws would be left ``untouched.´´"

"For all of these reasons, we conclude that the Sherman Act continues to apply in its own traditional domain, applying as it did before the Telecommunications Act, and the Telecommunications Act imposes new duties that may be enforced in accordance with its own provisions but not under the Sherman Act unless the conduct otherwise would have supported a claim under the Sherman Act absent the authority of the Telecommunications Act."

The Appeals Court concluded that "Because we find that Cavalier’s complaint alleges only breaches of duties that did not exist prior to the enactment of the Telecommunications Act and would not have supported a claim of monopolization or attempted monopolization, it has failed to state a claim under § 2 of the Sherman Act, and the State analogue, upon which relief can be granted. We therefore hold that the district court properly granted Verizon’s motion to dismiss this action pursuant to Rule 12(b)(6), and we affirm the judgment of the district court."

Judge Niemeyer wrote the opinion for the three judge panel. Judge Widener joined. Judge Morton Greenberg, a judge of the U.S. Court of Appeals (3rdCir) on senior status, sitting by designation, wrote a dissent.

This issue is far from settled. See for example, the Seventh Circuit's July 25, 2000, opinion in Goldwasser v. Ameritech, 222 F.3d 390 (7th Cir. 2000), dismissing an antitrust claim. In contrast, see the opinion of June 20, 2002, of the U.S. Court of Appeals (2ndCir) in the Trinko case, which reversed the District Court's dismissal of antitrust claims.

On March 10, 2003, the Supreme Court granted certiorari in Verizon v. Trinko. See, story titled "Supreme Court Grants Certiorari in Verizon v. Trinko" in TLJ Daily E-Mail Alert No. 620, March 11, 2003.

Also, on May 21, the U.S. Court of Appeals (9thCir) issued its amended opinion [47 pages in PDF] in MetroNet Services v. U S West. The Court made revisions to its original opinion, and denied petitions for rehearing and rehearing en banc. This is an antitrust case involving the market for small business local telephone services in Seattle, Washington. The Appeals Court reversed the District Court's grant of summary judgment to U S West (now Qwest). In so doing, the Appeals Court rejected U S West's argument that it has antitrust immunity. This issue is already before the Supreme Court in the Trinko case. See, story titled "9th Circuit Rules on Antitrust Immunity of ILECs" in TLJ Daily E-Mail Alert No. 634, April 1, 2003.

6th Circuit Adopts Standard for Substantial Similarity in Copyright Infringement Cases

5/20. The U.S. Court of Appeals (6thCir) issued its opinion in Kohus v. Mariol, a copyright infringement case involving the alleged copying of a design drawing. The Appeals Court adopted a standard for determining whether substantial similarity exists in copyright infringement cases. Basically, it modified the "ordinary observer" approach. It held that the Court should focus on the perspective of the intended audience, which usually means ordinary consumers, but, in a few cases, such as the present one, means persons with expertise in the field. Moreover, the Court held that where the target audience of the expression is persons with expertise, admission of expert testimony may be appropriate.

While the facts of this case involve designs for latches on portable children's playyards, the standard announced by the Appeals Courts' for determining whether there is substantial similarity in cases where the audience is persons with special expertise, would be applicable in cases involving, for example, copyrighted computer program code.

Background. Louis Kohus designs and invents consumer products. Previously, Kohus and John Mariol formed a corporation. This corporation developed a portable children's playyard. At issue in this case is a design drawing for a latch on this item. Kohus and Mariol had disagreements, which they litigated. Eventually, they settled. In the settlement Kohus was assigned "all rights, title and interest ... in ... design drawings".

Subsequently, Mariol, as a contractor for another company, developed another portable playyard. He also obtained two patents. However, his claims regarding the latch were rejected, on the grounds that it was anticipated by the original design drawing (that had been assigned to Kohus).

District Court. Kohus filed a complaint in U.S. District Court (SDOhio) against Mariol and others alleging copyright infringement. The District Court granted summary judgment to Mariol. Applying the ordinary observer test, it found that substantial similarity was lacking. This appeal followed.

Court of Appeals. The Court of Appeals vacated the District Court judgment, articulated a standard for substantial similarity, and remanded to the District Court for further proceedings.

The Court wrote that there is a two step test. First, filter out unprotected elements. Second, determine whether there is substantial similarity to the protected elements.

The Court wrote that "The essence of the first step is to filter out the unoriginal, unprotectible elements -- elements that were not independently created by the inventor, and that possess no minimal degree of creativity, see Feist, 499 U.S. at 345 -- through a variety of analyses." The Court also elaborated on this filtering process.

Then, "Once the unprotectible elements have been filtered out, the second step is to determine whether the allegedly infringing work is substantially similar to the protectible elements of the original." The Court continued that courts should apply the "ordinary reasonable person" standard. However, it added that "The test was designed for cases where the lay audience purchases the product at issue, and where the lay audience's untutored judgment determines whether the product will sell."

The Court elaborated, "In cases where the target audience possesses specialized expertise, however, the specialist's perception of similarity may be much different from the lay observer's, and it is appropriate in such cases to consider similarity from the specialist's perspective. The larger principle here is that the inquiry in the second prong of the substantial similarity test should focus on the intended audience. This will ordinarily be the lay public, in which case the finder of fact's judgment should be from the perspective of the lay observer or, as Monogram Models put it, the ordinary reasonable person. But in cases where the audience for the work possesses specialized expertise that is relevant to the purchasing decision and lacking in the lay observer, the trier of fact should make the substantial similarity determination from the perspective of the intended audience. Expert testimony will usually be necessary to educate the trier of fact in those elements for which the specialist will look."

The Appeals Court concluded: "The first prong of the inquiry will almost certainly require expert testimony, because the drawings are technical in nature and a lay person is unlikely to understand what constitutes creativity in this area, which elements are standard for the industry, and which elements are dictated by efficiency or by external standards. In conducting the second prong, the district court should consider substantial similarity from the viewpoint of the intended audience, the nature of which the court must determine. This appears to be one of those rare cases where the intended audience is not the lay public: the drawings are technical and are appropriate for patent treatment; interpretational guidance is needed for the lay viewer to imagine the structure and function of the device that the drawings depict; and the initial purchasers of the device would probably be trained engineers, capable of discerning technical niceties that the ordinary person would not detect, and likely to base their purchasing decision on such details."

USPTO Releases Report on Technological Systems to Protect Digitized Copyrighted Works

5/20. The U.S. Patent and Trademark Office (USPTO) released its report [46 pages in PDF] to Congress on technology designed to protect digitized copyrighted works from infringement. See also, USPTO release.

