read Freedman to hold that for a licensing scheme to be constitutional, 1) the licensor must make the licensing decision within a specific and reasonable period of time; 2) there must be prompt judicial review; and 3) the censor must bear the burden of going to court to uphold a licensing denial and once there bears the burden of justifying the denial. FW/PBS, 493 U.S. at 227-28 (citing Freedman, 380 U.S. at 58-60). The new regulations, like the ITAR, are woefully inadequate.
The EAR provides that license applications will be resolved or referred to the President within 90 days.
15 C.F.R. § 750.4(a). However, there is not time limit on an application that has been referred to the President. If a license is denied, the agency provides an internal appeals process, 15 C.F.R. Pt. 756, but the only time limit on the appeals decision is that the agency "shall decide an appeal within a reasonable time after receipt of the appeal." 15 C.F.R. § 756.2(c)(1). That decision is final and not subject to judicial review. 15 C.F.R. § 756.2(c)(2); 50 U.S.C. App. § 2412(e); see also United States v. Bozarov, 974 F.2d 1037, 1044-45 (9th Cir. 1992) (EAA's preclusion of judicial review does not violate nondelegation doctrine), cert. denied, 507 U.S. 917, 122 L. Ed. 2d 668, 113 S. Ct. 1273 (1993).
And most important, and most lacking, are any standards for deciding an application. The EAR reviews applications for licenses "on a case-by-case basis" and appears to impose no limits on agency discretion. 61 Fed. Reg. 68581 (to be codified at 15 C.F.R. § 742.15(b)). Like the ordinance in Lakewood, where the mayor could deny a permit without any more justification than that it was not in the public interest, nothing in the regulations prevents the BXA from justifying a denial of an application by stating that it is contrary to national security and foreign policy interests.
As the Court noted in Lakewood, these are illusory constraints. 486 U.S. at 769; see also Desert Outdoor Advertising, Inc. v. City of Moreno Valley, 103 F.3d 814, 818 (9th Cir. 1996) (finding billboard permit requirement unconstitutional because city officials had "discretion to deny a permit on the basis of ambiguous and subjective reasons"). This court has stated previously that while it is mindful of the problems inherent in judicial review of licensing decisions regarding cryptographic software, both with respect to the sophistication of the technology and the potentially classified nature of the licensing considerations, there must still be some review available if the export controls on cryptographic software are to survive the presumption against prior restraints on speech. In this case, for the reasons enumerated, the court concludes that the encryption regulations are an unconstitutional prior restraint in violation of the First Amendment.
2. Controls on Encryption Technology
Plaintiff does not distinguish the regulation of encryption technology--as opposed to commodities and software--for the purposes of prior restraint analysis. With respect to vagueness, the only provision he addresses as vague is "technical assistance." 15 C.F.R. § 744.9(a). Defendants allege that plaintiff lacks standing to challenge the controls on technology because they have not been applied to him and any injury is speculative. Even if plaintiff is found to have standing, defendants contend that a facial challenge is still inappropriate because United States v. Edler Indus., Inc., 579 F.2d 516, 520 (9th Cir. 1978), found that the technical data provisions of the predecessor to the AECA survived constitutional challenge with a narrowing construction.
It does not appear necessary to address the vagueness argument advanced by plaintiff, or any of the other constitutional arguments, as the bulk of the encryption regulations have been adjudged to constitute a prior restraint on speech. The First Amendment does not "render inapplicable the rule that a federal court should not extend its invalidation of a statute further than is necessary to dispose of the case before it." Brockett v. Spokane Arcades, Inc., 472 U.S. 491, 502, 86 L. Ed. 2d 394, 105 S. Ct. 2794 (1984) (citation omitted). The restrictions on technical assistance under the new regulations prohibit a person from providing technical assistance without a license to foreign persons "with the intent to aid a foreign persons in the development or manufacture outside the United States of encryption commodities and software that, if of United States origin, would be controlled for 'EI' reasons under ECCN 5A002 or 5D002." 61 Fed. Reg. 68584 (to be codified at 15 C.F.R. § 744.9). The technical assistance provision also states that the "mere teaching or discussion of information about cryptography" does not establish the requisite intent. 61 Fed. Reg. 68584 (to be codified at 15 C.F.R. § 744.9(a)). However cryptic this provision might be viewed in relation to the more expansive exemptions for educational information and fundamental research elsewhere in the regulations, because it is dependent on the definitions and regulation of encryption commodities and software, it is unenforceable under the court's holding above.
III. Proper Defendants
Plaintiff named three additional defendants in his supplemental complaint--the Departments of Energy ("DOE") and Justice ("DOJ") and the Central Intelligence Agency ("CIA")--because officials from each are now involved in some way with licensing reviews. 61 Fed. Reg. 68585 (to be codified at 15 C.F.R. § 750.3(b)(2)(v)); 15 C.F.R. § 750.4(d)-(e); 15 C.F.R. § 772 (listing committees involved in interagency review and their members). Plaintiff also contends that these agencies are involved with overall jurisdictional decisions as well. Press Release, at 4 (stating that after legislative reauthorization of export controls the Secretaries of Defense and State together with the Attorney General "shall reexamine whether adequate controls on encryption products can be maintained under the provisions of the new statute and advise the Secretary of Commerce of their conclusions as well as any recommendations for action"). Defendants claim that there is no justification for joining every agency that participates in the review process and that the Secretary of Commerce is the only proper defendant.
