News from March 11-15, 2004

Rep. Smith Urges Senate to Pass Intellectual Property Bills

3/15. Rep. Lamar Smith (R-TX), the Chairman of the House Judiciary Committee's Subcommittee on Courts the Internet and Intellectual Property spoke in the House regarding there intellectual property bills that have been passed by the House, but not by the Senate.

rightRep. Smith (at right) He stated that "three intellectual property bills have passed the House in the last 2 weeks. They were based on two principles essential to a democracy: the protection of intellectual property rights and the freedom to exchange goods and services in the marketplace."

"The Patent and Trademark Office Fee Act protects the rights of American inventors, from the lone individual working in their garage, to the small business person with a breakthrough idea, to the large high-tech company that applies for hundreds of patents. The Copyright Royalty and Distribution Reform Act benefits artists, songwriters, music publishers and Web casters. The Cooperative Research and Technology Enhancement Act allows researchers and inventors who work for different organizations to share information without losing the ability to file for a patent."

He concluded that "These three bills await action in the Senate where I hope they will become law. American jobs and profits are at stake." See, Congressional Record, March 15, 2004, at Page H1081.

On March 3, 2004, the House passed HR 1561, the "United States Patent and Trademark Fee Modernization Act of 2003", by a vote of 379-28. See, Roll Call No. 38. This bill contains increases in user fees that implement the U.S. Patent and Trademark Office's (USPTO) 21st Century Strategic Plan. It also provides for U.S. outsourcing of patent searches, and an end to the diversion of user fees to subsidize other government programs. See, story titled "House Passes USPTO Fee Bill", also published in TLJ Daily E-Mail Alert No. 849, March 4, 2004.

On October 20, 2003, Sen. Norm Coleman (R-MN) introduced the Senate version of the bill, S 1760, also titled the "United States Patent and Trademark Fee Modernization Act of 2003 " It was referred to the Senate Judiciary Committee. No action has been taken on the bill.

On March 10, the House passed HR 2391, the "Cooperative Research and Technology Enhancement (CREATE) Act", by a voice vote. This is a non-controversial bill to promote collaborative research. The bill would amend Section 103(c) of the Patent Act, which is codified at 35 U.S.C. § 103, to address the August 8, 1997 opinion of the U.S. Court of Appeals for the Federal Circuit in OddzOn Products, Inc. v. Just Toys, Inc., which ruled that derived prior art may serve as evidence of obviousness. See, story titled "House Passes CREATE Act" also published in TLJ Daily E-Mail Alert No. 854, March 11, 2004.

Sen. Orrin Hatch (R-UT), Sen. Patrick Leahy (D-VT), Sen. Herb Kohl (D-WI), and Sen. Russ Feingold (D-WI) introduced the Senate version of this bill, S 2192, on March 10.

On March 3, the House passed HR 1417, the "Copyright Royalty and Distribution Reform Act of 2003" by a vote of 406-0. See, Roll Call No. 37. This bill would replace copyright arbitration royalty panels (CARPs) with a Copyright Royalty Judge. See, story titled "House Passes Copyright Royalty and Distribution Act" in TLJ Daily E-Mail Alert No. 849, March 4, 2004.

Four Senators Urge AG Ashcroft to Appeal in Unbundling Case

3/15. Sen. Ernest Hollings (D-SC) and other Senators wrote a letter [PDF] to Attorney General John Ashcroft urging him to "appeal" the Appeals Court opinion [62 pages in PDF] in USTA v. FCC.

The letter was cosigned by Sen. Ted Stevens (R-AK), Sen. Conrad Burns (R-MT), and Sen. Daniel Inouye (D-HI), who, like Sen. Hollings, are senior members of the Senate Commerce Committee.

On March 2, 2004 the U.S. Court of Appeals (DCCir) issued its opinion [62 pages in PDF] in USTA v. FCC overturning key parts of the FCC's triennial review order (TRO). The opinion leaves largely untouched those portions of the TRO in which the FCC refrained from unbundling next generation broadband facilities. The opinion vacates those portions of the TRO in which the FCC delegated decision making authority to the state to make impairment findings. See, story titled "Appeals Court Overturns Key Provisions of FCC Triennial Review Order", also published in TLJ Daily E-Mail Alert No. 848, March 3, 2004.

