TLJ News from July 26-31, 2005

FCC Seeks Comments of Massachusetts Port Authority's Attempt to Regulate Airport WiFi Hotspots

7/29. The Federal Communications Commission's (FCC) Office of Engineering and Technology (OET) issued a Public Notice [PDF] requesting comments on Continental Airlines' Petition for a Declaratory Ruling [16 pages in PDF] and supplement [PDF] regarding the Massachusetts Port Authority's (MPA) attempt to regulate and extract revenues from airport WiFi hotspots.

Continental installed a WiFi hotspot in its frequent flyer lounge at the Boston Logan International Airport. It provides WiFi access for free.

The MPA has demanded removal of the antenna. The MPA asserted in a letter to Continental (which is attached to the petition) that there is a "potential threat to public safety caused by Continental’s unauthorized and unlawful wireless communications". The MPA asserts that Continental's service creates an interference problem.

However, the correspondence attached to the petition suggests that the MPA's concern is not with radio frequency interference. Rather, Continental's free service is interfering with the extraction of monopoly rents from WiFi users, most of whom are not Boston area residents. See, full story.

4th Circuit Rules in Software Engineer's Employment Discrimination Case

7/29. The U.S. Court of Appeals (4thCir) issued its opinion in Venkatraman v. REI, a racial discrimination case. There are many discrimination cases in the federal courts. What is distinctive about this one is that the plaintiff is a software engineer who also alleges illegal conduct in the hiring of foreign workers under the H1B visa program.

The Court of Appeals affirmed the District Court's dismissal of the complaint. It held that his employment discrimination claim fails because he failed to exhaust administrative remedies. It also held that there is no private right of action against an employer for lying to the INS to obtain H1B visas for high tech workers.

Kirthi Venkatraman is a U.S. citizen of Indian origin. He needs no visa to work in the U.S. However, his former employer did hire alien workers under the H1B visa program for high tech workers. REI fired him. Venkatraman asserts that REI paid him less than its white workers and fired him for complaining of this treatment. He also alleges that REI lied to the INS to obtain H1B visas for other workers.

Venkatraman filed a complaint in U.S. District Court (EDVa) against REI alleging (1) employment discrimination, in violation of Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e, et seq., (2) wrongful discharge in violation of public policy, (3) infliction of emotional distress, (4) violation of immigration laws. REI moved to dismiss the complaint.

At issue on appeal are the District Court's dismissal of counts (1), (2), and (4). However, the District Court also dismissed count (3). The Court of Appeals affirmed.

The Court wrote that before filing a Title VII employment discrimination claim in court, one must first a charge with the Equal Employment Opportunity Commission (EEOC). Venkatraman did not. The Court of Appeals also rejected his argument he has a discrimination claim under Title VI, which prohibits discrimination "under any program or activity receiving Federal financial assistance", for the simple reason that he did not raise it in the District Court. Hence, the Court of Appeals affirmed the dismissal of the employment discrimination count.

The Court also affirmed the dismissal of the second count, wrongful discharge in violation of public policy, on the basis that it is either a federal Title VII claim (on which he failed to exhaust his EEOC remedy), or a state claim which has been precluded by an opinion of the Virginia Supreme Court.

The Court also affirmed the dismissal of the fourth count alleging violation of immigration law. Venkatraman alleged that REI had hired numerous H1B non-immigrants by falsely representing to the Immigration and Naturalization Service (INS) that there was a shortage of qualified U.S. workers. He alleged that such actions are in violation of 8 U.S.C. § 1182(n), and that a private right of action for a violation of § 1182(n) must be implied.

The Court of Appeals held that § 1182(n) does not create a private right of action.

This case is Kirthi Venkatraman v. REI Systems, Inc, U.S. Court of Appeals for the 4th Circuit, App. Ct. No. 03-1679, an appeal from the U.S. District Court for the Eastern District of Virginia, at Alexandria, D.C. No. CA-03-278-A, Judge T.S. Ellis presiding. Judge Widener wrote the opinion of the Court of Appeals, in which Judges Duncan and Quarles joined.

GAO Examines Information Security Practices of Financial Market Organizations

7/29. The Government Accountability Office (GAO) wrote a letter [9 pages in PDF] to leaders of the House Commerce Committee (HCC) titled "Financial Market Organizations Have Taken Steps to Protect against Electronic Attacks, but Could Take Additional Actions".

The letter was written for the Rep. Joe Barton (R-TX) and Rep. John Dingell (D-MI), the Chairman and ranking Democrats of the HCC, as well as the Chairmen and ranking Democrats on two of the HCC's subcommittees.

The letter states that "Electronic attacks can be the result of individuals (such as hackers) or groups, such terrorist organizations or foreign governments, attempting to gain unauthorized access to a specific organization’s networks or systems or from malicious computer programs or codes, such as viruses or worms, that seek to damage data or deny access to legitimate users." (Parentheses in original.)

The letter then identifies five elements of a sound information security program:

  "Information security policies and procedures that cover all major systems and facilities and outline the duties of those responsible for security,
  Access controls to prevent unauthorized access to networks and information systems,
  Intrusion detection systems that monitor for attempts to gain unauthorized access to networks and information systems,
  Incident response procedures to address electronic attacks or breaches, and
  Testing and assessments of an organization’s vulnerability to attack and audits of its information security practices and controls."

The GAO examined the information security practices of financial market organizations, which it did not identify. It found that "all seven of the selected financial market organizations are taking steps to prevent their operations from being disrupted by electronic attacks. Each of the organizations had implemented the five major elements of a sound information security program. However, we identified actions that each organization could take to further improve their protections against attacks or unauthorized access."

People and Appointments

7/29. The Senate confirmed former Rep. Christopher Cox (R-CA), Roel Campos, and Annette Nazarath to be Commissioners of the Securities and Exchange Commission (SEC). Cox has been designated by President Bush to be Chairman. His term expires on June 5, 2009. Campos, who was reappointed, has a new term that expires on June 5, 2010. Nazareth has term that expires on June 5, 2007. See also, story titled "Rep. Cox to Replace Donaldson as SEC Chairman" in TLJ Daily E-Mail Alert No. 1,146, June 2, 2005.

