STEPHEN J. BARRETT et al., Plaintiffs and Appellants, v. ILENA ROSENTHAL, Defendant and Respondent.
(Superior Court of Alameda County, No. 833021-5 James A. Richman, Judge.)
(The Court of Appeal, First Dist., Div. Two, No. A096451, 114 Cal.App.4th 1379.)

(Opinion by Corrigan, J., with George, C. J., Kennard, J., Baxter, J., Werdegar, J., Chin, J., and Moreno, J., concurring. Concurring opinion by Moreno, J.)

COUNSEL

Law Offices of Christopher E. Grell, Christopher E. Grell, Richard R. Rescho and Ian P. Dillon for Plaintiffs and Appellants.
Mark Goldowitz, Jesper Rasmussen; Piper Rudnick, Roger Myers, Lisa Sitkin and Katherine Keating for Defendant and Respondent.
Lee Tien and Kurt Opsahl for Electronic Frontier Foundation as Amicus Curiae on behalf of Defendant and Respondent.
Ann Brick for American Civil Liberties Union Foundation of Northern California as Amicus Curiae on behalf of Defendant and Respondent.
Cooley Godward, Michael G. Rhodes, Lori R.E. Ploeger, and Laura C. Pirri for eBay Inc. as Amicus Curiae on behalf of Defendant and Respondent.

Wilmer Cutler Pickering Hale and Dorr, Patrick J. Carome, Samir Jain, and C. Colin Rushing for Amazon.com, Inc., America Online, Inc., eBay Inc., Google Inc., Microsoft Corporation, Yahoo! Inc., ABC, Inc., Ask Jeeves, Inc., Cable News Network LP, LLLP, Compuserve Interactive Services, Inc., Earthlink, Inc., ESPN, Inc., Netscape Communications Corporation, SBC Internet Services, Time Warner Cable Inc., The Washington Post Company, Association for Competitive Technology, California Newspaper Publishers Association, Information Technology Association of America, Internet Alliance, Internet Commerce Coalition, National Cable & Telecommunications Association, Netchoice, Netcoalition Newspaper Association of America, Online News Association, Online Publishers Association, TechNet and United States Internet Service Provider Association as Amici Curiae on behalf of Defendant and Respondent.
Deidre K. Mulligan for Law Professors with Expertise in Internet Law as Amicus Curiae on behalf of Defendant and Respondent.
OPINION

CORRIGAN, J.-

In the Communications Decency Act of 1996, Congress declared: “No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” (47 U.S.C. § 230(c)(1).) fn. 1 “No cause of action may be brought and no liability may be imposed under any State or local law that is inconsistent with this section.” (§ 230(e)(3).)
These provisions have been widely and consistently interpreted to confer broad immunity against defamation liability for those who use the Internet to publish information that originated from another source. The immunity has been applied regardless of the traditional distinction between “publishers” and “distributors.” Under the common law, “distributors” like newspaper vendors and book sellers are liable only if they had notice of a defamatory statement in their merchandise. The publisher of the newspaper or book where the statement originally appeared, however, may be held liable even without notice. {Slip Opn. Page 2}

In this case, the Court of Appeal diverged from the prevailing interpretation of section 230. It decided that common law “distributor” liability survived the congressional grant of immunity, so that Internet service providers and users are exposed to liability if they republish a statement with notice of its defamatory character.

We granted review to decide whether section 230 confers immunity on “distributors.” Because this case involves the liability of an individual rather than a service provider, we asked the parties to address the definition of the statutory term “user.” We also requested briefing on whether the immunity analysis is affected if a user engages in active rather than passive conduct. We conclude that section 230 prohibits “distributor” liability for Internet publications. We further hold that section 230(c)(1) immunizes individual “users” of interactive computer services, and that no practical or principled distinction can be drawn between active and passive use. Accordingly, we reverse the Court of Appeal’s judgment.

We acknowledge that recognizing broad immunity for defamatory republications on the Internet has some troubling consequences. Until Congress chooses to revise the settled law in this area, however, plaintiffs who contend they were defamed in an Internet posting may only seek recovery from the original source of the statement.

I. FACTUAL AND PROCEDURAL BACKGROUND

Plaintiffs, Dr. Stephen J. Barrett and Dr. Timothy Polevoy, operated Web sites devoted to exposing health frauds. Defendant Ilena Rosenthal directed the Humantics Foundation for Women and operated an Internet discussion group. Plaintiffs alleged that Rosenthal and others committed libel by maliciously distributing defamatory statements in e-mails and Internet postings, impugning plaintiffs’ character and competence and disparaging their efforts to combat {Slip Opn. Page 3 } fraud. fn. 2 They alleged that Rosenthal republished various messages even after Dr. Barrett warned her they contained false and defamatory information.

Rosenthal moved to strike the complaint under the anti-SLAPP statute. (Code Civ. Proc., § 425.16; SLAPP is an acronym for strategic lawsuit against public participation.) She claimed her statements were protected speech, and argued that plaintiffs could not establish a probability of prevailing because she was immune under section 230. (See Code Civ. Proc., § 425.16, subd. (b); Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67.) She also contended her statements were not actionable.

The court granted the motion, finding that Rosenthal’s statements concerned an issue of public interest within the scope of the anti-SLAPP statute, and were, for the most part, not actionable because they contained no provably false assertions of fact. Plaintiffs do not challenge that ruling. The court determined that the only actionable statement appeared in an article Rosenthal received via e-mail from her codefendant Tim Bolen. This article, subtitled “Opinion by Tim Bolen,” accused Dr. Polevoy of stalking a Canadian radio producer. Rosenthal posted a copy of this article on the Web sites of two newsgroups devoted to alternative health issues and the politics of medicine, not on the site of her own discussion group. According to Rosenthal, these newsgroups were part of “the wild west of the Internet,” with “no administrators {Slip Opn. Page 4} and no one to enforce rules of conduct.” fn. 3 The trial court ruled that this republication was immunized by section 230(c) (1).

The Court of Appeal vacated the order granting the motion to strike insofar as it applied to Dr. Polevoy. It held that section 230 did not protect Rosenthal from liability as a “distributor” under the common law of defamation. We granted Rosenthal’s petition for review. fn. 4

No. 00 C 1187.
March 1, 2000.
MEMORANDUM OPINION AND ORDER

BUCKLO, District Judge.
Scott Mitchell used to work as a programmer for YourNetDating, which runs internet dating services. He no longer does, but YourNetDating alleges that he and Webscapades, Inc., an Illinois corporation, are using Mitchell’s knowledge of the codes he wrote to hack the YourNetDating site and divert its clients and users to a porn site they operate or operated under the name of Sexetera.[FN1] Sexetera advertises itself as “the forum for sexual discovery” and includes on its introductory page an illustrated banner photograph of Pamela Anderson Lee performing fellatio with a gross and vulgar descriptive caption. The rest of the site is in the same spirit. The Sexetera site was a “blind link”; that is, it was not possible to return to the YourNetDating site from Sexetera.

To use YourNetDating’s services, a customer signs on and fills out a “profile,” providing personal information about sex, age, physical appearance, tastes, and preferences in a partner or partners, typically under a pseudonym. The service provides a password, and thereafter a user can sign on and search for particular profiles under various categories, such as twentysomething men in Chicago.

After a customer complaint in mid-February 2000, YourNetDating investigated and determined that a certain client, purportedly based in Idaho, calling herself ” Debbie Does Dallas ” (the name of a well-known porn flick) had somehow embedded code in her profile that diverted YourNetDating’s users to the Sexetera website whenever ” Debbie ” was brought up in a search, either by selecting “Debbie” individually or by searching a category that included “Debbie,” such as all women in Idaho. “Debbie” could be traced to Mitchell, who admits he created the profile. YourNetDating says that it is not possible to embed such code in a profile in the ordinary course of business, and that to do this one would need special access, such as the password of a systems administrator, which they allege Mitchell has.

YourNetDating purged “Debbie,” but there is evidence that Mitchell hacked their system again and did the same thing with a profile for a “Lisa Martin, ” purportedly based in California. That Mitchell created “Lisa ” is undisputed. Because Mitchell knows the codes that he wrote for YourNetDating, it has been impossible to keep him out of the system.

YourNetDating moves for a temporary restraining order (“TRO “) or a preliminary or permanent injunction, damages, attorney’s fees, and costs. The motion for a TRO is granted and the other motions are denied as premature.

The appropriate relief in the circumstances is a TRO, particularly since I am acting here only as the emergency judge. The standards I must apply when determining whether a TRO is appropriate are analogous to the standards applicable when determining whether preliminary injunctive relief is appropriate. Consumer Sales & Marketing, Inc. v. Digital Equipment Corp., No. 95 C 5049, 1995 WL 548765, at *3 (N.D.Ill. Sept. 13, 1995). Injunctive relief is an extraordinary and drastic remedy that should not be granted unless the movant, by a clear showing, carries the burden of persuasion. Mazurek v. Armstrong, 520 U.S. 968, 972, 117 S.Ct. 1865, 138 L.Ed.2d 162 (1997). Five factors figure into the determination of whether a preliminary injunction or TRO should be granted. Roland Mach. Co. v. Dresser Indus., Inc., 749 F.2d 380, 385-88 (7th Cir.1984). As a threshold matter, the plaintiff must show (1) a likelihood of success on the merits, (2) irreparable harm if the preliminary injunction is denied, and (3) the inadequacy of any remedy at law. Once this threshold showing is made, I balance (4) the harm to plaintiff if the preliminary injunction were wrongfully denied against the harm to the defendants if the injunction were wrongfully granted, and (5) the impact on persons not directly concerned in the dispute (the “public interest “). Cooper v. Salazar, 196 F.3d 809, 813 (7th Cir.1999).

YourNetDating has come forward with enough to persuade me by a preponderance of the evidence that it has a likelihood of success on the merits. The evidence is mainly this: (1) when and only when certain profiles are accessed, a user is diverted to Sexetera, a site in which Mitchell has a substantial ownership interest; (2) those profiles were admittedly created by Mitchell; (3) Mitchell wrote the YourNetDating codes and allegedly had the administrative access codes that would allow him to insert the code that would divert users to Sexetera. Against this, Mitchell denies that he did this or that it is even possible to do it, but I must balance his bald (and unsworn) statement against the evidence described above. “One bare assurance is worth just as much as another.” G.F.W. Hegel, The Phenomenology of Spirit 48 (A.V. Miller trans. 1977 [1807] ) (quoted in Olander v. Bucyrus Erie Co., 187 F.3d 599, 608 (7th Cir.1999)). If YourNetDating’s allegations are true, the defendants have violated the Computer Fraud and Abuse Act, 18 U.S.C. §1030, see America Online, Inc. v. LCGM, Inc., 46 F.Supp.2d 444, 450-51 (E.D.Va.1998) (unauthorized access in violation of statute warrants injunction), and several state statutes. The showing of irreparable harm is in the damage to the goodwill of its services. See Gateway Eastern Railway Co. v. Terminal RR Assoc. of St. Louis, 35 F.3d 1134, 1140 (7th Cir.1994) (damage to good will suffices for irreparable harm). Persons who sign up to get an online date do not necessarily want be subjected to pictures of Pamela Anderson Lee performing sex acts. The customer who complained asked to be removed from YourNetDating’s services, and is unlikely to be the only such person to do this.

Mitchell and Webscapades will suffer no legitimate harm of which they can complain if the TRO is granted because they have no honest business hacking YourNetDating’s system and diverting its customers to Sexetera. Mitchell expresses worry about injury to his reputation and worry that if someone else hacks the YourNetDating system in the ten days that the TRO is in force, he will be held accountable for it. These are insubstantial concerns compared to the risks to YourNetDating.

The public will not be harmed and will be benefitted by granting the preliminary injunction because people who do want dating services but do not want hardcore porn will not be subjected to pornography because of Mitchell’s misconduct.

I therefore GRANT YourNetDating’s motion for a temporary restraining order, without bond, enjoining Mitchell and Webscapades or anyone acting on their behalf from (1) diverting or attempting to divert any user of YourNet or YourNetDating to Sexetera or any other website; (2) accessing or attempting to access any computer, program, or services of YourNet and YourNetDating, or (3) damaging or interfering with YourNetDating’s computers, programs, or services, or otherwise injuring the business or reputation of YourNet and YourNetDating. YourNetDating’s motions for damages, attorney’s fees, and costs, are DENIED as premature, and will be addressed by the regular judge for this case.

FOOTNOTES:

FN1. Mitchell claims that the Sexetera site is now down, having itself been hacked, and will probably not be reconstituted.

Defendant-Appellant.
No. 94-10533
Appeal from the United States District Court for the District of Guam John S. Unpingco, District Judge, Presiding
Argued and Submitted
November 3, 1995–Honolulu, Hawaii
Filed August 7, 1996
Before: Procter Hug, Jr., Chief Judge, David R. Thompson and Diarmuid F. O’Scannlain, Circuit Judges.
Opinion by Chief Judge Hug

COUNSEL

David K. Link, Hogan & Link, Agana, Guam, for the defendant-appellant. Mark E. Kondas, Assistant United States Attorney, Agana, Guam; Stevan D. Mitchell, United States Department of Jus- tice, Washington, D.C., for the plaintiff-appellee.

OPINION

HUG, Chief Judge:

Bernadette H. Sablan appeals her conviction for computer fraud under 18 U.S.C. Section 1030(a)(5) 1988, amended by Pub. L. No. 103-322, Section 290001(b), 108 Stat. 2097-2099 (Sept. 13, 1994), following a conditional guilty plea. Sablan argues that the district court wrongly interpreted the elements of the crime and, alternatively, that the statute is unconstitutional. Sablan also challenges the district court’s calculation of the loss attributable to her conduct, the court’s decision not to depart downward, and the restitution order. We have jurisdiction under 28 U.S.C. Section 1291 and 18 U.S.C. Section 3576. We affirm Sablan’s conviction and her sentence. However, we reverse and remand for a recalculation of the restitution award.

FACTS

In the early hours of August 15, 1992, Sablan, a former employee of the Bank of Hawaii’s Agana, Guam branch, left a bar where she had been drinking with a friend. Sablan had recently been fired from the bank for circumventing security procedures in retrieving files. That morning, Sablan left the bar and entered the closed bank through an unlocked loading dock door. She went to her former work site (using a key she had kept) and used an old password to log into the bank’s mainframe. Sablan contends that she then called up several computer files and logged off. The Government asserts that Sablan changed several of the files and deleted others. Under either version, Sablan’s conduct severely damaged several bank files.

Sablan was charged with computer fraud in violation of 18 U.S.C. Section 1030(a)(5) (the “computer fraud statute”). In a pre-trial motion to dismiss, Sablan attacked the statute for its failure to require a mens rea for each of the essential elements of the offense. In the alternative, Sablan requested a jury instruction that required the Government to prove intent as to all ele- ments of the crime. In particular, Sablan wanted the jury to be instructed that the Government needed to prove that she had the intent to damage bank files. The district court denied the motion and ruled that, as used in the computer fraud statute, the word “intentionally” applied only to the access element of the crime. Sablan then entered into a conditional plea agreement that preserved her right to appellate review of the issue raised in her motion.

The district court calculated Sablan’s sentence under Sentencing Guideline Section 2F1.1(a), and enhanced her sentence due to the amount of damage caused by Sablan’s conduct. The calculation included the cost of numerous hours of computer programming to restore the damaged files. Sablan asserts that the district court improperly calculated the amount of damage due to her actions and that the improper calculation led to (1) an improperly enhanced sentence, (2) a refusal to depart downward, and (3) an improper restitution order.

DISCUSSION

I. THE COMPUTER FRAUD STATUTE

Sablan contends on appeal that the computer fraud statute must have a mens rea requirement for all elements of the crime. She asserts that the indictment was defective because it did not allege the appropriate mens rea required by the statute. In the alternative, Sablan asserts that a jury instruction was required to inform the jurors that the state had to prove intent for every element of the crime.
Sablan was convicted under the version of the computer fraud statute in effect from 1986 to 1994. That statute stated:
(a) Whoever-
. . .
(5) intentionally accesses a Federal interest com- puter without authorization, and by means of one or more instances of such conduct alters, damages, or destroys information in any such Federal interest computer . . . and thereby-
(A) causes loss to one or more others of a value aggregating $1,000 or more during any one year period;
. . .
shall be punished as provided . . . .
18 U.S.C. Section 1030 (amended by Pub. L. No. 103-354). In order to have violated the statute, a defendant must have (1) accessed (2) a federal interest computer (3) without authorization and (4) have altered, damaged, or destroyed information (5) resulting in the loss to one or more others (6) of at least one thousand dollars. The district court held that the statute’s mens rea requirement, “intentionally,” applied only to the access element of the crime. We review questions of statutory interpretation de novo. United States v. Valencia-Roldan, 893 F.2d 1080, 1082 (9th Cir.), cert. denied, 495 U.S. 935 (1990).

A.

We begin our analysis by noting that the statute is ambiguous as to its mens rea requirement. Although the statute explains that one must “intentionally access[ ] a Federal interest computer without authorization, and . . . destroy[ ] information in any such Federal interest computer,” punctuation sets the “accesses” phrase off from the subsequent “damages” phrase. With some statutes punctuation has been used to indicate that a phrase set off by commas is independent of the language that followed. E.g., United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241 (1989). However, punctuation is not always decisive in construing statutes. See Constanzo v. Tillinghast, 287 U.S. 341 (1932). In Liparota v. United States, 471 U.S. 419 (1985), and United States v. X-Citement Video, 115 S. Ct. 464 (1994), for example, the Supreme Court applied the mental state adjacent to initial words to later clauses without regard to intervening punctuation. In both cases, the Supreme Court resorted to legislative history to clarify the ambiguous language.

We conclude that the comma after “authorization” does not resolve the ambiguity. Allowing the mens rea requirement to reach subsequent elements of the crime would comport with general linguistic rules. Similarly, it is proper to read the statute without extending “intentionally” to the other clauses of the sentence. Therefore, we look to the statute’s legislative history to clear up the textual ambiguity. See X-Citement Video, 115 S. Ct. at 469.

In United States v. Morris, 928 F.2d 504 (2d Cir.), cert. denied, 502 U.S. 817 (1991), the Second Circuit examined the legislative history of the computer fraud statute and concluded that the “intentionally” standard applied only to the “accesses” element of the crime. Id. at 509. The court focused on the fact that original version of the statute, passed in 1984, punished anyone who knowingly accesses a computer without authorization, or having accessed a computer with authorization, uses the opportunity such access provides for purposes to which such authorization does not extend, and by means of such conduct knowingly uses, modifies, destroys, or discloses information in, or prevents authorized use of, such computer, if such computer is operated for or on behalf of the Government of United States and such conduct affects such operation.

Pub. L. No. 98-473, subsection (a)(3) (amended latest by Pub. L. No. 103-354) (emphasis added). When the statute was amended in 1986, the scienter requirement was changed from knowingly to intentionally1 and the second mens rea reference was eliminated. By contrast, other subsections of section 1030 retained the “dual-intent” language by placing the mens rea requirement at the beginning of both the “accesses” phrase and the “damages” phrase. See, e.g., 18 U.S.C. Section 1030(a)(1). The court concluded that the decision of Congress not to repeat the scienter requirement within this statute evidenced an intent not to require the Government to prove a defendant’s intent to cause damage. Morris, 928 F.2d at 509.

Sablan urges this court to reject the holding in Morris, contending that the 1986 bill was intended only to apply to those who intentionally damage computer data. She points to one line in a Senate report that evidenced a desire to retain the dual intent language: “The new subsection 1030(a)(5) to be created by the bill is designed to penalize those who intentionally alter, damage, or destroy certain computerized data belonging to another.” 1986 U.S.C.C.A.N. at 2488. Thus, Sablan argues, the computer fraud statute has a mens rea requirement for the damages clause of the bill. We disagree.

As the Morris court concluded:

Despite some isolated language in the legislative history that arguably suggests a scienter component[FN1] for the “damages” phrase of section 1030(a)(5)(A), the wording, structure, and purpose of the subsec- tion, examined in comparison with its departure from the format of its predecessor provision persuade us that the “intentionally” standard applies only to the “accesses” phrase of section 1030(a)(5)(A), and not to its “damages” phrase.
Morris, 928 F.2d at 509. We adopt the reasoning of the Morris court and hold that the computer fraud statute does not require the Government to prove that the defendant intention- ally damaged computer files.

B.

Sablan contends that if the computer fraud statute does not have a mens rea requirement for the damages element of the offense, the statute is unconstitutional. Relying on the Supreme Court’s decision in X-Citement Video, 115 S. Ct. at 464, Sablan states that a mens rea must be applied to all elements of an offense or due process standards are violated. We review de novo the district court’s determination of federal constitutional law. United States v. Cook, 859 F.2d 777, 778 (9th Cir. 1988).

The Supreme Court has never ruled that mens rea is a constitutional requirement. However, in X-Citement Video, the Supreme Court stated that a statute without any scienter requirements “would raise serious constitutional doubts.” X-Citement Video, 115 S. Ct. at 472. Sablan contends that lack of a scienter requirement for the damages element of the offense renders the statute constitutionally infirm. In X-Citement Video, the Court construed the “knowingly” scienter requirement beyond the most proximate clause of 18 U.S.C. Section 2252 to clarify that one charged with trafficking in child pornography must know that the material involves the use of a minor. Id. at 472.

After reviewing the cases interpreting criminal statutes to include broadly applicable scienter requirements the Court held that the “presumption in favor of a scienter requirement should apply to each of the statutory elements which criminalize otherwise innocent conduct.” X-Citement Video, 115 S. Ct. at 469. However, the computer fraud statute does not criminalize otherwise innocent conduct. Under the statute, the Government must prove that the defendant intentionally accessed a federal interest computer without authorization. Thus, Sablan must have had a wrongful intent in accessing the com- puter in order to be convicted under the statute. This case does not present the prospect of a defendant being convicted without any wrongful intent as was the situation in X-Citement Video. Therefore, we hold that the computer fraud statute’s mens rea requirement is sufficient to meet constitutional standards.

II.SABLAN’S SENTENCE

Sablan asserts that the district court erred in three ways in sentencing her: (1) incorrectly applying the Sentencing Guidelines in calculating the amount of loss sustained by the victim, (2) failing to depart downward at sentencing, and (3) ordering restitution. We review the district court’s interpreta- tion of the Sentencing Guidelines de novo. United States v. Felix, _______ F.3d _______, 1996 WL 351188 at *1 (9th Cir. June 27, 1996); United States v. Ginn, _______ F.3d_______, 1996 WL 346225 at *4 (9th Cir. June 26, 1996). The district court’s factual determinations supporting a sentence are reviewed for clear error. United States v. Mainard, 5 F.3d 404, 405 (9th Cir. 1993).

A.

At sentencing, the principal issue in dispute was the amount of loss sustained by the Bank of Hawaii as a result of Sablan’s conduct. Sentencing Guideline Section 2F1.1(a), which applies to fraud and related activities in connection with computers, provides for a base offense level of 6. The base offense level is subject to enhancement depending upon the extent of the loss incurred. U.S.S.G. Section 2F1.1(b). In calculating the loss, the dis- trict court included the cost of repairs and other activities necessary to restore the bank’s files to their original condition. These costs included $13,377.38 in programming and $14,875 in associated expenses, for a total of $28,282.38.

The court applied U.S.S.G. Section 2F1.1(b)(1), which provides that when the loss exceeds $20,000 the offense level is to be increased by four levels. Application Note 8 states that for this purpose, “the loss need not be determined with precision. The court need only make a reasonable estimate of the loss, given the available information.” Application Note 7, dealing with the valuation of the loss, refers to the Commentary for U.S.S.G. Section 2B1.1 dealing with valuation of loss in theft cases. Application Note 2 to that section is pertinent with respect to the damage loss in this case. It states in part,”[w]hen property is damaged, the loss is the cost of repairs, not to exceed the loss had the property been destroyed.”

The district court calculated the cost of repairs based upon the bank’s standard hourly rate for its employees’ time, computer time, and administrative overhead–the same rate that the bank uses in charging paying customers. Sablan complains that this was improper because of the profit margin and administrative overhead that is built into these charges. However, had the bank hired an outside contractor to make the repairs these factors would have been built into the charges. Similarly, had it not been necessary for the bank to devote its employees’ time and computer time to making these repairs, the administrative overhead and profit would have been paid to the bank by its normal customers. The utilization of the normal bank charges in valuation of the loss was a reasonable approach by the district court.

Sablan also objects to the inclusion in the calculation of $4,000, which reflect the value of a meeting of bank managers with the FBI, $1,000 for a staff meeting to discuss the incident, and $350 for the handling of crank calls during the repair time. These expenses, while probably foreseeable, were not required to repair the damage. Thus, they were consequential losses. There is some uncertainty in the case law as to whether and under what circumstances consequential damages may be considered in valuing loss under the Sentencing Guidelines. Compare United States v. King, 915 F.2d 269, 272 (6th Cir. 1990) (holding that foreseeable consequential damages are to be considered in valuing loss) with United States v. Wilson, 993 F.2d 214, 217 (11th Cir. 1993) (holding that consequential damages are not to be considered). However, we need not consider this matter in this case because even deducting the $5,350 in consequential damages from the $28,252.38 calculated by the district court, the remaining balance exceeds the $20,000 specified for the four-level enhancement.

B.

Sablan asserts that the district court should have departed downward in her sentence because (1) the damage figure overstates the seriousness of the offense and (2) this was a single incident. We affirm the district court’s refusal to depart downwards on jurisdictional grounds. A district court’s refusal to depart from the Sentencing Guidelines is not reviewable on appeal. United States v. Eaton, 31 F.3d 789, 792 (9th Cir. 1994); United States v. Morales, 972 F.2d 1007, 1011 (9th Cir. 1992), cert. denied, 113 S. Ct. 1665 (1993). In the present case, the district court recognized that it could depart downwards and chose not to. That decision is not reviewable by this court.

C.

