TLJ News from April 26-30, 2011

Doha Round on Brink of Failure

4/29. Trade negotiators met in Geneva, Switzerland, to discuss the long sought Doha round multilateral trade agreement.

Pascal Lamy, Director General of the World Trade Organization (WTO), gave a speech on April 29 in Geneva in which he stated that "This Round is, once more, on the brink of failure", and that the risk is "a creeping return to the law of the jungle".

Pascal LamyLamy (at left) said that "what emerges from the consultations I have had so far is that simply keeping the status quo in the Doha Round is dangerous. Of course, short-term, the WTO machinery will continue to deliver on its monitoring functions in the many committees which keep overseeing the implementation by Members of their commitments. The WTO will also continue to settle the disputes brought by its Members. ... In sum, the WTO is not in danger of immediate irrelevance."

But, he continued that "we need to be lucid and realistic: failure of the WTO to deliver on its legislative function, failure of the WTO to update the rules governing international trade -- last updated in 1995 -- by adapting them to the evolving needs of its Members, failure of the WTO to harness our growing economic interdependence in a cooperative manner risks a slow, silent weakening of the multilateral trading system in the longer term. And with this, a loss of interest by political leaders in many quarters, an erosion of the rules-based multilateral trading system, a creeping return to the law of the jungle."

He added that "today's stalemate over the Doha Development Round risks damaging the capacity of the WTO to deliver trade opening for the benefit of all, which is its core mission".

Michael Punke, Deputy U.S. Trade Representative and U.S. representative to the WTO, gave a speech on April 29 in Geneva in which he said that "The United States has not given up on Doha".

Ron Kirk Ron Kirk (at right), the U.S. Trade Representative, gave a speech in Washington DC on April 28 in which he said that "You will all have seen that Doha is -- not for the first time -- undergoing a challenging period. Reports and texts issued last week in Geneva confirm what we and others, including Director General Lamy, have been saying -- the gaps are large after more than two years of dedicated efforts to narrow them through bilateral negotiations with key partners."

Kirk continued that "Nobody wants to give up on Doha, because we all know that this negotiation offers unique opportunities for deep and comprehensive trade liberalization on a multilateral level. We are continuing to work so that we can seize every available chance to achieve those opportunities. But the United States can't do this alone. We continue to hope that key partners, including the spectacularly successful emerging economies, will work with us to find a deal that makes sense for the economy we are all now a part of."

Doha and E-Commerce. 142 members of the WTO launched this round of trade negotiations in Doha, Qatar in 2001. See, story titled "WTO Members Agree to Launch New Round of Trade Negotiations" in TLJ Daily E-Mail Alert No. 309, November 15, 2001.

The last multilateral agreement was concluded 16 years ago, in 1995. While WTO member nations now deadlock over ancient issues such as agriculture, the original purposes of the Doha round included modernizing the international trading system to address new topics such as electronic commerce and TRIPS.

For example, the declaration adopted back in 2001 stated that "We take note of the work which has been done in the General Council and other relevant bodies since the Ministerial Declaration of 20 May 1998 and agree to continue the Work Programme on Electronic Commerce. The work to date demonstrates that electronic commerce creates new challenges and opportunities for trade for Members at all stages of development, and we recognize the importance of creating and maintaining an environment which is favourable to the future development of electronic commerce."

That declaration also instructed the General Council "to consider the most appropriate institutional arrangements for handling the Work Programme, and to report on further progress to the Fifth Session of the Ministerial Conference. We declare that Members will maintain their current practice of not imposing customs duties on electronic transmissions until the Fifth Session."

Rep. Boehner Addresses Electronic Data Standards for House

4/29. Rep. John Boehner (R-OH), the Speaker of the House, and Rep. Eric Cantor (R-VA), the House Majority Leader, sent a letter to Karen Haas, the Clerk of the House of Representatives, regarding electronic publication of House documents and data.

They wrote that "At the start of the 112th Congress, the House adopted a Rules Package that identified electronic documents as a priority for the institution. Towards that end, we are asking all House stakeholders to work together on publicly releasing the House's legislative data in machine-readable formats."

"The Rules of the House, adopted on the opening day of this Congress, directed the Committee on House Administration to establish and maintain electronic data standards for the House and its committees. We have asked that this standard be developed in conjunction with your office for the purpose of transitioning the House to more open data formats, such as XML."

They added that "We believe that this legislative data, using standardized machine-readable formats, should be publicly available on House websites. The Clerk’s office should work to ensure the consistent public availability and utility of the House’s legislative data."

Update on US Korea FTA

4/29. A group of U.S. government officials and Members of Congress concluded a visit to Korea. Topics discussed included the still pending U.S. Korea Free Trade Agreement.

The Department of Commerce (DOC) issued a release in which Secretary of Commerce Gary Locke said that this FTA will benefit the economies of both the U.S. and Korea. Rep. Joseph Crowley (D-NY) stated in this release that "I look forward to working to secure Congressional approval of KORUS upon our return to the U.S."

In addition, Locke gave a speech in Seoul, Korea on April 28 in which he noted that the FTA "includes rigorous intellectual property protections that will result in increased protection for Korean and American inventors and content producers".

The FTA also addresses telecommunications and e-commerce. See, text of the FTA, and sections regarding telecommunications [17 pages in PDF], electronic commerce [4 pages in PDF], and intellectual property rights [35 pages in PDF].

