Kaspersky Lab, Inc. v. United States Department of Homeland Security, 113018 FEDDC, 18-5176

Docket Nº:18-5176, 18-5177
Opinion Judge:Tatel, Circuit Judge
Party Name:Kaspersky Lab, Inc. and Kaspersky Labs Limited, Appellants v. United States Department of Homeland Security and Kirstjen M. Nielsen, in her official capacity as Secretary of Homeland Security, Appellees
Attorney:Scott H. Christensen argued the cause for appellants. With him on the briefs were Ryan P. Fayhee and Stephen R. Halpin III. Lewis S. Yelin, Attorney, U.S. Department of Justice, argued the cause for appellees. With him on the brief was H. Thomas Byron, III.
Judge Panel:Before: Tatel, Circuit Judge, and Edwards and Ginsburg, Senior Circuit Judges.
Case Date:November 30, 2018
Court:United States Courts of Appeals, Court of Appeals for the District of Columbia Circuit
 
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Kaspersky Lab, Inc. and Kaspersky Labs Limited, Appellants

v.

United States Department of Homeland Security and Kirstjen M. Nielsen, in her official capacity as Secretary of Homeland Security, Appellees

Nos. 18-5176, 18-5177

United States Court of Appeals, District of Columbia Circuit

November 30, 2018

Argued September 14, 2018

Appeals from the United States District Court for the District of Columbia (No. 1:17-cv-02697) (No. 1:18-cv-00325)

Scott H. Christensen argued the cause for appellants. With him on the briefs were Ryan P. Fayhee and Stephen R. Halpin III.

Lewis S. Yelin, Attorney, U.S. Department of Justice, argued the cause for appellees. With him on the brief was H. Thomas Byron, III.

Before: Tatel, Circuit Judge, and Edwards and Ginsburg, Senior Circuit Judges.

OPINION

Tatel, Circuit Judge

Kaspersky Lab is a Russian-based cybersecurity company that provides products and services to customers around the world. Recently, however, Kaspersky lost an important client: the United States government. In September 2017, based on concerns that the Russian government could exploit Kaspersky's access to federal computers for ill, the Acting Secretary of Homeland Security directed federal agencies to remove the company's products from government information systems. And a few months later, Congress broadened and codified that prohibition in the National Defense Authorization Act. Kaspersky sued, arguing that the prohibition constitutes an impermissible legislative punishment-what the Constitution calls a bill of attainder. The government responded that the prohibition is not a punishment but a prophylaxis necessary to protect federal computer systems from Russian cyber-threats. In consolidated cases, the district court concluded that Kaspersky failed to adequately allege that Congress enacted a bill of attainder and that the company lacked standing to bring a related suit against the Department of Homeland Security. The district court thus granted the government's motions to dismiss. We affirm.

I.

According to the allegations contained in Kaspersky's complaint, which we "must . . . accept . . . as true" at the motion-to-dismiss stage, Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007), Kaspersky Lab is one of the world's largest cybersecurity companies. See Complaint, Kaspersky Lab, Inc. v. United States, No. 1:18-cv-00325, ¶ 18 (D.D.C. Feb. 12, 2018) ("Compl."). Kaspersky operates in 200 countries and territories and maintains 35 offices in 31 of those countries. Id. The United States is one of Kaspersky's most important geographic markets, and Kaspersky has "a substantial interest in its ability to conduct federal government business." Id. ¶¶ 22-23.

Ranking among the world's top four cybersecurity vendors, Kaspersky "has successfully investigated and disrupted" cyberattacks by "Arabic-, Chinese-, English-, French-, Korean-, Russian-, and Spanish-speaking" hackers. Id. ¶¶ 20-21. Founded by a Russian national and headquartered in Moscow, Kaspersky boasts that its "presence in Russia and its deployment in areas of the world in which many sophisticated cyberthreats originate . . . makes it a unique and essential partner in the fight against such threats," including hacker groups with suspected connections to Russian intelligence services. Id. ¶ 20.

But the U.S. government has come to disagree. Around the beginning of 2017, executive and legislative branch officials began voicing concerns that Kaspersky's ties to Russia make it a proverbial fox in the government's cyber-henhouse: a threat to the very systems it is meant to protect.

