TLJ News from September 11-15, 2005

House Commerce Committee Releases Draft of Bill to Regulate Internet Protocol Services

9/15. The House Commerce Committee (HCC) released a discussion draft [77 pages in PDF] on September 15, 2005, of a bill that is as yet unnumbered and untitled. It creates three new regulatory regimes -- for broadband internet transmission services (BITS), voice over internet protocol (VOIP) services, and broadband video services (BVS). The HCC also released a summary [7 pages in PDF] and a short release. See, full story.

Reaction to House Commerce Committee Discussion Draft

9/15. Many representatives of affected companies, their trade groups, and interest groups commented on the House Commerce Committee's (HCC) discussion draft [77 pages in PDF].

Walter McCormick, P/CEO of USTelecom, stated in a release that the draft bill "demonstrates a bipartisan commitment of the committee leadership to begin to move beyond government-managed competition and toward a truly consumer-controlled marketplace that encourages vigorous investment, competition and innovation across today’s diverse communications landscape."

He wrote that "we are encouraged by its overall direction, particularly in promoting investment and competition in advanced services. Of course, there are areas we would like to see addressed in a more comprehensive manner, such as the sustainability of universal service. We also believe that any legislation should spur immediate competition in the video market and if regulations are deemed outdated, they should be lifted for all competing services, not solely new ones."

He concluded that "Alongside Senator Ensign's bill, this draft legislation continues to build critical momentum for real reform."

Herschel Abbott, BellSouth's VP for Governmental Affairs, stated in a release that "We welcome the release of this staff draft. We understand that a lot of work by the staff has resulted in a fairly broad consensus among the Committee leadership. Now that we have a document in hand we will review it closely. We welcome the staff's invitation that we submit comments and we will. What is important today is that we have momentum, this is a very positive step toward having forward-looking, consumer-friendly, consumer-oriented legislation passed this year."

Michael Petricone, VP of Technology at the Consumer Electronic Association (CEA), stated in a release that the bill will "will advance the deployment of broadband services". He added that "We are especially pleased that this draft reflects important principles that ensure consumers' ability to access content, use applications and connect devices of their choice to high-speed Internet networks."

Gigi Sohn, President of the Public Knowledge, stated in a release that the bill has "many the pro-competitive features". She added that "We were very pleased to see that Chairman Barton recognized the need for preserving the model of an open broadband network by codifying the duty of broadband providers to allow subscribers to have access to the services, equipment and applications they need without interference from network providers and by requiring the interconnection of traffic." She also praised "the loosening of franchise requirements on new broadband video providers and by the recognition of the role of municipalities in providing broadband service."

The Independent Telephone and Telecommunications Alliance (ITTA), the National Telecommunications Cooperative Association (NTCA), the Organization for the Promotion and Advancement of Small Telecommunications Companies (OPASTCO), and the Western Telecommunications Alliance (WTA), stated in a joint release that "We are pleased to see that the draft recognizes the need for communications providers to live up to their universal service and reciprocal compensation responsibilities, though we would like to see these guidelines even more definitive.  Our objective going forward will be to ensure these draft provisions are strengthened from the perspective of rural carriers and consumers to fully ensure we are able to maintain a nationwide integrated communications infrastructure that has proven so critical to our economic and national security.”

A collection of 21 groups joined in a release that declined to offer support for the draft bill. These groups include the Consumers Union, the Center for Digital Democracy, the Consumer Federation of America, the Media Access Project, the Future of Music Coalition, the Common Cause, and the National Association of Telecommunications Officers and Advisors (NATOA).

They wrote that "Telecommunications legislation has for too long been negotiated behind closed doors with key industry heavyweights and major media conglomerates, which spend hundreds of millions of dollars on campaign contributions and lobbying in Washington."

They wrote that any bill should guarantee "Equal access, regardless of race, income, ethnicity or location, to affordable, advanced telecommunications technologies". It should also ensure that "that franchising agreements protect consumers, extend the benefits of competition to underserved communities, provide adequate compensation to local governments for use of public resources, provide for public access media, and flexibly address community needs".

Representatives Urge Hard Date for DTV Conversion and Funding for Converter Boxes

9/15. Eight Democrats in the House of Representatives wrote a letter to Rep. Joe Barton (R-TX), Chairman of the House Commerce Committee, in which they advocated a hard date for DTV conversion, and funding for digital to analog converter boxes.

They wrote that "to express our support for legislation establishing a ``hard date´´ for television broadcasters to return their analog spectrum so it can be utilized to improve public safety communication systems and promote the deployment of innovative wireless technologies. In order to ensure a smooth transition to digital television (DTV) for consumers, this legislation should include a self-funded program to provide financial assistance for digital converter devices for all American households."

The signers of the letter include Rep. Anna Eshoo (D-CA), Rep. Bart Stupak (D-MI), and Rep. Jane Harman (D-CA), all of whom are members of the HCC. The other signers are Rep. Ellen Tauscher (D-CA), Rep. Ron Kind (D-WI), Rep. Artur Davis (D-AL), Rep. Adam Smith (D-WA), and Rep. Jay Inslee (D-WA).

Also on September 15, the High Tech DTV Coalition hosted a technology demonstration in House Commerce Committee's third floor hearing room, at which several companies displayed their converter boxes.

