DEPARTMENT OF JUSTICE PROPOSED REPORT ON H.R. 4836 - LAND REMOTE SENSING COMMERCIALIZATION ACT OF 1984

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90B01370R001101570013-3
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 17
• Document Creation Date: December 21, 2016
• Document Release Date: February 4, 2009
• Sequence Number: 13
• Publication Date: March 27, 1984
• Content Type: MEMO

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Office of Legislative Liaison
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EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
Chrono
WASHINGTON. D.C. 20503
n
March 27, 1984
LEGISLATIVE REFERRAL MEMORANDUM
TO: Legislative. Liaison Officer
Department of Commerce Central Intelligence Agency
National Security Council Department of Transportatic
Office of Science and Technology
Department of the Interior
Federal Communications Commission
General Services Administration
Department of State
Department of Agriculture
National Aeronautics & Space Administration
SUBJECT: Department of Justice proposed report on
H.R. 4836 -- Land Remote Sensinq Commercialization
Act of 1984.
The Office of Management and Budget requests the views of. your
agency on the above subject before advising on its relationship
to the program of the President, in accordance with OMB Circular
A-19.
A response to this request for your views is needed no later than
COB -- Tuesday, April 10, 1984. Oral comments acceptable.
Questions should be referred to William J(. Maxwell (39,5-3890),
the legislative analyst in this office.
Ja 'e$ " C . -m$r& /fcvf `J~'_
Assistant Director for
Legislative Reference
Enclosures
cc: Scott Gudes Tim Surehe
Mike Horowitz Frank Seidl
Dan Taft Bill Hughes
Jeff Struthers
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v. J. Lepartment of Justice
Office of Legislative Affairs
Honorable James H. Scheuer
Chairman, Subcommittee on Natural Resources.
Agriculture Research and Environment
Committee on Science and Technology
House of Representatives
Washington, D.C. 20515
Dear Mr. Chairman:
This is in response to your request for the views of the
Department of Justice on H.R. 4836, the 'Land Remote-Sensing
Commercialization Act of 1984' ('the Act'). The Department of
Justice does not object to enactment of this legislation.if
amended as suggested herein.
I. Summary of the Bill
The bill provides'for the transfer to the private sector of
the responsibility for operating land remote-sensing
satellites, a function now performed by the 'Landsat' system
operated by the National Oceanic and Atmospheric
Administration. Title I of the bill states that it is the
policy of the United States to commercialize those
remote-sensing functions that lend themselves to private sector
development. Section 103(c). The Government's right to
acquire and disseminate land remote-sensing data must, however.
be preserved. Section 103(a).
In general terms, Title II of the bill provides for the
Secretary of Commerce to contract with a private party to
operate the Government's current Landsat system. Title III
contains certain interim provisions designed to assure
continued availability of the data through private sector
operation of new privately-owned land remote-sensing systems
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after the 'practical demise' of the space segment of the
Landsat system. Title IV sets the conditions under which
private operators of future land remote-sensing systems will be
licensed. Title V provides for continued federal research and
development. Title VI requires that in all circumstances users
are to have "non-discriminatory' access to the data as defined
in Section 104(3). 1/ Although by its express terms the bill
applies only to the land remote-sensing system, and not to the
meteorological system, Title VII specifically prohibits sale of
the Government's meteorological system.
Specifically, the contract for operation of the Landsat
system provided for in Title II will be awarded on a
competitive basis. Section 201(b). The Government will
continue to own the data marketed by the operator. Section
202(a). Such sales may continue after the 'practical demise'
of the space segment of the Landsat system. Section 202(b).
The contractor may use and replace elements of the system at
its own expense. Section 210(c). The1Secretary of Commerce
shall award the contract on the basis of financial return to
the Government, technical competence, ability to satisfy all
conditions of the sale, marketing ability, absence of conflicts
of interest affecting access to the data, and ability of the
contractor to effect a smooth transition from Government to
private operation and 'such other factors as he shall deem
appropriate.' Section 203(b).
