• SUMMARY
• MOST RECENT DEVELOPMENTS
• BACKGROUND AND ANALYSIS
• Encryption, Computers, and Electronic Communications
• Clinton Administration Policy: Incremental Changes
• Interim and Latest Policies
• Industry Reaction
• Action in the 105th Congress
• Action in the 106^th Congress
• Issues
• Key Recovery
• Export Restrictions
• Domestic Use
• LEGISLATION

Fundamentally, the controversy over encryption concerns what access the government should have to encrypted stored computer data or electronic communications (voice and data, wired and wireless) for law enforcement purposes.

Encryption and decryption are methods of using cryptography to protect the confidentiality of data and communications. When encrypted, a message only can be understood by someone with the key to decrypt it. Businesses and consumers want strong encryption products to protect their information, while the Clinton Administration wants to ensure the law enforcement community's ability to monitor undesirable activity in the digital age.

The Administration's new policy promotes the use of strong encryption (greater than 56 bits) here and abroad, as long as it is designed with "key recovery" features where a "key recovery agent" holds a "spare key" to decrypt the information. The Administration would require key recovery agents to make the decryption key available to duly authorized federal and state government entities. Privacy advocates argue that law enforcement entities would have too much access to private information.

The Administration has been using the export control process to influence whether companies develop key recovery encryption products by making it easy to export products with key recovery, and difficult for those products without. Today there are no limits on domestic use or import of any type of encryption, so the Administration has tried to influence what is available for domestic use through export controls since most companies do not want to create two products--one for U.S. use and another for export. U.S. companies believe U.S. export policies hurt their market share while helping foreign companies that are not subject to export restrictions. Many businesses and consumer groups agree that key recovery is desirable when keys are lost, stolen, or corrupted, but want market forces--not government directives--to drive the development of key recovery encryption products. They also object to government having any role in determining who can hold the keys.

In September 1997, the debate shifted to add the prospect that the domestic use policy could change. FBI Director Louis Freeh raised the possibility of requiring encryption products manufactured in or imported into the United States to have key recovery features and opened the possibility that key recovery could be enabled by the manufacturer, not only the user. The House Intelligence Committee marked up H.R. 695 with an amendment similar to Freeh's views. The House Commerce Committee rejected a similar amendment.

All parties agree that encryption is essential to the growth of electronic commerce and use of the Internet, but there is little consensus beyond that. Seven bills on encryption or computer security were introduced in the 105th Congress. None of the bills was enacted, but similar legislation has been introduced in the 106^th Congress intended to foster widespread use of the strongest encryption, while the Administration continues to oppose such legislation.

On June 23 the House Commerce Committee approved H.R. 850 with amendments, one of which would make it a crime to fail to decrypt information upon court orders, raising opposition from privacy rights advocates. Also on June 23, the Senate Commerce Committee approved S. 798. On July 1 and 13 the House Armed Services Committee held hearings on H.R. 850, with testimony only from the Departments of Defense, Justice and Commerce. That Committee has scheduled a mark-up of the bill for July 21. On July 13 the House International Relations Committee approved its version of H.R. 850, with several amendments. On July 14 the House Intelligence Committee held its second hearing on H.R. 850, with testimony from the Attorney General, the Directors of the Federal Bureau of Investigation and the Drug Enforcement Administration, and the Deputy Secretary of Defense. All Committees of referral have until July 23 to report on the bill.

On June 21 the Department of Justice filed a petition with a federal appeals court for reconsideration in the Bernstein case, which on May 6 upheld a ruling that encryption source code is scientific expression protected by the First Amendment.

On July 8, the Foreign Broadcast Information Service reported that the German government had announced a more liberal encryption policy, and that its government would not limit free access to encryption products within Germany.

Encryption and decryption are procedures for applying the science of cryptography to ensure the confidentiality of messages. Technically, the issue discussed here is cryptography policy, but since encryption is the most controversial application of cryptography, it is the term used popularly and herein. (There are other methods of using cryptography to protect confidentiality -- steganography and "chaffing and winnowing" -- but constraints on the length of this issue brief do not permit discussion of them.) Also, for a discussion of the specific issues regarding medical records privacy and security, see CRS Issue Brief 98002, Medical Records Confidentiality, updated regularly.

Encrypting messages so they can be understood only by the intended recipient historically was the province of those protecting military secrets. The burgeoning use of computers and computer networks, including the Internet, now has focused attention on its value to a much broader segment of society. Government agencies seeking to protect data stored in their databases, businesses wanting to guard proprietary data, and consumers expecting electronic mail to be as private as first class mail, all want access to strong encryption products. Other users of electronic communications, for example cellular (wireless) phone users who expect calls to be as private as wireline calls, also are showing increased interest in encryption. While encryption is uncommon for telephone users today, the advent of digital telephone services (particularly Personal Communication Services, PCS, a digital form of cellular telephony) is expected to make encrypted voice and data communications over telephones more common.

