News from March 16-20, 2005

RIM to Pay $450 Million to Settle NTP's Blackberry Related Patent Claims

3/18. Research in Motion (RIM), the maker of Blackberrys, announced that it has resolved all current litigation with NTP, Inc. RIM stated in a release that "NTP will grant RIM and its customers an unfettered right to continue its BlackBerry-related wireless business without further interference from NTP or its patents". RIM added that "RIM will pay to NTP US$450 million in final and full settlement of all claims".

NTP holds U.S. patents which pertain to technology for integrating existing e-mail systems with radio frequency (RF) wireless communication networks, to enable mobile users to receive e-mail over a wireless network.

NTP filed a complaint in U.S. District Court (EDVa) against RIM alleging infringement of its patents. The District Court entered judgment of infringement for NTP, awarded damages to NTP, and enjoined RIM from further infringement. RIM appealed.

On December 14, 2004, the U.S. Court of Appeals (FedCir) issued an opinion [60 pages in PDF] in which it affirmed in part, vacated in part, and remanded. The Court of Appeals held that the District Court erred in construing the claim term "originating processor", but did not err in construing any of the other claim terms on appeal. The Court of Appeals also affirmed the District Court's finding of infringement.

This case is NTP, Inc. v. Research in Motion, Ltd., App. Ct. No. 03-1615 , an appeal from the U.S. District Court for the Eastern District of Virginia, Judge James Spencer presiding, D.C. No. 3:01CV767. Judge Linn wrote the opinion of the Court of Appeals, in which Judges Schall and Michel joined.

See also, stories titled "Federal Circuit Rules in Blackberry Patent Infringement Case" in TLJ Daily E-Mail Alert No. 1,038, December 15, 2004, and "USPTO Orders Reexamination of NTP Patents" in TLJ Daily E-Mail Alert No. 584, January 16, 2003.

FCC Again Delays Deadline for Integrating Navigation and Security Functionalities in Cable Set Top Boxes

3/18. The Federal Communications Commission (FCC) released its Second Report and Order [37 pages in PDF] in its proceeding titled "In the Matter of: Implementation of Section 304 of the Telecommunications Act of 1996 Commercial Availability of Navigation Devices". This order again extends the deadline for cable companies to provide separable security for cable set-top boxes.

The deadline was July 1, 2006. This order extends the deadline to July 1, 2007. The cable industry is pleased with this further delay. The consumer electronics industry, which would like to compete with cable companies in the sale of set top boxes, opposes this extension.

The FCC adopted and released this item on March 18. This item is FCC 05-76 in CS Docket No. 97-80. See also, FCC release [PDF] summarizing this order.

Section 304 of the Telecommunications Act of 1996, which is codified at 47 U.S.C. § 549, addresses "Competitive availability of navigation devices". It provides, in part, that "The Commission shall, in consultation with appropriate industry standard-setting organizations, adopt regulations to assure the commercial availability, to consumers of multichannel video programming and other services offered over multichannel video programming systems, of converter boxes, interactive communications equipment, and other equipment used by consumers to access multichannel video programming and other services offered over multichannel video programming systems, from manufacturers, retailers, and other vendors not affiliated with any multichannel video programming distributor."

It further provides that the FCC "shall not prescribe regulations ... which would jeopardize security of multichannel video programming and other services offered over multichannel video programming systems, or impede the legal rights of a provider of such services to prevent theft of service".

The order states that "the development of set-top boxes and other devices utilizing downloadable security is likely to facilitate a competitive navigation device market, aid in the interoperability of a variety of digital devices, and thereby further the DTV transition. We also recognize that software-oriented conditional access solutions currently under development may allow common reliance by cable operators and consumer electronics manufacturers on an identical security function without the potentially costly physical separation of the conditional access element."

Hence, the order states that the FCC "will, therefore, afford cable operators a limited extension of the integration ban to determine whether it is possible to develop and deploy a downloadable security function that will permit them to comply with our rules without incurring the costs associated with the physical separation approach. Accordingly, we hereby extend the deadline for phase-out of integrated set-top boxes until July 1, 2007 and require the cable industry to report to us no later than December 1, 2005 regarding the feasibility of a downloadable security solution. In addition, NCTA and CEA shall file joint status reports and hold joint status meetings with the Commission on or before August 1, 2005 and every 60 days thereafter on progress in bidirectional talks and a software-based conditional access agreement."

While the order provides for another delay, it does also state that the FCC "will not eliminate the requirement that cable operators separate security and non-security functions in the devices they provide on a leased or sale basis".

Jonathan AdelsteinFCC Commissioner Jonathan Adelstein wrote in a separate statement [PDF] that "Given past delays, and even more importantly, the lack of any real alternative to leasing a set-top box for cable subscribers who want access to the latest digital technologies, I was very hesitant to support any further adjustment to the integration ban, absent a compelling reason to do so. While a close call, I believe today's decision provides a justification for a modest extension. We make a strong case for the continued existence of the ban, but decide to postpone it, for one year only, to give the players involved a chance to determine whether a downloadable security solution is feasible, and if so, when it could be implemented."