Under Title III, the Secretary is to award a contract, on a
competitive basis, to a private party that will offer for a
period of six years the 'capability of generating data of a
quality at least equal to the quality of multi-spectral scanner
data and of selling and delivering such data to the United
States Government' in quantities equal to the annual volume of
federal usage during fiscal year 1983. Section 302. The
Government may contract to prepay to the operator a portion of
the capital cost of the system, Section 302(b)(4), but shall
not guarantee any data purchases by the United States
Government. Section 302(b)(6). The United States Government,
unlike other buyers, will recover a rebate of at least five
percent on any purchases of data. Section 303(b). The bases
for the award of the contract are: (1) the cost to the
1/ According to Section 104(3)(A). the term
"non-discriminatory basis' means:
without preference, bias, or any other special
arrangement regarding delivery, format, financing,
or technical considerations which would favor one
buyer or class of buyers-over another.
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Government of providing the capability; (2) the technical and
financial qualifications of the contractor; (3) the
contractor's ability to develop the private market for land
remote-sensing data; (4) the contractor's ability to supplement
the basic system and maintain United States leadership in the
industry; (5) the contractor's ability to be licensed under
Title IV of the Act; (6) the reliability of the contractor; (7)
the contractor's ability to effect a smooth transition to Title
III of the Act; (8) the size of the royalty or rebate to the
United States Government; and (9) any other factors the
Secretary of Commerce deems appropriate. Section 302(c).
The licensing provisions in Title IV authorize the
Secretary of Commerce to license qualified private parties,
consortia of private parties, or consortia of federal agencies
and private parties wishing to operate their own land
remote-sensing systems. Section 403. Licensees must operate
any system under the following conditions: (1) operation must
,preserve and promote United States natiohal security; (2) data
must be available to all potential users on a
non-discriminatory basis; (3) the system shall be administered
by a central entity (in the case of a consortium); (4) the
license shall not protect the holder from "fair- competition'
from other licensees; (5) before terminating its operations,
the licensee shall dispose of any orbiting satellites in a
manner acceptable to the President; (6) the licensee shall make
any data available to the Secretary of Commerce for archiving
purposes; and (7) the licensee shall provide the Secretary of
Commerce with notice of "value-added' activities and a plan for
compliance with the non-discrimination requirement. Section
402(b). The Secretary determines the term of any license and
has 120 days to approve any application, except that pending
issues and actions to resolve them may extend the period.
Section 403.
Licenses may be revoked for non-compliance with all Title
IV conditions. Section 401. The Secretary may also revoke,
suspend, or modify a license upon written notice that there has
been substantial failure to comply with any provision of the
Act, any regulations, any terms, conditions, or restrictions of
the license, or any international obligation or national
security concern. Section 403(e). Upon request, the applicant
or licensee is entitled to an agency hearing and decision by
the Secretary on the record, subject to judicial review under
the Administrative Procedures Act. Section 403(f).
Regulations can be issued after public notice and hearings.
Section 404. The Secretary can monitor remote-sensing
satellite systems and 'value-added" activities by inspections
of business or financial records and any space-related or
ground segment hardware or software, and, after notice and
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hearing,2/ impose civil penalties of $10,000 per day for each
violation. Section 405. The Secretary has the power to
subpoena materials, documents, records, and testimony under
oath, and to seize objects, records, or reports used or likely
to be used in violation of the Act. Section 405(d).
II. Discussion
The determination to commercialize the land remote-sensing
system raises difficult issues. A private firm would choose to
operate the system only if it believed it could derive
sufficient revenues from buyers of land remote-sensing data to
more than offset its costs. Thus, if'the initial fixed costs
of investing in the system were very high, high prices would
have to be paid by data users to make commercialization
feasible. Since users pay very little at present for these
data, it is not at all clear.whether the market would be able
to support a private Landsat system absent large continuing
Government subsidies. 3/ Even assuming, however, that
potential users valued Landsat data highly, the system operator
could sustain profitable prices only if it could encrypt the
data and thereby prevent satellite signal piracy.
The questionable outlook for commercialization is further
clouded by Sections 103(b). 402(b)(2), and 601(a), which
require that all potential users be granted access on a
'non-discriminatory' basis. It may be that only a system of
discriminatory pricing -- under which different users are
charged different prices according to the value they place on
the data, and thus the price they are willing to pay for it --
would yield sufficient revenues to cover costs and make
2/ We assume that the reference to Title 5 'is to the formal
notice and hearing procedures of the Administrative Procedure
Act, 5 U.S.C. ? 551 et seq. Express reference to the
apparently relevant provisions of Title 5 (5 U.S.C. ?5 554-57)
should be made, or the precise intent otherwise clarified.
