1 September 1997
Source: Hardcopy from Greg Broiles (http://www.parrhesia.com)

See subsequent Bernstein Stay: http://jya.com/bernstein-stay.htm

See related case documents: http://www.eff.org/pub/Legal/Cases/Bernstein_v_DoS/Legal/

See related EAR documents: http://jya.com/eartoc.htm

                                                        FILED
                                                        AUG 25 2 12 PM '97
                                                        RICHARD W. WIEKING
                                                        CLERK
                                                        U.S. DISTRICT COURT
                                                        NO. DIST. OF CA.

                      UNITED STATES DISTRICT COURT

                     NORTHERN DISTRICT OF CALIFORNIA

    DANIEL J. BERNSTEIN                          No. C-95-0582 MHP

         Plaintiff                               OPINION

      vs.

    UNITED STATES DEPARTMENT OF STATE, et al.

         Defendants
    _________________________________________/

         Plaintiff Daniel Bernstein originally brought this action
    against the Department of State and the individually named
    defendants seeking declaratory and injunctive relief from their
    enforcement of the Arms Export Control Act ("AECA"), 22 U.S.C.
    § 2778 (1990), and the International Traffic in Arms Regulations
    ("ITAR"), 22 C.F.R. §§ 120-30 (1994), on the grounds that they are
    unconstitutional on their face and as applied to the plaintiff. The
    court granted in part and denied in part the parties' cross motions
    for summary judgment on December 9, 1996. Just prior to the court's
    order, President Clinton by Executive Order 13026 transferred
    jurisdiction over the export of nonmilitary encryption products to
    the Department of Commerce pursuant to the Export Administration
    Act of 1979 ("EAA"). 50 U.S.C. App. §§ 2401 et seq. (1991), and
    the Export Administration Regulations ("EAR"), 15 C.F.R. Pt. 730 et
    seq. (1997). On December 30, 1996, the Commerce Department issued
    an interim rule regulating certain encryption products. 61 Fed.
    Reg. 68572 (Dec. 30, 1996). Plaintiff subsequently amended his
    complaint to include the

                                    1

    new regulations and new defendants. Now before this court are the
    parties' second cross-motions for summary judgment on the question
    of whether licensing requirements for th export of cryptographic
    devices, software and related technology covered by the amendments
    to the EAR constitute an impermissable infringement on speech in
    violation of the First Amendment.

    Having considered the parties' arguments and submissions, and for
    the reason set forth below, the court enters the following
    memorandum and order.

    BACKGROUND1

         At the time this action was filed, plaintiff was a PhD
    candidate in mathematics at University of California at Berkeley
    working in the field of cryptography, an area of applied mathematics
    that seeks to develop confidentiality in electronic communication.
    Plaintiff is currently a Research Assistant Professor in the
    Department of Mathematics, Statistics and Computer Science at the
    University of Illinois at Chicago.

    I.   Cryptography

         Encryption basically involves running a readable message known
    as "plaintext" through a computer program that translates the
    message according to an equation or algorithm into unreadable
    "ciphertext." Decryption is the translation back to plaintext when
    the message is received by someone with an appropriate "key." The
    message is both encrypted and decrypted by compatible keys.2 The
    uses of cryptography are far-ranging in an electronic age, from
    protecting personal messages over the Internet and transactions on
    bank ATMs to ensuring the secrecy of military intelligence. In a
    prepublication copy of a report done by the National Research
    Council ("NRC") at the request of the Defense Department on
    national cryptography policy, the NRC identified four major uses of
    cryptography: ensuring data integrity, authenticating users,
    facilitating nonrepudiation (the linking of a specific message with
    a specific sender) and maintaining confidentiality. Tien Decl.,
    Exh. E, National Research Council, National Academy of Sciences,
    Cryptography's Role in Securing the Information Society C-2
    (prepublication Copy May 30, 1996) (hereinafter "NRC

                                    2

    Report").

         Once a field dominated almost exclusively by governments
    concerned with protecting their own secrets as well as accessing
    information held by others, the last twenty years has seen the
    popularization of cryptography as industries and individuals alike
    have increased their use of electronic media and have sought to
    protect their electronic products and communications. NRC Report at
    vii. As part of this transformation, cryptography has also become
    a dynamic academic discipline within applied mathematics. Appel
    Decl. at 5; Blaze Decl. at 2.

    II.  Prior Regulatory Framework

         Plaintiff's original complaint and both of the court's
    decisions in this action were directed at the regulations in force
    at the time, the ITAR, promulgated to implement the AECA. The ITAR,
    administered within the State Department by the Director of the
    Office of Defense Trade Controls ("ODTC"), Bureau of Politico-
    Military Affairs, regulates the import and export of defense
    articles and defense services by designating such items to the
    United States Munitions List ("USML"), 22 U.S.C. § 2778(a)(1).3
    Items listed on the USML, which at the time included all
    cryptographic systems and software, require a license before they
    can be imported or exported. 22 U.S.C. § 2778(b)(2). The ITAR
    allows for a "commodity jurisdiction procedure" by which the ODTC
    determines if an article or service is covered by the USML when
    doubt exists about an item. 22. C.F.R. § 120.4(a).

         As a graduate student, Bernstein developed an encryption
    algorithm he call "Snuffle." He describes Snuffle as a zero-delay
    private-key encryption system. Complaint Exh. A. Bernstein has
    articulated his mathematical ideas in two ways: an academic paper
    in English entitled "The Snuffle Encryption system," and in "source
    code" written in "C", a high-level computer programming
    language,4 detailing both the encryption and decryption, which he
    calls "Snuffle.c" and "Unsnuffle.c", respectively. Once source code
    is converted to "object code," a binary system consisting of a
    series of 0s and 1s read by a computer, the computer is capable of
    encrypting and decrypting data.

                                    3

         In 1992 plaintiff submitted a commodity jurisdiction ("CJ")
    request to the State Department to determine whether Snuffle.c and
    Unsnuffle.c (together referred to as Snuffle 5.0), each submitted
    in C language source files, and his academic paper describing the
    Snuffle system, were controlled by ITAR.5 The ODTC determined that
    the commodity Snuffle 5.0 was a defense article on the USML under
    Category XIII of the ITAR and subject to licensing by the Department
    of State prior to export. The ODTC identified the item as a "stand-
    alone cryptographic algorithm which is not incorporated into a
    finished software product." Complaint Exh. B.

         Alleging that he was not free to teach, publish or discuss with
    other scientists his theories on cryptography embodied in his
    Snuffle program, plaintiff brought this action challenging the AECA
    and the ITAR on the grounds that they violated the First Amendment.
    In Bernstein I this court found that source code was speech for
    purposes of the First Amendment and therefore plaintiff's claims
    presented a colorable constitutional challenge and were accordingly
    justiciable. In Bernstein II the court concluded that the licensing
    requirements for encryption software under the ITAR constituted an
    unlawful prior restraint. The court also considered vagueness and
    overbreadth challenges to certain terms contained in the ITAR. The
    court issued its decision in Bernstein II on December 9, 1996.

    III. The Transfer of Jurisdiction and the Current Regulatory Framework

         On November 15, 1996, President Clinton issued Executive Order
    13026, titled "Administration of Export Controls on Encryption Products,"
    in which he ordered that jurisdiction over export controls on nonmilitary
    encryption products and related technology be transferred from the
    Department of State to the Department of commerce. The President's
    Executive Order specifies that encryption products that would be
    designated as defense articles under the USML and regulated under the
    AECA are now to be placed on the Commerce Control List ("CCL"), under
    the EAR. The White House Press Release accompanying the Executive Order
    clarified that encryption products designed for military applications
    would remain on the USML and continue to be regulated under the ITAR.
    Press Release Accompanying Exec. Order No. 13026, at 2 (hereinafter
    "Press Release")

                                        4

    The Executive Order also provides a caveat that is repeated in the
    Press Release and throughout the new regulations: "the export of
    encryption software, like the export of other encryption products
    described in this section, must be controlled because of the
    software's functional capacity, rather than because of any
    informational value of such software...." Exec. Order No. 13026,
    61 Fed. Reg. 58768 (1996). The Press Release states that encryption
    products must be controlled for foreign policy and national security
    interests and concludes by noting that if the new regulations do not
    provide adequate controls on encryption products then such products
    will be redesignated as defense articles and placed again on the
    USML. Press Release, at 1, 4.

