TLJ News from February 1-5, 2008

Dudas Discusses Patent Reform

2/5. Jon Dudas, head of the U.S Patent and Trademark Office (USPTO), spoke and answered questions at a news conference regarding patent reform legislation and related issues.

The SJC approved S 1145 [LOC | WW], the "Patent Reform Act of 2007", on July 19, 2007. However, the full Senate has not yet approved the bill.

Jon DudasDudas (at right) said that the U.S. "patent system is the envy of the world", but can be improved. He said that the Bush administration would "very much like to have a bill", but that it is "strongly opposed to S 1145 in its current form". The main problem, he said, is the damages provision in Section 4 of the bill.

Also, on February 4, 2008, Nathaniel Wienecke, of the Department of Commerce, sent a letter [6 pages in PDF] to members of the SJC explaining the administration's concerns with the bill.

Sen. Patrick Leahy (D-VT), the Chairman of the Senate Judiciary Committee (SJC), and Sen. Orrin Hatch (R-UT), a senior member of the SJC, issued a joint statement on February 5, 2008.

They wrote that "A critical piece of the Patent Reform Act addresses how courts determine damages for patent infringement. Since its passage in committee, we have been working to strike the right balance to ensure patent holders obtain appropriate compensation in infringement cases. We have worked and will continue to work with the White House as the Senate prepares to consider this important legislation."

They also wrote that "we are preparing for its consideration in the Senate this month".

Dudas also stated that "we" have visited forty Senate offices in the last two weeks, and that "the reception has been good".

Dudas related that the opponents of the damages language in the version of S 1145 reported by the SJC include mainstream manufacturers, universities, biotech and pharmaceutical entities, small inventors and small businesses, and venture capitalists, who Dudas said represent small inventors and businesses.

He said that the bill should be "technology neutral". With respect to damages, he said the trial court judges must keep "the proper amount of flexibility" in instructing juries. The bill should "give the judges the discretion to look at all of the factors", and then instruct the jury as to which are the most important.

Dudas also stated that the USPTO should be "fully funded", and that the USPTO should have greater fee setting authority. He expressed support for Sen. Tom Coburn's (R-OK) amendment, which allows the USPTO to set fees, which the Congress can then reject.

On July 18, 2007, the House Judiciary Committee (HJC) amended and approved HR 1908 [LOC | WW] , also titled the "Patent Reform Act of 2007".

Cable Programming Networks Challenge FCC's September Viewability Order

2/5. On February 4, 2008, C-SPAN, Discovery and other cable programming networks filed a petition for review in the U.S. Court of Appeals (DCCir) of an order [68 pages in PDF] of the Federal Communications Commission (FCC) regarding mandatory cable carriage of digital broadcast television signals after the DTV transition.

On September 11, 2007, the FCC adopted a Third Report and Order and Third Further Notice of Proposed Rulemaking regarding the mandatory cable carriage of digital broadcast television signals after the conclusion of the digital television (DTV) transition. The FCC elaborated that cable operators can "comply with the viewability requirement by choosing to either: (1) carry the digital signal in analog format, or (2) carry the signal only in digital format, provided that all subscribers have the necessary equipment to view the broadcast content."

See also, story titled "FCC Adopts R&O and Further NPRM Regarding Cable Carriage of Digital Broadcast TV Signals" in TLJ Daily E-Mail Alert No. 1,640, September 17, 2007.

The FCC released the text [68 pages in PDF] of this item on November 30, 2007. This proceeding is titled "Carriage of Digital Television Broadcast Signals, Amendment to Part 76 of the Commission’s Rules". This order is FCC 07-170 in CS Docket No. 98-120.

On February 5, 2008, David Rehr, head of the National Association of Broadcasters (NAB), sent a letter [2 pages in PDF] to FCC Chairman Kevin Martin regarding this legal challenge.

He wrote that "It was with great disappointment that I heard the news Monday that certain cable programmers are attempting to derail the digital television transition (DTV) with a lawsuit that could prevent many cable consumers from receiving local broadcast television stations after the transition. We agree with the Commission that its ``viewability´´ rules are required by the 1992 Cable Act and are essential to protecting the 40 million cable subscribers with analog cable."

Rehr added that "without rules ensuring the viewability of must-carry stations, many small, foreign language, and religious broadcast stations will go dark on some cable systems after the transition, disenfranchising millions of dedicated viewers that rely on cable companies to provide local stations without discrimination or material degradation. This would not be an acceptable outcome."

House Commerce Committee to Examine Google DoubleClick and Microsoft Yahoo Mergers

2/5. Rep. Bobby Rush (D-IL), the Chairman of the House Commerce Committee's (HCC) Subcommittee on Commerce, Trade, and Consumer Protection stated in a release that the Subcommittee plans to examine and hold a hearing on mergers involving companies involved in online advertising.

Antitrust merger reviews are conducted by the Department of Justice's (DOJ) Antitrust Division and the Federal Trade Commission (FTC) pursuant to statute. The Federal Communications Commission (FCC) has also conducted redundant antitrust merger reviews of some transactions that involve transfers of FCC licenses since passage of the Telecommunications Act of 1996.

