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Editor's note: A reminder that Technology Daily publishes its final editions this Thursday, Jan. 31. See below for further information.
Lobbying
Companies Make Their Cases For Patent Reform
by Heather Greenfield
Officials who represent companies most impacted by proposed changes to patent law met with about 40 Senate staffers Monday ahead of some anticipated alterations to the bill before it is expected to go to the Senate floor next month.
The meeting was a chance for leading advocates on either side, like the Coalition for Patent Fairness and the Innovation Alliance, to lobby staffers. Up to a dozen points remain and two of the most controversial -- damages from patent infringement and rules on counter claims by plaintiffs -- did not make it into the discussion.
The two sides do agree on one thing -- that the House- and the Senate Judiciary Committee-passed bills would be the first major rewrite of patent law in 50 years. Backers of the legislation argue that it would keep innovation from being blocked from development by legal action or stalled negotiations with patent holders who sometimes hold patents for just a small piece of technology yet sue for the value of entire products.
On the flip side is the concern that major patent changes that shift the balance of power in negotiations from smaller inventors to bigger businesses and inventors could result in some of the financial incentive to innovate being lost.
Another formal meeting of stakeholders is expected before the final language is offered. A spokeswoman for the Judiciary Committee said that both Chairman Patrick Leahy, D-Vt., and Orrin Hatch, R-Utah, who co-authored the bill, are committed to floor action in February.
Steve Elmendorf, a spokesman for the Coalition for Patent Fairness, said he was encouraged that both Leahy and Hatch attended the meeting, as their presence sent "a strong signal" that an overhaul is happening and "it's time for people to come to the table."
"There are people on the other side of this bill that want to stop this," Elmendorf said. "They're coming to the conclusion that [no legislation] is not an option."
Manus Cooney, an attorney who represents the Innovation Alliance, welcomed the meeting and described it as constructive but added that important issues still need to be resolved.
"The reality when dealing with patent law isn't to split the baby in half but to create policies that incentivize the investment in innovation," Cooney said.
Those points will get made as CEOs and company representatives for both groups visit over the next couple of weeks to make their case in smaller meetings on Capitol Hill. While neither side gave details of the meetings, they described them as highly active lobbying time.
Last week, the Innovation Alliance ran a full-page advertisement in Roll Call to make sure congressional staffers know that not everyone is happy with the legislation.
Symantec, which is happy with the current language, met with lawmakers last week and again this week. Symantec lobbyist Kevin Richards said the company is "confident a solution will be put forward" on some differences that remain.
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Business
Federal Aid To Small Tech Firms Is Critiqued
by Aliya Sternstein
Funding for a federal program that annually awards $2 billion to small, high-tech businesses should not be increased unless the program starts quantitatively evaluating performance, a technology management expert told lawmakers at a Tuesday hearing.
The House Small Business Committee held the session to gather input from industry representatives as it begins the process of renewing the Small Business Innovation Research program, which is known as SBIR. Set to expire Sept. 30, the program funds entrepreneurs so they can compete commercially on the same level as larger businesses.
"The program needs to be better quantified and measured," said Michael Borrus, the founding general partner of X/Seed Capital and a member of the National Academies committee that is studying SBIR. He was expressing his own views during the testimony, except when explicitly citing various academies conclusions.
One such conclusion is that the program is not sufficiently evidence-based, partly because of limited tracking of program outcomes. Borrus' written testimony said, in his opinion, it is "effectively impossible" to decide what kind of "preferential claim" SBIR should have on scarce federal research and development resources without hard data.
Despite assessment holes, he said the program overall is meeting its congressionally mandated objectives, according to the academies.
After disclosing that some of X/Seed's portfolio companies have applied for SBIR awards, Borrus noted that the program fills several major gaps in funding. "SBIR dollars matter," he said. "They help seed innovative ideas" while businesses pursue the "often tortuous path for commercial success."
Ohioan Steve Chabot, the panel's ranking Republican, raised the issue of whether small businesses that are majority-owned by venture capitalists should be allowed to seek funding.
Borrus said he does not think it is fair to exclude VC-backed firms if they otherwise meet the program criteria. The academies data discovered no evidence that other small businesses have ever been crowded out by the participation of companies that are majority-owned by VCs, he testified.
Some witnesses urged Congress to raise the SBIR award levels from those set in 1992 to account for the pace of technological change. As committee Chairwoman Nydia Velazquez, D-N.Y., quipped, when the committee last authorized the program in 1999, the term googol was an obscure mathematical term, not a widely-recognized Internet giant.
Larry Farrell, president and CEO of the National Defense Industrial Association, said his members "would like to see some flexibility within the award amounts."
