News from November 16-20, 2002

Recording Industry Plaintiffs File Contempt Motion Against Madster

11/20. The plaintiff music companies in the case captioned "In Re Aimster Copyright Litigation" filed a motion titled "Plaintiffs' Motion for Order to Show Cause Re Contempt", and an memorandum in support, in the U.S. District Court (NDIll). See, motion and memorandum [16 page PDF scan].

On September 4, 2002, the District Court issued its Memorandum Opinion and Order in the consolidated Aimster copyright litigation, granting a motion for preliminary injunction filed by various record companies and music publishers against the Aimster file sharing service, which is now known as Madster.

The plaintiffs now state that the infringement by Madster "continues unabated". They ask the Court to hold Madster in contempt for violation its November 4 injunction order. They also ask for appointment of a compliance officer, and for the assessment of fines.

The memorandum in support states that "the overwhelming majority of Plaintiffs' copyrighted works identified in their Complaints still are available on the Aimster System and Service." See also, Recording Industry Association of America (RIAA) release.

See also, story titled "District Court Finds Contributory and Vicarious Infringement by Madster" in TLJ Daily E-Mail Alert No. 502, September 5, 2002; and story titled "RIAA Files Proposed Injunction Order in Aimster Case" in TLJ Daily E-Mail Alert No. 513, September 13, 2002.

People and Appointments

11/20. Afshin Mohebbi, Qwest's P/COO, will resign, effective December 31, 2002. See, Qwest release.

11/20. Avanex stated in a release that "company chairman Walter Alessandrini has been elected by the Board of Directors to the additional roles of chief executive officer and president of the company effective immediately. He succeeds Paul Engle, who had served as president and CEO since July 2001, and has resigned from the company to pursue other interests."

More News

11/20. U.S. Trade Representative (USTR) Robert Zoellick spoke with reporters in Manilla. See, transcript. He touched on the just announced agreement in substance between the U.S. and Singapore on a free trade agreement. He also discussed trade negotiations with the Philippines. He stated that "we've been working with the Philippines to strengthen intellectual property protection and enforcement, and if we can make some headway on that, that will make it easier to get into a free trade agreement." He was also asked if the Philippines would "have to be out of the IPR watchlist, even before you consider negotiating with us for an FTA?" He responded, "We haven't set any pre-conditions."

11/20. The Copyright Office published a notice in the Federal Register requesting "written comments and proposals for the scheduling of Copyright Arbitration Royalty Panel (CARP) proceedings to adjust royalty rates and terms under provisions of the Copyright Act governing ephemeral recordings and digital transmissions of performances of sound recordings, as well as notices of intent to participate in the CARP to set rates and terms under the statutory license for eligible nonsubscription services to make certain digital audio transmissions of sound recordings for the 2003-2004 period." Notices of intent to participate are due by December 23, 2002. Comments and proposals for the scheduling of the CARP proceedings are due by December 2, 2002. See, Federal Register, November 20, 2002, Vol. 67, No. 224, at Pages 70093 - 70094.

11/20. EchoStar Communications stated in a release that EchoStar and NBC "have settled their dispute over the Satellite Home Viewer Improvement Act and distant network channel transmission. That litigation, pending in Federal court in Florida, will be dismissed between EchoStar and NBC."

Boxer and Allen to Propose Legislation to Require Allocation of Unlicensed Spectrum

11/19. Sen. Barbara Boxer (D-CA) and Sen. George Allen (R-VA) have prepared a Staff Working Draft of a bill to be named the "Jumpstart Broadband Act". It would require the Federal Communications Commission (FCC) to allocate 255 megahertz of contiguous spectrum below 6 gigahertz for unlicensed use by wireless broadband devices.

The two Senators plan to introduce the bill next year.

The bill would require the FCC to promptly reallocate spectrum. It states that "Within 180 days after the date of enactment of this Act, the Commission shall allocate not less than 255 megahertz of contiguous spectrum below 6 gigahertz for unlicensed use by wireless broadband devices while ensuring that Department of Defense devices and systems are not compromised."

This bill would impose a tall task upon the FCC. 255 MHz is a large block of spectrum. Reallocating contiguous spectrum makes the task for the FCC all the more difficult. Moreover, the FCC would have to relocate incumbent users, most of whom would resist any effort to reallocate spectrum assigned to them. Usually it takes the FCC years, if not decades, to reallocate spectrum.

The bill would also require the National Telecommunication and Information Administration (NTIA) to "establish standards for interference protection" within 180 days.