7/29. The Senate confirmed Josette Shiner to be an Under Secretary of State (Economic, Business, and Agricultural Affairs). She was Deputy U.S. Trade Representative. Before that, she was Associate U.S. Trade Representative for Policy and Communications. Before that, she was P/CEO of a group named Empower America. She is also a former Managing Editor of the Washington Times.

7/29. The Senate confirmed Karen Hughes to be Under Secretary of State for Public Diplomacy.

7/29. The Senate confirmed Kristen Silverberg to be an Assistant Secretary of State (International Organization Affairs). She was Deputy Assistant to the President and Advisor to the Chief of Staff in the White House. Before that, she was Deputy Assistant to the President for Domestic Policy. Before that, she was Senior Advisor to Ambassador Paul Bremer in Iraq. And before that, she was Special Assistant to the President in the Office of the Chief of Staff. Before her positions in the Bush administration, she worked for the Bush Cheney 2000 campaign. She has also worked for the Washington DC office of the law firm of Williams & Connolly, for Supreme Court Justice Clarence Thomas, and for U.S. Court of Appeals (DCCir) Judge David Sentelle.

7/29. The Senate confirmed Shara Aranoff to be Commissioner of the U.S. International Trade Commission (USITC) for the remainder of a nine year term expiring on December 16, 2012. Sen. Harry Reid (D-NV), the Senate Democratic Leader, designated Aranoff for nomination to a Democratic position on the USITC. She was Senior International Trade Counsel on the Democratic staff of the Senate Finance Committee. She has also worked in the USITC's Office of General Counsel, and for the law firm of Steptoe & Johnson. She replaces Marcia Miller, whose term has expired. Sen. Max Baucus (D-MT), the ranking Democrat on the Senate Finance Committee, praised Aranoff in a January release [PDF].

7/29. The Senate confirmed Sandra Pack to be an Assistant Secretary of the Treasury, Timothy Adams to be an Under Secretary of the Treasury, Randal Quarles to be an Under Secretary of the Treasury, Kevin Fromer to be a Deputy Secretary of the Treasury, and Robert Kimmitt to be a Deputy Secretary of the Treasury.

7/29. The Senate confirmed Michael J. Garcia to be the U.S. Attorney for the Southern District of New York for a term of four years.

FCC Announces Short Agenda for August 4 Meeting

7/28. The Federal Communications Commission (FCC) released an agenda [PDF] for its event titled "Open Meeting", scheduled for Thursday, August 4, 2005.

First, the FCC will consider a Notice of Inquiry (NOI) concerning the effects of anticompetitive conduct and circuit disruption by foreign carriers on U.S. international routes.

Second, the FCC will consider a NOI that requests comments to assist it in preparing its 12th annual report on the status of competition in the market for the delivery of video programming.

Third, the FCC will consider an Order on Reconsideration regarding its service rules for advanced wireless services in the 1710-1755 MHz and 2110-2155 MHz bands. This is WT Docket No. 02-353.

As with other recent events, the agenda for this event is short and non-controversial. With the departure of Michael Powell, there are two Democrats and two Republicans. More significant FCC decisions are likely to be delayed until there are again five Commissioners. This will not likely be soon. The Senate, which must confirm any nominee for FCC Commissioner, is on recess until after Labor Day. Then, the Senate will have some other major items on its Fall agenda, including consideration of the nomination of John Roberts to be a Justice of the U.S. Supreme Court.

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.

Chertoff Discusses Statute Limiting Liability for Developers of Anti-Terrorism Technologies

7/28. Secretary of Homeland Security Michael Chertoff gave a speech in Santa Clara, California, to the Commonwealth Club of California in which he discussed technology and the provisions in the Homeland Security Act of 2002 that limit liability for certain anti terrorism technologies. He also addressed cyber security.

Companies that develop and sell anti terrorism technologies could face lawsuits, and massive liability, when terrorist attacks occur. This gives would be technology developers a disincentive to develop anti terrorism related technologies. The SAFETY Act, which is a part of the Homeland Security Act, pertains to this problem. However, its effectiveness in incenting technology development may be limited by several things.

For example, it only offers protection to "qualified anti-terrorism technologies". That is, the developer must first obtain certification from the Department of Homeland Security (DHS). The lengthy and burdensome regulatory review process has resulted in few certifications. Also, once the developer qualifies, the limitation on liability is only partial. Secretary Chertoff stated the the DHS "not done enough to take advantage" of the SAFETY Act's provisions.

The Congress enacted the "Support Anti-terrorism by Fostering Effective Technologies Act of 2002", or SAFETY Act, as Subtitle G of Title VII of the "Homeland Security Act of 2002", or HSA. The HSA was HR 5005 in the 107th Congress. It is now Public Law No. 107-296.

The SAFETY Act provides that "There shall exist a Federal cause of action for claims arising out of, relating to, or resulting from an act of terrorism when qualified anti-terrorism technologies have been deployed in defense against or response or recovery from such act and such claims result or may result in loss to the Seller."

It then provides that "Such appropriate district court of the United States shall have original and exclusive jurisdiction over all actions for any claim for loss of property, personal injury, or death arising out of, relating to, or resulting from an act of terrorism when qualified anti-terrorism technologies have been deployed in defense against or response or recovery from such act and such claims result or may result in loss to the Seller."

The SAFTETY Act also prohibits the award of punitive damages. It also limits non-economic damages. It provides that "Noneconomic damages may be awarded against a defendant only in an amount directly proportional to the percentage of responsibility of such defendant for the harm to the plaintiff, and no plaintiff may recover noneconomic damages unless the plaintiff suffered physical harm."

