E-Commerce Law Week, Issue 445

Warrantless Wiretapping Winds Down, But Litigation Lingers

Despite Attorney General Alberto Gonzales' announcement in January that the President would not reauthorize the Terrorist Surveillance Program (TSP) -- which involves the National Security Agency's warrantless interception of certain international telephone and Internet communications to or from the United States -- legal challenges to that Program continue.  Questions about the TSP are currently being litigated in the Sixth and Ninth Circuits.  At the same time, the Judicial Panel on Multidistrict Litigation ("Judicial Panel") transferred six additional cases – all stemming from actions by state regulatory agencies against the telecoms that allegedly cooperated with the NSA – to the Northern District of California, where they join Judge Vaughn R. Walker's already hefty docket of TSP-related litigation.  Meanwhile, Judge Walker granted a limited stay of discovery while the Ninth Circuit reviews his denial of motions to dismiss a challenge to the TSP, but said he might require responses to "limited and targeted" questions by the plaintiffs.  He also permitted several media entities to intervene in the consolidated cases, but did not grant their request to unseal documents.  In addition, Congress is still planning to investigate the TSP even though all domestic surveillance is now supposed to be reviewed by the Foreign Intelligence Surveillance Court.  So despite the apparent demise of the TSP, the government's surveillance activities -- and the alleged involvement of several telecoms -- remain very much under the microscope.

SEC Takes on Hackers

Data breach investigations used to be the sole province of the FBI and Secret Service, which focus on identifying and arresting those who crack into computers.  Then the Federal Trade Commission came along and decided to take a hard look at the security practices of companies that are the victims of hacking and other data breaches.  Recently, a (nother) new sheriff has ridden into town -- the Securities and Exchange Commission.  On February 26, the SEC filed a civil complaint in the U.S. District Court for the Southern District of New York against Blue Bottle Limited, a Hong Kong-chartered firm purportedly based in London, and Matthew Stokes, the firm's owner and CEO, alleging that Blue Bottle had improperly gained access to material non-public information about a variety of companies and then engaged in options trading and long- and short-equities trading based on that information, in violation of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act.  Although the SEC seems to be focusing on the bad guys, given its obligation to enforce the Gramm-Leach-Bliley Act and implementing regulations that require brokers, dealers, and investment companies and advisors to safeguard customer information, the SEC's new interest in computer hacking could portend closer scrutiny of regulated companies' security practices as well.

That Email You Just Forwarded May be Copyrighted

One of the blessings -- and curses -- of email is how easy it is to forward information you receive to someone else you think might be interested in it.  But did you ever stop to consider that the act of forwarding that email might constitute copyright infringement?  According to a recent ruling by a British court, it just might.  The England and Wales High Court held that a short business letter between executives of affiliated companies was "an original literary work" protected by copyright, and that when a person in a commercial dispute with the companies got hold of that letter and circulated it, he committed copyright infringement.  While the letter in question was of the "snail mail" variety, the court's reasoning would appear to apply to email as well.  The ruling comes just days after a U.S. court ruled that sharing a single-user subscription to an online database could impinge upon the database owner's copyright (and violate U.S. computer crime and privacy laws).  Together, these decisions suggest that people may want to exercise caution before forwarding confidential emails or sharing access to a restricted web site.

FCC Gives VoIP A Spoonful of Sugar to Help the Telephony Medicine Go Down

On March 1, the Federal Communications Commission continued its program of incrementally extending traditional telephone regulation to Voice over Internet Protocol (VoIP) services by granting Time Warner Cable’s 2006 request for a declaratory ruling that its wholesale carrier partners have the right to interconnect and exchange traffic with incumbent local exchange carriers (LECs) under section 251 of the Communications Act of 1934 (as amended).  But even as it affirmed the rights of VoIP providers' wholesale carrier partners to interconnect with incumbent LECs, the FCC imposed conditions requiring VoIP number portability and addressing the so-called "phantom traffic" problem.  And, while the FCC's regulatory objectives may be laudable, it is at least open to question whether the FCC can impose conditions on statutory interconnection rights that are not found in the statute itself (at least without a full-fledged rulemaking).  More broadly, the FCC's latest action suggests again that the freewheeling days of the VoIP industry are numbered.  By hook or by crook, the current FCC will find ways to extend more and more of the traditional telephone regulatory regime to VoIP.  VoIP providers should plan accordingly.

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