Source: http://www.techlawjournal.com/alert/2006/05/31.asp
Timestamp: 2019-04-20 08:38:06+00:00

Document:
TLJ Daily E-Mail Alert No. 1,381, May 31, 2006.
May 31, 2006, Alert No. 1,381.
5/30. The Supreme Court denied certiorari in Yahoo v. La Ligue. See, Order List [8 pages in PDF] at page 2. This is a case regarding whether Yahoo can obtain from the U.S. District Court a declaratory judgment that a French court order censoring internet speech on Yahoo's servers in the U.S. violates the First Amendment.
The en banc panel of the Court of Appeals issued a short, two paragraph, per curiam opinion that, like the three judge panel, reversed the District Court's judgment in favor of Yahoo. Judges also wrote several opinions [99 pages in PDF]. This disposition was a defeat for internet service providers, internet speakers, and freedom of speech online.
This petition for writ of certiorari was filed, not by Yahoo, but by La Ligue, one of the French entities that originally sought censorship. Yahoo filed no opposition. See, Supreme Court docket.
story titled "9th Circuit En Banc Panel Rules Against Yahoo in French Internet Censorship Case" in TLJ Daily E-Mail Alert No. 1,289, January 13, 2006.
story titled "9th Circuit Grants Rehearing En Banc in Yahoo v. LICRA" in TLJ Daily E-Mail Alert No. 1,075, January 11, 2005.
story titled "9th Circuit Reverses in Yahoo v. LICRA" in TLJ Daily E-Mail Alert No. 965, August 24, 2004.
story titled "NDCal: French Court Order Restricting Internet Speech is Unenforceable in U.S." in TLJ Daily E-Mail Alert No. 305, November 9, 2001.
story titled "U.S. Has Jurisdiction over French Defendants in Yahoo v. LICRA" in TLJ Daily E-Mail Alert No. 205, June 11, 2001.
This case is Yahoo, Inc. v. La Ligue Contre La Racisme et L'Antisemitisme and L'Union Des Etudiants Juifs de France, Sup. Ct. No. 05-1302, a petition for writ of certiorari to the U.S. Court of Appeals for the 9th Circuit. The Court of Appeals number is No. 01-17424. It heard an appeal from the U.S. District Court for the Northern District of California, D.C. No. CV-00-21275-JF.
5/26. The Court of Appeal of the State of California, Sixth Judicial District, issued it opinion [69 pages in PDF] in O'Grady v. Superior Court, issuing a writ of mandate directing the Superior Court to grant O'Grady's motion for a protective order in Apple's suit to obtain the identities of his confidential sources.
Jason O'Grady published in his news web site about Apple information about a forthcoming Apple product. Apple sought to use the discovery process in a civil John Doe action to compel O'Grady to disclose his sources. The Superior Court denied O'Grady's motion for a protective order. Apple and other tech companies argued that the importance of protecting trade secrets, particularly at tech companies, and especially in light of the threats to trade secrets posed by e-mail and web sites, warrants allowing this sort of discovery. O'Grady and others advanced arguments related to freedom of speech online.
The Court of Appeal held that the Stored Communications Act's (SCA) ban on the disclosure by service providers of stored e-mail contains no implied exception for disclosure pursuant to civil subpoenas. The Court of Appeal also held that the California reporters' shield law, which protects any "publisher, editor, reporter, or other person connected with or employed upon a newspaper, magazine, or other periodical publication", applies to Jason O'Grady and his web site. The Court of Appeal also held that the discovery sought by Apple is barred by the conditional federal and state constitutional privilege against compulsory disclosure of confidential sources.
That is, O'Grady and the freedom of speech proponents prevailed over the trade secrets proponents. O'Grady gets his protective order. Apple does not get the records that would reveal O'Grady's sources. However, the Court of Appeal is an intermediate court of appeal. Apple may appeal to the Supreme Court of California.
Background. Jason O'Grady publishes a web site that contains news about Apple products. On November 19, 2004, he published a story about a forthcoming audio recording device to be sold by Apple. He published three further stories that provided more detail, including a drawing, likely prices, and a likely release date.
Apple wrote to O'Grady on December 8. The Court of Appeal opinion provides this quote: "The information in these posts and accompanying comments constitutes trade secrets that you have published without Apple[’]s authorization. ... It appears that you may be engaged in a practice of soliciting and disseminating such trade secrets. Apple also demands that you provide all information available to you regarding the sources for the posting and comments identified above. ..."
