TLJ News from June 1-5, 2005

FCC Releases VOIP E911 Order

6/3. The Federal Communications Commission (FCC) released the text [90 pages in PDF] of its First Report and Order and Notice of Proposed Rulemaking in its proceeding regarding the regulation of internet protocol (IP) enabled services.

The FCC adopted, but did not release, this order and NPRM at its meeting of May 19, 2005. The order portion of this item extends 911/E911 regulation to interconnected voice over internet protocol (VOIP) service providers. The order states that it requires compliance within 120 days of the effective date.

This item begins with the statement, "we require providers of interconnected VoIP service to provide E911 services to all of their customers as a standard feature of the service, rather than as an optional enhancement. We further require them to provide E911 from wherever the customer is using the service, whether at home or away from home." (See, Paragraph 1.)

This item states that "We make no findings today regarding whether a VoIP service that is interconnected with the PSTN should be classified as a telecommunications service or an information service under the Act." (See, Paragraph 24.) However, this order begins a piecemeal application of telecommunications regulations to internet protocol services.

Then, having applied one category of common carrier regulation (911) to interconnected VOIP service providers in its order, the NPRM portion of this item asks about applying other types of common carrier regulation to these service providers. The NPRM asks what disability access requirements should be imposed upon interconnected VOIP service providers. (See, Paragraph 63.) The NPRM also asks about what privacy requirements should be applied to interconnected VOIP service providers. (See, Paragraph 62.)

See, full story.

Pate Addresses IPR and Antitrust

6/3. Hewitt Pate, Assistant Attorney General in charge of the Department of Justice's Antitrust Division, gave a speech titled "Competition and Intellectual Property in the U.S.: Licensing Freedom and the Limits of Antitrust" at an EU event in Florence, Italy. He focused primarily on application of antitrust principles to patents.

Hewitt PatePate (at right) said at the outset that "the recent trend has been one of increasing convergence in U.S. and European approaches to IP licensing questions". He concluded that "we have every reason to expect more of the same".

He also said that "for competition law purposes, intellectual property should be treated in essentially the same way as other forms of property", and "our policy is animated by the recognition that IP licensing is generally procompetitive".

He compared and contrasted the antitrust and IPR regimes. He said that antitrust "does not attempt to create an affirmative incentive for procompetitive conduct, by promising any specific reward or legal recognition for competitors who play by the rules. It focuses on specific anticompetitive actions". In contrast, IPR laws "provide a complex system of affirmative rewards for an important type of procompetitive behavior -- innovation." He added that "The hope is that such innovations will lead to increased competition and increased consumer welfare in the long term."

Refusals to License. He then discussed unilateral refusals to license patents. He said that "A unilateral, unconditional refusal to license a valid patent cannot, by itself, result in antitrust liability under U.S. law." But, he added that "the owner does not have the right to impose conditions on licensees that would effectively extend an intellectual property right beyond the limits of the Patent Act".

He also said the the Supreme Court's opinion in the Trinko case reinforces the principle regarding unilateral refusals. Quoting from the Trinko opinion, he said that "The Court showed great skepticism about expanding liability for the refusal to deal because such liability ``may lessen the incentive for the monopolist, the rival, or both to invest in . . . economically beneficial facilities创 and ``also requires antitrust courts to act as central planners ... a role for which they are ill-suited.创"

The Supreme Court issued its opinion [22 pages in PDF] in Verizon v. Trinko on January 13, 2004. See also, story titled "Supreme Court Holds That There is No Sherman Act Claim in Verizon v. Trinko" in TLJ Daily E-Mail Alert No. 825, January 14, 2004.

He offered this rationale. "When analyzing the effects of a unilateral refusal to deal, one cannot merely consider the effect on a rival that is refused a license; one must also consider the alternative world in which the IP owner would have had less of an incentive to innovate because he could not be assured of the right to refuse to license. Would that IP owner have chosen to innovate less? If so, would competition or consumer welfare have been better off with the present state of affairs, including the right to refuse? In the short term, it will always be more efficient to disregard the IP right and allow duplication. The IP system rests on the idea of long-term innovation incentives, so we must think about the long-term effects of a rule imposing liability in this context."