Whether hardware- or software-based, an encryption product scrambles a message using mathematical algorithms. A corresponding key is needed to decrypt (unscramble) the message, and the key itself also may be encrypted. The algorithm is a series of digital numbers (bits), and the level of difficulty of breaking the code (its "strength") is usually represented by the number of bits in the key. (There are other factors that affect a key's strength, but in this debate, bit length is used as a benchmark.) Unencrypted data are referred to as "plaintext." Encrypted data are "ciphertext."

The National Institute of Standards and Technology (NIST), in conjunction with industry, developed an encryption standard using a 56-bit key in 1977. Called the Data Encryption Standard (DES), it is widely used today in the United States and abroad, often in an enhanced mode called "3-key triple DES" providing the equivalent of a 112- bit key. NIST is currently working to establish a new, stronger standard than DES referred to as the Advanced Encryption Standard (AES). The need for a stronger standard was underscored in June 1997 when DES was broken.

Encryption products are widely available today, including some that use 128-bit keys or more. Some 128-bit encryption software can be downloaded from the Internet. There are no limits on the strength of encryption products used in the United States, whether acquired here or imported. The only limits are on exports. This indirectly influences what is available domestically, however, since most U.S. companies are reluctant to develop two products, one for the U.S. market and another for export. For many years, reflecting the policies of the past three Administrations, the State Department did not allow general exports of encryption with more than 40-bit keys, except for banking and U.S.-owned subsidiaries (for a list of exceptions, see CRS Report 96-232). In December 1996, the Clinton Administration temporarily and conditionally raised the limit to 56 bits for easily exportable encryption products that do not have key recovery features (see box), and removed bit length limits entirely for products with key recovery. Breaking a message encrypted with a 40-bit key by "brute-force" (trying every possible combination of bits until the correct one is found) is not considered difficult. In January 1997, a 40-bit key was broken in 3.5 hours. In general, for each bit added to the encryption key, the time required to break the key doubles. Thus it takes 2¹⁶ (65,536) times longer to break a 56-bit key than a 40-bit key. Later in 1997, an ad hoc group broke 56-bit encryption over a period of five months. In July 1998, a group from the Electronic Freedom Foundation (an electronic privacy rights group) demonstrated the vulnerability of 40- and 56-bit keys by using a network of nearly 100,000 PCs on the Internet (for less than $250,000) that broke a 56-bit key in 22 hours, 15 minutes. Experts agree that the technology to break 128-bit encryption (commonly used for strong encryption) may not be developed for many years.

In May 1996, the National Research Council (NRC) released a comprehensive report entitled Cryptography's Role in Securing the Information Society (the "CRISIS" report). It stressed that national policy should make cryptography broadly available to all legitimate elements of society, promote continued economic growth and leadership of key U.S. industries, and ensure public safety and protection against foreign and domestic threats. Among the recommendations: key escrow is an unproven technology and the government should experiment with it and work with other nations, but not aggressively promote it now; export controls should be relaxed progressively, but not eliminated; and encryption policy issues can be debated adequately in public without relying upon classified information. The report also recommended that no law should bar the manufacture, sale or use of any form of encryption within the United States; and government should promote information security in the private sector. Importantly, the report underscored that utilization of strong encryption and law enforcement objectives can be mutually compatible.

Business and consumer groups consider 40- and 56-bit keys inadequate to ensure privacy and security. They oppose export encryption controls, or at least want increasingly higher limits on the bit length, without requiring key recovery features. They object to the government using the export process to force the development of key recovery encryption products, rather than allowing market forces to prevail, and to the government's role in determining who can serve as key recovery agents. These groups argue that strong encryption is needed, for example, to enhance the prospects for electronic commerce and other uses of computer networks. The willingness of consumers to buy goods via the Internet could be markedly affected by their beliefs as to whether credit card numbers will be secure. Businesses using computers for either internal or external communications need to ensure that competitors or other unauthorized parties cannot gain access to proprietary information. Privacy advocates argue that consumers should be assured that personal, medical and financial information transmitted by or stored in computers will be protected. They note that since 128-bit non-key recovery encryption is available worldwide either by downloading it from the Internet or buying it from foreign firms, the U.S. government already has lost control of influencing its availability. A September 1997 survey conducted by Trusted Information Systems http://www.tis.com/docs/research/crypto shows 656 foreign encryption products available from 29 countries (in addition to 963 U.S. products). Of the foreign products, 281 employ DES, demonstrating the widespread availability of strong encryption. An April 1998 report by the Economic Strategy Institute, Finding the Key, concluded that if the Administration's current policies remain in effect, the U.S. economy will lose $35-96 billion over the next 5 years (1998-2002) in lost encryption product sales; slower growth in encryption-dependent industries; foregone cost savings and efficiency gains from the Internet, intranets, and extranets; and indirect effects throughout the economy.