Sablan challenges the amount of restitution ordered by the district court. Restitution in criminal cases is authorized by the Victim and Witness Protection Act (“VWPA”), 18 U.S.C. Sections 3663-3664. The amount of restitution ordered is reviewed for abuse of discretion. United States v. Catherine, 55 F.3d 1462, 1465 (9th Cir. 1995). However, restitution can only include losses directly resulting from a defendant’s offense. United States v. Koenig, 952 F.2d 267, 275 (9th Cir. 1991). Sablan challenges the restitution order because it includes consequential damages and because it does not consider her ability to pay.

As discussed above, the $28,252.38 loss valuation contains consequential damages of $5,350. We have held that a restitution order must be based on losses directly resulting from the defendant’s criminal conduct. United States v. Barany, 884 F.2d 1255, 1261 (9th Cir. 1989), cert. denied, 493 U.S. 1034 (1990). The consequential expenses incurred due to the meetings with the FBI, the staff meeting, and the handling of the crank calls were not expenses necessary to repair the files damaged by Sablan’s criminal conduct. These expenses were thus not properly included in the restitution order. On remand, the sum of $5,350 should be excluded from the restitution order, resulting in a restitution order of $22,902.38.

We reject Sablan’s contention that no order of restitution is proper because she is unable to pay. In issuing an order of restitution, a district court must consider (1) the amount of loss sustained by the victim, (2) the financial resources of the defendant, and (3) the financial needs and earnings of the defendant and the defendant’s dependents. 18 U.S.C. Section 3664(a). Although the district court is not required to make findings of fact regarding the defendant’s financial condition, United States v. Cannizzaro, 871 F.2d 809, 810-11 (9th Cir.), cert. denied, 493 U.S. 895 (1989), the record must reflect that the district court had at its disposal information relating to the defendant’s financial position. Id. at 811. In the present case, the presentencing report contains information relating to Sablan’s financial condition. The report concludes that Sablan has a negative net worth of $8,587.83 and a negative monthly cash flow of $187.28. Nonetheless, the court ordered Sablan to pay restitution to the bank.

Although Sablan is indigent at the present time, we hold that an order of restitution was proper. A defendant’s present indigence is not sufficient to preclude a restitution order. United States v. Smith, 944 F.2d 618, 623 (9th Cir. 1991), cert. denied, 503 U.S. 951 (1992).”Imposing restitution on indigent persons is deemed appropriate in the Ninth Circuit because the defendant’s future financial status is indeterminable and could change.” United States v. Jackson, 982 F.2d 1279, 1284 (9th Cir. 1992). The district court found that Sablan had the capability of providing restitution. The court noted that she “is a trained person, she has an education, and she has, therefore, skills that can still be used on the job market.” Because Sablan has a computer science degree, the court determined that she would have the ability to pay a restitution order. That finding is not an abuse of discretion.

We therefore AFFIRM Sablan’s conviction under 18 U.S.C. Section 1030(a) and her sentence. We REVERSE AND REMAND the restitution order for recalculation consistent with this opinion.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.

FOOTNOTES:

FN1. “The substitution of an’intentional’ standard [wa]s designed to focus Federal criminal prosecutions on those whose conduct evinces a clear intent to enter, without proper authorization, computer files or data belonging to another.” S. Rep. No. 99-432, 99th Cong., 2d Sess. 6 (1986), reprinted in 1986 U.S.C.C.A.N. 2479, 2484.

743 F.Supp. 556 (N.D. Ill. 1990)

BUA, District Judge.

1) On June 5, 1990, this court entered a memorandum opinion denying defendant Craig Neidorf’s motion to dismiss the original indictment in this case. See United States v. Riggs, 739 F.Supp. 414 (N.D.Ill.1990). Two days later, the Special April 1990 Grand Jury returned an 11- count superseding indictment against Neidorf and his co- defendant, Robert Riggs. Neidorf now moves to dismiss each count in the superseding indictment except Count I, which names only Riggs as a defendant. In support of his motion, Neidorf adopts the arguments in the amicus curiae briefs of Electronic Frontier Foundation (“EFF”). For the reasons stated herein, EFF’s arguments are rejected; Neidorf’s motion to dismiss the superseding indictment is accordingly denied.

FACTS

2) The facts set forth in the superseding indictment are essentially the same as those in the original indictment, so only a brief overview of them is necessary here. The government charges that Neidorf and Riggs devised and implemented a scheme to defraud involving the use of computers. The original indictment charged that the focus of the fraud scheme was narrow; the government claimed that the goal of the scheme was to use computers to steal the E911 text file owned by Bell South Telephone Company (“Bell South”).[1] The superseding indictment, however, now charges that misappropriation of Bell South’s E911 text file was only one of the goals of the fraud scheme in which Neidorf and Riggs participated. The objective of the scheme is now more generally described as follows:

To fraudulently obtain and steal private property in the form of computerized files by gaining unauthorized access to other individuals’ and corporations’ computers, copying the sensitive computerized files in those computers, and then publishing the information from the computerized files in a hacker publication for dissemination to other computer hackers.
Thus, government now claims that Riggs and Neidorf entered into a scheme to steal and disseminate not only Bell South’s E911 file, but other valuable computer-stored information as well.

3) According to the superseding indictment, Riggs and Neidorf committed several acts in furtherance of their broad scheme to distribute information stolen from computer systems. Each of these acts forms the basis for separate charges in Counts Two, Three, Four and Seven of the superseding indictment. Count Two charges that Neidorf violated the federal wire fraud statute, 18 U.S.C. Section 1343, by using his computer to announce the beginning of the “Phoenix Project.” According to the government, that project involved a plan to solidify the hacker community by publishing hacking tutorials and disseminating other items of interest to hackers, such as information on how to prevent law enforcement authorities from discovering hacking activity. Neidorf’s plan was to use a computer hacker newsletter entitled “PHRACK,” which he published regularly, to distribute information to the hacking community. Counts Three and Four charge that Neidorf and Riggs further violated section 1343 by sending communications to each other via electronic mail concerning the implementation of their scheme. In addition, Count Seven charges that Neidorf violated section 1343 by publishing an issue of PHRACK which contained a series of tutorials about breaking into computer systems.

4) The superseding indictment also charges Neidorf and Riggs with committing acts in furtherance of their more specific goal to fraudulently obtain Bell South’s E911 text file. These acts form the basis of the remaining counts in the superseding indictment– Counts One, Five, Six, Eight, Nine, Ten, and Eleven. Count One charges that Riggs violated section 1343 by gaining unauthorized access to Bell South’s computer system in Atlanta, Georgia, downloading a copy of Bell South’s E911 text file to his home computer in Decatur, Georgia, and then transferring the E911 file to a computer bulletin board service in Lockport, Illinois, where he stored it for Neidorf’s review. Count Five charges that Neidorf and Riggs violated section 1343 when Neidorf, using a computer located at the University of Missouri in Columbia, Missouri, retrieved the E911 file from the Lockport computer bulletin board. Count Six charges that Neidorf’s receipt of the E911 file from Riggs through the Lockport computer bulletin board constitutes a violation of the federal statute prohibiting the interstate transportation of stolen property, 18 U.S.C. section 2314.

5) After receiving the E911 file, Neidorf allegedly edited the file to conceal the fact that it had been fraudulently obtained by Riggs. Counts Eight and Nine charge that Riggs and Neidorf violated section 1343 and section 2314 when Neidorf transferred the edited version of the E911 file back to Riggs through the Lockport bulletin board. A short time later, Neidorf used his computer to publish the edited version of the E911 text file in an issue of PHRACK. Count Ten charges that Neidorf violated section 1343 by publishing the E911 text file in PHRACK, and Count Eleven charges that the publication of the E911 file in PHRACK constituted a violation of section 2314 by both Neidorf and Riggs.

DISCUSSION

6) Neidorf’s arguments, as presented by amicus EFF, attack the superseding indictment in two waves. One set of arguments challenges the counts against Neidorf based on the transfer of the stolen E911 file– Counts Five, Six, Eight, Nine, Ten and Eleven. The other set of arguments challenges the counts dealing with the remaining charges– Counts Two, Three, Four, and Seven. The court will address each set of Neidorf’s arguments separately.

I. Counts Five, Six, Eight, Nine, Ten and Eleven

A. First Amendment

7) Neidorf’s main challenge to Counts Five, Six, Eight, Nine, Ten and Eleven of the superseding indictment is grounded in the First Amendment. He argues that criminalizing his publication of the E911 text file in PHRACK– as the government attempts to do in Counts Ten and Eleven– constitutes an unconstitutional abridgement of his First Amendment rights. He further contends that since Counts Five, Six, Eight and Nine are based on the transfer of information which was incidental to the publication of the E911 file in PHRACK, finding him criminally liable under those counts would also abridge his First Amendment freedoms.

8 ) In support of his argument, Neidorf relies principally on three cases: Smith v. Daily Mail Publishing Co., 443 U.S. 97, 99 S.Ct. 2667, 61 L.Ed.2d 399 (1979); Landmark Communications, Inc. v. Virginia, 435 U.S. 829, 98 S.Ct. 1535, 56 L.Ed.2d 1 (1978); and Worrell Newspapers of Indiana, Inc. v. Westhafer, 739 F.2d 1219, 1222 (7th Cir.1984), aff’d, 469 U.S. 1200, 105 S.Ct. 1155, 84 L.Ed.2d 309 (1985). Neidorf maintains that under this precedent, a statute which criminalizes the publication of information can be sustained against a First Amendment attack only if it serves “the highest form of governmental interest.” The Smith, Landmark, and Worrell decisions, however, are clearly distinguishable from the instant case. Each of those cases involved a statute expressly aimed at placing a prior restraint on speech. In addition, each of those cases involved the criminal prosecution of an individual for publishing information which had been lawfully obtained. In the instant case, in contrast, the superseding indictment does not charge Neidorf under a statute creating an express prior restraint on speech and, more importantly, the superseding indictment does not allege that Neidorf lawfully obtained Bell South’s E911 file. In fact, the superseding indictment specifically charges that Riggs and Neidorf entered into a scheme to steal and disseminate confidential, computer-stored information, including Bell South’s E911 text file. Thus, according to the superseding indictment, even though Neidorf did not actually steal the E911 file, he was completely aware that it was stolen when he received it from Riggs.[2] As such, Neidorf clearly stands on different footing than the defendants in Smith, Landmark, and Worrell.

9) Moreover, the law is clear that where an individual violates an otherwise valid criminal statute, the First Amendment does not act as a shield to preclude the prosecution of that individual simply because his criminal conduct involves speech. For example, in United States v. Rowlee, 899 F.2d 1275 (2d Cir.1990), defendant Rowlee formed a society whose activities dealt almost exclusively with promoting the evasion of taxes and frustrating the work of the Internal Revenue Service. Rowlee conducted seminars in which he counseled individuals to violate federal tax laws; he also advertised his anti-tax theories and services in the newspapers. The Second Circuit rejected Rowlee’s argument that his First Amendment rights were abridged by his conviction for mail fraud and for violations of 18 U.S.C. section 371 (conspiracy to defraud the United States) and 26 U.S.C. section 7206(2) (aiding and abetting tax fraud). With respect to the s 371 charge, the court held: “[S]peech is not protected by the First Amendment when it is the very vehicle of the crime itself["] … [Rowlee was] convicted of the act of conspiracy, an act forbidden by section 371. [His] conduct was not protected by the First Amendment merely because, in part, it may have involved the use of language. Id. at 1278 (quoting United States v. Varani, 435 F.2d 758, 762 (6th Cir.1970)). In addressing the mail fraud charge, the court found that the First Amendment was simply not implicated. The court stated, “The defendants either violated the mail fraud statute or they did not. If they did not, reference to the First Amendment [in the jury instructions] only introduced an unnecessary complication into the case.” Id. at 1280.

10) Similarly, in United States v. Morison, 844 F.2d 1057 (4th Cir.), cert. denied, 488 U.S. 908, 109 S.Ct. 259, 102 L.Ed.2d 247 (1988), where a military intelligence employee was charged with violating the Espionage Act by sending an unauthorized transmission of national security material to a member of the press, the court held that First Amendment was not implicated. The court noted that the government based the charges on allegations that the defendant knowingly and willfully stole and distributed the secret documents. The court then stated, “We do not think that the First Amendment offers asylum under those circumstances, if proven, merely because the transmittal was to a representative of the press.” Id. at 1068. Other courts have rejected First Amendment arguments similar to those in Rowlee and Morison. See, e.g., United States v. Lincoln, 589 F.2d 379, 382 (8th Cir.1979) (rejecting defendant’s First Amendment attack against his conviction for mailing a threatening letter in violation of 18 U.S.C. section 876); United States v. Bodin, 375 F.Supp. 1265, 1267 (W.D.Okla.1974) (rejecting defendant’s argument that federal statutes proscribing copyright infringement violate the First Amendment).

11) Neidorf argues that the E911 text file he published “is plainly of interest to any member of the public concerned with the operation of the system through which he can reach ‘police, fire, and/or ambulance services.’ ” Even if that were true, however, under Branzburg v. Hayes, 408 U.S. 665, 92 S.Ct. 2646, 33 L.Ed.2d 626 (1972), Neidorf’s violation of criminal law is not excused simply because he provided the public with interesting information. In Branzburg, a reporter had written a newspaper article concerning certain criminal activities of individuals whom he had promised not to identify. When a grand jury subpoenaed the reporter to gather information concerning the criminal activity described in his article, the reporter argued that the First Amendment protected him from divulging the information. The Supreme Court rejected the reporter’s argument. The Court held: It would be frivolous to assert– and no one does in these cases– that the First Amendment, in the interest of securing news or otherwise, confers a license on either the reporter or his news sources to violate valid criminal laws. Although stealing documents or wiretapping could provide newsworthy information, neither reporter nor source is immune from conviction for such conduct, whatever the impact on the flow of news. Id. at 691, 92 S.Ct. at 2662.

12) In short, the court finds no support for Neidorf’s argument that the criminal activity with which he is charged in this case is protected by the First Amendment. Interpreting the First Amendment as shielding Neidorf from criminal liability would open a gaping hole in criminal law; individuals could violate criminal laws with impunity simply by engaging in criminal activities which involve speech-related activity. The First Amendment does not countenance that kind of end run around criminal law.

B. Vagueness

13) Under Palmer v. City of Euclid, 402 U.S. 544, 91 S.Ct. 1563, 29 L.Ed.2d 98 (1971), a criminal charge must be dismissed where a criminal statute, as applied to the defendant’s conduct, “fail[s] to give ‘a person of ordinary intelligence fair notice that his contemplated conduct is forbidden.’ ” Id. at 545, 91 S.Ct. at 1564 (quoting United States v. Harriss, 347 U.S. 612, 617, 74 S.Ct. 808, 811-12, 98 L.Ed. 989 (1954)). Neidorf argues that Counts Five, Six, Eight, Nine, Ten and Eleven should be dismissed pursuant to Palmer because sections 1343 and 2314 are unconstitutionally vague as applied to his alleged conduct.

14) The court finds no merit in Neidorf’s contention. Two elements must be proven to sustain a conviction under the wire fraud statute: (1) a scheme to defraud; and (2) use of wire communications in furtherance of the scheme. Lombardo v. United States, 865 F.2d 155, 157 (7th Cir.), cert. denied, — U.S. — , 109 S.Ct. 3186, 105 L.Ed.2d 695 (1989). It is not in any way unclear or ambiguous that Neidorf’s alleged conduct satisfies each of these elements. According to the superseding indictment, Neidorf entered into a scheme to defraud Bell South and other corporations and individuals out of valuable, computer-stored information, and through the use of a computer he allegedly caused wire communications to be sent in furtherance of that scheme. If these allegations are true, then Neidorf schemed, and he used wire communications to further his scheme. Thus, there are no vagueness problems with respect to section 1343; that statute clearly applies to Neidorf’s alleged conduct.[3]

15) With respect to section 2314, Neidorf’s vagueness argument is a by-product of his previous argument against the original indictment that he did not cause “goods, wares, or merchandise” to be transferred within the meaning of the statute. The court rejected that argument, finding that the confidential, computer-stored information which Neidorf allegedly transferred comes within the section 2314 definition of “goods, wares, or merchandise.” Neidorf now argues that section 2314 is unconstitutionally vague as applied to him because he could not have known that the information he transferred came within the definition of “goods, wares, or merchandise.”

16) However, as this court detailed in the earlier opinion in this case, several courts have already held that the definition of “goods, wares, or merchandise” in section 2314 encompasses proprietary business information which is stored on a tangible medium, such as paper. See United States v. Riggs, 739 F.Supp. 414, 420 (N.D.Ill.1990) (collecting cases). The only difference between those cases and this case is that here the information was stored on computer. Moreover, it is clear that in this case Neidorf knew the information he transferred was valuable property; in fact, that is the precise reason he wanted to obtain the information and share it with other computer hackers. Therefore, the court finds that section 2314, as applied to this case, is not unconstitutionally vague. Neidorf had fair notice that his alleged conduct could constitute a violation of that statute.

II. Counts Two, Three, Four and Seven

A. Scheme to Defraud

17) Neidorf argues that Counts Two, Three, Four and Seven– all of which charge wire fraud– should be dismissed on the grounds that the superseding indictment “fails to allege a scheme to defraud of which these counts could be a part.” This argument is easily rejected. As noted above, the superseding indictment expressly alleges that Neidorf and Riggs entered into a scheme to defraud individuals and corporations out of proprietary information stored on computers. This plan involved two major steps: (1) stealing the information by gaining unauthorized access to computers; and (2) disseminating the information to others. Any use of the wires in furtherance of the alleged scheme is chargeable under the wire fraud statute. To satisfy the “in furtherance” requirement, a wire communication must simply be “incident to an essential part of the scheme.” Schmuck v. United States, 489 U.S. 705, 109 S.Ct. 1443, 1447, 103 L.Ed.2d 734 (1989) (quoting Badders v. United States, 240 U.S. 391, 394, 36 S.Ct. 367, 368, 60 L.Ed. 706 (1916)).

18) Each wire communication alleged in Counts Two, Three, Four and Seven clearly satisfies that requirement. Counts Three and Four charge that Neidorf and Riggs exchanged electronic mail discussing the implementation of the scheme. Counts Two and Seven involve wire transfers of separate issues of PHRACK. In one of those issues (Count Two), Neidorf announced the beginning of the “Phoenix Project;” in the other (Count Seven), he published tutorials on computer hacking. Each of these communications was certainly incident to an essential part of the scheme, since the aim of the communications was ostensibly to encourage others to illicitly obtain confidential, computer-stored information. Therefore, based on the scheme alleged in the superseding indictment, the acts in Counts Two, Three, Four, and Seven are properly chargeable under the wire fraud statute.

B. First Amendment

19) Relying again on the First Amendment, Neidorf raises a separate challenge to Counts Two and Seven, which he claims charge him with mere advocacy of illegal conduct. He argues that under Brandenburg v. Ohio, 395 U.S. 444, 89 S.Ct. 1827, 23 L.Ed.2d 430 (1969), his mere advocacy of illegal activity is no basis for criminal liability because: (1) the alleged advocacy was not directed at producing imminent lawless action; and (2) the alleged advocacy was not likely to produce or incite such action.

20) Neidorf’s argument must be rejected for the same reasons the court rejected Neidorf’s previous First Amendment argument. If Neidorf participated in the scheme to defraud as alleged in the superseding indictment, then he is criminally responsible for his conduct in furtherance of the scheme, and the First Amendment does not shield him from that responsibility merely because his criminal conduct involved speech. See, e.g., Rowlee, 899 F.2d at 1278-81; Morison, 844 F.2d 1068. Cases like this one, where a wire fraud violation is based on the theft and unlawful dissemination of proprietary business information, simply do not implicate the type of First Amendment concerns which arise in cases like Brandenburg, which involved prosecution under a criminal syndicalism statute. Moreover, as the court noted in Rowlee, the Brandenburg test cannot be reasonably applied to violations of the mail fraud or wire fraud statutes, which usually “involve long- term, slowly-developing wrongs, not ‘imminent lawless action.’ ” Rowlee, 899 F.2d at 1280. Therefore, Neidorf’s request to dismiss Counts Two, Three, Four and Seven on First Amendment grounds must be denied.

CONCLUSION

21) For the foregoing reasons, Neidorf’s motion to dismiss the superseding indictment is denied.

FOOTNOTES

FN2. The E911 computer text file contains confidential, valuable, proprietary information describing the computerized control and maintenance of the emergency 911 services in the nine-state region in which Bell South operates.

FN3. The First Amendment argument in EFF’s amicus brief is based largely on its assertion that Neidorf “did not participate in or know of the theft [of the E911 file] in advance.” While Neidorf is certainly free to try to prove the truth of that assertion at trial, that statement is directly contradictory to the charges in the superseding indictment.

FN4. The court notes that as with its First Amendment argument, EFF’s vagueness argument is based largely on the notion that Neidorf was an innocent recipient of the stolen E911 file. As the court has already pointed out, that notion is contradicted by the express allegations in the superseding indictment. Those allegations charge that when Neidorf received the E911 file, he was completely aware of the fact that it had been stolen.

United States Court of Appeals,
Second Circuit.
Argued Dec. 4, 1990.
Decided March 7, 1991.

Thomas A. Guidoboni, Washington, D.C., for defendant-appellant.
Ellen R. Meltzer, U.S. Dept. of Justice, Washington, D.C. (Frederick J. Scullin, Jr., U.S. Atty., Syracuse, N.Y., Mark D. Rasch, U.S. Dept. of Justice, Washington, D.C., on the brief), for appellee.
Before NEWMAN and WINTER, Circuit Judges, and DALY, District Judge.[*]

JON O. NEWMAN, Circuit Judge:

This appeal presents two narrow issues of statutory construction concerning a provision Congress recently adopted to strengthen protection against computer crimes. Section 2(d) of the Computer Fraud and Abuse Act of 1986, 18 U.S.C. Section 1030(a)(5)(A) (1988), punishes anyone who intentionally accesses without authorization a category of computers known as “[f]ederal interest computers” and damages or prevents authorized use of information in such computers, causing loss of $1,000 or more. The issues raised are (1) whether the Government must prove not only that the defendant intended to access a federal interest computer, but also that the defendant intended to prevent authorized use of the computer’s information and thereby cause loss; and (2) what satisfies the statutory requirement of “access without authorization.”

These questions are raised on an appeal by Robert Tappan Morris from the May 16, 1990, judgment of the District Court for the Northern District of New York (Howard G. Munson, Judge) convicting him, after a jury trial, of violating 18 U.S.C. Section 1030(a)(5)(A). Morris released into Internet, a national computer network, a computer program known as a “worm”[1] that spread and multiplied, eventually causing computers at various educational institutions and military sites to “crash” or cease functioning.

We conclude that section 1030(a)(5)(A) does not require the Government to demonstrate that the defendant intentionally prevented authorized use and thereby caused loss. We also find that there was sufficient evidence for the jury to conclude that Morris acted “without authorization” within the meaning of section 1030(a)(5)(A). We therefore affirm.

FACTS

In the fall of 1988, Morris was a first-year graduate student in Cornell University’s computer science Ph.D. program. Through undergraduate work at Harvard and in various jobs he had acquired significant computer experience and expertise. When Morris entered Cornell, he was given an account on the computer at the Computer Science Division. This account gave him explicit authorization to use computers at Cornell. Morris engaged in various discussions with fellow graduate students about the security of computer networks and his ability to penetrate it.

In October 1988, Morris began work on a computer program, later known as the Internet “worm” or “virus.” The goal of this program was to demonstrate the inadequacies of current security measures on computer networks by exploiting the security defects that Morris had discovered. The tactic he selected was release of a worm into network computers. Morris designed the program to spread across a national network of computers after being inserted at one computer location connected to the network. Morris released the worm into Internet, which is a group of national networks that connect university, governmental, and military computers around the country. The network permits communication and transfer of information between computers on the network.

Morris sought to program the Internet worm to spread widely without drawing attention to itself. The worm was supposed to occupy little computer operation time, and thus not interfere with normal use of the computers. Morris programmed the worm to make it difficult to detect and read, so that other programmers would not be able to “kill” the worm easily. Morris also wanted to ensure that the worm did not copy itself onto a computer that already had a copy. Multiple copies of the worm on a computer would make the worm easier to detect and would bog down the system and ultimately cause the computer to crash. Therefore, Morris designed the worm to “ask” each computer whether it already had a copy of the worm. If it responded “no,” then the worm would copy onto the computer; if it responded “yes,” the worm would not duplicate. However, Morris was concerned that other programmers could kill the worm by programming their own computers to falsely respond “yes” to the question. To circumvent this protection, Morris programmed the worm to duplicate itself every seventh time it received a “yes” response. As it turned out, Morris underestimated the number of times a computer would be asked the question, and his one-out-of-seven ratio resulted in far more copying than he had anticipated. The worm was also designed so that it would be killed when a computer was shut down, an event that typically occurs once every week or two. This would have prevented the worm from accumulating on one computer, had Morris correctly estimated the likely rate of reinfection.

Morris identified four ways in which the worm could break into computers on the network: (1) through a “hole” or “bug” (an error) in SEND MAIL, a computer program that transfers and receives electronic mail on a computer; (2) through a bug in the “finger demon” program, a program that permits a person to obtain limited information about the users of another computer; (3) through the “trusted hosts” feature, which permits a user with certain privileges on one computer to have equivalent privileges on another computer without using a password; and (4) through a program of password guessing, whereby various combinations of letters are tried out in rapid sequence in the hope that one will be an authorized user’s password, which is entered to permit whatever level of activity that user is authorized to perform.

On November 2, 1988, Morris released the worm from a computer at the Massachusetts Institute of Technology. MIT was selected to disguise the fact that the worm came from Morris at Cornell. Morris soon discovered that the worm was replicating and reinfecting machines at a much faster rate than he had anticipated. Ultimately, many machines at locations around the country either crashed or became “catatonic.” When Morris realized what was happening, he contacted a friend at Harvard to discuss a solution. Eventually, they sent an anonymous message from Harvard over the network, instructing programmers how to kill the worm and prevent reinfection. However, because the network route was clogged, this message did not get through until it was too late. Computers were affected at numerous installations, including leading universities, military sites, and medical research facilities. The estimated cost of dealing with the worm at each installation ranged from $200 to more than $53,000.

