• Authorities in San Mateo, California, contemplate filing criminal charges in connection with the sale of an Apple prototype (of a new iPhone), lost by and possibly stolen from an Apple software engineer and bought for $5,000 by the website Gizmodo.com, the New York Times reports.

• From the San Francisco Chronicle: citing a desire to help fight censorship, Google has launched a tool that discloses requests the company receives from governments for content removal and user data.

• India’s new copyright proposals, which include both fines and jail time for offenders, are still not strict enough for the RIAA, MPAA, and other organizations that lobby for greater intellectual property enforcement, Ars Technica explains.

• From CNET, a summary of the recent Supreme Court decision declaring unconstitutional a law banning Internet videos of animal cruelty, while leaving open the possibility that a narrower law would be permissible.

• A new study funded by net neutrality opponents claims that the FCC’s proposed net neutrality rules would cost the telecommunications industry over 340,000 jobs in the next ten years, PC World reports.

• PatentlyO notes that the Supreme Court has decided to hear a case on international copyright exhaustion, and gives a summary of the case.

• Also from PatentlyO, links to videos of patent attorney Kevin Noonan defending genetic patents on 60 Minutes and the Colbert Report.

The Case: FCC v. Comcast

The FCC based its legal argument on its 2005 “Internet Policy Statement” (PDF), which declared (among other things) that internet users had the right to freely access the internet content of their choice, subject to the requirements of “reasonable network management.” Comcast, the FCC argued, had violated the Internet Policy Statement by its traffic discrimination against BitTorrent, which did not fall within “reasonable network management.”

Comcast countered by arguing that the FCC had no right to regulate its network management in any way. The Internet Policy Statement was a set of guidelines, not rules, and the FCC admitted its unenforceability within the statement itself. Until the FCC makes the “Policy Statement” an active, binding policy, Comcast argued, the agency had no authority to enforce its rules.

The FCC, in response to sharp questions from the court about the source of its authority and asking which particular statute Comcast had violated, claimed that its “ancillary” power to implement its Congress-granted authority gave it the right to regulate Comcast. This ancillary power comes from Title I of the 1934 Communications Act, which gives the FCC to promulgate regulations “reasonably ancillary” to the agency’s specific duties outlined elsewhere in the Act.

The court did not buy this argument. In its opinion (PDF), the court stated that “ancillary” jurisdiction was not free-floating but had to be related to an explicit statutory grant of power. Finding no express Congressional permission for the FCC to regulate Comcast’s network management, the court threw out the FCC’s order.

The Larger Issue

The FCC’s fight for “net neutrality” is a part of its stated general agenda to make the internet easily accessible to every American. Through its proposed National Broadband Plan (NBP), submitted to Congress on March 16^th, 2010, it intends to make high-speed internet “the country’s dominant communication network.”

Aspects of the NBP include a subsidy for ISPs in rural parts of the country, auctioning broadband spectrum to wireless providers, a “digital literacy corps” to help Americans learn online skills, up to $16 billion for a public safety network to coordinate first responders to disasters and crises, a goal of having 100 million households with 100 megabit-per-second internet access (contrasted with the current average of three to four megabits-per-second) by 2020, and reduction of phone subsidies in favor of internet subsidies.

The FCC faces push-back from the television industry in particular, which is currently using parts of the over-the-air spectrum that, under the NBP, may be auctioned off for broadband use. The FCC already fought and won a similar battle with the enforced end of analog transmissions of TV signals—the spectrum used for over-the-air analog transmission was reclaimed (and all analog TV signals replaced with digital ones) and auctioned off.

What will likely happen next?

The FCC’s public reaction to the recent federal court decision has been unabashed and undismayed. In its release on April 8^th announcing its 2010 Broadband Action Agenda (PDF), an elaboration on the specifics of the NBP, the FCC Chairman Julius Genachowski declared, “The court decision earlier this week does not change our broadband policy goals, or the ultimate authority of the FCC to act to achieve those goals. The court did not question the FCC’s goals; it merely invalidated one technical, legal mechanism for broadband policy chosen by prior Commissions.” The announcement then lists those goals and the steps the FCC proposes to implement them. Ars Technica explains some of the FCC’s plans here.