The SAFETY Act provides no protection in any litigation brought by governmental authority under a criminal statute. Nor does it provide any limitation on liability in civil actions if the defendant "attempts to commit ... any criminal act".

The Act also creates a "rebuttable presumption that the government contractor defense applies" in product liability litigation, but only for "qualified anti-terrorism technologies approved by the Secretary".

Michael ChertoffChertoff (at left) stated that "Technology can play a role in the detection of a threatened nuclear attack. Technology can be deployed in the form of biological sensors throughout our cities to detect the release of dangerous toxins. Technology provides the ability to screen passengers with just the simple swipe of a finger or screen cargo without ever opening a lid."

"Of course to realize the full benefits technology has to offer, we are looking beyond the walls of DHS -- to the private sector, to the high tech world. To the innovators who have made our world so much smaller, we are now looking to you to help make it that much safer."

Chertoff continued that "we recognize our responsibility to support and aid these efforts in any way we can. For example, three years ago, Congress passed the SAFETY Act to enable our private sector partners to develop innovative technology to protect the homeland without the fear of unduly high transaction costs imposed by the possibility of frivolous lawsuits."

He concluded that "we have not done enough to take advantage of this powerful tool to spur new technologies and new systems. We are streamlining the application process and working to deploy incentives under the SAFETY Act more broadly, with the hope that these changes will motivate the private sector to take full advantage of this tool."

Cyber Security. Chertoff stated that "when it comes to securing the cyber systems that connect and control much of our infrastructure, we depend on our technology providers to take a direct role and partner with us in cyber risk assessment and mitigation to achieve the measure of security we all desire." He added that "the vast majority of our cyber assets are privately owned and operated. It therefore follows that security cannot take the form of government dictates, but must be the product of strong partnership work and disciplined collaboration."

He said that "There are several steps we must take. These include maintaining and enhancing a robust cyberspace response system, furthering information sharing and supporting working partnerships between government and industry – operationally and on strategic issues such as software assurance and corporate governance. In addition, we must work to integrate cyber priorities into our infrastructure protection plans and prepare ourselves to respond to new technology threats.

Chertoff added that "we are working to finalize a National Infrastructure Protection Plan that will offer baseline preparedness plans and response protocols for seventeen critical infrastructure sectors and resources including Information Technology, Agriculture, Water, and Energy. We’re working closely with a variety of stakeholders to develop our plan for the IT portion, but we’re also looking at the kind of impact IT has on other infrastructures."

4th Circuit Reinstates Hatfill's Defamation Suit Against NYT

7/28. The U.S. Court of Appeals (4thCir) issued its divided opinion [25 pages in PDF] in Hatfill v. New York Times, a defamation case. The District Court dismissed for failure to state a claim. A three judge panel of the Court of Appeals reversed. Judge Niemeyer dissented.

The Department of Justice has not prosecuted anyone for mailing letters containing anthrax spores in the fall of 2001. However, the Federal Bureau of Investigation (FBI) has investigated Steven Hatfill, a research scientist who is a germ warfare specialist.

Nicholas Kristoff is employed by the New York Times (NYT), a daily newspaper. Kristoff wrote on numerous occasions about the 2001 anthrax mailings, and the FBI's investigation. Hatfill asserts that this defamed him.

Hatfill filed a complaint in U.S. District Court (EDVa) against the NYT and Kristoff alleging defamation and intentional infliction of emotional distress, under Virginia state law. Hatfill dismissed the claims against Kristoff, on the basis that the court lacks personal jurisdiction over him.

The District Court dismissed the claims against the NYT for failure to state a claim upon which relief can be granted, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Hatfill appealed.

The Court of Appeals reversed. Judge Dennis Shedd wrote the opinion for the majority. He quoted extensively from Kristoff's pieces in the NYT, and concluded that the complaint adequately alleges claims for defamation and intentional infliction of emotional distress, based upon the courts construction of the Kristoff pieces.

Judge Niemeyer wrote a dissent. He argued that Kristoff criticized the FBI's handling of the investigation of Hatfill, and the Kristoff argued that the FBI should have been pursuing certain leads regarding Hatfill, but that Kristoff never accused Hatfill of sending the anthrax, or committing a crime. He would have affirmed the District Court's dismissal.

Christopher Wright of the law firm of Harris Wiltshire & Grannis argued the case for Hatfill. Wright is a former General Counsel of the Federal Communications Commission (FCC).

This case is Steven Hatfill v. The New York Times Company and Nicholas Kristoff, U.S. Court of Appeals for the 4th Circuit, App. Ct. No. 04-2561, an appeal from the U.S. District Court for the Eastern District of Virginia, D.C. No. CA-04-807-A, Judge Claude Hilton presiding. Judge Dennis Shedd wrote the opinion of the Court of Appeals, in which Judge Wilkins joined. Judge Niemeyer dissented.

People and Appointments

7/28. The Senate confirmed Rachel Brand to be Assistant Attorney General in charge of the Office of Legal Policy at the Department of Justice (DOJ). She was the Principal Deputy Assistant Attorney General in the OLP. She previously worked as Associate Counsel to the President, for the law firm of Cooper Carville & Rosenthal, which is now Cooper & Clark, and for Supreme Court Justice Anthony Kennedy. The responsibilities of the OLP relate to, among other things, the screening, selection and confirmation of judicial nominees.

7/28. The Senate confirmed Richard Skinner to be Inspector General of the Department of Homeland Security (DHS).

7/28. The Senate confirmed Janice Gardner to be Assistant Secretary for Intelligence and Analysis at the Department of the Treasury.

7/28. The Senate confirmed John Redd to be Director of the National Counterterrorism Center in the Office of the Director of National Intelligence.

More News

7/28. The Recording Industry Association of American (RIAA) announced the filing of another round of lawsuits against individuals in U.S. District Courts around the country alleging copyright infringement in connection with the use of peer to peer systems. See, release.

