S. HRG. 105-627

PRIVACY IN THE DIGITAL AGE:

ENCRYPTION AND MANDATORY ACCESS

HEARINGS

BEFORE THE

SUBCOMMITTEE ON THE CONSTITUTION,

FEDERALISM, AND PROPERTY RIGHTS

OF THE

COMMITTEE ON THE JUDICIARY

UNITED STATES SENATE

ONE HUNDRED FIFTH CONGRESS

SECOND SESSION

ON

EXAMINING THE USE OF ENCRYPTION AND MANDATORY ACCESS IN

DIGITAL COMMUNICATIONS, FOCUSING ON PROPOSALS TO BALANCE

PRIVACY RIGHTS WITH LAW ENFORCEMENT CONCERNS

MARCH 17, 1998

Serial No. J-105-87

Printed for the use of the Committee on the Judiciary

U.S. GOVERNMENT PRINTING OFFICE

50-474 WASHINGTON : 1998

For sale by the U.S. Government Printing Office

Superintendent of Documents, Congressional Sales Office, Washington, DC 20402

ISBN 0-16-057514-1
COMMITTEE ON THE JUDICIARY

ORRIN G HATCH, Utah, Chairman

STROM THURMOND, South Carolina

CHARLES E. GRASSLEY, Iowa

ARLEN SPECTER, Pennsylvania

FRED THOMPSON, Tennessee

JON KYL, Arizona

MIKE DEWINE, Ohio

JOHN ASHCROFT, Missouri

SPENCER ABRAHAM, Michigan

JEFF SESSIONS, Alabama

PATRICK J LEAHY, Vermont

EDWARD M. KENNEDY. Massachusetts

JOSEPH R BIDEN, JR., Delaware

HERBERT KOHL, Wisconsin

DIANNE FEINSTEIN, California

RUSSELL D. FEINGOLD, Wisconsin

RICHARD J. DURBIN. Illinois

ROBERT G. TORRICELLI, New Jersey

MANUS COONEY, Chief Counsel and Staff Director

BRUCE A. COHEN, Minority Chief Counsel

SUBCOMMITTEE ON THE CONSTITUTION, FEDERALISM, AND PROPERTY RIGHTS

JOHN ASHCROFT, Missouri, Chairman

ORRIN G. HATCH, Utah

SPENCER ABRAHAM, Michigan

STROM THURMOND, South Carolina

FRED THOMPSON, Tennessee

PAUL CLEMENT, Chief Counsel

MICHAEL O'LEARY, Minority Chief Counsel

(II)

RUSSELL D. FEINGOLD, Wisconsin

EDWARD M. KENNEDY, Massachusetts

ROBERT G TORRECELLI, New Jersey

'(.Ol ?•/<>• 41
KFxu

CONTENTS

STATEMENTS OF COMMITTEE MEMBERS

Page

Ashcroft, Hon. John, U.S. Senator from the State of Missouri 1

Feingold, Hon. Russell D., U.S. Senator from the State of Wisconsin 3

Leahy, Hon. Patrick J., U.S. Senator from the State of Vermont 100

CHRONOLOGICAL LIST OF WITNESSES

Hon. Bob Goodlatte, a Representative in Congress from the State of Virginia 5

Robert S. Litt, Principal Associate Deputy Attorney General, U.S. Department

ofJustice, Washington, DC 11

Panel consisting of James J. Fotis, executive director, Law Enforcement Alliance of America, Falls Church, VA; Thomas Parenty, director, data and

communications security, Sybase, Inc., Emeryville, CA, on behalf of Americans for Computer Privacy; and Bill Wiedemann, founder and executive

vice president, Redcreek Communications, Newark, CA 23

Panel consisting of Kathleen M. Sullivan, professor, Stanford University

School of Law, Stanford, CA, on behalf of Americans for Computer Privacy;

Richard A. Epstein, professor, University of Chicago Law School, Chicago,

IL, on behalf of Americans for Computer Privacy; Cindy A. Cohn,

McGlashan and Sarrail, San Mateo, CA; and Tim D. Casey, chief technology

counsel, MCI Communications Corp., Washington, DC 42

ALPHABETICAL LIST AND MATERIAL SUBMITTED

Casey, Tim D.:

Testimony 91

Prepared statement "..,.!... 93

Cohn, Cindy A.:

Testimony 58

Prepared statement 61

974 F.Supp. 1288•Daniel J. Bernstein, plaintiff, v. United States

Department of State, et al, defendants, dated Aug. 25, 1997 64

Epstein, Richard A.:

Testimony 50

Prepared statement 52

Fotis, James F.: Testimony 23

Goodlatte, Hon. Bob:

Testimony 5

Article entitled, "Support for Encryption Is Less Than U.S. Claims, Study

Says," from the New York Times, dated Feb. 9, 1998 9

Prepared statement 10

Litt, Robert S.:

Testimony 11

Prepared statement 18

Parenty, Thomas:

Testimony 26

Prepared statement 28

Members List•Americans for Computer Privacy 34

Sullivan, Kathleen M.:

Testimony 42

Prepared statement 45

(III)
IV

Page

Wiedemann, Bill:

Testimony 36

Prepared statement 38

APPENDIX

QUESTIONS AND ANSWERS

Responses of Robert S. Litt to questions from Senators:

Ashcroft 105

Leahy 107

Responses of Kathleen M. Sullivan to questions from Senators:

Ashcroft 110

Leahy Ill

Responses of Richard A. Epstein to questions from Senators:

Ashcroft 112

Leahy 112

Responses of Tim D. Casey to questions from Senators:

Ashcroft 113

Leahy 114

Responses of Cindy A. Cohn to questions from Senator Ashcroft 115

ADDITIONAL SUBMISSION FOR THE RECORD

Prepared statement by Richard A. Epstein and Kathleen M. Sullivan on

behalf of the Americans for Computer Privacy 117
PRIVACY IN THE DIGITAL AGE: ENCRYPTION

AND MANDATORY ACCESS

TUESDAY, MARCH 17, 1998

U.S. SENATE,

SUBCOMMITTEE ON THE CONSTITUTION, FEDERALISM,

AND PROPERTY RIGHTS,

COMMITTEE ON THE JUDICIARY,

Washington, DC.

The subcommittee met, pursuant to notice, at 10:05 a.m., in room

SD-226, Dirksen Senate Office Building, Hon. John Ashcroft

(chairman of the subcommittee) presiding.

Also present: Senator Feingold.

OPENING STATEMENT OF HON. JOHN ASHCROFT, A U.S.

SENATOR FROM THE STATE OF MISSOURI

Senator ASHCROFT. Good morning, and welcome to our hearing

on Privacy in the Digital Age: Encryption and Mandatory Access.

We are holding this hearing to raise awareness about the important privacy interests that are at stake in the debate over

encryption policy. Many have approached this debate as if it were

just a technology issue or solely a law enforcement issue, but there

are important civil rights at risk as well.

To date, we in the Senate have heard a great deal about the

needs of law enforcement in the digital age and the risk that robust

encryption poses to the traditional methods employed by law enforcement. We have been told that law enforcement needs mandatory access to every individual's electronic messages and material.

We have even heard that we need a new fourth amendment for the

digital age.

At the same time, we have heard almost nothing about privacy

interests of law-abiding citizens. There has been an insistence that

we turn over the keys to our individual privacy to the Federal Government, but there has been little or no talk about safeguards or

privacy. Apparently, innocent citizens are expected to trust the bureaucracy not to abuse them, as the IRS has done by shakedown

audits or the FBI by handing over hundreds of sensitive files to political operatives in the White House.

The purpose of this hearing is to balance the debate by adding

the privacy interests of all U.S. citizens to the discussion. After all,

the fourth amendment to the Constitution is about balance, the

balance between the legitimate interests of law enforcement and

the privacy interests of the citizenry. The fourth amendment neither prohibits nor permits all searches. It recognizes the legitimate

(l)
2

needs of law enforcement by authorizing reasonable searches and

respects individual privacy by prohibiting unreasonable searches.

The Founding Fathers recognized the importance of this balance.

In no way did they favor the notion that a key to every home,

diary, bank account, medical record, business plan, or investment

should be provided to the Federal Government for use without the

individual's knowledge.

Some might suggest that the views of the Founding Fathers are

irrelevant to the debate on encryption because they could not envision this type of technology. But it is dangerous to underestimate

the Founding Fathers. Thomas Jefferson invented the wheel cypher

in the 1790's. This invention consisted of a spindle of 36 wooden

disks with letters carved on the outside. This simple devise would

provide robust encryption similar to that provided by the high-tech

software that the FBI is so concerned about. Nonetheless, neither

Thomas Jefferson nor any of the other Framers suggested that

encryption should be banned or that the fourth amendment should

be repealed. Instead, they opted for the balanced approach reflected

in the Constitution.

Such a balance is missing from the policies embraced by the administration and from the Senate Commerce Committee's bill. Moving forward with such proposals would be an act of folly, causing

severe damage to our constitutional guarantees. The FBI has argued that a system of mandatory access would make it easier for

law enforcement to do its job. Of course it would, but it would also

make things easier on law enforcement if we simply repealed the

fourth amendment.

None of this is to say that law enforcement does not have legitimate and important concerns. It does. We must work to provide

law enforcement with the necessary amount of access, but we must

do so in a manner consistent with our constitutional freedoms.

The issue of encryption policy also has broad implications for the

future of electronic commerce and the extent to which the United

States maintains a global electronic trade surplus. This is not

merely an issue for the technology sector, but instead is critical to

the future of digital commerce. Privacy is critical not just for personal information, but for financial and business information as

well.

Business Week has recently reported that 61 percent of adults

responded that they would be more likely to go online if the privacy

of their information and communications were protected. Simply

put, strong encryption means a strong economy. Mandatory access,

by contrast, means weaker encryption and a less secure, and therefore less valuable network.

Without the protection of privacy, the Internet is doomed to the

status of an international party line or an international broadcast

device that will never become a useful means of education, commerce, communication, or entertainment. This morning's hearing

will give us an important opportunity to explore these issues and

balance the debate.

After my colleague from Wisconsin has had an opportunity to

give an opening statement, we will hear from Congressman Goodlatte, who has championed the encryption issue in the House. Next,

Bob Litt of the Justice Department will provide the administra-
tion's perspective on these issues. Then we will hear from two panels of outside witnesses, including constitutional scholars and technology experts who will share their perspectives on the importance

of privacy in the digital age.

Fundamentally, this debate and this hearing is about the relationship of U.S. citizens to our Government. We must take steps

to balance their privacy rights and the legitimate concerns of law

enforcement. There is no greater challenge for concerned citizens

inside and outside Government than to ensure that our great constitutional traditions are enhanced, not compromised, in the face of

new technology. I hope that this morning's hearing can serve as a

modest first step in meeting that challenge.

I am pleased to call upon Senator Feingold from Wisconsin.

STATEMENT OF HON. RUSSELL D. FEINGOLD, A U.S. SENATOR

FROM THE STATE OF WISCONSIN

Senator FEINGOLD. Thank you, Mr. Chairman, for calling this

hearing on this very interesting and informative topic.

The importance of effective and trustworthy encryption cannot be

exaggerated. The use of encryption is likely to reach into virtually

every aspect of our lives. Indeed, encryption systems provide security to conventional and cellular telephone conversations, fax transmissions, local and widearea networks, personal computers, remote

key entry systems, and radio frequency communication systems.

Perhaps the most obvious application of encryption is its use to

protect Internet and electronic commerce. Reportedly, the Internet

and other like data networks will become the ideal way to conduct

business in the near future. The Internet obviously provides a

quick and efficient medium for the display of goods and services

and for the transfer of sensitive information, such as credit card

numbers and medical records and bank transactions.

In reality, however, the Internet will never become the mecca of

commerce if people do not trust that their transactions and communications conducted on the Internet will remain confidential. Who

would be willing to shop on the Internet if they thought there

might be a thief lurking out there on the Net waiting to steal his

or her Visa number?

Or consider even a more commonplace issue. Think of all the information you have stored in your computer at work or at home•

your taxes, your banking information, maybe even your first novel.

Or think of all the sensitive information you transmit via e-mail.

Encryption may be the only way to keep this information safe. In

short, if we are to ever realize the great commercial and communications potential of the Internet, we must have sophisticated and

effective encryption.

Unfortunately, however, Mr. Chairman, there is also a downside

to encryption. First, encryption can backfire. If the key to a system

is lost, a user can be locked out of his or her own data and communications. Or perhaps more importantly, there are significant public safety issues that are raised by the use, sale and exportation of

encryption.

As reported by the FBI:
Encryption has been used to conceal criminal activity and thwart law enforcement

efforts to collect critical evidence needed to solve serious and often violent criminal

activities.

The same technology that prevents a hacker from stealing your

credit card number can prevent a law enforcement officer, even if

she has properly obtained a court order, from decrypting illegal information. Indeed, the FBI reports that encryption has already

been used in a number of high-profile cases, including the Aldrich

Ames spy case, the Ramzi Yousef World Trade Center bombing,

and a child pornography ring where pornographic images of children were transmitted using commercially available encryption

technology.

Most encryption products in use today are nonrecoverable. That

means that there is a far lesser chance of a hacker breaching the

integrity of encrypted data, but it also means that law enforcement

cannot always obtain timely access to the plain text of encrypted

criminal-related and legally seized communication of information.

According to the FBI, court-authorized electronic wiretaps and

searchers are two of the most important law enforcement investigative techniques used to fight crime and prevent terrorism. Nonrecoverable encryption has the potential, therefore, to completely

frustrate these essential law enforcement tools.

Law enforcement is calling for a technological solution to the

problem of nonrecoverable encryption, whether that system be key

recovery or some other solution that allows them access to information so that they can effectively prevent and investigate crime. The

FBI, the National Sheriffs Association, the National District Attorneys Association, the International Association of Chiefs of Police,

and the National Association of Attorneys General, all strongly

advocate for an encryption policy that does not preclude them from

continuing to lawfully obtain information regarding criminal

activity.

Mr. Chairman, as you well pointed out, any solution that allows

for law enforcement to obtain such information, however, can also

compromise the integrity of an encryption system. If there is another key or a back door the FBI can use to conduct surveillance

or a search, there is another key or back door that a hacker can

use to steal someone's lawfully held personal information.

So we must return to my first point. If there is a flaw or a hole

in the confidentiality of an encryption system, users will not trust

the system and the development of electronic commerce and communications will be significantly retarded.

There is also, of course, as the chairman has pointed out, the

fundamental right to privacy that will be at least somewhat sacrificed. If an encryption user is denied the right to purchase nonrecoverable encryption or if she is required to place the key to her

system in escrow, that user is deprived of the right to keep her personal, lawful information completely confidential.

We as a society would be saying to this encryption user that although it is highly unlikely you will use encryption for any unlawful purpose, we are going to, ex ante, mandate that you forfeit a

portion of your privacy. Moreover, there are novel and serious

fourth and fifth amendment issues raised by a policy that would

compel the use of recoverable encryption.
We have to ask ourselves, should the Government be able to require that a person, prior to any evidence that this particular individual has or will commit a criminal act, be forced to supply the

Government with quick and easy access to her personal information on the off chance that this person commits an unlawful act in

the future, and would such a policy with regard to encryption be

a violation of the fifth amendment?

Or even more fundamentally, should an encryption user be mandated to trust the Government to use the recovery system properly?

How can the encryption user be sure that the key to her encryption

system will not be abused or fall into the wrong hands? As noted

by Thomas Jefferson in a statement to James Madison, any society

that would trade a little liberty to gain a little safety will deserve

neither and lose both.

So, in conclusion, Mr. Chairman, I believe it is quite obvious to

all of us that we have a difficult task before us. In the end, we

must reach a solution to this issue that balances the equally significant, important interests of law enforcement and personal privacy. I do not, however, think that these interests have to be mutually exclusive. Indeed, as I understand it, progress is being made

between the various parties toward a solution that may be acceptable to all. If everyone participates in a good-faith discussion of this

issue, I believe we can reach a solution together. And I think this

hearing is a very good step in that direction, so I thank the Chair.

Senator ASHCROFT. Thank you very much.

It is my pleasure now to introduce Congressman Bob Goodlatte,

who represents the Sixth District of the State of Virginia. He has

taken the lead role in the House on a number of technology issues

and has championed the Security and Freedom Through

Encryption, what is called the SAFE Act, H.R. 695.

Thank you very much for coming to share your views with the

committee, Representative Goodlatte, and if you would proceed.

STATEMENT OF HON. BOB GOODLATTE, A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF VIRGINIA

Representative GOODLATTE. Mr. Chairman, thank you very much

for holding today's hearing and for your leadership on this issue,

and thank you for affording me the opportunity to participate. I

very much appreciate both of you mentioning in your opening remarks Thomas Jefferson, of my State of Virginia, and his actions

and words regarding the issues of privacy and freedom which are

very much at stake in this issue.

I do have a prepared statement which I would ask that the committee accept for the record and I will speak extemporaneously

about this issue.

Senator ASHCROFT. It will be received. Thank you very much.

Representative GOODLATTE. The legislation that you referred to

which I have introduced in the House of Representatives has experienced a tremendous surge in the last 2 years as a result of the

increasing awareness of the public, the business community, and

privacy organizations regarding the lack of security in their electronic communications, whether it be cellular telephone communications or transactions occurring on the Internet.
6

When I first introduced this in the 104th Congress, we had about

45 cosponsors and a hearing was held late in that Congress on the

issue. During this Congress, that support has grown to 250 Members of the House of Representatives, a substantial majority of the

House. It has passed through now five House committees and is expected to go to the floor of the House sometime this spring.

The legislation has the support of a wide array of organizations,

everybody from the American Civil Liberties Union to the National

Rifle Association. There are not many bills introduced in Congress

that both of those organizations support, but I am proud to have

both of their organizations' support because of the concern across

the political spectrum about protecting the right to privacy of

American citizens.

It also has the support of the U.S. Chamber of Commerce, the

National Association of Manufacturers, the Online Bankers Association, the Direct Marketing Association, the National Retail Federation, a whole host of business organizations not only in the software and hardware computer industry, but across the wide array

of industries that do now and need to in the future utilize strong

encryption to protect their business transactions and those of their

customers and suppliers.

The legislation is vitally important because it does three things.

It protects the privacy of American citizens by assuring that they

will be able to use strong encryption in the future. It fights crime,

and I think we should not minimize the importance of this at all.

The FBI and others do have a legitimate concern about the misuse

of encryption, but they should not pursue a policy that stunts or

even prohibits the availability of strong encryption to the good

guys, to law-abiding citizens. This is something that will assure

people that their credit card on the Internet will be secure, their

medical records will be secure, their industrial trade secrets will be

secure.

But equally importantly, we should recognize that the lack of

strong encryption today makes many of the institutions in this

country vulnerable to those same criminal hackers or terrorists

that the FBI is concerned about, and we could face a crisis of almost unprecedented proportions sometime in the near future if we

do not change this Government's policy and promote access to

strong encryption. The New York Stock Exchange, the Chicago

Board of Trade, nuclear powerplants, the electric power grid of this

country will all be vulnerable at some point in the future if we do

not promote ever-increasingly strong use of encryption by the institutions that are so important to protect in this country.

The chairman of the House Subcommittee on Crime, Congressman Bill McCollum, of Florida, has cited studies finding that the

theft of proprietary business information costs American industry

from $24 billion to over $100 billion every year. The use of strong

encryption can prevent a great deal of that crime because most of

it occurs electronically.

Strong encryption also helps to fight terrorism. Without strong

encryption, we will face a threat to this country in the near future,

and as a result I think the best response to law enforcement raising these alarms about the misuse of encryption is to point out that

while we have concerns about that and want to help them address
those concerns, the appropriate way to do that is not to limit access

and create mistrust in encryption systems which I fear the proposals by the Director of the Federal Bureau of Investigation and others would create.

The Senator from Wisconsin's very fine remarks pointed out that

there have been those who are already using encryption for misdeeds, and he cited several of those. It is important to point out

that none of those criminals or terrorists filed their key with law

enforcement or with a third party to make the recovery of that key

possible to law enforcement. Nor would Muammar Qadhafi or Saddam Hussein or the Cali cartel do so in the future.

I think that this is the heart of the problem. What we will do

is we will keep encryption out of the hands of law-abiding citizens.

We will harm the industry that has achieved great success in our

country. About 75 percent of all of the software sold in the world

today is created in the United States. In the future, a great portion

of this software will have strong encryption attached to it. Virtually

any software used for data storage or data communication, which

is, if you think about it, most uses of software, will have strong

encryption attached to it. People will buy it in the United States

or they will buy it overseas. If we don't change our export control

laws as provided for in my legislation, they will be buying it overseas and we will greatly harm this industry.

The misuse of export control laws in the past has harmed other

American industries, and I fear greatly that a misunderstanding of

this issue and the continued perpetuation of the belief that

encryption, which is not even a tangible item•it is not a bomb or

a jet or a mainframe computer, but it is simply a mathematical algorithm, little l's and O's going through electronic wires•is not

suitable for a massive export control program.

I would also point out that my legislation does not eliminate ex-

{tort controls, as the administration has on some occasions claimed,

t allows the export of United States made encryption if those products are generally available in the marketplace, and the bill does

not allow the export of sensitive military or weapons technology or

the use of encryption attached to those technologies.

Relaxing the current export barriers will free U.S. industry to remain a leader in software, hardware, and Internet development.

And by allowing our computer industry to market the highest technology with the strongest security features available, America will

lead the way into the 21st century information age and beyond.

Hundreds of thousands, perhaps ultimately millions of American

jobs are at stake in our failure to promote and protect this industry, and that is the third purpose of my legislation. The legislation

does four things. It prohibits the administration from establishing

a mandatory key escrow or key recovery system. It is certainly not

at all harmful for businesses to want to have access to a key recovery system of their own choosing and utilize it in a manner that

they choose.