Antitrust matters, and oversight of the Antitrust Division's and FTC's merger review activities, fall within the jurisdiction of the House Judiciary Committee (HJC).

The HCC has a long and bipartisan record of aggressively and creatively interpreting its jurisdiction to engage in legislative and oversight activities in areas assigned to other committees.

In the cases of the Google DoubleClick merger and the possible Microsoft Yahoo merger, the HCC is asserting its jurisdiction over consumer protection and privacy to examine these mergers.

Rep. Bobby RushRep. Rush stated that his Subcommittee "plans to hold a hearing on the privacy issues raised by last year's mergers in the online advertising space".

He also said that the "recent announcement by Microsoft demonstrates that consolidation of companies in the Internet advertising world will continue, irrespective of whether this specific deal materializes. The Subcommittee intends to request a confidential briefing from the appropriate Government regulators, and to schedule a hearing this Spring to explore the tough competition and consumer privacy issues that have been and will be raised by this activity".

Rep. Ed Whitfield (R-KY), the ranking Republican on the Subcommittee, stated in the same release that "Recent mergers in the search and online advertising worlds raise significant privacy concerns. I joined 11 of my Republican colleagues last fall in requesting Chairman Rush look into the privacy issues raised by the mergers of online search and online advertising firms. I am pleased Chairman Rush has committed to scheduling a hearing on these matters and I look forward to working with him as we investigate what personal information these types of companies glean from consumers' use of the internet, and how those data sets may be combined for future use."

The HCC has not yet announced a date for any merger related hearings.

On December 20, 2007, the FTC announced, after a long review, that it will not seek to block the Google DoubleClick merger. See, story titled "FTC Will Not Block Google DoubleClick Merger" in TLJ Daily E-Mail Alert No. 1,691, December 19, 2007.

The FTC wrote at the time that "some have urged the Commission to oppose Google's proposed acquisition of DoubleClick based on the theory that the combination of their respective data sets of consumer information could be exploited in a way that threatens consumers’ privacy." However, it "concluded that privacy considerations, as such, do not provide a basis to challenge this transaction."

The relevant statutory authority, Section 7 of the Clayton Act, which is codified at 15 U.S.C. § 18, prohibits acquisitions or mergers, the effect of which "may be substantially to lessen competition, or to tend to create a monopoly."

The lessening of privacy is not a statutory basis for blocking a merger.

Also, on December 12, 2007, Rep. Joe Barton (R-TX), the ranking Republican on the HCC, sent a letter to Eric Schmidt, Ch/CEO of Google, that propounded numerous written interrogatories related to the merger of Google and Doubleclick, protection of consumer privacy, and HR 964 [LOC | WW], the "SPY ACT". See, story titled "Rep. Barton Questions Google on Doubleclick Merger and Privacy" in TLJ Daily E-Mail Alert No. 1,688, December 13, 2007.

More News

2/5. Federal Communications Commission (FCC) Commissioner Deborah Tate gave a speech [14 pages in PDF] in Washington DC to the Federalist Society in which she addressed many issues, but focused on the FCC's universal service subsidies.

2/5. The Federal Communications Commission (FCC) released an order [4 pages in PDF] in its proceeding titled "In the Matter of Local Number Portability Porting Interval and Validation Requirements: Telephone Number Portability: Embarq Petition for Waiver of Deadline". This order grants "a request from Embarq to waive until September 30, 2008, the deadline to comply with the Commission’s declaratory ruling that the validation process for local number portability (LNP) requests should be based on no more than four fields." It also waives the same deadline for all other affected companies until July 31, 2008. This order is FCC 08-31 in WC Docket No. 07-244 and CC Docket No. 95-116.

2/5. The Federal Communications Commission (FCC) announced in a Public Notice [5 pages in PDF] (DA 08-295) that it "has designated 10 megahertz of spectrum in the 470-512 MHz band as a Spectrum Sharing Innovation Test-Bed (Test-Bed) and identified procedures for interested parties to conduct technology tests in that band. The Test-Bed is intended to provide a venue for demonstrating techniques to provide for better sharing between Federal Government (federal) and non-federal radio users. The Commission takes this action in conjunction with similar action by the U.S. Department of Commerce's National Telecommunications and Information Administration (NTIA) to designate the 410-420 MHz band and establish procedures for a Test-Bed, as required by the President’s Spectrum Policy Initiative." (Emphasis added.) The FCC's proceeding is ET Docket No. 06-89.

2/5. The Department of Commerce's (DOC) National Telecommunications and Information Administration (NTIA) published a notice in the Federal Register that announces that expressions of interest to participate in the Spectrum Sharing Innovation Test-Bed (Test-Bed) is Friday, February 29, 2008. See, Federal Register, February 5, 2008, Vol. 73, No. 24, at Pages 6710-6711.

FCC Releases Report on Wireless Competition

2/4. The Federal Communications Commission (FCC) released a report [pages in PDF] titled "Twelfth Report". This is the FCC's annual report to the Congress on the state of competition Commercial Mobile Radio Services (CMRS) industry. The report concludes that "there is effective competition in the CMRS market".