The US and Korea concluded their original FTA in 2007. See, story titled "US and Korea Announce FTA" in TLJ Daily E-Mail Alert No. 1,559, April 2, 2007. However, Congressional Democrats blocked approval. The US and Korea renegotiated this FTA late last year, making changes affecting automobiles and other matters. See, stories titled "US Korea Free Trade Agreement" in TLJ Daily E-Mail Alert No. 2,150, November 8, 2010; "US and Korea Fail to Reach Agreement on Free Trade" in TLJ Daily E-Mail Alert No. 2,155, November 14, 2010; and "OUSTR Announces Progress on US Korea FTA" in TLJ Daily E-Mail Alert No. 2,171, December 7, 2010.

People and Appointments

4/29. James Smith was named Chief Administrative Patent Judge of the U.S. Patent and Trademark Office's (USPTO) Board of Patent Appeals and Interferences (BPAI) effective May 8, 2011. He is currently Associate General and Chief Intellectual Property Counsel at Baxter International. He will replace Michael Fleming, who retired last year. See, USPTO release.

More News

4/29. Microsoft release a short piece advocating the use of incentive auctions. It is titled "Incentive Auctions, Smart Radio Technology and Unlicensed Spectrum -- Tools to Meet the Exploding Wireless Broadband Demand". The author is Microsoft's Fred Humphries. Microsoft argues that "Congress must act to grant the FCC incentive auction authority, which will assist the FCC in reclaiming spectrum for wireless broadband". For more on this issue, and pending bills that would give the FCC authority to conduct incentive auctions, see stories titled "NAB Reports That There Is No Spectrum Crisis" and "Rep. Latta Introduces Incentive Auctions Bill" in TLJ Daily E-Mail Alert No. 2,227, April 27, 2011.

4/29. The U.S. Patent and Trademark Office (USPTO) published a notice in the Federal Register regarding its postponement of the start date of the Track One prioritized patent examination program, which had been scheduled for May 4, 2011. The USPTO first announced this postponement in an April 27, 2011, release. See, story titled "USPTO Postpones Fast Track Patent Application Processing" in TLJ Daily E-Mail Alert No. 2,227, April 27, 2011. The just published notice states that the USPTO lacks funding to implement this program. It states that "With the current level of resources, the Office will not be able to meet the twelve-month pendency goal in prioritized examination applications without impacting the non-prioritized examination applications at this time. Therefore, the Office is delaying the effective date and applicability date of the Track I final rule until further notice. When the funding limitations are resolved, the Office will issue a subsequent notice identifying a revised effective date and applicability date ..." See, Federal Register, April 29, 2011, Vol. 76, No. 83, at Page 23876.

Sen. Blumenthal Urges DOJ Investigation of Sony PlayStation Network Breach

4/28. Sen. Richard Blumenthal (D-CT) sent a letter to the Department of Justice (DOJ) regarding the recent data breach disclosed by Sony Computer Entertainment America.

Sen. Blumenthal urged the DOJ to "immediately open an investigation to track down and hold accountable those who have stolen sensitive personal information, and to examine any potential wrongdoing in Sony's response to this matter".

Sen. Blumenthal, who is a member of the Senate Judiciary Committee (SJC), wrote that "any individual hacking into the PlayStation Network online and stealing personal information would appear to be criminally liable" under 18 U.S.C. § 1030.

He also wrote that "I am especially concerned about Sony's failure to promptly notify its customers about the breach and what data may have been compromised. Although Sony rightly disabled its PlayStation Network soon after learning of the breach, it waited two days before announcing that its network was down due to an “external intrusion” – and this announcement was simply posted on the PlayStation blog. I am troubled that Sony waited four more days before announcing on its blog that the external intrusion may have resulted in users’ personal and financial information being compromised, and waited one additional day before making any affirmative effort to contact its users and inform them of the breach and possible third-party access to their personal and financial information.

He added that "This week-long delay in disclosing a possible breach of financial information is unacceptable, and left consumers highly vulnerable and primarily reliant on the varied quality of whatever anti-fraud protections may be provided by their banks or credit card providers. Any investigation of this matter should include a thorough inquiry into whether Sony’s handling of events in the wake of its security breach gives rise to civil or criminal liability."

Finally, he wrote, "If it does not, I would welcome comments from the Justice Department regarding how the law can be updated to best hold companies accountable for inadequate protection of personal consumer information, and inadequate notification when breaches occur."

Wireless Carriers Explain Data Collection Policies

4/28. Rep. Ed Markey (D-MA) and Rep. Joe Barton (R-TX) released letters which they received from Verizon, AT&T, T-Mobile USA and Sprint in response to their March 29, 2011 letter regarding collection of information about their customers.

See, letter from Verizon [17 pages in PDF], letter from AT&T [8 pages in PDF], letter [4 pages in PDF] from T-Mobile USA, and letter [10 pages in PDF] from Sprint.

See also, story titled "Reps. Barton and Markey Write Wireless Companies About Their Customer Data Practices" in TLJ Daily E-Mail Alert No. 2,216, April 4, 2011.

Rep. Barton stated in a release that "After thoroughly reviewing the responses from the wireless carriers, I am left with a feeling of uneasiness and uncertainty ... The companies informed us that customer consent before access of location data is a common practice, but the disconnect is when third-party applications come in to play. While I am happy to hear that carriers inform their customers of the risks of using independent third-party applications, third-party developers can access the location of customers anytime they want. This is a huge problem. They shouldn’t have free reign over your location data and personally identifiable information. I believe it is time we hold third-party developers accountable, and I am determined to work with other members of Congress to get this done."

Rep. Markey stated in this release that "The use of encryption and related security technologies were utilized to varying degrees across the four wireless carriers, and sensitive data was retained for differing periods of time ... Personal data should be made unreadable to those without a legitimate need to access it to the greatest extent possible, and the data should not be retained longer than absolutely necessary. Otherwise, there is a heightened risk of security breaches that expose consumers to identity theft and other crimes."