Trial Court. On December 13, 2004, Apple filed a complaint in Superior Court in Santa Clara County, California, against numerous unnamed defendants identified only as "John Doe" alleging misappropriation of trade secrets under California state law. O'Grady is not a defendant.
Apple applied to the Superior Court for the issuance of subpoenas for document. It sought from O'Grady, other publishers, and e-mail service providers, records regarding the sources of information for the news stories about Apple.
O'Grady and others filed a motion for a protective order. The Superior Court denied the motion for a protective order, on the ground that the publishers had involved themselves in the unlawful misappropriation of a trade secret.
Court of Appeal. O'Grady and others then filed with the Court of Appeal a petition for writ of mandate or prohibition to compel the trial court to set aside its denial of the motion for protective order. The Court of Appeal granted the petition, and directed the Superior Court to grant the motion for a protective order.
The Court of Appeal held that "(1) the subpoena to the email service provider cannot be enforced consistent with the plain terms of the federal Stored Communications Act (18 U.S.C. §§ 2701-2712); (2) any subpoenas seeking unpublished information from petitioners would be unenforceable through contempt proceedings in light of the California reporter’s shield (Cal. Const., art. I, § 2, subd (b); Evid. Code, § 1070); and (3) discovery of petitioners’ sources is also barred on this record by the conditional constitutional privilege against compulsory disclosure of confidential sources ..."
Stored Communications Act. The Court of Appeal first addressed the issues raised by the SCA. Since this is a state court construction of a federal statute, this part of the opinion is not binding precedent outside of California. However, the SCA is national in scope, and other courts might find the analysis of the California court persuasive.
18 U.S.C. § 2702 provides that "a person or entity providing an electronic communication service to the public shall not knowingly divulge to any person or entity the contents of a communication while in electronic storage by that service".
The Court of Appeal wrote that Apple cannot obtain stored e-mail from O'Grady's e-mail service provider pursuant to a civil subpoena because Section 2702(a) prohibits this, and Section 2702(b), which enumerates exceptions, contains no applicable exception.
Apple argued that Section 2702(b), which exempts the contents of communications disclosed "as may be necessarily incident to the rendition of the service or to the protection of the rights or property of the provider of that service", is applicable. Apple feebly argued that since noncompliance with a subpoena would expose the service provider to contempt or other sanctions, its property was at risk. The Court of Appeals was not impressed.
Apple also argued that 18 U.S.C. § 2707's language, which provides, in part, that "good faith reliance on ... a court warrant or order ... is a complete defense to any civil or criminal action brought under" the SCA, entitles it to obtain the records. However, the Court of Appeal held that this language merely provides the service provider an exemption from liability for good faith, but illegal disclosure. It does not make the disclosure legal.
The Court of Appeal also rejected, following a lengthy analysis, the argument that there is an implied exemption to the SCA for civil discovery.
California Reporter's Shield Law. The California constitution provides that "A publisher, editor, reporter, or other person connected with or employed upon a newspaper, magazine, or other periodical publication . . . shall not be adjudged in contempt . . . for refusing to disclose the source of any information procured while so connected or employed for publication in a newspaper, magazine or other periodical publication, or for refusing to disclose any unpublished information obtained or prepared in gathering, receiving or processing of information for communication to the public." There is a related provision in the California Evidence Code.
These are provisions of California law, applicable only in cases to which California law is applied.
First, Apple argued that O'Grady and the others could not assert the shield because they were not engaged in "legitimate journalism or news", because they were misappropriating trade secrets.
The Court of Appeal rejected this argument. It wrote that "The shield law is intended to protect the gathering and dissemination of news, and that is what petitioners did here. We can think of no workable test or principle that would distinguish ``legitimate´´ from ``illegitimate´´ news. Any attempt by courts to draw such a distinction would imperil a fundamental purpose of the First Amendment, which is to identify the best, most important, and most valuable ideas not by any sociological or economic formula, rule of law, or process of government, but through the rough and tumble competition of the memetic marketplace."
Second, Apple argued that O'Grady and the others could not assert the shield because they published verbatim information provided to them. The Court of Appeal rejected this argument. It wrote that "A reporter who uncovers newsworthy documents cannot rationally be denied the protection of the law because the publication for which he works chooses to publish facsimiles of the documents rather than editorial summaries. The shield exists not only to protect editors but equally if not more to protect newsgatherers."
