TLJ News from August 16-20, 2011

FCC to Hold Workshop on Expanding Outage Reporting Requirements and Reliability Standards to Cover VOIP and Broadband

8/19. The Federal Communications Commission (FCC) announced that it will hold an event titled "public workshop" on September 8, 2011, in connection with two broadband related proceeding in which the FCC seeks to expand old communications regulatory regimes into VOIP and broadband. See, notice.

The FCC has an open rulemaking proceeding regarding expansion and adaptation of its outage reporting requirements to cover broadband internet access service (BIAS) providers and interconnected voice over internet protocol (VOIP) service providers, and an open inquiry proceeding regarding expansion and adaptation of its reliability and continuity standards to cover broadband networks.

The FCC lacks statutory authority to expand either of these regulatory regimes.

On May 12, 2011, the FCC adopted and released its Notice of Proposed Rulemaking (NPRM) [62 pages in PDF] regarding expanding the entities covered by outage reporting requirements. It released this NPRM on May 13. See, story titled "FCC Proposes Expanding Outage Reporting Requirements to VOIP and BIAS Providers" in TLJ Daily E-Mail Alert No. 2,240, May 13, 2011. It is FCC 11-74 in PS Docket No. 11-82.

On April 7, 2011, the FCC adopted a Notice of Inquiry (NOI) [26 pages in PDF] regarding whether the FCC should impose standards of reliability and resiliency of broadband networks. It is FCC 11-55 in Docket No. 11-60. September 1 is the deadline to submit reply comments.

This event will be held from 9:30 AM to 3:00 PM in the FCC's Commission Meeting Room. The FCC will webcast this event. The FCC will condition attendance, either in person or online, upon pre-registration by September 6. See, registration page.

Xi Jinping Addresses IPR in PRC and Technology Export Controls in US

8/19. Xi Jinping, Vice President of the People's Republic of China (PRC), gave speech in Beijing in which he addressed intellectual property rights (IPR) protection in the PRC, and export controls in the US.

He stated that "China will continue to free its mind and stay committed to reform and opening up. We will -- running the country according to the law, and make continual improvements to our laws and regulations related to foreign business cooperation. We will intensify IPR protection and treat all businesses as equals in terms of the accreditation of indigenous innovation products and government procurement."

He also stated that "At the same time, we hope the United States will eliminate the interferences of trade and investment protectionism. We hope that there will be early and concrete actions on the part of the United States on issues which are of high concern to the Chinese side, including easing the export restrictions of high-tech products to China and providing a fair environment for Chinese businesses to make investment in the United States."

Wiretaps Up Sharply in 2010

8/18. The Administrative Office of U.S. Courts (AOUSC) released its 2001 annual report on Title 18 intercepts. It finds that the use of state and federal wiretaps and other intercepts increased 34% from 2009 to 2010.

It states that "A total of 3,194 intercepts authorized by federal and state courts were completed in 2010". 1,207 were federal. 1,987 were state. Also, the AOUSC disclosed that it obtained data from only 25 states.

The report also states that "The average number of persons whose communications were intercepted rose from 113 per wiretap order in 2009 to 118 per wiretap order in 2010." 3,194 intercepts multiplied by 118 persons per intercept equals 376,892 persons.

This report does not include intercepts conducted pursuant to the Foreign Intelligence Surveillance Act (FISA), which is codified in Title 50.

The report states that the average cost of a federal wiretap in 2010 was $63,566.

The report states that almost all intercepts, both state and federal, are wiretaps of telephone communications, which includes both wireline and wireless.

The report also reveals that narcotics investigations continue to account for most intercepts. 2,675 out of 3,194 orders granting intercepts in 2010 were narcotics related.

The full title of the report is "Report of the Director of the Administrative Office of United States Courts on Applications for Orders Authorizing or Approving the Interception of Wire, Oral, or Electronic Communications".

Groupon Addresses Representatives' Privacy Concerns

8/18. Groupon sent a letter [16 pages in PDF] to Rep. Ed Markey (D-MA) and Rep. Joe Barton (R-TX) on August 10, 2011, that responds to their letter of July 26, regarding the July 11 article in the Washington Post titled "Groupon changes privacy policy to collect, share more information".

Rep. Barton stated in a release on August 18 "In answering the questions posed by Rep. Markey and myself the company demonstrated several ways in which they protect consumers' private information. I have learned that Groupon desires to deliver offers that are convenient, affordable, and relevant. In an effort to make this a reality, they should never let convenience compromise the integrity of the company."

Rep. Markey stated in this release that "It's appropriate that Groupon currently uses an opt-in feature for location-based services. This enables consumers to decide whether to grant permission for Groupon to pinpoint where a consumer is at any given moment so it can make offers tailored to that location. Transparent, easily understandable privacy policies and practices are key here, and I will continue to monitor this rapidly developing area of the industry."

