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Executive Summary: Week of April 7, 2008 Executive Summary: Week of April 7, 2008

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Executive Summary: Week of April 7, 2008

Intellectual Property

Leahy Frustrated By Stalled Progress On Patent Bill

Senate Judiciary Chairman Patrick Leahy fired back late this week at colleagues who remain critical of his legislation to overhaul the patent system and who have impeded the bill's progress to the floor. "I have said repeatedly that the time for patent reform is now. Unfortunately, some have yet to fully grasp this fact," Leahy declared. Among the major provisions stalling the bill is one that would change how damages are awarded in infringement lawsuits. Judiciary ranking member Arlen Specter, whose staff has been negotiating with Leahy's for months, said earlier this week that the parties thought they had reached an agreement "but the language continued to shift, so we do not yet have a deal," adding that he was hopeful that the senators could still reach an agreement.


Pennsylvania Bio, the trade group that represents the biotechnology sector in Specter's home state, issued a statement thanking the senator for "holding firm in his resolve to get this important legislation right." Senate Majority Leader Reid wants to get the bill to the floor before Memorial Day, according to a Reid aide. A spokesman for the Coalition for Patent Fairness, which is made up of technology and media companies that back the bill, said even though hopes of getting a vote next week have been dashed, "there is a lot of time between now and when they leave [for the Memorial Day recess] and I haven't heard anyone close the door on this." The Innovation Alliance, whose high-tech members oppose the bill, questioned why so-called compromise language has yet to be shared with most Senate offices and stakeholders. Former Patent and Trademark Office official Steve Pinkos, who is an Alliance adviser, said even if Leahy and Specter strike a deal, "that doesn't mean the other 98 senators will nod in agreement."

Intellectual Property

Tech Companies Challenge 'Business Method Patents'

High-tech companies are urging the Federal Circuit Court of Appeals to reconsider a pair of cases that paved the way for "business method patents," which disclose and claim new methods of doing business. According to a friend-of-the-court brief by the Computer and Communications Industry Association, a group that represents Google, Microsoft and others, the cases in question -- State Street Bank & Trust v. Signature Financial Group and AT&T v. Excel -- should be overturned by the panel, which hears patent appeals. The court invited arguments on the matter when it agreed to rehear a case against the Patent and Trademark Office earlier this year. Oral argument before the full court is set for May 8. At issue is an appeal by inventor Bernard Bilski after the PTO denied a patent on what some believe is an abstract idea to reduce risk in buying and selling commodities. CCIA said in its brief that the State Street and AT&T cases have contributed to the ease of getting non-innovative software patents and extending the patent system's reach to virtually all areas of the economy. Senate Minority Whip Kyl unsuccessfully offered an amendment to a Senate patent bill last summer that would have barred business method patents. The PTO filed a brief last month saying its Board of Patent Appeals and Interferences correctly rejected Bilski's claim because it failed to address patent-eligible subject matter. The Business Software Alliance urged the court to reject artificial limitations on patentable processes that would hinder the development of new technologies.


Homeland Security

Hoyer Trying To Break FISA stalemate

House Majority Leader Hoyer disclosed this week he has been meeting separately with key lawmakers in the House and Senate in an effort to break a stalemate over legislation rewriting the nation's surveillance laws. While Hoyer is seen as a key player on efforts to forge a deal on reauthorizing the Foreign Intelligence Surveillance Act, several meeting participants or their aides indicated that Hoyer is still a long way from forging a compromise -- especially on the Bush administration's demand that the legislation include legal immunity for telecommunications firms that aided its warrantless eavesdropping activities. Hoyer's immediate challenge is getting the major players to the negotiating table. Hoyer said he met earlier this week with House Intelligence Chairman Silvestre Reyes and House Judiciary Chairman John Conyers, the main authors of the House-passed FISA bill -- which does not include the immunity provision -- to discuss how to proceed. Hoyer also met recently with Senate Intelligence ranking member Christopher (Kit) Bond, an architect of the Senate-passed FISA bill that includes the administration's immunity provision. Based on that meeting, Bond's office expects Hoyer to deliver a proposal to the Senate outlining the provisions House Democratic leaders believe must be included in final FISA legislation, a Republican aide said. Hoyer said he believes the House-passed bill facilitates intelligence collection while protecting the rights of U.S. citizens. Reyes said he and Conyers urged Hoyer to set up a meeting between House and Senate lawmakers, as well as with the White House. Senate Intelligence Chairman John (Jay) Rockefeller is having "initial discussions" with the administration, an aide said.


