News from January 26-31, 2004

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1/31. President Bush discussed his budget proposals for FY 2005 in his weekly radio address. He stated that "This coming week, my administration will release our proposed budget for fiscal year 2005". Administration officials will testify before numerous House and Senate Committees in the next two weeks. See, TLJ's Washington Tech Calendar.

FCC Writes Re Effect of Appropriations Bill on Judicial Review of Media Ownership Rules

1/30. The Federal Communications Commission (FCC) filed a letter brief [5 pages in PDF] with the U.S. Court of Appeals (3rdCir) in Prometheus Radio Project v. FCC, the case which consolidates numerous petitions for review of the FCC's changes to its media ownership rules.

On January 27, the Court of Appeals asked for comments regarding the effect of the language in the FY 2004 omnibus appropriations bill pertaining to the national television ownership cap.

The FCC wrote in its letter brief that the bill directs the FCC "to modify its rules with respect to the national television ownership limitation. In addition, the new statute modifies the biennial review requirement of the 1996 Act to a quadrennial review requirement and excepts from the quadrennial review requirement ``any rules relating to the 39 percent audience reach limitation in subsection (c)(1)(B).´´ "

The FCC added that the FCC "is thus under a statutory directive to modify the national television ownership rule. Once the Commission has amended the rule, challenges pending before the Court to the agency's action increasing the limit to 45% ... will become moot."

The FCC recommended that "the Court may prefer to streamline the oral argument scheduled for February 11, 2004, by eliminating consideration of the national television ownership rule."

The FCC also stated that "Intervenor Capitol Broadcasting has sought to challenge the UHF discount rule, which is an
appendage to the national television ownership rule. We believe that the Court lacks jurisdiction over Capitol’s challenge" because Capitol "has sought reconsideration of the same issues by the agency."

The FCC argued in the alternative that "If the Court, however, is not prepared to conclude that jurisdiction is lacking, it should hold the UHF discount issue in abeyance pending FCC action on Capitol’s reconsideration petition. ... In either event, we do not believe that it will be necessary for the Court to hear oral argument on that aspect of this case."

HR 2673, the omnibus appropriations bill, signed by President Bush on January 23, 2004, contains appropriations for many technology related departments, agencies and other units, including the FCC. It also contains several technology related substantive law provisions. The bill appropriates to the FCC for FY 2004 $273,958,000.

The bill also contains substantive language regarding the national TV ownership cap. It amends the Communications Act to provide a cap of 39 percent. Section 629 provides as follows:

"The Telecommunications Act of 1996 is amended as follows--
  (1) in section 202(c)(1)(B) by striking `35 percent' and inserting `39 percent';
  (2) in section 202(c) by adding the following new paragraphs at the end:
    `(3) DIVESTITURE- A person or entity that exceeds the 39 percent national audience reach limitation for television stations in paragraph (1)(B) through grant, transfer, or assignment of an additional license for a commercial television broadcast station shall have not more than 2 years after exceeding such limitation to come into compliance with such limitation. This divestiture requirement shall not apply to persons or entities that exceed the 39 percent national audience reach limitation through population growth.
    `(4) FORBEARANCE- Section 10 of the Communications Act of 1934 (47 U.S.C. 160) shall not apply to any person or entity that exceeds the 39 percent national audience reach limitation for television stations in paragraph (1)(B);'; and
  (3) in section 202(h) by striking `biennially' and inserting `quadrennially' and by adding the following new flush sentence at the end:
`This subsection does not apply to any rules relating to the 39 percent national audience reach limitation in subsection (c)(1)(B).'."

See also, story titled "Summary of Technology Related Provisions of the Omnibus Appropriations Bill", also published in TLJ Daily E-Mail Alert No. 824, January 27, 2004.

On July 2, 2003, the FCC released its Report and Order and Notice of Proposed Rulemaking [257 pages in PDF] in its proceeding regarding its media ownership rules. See, story titled "FCC Releases Media Ownership Order and NPRM" in TLJ Daily E-Mail Alert No. 692, July 7, 2003. The FCC announced, but did not release, this item at its June 2, 2003 meeting. See, story titled "FCC Announces Revisions to Media Ownership Rules" in TLJ Daily E-Mail Alert No. 672, June 3, 2003.

Court Holds Judgment for Willful Patent Infringement Not Dischargable in Bankruptcy

1/30. The U.S. Court of Appeals (6thCir) issued its opinion in In Re Trantham, a case regarding the dischargability in bankruptcy of a pre-petition willful patent infringement judgment. The Bankruptcy Court held that the judgment is dischargable. The Court of Appeals reversed.

William Trantham is a bankrupt farmer in the state of Tennessee. Monsanto Company holds patents for genetically modified seeds.

Trantham used Monsanto seeds, without license, and knowing that he had no license, on his farm for two years. Monsanto caught him. Monsanto filed a complaint in U.S. District Court for patent infringement. It obtained a judgment against Trantham for patent infringement in the amount of $592,677.89.

Actually, the jury returned a verdict for $34,392, but the judge increased the base award to $87,022.50, and then added to this treble damages for willful conduct, as well as some attorneys fees and costs, bringing the total judgment to $592,677.89.

Trantham then filed a Chapter 7 bankruptcy petition in the U.S. Bankruptcy Court (WDTenn). Monsanto filed a complaint objecting to the discharge of its patent infringement judgment pursuant to 11 U.S.C. § 523(a)(6). The Bankruptcy Court held that the judgment is dischargable because Monsanto did not met its burden of showing a willful and malicious injury under § 523(a)(6). Monsanto appealed.

Section 523 provides, in part, that "(a) A discharge ... does not discharge an individual debtor from any debt -- for willful and malicious injury by the debtor to another entity or to the property of another entity".

The Bankruptcy Court reasoned that while Trantham knew he had no license to use the seeds, his intent in doing so was to save his struggling farm, and not to injure Monsanto.

The Court of Appeals reasoned differently. It wrote that "Trantham must have believed that the consequences of his refusal to pay the license fee would be financial injury to Monsanto because, in the zero-sum situation inherent wherever something is reserved to the use of a particular entity, Trantham could only profit if Monsanto lost its reservation without proper compensation, i.e., the gain he sought could come only at Monsanto's expense."

The Court, citing various 6th Circuit cases, held that the standard of willful injury is met. The Court continued that "because Trantham acted in conscious disregard of his duty to Monsanto, the requirement of a ``malicious´´ injury is also met."

Moreover, the Appeals Court added, "patent infringement, being the invasion of a protected interest, is a tort. Here, according to the district court's finding of willfulness, it was an intentional tort. Since the Supreme Court observed that § 523(a)(6) was probably focused on intentional torts, Trantham's infringement in this case would pass muster" under 6th Circuit precedent. Hence, the Appeals Court reversed.

Trantham, a failed farmer from Tipton County, Tennessee, is now stuck with a nondischarged debt of $592,677.89 to Monsanto for planting unlicensed seeds on his farm.

And the peer to peer music copying enthusiasts think that the RIAA is a rough bunch.

This case is In Re William Harris Trantham, No. 03-8010, an appeal from the U.S. Bankruptcy Court for the Western District of Tennessee, at Memphis, No. 02-27859-K

Microsoft and SCO Offer Rewards for Information Leading to Conviction of Malicious Coder

1/30. Microsoft announced that it "will pay a $250,000 (U.S.) reward for information resulting in the arrest and conviction of those responsible for unleashing" any of the variants of the MyDoom worm, which is also known as the Novarg worm. See, Microsoft release.

On January 27, the SCO Group announced that "it is offering a reward of up to a total of $250,000 for information leading to the arrest and conviction of the individual or individuals responsible for creating the Mydoom virus". See, SCO release.

The U.S. Computer Emergency Readiness Team (U.S. CERT) stated in its updated advisory on this mass mailing worm, released on January 30, that "The virus appears be designed to launch distributed denial-of-service (DDoS) attacks against on February 1, 2004 and against on February 3, 2004." See, Technical Cyber Security Alert TA04-028A.

In addition, the US CERT states that the worm only affects systems running Microsoft Windows.

The SCO web site was inaccessible on Sunday, February 1. It remains inaccessible on Monday morning, February 2.

11th Circuit Rules on Statute of Limitations in 10b Suit

1/30. The U.S. Court of Appeals (11thCir) issued its opinion [PDF] in La Grasta v. First Union Securities, a class action securities fraud case involving the defense that the claim is time barred. The stock at issue is Ask Jeeves, Inc.

Investors who purchased the stock of Ask Jeeves filed a complaint in U.S. District Court (MDFl) against First Union Securities (now Wachovia Securities) alleging securities fraud pursuant to Section 10b of the Securities Exchange Act, and Rule 10b-5 thereunder.

Ask Jeeves is an online research company whose stock soared at the height of the tech boom. First Union Securities' (FUS) analyst issued "strong buy" recommendations. The plaintiff investors allege that the analyst inflated the price of the stock while acting under an undisclosed conflict of interest -- that FUS was trying to obtain investment banking business from Ask Jeeves, while at the same time providing unbiased analysis of the company. Plaintiffs allege that this is fraud within the meaning of Section 10b and Rule 10b-5.

FUS filed a Rule 12(b)(6) motion to dismiss for failure to state a claim. It argued that the claim is time barred -- that is, that the investors waited too long to bring the suit -- and that the plaintiffs did not sufficiently allege loss causation. The District Court ruled that the claim was time barred, and did not reach the causation issue. This appeal followed.

The Court of Appeals wrote that "A cause of action for securities fraud under § 10(b) of the Act and Rule 10b-5 must be brought within one year of ``discovery of the facts constituting the violation.´´ ... In this circuit, discovery occurs ``when a potential plaintiff has inquiry or actual notice of a violation.´´ ... Inquiry notice, in turn, is ``the term used for knowledge of facts that would lead a reasonable person to begin investigating the possibility that his legal rights had been infringed.´´" (Citing Theoharous v. Fong, 256 F.3d 1219 (11th Cir. 2001).)

The plaintiffs filed their complaint in this case on May 14, 2001. The question turns, therefore, on whether the plaintiffs were on inquiry notice before May 14, 2000.

In December of 1999, the lead plaintiffs bought 1,000 shares at $134.88 per share, and 1,000 shares at $124.68 per share. Other investors in the class bought at prices ranging from $78 to $134 per share. As the price later tumbled, FUS's analyst continued to give "strong buy" recommendations.

By April of 2000 the price of Ask Jeeves stock had dropped to $24. The District Court found that this was sufficient to conclude that the plaintiffs were on inquiry notice of the alleged fraud more than one year before the filing of the complaint.

The Court of Appeals disagreed. It held that the complaint was not necessarily time barred on its face, and remanded to the District Court for further discovery on the issue. The Court of Appeals also declined to address the causation issue.

This case is Nicholas La Grasta, et al. v. First Union Securities, Inc., U.S. Court of Appeals for the 11th Circuit, No. 02-16215, an appeal from the U.S. District Court for the Middle District of Florida, D.C. No. 2:01-cv-251-FtM-29DNF.

Rep. Dunn Will Not Seek Re-election

1/30. Rep. Jennifer Dunn (R-WA) announced that she will not run for re-election. She represents a Seattle area district in the House that is home to many Microsoft employees. She holds a seat on the House Ways and Means Committee and its Trade Subcommittee. She is also a member of the House Homeland Security Committee and the Joint Economic Committee.

Rep. Jennifer DunnRep. Dunn (at right) has been supportive of information technology interests, particularly in those areas that fall within the jurisdiction of the Ways and Means Committee -- taxation and trade. She has supported free trade, free trade agreements (FTAs), trade promotion authority for the President, and Chinese membership in the WTO. She has particularly backed the inclusion of provisions related to the protection of intellectual property rights in FTAs.