The four Senators wrote that "The appeals court invalidated the FCC's rules implementing the statute's requirement allowing competitive local telephone companies to lease portions of the incumbent carriers' networks -- but at a fair price. The court found, wrongly, that the FCC could not ask the state public utility commissions to apply the FCC-mandated requirements. Congress plainly contemplated a role for the states in determining the extent of the incumbents' obligations to lease their networks. Section 251(d)(3) of the Act specifically provides that "in prescribing and enforcing regulations to implement the requirements of this section, the Commission shall not preclude the enforcement of any regulation, order, or policy of a State commission that establishes access and interconnection obligations of local exchange carriers..."

The Senators continued that "The decision failed to recognize the balance the Act sought to strike. The Bell companies were permitted to enter the long distance market if and only if they could show they made their networks available for competitors (including long distance companies) to enter the local telephone service market. Every Bell incumbent has now entered the long distance market while long distance and other competitors have leased the Bell networks to enter the local market. The result has been a wide array of service offerings at a much lower price for consumers. Competition has really worked."

District Court Sets June 7 Trial Date in U.S. v. Oracle

3/15. The U.S. District Court (NDCal) issued a Case Management Order that adopts the Case Management Statement and Proposed Order submitted by the parties in the antitrust case, U.S. v. Oracle.

This provides, among other things, that "Trial shall commence on June 7, 2004, or as soon thereafter as the Court calendar permits. Each side shall have at least 8 full trial days to submit its respective case." This also addresses initial disclosure, pre-trial discovery, witness lists, exhibit lists, deadlines and other pre-trial matters.

The Court also issued a Stipulated Protective Order pertaining to the protection of confidential information.

On February 26, 2004, the U.S. and seven states filed a complaint against the Oracle Corporation alleging that Oracle's proposed acquisition of PeopleSoft, Inc. would lessen competition substantially in interstate trade and commerce in violation of Section 7 of the Clayton Act, which is codified at 15 U.S.C. § 18. The plaintiffs seek an injunction of the proposed acquisition.

See, story titled "Antitrust Division Sues Oracle to Enjoin Its Proposed Acquisition of PeopleSoft" in TLJ Daily E-Mail Alert No. 846, March 1, 2004.

This case is U.S., et al. v. Oracle, U.S. District Court for the Northern District of California, D.C. No: C 04-00807 VRW, Judge Vaughn Walker presiding.

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3/15. The Office of the U.S. Trade Representative (USTR) published in its web site the USTR Trade Advisory Committee Reports on the U.S. Australia Free Trade Agreement (FTA). See especially, report [8 pages in PDF] of the Industry Functional Advisory Committee on Electronic Commerce (IFAC-4), report [22 pages in PDF] of the Industry Functional Advisory Committee on Intellectual Property Rights for Trade Policy Matters (IFAC-3), report [9 pages in PDF] by the Industry Sector Advisory Committee on Electronics and Instrumentation for Trade Policy Matters (ISAC 5), and the report [20 pages in PDF] of the Industry Sector Advisory Committee on Services for Trade Policy Matters (ISAC 13), which addresses telecommunications.

3/15. The Office of the U.S. Trade Representative (USTR) announced that a World Trade Organization (WTO) panel ruled that Mexico's current regime for international telecommunications violates Mexico's WTO obligations. For example, the panel found that Mexico breached its commitment to ensure that U.S. carriers can connect their international calls to Mexico's major supplier, Telmex, at cost-based rates. See, USTR release.

3/15. The World Intellectual Property Organization (WIPO) announced that it has written a paper titled "Minding Culture: Case Studies on Intellectual Property and Traditional Cultural Expressions´". The WIPO stated in a release that this paper is "planned to guide the work of WIPO on how the intellectual property system can respond to the needs and expectations of the custodians of traditional cultures and knowledge".

People and Appointments

James Comey
James Comey

3/14. The Department of Justice (DOJ) announced that Attorney General John Ashcroft was discharged from the George Washington University Hospital on March 14, 2004, following surgery to remove his gallbladder. The DOJ added that "Deputy Attorney General James Comey will continue to run the Department while Attorney General Ashcroft recuperates." (Emphasis and hyperlink added.) See, DOJ release.