7/28. The Department of Justice (DOJ) announced that a grand jury of the U.S. District Court (WDNC) returned an indictment that charges four people with criminal copyright infringement in connection with their alleged illegal distribution of copyrighted movies, software, games and music on the internet. The indictment charges David Lee Pruett (of Auburn, Washington), Alexander C. Von Eremeef (Belmont, Massachusetts), George C. Stoutenburgh (Bennet, Colorado), Jerry M. Melvin (Roanoke, Virginia). The DOJ also announced in a release that it charged four additional persons by criminal information with conspiracy to commit criminal copyright infringement. These people are David Chen Pui (Fountain Valley, California), Shawn W. Laemmrich (Calumet, Michigan), Scott John Walls (Spokane, Washington), and Franklin Edward Littell (Martinsville, Indiana).

7/28. The Office of Management and Budget (OMB) sent a memorandum [PDF] to chief information officers at  executive departments and agencies that contains instructions for agency annual reporting under the E-Government Act of 2002.

House Approves DR-CAFTA Free Trade Bill

7/27. The House approved HR 3045, the "Dominican Republic-Central America-United States Free Trade Agreement Implementation Act", by a vote of 217-215. The vote broke down largely along party lines, with Republicans voting 202-27, and Democrats voting 15-187. See, Roll Call No. 443.

Like the vote on the Bipartisan Trade Promotion Authority Act of 2001, this vote was close. Also, like the 2001 vote, the Republican leadership kept open the voting long beyond the expiration of 15 minutes, to persuade more members to vote for the measure. The vote continued for over an hour, until midnight, to enable proponents to collect a majority in favor. See also, story titled "House Passes Trade Promotion Authority Bill" in TLJ Daily E-Mail Alert No. 323, December 7, 2001.

Opponents of the bill argued various protectionist theories regarding loss of jobs, impact on unions, and environmentalism.

This trade agreement also has many little debated technology related provisions. See especially, Chapter 13 [18 pages in PDF], titled "Telecommunications", Chapter 14 [3 pages in PDF], titled "Electronic Commerce", and Chapter 15 [33 pages in PDF] titled "Intellectual Property Rights".

Democratic technophiles, such as Rep. Rick Boucher (D-VA), Rep. Anna Eshoo (D-CA), Rep. Bart Gordon (D-TN), Rep. Jay Inslee (D-WA), and Rep. Zoe Lofgren (D-CA), all voted the party line.

Robert Portman, the U.S. Trade Representative (USTR), stated in a release that "Tonight is an historic night for American leadership on free and fair trade. House passage of CAFTA-DR will create jobs and economic growth here at home and promote democracy, prosperity and hope in the Central American region. This win sends a powerful signal to the region and the world that the United States will continue to lead in opening markets and leveling the playing field."

The Senate has already passed its CAFTA bill. The bill now goes to the President, who will sign it.

President Bush released a statement immediately after the vote. "I am proud that the House of Representatives has acted to advance America's economic and national security interests by passing the CAFTA-DR agreement. CAFTA helps ensure that free trade is fair trade. By lowering trade barriers to American goods in Central American markets to a level now enjoyed by their goods in the U.S., this agreement will level the playing field and help American workers, farmers, and small businesses. The agreement is more than a trade bill; it is a commitment of freedom-loving nations to advance peace and prosperity throughout the Western hemisphere. We have a moral obligation and a vital national security interest in helping the democracies of Central America and the Dominican Republic succeed, and CAFTA furthers that goal. I look forward to signing this important legislation into law."

Barr Bashes UN Efforts to Govern the Internet

7/27. Former Rep. Bob Barr (R-GA), now a civil libertarian, published an essay in his web site (also published in the Atlanta Journal Constitution) in which he addresses several issues, including the United Nation's (UN) Working Group on Internet Governance's (WGIG) efforts to establish a global internet regulator.

On July 18, 2005, the UN's WGIG released a report [24 pages in PDF] titled "Report of the Working Group on Internet Governance". This report states the UN's ambitious case for acquiring vast power to regulate various aspects of the operation and use of the internet. See, story titled "UN Seeks Vast Authority to Regulate Operation and Use of the Internet" in TLJ Daily E-Mail Alert No. 1,178, July 20, 2005.

Bob BarrBarr (at right) He wrote that "A U.N. ``working group´´ -- talk about a oxymoron -- has proposed that this organization, which recently gave us the multibillion-dollar fiasco known as ``oil-for-food,´´ be given control of regulating the working mechanism of the Internet. You heard right: Put the United Nations in charge of the Internet! Of interest to those who understand the inner workings of the Internet, or who follow political machinations of world politics, is the makeup of this Working Group on Internet Governance. The membership reads like a list of the old, so-called ``nonaligned´´ nations group (which was anything but nonaligned), and includes such high-tech, free enterprise champions as Cuba and Iran." (Parentheses in original.)

He continued that "While such a proposal brings tears of laughter to those of us in the United States who understand that the magic of the Internet lies not in government regulation but in the free market and universal access, the fact that the United Nations proposes it play a role in regulating the Internet means, at a minimum, that the idea will be the subject of interminable bureaucratic deliberations. It will foster a permanent bureaucracy of its own, will cost millions, and will result in repeated tirades against the exploitation of the Internet by the developed nations against the interests of the Third World."

He concluded that "The meddling by the United Nations is boundless. It is aggravating. It is costly. But mostly, it is just plain wrong. And someone needs to stand up and tell it so."

Barr suggests that John Bolton, the new U.S. Ambassador to the UN, is appropriate for the task.

However, Michael Gallagher, the head of the U.S. National Telecommunications and Information Administration (NTIA), stated bluntly, on June 30, 2005, that the U.S. will not yield to any UN request to take control of the domain name system (DNS). See, story titled "NTIA Rebuffs UN Efforts to Gain Control Over Internet Governance" in TLJ Daily E-Mail Alert No. 1,166, July 1, 2005.

