News from October 6-10, 2003

People and Appointments

10/10. Joseph Hall was named Senior Policy Fellow in the Securities and Exchange Commission's (SEC) Office of General Counsel for a two year term beginning on October 20, 2003. He is currently a partner in the New York City office of the law firm Davis Polk & Wardwell. See, SEC release.

FCC Announces Agenda for October 16 Meeting

10/9. The Federal Communications Commission (FCC) announced the agenda [PDf] for its Thursday, October 16 meeting.

First, the FCC will consider a Report and Order regarding the allocation, band plan and service rules in the 71-76 GHz, 81-86 GHz and 92-95 GHz bands. This is WT Docket No. 02-146 and RM-10288.

Second, the FCC will consider an Order on Remand, Further Notice of Proposed Rulemaking, and Memorandum Opinion and Order regarding the universal service support mechanism for non-rural carriers. This item follows the July 31, 2001 opinion of the U.S. Court of Appeals (10thCir) in Qwest v. FCC, 258 F.3d 1191, which reversed and remanded the FCC's Ninth Order "because it does not provide sufficient reasoning or record evidence to support its reasonableness." See also, the FCC web page titled "Tenth Circuit Remand". This is CC Docket No. 96-45.

Third, the FCC will consider an Order to resolve issues raised in the Auction No. 52 Comment Public Notice related to the FCC's authority to auction Direct Broadcast Satellite (DBS) licenses and eligibility for the DBS licenses currently available. See also, the FCC web page titled "Auction 52: Direct Broadcast Satellite Service". This is AUC-03-52.

Fourth, the FCC will consider an Order regarding applications submitted by commercial television stations seeking extensions of the May 1, 2002, deadline for construction of digital television facilities.

Fifth, the FCC will consider a Report and Order regarding licensing, technical and competitive bidding rules for spectrum in the 1710-1755 MHz and 2110-2155 MHz bands, which is allocated for advanced wireless services (AWS). AWS, which is also known as Third Generation (3G) wireless services, is a digital, packet switched, internet protocol system. It is planned that it will carry voice, music and data. It is also planned that it will increase the efficiency of use of spectrum. It is intended to bring broadband internet access to portable devices. See also, the FCC's November 22, 2002 notice of proposed rulemaking (NPRM) [44 pages in PDF], and the FCC's 3G web page. This is WT Docket No. 02-353. The NPRM is FCC 02-305.

The meeting will be held in the FCC's Commission Meeting Room, 445 12th Street, SW, Room TW-C05. The meeting will also be webcast.

FCC Files Opposition to ILEC's Petitions for Writ of Mandamus Re UNE-P Provisions of TRO

10/9. The Federal Communications Commission (FCC) filed with the U.S. Court of Appeals (DCCir) its opposition [PDF] to the incumbent local exchange carriers' (ILEC) petitions for writ of mandamus that challenge the unbundled network element platform (UNE-P) provisions of the FCC's triennial review order [576 pages in PDF].

The FCC argues that a writ of mandamus is an "extreme remedy", and that the ILEC petitioners have not met the high burden required for this writ. Moreover, the FCC argues that the TRO is fully consistent with the USTA v. FCC opinion which vacated the previous unbundling order.

This proceeding is not a petition for review of the FCC's TRO, although petitions for review have also been filed. Rather, this is a continuation of the proceeding in which the Court of Appeals overturned the FCC's previous unbundling order. The ILECs assert that the TRO flouts and defies the previous opinion of the Court of Appeals in USTA v. FCC, 290 F.3d 415 (2002)

That is, the Supreme Court vacated the FCC's first unbundling order in AT&T v. Iowa Utilities Board, 525 U.S. 366 (1999). The FCC then promulgated its second unbundling order, in its proceeding titled "Implementation of the Local Competition Provisions of the Telecommunications Act of 1996"; see, Third Report and Order and Fourth Further Notice of Proposed Rulemaking, published at 15 FCC Rcd 3696 (1999). But, the DC Circuit vacated that order last year in USTA v. FCC, and the Supreme Court denied certiorari. The TRO, which is the third unbundling order, was promulgated in response to the USTA v. FCC opinion.

The FCC announced its TRO on February 20, 2003, but did not release the text until August 21, 2003. See, TLJ story titled "Summary of FCC Triennial Review Order", also published in TLJ Daily E-Mail Alert No. 725, August 25, 2003. See also, stories titled "FCC Announces UNE Report and Order", "FCC Order Offers Broadband Regulatory Relief", "FCC Announces Decision on Switching", "Commentary: Republicans Split On FCC UNE Order", and "Congressional Reaction To FCC UNE Order" in TLJ Daily E-Mail Alert No. 609, February 21, 2003.

The TRO addressed many subjects. While much of the coverage of the TRO in TLJ has focused on the broadband related provisions, the petitions for writ of mandamus go to the provisions regarding unbundled network element platform, or UNE-P.

On August 28, 2003, the U.S. Telecom Association (USTA), SBC Communications, BellSouth and Qwest filed a petition for writ of mandamus with the U.S. Court of Appeals (DCCir) seeking a stay of part of the FCC's triennial review order [576 pages in PDF]. This petition was filed in the Appeals Court proceeding numbered 00-1012 (and consolidated proceedings). These pertain to the petitions for review of the FCC's previous unbundling order. The present petition asserts that the TRO flouts and defies the previous opinion of the Court of Appeals, and seeks a writ of mandamus staying part of the order. Also on August 28, Verizon filed a parallel petition for writ of mandamus with the same court, seeking broader relief.

See, stories titled "ILECs File Petitions for Writ of Mandamus Challenging Triennial Review Order" and "A Petition For Writ of Mandamus?" in TLJ Daily E-Mail Alert No. 730, September 2, 2003; and "Appeals Court Orders FCC to Respond to Petitions for Writ of Mandamus Regarding Number Portability" in TLJ Daily E-Mail Alert No. 749, September 30, 2003.

The FCC states in its opposition to the petitions for writ of mandamus that "Not only is direct review a fully adequate means for the ILECs to seek relief ..., the Triennial Review Order is wholly consistent with -- and fully supported by -- this Court’s mandate in USTA. The Order abandoned the impairment standard that the Court found deficient in USTA, and adopted a new standard that is substantially similar to standards advocated by the ILECs."

The opposition brief also argues that "The ILECs now challenge the merits of the few portions of the Triennial Review Order that did not go their way. Primarily, they attack the FCC’s decision to delegate a role to the state commissions in implementing a granular, market-by-market impairment test. Not only was the lawfulness of such a delegation not even discussed in USTA, but the ILECs themselves have repeatedly advocated precisely this kind of delegation to the states."

It further argues that "It is thus clear that the ILECs’ real complaint is that the FCC decided not to eliminate immediately the unbundling of switching and several other network elements. But neither the USTA decision nor any other court decision requires such a result. And the FCC’s decisions were based on highly factual determinations amply justified by the record."

The FCC's brief was prepared by the Department of Justice and the FCC's Office of General Counsel, whose job it is to defend the orders of the FCC.

However, the arguments advanced in the FCC in its opposition are contrary to the arguments advanced by FCC Chairman Michael Powell. For example, he wrote in his statement [6 pages in PDF] of February 20, 2003, that "the majority flouts the D.C. Circuit mandate."

Powell elaborated that the TRO "is legally suspect if for no other reason than it is nearly identical at its core to the ill-fated UNE Remand Order of 1999. In substance and in spirit it endeavors again to reverse the presumptions of the statute by treating unbundled switching as an unqualified good that should be provided by an incumbent to an entrant, unless the incumbent proves that the ``presumption´´ of impairment is unwarranted. I think this basic paradigm turns the statute on its head and flies in the face of the Court’s ruling."