Rep. Barton Comments on Supercookies

8/18. Rep. Joe Barton (R-TX) commented in a release on news media reports regarding supercookies. He wrote that "I find the most recent news of these so-called 'supercookies' disturbing and the fact that major websites like Hulu and MSN didn't know they were attached to their products is just plain frightening."

See, Wall Street Journal story titled "Tech Today: Coming to Your Computer: The Invasive Supercookie" and story titled "Latest in Web Tracking: Stealthy Supercookies", both published on August 18, 2011.

Rep. Barton stated that "Supercookies are legal, but I don't think they should be. It is just one more tool that can be used to track people or even find out their financial information.

He added that "The constant abuse of online activity must stop. I believe the internet business community needs to continue to investigate incidents like this and do a better job at protecting users’ privacy."

Rep. Barton is a senior member of the House Commerce Committee (HCC).

People and Appointments

8/18. The Federal Trade Commission (FTC) published a notice in the Federal Register (FR) that lists the members of the FTC's Performance Review Board: Eileen Harrington (Executive Director), Willard Tom (General Counsel), Pauline Ippolito (Deputy Director of the Bureau of Economics), Richard Feinstein (Director of the Bureau of Competition), and Jessica Rich (Deputy Director of the Bureau of Consumer Protection). See, FR, Vol. 76, No. 160, Thursday, August 18, 2011, at Pages 51368-51369.

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8/18. The Department of Justice's (DOJ) Antitrust Division published a notice in the Federal Register (FR) that announces that the Connected Media Experience, Inc., a standard setting organization, has disclosed, pursuant to the National Cooperative Research and Production Act of 1993, changes to its membership. See, FR, Vol. 76, No. 161, Friday, August 19, 2011, at Pages 52013-52014.

8/18. The U.S. District Court (EDVa) sentenced Donald H. Cone to serve 30 months in prison and pay $143,300 in restitution following his previous conviction for importing and selling counterfeit Cisco branded computer networking equipment. The other convicted defendant, Chun-Yu Zhao, is scheduled to be sentenced in September. See, DOJ release.

NMPA Settles with YouTube

8/17. National Music Publishers' Association (NMPA) announced in a release that it has reached a settlement with YouTube in copyright infringement litigation initiated the District Court in New York in 2007.

The NMPA stated in this release that "music publishers will have the opportunity to enter into a License Agreement with YouTube and receive royalties from YouTube for musical works in videos posted on the site." In addition, the Harry Fox Agency (HFA) "will administer the license agreements which will be available to all music publishers regardless of affiliation."

Viacom and others filed a complaint in the U.S. District Court (SDNY) on March 12, 2007. See, story titled "Viacom Files Complaint Against Google and YouTube Alleging Violations of Copyright Law" in TLJ Daily E-Mail Alert No. 1,551, March 13, 2007. The NMPA joined this litigation in August of 2007. See, NMPA release.

The District Court granted summary judgment to YouTube on June 23, 2010. It ruled in its opinion and order [30 pages in PDF] that the activities of YouTube at issue in this action fall within the safe harbor protection of the Digital Millennium Copyright Act (DMCA), which is codified at 17 U.S.C.§ 512(c). See, story titled "District Court Grants Summary Judgment to YouTube in Copyright Infringement Case" in TLJ Daily E-Mail Alert No. 2,100, June 23, 2010.

The plaintiffs appealed to the U.S. Court of Appeals (2ndCir), which has not yet ruled. See also, story titled "Viacom Files Appeal Brief in YouTube Copyright Infringement Case" in TLJ Daily E-Mail Alert No. 2,172, December 8, 2010, and "MPAA Files Amicus Brief in Viacom v. YouTube" in TLJ Daily E-Mail Alert No. 2,176, December 12, 2010.

These cases are Viacom International, Inc. et al. v. YouTube, Inc. et al., D.C. No. 07 Civ 2130 (LLS), and Football Association Premier League Limited, et al. v. YouTube, Inc., D.C. No. 07 Civ. 3582 (LLS), both in the U.S. District Court for the Southern District of New York, Judge Louis Stanton presiding.

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8/17. The American Antitrust Institute (AAI) released a paper [38 pages in PDF] titled "The Effects of AT&T's Acquisition of T-Mobile Is Likely to Substantially Lessen Competition".

7th Circuit Rules in Phone Bill Cramming Class Action

8/16. The U.S. Court of Appeals (7thCir) issued its opinion in Lady Di's v. Enhanced Services Billing, Inc., a case regarding phone bill cramming in which the Court of Appeals affirmed the summary judgment of the District Court against the phone customer.

This case is a putative class action, alleging violation of the laws of the state of Indiana, brought by a phone customer, against two intermediaries that represent purported third party billers in causing third party charges to be placed on phone bills.

