TLJ News from December 11-15, 2006

DC Circuit Rules in Nuvio v. FCC

12/15. The U.S. Court of Appeals (DCCir) issued its opinion [20 pages in PDF] in Nuvio v. FCC, denying several consolidated petitions for review of the Federal Communications Commission's (FCC) 2005 VOIP 911 order.

The FCC adopted its First Report and Order and Notice of Proposed Rulemaking [90 pages in PDF] on May 19, 2005, and released it on June 3, 2005. It is FCC 05-116 in WC Docket No. 04-36 and WC Docket No. 05-196.

The order portion of this item extends 911/E911 regulation to interconnected voice over internet protocol (VOIP) service providers. The order states that it requires compliance within 120 days of the effective date.

See also, stories titled "FCC Adopts Order Expanding E911 Regulation to Include Some VOIP Service Providers", "Summary of the FCC's 911 VOIP Order", "Opponents of FCC 911 VOIP Order State that the FCC Exceeded Its Statutory Authority", and "More Reaction to the FCC's 911 VOIP Order", in TLJ Daily E-Mail Alert No. 1,139, May 20, 2005. And see, story titled "FCC Releases VOIP E911 Order" in TLJ Daily E-Mail Alert No. 1,148, June 6, 2005.

The petitioners in this case are providers of VOIP service: Nuvio Corporation, Lightyear Network Solutions, LLC, Primus Telecommunications, Inc., Lingo, Inc., and i2 Telecom International, Inc.

The Court of Appeals offered this summary of the petitioners' arguments. "First, petitioners assert that the Order’s 120-day deadline for IVPs to provide E911 service to their users of nomadic, non-native VoIP service is an unexplained departure from the Commission’s precedent made without adequate regard to economic and technological obstacles. Petitioners also fault the Order for requiring that IVPs connect to the Wireline E911 network but failing to impose a corresponding duty on ILECs to permit this connection. Finally, petitioners contend that the Commission did not give adequate notice of the substance of the Order."

The Court of Appeals rejected all three arguments, and denied the petitions for review.

This case is Nuvio Corporation v. FCC and USA, respondents, and Verizon Telephone Companies and AT&T Corporation, intervenors, U.S. Court of Appeals for the District of Columbia, App. Ct. Nos. 05-1248, 05-1345, 05-1346, and 05-1347, petitions for review of a final order of the FCC. Judge Griffith wrote the opinion of the Court of Appeals, in which Judges Kavanaugh and Ginsburg joined.

US and PRC Wrap Up First Strategic Economic Dialogue

12/15. Secretary of the Treasury Henry Paulson, Secretary of Commerce Carlos Guitierrez, and other US government officials traveled to the People's Republic of China for the first U.S.-China Strategic Economic Dialogue on December 13 through 15, 2006.

Paulson gave a speech on December 15 in which he stated that "We have agreed to continue and focus discussions on a number of issues, including working toward sustainable growth and greater integration into the global economy without significant trade imbalances, and maintaining high productivity and enhancing protections for intellectual property rights."

Henry PaulsonPaulson (at right) stated in a second speech on December 15 that "We have agreement with the Chinese government on a number of fundamental principles. ... China's full participation in the global economy requires transparency and a commitment to enforcing international laws, especially in relation to property rights. Both sides have committed to reinvigorating discussions within the Joint Committee on Commerce and Trade to improve transparency and intellectual property protections."

Paulson added that "Our next meeting of the Dialogue will take place in May in Washington. Today we agreed that at the next meeting we will focus on the efforts of both nations to achieve innovative societies and greater openness to trade and investment and without significant trade imbalances."

See also, release of the U.S. Chamber of Commerce.

Copyright Industry Groups and National Copyright Administration of China Enter Into MOU

12/15. The Motion Picture Association, Business Software Alliance (BSA), Association of American Publishers (AAP), and The UK Publishers Association entered into a Memorandum of Understanding (MOU) with the National Copyright Administration of China (NCAC).

This MOU states that the "NCAC will investigate and handle, pursuant to law, online copyright infringement and piracy committed in the territory of China ..."

This MOU also provides method to report online copyright infringement to the NCAC.

The MOU also states that the parties "believe it is necessary to further enhance and improve the verification system of copyright authorization".

Robert Holleyman, head of the BSA, stated in a release that "BSA and its members are extremely pleased with the Memorandum of Understanding with the Chinese government to address the serious problem of online theft of copyrighted works, including computer software."

"The cooperation, investigation and enforcement strategies outlined in the MOU will go a long way in stemming the growth of online theft. We look forward to working with Chinese officials and industry partners in educating and training computer users, a critical component to increasing protection for online copyrighted works." Holleyman added that "“The software industry stands ready to provide the necessary information to assist the Chinese government in taking actions against online pirates."

Bernanke Speaks About Growth in China

12/15. Ben Bernanke, Chairman of the Federal Reserve Board, gave a speech in Beijing, People's Republic of China, titled "The Chinese Economy: Progress and Challenges".

He discussed and explained the growth of the PRC's economy since it began to reform in 1978. He praised and advocated free markets and free trade.

He said that "Well-defined property rights (including intellectual property rights), transparent accounting standards, good corporate governance, effective supervisory oversight of banks and markets, the consistent enforcement of contracts, and rules that allow for orderly bankruptcy proceedings for unprofitable firms all help to support efficient investment. China has made progress in developing these critical institutions, but continued focus on these areas would provide large economic benefits in the long run." He did not dwell on intellectual property rights." (Parentheses in original.)

He said that China also faces some significant risks and imbalances. "The principal risk arises from the likelihood that capital is not being allocated as efficiently as possible, the result of an undervalued exchange rate and of capital markets that, despite positive steps, remain distorted and underdeveloped."

He also said that the US "must also do its part, in particular by increasing its own rate of national saving and by avoiding protectionism."

Bernanke also made some comments about the nature of innovation. For example, he said that "Substantial experience has shown that modern economies, including those in early stages of development, are too complex to be managed effectively on a centralized basis. Prices set in free and competitive markets serve several critical functions, among them ... and providing incentives to engage in ... innovation ..."

He also stated that "small- and medium-sized enterprises are emerging as an engine of job creation in China -- as they are in the United States -- even as they promote innovation and help to create a more dynamic and diversified economy."