         The EAR were promulgated to implement the EAA, but the EAA is not
    permanent legislation. Lapses in the EAA have been declared national
    emergencies and the President has issued Executive orders authorizing
    continuation of the EAR export controls under the authority of the
    International Emergency Economic Powers Act ("IEEPA"), 50 U.S.C.
    §§ 1701-1706. See, e.g., Exec. Order No. 12924, 59 Fed. Reg. 43437
    (1994). Executive Order 13026 states that the authority of the
    President to administer these changes in the export control system
    under the EAR derives in part from the IEEPA and that the new controls
    on encryption products are "additional steps with respect to the
    national emergency described and declared" in the previous Executive
    Orders continuing in effect the EAR. Exec. Order No. 13026, 61 Fed.
    Reg. 58767 (1996).

         On December 30, 1996, the Bureau of Export Administration
    ("BXA") under the Department of Commerce issued an interim rule
    amending the EAR "by exercising jurisdiction over, and imposing new
    combined national security and foreign policy controls on, certain
    encryption items that were on the [USML].: 61 Fed. Reg. 68572
    (1996) (to be codified at 15 C.F.R. Pts. 730-774) ("encryption
    regulations" or "new regulations"). The EAR is structured around
    the CCL. 15 C.F.R. Pt. 774, 61 Fed. Reg. 12937 (1996), which
    categorizes items whose export is regulated according to various
    criteria, including the reason for their control. The new
    regulations add a category called "Encryption Items" or "EI" as a
    reason for control. 61 Fed. REg. 68579 (1996) (to be codified at 15
    C.F.R. § 738.2(d)(2)(I)(A)). Encryption items are defined as "all
    encryption commodities, software, and technology that contain
    encryption features and are subject to EAR." 61 Fed. Reg. 68585 (to

                                    5

    be codified at 15 C.F.R. § 772). This does not include those
    items still listed on the USML and controlled by the Department of
    State. With certain exception, one must obtain a license from the
    BXA prior to exporting any item listed on the CCL. See 15 C.F.R.
    Pts. 740-44. All items on the CCL are given an Export Control
    Classification Number ("ECCN") which can be used to determine the
    categories under which an item is controlled and the reasons for
    its control.

         The new regulations add three categories of items to the CCL
    which are controlled for EI reasons,6 all of them more generally
    classified in Category 5, which covers telecommunications and
    information security. See C.F.R. § 738.2(a). Those items are ECCN
    5A002, covering encryption commodities; ECCN 5D002, covering
    encryption software; and ECCN 5E002, covering encryption
    technology. 61 Fed. Reg. 68586-87 (to be codified at 15 C.F.R. §
    774 supp. 1). For export licensing purposes, encryption software is
    treated the same as an encryption commodity. See note following
    ECCN 5D002. A commodity is defined generally as "[a]ny article,
    material, or supply except technology and software." 61 Fed. Reg.
    68586 (to be codified at 15 C.F.R. Pt. 772). Encryption software is
    regulated differently from other software controlled by the CCL and
    is defined as "[c]omputer programs that provide capability of
    encryption functions or confidentiality of information or
    information systems. Such software includes source code, object
    code, applications software, or system software." 61 Fed. Reg.
    68585 (to be codified at 15 C.F.R. Pt. 772).7 Definitions of
    encryption source code and encryption object code have also been
    added.8 Technology has not been amended by the encryption
    regulations and is defined generally as teh technical data or
    technical assistance necessary for the development or use of a
    product. 15 C.F.R. Pt. 772. Controlled technology is that
    technology required for the development or use of items on the CCL.
    15 C.F.R. Pt. 774 supp. 2 (General Technology Note). New
    restrictions on technical assistance have been added, however, to
    require a license to provide technical assistance (including
    training) to foreign persons with the intent to aid them in the
    foreign development of items that if they were domestic would be
    controlled under ECCNs 5A002 and 5D002.9 61 Fed. Reg. 68584 (to
    be codified at 15 C.F.R. § 744.9(a)); 61 Fed. Reg. 68579 (to be
    codified at 15 C.F.R. § 736.2(b)(7)(ii)).

                                    6

         The EAR defines export as "an actual shipment or transmission of
    items subject to the EAR out of the United States, or release of
    technology or software subject to the EAR to a foreign national in the
    United States ...." 15 C.F.R. § 734.2(b)(1). The encryption regulations
    add a specific definition of export for encryption source code and object
    code software controlled under ECCN 5D002 which includes

         downloading, or causing the downloading of, such software to
         locations (including electronic bulletin boards, Internet file
         transfer protocol, and World Wide Web sites) outside the United
         States, over wire, cable, radio, electromagnetic, photooptical,
         photoelectric or other comparable communication facilities
         accessible to persons outside the United States, including
         transfers from electronic bulletin boards, Internet file transfer
         protocol and World Wide Web sites, unless the person making the
         software available takes precautions adequate to prevent
         unauthorized transfer of such code outside the United States.

    61 Fed. Reg. 68578 (to be codified at 15 C.F.R. § 734.2(b)(9)).

         A number of licensing exceptions are available under the EAR. See
    15 C.F.R. Pt. 740. Under the encryption regulations, after a one-time
    review by BXA, licensing exceptions will be available for certain
    commercial encryption items, including mass-market encryption software,
    key-recovery software and commodities, and non-recovery encryption items
    up to 56-bit key length DES or equivalent strength software accompanied
    by a commitment to develop recoverable items. 61 Fed. Reg. 68581 (to be
    codified at 15 C.F.R. § 742.15). In general, items that are already
    publicly available or contain "de minimus" domestic content are not
    subject to the EAR. 15 C.F.R. §§ 734.3(b)(3) & 734.4. However, as
    directed by the President and implemented by the new regulations, these
    exceptions do not apply to encryption commodities or software. 61 Fed.
    Reg. 68577-78 (to be codified at 15 C.F.R. §§ 732.2(b) & (d), 734.3(b)(3),
    734.4(b)); Exec. Order No. 13026, 61 Fed. Reg. 58768 (1996) ("I have
    determined that the export of encryption products described in this
    section could harm national security and foreign policy interests even
    where comparable products are or appear to be available from sources
    outside the United States ...."). This exception for encryption software
    to the general exclusion of publicly available Items appears to pertain
    to publicly available or published information and software within the
    United States as well. 61 Fed. Reg. 68578 (to be codified at 15 C.F.R.
    § 734.7(c)). In addition, the EAR allows for broadly defined exceptions
    from the regulations for information resulting from fundamental research

                                      7

    and educational information. 15 C.F.R. §§ 734.8, 734.9, & supp. 1.
    Neither of these exceptions applies to encryption software controlled
    under ECCN 5D002. 61 Fed. Reg. 68579 (to be codified at 15 C.F.R.
    §§ 734.8, 734.9). They do appear to apply to encryption technology.
    Finally, phonographic records and most printed matter are not subject to
    the EAR and encryption software is not exempted from this exclusion.
    15 C.F.R. § 734.3(b)(2). Indeed, an intriguing if somewhat baffling note
    appears in the new regulations: "A printed book or other printed material
    setting forth encryption source code is not itself subject to the EAR
    (see § 734.3(b)(2)). However, notwithstanding § 734.3(b)(2), encryption
    source code in electronic form or media (e.g. computer diskette or CD
    ROM) remains subject to the EAR (see § 734.3(b)(3))."10 61 Fed. Reg.
    68578 (to be codified at 15 C.F.R. § 734.3).

         Licenses are required for export of items controlled by ECCNs
    5A002, 5D002 and 5E002 for all destinations except Canada. 61 Fed. Reg.
    68580 (to be codified at 15 C.F.R. § 742.15(a)). Applications for
    licenses "will be reviewed on a case-by-case basis by BXA, in conjunction
    with other agencies, to determine whether the export or reexport is
    consistent with U.S. national security and foreign policy interests." 61
    Fed. Reg. 68581 (to be codified at 15 C.F.R. § 742.15(b)). The EAR
    provides that license applications will be resolved or referred to the
    President within 90 days. 15 C.F.R. § 750.4(a). While an applicant who is
    denied a license is informed of appeal procedures, 15 C.F.R. § 750.6(a)(6),
    the EAR does not appear to allow for judicial review. 15 C.F.R.
    § 756.2(c)(2); 50 U.S.C. App. § 2412(e).