But I have grave constitutional concerns about the Government's

involvement, as the Senator from Wisconsin also noted, in telling

people in advance who have committed no crime, who are simply

law-abiding citizens•and we are talking here about virtually every

citizen of the United States•that they, in advance, must take an
8

action to put the key to their computer in a location where law enforcement can access it without their knowledge.

This is analogous to the requirement if the Senate or the House

or the Congress were to pass legislation requiring a U.S. citizen to

take the key to their home or their safe deposit box to a third party

or to the local police station and deposit it there, with the assurance that law enforcement will not use it unless they get a court

order. But if they do get a court order, they are going to take that

key, enter your home, enter your safe deposit box, without your

knowledge, and copy or take anything that they deem to be appropriate.

This is a major erosion of our fourth amendment protections

against search and seizure, for several reasons. First of all, this is

very much different than a wiretap where an individual is simply

listening in to an ongoing conversation. We are talking about a person's entire financial records, their entire medical records, their entire political involvement that they may choose to store in a computer being made accessible not only to law enforcement, but to

any hacker or criminal or terrorist who chooses to target that

third-party holder of the key or that Government holder of the key.

And this will become the Achilles heel of our electronic communications system if we put these keys out there where they will be vulnerable to a wide array of other people.

And, again, I commend the Senator from Wisconsin for pointing

out that this would be a major change in our constitutional law to

affirmatively require individuals in advance of any wrongdoing on

their part, even suspicion of wrongdoing on their part, to compromise their own security in this fashion.

And so I would urge the Senate to take action similar to the

progress we have been making in the House and to reject those

forms of this legislation that have been proposed by others that

turn the legislation on its head and promote these domestic key recovery systems which we do not have in this country today and I

pray we will never have in the future.

Mr. Chairman, I thank you for the opportunity to testify. I do

have a couple of additional items that I would ask be made a part

of the record. One is a study entitled The Risks of Key Recovery,

Key Escrow, and Trusted Third Party Encryption" prepared by a

very distinguished group of cryptographers and computer scientists, including some of those who devised the public-private key

encryption system that now allows us to have, when it is used

properly, security on the Internet and in other forms of electronic

communication; and, second, an article from the New York Times

entitled "Support for Encryption Is Less Than U.S. Claims, Study

Says." This article is about the efforts of our Government to convince other governments around the world that they should adopt

a similar policy regarding the escrowing of these keys and points

out, in my opinion, the overwhelming rejection of this by the European Union and other countries around the world, raising further

the question of how this system could ever be workable because of

the international nature of the Internet. Unless you had virtually

100-percent participation around this world, this system would not

be workable, and we have very, very much less than that kind of

support from our competitors and our allies around the world.
Senator ASHCROFT. The committee thanks you for those submissions and they will be received for inclusion in the record.

Representative GOODLATTE. Thank you, Mr. Chairman.

[The information referred to follows:]

[The study "The Risks of Key Recovery, Key Escrow, and Trusted

Third Party Encryption" is retained in committee files.]

[From the New York Times, Feb. 9, 1998]

SUPPORT FOR ENCRYPTION IS LESS THAN U.S. CLAIMS, STUDY SAYS

(By Jeri Clausing)

WASHINGTON.•The Clinton administration is losing its battle to increase international controls over how reliably computer data can be scrambled to insure privacy, according to a report scheduled to be released Monday by an independent research group.

The administration has been lobbying members of the European Union and other

industrialized nations to back its efforts to place controls on "strong encryption," a

technology for scrambling data so effectively that the code cannot be broken and the

content cannot be deciphered without a digital key.

Data encrypting is used increasingly to protect the privacy of financial transactions, medical records and business communications. The administration wants

the ability to descramble all encrypted messages to keep tabs on criminals.

In a report scheduled to be released Monday, the Electronic Privacy Information

Center, a Washington-based research group, says that its survey of 243 governments showed that the United States is virtually the only democratic, industrialized

nation seeking domestic regulation of strong encryption.

That finding directly contradicts the Clinton administration's assertion in congressional hearings that it has the support of most nations on this issue.

David Sobel, who directed the study by the research group for the Global Internet

Liberty Campaign, a civil-liberties advocacy group, said of the administration: "They

make the claim that other countries are accepting the U.S. position on this, then

in an attempt to make that a reality, our government launched a worldwide lobbying campaign on encryption policy."

William Reinsch, the undersecretary for export administration in the U.S. Commerce Department, denied that the study contradicted the administration's assertions. , .[ eri'

"All the administration has ever said is that there are more countries that go farther than we do," he said. "The study confirms that. And what I've gone on to say

is that in talks with other countries, they are moving in our direction. I don't think

the study itself does anything to contradict that."

The report comes as Congress prepares to renew what has become a contentious

debate on encryption policy. Currently, the United States controls only the export

of strong encryption. But the administration is pushing for a system that would give

a third party a set of spare keys to all scrambled data so that law enforcement agencies could gain easy access to otherwise uncrackable computer files. The Federal Bureau of Investigation is pushing for a mandatory key recovery system that would

guarantee the agency "immediate" access to the communications and data of suspected criminals.

Key recovery, as such systems are known, is opposed by virtually everyone outside

of law enforcement agencies, including groups as diverse as the American Civil Liberties Union and the National Rifle Association. Opponents argue that such systems

would be analogous to being required to leave copies of your letters at the post office

in case some day you were suspected of committing a crime.

The survey, based on direct questioning of officials in more than 200 nations and

territories, found that in the "vast majority of countries, cryptography may be freely

used, manufactured, and sold without restriction," according to the report.

"This is true for both leading industrial countries and for countries in emerging

markets," the report says. "We also noted that recent trends in international law

and policy suggest greater relaxation in controls on cryptography. There are a small

number of countries where strong domestic controls on the use of cryptography are

in place. These include Belarus, China, Israel, Pakistan, Russia, and Singapore.

There are an even smaller number of countries that are currently considering the

adoption of new controls. These include India, South Korea and the United States."
10

The report calls the policies of the United States "most surprising, given the fact

that virtually all of the other democratic, industrial nations have few if any controls

on the use of cryptography."

It goes on to observe that the administration's position "may be explained, in part,

by the dominant role that state security agencies in the U.S. hold in the development of encryption policy."

France is a notable exception to the international trend, having one of the most

restrictive encryption control policies in the world. But the movement there has

been toward easing those controls, according to the report. Last August, Industry

Minister Christian Pierret said that France would liberalize its encryption policies

to "allow French companies to fully enter the market of electronic commerce currently dominated by U.S. companies."

Sobel said that the study was conducted, in part, "to test the administration's representations about the state of play around the world on these issues, because they

have been pretty outspoken in congressional hearings in claiming that the U.S. policy is in line with what governments are inclined to do with respect to encryption

issues."

Reinsch defended those claims. "What we are finding in talks with government

after government is a recognition of the need to create key management infrastructure," he said.

Lynn McNulty, a retired associated director for computer security at the National

Institute for Standards and Technology who now is director of government affairs

for the RSA Data Security, a developer of commercial encryption software, said he

was not surprised by the survey's findings.

"I don't see any clear consensus out there in the world," McNulty said. "I think

the governments are equally divided on these issues and are not likely to try and

follow the U.S. in trying to go down the path of the U.S. in the key recovery

scheme."

Representative GOODLATTE. I would also like to thank the Center

for Democracy and Technology for their efforts to adopt a legislative program which can be accessed on the Internet and gives a

great deal of information to our citizenry about this issue and how

they can communicate with all of us regarding their concerns.

Thank you.

Senator ASHCROFT. Thank you.

[The prepared statement of Representative Goodlatte follows:]

PREPARED STATEMENT OF REPRESENTATIVE BOB GOODLATTE

Mr. Chairman, I would like to thank the Subcommittee for holding today's important hearing on the issue of encryption and privacy protection in the Information

Age. As you know, I have introduced legislation in the House•H.R. 695, the Security And Freedom through Encryption (SAFE) Act of 1997•to encourage the use of

strong encryption by all Americans.

This much-needed, bipartisan legislation, which currently has 250 House cosponsors and is likely to come to the House floor this Spring, accomplishes several important goals. First, it aids law enforcement by preventing piracy and white-collar

crime on the Internet. At a hearing during the last Congress on economic espionage,

the Chairman of the House Subcommittee on Crime•Bill McCollum of Florida•

cited studies finding that the theft of proprietary business information costs American industry from $24 billion to over $100 billion every year.

The use of strong encryption to protect proprietary business information would

prevent this theft from occurring, which is one of the reasons why I have introduced

the SAFE Act. If an ounce of prevention is worth a pound of cure, then an ounce

of encryption is worth a pound of subpoenas.

Strong encryption also helps fight terrorism. Without strong encryption, our nuclear power plants, air traffic control networks, financial markets, and national security infrastructures are completely vulnerable against those who seek to do America harm.

Only by allowing the use of strong encryption can we hope to make digital communications, on-line transactions, and America's national infrastructures safe and

secure. As the blue-ribbon National Research Council concluded, "If cryptography

can protect the trade secrets and proprietary information of businesses and thereby

reduce economic espionage (which it can), it also supports in a most important manner the job of law enforcement. If cryptography can help protect nationally critical
11

information systems and networks against unauthorized penetration (which it can),

it also supports the national security of the United States.

With the availability of strong encryption overseas and on the Internet, current

export controls only serve to tie the hands of American business. According to a

widely noted study in December 1995, failure to remove these export controls by the

year 2000 will cost our economy $60 billion and 200,000 jobs. The current export

controls are forcing America to surrender our dominance of the global marketplace.

The SAFE Act remedies this situation by allowing the export of generally available American-made encryption products. This is an important point which I would

like to make very clear•the bill does not eliminate export controls, as the Administration has argued on many occasions. It allows the export of U.S.-made encryption

if those products are generally available in the marketplace. The bill does not allow

the export of sensitive military or weapons technologies.

Relaxing the current export barriers will free U.S. industry to remain the leader

in software, hardware, and Internet development. And by allowing our computer industry to market the highest technology with the strongest security features available, America will lead the way into tine 21st century information age and beyond.

This bipartisan legislation enjoys the support of members ana organizations

across the entire spectrum of ideological and political beliefs. The SAFE Act enjoys

this support not only because it is a common-sense approach to solving a serious

problem, but also because ordinary Americans' privacy and security is being assaulted by this Administration.

The Administration continues to enforce antiquated encryption policies that

threaten the personal privacy of law-abiding Americans. The Administration's approach, commonly called "key recovery" encryption, would require computer users

to affirmatively give the government access to their private information and communications without their knowledge.

In addition to the feasibility questions surrounding the Administration's policy, its

approach raises serious constitutional questions as well. First Amendment guarantees of freedom of speech, Fourth Amendment protections against unreasonable

searches and seizures, and Fifth Amendment rights against self-incrimination are

all implicated by the Administration's proposals. I should note as well that the Administration's current export control scheme has already been ruled unconstitutional by one federal court

The Administration is proposing an Industrial Age solution to an Information Age

problem. The SAFE Act, on the other hand, prevents the Administration from placing roadblocks on the information superhighway by prohibiting the government

from mandating a back door into the computer systems of private citizens and businesses. Additionally, the SAFE Act ensures that all Americans have the right to use

any security system they choose to protect their confidential information, while applying criminal penalties to those who use encryption to hide evidence from law enforcement or cover up federal felonies.

With millions of communications and transactions occurring on the Internet every

day, American citizens and businesses must have the confidence that their private

information and communications are safe and secure. That is precisely what the

SAFE Act will ensure.

Mr. Chairman, thank you for holding today's important hearing and for allowing

me the opportunity to testify. I would be happy to answer any questions you or the

other members of the Subcommittee may have.

Senator ASHCROFT. It is my pleasure now to introduce Bob Litt,

who serves as Deputy Assistant Attorney General at the Department of Justice. He has agreed to join us today to present the administration's views on encryption, and we are very pleased to welcome you and to thank you for being willing to make this appearance.

Mr. Litt.

STATEMENT OF ROBERT S. LITT, PRINCIPAL ASSOCIATE DEPUTY ATTORNEY GENERAL, U.S. DEPARTMENT OF JUSTICE,

WASHINGTON, DC

Mr. LlTT. Thank you, Mr. Chairman. In the interest of completeness, I should let you know that my position is now Principal Associate Deputy Attorney General, which is one word longer, and my

kids can't figure out what the difference is.
T

12

Senator ASHCROFT. Well, thank you, thank you. Principal Associate Deputy Attorney General?

Mr. LITT. That is correct.

Senator ASHCROFT. Great.

Mr. LITT. Mr. Chairman, members of the subcommittee, thank

ou for the opportunity to appear today and present the views of

aw enforcement on the important issue of encryption. And I want

to emphasize that the administration's goals on encryption are

shared not only by the Department of Justice, but also, as Senator

Feingold mentioned before, by the National Association of Attorneys General, the National District Attorneys Association, the

International Association of Chiefs of Police, and the National

Sheriffs Association. There is a very strong law enforcement consensus on this issue.

I would like to begin by clarifying the Clinton administration's

recent initiatives on encryption. Two weeks ago, we began an intensive dialog between industry and law enforcement. Our goal in

this process is to bring the creative genius of America's technology

leaders to bear in trying to create and develop technical, marketsavvy solutions that will enable Americans to realize the benefits

of strong encryption while continuing to protect public safety and

the national security.

We are not wedded to any particular technical approach. We are

confident that American industry can come up with creative solutions. I am pleased to report that in our initial discussions with

leaders of a number of high-tech companies, we have found them

willing to work cooperatively with us in recognizing the important

national security and public safety interests that are at stake. We

think that a constructive dialog is far better than a legislative donnybrook.

Let me say in passing, by the way, that I have a much more complete written statement that I would ask to be part of the record.

I am just going to summarize that orally.

Senator ASHCROFT. We thank you for your willingness to summarize and we would gratefully receive for the record your written

statement.

Mr. LITT. Thank you, Mr. Chairman.

I do want to be clear that law enforcement strongly supports the

use of strong encryption. We want to do what we can to encourage

it. As Representative Goodlatte and as you both pointed out,

encryption has important benefits for law enforcement and for individual privacy. Indeed, the role of the Department of Justice includes protecting privacy and intellectual property through enforcement of a number of statutes that the Congress has passed, such

as the Economic Espionage Act that was passed by the last Congress.

Strong encryption is also essential to ensuring the growth and

development of electronic commerce. But unbreakable encryption

also presents a clear danger to our safety as individuals and as a

nation. If unbreakable encryption becomes widespread, law enforcement will lose the benefit of valuable tools that are essential to protect public safety and the national security.

Court-ordered wiretaps which the Congress has authorized would

become unintelligible. Information stored on computers by crimi-
13

nals which we can seize today pursuant to a warrant would become

unreadable. Financial transactions of money launderers would become untraceable. In short, our ability to investigate and prosecute

criminals such as drug dealers, terrorists, child pornographers, con

artists, and many others would be greatly compromised.

Mr. Chairman, these are not theoretical concerns. When I was a

Federal prosecutor, I found that the little black book that a drug

dealer kept was often invaluable evidence that we could use to convict him and his confederates. We were able to seize these by a variety of legal and fully constitutional means. Today, that little

black book might be one of the new electronic pocket organizers.

Tomorrow, that pocket organizer might be encrypted and we would

be absolutely unable to use that information.

I cannot emphasize for you strongly enough that as encryption

becomes more and more widely available, the public safety and the

national security will be endangered unless we act responsibly.

Some people have suggested that law enforcement can actually

break any encryption, that we have magic super computers hidden

away somewhere that can do this. As I am sure you know, that is

not so.

It was widely reported that one group managed to break a message that had been encrypted with 56-bit DES. However, they

needed 14,000 computers to do it and it took them 4 months to

decrypt a single message using those 14,000 computers. Mr. Chairman, tell the Jefferson City Police when they are wiretapping a

kidnapper to try to save somebody's little girl's life that all they

have to do is round up 14,000 computers and get them to work for

4 months to decrypt each conversation that they are intercepting.

I think that gives a sense of the magnitude of the problem that we

are facing.

I think that this has been set up to a certain extent as a false

dichotomy. Either we are going to have encryption or we are not

going to have encryption, and the suggestion has been made that

law enforcement doesn't want people to have encryption. Mr.

Chairman, there is a way that we can both guarantee Americans

the benefit of strong encryption and preserve law enforcement's

ability to protect the public, and that is through encryption that

provides a means for law enforcement to obtain the plain text of

encrypted data under appropriate lawful authority.

This kind of technology will let Americans use strong encryption

to protect their personal information and American business use

strong encryption to protect their business secrets. But it will also

let American law enforcement protect American citizens and businesses from terrorists and criminals. One way to do this would be

through what is called key recovery, providing to a trusted third

party a copy of the information needed to decrypt data. But I want

to emphasize that we are not wedded to that particular solution to

the problem.

Mr. Chairman, my written statement addresses at some length

the constitutional issues that plain text recovery technology raises

and I would like to very briefly summarize what the Department's

views on these issues are. But, first, I would like to mention a couple of important caveats.
14

First, I want to emphasize that the administration is not seeking

mandatory domestic controls on encryption. Our goal, as I said before, is to work voluntarily with industry. It is somewhat difficult

to discuss in the abstract the constitutionality of mandatory plain

text recovery systems, since they could take many possible forms

and different constitutional results might follow from different regimes.

The second point I want to make is that the issues raised by

encryption are novel ones. The spectacular growth of the digital

world has created many confounding legal issues that the Congress, the courts, the administration, and our society at large are

wrestling with. But with these caveats, it is our best judgment that

a mandatory plain text recovery regime, if appropriately structured

and with appropriate safeguards, could comport with constitutional

doctrine.

We believe that a plain text recovery regime could comply with

the fourth amendment as long as the standards for seeking evidence by warrants or otherwise were not lessened; that is to say,

today we need probable cause to obtain a search warrant to obtain

your business records. We should still need the same probable

cause to obtain those records in the future if they are encrypted.

And let me say in this regard that we are not talking about a

lessening of privacy under this regime. We are talking about an increase in privacy because people's records that today are freely

available and unencrypted would be encrypted. The Government is

still going to require the same kind of legal process to obtain those

records.

We also believe that a plain text recovery regime could comply

with the fifth amendment's prohibition against compulsory self-incrimination. For example, if manufacturers of encryption products

were required to keep a copy of encryption keys for products they

sold, there would be no testimonial compulsion exercised against

the user of the encryption if the Government later obtained that

key pursuant to lawful process. Even if the user is himself required

to deposit a copy of the key with a third party, we believe that

under the Supreme Court's cases this would not violate the fifth

amendment, as I explained in more detail in my written statement.

Finally, we don't believe that mandatory plain text recovery

would violate the first amendment. While the arguments here are

somewhat complex and analogous questions are before the courts

now in the Karn and Bernstein cases involving export controls, at

bottom we do not believe that an encryption program itself is

speech, and we do not believe that the sorts of restrictions on

encryption that we are talking about would impermissibly limit

anyone's ability to speak.

Mr. Chairman, the suggestion has been made that because plain

text recovery schemes could be abused by people, therefore they are

unconstitutional. But that same analysis could be applied to search

warrants or wiretaps or any one of a number of other technologies.

I want to conclude by emphasizing that law enforcement does

recognize that we need a balanced approach in this area. We know

that we can't get everything that we would want in our wildest

dreams. There will always be those who use unbreakable

encryption products, and some criminals will go free as a result.
15

We recognize, however, that we have to accept these limitations because there are other interests involved as well and that we need

to balance those interests. Our approach does that. As I said, it recognizes the importance of both law enforcement and individual privacy and protects both.

And I want to make one last point. The Framers of our Constitution did not provide for an absolute right of privacy. They recognized in the Constitution that there were circumstances in which

it is appropriate for law enforcement to obtain information even

when an individual wants that information to be kept private. We

can go to a judge and get a search warrant or a wiretap order upon

probable cause.

Decisions as to where that line should be drawn are political and

legal decisions, not scientific or business ones. They should be

made by Congress and the courts, not by programmers or marketers. Policy should regulate technology. Technology should not dictate policy. There is no question that, one way or another, the law

is going to have to take account of the changes that are brought

about by encryption.

Mr. Chairman, I appreciate this opportunity to express the views

of law enforcement on this important issue and I would be pleased

to answer at this time any questions that you have.

Senator ASHCROFT. Thank you, Mr. Litt. Is it illegal to use

encryption now in the United States?

Mr. LITT. NO, sir.

Senator ASHCROFT. So that any level of encryption is now legal

for people to use in this country?

Mr. LITT. That is correct.

Senator ASHCROFT. And your view is that we need to restrict

that?

Mr. LITT. No, sir. What we are saying is we want to work with

industry cooperatively. We are not looking for any kind of mandatory controls or restrictions domestically at this time. Our hope is

that through conversations with industry and discussions where we

lay out the problems that we think need to be solved and we invite

industry's attention and participation in solving those problems

that we will get a technological solution to these problems.

Senator ASHCROFT. If a person is required by Government to

hand over a key, would that be a seizure that would trigger the

fourth amendment, in your view?

Mr. LITT. For the Government to obtain the key, yes, that would

be a seizure that would implicate the fourth amendment, yes, sir.

Senator ASHCROFT. If the Government took a set of my files and

copied them all and returned the originals, but promised not to

make any use of the files unless and until agents demonstrated to

a magistrate that they had probable cause to analyze the files and

that the files were relevant, would the original seizure pose any

fourth amendment concerns, in your view?

Mr. LITT. Yes, it would.

Senator ASHCROFT. In the handful of cases in which encryption

is encountered, how many times has the case been broken using

traditional investigative measures? Do you know?
16

Mr. LITT. I can't get you that information specifically, but I do

know that there are cases that we have had, Mr. Chairman, where

we have encountered unbreakable encryption.

Senator ASHCROFT. IS it your view that if the Government requires you to deposit the key with a third party instead of with the

Government that it obviates or somehow deletes the triggering of

the fourth amendment?

Mr. LITT. We think, Mr. Chairman, that if Congress were to pass

a regime that required, that it could be structured so as to comply

with the fourth amendment, yes.