GAO Reports on Agencies' Failure to Implement IT Worker Exchange Program

12/15. The Government Accountability Office (GAO) released a report [19 pages in PDF] titled "Information Technology: Status and Challenges of Employee Exchange Program". This report finds that government agencies have failed to implement an information technology (IT) worker exchange program that was created by statute in 2002 to improve the quality of government IT systems.

This report addresses the Information Technology Exchange Program (ITEP). It was created by the E-Government Act of 2002. This Act was HR 2458 in the 107th Congress. It is now Public Law No. 107-347. Section 209 of the Act created an IT employee exchange program "to improve the skills of the Federal workforce in using information technology to deliver Government information and services".

For example, the Act provides that for IT management personnel, "On request from or with the agreement of a private sector organization, and with the consent of the employee concerned, the head of an agency may arrange for the assignment of an employee of the agency to a private sector organization or an employee of a private sector organization to the agency".

However, the just released GAO report finds that "With only 1 year remaining to begin exchanges under the ITEP program, the seven agencies that volunteered to participate are still initiating their programs, and no exchanges have taken place. The participating agencies all have drafted plans, but only three -- DHS, DOD, and Commerce -- have finalized them. Only DHS has attempted to negotiate an exchange, but it was unsuccessful in exchanging staff with a potential private-sector partner. In its last two semiannual reports OPM has reported on the status of agency plans, but has not reported that no exchanges have taken place to date."

Antitrust Division Amends 2001 Merger Review Process Initiative

12/15. The Department of Justice's (DOJ) Antitrust Division issued its amended Merger Review Process Initiative (MRPI). This revises the 2001 MRPI.

The DOJ also issued an amended model request for addition information and documentary material.

Thomas Barnett, the Assistant Attorney General in charge of the Antitrust Division, stated in a release that "The amendments to the Division's already successful Merger Review Process Initiative are part of our ongoing efforts to reduce enforcement burdens, while at the same time preserve our ability to conduct thorough investigations and protect consumers from anticompetitive transactions."

The DOJ release continues that "The amendments announced today include a voluntary option that will enable companies to reduce significantly the duration and cost of merger investigations. The new option would limit the document search required by a Division information request, known as a "second request," to certain central files and a targeted list of 30 employees whose files must be searched for responsive documents. This option will be made available to parties to most transactions that are reviewed by the Division, and will be conditioned on certain timing and procedural agreements that, among other things, protect the Division's ability to obtain appropriate discovery should it decide to challenge the deal in federal district court."

1st Circuit Addresses Copyright Preemption

12/15. The U.S. Court of Appeals (1stCir) issued its opinion in Santa Rosa v. Combo Records, a music recording contract rescission case involving Copyright Act preemption. The Court of Appeals affirmed the judgment of the District Court, which dismissed a musician's complaint against his record company. The Court of Appeals held that a claim to rescind a music recording contract is preempted by the Copyright Act. It did not address whether an action to collect damages would be preempted.

Gilberto Santa Rosa [Amazon] is a salsa singer and band leader. Combo Records is a record production company that produced and distributed several music albums of songs sung by Santa Rosa from 1986 through 1989.

Santa Rosa filed a complaint in 2004 in U.S. District Court (DPR) against Combo and others seeking rescission of a contract based on material breach, damages for unjust enrichment, a declaratory judgment of ownership of the recordings, and a declaratory judgment of violation of the Lanham Act. The District Court dismissed the complaint with prejudice.

Santa Rosa brought the present appeal. The Court of Appeals held that the claim for rescission is preempted by the Copyright Act.

17 U.S.C. § 301(a) provides, in part, that "all legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright ... are governed exclusively by this title. Thereafter, no person is entitled to any such right or equivalent right in any such work under the common law or statutes of any State."

The Court of Appeals reasoned that "Because Santa Rosa seeks rescission of his contract, if we were to grant him the relief that he sought, we would be required to determine his ownership rights by reference to the Copyright Act."

The Court of Appeals, relying on Data Gen. Corp. v. Grumman Sys. Support Corp., 36 F.3d 1147 (1st Cir. 1994), continued that "In such a case, there is little question that we would be merely determining whether Santa Rosa was entitled to compensation because of "mere copying" or "performance, distribution or display" of his recordings."

It concluded, therefore, that Section 301 "preempts Santa Rosa's rescission claim. Once it is determined that Santa Rosa's rescission claim is preempted, his only remedy is a claim under the Copyright Act ..."

The Court of Appeals then held that Santa Rosa's claim under the Copyright Act is barred by limitation.

17 U.S.C. § 507(b) provides that "No civil action shall be maintained under the provisions of this title unless it is commenced within three years after the claim accrued."

The Court of Appeals wrote that a claim for declaratory judgment of ownership accrues when the plaintiff knew of the alleged grounds for the ownership claim, which in the present case was "as soon as he finished recording each album". This was more than three years before the filing of the complaint.

This case is Gilberto Santa Rosa v. Combo Records, et al., U.S. Court of Appeals for the 1st Circuit, App. Ct. No.05-2237, an appeal from the U.S. District Court for the District of Puerto Rico, Judge Jay García-Gregory presiding. Judge Torruella issued the opinion of the Court of Appeals, in which Judges Baldock and Stahl joined.

1st Circuit Addresses Probative and Substantial Similarity in Copyright Infringement Case

12/15. The U.S. Court of Appeals (1stCir) issued its opinion in  Quaglia v. Bravo Networks, a copyright infringement case involving television programs. The Court of Appeals affirmed the summary judgment of the District Court for the defendant. The key section of the opinion addresses probative and substantial similarity.

Frank Quaglia is the creator and copyright holder of the film titled "The Ultimate Audition". The Bravo Network and others made a series of television programs titled "The It Factor".

Quaglia filed a complaint in U.S. District Court (DMass) against Bravo and others alleging copyright infringement, breach of confidentiality and breach of implied contract. The District Court granted summary judgment to the Bravo Network.

The Court of Appeals affirmed. It wrote that to prevail on a claim of copyright infringement, a plaintiff must demonstrate ownership of a valid copyright, and copying of constituent elements of the work that are original. The parties did not dispute Quaglia's copyright ownership. However, copying was at issue.