She has also opposed mandated expensing of employee stock options (see, letter to FASB), and supported making the research and development tax credit permanent.

She was born in 1941. In years past there was speculation that she might run for the Senate, or be appointed USTR.

President Bush released a statement praising Rep. Dunn.

More People and Appointments

1/30. President Bush announced his intent to appoint nine people to be Members of the Presidential Commission on Implementation of United States Space Exploration Policy. The list includes Carly Fiorina, Ch/CEO of Hewlett Packard. See, White House release naming members, and January 30, 2004 executive order creating the commission.

1/30. Ronald Turner, Ch/P/CEO of Ceridian Corporation, was named Chairman of the Electronic Industries Alliance's (EIA) Board of Governors for 2004. See, EIA release.

1/30. Vodafone announced that Gavin Darby, who is currently Chief Executive of Vodafone UK, has been appointed Chief Executive Americas Region, effective April 1, 2004. See, Vodafone release.

More News

1/30. The International Telecommunications Union (ITU) announced that it will host an event titled "Workshop on Internet Governance" on February 26-27, 2004, in Geneva, Switzerland. The ITU stated in a release that "The workshop will provide a forum for exchanging views on definitions, viewpoints, visions and analytical studies on Internet governance. The output of the workshop will be submitted to the ITU decision-making bodies for their further consideration."

Tauzin Asks FCC for Prompt Response on AT&T VOIP Petition

1/29. Rep. Billy Tauzin (R-LA), the Chairman of the House Commerce Committee, wrote a letter to Federal Communications Commission (FCC) Chairman Michael Powell, and the other FCC Commissioners, regarding AT&T's petition for declaratory ruling regarding voice over internet protocol (VOIP).

AT&T seeks a ruling that access charges do not apply to its service in which calls originate and terminate on circuit switched PSTN facilities, but are routed on internet backbone. AT&T filed its petition [37 pages PDF] on October 18, 2002.

Rep. Billy TauzinRep. Tauzin (at right) wrote that "More than fifteen months ago, AT&T filed a petition (WC Docket No. 02-361) asking the Federal Communications Commission (the Commission) to determine whether access charges apply to long-distance voice calls that AT&T transports over its Internet Protocol (IP) backbone. The petition did not ask the Commission to change its current rules -- it simply asked the Commission to state what its existing access charge rules require today. Yet, fifteen months later, the Commission has failed to answer this straightforward question. In the meantime, the Commission's silence on the question has been deafening."

Rep. Tauzin added that "I am extremely concerned that the Commission's continued failure to clarify the rules governing traffic over AT&T's IP backbone could jeopardize our ability to keep telephone rates in rural areas affordable."

He continued: "Accordingly, I request that by February 5, 2004 you provide me with a direct answer to the following question: Do the Commission's existing access charge rules apply to the long-distance service described in AT&T's petition? I am not asking whether those rules apply to the services described in other petitions, such as those filed by, Vonage, Level 3, or any other provider. I am also not asking whether the Commission may change its access charge rules in the future. I would simply like to know whether the traffic described in AT&T's petition is subject to access charges today under the Commission's existing rules. Silence is not acceptable."

Vonage seeks a ruling that its service is an "information service" and that federal policy preempts state action in this area. Vonage filed its petition on September 22, 2003. See, part 1, part 2, part 3, part 4, part 5, and part 6 [all in PDF]. This is WC Docket No. 03-211.'s Free World Dialup (FWD) is a closed network that uses specialized equipment. Traffic is carried by the users' ISPs using broadband connections. seeks a ruling that its service is neither "telecommunications" nor a "telecommunications service". It filed its petition [11 pages in PDF] on February 5, 2003. This is WC Docket No. 03-45.

Level 3 Communications filed a petition with the FCC on December 23, 2003, requesting that it forebear from applying the requirements of Section 251(g) and FCC rules to the extent that they might be interpreted to allow local exchange carriers (LECs) to impose interstate or intrastate access charges on internet protocol (IP) traffic that originates or terminates on the public switched telephone network (PSTN), or on PSTN-PSTN traffic incidental thereto. See, petition, part 1, part 2, part 3, part 4, and part 5.

One FCC Commissioner has already publicly spoken about regulatory treatment of services of the nature being offered by AT&T. Kathleen Abernathy gave a speech [6 pages in PDF] on January 22, 2004. She stated that "we should not assume that any use of IP technology necessarily transforms a circuit-switched service into VOIP. When I talk about creating a new regulatory framework for VOIP, I have in mind services that use Internet protocol over the last mile, at least on one end of the call. By contrast, a call that starts on the PSTN and ends on the PSTN does not necessarily warrant different regulatory treatment from other circuit-switched calls simply because a long distance carrier chooses to use IP technology at some mid-point in the network. Long distance carriers, local carriers, and enhanced service providers all have raised questions about the applicability of our intercarrier compensation rules and other requirements to these phone-to-phone services, and I believe the Commission should provide clarity as soon as possible." See also, story titled "Abernathy Addresses VOIP Regulation" in TLJ Daily E-Mail Alert No. 822, January 23, 2004.

See also, story titled "FCC Holds VOIP Forum", December 1, 2003, also published in TLJ Daily E-Mail Alert No. 790, December 2, 2003; stories titled "Level 3 Files VOIP Petition With FCC and "Summary of Other VOIP Proceedings at the FCC" in TLJ Daily E-Mail Alert No. 815, January 14, 2004; and, story titled "Powell Addresses Regulation of VOIP" in TLJ Daily E-Mail Alert No. 816, January 15, 2004.

California Court Addresses Constitutionality of Regulation of Cyber Cafes

1/29. The California Court of Appeal (4/3) issued its divided opinion [42 pages in MS Word] in Thanh Thuy Vo v. City of Garden Grove, a challenge to a municipal ordinance requiring cyber cafes to obtain conditional use permits, and to comply with regulations specific to cyber cafes, such as curfews for minors, minimum numbers of employees, weekend security guards, and video surveillance.

The trial court held that much of the ordinance was unconstitutional under the First Amendment of the U.S. Constitution, and Article I, Sections 1 and 2, of the California Constitution. The Court of Appeal affirmed the injunction of the conditional use permit requirement, but reversed the injunction of the regulations.

One provision of the regulations required video surveillance in cyber cafes (of patrons' activities, but not the content of their internet communications). The majority upheld this. The dissent called this "Orwellian".

The Court of Appeal also upheld regulations setting a daytime curfew for children, setting minimum numbers of employees at cyber cafes, requiring a security guard on Friday and Saturday nights. However, the Court found unconstitutional the requirement that cyber cafes obtain a conditional use permit when the process left some discretion with the permit issuing official.

Background. The City of Garden Grove, in Orange County, in southern California, experienced both a rapid growth in the number of cyber cafes, and in the amount of criminal activity in or near some, but not all, of these cyber cafes. There was a murder in front of one cyber cafe.

The City then passed an ordinance requiring the operators of cyber cafes to obtain a conditional use permit and to comply with certain regulations.

Thanh Thuy Vo, and the owners of four other cyber cafes in Garden Grove, filed a complaint in state court seeking damages pursuant to 42 U.S.C. § 1983 for the deprivation of rights, privileges and immunities secured by the federal and state Constitutions, declaratory relief concerning the validity of the ordinance, and a temporary restraining order (TRO), preliminary injunction and permanent injunction against enforcement of the ordinance.

The trial court granted a TRO. Meanwhile, the city amended its ordinance, and some of the cyber cafe owners settled with the city.

Garden Grove's Ordinance. The ordinance under review by the Court of Appeal in this case includes the following provisions.

First, it requires cyber cafes to apply for a conditional use permit (CUP).

Second, it provides that "Minors may not enter or remain in a CyberCafe establishment on any day after 10 p.m.; or between the hours of 8 a.m. and 3 p.m. during those weekdays when the public school system within the City jurisdiction is open and classes are being conducted." However, it adds that "This time restriction shall not apply when a minor is accompanied by a parent or guardian (with the guardian being able to authenticate guardianship)." (Parentheses in original.) Finally, it provides that "The hours of operation shall be limited to 7 a.m. to 1 a.m., daily; excepting Friday and Saturday nights wherein hours of operation shall be limited to 7 a.m. to 2 a.m."

Third, it provides minimum requirements for the number of employees on the premises (at least one, and two if the cyber cafe has 30 or more computers), and requires licensed, uniformed security guards on Friday and Saturday nights.

Fourth, the ordinance requires video surveillance, with data saved for 72 hours. The ordinance does not require that the city have access to the surveillance data, or that the cyber cafes capture information about the content of internet communications.

Court of Appeal. The trial court issued a preliminary injunction, enjoining both the CUP requirement, and various regulations. This appeal followed. While the complaint pled several claims, the main issue on appeal is application of freedom of speech to the municipal ordinance.

First, the Court of Appeal held that an ordinance affecting cyber cafes does implicate the First Amendment. It wrote that cyber cafes "provide their customers with access to the Internet, allowing users to communicate privately by e-mail, acquire vast amounts of information from the World Wide Web", and like book publishers, video arcades, cabarets and movie theaters, are entitled to First Amendment protection. The Court wrote that "We perceive no rationale by which CyberCafes should be accorded less protection than any of these older or more traditional businesses."

The Court continued that the regulations regarding curfews, employees and videotape surveillance regulate the time, place and manner of speech, while the CUP provision requires the permission of the government before engaging in activity protected by the First Amendment.

The Court of Appeal wrote that "Irreparable harm from enforcement will not be recognized where the time, place and manner restrictions on First Amendment activities are narrowly drawn and adopted for legitimate governmental reasons, and where the restrictions are not otherwise constitutionally infirm."

Conditional Use Permits. The Court of Appeal wrote, citing the Supreme Court of California, that "A long line of decisions has held unconstitutional ordinances governing the issuance of licenses to conduct First Amendment activities where administrative officials were granted excessive discretion in determining whether to grant or deny the license."

The Court continued that "The city also asserts it ``has no control whatsoever over the websites accessed by patrons of cyber cafès.´´ But it does. Under the ordinance, the zoning administrator has unfettered discretion in deciding what conditions to impose when issuing a CUP. The city does not identify how or in what manner that discretion is limited, and without objective standards, the zoning administrator retains the power to require software filters restricting access to any designated website." Hence, the Court affirmed the trial court's injunction of enforcement of the CUP requirement.

Curfews at Cyber Cafes. The Court reasoned that "Because the daytime curfew restricts the ability of minors to communicate on the Internet at CyberCafe locations during seven consecutive hours each school day, we review this regulation to determine whether it is a reasonable time, place, and manner restriction on First Amendment activities."

The Court elaborated that "a reasonable time, place, and manner restriction on First Amendment activities is constitutionally permissible if it is content neutral, is narrowly tailored to serve a significant governmental interest, and ample alternative channels for communication remain open."

It concluded that the daytime curfew "is a content-neutral, narrowly tailored restriction that advances a significant governmental interest, leaving open ample alternative means of communication, and that the restriction does not restrict more speech than is necessary to advance the city’s legitimate interest." The Court reversed the trial court's injunction of the daytime curfew.

Employees and Guards at Cyber Cafes. Here too the Court of Appeal reversed the injunction of the trial court. It wrote that "The impact on First Amendment activities of these staffing and security guard requirements is tenuous at best. Some would say there is no impact at all. But the ordinance does somewhat restrict the manner in which First Amendment activities may be conducted. Thus, communication over the Internet in a CyberCafe is prohibited unless conducted on premises having the required number of employees and, during specified hours, a security guard. We review these requirements to determine whether they are content-neutral, narrowly tailored manner restrictions, which leave open alternative channels for communications."