William Bean, director of the technology and business center at the College of William and Mary, called for a permanent SBIR program; an increase in the funding cap for early-phase technologies from $100,000 to $150,000; and a boost to the second phase from $750,000 to $1.25 million.
"The ravages of inflation have driven down the value that you are going to get" from that money, Bean said.
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Executive Branch
Use Of State-Secrets Privilege Gets Capitol Scrutiny
by Andrew Noyes
The Bush administration's use of the state-secrets privilege to "increase monitoring of the Internet" and "stop court cases in their tracks" is troubling and must be addressed, House Judiciary Committee Chairman John Conyers said at a Tuesday hearing.
The doctrine, which bars public disclosure of data that could harm national security, has been employed to "bully Congress" and grant telecommunications firms immunity from litigation stemming from their role in anti-terrorism wiretapping, the Michigan Democrat said.
New York Democrat Jerrold Nadler, who chairs the Constitution, Civil Rights and Civil Liberties Subcommittee, is crafting legislation that would let judges determine the validity of state-secrets claims. Sens. Edward Kennedy, D-Mass., and Arlen Specter of Pennsylvania, the top Republican on Senate Judiciary, introduced a similar bill last week.
The House panel's ranking Republican, Trent Franks of Arizona, said he would "strongly oppose" such a bill because it would weaken an "irreplaceable tool" in the war against terror. "People with legitimate claims aren't denied access to court review," he argued.
Despite claims to the contrary, Franks cited a recent academic study that indicated the Bush administration has not used the privilege with greater frequency or in "unprecedented substantive contexts." It is also unclear whether Congress could constitutionally amend the privilege, he said.
When used properly, the privilege protects "vital national security interests," Nadler said, but he worries that not only "truly sensitive information" is being concealed. He said the principle has "prevented meaningful judicial review of government activity that might otherwise prove to be politically embarrassing or clearly illegal."
Kevin Bankston, an Electronic Frontier Foundation attorney who sued AT&T for allegedly helping the National Security Agency spy on American citizens in violation of their privacy and without warrants, said his case has been stymied due to the government's state-secrets assertion.
The Justice Department has asserted "astonishingly broad claims" to kill that lawsuit -- and nearly 40 others -- and has argued that courts cannot rule because it would affirm the telecom companies' role in the surveillance. "To call such logic Kafkaesque would be an understatement," Bankston said.
Clarifying the state-secrets privilege through legislation would benefit the justice system, American Bar Association President-Elect Thomas Wells said. He made several recommendations for advancing a bill that "protects legitimate national security interests while permitting litigation to proceed with non-privileged evidence."
Former Associate Deputy Attorney General Patrick Philbin also urged lawmakers to "tread carefully" when pursuing legislation in this arena. Congress must ensure that any bill recognizes the criticality of and constitutional basis for the privilege, he said.
The American Civil Liberties Union issued a statement commending the subcommittee's action, saying that "victims of our government's extraordinary rendition and domestic spying programs have had the courthouse door slammed in their faces."
Officials with the bipartisan, nonprofit Constitution Project said congressional action "to ensure that the state-secrets privilege is used to protect national security and not to shield the executive branch from accountability is long overdue."
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Television
FCC's Copps Fears Digital Converter Complications
by David Hatch
Millions of consumers face potential complications with converter boxes that they will be attaching to their analog television sets to prepare for the transition to digital signals, FCC Commissioner Michael Copps warned Tuesday.
The devices will enable digital broadcasts to be displayed on older sets receiving over-the-air reception. To encourage their use, the federal government has established a coupon program, with 32 TV models eligible so far.
But problems could arise for some viewers -- particularly in rural areas -- because many of the boxes block analog signals from being seen on analog sets. That is a concern because the roughly 4,700 translator stations serving less-populated regions and 2,100 low-power stations that offer community programming can operate in analog for months or years beyond the official Feb. 17, 2009, switchover. There is no statutory deadline for their conversion to digital.
Consumers attaching the devices before the transition are likely to immediately lose those signals because the vast majority of translator and low-power stations only broadcast in analog. "They'll plug it in," Copps warned of the converters at a press briefing, "and the TV's worse than it was."
The Democratic commissioner weighed in as the nation fast approaches Feb. 17 -- the one-year mark from the changeover. He also spoke as the House and Senate commerce committees prepare to hold DTV oversight hearings Feb. 13 and Feb. 14, respectively.
Todd Sedmak, a spokesman for the National Telecommunications and Information Administration, which is implementing the voucher program, confirmed that only three devices, one from EchoStar Communications and two from Philco, can "pass through" analog signals to older televisions. "We expect other boxes to be certified that have the pass-through feature," he added.