Finally, the bill would require the FCC to write rules "to require that all wireless broadband devices manufactured after the effective date of those rules that operate in the spectrum ... (i) be capable of 2-way data packet communication; (ii) be designed and manufactured to maximize spectrum efficiency, to use the minimum power necessary to provide broadband service, and to minimize interference; and (iii) meet the interference protection standards ..."

That is, the bill would give the FCC authority to regulate technology standards for computers.

Sen. George Allen

Sen. Allen (at right) is a member of the Senate Commerce Committee, and its Communications Subcommittee, which will likely have jurisdiction over the bill once it is introduced in the 108th Congress. He is also Chairman of the Senate Republican High Tech Task Force (HTTF).

The two Senators also circulated a Dear Colleague letter to other members of the Senate. In it they wrote that "much of the current debate in Congress over broadband services has focused on two platforms, cable and DSL, and whether we should support competition versus deregulation of telecommunications as the best mechanism for encouraging broadband deployment. This debate has reached an unproductive stalemate and fails to consider that other technologies are available that can jump start consumer driven investment and demand in broadband services."

Sen. Barbara Boxer

Sen. Boxer (at right) is also a member of the two panels responsible for communications related legislation and oversight.

The two further stated in their letter to other Senators that "The innovations and advances in the development of unlicensed wireless, radio based networks, currently referred to as Wi-Fi offer an additional means of delivering data at high speed and also allow new business models for delivering broadband connectivity to emerge. These emerging unlicensed wireless technologies can support the transmission of data at high speeds and at low cost. This is especially compelling in rural areas where distance is so frequently the enemy of wire-line networks and the primary reason for the high cost of rural broadband deployment."

USTR Announces Agreement for FTA with Singapore

11/19. The Office of the U.S. Trade Representative (USTR) announced that the U.S. and Singapore have reached an agreement in substance on a free trade agreement (FTA).

The USTR has not released a draft of any agreement, or even a detailed summary. It did, however, issue a one page release [PDF]. It states that the agreement contains "Strong intellectual property protections, including significant improvements in the protection of intellectual property in the digital age, as well as better legal tools for enforcing intellectual property rights in Singapore", as well as "Strong anti-circumvention provisions generally, but specifically with regard to textiles trade and intellectual property rights".

This release also states that the agreement contains "Market access commitments to Singapore's telecommunications network, including network access, rights of way and access to cable landing stations at cost-based rates on non-discriminatory terms. Rights to re-sell telecom services, access to leased elements of the network, cost-based interconnection between networks, and strong disciplines on regulatory transparency also included. State-of-the art provisions on e-commerce, including national treatment and Most Favored Nation (MFN) obligations for products delivered electronically, affirmation that service disciplines cover all services delivered electronically, and permanent duty-free status of products delivered electronically."

USTR Robert Zoellick

USTR Robert Zoellick (at right) and George Yeo of the Singapore Ministry of Trade and Industry spoke about the agreement at an press conference in Singapore. See, transcript.

Zoellick said little about tech related provisions of the agreement. He stated merely that "We have special provisions dealing with electronic commerce. ... We have major advances in the area of intellectual property, and both countries put a strong premium on being economies based on intellectual property protection."

Zoellick also addressed the schedule. He stated that "in the coming weeks we will be completing the drafting of the legal text". He later added that "we need to complete the legal drafting of this agreement. I hope that will be done in a matter of weeks. So as I've been saying, I hope we can complete the document by the end of the year."

Willard Workman, of the U.S. Chamber of Commerce, stated in a release that "We are looking for the FTA to provide additional access for American companies in financial and professional services, greater protection for investment and intellectual property rights, as well as bilateral cooperation in customs and business facilitation ... Once we verify that the agreement is adequate in these priority areas, and we have confidence that it would, the Chamber will be a forceful advocate of the agreement and will lead the charge to mobilize our members to help secure Congressional passage of the FTA."

Greenspan Explains Resiliency of Financial Markets to Collapse in Telecom Sector

11/19. Federal Reserve Board Chairman Alan Greenspan gave a speech titled "International Financial Risk Management". He spoke to the Council on Foreign Relations in Washington DC. He addressed how new financial instruments, along with new computer and telecom technologies, have made it possible to transfer risks, and hence, lessen the impact on financial markets of events such as the collapse of stocks in the telecom sector.

"Financial derivatives, more generally, have grown at a phenomenal pace over the past fifteen years. Conceptual advances in pricing options and other complex financial products, along with improvements in computer and telecommunications technologies, have significantly lowered the costs of, and expanded the opportunities for, hedging risks that were not readily deflected in earlier decades", said Greenspan. "These increasingly complex financial instruments have especially contributed, particularly over the past couple of stressful years, to the development of a far more flexible, efficient, and resilient financial system than existed just a quarter century ago."