The Court noted that the staffing requirements make no reference to the content of any communication and are thus content neutral. It concluded that "Given the well-demonstrated criminal activity observed at CyberCafes, and their tendency to attract gang members, the court should not have second-guessed the city council’s judgment and discretion. The staffing requirements are content-neutral and are narrowly tailored to serve a significant governmental interest. Ample alternative means of communication remain open, and the requirements are not substantially broader than necessary. Accordingly, the court abused its discretion by enjoining enforcement of the employee and security guard requirements."

Video Sureveillance at Cyber Cafes. The Court of Appeal reversed the trial court's injunction of the video surveillance requirement of the ordinance. First, the Court reviewed the facts that it found pertinent. "The ordinance does not require the owner to allow inspection of the tape upon demand. For enforcement purposes, the city can assure itself the video surveillance system is operational. That is all the ordinance requires. At the hearing on the preliminary injunction, counsel for the city agreed with this interpretation, and acknowledged the city could not take possession of the video tape without legal process such as a search warrant." It added that "The ordinance does not require video surveillance of e-mail or images from the Internet appearing on the customer's computer screens."

The Court then concluded that "the video surveillance requirement is a content-neutral manner restriction, narrowly tailored to advance the city's legitimate interest in public safety and deterrence of gang violence."

The Court then went on to reject the cyber cafes' state constitution privacy claim. Basically, it wrote that customers do not have an expectation of privacy in a public retail establishment.

Justice Raymond Ikola wrote the 29 page opinion of the Court. Justice William Bedsworth joined.

Dissent. Justice David Sills wrote a 13 page opinion in which he dissented in part. He called the majority ruling "Orwellian".

He wrote that "I respectfully dissent to the most important part of the majority opinion, in which it holds that Garden Grove may require video surveillance in every cybercafe in the city, regardless of whether that cybercafe has experienced any gang-related violence, or, indeed, even any problems of the most minor nature."

He pointed out that the evidence before the trial court demonstrated that the gang violence occurred at only a small subset of the Garden Grove cyber cafes.

He argued that "cybercafes deserve the protection of a strict scrutiny standard when regulations implicating privacy and freedom of speech are imposed upon them. But even if a strict scrutiny standard is not appropriate, a balancing standard certainly is. The majority have not even attempted a balancing of the respective interests. Rather, the essence of their opinion is nothing less than almost slavish deference to an unsupported and illogical conclusion of the city’s police chief and city council."

Judge Sills wrote with wrath. "Do my colleagues not realize the -- there is no other word for it -- Orwellian implications of their ruling today? They approve an ordinance which literally forces a ``Big Brother´´ style telescreen to look over one's shoulder while accessing the Internet."

"Sorry, I can't go along with this emasculation of our state Constitutional right to privacy and with the concomitant infringement on the rights of freedom of speech and press."

He concluded that, "This is the way Constitutional rights are lost. Not in the thunder of a tyrant's edict, but in the soft judicial whispers of deference."

Final Notes. This case is Thanh Thuy Vo, et al. v. City of Garden Grove, Court of Appeal, Fourth Appellate District, Division Three, Appeal No. G032058, an appeal from the Superior Court for Orange County, Super. Ct. No. 02CC13030, Judge Dennis Choate presiding.

Rep. Loretta Sanchez (D-CA) represents Garden Grove in the House of Representatives. She is also a Co-chair of the Congressional Caucus on Vietnam. She is a frequent critic of Vietnam's suppression of freedom of speech, and has condemned the government of Vietnam for it treatment of cyber cafes. (See, October 1, 2003 release.) Perhaps there is some irony, that now, Thanh Thuy Vo and others find their cyber cafes regulated by the government in Rep. Sanchez's home town, albeit, with a lighter regulatory touch than in Vietnam.

10th Circuit Reverses in Dominion v. EchoStar

1/29. The U.S. Court of Appeals (10thCir) issued its opinion in Dominion Video Satellite v. Echostar Satellite Corporation, a contract dispute between DBS providers EchoStar and Dominion over an exclusivity provision, and whether injunctive relief is available (as stipulated by their contract) for breach of this provision.

Overview. EchoStar and Dominion have a contract that provides that EchoStar will lease and partially lease back satellite transponders, that Dominion customers will use DISH equipment to receive signals, and that EchoStar will not provide predominantly Christian channels. EchoStar then provided two predominantly Christian channels. When Dominion sued for injunctive relief, EchoStar argued, notwithstanding its contract stipulation of irreparable harm, that injunctive relief is unavailable because of the absence of irreparable harm.

The District Court granted injunctive relief. The Appeals Court reversed. This case serves as precedent on the effectiveness of contract stipulations regarding the availability of injunctive relief, and on the availability of injunctive relief for breach of exclusivity provisions. This case also provides guidance for entities contemplating negotiating contracts with EchoStar.

Background. EchoStar Satellite Corporation and Dominion Video Satellite, Inc. both operate direct broadcast satellite (DBS) systems. EchoStar runs the DISH Network with over 150 channels. Dominion runs the SkyAngel network, which provides predominantly Christian programming, with 20 channels.

The satellite is EchoStar's. But, it has more transponders (devices on the satellite that receive signals from the ground, and then transmit them back to the ground for reception over a broad area) than it is permitted to use under its Federal Communications Commission (FCC) license. So, EchoStar has entered into a contract with Dominion under which Dominion leases eight transponders, and then subleases six back to EchoStar. Dominion uses two to broadcast to its SkyAngel subscribers.

Another provision of the contract is that SkyAngel subscribers must purchase DISH brand equipment. The contract also provides that Dominion has the exclusive right to transmit Christian programming. The contract also addresses remedies. It stipulates that breach of the contract would result in irreparable harm, and that therefore, injunctive relief is available. It also provides for arbitration.

This dispute arose when EchoStar began transmitting two predominantly Christian channels, Daystar and FamilyNet.

District Court. Dominion filed a complaint in U.S. District Court (DColo) against EchoStar alleging breach of contract and seeking an injunction. Also, a third party, Daystar Television Network, moved to intervene.

The District Court granted Dominion a preliminary injunction. It rejected Dominion's argument that it suffered irreparable harm as a result of EchoStar's broadcast of the two Christian channels. Rather, it based its preliminary injunction upon the contract stipulation regarding irreparable harm, and Dominion's loss of exclusivity in broadcasting Christian Channels. It also denied Daystar's motion to intervene, and ordered the parties to begin arbitration. EchoStar and Daystar then brought the present appeal.

Court of Appeals. The Appeals Court reversed the entry of the preliminary injunction. It began its analysis with a recitation of the elements required to obtain a preliminary injunction: "(1) it will suffer irreparable harm if the injunction is not granted, (2) its threatened injury outweighs the harm caused to the opposing party as a result of the injunction, (3) the injunction is not adverse to the public interest, and (4) it has a substantial likelihood of success on the merits of the case."

The Court reversed because it held that Dominion did not meet the irreparable harm requirement.

It held that while irreparable harm often arises from the breach of a contract's exclusivity provisions, a showing of irreparable harm is still necessary, and Dominion did not make this showing.

Also, the Court refused to base a finding of irreparable harm on the contract stipulation. It wrote that "While courts
have given weight to parties' contractual statements regarding the nature of harm and attendant remedies that will arise as a result of a breach of a contract, they nonetheless characteristically hold that such statements alone are insufficient to support a finding of irreparable harm and an award of injunctive relief."

This case is Dominion Video Satellite, Inc. v. Echostar Satellite Corporation, U.S. Court of Appeals for the 10th Circuit, Nos. 03-1274 and 03-1303, appeals from the U.S. District Court for the District of Colorado, D.C. No. 03-K-607 (CBS).

Microsoft Will Not Now Make Eolas Related Changes to Windows or MSIE

1/29. Microsoft stated in a release that "it will not, for now, implement modifications to its Windows® operating system or Microsoft® Internet Explorer as a result of the Eolas patent lawsuit."

Microsoft added that "Given the present legal status as well as requests made by partners and customers, Microsoft will, for the time being, not move ahead with the modest steps it intended to take to modify Windows and Internet Explorer as a result of the August jury decision in the Eolas patent lawsuit."

The Eolas patent is 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".

On August 11, 2003, a trial jury of the U.S. District Court (NDIll) returned its verdict that Microsoft's Internet Explorer infringed this patent. The jury also awarded damages of $521 Million. See, story titled "Jury Returns Verdict of Infringement Against Microsoft in Eolas Browser Patent Case" in TLJ Daily E-Mail Alert No. 716, August 12, 2003.

On October 30, 2003, the U.S. Patent and Trademark Office (USPTO) issued a "Director Initiated Order for Reexamination". See, story titled "USPTO Orders Reexamination of Eolas Patent" in TLJ Daily E-Mail Alert No. 778, November 13, 2003.

The District Court entered final judgment in January. Microsoft stated that it intends to appeal. The District Court stayed its injunction pending appeal.

More News

1/29. The European Commission published the January 20, 2004 version of its Merger Regulation [22 pages in PDF]. This is titled "COUNCIL REGULATION (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings". It also published a working document [24 pages in PDF] titled "Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of concentrations between undertakings".

1/29. The U.S. Court of Appeals (6thCir) issued its opinion in Eagles v. American Eagle Foundation, a trademark case involving the use of the term "Eagles" and the domain The plaintiffs are corporate entities affiliated with the ancient country rock band known as the Eagles. (It songs include Take It Easy, Peaceful Easy Feeling, and Hotel California). The defendant is a foundation dedicated to the preservation of the large birds known as eagles. The foundation filed a trademark application with the U.S. Patent and Trademark Office (USPTO) for "American Eagles Records". The band filed an opposition. The band also filed a complaint in U.S. District Court alleging trademark infringement, dilution, and other causes of action under the Lanham Act. As trial approached, the band was touring in Europe, and moved to dismiss the action. This case involves residual issues, including the effect of the dismissal on the award of attorneys fees, and disposition of the USPTO proceeding. This case is Eagles, Ltd. and Eagles Recording Co., v. American Eagle Foundation f/k/a National Foundation to Protect America’s Eagles, U.S. Court of Appeals for the 6th Circuit, No. 02-5560, an appeal from the U.S. District Court for the Eastern District of Tennessee, at Knoxville, D.C. No. 98-00090, Judge Leon Jordan presiding.

1/29. The National Institute of Standards and Technology (NIST) released a draft document [58 pages PDF] numbered "NIST Special Publication 800-63" and titled "Recommendation for Electronic Authentication". This publication supplements the December 16, 2003 Office of Management and Budget (OMB) memorandum [PDF] titled "E-Authentication Guidance for Federal Agencies" that defines four levels of authentication in terms of the likely consequences of an authentication error. This NIST publication states that it "provides technical guidance to Federal agencies implementing electronic authentication. The recommendation covers remote authentication of users over open networks. It defines technical requirements for each of four levels of assurance in the areas of identity proofing, registration, tokens, authentication protocols and related assertions." Public comments on this draft are due by March 15, 2004. E-Mail comments to

1/29. The Consumer Federation of America (CFA) and Consumers Union released yet another paper [PDF] regarding the FCC's media ownership rules changes. See, also CFA/CU release.

House Judiciary Committee Approves Internet Tobacco Sales Enforcement Act

1/28. The House Judiciary Committee amended and approved HR 2824, the "Internet Tobacco Sales Enforcement Act", by unanimous voice votes.