Senator ASHCROFT. Could you explain how it is that if the Government requires you to give a key to some third party that it

could avoid that problem?

Mr. LITT. Because we would still be required to meet the traditional standards of probable cause or whatever else was imposed

in the particular situation for the Government in order to obtain

any of the information that the person has. We would not be affecting the underlying constitutional standard that limits the Government's ability to get information or evidence from individuals.

Senator ASHCROFT. IS it your view that the fourth amendment

only applies to protect a citizen from an unreasonable search by the

Government?

Mr. LITT. Yes, sir.

Senator ASHCROFT. What does law enforcement do when it intercepts a telephone conversation on a wiretap, but both parties are

speaking in a code that appears to be gibberish?

Mr. LITT. We try to decode it, and we encounter frequently in

narcotics cases that people do speak in codes.

Senator ASHCROFT. Am I correct that if agents have obtained a

warrant to search a home and they find a computer, you believe

they should be allowed to have the key to all the stored data only

upon a showing of relevance?

Mr. LITT. I am not sure I understand the question.

Senator ASHCROFT. Am I correct that if agents have obtained a

warrant to search a home and they find a computer, you believe

they should be allowed to have the key to all the stored data only

upon a showing of relevance?

Mr. LITT. I believe that the ability to obtain the key should depend upon the ability to obtain the underlying data. If we have

probable cause to seize particular data on that computer, we should

be able to obtain the key to decrypt it.

Senator ASHCROFT. What is that showing going to look like,

given that the proceeding will be ex parte and the Government will

not know the content of the encrypted information?

Mr. LITT. Ordinarily, in a situation such as you suppose, we

would have gone to a magistrate and we would have presented information to the magistrate that would establish probable cause

that a crime had been committed. Let us say that this person was

a pedophile and had been exchanging communications trying to

lure 13-year-old children to meet with him for sexual purposes. We

would have established probable cause through a variety of other

evidence to believe, No. 1, that that crime had been committed and,

No. 2, that evidence of that crime would be found on the computer.
17

We have to meet that standard before we can get a warrant for the

computer.

Senator ASHCROFT. SO you would require an additional showing

of probable cause to the magistrate to enter the computer?

Mr. LITT. I don't know what you mean by "additional." We have

to show probable cause to believe that there is evidence on that

computer in order to obtain a warrant to search the computer. That

is true today, yes, sir.

Senator ASHCROFT. Senator Feingold.

Senator FEINGOLD. Mr. Litt, there is•I think you already

cleared this up, but some confusion between the White House and

where the FBI stands on this issue. As I understand it, the FBI

appears to be calling for a key recovery system for domestic

encryption, but the Vice President recently sent a letter to Senator

Daschle noting, The administration is not wedded to any single

technological solution. The administration believes that the best

approach is to pursue a good-faith dialog over the coming months

between industry and law enforcement which can produce cooperative solutions rather than seeking to legislate domestic controls."

Do I understand you to say that the administration position is

different, then, from the FBI on this?

Mr. LITT. No. I think the administration's position, including law

enforcement's position on this, is as set forth by the Vice President.

I think that we are all looking at this point not to impose any mandatory legislation, but to work cooperatively with industry to find

whatever solutions are available out there.

Senator FEINGOLD. And you are representing that that is the

FBI's position as well?

Mr. LITT. Yes, sir.

Senator FEINGOLD. OK. With regard to some of the issues the

chairman was raising, is it your position that law enforcement

should have to attain the same court order or warrant to conduct

a wiretap or to seize encrypted material as it would to gain access

to any other type of information?

Mr. LlTT. If I understand your question correctly, the answer is

yes. In the wiretap context, we would have to meet the very high

various evidentiary thresholds that apply before we can get a wiretap and we should be able to intercept the communication, whether

it is encrypted or not, if we can meet those thresholds.

Senator FEINGOLD. And then do you support the amended

McCain-Kerry bill that would also require law enforcement to obtain an additional court order declaring that the encrypted material is relevant?

Mr. LITT. I have not had an opportunity to review the amended

Kerry-McCain bill. Obviously, we think that Congress has the

power to impose limitations for the greater protection of privacy

than would be required by the fourth or fifth amendments, and we

would certainly be prepared to work with you to establish any such

precautions that would, on the one hand, not impose undue burdens on law enforcement, but also would give people the kind of assurances that they need that these are, in fact, going to be adequately protected.
18

Senator FEINGOLD. I appreciate that answer. Can you tell me

about any cases in which encryption has frustrated law enforcement's efforts to obtain unlawful information?

Mr. LITT. I do know•and I obviously can't go into a lot of detail

here, but I do know that there have been hacker cases, one in particular that I am aware of, where a hooker who was breaking into

Government computers stored encrypted data on his machine and

as a result of that we were unable to ascertain all the data that

he had downloaded or what he had done with it. There are also

narcotics conspiracies where we are getting wiretap information

and we are starting to occasionally see encryption in those that

frustrates us from learning who the other conspirators are, when

they are bringing drugs in, and so on.

Senator FEINGOLD. Thank you, Mr. LITT. Mr. Chairman, I have

to go to the beginning of the markup on the Budget Committee for

the budget, but I really do appreciate the opportunity to participate

in the hearing to this point and I look forward to working with you

on this issue, Mr. Chairman.

Senator ASHCROFT. Thank you, Senator Feingold.

I thank the witness for coming, and let me see if I can•I want

to thank the Principal Associate Deputy Attorney General. [Laughter.]

Mr. LITT. Thank you, Mr. Chairman.

Senator ASHCROFT. I appreciate your remarks and your contribution to the committee. Thank you.

[The prepared statement of Mr. Litt follows:]

PREPARED STATEMENT OF ROBERT S. LITT

Thank you, Mr. Chairman and members of the Subcommittee, for this opportunity

to discuss with you the important and complex issue of encryption. Encryption holds

the promise of providing all of us with the ability to protect data and communications from unlawful and unauthorized access, disclosure, and alteration. Moreover,

encryption can help prevent crime by protecting a wide range of data as we and our

valued information become more and more connected to each other and to potential

adversaries through the spread of information networks. As a result, the law enforcement community supports the development and widespread use of strong

encryption products and services.

At the same time, however, the widespread use of unbreakable encryption presents a tremendous potential threat to public safety and national security. Criminals and terrorists have already begun using encryption to conceal their illegal activities and to defeat important law enforcement and national security objectives.

In developing our Nation's encryption policy, we must carefully balance the many

different interests that the policy will affect. In seeking that balance, it is essential

to understand both the promise and the peril that this technology holds, and to

identify responsible ways forward that advance all of the competing interests.

I want to begin, Mr. Chairman, by clarifying the Clinton Administration's recent

initiatives regarding encryption. For some time, the Administration's position has

been to encourage the design, manufacture, and use of encryption products and

services that allow for the plaintext of encrypted data to be recovered. The Administration's approach has in fact found support in the marketplace, in part because

businesses and individuals need a routinely available method to recover encrypted

information. For example, a company might find that one of its employees lost his

encryption key, thus accidentally depriving the business of critically important and

time-sensitive data. Or a business may find that a disgruntled employee has

encrypted confidential information and then absconded with the key. In this type

of case, a data recovery system promotes important private sector interests. Indeed,

as the Government implements encryption in our own information technology systems, it also has a business need for plaintext recovery to assure that data and information that we are statutorily required to maintain are in fact available at all

times. For these reasons, as well as to protect public safety, the Administration has

been affirmatively encouraging the development of data recovery products, recogniz-
19

ing that only their widespread, ubiquitous use will both provide greater protection

for data and protect public safety.

In further support of this goal, two weeks ago we set in motion a process of pursuing an intensive dialogue between industry and law enforcement. Our goal in this

process is to bring the creative genius of America's technology leaders to bear in developing technical, market-savvy solutions that will enable Americans to realize the

benefits of strong encryption while continuing to protect public safety and national

security. We do not harbor any illusions that there is no magic technology, a silver

bullet that addresses all the needs of the marketplace. But we think constructive

dialogue in a variety of areas and fora is far preferable to a stalemate that arises

from a battle of wills and rhetoric; working together is better than fighting legislative battles.

The Administration is not advocating any single product, technology, or even technical approach. Rather, we are flexible•provided that the resulting solutions and

arrangements preserve the Nation's ability to protect the public safety and defend

our national security. These are public interests of the highest order, shared by the

Congress and by all of our law-abiding citizens. Industry has the technical knowhow to develop commercially viable mechanisms that maintain the government's

ability to safeguard its citizens, while protecting our citizens from unwarranted intrusions from any source.

Now let me describe in a little more detail the important law enforcement and

national security interests that are at stake in the encryption debate. First, I want

to reiterate that the Department of Justice supports the use of strong encryption.

Law enforcement's responsibilities and concerns include protecting privacy and promoting secure commerce over our nation's information infrastructure. For example,

we prosecute those who violate the privacy of others by illegal eavesdropping, hacking, or stealing confidential information. In the National Information Infrastructure

Protection Act of 1996, at the request of the Administration, Congress provided further protection to the confidentiality of stored data. And the Department of Justice

helps promote the growth of electronic commerce by enforcing the laws, including

those that protect intellectual property rights and that combat computer and communications fraud.

Moreover, the Department of Justice, like other government agencies, realizes

that our own information technology systems will increasingly require the use of

strong encryption to provide appropriate security for the valuable and sensitive information that we hold on behalf of the American people. The Department, both as

an enforcer of the law and as a consumer of encryption technologies, thus has a

keen interest in the success of American industry in this area.

However, I don't think that it can reasonably be disputed that the unchecked

spread of non-recoverable encryption will also endanger the public safety and our

national security. People think of encryption primarily in the context of transmitted

communications such as phone calls, and its effects on wiretaps. Indeed, it is absolutely essential that law enforcement preserve the ability to obtain the plaintext of

information from lawfully authorized wiretaps and to authenticate this information

in court. Court-ordered wiretaps are an essential tool for law enforcement in investigating and prosecuting some of our most important matters involving narcotics

dealing, terrorism and organized crime.

But I'd like to focus for a moment on a slightly different aspect here: data stored

on computers. It's very common, for example, for drug dealers or terrorists, or any

other criminals for that matter, to keep records of their activities in notebooks or

other written form. When I was an Assistant United States Attorney, I prosecuted

several cases in which we arrested drug dealers and seized their "Tittle black books"

pursuant to search warrants or other valid legal authority. These notebooks provided invaluable evidence against the defendant and helped us identify and prosecute other members ofthe drug ring.

Today, however, we might find that the defendant is using one of the increasingly

popular electronic organizers or personal information manager software programs to

keep his records instead of a notebook. Or we might find that a swindler running

a telemarketing scam has his records on a computer instead of in file cabinets. The

switch from written to digital records does not undermine law enforcement interests•as long as the defendant hasn't encrypted the data. But if strong encryption

becomes a standard feature, law enforcement will lose its ability to obtain and use

this evidence. In fact, commonly available encryption products are already so strong

that we cannot break them.

The same problem exists with respect to other types of criminals also. Ramzi

Yousef, the mastermind of the World Trade Center bombing, used a laptop computer. Pedophiles who exchange child pornography via computer are already actively using encryption. White collar criminals and economic spies often use comput-
20

ers to steal our businesses' valuable intellectual property. I can't emphasize too

strongly the danger that unbreakable, non-recoverable encryption poses: as we move

further into the digital age, as more and more data is stored electronically rather

than on paper, as very strong encryption becomes built into more and more applications, and as it becomes easier and easier to use encryption as a matter of routine,

our national security and public safety will be endangered•unless we act responsibly.

Some people have suggested that this is a mere resource problem for law enforcement Tney believe that law enforcement agencies should simply focus their resources on cracking strong encryption codes, using high-speed computers to try

every possible key when we need lawful access to the plaintext of data or communications that is evidence of a crime. But that idea is simply unworkable, because

this kind of brute force decryption takes too long to be useful to protect the public

safety. For example, decrypting one single message that had been encrypted with

a 56-bit key took 14,000 Pentium-level computers over four months; obviously, these

kinds of resources are not available to the FBI, let alone the Jefferson City Police

Department. Moreover, it is far easier to extend key lengths than to increase computer power. Indeed, 128-bit encryption is already becoming commonplace. In this

environment, no one has been able to explain how brute force decryption will permit

law enforcement to fulfill its public safety responsibilities.

We believe that the most responsible solution is the development and widespread

use of encryption systems that, through a variety of technologies, permit timely access to plaintext by law enforcement authorities acting under lawful authority. I will

refer to these systems, collectively, as plaintext recovery systems, although they can

encompass a variety of technical approaches. The concept of key recovery, where the

key to encryption is held by a trusted third party, is one such approach, but it is

by no means the only one that would meet law enforcement's goals.

Some have suggested that law enforcement's access to the plaintext of encrypted

data and communications that is evidence of a crime would violate constitutional

rights. Although I will discuss in a moment the constitutionality of a mandatory recovery regime, let me begin by reiterating that no such mandatory regime exists,

nor does the Administration seek one. Rather, the Administration's efforts have

been to encourage the voluntary use of data recovery products. In this context, there

is no doubt that the government's efforts are constitutional.

It is certainly difficult to understand how a voluntary regime might violate the

Fourth Amendment. As with any kind of stored and transmitted data, it is axiomatic that the government may obtain both encrypted text and decryption keys pursuant to lawful process, which may include a wiretap order, a search warrant issued

upon probable cause, a subpoena, or the consent of the party possessing the particular item. Each of these comports with the Fourth Amendment, and voluntary data

recovery products do not change this analysis. Additionally, if an individual's

encryption key were stored with a third party, Congress requires by legislation that,

to compel production of the key, law enforcement would have to meet a standard

higher than that required by the Fourth Amendment, much as the Electronic Communications Privacy Act requires a court order to obtain transactional data. If Congress were to address this issue, we would be pleased to work with you to determine

the appropriate standard and mechanisms for obtaining keys.

The Subcommittee has requested that I address the legal issues that might be associated with a mandatory plaintext recovery regime. Again, let me restate that the

Administration does not advocate such an approach, and believes that a voluntary

solution is preferable. Nonetheless, I am prepared to discuss hypothetical legislation

prohibiting the manufacture, distribution and import of encryption products that do

not contain plaintext recovery technologies, so that the capability to decrypt

encrypted data and communications is available to law enforcement upon presentation of valid legal authority.

In considering the Department's views on these issues, I would urge you to keep

several caveats in mind. First, the constitutional issues that such a regime would

present are undoubtedly novel ones. Indeed, the spectacular growth of the digital

world has created many confounding legal issues that the Congress, the courts, the

Administration, and our society at large are wrestling with. Ifhistory is any guide,

changes in technology can lead to changes in our understanding of applicable constitutional doctrine. Moreover, these issues are particularly difficult to address in

the abstract, because mandatory plaintext recovery could take a variety of forms.

Nonetheless, and with these caveats, it is the best judgment of the Department of

Justice that a mandatory plaintext recovery regime, if appropriately structured,

could comport with constitutional doctrine.

Let me turn first to the Fourth Amendment. It should be remembered at the outset that the Fourth Amendment does not provide an absolute right of privacy, but
21

protects reasonable expectations of privacy by prohibiting unreasonable searches

and requiring that a warrant issue only upon a finding of probable cause by a neutral and detached magistrate. A well-designed plaintext recovery regime would ensure that users' reasonable expectations of privacy were preserved. Any legislation

in this area, whether or not it imposed plaintext recovery requirements, should not

lessen the showing the government must make to obtain access to plaintext. If a

search warrant for data was required before, it should be required under any new

regime. By requiring the government to meet current constitutional thresholds to

obtain plaintext, such a regime would, in our view, comply with the Fourth Amendment. Moreover, Congress could require under such a regime that even if law enforcement obtains a search warrant for data or communications, it would need additional authority, such as a court order, to obtain the key or other information necessary to perform any decryption if the information is encrypted.

Some have also argued that mandatory plaintext recovery regime would violate

the Fifth Amendment's prohibition against compulsory self-incrimination. However,

the Fifth Amendment generally prohibits only disclosures that are compelled, testimonial, and incriminating. If a manufacturer of an encryption product were required to maintain information sufficient to allow law enforcement access to

plaintext, we believe that there would be no violation of the Fifth Amendment because no disclosure at all would be compelled from the user of the encryption product. If, on the other hand, a mandatory plaintext recovery regime required the user

of an encryption product to store his key (or other information needed for recovery)

with a third party in advance of using the product, we do not believe that such an

arguably compelled disclosure would be testimonial as that term has been interpreted by the Supreme Court. In Doe v. United States, 489 U.S. 201 (1988), the

Court held that an order compelling a person to execute a form consenting to disclosure of foreign bank accounts did not violate the Fifth Amendment because the form

was not testimonial. The compelled disclosure of decryption information to a third

party would not seem to be any more testimonial. Moreover, we doubt whether such

a disclosure would be incriminating, because unless and until the encryption product is used in the commission of a crime, the key would pose no threat of incrimination against the user.

Finally, it has been suggested that a statutory restriction on the manufacture, import, and distribution of certain types of encryption products would violate the First

Amendment. Opponents of encryption restrictions sometimes argue that the First

Amendment protects the right of persons to speak in "code"•i.e., to speak in

ciphertext•and that a restriction on the distribution of products that make a particular coded communication possible would be analogous to placing a restriction on

the use of a foreign language. This First Amendment argument rests on the faulty

premise that the creation or dissemination of ciphertext itself is constitutionally protected. But, unlike a foreign language, the ciphertext that is created by strong

encryption products cannot be understood by the viewer or listener. When it is

heard, such as on a wiretap of a telephone, ciphertext simply takes the form of unintelligible static. In written form, ciphertext may be in the form of letters, numerals

and symbols, but no human being can read or "understand" it: it does not contain

characters or words or symbols that represent or correspond to any other characters,

words or symbols. Accordingly, ciphertext is not like a foreign language, the use of

which can convey unique meaning and nuance to the listener or reader. Thus,

ciphertext itself•as opposed to the underlying plaintext•has none of the properties

of protected "speech" that the Supreme Court has traditionally identified, and, accordingly, the dissemination of ciphertext should not be entitled to First Amendment protection.

A second form of First Amendment argument focuses not on the ciphertext, but

on the underlying plaintext. Under this theory, a prohibition on the manufacture

or distribution of nonrecoverable encryption products would inhibit an alleged constitutional right of persons to obscure their communications in any manner they see

fit. Even if legislation would impose such a practical limitation on the manner in

which speakers may obscure their underlying communications, it could be drafted

so as to pass muster as a permissible time, place and manner restriction•particularly since any such restriction on the "tools of speech would be unrelated to any

communicative impact of the underlying plaintext and the controls would leave open

ample and robust alternative channels or methods for obscuring the underlying

plaintext.

A related argument is that a communications infrastructure in which recoverable

encryption is the de facto standard will impermissibly chill a significant quantum

of speech because individuals' knowledge of law enforcement's ability to overhear

and decipher communications and data will unduly deter them from communicating.

But under such a system, the government would have no greater access to the con-
22

tent of private parties' communications than it currently has, and it is well-settled

that the government's exercise of its established statutory powers to intercept and

seize communications does not create such a "chilling" effect on speech as to transgress the First Amendment, so long as that power is exercised consistent with the

Fourth Amendment, and for valid reasons authorized by statute, such as to discover

evidence of criminal wrongdoing. See, e.g, United States v. Ramsey, 503 F.2d 524,

526 n.5 (7th Cir. 1974) (Stevens, J.) (rejecting argument that "the very existence of

wiretapping authority has a chilling effect on free speech and, therefore, * * * violates the First Amendment"); Accord United States v. Moody, 977 F.2d 1424, 1432

(11th Cir. 1992).

A final type of First Amendment argument often heard is that a restriction on

the manufacture and distribution of certain types of encryption products would

impermissibly restrict the ability of cryptographers, and others, to disseminate the

computer code that is used by computers to transform plaintext into ciphertext. But

that argument is based on the mistaken premise that dissemination of the code embedded in encryption products itself is necessarily a form of expression protected by

the First Amendment. Most such code is in the form of "obiect code." Object code

is simply an immense string of "0"s and "l"s, representing a bewildering concatenation of thousands or millions of high and low voltage electrical impulses. As such,

machine-"readable" cryptographic object codes can reveal neither to possible "readers" neither the ideas they embody, nor the manner in which the ideas are expressed. And this is especially true where such object code is embedded in a product

such as a semiconductor chip, so that even the 0"s and "l"s cannot be discerned.

Therefore, a restriction on the dissemination of encryption products containing object code would not violate the First Amendment.

The question would be somewhat more complicated with respect to source code•

i.e., the instructions to the computer that human beings write and revise. Some persons do disseminate source code for communicative purposes. Nevertheless, we believe that a restriction on the dissemination of certain encryption products could be

constitutional even as applied to those relatively infrequent cases in which such

products are in the form of software that is disseminated for communicative reasons, because such a restriction could satisfy the "intermediate" scrutiny that the

First Amendment provides for incidental restrictions on communicative conduct. As

we have argued in litigation in the export-control context, such intermediate scrutiny would oe appropriate because the government's reason for regulation sourcecode software would not be based on any informational value that its dissemination

might have. Instead, regulation would be premised on the fact that such software•

like all of the "encryption products" that would be regulated•has physical, functional properties that can cause a computer to encrypt information and thereby

place plaintext beyond the technical capabilities of law enforcement to recover.

Once again, I would like to emphasize that I have presented our constitutional

analysis of a mandatory plaintext recovery system to respond to the Subcommittee's

request for our views on the legal issues associated with such systems. As I noted

above, this constitutional analysis would depend significantly on the nature of the

particular system Congress mandated and the findings which supported it; our analysis is entirely generic. Moreover, I would emphasize again here that it is not the

policy of the Administration to seek mandatory plaintext recovery legislation; it is

the Department of Justice's hope and expectation that the dialogue with industry

that I spoke of earlier will yield outcomes that make sense from both a business

and a public policy perspective.

