CONTENTS OF THIS ISSUE:
Federal Funds to be Extended One More Week
Secretary of the Army Louis Caldera Addresses Californians in Washington
House Passes “Cybersquatting” Bill
Labor HHS Education Funding Bill Passes House with DC Approps
      and Across-the-Board Reduction; Hold Harmless Included
House Passes Resolution on Permanent Internet Tax Moratorium
House Armed Services Examines Supercomputer Export Rules
Letter Asks FAA to Focus on Southern California in Air Usage Study
Plant and Disease Threats to California Agriculture Discussed
Letter on Land And Water Conservation Fund Circulating
Interior Department Spending Bill to Include $21.5 Million for Land Purchases and Maintenance
California Residents Receive the Most Patents, and Share is Growing
Census Bureau Reports on $623 Billion Information Industry; California Again Leads
House Reviews Digital Millennium Copyright Act (DCMA) on Its One Year Anniversary
House Subcommittee Approves Electricity Deregulation
Medical Confidentiality Proposal From White House Imminent

By Friday, Congress is expected to send the White House a third spending continuation bill (H.J.Res 73), maintaining federal government operations for Fiscal Year 1999 until midnight next Friday, November 5. Two previous continuing resolutions have kept the government operating since the official end of the fiscal year on September 30. The House approved the measure Thursday, 424 to 2.
 

Secretary of the Army Louis Caldera Addresses Californians in Washington

Secretary of the Army Louis Caldera addressed a luncheon meeting of the Golden State Roundtable on Wednesday. The Secretary briefed the guests on the major role the military continues to play in California’s economy, noting that each year $122 billion in Defense Department procurement goes to the state. He also spoke of the Army’s current strategy of heavily increasing its investment in technology and boosting its recruitment programs to reach out to a broader base of young men and women. During questioning, Secretary Caldera indicated that the Army continues to have surplus facilities and another round of closures would result in $20 billion in savings over five years. A graduate of West Point as well as Harvard’s Law and Business Schools, Secretary Caldera is a former member of the California State Legislature from Los Angeles and was appointed to his current post last year.
 

House Passes “Cybersquatting” Bill

By voice vote on Tuesday, October 26 the House passed S. 1255 , the Trademark Cyberprivacy Protection Act, after inserting the language of the House bill, H.R. 3028. The bill, authored by Reps. Jim Rogan (Glendale) and Rick Boucher (VA), will prevent what is known as “cybersquatting” — the practice of registering, in bad faith, an Internet domain name or a website using the same or confusingly similar trademark of another entity. See, Bulletin, Vol. 6, No. 32 (10/7/99).

The House-passed version grants trademark holders more accessible remedies against Internet infringers without substantively changing current trademark law. It prohibits the registration, use, or trafficking in a domain name that is identical or confusingly similar to, or dilutive of, a distinctive trademark. It establishes: (1) a civil cause of action against an infringer who acts with the bad faith intent to profit from the rightful trademark; and (2) an in rem civil action through which the infringing mark can be forfeited or canceled. It also sets civil damages of up to $100,000 per Internet address.

With limited time left for a conference, the Senate may approve the House-amended version.
 

Labor HHS Education Funding Bill Passes House with DC Approps and Across-the-Board Reduction; Hold Harmless Included

By a 218-211 margin, the House on Thursday afternoon passed a combined appropriations bill (H.R. 3064) which includes $313 billion in funds for the Departments of Labor, HHS and Education, $95 billion of which are discretionary dollars. The conference report (H.Rept. 106-419), which includes funding for the District of Columbia, also proposes a 0.97% across-the-board reduction in spending on all federal discretionary programs.

The House “pre-conferenced” the Labor-HHS-Education (“Labor-H”) measure, moving it to conference without floor action. The Senate, which had passed a freestanding version of the Labor-H bill on October 7, was expected to consider the House-passed conference report on Friday, with a vote expected early next week. A Presidential veto of the measure is widely expected.