He continued that "Greater resilience has been evident in many segments of the financial markets. One prominent example is the response of financial markets to a burgeoning and then deflating telecommunications sector. Worldwide borrowing by telecommunications firms in all currencies amounted to more than the equivalent of one trillion U.S. dollars during the years 1998 to 2001. The financing of the massive expansion of fiber optic networks and heavy investments in third generation mobile phone licenses by European firms strained debt markets."

"At the time, the financing of these investments was widely seen as prudent because the telecommunication borrowers had very high valuations in equity markets, which could facilitate a stock issuance, if needed, to take down bank loans and other debt. In the event, of course, prices of telecommunication stocks collapsed, and many firms went bankrupt. In decades past, such a sequence would have been a recipe for creating severe distress in the wider financial system. However, compared with decades past, banks now have significantly more capital with which to absorb shocks, and they employ improved systems for managing credit risk. In conjunction with this improvement, both as cause and effect, banks have more tools at their disposal with which to transfer credit risk and, in so doing, to disperse credit risk more broadly through the financial system."

After reviewing some of these new instruments, he stated that "such instruments appear to have effectively spread losses from defaults by Enron, Global Crossing, Railtrack, WorldCom, Swissair, and sovereign Argentinian credits over the past year to a wider set of banks than might previously have been the case in the past, and from banks, which have largely short term leverage, to insurance firms, pension funds, or others with diffuse long term liabilities or no liabilities at all."

Senate Passes Homeland Security Bill

11/19. The Senate passed the Homeland Security Act of 2002, by a vote of 90-9. The bill creates a new Department of Homeland Security (DHS).

Democrats (plus Jeffords) cast all of the votes in opposition: Akaka, Byrd, Feingold, Hollings, Inouye, Jeffords, Kennedy, Levin, and Sarbanes. See, Roll Call No. 249.

The House passed the bill on November 13 by a vote of 299-121. See, Roll Call No. 477. However, the Senate made some minor changes. The House is likely to approve the bill as passed by the Senate, either by voice vote or unanimous consent later this week.

President Bush, who proposed creating the new Department of Homeland Security (DHS) last summer, stated that "The United States Congress has taken an historic and bold step forward to protect the American people by passing legislation to create the Department of Homeland Security. This landmark legislation, the most extensive reorganization of the Federal Government since the 1940s, will help our Nation meet the emerging threats of terrorism in the 21st Century."

Bush continued that "This bill includes the major components of my proposal -- providing for intelligence analysis and infrastructure protection, strengthening our borders, improving the use of science and technology to counter weapons of mass destruction, and creating a comprehensive response and recovery division."

Bush added, "I look forward to signing this important legislation." See, White House release.

The bill also transfers to the new DHS various government units with missions related to cyber security. It also contains various provisions relating to cyber crimes and protecting critical information infrastructures.

Judge Posner Offers an Economic Theory of Creation of Intellectual Property Rights

11/19. Richard Posner, a Judge of the U.S. Court of Appeals (7thCir), gave a lecture titled "The Political Economy of Intellectual Property Law" in Washington DC.

His address was based on a part of a book that he and economist Bill Landes are currently writing that may be titled The Economic Structure of Intellectual Property Law.

Posner (at right) argued that "intellectual property rights have greatly expanded", beginning with passage of Copyright Act of 1976. He further argued that is odd. He asserted that intellectual property rights are a form or government regulation, and that the general trend since 1976 has been towards deregulation. Hence, according to Judge Posner, intellectual property law goes against the trend.

His address focused on his theory as to why this has occurred. He resorted to a body of economic analysis know as public choice theory, with an emphasis on the role of interest groups.

Basically, he suggests that intellectual property rights (IPR) are a form of government regulation, which enables cartelization, and the resultant shoring up of prices. That is, intellectual property laws are a mechanism which enable IPR owners to extract monopoly rents.

He continued that the alternative to a system of IPR is the public domain. In a public domain one can only charge a competitive price. Hence, argues Posner, there is an asymmetry of benefits. Proponents of IPR stand to gain monopoly rents by lobbying for an expansion of IPR, while proponents of the public domain stand to gain only competitive pricing by lobbying in opposition to IPR. This means that there is a greater incentive to form pro IPR interests groups, and consequently, there will be more pro IPR interest groups, and more IPR statutes will get passed.

He concluded that "it looks as though it is much easier to organize a coalition of people who want to expand property rights, than to organize a copiers' interest group. And, on that theory, one might expect continuous inexorable political pressure for expansion of intellectual property rights."