Issa and Eshoo Oppose Radio Tuners Mandate

4/28. Rep. Darrell Issa (R-CA) and Rep. Anna Eshoo (D-CA) introduced HConRes 42, titled the "Creativity and Innovation Resolution", on April 14, 2011. It resolves that the Congress should not mandate that radio tuners be built into all mobile devices.

The Recording Academy, CTIA, Consumer Electronics Association (CEA), and Recording Industry Association of America (RIAA) announced their support for this resolution. See, release.

Terrestrial radio broadcasters would benefit from a radio tuner mandate. And, on April 28, Gordon Smith, head of the National Association of Broadcasters (NAB), offered a reminder, regarding recent tornadoes, that "In times of crisis, local broadcasters are a reliable first informer in providing emergency weather coverage that saves lives." See, NAB release.

This resolution states that the Congress should "protect those who create intellectual property and provide economic incentives that will encourage American artists, creators, and innovators to take the necessary risks to create and innovate".

It also states that the Congress should "oppose any mandate for the inclusion of terrestrial broadcast radio tuners in the manufacture or sale of mobile devices, which would stifle innovation, competition, and consumer choice".

This resolution recites the finding that "Whereas Internet, satellite, and cable radio support the creation of new music by compensating the artists whose talent and hard work are at the core of the music and the investors who support them and bring their music to the public".

It also states that "a new Government mandate that will force mobile device manufacturers and wireless carriers to include terrestrial broadcast radio tuners in new mobile devices will stifle innovation, competition, and consumer choice"

It was referred to the House Judiciary Committee (HJC) and the House Commerce Committee (HCC).

See also, September 9, 2009, letter from Rep. Greg Walden (R-OR) and others to the Federal Communications Commission (FCC) and Department of Homeland Security (DHS) urging the inclusion of radio tuners in mobile phones.

Royalty Payments. One of the issues involved is income derived from playing music recordings.

Section 106 of the Copyright Act, which is codified at 17 U.S.C. § 106, enumerates the exclusive rights of owners of copyrights. Section 106(6) currently provides that "the owner of copyright under this title has the exclusive rights to do and to authorize any of the following: ... (6) in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission".

17 U.S.C. § 114 then elaborates on what is an exclusive right under Section 106(6), and what is exempt. Performances by AM and FM radio broadcasters (terrestrial broadcasters) are exempted from the exclusive rights of copyright holders. These broadcasters do not need to obtain permission, or pay royalties, for playing copyrighted songs in the U.S.

That is, terrestrial radio broadcasters have an exemption from paying copyright royalties when they play copyrighted songs, while others, including satellite radio and other new distribution platforms, must pay.

Hence, copyright owners and music industry interests oppose a radio tuner mandate, and support legislation that would end the exemption.

Neil Portnow, President of the Recording Academy, stated in the release that "The music community wants to see the growth of distribution platforms that compensate musicians and performers. The most exciting new mobile devices are also the distribution platforms that fully compensate musicians and performers. FM Radio, by contrast, does not".

Mitch Bainwol, Ch/CEO of the RIAA, stated that "Every platform in the industrialized world respects property rights but one -- terrestrial radio in the U.S. So the idea of the government rigging the playing field to expand the scope of the existing taking makes zero sense. That's why we welcome this resolution and the broader concept of policies that reward technical and creative innovation".

There were bills to end the exemption in the 110th and 111th Congress, but no bill was enacted. For the 110th Congress, see HR 4789 [LOC | WW], the "Performance Rights Act of 2007", and S 2500 [LOC | WW]. For the 111th Congress, see HR 848 [LOC | WW], the "Performance Rights Act", and S 379 [LOC | WW],

Broadcasters oppose this legislation.

See also, story titled "NAB Opposes Vote on Performance Rights Act" in TLJ Daily E-Mail Alert No. 1,949, June 5, 2010, and story titled "House Judiciary Committee Approves Performance Rights Act" in TLJ Daily E-Mail Alert No. 1,938, May 13, 2009.

Technology Design Mandates. Another issue is technology mandates.

Gary Shapiro, head of the CEA, a group whose members would be compelled to redesign their mobile devices, stated that "An FM chip mandate is unnecessary and unjustified. These new mobile devices are platforms for innovation and creativity, and Americans can decide for themselves what functions and features they want. Requiring today's digital phones to include an analog FM Chip makes as much sense as requiring them to include a telegraph".

Similarly, Steve Largent, head of the CTIA, stated that "With more than 650 unique wireless devices in the U.S., consumers have a variety of options, including handsets with FM chips."

Currently, many mobile devices can receive radio broadcasts. If a consumer wants a radio, it is available. For a list of devices with radio tuners, see the NAB's web page titled "Find a Radio Ready Cell Phone".

However, some proponents of a radio tuner mandate want every mobile device to include a radio tuner.

Perhaps it should be noted that the CEA and the consumer electronics industry lost a similar argument last year when the Congress passed legislation under the rubric of disability access. One large issue was the usability of new communications, information technology, and entertainment devices by persons with various disabilities, such as loss of sight and hearing. One threshold question was whether the policy goal of disability access should be that for each type of device persons with each type of disability should have accessible options, or whether every device must be accessible.

The statute was enacted with little testimony or debate. However, at one Senate Commerce Committee (SCC) hearing, on May 26, 2010, Sen. Mark Pryor (D-AR) discussed the matter. The star witness, a U.S. Army veteran, Brian Pearce, who suffered vision loss in the line of duty in Iraq, volunteered that disabled people needed one accessible device, not access to every device. The professional witnesses quickly rebutted his statement.

