TLJ News from September 11-15, 2012

OUSTR Pleased With Progress in TPPA Negotiations

9/15. The Office of the U.S. Trade Representative (OUSTR), which is negotiating the Trans Pacific Partnership Agreement (TPPA) on behalf of the U.S., released a sterile statement regarding the latest round of negotiations that took place in Leesburg, Virginia on September 6-15.

The OUSTR wrote that "Over the 10-day negotiating round, negotiators from the United States and the other eight TPP countries -- Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam -- advanced their efforts to reach agreement on the texts of the 29 chapters of the agreement."

In addition, Mexico and Canada will soon join the TPPA negotiations.

The OUSTR added that "The teams were pleased with progress made on a wide range of chapters, including market access, customs, rules of origin, technical barriers to trade, sanitary and phytosanitary standards, cross border services, telecommunications, government procurement, and others. TPP member delegations also continued to move forward in constructing the tariff and other specific market-opening commitments that each country is making on industrial goods, agriculture, textiles, services and investment, and government procurement. Along with this progress, the nine countries also reported a continued focus on other important issues from intellectual property rights to labor and environment and other topics that address core issues faced by manufacturers, service providers, farmers, ranchers, and workers in the 21st century."

The OUSTR does not release to the public drafts of proposed TPPA language that it submits or receives from others. It does maintain a TPPA web page with little information. However, from time to time others publish documents online purported to be drafts of free trade agreement provisions, including TPPA IP provisions.

The OUSTR also stated that "The Leesburg negotiating round was structured by the United States to continue to provide stakeholders who accepted the invitation to be on-site during the talks with input and information regarding the round. On September 9, more than 250 stakeholders representing 93 groups from civil society, business, labor and regional development organizations spoke one-on-one or in small groups with TPP negotiators in a Direct Stakeholder Engagement Forum; 60 presenters also accepted the opportunity to give brief presentations on their views on key negotiating issues. That same day, U.S. Chief Negotiator and Assistant U.S. Trade Representative Barbara Weisel and fellow chief negotiators briefed stakeholders and took questions on the substance and process of the TPP talks."

The next round of TPPA negotiations will take place in Auckland, New Zealand on December 3-12, 2012.

Some U.S. based groups, such as the Public Knowledge (PK), do not share the OUSTR's enthusiasm for the TPPA's provisions regarding intellectual property. The PK's Jodie Griffin wrote a short essay on September 14, titled "Failing to Understand the Needs of the 21st Century: The TPP and the Notice-and-Takedown System".

House to Consider STEM Visa Bill

9/14. Rep. Lamar Smith (R-TX), the Chairman of the House Judiciary Committee (HJC) released the draft [22 pages in PDF] of a bill titled "STEM Jobs Act of 2012".

Also on September 14, House Republican leaders announced that the agenda for the week of September 17 includes consideration of this bill on Thursday, September 20, or Friday, September 21, under suspension of the rules. See, Rep. Cantor's schedule.

This bill would amend the Immigration and Nationality Act regarding issuance of visas. Section 3 of the bill would eliminate the diversity lottery green card program. Section 2 of the bill would replace it with a new visa category, capped at 55,000 per year,  for aliens with advanced STEM degrees.

These new visas would go to aliens who "hold a doctorate degree in a field of science, technology, engineering, or mathematics from a United States doctoral institution of higher education" and "agree to work for a total of not less than 5 years in the aggregate for the petitioning employer or in the United States in a field of science, technology, engineering, or mathematics upon being lawfully admitted for permanent residence".

The bill also requires that all of the doctoral courses be taken "while physically present in the United States". The bill provides that the degree fields covered would be "computer and information sciences and support services, engineering, mathematics and statistics, and physical sciences". The bill also imposes limitations on what qualifies as a Ph.D. granting institution.

The bill also provides that if less than 55,000 visas are granted to aliens with STEM Ph.D.s, the remaining visas may be granted to aliens with STEM masters degrees.

Rep. Smith announced in a release that "Many of the world's top students come to the U.S. to obtain advanced degrees in science, technology, engineering, and math (STEM) subjects. We could boost economic growth and spur job creation by allowing American employers to more easily hire some of the best and brightest foreign graduates of U.S. universities. These students have the ability to start a company that creates jobs or come up with an invention that could jump-start a whole new industry."

He continued that "In a global economy, we cannot afford to educate these foreign graduates in the U.S. and then send them back home to work for our competitors. For America to be to the world’s economic leader, we must have access to the world's best talent. The proposed legislation will generate jobs and economic growth by allowing U.S. businesses to retain outstanding foreign graduates of U.S. universities with advanced degrees in STEM fields. This will help us create jobs, increase our competitiveness, and spur our innovation."

President Obama has spoken in support of the concept that underlies this bill. For example, he stated in a speech on February 7, 2011 that "Others come here from abroad to study in our colleges and universities. But as soon as they obtain advanced degrees, we send them back home to compete against us. It makes no sense." See also, story titled "President Obama Addresses Innovation" in TLJ Daily E-Mail Alert No. 2,196, February 7, 2011.

Rep. Lofgren Introduces Alternative STEM Visa Bill

9/14. Rep. Zoe Lofgren (D-CA) and other House Democrats introduced HR 6412 [LOC | WW | PDF], another STEM visa bill, titled "Attracting the Best and Brightest Act of 2012" or "ABBA".

This bill, like Rep. Lamar Smith's (R-TX) draft [22 pages in PDF] bill, would create a new visa category for aliens with Ph.D.s and Masters in STEM fields. Both bills would provide for a similar number of visas each year: Rep. Smith 55,000, and Rep. Lofgren 50,000.

However, the two bills differ regarding the existing 55,000 visas per year diversity lottery program. Rep. Smith's bill would eliminate it. Rep. Lofgren's would not.

Rep. Lofgren also stated in a release that her bill "Requires that the offered wage to the STEM graduate meets or exceeds the actual wage paid to U.S. workers with similar levels of experience. The Republican proposal does not include this provision and does not adequately ensure that American workers are protected."

Rep. Smith's bill is scheduled to be considered by the full House on Thursday, September 20, or Friday, September 21, under suspension of the rules. This means that no amendments will be in order. Hence, Rep. Lofgren cannot offer her bill as a substitute amendment. However, items on the suspension calendar require a two thirds majority for passage.