Moreover, when examining trends in mobile internet access for handsets, laptops and other devices, the report concludes that "competition in mobile telecommunications markets is flourishing".

The report finds that 99.8 percent of the U.S. population is served by at least one CMRS provider. 99 percent of the population is served by at least two providers. 95.5 percent is served by at least three. 89.9 percent is served by at least four.

47 U.S.C. § 332(c)(1)(C) requires the FCC to write an annual report on "competitive market conditions with respect to commercial mobile services", including "an analysis of whether or not there is effective competition". Neither the statute, nor this report, define the term "effective competition".

See also, FCC release [PDF] summarizing this report. This report is FCC 08-28 in WT Docket No. 07-71.

See, full story.

FCC Releases Text of Media Ownership Order

2/4. The Federal Communications Commission (FCC) released the text [124 pages in PDF] of its Report and Order on Reconsideration in its proceeding regarding regulation of the ownership of media. The FCC adopted this item back on December 18, 2007.

FCC Commissioners Michael Copps and Jonathan Adelstein complained in a joint statement [3 pages in PDF] released on February 4, 2008 that "After being told we have to ``hurry up´´ and vote by December 18, the Commission waited over a month and a half before finally issuing this Order."

The two also wrote that "From the day Chairman Martin's newspaper-broadcast cross-ownership proposal was announced last November, we pointed out that it was so vague and chock-full of loopholes that it would permit any broadcast station to merge with any newspaper in virtually any market in the country. The Order being released today does little to close those loopholes -- indeed, it creates two new ones."

See also, story titled "Copps and Adelstein Complain About FCC Media Ownership Agenda Item" in TLJ Daily E-Mail Alert No. 1,688, December 13, 2007, and story titled "Martin Releases Media Ownership Proposal" in TLJ Daily E-Mail Alert No. 1,675, November 13, 2007.

This item is FCC 07-216 in MB Docket No. 06-121, MB Docket No. 02-277, MM Docket No. 01-235, MM Docket No. 01-317, MM Docket No. 00-244, MB Docket No. 04-228, and MM Docket No. 99-360.

US Joins Trade Negotiations with P-4 Nations

2/4. The Office of the U.S. Trade Representative (OUSTR) announced in a release [PDF] that the U.S. "will join negotiations on investment and financial services set to begin in March among Singapore, Chile, New Zealand and Brunei, known as the ``P-4´´ group of countries."

The OUSTR added that "These four countries have negotiated their own Free Trade Agreement (FTA), the Trans-Pacific Strategic Economic Partnership, based largely on the United States’ FTAs with Singapore and Chile. While the Trans-Pacific Strategic Economic Partnership Agreement entered into force in 2006, the investment and financial services chapters remain to be negotiated."

The AeA's Rob Mulligan said in a release that "Trade with countries in the Asia-Pacific region is critical to AeA member companies, as U.S. high-tech goods exports to Asia-Pacific reached $86.2 billion in 2006."

He added that "If this negotiation can lead to a broader regional agreement addressing key areas of interest to the high-tech industry such as tariff and non-tariff barriers, intellectual property protection, and e-commerce, it would provide increased access for the US high-tech industry to the rapidly growing Asia-Pacific markets."

He also stated that "it is our hope that USTR will include provisions from the Korea Free Trade Agreement (FTA) that improved upon the high-standard terms of the US-Singapore and US-Chile agreements."

Mulligan concluded that "U.S. companies do not want to be at a disadvantage relative to growing high-tech competitors from other countries moving forward with FTAs."

The U.S. Chamber of Commerce's Myron Brilliant stated in a release that "the business community hopes more countries will join in. This agreement could be a catalyst to open markets for U.S. exports across the Asia-Pacific region, which accounts for half the world economy."

Bush Releases FY 2009 Budget Proposal

2/4. President Bush submitted his proposed budget for fiscal year 2009 to the Congress. See, White House press office web page with hyperlinks to relevant documents.

See also, related stories in this issue titled "Bush Releases Proposed Budget and Legislative Proposals for FCC" and "Bush Releases Proposed Budget for USPTO".

NSF. Under President Bush's proposal, the National Science Foundation (NSF) budget would be increased from $6,033 Million in FY 2008 to $6,854 in FY 2009, with the budget for research and related activities being increased from $4,805 Million to $5,594 Million. See, NSF summary and detail [PDF].

DOJ. The Department of Justice (DOJ) budget would be decreased from $22,690 Million in FY 2008 to $20,267 Million in FY 2009. However, the Federal Bureau of Investigation's (FBI) budget would be increased from $6,514 Million to $7,108 Million.

The DOJ's Antitrust Division's budget would be increased from $147,819,000 to $150,591,000.

The President's budget proposal lacks specificity regarding either the investigation or prosecution of intellectual property crimes or cyber or network security crimes. Nor does the proposal disclose a budget for the DOJ's Computer Crimes and Intellectual Property Section (CCIPS).