In a significant but not surprising loss for California, the measure includes language pushed by the Senate but opposed by the House Appropriators creating a “100% hold harmless” on Title I education funds. By preventing any state from losing funding regardless of variances in child poverty demographics, the provision in effect nullifies funding increases due California and other states which have been strained by rapid growth in poor children. See Bulletin, Vol 6, No. 33 (10/14/99). The conferees went further, adding a provision guaranteeing 100% Title I “concentration grant” funding to states which were eligible in 1998 but would be ineligible in 2000. The four primary conferees on the Labor-H bill were from Illinois, Wisconsin, Pennsylvania and Iowa — all states with no or relatively slow growth in children in poverty as compared to the national average and thus a parochial incentive to promote the hold harmless. The report includes House language protesting the 100% hold harmless.

However, in one positive development, the conference report does include language pushed by Senator Dianne Feinstein, with the support of the state’s House delegation. The language prohibits the 100% hold harmless from being used to calculate the funding levels for other education programs whose formulas rely in whole or in part on the Title I funding allocations. In March, Reps. Duke Cunningham (San Diego), Lynn Woolsey (Petaluma), Buck McKeon (Santa Clarita) and Nancy Pelosi (San Francisco) wrote to oppose the application of the hold harmless to other programs, such as the Eisenhower Professional Development and Safe and Drug Free Schools State Grants. In addition to working against the overall 100% hold harmless, the delegation, both Senators and Governor Davis had actively opposed the Title I hold harmless extension to these other programs.

In other areas, the bill specifies that $3.5 million be spent to obtain local-educational-agency-level census poverty data from the Census Bureau, which will ensure that the figures will exist if and when they are allowed to be used. The bill would also increase special education spending by $700 million, to $5.8 billion, and boost the maximum Pell Grant by $75 over FY99 levels, bringing the maximum award for FY2000 to $3,300, $50 more than the President’s request.

The Labor-H funding bill exceeds the Administration request for AIDS treatment, a large share of which is spent in California. Overall Ryan White AIDS funding would be increased $139 million over FY1999, bringing FY2000 funding to $1.55 billion; California receives between 15 and 24 percent of these funds. The bill proposes to boost National Institutes of Health (NIH) spending by more than $2 billion, to $17.9 billion, but requires a delay of $7.5 billion until the end of FY 2000 in order to keep costs down.
 

House Passes Resolution on Permanent Internet Tax Moratorium

By a vote of 423-1, the House passed H.Con.Res. 190 on Tuesday, October 26. The resolution, authored by Rep. Chris Cox (Newport Beach) urges the President to seek a global consensus in support of a permanent international ban on tariffs on electronic commerce and on certain e-commerce taxes. Currently, the World Trade Organization (WTO) has agreed to a moratorium on the imposition of duties on electronic transmissions. H.Con.Res.190 applies to the international arena the principle of the Internet Tax Freedom Act — that taxes should not be levied that discriminate against electronic commerce and the Internet.

The resolution has three main elements. First, it calls on the World Trade Organization, which will be meeting in late November, 1999 in Seattle, to enact a permanent moratorium on e-commerce tariffs. Second, it establishes the principle of no multiple or discriminatory foreign taxes on electronic commerce and urges the Organization for Economic Cooperation and Development and its 29 member countries to subscribe to the principle of no multiple discriminatory or special Internet taxes. Third, it condemns the bit tax proposal of the United Nations and calls for a permanent ban on such Internet specific taxes. A bit tax is a tax on every bit of information, all the digital 0s and 1s. The more 0s and 1s, the greater the file size, and therefore the greater the tax.

Sen. Ron Wyden (WA) has introduced an identical version, S.Con.Res. 90, in the Senate.
 

