News from August 11-15, 2003

People and Appointments

8/15. President Bush announced his intent to nominate Peter Sheridan to be a Judge of the U.S. District Court for the District of New Jersey. The White House release announcing the prospective appointment states that "President George W. Bush today announced his intention to nominate one individual to serve in his administration: ..." The release does not explain in what capacity Sheridan will "serve in his administration", or how such service would be consistent with judicial independence.

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8/15. The Federal Communications Commission (FCC) announced that its 12th Street Entrance will reopen on Monday, August 18, 2003. See, release [PDF].

8/15. The U.S. Patent and Trademark Office (USPTO) issued a release regarding the August 14 power outage in the Northeast and Midwest, and the resulting closure of U.S. Postal Service (USPS) offices. The USPTO stated that it "is designating the interruption in the service of the USPS as a postal service interruption and an emergency within the meaning of 35 U.S.C. § 21(a) and 37 C.F.R. 1.6(e). As soon as the USPTO receives further information from the USPS as to when postal services in the affected areas will be resumed, the USPTO will post the information on the USPTO's Internet Web site at and a final notice will be published in the Official Gazette." The USPTO added that "Correspondence that would have been filed with the USPTO under 37 CFR 1.10 during this USPS service interruption, but which was not filed due to the USPS service interruption, should be filed promptly after the termination of the USPS service interruption with a statement that the correspondence would have been deposited with the USPS but for the designated interruption or emergency in ``Express Mail´´ service."

8/15. The LOCAL Television Loan Guarantee Board published a notice in the Federal Register that recites and describes a proposed regulation to implement the LOCAL Television Loan Guarantee Program, as authorized by the Launching Our Communities' Access to Local (LOCAL) Television Act of 2000. The purpose of the Act is to facilitate access to signals of local TV stations in nonserved areas and underserved areas. The Act establishes a LOCAL Television Loan Guarantee Board to approve guarantees of up to 80% of loans totaling no more than $1.25 Billion. The regulation proposes to establish eligibility and guarantee requirements, the application and approval process, the administration of guarantees, and the process through which the Board will consider applications under the priority considerations required in the Act. Written comments are due by September 15, 2003. Comments regarding the information and recordkeeping requirements are due by October 14, 2003. See, Federal Register, August 15, 2003, Vol. 68, No. 158, at Pages 48814 - 48833. See also, Treasury release.

8/15. Microtune stated in a release that the U.S. District Court (EDTex) awarded it injunctive and monetary relief in a patent infringement action against Broadcom. On January 24, 2001, Microtune filed a complaint in the Eastern District of Texas against alleging infringement of U.S. Patent No. 5,737,035, titled "Highly Integrated Television Tuner on a Single Microcircuit." Microtune, based in Plano, Texas, makes RF broadband chips for use in cable modems, set-top boxes, PC/TV multimedia, TV/digital TV and other consumer appliances. It alleged that Broadcom's BCM 3415 microchip infringes its patent. Microtune added in its release that "On August 14, 2003 in a hearing before the same Court, the Court determined that significant fact issues remain concerning Broadcom's BCM3416 tuner chipset and Microtune's '035 patent and that these fact issues should be resolved by a jury. The Court has currently set a trial date for June 7, 2004." There is also other pending patent litigation between the parties. For example, on January 27, 2003, Broadcom filed a complaint in the U.S. District Court (NDCal) against Microtune alleging patent infringement. Broadcom alleges that tuners, power amplifiers and Bluetooth products made by Microtune infringe its U.S. Patent No. 6,445,039B1, titled "System And Method For ESD Protection", U.S. Patent Nos. 5,682,379 titled "Wireless Personal Local Area Network" and U.S. Patent No. 6,359,872 titled "Wireless Personal Local Area Network."

Cyber Security Division Issues Advisory Re Blaster Worm

8/14. The Department of Homeland Security's (DHS) Information Analysis and Infrastructure Protection Directorate's (IAIP) National Cyber Security Division (NCSD) issued an advisory regarding the potential for internet disruptions beginning on Saturday, August 16, 2003.

The advisory states that "An Internet worm dubbed ``msblast´´, ``lovesan´´, or ``blaster´´ began spreading on August 11th that takes advantage of a recently announced vulnerability in computers running some versions of the Microsoft Windows operating system. ... NCSD would like to highlight that this worm contains additional code which may cause infected computers to attempt repetitive connections to a popular Microsoft web site, beginning just after midnight on the morning of August 16th."

It continues that "Because of the significant percentage of infected computers using high speed connections to the Internet (DSL or cable for example) the conditions exist for a phenomena known as a distributed denial of service (DDoS) attack against the Microsoft web site beginning on August 16th. ... Owners of computers infected by the worm may experience a general slowness of their computer along with difficulty in connecting to Internet sites or local network resources. Systems that are still infected on August 16th may stop spreading the worm and may begin flooding the Microsoft Update site with repeated connection requests. Other customers who attempt to use the site to update their Microsoft Windows operating systems on or after August 16th might experience slowness in response or inability to connect to the update site."

FCC Releases Report and Order Re Hearing Aid Compatible Digital Phones

8/14. The Federal Communications Commission (FCC) released its Report and Order [57 pages in PDF] in its proceeding titled "In the Matter of Section 68.4(a) of the Commission's Rules Governing Hearing Aid-Compatible Telephones". This is WT Docket No. 01-309. The FCC adopted this Report and Order at its July 10, 2003, but only issued a press release at that time.

The Report and Order states that "we modify the exemption for wireless phones under the Hearing Aid Compatibility Act of 1988 (HAC Act) to require that digital wireless phones be capable of being effectively used with hearing aids. We find that modifying the exemption in the manner described below will extend the benefits of wireless telecommunications to individuals with hearing disabilities -- including emergency, business, and social communications ..."