Morris was found guilty, following a jury trial, of violating 18 U.S.C. Section 1030(a)(5)(A). He was sentenced to three years of probation, 400 hours of community service, a fine of $10,050, and the costs of his supervision.

DISCUSSION
I. The intent requirement in section 1030(a)(5)(A)

Section 1030(a)(5)(A), covers anyone who (5) intentionally accesses a Federal interest computer without authorization, and by means of one or more instances of such conduct alters, damages, or destroys information in any such Federal interest computer, or prevents authorized use of any such computer or information, and thereby (A) causes loss to one or more others of a value aggregating $1,000 or more during any one year period; … [emphasis added].

The District Court concluded that the intent requirement applied only to the accessing and not to the resulting damage. Judge Munson found recourse to legislative history unnecessary because he considered the statute clear and unambiguous. However, the Court observed that the legislative history supported its reading of section 1030(a)(5)(A).

Morris argues that the Government had to prove not only that he intended the unauthorized access of a federal interest computer, but also that he intended to prevent others from using it, and thus cause a loss. The adverb “intentionally,” he contends, modifies both verb phrases of the section. The Government urges that since punctuation sets the “accesses” phrase off from the subsequent “damages” phrase, the provision unambiguously shows that “intentionally” modifies only “accesses.” Absent textual ambiguity, the Government asserts that recourse to legislative history is not appropriate. See Burlington N.R. Co. v. Oklahoma Tax Comm’n, 481 U.S. 454, 461, 107 S.Ct. 1855, 1859, 95 L.Ed.2d 404 (1987); Consumer Product Safety Comm’n v. GTE Sylvania, Inc., 447 U.S. 102, 108, 100 S.Ct. 2051, 2056, 64 L.Ed.2d 766 (1980); United States v. Holroyd, 732 F.2d 1122, 1125 (2d Cir. 1984).

With some statutes, punctuation has been relied upon to indicate that a phrase set off by commas is independent of the language that followed. See United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 241, 109 S.Ct. 1026, 1030, 103 L.Ed.2d 290 (1989) (interpreting the Bankruptcy Code). However, we have been advised that punctuation is not necessarily decisive in construing statutes, see Costanzo v. Tillinghast, 287 U.S. 341, 344, 53 S.Ct. 152, 153, 77 L.Ed. 350 (1932), and with many statutes, a mental state adverb adjacent to initial words has been applied to phrases or clauses appearing later in the statute without regard to the punctuation or structure of the statute. See Liparota v. United States, 471 U.S. 419, 426-29, 105 S.Ct. 2084, 2088-90, 85 L.Ed.2d 434 (1985) (interpreting food stamps provision); United States v. Nofziger, 878 F.2d 442, 446-50 (D.C.Cir.) (interpreting government “revolving door” statute), cert. denied, — U.S. —-, 110 S.Ct. 564, 107 L.Ed.2d 559 (1989); United States v. Johnson & Towers, Inc., 741 F.2d 662, 667-69 (3d Cir. 1984) (interpreting the conservation act), cert. denied, 469 U.S. 1208, 105 S.Ct. 1171, 84 L.Ed.2d 321 (1985). In the present case, we do not believe the comma after “authorization” renders the text so clear as to preclude review of the legislative history.

The first federal statute dealing with computer crimes was passed in 1984, Pub.L. No. 98-473 (codified at 18 U.S.C. Section 1030 (Supp. II 1984)). The specific provision under which Morris was convicted was added in 1986, Pub.L. No. 99-474, along with some other changes. The 1986 amendments made several changes relevant to our analysis.

First, the 1986 amendments changed the scienter requirement in section 1030(a)(2) from “knowingly” to “intentionally.” SeePub.L. No. 99-474, section 2(a)(1). The subsection now covers anyone who (2) intentionally accesses a computer without authorization or exceeds authorized access, and thereby obtains information contained in a financial record of a financial institution, or of a card issuer as defined in section 1602(n) of title 15, or contained in a file of a consumer reporting agency on a consumer, as such terms are defined in the Fair Credit Reporting Act (15 U.S.C. 1681 et seq.). According to the Senate Judiciary Committee, Congress changed the mental state requirement in section 1030(a)(2) for two reasons. Congress sought only to proscribe intentional acts of unauthorized access, not “mistaken, inadvertent, or careless” acts of unauthorized access. S.Rep. No. 99-432, 99th Cong., 2d Sess. 5 (1986), reprinted in 1986 U.S. Code Cong. & Admin. News 2479, 2483 [hereinafter Senate Report].

Also, Congress expressed concern that the “knowingly” standard “might be inappropriate for cases involving computer technology.” Id. The concern was that a scienter requirement of “knowingly” might encompass the acts of an individual “who inadvertently ’stumble[d] into’ someone else’s computer file or computer data,” especially where such individual was authorized to use a particular computer. Id. at 6, 1986 U.S.Code Cong. & Admin.News at 2483. The Senate Report concluded that “[t]he substitution of an ‘intentional’ standard is designed to focus Federal criminal prosecutions on those whose conduct evinces a clear intent to enter, without proper authorization, computer files or data belonging to another.” Id., U.S.Code Cong. & Admin.News at 2484. Congress retained the “knowingly” standard in other subsections of section 1030. See 18 U.S.C. Section 1030(a)(1), (a)(4).

This use of a mens rea standard to make sure that inadvertent accessing was not covered is also emphasized in the Senate Report’s discussion of section 1030(a)(3) and section 1030(a)(5), under which Morris was convicted. Both subsections were designed to target “outsiders,” individuals without authorization to access any federal interest computer. Senate Report at 10, U.S.Code Cong. & Admin.News at 2488. The rationale for the mens rea requirement suggests that it modifies only the “accesses” phrase, which was the focus of Congress’s concern in strengthening the scienter requirement.

The other relevant change in the 1986 amendments was the introduction of subsection (a)(5) to replace its earlier version, subsection (a)(3) of the 1984 act, 18 U.S.C. Section 1030(a)(3) (Supp. II 1984). The predecessor subsection covered anyone who knowingly accesses a computer without authorization, or having accessed a computer with authorization, uses the opportunity such access provides for purposes to which such authorization does not extend, and by means of such conduct knowingly uses, modifies, destroys, or discloses information in, or prevents authorized use of, such computer, if such computer is operated for or on behalf of the Government of United States and such conduct affects such operation. The 1986 version changed the mental state requirement from “knowingly” to “intentionally,” and did not repeat it after the “accesses” phrase, as had the 1984 version. By contrast, other subsections of section 1030 have retained “dual intent” language, placing the scienter requirement at the beginning of both the “accesses” phrase and the “damages” phrase. See, e.g., 18 U.S.C. Section 1030(a)(1).

Morris notes the careful attention that Congress gave to selecting the scienter requirement for current subsections (a)(2) and (a)(5). Then, relying primarily on comments in the Senate and House reports, Morris argues that the “intentionally” requirement of section 1030(a)(5)(A) describes both the conduct of accessing and damaging. As he notes, the Senate Report said that “[t]he new subsection 1030(a)(5) to be created by the bill is designed to penalize those who intentionally alter, damage, or destroy certain computerized data belonging to another.” Senate Report at 10, U.S.Code Cong. & Admin.News at 2488. The House Judiciary Committee stated that “the bill proposes a new section (18 U.S.C. 1030(a)(5)) which can be characterized as a ‘malicious damage’ felony violation involving a Federal interest computer. We have included an ‘intentional’ standard for this felony and coverage is extended only to outside trespassers with a $1,000 threshold damage level.” H.R.Rep. No. 99-612, 99th Cong.2d Sess. at 7 (1986). A member of the Judiciary Committee also referred to the section 1030(a)(5) offense as a “malicious damage” felony during the floor debate. 132 Cong.Rec. H3275, 3276 (daily ed. June 3, 1986) (remarks of Rep. Hughes).

The Government’s argument that the scienter requirement in section 1030(a)(5)(A) applies only to the “accesses” phrase is premised primarily upon the difference between subsection (a)(5)(A) and its predecessor in the 1984 statute. The decision to state the scienter requirement only once in subsection (a)(5)(A), along with the decision to change it from “knowingly” to “intentionally,” are claimed to evince a clear intent upon the part of Congress to apply the scienter requirement only to the “accesses” phrase, though making that requirement more difficult to satisfy. This reading would carry out the Congressional objective of protecting the individual who “inadvertently ’stumble[s] into’ someone else’s computer file.” Senate Report at 6, U.S. Code Cong. & Admin. News at 2483.

The Government also suggests that the fact that other subsections of section 1030 continue to repeat the scienter requirement before both phrases of a subsection is evidence that Congress selectively decided within the various subsections of section 1030 where the scienter requirement was and was not intended to apply. Morris responds with a plausible explanation as to why certain other provisions of section 1030 retain dual intent language. Those subsections use two different mens rea standards; therefore it is necessary to refer to the scienter requirement twice in the subsection. For example, section 1030(a)(1) covers anyone who (1) knowingly accesses a computer without authorization or exceeds authorized access, and by means of such conduct obtains information that has been determined by the United States Government pursuant to an Executive order or statute to require protection against unauthorized disclosure for reasons of national defense or foreign relations, or any restricted data … with the intent or reason to believe that such information so obtained is to be used to the injury of the United States, or to the advantage of any foreign nation.

Since Congress sought in subsection (a)(1) to have the “knowingly” standard govern the “accesses” phrase and the “with intent” standard govern the “results” phrase, it was necessary to state the scienter requirement at the beginning of both phrases. By contrast, Morris argues, where Congress stated the scienter requirement only once, at the beginning of the “accesses” phrase, it was intended to cover both the “accesses” phrase and the phrase that followed it.

There is a problem, however, with applying Morris’s explanation to section 1030(a)(5)(A). As noted earlier, the predecessor of subsection (a)(5)(A) explicitly placed the same mental state requirement before both the “accesses” phrase and the “damages” phrase. In relevant part, that predecessor in the 1984 statute covered anyone who “knowingly accesses a computer without authorization, … and by means of such conduct knowingly uses, modifies, destroys, or discloses information in, or prevents authorized use of, such computer….” 18 U.S.C. Section 1030(a)(3) (Supp. II 1984) (emphasis added). This earlier provision demonstrates that Congress has on occasion chosen to repeat the same scienter standard in the “accesses” phrase and the subsequent phrase of a subsection of the Computer Fraud Statute. More pertinently, it shows that the 1986 amendments adding subsection (a)(5)(A) placed the scienter requirement adjacent only to the “accesses” phrase in contrast to a predecessor provision that had placed the same standard before both that phrase and the subsequent phrase.

Despite some isolated language in the legislative history that arguably suggests a scienter component for the “damages” phrase of section 1030(a)(5)(A), the wording, structure, and purpose of the subsection, examined in comparison with its departure from the format of its predecessor provision persuade us that the “intentionally” standard applies only to the “accesses” phrase of section 1030(a)(5)(A), and not to its “damages” phrase.

II. The unauthorized access requirement in section 1030(a)(5)(A)

Section 1030(a)(5)(A) penalizes the conduct of an individual who “intentionally accesses a Federal interest computer without authorization.” Morris contends that his conduct constituted, at most, “exceeding authorized access” rather than the “unauthorized access” that the subsection punishes. Morris argues that there was insufficient evidence to convict him of “unauthorized access,” and that even if the evidence sufficed, he was entitled to have the jury instructed on his “theory of defense.”

We assess the sufficiency of the evidence under the traditional standard. Morris was authorized to use computers at Cornell, Harvard, and Berkeley, all of which were on INTERNET. As a result, Morris was authorized to communicate with other computers on the network to send electronic mail (SEND MAIL), and to find out certain information about the users of other computers (finger demon). The question is whether Morris’s transmission of his worm constituted exceeding authorized access or accessing without authorization.

The Senate Report stated that section 1030(a)(5)(A), like the new section 1030(a)(3), would “be aimed at ‘outsiders,’ i.e., those lacking authorization to access any Federal interest computer.” Senate Report at 10, U.S.Code Cong. & Admin.News at 2488. But the Report also stated, in concluding its discussion on the scope of section 1030(a)(3), that it applies “where the offender is completely outside the Government, … or where the offender’s act of trespass is interdepartmental in nature.” Id. at 8, U.S.Code Cong. & Admin.News at 2486 (emphasis added).

Morris relies on the first quoted portion to argue that his actions can be characterized only as exceeding authorized access, since he had authorized access to a federal interest computer. However, the second quoted portion reveals that Congress was not drawing a bright line between those who have some access to any federal interest computer and those who have none. Congress contemplated that individuals with access to some federal interest computers would be subject to liability under the computer fraud provisions for gaining unauthorized access to other federal interest computers. See, e.g., id. (stating that a Labor Department employee who uses Labor’s computers to access without authorization an FBI computer can be criminally prosecuted).

The evidence permitted the jury to conclude that Morris’s use of the SEND MAIL and finger demon features constituted access without authorization. While a case might arise where the use of SEND MAIL or finger demon falls within a nebulous area in which the line between accessing without authorization and exceeding authorized access may not be clear, Morris’s conduct here falls well within the area of unauthorized access. Morris did not use either of those features in any way related to their intended function. He did not send or read mail nor discover information about other users; instead he found holes in both programs that permitted him a special and unauthorized access route into other computers.

Moreover, the jury verdict need not be upheld solely on Morris’s use of SEND MAIL and finger demon. As the District Court noted, in denying Morris’ motion for acquittal, Although the evidence may have shown that defendant’s initial insertion of the worm simply exceeded his authorized access, the evidence also demonstrated that the worm was designed to spread to other computers at which he had no account and no authority, express or implied, to unleash the worm program. Moreover, there was also evidence that the worm was designed to gain access to computers at which he had no account by guessing their passwords. Accordingly, the evidence did support the jury’s conclusion that defendant accessed without authority as opposed to merely exceeding the scope of his authority. In light of the reasonable conclusions that the jury could draw from Morris’s use of SEND MAIL and finger demon, and from his use of the trusted hosts feature and password guessing, his challenge to the sufficiency of the evidence fails.

Morris endeavors to bolster his sufficiency argument by contending that his conduct was not punishable under subsection (a)(5) but was punishable under subsection (a)(3). That concession belies the validity of his claim that he only exceeded authorization rather than made unauthorized access. Neither subsection (a)(3) nor (a)(5) punishes conduct that exceeds authorization. Both punish a person who “accesses” “without authorization” certain computers. Subsection (a)(3) covers the computers of a department or agency of the United States; subsection (a)(5) more broadly covers any federal interest computers, defined to include, among other computers, those used exclusively by the United States, 18 U.S.C. Section 1030(e)(2)(A), and adds the element of causing damage or loss of use of a value of $1,000 or more. If Morris violated subsection (a)(3), as he concedes, then his conduct in inserting the worm into the Internet must have constituted “unauthorized access” under subsection (a)(5) to the computers of the federal departments the worm reached, for example, those of NASA and military bases.

To extricate himself from the consequence of conceding that he made “unauthorized access” within the meaning of subsection (a)(3), Morris subtly shifts his argument and contends that he is not within the reach of subsection (a)(5) at all. He argues that subsection (a)(5) covers only those who, unlike himself, lack access to any federal interest computer. It is true that a primary concern of Congress in drafting subsection (a)(5) was to reach those unauthorized to access any federal interest computer. The Senate Report stated, “[T]his subsection [(a)(5)] will be aimed at ‘outsiders,’ i.e., those lacking authorization to access any Federal interest computer.” Senate Report at 10, U.S. Code Cong. & Admin. News at 2488. But the fact that the subsection is “aimed” at such “outsiders” does not mean that its coverage is limited to them. Congress understandably thought that the group most likely to damage federal interest computers would be those who lack authorization to use any of them. But it surely did not mean to insulate from liability the person authorized to use computers at the State Department who causes damage to computers at the Defense Department. Congress created the misdemeanor offense of subsection (a)(3) to punish intentional trespasses into computers for which one lacks authorized access; it added the felony offense of subsection (a)(5) to punish such a trespasser who also causes damage or loss in excess of $1,000, not only to computers of the United States but to any computer within the definition of federal interest computers. With both provisions, Congress was punishing those, like Morris, who, with access to some computers that enable them to communicate on a network linking other computers, gain access to other computers to which they lack authorization and either trespass, in violation of subsection (a)(3), or cause damage or loss of $1,000 or more, in violation of subsection (a)(5).

Morris also contends that the District Court should have instructed the jury on his theory that he was only exceeding authorized access. The District Court decided that it was unnecessary to provide the jury with a definition of “authorization.” We agree. Since the word is of common usage, without any technical or ambiguous meaning, the Court was not obliged to instruct the jury on its meaning. See, e.g., United States v. Chenault, 844 F.2d 1124, 1131 (5th Cir. 1988) (“A trial court need not define specific statutory terms unless they are outside the common understanding of a juror or are so technical or specific as to require a definition.”).

An instruction on “exceeding authorized access” would have risked misleading the jury into thinking that Morris could not be convicted if some of his conduct could be viewed as falling within this description. Yet, even if that phrase might have applied to some of his conduct, he could nonetheless be found liable for doing what the statute prohibited, gaining access where he was unauthorized and causing loss.

Additionally, the District Court properly refused to charge the jury with Morris’s proposed jury instruction on access without authorization. That instruction stated, “To establish the element of lack of authorization, the government must prove beyond a reasonable doubt that Mr. Morris was an ‘outsider,’ that is, that he was not authorized to access any Federal interest computer in any manner.” As the analysis of the legislative history reveals, Congress did not intend an individual’s authorized access to one federal interest computer to protect him from prosecution, no matter what other federal interest computers he accesses.

CONCLUSION

For the foregoing reasons, the judgment of the District Court is affirmed.

FOOTNOTES

FN* The Honorable T.F. Gilroy Daly of the District Court for the District of Connecticut, sitting by designation.

FN1 In the colorful argot of computers, a “worm” is a program that travels from one computer to another but does not attach itself to the operating system of the computer it “infects.” It differs from a “virus,” which is also a migrating program, but one that attaches itself to the operating system of any computer it enters and can infect any other computer that uses files from the infected computer.

v.

DAVID LaMACCHIA

CRIMINAL ACTION NO. 9410092-RGS
December 28, 1994

MEMORANDUM OF DECISION AND ORDER ON DEFENDANT’S MOTION TO DISMISS
STEARNS, D.J.

This case presents the issue of whether new wine can be poured into an old bottle. The facts, as seen in the light most favorable to the government, are these. The defendant, David LaMacchia, is a twenty-one year old student at the Massachusetts Institute of Technology (MIT). LaMacchia, a computer hacker, used MIT’s computer network to gain entree to the Internet. Using pseudonyms and an encrypted address, LaMacchia set up an electronic bulletin board which he named Cynosure.[1] He encouraged his correspondents to upload popular software applications (Excel 5.0 and WordPerfect 6.0) and computer games (Sim City 2000). These he transferred to a second encrypted address (Cynosure II) where they could be downloaded by other users with access to the Cynosure password. Although LaMacchia was at pains to impress the need for circumspection on the part of his subscribers, the worldwide traffic generated by the offer of free software attracted the notice of university and federal authorities.

On April 7, 1994, a federal grand jury returned a one count indictment charging LaMacchia with conspiring with “persons unknown” to violate 18 U.S.C. Sec. 1343, the wire fraud statute. According to the indictment, LaMacchia devised a scheme to defraud that had as its object the facilitation “on an international scale” of the “illegal copying and distribution of copyrighted software” without payment of licensing fees and royalties to software manufacturers and vendors. The indictment alleges that LaMacchia’s scheme caused losses of more than one million dollars to software copyright holders. The indictment does not allege that LaMacchia sought or derived any personal benefit from the scheme to defraud.

On September 30, 1994. the defendant brought a motion to dismiss, arguing that the government had improperly resorted to the wire fraud statute as a copyright enforcement tool in defiance of the Supreme Court’s decision in Dowling v. United States, 473 U.S. 207 (1985) The government argues that Dowling is a narrower case than LaMacchia would have it, and holds only that copyright infringement does not satisfy the physical “taking” requirement of the National Stolen Property Act, 18 U.S.C. Sec. 2314.
THE DOWLING DECISION
Paul Edmond Dowling was convicted of conspiracy, interstate transportation of stolen property [ITSP], copyright violations and mail fraud in the Central District of California. Dowling and his co-conspirators sold bootleg Elvis Presley recordings by soliciting catalogue orders from post office boxes in Glendale, California. The infringing recordings were shipped in interstate commerce to Maryland and Florida. The eight ITSP counts on which Dowling was convicted involved thousands of phonograph albums. “[E]ach album contained performances of copyrighted musical compositions for the use of which no licenses had been obtained nor royalties paid ….” Dowling, supra at 212. Dowling appealed his convictions (except those involving copyright infringement) The Ninth Circuit Court of Appeals affirmed. “[T]he [Ninth Circuit] reasoned that the rights of copyright owners in their protected property were indistinguishable from ownership interests in other types of property and were equally deserving of protection under the [stolen property] statute.” Id.

The Supreme Court granted certiorari only as to Dowling’s convictions for interstate transportation of stolen property.[2] The Court, in an opinion by Justice Blackmun, held that a copyrighted musical composition impressed on a bootleg phonograph record is not property that is “stolen, converted, or taken by fraud” within the meaning of the Stolen Property Act. Justice Blackmun emphasized that cases prosecuted under Sec. 2314 had traditionally involved “physical ‘goods, wares [or] merchandise.’” The statute “seems clearly to contemplate a physical identity between the items unlawfully obtained and those eventually transported, and hence some prior physical taking of the subject goods” Id at 216. In Dowling’s case there was no evidence “that Dowling wrongfully came by the phonorecords actually shipped or the physical materials from which they were made.” Dowling, supra at 214.

Justice Blackmun felt compelled, however, to answer the government’s argument that the unauthorized use of the underlying musical compositions was itself sufficient to render the offending phonorecords property “stolen, converted or taken by fraud.”
[T]he Government’s theory here would make theft, conversion, or fraud equivalent to wrongful appropriation of statutorily protected rights in copyright. The copyright owner, however, holds no ordinary chattel. A copyright, like other intellectual property, comprises a series of carefully defined and carefully delimited interests to which the law affords correspondingly exact protections. Id. at 216.
A copyright, as Justice Blackmun explained, is unlike an ordinary chattel because the holder does not acquire exclusive dominion over the thing owned. The limited nature of the property interest conferred by copyright stems from an overriding First Amendment concern for the free dissemination of ideas. “The primary objective of copyright is not to reward the labor of authors. but ‘[t]o promote the Progress of Science and useful Arts.’ Art. I, Sec. 8, cl. 8.” Feist Publications, Inc. v. Rural Telephone Service Co., 499 U.S. 340, 349 (1991). Data general Corp. v. Grumman Systems Support, 36 F.3d 1147, 1187 (1st Cir. 1994) (same). Justice Blackmun offered the “fair use” doctrine (17 U.S.C. Sec. 107) and the statutory scheme of compulsory licensing of musical compositions (17 U.S.C. Sec. 115) as examples of ways in which the property rights of a copyright holder are circumscribed by the Copyright Act.[3] Dowling, supra at 217.
It follows that interference with copyright does not easily equate with theft, conversion or fraud. The Copyright Act even employs a separate term of art to define one who misappropriates a copyright:

“Anyone who violates any of the exclusive rights of the copyright owner,” that is, anyone who trespasses into his exclusive domain by using or authorizing the use of the copyrighted work in one of the five ways set forth in the statute, “is an infringer of the copyright.” There is no dispute in this case that Dowling’s unauthorized inclusion on his bootleg albums of performances of copyrighted compositions constituted infringement of those copyrights. It is less clear, however, that the taking that occurs when an infringer arrogates the use of another’s protected work comfortably fits the terms associated with physical removal employed by Sec. 2314. The infringer invades a statutorily defined province guaranteed to the copyright holder alone. But he does not assume physical control over the copyright; nor does he wholly deprive its owner of its use. While one may colloquially like infringement with some general notion of wrongful appropriation, infringement plainly implicates a more complex set of property interests than does run-of-the-mill theft, conversion or fraud. As a result, it fits but awkwardly with the language Congress chose – “stolen, converted or taken by fraud” – to describe the sorts of goods whose interstate shipment Sec. 2314 makes criminal. Id at 217-218 (citations omited).
The ITSP statute, Justice Blackmun observed, had its roots in efforts by Congress to supplement the efforts of state authorities frustrated by jurisdictional problems arising from the transportation of stolen property across state lines. Id. at 219-220.
No such need for supplemental federal action has ever existed, however, with respect to copyright infringement, for the obvious reason that Congress always has had the bestowed authority to legislate directly in this area…. Given that power, it is implausible to suppose that Congress intended to combat the problem of copyright infringement by the circuitous route hypothesized by the government . . . In sum, the premise of Sec. 2314 — the need to fill with federal action an enforcement chasm created by limited state jurisdiction — simply does not apply to the conduct the Government seeks to reach here. Id at 220-221.
A review of the evolution of criminal penalties in the Copyright Act led Justice Blackmun to observe that:
“[T]he history of the criminal infringement provisions of the Copyright Act reveals a good deal of care on Congress’ part before subjecting copyright infringement to serious criminal penalties…. In stark contrast, the Government’s theory of this case presupposes a congressional decision to bring the felony provisions of Sec. 2314, which make available the comparatively light fine of not more than $10,000 but the relatively harsh term of imprisonment of up to 10 years, to bear on the distribution of a sufficient quantity of any infringing goods simply because of the presence here of a factor-interstate transportation-not otherwise though relevant to copyright law. The Government thereby presumes congressional adoption of an indirect but blunderbuss solution to a problem treated with precision when considered directly. Id. at 225-226.
Finally, noting that the government’s expansive reading of the Stolen Property Act would have the unsettling effect of criminalizing a broad range of conduct involving copyright and other intellectual property that had been historically regulated by the civil laws, Justice Blackmun concluded that “the deliberation with which Congress over the last decade has addressed the problem of copyright infringement for profit, as well as the precision with which it has chosen to apply criminal penalties in this area, demonstrates anew the wisdom of leaving it to the legislature to define crime and prescribe penalties. Here, the language of Sec. 2314 does not ‘plainly and unmistakably’ cover petitioner Dowling’s conduct” Id at 228 (footnote omitted). Dowling’s ITSP convictions were reversed.
THE COPYRIGHT LAW
Article 1, Sec. 8, cl. 8 of the U.S. Constitution grants Congress the exclusive power “[t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective writings and Discoveries.” Thus “[t]he remedies for infringement ‘are only those prescribed by Congress.’” Sony Corporation of America v. Universal City Studios, Inc., 464 U.S. 417, 431 (1984) (quoting Thompson v. Hubbard, 131 U.S. 123, 151 (1889)). Since 1897, when criminal copyright infringement was first introduced into U.S. copyright law, [4] the concept differentiating criminal from civil copyright violations has been that the infringement must be pursued for purposes of commercial exploitation.