Pulver Criticizes FCC for Slighting VOIP and Other IP Services

9/15. The four Commissioners of the Federal Communications Commission (FCC) held a meeting in Atlanta, Georgia, that focused on communications and Hurricane Katrina.

Jeff Pulver, a voice over internet protocol (VOIP) innovator, wrote a piece in his web site on September 15 in which he criticized the FCC for not acknowledging the role played by VOIP and other IP based communications in keeping people connected. He said that the internet community and the Amateur Radio Relay League were excluded from testifying at the meeting.

He wrote that "the FCC Open Meeting was a slight, not just to VoIP providers, but to the Internet and the entire, current and evolving IP-based communications industry."

"I think the FCC has been searching around for communications failures to highlight what went wrong in the wake of Katrina. The IP-based communications story does not fit that story -- the Internet and IP story is a story about what went right and what could go even more right with greater public awareness of the enabling power of IP technology and the Internet," wrote Pulver.

He opined that "it really is the larger Internet and the multitude of applications that IP technology allows that could revolutionize the ways in which government and citizens respond to public catastrophes. It wasn't just the VoIP service that helped bridge the communications divide during Hurricane Katrina. Frankly, text messaging, email, Web-obtained information, video blogs and other streaming media, and other IP-based applications were instrumental in keeping people connected and informed in the wake of Hurricane Katrina. These applications only hint at what is possible through more ubiquitous, robust usage of the Internet. All these applications have been slighted today by the FCC's focus on carriers and traditional modes of communication."

"But if we do not shine a spotlight more brightly on the power of the Internet and the host of emerging and evolving applications that the Internet will spawn, we cannot expect the public to ever understand what could be. In the absence of public awareness, regulators will never feel any compulsion beyond caving to the will of the traditional communications companies, reluctant to experiment with the power of IP."

He had more unkind words for the FCC and its exercise of regulatory authority. "Now, I might say, thank goodness that the FCC has not recognized the role of the Internet in times of public emergencies. If the FCC recognized the Internet as a bona fide communications network, it might be inclined to regulate it. Oh, wait, the FCC has already begun to do so. Ironically, the FCC's first foray into regulating the Internet came in its effort to impose cookie-cutter E-911 obligations on VoIP. As I have previously noted, had the FCC rule been in place during Hurricane Katrina, VoIP services would have been shut off if the provider could not offer the cookie-cutter E-911 offering of the PSTN. Who would have benefited from such a backward-looking decision during a public crisis? Certainly not the Mayor who needed a Vonage phone to speak with President Bush."

He concluded that "If one lesson should have been learned by those who regulate communications, it should be that one-size-fits-all regulation destroys resiliency and the power afforded by promoting a multiplicity of communications options and capabilities. The Internet should be recognized as a means to improve lives and promote the public good, both during crises and otherwise. Government should work not to restrain the capabilities of the Internet but to encourage the Internet innovators to go forth, to differentiate, and to offer a multitude of products and services that will allow for as many communications alternatives as possible. Such alternatives will make communications more survivable and resilient during times of public catastrophes. But this is a message that the FCC and the public will not hear today."

See also, prepared statement [PDF] of Kevin Martin, prepared statement [PDF] of Kathleen Abernathy, prepared statement [PDF] of Michael Copps, and prepared statement [PDF] of Jonathan Adelstein. And see, FCC's video [RAM] of the meeting.

House Science Committee Holds Hearing on Cyber Security

9/15. The House Science Committee (HSC) held a hearing titled "Cybersecurity: How Can the Government Help Address Vulnerabilities in Critical Industries?"

Rep. Sherwood Boehlert (R-NY), the Chairman of the Committee, wrote in his opening statement [PDF] that "We still pay inadequate attention to cybersecurity research and operations in both the government and private sector. We shouldn’t have to wait for the cyber equivalent of a Hurricane Katrina -- or even and Hurricane Ophelia might serve -- to realize that we are inadequately prepared to prevent, detect and respond to cyber attacks."

Donald Andy Purdy, the acting Director of the Department of Homeland Security's (DHS) National Cyber Security Division (NCSD), wrote in his prepared testimony [PDF] that "Cyber-related research and development (R&D) is vital to improving the resiliency of the Nation's critical infrastructures." Most of his prepared testimony reviews the organization and activities of the NCSD.

Andrew Geisse, CIO of SBC, wrote in his prepared testimony [PDF] that "Behind the networks that move voice and data, are many applications, private networks, and computing resources. These resources support the operations, administration, maintenance, and provisioning services of our telecommunications infrastructure. These information systems and networks provide SBC and other carriers the ability to manage this complex industry supporting the dial tone and Internet connections that we have all come to expect as a part of our daily lives."

"Communications plays ever increasing importance to health industries, emergency first responders, 911 services, law enforcement, banking, power, and other parts of our society that serve critical functions", wrote Geisse. "With the growing use of wireless technologies, we must recognize that those wireless systems still rely on an underlying physical transport, use of back-end systems and applications that may interconnect with other carriers. As we have recently witnessed in New Orleans and the Gulf Coast, if the supporting infrastructure is disrupted, communication fails. A cyber disruption could cause similar impacts as a physical disruption."

