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BERNSTEIN v. U.S. DEPARTMENT OF COMMERCE

July 28, 2003

DANIEL J. BERNSTEIN, PLAINTIFF,
v.
UNITED STATES DEPARTMENT OF COMMERCE, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Marilyn Hall Patel, United States District Judge.

MEMORANDUM & ORDER

Motions for Summary Judgment

Plaintiff Daniel Bernstein filed a second supplemental complaint in this action alleging that export regulations administered by defendant United States Department of Commerce are in violation of the First, Fourth and Fifth Amendments, both facially and as applied to plaintiff's cryptographic research. Among other claims, Bernstein alleges that the revised regulations are impermissibly content-based, constitute a prior restraint, and are vague and overbroad. Defendants now bring a motion to dismiss, or in the alternative for summary judgment,*fn1 and plaintiff brings a cross-motion for summary judgment. Having considered the arguments presented, and for the reasons set forth below, the court rules as follows.

BACKGROUND*fn2

Bernstein is an associate professor in the Department of Mathematics, Statistics, and Computer Science at the University of Illinois at Chicago. Bernstein Dec. Supp. Pl.'s Mot. Summ. J. ¶ 7. Bernstein's research interests include cryptography, a field of applied mathematics that uses computer programs to encrypt electronic communications. Encryption converts a set of data into code, which can ensure data integrity, authenticate users, link messages to their senders, and maintain confidentiality.

Initially, the Arms Export Control Act, 22 U.S.C. § 2278, and the International Traffic in Arms Regulations ("ITAR"), 22 C.F.R. § 120-30, limited the export of encryption items. All items placed on the United States Munitions List ("USML") required a license for export. An exporter could submit an item to the United States Department of State under a "commodity jurisdiction procedure" to determine whether the item was controlled by ITAR. On June 30, 1992, Bernstein submitted source code for an encryption algorithm he called "Snuffle," together with accompanying papers explaining the program, to the Department of State. The Department of State determined that "Snuffle" was a defense article subject to the USML, and thus required a license for export.

In 1995, Bernstein brought this action against the Department of State and individually named defendants seeking declaratory and injunctive relief from enforcement of the Arms Export Control Act and ITAR on the grounds that they were unconstitutional on their face and as applied to him. This court denied defendants' motion to dismiss and held that for purposes of First Amendment analysis, source code is speech. Bernstein v. United States Dept. of State, 922 F. Supp. 1426, 1436 (N.D.Cal. 1996).

Subsequently, on cross-motions for summary judgment, this court held that the ITAR licensing scheme with regard to encryption items was an unconstitutional prior restraint. Bernstein v. United States Dept. of State, 974 F. Supp. 1288, 1290 (N.D.Cal. 1997). This court also held that two license exceptions were void for vagueness. Id. at 1294.

In November 1996, before this court issued its order on the cross-motions for summary judgment, the President of the United States transferred jurisdiction over the export of nonmilitary encryption products to the United States Department of Commerce. Exec. Order No. 13,206, 61 Fed. Reg. 58,767 (Nov. 15, 1996). The transferred encryption items were thereafter subject to the Export Administration Regulations ("EAR"), 15 C.F.R. § 730 et seq. On December 30, 1996, the Bureau of Export Administration, now the Bureau of Industry and Security ("BIS"), issued an interim rule on export of encryption items. 61 Fed.

Reg. 68,572 (Dec. 30, 1996). Bernstein supplemented his complaint to add the new rule and the Department of Commerce as a defendant. On cross-motions for summary judgment, this court held that the regulation of encryption items, which was identical in effect to the ITAR requirements, constituted an unconstitutional prior restraint on speech. Bernstein v. United States Dept. of State, 974 F. Supp. 1288, 1308 (N.D.Cal. 1997). The court then granted declaratory and injunctive relief. Id. at 1310.

On appeal to the Ninth Circuit, the panel upheld this court's 1997 decision. Specifically, the panel held that "encryption software, in its source code form and as employed by those in the field of cryptography, must be viewed as expressive," and that the encryption regulations were an unconstitutional prior restraint on speech. Bernstein v. United States Dept. of Justice, 176 F.3d 1132, 1141, 1145 (9th Cir. 1999). The Ninth Circuit then voted to rehear the action en banc and withdrew the panel decision.

Bernstein v. United States Dept. of Justice, 192 F.3d 1308, 1309 (9th Cir. 1999). Before the action was heard en banc, the Department of Commerce issued regulations amending the EAR's encryption provisions. 65 Fed. Reg. 2492 (Jan. 14, 2000). The action was then remanded to this court for further proceedings.

LEGAL STANDARD

Summary judgment is proper when the pleadings, discovery and affidavits show that there is "no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). Material facts are those which may affect the outcome of the case. Anderson v.

Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute as to a material fact is genuine if there is sufficient evidence for a reasonable jury to return a verdict for the nonmoving party. Id. The moving party for summary judgment bears the burden of identifying those portions of the pleadings, discovery and affidavits that demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Cattrett, 477 U.S. 317, 323 (1986). On an issue for which the opposing party will have the burden of proof at trial, the moving party need only point out "that there is an absence of evidence to support the nonmoving party's case." Id.

Once the moving party meets its initial burden, the nonmoving party must go beyond the pleadings and, by its own affidavits or discovery, "set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). Mere allegations or denials do not defeat a moving party's allegations. Id.; see also Gasaway v. Northwestern Mut. Life Ins. Co., 26 F.3d 957, 960 (9th Cir. 1994). Nor is it sufficient for the opposing party simply to raise issues as to the credibility of the moving party's evidence.

National Union Fire Ins. Co. v. Argonaut Ins. Co., 701 F.2d 95, 97 (9th Cir. 1983). If the nonmoving party fails to show that there is a genuine issue for trial, "the moving party is entitled to judgment ...


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