This is scary stuff and could mark a new low point for privacy in America. Thank god, then, that the report wasn’t true. Instead, the “feds all up in your email” story appears to have been the latest attempt to exploit readers’ fears of a growing surveillance society. Here’s a quick look at what happened:

Panic over privacy

Last Tuesday, as Americans prepared to settle into days of turkey and TV, the tech news site CNET published an alarming story headlined: “Senate bill rewrite lets feds read your e-mail without warrants.”

According to CNET, the Chairman of the Senate Judiciary Committee, Patrick Leahy (D Vt), quietly rewrote a proposed law to give vast new investigative powers to 22 agencies like the Federal Reserve and the FCC. CNET pointed to excerpts from a draft bill to suggests agency gnomes would no longer even need a warrant to read your emails, Facebook musings or Google documents.

CNET’s would-be privacy bombshell soon received appropriate attention, even landing at the top of the Drudge Report. The site, which has a massive audience and enjoys embarrassing Democrats, reported it like this:

Other sites also began reporting on the Senate’s scary new plan to let agencies read our emails.

What really happened

Not everyone, however, took the CNET report at face value. Kashmir Hill, a veteran privacy reporter at Forbes, put it bluntly on Twitter:

The CNet report on a bill that would make warrantles searches of your email A-okay is bunk. Some flawed reporting there.

— Kashmir Hill (@kashhill) November 20, 2012

Hill soon issued a rejoinder to the CNET report, noting that the bill it cited was just one of many versions circulating in the Senate and was not one being taken seriously. She also pointed out that such a law would come at a disturbing time given the recent flap over General Petraeus’ email. Finally, Hill quoted a Leahy spokesman who said the article was “wrong.”

Other news outlets soon published additional denials from Leahy’s office. Meanwhile, sites like The New York Times, The Wall Street Journal and Politico simply ignored l’affaire Leahy altogether. (For a level-headed rundown of the whole episode, including how the feds can already read your email in some cases, see Wired’s report here.)

Whether CNET was set up by one of Leahy’s enemies or simply jumped the gun in reporting a draft bill isn’t clear. The only response to the controversy from the story’s author, Declan McCullough, was to write a follow-up piece that suggested CNET’s initial story had helped force Leahy to back down.

Crying Wolf

If nothing else, this non-scandal over email privacy reveals how these stories exist in a media sweet spot that taps public fears of technology, the government and big companies. News stories that confirm suspicions about an online Big Brother will always attract an audience, especially as they appeal to both liberals and right-wing libertarians.

Unfortunately, the widespread fears over online privacy also mean that it’s easy for the media to pander to them. Any headline with some combination of “privacy,” “Google” and “government” is likely to track well.

The bigger problem here is that online privacy is a serious issue — every day we turn more of our personal information over to the cloud with little assurances that it will remain safe from companies and governments. But every time the media points to smoke without fire, the greater the chance we will tune out genuine privacy threats.

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That’s why it’s fun to come across a startup like Firefly, the creation of four University of Pennsylvania undergraduates who want to make it drop-dead easy for companies to guide customers through their websites by co-browsing or sharing screens without plugins or downloads.

So if you’re perusing your a healthcare provider’s web site and get stuck on a form, the customer service agent can with a button click,  get in and share that screen — without seeing any of the user’s other tabs or screens — to walk the user through the process. To facilitate this, the company just adds a few lines of JavaScript code to the URL header.

The product has gotten some ink  and it is cool. But what impressed me was the co-founders. I met two of the three – Wharton undergrads Patrick Leahy and Justin Meltzer  – at Boston AngelHack last spring, when Leahy was in in the midst of a hackathon road trip.

Just coming off the 48-hour Penn Apps hackathon, Leahy Bolt-bused up to Cambridge for the 30-hour Boston AngelHack, before jumping aboard StartupBus, a 70-hour hackathon-on-wheels to South By Southwest, where he was going to participate in — wait for it — another hackathon. Code means a lot to this guy…

Firefly co-founder Patrick Leahy

Foresaking Wall Street for code

So much, in fact, that Leahy turned down an investment banking internship with a New York financial services giant to focus on programming. “I did one internship on derivatives trading last year and liked it and was going to go back for investment banking, but I want to build the company,” Leahy told me by phone last week.

