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The week in review: Privacy and protection

In the wake of last month's terrorist attacks, lawmakers are considering greatly expanded electronic surveillance powers for police and ratcheting up penalties for certain computer crimes.

In the wake of last month's terrorist attacks, lawmakers are considering legislation that could greatly expand the electronic surveillance powers of police and ratchet up penalties relating to certain computer crimes.

Known as the Provide Appropriate Tools Required to Intercept and Obstruct Terrorism (PATRIOT) Act, the bill would add to the powers of law enforcement and intelligence communities-- including near-blanket rights to wiretap any communications device used by a person in any way connected to a suspected terrorist; the power to detain indefinitely an immigrant connected to an act of terrorism; and the classification of any computer hacking crime as a terrorist offense.

In the same vein, companies are scrambling to ensure their online privacy policies do not run afoul of the sprawling investigation into last month's terrorist attacks, a move that could prompt some to rewrite their published statements. Most online privacy policies contain provisions for sharing customer information with law enforcement agencies in the event of a criminal investigation or suspected illegal activity.

Nevertheless, some companies that have been cooperating with authorities investigating the hijackings are now reviewing their actions for possible privacy violations, according to people familiar with their concerns. A key issue, privacy advocates say, has come from companies that worry they may have gone too far in handing over complete databases to law enforcement in the immediate aftershocks of the attacks without requiring a court order or a subpoena.

In other privacy news, a company that pushed encryption and networking technology to enhance people's privacy said this week that it would close its flagship anonymity network and focus on security software for home users. Security software maker Zero-Knowledge Systems announced that it would shut down the premium service component of its Freedom Network, which let people surf the Internet and send e-mail with almost complete privacy by using pseudonyms.

Although more than 70,000 people signed on to the free test of the service two years ago, the swell of interest didn't produce more than a small number of paying subscribers, the company said. Encryption experts designed the service so that the identity of the Internet surfer could be hidden by hopping through several computers, each jump increasing the difficulty of matching up a Web user's online identity with that person's real one.

Net turbulence
Adding a new challenge to their list of legal attacks, the record industry and Hollywood studios joined forces to sue MusicCity, Kazaa and Grokster, which together form one of the most popular file-trading networks to spring up in Napster's wake. The suit marks the fourth major legal action the copyright holders have filed in their attempt to restrain millions of people from trading copies of songs and movies online.

On another front, the attempted defection of an Amazon.com executive sparked a legal squabble between the giant e-tailer and eBay. Former international Chief Financial Officer Christopher Zyda was a trusted member of Amazon's "select inner circle of top executives," according to statements filed last month by the company's lawyers. Amazon insists that Zyda's September bid to join eBay as vice president of financial planning and investor relations could dent Amazon's sales and jeopardize its long-term business strategy.

Observers say the case is the latest salvo in a turf war between the companies, whose business strategies increasingly butt heads. Wall Street is pressuring both Amazon and eBay to grow their audiences--especially as the companies ramp up for the traditional holiday spending blitz--and both are looking for ways to increase revenue despite an economic slowdown.

Also this week, eBay changed the way it operates the online charity auction it launched for the victims, families and communities affected by last month's terrorist attacks. When it launched its Auction for America campaign Sept. 17, the online auctioneer asked sellers to donate goods and asked them to pay the shipping costs for any goods sold, something normally paid by eBay buyers.

But an eBay spokesman said the company is now giving sellers the option of making the buyers pick up the shipping costs of the goods. The spokesman said sellers told the company that they would be more willing to participate in the charity auction if they were not held responsible for the shipping charges

Fear and discontent
Microsoft launched a major security initiative intended to address concerns that its software is prone to security problems and virus attacks. The world's largest software maker is looking to allay fears over ongoing security problems and recent worm attacks from Nimda and Code Red, which have led experts to warn that the company's Internet Information Server Web server software is not secure enough for customers.

In addition, a survey found that most corporate customers are unhappy with looming changes in Microsoft software-licensing programs, and many would consider switching to competitors' products. The survey of technology professionals found that 80 percent expected to pay more for Microsoft software under the controversial new programs. About 42 percent said their Microsoft software costs would increase anywhere from 20 percent to 50 percent. Of the remainder, 19 percent said their costs would double or triple.

The survey also found that 36 percent said they would consider alternative products in light of the changes. The high number of potential defectors is likely an emotional reaction, said analysts, but it's a further indication that Microsoft may have blundered when it enacted new licensing provisions Oct. 1.

Separately, the software giant has backed off a controversial licensing provision that forced some customers to pay twice for the software they purchased. Microsoft quietly introduced the change also on Oct. 1. Analysts said the switch came as a result of customer pressure for a more reasonable solution.

Apple Computer wasn't immune from a similar uneasy eye on strategy. As Apple prepared to open its ninth store--this one in its own back yard in Silicon Valley--existing Mac dealers across the country say they view the company's outlets with both trepidation and anticipation.

Several dealers nearby existing or future Apple stores are expressing fears that they will lose business in the short term, but the consensus seems to be that the stores are necessary if Apple is to regain market share in the brutally competitive PC market. Apple plans to launch 25 stores this year, including the Palo Alto, Calif., shop that will open Saturday.

Think differently
Motorola researchers announced that they have successfully demonstrated a methane gas-powered fuel cell, which can provide enough juice between charges for a month of cell phone calls. The fuel cell is essentially a miniature electrochemical plant that fits into a belt holster. Inside the cell, methane is stored in an area the size of a ballpoint pen's ink holder. A chemical reaction releases oxygen, heat and electricity. The electricity then either powers the phone directly or, in the case of Motorola's product, charges another battery that can then power the phone.

IBM unveiled its top-end Unix server, marking Big Blue's departure from the industry's assumption that more processors makes a better computer. The 32-processor p690, code-named Regatta, includes Power4 processors that package two CPUs on a single slice of silicon, self-healing abilities and the multi-chip module packaging of its CPUs. IBM now has revealed the pricing for the system--about a third the cost of a competing Sun Fire 15K "Starcat" server with the same memory and number of processors--and has offered details on the 128-processor Regatta alternative that never saw the light of day.

Transmeta has begun marketing its Crusoe processor to manufacturers of networking equipment, printers and other "embedded" devices in an effort to achieve critical mass. "By this time next year, it could equal the notebook market," Mark Allen, Transmeta's CEO, said of the company's prospects in the market for embedded chips.

Embedded computers are systems that are not PCs, including set-top boxes and point-of-sale devices such as cash registers. The push into the embedded processor market comes as a way for Transmeta to tackle one of its chief longer-term challenges: volume. Although the company landed a number of high-profile deals with major notebook manufacturers in Crusoe's first year of availability, analysts say Transmeta runs the risk of being wedged into a niche market.

Also of note
The Federal Reserve cut interest rates as expected for the ninth time this year, citing concerns that the Sept. 11 terrorist attacks might have a negative effect on an already ailing economy...Compaq Computer is recalling nearly 1.4 million notebook power adapters, citing fire risk...With much uncertainty surrounding its proposed deal to be acquired by Hewlett-Packard, Compaq is offering a new way for employees to sell customers on the value of the deal...Yahoo is considering several new paid services, including broadband access, that could help the Web giant find new sources of revenue amid a steep decline in online advertising...San Francisco officials voted to ban Internet filters on computers in local public libraries, risking the loss of some $20,000 in federal funds.

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