The National Cable & Telecommunications Association's (NCTA) Brian Dietz stated in a release that "We are pleased that the Commission has deferred implementation of the ban on cable-operator supplied integrated set-top boxes. In the additional time provided by this Order, the cable industry will investigate the feasibility of a downloadable security solution as requested by the Commission, plus we will demonstrate beyond a doubt that cable operators are making CableCARDs work with Digital Cable Ready devices. More than 31,000 CableCARDs have been provided by cable operators to our customers and we expect that number will grow significantly as more Digital Cable Ready equipment is purchased in the future."

Dietz added that "The cable industry looks forward to a continued partnership with the consumer electronics industry to develop equipment that allows consumers to enjoy digital and High-Definition TV without the need for a set-top box."

Gary Shapiro, CEO of the Consumer Electronics Association (CEA), stated in a release that "We are disappointed by the FCC's decision to allow cable operators to maintain their monopoly on cable set-top boxes for an additional twelve months. While at first glance, one year may not seem like a long time, the extension provides cable operators with additional time to further entrench their monopoly."

He added that "The real victims of this decision are cable consumers who will be unable to reap the benefits of a competitive market, including consumer choice, innovation and competitive pricing. Once again, Americans are tied to the limited choices, premium pricing and questionable customer service that have become a hallmark of consumer complaints about their cable providers."

4th Circuit Rules in Dormant Commerce Clause Case

3/18. The U.S. Court of Appeals (4thCir) issued its opinion [18 pages in PDF] in Yamaha v. Jim's Motorcycle, a case involving the dormant commerce clause. This case does not involve technology. It is a dispute between a motorcycle manufacturer and a motorcycle dealer. However, this opinion is also favorable to e-commerce companies that face discriminatory state statutes.

Yamaha brought a constitutional challenge to the state of Virginia's motorcycle dealer franchise law, which allows any motorcycle dealer in the state to protest the establishment of a new dealership for the same brand anywhere else in the state. The District Court rejected Yamaha's dormant commerce clause challenge. The Court of Appeals reversed. It held that the state statute unduly burdens interstate commerce, and therefore violates the dormant Commerce Clause.

The dormant commerce clause is often invoked by entities engaged in electronic commerce, such as internet wine sales, to challenge protectionist state statutes designed to discriminate against internet based competitors. The Court of Appeals' holding may assist e-commerce entities in future challenges to state statutes.

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).

This case is Yamaha Motor Corporation, U.S.A. v. Jim's Motorcycle, Inc., et al., U.S. Court of Appeals for the 4th Circuit, App. Ct. No. 03-2070, an appeal from the U.S. District Court for the Eastern District of Virginia, D.C. No. CA-01-471. Judge Michael wrote the opinion of the Court of Appeals, in which Judges Luttig and Baldock, of the 10th Circuit, joined.

EPIC Writes Majoras Regarding Regulation of Data Aggregators

3/18. Marc Rotenberg, Executive Director of the Electronic Privacy Information Center, and five others, wrote a letter [37 pages in PDF] to Federal Trade Commission (FTC) Chairman Deborah Majoras regarding regulation of companies that aggregate and sell information on individuals.

Majoras testified before the House Commerce Committee's Subcommittee on Commerce, Trade and Consumer Protection's hearing titled "Protecting Consumer's Data: Policy Issues Raised by Choice Point". See, story titled "House Subcommittee Holds Hearing on Data Aggregators" in TLJ Daily E-Mail Alert No. 1,096, March 16, 2005.

Rotenberg wrote that "Your apparent alignment with the businesses that are now the target of Congressional investigation is deeply distressing."

Rotenberg asserted that FTC "may itself be responsible for growing problem of identity theft and the failure to establish adequate regulations of data brokers such as Choicepoint. In the late 1990s, Choicepoint and others formed a weak self-regulatory system, known as the Individual Reference Services Group (IRSG) Principles, that the FTC approved. That system allowed companies such as Choicepoint to sell Social Security Numbers and other information to whomever they deemed ``qualified.´´ In retrospect, we now know that the category of ``qualified´´ was so broad as to include criminals."

He asserted that "Your testimony also reflected that the FTC views the Choicepoint matter primarily as a security problem, rather than as a privacy problem. Even if Choicepoint's sale of personal information were done securely, that would not solve the problem. Choicepoint and other data brokers act as consumer reporting agencies but sell personal information to law enforcement and a variety of other businesses outside the protections of the" Fair Credit Reporting Act (FCRA).

The letter itself is four pages. The signatories also attached copies of recent testimony by some of the signatories. See also, story titled "Senate Banking Committee Holds Hearing on Data Security" in TLJ Daily E-Mail Alert No. 1,093, March 11, 2005.

USPTO Releases Top Ten List of Universities Receiving Patents

3/18. The U.S. Patent and Trademark Office (USPTO) released its list of the universities receiving the most patents in 2004. For the 11th consecutive year, the University of California system, which has numerous components, leads.

Rank Patents Recipient
1 424 Univ. of California
2 135 Cal Tech
3 132 MIT
4 101 Univ. of Texas
5 94 Johns Hopkins
6 75 Stanford
7 67 Univ. of Michigan
8 64 Univ. of Wisconsin
9 58 Univ. of Illinois
10 52 Columbia

Jon Dudas, the head of the USPTO, state in a release that "Academic institutions are generators of discovery and innovation, and their patented inventions benefit all Americans through new jobs and new products that improve our lives daily."