Leahy and another Firefly co-founder Dan Shipper are startup veterans, having already launched Airtime for Email, which gives companies a way to brand their marketing messages in email and track how those emails are treated. Were they read? Nuked? Forwarded? Never opened?

Leahy speaks about code as someone who is knowledgeable but still eager to learn. “We wrote the first version of Firefly at Penn Apps using Ruby on Rails but we couldn’t get to the level of complexity we needed so we rewrote it at AngelHack in Node.js. We learned that language at AngelHack and it’s perfect for what we needed,” Leahy said.

Picking the right tools

“Programming languages are like different sized kitchen knives — they suit different jobs,” he said. Ruby on Rails is a great framework for building “CRUD”  or Create, Read, Update, Delete — applications, he said. ”If you have a big table you want to edit — a customer information page, your sales rep page, Ruby on Rails if fine,” he said.

But for Firefly, which needs to handle fast browser-to-browser communication, Node.js was better. “We have to pass messages back and forth so our server sits in the middle and we wrote code to connect all those browsers. This is an evented pattern where you’re having a conversation, listening for things to be said and holding till you hear them. Ruby on Rails is not good for that but a functional programming language like JavaScript makes it easy to call a function to handle an event,” he added.

The Firefly foursome used to work out of dorms and apartments but is moving into the offices of First Round Capital, although there are no plans to take venture funding yet.

To be sure, Firefly isn’t entering an empty stage. LogMeIn offers a popular screen charing application and Salesforce.com bought GoInstant a screen-sharing company in July for $70 million. But Salesforce is attacking big companies with a full array of analytics and other perks while Firefly focuses on customer service and might be more attractive to smaller companies. Whatever the competitive landscape,  I wouldn’t sell this team short. They show a remarkable maturity that complements their youthful exuberance. Asked if Firefly was seeking venture capital, Leahy was cautious.

“We want to get to free cash flow and get stable before thinking about raising money from outside. We want to make sure we can manage our own money first,” Leahy said.

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1: The social aspect is big

Many participants, and they varied from undergrads to folks in their 40s and 50s, came to see what others are up to, and to network.

Marsh Sutherland, CEO and co-founder of Referral Bonus, loves hackathons because, he said, they make his “brain tingle and adrenaline pump,” and he bonds with new friends. And, he said, “I help create something I’m proud of.”

Andres Douglas, a Boston-based developer who has participated in Facebook hackathons, Music Hack Day and TechCrunch Disrupt events, agreed that it’s all about the people. “It’s great getting to work with new people. It’s kind of like dating. We came with two [team members] and added two here,” he said.

Aaron Roth, a senior at the University of Pennsylvania, said he loves the enforced focus of the event.  ”You’re working with a team to create something new and great, in a short period of time, and work continuously through the night,” he said.

2: Don’t underestimate the thrill of adventure

There is huge appeal in trying out new things.  ”If you’re a developer, this may mean learning a new language, using a new set of APIs or building a product that’s different from your ‘day-job,’” said Jeffrey Peden, founder and CEO of CraveLabs, a Cambridge,Mass.-based maker of social network marketing tools. The same motivation holds with marketers and sales people, he said. They all want to try something new.

Cheryl Tom, whose day job is as a Montreal-based director of front-end development for CrowdTwist.com, said she welcomes the opportunity to hone her skillset and add new expertise. This weekend she learned Facebook and Twilio APIs.

3: They’re great talent pools

Several attendees that are already in established businesses use hackathons to check out prospective programmers and developers. Said Peden: “There is no better way to evaluate folks than to see how they go through a 30-hour, start-to-finish marathon of trying to build something — and it’s not something you can just show up at the end to discover.”

Several attendees said they’d received feelers from prospective employers.

4: They’re addictive

Nearly every AngelHack attendee seemed to be a hackathon veteran.  Sutherland has participated in several Boston Startup Weekends and is helping to build a similar event in Spokane, Wash.

Patrick Leahy, a business student at Penn’s Wharton School, may be an extreme example. On January 13, he was in the 48-hour PennApps 2012 hackathon. On February 27 it was the 72-hour paid hackathon for Wharton MBAs. This weekend was AngelHack. And Tuesday he’ll be aboard the StartupBus Boston for a 73-hour traveling hackathon to South by Southwest.