3/ It is not clear that total demand for land remote-sensing
data is sufficient for full commercialization of the land
remote-sensing system. See Report of National Oceanic and
Atmospheric Administration in Response to P.L. 97-324 (January,
1983); The National Academy of Public Administration, Space
Remote Sensing and the Private Sector: An Essay (March, 1983).
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commercialization attractive. 4/ Under such a system, revenues
derived from customers willing to pay higher prices might
substitute for the subsidy now provided by the Government. As
described below, a subsidy gives a competitive advantage to the
initial operator. This suggests that, in order to maximize the
likelihood of successful commercialization without a Government
subsidy and with some prospect of competition, H.R. 4836 should
be modified to omit any requirement that the prices charged for
data necessarily be "non-discriminatory." If foreign policy
considerations require that foreign governments' concerns about
the availability of the data be accommodated, a requirement
that foreign governments be given access to these data on equal
terms could be added. 5/
We also wish to point out that, assuming the aggregate
social benefits of operating Landsat exceed the costs, and that
commercialization is feasible, the transfer of the Landsat
system from public to private hands may inefficiently restrict
.the usage of remote-sensing data. Economic welfare is
maximized when a good is sold to all buyers willing to pay at
4/ For a good description of price discrimination in
'decreasing cost" industries, see generally 1 A. Kahn, The
Economics of Regulation 123-58 (1970). In order for
discriminatory pricing to be effective, the system operator
would have to be able to prevent arbitrage -- the resale of
data by customers charged a low price to customers charged a
high price. Arbitrage might be prevented by enforceable
contractual clauses prohibiting such resales. The bill, in
Section 603, authorizes such conditions on sales of data,
although the bill prohibits discriminatory pricing.
5/ Under such a 'most-favored nation" clause, the treatment of
foreign government users would not necessarily be identical to
the terms afforded domestic purchasers of data. Of course, due
to commercialization, foreign governments would be charged
higher prices after the demise of Landsat than they presently
pay for the data -- unless the United States Government
explicitly subsidized private sales to foreign governments.
If the treatment of foreign private users raised no foreign
policy concerns, they could be sold data under the same terms
as domestic users. It is, of course, possible that foreign
governments might request preferential treatment for
politically influential private users. United States
Government agreement to such special treatment would, once
again, require the payment of federal subsidies to the Landsat
operator.
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least marginal cost -- the cost of supplying one more unit of
the good. If the marginal cost of supplying remote-sensing
data is extremely low, the socially optimal use of these data
is assured by charging a correspondingly low price for them --
as the Government may be doing at present. If, under private
ownership, higher prices were charged (to ensure that total
revenues covered total operating costs), some current users who
value the data at an amount equal to or greater than marginal
cost -- but at less than the privately charged price -- would
be inefficiently deprived of the data. 6/
Particularly notable in light of these principles is the
language of Section 104(3)(B) stating. that sales will be deemed
to be on a 'non-discriminatory basis' only if:
(1) any offer to sell or deliver data is advertised
in advance and is equally available to all
prospective buyers; (ii)-the systei operator has not
established or charged any price, policy, procedure,
or other term or condition in a manner which gives
one class of buyer de facto favored access to data;
and (iii) in a case where a system operator offers
volume discounts, such discounts are no greater than
the demonstrable reductions in the cost of such
sales. The sale of data 'on a non-discriminatory
basis' does not preclude the system operator
offering discounts other than volume discounts to
the extent that such discounts are not inconsistent
with any other provision of this paragraph.
This language raises in precise terms the possibility of rate
of return regulation that most troubles us. First, the bill's
proposed regulatory structure in Title IV to enforce Section
104(3)(B) and other conditions confirms that rate and other
regulation may be anticipated. Second, there is no basis for
the proposed degree of regulation.