People and Appointments

3/18. Dave Thomas was named VP of the Software Division of the Software & Information Industry Association (SIIA). See, SIIA release [PDF].

More News

3/18. The Federal Communications Commission (FCC) released its Second Report and Order, Declaratory Ruling, and Second Further Notice of Proposed Rulemaking [57 pages in PDF] that extends truth in billing requirements to consumers' wireless phone bills. The FCC adopted this item at its March 10, 2005 meeting. This item is FCC 05-55 in CC Docket No. 98-170 and CG Docket No. 04-208. Initial comments will be due 30 days after publication of a notice in the Federal Register. Reply comments will be due 60 days after publication. See also, story titled "FCC Extends Truth in Billing Requirements to CMRS Carriers" in TLJ Daily E-Mail Alert No. 1,094, March 14, 2005.

Bush Picks Rep. Portman to be USTR

3/17. President Bush nominated Rep. Bob Portman (R-OH) to be the U.S. Trade Representative (USTR). If confirmed by the Senate, he will replace Robert Zoellick, who is now Deputy Secretary of State. Peter Allgeier is the acting USTR.

Bush and Portman spoke at a White House event to announce the nomination. Bush said that "trade creates jobs, raises living standards, and lowers prices for families here at home. Rob also understands that as the world trades more freely, it becomes more free and prosperity abounds." See, transcript.

Bush also said that "We need to continue to open markets abroad by pursuing bilateral free trade agreements with partners around the world. We need to finish our work to establish a free trade area of the Americas, which will become the largest free trade zone in the world. We need to complete the Doha round negotiations within the World Trade Organization to reduce global barriers to trade. We must continue to vigorously enforce the trade laws on the books so that American businesses and workers are competing on a level playing field."

Portman stated that "open markets and better trade relations are key components to a more peaceful, a more stable and a more prosperous world. Through expanded trade, the roots of democracy and freedom are deepened. And here at home, trade policy opens markets to create jobs, a higher standard of living and greater economic growth."

Portman has been a U.S. Representative for twelve years. He is also a member of the House Ways and Means Committee, which has trade related jurisdiction, and a member of the House Republican leadership. Before that he worked for the elder President Bush, in the Office of Legislative Affairs, and as Associate Counsel. Before that he worked for the law firm of Graydon Head & Ritchey in Cincinnati, and for the law firm of Patton Boggs in Washington DC.

IRS Commissioner Addresses Electronic Filing of Tax Returns

3/17. Mark Everson, Commissioner of the Internal Revenue Service (IRS), gave a speech at the National Press Club in Washington DC on March 15. He discussed electronic filings of tax returns, the IRS web site, and computer systems at the IRS. On March 17 the IRS released data on electronic filings.

Mark EversonEverson (at right) stated that "Electronic filing continues to grow. Last year Americans filed 62 million electronic returns. This year we expect that over half of all individual returns will be e-filed. That's correct. Those who file on paper are now in the minority. We take every opportunity we can to trumpet the benefits of electronic filing. E-filing is fast, convenient and gets your refund to you in half the time of paper returns."

The IRS issued a release on March 17 with more data. It states that "Out of 61 million returns filed as of March 11, almost 70 percent of them were e-filed -- up from 65 percent the previous year. While this percentage will decline as April 15 approaches, the IRS expects for the first time to have more than half of all individual tax returns filed electronically."

"Out of tax returns e-filed so far, the biggest increase is among those who prepare their own returns on a home computer -- 10.6 million returns, up more than 14 percent over results from the same period last year."

The release also states that "The jump in computer use coincides with another strong year from the Free File program. The IRS and a consortium of tax software manufacturers offer free services through Free File, which is available at More than 3.33 million returns came in through Free File through March 9, which is a 44 percent increase from 2.32 million returns for the same period last year."

Everson also said the "In terms of modernizing our big computer systems at the IRS, we've finally turned the corner. Since March 2004, two important systems have started operating. First, we have a new financial system to help better manage the agency. And secondly, and more importantly, for the first in 40 years, the IRS is processing tax returns on a new computer system. We started with 1040EZ returns. This is a big step forward in our effort to modernize our antiquated computer systems."

He also discussed the IRS web site. He said that "Use of our website,, is also up sharply. During the filing season, it is one of the busiest websites in the world. We average more than one million visits a day. Just to give you a frame of reference: One major search engine reported that in a recent week we were surpassed only by Paris Hilton, Clay Aiken, Pamela Anderson, Britney Spears, and a poker game. During the past year, we have also rolled out important new on-line services to tax professionals to help them better serve their clients."

Capitol Hill Markups

3/17. The House Science Committee (HSC) amended and approved HR 28, the "High-Performance Computing Revitalization Act of 2005". The Committee rejected, on a vote of 17-19, an amendment offered by Rep. Brad Sherman (D-CA) that would have added the requirement that the National Science Foundation (NSF) support research into the implications of computers that would be capable of mimicking human abilities to learn, reason, and make decisions. Rep. Sherwood Boehlert (R-NY), the Chairman of the Committee, and a cosponsor of the bill, stated that "Now I might be willing to continue to support this amendment ... if I thought that it dealt with a crucial and pressing problem. But it doesn't. All the experts tell us we are nowhere near creating the dystopia that Mr. Sherman fears." See, HSC release.