The budget proposal for the Department of Commerce (DOC) covers many technology related entities, including the USPTO, BIS, NTIA, NIST, and others. See, DOC budget summary and detail [PDF]

Export Controls. Under Bush's proposal, the DOC's Bureau of Industry and Security's (BIS) budget would be increased from $72,855,000 in FY 2008 to $83,676,000 in FY 2009.

The BIS regulates the export of, and other activities related to, dual use items, including software, microprocessors, and encryption products.

NTIA. The DOC's National Telecommunications and Information Administration (NTIA) has responsibilities with respect to the management of spectrum used by federal agencies. It is also an advisor and advocate of the executive branch on domestic and international telecommunications issues. These functions, and funding therefor, remain largely unchanged.

In addition, the NTIA has historically been used in the distribution of grants. Bush's proposal would terminate the Department of Commerce's (DOC) Public Telecommunications Facilities, Planning and Construction Grants ($19 Million for FY 2008), which are administered by the NTIA.

The proposed budget states that "The awarding of new Public Telecommunications Facilities, Planning and Construction grants is proposed for termination in 2009. Since 2000, almost 70 percent of PTFP awards have supported public television stations’ conversion to digital broadcasting, and mandated conversion efforts are now largely completed. Funding for remaining digital conversion and other activities is available from a number of other sources."

NIST. Bush's budget proposal provides that the National Institute of Standards and Technology's (NIST) budget would be increased from $440,517,000 in FY 2008 to $535,000,000 in FY 2009.

The budget proposal states that "As part of the President’s 10-year American Competitiveness Initiative to significantly increase Federal funding for basic research in the physical sciences, NIST will target key investments that promote U.S. innovation and industrial competitiveness, including, among other things: expanding NIST’s neutron facility to aid in characterizing novel materials in high-growth research fields; improving nanotechnology manufacturing capabilities; enhancing innovation in the biosciences through measurement and standards development related to complex life systems; increasing communications capabilities through research in optical technologies; and enhancing cyber security by developing infrastructure needed to respond to emerging online threats."

Bush's proposal would increase funding for NIST laboratories, but would terminate the NIST's Technology Innovation Program (TIP), which was previously known as the Advanced Technology Program (ATP).

Technology Administration. The Congress eliminated the DOC's Technology Administration in August of 2007 in Section 3002 of HR 2272 [LOC | WW], the "America Competes Act of 2007", which is now Public Law No. 110-69.

Hence, Bush's budget proposal contains no proposed funding for the Technology Administration..

CPB. The President's budget would reduce funding for the Corporation for Public Broadcasting (CPB), and independent entity, from $448 Million in FY 2008 to $200 Million in FY 2009.

Rural Utilities. The President's budget would terminate the Department of Agriculture's (DOA) Community Connect (Broadband) Grants ($13 Million in FY 2008) and Public Broadcast Grants ($5 Million in FY 2008).

It would reduce the DOA's Distance Learning and Telemedicine Grants program from $30 Million in FY 2008 to $20 Million in FY 2008.

FTC. Under President Bush's proposal, the Federal Trade Commission (FTC) budget would be increased from $243,864,000 in FY 2008 to $256,200,000 in FY 2009.

The budget proposal states that this will enable the FTC "to maintain the current performance of its missions", which include both antitrust and consumer protection, including from online fraud.

Funding for the FTC comes from the general fund, Hart Scott Rodino premerger notification filings, and telemarketing fees.

OSTP. Under the President's proposal, the budget for the Executive Office of the President's (EOP) Office of Science and Technology Policy (OSTP) would be increased from $5,184,000 in FY 2008 to $5,303,000 in FY 2009.

PCLOB. The Privacy and Civil Liberties Oversight Board (PCLOB) was created by The Intelligence Reform and Terrorism Prevention Act of 2004 (IRTPA) as a board with the Executive Office of the President (EOP). The Implementing Recommendations of the 9/11 Commission Act of 2007, which President Bush signed into law in August of 2007, converted the board into a separate agency within the executive branch.

The President's budget proposal for the PCLOB for FY 2009 is $2 Million.

Tax Policy. The President's proposed budget also contains several technology related taxation proposals.

First, it proposes to extend the research and experimentation tax credit.

Second, it proposes to repeal the excise tax on local telephone service.

Third, it would permanently extend the deduction for corporate donations of computer equipment for educational purposes.

Reaction. Rep. John Dingell (D-MI), the Chairman of the House Commerce Committee (HCC), issued two releases.

He wrote in one release that the "budget proposal regarding the communications sector offers much of what we have seen in prior years, such as the ill-advised attack on the Corporation for Public Broadcasting and the proposed termination of the Telecommunications Development Fund. In the past, Congress has wisely blocked these attempts, and I suspect Congress will do so again."

He continued that "While the President’s proposed budget would increase the Federal Communications Commission’s budget for consumer outreach about the digital television transition, I am concerned about the size of the increase."

He added that "The President has proposed an additional $20 million dollars for educating consumers about digital television. When added to the original $5 million that was allotted by the Republican Congress that enacted this program, this is far too little to educate a nation of 300 million people."