6/ This inefficiency probably would exist to some extent
whether the land remote-sensing industry became competitive or
monopolistic. If several competitors could profitably serve
the market -- as H.R. 4836 apparently assumes -- competition
would somewhat constrain prices (and incidentally, limit the
use of price discrimination). Nevertheless, price probably
would not reach the very low level of marginal cost, and some
would-be users would be denied access to the data,
notwithstanding their willingness to pay an amount equal to or
exceeding marginal cost.
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Unless the provision of satellite data involves a natural
monopoly, or there is some other "market failure,' there is no
economic rationale for regulation of land remote-sensing
satellite systems at all. Moreover, even the existence of
natural monopoly would not necessarily justify regulation.
Rate of return and other forms of natural monopoly regulation
are economically justifiable only if regulatory costs do not
outweigh regulatory benefits. 7/ Public availability of
prices, as well as the extensive enforcement mechanism under
Title IV that could apparently be used to shut off any price
discrimination possibilities and increase the costs of a rate
regulatory process, would discourage any price competition. In
addition, in a technologically dynamic area such as land
remote-sensing, the static nature of regulation may actually
cause more damage by retarding innovation than would be caused
by allowing a temporary monopolist to set prices without
constraints. 8/
Title IV of the Act, furthermore, if"viewed literally,
provides for a panoply of regulatory requirements extending
7/ Regulation is justifiable generally where market failures
result in inefficient levels of production of goods and
services or no production at all. Some forms of regulation,
however, have counter-productive tendencies. Rate base and
rate of return regulation reduces incentives for efficiency and
emphasizes service competition at the expense of price
competition. Since a 'normal' rate of return is guaranteed on
service expenditures that are included in a regulated firm's
rate base, the regulated company has an incentive to
'overinvest' in services, with little regard to cost. In
addition, regulation consumes significant resources of both the
regulated firm in supporting rate requests and the regulating
agency in sorting out the large volume of data submitted with
these rate requests. A rate. regulatory process can also
provide a licensee with incentives for inefficiency in its
investments and operations, and for rigidity in its rate
structures and service offerings. See Joskow & Noll,
Regulation in Theory and Practice: An Overview, in G. Fromm
(ed.), Studies in Public Regulation 1 (1981); S. Breyer,
Regulation'and Its Reform 36-59 (1982).
8/ There are currently prospects for competition from foreign
(e.g., French and Japanese) launched and operated systems.
These systems may not be profit-making enterprises, and may
involve significant Government subsidies. They may,
nevertheless, represent a competitive check on the exercise of
monopoly power by a United States firm.
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well beyond considerations of price and non-discriminatory
access. "Value-added" activities, for example, must be
proposed to the Secretary of Commerce under Section 402(b)(7),
are subject to imposition by the Secretary of terms,
conditions, or restrictions under Section 403, and are subject
to the full enforcement powers of the Secretary in Section
405. 9/ Investigatory, hearing, adjudicatory, and
administrative penalty powers are all centered in the Secretary.
of Commerce. Unlimited rule-making authority is vested in the
Secretary. Section 404. In short, a comprehensive new
regulatory agency would be created within the Department of
Commerce to regulate virtually every aspect of the industry.
Not only would transactional costs of implementing operations,
pricing sales, or developing new value added services skyrocket
as each change had to be presented to the Secretary, but
innovation would be dampened. Delays would attend the
administrative process, virtually assuring that new technology
would lag in implementation, that better and cheaper data for
users would be slower in being marketed, and that full
commercialization would be a longer process. These regulatory
costs would outweigh, in our view, any benefits of such an
extensive regulatory scheme. While we recognize the importance
of assuring compliance with our international obligations,
achievement of this goal does not justify the scope of Title IV
and can be assured by other means.
Because the bill as presently drafted would structure the
land remote-sensing industry as a pervasively regulated
industry, the warrantless inspection authority in section 405
is probably constitutional, although it would be desirable to
limit inspections to 'reasonable times." See Donovan v. Dewey,
452 U.S. 494 (1981) (need for predictable and guided federal
regulatory presence). We believe, however, that Section
405(e)(1), which provides for seizure authority, is subject to
constitutional challenge. Subsection (e)(1) states that, in
carrying out his enforcement responsibilities, the Secretary
may "seize any object, record, or report where it reasonably
appears that such was used, is being used, or is likely to be
used in violation of this Act. . . (emphasis added). As a
rule. warrantless searches are permissible only where the
exigencies of the situation make that course imperative. See
Coolidge v. New Hampshire, 403 U.S. 443, 455 (1971). Emergency
situations might involve an alerted criminal bent on flight, a
movable car containing contraband or stolen or dangerous
articles that may never be found again, or misbranded drugs
9/ These enforcement powers do not create in the Secretary an
independent power to litigate.