Bush Addresses Trade and Protectionism

3/13. President Bush gave a radio address on March 13, 2004, and a speech in Cleveland, Ohio on March 10 in which he addressed trade issues. He advocated free trade, and argued that protectionism threatens jobs. However, he did not expressly mention outsourcing.

He stated in his weekly radio address that "Some politicians in Washington see this new challenge, and they want to respond in old, ineffective ways. They want to increase federal taxes -- yet punishing families and small businesses is not a job-creation strategy. They want to build up trade walls, and isolate America from the rest of the world -- but economic isolationism would threaten the millions of good American jobs that depend on exports. These tired, old policies of tax and spend, and economic isolationism, are a recipe for economic disaster. There's a better way to help our workers and help our economy."

Bush continued that "we must pursue a confident policy of trade. Millions of American jobs depend on our goods being sold overseas; and foreign-owned companies employ millions of Americans here at home. We owe those workers our best efforts to make sure other nations open up their markets, and keep them open. We want the entire world to buy American, because the best products in the world carry the label, ``Made in the USA.´´"

President Bush provided more detail on March 10 when he spoke at an event titled "Women's Entrepreneurship in the 21st Century Forum" in the city of Cleveland.

He stated that the "politicians in Washington" who want to "to increase federal taxes, to build a wall around this country ... don't explain how closing off markets, closing off markets abroad would help the millions of Americans who produce goods for export, or work for foreign companies right here in the United States."

"The old policy of economic isolationism is a recipe for economic disaster. America has moved beyond that tired, defeatist mind-set, and we're not going back. There's a better way, and that's what I want to talk about today. To expand the creation of new jobs, and to see our workers through our transition, government must meet basic responsibilities", said Bush.

Bush argued that "instead of building barriers to trade, we must break down those barriers so that good products, American products, are welcomed and sold on every continent. Look at it this way: America has got 5 percent of the world's population. That means 95 percent of potential customers are in other countries. We cannot expect to sell our goods and services, and create jobs, if America and our partners, trading partners, start raising barriers and closing off markets."

"The surest way to add more jobs is a confident policy, a confident economic policy that trades with the world", said Bush. "The economic isolationists have a pessimistic outlook; they don't show much faith in the American worker or the American entrepreneur. They don't think we can compete."

Bush also said that "politicians in Washington attack trade for political reasons", but he did not identify any of these politicians by name.

Bush argued that instead of adopting protectionist policies, the U.S. should pursue other policies to promote job growth. He cited tax cuts, tort reform and ending frivolous lawsuits against doctors and hospitals.

He said that "To create more jobs, government must meet a second basic responsibility. If we want to continue to out-perform the world, if we want to be able to compete, America must remain the best place in the world to do business. If we want to be competitive with other places, we've got to be a good place for people to invest capital. We've got to make sure that people who invest capital are not penalized by lousy government policy. Tax cuts were vital to creating the environment for growth and innovation, and there are more steps that need to be done."

"In order to make sure that we're able to create jobs here at home, and to prevent jobs from going overseas, this country must have tort reform. Frivolous lawsuits, or the threat of a frivolous lawsuit, create an environment that is not conducive to job creation and job expansion. There's a role at the federal level for tort reform. The trial lawyers are tough up there, though. Members of the Senate need to hear from you. The House has passed good tort legislation, but the Senate has got to hear from you. Tort reform will help make it easier to keep jobs here at home."

The House passed HR 1115, the "Class Action Fairness Act", by a vote of 253-170 on June 12, 2003. See, Roll Call No. 272. On October 22, 2003, the Senate rejected a motion to invoke cloture on S 1751, the "Class Action Fairness Act of 2003", by a vote of 59-39. See, Roll Call No. 403.

Finally, he said that "We need to do something about the high cost of health care, as well. I'm a strong proponent of association health plans to allow small business to pool risk so you can better afford health care plans for your employees. We've introduced a new concept called health savings accounts, which will make a big difference for small business owners and employees, as well. And the market has taken hold. We ought to -- listen, frivolous lawsuits are running up the cost of health care in America. Frivolous lawsuits against docs and hospitals are making it harder for you to be able to afford health care. We need medical liability reform at the federal level now."

House Passes Broadcast Decency Bill

3/12. The House amended and passed HR 3717, the "Broadcast Decency Enforcement Act of 2004", by a vote of 391-22, on March 11. See, Roll Call No. 55. This bill would increase the penalties for violations by television and radio broadcasters of the prohibitions against the transmission of obscene, indecent, and profane language.

