• by Wendy Davis  @wendyndavis, April 26, 2011

Lawmakers have recently proposed measures that would require Web companies to allow consumers to opt out of online data collection, but significant questions remain about whether such laws would violate companies' First Amendment rights to communicate with each other.

On Tuesday, the U.S. Supreme Court heard arguments in a case that could go a long way toward answering those questions. The matter stems from a Vermont law that prohibits pharmacies from selling records of prescriptions written by doctors without their opt-in consent.

The law, which was enacted in 2007, bans such sales even though pharmacies mask patients' names by "de-identifying" the records. Data mining companies including IMS Health challenged the law in court, arguing that it violated the First Amendment by restricting speech -- in this case, their ability to obtain information that is used to market drugs to doctors.

The Second Circuit Court of Appeals agreed with IMS Health and struck down the law. Vermont's top law enforcement official is now attempting to convince the Supreme Court to reinstate the measure.

Tuesday's Supreme Court proceeding drew the attention of a host of outside groups that weighed in with friend-of-the-court briefs, some of which raise arguments that would apply to laws regarding online behavioral targeting, or serving ads to people based on sites they previously visited.

For instance, the trade groups Association of National Advertisers, American Advertising Federation and American Association of Advertising Agencies argue in a joint brief that marketers have a constitutional right to collect information. "The First Amendment safeguards the entire communication process, including the gathering of data used to create a commercial or non-commercial message," the associations say in their brief.

Those same arguments also have been raised to the Federal Trade Commission. In 2008, the Newspaper Association of America filed comments with the FTC arguing that any rules curbing newspapers' ability to serve ads to readers would violate newspapers' First Amendment rights. (The following year, the group retreated somewhat and voiced support for the idea that Web companies should voluntarily allow users to opt out of online behavioral targeting.)

On the other side of the issue, the Electronic Frontier Foundation was among the groups supporting the Vermont law as necessary to protect patients' privacy. The EFF says that enabling doctors to prevent the sale of their prescription-writing histories -- even with patients "de-identified" -- ultimately protects people from the risk that their identities will be pieced together. "There are substantial concerns today about the efficacy of this 'de-identification' for protecting privacy given the enormous trade in consumer data," the EFF argues.

During Tuesday's hearing, Antonin Scalia indicated that he saw restrictions on data mining as problematic. After an attorney advocating on behalf of the Vermont law said that it wasn't a restriction on speech but on "access to the information that the pharmaceutical manufacturers would like to use to inform their advertising," Scalia interjected with the following comment: "The information necessary for effective speech is what you're saying, right?"

Sonia Sotomayor, on the other hand, indicated that she believes that the government has a valid interest in protecting consumers' privacy. "If you're a consumer who doesn't want a million catalogs, the industry is giving you the right to opt out, so they don't sell your address," she said, before wondering aloud whether Vermont should have passed a statute allowing doctors to opt out of having their prescription-writing histories sold rather than banning sales without opt-in consent.

She also remarked: "Today with the Internet and with computers, there's virtually no privacy individuals have."