The chorus of concern about Kaspersky began to swell in the spring of 2017. Between March and July of that year, Kaspersky garnered attention in at least five committee hearings before both houses of Congress. For example, at one hearing dedicated to the subject of Russian cyber-operations, Senator Marco Rubio highlighted "open source reports" detailing ties between Kaspersky's founder, Eugene Kaspersky, and the Russian Federal Security Service, successor to the KGB. Disinformation: A Primer in Russian Active Measures and Influence Campaigns Panel II: Hearing Before the Senate Committee on Intelligence, 115th Cong., pt. 2, at 40 (2017). And at a later hearing, Senator Rubio asked six heads of various U.S. intelligence agencies, including the Central Intelligence Agency and the Federal Bureau of Investigation, whether they would install Kaspersky software on their own computers. All six replied no. See Open Hearing on Worldwide Threats: Hearing Before the Senate Committee on Intelligence ("Worldwide Threats"), 115th Cong. 48 (2017).

In September 2017, the Acting Secretary of Homeland Security issued Binding Operational Directive 17-01 (the "Directive"), which required most federal agencies to begin removing "Kaspersky-branded products" from their information systems within 90 days. National Protection and Programs Directorate; Notification of Issuance of Binding Operational Directive 17-01 and Establishment of Procedures for Responses ("BOD-17-01"), 82 Fed. Reg. 43, 782, 43, 783 (Sept. 19, 2017). Invoking her statutory authority to issue directives "for purposes of safeguarding Federal information and information systems from a known or reasonably suspected information security threat, vulnerability, or risk," 44 U.S.C. § 3552(b)(1), the Acting Secretary justified the Directive based on an interagency assessment of "the risks presented by Kaspersky-branded products," BOD-17-01, 82 Fed. Reg. at 43, 783. The Directive gave Kaspersky roughly two months to submit a response and announced that the Acting Secretary would issue a final decision by mid-December. BOD-17-01, 82 Fed. Reg. at 43, 784.

More congressional hearings followed. In October, the House Science Committee's Subcommittee on Oversight held a hearing on the potential threat posed by Kaspersky products to federal information systems. See Bolstering the Government's Cybersecurity: Assessing the Risk of Kaspersky Lab Products to the Federal Government: Hearing Before the House Subcommittee on Oversight, House Committee on Science, Space, and Technology, 115th Cong. 3 (2017). Several members expressed deep concerns about Eugene Kaspersky's personal and professional ties to Russia, citing reports that he was "educated at a KGB cryptography institute" and "worked for the Russian intelligence services before starting his software company." Id. at 12 (statement of Donald S. Beyer); see also id. at 4 (statement of Lamar S. Smith); id. at 8 (statement of Darin LaHood). The Committee also heard testimony about the susceptibility of the company's software to Russian exploitation, with one expert explaining that due to Russia's permissive "telecommunications surveillance and monitoring laws," Kaspersky could passively-in the absence of any "willful complicity or collaboration" in a Russian cyber-operation-provide the Russian government access to federal computers. Id. at 44 (testimony of Sean Kanuck).

The same subcommittee held a second hearing on November 14, this time to survey agencies' compliance with the Directive. See Bolstering the Government's Cybersecurity: A Survey of Compliance with the DHS Directive: Hearing Before the House Subcommittee on Oversight, House Committee on Science, Space, and Technology, 115th Cong. 22 (2017). The subcommittee heard testimony from Jeanette Manfra, Assistant Secretary for Cybersecurity and Communications at the Department of Homeland Security, who described the Department's rationale for issuing the Directive. She emphasized three concerns. First, "certain Kaspersky officials" enjoy "ties" to "Russian intelligence and other government officials." Id. at 19. Second, Russian law "allow[s] Russian intelligence agencies to request or compel assistance from Kaspersky and to intercept communications transiting Russian networks." Id. And third, all antivirus software, including Kaspersky's, receives "broad access" to the systems on which it operates. Id. So like a thief who has stolen a security guard's master key, a cyberattacker can exploit antivirus software's "elevated privileges" to inflict serious damage on the systems the software ostensibly protects. Id. In the Department's view, Manfra concluded, the Directive "is a reasonable, measured approach to the information security risks posed by . . . [Kaspersky] products to the federal government." Id.

Congress apparently agreed with the Department of Homeland Security's assessment that Kaspersky software presented a serious threat. Earlier, in July 2017, when considering the Senate version of the National Defense Authorization Act for Fiscal Year 2018 ("NDAA"), the Senate Armed Services Committee, citing "reports that the Moscow-based company might be vulnerable...

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