On March 9, 2004, the Senate Commerce Committee amended and approved S 2056, which is also titled the "Broadcast Decency Enforcement Act of 2004". See, story titled "Senate Commerce Committee Marks Up Broadcast Decency Bill" in TLJ Daily E-Mail Alert No. 853, March 10, 2004.

Secretary of Commerce Donald Evans released a statement: "On behalf of the Administration, I commend the House of Representatives for its quick action on H.R. 3717 ..."

On March 12, the the Federal Communications Commission (FCC) released a Notice of Apparent Liability (NAL) [17 pages in PDF] that proposes to fine various subsidiaries of Clear Channel Communications, Inc. $247,500 for willfully and repeatedly broadcasting indecent material on the radio program titled "Elliot in the Morning" on March 13, 2003. $247,500 is the maximum fine under the current statute for nine violations. See also, FCC release [PDF].

FCC Commissioner Michael Copps dissented, writing that "I believe the Commission should have designated these cases for license revocation hearings."

Rep. Tauzin Introduces Bill to Limit Foreign Government Control of FCC Licenses

3/12. Rep. Billy Tauzin (R-LA) introduced HR 3969, the "Foreign Government Ownership Act of 2004", a bill to bar any foreign government from controlling more than 25% of any entity to owns a license issued by the Federal Communications Commission (FCC). The bill was referred to the House Commerce Committee.

The bill provides that "no license, permit, or operating authority under this Act may be granted to or held by a corporation, joint venture, partnership, other business organization, trust, or other entity after the date of enactment of the Foreign Government Ownership Act of 2004, if that corporation, joint venture, partnership, other business organization, trust, or other entity is directly or indirectly controlled by a foreign government or its representative".

The bill defines control as either "(1) more than 25 percent of the ownership, voting rights, capital stock, or other interest in that corporation or other entity is owned, held, or controlled, directly or indirectly, by a foreign government or its representatives; (2) a foreign government or its representatives has the authority to approve or disapprove the appointment or employment of any officer of the corporation, joint venture, partnership, other business organization, trust, or other entity; or (3) a foreign government or its representative has the authority to exercise control over such corporation, joint venture, partnership, other business organization, trust, or other entity in any other manner."

The ban would be absolute. The FCC would have no authority to waive this requirement.

The bill does not affect control by the U.S. government, states, or subdivisions thereof.

Nor does the bill affect control by foreign companies or persons that are not controlled by foreign governments. Of course, there is the matter of the Exon Florio provision. That is, Section 5021 of the Omnibus Trade and Competitiveness Act of 1988 amended Section 721 of the Defense Production Act of 1950 to give the President authority to suspend or prohibit any foreign acquisition, merger or takeover of a U.S. corporation that is determined to threaten the national security of the United States. As a practical matter, this authority is exercised by the Committee on Foreign Investments in the United States (CFIUS), an interagency entity chaired by the Secretary of the Treasury.

FTC Obtains TRO Against Computer Sales Scam

3/12. The U.S. District Court (CDCal) issued a Temporary Restraining Order [35 pages in PDF] in FTC v. Unicyber Technology.

The Federal Trade Commission (FTC) filed a complaint against Unicyber Technology, Inc. and others on March 9, 2004, alleging that it violated Section 5(a) of the FTC Act, which is codified at 15 U.S.C. § 45 (a), in connection with a fraudulent computer sales scheme.

The complaint alleges that the defendants offered complete computer systems for three payments of $199. However, after the first payment, consumers received only peripherals, such as keyboards. Some consumers then made no further payments, and received no further equipment. Others who made full payment received computer equipment that was salvaged, damaged, did not work, and/or could not run current software.

See also, FTC release. This case is Federal Trade Commission v. Unicyber Technology, Inc. et al., U.S. District Court for the Central District of California, Western Division, D.C. CV04-1569LGB (MANx).

People and Appointments

3/12. President Bush nominated William Pryor to be a Judge of the U.S. Court of Appeals for the 11th Circuit. Judge Pryor currently has a recess appointment. Senate Democrats are filibustering votes on his confirmation. See, White House release.