Supporters of en-cryption export controls agree that strong en-cryption is needed but insist that law enforce-ment and national secu-rity concerns demand that, when authorized, the government be able to intercept and decrypt electronic communica-tions or decrypt stored computer data where undesirable activity is suspected. Law enforce-ment and national se-curity officials want to ensure their ability to access the plaintext of the information. The method most often discussed is to obtain the key needed to unscramble encrypted information from key recovery agents. Hence, they support the use of strong encryption products as long as they include key recovery features, and want to limit the development of strong non-key recovery products. While conceding some strong non-key recovery encryption products already are available, they claim use of these products is not widespread. They argue that while the U.S. government cannot prevent the availability of strong non-key recovery encryption, at least it can be restrained, and future generations of encryption products (with key recovery) will displace those now in use.

Although the publicity surrounding the encryption debate so far has centered on access to stored computer data, electronic communications are equally important to the law enforcement and national security communities. An Internet message, for example, is stored data when it resides on a server or an individual's computer, but it is an electronic communication while it is being transmitted between computers. The encryption export regulations apply to products for encrypting other electronic communications, not just those between computers. Telephones, whether wired or wireless (such as cellular phones), are also covered, for example. The 1994 Communications Assistance to Law Enforcement Act (CALEA, often called the "Digital Wiretap" Act, P.L. 103-414) requires telecommunications carriers to ensure their equipment permits the interception of any electronic communication by law enforcement officials. If the communication is encrypted, law enforcement agencies want to ensure they can decrypt it, too. (CALEA requires the telecommunications carrier to provide decrypted information if the carrier itself is responsible for the encryption, but not if the customer has encrypted it.)

The Clinton Administration has strongly supported arguments by law enforcement and national security agencies that the government must be able to gain access to the plaintext of encrypted electronic data and messages when undesirable activity is suspected. While there is interest in international criminal activity, the Administration (notably the FBI) also wants to be able to monitor domestic criminal activity. U.S. policy has been to permit use of any strength encryption, without a key recovery requirement, in the United States. Rather than attempting to change that policy directly, the Administration has been using the indirect route of export controls to influence what types of encryption products are available, both here and abroad. However, in 1997 FBI Director Freeh raised the possibility of imposing domestic use restrictions. Although the Administration's policy did not change, Freeh's statement revealed tensions within the Administration.

For many years, the Clinton Administration sought to restrain the development of strong encryption products by not permitting export of better than 40-bit encryption (with a few exceptions). In the fall of 1996, it focused its policy on the need for strong encryption, as long as it includes key recovery features. The key recovery agent would be required to give the key to duly authorized law enforcement officials if undesirable activity is suspected (the three types most often cited are drug cartels, child pornographers, and terrorists).

The Clinton Administration has tried several approaches to promote "voluntary" use of key recovery agents. In April 1993, the Administration released its "Clipper chip" policy requiring emplacement of special encryption computer chips (called Clipper, an encryption device used for unclassified but sensitive government communications) into new government equipment for voice communications, with two government agencies, NIST and the Department of Treasury, jointly serving as key escrow agents (each holds part of the key). The Administration implemented this policy in 1994 for sensitive but unclassified voice communications in the federal government through a Federal Information Processing Standard (FIPS) called the Escrowed Encryption Standard (EES, or FIPS-185).

The Administration hoped that industry would accept the Clipper chip for its own use on a voluntary basis, but industry strongly objected to the key escrow provisions, particularly the fact that government agencies would hold the keys. In July 1994, the Administration agreed to work with the private sector to develop a "voluntary" key escrow system for data using "trusted third parties" as escrow agents instead of government agencies. This proposal is sometimes referred to by its detractors as "Clipper II."

Industry continued to object to the key escrow concept as well as the export controls, leading to the legislation discussed below. On May 20, 1996, the Administration released a draft paper on encryption policy, followed by a July 12 statement by Vice President Gore. Called "Clipper III" by its opponents, these documents outlined policy changes the Administration was considering. Among other things, the term "key recovery" replaced "key escrow" to emphasize the positive attributes of key escrow in providing a means to recover a key that is lost, stolen, or corrupted. Furthermore, "key escrow" had come to be identified with the concept of the government holding the key. Under the key recovery policy, a trusted third party or an organization itself can serve that function ("self escrow"), with some restrictions.

Interim and Latest Policies

Vice President Gore announced the changes on October 1, 1996. The associated executive order was signed November 15, and the Administration published an "interim final" regulation on December 30, to last two years, with the following details: continuation of no restrictions on domestic use or import of any encryption; no key length restrictions on export of encryption products if a key recovery system was used for that product; for 56-bit encryption products without key recovery systems, a one-time review was required before exporting the product, and within two years the exporter must have developed a key recovery system; export licenses were granted in 6-month increments to hold exporters to a timetable to ensure the key recovery systems were being developed (if not, the export license was not renewed); trusted parties served as key recovery agents, and in some cases, organizations were allowed to escrow keys themselves (self-escrow) if they met certain requirements; and commercial encryption was removed from the Munitions List and responsibility for commercial encryption export licensing was transferred from the State Department to the Commerce Department, with the Department of Justice serving an advisory role in commercial encryption export decisions. Foreign governments would apply to U.S. courts to gain access to keys, as they do when seeking other types of evidence. Over the two years, the Commerce Department granted some waivers for banking and financial services.