People and Appointments

3/17. The Senate confirmed John Schieffer to be Ambassador to Japan. See, Congressional Record, March 17, 2005, at page S3092.

3/17. The Senate confirmed Christopher Hill to be an Assistant Secretary of State for East Asian and Pacific Affairs. See, Congressional Record, March 17, 2005, at page S3092.

More News

3/17. The Federal Communications Commission released a Second Order on Reconsideration and Further Notice of Proposed Rulemaking [31 pages in PDF] in its proceeding regarding the creation of low power FM (LPFM) radio service. The order imposes a six month freeze on application grants of FM translator new station construction permits. The FNPRM asks numerous questions regarding technical rules, transfer of licenses, and ownership restrictions. The FCC adopted this item on March 16, and released it on March 17, 2005. This item is FCC 05-75 in MM Docket No. 99-25. Initial comments will be due 30 days after publication of a notice in the Federal Register. Reply comments will be due 45 days after publication. See also, FCC release summarizing this item, statement by Commissioner Michael Copps in support of this item, and statement by Commissioner Jonathan Adelstein in support.

Bush Names Kevin Martin Chairman of FCC

3/16. President Bush named Kevin Martin Chairman of the Federal Communications Commission (FCC). See, White House release. There remains to be filled a Republican vacancy on the FCC.

Martin has been an FCC Commissioner for almost four years. Bush announced his intent to nominate Martin, along with Kathleen Abernathy and Michael Copps, back on April 6, 2001. See, story titled "FCC Appointments" in TLJ Daily E-Mail Alert No. 161, April 9, 2001. The Senate confirmed him for a five-year term expiring June 30, 2006. His home state's former Sen. John Edwards (D-NC) testified in support of him at his Senate Commerce Committee confirmation hearing. He took the oath of office on July 3, 2001.

Martin's wife, Catherine Martin, works for Vice President Dick Cheney. She previously worked for former Texas Attorney General John Cornyn, who is now Sen. John Cornyn (R-TX).

Martin previously worked as a Legal Advisor to former FCC Commissioner Harold Furchtgott-Roth. He authored many of Furchtgott-Roth's dissenting opinions, speeches and statements for Congressional committees on common carrier matters. Before that, he worked at Wiley Rein & Fielding, a Washington DC based law firm with Republican ties that specializes in communications law. Also, in the 2000 election cycle, Martin was Deputy General Counsel for Bush for President. He then was briefly Special Assistant to the President for Economic Policy.

Kevin MartinMartin (at right) wrote in a statement [PDF] that "I am deeply honored to have been designated as the next Chairman of the Federal Communications Commission, and I thank President Bush for this distinct privilege. I look forward to working with the Administration, Congress, my colleagues, and the FCC’s talented staff to ensure that American consumers continue to enjoy the benefits of the best communications system in the world. I thank Chairman Powell for his excellent stewardship of this agency, and I look forward to continuing his efforts in bringing the communications industry into the 21st Century."

Outgoing Chairman Michael Powell wrote in a statement [PDF] that "He will soon take a front seat at the technology revolution. His wide knowledge of telecommunication policy issues and insight into the rapidly changing nature of communications technology will serve the agency well. Ultimately, everything the FCC does must serve the public interest and benefit consumers, and I am confident he will be vigilant in pursuing these goals. I pledge my complete cooperation to ensure a smooth transition, and wish him all the best for every success."

Commissioner Kathleen Abernathy wrote in a statement [PDF] that Martin "has been a strong voice for broadband deployment and for rationalizing the rules that apply to broadband services. He has also focused on ensuring that new technologies and services are delivered to rural America. There are many significant challenges ahead as technology continues to change the way we live and work. I look forward to working with Commissioner Martin in his new capacity as Chairman and I am confident he will effectively steer the agency into the new broadband future."

Powell and Abernathy differed sharply with Martin on one significant matter, the provisions regarding switching and state authority to make impairment findings, in the FCC's triennial review order (TRO), which the FCC announced on February 20, 2003.

Martin, along with Democrats Copps and Adelstein, formed a majority on this issue. Powell was livid. Former House Commerce Committee Chairman Billy Tauzin (R-LA) called Martin a "Republican renegade". President Bush said nothing in public.

See, stories titled "FCC Announces UNE Report and Order", "FCC Order Offers Broadband Regulatory Relief", "FCC Announces Decision on Switching", "Commentary: Republicans Split On FCC UNE Order", and "Congressional Reaction To FCC UNE Order" in TLJ Daily E-Mail Alert No. 609, February 21, 2003.

The TRO was challenged in court, and the U.S. Court of Appeals for the District of Columbia issued its opinion [PDF] in USTA v. FCC on March 2, 2004 overturning Martin's position. See, stories titled "Appeals Court Overturns Key Provisions of FCC Triennial Review Order" and "Reaction to the Appeals Court Opinion in USTA v. FCC" in TLJ Daily E-Mail Alert No. 848, March 3, 2004.