FCC Sets Comments Deadlines for AT&T T-Mobile USA Antitrust Merger Review

4/28. The Federal Communications Commission (FCC) announced filing deadlines associated with its antitrust merger review of AT&T's proposed acquisition of T-Mobile USA.

Petitions to deny are due by May 31, 2011. Oppositions are due by June 10, 2011. Replies are due by June 20, 2011. See, FCC Public Notice (PN). It is DA 11-799 in WT Docket No. 11-65.

AT&T and T-Mobile USA announced their transaction on March 20. See, story titled "AT&T to Acquire T-Mobile USA" in TLJ Daily E-Mail Alert No. 2,205, March 21, 2011. They filed their merger application [112 pages in PDF, redacted], nominally a license transfer request, on April 21, 2011.

As with all antitrust merger reviews, the FCC did not set a deadline for its decision. The FCC's strategy in merger reviews is to delay its determination while it extracts concessions from the merging parties in return for granting approval. For example, the FCC delayed the SBC Ameritech merger for 439 days, and the Bell Atlantic GTE merger for 623 days.

This PN states that "petitioners and commenters should raise all issues in their initial filings. New issues may not be raised in responses or replies."

This PN also states that "this proceeding will be governed by permit-but-disclose ex parte procedures that are applicable to non-restricted proceedings under section 1.1206 of the Commission's rules." That is, much of the information and argument imparted to the FCC will take place in closed meetings.

Some interested parties who utilize ex parte meetings are required to file disclosure statements. These are often brief statements that do not put the public on notice as to the content of the ex parte meeting. The just released PN again contains the gesture that "More than a one- or two-sentence description of the views and arguments presented is generally required." Some interested parties, such as Members of Congress, engage in ex parte communications for which no disclosures are made.

The FCC issued a Protective Order [6 pages in PDF] on April 14, 2011. It issued a Second Protective Order [8 pages in PDF] on April 27, 2011. These pertain to confidential, proprietary and competitively sensitive information.

BEA Reports Sluggish Growth in GDP and IT Investment

4/28. The Department of Commerce's (DOC) Bureau of Economic Analysis (BEA) released its gross domestic product (GDP) advance estimate [14 pages in PDF] for the first quarter (QI) of 2011.

The BEA stated that GDP "increased at an annual rate of 1.8 percent in the first quarter of 2011 (that is, from the fourth quarter to the first quarter) ... In the fourth quarter, real GDP increased 3.1 percent." (Parentheses in original.) That is, US economic growth has slowed.

The breakdown data shows that within the category of "gross private domestic investment" or GPDI, investment in nonresidential structures declined dramatically.

Also within GPDI, investment in "information processing equipment and software" grew slightly in the first quarter, after a larger increase in the fourth quarter of 2010 -- from $595.5 Billion (in current dollars at a seasonally adjusted annual rate) in QIII, to $614.0 Billion in QIV, to $616.2 Billion in QI. (See, Table 3, attached to advance estimate.)

People and Appointments

4/28. Jeff Moss was named VP and Chief Security Officer of the Internet Corporation for Assigned Names and Numbers (ICANN). The ICANN stated in a release that he is a "Respected Hacker", and "founder of DEF CON, the world's largest hacker conference, and Black Hat, a global technical security conference". Rod Beckstrom, P/CEO of ICANN, stated in this release that Moss "has the in-depth insider's knowledge that can only come from fighting in the trenches of the on-going war against cyber threats."

4/28. Robert Callahan joined Tech America (TA) as Director for State Government Affairs. He will be based in the TA's Sacramento office. He previously worked for the California Chamber of Commerce.

4/28. Comcast promoted Bret Perkins to Vice President, External and Government Affairs. He was Senior Director of Public Policy. See, Comcast release.

4/28. Tammy Sun was named Communications Director of the Federal Communications Commission (FCC) and head of the FCC's Office of Media Relations (OMR). In addition, Neil Grace was named Press Secretary to FCC Chairman Julius Genachowski. See, FCC release. Sun previously worked in media relations positions for the William J. Clinton Foundation, the Democratic Leadership Council (DLC), and the 2006 re-election campaign of Sen. Joe Lieberman (D-CT). Grace previously worked in media relations for Burson Marsteller. Sun replaces David Fiske, who remains at the FCC/OMR. Grace replaces Jen Howard who left the FCC in January to work for the recently created Consumer Financial Protection Bureau (CFPB), and her interim replacement, Rob Kenny, who just left the FCC to work for Mercury Public Affairs. The primary function of the FCC/OMR is to limit reporters' access to information regarding, and public understanding of, the activities and operations of the FCC.

More News

4/28. The Department of Commerce's (DOC) National Telecommunications and Information Administration (NTIA) published a notice in the Federal Register that announces a deadline for LPTV and Translator Upgrade Program applications. See, Federal Register, April 28, 2011, Vol. 76, No. 82, at Pages 23795-23796. This notice states that "the final Closing Date for receipt of applications for the Low-Power Television and Translator Upgrade Program (Upgrade Program) will be Monday, July 2, 2012. NTIA also announces that it will use population data from the newly available 2010 U.S. Census for applications received after July 1, 2011 in determining whether a facility meets the rurality eligibility requirement of the Upgrade Program. Applications submitted up to and including July 1, 2011, can continue to use the population reported in the 2000 Census. All other requirements for the Upgrade Program remain unchanged as set forth in the Notice of Availability of Funds and Program Guidelines (Upgrade Program NOFA)" published on May 12, 2009. (Parentheses in original.) See, notice in the Federal Register, May 12, 2009, Vol. 74, No. 90, Pages 22401-22415.