On March 4, 1998, Vice President Gore wrote to Senator Daschle restating the Administration's desire for a "balanced approach" to encryption policy and seeking a "good faith dialogue" to "produce cooperative solutions, rather than seeking to legislate domestic controls." The letter added that the discussions could also enable additional steps to relax export controls on encryption products. On April 15, Secretary of Commerce Daley announced the release of a new report on electronic commerce wherein he said that although the Administration's policy was the right one, its implementation was a failure. He urged both industry and government to strive harder to reach consensus on the issue.

In April 1998, Undersecretary of Commerce Reinsch commented at a Congressional Internet Caucus meeting that the Administration was no longer looking for a legislative solution to the encryption issue. In 1997, however, he had outlined key aspects of proposed legislation that was being drafted within the Administration. Following FBI Director Louis Freeh's testimony to the Senate Judiciary Committee on September 3, 1997, the existence of another administration draft bill became widely known that reflected Freeh's comments about the need for domestic use restrictions. Vice President Gore later stated that Freeh's comments reflected the FBI's view, but did not indicate a change in Administration policy. The House Intelligence Committee later approved an amendment to H.R. 695 similar to Freeh's position about the need for key recovery to be built into encryption products.

Later in 1998, the Administration made further concessions in encryption policy: in July it declassified two security algorithms used in the Clipper chip; on September 16 it announced plans to allow the export of 56-bit encryption products without requiring provisions for key recovery, after a one-time review, to all users outside the seven "terrorist countries." The new policy would apply only to U.S. companies in the finance, health care, insurance, and electronic commerce industries. Export of encryption products of any strength was permitted to 46 designated countries if key recovery or access to plaintext is provided to a third party. The Administration would also support an FBI proposal to establish a technical support center to help law enforcement keep abreast of encryption technologies.

On December 31, the Bureau of Export Administration of the Department of Commerce released new interim rules to implement the Administration's new export control policy initiative of September 16. The rule allows for the export of encryption commodities and software to U.S. subsidiaries, insurance companies, health and medical end-users, on-line merchants and foreign commercial firms. The final ruling is forthcoming.

Industry Reaction

Many participants in this debate agree that market forces will lead to the development of key recovery-based encryption products for stored data because companies and individuals will want to be able to replace lost, stolen or corrupted keys. The debate is over the government's role in "encouraging" the development of key recovery products through export regulations, and the access government wants to the keys. Also of concern is the government's inclusion of other electronic communications.

Many computer companies continue to argue against the Administration's policy, but some also are developing key recovery products that satisfy the policy. A group of companies formed the Key Recovery Alliance http://www.kra.org in 1996 to identify barriers to the development of marketable key recovery products. In April, 1998, Mr. Reinsch stated that the Department of Commerce had approved 50 applications that had been submitted together with commitment plans for key recovery. While continuing his strong opposition to the government's encryption policy, James Barksdale, Netscape CEO, credited that policy with successfully pushing industry to develop key recovery products.

On March 4, 1998, a group of more than 100 companies and organizations (some also members of the Key Recovery Alliance) formed the Americans for Computer Privacy (ACP) coalition http://www.computerprivacy.org. The group lobbies in favor of using strong encryption, against export controls on strong encryption, and against mandatory key recovery. Among the members are Netscape, Microsoft, Sybase, the National Rifle Association, the Law Enforcement Alliance of America, and the Business Software Alliance.

On another front, Network Associates announced in March 1998 that it had arranged for a Swiss company to develop its own software product using specifications in a book by Philip Zimmerman, the creator of Pretty Good Privacy (PGP). Network Associates bought Mr. Zimmerman's company in 1997. PGP is a 128-bit encryption product that does not have key recovery and hence could not be exported under the current regulations. (An older version is available via the Internet, however, which sparked a multi-year Justice Department investigation of Mr. Zimmerman that resulted in no action against him). Since the book may be exported, and the Swiss company received no technical assistance from Network Associates, the company believes no laws were broken. The Swiss product was sold by a Dutch firm under the PGP name. Opponents of encryption controls point to this as evidence that the U.S. government cannot control the spread of non-key recovery encryption.

In July 1998, as a possible compromise to the Administration, a group of software companies announced plans to develop a product, "private doorbell", to capture data that could be given to law enforcement before it is encrypted and sent over the Internet. While industry groups approve of the Administration's new encryption export policy, they argue that 56-bit encryption has been broken and that stronger encryption is now necessary. Furthermore, the Department of Commerce's rules could possibly render the policy ineffective in increasing their ability to export encryption products. Privacy rights groups argue that while the new policy may help big companies, it will not increase the availability or use of 56-bit or stronger encryption by individual users of Internet communications.