The Court also elaborated on this principle in the context of online writing. "Digital communication and storage, especially when coupled with hypertext linking, make it possible to present readers with an unlimited amount of information in connection with a given subject, story, or report. The only real constraint now is time -- the publisher's and the reader's. From the reader’s perspective, the ideal presentation probably consists of a top-level summary with the ability to ``drill down´´ to source materials through hypertext links. The decision whether to take this approach, or to present original information at the top level of an article, is itself an occasion for editorial judgment. Courts ought not to cling too fiercely to traditional preconceptions, especially when they may operate to discourage the seemingly salutary practice of providing readers with source materials rather than subjecting them to the editors' own ``spin´´ on a story."
Apple next argued that O'Grady and the others could not assert the shield because they are merely individuals operating web sites. It argued that they are not covered because they are "not members of any professional community governed by ethical and professional standards". The Court of Appeal rejected this argument. It reasoned, based upon dictionary statements of the meanings of words, that the shield applies to "publishers", and O'Grady and the other were publishers.
Apple next argued that O'Grady and the others could not assert the shield because their publications did not fall within the meaning of "newspaper, magazine or other periodical publication". The Court of Appeal rejected this argument. It concluded that the web sites at issue could not be considered a "newspaper", but are a "magazine" or "other periodical publication".
Hence, the Court of Appeal concluded that O'Grady and the others "are entitled to the protection of the shield law, which precludes punishing as contempt a refusal by them to disclose unpublished information."
Constitutional Privilege. Finally, the Court of Appeal held that the discovery sought by Apple is barred by the conditional federal and state constitutional privilege against compulsory disclosure of confidential sources. The Court followed the test established in 1984 by the California Supreme Court in Mitchell v. Superior Court, which is reported at 37 Cal.3d 268.
Amicus Briefs. Several companies and groups filed amicus curiae briefs in support of Apple, including Genentech, Intel and the Business Software Alliance (BSA), and the Information Technology Industry Counsel (ITIC).
Intel and the BSA wrote that "all technology-oriented companies -- and ultimately consumers -- share a strong interest in vigorous enforcement of the trade secret laws, including discovery to determine who may have violated those laws."
They continued that "strong trade secret laws are vital to the health of California's high-technology businesses and to the economy of the nation as a whole. The types of trade secrets at issue here (information about unannounced future products) are among the most valuable and closely guarded of all. There is no public interest in having such trade secrets stolen and plastered on the Internet for competitors and others to see. If that occurs, victims must be entitled to use the courts for redress -- starting with discovery to determine who committed the theft. The protections of the Civil and Penal Codes must be available in practice as well as in name."
This case is Jason O'Grady v. Superior Court of Santa Clara County, Court of Appeal of the State of California, Sixth Judicial District, App. Ct. No. H028579, a petition for writ of mandate to the Santa Clara County Superior Court, Superior. Ct. No. CV032178.
5/22. The U.S. Court of Appeals (1stCir) issued its opinion in New Hampshire Motor Transport Association v. Stephen Rowe, a case involving whether a statute of the state of Maine that regulates the sale and delivery of tobacco products purchased via the internet or other electronic means is preempted by the Federal Aviation Administration Authorization Act of 1994 (FAAAA).
The Court of Appeals affirmed in part the judgment of the District Court granting summary judgment the plaintiffs. This case is a small victory for internet commerce.
The state of Maine enacted a statute regulating the sale of tobacco products over the internet. However, it also had the effect of requiring air and motor carriers, such as United Parcel Service (UPS), to enforce the ban, thereby imposing considerable burdens upon them. For example, it had the effect of requiring the carriers to ascertain the content of packages, the age of the addressee of packages, and whether the addressee is of legal age to receive the package (27 years old in the case of tobacco products). It further required carriers to ascertain whether the retailer was licensed by the state of Maine to sell tobacco products.
The New Hampshire Motor Transport Association and other trade groups that deliver packages challenged the Maine statute. They filed a complaint in U.S. District Court (DMaine) against the Attorney General of Maine seeking declaratory and injunctive relief that the Maine statute is preempted by the FAAAA.