Those who argue against preserving lawful government access to encrypted communications often say that the government should bow to the inevitable and accept,

even embrace, the spread of unbreakable encryption, rather than trying to fight it.

For example, one of my colleagues recently met with a representative of a large

computer company who is critical of the Administration's encryption policy. This industry representative said that he recognized that encryption poses a problem for

law enforcement, but that we should recognize that other technologies, such as cars,

also create problems for law enforcement, yet we have managed. He said, "We don't

ban cars, do we? Then why are you trying to ban encryption?^

Of course, I hope it is clear by now that the Government is not trying to ban

encryption. Law enforcement supports the responsible spread of strong encryption.

Use of strong encryption will help deter crime and promote a safe national information infrastructure.

But the more fundamental point raised by the analogy to the rise of the automobile is that society "managed" the automobile, not by letting it develop completely

unfettered and without regard to public safety concerns, but first by recognizing

that cars could cause substantial damage to the public safety, and then by regulating the design, manufacture, and use of cars to protect the public safety. Cars must
23

be inspected for safety on a regular basis. Cars are subject to minimum gasoline

mileage requirements and maximum pollutant emission requirements. Cars built

today must include seat belts and air bags. Perhaps most closely analogous, the

laws of every jurisdiction in the United States closely regulate every aspect of driving cars on the public streets and highways, from drivers licenses to regulation of

speed to direction and flow of traffic. Congress and the state legislatures recognized

the public safety and health threats posed by the technology of automotive transportation, even as they recognized the dramatic benefits of mobility, productivity, and

industrialization that the automobile brought with it. Elected government representatives of the people have consistently acknowledged and acted on their sworn responsibilities by assessing the public safety issues at stake and then regulating the

technology accordingly.

Perhaps most relevant to the policy issues posed by encryption is the practice,

begun by most states about a hundred years ago, of requiring cars to be registered

and to bear license plates. More recently, federal law has required all vehicles to

bear a vehicle identification number, or VIN. As you may recall, it was the VIN in

the Oklahoma City bombing case that led the FBI to the truck rental office at which

Timothy McVeigh rented the truck he used. We now recognize that license plates

and VIM'S afford victims of accidents, victims of car theft, and law enforcement officials with an essential means of identifying vehicles and obtaining information on

the movements of criminals. Just as legislatures in the early 1900's acted to manage

the risks posed by automotive technology, government leaders today, as the 21st

century approaches, must bring the same sensitivity to the need to preserve and advance public safety in the face of encryption in the information age. And such a regulatory scheme, if constructed properly, will, like license plates, have benefits for

businesses and consumers as well.

Of course, no analogy is perfect. Computers are not cars, and plaintext recovery

is not a speed limit. But my broader point is an important one. The Framers of our

Constitution determined that individuals would not have an absolute right of privacy. The Constitution recognizes that there are certain circumstances in which it

is appropriate for law enforcement to obtain information that the individual wants

to keep private: for example, when a judge finds probable cause to believe that information is evidence of a crime. Decisions as to where that line should be drawn are

golitical and legal ones, not scientific or business ones; they should be made by this

ongress and the courts, not by programmers or marketers. Policy should regulate

technology; technology should not regulate policy. Just as in the first part of the

twentieth century, tfie law had to take account of the changes in society brought

about by the automobile, the law will have to take account of the changes brought

about by encryption.

We at the Department of Justice look forward to continuing the productive discussions we have had with this Subcommittee and the Congress on encryption issues.

We share the goal of arriving at a policy and marketplace that appropriately balance the competing public and private interests in the spread of strong encryption.

I would be pleased to answer any questions you may have.

Senator ASHCROFT. It is my pleasure now to call the third panel,

which includes James J. Fotis, Tom Parenty, and Bill Wiedemann.

Mr. James J. Fotis is the executive director of the Law Enforcement Alliance of America. He has a significant prior career in law

enforcement. It is my pleasure to call upon him to begin by making

remarks.

PANEL CONSISTING OF JAMES J. FOTIS, EXECUTIVE DIRECTOR, LAW ENFORCEMENT ALLIANCE OF AMERICA, FALLS

CHURCH, VA; THOMAS PARENTY, DIRECTOR, DATA AND

COMMUNICATIONS SECURITY, SYBASE, INC., EMERYVILLE,

CA, ON BEHALF OF AMERICANS FOR COMPUTER PRIVACY;

AND BILL WTEDEMANN, FOUNDER AND EXECUTIVE VICE

PRESDDENT, REDCREEK COMMUNICATIONS, NEWARK, CA

STATEMENT OF JAMES F. FOTIS

Mr. FOTIS. Thank you, Mr. Chairman, members of the subcommittee, for providing me with this opportunity to discuss the

important and complex issue of encryption. My name is Jim Fotis
24

and I am the executive director of the Law Enforcement Alliance

of America, more commonly known as LEAA. LEAA is the Nation's

largest coalition of law enforcement professionals, crime victims,

and supporters, representing over 65,000 Americans. I am testifying today on behalf of Americans for Computer Privacy, a broadbased coalition working to ensure that privacy of American communications is preserved and protected in the information age.

I am also a retired police officer, and as a retired police officer

I urge citizens to protect themselves from attack and thefts in a variety of ways, such as purchasing a deadbolt or a high-tech security

system for their house or car, or reminding them to park in welllit lots and beware of their surroundings. I advocate the same protections for their intellectual property and digital files, and

encryption is a deadbolt that locks those files.

However, the administration and FBI Director Freeh have stated

that encryption poses a threat to public safety. On the contrary, the

threat to public safety comes from the lack of encryption. Files that

are not secure are ripe for theft and misuse. Without encryption,

the electronic networks that control such critical functions as prison records, the air traffic controller system, and public telephone

systems would be vulnerable.

Many governmental agencies utilize encryption. If cryptography

can help protect nationally critical information systems and networks against unauthorized penetration, it can also support the national security of the United States, as well as the security of individual citizens. The Federal Government should also be interested

in helping to defend U.S. business interests against compromises of

information or security leaks. The Justice Department reported

computer security breaches cost U.S. business and consumers $7

billion a year.

In today's markets, businesses and individuals transmit a considerable amount of confidential information, including items such as

financial records and assets, project and merger proposals, medical

records, trade secrets, and research and development information

through electronic channels. More significantly, U.S. businesses are

competing on a worldwide basis, making them potential targets for

competitors, foreign governments, or vandals. So if, by using

encryption, we can reduce computer theft crimes and lower economic espionage, it is a net gain for law enforcement.

I work with crime victims every day. We have to give them the

power to protect themselves against unwanted attack, physical or

informational. As a police officer, I swore to uphold the Constitution of the United States, protect its citizens, and enforce its laws.

But the current administration's policies fly in the face of our

Founding Fathers, running afoul of the 4th, 1st, 5th, and 10th

amendments. Since when did we decide our citizens are guilty until

proven innocent, because that is essentially what you are saying

when you mandate back-door access to their files?

As an officer, I cannot and will not support a policy that potentially victimizes law-abiding citizens. The proposed legislation

would require purchasers of encryption to turn over a key to a

third party. That third party might be, in turn, ordered to turn

that key over to the Government. So much for fourth amendment

guarantees, the right of the people to be secure in their persons,
houses, papers, and effects against unreasonable searches and seizures. If we as law enforcement officers needed to search your computer files or read your e-mail, we should have to go through the

same procedures as we would for tangible or real property, meaning we would have to show the court probable cause to obtain a

search warrant.

Even scarier than the blatant erosion of our fourth amendment

rights is the fact that those supporting this legislation have chosen

to ignore a report issued by the world's top cryptographers entitled

"The Risk of Key Recovery, Key Escrow, and Trusted Third Party

Encryption." It stated clearly, "the field of cryptography has no experience deploying secure systems of this scope and complexity,"

implying such systems involve security risks and could potentially

cost billions of dollars.

The 1996 National Research Committee report also warned

third-party recovery introduced a system weakness, putting crucial

infrastructures at risk, and questioned whether it could actually

work on a large scale. As lawmakers and law enforcement professionals, we have a duty to protect, not jeopardize, our constituents'

business and private information. But by concentrating too much

power in untested key recovery centers, we make the Nation vulnerable to attack by terrorists and abuse by those entrusted with

the power.

Now, to answer the question I know many of you are waiting to

ask, yes, encryption sometimes provides a shield for some criminal

activities. But the simple fact is that more than 500 strong

encryption products are readily available and in use around the

world. If the administration is trying to prevent criminal access to

encryption, then they are too late. We must strive to keep the political debate focused on criminal behavior and criminal punishment

and to communicate the shared opinion of most law enforcement

professionals that encryption restrictions are not effective crime deterrents.

Meanwhile, state-of-the-art software applications have thwarted

an incalculable number of crimes, protecting millions of dollars and

thousands of people, as well as giving street cops and departments

such as the Delaware State Police fast access to reliable information before they approach a vehicle, house, or suspect, allowing

them to accurately assess potentially dangerous situations.

Police are able to connect directly into the national and State

databases, police computers, and national crime information computer. Unlike traditional police radio transmissions, information

running over these networks is secure, since the system uses

encryption that is inherent in their design. In addition to other

benefits, this technology allows officers to stay silent, unlike radio

transmissions that can be picked up on scanners by people attempting to keep track of police whereabouts; for instance, drug

dealers and burglars.

Now, the FBI is going to say that this will mean unbreakable

codes, translating into creation of more crime. This is wrong. For

Ereventing sabotage, you need a system that does not have wellnown limits or vulnerabilities. If everybody uses the same type of

encryption, sooner or later someone will find vulnerability and fig-
26

ure out how to break it. Therefore, to be safe, you need different

systems.

The FBI says it is trying to stop crime. The problem is you can't

stop crime by focusing on inanimate objects. You must focus on the

criminal. The criminal terrorist or the college hacker is still out

there and using the very weapons our Government won't allow us

to access. Simply put, you are mandating that criminals outgun us.

It is like giving the American public a rubber baseball bat to fight

a robber with a gun. If you think this is helping law enforcement,

you are dead wrong.

Kenneth Dam of the University of Chicago, who chaired the

NRC's committee to study encryption policy, said it best in Issues

in Science and Technology. "If encryption can protect nationally

critical information systems and networks against unauthorized

penetration, it also supports national security."

The cold war has ended, but a new war has emerged, a war for

control of our new-found infrastructure, and the only way to win

that war and protect constitutional rights is to have strong

encryption. Let us not allow 1998 to become the start of "1984."

I thank you for the time and I look forward to your questions.

Sir, I would like to explain one thing. We have used the term "law

enforcement" in here. There are many, many law enforcement

groups out there. There are Federal law enforcement groups, and

we said that the International Association of Chiefs of Police and

many other groups support the proposals by the FBI. What we

have to look at it is the fact that these groups depend on much of

the funding from the Federal Government and if they came out

against these particular types of legislations and statements by the

director of the FBI, they may not get the funds that they need to

run their department. There are 18,000 departments out there,

most of them under 50 men, and those are the people that I am

talking about that don't want encryption.

Senator ASHCROFT. Thank you.

Tom Parenty is the director of Data Communications Security for

Sybase, Inc. He has been active in the cryptography and computer

security field for over a decade, starting with his tenure at the National Security Agency, NSA.

Mr. Parenty.

STATEMENT OF THOMAS PARENTY

Mr. PARENTY. Mr. Chairman, I would like to thank you very

much for the opportunity to address you this morning, and also to

thank you for the time and energy you have put into understanding a very difficult and complex issue, and also your leadership in

addressing the privacy concerns of this issue in this particular

hearing. I would also like to thank other members of the subcommittee and committee who are addressing and interested in

American concerns of privacy in the information age.

This morning, I am also speaking on behalf of Americans for

Computer Privacy, which consists of over 70 companies and 28 associations, as well as the Business Software Alliance which is an

association of the leading U.S. software vendors in the United

States. We share two basic principles.
27

The first is we object to any controls, whether through law or

through heavy-handed incentives, on the domestic use of

encryption. And in spite of the comments made by•and I confess

I cannot recall the precise title of the representative of the Justice

Department. We are very concerned about the statements that the

director of the FBI has made concerning domestic control.

But maintaining the status quo is not adequate, and so we also

advocate an immediate legislative solution for relief on the export

side so that U.S. companies might be able to compete internationally on a level playing field.

In terms of my own background, I speak to you as somebody who

has spent his entire career protecting sensitive information, starting with my time at NSA in the early and mid-1980's when I

worked on nuclear command and control systems, to the present

where I work with customers who are building applications for the

Internet that will process sensitive business and personal data.

If you look at the Internet today, it is a world in which everyone

sends postcards, in which the messages are readable by anyone

who simply wants to spend the time to look. And while that is fine

for a lot of applications, it is encryption that provides the sealed

envelopes that make the Internet safe for real business and sensitive personal use. To make this discussion less abstract, I want

to talk about two specific applications that are being built by my

customers that highlight the privacy concerns that you are addressing.

The first is in our own backyard in New York State, where the

New York State Department of Health is building a child immunization program so that whenever a child goes to a doctor's office,

a hospital, a mobile clinic, it will be possible to check on the immunization status of that child and if they need a booster or an inoculation, it can be given to them and their records appropriately updated, something that provides a very clear health benefit for the

children of the State of New York. If one looks to the other side

of the world, the New Zealand Ministry of Health is building an

Internet-based system that will link doctors, hospitals, and other

health care providers to be able to share medical information about

patients throughout the entire country.

It is clear both of these systems provide very, very strong benefit

in terms of providing health care to either the children of New

York or the citizens of New Zealand. And because of the very significant privacy concerns in both cases, strong encryption will be

used, and specifically strong encryption without third-party key recovery.

I could talk to you today about the technological infeasibility of

building a key recovery system along the lines that the administration has outlined. I could also tell you that even if such a system

could be built, it would be too expensive to manage. But I will leave

those discussions for another time. What I will say is that what

third-party key recovery does do is it inserts a vulnerability into

what could otherwise be a secure system. It inserts a trap door that

could be used by unauthorized personnel, by criminals, or in the

case of childhood medical records by child predators. And it is

something that both in the New York State case and the New Zea-
28

land case, they made the right decision not to include that vulner- *

ability. «J

Having worked on secure systems for over 15 years, I can tell^,

you any of the protestations by the administration that there will k

be legal and technical measures in place to prevent the abuse of -

that back door, those arguments ring hollow.

It is clear that encryption enhances national security by provid- B

ing the robustness and safety that is required for all of the critical -J

infrastructures upon which we depend, such as transportation, [:

health care, banking, things like that. It is also the case that t

encryption, specifically strong encryption without third-party key

recovery, prevents crime by keeping sensitive business and personal data safe from abuse, and in the case of the New York State

application being able to offer the ability to protect children in the

first place.

In conclusion, I would like to recall a story of something that

happened to me in college. It was Christmas. It had snowed the

night before and I looked out my living room window to where 1

had parked my car and I noticed, instead of my car, a black rectangle where my car used to be parked. I thought clearly I was mistaken, so I went into my bedroom and then I came back into the

living room, expecting that I would actually miraculously see my

car.

Well, the police did find my car several days later. It was stolen;

it was pushed off a cliff into a gravel quarry. And while I was

happy to get my car back in the condition it was, I could not help

but think I wish that I had spent more time and energy protecting

my car from theft in the first place.

I thank you, Mr. Chairman, for the opportunity to address you

this morning.

Senator ASHCROFT. Thank you, Mr. Parenty.

[The prepared statement of Mr. Parenty follows:]

PREPARED STATEMENT OF THOMAS PARENTY

SUMMARY

Strong encryption protects privacy in the information age

As computer users worldwide become more networked, the need for strong

encryption to protect electronic information and confidential information becomes

ever more important. Information security is critical to the integrity and stability

of individuals, corporations, and governments, and cryptography is the keystone of

secure distributed systems. Correspondingly, corporations are now demanding 128-

bit, not 40 or 56-bit encryption.

Encryption is necessary to prevent crime and to promote America's national and economic security

The interests of computer users, hardware and software companies and privacy

f-oups are not opposed to those of law enforcement and national security.

ncryption prevents crime by protecting trade secrets and proprietary information,

and this reduces economic espionage. Encryption promotes national security by protecting electronic networks that control such critical functions as airline flights,

health care functions, electrical power and financial markets which are highly vulnerable.

The administration's key recovery scheme does not meet demands for privacy

A huge bureaucracy will be necessary to manage the Administration's key recovery scheme.

The technology does not yet exist to create and smoothly operate a reliable system

of this magnitude and complexity.

•---1
29

Despite widespread claims of international agreements on "key recovery" infrastructures, no such agreements exist today.

Criminals and terrorist groups will avoid using the Administration's key recovery

scheme.

Export controls on American products with strong encryption must be modernized

The results of unilateral U.S. export controls on computer software and hardware

with encryption are two-fold:

First, the U.S. government has succeeded in delaying the widespread deployment

of American products with strong encryption within the U.S. as well as abroad.

Why? Because American companies manufacturing mass market products for the

world market find it extremely inefficient and difficult to develop, market, and support two versions of their products-one for the U.S. and one abroad. Recently, some

companies have had to go down this route or risk losing purely domestic sales. But

this does not help customers with global operations and interests who demand the

ability to securely interact worldwide. American companies can only offer these customers products with 40-bit encryption!

Second, the U.S. government has succeeded in giving foreign companies a major

market opportunity. An on-going industry by Trusted Information System (TIS

Study) revealed that as of September 1997, there were 653 foreign programs and

products available from 29 countries, 275 of which employ DES. American companies face strong competitive disadvantages overseas and are losing product sales

every day because of current encryption export controls.

The time for action is now

Privacy must be assured, crime prevented and national security promoted. U.S.

export controls are inhibiting the use of products with strong encryption domestically. They must be immediately updated to reflect technological and international

market realities and enable American companies to compete on a level playing field.

Domestic controls in any form that have the effect of forcing the inclusion of back

doors must be opposed as they will open up our electronic information to unnecessary and potentially harmful vulnerabilities and insecurities, thus posing an even

greater risk to our national and economic security.

INTRODUCTION

Good morning. I am Thomas Parenty, the Director of Data and Communications

Security for Sybase, Inc., and responsible for all security-related product development for the sixth largest software company in the world.

I want to take this opportunity, Mr. Chairman, to thank you for taking the time

to analyze this complex, difficult issue and for your leadership in helping to bring

it to the attention of the public. I also would like to thank the others on this Subcommittee, and on the full Committee•especially Senator Leahy who has worked

tirelessly on the subject•who have expressed their desire to address the concerns

ofAmerican citizens about privacy in the Information Age.

I also, at this time, would like to acknowledge the recent overtures of the Administration and their desire to pursue a dialogue with the private sector to arrive at

"cooperative solutions". We certainly are always open to discussion•as we have

been for six years. But we need policies now that work for American computer users

and American computing companies. That is why we are strongly supporting legislative efforts this Congress to affirm the rights of Americans to use and sell whatever

encryption they want and to end unwise export controls on American encryption

products.

I have been active in the cryptography and computer security field for over a decade, starting with my tenure at the National Security Agency (NSA) in the early

and mid-eighties. While at NSA, I worked on internal NSA computer security issues

and focused on the formal verification of cryptographic protocols and internal computer security controls for global nuclear command and control networks. Since then

in the private sector, I have worked on the security design of operating systems,

networks, and database management systems for many customers ranging from

U.S. companies to government agencies, including the Central Intelligence Agency,

the Defense Intelligence Agency, and the Air Force. Most recently, I have served as

an advisor to the President's Commission on Critical Infrastructure Protection, specifically addressing the needs of the telecommunications and banking infrastructures.

My company, Sybase, Inc., is headquartered in Emeryville, California, and is a

worldwide leader in distributed, open computing solutions. We provide customers

and partners with the software and services to create business solutions for strate50-474 98-2
30

gic, competitive advantage. These high-performance, end-to-end solutions encompass

client/server, Internet and intranet transaction processing, mobile computing, and

data mart and data warehousing applications. Sybase's Adaptive Component Architecture• enables rapid design, development and deployment of distributed multitier business applications. Our product lines include Sybase high-performance database servers, distributed data access and connectivity products, and Powersoft181 enterprise development tools.

Today, however, I am not only speaking on behalf of Sybase, but also on behalf

of Americans for Computer Privacy (ACP), which includes the Business Software Alliance (BSA)• and Sybase.

ACP is a new coalition of more than 70 companies and 28 associations representing the financial services, manufacturing, telecommunications, high-tech and transportation sectors, and associations and organizations, including the Eagle Forum,

Americans for Tax Reform, and Center for Democracy and Technology. ACPs mission is to ensure that the privacy of all Americans' confidential files and communications is preserved and protected in the information age. ACP opposes new federal

restrictions on the use of encryption products in the U.S. and supports the sale of

strong U.S. encryption products to customers around the world.

But most of all, I am here today to speak on behalf of the tens of millions of users

of American software products. The American software industry has succeeded because we have listened and responded to the needs of computer users worldwide.

We develop and sell products that users want and for which they are willing to pay.

One of the most important features computer users are demanding is the ability

to protect their electronic information and to interact securely worldwide. Medical

records. Employee evaluations. Information about credit cards, Internet sales, and

bank accounts. In short, users are demanding the ability to protect the privacy of

confidential and sensitive files and communications.

This morning, I want to make four points:

(1) Encryption protects privacy rights in the information age;

(2) Encryption prevents crime and protects national security;

(3) The Administration's key recovery scheme inherently introduces additional

vulnerability and insecurity and will not work; and

(4) In order to promote American's privacy, Congress should reject proposals

which mandate•by law or heavy-handed incentives or conditions•key recovery and

liberalize existing U.S. export controls on American products with strong encryption

capabilities.