"Television is the primary means by which the public receives news concerning public safety and national security, so public awareness of the digital television transition is critical. If we are truly concerned about the safety and security of our Nation, we should not be attempting this transition on the cheap", said Rep. Dingell.

In a second release, Rep. Dingell stated that "President Bush’s request for decreased funding for key Commerce Department programs represents significant disregard for the well-being and productivity of American workers and businesses.  Moreover, these cuts fly in the face of the Commerce Department’s purported goals of maximizing U.S. competitiveness and promoting innovation."

Rep. Dingell added that "I plan to seek detailed clarification from Commerce Secretary Gutierrez about proposed funding decreases for the Economic Development Administration (EDA) and the National Institute of Standards and Technology (NIST). In my view, such irresponsible cuts will hinder the Nation's capacity to generate robust economic growth."

Rep. Bernie Thompson (D-MS), the Chairman of the House Homeland Security Committee, wrote in a release that Bush's budget proposal "neglects firefighters, police officers, and other emergency service providers who respond to our calls for help by slashing their funding". However, he noted that "The President has finally increased funding to secure federal government information networks after grossly under-funding them for years."

Rep. Bart Gordon (D-TN), the Chairman of the House Science Committee, stated in a release that the proposed budget "proposes an incomplete and short-sighted plan to promote U.S. competitiveness".

Rep. Gordon explained that this "budget boosts funding for basic research at NSF, but doesn’t make education a priority". He also opposed elimination of the NIST's Technology Innovation Program.

Rep. Tom Davis (R-VA) praised the President's budget proposal for providing increased funding for implementation of two statutes sponsored by Rep. Davis, the E-Government Act of 2002, and the Federal Information Security Management Act.

Patricia Harrison, head of the CPB, stated in a release that the President's proposed cut to the CPB budget is "draconian".

Bush Releases Proposed Budget and Legislative Proposals for FCC

2/4. President Bush released his budget proposal for the Federal Communications Commission (FCC). It provides for an increase from $313,000,000 in FY 2008 to $338,874,783 in FY 2009. The proposal also includes several policy and legislative proposals.

Bush proposes to eliminate the Anti-Deficiency Act exemption for certain universal service tax and subsidy programs. He also backed the use of reverse auctions in awarding universal service high cost subsidies.

He also advanced several spectrum auction related legislative proposals. See, budget proposal [PDF] for "Other Independent Agencies".

The FCC stated in a release that "The requested FY 2009 funding level would provide funding to conduct an outreach campaign to educate consumers about the impact and benefits of the transition to Digital Television".

It also stated that "the request would allow the Commission to combat waste, fraud, and abuse, in the Universal Service Fund".

And, it stated that the budget proposal would "replace Mobile Digital Direction Finding (MDDF) vehicles that are used to support public safety entities (e.g., emergency responders, police, fire departments) in the resolution of harmful interference to their communications systems; establish a Public Safety Clearinghouse Program that will significantly expand the Commission’s coordination and outreach efforts targeted to the public safety community; consolidate existing licensing systems to improve the Commission’s management and processing of licensing transactions; and strengthen management and oversight of the Commission’s financial and accounting processes."  (Parentheses in original.)

Finally, the FCC stated that "The request would also provide funds to cover mandatory increases in salaries and benefits and inflationary increases for contractual services."

Universal Service. The budget proposal for the FCC states that "The Administration supports Universal Service Fund reforms, such as the use of reverse auctions to allocate High Cost subsidies, that will help ensure subsidies are well-targeted, demonstrate results, and minimize the burden to ratepayers. In addition, the Administration will pursue means to strengthen USF financial and program management, to minimize waste, fraud, and abuse. The programs can be managed successfully consistent with standard financial controls such as the Anti-Deficiency Act, which protect program beneficiaries and ratepayers."

It elaborates that "The Administration strongly opposes provisions that exclude the Universal Service Fund (USF) from the financial management protections provided by the Anti-Deficiency Act and restrict the types of USF reforms that can be considered by the Federal Communications Commission. These provisions unnecessarily increase the risk of financial mismanagement of the Fund and limit reforms that could improve the efficiency of the program and reduce burdens on telephone ratepayers."

Spectrum Auctions. Bush proposed "legislation to extend indefinitely the authority of the Federal Communications Commission to auction spectrum licenses, which expires on September 30, 2011."

He also proposed legislation to provide the FCC "with new authority to use other economic mechanisms, such as fees, as a spectrum management tool. The Commission would be authorized to set user fees on unauctioned spectrum licenses based on spectrum-management principles. Fees would be phased in over time as part of an ongoing rulemaking process to determine the appropriate application and level for fees. Fee collections are estimated to begin in 2008, and total $4.1 billion through 2018."

Bush also proposed legislation "to ensure that spectrum licenses for predominantly domestic satellite services are assigned efficiently and effectively through competitive bidding. Services such as Direct Broadcast Satellite and Satellite Digital Audio Radio Services were assigned by auction prior to a 2005 court decision that questioned this practice on technical grounds. By clarifying through legislation that auctions of licenses for these domestic satellite services are authorized, prior policy of the Federal Communications Commission will be restored. Auction receipts associated with this clarification are estimated to begin in 2008, and total $593 million through 2018."