It continues that "we find that digital wireless phone manufacturers and service providers should be required to take steps to reduce the amount of interference emitted from digital wireless phones and to provide the internal capability for telecoil coupling."

FCC Commissioner Michael Copps wrote in a statement [PDF] that "With this action our Commission adds to a list of actions the past Commission took to promote accessibility. The previous Commission wrote new rules to ensure that communications products and services are accessible to those with disabilities, as Congress directed, in Section 255; overhauled and updated our Telecommunications Relay Services (TRS) rules to provide for faster, more effective relay services; established 711 for relay services so that consumers will no longer need to remember different TRS numbers and TRS users will be able to put one number on their business cards, thereby making it easier for people to call them; and took action on captioning to ensure that everyone has access to televised information, including, most importantly, warnings about emergency situations."

People and Appointments

8/14. Donald Nicolaisen was named Chief Accountant of the Securities and Exchange Commission (SEC). See, SEC release.

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8/14. The U.S. Court of Appeals (1stCir) issued its opinion in GTE Wireless v.Cellexis, a case involving the effect of an agreement not to sue for certain intellectual property claims regarding cell phone technology. Following an earlier lawsuit brought by Cellexis and Freedom Wireless against GTE alleging that GTE stole its trade secrets by using Cellexis's technology for prepaid cellular telephone service, Cellexis signed a settlement agreement that stated that Cellexis and its principals would not sue GTE and its affiliates, partnerships, joint ventures, and successors in the future over GTE's use of the technology. The issue is whether future affiliates of GTE are covered by the settlement agreement. The District Court held on summary judgment that the settlement agreement did not reach entities that subsequently became affiliates of GTE. The Appeals Court reversed and remanded. It held that based on the procedural history and extrinsic evidence there are conflicting reasonable interpretations of the contract language, and that these conflicting interpretations create a triable issue of fact. This is GTW Wireless, Inc, f/k/a GTE Mobilnet Service Corp, v. Cellexis International, Inc., Freedom Wireless, Inc., and Douglas V. Fougnies, No. 02-2174, an appeal from the U.S. District Court for the District of Massachusetts, Judge Douglas Woodlock presiding.

SCO Group Delivers Notice to IBM of Termination of UNIX License Agreement

8/13. SCO Group announced in a release that it "delivered final written notice yesterday to Sequent Computer Systems for termination of its UNIX System V software contract. Sequent is now owned by IBM. The Sequent (IBM) contract was terminated for improper transfer of Sequent's UNIX source code and development methods into Linux. As a result, IBM no longer has the right to use or license the Sequent UNIX product known as ``Dynix/ptx.´´ Customers may not acquire a license in Dynix/ptx from today's date forward."

SCO Group stated in its June 13, 2003 From 10-Q filed with the Securities and Exchange Commission (SEC) that "We have provided IBM notice that we will have the authority to revoke its UNIX license agreement that underlies their AIX software on June 13, 2003, unless IBM cures the claims that we have asserted."

IBM acquired Sequent in 1999. See, IBM release announcing merger plans.

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 did not assert copyright or patent infringement. IBM removed the action to the U.S. District Court (DUtah). This is D.C. No. 2:03CV0294. See also, amended complaint, filed on June 16. (In May, Caldera amended its articles of incorporation to change its name to SCO Group.)

IBM filed its answer [17 page PDF scan] on April 30, 2003. It asserted that "contrary to Caldera's allegations, by its lawsuit, Caldera 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.) See also, IBM's amended answer [19 page PDF scan], filed on June 16.

SCO Group also wrote a letter to Linux customers on May 12, 2003. It asserted that "SCO holds the rights to the UNIX operating system software originally licensed by AT&T to approximately 6,000 companies and institutions worldwide (the ``UNIX Licenses´´). The vast majority of UNIX software used in enterprise applications today is a derivative work of the software originally distributed under our UNIX Licenses."

SCO Group further stated in its August 13 release that "SCO's System V UNIX contract allowed Sequent to prepare derivative works and modifications of System V software ``provided the resulting materials were treated as part of the Original [System V] Software.´´ Restrictions on use of the Original System V Software include the requirement of confidentiality, a prohibition against transfer of ownership, and a restriction against use for the benefit of third parties. Sequent-IBM has nevertheless contributed approximately 148 files of direct Sequent UNIX code to the Linux 2.4 and 2.5 kernels, containing 168,276 lines of code. This Sequent code is critical NUMA and RCU multi-processor code previously lacking in Linux. Sequent-IBM has also contributed significant UNIX-based development methods to Linux in addition to the direct lines of code specified above. Through these Linux contributions, Sequent-IBM failed to treat Dynix as part of the original System V software, and exceeded the scope of permitted use under its UNIX System V contract with SCO."

SCO Group also stated that it provided two months written notice prior to termination, and that IBM did not cure the breach of contract. SCO Group also asserted that "SCO's termination of the Sequent-IBM UNIX System V license is self-effectuating and does not require court approval. SCO previously terminated IBM's right to use or license IBM's UNIX product known as AIX. From and after June 16, 2003, customers no longer have the legal right to acquire new AIX licenses."

SCO Group also announced, on August 11, that it has signed its "first Intellectual Property Compliance License for SCO UNIX Rights". SCO Group, however, did not reveal who signed the license. It merely stated in a release that it is a "Fortune 500 company".

SCO Group stated in its June 13, 2003 Form 10-Q that "Pursuit of the litigation against IBM and, potentially, others will be costly, and management expects the costs for legal fees could be substantial. In addition, the Company may experience a decrease in revenue as a result of the loss of sales of Linux products and initiatives previously undertaken jointly with IBM and others affiliated with IBM. The Company anticipates that participants in the Linux industry will seek to influence participants in the markets in which we sell our products to reduce or eliminate the amount of our products and services that they purchase. There is also a risk that the assertion of the Company's intellectual property rights will be negatively viewed by participants in our marketplace and we may lose support from such participants. Any of the foregoing could adversely affect the Company’s position in the marketplace and our results of operations. The ultimate outcome or potential effect on the Company’s results of operations or financial position is not currently known or determinable."