He added that "I think there is a persisting asymmetry in, because intellectual property rights generate rents for the owners, and the public domain does not generate rents for anyone. And we see that in the absence of any serious opposition to the Sony Bono Act."

Posner elaborated this theory in some detail. "And now, economists", said Posner, "have an approach they call public choice, to try to explain the structure of government and political process, and to address specific issues, like ... why does a particular area of law or policy expand. And, the emphasis in the public choice literature has been particularly on the role of interest groups in overcoming free rider problems that bedevil efforts at political organization, just like other types of organizations."

He continued that "a person or a firm can enjoy the full benefit of a statute or regulation without paying anything for the benefits of the statute. It applies to everyone within its scope, even if you didn't contribute to the lobbying activities that brought it about. This is a problem very similar to that that plagues cartels, because a firm that does not join a cartel, remains outside, but sells at a price only slightly below what the cartel price is can actually obtain disproportionate efforts from the cartel price, without having contributed anything to the formation, the maintenance, the legal risks, or cartelization."

"So public choice theorists first identified this regulation as an actual form of cartelization, of shoring up, or enabling private cartels, and then showing, exploring the conditions that enabled this regulatory, regulatory cartelization, explaining that the more concentrated the cartelists market is, the more diffuse the people, the consumers, who are going to be adversely affected by monopoly pricing, are, is, the easier it will be for the cartelist to overcome the free rider problems. And actually, the sort of best position to be in is a, as a cartelist, is to be a member of a very small group, compact, which can obtain significant monopoly rents for -- significant relative to the incomes of the members of the cartel -- but small in the overall economy, and can diffuse these costs, which are not great, over a very large number of consumers, who do not notice that they are being mulcted for monopoly rents", said Posner.

"Well, how do you explain that at the same time that regulation was diminishing that intellectual property rights were blossoming. And it depends partly, the answer depends partly on how we want to classify intellectual property law." Posner continued, "do we want to think of intellectual property law as a form of regulation. If you think of it as a form of regulation, then we have these opposite trends bucking each other. Deregulation in transportation, communications, financial institutions, and so on, and then this opposite trend of increased regulation of the intellectual property sector, drug companies, and movies, and publishers."

"One possibility is that there is inherent asymmetry between the value that the creators of intellectual property place upon having property rights, and the value that would be copiers place on freedom to copy without having to obtain a license." He continued, "if you get an exclusive right to a piece of intellectual property, whether it is an invention or a book, or a movie, or what have. That may shower economic rents on you. But copiers can only hope to obtain a competitive return. It is a feature of intellectual property. It differs from physical property."

"Once intellectual property enters the public domain, with really minute exceptions, it is there forever. Anyone can use it. But, no one can establish rights in it. And that makes it very difficult to make a lot of money from the public domain, the sort of money that would enable the formation of a compact interest group, with a really big stake in knocking out existing copyrights or patents, and contributing to the Congressmen, and so on," said Posner.

Posner also stated that "One implication of this is that the public domain isn't really worth that much. But I don't think that is true. I think the social value of the public domain in intellectual property is great. But the private values are limited because of this impossibility of appropriating it."

Judge Posner also expressed his views on several specific statutes and categories of intellectual property. He called the Copyright Term Extension Act "absurd".

He stated that "These business method patents are kind of clogging retail commerce on the Internet. And software copyrights, in particular, apparently, impediments to software development."

He also said that "trade secrecy ... is terribly important".

Judge Posner is one of the most prominent and prolific of the members of the law and economics movement. He was appointed to the bench by former President Ronald Reagan.

He spoke at an AEI-Brookings Joint Center event. His audience included free market think tank economists, property rights advocates, intellectual property and technology lawyers, and Congressional staff. He was well received.

Judge Posner is a Judge of the U.S. Court of Appeals for the Seventh Circuit, which is based in Chicago, Illinois. The U.S. Court of Appeals for the Federal Circuit has exclusive jurisdiction over appeals in patent cases. While there is no specialized court of appeal for copyright cases, as a practical matter, most copyright cases are heard in the Second or Ninth Circuits, with the Fourth Circuit also becoming increasingly important. Hence, Judge Posner has little opportunity to inflict his views about intellectual property upon the high tech sector or other intellectual property based industries.

House Committee Holds Hearing on Lack of Computer Security at Federal Agencies

11/19. The House Government Reform Committee's Subcommittee on Government Efficiency, Financial Management and Intergovernmental Relations held a hearing titled "Computer Security in the Federal Government: How Do the Agencies Rate?" The Subcommittee used this hearing to release its third annual report [MS Word] grading executive branch agencies on their computer security efforts.