    LEGAL STANDARD

         Under Federal Rule of Civil Procedure 56, summary judgment shall
    be granted "against a party who fails to make a showing sufficient to
    establish the existence of an element essential to that party's case,
    and on which that party will bear the burden of proof at trial . . .
    since a complete failure of proof concerning an essential element of the
    nonmoving party's case necessarily renders all other facts immaterial."
    Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); See also T.W.
    Elec. Serv. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th
    Cir. 1987) (the nonmoving party may not

                                        8

    rely on the pleadings but must present significant probative evidence
    supporting the claim); Anderson v. Liberty Lobby, Inc., 477 U.s. 242,
    248 (1986) (a dispute about a material fact is genuine "if the evidence
    is such that a reasonable jury could return a verdict for the nonmoving
    party.").

         The court's function, however, is not to make credibility
    determinations, Anderson, 477 U.S. at 249, and the inferences to be drawn
    from the facts must be viewed in a light most favorable to the party
    opposing the motion. T W. Elec. Serv., 809 F.2d at 631.

         Where as here, the question is purely a legal one involving no
    disputes,of material fact, the matter is appropriately handled on a
    motion for summary judgment.

    DISCUSSION

         Plaintiff contends that the EAR, specifically the amendments
    regulating encryption items, both facially and as applied, constitutes a
    prior restraint on plaintiff's right to free speech, is unconstitutionally
    vague and overbroad, is content-based, and violates his freedom of
    association. Plaintiff also claims that the presidential transfer of
    jurisdiction to the Commerce Department and the encryption regulations
    themselves exceed their statutory authority and are ultra vires.
    Plaintiff requests declaratory and nationwide injunctive relief. In
    addition to opposing plaintiff's claims, defendants seek to dismiss
    certain defendants as extraneous and ask that the court vacate its
    decision in Bernstein II.

    I.   Statuatory Authority of the President and the Agency to Regulate
         Encryption Items

         In his amended complaint plaintiff alleges that the presidential
    transfer of jurisdiction and the subsequent agency regulations are ultra
    vires because the President and the Department of Commerce lacked
    statutory authority under the IEEPA to regulate encryption products.
    Plaintiff contends that the IEEPA, by its own terms, restricts the
    regulation of information protected by the First Amendment. Plaintiff
    also argues that use of the IEEPA requires an international emergency,
    which is not identified in the President's Executive Order. Plaintiff
    also maintains that the

                                       9

    regulation of encryption products by the President and the Secretary
    violates the APA.

         Defendants contend that the court lacks jurisdiction to review
    presidential determinations under the IEEPA. To the extent a claim may
    still lie against the Secretary, defendants argue that the IEEPA does not
    preclude export controls on encryption items.

         Although the parties do not identify this claim as a threshold
    issue, plaintiff's argument is that the transfer of jurisdiction to
    Commerce and the Secretary's regulations were in excess of their
    statutory authority and are therefore invalid. To the extent this issue
    implicates the very validity of the current regulations, the court finds
    that it should be addressed before a review on the merits. In addition,
    courts must consider nonconstitutional questions before reaching
    constitutional considerations in order to avoid passing on
    constitutionality where possible. Jean v. Nelson, 472 U.S. 846, 854
    (1985).

         A.   The IEEPA

         The IEEPA authorizes the President "to deal with any unusual and
    extraordinary threat, which has its source in whole or substantial part
    outside the United States, to the national security, foreign policy, or
    economy of the United States, if the President declares a national
    emergency with respect to such threat." 50 U.S.C. § 1701(a). Under this
    authority the President may "investigate, regulate, or prohibit any
    transaction in foreign exchange," 50 U.S.C. § 1702(a)(1)(A)(I), and
    investigate, regulate, direct and compel, nullify, void, prevent or
    prohibit, any . . . exportation of . . . any property in which any
    foreign country or a foreign national thereof has any interest ...."
    50 U.S.C. § 1702(a)(1)(B). However, the IEEPA explicitly excludes any
    authority

         to regulate or prohibit, directly or indirectly -- any postal,
         telegraphic, or other personal communication, which does not
         involve a transfer of anything of value; . . . or the importation
         from any country, or the exportation to any country, whether
         commercial or otherwise, regardless of format or medium of
         transmission, of any information or informational materials,
         including but not limited to, publications, films, posters,
         phonograph records, photographs, microfilms, microfiche, tapes,
         compact disks, CD ROMs, artworks, and news wire feeds.

    50 U.S.C. § 1702(b)(1) & (3) (1991 & Supp. 1996). The statute goes on to
    limit the above exemption to those exports which are not otherwise
    controlled under sections 2404 and 2405 of the

                                       10

    EAA. 50 U.S.C. § 1702(b)(3).

         The IEEPA was passed in 1977 as a refinement of the Trading With
    the Enemy Act of 1917 ("TWEA"), which at the time provided a source of
    presidential emergency authority. S. Rep. No. 95-466, at 2 (1977),
    reprinted in 1977 U.S.C.C.A.N. 4540, 4541. In the Senate Report
    accompanying the passage of the IEEPA, the Committee suggests that what
    became section 1702(b) was intended to exclude donations and humanitarian
    contributions from emergency regulation so long as such transfers did not
    subvert the effective exercise of emergency authority. S. Rep. No. 95-466,
    at 5; Section 1702(b)(3) of the IEEPA was enacted in 1988 and amended in
    1994 to broaden and strengthen the exemption for informational materials.
    According to the House Conference Report, language adopted in 1988 was
    intended to ensure "that no embargo may prohibit or restrict directly or
    indirectly the import or export of information that is protected under
    the First Amendment to the U.S. Constitution. The language was explicitly
    intended, by including the words 'directly or indirectly' to have a broad
    scope." H.R. Con. Rep. No. 103-482, at 239 (1994), reprinted in 1994
    U.S.C.C.A.N. 302, 483. However, overly-narrow interpretations of section
    1702(b)(3) by the Treasury Department prompted the 1994 amendment to
    "facilitate transactions and activities incident to the flow of
    information and informational materials without regard to the type of
    information, its format, or means of transmission, and electronically
    transmitted information ...." H.R. Con. Rep. No. 103-482, at 239.

         B.   Statutory Authority of the President to Regulate Encryption
              Items Under the IEEPA

         Plaintiff argues that President Clinton exceeded his authority
    under the IEEPA because the encryption items regulated are properly exempt
    from regulation under section 1702(b) and because the transfer was not a
    temporary exercise of emergency authority.11 Defendants claim that the
    President's actions are not reviewable.

         It is clear that the President's order is not reviewable under the
    APA. Franklin v. Massachusetts, 505 U.S. 788, 796 (1992). In Franklin, an
    action seeking APA review of the decennial reapportionment of the House
    of Representatives, the Supreme Court concluded that "the

                                      11

    final action complained of is that of the President, and the President is
    not an agency within the meaning of the [APA]." Id. The Court went on to
    note that the President's actions were still reviewable for
    constitutionality. Id. at 801.

         Less clear is the extent to which a court may review a non-APA claim
    that the President exceeded his statutory authority where there is no
    allegation of a constitutional violation. Not long after Franklin the
    Supreme Court decided Dalton v. Specter, 511 U.S. 462 (1994), in which it
    reviewed a claim that the President exceeded his statutory authority
    under the Defense Base Closure and Realignment Act. The court below had
    attempted to follow Franklin by reasoning that when the President's
    actions exceed his statutory authority he also violates the
    constitutional separation of powers doctrine. Id. at 471. The Dalton
    Court rejected this conclusion, holding that "claims simply alleging that
    the President has exceeded his statutory authority are not
    'constitutional' claims, subject to judicial review under the exception
    recognized in Franklin." Id. at 473-74 (footnote omitted). However, the
    Court did not rule out the possibility of judicial review of statutory
    claims entirely.

         We may assume for the sake of argument that some claims that the
         President has violated a statutory mandate are judicially reviewable
         outside the framework of the APA. But longstanding authority holds
         that such review is not available when the statute in question
         commits the decision to the discretion of the President.