CAI Settles Suit Brought By The Canopy Group

8/13. Computer Associates International (CAI) announced that "it has reached an agreement with The Canopy Group and Center 7 to settle all claims in pending litigation between the parties."

The Canopy Group filed a complaint in U.S. District Court (DUtah) against CAI in April of 2001 alleging breach of contract and breach of the implied covenant of good faith and fair dealing.

CAI added that "The settlement will involve a cost to the company of approximately $40 million and will have an impact to earnings in the range of 2-3 cents per share. It is expected that the settlement will be approved by the Court in the current quarter. As part of the agreement between the parties, no other terms of the settlement will be disclosed."

CAI stated in its July 23, 2003 Form 10-Q filed with the Securities and Exchange Commission (SEC) that "In April 2001, a lawsuit captioned The Canopy Group, Inc., et al. v. Computer Associates International, Inc. was filed in the United States District Court for the District of Utah, Central Division. Based upon a series of written agreements involving the licensing of certain software products, the complaint seeks monetary damages based upon claims for, among other things, breach of contract and breach of the implied covenant of good faith and fair dealing."

See also, stories titled "SCO And Novell Continue Argument Over Rights in UNIX Operating System" in TLJ Daily E-Mail Alert No. 676, June 9, 2003; "Novell Asserts Intellectual Property Rights in UNIX Technology" and "German Software Group Threatens to Sue SCO Over Linux Claims", in TLJ Daily E-Mail Alert No. 670, May 30, 2003; and "Microsoft Licenses Technology at Issue in Caldera v. IBM", in TLJ Daily E-Mail Alert No. 669, May 29, 2003.

Commentary: Canopy Group, SCO and Caldera

8/13. Linux users and the open source community have expressed outrage over the actions of the SCO Group. Many have also labeled the IBM lawsuit meritless. However, the litigation history of SCO Group, and affiliated entities, suggest a capacity for extracting large settlements from the targets of their litigation.

The Canopy Group is the principle stockholder of SCO Group, which until recently was named Caldera. The SCO Group filed the lawsuit, that is now pending in the U.S. District Court (DUtah), against IBM, regarding IBM's alleged use of its proprietary UNIX code, that has so angered the open source community.

Previously, Caldera brought, and settled, a similar lawsuit in the U.S. District Court (DUtah) against Mircosoft. In tthat action, Caldera obtained DR-DOS from Novell in 1996, and then filed its complaint, in which it alleged violation of federal antitrust laws. See, amended complaint. That action was D.C. No. 2:96 CV 645B. In the IBM case, SCO Group alleged that it purchased the rights and ownership of UNIX and UnixWare that had been originally owned by AT&T. It then sued IBM. See, above story, titled "SCO Group Delivers Notice to IBM of Termination of UNIX License Agreement", for the latest developments in this case.

And, just recently, Computer Associates International (CAI) settled a lawsuit brought against it by the Canopy Group in the U.S. District Court (DUtah). See, above story, titled "CAI Settles Suit Brought By The Canopy Group".

Whatever the technological innovation of The Canopy Group companies may be, The Canopy Group and its companies have demonstrated in the Microsoft, CAI and IBM cases that they are highly innovative at litigation. And, as the Microsoft and CAI cases suggest, they are successful at extracting huge settlements.

Cato Paper Criticizes McCain Proposal to Mandate Campaign Programming and Create Campaign Ad Voucher System

8/13. The Cato Institute released a paper [27 pages in PDF] titled "Why Subsidize the Soapbox? The McCain Free Airtime Proposal and the Future of Broadcasting". See also, summary.

The paper states that Sen. John McCain (R-AZ) plans to introduce a bill in the 108th Congress that would require broadcasters to devote airtime to political campaigns and to subsidize electoral advertising for candidates. Sen. McCain introduced a similar bill in the previous Congress. See, S 3124 (107th), the "Political Campaign Broadcast Activity Improvements Act", introduced on October 16, 2002.

The Cato paper states that the forthcoming McCain bill "imposes two major requirements on broadcasters. It requires broadcasters to run 12 hours of ``candidate-centered and issue-centered programming´´ in the six weeks prior to primary and general elections. The bill outlines the required programming as follows: ``Candidate-centered programming´´ refers to debates, interviews, candidates statements, and other news or public affairs formats that provide for a discussion of issues by candidates; it does not include paid political advertisements. ``Issue-centered programming´´ refers to debates, interviews, and other formats that provide for a discussion of ballot measures in the forthcoming election. It does not include paid political ads." (Footnote omitted.)

The bill would also create a voucher system for the purchase of commercial broadcast airtime for political advertisements, financed by an annual spectrum use fee on all broadcast license holders.

The paper criticizes the proposal. It argues that the bill would limit the editorial control of broadcasters, and constitute a tax on broadcasters. It further argues the the underlying rationale for the bill, that government regulation of broadcasters is warranted because of spectrum scarcity and signal interference, is based on outdated assumptions that no longer hold up.

The paper was written by John Samples and Adam Thierer of the Cato Institute.

9th Circuit Applies Section 230 Immunity to Online Dating Service

8/13. The U.S. Court of Appeals (9thCir) issued its opinion [12 pages in PDF] in Carafano v., a case regarding application of Section 230 interactive computer service immunity to an online dating service. The District Court had held that the online dating service, which wrote the questionnaire to be used by persons who post their profiles, did not have § 230 immunity for a false posting, because it contributed to the content. The Appeals Court held that the service does have § 230 immunity. See, full story.