He recommended that the government focus on "the education of the consumers regarding cybersecurity matters", and on "security standards and collaborative support organizations". He argued that "Legislation should not always be necessary to bring industry attention to technical priorities. However, providing research assistance, grants, and funds to focus the information technology industry to work towards security standards and best practices is necessary."

He also recommended that the criminal laws should "carry serious penalties for cybersecurity issues and that the instigators are prosecuted to the full extent of the law. It must become a major crime. It is no longer just kids playing with computers. The attacks are serious."

See also, prepared testimony [PDF] of David Kepler (Dow Chemical), prepared testimony [PDF] of John Leggate (BP), and prepared testimony [PDF] of Gerald Freese (American Electric Power).

Enzi Advocates Export Administration Act

9/15. The Senate Banking Committee held a hearing on numerous pending nominations, including those of David McCormick (to be Under Secretary of Commerce for Export Administration), Darryl Jackson (to be Assistant Secretary of Commerce), and Franklin Lavin (to be Under Secretary of Commerce for International Trade).

See also, story titled "Bush Nominates McCormick and Jackson for Export Control Office" in TLJ Daily E-Mail Alert No. 1,165, June 30, 2005.

Sen. Mike Enzi (R-WY), a member of the Committee, used the hearing to advocate enactment of the Export Administration Act. The previous act has expired. The Congress came close to enacting replacement legislation in the 107th Congress in 2001. The Senate approved S 149, the "Export Administration Act of 2001", sponsored by Sen. Enzi, by a vote of 85-14, just prior to the terrorist attacks of September 11, 2001. Support for the legislation then dissipated.

S 149 would have modernized export control laws. It would have eased restraints on most dual use products, such as computers and software, but increased penalties for violations. It also would have eliminated the use of Million Theoretical Operations Per Second (MTOPS) based limits to control the export of high performance computers.

Sen. Mike EnziSen. Enzi (at right) stated at the September 15 hearing that "I have been working to reauthorize the Export Administration Act for over seven years now. During this time, my staff and I have worked diligently with all parties to craft legislation that would correct some of the critical shortcomings in the current regulation. In some ways, we have been successful."

He continued that the Department of Commerce (DOC), and its Bureau of Industry and Security (BIS), which administers the export control regime, have "streamlined some of the licensing processes and relieved some of the burden that technology companies face by doing business overseas. I applaud them on their efforts. However, they need statutory authority to make substantive improvements to law enforcement and control mechanisms. Congress should be committed to granting this authority."

He also stated that "The federal government has limited resources to deal with the control of dual-use exports developed within the United States. Molding export controls that focus our priorities on those products and nations that may threaten our national security is good policy.  Not only will it make our controls more effective, it will strengthen our ability to craft multilateral controls that truly keep our dual-use technology out of the wrong hands. It is very difficult for the United States to tell our international partners to stop selling goods and technology to bad actors, when we don’t have a statute in place that controls our own sales."

House Subcommittee to Hold Hearing on Financial Services Regulatory Relief Act

9/15. The House Financial Services Committee's Subcommittee on Financial Institutions will hold a hearing on HR 3505, the "Financial Services Regulatory Relief Act of 2005", on Thursday, September 22.

This is a large bill that is mostly not related to technology. However, it contains some provisions that pertain to the electronic storage and transfer of financial data, and the privacy of the individuals and entities to which such data relates.

Rep. Jeb Hensarling (R-TX) and Rep. Dennis Moore (KS) introduced this bill on July 28, 2005.

§ 602 of the bill would both the Federal Deposit Insurance Act and the Federal Credit Union Act to require the federal banking agencies and the National Credit Union Administration to engage in certain data sharing with other agencies and persons.

§ 605 of the bill would permit any federal banking agency to "cause any and all records, papers, or documents kept by the agency or in the possession or custody of the agency to be ... preserved in any electronic medium or format which is capable of ... being read or scanned by computer ..."

§ 617 of the bill would amend § 503 of the Gramm Leach Bliley Act, which is codified at 15 U.S.C. § 6803. § 6803 pertains to "Disclosure of institution privacy policy". § 617 of HR 3505 would to create an exemption to the annual notice requirement for certain financial institutions.

§ 621 of the bill would amend § 1101 of the Right to Financial Privacy Act of 1978, which is codified at 12 U.S.C. § 3401. § 1101 is the definitional section of the Act. § 621 of HR 3505 would amend the definition of "financial institution" to also include "any lender who advances funds on pledges of personal property".

§ 705 of the bill would require the Department of the Treasury to "conduct a study on the feasibility of developing and implementing interfaces and templates for use in electronic communications between financial institutions ... and the Secretary, the Financial Crimes Enforcement Network, and other Federal financial institution regulatory agencies." The bill also defines the term "interfaces" as "the point and method of interaction between any 2 or more electronic data storage and communication systems that permits and facilitates active electronic communication between or among the systems", and the term "templates" as "authoring software that ensures that data entered into it will adhere to a consistent format and content scheme".

People and Appointments

9/15. The House Republican Conference appointed Rep. Peter King (R-NY) Chairman of the House Homeland Security Committee (HHSC). He replaces former Rep. Chris Cox (R-CA), who is now the Chairman of the Securities and Exchange Commission (SEC). In addition, Rep. Ginny Waite (R-FL) was named to fill a vacancy on the HHSC. See, HHSC release.