4/28. The National Institute of Standards and Technology's (NIST) Computer Security Division (CSD) released its draft NIST IR-7696 [32 pages in PDF] titled "Common Platform Enumeration: Name Matching Specification Version 2.3". The deadline to submit comments is May, 20, 2011.

4/28. Jacob Lew, Director of the Executive Office of the President's (EOP) Office of Management and Budget (OMB) issued a memorandum to the heads of executive departments and agencies titled "Implementing the Telework Enhancement Act of 2010 IT Purchasing Requirements". See, HR 1722 [LOC | WW] enacted by the 111th Congress. It is now Public Law No. 111-292. See also, stories titled "House Passes Government Telework Bill" and "Congress Inactive on Private Sector Telework Bills" in TLJ Daily E-Mail Alert No. 2,104, July 14, 2010, and story titled "Senate Passes Government Telework Bill" in TLJ Daily E-Mail Alert No. 2,137, October 1, 2010.

4/28. The Securities and Exchange Commission (SEC) filed a civil complaint [22 MB] in the U.S. District Court (NDTex) against David Ronald Allen, Alex Dowlatshahi, Christopher Mills, China Voice Holding Corp., and others alleging violation of federal securities laws in connection with the operation of a Ponzi scheme involving the purported offering of voice over internet protocol (VOIP), broadband internet access, and other services in China. The SEC announced in a release that it obtained a court order freezing assets.

Supreme Court Holds Class Action Waiver Clauses in Arbitration Contracts Are Enforceable

4/27. The Supreme Court issued its 5-4 opinion [39 pages in PDF] in AT&T Mobility v. Concepcion holding that a contract between a wireless phone company and its consumers that provides for mandatory arbitration of consumer complaints, and waiver of class actions, is enforceable under Section 2 of the Federal Arbitration Act, notwithstanding the state of California's attempt to render such contracts unenforceable as unconscionable.

Many wireless service providers, broadband internet access service (BIAS) providers, web site operators, and other information and communications technology sector companies, include arbitration clauses in a wide range of contracts with consumers and employees. More companies likely would have used such clauses, but for legal uncertainty regarding enforceability. This opinion brings further certainty.

The Supreme Court reversed the judgment of the U.S. Court of Appeals (9thCir) and remanded. See, October 27, 2009, opinion [15 pages in PDF] of the 9th Circuit, which was titled Jennifer Laster, et al. v. AT&T Mobility. That opinion was also reported at 584 F. 3d 849.

This opinion is a victory for wireless service providers, BIAS providers, and other businesses that sell products or services to consumers that include arbitration clauses in contracts. This opinion is a defeat for the plaintiffs class action bar.

There exist wide differences of opinions as to whether consumers will be harmed or helped by this opinion.

Proceedings Below. Nominally, the lead plaintiff is Vincent Concepcion. Concepcion and Laster were customers of Cingular Wireless, which was subsequently acquired by AT&T Mobility. They were parties to a contract that included an arbitration clause, which required any disputes to be submitted to arbitration, and a class action waiver clause.

The gist of their grievance is that when they became a customers, they were promised free phones, which they received, but for which they were charged a sales tax. They filed complaints in the U.S. District Court, alleging breach of contract, with jurisdiction based upon diversity of citizenship, and seeking class action status.

AT&T filed a motion to compel arbitration, which the District Court denied. The District Court held that the class waiver provision of the arbitration agreement is unconscionable under California law and that the California unconscionability law is not preempted by the Federal Arbitration Act (FAA).

AT&T appealed to the 9th Circuit, which affirmed. AT&T petitioned for writ of certiorari.

Statute. The Federal Arbitration Act (FAA) is codified at Title 9, Chapter 1, §§ 1-16. The key section at issue in this case is codified at 9 U.S.C. § 2.

Section 2 provides in full that "A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract."

That is, it provides that contract clauses that provide for arbitration of disputes are valid and enforceable, except "upon such grounds as exist at law or in equity for the revocation of any contract".

This section makes no reference to class action arbitration. The FAA was enacted in 1925, before the development of class action procedure.

Supreme Court. The Supreme Court granted certiorari on May 24, 2010. It heard oral argument on November 9, 2010. See, Supreme Court docket.

The Court opinion states that "The final phrase of §2, however, permits arbitration agreements to be declared unenforceable ``upon such grounds as exist at law or in equity for the revocation of any contract.´´ This saving clause permits agreements to arbitrate to be invalidated by ``generally applicable contract defenses, such as fraud, duress, or unconscionability,´´ but not by defenses that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue."

It continues that "The question in this case is whether §2 preempts California's rule classifying most collective-arbitration waivers in consumer contracts as unconscionable. We refer to this rule as the Discover Bank rule."

See, the California Supreme Court opinion in Discover Bank v. Superior Court, 113 P.3d 1100 (Cal. 2005).

"When state law prohibits outright the arbitration of a particular type of claim, the analysis is straightforward: The conflicting rule is displaced by the FAA." But, the Court opinion continues, "the inquiry becomes more complex when a doctrine normally thought to be generally applicable, such as duress or, as relevant here, unconscionability, is alleged to have been applied in a fashion that disfavors arbitration."

"Although §2’s saving clause preserves generally applicable contract defenses, nothing in it suggests an intent to preserve state-law rules that stand as an obstacle to the accomplishment of the FAA's objectives."

The opinion concludes that "Requiring the availability of classwide arbitration interferes with fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA."

Also, "California's Discover Bank rule similarly interferes with arbitration. Although the rule does not require classwide arbitration, it allows any party to a consumer contract to demand it ex post."