People and Appointments

8/13. President Bush announced his intent to nominate Ricardo Martinez to be a Judge of the U.S. District Court for the Western District of Washington. See, White House release. He is currently a Magistrate Judge. The Western District of Washington includes Seattle, Tacoma, and Redmond.

8/13. Richard Roscitt was named President and Chief Operating Officer of MCI WorldCom. Roscitt was briefly Ch/CEO of ADC. Before that, he worked for 28 years for AT&T. See, release.

8/13. Robert Switz was named P/CEO of ADC. He is currently the CFO of ADC. He will replace Richard Roscitt, who was named P/COO of MCI WorldCom. In addition, John Blanchard was named non-executive Chairman of the Board. He is already a member of the board. See, ADC release.

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8/13. Rep. Bob Goodlatte (R-VA) issued a release that states that he traveled to Chile and met with Chilean Undersecretary of the Economy, Alvaro Diaz, "to discuss the recently passed Free Trade Agreement and the need for proper enforcement of piracy provisions". Rep. Goodlatte is a Co-Chair of the Congressional Internet Caucus, and a member of the House Judiciary Committee and its Courts, the Internet and Intellectual Property Subcommittee.

8/13. The U.S. Patent and Trademark Office (USPTO) published a notice in the Federal Register that describes and recites its final rule amending its rules to separate the provisions for patent matters and trademark matters with respect to filing correspondence, requesting copies of documents, payment of fees, and general information. The notice states that the USPTO is "amending its Rules of Practice in Patent Cases to delete all references to trademark matters, and amending its Rules of Practice in Trademark Cases to add new rules setting forth provisions for corresponding with and paying fees to the Office in trademark cases, and for requesting copies of trademark documents." These changes take effect on September 12, 2003. See, Federal Register, August 13, 2003, Vol. 68, No. 156, at Pages 48286 - 48293.

8/13. The Copyright Office published a notice in the Federal Register directing all claimants to royalty fees collected for calendar year 2001 under the cable statutory license to submit comments as to whether a Phase I or Phase II controversy exists as to the distribution of those fees and a Notice of Intention to Participate in a royalty distribution proceeding. These comments and notices of intention to participate are due by September 12, 2003. See, Federal Register, August 13, 2003, Vol. 68, No. 156, at Pages 48415 - 48417.

7th Circuit Holds State Cannot Substitute Tariff Filing for Negotiations to Set Prices and Terms for Interconnection

8/12. The U.S. Court of Appeals (7thCir) issued its split opinion [18 pages in PDF] in Wisconsin Bell v. Bie, a case regarding the interconnection provisions of §§ 251 and 252 of the Communications Act. The Appeals Court that the Wisconsin's public utilities commission cannot order the regional Bell company to filed tariffs setting the prices and terms on which competitors can interconnect. See, full story.

Poindexter Writes About Uses of Information Technology to Fight Terrorism

8/12. John Poindexter, who recently announced plans to resign as head of the Department of Defense's (DOD) Defense Advanced Research Projects Agency's (DARPA) Information Awareness Office (IAO), wrote a public letter [5 pages in PDF] addressed to Anthony Tether, Director of the DARPA, in which he explained and advocated the activities of his office.

He wrote that "Some of the research and development programs that we have been working on have become controversial and I want to take this opportunity in an open letter to you to put these controversies in perspective." He added that "there is still a great deal of misunderstanding".

One point that he made is that "DARPA is a tool builder and not a tool user. Technology solutions are developed and shown to work. It is then up to user agencies and Congress through the normal authorization and appropriations process to decide whether the technology solutions will be implemented and under what conditions." He concluded that "I regret we have not been able to make our case clear and reassure the public that we do not intend to spy on them."

He elaborated that "More than half of the foreign intelligence activities are in the Department of Defense and report to both the Secretary of Defense for resources and Director of Central Intelligence for tasking. The DOD clearly has a significant foreign intelligence role and it is appropriate that DARPA be involved in looking for technology solutions. DARPA is in a position to take a fresh look at the problem with no vested bureaucratic interests in coming up with an integrated solution. The technology and tools to be developed for the foreign part would be just as applicable to the domestic part; however if and when it comes to implementation the foreign intelligence activities of the DOD, CIA and others would apply the tools against foreign intelligence data and domestic intelligence activities, such as the FBI, would apply them against domestic intelligence in accordance with the laws and polices. In no case would DARPA be applying the tools. There are extensive Congressional oversight provisions for the foreign and domestic intelligence activities to detect any potential abuses."

He went on to discuss the IAO's project named Terrorism Information Awareness (TIA), which was previously named Total Information Awareness, and its project named Futures Markets Applied to Prediction (FutureMap), which would have established a futures market in which traders could trade in contracts to predict the likelihood of various possible terrorist attacks. He recently abandoned the later project. The fate of the former project lies in the defense appropriations process; the Congress has yet to pass is final version of the 2004 bill.

See, HR 2658. The House passed its version of the bill on July 8. The Senate then passed its version on July 17, with numerous amendments. In particular, the Senate version includes a Section 8120 that provides that "Notwithstanding any other provision of law, no funds appropriated or otherwise made available to the Department of Defense, whether to an element of the Defense Advanced Research Projects Agency or any other element, or to any other department, agency, or element of the Federal Government, may be obligated or expended on research and development on the Terrorism Information Awareness program." It further provides that the federal government may not deploy or implement the TIA program until the government notifies the Congress of its development, and the government has received authorization from the Congress.