The Court of Appeals stated that "Since there is usually no evidence of actual copying, a plaintiff may prove that wrongful copying occurred by showing that defendants had access to the copyrighted work and that the allegedly infringing work has ``probative similarity´´ to the copyrighted work."

The Court of Appeals continued that probative similarity exists where two works are "so similar that the court may infer that there was factual copying." Then, the plaintiff must prove that the copying of the copyrighted work was so extensive that it rendered the infringing and copyrighted works substantially similar.

The Court of Appeals concluded that "Quaglia's claim fails on the issue of probative and substantial similarity. After viewing both works, we conclude that, essentially for the reasons stated by the district court in its March 21, 2006, opinion, no reasonable juror could find substantial similarity of expression, even taking the evidence in the light most favorable to plaintiff. To the extent that there are similarities, many of them relate to stock characters and scènes à faire, which are not subject to copyright protection."

The Court of Appeals held that it was appropriate to grant summary judgment. It also affirmed the summary judgment as to the remaining issues, with little discussion.

This case is Frank Quaglia v. Bravo Networks, et al., U.S. Court of Appeals for the 1st Circuit, App. Ct. No. 06-1864, an appeal from the U.S. District Court for the District of Massachusetts, Judge Rya Zobel presiding. The Court of Appeals issued a per curiam opinion by Judges Torruella, Selya and Howard.

People and Appointments

12/15. The Department of Justice (DOJ) issued a release that states that Alberto Gonzales "announced the appointment of Lee Lofthus as Assistant Attorney General for Administration. Mr. Lofthus has served in an acting capacity since June 1, 2006".

More News

12/15. The Federal Bureau of Investigation (FBI) published a notice in the Federal Register that pertains to its CALEA Final Notice of Capacity. The Communications Assistance for Law Enforcement Act (CALEA), as amended and implemented, imposes technology mandates upon telecommunications carriers and others to assist government agencies' efforts to attain universal surveillance capabilities. This notice pertains to the requirement that regulated entities be capable of supporting a certain number of simultaneous intercepts, pen registers, traps and traces, and related internet protocol surveillances. See, Federal Register, December 15, 2006, Vol. 71, No. 241, at Pages 75581-75584.

12/15. The Federal Communications Commission (FCC) adopted, but did not release, a Report and Order and Order on Reconsideration that amends the FCC's rules for the Amateur Radio Service. The FCC issued a release [PDF] that describes this order. It states that the amendments revise "the examination requirements for obtaining a General Class or Amateur Extra Class amateur radio operator license and revising the operating privileges for Technician Class licensees. In addition, the Order resolves a petition filed by the American Radio Relay League, Inc. (ARRL) for partial reconsideration of an FCC Order on amateur service rules released on October 10, 2006." This order is FCC 06-149 in WT Docket Nos. 04-140 and 05-235.

12/15. The Federal Communications Commission (FCC) issued a Public Notice [PDF] regarding the Center for Public Integrity's action against the FCC under the federal Freedom of Information Act (FOIA) to compel the FCC to release all Form 477s filed with the FCC. The FCC mandates the filing of Form 477 twice per year to enable it to study the extent of local telecommunications competition and deployment of broadband services. See, FCC's Form 477 web page. This case is Center for Public Integrity v. FCC, U.S. District Court for the District of Columbia, D.C. No. 06-1644 (RMC).

Section 1030 and Unauthorized Wi-Fi Access

12/14. The U.S. District Court (DUtah) sentenced Ryan James Fisher to 24 months in prison following his plea of guilty to one count of unauthorized access to a protected computer in violation of 18 U.S.C. § 1030(a)(5)(A)(i) & (a)(5)(B). Fisher accessed the computer of a small Wi-Fi service provider to cut off service to customers.

Introduction. Section 1030 was originally enacted in 1984. However, it has been substantially amended by the USA PATRIOT Act in 2001 (Public Law No. 107-56), by the Homeland Security Act of 2002 (Public Law No. 107-296), and by the 21st Century Department of Justice Appropriation Authorization Act (Public Law No. 107-273), which was a huge composite bill enacted in 2002.

Some language in Section 1030 lacks clarity on its face. It broadly prohibits unauthorized access to protected computers. But more significantly, the technology and activities to which this section applies is rapidly evolving. The DOJ has brought over 100 criminal prosecutions since 1998.

There is a list of Section 1030 prosecutions since 1998 with hyperlinks to Department of Justice (DOJ) press releases in the web site of the DOJ's Computer Crimes and Intellectual Property Section (CCIPS). It contains cursory information, and hyperlinks to DOJ press releases. It lists 118 criminal prosecutions. It does not list any civil 1030 actions.

This is a relatively small number of cases. There have been few published court opinions. Moreover, the DOJ has not published any recent guidelines explaining its understanding of the statute, what activities it considers to be prohibited, or what cases it considers worth prosecuting.

Hence, there is uncertainty as to what actions are prohibited by Section 1030, and what the DOJ may prosecute. The present case provides a little guidance, and adds some new uncertainty.

The present case does not fit into any of the the common categories of prior Section 1030 prosecutions, such as theft of credit card data, theft of trade secrets, or malicious destruction of data. In this case the defendant accessed a computer of a small town Wi-Fi service provider to temporarily terminate Wi-Fi service to its customers.

This case may be noteworthy because one of the DOJ's theories regarding damages is based upon interference in unlicensed spectrum bands.

This case might also provide some indication as to current DOJ thinking regarding the use of Section 1030 in the context of pretexting related conduct.

Details of the Case. A grand jury of the U.S. District Court (Utah) returned a one count indictment on February 15, 2006. See, DOJ release. Fisher entered into a plea agreement on July 13, 2006. The District Court sentenced him on December 14, 2006. See, DOJ release [PDF]. This case was brought in Utah, and was nominally handled by the U.S. Attorney's Office in Utah.

A representative of the US Attorneys Office for the District of Utah told TLJ that no one from that office would discuss the case because it was handled by the Department of Justice (DOJ) in Washington DC. One name that appears on the indictment and plea agreement is Scott Garland, who is a Special Counsel in the DOJ's Computer Crimes and Intellectual Property Section (CCIPS). A representative of the DOJ wrote to TLJ to "respectfully decline your interview request".

