Silicon Valley Fights Limits on Exporting 'Encryption' Software

The technology wizards of Silicon Valley are eyeing a global market for computer software that protects the privacy of everything from electronic love letters to bank records. But one giant obstacle stands in their way - the US government.

US law-enforcement and intelligence agencies are blocking the export of this technology - a market the high-tech firms say could be worth $60 billion and 215,000 jobs by the turn of the century. The government's concern: Terrorists and criminals can use this software to shield their activities from American surveillance.

The software in question is encryption technology. It uses mathematical formulas to prevent unauthorized access to data stored in computers, including information sent across the globe via the Internet. The ability to send data securely is vital to the future of commerce on the Internet - everything from electronic banking to shopping with credit cards at "virtual" department stores.

All sides agree that computer security is vital. But encryption proponents argue that the need for a secure computer system outweighs all other concerns - even Washington's desire to uncover clandestine threats to national security. Unless computer users worldwide have access to encryption software, they argue, the privacy of messages and commercial transactions is threatened.

To firm up support for their position, encryption proponents are mobilizing an unusual political coalition - ranging from conservative libertarians to defenders of an unfettered cyberspace. At a forum this week at Stanford University here, bearded cryptographers with hair to their shoulders exchanged notes with members of Congress and computer executives. Part political rally and part teach-in, the event provided the backdrop for two prominent themes: American regulation will cost the industry billions in lost sales and jobs, and stand in the way of safeguarding corporate and individual privacy against government intrusion.

"We put locks on our doors so burglars can't get in," says Sen. Patrick Leahy (D) of Vermont. "We ought to put locks on our computer database."

Forum attendees are marshalling support for a bipartisan proposal to ease US export controls for encryption software. Currently, the United States allows the overseas sale only of relatively weak software - even though more-advanced encryption technology is readily available abroad. "The current export controls do not effectively keep cryptography out of the hands of terrorists," says Thomas Parenty, a computer-security expert at Sybase Corporation and former National Security Agency staffer.

The Silicon Valley crowd is also railing against the Clinton administration's idea for addressing privacy concerns. The government proposes to create a "key escrow" system, entrusting encryption keys (which can be used to unlock the software's mathematical codes) to a neutral third party.

The notion of the federal government holding a "key" to unlock all communications on the Internet enrages some on both the left and the right. Forum participants cited the FBI files that made their way into the White House basement as evidence of what might happen. "We do not want to let the Internet become the ultimate FBI background file," says Jerry Berman, executive director of the Center for Democracy and Technology.

"Key escrow is the biggest government power grab since income-tax withholding," says James Lucier, director of economic research at Americans for Tax Reform, a libertarian group.

Increasingly, cyberspace is forging these unusual alliances of left and right. "This is the cyber-economy, and those [ideological] labels are not current," says Eric Schmidt, chief technology officer at Silicon Valley's Sun Microsystems.

These forces are backing three bills aimed at prohibiting mandatory key escrow systems and relaxing export controls. Sponsors include Democratic Reps. Zoe Lofgren and Anna Eshoo, both from Silicon Valley, and GOP Sen. Conrad Burns of Montana.

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