DOJ's Perez Addresses Online Bullying

9/14. Thomas Perez, Assistant Attorney General in charge of the Department of Justice's (DOJ) Civil Rights Division (CRD) gave a speech in San Francisco in which he discussed bullying of children, including online bullying via "Facebook pages and Twitter feeds".

However, while he made many declarations of concern and priority, he cited no actions taken by the CRD, and threatened no future actions against service providers, or anyone else, under federal civil rights laws.

Any such action would be unsupported by the relevant statutes, because there is no anti-bullying provision in the civil rights statutes enforced by the CRD, and because interactive computer services, such as Facebook and Twitter, have immunity under 47 U.S.C. § 230 from liability for the statements their users.

Nevertheless, it should be recalled that the CRD has taken action against small online service providers, notwithstanding Section 230. See for example, story titled "DOJ Settles Case Against Interactive Computer Service" in TLJ Daily E-Mail Alert No. 808, December 31, 2003. However, companies as large as Facebook and Twitter would have the legal resources to contest any such an enforcement action.

There is precedent for application of Section 230 in civil rights cases. See, story titled "4th Circuit Affirms That Section 230 Immunity Extends to Federal Civil Rights Action" in TLJ Daily E-Mail Alert No. 863, March 25, 2004, Court of Appeals opinion and District Court opinion. Similarly, the 7th applied Section 230 in another housing civil rights case. See also, story titled "7th Circuit Applies Section 230 Immunity in Craigslist Case" in TLJ Daily E-Mail Alert No. 1,731, March 17, 2008.

In contrast, see story titled "9th Circuit Holds May be Liable for Speech of Users" in TLJ Daily E-Mail Alert No. 1,581, May 15, 2007, and story titled "En Banc 9th Circuit Panel Rejects Section 230 Immunity in Case" in TLJ Daily E-Mail Alert No. 1,741, April 2, 2008.

Washington State Attorney General Rob McKenna wrote in a short piece on September 13 that "Preventing cyberbullying is complicated because text, email and social media conversations between our children and others are a closed loop. An increased dependence on mobile phones has also made it difficult for young people to avoid a cyber bully. Adults are actively blocked from finding out what's being said."

Copyright Office Extends Comments Deadline for Small Copyright Claims NOI

9/14. The Copyright Office (CO) published a notice in the Federal Register (FR) that extends the deadline to submit comments in response to its Notice of Inquiry (NOI) regarding creating a small copyright claims process.

The old deadline was September 26. See, notice in the FR, Vol. 77, No. 164, August 23, 2012, at Pages 51068-51071. The new deadline is October 19, 2012. See, FR, Vol. 77, No. 179, September 14, 2012, at Pages 56874-56875

See also, stories titled "Copyright Office Seeks Comments on Creating a Process for Adjudicating Small Copyright Claims", "Orphan Works Legislation and Adjudicating Small Copyright Claims", and "Summary of First Round of Comments on Creating a Process for Adjudicating Small Copyright Claims" in TLJ Daily E-Mail Alert No. 2,445, September 11, 2012.

The CO wrote that "Due to the number and complexity of the issues raised in that Notice, it appears that some stakeholders may need additional time to respond." The CO did not disclose who requested an extension.

People and Appointments

9/14. Jonathan Adelstein was named head of the PCIA (aka Wireless Infrastructure Association). He was previously head of the Department of Agriculture's Rural Utilities Services. Before that, he was a Federal Communications Commission (FCC) Commissioner. See, PCIA release.

More News

9/14. Rachel Brandenburg, of the Department of Justice's (DOJ) Antitrust Division, gave a speech [21 pages in PDF] in Florence, Italy, titled "Recent Developments in Merger Control: Views from the U.S. Department of Justice’s Antitrust Division". She discussed the DOJ's rejection of the proposed merger of AT&T and T-Mobile.

9/14. Joseph Wayland, acting Assistant Attorney General in charge of the Department of Justice's (DOJ) Antitrust Division, gave a speech [14 pages in PDF] in Florence, Italy, titled "International Cooperation at the Antitrust Division".

9/14. The Government Accountability Office (GAO) released a report [50 pages in PDF] titled "Electronic Government Act: Agencies Have Implemented Most Provisions, but Key Areas of Attention Remain". The Electronic Government Act of 2002 (HR 2458, Public Law No. 107-347) states that its purpose is to "enhance the management and promotion of electronic Government services and processes by establishing a Federal Chief Information Officer within the Office of Management and Budget, and by establishing a broad framework of measures that require using Internet-based information technology to enhance citizen access to Government information and services".

9/14. The Government Accountability Office (GAO) released a report [45 pages in PDF] titled "Recovery Act: Broadband Programs Are Ongoing, and Agencies' Efforts Would Benefit from Improved Data Quality". This report pertains to HR 1 [LOC | WW], the huge spending bill passed by the Congress in February of 2009, which provided $7.2 Billion to the National Telecommunications and Information Administration (NTIA) and Rural Utilities Service (RUS) for the purpose of promoting broadband.

9/14. The Department of Justice's (DOJ) Antitrust Division published a notice in the Federal Register (FR) that announces that the 3D Consortium, Inc. filed a notification of a change in its membership, pursuant to the National Cooperative Research and Production Act of 1993, which pertains to limiting antitrust liability of standard setting consortia. See, FR, Vol. 77, No. 179, September 14, 2012, at Page 56861.

9/14. The American Antitrust Institute (AAI) published a book [Amazon hardcover] titled "Private Enforcement Of Antitrust Law In The United States". It is 432 pages, and is edited by Albert Foer and Randy Stutz. See also, AAI sales page, and Google ebook sales page.

9/14. The International Intellectual Property Alliance (IIPA) filed comments [8 pages in PDF] with the Office of the U.S. Trade Representative (OUSTR) to assist it in preparing its special 301 out of cycle review of notorious markets.

Rep. DeFazio Expresses Protectionist Opposition to TPPA

9/13. Rep. Peter Defazio (D-OR) spoke in the House about Trans Pacific Partnership Agreement (TPPA) negotiations held in Leesburg, Virginia on September 6-15, 2012. See, Congressional Record, September 13, 2012, at Page H5926.

