TLJ News from August 6-10, 2006

Copyright Office Seeks Comments on Revising Reporting Practices of Cable Operators

8/10. The Copyright Office (CO) published a notice in the Federal Register that announces, describes and sets comment deadlines for its notice of inquiry (NOI) regarding the reporting practices of cable operators that retransmit broadcast signals in accordance with the provision governing the statutory license set forth in 17 U.S.C. § 111.

The Motion Picture Association of America (MPAA) and other program suppliers filed a Petition for Rulemaking [25 pages in PDF] with the CO on June 7, 2005. See also, attachments [49 pages in PDF].

The petition states that "There have been significant technological, marketing and regulatory changes in the cable television industry during the more than twenty-five years since Congress enacted the Section 111 cable compulsory licensing provisions. Nevertheless, there have been relatively few modifications to the statement of account ("SOA") forms that cable operators must file to account for either these industry changes or the significant experience that copyright owners have gained from reviewing SOAs and dealing with cable operators concerning their filings. Indeed, the SOA forms, and related Copyright Office ("Office") regulations, have remained essentially the same since the mid-1980s."

The petition continues that "Because Section 111 (unlike other compulsory licenses) does not provide Program Suppliers with a right to audit cable operators, Program Suppliers rely almost exclusively on SOA information for compliance review. However, the information currently provided by cable operators on SOAs is in certain instances either unclear or inadequate, or both. Consequently, Program Suppliers have faced increasing challenges with respect to garnering information that can be used to efficiently analyze cable operators’ compliance with Section 111. On numerous occasions, Program Suppliers have found cable operators unwilling (and, indeed, without incentive) to provide additional information requested by Program Suppliers." (Parentheses in original.)

Hence, the petition states that the "Program Suppliers seek clarification and modification of the existing regulations and pertinent sections of the SOA forms. First, Program Suppliers request that the Office improve the nature of the information reported on the SOAs by cable operators, particularly information relating to gross receipts, service tiers, subscribers, headend locations, and cable communities. The proposed changes are necessary to keep current with a changing industry and are critical to efficient and effective compliance review by Program Suppliers and other copyright owners as well as the Licensing Division of the Copyright Office. Second, Program Suppliers request regulatory clarification regarding the effect of cable operators’ interest payments that accompany late-filed SOAs or amended SOAs – specifically, that payment of such interest does not impair the ability of copyright owners to bring infringement actions against cable operators that fail to pay the full amount of the royalties they owe on a timely basis. Finally, Program Suppliers request that the Office clarify the definition of the term cable "community" in its regulations to comport more clearly with the meaning of "cable system" as defined in Section 111, and to avoid misinterpretation by cable operators. That definition is crucial to determining the amount of Section 111 royalties that cable operators must pay."

The CO seeks comments on the points raised in this petition.

Initial comments are due by September 25, 2006. Reply comments are due by October 24, 2006.

For more information, contact the CO's Ben Golant, who until recently worked at the Federal Communications Commission's (FCC) Media Bureau.

The CO's notice is published at Federal Register, August 10, 2006, Vol. 71, No. 154, at Pages 45749-45752. This proceeding is CO Docket No. RM-2005-6.

The CO also published a notice in the Federal Register that announces, describes, and sets the effective date (October 1, 2006), for its final rule that amends its rules to require the submission of royalty fees to be made by electronic funds transfer. This affects fees paid by cable systems and satellite carriers that retransmit broadcast signals in accordance with the provisions governing the statutory licenses set forth in 17 U.S.C. § 111 and 17 U.S.C. § 119, respectively. It also affects fees paid by manufacturers and importers of digital audio recording devices and media who distribute these products in the U.S., pursuant to the Audio Home Recording Act of 1992, which is codified in Title 17, at Chapter 10. See, Federal Register, August 10, 2006, Vol. 71, No. 154, at Pages 45739-45740. This proceeding is CO Docket No. RM 2006-4.