Until 1909, “[t]he crime of copyright infringement was . . . limited to unlawful performances and representation of copyrighted dramatic and musical compositions.” Saunders, Criminal Copyright Infringement and the Copyright Felony Act, 71 Denv. U.L. Rev. 671, 673 (1994). The 1897 Act defined the mens rea of criminal copyright infringement as conduct that is “willfull” and undertaken “for profit,” a definition that remained unaltered until the general revision of the Copyright Act in 1976.

In 1909, the Copyright Act was revised to extend misdemeanor criminal sanctions to infringement of all copyrighted material with the exception of sound recordings. Copyright Act of 1909, ch. 320, 33 stat 1075-1082. The 1909 amendments also made criminal the knowing and willful aiding and abetting of another’s infringing activities. Performers and producers of musical recordings were not protected under the 1909 Act, and composers were given the exclusive rights to license only the first recording of their musical works. After that, a compulsory licensing provision allowed anyone to record and distribute the work so long as a two cent per copy royalty was paid to the original composer. Id, Subsec. 1(e), 25(e).

The framework set out by the 1909 Act remained in effect until 1971, when the growth of the recording industry following the musical revolution of the 1960’s brought the problem of unauthorized reproduction and sale of musical works to Congress’ attention. See H.R. Rep. No. 487, 92d Cong. 1st Sess. 2 (1971). In response, Congress passed the Sound Recording Act of 1971, which addressed the perceived flaw in the 1909 Act by granting sound recordings full copyright protection, including criminal penalties for profit motivated infringement. In 1976, Congress revamped the Copyright Act by eliminating the crime of aiding and abetting copyright infringement. It also eased the mens rea requirement for criminal copyright infringement by eliminating the burden of proving that an infringer acted “for profit,” requiring instead only that the infringement be conducted “willfully and for purposes of commercial advantage or private financial gain.” 17 U.S.C. Sec. 506(a). Criminal infringement under the 1976 Act was a misdemeanor except in the case of repeat offenders (who could be sentenced to a maximum of two years and a fine of $50,000).

After lobbying by the Motion Picture Association and the Recording Industry Association, Congress increased the penalties for criminal infringement in 1982. Act of May 24, 1982. Pub. L. No. 97-180. 97th Cong. 2d Sess., 96 Stat. 91. Certain types of first-time criminal infringement were punishable as felonies depending on the time period involved and the number of copies reproduced or distributed.[5] See 18 U.S.C. Sec. 2319. The mens rea element, however, remained unchanged, requiring proof of “commercial advantage or private financial gain.” 17 U.S.C. Sec. 506(a). Most criminal infringements remained misdemeanor offenses despite the new penalty structure.

In the decade following the 1982 revisions to the Copyright Act, the home computing and software industry underwent a period of explosive growth paralleling the expansion in the 1960’s and 1970’s of the recording and motion picture industries. In 1992, the Software Publishers Association reported in testimony to the Subcommittee on Intellectual Property and Judicial Administration of the House Committee on the Judiciary that software manufacturers were losing $2.4 billion in revenues annually as a result of software piracy. “Rather than adopting a piecemeal approach to copyright legislation and simply adding computer programs to audiovisual works, and sound recordings to the list of works whose infringement can give rise to felony penalties under [18 U.S.C.] Sec. 2319,” Congress passed the Copyright Felony Act.[6] Saunders, supra, at 680. The Act amended Sec. 2319 by extending its felony provision to the criminal infringement of all copyrighted works including computer software.[7] The mens rea for criminal infringement remained unchanged, requiring prosecutors to prove that the defendant infringed a copyright “willfully and for purpose of commercial advantage or private financial gain.” 17 U.S.C. Sec. 506(a).[8]
DISCUSSION
The wire fraud statute, 18 U.S.C. Sec. 1343 was enacted in 1952. In its entirety, the statute reads as follows:
Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice, shall be fined not more than $1,000 or imprisoned not more than five years, or both. If the violation affects a financial institution, such person shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.
The wire fraud statute was enacted to cure a jurisdictional defect that Congress perceived was created by the growth of radio and television as commercial media. In its report to the House of Representatives, the Committee on the Judiciary explained:
[T]he measure in amended form. . .creates a new. but relatively isolated area of criminal conduct consisting of the execution of a scheme to defraud or to obtain money or property by means of false or fraudulent pretenses, representations, or promises transmitted in writings, signs, pictures, or sounds via interstate wire or radio communications (which includes the medium of television). . . The rapid growth of interstate communications facilities, particularly those of radio and television, has given rise to a variety of fraudulent activities on the part of unscrupulous persons which are not within the reach of existing mail fraud laws, but which are carried out in complete reliance upon the use of wire and radio facilities and without resort to the mails…. Even in those cases of radio fraud where the mails have played a role, it is sometimes difficult to prove the use of the mails to the satisfaction of the court, and so prosecutions often fail. Because of the greater facility in proving the use of radio, this bill if enacted might often rescue a prosecution which would otherwise be defeated on technicalities.
H.R. Rep. No. 388, 82d Cong., 1st Sess. 102 (1951).
As the legislative history makes clear, the wire fraud statute was intended to complement the mail fraud statute by giving federal prosecutors jurisdiction over frauds involving the use of interstate (or foreign) wire transmissions. [9] Thus what can be prosecuted as a scheme to defraud under the mail fraud statute (18 U.S.C. Sec. 1341) is equally susceptible to punishment under Sec. 1343 so long as the jurisdictional element is met. Carpenter v. United States. 484 U.S. 19, 25 n.6 (1987). McEvoy Travel Bureau, Inc. v. Heritage Travel, Inc. 904 F.2d 786, 791 n.8 (1st Cir. 1990). The concomitancy of the two statutes underlies the government’s argument that significance should be read into the fact that the limited grant of certiorari in Dowling left Dowling’s convictions for mail fraud undisturbed.

A scheme to defraud is the defining concept of the mail and wire fraud statutes. Because of the conjunctive use of the word “or” in the statutory phrase “any scheme or artifice to defraud, or for obtaining money or property by false or fraudulent pretenses, representations, or promises.” the federal courts (encouraged by prosecutors) have essentially bifurcated mail and wire fraud into two separate offenses; the first, the devising of a scheme to defraud, the second, the devising of a scheme to obtain money or property by false pretenses. While the latter crime comports with common law notions of fraud, “[t]he phrase, ‘a scheme to defraud’ came to prohibit a plan, that is, to forbid a state of mind, rather than physical conduct.” Moohr, Mail Fraud and the Intangible Rights Doctrine: Someone to Watch Over Us, 31 Harv. J. on Legis. 153, 161 (1994).

The incarnation of mail fraud as an inchoate crime has its most celebrated expression in federal prosecutions of state and local public officials accused of depriving citizens of their intangible right to honest public service in violation of their fiduciary duty to disclose conflicts of interest.[10] See United States v. Mandel, 591 F.2d 1347, 1360-1362 (4th Cir. 1979). Because of the so-called “intangible rights doctrine,” mail fraud and its sister offense, wire fraud, have become the federal prosecutor’s weapon of choice. “Mail fraud . . . has been expanded to the point that a fiduciary, agent, or employee commits an offense when, through a material deception or a failure to disclose, a beneficiary, principal or employer suffers even an intangible, constructed detriment.” Moohr, supra, 31 Harv. J. On Legis. at 163. Wire fraud offers an especially pleasing feature from the government’s perspective that is particularly relevant to LaMacchia’s case. Unlike the criminal copyright statute, 17 U.S.C. Sec. 506(a), the mail and wire fraud statutes do not require that a defendant be shown to have sought to personally profit from the scheme to defraud. See United States v. Silvano, 812 F.2d 754, 759-760 (1st Cir. 1987).

While it is true, as LaMacchia contends, that the denial of a writ of certiorari “imports no expression upon the merits of the case,” United States v. Carver, 260 U.S. 482, 490 (1923), the more interesting issue is whether the Ninth Circuit’s mail fraud analysis (the significant portions of which the Supreme Court left intact) is applicable to the facts of his case.

Dowling brought himself within the orbit of the mail fraud statute by mailing catalogues advertising his bootleg phonograph records. So, too, the government argues, LaMacchia subjected himself to the wire fraud statute by advertising infringing software via computer transmissions. The government in Dowling (as here) did not argue any more than jurisdictional significance for Dowling’s mailings, that is, the mailings themselves did not make any false or misleading representations. They did, however, serve as an obvious means of furthering Dowling’s scheme to defraud. See Schmuck v. United States, 489 U.S. 705. 710-711 (1989).

The Ninth Circuit nonetheless focused on the fact that Dowling had “concealed his activities from the copyright holders with the intent to deprive them of their royalties.” 739 F.2d at 1449. “It is settled in this Circuit that a scheme to defraud need not be an active misrepresentation. A nondisclosure or concealment may serve as a basis for the fraudulent scheme.” Id. at 1448. See also United States v. Silvano, supra, 812 F.2d at 759 (same). The Ninth Circult rejected Dowling’s argument that non-disclosure can serve as the basis of a scheme to defraud only when a defendant has a fiduciary duty to make an affirmative disclosure. It also rejected the government’s contention that “the presence of illegal conduct alone may constitute the basis of the ‘fraud’ element.” 739 F.2d at 1449. “Rather, we conclude that a non-disclosure can only serve as a basis for a fraudulent scheme when there exists an independent duty that has been breached by the person so charged.” Id. This duty, the Ninth Circuit noted, could be fiduciary in nature, or it could “derive from an independent explicit statutory duty created by legislative enactment.” Id. In Dowling’s case, the duty located by the Ninth Circuit was the duty implicit in the compulsory licensing scheme of the Copyright Act, 17 U.S.C. Sec. 115, which requires vendors to notify copyright owners of the intention to manufacture and distribute infringing records.
In conclusion, we stress that the narrowness of our holding permits nondisclosures to form the basis of a scheme to defraud only when there exists an independent duty (either fiduciary or derived from an explicit and independent statutory requirement) and such a duty has been breached. To hold otherwise that illegal conduct alone may constitute the basis of the fraud element of a mail fraud conviction would have the potential of bringing almost any illegal act within the province of the mail fraud statute.
739 F.2d at 1450.
The difficulties in applying the Ninth Circuit’s Dowling analysis to support a wire fraud prosecution in LaMacchia’s case are three. First, no fiduciary relationship existed between LaMacchia and the manufacturers whose software copyrights he allegedly infringed. Second, there is no independent statutory duty of disclosure like the one that snared Dowling because there is no software equivalent to the compulsory licensing scheme.[11] Third, even were I to accept the argument made by the government in Dowling, that illegal conduct alone may suffice to satisfy the fraud element of [Sec. 1343], the holding would not cover LaMacchia’s case for the simple reason that what LaMacchia is alleged to have done is not criminal conduct under Sec. 506(a) of the Copyright Act.[12]

The government’s second and more plausible argument relies on the unobjectionable proposition “that [the] enactment of particularized federal interest statutes does not oust a more general interstate commerce statute from application.” Government’s Memorandum at 11. The government cites a number of areas of specialized federal law where the mail and wire fraud statutes have been held to remain viable enforcement tools. This same argument, however, did not impress Justice Blackmun in Dowling, as none of the cases cited there (as here) “involved copyright law specifically or intellectual property in general.” Dowling, supra at 218 n.8.[13] The government also points to 18 U.S C. Sec. 2319(a), which provides that “[w]hoever violates section 506(a). . . of title 17 shall be punished as provided in subsection (b) of this section and such penalties shall be in addition to any other provisions of title 17 or any other law.” The government emphasizes the last four words of the statute without apparently noticing the first four. LaMacchia is not alleged to have violated section 506(a). See also Dowling, supra at 225 n.18 (“In the absence of and such indication [that Congress intended to approve the use of Sec. 2314 in a copyright prosecution], we decline to read the general language appended to Sec. 2319(a) impliedly to validate extension of Sec. 2314 in a manner otherwise unsupported by its language and purpose”). Finally, the government cites Carpenter v. United States, 484 U.S 19 (1987), which holds that intangible as well as tangible property interests are protected by the mail and wire fraud statutes. “Absolutely nothing in Carpenter,” the government argues, “distinguishes intangible right to copy, distribute and license computer software from other intangible property interests….” Government’s Memorandum at 13. But see United States v. Riggs, 739 F. Supp. 414, 422-423 (N.D. Ill. 1990) (“As Dowling . . . recognized, the copyright holder owns only a bundle of intangible rights which can be infringed, but not stolen or converted. The owner of confidential, proprietary business information, in contrast, possesses something which has clearly been recognized as an item of property”).

The issue thus is whether the “bundle of rights” conferred by copyright is unique and distinguishable from the indisputably broad range of property interests protected by the mail and wire fraud statutes. I find it difficult, if not impossible, to read Dowling as saying anything but that it is.[14]“A copyright, like other intellectual property, comprises a series of carefully defined and carefully delimited interests to which the law affords correspondingly exact protections.” Dowling, supra at 216. If, as the government contends, Dowling stands for nothing more than the proposition that one cannot equate copyright infringement with a “physical taking” for purposes of the Stolen Property Act,[15] it is difficult to explain why Justice Blackmun devoted the bulk of his opinion to the issue of “whether the history and purpose of Sec. 2314 evince a plain congressional intention to reach interstate shipments of goods infringing copyrights.” Dowling supra at 218.[16] Nor can one explain why the same analysis should not be applied to the mail and wire fraud statutes, which like the Stolen Property Act, were enacted to fill enforcement gaps in state and federal law. Why is it not true of mail and wire fraud, as it is of ITSP, that “[n]o such need for supplemental federal action has ever existed …. for the obvious reason that Congress always has had the bestowed authority to legislate directly in this area [of copyright infringement]“? Dowling supra at 220. Finally, why would not the government’s position here produce the same pernicious result that Justice Blackmun warned of in Dowling, of permitting the government to subvert the carefully calculated penalties of the Copyright Act by selectively bringing some prosecutions under the more generous penalties of the mail and wire fraud statutes?[17]

What the government is seeking to do is to punish conduct that reasonable people might agree deserves the sanctions of the criminal law. But as Justice Blackmun observed in Dowling, copyright is an area in which Congress has chosen to tread cautiously, relying “chiefly . . . on an array of civil remedies to provide copyright holders protection against infringement,” while mandating “studiously graded penalties” in those instances where Congress has concluded that the deterrent effect of criminal sanctions are required. Dowling, supra at 221, 225. “This step-by-step, carefully considered approach is consistent with Congress’ traditional sensitivity to the special concerns implicated by the copyright laws.” Id at 225. Indeed, the responsiveness of Congress to the impact of new technology on the law of copyright limned earlier in this opinion, confirms Justice Blackmun’s conviction of “the wisdom of leaving it to the legislature to define crime and prescribe penalties” Dowling, supra at 228.
“The judiciary’s reluctance to expand the protections afforded by the copyright without explicit legislative guidance is a recurring theme. Sound policy, as well as history, supports our consistent deference to Congress when major technological innovations alter the market for copyrighted materials. Congress has the institutional authority and the institutional ability to accommodate fully the varied permutations of competing interests that are inevitably implicated by such new technology.”
Sony Corporation of America v. Universal City Studios, Inc., 464 U.S. 417, 431 (1984) (citations omitted).
While the government’s objective is a laudable one, particularly when the facts alleged in this case are considered, its interpretation of the wire fraud statute would serve to criminalize the conduct of not only persons like LaMacchia, but also the myriad of home computer users who succumb to the temptation to copy even a single software program for private use. It is not clear that making criminals of a large number of consumers of computer software is a result that even the software industry would consider desirable.[18]

In sum, I agree with Professor Nimmer that:
The Dowling decision establishes that Congress has finely calibrated the reach of criminal liability [in the Copyright Act], and therefore absent clear indication of Congressional intent, the criminal laws of the United States do not reach copyright-related conduct. Thus copyright prosecutions should be limited to Section 506 of the Act, and other incidental statutes that explicitly refer to copyright and copyrighted works.
3 Nimmer on Copyright, Sec. 15.05 at 15-20 (1993). See also 2 Goldstein, Copyright, Sec. 11.4.2.2 at 304 n. 67 (1989) (“[A]lthough the Court did not directly rule on whether the mail fraud statute encompassed the infringing conduct, its reasoning with respect to the Stolen Property Act, 18 U.S.C. Sec. 2314, suggests that it would have treated the mail fraud statute similarly.”)

Accordingly, I rule that the decision of the Supreme Court in Dowling v. United States precludes LaMacchia’s prosecution for criminal copyright infringement under the wire fraud statute.[19]

This is not, of course, to suggest that there is anything edifying about what LaMacchia is alleged to have done. If the indictment is to be believed, one might at best describe his actions as heedlessly irresponsible. and at worst as nihilistic, self-indulgent, and lacking in any fundamental sense of values. Criminal as well as civil penalties should probably attach to willful, multiple infringements of copyrighted software even absent a commercial motive on the part of the infringer. One can envision ways that the copyright law could be modified to permit such prosecution. But, “‘[i]t is the legislature, not the Court which is to define a crime, and ordain its punishment.’” Dowling, supra at 214 (quoting United States v. Wiltberger, 5 Wheat. 76, 95 (1820)).
ORDER
For the foregoing reasons, defendant LaMacchia’s motion to dismiss is ALLOWED.

SO ORDERED.

[signed, Richard G. Stearns]
=United States District Judge

FOOTNOTES:

FN1. The allusion is presumably to the North Star, a faithful astronomical reference point for mariners.

FN2. The Court observed a split among the Circuits concerning the applicability of 18 U.S.C. Sec. 2314 to the interstate transportation of infringing articles.

FN3. Another example is the finite duration of a copyright. See 17 U.S.C. Sec. 302.

FN4. Act of January 6, 1897. ch 4. 29 Stat. 481–482.

FN5. While the offense of criminal copyright infringement remained defined by 17 U.S.C. Sec. 506(a), the penalties were moved to a new freestanding statute, 18 U.S.C. Sec. 2319.

FN6. Pub. L. No. 102-561 [S. 893] (October 28, 1992) (enacted after amendment). This is not to say that Congress had been inattentive to the needs of the emerging software industry. In 1980, Congress added “computer program” to the list of definitions of works protected under the copyright statute See 17 U.S.C. Sec. 101. The Computer Software Rental Amendments Act of 1990 gave further protection to holders of software copyrights, although declining to subject violators to the criminal penalties of 17 U.S.C. Sec. 506 and 18 U.S.C. Sec. 2319. See 17 U.S.C. Sec. 109(b)(4).

FN7. The Report that accompanied the Senate version of the bill declared that “[t]he only defense against [software] piracy is the copyright law.” S. Rep. No. 268. 102d Cong., 2d Sess. (1992) (emphasis added)

FN8. As Senator Hatch, the Senate sponsor of the Act noted, “the copying must be undertaken to make money, and even incidental financial benefits that might accrue as a result of the copying should not contravene the law where the achievement of those benefits [was] not the motivation behind the copying.” 138 Cong. Rec. S. 17958-17959 (October 8, 1992).

FN9. The “interstate” limitation was inserted into the statute both out of jurisdictional concerns and to “avoid intrusion on the police power of the States.” H.R. Rep. No. 388, extend to the regulation of copyright, leading one to doubt, as defendant points out, that the statute was enacted to supplement state efforts to police copyright infringement. Defendant’s Memorandum at 18.

FN10. The origins and contours of the intangible rights doctrine (and the short-lived effort of the Supreme Court to reground the mail fraud statute in traditional concepts of property, see McNally v. United States, 483 U.S. 350 (1987)) are capably portrayed in Moohr, supra, 31 Harv. J. on Legis at 158-170. The doctrine has been applied with similar effect to schemes rising in a commercial context. See United States v. George, 477 F.2d 508 (7th Cir. 1973) (commercial kickbacks, employee’s duty to disclose).

FN11. In Cooper v. United States, 639 F Supp. 176, 180 (M.D. Fla. 1986), cited by the government, the petitioners did not raise the sufficiency of the allegation of a scheme to defraud, but rather the possibility that the jury might have perceived the interstate transportation of the pirated cassette tapes as the gravamen of the scheme, a theory indisputably precluded by the Supreme Court’s Dowling decision.

FN12. I do not believe that the Ninth Circuit’s mail fraud analysis survives Dowling in any event, as I will explain. Dowling, I note, did not contest his conviction for criminal violations of Sec. 506(a) of the Copyright Act.

FN13. The suggestion that the felony provisions of the wire fraud statute were enacted with the punishment of copyright infringement in mind in somewhat difficult to accept when one remembers that in 1952 the Copyright Act authorized only misdemeanor prosecutions, a circumstance that continued until 1982. Equally difficult to accept is the idea that Congress has in some fashion acquiesced by silence to the utilization of mail and wire fraud as copyright enforcement tools. One need only contrast the infrequent and, with exception of the Congressional reaction to McNally, technical amendments to the mail and wire fraud statutes with Congress’ exhaustive attention to developments affecting copyright law.

FN14. The government strenuously disagrees with me on this point. However, even the dissenters in Dowling (Justice Powell and White) saw the issue framed by the majority no differently than I do. As Justice Powell characterizes the opinion: “The Court holds today that 18 U.S.C. Sec, 2314 does not apply to this case because the rights of a copyright holder are ‘different’ from the rights of owners of other kinds of property.” Dowling, supra at 22 (Powell, J., dissenting)

FN15. See Government’s Memorandum at 8.

FN16. The government’s suggestion “that the legislative history of copyright protection serves only to provide additional reason to hesitate before extending Sec. 2314 to cover the interstate shipments in this case’.” and that Dowling simply held that “‘Congress has not spoken with the requisite clarity.’” seem to me equally applicable to the analysis of Sec. 1343. Government’s Memorandum at 8 (quoting Dowling, supra at 221, 229).

FN17. For example, a first offender who reproduces fewer than ten copies of a computer software program in a one hundred and eighty day period is subject to a maximum punishment of one year imprisonment 18 U.S.C. Sec. 2314(b)(3). The same prosecution under the wire fraud statute would entail a maximum prison sentence of five years. As defendant also notes, use of the wire fraud statute to punish criminal copyright infringement would override the shorter three year statute of limitations of the Copyright Act.

FN18. In 1992, in hearings before the House Judiciary Subcommittee on Intellectual Property and Judicial Administration, the Vice-President and General Counsel of the Computer & Communications Industry Association testified as follows: “There are millions of people with personal computers to make copies. That is exactly one of the reasons I think you want to be very careful. You do not want to be accidentally taking a large percentage of the American people, either small business or citizens, into the gray area of criminal law.” Hearing on S. 893 (August 12, 1992) at p. 65.

FN19. The issue presented in this case is one of infringement only. Infringement is a technical concept describing interference with the statutorily defined rights of a copyright holder. A scheme or artifice to defraud, the object of which was to fraudulently obtain possession of the copyright itself would, I believe, be clearly punishable under the mail and wire fraud statutes. See Dowling, supra at 217 (“[The infringer] does not assume physical control over the copyright, nor does he wholly deprive the owner of its use”).

Defendants.
ORDER FINDING FEDERAL QUESTION JURISDICTION; GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS; GRANTING IN PART PLAINTIFF’S MOTION FOR PRELIMINARY INJUNCTION

INTRODUCTION

In 1994, Congress amended the Computer Fraud and Abuse Act, 18 U.S.C. Section 1030 (“Act” or “CFAA”), the application of which in this case will confer jurisdiction on the district court for some or all of plaintiff’s claims. Plaintiff, a medical diagnostics company, seeks to assert the revised provisions of the Act as private rights of action against defendant software providers. Resolving ambiguities in the legislation in plaintiff’s favor, the Court by this Order concludes that plaintiff has stated a claim under federal question jurisdiction and pled two claims under the revised Act. The jurisdictional issue is examined first, followed by a discussion of defendants’ motion to dismiss plaintiff’s First Amended Complaint (“FAC”) and plaintiff’s motion for preliminary injunction.

II.PROCEDURAL HISTORY

Plaintiff filed this lawsuit on January 23, 1996, alleging only diversity jurisdiction. On March 11, 1996, plaintiff filed the First Amended Complaint (“FAC”), alleging federal question jurisdiction on the basis of the Computer Fraud and Abuse Act.

On April 9, 1996, plaintiff filed a motion for preliminary injunction. Defendants filed opposition on April 18, 1996; plaintiff filed a reply on April 25, 1996. Oral argument occurred on May 1, 1996, at which time the Court took the matter under submission and ordered the parties to file supplemental briefs on jurisdictional issues. Plaintiff filed supplemental papers on May 10, 1996 and May 24, 1996; defendant filed supplemental papers on May 21, 1996.

On April 15, 1996, defendants filed a motion to dismiss the complaint for failure to state a claim. On April 29, 1996, plaintiff filed opposition. On May 1, 1996, the Court heard oral argument on the motion and took the matter under submission. Defendants filed their reply on June 3, 1996.

III.SUMMARY OF FIRST AMENDED COMPLAINT

Plaintiff North Texas Preventive Imaging L.L.C. (“NTPI”) is a Dallas-based provider of medical diagnostic imaging (i.e., CAT scans), a method of diagnosing coronary artery disease, cancer, osteoporosis, and other medical conditions. To assist with its diagnostic imaging, plaintiff purchased a computer system (the “Scribe system”) from defendant Medical Diagnostic Imaging, Inc. (“MDI”). The Scribe system performs computer enhancement of medical images.

