CINDY A. COHN, ESQ.; SBN 145997 McGLASHAN & SARRAIL Professional Corporation 177 Bovet Road, Sixth Floor San Mateo, CA 94402 Tel: (415) 341-2585 Fax: (415) 341-1395 LEE TIEN, ESQ.; SBN 148216 1452 Curtis Street ROBERT CORN-REVERE, ESQ. Berkeley, CA 94702 JULIA F. KOGAN, ESQ. Tel: (510) 525-0817 JEREMY B. MILLER, ESQ. Hogan & Hartson L.L.P. M. EDWARD ROSS, ESQ.; SBN 173048 555 Thirteenth Street, NW STEEFEL, LEVITT & WEISS Washington, DC 20004 A Professional Corporation Tel: (202) 637-5600 One Embarcadero Center, 30th Floor San Francisco, CA 94111 Tel: (415) 788-0900 JAMES WHEATON; SBN 115230 ELIZABETH PRITZKER; SBN 146267 FIRST AMENDMENT PROJECT 1736 Franklin, 8th Floor Oakland, CA 94612 Tel: (510) 208-7744 Attorneys for Plaintiff Daniel J. Bernstein IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA DANIEL J. BERNSTEIN ) ) C 95-00582 MHP Plaintiff, ) ) MEMORANDUM IN SUPPORT OF v. ) EXPEDITED MOTION FOR LEAVE ) TO FILE SUPPLEMENTAL PLEADING ) F.R.C.P. 15(d) and Local Rule 7-10 UNITED STATES DEPARTMENT OF ) STATE et al., ) ) ) Defendants. ) ) Plaintiff seeks leave to file a proposed First Supplemental Complaint ("Supp. Compl."), a copy of which is attached hereto as Exhibit A and which has been served upon counsel for defendants now parties to this action, Mr. Anthony Coppolino. Plaintiff hereby certifies that he has complied with Local Rules 7-10(b) and (c). Defendants have stated that they intend to respond formally to this Motion. This action was filed on Feb. 21, 1995, challenging the constitutionality of the Arms Export Control Act ("AECA"), 22 U.S.C. sec. 2778 et seq., and its implementing regulations, the International Traffic in Arms Regulations ("ITAR"), 22 C.F.R. Part 120 et seq., on their face and as applied to plaintiff. New facts and law affecting this controversy have occurred, and the proposed First Supplemental Complaint updates the pleadings as to a new regulatory regime for encryption export licensing and adds new defendants who participate in the new licensing scheme. The Supplemental Complaint seeks injunctive and declaratory relief against the prohibitions contained in the new regulatory scheme for exports of encryption goods and technology. 61 Fed.Reg. 68572 (1996) ("EI regulations"), Exh. C to Supp.Compl. Plaintiff requests expedited review of this motion, because the new regulatory scheme which went into effect immediately on December 30, 1996, is a prior restraint that suffers from the same constitutional defects as held unconstitutional by this Court in its Memorandum and Order of December 16, 1996, and thus violates plaintiff's First Amendment rights. CHANGE IN REGULATORY CONTEXT On December 30, 1996, regulatory jurisdiction over cryptography export licensing was transferred from the regime attacked in the Complaint, i.e., the ITAR Scheme, to a regime administered primarily by the Commerce Department ("Commerce"). This new regime ("EAA/IEEPA Scheme"), has been grafted onto the existing Commerce export licensing regime of the Export Administration Regulations ("EAR"), 15 C.F.R. Parts 730 et seq. [cite pleading] For constitutional purposes, the EAA/IEEPA Scheme is virtually identical to the predecessor ITAR Scheme. The EAA/IEEPA Scheme by its terms regulates "encryption products that are or would be . . . designated as defense articles in Category XIII of the [U.S.] Munitions List and regulated by the [U.S.] Department of State pursuant to the Arms Export Control Act." Executive Order 13,026, Supp.Compl. Exh. B. The EAA/IEEPA Scheme contains none of the procedural safeguards that this Court found unconstitutionally absent from the previous ITAR scheme. It fails to limit agency discretion, to provide for prompt judicial review or to require that the government go to court and defend any decision to deny a license. In particular, the EAA/IEEPA Scheme requires a license prior to the publication of materials containing cryptographic software in electronic form. 15 C.F.R. sec. 734.2(b)(9); 742.15(a). Note to 15 C.F.R. sec. 734.3 (b)(2) and (3). It requires a license prior to providing "technical assistance" to foreign persons, a term which includes providing encryption software in the classroom, and either encryption software or technology (called "technical data" under the ITAR) at public conferences, or as part of normal peer review of scientific ideas. 