DOJ Recommends Approval of Qwest's Arizona Long Distance Request

10/9. The Department of Justice's (DOJ) Antitrust Division submitted its evaluation to the Federal Communications Commission (FCC) recommending that the FCC approve Qwest's Section 271 application to provide in region interLATA services in the state of Arizona.

The evaluation states that competitive local exchange carrier (CLEC) entry in Arizona in the business market is 36.9 percent, and CLEC entry in the residential market is 11.6 percent.

Hewitt Pate, Assistant Attorney General in charge of the Antitrust Division, stated in a release that "Conditions in Arizona local telecommunications markets appear favorable to fostering competition ... Facilities-based competitors have made progress in penetrating both the business and residential markets, and the Department believes there are no longer any material obstacles to competition in Arizona created by Qwest."

The application still requires approval by the FCC. See also, Qwest release.

Ridge Addresses Cyber Security

10/9. Secretary of Homeland Security Tom Ridge gave a speech at the Business Software Alliance's (BSA) Global Tech Summit. He addressed, among other topics, cybersecurity.

He spoke about the creation of the Cyber Security Tracking Center and Computer Emergency Response Team (which will work in partnership with Carnegie Mellon's CERT, the Homeland Security Advanced Research Project Agency (HSARPA), and the appointment of Amit Yoran as Director of the National Cyber Security Division of the Information Analysis and Infrastructure Protection office.

Tom RidgeRidge (at right) stated that "as we think about our vulnerabilities, we have to think about redundancies. I think that one of the, the notions that we have in our Department, and we think about it all the time, is the combination of a cyberattack and a physical attack. You can imagine, given the interdependency -- just emergency services alone, responding to a physical attack -- how that could complicate our mission to save lives."

He observed that "the enemies of freedom use the same technology that we do."

He also reviewed several of the things the Department of Homeland Security has done in the area of cybersecurity. He said, "We've created a Cyber Security Tracking Center to monitor incidents and coordinate our nationwide response. We'll be aided by our Computer Emergency Response Team, or U.S. CERT." He added that "It's a new partnership with Carnegie Mellon University, which will grow to include many members of the business community. We're going to need your help here. We can't get this done by ourselves. The connections you make, and the network you establish in support of the U.S. CERT will go a long way in helping us achieve our goal of reducing our vulnerability to cyberattacks."

Ridge continued that "I want to say we are also going to continue to invite more companies to join these information-sharing and analysis centers. They are critical to our effort to secure the homeland. We will continue to inform them of new threats and incidents."

He also talked about the HSARPA. He stated that "we don't have it completely configured the way we want it yet, but the notion that on an annual basis, we will be investing hundreds of millions of dollars in a similar fashion, to take advantage of the creativity and innovation of this country, I think is -- should give you, and certainly Americans, some comfort that we don't have the solution, it's out there and it's on the way."

He also talked about the appointment of Amit Yoran. (See, September 15, 2003 release of DHS announcing appointment of Yoran.)

Ridge said that "he was a highly respected -- he's a member of your alliance. He was out of the -- actually, he started the company and sold it to Symantec. ... So he's actually going to oversee our cyber security operation within the Department."

Joint Conference on Accounting Issues Submits Recommendations to FCC

10/9. The Federal-State Joint Conference on Accounting Issues submitted to the Federal Communications Commission (FCC) a list of recommended changes to the FCC's accounting rules, and a request that the FCC issue a notice of proposed rulemaking (NPRM) for the purpose of adopting these recommended changes. See, FCC release, with attached recommendations.

FCC Commissioner Kevin Martin wrote a statement [2 pages in PDF]  in which he expressed concern about some of the recommendations of the Joint Conference.

Commissioner Michael Copps wrote a statement [PDF] in which he said that the FCC "now must move swiftly to convert this Recommendation into a Notice of Proposed Rulemaking". He also wrote that the Joint Conference should now assess additional issues, which he recites.

The Joint Conference was formed in September of  2002 to provide a forum for a dialogue between the FCC and the states to ensure that regulatory accounting data and related information filed by carriers are adequate, truthful, and thorough. This proceeding is WC Docket 02-269.

California Court Rejects Privacy Challenge to Electronic Fingerprinting of Welfare Recipients

10/9. The California Court of Appeal (3) issued its opinion [42 pages in MS Word] in Sheyko v. Saenz, a challenge to the state of California's regulations regarding electronic fingerprinting of welfare recipients.

The California legislature created a program named Statewide Fingerprint Imaging System (SFIS) in order to reduce welfare fraud. The legislature required the California Department of Social Services (DSS) to promulgate regulations implementing the program.

Lyudmila Sheyko and others filed a complaint in California Superior Court (Sacramento County) challenging certain of the SFIS regulations. The trial court granted judgment to Sheyko as to certain regulations. Both Sheyko and Rita Saenz (as Director of the DSS) appealed.

The Court of Appeal upheld the DSS regulations in their entirety.

Sheyko challenged regulations on the basis that they were ineffective. The Court held that "It is for the Legislature to determine whether a particular welfare antifraud measure is or is not effective, therefore Sheyko's assertions that SFIS is ineffective should be addressed to the Legislature, not the judiciary."

Sheyko challenged regulations as an invasion of privacy. The Court held that "Sheyko’s underlying assertions that her privacy or religious freedoms are improperly impaired by SFIS lack merit."

It wrote that "Sheyko views fingerimaging as an invasion of privacy and personal dignity, and invokes the specter of 1984. But the Legislature could rationally find welfare recipients are no more stigmatized by fingerimaging than are driver’s license applicants, lawyers, accountants and many others."

The California Supreme Court has previously rejected a privacy challenge to fingerprinting for driver's licenses, because of the need to deter fraud. See, Perkey v. Department of Motor Vehicles, 42 Cal.3d 185 (1986).

This case is Lyudmila Sheyko. et al. v. Rita Saenz, C.A. No. C039132, an appeal from the Superior Court for Sacramento County, S.C. No. 00CS01130, Judge Ronald Robbie presiding.

Bush Praises Class Action Reform Bill

10/9. President Bush gave a speech in Manchester, New Hampshire. He addressed, among other topics, class action reform. He praised HR 1115, the bill sponsored by Rep. Bob Goodlatte (R-VA) and Rep. Rick Boucher (D-VA) bill named the "Class Action Fairness Act".

He stated that "Businesses are more likely to hire people if the health care for workers is affordable. We need to allow association health care plans, where small businesses can pool risk and gain the same bargaining power as big businesses. And in order to control health care costs, we need effective legal reform, medical liability reform at the federal level."

He continued that "Defensive medicine against frivolous lawsuits runs up the federal budgets, it increases the cost of Medicare and Medicaid and veteran health benefits. Medical liability reform is a national problem that requires a national solution."

He concluded that "Unfair lawsuits are also harming a lot of good and honest employers. There are too many large settlements that leave plaintiffs with a small sum and lawyers with a fortune. Class actions and mass tort suits that reach across state lines should be tried in a federal court so lawyers cannot shop around looking for a favorable judge. And most of the money in a judgment or settlement should go to those who have actually been harmed, not the lawyer."