Three bills in the House and four in the Senate concerning encryption were introduced in the 105th Congress; none were enacted, although one has passed the House (H.R. 1903). Three (H.R. 695, S. 376, and S. 377) were versions of bills considered in the 104th Congress, generally favoring relaxed encryption export controls (S. 376 also deals with the issue of key recovery agents). Four new bills were also introduced. S. 909, reflected a philosophy closer to that of the Clinton Administration than the three previous bills. H.R. 1903 focused broadly on computer security issues and the role of NIST. H.R. 1964 focused broadly on computer privacy and security issues. S. 2067 was generally viewed as pro-industry and pro-privacy. Hearings were held by six House committees (Commerce, International Relations, Intelligence, Judiciary, National Security, and Science) and two Senate committees (Judiciary; and Commerce, Science, and Transportation).

On February 12, 1997, Representative Goodlatte introduced H.R. 695, the Security and Freedom Through Encryption (SAFE) Act. Originally referred to the Committees on Judiciary and International Relations, on June 26, it was additionally referred to the Committees on Commerce, National Security, and Intelligence. Hearings were held March 20 by Judiciary, reported May 22 (H.Rept. 105-108, Part I); May 8 by International Relations, reported July 25 (H.Rept. 105-108, Part II) ; July 30 by National Security, reported September 12 (H.Rept. 105-108, Part III); September 4 by Commerce, reported September 29 (H.Rept. 105-108, Part V); and September 9 by Intelligence, reported September 16 (H.Rept. 105-108, Part IV). A summary of the amendments adopted by the various committees, some of which significantly change the character of the original bill, is shown in the following table. The Rules Committee did not consider any versions for further action in the 105^th Congress.

On February 27, 1997, Senator Leahy introduced S. 376, the Encrypted Communication Privacy Act of 1997. S. 376 would prohibit mandatory use of key recovery but allow law enforcement to access the key under court order if key recovery is used; codify existing domestic use policy; give the Secretary of Commerce exclusive jurisdiction over commercial encryption exports; liberalize export controls; make it a crime to use encryption to obstruct justice; and establish liability protection and penalties for "key holders." The bill also established procedures for foreign governments to access keys or decryption assistance. The Senate Judiciary Committee held a hearing on key recovery on July 9, 1997.

Also on February 27, 1997, Senator Burns introduced S. 377, the Promotion of Commerce On-Line in the Digital Era (PRO-CODE) Act of 1997. The bill prohibited mandatory key recovery and established an Information Security Board as a forum to foster communication and coordination between industry and government. The bill codified existing domestic use policy and gives the Secretary of Commerce exclusive jurisdiction over commercial encryption exports. It liberalized export controls but required the publisher or manufacturer of encryption software or hardware to report to the Secretary of Commerce within 30 days after exporting a product on the product's encryption capabilities. The report would include the same information required under the December 30, 1996 regulations, but would be provided after export instead of as a condition of obtaining a license.

On June 16, 1997, Senators McCain, Kerrey, and Hollings introduced S. 909, the Secure Public Networks Act. The bill was referred to the Senate Commerce, Science, and Transportation Committee, which ordered it reported, amended, on June 19. The report was not filed, however. The bill codified existing domestic use policy; established penalties for use of encryption in commission of a crime; encouraged but does not require use of key recovery; established procedures for government approval of key recovery agents and certificate authorities; required key recovery agents, whether or not registered by the government, to disclose recovery information to lawfully authorized federal or state government entities; provided liability protection for key recovery agents acting pursuant to the Act; required that encryption products procured by the U.S. government or purchased with federal funds for use in secure networks be based on a "qualified system of key recovery", and that future encrypted communications networks established by the government or with the use of federal funds use qualified systems of key recovery; permitted export of 56-bit encryption products without key recovery if they meet certain conditions, and directed the President to annually review that limit and increase it for products where similar products are widely available for export from other nations; permitted export of any strength encryption product if it is based on a qualified key recovery system and meets certain other conditions; established an Information Security Board to make recommendations to the President and Congress on a variety of issues; and allowed the President to waive provisions of the bill for national security or domestic safety and security reasons. During markup, the committee adopted an amendment establishing an Encryption Export Advisory Board (EEAB) with four government (CIA, FBI, NSA and the White House) and four industry representatives to make recommendations on whether export exemptions should be granted for non-key recovery products stronger than 56-bits. Several other amendments also were adopted. On March 4, 1998, the bill was modified so that the EEAB would be composed of eight industry and four government representatives; the President could still veto the Board's decisions for national security reasons, with notification to Congress required; U.S. companies could export products with optional recovery features to approved end users; use of key recovery remained optional in the United States, but when it is used, the key could "only be obtained by the government by a court order subpoena"; and dual registration of certificate authorities and key recovery agents was eliminated.