Rep. DeFazio is a 13th term labor union Democrat who rarely gets involved in technology related issues. He condemned the TPPA on protectionist grounds.

The TPPA would address a wide range of intellectual property (IP) issues. For this reason it is supported by many patent and copyright based businesses and groups in the U.S. On the other hand, these IP related provisions are of concern to some tech sector companies and groups such as the Public Knowledge (PK), Computer and Communications Industry Association (CCIA), and Electronic Frontier Foundation (EFF). However, Rep. DeFazio said nothing about IP in his speech.

He said, "About 27 miles away from here, secret negotiations are ongoing. A number of us have asked to be allowed to observe the negotiations because it will have a dramatic impact on the future of the United States of America and our economy, but no Member of Congress has been allowed into these negotiations. This is over something called the Trans-Pacific Partnership. It's essentially NAFTA for the whole Pacific Rim."

He alleged that the North American Free Trade Agreement (NAFTA) "has cost the U.S. hundreds of thousands of jobs in many industries".

He said that while "it's being negotiated among a small number of relatively small countries" ... "later on, other countries, like Japan and China, can plug in".

He also asserted that "if Japan is allowed to join, and the U.S. is trying to get Japan to join, we'll lose 90,000 automotive jobs immediately. This is yet another example of failed trade policy of the United States of America."

A review of Federal Election Commission (FEC) records discloses that labor unions are the leading source of contributions to Rep. DeFazio's election campaigns, followed by transportation sector companies. He is a senior member of the House Transportation Committee.

These contribution records show almost no support from information and communications technology (ICT) companies and groups in recent election cycles. Although, an eBay committee gave him $1,000 in 2011. The Recording Industry Association of America (RIAA), whose members hope to benefit from the TPPA, gave him $1,000 ten years ago. The National Telecommunications Cooperative Association (NTCA) gave him $1,000 in 2010.

See also, the Center for Responsive Politics' Open Secrets web site's analysis of contributions to Rep. DeFazio.

In 2008, in the 110th Congress, Rep. DeFazio introduced HR 5788 [LOC | WW], a bill to ban the use of cell phones on scheduled airline flights. Back in 1996, he voted against the Telecommunications Act.

On August 1 of this year he introduced, with Rep. Jason Chaffetz (R-UT), HR 6245 [LOC | WW], the "Saving High-tech Innovators from Egregious Legal Disputes", or "SHIELD Act". See, story titled "SHIELD Act Would Allow Court to Award Costs and Attorneys Fees to Prevailing Parties in IT Patent Cases" in TLJ Daily E-Mail Alert No. 2,420, August 4, 2012.

Update on ACLU Challenge to Constitutionality of 2008 FISA Act

9/13. While bills to extend the 2008 FISA Act for five years are moving through the Congress, a challenge to the Constitutionality of the Act is moving through the federal courts. The Supreme Court is scheduled to hear oral argument on October 29, 2012, although only on a preliminary issue.

The American Civil Liberties Union (ACLU) brought this action in 2008 immediately after enactment of the 2008 Act. Nominally, the plaintiffs are Amnesty International USA and other groups and individuals. See, July 10, 2008 complaint in Amnesty International USA, et al. v. John McConnell, et al., (the lead defendant is now James Clapper), U.S. District Court (SDNY), D.C. No. 08-DV-6259.

On August 20, 2009, the District Court issued its opinion holding that the plaintiffs lack standing to bring this challenge.

The plaintiffs appealed. The U.S. Court of Appeals (2ndCir) issued its opinion on March 21, 2011, reversing and reinstating the case. See, Amnesty International USA, et al. v. James Clapper, et al., U.S. Court of Appeals for the 2nd Circuit, App. Ct. No. 09-4112-cv. See also, story titled "2nd Circuit Reinstates Challenge to FISA Powers" in TLJ Daily E-Mail Alert No. 2,209, March 25, 2011.

The government petitioned for writ of certiorari, which the Supreme Court granted. See, July 26, 2012, government merits brief in Clapper v. Amnesty, Supreme Court, Sup. Ct. No. 11-1025.

The ACLU has not yet filed its merits brief. However, see its brief in opposition to the petition for writ of certiorari.

The Supreme Court is scheduled to hear oral argument on October 29, 2012. See, docket.

The only question presented to the Supreme Court at this time is whether the plaintiffs have standing. The Supreme Court will not decide whether or not the 2008 statute is constitutional. The question is "Whether respondents lack Article III standing to seek prospective relief because they proffered no evidence that the United States would imminently acquire their international communications using Section 1881a-authorized surveillance and did not show that an injunction prohibiting Section 1881aauthorized surveillance would likely redress their purported injuries."

If the Supreme Court were to hold that the plaintiffs have standing, the case would return to the District Court for resolution on the merits.

House Intelligence Committee Holds Hearing on PRC Telecoms

9/13. The House Intelligence Committee (HIC) held a hearing titled "National Security Threats Posed by Chinese Telecom Companies Working in the U.S." Charles Ding (Corporate SVP of Huawei) and Zhu Jinyun (SVP for North America and Europe, ZTE) argued that their companies are independent of the government and military of the People's Republic of China (PRC) and do not present security threats to the US or US businesses.

The HIC sent letters to Huawei and ZTE in June requesting information. See, letter to ZTE USA CEO Lixin Chen, and similar letter to ZTE Chairman Weigui Hu. See also, letter to Huawei Technologies Co., LTD. SVP Charles Ding, and similar letter to Chairman Ren Zhengfei. See also, story titled "Rep. Rogers and Rep. Ruppersburger Write Huawei and ZTE and About Ties to PRC Government" in TLJ Daily E-Mail Alert No. 2,395, June 13, 2012.

Members of the HIC, and other members of Congress have long expressed national security concerns about these two companies. See, stories titled:

Rep. Mike Rogers (R-MI), the Chairman of the HIC, wrote in his opening statement that "We have heard reports about backdoors or unexplained beaconing from the equipment sold by both companies. And our sources overseas tell us that there is a reason to question whether the companies are tied to the Chinese government or whether their equipment is as it appears."

"We have heard reports about their attempts to steal the trade secrets of other companies, which gives them a competitive advantage and makes us question their ability to abide by any rules", said Rep. Rogers. "Chinese actors are also the world’s most active and persistent perpetrators of economic espionage".