Strong encryption protects privacy in the information age

As computer users worldwide become more networked than ever before•through

private local area networks (LANs), wide area networks (WANs) and public networks such as the Internet•the need for strong encryption to protect their electronic information and confidential business information becomes ever more important. Companies, governments and individuals now realize that they can no longer

protect data and communications from others by simply limiting physical access to

computers or by maintaining stand-alone centralized mainframes. Yet they understandably do not want to put sensitive information on line without the best assurances that that information will remain private. A recent Business Week poll, "A

Look at On-Liners", found that if privacy were protected, 61 percent of those who

currently do not go online would be more likely to start using the Internet, and 78

percent of those who already do go online would be more likely to use the Internet

more often.

Consider the New York State Department of Health which is developing the New

York State Childhood Immunization Program to track immunization records of children. No matter what clinic, hospital or doctor's office a child visits, a doctor or

nurse need only pull up that child's records to determine whether he or she ever

got the right shot or is due for booster shots. Because of the highly sensitive nature

of the information and because the system will catalogue the names and addresses

of the state's children, strong encryption is being used (and no key recovery will be

incorporated into the system).

Similarly, doctors have noted that if they have access to even limited clinical information about a patient, especially in an emergency situation (such as pertinent

1 The BSA promotes the continued growth of the software industry through its international

public policy, education, and enforcement programs in 65 countries throughout North America,

Europe, Asia and Latin America. BSA worldwide members include the leading publishers of

software for personal computers, including Adobe, Apple Computer, Autodesk, Bentley Systems,

Lotus Development, Microsoft, Novell, The Santa Cruz Operation and Symantec. BSA's Policy

Council consists of these software publishers and other leading computer technology companies,

including Intel, Compaq and my company Sybase.
31

drug information, recent lab tests, or radiology results), they could save billions of

dollars by not initiating unnecessary or repetitive procedures.

Encryption provides assurances that the people updating medical records are authorized to make those changes. Encryption also assures that the personal information can neither be viewed or modified by unauthorized parties.

So, too, encryption is becoming vital to the banking and financial services industry. Today, cash is distributed electronically; banks clear and settle their funds electronically, as well. PC/Internet banking is quickly emerging as an alternative to inperson banking or even ATM transaction banking. In fact, one global banking firm

recently indicated that 80 percent of its transactions worth trillions of dollars are

routinely conducted electronically.

The U.S. Government recognizes the threats hackers pose in the new digital

world. In fact, FBI Director Freeh testified that "illegal electronic intrusion into

computer networks is a rapidly escalating crime problem. White collar criminals,

economic espionage agents, organized crime groups, foreign intelligence agents, and

terrorist groups have been identified as 'electronic intruders' responsible for penetration of many of America's computer networks. It is estimated that the Pentagon's

computers are subject to hackers attempts 250,000 times a year." Recently, defense

sources said approximately 11 Department of Defense sites were attacked•computers which are used to transmit logistics data as well as pay and personnel information. Deputy Defense Secretary John Hamre has acknowledged that DOD recently

has undertaken several exercises that confirmed DOD's vulnerability to computer

attack in the future.

Information security is critical to the integrity, stability and health of individuals,

corporations, and governments. While cryptography is but one element of security,

it is the keystone of secure distributed systems. For these reasons, corporations are

now demanding 128-bit encryption.

Encryption is necessary to prevent crime and to promote America's national and economic security

The interests of computer users, hardware and software companies and privacy

groups, therefore, are not opposed to those of law enforcement and national security.

As the blue ribbon National Research Council (NRC) Committee found in its May

1996 CRISIS Report ("Cryptography's Role in Securing the Information Society"),

encryption prevents crime by protecting the trade secrets and proprietary information of businesses and correspondingly reducing economic espionage. Encryption also

promotes the national security of the United States by protecting "nationally critical

information systems and networks against unauthorized penetration."

Thus, the NRC Committee found that on balance the advantages of more widespread use of encryption outweighed, the disadvantages and that the U.S. Government has "an important stake in assuring that its important and sensitive * * *

information * * * is protected from foreign government or other parties whose interests are hostile to those of the United States."

In 1996 the Computer Security Institute/FBI Computer Crime Survey indicated

that our worldwide corporations will be increasingly under siege: over half from

within the corporation, and nearly half from outside of their internal networks. We

may see many, many hundreds of millions in losses, and we may possibly see the

destabilization of a company, the stock market or perhaps even a whole economy.

To counter these threats, corporations "compartmentalize" their critical business

information, and strictly control access to these compartments. Not everyone is

trustworthy within a company, and it is this security, this compartmentalization,

that prevents crimes such as insider trading, leakage of trade secrets, and corporate

espionage. Frankly, there is no substitute for good, widespread, strong cryptography

when attempting to prevent crime through these networks.

Widespread use of encryption is also necessary to protect the electronic networks

that control such critical functions as airline flights, health care functions, electrical

power and financial markets which are highly vulnerable. Indeed, the U.S. General

Accounting Office in its report issued in May of 1996 entitled "Information Security:

Computer Attacks at Department of Defense Pose Increasing Risks," found that:

Computer attacks are an increasing threat, particularly through connections on the

Internet; such attacks are costly and damaging; and such attacks on Defense and

other U.S. computer systems pose a serious threat to national security.

Furthermore, U.S. export controls have had the effect of creating an encryption

expertise outside the United States that is gathering momentum. Thus, every time

research and development of an encryption technique or product moves off-shore,

U.S. law enforcement and national security agencies loose. Continuing down their

present path will be more harmful to our national security and law enforcement ef-
32

forts as American companies will no longer be the world leaders in creating and developing encryption products.

The Administration's key recovery scheme does not meet demands for privacy

The Administration's key recovery scheme is too complex and inherently too vulnerable. Technologically, it will not work on the scale required, and users do not

want it. Let me explain why.

First, a huge bureaucracy will be necessary to manage the Administration's

key recovery scheme

The Administration's proposal assumes that we can effectively accommodate the

needs of dozens of governments, thousands of companies, tens of thousands of law

enforcement offices, and millions of users. It also assumes that we can handle tens

of millions of public-private key pairs and billions of recoverable session keys across

thousands of different products. As the number of people using computers and the

Internet grows, the number of keys that must be managed will explode. By the end

of the decade, a key recovery system capable of accommodating all of the potential

users around the world would have to be capable of handling many, many billions

of keys. This is a very tall order. The bureacracy to manage this key recovery system is likely to rival that of the Social Security Administration, the Internal Revenue Service, or the U.S. Postal Service.

Second, the technology does not yet exist to create and smoothly operate a reliable system ofthis magnitude and complexity

Furthermore, the Administration's proposed key recovery scheme may actually

make consumers more vulnerable. Advocates of a worldwide key recovery system

conveniently overlook the tremendous technology barriers posed. It is unclear that

such a system can be built at all, much less in the next few years. As Novell's CEO,

Dr. Eric Schmidt stated, "Perhaps the technology necessary to create such a system

will be available in my lifetime; it is not available today."

Cryptography experts report that "secure cryptographic systems are deceptively

hard to design and build properly. * * * Very small changes frequently introduce

fatal security flaws. * * * [A]dding key recovery makes it much more difficult to

assure that such systems work as intended. It is possible, even likely, that lurking

in any key recovery system are one or more design, implementation, or operational

weaknesses that allow recovery of data by unauthorized parties." (See The Risks of

Key Recovery, Key Escrow, and Trusted Third Party Encryption, A Report By An

Ad Hoc Group of Cryptographers and Computer Scientists, May 1997.)

Third, despite widespread claims ofinternational agreements on "key recovery"

infrastructures, no such agreements exist today

Bilateral and/or multilateral agreements must be negotiated and foreign governments' rights and responsibilities must be defined before the Administration's key

recovery system can be realized. Despite years of insisting that these treaties were

just around the corner, the Administration has yet to conclude a single bilateral,

much less multilateral, agreement with another government on key recovery. Nor

has the Administration outlined any rights or responsibilities for foreign governments requesting access to U.S. decryption keys held by key recovery agents. It is

not even clear whether these keys are subject to civil discovery in addition to criminal discovery.

Ministers and business leaders from 30 European nations attending an Internet

conference in Bonn, Germany, roundly critized the U.S. key recovery policy that requires guaranteed access for law enforcement. The ministers agreed in the Bonn

Declaration that "they will work to achieve international availability and free choice

of cryptography products and interoperable services, subject to applicable law, thus

effectively contributing to data security. If countries take measures in order to protect legitimate needs of lawful access, they should be proportionate and effective and

respect applicable provisions relating to privacy." The German Economics Minister,

Guenter Rexrodt, in fact opened the conference by calling for the removal of restrictions on encryption technology. (See "Should Encryption Software Have Limits?,"

MSNBC Reuters Report and Jack Breibart, "Europeans Hit U.S. Encryption Policy,"

American Reporter Correspondent.)

Finally, criminals and terrorist groups will avoid using the administration's

key recovery scheme

The stated purpose of the Administration's key recovery scheme is to strengthen

law enforcement and national security. But it is unlikely that criminals and terrost

groups will choose to use a key recovery system that requires them to provide their
33

keys to third-parties who can, in turn, give them to government officials. At the

same time, it is impossible to force criminals to use a key recovery system!

Unfortunately, other similar attempts at forcing key recovery also are fatally

flawed. The Secure Public Networks Act, S. 909, as adopted by the Senate Commerce Committee promotes, through the use of heavy handed incentives, the Administration's mandated third party key recovery access. It is a significant step backwards for American consumers. In fact, far from being a compromise, S. 909 is actually worse than the status quo. The bill attempts to set up an extremely complex

domestic key recovery system that puts at greater risk the privacy of all Americans.

This complex key recovery scheme will inevitably sacrifice business and consumer's

security and unnecessarily drastically increase their costs. At the same time, S. 909

does not ensure easy exportability of stronger encryption or otherwise meaningfully

relax export restrictions.

Export controls on American products with strong encryption must be modernized

The incredibly dynamic U.S. computer software industry is an American success

story. Since 1980, the industry has grown seven times faster than the rest of the

economy and today is larger than all but five manufacturing industries. Conservative estimates are that more than 1.2 million people are employed in the software,

hardware, and semiconductor industries•with more than half a million people in

the computer software industry alone. This economic success has fueled research

and development for new generations of products and spurred the creation of numerous market-leading products and choices.

The computer software industry is one of our country's most internationally competitive. Presently, U.S. software accounts for over 70 percent of the world market,

with exports of U.S. software programs constituting half of many software companies' revenues. The incredible growth of the industry and of its exporting success

benefits America through the creation ofjobs, highly-skilled, well-paid jobs, here in

the United States.

But, unless the government's export control policy changes, we will lose our competitive advantage. American software companies are still forced to limit the

strength of our encryption to the 40-bit key length level set in 1992•despite an Administration commitment at that time to increase key lengths regularly to take into

account technological and market developments. Recent regulations from the Administration allow, on a limited company-by-company basis, the export of products

with 56-bit encryption capabilities in exchange for proof of commitments to build

"key recovery" into future products. However, not only do customers demand

encryption stronger than 56-bit, but this license exception is set to expire in December, 1998. Furthermore the Administration has defined "key recovery" in its own

terms, not in consumer-driven terms, and so promoted the development of features

for which there is no demand. Thus, 40-bits remains the effective level for which

easy export is still permitted.

The results of these continuing, unilateral U.S. export controls on American computer software and hardware with encryption capabilities has been two-fold.

First, the U.S. Government has succeeded in delaying the widespread deployment ofAmerican products with strong encryption within the U.S. as well

as abroad

Why? Because American companies manufacturing mass market products for the

world market find it extremely inefficient and difficult to develop, market, and support two versions of their products-one for the U.S. and one abroad. Recently, some

companies have had to go down this route or risk losing purely domestic sales! But

this does not help customers with global operations and interests who demand the

ability to securely interact worldwide. American companies can only offer these customers products with 40-bit encryption!

For example, a U.S. design company which builds highways, bridges, and dams

in foreign countries would like to design its projects here in the U.S. and transmit

those designs to foreign countries. Unfortunately, because of the sensitive nature of

the information, they would have to use strong encryption with no key recovery•

which is prohibited by the U.S. government. Thus, those design jobs go overseas

where plans can be designed and developed in a safer atmosphere.

Second, the U.S. Government has succeeded in giving foreign companies a

major market opportunity

The General Accounting Office concluded in 1995 that sophisticated encryption

software was widely available to foreign users on foreign Internet sites. A 1996 Department of Commerce study confirmed the widespread availability of foreign manufactured encryption programs and products. The most widely used encryption pro-
34

gram, PGP, with over two million users worldwide, uses the Swiss developed IDEA

encryption algorithm, with a 128-bit key. An on-going industry study by Trusted Information Systems (TIS Study) revealed that as of September 1997, there were 653

foreign programs and products available from 29 countries, 275 of which employ

DES.

In short, U.S. companies can only sell a product that is inferior to the most popular products already available. It is like being forced to sell a car without bumpers

and seat belts in a world which demands safer and safer cars. As a result, American

companies face strong competitive disadvantages overseas and are losing product

sales every day because of current encryption export controls.

CONCLUSION

The time for action is now. Privacy must be assured, crime prevented and national security promoted. U.S. export controls are inhibiting the use of products with

strong encryption domestically. They must be immediately updated to reflect technological and international market realities and enable American companies to compete on a level playing field. Domestic controls in any form that have the effect of

forcing the inclusion of back doors must be opposed. It is hard enough to do security

right when the sole focus is protecting information•it is incredibly more difficult

to do so if one is forced to do so in a key recovery climate. Instead, it will open up

our electronic information to unnecessary and potentially harmful vulnerabilities

and insecurities, thus posing an even greater risk to our national and economic security.

Thank you.

ACP•AMERICANS FOR COMPUTER PRIVACY

MEMBERSHIP LIST

American Automobile Manufacturers Association.

American Conservative Union.

American Electronics Association.

American Financial Services Association.

American Petroleum Institute.

American Small Business Alliance.

Americans for Tax Reform.

Business Software Alliance.

Center for Democracy and Technology.

Citizens for a Sound Economy.

Computer and Communications Industry Association.

Consumer Electronics Manufacturers Association.

Eagle Forum.

Electronic Commerce Forum.

Electronic Industries Association.

Independent Insurance Agents of America.

Information Technology Association of America.

Information Technology Business Center.

Information Technology Industry Council.

IEEE-USA.

Law Enforcement Alliance of America.

NASDAQ Stock Market.

National Association of Manufacturers.

National Retail Federation.

National Rifle Association.

Online Banking Association.

Securities Industry Association.

Small Business Survival Committee.

Software Publishers Association.

Telecommunications Industry Association.

U.S. Chamber of Commerce.

U.S. Telephone Association.

3Com Corporation.

3K Associates, Incorporated.

ACL Datacom, Incorporated.

Acordia Northwest, Incorporated.

Adobe Systems, Incorporated.

America Online, Incorporated.
35

Asia Pacific Marketing, Incorporated.

Autodesk.

Axent Technologies, Incorporated.

Bokler Software Corporation.

Brooks Internet Software, Incorporated.

Cisco Systems, Incorporated.

Citrix Systems, Incorporated.

Claris Corporation.

Compaq Computer Corporation.

Computer Associates International, Incorporated.

Consensus Development Corporation.

Corel Corporation.

Countrywide Home Loans, Inc.

DBA Springfield CyberLink.

EDS Corporation.

Envision, Incorporated.

Furukawa Information Technologies, Incorporated.

General Instrument Corporation.

Genio USA.

GeoData Solutions, Incorporated.

Goodyear Tire & Rubber Company.

Honeywell, Incorporated.

I.S. Grupe, Incorporated.

I/O Software, Incorporate.

Intel Corporation.

Intellimedia Commerce, Incorporated.

Intershop Communications, Incorporated.

Intersolv, Incorporated.

Intuit, Incorporated.

Invincible Data Systems, Incorporated.

Kellogg Technologies.

Kinesix Corporation.

Lehrer Financial and Economic Advisory Svcs.

Lotus Development Corporation.

MacSourcery.

Mastercard International, Incorporated.

McLellan Software Center, Incorporated.

MeterNet Corporation.

Microsoft Corporation.

Microtest, Incorporated.

Mindscape, Incorporated.

Napersoft, Incorporated.

NeoMedia Technologies, Incorporated.

Netscape Communications Corporation.

Network Associates.

Network Risk Management Services.

Nokia.

Novell, Incorporated.

Now Software, Incorporated.

Oracle Corporation.

Piranha Interactive Publishing, Incorporated.

Platinum Technology, Incorporated.

Portland Software, Incorporated.

ProSys, Incorporated.

Rail Safety Engineering, Incorporated.

Raycom Data Technologies, Incorporated.

ReCor Corporation.

Rockwell International.

RSA Data Security, Incorporated.

Santa Cruz Operation, Incorporated.

Secure Computing Corporation.

SkillsBank Corporation.

Storage Technology Corporation.

Sun Microsystems, Incorporated.

Sybase, Incorporated.

Symantec Corporation.

Taft Development Group.

Ultimate Privacy Corporation.
36

Visa International.

Wyatt River Software, Incorporated.

Senator ASHCROFT. Bill Wiedemann is the founder and executive

vice president of RedCreek Communications, Inc. RedCreek, another in the long line of Silicon Valley success stories, began operations in July 1996 to address the growing demand by corporations

for more comprehensive network security solutions, especially in

the Internet market.

It is a pleasure to call upon you, Mr. Wiedemann, and to invite

your testimony before the committee.

STATEMENT OF BILL WIEDEMANN

Mr. WIEDEMANN. Thank you, Mr. Chairman. Thank you for providing me with this opportunity to testify in front of this subcommittee today. What I would like to do is just summarize my already submitted testimony for 5 minutes, if I could.

Encryption is a subject of vital importance to the U.S. economy.

I have been supporting the U.S. Chamber of Commerce and other

groups in Washington throughout 1997 and will continue to do so

in the future. Strong encryption is a tool that enables people and

businesses to communicate securely. U.S.-based companies are currently the leaders in this technology. Current export restrictions

foster foreign suppliers of encryption solutions. The Internet facilitates communication between individuals and businesses. Strong

encryption from preferred U.S. suppliers enables individuals and

businesses to take advantage of the low cost and wide availability

of the Internet as a communication medium.

What I would like to do is talk about basically two points in my

submitted testimony, and that is privacy that is afforded through

strong encryption, and also meeting the needs of law enforcement

through strong encryption.

Currently, we have the ability to export 40-bit encryption to all

but seven embargoes countries. 40-bit encryption is not perceived

to be strong enough by worldwide corporate customers. I think all

of us can remember how safe we felt when our parents gave us our

first lock for our bicycle. It was probably four tumblers with numbers between 0 and 9 on each dial. We felt safe and secure because

our parents told us that we were safe as long as you didn't let anyone know the combination.

Your first day at school, somebody unlocked your bike and took

it for a ride before locking it back up. How did they do this? What

they did is simply try every possible combination. It probably took

them less than 15 minutes to do that on those 4 tumblers. Industry

standard trusted encryption can only be broken using this same

brute force type of technique; in other words, trying every key.

It is commonly understood that a 40-bit key can be discovered by

trying all the possible combinations in about a week using several

hundred computers. A 56-bit key, which is 2 to the 16th or 64,000

times as many possible combinations as a 40-bit key, would take

64,000 times longer or 64,000 times as many computers as a 40-

bit key. However, a 56-bit key is still not believed to be strong

enough. A 128-bit key is commonly believed to be the length of the

key necessary to assure privacy of personal and corporate communications. That is why 128-bit is the approved key length for finan1
37

cial transactions. However, the U.S. Government currently restricts

general export of data privacy encryption to 40 bits.

What I would like to talk briefly about is how we can use strong

encryption to enable law enforcement to do their job. As I said, the

existing export policy has prevailed to date due to U.S.-based law

enforcement professing that these controls are necessary to enable

them to pursue criminal activity.

Let us suppose that there were a 40-mile-per-hour speed limit on

exported automobiles. Would this enable law enforcement to better

pursue criminal activity? Certainly, we would all agree that this

would not assist law enforcement, as automobiles are available

overseas that can go faster than 40 miles per hour. Yet, law enforcement continues to indicate that a 40-bit restriction on the export of encryption•that that should be the restriction even when

stronger encryption is available overseas and enables them to pursue criminal activities.

However, as I mentioned up front and in my submitted testimony, there are several ways to give law enforcement the protection they require and allow corporations to use and deploy strong

encryption which, of course, enables their use of the Internet for

worldwide secure corporate communications.

Hewlett Packard, as an example, recently obtained U.S. Government approval for their VerSecure technology allowing U.S. suppliers to ship 128-bit strong encryption products overseas. The reason

that the Hewlett Packard approach was approved is that exported

products are shipped with what is called dormant encryption. The

encryption product provides no encryption until it is enabled by a

foreign entity or government. Thus, it not only helps with the export of encryption from the United States, but also helps those

countries that are trying to restrict importation of certain types of

encryption. Foreign countries that have been already approved by

the United States Government include the United Kingdom, Australia, Denmark, France, and Germany.

Law enforcement's desire is to recover data by methods that are

afforded them today by wiretaps. Any method of data recovery by

law enforcement should use the currently established legal practices for obtaining permission to install a wiretap. If the desired

data is encrypted for privacy, the wiretap would need to be installed at a point where clear or unencrypted data is available.

This is a very simple location. In our example, it would be just inside of our box which, of course, is where clear data is available.

Another method for keeping strong encryption products out of

the hands of criminals is to allow the sale of strong encryption only

to recognized companies because, of course, they are not the criminals, and then require them to take precautions in the deployment

of solutions.

In summary, strong encryption is a tool that enables people and

businesses to communicate securely. U.S.-based companies are currently the leaders in this technology. Current export restrictions

foster foreign suppliers of encryption solutions, and current proposals to deploy key recovery or other data recovery systems here in

the United States would also only further foster foreign suppliers

of these solutions.

Thank you.
38

[The prepared statement of Mr. Wiedemann follows:]

PREPARED STATEMENT OF BILL WIEDEMANN

Mr. Chairman and members of the Subcommittee, thank you for providing me

with this opportunity to testify before you today. Encryption is a subject of vital importance to our industry.