The court is inclined to agree with defendants. The roles played by the DOE, DOJ and the CIA are limited to consulting and advising the Secretary of Commerce who is responsible for final decisions. Even if those agencies are asked to review any new legislation that may be passed,
their roles are advisory. Accordingly, any determination against the Secretary of Commerce is sufficient and the DOE, DOJ and the CIA are dismissed as defendants. Furthermore, because the applicable regulations are no longer implemented by the Department of State, the Secretary of State is also dismissed.
IV. Scope of Relief
Plaintiff requests that in addition to declaratory relief, the court issue a permanent injunction against defendants barring nationwide application of the encryption regulations on the grounds that loss of First Amendment freedoms constitutes irreparable injury, Elrod v. Burns, 427 U.S. 347, 373, 49 L. Ed. 2d 547, 96 S. Ct. 2673 (1976), and that he will not be afforded complete relief unless an injunction extends to students, colleagues and others not before the court. Bresgal v. Brock, 843 F.2d 1163 (9th Cir. 1987). Defendants protest that a nationwide injunction is improper because relief should be no broader than necessary, Meinhold v. United States Dept. of Defense, 34 F.3d 1469, 1480 (9th Cir. 1994), and because the issues are novel and of public importance. Azurin v. Von Raab, 792 F.2d 914, 915 (9th Cir. 1986).
In Bresgal, the Ninth Circuit found in the absence of a certified nationwide class that a district court could still order nationwide relief in order to ensure the prevailing parties were given the relief to which they were entitled so long as the injunction was directed against a party to the action, in that case the Secretary of Labor. 843 F.2d at 1170-71. However, this holding must still be weighed against the rule that an injunction should be no more burdensome than necessary to afford complete relief. Meinhold, 34 F.3d at 1480 (quoting Califano v. Yamasaki, 442 U.S. 682, 702, 61 L. Ed. 2d 176, 99 S. Ct. 2545 (1979)). In this instance the court, particularly given its determination of facial invalidity of the regulations, could indeed order nationwide relief. However, as it did in Bernstein II, the court concludes that because the legal questions at issue are novel, complex and of public importance, the injunctive relief should be as narrow as possible pending appeal. See Azurin, 792 F.2d at 915. While declaratory relief should be sufficient, plaintiff should not fear prosecution for teaching and writing about encryption. Nor should plaintiff have to conduct his scholarly activities under stipulation with the government. Accordingly, defendants are enjoined from enforcing the regulations against plaintiff or against anyone who seeks to use, discuss or publish plaintiff's encryption program.
V. Effect of Previous Order
Defendants ask the court to vacate its order in Bernstein II as the controversy has shifted to the new regulations and Category XIII of the USML no longer covers plaintiff's software. Plaintiff argues the court should reaffirm its previous order because the President left open the possibility that jurisdiction would be shifted back to the Department of State if export controls under the Commerce Department prove inadequate. The likelihood of the jurisdiction being transferred back to the State Department seems too remote to justify maintaining an order that no longer applies to the controversy before the court. While the government cannot avoid the constitutional deficiencies of its regulations by rotating oversight of them from department to department, the court does not believe that such was the intent here. Moreover, should the President direct that export controls on encryption be regulated under the ITAR once more, plaintiff can come back before this court at that time. However, given the continuing validity of the rationale in Bernstein II to the present order, neither is it necessary to vacate that decision. Accordingly, the court's holding in Bernstein II, in so far as it relates to the ITAR, is hereby superseded by the present order.
For the aforementioned reasons,
1) plaintiff's motion for summary judgment is GRANTED in part and DENIED in part in accordance with the foregoing;
2) defendants' motion for summary judgment is DENIED in part and GRANTED in part in accordance with the foregoing;
3) the Departments of State, Energy, Justice and the Central Intelligence Agency are dismissed as defendants;
4) the court's holding in Bernstein v. United States Dept. of State, 945 F. Supp. 1279, is superseded by this order;
5) the court declares that the Export Administration Regulations, 15 C.F.R. Pt. 730 et seq.(1997) and all rules, policies and practices promulgated or pursued thereunder insofar as they apply to or require licensing for encryption and decryption software and related devices and technology are in violation of the First Amendment on the grounds of prior restraint and are, therefore, unconstitutional as discussed above, and shall not be applied to plaintiff's publishing of such items, including scientific papers, algorithms or computer programs;
6) defendants are permanently enjoined from doing or causing to be done the following acts:
a) further and future enforcement, operation or execution of the statutes, regulations, rules, policies and practices declared unconstitutional under this order, including criminal or civil prosecutions with respect to plaintiff or anyone who uses, discusses or publishes or seeks to use, discuss or publish plaintiff's encryption program and related materials described in paragraph 5) of this order; and
b) theatening, detaining, prosecuting, discouraging or otherwise interfering with plaintiff or any other person described in paragraph 6) above in the exercise of their federal constitutional rights as declared in this order.
IT IS SO ORDERED.
Date: August 25, 1997
MARILYN HALL PATEL
United States District Judge
Northern District of California