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that threaten the national health and safety. See. e.g..
21 U.S.C. 5.334(a) (grounds for seizure of adulterated or
misbranded food and drugs). With respect to the present bill,
we believe that legislative history specifically establishing
that the authority to make warrantless seizures of objects
(presumably hardware or software used in satellites), records
or reports is both necessary for national security or other
reasons and otherwise meets the 'exigent circumstances'
rationale would be necessary in order to sustain the
constitutionality of this provision.
Assuming that there is a legitimate federal need for
warrantless seizures, we would nevertheless recommend that, if
enacted, the language of Section 405(e) be altered to meet the
substantive requirements of the Fourth Amendment. The Supreme
Court has generally indicated that probable cause is necessary
to justify a warrantless seizure. See Coolidge v. New
Hampshire, 403 U.S. at 472-73. We are aware of no Supreme
Court case that expressly authorizes warrantless seizures based
on less than probable cause. See. e.g., Colorado v. Bannister,
449 U.S. 1. 3 (1980) (per curtam); G.M. Leasing Corp. v. United
States, 429 U.S. 338, 351 (1977). Although the common law
'reasonable grounds to believe' standard is the substantial
equivalent of the Fourth Amendment's 'probable cause'
requirement, see Draper v. United States, 358 U.S. 307, 310 n.3
(1959), it is not clear that the "reasonably appears' language
in Subsection (e)(1) is the.equivalent of the 'reasonable
grounds to believe' standard or its constitutional analog.
'probable cause.' Section 405(e)(1) would have to be amended
to read: 'seize any object, record or report where he has
probable cause to believe that such was used, is being used, or
is about to be used in violation of this Act.'
Thus, as broadly as it is currently drafted, Title IV pf
the bill raises fundamental policy and legal concerns. Title
IV is subject to the interpretation that an extensive
regulatory scheme is to be imposed. If so, we oppose Title IV
and recommend its deletion in substantial part. -
We are also troubled about the possibility that the
contractor who contracts to make data available to the
Government during the six-year interim period will be provided,
as a result of the contract, with a significant subsidy that
will lessen the possibility of competitive entry into the
market (assuming no natural monopoly). Section 302 provides
that a party or parties contracting for the provision of data
to the Government must be capable of providing, at a minimum.
the amount of data used by the Government during fiscal year
1983. To encourage such production, Section 302 also provides
for a prepayment by the Government of a portion of the capital
cost of providing this capability. This prepayment subsidy
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would be at least partially repaid to the Government through
the five percent minimum rebate on United States Government
data purchases, but might not be fully repaid during the
contract period. Although the contractor would have no
guarantee that the Government would purchase data, the subsidy
could allow it to provide data at a lower cost. The rebate,
then, would act as a repayment mechanism encouraging the
Government to purchase from that contractor even if others
offered data to the public on equivalent terms. Thus, that
contractor could enjoy a significant advantage over other
potential entrants. While we recognize the possible need for a
subsidy to assure that land remote-sensing data will be
available, we are concerned that such.a contract may make it
difficult, as a practical matter, for any competing systems to
be formed.
The prepayment of the subsidy, under the bill as drafted,
poses other significant problems. It 1s unclear whether the
limitation on the Title III contract that it 'shall not provide
for any guaranteed data purchases by the Federal Government,'
Section 302(b).(6). means that the United States Government is
free to purchase data from other sources or simply that no
minimum level of purchases from a sole licensee is
anticipated. First, if the contract is not for United States
Government requirements, then incentives to repay the initial
subsidy may be lessened. Although required to maintain
capability for six years, the contractor may.find it more in
its interest to keep the subsidy and either terminate the
contract, not sell to the Government or not compete vigorously
for sales that, through rebates, reduce the start-up advantages
given by the prepayment. Sales to private users might be
substituted as the private market develops. 10/ Second, if the
contract is, in fact, a requirements contract, then it raises
the possibility that it may provide the contractor with an-
unnecessary competitive advantage continuing beyond the term of
the contract. The bill should balance generating the necessary
incentive for the .provision of the Government's data needs with
the creation of undue competitive advantage.