The Senate Judiciary Committee requested sequential referral of S. 909, and held a hearing on July 9, 1997, where FBI Director Louis Freeh expressed reservations about the bill because it allowed widespread use of strong encryption within the United States regardless of whether it has key recovery. Freeh amplified his concerns at a September 3 hearing before the Subcommittee on Technology, Terrorism, and Government Information. He stated that he wanted U.S. manufacturers to be required to build key recovery into encryption products, and that imported encryption products also be required to include key recovery. He further stated that achieving the goal of immediate lawful decryption "could be done in a mandatory manner. It could be done in an involuntary manner. ..." He later added that he thought legislation should first include the requirement that key recovery be built into encryption products and "then take up the more complex discussion about how that's enabled...." He also stated that Internet Service Providers should be required to have the capability to decrypt communications immediately.

Senator Ashcroft et al. introduced S. 2067, the Encryption Protects the Rights of Individuals from Violation and Abuse in Cyberspace (E-PRIVACY) Act, on May 12, 1998. The bill was referred to the Senate Judiciary Committee. S. 2067 prohibited mandatory key recovery and codified existing domestic use policy. The bill prohibited federal or state agencies from linking the use of encryption for authentication or identification to the use of encryption for confidentiality purposes; required that the use of encryption products be voluntary and market-driven; authorized government agencies to purchase encryption products, but such products that use key recovery must be interoperable with commercial encryption products; outlined procedures for U.S. and foreign law enforcement agencies to access decryption keys or assistance in decrypting electronic communications or stored data; and established a National Electronic Technologies Center (NET Center) in the Department of Justice to help law enforcement keep pace with encryption technology. Use of encryption to obstruct justice would be a crime. The bill gave the Secretary of Commerce exclusive control over commercial encryption product exports; allowed export of generally available encryption products after a one-time review except for products designed or modified for military use; permitted unrestricted export of customized encryption hardware and software products if a comparable product is or will be available within 18 months from foreign sources; established an Encryption Export Advisory Board to determine whether comparable foreign products are commercially available; prohibited restrictions on encryption exports for non-confidentiality purposes; and maintained the President's authority to prohibit export of encryption products to countries that support international terrorism or to impose embargoes on exports to or imports from a specific country. The bill provided that the contents of electronic records in networked electronic storage be treated in law as though the record had remained in the possession of the person who created the record and that government entities may only access the contents of the record under circumstances specified in the bill. The bill set the circumstances under which the government may require a mobile electronic communication service to reveal the real-time physical location of a subscriber, and may obtain information from pen register and trap and trace devices.

Representative Sensenbrenner introduced the Computer Security Enhancement Act, H.R. 1903, on June 17, 1997. The bill amended and updated the Computer Security Act of 1987, enhancing the role of the National Institute of Standards and Technology (NIST). As passed by the House (H.Rept. 105-243), the bill required NIST to promote the use of commercial-off-the-shelf encryption products by civilian government agencies; clarified that NIST standards and guidelines are not intended as restrictions on the production or use of encryption by the private sector; provided funding for computer security fellowships at NIST; and required the National Research Council to conduct a study of public key infrastructures. A section requiring NIST to develop standardized tests and procedures to evaluate the strength of foreign encryption products was removed before passage. The bill passed the House September 16, and was reported without amendment by the Senate Commerce Committee October 13, 1998 (S.Rept. 105-412).

Representative Markey introduced H.R. 1964, the Communications Privacy and Consumer Empowerment Act, on June 19, 1997. The bill covered a range of computer privacy and security issues, and was referred to the Commerce Committee. With regard to encryption, section 203 of the bill codified existing domestic use policy, prohibited the government (federal or state) from conditioning the issuance of certificates of authentication or certificates of authority upon use of key recovery systems, and prohibited the government (federal or state) from establishing a licensing, labeling or other regulatory scheme that requires key escrow as a condition of licensing or regulatory approval. The bill also required the National Telecommunications and Information Administration (NTIA) to conduct a study on, inter alia, how data security issues affect electronic commerce, including identification of generally available technologies (including encryption) for improving data security. 

On February 25, 1999, Representative Goodlatte introduced a new version of SAFE (H.R. 850), similar to the bill introduced in the 105^th Congress, with a new provision directing the Attorney General to compile examples in which encryption has interfered with law enforcement. The bill was reported by the Judiciary Committee on April 27, and was referred jointly and sequentially to Committees on International Relations, Commerce, Armed Services, and Intelligence. Hearings were held by the Committees on International Relations (May 18) and Intelligence (June 9). The bill has gained 257 co-sponsors, with a majority of both Republican and Democratic leadership.

On April 14, Senators McCain, Burns, Wyden, and Leahy introduced S. 798, the Promote Reliable Transactions to Encourage Commerce and Trade (PROTECT) Act. The bill would immediately raise the maximum exportable key length of encryption products to 64 bits, direct the completion of the Advanced Encryption Standard (based on encryption of 128 or more bits) and decontrol its export by 2002, establish an Encryption Export Advisory Board that would allow export of generally available products over 64 bits, and prohibit domestic controls and mandatory plaintext access by government. The Senate Commerce Committee held a hearing on the bill on June 10.