9/15. President Bush announced his intent to designate Santanu Baruah to be acting Assistant Secretary of Commerce for Economic Development. See, White House release.

9/15. President Bush nominated Karan Bhatia to be a Deputy U.S. Trade Representative. He had previously announced his intent to make this nomination. See, White House release.

9/15. James Unruh and Wayne Murdy were named to the Board of Directors of Qwest Communications. Unruh is a principal of Alerion Capital Group; he was previously P/CEO of Unisys. Murdy is Ch/CEO of Newmont Mining. In addition, Vinod Khosla resigned his position on the Board. Khosla is a general partner with the venture capital firm Kleiner Perkins Caufield & Byers.

More News

9/15. The Senate approved HR 2862, the "Departments of Commerce and Justice, Science, and Related Agencies Appropriations Act, 2006" by a vote of 91-4. See, Roll Call No. 235. The House approved a different version of the bill on June 16, 2005, by a vote of 418-7. See, Roll Call No. 268. This bill contains appropriations for most of the technology related agencies in the executive branch, including the Federal Communications Commission (FCC), Federal Trade Commission (FTC), U.S. Patent and Trademark Office (USPTO), National Institute of Standards and Technology (NIST), National Telecommunications and Information Administration (NTIA), Bureau of Industry and Security (BIS), Antitrust Division, Criminal Division, Office of Science and Technology Policy (OSTP), and National Science Foundation (NSF).

9/15. The Senate Judiciary Committee completed its hearing on the nomination of Judge John Roberts to be Chief Justice of the United States.

9/15. Robert Portman, the U.S. Trade Representative (USTR), and Peter Mandelson, the European Trade Commissioner, held a news conference in which they discussed the Doha round of trade negotiations. See, transcript.

9/15. The four Commissioners of the Federal Communications Commission (FCC) held a meeting in Atlanta, Georgia. See, prepared statement [PDF] of Kevin Martin, prepared statement [PDF] of Kathleen Abernathy, prepared statement [PDF] of Michael Copps, and prepared statement [PDF] of Jonathan Adelstein. See also, FCC's video [RAM] of the meeting.

Senators Introduce Anticounterfeiting Bill

9/14. Sen. Arlen Specter (R-PA), Sen. Patrick Leahy (D-VT), and ten others Senators, introduced S 1699, the "Stop Counterfeiting in Manufactured Goods Act".

This is a companion bill to HR 32, also titled the "Stop Counterfeiting in Manufactured Goods Act". It was introduced on January 4, 2005, approved by the House Judiciary Committee's (HJC) Subcommittee on Crime on March 17, approved by the full HJC on April 13, and approved by the House by voice vote on May 23. See also, House Report No. 109-68, and story titled "House Approves Bill Regarding Trafficking in Counterfeit Marks" in TLJ Daily E-Mail Alert No. 1,141, May 24, 2005.

This bill amends the Criminal Code with respect to trafficking in counterfeit marks, including wrappers, boxes and stickers. The bill makes numerous changes to 18 U.S.C. § 2320, which pertains to "Trafficking in counterfeit goods or services"

The bill amends § 2320(a) to impose criminal liability upon anyone who "intentionally traffics or attempts to traffic in labels, patches, stickers, wrappers, badges, emblems, medallions, charms, boxes, containers, cans, cases, hangtags, documentation, or packaging of any type or nature, knowing that a counterfeit mark has been applied thereto, the use of which is likely to cause confusion, to cause mistake, or to deceive".

The bill further provides that "Any article bearing or consisting of a counterfeit mark used in committing a violation" of § 2320(a), as amended, "shall be subject to forfeiture to the United States and no property right shall exist in such property".

This bill does not address the trafficking of non-counterfeit marks, as for example, in the removal of marks from non-counterfeit goods, and the subsequent reattachment to counterfeit goods.

Sen. Specter issued a release that states that "The current loophole was created in large part by the Tenth Circuit’s opinion in United States v. Giles, 213 F.3d 1247 (10th Cir. 2000). In this case, the United States prosecuted the defendant for manufacturing and selling counterfeit Dooney & Bourke labels that third parties could later affix to generic purses.  Examining Title 18, section 2320, of the United States Code, the Tenth Circuit held that persons who sell counterfeit trademarks that are not actually attached to any “goods or services” do not violate the federal criminal trademark infringement statute."

The U.S. Court of Appeals (10thCir) issued its opinion in U.S. v. Giles on May 19, 2000. Donald R. Giles sold to an undercover FBI agent counterfeit labels that were not attached to any goods. He was prosecuted under § 2320. The Court of Appeals reversed his conviction. It wrote that "A trademark is meant to identify goods so that a customer will not be confused as to their source", but that "Giles' conduct did not confuse any consumer about the origin of goods because there were no goods involved in the transaction". The Court concluded that "Section 2320 does not clearly penalize trafficking in counterfeit labels which are unattached to any goods."

The other original cosponsors of the bill are Sen. Evan Bayh (D-IN), Sen. Sam Brownback (R-KS), Sen. Jon Cornyn (R-TX), Sen. Mike DeWine (R-OH), Sen. Russ Feingold (D-WI), Sen. Orrin Hatch (R-UT), Sen. Carl Levin (D-MI), Sen. Jack Reed (D-RI), Sen. Debbie Stabenow (D-MI) and Sen. George Voinovich (R-OH).