    Id. at 474 (citing Dames & Moore v. Reagan, 453 U.S. 654, 667 (1981)).
    The Court went on to conclude that the statute in question did not limit
    the President's discretion and was therefore unreviewable.

         Notably, Dames & Moore, the case cited by the Court for the
    proposition that some non-APA statutory claims may still be subject to
    judicial review, involved review of various Executive Orders and
    regulations issued pursuant to the IEEPA which nullified attachments on
    Iranian assets in the United States and suspended claims against Iran
    following the hostage crisis. While the Court did not address the
    reviewability of the claims,12 it did indicate that when the President
    acts under authorization from Congress "the executive action 'would be
    supported by the strongest of presumptions and the widest latitude of
    judicial interpretation, and the burden of persuasion would

                                      12

    rest heavily upon any who might attack it.'" Dames & Moore, 453 U.S. at
    668 (quoting Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 637
    (1952)). The Court concluded that the IEEPA did authorize the
    nullification of attachments but did not directly authorize the
    suspension of claims. Id. at 675. However, despite this conclusion, the
    Court went on to find that due in part to the tenor and breadth of the
    IEEPA and congressional acquiescence in the practice of claim settlement
    by executive agreement, the President did not lack the power to settle
    claims against Iran.

         Although the Supreme Court suggested the possibility of judicial
    review of non-APA statutory claims, it did not indicate, beyond the very
    narrow and specific instance identified in Dames & Moore, under what
    circumstances that review might take place. One appellate court has
    concluded that Dalton does not preclude judicial review of executive
    action for conformity with an authorizing statute, or any other statute.
    Chamber of Commerce of U.S. v. Reich, 74 F.3d 1322, 1331 (D.C. Cir. 1996).
    Unlike the actions in Franklin and Dalton where the final action taken
    was by the President, and much like the present case, Chamber of Commerce
    involved an Executive Order which initiated agency regulations where the
    regulations carried direct and final consequences for the plaintiff.
    However, the court in Chamber of Commerce speaks boldly about the
    reviewability of executive action without readily distinguishing between
    whether such review lies equally for the President as for an executive
    official.13 In fact, in a footnote the court concedes that the "Dalton
    Court's hesitancy to review presidential action . . . suggests a
    reluctance to bring judicial power to bear directly on the President.
    Of course, here we are concerned with the long established non-statutory
    review of a claim directed at a subordinate executive official." Id. at
    1331 n.4. Indeed, the court goes on to note that in all the cases cited
    by the Dalton court, "special reasons existed for concluding that
    judicial review was precluded." Id. at 1331 n.5. Those reasons involved
    matters of political discretion and national security. Id.

         Finally, in United States v. Spawr Optical Research, Inc., 685 F.2d
    1076 (9th Cir. 1982), the Ninth Circuit, in a case predating Franklin and
    Dalton, reviewed an Executive Order by President Ford under the IEEPA's
    predecessor, the TWEA, continuing the EAA export regulations pending
    expiration of that Act. The Spawrs were convicted of the unlicensed
    exportation of laser mirrors

                                      13

    after the EAA's expiration "when the sole basis for the regulations was
    the Executive Order." Id. at 1080. Much like plaintiff here, the Spawrs
    argued on appeal that the government lacked authority to prosecute them
    because there was no genuine emergency, the regulations were not related
    to any emergency then in effect, and Congress had intended to let the
    regulations lapse. Id. Reviewing language very similar to that of the
    IEEPA, the court found that the statute afforded broad and extensive
    powers. Id. Noting that in the face of such broad discretion, courts have
    been wary of reviewing the political considerations involved in declaring
    or continuing a national emergency, the Spawr court declined to do so as
    well. Id. However, the court then concluded that "[a]lthough we will not
    address these essentially-political questions, we are free to review
    whether the actions taken pursuant to a national emergency comport with
    the power delegated by Congress." Id. at 1081 (citing United States v.
    Yoshida International Inc., 526 F.2d 560, 579 (Cust. & Pat. App. 1975)).
    In swift analysis the court went on to find that the regulations were
    rationally related to the emergency claimed and that Congress did not
    intend to terminate the regulations. Id. In fact, the court noted that
    each time the EAA had lapsed previously the President had issued an
    Executive Order declaring a national emergency to continue the export
    regulations and "Congress not only tolerated this practice, it expressed
    approval of the President's reliance on the TWEA to maintain the export
    regulations." Id. Such has been the case under the IEEPA as well.14 See,
    e.g., Exec. Order No. 12444, 48 Fed. Reg. 48215 (1983); Exec. Order No.
    12730, 55 Fed. Reg. 40373 (1990), reprinted in 50 U.S.C. App. § 1701 at
    598 (1991); Exec. Order No. 12924, 59 Fed. Reg. 43437 (1994). Plaintiff
    notes that in recent years Congress has criticized use of the IEEPA to
    extend export regulations when the EAA lapses. Plf. Mem. in Opp. at 17
    n.49 (citing statements made by various members of Congress). Be that as
    it may, it is within Congress' power to change this practice and it has
    chosen not to.

         While the analysis in Spawr is useful given that the facts are
    strikingly similar to the instant action, this court cannot ignore the
    skepticism with which the Supreme Court recently has approached judicial
    review of a presidential exercise of statutory authority absent a
    constitutional claim. As noted above, this case differs from Franklin
    and Dalton in that the final action is taken by

                                      14

    the agency rather than the President.15 But that does not significantly
    change the analysis of whether the actions the President took are
    reviewable. On this score Chamber of Commerce is not illuminating and
    the Supreme Court's allusion to Dames & Moore remains opaque. Indeed,
    given that the law is still unsettled on this question and that
    considerations precluding review do not apply to agencies -- thereby
    allowing plaintiff to seek the same relief from agency action on the
    basis of a claim that the agency acted in excess of statutory authority
    -- the court favors deference to the executive. In light of the recent
    Supreme Court decisions in this area, this court concludes that it
    cannot review whether the President exceeded his statutory authority
    under the IEEPA to transfer jurisdiction of encryption items to the
    Commerce Department.

         C.   Statutory Authority of the Commerce Secretary to Regulate
              Encryption Items Under the IEEPA

         Of critical importance in both Franklin and Dalton was the fact
    that the President was responsible for the final action under the
    statutes at issue. "What is crucial is the fact that '[t]he President,
    not the [Commission], takes the final action that affects' the military
    installations." Dalton, 511 U.S. at 470 (quoting Franklin, 505 U.S. at
    799). Here we have the situation at issue in Chamber of Commerce, where
    the President's Executive Order initiated the regulatory process and
    left it to the agency to finalize the rules. "That the Secretary's
    regulations are based on the President's Executive Order hardly seems to
    insulate them from judicial review ...." Chamber of Commerce, 74 F.3d at
    1327; see also Milena Ship Management Co. Ltd. v. Newcomb, 804 F.
    Supp. 846, 850 (E.D.La. 1992) (reviewing agency action taken pursuant to
    an unchallenged executive order under the IEEPA). Accordingly, this court
    will examine whether the Commerce Department's regulation of encryption
    items is consistent with the IEEPA.16

          To the extent that plaintiff argues that the regulations governing
    encryption are not a temporary exercise of emergency power, the question
    really belongs to the legitimacy of the Executive Order in the first
    instance and the court declines to address it. The declaration of a
    national emergency is an action that rests with the President and is
    based on his broad discretion

                                      15

    under section 1701 of the IEEPA. Moreover, the question of employing the
    IEEPA or the TWEA before it -- to maintain export regulations during
    lapses in the EAA was essentially laid to rest by the Ninth Circuit in
    Spawr and by the legislative history of the IEEPA.

         [I]t is unmistakable that Congress intended to permit the President
         to use the TWEA to employ the same regulatory tools during a
         national emergency as it had employed under the EAA. We, therefore,
         conclude that the President had the authority during the nine-month
         lapse in the EAA to maintain the export regulations.

    Spawr, 685 F.3d at 1082.

         The gravamen of plaintiff's ultra vires argument is that the IEEPA
    does not authorize the regulation of speech, particularly speech that
    does not involve a foreign interest in property, and that as speech,
    encryption software fits well within the exemption for personal
    communications and informational materials in sections 1702(b)(1) & (3).