Defendant MDI is a California corporation which allegedly owns and controls the Scribe system software at issue. FAC paragraph 5. Defendants Eisenberg and Pura Labs, Inc. do business as MDI. FAC paragraphs 4-6. Defendant Health Technologies & Wellness, Inc. (“HTW”) is a Delaware corporation which, prior to December 27, 1995, owned a majority interest in plaintiff NTPI. FAC paragraph 7. HTW also held itself out as the owner of the Scribe system software. Defendant Harvey Eisenberg is the owner and operator of all the aforementioned business entities. FAC paragraph 8. Defendant Roberta Eisenberg is Harvey Eisenberg’s wife. FAC paragraph 3. Non-party DVI Financial Services, Inc. (“DVIF”) is a financing company which helped plaintiff finance the purchase of the Scribe system software by buying it from defendants and leasing it to plaintiff. FAC paragraph 11. DVIF purchased the Scribe system according to the terms of price quotation 950103 on January 22, 1995. FAC paragraph 12. DVIF leased the software under the terms of lease #8 on February 27, 1995.

In May 1995, the Scribe system was installed in plaintiff’s facility. FAC paragraph 15. Plaintiff has allegedly paid 90% of the sales price for the Scribe system software. FAC paragraph 13. The core of the dispute is the parties’ disagreement over the licensing rights conferred by defendant’s sale of the Scribe system. The parties have no formal licensing contract; their arrangement is reflected in a price quotation which contains the following provision:

Software License Agreements: Software products provided by Multi-Dimensional Imaging are copyrighted, and all rights are reserved by Multi-Dimensional Imaging. The distribution and sale of Multi-Dimensional Imaging software products are intended for the use of the original purchaser only and for use only on the computer system(s) specified. Lawful users of this product are licensed to use the software as loaded on computers and/or provided on floppy disk for copying to computers. Users are also allowed to make back-up copies for safety. Any other copying, duplicating, selling, or otherwise distributing these products are a violation of the law. FAC paragraph 13; Friede Decl. Ex. 7 at 7 (full text of price quotation number 950103).

Plaintiffs were dissatisfied with the operation of the Scribe system and on December 27, 1995, sent a letter to MDI “cancelling” the purchase of the Scribe system and demanding return of $161,721 which had been “overpaid.” FAC paragraph 15. Defendants responded with a letter asking plaintiff to enter into a new licensing arrangement and noting that the software would be disabled on January 31, 1996, if the new license were not executed. FAC paragraph 16.

When the software was installed in March 1995, it contained no time restrictions or other disabling codes. Defendants apparently sent plaintiffs “update disks” periodically to update the Scribe system. In late 1995, defendants sent an “update” floppy computer disk to plaintiff which, unbeknownst to plaintiff, contained disabling codes. Disabling codes, or “time bombs,” are computer software codes which render a software program inoperable at a pre-set time and date. FAC paragraph 14. The software which plaintiffs loaded onto their computer in late 1995 contained a time bomb set to go off on January 31, 1996. The software was prepared on MDI’s computers in California. FAC paragraph 16.

Plaintiff learned of the existence of the time bomb and complained to defendant about its insertion in the Scribe system. A few days before the time bomb was scheduled to go off, MDI sent another set of computer codes which reset the time bomb for May 1, 1996. FAC paragraph 16.

The FAC alleges six causes of action. First, plaintiff alleges that defendants breached the DVIF-MDI purchase contract and that plaintiff, as third party beneficiary of the contract and assignee of DVIF’s rights may enforce the contract. Plaintiff asserts that it received invoices for $511,500, but received goods worth only $278,730. FAC paragraph 19. MDI has been paid $460,350 for goods supplied, and plaintiff alleges the right to the amount it overpaid for the goods — $181,620. FAC paragraph 19.

Second, plaintiff alleges that defendants breached the express and implied warranties for defect-free performance of the software and hardware. FAC paragraph 24. Plaintiff alleges that it has been damaged in the amount of $10,000, representing the cost of labor and measures taken to keep the Scribe system running. FAC paragraph 27; see also p. 24.

Third, plaintiff alleges that defendants’ conduct in secreting the time bomb in its Scribe system constitutes a violation of CFAA sections 1030(a)(5)(A) and (B). In particular, plaintiff claims that defendant, using its computers located in California, clandestinely caused the time bomb to be inserted in the Scribe system at plaintiff’s facility in Texas. FAC paragraph 29. The time bomb potentially impairs the medical examination, diagnosis, and treatment of NTPI’s patients. FAC paragraph 33.

Fourth, plaintiff alleges that defendants intentional insertion of the time bomb in the Scribe system constitutes conversion because it interferes with plaintiff’s right to quiet possession and use of the Scribe system. FAC paragraphs 37-39. Plaintiff requests damages in the amount of $460,350, representing the amount paid for the Scribe system. FAC paragraph 38.

Fifth, plaintiff requests a declaratory judgment because it is impossible to determine who owns and controls the Scribe system software at issue in this lawsuit and that several defendants have used the name “MDI.” Plaintiff requests a declaration as to which defendant owns and controls the software, and whether plaintiff holds a “non-exclusive license to use the software without cloud on title to such right.” FAC paragraph 43.

Sixth, plaintiff alleges that defendants HTW and Harvey Eisenberg committed “fraudulent misrepresentation and constructive fraud.” Claim 6, while captioned as a fraud claim, substantively appears to allege a claim for breach of fiduciary duty. In particular, claim 6 alleges that HT&W, as majority owner of plaintiff, and Eisenberg, as manager of NTPI, owed a fiduciary duty to disclose relevant information regarding the insertion of the time bomb in the Scribe system. Plaintiff alleges that both defendants breached their fiduciary duties to NTPI by knowingly failing to disclose this information. FAC paragraphs 45-46. Plaintiff requests compensatory damages in the amount of $460,350 plus various additional damages caused by defendants’ breach. FAC at p. 26.

IV.DISCUSSION

1. Federal Question Jurisdiction: Does the Computer Fraud and Abuse Act (“Act” or “CFAA”) prohibit the conduct complained of in the complaint?
The CFAA proscribes the unauthorized access to certain computer systems for harmful purposes by means of a modem or direct keyboard entry.
Section 1030(a)(5)(A) of statute reads:
“[Whoever] through means of a computer used in interstate commerce or communications, knowingly causes the transmission of a program, information, code, or.command to a computer or computer system if — (i) the person causing the transmission intends that such transmission will– (I) damage, or cause damage to, a computer, computer system, network, information, data, or program; or (II) withhold or deny, or cause the withholding or denial, of the use of a computer, computer services system or network informstion, data or program, and (ii) the transmission of the harmful component of the program, information, code, or command– (I) occurred without the authorization of the persons or entities who own or are responsible for the computer system receiving the program, information, code, or command; and (II)(aa) causes loss or damage to one or more other persons of value aggregating $1,000 or more during any 1-year period; or (bb) modifies or impairs, or potentially modifies of impairs, the medical examination, medical diagnosis, medical treatment, or medical care of one or more individuals… [shall be punished as provided in subsection (c) of this section].”

Section 1030(a)(5)(B) of the statute criminalizes the same conduct when done with “reckless disregard of a substantial and unjustifiable risk that the transmission will” cause harmful effects.

However, it is unclear whether the CFAA prohibits a person from sending a disk containing disabling codes to an authorized person who then unwittingly loads the codes onto a computer. The Court has found no cases on point, and indeed very few cases which construe Section (a)(5) at all.[1] The issue appears to be one of first impression. Although written as a criminal prohibition, the statute also creates a private right of action: Any person who suffers damage or loss by reason of a violation of the section, other than a violation of subsection (a)(5)(B), may maintain a civil action against the violator to obtain compensatory damages and injunctive relief or other equitable relief. Damages for violations of any subsection other than subsection (a)(5)(A)(ii)(II)(bb) or (a)(5)(B)(ii)(II)(bb) are limited to economic damages….

18 U.S.C. Section (g).

A. Legislative History of the CFAA

The CFAA, enacted in 1984, was intended to prohibit the gaining of unauthorized access to “federal interest” computers. The original CFAA focussed on unauthorized “access” to computers causing harm and did not reach harms caused by methods other than unauthorized access. The 1984 CFAA therefore contained a loophole in cases where: (1) an authorized person caused harm to a protected computer system, or (2) an unauthorized person gave a floppy computer disk or computer codes to an authorized person who loads it onto the computer.

The CFAA was amended in 1986 and 1994. The 1994 amendment was intended to broaden the scope of criminalized activities to reflect the broader range of techniques being used in society to wreak havoc on computer systems. The sponsor of the 1994 amendment, Senator Leahy, stated that:

These amendments clarify the intent standards, the actions prohibited and the jurisdiction of the current Computer Fraud and Abuse Act…. Under the current statute, prosecution of computer abuse crimes must be predicated upon the violator’s gaining unauthorized access to the affected Federal interest computers. However, computer abusers have developed an arsenal of new techniques which result in the replication and transmission of destructive programs or codes that inflict damage upon remote computers to which the violator never gained “access” in the commonly understood sense of that term.
139 Cong. Rec. S16421-03, Nov. 19, 1993 (stmt. of Sen. Leahy) (reprinted at 1993 WL 490040).
Thus while the pre-1994 CFAA was directed towards the unauthorized “access” of a computer system, presumably by modem or by direct keyboard entry, the post-1994 CFAA is directed towards a broader range of conduct by which a person knowingly “causes” the “transmission” of a program, information, code, or command to a computer. 18 U.S.C. Section 1030(a)(5). Senator Leahy stated that:
The new subsection of the CFAA created by this bill places the focus on harmful intent and resultant harm, rather than on the technical concept of computer access…. The computer abuse amendments make it a felony intentionally to cause harm to a computer or the information stored in it by transmitting a computer program or code — including destructive computer viruses — without the knowledge and authorization of the person responsible for the computer attacked. This is broader than existing law, which prohibits intentionally accessing a federal interest computer without authorization, if that causes damage.
139 Cong. Rec. S16421-03, Nov. 19, 1993 (stmt. of Sen. Leahy) (reprinted at 1993 WL 490040) (emphasis added).
The post-1994 CFAA undoubtedly is and was meant to be broader than previous law. The question, however, is whether the current law proscribes defendants’ conduct in this lawsuit — the act of sending a floppy computer disk containing a time bomb to a party who unknowingly loads it onto a computer.
During debates on the 1994 amendment, software manufacturers objected to the possibility that their practice of inserting “disabling codes” in software programs would be criminalized because disabling codes can be used as a legitimate security measure. On this issue, Senator Leahy stated that the new language would not criminalize the use of disabling codes “when their use is pursuant to a lawful licensing agreement that specifies the conditions for reentry or software disablement.” Cong. Rec. vol. 140 no. 122, 103d Cong., 2d sess., 8/23/94 at S. 12313 (plaintiff’s brief of 5/10/96 at 15-16). Although Senator Leahy did not state the converse proposition, i.e., that the bill did criminalize the use of disabling codes which are not specified in a lawful licensing agreement, this is certainly a reasonable implication of the statement. The Court has found nothing in the statute or legislative history to suggest that Congress intended a blanket exemption for the use of time bombs from the CFAA’s prohibitions[2]. Rather, time bombs would appear to fall within the statute’s proscription on the use of “codes, information, programs, or commands” to cause harm to protected computer systems. Whether the use of a time bomb is illegal appears to require a case-by-case analysis of the defendant’s intent, the type of computer involved, and the resulting harm[3].

C. Conclusion

By casting the net broadly to include many different “transmission” techniques, the 1994 amendment shifted the CFAA’s focus from the act of unauthorized access to the intent of the defendant. The transmission of a disabling code by floppy computer disk may fall within the new language, if accompanied by the intent to cause harm 18 U.S.C. Section 1030(a)(5). Accordingly, plaintiff has established federal question jurisdiction in claim 3 of the first amended complaint. The Court also chooses to exercise federal question jurisdiction over claim 5 (declaratory relief) and supplemental jurisdiction over remaining state law claims 1, 2, 4, and 6.

2. Defendants’ Motion to Dismiss the First Amended Complaint

Defendants seek to dismiss all six claims in the FAC for failure to state a claim upon which relief can be granted or, alternatively, to require a more definite statement or to strike parts of the FAC. As noted, the FAC alleges causes of action for: (1) breach of contract, (2) breach of implied and express warranties, (3) violation of the CFAA, (4) conversion, (5) declaratory relief, (6) and fraud.

A. Claim 1 — Breach of Contract

Defendants move to dismiss claim 1 on grounds the FAC does not adequately identify the contract which was allegedly breached. Claim 1 states that defendants “failed to supply goods specified on its written price quotatlon number 950103.” FAC paragraph 19. Further, claim 1 alleges that defendants breached the software use license contained in the price quotation by “demanding that NTPI enter into a new written software license agreement on substantially different terms, without any additional consideration…” FAC paragraph 20.

Defendants allege that claim 1 fails to identify the contract being sued upon, the provisions of the contract allegedly breached, the breaching act, or the breaching party. Claim 1 identifies the contract as price quotation number 950103; however, it does not identify which provisions were allegedly breached. The claim states that defendants “substituted certain inferior, or lower priced goods, for items specified” in the contract, and that as a result plaintiff received goods worth only $278,730. FAC paragraph 19. However, claim 1 fails to identify which goods were substituted or how plaintiff calculated the value received at only $278,730. Accordingly, it is difficult to see how defendants can adequately respond to the allegations. Defendants’ motion to dismiss claim 1 is granted.

B. Claim 2 — Breach of Express and Implied Warranty

Defendants seek to dismiss claim 2 because it fails to identify: (1) the source of the express warranty, (2) the source of the implied warranty, (3) the breaching party, or (4) the breaching act.

However, the FAC identifies the source of the express warranty as price quotation number 950103, see FAC paragraph 24, and defendants quote the exact language of the express warranty in their moving papers. Mtn. at 7:2-3. The FAC also appears to allege that the same sale gave rise to the implied warranty of fitness for intended use. FAC paragraph 24. Further, the FAC identifies the breaching party as “all defendants,” see FAC Count Two, or as “MDI.” FAC paragraphs 24-26. Plaintiff identifies the breaching party sufficiently for defendants to prepare a response. FAC paragraph 4. Finally, plaintiff lists a number of ways in which the product delivered by defendants allegedly failed to perform according to the warranties and caused damages. FAC paragraphs 26-27. Accordingly, defendants’ motion to dismiss claim 2 is denied.

C. Claim 3 — Violation of the CFAA

Defendants argue for dismissal of claim 3 on grounds that: (1) claim 3 fails to identify any individual responsible for the acts alleged, (2) claim 3 fails to plead violations of subsections (B)(i) and (B)(ii) (I), as required to state a claim under 18 U.S.C. Section 1030 (a) (5)(B). First, claim 3 alleges that “MDI has knowingly developed computer program code which it sent to NTPI in Texas, containing instructions through which MDI has sought to disable the operation of NTPI’s Scribe System…” FAC paragraph 33. Plaintiff has therefore identified the parties responsible, as well as identified the conduct which allegedly violates the CFAA.

Case No. 01-523 ADM/RLE

AMENDED TEMPORARY RESTRAINING ORDER
WITH ASSET FREEZE, ORDER APPOINTING A
TEMPORARY RECEIVER, AND OTHER EQUITABLE RELIEF

Plaintiff Federal Trade Commission (“Commission” or “FTC”), pursuant to Section 13(b) of the Federal Trade Commission Act (“FTC Act”), 15 U.S.C. $$ 53(b), filed a Complaint for Permanent Injunction and other relief, including consumer redress, and moved ex parte for a temporary restraining order with asset freeze, appointment of a temporary receiver, and an order to show cause why a preliminary injunction should not issue pursuant to Rule 65 of the Federal Rules of Civil Procedure.

FINDINGS OF FACT

This Court has considered the Complaint for Permanent Injunction, Motion for an Ex Parte Temporary Restraining Order and Other Equitable Relief, Memorandum of Law filed in support thereof, Supporting Exhibits and Attachments, and all other papers filed herein, and it appears to the satisfaction of the Court that:

1. This Court has jurisdiction over the subject matter of the case, and there is good cause to believe that the Court will have jurisdiction over the parties;

2. Venue lies properly with this Court;

3. There is good cause to believe that Defendants have engaged in and are likely to engage in acts and practices that violate Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), and that the Commission is likely to prevail on the merits of this action;

4. There is good cause to believe that immediate and irreparable harm will result from Defendants’ ongoing violations of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), absent entry of this Order;

5. There is good cause to believe that immediate and irreparable damage to the Court’s ability to grant effective final relief for consumers in the form of monetary redress will occur from the sale, transfer, assignment, or other disposition or concealment by Defendants of their assets or records unless Defendants are immediately restrained and enjoined by Order of this Court;

6. There is good cause for issuing this Order without prior notice to Defendants of the Commission’s application, pursuant to Federal Rule of Civil Procedure 65(b);

7. There is good cause to appoint a temporary receiver in this matter;

8. Weighing the equities and considering the Commission’s likelihood of success in its causes of action, this Order is in the public interest; and

9. No security is required of any agency of the United States for issuance of a restraining order. See Fed. R. Civ. P. 65(c).

DEFINITIONS
For purposes of this Order, the following definitions shall apply:

1. “Defendants” mean Bryan J. Kruchten, doing business as Page Creators d/b/a pagecreators.net and Trinity Host LLC d/b/a trinityhost.com.

2. “Assets” means any legal or equitable interest in, right to, or claim to, any real and personal property, including, but not limited to, chattel, goods, instruments, equipment, fixtures, general intangibles, effects, leaseholds, mail or other deliveries, inventory, checks, notes, accounts, credits, contracts, receivables shares of stock, and all cash, wherever located.

3. “Document” is synonymous in meaning and equal in scope to the usage of the term in Federal Rule of Civil Procedure 34(a), and includes writings, drawings, graphs, charts, photographs, audio and video recordings, computer records, and other data compilations from which information can be obtained and translated, if necessary, through detection devices into reasonably usable form. A draft or non-identical copy is a separate document within the meaning of the term.

4. “Material” means likely to affect a person’s choice of, or conduct regarding, goods or services.

PROHIBITED BUSINESS ACTIVITIES

I. IT IS THEREFORE ORDERED

that Defendants are hereby temporarily restrained and enjoined from making, or assisting in the making of, expressly or by implication, orally or in writing any false or misleading statement or representation of material fact:

A. that consumers owe money for the use of excess bandwidth or other non-standard services;

B. that consumers are legally obligated to pay for any Internet-related services that they did not authorize; and

C. relating to a consumer’s decision to purchase or use Defendants’ services or products.

II. IT IS FURTHER ORDERED

that in connection with the advertising, promotion, offering or sale of goods or services in commerce, Defendants are hereby temporarily restrained and enjoined from billing or receiving money, or assisting others in billing or receiving money, from consumers without authorization, including but not limited to charging or debiting consumers’ credit card or debit card accounts without consumers’ authorization.
ASSET FREEZ

III.IT IS FURTHER ORDERED

that Defendants are hereby temporarily restrained and enjoined from:

A. Transferring, converting, encumbering, selling, concealing, dissipating, disbursing, assigning, spending, withdrawing, or otherwise disposing of any funds, property, artwork, coins, precious metals, jewelry, contracts, shares of stock, or other assets, wherever located, that are: (1) owned or controlled by Defendants, in whole or in part; or (2) in the actual or constructive possession of Defendants; (3) owned, controlled by, or in the actual or constructive possession of any entity that is directly or indirectly owned, managed, controlled by, or under common control with Defendants, including, but not limited to, any assets held by or for Defendants in any account at any bank or savings and loan institution, or with any broker-dealer, escrow agent, title company, commodity trading company, precious metal dealer, or other financial institution of any kind, including, but not limited to, assets at:

Wells Fargo Bank
304 Maple Street
Alexandria, MN 56308

First Integrity Bank
111 NE 4th Street
Staples, MN 56479

First Data Merchant Services
1401 N.W. 136th Ave.
Sunrise, FL 33323

First Financial Bank
265 Broadhollow Road
Melville, NY 11747

CardService International
6101 Condor Drive
Moorpark, CA 93021

National Bank of the Redwoods
2800 Cleveland Ave.
Santa Rosa, CA 95403

United Bankers Bank
1650 West 82nd Street, Suite 1500
Bloomington, MN 55431

Imperial Bank
2015 Manhattan Beach Boulevard
Redondo Beach, CA 90278

B. Opening or causing to be opened any safe deposit boxes or storage facilities titled in the name of Defendants, or subject to access by Defendants or under their control, without providing the Commission prior notice and an opportunity to inspect the contents in order to determine that they contain no assets covered by this Section;

C. Notwithstanding the asset freeze provisions of Paragraphs A-B., above, Defendant Bryan J. Kruchten may, upon compliance with Section V (Financial Reports), infra, pay from his individual personal funds reasonable, usual, ordinary, and necessary living expenses subject to prior written agreement by the Commission or the Court;

D. Defendants’ assets frozen pursuant to Paragraphs A-C above are deemed to be property of the receivership, subject to administration by the receiver, as described in Section VII; and

E. The assets affected by this Section shall include both existing assets and assets acquired after the effective date of this Order.

DUTIES OF THIRD PARTIES HOLDING DEFENDANTS’
ASSETS, INCLUDING FINANCIAL INSTITUTIONS

IV.IT IS FURTHER ORDERED that any financial or brokerage institution, business entity or person having possession, custody or control of any records of any Defendant, or of any account, safe deposit box or other asset titled in the name of any Defendant, either individually or jointly or held for the benefit of any Defendant, or that has maintained any such account, safe deposit box or other asset at any time since January 1, 1997, shall:

A. Hold and retain within its control and prohibit the transfer, encumbrance, pledge, assignment, removal, withdrawal, dissipation, sale or other disposal of any such account or other asset, except for transfers or withdrawals directed by the Receiver or by further order of this Court;

B. Deny access to any safe deposit box titled individually or jointly in the name of any Defendant or otherwise subject to access by any Defendant;

C. Provide to counsel for the Commission and to the Receiver, within three (3) business days of notice of this Order, a sworn statement setting forth:

1. The identification of each account or asset titled in the name, individually or jointly, of any defendant, or held on behalf of, or for the benefit of, any defendant;

2. The balance of each account or a description of the nature and value of each asset as of the close of business on the day this Order is served, and, if the account or asset has been closed or moved, the date closed or removed, the total funds removed in order to close the account, and the person or entity to whom such account or other asset was remitted; and

3. The identification of any safe deposit box or storage facility that is either titled in the name of or subject to access by any Defendant.

D. Allow the Commission or the Receiver immediate access to inspect or copy any records or other documentation pertaining to such account or asset, including, but not limited to, originals or copies of account applications, account statements, signature cards, checks, drafts, deposit tickets, transfers to and from the accounts, all other debit and credit instruments or slips, currency transaction reports, 1099 forms, and safe deposit box logs. Any such financial institution, account custodian, or other aforementioned entity may arrange for the Commission or the Receiver to obtain copies of any such records which the Commission or the Receiver seeks, provided that such institution or custodian may charge a reasonable fee not to exceed fourteen (14) cents per page copied;

E. At the direction of the Commission or the Receiver appointed herein, and without further order of this Court, convert any stocks, bonds, options, mutual funds or other securities to their cash equivalents; and

F. Cooperate with all reasonable requests of the temporary receiver relating to implementation of this Order, including transferring funds at the receiver’s direction and producing records related to the Defendants’ accounts.
The assets and funds affected by this Section shall include both existing assets and assets acquired after the effective date of this Order.

FINANCIAL REPORTS
V.IT IS FURTHER ORDERED that each Defendant named in the caption herein shall provide this Court and serve upon counsel for the Plaintiff and the Temporary Receiver appointed herein within seventy-two (72) hours after entry of this Order a completed financial statement on the forms served with this Order and attached as Attachment A. A Financial Statement shall be completed for each Defendant named in the caption herein and for each business entity under which they conduct business, or of which they are an officer, and of each trust for which they are a trustee. The Financial Statements shall be accurate as of the date of the entry of this Order and shall be verified under oath.

RECORD KEEPING/BUSINESS OPERATIONS

VI.IT IS FURTHER ORDERED that Defendants are hereby temporarily restrained and enjoined from:

A. Destroying, erasing, mutilating, concealing, altering, transferring, or otherwise disposing of, in any manner, directly or indirectly, any: books; records; computer tapes, disks or other computerized records, including e-mail messages; accounting data; personnel and business checks (front and back); correspondence; forms; advertisements; brochures; manuals; banking records; customer files; customer lists; invoices; telephone records; ledgers; payroll records; scripts; postal receipts; appointment books; income tax returns; or other documents of any kind in their possession, custody and control that relate to the business practices or business or personal finances of Defendants;

B. Failing to make and keep books, records, bank statements, documents indicating title to real or personal property, and any other data which, in reasonable detail, accurately and fairly reflect the transactions and disposition of the assets of Defendants; and

C. Creating, operating, or exercising any control over any business entity, including any partnership, limited partnership, joint venture, sole proprietorship or corporation, without first providing the Commission with a written statement disclosing: (1) the name of the business entity; (2) the address and telephone number of the business entity; (3) the names of the business entity’s officers, directors, principals, managers and employees; and (4) a detailed description of the business entity’s intended activities.

TEMPORARY RECEIVER
VII. A. APPOINTMENT OF A TEMPORARY RECEIVER

IT IS FURTHER ORDERED that B. Todd Jones and Becky R. Thorson are appointed Temporary Receiver for the business activities of Defendants and any affiliates, subsidiaries, divisions, sales, entities, successors, or assigns, and any and all dba’s that any Defendant controls, with the full power of an equity Receiver. The Receiver shall solely be the agent of this Court in acting as Receiver under this Order. The Temporary Receiver shall be accountable directly to this Court. The Temporary Receiver shall comply with any Local Rules of this Court governing receivers and the Federal Rules of Civil Procedure.