He then discussed how the US and EU approaches compare. He said, "Does this mean that the policy on unilateral refusals conflicts with EU law as stated in IMS Health? At this time, that it is difficult to tell. The European Court of Justice decision, issued a year ago, began by stating that a refusal to license a copyright "cannot in itself" constitute an abuse of a dominant position. That seems to match the U.S. view on unilateral refusals to license. But the court added that liability might occur if: (1) the refusal prevents the emergence of a new product for which consumer demand exists; (2) the refusal is not justified by any objective considerations; and (3) the refusal excludes competition in a "secondary market." It is not clear how these three factors will be interpreted, or whether the same reasoning would apply to other contexts such as a refusal to license a patent."

Pate has spoken in the past about differences between the EU and US on application of antitrust to IPR, particularly in the context of Microsoft. See, Pate speech of June 7, 2004 and story titled "Pate Addresses US EU Differences on Antitrust, Microsoft, and IPR" in TLJ Daily E-Mail Alert No. 913, June 8, 2004. See also, Pate statement of March 24, 2004, and story titled "US Antitrust Chief Says EU's Microsoft Decision Could Harm Innovation and Consumers" in TLJ Daily E-Mail Alert No. 863, March 25, 2004.

Pate had this to say about the Microsoft proceeding. "While the Justice Department required Microsoft to make certain IP available to its competitors as part of the agreed remedy for antitrust violations, the European Commission imposed liability for the failure to make IP available. It will be up to the Court of First Instance to determine whether this was permissible under EU law."

Royalties and Standard Setting. Pate also discussed patent royalties and the standard setting process. He said that the Antitrust Division hears complaints that "one or more patent holders can ``hold up创 licensees by waiting until participants are locked into the standard, then charging an allegedly ``excessive创 royalty for patents that cover the standard."

He also noted that the Federal Trade Commission (FTC) "has brought antitrust enforcement actions related to this issue in two recent cases, Rambus and Unocal. Both cases are ongoing."

However, he said that at the Antitrust Division, bringing a complaint "about ``excessive创 royalties, without more, is a losing strategy. Antitrust enforcers are not in the business of price control. We protect a competitive process, not a particular result, and particularly not a specific price. In fact, if a monopoly is lawfully obtained, whether derived from IP rights or otherwise, we do not even object to setting a monopoly price."

Compulsory Licensing. Pate said that "Compulsory licensing is another place where enforcers need to be fully aware of antitrust's limitations. Licensing can be an effective remedy in some contexts; for example, for merger cases, it can serve as a less drastic alternative to a divestiture."

But, he concluded, "compulsory licensing of intellectual property as an antitrust remedy should be a rare beast."

Market Power. Pate said that IP "cannot be presumed to establish market power. While intellectual property grants exclusive rights, these rights are not monopolies in the economic sense: they do not necessarily provide a large share of any commercial market and they do not necessarily lead to the ability to raise prices in a market. A single patent, for example, may have dozens of close substitutes."

Excessive Patenting. Pate also discussed whether there is excessive patenting, in that too many patents are being granted. He said that this is a matter for the U.S. Patent and Trademark Office (USPTO).

He continued that "It is open to question whether antitrust analysis, which is specific and effects-based, can be applied to a question as broad as ``excessive patenting.创 To know whether patenting is excessive, we would first have to make a conclusion about the "but-for" world. If fewer patents were granted, would innovation have decreased? Would firms have reduced their research and development in areas that currently are covered by patents, and would the result have been fewer benefits for consumers? Antitrust enforcement is not well suited to answering such questions. These questions should be directed, instead, to the patent authorities or to legislators."

However, he added the the Antitrust Division might "challenge the validity or scope of a patent as part of an antitrust claim".