He first reviewed the context of each project. He wrote that "we have had basically two research paths -- each in the context of a premise. The first premise is that the U.S. government has all of the data it needs to find information that would allow us to detect foreign terrorists and their plans and thus enable the prevention of attacks against U.S. interests. The problems here are a matter of sharing this information amongst the various agencies involved and providing better ways of finding information more rapidly, tools to aid in conducting faster and better analyses and decision support tools to enable better decisions. The massive amounts of data that are presently available under existing laws and policies far exceed the capacity of the humans in the system to analyze these data without tools to aid them."

He elaborated that "On this first research path we created an experimental network called TIA and partnered with nine foreign intelligence, counter-intelligence and military commands for testing experimental tools using foreign intelligence data that is currently available to them."

He then discussed the second line of research, and the IAO's FutureMap project, in theoretical terms. He wrote that "If we are wrong on the first premise and the U.S. government does not have all of the data it needs to find the terrorists and prevent their attacks, we felt it prudent to explore a second research path. This is the controversial one. In terms of the recent flap over FutureMap -- did we want to bet the safety of thousands if not millions of Americans that our first premise was correct? Since we didn’t want to make that bet, we devoted a relatively small portion of the funds that had been made available to us to this second research path. There is another community of people who believe that all the data necessary to effectively counter the terrorism threat is not entirely in government databases. Instead, there may be more information in the greater information space that might prove valuable for the government to exploit in its counterterrorism operations, but currently this data is not used due to legal or policy restrictions. This research path is testing the hypothesis that when terrorist organizations engage in adverse actions against the United States, they make transactions in support of their plans and activities, and those transactions leave a signature in the information space. Those transactions will likely span government, private, and public databases."

He added that "The challenges for the supporting TIA programs in this second research path are twofold: First, is the signature detectable when embedded within a world of information noise? Second, in what part of the information space does that signature manifest itself? Ultimately, our goal within this thread is to understand the level of improvement possible in our counterterrorism capabilities if the government were able to access a greater portion of the information space, while at the same time considering the impact -- if any -- on information policies like the right to privacy, and then mitigate this impact with privacy protection technology. If our research does show an improvement in the government’s ability to predict and preempt terrorism, then it would be up to the policymakers, Congress, and the public at large -- not DARPA -- to decide whether to change law and policy to permit access to such data."

He concluded that "We have made significant progress with the TIA experimental network under the first premise that the government today has access to all the information it needs. The user agencies and commands are finding the tools and concepts valuable. There is a long way to go yet, but progress has been made. The work under the second premise is very much still in the research phase and obviously still controversial. I regret we have not been able to make our case clear and reassure the public that we do not intend to spy on them."

Finally, he commented on the ongoing appropriations process. He wrote that "The Senate version of the Defense Appropriations Bill going into conference with the House on September 2 eliminates funding for most of the counter-terrorism programs of my office -- both the non-controversial as well as the controversial. I hope a compromise can be reached that will permit a continuation of at least the non-controversial parts."

The letter also states that his resignation is effective August 29, 2003.

USPIRG Seeks Broad Regulation of Cable Service Providers

8/12. The U.S. Public Interest Research Group (USPIRG) released a report [90 pages in PDF] titled "The Failure of Cable Deregulation: A Blueprint For Creating a Competitive, Pro-Consumer Cable Television Marketplace". See also, USPIRG release and summary.

The report states that "Since enactment of the 1996 Act that deregulated cable rates, consumer cable prices have been rising at three times the rate of inflation and even faster for basic and expanded basic service, which is the choice of the overwhelming majority of cable subscribers. These rates have risen by more than 50 percent."

It asserts that "Cable price increases have been restrained by competition only when a wireline competitor, often referred to as an overbuilder, enters a market to challenge the incumbent. Where such overbuilder competition exists, the effect is dramatic: The General Accounting Office (GAO) reports that cable rates are 17 percent lower where there is an overbuilder in a franchise area. By contrast, national competition from satellite providers – notwithstanding their increasing market share – has not resulted in lower cable rates."

The report also addresses internet access over cable facilities. It states that "Cable operators now also dominate the broadband Internet market, comprising a huge new source of profits. Cable now has nearly twice as many subscribers as its nearest broadband competitor, DSL (digital subscriber line)."

It continues that "cable operators have become a critical link in the public's ability to participate in the Internet's growing virtual ``town square´´ of American discourse and civic activities. The danger that cable's reign poses to the diversity and democracy of the Internet is quite simple: Cable operators are not required to share their networks with competitive Internet service providers (ISP's). Independent ISP's will not be able to provide cable broadband Internet services because they will not have access to cable wires, unless cable operators open their wires and networks to competitors. They will either have to provide DSL reseller service from phone companies or attempt to negotiate access with a cable operator, which is at the discretion of such operators."

The report also states the "Cable operators have taken anti-competitive action to limit access to certain streaming video content to prevent or limit broadcast quality streaming video over their broadband Internet cable modem service as a means of blocking current and future competition for video content. This has created significant concern on behalf of many of the Internet’s leading content providers and e-commerce websites. Some cable operators have also apparently opted to condition the carriage of a video channel upon the provider’s agreement not to distribute the same content over the Internet at all."

The report contains a long wish list of regulatory restraints on cable service providers.

To start with, "Congress must empower state public utility commissions (PUC) to regulate all cable rates and charges for video services". Also, it recommends that the "Preemptive provisions of the Act have thwarted attempts by local communities to protect cable subscribers from the worst of the industry's depredations. These preemptive provisions must be abolished ..."

In addition, "Consumers must be given the right to purchase every individual channel on an á la carte basis at fair, reasonable and nondiscriminatory prices."

The report also recommends requiring "reasonably priced leased-access rates" similar to FCC rate setting for telecommunications services. It states that "Cable operators have avoided their obligation to lease channel capacity to independent programmers by setting the prices so high that no competing provider could possibly pay current fees and remain commercially viable. In order to promote competition with diverse and independent programming, reasonably priced leased access must be adopted."