House Armed Services Examines Supercomputer Export Rules

The House Armed Services Committee held a hearing on Thursday, October 28 to examine restrictions on the export of high performance computers (HPCs). Currently, exporters of computers with MTOPS (millions of theoretical operations per second) in excess of 2,000 (for military use) and 6,000 (for civilian use) to countries suspected of proliferating nuclear weapons (Tier 3 countries) must request approval from the Department of Commerce prior to export. Because of the rapid advance of computer technology, the Administration has proposed raising the upper threshold to 6,500 MTOPS before Commerce approval would be needed. Under the 1998 National Defense Authorization Act, Congress has 180 days to review the proposed rule change before it can take effect. The Administration has indicated it will seek to reduce that period to 30 days.

The General Accounting Office (GAO) briefed the committee on its report, Export Controls 1998 Legislative Mandate for High Performance Computers (GAO/NSAID 99-209). The report concluded that the current restrictions have limited the export of HPCs to Tier 3 countries. Between February 1998 (the beginning of the export notification requirement) and March 1999, GAO found that of the 938 export notifications, over ten percent raised sufficient concerns about the national security warranting a formal license application by the exporter. Of the 101 requiring applications, only 16 were ultimately approved.

Mr. Dan Hoydysh, Co-Chairman, Computer Coalition for Responsible Exports, testified in support of the Administration’s proposal to increase the MTOPS threshold. He also strongly supported working with the Committee and the Administration to develop a more efficient export control regime that would restrict exports to potentially dangerous end-users without harming the global competitiveness of U.S. computer companies.

The Honorable William Reinsch, Under Secretary for Export Administration, Department of Commerce also testified in support of the Administration’s proposal and the need to reduce the review period to 30 days.

Further testimony and information on the hearing can be obtained from the Committee’s website at: http://www.house.gov/hasc/.
 

Letter Asks FAA to Focus on Southern California in Air Usage Study

Rep. Steve Kuykendall (Torrance) led a letter signed by a bipartisan cross-section of Californians to the Federal Aviation Administration (FAA), urging it to make southern California a priority in their national study of air space utilization. The study, aimed at providing more information about air traffic and safety, is scheduled to start on the east coast and later make its way across the country.

Rep. Kuykendall and 15 Southern California co-signers commented, “Air traffic in southern California is under tremendous pressure due to increasing demand for air cargo and passenger service. A FAA air space utilization study will help the affected communities make an informed decision about accommodating the growth.”
 

Plant and Disease Threats to California Agriculture Discussed

The House Committee on International Relations’s International and Economic Policy and Trade Subcommittee met on Tuesday, October 27, to discuss agricultural diseases and their impact on U.S. trade. Partially due to an increase in movement of goods internationally, pests and plant infestations have invaded the US mainly through its borders. International passenger traffic has doubled since 1990, and the volume of air cargo is doubling every five to six years. Infestations not only affect the agricultural economy in the immediate sense, but additionally degrade international confidence in US exports.

Over the past several years, California has witnessed the harmful risks associated with increased international movement. While California agriculture contributes nearly $14 billion to the balance of US trade, outbreaks of the Mediterranean fruit fly, newcastle disease and Pierce’s Disease threaten to devastate the industry. Last year, California alone suffered 26 separate exotic and destructive fruit fly infestations. Extensive quarantines and expensive pest eradication efforts are now becoming more prevalent in the industry. As a result, key foreign trading partners like Taiwan, Korea, Australia and New Zealand deny market access for fresh produce grown in San Diego, Orange and Riverside.

In attendance at the hearing, Rep. George Radanovich (Fresno) testified in support of equitable and mutually beneficial international trade. He stressed the need for more reciprocity between the US and Argentina trade policies concerning fresh citrus fruit. Rep. Radanovich also urged support of the FY2000 Agricultural Appropriations measure, which asks the United States Department of Agriculture (USDA) Animal and Plant Health Inspection Service (APHIS) to use contingency funds towards the $33 million devastation in Napa, Sonoma, and Mendocino counties due to Pierce’s Disease (see Bulletin, Vol. 6 , No. 34 (10/21/99)).