The House, but not the Senate, has passed a bill that addresses some of the concerns expressed by President Bush. The House passed HR 1115, the "Class Action Fairness Acton", on June 12, 2003 by a vote of 253-170. This was a largely party line vote, although 32 Democrats joined Republicans in voting for the bill. See, Roll Call No. 272. See also, stories titled "Reps. Goodlatte and Boucher Re-Introduce Class Action Fairness Act" in TLJ Daily E-Mail Alert No. 619, March 10, 2003 and "House Passes Class Action Fairness Act" in TLJ Daily E-Mail Alert No. 680, June 13, 2003.

This bill amends 28 U.S.C. § 1332, regarding diversity of citizenship. It provides federal jurisdiction in certain class actions with a minimum total of aggregated claims where any member of a class of plaintiffs is a citizen of a state different from any defendant.

The bill would also require increased judicial scrutiny of class action settlements that provide for coupon and other non-cash settlement payments to plaintiffs. It would also prohibit geographic discrimination in awards to plaintiffs.

President Bush stated that "The House has passed a good bill. It is stuck in the Senate. Senators must understand no one has been healed by a frivolous lawsuit in America."

FRB Governor Discusses High Tech Equity Markets

10/8. Federal Reserve Board (FRB) Governor Susan Bies gave a speech titled "Comments on the Current State of the Economy". She spoke at Middle Tennessee State University in Murfreesboro, Tennessee. She offered her assessment of the rise and decline of tech sector equity markets.

Susan BiesBies (at right) stated that "In the late 1990s, financial conditions were easy. Very narrow risk premiums in both debt and equity markets and lofty expectations about returns on the part of investors and borrowers greatly reduced the cost of external funds. A frenzy of capital-raising followed, led by telecommunication and Internet firms. Corporate debt and equity issuance soared -- adding almost $2 trillion in new debt and equity to the balance sheets of nonfinancial corporations from 1998 through 2000 alone, with a good portion of the money raised by risky firms in the junk bond, venture capital, and initial public offering (IPO) markets. Firms used the proceeds not only to fund investment, but also to finance acquisitions of other companies, stock repurchases, and operating expenses."

She continued that "The spectacular collapse of high-tech equity valuations in the spring of 2000, led by the same telecommunication and Internet firms, wreaked havoc with corporate credit quality in some sectors and began a prolonged retrenchment in financial markets. Subsequently, financial markets were buffeted with a barrage of terrorism, war, and corporate governance shocks that further eroded investor confidence and stoked uncertainty and pessimism."

"The consequent retreat from risk-taking led to a substantial markdown in asset values, with obvious negative consequences for portfolios. Between early 2000 and the end of 2002, more than $6 trillion of stock-market wealth evaporated, and more than $200 billion of corporate bonds went into default. Many of the telecommunication firms that did IPOs or issued junk bonds during the easy market conditions of the late 1990s went bankrupt. For other firms, debt burdens that had appeared manageable suddenly looked excessive. Investors and lenders rightly responded to these events by becoming more wary, and financial conditions accordingly became more restrictive", said Bies.

House Approves Bill to Limit P2P File Sharing at Government Agencies

10/8. The House approved HR 3159, the "Government Network Security Act of 2003" by a voice vote. This bill requires federal government agencies to develop and implement plans to protect the security and privacy of government computer systems from the risks posed by peer-to-peer (P2P) file sharing.

HR 3159 is sponsored by Rep. Henry Waxman (D-CA), Rep. Tom Davis (R-VA), and others. Rep. Davis on October 8 stated that "file sharing programs create a number of risks for federal departments and agencies if they are installed on government computers. The federal government uses and stores a wide variety of classified and sensitive information, including information vital to national security, public health, and the personal and financial records of U.S. citizens and businesses. Installing these programs on government computers can cause this sensitive information to be exposed to the public. Because files are shared anonymously on peer to peer networks, there is also a risk of the spread of viruses, worms, and other malicious computer files."

See, stories titled "Representatives Introduce Bill to Protect Children from P2P Smut" in TLJ Daily E-Mail Alert No. 706, July 29, 2003; and "House Committee Passes Bill to Restrict P2P File Sharing on Computers and Networks of Federal Agencies" in TLJ Daily E-Mail Alert No. 749, September 30, 2003.

The Senate has not passed this bill. However, the Senate Judiciary Committee has held hearings that have addressed the use of P2P software at government agencies. See, stories titled "Senate Committee Holds Hearing on P2P Networks" in TLJ Daily E-Mail Alert No. 683, June 18, 2003; and "Senate Judiciary Committee Hears Testimony on Copyright Infringement on P2P Networks" and "Senate Judiciary Committee Hears Testimony on Porm on P2P Networks", in TLJ Daily E-Mail Alert No. 736, September 10, 2003.

FRB's Ferguson Addresses Impact of Information Technology on Financial Services

10/8. Federal Reserve Board (FRB) Vice Chairman Roger Ferguson gave a speech in Boston, Massachusetts titled "The Future of Financial Services -- Revisited". He discussed the impact of technological change on both the production and consumption of financial services.

Roger FergusonFerguson (at right) discussed how financial institutions have used new technologies to better manage risk. He stated that "I also point to another reason that the U.S. banking system has performed so well over the current economic cycle. This factor is the truly impressive improvement in methods of risk measurement and management and the growing adoption of these technologies by mostly large banks and other large financial intermediaries over the past five years. To be sure, at most banks the application of these methods is still in its infancy, if it has begun at all, and even the most advanced banks have room for improvement. But modern advances in the quantification of risk and in its management have provided bank management with a far more disciplined and structured process for evaluating loans, pricing risks, and deciding which risks to retain."

This is a subject that FRB Chairman Alan Greenspan has also addressed at length. See, for example, speech of October 7, 2002, and story titled "Greenspan Addresses Importance of Computing, Databases and Data Mining to Banking System" in TLJ Daily E-Mail Alert No. 525, October 8, 2002.

Ferguson also made the point the new technologies have played a role in "breaking down traditional distinctions between commercial banking, investment banking, and insurance products". He added that "the Gramm-Leach-Bliley Act can be thought of as a response to technological change".

He then focused on the use of information technology by consumers of financial services. Although, he conceded that here, "the process remains a considerable mystery".

He noted that "many academics, regulators, and bankers have for many years forecast that technological change would end use of the paper check and make the brick-and-mortar bank branch obsolete. However, here we are in October 2003 and the paper check is still very much in use, the smart card has not succeeded as predicted, and the number of brick-and-mortar bank offices is still increasing."

He offered some analysis. He reviewed data collected by the FRB in its triannual Survey of Consumer Finances. In 1998, 6 percent of households had used a computer to conduct business with their financial institutions, while 80 percent had used an in person visit to an office. In 2001, almost 20 percent responded that they had used a computer, while 78 percent had visited an office.

Ferguson said that "While one cannot draw any strong conclusions from this small number of facts, they support the view that, in matters of finance, households tend to adopt technological change only gradually. In addition, even when new technologies start to gain more widespread acceptance, old technologies are abandoned rather slowly and many users perhaps view the old and new technologies more as complements than as substitutes."

He concluded that "Research conducted by the Federal Reserve Board's staff reinforces the notion that the adoption of technological change is a highly complex process. For example, it appears that income, education, age, and other factors, perhaps even a household's attitudes toward risk, play important roles in determining a household's willingness to adopt new technologies for the consumption of financial services. On balance, I would suggest that strategic planners at financial institutions will need to take a wide variety of factors into account in planning and marketing technological innovations."

President Bush has renominated Ferguson to be Vice Chairman of the FRB. The Senate Banking Committee will hold a hearing on his renomination on October 14, 2003.