People and Appointments

6/3. Federal Communications Commission (FCC) Chairman Kevin Martin announced his intent to appoint Donna Gregg to be Chief of the FCC's Media Bureau, Roy Stewart to be Senior Deputy Chief of the Media Bureau, and Deborah Klein to be Deputy Chief of the Media Bureau. See, FCC release [PDF]. Gregg currently works for the Corporation for Public Broadcasting (CPB). Before that, she was a partner in the Washington DC law firm of Wiley Rein & Fielding (WRF). Martin also previously worked at WRF. Stewart is an oddity at the FCC. While most senior officials work at the FCC for only short periods of time, Stewart has worked at the FCC for forty years. Klein is currently the acting Chief of the Media Bureau. She has worked at the FCC since 1994.

6/3. David Stone announced his resignation as Assistant Secretary of Homeland Security, in charge of the Transportation Security Administration (TSA). Secretary Michael Chertoff praised his work. See, DHS release.

6/3. Trey Hodgkins was named director of defense programs at the Information Technology Association of America (ITAA). See, ITAA release.

FCC Releases Agenda for June 9 Meeting

6/2. The Federal Communications Commission (FCC) released an agenda [PDF] for its event titled "Open Meeting", scheduled for Thursday, June 9, 2005. This agenda includes consideration of a DR and NPRM regarding implementation of the CSEA.

The FCC will consider a Declaratory Ruling (DR) and Notice of Proposed Rulemaking (NPRM) regarding implementation of the Commercial Spectrum Enhancement Act (CSEA) and changing the FCC's competitive bidding rules and procedures.

The Congress enacted the CSEA late in the 108th Congress as part of HR 5419, a larger composite bill. The CSEA changes the process for reallocating spectrum from federal users to commercial users, such as wireless broadband services. The bill creates a Spectrum Relocation Fund, funded by auction proceeds, to compensate federal agencies for the cost of relocating.

See also, stories titled "House Approves Bill that Includes the Commercial Spectrum Enhancement Act" in TLJ Daily E-Mail Alert No. 1,025, November 24, 2004; "Powell Urges Senate to Approve Telecom Bill" in TLJ Daily E-Mail Alert No. 1,032, December 7, 2004; and, "Congress Approves Telecom Bill" in TLJ Daily E-Mail Alert No. 1,035, December 10, 2004.

Second, the FCC will consider a NPRM regarding procedures for amending the FM Table of Allotments and other procedures for making certain modifications to broadcast facilities. First Broadcasting Investment Partners LLC filed a petition for rulemaking [39 pages in PDF] on March 5, 2004. This proceeding is RM-10960.

Third, the FCC will consider a Report and Order and Further Notice of Proposed Rulemaking (FNPRM) regarding its rules requiring new television receivers to include the capability to receive off-the-air digital broadcast television signals. The FCC adopted its NPRM [9 pages in PDF] on January 19, 2005, and released its on February 14, 2005. This NPRM is FCC 05-17 in ET Docket No. 05-24. It stated that the FCC is considering adjusting the schedule by which new broadcast television receivers with screen sizes of 25 to 36 inches are required to include the capability to to DTV signals.

Fourth, the FCC will consider an Order on Reconsideration regarding its rules affected hearing aid compatibility of wireless telephones. This is WT Docket No. 01-309.

This event is scheduled for 9:30 AM on Thursday, June 9, 2005 in the FCC's Commission Meeting Room, Room TW-C305, 445 12th Street, SW. The event will be webcast by the FCC. The FCC does not always take up all of the items on its agenda. The FCC does not always start its monthly meetings at the scheduled time. The FCC usually does not release at its meetings copies of the items that its adopts at its meetings.

Rep. Cox to Replace Donaldson as SEC Chairman

William Donaldson6/2. William Donaldson (at right), Chairman of the Securities and Exchange Commission (SEC), announced his resignation, effective June 30, 2005. See, June 1 SEC release. On June 2, President Bush announced his intent to nominate Rep. Chris Cox (R-CA) to be the next SEC Chairman. See, White House release.

President Bush stated in a release that "Bill Donaldson took on a tough job at a tough time, and he delivered for the American people. He vigorously and fairly enforced our Nation's securities laws and helped rebuild the public trust in corporate America that has been important to our economic recovery."