B. RECEIVERSHIP DUTIES

IT IS FURTHER ORDERED that the Receiver is directed and authorized to accomplish the following:

1. Assume full control of Defendants’ operations by removing, as the Receiver deems necessary or advisable, any director, officer, independent contractor, employee, or agent of any of the Defendants from control of, management of, or participation in, the business affairs of Defendants;

2. Take exclusive custody, control and possession of all assets and documents of, or in the possession, custody, or under the control of, Defendants, wherever situated. The Receiver shall have full power to divert mail and to sue for, collect, receive, take in possession, hold, and manage all assets and documents of the Defendants and other persons or entities whose interests are now held by or under the direction, possession, custody, or control of the Defendants. PROVIDED, HOWEVER, the Receiver shall not attempt to collect any amount from a consumer if the Receiver believes the consumer was a victim of the unfair or deceptive acts or practices alleged in the Complaint in this matter;

3. Take all steps necessary to secure the business premises of the Receivership Defendants, including, but not limited to, all such premises located at: (1) 108 5th Avenue E., Osakis, MN 56360; (2) 1213 Lark Street, Alexandria, MN 56308; (3) 1424 Broadway Street, South, Suite 272, Alexandria, MN 56308; and (4) 3010 Hennepin Avenue, S, Suite 609, Minneapolis, MN 55408. Such steps may include, but are not limited to, the following as the Temporary Receiver deems necessary or advisable: (1) serving and filing this Order; (2) completing a written inventory of all assets of the Receivership Defendants; (3) obtaining pertinent information from all employees and other agents of the Receivership Defendants, including, but not limited to, the name, home address, social security number, job description, method of compensation, and all accrued and unpaid commissions and compensation of each such employee or agent; (4) video taping all portions of the location; (5) securing the location by changing the locks and disconnecting any computer modems or other means of access to the computer or other records maintained at that location; or (6) requiring any persons present on the premises at the time this Order is served to leave the premises, to provide the Temporary Receiver with proof of identification, or to demonstrate to the satisfaction of the Receiver that such persons are not removing from the premises documents or assets of the Defendants;

4. Conserve, hold, and manage all receivership assets, and perform all acts necessary or advisable to preserve the value of those assets in order to prevent any irreparable loss, damage, or injury to consumers or creditors of the Defendants, including, but not limited to, obtaining an accounting of the assets and preventing transfer, withdrawal, or misapplication of assets;

5. Liquidate any and all securities or commodities owned by or for the benefit of the Defendants that the Receiver deems to be advisable or necessary;

6. Enter into contracts and purchase insurance as advisable or necessary;

7. Prevent the inequitable distribution of assets and to determine, adjust, and protect the interests of consumers and creditors who have transacted business with Defendants;

8. Manage and administer the business of Defendants until further order of this Court by performing all incidental acts that the Receiver deems to be advisable or necessary, which includes retaining, hiring, or dismissing any employees, independent contractors, or agents;

9. Choose, engage, and employ attorneys, accountants, appraisers, and other independent contractors and technical specialists, as the Receiver deems advisable or necessary in the performance of duties and responsibilities under the authority granted by this Order;

10. Make payments and disbursements from the receivership estate that are necessary or advisable for carrying out the directions of, or exercising the authority granted by, this Order. The Receiver shall apply to the Court for prior approval of any payment of any debt or obligation incurred by the Defendants prior to the date of entry of this Order, except payments that the Receiver deems necessary or advisable to secure assets of the Defendants, such as rental payments;

11. Determine and implement the manner in which the Defendants will comply with, and prevent violations of, this Order and all other applicable laws, including, but not limited to, revising sales materials and implementing monitoring procedures;

12. Institute, compromise, adjust, appear in, intervene in, or become party to such actions or proceedings in state, federal or foreign courts that the Receiver deems necessary and advisable to preserve or recover the assets of Defendants, or that the Receiver deems necessary and advisable to carry out the Receiver’s mandate under this Order;

13. Defend, compromise, adjust, or otherwise dispose of any or all actions or proceedings instituted in the past or in the future against the Receiver in his role as Receiver, or against Defendants that the Receiver deems necessary and advisable to preserve the assets of Defendants or that the Receiver deems necessary and advisable to carry out the Receiver’s mandate under this Order;

14. Continue to conduct the business of the Receivership Defendants in such manner, to such extent, and for such duration as the Receiver may in good faith deem to be necessary or appropriate to operate the businesses profitably and lawfully, if at all; PROVIDED, HOWEVER, that the continuation and conduct of the business shall be conditioned upon the Receiver’s good faith determination that the businesses can be lawfully operated at a profit using the assets of the receivership estate;

15. Communicate with, and respond to communications from, customers of Defendants concerning the status of this action;

16. Issue subpoenas to obtain documents and records pertaining to the receivership, and conduct discovery in this action on behalf of the receivership estate;

17. Open one or more bank accounts in the District of Minnesota as designated depositories for funds of the Defendants. The Receiver shall deposit all funds of Defendants in such a designated account and shall make all payments and disbursements from the receivership estate from such an account(s);

18. Maintain accurate records of all receipts and expenditures that he makes as Receiver; and

19. Cooperate with reasonable requests for information or assistance from any state or federal law enforcement agency.

C. COOPERATION WITH THE RECEIVER

IT IS FURTHER ORDERED that Defendants, and their officers, agents, directors, servants, employees, salesperson, independent contractors, attorneys, corporations, subsidiaries, affiliates, successors, and assigns, all other persons or entities in active concert or participation with them, who receive actual notice of this Order by personal service or otherwise, which acting directly or through any trust, corporation, subsidiary, division, or other device; or any of them, shall fully cooperate with and assist the Receiver. Defendants’ cooperation and assistance shall include, but not be limited to, providing any information to the Receiver that the Receiver deems necessary to exercising the authority and discharging the responsibilities of the Receiver under this Order; providing any password required to access any computer, electronic files in any medium; or advising all persons who owe money to the Defendants that all debts should be paid directly to the Receiver. Defendants are hereby restrained and enjoined from directly or indirectly:

1. Transacting any of the business of the Defendants;

2. Destroying, secreting, defacing, transferring, or otherwise altering or disposing of any documents of Defendants, including, but not limited to, books, records, accounts, writings, drawings, graphs, charts, photographs, audio and video recordings, computer records, and other data compilations, electronically-stored records, or any other papers of any kind or nature;

3. Transferring, receiving, altering, selling, encumbering, pledging, assigning, liquidating, or otherwise disposing of any assets owned, controlled, or in the possession or custody of, or in which an interest is held or claimed by, the Defendants, or the Receiver;

4. Excusing debts owed to Defendants;

5. Failing to notify the Receiver of any asset, including accounts, of a Defendant held in any name other than the name of the Defendant, or by any person or entity other than the Defendant, or failing to provide any assistance or information requested by the Receiver in connection with obtaining possession, custody, or control of such assets;

6. Doing any act or refraining from any act whatsoever to interfere with the Receiver’s taking custody, control, possession, or managing of the assets or documents subject to this receivership; or to harass or interfere with the Receiver in any way; or to interfere in any manner with the exclusive jurisdiction of this Court over the assets or documents of Defendants; or to refuse to cooperate with the Receiver or the Receiver’s duly authorized agents in the exercise of their duties or authority under any order of this Court; or

7. Filing, or causing to be filed, any petition on behalf of Defendants for relief under the United States Bankruptcy Code, 11 U.S.C. § 101 et seq., without prior permission from this Court.

D. DELIVERY OF RECEIVERSHIP PROPERTY

IT IS FURTHER ORDERED that:

1. Immediately upon service of this Order upon them or upon their otherwise obtaining actual knowledge of this Order, or within a period permitted by the Receiver, Defendants or any other person or entity shall transfer or deliver possession, custody, and control of the following to the Receiver:

a. All assets of Defendants;

b. All documents of Defendants, including, but not limited to, books and records of accounts, all financial and accounting records, balance sheets, income statements, bank records (including monthly statements, canceled checks, records of wire transfers, and check registers), computers and computer related equipment, computer files, client lists, title documents and other papers;

c. All assets belonging to members of the public now held by the Defendants;

d. All keys, computer passwords, and codes necessary to secure access to any assets or documents of Defendants, including, but not limited to, access to their business premises, means of communication, accounts, computer systems, or other property; and

e. Any property transferred from any law enforcement agencies, including the Federal Bureau of Investigation, shall be delivered to Co-Receiver Becky R. Thorson.

2. In the event any person or entity fails to deliver or transfer any asset or otherwise fails to comply with any provision of this Section of the Order, the Receiver may file ex parte an Affidavit of Non-Compliance regarding the failure. Upon filing of the affidavit, the Court may authorize, without additional process or demand, Writs of Possession or Sequestration or other equitable writs requested by the Receiver. The writs shall authorize and direct the United States Marshal or any sheriff or deputy sheriff of any county, or any other federal or state law enforcement officer, to seize the asset, document, or other thing and to deliver it to the Receiver.

E. TRANSFER OF FUNDS TO THE TEMPORARY RECEIVER

IT IS FURTHER ORDERED that, upon service of a copy of this Order, all banks, broker-dealers, savings and loans, escrow agents, title companies, commodity trading companies, or other financial institutions shall cooperate with all reasonable requests of the Receiver relating to implementation of this Order, including transferring funds at his direction and producing records related to the assets of Defendants.

F. STAY OF ACTIONS

IT IS FURTHER ORDERED that:
1. Except by leave of this Court, during pendency of the receivership ordered herein, Defendants and all other persons and entities be and hereby are stayed from taking any action to establish or enforce any claim, right, or interest for, against, on behalf of, in, or in the name of, any of the Defendants, any of their subsidiaries, affiliates, partnerships, assets, documents, or the Receiver or the Receiver’s duly authorized agents acting in their capacities as such, including, but not limited to, the following actions:

a. Commencing, prosecuting, continuing, entering, or enforcing any suit or proceeding, except that such actions may be filed to toll any applicable statute of limitations;

b. Accelerating the due date of any obligation or claimed obligation; filing or enforcing any lien; taking or attempting to take possession, custody, or control of any asset; attempting to foreclose, forfeit, alter, or terminate any interest in any asset, whether such acts are part of a judicial proceeding, are acts of self-help, or otherwise;

c. Executing, issuing, serving, or causing the execution, issuance or service of, any legal process, including, but not limited to, attachments, garnishments, subpoenas, writs of replevin, writs of execution, or any other form of process whether specified in this Order or not; or

d. Doing any act or thing whatsoever to interfere with the Receiver taking custody, control, possession, or management of the assets or documents subject to this receivership, or to harass or interfere with the Receiver in any way, or to interfere in any manner with the exclusive jurisdiction of this Court over the assets or documents of Defendants.

2. Except as otherwise provided in this Order, all persons and entities in need of documentation from the Receiver shall in all instances first attempt to secure such information by submitting a formal written request to the Receiver, and, if such request has not been responded to within thirty (30) days of receipt by the Receiver, any such person or entity may thereafter seek an Order of this Court with regard to the relief requested.

G. COMPENSATION OF TEMPORARY RECEIVER

IT IS FURTHER ORDERED that the Receiver and all personnel hired by the Receiver as herein authorized, including counsel to the Receiver and accountants, are entitled to reasonable compensation for the performance of duties pursuant to this Order and for the cost of actual out-of-pocket expenses incurred by them, from the assets now held by or in the possession or control of or which may be received by Defendants. The Receiver shall file with the Court and serve on the parties periodic requests for the payment of such reasonable compensation, with the first such request filed no more than sixty (60) days after the date of this Order. The Receiver shall not increase the hourly rates used as the bases for such fee applications without prior approval of the Court.

H. TEMPORARY RECEIVER’S BOND

IT IS FURTHER ORDERED that the Receiver shall file with the Clerk of this Court a bond in the sum of $1000 with sureties to be approved by the Court, conditioned that the Receiver will well and truly perform the duties of the office and abide by and perform all acts the Court directs.

I. ACCESS TO DEFENDANTS’ BUSINESS PREMISES AND RECORDS

IT IS FURTHER ORDERED that the Receiver shall allow the Commission’s representatives, agents, and assistants, as well as Defendants and their representatives, reasonable access to the premises and records of Defendants. The purpose of this access shall be to inspect and copy any and all books, records, accounts, computerized files and data, documents and other property owned by or in the possession of Defendants. The Receiver shall have the discretion to determine the time, manner, and reasonable conditions of such access.
DUTIES OF THIRD PARTIES TO ASSIST IN THE TRANSFER
OF DEFENDANTS’ BUSINESS OPERATIONS TO THE RECEIVER
VIII.
IT IS FURTHER ORDERED that, in conjunction with the Receiver’s duties pursuant to Section VII of this Order, any third party who has custody, control, management or administrative authority or possession of documents, computer files, computers and computer related equipment used in Defendants’ business operations, including, but not limited to SkyNetWEB Ltd., 3500 Boston Street, Suite 231, Baltimore, Maryland 21224 and Yeshost.com, 475 Central Avenue, Suite B100, St. Petersburg, Florida 33701, shall assist the Receiver in assuming full control of Defendants’ operations by taking actions, including, but not limited to: (1) forming any new system accounts; and (2) providing and/or changing any computer user names or passwords.
EXPEDITED DISCOVERY
IX.
IT IS FURTHER ORDERED that the Commission and the Receiver are granted leave, at any time after service of this Order:

A. To take the depositions of any person, whether or not a party, for the purpose of discovering the nature, location, status, and extent of the assets of Defendants; the nature and location of documents reflecting the business transactions of Defendants; the whereabouts of Defendants; and the applicability of any evidentiary privileges to this action. Two (2) days notice shall be deemed sufficient for any such deposition, and the limitations and conditions set forth in Fed.R.Civ.P. 30(a)(2)(B) and 31(a)(2)(B) regarding subsequent depositions of an individual shall not apply to depositions taken pursuant to this Paragraph. Any such depositions taken pursuant to this Paragraph shall not be counted toward the ten-deposition limit set forth in Fed. R. Civ. P. 30(a)(2)(A) and 31(a)(2)(A). Service of discovery upon a party, taken pursuant to this Paragraph, shall be sufficient if made by facsimile or by overnight delivery; and

B. relating to the nature, status, or extent of Defendants’ assets; the location of documents reflecting the business transactions of Defendants; the whereabouts of Defendants; and the applicability of any evidentiary privileges to this action. Five (5) days’ notice shall be deemed sufficient for the production of any such documents, and twenty four (24) hours’ notice shall be deemed sufficient for the production of any such documents that are maintained or stored as electronic data. Service of discovery upon a party, taken pursuant to this Paragraph, shall be sufficient if made by facsimile or by overnight delivery.

REQUIRED DISTRIBUTION OF ORDER BY DEFENDANTS
X.
IT IS FURTHER ORDERED that Defendants shall immediately provide a copy of this Order to each of their affiliates, partners, divisions, sales entities, successors, assigns, employees, agents, and representatives. Within twenty-one (21) calendar days following service of this Order by Plaintiff, Defendants shall file with the Court, and serve on Plaintiffs, an affidavit identifying the names, titles, addresses and telephone numbers of each such person or entity Defendants have served with a copy of this Order in compliance with this provision.
DURATION OF TEMPORARY RESTRAINING ORDER
XI.
IT IS FURTHER ORDERED that the Temporary Restraining Order granted herein shall expire on April 5, 2001, unless, within such time, the Order, for good cause shown, is extended or unless, as to any defendant, the defendant consents that it should be extended for a longer period of time.
ORDER TO SHOW CAUSE REGARDING PRELIMINARY INJUNCTION
XII.
IT IS FURTHER ORDERED that, pursuant to Federal Rule of Civil Procedure 65(b), each of the Defendants shall appear before this Court on March 30, 2001, at 10:00 o’clock a.m., at the Federal Courthouse located at:

202 U.S. Courthouse, #13W
300 South Fourth Street
Minneapolis, MN 55415

to show cause, if there be any, why this Court should not enter a preliminary injunction, pending final ruling on the Complaint against said Defendants enjoining them from further violations of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), continuing the freeze of their assets, continuing the temporary receivership, and imposing such additional relief as may be appropriate.
SERVICE OF ANSWERING AFFIDAVITS, MEMORANDA, AND OTHER EVIDENCE
XIII.
IT IS FURTHER ORDERED that Defendants shall serve any answering affidavits, pleadings and legal memoranda on counsel for the Plaintiff not less than 5:00 p.m. Central Time four business days prior to the hearing on the Plaintiff’s request for a preliminary injunction hearing. Defendants shall serve copies of all such materials on Plaintiff by personal service or facsimile to Steven M. Wernikoff, Esq., Federal Trade Commission, 55 East Monroe Street, Suite 1860, Chicago, Illinois 60603, facsimile (312) 960-5600.
Plaintiff may serve and file a supplemental memorandum of points and authorities based on evidence discovered subsequent to the filing of its Complaint by no later than 5:00 p.m. Central Time four days prior to the hearing on Plaintiffs’ request for a preliminary injunction, and may serve and file a reply to any opposition served by Defendants no later than 5:00 p.m. Central Time on the day prior to the hearing.
WITNESS IDENTIFICATION
XIV.
IT IS FURTHER ORDERED that if any party to this action intends to present the testimony of any witness at the hearing on a preliminary injunction in this matter, that party shall, at least seventy-two (72) hours prior to the scheduled date and time of the hearing, file with this Court and serve on counsel for the other party by personal service or facsimile a statement of the name, address, and telephone number of any such witness, and either a summary of the witness’s expected testimony, or the witness’s sworn declaration revealing the substance of such witness’s expected testimony.
SERVICE OF THIS ORDER
XV.
IT IS FURTHER ORDERED that copies of this Order may be served by first class mail, overnight delivery, facsimile, or personally, by agents or employees of the Commission or the Receiver, upon any bank, savings and loan institution, credit union, financial institution, brokerage house, escrow agent, money market or mutual fund, title company, commodity trading company, third-party billing aggregator, common carrier, storage company, trustee, commercial mail receiving agency, mail holding or forwarding company, or any other person, partnership, corporation, or legal entity that may be in possession of any records, assets, property, or property right of any Defendant, and any Internet service provider or other person, partnership, corporation, or legal entity that may be subject to any provision of this Order. For purposes of service on anyone in possession of records, assets, property, or property rights, actual notice of this Order shall be deemed complete upon notification by any means, including, but not limited to, notice from service by facsimile transmission of Sections III, IV, VII and VIII (if receivership records, assets, property or property rights are involved), XI, XV, and the final page of this Order, provided that notice is followed within five (5) business days by delivery of a complete copy of this Order.
CONSUMER CREDIT REPORT
XVI.
IT IS FURTHER ORDERED that, pursuant to Section 604 of the Fair Credit Reporting Act, 15 U.S.C. § 1681b, any consumer reporting agency served with this Order shall promptly furnish a consumer or credit reports concerning any of the Defendants to Plaintiff.
JURISDICTION
XVII.
IT IS FURTHER ORDERED that this Court shall retain jurisdiction of this matter for all purposes.
No security is required of any agency of the United States for the issuance of a restraining order. Fed. R. Civ. P. 65(c).

ORDER GRANTING JUDGMENT OF ACQUITTAL

I. BACKGROUND

The defendant, Herbert Pierre-Louis, has moved for Judgment of Acquittal, pursuant to Fed.R.Crim.P. 29, on his two-count conviction for violation of Title 18, United States Code, Section 1030(a)(5) of the Computer Fraud and Abuse Act (“CFAA”). Under the CFAA, it is a federal crime for anyone to knowingly cause the transmission of a program or code, i.e., a computer virus, with the intention of causing damage to a protected computer. The Defendant’s motion raises two essential questions1 First, can the Government meet its statutory burden to prove “damage” [i.e. loss of at least $5,000 in value] beyond a reasonable doubt by inclusion of “lost profits?’’ Second, whether the Government’s evidence of “lost profits,’’ based on a “daily average’’ calculation, is sufficient to prove the requisite jurisdictional amount beyond a reasonable doubt?2

II. FACTS.

The essential facts are not in dispute. The jury found that Defendant Pierre-Louis sent a computer virus (“the ProComm Virus”) that damaged computers at two sites, one in New York and, the other in Minnesota, owned and operated by his then-employer, Purity Wholesale Grocers, Inc. (“Purity’’). At trial, the Government introduced evidence regarding, among other things “financial harm’’ suffered by Purity as a result of the ProComm Virus. The amount of “financial harm’’ was an essentially jurisdictional element in the case. Under the CFAA, the Government had to prove that the damage to each site resulted in a “loss of at least $5,000 in value during any one-year period to one or more individuals.

The evidence of Purity’s loss fell into one of four categories: (a) the value of the damaged computer hardware at each site; (b) the costs associated with repairing computer terminals at the affected sites (i.e. labor and travel costs); (c) salary payments to Purity employees who did not participate in the repairs, but were otherwise unable to work due to the virus; and (d) Purity’s estimated “lost profits’’ during a two-day work stoppage caused by the virus. Purity’s representative, Mr. Tarr, who was Vice-President for Operations, arrived at a “lost profit’’ figure for each site using an average daily business volume average daily profit. Using this approach, he testified that the lost profit for Purity’s New York site was more than $6,400.00, and the lost profit for the Minnesota site was more than $24,000.00.

The jury was instructed as to the essential elements of the 18 U.S.C. $1030(a)(5)(A) [D.E. #87, page 7].3 In response to a special interrogatory, the jury found that the damage, that is, the amount of loss, to each site would not total the requisite $5,000.00 without including “lost profits.’’

III. APPLICABLE LEGAL STANDARDS

In considering a motion for the entry of judgment of acquittal under Federal Rule of Criminal Procedure 29(c), a district court should apply the same standard used in reviewing the sufficiency of the evidence to sustain a conviction. See United States v. Sellers, 871 F.2d 1019, 1020 (11th Cir. 1989). The district court must view the evidence in the light most favorable to the government. See id. (citing Glasser v. United States, 315 U.S. 60, 80, 62 S.Ct. 457, 86 L.Ed. 680 (1942), superceded by rule on other grounds, Bourjaily v. United States, 483 U.S. 171, 107 S.Ct. 2775, 97 L.Ed.2d 144 (1987)). The court must resolve any conflicts in the evidence in favor of the government, see United States v. Taylor, 972 F.2d 1247, 1250 (11th Cir. 1992), and must accept all reasonable inferences that tend to support the government’s case. See United States v. Burns, 597 F.2d 939, 941 (5th Cir. 1979). The court must ascertain whether a reasonable jury could have found the defendant guilty beyond a reasonable doubt. See Sellers, 871 F.2d at 1021 (citing United States v. O’Keefe, 825 F.2d 314, 319 (11th Cir. 1987)). “‘It is not necessary for the evidence to exclude every reasonable hypothesis of innocence or be wholly inconsistent with every conclusion except that of guilt, provided a reasonable trier of fact could find that the evidence establishes guilt beyond a reasonable doubt.’’’ Sellers, 871 F.2d at 1021 (quoting United States v. Bell, 678 F.2d 547, 549 (5th Cir. Unit B 1982) (en banc), aff’d on other grounds, 462 U.S. 356, 103 S.Ct. 2398, 76 L.Ed.2d 638 (1983)). A jury is free to choose among reasonable constructions of the evidence. See Sellers, 871 F.2d at 1021. The court must accept all of the jury’s “reasonable inferences and credibility determinations.’’ See id. (citing United States v. Sanchez, 722 F.2d 1501, 1505 (11th Cir. 1984)). But, at the same time, the Court must affirm the conviction only if “any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt.’’ Jackson v. Virginia, 443 U.S. 307, 319 (1979). Where, as here, the jury has made a reasonable construction of the evidence which places into issue the Government’s proof of an essential element of the crime, a judgment of acquittal is warranted.

IV. LAW APPLIED.

As enacted at the time of the trial, 18 U.S.C. $1030(e)(8)(A) defined the term “damage” to mean “any impairment to the integrity or availability of data, a program, a system, or information that causes loss aggregating at least $5,000 in value during any one-year period to one or more individuals. No definition of loss was provided by the statute at the time of the offense and verdict. As agreed to by the parties, no judicial decision has directly interpreted the word “loss’’ to include “lost profits.” As amended on October 26, 2001, subsequent to the verdict in this case, the United States Congress has amended the statute to added the concept of “consequential damages” so that “loss” is to include “any revenue lost, cost incurred, or other consequential damages incurred because of interruption of service.’’ See 18 U.S.C. $1030(e)(11) (effective October 26, 2001), USA Patriot Act, P.L. 107-56, Laws of the 107th Congress-1st Session, Sections 814(d)(8) and (11).4

The Defendant argues that 18 U.S.C. $1030(e)(8)(A) is ambiguous and that the rule of lenity dictates that the ambiguity be resolved in his favor given the absence of a clear and definite legislative directive. See United States v. Wichester, 916 F.2d 601, 607 (11th Cir. 1990) (“The rule rests on the fear that expansive judicial interpretations will create penalties not originally intended by the legislature. It is an outgrowth of our reluctance to increase or multiply punishments absent a clear and definite legislative directive’’).

The rule of lenity, however, is not a doctrine of first resort whenever a criminal defendant identifies a potential ambiguity in a statute, and the rule “is not invoked by a grammatical possibility.’’ Caron v. United States, 524 U.S. 308, 316, 118 S.Ct. 2007, 2012, 141 L.Ed.2d 303 (1998); United States v. Maldonado-Ramirez, 216 F.3d 940, 943 (11th Cir. 2000) (same). Instead, the rule of lenity applies only when “the traditional canons of statutory construction’’ fail to resolve an ambiguity. United States v. Shabani, 513 U.S. 10, 17, 115 S.Ct. 382, 386, 130 L.Ed.2d 225 (1994). It is invoked when, after considering the structure and purpose of a criminal statute, “we are left with nothing more than a guess as to what Congress intended.’’ United States v. Shugart, 176 F.3d 1373, 1376 (11th Cir. 1999) (citation omitted). The ultimate question is whether there is a “grievous ambiguity’’ sufficient to require application of the rule of lenity. Id. See also United States v. Sepulveda, 115 F.3d 882, 887 n. 11 (11th Cir. 1997) (rule of lenity “has no application where the fair meaning of the statute is clear.’’).