3/12. Vice President Cheney gave a speech in the state of Kentucky for Sen. Jim Bunning (R-KY) in which he stated that "It's also time for the United States Senate to get about the business of confirming President Bush's judicial nominees. The President has put forward talented, experienced men and women who represent the mainstream of American law and American values. One of these fine appointees was David Bunning, now a U.S. district judge here in Kentucky. Other nominees still await confirmation, yet Senate Democrats have taken to waging filibusters, denying up-or-down votes for months and even years. This is unfair to the judicial nominees and an abuse of the constitutional process. This small group of senators needs to stop playing politics with American justice. Every nominee deserves a prompt up-or-down vote on the floor of the Senate. And that is another good reason to send Jim Bunning back to the United States Senate."

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3/12. The Progress and Freedom Foundation (PFF) released a paper [25 pages in PDF] titled "Liability of P2P File-Sharing Systems For Copyright Infringement By Their Users". This paper, which was written by the PFF's William Adkinson, examines the extent to which peer to peer file sharing systems should be held liable for the infringing activity of their users, based on theories of secondary liability.

3/12. MCI WorldCom announced in a release that its has reached "a settlement with the state of Oklahoma in which criminal charges filed against the company last year will be dropped". Carol Ann Petren, MCI WorldCom Deputy General Counsel, states in this release that "In exchange for dropping the charges against the company, MCI agreed to add 1,600 jobs over the next 10 years at its Tulsa facility ..." Tulsa is in Oklahoma. Oklahoma charges MCI WorldCom by criminal complaint [PDF] on August 27, 2003. See, story titled "Oklahoma Files Criminal Charges Against MCI WorldCom" in TLJ Daily E-Mail Alert No. 728, August 28, 2003.

3/12. The Federal Communications Commission (FCC) released a Notice of Apparent Liability (NAL) [35 pages in PDF] that proposes to fine Qwest Communications $9 Million for willfully and repeatedly violating its statutory obligations under 47 U.S.C. § 252(a)(1) by failing to file 46 interconnection agreements with the Minnesota Public Utilities Commission and the Arizona Corporation Commission for approval under 47 U.S.C. § 252. FCC Chairman Michael Powell wrote in a statement [PDF] that this is "the largest proposed forfeiture in the Commission’s history". He added that "This action sends a clear message, along with the complementary state actions, that violations of the key pro-competitive provisions of the Act will not be tolerated."

Greenspan Opposes New Round of Protectionism

3/11. Alan Greenspan, the Chairman of the Federal Reserve Board, testified at a House Education and Workforce Committee hearing titled "The Changing Nature of the Economy: The Critical Roles of Education and Innovation in Creating Jobs & Opportunity in a Knowledge Economy". He stated that while outsourcing is creating "palpable unease", the U.S. should pursue policies of free trade and "vigorous engagement in the global economy".

He concluded that "We can erect walls to foreign trade and even discourage job-displacing innovation. The pace of competition would surely slow, and tensions might appear to ease. But only for a short while. Our standard of living would soon begin to stagnate and perhaps even decline as a consequence. Time and again through our history, we have discovered that attempting merely to preserve the comfortable features of the present, rather than reaching for new levels of prosperity, is a sure path to stagnation."

He also said that "a new round of protectionist steps is being proposed. These alleged cures would make matters worse rather than better. They would do little to create jobs; and if foreigners were to retaliate, we would surely lose jobs. Besides enhancing education, we need to further open markets here and abroad to allow our workers to compete effectively in the global marketplace."

Greenspan said that recently "concerns have arisen about the possibility that an increasing number of our better-paying white-collar jobs will be lost to outsourcing, especially to India and China. Many of these jobs are in the service sector, and they were previously perceived as secure and largely free from the international competition long faced in the manufacturing sector. There is a palpable unease that businesses and jobs are being drained from the United States, with potentially adverse long-run implications for employment and the standard of living of the average American. Job insecurity is understandably significant when nearly two million members of our workforce have been unemployed for more than six months."

But, he argued that "our economy is best served by full and vigorous engagement in the global economy."

He noted that "Over the long sweep of American generations and waves of economic change, we simply have not experienced a net drain of jobs to advancing technology or to other nations. Since the end of World War II, for example, the unemployment rate in the United States has averaged less than 6 percent with no apparent trend; and as recently as 2000, it dipped below 4 percent." He added that "real earnings of the average worker have continued to rise."