         With respect to whether encryption software fits within the scope
    of "property in which any foreign country or a national thereof has any
    interest", the court finds that section 1702(a))1) is sufficiently broad
    to allow for many forms of property, both tangible and intangible, and
    many forms of interest, both direct and indirect. See 31 C.F.R. §§
    500.311, 500.312; see also Spawr, 685 F.2d at 1081 n.10 (finding that
    section 5(b) of the TWEA was broad enough to allow regulation "of any
    property to any foreign country"). Encryption software or other
    technology comes within this section.

         Plaintiff also alleges that the regulations are beyond the statutory
    authority of the IEEPA because they affect personal communications and
    informational materials. Section 1702(b)(1) prohibits direct or indirect
    regulation of "any postal, telegraphic, telephonic or other personal
    communication" which does not transfer anything of value. As defendants
    convincingly argue, to the extent this argument is directed at academic
    discussion of cryptographic ideas, the regulations attempt to exempt such
    communications -- although whether they do so according to the demands of
    the First Amendment is a separate question. To the extent this argument
    is directed at cryptographic software generally, it does not appear to
    fit within this seemingly narrow and simple provision. Nor can it be
    assured that software would have no value. Indeed, there are potentially
    billions of dollars

                                      16

    at stake in the export of commercial encryption software. See Jared
    Sandberg, "Judge Rules Encryption Software Is Speech in Case on Export
    Curbs," Wall St. J., Apr. 18,1996, at B7. Thus, the regulations do not
    exceed this statutory provision.

         Finally, plaintiff contends that the regulations go beyond the
    authority provided by section 1702(b)(3) which specifically limits
    regulation of information or informational materials regardless
    of format or medium of transmission. Plaintiff argues that the broad
    scope of this provision precludes regulation of encryption software. In
    addition, plaintiff contends that by specifically referencing sections
    2404 and 2405 of the EAA, and exempting -- from the informational
    materials exemption -- items "otherwise controlled for export" under
    those sections, the court is bound by principles of statutory
    construction to consider only those items controlled when section
    1702(b)(3) was last amended, or April 30, 1994. Plaintiff then concludes
    that because encryption software fits within the scope of this provision
    and was not otherwise controlled under the EAA as of April of 1994, it
    cannot be regulated under the IEEPA.

         Defendants contend that section 1702 (b)(3) does not expressly
    provide for software, and that to include software in those items
    exempted from regulation for their informational value would lead
    to absurd results. Moreover, defendants counter plaintiff's statutory
    construction argument and claim that the items exempted from this
    provision by virtue of being controlled under the EAA are not only those
    that were on the Commerce Control List as of April of 1994 but any others
    that have since been added -- including the encryption technology at
    issue here. Defendants also argue that to read section 1702(b)(3) as
    exempting encryption software on the basis that it is protected under
    the First Amendment would be to impose a novel theory of free speech not
    contemplated by Congress.

         As noted above, the IEEPA explicitly excludes any authority

         to regulate or prohibit, directly or indirectly -- . . . the
         importation from any country, or the exportation to any country,
         whether commercial or otherwise, regardless of format or
         medium of transmission, of any information or informational
         materials, including but not limited to, publications, films,
         posters, phonograph records, photographs, microfilms, microfiche,
         tapes, compact disks, CD ROMs, artworks, and news wire feeds. The
         exports exempted from regulation or prohibition by this paragraph
         do not include those which are otherwise controlled for export
         under section 2404 of the Appendix to this title, or under section
         2405 of the Appendix to this title to the extent that such controls
         promote the nonproliferation or antiterrorism policies of the
         United States ...."

                                     17

    50 U.S.C. § 1702(b)(3) (Supp. 1996).

         First, the court must consider whether software -- in this case,
    encryption software -- comes within the exception to the exception; if
    so, then the instant regulations do not exceed their statutory authority.
    In other words, anything controlled by sections 2404 and 2405 of the EAA
    may be regulated regardless of its informational content. Under the
    referenced sections of the EAA the President may "prohibit or curtail
    the exportation of any goods, technology, or other information subject
    to the jurisdiction of the United States" for either national security
    or foreign policy reasons. 50 U.S.C. App. § 2405(a)(1) (foreign policy
    controls); 50 U.S.C. App. § 2404(a)(1) (national security controls). It
    is not disputed that Executive Order 13026, by transferring encryption
    products to the Commerce Control List ("CCL"), subjected them to
    regulation under sections 2404 and 2405 of the EAA.

         The question becomes whether reference to sections 2404 and 2405 of
    the EAA should be understood to include all items currently on the CCL --
    in which case the present regulations effectively remove encryption
    products from the exemption -- or whether rules of statutory construction
    require the court to construe the reference to those sections as
    including only those items listed at the time section 1702(b) was last
    amended, or April 30, 1994. A secondary issue complicates this already
    complicated matter further: since sections 2404 and 2405 do not
    themselves designate specific items on the CCL, which is governed by
    regulation, does the construction of the IEEPA with respect to those
    sections also apply to their implementing regulations?

         Plaintiff relies on a canon of statutory construction discussed in
    Hassett v. Welch, 303 U.S. 303, 314 (1938) and Pearce v. Director,
    Office of Workers' Comp. Programs, 603 F.2d 763, 767 (9th Cir. 1979)
    which holds that without clear congressional indication to the contrary,
    where one statute adopts provisions of another by specific reference to
    the provisions adopted (known as a statute of specific reference) the
    effect is that such adoption takes the provision as it existed at the
    time of adoption and does not include subsequent amendments; conversely,
    where a statute adopts the general law in a given area (a statute of
    general reference), it is construed to adopt that law's subsequent
    amendments. See 2A Sutherland, Statutory Construction § 51.07 (4th ed.
    1984).

                                     18

    Plaintiff claims that the IEEPA is a statute of specific reference and
    cannot be read as adopting subsequent changes to sections 2404 and 2405
    of the EAA. Plaintiff further supports this position by pointing to the
    fact that at least one agency has interpreted the "informational
    materials" provision to exclude items that were, as of April 30, 1994,
    controlled for export under sections 5 and 6 of the EAA. 31 C.F.R.
    § 560.31 S(b) (Office of Foreign Assets Control regulation of Iranian
    transactions).

         Defendants contend that the IEEPA is more like the statute in
    United States v. Smith, 683 F.2d 1236 (9th Cir. 1982), in which the
    Ninth Circuit read the Youth Corrections Act ("YCA") as not incorporating
    specific provisions of the general probation statute. The court concluded
    that while there were persuasive arguments on both sides, the YCA did not
    really appear to adopt or incorporate the referenced provisions of the
    probation statute. "Rather, it merely provides that the YCA is not to
    'be construed in any wise to amend, repeal, or affect the provisions of'
    the probation statute." Id. at 1239. According to the court this was not
    properly a statute of specific reference in which certain provisions of
    another statute are incorporated into it, but one that "actually
    emphasizes that these are distinct statutes". Id. Under defendants'
    reasoning, section 1702(b)(3) of the IEEPA does not incorporate sections
    2404 and 2405 of the EAA but rather distinguishes them and as such
    those sections are to be read with their full and current force.

         This court believes that defendants have the better argument. The
    rules of statutory interpretation are not hard and fast. "A provision
    which, in terms, however, reads as a specific reference may, in context,
    be construed as a general reference." United States v. Rodriguez-
    Rodriguez, 863 F.2d 830, 831 (11th Cir. 1989). Such is the case here.
    Read in context, section 1702(b)(3) excludes rather than incorporates
    those items covered under the EAA. Moreover, the sections referenced are
    themselves fairly general and are clearly intended to be fleshed out by
    regulations suited to meet the changing needs of national security and
    foreign policy. Given the goals of the IEEPA and the powers it gives the
    President, it would seem odd indeed for Congress to exclude from the
    exemption those items the President deems sensitive to the national
    security under the EAA, but to freeze that list of items as of a certain
    date. As the court noted in Smith, this "is the

                                     19

    more appropriate interpretation in view of the policies that the
    [statute] is designed to advance. It is proper, and indeed essential, to
    interpret the words of a statute in the light of the purposes Congress
    was seeking to serve." 683 F.2d at 1240 (citations omitted). Therefore,
    because encryption products are currently regulated under sections 2404
    and 2405 of the EAA they do not fall within the exemption for
    informational materials.17

         Accordingly, this court finds that the regulation of encryption
    items is not prohibited by section 1702(b)(3) and therefore does not
    exceed the statutory authority provided by the IEEPA. It is worth noting
    at this juncture that this court's rather narrow determination that
    source code is speech protected by the First Amendment does not serve to
    remove encryption technology from all government regulation. Both parties
    exaggerate the debate needlessly. Plaintiff does so by aggrandizing the
    First Amendment, by assuming that once one is dealing with speech that it
    is immaterial what the consequences of that speech may be. Defendants do
    so by minimizing speech, by constantly referring to "mere speech" or
    "mere ideas" in their briefs and assuming that the functionality of
    speech can somehow be divorced from the speech itself. This controversy
    is before this court precisely because there is no clear line between
    communication and its consequences. While defendants may have the
    authority to regulate encryption source code, they must nonetheless
    do so within the bounds of the First Amendment.