This case arose in the small town of Vernal, Utah, which lies in a sparsely populated area east of Salt Lake City, near the northwest corner of the state of Colorado.

The indictment states that this is a "Computer Hack" case in which the defendant, Fisher, accessed, without authorization, the computers of a Wi-Fi internet access service provider to terminate its service to its Wi-Fi customers.

The indictment alleges, and Fisher admits in the plea agreement, that he previously worked for SBT Internet, a small service provider in Vernal, and later became the owner of a competing ISP. However, neither document identifies Fisher's purpose in terminating internet access of SBT's and UT1's customers' service. Both documents state that Fisher disagreed with SBT about financial and business issues. Hence, his acts may have been motivated by malice against SBT. Both documents state that Fisher became a competitor of SBT and UT1. Hence, his acts may have been motivated by a desire to win new customers through unfair competition practices.

TLJ spoke with Fisher. He said that he terminated service to SBT customers. He said that the business issue referenced in the plea agreement was that someone stole equipment from him, went to work for SBT, and took the equipment with him. He said that the financial issue was abuse of tax power. He stated that the wife of the owner of SBT works in the county assessor's office, and threatened to seize his property for failure to pay local taxes. He said that he did not owe the asserted tax debt.

Statute. Subsection (a)(5) provides that anyone who:

  "(A)(i) knowingly causes the transmission of a program, information, code, or command, and as a result of such conduct, intentionally causes damage without authorization, to a protected computer; (ii) intentionally accesses a protected computer without authorization, and as a result of such conduct, recklessly causes damage; or (iii) intentionally accesses a protected computer without authorization, and as a result of such conduct, causes damage; and
  (B) by conduct described in clause (i), (ii), or (iii) of subparagraph (A), caused (or, in the case of an attempted offense, would, if completed, have caused) -- (i) loss to 1 or more persons during any 1-year period (and, for purposes of an investigation, prosecution, or other proceeding brought by the United States only, loss resulting from a related course of conduct affecting 1 or more other protected computers) aggregating at least $5,000 in value; (ii) the modification or impairment, or potential modification or impairment, of the medical examination, diagnosis, treatment, or care of 1 or more individuals; (iii) physical injury to any person; (iv) a threat to public health or safety; or (v) damage affecting a computer system used by or for a government entity in furtherance of the administration of justice, national defense, or national security;"

RF Interference. One element of Subsection (a)(5)(A)(i) is "damage". Subsection (a)(5)(B) then elaborates that the damage requirement can be met by loss of "at least $5,000 in value", or through several non-monetary criteria, such as "physical injury to any person". This case is based upon monetary loss of at least $5,000.

The indictment and plea agreement lack clarity on the nature of the damages. Both recite that there was $5,000 in damages. The plea agreement provides at least three sources of loss. First, internet users lost their service. Second, SBT spent time remedying the changes made by Fisher. Third, the plea agreement discusses, in vague terms, radio frequency interference as a cause of damage.

Wi-Fi devices use unlicensed spectrum bands. Users of these bands need not obtain FCC spectrum licenses. As a consequence, Wi-Fi operators and users must accept the possibility of interference from others. See especially, 47 C.F.R. § 15.5(b).

The FCC reaffirmed this principle in its Logan Airport Wi-Fi proceeding. It wrote in its order that "The spectrum used by these unlicensed Wi-Fi systems may be used by any type of unlicensed device that meets the Commission’s rules. The Commission has authorized a wide variety of consumer products for this frequency band, including Bluetooth devices, ad hoc wireless local area network devices, RF ID devices, cordless telephones, etc. All of these devices operate under the conditions that they may not cause harmful interference and must accept any interference received, including interference caused by other unlicensed devices."

See, story titled "FCC Rules Boston Airport Cannot Regulate WiFi" in TLJ Daily E-Mail Alert No. 1,481, November 2, 2006. See also, the FCC's Memorandum Opinion and Order [25 pages in PDF]. This is FCC 06-157 in ET Docket No. 05-247.

Nevertheless, the plea agreement in the Fisher case suggests that it may be the DOJ's understanding that interference in unlicensed bands can form the basis of the damage element in a Section 1030 action.

The plea agreement includes this recitation by Fisher. "Because Wi Fi Internet service providers use radio frequencies to send and receive data, the transmission from one Wi Fi Internet service provider can interfere with the transmissions from another Wi Fi Internet service provider if individual providers do not operate with certain agree-upon parameters. There are also other factors that can affect radio frequency transmissions. As a result of my programs, information, codes, and commands effectively terminating the Internet access of SBT's customers, each of these customers' access points, in their normal operation to regain network connectivity, began to repeatedly broadcast radio signals on frequencies, some of which were used by at least one other Wi Fi Internet service provider who provided Wi Fi Internet services in the same geographic areas as SBT, namely UT1."

Fisher told TLJ that he caused no interference problem. Rather, he said that SBT "overpowered it access points". He said that the above quoted paragraph is "weird", that he did not draft it, and that he signed the plea agreement for reasons of expediency despite this paragraph.

HP and Pretexting. It may also be noteworthy that the defendant, Fisher, accessed a computer to cut off a communications service. This is also a tactic used by persons attempting to acquire confidential phone records.

That is, the House Commerce Committee's (HCC) Subcommittee on Oversight and Investigations investigation into Hewlett Packard and communications industry pretexting in 2006 revealed that data predators sometimes cut off a victim's communications service for which it cannot obtain data, to induce the victim to use another communications service, such as cell phone service, for which the predator can obtain records.

See, stories titled "Summary of Existing Federal Laws Related to Pretexting" and "Federal Criminal Statutes Related to Pretexting" in TLJ Daily E-Mail Alert No. 1,463, October 6, 2006.

Also, the state of California, which has brought criminal charges against persons involved in the HP pretexting scandal, charged violation of California's state computer fraud and abuse statute. See, story titled "California Charges Patricia Dunn and Others With Four Felonies", in TLJ Daily E-Mail Alert No. 1,462, October 5, 2006.

While Fisher had no motive related to obtaining confidential personal information, this case suggests that the DOJ might use Section 1030 to prosecute certain pretexting related conduct.