The report reviews some core technologies of protection systems, including encryption, digital watermarking, and authentication. It also reviews some of the concepts of digital rights management systems, including trusted computing, rights models and rights expression languages, DRM architecture, and types of DRM systems. The report then gives a lengthy review of companies that are developing or offering technological protection systems to protect digitized copyrighted works and prevent infringement. Finally, the report lists and describes groups and organizations that are involved in this area.

This report was required by the "Technology, Education and Copyright Harmonization Act of 2002" (aka TEACH Act). (See, Pub. L. No. 107-273, 116 Stat. 1758.) The Congress passed this Act in late 2002 as part of a larger Department of Justice authorization bill. The TEACH Act primarily deals with amendments to copyright law to facilitate distance learning.

DARPA Releases TIA Report

5/20. The Department of Defense Advanced Research Projects Agency (DARPA) released a report [PDF] titled "Report to Congress Regarding the Terrorism Information Awareness Program". The DARPA had previously referred to this project as "Total Information Awareness".

Following privacy related criticisms of the TIA program, the Congress earlier this year imposed certain limits upon the TIA program, and required the DARPA to submit this report.

Sen. Ron Wyden (D-OR) offered an amendment (SA 59) to HJRes 2 the further appropriations for FY 2003 resolution in January of 2003. It was approved by the Senate, and, with minor changes, was incorporated into the final resolution as passed by both the House and Senate. See, story titled "Senate Approves Total Information Awareness Amendment" in TLJ Daily E-Mail Alert No. 590, January 24, 2003, and story titled "House and Senate Pass FY 2003 Appropriation Package With TIA Amendment" in TLJ Daily E-Mail Alert No. 604, February 14, 2003.

The report states that "The TIA research and development program aims to integrate information technologies into a prototype to provide tools to better detect, classify, and identify potential foreign terrorists. TIA's research and development goal is to increase the probability that authorized agencies of the United States can preempt adverse actions."

In elaborates that "The TIA research and development efforts seek to integrate technologies developed by DARPA (and elsewhere, as appropriate) into a series of increasingly powerful prototype configurations that can be stress-tested in operationally relevant environments using real-time feedback to refine concepts of operation and performance requirements down to the technology component level. In a sense, TIA is a program of programs whose goal is the creation of a counterterrorism information architecture that would:

The report concludes that "neither individuals nor teams of unaided humans can function with maximum effectiveness in the present environment. DARPA's aim in TIA research and development is to seek a revolutionary leap forward by augmenting human performance in dealing with several facets of the terrorist problem. Through an aggressive program to harness and integrate a group of computer tools in various states of R&D, DARPA plans to assist humans cope with massive and varied data sets, think and reason about the counterterrorism problem, and work together in ad hoc teams to bring diverse points of view to the solutions to the problems. By augmenting human performance using these computer tools, the TIA Program expects to diminish the amount of time humans must spend in discovering information and allow humans more time to focus their powerful intellects on things humans do best -- thinking and analysis."

The report also addresses privacy. It states that "TIA's research and testing activities have depended entirely on (1) information legally obtainable and usable by the Federal Government under existing law, or (2) wholly synthetic, artificial data that has been generated to resemble and model real-world patterns of behavior. Further, the TIA Program is not attempting to create or access a centralized database that will store information gathered from various publicly or privately held databases."

It further states that "Nevertheless, ultimate implementation of some of the component programs of TIA may raise significant and novel privacy and civil liberties policy issues. Largely because of the greater power and resolution of TIA's search and data analysis tools, questions will arise concerning whether the safeguards against unauthorized access and use are sufficiently rigorous, and whether the tools can or should be applied at all with respect to certain types of particularly sensitive information. In addition, privacy and civil liberties issues may arise because some would argue that the performance and promise of the tools might lead some U.S. Government agencies to consider increasing the extent of the collection and use of information already obtained under existing authorities."

The report adds that "Safeguarding the privacy and the civil liberties of Americans is a bedrock principle."

People and Appointments

5/20. President Bush announced his intent to nominate Penrose Albright to be Assistant Secretary of Homeland Security (Plans, Programs and Budgets). He is currently Assistant Director for Homeland and National Security in the White House Office of Science and Technology Policy (OSTP). He has also worked for the Defense Advanced Research Projects Agency (DARPA) and the Institute for Defense Analyses. See, White House release.

5/20. Josh Swift was named Legal Counsel to the Federal Communications Commission (FCC) Wireline Competition Bureau (WCB) Chief William Maher. He has worked at the WCB since August of 2001. Before that, he was a trial attorney at the Department of Justice (DOJ). Before that, he was an associate in the Washington DC office of the law firm of Morgan Lewis & Bockius. See, FCC release [PDF].

5/20. Paul Garnett was named Acting Assistant Chief of the Federal Communications Commission's (FCC) Wireline Competition Bureau's (WCB) Telecommunications Access Policy Division. The Assistant Chief, Anita Cheng, is on parental leave. The FCC stated in a release [PDF] that Garnett will have responsibility for "issues relating to the receipt of universal service support in competitive areas, the payment of universal service contributions, and the high-cost universal service support mechanisms". He has worked at the FCC since March of 2000. Before that, he worked in the Washington DC office of the law form of Swidler Berlin.

More News

5/20. On Tuesday, May 20, the House Financial Services Committee will meet to mark up eight bills, including HR 2143, the "Unlawful Internet Gambling Funding Prohibition Act". The meeting may be continued to 10:00 AM on May 21. The HFSC already approved HR 21, a bill with the same title, on March 13, 2003. See, story titled "House Committee Approves Internet Gambling Bill" in TLJ Daily E-Mail Alert No. 623, March 14, 2003. See also, story titled "Rep. Leach Introduces Internet Gambling Bill" in TLJ Daily E-Mail Alert No. 579, January 9, 2003. On May 14, the House Judiciary Committee, which also has jurisdiction, amended and approved HR 21 by a vote of 16-15.