5: People like prizes

For all the talk of camaraderie and collaboration, free pizza, Red Bull and beer — there are also prizes. Teams get cash money for the best use of APIs from sponsors — Microsoft Bing, Box, Viximo, Twilio — and others.  There’s a free Geeks on a Plane trip. And tickets to the upcoming GigaOM Structure:Data conference.

Asked if the prizes mattered, Penn’s Roth said: “Oh, yeah. Big time.”

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What are SOPA and PIPA in general?

SOPA stands for the Stop Online Piracy Act, which was introduced in the House in October, and sponsored by Rep. Lamar Smith. A copy of it can be found here. PIPA is the Senate version of the same bill, which was sponsored by Sen. Patrick Leahy (D-VT) and others, some of whom have begun distancing themselves from the legislation. The bills aim to halt the spread of pirated content on the web by several means, which originally included taking the names of offending sites from the DNS directory — the address book for the Internet. So far, SOPA sponsor Rep. Smith said he would remove the DNS provisions from the bill, while PIPA sponsor Leahy said he would hold hearings on the issue. The bills also seek to force payments processors to halt money flowing to pages that host potentially pirated content. More detailed information can be found here.

Why is everyone so upset?

While the stated intent behind SOPA is to halt the spread of pirated goods and content from bad actors, the way the bills are written the punishments associated don’t match the crimes. Having pirated content appear on a site, even without the knowledge or action by the site’s owner, can lead to a site being shut down without the owner having a chance to defend itself. It also threatens content hosting sites by cutting off their money flow if they are deemed to be hosting an infringer, until they can otherwise prove they are exempt from the infringement claims. Basically it turns the American idea of innocent until proven guilty to guilty until proven innocent. For more takes on this see a publisher’s comments, a venture capitalist’s and a cloud entrepreneur’s take.

What is the argument for these bills?

The argument made by those in support of the bills is that intellectual property theft is out of hand and is expedited by the web. Current controls such as the Digital Millenium Copyright Act do not offer a big enough stick to stop bad actors from sharing and spreading priated content and goods. Additionally there is an argument that counterfeiting goods not only results in losses to their original manufacturer, but in the case of food, drugs and even watches, can cause potential harm or inconvenience to the buyer if they are unaware of the subterfuge. Finally, there is an argument that the web is freaking out over the bills for no reason.

Where can I learn more?

For discussions of SOPA, check out this article from my colleague Mathew Ingram, this one offering a historical perspective from Ars Technica, or this fact sheet from the Electronic Frontier Foundation. You could also read the bill.

For the information on PIPA, read this article, this Reddit analysis, or the bill itself.

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Lamar Smith (R-Tx) said he intends to remove the part of the bill that calls on Internet Service Provider to block access to foreign websites. Critics had said the proposed rule would tamper with the architecture of the internet and that it mimicked the censoring practices of China and Iran.

The move came after Senator Patrick Leahy (D-Vt), in an apparent victory for SOPA critics, earlier in the day stated he would support removing the Domain Name System provisions from a Senate version of the bill. Here is part of Smith’s release:

Washington, D.C. – House Judiciary Committee Chairman Lamar Smith (R-Texas) today said he plans to remove a provision in the Stop Online Piracy Act (H.R. 3261) that requires Internet Service Providers to block access to certain foreign websites.

Chairman Smith: “After consultation with industry groups across the country, I feel we should remove Domain Name System blocking from the Stop Online Piracy Act so that the Committee can further examine the issues surrounding this provision. We will continue to look for ways to ensure that foreign websites cannot sell and distribute illegal content to U.S. consumers.

The SOPA soap opera is gearing up again after opponents used procedural maneuvers to fight the bill to a stand still in the House Judiciary Committee in December.

SOPA opponents, who include major technology companies and civil liberties advocates, notched another victory earlier this week when they pulled influential conservative House member Paul Ryan (R-WI) to their side. The campaign also gained momentum when both right and left wing blogs began to oppose SOPA, and after rumors began to appear that companies like Google (NSDQ: GOOG) and Facebook would shut down their websites in protest.

This is a second reversal of sorts this week for Congressman Smith. Yesterday, SOPA opponents produced evidence that he had used an unauthorized (or pirated) photo on his own campaign site.

See this post by Dyn for a helpful explanation of how the domain name system works and proposed blocking measures would work.

Vocal SOPA critics like TechDirt’s Mike Masnick aren’t convinced Senator Leahy’s pledge to pull the DNS provisions is sincere.

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