The report next recommends that the "existing federal program-access law must be modified to eliminate loopholes that have allowed the cable industry to continue these anti-competitive practices and undermine the emergence of wireline competitors. Additionally, cable operators should be prohibited from entering into exclusive contracts for equipment or other technical services that prevent competitor access to such programming."

The report also states that "A public member representing subscribers should be placed on the board of directors of any cable operator with a greater than four percent market share of cable households as a condition of franchise or FCC approval."

Finally, the USPIRG report recommends prohibiting "cable broadband content restrictions". It states that "Cable operators have a long history of restricting consumer access to content that cable operators disfavor. With the cable industry's ongoing dominance of the broadband market, cable operators must be prohibited from restricting consumer access to Internet content based on the source or nature of the consumer's request."

Rob Stoddard, a SVP of the National Cable & Telecommunications Association (NCTA), responded that "The wild and unfounded claims of these Washington-based advocacy groups are recycled arguments that fell out of favor a decade ago. The regulatory environment envisioned by Congress in 1996 and maintained by the FCC has fostered the most robust telecommunications marketplace in the world. It’s providing a better deal for consumers, who are getting far more for their dollar. How odd that so-called consumer groups would prefer to take all that away." See, release.

He also addressed broadband internet access. He stated that "The broadband renaissance, and the marketplace competition it has spawned, has brought unprecedented choice and value to tens of millions of Americans. Cable’s investment of more than $75 billion in upgrades and rebuilds has facilitated the transmission of more than 300 nationally-delivered video networks and popular consumer services such as high-speed Internet access, video on demand, high definition television, and competitive local telephone service. If these self-appointed consumer representatives had their way, the majority of this investment and innovation would have been stifled from the start."

Defendant Pleads Guilty to Aiding and Abetting the Publication of a Conference Call

8/12. Gary Russell Thomson plead guilty in U.S. District Court (EDVa) to one misdemeanor charge of aiding and abetting the unauthorized publication of a wire communication. The District Court sentenced him to two years of supervised probation and a $2000 fine. See, release [PDF] of the U.S. Attorneys Office (EDVa) and substantially identical release of the Department of Justice's (DOJ) Computer Crimes and Intellectual Property Section (CCIPS).

Edmund Matricardi, a former Executive Director of the Republican Party of Virginia (RPV), obtained the call in number and access code for a Democratic Party conference call, used his phone at the RPV to listen in without disclosing his presence, and then disclosed the contents of the conference calls to others. The Democratic Party sent out an e-mail and a fax notice of the conference calls, but invited only members of the Joint Democratic Caucus.

Gary Thomson was the Chairman of the RPV. Matricardi was his subordinate. The USAO stated in its release that Thomson "aided and abetted" Matricardi in disclosing the contents of the call to a third party.

See also, story titled "Grand Jury Returns Wire Act Indictment for Listening in on Conference Calls" in TLJ Daily E-Mail Alert No. 591, January 27, 2003.

GAO Report Faults EOUSA IT Management

8/12. The General Accounting Office (GAO) released a report [60 pages in PDF] titled "Information Technology: Executive Office for U.S. Attorneys Needs to Institutionalize Key IT Management Disciplines".

This report examines, for the House Judiciary Committee, the extent to which the Executive Office for United States Attorneys (EOUSA), which is responsible for managing the information technology (IT) resources for the U.S. Attorneys' Offices (USAO), has institutionalized key IT management capabilities critical to achieving the Department of Justice's (DOJ) strategic goal of improving the integrity, security, and efficiency of its IT systems.

The 93 USAOs prosecute criminal cases for the federal government, prosecute and defend civil cases in which the U.S. is a party, and collect debts owed to the federal government that are administratively uncollectible. The EOUSA provides administrative and operational support to the USAOs.

The report finds that the "EOUSA has partially defined and implemented certain IT management disciplines". However, "it has yet to institutionalize any of these disciplines, meaning that it has not defined existing policies and procedures in accordance with relevant guidance, and it has yet to fully implement what it has defined. In particular, while EOUSA has developed an enterprise architecture -- a blueprint for guiding operational and technological change -- the architecture was not developed in accordance with certain best practices.

In addition, the report states that "while the office has implemented certain process controls for selecting, controlling, and evaluating its IT investments, it has not yet implemented others that are necessary in order to develop an effective foundation for investment management. Further, it has not implemented important management practices that are associated with an effective security program. In contrast, it has defined -- and is implementing on a major system that we reviewed -- most, but not all, of the management practices associated with effective systems acquisition."

The report concludes that "Institutionalization of these IT management disciplines has not been an agency priority and is not being guided by plans of action or sufficient resources. Until each discipline is given the priority it deserves, EOUSA will not have the IT management capabilities it needs to effectively achieve the department’s strategic goal of improving the integrity, security, and efficiency of its IT systems."

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8/12. The Department of Homeland Security's (DHS) Information Analysis and Infrastructure Protection  Directorate's (IAIP) National Cyber Security Division (NCSD) issued an updated advisory in which it stated that "MALICIOUS CODE DUBBED "MSBLAST", "LOVESAN", OR "BLASTER" BEGAN CIRCULATING ON THE INTERNET ON AUGUST 11TH. THIS WORM TAKES ADVANTAGE OF THE VULNERABILITY DISCUSSED IN THIS ADVISORY, AND CONTAINS CODE THAT WILL TARGET MICROSOFT'S UPDATE SERVERS ON AUGUST 16TH. THIS ADDITIONAL ATTACK COULD CAUSE SIGNIFICANT INTERNET-WIDE DISRUPTIONS. IT IS POSSIBLE THAT OTHER WORMS BASED ON THIS VULNERABILITY WILL BE RELEASED OVER THE NEXT FEW DAYS AS "COPY CAT" ATTACKS.)" (Capitals and parentheses in original.) See also, Symantec's report on the W32.Blaster.Worm, McAfee's report on the worm, and Microsoft's Security Bulletin MS03-026 regarding the vulnerability.