    II.  Prior Restraint18

         A.   Analytical Framework

         As the Supreme Court has stated, in determining the extent of the
    constitutional protection afforded by the guarantees of the First
    Amendment, "it has been generally, if not universally, considered that
    it is the chief purpose of the guaranty to prevent previous restraints
    upon publication." Near v. Minnesota, 283 U.S. 697, 713 (1931). It is
    for this reason that the Court has held: "Any prior restraint on
    expression comes to this Court with a 'heavy presumption' against its
    constitutional validity." Organization for a Better Austin v. Keefe, 402
    U.S. 415, 419 (1971) (citations omitted).

                                      20

         While prior restraints have often come in the form of judicial
    injunctions on publication, see e.g., C.B.S. v. Davis,510 U.S. 1315
    (1994); New York Times v. United States 403 U.S. 713 (1971), they are
    also recognized in licensing schemes. See e.g., FW/PBS, Inc. v. Dallas,
    493 U.S. 215 (1990); Lakewood v. Plain Dealer Publishing Co., 486 U.S.
    750 (1988). Governments may impose valid time, place and manner
    restrictions when they are content neutral, narrowly tailored to serve a
    substantial governmental interest, and leave open alternative channels
    for communication. See e.g., Clark v. Community for Creative Non-Violence,
    468 U.S. 288, 293 (1984). However, "even if a government may
    constitutionally impose content-neutral prohibitions on a particular
    manner of speech, it may not condition that speech on obtaining a license
    or permit from a government official in that official's boundless
    discretion." Lakewood, 486 U.S. at 764.

         It is axiomatic that the First Amendment is more tolerant of
    subsequent criminal punishment of speech than it is of prior restraints
    on the same speech.

              The thread running through all these cases is that prior
         restraints on speech and publication are the most serious and the
         least tolerable infringement on First Amendment rights. A criminal
         penalty or a judgment in a defamation case is subject to the whole
         panoply of protections afforded by deferring the impact of the
         judgment until all avenues of appellate review have been exhausted....

              A prior restraint, by contrast and by definition, has an
         immediate and irreversible sanction. If it can be said that a threat
         of criminal or civil sanction after publication "chills" speech,
         prior restraint "freezes" it at least for the time.

    Nebraska Press Ass'n v. Stuart, 427 U.S. 539, 559(1976).

         While the Supreme Court has consistently rejected the idea that a
    prior restraint can never be employed, id. at 570, it nonetheless begins
    with a presumption of invalidity. The danger inherent in prior restraints
    is largely procedural, in that they bypass the judicial process and
    locate in a government official the delicate responsibility of passing
    on the permissibility of speech. See Freedman v. Maryland, 380 U.S. 51,
    58 (1965) (holding that "a noncriminal process which requires the prior
    submission of a film to a sensor avoids constitutional infirmity only if
    it takes place under procedural safeguards designed to obviate the
    dangers of a censorship system".) Freedman sets forth three procedural
    safeguards that have been used by the Supreme Court to examine licensing
    schemes: 1) any restraint prior to judicial review can only be imposed
    for a brief and specified period

                                      21

    during which the status quo prevails; 2) expeditious judicial review must
    be available; and 3) the censor must bear the burden of going to court to
    suppress speech and once there bears the burden of proof FW/PBS, 493 U.S.
    at 227 (citing Freedman, 380 U.S. at 58-60).

         When the risks associated with unbridled licensing schemes are
    present to a significant degree, "courts must entertain an immediate
    facial attack on the law." Lakewood, 486 U.S. at 759.

         B.   Analysis

         In Bernstein II this court held that the ITAR effected an
    unconstitutional prior restraint on speech due to inadequate procedural
    safeguards. Plaintiff contends that the new encryption regulations suffer
    from identical deficiencies. Defendants do not argue that the effect of
    the new regulations is notably different from that of the ITAR.19 They
    do, however, present arguments against some of the reasoning in
    Bernstein II and to the extent that these arguments are applicable to
    the current analysis, the court will address them.

              1.     Controls on Encryption Commodities and Software

         First, defendants protest that a facial challenge is not applicable
    here because there is not a "close enough nexus to expression, or to
    conduct commonly associated with expression, to pose a real and
    substantial threat of identified censorship risks." Lakewood, 486 U.S.
    at 759. In Lakewood, a newspaper challenged a city ordinance which
    required annual permits for newsracks on public property and gave the
    mayor authority to grant or deny applications for those permits. The
    Court contrasted laws that are directed at expression, such as one
    governing the circulation of newspapers, with laws of general
    applicability not aimed at conduct commonly associated with expression,
    such as a law requiring building permits. Id. at 760-61. The former risks
    self-censorship on the part of those applying for permits and censorship
    on the part of the decisionmaker. The latter rarely do. See also
    Freedman, 380 U.S. 51 (licensing of films); FW/PBS, 493 U.S. 215
    (licensing of sexually-oriented businesses). Defendants contend that
    while licensing schemes that vest unbridled discretion to regulate
    conduct commonly associated with expression are appropriate for facial
    attack

                                     22

    under prior restraint doctrine, such is not the case here where the
    activity at issue is the programming of a computer to encrypt
    information.20 Defendants also cite Roulette v. City of Seattle, 97 F.3d
    300, 305 (9th Cir. 1996), to support their contention that only laws
    narrowly and specifically directed at expressive activities are subject
    to facial challenge. At issue in Roulette was an ordinance that
    prohibited people from sitting or lying on public sidewalks in certain
    areas and during certain times. The court, in a pithy opinion, held that
    "[t]he fact that sitting can possibly be expressive, however, isn't
    enough to sustain plaintiffs' facial challenge to the Seattle ordinance....
    Consistent with this speech-protective purpose, the Supreme Court has
    entertained facial freedom-of-expression challenges only against
    statutes that, 'by their terms,' sought to regulate" words or expressive
    conduct. Id. at 303 (quoting Broadrick v. Oklahoma, 413 U.S. 601, 612-13
    (1973)).

         The court does not disagree with defendants' statement of the law
    but with their application to the facts. The encryption regulations
    issued by the BXA are much more like the regulation of newspaper racks
    than lying or sitting. The new regulations are directed quite
    specifically and "by their terms" to an entire field of applied
    scientific research and discourse. Where one places a newspaper rack is
    not an activity associated with expression, but the availability of
    newspapers generally is. Similarly, while the export of a commercial
    cryptographic software program may not be undertaken for expressive
    reasons, that same activity -- undisputably regulated under the EAR -- is
    often undertaken by scientists for purely expressive reasons. By the very
    terms of the encryption regulations, the most common expressive
    activities of scholars -- teaching a class, publishing their ideas,
    speaking at conferences, or writing to colleagues over the Internet --
    are subject to a prior restraint by the export controls when they involve
    cryptographic source code or computer programs. In the field of applied
    science ideas are not just expressed in abstract, theoretical terms, but
    in precise applications. Those applications are subject to licensing
    under the encryption regulations and are excluded from the exemptions for
    fundamental research and educational information. This is precisely the
    kind of law identified in Lakewood that risks self-censorship on the part
    of those that must apply for licenses and censorship on the part of the
    decisionmaker. As the American Association for the Advancement of Science
    ("AAAS") stated to the BXA in their comments

                                      23

    regarding the new regulations, the "basic thrust" of the Interim Rule

         threatens to undermine essential features of scientific freedom and
         the open exchange of information that are generally acknowledged as
         critical to innovation in science and technology and are responsible
         in large part for the preeminence of America's research and
         development enterprise. AAAS opposes attempts by the government to
         restrict the communication or publication of unclassified research
         and technical information, efforts which we believe are inconsistent
         with scientific advancement.