It is not necessary to resort to the “rule of lenity’’ if the language at issue has a plain and unambiguous meaning with regard to the particular dispute in the case. To establish ambiguity, the Defendant first argues that there is a conflict between 18 U.S.C. $1030(a)(5)(A), which states the substantive crime, and 18 U.S.C. $1030(e)(8)(A), which defines “damage.’’ The apparent conflict argued is that the phrase “to a protected computer’’ modifies the word “damage” in 18 U.S.C.$1030(a)(5)(A), such that damage must be limited to the “protected computer,” as compared to the entity or individual(s) involved, as specified with respect to reference to “loss’’ in 18 U.S.C. $1030(e)(8)(a). This Court has previously found an ambiguity due to the dangling participle (“to a protected computer’’), but based on legislative history, concluded that damage is to be measured as it affects individuals and not a single computer. See In re America Online, Inc. Version 5.0 Software Litigation, 168 F.Supp.2d 1359, 1372-1374 (S.D. Fla 2001) (setting forth analysis). See also Shurgard Storage Centers, Inc. v. Safeguard Self Storage, Inc., 199 F.Supp.2d 1121, 1128 (W.D. Wash. 2000) (citing S.Rep.No. 104-357 at 3, 4, and 5, which details that “protected computer’’ is a term used to identify the scope of the statute, and not a modifying phrase on the issue of damages). Accordingly, there is insufficient basis to invoke the rule of lenity on that ground alone.

The next question is whether 18 U.S.C. $1030(e)(8)(A) itself is ambiguous as to the meaning of loss. A court must assume that Congress used the words in a statute as they are commonly and ordinarily understood, and if the statutory language is clear, no further inquiry is necessary. In examining the pertinent statutory language, a court cannot look at a word or term in isolation; it must look at the entire statutory context and scheme. See Federal Reserve Bank of Atlanta v. Thomas, 220 F.3d 1235, 1239 (11th Cir. 2000) (citations omitted). If the statutory language is ambiguous, a court may examine extrinsic materials, including legislative history, to determine Congressional intent. See id.; see also Dowling v. United States, 473 U.S. 207, 213, 105 S.Ct. 3127, 3131, 87 L.Ed.2d 152 (1985) (“[W]hen assessing the reach of a federal criminal statute, we must pay close need to the language, legislative history, and purpose in order to strictly determine the scope of the conduct the enactment forbids..’’); Iraola & CIA. S.A. v. Kimberly-Clark Corp., J.N., 232 F.3d 854, 857 (11th Cir. 2000) (discussing statutory interpretation).

Applying these standards, the Court finds ambiguity under traditional canons of statutory interpretation for criminal purposes. The statute itself makes a distinction between the type of damages involved for criminal and civil purposes. For civil damages under subsection 1030(g), damages as defined in subsection (e)(8)(A), are limited to “economic damages.’’ No definition of “economic damages’’ is provided. The Government argues that, by implication, economic damages must be included in “loss’’ under subsection (e)(8)(A), but, considering the structure of the statute, the Court finds an ambiguity in that regard. The implication can be read contrary to the Government’s position, namely, that the omission of reference to “economic damages’’ in subsection (e)(8)(A) suggests its intended “exclusion’’ under that section for criminal purposes.5 See In re Old Naples securities, Inc. 223 F.3d. 1296, 1306 (11th Cir. 2000) (citing authorities in that regard).

When interpreting a statute, we look first to the plain meaning of its language, see United States v. Gonzales, 520 U.S. 1, 4-6, 117 S.Ct. 1032, 1034-35, 137 L.Ed.2d 132 (1997), and “[w]here Congress includes particular language in one section of a statute but omits it in another section of the same act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion,’’ see Russello v. United States, 464 U.S. 16, 23, 104 S.Ct. 296, 300, 78 L,.Ed.2d 17 (1983) (quoting United States v. Wong Kim Bo, 472 F.2d 720, 722 (5th Cir. 1972) (per curiam)). In this regard, subsection (e)(8)(A), being the definition section, refers to loss without reference to economic damages. The only reference to economic damage is with regard to civil matters. The structures of subsection (e)(8)(A) supports that economic loss was not included for criminal purposes because the focus of the definition of damage under (e)(8)(A) is on “impairment’’ which results in “loss,’’ and the word “impairment’’ is directly linked to “the integrity or availability of data, a program, a system, or information’’ rather than the consequential loss resulting from such impairment.

The legislative history does not directly support that “lost profit’’ or “lost revenue’’ was included in the term “loss.’’ Rather, the focus of discussion was that loss would not be limited only to the cost or repair but would include other remedial costs such as lost computer time and the cost of reprogramming or restoring data to its original condition. S.Rep. 99-432, 1986 U.S.C.C.A.N. 2479 at 2488-2489. The limited case law on the question tends to support that position. Other courts, which have considered related issues, have limited the term “loss’’ to target remedial expenses borne by victims based on the facts and circumstances of each case, See United States v. Morris, 928 F.2d 504, (2nd Cir. 1991) (limiting calculation of “damage” to the costs necessary to repair the physical damage caused by the viral computer “worm”); United States v. Middleton, 231 F.3d, 1207, 1213 (9th Cir. 2000) (upheld jury instruction that jury may consider any loss found to be a natural and foreseeable result of any damage that it found occurred, and further instruction that, in determining the amount of loss, jury may consider that measures were reasonably necessary to restore the data, program, system, or information that you find was damaged or what measures were reasonably necessary to resecure the data, program, system, or information from further damage);6 In Re Doubleclick Inc. Privacy Litigation, 154 F.Supp.2d 497, 521 (S.D.N.Y. 2001) (“S.Rep. No 104-357 seems to make clear that Congress intended to the term ‘loss’ to target remedial expenses borne by victims that could not properly be considered direct damage caused by a computer hacker’’).

Given that the term “loss’’ within the statutory context is “grievously ambiguous,’’ the rule of lenity applies “as an outgrowth of our reluctance to increase or multiply punishments absent a clear and definite legislative directive.’’ United States v. Winchester, 916 F.2d 601, 607. See also Dowling v. United States, 473 U.S. 207, 228 (1985) (invoking the “time honored interpretive guideline’’ that “ambiguity concerning the ambit of criminal statutes should be resolved in favor of lenity’’); Bifulco v. United States, 447 U.S. 381, 387 (1980) (“This policy of lenity means that the Court will not interpret a federal criminal statute so as to increase the penalty that it places on an individual when such an interpretation can be based on no more than a guess as to what Congress intended.’’).

The fact that Congress has amended the CFAA to now include consequential damages (including “lost profits’’) adds weight to applying the rule of lenity here in that it suggest that the former statute was more limited in scope. See United States v. McKelvey, 203 F.3d 66 (1st Cir. 2000) (construing statute against the government where statutory ambiguity existed on an element of a criminal offense at the time of the crime and where subsequent legislation broadened statute’s coverage); United States v. McKie, 112 F.3d 626 (3rd Cir. 1997) (same); United States v. Childress, 104 F.3d 47 (4th Cir. 1996) (same). The Court rejects the government’s position that the subsequent legislation served to only clarify, or technically amend, earlier enactments; rather it unequivocally) broadened that statute’s coverage Nothing about the subsequent amendment expressly and unequivocally declares Congress’ intention to only clarify the terms of the former statute. See Dowling, 473 U.S. at 228 n. 18 and 229 (rejecting the notion that Congress acts “implicitly’’ and confirming that ambiguities in a prior criminal statute inure to the benefit of defendant). Rather, this is a criminal statute which carries with it special rules of construction. It is a fundamental rule of criminal statutory construction that statutes are to be strictly construed and should not be interpreted to extend criminal liability beyond that which Congress has plainly and unmistakenly proscribed. Otherwise, the accused lacks fair notice of criminal liability when it is based on some unforeseeable judicial construction of the statute. Thus, the ambiguity in the criminal statue must be resolved in favor of lenity for the accused.

WHEREFORE, for the reasons stated in this Order, it is hereby ORDERED, that the Defendant’s motion for judgment of acquittal is GRANTED, and the charges in the Indictment against the Defendant are hereby dismissed.

ORDERED this 22 day of March, 2002.
/s/
Alan S. Gold
United States District Judge
cc.
A.U.S.A. Richard Boscovich
Manual L. Casabielle, Esq
1The Defendant argues that the Government’s evidence did not allow a permissible inference that the Defendant was guilty of the crimes charged. Other than as addressed in this Order, the Court concludes, applying the applicable legal standard, that the motion is without merit as to the remaining elements of each count.

2Based on the Court’s ruling that the rule of lenity should apply, I do not reach the second question, If I did, I would enter judgment of acquittal based on the fact that the Government’s evidence as to an annual average of “lost profits’’ did not establish the amount of lost profit beyond a reasonable doubt for each site.

3The jury was instructed that the Defendant could only be found guilty if all the following facts were proven beyond a reasonable doubt: (1) that the Defendant knowingly caused the transmission of a program, code, command, or information to a computer without authorization; (2) that as a result of the transmission, the Defendant intentionally and without authorization impaired the integrity or availability of data, a program, a system, or information; (3) that the impairment of the data, program, or information resulted in losses to one or more individuals totaling at least $5,000 in value at any time during the one-year period beginning on June 18, 1998, up to and including June 17, 1999; and (4) that the computer in which the impairment occurred was used in interstate or foreign commerce or communication (emphasis added). The Court concludes there is no basis for a judgment of acquittal as to grounds one, two and four. The sole basis turns on ground three.

4The amended act revised the definition of “damage’’ and, for the first time, defined that term “loss.’’ As noted below, the act in effect at the time of indictment and jury verdict defined “damage’’ to mean any impairment to the integrity or availability of data, a program, a system, or information that causes loss aggregating at least $5,000 in value during any 1-year period to one or more individuals.’’ 18 U.S.C. $1030(e)(8)(A). Subsequent thereto, the act was amended to define “damage” to mean “any impairment to the integrity or availability of data, a program, a system or information.’ 18 U.S.C. $1030(e)(8) (effective October 26, 2001). The term “loss’’ was separately defined to mean “any reasonable cost to any victim, including the cost of responding to an offense, conducting a damage assessment and restoring the data, program, system, or information to is condition prior to the offense, and any revenue lost, cost incurred, or other consequential damages incurred because of interruption of service.’’ 18 U.S.C. $1030(e)(11) (effective October 26, 2001).

5Subsection 1030(g)’s purpose is to prevent recoveries for non-economic damages. See In Re Doubleclick Privacy Litigation, 154 F.Supp.2d 497, 523 n.33 (S.D.N.Y. 2001) (Section 1036(g) bars recovery for claims involving “invasion of privacy,’’ “trespass to personal property,” “misappropriation’’ and “emotional distress’’).

6In Middleton, the defendant was arrested and charged with a violation of 18 U.S.C. 1030(a)(5)(A).] See id. at 1209. The defendant filed

Appeal from the Untied States District Court for the Eastern District of Wisconsin. No. 95-CV-336–Terence T. Evans, Chief Judge.
SUBMITTED MARCH 4, 1997
DECIDED APRIL 28, 1997
Before POSNER, Chief Judge, and KANNE and DIANE P. WOOD, Circuit Judges.

POSNER, Chief Judge.

This unusual appeal asks us to reverse the denial of relief sought by a state prisoner who claims that his crime was privileged by federal copyright law. Brian Corcoran was hired by a consulting firm to write computer programs that would enable the processing of data owned by the firm. His work was full of errors, and he became concerned that he wouldn’t be paid. So, in anticipatory revenge, he installed in one of the programs a software time bomb that was set to go off, deleting the programs from the firm’s computer’s memory, at a specified date and time if he activated the device by a harmless-appearing instruction. Deleting the program would also, as Corcoran knew and intended, delete any data that the firm had supplied to him for use in the programs as soon as someone entered new data into the computer. Eventually Corcoran instructed the firm to give the computer that innocent-appearing instruction. The firm did so, and unknowingly deleted the programs. As a result, the firm’s data were lost forever when, still unaware of Corcoran’s plot, the firm later inputted new data. Convicted and sentenced under a Wisconsin law that criminalizes the willful destruction of computer data, Wis. Stat. sec. 943.70(2)(a)2; see State v. Corcoran, 522 N.W.2d 226 (Wis. App. 1994), Corcoran asked for federal habeas corpus primarily on the ground that federal copyright law entitles him to destroy his own copyrighted software; it is conceded that he had a valid copyright in the programs that he wrote for the consulting firm.

The anterior question is whether this is the kind of defense to a state criminal charge that can be made the subject of a collateral attack on the conviction under the federal habeas corpus statute. Any claim of federal preemption of a state statute is a federal constitutional claim because the basis of such preemption is the supremacy clause; and anyway the habeas corpus statute embraces violations of the “laws,” as well as of the Constitution, of the United States. But habeas corpus (and its federal-prisoner substitute, a motion under 28 U.S.C. Section 2255 to vacate the prisoner’s sentence) is available only to correct fundamental errors in the criminal process of the states, see, e.g., Hill v. United States, 368 U.S. 424, 428 (1962); Reed v. Farley, 512 U.S. 339, 348 (1994) (plurality opinion); Hussong v. Warden, 623 F.2d 1185, 1190-91 (7th Cir. 1980), and as an original matter it is not altogether easy to see how an error in the interpretation of a federal statute (for preemption turns on the interpretation of the statute claimed to preempt, Barnett Bank v. Nelson, 116 S. Ct. 1103, 1107 (1996); Louisiana Public Service Comm’n v. FCC, 476 U.S. 355, 368-69 (1986); Hughes v. United Van Lines, Inc., 829 F.2d 1407, 1412 (7th Cir. 1987); Lawrence H. Tribe, American Constitutional Law sec. 6-25, p. 480 (2d ed. 1988)) that is unrelated to criminal procedure could be thought fundamental to the propriety of the petitioner’s continued imprisonment. If Corcoran is right, the Wisconsin state courts erred in holding that federal copyright law does not extend its protection to (and therefore confer an implied right of destruction of) property owned by another but physically embodied in the copyrighted work. Such an “error” of statutory interpretation would not appear to be the stuff of which habeas corpus is made. Although convicting a person for engaging in conduct that the law does not make criminal was held in Davis v. United States, 417 U.S. 333, 346-47 (1974) (and many later cases, illustrated by Johnson v. United States, 805 F.2d 1284, 1288 (7th Cir. 1986)) to be a denial of due process that can be remedied by means of an application for federal habeas corpus (actually a motion under 28 U.S.C. sec. 2255 in the cases we have cited, but the principle is equally applicable to habeas corpus), there is no doubt that Wisconsin has attempted to criminalize Corcoran’s conduct. The only question is whether the Wisconsin courts erred in failing to recognize a defense. And while we have found two cases in which courts considered copyright preemption claims in federal habeas corpus proceedings, Anderson v. Nidorf, 26 F.3d 100 (9th Cir. 1994); Crow v. Wainwright, 720 F.2d 1224 (11th Cir. 1983), in neither did the court allude to a possible jurisdictional issue, so neither is a precedent on the issue. Pennhurst State School & Hospital v. Halderman, 465 U.S. 89, 119 (1984); Glidden v. Chromalloy American Corp., 808 F.2d 621, 625 (7th Cir. 1986); cf. United States v. Kucik, 844 F.2d 493, 498 (7th Cir. 1988).

Nevertheless we think that Davis controls, and makes actionable by federal habeas corpus a claim that a state conviction violates due process because the conviction is based on a statute that has been preempted–wiped out (e.g., Cipollone v. Liggett Group, Inc., 505 U.S. 504, 516 (1992); EEOC v. Illinois, 69 F.3d 167, 169 (7th Cir. 1995))–by a federal statute. Davis holds that habeas corpus provides a remedy to a person who is convicted of engaging in conduct that is not criminal; and by virtue of the supremacy clause, a federal statute can nullify a state criminal statute and if it does so the state can no longer criminalize conduct within the federal statute’s preemptive scope. The state statute (more precisely, so much of it as is preempted) is wiped out as effectively as if it had been repealed; and the defendant can no more be convicted under it, consistent with due process, than he could be convicted under a repealed statute.

So we have jurisdiction of Corcoran’s copyright claim, but the merits of it need detain us only briefly. Of course federal copyright law does not preempt state criminal prosecutions for destroying noncopyrighted property that is commingled with a copyrighted work. Otherwise an author invited into the home of someone who had bought one of his books would have a legal privilege to tear up the book if he had retained the copyright in it. In that hypothetical case the copyrighted work is embodied in a physical medium that is not itself copyrighted, and the Copyright Act is explicit that “ownership of a copyright, or of any of the exclusive rights under a copyright, is distinct from owner- ship of any material object in which the work is em- bodied.” 17 U.S.C. Section 202; see Schiller & Schmidt, Inc. v. Nordisco Corp., 969 F.2d 410, 413 (7th Cir. 1992). In this case, noncopyrighted work is embedded in copyrighted work; but the result is the same. Corcoran did not have, and could not have acquired, a copyright in the firm’s data, even though he embedded those data in his copyrighted programs. 17 U.S.C. Section 103(b); Feist Publications, Inc. v. Rural Telephone Service Co., 499 U.S. 340, 344-45 (1991); Rockford Map Publishers, Inc. v. Directory Service Co. of Colorado, Inc., 768 F.2d 145, 148 (7th Cir. 1985). What he destroyed was therefore not covered by his copyright, or its destruction privileged by virtue of the copyright in the programs. The Copyright Act provides that nothing in it “annuls or limits any rights or remedies under the common law or statutes of any State with respect to activities violating legal or equitable rights that are not equivalent to any of the exclusive rights within the general scope of copyright as specified” in the Act. 17 U.S.C. Section 301(b)(3); see United States Trotting Ass’n v. Chicago Downs Ass’n, Inc., 665 F.2d 781, 786 (7th Cir. 1981) (en banc); National Car Rental System, Inc. v. Computer Associates Int’l, Inc., 991 F.2d 426 (8th Cir. 1993). The Act granted Corcoran no rights over the firm’s data, as we have seen, and therefore, by force of the provision that we just quoted (yet the conclusion would be obvious without it), did not prevent Wisconsin from criminalizing activities that invaded the firm’s property rights in those data.

Corcoran also mounts some more conventional challenges to the legality of his conviction, such as that the computer-crimes statute is unconstitutionally vague; but they have too little merit to warrant discussion.

AFFIRMED.

Plaintiffs-Appellants,

v.

ANTHONY GRACEY, MARK WENTHOLD,
and GREGORY TAYLOR, Officers
in their official capacities
as Oklahoma City Police Officers
and as individuals,

Defendants-Appellees,

Appeal from the United States District Court
for the Western District of Oklahoma
(D.C. No. CIV-94-335-L)

Michael Salem, Salem Law Offices, Norman, Oklahoma (William R. Holmes,
Norman, Oklahoma, with him on the brief), for Plaintiffs-Appellants.

Stacey Haws Felkner (Robert E. Manchester and Susan A. Knight, with her on the
brief), of Manchester & Pignato, Oklahoma City, Oklahoma, for Defendants-
Appellees.

Before SEYMOUR, Chief Judge, BARRETT and LIVELY,(1) Senior Circuit
Judges.

SEYMOUR, Chief Judge.

(1) The Honorable Pierce Lively, Senior United States Circuit Judge for the Sixth Circuit, sitting by designation. Anthony Davis operated a large computer bulletin board system in Oklahoma City. After Mr. Davis sold obscene CD-ROMs to an undercover officer, a warrant was obtained to search his business premises. During the execution of the warrant, police officers determined pornographic CD-ROM files could be accessed through the bulletin board and seized the computer equipment used to operate it. Following his criminal conviction and civil forfeiture of the computer equipment in state court proceedings, Mr. Davis, his related businesses, and several users of electronic mail (e-mail) on his bulletin board brought this action in federal court against the officers who executed the search, alleging that the seizure of the computer equipment, and e-mail and software stored on the system, violated several constitutional and statutory provisions. The district court granted summary judgment for the officers. We affirm.

I Background

Mr. Davis operated the Oklahoma Information Exchange, a computer bulletin board system. Computer users could subscribe to the bulletin board, dial in using a modem, then use the system to send and receive messages via e-mail, access the Internet, utilize on-line databases, and download or upload software. According to Mr. Davis, approximately 2000 subscribers used his bulletin board. In April 1993, the Oklahoma City Police Department received an anonymous tip that Mr. Davis was selling obscene CD-ROMs from his business premises. On three different occasions, an undercover officer purchased “adult” CD-ROMs directly from Mr. Davis. During one of these visits, Mr. Davis mentioned to the officer that he operated a bulletin board, and that similar pornographic images could be accessed by dialing in to the bulletin board. The officer never actually saw the computer equipment used to operate the bulletin board. In his affidavit for a search warrant, the officer did not mention the possibility that a bulletin board was being operated on the premises, or the possibility that this bulletin board could be used to distribute or display pornographic images. A judge determined that two CD-ROMs acquired from Mr. Davis were obscene, and issued a warrant to search his business premises for pornographic CD-ROMs and “equipment, order materials, papers, membership lists and other paraphernalia pertaining to the distribution or display of pornographic material in violation of state obscenity laws set forth in O.S. Title 21-1024.1.” Aplee. supp. app., vol. I at 45.Several officers, including defendants Anthony Gracey and Mark Wenthold, conducted the search at Mr. Davis’ business. During the search, the officers discovered the bulletin board. Attached to it were CD-ROM drives housing sixteen CD-ROM discs, including four discs identified by Mr. Davis to the officers as containing pornographic material. The officers believed from the configuration of the bulletin board computers that the files accessible via the bulletin board included files from the four pornographic CD-ROMs. The officers called for assistance from officer Gregory Taylor, who was reputed to be more knowledgeable about computers than they were. He confirmed that the pornographic CD-ROMs could be accessed via the bulletin board. The officers seized the computer equipment used to operate the bulletin board, including two computers, as well as monitors, keyboards, modems, and CD-ROM drives and changers. The seizure of this computer equipment is the subject of the federal proceedings in this case.

At the time of the seizure, the computer system contained approximately 150,000 e-mail messages in electronic storage, some of which had not yet been retrieved by the intended recipients. The hard drive of the computer system also contained approximately 500 megabytes of software which had been uploaded onto the bulletin board by individual subscribers. Mr. Davis intended to republish this “shareware” on a CD-ROM for sale to the public. Mr. Davis had previously published three such compilations of shareware on CD-ROM.
Mr. Davis was convicted of several counts of possessing and distributing obscenity, and of using a computer to violate Oklahoma statutes. His conviction was upheld on appeal. Davis v. State, 916 P.2d 251, 254 (Okla. Crim. App. 1996). The State also obtained civil forfeiture of the computer equipment used to operate the bulletin board. State ex rel. Macy v. One (1) Pioneer CD-ROM Changer, 891 P.2d 600, 607 (Okla. Ct. App. 1994). Law enforcement officials have apparently disclaimed any interest in the materials in electronic storage, either for purposes of evidence or forfeiture.Mr. Davis, Gayla Davis, John Burton, and TSI Telecommunication Specialists, Inc.,(1) filed the instant suit in federal court alleging claims under 42 U.S.C. 1983 for violation of First and Fourth Amendment rights, and under the Privacy Protection Act (PPA), 42 U.S.C. 2000aa – 2000aa-12, and the Electronic Communications Privacy Act (ECPA), 18 U.S.C. 2510-2711. The crux of the complaint is that the seizure of the equipment was illegal because the warrant was not sufficiently particular and because the seized computer system contained e-mail intended for private subscribers to the bulletin board, and software intended for future publication by Mr. Davis. Plaintiffs contend these

(1) Gayla Davis was, at the time of the search, Mr. Davis’ wife and co-owner of the Oklahoma Information Exchange bulletin board. TSI Telecommunications is a corporation owned by Anthony and Gayla Davis. The Davises and John Burton were users of the bulletin board. Stored electronic materials were outside the scope of the warrant, and are protected by several congressional enactments. Original defendants in this suit included the City of Oklahoma City, the Oklahoma City Police Department, and several officers of the Oklahoma City Police Department who executed the search and seizure of the computer equipment. The municipal entities were dismissed from the case. Plaintiffs do not dispute that their only remaining claims are against the officers in their individual capacities. The district court entered summary judgment for the officers, holding that their reliance on a valid warrant entitled them to qualified immunity on the constitutional claims, and entitled them to the statutory good faith defenses contained in the PPA and ECPA.