5-4 Split. It should be noted that the Justices of the Supreme Court divided 5-4 into traditional ideological groups. Conservatives formed the majority. Liberals dissented.

Justice Antonin Scalia wrote the opinion of the Court, in which Justices Roberts, Alito, Kennedy, and Thomas joined. Justice Stephen Breyer wrote a dissenting opinion, in which Justices Ginsburg, Sotomayor, and Kagan joined.

Similarly, the Supreme Court's 2001 opinion in Circuit City Stores, Inc. v. Adams, 532 U.S. 105, was also a 5-4 split. In that case the Supreme Court held that an arbitration clause in an employment application is enforceable when that employee subsequently brings an employment discrimination action against the employer.

Moreover, Justice Thomas, who joined with the majority in both cases, wrote a concurring opinion in the present case in which he stated that he only reluctantly joined with the majority.

Justices Breyer and Ginsburg dissented in 2001, and continued to dissent in the just decided case. It may be the case that the doctrine of stare decisis is of little importance to the dissenters on the subject of arbitration clauses in consumer and employee contracts. If so, one new appointment to the Supreme Court could undo the holdings in Circuit City Stores v. Adams and AT&T Mobility v. Concepcion, and the lower court opinions that build upon them. 

Congressional Bills. Enforceable arbitration clauses in consumer contracts have attracted the attention of members of Congress. Bills have been introduced, and hearings have been held. However, no recent bills have become law, and the Republicans' return to majority status in the House of Representatives following the November 2010 elections greatly diminishes the likelihood that the House would adopt any bill to limit the enforceability of arbitration clauses in consumer or employment contracts.

For example, HR 3010 [LOC | WW], the "Arbitration Fairness Act of 2007", in the 110th Congress, had 104 mostly Democratic sponsors, including Rep. John Conyers (D-MI), the then Chairman of the House Judiciary Committee (HJC). The companion bill in the Senate, S 1782 [LOC | WW], had eight sponsors -- all Democrats.

These bills would have provided that "No predispute arbitration agreement shall be valid or enforceable if it requires arbitration of (1) an employment, consumer, or franchise dispute; or (2) a dispute arising under any statute intended to protect civil rights or to regulate contracts or transactions between parties of unequal bargaining power".

See also, story titled "House Judiciary Committee to Hold Hearing on Arbitration Fairness Act" in TLJ Daily E-Mail Alert No. 1,658, October 19, 2007.

For the 111th Congress, see HR 1020 [LOC | WW] and S 931 [LOC | WW], both titled the "Arbitration Fairness Act of 2009".

These bills have not yet been introduced in the 112th Congress.

However, Rep. Hank Johnson (D-GA), the lead sponsor of HR 3010 (109th Congress) and HR 1020 (110th Congress), along with Sen. Al Franken (D-MN) and Sen. Richard Blumenthal (D-CT), stated in a joint release that they plan to introduce the Arbitration Fairness Act next week as a result of the Supreme Court's opinion.

Rep. Hank JohnsonRep. Johnson (at left) stated that "Forced arbitration agreements undermine our indelible Constitutional right to trial by jury, benefiting powerful businesses at the expense of American consumers and workers".

He continued that "Americans with few choices in the marketplace may unknowingly cede their rights when they enter contracts to buy a home or a cell phone, place a loved one in a nursing home, or start a new job. We must fight to defend our rights and re-empower consumers."

Sen. Franken stated in this release that "This ruling is another example of the Supreme Court favoring corporations over consumers".

Kepas v. eBay. It should also be noted that on April 25, 2011, the Supreme Court issued an Orders List [9 pages in PDF] that discloses that the Supreme Court denied certiorari in Kepas v. eBay.

This lets stand the November 2, 2010, divided opinion [25 pages in PDF] of the U.S. Court of Appeals (10thCir), which affirmed the judgment of the U.S. District Court (DUtah), which enforced an arbitration agreement in an employment contract. Kepas had sought unsuccessfully to litigate an employment discrimination claim in the District Court.

That case is Emmanuel Kepas v. eBay, Inc., Sup. Ct. No. 10-1085, a petition for writ of certiorari to the U.S. Court of Appeals for the 10th Circuit, App. Ct. No. 09-4200.

The present case is AT&T Mobility v. Vincent Conception, Supreme Court of the U.S., Sup. Ct. No. 09-893, a petition for writ of certiorari to the U.S. Court of Appeals for the 9th Circuit. App. Ct. No. 08-56394.

Apple Addresses Location Privacy in Advance of Senate Hearing

4/27. Apple released a statement regarding the collection of location data by iPhones and iPads. It asserted that "Apple is not tracking the location of your iPhone. Apple has never done so and has no plans to ever do so."

Apple offered this explanation of location data collection by its devices. "The iPhone is not logging your location. Rather, it's maintaining a database of Wi-Fi hotspots and cell towers around your current location, some of which may be located more than one hundred miles away from your iPhone, to help your iPhone rapidly and accurately calculate its location when requested. Calculating a phone's location using just GPS satellite data can take up to several minutes. iPhone can reduce this time to just a few seconds by using Wi-Fi hotspot and cell tower data to quickly find GPS satellites, and even triangulate its location using just Wi-Fi hotspot and cell tower data when GPS is not available (such as indoors or in basements). These calculations are performed live on the iPhone using a crowd-sourced database of Wi-Fi hotspot and cell tower data that is generated by tens of millions of iPhones sending the geo-tagged locations of nearby Wi-Fi hotspots and cell towers in an anonymous and encrypted form to Apple." (Parentheses in original.)