Reaction to 9th Circuit Opinion in Brand X Internet Services v. FCC

10/8. Daniel Brenner, SVP, Law and Regulatory Policy, at the National Cable Telecommunications Association (NCTA) released a statement regarding the October 6 opinion [39 pages in PDF] of the U.S. Court of Appeals (9thCir) in Brand X Internet Services v. FCC vacating the Federal Communications Commission's (FCC) declaratory ruling that cable modem service is an information service, and that there is no separate offering as a telecommunications service.

The FCC adopted a Declaratory Ruling and Notice of Proposed Rulemaking [75 pages in PDF] at its March 14, 2002 meeting. This is FCC 02-77 in Docket No. 00-185 and Docket No. 02-52. See, TLJ story titled "9th Circuit Vacates FCC Declaratory Ruling That Cable Modem Service is an Information Service Without a Separate Offering of a Telecommunications Service", also published in TLJ Daily E-Mail Alert No. 754, October 7, 2003.

Brenner wrote that "The decision is a strained reading of an earlier Ninth Circuit case to which the three-judge panel felt legally bound. By virtue of the prior decision in AT&T v. City of Portland, the panel felt compelled to characterize cable modem service as a telecommunications service, a legally erroneous conclusion that neither Congress nor any other U.S. court has ever reached. Well-established U.S. Supreme Court precedent provides that where a statute is ambiguous, courts are compelled to defer to reasonable agency interpretations. Because of the odd legal juxtaposition of the Brand X appeal and the prior Portland case, the panel failed to defer to the FCC." He added that the "NCTA fully supports an FCC appeal."

Meanwhile, Randolph May of the Progress & Freedom Foundation (PFF) stated that "The Commission should not allow the Ninth Circuit's panel decision to prevent it from proceeding promptly to do whatever is necessary to ensure that cable broadband services are free from traditional common carrier regulation ... Even if the Ninth Circuit's legally questionable interpretation concerning the classification of cable modem services were correct, the FCC has authority under the 1996 Act, and already has compiled a sufficient record, to forbear from regulating broadband services. In light of the competitive nature of the services, the agency should exercise such authority without delay."  See, FCC release.

In contrast, Dave Baker, VP of law and public policy at EarthLink (which challenged the FCC's declaratory ruling), stated that the 9th Circuit's opinion "vindicates what EarthLink has been telling the FCC for five years now, that cable modem service contains a telecommunications service. As the Court noted in its decision, ‘The practical result of such a classification is that cable broadband providers would be required to open their lines to competing ISPs.’ Cable modem users deserve choice in high-speed Internet providers. Today’s ruling is a big step towards finally affording them that choice." See, release.

More Court Opinions

10/8. The U.S. Court of Appeals (4thCir) issued its opinion [PDF] in Bouchat v. Baltimore Ravens, a copyright case involving the artwork used by the Baltimore Ravens football team. The District Court, following a jury trial, found that Bouchat's copyright had been infringed, but awarded him no portion of the Ravens' profits as damages. He asserted that the District Court erroneously failed to accord him the benefit of a statutory presumption that an infringer's revenues are entirely attributable to the infringement. The Appeals Court affirmed. This case is Frederick Bouchat v. Baltimore Ravens Football Club, Inc., et al., No. 02-1999, an appeal from the U.S. District Court for the District of Maryland, at Baltimore, Judge Marvin Garbis presiding, D.C. No. CA-97-1470-MJG.

10/8. The U.S. Court of Appeals (6thCir) issued its opinion in Miller v. Champion Enterprises, a class action securities fraud case involving the Private Securities Litigation Reform Act (PSLRA). The District Court dismissed the complaint for failure to meet the heightened pleading requirements for scienter under the PSLRA. The Appeals Court affirmed. This case is Joel Miller, et al. v. Champion Enterprises, Inc., No. 01-1955, an appeal from the U.S. District Court for the Eastern District of Michigan, at Detroit, Judge John Feikens presiding, D.C. No. 99-74231.

More News

10/8. General Electric and Vivendi Universal announced that they have signed a definitive agreement for the merger of NBC (which is a division of GE) and Vivendi Universal Entertainment (VUE). The new company will be 80%-owned by GE, with 20% held by the shareholders of VUE. See, GE release. The proposed merger is subject to regulatory approvals. Sen. Mike DeWine (R-OH) and Sen. Herb Kohl (D-WI), the Chairman and ranking Democrat on the Senate Judiciary Committee's Subcommittee on Antitrust, Competition Policy and Consumer Rights issued a joint statement. They wrote that "The combination of NBC and Vivendi Universal's media holdings is the latest example of the increasing consolidation in our media industry, a trend which should concern all of us who care about the diversity of viewpoints available to all Americans. We need to scrutinize this deal closely to examine its implications for competition in media marketplace, and expect to be holding a hearing shortly."

10/8. The Federal Communications Commission (FCC) issued an Order and Authorization [52 pages in PDF] that authorizes, subject to certain conditions, the transfer of licenses incident to Singapore Technologies Telemedia's (ST Telemedia) acquisition of the assets of the bankrupt Global Crossing (GC). GC owns and operates a global fiber optic network. In January of 2002, GC and subsidiaries filed Chapter 11 bankruptcy petitions in U.S. bankruptcy court. Global Crossing will transfer assets to GC Acquisition Limited (New GX). ST Telemedia will obtain common and preferred stock equal to a controlling interest of 61.5 percent of New GX's equity. The FCC's review involved competition analysis, foreign investment analysis, and national security analysis. This is IB Docket No. 02-286. See also, FCC release [2 pages in PDF].

10/8. The Federal Communications Commission (FCC) announced that since October 1, it has received 2,379 complaints about alleged violations of the do-not-call rules and 5,879 inquiries about the rules. See, FCC release.

10/8. Rep. Billy Tauzin (R-LA) and Rep. John Dingell (D-MI), the Chairman and ranking Democrat on the House Commerce Committee, issue a joint statement in which they praised the opinion of the U.S. Court of Appeals (10thCir) staying the U.S. District Court (DColo) opinion barring the Federal Trade Commission (FTC) from enforcing the national do-not-call registry. They also announced that "To lend our full and complete support of the FTC's do-not-call registry, we plan to file an amicus brief with the 10th Circuit that will be drafted by First Amendment expert and former Solicitor General Walter Dellinger." Dellinger, who is now a law professor at Duke University, was the Assistant Attorney General in charge of the Department of Justice's Office of Legal Counsel, and then Solicitor General, during the Clinton administration.

10/8. The Copyright Office (CO) published a notice in the Federal Register stating that the CO "is requesting public comment on the adoption of regulations for records of use of sound recordings performed pursuant to the statutory license for public performances of sound recordings by means of digital audio transmissions between October 28, 1998, and the effective date of soon-to-be-announced interim regulations." Comments are due by November 24, 2003. Reply comments are due by December 22, 2003. See, Federal Register: October 8, 2003, Vol. 68, No. 195, at Page 58054.

Sen. Grassley Writes PR China Regarding WTO Obligations

10/7. Sen. Charles Grassley (R-IA), the Chairman of the Senate Finance Committee, wrote a letter [4 pages in PDF] to Lu Fuyuan, Minister of Commerce of the People’s Republic of China, in which he urged China to abide by its World Trade Organization (WTO) accession agreement.

He wrote that "there are multiple reports stating that China is failing to fulfill its WTO obligations, including: in its use of insufficient regulatory transparency; by utilizing unreasonable standards for agricultural biotech products; in its application of agricultural and industrial quotas and tariff-rate quotas (TRQs); through its use of export subsidies; by utilizing discriminatory tax policies on imports; by failing to provide protection for U.S. intellectual property rights; and, in maintaining high capital requirements for establishing service businesses. It is time to take more action."

