Election 2000: Impact on Technology Policy-A Political and Policy Analysis


Government Regulations/Government Relations Alert: December 2000, No. 2

Technology policy remains the "favorite son" for U.S. federal legislators on both sides of the political aisle. Though neither presidential candidate directly addressed any specifics during the campaign, Democratic and Republican policymakers across the board and throughout the country have generally embraced the concept that the industry should remain free of government regulation: "industry-led, marketdriven, self-regulatory." Information technology (IT) continues to be a non-partisan/bipartisan issue, with Congress and the Administration doing everything in their power to ensure the IT industry's continued robust growth in leading the positive indicators of the U.S. economy.

The narrowing of the Republican majorities in both the House of Representatives and the Senate, together with the lack of a mandate for the next president (whether, in the end, it is Governor George W. Bush or Vice President Albert Gore, Jr.), should not have a major impact on the U.S. government's long-standing bipartisan support for e-commerce. However, given these dynamics, quick passage of any major initiative is highly unlikely. The key for passing any legislation will certainly be to trumpet the issue's nonpartisan and universal economic benefit.

The 30 or more so-called "New Democrats" (who are represented in both chambers) have built their reputation on issues regarding the information economy and e-commerce. We foresee that on a number of key IT issues, such as privacy, information security, Internet taxation, H-1B visas, telecom deregulation and broadband, these members have been and will continue to be looked to by their colleagues for advice and counsel. And, due to the slim Republican majorities, they could be critical in swaying the final outcome on key technology policy issues. Should such collaborative efforts not materialize, it is possible that progress on IT policy will be affected.

There will be a number of congressional committee leadership changes that could impact e-commerce/ technology issues in the 107th Congress. Due to internal term limits on House chairmanships and several retirements, the two key "IT committees" in the House– Judiciary and Commerce–will see new chairmen, for example. Both the Senate Judiciary and Commerce Committees' chairs and ranking Members will remain the same in 2001-2002. But individual personality changes will have less of an impact than the possible overall gridlock that may ensue due to the lack of a clear and substantial majority by either political party. Differing "personalities" and political philosophies may come into play, however, when the next president begins appointing members to key regulatory and administration agencies, including the Federal Trade Commission (FTC), the Federal Communications Commission (FCC), the U.S. Trade Representative (USTR), and the departments of Justice and Commerce.

Gore may, for example, continue the Clinton administration's philosophy regarding antitrust, while a Bush administration may not be as forceful in challenging corporate mergers, particularly "vertical mergers" which combine companies that do not directly compete. We could also witness a change in communications policy, particularly at the FCC where a President Bush might ease ownership limits and possibly be more "liberal" in allowing cable, broadcast and telecommunication firms to consolidate. On the other hand, the current FCC has thus far avoided directly regulating the Internet and this policy could be continued in a Gore administration.

Thus, the balance of power, together with the increased numbers and visibility of the "New Democrats," will result in many bills being introduced and a lot of hearings, but probably little legislation in the area of regulation of the Internet and e-commerce.

Technology policy issues the 107th Congress is likely to deal with (or avoid) could include:

Privacy

No other issue in the e-commerce arena causes as much controversy and may result in potential legislative action as Internet privacy. The next administration and the U.S. Congress will have to confront the growing anxiety of consumers. On the one hand, individuals want convenient, fast and affordable access to more and more information from the Internet. Internet enterprises in all sectors (retail, medical, financial, etc.), likewise, collect information from individuals (or, more precisely, in many instances, from the device being used) to meet better those needs and tailor their products. In what manner these enterprises collect "personally identifiable information," to what extent they protect the privacy, enforce privacy policies and communicate those policies to the individual, have been the subject of numerous congressional, state and global governmental debates. Particular focus has been placed on the highly sensitive areas of medical and financial information, with no consensus yet proposed. And, both "opt in" and "opt out" approaches have consequences–both intended and unintended.

There is no one uniform omnibus on-line privacy policy in the United States; the pressure on U.S. companies (particularly in the face of the European Union's Data Privacy Directive and the recently negotiated "Safe Harbor" provisions1) to make sure that they establish strong and enforceable self-regulated policies is enormous. Even if the e-commerce industry loses its primary "self-regulatory" argument and concedes to a federal omnibus privacy approach, many feel that Congress would have to support a federal preemption of 50 state laws on Internet privacy in order to enact such a measure. Over two-thirds of the 50 states have considered hundreds of privacy bills this past year alone. Again, in the face of a slim majority and a number of "states' rights" policy advocates in Congress, the chances of passing such a federal law remain rather remote.