President Bush spoke at a White House event on June 2. He stated that "I've given Chris a clear mission: To continue to strengthen public trust in our markets so the American economy can continue to grow and create jobs. The nation is increasingly a nation of stock holders. A generation ago, only a small percentage of American families invested in stocks and bonds. Today, more than half of households are investing -- for their families and for their futures. Now more than ever, we must make sure Americans can rely upon the integrity of our markets." See, transcript.

See, full story.

People and Appointments

6/2. Comcast elected directors at its annual meeting in Philadelphia, Pennsylvania. All twelve board nominees were elected. See, Comcast release.

More News

6/2. Sun Microsystems and Storage Technology announced that they "entered into a definitive agreement under which Sun will acquire StorageTek." The transaction requires regulatory approval. See, Sun release.

6/2. CompTel/ALTS released a updated version of its report [PDF] titled "Regulatory Scorecard". It compares the "relative effectiveness of the regulatory frameworks for electronic communications" in the U.S. Belgium, Denmark, France, Germany, Ireland, Italy, the Netherlands, Spain, Sweden and the United Kingdom. It concludes that the U.S. regulatory regime scores lower than those of all of the European nations in the study, except those of Belgium and Germany. Earl Comstock, CEO of CompTel/ALTS, stated in a release that "For the past several years, the FCC has failed to adopt regulations that properly implement the network access provisions of the 1996 Act ... Congress created a regulatory framework so that businesses and consumers would have lower prices and more choices for broadband services. This report illustrates that the FCC has the authority to fix the problem of broadband penetration if it wants to. This report also demonstrates that U.S. regulators -- in their zeal to appear ``deregulatory创 -- have closed networks to competition and denied consumers the benefits of the 1996 Act. As a result, the U.S. continues to fall further behind the broadband penetration levels of countries that maintain consistently enforced regulatory regimes that guarantee network access at nondiscriminatory rates."

GAO Reports on Doha Development Agenda

6/1. The Government Accountability Office (GAO) released a report [72 pages in PDF] titled "World Trade Organization: Global Trade Talks Back on Track, but Considerable Work Needed to Fulfill Ambitious Objectives".

The report states that "the Doha Round is behind schedule, but the global trade talks have regained their footing and achieved some forward momentum since the failed Cancun ministerial."

It adds that "Agriculture remains the top issue for many participants, and dissatisfaction with progress on agriculture has held up movement on the other 18 issues on the negotiating agenda."

While agriculture and other non-technology related issues have been the most contentious, the 2001 Doha ministerial declaration sets forth a broad work program that covers nineteen negotiating areas. Several of these do affect the technology related sectors, including trade related aspects of intellectual property rights, e-commerce, services, market access, competition policy, and government transparency. The present GAO report does address progress on market access and services. However, it has little to say about the other issues.

FCC News

6/1. The Federal Communications Commission (FCC) released a public notice [37 pages in PDF] that requests public comments on its plan to review rules adopted by the FCC in 1993, 1994 and 1995, pursuant to the Regulatory Flexibility Act of 1980, which is codified at 5 U.S.C. 610. This public notice lists the rules to be reviewed. Comments are due by September 1, 2005. This public notice, which is dated May 31, 2005, is numbered DA-05-1524.

6/1. Microsoft, the U.S., and various state plaintiffs, filed a pleading with the U.S. District Court (DC) titled "Joint Status Report on Microsoft's Compliance with the Final Judgments". The District Court will hold a status conference on June 6, 2005.

6/1. Vice President Richard Cheney gave a speech at the Air Force Academy in the state of Colorado in which he spoke about technology and the Air Force. He said that "We all remember the images from Afghanistan of Air Force airmen on horseback. They were there with laser designators and laptop computers, taking readings on enemy coordinates, transmitting them to a cockpit more than 32,000 feet overhead, and calling in precision air strikes within minutes." He noted that the graduating cadets took courses "from biology to physics, from law to computer science, from philosophy to astronautical engineering." He also said that "Our task is to continue building on America's advantages -- our technological superiority, our ability to project force across great distances, our precision strike capabilities, a space program second to none." And, he said that the Air Force mindset now includes problem solving, innovation, and creativity.

Go to News from May 26-31, 2005.