The U.S. Chamber of Commerce praised the Senate bill in a release.

Bush Advocates Conclusion of Doha Round

9/14. President Bush gave a speech at the United Nations, in New York City, in which he said that "we must bring the Doha trade talks to a successful conclusion". He also proposed the elimination of "all tariffs, subsidies and other barriers to free flow of goods and services".

He said that "A successful Doha Round will reduce and eliminate tariffs and other barriers on farm and industrial goods. It will end unfair agricultural subsidies. It will open up global markets for services. Under Doha, every nation will gain, and the developing world stands to gain the most. Historically, developing nations that open themselves up to trade grow at several times the rate of other countries. The elimination of trade barriers could lift hundreds of millions of people out of poverty over the next 15 years. The stakes are high. The lives and futures of millions of the world's poorest citizens hang in the balance -- and so we must bring the Doha trade talks to a successful conclusion."

He continued that "Today, I reiterate the challenge I have made before: We must work together in the Doha negotiations to eliminate agricultural subsidies that distort trade and stunt development, and to eliminate tariffs and other barriers to open markets for farmers around the world. Today I broaden the challenge by making this pledge: The United States is ready to eliminate all tariffs, subsidies and other barriers to free flow of goods and services as other nations do the same. This is key to overcoming poverty in the world's poorest nations."

Bush also argued that free trade does more than increase income and promote economic development. He said that "By expanding trade, we spread hope and opportunity to the corners of the world, and we strike a blow against the terrorists who feed on anger and resentment. Our agenda for freer trade is part of our agenda for a freer world, where people can live and worship and raise their children as they choose."

People and Appointments

9/14. Leslie Harris was named Executive Director of the Center for Democracy and Technology (CDT), effective January 1, 2006. She heads her own firm, Leslie Harris & Associates. Before that, she worked for the ACLU. She will replace James Dempsey, who remains Policy Director, but has relocated to San Francisco, California. Ari Schwartz will handle management and administrative responsibilities until Harris starts. See, CDT release [PDF].

Mandelson Advocates Conclusion of Doha Round of Trade Negotiations

9/13. Peter Mandelson gave a speech in Washington DC on September 13, 2005,  titled "The Right Choices for the Doha Round". He advocated free trade, and advancing the Doha round of multilateral trade negotiations.

Mandelson is the EU Trade Commission. He spoke at a luncheon at the National Press Club.

He discussed at length why free trade is desirable. "Open markets are a precondition for growth, and growth is essential to economic development. Forget the doctrines of those who think poor countries can develop successfully behind protectionist walls. The only credible way forward is progressive liberalisation, domestically and internationally."

rightMoreover, Mandelson (at right) argued that regional trade agreements, and two party trade agreements, are not enough. "Could we obtain the same results by going down a different route of regional and bilateral trade agreements? My answer is: no. Bilateral and regional agreements can supplement the multilateral approach, but they cannot substitute for it. Doha is the big prize for the global economy and for the next big boost of poverty alleviation. For a very simple reason: because the multiplying power of market opening and multilateral disciplining of state aids and subsidies, undertaken by all nations together, cannot be matched any other way."

He also stated that "a successful conclusion to Doha would take forward the fundamental reshaping of the international division of labour, in which Europe and America can flourish as knowledge-based service and manufacturing economies, with manufacturing success based on leading edge innovation, top of the range products and niche specialisation."

Citing World Bank estimates, he said that "a feasible outcome for Doha could boost global incomes by 100 billion dollars a year."

Trade negotiators are working to reach agreement before the World Trade Organization (WTO) holds its Sixth WTO Ministerial Conference in Hong Kong, China, on December 13-18, 2005. See, WTO notice.

See also, piece by Patrick Ross titled "Free Trade: The EU Perspective" in the Progress and Freedom Foundation's (PFF) IPCentral web site.

US Chamber Criticizes PR China's Failure to Comply with Its WTO Obligations on IPR and Telecom

9/13. The U.S. Chamber of Commerce released a report [53 pages in PDF] titled "China’s WTO Implementation and Other Issues of Importance to American Business in the U.S.-China Commercial Relationship".

Intellectual Property. The report addresses the People's Republic of China's failure to protect intellectual property rights. (See, report at pages 16-22.) It states that "China fails on the whole to accord to companies of all sizes IPR protection that meets the standards of ``effectiveness´´ and ``deterrence´´ set forth in the WTO Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement."

It adds that "The scale of counterfeiting and piracy appears to have increased during the last few years, notwithstanding the government’s attempts to improve the situation, and recently introduced measures to address the issue appear inadequate to bring the problem under control."

The report also contains many recommendations, including several pertaining to software and online piracy. For example, it states that "China needs to ensure market access for and dramatically increase purchase of foreign IP-based products that are now being used illegally. For example, China needs to ensure that its government procurement market for software remains open, nondiscriminatory and technology neutral. To fulfill its commitment at the JCCT to ensure the use of legal software at central, provincial, and municipal levels of the state-owned sector by the end of 2005, China must commit adequate software procurement budgets to government agencies. Absent sufficient funds to purchase legal software, piracy will continue. Likewise, China’s July 2005 JCCT commitment to extend software legalization to large enterprises, including state-owned enterprises, is important, and China needs to commit adequate resources to auditing and enforcement."