Information Security

In many respects, data protection/information security is the foundation upon which continued future growth of the Internet will rest. Businesses and consumers must feel that the information they provide is secure. Without "trust and confidence" in the network, our digital future will not beget business certainty or consumer empowerment.

Due to the numerous scares in 2000 with Internet "Denial of Service" attacks and "I Love You"-type viruses, there were a number of federal bills, and even a proposed Counsel of Europe "Cyber Crime Treaty," introduced to address fears of loss or theft of information. However, it appeared that in the waning days of the 106th congressional session, in particular, the enthusiasm for immediate legislative action had somewhat dulled. This would include measures that were expected to be inserted in some of the last of the spending bills that were left for the lame duck session. But for unrelated reasons, President Clinton had vowed to veto, more specifically, the bill funding the departments of Commerce, State, Justice and the Judiciary, as well as that funding the departments of Labor and Health and Human Services. Thus, it was likely that when these bills finally passed, they would be stripped down to bare essentials, due to their general contentiousness.

With the increase in awareness and "near-misses," policymakers at all governmental levels, together with industry groups, will be working in 2001 to explore solutions to achieve and maintain a high level of "trust and confidence" in electronic commerce. The initial debate–and possible future action–has centered on increasing federal funding of law enforcement and adding new laws, which would permit greater access to electronic communications (e.g., "Carnivore" in the United States and "RIPA" in the United Kingdom).

Internet Taxation

The federal Internet Tax Moratorium became law in 1998, but is due to expire in October 2001. The current statute and a proposed five-year extension (introduced but not passed in 2000) do not prevent a locality from taxing an Internet product if it is already taxable in the analogue environment. They merely prevent a state or local government from imposing new taxes on Internet products or services. Congress will have to address this issue early in its first term in 2001, and will be tasked with having to find the proper balance between the preservation of state/local governments' taxing authority, with the need to keep interstate e-commerce free of burdensome new taxes.

Jurisdiction

Recognition of Foreign Judgments

The issue of "jurisdiction" is a key dilemma in taxation policy, as well as in overall e-commerce dispute resolution policies. Deciding to what extent a "substantial" physical presence exists or "purposeful availment" has been achieved in a given forum is part of an ongoing debate in The Hague, for example, which is negotiating a Convention (international treaty) on the "Recognition and Enforcement of Foreign Judgments." This debate was part of a House Judiciary Committee hearing in 2000 and a formal Diplomatic Conference is scheduled to begin in June 2001. Shaw Pittman lawyer Marc Pearl, representing the e-commerce industry, is the private sector member of the U.S. government delegation negotiating this Treaty. The jurisdiction issue will be debated in many fora this coming year.

Internet Gambling

U.S. federal and state laws cannot deal with the onslaught of virtual gaming. States are unlikely to be able to prosecute out-of-state casino operators operating in cyberspace. Although they may be able to prosecute their own citizens for gambling on-line, enforcement will be difficult. Federal statutes may criminalize cyberspace casinos, but the U.S. government's ability to prosecute foreign operators is questionable.

Intellectual Property

Business Method Patents

A number of controversial business method and software patents have stirred up increased interest throughout the country and in the U.S. Congress. The Business Method Patent Improvement Act was introduced at the end of the 106th Congress by Representative Howard Berman (D-CA), member of the House Judiciary Committee and ranking minority member on its Intellectual Property and Courts Subcommittee. This issue–whether dealt with in Congress, the courts or at the U.S. Patent and Trademark Office (USPTO)– will continue to get increased attention by companies and the media. An additional problem surrounding business method and software patents is the fact that EU countries have constantly resisted the pressure to change their regulations to allow the patentability of software. Related to this issue is a continuing debate in Congress regarding the ability of the USPTO to retain the patent application fees it collects and apply this income to the hiring of more examiners.

Database Protection

In response to the EU Directive on Protecting Databases, the United States has been debating, for more than four years, a new statute, which would revise U.S. law on such collection of information. There has been a tug-of-war primarily between database users and providers, which has produced a few House Judiciary Committee hearings, a bill which passed in the House in 1998, but no further action in the Senate since that time. In 1999, an alternative approach was introduced in the House Commerce Committee, which further complicated the matter. Building on current protections in contract, copyright, state misappropriation and trade secret laws, together with technology protections, the debate has centered on to what extent a legal gap must be filled by federal legislation. Should the database provider and user sides be able to hammer out a compromise, this issue could be resolved in the 107th Congress.