Sen. Charles GrassleySen. Grassley (at right) continued that "although China has good intellectual property rights (IPR) laws on its books, it is sorely lacking in enforcement and coordination. U.S. businesses continue to experience significant IPR problems in China that cost them billions of dollars each year in lost sales. It is estimated that counterfeits account for 15 to 20 percent of all products made in China. Chinese factories violating copyright, trademark, and patent laws are not being shut down and violators are not being prosecuted. China should make an example of these offenders through stiffer penalties and by imposing prison sentences. This could go a long way toward slowing down the illegal trade."

With respect to transparency, he wrote that "certain Chinese agencies are selectively choosing who they will bring in for consultations on rule-making issues, are providing short and ineffective comment periods for new regulations, and are making their final decisions in a black box."

He added that "Nontransparent actions by government agencies and high capitalization requirements are keeping U.S. service providers out of the market."

10th Circuit Stays District Court Injunction of Implementation of Do Not Call Registry

10/7. The U.S. Court of Appeals (10thCir) issued an order [24 pages in PDF] staying the September 25 order of the U.S. District Court (DColo) that barred the Federal Trade Commission (FTC) from implementing its national telemarketing do not call registry. The FTC and FCC may now proceed to implement and enforce their rules pertaining to the do not call registry. See, full story.

FCC Finally Releases R&O and FNPRM in Secondary Spectrum Markets Proceeding

10/7. The Federal Communications Commission (FCC) released its Report and Order and Further Notice of Proposed Rulemaking [198 pages in PDF] in it proceeding titled "In the Matter of Promoting Efficient Use of Spectrum Through Elimination of Barriers to the Development of Secondary Markets".

The FCC adopted this item on May 15, 2003, but did not release it until October 7, 2003, almost five months later. See, TLJ story titled "FCC Adopts Order Allowing Some Secondary Leasing of Spectrum", May 15, 2003. This is FCC 03-113 in WT Docket No. 00-230.

The FCC also announced deadlines for comments. Initial comments are due by December 5, 2003. Reply comments are due by January 5, 2004.

This item is part of WT Docket No. 00-230, which was opened in 2000, during the tenure of former Chairman William Kennard. The FCC adopted its original Notice of Proposed Rulemaking [61 pages in PDF] on November 9, 2000. See, TLJ story titled "FCC Discusses Secondary Markets for Wireless Spectrum", and TLJ news analysis titled "Mobile Internet Access Devices and the Internet", both dated November 10, 2000.

This R&O and FNPRM also builds upon the work of the FCC's Spectrum Policy Task Force (SPTF), which Chairman Powell formed in June of 2002. The SPTF solicited comments and held hearings, outside of the context of WT Docket No. 00-230, or any other rule making proceeding. See, story titled "Powell Creates Task Force to Conduct Spectrum Inquiry" in TLJ Daily E-Mail Alert No. 446, June 7, 2002. The FCC announced the completion of a SPTF report on November 7, 2002. See, story titled "FCC Announces Report on Spectrum Policy" in TLJ Daily E-Mail Alert No. 545, November 8, 2002. The SPTF released this Report [73 pages in PDF] on November 15, 2002. One of the many topics addressed by the report is moving towards markets for spectrum. The report recommends that "spectrum policy must evolve towards more flexible and market oriented regulatory models."

This item states that "we revise the Commission’s de facto control standard for interpreting Section 310(d) requirements in the context of spectrum leasing, replacing the outdated Intermountain Microwave standard that has been in place since 1963 with a refined standard that better accords with our contemporary market-oriented spectrum policies, fast-changing consumer demands, and technological advances." (Intermountain Microwave is published at 12 FCC 2d 559 (1963).)

It further states that "we implement two different options for spectrum leasing. One option enables licensees and ``spectrum lessees´´ to enter into leasing arrangements, without the need for Commission approval, so long as the licensee retains de facto control of the leased spectrum under the newly refined standard. The other option permits parties to enter into arrangements in which the licensee transfers de facto control to the lessee pursuant to streamlined approval procedures.

This item also includes a further notice of proposed rule making. It states that "we seek comment on how to encourage the development of information and clearinghouse mechanisms that will facilitate secondary market transactions between licensees and new users in need of access to spectrum. We also seek comment on further streamlining of application processing for leasing, transfers, and assignments, expanding leasing to additional services not covered by today’s order, and modifying or eliminating other regulatory barriers impeding secondary market transactions."

The item further comments that "The Commission’s objectives in ``managing´´ spectrum usage have significantly evolved in recent years in response to statutory, technological, and marketplace changes. We are increasingly seeking to ensure that spectrum is put to its highest valued use, which generally can be most efficiently determined by operation of market forces. In pursuit of that goal, the Commission has increasingly granted flexibility to its licensees to enable them to put spectrum to its highest and best uses, consistent with preventing unacceptable interference."

"Innovative technological changes and substantially increased demand have reinforced the need for the Commission to revisit its traditional approaches. It is in this vein that the Report and Order and the Further Notice posit an end goal of an overall spectrum policy under which licensees have much greater ability and incentive to make unused spectrum -- whether by frequency bandwidth, geographic area, or time (or any combination thereof) -- available to third parties. These parties may be current spectrum operators requiring additional spectrum to meet customer needs over either the short- or long-term, new entrants seeking to serve a limited area or narrowly targeted end-user market, small businesses trying to deliver services in rural communities, diverse entities unable or unwilling to participate in spectrum auctions or that otherwise do not have a license through which they can access spectrum to meet consumer needs, or innovative spectrum users seeking to provide services by means of opportunistic spectrum devices." (Parentheses in original.)

Finally, perhaps it is noteworthy that the first sentence of the first paragraph of this R&O and FNPRM uses the phrase "spectrum usage rights". Heretofore, the FCC has used the word "rights" sparingly in the context of spectrum. Still, the R&O and FNPRM does not refer to U.S. "property rights" in spectrum. Although, FCC Commissioner Kathleen Abernathy wrote in her concurring statement that "We must have an effective and legally defensible secondary market if the property-like rights driven license model for spectrum-based services is to succeed."

FCC Issues LNP Order

10/7. The Federal Communications Commission (FCC) issued a Memorandum Opinion and Order (MOO) [pages in PDF] in its proceeding titled "In the Matter of Telephone Number Portability -- Carrier Requests for Clarification of Wireless-Wireless Porting Issues". This MOO addresses wireless-wireless, but not wireless-wireline, local number portability (LNP) issues.

The MOO states that it offers "further guidance to the industry as it nears the November 24, 2003, deadline to provide wireless local number portability (LNP). The guidance we offer today is applicable to wireless-wireless porting only. We intend to address issues related to wireline-wireless porting in a separate order. Today, in response to a Petition for Declaratory Ruling/Application for Review, we hold that while carriers may agree to rules with their customers via contract, such rules may not restrict carriers' obligations to port numbers to other carriers upon receipt of a valid request to do so." (Footnote omitted.)

The MOO continues that "we address several separate LNP implementation issues that have been raised in the context of the Cellular Telecommunications & Internet Association's May 13th Petition for Declaratory Ruling. We clarify that wireless carriers may not refuse a request to provide LNP from another wireless carrier on the basis of the lack of proximity of the requesting carrier’s switch to the porting out carrier’s switch. We confirm also that interconnection agreements are not required for wireless to wireless porting and that, in cases where wireless carriers are unable to reach agreement regarding the terms and conditions of porting, all such carriers must port numbers upon receipt of a valid request from another carrier, with no conditions. We encourage wireless carriers to complete ``simple´´ ports within the industry-established two and one half hour porting interval. We find that no action is necessary regarding the porting of numbers served by Type 1 interconnection because carriers are migrating these numbers to switches served by Type 2 interconnection or are otherwise developing solutions. Finally, we reiterate the requirement that wireless carriers support roaming nationwide for customers with pooled and ported numbers, and we address outstanding petitions for waiver of the roaming requirement." (Footnote omitted.)