The FCC may also have another legal option available to protect net neutrality specifically, in addition to implementing the NBP. University of Michigan law professor Susan Crawford persuasively argues that the FCC can easily acquire the legal authority to enforce net neutrality.  In an op-ed column for the New York Times, Professor Crawford points out that the recent federal court decision rests upon the labeling of ISPs as “information services” rather than “telecommunications services.”  Until 2002, the internet was considered a telecommunications service. But under the George W. Bush administration the FCC re-labeled high-speed internet providers as providers of “information services” because they offered services other than internet connection (like e-mail and web-hosting).

Why does this re-labeling matter? Because the Communications Act gives the FCC the authority to regulate “common carriers,” which includes “telecommunications services” and does not include “information services.” Since the FCC is in charge of this labeling process (which is how it changed the label from “telecommunications services” to “information services” in the first place), it is legally empowered to reverse its own decision and simply change the label back to “telecommunications services”—provided that it can offer a good reason for doing so. Professor Crawford argues that the reason for reversing the reclassification is obvious, because people buy internet services based on speed and price, and not because of the extra services some high-speed providers offer (such as e-mail).

At this point the FCC has not declared any intention of undoing the Bush administration-era re-labeling of high-speed internet.  Its legal authority to do so, however, presents an intriguing possible twist in this ongoing battle.

• The Department of State’s annual Human Rights Report turns the spotlight on internet freedom in China and Iran, from ZDNet Government.

• The US District Court in Delaware stays the patent litigations between Apple and Nokia, pending decisions by the International Trade Commission, says The Register.

• A California appeals court rules that cyberbullying threats are not protected free speech, reports Wired.

• Also from Wired, the Supreme Court agrees to review a Ninth Circuit decision on privacy rights in the context of background checks on government workers.

• The FCC announces that it will recommend the sale of 500 megahertz of spectrum to meet the needs of mobile broadband users, from the Washington Post.

• Programmers in trouble over financial misdeeds: two programmers who developed code for Madoff are charged with fraud (The New York Times, The Register) and the Securities Exchange Commission files a complaint against a one-man Russian investment company for hacking into online portfolios to “pump and dump” stocks (Switched, Wired).

• From E-Commerce Times: TiVo wins its long running patent infringement case against digital video recorder rivals.

• Spicy IP reports that Brazil seems set to invoke WTO intellectual property cross-retaliation provisions for the first time, against the US.

• The European Parliament threatens to bring a legal challenge against the European Commission if it fails to disclose details of the Anti-Counterfeiting Trade Agreement (ACTA), writes Outlaw (see our post on the controversial treaty here).

• Also from Outlaw: Net Neutrality in the UK: Ofcom to probe broadband providers’ management of web traffic.

Flash, owned and distributed by Adobe, is an extremely popular method to add animation and interactivity to web pages, used by over 85% of top websites.  Anyone who has visited YouTube, Hulu, or the vast majority of media rich websites has enjoyed the benefits of Flash.  Not surprisingly, many iPhone users are already demanding Flash.  Adobe reported that in December 2009 there were seven million attempts to download Flash from iPhones and iPod Touches.

With such a high level of demand, why would Apple refuse to adopt Flash on the iPad, a device well equipped to handle the technical requirements of Flash?  Well known entrepreneur Mark Cuban claims “[t]he reason is obvious. No flash, far less streaming over 3G… Less bandwidth consumed means AT&T can offer a great price on the 3G data service.”  A recent article in the Wall Street Journal offered a different explanation: “Flash would let users freely obtain the kinds of features they can only get now at the Apple App Store.”  In other words, Flash would allow users to watch videos and play games in a world outside of Apple’s control and revenue stream.

