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In a victory for privacy advocates, a federal appeals court has upheld a tough penalty meted out last year to a company that sold the contents of individuals' phone records without their permission.

A three-judge panel of the 10th US Circuit Court of Appeals affirmed a lower-court ruling that ordered the owners of Abika.com to surrender almost $200,000 in revenue earned from the sales of such records. From 2003 to 2006, the site offered to sell "details of incoming or outgoing calls from any phone number, prepaid calling card or Internet Phone" to anyone with a credit card.

The US Federal Trade Commission sued Abika parent company Accusearch in May 2006, just a few months before revelations that Hewlett-Packard obtained reporters' private phone records. The scandal exposed a practice known as pretexting, in which unscrupulous investigators misrepresent their identities to phone company representatives in an attempt to trick them into revealing the billing records of people.

In January 2008, a federal judge in Wyoming ordered Accusearch to pay $199,692 and to abandon the practice. The company appealed the decision on a variety of grounds, including the argument that under the US Communications Decency Act, or CDA, websites are immunized from lawsuits that stem from the acts of its users. Abika, the site argued, merely acted as a matchmaker that introduced private investigators to people seeking the phone records of others.

The appeals judges saw things differently. They branded Abika an "information content provider" because it actively developed databases containing the phone records.

"Accusearch solicited requests for such confidential information and then paid researchers to obtain it," the majority wrote in a decision (PDF) published Monday. "It knowingly sought to transform virtually unknown information into a publicly available commodity. And as the district court found and the record shows, Accusearch knew that its researchers were obtaining the information through fraud or other illegality."

The appeals court also rejected Accusearch arguments that the FTC lacked the authority to bring the case because the practice was not illegal at the time. They held that the Federal Trade Commission Act "enables the FTC to take action against unfair practices that have not yet been contemplated by more specific laws."

While the decision is good news to anyone who wants their phone bills to remain private, some legal experts worry its rejection of Abika's CDA claims could backfire. Provisions immunizing websites have largely been championed by free speech advocates who say the owners interactive services shouldn't be held responsible for the statements of individual users.

"I don't have any love for these guys," said Eric Goldman, a professor of law at Santa Clara University who blogged about the decision here. But in an interview with El Reg, he added: "Getting to that result without causing collateral damage can be tricky, and I'm not sure the court struck the right balance." ®

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