Tom Wheeler, P/CEO of the Cellular Telecommunications & Internet Association (CTIA), stated in a release that "The industry is hard at work implementing these daunting upgrades. But with the deadline only 49 days away, the Commission still has not answered some basic implementation questions ... The FCC has simultaneously managed to tie the industry's hands and hold our feet to the fire." He added that "The Commission has yet to determine when a wireline carrier must port a customer's telephone number to a wireless carrier. If this issue is not resolved, the practical effect is that 85% of wireline customers will NOT be able to port to wireless."

This is FCC 03-237, in CC Docket No. 95-116.

DHS General Counsel Addresses Data Mining by the National Targeting Center

10/7. Joe Whitley, General Counsel of the Department of Homeland Security (DHS), gave a speech to the National College of District Attorneys. One of the subjects that he addressed was data mining at the DHS.

Joe WhitleyWhitley began by reviewing the creation, organization and progress of the new DHS, which was created last year by the Homeland Security Act of 2002, Public Law 107-296.

He went on to discuss the National Targeting Center (NTC), which he described as "a critical sharing strategy at work in real time, 24/7." He said that the NTC "is simply the centralized coordination point for all of Customs and Border Protection's (CBP) anti-terrorism efforts. Using sophisticated information-gathering techniques and intelligence, the NTC provides target-specific information to field offices ready to act quickly and decisively."

He added that the NTC "increases our capacity to identify potential terrorist threats; provides national targeting of passengers and cargo for the first time; and employs a sophisticated computer system to monitor, analyze, and sort information from many intelligence agencies and law enforcement agencies."

NTC uses "both external and internal sources of information such as the Treasury Enforcement Communications System (TECS), the Automated Commercial System (ACS), the Automated Targeting System (ATS), and the Automated Entry System (AES) that provide a wealth of information. The center also works closely with the newly formed CBP Office of Intelligence, and ICE agents to share information and to formulate their advisories", said Whitley.

"The phrase ``data mining´´ is a term of art for the process that the NTC staff employs in developing targets", said Whitley. "Initially, analysts conduct broad-based research to collect and sift through information to establish a base line of data. However, collecting data is only the first step; an analyst must also know how to use it. The center looks at any resource that could be used to support a terrorist effort, ranging from people to weapons components. The goal of the center is to deter or disrupt any terrorist efforts by stopping the movement of individuals and the flow of materials or money needed for such an operation. When the data points to a particular product, distribution channel, conveyance, or importer, the review goes from broad to narrow. However, an analyst may pursue several different analytical tracks to home in on a target."

He continued that "One track may be to conduct a trend analysis on a specific commodity. This can be a complicated process particularly if the commodity has dual use -- if it is used in the production of a legitimate product but can also be associated with the production of a harmful agent. A different approach may be to evaluate importer relationships by the types of goods routinely imported, and the ports of entry normally used. Typically an analyst would focus on sudden changes in the type of commodity an importer has historically imported, or evaluate the relationship between an importer and a supplier searching for anomalies that warrant further analysis."

"Another approach is to ferret out financial information, that can serve as leads for agents to ``follow the money,´´ looking for assets that might be used to support terrorist activities. Evidence of the transfer of checks, cash, or some combination of illegal or suspicious movement of fiscally liquid items either in or out of the United States may also trigger referral for deeper probing by ICE agents", said Whitley.

Whitley also commented that "the border is no longer just a geographic line between two countries; it is also a line of information in a computer that distinguishes those that wish us harm from those that are trustworthy."

More News

10/7. The House Judiciary Committee's Subcommittee on Courts, the Internet, and Intellectual Property postponed its meeting, scheduled for 5:00 PM on Tuesday, October 7. It had been scheduled to continue its mark up of HR 2517, the "Piracy Deterrence and Education Act of 2003". The Subcommittee began this markup on Thursday, October 2.

10/7. The House approved HR 1303, a bill to amend the E-Government Act of 2002 with respect to rulemaking authority of the Judicial Conference, by a voice vote.

10/7. Microsoft and Sun Microsystems announced an agreement under which Microsoft will extend its support for the Microsoft Java Virtual Machine (MSJVM) until September 30, 2004. See, Microsoft release and Sun release.

10/7. The Copyright Office (CO) published a notice in the Federal Register announcing that it is "making a non-substantive technical amendment to its final regulations adjusting the royalty rates and terms under the Copyright Act for the statutory license for the use of sound recordings by preexisting subscription services for the period January 1, 2002, through December 31, 2007." See, Federal Register, October 7, 2003, Vol. 68, No. 194, at Pages 57814 - 57815.

9th Circuit Vacates FCC Declaratory Ruling That Cable Modem Service is an Information Service Without a Separate Offering of a Telecommunications Service

10/6. The U.S. Court of Appeals (9thCir) issued its opinion [39 pages in PDF] in Brand X Internet Services v. FCC, vacating the Federal Communications Commission's (FCC) declaratory ruling that cable modem service is an information service, and that there is no separate offering as a telecommunications service.

The FCC adopted a Declaratory Ruling and Notice of Proposed Rulemaking [75 pages in PDF] at its March 14, 2002 meeting. This is FCC 02-77 in Docket No. 00-185 and Docket No. 02-52. See also, March 14 FCC release.

The Declaratory Ruling (DR) component of this item states that "we conclude that cable modem service, as it is currently offered, is properly classified as an interstate information service, not as a cable service, and that there is no separate offering of telecommunications service."

The opinion of the Court of Appeals vacates this DR. In so doing, the Court has placed itself in the role of writing broadband policy for the U.S., and thereby, undermined the FCC's attempts to promote broadband deployment.

FCC Chairman Michael Powell promptly announced that the FCC will appeal. See, full story.

Supreme Court Denies Certiorari in Communications Cases

10/6. The Supreme Court begins its October 2003 term. It issued an 83 page Order List [PDF] in which it ruled on numerous accumulated petitioner for writ of certiorari. The Court denied petitions, and thereby let stand Court of Appeals decisions, in several communications cases.

The Court denied certiorari in Alabama Power v. FCC, a case in which power companies raised a Fifth Amendment takings clause challenge in a pole attachments case. See, story titled "Supreme Court Denies Certiorari in Pole Attachments Case", below.

The Court denied certiorari in Ruggiero v. FCC, a case in which a microbroadcaster raised a First Amendment free speech clause challenge to the statute and rule that prohibits him from obtaining a low power FM license on the grounds that he once broadcast without a license. See, story titled "Supreme Court Denies Certiorari in Ruggiero v. FCC", below.

The Court denied certiorari in AT&T v. Ting, a class action lawsuit in which the lower courts enjoined the enforcement of various limitations on legal remedies contained in AT&T's Consumer Services Agreement (CSA) as a violation of California law. See, story titled "Supreme Court Denies Certiorari in AT&T v. Ting", below.

The Court denied certiorari in AT&T v. U.S., a dispute over the amount of payment due under a federal contract. See, story titled "Supreme Court Denies Certiorari in AT&T v. U.S.", below.