PRIVACY AND POLICY

Privacy is considered a fundamental right by all citizens of the United States. Our

government has always fully protected this right, whether we are communicating

in our homes, through the postal service or over the telephone network. A new communications medium, the Internet, has emerged as the preferred, or certainly a very

commonly used, infrastructure. Today we can send email to friends, customers and

business colleagues. We do this because it is easy, it allows us to compose our

thoughts, and it provides us with a record of the "dialogue."

We can also use the Internet as an infrastructure to conduct commerce.

1. How many of us have bought something on the Internet?

2. Those that haven't yet bought something on the Internet, how many would if

they could be assured that it would be safe, secure and private?

Well I am here today to tell you that it is safe, secure and private to communicate

and conduct business over the Internet. Software programs are available that enable our existing email and browsers to perform the necessary functions of privacy

that make our messages and transactions secure. A major reason individuals in the

United States are not using the Internet for ordering products and services is they

are not informed that the security of their credit card number is guaranteed by their

credit card supplier.

Current policy does not allow U.S. companies to sell data privacy solutions, unless

the encryption is 40 bits or less. U.S.-based companies use strong encryption for

communications within the United States and Canada but are prevented from using

the same products with strong encryption when their communications go outside the

United States. The exportable versions contain encryption that is reduced to 40 bits.

Therefore, to securely communicate on a global basis, companies obtain a strong

encryption add-on from a foreign supplier.

Law enforcement has indicated mat the 40 bit export restriction helps them to

apprehend criminals. It only hinders the use of these enabling Interent technologies

because companies are forced to use foreign suppliers rather than the preferred

United States encryption solutions that are contained in the U.S. versions of

Interent email and browser products.

Controls on the export of encryption technology, the technology that enables us

to attain privacy over the Internet, have curtailed this market and have left some

with a felling that the Interent is not yet safe for communications and transactions.

A most important fact is that it has only curtailed the use of security solutions. It

has not stopped it. Talented engineers and resourceful entrepreneurs in overseas

countries have designed plug-ins and add-ons to our favorite email and Internet

browser programs. I am sure many of you have seen the articles and quotes from

these foreign companies hoping the U.S. government does not change its policy of

restricting the export of strong encryption. This restrictive policy is what created

and sustains their business. As I said earlier, security is not a problem today for

email because foreign companies have solved the problem. The current U.S. policy

accomplishes nothing to help law enforcement apprehend criminals. It only curtails

the use and therefore growth of the market because global users of these enabling

business solutions would prefer not to have to install and support these foreign addons for their oversight users.

INTERNET GROWTH

While commerce will grow from $8 billion in 1997 to over $300 billion in 2002

and the number of email users, currently 50 million, doubles every 3 months, an

even bigger growth opportunity is the use of the Internet for corporate networks.

The Internet will drive the interconnection of corporate offices, remote/mobile users,

and business partners. The advantages of the Internet, widely available connections,

and low cost access are big expense control and productivity drivers for corporate

America. Remote and mobile employees can now telecommute with unlimited access

to their corporate resources for as little as $20 dollars per month. Corporate offices

can be interconnected for monthly costs that are less than half of other wide area

network technologies.

A corporate network based on the Internet is possible because of two things:
1. A widely available quality network.

2. Strong encryption to ensure privacy.

Without strong encryption corporations would not consider putting their private

information on the Internet. Strong encryption also provides an impenetrable

boundary between the hackers on the public Internet and the users and data on a

corporation's private network.

Enterprising companies have recognized this opportunity to provide strong

encryption and thereby facilitate secure corporate communications over the Internet.

RedCreek recognized the shortcomings in current security solutions and set out to

design next generation products. Previous solutions were too slow, too bulky, too

costly, and were based on proprietary technology, due to the lack of interoperability

standards. U.S. companies such as RedCreek have responded to the need for high

performance, small size, low cost, standards-based solutions. Due to this progress

in security solutions, companies such as AT&T, MCI, and Sprint can now provide

secure corporate connectivity over the Internet.

The availability of a quality network and high-performance security solutions are

enabling the explosive potential for the Internet as a corporate networking solution.

However, corporations must have the opportunity to obtain strong encryption from

a U.S. supplier to address their global networking needs. Today corporations are

forced to use foreign company solutions for their overseas locations. As the revenue

from security products is handed to foreign suppliers, the current market leading

position of U.S.-based companies like RedCreek is jeopardized.

PRIVACY THROUGH STRONG ENCRYPTION

Currently we have the ability to export 40 bit encryption to all but seven embargoed countries. Forty bit encryption is not perceived to be strong enough by worldwide corporate customers. Do you remember how safe you felt when your parents

gave you your first lock for your bicycle? It was probably four tumblers with numbers between zero and nine on each dial. You felt safe and secure because your parents told you that you were safe as long as you didn't let anyone know the combination. Your first day at school somebody unlocked your bike and took it for a ride

before locking it back up. How did they do that? What they did is simply try every

possible combination. It probably took less than 15 minutes.

Industry standard trusted encryption can only be broken using the same "brute

force" method of trying every key. It is commonly understood that a 40 bit key can

be discovered by trying all possible combinations in about a week using several hundred computers. A 56 bit key is 64,000 times as many possible combinations as a

40 bit key. Therefore a 56 bit key would take 64,000 times longer or 64,000 times

more computers than a 40 bit key. A 128 bit key is commonly believed to be the

length of key necessary to assure privacy of personal and corporate communications.

While 128 bit is the approved key length for financial transactions, the US government currently restricts general export of data privacy encryption to 40 bits.

Financial institutions and U.S.-based companies can use 56 bit data encryption

for their overseas offices, however, this is still well below the accepted minimum of

128 bits for data privacy. Consequently users who desire to take advantage of the

benefits of these technologies must buy products with unrestricted strong encryption

for deployment in the United States and Canada and use foreign suppliers for their

overseas offices and partners. Companies such as Timestep in Canada, and

Radguard in Israel are not restricted and are shipping solutions that are alternatives to the currently superior solutions available in the United States.

MEETING THE NEEDS OF LAW ENFORCEMENT

The existing export policy has prevailed to date, due to US-based law enforcement

professing that these controls are necessary to enable them to pursue criminal activity. Suppose there were a 40 mph speed limit on exported automobiles. Would this

enable law enforcement to better pursue criminal activity? Certainly this would not

assist law enforcement as automobiles are available overseas that can go faster than

40 mph. Yet law enforcement continues to indicate that a 40 bit restriction on the

export of encryption, even when stronger encryption is available overseas, enables

them to pursue criminal activities.

Law enforcement's current proposal is to allow 56 bit encryption to be shipped

outside of the United States as long as they can get access to a copy of the

encryption key. How many of us would be willing to make a copy of our house key

and car key available to U.S. and foreign governments without prior notification of

the use of our key? Many people consider this type of government access to our

encryption keys an extreme invasion of privacy.
40

However there are ways to give law enforcement the protection they require, and

allow corporations to use the strong encryption, which enables the use of the Internet for worldwide corporate communications. Hewlett Packard recently obtained

U.S. government approval for their VerSecure technology allowing U.S. suppliers to

ship 128 bit strong encryption products overseas. The reason that the Hewlett Packard approach was approved is that exported products are shipped with "dormant''

encryption. The encryption product provides no encryption until it is "enabled" by

a foreign entity or government. Foreign countries that have been approved by the

United States include the United Kingdom, Australia, Denmark, France, and Germany.

Law enforcement's desire is to recover data by methods afforded them today with

wiretaps. Any method of data recovery by law enforcement should use the currently

established legal practices for obtaining permission to install a wiretap. If the desired data is encrypted for privacy, the wiretap would need to be installed at a point

where clear (unencrypted) data is available.

Another method for keeping strong encryption products out of the hands of criminals is to allow the sale of strong encryption only to recognized companies and then

require them to take precautions in the deployment of the solutions.

SUMMARY

Mr. Chairman and members of the Subcommittee, privacy is a fundamental right

of all people. Strong encryption is a tool that enables people and businesses to communicate securely. U.S.-based companies are currently the leaders in this technology. Current export restrictions foster foreign suppliers of encryption solutions.

The Internet facilitates communication between individuals and businesses.

Strong encryption, from preferred U.S. suppliers, enables individuals and businesses

to take advantage of the low cost and wide availability of the Internet.

Senator ASHCROFT. I want to thank all of you for your testimony.

Mr. Parenty, tell me about your company's experiences with current encryption controls and whether they harm your international

competitiveness.

Mr. PARENTY. Certainly. I would like to talk on two points, one

of which is, especially in the last 6 months, any conversations with

customers overseas•and this covers a wide variety of respected industries•have said that they would not purchase any products

from us unless we were able to provide a solution that included

128-bit encryption.

We tried to work with the administration in their key recovery

plan that would allow the temporary export of 56-bit encryption

and our experience was that the rules changed underneath us as

time went by, so that it was impossible for us to make any business

plans based on what the Government would allow us to do. And so

our personal experience with the KMI exception program showed

us that it was not something a business could participate in. We

also found that the ability to export just 56-bit DES overseas is not

something that satisfies any of our legitimate customers' needs.

Senator ASHCROFT. So is it your view that the exceptions that

are available are unworkable?

Mr. PARENTY. That is absolutely correct.

Senator ASHCROFT. Our Government has allowed export of up to

128-bit encryption for financial matters. Are these financial concerns more important or entitled to greater protection than other

kinds of trade secrets, in your judgment?

Mr. PARENTY. In my judgment, they are not. And in point of fact,

when one thinks of the kinds of information that are transmitted

over electronic networks, specifically the Internet, there are many

very valuable, sensitive kinds of information above and beyond

simply an electronic funds transfer.
41

I had mentioned specifically examples in the medical industry. It

is also quite true that American companies that have subsidiaries

and partners overseas have a very significant issue with respect to

protecting their intellectual property. And there is a very strong

concern and worry about any kind of system that would involve

giving a foreign government escrowed access to keys because there

is a lot of experience that we have with foreign governments using

their intelligence agencies in economic espionage against U.S. companies.

Senator ASHCROFT. Mr. Fotis, I want to be clear on your testimony. You are saying that, contrary to the previous FBI assertions,

not all the law enforcement agencies across the country are against

the capacity of people to use robust encryption?

Mr. FOTIS. That is correct, Senator. In 1988, I developed one of

the first internal automation systems in Nassau County. It is being

used by the Nassau County police and about 35 other police departments in New York. If this had been in effect, we would have had

to give a back door to the FBI to get into our system not only from

the companies' standpoint, but from the police departments' standpoint. There are sensitive investigations that go on in every small

to medium police department and they do not want the FBI or

other Government agencies to be able to get into their encrypted

records.

Senator ASHCROFT. Mr. Wiedemann, you suggested perhaps, if I

am not mistaken, that if we were to have robust encryption, we

could limit it to only well-established, large companies. Was I correct in hearing you say that?

Mr. WIEDEMANN. Yes, that is certainly one proposal. I don't believe that law enforcement believes that this should be restricted

use to respectable companies, you know, Fortune 1000 or recognized worldwide companies. And as long as they were able to control the deployment of that in a secure fashion, that could restrict

it being used by criminals.

Senator ASHCROFT. Certainly, in the computer industry companies come and go from the list of respectable, top companies pretty

rapidly. Are there any startup companies that might have a need

for robust security that would parallel or equal the needs of the

well-established companies?

Mr. WIEDEMANN. Certainly, virtually all companies have the

need for•many of our customers, in fact, are small companies that

are desiring to communicate in a secure fashion using these data

networks.

Senator ASHCROFT. Mr. Parenty, we don't have any limitation on

the use of encryption in the United States now, is that correct?

Mr. PARENTY. That is correct, yes.

Senator ASHCROFT. SO you can use 128-key encryption, very robust encryption in the United States?

Mr. PARENTY. That is correct.

Senator ASHCROFT. And every company can, or every individual

could here at this time?

Mr. PARENTY. Yes.

Senator ASHCROFT. Why is it that it doesn't appear that a lot of

people are using it? You know, you talk about the Internet being

a postcard now, but if we were to have certain kinds of encryption
42

available internationally, it would somehow become a sealed envelope. Well, for most people who don't really go around the world on

the Net, but just go to talk to their kids in Chicago or what have

you, there does not seem to be much utilization of encryption. Can

you explain that?

Mr. PARENTY. It is something that when you think about the use

of encryption, the first thing that one should keep in mind is in

some sense the best and most effective encryption is absolutely

transparent to the end user. And one very good example of the role

of encryption in daily lives that people may not be aware of is ATM

machines. When I use my ATM card and get money from the bank,

encryption is being used to protect my financial situation.

And it is the case that even for individuals who are perhaps just

using the computer for sending e-mail to their child in college,

there is a significant amount of personal, financial, medical, spending-pattern, consumer-oriented information that is on the networks

today. And it is something that I think it is incumbent upon policymakers to ensure that that information is adequately protected.

Senator ASHCROFT. Thank you, Mr. Parenty. I want to thank the

members of the panel. We have one more panel to move through

today and I am eager to get their testimony. They are a panel of

constitutional experts. I am grateful for all of your participation.

Mr. PARENTY. Thank you.

Senator ASHCROFT. Let me thank each of you for coming. I would

welcome any presentations of written documents, in addition to

your spoken testimony, and I will begin immediately with the introduction of Professor Kathleen Sullivan, the Stanley Morrison

Professor of Law at Stanford Law School. She is a noted expert on

constitutional law, including the first amendment and criminal procedure. Her prominence in the field is illustrated by the fact that

the 20th Century Fund selected her as a contributor to the "New

Federalist Papers: Essays in Defense of the Constitution."

Professor Sullivan, thank you for coming. We would be pleased

to have your remarks.

PANEL CONSISTING OF KATHLEEN M. SULLIVAN, PROFESSOR,

STANFORD UNIVERSITY SCHOOL OF LAW, STANFORD, CA,

ON BEHALF OF AMERICANS FOR COMPUTER PRIVACY; RICHARD A. EPSTED4, PROFESSOR, UNIVERSITY OF CHICAGO

LAW SCHOOL, CHICAGO, IL, ON BEHALF OF AMERICANS FOR

COMPUTER PRIVACY; CINDY A COHN, McGLASHAN AND

SARRAIL, SAN MATEO, CA; AND TIM D. CASEY, CHIEF TECHNOLOGY COUNSEL, MCI COMMUNICATIONS CORP., WASHINGTON, DC

STATEMENT OF KATHLEEN M SULLP7AN

Ms. SULLIVAN. Thank you very much, Mr. Chairman. Thank you

for the opportunity to testify before the subcommittee and thank

you for your interest in this very important topic about privacy in

the digital age.

Mr. Chairman, as you stated in your opening remarks, the Framers created a world under our Constitution in which privacy is very

substantially protected. It is protected because the Framers established a world in which the Government may not engage in general
43

searches, may not engage in dragnets, no matter how effective they

may be for law enforcement. The Framers created a world in which

we may speak freely and protect our privacy freely, unless and

until there is particularized cause to think that we are doing something wrong.

The first amendment has been interpreted by the Supreme Court

to say that the Government may never ban an entire category of

speech, may never ban an entire medium through which we speak.

It may simply regulate particular instances of speech that create

danger, such as the proverbial shout of "fire" in the crowded theater. And under the fourth amendment, the Court has been quite

clear that we cannot have general searches.

Now, the problem with any system that would mandate that

those of us who encrypt the messages we send or store on the

Internet•any system that would require us to turn over the key

to third parties inverts that world that the Framers so carefully

[>ut in place. It would say not that all speech is presumed free uness and until it poses a danger, but it would say, rather, all speech

is presumed potentially relevant to the Government and we are

going to collect it and store it all in a way that makes it more accessible to the Government in advance.

Now, the administration says, "Well, don't worry. We will have

to have particularized cause at the later point when we try to obtain information from the storehouses that we have required you

to set up with these third parties." And, with respect, I would like

to submit that, as the chairman's remarks pointed out, that is not

enough. Particularized cause later is not enough to cure the problem of a general search at the outset, and let me talk about a few

examples to try to make this point clear.

Imagine that the Government were to say we all have to install

surveillance cameras in our houses. We won't turn them on, of

course, the Government says, unless and until we have reason to

think you are doing something wrong. But I think we all would

sense that we have suffered a tremendous loss of privacy just by

creating that potential for surveillance which, of course, might be

intercepted by the wrong parties as well as by the Government.

If the Government were to say, "Well, now that we have smart

clothing and smart jewelry, all of you are required to wear computerized jewelry that we could turn on at any point when we wanted

to study your movements; we would only turn on this monitoring

device, of course, if we thought you were about to do something

wrong^•but I think we would sense that we have lost a great deal

by even having to wear that jewelry and create that opportunity for

the Government.

Or as the chairman pointed out in his opening statement, suppose the Government were to say that we have to file copies of

every one of the documents that we produce and would like to keep

private, would like to keep between us and the intended recipient,

with an escrow agent, with a third party, with a bank or a safe deposit box somewhere. The Government might say, "Well, we are

only going to compel those papers from that box we have made you

store them in if we think you are doing something wrong." And yet

I think we would all agree that we had lost a tremendous amount

of privacy up front when we had to give that up.
44

Now, Justices on the Supreme Court have recognized this principle many times, none perhaps so eloquently as Justice Harlan,

who wrote in a 1971 opinion that the fourth amendment is designed not to shield wrongdoers, but to secure a measure of privacy

and a sense of personal security throughout our society; that is, for

all of us who are law-abiding citizens and corporations.

Now, Justice Harlan in that opinion said that, of course, if the

Government simply listened to us all the time, we would give up

that sense of what he called the spontaneity and frivolity that characterize our sense of life when we think we can keep our life private among the people we want to speak to and not open to the

outside world.

So the first point would be that the world the Framers set up is

that Government needs particularized suspicion. It can't run a general search at the outset and assure us that, of course, it will never

use this data until later. The privacy loss happens at the outset.

The second point I would like to stress•and these points are

elaborated in my written testimony and I am grateful if the chairman would admit that to the record.

The second point I would like to make is that contrary to the position that Mr. Litt took on behalf of the administration, the regulation of encryption is the regulation of speech. It is a mistake to

think that a new technology changes the basic principles of the

first amendment. It would be a mistake, for example, to say that

a telephone call is not protected by the first and fourth amendments just because it travels through electrons rather than on a

paper that is carried by horseback, and the Supreme Court said it

wouldn't make that mistake when it protected our telephone calls

under the fourth amendment in 1967.

I think we would all recognize that if the Government tried to

regulate print and ink instead of regulating a newspaper, that

would implicate the first amendment. I think we would all see that

if the Government said you have to send your letters by postcard

or in transparent glacine envelopes, that would limit speech in a

way that would implicate the first amendment. And so the fact that

people send messages in bits and digits does not affect the fact that

these regulations would affect speech.

And finally, and in closing, cooperative solutions are not necessarily constitutional. Cooperative solutions have the potential to

be coercive. Cooperative solutions that try to use the Government's

leverage and buying power and procurement power and regulatory

subsidy power in order to extract responses from industry may, in

fact, implicate the Constitution. The Supreme Court has repeatedly

recognized that sometimes conditions on funding and conditions on

contracts can be unconstitutional when the Government goes too

far, when it seeks to use its leverage over a private contract, for

example, to tell its contractor what the contractor can do with his

or her or its own suppliers. Further elaboration is in the written

testimony.

Thank you for the opportunity to make these remarks.

Senator ASHCROFT. Thank you very much, Professor Sullivan. I

appreciate the remarks and they are helpful.

[The prepared statement of Ms. Sullivan follows:]
45

PREPARED STATEMENT OF KATHLEEN M. SULLIVAN

Mr. Chairman and Members of the Subcommittee:

Thank you for the opportunity to testify before you on the constitutional concerns

raised by various proposals by the Administration, the Federal Bureau of Investigation, and some members of Congress to restrict the use of data encryption on the

internet, in particular by requiring those who make or use encryption technologies

to turn over their digital keys to third parties in order to preserve ready access by

government to the encrypted information. Whether or not such proposals would, if

enacted, be struck down by the United States Supreme Court, the very least that

can be said is that they pose serious risks to the liberty and privacy values embodied in the First Amendment's protection of the freedom of speech and press, the

Fourth Amendment's protection against unreasonable searches and seizures, and

the Fifth Amendment's protection against compelled self-incrimination. These constitutional costs should be factored carefully into consideration of any legislation

governing key recovery.

Whatever disagreements might divide participants in this controversy, all can

agree upon certain starting points. First, it would seem beyond reasonable dispute

that instantaneous global communication over the internet has great benefits to

offer both to our commercial marketplace and to our marketplace of ideas, and that

the ability of those who use the internet to maintain some degree of privacy in their

communications is essential to maximizing those benefits. Various polls have suggested that privacy is a very important issue to users of the internet; for example,

a recent Harris poll reported in Business Week found that 78 percent of users would

be more likely to use the internet if its privacy protections were more secure. If the

internet is to fulfill its vast potential, then citizens and corporations must be confident that sensitive information that flows over the internet•from the transmission of credit card numbers, medical records and trade secrets to the discussion

of views critical of government•will be shielded from unwanted eyes and ears. Privacy with respect to sensitive information and unpopular opinions is as basic an

American value in the fast-paced information age of the late twentieth century as

it was at the time the Constitution was framed. By enabling secure lines of communication, encryption allows privacy to retain its historical meaning even in an era

of changing technology.

Second, all can agree at the same time that the use of robust encryption poses

some risks as well as benefits. The use of encryption by criminals or terrorists, for

example, may well make it more difficult in particular instances for the government

to protect law-abiding citizens, corporations or the government itself against threats

to personal, business, or national security. In the absence of mandatory key recovery

systems, law enforcement officials can decode encrypted information only ifthey can

obtain voluntary or compelled cooperation from the sender or recipient, seize a key

from someone else to whom the sender or recipient has voluntarily or accidentally

entrusted it, or deploy superior computing power sufficient to break the code by the

mathematical equivalent of brute force. Of course, law enforcement officials retain,

even in the digital age, a wide array of traditional methods of surveillance as well

as considerable power to search for, seize, or compel production of communications

in plaintext. Nonetheless, it is understandable that some law enforcement officials

would prefer additional access to encrypted information through the back door of

key recovery.