Lawmakers Chide FCC Over DTV Education

The FCC's FY09 budget request of $20 million for public education regarding the nation's shift to digital television in February triggered concerns on Capitol Hill this week that the money should have been sought earlier. Noting that the agency's budget may not be enacted for some time, House Financial Services Appropriations Subcommittee Chairman Jose Serrano, D-N.Y., asked FCC Chairman Kevin Martin if the FCC's "request for additional DTV funds [is] occurring too late?" During a hearing on the agency's overall budget request, Serrano also raised concerns that a continuing resolution might further delay the availability of the money. Martin said a resolution can include provisions requiring the funding of specific programs. He also noted that the FCC request is supplementing the National Association of Broadcasters' public service campaign, valued at nearly $700 million, and additional outreach by cable systems and TV set manufacturers. The new fiscal year begins Oct. 1, four and a half months before the Feb. 17, 2009 termination of analog transmissions by full-power broadcasters. Panel members joined a growing chorus of lawmakers -- including the chairman and ranking member of the Senate Commerce Committee Tuesday -- in criticizing Martin for being distracted by less pressing policy matters, while urging him to make the DTV transition his top priority.



FCC Chairman Proposes DTV Relief For Small Cable Firms

FCC Chairman Kevin Martin announced this week that he is circulating a proposal that would grant regulatory relief to small cable operators as they comply with federal mandates governing the carriage of digital television signals. Under the proposal, small operators would not have to transmit high-definition broadcast feeds that would strain their cable capacity. Instead, they would carry each broadcaster's primary signal in analog, after "down-conversion" from digital, and when possible in standard-definition, a lower resolution format. "This was the right decision for the hundreds of system operators who didn't have the extra bandwidth to comply with the digital must-carry obligation," American Cable Association President and Chief Executive Officer Matthew Polka said in a statement. The FCC adopted guidelines in September to ensure that all cable viewers have access to each broadcaster's main digital channel by next Feb. 17, when stations cease analog transmissions. Small cable systems argued that mandating broadcast carriage in up to three formats -- high-definition, standard definition and down-converted analog -- would strain capacity.


Administration Urged To Keep Acting NTIA Chief

A Democratic senator implored the Bush administration this week not to remove the acting head of one of the two agencies shepherding the nation's shift to digital television signals. "I don't understand why the White House is interested in replacing you," Sen. Claire McCaskill, D-Mo., told Meredith Baker, acting chief of the Commerce Department's National Telecommunications and Information Administration, during a Senate Commerce Committee hearing. NTIA is overseeing a $1.5 billion federal coupon program designed to assist analog-only television households with the changeover. Baker announced in late February that she would step down once her successor was confirmed. On March 5, President Bush nominated Neil Patel, staff secretary to Vice President Cheney, to the NTIA post. "I think you should stay through the date of the transition," McCaskill said, referring to Feb. 17, when full-power broadcasters are scheduled to terminate analog transmissions. Meanwhile, Senate Commerce leaders urged FCC Chairman Kevin Martin to make the DTV transmission his top priority. While acknowledging the importance of the transition, Martin described it as one of the agency's top concerns. He also cited the re-auction of spectrum being vacated by analog broadcasters that is slated for use by police and other first responders as a critical priority.


IRS Criticized For Lax Response To Tax-Related ID Theft

The IRS was sharply criticized this week for having inadequate procedures in place to respond to and measure the growing problem of tax-related identity theft. During a Senate Finance Committee hearing, lawmakers as well as the IRS inspector general and national taxpayer advocate criticized the agency for failing to adequately deal with the problem. "I am amazed the IRS has no mechanism for taxpayers to give the IRS a heads-up that their identities have been stolen," said Finance Chairman Max Baucus, who added that such taxpayers have been instead told to contact the FTC to report the problem. Baucus urged the IRS to develop a comprehensive identity-theft strategy "with goals, timelines and milestones" and gave the agency 90 days to provide a status report on the issue. IRS officials said tax-related identity theft usually involves the filing of a false return to obtain a fraudulent tax refund or the theft and use of another person's Social Security number to obtain employment. IRS National Taxpayer Advocate Nina Olson and others urged the IRS to establish a centralized unit to deal with identity theft cases, while the Treasury Department inspector general for tax administration said the IRS must improve its computer and network security procedures. IRS Commissioner Douglas Shulman acknowledged the problems and said new procedures are being implemented, including ensuring that specially trained employees will be in place by this fall to help taxpayers who call to report identity theft.v


H-1B Cap For Next Fiscal Year Hit

The Department of Homeland Security announced this week that it had received enough high-skilled H-1B petitions to meet the cap for FY09. Because of the high number of petitions filed, the department said it is not able to set a date for the lottery that will determine which petitions will be approved. The announcement was swiftly denounced by employer groups who have asked for an increase in the 65,000 annual H-1B allotment.

"U.S. employers deserve better than a random lottery to determine if they can hire the highly educated candidates they need," said Robert Hoffman, an Oracle vice president and co-chairman of Compete America, a coalition of businesses seeking an increase in the number of H-1B visas.