    Wimberly Decl., Exh. A, at 1. The regulations merit the application of
    the prior restraint doctrine because they present "a danger of unduly
    suppressing protected expression." Freedman, 380 U.S. at 54.

         The encryption regulations, like Category XIII of the USML, is
    specifically directed at speech protected by the First Amendment. The
    Department of Commerce requires a license to export items controlled
    under ECCNs 5A002 and 5D002. And as made explicit by the new regulations,
    export includes publication where publication is or could be made
    electronic and even where the information to be published is already
    publicly available. In fact, in spite of the disclaimers regarding
    functionality and the exception for printed materials, the encryption
    regulations issued by the BXA appear to be even less friendly to speech
    interests than the ITAR. Here encryption software is singled out and
    treated differently than other software regulated under the EAR. 61 Fed.
    Reg. 68580 (to be codified at 15 C.F.R. § 742.15); see FW/PBS, 493 U.S.
    at 225 ("Therefore, even assuming the correctness of the city's
    representation of its 'general' inspection scheme, the scheme involved
    here is more onerous with respect to sexually-oriented businesses than
    with respect to the vast majority of other businesses.").

         And the exception for printed materials, while at first glance a
    concession to the speech interests involved, is so irrational and
    administratively unreliable that it may well serve to only exacerbate
    the potential for self-censorship. 61 Fed. Reg. 68578 (to be codified at
    15 C.F.R. § 734.3). First, the exception is unreliable because the BXA
    has indicated that it reserves the right to control scannable source
    code in printed form. 61 Fed. Reg. 68575. Second, the exception seeks to
    codify a distinction between paper and electronic publication that makes
    little or no sense and is untenable. See Bernstein II, 945 F. Supp. at
    1291 n.10. As the AAAS commented,

                                      24

         [w]hile it is acceptable under this provision to publish such
         material in a book and distribute it internationally without an
         export license, putting the same information on a disk and sending
         it abroad is subject to EAR approval. This distinction has serious
         ramifications for scholarly communication as many professional
         journals are now moving onto the Internet as electronic publications.

    Wimberly Decl, Exh. A, at 1. As an example, the AAAS noted that their
    journal Science is available in both print and electronic form. At oral
    argument defendants admitted that encryption code in print form could be
    converted into a functioning encryption product, but defended the
    distinction on the basis that converting the print version to working
    software required a good deal of skill. The court is somewhat confounded
    by this explanation. Defendants claim that encryption poses unique and
    serious threats to national security, yet the printed matter exception
    belies this rationale by making encryption freely available to only those
    foreigners who are technologically sophisticated. Defendants conceded at
    oral argument that the effect of this dichotomy would be to make it more
    difficult only for the more inept. This seems to defeat the very purpose
    of the regulation since those who likely pose a greater threat to
    national security are likely more willing to expend the time and
    resources in that effort and will not be prevented by the regulation.
    In effect, the exception undermines the stated purpose of the
    regulations. Again, the government conceded that in only a slightly
    greater length of time and with some greater technological skill, the
    regulation could be defeated.

         Finally, the Supreme Court's recent decision in Reno v. American
    Civil Liberties Union, ___U.S.___, 117 S.Ct. 2239 (1997), suggests that
    not only is the distinction between print and electronic media
    increasingly untenable, but that the Internet is subject to the same
    exacting level of First Amendment scrutiny as print media

         This dynamic, multifaceted category of communication includes not
         only traditional print and news services, but also audio, video,
         and still images, as well as interactive, real-time dialogue.
         Through the use of chat rooms, any person with a phone line can
         become a town crier with a voice that resonates farther than it
         could from any soapbox. Through the use of Web pages, mail
         exploders, and newsgroups, the same individual can become a
         pamphleteer. As the District Court found, 'the content on the
         Internet is as diverse as human thought.' We agree with its
         conclusion that our cases provide no basis for qualifying the level
         of First Amendment scrutiny that should be applied to this medium.

    Id. at 2344. Thus, the dramatically different treatment of the same
    materials depending on the

                                    25

    medium by which they are conveyed is not only irrational, it may be
    impermissible under traditional First Amendment analysis.

         As this court noted in Bernstein II, that BXA regulates encryption
    in the interest of national security does not alone justify a prior
    restraint. In New York Times Co., 403 U.S. at 714, the Supreme Court
    invalidated a prior restraint on classified material that had been
    enjoined in the interests of national security. While that case inspired
    nine separate opinions on the propriety of enjoining publication of the
    Pentagon Papers in The New York Times and The Washington Post, a
    majority of Justices found national security, without more, too amorphous
    a rationale to abrogate the protections of the First Amendment. See id.
    at 719 (Black, J. and Douglas, J., concurring). Justice Brennan concluded
    that the First Amendment's ban on prior restraints could only be
    overridden in time of war, id. at 726 (Brennan, J. concurring) (citing
    Schenck v. United States, 249 U.S. 47 (1919)), and even then, according
    to Justice Stewart, only when disclosure would "surely result in direct,
    immediate, and irreparable damage to our Nation or its people." Id. at
    730 (Stewart, J. and White, J. concurring). Even without a consensus from
    the Supreme Court on how exacting the standard should be, it is clear
    from New York Times that national security alone is insufficient without
    more. Yet that is exactly what both the President and the BXA have
    offered here as the justification for the regulation: national security
    and foreign policy interests. Exec. Order No. 13026, 61 Fed. Reg. 58767;
    61 Fed. Reg. 68573. Particularly now, when none of the encryption items
    subject to export controls under the EAR have military applications, a
    less amorphous rationale is required.21

         Nor is it necessary that an item be regulated for its content to
    make the regulations function as a prior restraint on speech. It is
    enough that they are directed at expressive activity. As the plurality
    opinion in FW/PBS suggests, even a licensing scheme with a content-
    neutral purpose must still contain adequate procedural safeguards in
    order to be constitutional.22 Thus, without deciding whether the
    regulations are content-based, the court turns to the procedural
    safeguards afforded under the encryption regulations. As noted above,
    the Court in FW/PBS read Freedman to hold that for a licensing scheme
    to be constitutional, 1) the licensor must make the licensing decision
    within a

                                     26

    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.23 15 C.F.R. § 750.4(a).
    However, there is no 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 (1993).24 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.25 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

                                       27

    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
    (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
    person 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.

                                     28

    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,26 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 (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).

                                      29

    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, 1915 (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 (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 1915. 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

                                      30

    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.

    CONCLUSION

         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.(l997) 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
    unconsitutional under this order, including criminal or civil

                                    31

    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) threatening, 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.

                                            [Signature]
    Date August 25, 1997                    MARILYN HALL PATEL
                                            United States District Judge
                                            Northern District of California

                                      32

                                   ENDNOTES

    1.   Some of the information in this section is taken directly from the
    court's previous opinions in this action, Bernstein v. United States
    Dept. of State, 922 F. Supp. 1426 (N.D. Cal. 1996) (Bernstein I), and
    Bernstein v. United States Dept. of State, 945 F. Supp. 1279 (N.D. Cal.
    1996) (Bernstein II); other background information is left out or
    condensed and reference is made to those opinions. Additional information
    comes from the parties' current submissions or other sources as indicated.

    2.   In symmetric cryptography the encryption key is the same as the
    decryption key. Asymmetric, or public-key, cryptography uses different
    keys for encryption and decryption and generally only the encryption key
    is disclosed.

    3.   For a full description of the ITAR, see Bernstein I, 922 F. Supp. at
    1429-30 and Bernstein II, 945 F. Supp. at 1283-84.

    4.   Source code is the text of a source program and is generally written
    in a high-level language that is two or more steps removed from machine
    language which is a low-level language. High-level languages are closer
    to natural language than low-level languages which direct the functioning
    of the computer. Source code must be translated by way of a translating
    program into machine language before it can be read by a computer. The
    object code is the output of that translation. It is possible to write a
    source program in high-level language without knowing about the actual
    functions of the computer that carry out the program. Encyclopedia of
    Computer Science 962, 1263-64 (Anthony Ralston & Edwin D. Reilly eds.,
    3d ed. l995).