The foregoing discussion highlights the broad competitive
issues raised by the bill. There are also more specific
definitional issues raised by the bill as currently drafted.
Section 203(b)(5) imposes as a criterion for selection as a
provider of land remote-sensing data the 'absence of any
10/ Required repayment by the end of the contract period or
over a longer period might correct for this built-in
disincentive.
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conflicts-of-interest which could inhibit non-discriminatory
access to such data.' While, standing alone, that language
could be construed to bar the system operator from providing
'value-added' services regardless of whether it is a regulated
monopolist, the specific reference to 'value-added' activities
in Sections 402(b)(7) and 405(b) may be sufficient to counter
such a narrow intepretation. Leaving to the Secretary of
Commerce the power. to define 'value-added" may, however, by
implication, impose a type of public convenience and necessity
test for new services, similar to that required for facilities
construction under Section 214 of the Communications Act of
1934, 47 U.S.C. S 214. As noted, we believe that no such
extensive regulatory scheme is needed here.
Furthermore, Title II as whole raises serious definitional
problems. There is no specification of when the Landsat
operator's activities are to end and when the Title III
operator's activities begin. The language in Section 201(b)
concerning renewal implies a continuing. contract. It is also
unclear what the source of compensation for an operator will
be -- whether this compensation will take the form of fees from
Government appropriations alone or sales to private users or
both. Our concern with competitive issues in Titles III and IV
would extend to Title II were the same operator to gain a
continued competitive advantage from its Title II license and
thereby increase the likelihood of monopoly and decrease any
competitive initiatives by itself or others.
Additionally, the criterion in Section 402(b)(4) that no
license shall protect the holder from "fair competition" should
be clarified, so as to fulfill two distinct and important
functions. First, specific language should be added to the
general language of Section 607, that '[t]he requirements of
this Act are in addition to, and not in lieu of. any other
provision of law," to'insure against any implicit repeal of the
antitrust laws. We suggest the following language: 'Nothing in
this Act shall be deemed to create an exemption or defense to
any action under the federal antitrust laws, as defined in
Section 1 of the Clayton Act (15 U.S.C. S 12), or the Federal
Trade Commission Act (15 U.S.C. S 41-58); provided, that a
contract entered into by the Secretary in accordance with this
Act shall not be deemed to violate such statutes.' Second,
Section 402(b)(4) should preclude an unduly restrictive
licensing process that might exclude potential entrants. The
section should specifically provide that the Secretary is not
to grant exclusive licenses, or to consider the economic
effects of entry of additional firms into the land
remote-sensing or "value-added" business. Thus, replacing the
'fair competition' language with a provision clarifying the
Secretary's powers and insertion of an antitrust savings clause
would more effectively serve the purpose of preserving
competition.
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Moreover, the participation of federal agencies .in consortia,
even with private parties, raises both substantive and definitional
problems. Section 406(b) limits such activities to those that
"will not compete with other United States private sector activi-
ties." However, both operational and "value-added" services of
such mixed public and private sector consortia would seem inherently
likely to compete with purely private sector activities in the land
remote-sensing industry. Moreover, the possibility of mixed
consortia may in itself distort the incentives of the private sec-
tor to develop land remote-sensing services. Potential private
entrants would be deterred if they feared that the participation
of federal agencies might entail public subsidies for the consortium
with which they would have to compete. This suggests that indivi-
dual Government agency needs should be met contractually through
the private sector alone, not through Government partnership ar-
rangements, so that all potential providers may have the oppor-
tuntity to compete for any necessary Government subsidies. On
balance, permitting Government participation in consortia appears
unnecessary and possibly damaging to competition.