Other Wi-Fi Issues. There are a number of other Wi-Fi related factual scenarios that might give rise to a Section 1030 prosecution. This case shows that there is at least one Wi-Fi computer access scenario that the DOJ may prosecute. But, it reveals nothing about what other Wi-Fi related scenarios might result in criminal prosecution.

More Information. Scott Garland, other attorneys in the CCIPS, and attorneys in the US Attorneys Office in Utah will not speak with TLJ regarding this case, or other issues related to this case. TLJ has also contacted several persons at the Federal Communications Commission (FCC), all of whom did not return calls, or provided no responsive information.

Persons interested in learning more about the DOJ's understanding of Section 1030 may find a January 23 luncheon informative. Eric Wenger, a Trial Attorney in the CCIPS will speak at a luncheon titled "Federal Computer Crimes" on Tuesday, January 23, 2007, at 12:15 PM. The event is sponsored by the Federal Communications Bar Association's (FCBA) Common Carrier Committee. However, he may focus on issues unrelated to what is prosecutable under Section 1030, such as data retention requirements for ISPs. The price to attend ranges from $25 to $60. The deadline for registrations and cancellations is 5:00 PM on January 19. See, registration form [PDF]. This luncheon will be held at the offices of the law firm of Wiley Rein & Fielding, 1776 K Street, NW.

See also, Scott Garland's September 13, 2006, outline titled "Computer and Intellectual Property Crimes". He spoke at the University of Michigan law school.

This case is USA v. Ryan James Fisher, U.S. District Court for the District of Utah, D.C. No. 2:06 CR 00080 PGC.

More News

12/14. The U.S. Court of Appeals (6thCir) issued its opinion [PDF] in Mike's Train House v. Lionel, a case involving misappropriation of trade secrets related to model trains, and unjust enrichment. The plaintiff, Mike's Train House, prevailed in the District Court, and obtained an award of over $40 Million. The Court of Appeals reversed. This case is Mike's Train House, Inc. v. Lionel LLC, Korea Brass and Yoo Chan Yang, U.S. Court of Appeals for the 6th Circuit, App. Ct. No. 05-1095, an appeal from the U.S. District Court for the Eastern District of Michigan, D.C. No. 00-71729.

SEC Adopts E-Proxy Rule Changes

12/13. The Securities and Exchange Commission (SEC) adopted, but did not release, amendments to its proxy rules that allow companies to furnish proxy materials to shareholders through a notice and access model using the internet.

The SEC issued a release that describes these rule changes. It states that "A company choosing to follow the model must post its proxy materials on an Internet Web site and send a Notice of Internet Availability of Proxy Materials to shareholders at least 40 days before the meeting date. A proxy card may not accompany the Notice. However, a company may send a paper proxy card accompanied by another copy of the Notice 10 days or more after sending the initial the Notice."

The SEC's release also states that it "is proposing to require companies and soliciting persons to follow the notice and access model for all solicitations not related to a business combination transaction in the future. The proposed mandatory model would operate in substantially the same manner as the voluntary model. However, under the proposal, the Notice could be accompanied by a full set of proxy materials, including the proxy statement, annual report, and proxy card."

FCC Releases Agenda for December 20 Event

12/13. The Federal Communications Commission (FCC) released an agenda [2 pages in PDF] for its event on Wednesday, December 20, 2006, titled "Open Meeting".

The agenda states that the FCC will consider a Report and Order and Further Notice of Proposed Rulemaking regarding Section 621(a)(1).

Section 621 of the Communications Act of 1934, as amended by the Cable Television Consumer Protection and Competition Act of 1992, is codified at 47 U.S.C. § 541. Subsection (a)(1) provides that "A franchising authority may award, in accordance with the provisions of this subchapter, 1 or more franchises within its jurisdiction; except that a franchising authority may not grant an exclusive franchise and may not unreasonably refuse to award an additional competitive franchise. Any applicant whose application for a second franchise has been denied by a final decision of the franchising authority may appeal such final decision pursuant to the provisions of section 555 of this title for failure to comply with this subsection."

The FCC adopted a Notice of Proposed Rulemaking (NPRM) [26 pages in PDF] on November 3, 2005. The FCC released the text of this NPRM on November 18, 2005. It is FCC 05-189. This proceeding is MB Docket 05-311. See also, story titled "FCC Adopts NPRM Regarding Local Franchising of Video Services" in TLJ Daily E-Mail Alert No. 1,247, November 4, 2005.

The agenda also states that the FCC will consider a 9th NPRM regarding public safety communications in the 700 MHz band. This proceeding is WT Docket No. 96-86.

The agenda also states that the FCC will consider a Report on cable industry prices. This proceeding is MM Docket No. 92-266.

The agenda also states that the FCC will consider a Declaratory Ruling (DR) regarding whether internet protocol (IP) captioned telephone service is a form of telecommunications relay service (TRS) compensable from the Interstate TRS Fund. This proceeding is CG Docket No. 03-123.

However, this agenda does not include consideration of a Memorandum Opinion and Order regarding the merger of AT&T and BellSouth.

This event titled "Open Meeting" is scheduled for 9:30 AM on Wednesday, December 20, 2006 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 consider all of the items on its published agenda. The FCC sometimes adds items to the agenda without providing the "one week" notice required 5 U.S.C. § 552b. The FCC does not always start its events at the scheduled time, or at all. The FCC usually does not release at its events copies of the items that it adopts at its events.

Sen. Tim Johnson Hospitalized

12/13. Sen. Tim Johnson (D-SD) is hospitalized in Washington, DC. See, release of Sen. Harry Reid (D-NV) which states that Sen. Johnson "has suffered a possible stroke". There is a possibility that Republicans could regain control of the Senate as a result.

The partisan balance in the Senate is 51-49. Were Sen. Johnson to leave the Senate, the partisan balance would become 50-49. Were the Governor of South Dakota, who is Republican Michael Rounds, to appoint a Republican replacement, the partisan balance of the Senate would become 50-50. The Constitution provides that the Vice President, who is currently the Republican Dick Cheney, breaks tie votes in the Senate. See also, statement of Gov. Rounds.

The US Constitution, at Article I, Section 3, paragraph 4, provides in part that "The Vice President of the United States shall be President of the Senate, but shall have no Vote, unless they be equally divided."

