Tracking of E-Mails Held Legal

In an online eavesdropping case with potentially profound implications, a federal appeals court ruled it was acceptable for a company that offered e-mail service to surreptitiously track its subscribers’ messages.

The case involves a now-defunct online literary clearinghouse, Interloc Inc., which was acquired in 1998 by Alibris Inc., an Emeryville, Calif.-based online rare-book broker. Interloc made copies of the e-mails sent to its subscribers by rival Amazon.com Inc. An Interloc executive was subsequently indicted on an illegal wiretapping charge.

The San Francisco-based Electronic Frontier Foundation said that the court “dealt a grave blow to the privacy of Internet communications.”

In a 2-1 decision, the U.S. 1st Circuit Court of Appeals in Boston upheld a federal judge’s dismissal last year of a wiretapping charge against Branford C. Councilman, a former Interloc vice president.

According to his 2001 indictment, Councilman directed employees to write computer code to intercept and copy all incoming e-mails from Amazon.com to Interloc’s subscribers, who were dealers seeking buyers for rare and out-of-print books.

But Councilman contended that no violation of the federal Wiretap Act had occurred because the e-mails were copied while in “electronic storage” -- the messages were in the process of being routed through servers.

Prosecutors did win guilty pleas from two other defendants, including Alibris, which paid a $250,000 fine. The other guilty plea came from Interloc’s former computer systems administrator, who was placed on probation.