5/20. The U.S. Patent and Trademark Office (USPTO) published a notice in the Federal Register requesting public comments regarding changes needed to implement a Patent Cooperation Treaty (PCT) style Unity of Invention standard in the U.S. The deadline to submit public comments is July 21, 2003. See, Federal Register, May 20, 2003, Vol. 68, No. 97, at Pages 27536 - 27539. For more information, contact Robert Clarke at 703 305-9177 or

5/20. The Copyright Office (CO) published a notice in the Federal Register "requesting comment on proposed regulations that set rates and terms for the use of sound recordings in eligible nonsubscription transmissions and new subscription services, other than transmissions made by certain noncommercial entities, together with related ephemeral recordings. The rates and terms are for the 2003 and 2004 statutory licensing period, except in the case of new subscription services in which case the license period runs from 1998 through 2004." This notice also states that "The agreement published herein supersedes the agreement published in the Federal Register on May 1, 2003, and parties should only comment on the proposed rates and terms set forth in this notice." Comments are due by June 19, 2003. See, Federal Register, May 20, 2003, Vol. 68, No. 97, at Pages 27506 - 27513. See also, superseded notice in the Federal Register, May 1, 2003, Vol. 68, No. 84, at Pages 23241 - 23249. For more information, contact David Carson (CO General Counsel) or Tanya Sandros (Senior Attorney, Copyright Arbitration Royalty Panel) at 202 707-8380.

5/20. The Senate Banking Committee held a hearing to examine the Fair Credit Reporting Act (FCRA) and issues presented by the re-authorization of the expiring preemption provisions. Howard Beales, Director of the Federal Trade Commission's (FTC) Bureau of Consumer Protection, testified. See, prepared testimony [29 pages in PDF].

5/20. The House Homeland Security Committee's (HHSC) held a hearing to assess progress made by the new Department of Homeland Security. See, opening statement by Rep. Chris Cox (R-CA), Chairman of the Committee, and prepared testimony of Secretary of Homeland Security Tom Ridge. Ridge addressed, among other topics, cyber security. He testified that "DHS' Information Analysis and Infrastructure Protection Directorate (IA&IP) provides infrastructure coordination for physical and cyber disruptions, maps threat against vulnerability information, and provides indications and warnings of potential attacks." He added that "We recognize that many of our nation's infrastructures and processes are highly reliant on cyberspace. DHS is committed to making the protection of our nation's cyber infrastructure and prevention of cyber attacks a strategic priority."

5/20. U.S. Telecom Association (USTA) P/CEO Walter McCormick criticized the Federal Communications Commission (FCC) for failing to release its triennial review order, which the FCC announced that it had adopted back in February. He stated in a release that this delay is "an open-ended policy limbo that deepens telecom's fiscal woes and ill-serves the nation." See also, story titled "Rep. Upton Criticizes FCC for Failure to Release Triennial Review Order" in TLJ Daily E-Mail Alert No. 666, May 21, 2003.

Microsoft Licenses Technology at Issue in Caldera v. IBM

5/19. Caldera Systems, dba SCO Group, announced in a release that SCO "has licensed its UNIX technology including a patent and source code licenses to Microsoft Corporation. The licensing deal ensures Microsoft's intellectual property compliance across all Microsoft solutions and will better enable Microsoft to ensure compatibility with UNIX and UNIX services."

On March 6, 2003, Caldera filed a complaint in state court in Utah against IBM alleging misappropriation of trade secrets, tortious interference, unfair competition and breach of contract in connection with IBM's alleged use of Caldera's proprietary UNIX code.

The complaint alleges that "UNIX is a computer operating system program and related software originally developed by AT&T Bell Laboratories (``AT&T´´). SCO/UNIX is a modification of UNIX and related software developed by SCO and its predecessors. UNIX and SCO/UNIX are widely used in the corporate, or ``enterprise,´´ computing environment."

It continues that "As a result of its acquisition of the rights to UNIX from AT&T and its own development of UNIX and SCO/UNIX, SCO is the present owner of both UNIX and SCO/UNIX software. UNIX and SCO/UNIX are valuable software programs and SCO and its predecessors have invested hundreds of millions of dollars in their development and enhancement. SCO (which, as used herein, includes its predecessor) has licensed UNIX and SCO/UNIX both to software vendors such as IBM and computer end-users such as McDonald's. The UNIX and SCO/UNIX licenses granted to software vendors and end-users are limited licenses, which impose restrictions and obligations on the licensees designed to protect the economic value of UNIX and SCO/UNIX." (Parentheses in original.)

Caldera also states in its complaint that "UNIX and SCO/UNIX compete with other proprietary programs and with “open source” software, which is software dedicated to the public. There are advantages of proprietary programs to end-users (including their proprietary functions in which their developers have invested large amounts of time and money). There are also advantages to open source programs to end-users (including that they do not have to pay for the program itself) and to software vendors (whom market the additional products and services that end-users who use open source programs ordinarily require). This case is not about the debate about the relative merits of proprietary versus open source software. Nor is this case about IBM’s right to develop and promote open source software if it decides to do so in furtherance of its independent business objectives, so long as it does so without SCO’s proprietary information. This case is, and is only, about the right of SCO not to have its proprietary software misappropriated and misused in violation of its written agreements and well-settled law." (Parentheses in original.)

The complaint concludes that "... IBM has breached its own obligations to SCO, induced and encouraged others to breach their obligations to SCO, interfered with SCO’s business, and engaged in unfair competition with SCO, including by
a) misusing and misappropriating SCO’s proprietary software;
b) inducing, encouraging, and enabling others to misuse and misappropriate SCO’s proprietary software; and
c) incorporating (and inducing, encouraging, and enabling others to incorporate) SCO’s proprietary software into open source software offerings." (Parentheses in original.)

IBM filed its answer [17 page PDF scan] on April 30, 2003. It asserted that "contrary to Caldera's allegations, by its lawsuit, Calderal seeks to hold up the open source community (and development of Linux in particular) by improperly seeking to assert proprietary rights over important, widely used technology and impeding the use of that technology by the open source community." (Parentheses in original.)

IBM added that it "has not engaged in any wrongdoing. Contrary to Caldera's unsupported assertions, IBM has not misappropriated any trade secrets; it has not engaged in unfair competition; it has not interfered with Caldera's contracts; and it has not breached contractual obligations to Caldera. In any event, IBM has the irrevocable, fully paid-up, and perpetual rights to use the ``proprietary software´´ that it is alleged to have misappropriated or misused."

Microsoft's licensing of UNIX technology may be noteworthy. On the one hand, Microsoft's licensing of Caldera's UNIX technology lends credibility to Caldera's claims in its lawsuit against IBM. Moreover, Microsoft and Caldera have a history of adversity. For example, Caldera sued Microsoft alleging violation of federal antitrust laws. See, for example, Amended Complaint. Also, Caldera is represented by the law firms of Boies Schiller & Flexner and Hatch James & Dodge. David Boies was lead trial counsel for the Department of Justice in the trial of its antitrust case against Microsoft. Brent Hatch is the son of Sen. Orrin Hatch (R-UT), the Chairman of the Senate Judiciary Committee, and Microsoft's leading critic in the Senate.

On the other hand, Microsoft now competes with IBM in the server software market. Microsoft's licensing of Caldera technology could harm IBM's Linux strategy.