"U.S. firms and cybersecurity specialists speak about an on-going onslaught of sophisticated computer network intrusions originating in China, that are almost certainly the work of, or done at the backing of, the Chinese government." He continued that "Defending against the risk of cyber attacks becomes a bigger challenge when the system itself cannot be trusted. When the equipment and software is provided by companies we cannot trust, then we must constantly worry whether our systems our going to work against us."

Rep. Rogers  stated that "A sophisticated nation-state actor like China has the motive to tamper with the global telecommunications supply chain ..." and "Huawei and ZTE provide a wealth of opportunities for Chinese intelligence agencies to insert malicious hardware or software implants into critical telecommunications components and systems. And under Chinese law, ZTE and Huawei would likely be required to cooperate with any request by the Chinese government to use their systems or access for malicious purposes."

Rep. Rogers wrote that the HIC "has been disappointed that the companies provided little actual evidence to ameliorate the Committee's concerns. In particular, they did not provide documentation supporting or confirming their claims about their formal relationships or regulatory interaction with Chinese authorities, corporate structure, ownership, operations, or management. We were willing to work with both companies, to find a reasonable way to answer our documents requests. But the companies refused, apparently because to turn over internal corporate documents would potentially violate China’s state-secret laws. It is strange the internal corporate documents of purportedly private sector firms are considered classified secrets in China. This fact alone gives us a reason to question their independence."

Rep. Dutch Ruppersburger (D-MD), the ranking Democrat on the HIC, wrote in his opening statement that "both companies, Huawei and ZTE, were created and headquartered in China, a country known to aggressively conducts cyber espionage, raises issues. And add to that… the fear that China, a communist country, could compel these companies to provide it information or worse yet spy on Americans using this equipment."

He added that "We were disappointed with the lack of direct answers to our in-person questions and vague responses to our letter."

Charles Ding of Huawei wrote in his prepared testimony that many US IT and telecommunications companies already "have substantial operations in China, and much equipment used in U.S. networks is developed and manufactured in China."

Ding also argued that Huawei has strong incentives, and does in fact strive, to provide cyber security for its customers around the world. "Ensuring cyber security is essential for Huawei’s customers. It is also good for our business. Huawei intends to continue as a leading world-wide supplier of telecommunications equipment and services. As a global company that earns a large part of its revenue from markets outside of China, we know that any improper behavior would blemish our reputation, would have an adverse effect in the global market, and ultimately would strike a fatal blow to the company’s business operations. Our customers throughout the world trust Huawei. We will never do anything that undermines that trust. It would be immensely foolish for Huawei to risk involvement in national security or economic espionage."

He reiterated, "Huawei has not and will not jeopardize our global commercial success nor the integrity of our customers’ networks for any third party, government or otherwise. Ever."

"Like any corporation, Huawei complies in good faith with the laws, rules, and regulations of the governments in the countries where it does business. Thus, Huawei complies with the laws, rules, and regulations of the Chinese government." However, he added that "the Chinese government has no influence over Huawei’s daily operations, investment decisions, profit distributions, or staffing. Nor does the PLA. As previously stated, neither the Chinese government nor the PLA has any ownership interest in Huawei", and "Huawei does not engage in customized R&D or production for military purposes."

He also said that "we have been hindered by unsubstantiated, non-specific concerns that Huawei poses a security threat."

Zhu Jinyun of ZTE wrote in his prepared testimony that ZTE wants an "open and equal opportunity to compete in the United States".

"ZTE’s path has never been government-directed. ZTE started as, and remains today, a company of telecom equipment engineers who pursue commercial opportunity and social responsibility in product innovation." He said that "ZTE is not an SOE or government controlled. Indeed, ZTE is China’s most independent, transparent, globally focused, publicly traded telecom company."

He wrote that the U.S. Defense Department and Department (DOD) of Homeland Security (DHS) have advised Congress that the most effective cyber protection is universal application of equipment standards and Trusted Delivery Models. He then argued that "Not only is ZTE’s equipment certified according to the most advanced standards, ZTE has offered a state of the art Trusted Delivery Model to US telecom equipment purchasers since 2010."

He argued that ZTE is promoting cyber security.

He asked a rhetorical question, "would ZTE grant China’s government access to ZTE telecom infrastructure equipment for a cyber attack?" He then answered his question, "emphatically: no! China’s government has never made such a request. We expect the Chinese government never to make such a request of ZTE. If such a request were made, ZTE would be bound by US law."

Like Charles Ding of Huawei, he stated that if there is a security threat posed by manufacturing in the PRC, then the US is already deeply exposed, because many US companies have "joint venture partners and suppliers" in the PRC, and "virtually all of the telecom equipment now sold in the United States and throughout the world contains components made, in whole or in part, in China".

He also argued that "Proposals that specific Chinese companies be excluded from the US market, either directly or indirectly, would constitute obvious unfair trade practices and are so narrow that they would provide no meaningful solution in support of US cyber security."

Google Search, Advertising and Antitrust

9/13. The Federal Trade Commission's (FTC) Bureau of Competition (BOC) is conducting an investigation of Google regarding whether its search or search advertising business practices violate federal laws enforced by the FTC, including Section 2 of the Sherman Act (15 U.S.C. § 2) and Section 5 of the FTC Act (15 U.S.C. § 45). The European Commission is also investigating Google.

The FTC's investigation, negotiations, and decision making is transpiring without public disclosure by the FTC. However, both advocates and opponents of antitrust action by the FTC are advancing their arguments in public fora. No current employees of the FTC are speaking at such events.

On Thursday, September 13, rival groups, Fair Search (FS) and the Computer and Communications Industry Association (CCIA), hosted panel discussions on the subject of whether the FTC should or should not take action against Google. On Friday, September 28, the Tech Freedom will host a luncheon debate in Washington DC that will also be webcast.

Fair Search is a group of recent origin whose members include Microsoft, Expedia, Kayak, Oracle, Nokia, the Poland based online auction web site Allegro, and other companies. It states in its web site that "Google controls nearly 80% of all searches done in the U.S., and more than 90% of all searches in Europe. It has the unique ability to manipulate the marketplace and illegally thwart competition. Ending its abuses and restoring competition in online search is vital to ensuring continued economic growth, innovation and consumer choice."