House Alters Rule, Delays Vote On Colombia Agreement

The House voted this week, largely along party lines, to alter a rule requiring congressional action on the Colombia Free Trade Agreement, a move that the White House said might kill the measure. The vote changed a rule requiring lawmakers to vote on the trade deal within 90 days. House Speaker Pelosi said President Bush made an unprecedented move in sending the deal to Congress without her consent, and argued that her move would give lawmakers time to negotiate an economic-aid package with Bush before returning to the trade pact. Pelosi said the vote was the logical outcome. "I think that [Bush] either had bad advice or he knew it would lose, and that would serve some purpose for him," she said. Bush, however, said Pelosi potentially had undermined U.S. credibility around the world. "The House has severed a bond of trust between the executive branch and the Congress, and with our trading partners, that has served our nation well for decades," Bush said in a statement. The White House and business community did not help themselves in the run-up to this week's vote, Democrats said. Several K Street groups told House members it would be a "key vote" for their annual scorecards, which did not sit well with a number of pro-free trade agreement Democrats. "Quite frankly, if they're not happy with the outcome, they have no one but themselves to blame, because we warned them this would happen," said Rep. Joseph Crowley, D-N.Y.


Key Senators Push To Beef Up FTC

Senate Commerce Chairman Daniel Inouye and Sen. Byron Dorgan, D-N.D., are pushing for the FTC to get significantly more money and more authority amid the growing importance of consumer protection issues. They introduced a bill this week to reauthorize the agency after more than a decade of stagnation. The legislation would provide for a seven-year reauthorization starting in 2009 and set its funding at $264 million, with increases of 10 percent per year. The Bush administration's FY09 budget request released in February asks for $256 million for the FTC, up from the $243 million Congress provided for FY08. Dorgan said staffing at the FTC is "at a near 30-year low" when the agency needs more people to regulate and investigate growing consumer problems such as identity theft. The bill would give the FTC independent regulatory authority and the power to give preference in the hiring of administrative law judges. In addition, it would let the agency start civil actions in district courts; extend its jurisdiction to permit prosecution of nonprofit entities; and repeal an exemption that precludes the FTC from taking action against common carriers for anticompetitive, deceptive, unfair and fraudulent practices. The agency's commissioners lauded the reauthorization proposal at a hearing this week.


Census Bureau Accused Of Mismanaging Census Contract

Members of the House Oversight and Government Reform Committee this week accused Census Bureau officials of mismanaging a hand-held computer contract that will result in the agency reverting to counting millions of people the old-fashioned way -- by paper and pencil. "This is a colossal failure," Oversight and Government Reform Chairman Henry Waxman said at a hearing. "The mismanagement of the contract has jeopardized the success of the 2010 Census and will cost taxpayers billions of dollars." Oversight and Government Reform ranking member Tom Davis echoed Waxman, saying: "It's a big screw-up." Their anger was directed at Census Bureau officials who signed off on a $600 million cost-plus contract with the international technology firm, Harris Corp., in 2006 for about 500,000 hand-held computers that were to be used to count and interview people who failed to respond to mailed questionnaires. The cost of the contract has since doubled to about $1.3 billion for only 151,000 computers for limited use. Last week, Commerce Secretary Gutierrez announced the Census Bureau would return to paper surveys to follow up on people who failed to respond to mail questionnaires. The move will boost the cost of the census by up to $3 billion above the original $11.5 billion estimate. The hand-held computers will instead only be used for confirming addresses. A Harris Corp. official said the Census bureau kept adding on new requirements for software changes. Census Bureau Director Steve Murdock said the problem with the computer contract was due in part to a lack of effective communication between the Census Bureau and the prime contractor.


Child Advocacy Groups Urge Rules For Social Networking Sites

Children's advocacy groups including the American Academy of Pediatrics asked the FTC this week to develop rules to better protect young people who frequent social networking Web sites. The issue has spurred calls for action from Capitol Hill, prompting sites to beef up privacy and safety controls. Today is the deadline for public comments on a set of privacy principles for self-governance with respect to interactive marketing that FTC staffers released in December. The proceeding was an outgrowth of complaints by the Center for Digital Democracy and the U.S. Public Interest Research Group. The Center for Digital Democracy signed onto a 14-page set of recommendations from the children's advocates. They call for adoption of voluntary industry guidelines that define "sensitive data" to include the online activities of all persons under age 18 and ban sensitive data collection for behavioral advertising purposes. They also ask the FTC to initiate a rule-making proceeding if sites are not found to be following the principles. The American Advertising Federation, Direct Marketing Association, National Retail Federation, U.S. Chamber of Commerce and other business groups complained that self-regulation should be developed by them rather than imposed by the government.

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