Finally, Bush proposed "legislation to improve the management of hybrid terrestrial -- satellite mobile communications spectrum licenses by setting a fee on the terrestrial authority of these integrated networks. Under current policy, these licenses are granted free of charge, though providers will compete with terrestrial wireless carriers that have purchased licenses at auction."

The budget proposal continues that "Setting a fee on the Ancillary Terrestrial Component of Mobile Satellite Service licenses will help to ensure that the radio spectrum is put to its most highly valued use by promoting consideration of the economic value of the spectrum, providing incentive for timely and robust network development, and improving equity relative to service providers that purchase their spectrum licenses in auctions."

The budget proposal states that "Receipts associated with this policy are estimated to begin in 2008, and total $1.16 billion through 2018."

Bush Releases Proposed Budget for USPTO

2/4. President Bush released his budget proposal for the U.S. Patent and Trademark Office (USPTO). This proposal is part of Bush's proposal for the Department of Commerce (DOC). See, summary and detail [PDF].

The President and Congress have historically employed budgetary smoke and mirrors to the USPTO, under which funding for the USPTO is provided by user fees, with some fees sometimes being diverted to subsidize the rest of the federal government's operations.

Bush's just released budget proposal contains the following language for the USPTO. "For necessary expenses of the United States Patent and Trademark Office (USPTO) provided for by law, including defense of suits instituted against the Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office, [$1,915,500,000] $2,074,773,000, to remain available until expended: Provided, That the sum herein appropriated from the general fund shall be reduced as offsetting collections assessed and collected pursuant to 15 U.S.C. 1113 and 35 U.S.C. 41 and 376 are received during fiscal year [2008] 2009, so as to result in a fiscal year [2008] 2009 appropriation from the general fund estimated at $0: Provided further, That during fiscal year [2008] 2009, should the total amount of offsetting fee collections be less than [$1,915,500,000] $2,074,773,000, this amount shall be reduced accordingly: Provided further, That any amount received in excess of [$1,915,500,000] $2,074,773,000 in fiscal year [2008] 2009, in an amount up to $100,000,000, shall remain available until expended:"

That is, under this language, the USPTO is to be funded out of user fees. The President projects a budget of $2,074 Million. However, if fees are less, then the USPTO budget will be so reduced. If fees are over $2,074 Million, then the first $100 Million would go to the USPTO, but any fees above that would be diverted to subsidize the rest of the government, rather than to pay for improved operation of the USPTO.

Bush Administration Opposes Senate Version of Patent Reform Act

2/4. Nathaniel Wienecke, of the Department of Commerce, sent a letter [6 pages in PDF] to Sen. Patrick Leahy (D-VT), the Chairman of the Senate Judiciary Committee (SJC), and the other members of the SJC, announcing and explaining the Bush administration's strong opposition to S 1145 [LOC | WW], the "Patent Reform Act of 2007", in its current form. See, full story.

More News

2/4. The Federal Trade Commission (FTC) announced that it will hold a workshop on May 6-7, 2008, titled "Beyond Voice: Mapping the Mobile Marketplace". It will address "The use of mobile-messaging services as instruments of M-commerce; Consumers’ ability to control mobile applications; The adaptation of advertising to mobile devices, including the challenges presented by small screen disclosures; M-commerce practices targeting children and teens; Industry best practices in preventing fraud, disclosing costs, and resolving billing disputes; Evolving security threats and solutions; and Next-generation products and services". February 27 is the deadline to submit requests to to be panelists. March 17 is the deadline to submit comments or original research to the FTC. The workshop will be held at the FTC Conference Center, 601 New Jersey Ave., NW. The workshop is free and open to the public. It will also be web cast. See, FTC notice.

2/4. The Federal Communications Commission (FCC) announced in a release [PDF] that March 14, 2008, is the deadline for recent law school graduates, graduating law students, and judicial clerks to submit applications for participation in the FCC's 2008 Attorney Honors Program.

Google Opposes Microsoft Bid for Yahoo

2/3. Google's Chief Legal Officer, David Drummond, issued a statement on February 3, 2008, regarding Microsoft's offer to purchase Yahoo. He wrote that "Microsoft's hostile bid for Yahoo! raises troubling questions. This is about more than simply a financial transaction, one company taking over another. It's about preserving the underlying principles of the Internet: openness and innovation."

Drummond continued. "Could Microsoft now attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC? While the Internet rewards competitive innovation, Microsoft has frequently sought to establish proprietary monopolies -- and then leverage its dominance into new, adjacent markets."

He also stated, "Could the acquisition of Yahoo! allow Microsoft -- despite its legacy of serious legal and regulatory offenses -- to extend unfair practices from browsers and operating systems to the Internet? In addition, Microsoft plus Yahoo! equals an overwhelming share of instant messaging and web email accounts. And between them, the two companies operate the two most heavily trafficked portals on the Internet. Could a combination of the two take advantage of a PC software monopoly to unfairly limit the ability of consumers to freely access competitors' email, IM, and web-based services?"

Drummond urged regulatory action. "Policymakers around the world need to ask these questions -- and consumers deserve satisfying answers."