On July 23, 2003, Rep. Mark Green (R-WI), Rep. Marty Meehan (D-MA), and others introduced HR 2824. See, story titled "Internet Cigarette Sales Bill Introduced in House" in TLJ Daily E-Mail Alert No. 711, August 5, 2003.

On October 2, 2003, the House Judiciary Committee's Subcommittee on Courts, the Internet, and Intellectual Property amended and approved the bill. See, story titled "House Subcommittee Approves Internet Tobacco Sales Enforcement Act" in TLJ Daily E-Mail Alert No. 752, October 3, 2003.

Also, on August 13, 2002, the General Accounting Office (GAO) released a report [60 pages in PDF] titled "Internet Cigarette Sales: Giving ATF Investigative Authority May Improve Reporting and Enforcement" which documents non compliance with the Jenkins Act by internet vendors. See also, story titled "GAO Reports on Internet Cigarette Sales" in TLJ Daily E-Mail Alert No. 491, August 14, 2002.

Rep. Meehan stated at the January 28 markup that the bill serves two purposes. First, it addresses "the problem of illegal sales of tobacco to children over the internet". Second, it addresses "the rampant tax evasion" resulting in lost state revenues due to internet sales. See, full story.

NTIA Seeks Comments on Use of 3650-3700 MHz Band By Unlicensed Devices

1/28. The National Telecommunications and Information Administration (NTIA) published a notice in the Federal Register stating that it "invites interested parties to review and comment on the questions presented in this Notice to assist NTIA in developing recommendations to the Federal Communications Commission (FCC) on the use of the 3650-3700 MHz band for unlicensed devices." Unlicensed devices include, among other things, 802.11 (WiFi) and Bluetooth devices.

Comments are due by February 27, 2004.

This notice of inquiry (NOI) adds that the "NTIA's specific interest is to ensure the continued protection of operations of Government agencies in this band. In order to ensure that these Federal operations are not adversely affected, NTIA is seeking public comment to explore the merits of frequency and/or geographic avoidance technologies, and other interference-mitigation techniques, and to examine technical requirements to allow compatible unlicensed device usage in the 3650-3700 MHz band."  The citation for this NOI is Federal Register, January 28, 2004, Vol. 69, No. 18, at Pages 4118 - 4120.

Acting head of the NTIA Michael Gallagher stated in a release that "We want to make more spectrum available so that people who live in rural areas can have access to wireless broadband ... This continues our progress in facilitating the sharing of spectrum among government and commercial users."

The FCC issued its NOI over a year ago. On December 11, 2002, the FCC announced its NOI regarding "Additional Spectrum for Unlicensed Devices Below 900 MHz and in the 3 GHz Band". See story, "FCC Announces Notice of Inquiry Re More Spectrum for Unlicensed Use" in TLJ Daily E-Mail Alert No. 566, December 12, 2002.

On December 20, 2002, the FCC released the actual text of this Notice of Inquiry [MS Word]. This is ET Docket No. 02-380.

The NTIA has already responded once to the FCC's NOI. On May 7, 2003, the NTIA submitted a comment.

Ashcroft Opposes Senate Bill to Roll Back PATRIOT Act Provisions

1/28. Attorney General John Ashcroft wrote a letter [4 page PDF scan] to Senate leaders in which he opposed passage of S 1709, the "Security and Freedom Ensured Act of 2003" (SAFE Act), a bill to modify the PATRIOT Act. He also stated that, if passed by the Congress, the President might veto it.

Sen. Larry Craig (R-ID), Sen. Dick Durbin (D-IL), and others introduced the bill on October 2, 2003. See, story titled "Senators Craig and Durbin Introduce Bill to Modify PATRIOT Act" in TLJ Daily E-Mail Alert No. 753, October 6, 2003.

The bill currently has twelve cosponsors. There have been no hearings or mark ups of the bill. There are also several related bills. However, the Attorney General only addressed S 1709, the SAFE Act, in this letter.

AG Ashcroft sent the letter to Sen. Orrin Hatch (R-UT) and Sen. Patrick Leahy (D-VT), the Chairman and ranking Democrat of the Senate Judiciary Committee, and Sen. Bill Frist (R-TN) and Sen. Tom Daschle (D-SD), the Senate Majority and Minority Leaders. None are co-sponsors of the bill.

The bill would modify several sections of the criminal code, which is codified at Title 18, and the Foreign Intelligence Surveillance Act (FISA), which is codified at 50 U.S.C. § 1861, et seq., to revise changes made by the USA PATRIOT Act. The "Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001" was passed by the 107th Congress as HR 3162. It became Public Law 107-56 on October 26, 2001.

John AshcroftAshcroft wrote that "The Department of Justice strongly objects to S.1709". He wrote that it "would roll back many of the most important and useful anti-terrorism authorities enacted by the USA PATRIOT Act."

He added that "We urge the Senate to reject the SAFE Act and retain the vital tools that law enforcement needs to safeguard American lives and liberties. If S.1709 is presented in its current form to the President, the President's senior advisors will recommend that it be vetoed."

The letter addresses John Doe roving wiretaps, delayed notice search warrants (also referred to as sneak and peak), business records, obtaining information from libraries information about wire or electronic communications, and the sunsetting of §§ 213, 216, and 219 of the PATRIOT Act (§ 216 extended the statutory provisions regarding pen register and trap and trace devices to online communications).

Roving Wiretaps. S 1709, at § 2, would amend § 105(c) of the FISA, which is codified at 50 U.S.C. § 1805. Sen. Durbin offered this explanation when the bill was introduced. "The FBI can obtain a ``John Doe´´ roving wiretap, which does not specify the target of the wiretap or the place to be wiretapped. This increases the likelihood that the conversations of innocent people wholly unrelated to an investigation will be intercepted."

Sen. Durbin added that S 1709 would "Limit ``John Doe´´ roving wiretaps by requiring the warrant to identify either the target of the wiretap or the place to be wiretapped. To protect innocent people from Government surveillance, it would also require that surveillance be conducted only when the suspect is present at the place to be wiretapped."

Ashcroft views things differently. He wrote, "imagine that there is a terrorist whose physical description is known to law enforcement, but whose actual identity is unknown. This terrorist consistently thwarts surveillance by changing his cellular telephone and Internet accounts just prior to important meetings and communications. Before the passage of the PATRIOT Act, each time this would happen, the government would need to return to the FISA court for a new order just to change the name of the third party needed to assist in the new installation. The PATRIOT Act now permits the court to issue a generic order that can be presented to the new third party directing their assistance to assure that the surveillance may be undertaken as soon as technically feasible."

He concluded that "The SAFE Act would roll back this common-sense authority in instances where only a description of the target is known, which would hamper the ability of law enforcement to investigate terrorism and national-security cases, in which the targets are very adept at concealing their identities and methods of communications."

Delayed Notice of Search Warrants. S 1709, at § 3, would amend 18 U.S.C. § 3103a to limit the authority to delay notice of search warrants.

Sen. Durbin stated last fall that "The FBI can conduct a ``sneak and peek´´ search of your home, not notifying you of the search until after a ``reasonable period,´´ a term which is not defined in the PATRIOT Act. A court is now authorized to issue a ``sneak and peek´´ warrant where a court finds ``reasonable cause´´ that providing immediate notice of the warrant would have an ``adverse result,´´ a very broad standard. The use of ``sneak and peek´´ warrants is not limited to terrorism cases."

He said that S 1709 would "Authorize a court to issue a delayed notification warrant where notice of the warrant would endanger the life or physical safety of an individual, result in flight from prosecution, or result in the destruction of or tampering with the evidence sought under the warrant. It would require notification of a covert search within seven days, rather than an undefined ``reasonable period.´´ It would authorize unlimited additional 7-day delays if the court found that notice of the warrant would continue to endanger the life or physical safety of an individual, result in flight from prosecution, or result in the destruction of or tampering with the evidence sought under the warrant."

Ashcroft wrote in his letter that § 3 of S 1709 "would run the risk of tipping off terrorists to the fact that they are under investigation by limiting the ability of the courts to issue delayed-notice search warrants ..." He added S 1709 would only allow these warrants in three circumstances", and this "could tip off suspects and thus enable their associates to go into hiding, flee, change their plans, or event accelerate their plots."

Section 501 Business Records. S 1709 would amend § 501 of the FISA. This is the section of the FISA that provides for "Access to Certain Business Records for Foreign Intelligence and International Terrorism Investigations". The PATRIOT Act, at § 215, rewrote § 501.

This § 215 is the source of the American Library Association's (ALA) complaints regarding harm to libraries and library users.

Ashcroft has responded previously that the government has never used this section to obtain the records of any library. He recently stated that "Not a single American's library records has been reviewed under the Patriot Act". He added, "No offense to the American Library Association, but we just don't care." See, September 18, 2003 speech.

See also, stories titled "Ashcroft Says American Library Association Attacks on PATRIOT Act Are Hysteria and Hyperbole" in TLJ Daily E-Mail Alert No. 740, September 16, 2003; "Ashcroft and Critics Continue Debate Over Section 215 Access to Business Records" in TLJ Daily E-Mail Alert No. 745, September 24, 2003; and "Ashcroft Addresses Roving Wiretaps and Access to Business Records" in TLJ Daily E-Mail Alert No. 746, September 25, 2003.

The debate over § 215 and business records is somewhat technical. Here is an overview. § 215 of the PATRIOT Act (HR 3162 in the 107th Congress) replaced §§ 501-503 of the FISA with new language designated as §§ 501 and 502. § 501 of the FISA, in turn, is codified in Title 50 as § 1861. HR 1709, the SAFE Act, provides, at § 4, further revisions to Section 501 of the FISA.

FISA only applies to foreign powers, and agents of foreign powers, including international terrorists. § 501 enables the FBI to obtain from a judge or magistrate an order requiring the production business records. While the statute does not expressly include library records, neither the ALA, nor the DOJ, dispute that library records could be obtained.

Currently, § 501 requires that the application to the judge or magistrate "shall specify that the records concerned are sought for an authorized investigation conducted in accordance with subsection (a)(2) to obtain foreign intelligence information not concerning a United States person or to protect against international terrorism or clandestine intelligence activities."

S 1709 would change this to require that the application, "shall specify that--
  (A) the records concerned are sought for an authorized investigation conducted in accordance with subsection (a)(2) to obtain foreign intelligence information not concerning a United States person or to protect against international terrorism or clandestine intelligence activities; and
  (B) there are specific and articulable facts giving reason to believe that the person to whom the records pertain is a foreign power or an agent of a foreign power."

Also, currently, § 501 provides that "Upon an application made pursuant to this section, the judge shall enter an ex parte order as requested, or as modified, approving the release of records if the judge finds that the application meets the requirements of this section."

S 1709 would add a phrase requiring that the judge finds that "there are specific and articulable facts giving reason to believe that the person to whom the records pertain is a foreign power or an agent of a foreign power".

That is, S 1709 adds the requirement that the FBI state to the judge, and the judge must find, that there are facts giving reason to believe that the person to whom the records pertain is a foreign power or an agent of a foreign power. This change, if enacted, might make it harder for the FBI to obtain orders under § 501.

Sen. Durbin, a cosponsor of S 1709, stated in the Senate on October 2 that "The FBI can now seize records on the books you check out of the library or the videos you rent, simply by certifying that the records are sought for a terrorism or intelligence investigation, a very low standard. A court no longer has authority to question the FBI's certification. The FBI no longer must show that the documents relate to a suspected terrorist or spy."