Michael Wootton, Director of Federal Government Affairs at Sunkist Growers also testified at the hearing. Sunkist Growers, a farmer-owned marketing cooperative of 6,500 citrus farmers in California and Arizona, provides one third of its fresh fruit to foreign markets. Wootton stressed the need to maintain the sanitary and phytosanitary security in domestic production areas through the Sanitary and Phytosanitary (SPS) Agreement. The SPS Agreement was accepted by members of GATT/WTO in an attempt to distinguish trade protectionism measures from import restrictions based on food safety and pest prevention. Wootton also noted that current enforcement agency budgets have not kept pace with the increased volumes of legal and illegal imports.

Michael V. Dunn, Under Secretary for Marketing and Regulatory Programs, USDA, testified about current enforcement and regulatory efforts. Through APHIS and its program divisions, the US inspects exports and imports, regulates importer permits, and works abroad at keeping agricultural pests and diseases from entering the country. Dunn stressed his support of the SPS Agreement, adding that it emphasizes the importance of using risk analysis and sound science in making regulatory decisions. Dunn suggested that the US focus on new ways to prevent and detect pests and diseases.

For a more detailed report of the hearing, contact the House Committee on International Relations at 202-225-5021 or at their web site: http://www.house.gov/international_relations .
 

Letter on Land And Water Conservation Fund Circulating

Reps. Lois Capps (Santa Barbara) and Tom Campbell (Campbell) are circulating a letter to the Chair and Ranking Member of the House Resources Committee, Reps. Don Young (AK) and George Miller (Martinez). The letter urges the Committee to pass legislation this year to fully fund the Land and Water Conservation Fund. For more information, or to sign the letter contact Blake Selzer in Rep. Capps office at x5-3601, or Ed Seibert in Rep. Campbell’s office at x5-2631. The letter will be sent within the next day or two.
 

Interior Department Spending Bill to Include $21.5 Million for Land Purchases and Maintenance

On Friday, October 22, Congress requested an Interior Department spending bill that includes $21.5 million for land purchases and maintenance projects in the Mojave Desert and San Bernardino Mountains national parks and forests. Specifically the bill includes $10 million towards purchasing holdings in Mojave National Preserve and Joshua Tree National Park and $2.5 million for purchases in the San Bernardino National Forest.

The $10 million for the Mojave National Preserve and Joshua Tree National Park matches the Wildlands Conservancy’s previous donations and will be used to acquire 487,000 acres owned by the Catellus Development Corporation. Congress will consider an additional $20 million over the next two years to complete the purchase from Catellus, as long as the Department of the Interior and Department of Defense resolve other related issues. Funds requested for the San Bernardino National Forest will be used towards developing private parcels within the forest that contain optimal growth conditions.
 

California Residents Receive the Most Patents, and Share is Growing

The United States Patent and Trademark Office (PTO) released a report detailing patent awards by state during 1998, as well as during the first half of 1999. California ranked first by a long shot, with 8,057 patents from January through June 1999, accounting for slightly more than 20% of the 39,920 patents awarded to U.S. residents.

The state’s dominance was similar in 1998, when California’s 17,828 patents represented 19.7% of the nation’s 90,699 awards. Other states receiving high numbers of patents in 1998 included New York (7,113), Texas (5,979), Illinois (4,366), and New Jersey (4,206).

Since 1977, California has received 187,171 total patents, which represents 15.6% of patents awarded to U.S. applicants, and approximately 9% of the total 2,090,902 patents awarded worldwide.

“Utility patents” (also known as patents for invention) accounted for approximately 85% of California’s total patents. The PTO broke out utility patent figures in greater detail for 1998, when California’s 15,971 utility patent awards accounted for 19.9% of the U.S. total. Within California, the top five metropolitan areas receiving the most utility patents included: San Jose (4,931), Los Angeles-Long Beach (2,335), San Francisco (1,705), San Diego (1,673), and Orange County (1,484) respectively, with San Jose ranking first in the entire U.S. and all five areas in the top 12. From 1994-98, the organizations receiving the greatest number of utility patents in California included the University of California (1,108), IBM (1,042), Hewlett-Packard (1,000), Hughes Aircraft (991), Apple (750), Intel (731), National Semiconductor (698), Sun (685), Xerox (675), LSI Logic (604), Advanced Micro Devices (521), and Applied Materials (453).