IBM is represented by Cravath Swain, and locally, by Snell & Wilmer. The case is pending in the Third Judicial District of Salt Lake County, State of Utah. It is Civil No. 2:03cv0294. Judge Dale Kimball is presiding.

Senators Hatch and Leahy Introduce Antitrust Bill

5/19. Sen. Orrin Hatch (R-UT) and Sen. Patrick Leahy (D-VT) introduced S 1080, the "Antitrust Improvements Act of 2003". The bill would raise the maximum term of imprisonment for an individual who violates the criminal provisions of the antitrust laws from 3 years to 10 years. It would also raise the maximum fine for a corporation from $10 Million to $100 Million. The bill would also repeal Title VIII of the Antidumping Act of 1916, which is codified at 15 U.S.C. § 72.

Sen. Orrin HatchSen. Hatch (at right) stated in the Senate that "These changes are long overdue and will eliminate the huge disparity present in our laws between the treatment of criminal white collar offenses and antitrust criminal violations. The Sarbanes Oxley Act passed last year raised the criminal penalties for a number of white collar offenses, but did not do so for antitrust criminal violations. An antitrust price-fixer who defrauds consumers for a total of $5 million should be subject to a penalty which is more consistent with the penalty scheme for other white collar offenses." See, Congressional Record, May 19, 2003, at page S6631-2.

Sen. Leahy stated in the Senate that "This increase will make it clear to corporate wrongdoers that no antitrust violation is affordable. These changes bring antitrust penalties in line with other white-collar crimes and send a clear message that the United States will not allow any company to abuse its consumers by misusing market power." See, Congressional Record, May 19, 2003, at page S6632.

U.S. Trade Representative (USTR) Robert Zoellick and Attorney General John Ashcroft wrote a letter, which was inserted in the Congressional Record, regarding the proposed repeal of the provision from the 1916 Act. They wrote, "That provision provides for a private right of action for treble damages, as well as for criminal penalties in an action brought by the U.S. government, for international price discrimination. The Administration proposes repeal of this provision because it is redundant of other U.S. laws providing remedies for international price discrimination. To our knowledge, during the past 85 years no plaintiff has obtained a final judgment on the merits under this rarely-invoked law and no government enforcement action has been taken. Furthermore, this provision is inconsistent with the obligations of the United States under the Marrakesh Agreement Establishing the World Trade Organization". See, Congressional Record, May 19, 2003, at page S6632.

The bill was referred to the Senate Judiciary Committee. Sen. Hatch is the Chairman. Sen. Leahy is the ranking Democrat.

Supreme Court Denies Cert in Patent Case Involving On Sale Bar

5/19. The Supreme Court denied certiorari, without opinion, in Micrel v. Linear Technology, a patent infringement case involving the on sale bar. See, Order List [18 pages in PDF], at page 15. This is Supreme Court No. 02-39.

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

On October 15, 2002, the Supreme Court invited the Office of the Solicitor General (OSG) to submit a brief. The OSG submitted a brief arguing that the Appeals Court opinion "does not mark any significant departure from prior Federal Circuit precedent, but rather is part of the Federal Circuit's ongoing effort to clarify the law relevant to Section 102(b)'s on-sale bar. Further review by this Court is not warranted." The Supreme Court's denial of certiorari is consistent with the recommendation of the OSG.

Supreme Court Denies Cert in Case Involving Personal Jurisdiction in Internet Defamation Suit

5/19. The Supreme Court denied certiorari, without opinion, in Young v. New Haven Advocate, a case involving whether a court has jurisdiction over out of state newspapers in a defamation case based upon their publication on the web. See, Order List [18 pages in PDF], at page 5. This is at least the second time this year that the Supreme Court has refused to take a defamation case involving personal jurisdiction based upon internet activity.

On December 13, 2002, the U.S. Court of Appeals (4thCir) issued its opinion [12 pages in PDF] in Young v. New Haven Advocate, holding that a court in Virginia does not have jurisdiction over two small newspapers, and their editors and reporters, located in Connecticut, who wrote allegedly defamatory stories about a Virginia prison warden and published them on the internet. The Court held that the web publication did not establish minimum contacts because the newspapers are not directed at a Virginia audience. See also, TLJ story titled "4th Circuit Rules in Internet Jurisdiction Case", December 13, 2002.

On April 28, 2003, the Supreme Court denied certiorari, without opinion, in v. Northwest Healthcare Alliance. This denial let stand an opinion of the U.S. Court of Appeals (9thCir) holding that the U.S. District Court (WDWash) has personal jurisdiction over an out of state defendant in defamation case, based solely upon publication of its allegedly defamatory statements in its internet web site. See, TLJ story titled "Supreme Court Denies Certiorari in Internet Jurisdiction Case", April 28, 2003.

The lower courts, and foreign courts, have issued many opinions in the last few years in defamation cases. These opinions leave considerable uncertainty as to when a court has personal jurisdiction over a distant defendant, whose internet based conduct serves as the basis for the claim, and personal jurisdiction.

There is also the December 31, 2002 opinion [20 pages in PDF] of the U.S. Court of Appeals (5thCir) in Revell v. Lidov, another internet defamation case. The plaintiff, a resident of Texas, brought suit in Texas against a Harvard (Massachusetts) professor and Columbia University (New York) for an article that the professor published on a Columbia bulletin board. The Appeals Court held that the Texas court lacked personal jurisdiction over the defendants.

In addition to these recent U.S. cases, there is the December 10, 2002 opinion of the High Court of Australia in Dow Jones v. Gutnick, another defamation case.

The Australian Court wrote in the Gutnick case that "defamation is to be located at the place where the damage to reputation occurs. ... In the case of material on the World Wide Web, it is not available in comprehensible form until downloaded on to the computer of a person who has used a web browser to pull the material from the web server. It is where that person downloads the material that the damage to reputation may be done. Ordinarily then, that will be the place where the tort of defamation is committed." See, story titled "High Court Rules Australia Has Jurisdiction Over Dow Jones Based on Web Publication" in TLJ Daily E-Mail Alert No. 564, December 10, 2002.

Thus, in two of these quite recent defamation cases -- Young and Revell -- the courts found that there was no jurisdiction in the forum of the defamed party, while in two other cases -- Healthgrades and Dow Jones -- the courts found jurisdiction in the forum of the defamed party.

And, of course, these cases all deal only with personal jurisdiction when the claim is defamation. The nature of the jurisdictional analysis is different for different types of claims.