He stated that S 1709 would "Reinstate the pre-PATRIOT Act standard for seizing business records. In order to obtain a subpoena, the FBI would have to demonstrate that it has reason to believe that the person to whom the records relate is a suspected terrorist or spy. The SAFE Act retains the expansion of the business record provision to include all business records, including library records, rather than just the four types of records -- hotel, car rental, storage facility and common carrier -- covered before the PATRIOT Act."

Ashcroft wrote in his January 28 letter that "Section 4 of the SAFE Act would deny terrorism investigators access to crucial intelligence information by raising the standards under which the FISA court can order the production of business records. In particular, the FISA court could not request business records from libraries or bookstores unless it found ``specific and articulable facts to believe that the person to whom the records pertain is a foreign power or an agent of a foreign power.´´"

He elaborated that "This standard is much more rigorous than the simple ``relevance´´ standard under which federal grand juries, in ordinary criminal investigations, can subpoena the same records. The SAFE Act would thus make it more difficult to conduct national-security investigations under FISA than it is to investigate garden-variety crimes such as drug trafficking and health-care fraud."

Libraries As Electronic Communication Service Providers. S 1709 would amend 18 U.S.C. § 2709, which currently requires that "A wire or electronic communication service provider shall comply with a request for subscriber information and toll billing records information, or electronic communication transactional records in its custody or possession made by the Director of the Federal Bureau of Investigation ..." (§ 505 of the PATRIOT Act amended § 2709 of Title 18.) S 1709, at § 5, would insert an exception: "A library shall not be treated as a wire or electronic communication service provider for purposes of this section."

Ashcroft wrote that "The SAFE Act would make it more difficult, in some circumstances, to obtain information about emails sent from public computer terminals at libraries than it would be to obtain the same information about emails sent from home computers. Ironically, it would extend a greater degree of privacy to activities that occur in a public place than to those taking place in a home."

Sunsetting of §§ 213, 216, and 219 of the PATRIOT Act. S 1709 would provide for the sunsetting, at the end of 2005, of three Sections of the PATRIOT Act. These are § 213 (pertaining to authority for delaying notice of the execution of a warrant), § 216 (pertaining to use of pen register and trap and trace devices), and § 219 (pertaining to single-jurisdiction search warrants for terrorism).

§ 216 is one of the key technology related provisions of the PATRIOT Act. It expands of the statutory provisions regarding pen register and trap and trace devices (PR&TTD) to online communications.

PR&TTD are telephone industry concepts. Pen registers are used to obtain outgoing phone numbers. Trap and trace devices are used to obtain incoming numbers. Before passage of the PATRIOT Act, the relevant statute referenced "wire" communications.

The PATRIOT Act provides that the concept of a pen register is expanded from merely capturing phone numbers, to capturing routing and addressing information in any electronic communications, including internet communications. It similarly expands the concept of trap and trace devices. The Act also provides that a single order shall apply nationwide.

PR&TTD orders do not authorize a law enforcement agency to obtain the content of communications. Also, court orders authorizing PR&TTD devices do not require a showing of probable cause, as is the case for wiretaps, which enable LEAs to obtain the content of communications.

Ashcroft wrote in his January 28 letter that "Section 216 of the PATRIOT Act amended the pen register/trap and trace statute to clarify that it applies to Internet communications. This was a modest and necessary update to federal law, ensuring that investigators are able to collect non-content information about terrorists' communications regardless of the medium they use. It will still be needed by law enforcement after December 31, 2005, as the Internet is in no danger of disappearing."

Reaction to Ashcroft's Letter. Former Rep. Bob Barr (R-GA) issued a release which states that he sent a letter to Senate leadership urging the Senate to hold hearings and pass the bill. His release states that "the government is broadly employing the powers granted in the PATRIOT Act to prosecute cases involving other crimes having nothing to do with terrorism". His release adds that "the PATRIOT Act and other powers now used by the government to fight terrorism, reach too broadly and in so doing violate civil liberties, including Americans' right to privacy."

Anthony Romero, Executive Director of the American Civil Liberties Union (ACLU), stated in a release that "The Attorney General's attack on the SAFE Act shows how out of step the Bush Administration is with growing national concern over the Patriot Act ... Ironically, the veto threat also demonstrates that the SAFE Act is becoming an increasingly viable legislative measure, one that has obviously put the Ashcroft Justice Department on the defensive."

Related Bills. On July 31, 2003, Sen. Lisa Murkowski (R-AK) introduced S 1552 [21 pages in PDF], the "Protecting the Rights of Individuals Act", or PRI Act. See, TLJ story titled "Sen. Lisa Murkowski Introduces Bill to Roll Back Surveillance Provisions of PATRIOT Act", July 31, 2003.

On October 1, 2003, Sen. Patrick Leahy (D-VT) and others introduced S 1695, the "PATRIOT Oversight Restoration Act". It pertains to the sunsetting of various provisions of the USA PATRIOT Act. See, story titled "Sen. Leahy Introduces Bill to Expand List of Surveillance Provisions of PATRIOT Act to Be Sunsetted" in TLJ Daily E-Mail Alert No. 757, October 14, 2003.

On October 2, 2003, Sen. Russ Feingold (D-WI) introduced S 1701, the "Reasonable Notice and Search Act" a bill to limit the use of delayed notice warrants, also know as sneak and peak warrants. See, story titled "Sen. Feingold Introduces Bill to Limit Delayed Notice Warrants" in TLJ Daily E-Mail Alert No. 753, October 6, 2003.

On October 21, 2003, Rep. Butch Otter (R-ID) introduced HR 3352, the "Security and Freedom Ensured Act of 2003 (SAFE) Act". This bill is similar, but not identical, to S 1709. See, story titled "Rep. Otter Introduces Bill to Amend PATRIOT Act" in TLJ Daily E-Mail Alert No. 764, October 23, 2003.

DHS Announces National Cyber Alert System

1/28. The Department of Homeland Security's (DHS) National Cyber Security Division (NCSD) announced that it has created a National Cyber Alert System (NCAS).

This announcement comes almost one year after the Bush administration released documents titled "National Strategy to Secure Cyberspace" and "Physical Protection of Critical Infrastructure and Key Assets", and less than two weeks after a group of House Democrats released a report [18 pages in PDF] that criticizes the Bush administration for delay in implementing its National Strategy to Secure Cyberspace.

See, story titled "Bush Administration Releases Final Cyber Security Plan" in TLJ Daily E-Mail Alert No. 605, February 17, 2003, and story titled "House Democrats Criticize Bush Administration on Cyber Security and Use of IT" also published in TLJ Daily E-Mail Alert No. 818, January 19, 2004.

The DHS described its new NCAS in a release as a "coordinated national cyber security system for identifying, analyzing, and prioritizing emerging vulnerabilities and threats. Managed by the United States Computer Emergency Readiness Team (US-CERT), a partnership between NCSD and the private sector, the National Cyber Alert System provides the first infrastructure for relaying graded computer security update and warning information to all users."

In September of 2003, the DHS's NCSD' formed a partnership with Carnegie Mellon University's CERT Coordination Center. This partnership is named the U.S. Computer Emergency Response Team, or U.S. CERT.

The NCAS will offer three things by e-mail -- Cyber Security Tips, Cyber Security Bulletins, and Cyber Security Alerts.

The Cyber Security Tips are bi-weekly e-mail messages that contain best computer security practices. They are targeted at non-technical home and corporate computer users.

The Cyber Security Bulletins are bi-weekly e-mail messages that contain summaries of security issues, new vulnerabilities, potential impact, patches and work-arounds, as well as actions required to mitigate risk. They are targeted at technical audiences.

Finally, Cyber Security Alerts are real-time information about security issues, vulnerabilities, and exploits currently occurring that encourage users to take rapid action. They are in two forms -- one for non-technical users and another for advanced for technical users.

Subscriptions to all of these are available for free. To subscribe, visit the U.S. CERT's NCAS subscriptions web page.

The DHS's release and the U.S. CERT web site do not identify what information the NCAS will provide that is not currently being provided by the CERT Coordination Center, private sector security companies, software companies, and other sources.

The NCSD has no web site. The DHS web site has a press release, dated June 6, 2003, announcing its creation. The NCSD is a part of the DHS's Information Analysis & Infrastructure Protection (IAIP) Directorate. On November 15, 2003, Amit Yoran was named Director of the NCSD. See, story titled "Amit Yoran Named Head of Cyber Security Division" in TLJ Daily E-Mail Alert No. 740, September 16, 2003.

Yoran works for Bob Liscouski, the Assistant Secretary for Infrastructure Protection in the IAIP. Liscouski works for Frank Libutti, the Under Secretary for Information Analysis and Infrastructure Protection. Libutti works for Tom Ridge, the Secretary of Homeland Security.

Frank LibuttiIAIP Under Secretary Frank Libutti (at right), an ex-Marine with no background in cyber security, stated in the DHS release announcing the formation of the NCAS that "The President's National Strategy to Secure Cyberspace provides a framework for the public and private sectors to work together to secure cyberspace". He added that "The National Cyber Security Division's mission is to serve as a focal point for implementing the National Strategy and protecting the American People."

On January 16, 2004, the Democrats on the House Homeland Security Committee released a report [18 pages in PDF] titled "America At Risk: The State of Homeland Security: Initial Findings". While the report criticizes the Bush administration across all areas of homeland security, it levels numerous accusations related to cyber security.

The Democrats' report states that "In February 2002, the Administration released a ``National Strategy to Secure Cyberspace´´, setting forth five cybersecurity priority areas, including the development of a cybersecurity response team, a threat and vulnerability reduction program, and awareness and training programs, as well as plans for securing government computers and developing national security and international cooperation. Implementation of the plan has been delayed for nearly a year and two Presidential advisors on cybersecurity have left the government, one after only two months."

It also criticizes the administration for not making Yoran's position more important. The report states that "The top cybersecurity position in the government is now the Director of the National Cyber Security Division, buried deep within DHS. There is no longer a Presidential advisor or senior official with the authority to direct all the agencies responsible for cybersecurity should a cyber-crisis occur."

House Judiciary Committee Approves Bill to Repeal 88 Year Old Anti-Dumping Statute

1/28. The House Judiciary Committee approved HR&nbps;1073, without amendment, by voice vote. This is an untitled bill to repeal Section 801 of the Revenue Act of 1916.

This bill would repeal section 801 of the Revenue Act of 1916, which is codified at 15 U.S.C. § 72. The bill was introduced on March 4, 2003 by Rep. James Sensenbrenner (R-WI) and Rep. Bill Thomas (R-CA). It was referred to the House Judiciary Committee, of which Rep. Sensenbrenner is the Chairman.

15 U.S.C. § 72 provides, in part, that "It shall be unlawful for any person importing or assisting in importing any articles from any foreign country into the United States, commonly and systematically to import, sell or cause to be imported or sold such articles within the United States at a price substantially less than the actual market value or wholesale price of such articles, at the time of exportation to the United States, in the principal markets of the country of their production, or of other foreign countries to which they are commonly exported after adding to such market value or wholesale price, freight, duty, and other charges and expenses necessarily incident to the importation and sale thereof in the United States: Provided, That such act or acts be done with the intent of destroying or injuring an industry in the United States, or of preventing the establishment of an industry in the United States, or of restraining or monopolizing any part of trade and commerce in such articles in the United States."

Rep. John Conyers (D-MI), the ranking Democrat on the Committee, opposes the bill. He argued in a prepared statement that "repeal of this law will have a detrimental effect on U.S. jobs. The Act empowers companies to bring private antitrust suits against foreign companies that import their goods at below-market prices. If we take away this ability, and foreign companies are allowed to dump their products, U.S. companies will not be able to compete, will lose market share, and will have to cut jobs."