While the computer industry, as well as privacy and consumer advocacy groups, generally favors both bills, H.R. 850 is considered more pro-industry because of its greater liberalization of encryption export controls. The Administration remains opposed to both bills, arguing that the current export restrictions are necessary to prevent the use of encryption by undesirable groups.

On April 21, Senator Leahy introduced S. 854, which includes provisions that promote the use of encryption by prohibiting government requirements for non-federal use of key recovery or plaintext access practices, by prohibiting federal agencies from requiring non-federal entities to use specific encryption products to receive services, by prohibiting federal encryption products that interact with commercial systems from interfering with the encryption capabilities of the commercial products, and prohibiting the disclosure of decryption assistance to foreign governments without a court order. The bill was referred to the Committee on the Judiciary.

On June 9, the House Intelligence Committee held a hearing on H.R. 850. The Senate Commerce Committee held a hearing on S. 798 on June 10. The House Telecommunications Subcommittee approved H.R. 850 (with amendments) on June 16, and forwarded the bill to the House Commerce Committee. On June 9, Representative Sensenbrenner introduced H.R. 2086, which included a provision directing the National science Foundation to undertake a study comparing the availability of encryption technologies in foreign countries to those subject to U.S. export restrictions. On June 10, George Washington University released a study on the "Growing Development of Foreign Encryption Products in the face of U.S. Export Regulations." Also in June, the Electronic Privacy Information Center released its second annual report (titled "Cryptography and Liberty") on encryption policies of foreign countries and international organizations, concluding that "in the vast majority of countries [both developed and developing] cryptography may be used, manufactured, and sold without restriction."

Key Recovery

Key recovery is the fundamental tenet of the Clinton Administration policy. The Administration wants law enforcement access to keys for encrypted data stored by computers, transmitted between computers, or other types of electronic communications. Not only does the Administration view this as critical for U.S. users, but it seeks creation of a global key management infrastructure (KMI) to ensure confidentiality for the growth of global electronic commerce, and monitoring undesirable activity (by terrorists, drug cartels, or child pornographers, for example).

Many opponents of encryption controls agree that key recovery has advantages for recovering a lost, stolen, or corrupted key, but believe market forces will drive the development of a KMI for stored computer data without government involvement. Less likely is a market-driven demand for key recovery products for electronic communications. In any case, opponents of controls insist that the government should have no role in choosing who holds the keys. They fear the government will have unfettered access to private files and communications, though the Clinton Administration stresses that proper legal authorization will be required. Liability protection for proper release of keys, and penalties for improper use or release of keys, is an important aspect of Administration policy.

Questions about technical vulnerabilities that could be introduced if key recovery is incorporated into computer systems were raised in a May 1997 report, The Risks of Key Recovery, Key Escrow, and Trusted Third Party Encryption, by an ad hoc group of crypto-graphers and computer scientists. They concluded that key recovery "introduces a new and vulnerable path to the unauthorized recovery of data" and the "massive deployment of key-recovery-based infrastructures to meet law enforcement's specifications will require significant sacrifices in security and convenience and substantially increased costs...."

The Administration notes that global agreement on the need for key recovery and a global KMI is essential to its policy and has been working with the Organization for Economic Cooperation and Development (OECD) to develop guidelines for a global KMI. On March 27, 1997, the OECD released those guidelines which include 8 principles. Principle 6 states that "national cryptography policies may allow lawful access to plaintext, or cryptographic keys, or encrypted data" (emphasis added). Hence, OECD neither endorsed nor rejected the concept of law enforcement access to decryption keys. The European Commission published a communication in October 1997 that noted the need for strong encryption to advance electronic commerce and expressed strong reservations about regulating encryption (by requiring key recovery, for example). Since then, Canada, Finland and France have announced a relaxation of their key recovery laws.

Export Restrictions

Using the export process to influence the type of encryption products that are available in the United States and abroad is one strategy of the Clinton Administration policy. The Administration points to threats to national security and public safety that would arise if criminals and terrorists used encryption that the U.S. government could not decrypt. Administration representatives argue that the National Security Agency (NSA), for example, has been able to thwart criminals and terrorists because NSA intercepted communications in time; if those communications had been encrypted with strong encryption, their task would have been much more difficult. NSA expresses particular concern about passing a law that does not require companies to notify the government of what encryption products are being exported and to whom. Others point to difficulties in stopping future attacks such as that in Oklahoma City in an era when terrorists could use strong encryption.

Opponents of the Administration's policy counter that the United States, through export controls, cannot prevent access to strong non-key recovery encryption by criminals and terrorists because it is already available elsewhere in the world. They further point out that the current policy of no restrictions on domestic use or import of encryption means that domestic threats would not be affected.