On September 19-30, The International Telecommunications Union (ITU) will host the third meeting of the Preparatory Committee (PrepCom3) in Geneva, Switzerland, for the second meeting of the World Summit on Information Society (WSIS), to be held in Tunis, Tunisia, on November 16-18, 2005. See, WSIS web site.

Appeals Court Affirms in Telemarketing Sales Rule Case

7/27. The U.S. Court of Appeals (7thCir) issued its opinion [12 pages in PDF] in FTC v. World Media Brokers, a telemarketing sales rule case involving the sale of Canadian lottery tickets by telephone to consumers in the U.S. This is not legal. Yet, the telemarketers deceived consumers about this. The Court of Appeals affirmed the District Court's $19 Million judgment against both corporate defendants, and two individuals. The Court's opinion sets for the circumstances under which individuals can be held liable for the deceptive acts of corporations under the FTC Act.

The U.S. Federal Trade Commission (FTC) filed a complaint [PDF] in U.S. District Court (NDIll) on September 30, 2002, against World Media Brokers, related corporate entities and dbas, and its principals, alleging violation of § 5(a) of the FTC Act, which is codified at 15 U.S.C. § 45(a). It prohibits unfair or deceptive acts or practices in or affecting commerce. The complaint also alleged violation of §§ 13(b) and 19 of the FTC Act, 15 U.S.C. §§ 53(b) and 57b, the Telemarketing and Consumer Fraud and Abuse Prevention Act, 15 U.S.C. § 6101-6108, and the FTC Telemarketing Sales Rule (TSR), 16 C.F.R. § 310.1-9.

The District Court entered judgment against five corporate entities, and two principals, George Yemec and Anita Rapp, individually. It enjoined further violations of the law, and ordered the payment of $19 Million in consumer redress.

The Appeals Court affirmed. It held that individuals can be held liable for the deceptive practices of a corporation in violation of § 5(a) of the FTC Act if it demonstrates that "the individual defendants either participated directly in the deceptive acts or practices or had authority to control them". The Court continued that the FTC "must also prove that the individual defendants either knew or should have known about the deceptive practices, but it is not required to prove subjective intent to defraud. ... Instead, the FTC may fulfill the knowledge requirement with evidence that the individuals had ``actual knowledge of material misrepresentations, reckless indifference to the truth or falsity of such misrepresentations, or an awareness of a high probability of fraud along with an intentional avoidance of the truth.´´" (Citations omitted.)

This case is Federal Trade Commission v. World Media Brokers, et al., U.S. Court of Appeals for the 7th Circuit, App. Ct. No. 04-2721, an appeal from the U.S. District Court for the Northern District of Illinois, Eastern Division, D.C. No.  02 C 6985, Judge Amy St. Eve presiding. Judge Rovner wrote the opinion of the Court of Appeals, in which Judges Bauer and Easterbrook joined.

People and Appointments

Paul Margie7/27. Paul Margie (at right), who is currently Federal Communications Commission (FCC) Commissioner Michael Copps' Spectrum and International Legal Advisor, will leave the FCC to take the position of Senior Director for Technology Partnerships at the United Nations Foundation. John Giusti, who is Assistant Bureau Chief of the FCC's International Bureau, will temporarily work for Commissioner Copps.

7/27. President Bush nominated Sandra Frances Ashworth, Jan Cellucci, and Diane Rivers to be members of the National Commission on Libraries and Information Science for the remainder of five year terms expiring July 19, 2009. See, White House release and release.

More News

7/27. Sen. John Ensign (R-NV) introduced S __ [72 pages in PDF], the "Broadband Consumer Choice Act of 2005". This bill contains numerous significant changes to telecommunications and technology law.

7/27. The Electronic Privacy Information Center (EPIC) released a memorandum [27 pages in PDF] regarding the Department of Defense's (DOD) military recruitment database. The EPIC writes that "The database will be managed by a private direct marketing firm and will include such information as grade point average, ethnicity, and social security number. The proposal raises significant questions about the Department's compliance with the Privacy Act."

7/27. The U.S. Court of Appeals (11thCir) issued its opinion [13 pages in PDF] in Maverick Boat Company v. American Marine Holdings, a copyright infringement and trade dress infringement case involving boat hull designs. Not everything in the Digital Millennium Copyright Act (DMCA) pertains to digital works. The Congress included in the DMCA the Vessel Hull Design Protection Act (VHDPA). It is now codified at 17 U.S.C. § 1301 et seq. This was a response to the opinion of the Supreme Court in Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141 (1989). The District Court cancelled Maverick's copyright registration, and denied its claims for copyright and trade dress infringement. The Court of Appeals affirmed. This case is Maverick Boat Company, Inc. v. American Marine Holdings, Inc., U.S. Court of Appeals for the 11th Circuit, App. Ct. No. 04-11259, an appeal from the U.S. District Court for the Southern District of Florida, D.C. Nos. 02-14102 CV-DMM and 02-14283 CV-DMM. Judge Dubina wrote the opinion of the Court of Appeals, in which Judges Fay and Goldberg joined.

7/27. The Federal Communications Commission (FCC) published a notice in the Federal Register that states that the Office of Management and Budget (OMB) has approved the extensive information collection mandates contained in the FCC's VOIP E911 Order. See, Federal Register, July 27, 2005, Vol. 70, No. 143, at Page 43323. See also, the FCC's document titled "First Report and Order and Notice of Proposed Rulemaking" [90 pages in PDF], numbered FCC 05-116, adopted on May 19, 2005, and released on June 3, 2005. See also, the order contained in the FCC's document titled "Public Notice' [PDF], numbered DA 05-2085, and released on July 26, 2005. These orders were issued in FCC proceedings regarding extending elements of the regulatory regime for communications to internet protocol based services: "In the Matter of IP-Enabled Services", numbered WC Docket No. 04-36, and "E911 Requirements for IP-Enabled Service Providers", numbered WC Docket No. 05-196.