The Department of Justice (DOJ) received an F. The DOJ is responsible for, among other things, investigating and prosecuting computer crimes through its Computer Crimes and Intellectual Property Section (CCIPS).

The Department of Commerce received a D+. The DOC includes such entities as the National Institute of Standards and Technology (NIST), the U.S. Patent and Trademark Office (USPTO), and the National Telecommunications and Information Administration (NTIA).

The Subcommittee Chairman, Rep. Steve Horn (R-CA), said in his opening statement that "I am disheartened to announce that again this year, the government has earned an overall grade of F for its computer security efforts. Despite the Administration's welcomed focus on this important problem, 14 agencies scored so poorly that they earned individual grades of an F."

The Department of Transportation (DOT) received the lowest score, while the Social Security Administration received the highest score of the rated agencies.

Kenneth Mead, Inspector General of the DOT, said in his prepared testimony [MS Word] that the "DOT still has a long way to go to adequately secure its computer systems." He also pointed out that the "DOT has 561 mission critical systems that are used to perform such functions as directing air traffic, rescuing distressed ships, and distributing money to build the Nation's highway and transit systems." He asserted that "DOT is making progress addressing computer security issues."

Robert Dacey, Director of Information Security Issues at the General Accounting Office (GAO) submitted prepared testimony [36 pages in PDF] titled "Computer Security: Progress Made, But Critical Federal Operations and Assets Remain at Risk".

This testimony reports that "Although GAO's current analyses of audit and evaluation reports for the 24 major departments and agencies issued from October 2001 to October 2002 indicate some individual agency improvements, overall they continue to highlight significant information security weaknesses that place a broad array of federal operations and assets at risk of fraud, misuse, and disruption."

This testimony also addresses problems at the DOJ. It states that "In April 2002, the IG for the Department of Justice reported serious deficiencies in controls for five sensitive but unclassified systems that support critical departmental functions, such as tracking prisoners; collecting, processing, and disseminating unclassified intelligence information; and providing secure information technology facilities, computing platforms, and support facilities. The most significant of these deficiencies concerned the technical controls that help prevent unauthorized access to system resources. Because of the repetitive nature of the security deficiencies and concerns identified, the IG recommended that a central office responsible for system security be established to identify trends and enforce uniform standards. The IG also included other specific recommendations intended to improve departmentwide computer security for both classified and sensitive but unclassified systems."

Rep. Horn is retiring. He did not seek re-election this year.

People and Appointments

11/19. The Senate confirmed Dennis Shedd to be a Judge of the U.S. Court of Appeals for the Fourth Circuit by a vote of 55-44. He is currently a Judge of the U.S. District Court. It was an almost strait party line vote, with several Southern Democrats and others crossing over to vote for confirmation: Byrd (WV), Graham (FL), Hollings (SC), Inouye (HI), Lincoln (AR), Miller (GA), and Nelson (NE). See, Roll Call No. 250.

11/19. President Bush announced his intent to nominate Ellen Weintraub to be a Democratic member of the Federal Election Commission (FEC) for the remainder of a six year term expiring April 30, 2007. She will replace Commissioner Karl Sandstrom. She is an attorney in the Washington DC office of the law firm of Perkins Coie. She focuses on representing Democrats in election law matters. From 1990 through 1996 she worked for the House Committee on Standards of Official Conduct. She has the support of both Senate sponsors of the recently enacted campaign finance bill, Sen. John McCain (R-AZ) and Sen. Russ Feingold (D-WI). Her husband works for Sen. Feingold. See, White House release.

11/19. James DeLong will join the Progress & Freedom Foundation (PFF) as a full time Senior Fellow and Director of the PFF's new Center for the Study of Digital Property, effective December 1, 2002. He currently works at the Competitive Enterprise Institute. See, PFF release.

More News

11/19. The U.S. Court of Appeals (9thCir) issued its opinion [PDF] in Jebian v. Hewlett Packard, a challenge to an ERISA plan's denial of benefits to a software engineer with back problems who was formerly employed by Hewlett Packard.

11/19. The Federal Election Commission (FEC) fined the Sony Pictures Entertainment Inc. Political Action Committee $900 for not filing a December Monthly 2001 report. See, FEC release.

11/19. November 18 was the published deadline to submit comments to the President's Critical Infrastructure Protection Board (PCIPB) regarding the document titled "National Strategy to Secure Cyberspace", which was released on September 18. See, original notice in the Federal Register. However, on November 19, the PCIPB published a supplemental notice in the Federal Register stating that, notwithstanding its previously announced deadline of September 18, it requests ongoing public comments. See, Federal Register, November 19, 2002, Vol. 67, No. 223, at Pages 69741 - 69742. For more information, contact Tommy Cabe at 202 456-5420.