For the entire report, and a more detailed breakdown of numbers of patents received in the US, contact the United States Patent Trademark Office (PTO) at 703-306-2600 or at their web site: http://www.uspto.gov/web/offices/ac/ido/oeip/taf/index.html .
 

Census Bureau Reports on $623 Billion Information Industry; California Again Leads

According to the Economic Census report released today by the Census Bureau, American information services businesses have employed more than three million people and have reported $623 billion in receipts since 1997. The report highlighted the $346 billion broadcasting and telecommunications information subsector, a $179 billion publishing industry, and a $62 billion software publishing industry. California led all states with $18.6 billion in software publishing receipts, 30% of the U.S. total, with Santa Clara County alone accounting for $5.8 billion.

The motion picture and sound recording subsector accounted for $56 billion in receipts, led by the motion picture and video industry with $45 billion in receipts. Within the motion picture and video industry, the report states that “California led all states with $26.1 billion in receipts, which represented over half of the nations total receipts.” Los Angeles County accounted for $24 billion.

The Bureau’s report included 34 kinds of businesses in the information sector of the new North American Industry Classification System (NAICS). The Economic Census is taken every five years.

For a look at the entire report or a breakdown of statistics by industry or geographic area, contact the Census Bureau at http://www.census.gov or at 310-457-4100.
 

House Reviews Digital Millennium Copyright Act (DCMA) on Its One Year Anniversary

The House Committee on Commerce Telecommunication, Trade, and Consumer Protection Subcommittee held a hearing on Thursday, October 28 to review the DCMA, signed exactly one year ago. The DCMA was established to protect copyright owners in today’s digital environment by preventing circumvention of effective technological measures. The DCMA seeks to foster electronic commerce while protecting intellectual property rights.

DCMA has made strides in protecting copyright owners, however, committee members and some witnesses focused on concerns that have arisen in the past year. One concern is the confusion between home recording and what is considered commercial piracy. While pirates compete with authorized program distributors, consumers are allowed to record for time shift benefit. Due to the increase of internet piracy, however, copyright owners are seeking technologies, such as 5C technology, which would prevent all copying capabilities by temporarily disabling VCR record buttons. With 5C technology, consumers would have no way of recording a favorite TV show or movie. High definition sales and technologies have been delayed as a result of this conflict, according to several witnesses.

In his testimony, Michael Moradzadeh from Intel Corporation, outlined some of the objections to 5C technology, which was developed by Intel, Hitachi Ltd., Matsushita Electrical Industrial Co., Ltd., Sony Corporation, and Toshiba Corporation. While the technology was formed to protect the motion picture industry, he noted that many studio representatives object to adoption of 5C, partially because studios would have the power to block all consumer copying, including the single copy used by a consumer for time shifting. Mr. Moradzadeh also stated that other objections to the technology include its ability to encrypt all programming, including broadcast television, so that programs may not be able to be sent over the internet.

Rhett B. Dawson, President of the Information Technology Industry Council (ITI) testified in support of 5C technology and the content scrambling system (CSS). CSS allows licensed manufacturers to descramble a video (and therefore allow it to be viewed) under terms that require the licensed device to obey embedded copy control information. The CSS technology and 5C work hand in hand because 5C contains necessary embedded copy control information, according to Dawson.

Another witness, Jack Valenti, President and CEO of the Motion Picture Association of America praised DCMA for its strong legal protection in an industry that faced $18-$20 billion in worldwide losses in 1995. He defined the newest form of internet piracy as downloadable media, whereby a pirate can load a single copy of a motion picture onto a computer, act as a server and make it available for others to copy onto their own computers. Valenti believes that as a result of DCMA and its enforcement, the federal government has strengthened its fight against this type of piracy, as well as others.