Republicans Appoint Hall to Commerce and Science Committees with Seniority

1/28. The House adopted HRes 505, which names Rep. Ralph Hall (R-TX) to the House Commerce Committee, "to rank after Mr. Tauzin", and to the House Science Committee, "to rank after Mr. Boehlert".

On January 2, 2004, Rep. Hall, a longtime Democrat, announced that he would run for re-election as a Republican. See, Rep. Hall's statement and story titled "Rep. Hall Becomes a Republican" in TLJ Daily E-Mail Alert No. 809, January 5, 2004.

Rep. Ralph HallRep. Hall (at right) held seats as a Democrat on the Commerce and Science Committees. He was fourth in seniority on the Commerce Committee, behind Rep. John Dingell (D-MI), Rep. Henry Waxman (D-CA), and Rep. Ed Markey (D-MA). He was the ranking Democrat on the Science Committee. When he switched parties, he lost his committee assignments that had been based upon his Democratic affiliation.

The House Republicans have given him back his committee assignments, with seniority. He is in his twelfth term in the House.

Rep. Hall stated in a release on January 28 that "I'm pleased to be back on these great committees and to retain my seniority". He elaborated that "When I decided to switch parties, I didn't extract any promises from anyone, but when I reported my switch to the Speaker and asked that my seniority be honored, he responded that it would be. Today he and all those with whom he works in leadership kept their word."

Rep. Hall's release added, "Subcommittee assignments will be determined later."

Rep. Hall is running in the Republican primary in Texas on March 9. On January 2, President Bush stated in a release that "I strongly support his re-election".

More People and Appointments

1/28. Rep. John Sullivan (R-OK) was appointed to the House Commerce Committee. He represents the First District, which was previously represented by former Rep. Steve Largent (R-OK), who ran unsuccessfully for Governor of Oklahoma. Largent is now the P/CEO of the Cellular Telecommunications and Internet Association (CTIA). Rep. Sullivan resigned as a member of House Government Reform Committee, the House Transportation and Infrastructure Committee, and the House Science Committee. See, HRes 505, Sullivan release and Congressional Record, January 28, 2004, at page H222 and H223.

1/28. Rep. Roy Blunt (R-MO) resigned as a member of the House Commerce Committee. He was appointed to the House International Relations Committee, "to rank after Mr. McHugh". He is already the House Republican Whip. See, HRes 505 and Congressional Record, January 28, 2004, at pages H222 and 223.

1/28. Rep. Chris Bell (D-TX) resigned from the House Government Reform Committee. The House then approved HRes 504, naming Rep. Bell to the House Financial Services Committee. See, Congressional Record, January 28, 2004, at pages H222-3.

1/28. The Senate confirmed Gary Sharpe to be a Judge of the U.S. District Court for the Northern District of New York by a vote of 95-0. See, Roll Call No. 6.

More News

1/28. Rep. Anthony Weiner (D-NY) introduced HR 3749, the "Local Government Internet Tobacco Sales Enforcement Act of 2004". The House Judiciary Committee amended and approved HR 2824, the "Internet Tobacco Sales Enforcement Act", by unanimous voice votes, on January 28, 2004. HR 2824 would make it easier for states to collect taxes on sales of cigarettes. Currently, many internet sellers are not paying state taxes. Rep. Weiner wants any legislation that is ultimately passed by the Congress to also give enforcement authority to local governments that tax cigarettes, such as New York City, which he represents. HR 3749 would accomplish this. See also, story titled "House Judiciary Committee Approves Internet Tobacco Sales Enforcement Act", also published in TLJ Daily E-Mail Alert No. 826, January 29, 2004.

Number of
AT&T 2,297
Sprint 1,119
Verizon 739
Cingular 699
T-Mobile 625
Nextel 332
Qwest 195
  Total 4,734

1/28. The Federal Communications Commission (FCC) released data on informal complaints that it received about wireless number portability. Wireless number porting began on November 24, 2003. The FCC released data for complaints since November 24, 2003, and through January 23, 2004. The FCC has received 4,734 informal complaints about wireless local number portability. Most of the complaints concern alleged delays in porting numbers from one wireless carrier to another. A much smaller number of complaints, just over 5 percent of the total, involve alleged delays in porting numbers from wireline carriers to wireless carriers. The carriers mentioned in at least 100 complaints are: AT&T Wireless (2297); Sprint PCS (1119); Verizon Wireless (739); Cingular Wireless (699), T-Mobile (625), Nextel (332); Qwest (195); ALLTEL (119). Many of the complaints concern more than one carrier so the total number of complaints received is smaller than the number of times a carrier is mentioned in a complaint. See, FCC release.

1/28. The Federal Communications Commission (FCC) released its report [146 pages in PDF] "Tenth Annual Report" to Congress on the status of competition in the market for the delivery of video programming. See also, FCC release [10 pages in PDF]. The report finds that "Overall, due, in part, to Congressional efforts made over the past decade, technological advances and investment in new platforms for delivering video programming, the vast majority of Americans enjoy more choice, more programming and more services than any time in history. In addition to an increase in the number of video channels, cable operators and other MVPDs also now offer advanced video services and many non-video advanced services. Cable television, however, remains the predominant technology for the delivery of video programming. Ten years ago, cable operators served almost 100% of the nation’s subscribers. Today, cable’s share has fallen to approximately 75% of all MVPD subscribers." Robert Sachs, P/CEO of the National Cable & Telecommunications Association (NCTA), stated in a release that the FCC "found that cable faces significant competition, evidenced by the fact that the two nationwide DBS providers now serve over 20 million subscribers or 22 percent of all multichannel video households. ... To the benefit of consumers, deregulation and competition have produced a vibrant digital video and broadband marketplace."

1/28. The Federal Communications Commission (FCC) closed early on Tuesday, January 27, 2004. The FCC issued a statement [PDF] regarding the effect on filings. "According to Section 1.4(e)(1) of the Commissions rules, 47 C.F.R. Section 1.4(e)(1), all filings, paper and electronic, that were due on January 27 are due on the Commission’s next official business day after closing. In addition, January 27 does not count in computing filing periods that are less than seven days. See 47 C.F.R. Section 1.4(g). Please direct all questions and comments to Bill Caton, Deputy Secretary, at (202)418-0300."

1/28. The U.S. Court of Appeals (DCCir) heard oral argument in USTA v. FCC. This argument was on petitions for review of the Federal Communications Commission's (FCC) triennial review order [576 pages in PDF] (TRO), released on August 21, 2003. This is A.C. No. 00-1020.

Canadian Court Rules It Has Jurisdiction Over Washington Post Based on Web Publication

1/27. The Superior Court of Justice in the province of Ontario, in the nation of Canada, released an opinion in Bangoura v. Washington Post, in which it denied the Washington Post's motion to dismiss for lack of personal jurisdiction.

This opinion, like the opinion of the High Court of Australia in Dow Jones v. Gutnick, which the Canadian court quoted at length, holds, in effect, that a party claiming defamation by a web publisher, may obtain personal jurisdiction over the publisher in any jurisdiction in the world where there is plaintiff with internet service.

Facts. Bangoura recently became a resident of Ontario, Canada. The opinion states that he previously worked for the "United Nations in a variety of countries, namely, Austria from 1987 to 1993, Ivory Coast from 1993 to 1994, and Kenya from December 1994 to January 1997."

The claim is over seven years old. It relates to articles originally published in January 1997.

The Washington Post is a publication the Washington Post Company, a Delaware corporation that is based in Washington DC. The Washington Post published in its newspaper and website three articles about the Bangoura while he was a United Nations employee working in the nation of Kenya.

The Court opinion quotes from these articles. For example, the opinion states that the Washington Post wrote that "The United Nations has removed a controversial African official from his post at the U.N. Drug Control Program and will not renew his contract because of ``misconduct and mismanagement,´´ a U.N. spokesman said yesterday." The opinion quotes another article: "Colleagues have accused him of sexual harassment, financial improprieties and nepotism."

The three Washington Post reports who wrote the articles are William Branigin, James Rupert, and Steven Buckley. All three now reside in the U.S. Two resided in Africa at the time that they wrote the articles that are the subject of this action.

Branigan remains with the Washington Post, and recently reported from Iraq as a journalist embedded with the 3rd Infantry Division. See, articles by Branigin on war in Iraq. (Washington Post web site requires registration.) Rupert is now Newsday's Deputy Foreign Editor.

Procedure. Bangoura filed a complaint in the Superior Court of Justice in Ontario against the Washington Post, the three reporters, the United Nations, and one other individual, alleging publication of false and injurious communications. Bangoura seeks an order censoring publication of the articles in the web site. Bangoura also seeks an order compelling publication of a prominent retraction.

Bangoura also seeks a huge damages award. The Court summarized these demands as follows: "Damages against the Washington Post defendants in the amount of $500,000.00 for intentional interference with prospective economic advantage and inducing a breach of employment contract ... in the amount of $1,000,000.00 for intentional infliction of mental anguish ... in the amount of $1,000,000.00 for negligence." He also seeks damages against the Washington Post only "in the amount of $1,000,000.00 for refusing to post retractions, and for unreasonable delay in removing defamatory messages posted on its web page." Finally, he seeks "Punitive and exemplary damages in the amount of $2,000,000.00."

The Washington Post and its three reporters then filed motion to dismiss them on the grounds that it lacks jurisdiction.

The Superior Court of Justice is a trial court. The presiding judge is Justice Romain W. M. Pitt, of the Toronto region.

Court Holding. The Court denied the motion, and held that it does have jurisdiction.

The Court began with the statement that "The publication took place in Washington, but the plaintiff's reputation was affected in Ontario. The applicable law is that of the lex loci delicti in tort cases; but, because this case involves defamation, it is difficult to determine where the tort occurred. If based on publication, then the District of Columbia is the choice of law; if based on damages and where reputation was affected, then Ontario is the choice of law. It is safe to say that Ontario and the District of Columbia are both appropriate fora."

The Court then wrote that "Before a court can assume jurisdiction over a foreign defendant, it must be satisfied that a real and substantial connection exists." Citing an earlier Ontario precedent, it identified eight factors to be considered in determining whether a "real and substantial connection exists":

"(1) The connection between the forum and the plaintiff's claim.
(2) The connection between the forum and the defendant.
(3) Any unfairness to the defendant in assuming jurisdiction.
(4) Any unfairness to the plaintiff in not assuming jurisdiction.
(5) The involvement of other parties in the suit.
(6) The court's willingness to recognize and enforce a foreign judgment rendered on the same jurisdictional basis.
(7) Whether the case is interprovincial or international in nature.
(8) Comity and the standards of jurisdiction, recognition and enforcement prevailing elsewhere."

The Court proceeded to examine each of these in order, and in the end, found that it may exercise jurisdiction. However, it only loosely related the facts of the case to the eight factors.

For example, in addressing the second factor, the "connection between the forum and the defendant", that Court wrote that "Admittedly, the defendants have no connection to Ontario". But, it stated that "the Washington Post is a major newspaper", and it is "often spoken of in the same breath as the New York Times". The Court offered no explanation for why these statements are relevant to the connection between the forum and the Washington Post, and if so, why they relate to the connection between the forum and the individual reporters.

Similarly, in addressing the third factor, "unfairness to the defendant in assuming jurisdiction", the Court wrote without explanation that publishers and reporters should be "insured for damages for libel or defamation anywhere in the world".

The Court did not address the consequences that the jurisdictional decision has on the case, beyond the inconvenience of transporting almost all of the parties and witnesses to a distant forum. The applicable substantive law differs significantly between the U.S. and Canada. First, in a suit alleging defamation of a government official, the opinion of the U.S. Supreme Court in New York Times Co. v. Sullivan, 376 U.S. 254 (1964) offers publishers more protection than does the law of defamation in Ontario.