FS hosted an event at the Newseum in Washington DC at which most of the speakers condemned Google's business practices. The speakers included Susan Athey (Harvard University professor and Microsoft consultant), Robert Birge (travel search provider KAYAK), Tim Carter ( via video), Mark Corallo, Albert Foer (American Antitrust Institute), Rodman Forter (Skyhook Wireless), Pamela Harbour (Fulbright & Jaworski), Patrick Lynch (consultant to Fair Search, and former AG of Rhode Island), Nathan Newman (NYU), Jim O'Connell (Covington & Burlington and counsel to Expedia), and Dan Savage ( See, FS web page with hyperlinks to video of both panels.

Foer said that the AAI has not taken a position. He said that the key legal issues include the definition of the relevant market. He noted that Google operates in a two sided market, in which Google provides search to users, and advertising to advertisers. He said that the Sherman Act Section 2 theories of natural monopoly, essential facilities and monopoly leveraging are unlikely to be alleged by the FTC. He suggested that the FTC would rely on vertical foreclosure theories.

He speculated that the FTC may be examining six questions. First, and foremost, "Has Google manipulated organic search results, unfairly favoring its own products, and disadvantaging rival vertical search products?"

Second, "Has Google manipulated paid search results by blacklisting rival vertical search sites, or artificially lowering rivals' quality scores, and in turn  affecting their auction rankings, to make winning bids prohibitively expensive?"

Third, "Has Google acted anti-competitively in its advertising agreements with other web sites, attempting primarily through long term exclusive agreements, to prevent advertisers from moving their campaigns to rival search engines?"

Fourth, "Has Google improperly scraped content from rival sites without permission?"

Fifth "Has Google abused its dominance in the Android mobile operating system by for example locking Android handset manufacturers into using Google as their default mobile search engine, by manipulating the operating system's compatibility standards?"

Sixth, "Has Google locked advertising into AdWorks by hampering data portability, and using API restrictions that effectively prevent comparison shopping on rival platforms?"

Content providers at the FS event complained that Google has written its search algorithms to bias results against competing content providers.

Athey, who is also a Microsoft consultant, argued that Google is engaging in anti-competitive conduct that keeps Microsoft, provider of Bing, from realizing the benefits of competition.

Several speakers complained about Google activities that have violated federal law, but not the Sherman Act, such as selling ads to businesses that sell fake drugs, and to predatory real estate lenders.

The CCIA hosted another event on the 13th at which speakers defended Google. The speakers were Glenn Manishin (Troutman Sanders, and counsel to the CCIA), Michael Petricone (Consumer Electronics Association), Eric Goldman (Santa Clara University law school), and Dan Crane (University of Michigan law school).

Manishin argued that search advertising is the relevant market, not search. Hence, Google's 80% share of search in the U.S. is irrelevant. He also argued that in search advertising, digital advertising is a substitute for traditional advertising.

Manishin also argued that issues such as fairness are irrelevant to antitrust analysis. What matters in this matter is whether there is exclusionary conduct. And, in this case, "there is no exclusionary effect".

Petricone added that users can switch search providers with the click of the mouse. He also argued that since information technology is dynamic, fast moving and subject to disruptive innovation, "light hand" regulation is appropriate.

The Tech Freedom event next week will be structured as a debate between two supporters of government action -- Eric Clemons (University of Pennsylvania business school and Allen Grunes (Brownstein Hyatt) -- and two opponents of government action (Manishin and Geoffrey Manne (Lewis & Clark law school).

The Senate Judiciary Committee's (SJC) Subcommittee on Antitrust, Competition Policy and Consumer Rights held a hearing on September 21, 2011, titled "The Power of Google: Serving Consumers or Threatening Competition". See, SJC web page with hyperlinks to statements, testimony and video.

People and Appointments

9/13. President Obama nominated Mark Doms to be Under Secretary of Commerce for Economic Affairs. See, White House news office release and release. He is Chief Economist at the Department of Commerce (DOC). Before that, he was a Senior Economist at the Federal Reserve Bank of San Francisco.

9/13. Linda Dempsey joined the National Association of Manufacturers (NAM) as VP for International Economic Affairs. The NAM stated in a release that she will be responsible for "advocating for intellectual property protection, increased export financing and the elimination of trade barriers, as well as pushing for agreements and treaties to open up new export markets to create jobs". She previously worked for the Emergency Committee for American Trade (ECAT). And before that, she worked as trade counsel to the Senate Finance Committee (SFC).

More News

9/13. Microsoft's Peter Cullen wrote a short piece titled "Working Toward a Privacy Framework for the Big Data Era".

9/13. The Senate Judiciary Committee (SJC) held an executive business meeting at which it held over consideration of all of the technology related items on its agenda: HR 2471 [LOC | WW], a bill to amend 18 U.S.C. § 2710, S 3486 [LOC | WW], the "Patent Law Treaties Implementation Act", S 3523 [LOC | WW], the "Innovative Design Protection Act of 2012", and consideration of the nomination of William Baer to be Assistant Attorney General in charge of the Department of Justice's (DOJ) Antitrust Division. Each of these items is again on the agenda for the SJC's executive business meeting on Thursday, September 20, 2012. See also, story titled "Senate Judiciary Committee to Take Up Tech Bills and Baer Nomination" in TLJ Daily E-Mail Alert No. 2,445, September 11, 2012.

9/13. The Federal Trade Commission (FTC) published a notice in the Federal Register (FR) announcing recent Hart Scott Rodino (HSR) grants of early termination of the waiting period provided by law and the premerger notification rules. See, FR, Vol. 77, No. 177, September 12, 2012, at Pages 56210-56212.

Rep. Markey and Rep. DeGette Introduce Mobile Device Privacy Act

9/12. Rep. Ed Markey (D-MA) and Rep. Dianne DeGette (D-CO) introduced HR 6377 [LOC | WW], the "Mobile Device Privacy Act".

This bill would create a broad new regulatory regime at the Federal Trade Commission (FTC) for mobile phones and all mobile internet connected devices. The FTC has not requested this authority.

This bill would be a class action law firm's dream, but a nightmare for many companies that participate in the mobile devices ecosystem.