8/12. The U.S. Court of Appeals (DCCir) issued its opinion [19 pages in PDF] in Information Handling Services v. Defense Automated Printing Services. Information Handling Services (IHS) is a commercial publisher of government and industrial standards and specifications. Defense Automated Printing Services (DAPS) is the component of the Department of Defense (DOD) that is responsible for managing, maintaining, and distributing documents relating to unclassified military specifications and standards. IHS filed a complaint in the U.S. District Court (DC) in 1998 against DAPS alleging violation of the Administrative Procedure Act and the DOD's procurement regulations by developing and maintaining an internet accessible database for the dissemination of government documents without first determining whether the private sector could do so at lower cost. The District Court dismissed for lack of standing, and in the alternative, granted summary judgment. The Appeals Court reversed and remanded. This is Information Handling Services, Inc. v. Defense Automated Printing Services, et al., No. 02-5192, an appeal from the U.S. District Court for the District of Columbia, D.C. No. 98cv02796.

8/12. The U.S. District Court (SDNY) issued an order [20 pages in PDF] in In Re Merrill Lynch & Co., Inc.: Research Reports Securities Litigation. The Court denied plaintiffs' motion for reconsideration of the Court's previous order dismissing with prejudice the amended complaints in the 24/7 Real Media, Inc. and Interliant consolidated actions. The Court also denied plaintiffs' motion to amend their consolidated amended complaint.

Jury Returns Verdict of Infringement Against Microsoft in Eolas Browser Patent Case

8/11. A trial jury of the U.S. District Court (NDIll) returned its verdict that Microsoft infringed U.S. Patent No. 5,838,906 titled "Distributed hypermedia method for automatically invoking external application providing interaction and display of embedded objects within a hypermedia document". The jury also awarded damages of $521 Million.

Microsoft stated in a release that "While today's outcome is disappointing, we do plan to appeal this decision and we are confident the facts and the law will support our position. It's important to note that the court has already rejected claims that there was any willful infringement. We believe the evidence will ultimately show that there was no infringement of any kind, and that the accused feature in our browser technology was developed by our own engineers based on pre-existing Microsoft technology."

Microsoft added that "As an intellectual property company, Microsoft invests heavily in research and development, and is committed to respecting the intellectual property rights of others. Microsoft stands by its products and will continue to develop innovative technologies that benefit consumers. Regardless of the ultimate outcome of this case, Microsoft will work hard to ensure that there is very little if any impact on our customers."

The patent application was filed in October 1994. The patent was issued on November 17, 1998. The inventors are Michael Doyle, the founder of Eolas Technologies, David Martin and Cheong Ang.

The abstract of the patent states the following: "A system allowing a user of a browser program on a computer connected to an open distributed hypermedia system to access and execute an embedded program object. The program object is embedded into a hypermedia document much like data objects. The user may select the program object from the screen. Once selected the program object executes on the user's (client) computer or may execute on a remote server or additional remote computers in a distributed processing arrangement. After launching the program object, the user is able to interact with the object as the invention provides for ongoing interprocess communication between the application object (program) and the browser program. One application of the embedded program object allows a user to view large and complex multi-dimensional objects from within the browser's window. The user can manipulate a control panel to change the viewpoint used to view the image. The invention allows a program to execute on a remote server or other computers to calculate the viewing transformations and send frame data to the client computer thus providing the user of the client computer with interactive features and allowing the user to have access to greater computing power than may be available at the user's client computer." (Parentheses in original.)

Powell Addresses E911 and DTV Transition

8/11. Federal Communications Commission (FCC) Chairman Michael Powell gave a speech [PDF] in Indianapolis, Indiana to the Association of Public Safety Communications Officials International. He focused on E911 implementation, but also addressed 800 MHz interference issues, and the DTV transition.

Michael PowellPowell (at right) began by stating that "Spectrum policy and homeland security are at the forefront of my strategic plan for the Commission. Central to that plan is the implementation of Enhanced 911 for wireless communications devices."

He noted that "the FCC cannot MAKE E911 happen -- we need carriers, public safety, ILECs, equipment vendors, and state and local governments ..."

However, he added that "our progress requires the use of an occasional stick. The Commission has not hesitated to use its enforcement power when wireless carriers are not justified in delayed deployment. Within the past fifteen months, we have taken a number of actions where carriers have failed to comply, including entering into consent decrees with multiple national carriers who did not adhere to their deployment schedules. In addition to substantial fines, each carrier is now subject to binding deployment schedules with automatic penalties if they fail to comply again."

Powell also addressed interference in the 800 MHz band. He stated that "public safety needs reliable access to its existing spectrum resources, particularly at 800 MHz. The interference issues at 800 MHz are very serious and complex. In fact, this may be one of the most challenging spectrum policy proceedings that will come before this Commission."

Finally, he touched on the 700 MHz band, and DTV transition. He stated that the FCC is "committed to speeding public safety deployment in the 700 MHz band. ... However, as you know, the band is currently encumbered by broadcasters. The delay in the initial auction of the 700 MHz commercial bands has required modification of the FCC's original voluntary band clearing plan. Congress is exploring new options for moving this process forward. In addition, we are tackling the challenge of the DTV transition to hasten the clearing of the band. Whatever the ultimate mechanism, rest assured that we understand the need to make these frequencies available as soon as possible."

See also, letter [PDF] from Powell to Melvin Carraway, Superintendent of the Indian State Police Department, and FCC release [PDF].