People and Appointments

8/10. Randal Quarles will leave the Department of the Treasury, effective on the adjournment of the 109th Congress. He is currently the Under Secretary of the Treasury for Domestic Finance. From 2001 through 2005 he was Assistant Secretary of the Treasury for International Affairs. See, Treasury release.

8/10. Alexis Fabbri joined Washington Internet Daily as a reporter. She recently received a masters degree in journalism from American University.

More News

8/10. The Federal Communications Commission (FCC) published a notice [10 pages in PDF] the describes and sets the comment deadlines for its 2006 biennial review of telecommunications regulations. Initial comments are due by September 1, 2006. Reply comments are due by September 15, 2006. This is CG Docket No. 06-152, EB Docket No. 06-153, IB Docket No. 06-154, ET Docket No. 06-155, WT Docket No. 06-156, and WC Docket No. 06-157.

8/10. The U.S. Court of Appeals (11thCir) issued its opinion [15 pages in PDF] in Imaging Business Machines v. Banctec, a trade secrets case involving high speed document scanner technology. The Court of Appeals reversed in part, affirmed in part, and remanded. This case is Imaging Business Machines, LLC v. Banctec, Inc., U.S. Court of Appeals for the 11th Circuit, App. Ct. No. 05-10835, an appeal from the U.S. District Court for the Northern District of Alabama, D.C. No. 04-01104-CV-J-S.

8/10. The Common Cause (CC) released a report [16 pages in PDF] titled "Wolves in Sheep's Clothing, Part II: More Telecom Industry Front Groups and Astroturf". The report states that "Telephone and cable industry giants are fiercely lobbying for a telecommunications reform bill pending in the Senate. Some of their methods are easy to spot: campaign contributions, television ads that run only inside the Beltway, and meetings with influential members of Congress. Other tactics are more insidious. One of the underhanded tactics increasingly being used by telecom companies is ``Astroturf lobbying´´ -- creating front groups that try to mimic true grassroots, but that are all about corporate money, not citizen power." CC identifies five such groups that oppose Congressional legislation that would impose a network neutrality mandate. See also, CC's first report [28 pages in PDF], released in March of 2006, that makes similar allegations regarding nine other groups. Some, but not all, of the groups identified by the CC have been in existence for many years, and have been active on a wide range of issues. CC is a Washington DC based interest group that supports a network neutrality mandate, a position that is also supported by large companies such as Microsoft and Google. See, CC web page titled "Net Neutrality".

8/10. The Federal Communications Bar Association (FCBA) has formed a new ad hoc committee on Homeland Security and Emergency Communications. The Committee plans to host an event for the leadership of the Federal Communications Commission's (FCC) new Homeland Security Bureau. It is also planning an event on emergency alert systems. The Committee will also host a brown bag lunch on September 27 to discuss what events it should host. The Co-Chairs of the Committee are Jennifer Manner (Mobile Satellite Ventures), Greg Cook (FCC's Enforcement Bureau), Bob Gurss (Association of Public Safety Communications Officials) and David Wye. For more information, contact Jennifer Manner at 703-390-2730 or jmanner at msvlp dot com.

8/10. The Federal Communications Bar Association (FCBA) has formed a new committee on Communications Law, Copyright & Digital Rights Management. There will be an organizational meeting on September 21. For more information, contact Seth Davidson at sdavidson at fw-law dot com, Ben Golant at bgol at loc dot gov or Ann Bobeck at abobeck at nab dot org.

Grand Jury Indicts Man for Accessing E-Mail of Others at Former Place of Employment

8/9. A grand jury of the U.S. District Court (DUtah) returned an indictment that charges William Kurt Dobson with violation of 18 U.S.C. § 1030(a)(2)(C) and 18 U.S.C. § 2511(1)(a) in connection with his alleged accessing of e-mail of persons at a company where he was previously employed.

This case illustrates some of the cyber threats posed by disgruntled or disloyal former employees and contractors.

The indictment states that Dobson was the Chief Technology Officer and a Director of S5 Wireless, Inc., a Utah based company that "was developing a wireless tracking technology that would use radio frequencies to track the location of packages and containers."