The US Constitution, at Amendment XVII, provides in part that "When vacancies happen in the representation of any State in the Senate, the executive authority of such State shall issue writs of election to fill such vacancies: Provided, That the legislature of any State may empower the executive thereof to make temporary appointments until the people fill the vacancies by election as the legislature may direct."

South Dakota Codified Laws, at 12-11-4, provides as follows: "Temporary appointment by Governor to fill vacancy in United States Senate. Pursuant to the Seventeenth Amendment to the Constitution of the United States of America, the Governor may fill by temporary appointment, until a special election is held pursuant to this chapter, vacancies in the office of senator in the Senate of the United States."

12-11-1 provides as follows: "Special election to fill congressional vacancy -- Time of election of representative. If a vacancy occurs in the office of a senator or representative in the United States Congress it shall be the duty of the Governor within ten days of the occurrence, to issue a proclamation setting the date of and calling for a special election for the purpose of filling such vacancy. If either a primary or general election is to be held within six months, an election to fill a vacancy in the office of representative in the United States Congress shall be held in conjunction with that election, otherwise the election shall be held not less than eighty nor more than ninety days after the vacancy occurs.

Also, the South Dakota Constitution, at Article IV, Section 3, provides that "Whenever a vacancy occurs in any office and no provision is made by the Constitution or laws for filling such vacancy, the Governor shall have the power to fill such vacancy by appointment."

People and Appointments

12/13.  The Senate confirmed Eric Solomon to be an Assistant Secretary of the Treasury, for tax policy, on December 8, 2006. He took the oath of office on December 13. See, DOT release.

12/13. The Senate confirmed Philip Swagel to be an Assistant Secretary of the Treasury, for economic policy, on December 8, 2006. He took the oath of office on December 13. See, DOT release.

12/13. The Senate confirmed Anthony Ryan to be an Assistant Secretary of the Treasury, for financial markets, on December 8, 2006. He took the oath of office on December 13. See, DOT release.

12/13. The Senate confirmed Michele Davis to be an Assistant Secretary of the Treasury, for public affairs, on December 8, 2006. He took the oath of office on December 13. See, DOT release.

12/13. The Senate confirmed Robert Hoyt to be General Counsel of the Department of the Treasury, on December 8, 2006. He took the oath of office on December 13. See, DOT release.

12/13. Dale Hatfield was named chairman of the Spectrum Management Advisory Committee. See, NTIA release.

More News

12/13. The Progress and Freedom Foundation (PFF) published a paper titled "Solutions for Software Patents: Notes From Under My Desk". The author is the PFF's Solveig Singleton.

House Commerce Committee Democrats Seek Further Information from HP's Mark Hurd

12/12. Rep. John Dingell (D-MI) and Rep. Bart Stupak (D-MI) send a letter [PDF] to Mark Hurd, the P/CEO/Ch of Hewlett Packard Company (HP), regarding his exercise of stock options just prior to HP's public disclosure of pretexting and surveillance activities in its September 6, 2006, filing of a Form 8-K with the Securities and Exchange Commission (SEC).

See, story titled "HP Admits Spying on its Directors via Pretexting to Obtain Confidential Home Phone Records" in TLJ Daily E-Mail Alert No. 1,443, September 6, 2006.

Rep. John DingellRep. Dingell (at right) will become Chairman of the House Commerce Committee (HCC) in the 110th Congress. Rep. Stupak may become Chairman of the HCC's Subcommittee on Oversight and Investigations.

They wrote in their letter to Hurd that "A key issue in the Subcommittee's investigation is how much Hewlett-Packard Co. (HP) management knew about the board-leak investigation, when they knew it, and what actions they took in response. In that regard, it appears from the enclosed chart on HP executive trading, that you voluntarily cashed in $1.37 million worth of options on August 25, 2006, the very same day that you were questioned by Wilson Sonsini attorneys who were ``investigating the investigation.´´ This was also before the company filed its September 6, 2006, Form 8-K with the Securities and Exchange Commission (SEC), disclosing the circumstances surrounding the resignation of Thomas Perkins from the Board of Directors and the controversial methods used to obtain phone records and other sensitive information on HP insiders and members of the press."

They continued that "The August 25 transaction does not appear to be part of any prescheduled program; the chart indicates that you exercised options and cashed them out on the same day. Please state whether the chart is accurate. If it is accurate, please explain the reason for this transaction. Continuing revelations about widespread ``backdating´´ and ``spring loading´´ abuses have raised questions about whether executives are cashing in (``bullet dodging´´) while in possession of potentially damaging material facts that shareholders do not know. Please state whether this is or is not the case with your transaction, and further please inform us whether any other HP officers or directors engaged in similar transactions during this period."

The two Representatives requested a response by Thursday, December 21, 2006.

The HCC's Subcommittee on Oversight and Investigations held two days of hearings on HP and pretexting on September 28 and 29, 2006. On October 4, 2006, the state of California brought felony charges against five persons.

See, related stories in TLJ Daily E-Mail Alert No. 1,462, October 5, 2006.
 • California Charges Patricia Dunn and Others With Four Felonies
 • Cingular Sues Pretexting Firm Involved in HP Scandal
 • Verizon Wireless Files John Doe Complaint Against HP's Pretexters
 • HP Discloses Terms of Ann Baskins' Resignation Agreement
 • Persons Involved in the HP Scandal
 • Bibliography for HP Scandal
See also, related stories in TLJ Daily E-Mail Alert No. 1,463, October 6, 2006.
 • Summary of Existing Federal Laws Related to Pretexting
 • Federal Criminal Statutes Related to Pretexting
 • Civil and Administrative Actions by Federal Agencies Related to Pretexting
 • Federal Private Rights of Action Related to Pretexting
 • FCC License Revocation, Renewal and Transfer Proceedings

Rep. Pelosi Announces Some Committee Assignments

12/12. Rep. Nancy Pelosi (D-CA), who will be the Speaker of the House in the 110th Congress, announced some new members of House committees. See, release. Subcommittee assignments and Chairs have not yet been announced.

Rep. elect Steve Cohen (D-TN) was named to the House Judiciary Committee (HJC). Cohen, a Tennessee state senator, will represent the Memphis, Tennessee, district previously represented by Rep. Harold Ford (D-TN), who ran unsuccessfully for the US Senate.