Peter Harter, Vice President of Redwood City based Emusic.com Incorporated testified about unintended consequences of the DCMA. He notes that while the anti-circumvention provision in the DCMA has good intentions, it actually fosters an environment that protects circumvention, rather than preventing it. He explained that because copyright security deems it illegal to circumvent technology, even in the name of testing technology for potential flaws, proponents of a security standard can use lawsuits and the threat of criminal prosecution to stop any kind of investigative work on behalf of consumers. In short, Harter stated, some tests and investigations are illegal because of DCMA. Harter expressed support for “robust copyright management systems that actually work and are based on open, transparent technical standards,” concluding that, “there is much more at stake than combating piracy: technological excellence, free speech, innovation, and competition are on the line.”

Hillary Rosen, President and CEO of the Recording Industry Association of America encouraged the development of business models that consumers wish to use to obtain music, thereby providing greater consumer choice while securing a creative outlet for artists to create and advertise new works.

Rondal J. Moore, Vice President of Business and Legal Affairs of San Jose-based RioPort.com, Inc., testified that the biggest challenge surrounding internet piracy pertains to international rights. The company designs and sells digital audio delivery platforms, including small memory devices that can store and play digitally recorded music from a computer. Moore notes that a lack of continuity in rates and right holders around the world creates a difficult atmosphere for copyright royalty collecting. However, Moore commended the committee on the strides in securing copyright owners’ rights, providing more consumer choice, and assuring predictable legal requirements for online distributors.

For more detailed information on the hearing, contact the House Commerce Committee Telecommunications, Trade and Consumer Protection Subcommittee at 202-225-2927 or on the committee web site: http://www.house.gov/commerce .
 

House Subcommittee Approves Electricity Deregulation

The House Commerce Energy and Power Subcommittee approved HR 2944 on Wednesday, October 27. The bill, authored by Rep. Joe Barton (Texas) would restructure the $220 billion utility industry. The Subcommittee reported the bill by a vote of 17-11.

The Barton bill would permit voluntary cooperation in regional transmission organizations (RTO), give states most authority in oversight of the deregulated market, and lessen the authority of the Federal Energy Regulatory Commission (FERC). During the markup, Rep. Albert Wynn (MD) offered an important amendment for states that have previously opened their markets to competition. For California and other states that have already deregulated their electricity industries, or for states that plan to do so within three years of the bill’s enactment, state laws will supercede federal laws under the Wynn amendment, which was accepted by voice vote.

HR 2944 is now expected to move to the full House Commerce Committee for consideration in the spring of 2000.

For more information on this hearing, contact the House Commerce Committee at 202-225-2927 or at their web site: http://www.house.gov/commerce .
 

Medical Confidentiality Proposal From White House Imminent

Responding to reporters’ questions on Wednesday, White House spokesman Joe Lockhart said that the Administration’s process of reviewing the medical records confidentiality issue is “almost complete.” He added that he expects a proposed rule from the Administration “in a matter of days.”

Then, on Thursday, Administration officials reportedly announced that HHS Secretary Donna Shalala will announce new rules on Friday, setting standards and imposing penalties for violating them.

Congress examined medical records confidentiality issues on several occasions this year, but it has not passed legislation. After Congress missed an August 21 statutory deadline, the Administration began drafting its guidelines. However, current law only gives the Administration authority to propose rules governing electronic records, not paper versions. Congress is expected to continue its efforts to pass legislation later in this Congress.

The issue is of considerable concern to the biomedical industry, one-third of which is housed in California. For more information, see Bulletin, Vol. 6, Nos. 13 (4/23/99), 14 (4/30/99), 18 (5/28/99), 23 (7/16/99), and 24 (7/23/99).
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