Supreme Court Denies Certiorari in Pole Attachments Case

10/6. The Supreme Court denied certiorari, without opinion, in Alabama Power v. FCC, a case regarding pole attachments. See, Order List [83 pages in PDF] at page 72.

The Pole Attachments Act, codified at 47 U.S.C. § 224, provides that cable companies may gain access to the pole networks of power companies at rates set by the Federal Communications Commission (FCC). Subsection (f)(1) states that "A utility shall provide a cable television system or any telecommunications carrier with nondiscriminatory access to any pole, duct, conduit, or right-of-way owned or controlled by it."

In this case, the power companies argued that this constitutes a taking under the Fifth Amendment of the Constitution, which provides, "nor shall private property be taken for public use without just compensation".

The U.S. Court of Appeals (11thCir) issued its opinion on November 14, 2002, in which it rejected the taking clause argument. See, story titled "11th Circuit Rules on FCC Pole Attachments Rates" in TLJ Daily E-Mail Alert No. 551, November 18, 2002.

See also, brief of the Solicitor General urging the Supreme Court to affirm the Court of Appeals.

This case is Alabama Power Company v. FCC, Supreme Court No. 02-1474. This is a petition for writ of certiorari to the U.S. Court of Appeals for the 11th Circuit in Alabama Power Company, et al. v. FCC, Appeals Court Nos. 00-14763, 00-15068, and 01-13058. The Appeals Court proceeding was on petitions for review of a final order of the FCC, FCC Docket No. PA 00-00003.

Supreme Court Denies Certiorari in Ruggiero v. FCC

10/6. The Supreme Court denied certiorari, without opinion, in Ruggiero v. FCC. See, Order List [83 pages in PDF], at page 8.

The Federal Communications Commission's (FCC) denied a license to a microbroadcaster named Greg Ruggiero on the basis that he had previously broadcast without a license.

The Radio Broadcasting Preservation Act of 2000 (RBPA) and the FCC's implementing rules required the denial. But, since Ruggiero would have broadcast speech, his First Amendment rights were implicated. Ruggiero asserted that the FCC's denial constituted an unconstitutional content based restraint on speech, and therefore, that the Court should have applied an intermediate scrutiny standard, such as that articulated in FCC v. League of Women Voters, 468 U.S. 364 (1984).

The FCC asserted that its decision was content neutral, and therefore, that the Court should have applied a minimal scrutiny standard, such as that articulated in FCC v. National Citizens Committee for Broadcasting, 436 U.S. 775 (1978).

It was incumbent upon the U.S. Court of Appeals (DCCir) to explain its application of the First Amendment to the facts of this case. A divided three judge panel issued an opinion in which it Ruggiero prevailed. Then, a divided en banc panel issued an opinion in which the FCC prevailed.

The en banc panel provided an outcome (Ruggiero lost), but no explanation. It wrote that "the appropriate standard of review occupies a ground somewhere between the minimal scrutiny advocated by the Commission and the intermediate scrutiny proposed by Ruggiero". It offered the following elaboration: "We need not be more precise".

The Supreme Court could have clarified the uncertainty resulting from this opinion. It could even have taken this case to address more broadly the First Amendment limitations upon regulation of broadcast speech. But, like the Appeals Court, it ducked the issue.

The outcome in this case stands in contrast to the outcomes in other matters. For example, last week the FCC assessed fines, but did not revoke licenses, for broadcasting coverage of sex acts in public places, such as St. Patrick's Cathedral. FCC Commissioner Michael Copps wrote that the FCC's Notice of Apparent Liability for Forefeiture [21 pages in PDF] "provide no more than a slap on the wrist", and that ""The message to licensees is clear. Even egregious repeated violations will not result in revocation of a license." See, story titled "FCC Fines Infinity for Indecent Broadcasts" in TLJ Daily E-Mail Alert No. 752, October 3, 2003. There is also the matter of accounting fraud by FCC licensees.

Judge Tatel made the observation in his dissent to the en banc opinion that "The question presented here is whether unlicensed microbroadcasters, many of whom have already been punished for their misdeeds, may be subjected to a unique and draconian sanction that automatically and forever bars them -- unlike any other violator of the Communications Act or regulations -- from applying for low power licenses regardless of either the circumstances of their offenses or evidence that they can nevertheless operate in the public interest." He wrote that "this double standard is indefensible" and "restricts speech". However, he was in the minority.

See also, stories titled "Appeals Court Overturns Ban on Licensing Former Pirate Broadcasters" in TLJ Daily E-Mail Alert No. 365, February 11, 2002; "DC Circuit Grants Rehearing En Banc in Ruggiero Case" in TLJ Daily E-Mail Alert No. 430, May 13, 2002; and "DC Circuit Adopts "Somewhere Between" Standard in Ruggiero Case" in TLJ Daily E-Mail Alert No. 596, February 3, 2003.

This case is Greg Ruggiero v. FCC, Supreme Court No. 02-1608. The Appeals Court proceeding was Greg Ruggiero  v. FCC, Appeals Court No. 00-1100.

Supreme Court Denies Certiorari in AT&T v. Ting

10/6. The Supreme Court denied certiorari, without opinion, in AT&T v. Ting, a class action lawsuit challenging provisions of AT&T's Consumer Services Agreement (CSA) as a violation of California law. See, Order List [83 pages in PDF] at page 7.

Darcy Ting brought a class action lawsuit alleging that various provisions of AT&T's CSA violate California's Consumer Legal Remedies Act (CLRA) and Unfair Practices Act. AT&T asserted that California law is preempted by the Communications Act and the filed rate doctrine, and the Federal Arbitration Act (FAA). The U.S. District Court (NDCal) held that certain provisions of the CSA are unconscionable, and in violation of California law, and enjoined their enforcement. It rejected the preemption defense, and enjoined certain provisions of the CSA, including its ban on class actions.

The U.S. Court of Appeals (9thCir) issued its opinion [42 pages in PDF] on February 11, 2003 in which it affirmed in part and reversed in part. See, story titled "9th Circuit Rules in Challenge to AT&T Consumer Services Agreement" in TLJ Daily E-Mail Alert No. 602, February 12, 2003.

The Supreme Court's denial of certiorari lets stand the ruling of the Appeals Court.

This case is AT&T Corp. v. Darcy Ting, et al., Supreme Court No. 02-1521. This is a petition for writ of certiorari to the U.S. Court of Appeals in Darcy Ting and Consumer Action v. AT&T, Appeals Court No. 02-15416. This was an appeal from the U.S. District Court for the Northern District of California, Magistrate Judge Bernard Zimmerman presiding, District Court  No. CV 01-2969 BZ.

Supreme Court Denies Certiorari in AT&T v. U.S.

10/6. The Supreme Court denied certiorari, without opinion in AT&T v. U.S., a case regarding a federal contract. See, Order List [83 pages in PDF], at page 72.

AT&T bid on and won a fixed price incentive contract with the U.S. to develop of an anti-submarine sonar system. AT&T performed the contract at a cost of $91 Million, which was more than the final adjusted contract price of $34.5 Million. AT&T filed a claim with the contracting officer asserting that the contract was invalid based upon the government's failure to comply with Section 8118 Department of Defense Appropriations Act for Fiscal Year 1988.

A divided en banc panel of the Court of Appeals for the Federal Circuit held that Section 8118 provided no basis for declaring the contract void ab initio.

The Solicitor General argued in its brief that Section 8118 "placed conditions on the use of appropriated funds for fixed-price development contracts. Petitioners successfully bid for and performed a fixed-price development contract that did not meet the conditions imposed by Section 8118. The questions presented are: 1. Whether petitioners are entitled to convert the completed contract from a fixed-price contract to a cost-reimbursement contract. 2. Whether petitioners waived their asserted right to be reimbursed on the basis of cost by failing to seek cost-based reimbursement before performance of the contract began."