Commissioner Michael Copps wrote in a statement [PDF] that "I congratulate my colleague and friend, Kevin Martin, on his designation by President Bush as Chairman of the Federal Communications Commission. I have enjoyed working with Commissioner Martin over the past three and a half years and look forward to working together with him on the important unfinished agenda of the FCC."

Commissioner Jonathan Adelstein wrote in a statement [PDF] that "I am very pleased for Kevin and for the Commission. Commissioner Martin has proven himself a dedicated public servant, a thoughtful policymaker, and an energetic colleague during our time together on the Commission. He has the experience and the skills to make an outstanding Chairman, and I look forward to working with him as we address the many challenging issues before us."

Sen. Ted Stevens (R-AK), the Chairman of the Senate Commerce Committee, stated in a release that "I look forward to working with Kevin in his new role as FCC Chairman. Kevin has a strong legal background in telecommunications law and has demonstrated a keen understanding of the issues before the FCC. He has traveled throughout Alaska and understands the role of communications in rural America. The Alaska Telephone Association endorsed Kevin because of his sensitivity to rural issues. We have worked in the past with Kevin to address the challenges that rural areas face in the ever-evolving world of the telecommunications and look forward to continuing our work in these and other areas. Kevin’s promotion will now create a vacancy on the Commission and it is my continued hope and recommendation that Earl Comstock be named to fill the now vacant seat."

Sen. Daniel Inouye (D-AK), stated in the same release that "The President's decision to appoint Commissioner Martin to be the next Chairman of the FCC comes at an important time for consumers and for the communications and media industries. We look forward to working with Chairman Martin as he endeavors to build consensus and adopt policies that will spur competition and innovation, and will bring the benefits of the Internet age to all Americans."

Cellular Telecommunications and Internet Association (CTIA) P/CEO Steve Largent stated in a release that Martin "is uniquely qualified to assume the chairmanship of the FCC. He brings to the office a wealth of knowledge on telecommunications matters, in addition to a keen understanding of how the efficient deployment of technology can spur economic growth." Largent added that Martin "has demonstrated a strong belief in forward thinking regulatory policies that empower consumers and provide them lower prices and innovative wireless services. He recognizes the importance of avoiding a regulatory structure that chooses technology winners and losers and appreciates the unique benefits and services the wireless industry is delivering to consumers."

Kyle McSlarrow, P/CEO of the National Cable & Telecommunications Association (NCTA), stated in a release that "We look forward to continuing to work closely with Chairman Martin to maintain a deregulatory environment for competitive telecommunications services."

Walter McCormick, P/CEO of the United States Telecom Association (USTA) stated in a release that Martin "understands how dramatically global communications have changed and how crucial it is that we update U.S. policies to keep pace with modern advances in order to encourage market-based competition among companies investing in a wide array of technologies and to safeguard vital social objectives. With Congress prepared to update the nation’s communications laws, this is a critical time for the telecom industry. We look forward to working closely with Chairman Martin to help craft a modern, constructive policy framework that renews America’s global information leadership, advances the competitiveness of U.S. businesses and speeds new choices and innovations to consumers."

BellSouth's Herschel Abbott stated in a release that Martin "has shown both a willingness and ability to work in a collegial fashion with his fellow commissioners and an understanding of the complex issues before the FCC. His focus on enabling the rollout of broadband for consumers demonstrates a 21st Century view of the communications marketplace. His skill and energy make him an outstanding choice to take over the chairmanship at this time when so many critical issues are before the commission."

Verizon's Tom Tauke stated in a release that Martin "has an excellent grasp of the issues, knows how to move the FCC's decision-making processes, and can hit the ground running as the new chairman. He has a record of supporting the administration's broadband policy, and that is good news for consumers and the communications sector."

Randolph May of the Progress and Freedom Foundation (PFF) stated in a release that "it will be important for Martin to demonstrate an appreciation of the way technological developments and new competitive marketplace realities undermine the rationale for continued economic regulation of the telecom industry".

May added that "This appreciation should manifest itself in a willingness to assume a leadership role in explaining to Congress, the president, and the American public why we need an updated Communications Act and why the FCC itself needs to be substantially transformed."

Kyle Dixon, a Senior Fellow at the PFF, and a former assistant to Powell, stated that "To succeed as Chair ... Martin must withstand inevitable criticism in complex battles where some party must lose, and explain why investment and innovation are good for consumers. If Martin can win support and air cover from the White House and his colleagues, he will be well on his way."

Sen. Stevens Addresses Telecom and Internet Issues

3/16. Sen. Ted Stevens (R-AK), the Chairman of the Senate Commerce Committee, gave a speech in Washington DC at a breakfast event hosted by The Hill.

He discussed the organization of the Senate Commerce Committee, appointments to the Federal Communications Commission (FCC), legalizing closed FCC meetings, the SBC AT&T merger, regulation of broadcast and cable indecency, transition to digital television, spectrum auctions, universal service, and rewriting the Communications Act.

Sen. Stevens discussed his close working relationship with Sen. Daniel Inouye (D-HI), the ranking Democrat on the Committee. He said that "we're going to try to see if we can change the Commerce Committee to the concept of a partnership of a broad-based, consensus-seeking group to try and solve some of the problems we have." He also stated that "Dan and I have kept communications at the full Committee".