This bill follows Congressional inquiries regarding Carrier IQ software installed on smart phones. See, stories titled "House Commerce Committee Democrats Seek Hearing on Carrier IQ Software" and "Carrier IQ, Telcos and Phone Makers Respond to Sen. Franken's Questions" in TLJ Daily E-Mail Alert No. 2,327, January 14, 2012.

Rep. Ed MarkeyRep. Markey (at right) stated in a release that "Consumers should know and have the choice to say no to software on their mobile devices that is transmitting their personal and sensitive information. This is especially true for parents of children and teens, the fastest growing group of smartphone users. This legislation will provide greater transparency into the transmission of consumers' personal information and empower consumers to say no to such transmission."

Rep. Markey has often worked in tandem with Rep. Joe Barton (R-TX) on privacy related matters affecting information and communications technology. However, Rep. Barton is not a cosponsor of this bill, did not join with Rep. Markey early this year in asking for a hearing on Carrier IQ, and did not join with Rep. Markey in asking the FTC to investigate.

This bill would create a new regulatory regime, centered at the Federal Trade Commission (FTC). However, while the FTC would write rules, the bill would also give redundant enforcement authority to both the Federal Communications Commission (FCC) and the states. It would also create a private right of action.

Moreover, the bill would not only not preclude class action litigation, it would be encourage it. It provides that "A person injured by an act in violation" can recover the greater of actual damages, or statutory damages of $1,000, even in the absence of actual monetary loss. Damages could be trebled for "willfully or knowingly in committing a violation".

Samsung, for example, stated in its letter in response to a Senate request that Carrier IQ software had been installed on about 25 Million phones. This could provide for minimum class action damages of $25 Billion.

But, there is more for the class action bar. Private actions could be brought in either state or federal court. Since mobile phones and tablets are sold to users in every judicial district in the country, class action lawyers would be free to pick the most class action friendly state judges in the country. Moreover, the court could issue injunctive relief. The issuance of a preliminary injunction would give class action lawyers tremendous power in bargaining for financial settlements.

This bill would require the FTC to write rules, under Administrative Procedure Act (APA) procedure, not the Magnuson Moss Act procedure specified in the FTC Act. These rules must provide that sellers of mobile devices, makers of mobile devices, wireless voice providers, wireless internet access providers, and mobile device operating system makers must disclose to consumers that "monitoring software is installed on the mobile device", the "types of information that the monitoring software is capable of collecting and transmitting", with whom information will be shared, how it will be used, and other things.

These rules must also require that any entity that is subject to these disclosure requirements must "obtain the express consent of the consumer prior to the time when the monitoring software first begins collecting and transmitting information".

These rules must also require any entity that obtains information subject to these disclosure requirements implement specified  information security practices.

This bill creates no exceptions or exemptions for law enforcement, public safety, or intelligence uses or purposes.

This bill was referred to the House Commerce Committee (HCC). Both Rep. Markey and Rep. DeGette are members.

House Passes Bill to Extend FISA Outside the US Surveillance Authority

9/12. The House passed HR 5949 [LOC | WW], the "FISA Amendments Act Reauthorization Act of 2012", without amendment, by a vote of 301-118. See, Roll Call No. 569.

Republicans voted 227-7. Democrats voted 74-111. President Obama publicly supported this bill. See, story titled "Obama Backs FISA Bill" in TLJ Daily E-Mail Alert No. 2,446, September 12, 2012.

The Senate has not yet passed its version of the bill, S 3276 [LOC | WW]. Sen. Ron Wyden (D-OR), who opposed the bill in the Senate Intelligence Committee (HIC), has placed a hold on the bill.

This bill would extend for five years government authority to conduct surveillance related to persons "outside" the US, without individualized court approval. Surveillance of persons "outside of the United States" is a term of art that also enables surveillance of persons inside of the US who fall within the protection of the 4th Amendment.

Rep. Lamar Smith (R-TX) stated in the House that "America and its allies continue to face national security threats from foreign nations, spies, and terrorist organizations. Our national security agencies must be able to conduct surveillance of foreign terrorists and others so we can stop them before they disable our defenses, carry out a plot against our country, or kill innocent Americans." See, Congressional Record, September 26, 2012, at Page H5891.

Rep. Zoe Lofgren (D-CA) stated that the 2008 Act "raises several serious constitutional and civil liberties issues that Congress needs to address and has not addressed in this bill".

See, full story.

DOJ Seeks Billion Dollar Fine and 10 Year Prison Sentences in LCD Price Fixing Case

9/12. The Department of Justice's (DOJ) Antitrust Division (AD) filed a sentencing memorandum with the U.S. District Court (NDCal) in one of its cases regarding a price fixing conspiracy by manufacturers of thin film transistor liquid crystal displays (TFT-LCD).

This memorandum pertains to defendants AU Optronics Corporation (AUO), H.B. Chen and Hui Hsiung, who were all convicted following trial in the District Court.

The DOJ wants the District Court to sentence AUO to pay a fine of $1 Billion. It wants H.B. Chen and Hui Hsiung to be sentenced to serve ten years in prison and pay $1 Million fines.

This would be very steep punishment. However, the DOJ argues that this would be justified, because of the brazenness of the price fixing conspiracy, the scope of the economic harm, and these defendants' refusals to admit guilt and cooperate with DOJ investigators. Other defendants who cooperated received much lighter penalties.

This is one of several related cases against numerous defendants. See, for example, stories titled:

See also, "More News" in TLJ Daily E-Mail Alert No. 1,921, April 1, 2009, and TLJ Daily E-Mail Alert No. 1,931, April 27, 2009, and "Tech Crime Report" in TLJ Daily E-Mail Alert No. 1,982, September 10, 2009, and TLJ Daily E-Mail Alert No. 2,080, May 14, 2010.

There are also parallel civil and state enforcement actions. See, story titled "New York Files State LCD Price Fixing Complaint" in TLJ Daily E-Mail Alert No. 2,122, August 10, 2010.

The federal cases allege conspiracy to fix prices in violation of 15 U.S.C. § 1. It provides that "Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $100,000,000 if a corporation, or, if any other person, $1,000,000, or by imprisonment not exceeding 10 years, or by both said punishments, in the discretion of the court."