The transaction would require regulatory approvals.

Microsoft Makes Offer to Acquire Yahoo

2/1. Microsoft announced in a release that "it has made a proposal to the Yahoo! Inc. ... Board of Directors to acquire all the outstanding shares of Yahoo! common stock for per share consideration of $31 representing a total equity value of approximately $44.6 billion."

Yahoo issued a release in response in which it stated that "it has received an unsolicited proposal from Microsoft to acquire the Company", and its "Board of Directors will evaluate this proposal carefully and promptly in the context of Yahoo!'s strategic plans and pursue the best course of action to maximize long-term value for shareholders."

Microsoft stated in its release that "The online advertising market is growing at a very fast pace, from over $40 billion in 2007 to nearly $80 billion by 2010. The resulting benefits of scale along with the associated capital costs for advertising platform providers make this a time of industry consolidation and convergence."

"Today this market is increasingly dominated by one player", wrote Microsoft, without mentioning Google by name. "Together, Microsoft and Yahoo! can offer a competitive choice while better fulfilling the needs of customers and partners."

The House Judiciary Committee's (HJC) Task Force on Antitrust and Competition Policy will hold a hearing titled "Hearing on the State of Competition on the Internet" on February 8, 2008. See, HJC notice.

Rep. John Conyers (D-MI), the Chairman of the HJC, and Rep. Lamar Smith (R-TX), the ranking Republican on the HJC, wrote in a joint statement that "Microsoft's bid to acquire Yahoo is certainly one of the largest technology mergers we’ve seen and presents important issues regarding the competitive landscape of the Internet. The House Judiciary Committee’s Task Force on Antitrust and Competition Policy intends to give the proposal a careful examination by holding a hearing next week. The Committee will hear from experts who will weigh in on whether this proposed consolidation works to further or undermine the fundamental principles of a competitive Internet.

The transaction would require regulatory approvals.

Cord Blomquist of the Competitive Enterprise Institute (CEI) stated in a release that "Unfortunately for consumers, the FTC will face pressure by the same groups that lobbied against the proposed Google/DoubleClick merger ... And again, many of the arguments won't be about competition, but instead will focus on privacy concerns."

He added that "With the Google/DoubleClick approval now serving as precedent, the FTC should be able to dismiss these arguments. The FTC approval must make a decision based on competition, which this deal increases significantly ... But, since that the deal is still pending in the EU and several groups are challenging the approval in the US, ‘Microhoo!’ may languish for a while."

House to Vote on Do Not Call Registry Fee Extension Act

2/1. The House is scheduled to consider S 781 [LOC | WW], the "Do-Not-Call Registry Fee Extension Act of 2007", on Wednesday, February 6, 2008, under suspension of the rules. See, Rep. Hoyer's calendar [PDF] for week of February 4.

The Senate passed this bill on December 17, 2007. The House passed its versions of this bill, HR 2601 [LOC | WW], also titled the "Do-Not-Call Registry Fee Extension Act of 2007", on December 11, 2007. The two bills a substantially the same, and have broad bipartisan support.

See also, story titled "House Commerce Committee Approves Do Not Call Registry Fee Extension Bill" in TLJ Daily E-Mail Alert No. 1,666, October 31, 2007, and story titled "Senate Commerce Committee Approves Bill to Revise and Extend Do Not Call Registry Fees" in TLJ Daily E-Mail Alert No. 1,620, August 1, 2007.

S 781 extends the authority of the Federal Trade Commission (FTC) to collect Do-Not-Call Registry fees to fiscal years after fiscal year 2007. In 2003, the Congress enacted and President Bush signed HR 395 (108th Congress), the "Do-Not-Call Implementation Act". It provided that the FTC may only collect fees through 2007. See also, stories titled "Senate Passes Do Not Call Implementation Act" in TLJ Daily E-Mail Alert No. 605, February 17, 2003, and "Bush Signs Do Not Call Implementation Act" in TLJ Daily E-Mail Alert No. 621, March 12, 2003.

The 2003 Act made it illegal for telemarketers to call consumers with whom they do not have a prior business relationship. It also limits the times of day they can call, the use of auto dialing technology, and the area codes accessible to telemarketers. The 2003 Act provides fines for calling numbers on the Do Not Call Registry, and requires telemarketers to keep their call lists up to date with the Registry.

S 781 also lower fees for telemarketers who access the database to $54 per area code, or a maximum of $14,850. Currently, telemarketers pay $62 for each area code, with the first five area codes free, and total fees capped at $17,050. The bill also provides that the FCC shall not charge for the first 5 area codes of data. The bill also provides for future adjustments of fees according to changes in the Consumer Price Index.

S 781 prohibits telemarketers from entering into fee and data sharing arrangements, "including any arrangement to divide the costs to access the registry among various clients of a telemarketer or service provider".

The bill also adds to the FTC's reporting requirements, and extends rulemaking authority to the FTC to carry out the amendments in the bill.

