News from May 21-25, 2004

Powell and Adelstein Address FCC Spectrum Related Proceedings

5/25. Federal Communications Commission (FCC) Commissioner Jonathan Adelstein gave a speech [3 pages in PDF] at an event titled "Wireless Internet Service Provider Forum" held at the South Dakota School of Mines and Technology in Rapid City, South Dakota. He gave a quick overview of the main FCC proceedings pertaining to use of spectrum for wireless internet service. FCC Chairman Michael Powell gave a speech [4 pages in PDF] at the FCC's Wireless Broadband Forum on May 19 at which he reviewed various FCC spectrum related proceedings. See, full story.

Privacy Groups Comment on Proposed Rules Regarding Use of Medical Information in Financial System

5/25. The Electronic Privacy Information Center (EPIC), and other groups, filed a comment [22 pages in PDF] with the Federal Deposit Insurance Corporation (FDIC) and other financial regulatory agencies in their rulemaking proceeding to implement Section 411 of the the Fair and Accurate Credit Transactions Act of 2003 (FACT Act), which pertains to medical information.

The FACT Act was HR 2622. It was enacted by the Congress in 2003, and signed by the President on December 4, 2003. It became Public Law No. 108-159. See also, President Bush's signing speech and White House press office summary.

Section 411 of the Act pertains to "Protection of Medical Information in the Financial System". It provides that "A consumer reporting agency shall not furnish for employment purposes, or in connection with a credit or insurance transaction, a consumer report that contains medical information about a consumer, unless" certain conditions are met.

It also provides that "a creditor shall not obtain or use medical information pertaining to a consumer in connection with any determination of the consumer's eligibility, or continued eligibility, for credit", except as provided by regulation. The Act also restricts redisclosure and sharing of medical information.

The FDIC and other financial regulatory agencies published a notice in the Federal Register that describes, and sets a comment deadline for, the agencies' proposed rules implementing Section 411. See, Federal Register, April 28, 2004, Vol. 69, No. 82, at Pages 23379 - 23407.

The EPIC wrote in response that "The Agencies should also be aware that provisions (no matter how limited) that allow creditors to obtain and use medical information have the potential to create a new form of consumer reporting that focuses exclusively on health information. The justification of collection health information on all consumers would be that the information can be used in some instances, as the final regulation will demonstrate. Those with an incentive to collect health information might well be beyond the scope of existing regulation and may be able to use the information for other purposes. It would be an extremely unfortunate result if a provision intended to allow extremely narrow use of medical information ended up creating a new, massively invasive consumer reporting activity for that information. The Agencies should be aware of this possibility, and they should take steps wherever possible to prevent or discourage creditors from obtaining medical information from new or unregulated sources."

The deadline for comments is May 28, 2004. This is the FDIC's RIN 3064-AC8.

FCC Releases NPRM Regarding Unlicensed Use of TV Spectrum

5/25. The Federal Communications Commission (FCC) released its Notice of Proposed Rulemaking (NPRM) [38 pages in PDF] regarding use by unlicensed devices of broadcast television spectrum where that spectrum is not in use by broadcasters. The purpose of the proposed rules is to make more spectrum available, and make available spectrum that can penetrate buildings, for networking electronic devices within premises, and providing wireless broadband internet access.

This NPRM states that "To ensure that no harmful interference to authorized users of the spectrum will occur, we propose to define when a TV channel is “unused” and to require these unlicensed devices comply with significant restrictions and technical protections. Unlicensed devices would be required to incorporate “smart radio” features to identify the unused TV channels in the area where they are located. We intend to consider several alternative methods for identifying the unused TV channels, including approaches that would: 1) allow existing television and/or radio stations to transmit information on TV channel availability directly to an unlicensed device; 2) employ geo-location technologies such as the Global Positioning Satellite (GPS) system; or 3) employ spectrum sensing techniques that would determine if the signals of authorized TV stations are present in an area."

The FCC adopted, but did not release, this NPRM at its May 13 meeting. See, story titled "FCC Adopts NPRM Regarding Unlicensed Use of Broadcast TV Spectrum" in TLJ Daily E-Mail Alert No. 898, May 14, 2004.