The report states that "Internet piracy has emerged as a major challenge in China. In addition to online infringers continuing to use the Internet to distribute a wide range of illegal products that violate copyright protections, including films, audio recordings, and books, piracy of broadcast signals and the underlying content incorporated into broadcasts is a growing problem. China is encouraged to accelerate ongoing efforts to update its Copyright Law and accede to the WIPO Internet treaties, namely the WPPT and the WCT, thereby complying with its commitments made during the JCCT meetings in 2004 and 2005."

Telecom. The report also addresses China's failure to comply with its WTO obligations regarding telecommunications. (See, report at pages 56-57.) It states that "China has taken no meaningful action in the past year toward meeting its telecom commitments and continues to retain barriers to market entry. Under its WTO schedule, all geographic restrictions on value-added service (VAS) licenses were lifted last December, followed by the availability of basic telecommunications service licenses in the major cities of Beijing, Shanghai, and Guangzhou."

In continues that "Notwithstanding this threshold liberalization, there has been no rush by foreign carriers to enter the world's largest and fastest-growing telecom market because several barriers remain in the licensing process and general regulatory framework. The most important barriers are the requirement to enter a telecom joint venture with one of the existing state-owned telecommunications carriers; the excessive capitalization requirements for basic service licenses; the uncommonly narrow scope of service permissible under a VAS license; and the lengthy and labyrinthine license application process."

Trial Court Issues Preliminary Injunction in Microsoft v. Kai-Fu Lee and Google

9/13. A trial court of the state of Washington issued a Preliminary Injunction [13 pages in PDF] in Microsoft v. Kai-Fu Lee and Google. Until trial, Kai-Fu Lee and Google are enjoined from engaging in certain activities.

Microsoft filed its complaint in the Superior Court, King County, Washington, on July 19, 2005, alleging that Kai-Fu Lee, a former employee, breached his employee confidentiality and non-compete agreement with Microsoft, by going to work for Google on competing projects. See, story titled "Microsoft Sues Former Employee Who Joined Google" in TLJ Daily E-Mail Alert No. 1,178, July 20, 2005.

Microsoft filed its motion for a preliminary injunction [redacted, 26 pages in PDF] on August 22. The Court held a hearing on September 6-7. See, story titled "Court Holds Hearing on Microsoft's Motion for Preliminary Injunction Against Google" in TLJ Daily E-Mail Alert No. 1,210, September 9, 2005.

The Court found that there is a confidentiality and non-compete agreement, but left open for trial the question of whether there was consideration for the contract.

The Court found that "In June of 2005, Dr. Lee misled Microsoft about his intention to return to Microsoft following his sabbatical and he continued to have access to Microsoft's proprietary information after he decided to leave Microsoft to join one of its competitors without informing Microsoft. Dr. Lee began assisting Google while he was still employed at Microsoft. Dr. Lee confused the difference between the discretion given him to disclose Microsoft's confidential information for the benefit of Microsoft and disclosing Microsoft's confidential information for his own benefit or the benefit of others."

The Court also found that "During his employment with Microsoft, Dr. Lee worked on products, services or project (including actual or demonstrably anticipated research or development) and/or received Microsoft confidential, proprietary or trade secret information in the areas of computer search, including but not limited to, internet search, desktop search, desktop search and mobile search, and natural language processing and speech technologies."

The Court decided Kai-Fu Lee "is enjoined from accepting employment competitive with or engaging in any activities competitive with any product, service or project (including actual or demonstrably anticipated research or development) on which he worked or about which he learned confidential or proprietary information or trade secrets while employed at Microsoft, including but not limited to activities related to:
  (a) computer search technologies, including but not limited to internet search, desktop search, or mobile search;
  (b) natural language processing or speech technologies; and
  (c) participation in setting the budget or compensation levels and defining the research and development to be undertaken at Google's planned research and development facility in China.

Similarly, Google is enjoined from employing Kai-Fu Lee for any of these activities.

Moreover, both Lee and Google are enjoined "from disclosing or misappropriating for their own use or benefit, any trade secrets or other confidential or proprietary information of Microsoft obtained in connection with Dr. Lee's work for Microsoft."

This case is Microsoft Corporation v. Kai-Fu Lee and Google, Inc., Superior Court for the State of Washington in and for King County, No. 05-2-23561-6 SEA, Judge Steven Gonzalez presiding.

2nd Circuit Holds Foreign Governments Cannot Use RICO to Collect Taxes in US Courts

9/13. The U.S. Court of Appeals (2ndCir) issued its opinion [12 pages in PDF] in European Community v. RJR Nabisco, holding that foreign governments cannot bring civil suits in US Courts against tobacco companies under the Racketeer Influenced and Corrupt Organizations Act (RICO) to recover lost tax revenues and law enforcement costs due to alleged smuggling. This is a technology related opinion that will benefit international e-commerce. See, full story.

GAO Reports on DOD Development of Passive RFID Technology

9/13. The Government Accountability Office (GAO) released a report [59 pages in PDF] titled "Defense Logistics: Better Strategic Planning Can Help Ensure DOD's Successful Implementation of Passive Radio Frequency Identification".