7/27. The National Institute of Standards and Technology (NIST) Computer Security Division released NIST Special Publication (SP) 800-79 [59 pages in PDF' titled "Guidelines for the Certification and Accreditation of PIV Card Issuing Organizations". PIV is personal identity verification. The guidelines in this document are for use by federal departments and agencies issuing, or preparing to issue, PIV cards that comply with Federal Information Processing Standard (FIPS) 201 to their federal employees and/or federal contractor employees.

Senate Committee Approves Cybercrime Treaty

7/26. The Senate Foreign Relations Committee recommended the ratification by the full Senate of the Council of Europe Convention on Cybercrime, which was signed by the U.S. on November 23, 2001.

The Business Software Alliance (BSA) is pleased. Robert Holleyman, P/CEO of the BSA, wrote in a release that "Today's action is a significant step forward in the fight against worldwide cybercrime. The BSA and its member companies have long advocated loud and clear that the U.S. Senate take up and pass this important international treaty. With the rise of organized cybercrime, and information and data theft, businesses and consumers are increasingly recognizing the importance of protecting themselves and thwarting such attacks. By passing the treaty today, Chairman Lugar and the committee are sending the right signal to our international partners who work with us to fight these global, borderless criminals. We urge the full Senate to take up and pass this treaty in short order so we have the necessary tools to deter and prosecute global cybercrime."

The Electronic Privacy Information Center (EPIC) opposes ratification of this treaty. Marc Rotenberg and Cedric Laurent of the EPIC wrote a letter to Sen. Richard Lugar (R-IN) on July 26. They stated that "The treaty would create invasive investigative techniques while failing to provide meaningful privacy and civil liberties safeguards, and specifically lacking judicial review and probable cause determinations required under the Fourth Amendment. A significant number of provisions grant sweeping investigative powers of computer search and seizure and government surveillance of voice, e-mail, and data communications in the interests of law enforcement agencies, but are not counterbalanced by accompanying protections of individual rights or limit on governments' use of these powers."

Sen. Hatch Comments on Judicial Selection and IP Law

7/26. Senate Judiciary Committee's Subcommittee on Intellectual Property held a hearing titled "Perspective on Patents: Harmonization and Other Matters". Sen. Orrin Hatch (R-UT), the Chairman of the Subcommittee, was the only Senator to participate in the hearing.

TLJ spoke with Sen. Hatch after the hearing about the selection of federal judges and intellectual property law. He stated that intellectual property issues do not play much of a role in judicial selection, with two exceptions. He said that it is important in the selection of Judges for the U.S. Court of Appeals for the Federal Circuit and the U.S. Court of Appeals for the District of Columbia.

The Federal Circuit has exclusive jurisdiction over appeals in most patent related cases. See, 28 U.S.C. § 1295. The DC Circuit hears many cases that involve the 1984 Hatch-Waxman amendments to the Food, Drug, and Cosmetic Act. This was the "Drug Price Competition and Patent Term Restoration Act of 1984. It is Public Law No. 98-417.

The Senate Judiciary Committee has jurisdiction over both intellectual property bills and appointments to the federal judiciary and to the U.S. Patent and Trademark Office (USPTO).

Senate Banking Committee Holds Hearing on Nomination of Rep. Cox to Be SEC Chairman

7/26. The Senate Banking Committee held a hearing on the nominations of Rep. Christopher Cox (R-CA), Roel Campos, and Annette Nazarath to be Commissioners of the Securities and Exchange Commission (SEC).

Rep. Cox stated in his prepared testimony [PDF] that "I will strongly support the Commission's ongoing work to ensure that the rules governing our financial markets keep pace with advancing technology. The rapid globalization of securities markets, and the amazing development of the Internet as a medium for commerce and information, have taken place at the same time that the number of Americans who are directly invested in securities has reached a record level. These developments offer both investors and issuers extraordinary new opportunities -- but they also bring unprecedented risks. As a result, the work of the SEC is now more important than ever."

Roel Campos stated in his prepared testimony [PDF] that the SEC " must continue to reduce and eliminate antiquated rules".

See also, prepared testimony [PDF] of Annette Nazareth. Nazareth was accompanied at the hearing by her husband, Roger Ferguson, who often testifies before the Committee as the Vice Chairman of the Federal Reserve Board.

FCC Amends E911 VOIP Order's Subscriber Notice, Reporting and Cancellation Requirements

7/26. The Federal Communications Commission (FCC) released a document [PDF] in its proceedings titled "In the Matter of IP-Enabled Services" and numbered WC Docket No. 04-36, and "E911 Requirements for IP-Enabled Service Providers" and WC Docket No. 05-196.

This document amends and expands upon the requirements imposed upon the providers of interconnected VOIP services with respect to mandatory notice to their customers, mandatory acquisition of responses from customers, mandatory reporting to the FCC, and mandatory cancellation of service.

See, full story.

Martin Gives Speech At NARUC Meeting

7/26. Federal Communications Commission (FCC) Chairman Kevin Martin gave a speech in Austin, Texas, at a meeting of the National Association of Regulatory Utility Commissioners (NARUC). He spoke about universal service, intercarrier compensation, regulatory parity, and expanding the CALEA regulatory regime.

Universal Service. Martin stated that "The universal service mechanism is breaking. The method for carriers to contribute into the fund is outdated. It doesn’t adequately account for the increase in bundled service offerings, the migration to wireless and VoIP services, and the shrinking long distance market. Similarly, the way that the funds are distributed is fraught with complexity."

He said that "it is critical that there be a sufficient and sustainable mechanism to collect funds in an efficient manner." He added that "I have urged the Commission to begin assessing contributions primarily based on working telephone numbers rather than interstate revenue." This would entail taxing internet protocol based services that assign subscribers numbers.

Kevin MartinIntercarrier Compensation. Martin (at left) stated that "The intercarrier compensation scheme is breaking. The existing scheme is simply unsustainable in a competitive environment characterized by bundles and mobility."