As word spread that the iPad would lack Flash, bloggers began to question Apple’s claim that the device would be the “best way to experience the internet.”  Some predict that the iPad’s closely controlled software environment could have a chilling effect on innovation.  Unlike traditional operating systems, the iPad and iPhone operating system forces all software downloads through the App Store, giving Apple significant control over how the devices are used.  Reflecting these concerns, Adobe reacted to Apple’s decision by stating that “[w]e strongly believe the Web should remain an open environment with consistent access to content and applications regardless of your viewing device.”

Normally, one would expect Apple to support Flash due to simple market forces, the argument being that without Flash, fewer people would buy the iPad, thus harming Apple’s profits.  Here, however, Apple is likely more profitable by excluding Flash in order to promote the App Store.  The absurdity of this situation begs the question of whether Apple’s decision is lawful and what might be done to intervene.

Net Neutrality Concerns

Traditionally, net neutrality has been discussed in the context of broadband providers attempting to restrict information exchanged by its networks.  An example would be a cable internet company curbing P2P traffic to save on bandwidth expenses.  Proponents of net neutrality rules argue that legislation or regulation is necessary to stop such limitations.  These rules are generally opposed by telecom providers but supported by consumers and web companies offering high bandwidth music, movies, and games.

Without delving into the merits of the debate, it is sufficient to state that the Obama administration supports net neutrality, prompting the FCC to propose new rules which would expand the scope of net neutrality for both wired and wireless providers.  While still in the rulemaking process, these rules could be codified by the FCC within the next few weeks.

Perhaps the most important new rule would require broadband providers to “treat lawful content, applications, and services in a nondiscriminatory manner.”  This broad provision provides exceptions in order to manage network congestion and prohibit unlawful content.  Under the plain meaning of this rule, Apple’s decision to exclude Flash content in favor of its officially sanctioned apps might very well be prohibited.

Apple may contend that the lack of Flash is a legitimate effort to manage AT&T’s network congestion.   This argument seems weak, however, because Flash requires no more bandwidth than many popular apps, such as the YouTube app and many newly approved voice over 3G apps.  It seems likely that the lack of Flash is really just a way to promote the App Store, making it difficult for Apple to fit this decision within the network management exception.  Even if it were trying to limit network congestion, network neutrality would demand a nondiscriminatory approach, such as offering tiered data plans or prohibiting all high bandwidth functions from the 3G network.

While the FCC has clear authority over wireless networks, it’s not entirely clear that it could mandate software requirements for mobile browsers.  Apple might argue that since it is not a broadband provider, these net neutrality rules should not apply to it.

Still, the FCC seems more than willing to get involved in this arena.  Last fall the FCC inquired into the rejection of the Google Voice app, which caused quite a bit of bad press for Apple.  The inquiry included broad questions about Apple’s method of approving apps.  Given the FCC’s general interest in the app approval process, it is not farfetched for the FCC to inquire about how Apple decides to reject standards in its web browser.

Officially, the FCC’s inquiry into the Google Voice rejection was part of ongoing proceedings into wireless open access and handset exclusivity.  However, it didn’t take a formal FCC ruling for Apple and AT&T to change course and allow voice over 3G apps.  A similar FCC inquiry in this instance might call enough attention to the matter that Apple would relent and decide to allow Flash without the need for formal proceedings.

It will be interesting to see if the FCC decides to get involved in this situation.  Given its recent focus on net neutrality and its willingness to question Apple’s activities, some sort of action in this instance would not be surprising.  Involvement would show that the FCC is serious about making the net a truly open place, even on wireless networks.

• Patently-O wonders whether the Supreme Court might take the opportunity afforded by the upcoming Bilski method patent case to scrap software patents, and states the socio-economic case for abandoning them.

• Engineering crime scenes: Lawyers.com considers a study which suggests that fabricating DNA evidence is far from science fiction.

• For an international perspective: European blogs Marques and Catch Us If You Can!!! weigh in on the use of “RNA” in trademarks as addressed by the European Court of First Instance (full text of the CFI’s judgment here).