E-Commerce Law Week, Issue 407

ISPs Dodge a Discovery Bullet, While Bloggers Pat Themselves on the Back
Internet Service Providers can breathe a sigh of relief as a result of a California appellate court ruling in a discovery dispute involving Apple Computer. In a decision filed May 26, the California Sixth Appellate District Court ruled that Apple's subpoena of email service providers for email records (in a case concerning alleged misappropriation of trade secrets) was unenforceable under the federal Stored Communications Act, 18 USC § 2701 et seq. Had this decision gone the other way, ISPs could have been flooded with discovery requests from parties in civil suits. The court also ruled that two websites devoted to Apple-related information were protected from having to disclose their sources under both California's "reporters' shield" laws and a conditional privilege emanating from the state and federal Constitutions. While bloggers will rejoice over being accorded the privileges (and immunities) of traditional reporters, hardware and software manufacturers (some of whom sided with Apple) will worry about how to identify employees who leak trade secrets. Since this case could go to the state Supreme Court next, it bears watching closely.

NSA Datamining and Warrantless Surveillance -- The Action Continues
The past few weeks have seen a flood of new developments regarding the recent allegations that three telecommunications carriers provided the National Security Agency with non-content call records of millions of customers for datamining purposes, and also regarding the NSA's warrantless wiretapping program. On May 22, journalist and author Studs Terkel -- along with five other "prominent social and political leaders" and the American Civil Liberties Union -- filed a lawsuit in Chicago against AT&T, on behalf of the class of Illinois residents that are either AT&T phone service customers or subscribers to its remote computing or electronic services. The lawsuit seeks declaratory and injunctive relief "to remedy the systematic release" by AT&T to the NSA of "protected information about the domestic telephone calls of many millions of AT&T customers in Illinois," in alleged violation of the Electronic Communications Privacy Act. On May 26, former Rep. Tom Campbell (R-CA) and a host of others joined the ACLU in filing two suits in California state courts -- one against Verizon, and the other against AT&T. The California suits claim that the companies violated plaintiffs' right to privacy under the California State Constitution and California Public Utilities Code. Meanwhile, the ACLU announced on May 24 that its affiliates in 20 states had filed complaints with Public Utility Commissions or sent letters to state Attorneys General and other officials demanding investigations into whether local telecommunications companies allowed the NSA to spy on their customers. And this week, the ACLU urged the FCC not to permit AT&T's proposed merger with BellSouth without investigating the companies' alleged involvement in the datamining program, despite the Commission's initial refusal to investigate the allegations because of the classified nature of the program.

Appeals Court Leaves Constitutionality of NSLs Undecided
If your company were served with a burdensome or legally troubling National Security Letter, could you successfully object on constitutional grounds? Given that the government issued over 9,000 NSLs last year, according to a Justice Department report, the question is far from academic.  ISPs, banks, credit card companies, and telecommunications companies are all likely recipients of these administrative subpoenas, whose scope was dramatically expanded by the USA PATRIOT Act. Over the past two years, federal judges in two cases -- one in the Southern District of New York (SDNY) and the other in Connecticut -- found that the NSL's gag order provision violates the First Amendment. The judge in New York also ruled that the FBI's implementation of NSLs violated the Fourth Amendment's prohibition against unreasonable searches and seizures. The government appealed the rulings in both cases, and on May 23 the U.S. Court of Appeals for the Second Circuit issued a per curiam decision on the consolidated appeal, vacating and remanding the decision in the New York case and dismissing the government's appeal in the Connecticut case. The court's action leaves alive the First Amendment challenges to NSL gag orders, to be addressed by the SDNY on remand. But it disposes of the Fourth Amendment challenge to NSLs for now.  So while the playing field has changed a bit, the game is far from over on NSLs.

European Court Decision Means Severe Turbulence for US-EU Airline Passenger Data Deal
A decision late last month by the European Court of Justice has invalidated a 2004 US-EU deal on transfer of passenger name record (PNR) data on European airline passengers to the US Bureau of Customs and Border Protection. This decision will require difficult negotiations over the coming months in order to avoid a direct conflict between US and EU law, which would leave airlines between a severe thunderstorm and a hard place. Though the decision is based on a technical issue of EU law, the matter is just one more iteration of the potential for conflict between US law enforcement and security requirements, on the one hand, and European data protection and privacy rules, on the other. It is only a few months since the last significant flare-up over conflicting US and EU law on data protection -- involving anonymous whistleblower hotlines required by the Sarbanes-Oxley Act. Although that issue has moved fairly quickly toward amicable resolution, prospects for easy resolution of the PNR data issue are more remote. And another issue sure to loom large for companies, particularly communications providers and possibly financial institutions, is the conflict between US law enforcement and intelligence demands for information stored in Europe, on the one hand, and European privacy rules that restrict access to such information, on the other. With US agencies' appetite for information growing by the day, and multinational companies storing information about customers in different countries, such conflicts-of-law could put companies in a difficult bind. How the US and EU resolve the PNR issue could signal how they are likely to resolve future conflicts involving US demands for information from individual companies.

Steptoe & Johnson LLP and IP Law and Business Magazine Continue Teleconference Series
On June 22, 2006, from 1:00 pm until 2:00 pm EDT, Steptoe partner, Scott Doyle, will discuss when and why a company should perform Competitive Patent Intelligence to navigate through the briar patch of murky IP conditions many companies now face. A "CPI" conceptualizes the patent landscape by drawing upon an analogy to real estate: identifying the valuable land and danger zones where third parties may have blocking patents, determining unclaimed valuable land for patent mining, suggesting barriers and design-arounds as protection strategies for mitigating threats, determining relative value of patented technology, and locating the public land of prior art.

The teleconference is toll-free, and there is no charge to participate. For additional information, please email Alycia Polley or contact her by phone at 202.457.5436.

Questions and comments about E-Commerce Law Week are always welcome. Please send your feedback to Sally Albertazzie.