The Administration is using the export process to encourage companies to develop products with key recovery features. There are no limits on the strength of encryption products that can be exported if they include key recovery. Opponents of export controls object to the government essentially mandating the use of key recovery, arguing that foreign companies are not bound by such restrictions. They argue that customers who do not want U.S. law enforcement or national security agencies having access to decryption keys will buy encryption products from foreign suppliers. They insist that the U.S. government cannot control the availability of strong non-key recovery encryption products, since they already can be procured from foreign suppliers, or downloaded from the Internet. They assert U.S. policies simply ensure that U.S. companies will lose market share to foreign competitors and will not achieve the overall objective of assuring law enforcement access to encrypted information of criminal groups. They point out that drug cartels, for example, could develop their own encryption products rather than buying commercially available products that would allow governments to access the keys.

Proponents of export controls concede that some criminal groups may develop their own encryption, but insist that at some point they will have to interact with mainstream companies (such as banks or airlines). If the mainstream companies are using key recovery-based systems, this would provide an opportunity for law enforcement to access at least some of the groups' activities. They also point out that even though law enforcement agencies have been allowed to tap telephone lines for decades, criminals still use telephones because the infrastructure is already in place, easily used, and less costly than building an alternative system for their own use. As for foreign competition, proponents argue that although some strong non-key recovery products are available from the Internet or foreign suppliers, they are not widely used and some are not as strong as their advertisements claim.

Some cases involving encryption export controls have been the basis for legal action. One involves University of Illinois Professor Daniel Bernstein and his attempts to publish, both in print and on the Internet, the source code for his Snuffle encryption algorithm. The government argued that the export required a license under the Arms Export Control Act (AECA) and the International Traffic in Arms Regulations (ITAR) through which AECA is implemented. On April 15, 1996, U.S. District Judge Marilyn Patel ruled that computer source code is "speech" and protected under the Constitution. On December 18, she further ruled that ITAR represents an unconstitutional prior restraint on free speech. Following the December 30, 1996 shift in jurisdiction over commercial export products from the State Department to the Commerce Department, Bernstein's lawyers asked her to review the new regulations. On August 25, 1997 she ruled that the new regulations also violate the First Amendment. The government appealed the ruling, and on May 6, 1999, a federal appeals court upheld the ruling. An opposite ruling was made in March 1996 by Judge Charles Richey in a case involving Philip Karn. Mr. Karn was denied permission to export source code on diskette even though the source code had been published in a book and hence was in the public domain. The State Department designated the diskette as a "defense article" under AECA and denied its export. Judge Richey dismissed the complaint because the AECA does not permit judicial review of what is designated by the President as a "defense article." Mr. Karn appealed the ruling, but by the time the appeal was heard in January 1997, the export regulations had changed so the case was remanded back to DC District Court. On July 7, 1998, U.S. District Judge James Gwin ruled that an individual could not challenge encryption export restrictions on the ground that they abridge his right to free speech on the Internet. 

Domestic Use

The focus of the encryption debate shifted in September 1997 to include potential changes to domestic use policy. Current U.S. policy allows any type of encryption to be used in or imported into the United States. Administration concerns that attempting to change this policy would be unsuccessful was a factor in its choice of using export controls to influence what encryption products are available for domestic use. FBI Director Freeh's testimony to the Senate Judiciary Committee on September 3 (described above) heralded a shift in the debate toward the possibility of requiring that key recovery be built into products manufactured in or imported into the United States, and possibly enabled by the manufacturer, not only the user. The Administration asserts that its policy has not changed.

H.R. 850 (Goodlatte)
Security and Freedom Through Encryption (SAFE) Act. Similar to H.R. 695 from 105^th Congress, with changes including creating criminal penalties for the use of encryption to conceal criminal conduct, and directing the Attorney General to compile examples in which encryption has interfered with law enforcement. Introduced February 25, 1999; referred to Committees on Judiciary and on International Relations; referred to Subcommittee on Courts and Intellectual Property March 3; Committee mark-up March 24; reported by Committee (H.Rept. 106-117, Part I) April 27 without amendment; referred jointly and sequentially to Committees on Armed Services, Commerce, and Intelligence, for a period ending not later than July 2 (later extended to July 23); reported by Commerce Committee June 23 (H.Rept. 106-117, Part II) and by International Relations Committee July 13.

S. 798 (McCain)
Promote Reliable On-Line Transactions to Encourage Commerce and Trade (PROTECT) Act of 1999. Intended to promote electronic commerce by encouraging and facilitating the use of encryption in interstate commerce consistent with the protection of national security. Introduced April 14, 1999; referred to Committee on Commerce, Science, and Transportation; ordered to be reported June 23 without amendment.

S. 854 (Leahy)
Electronic Rights for the 21st Century Act. Intended to protect the privacy and constitutional rights of Americans, to establish standards and procedures regarding law enforcement access to location information, decryption assistance for encrypted communications and stored electronic information, and other private information, and to affirm the rights of Americans to use and sell encryption products as a tool for protecting their online privacy. Introduced April 21, 1999; referred to Committee on Judiciary.