The discussed, with approval, the theory of Joseph Schumpeter know as creative destruction, or "the continuous scrapping of old technologies to make way for the new". Greenspan said that "Standards of living rise because the 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 migrate with the capital. This is the process by which wealth is created, incremental step by incremental step."

He continued that "The process of creative destruction has been accompanied by an ever-growing conceptualization of economic output. Ideas rather than materials or physical brawn have been by far the greatest contributors during the past half-century to our average annual increase of 3-1/4 percent in real gross domestic product."

He argued against protectionist policies, but in favor of education. He stated that "One area in which educational investments appear to have paid off is our community colleges."

The Committee also heard for a second panel of witnesses. See, prepared testimony of John Castellani (Business Roundtable), Robert Grady (Carlyle Group and National Venture Capital Association), and Jared Bernstein (Economic Policy Institute).

House CIIP Subcommittee Holds Hearing on Compulsory Licensing

3/11. The House Judiciary Committee's Subcommittee on Courts, the Internet, and Intellectual Property (CIIP) held a hearing titled "Section 115 of the Copyright Act: In Need of Update?". 17 U.S.C. § 115 pertains to compulsory licensing.

rightMarybeth Peters (at right), the Register of Copyrights, wrote in her prepared testimony [29 pages in PDF] that "the means to create and provide music to the public has changed radically in the last decade, necessitating changes in the law to protect the rights of copyright owners while at the same time balancing the needs of the users in a digital world."

Jonathan Potter, the Executive Director of the Digital Media Association, wrote in his prepared testimony that "Royalty-paying online services are precisely the type of new music market that Congress intends to promote; and the Section 115 compulsory mechanical license could and should be playing an important role in building online music services with broad catalogs and the ability to compete with online black markets. Unfortunately, Section 115 is not very useful to online services, because (i) the licensing process is unworkable for digital music services; and (ii) its ambiguous scope causes uncertainty, risk, and excessive double-dip royalty payments."

He argued that Section 115 is "dysfunctional" and that "It is time for Congress to provide for today’s online music environment the same rights it provided in 1909, 1976, and what this industry needs -- a compulsory mechanical license that relieves legal risk to well-intended royalty-paying services, that promotes new markets for music, and assures royalty payments to songwriters."

Carey Ramos, of the National Music Publishers Association (NMPA), wrote in his prepared testimony [10 pages in PDF] that Section 115 "is not in need of legislative change".

Cary Sherman, the President of the Recording Industry Association of America (RIAA), wrote in his prepared testimony that "We are working hard to lure customers back through a range of exciting new consumer product and service offerings", including multisession discs, computers and players that are preloaded with music that consumers can unlock on a per tune basis or as part of a subscription service, and downloads and physical products with digital rights management systems that allow users to make a limited number of personal use copies.

Sherman continued that "It is important that mechanical licenses be as available for these new offerings as they always have been for more traditional offerings. Toward that end, we have tried hard to work with publishers to keep them abreast of these offerings and work out any issues. However, disagreements concerning the application of the Section 115 license, and the inflexibility of the per-unit statutory royalty set for a 10 year period (in contrast to a percentage royalty) are impeding the introduction of these offerings in the U.S."

FTC Announces CAN-SPAM Act Rulemaking

3/11. The Federal Trade Commission (FTC) published a notice in the Federal Register requesting comments, and setting comment deadlines, regarding various regulations and reports required by the CAN-SPAM Act.

The Congress passed S 877, the "Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003", also known as the "CAN-SPAM Act of 2003", late last year. On December 16, 2003, President Bush signed the bill. It became Public Law No. 108-187.

Several provisions in the CAN-SPAM Act instruct the FTC to write regulations implementing the Act. Other provisions require the FTC to prepare reports for the Congress. This notice requests public comments to assist the FTC in writing these regulations, and preparing these reports.

See, full story.

FCC Announces Rulemaking on Wireless Provisions of CAN-SPAM Act

3/11. The Federal Communications Commission (FCC) announced, but did not release, a notice of proposed rulemaking (NPRM) regarding Section 14 of  "Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003", also known as the "CAN-SPAM Act". The FCC issued a short release [PDF] describing this NPRM.