The indictment further alleges that after Dobson resigned from the company, he "accessed the computer that hosted S5's e-mail using his home computer's Internet connection in Sandy, Utah. He did so using a user name and password that he had learned during his employment with S5. Dobson accessed the computer without the authorization of S5 or any S5 officer or employee."

It states that "During this access, Dobson created a new mailbox on that server, named ``,´´ and secured it with a password."

The indictment continues that David Carter was the CEO of S5, and that Dobson "sent the server interception instruction that caused the e-mail server to place a copy of each incoming e-mail addressed to Carter in the ``´´ mailbox contemporaneously with placing the incoming e-mail in Carter's mailbox." The indictment adds that Dobson later did the same for a second S5 officer.

The indictment alleges that Dobson configured his home computer to automatically download all of the messages on S5's server in the "" mailbox. He thus obtained copies of e-mails sent to these two persons over a six week period.

The indictment contains two counts of violation of § 2511(1)(a), which provides that "any person who -- (1) intentionally intercepts, endeavors to intercept, or procures any other person to intercept or endeavor to intercept, any wire, oral, or electronic communication ... shall be punished ..." There is one count for each of the two persons whose e-mail he obtained.

The indictment also contains one count of violation of § 1030(a)(2)(C), (b), (c)(2)(B)(i)-(iii), and (e)(2)

Subsection (a)(2)(C) provides that "Whoever ... intentionally accesses a computer without authorization or exceeds authorized access, and thereby obtains ... information from any protected computer if the conduct involved an interstate or foreign communication ... shall be punished as provided in subsection (c) of this section."

Subsection b prohibits attempts. It provides, in full, that "Whoever attempts to commit an offense under subsection (a) of this section shall be punished as provided in subsection (c) of this section."

Subsection c is not a prohibition. Rather, it contains punishments. Subsection e is not a prohibition. Rather, it contains definitions.

This case is U.S.A. v. William Kurt Dobson, U.S. District Court for the District of Utah, D.C. No. 2:06CR00563 TC.

Rep. Markey Advocates Data Destruction Bill

8/9. Rep. Ed Markey (D-MA) stated in a release that "Internet companies are often able to glean personal information through a computer user's surfing and searching of Internet sites. Such entities should not hoard this data, which often hold the imprints of millions of individuals and their Internet use. This stored-up data about consumers’ Internet use should not be needlessly kept in perpetuity, inviting data thieves or fraudsters, or disclosure through judicial fishing expeditions".

Rep. Markey, is the ranking Democrat on the House Commerce Committee's Subcommittee on Telecommunications and the Internet, and the sponsor of HR 4731, the "Eliminate Warehousing of Consumer Internet Data Act of 2006".

This bill provides that "An owner of an Internet website shall destroy, within a reasonable period of time, any data containing personal information if the information is no longer necessary for the purpose for which it was collected or any other legitimate business purpose, or there are no pending requests or orders for access to such information pursuant to a court order."

The bill also would also give the Federal Trade Commission (FTC) civil enforcement authority. Violations would constitute unfair or deceptive acts under the FTC Act.

While Rep. Markey introduced this bill on February 8, 2006, his latest statement follows America Online's disclosure that it released a database of users' online search histories, without authorization from users.

HR 4731 recites in its findings that "Certain information about Internet searches or website visits conducted from a particular computer can be obtained and stored by websites or search engines, and can be traced back to individual computer users."

Also, while Rep. Markey seeks to limit data retention, the Department of Justice (DOJ) is urging the Congress to enact legislation that would mandate the retention of certain data by service providers that they do not currently retain. See for example, April 20, 2006, speech by Attorney General Alberto Gonzales, and story titled "Gonzales Proposes Data Retention Mandate, Web Site Labeling, and Ban on Deceptive Source Code" in TLJ Daily E-Mail Alert No. 1,357, April 25, 2006.

Rep. Markey's bill also states that "Consumers have an ownership interest in their personal information".

John Locke wrote in his Second Treatise on Government (Chapter 5) that "every man has a property in his own person".