NetCoaltion Propounds Interrogatories by Letter to RIAA Re DMCA Subpoenas

8/11. NetCoalition wrote a letter [6 pages in PDF] to Cary Sherman, President of the Recording Industry Association of America (RIAA), which propounds numerous written interrogatories about the RIAA's use of subpoenas issued by the U.S. District Court pursuant to Section 512 of the DMCA, that direct ISPs to provide information about subscribers alleged to be engaging in P2P copyright infringement over the ISPs' networks. There is no pending lawsuit between the NetCoalition and the RIAA.

The Netcoalition is a Washington DC based interest group. Its website lists as members Yahoo, Inktomi, Lycos, and DoubleClick. Its letter to the RIAA states that its membership includes "hundreds of small Internet service providers".

The letter includes 18 numbered paragraphs with questions to be answered by the RIAA. Many paragraphs include multiple questions. Furthermore, the NetCoalition wants the RIAA to meet with the NetCoalition "and other interested parties to discuss the RIAA's legal initiative and, hopefully, provide answers to the questions".

Some of the questions seek facts regarding the RIAA's subpoenas. They resemble written interrogatories submitted pursuant to Rule 33, Federal Rules of Civil Procedure. However, the letter exceeds the limit of 25 interrogatories. It also asks some questions regarding legal conclusions and litigation strategies and plans.

For example, the letter asks "What methods does the RIAA employ to search for potential copyright infringers on P2P networks?", "what criteria does the RIAA employ to determine whether to file a copyright infringement suit?", "Are the RIAA's investigative efforts also targeting potential file sharing that may be occurring through email, instant messaging, or other comparable technology?", and "Once the RIAA believes it has identified a possible infringing file through technological means, what ``due diligence´´ does RIAA perform to ensure the accuracy of this identification?"

The NetCoalition has not filed a lawsuit against the RIAA. However, on July 30, 2003, Pacific Bell Internet Services (PBIS), an SBC affiliate, filed a complaint in U.S. District Court (NDCal) against the RIAA seeking declaratory and injunctive relief regarding the validity of subpoenas issued by the U.S. District Court (DC), pursuant to Section 512 of the DMCA. In fact, several questions in the NetCoalition's letter reference allegations made by the RIAA in PBIS v. RIAA. Answers to the NetCoalition's questions would aid PBIS in its lawsuit.

See, TLJ story titled "Pacific Bell Internet Services Sues RIAA Over Infringer Subpoenas", July 30, 2003 (also published in TLJ Daily E-Mail Alert No. 709, August 1, 2003.

The letter also asks questions regarding legal conclusions and interpretations. For example, it asks "Can you explain the RIAA's interpretation of ``good faith belief´´", as referenced in the DMCA. It also asks, "Does the RIAA believe that it, too, has ``roving subpoena´´ authority, and can seek a subpoena in one federal court (e.g., the federal district court for the District of Columbia), which can be served no matter where a service provider is actually located?"

Similarly, the letter asks, "Does the RIAA believe that ISPs are legally required to reconfigure the operation of their networks, particularly WiFi networks and other networks using temporary or ``dynamic´´ Internet Protocol addresses, to facilitate the identification of alleged infringers using such networks?"

The letter also asks questions regarding the RIAA's litigation strategy and plans. For example, it asks, "what criteria does the RIAA employ to determine whether to file a copyright infringement suit?" It also asks, "Does the RIAA intend to reimburse Internet companies, especially small ones, for the resources they expend answering RIAA's subpoenas?" Finally, it asks, "What compensatory damages will the RIAA provide to an individual whose personal information was released by the RIAA as a result of the subpoena process but was not subject to a lawsuit or were wrongfully targeted?"

The letter also states that "There are understandable fears among many in the Internet community that the real purpose of this legal campaign is to achieve in court what the association has not yet been able to accomplish in Congress – to make Internet companies legally responsible for the conduct of individuals who use their systems, forcing these companies to become not only the police of the Internet but also permanent and constant watchdogs of the substance of all email traffic, instant messaging, and file sharing."

People and Appointments

8/11. Deputy Attorney General Larry Thompson will leave the Department of Justice (DOJ) at the end of August. He will take a position at the Brookings Institution. See, DOJ release.

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8/11. Thomas S. Hughes plead guilty in U.S. District Court (CDCal) to securities fraud. He is the former CEO of eConnect. The U.S. Attorneys Office (USAO) stated in a release that he orchestrated "a scheme to distribute false information designed to boost the stock price of the publicly traded company".

8/11. The U.S. Court of Appeals (10thCir) issued its opinion in Pirraglia v. Novell, a class action securities fraud case regarding the heightened pleading requirements of the Private Securities Litigation Reform Act of 1995 (PSLRA). The District Court dismissed the complaint pursuant to Rule 129b)(6), Federal Rules of Civil Procedure. The Appeals Court affirmed in part and reversed in part. This is Domenico Pirraglia, et al. v. Novell, Inc, Joseph Marengi, James Tolonen, and John Young, No. 02-4077, an appeal from the U.S. District Court for the District of Utah, D.C. No. 99-CV-995-C.

8/11. The U.S. Court of Appeals (10thCir) issued its opinion in Adams v. Kinder Morgan, a class action securities fraud case regarding the heightened pleading requirements of the Private Securities Litigation Reform Act of 1995 (PSLRA). The District Court dismissed the complaint pursuant to Rule 12(b)(6), Federal Rules of Civil Procedure. The Appeals Court reversed the dismissal as to three defendants, but affirmed as to a fourth, and remanded. This is James Adams, et al. v. Kinder Morgan, Inc., Larry Hall, Clyde McKenzie, and Richard Kinder, No. 02-1208, an appeal from the U.S. District Court for the District of Colorado, D.C. No. 00-N-516.

Go to News from August 6-10, 2003.