The statute directs the FCC, in consultation with the Federal Trade Commission (FTC), to promulgate regulations within 270 days "to protect consumers from unwanted mobile service commercial messages".

The CAN-SPAM Act directs the FCC to write rules that "provide subscribers to commercial mobile services the ability to avoid receiving mobile service commercial messages unless the subscriber has provided express prior authorization to the sender", and "allow recipients of mobile service commercial messages to indicate electronically a desire not to receive future mobile service commercial messages from the sender".

The FCC's release also states that this NPRM requests public comments on "two issues related to the restrictions under the Telephone Consumer Protection Act (TCPA). For autodialed and artificial or prerecorded message calls to wireless telephone numbers, we seek comment on the possibility of instituting a "safe harbor" for telemarketers to allow them reasonable opportunities to comply with the rules in the era of local number portability. In addition, the Commission seeks comment on whether, as part of its safe harbor, telemarketers should be required to update their calling lists every 30 days using the national do-not-call registry, to be consistent with a possible rule change by the Federal Trade Commission (FTC)."

The CAN-SPAM Act is S 877 in the 108th Congress; it is now Public Law No. 108-187. The FCC NPRM is FCC 04-52 in CG Docket Nos. 04-53 and 02-278.

California Court Finds Jurisdiction Over Nevada Hotels Based on Interactive Websites

3/11. The California Court of Appeal (2/3) issued its opinion [14 pages in PDF] in Snowney v. Harrah's, a case regarding the exercise of personal jurisdiction over out of state hotels. The Court held that an out of state hotel that operates an interactive website that enables California residents to make hotel reservations online, operates a toll free phone reservation system, and advertises in California, has sufficient contacts with the state to subject it to the jurisdiction of the state's courts.

The plaintiff, Frank Snowney, is a resident of the state of California. The defendants either own and operate hotels in the state of Nevada, or are holding companies that own these hotels. Defendants do not have hotels or offices in California.

Snowney filed a complaint in the Superior Court for Los Angeles County (a state trial court) against Harrah’s Entertainment, Inc. and others alleging various causes of action under California law, including unfair competition law, breach of contract, unjust enrichment, and false advertising. Snowney also sought class action status.

The defendants moved to dismiss the complaint for lack of personal jurisdiction over the defendants. The Superior Court granted the motion. This appeal followed.

The Court of Appeal held that "the defendants who own and operate the Nevada hotels have sufficient contacts with California to justify the exercise of personal jurisdiction based on their advertising in California, interactive Internet site, tollfree telephone number for hotel reservations, and other activities purposefully directed at California residents. We conclude further that the defendants who do not own or operate the hotels have insufficient contacts with California to justify the exercise of personal jurisdiction."

The Court of Appeal analyzed each of the contacts of the defendant hotels with persons in California. The Appeals Court's analysis of internet contacts relied heavily on the California Supreme Court opinion in Pavlovich v. Superior Court.

On November 25, 2002, the Supreme Court of California issued its 4-3 opinion in Pavlovich v. Superior Court, reversing the Court of Appeal. The Supreme Court held that the California courts do not have personal jurisdiction over a nonresident individual who had published the DeCSS program his web site. This case is also reported at 29 Cal.4th 262.

See also, story titled "California Has No Personal Jurisdiction Over Non Resident DeCSS Poster" in TLJ Daily E-Mail Alert No. 556, November 27, 2002.

This reversed the August 7, 2001 opinion of the Court of Appeal of California (6th Appellate District). See, story titled "California Has Personal Jurisdiction over Non Resident DeCSS Poster" in TLJ Daily E-Mail Alert No. 244, August 8, 2001.

In the present case the Court of Appeal wrote that "A central Internet site provides information on the six hotels here at issue. The California Supreme Court in Pavlovich ... adopted a sliding scale analysis to determine whether Internet use can justify the exercise of personal jurisdiction. The determination turns on the degree of interactivity of the Internet site and the commercial nature and extent of the exchange of information. ... An interactive Internet site through which a nonresident defendant enters into contracts or conducts other business transactions with forum residents can be a means of purposefully directing activities at forum residents and, depending on the circumstances, may support the exercise of personal jurisdiction." (Citations omitted.)

