Law proposed to regulate encoding devices

			   BY JOHN MARKOFF
			    New York Times
				9/6/97

The Clinton administration is circulating proposed legislation on
Capitol Hill that would, for the first time, impose strict controls on
the manufacture and use of technology that scrambles electronic data
for privacy reasons.

The proposal would prohibit the manufacture, sale, import or
distribution within the United States of any such technology unless it
contained a feature to permit immediate decoding of any message by
law-enforcement officials with a wiretap order from a court, known as
a trapdoor feature.

The law would also require telephone companies and Internet providers
that offer data-scrambling technology, called encryption, to have that
same feature.

Encryption technology has broad uses, including protecting information
related to purchases made over the Internet, making possible private
communication by telephone or computer and certifying the identity of
an individual, as well as in the transmission of military and
intelligence secrets. The government maintains that it needs access to
scrambled data for national security and law enforcement.

Currently, the only limitations on data-scrambling technology are
regulations governing the export of hardware and software containing
encryption features.  That has allowed U.S. citizens and companies to
develop and use any kind of encryption devices.

Under the administration proposal, although data-scrambling technology
would have to have the trapdoor feature, the users would not be
required to turn on the feature.

Critics of the proposal say the feature would simply be a first step
toward making such a surveillance capability a legal requirement.

And in testimony last week before the Senate subcommittee dealing with
the issue, Louis Freeh, director of the FBI, said that he would lobby
to make the trapdoor feature a legal requirement.

The new legislation represents a significant reversal for the
administration, which had until now insisted that it was opposed to
domestic encryption controls. It also appears to contradict the
administration's support for unregulated development of commerce on
the Internet, an approach emphasized last week in a speech by Ira
Magaziner, a senior presidential adviser, to a meeting of the American
Electronics Association in Silicon Valley.

The proposal comes at a time when encryption hardware and software are
becoming increasingly crucial for the development of secure electronic
commerce systems and for the protection of personal privacy on the
Internet.

Civil libertarians say the legislation would be a significant move
toward a complete ban on products that offer unbreakable
communications privacy.

``This is not the first step toward the surveillance society -- it is
the surveillance society,'' said Jerry Berman, executive director of
the Center for Democracy and Technology, a Washington advocacy group.

But government officials disputed the idea that requiring decoding
technology would necessarily mean the technology would be used.

``There is nothing about putting this enabling technology into law
that will inevitably lead to it being turned on,'' said Robert Litt, a
deputy assistant U.S.  attorney in the Justice Department's criminal
division.  ``From the law-enforcement point of view, this is a better
way to provide for our public safety.''

In 1993 the administration attempted to gain domestic adoption of
encryption technology by proposing standards that it hoped would be
adopted by industry, touching off a national debate. It announced
plans at that time to use an electronic trapdoor known as the Clipper
Chip.

That system, which has been built into some secure government
telephones, installed an electronic trapdoor allowing law-enforcement
officials to eavesdrop on telephone conversations if they obtained
special mathematical keys needed to decrypt the encoded telephone
signals.

The government later introduced a second data-scrambling device, known
as Fortezza, to be used for computer network communications. But the
government recently discontinued the manufacture of the personal
computer cards that contain the scrambling system.

Current eavesdropping systems call for the establishment of certified
third parties, known as escrow agents, that would maintain vast
computer data bases of keys -- long strings of numbers -- that could
be retrieved by law-enforcement officials with a court-authorized
wiretap order.

The administration is now moving in an effort to block legislation
that is to be considered this week by the House Intelligence and
National Security Committees.  That legislation would end government
control over cryptographic systems. The administration proposal is
being offered as an amendment to that bill.

Technology companies in the United States have generally opposed
government restrictions on the use of encryption technology. Moreover,
they have complained bitterly that they are at a competitive
disadvantage with companies in other nations that are not faced with
the same restrictions imposed by U.S.  export laws.

Under pressure from the administration, some companies, including IBM
and Hewlett Packard, have begun to develop key escrow software and
hardware.

Other major technology companies, like Microsoft Corp. and Sun
Microsystems, have resisted any restrictions.

``My paranoid meter has swung all the way over,'' said George Spix, a
Microsoft executive who focuses on encryption regulations. ``This
proposal frightens me.  It's pretty extreme.''
                                               

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