"With respect to what boxes are going to be sold and where, that comes [on] the retailer side of things," he said. But major retailers have been criticized by lawmakers and watchdogs for ambiguous statements about their plans for stocking the units in all of their stores.
Converters also would be available for purchase online. Sedmak was unaware of any advisories to consumers about the issue on NTIA's DTV2009.gov Web page.
Copps also cautioned that direct-broadcast satellite customers who do not receive local broadcast signals from their providers may not realize they also will need boxes.
For months, he has been pressing his colleagues to back test runs of the transition in cities of various sizes. Despite FCC Chairman Kevin Martin apparently rejecting that idea at a recent press briefing, Copps said he will continue to urge Martin, a Republican, to change his mind.
While Copps is not sure how much the tests would cost, he suggested that the wisdom culled from such trials would save broadcasters and the government money in the long run.
Regarding who is responsible for the hiccups, Copps said there is plenty of blame to share but singled out the lack of coordination between the FCC and NTIA as a major shortcoming.
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Telecom
Battle Over Verizon Sales Moves To N.H., Vermont
by Michael Martinez
Opponents of a major telecommunications deal in New England are prepared to wage a two-state fight in the next several weeks to block it.
Verizon Communications wants to sell its traditional telephone infrastructure in Maine, New Hampshire and Vermont to the North Carolina-based FairPoint for $2.7 billion. So far, the FCC and the Maine Public Utilities Commission have approved the sale. Utility regulators in New Hampshire and Vermont are the last obstacles to the sale.
The companies got another boost last week when the staff of the New Hampshire Public Utilities Commission recommended that regulators in the Granite State also approve the deal. The recommendation is nonbinding, and the commission still most vote on the matter.
Verizon made several concessions to win over New Hampshire regulators. The company agreed to reduce the overall purchase price and provide additional assistance to help FairPoint with its current corporate debt.
FairPoint CEO Gene Johnson said in a statement that the recommendations were sound and that he is confident the deal will move forward. "This agreement appropriately addresses important public-interest issues in the state," he said.
The Vermont Public Service Board, meanwhile, is slated to hold a hearing on the deal Tuesday. A vote on the sale is not expected to occur.
The deal's opponents are still working overtime to derail it. The AFL-CIO, Communications Workers of America and International Brotherhood of Electric Workers are actively lobbying regulators in the remaining states to stop the sale.
Rand Wilson, a New England spokesman for the AFL-CIO, said by telephone that the fight is far from over. He said Verizon made significant concessions to win support in New Hampshire.
The AFL-CIO and other groups have argued that FairPoint is not on solid enough financial ground to provide adequate service to New Englanders, particularly for high-speed Internet. Wilson said nothing Verizon has promised will help FairPoint overcome its massive debt.
"We're going to actively participate in the two state hearings that are scheduled in Vermont and New Hampshire," Wilson said. "We're going to continue to argue that the concessions made by Verizon fall short of the debt reduction needed to put FairPoint on sound footing. And the concessions by FairPoint only make that company appear to be shakier."
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Games
Merchants Battle New Mexico Plans To Tax Games
by Michael Martinez
Retailers are fighting a proposal in New Mexico to impose a special tax on videogame sales.
The Entertainment Merchants Association is peeved by pending legislation there to levy a tax on videogames and television sets. The proposal is being pushed by environmental groups that say the revenue generated by the tax could fund education and anti-obesity programs.
Game manufacturers and retailers already are attacking the measure as unconstitutional. Sean Bersell, EMA's vice president of public affairs, wrote in a letter last week to the Rio Grande chapter of the Sierra Club that legislators would be picking a legal battle by supporting the bill. The Sierra Club is one of the groups actively lobbying for the tax.
"Because the proposed tax would single out the sale of videogames for special taxation, it would heavily burden a particular category of protected speech and is likely constitutionally invalid," Bersell said. "Almost certainly, such impairment on speech would be subjected to a federal court challenge."
The videogame industry has amassed an impeccable legal record during the past several years. It has successfully challenged as unconstitutional attempts in several states to ban sales of violent and sexually explicit games to minors.
Adam Thierer, a senior fellow at the Progress and Freedom Foundation, said the New Mexico proposal is likely to raise many of the same First Amendment issues because of how it targets games. But he also said he expects state lawmakers will continue to float new ideas to curtail sales of controversial games to underage buyers.
"Anytime the government seeks to tax a form of media or speech, it runs into some sticky issue," Thierer said. "That's clearly going to be the case again with regards to videogames."