Second, the complaint seeks damages for unreasonable delay in removing defamatory messages posted on the Washington Post's web site. 47 U.S.C. § 230(c)(1) provides that "No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider".

Gutnick Case. The Court quoted extensively, and with approval, from Dow Jones v. Gutnick. That was a defamation case in which the Court held that personal jurisdiction exists where the allegedly defamed party is located.

The Australian Court wrote in the Gutnick case that "defamation is to be located at the place where the damage to reputation occurs. ... In the case of material on the World Wide Web, it is not available in comprehensible form until downloaded on to the computer of a person who has used a web browser to pull the material from the web server. It is where that person downloads the material that the damage to reputation may be done. Ordinarily then, that will be the place where the tort of defamation is committed."

See, story titled "High Court Rules Australia Has Jurisdiction Over Dow Jones Based on Web Publication" in TLJ Daily E-Mail Alert No. 564, December 10, 2002.

U.S. Cases. One U.S. case has reached a substantial different result. On December 13, 2002, the U.S. Court of Appeals (4thCir) issued its opinion [12 pages in PDF] in Young v. New Haven Advocate, holding that a court in Virginia does not have jurisdiction over two small newspapers, and their editors and reporters, located in Connecticut, who wrote allegedly defamatory stories about a Virginia prison warden and published them on the internet. The Court held that the web publication did not establish minimum contacts because the newspapers are not directed at a Virginia audience.

The U.S.4th Circuit wrote that "The facts in this case establish that the newspapers' websites, as well as the articles in question, were aimed at a Connecticut audience. The newspapers did not post materials on the Internet with the manifest intent of targeting Virginia readers. ... In sum, the newspapers do not have sufficient Internet contacts with Virginia to permit the district court to exercise specific jurisdiction over them."

In the Ontario case, the Court wrote "At the time of the publication of the articles, there was no wholesale distribution of the Post in Ontario or anywhere else in Canada. The only recipients of the Post in Ontario at the time of the publication were seven paid subscribers."

See also, TLJ story titled "4th Circuit Rules in Internet Jurisdiction Case", December 13, 2002. See also, stories titled "Internet Shoes: Two Appeals Courts Address Internet Based Personal Jurisdiction", "Fourth Circuit Holds No Personal Jurisdiction Over Out of State Web Host", and "DC Circuit Suggests Personal Jurisdiction Over Out of State Online Brokerage" in TLJ Daily E-Mail Alert No. 452, June 17, 2002.

However, in another U.S. case, the Court found personal jurisdiction in a defamation case based upon internet publication. The U.S. Court of Appeals (9thCir) issued its opinion in Northwest Healthcare Alliance v. in 2002 holding that the U.S. District Court (WDWash) has personal jurisdiction over an out of state defendant in defamation case, based solely upon publication of its allegedly defamatory ratings of health care providers in a web site.

The Supreme Court denied certiorari. See, story titled "Supreme Court Denies Certiorari in Internet Jurisdiction Case" also published in TLJ Daily E-Mail Alert No. 652, April 30, 2003.

The Canadian case is Cheickh Bangoura v. The Washington Post, William Branigin, James Rupert, Steven Buckley, the United Nations and Fred Eckhard, Case No. 03-CV-247461CM1.

SEC Files Complaint Against Presto Telecommunications

1/27. The Securities and Exchange Commission (SEC) filed a civil complaint in U.S. District Court (SDCal) against Presto Telecommunications, Inc., and Alfred Louis Vassallo, Jr. aka Bobby Vassallo alleging violation of federal securities law in connection with the alleged sale of unregistered securities in a purported telecommunications company.

The SEC stated in a release that the District Court granted emergency relief; it "granted the relief that the Commission sought, ordering the freezing of Presto's and Vassallo's assets, the appointment of a temporary receiver over Presto, and other relief."

The complaint alleges that this case "involves the ongoing, fraudulent, unregistered offer and sale of at least $11 million worth" of Presto Telecommunications common stock by Vassallo. It further alleges that "Presto purports to be an international telecommunications company ``positioned to become Latin America's Premier Integrated Communications Provider....´´"

The complaint states that "From at least 1998 to the present, Presto and Vassallo have offered and sold Presto common stock to some 800 investors in 42 states and raised at least $11 million. The defendants have falsely represented that (1) Presto has business relationships with telecommunications companies such as AT&T Corporation ("AT&T"), Sprint Corporation ("Sprint"), MCI Corporation ("MCI"), and Qwest Communications International, Inc. ("Qwest"), and that one or more of those companies have expressed interest in acquiring Presto or making a capital investment in Presto; (2) Presto has "alliances" or is a "partner" with telecommunications equipment makers Cisco Systems, Inc. ("Cisco") and Unisys Corporation ("Unisys"); (3) the United States Department of Commerce ("Commerce Department") was making a "push" with Mexican telecommunications regulators on Presto's behalf; and (4) investor funds would be used to build and operate Presto's network in Mexico."

The three count complaint alleges unregistered offer and sale of securities in violation of Sections 5(a) and 5(c) of the Securities Act, fraud in the offer or sale of securities in violation of Section 17(a) of the Securities Act, and fraud in violation of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.

DOJ Submits Report on Complaints Regarding Abuses of Civil Rights and Civil Liberties

1/27. The Department of Justice's (DOJ) Office of the Inspector General (OIG) submitted a report to Congress titled "Report to Congress on Implementation of Section 1001 of the USA PATRIOT Act". The DOJ/OIG is required to submit this report twice per year regarding "complaints alleging abuses of civil rights and civil liberties" by DOJ employees.

There is nothing in the report regarding wiretaps, pen registers and trap and trace devices, surveillance of internet communications, CALEA, or other technology related provisions of the PATRIOT Act. The report does not state that these fall either within or outside of the scope of Section 1001 reporting requirements.

The full title of the USA PATRIOT Act is the "Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001". It was passed by the 107th Congress as HR 3162. It became Public Law 107-56 on October 26, 2001.

Section 1001(3) of this Act provides that "The Inspector General of the Department of Justice shall designate one official who shall--
   (1) review information and receive complaints alleging abuses of civil rights and civil liberties by employees and officials of the Department of Justice;
   (2) make public through the Internet, radio, television, and newspaper advertisements information on the responsibilities and functions of, and how to contact, the official; and
   (3) submit to the Committee on the Judiciary of the House of Representatives and the Committee on the Judiciary of the Senate on a semi-annual basis a report on the implementation of this subsection and detailing any abuses described in paragraph (1), including a description of the use of funds appropriations used to carry out this subsection."

The report states that "One of the initial determinations is whether a complaint alleges the type of abuse of civil rights and civil liberties contemplated by Section 1001 of the Patriot Act. While the phrase ``civil rights and civil liberties´´ is not specifically defined in the Patriot Act, the OIG has looked to the ``Sense of Congress´´ provisions in the statute, namely Sections 102 and 1002, for context. Sections 102 and 1002 identify certain ethnic and religious groups who would be vulnerable to abuse due to a possible backlash from the terrorist attacks of September 11, 2001, including Muslims, Arabs, Sikhs, and South Asians."

Thus, complaints, if any, regarding conduct by the DOJ with respect to electronic surveillance that does not involve race, religion or national origin may not be addressed in this report.

Rep. James Sensenbrenner (R-WI), the Chairman of the House Judiciary Committee, commented on the report. He stated that "This report demonstrates the IG and others continue to aggressively investigate any allegation a of civil liberties violation. Thus, I'm pleased this section of the PATRIOT Act focusing on protecting civil liberties is working as Congress intended. In addition, this Committee will continue conducting oversight of implementation of the PATRIOT Act and others matters central to the war on terrorism. I would note for those intent on skewering the PATRIOT Act with misinformation, today's report states, `None of the 162 matters involved complaints alleging misconduct by DOJ employees related to their use of a substantive provision in the PATRIOT Act.´" See, release.

European Trade Commissioner Addresses WTO and Doha

1/27. Pascal Lamy (at right), the EU Commissioner for Trade, gave a speech titled "The Future of the WTO" in which he addressed the World Trade Organization (WTO), the Doha Development Agenda (DDA), the Cancun ministerial, free trade agreements (FTAs), and related topics.

Pascal LamyLamy (at right) said that "the EU, after Cancun, spent some time soul-searching and asking some really fundamental questions regarding the overall orientation of EU trade policy."

He stated that "the EU should continue to insist on both a strong trade liberalisation and a strong rules-making component in the WTO."

He also stated that "the EU has launched no new FTA negotiations since Doha, although we have continued to work hard on our existing mandates, such as on Mercosur. The question we posed was whether the EU should switch to the bilateral road as a priority: the conclusion we drew is that in order not to undermine progress in the DDA we should be careful not to shift the balance significantly further towards bilateralism."

He added that the EU needs "to be more flexible on the Singapore issues (investment, competition, trade facilitation, government procurement). These issues need to be treated on a case by case basis." (Parentheses in original.) He also said that "priority for us clearly is trade facilitation and transparency in government procurement."

He continued that "I have also been authorised to take, on behalf of the EU, a more flexible attitude on environment and on the issue of geographical indications in order to ensure the continuation of the negotiation process." Moreover, "On agriculture we have reaffirmed our willingness to negotiate seriously, including by eliminating export subsidies on products of interest to developing countries."

Finally, he stated that "the WTO remains fundamentally fair and pro-development, and indeed that the Uruguay Round was not an unfair deal. The DDA should therefore not aim at removing all responsibility from all developing countries."

People and Appointments

1/27. Carlos Ghosn was elected to the Board of Directors of IBM. He is the Co-Chairman, President and CEO of of Nissan Motor Co. See, IBM release.

More News

1/27. The Federal Communications Commission (FCC) held event titled "Satellite Rural Forum" which addressed broadband access, information and mass media entertainment, telemedicine, distance learning and other issues. FCC Chairman Michael Powell stated that "I place a high priority on ensuring that Americans living and working in rural and remote parts of our Nation have access to the same kind of high quality, advanced communications services as do Americans living in cities and suburbs." He added that "there is one communications technology -- satellite -- that is capable of reaching each and every single American, in every spot of the country". See, Powell speech [2 pages in PDF].

1/27. The U.S. Court of Appeals (DCCir) issued its opinion [17 pages in PDF] in Vernal Enterprises v. FCC, a petition for review of a Federal Communications Commission (FCC) order denying a request for a refund of a filing fee paid in connection with a permit application for construction of a broadcast station. The Appeals Court denied the petition for review. This case is Vernal Enterprises, Inc., and Larry Schrecongost v. FCC and USA, U.S. Court of Appeals for the District of Columbia, No. 02-1297, a petition for review of a final order of the FCC.

1/27. The European Commission released a document [31 pages in PDF] titled "Communication from the Commission to the European Parliament, The Council, The European Economic and Social Committee and the Committee of the Regions on Unsolicited Commercial Commercial Communications or `Spam´" and dated January 22, 2004. See also, EC release dated January 27, 2004.

1/27. The Progress and Freedom Foundation (PFF) released a paper [PDF] titled "Delocalization in Telecommunications Networks". It argues that "modern telecommunications networks are evolving in ways that render local and state authority over many telecommunications policy decisions less justifiable. Networks, and the services offered over the network, are delocalizing in design, operations, traffic and cost characteristics. Further, the benefits from a modernized network are undermined by policies that attempt to make a distinction between local and non-local aspects of the network, particularly as this relates to the services carried on these networks." This paper was written by Douglas Sicker, who is a Adjunct Fellow at the PFF and a professor in computer science and telecommunications at the University of Colorado at Boulder.