This memorandum states that these "Defendants’ offense was no regulatory violation, nor a momentary lapse soon regretted. Rather, fully conscious of the wrongfulness of their actions, AUO and its executives conspired with the other major makers of TFT-LCD panels to systematically fix prices. The conspiracy lasted five years, ending only when the FBI raided their offices and a federal grand jury subpoenaed the conspirators’ records. And unlike their coconspirators, defendants have refused to cooperate, assist the investigation, or accept responsibility after the government discovered the cartel or even after the jury convicted them."

It adds that "The conspiracy’s breadth and its pernicious effect can hardly be overstated. The conspirators sold $71.9 billion in price-fixed panels worldwide. Even conservatively estimated, the conspirators sold $23.5 billion -- AUO alone sold $2.34 billion -- in price-fixed panels destined for the United States. The conspiracy particularly targeted the United States and its hi-tech companies: Apple, HP, and Dell."

The District Court is scheduled to hold a hearing on September 20, 2012, at 10:00 AM.

This case is USA v. AU Optronics Corporation, et al., U.S. District Court for the Northern District of California, San Francisco Division, D.C. No. 3:09-cr-00110-SI, Judge Susan Illston presiding.

Commentary: Increasing IT Prices Decreases Consumption and Creates a Social Loss

9/12. The Department of Justice's (DOJ) Antitrust Division (AD) filed a sentencing memorandum with the U.S. District Court (NDCal) in USA v. AU Optronics Corporation, one of its LCD price fixing cases.

This memorandum argues that the main harm resulting from the price fixing conspiracy was the high prices paid by companies like Apple, HP and Dell. The memorandum also argues that the conspiracy harmed businesses and individual consumers who paid more for their laptops and desktops because of the price fixing conspiracy.

However, the memorandum also adds the argument that other individuals were harmed, and there was social harm, because the increased prices caused some people not to buy and use laptops and desktops.

This DOJ memorandum is a rare instance of the federal government admitting that raising the price of access to IT decreases consumption, harms individuals who do not buy the higher priced items, and creates a social loss. Other government entities rarely acknowledge this when they tax IT products or services.

The memorandum states that "The conspiracy affected every family, school, business, charity, and government agency that paid more to purchase notebook computers, computer monitors, and LCD televisions during the conspiracy. Yet, even the overcharges they paid do not fully reflect the conspiracy’s harm."

"Because of the increased prices, notebook computers, computer monitors, and LCD televisions were not purchased by American consumers, causing further personal and social loss."

This memorandum does not estimate either the price elasticity of demand for laptops or desktops, or the number of purchases not made as a result increased prices caused by the price fixing conspiracy. It merely identifies the harm.

This memorandum identifies a harm that is indistinguishable from the harm caused by local, state, and federal taxes on IT services, including state and local taxes on wireless service and internet access, and Federal Communications Commission (FCC) taxes on phone service. The FCC does not concede that its USF taxes are taxes. They are portrayed as a fee for services -- universal service.

Whenever prices are artificially raised, whether by collusion among competitors to fix prices, by monopoly pricing, or by taxation, there is, in economic terms, a deadweight loss or allocative inefficiency.

However, in the case of IT products and services, there is also interference with the attainment of numerous social policy goals. There is decreased use of telemedicine services, less access to information about government activities, less online political participation, less distance learning, less access to online textbooks, and less participation in online religious and social communities.

Rep. Waxman and Rep. Rush Write FCC Regarding Prison Phone Fees

9/12. Rep. Henry Waxman (D-CA) and Rep. Bobby Rush (D-IL) sent a letter to Federal Communications Commission (FCC) Chairman Julius Genachowski regarding "the exorbitant rates that the families of prisoners pay to communicate with an incarcerated family member".

They urge the FCC to "move expeditiously" on "lowering prison telephone rates".

They wrote that "Research shows that regular contact between prisoners and family members during incarceration reduces recidivism. Phone calls are the primary means for families to maintain contact with incarcerated relatives. Experts across the political spectrum have recommended minimizing the cost of prison phone calls as a way to support strong family relationships with inmates. Yet under current policies and practices, prisoners and their families pay unusually high rates for phone service that discourage regular contact. In fact, a one hour call from prison often costs as much as a month of unlimited home phone service." (Footnotes omitted.)

Prison systems that provide phone services to inmates generally do so on a sole provider basis. Moreover, in the U.S. such arrangements are exempt from federal antitrust liability. See, the U.S. Court of Appeals (6thCir) April 23, 2002 opinion in Michigan Paytel v. City of Detroit.

However, some prisoners use wireless services, with devices smuggled into prisons, because they are a lower cost alternative to the monopoly service provider.

Meanwhile, prison authorities seek to stop this practice, citing use of such phones for illegal purposes, rather than the effect upon monopoly service providers.

This issue has also been the subject of much debate in Congress and federal agencies. See for example, TLJ stories:

More News

9/12. The Department of Justice's (DOJ) Civil Rights Division (CRD) released a report titled "Section 508 Report to the President and Congress: Accessibility of Federal Electronic and Information Technology".

9/12. David Kappos, head of the U.S. Patent and Trademark Office (USPTO), wrote a short piece titled "Progress Report on Satellite Office Openings".

9/12. The Copyright Office (CO) extended the deadline to submit reply comments in response to its notice in the Federal Register (FR) that requests comments on its proposed rules regarding the verification of Statements of Account and royalty payments that are deposited with the CO by cable operators and satellite carriers. The extended deadline to submit reply comments is 5:00 PM on October 3, 2012. See, original notice in the FR, Vol. 77, No. 115, June 14, 2012, at Pages 35643-35652, and extension notice in the FR, Vol. 77, No. 176, September 11, 2012, at Page 55783. See also, CO web page with initial comments submitted by the American Cable Association (ACA), National Cable & Telecommunications Association (NCTA), AT&T, Directv, Dish, and a collection of copyright owners.