CDT Reports that Well Known Companies Pay to Have Their Ads Displayed Via Harmful Adware

8/9. The Center for Democracy and Technology (CDT) released a report [28 pages in PDF] titled "Following the Money II: The Role of Intermediaries in Adware Advertising".

This report states that "Potentially harmful advertising software has grown from an annoying computing issue into a serious computer security risk. Well-known companies are helping to spread this unwanted adware, often unwittingly, by paying to have their ads displayed by nuisance or harmful adware programs. Many high-profile companies are unaware of this problem because the chain of intermediaries involved in moving ads from marketers to adware applications can be incredibly complex."

The report does not identify these well know companies.

The CDT's Ari Schwartz stated in a release that "It's deeply frustrating that legitimate companies continue to willingly do business with adware distributors known to be engaged in unethical, and in some cases illegal, distribution practices ... Clearly these companies haven't gotten the message about how fed up consumers are with adware and spyware. I can't understand why any legitimate company would risk tarnishing its brand by association with such practices."

The report provides a summary participants of the online advertising industry and their activities.

It also contains recommendations for marketers, ad agencies and intermediaries to follow, such as "Having a policy that explicitly states which ad placements are considered acceptable will provide a standard to which all advertising partners can be held" and requiring "all advertising partners by contract to adhere to those policies. All partners must also require their partners to include these ad placement terms in their contracts with their partners, essentially forcing the contractual bind all the way down the advertising chain."

August Recess Reading List

8/9. Readers may find some of the following recently published technology related books appropriate reading material for the August recess.

Accelerating the Globalization of America: The Role for Information Technology [Amazon] by Catherine Mann and Jacob Kirkegaard. Most of this book is also available in eight PDF files in the web site of the Institute for International Economics (IIE). Published June 15, 2006, by the IIE.

Identity Crisis: How Identification Is Overused and Misunderstood [Amazon], by Jim Harper (Cato Institute), published by Cato in May, 2006. See also, Cato book sale page.

The Wealth of Networks : How Social Production Transforms Markets and Freedom [Amazon], by Yochai Benkler (Yale Law School), published by Yale University Press on May 16, 2006.

Nanotechnology Regulation And Policy Worldwide [Amazon], by Jeffrey Matsuura, published by Artech House Publishers on June 30, 2006.

Creating Breakthrough Innovations (Results-Driven Manager)" [Amazon], published by Harvard Business School Press on June 30, 2006.

Spoiling for a Fight: The Rise of Eliot Spitzer" [Amazon], by Washington Post writer Brooke Masters, published by Times Books on July 25, 2006.

Net Neutrality or Net Neutering: Should Broadband Internet Services be Regulated?, a collection of essays edited by Tom Lenard and Randy May (Progress and Freedom Foundation), and published by Springer Science and Business Media in July of 2006.

Who Controls the Internet?: Illusions of a Borderless World" [Amazon], by Jack Goldsmith (Harvard Law School) and Timothy Wu (Columbia Law School), published by Oxford University Press on March 17, 2006.

People and Appointments

8/9. President Bush named Brent McIntosh to be Associate Counsel to the President. He was previously a Deputy Assistant Attorney General in the Department of Justice's (DOJ) Office of Legal Policy (OLP). He has worked on confirmation of judicial nominees. Also, on May 24, 2006, he testified before the House Judiciary Committee's Subcommittee on Crime regarding HR 4239, the "Animal Enterprise Terrorism Act". See, prepared testimony [PDF]. See, White House release.

8/9. President Bush named Neal Burnham to be Special Assistant to the President for White House Management. He was previously a Deputy Assistant Secretary at the Department of Commerce. See, White House release.

8/9. President Bush named Gregory Jacob to be Special Assistant to the President for Domestic Policy. He was previously Deputy Solicitor of Labor at the Department of Labor. See, White House release.

8/9. Jeff Joseph will leave the Consumer Electronics Association (CEA), effective August 30, 2006. He is the CEA's VP for Communications and Strategic Relations. He will join the Biotechnology Industry Organization (BIO). See, CEA release.