Finally, apart from those policy concerns set forth above, we
have several reservations regarding the bill's-structure of judi-
cial review and required administrative procedures. Additionally,
several of the provisions concerning the sale and dissemination of
data and the procedures for awarding a contract for the operation
of the land remote-sensing system are vague so as to invite initial
litigation over their meaning.
Section 403 provides that before granting a license to quali-
fied private sector parties, the Secretary of Commerce must deter-
mine that the applicant will comply with the Act, regulations, in-
ternational obligations and national security concerns. The Secre-
tary may revoke, suspend, or modify a license issued under the Act
for failure to comply. Upon timely request after an adverse action,
an applicant or licensee is entitled to a hearing and adjudication
on the record by the Secretary. A final action of the Secretary
is subject to judicial review under the Administrative Procedure
Act.
Under Section 606, the Secretary is required to consult with
the Secretary of Defense on national security concerns and the
Secretary of State on international obligations. The Secretary
of Defense and the Secretary of State have responsibility, respec-
tively, for identifying and notifying the Secretary of national
security concerns and international obligations relating to acti-
vities under the Act. However, Section 606(c)(1) empowers the
Secretary of-Commerce to determine the appropriateness and reason-
ableness of conditions based on national security or international
obligations to be imposed on any systems operator. There is no
express provision for judicial review in Section 606.
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We oppose judicial review of those Secretary of Commerce deter-
minations under the Administrative Procedure Act involving national
security and compliance with international obligations. Decisions
in the national security and foreign relations areas are largely
within the authority of the Executive Branch and should not be
subjected to Judicial review. We recommend that language be in-
serted to provide that to the extent the decisions of the Secre-
tary of Commerce concern national security and compliance with
international obligations, they are committed to the Secretary's
discretion and are not subject to judicial review.
Section 404 of the bill authorizes the Secretary to promul-
gate appropriate regulations. Section 404(b) provides that such
regulations "shall be carried out only after public notice and
hearings in accordance with the provisions of title 5, United
States Code." The language of this provision is ambiguous and
may be read to require the Secretary to employ notice-and-comment,
and perhaps other, procedures for all regulations, including those
that would otherwise be exempt from the required procedures. See
5 U.S.C. 5553(a),(b). This ambiguity can be removed simply by
deleting the phrase "only after public notice and hearings."
Some provisions of the bill are so vague that they invite
litigation over their construction, with the prospect of ceding
to the courts what should initially be determined by Congress,
and subsequently be interpreted by the Secretary. First, the
provisions relating to a contract for the operation of the exist-
ing land remote-sensing satellite system are extremely sketchy.
These provisions are likely to generate litigation if there is
more than one bidder and a disappointed bidder wishes to prevent
an award of the contracts. The bill fails to indicate whether
other statutes and regulations relating to government procurement
are applicable to this type of contract. See, e.g., the Contract
Disputes Act, 41 U.S.C. 5601 et seg.; the Fie eral civil procurement
statute, 41 U.S.C. ?251 et segg. and the Federal acquisition regu-
lations promulgated thereunder.
Additionally, the provisions relating to the sale and dissem-
ination of data have been drafted without regard for the copy-
right law of Title 17. For instance, section 202 states that
"title" to the data is retained by the United States. It is un-
clear whether the data is a government work within the meaning
of 17 U.S.C. 5105, so that no copyright can subsist in the data,
or that the copyright is obtained by the contractor and assigned
to the United States. In either event, it is unclear who may en-
force the copyright.
Section 202 also provides that the contractor is entitled to
the revenues from the sale of data. A question arises as to whether
the contractor is entitled to such revenues if the government sells
data to which the government has "title." The bill does not address
the contractor's remedy, if any, should someone else sell the
data. Another problem is that although "digital remote-sensing
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data" is defined, the general term "data," as used in section
202, is not. By implication, the term "data," is broader than
"digital remote-sensing data" and would include copyrightable
subject matter.
For the foregoing reasons, the Department of Justice believes
that this legislation raises questions that should be thoroughly
considered. If amended as suggested above, however, the Depart-
ment does not object to enactment of this legislation.
The Office of Management and Budget has advised this Depart-
ment that there is no objection to the submission of this report
from the standpoint of the Administration's program.
Sincerely,
Robert A. McConnell
Assistant Attorney General
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