The bill's advocates have dubbed it the "No Child Left Inside Act," a spin on the 2002 federal education law known as the No Child Left Behind Act. The Sierra Club claims on its Web site that the measure has been designed to "fight obesity and poor school performance, which may result from excessive TV, movie and videogame exposure."
A similar bill died last year in the New Mexico Legislature.
Bersell said in a telephone interview that it is unfair to single out gaming as a cause of obesity. He also questioned the argument that the tax would have a minimal effect on retailers because it would be only 1 percent.
"Some people would say it's only 1 percent," he said. "But it's clearly enough to put brick-and-mortar retailers at a competitive disadvantage."
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Today's Feature:
People Column
Julie Barko Germany will officially become director of the Institute for Politics, Democracy and the Internet starting next month.
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E-briefs
Intelligence: The Senate deadlocked Tuesday over legislation to revise the Foreign Intelligence Surveillance Act, while House Democrats prepared to pass a bill that would extend a temporary surveillance law for a short period. Senate Democrats and Republicans have been unable to reach agreement on debating amendments to a White House-backed FISA bill, and a temporary law altering FISA expires in less than 48 hours. Senate Majority Leader Harry Reid, D-Nev., said it appears "legislatively impossible" for Congress to finish work on a long-term bill before then. At press time, Senate leaders were locked in tense negotiations over how to proceed, but Reid said he is prepared to pull the bill from the floor and move onto other business if an agreement cannot be reached. Across Capitol Hill, House Democratic leaders were ready to pass their own bill to extend the temporary law anywhere from two weeks to 30 days.
Security: The Homeland Security Department on Tuesday announced plans to make an additional $48.5 million available to help states begin issuing federally compliant driver's licenses. Homeland Security also announced that it will extend until March 7 the deadline for states to apply for grant funding to help them satisfy the requirements of the so-called REAL ID Act. Final standards for the mandate were released earlier this month. Homeland Security Secretary Michael Chertoff said the final rules were designed to significantly reduce the compliance burden placed on the states, but some state lawmakers already plan to opt out of REAL ID. Montana Gov. Brian Schweitzer, a Democrat, is trying to rally a rejection of the 2005 law. Legislation also is on the table in Congress to repeal REAL ID.
Television: A top executive with Comcast apologized Tuesday to the House Energy and Commerce Committee for taking steps in Michigan that resulted in public, educational and governmental cable channels being more expensive for subscribers. "In retrospect, we failed to communicate adequately our goals and to work cooperatively with our local partners to produce a 'win' for everyone -- for the consumer, the franchising authority, the PEG community and the cable company," Executive Vice President David Cohen said in written testimony. "That is not the way we want to do business -- in Michigan or in the rest of the country -- and I want to apologize for that." Committee Chairman John Dingell, D-Mich., criticized Comcast for shifting the community channels to digital cable and requiring customers to rent or purchase set-top boxes to see them. Comcast said it was trying to free capacity for high-definition programming, video-on-demand and faster Internet connectivity.
Politics: The head of the Republican National Convention used a live, online broadcast Tuesday to announce to reporters that Ustream.TV will be the event's official video-streaming provider. There were a few technical problems with the audio during the announcement. RNC Chief Executive Maria Cino said the new technology will be used to engage Americans and bloggers from the convention in Minneapolis in September. Ustream.TV will be used to provide live, gavel-to-gavel coverage for bloggers and media that cannot make it to Minnesota. Republican officials say they will participate in live video chats. Ustream.TV was founded by two military veterans and a technologist, and allows anyone with a camera and computer connection to broadcast live on the Internet.
Dear Reader:
After nine years of publication, National Journal's Technology Daily bids farewell this Thursday.
In announcing this decision recently, we noted that National Journal Group is moving to increase technology-related coverage throughout all of its publications. In particular, National Journal's CongressDaily -- our twice daily publication for Capitol Hill insiders -- will be adding staff for this purpose.
And, beginning next Monday, Feb. 4, the online edition of CongressDaily will contain a new, continuously updated section that will include stories of interest to the technology sector in one convenient place. This section will also be home to several of the weekly features that have appeared regularly in Technology Daily over the years.
If you are interested in a trial subscription to CongressDaily, please call 800-424-2921 or e-mail us at memberships@nationaljournal.com.
With best regards,
Lou Peck
Editor In Chief
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President -- John Fox Sullivan, 202-739-8468
Editor in Chief -- Louis Peck, 202-739-8481
Editor -- K. Daniel Glover (bio)
Assistant Editor -- Theresa Poulson
Senior Writers -- David Hatch (bio), Heather Greenfield (bio), Andrew Noyes (bio) and Aliya Sternstein (bio)
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