Sen. Stevens also said that he wants to see his former assistant, Earl Comstock, appointed to the FCC. President Bush has already elevated Kevin Martin to the Chairmanship. This leaves open a Republican vacancy on the FCC.

Sen. Stevens said that "It's no secret to anybody that I have recommended and Senator Inouye has joined me in recommending Earl Comstock to take one of the seats on that Commission. He was my assistant when we were working to try and revamp the basic law of 1934 in the Congress before the final version on '96. I think he knows more about how the changes that were made and what the intents were than anyone because the key provisions of that bill, in my opinion still, were those that pertain to rural America and I do hope that he is one of the Commissioners that we are able to deal with."

Sen. Stevens also touched on telecom mergers. He said that "We've had one listening session with AT&T and SBC, just to explain what was going on in the merger, not to have us react, in other words, just to answer questions about the merger and that’s gone fairly well. We're going to hold off our decision on whether or not to hold a hearing on that until after the recess." The House and Senate begin a two week recess on March 21.

He also discussed at length indecency in broadcasting, and other multi-channel programming. Much of his speech, and responses to questions, dealt with this topic.

Sen. Stevens also discussed government planning of the transition to digital television (DTV) . He first said that "The House is probably going to move first. I commend them, by the way. They're really going at these subjects very well, very hard. They don't have a changed Committee. We have a learning curve going on now and I think we’ll catch up with them."

He then stated that "We've asked the broadcasters for their input on how we might advance the objective of completing the digital transition by the time the House seeks, which is 2006 or as soon as they possibly could. And, we do not want to have over-the-air broadcaster prematurely cut off and we want to make certain that we’re dealing with a public that has access to the digital sets. I am a little disturbed that the manufacturers of televisions are still selling analog sets, you know, at discounts and what not."

He added that "I've asked Mitch Rose, another person who used to be my chief of staff, he's at ABC now, to see if he can help get those discussions off the dime and get some input from the broadcasters on what we can do and bring about that transition earlier. Now, quickly some of the other issues are the problems of whether we should go into the possibility of buying the boxes. I hope we don’t have to do that. I’d rather see manufacturers find someway to step into this."

Sen. Stevens also discussed spectrum auctions. "The spectrum auction reauthorization has to go forward", said Sen. Stevens. "We believe that we will reauthorize spectrum auctions and we have a series of recommendations coming at us now on ways to make that more complicated in terms of whether it should be leasing the spectrum or having the spectrum subject to strings. We're going to take a long look at that."

He also said that "Federal agencies ... are exploring ways to lease or sublease spectrum to the private sector, which they do not need now, but might need in the future, that would free up a tremendous amount of spectrum very quickly. There are other ideas out there and if you have any I’ll be glad to consider them".

Finally, Sen. Stevens discussed Congressional efforts to rewrite portions of the Communications Act. He discussed his Committee's process. It is proceeding the closed meetings with interested parties that he identifies as "listening sessions", rather than open public hearings.

He said that "I think this process can work better if we're allowed the leeway of trying to learn what the problem is and then work with one another to find out what the solutions are and finally come to consensus on how to do it. And, that's what we're going to try to do with the '96 Act."

He was vague on how the law might be amended. "I can't tell you we want to replace it, or we want to amend it, or what we want to do with it really. There may be others that have a viewpoint, but Dan and I have no fixed, firm view of what has to be done. We just know there’s new technology coming and that the ’96 Act has already sort of become outmoded in the nine years since its passed. The '34 Act lived through to '96 and survived barely in the last few days. We don't know how long it's going to be before the '96 Act really hampers the expansion and modernization and development of new technology".

He also ambitiously stated that "I think that we'll have a bill ready to go out to the floor sometime by the end of June or July. I expect to be able to go to conference with them sometime this fall. It depends on how our people respond to these listening sessions, but we expect a bill this year."

He did address a few specific issues, including universal service, and the scope of regulated communications. He said that "I believe it's communication if you take an input, a message someone wants to send and it comes out somewhere else and it's delivered -- now that's communication. We had a Communications Act, I thought. Many people think they can get away from that by having a different way they approach putting these things into symbols and sending them through the air. I don't. I think we're looking for a Communications Act and that Act will cover all forms of communications and try to level the playing field for those who are involved in it."

He also said that "I don’t think that one should escape for instance Universal Service and say that's not communication. Or like, the calling card did, just put a little snippet on it and if you hear a little sound saying you can buy these cards at Walmart, it’s not a card that is dealing with communication, that was an information card they said. That’s a lot of baloney."

He also noted the important of universal service to his state, Alaska. "Our schools in rural America operate because of universal service. We have tele-medicine and tele-education."

Chairman Barton Suggests Ending E-Rate Program

3/16. The House Commerce Committee's Subcommittee on Subcommittee on Oversight and Investigations held a hearing titled "Problems with the E-rate Program: GAO Review of FCC Management and Oversight". Rep. Joe Barton (R-TX), the Chairman of the full Committee, appeared late in the hearing and questioned whether the program should be discontinued, whether it should be limited to low income schools, and whether its administration should be be transferred away from the Federal Communications Commission (FCC) to another government agency.