But, third, any such backdoor key access undeniably has formidable costs as well

as benefits. There can be little doubt that universal third-party key escrow, if mandated, would reduce the degree of privacy we would all enjoy if we could use strong

encryption without turning over keys to outside intermediaries. The creation of a

massive, complex system of key escrow intermediaries that are not controlled by

users would dramatically multiply the opportunities for information to be transferred into the wrong hands through the mistaken or fraudulent release of keys. It

would also lead to the concentration of valuable data in centralized databases that

would be far more inviting and vulnerable to targeted attack by criminals than

would more decentralized systems of key maintenance. Backdoor decryption would

also, by design, compromise privacy in relation to government. No matter how benignly motivated, and even if subject to threshold requirements ofjudicial approval,

government use of key recovery will inevitably be prone to risks of error. By thus

compromising the privacy and security that could otherwise be obtained through

strong encryption, mandatory key escrow would likely have at least some deterrent

effect on the use and growth of internet communication.

Once these initial propositions are established, it becomes clear that the question

before this Subcommittee is whether the actual gains to effective law enforcement

from mandatory key access justify the considerable costs to constitutionally pro-
46

tected privacy interests that it would entail. Concerns about crime and terrorism

will always seem overrriding in the abstract But legislation does not operate in the

abstract. If mandatory key access is likely to be highly porous, then criminals will

evade its strictures and it will fail to serve the vital but generalized government

interests asserted by key access advocates. On the other hand, for ordinary lawabiding citizens, mandatory key access does much that turns traditional constitutional liberties on their head. The method involved in mandatory key escrow•namely, compromising every citizen's liberty and privacy in order to make it easier for

government to intercept or capture the unlawful few•is the reverse of our usual

procedures under the First, Fourth, and Fifth Amendments. Usually we allow citizens a wide berth for freedom unless and until their exercise of liberty threatens

to harm others or the state. Thus, no matter how laudable the generalized law enforcement goals at issue, mandatory key access also involves extremely serious constitutional tradeoffs.

1. Freedom of Speech and Press. The First Amendment provides in relevant part

that "Congress shall make no law abridging the freedom of speech, or of the press."

Of course, the right to speak is not absolute; government may regulate speech to

prevent particularized and imminent harms, such as the stampede that might be

caused by the proverbial shout of "Fire!" in a crowded theater, or the violence that

might ensue from a speaker's face-to-face provocation of an edgy mob. But the story

of free speech protection in the twentieth century consists very largely of the Supreme Court's increasing insistence that entire categories of speech may not be categorically or prophylactically presumed in advance to be dangerous and therefore

regulable. Rather, outside of certain narrow areas of unprotected speech such as obscenity, extortion or blackmail, the government is constitutionally required to be put

to its proof, case by case, that a particular instance of speech is so likely to be seriously harmful as to justify its regulation. See, e.g., Brandenburg v. Ohio, 395 U.S.

444 (1969).

The Supreme Court likewise has held repeatedly that government may not impose

a total ban on an entire medium of expression in which willing speakers and listeners otherwise would engage. For example, government may not ban all leafleting in

the public square, all door-to-door solicitation for charitable causes, or all posting

of signs on privately owned residences by their owners. As the Court recently noted

in a unanimous decision, its "prior decisions have voiced particular concern with

laws that foreclose an entire medium of expression" because, even if such laws do

not discriminate against particular ideas, they "can suppress too much speech." City

of Ladue v. Gilleo, 512 U.S. 43 (1994). First Amendment suspicion is understandably raised by any law that, like a total medium ban, will predictably reduce the

quantity of expression in society.

Mandatory key escrow proposals contravene these traditional approaches to free

speech because they in effect impose a total ban on a medium of expression•the

medium of securely encrypted digital communication•based merely on generalized

predictions of dangerousness. Because some unescrowed encrypted communications

might amount to a crime or provide evidence of a crime, all unescrowed encrypted

communication is forbidden. This reverses the usual presumption that all categories

of speech and all media of expression should be permitted unless and until a particular instance of speech is shown to be imminently likely to cause serious harm.

Mandatory key escrow is in considerable tension with another aspect of our First

Amendment tradition as well: By compelling the maker and/or the user of

encryption products unwillingly to disclose how to decrypt coded information, it arguably violates the right not to speak that has long been read as an unspoken corollary of the right to speak. Government generally may not make us speak against

our will, whether by pledging allegiance to a flag, bearing a slogan we find offensive

on our automobile license plates, or turning over part of our property to serve as

a bulletin board for our critics. Similarly, government generally may not force us

to disclose our identity when we engage in otherwise protected expression. The Supreme Court has long held, for example, that civil rights activists and others who

risk retaliation for their important but unpopular speech may not be made to sign

their pamphlets or disclose their organizational membership lists merely because

doing so might make it easier for government to monitor for subversion or fraud.

See Talley v. California, 362 U.S. 60 (1960); NAACP v. Alabama, 357 U.S. 449

(1958).

The Court recently reaffirmed this right against compelled disclosure of identity

in a decision invalidating, on First Amendment grounds, a criminal ban on unsigned

literature in a referendum campaign. In that decision, Mclntyre v. Ohio Elections

Commission, 115 S. Ct. 1511 (1995), both Justice Stevens and Justice Thomas emphasized that an author's decision to remain anonymous is part of a venerable tradition that stretches back to the nation's founding era: the Federalist Papers them-
47

selves were written under the pseudonym "Publius" and countered by anti-Federalist tracts written under such pseudonyms as "Cato," "Brutus," and "the Federal

Farmer." To be sure, internet users of encryption technology seek to keep private

the content of as well as the signature on their documents. But a generation that

included Paul Revere as well as Madison, Hamilton and Jay undoubtedly understood that content ("one if by land, two if by sea") no less than authorship sometimes needs to be encrypted.

It is no answer to such concerns that the proposed third-party key escrow systems, unlike earlier proposals for government key escrow, require disclosure of

decryption keys not to the government but rather to private parties chosen by each

speaker. The Supreme Court has invalidated, for example, a requirement that charitable solicitors disclose the amount they spend on overhead to the private parties

from whom they seek donations. See Riley v. National Federation of the Blind, 487

U.S. 781 (1988). As the Court emphasized in Riley, what matters is not to whom

the disclosure is directed, but whether the government has "mandatjed] speech that

a speaker would not otherwise make." Mandatory key escrow by definition does just

that.

Nor is it necessarily a sufficient answer to such concerns that mandatory key escrow aims not at the message but at the vehicle by which it is expressed•that is,

at the equivalent of the envelope rather than the letter. For the Supreme Court has

often admonished that regulation of conduct that facilitates speech triggers the First

Amendment no less than regulation of the speech itself. For example, government

may not prohibit payment for solicitation of signatures on ballot petitions or the receipt of honoraria for off-duty speeches and articles by government employees, because such regulations decrease incentives to engage in speech even if the speech

itself may be engaged in by other means. See Meyer v. Grant, 486 U.S. 414 (1988);

United States v. National Treasury Employees Union, 513 U.S. 454 (1995). Similarly, the Court has been just as willing to invalidate a selective tax on paper and

ink as to invalidate a selective tax on a newspaper itself. See Minneapolis Star v.

Minnesota Commissioner of Revenue, 460 U.S. 575 (1983). Requiring escrowed key

encryption•like requiring that letters be mailed in glassine envelopes•would surely discourage speech as effectively as a tax or regulation on the underlying speech

itself, and thus call for heightened scrutiny under the First Amendment.

Finally, any provision that conditions the right to make or sell encryption software upon the government's prior approval of that software's key recovery capabilities might raise familiar First Amendment concerns about prior restraint. Assuming

that computer code, like scientific or musical notation, free verse or abstract painting, counts as speech as much as does a political tract or the daily news, such

preclearance requirements, like any system of speech licensing, creates the danger

that the exercise of administrative discretion will tend to give inadequate protection

to interest in freedom of speech. See generally Bernstein v. United States, 974 F.

Supp. 1288 (N.D. Cal. 1997).

2. Protection From Unreasonable Search and Seizure. The Fourth Amendment

protects "the right of the people to be secure in their persons, houses, papers, and

effects, against unreasonable searches and seizures." It also provides that "no Warrants shall issue, but upon probable cause" and "particularly describing" the objects

of search or seizure. The reasonableness and warrant requirements help to ensure

that, under our systems of government, law enforcement officials will not engage in

dragnets or general searches, no matter how useful they might be in facilitating occasional access to evidence of crimes. The reason is, of course, that a general search

also sweeps in countless other innocent transactions of daily life, thus diminishing

the privacy and security enjoyed by law-abiding citizens. As Justice Harlan once

wrote, the Fourth Amendment "is designed not to shield 'wrongdoers,' but to secure

a measure of privacy and a sense of personal security throughout our society."

United States v. White, 401 U.S. 745 (1971) (Harlan, J., dissenting). Mandatory key

escrow bears a troubling resemblance to a general search, exacting a significant surrender of privacy and security in the absence of any initial particularized suspicion.

The interests protected by the Fourth Amendment, which extend beyond "persons,

houses, papers and effects" to all aspects of our lives in which we have "reasonable

expectations of privacy," were not frozen in time in the eighteenth century. Those

interests may well alter or expand with the advent of new technologies. In Katz v.

United States, 398 U.S. 347 (1967), for example, the Court easily found a twentiethcentury telephone call be the functional equivalent of eighteenth-century "papers,"

and thus determined that the government's warrantless use of a modern electronic

eavesdropping device was just as problematic under the Fourth Amendment as redcoats rummaging through one's drawers. Fourth Amendment protections ought likewise extend by analogy to the internet: Just as one who shuts the door to a phone

booth and pays for a phone call may reasonably expect that the content of his phone
48

call will not be intercepted, so one who encrypts the content of a transmission over

the internet and carefully secures the key has taken socially reasonable steps to

maintain the confidentiality of his communication.

To be sure, we do not maintain reasonable expectations of privacy in those aspects

of our lives that we voluntarily reveal to potential uninvited onlookers. For example,

the Supreme Court has held that the Fourth Amendment does not constrain government searches of open fields that would be visible to hunters passing by and airplane pilots flying overhead, or of garbage bags placed on the curbside where their

contents would be readily accessible to scavengers and the trash collector. See Oliver

v. United States, 466 U.S. 170 (1984); California v. Greenwood, 486 U.S. 35 (1988).

But the Court has never held that the government is presumptively entitled to access to anything more than we choose voluntarily to reveal, or risk revealing, to the

world at large. We are not normally expected to grant easements of access to the

government to areas of our lives that we have generally shielded from meaningful

public view.

Mandatory key escrow inverts these usual presumptions by requiring that citizens

take affirmative steps to facilitate government surveillance. Imagine if government,

for similar reasons, requested us to live in glass houses, conduct all our conversations loudly and exclusively in English, carry all our personal belongings in clear

plastic bags, or keep all of our possessions in unlocked cabinets or drawers. Most

Americans would no doubt be deeply troubled by such laws. Government may not

bootstrap its way out of Fourth Amendment constraints simply by outlawing methods for preserving privacy that would otherwise be considered reasonable within the

broad contours of our customs and traditions.

Or suppose that government, under laws more closely analogous to mandatory

digital key escrow, ordered that copies of all personal papers be deposited in safe

deposit boxes in private banks, or that a duplicate of every set of house keys be kept

with an insurance agent, in order to facilitate ready later access by law enforcement

officials. Such methods, much like the regular conduct of general searches, would

seriously compromise the individual privacy and security that we all enjoy, not just

that enjoyed by would-be criminals.

It makes little difference that one is compelled to turn over one's keys, as an initial matter, to private parties rather than to the government. The compromise to

individual security and privacy remains much the same. Nor is it plausible to suppose that no government search or seizure really occurs until government approaches a key escrow agent for the key•at which point there will be a warrant,

a court order or at least enough particularized suspicion to make the government's

action reasonable. Any particularized suspicion that might be thought to justify key

recovery at a later time cannot cure the problems caused by the generality of the

initial sweep.

Imagine, for example, that government required that we all install surveillance

cameras inside our homes•while promising to turn them on only upon particularized suspicion. Or suppose that government were to require that we wear computerized jewelry that could be programmed by government to monitor our movements•

but only if government comes to suspect that we are about to do something illegal.

And suppose further that government turned on the cameras or activated the silent

beeper without any specific notice to use akin to the ancient common-law requirement of knock-and-announce. In such settings, government's promise that it would

activate its enhanced capacity to invade our privacy only if it accurately suspected

us of some wrongdoing would hardly be enough to assure us that it would never

make a mistake or single us out for some other less relevant reason. It is the very

purpose of the Fourth Amendment to shift the risk of such error to the government

Finally, proponents of mandatory key recovery might argue that it presents no

greater Fourth Amendment problems than does the requirement that digital telephones be configured to allow the government to wiretap conversations. This analogy is inapt. Telephone users necessarily surrender some control of their communications to telephone companies, who in turn can be, and historically have been,

forced to surrender access to the government; by contrast, the internet makes possible unmediated communication between speaker and listener in which the users

at all times can maintain exclusive control of the decryption keys. Mandatory key

recovery thus would force internet users to make a copy of a key they never would

have lost control of in its absence. Moreover, telephone interception applies to

ephemeral communications, while mandatory key recovery gives government potential access to a much broader realm of stored data.

3. Privilege Against Self-Incrimination. The Fifth Amendment provides, among

other things, that no person "shall be compelled in any criminal case to be a witness

against himself." This privilege against self-incrimination helps prevent government

from plundering the defendant's own mind for assistance in convicting him of a
49

crime. But to trigger the protection of this clause, a communication must simultaneously be testimonial, incriminating and governmentally compelled.

The contours of the privilege as it applies to compelled surrender of encryption

keys are controversial, but one thing is clear: Mandatory key escrow would operate

to defeat any Fifth Amendment protection that might otherwise attach by

disaggregating the elements of any defense. In the absence of third-party escrow,

government would have to try to compel individual keyholders to divulge or hand

over their keys. Forced recitation of a key from memory, like forced recitation of a

combination to a safe, is arguably testimonial, as well as incriminating and compelled. Compulsory surrender of a recorded version of a key might likewise trigger

the privilege, at least if the act of production of the key were itself communicative,

for example authenticating a document or attesting to the defendant's connection to

the message that key enables the government to decrypt.

But the Fifth Amendment privilege could be bypassed altogether if government

could compel production of a key by a third-party escrow agent rather than from

the user of the key. The user's surrender of the key at the outset is compulsory,

but not at that time either testimonial or incriminating. The user's creation and

encryption of any particular message is voluntary, not compelled. And even if a key

enabling decryption of a particular message is incriminating to the user, its compulsion from the third-party escrow agent does not amount to testimony by the user.

In short, the Fifth Amendment privilege might sometimes protect the papers of a

defendant from compulsory production by the defendant, but not from compulsory

production by a third party, and at a minimum, the same logic would appear to

apply to decryption keys.

Mandatory key recovery thus helps to work an end run around the protections

of the Fifth Amendment privilege against self-incrimination. Normally it is up to individuals to decide whether to increase the risk that their documents•or, in this

context, their decryption keys•will ultimately be surrendered to the government by

transferring those documents to third parties. Mandatory key recovery takes away

that choice.

4. The Problem of Futility. Even clear infringements of fundamental constitutional rights can sometimes be justified if they are sure to serve compelling government interests. Prevention of crime, terrorism and threats to national security are

undoubtedly compelling interests. But it is very far from certain that domestic

encryption controls•even in tandem with existing or future export controls•will be

genuinely effective in preventing such dangers. For the skilled user, strong

encryption will inevitably be available for import from foreign sources. And the

availability of strong encryption from foreign sources can be expected to increase

farther to the extent that domestic encryption controls drives software design talent

overseas. Furthermore, high-tech criminal activity can be expected to cultivate its

own encryption expertise, and those who are undeterred by the general criminal law

are unlikely to comply with third-party key escrow requirements. While standardization of key recovery-based encryption products thus may enable detection and deterrence of criminals at the lower end of the expertise scale, mandatory key recovery

is far less likely to do the same for the most sophisticated and dangerous criminals

or terrorists. The lower the expected utility of a particular technique of law enforcement, the less justifiable its adverse impact on our general sense of privacy and security.

5. Unconstitutional Conditions. The constitutional concerns raised above would

not evaporate if government sought to achieve key escrow through use of its spending power, rather than through direct regulation. The Supreme Court has long held

that there are limits to how much regulatory leverage government can obtain

through its market participation. Across a range of constitutional areas, the Court

has held that government's power to dictate the terms on which its own resources

may not be used to dictate the terms on which its contracting partners or grantees

may use their own resources. For example, a grant of a public broadcasting subsidy

does not entitle government to bar all editorializing by the recipient, even if such

speech is supported by private funds. Nor may government dictate to a public employee what income he may derive from speech activities he undertakes in his spare

time. Similarly, the government may impose key recovery requirements on computer

products and internet services that it purchases for its own (presumably non-classified) use. But that does not necessarily entitle it to impose such requirements on

its suppliers in their dealings with private customers.

To the extent that network externalities require those who do large amounts of

internet business with the government to standardize their products for both public

sector and private sector markets, there is a real danger that government procurement conditions will operate in fact as regulatory conditions extending far beyond
50

the scope of a government contract. The significant temptation for overreaching in

such a setting calls for the exercise of considerable governmental self-restraint.

Conclusion. Privacy is a basic and traditional constitutional value served in overlapping ways by the First Amendment's protection of anonymous speech; by the

Fourth Amendment's protection of our persons, houses, papers and effects and their

modern equivalents; and by the Fifth Amendment's protection of knowledge we commit to memory and decline to divulge to anyone else. Mandatory key access would

undermine all three protections. It would reverse the usual constitutional presumption that we are free until we pose a threat of material harm, presuming instead

that all securely encrypted internet communications are potentially appropriate targets for government access. Such an inversion of our constitutional order might be

justified if mandatory key escrow really could keep criminals and terrorists at bay.

But a complex non-user-controlled key access system is likely to be both easily

evaded by high-tech criminals and increasingly vulnerable to their predations at the

expense of ordinary citizens. Under such circumstances, mandatory key access

should be rejected.

Senator ASHCROFT. Richard Epstein is the James Parker Hall

Distinguished Service Professor of Law at the University of Chicago Law School. He has written widely on a variety of constitutional issues too numerous to mention and has authored perhaps

the most influential modern work on the takings clause.

It is my pleasure to call upon Professor Epstein at this time.

STATEMENT OF RICHARD A. EPSTEIN

Mr. EPSTEIN. Thank you very much. I would like to depart a little bit from my written statement to comment on some of the

points that were made by the Justice Department and try and put

it in some sort of a larger context.

Senator ASHCROFT. Thank you.

Mr. EPSTEIN. I think the basic context that one has to examine

in all of these particular disputes is a world in which there are always two kinds of errors. In some situations, it turns out that individuals are deprived of privacy which they ought to be able to keep,

and in other cases individuals engaged in criminal activities will be

able to maintain privacy that they ought to be able to lose.

The great question and the reason why we have such long hearings is that there is no set of social institutions that can drive either of these kinds of errors to zero, and the effort to insist or to

pretend that there is a way in which you can guarantee that you

will be able to achieve all of your ends without necessarily compromising any of the desires of other individuals is, on purely a

priori grounds, simply a fiction that cannot be sustained.

I think the great mistake in the Justice Department's position is

that they assume that they can continue to guarantee the same

safety with weak encryption•that is, encryption that is subject to

the back-door key•as they can without it. The only question that

one has to ask is not whether that is possible. It is not. The question that one has to ask is whether or not the sacrifices and safety

that come by virtue of the installation of the trap door are worth

it in terms of the law enforcement benefits that can be gained. I

think the answer to that question, on balance, has to be regarded

as no.

The simplest way in which I would like to put this is to ask yourself who is likely to be more responsive to the ability to evade these

kinds of regulations, criminals who do not register with the Government and who are not known in advance or large and major corporations whose every activity is subject to Government regulation
51

and whose ability to operate, as it were, off the books would subject

them to severe sanctions of all kinds and descriptions.

The simple point, I think, is that to the extent that we have a

world in which there is explicit regulation with key recovery and

similar devices, we will have a world in which the criminals will

not play. They will find some ways to go overseas. They will take

pretty good privacy methods that are out there already and use

them. They will make sure, in effect, that they will engage in a variety of deceptions that will render the system of regulation essentially ineffective.

In addition to this, it seems to me that we have to recognize that

the system itself can break down. The moment you start to install

third-party key recovery systems, you have to ask a lot of questions

which are not answered by the Government at this point. Who is

going to be a trusted key operator? Who is going to, under these

circumstances, pay these people in order to provide the services

that they render? Is it going to be paid for by the Government? Is

it going to be paid for by the individuals who are forced to turn

their keys over under these circumstances? How are these parties

going to work and what are going to be the consequences in the

event that there is a slip-up so the data in question in going to be

lost through inadvertence or through theft?

These are constant questions, and it is simply not sufficient, in

my judgment, to say that appropriate regulations can be used in

order to handle these problems. Before one wants to embark on

these kinds of surveys, you have to know what these regulations

are, not simply take a promise that they could be made that way.

I have looked at enough of the reports by technical people to believe that what they say is, in fact, correct. At the moment you introduce two keys to any particular document, it is not a question

of market savvy. It is a question of an impossibility theorem. You

cannot make something which has two keys to it as safe as something which has only one key. You cannot make something which

responds to the demands of law enforcement which would be as

good as a voluntary system of key recovery that responds only to

the demands of the customer who happened to purchase that thing

in the first place.

Now, with all of this said, the balance, in effect, is going to be

extremely important in the way in which you think about first

amendment and fourth amendment and other kinds of rights in

question. Whenever one sees the word "unreasonable" before anything, you know that some kind of a balancing test is going to be

involved. And if what I said is correct that the gains to law enforcement will be subject to massive evasion by criminal efforts, but the

losses to private individuals engaged in lawful activities will be

very substantial, then it seems to me that the reasonable balance

is put in the direction of saying stay the hand of Government

under these circumstances.