11/19. Rep. John Conyers (D-MI) introduced HR 5760, a bill to create a commission on Internet gambling licensing and regulation. It was referred to the House Judiciary Committee and the House Commerce Committee.

8thCir Holds 4thAm Does Not Require Presence of Officer at ISP Searches

11/18. The U.S. Court of Appeals (8thCir) issued its opinion [PDF] in USA v. Bach, holding that a search of an Internet service provider's electronic mail records, by the ISP's employees, pursuant to a state subpoena, without the presence of a law enforcement officer, is not unreasonable under the Fourth Amendment. The Court of Appeals reversed the District Court's holding that seizure of e-mails by Yahoo personnel from Yahoo's servers violated 18 U.S.C. § 3105 and Minnesota statutes, and thus the Fourth Amendment.

Background. This is a criminal case in which Dale Bach was prosecuted in federal court for violation of various child pormography statutes. However, the subject of the appeal is the procedure used for obtaining evidence from an ISP, Yahoo.

The mother of a minor reported to the city police in St. Paul, Minnesota that an anonymous person had improper communications with her son in a Yahoo chat room. The city police investigated, and ultimately obtained a warrant issued by the state of Minnesota for the search of Yahoo e-mail records. Yahoo is located in the state of California. The warrant, and its method of service (fascimile) and execution (by Yahoo employees) complied with California law. Yahoo searched its records, and provided responsive records to the police.

District Court. Later, Bach was indicted by a federal grand jury. The evidence against him included material obtained from Yahoo. Bach moved to suppress evidence on the grounds that since a police officer was not present for the execution of the warrant it violated his Fourth Amendment right to be free from unreasonable searches and seizures.

The District Court agreed. It held that 18 U.S.C. § 3105 and sections 626.13 and 626A.06 of the Minnesota Statutes, which require officer presenc, codify the Fourth Amendment. The prosecution appealed.

Appeals Court Holding. The Appeals Court reversed the District Court. It wrote that "The Fourth Amendment does not explicitly require official presence during a warrant's execution, therefore it is not an automatic violation if no officer is present during a search."

The Court continued that the "The Fourth Amendment is governed by a ``reasonableness´´ standard. ... This standard is flexible and should not be read to mandate rigid rules that ignore countervailing law enforcement interests. ... Official presence should simply be one of many factors considered in determining the reasonableness of the execution of a search warrant. ... Other relevant factors are the scope of the warrant, the behavior of the searching agents, the conditions where the search was conducted, and the nature of the evidence being sought." (Citations omitted.)

The Court provided this analysis: "We consider several factors in this case to determine whether the search and seizure of Bach's e-mail from Yahoo!'s server by Yahoo! technicians violated Bach's Fourth Amendment rights, including the fact that no warrant was physically ``served,´´ no persons or premises were searched in the traditional sense, and there was no confrontation between Yahoo! technicians and Bach. ... Other factors crucial to our decision include: (1) the actual physical presence of an officer would not have aided the search (in fact may have hindered it); (2) the technical expertise of Yahoo!'s technicians far outweighs that of the officers; (3) the items ``seized´´ were located on Yahoo!'s property; (4) there was a warrant signed by a judge authorizing the search; and (5) the officers complied with the provisions of the Electronic Communications Privacy Act, 18 U.S.C. § 2701. All of these factors weigh in favor of the government and we therefore find that the search was constitutional under the Fourth Amendment's reasonableness standard."

Expectation of Privacy. The Court ducked the issue of whether there is an expectation of privacy in stored e-mail communications. That is, there can only be a Fourth Amendment search and seizure violation if there is an legitimate expectation of privacy. There is an issue here because the e-mails at issue were not in Bach' possession. Rather, he had entrusted them to a third party -- Yahoo.

The Court wrote that "we first note that in order to find a violation of the Fourth Amendment, there must be a legitimate expectation of privacy in the area searched and the items seized. Smith v. Maryland, 442 U.S. 735, 740 (1979). If there is no legitimate expectation of privacy, then there can be no Fourth Amendment violation. Id. While it is clear to this court that Congress intended to create a statutory expectation of privacy in e-mail files, it is less clear that an analogous expectation of privacy derives from the Constitution. Even though ordinarily we would need to determine whether there is a constitutional expectation of privacy in e-mail files in order to proceed, we decline to decide this issue because even if there is such an expectation, we find on other grounds that this particular search did not violate Bach's Fourth Amendment rights."

Recent Legislation. The Congress has just amended federal statutes regarding federal procedure for service and execution of search warrants.

