According to commentators, unless overturned, the landmark ruling will have a serious effect on e-mail privacy in the US.
The case was brought by the Justice Department against Bradford Councilman, a seller of rare and used books. He was vice-president of Interloc, a company which provided an e-mail service to certain book dealer customers. However, Councilman had configured the mail processing software so that all incoming e-mail sent to dealers from Interloc's biggest competitor, Amazon.com, was copied and sent to Councilman's mailbox as well as to the intended recipient's.
The US Wiretap Act prohibits unauthorised interceptions of communications. The main issue in the case was whether Councilman's actions constituted an intercept.
In June, to the alarm of privacy activists, a three judge panel of the Court of Appeals upheld the ruling of a lower court, concluding that there was no breach of the Act, because the tapping took place while the messages were stored on Councilman's computer, rather than being continuously in motion, as is the case with traditional telephone calls.
The Justice Department appealed, and privacy groups, including the Electronic Frontier Foundation (EFF), the Center for Democracy and Technology, the Electronic Privacy Information Center and the American Library Association, filed their own "friend-of-the-court" brief, supporting the request.
This has now been granted and the July ruling withdrawn pending the First Circuit's rehearing of the case, which will take place in December.
"It may well be that the protections of the Wiretap Act have been eviscerated as technology advances," the panel commented in issuing the order.
"The First Circuit clearly understands the need to quickly reconsider the court's earlier ruling, which raised significant constitutional questions and threatened to disrupt the traditional understanding of wiretap law," said Kevin Bankston, lawyer with the EFF.
"Upon rehearing the case, the full First Circuit should recognise that the original decision rewrote the field of internet surveillance law in ways that Congress never intended," he added.