Rep. Barton added that the Committee will likely address this subject in the "Telecommunications Restructuring Act of 2005", "later this summer". Although, he conceded, "I don't know where the votes are." See, full story.

4th Circuit Reverses in Pinney v. Nokia

3/16. The U.S. Court of Appeals (4thCir) issued its divided opinion [39 pages in PDF] in Pinney v. Nokia, class action litigation regarding radio frequency (RF) radiation of wireless telephones. This opinion deals with the procedural battle over whether these cases should be heard in federal court, which is Nokia's choice, or in various state courts, which is the choice of the class action lawyers, and whether the claims are preempted by the federal Communications Act.

The District Court previously held that the plaintiffs' claims in four actions arise under federal federal law, and hence, that the U.S. District Court has subject matter jurisdiction. The District Court further held that the claims in all five of these cases are preempted by federal law, and hence, must dismissed. The Court of Appeals reversed.

This opinion is a major setback for companies that sell RF devices. It also minimizes the effect of the Federal Communications Commission (FCC) rules in this area. If this opinion stands, equipment makers could be held liable by state courts, under state law, for selling equipment that satisfies the FCC's radiation standards.

Background. Class action lawyers filed five complaints in the courts of five states against Nokia and other companies that make and sell wireless telephones. They alleged that their wireless telephones emit an unsafe level of RF radiation, and that in knowing this, negligently and fraudulently endangered the consuming public by marketing wireless telephones without headsets. J. Douglas Pinney is the lead plaintiff in one of these five actions.

The class action lawyers asserted only state law claims, in actions brought in state courts. More specifically, the class action lawyers alleged that Nokia is strictly liable for its failure to warn about the adverse health risks associated with wireless telephones, that Nokia is liable for violating various state consumer protection statutes, that Nokia breached an implied warranty of merchantability by selling and distributing unreasonably dangerous wireless telephones, that Nokia is liable for negligence, that Nokia engaged in a civil conspiracy to market unsafe wireless telephones by improper and wrongful means, and that Nokia engaged in fraud by misinforming and misleading the public as to the safety of wireless telephones.

However, the Federal Communications Commission (FCC), pursuant to the Communications Act, has written rules on RF emissions by wireless phones. See also, the FCC's Office of Engineering and Technology's (OET) web page titled Radio Frequency Safety.

Nokia removed all of these actions to federal courts, pursuant to 28 U.S.C. § 1447, which governs procedure for removal of actions. Nokia asserted that the claims raise a federal claim, and hence, that the federal courts have subject matter jurisdiction. (The Constitution provides that "The judicial power shall extend to all Cases, in Law and Equity, arising under this Constitution, the Laws of the United States, ..." and "between Citizens of different States".)

The Judicial Panel on Multidistrict Litigation (JPML) then transferred the actions to the U.S. District Court for the District of Maryland for consolidated pretrial proceedings.

The class action lawyers moved to remand four of these actions back to state courts. In the fifth action there is diversity jurisdiction. (That is, it is "between Citizens of different States".) The District Court denied the request. It also held that the claims in all five cases are preempted by the Communications Act of 1934, and dismissed them.

See, District Court's June 21, 2002 Memorandum [39 pages in PDF] regarding federal jurisdiction.

Court of Appeals Opinion. The Court of Appeals reversed. It remanded to the District Court with instructions that it remand the four cases to the various state courts in which they were originally brought (Georgia, Maryland, New York, and Pennsylvania).

In the fifth action (in Louisiana), the Court of Appeals found that there is federal jurisdiction based upon diversity of citizenship of the parties. Hence, the Court of Appeals reversed the District Court's preemption based dismissal, and remanded that case back to the U.S. District Court for further proceedings in the District Court.

The Appeals Court wrote that "In determining whether a plaintiff's claim arises under federal law, we apply the well-pleaded complaint rule", which provides that the court should consider only the complaint of the plaintiff, and not defenses raised by the defendant. Moreover, the Appeals Court wrote that "it is undisputed that state law creates the claims asserted by the Pinney plaintiffs".

Also, the Appeals Court concluded that these cases do not raise any "substantial question of federal law".

The Appeals Court also addressed the District Court's holding. "The district court, however, determined that these cases depend on the resolution of a substantial federal question because the claims ``put ... directly into dispute´´ the validity and sufficiency of the federal RF radiation standards for wireless telephones."

It continued, "The ultimate objective of these complaints, according to the district court, ``is to attack the lack of a headset requirement under the federal RF safety rules.´´ ... Although the court acknowledged that the complaints contain no allegations attacking the federal RF radiation standards, it believed that it could ultimately resolve the case only by passing judgment on the validity of the federal standards. The court therefore determined that removal was justified under the substantial federal question doctrine."

The Court of Appeals concluded that "The district court erred by not recognizing that its inquiry was limited by the well-pleaded complaint rule. It should have considered only whether a disputed question of federal law is an essential element of one of the well-pleaded state claims."

Analysis. This opinion is a victory for the class action lawyers who purport to present people who have been injured by cell phone use. Conversely, it is a defeat for the companies that make and sell wireless phones. Moreover, it could adversely affect the wireless industry.

This opinion also minimizes the authority of the FCC to set safety standards for radio frequency devices.