The House passed HR 2215, the 21st Century Department of Justice Appropriation Authorization Act, by a vote of 400-4 on September 26. See, Roll Call No. 422. The Senate passed this bill on October 3. The President signed it on November 2. The bill does far more than authorize appropriations for the Department of Justice (DOJ). It is also the vehicle for passage of numerous other tech related items.

Under current law, 18 U.S.C. § 3105 covers persons authorized to serve search warrants. It specifies "an officer authorized by law". Section 11010 of HR 2215 would add a new subsection to 18 U.S.C. § 2703. This section is a part of Title 121, which pertains to "Stored Wire and Electronic Communications and Transactional Records Access". This title was revised last year by the USA PATRIOT Act.

The new subsection 2703(g) provides, in full, that "(g) PRESENCE OF OFFICER NOT REQUIRED. -- Notwithstanding section 3105 of this title, the presence of an officer shall not be required for service or execution of a search warrant issued in accordance with this chapter requiring disclosure by a provider of electronic communications service or remote computing service of the contents of communications or records or other information pertaining to a subscriber to or customer of such service."

Thus, federal law enforcement authorities will be able to serve search warrants on ISPs by fax, without having to travel in person around the country, and then allow the ISP personnel to perform the searches. Likewise, ISPs will be more able to keep law enforcement officers off of their premises.

Similar language had also been in HR 3482, the Cyber Security Enhancement Act, sponsored by Rep. Lamar Smith (R-TX). This bill passed the House last summer. But then, it did not initially move in the Senate. However, Sen. Orrin Hatch (R-UT) was successful in having much of its content inserted into HR 5710, the bill creating a new Department of Homeland Security, earlier this month. But, this section of HR 5710 does not include language regarding officer presence at service and execution of warrants. It did not have to; the provision was already passed in the DOJ authorization bill.

See, for example, HR 3482 as adopted by the House Judiciary Committee on May 8, 2002. It stated that "Section 3105 of title 18, United States Code, is amended by adding at the end the following: ``The presence of an officer is not required for service or execution of a warrant under section 2703 when the provider of electronic communications service or remote computing service produces the information required in the warrant.´´"

FISA Appeals Court Reverses FISA Lower Court

11/18. The Foreign Intelligence Surveillance Court of Review (no website) issued an opinion [56 pages in PDF, redacted] in the proceeding titled "In re: Sealed Case No. 02-001 Consolidated with 02-002" reversing the Foreign Intelligence Surveillance Court ruling of May 17 imposing restrictions upon the federal government's FISA surveillance.

This case involves the Foreign Intelligence Surveillance Act (FISA) and the specialized courts that it created, the Foreign Intelligence Surveillance Court (FISC) and the Foreign Intelligence Surveillance Court of Review (FISCOR). The case is the first ever for the FISCOR.

The FISA is codified at 50 U.S.C. §§ 1801-1862. It sets out rules for the collection of information categorized as foreign intelligence surveillance. It is a regime distinct from the "Title III" regime for the issuance of warrants in criminal proceedings.

The FISA was enacted in 1978, and has been amended several times since, most recently by the USA PATRIOT Act passed in late 2001.

Pursuant to the FISA, the government applied to the FISC for a surveillance order for a United States person who the government contends is aiding, abetting, or conspiring with others in international terrorism. The FISC granted the order on May 17, but also imposed restrictions upon the government, which are the subject of the present appeal. See, Memorandum Opinion of May 17 of the FISC.

The FISC wrote in May that "law enforcement officials shall not make recommendations to intelligence officials concerning the initiation, operation, continuation or expansion of FISA searches or surveillances. Additionally, the FBI and the Criminal Division [of the Department of Justice] shall ensure that law enforcement officials do not direct or control the use of the FISA procedures to enhance criminal prosecution, and that advice intended to preserve the option of a criminal prosecution does not inadvertently result in the Criminal Division’s directing or controlling the investigation using FISA searches and surveillances toward law enforcement objectives."

The FISCOR's opinion of November 18 further characterizes the FISC's May ruling: "To ensure the Justice Department followed these strictures the court also fashioned what the government refers to as a ``chaperone requirement´´; that a unit of the Justice Department, the Office of Intelligence Policy and Review (OIPR) (composed of 31 lawyers and 25 support staff), ``be invited´´ to all meetings between the FBI and the Criminal Division involving consultations for the purpose of coordinating efforts ``to investigate or protect against foreign attack or other grave hostile acts, sabotage, international terrorism, or clandestine intelligence activities by foreign powers or their agents.´´ If representatives of OIPR are unable to attend such meetings, ``OIPR shall be apprized of the substance of the meetings forthwith in writing so that the Court may be notified at the earliest opportunity.´´"

The FISCOR wrote that the FISC "apparently believes it can approve applications for electronic surveillance only if the government’s objective is not primarily directed toward criminal prosecution of the foreign agents for their foreign intelligence activity. But the court neither refers to any FISA language supporting that view, nor does it reference the Patriot Act amendments, which the government contends specifically altered FISA to make clear that an application could be obtained even if criminal prosecution is the primary counter mechanism."