SEC Delays Sarbox 404 Implementation

2/1. The Securities and Exchange Commission (SEC) announced in a release that "its professional staff has commenced a cost-benefit study of an upcoming auditor attestation requirement for smaller companies under Section 404(b) of the Sarbanes-Oxley Act of 2002."

This release also states that "In connection with the study, the four-member Commission unanimously proposed on Jan. 31, 2008, the one-year extension of the Section 404(b) auditor attestation requirement for smaller companies that SEC Chairman Christopher Cox had previously announced in testimony before the House Small Business Committee in December 2007. The postponement would allow time for completion of the study. Under the proposed extension, the Section 404(b) requirements would apply to smaller public companies beginning with fiscal years ending on or after Dec. 15, 2009."

The SEC also announced that it will conduct a web based survey of companies that are subject to Section 404; and "in-depth interviews including companies that are just now becoming compliant". It added that it will publish a notice in the Federal Register seeking comments on the proposed extension of the auditor attestation requirement for smaller companies.

Nydia VelázquezRep. Nydia Velázquez (D-NY) (at right), the Chairman of the House Small Business Committee, stated in a release that "I have repeatedly called on the SEC to delay implementation and conduct this study, and I am very pleased that they are taking action. It is essential, however, that their analysis be designed with the needs of entrepreneurs in mind. That is the only way it will meet its intended goal".

The Sarbanes-Oxley Act of 2002 was HR 3763 in the 107th Congress. It is now Public Law No. 107-204.

Section 404 is titled "Management assessment of internal controls". Subsection 404(b) provides, in full, as follows: "(b) INTERNAL CONTROL EVALUATION AND REPORTING -- With respect to the internal control assessment required by subsection (a), each registered public accounting firm that prepares or issues the audit report for the issuer shall attest to, and report on, the assessment made by the management of the issuer. An attestation made under this subsection shall be made in accordance with standards for attestation engagements issued or adopted by the Board. Any such attestation shall not be the subject of a separate engagement."

Small public technologies companies have long argued that Section 404, and the SEC's implementation of it, is imposing huge burdens on them, with little benefit to investors. These arguments are supported by the May 8, 2006, Government Accountability Office (GAO) report [93 pages in PDF] titled "Sarbanes-Oxley Act: Consideration of Key Principles Needed in Addressing Implementation for Smaller Public Companies". See also, story titled "GAO Reports that Section 404 of Sarbanes Oxley Burdens Small Public Companies" in TLJ Daily E-Mail Alert No. 1,366, May 9, 2006.

See also, the AeA's February 2005 report titled "Sarbanes-Oxley Section 404: The 'Section' of Unintended Consequences and its Impact on Small Business".

SEC's Sirri Discusses Dark ATSs

2/1. Erik Sirri, Director of the Securities and Exchange Commission's (SEC) Division of Trading and Markets, gave a speech in New York in which he discussed dark pools, including dark alternative trading systems (ATSs), as well as their technologies and their implications for securities regulators.

He said that a dark pool is "a service offered by any trading venue that offers the potential to interact with liquidity beyond the venue's public quotes, if indeed the venue quotes at all".

Sirri continued that "Dark pools are solutions to a perennial trading dilemma for anyone that needs to trade in substantial size, particularly institutional investors. They provide a mechanism for such transactions to interact without displaying the full scale of their trading interest. Today, nearly every equity trading venue in the U.S. offers some sort of dark liquidity."

He noted that dark ATSs are increasing their share of trading volume.

The dark ATSs are enabled by new technologies. He said that "the use of algorithms and other sophisticated trading strategies that search out the most efficient venues for executing different types of orders has enabled large investors not merely to deal with highly active, automated markets, but to benefit from them. Some of these venues, of course, are dark ATSs, particularly those block crossing systems that have found creative ways for ``natural´´ buyers and sellers in size to find each other, while still preventing information leakage prior to actually executing the large trade. In this respect, technology has found more efficient ways to deal with the perennial trading dilemma of finding a way to trade in large size without tipping the market."

He continued with discussions of transactions, price transparency, fair competition, and best execution of investor orders.

More News

2/1. The Federal Communications Commission (FCC) set comment deadlines for its 3rd Further Notice of Proposed Rulemaking regarding cable carriage of digital television broadcast signals. Initial comments are due by March 3. Reply comments are due by March 17. The FCC adopted this item on September 11, 2007, and released the text [68 pages in PDF] on November 30, 2007. This item is FCC 07-120 in CS Docket No. 98-120. See, story titled "FCC Adopts R&O and Further NPRM Regarding Cable Carriage of Digital Broadcast TV Signals" in TLJ Daily E-Mail Alert No. 1,640, September 17, 2007. See also, notice in the Federal Register, February 1, 2008, Vol. 73, No. 22, at Pages 6099-6101. This item also includes a Third Report and Order that finalizes the material degradation requirements adopted by the FCC in 2001, and establishes two alternative approaches that cable operators may use to meet their responsibility to ensure that cable subscribers with analog television sets can continue to view all must-carry stations after the end of the DTV transition. The notice in the Federal Register describes, recites, and sets the effective date (February 3, 2008) for, rules changes in this R&O.

Go to News from January 26-31, 2008.