Supreme Court Denies Cert in Pay Phone Antitrust Case

5/19. The Supreme Court denied certiorari, without opinion, in Southwestern Bell v. Telecor Communications, an antitrust action brought by independent pay phone service providers against an incumbent local exchange carrier. See, Order List [18 pages in PDF], at page 3. This is Supreme Court No. 02-1171.

On September 10, 2002, the U.S. Court of Appeals (10thCir) issued its split opinion in Telecor Communications v. Southwestern Bell, a private antitrust case involving definition of the relevant market, application of the Noerr Pennington doctrine, and application of the state action and exclusive jurisdiction doctrines. After several pretrial orders, and a jury trial, plaintiffs were awarded $20 Million. The Appeals Court affirmed.

See also, story titled "10th Circuit Rules in Private Telecom Antitrust Case" in TLJ Daily E-Mail Alert No. 506, September 11, 2002.

More Supreme Court News

5/19. The Supreme Court denied certiorari, without opinion, in Grace Consulting v. Dun & Bradstreet, a software copyright and misappropriation of trade secrets case. See, Order List [18 pages in PDF], at page 3. This is Supreme Court No. 02-1307. The U.S. Court of Appeals (3rdCir) issued its opinion on September 24, 2002.

5/19. The Supreme Court denied certiorari, without opinion, in Mirror Image Internet v. Parfi Holding AB. See, Order List [18 pages in PDF], at page 4. This is Supreme Court No. 02-1320. On November 4, 2002, the Supreme Court of Delaware issued its opinion [20 page PDF scan] holding that contracting parties who provide for arbitration of disputes in their agreements need submit to arbitration only those legal claims that touch on the legal rights created by their contract.

5/19. The Supreme Court denied certiorari, without opinion, in Brittan Communications v. Southwestern Bell, ... See, Order List [18 pages in PDF], at page 4. This is Supreme Court No. 02-1376. On December 16, 2002, the U.S. Court of Appeals (5thCir) issued its split opinion [16 pages in PDF] in Brittan Communications v. Southwestern Bell, affirming the District Court's dismissal of a suit brought by a reseller of long distance telephone service (Brittan) against an incumbent local exchange carrier (Southwestern Bell) for suspending billing services. See, story titled "5th Circuit Rules in Brittan v. Southwestern Bell" in TLJ Daily E-Mail Alert No. 569, December 17, 2002.

5/19. The Supreme Court will be in recess from Monday, May 19, 2003, until Tuesday, May 27, 2003. See, Order List [18 pages in PDF], at page18

5/19. President and first lady Bush hosted a state dinner at the White House for Philippines President Gloria Arroyo and Jose Arroyo. The guests included Justice Sandra O'Connor and John O'Connor. Supreme Court Justices do not frequently attend White House events. Various press accounts have carried rumors and speculation that Justice O'Connor may retire at the close of the current term.

1st Circuit Rules E-Rates Subsidies Owed By USAC To Bankrupt Contractor Are Not Part of Estate

5/19. The U.S. Court of Appeals (1stCir) issued its opinion in Springfield v. Ostrander, a bankruptcy case involving e-rate subsidies.

Background. The City of Springfield operates a public school system, including several high schools, one of which is named Central High School. Springfield contracted with LAN Tamers to install a high speed data network at Central High School for $1,096,180.28. It also contracted with LAN Tamers to provide network maintenance services at several Springfield schools. LAN Tamers performed its contractual obligations. Springfield paid LAN Tamers.

Springfield also applied to the Federal Communications Commission's (FCC) Universal Service Administration Corporation (USAC) for reimbursement of most of the amounts that it paid to LAN Tamers, pursuant to the e-rate subsidy program. The USAC initially determined that these contracts were ineligible, but later reversed itself. However, before the USAC made payment, LAN Tamers went into bankruptcy. (David Ostrander, who lends his name to the case, is the trustee in bankruptcy.)

The e-rate program is essentially an FCC imposed tax on consumers of telephone services. The FCC then appropriates these revenues to schools and libraries to purchase telecommunications services, internet access, and internal connections. But, since only the Congress has authority to impose taxes, and appropriate funds, the FCC, in form, operates this program under the rubric of universal service support provisions of 47 U.S.C. § 254. Under this form, funds are transferred from regulated service providers to other service providers to accomplish universal service objectives.

Hence, in the present case, the USAC collects funds from carriers (which pass on the cost to their customers), and then transfers funds to the other service providers (such as LAN Tamers, who in turn pass the funds on to the schools). However, this form provides LAN Tamers' creditors with the plausible argument that the funds that have not yet been transferred to LAN Tamers (and on to Springfield) are assets of the bankrupt's estate, pursuant to 11 U.S.C. § 541.

The creditors of LAN Tamers, of course, want these funds to satisfy debts owed to them. And naturally, Springfield also wants the money from the USAC. Meanwhile, the FCC faces a situation reminiscent of the NextWave case.

Proceedings Below. Springfield filed a complaint in U.S. Bankruptcy Court (DMass) against LAN Tamers, the USAC, and LAN Tamers' creditors seeking declaratory relief that the reimbursement funds to be paid to LAN Tamers by the USAC for work performed on Springfield's behalf are not property of the estate, but rather the property of the Springfield.

The Bankruptcy Court issued its Memorandum of Decision on August 16, 2002. It held that "The ownership rights in the Reimbursements are held by the City, not by the Debtor. Accordingly, the funds are available neither as collateral for the Bank, nor as a source of funds for a distribution to unsecured creditors. For the reasons set forth above, the Court holds that the Reimbursements are not part of the Debtor's estate pursuant to § 541(d)." The District Court affirmed. This appeal followed.

Appeals Court. The Appeals Court affirmed. Like the courts below, it analyzed the e-rate program, and, in the final analysis, placed the substance of the program above the form created by the FCC. While the money must be paid to the service provider (LAN Tamers), this is in essence merely a pass through, and hence, is not property of the estate pursuant to Section 541 of the Bankruptcy Code.

This Court also wrote that the NextWave case is distinguishable from the present case.

See also, Supreme Court opinion [34 pages in PDF], and TLJ story titled "Supreme Court Rules Against FCC in NextWave Case", January 27, 2003.

Postscript. The Springfield Public Schools report card for Central High School states that total enrollment for the 2002-2003 academic year was 1,817. The Appeals Court opinion states that the amount of the contract between Springfield and LAN Tamers to install the network was $1,096,180. This comes to $603.29 per student to wire the school for internet access.

4th Circuit Rules in Cybersquatting Case

5/19. The U.S. Court of Appeals (4thCir) issued its split opinion [62 pages in PDF] in International Bancorp v. SBM, a cybersquatting case. The Appeals Court affirmed a District Court summary judgment that the use of forty-three domain addresses infringe a foreign corporation's rights under the Lanham Act and violate the Anticybersquatting Act.