The FCC announced a Notice of Inquiry [MS Word] (NOI) in its proceeding number 02-380 on December 11, 2002. See, story titled "FCC Announces Notice of Inquiry Re More Spectrum for Unlicensed Use" in TLJ Daily E-Mail Alert No. 566, December 12, 2002.

Comments will be due 75 days after publication of a notice in the Federal Register. Reply comments will be due 105 days after publication of this notice. This notice has not yet been published.

This proceeding is titled "In the Matter of Unlicensed Operation in the TV Broadcast Bands Additional Spectrum for Unlicensed Devices Below 900 MHz and in the 3 GHz Band". This NPRM is FCC 04-113 in ET Docket Nos. 04-186 and No. 02-380.

People and Appointments

5/25. The Department of Commerce (DOC) announced that Michelle O'Neill will be appointed Deputy Under Secretary of Commerce for Technology, "Effective next month". Ben Wu, who has been nominated for the position of Assistant Secretary of Commerce for Technology Policy, is currently Deputy Under Secretary of Commerce for Technology. O'Neill has worked for the DOC for 17 years. See, DOC release.

5/25. The Department of Commerce (DOC) announced that Daniel Caprio will be appointed Deputy Assistant Secretary for Technology Policy, "Effective next month". He will replace Chris Israel, who is now Deputy Chief of Staff for Secretary of Commerce Don Evans. Caprio has worked for Federal Trade Commission (FTC ) Commissioner Orson Swindle as Special Assistant, Chief of Staff, and principal technology policy advisor. See, DOC release.

More News

5/25. Secretary of Homeland Security Tom Ridge gave a speech in Washington DC to the Council for Excellence in Government in which he addressed, among other topics, interoperability of communications systems. He stated that "This Department is taking steps in the short term to fix the immediate communications problems that were dramatized at the Trade Center on 9/11. In the end, when we say ``interoperability´´ we are basically talking about a ``technology translator´´ -- the capability of first responders to communicate and understand each other regardless of technology, mode of communication, or frequency. Already, we have identified technical specifications for a baseline interoperable communications capability, so that first responders will have an interim way to talk to each other during a crisis."

Supreme Court Grants Certiorari in Internet Wine Sales Cases

5/24. The Supreme Court granted certiorari in three case pertaining to the relationship between the Constitution's dormant commerce clause, and the states' ability to regulate internet sales, and other direct sales, of alcoholic beverages under the 21st Amendment.

The Court wrote the following: "The petitions for writs of certiorari are granted limited to the following Question: ``Does a State's regulatory scheme that permits in-state wineries directly to ship alcohol to consumers but restricts the ability of out-of-state wineries to do so violate the dormant Commerce Clause in light of Sec. 2 of the 21st Amendment?´´ These cases are consolidated and a total of one hour is allotted for oral argument." See, Order List [14 pages in PDF] at pages 3-4.

Cases Under Review. The three cases are Swedenburg v. Kelly (No. 03-1274), Granholm v. Heald (No. 03-1116), and Michigan Beer & Wine Wholesalers v. Heald (No. 03-1120).

On February 12, 2004, the U.S. Court of Appeals (2ndCir) issued its opinion [28 pages in PDF] in Swedenburg v. Kelly. The District Court had held that a New York statute prohibiting out of state wineries from selling directly to New York residents, such as via the internet, violated the Commerce Clause of the Constitution. The Appeals Court reversed, holding that New York's statute is a permissible exercise of authority granted to states under the 21st Amendment, thus rejecting the Commerce Clause challenge.

See, stories titled "2nd Circuit Rules in Internet Wines Sales Case" in TLJ Daily E-Mail Alert No. 840, February 19, 2004; and "Court Holds New York's Ban on Internet Wine Sales Is Unconstitutional" in TLJ Daily E-Mail Alert No. 551, November 18, 2002.