The report pertains to the Department of Defense's (DOD) use of passive radio frequency identification (RFID) technology to track and manage inventory. While the DOD has been using active RFID technology for over a decade, it has only just recently begun to use passive RFID technology. The report addresses the status of RFID technology implementation, the DOD's strategic approach for implementation, and challenges that the DOD faces in implementation.

The report finds that "While DOD has taken a number of actions to guide and direct the implementation of passive RFID, it has not yet developed a comprehensive strategic management approach that incorporates sound management principles and could ensure that passive RFID is efficiently and effectively implemented. Existing passive RFID implementation policy and operational guidance for both DOD and its military components lack or only partially incorporate several key management principles, such as those used by leading organizations and embodied in the Government Performance and Results Act of 1993 (GPRA), that are needed to effectively guide, monitor, and assess implementation."

It adds that "Among the key management principles that are missing or are only partially present are (1) general and long-term goals and objectives, (2) a description of specific actions to support goals and objectives, (3) performance measures to evaluate specific actions, (4) schedules and milestones for meeting deadlines, (5) identification of total resources needed and annual cost estimates for passive RFID implementation into the supply chain, and (6) evaluation of the overall program with specific processes to allow for adjustments and changes."

People and Appointments

9/13. President Bush announced his intent to name Karan Bhatia to be Deputy U.S. Trade Representative. He is currently Assistant Secretary for Aviation and International Affairs at the Department of Transportation. Before that he worked the Department of Commerce (DOC), first as Chief Counsel for the Bureau of Industry and Security (BIS), which was previously known as the Bureau of Export Administration (BXA), and then as Deputy Under Secretary of Commerce for Industry and Security. The mission of the Office of the USTR is to promote trade and economic development. The mission of the BIS/BXA is the opposite, to restrict trade. He was previously a partner at the law firm of Wilmer Cutler & Pickering. See, White House release. USTR Robert Portman stated in a release that "Karan Bhatia will bring to USTR a rich background in the government, the private sector and academia. His proven skill in negotiating agreements around the world will be crucial in advancing the President's trade agenda to help open foreign markets to U.S. exports and level the playing field. Bhatia also has extensive legal experience which will be invaluable in his new position."

9/13. President Bush announced his intent to nominate several people, including Linnet Deily, to be members of the J. William Fulbright Foreign Scholarship Board for the remainder of three year terms expiring on September 22, 2008. Deily was until recently a Deputy U.S. Trade Representative (USTR). Before that, she worked for the Charles Schwab Corporation. And before that, she was P/Ch/CEO of First Interstate Bank of Texas. See, White House release.

9/13. President Bush nominated Gregory Van Tatenhove to be a Judge of the U.S. District Court for the Eastern District of Kentucky. See, White House release.

More News

9/13. Stephen Pinkos, Deputy Under Secretary of Commerce for Intellectual Property, gave a speech at the Gattis Elementary School in Round Rock, Texas, in which he urged students not to illegally copy copyrighted music, movies, software and computer games. See, USPTO release.

9/13. The Department of Commerce's (DOC) Bureau of Industry and Security (BIS) updated its Denied Persons List.

9/13. The National Music Publishers Association (NMPA) rejoined the International Intellectual Property Alliance (IIPA). See, IIPA release [PDF].

EBay to Acquire Skype

9/12. EBay, an online auction company, announced that it will acquire Skype, a voice over internet protocol (VOIP) company based in Luxembourg, "for approximately $2.6 billion in up-front cash and eBay stock, plus potential performance-based consideration. See, eBay release [PDF] and substantially identical Skype release.

EBay stated that "Skype, eBay and PayPal will create an unparalleled ecommerce and communications engine for buyers and sellers around the world."

EBay explained the relationship between online auctions and VOIP communications. "Online shopping depends on a number of factors to function well. Communications, like payments and shipping, is a critical part of this process. Skype will streamline and improve communications between buyers and sellers as it is integrated into the eBay marketplace. Buyers will gain an easy way to talk to sellers quickly and get the information they need to buy, and sellers can more easily build relationships with customers and close sales. As a result, Skype can increase the velocity of trade on eBay, especially in categories that require more involved communications such as used cars, business and industrial equipment, and high-end collectibles."

See, also eBay's presentation slides [78 pages in PDF].

The design and operation of VOIP communications services are increasingly being regulated by the Federal Communications Commission (FCC), at the urging, in part, of the Department of Justice (DOJ). FCC employees contacted by TLJ did not immediately return phone calls.

Oracle to Acquire Siebel

9/12. Oracle announced that it will acquire Siebel Systems, a customer relations management (CRM) software company. See, Oracle release.

Larry Ellison, CEO of Oracle, stated that "In a single step, Oracle becomes the number one CRM applications company in the world ... Siebel's 4,000 applications customers and 3,400,000 CRM users strengthen our number one position in applications in North America and move us closer to the number one position in applications globally."

Oracle also stated in its release that "The Board of Directors of Siebel Systems has voted in favor of the transaction, and Tom Siebel has agreed to vote his shares in favor of the acquisition. Siebel stockholders will convene in a special meeting to vote on the acquisition. Oracle stockholder approval is not required."

The transaction requires regulatory approval.

