Magic Lantern is a keystroke logging program developed by the Federal Bureau of Investigation. Magic Lantern was first reported in a column by Bob Sullivan of MSNBC on 20 November 2001 , also by Ted Birdis of the Associated Press (Ted Birdis, Washington Post, 11/22/01 “FBI Develops Eavesdropping Tools”).
Unlike previous keystroke logger programs used by the FBI, Magic Lantern can reportedly be installed remotely, via an email attachment or “by exploiting common operating system vulnerabilities.” It has been variously described as a virus and a Trojan horse. It is not known how the program might store or communicate the recorded keystrokes.
In response to a Freedom of Information Act request filed in 2000 by the Electronic Privacy Information Center, the FBI released a series of unclassified documents relating to Carnivore, which included the “Enhanced Carnivore Project Plan.” Sullivan’s confidential source said that redacted portions of that document mention “Cyber Knight,”
“. . . a database that sorts and matches data gathered using various Carnivore-like methods from e-mail, chat rooms, instant messages, and Internet phone calls. It also matches files with captured encryption keys.”
Spokesmen for the FBI soon confirmed the existence of a program called Magic Lantern, denied that it had been deployed, and declined to comment further. 
The public disclosure of the existence of Magic Lantern sparked a debate as to whether anti-virus companies could or should detect the FBI’s keystroke logger. Birdis reported that at least some anti-virus companies, including Network Associates, maker of McAffee anti-virus products, had contacted the FBI following the press reports about Magic Lantern, to ensure its anti-virus software would not detect the program.  Network Associates issued a statement denying this kind of cooperation with U.S. legal authorities within a week, fueling speculation as to which anti-virus products might or might not detect government trojans. 
-  First press story about Magic Lantern, CNBC 20 November 2001
-  Early wire report (AP) 21 November 2001
-  AP story about Magic Lantern 22 November 2001
-  San Francisco Chronicle 28 November 2001
-  Wired article 29 November 2001
-  Villiage Voice 24 May 2002
Amanda So and Christopher Woo. “The Case for Magic Lantern: September 11 Highlights the Need for Increased surveillance” Harvard Journal of Law and Technology. v15 p521. (about the legal framework surrounding the use of keystroke loggers in law enforcement)