    5.   Again, a more detailed description of plaintiff's communications with
    the ODTC appears in Bernstein I, 922 F. Supp. at 1430, and Bernstein II,
    945 F. Supp. at 1284-85. Those opinions also describe the confusion
    surrounding the determination of the academic paper.

    6.   These items are also controlled for national security and
    anti-terrorism reasons. 61 Fed. Reg. 68586-87 (to be codified at 15
    C.F.R. § 774 supp. 1).

    7.   Under Part 772 of the new regulations which is dedicated to
    definitions of terms, the term "commodity" contains the following note:

         Note that the provisions of the EAR applicable to the control of
         software (e.g. publicly available provisions) are not applicable to
         encryption software. Encryption software is controlled because, like
         the items controlled under ECCN 5A002, it has a functional capacity
         to encrypt information on a computer system, and not because of any
         informational or theoretical value that such software may reflect,
         contain or represent, or that its export may convey to others abroad.

    61 Fed. Reg. 68585 (to be codified at 15 C.F.R. Pt. 772).

    8.   Encryption source code is defined as "[a] precise set of operating
    instructions to a computer that, when compiled, allows for the execution
    of an encryption function on a computer." Encryption object code is
    defined as "[c]omputer programs containing an encryption source code that
    has been compiled into a form of code that can be directly executed by a
    computer to perform an encryption function." 61 Fed. Reg. 68585 (to be
    codified at 15 C.F.R. Pt. 772).

    9.   This provision notes "that the mere teaching or discussion of
    information about cryptography, including, for example, in an academic
    setting, by itself would not establish the intent described in this
    section, even where foreign persons are present." 61 Fed. Reg. 68584
    (to be codified at 15 C.F.R. § 744.9(a)).

                                       33

    10.  The introductory information about the new regulations includes the
    following with respect to the exception for printed materials: "The
    administration continues to review whether and to what extent scannable
    encryption source or object code in printed form should be subject to the
    EAR and reserves the option to impose export controls on such software
    for national security and foreign policy reasons." 61 Fed. Reg. 68575.

    11.  At oral argument plaintiff retreated from his position that the
    ultra vires claim was directed at the President. However, Count VI of
    plaintiff's supplemental complaint clearly alleges that the President's
    actions exceeded his authority under the IEEPA.

    12.  In fact, due to the significance of the issues involved, the Court
    granted certiorari prior to judgment and ordered expedited briefing.

    13.  The Ninth Circuit on at least one occasion has declined to endorse
    the Chamber of Commerce decision. Alameda Newspapers, Inc. v. City of
    Oakland, 95 F.3d 1406, 1419 (9th Cir. 1996).

    14.  In fact, as defendants point out, when the TWEA was amended and the
    IEEPA enacted (as Title II of the same bill), the House Report on the
    legislation indicated that while it rejected a suggestion by the
    committee to make the EAA permanent legislation, the committee expected
    that in the case of future lapses of the EAA "the authority of Title II
    of this bill could be used to continue the Export Administration
    Regulations in effect if, and to the extent that, the President declared
    a national emergency as a result of such lapse according to the
    procedures of the National Emergencies Act." H.R. Rep. No. 95-459, at 3
    (1977).

    15.  Admittedly, in both of those cases review was precluded in large part
    because the Court found that the authorizing statutes at issue granted
    broad discretion to the President. However, this action is not so
    different as to allow a court to review what the Ninth Circuit has found
    to be the extensive discretion afforded by section 5(b) of the TWEA,
    which was essentially reenacted as section 1702 of the IEEPA. Both
    sections 1701 and 1702 provide little guidance with which to judge the
    actions taken by the President. Where "the Act provides no standards by
    which to judge the exercise of discretion by the Executive Branch, we
    cannot subject that exercise of discretion to judicial review." Medina
    v. Clinton, 86 F.3d 155, 158 (9th Cir. 1996) (citing Dalton, 114 S.Ct.
    at 1728).

    16.  Since the EAA has expired, the "sole basis for the regulations" is
    the Executive Order, which itself is premised on the IEEPA. Spawr, 685
    F.2d at 1080.

    17.  Even assuming the exemption excludes from regulation only those items
    designated before April 30, 1994, many software products were regulated
    at that time. That being so, there is no support for the contention that
    software generally would fall within the exemption.

    18.  Portions of the court's analysis of prior restraint cases in [sic]
    taken directly from its opinion in Bernstein II, 945 F. Supp. at 1286-90.

    19.  In their motion for reconsideration, defendants concede that the
    "essential requirements that previously applied to encryption source code
    under the ITAR would continue under the EAR." Df. Motion for
    Reconsideration, at 2. The government also acknowledged at oral argument
    that the issues before the court were basically unchanged.

    20.  Defendants again spend a great deal of energy arguing that encryption
    source code is not speech by citing to all the undisputed facts that show
    its functional capacity -- its ability to actually secure communication;
    Df. Mem. in Support, at 9-10. Defendants argue that just because "a
    program may be understood by those trained in programming does not negate
    the functional nature

                                       34

    of the program, nor render it a mere 'idea' ...." Df. Mem. in Opp., at 5.
    Again, the court does not disagree that encryption software is highly
    functional, but functionality does not remove it from the realm of
    speech. Just because an idea is functional does not "negate" its
    expressiveness. Indeed, it is functional speech. Programming is not, as
    defendants would have it, merely mechanical. It is both an art and a
    science. "[A] computer program is not just a way of getting a computer
    to perform operations but rather . . . is a novel formal medium for
    expressing ideas about methodology." Plaintiff. Mem. in Opp., at 6 n.15
    (quoting Abelson and Sussman, Structure and Interpretation of Computer
    Programs, preface (1985)).

    21.  One might make the argument that encryption software could be validly
    regulated for its "secondary effects," much like adult theaters were in
    Young v. American Mini-Theaters, Inc., 427 U.S. 50 (1975), and Renton v.
    Playtime Theaters, Inc., 475 U.S. 41 (1986), where the Supreme Court
    upheld zoning ordinances aimed at the secondary effects of such theaters
    in the surrounding community. However, the secondary effects rationale
    has never been extended beyond sexually explicit speech. See Roos v.
    Barry, 485 U.S. 312 (1988) (refusing to apply the rationale to political
    speech). See also Reno, 97 C.D.O.S. at 5002 (considering the secondary
    effects doctrine in relation to a statute regulating speech on the
    Internet).

    22.  In FW/PBS Justice O'Connor, joined by Justices Stevens and Kennedy,
    stated:

         Because we conclude that the city's licensing scheme lacks adequate
         procedural safeguards, we do not reach the issue decided by the
         Court of Appeals whether the ordinance is properly viewed as a
         content-neutral time, place, and manner restriction aimed at
         secondary effects arising out of the sexually oriented businesses.

    FW/PBS, 493 U.S. at 223.

    23.  Given the other more obvious deficiencies in the procedural aspects
    of the regulations, the court does not consider whether 90 days is fast
    enough given the demands in the field of cryptography.

    24.  To the extent the EAR are authorized by the IEEPA, that statute
    does not appear to preclude judicial review. Milena Ship Management Co.
    Ltd. v. Newcomb, 804 F. SUPP. 846, 850 n.2 (E.D.La. 1992) (nothing in
    IEEPA provides clear evidence of intent to preclude judicial review).
    However, if the EAR are authorized exclusively by Executive Order 13026,
    that order seems to preclude judicial review. Exec. Order No. 13026, 61
    Fed. Reg. 58768.

    25.  As the court discussed in Bernstein II with respect to the ITAR,
    some of the dangers of a standardless licensing scheme had already been
    realized. According to the NRC Report, the risk of discriminatory
    treatment associated with such schemes was reflected in the Report's
    comments that companies were reluctant to express their full
    dissatisfaction with the rules and implementation of export controls
    over cryptographic products for fear that "any explicit connection
    between critical comments and their company might result in unfavorable
    treatment of a future application for an export license for one of their
    products." NRC Report at 4-29.

    26.  It is not clear from the Press Release accompanying the President's
    Executive Order 13026 whether the review those agencies are to provide is
    limited to the enactment of new legislation or whether they will also
    review the new regulations.

[End]

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