15 C.F.R. sec. 744.9(a). Even as to printed encryption source code, "[t]he 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 right to impose export controls on such software." 61 Fed.Reg. 68575. Although the normal EAR provisions exempt publicly available information, information resulting from fundamental research and educational information from export controls, these exemptions do not apply to "encryption software." 15 C.F.R. sec. 732.2(b); 734.8 (a); 734.9. Thus, as before, plaintiff may not may not send cryptographic software to a scientific peer outside the United States, use encryption software in teaching a foreign student, or publish cryptographic software on the Internet without a license. 15 C.F.R. sec. 734.2 (b)(9), 744.9(a). He may not provide information related to the design of cryptographic software to foreign scientific peers except in academic settings. 15 C.F.R. sec. 744.9 (a). NEW PARTIES Plaintiff seeks to add as Defendants the U.S. Department of Energy, the U.S. Department of Justice, and the Central Intelligence Agency. These government agencies are now part of the process of determining whether dissemination of any encryption software or technology must be licensed. 15 C.F.R.S. sec. 750.3(b)(2)(v), 772, Supp.Compl. Exhibit C. They are therefore necessary and proper parties to an adjudication of the constitutional issues raised by plaintiff. ARGUMENT Supplemental pleadings are liberally allowed because they avoid piecemeal litigation. Keith v. Volpe, 858 F.2d 467, 473 (9th Cir. 1988), cert. denied, 493 U.S. 813 (1989) ("tool of judicial economy and convenience"). Here, the additional facts alleged occurred after the Complaint was filed, and plaintiff merely updates the action so as to bring relevant new claims based on these facts within the Court's jurisdiction. Id., at 473-474. The new claims are closely related to the original action and they present the same fundamental issue: whether a government export licensing scheme focused on cryptography is an unconstitutional prior restraint on plaintiff's First Amendment rights to publish, teach and exchange cryptography. The addition of new parties, namely DOJ, DOE and the CIA, is also proper. Fed.R.Civ.P. 15(d) "plainly permits supplemental amendments to cover events happening after suit, and . . . persons participating in these new events may be added if necessary." Griffin v. County School Bd., 377 U.S. 218, 227 (1964). These agencies are part of the new regulatory scheme. Leave to supplement under Fed.R.Civ.P. 15(d) is liberally granted "unless undue prejudice to the opposing party will result; the purpose of the rule is to promote complete adjudication between the parties." LaSalvie v. United Dairymen of Arizona, 804 F.2d 1113, 1119 (9th Cir. 1986), cert. denied, 482 U.S. 928 (1987). Defendants are not prejudiced by this Supplemental Pleading, which is offered within days of the effective date of the new regulations and raises legal issues almost identical to those already adjudicated by the Court. Adjudication of plaintiff's rights cannot be "complete" without the Court's addressing the new licensing scheme, and the public interest in free speech and academic freedom will be served by permitting plaintiff to plead these new claims. For the foregoing reasons, this Court should grant plaintiff leave to file the proposed Supplemental Pleading and thereby add the new claims and parties. Date: January 13, 1996 McGLASHAN & SARRAIL Professional Corporation (signed Cindy A. Cohn) By _________________________________ CINDY A. COHN