He said that the FCC "must adopt a rational and unified approach that replaces the current patchwork of rules. Any new framework must remove the opportunities for regulatory arbitrage and provide incentives for efficient investment decisions."

He continued that "we must move to a single unitary rate for all the different types of traffic -- wireless, wireline, VoIP, local, long distance, interstate, intrastate. In today’s converging IP world, these distinctions are unsustainable and create opportunities for people to game the system."

Regulatory Parity. He stated that "We also suffer from a market-distorting lack of regulatory certainty in the broadband market. Most prominently, for some time there has been a lack of regulatory parity between telcos and cable in their provision of broadband."

He said that "we should place all broadband providers on equal footing so that they can fairly compete in the marketplace -- not in front of regulators". And, he said that Supreme Court's June 26 opinion [59 pages in PDF] in NCTA v. Brand X "provides us the opportunity to make this happen."

Martin said that "I have already shared with my colleagues a proposal that would give telcos the same deregulatory treatment as cable. It is my strong hope that this order will be adopted as soon as possible so that consumers can reap the benefits of continued infrastructure investment and the increased deployment of broadband services."

CALEA. Martin also discussed extending the Communications Assistance for Law Enforcement Act (CALEA) regulatory regime to internet services. He said that "broadband Internet access providers and VoIP providers cannot escape the ability of law enforcement to conduct legitimate surveillance", and that "law enforcement agencies must have the ability to conduct electronic surveillance over these new technologies."

PFF Paper Criticizes Compulsory Music Licensing

7/26. The Progress and Freedom Foundation (PFF) released a paper [13 pages in PDF] titled "Why Government Can't Be Trusted With Trust Funds: A 118-Year-Old Case Study Highlights the Dangers of Compulsory Licensing". It was written by Patrick Ross of the PFF.

It reviews and criticizes various proposals to replace the current copyright regime for music with compulsory licensing of digital music, and compensation for creators provided from a government trust, funded by taxation of such things as ISPs or consumer electronic devices.

The paper reviews five proposals, or collections of proposals.
 • Distributed Computing Industry Association's (DCIA) proposal [17 pages in PDF] titled "P2P Revenue Engine".
 • Electronic Frontier Foundation's (EFF) proposal.
 • Berkman Center for Internet & Society's (Harvard Law School) four proposals. See, overview and paper [83 pages in PDF] titled "Content and Control: Assessing the Impact of Policy Choices on Potential Online Business Models in the Music and Film Industries".
 • William Fisher's (professor at Harvard Law School) proposal in his book titled "Promises to Keep: Technology, Law and the Future of Entertainment" [Amazon].
 • Lawrence Lessig's (professor at Stanford Law School) proposal in his book titled " Free Culture: How Big Media Uses Technology and the Law to Lock Down Culture and Control Creativity" [Amazon].

Ross argues first that the government has a poor record of administering other trust funds. He discusses the example of the Dawes Act of 1887 and the federal government's failed management of Indian lands and the Indian Trust Fund.

He states that both compulsory licensing and trust funds "involve the federal government attempting to monitor the marketplace, and extract rent from one party to fund another. This is an extremely difficult thing to do, but a relatively simple thing for a market to perform. Both also are systems that, once in place, are difficult to dismantle, because parties in the system become dependent on them."

He concludes that "Just because the Internet has enabled theft of intellectual property in ways never before contemplated does not mean our existing system should be abandoned. Rather, those claiming to support artists and their right to be compensated should defend the current legal structure -- incrementally improve it where warranted -- and work constructively to promote artists and mitigate the harmful impact of online theft."

10th Circuit Rules on When Copyright Registration Occurs

7/26. The U.S. Court of Appeals (10thCir) issued its opinion [28 pages in PDF] in La Resolana Architects v. Clay Realtors Angel Fire, a case regarding the registration of works with the Copyright Office (CO). Registration is required before a copyright holder can sue for infringement. The 10th Circuit held that registration does not occur until the CO decides upon an application. Other courts have held that proof of application for registration is sufficient.

The present case involves architectural plans. However, this issue is more critical in the area of online infringement of digital works, where obtaining immediate injunctive relief may be essential. Yet, it takes time to obtain a certificate of registration from the CO. For example, Napster argued, unsuccessfully, that works with pending registration applications are not entitled to the same rebuttable presumption as registered works.

The plaintiff, La Resolana Architects (LRA) is an architectural firm in Sante Fe, New Mexico. It created some architectural designs for townhouses. It showed these designs to Clay Realtors Angel Fire (Clay). The parties never reached an agreement. However, Clay went on to build townhouses in Angel Fire, New Mexico, which LRA alleges are similar to those depicted in the designs shown to Clay.

LRA applied to register the copyrighted drawings with the CO, by sending the requisite applications, fees, and deposits. The CO confirmed receipt of these materials.

Before the CO issued a certificate of registration, LRA filed a complaint in U.S. District Court (NMex) against Clay and others alleging copyright infringement. More specifically, LRA applied to register its copyright on November 6, 2003. It filed suit on November 20, 2003. On January 22, 2004 the CO approved the registration, with an effective registration date of November 19, 2003. On March 10, 2004, the CO wrote a letter stating this. It did not send LRA a certificate of copyright registration.

The District Court held that the CO letter was inadmissable, and that the copyright had not been registered. It dismissed the complaint.

LRA appealed. The Court of Appeals affirmed.

Registration of a copyrighted work is voluntary. 17 U.S.C § 408(a) provides, in part, that "registration is not a condition of copyright infringement." However, registration is a necessary prerequisite for filing suit, except when the CO refuses to register. 17 U.S.C. § 411 provides, in part, that "no action for infringement of the copyright in any United States work shall be instituted until registration of the copyright claim has been made in accordance with this title." See also, 17 U.S.C. § 410, regarding "Registration of claim and issuance of certificate"

The Court of Appeals held that "registration occurs when the copyright office actually approves or rejects the application".