The District Court granted summary judgment for the the trade groups. Maine brought this appeal.
The FAAAA provides both that a "State ... may not enact or enforce a law ... related to a price, route, or service of any motor carrier . .. with respect to the transportation of property", and that a "State may not enact or enforce a law ... related to a price, route, or service of an air carrier or carrier affiliated with a direct air carrier through common controlling ownership when such carrier is transporting property by aircraft or by motor vehicle. ..."
The Court of Appeals affirmed in part, and reversed in part. It held that "the FAAAA focuses on the effect that a state's law has on carriers, and not on the state's objective in passing the law. To the extent that Maine's Tobacco Delivery Law requires (or has the effect of requiring) carriers to implement state-mandated procedures in the processing and delivery of packages, it is preempted by the FAAAA. But to the extent that the Tobacco Delivery Law merely bars all persons (including carriers) from knowingly transporting contraband tobacco into Maine, the FAAAA is not implicated."
This case is New Hampshire Motor Transport Association, et al. v. Stephen Rowe, U.S. Court of Appeals for the 1st Circuit, App. Ct. No. 05-2136, an appeal from the U.S. District Court for the District of Maine, Judge Brock Hornby presiding. Judge Howard wrote the opinion of the Court of Appeals, in which Judges Boudin and Stahl joined.
There was no issue of the TLJ Daily E-Mail Alert on Tuesday, May 30, 2006.
8:30 AM - 5:00 PM. Day two of a two day workshop on public participation in nanotechnology hosted by the National Nanotechnology Coordination Office (NNCO). See, notice in the Federal Register, May 3, 2006, Vol. 71, No. 85, at Page 26117. Location: Westin Arlington Gateway Hotel, 801 North Glebe Road, Arlington, VA.
12:00 NOON - 2:00 PM. The Progress and Freedom Foundation (PFF) will host a panel discussion titled "The Role of Music Licensing in the Digital Age". The speakers will be Michael Petricone (Consumer Electronics Association), Mitch Glazier (Recording Industry Association of America), and others. Patrick Ross (PFF) will moderate. See, notice. Lunch will be served. Location: Room B-354, Rayburn Building.
12:00 NOON - 2:00 PM. The Progress and Freedom Foundation (PFF) will host a lunch. The featured speaker will be Brian Roberts, Ch/CEO of Comcast Corporation. The other speakers will be Aryeh Bourkoff (UBS Investment Research), Blair Levin (Legg Mason), and Craig Moffett (Sanford Bernstein & Co.) See, notice. Location: South American Room, Capitol Hilton, 1001 16th Street, NW.
5/30. John Snow announced his resignation as Secretary of the Treasury. President Bush nominated Henry Paulson (at left), the Chairman and CEO of Goldman Sachs Group, to replace him. See, White House release. President Bush stated that "He will help ensure that our trading partners play by the rules, respect intellectual property rights, and maintain flexible, market-based exchange rates for their currencies." See, transcript.
5/26. Federal Communications Commission (FCC) Commissioner Deborah Tate gave a speech [6 pages in PDF] via videotape to the American Public Communications Council (APCC). She said that "payphones are still an important part of many people’s lives", noting both that millions of people have no phone service, and that others rely upon pay phones in emergencies. She also said that "the FCC needs to be prepared for the possibility of a flu pandemic", because many people would then work from home. "The ability to work from home is going to depend on the ability to of our communications networks to handle the increased load."
5/26. The Federal Communications Commission's (FCC) Consumer & Governmental Affairs Bureau (CGB) issued a revised version [18 pages in PDF] of its quarterly report on consumer inquiries and complaints.
5/26. The Federal Communications Commission's (FCC) denied the Electronic Privacy Information Center's (EPIC) application for review of the Wireline Competition Bureau's (WCB) denial of the EPIC's requests for records, pursuant to the Freedom of Information Act (FOIA), regarding the FCC proceeding in which the FCC mandated that interconnected voice over internet protocol (VOIP) services comply with E911 rules. While the FCC decided to give 10 pages of records to the EPIC, it stated that the rest fall within the FOIA's deliberative process exemption. See, FCC's Memorandum Opinion and Order [4 pages in PDF]. This item is FCC 06-72. The FCC's VOIP E911 proceeding is WC Docket Nos. 04-36 and 05-196. The FOIA is codified at 5 U.S.C. § 552.

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