This opinion overturns no rules. Nor does it limit FCC authority to enforce its rules against companies that make or sell RF equipment. Rather, this opinion allows persons to sue, under state law, and in state courts, for conduct that meets FCC standards.

For example, the Court of Appeals also wrote that "even if Nokia's wireless telephones comply with the federal RF radiation standards, the Pinney plaintiffs could still establish the defective design element of the their strict liability claim. Conversely, if Nokia’s wireless telephones do not comply with the federal RF radiation standards, the Pinney plaintiffs would not automatically establish the defective design element."

Companies that make or sell RF devices might be subjected to 51 different sets of rules or standards.

Nokia and the others might yet seek en banc review, or certiorari. (All counsel contacted by TLJ either declined to discuss this case, or did not return phone calls.) It is also possible that the FCC might participate as amicus curiae in further proceedings.

Judge Michael wrote the opinion of the Court of Appeals. Judge Michael Luttig, who has long been considered to be a potential Supreme Court nominee in any Republican administration, joined. Judge Jackson Kiser wrote a dissent.

Ken Starr, lead counsel for the companies that make and sell wireless phones before the Court of Appeals, stated in a release that "Congress has given the FCC broad authority to regulate radio frequency emissions from wireless phones and the FCC has accordingly set standards for wireless phones through a uniform, nationwide scheme. Thus, these cases belong in federal court. The Fourth Circuit's split-decision that these cases should not be heard in federal court and are not preempted by federal law is unfortunate. We are considering appealing to the full Court of Appeals, and, if necessary will consider seeking review by the Supreme Court. The jurisdictional issues in this case are important, not just to the mobile telephone industry but to the general enforcement of federal law, and should attract interest from the Supreme Court. But whether these cases are heard in state or federal court, we are confident that the courts will find, as the scientific community has found, that wireless phones cause no adverse health effects."

Dissent. Judge Kiser wrote that the FCC, pursuant to statutory authority, has promulgated rules regarding permissible RF emissions by wireless telephones. He wrote that the class action lawyers "will have to prove the unreasonableness of the RF radiation emitted by FCC-compliant wireless telephones. The plaintiffs will thus have to establish that the FCC standards are insufficient. It is well-settled that a suit to invalidate a federal regulation arises under federal law."

He added that "We should not dismiss this case as lacking federal question jurisdiction simply because the plaintiffs have filed claims cloaked in state law language. Instead, we should use common sense and recognize that plaintiffs' claims directly implicate a federal regulatory scheme and threaten to undermine that same scheme. I would affirm the district court's finding of federal question jurisdiction."

This case is J. Douglas Pinney, et al. v. Nokia, Incorporated, et al., and consolidated cases, U.S. Court of Appeals for the 4th Circuit, App. Ct. No. 03-1433, an appeal from the U.S. District Court for the District of Maryland, D.C. Nos. CA-01-1421-CCB, CA-01-1456-CCB, CA-01-3259-CCB, CA-01-3260-CCB, CA-01-3261-CCB, and CA-01-3899-CCB), Judge Catherine Blake presiding.

People and Appointments

3/16. Lee Richards was appointed by U.S. District Court Judge Leo Glasser to act as Independent Examiner for Computer Associates International, Inc. (CA). This appointment is made pursuant to the Final Judgment in the Securities and Exchange Commission's (SEC) civil action against CA, and the Deferred Prosecution Agreement (DPA) that Computer Associates entered into with the United States Attorney for the Eastern District of New Yorkon Sept. 22, 2004. Richards is a partner in the New York, New York law firm of Richards Spears Kibbe & Orbe. See, SEC release.

More News

3/16. The House Judiciary Committee approved, without amendment, S 256, the "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005". The Committee considered, but rejected, numerous amendments. The Senate approved S 256 on March 10, 2005. The House Judiciary Committee stated in a release that this bill "now moves to the House floor, where it will be considered in early April. If, as expected, no amendments are made, S. 256 will then be sent to President Bush for his signature."

3/16. The House Commerce Committee's Subcommittee on Telecommunications and the Internet held a hearing titled "How Internet Protocol-Enabled Services are Changing the Face of Communications: A Look at the Voice Marketplace". See, prepared testimony [10 pages in PDF] of Paul Erickson (Chairman of SunRocket), prepared testimony [12 pages in PDF] of Carl Grivner (CEO of XO Communications), prepared testimony [16 pages in PDF] of John Melcher (Executive Director Greater Harris County, in the Houston, Texas, area), prepared testimony [5 pages in PDF] of Karen Puckett (P/COO of CenturyTel), prepared testimony [5 pages in PDF] of Thomas Rutledge (COO of Cablevision, testified on behalf of the National Cable Telecommunications Association), and prepared testimony [8 pages in PDF] of Mark Shlanta (CEO of South Dakota Network Communications, testifying on behalf of the National Telecommunications Cooperative Association).

3/16. The Progressive Policy Institute (PPI) released a report [16 pages in PDF] titled "Internet Telephone Service: A New Era of Competition in Telecommunications". See also, summary of report. The report was written by Robert Atkinson, Director of the PPI's Technology & New Economy Project.

Go to News from March 11-15, 2005.