The U.S. Court of Appeals (6thCir) issued its opinion in Heald v. Engler on August 28, 2003. The Court held that Michigan's alcohol sales statute violates the dormant commerce clause. (This case is also reported at 342 F.3d 517.)

These New York and Michigan cases are just two of a larger number of Appeals Court cases that have addressed internet wine sales.

Dormant Commerce Clause and the 21st Amendment. There is no dormant commerce clause in the Constitution. There is only a commerce clause. Article I, Section 8, of the Constitution provides that "The Congress shall have Power ... to regulate Commerce with foreign Nations, and among the several States ..."

The dormant commerce clause is the judicial concept that the Constitution, by delegating certain authority to the Congress to regulate commerce, thereby bars the states from legislating on certain matters that affect interstate commerce, even in the absence of Congressional legislation.

It is applied to block states from regulating in a way that materially burdens or discriminates against interstate commerce. See, Gibbons v. Ogden, 22 U.S. 1 (1824), and Cooley v. Board of Wardens, 53 U.S. 299 (1851). More recent treatments of the concept include Healy v. The Beer Institute, 491 U.S. 324 (1989), and CTS Corp. v. Dynamics Corp. of America, 481 U.S. 69 (1987).

Section 2 of the 21st Amendment provides, in part, that "The transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited."

It prohibits, as a matter of federal Constitutional law, violation of a state's laws regarding the transportation or importation of alcoholic beverages into that state . It thus confers upon the states some authority to regulate interstate commerce in alcoholic beverages.

Potential Impact of the Supreme Court's Opinion. There exists an unresolved collection of legal issues regarding the extent to which the dormant commerce clause, and other constitutional provisions, such as the privileges and immunities clauses, limit the states' ability to regulate electronic commence. The present case does not put all of these issues before the Court.

First, state regulation of electronic commerce in wine is a special case of electronic commerce. The 21st Amendment gives the states certain regulatory authority over alcohol, but not other goods and services. The Court could write an opinion that consists of a narrow application of the 21st Amendment, in a manner that would affect regulation of internet alcohol sales, but not, for example, internet book sales.

Also, the Supreme Court, in granting certiorari, expressly limited the issue on review to whether the New York and Michigan statutes "do so violate the dormant Commerce Clause in light of Sec. 2 of the 21st Amendment?" This excludes consideration of challenges based on clauses other than the dormant Commerce Clause.

Nevertheless, the Court's opinion in this case could be written in a manner that does impact state attempts to regulate e-commerce beyond regulation of wine sales.

Steve Simpson, of the Institute for Justice, which represents small wineries and wine consumers in the New York case, stated in a release that "The case could impact Internet commerce far beyond wine. The 2nd Circuit ruled that New York could require out-of-state businesses to set up a separate business with the state in order to sell goods there. If that ruling stands, it could severely inhibit the vast potential of the Internet to expand consumer freedom and choice."

More Supreme Court News

5/24. The Supreme Court denied certiorari in Turn-Key-Tech v. National Film Laboratory, et al, a patent case. This is Sup. Ct. No. 03-1138  See, Order List [14 pages in PDF] at page 4.

5/24. The Supreme Court announced that it "will take a recess from Monday, May 24, 2004, until Tuesday, June 1, 2004." See, Order List [14 pages in PDF] at page 14.

DOJ States That It Is Incapable of Copying its Own Data

5/24. Thomas McIntyre of the Department of Justice's (DOJ) Criminal Division wrote a letter [PDF] to the Center for Public Integrity (CIP) denying its request for electronic records made pursuant to the Freedom of Information Act. The CPI had requested a copy in electronic format of the Criminal Division's Foreign Agent Registration Unit's database of foreign lobbyists' registrations made pursuant to the Foreign Agent Registration Act.

The DOJ denied the request on the grounds that "implementing such a request risks a crash that cannot be fixed and could result in a major loss of data". The DOJ added that "the current application was not designed for mass export" and that the DOJ has "experienced substantial problems with the current system". See also, CIP release.

The DOJ and its FBI, along with the Internal Revenue Service, have long suffered from serious information technology deficiencies, such as lost and stolen computers, security vulnerabilities, and poor IT management.