This case is AT&T Corporation and Lucent Technologies v. U.S., Supreme Court No. 02-1569.

More Supreme Court News

10/6. The Supreme Court denied certiorari, without opinion, in Obabueki v. Choicepoint. See, Order List [83 pages in PDF], at pages 76-7. Obabueki sought employment from IBM. IBM withdrew a job offer when it learned from a criminal background check performed by ChoicePoint that Obabueki had not disclosed on his employment application a conviction that had been vacated and dismissed. He filed a complaint in U.S. District Court (SDNY) against IBM and ChoicePoint alleging violation of the Fair Credit Reporting Act (FCRA), codified at 15 U.S.C. §§ 1681 et seq., and the New York Human Rights Law. The District Court granted judgment as a matter of law to the IBM and ChoicePoint. The Court of Appeals (2ndCir) affirmed. See, opinion.

10/6. The Supreme Court denied certiorari, without opinion, in Imageline v. Xoom, a case involving registration of copyright in CD-ROM clip art packages, statutory damages, and other issues. See, Order List [83 pages in PDF], at page 41. On March 21, 2003, the U.S. Court of Appeals (4thCir) issued its opinion [PDF]. See, story titled "4th Circuit Rules in Copyright Registration Case" in TLJ Daily E-Mail Alert No. 630, March 25, 2003.

10/6. The Supreme Court denied a motion, without opinion, in Dastar v. Twentieth Century Fox. The Court wrote that "The motion of petitioner for attorney fees is denied without prejudice to filing in the United States Court of Appeals for the Ninth Circuit." See, Order List [83 pages in PDF], at page 4. On June 2, 2003, the Supreme Court issued its opinion [18 pages in PDF] reversing the opinion of the U.S. Court of Appeals (9thCir), which had upheld a District Court judgment of violation of the Lanham Act. See, TLJ story titled "Supreme Court Reverses in Dastar v. Fox" , June 2, 2003.

6th Circuit Rules in Gordon v. Nextel

10/6. The U.S. Court of Appeals (6thCir) issued its opinion in Gordon v. Nextel, a copyright infringement case involving the de minimis and fair use defenses.

Stephen Gordon is a medical artist. He has drawn, and copyrighted, dental illustrations. Nextel is a communications company. Nextel and its advertising agency, Mullen Advertising, produced and published a television commercial in which Gordon's illustrations appear. They did not obtain authorization from Gordon.

Gordon filed a complaint in U.S. District Court (EDMich) against Nextel and Mullen alleging copyright infringement, and removal of copyright notice. The District Court ruled that the use constituted fair use and was de minimis, and that there was therefore no infringement. It also ruled that Gordon had failed to introduce evidence of intentional removal of copyright notice.

The Appeals Court affirmed. It first held that the use of the illustrations was de minimis. Hence, there was no copyright infringement. The Court did not proceed to examine the fair use defense. The Appeals Court affirmed the District Court on the copyright notice removal claim. He failed to introduce evidence of intent, as required by 17 U.S.C. § 1202(b).

This case is Gordon v. Nextel Communications and Mullen Advertising, Inc., No. No. 01-2274, an appeal from the U.S. District Court for the Eastern District of Michigan, at Detroit, Judge John O'Meara presiding, D.C. No. 00-73201.

GAO Reports on Distance Learning at Minority Serving Institutions

10/6. The General Accounting Office (GAO) released a report [PDF] titled "Distance Education: More Data Could Improve Education's Ability to Track Technology at Minority Serving Institutions". The GAO surveyed three categories of Minority Serving Institutions (MSIs), Historically Black Colleges, Hispanic Serving Institutions, and Tribal Colleges, and found differences. It is the Tribal Colleges, which are located mostly in the upper midwest and western states, that have the most interest in offering distance learning courses. And, they face technological obstacles.

The report found that MSIs "take into account two key factors in deciding whether to offer distance education,". First, there is "their preferred teaching method. About half of Historically Black Colleges and Universities that currently do not offer distance education to undergraduates indicated that a primary reason for not offering distance education was that they prefer teaching in the classroom."

Second, there is "limited resources for technology". The report found that some MSIs "said they wanted to offer more distance education but had limited technology to do so. For example, officials from the 10 Tribal Colleges that do not offer any distance education indicated that improvements in technology would be helpful."

The report also states that "from a broader context, Minority Serving Institutions reported that they view distance education as just one of many goals for technology -- with varying degrees of priority depending on the college. In response to our survey, officials from Historically Black Colleges and Universities and Hispanic Serving Institutions more frequently indicated, for example, that relative to goals such as increasing the use of technology in the classroom, distance education ranks lower. At these schools, training faculty in the use of technology and improving the use of information technology in the classroom are higher priorities than distance education. By contrast, officials at Tribal Colleges more frequently placed distance education as a higher priority, reflecting their struggle to provide educational opportunities to populations across large geographic areas."

There are two bills pending in the Congress that would authorize the appropriation of funding for a grant program to provide technology for MSIs for, among other things, distance learning.

First, there is S 196, the "Minority Serving Institution Digital and Wireless Technology Opportunity Act of 2003", which was introduced by Sen. George Allen (R-VA) on January 17, 2003. The Senate passed S 196 on April 30, 2003 by a vote of 97-0. See also, stories titled "Sen. Allen Introduces Bill to Create Technology Grant Program for MSIs", TLJ Daily E-Mail Alert No. 586, January 20, 2003; "Senate Committee Approves Technology Grant Program for Minority Serving Institutions" in TLJ Daily E-Mail Alert No. 623, March 14, 2003; and "Senate Passes Technology Grant Bill" in TLJ Daily E-Mail Alert No. 655, May 5, 2003.

Second, there is HR 2183, the "Minority Serving Institution Digital and Wireless Technology Opportunity Act", which was introduced on May 21, 2003 by Rep. Randy Forbes (R-VA). The House Science Committee has held a hearing on the bill. See, stories titled "Rep. Forbes Introduces Bill to Provide Grants for Digital and Wireless Technology for MSIs" in TLJ Daily E-Mail Alert No. 669, May 29, 2003; and "House Science Committee Holds Hearing on MSI Tech Grant Bill" in TLJ Daily E-Mail Alert No. 695, July 10, 2003.

There is also HR 3039, the "Expanding Opportunities in Higher Education Act of 2003", which was introduced by Rep. Tom Cole (R-OK) on September 9, 2003. This bill would amend the Higher Education Act to allow MSIs to use a portion of their funds to expand internet capabilities and other distance learning capabilities.

People and Appointments

10/6. Rodger Woock was named Chief Economist of the Federal Communications Commission's (FCC) Wireline Competition Bureau. He was previously Director, R&D Engineering at AT&T Broadband Labs in Denver, Colorado. See, FCC release [PDF].

More News

10/6. The AEI-Brookings Joint Center for Regulatory Studies published a paper titled "Is There Such a Thing as Too Much Financial Privacy?", authored by Robert Hahn.

10/6. The U.S. Court of Appeals (9thCir) issued its opinion [PDF] in Lamps Plus v. Seattle Lighting Fixture, a copyright case involving table lamps. This case is Lamps Plus, Inc. v. Seattle Lighting Fixture Co., et al., Nos. 01-35352, 01-35399 and 01-35484, appeals from the U.S. District Court for the Western District of Washington.

Go to News from October 1-5, 2003.