Apple also wrote that "Our iAds advertising system can use location as a factor in targeting ads. Location is not shared with any third party or ad unless the user explicitly approves giving the current location to the current ad (for example, to request the ad locate the Target store nearest them)." (Parentheses in original.)

Apple did not address in this statement why this location data is stored in accessible and unencrypted files.

See also, House Commerce Committee's (HCC) April 25, 2011, letter [PDF] to Steve Jobs, and story titled "House Republicans Write Apple and Others Re Cell Phone and Tablet Location Data Collection" in TLJ Daily E-Mail Alert No. 2,225, April 25, 2011,

And see, Sen. Al Franken's (D-MN) April 20, 2011, letter to Steve Jobs, and story titled "Sen. Franken Writes Steve Jobs Regarding Location Data Retention by iPhones and 3G iPads" in TLJ Daily E-Mail Alert No. 2,224, April 20, 2011.

On Tuesday, May 10, 2011, the Senate Judiciary Committee's (SJC) Subcommittee on Privacy, Technology and the Law will hold a hearing titled "Protecting Mobile Privacy: Your Smartphones, Tablets, Cell Phones and Your Privacy". See, SJC notice.

USPTO Postpones Fast Track Patent Application Processing

4/27. The U.S. Patent and Trademark Office (USPTO) announced in a release that it has "has postponed the start date of the Track One prioritized patent examination program, which was scheduled to go into effect on May 4, 2011, until further notice due to reduced spending authority in the Full-Year Continuing Appropriations Act, 2011."

Last June the USPTO announced a three track plan. Track one allows inventors and businesses, for a fee, to have their patents processed within twelve months. See, notice in the Federal Register, June 4, 2010, Vol. 75, No. 107, at Pages 31763-31768, and story titled "USPTO Proposes Three Track Patent Examination System" in TLJ Daily E-Mail Alert No. 2,092, June 4, 2011.

David Kappos, head of the USPTO, added in this release that the USPTO lacks "resources to hire a sufficient number of examiners to implement Track One".

The USPTO added that it will publish additional information in a notice in the Federal Register on Friday, April 29, 2011.

People and Appointments

4/27. President Obama announced his intent to nominate Thomas Wheeler to be a member of the Executive Office of the President's (EOP) President's Intelligence Advisory Board (PIAB). Wheeler is Managing Director at Core Capital Partners. He was President of the National Cable Television Association from 1979 to 1984 and then the long time CEO of the Cellular Telecommunications & Internet Association. See, White House news office release.

4/27. President announced his intent to nominate Robert Langer to be a member of the President’s Committee on the National Medal of Science. He is a professor at the Massachusetts Institute of Technology (MIT). See, White House news office release.

More News

4/27. The Center for Democracy and Technology (CDT) released a paper [7 pages in PDF] that summarizes and praises S 799 [LOC | WW], the "Commercial Privacy Bill of Rights Act of 2011", sponsored by Sen. John Kerry (D-MA) and Sen. John McCain (R-AZ). See also, story titled "Sen. McCain and Sen. Kerry Introduce Privacy Bill" in TLJ Daily E-Mail Alert No. 2,225, April 25, 2011. This paper concludes that this bill "represents a tremendous advancement in the long fight for the enactment of a baseline privacy law. While not perfect, the bill presents an opportunity to develop a strong, comprehensive, and flexible privacy protection framework that consumers and businesses increasingly need in the modern data ecosystem. CDT urges industry and civil society groups to take advantage of this opportunity by constructively engaging with the drafters and the members of the Senate Commerce Committee in refining and improving this bill and advocating toward its eventual passage."

USPTO Funded Paper Advocates Conventional IP Protection for Commercialization of Traditional Knowledge

4/26. The Institute for Policy Innovation (IPI) released a paper titled "Commercialization and Benefit Sharing from Traditional Knowledge: Case Studies from the United States". The author is Solveig Singleton. The U.S. Patent and Trademark Office (USPTO) provided grant funding.

This is a paper about intellectual property in the context of "traditional knowledge", which the paper states is "an existing body of knowledge known to a group of people long identified by their ethnic, linguistic, or geographic traits rather than by their affiliation with a formal research institution such as a firm or a university".

This paper includes a series of case studies of the commercialization of traditional knowledge derived from the US, such as the Br'er Rabbit and Pocahontas stories, and food and medicinal plants.

It concludes that these case studies of the commercialization of folklore, music, foods, medicines, and other products in the US show that markets supported by conventional intellectual property, including copyright, patent and trade secret, "have  played a key role in gaining recognition and respect for holders of traditional knowledge".

This paper continues that "Holders of traditional knowledge have often been able to avail themselves of the protection of IP. Furthermore, consumers have enjoyed tremendous benefits from the development of products that incorporate traditional knowledge. Revenue streams protected by IP rights entice new competitors to enter the field".

Although, "revenues will tend to flow to those involved in the late stages of commercialization, in actually putting a real product on the shelves".

This paper advocates reliance upon traditional intellectual property. It argues that "Legislating greater respect would require legal rules that target certain content, and is likely to cause as many or more problems than it solves."

This paper also argues that "it would often be harmful to impose a top-down general principle as to who and how holders of traditional knowledge should be compensated for their contributions".

WIPO World Intellectual Property Day Observed

4/26. The World Intellectual Property Organization (WIPO) has designated April 26, 2011, World Intellectual Property Day. Proponents of intellectual property protection used the occasion present and release papers, give speeches, and issue statements.

Gary Locke, Secretary of Commerce, stated in a release for the occasion that "In today's competitive global economic climate, protecting and encouraging American innovation has never been more important. A strong intellectual property system enables successful inventors to secure access to capital and hire employees -- creating new jobs, new industries and new economic opportunities for Americans."