See for example, story titled "FBI Loses 317 Laptops" in TLJ Daily E-Mail Alert No. 493, August 16, 2002; story titled "DOJ OIG Report Criticizes FBI Management of IT Resources" in TLJ Daily E-Mail Alert No. 572, December 20, 2002; story titled "Sen. Grassley Condemns IRS for 2,300 Missing Computers" in TLJ Daily E-Mail Alert No. 342, January 9, 2002; story titled "IRS Loses More Computers, Jeopardizes Taxpayer Info" in TLJ Daily E-Mail Alert No. 493, August 16, 2002; story titled "GAO Report Finds That Computer Weaknesses At IRS Put Taxpayer Data At Risk" in TLJ Daily E-Mail Alert No. 673, June 4, 2003; and story titled "IRS Data Vulnerable" in TLJ Daily E-Mail Alert No. 145, March 16, 2001.

At an oversight hearing before the Senate Judiciary Committee on May 20, 2004, Sen. Patrick Leahy (D-VT), stated to FBI Director Robert Mueller that "the FBI has not solved even its most basic problem: Its information technology systems are hopelessly out of date. In this regard, the FBI is not much better off today than it was before September 11, 2001, when it was unable to do a computer search of its own investigative files to make critical links and connections. By all accounts, the Trilogy solution has been a disaster." He added that "I suspect most small county sheriff's departments have better computer systems." See, story titled "FBI Director Mueller Appears Before Senate Judiciary Committee" in TLJ Daily E-Mail Alert No. 904, May 24, 2004.

Snow Addresses Entrepreneurship and Innovation

5/24. Secretary of the Treasury John Snow gave a speech in New York City in which he addressed the nature of innovation and entrepreneurship. He stated that "The basic question we face is how to increase the number of entrepreneurs, to spread the spirit of entrepreneurship; and how do we do it?"

He stated that the "entrepreneur's innovations take many forms from new products and services to new technologies to new forms of organization to opening up new markets". But, he noted, economists "have no formal theory of entrepreneurship", and "have been unable to model entrepreneurship".

Nevertheless, he said, "We do believe, however, that we can foster an environment that enables entrepreneurship to flourish." He suggested that part of this environment is cultural. That is, "Entrepreneurs are essentially individualistic and self-reliant. They are people who trust their own judgment, so a culture that stresses individuality, independent judgment, self-reliance and self-confidence is certainly likely to be favorable to entrepreneurship. So is a culture that celebrates creativity and the joy of creativity."

In the end, he did not explain in this speech how government policy can foster an environment of entrepreneurship and innovation.

People and Appointments

5/24. Verizon announced that Tom Tauke has been named EVP -- Public Affairs and Communications. He will "oversee all internal and external communications, reputation management, philanthropy and issues management for Verizon, and will serve as a member of the company's Corporate Leadership Council". He had already been responsible for policy advocacy at the local, state, federal and international levels. Tauke represented an Iowa Congressional district from 1979 through 1991. He was a member of the House Commerce Committee and its Telecommunications Subcommittee.

More News

5/24. The General Accounting Office (GAO) released a report [31 pages in PDF] titled "Information Technology: Homeland Security Should Better Balance Need for System Integration Strategy with Spending for New and Enhanced Systems".

5/24. The General Accounting Office (GAO) released a report [pages in PDF] titled "Telecommunications: Issues Related to Federal Funding for Public Television by the Corporation for Public Broadcasting".

5/24. The Recording Industry Association of America (RIAA) announced that it filed lawsuits against "493 additional illegal file sharers" in various U.S. District Courts, alleging copyright infringement. Cary Sherman, President of the RIAA, stated that "Our continuing objective is to send a message of deterrence, protect the rights of property owners, and foster environment where the legitimate marketplace, both online and at retail, can flourish". See, RIAA release.

1st Circuit Construes Attorneys Fees Shifting Section of Copyright Act

5/21. The U.S. Court of Appeals (1stCir) issued its opinion in Invessys, Inc. v. McGraw-Hill, a case involving the attorneys fees shifting provisions of the Copyright Act, codified at 17 U.S.C. § 505.