The Department of Justice's (DOJ) Antitrust Division filed an antitrust complaint in an effort to block Oracle's last major acquisition, PeopleSoft. However, the District Court ruled that the DOJ failed to show that the merger would likely substantially lessen competition in a relevant product and geographic market. See, story titled "DOJ Loses Oracle Case" in TLJ Daily E-Mail Alert No. 974, September 10, 2004.

Ambassador Gross Says UN Will Not Be in Charge of the Internet

9/12. The Center for Democracy and Technology (CDT) hosted a panel discussion titled "Global Internet Governance: Should There be an Enhanced Role for the U.N.?" The speakers were David Gross (Department of State) and Michael Gallagher (head of the National Telecommunications and Information Administration).

On July 18, 2005, the United Nation's (UN) Working Group on Internet Governance (WGIG) released a report [24 pages in PDF] titled "Report of the Working Group on Internet Governance". This report states the UN's case for acquiring vast power to regulate various aspects of the operation and use of the internet. See also, 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.

The International Telecommunications Union (ITU) will hold the second phase of its meeting titled "World Summit on Information Society" (WSIS) in Tunis, Tunisia, on November 16-18, 2005. The UN report will be discussed. See also, WSIS web site.

Gross said at the September 12 luncheon that "The United Nations will not be in charge of the Internet." Gallagher said that there is no need for another bureaucracy.

Gross stated while there is no need for a new UN bureaucracy, "this is actually very good news for the United States". He explained that previously, the US worked to convince other nations to adopt the internet. The UN report and upcoming meeting demonstrate that nations have adopted the internet, and that the dialogue has shifted to use and regulation of the internet.

He continued that the US will seek to preserve the "less regulated nature" of the internet, freedom of expression, and the protection of intellectual property rights. However, he conceded that even the nations that respect freedom of speech to do not so to the same extent as the US.

Gross said that many nations do not protect freedom of speech and expression on the internet. "China and a number of other countries have very effectively blocked content." He added that "content control by governments is pervasive" and that "we can't stop it".

See also, story titled "NTIA Rebuffs UN Efforts to Gain Control Over Internet Governance" in TLJ Daily E-Mail Alert No. 1,166, July 1, 2005.

The event was hosted by the Advisory Committee to the Congressional Internet Caucus (ACCIC), which is headed by Jerry Berman. The ACCIC's events, publications and administration are funded by the Internet Education Foundation (IEF). Berman is its President. Berman is also President of the CDT. All three entities are located in the same offices. Hence, Tech Law Journal refers to these three entities, ACCIC, IEF, and CDT, as the CDT.

3rd Circuit Affirms in Pharmacy Web Site Case

9/12. The U.S. Court of Appeals (3rdCir) issued its opinion [17 pages in PDF] in Franklin Prescriptions v. New York Times, a case regarding awarding damages for defamation.

The New York Times (NYT) published a news story regarding the online sale of drugs. Franklin Prescriptions is a small pharmacy in Philadelphia, Pennsylvania, that specializes in fertility medications. It also operated an information only web site. It did not sell controlled substances through this web site; and, it only sold controlled drugs pursuant to a doctor's prescription. The NYT story described "unscrupulous" and "cloak and dagger" web sites that process online orders for controlled drugs without prescriptions. It did not mention Franklin, but included an partial image from the Franklin web site.

Franklin filed a complaint in U.S. District Court against the NYT and others alleging defamation. Jurisdiction was based on diversity of citizenship, and hence, Pennsylvania law regarding defamation applied. The trial court jury returned a verdict for Franklin, but awarded no damages. This appeal concerns the issue of whether Franklin was entitled to a jury instruction on presumed damages and defamation per se.

The Appeals Court affirmed. It concluded that "it appears that Pennsylvania law is unsettled on the availability of presumed damages in this case. ... In any event, we need not decide this issue. Even assuming Pennsylvania allows presumed damages upon a showing of actual malice, Franklin Prescriptions initially failed to enter an on-the-record objection to the lack of a presumed damages instruction and then acceded to a verdict sheet that compelled the jury to return to the courtroom before addressing the issue of actual malice. Because Franklin Prescriptions failed to seek or obtain an antecedent jury finding of actual malice, we see no prejudice rising to the level of plain error. Furthermore, the District Court noted that ``the evidence at trial fell well short of that necessary for a showing of actual malice or reckless disregard.´´ ... Accordingly, the District Court’s omission of a presumed damages instruction cannot constitute a fundamental error resulting in a miscarriage of justice, if it was error at all." (Emphasis in original. Citations and footnote omitted.)

This case is Franklin Prescriptions v. New York Times, et al., U.S. Court of Appeals for the 3rd Circuit, App. Ct. No. 04-3404, an appeal from the U.S. District Court for the Eastern District of Pennsylvania, D.C. No. 01-cv-00145, Judge Cynthia Rufe presiding. Judge Scirica wrote the opinion of the Court of Appeals, in which Judges Alito and Garth joined.

More News

9/12. The Chamber of Commerce and the Business Software Alliance (BSA) postponed their event, titled "Intellectual Property Business Forum", which had been scheduled for September 12. The featured speaker Carlos Gutierrez, the Secretary of Commerce, spoke instead on hurricane Katrina relief efforts.

Go to News from September 6-10, 2005.