9/12. The Copyright Office (CO) published a notice in the Federal Register (FR) that extends the comment deadlines for its proposed rules regarding reporting Monthly and Annual Statements of Account for the making and distribution of phonorecords under compulsory licenses obtained pursuant to 17 U.S.C. § 115. The extended deadline to submit initial comments is October 25, 2012. The extended deadline to submit reply comments is November 26, 2012. See, FR, Vol. 77, No. 176, September 11, 2012, at Pages 55783-55784. The CO published its original notice that announces, describes, and recites its proposed rules on July 27, 2012. See, Vol. 77, No. 145, July 27, 2012, at Pages 44179-4419. The original comment deadlines were September 25 and October 25.

9/12. The Information Technology and Innovation Foundation (ITIF) released a report [33 pages in PDF] titled "Comparing the 2012 Presidential Candidates' Technology and Innovation Policies".

Obama Nominates Joshua Wright for FTC Commissioner

9/11. President Obama nominated Joshua Wright to be a member of the Federal Trade Commissioner (FTC) for the term of seven years from September 26, 2012. This nomination is for the position now held by Thomas Rosch. See, White House news office release and release.

Wright obtained a law degree, and an economics doctorate, from UCLA. He is now a professor of law at George Mason University's law school.

He has published numerous books and articles on antitrust law. See, list of publications, with hyperlinks.

He has also been a frequent participant in Washington DC area panel discussions and conferences on antitrust and technology issues. See, for example, story titled "Technology Policy Institute Event Addresses Antitrust and Tech" in TLJ Daily E-Mail Alert No. 2,170, December 6, 2010.

Last year, when Google announced that it is being investigated by the FTC, he stated in a joint release (with Geoffrey Manne) that "The focus of any antitrust inquiry must always be on consumer harm -- not harm to certain competitors. We are skeptical that any such harm can be proven here. Google today is not the Microsoft of 1998, and even if it were, subsequent history has demonstrated that consumers are better served by letting rapid technological change play out in digital markets than by heavy-handed antitrust remedies."

The two added that "We are also troubled by statements by FTC Commissioners suggesting that the agency intends to pursue this case as a so-called "Section 5" case rather than the more traditional "Section 2" case. Commissioner Rosch has claimed that a Section 5 "unfair competition" claim could address conduct that has the effect of "reducing consumer choice"--even absent evidence that the conduct actually reduces consumer welfare."

See also, story titled "FTC Investigates Google" in TLJ Daily E-Mail Alert No. 2,252, June 30, 2011.

House Passes Bill to Extend SAFE WEB Act

9/11. The House passed HR 6131 [LOC | WW], a bill to extend the SAFE WEB Act, by voice vote, after little debate. See, House Commerce Committee (HCC) release. See also, Rep. Mary Mack's (R-CA) floor statement [3:36 minutes in YouTube].

The HCC approved this bill on August 1. The Senate Commerce Committee (SCC) approved S 3410 [LOC | WW], a substantially identical bill, on July 31, 2012. See, story titled "House and Senate Commerce Committees Pass Bills to Extend SAFE WEB Act" in TLJ Daily E-Mail Alert No. 2,418, August 2, 2012.

The Congress enacted the original SAFE WEB Act in late 2006, with a seven year sunset. HR 6131 and S 3410 would extend the sunset until September 20, 2020. These bills are short simple extensions. These bills have attracted no opposition inside or outside the Congress.

However, the SAFE WEB Act conferred some broad powers on the Federal Trade Commission (FTC). For example, the Act gave the FTC power to compel third party service providers to disclose the contents of stored wire and electronic communications, without notice to the owner of the communications, and with a gag order imposed upon the service provider. It also gives the FTC broad authority to share information with other nations. Moreover, the title of the Act is deceptive. The Act expanded the powers of the FTC across a wide range of investigations and actions, and not just those that affect the web.

Rep. Mack stated in the House that the Act "has been extremely effective". She said that it has allowed the FTC "to better protect U.S. consumers from fraud, deception, spam, and spyware in cross-border cases involving threats originating domestically and abroad".

House Passes Technical Correction to Trademark Dilution Statute

9/11. The House passed HR 6215 [LOC | WW], a technical corrections bill regarding remedies for trademark dilution, voice vote.

This bill is neither controversial, nor explainable in under two thousand words.

This bill would amend 15 U.S.C. § 1125(c)(6). Basically, when the 109th Congress passed HR 683, the "Trademark Dilution Revision Act of 2006", or "TDRA", it contained an inadvertent error. The HJC reported this bill, and then the House passed it. However, when the SJC took up the bill it reformatted paragraphs in a manner that did not change the words of the bill, but did inadvertently change the meaning of one provision. No one caught this at the time. The Senate passed this version, and the House then passed it too. HR 6215 would correct this error.

See, story titled "Rep. Smith Introduces Bill to Tweak Trademark Dilution Statute" in TLJ Daily E-Mail Alert No. 2,414, July 28, 2012, and story titled "House Judiciary Committee Passes Technical Amendment to Trademark Dilution Statute" in TLJ Daily E-Mail Alert No. 2,422, August 6, 2012.

More People and Appointments

9/11. President Obama nominated Scott Kieff to be a member of the U.S. International Trade Commission (USITC) for the term expiring June 16, 2020. See, White House news office release and release.

9/11. Federal Communications Commission (FCC) Commissioner Jessica Rosenworcel announced in a release her appointment of Alexander Saric to be her Policy Director. He will have "primary responsibility for media and technology issues". He has been Deputy General Counsel for Strategic Initiatives in the Department of Commerce's (DOC) Office of the General Counsel. His DOC biography states that he is the "principal advisor to the General Counsel on Internet privacy, security, and intellectual property matters and as liaison to various Departmental committee and working groups on such matters." Before that, he worked for the Senate Commerce Committee (SCC). And before that, he worked for the law firms of Latham & Watkins and Sullivan & Cromwell.

More News

9/11. The Federal Trade Commission (FTC) announced that it approved a final order [6 pages in PDF] in its administrative action against MySpace, in which the FTC alleged unfair or deceptive acts or practices violation of the FTC Act in connection with MySpace's misrepresentation of protection of users' personal information. See also, FTC release.

9/11. The House passed SConRes 17 under suspension of the rules, by voice vote. This resolution provides that "it is the sense of Congress that" the US "should take a leading role in garnering international support for the granting of observer status to Taiwan in the" International Civil Aviation Organization (ICAO). It also states that the US has "declared its support for the participation of Taiwan in appropriate international organizations".

Go to News from September 6-10, 2012.