1/27. The Federal Communications Commission (FCC) filed its brief [31 pages in PDF] with the U.S. Court of Appeals (DCCir) in City and County of San Francisco v. FCC, an appeal of a final order of the FCC. This is Case No. 03-1186. The FCC states that it "granted microwave applications over the objection of appellant City of San Francisco, dismissed the City’s competing applications as untimely, disallowed a settlement agreement between the City and the successful applicant that would have violated Commission processing rules, and denied the City’s request for waiver of the processing rules. The issues presented are:
  1. Whether the City suffered a violation of its rights to due process, and
  2. Whether the FCC’s licensing decisions, the disapproval of the settlement agreement, and the denial of the waiver request were an abuse of agency discretion."

Greenspan Addresses Info Tech and Economic Flexibility

1/26. Federal Reserve Board Chairman Alan Greenspan gave a speech via satellite to the HM Treasury Enterprise Conference, in London, England, titled "Economic Flexibility".

He praised free markets, deregulation, flexible labor markets, and Joseph Schumpeter, while dismissing government planning and John Maynard Keynes. And, in the process, he analyzed the role on innovative information technologies in contributing to economic flexibility. Flexibility, said Greenspan "implies a faster response to shocks and a correspondingly greater ability to absorb their downside consequences and to recover from their aftermath."

Greenspan stated that "Joseph Schumpeter, the renowned Harvard professor, called ``creative destruction,´´ the continuous scrapping of old technologies to make way for the innovative. In that paradigm, standards of living rise because depreciation and other cash flows of industries employing older, increasingly obsolescent, technologies are marshaled, along with new savings, to finance the production of capital assets that almost always embody cutting-edge technologies. Workers, of necessity, migrate with the capital."

He added that "Through this process, wealth is created, incremental step by incremental step, as high levels of productivity associated with innovative technologies displace lesser productive capabilities. The model presupposes the continuous churning of a flexible competitive economy in which the new displaces the old."

He also addressed the role of information technologies. He stated that "Beyond deregulation and culture change, innovative technologies, especially information technology, have been major contributors to enhanced flexibility. A quarter-century ago, companies often required weeks to unearth a possible inventory imbalance, allowing production to continue to exacerbate the excess. Excessive inventories, in turn, necessitated a deeper decline in output for a time than would have been necessary had the knowledge of their status been fully current. The advent of innovative information technologies has significantly foreshortened the reporting lag, enabling flexible real-time responses to emerging imbalances."

In addition, "Deregulation and the newer information technologies have joined, in the United States and elsewhere, to advance financial flexibility, which in the end may be the most important contributor to the evident significant gains in economic stability over the past two decades."

He elaborated that "recent regulatory reform coupled with innovative technologies has spawned rapidly growing markets for, among many other products, asset-backed securities, collateral loan obligations, and credit derivative default swaps."

Also, "Financial derivatives, more generally, have grown throughout the world at a phenomenal rate of 17 percent per year over the past decade. Conceptual advances in pricing options and other complex financial products, along with improvements in computer and telecommunications technologies, have significantly lowered the costs of, and expanded the opportunities for, hedging risks that were not readily deflected in earlier decades."

Thornburgh Files Final Report in MCI WorldCom Bankruptcy Case

1/26. Richard Thornburgh, the Examiner in the MCI WorldCom bankruptcy proceeding, filed his Third and Final Report [542 pages in PDF] with the U.S Bankruptcy Court (SDNY). This report addresses, among other things, a "state tax minimization program" that "appears improper", and the recommendation that WorldCom has causes of action for negligence and malpractice against KPMG for the "flawed advice" that it provided to WorldCom in connection with this state tax minimization program.

Thornburgh was appointed by the Court on August 6, 2002. See also, Thornburgh's Second Interim Report [PDF], filed on June 9, 2003, and First Interim Report [PDF], filed on November 4, 2002.

The report addresses "WorldCom's state tax minimization program". It states that "This program, which began in 1998, is yet another example of the Company converting what could be legitimate into something that appears improper as a result of its aggressive design and implementation. With respect to the state tax minimization program, WorldCom likely avoided paying hundreds of millions of dollars in state taxes in 1998-2001 based upon the accrual of over $20 billion in questionable royalty charges."

The report continues that "The cornerstone of this program, which was designed by KPMG Peat Marwick LLP (``KPMG´´), was the classification of the ``foresight of top management´´ (``management foresight´´) as an intangible asset, which the parent company could license to the subsidiaries in return for massive royalty charges. As discussed below and in Chapter IV, the Examiner believes that ``management foresight´´ is not an intangible asset that could support the royalty charges and that there are other flaws as well in the WorldCom state tax minimization program. As a result, the accrued royalties, and the substantial state tax savings created thereby, are vulnerable to attack by state taxing authorities."

The report also recommends that, as a result, WorldCom has causes of action against KPMG. It states that "The Examiner believes that WorldCom has causes of action against a number of persons and entities that bear responsibility for WorldCom's injuries."

The potential claims include "Claims for malpractice and negligence against KPMG to recover any interest and/or penalties paid by the Company to any state taxing authorities based upon the flawed advice KPMG provided to WorldCom in connection with the state tax minimization program. The Company may also have claims to require KPMG to return the millions of dollars in fees paid to KPMG for its flawed advice", states the report.

And of course, the report concludes that WorldCom has several claims against Bernie Ebbers and former CFO Scott Sullivan.

The report adds that "The Examiner recognizes that the WorldCom plan of reorganization assigns any such claims to WorldCom", and that "The Examiner expresses no opinion whether any of the claims actually should be pursued."

MCI WorldCom responded to the report in a release. Stasia Kelly, MCI EVP and General Counsel, stated in this release that "The Examiner's discussion of potential claims against KPMG for its involvement in company tax planning in 1997 and 1998 will, of course, receive careful review by the Company and our Board. However, KPMG's involvement in this program has previously been carefully reviewed by our current Audit Committee of the Company's Board of Directors and the Company's inside and outside tax counsel. Based upon this earlier review, the Company concluded that the tax program recommended by KPMG in 1997 and 1998 was appropriate. As a result, the Company has no plans to pursue claims against KPMG."

Thornburgh engaged the law firm of Kirkpatrick & Lockhart as his legal counsel. See also, K&L release.

The report is titled "Third and Final Report by Richard Thornburgh, Bankruptcy Court Examiner". This case is In re WorldCom Inc., et al., U.S. Bankruptcy Court for the Southern District of New York, Case No. 02-13533 (AJG), Judge Arthur Gonzalez presiding.

Appeals Court Affirms in CBC v. Disney

1/26. The U.S. Court of Appeals (8thCir) issued its opinion [16 pages in PDF] in Children's Broadcasting Corp. v. Disney, a case involving misappropriation of trade secrets in the broadcast radio industry. This is the second time that this case has come before the Court of Appeals. In this appeal, the Appeals Court affirmed the District Court

The Children's Broadcasting Corp. (CBC) created a 24 hour radio format aimed at children and their parents in the early 1990s. (It sold its radio stations to the Catholic Radio Network in 1998). In 1995 CBC entered into a contract with ABC Radio. (Disney acquired ABC Radio in 1996.)

ABC Radio, which did not have a competing format in 1995, contracted to provide CBC services, including advertising sales, affiliate development, and consulting. CBC and ABC Radio agreed to keep information developed during the term of the agreement confidential and to use this information only for the purposes of the agreement. However, the agreement was terminable at will. In 1996 ABC Radio terminated the agreement, and began its own children's radio format.

CBC filed a complaint in U.S. District Court (DMinn) against Disney and ABC Radio, alleging a variety of claims. The claims that survived the defendants' motion for summary judgment were misappropriation of trade secrets, breach of contract for failure to use reasonable efforts to sell advertising and develop affiliates, and breach of the contractual duty of confidentiality.

In the first trial, the jury found that the defendants had misappropriated CBC's advertiser list and rate information, and awarded it $10 Million from each defendant. The jury also found that ABC Radio breached the contract with respect to advertising sales and confidentiality and awarded $20 Million. The District Court then granted defendants judgment as a matter of law (JMOL) on the grounds that CBC had not presented sufficient evidence as to causation and damages. It also granted an alternative motion for a new trial on the issue of damages.

In the first appeal, the Appeals Court reversed the JMOL, but affirmed the grant of a new trial on damages. The Appeals Court issued its first opinion [19 pages in PDF] on April 10, 2001. That opinion is reported at 245 F.3d 1008. See also, story titled "Misappropriation of Trade Secrets" in TLJ Daily E-Mail Alert No. 163, April 11, 2003.

On remand, CBC presented evidence that ABC Radio and Disney had accelerated their entry into the children’s radio market by using information about advertising and marketing they obtained from CBC and its children's radio network. The trial jury awarded CBC $1.5 Million for breach of contract, and $8 Million for breach of the contractual duty of confidentiality and misappropriation of the trade secret.

The present cross appeals followed. The Appeals Court affirmed the District Court on all issues.

This case is Children's Broadcasting Corporation v. The Walt Disney Company and ABC Radio Networks, Inc., U.S. Court of Appeals for the 8th Circuit, Nos. 02-3161 and 02-3310, appeals from the U.S. District Court for the District of Minnesota.

USTR Makes Announcement Re Costa Rica, CAFTA, Communications and IPR

1/26. The Office of the U.S. Trade Representative (USTR) announced that "United States and Costa Rica today concluded negotiations to finalize Costa Rica's participation in the U.S.-Central America Free Trade Agreement (CAFTA)". See, USTR release [4 pages in PDF].

The USTR added that "Costa Rica made specific commitments to gradually open its telecommunications market in three key areas -- private network services, Internet services, and wireless services and committed to establishing a regulatory framework to help foster effective market access."

In addition, the USTR stated that "Costa Rica's full participation in CAFTA will streamline trade, promote investment, slash tariffs on goods, open trade in services, protect advanced intellectual property ..."

The draft CAFTA agreement has not been released. However, the USTR stated that it "will be made public before the end of January."

The USTR further stated that this agreement will provide "State-of-the-art protections and non-discriminatory treatment are provided for digital products such as U.S. software, music, text, and videos. Protections for U.S. patents, trademarks and trade secrets are strengthened."

People and Appointments

Barry Ohlson

1/26. Federal Communications Commission (FCC) Commissioner Jonathan Adelstein named Scott Bergmann to be his his Wireline Legal Advisor, effective March 1. He will replace Lisa Zaina. She was recently appointed CEO of the FCC's Universal Service Administrative Company (USAC). Adelstein also announced that Barry Ohlson, who is his Spectrum and International Legal Advisor, will also become his Senior Legal Advisor. Zaina had previously been Senior Legal Advisor. See, FCC release [PDF]. Bergmann has worked at the FCC since 1996, most recently as Deputy Chief of the Wireline Competition Bureau's (WCB) Competition Policy Division. Before that, he was an Interim Legal Advisor to Commissioner Adelstein. He has held various other positions in the WCB. Ohlson joined the FCC in 2001 as a Legal Advisor to Adelstein. Before that, he worked for Winstar Communications as Senior Director for Federal Regulatory Affairs. He has also worked for the law firms of McDermott Will & Emery and Keller & Heckman.

More News

1/26. The Librarian of Congress published a notice in the Federal Register announcing it has accepted in full the determination of the Copyright Arbitration Royalty Panel (CARP) and is announcing the final Phase I distribution of cable royalties for 1998 and 1999. See, Federal Register, January 26, 2004, Vol. 69, No. 16, at Pages 3606 - 3620.

Go to News from January 21-25, 2004.