Chris Dodd, head of the Motion Picture Association of America (MPAA), stated in a release that "Respect for intellectual property is essential to the success of nations that aspire to greater development as well as key to maintaining the economies of developed nations. World Intellectual Property Day is a time to reflect on the economic as well as cultural contributions intellectual creativity has produced and renew our commitment to value intellectual creation as we do physical creation."

Eric Smith, head of the International Intellectual Property Alliance (IIPA), stated in a release that "regrettably, copyright piracy, in both the physical and digital world, continues to threaten the livelihood of creators, authors, performers and the vast infrastructure of companies -- large and small, American and international -- that support them."

The Institute for Policy Innovation (IPI) hosted a half day event in Washington DC. See, agenda. Solveig Singleton presented a paper [45 pages in PDF] titled "Commercialization and Benefit Sharing from Traditional Knowledge: Case Studies from the United States". See, related story in this issue titled "USPTO Funded Paper Advocates Conventional IP Protection for Commercialization of Traditional Knowledge". Chris Israel presented a paper [23 pages in PDF] titled "Development & Deployment of Clean Technology Through IP Protections".

Copps Calls House Bill to Limit NPR Funding Unfathomable

4/26. FCC Commissioner Michael Copps gave another speech in which he lamented media consolidation and the state of journalism. He argued for more FCC regulation of broadcasters, news media and political speech, and condemned efforts to limit National Public Radio (NPR) subsidies.

In this speech, at the University of Southern California's (USC) Annenberg School, Copps revisited themes that he has expressed previously. See, for example, December 3, 2010 speech [8 pages in PDF] and story titled "Copps Wants to Impose Public Value Test on Broadcasters".

Copps referenced "the blistering pace of media consolidation", "rampant private sector speculation", and "stations owned by hedge funds, banking trusts and private equity firms for whom the public interest may be a wholly alien concept".

He accused the Federal Communications Commission (FCC) of "abdication of public interest responsibilities". He argued that prior "Commissions not only blessed just about every media merger transaction that came their way, but they wiped the slate virtually clean of the public interest guidelines and responsibilities of licensees that had been built up by generations of reformers".

He said that "real change at the FCC awaited bigger change in Washington that would open a window for change. Then that new era finally came and a window opened, and many of us thought real media reform was just around the corner. Alas, it's been 27 months now -- and we're still waiting. Still waiting for media reform -- or even a down-payment on media reform."

He elaborated that he wants an FCC based "public-interest licensing system" in which the FCC passes judgment on news reporting. He said that he wants more than the current "slam-dunk license renewal system".

He also restated his desire for more FCC regulation of political campaign speech, and in particular, "Anonymous ads". He added that "Both sides of the political spectrum have committed sins of commission and omission here".

He also condemned members of Congress who advocate reduced federal subsidies for NPR. See, HR 1076 [LOC | WW], and story titled "House Passes Bill to Limit NPR Funding" in TLJ Daily E-Mail Alert No. 2,205, March 21, 2011.

Copps said that "It is utterly unfathomable to me that some in Washington are trying to gut the very limited funding we currently provide for this precious news, information and education resource. Other democracies leave us in the dust by investing meaningful resources in public broadcasting while the issue here is lining it out of the budget."

NAB Reports That There Is No Spectrum Crisis

4/26. The National Association of Broadcasters (NAB) released a paper [PDF] titled "Solving the Capacity Crunch: Options for Enhancing Data Capacity on Wireless Networks". The author is Uzoma Unyeije. See also, NAB release.

The report states this. "Is massive spectrum reallocation urgently needed to address the capacity concerns of wireless
carriers? The simple answer is no."

And this. "Many wireless carriers and their trade associations argue that the FCC must make hundreds of megahertz of spectrum available for wireless broadband in order to keep pace with customers' growing mobile data demands. But this is not so. Capacity problems can be addressed in numerous ways that do not involve spectrum. So while additional spectrum is a tool that can help relieve congestion on mobile networks, the current rush to reallocate is not necessary."

See, full story.

BSA Public Opinion Poll Finds Support for Patent Rights

4/26. The Business Software Alliance (BSA) announced that it conducted of a public opinion survey regarding support for protection of intellectual property. On April 26, 2011, it announced the responses to one question, regarding support for patent rights.

Surveyors read two statements, and asked respondents, "Which comes closer to you view". 71% picked the pro-patent statement. See, BSA release.

The pro-patent statement was as follows: "It is important for people who invent new products or technologies to be paid for them, because it creates an incentive for people to produce more innovations. That is good for society because it drives technological progress and economic growth." The anti-patent statement was as follows: "No company or individual should be allowed to control a product or technology that could benefit the rest of society. Laws like that limit the free flow of ideas, stifle innovation, and give too much power to too few people."

The BSA added that Ipsos Public Affairs conducted the poll of "a globally representative sample of approximately 15,000 personal computer users in 32 countries". The BSA has yet to release this poll's other questions and responses. The full report will be titled "2010 BSA Global Software Piracy Study".

People and Appointments

4/26. Patrick McCormick was named Republican Special Counsel on the Senate Energy and Natural Resources Committee. He previously worked for the law firm of Hunton & Williams. This Committee has jurisdiction over several technology related matters, including cyber security for systems that support the generation, transmission, or distribution of electricity, and promoting the development of a domestic supply chain for rare earth materials, which are used in computer chips, smart phones, fiber optic cable, and other technology related products. See, Sen. Lisa Murkowski's (R-AK) release.

Go to News from April 21-25, 2011.