E-Commerce Law Week, Issue 415

Antigua, Barbuda, Think DoJ Can't Reach 'Ya?
When the Beach Boys sang about the joys of life in the Caribbean, they probably didn't have Internet gambling in mind. Even if they did, the joy would have faded in the last several weeks after the Department of Justice indicted offshore gambling giant BETonSPORTS PLC, its CEO David Carruthers, and other associated companies and individuals. DoJ's aggressive moves have made it clear that the feds believe offshore gambling operations that take bets from U.S. gamblers by phone or Internet violate U.S. law. Thus far, BETonSPORTS has complied with DoJ's demands by shutting down its gambling site. It also sacked Carruthers and suspended trading of its stock on the London Stock Exchange. But the countries that shelter these highly profitable enterprises -- many of which are located in the Caribbean -- are unlikely to give up access to U.S. markets without a fight, as evidenced by Antigua and Barbuda's recent renewal of its complaint to the World Trade Organization. Interestingly, the island nation's action before the WTO came ten days before DoJ unsealed its indictment of BETonSPORTS. It will be interesting to see if the United Kingdom -- where BETonSPORTS PLC is headquartered and where online gambling was legalized last year  -- enters the fray in support of a thriving domestic industry.

Chicago Court Bars Datamining Suit Against AT&T, But Leaves Door Slightly Ajar
On July 25, the U.S. District Court for the Northern District of Illinois dismissed, on the ground of "state secrets," a putative class action against AT&T over its alleged cooperation with the National Security Agency in a program to collect and datamine "massive numbers" of domestic phone records. The ruling came on the heels of a decision in a similar case, Hepting v. AT&T, denying the government's motion to dismiss a suit over warrantless wiretapping. The key difference in the two cases was that the government has publicly acknowledged the wiretapping program, which involves monitoring the content of communications, but has not commented on the alleged program involving non-content phone records. If other courts follow this logic, it will likely cause the government to refuse to discuss its intelligence activities altogether, lest it lose its ability to assert the state secrets privilege.

Pen Register Order Deemed Insufficient to Obtain Dialed Digit Extraction or Cell Phone Location
On July 19, a U.S. Magistrate Judge in the Southern District of Texas ruled that law enforcement must show probable cause and obtain a Title III wiretap order before obtaining access to "post-cut-through dialed digits" -- i.e., the digits that a caller might dial after his initial call is connected -- on the basis that such digits often represent call content that cannot be obtained under a pen register order. In doing so, the Magistrate resolved for the first time an issue that had been left open by both the D.C. Circuit and the Federal Communications Commission when the latter decided that the Communications Assistance for Law Enforcement Act (CALEA) required carriers to have such "dialed digit extraction" capability. The Judge also joined a majority of courts that have rejected the Justice Department's attempt to use pen register orders to obtain cell phone location information.

Groups Petition for Rehearing En Banc of DC Circuit's CALEA Ruling
Several civil liberties groups are asking the full U.S. Court of Appeals for the D.C. Circuit to rehear their challenge of the FCC's Order extending CALEA to broadband Internet access providers and "interconnected" Voice over Internet Protocol providers. CALEA requires that "telecommunications carriers" ensure that their networks are capable of being accessed by law enforcement for surveillance purposes, but excludes "information services" from its coverage. The groups' petition for review of the FCC's order was denied by a three-judge panel of the D.C Circuit in June. Given the composition of the full D.C. Circuit, the petitioners have a steep uphill battle. But since they have both the plain language of the statute and clear legislative history on their side, rehearing is not out of the question.

Financial Industry Regulators  Raise Identity Theft "Red Flags," Request Comments
On July 18, the Federal Trade Commission and five other financial industry regulators released a proposed rule concerning "identity theft 'red flags' and address discrepancies." The rule is required by the Fair and Accurate Credit Transactions Act of 2003 (FACTA), which directed the agencies to work together to draw up guidelines for financial institutions and creditors "that identify patterns, practices, and specific forms of activity that indicate a possible risk of identity theft." In an attempt to ensure that consumer financial data is better protected, the proposed rule would establish "red flag" regulations "requiring each financial institution and creditor to implement a written Identity Theft Prevention Program" (Program). The rule would also establish specific "red flag" guidelines that identify patterns, practices, and activities that indicate a risk of identity theft. Institutions must determine which specific flags are relevant to them, and supplement them with other "flags" based on their own experience and risk evaluation or derived from later supervisory guidance. Comments are due on the proposed rule by September 18.

Music Industry Expands UK File Sharing Battle to ISPs
The music industry has taken a further tactical step in its increasingly successful war against unauthorized online distribution of copyrighted music, by initiating an expansion of the UK front from skirmishes against individual file sharers to bigger battles against Internet service providers (ISPs). Until a few weeks ago, the British Phonographic Industry (BPI) -- the United Kingdom equivalent of the Recording Industry Association of America -- had pursued litigation directly against individuals engaged in file sharing. But early last month, BPI reportedly wrote to UK ISPs Tiscali and Cable & Wireless, asking them to shut down 59 accounts belonging to individuals allegedly engaging in illegal filesharing. Reportedly, at least Tiscali has responded that it will not shut down the accounts without providing the account holders an opportunity to defend their actions. It is not clear how firm the ground is for ISPs who give such a response. The EU Electronic Commerce Directive and the UK law that implements it make clear that an ISP is not liable for hosting infringing content if it has no knowledge of the infringement. But depending on the evidence of infringement presented by the BPI, that safe harbor could dry up.

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