The FISCOR reversed the FISC's orders to the extent that they imposed conditions upon the government, and remanded the matter to the FISC.

John AshcroftAttorney General John Ashcroft gave a speech in which he praised the FISCOR opinion. He stated that "the court issued an opinion that affirmed President Bush's and Congress's call for greater cooperation and coordination in the war on terror. In intelligence, in counter intelligence, and counter terrorism investigations, the court's ruling confirmed the Department of Justice's legal authority to integrate fully the functions of law enforcement and intelligence."

He added that it "revolutionizes our ability to investigate terrorists and prosecute terrorist acts. The decision allows the Department of Justice to free immediately our agents and prosecutors in the field to work together more closely and cooperatively in achieving our core mission, the mission of preventing terrorist attacks."

This was not an adversarial proceeding. The target of the surveillance was not a party to the proceeding. Moreover, since the government, which is the only party, prevailed before the FISCOR, the prospects for an appeal to the Supreme Court are slim.

The FISCOR did, however, receive and reference two amicus curiae briefs that urged affirmance of the FISC. See, amicus brief [PDF] of the Electronic Privacy Information Center (EPIC) and other groups, and amicus brief [PDF] of National Association of Criminal Defense Lawyers (NACDL).

The FISC is comprised of seven District Court judges appointed by the Chief Justice of the United States. The FISCOR was comprised of three Appeals Court judges on senior status, Ralph Guy (6thCir), Laurence Silberman (DCCir), and Edward Leavy (9thCir).

SBC Offers UNE Proposal to FCC

11/18. SBC Communications representatives met with Federal Communications Commission (FCC) officials to propose the "Establishment of a two year transitional wholesale offering for serving residential customers that is functionally equivalent to the UNE-P at a rate of $26 per month. CLECs could migrate new residential customers under this wholesale offering during the transition period for a non-recurring charge of $10.00. Existing UNE-P customers migrated to $26 rate over twelve months." See, notice of ex parte communication [PDF].

SBC further stated that "Upon the effective date of the Triennial Review Order, ILECs would no longer be required to provide UNE-P to serve business customers. Resale, as well as facilities based competition utilizing unbundled loops, would remain available. Parties would remain free to negotiate business to business facilities leasing arrangements."

SBC President William Daley stated in a release that "We have offered to the Commission a reasonable framework that will help bring certainty back into the market, establishes a healthy model for sustainable competition and which promotes investment in the nation's telecom infrastructure."

CompTel opposed the proposal. It stated in a release that "SBC's UNE transition proposal should be rejected by policymakers. It is a clear attempt by SBC to remonopolize the local phone market. SBC's proposal would lead to higher prices for consumers and pre-empt state regulatory authority to determine the appropriate price competitors must pay to access key parts of the public network."

The Consumer Federation of America stated in a release that "This price is nearly double the price set in many states like New York and Illinois where real local phone competition is just beginning to flourish. In the 1996 Telecommunications Act, Congress recognized that state regulators are best positioned to determine local market conditions and to set network availability and pricing. The FCC should not usurp state regulator's authority just as consumers are beginning to see the benefits of local phone competition."

People and Appointments

11/18. BT named Matthew Bross to be its Chief Technology Officer. He previously worked for Williams Communications. See, BT release.

11/18. Charles Wang announced his retirement as Chairman and as a member of the Board of Directors of Computer Associates International, effective immediately. The Board elected P/CEO Sanjay Kumar to succeed Wang as Chairman. See, CAI release.

More News

11/18. A collection of groups wrote a letter to Congressional leaders urging that the Congress "adopt an amendment to the pending Homeland Security Act that would stop further development of a Defense Advanced Research Projects Agency (DARPA) system called ``Total Information Awareness´´ (TIA)." The letter was signed by representatives of the Electronic Privacy Information Center (EPIC), Free Congress Foundation, American Library Association (ALA), People For the American Way (PFAW), Competitive Enterprise Institute, American Civil Liberties Union (ACLU), and other groups.

11/18. The U.S. Court of Appeals (7thCir) issued its opinion [PDF] in AM General Corporation v. Daimler Chrysler, a trademark infringement and dilution case involving the front grilles on SUVs.

Go to News from November 11-15, 2002.