The Court continued that "The Pavlovich court stated that the defendant’s Internet site was passive in that it only posted information and had no interactive features. The site did not target California residents. Finally, there was no evidence that a California resident had ever visited or downloaded information from the site. The court therefore concluded that the defendant’s use of the site did not justify the exercise of specific jurisdiction. ... Here, in contrast, the Internet site is interactive. California customers can and do make room reservations online. The site also provides driving directions to the hotels from several California cities. These features constitute an effort to solicit business from California residents." (Citations omitted.)

This, combined with a advertising directed at California residents, and a "toll-free telephone reservation system", led the Court of Appeal to conclude that "by soliciting and receiving the patronage of California residents through these activities and to this extent, the Hotel Defendants have purposefully directed their activities at California residents, have purposefully derived benefit from their contacts with California, and have established a substantial connection with this state."

This case is Frank Snowney, et al. v. Harrah's Entertainment, Inc., et al., California Court of Appeal, Second Appellate District, Division Three, App. Ct. No. B164118, an appeal from the Los Angeles County Superior Court, Sup. Ct. No. BC267575.

People and Appointments

3/11. The Senate confirmed Louis Guirola to be a Judge of the U.S. District Court for the Southern District of Mississippi.

3/11. The Senate confirmed Neil Wake to be a Judge of the U.S. District Court for the District of Arizona.

3/11. The Senate confirmed Mark Warshawsky to be an Assistant Secretary of the Treasury.

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3/11. The Copyright Office published a notice in the Federal Register announcing "interim regulations specifying notice and recordkeeping requirements for use of sound recordings under two statutory licenses under the Copyright Act." The CO further announced that "Electronic data format and delivery requirements for records of use as well as regulations governing prior records of use shall be announced in future Federal Register documents." The interim notice and recordkeeping regulations are effective April 12, 2004. The updated notices of intent to use the statutory licenses under 17 U.S.C. §§ 112 and 114 are due by July 1, 2004. See, Federal Register, March 11, 2004, Vol. 69, No. 48, at Page 11515-11531.

3/11. The Copyright Office published a notice in the Federal Register that announces, describes, and sets the comment deadline for, a rule making proceeding "to amend its regulations governing the content and service of certain notices on the copyright owner of a musical work. The notice is served or filed by a person who intends to use a musical work to make and distribute phonorecords, including by means of digital phonorecord deliveries, under a compulsory license." The deadline to submit comments is April 12, 2004. See, Federal Register, March 11, 2004, Vol. 69, No. 48, at Pages 11566-11577.

3/11. The Department of Agriculture's Rural Utilities Service (RUS) published a notice in the Federal Register regarding "the process by which Fiscal Year 2004 funding of its pilot grant program to finance the conversion of television services from analog to digital broadcasting for public television stations serving rural areas will be made available. For Fiscal Year 2004, $14 million in grants will be made available for the continued funding of the national competition announced on July 18, 2003, to enable public television stations that serve substantial rural populations to continue serving their coverage areas." The RUS further announced that "Successful grant applicants will be notified no later than March 31, 2004." See, Federal Register, March 11, 2004, Vol. 69, No. 48, at Page 11593.

3/11. The General Accounting Office (GAO) released a report [31 pages in PDF] titled "Information Technology: OMB and Department of Homeland Security Investment Reviews". The Department of Homeland Security was formed as a result of the Homeland Security Act of 2002. In July of 2002, the President's Office of Management and Budget (OMB) issued two memoranda directing federal agencies that were expected to be part of the new DHS to temporarily cease funding for new information (IT) infrastructure and business systems investments and submit information to the OMB on current or planned investments in these areas. The House Government Reform Committee requested that the Congress' GAO prepare a report that examines how the OMB implemented the July 2002 memoranda, identify what, if any, changes to agency IT investments resulted from the July memorandums and the Homeland Security IT Investment Review Group's evaluations, and ascertain whether the DHS has initiated its own investment management reviews and, if so, what the results of these reviews have been. The report states that the DHS "relied on an informal and undocumented process to fulfill its responsibilities" under the July 2002 memoranda, and that few component agency investments were submitted for approval. The report recommends that the DHS report savings resulting from its consolidation and integration of systems and develop a schedule for reviews of IT investments subject to departmental oversight.

3/11. Federal Communications Commission (FCC) Commissioner Michael Copps gave a speech [PDF] in Washington DC titled "An Always On Campaign for Consumers".

Go to News from March 6-10, 2004.