This case is of limited significance. It only involves Indiana law. Moreover, the District Court ruled, in part, upon the factual finding that the plaintiff had consented to the disputed charges.

Phone companies bill their customers for services that they provide. They also include on phone bills charges at the direction of third party billers. Many of these third party charges are not authorized by the customers, and are fraudulent.

The case, along with a Senate hearing last month on this issue, and the Federal Communications Commission's (FCC) open rulemaking proceeding, show that fraudulent third party billing is widespread, consumers have no federal private right of action, states such as Indiana provide little recourse to consumers, and the FCC has only limited statutory authority and inclination to tackle fraudulent third party billing practices.

Senate Commerce Committee Hearing. The Senate Commerce Committee (SCC) held a hearing on phone bill cramming on July 13, 2011. At that hearing, Lisa Madigan, Attorney General of Illinois, advocated enactment of legislation banning third party charges on phone bills. She said that allowing third party billing is an "open invitation to fraud and deceit" and "should be banned altogether".

Lisa MadiganMadigan (at right) said that "people are completely unaware of the fact that their phone number can be used as a credit card". She added that "the vast majority" of consumers never find these unauthorized charges on their bills. And, "almost nobody" goes through their bills. See, story titled "Senate Commerce Committee Holds Hearing on Phone Bill Cramming" in TLJ Daily E-Mail Alert No. 2,258, July 14, 2011.

The SCC also heard testimony from a phone industry representative that the industry derives $200 Million in revenue per year from third party billing.

FCC NPRM. The FCC has an open rulemaking proceeding on phone bill cramming. On July 12, 2011, it adopted and released its Notice of Proposed Rule Making (NPRM) [48 pages in PDF]. It is FCC 11-106 in CG Docket Nos. 11-116 and 09-158, and CC Docket No. 98-170.

On August 23, the FCC set comment deadlines. Initial comments are due by October 24, 2011. Reply comments are due by November 21, 2011. See, notice in the Federal Register, Vol. 76, No. 163, Tuesday, August 23, 2011, a Pages 52625-52632.

However, the proposed rules in this NPRM would only impose minimal new requirements on carriers. First, this NPRM does not propose either to prohibit third party charges on carriers' phone bills, or to require that consumers be given the option to block all third party charges.

Rather, this NPRM merely proposes to tinker with the arrangement of bills, and notices contained in bills. It proposes that FCC's rules be amended to provide that "Where charges for two or more carriers appear on the same telephone bill, the charges must be separated by service provider."

See also, story titled "FCC Adopts Cramming NPRM" in TLJ Daily E-Mail Alert No. 2,258, July 14, 2011.

Lady Di's v. EBSI. Enhanced Services Billing, Inc. (EBSI), one of two defendants in this case, has a history with regulators. The Federal Trade Commission (FTC) filed a civil action in 2001 in the U.S. District Court (DC) against EBSI, alleging unfair and deceptive trade practices, and obtained a consent judgment.

Lady Di's, Inc., a small business that obtains telecommunications services from AT&T, filed a complaint in the U.S. District Court (SDInd) against Enhanced Services Billing, Inc. and ILD Telecommunications, Inc., billing aggregators who cause phone companies to place charges on phone customers' bills, alleging violations of Indiana state law in connection with the placement of unauthorized charges on phone bills. Lady Di's also sought class action status.

The federal Communications Act does not expressly create a private right of action for phone bill cramming. Indeed, the Federal Communications Commission's (FCC) statutory authority to regulate cramming is limited. The only relevant statutory provision, 47 U.S.C. § 201(b), provides, in relevant part, that "All charges, practices, classifications, and regulations for and in connection with such communication service, shall be just and reasonable, and any such charge, practice, classification, or regulation that is unjust or unreasonable is declared to be unlawful ..."

The plaintiff alleged violation of the Indiana anti-cramming regulation, 170 IAC § 7-1.1-19(p), which does not provide a private right of action, and violation of Indiana's Deceptive Commercial Solicitation Act, Ind. Code § 24-5-19-9.

The District Court denied the request for class certification, and granted summary judgment to the defendants. Lady Di's brought the present appeal.

The Court of Appeals affirmed the judgment of the District Court.

It wrote that "the Indiana anticramming regulation does not apply to these defendants because they are not telephone companies and did not act in this case as billing agents for telephone companies."

"Second, we find that there was no unjust enrichment where the plaintiff ordered and received the services in question."

"Third, we find that the Deceptive Commercial Solicitation Act does not apply because the plaintiff had actually ordered the services for which it was charged."

This case is Lady Di's, Inc. v. Enhanced Services Billing, Inc., et al., U.S. Court of Appeals for the 7th Circuit, App. Ct. No. 10-3903, an appeal from the U.S. District Court for the Southern District of Indiana, Indianapolis Division, D.C. No. 1:09-cv-00340-SEB-DML, Judge Sarah Barker presiding. Judge Hamilton wrote the opinion of the Court of Appeals in which Judges Rovner and Joan Lefkow (USDC/NDIll sitting by designation) joined.