Seven sitting Representatives, and one Representative elect, were named to the House Commerce Committee (HCC): Rep. Jane Harman (D-CA), Rep. Leonard Boswell (D-IA), Rep. Darlene Hooley (D-OR), Rep. Anthony Weiner (D-NY), Rep. Jim Matheson (D-UT), Rep. G.K. Butterfield (D-NC), Rep. Charlie Melancon (D-LA), and Rep. elect Baron Hill (D-IN).

See also, Rep. Hooley's release, Rep. Boswell's release, Rep. Matheson's release, and Rep. Melancon's release.

Rep. Pelosi passed over Rep. Harman in naming Rep. Sylvestre Reyes (D-TX) to be Chairman of the House Intelligence Committee (HIC). She was the ranking Democrat on the HIC in the 109th Congress. See, Rep. Harman's release.

TLJ spoke with an assistant to Rep. Pelosi who said that she "hasn't decided ratios yet", and that further assignments could be made. He added that there is "no way to get a full roster of committee" memberships until January.

Rep. Weiner, who has been named to the HCC, and Rep. Van Hollen, who has been named to the House Ways and Means Committee (HWMC), are both currently members of the HJC. Rep. Weiner is also a member of the Subcommittee on Courts, the Internet and Intellectual Property.

Both the HCC and the HWMC are designated as exclusive committees. Rep. Weiner and Rep. Van Hollen must give up their current HJC assignments, unless they request and receive waivers. There are precedents for members sitting on both the HJC and HCC, such as Rep. Rick Boucher (D-VA).

Neither Rep. Weiner's nor Rep.Van Hollen's offices immediately returned phone calls from TLJ.

More News

12/12. The U.S. Court of Appeals (4thCir) issued its opinion [PDF] in Space Technology Development Corp. v. Boeing, a contract dispute regarding the Naval EarthMap Observer Satellite (NEMO). The Court of Appeals affirmed the District Court's judgment in favor of Boeing. This case is Space Technology Development Corporation, Earth Search Sciences, Inc., and Accuprobe, Inc. v. Boeing Company, U.S. Court of Appeals for the 4th Circuit, App. Ct. No. 05-1671, an appeal from the U.S. District Court for the Eastern District of Virginia, at Alexandria, Judge Leonie Brinkema presiding, D.C. No. CA-05-411-1.

OUSTR Reports on PR China's Continuing Failure to Protect IPR

12/11. The Office of the US Trade Representative (OUSTR) released a report [109 pages in PDF] titled "2006 Report to Congress on China's WTO Compliance". The report is particularly critical of the People's Republic of China's failure to protect intellectual property rights (IPR).

The report concludes that the US "will have to pursue other options if the bilateral approach is not fruitful". That is, the US "remains prepared to take action, including WTO dispute settlement, where appropriate, to ensure that China develops and implements an effective system of IPR enforcement, as required by the TRIPS Agreement."

Susan Schwab, the USTR, stated in a release that "The United States and China have both benefited greatly from our growing trade relationship, and China’s participation in the rules-based international trading system has aided China greatly as it transforms itself into a modern commercial power. China has taken many important steps to implement its WTO obligations, but on the fifth anniversary of its WTO membership, China’s overall record is decidedly mixed".

She continued that "Chinese reforms have lowered systemic trade barriers to many goods and services from the United States and other WTO members and have begun to strengthen the rule of law in economic matters.  At the same time, certain industries face frustrating barriers to doing business in China, and there are worrisome signs that China’s market liberalization efforts have slowed in the last year.  With five years of WTO membership experience under its belt, we believe it is fair to expect China to be implementing the letter and spirit of its WTO obligations in full.  This would benefit both of our countries and strengthen the global trading system."

The report, which is required by Congressional statute, begins that "When China acceded to the World Trade Organization on December 11, 2001, it committed to implement over time a set of sweeping reforms that required it to lower trade barriers in virtually every sector of the economy, provide national treatment and improved market access to goods and services imported from the United States and other WTO members, and protect intellectual property rights. Five years later, the deadlines for almost all of China’s commitments have passed, and China’s transition period as a new WTO Member is now essentially over."

The reports finds progress in implementing WTO obligations in some areas, but concludes that "China’s shortcomings in enforcing laws in areas where detailed WTO disciplines apply, such as intellectual property rights (IPR), have also created serious problems for the United States and its other trading partners."

Intellectual Property Rights. The report contains an extensive section on China's failure to fulfill its WTO obligations to protect IPR. (See, pages 6-7 and 70-78.)

The report states that China's "framework of laws, regulations and implementing rules remains largely satisfactory". Although, it states that they are lacking on certain criminal penalties, on "Internet copyright protection", and in protecting "electronic information networks". It also states that Chinese law is defective in protecting against theft of company names, designs and trademarks, and trade secrets.

However, the main criticism of the report is that "China has continued to demonstrate little success in actually enforcing its laws and regulations in the face of the challenges created by widespread counterfeiting, piracy and other forms of infringement."

The report states that "U.S. industry in 2006 continued to estimate that levels of piracy in China across all lines of copyright business range between 85 and 93 percent, indicating little or no improvement over 2005. Trade in pirated optical discs continues to thrive, supplied by both licensed and unlicensed factories and by smugglers. Small retail shops continue to be the major commercial outlets for pirated movies and music (and a variety of counterfeit goods), and roaming vendors offering cheap pirated discs continue to be visible in major cities across China. Piracy of books and journals and end-user piracy of business software also remain key concerns. In addition, Internet piracy is increasing, as is piracy over enclosed networks such as universities." (Parentheses in original.)

Meanwhile, the report states, as pirates sell infringing products, "China maintains market access barriers, such as import restrictions and restrictions on wholesale and retail distribution, which discourage and delay the introduction of a number of legitimate foreign products into China’s market." It states that these barriers add to the incentive to infringe IPR.

The report adds that "China's widespread counterfeiting not only harms the business interests of foreign right holders, but also includes many products that pose a direct threat to the health and safety of consumers in the United States, China and elsewhere, such as pharmaceuticals, food and beverages, batteries, auto parts, industrial equipment and toys, among many other products."

The report states that the "One bright spot appears to be China's implementation of the new rules requiring computers to be pre-installed with licensed operating system software, as U.S. industry has been pleased with the initial results of that effort."