8/9. The National Association of Broadcasters (NAB) promoted Dennis Wharton to Executive Vice President, Media Relations. See, NAB release.

More News

8/9. The Department of Homeland Security (DHS) announced in a release that it recommends that "Windows Operating Systems users apply Microsoft security patch MS06-040 as quickly as possible. This security patch is designed to protect against a vulnerability that, if exploited, could enable an attacker to remotely take control of an affected system and install programs, view, change, or delete data, and create new accounts with full user rights." See also, Microsoft's web page titled "Microsoft Security Bulletin MS06-040" for more information, and to download the patch. See also, United States Computer Emergency Readiness Team (US-CERT) notice.

8/9. A grand jury of the U.S. District Court (SDCal) returned an indictment of Joshua Edward Eveloff and Michael Steven Twombly that charges fraud in sending e-mail, in violation of 18 U.S.C. §§ 1037 (a)(3) and (a)(4), and conspiracy, in violation of 18 U.S.C. § 371, in connection with their sending bulk commercial e-mail with falsified header information. That is, the is a case brought under the CAN-SPAM Act of 2003. The U.S. Attorneys Office stated in a release [PDF] the "the defendants then transmitted as many as 1,000,000 spam messages in a single day".

FTC Sues Movieland for Pop Up Ads Extortionate Tactics

8/8. The Federal Trade Commission (FTC) filed a complaint [25 pages in PDF] in U.S. District Court (CDCal) against Digital Enterprises, Inc., dba, and others, alleging violation of Section 5 of the FTC Act in connection with their alleged distribution of software that produces pop-ups ads on consumers' computers, and their associated demands for payments from consumers to stop the stream of pop-up ads.

The complaint alleges that the defendants "have engaged in a nationwide scheme to use deception and coercion to extract payments from consumers. Defendants' putative business offers consumers membership to an Internet download service with content such as news, sports, games, and adult entertainment. This service supposedly uses software called a ``download manager´´ that, once installed on a computer, will allow access to Defendants' download service. Defendants purport to market the software and download service with a 3-day free trial."

The complaint continues that "Installation of Defendants' download manager is merely a smokescreen concealing Defendants' true purpose: to install software and other files onto consumers' computers that enable Defendants to launch pop-up windows on consumers' computers demanding payments to Defendants. These pop-up windows, which display both textual and audiovisual payment demands, significantly disrupt consumers' use of their computers. After Defendants cause these pop-up payment demands to display on a particular computer for the first time, they cause them to redisplay again and again with ever-increasing frequency. To get these pop-ups to stop appearing, many consumers give in to Defendants' extortionate tactics and pay the Defendants.

The complaint adds that "To ensure that consumers cannot free their computers ``´´, ``,´´ or ``´´ and from the pop-up payment demands, Defendants install programs and computer code that prevent consumers from using reasonable means to uninstall Defendants' software."

The FTC stated in a release that the District Court denied the FTC's motion for a temporary restraining order.

This case is FTC v. Digital Enterprises, Inc., dba, Triumphant Videos, Inc., dba, Pacificon International, Inc., dba Vitalix, Alchemy Communications, Inc., Accessmedia Networks, Inc., Innovative Networks, Inc., Film Web, Inc., Binary Source, Inc., dba, Mediacaster, Inc., dba, CS Hotline, Inc., Easton Herd, and Andrew Garroni, U.S. District Court Central District Of California, Western Division, D.C. No. CV06-4923 CAS (AJWx).

9th Circuit Holds There is No Secondary Liability for Violation of ECPA's § 2702

8/8. The U.S. Court of Appeals (9thCir) issued its opinion [15 pages in PDF] in Freeman v. DirecTV, a class action alleging violation of the Electronic Communications Privacy Act (ECPA). The Court of Appeals affirmed the dismissal by the District Court, and held that there is no secondary liability for violation of §§ 2702 and 2707 of the ECPA, which bar an electronic communication service provider from divulging electronic communications, and provide a private right of action for violation of the bar. See, full story.