McGraw-Hill negotiated a contract with Invessys, Inc., and its sole shareholder and employee, Peter Hodges, for the sale of certain software and a software related business. Initially, the parties negotiated for the sale of a company named Micropal Accounting Portfolio Services, Inc. (MAPSI). MAPSI's primary business was the licensing and support of a program named MaPS. Hodges then asked that earlier DOS versions of the program be included in the transaction. McGraw-Hill agreed. He also asked that an unrelated program named AIM be included. The contract included the AIM program. After execution of the contract, Hodges asked for transfer of the AIM program. McGraw-Hill refused, asserting the its inclusion in the contract was a scrivener's error.

Hodges and Invessys filed a complaint in U.S. District Court (DMass) against McGraw-Hill alleging breach of contract, fraud, conversion, and other state law claims. The complaint also included a copyright infringement claim. The jury found that the inclusion of the AIM program was a scrivener's error. Thus, McGraw-Hill prevailed. The Court then awarded McGraw-Hill $200,000 in attorney's fees and $28,583.78 in costs, pursuant to Section 505.

Had Hodges plead only state law claims, McGraw-Hill would not have been able to recover its attorneys fees and costs.

Section 505 of the Copyright Act provides, in full, that "In any civil action under this title, the court in its discretion may allow the recovery of full costs by or against any party other than the United States or an officer thereof. Except as otherwise provided by this title, the court may also award a reasonable attorney's fee to the prevailing party as part of the costs."

The Appeals Court affirmed the District Court. Notwithstanding the circumstance that the case and trial primarily revolved around the state law contract issue of scrivener's error, and notwithstanding the circumstance that copyright infringement was only one of many counts in the complaint, the Appeals Court held that the plaintiffs could rely upon Section 505 to recover all of their attorneys fees and costs.

This case is Invessys, Inc. and Peter Hodges v. McGraw-Hill Companies, Ltd., et al., U.S. Court of Appeals for the 1st Circuit, App. Ct. No. 03-1954, an appeal from the U.S. District Court for District of Massachusetts, Judge George O'Toole presiding.

DC Circuit Rules in Patent Malpractice Case

5/21. The U.S. Court of Appeals (DCCir) issued its opinion [14 pages PDF] in Kaempe v. Myers, a case involving claims of conversion of a patent, and malpractice in processing a patent application. The Appeals Court affirmed the District Court's judgment for the attorney.

George Myers provided legal services to Staffan Kaempe in connection with processing a patent application. Subsequently, Kaempe filed a complaint in U.S. District Court (DC) against Myers and his current and former law firms, alleging conversion of the patent by assignment, and legal malpractice. The District Court ruled for Myers on both counts. The Court of Appeals affirmed.

While the District Court had held that an action for conversion of patent rights is not recognized under District of Columbia law, the Appeals Court held that it is unclear whether DC law recognizes such a claim. It held that even if the claim is recognized, the facts of the case are that there was no assignment, and hence, no conversion. The Appeals Court also affirmed the District Court's summary judgment for Myers on the malpractice claim because Kaempe failed to provide expert testimony in support of his malpractice action.

This case is Staffan Kaempe v. George Myers, et al., U.S. Court of Appeals for the District of Columbia, App. Ct. No. 03-7037, an appeal from the U.S. District Court for the District of Columbia, D.C. No. 01cv02636.

More News

5/21. The Federal Trade Commission (FTC) extended to July 9, 2004 the deadline to submit comments on the uses, efficiencies, and implications for consumers associated with radio frequency identification (RFID) technology. The FTC will hold a workshop on June 21. The FTC previously announced that the deadline for submitting comments would be May 21, 2004. See, original notice in the Federal Register, April 15, 2004, Vol. 69, No. 73, at Pages 20523 - 20525, and notice [PDF] to be published in the Federal Register extending the deadline to July 9. See also, FTC web page for this workshop.

Go to News from May 16-20, 2004.