Apple gets some love from the Big Apple

U.S. Magistrate Judge James Orenstein in New York has ruled against the government in a separate All Writs Act request to unlock an iPhone. Alex Bewitt at InfoQ highlights some of the key points in the decision (the full ruling can be found here).

This is a scathing ruling against the government.One key point appears in a footnote:

In considering the burden the requested relief would impose on Apple, it is entirely appropriate to take into account the extent to which the compromise of privacy and data security that Apple promises its customers affects not only its financial bottom line, but also its decisions about the kind of corporation it aspires to be. The fact that the government or a judge might disapprove Apple's preference to safeguard data security and customer privacy over the stated needs of a law enforcement agency is of no moment: in the absence of any other legal constraint, that choice is Apple's to make, and I must take into account the fact that an order compelling Apple to abandon that choice would impose a cognizable burden on the corporation that is wholly distinct from any direct or indirect financial cost of compliance [emphasis added].

In other news from New York, District Attorney Cyrus Vance Jr. will go before Congress to discuss encryption. As Gregg Keizer at ITWord says of Vance, he "wanted Apple to return to the security model it used through 2013's iOS 7. 'We want smartphone makers to offer the same strong encryption that Apple employed before iOS 8,' Vance said."

Apple wants personal device security to be controlled by the person; the government wants it controlled by the government via corporate proxies.

Measures of Inequality

Robert Samuelson has an article on some recent research on inequality by the White House's Council of Economic Advisers (CEA). Samuelson summarizes one point as follow:

[The CEA] attributes much inequality to differences between companies and not to individuals in the same firm. It’s not so much that the gap between the chief executive and the janitor at company A has widened; it’s that company A is falling behind company B, which is more profitable and pays both the CEO and the janitor better. Think General Motors (company A) and Google (B). The economy is splintering into increasingly and decreasingly profitable firms, argues CEA Chairman Jason Furman.

Income inequality is a complex phenomena which has many causes. Some may be institutional failures (e.g., rent seeking, poor schools), while others could be signs of growth and lifestyle changes (e.g., innovation, demographic changes, immigration). And that is ignoring the measurement issues around compensation (i.e., the growth of fringe benefits and government transfer payments). Samuelson argues against "stock explanations" like greed and corporate compensation packages to CEOs, and I agree.

Apple Defenses

Kim Zetter at Wired has an article up explaining the First Amendment defenses that Apple could use in its case against the government. As I mentioned in a previous post, the courts have ruled that, in essence, computer code is speech. A defense tactic in this vein could argue that requiring Apple to write a special version of iOS is compelled speech. However, as Zetter illustrates, there is another line of defense Apple could take, and it pertains to the digital signing of that new code.

Instead, it's the digital signature that Apple would use to sign that code that is the key to Apple's First Amendment argument, say legal experts who spoke with WIRED. "The human equivalent of the company signing code is basically saying, 'We believe that this code is safe for you to run,'" says Jennifer Granick, director of civil liberties for the Center for Internet and Society at Stanford Law School. "So I think that when you force Apple to cryptographically sign the software, it has a communicative aspect to it that I think is compelled speech to force them to do it."

"[B]ecause what's so expressive, necessarily, about that? But to me, the signing is expressive—very clearly so," she says. "That's kind of what the code signing is—it's saying 'I'm Apple Computer and we support this software and we think this software is safe for you to run'...So a forced signature to me is compelled speech."

 If Apple were to use this defense it could set some interesting precedents for digital signatures.

Other than the First Amendment, Apple could take the 5th in this case. Not refuse to testify, of course, but apply that other pesky part of the 5th Amendment - due process. David Kravets at Ars Technica explains how "conscripting Apple to build something that it doesn't want to do...is a breach of its 'substantive due process.'"

There is also the question of whether Congress has already had its say in this matter. The All Writs Act that the FBI is using to compel Apple only gives courts a tool to enforce existing statutes. As Albert Gidari shows, Congress in 1994 passed the Communications Assistance for Law Enforcement Act (CALEA) which "did not prohibit a [telecommunications] carrier from deploying an encryption service for which it did not retain the ability to decrypt communications for law enforcement access" (emphasis mine). So, CALEA could trump AWA. It is yet to be seen, however, if the courts view Apple as a "telecommunications carrier."

Whatever

• Surprise! (not really) PATRIOT ACT expanded beyond terrorism investigations
• U.S. Marshals using stingray devices for cellphone surveillance. Taking a note from above, how long before this is used for...well...whatever.
• Military-funded study predicts when you'll protest on Twitter
• Recording cops isn't necessarily protected by the First Amendment. A dangerous precedent here basically saying that speech is only protected if it is some form of challenge or criticism.
• The Sony hack wasn't just a one-off. The Lazarus group has been causing mayhem for years.
• Apple may look to the Fifth Amendment for protection against the government. "If this legal argument sounds novel, it's because the government's claim is unprecedented." But they may actually get protection from an existing wiretapping statute.
• Bitcoin, Hai!
• I'll care about gravitational waves when I can surf them 

Little Lies by William Dupre
We can't escape
Having a little of what we hate
Of others within ourselves. 

