Though the ruling technically renders moot all export controls, the government is expected to receive a stay, possibly a year or more from now, until the issue can be settled.
"We are another giant step along the way of getting rid of the export regulations," said Cindy Cohn, attorney for plaintiff and University of Illinois Professor Daniel Bernstein. "I expect the government will ask for an emergency stay.
In a 2-1 ruling, the appeal court attacked both the regulations' effect on free expression and the "boundless discretion to government officials" they said control encryption technologies engenders.
The heart of the ruling dealt mainly with the rights of software designers like Bernstein, who wanted to publish on the Internet the source code for a powerful encryption package. Source code, unlike the machine-readable software most people use, can be read easily by programmers. Thus, the court agreed with Bernstein in ruling the Administration violated the First Amendment by asking him to get an export license before posting that code to the Internet.
The government argued that it wished to control not the content of Bernstein's speech but its function, namely scrambling email, phone calls and other communications. The technology itself, attorneys argued, meant US officials could not to eavesdrop on terrorists, drug runners and a host of other enemies.
But Judge Betty B. Fletcher said: "The First Amendment is concerned with expression, and we reject the notion that the admixture of functionality necessarily puts expression beyond the protections of the Constitution," she wrote. More telling still was the issue the Administration never raised: privacy itself. Fletcher concluded her remarks with a salvo aimed, it seemed, at the entirety of the White House policy.
"Whether we are surveilled by our government, by criminals, or by our neighbours, it is fair to say that never has our ability to shield our affairs from prying eyes been at such a low ebb," she wrote.
Of all issues affecting the Internet, government cryptography controls have been the most bitterly debated. The FBI and NSA have successfully blocked most commercial encryption exports from the US, and Government officials argue foreign terrorists and criminals will soon be immune from surveillance if exports of the most powerful cryptography become commonplace.
But the world continues to catch up to US encryption prowess. Hundreds of foreign encryption products now use encryption algorithms theoretically billions of times more secure than what US makers can export. And though selected organisations may buy the strongest US encryption products abroad, they are few and far between.
Activists hailed today's decision. "It's probably the most significant decision affecting the Internet since the Supreme Court struck down the Communications Decency Act," said David Sobel, legal counsel to the Electronic Privacy Information Centre.