9th Circuit Addresses Probable Cause to Search Home Computers

8/16. The U.S. Court of Appeals (9thCir) issued its opinion [14 pages in PDF] in Dougherty v. City of Covina, a claim against a political subdivision of a state, under 42 U.S.C. § 1983, for violation of his constitutional rights. He alleged that the city violated his 4th Amendment right to be free from unreasonable searches and seizures by seizing and searching his home computer and other electronic items, without probable cause. The Court of Appeals held that the city lacked probable cause, but possesses immunity from this suit.

The probable cause holding in this case is of little significance. It provides an example of what does not constitute probable cause to search a home computer in a case which a law enforcement officer alleges to be a child pornography (CP) investigation. However, it does not provide an explanation of what does constitute probable cause to search a home computer, and which is applicable to all types of criminal investigations. Moreover, the section on probable cause is neither long nor thoughtfully drafted.

That is, this opinion does not provide guidance as to what would constitute probable cause to search a home computer for evidence of computer hacking, criminal copyright infringement, or online fraud.

The City of Covina Police Department requested a warrant to search the home, computers, cameras, and electronic media of Bruce Dougherty, an elementary school teacher. A police officer represented to the magistrate that there was probable cause to believe that Dougherty had CP in his home.

The officer submitted an affidavit to the magistrate that alleged the manner in which Dougherty looked at his students in class. It also alleged that on one recent occasion he picked up a student in class. It also alleged older in class touching. But, it contained no allegations regarding CP use. The affidavit alleged that in the experience of the investigating officer, the acts alleged in the affidavit are linked to CP use. Also, the affidavit did not allege that Dougherty owned a home computer, or had an internet access account.

The magistrate issued the warrant. Police conducted a search of Dougherty's home at gunpoint. The police seized and searched his computer. No charges were brought. Dougherty then sued the city, the officer, and the Chief of Police in the U.S. District Court (CDCal). The District Court dismissed the complaint. Dougherty brought the present appeal.

The Court of Appeals held that there was not probable cause to search his home computer or electronic media. However, it also held that since the 9th Circuit had not previously ruled on the question of probable cause to search a home computer in a CP investigation, the city and its employees have immunity from this suit.

The Court of Appeals adopted the following standard: "Under the totality of the circumstances, a search warrant issued to search a suspect's home computer and electronic equipment lacks probable cause when (1) no evidence of possession or attempt to possess child pornography was submitted to the issuing magistrate; (2) no evidence was submitted to the magistrate regarding computer or electronics use by the suspect; and (3) the only evidence linking the suspect's attempted child molestation to possession of child pornography is the experience of the requesting police officer, with no further explanation." (Emphasis added.)

As a practical matter, this standard will not preclude law officers from obtaining search warrants for home computers in investigations which they allege to be CP investigations. All officers need do to avoid denial of a request for a warrant under this standard is allege that the suspect has home computer, which the officer in this case failed to do. Had the Court written a standard in which the three prongs were conjoined by the word "or", rather than "and", then the standard would have imposed a more meaningful limitation.

This opinion may be of only limited applicability to searches and seizures of computers in other types of investigations, because the Court only discussed probable cause in the context of CP investigations, the leading cases discussed and relied upon by the Court as precedent were CP related cases, and the standard adopted by the Court references CP.

This case is Bruce Dougherty, et al. v. City of Covina, et al., U.S. Court of Appeals for the 9th Circuit, App. Ct. No. 09-56395.

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8/16. The U.S. Patent and Trademark Office (USPTO) announced in a release that it issued its 8 Millionth patent. Also on August 16, David Kappos, head of the USPTO, stated in a release that the backlog of patent applications awaiting first office action by examiners is 689,226, and that Traditional First Action Pendency is 27.8 months.

8/16. The U.S. District Court (CDCal) entered a Stipulated Permanent Injunction and Final Order [18 pages in PDF] in Federal Trade Commission v. Flora, a civil case involving the sending of unsolicited commercial text messages in violation of the federal CAN-SPAM Act, which is codified at 15 U.S.C §§ 7701-7713. The FTC filed its complaint in February. See, story titled "FTC Files Complaint Against Text Spammer" in TLJ Daily E-Mail Alert No. 2,198, February 25, 2011. The order merely bars Flora from continuing to violate the CAN SPAM Act, and imposes a judgment of $58,946.90. See also, FTC's September 29, 2011 release. This case is FTC v. Phillip A. Flora, U.S. District Court for the Central District of California, D.C. No. 8:11-cv-00299-AG -JEM.

Go to News from August 11-15, 2011.