It wrote that "Registration is satisfied by completing the following steps:
  a. application and payment of fee, § 408;
  b. deposit of a copy of the copyrightable material, § 408;
  c. examination by the Register of Copyrights, § 410;
  d. registration (or refusal to register) by the Register, § 410;
  e. issuance of certificate of registration, § 410.
The plain language of the statute thus requires a series of affirmative steps by both the applicant and the Copyright Office. No language in the Act suggests that registration is accomplished by mere receipt of copyrightable material by the Copyright Office. Instead, the Register of Copyrights must affirmatively determine copyright protection is warranted, § 411, before registration occurs under the Act. And only upon registration or refusal to register is a copyright holder entitled to sue for copyright infringement under § 411. Until those steps are followed and registration is ``made,´´ federal courts lack subject matter jurisdiction over the infringement claim." (Parentheses in original. Footnotes omitted.)

The Court added that "registration is separate from the issuance of a registration certificate and that a court’s jurisdiction does not turn on the existence of a paper certificate, but rather on the fact of registration, however it is demonstrated."

The Court also reviewed the opinions of other courts. Some require that the copyright holder actually receive the certificate of registration. On the other hand, some courts allow suit to be maintained merely by proving payment of the required fee, deposit of the work in question, and receipt by the Copyright Office of a registration application. See, for example, Apple Barrel Productions, Inc. v. Beard, 730 F.2d 384 (5th Cir. 1984). Also, Nimmer on Copyright, at Vol. 2 § 7.16[B][1][a], pages 7-154-56, backs the 5th Circuit approach.

Thus, there exists a split between circuits on this issue.

Perhaps it should also be noted that the Congress enacted the Family Entertainment and Copyright Act of 2005 (FECA) earlier this year. It was S 167. It is now Public Law No. 109-9. See also, story titled "House Approves Copyright Bill" in TLJ Daily E-Mail Alert No. 1,119, April 20, 2005.

The FECA does not address the issue in this case. However, it may have contributed to the lack of clarity of the law regarding registration. The FECA contains a provision that requires the Register of Copyrights to "establish procedures for preregistration of a work that is being prepared for commercial distribution and has not been published ... for any work that is in a class of works that the Register determines has had a history of infringement prior to authorized commercial distribution". It also provides that infringement actions may be based upon these preregistrations.

The CO is in the process of writing implementing regulations. See also, story titled "Copyright Office Commences Rulemaking on Preregistration of Unpublished Works" in TLJ Daily E-Mail Alert No. 1,181, July 25, 2005.

Judge Timothy Tymkovich wrote the opinion of the Appeals Court. Tymkovich, who probably lacks substantial experience in dealing with the Copyright Office (see, biography), also wrote that "registering a copyright is a relatively simple and inexpensive process".

This case is La Resolana Architects v. Clay Realtors Angel Fire, et al., U.S. Court of Appeals for the 10th Circuit, App. Ct. No. 04-2127, an appeal from the U.S. District Court for the District of New Mexico, D.C. No. CIV-03-1337-ACT/RHS. Judge Tymkovich wrote the opinion of the Court of Appeals, in which Judges Lucero and Blackburn joined.

10th Circuit Addresses Search and Seizures Associated with Misappropriation of Trade Secrets Cases

7/26. The U.S. Court of Appeals (10thCir) issued its opinion [22 pages in PDF] in Yanaki v. Iomed, a Section 1983 case involving the search of the residence, and seizure of computer equipment, of a former employee of a pharmaceutical company that accused him of misappropriation of trade secrets and breach of a confidentiality agreement. The Court of Appeals affirmed the District Court's dismissal of the complaint for failure to state a claim.

Jamal Yanaki previously worked for Iomed, Inc., a pharmaceutical company based in Salt Lake City, Utah. Iomed filed a complaint in state court in Utah against Yanaki. It also obtained an ex parte order directing local police, with the assistance of Iomed, to execute a search of Yanaki’s residence.

A state court issued the orders regarding the search. State police officers searched Yanaki's home. But, Yanaki does not challenge the constitutionality of the state laws upon which the orders were based.

Yanaki then filed a complaint in U.S. District Court (DUtah) agaisnt Iomed and some of its employees and lawyers, alleging violation of 42 U.S.C. § 1983. He alleged deprivation of his 4th Amendment right to be free from unreasonable searches and seizures, among other things.

Section 1983 provides, in part, that "Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress, except that in any action brought against a judicial officer for an act or omission taken in such officer’s judicial capacity, injunctive relief shall not be granted unless a declaratory decree was violated or declaratory relief was unavailable."

The Court of Appeals held that Yanaki failed to plead the "under color of any statute" element of a Section 1983 claim. It held that Yanaki merely asserts private misuse of a state laws, which is not actionable under Section 1983.

This case is Jamal Yanaki, et al. v. Iomed, Inc., et al., U.S. Court of Appeals for the 10th Circuit, App. Ct. No. 04-4061, an appeal from the U.S. District Court for the District of Utah, D.C. No. 2:03-CV-345-DB. Judge Murphy wrote the opinion of the Court of Appeals, in which Judges Holloway and Briscoe joined.

People and Appointments

7/26. Carl Biersack joined the Washington DC office of the law and lobbying firm of Balch & Bingham as Director of Government Affairs. He works on technology and telecommunications related issues. He previously worked for the lobbying and consulting firm of Barbour Griffith & Rogers. Before that, he worked for ten years for Sen. Trent Lott (R-MS), a member of the Senate Commerce Committee.

7/26. Judith Mühlberg was named SVP Corporate Communications for Sprint and Nextel Communications. See, release.

More News

7/26. The House rejected HR 3283, the "United States Trade Rights Enforcement Act", by a vote of 240-186. See, Roll Call No. 421. The bill was considered under suspension of the rules, which means that a two-thirds majority was required for approval. It was a party vote. Republicans voted 221-5. Democrats voted 19-180.

Go to News from July 21-25, 2005.