The Societe Des Bains De Mer Et Du Cercle Des Etrangers A Monaco (SBM) operates resorts and casinos in Monte Carlo, Monaco, including the "Casino de Monte Carlo". It registered a trademark in 1863 in Monaco. It has not registered a trademark in the U.S. Although, it does have some operations in the U.S., such as advertising and marketing.

International Bancorp others operate internet gambling web sites. Fifty three of their web sites have domain names that incorporate some portion of the trademarked term.

SBM first challenged the gambling operations' use of its trademark before the World Intellectual Property Organization (WIPO). A WIPO panel ruled in SBM's favor, and ordered the transfer of the domain names to SBM.

The gambling operations then filed a complaint in U.S. District Court (EDVa) against SBM seeking declaratory judgment that they are entitled to keep the disputed domain names. SBM counterclaimed under the Lanham Act, 15 U.S.C. § 1111 et seq., for trademark infringement under § 1125(a), trademark dilution under § 1125(c), cybersquatting under § 1125(d)(1), and unfair competition in violation of § 1126(h).

The District Court ruled against SBM on its § 1125(c) trademark dilution claim, because SBM did not show actual economic harm, and on its § 1126(h) unfair competition claim. However, the Court ruled in favor of SBM on its trademark infringement claim and on its cybersquatting claim. The Court also awarded SBM $51,000 in statutory damages and ordered the transfer of 43 of the 53 contested domain addresses.

The Appeals Court affirmed. Judge Diana Motz dissented. She wrote that "The majority reaches the unprecedented conclusion that an entity's use of its foreign trademark solely to sell services in a foreign country entitles it to trademark protection under United States law, even though the foreign mark holder has never used or registered its mark in the United States."

Senate to Take Up Defense Authorization Bill

5/19. The Senate Armed Services Committee (SASC) completed its markup of the defense authorization bill on May 9. On May 13, Sen. John Warner (R-VA), the Chairman of the SASC, introduced S 1050, the "National Defense Authorization Act for Fiscal Year 2004", which reflects the Committee markup. The full Senate is scheduled to begin consideration of the bill on May 19. This is a huge bill. Many provisions are information technology related.

The bill authorizes the appropriation of $10.7 Billion for science and technology projects, provides for network centric wireless communications R&D, revises spectrum management, provides for Department of Defense (DOD) use of private sector IT services, amends the Clinger Cohen Act regarding DOD procurement of IT equipment, creates a program to monitor and analyze the research activities and capabilities of foreign nations, and provides for education in math, science, engineering, technology, and information assurance.

See also, Sen. Warner's summary of the bill, and Senate Report No. 108-046.

$10.7 Billion Authorized for Science & Tech. Section 202 of the Senate bill authorizes the appropriation of $10,705,561,000 for "science and technology projects".

Network Centric Wireless Communications R&D. Section 234 provides that "The Secretary of Defense shall carry out a program of research and development to promote greater bandwidth capability with high-speed network-centric communications". In particular, "the Secretary shall ... identify areas of advanced wireless communications in which research and development, or the leveraging of emerging technologies, has significant potential to improve the performance, efficiency, cost, and flexibility of advanced network-centric communications systems".

It further provides that the Secretary shall "develop a coordinated plan for research and development on (i) improved spectrum access through spectrum-efficient network-centric communications systems; (ii) networks, including complex ad hoc adaptive network structures; (iii) end user devices, including efficient receivers and transmitter devices; (iv) applications, including robust security and encryption ..."

Spectrum Management. Section 803 provides that "Not later than one year after the date of the enactment of this Act, the Secretary of Defense shall revise and reissue Department of Defense Directive 4650.1, relating to management and use of the radio frequency spectrum, last issued on June 24, 1987, to update the procedures applicable to Department of Defense management and use of the radio frequency spectrum." See, Defense Directive 4650.1 [PDF].

This section would also require "that each military department or Defense Agency carrying out a program for the acquisition of a system that is to use the radio frequency spectrum consult with the official or board" to be designated by the Secretary of Defense.

DOD Use of Private Sector IT Services. Section 812 authorizes, but does not require, the Secretary of Defense to "carry out a pilot program for use of a best value criterion in the selection of sources for performance of information technology services for the Department of Defense".

This section further provides, subject to certain exceptions, that "Under the pilot program ... the Secretary shall procure information technology services necessary for or beneficial to the accomplishment of the authorized functions of the Department of Defense ... from a source in the private sector if performance by that source represents the best value to the United States ..."

DOD Procurement of IT Equipment. Section 822 provides that "The Secretary of Defense shall establish a board of senior acquisition officials to administer the implementation of the policies and requirements of chapter 113 of title 40 in procurements of information technology equipment determined by the Secretary as being an integral part of a weapon or a weapon system".

Moreover, this section provides that this board shall ensure that "issues of spectrum availability, interoperability, and information security are appropriately addressed in the development of weapons and weapon systems".

Monitoring Research of Other Nations. Section 231 is titled "Global Research Watch program in the Office of the Director of Defense Research and Engineering". This section creates a "Global Research Watch", the goal of which is to "monitor and analyze the basic and applied research activities and capabilities of foreign nations in areas of military interest, including allies and competitors". It would also "establish and maintain an electronic database on international research capabilities, comparative assessments of capabilities, cooperative research opportunities, and ongoing cooperative programs".

This section further provides that "Information in electronic databases of the Global Research Watch program shall be maintained in unclassified form and, as determined necessary by the Director, in classified form in such databases".

SMET/IT Education. Section 233 authorizes the Secretary of Defense to "support educational programs in science, mathematics, engineering, and technology", by, among other things, entering into contracts, making "grants of financial assistance", and providing "cash awards".

Section 533 makes certain enlisted personnel eligible for "a program of education in information assurance as a participant in the Information Security Scholarship program".

Sen. Warner also stated in his summary of the bill that it authorizes "$7.0 million for information assurance technologies, including a $3 million increase for the Information Assurance Scholarship Program which trains the next generation of information assurance professionals to defeat the increasing threat of cyber-terrorism."

More Tech Provisions. Section 361 provides that "The Secretary of Defense may sell working-capital funded services of the Defense Information Systems Agency to a person outside the Department of Defense for use by that person in the performance of the Navy-Marine Corps Intranet contract."

Section 232 provides for a biennial strategic plan by the Defense Advanced Research Projects Agency (DARPA).