Domain Names

The Internet Corporation for Assigned Names and Numbers (ICANN), the international not-for-profit corporation designated by the U.S. Government in 1998 to take control of the technical management of the domain name system, has recently approved seven new top level domain names (TLD) to supplement .com, .net, .edu and .org. The purpose was to begin the process of unclogging the pipeline of domain names, to increase competition among registrars and to promote geographic diversity of registries. The new TLDs will be: .pro, .info, .biz, .coop, .name, .museum and .aero. These TLDs could be made available to the public as early as Spring 2001. Additionally, ICANN will attempt to discourage abusive domain name registrations in these new TLDs by (1) offering trademark owners a sunrise period in which to pre-register domain names before the registry is available to the general public; (2) requiring TLD registries to provide complete, accurate and centralized WHOIS2 data; (3) requiring registrants in the new TLDs to submit complete and accurate contact information during the registration process; and (4) subjecting all new TLDs to ICANN's Uniform Dispute Resolution Policy. There may be court challenges and/or legislative initiatives (in both the U.S. and foreign capitals) to the ICANN decision. 3

Digital Millennium Copyright Act (DMCA)

Following the passage of this historic law in 1998, a number of new media companies have begun to question whether or not it is appropriate to revisit the DMCA and call for significant amendments and changes. Congress in 2001-2002 will probably not make changes in the law, but will most likely hold hearings and ask that stakeholders help them sort out with greater scrutiny the effects of copyright law on e-commerce.

Broadband Access

Due to the increased demand for Internet access, older data connections have become bogged down and overwhelmed. Businesses and consumers are turning to other options and newer technology to achieve the speed and connections they desire. Congress (together with the FTC) may find itself having to referee the competitors to encourage more rapid broadband deployment and to enforce vigilantly greater competitive safeguards.

IT Human Resource Issues

Business Immigration

In order to keep companies competitive in the digital age, they need high-skilled technology employees. Enterprises across the globe are always engaged in extensive efforts to locate and train qualified domestic workers to meet this demand before incurring the substantial expense and bureaucratic obstacles of hiring foreign workers to address labor shortages. However, a number of nations, including the United States, have amended their immigration laws and increased the quotas for workers that companies are able to recruit (in the United States, these workers gain entry under the H-1B visa program). After months of debate, the U.S. Congress passed legislation in October which was able to wipe out the backlog of such pending visa cases by raising the yearly cap on H-1B visas to 195,000 through October 2004, while at the same time providing for new education and training initiatives.

The legislative measures Congress could examine in 2001 regarding IT workers depends almost entirely on which members of Congress become the new relevant committee and subcommittee chairs, and who finally becomes president. Many agree that the Immigration and Naturalization Service (INS) is in need of a major reorganization. In particular, some suggest reform should include re-focusing the agency from one of providing of legal immigration services to that of "enforcement" against illegal immigration.

Digital Divide

The partial solution mentioned above to the high number of labor vacancies in the IT field throughout the country must still be addressed in a comprehensive fashion in the near future. Many members of Congress support programs that would help train U.S. workers to become participants in the New Economy.

Additionally, they would like to see students–particularly those in rural and minority communities–gain increased access to computers and the Internet, be encouraged to focus their studies in the science and math fields and seek employment in IT. The private sector will be encouraged to commit and speak out on the resources they are expending to help convert the "Digital Divide" into a "Digital Opportunity."


FOOTNOTES

1. A summary analysis on the "Safe Harbor" provisions is available by contacting Shaw Pittman or by visiting www.shawpittman.com.
2 . "WHOIS" is a program that can identify the owner of any registered second level domain name, and can also be used to find out whether a domain name is available.
3. A more complete Domain Name memo is available by contacting Shaw Pittman or by visiting www.shawpittman.com.


For further information concerning the issues in this Alert, please contact:

Thomas J. Spulak
thomas.spulak@shawpittman.com - 202.663.8118
Anita Epstein
anita.epstein@shawpittman.com - 202.663.8075
J. E. Murdock III
sandy.murdock@shawpittman.com - 202.663.8342
Rudy Fuentes
rudy.fuentes@shawpittman.com - 202.663.8240
Andrew L. Woods
andrew.woods@shawpittman.com - 202.663.8150
E. Michael O'Malley
michael.o'malley@shawpittman.com - 202.663.8935
Marc A. Pearl
marc.pearl@shawpittman.com - 202.663.8993
Claudia A. Hrvatin
claudia.hrvatin@shawpittman.com - 202.663.8245