Yet we let the lie reside
Lest we make light the biases
We desire to hide --

The Hypocrisy doesn't wear well
As we tell stories of the self.

Bubble Watch

Evan Soltas has an article looking at how the decline in oil prices could end up hitting the banking sector. He writes,

That link to the financial system has people on edge. Andrew Levin, a former adviser to Ben Bernanke and Janet Yellen, has been ringing the "recession" alarm bell as loud as he can. Larry Summers has warned policymakers to "heed the fears of financial markets."

The banks are tied up in this for a simple reason: America’s fracking boom was brought to you by very aggressive financing. Buying land, drilling a well, renting equipment, hiring a team, and securing pipeline or rail space to ship out the oil — all that takes capital, and the banks provided it at low interest rates with little equity from the borrower.

Banks lent so much to frackers that the cost of debt service consumed 60 percent of cash flow before oil prices fell, according to the Energy Information Administration. The collapse in oil prices makes that kind of debt unpayable. Frackers will default and force banks to eat the loss. (Emphasis in the original)

He also has a graph showing how this exposure is hitting banks stocks.

Tim Hartford also writes about how cheap oil might trickle through the economy. He's worried that consumers are using the spare cash from cheap gas to save and not spend more. I'm skeptical of the notion that savings is bad, and think that it could be the cushion to soften the blow of a fall. However, he may be right that innovation in the clean energy sector may slow because of the disincentive to invest that industry. On the other hand, how much of the clean energy sector is being propped up by government subsidies?

I'm not willing to bet on a big slow just yet, but both articles are worth a read to understand the difficult times that may be ahead.

Postscript: Above, Soltas mentions the fracking boom and how it was brought on in part by aggressive financing of, among other things, rail space for shipping oil. Working in the rail industry, I for one know that there has been a slow down in shipments of energy-based commodities. Coal shipments have been hit the hardest, but other areas are being hit as well.

The Security Chess Game

The Justice Department is now chiming in to defend the FBI's All Writs Act request to Apple. We've also learned that late last year the White House ordered government agencies to work around encryption. As Bloomberg reports, agencies were requested to "find ways to counter encryption software and gain access to the most heavily protected user data on the most secure consumer devices."


In the DOJ's defense of the FBI's request, they said that Apple's refusal to comply "appears to be based on its concern for its business model and public brand marketing strategy." That may be true, but the government is playing the same game. It looks like they are using the emotions around the San Bernardino incident to garner political support for a more strategic move against companies refusing to break encryption. They know this could set the precedent they need to strong arm industry players into either installing "backdoors" on encrypted devices or bending over whenever the FBI comes knocking.

So we have competing strategies at play: the enabling of security vs. the subversion of security. Which one were you taught in high school was the government's side?

As I mentioned in a previous post, government agencies have ways to get into devices. Andy Greenberg has an entire article on the ways government officials can get access to data on an iPhone. So this really does seem like the government is playing a chess game here.

***

Regarding the All Writs Act request, check out Orin Kerr's thoughts on the 1789 statute. The ruling precedent right now is the 1977 case United States vs. New York Telephone. According to Kerr,

The tricky part of New York Telephone is that the Court left the actual test for what the AWA allows frustratingly murky. The Court was comparatively clear about one essential limit on a Court’s power under the AWA: "We agree that the power of federal courts to impose duties upon third parties is not without limits; unreasonable burdens may not be imposed." Okay. But the rest of what the Court says is really unclear.

So the chess game could be a long one.

#FBIvsApple

Elsewhere (on Facebook), I backed away from a claim that the order issued by the California Court requiring Apple to assist the FBI in accessing a locked iPhone was a 4th Amendment issue. In this particular case it clearly isn't. However, if Apple loses its challenge, the precedent set could have longer term 4th and 5th Amendment issues. (This is important because the current makeup of SCOTUS, especially since the passing of Justice Scalia, leans towards deference to the government is such cases.) There is also an interesting First Amendment issue to consider. In Bernstein v. Department of Justice, the U.S. District Court for the Northern District of California ruled that, in essence, computer code is equivalent to speech. So, is it compelled speech if the government requires Apple to create a modified version of iOS?

So, clearly there are some Civil Rights issues on the line with this order.

Another interesting angle in this case is the question of whether the FBI actually needs Apple at all. It is known that the government has tools to hack into software systems already. Specifically, the NSA has a stash of zero-day exploits it has collected over the years. Now, of course, the NSA isn't going to share those with the FBI, but could the FBI have its own stash? Also, are they really just using this order to set a legal precedent? Or are they using it to garner public support to force software companies to include backdoors in encryption tools? There is no evidence that this is what is going on, but these are some of the issues that are now in play.

Apple has a fight on its hands and we will soon see how this particular case plays out. However, there are serious security, technology, privacy, and rights implications that will play out over the longer term.