Section 911 provides that "The Under Secretary of the Air Force, in consultation with the Director of Defense Research and Engineering, shall develop a space science and technology strategy and shall review and, as appropriate, revise the strategy annually."

The bill also added $60.0 Million to the administration's request for the Advanced Extremely High Frequency (AEHF) communications satellite. The DOD website describes this as "next generation highly secure, high capacity communications satellites and ground command and control system as a follow-on capability to DoD’s current Milstar communications satellite program."

The bill also added $80.0 Million to the administration's request to accelerate the Global Positioning System III (GPS III) next generation navigational satellite.

House to Take Up Defense Authorization Bill

5/19. The House Armed Services Commitee (HASC) completed its markup of HR 1588, its version of the defense authorization bill, on May 14. The House is scheduled to take up this bill beginning on Wednesday, May 21. This is a huge bill with many technology related provisions.

This bill is sponsored by Rep. Duncan Hunter (D-CA), the Chairman of the HASC. The HASC approved this bill by a vote of 58-2. See also, HASC summary of HR 1588 and Report No. 108-106.

Section 202 of the House bill provides that "$10,893,077,000 shall be available for the Defense Science and Technology Program", which is slightly more than the Senate proposal.

The HASC summary states that "Defense science and technology programs are critical to maintaining U.S. military technological superiority in the face of evolving threats to U.S. national security interests around the world. However, the Administration’s budget request for science and technology of 2.7 percent of the total DOD budget does not meet the goal of three percent established by the 2001 Quadrennial Defense Review. In addition, the committee is concerned that the military services’ science and technology budget requests are not sufficient to meet their transformation goals. As such, the committee recommends $10.9 billion ($662 million more than the Administration’s request) for the DOD science and technology program, including $2 billion for the Army, $1 billion for the Navy, $2.3 billion for the Air Force, and $4.7 billion for Defense Agency science and technology (including $2.9 billion for DARPA, the Defense Advanced Research Projects Agency)." (Parentheses in original.)

The House bill, like the Senate bill, adds $60 Million to the President's request for the AEHF system. The HASC summary states that "The Advanced Extremely High Frequency (AEHF) military satellite communication system (MILSATCOM), provides secure, global communications to support U.S. and allied forces on the land or sea, and in the air. It also connects strategic activities such as nuclear operations, theater missile defense, space operations, and intelligence. The committee recommends $838.1 ($60 million more than the Administration’s request) for AEHF."  (Parentheses in original.)

The HASC summary also states that "The Advanced Wideband System is a high-capacity tactical communications system that, once developed, is intended to provide greatly enhanced communications for the warfighter. However, much of the system is not mature, and the final transformational communications architecture has yet to be determined. Slightly less funding will allow technology maturation and risk reduction, while freeing resources for urgently needed nearer term systems, such as the Advanced EHF MILSATCOM. Therefore, the committee recommends $359.3 million ($80 million less than the Administration's request to better pace program growth) for the Advanced Wideband System."

The House bill, at Section 1429, authorizes telecommuting at federal contractors.

Like the Senate bill, the House bill allows certain enlisted members to receive instruction in the information security scholarship program at the Naval Postgraduate School.

The House bill, at Section 331, provides that the "Chief Information Officer of the Department of Defense and the Chief Information Officer of a military department shall ... encourage the use of performance-based and results-based management ..."

FCC Releases Text of FNPRM on Regulatory Framework for Local Phone Companies Offering LD Service

5/19. The Federal Communications Commission (FCC) released its Further Notice of Proposed Rulemaking (FNPRM) [32 pages in PDF] regarding the regulatory framework for local phone companies offering long distance service.

This item states that the FCC seeks "comment on the appropriate classification of Bell Operating Companies' (BOCs) and incumbent independent local exchange carriers' (independent LECs) provision of in-region, interstate and international interexchange telecommunications services. We seek comment on how changes to the competitive landscape within the interexchange market should affect this classification and on what approach is appropriate for BOCs and independent LECs, if and when these carriers may provide in-region, interexchange services outside of a separate affiliate."

The FCC announced, but did not release, this FNPRM at its May 15, 2003 meeting. See also, May 15 FCC release [3 pages in PDF] summarizing this FNPRM.

Public comments are due within 30 days after publication in the Federal Register, and reply comments are due within 60 days after publication in the Federal Register. As of the May 20 issue of the Federal Register, no such notice has yet been published.

This proceeding is titled "In the Matter of Section 272(f)(1) Sunset of the BOC Separate Affiliate and Related Requirements 2000 Biennial Regulatory Review Separate Affiliate Requirements of Section 64.1903 of the Commission’s Rules". The is WC Docket No. 02-112 and CC Docket No. 00-175. For more information, contact Robert Tanner or Pam Megna at, or 202-418-1580.

Adelstein Addresses Cognitive Radio Technologies

5/19. Federal Communications Commission (FCC) Commissioner Jonathan Adelstein delivered remarks at the FCC's workshop on cognitive radio technologies. He stated that "In dealing with spectrum, I believe the Commission has a responsibility to establish ground rules for issues such as interference and availability, but applying the rules with a light touch. In this area, fortunately, we can rely heavily on technology, with engineering and innovation driving increased performance, increased capacity, and more and better services for consumers."

Jonathan AdelsteinAdelstein (at right) added that "New cognitive radio technologies can potentially play a key role in shaping our spectrum use in the future. These technologies can lead to the advent of smarter unlicensed devices that make greater use of spectrum than possible today -- without interfering with licensed users. Cognitive radios may also provide licensees with innovative ways to use their current spectrum more efficiently, and to lease their spectrum on the secondary market."

He also said that "cognitive radio technologies offer the promise of helping us leave the world of command and control behind".

People and Appointments

5/19. The Senate confirmed Maurice Hicks to be a Judge of the U.S. District Court for the Western District of Louisiana.

More News

5/19. Federal Communications Commission (FCC) Chairman Michael Powell announced in a release [PDF] that he intends to form a federal advisory committee to assist the FCC "in formulating new ways to create opportunities for minorities and women in the communications sector". He also named Jane Mago, who is the Chief of the FCC's Office of Strategic Planning and Policy Analysis, to be the Designated Federal Official (DFO) from the FCC responsible for the administration of the Committee, including calling all meetings, approving meeting agendas and conducting all meetings.

5/19. The Securities and Exchange Commission (SEC) filed a proposed settlement with the U.S. District Court (SDNY) in the case SEC v. WorldCom. This proposed settlement provides for a judgment requiring WorldCom to pay a civil penalty of $1,510,000,000; however, due to WorldCom's bankruptcy, it would only have to pay $500,000,000. The proposed settlement requires approval by both the District Court and the Bankruptcy Court. See, SEC release and MCI WorldCom release.