II Preliminary Issues

At the outset, we must note the narrow scope of our consideration of the issues before us. (2) We address here plaintiffs’ arguments only to the extent they (2) although plaintiffs have raised several new arguments on appeal, we dispose only of those arguments that were advanced in the district court in opposition to the officers’ motion for summary judgment. See Bancamerica Commercial Corp. v. Mosher Steel of Kansas, Inc., 100 F.3d 792, 798-99 (10thCir. 1996).concern the legality of the initial seizure of the computer equipment and the electronic material stored therein. Plaintiffs make repeated references in their briefs to the retention by law enforcement authorities of the stored electronic material, and the failure of such authorities to copy or return the material when requested to do so.(3) A failure timely to return seized material which is without evidentiary value and which is not subject to forfeiture may state a constitutional or statutory claim. Cf. Fed. R. Crim. P. 41 advisory committee’s note to 1989 Amendment (stating that even when property is lawfully seized, “if the United States’ legitimate interests can be satisfied even if the property is returned, continued retention would become unreasonable”); In re Search of Kitty’s East, 905 F.2d 1367, 1375 (10th Cir. 1990) (same). However, plaintiffs have made no allegation that defendant officers are persons with authority to return materials once seized. The City and the Police Department have been dismissed from this action. We therefore do not consider any potential violations of plaintiffs’ constitutional or statutory rights that derive from failure or delay in returning or copying materials once seized. We address only those claims arising out of the initial seizure of the computer equipment in question. The officers assert that plaintiffs’ claims are barred by collateral estoppel and res judicata arising out of the state court criminal and forfeiture proceedings. We “must give the same preclusive effect to state court judgments that those judgments would be given in the courts of the state in which the judgments were rendered.” Comanche Indian Tribe of Oklahoma v. Hovis, 53 F.3d 298, 302 (10th Cir. 1995). Collateral estoppel only applies to issues actually and necessarily determined in the prior proceeding. Laws v. Fisher, 513 P.2d 876, 877 (Okla. 1973). The officers concede the earlier proceedings in state court did not resolve the statutory claims raised by plaintiffs. The Oklahoma Court of Criminal Appeals did not address the issues. The Oklahoma Court of Appeals addressing the civil forfeiture declined to determine if a claim was stated under the ECPA or PPA, holding only that if such claims existed they would not affect the legality of the computer equipment forfeiture. One (1) Pioneer CD-ROM Changer, 891 P.2d at 605-07. Moreover, collateral estoppel applies only to persons who were parties or in privity with parties to the prior proceeding. Laws, 513 P.2d at 877. Without deciding if other plaintiffs are estopped from asserting their various claims, at a minimum we are not persuaded the officers have established that Mr. Burton is in

(3) It is not clear from the record whether plaintiffs made a proper request for the return of the electronically stored materials or only for the computer equipment generally. The latter was subject to forfeiture, and thus plaintiffs were not entitled to its return.privity with Mr. Davis. Consequently, at least one plaintiff is able to assert each claim on appeal; for convenience we will refer throughout to plaintiffs collectively. We address in turn each of the claims remaining in this appeal.(4)

III Fourth Amendment

The officers claim they are entitled to qualified immunity on the constitutional claims. We review de novo the district court’s grant of qualified immunity on summary judgment, viewing the evidence in the light most favorable to the nonmoving party. Romero v. Fay, 45 F.3d 1472, 1475 (10th Cir. 1995). “We analyze assertions of qualified immunity under a two-part framework: first we determine whether the plaintiff has asserted a violation of a constitutional or statutory right, and then we decide whether that right was clearly established such that a reasonable person in the defendant’s position would have known that her conduct violated the right.” Garramone v. Romo, 94 F.3d 1446, 1449 (10th Cir. 1996) (citing Siegert v. Gilley, 500 U.S. 226, 231 (1991)). “The plaintiff must

(4) On appeal, plaintiffs do not pursue a distinct First Amendment claim, although they do assert that First Amendment concerns animate Fourth Amendment jurisprudence and the statutory remedies provided in the Privacy Protection Act. articulate the clearly established constitutional right and the defendant’s conduct which violated the right with specificity.” Romero, 45 F.3d at 1475. Once the plaintiffs have met this initial burden, “the defendant must demonstrate that no material issues of fact remain as to whether his or her actions were objectively reasonable in light of the law and the information he or she possessed at the time.” Coen v. Runner, 854 F.2d 374, 377 (10th Cir. 1988). If we determine that
plaintiffs have failed to show the officers’ conduct constituted a violation of a constitutional or statutory right, we need not address the other elements of the qualified immunity inquiry.Plaintiffs assert that the warrant did not specifically authorize the seizure of the computer equipment and thus was unconstitutionally overbroad. They suggest the officers misled the magistrate in procuring the warrant. Even if the warrant authorized the seizure of the computer equipment, plaintiffs contend the warrant should not have been executed in a manner resulting in the incidental seizure of e-mail and other files stored on the hardware which were clearly outside the scope of the warrant. We address each of the contentions in turn.

A. The Warrant we review de novo whether the warrant was overbroad under the Fourth Amendment. United States v. Leary, 846 F.2d 592, 600 (10th Cir. 1988). “The fourth amendment requires that a search warrant describe the things to be seized with sufficient particularity to prevent a `general, exploratory rummaging in a person’s belongings.’” Voss v. Bergsgaard, 774 F.2d 402, 404 (10th Cir. 1985) (quoting Coolidge v. New Hampshire, 403 U.S. 443, 467 (1971)). “The particularity requirement ensures that a search is confined in scope to particularly described evidence relating to a specific crime for which there is demonstrated probable cause.” Id. “The requirement that warrants shall particularly describe the things to be seized makes general searches under them impossible and prevents the seizure of one thing under a warrant describing another. As to what is to be taken, nothing is left to the discretion of the officer executing the warrant.” Marron v. United States, 275 U.S. 192, 196 (1927).We have stated that “[t]he test applied to the description of the items to be seized is a practical one,” Leary, 846 F.2d at 600, and the language in warrants is to be read in a “common sense fashion,” In re Search of Kitty’s East, 905 F.2d at 1374. Thus, “`[a] description is sufficiently particular when it enables the searcher to reasonably ascertain and identify the things authorized to be seized.’” Leary, 846 F.2d at 600 (quoting United States v. Wolfenbarger, 696 F.2d 750, 752 (10th Cir. 1982)) (internal quotation omitted). “As an irreducible minimum, a proper warrant must allow the executing officers to distinguish between items that may and may not be seized.” Id. at 602. Moreover, “[e]ven a warrant that describes the items to be seized in broad or generic terms may be valid `when the description is as specific as the circumstances and the nature of the activity under investigation permit.’” Id. at 600 (quoting United States v. Santarelli, 778 F.2d 609, 614 (11th Cir. 1985)).Plaintiffs suggest that the warrant’s failure to indicate explicitly that “equipment” encompassed computer equipment or electronics was a fatal defect. We do not agree. We ask two questions: did the warrant tell the officers how to separate the items subject to seizure from irrelevant items, and were the objects seized within the category described in the warrant? Here, we answer both of these questions in the affirmative. The warrant directed the officers to search for “equipment . . . pertaining to the distribution or display of pornographic material in violation of state obscenity laws set forth in O.S. Title 21-1024.1.” Aplee. supp. app., vol. I, at 45. Computer equipment which fell into this category could be legally seized. Plaintiffs do not dispute that the bulletin board could be used for dial-in access to and copying of pornographic files from the loaded CD-ROMs. The seized computer equipment fell within the scope of the warrant. Alternatively, plaintiffs argue that if the computer equipment was encompassed in the language of the warrant, the warrant was overly broad. We disagree. The description given in the warrant was sufficient to provide a meaningful limitation on the search, and was far narrower than those we have found lacking sufficient particularity. We have invalidated warrants for overbreadth where the language of the warrants authorized the seizure of “virtually every document that one might expect to find in a . . . company’s office,” including those with no connection to the criminal activity providing the probable cause for the search. Leary, 846 F.2d at 602; see also Voss, 774 F.2d at 405. We have also held that an “unadorned reference to a broad federal statute does not sufficiently limit the scope of a search warrant.” Leary, 846 F.2d at 602; see also United States v. Brown, 984 F.2d 1074, 1077 (10th Cir. 1993) (holding overbroad language authorizing a search for “other item which the officers determine or have reasonable belief is stolen”). Similarly, the Ninth Circuit found insufficiently particular a warrant which “authorized the seizure of virtually every document and computer file” at the target company. United States v. Kow, 58 F.3d 423, 427 (9th Cir. 1995). The court emphasized that the warrant “contained no limitations on which documents within each category could be seized or suggested how they related to specific criminal activity.” Id.The warrant here was confined to that equipment “pertaining to the distribution or display of pornographic material.” Aplee. supp. app., vol. I at 45. This description included only that equipment directly connected to the suspected criminal activity, not a wide range of equipment used for purposes unrelated to the suspected criminal activity. Nor did it encompass all the equipment one might expect to find at a legitimate business. Furthermore, the criminal activity referenced in the warrant was very narrow, providing a ready guide to determine if a given item was one that might be the instrument or evidence of the criminal activity. The warrant was not overbroad. Our approval of the particularity of the warrant is bolstered by the execution of the search itself. The officers did not conduct a general search of the premises. They left behind approximately 2000 CD-ROM discs that Mr. Davis represented to be of his own manufacture and non-pornographic in nature. There is no evidence the officers attempted to search or seize computer equipment that was not connected to the CD-ROM drives or the bulletin board. The executing officers consulted with a more expert officer to confirm that the computer equipment was in fact used to distribute or display pornographic material and therefore fell within the scope of the warrant. If the executing officers had flagrantly disregarded the limitations of the warrant, an otherwise constitutional warrant might have been transformed into a general search. United States v. Medlin, 842 F.2d 1194, 1199 (10th Cir. 1988). There is no indication of such behavior here.

B. The Warrant Application Plaintiffs also infer that the magistrate was misled by the failure of the affidavit for the warrant to mention either the possible existence of the bulletin board, or the possible distribution of pornography via computer, when the swearing officer knew of these possibilities. However, plaintiffs do not suggest the magistrate was unaware that “equipment . . . pertaining to the . . . display of pornographic material” contained on CD-ROM discs was likely to include computers and related accessories. Indeed, the affidavit informed the magistrate that the swearing officer viewed one of the obscene discs “on a computer with a CD-ROM drive.” Aplee. supp. app., vol. I at 43.Plaintiffs assert that because the officers knew about the bulletin board but did not include this knowledge in the affidavit supporting the warrant their reliance on the warrant could not be in good faith. “Only where the warrant application is so lacking in indicia of probable cause as to render official belief in its existence unreasonable . . . will the shield of immunity be lost.” Malley v. Briggs, 475 U.S. 335, 344-45 (1986) (citing United States v. Leon, 468 U.S. 897, 923 (1984)). The warrant was amply supported by probable cause. Plaintiffs have offered no theory why a reasonable officer would believe that omitting mention of the bulletin board would vitiate the probable cause contained in the affidavit. Plaintiffs’ argument reduces to the narrow claim that the warrant was invalid because the affidavit failed to recite that a computer system might also be configured to allow remote viewing of the pornographic material via a computer bulletin board. We decline to invalidate a warrant supported by probable cause simply because officers executing it suspect, and then discover, that the target of
the search has employed an unstated methodology for using the objects specified in the warrant for commission of the crime referenced in the warrant.

C. Incidental Seizure of Electronically Stored Materials Plaintiffs appear to argue that even if the warrant authorized the seizure of the computer equipment, such a seizure was nonetheless illegal because of the concomitant incidental seizure of e-mail and software stored therein.(5) We can discern no doctrinal support for this proposition. The argument appears to draw its force from plaintiffs’ efforts to distinguish between the computer hardware–the “container”–and its contents. They repeatedly urge that the seizure was unlawful because no probable cause was asserted to seize the contents independent of the probable cause asserted to seize the computer equipment. The question then is whether the incidental temporary seizure of stored electronic

(5) We consider below the similar issues raised by plaintiffs’ statutory claim under the ECPA.materials invalidated the seizure of the computer within which they were stored. We hold that it did not. Plaintiffs’ argument fails for the simple reason that the computer equipment was more than merely a “container” for the files; it was an instrumentality of the crime. In the typical case, the probable cause supporting seizure of a container is probable cause to believe that the container’s contents include contraband or evidentiary material. Here, in contrast, the probable cause supporting the seizure of the computer/container related to the function of the computer equipment in distributing and displaying pornographic images, not to its function in holding the stored files. The fact that a given object may be used for multiple purposes, one licit and one illicit, does not invalidate the seizure of the object when supported by probable cause and a valid warrant. We also note the obvious difficulties attendant in separating the contents of electronic storage from the computer hardware during the course of a search. Perhaps cognizant of the potential burdens of equipment, expertise, and time required to access, copy, or remove stored computer files, plaintiffs have not suggested any workable rule. In short, we can find no legal or practical basis for requiring officers to avoid seizing a computer’s contents in order to preserve the legality of the seizure of the computer hardware. In any event, we are well able to distinguish between the legality of the initial seizure of a container, and any subsequent search or retention of the contents. See, e.g., United States v. Corral, 970 F.2d 719, 725 (10th Cir. 1992); United States v. Donnes, 947 F.2d 1430, 1436 (10th Cir. 1991). Even in the typical case, seizure of a container need not be supported by probable cause to believe that all of the contents of the container are contraband. The seizure of a container is not invalidated by the probability that some part of its “innocent” contents will be temporarily detained without independent probable cause. We will not hold unlawful the otherwise constitutional seizure of the computer equipment in order to prevent the temporary deprivation of plaintiffs’ rights to the contents. However, our conclusion that the seizure of the computer equipment pursuant to a warrant here allowed the incidental seizure of files stored therein should not be read as approval of any subsequent efforts by the police to search or retain the stored files without a warrant.(6) Finally, plaintiffs suggest that once the CD-ROMs and CD-ROM drives were seized, the officers lacked cause to remove the remainder of the computer equipment. Again, we are unable to discern a practical or doctrinal basis for this proposed rule of minimization. The computer equipment as a whole was an

(6) Not only is there no evidence that the officers ever read the e-mail or files in question, the law enforcement personnel involved in this action repeatedly, both in state and federal court, disclaimed any interest in the contents thereof.
instrumentality of the crime of distributing obscenity, and the equipment was covered by the warrant.Viewing the evidence in the light most favorable to plaintiffs, the conduct of the officers did not rise to a constitutional violation. The district court therefore properly granted summary judgment to the officers on plaintiffs’ constitutional claim.

IV Privacy Protection Act

Plaintiffs assert that the seizure of the stored electronic materials constituted a violation of the Privacy Protection Act (PPA), 42 U.S.C. 2000aa – 2000aa-12. The PPA provides that it shall be unlawful for a government officer or employee, in connection with the investigation or prosecution of a criminal offense, to search for or seize any work product materials possessed by a person reasonably believed to have a purpose to disseminate to the public a newspaper, book, broadcast, or other similar form of publication.
42 U.S.C. 2000aa (a).

(7) The PPA requires law enforcement officers, absent exigent circumstances, id. 2000aa (a) (2), to rely on subpoenas to acquire materials ntended for publication unless “there is probable cause to believe that the person possessing [work product] materials has committed or is committing the criminal offense to which the materials relate,” id. 2000aa (a) (1).The statute creates a civil cause of action for damages resulting from a search or seizure of materials in violation of the Act. Id. 2000aa-6. This cause of action is available against the United States, against a State (if the State has waived sovereign immunity), or against “any other governmental unit.” Id. 2000aa-6(a)(1). A cause of action is available against the officers or employees of a State only if the State has not waived its sovereign immunity. Id. 2000aa-6(a)2).

(8) The Act provides that “[i]t shall be a complete defense to a civil action [against a government officer or employee] that the officer had a reasonable good faith belief in the lawfulness of his conduct.” 42 U.S.C. 2000aa-6(b). The district court here granted summary judgement for the officers, holding them entitled to the good faith defense due to their reliance on a warrant. We hold instead that we lack subject matter jurisdiction over defendant officers under the PPA. The statute provides: The remedy provided by [section 2000aa-6(a)(1)] against the United States, a State, or any other governmental unit is exclusive of any other civil action or proceeding for conduct constituting a violation of this chapter, against the officer or employee whose violation gave rise to the claim, or against the estate of such officer or employee.Id. 2000aa-6(d). Thus, an action under the PPA may only be brought against the governmental entity, unless the state has not waived sovereign immunity in which event state employees may be sued. Id. 2000aa-6(a)(2). The PPA by its (7) The PPA also provides protection to “documentary materials, other than work product materials,” which are not themselves intended for publication but which are “possessed . . . in connection with a purpose to disseminate” a public communication. 42 U.S.C. 2000aa (b). (8) Section 2000aa-6(a) reads in full:

Civil actions by aggrieved persons (a) Right of action A person aggrieved by a search for or seizure of materials in violation of this chapter shall have a civil cause of action for damages for such search or seizure–
(1) against the United States, against a State which has waived its sovereign immunity under the Constitution to a claim for damages resulting from a violation of this chapter, or against any other governmental unit, all of which shall be liable for violations of this chapter by their officers or employees while acting within the scope or under color of their office or employment; and (2) against an officer or employee of a State who has violated this chapter while acting within the scope or under color of his office or employment, if such State has not waived its sovereign immunity as provided in paragraph (1). 42 U.S.C. 2000aa-6(a).terms does not authorize a suit against municipal officers or employees in their individual capacities. The statute therefore provides no cause of action against these defendants. Although the parties stipulated below to subject-matter jurisdiction, “no action of the parties can confer subject-matter jurisdiction upon a federal court,” Insurance Corp. of Ireland v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702 (1982). We dismiss the PPA claim for lack of subject-matter jurisdiction.

V Electronic Communications Privacy Act

Plaintiffs claim that the seizure of the e-mail on the bulletin board violated the Electronic Communications Privacy Act (ECPA), 18 U.S.C. 2510-2711. Title II of the ECPA, id. 2701-2711, bars unauthorized access to stored electronic communications. Section 2701 provides criminal penalties for whoever (1) intentionally accesses without authorization a facility through which an electronic communication service is provided; or (2) intentionally exceeds an authorization to access that facility; and thereby obtains, alters, or prevents authorized access to a wire or electronic communication while it is in electronic storage in such system. Id. 2701(a). In addition to criminal penalties, the ECPA provides a civil cause of action for “any provider of electronic communication service, subscriber, or other person aggrieved by any violation of this chapter.” Id. 2707(a). However, “[a] good faith reliance on . . . a court warrant or order . . . is a complete defense to any civil or criminal action brought under this chapter or any other law.” Id. 2707(e). Plaintiffs contend that by seizing the e-mail and dismantling the bulletin board, the officers “obtain[ed] . . . or prevent[ed] authorized access to a[n] . . . electronic communication while it is in electronic storage” within the meaning of section 2701(a).

(9) This claim raises a question of first impression in this or any circuit. There are few cases interpreting the reach of the substantive provisions of the ECPA or applying the good faith defense to violations of Title II of the
ECPA, although a body of decisions does address the parallel good faith defense in Title I of the ECPA, 18 U.S.C. 2520(d).(10) See, e.g., Heggy v. Heggy, 944 F.2d 1537, 1541-42 (10th Cir. 1991); Halperin v. Kissinger, 807 F.2d 180, 183-88 (D.C. Cir. 1986); Campiti v. Walonis, 611 F.2d 387, 394-95 (1st Cir. 1979).Plaintiffs rely heavily on the decision in Steve Jackson Games, Inc. v. United States Secret Serv., 816 F. Supp. 432 (W.D.Tex. 1993), aff’d, 36 F.3d 457 (5th Cir. 1994), which contains the most extensive discussion of the substantive provisions of the ECPA we have found. In that case, federal law enforcement officers sought a sensitive computer document stolen by computer hackers as well as evidence of related codebreaking activity. The officers had reason to believe that a suspect employed by Steve Jackson Games may have uploaded such documents to the company’s computer bulletin board, which the suspect used and helped operate. No illegal activity by the company itself was alleged. The officers obtained a warrant to seize a variety of computer files and documents from the company’s bulletin board. The trial court found that, despite their denials, Secret Service personnel did in fact read all electronic communications (9) we note that section 2703 establishes the requirements for governmental access to the contents of electronic communications held in electronic storage. 18 U.S.C. 2703 (see note 11 infra). The State disclaimed any interest in the contents of the seized e-mail and did not seek forfeiture of the e-mail. Defendant officers also disclaim any such interest. Plaintiffs have not alleged that the officers have attempted to access or read the seized e-mail. The gravamen of the complaint is not unauthorized governmental access to the contents of the e-mail, but seizure of the e-mail and its delivery system which prevented access by the intended recipients.

(10) The earlier version of Title I of the ECPA is commonly referred to as part of Title III of the Omnibus Crime Control and Safe Streets Act. In their First Amended Complaint, plaintiffs also alleged a claim for illegal interception of electronic communications under Title I of the ECPA, 18 U.S.C. 2510-2521. Title I amended Title III of the Omnibus Crime Control and Safe Streets Act governing the use of wiretapping. The district court held that the seizure here did not constitute an “interception” and granted summary judgment to the officers on that claim. Plaintiffs do not appeal on that issue. Seized, including private e-mail not mentioned in the search warrant or affidavit, and also deleted some of the seized files. The court held that the Secret Service’s conduct with respect to the private e-mail failed to comply with the requirements of Title II of the ECPA relating to the disclosure of the contents of stored electronic communications, 18 U.S.C. 2703. The court also declined to find the defendants entitled to a good faith defense for their reliance on the search warrant. Although the Title II issue was not appealed, the circuit court in its discussion of other issues on appeal referred approvingly to the district court’s conclusion “that Title II of the ECPA clearly applies to the conduct of the Secret Service.” Steve Jackson Games, Inc. v. United States Secret Serv., 36 F.3d 457, 462 (5th Cir. 1994).We do not find this scant precedent helpful. The circumstances here are far different from those in Steve Jackson Games. Most centrally, that case involved a seizure of electronic communications and the subsequent review, reading, and deletion of files in electronic storage. The court focused on the provisions of section 2703, which establishes the procedures for government access to “the contents of an electronic communication.”(11) We assume without deciding that an

(11) Titled, “Requirements for governmental access,” section 2703 reads:

(a) Contents of electronic communications in electronic storage.–A governmental entity may require the disclosure by a provider of electronic communication service of the contents of an electronic communication that is in electronic storage in an electronic communications system for one hundred and eighty days or less, only pursuant to a warrant . . . . A governmental entity may require the disclosure by a provider of electronic communications services of the contents of an electronic communication that has been in electronic storage . . . for more than one hundred and eighty days by the means available under subsection (b) . . . .
(b) Contents of electronic communications in a remote computing service.–(1) A governmental entity may require a
Provider of remote computing service to disclose the contents of any electronic communication . . . –
(A) without required notice to the subscriber or customer, if the governmental entity obtains a warrant . . . .18 U.S.C. 2703 (emphasis added). Additional warrant in compliance with section 2703 would have been required for the law enforcement officials in the instant case to gain access to the contents of the seized e-mail. Plaintiffs have not alleged that the officers attempted to access or read the seized e-mail, and the officers disclaimed any interest in doing so. We are therefore faced with the entirely distinct question of whether an incidental seizure of electronic communications, standing alone, is a violation of the ECPA. Section 2703 does not appear to address this situation.(12)We assume without deciding that plaintiffs have described conduct which constitutes a violation of section 2701, that is, that the officers “intentionally access[ed] without authorization a facility through which an electronic communication service is provided . . . and thereby . . . prevent[ed] authorized access to a wire or electronic communication while it [was] in electronic storage in such a system.” 18 U.S.C. 2701(a). (13) We further accept as true plaintiffs’ assertion that a reasonable officer with the computer skills of defendant officers should have known that seizure of computer hardware would result in the seizure and disruption of e-mail. Nevertheless, we hold that the officers were entitled to summary judgment because they qualify for the statutory good faith defense as a matter of law.

(12) The various provisions of section 2703 refer repeatedly to the procedure by which the government may require a service provider to disclose communications or information of a subscriber or customer. The section provides a mechanism for a service provider to contest such a requirement, 2703(d), and shields the service provider from liability for cooperating with the government pursuant to a court order, 2703(e). Steve Jackson Games involved the seizure and subsequent search of e-mail from a bulletin board where the owner of the bulletin board was not a suspect in the crime. Steve Jackson Games, Inc. v. United States Secret Serv., 816 F. Supp. 432, 436 n.4 (W.D. Texas 1993), aff’d, 36 F.3d 457 (5th Cir. 1994). Here, the provider of the bulletin board was himself the target of the investigation, and the computer equipment storing the electronic communications was an instrumentality of the crime subject to seizure pursuant to a valid warrant.

(13) We note it is unclear whether this section was intended to apply to the sort of law enforcement activities involved here. Cf. State Wide Photocopy Corp. v. Tokai Fin. Servs., Inc., 909 F. Supp. 137, 145 (S.D.N.Y. 1995) (“[I]t appears that the ECPA was primarily designed to provide a cause of action against computer hackers, (i.e., electronic trespassers).”). It is also unclear whether the term “access” encompasses the simple physical dismantling of the operating hardware. Plaintiffs suggest that the officers could have made a lawful seizure of the electronically stored communications only by satisfying one of the listed exceptions to liability under section 2701 of the ECPA.

(14) The exceptions listed contemplate that no liability attaches for “obtain[ing], alter[ing] or prevent[ing] authorized access to a . . . electronic communication,” 2701(a), if such disruption is incident to the government’s access to the contents through the procedures for disclosing, 2703, copying, 2704, or intercepting, 2518. In short, these exceptions all excuse government officers from liability based upon a required showing to a magistrate that the intrusive activity is necessary for a law enforcement purpose. In addition to the enumerated exceptions, however, the statute contains the general good faith defense of section 2707(e) for reliance on a warrant. The officers relied on the warrant to seize the computer equipment, and the seizure of the stored electronic communications was incidental to the execution of the warrant. To be in good faith, the officers’ reliance must have been objectively reasonable. Malley v. Briggs, 475 U.S. at 344-45. We have already concluded in our discussion of plaintiffs’ Fourth Amendment claim that the warrant was valid and encompassed the computer equipment. The officers’ reliance on the warrant was therefore objectively reasonable. Finally, plaintiffs contend the officers are not entitled to a good faith defense because they did not inform the magistrate of the possible existence of
the stored electronic communications. We have held in our discussion of plaintiffs’ constitutional claim that plaintiffs’ inference of subjective bad faith in the officers’ omission of information from the affidavit does not eliminate the officers’ ability to rely on a valid warrant supported by probable cause. The plaintiffs have not persuaded us the statute imposes a requirement stricter than the Fourth Amendment in this respect. To the extent plaintiffs’ contention is based on their view that the warrant must contain probable cause to seize the contents independent of the probable cause supporting the seizure of the computer, we have likewise concluded otherwise. The officers established a good faith defense as a matter of law.(15)
14) Section 2701(c) reads:
Exceptions.–Subsection (a) of this section does not apply with respect to conduct authorized–
(1) by the person or entity providing a wire or electronic communications service;
(2) by a user of that service with respect to a communication of or intended for that user; or
(3) in section 2703, 2704 or 2518 of this title.

(15)We reiterate that we do not address here any potential statutory liability or failure to promptly copy or return stored electronic communications pursuant to a proper request to do so.

VI Conclusion

We hold that the officers’ reliance on a valid warrant entitled them to qualified immunity on plaintiffs’ Fourth Amendment claim, and established a good faith defense under the ECPA.(16) We also hold that we lack subject matter jurisdiction over plaintiffs’ asserted claim against the officers under the PPA. We AFFIRM the district court’s entry of summary judgment for the officers.

(16) Although we have determined here that plaintiffs failed to allege conduct which created constitutional or statutory liability, we note that salutary benefits may accrue from a practice in the application for warrants of informing magistrates as fully as practicable of the officer’s knowledge of the possible presence of publication materials or equipment for electronic storage or communication. Other cases may present closer questions of the applicability of required statutory procedures. Sufficient information will enable magistrates to set bounds which will minimize the potential for liability arising out of the initial search and seizure, or the post-seizure disposition of seized materials.