Telecommunications. The report concludes that "no meaningful progress took place in 2006 in the telecommunications services sector".

The report states that "China has not yet established a truly independent regulator in the telecommunications sector. The current regulator, MII, while nominally separate from the current telecommunications operators, maintains extensive influence and control over their operations and continues to use its regulatory authority to disadvantage foreign firms."

The report also finds that China continues to maintain excessive "capitalization requirements" on telecommunications services.

The report also complains that China has refused to publicly release a draft of its "Telecommunications Law", which the government has been working on since 2004.

Cato Paper Criticizes Use of Predictive Data Mining to Fight Terrorism

12/11. The Cato Institute released a paper [12 pages in PDF] titled "Effective Counterterrorism and the Limited Role of Predictive Data Mining". The authors are Jim Harper (Cato) and Jeff Jonas (IBM).

The paper defines data mining as "the process of searching data for previously unknown patterns and using those patterns to predict future outcomes."

It argues that "Though data mining has many valuable uses, it is not well suited to the terrorist discovery problem. It would be unfortunate if data mining for terrorism discovery had currency within national security, law enforcement, and technology circles because pursuing this use of data mining would waste taxpayer dollars, needlessly infringe on privacy and civil liberties, and misdirect the valuable time and energy of the men and women in the national security community."

"This is all the more important in light of recent controversies about the monitoring of telephone calls and the collection of telephone traffic data by the U.S. National Security Agency, as well as surveillance of international financial transactions by the U.S. Department of the Treasury."

The paper states that the September 11, 2001 terrorist attacks might have been prevented if national security and law enforcement agencies had been able "to connect the dots" with the information that it possessed. However, the report concludes that "What was needed to reveal the remaining 9/11 conspirators was better communication, collaboration, a heightened focus on the two known terrorists, and traditional investigative processes", rather than not data mining. The report details how investigatory and surveillance could have rolled up the plot.

The paper states that predictive data mining can be useful in marketing to consumers. Here, retailers use data on consumers to target, and advertise to, persons that its data mining analysis predicts might become good customers of the company. The report continues that most targeted consumers are "false positives". That is, for example, "The ``damage´´ done by an imperfectly aimed direct-mail piece may be a dollar lost to the marketer and a moment's time wasted by the consumer. That is an acceptable loss to most people."

In contrast, Harper and Jonas's paper states that there is no underlying body of data on terrorism upon which to build predictive models. The report states that "With a relatively small number of attempts every year and only one or two major terrorist incidents every few years -- each one distinct in terms of planning and execution -- there are no meaningful patterns that show what behavior indicates planning or preparation for terrorism."

Moreover, the "damage" resulting from "false positives" is far greater when data mining is used to predict terrorists. That is, "Civil liberties violations would be routine and person-years of investigators' precious time would be wasted if investigations, surveillance, or the commitment of people to screening lists were based on algorithms that were wrong the overwhelming majority of the time."

The report concludes that "Protecting America requires no predictive-data-mining technologies. Indeed, if there is a lesson to be learned from 9/11, it is not very groundbreaking. It is this: Enable investigators to efficiently discover, access, and aggregate relevant information related to actionable suspects. Period. Sufficient dedication of national resources to more precisely ``pull the strings´´ offers the best chance of detecting and preempting future acts of terrorism."

GAO Reports on Overlap Between NIPLECC and STOP Programs

12/11. The Government Accountability Office (GAO) released a report [57 pages in PDF] titled "Intellectual Property: Strategy for Targeting Organized Piracy (STOP) Requires Changes for Long-term Success".

The report covers two related federal programs, the National Intellectual Property Law Enforcement Coordination Council (NIPLECC), which is created by statute, and the Strategy for Targeting Organized Piracy (STOP), which is an initiative of the current administration.

The report finds that "NIPLECC and STOP originated under different authorities, but the lines between them have become increasingly blurred, creating overlapping structures to protect and enforce IP rights. NIPLECC is a coordinating council created by Congress in 1999, while STOP is a strategy initiated by the White House in 2004 under the auspices of the National Security Council, with a strong coordination component; both involve nearly the same agencies."

The report states that "STOP is a good first step toward a comprehensive, integrated national strategy to protect and enforce U.S. intellectual property, and it has energized agency efforts. However, we found that STOP’s full potential as a strategy is limited because it does not fully address the six desirable characteristics of an effective national strategy."

The report also notes that the "NIPLECC retains an image of inactivity among the private sector". On the other hand, it states that the "authority and influence STOP enjoys as a presidential initiative could disappear after the current administration."

People and Appointments

12/11. Charles Fishkin, Director of the Securities and Exchange Commission's (SEC) Office of Risk Assessment, will leave the SEC "early in the new year" after a "transition period". He will work for AllianceBernstein.

More News

12/11. The Federal Communications Commission (FCC) renewed the charter for its Advisory Committee on Diversity for Communications in the Digital Age for a two year period ending on December 5, 2008. See, notice in the Federal Register, December 11, 2006, Volume 71, Number 237, at Page 71543.

12/11. The Government Accountability Office (GAO) released a report [114 pages in PDF] titled "Information Technology: DOD Needs to Ensure That Navy Marine Corps Intranet Program Is Meeting Goals and Satisfying Customers".

12/11. The Federal Communications Commission (FCC) held a hearing regarding regulation of media ownership in Nashville, Tennessee. FCC Commissioners Michael Copps wrote in his statement [PDF] that "In an era where minority ownership appears to be at shockingly and embarrassingly low lows, while payola allegations continue to raise their ugly heads, when infomercials and propaganda are passed off as news, and where license renewal has become a mindless pro forma farce, I believe that the bargain that America made with commercial broadcasting has gotten wildly out of whack." Commissioner Jonathan Adelstein wrote in his statement [PDF] that there are "exciting new platforms -- like satellite radio, the Internet, I-tunes and You Tube", but that "broadcasting is still the dominant source of not just local news and information, but also entertainment programming", and this has "huge implications for the free exchange of ideas". Chairman Kevin Martin wrote in his statement [PDF] that "We are still in the beginning phases of this review of our ownership rules." Commissioner Robert McDowell did not attend, but issued his regrets [PDF].

Go to News from December 6-10, 2006.