5/19. The U.S. District Court (DC) issued its opinion [26 pages in PDF] in ACLU v. DOJ, a Freedom of Information Act (FOIA), 5 U.S.C. § 552, case involving access to records of the Department of Justice (DOJ) regarding implementation of certain of the USA PATRIOT Act's provisions pertaining to surveillance and investigations. Many types of records were sought, including records pertaining to the new pen register and trap and trace device authority provided under section 214 of the Act. The Court ruled, on cross motions for summary judgment, that the requested records are exempt from disclosure pursuant to two FOIA provisions.

FCC Sets Deadlines for Comments on News Corp.'s DirecTV Deal

5/16. The Federal Communications Commission (FCC) announced deadlines for comments in its proceeding regarding News Corporations' proposed acquisition of an interest in DirecTV. Comments are due by June 16. Reply comments are due by July 1, 2003.

On April 9, 2003 General Motors (GM) and Hughes Electronics announced that "GM intends to split off Hughes, and simultaneously sell GM's 19.9 percent economic interest in Hughes to News Corp. ... for $14 per share, or approximately $3.8 billion." See, Hughes release. Direct broadcast satellite service (DBS) provider DirecTV is a unit of Hughes. See, story titled "GM, Hughes and News Corps Announce Directv Deal" in TLJ Daily E-Mail Alert No. 643, April 14, 2003.

On May 2, 2003, GM, Hughes and News Corp. submitted an application to the FCC requesting approval of the transfer of licenses associated with the transaction. The proceeding is in the nature of an antitrust merger review.

The FCC stated in its notice [7 pages in PDF] that "If approved, the proposed transaction will permit News Corp. to hold the single largest block of shares in Hughes, thus providing News Corp. with a de facto controlling interest over Hughes and its subsidiaries, including DIRECTV Holdings, LLC, a wholly-owned subsidiary of Hughes which provides DBS service in the United States, as well as Hughes Network Services, Inc., a facilities-based provider of very small aperture terminal (``VSAT´´) network systems, and PanAmSat Corporation, a global facilities-based provider of geostationary-satellite orbit fixed satellite services."

The FCC added that "Rupert Murdoch, chairman and chief executive officer of News Corp., will become chairman of Hughes, and Chase Carey, News Corp.'s former co-chief operating officer, will become president and chief executive officer of Hughes."

The FCC notice also states that "The Applicants claim that approval of the proposed transaction will create direct and tangible public interest benefits without producing any public interest harms in any relevant market. ... Specific claimed benefits include ... aggressively to ensure that broadband services are available to as many American consumers as possible".

On May 8, 2003, Rupert Murdoch testified before the House Judiciary Committee. He argued that there are neither horizontal nor vertical merger concerns associated with the proposed transaction. He also said in his prepared testimony that "News Corp. will work aggressively to build on the services already provided by Hughes to make broadband available throughout the U.S., particularly in rural areas." See, story titled "Murdoch Defends News Corp.'s DirecTV Deal" in TLJ Daily E-Mail Alert No. 659, May 12, 2003.

The FCC also stated that "Because this proceeding involves broad public policy issues, the proceeding will be treated as ``permit but disclose´´ for purposes of the Commission's ex parte rules. See generally 47 C.F.R. §§ 1.1200-1.1216."

This is MB Docket No. 03-124. For more information, contact Marcia Glauberman at or 202 418-7046 or Linda Senecal at or 202 418-7044.

More News

5/16. The Bureau of Industry and Security (aka Bureau of Export Administration) published a notice in the Federal Register requesting public comments on its proposal titled "Best Practices for Exporters/Re-exporters and Trade Facilitation/Freight Forwarding Companies Regarding the Transit, Transshipment, and Reexport of Dual-Use Items". These "best practices" are recited in the notice. The deadline to submit comments is June 16, 2003. For more information, contact Rick Cupitt at or 202 482-1459. See, Federal Register, May 16, 2003, Vol. 68, No. 95, at Pages 26567 - 26569.

5/16. The National Institute of Standards and Technology (NIST) published a notice in the Federal Register announcing, and requesting public comments on, its document [12 pages in PDF] titled "Draft Federal Information Processing Standard (FIPS) 199 on Standards for Security Categorization of Federal Information and Information Systems". The NIST states that this document "defines requirements to be used by Federal agencies to categorize information and information systems, and to provide appropriate levels of information security according to a range of risk levels. This draft standard establishes three potential levels of risk (low, moderate, and high) for each of the security objectives of confidentiality, integrity, and availability. The levels of risk are based on what is known about the potential impact or harm. Harmful events can impact agency operations (including mission, functions, image or reputation), agency assets, or individuals (including privacy). The levels of risk consider both impact and threat, but are more heavily weighted toward impact." The deadline for comments is August 14, 2003. For more information, contact Ron Ross at 301 975-5390 or See, Federal Register, May 16, 2003, Vol. 68, No. 95, at Pages 26573 - 26574.

5/16. Representatives of the Department of Justice (DOJ), Federal Trade Commission (FTC), U.S. Postal Service (USPS), and other government agencies hosted an event in Washington DC to tout recent enforcement actions related to internet fraud. The DOJ issued a summary of indictments, complaints, and criminal informations, most of which have been returned or filed since January of 2003. However, some of these actions date back several years. Several were previously reported in the TLJ Daily E-Mail Alert. "High-tech scam artists who think they can hijack the Internet should think again," said Michael Chertoff, Assistant Attorney General. See, DOJ release. Chertoff's nomination to the U.S. Court of Appeals (3rdCir) is currently being considered by the Senate. Also, on May 15, the FTC and other government agencies hosted an event in Dallas, Texas, to tout recent enforcement actions related to unsolicited bulk e-mail. See, FTC release.

5/16. The Federal Bureau of Investigation (FBI) published a notice in the Federal Register stating that the National Crime Prevention and Privacy Compact Council will hold a meeting on June 24-25, 2003. The topics addressed at the meeting may include the exchange of criminal history records, fingerprint records, the "Noncriminal Justice Outsourcing Initiatives", and "extending federal civil criminal justice applicant background investigation to include criminal records checks of friends, relatives and associates". Consistent with the FBI's commitment to making the policy making activities and operations of government open and accessible to the public in a transparent manner, the meeting will be held in West Yellowstone, Montana, and will not be webcast. See, Federal Register, May 16, 2003, Vol. 68, No. 95, at Pages 26649 - 26650. See also, West Yellowstone fly fishing guide.

Go to News from May 11-15, 2003.