More News

8/8. The Department of Commerce's (DOC) Bureau of Industry and Security (BIS) announced that it will host a series of meeting to discuss its revised policy for exports and reexports of dual use items to the People's Republic of China (PRC). These meetings will be in Boston on August 15, Chicago on August 17, Houston on August 21, and La Jolla, California on August 22. See, notice in the Federal Register, August 8, 2006, Vol. 71, No. 152, at Pages 44943-44944.

FTC Sues Walsh Optical for Internet Sales of Contact Lens Without Prescriptions

8/7. The Federal Trade Commission (FTC) filed a complaint [6 pages in PDF] in U.S. District Court (DNJ) against Walsh Optical, Inc. and Kevin Walsh alleging violation of the Fairness to Contact Lens Consumers Act (FCLCA) and the FCT Act in connection with the sale of contact lens via web sites, without first obtaining verification of a prescription. The FTC simultaneously entered into a consent decree [12 pages in PDF] with the defendants. See also, FTC release.

The Congress enacted the FCLCA in 2003 in part to facilitate the sale of contact lenses over the internet. It requires that ophthalmologists and optometrists release contact lens prescriptions to their patients and verify contact lens prescriptions for internet sellers and other third parties. It is now codified at 15 U.S.C. §§ 7601-7610.

See, stories titled "House Passes Contact Lens Bill" in TLJ Daily E-Mail Alert No. 783, November 20, 2006; "Bill Would Facilitate Internet Sale of Replacement Contact Lenses" in TLJ Daily E-Mail Alert No. 669, May 29, 2003; and "House Subcommittee Holds Hearing on Contact Lens Bill" in TLJ Daily E-Mail Alert No. 736, September 10, 2003.

The FTC promulgated rules that require that contact lens sellers may sell contact lenses only in accordance with a contact lens prescription for the patient that is either presented to the seller or verified by direct communication with the prescriber. However, Walsh Optical sold contact lenses with complying with this rule.

The consent decree provides that the defendants will pay a fine of $40,000. It also enjoins the defendants from further violations, and imposes record keeping and reporting requirements.

This case is FTC v. Walsh Optical, Inc. and Kevin Walsh, U.S. District Court for the District of New Jersey, D.C. No. 06-3591.

Caprio Named President of Progress and Freedom Foundation

8/7. The Progress and Freedom Foundation (PFF) named Dan Caprio to be its next President. He will replace Raymond Gifford, who will become a partner in the Denver, Colorado law firm of Kamlet Shepherd Reichert. Gifford has been a special counsel for the firm. He was previously Chairman of the Colorado Public Utilities Commission. Gifford will remain an adjunct fellow at the PFF. See, PFF release.

rightCaprio (at right) joined the PFF in April of 2006 as a Executive Vice President, and a Senior Fellow. Before that, he was the Department of Commerce's Chief Privacy Officer and acting Assistant Secretary for Technology Policy.

Prior to working at the DOC, Caprio was Chief of Staff to former Federal Trade Commission (FTC) member Orson Swindle, who is now is a Distinguished Fellow at the PFF.

More News

8/7. The U.S. Court of Appeals (DCCir) issued its opinion [13 pages in PDF] in Telebrands v. FTC, upholding an order of the Federal Trade Commission (FTC). The FTC issued an administrative complaint against Telebrands Corp., and others, alleging that it made false and misleading claims in violation of Sections 5 and 12 of the FTC Act, which are codified at 15 U.S.C. §§ 45 and 52, in connection with its making unsubstantiated claims in infomercials regarding a purported weight loss and muscle building product. The FTC held that Telebrands violated the FTC Act and issued an order that contains fencing in injunctive provisions. Telebrands brought this petition for review to modify the order. The Court of Appeals upheld the order. This case is Telebrands Corp., et al. v. FTC, U.S. Court of Appeals for the District of Columbia Circuit, App. Ct. No. 05-2322, a petition for review of a final order of the FTC.

Go to News from August 1-5, 2006.