We were told, of course, however, by Mr. Litt that regulation is

all-pervasive, and his remarks he concludes with a discussion of

how it is that the United States does not ban automobiles, but

nonetheless subjects them to various kinds of extensive regulations,

some of which, I might add, off the record, I deplore. But that is

not the point that we are worried about here. The question we are
52

worried about here is whether the analogy will work as a constitutional or as a business matter, and I submit to you that it fails on

both of these grounds.

The first point that one has to recognize is that to the extent that

you are talking about the regulation of automobiles on a public

highway, you are talking about the kinds of activities which under

current Supreme Court doctrine receive the lowest level of scrutiny

and protection. To the extent, on the other hand, that you are dealing with privacy and other kinds of first amendment speech and interest, you are dealing where there is either intermediate or strict

scrutiny. To show that there is pervasive legislation in an area of

rational basis review is not to show anything about what happens

where the level of review becomes much more stringent. So under

these circumstances, if you look at the regulations, it seems to me

that they surely fail.

In addition, the kinds of regulations that one has asked for in an

area more sensitive are far more sensitive than the sorts of regulations that you had in the other areas. To give but a simple point,

if the only thing you could do with respect to computer records was

to have license tags on them, then the Government would be able

to see that there is an undecipherable message which is sent out

by company xyz. It would not be able to get the stuff in question.

So what happens is the Government gets the wrong standard of

scrutiny, and then what it does is it demands the wrong level of

invasion relative to that level of scrutiny. It may be that there are

certain kinds of license tags or identification numbers or something

else that could be worked out, but a strong key is far more intrusive than any form of regulation that is demanded with respect to

the automobile.

This is not a case where if you want to go on the highway, you

would have to file in advance with the Government your travel

plans before you are allowed to use the roads. Over and over again,

one has said that the monopoly that the State has over the public

means of communication does not allow it to impose whatever

terms and conditions it sees fit on individual citizens. That is true

with respect to the highways going back to the 1920's. It ought to

be true of the Internet today.

Thank you.

Senator ASHCROFT. Thank you, Professor Epstein.

[The prepared statement of Mr. Epstein follows:]

PREPARED STATEMENT OF RICHARD A. EPSTEIN

A World of Clashing Imperatives. The issues before the Subcommittee raise the

inescapable tension between two sets of vital concerns, both of which deserve constitutional recognition. On the one hand lies the need of all Americans to preserve

privacy and confidentiality of information essential to their personal lives and their

professional businesses. No one can doubt the huge volume of sensitive information

that travels across the internet•medical records, financial information, trade secrets, intellectual property. The immense value of that information will be compromised or lost if allowed to fall into the wrong hands. Yet by the same token, no

one can doubt the legitimate needs of law enforcement officials at the federal, state

and local levels to monitor the high tech criminal activities that threaten the security of this nation, the liberty of the citizens within it, and the security and safety

of the property they own. It would be irresponsible to offer testimony before this

Committee that slights the strength and validity of either interest.

Acknowledging the importance of both ends sets the stage for analyzing the current controversy: legislative proposals that mandate, often through some form of a
53

key escrow or key recovery system, mandatory government access to private

encryption of sensitive information. With weighty interests on both sides, the proper

accommodation all boils down to a single set of relevant considerations. What are

the costs and benefits of the various systems that step up public surveillance over

private information transmitted over the internet? To see why, just consider for a

moment the position of private users of the internet if they knew to a certainty that

the present proposals for mandatory government access were foolproof, that is, that

they always worked only as intended. Given that assumption, government law enforcement agencies would only obtain private encrypted information when able to

show probable cause that the information would assist them in detecting, preventing

or solving a crime. The information in question would be strictly limited to these

purposes. This fail-safe system could never be misused by public authorities; and

the creation of the trap door method of entry into the system would never compromise to the slightest degree the ability of strong encryption to keep its messages

from fanatical terrorists, criminal elements, computer hackers, rogue governments

or other undesirables who wanted to seize it for their own advantage. Finally, all

the governments of the world could adopt this fail-safe system as well as the protections for individual privacy guaranteed by the Fourth Amendment. Satisfy these

strict conditions, then every private firm that now strongly opposes the many variations for mandatory public access to encrypted information might testify on behalf

of the proposal. They would benefit from the increased security obtained from superior law enforcement efforts, and they would experience no diminution in the security and efficacy of their private telecommunications. The world would be devoid of

nettlesome trade-offs, and delicate risk calculations.

But these companies have formed a massive alliance to protest the proposals of

the Clinton Administration, the Department of justice and the Federal Bureau of

Investigation to introduce any system of mandatory access into every private communication made over the internet. It is not that these companies are opposed in

principle to vigorous criminal law enforcement that protects the sensitive personal

information and trade secrets of their own businesses and their millions of customers. It is because they reject this optimistic scenario on both practical and theoretical grounds.

Practically, they insist that the advanced technology needed to operate a system

of key recovery on a massive scale is not available; theoretically, they believe that

advances in computer technology alone will never be able to overcome the inherent

risks associated with the operations of this system no matter how many design safeguards the federal government seeks to build into the system. It is clear, almost as

a matter of first principle, that the more complex a system of transmission of

encrypted information must be, in serving multiple ends, the greater the likelihood

its design will compromise its ability to achieve it stated mission•the secure transmission of sensitive information over the internet. Technical complexity does more

than increase the costs of transmission: it also creates weaknesses in structure that

can be exploited by the very criminal parties whose activities the government wishes to curtail by its mandatory access programs. The technical report of the Ad Hoc

Group of Cryptographers and Computer Scientists, 'The Risks of Key Recovery, Key

Escrow, and Trusted Third Party Encryption" (May, 1997) demonstrates this conclusion beyond any shadow of a doubt. Any trap door system increases the risk that

someone else will be able to find, duplicate or manufacture the key to the encrypted

information. The trap door places enormous operational trust in personal security

systems that government officials must develop to handle massive amounts of data

and billions of separate keys. That logistical key-control center exposes the entire

system to the risk of a common-mode failure which in turn becomes the obvious target point for terrorist and criminal elements: blackmail, deception, impersonation

can all be focused on a single known end. No complex administrative program advances only its stated ends. Each creates unwanted incentives that set in motion

complex forces that are only imperfectly perceived when the program is first introduced. Social theorists often warn of the unintended (and counterproductive) consequences of purposive action. That warning must be needed here. Lawful individuals and firms will be trapped by Byzantine requirements, imperfectly executed;

criminal and terrorist elements will hone in on ways to evade or subvert the complex structures at hand.

What is so distressing about the current hearings is that high law enforcement

officials are so inattentive to the specific objections raised against the programs of

mandatory access that they refuse to acknowledge the risks their own initiative creates. The letter of Attorney General Reno, FBI director Freeh and six other high

criminal law enforcement officials in the Clinton administration to members of Congress on July 18, 1997 embodies this unsound approach. The letter notes:
54

"As we move from the plaintext world to an encrypted one, we have a critical

choice to make: we can either (1) choose robust, unbreakable encryption that protects commerce and privacy but gives criminals a powerful new weapon, or (2)

choose robust, unbreakable encryption that protects commerce and privacy and

gives law enforcement the ability to protect public safety. (Emphasis aaded. " With respect, the choices offered miss the entire point. As stated, the letter assumes that a system of perfect enforcement can be implemented; how else could it

be said (1) that strong encryption without mandatory access only protects criminals

but confers no additional advantage on the private individuals and firms that use

it, and (2) that the system of encryption with mandatory access remains "robust and

unbreakable'' when every known expert in the area stresses the heightened

vulnerabilities to which this system exposes its users. Any candid analysis of the

tradeoffs must recognize that a system of robust, unbreakable encryption also reduces the targets for criminal ana terrorist activities and thus their rate of occurrence. Any accurate overall assessment must also recognize that any key escrow system compromises, perhaps fatally, what would otherwise be a robust and unbreakable system of encryption. It is perfectly proper for the Attorney General, the Director of the FBI and their key law enforcement officials to point out the advantages

of the system they champion. It is wholly improper for them to pretend that it contains no real disadvantages. The proper choice between difficult alternatives is not

advanced by any communication that pretends that the relevant trade-offs simply

do not exist.

The Constitutional Implications. Thus far I have stressed the practical and operational risks inherent in any system of mandatory access. I believe that this background information not only goes to the legislative wisdom of the Clinton Administration proposals but also to both its constitutionality and impact on property rights.

It would be idle for any opponent to mandatory key access to claim before this Subcommittee the fatal nature of the many constitutional objections lodged against the

proposed legislation. The complex nature of the legal issues mirrors the complexity

of the technical problems of implementation. The most that can be claimed in the

absence of authoritative determinations by our Supreme Court is that the proposed

statute travels on a collision course with many of the guarantees of individual liberty found in our Constitution. I think that it is the obligation of this Committee

to make its own independent assessment of these constitutional objections before deciding whether or not to recommend the passage of any legislation that contains the

mandatory access provisions sought by the Clinton Administration and the Department of Justice. In so doing, I believe that it is perfectly proper for this Committee

to refuse to recommend passage of the legislation if it finds these Constitutional objections severe and weighty even if it is uncertain whether the Supreme Court

would be certain to strike that legislation down. It is in that spirit that I shall examine the proposed legislation against two vital Constitutional guarantees: the forth

amendment's protection against unreasonable searches and seizures, and the fifth

amendment's protection against the taking of private property without just compensation. "Unreasonable Searches and Seizures:" The Fourth Amendment reads:

"The right of the people to be secure in their persons, houses, papers and effects,

against unreasonable searches and seizures, shall not be violated, and no Warrants

shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the person or things to be seized.''

The jurisprudence on this clause has been vast, both in the courts and outside,

but a few salient features of the clause deserve special mention. First, the coverage

of the amendment extends to all the "people,'' and thus is directed toward the comprehensive form of government activity contemplated by all mandatory access programs. Linguistically, the coverage of "persons, nouses, papers and effects" does not

capture perfectly the nuances of the information age, but it takes very little tugging

to see their contemporary relevance. In particular, "papers" are protected not because they are blank, but because of the sensitive information they contain. These

records and information do not lose their protection because they are stored digitally

or transferred electronically, only to regain that protection when printed out in hard

copy. The Supreme Court had no difficulty in deciding that telephone calls and private conversations could not be tapped and overhead without regard to the requirements of the fourth amendment, and the same logic surely applies to the electronic

information involved in this area.

A similar approach should be taken to the question of whether the imposition of

a mandatory access program should be regarded as a search or seizure within the

meaning of the fourth amendment The precise question has not been answered by

current Supreme Court law, but its case law provides us with some clues as to the

proper direction of the analysis. The constitutional protection against searches and

seizures is not limited solely to the protection against government trespasses, al-
55

though these are always included. Rather, the protection extends as well to a reasonable zone of privacy that also protects individuals from some nontrespassory

forms of snooping. Here it is sometimes said that all individuals are entitled to a

reasonable expectation of privacy, which is fine so far as it goes, but should never

be construed to allow the government to dash all expectations of privacy by announcing in advance its intended program of state surveillance. The term "reasonable expectations" is meant to serve as a further barrier to government intrusions

of all sought. These expectations cannot be defeated by the facile observation that

so long as one knows that the government is about to snoop, then no one has any

reasonable expectation of privacy. Rather the right way to look at expectations is

to note that the Constitution insures the protection of a reasonable zone of privacy

even against the determined efforts of government to undermine it.

With that said, the cases here do raise some difficult issues of principle that are

not fully resolved under the case law. Thus far the litigated cases have all involved

situations where the government has gained information at the same time that it

has been taken from its owner. A recovery key system, however, does not take

things from the private citizen and give them to the government. Rather it sets the

stage for their easy transfer at some other time, either with or without a warrant.

In dealing with the protection of individual liberties, I believe that constitutional

guarantees are triggered by what the individual citizen has lost. The escrowed key

was taken at the direction of the government and put into the hands of an agent

of its own choosing. If the same thing were done with a second key to a safe or a

front door, could it be said with a straight face that the government has not "seized"

the key from its owner simply because it did not rummage through his papers? And

once the key is seized, could one deny that it has compromised the integrity of that

safe or house?

I take it as beyond question that the surrender of the escrow key surely compromises the integrity of its owner's sensitive information. That surrender also

makes it easier for the government to gain actual possession of that information at

some later date, especially since a government official can turn the escrow key in

the computer lock without the knowledge or cooperation of the individual whose information is being gathered. A key that is taken for one purpose may easily be used

for another. Indeed if the information is never introduced as evidence in court, the

invasion of privacy could take place free not only of judicial sanction but even of

judicial knowledge. Under these circumstances it seems idle to say that the fourth

amendment does not apply because government has not taken the individual's papers or effects. I think the protections of the fourth amendment are triggered when

government action takes the key and compromises the natural defenses that ordinary owners have, just as it would be triggered if the government were authorized

to place hidden microphones in every telephone, microphones that could be turned

on only with the assistance ofsome responsible third party.

The next question is whether this seizure of the escrow key should be regarded

as unreasonable under the fourth amendment. Here the government puts forward

only generalized concerns with international terrorism or organized crime to justify

its massive invasions. Yet it must concede that the number of actual transmissions

which it is entitled to intercept constitutes only a minuscule fraction of those to

which it gains potential access. The insecurity of the mandatory access program,

however, ripples through each and every transaction for which the government receives its hidden key, so that the government faces a heavy burden to explain why

that initial seizure should be regarded as reasonable. In this case, it can get no help

from the warrant requirement, for the generalized insistence on mandatory access

does not remotely demonstrate any "probable cause" of criminal activity. Nor could

any warrant possibly issue for receiving such a key in the absence of any particular

description of the transmissions that will be intercepted.

The entire system of preestablished key recovery reads like in indirect evasion of

the individual safeguards normally afforded under the fourth amendment. The system introduces a massive system of potential surveillance. It cuts out the notice and

knock provisions that must be satisfied before a warrant could be executed. It vests

vast powers in third-party agents who have neither the incentive nor knowledge to

contest any government intrusion. It presupposes uniform good faith by public officials and overlooks the major costs of even a tiny number of official misdeeds or mistakes. The proposed mandatory access system should be condemned therefore "as

an unreasonable search and seizure." The Senate should not give its blessing to a

scheme of such dubious constitutionality. Instead it should encourage law enforcement agencies to adopt other methods of investigation and surveillance, and to enter

into cooperative agreements with major firms in the internet business to expedite

the request for information when the more exacting warrant requirements are met.
Fifth Amendment Takings. At this point. I think that it is also appropriate to express my concerns in another area: should the government have to pay compensation to those persons whose confidential information has been compromised by leaks

from government sources? The relevant text in this context is of course the fifth

amendment protection against takings which reads in full:

"Nor shall private property be taken for public use, without just compensation.''

The command of the fifth amendment is best analyzed as though initially it raises

ordinary questions of tort and property law. The government insists upon the receipt of certain keys for its own benefit. It is therefore as though the government

were the bailee of these keys, for its own use. The law of bailments has long dealt

with the allocation of the risk of loss when property bailed is stolen or lost. Those

analogies help inform the constitutional inquiry into the law of takings.

Initially, let us suppose that some third party steals a key from the government

and uses it to unlock information that causes great private loss. Everyone agrees

that the third party should in principle be subject to criminal and civil sanctions,

assuming that he could be apprehended. But the law is equally clear that the party

who received the key•its cyberspace bailee•may frequently be found liable when

apprehension of that third party is not possible. And no cases ever hold that the

deliberate actions of a third party necessarily insulate the bailee from liability for

its antecedent conduct: the tort law generally has routinely acknowledged that more

than one party could be a proximate cause of a given plaintiffs property damage.

Just that analysis applies here. The law of bailments often apportions the risk

of liability in accordance with the pattern of benefits derived from the bailment relationship. In this case the transaction is done over the objection of the private party

and without its consent: the benefit is for the public at large, and the risk is to the

private party. Under those circumstances, traditional common law doctrine places

the risk of loss from third party interventions squarely on the bailee (here the government) whose actions has increased the risk or hazard of the bailor's (here the

individual or firm's) loss by its own conduct for its own advantage. The standard

always holds the government liable for ordinary negligence, and for routine cases

of theft or loss may impose strict liability as well. But by no stretch of the imagination does the private law confer total immunity for all misconduct on the bailee.

In looking over these various draft bills, all of them deny private parties any recourse for liability against the government on the one hand or the third party escrow agents on the other. This sheer assertion of public will does not of course make

the losses disappear; and it will encourage the government officials to overuse and

underprotect its own key system since the government receives total immunity from

the financial (let alone social) consequences for the damaging loss of commercial and

personal information that could easily take place.

It is, moreover, a fair question to ask whether the government's efforts to insulate

itself from the consequences of its own actions generates potential liability under

the takings clause: the government has taken the key and compromised the contents

of the files: why insulate it from the loss that it concentrates on some particular

individuals for the benefit of the public at large? To be sure, the government may

raise a number of technical legal defenses on its own behalf. It may argue that it

has not taken the information in question when the improper disclosure is directly

done by a third party, and thus take refuge behind a highly restrictive reading of

the takings clause. The government takes a key that operates a dam and places it

in the hands of a third party. The key is stolen, the dam is opened, and a citizen's

land is flooded. Should the government be entitled to deny that it has taken property when it is clearly liable under ordinary tort law for the property interests it

has compromised or destroyed? Should the government claim that the disclosure of

confidential information only amounts to a tort and not a taking when no one has

been able to articulate clearly the line between the two? Should the government be

entitled to invoke the doctrine of sovereign immunity where its necessity for action

rests not on some identified imminent peril or danger, but only on some undifferentiated concern about crime and terrorism not tied to the transaction at hand?

The losses inflicted by government action are real and palpable even if these technical defenses should persuade a court not to require compensation for the private

losses of these public programs. But one central purpose of a constitution is to restrain the excessive powers of government, and that is hardly done by immunizing

it from liabilities that have long been applied to private persons whose own exposure to risk should, if anything, be less than the governments. (After all, no private

party can compel someone else to turn over a back door key for their personal use.)

A strong case could be made that the takings clause should in principle apply to

deprivations of property brought about by the loss or theft of the government key.

It is far from self-evident that the Supreme Court will reject that position when the

full risks of the mandatory access program are made apparent to it. It is also clear
57

that this Committee, with its special concern with property rights generally, should

scrutinize the constitutional, legal and moral power of the property claims that

stand in the way of the current government initiative.

Unconstitutional Conditions. Thus far I have examined the desirability and constitutionality of direct government proposals to regulate the use of electronic transmissions. A more complete analysis must also take note, however, of the indirect

forms of regulation available to the state. The government is an omnivorous user

of electronic transmissions. It deals extensively with all sorts of private parties on

a direct contractual basis. One concern is that it might seek to impose these conditions by executive order as part of its ongoing contractual relations with major suppliers of internet and electronic services.

In many cases the imposition of conditions under grants or contracts is a routine

part of any transaction. Thus no one questions that the government is entitled to

specify the quality and quantity of services demanded, the terms of payment, and

the time and conditions of its delivery. But just as private parties may from time

to time use their power to improperly advance their position in collateral markets,

so too government may use its power to extend its influence into ordinary spheres.

The federal government has exclusive control over the interstate highway system,

and yet no one thinks that it can condition the access of drivers to that system on

their willingness to abandon their fourth or fifth amendment rights in unrelated

contexts. So it is that it would be wholly inappropriate for the government to stipulate that it would not do business with any firm that refuses in its unrelated transactions to adopt a system of escrowed key recovery.

This possible restriction of strong encryption not only places ordinary individuals

and firms at risk, but it also threatens to undermine the appropriate division of

labor between the separate and equal branches of government. The question of mandatory access to private communication or electronic transmission is too vexing and

controversial to be solved by executive order. It should command the anxious attention of Congress so that any proposal goes through the full deliberative process before its possible adoption. An executive order should be discouraged not only because

of its adverse consequences on individual rights, but also because of the threat it

poses to the structural safeguards found in our basic constitutional structure.

Export Controls. Last I should mention a few words about the use of export controls as a device to limit the manufacture and deployment of strong encryption devices. In the short run these are likely to inhibit the proliferation of these devices,

at least as long as the United States enjoys some technical advantages over the rest

of the world. The impact of these restrictions, moreover, should be felt in domestic

as well as foreign markets, given the reluctance of domestic producers to make different products to serve different portions of what is ultimately a global market in

internet and communications services.

Yet the protection afforded by export controls promises to be short-lived at best.

The efforts of the United States to get other nations to go along with its mandatory

access programs have failed (ironically even in nations that have no entrenched constitutional provisions). If the United States cannot export its technology to the

world, then talent will flow to those nations free of the restrictions that limit United

States producers. In the long run, leadership in technology will follow freedom to

innovate, so that strong encryption devices will be available throughout the world.

Our own futile effort to prevent the spread of these devices will only result in the

erosion of our leadership in a potentially booming field of industrial growth. The

strategy will be self-defeating in the end.

Conclusion. In making these observations, I want to be perfectly clear that the

recognition of constitutional protections always comes at some cost. It could well be

in some given situation, the adoption of the mandatory access regime proposed by

the Clinton Administration could outperform a technology world in which private

parties may continue to use strong encryption devices as they see fit. But the issue

before this Committee, and before the nation, should not be decided with reference

to a single scenario without reference to other possibilities that seem more likely.

A mandatory access provision may also allow foreign terrorists or organized crime

to sabotage the very communications system that the mandatory access provisions

are designed to protect.

We live in a world with great potential; but it is also a world of great risks. We

must do the best that we can to minimize the risks. But that requires us to consider

the scenarios in which government regulation does harm as well as those in which

it does good, and to make the best and most responsible decision that we can on

the strength of all available information. On matters such as these it is difficult to

separate the constitutional from the practical considerations, and at this stage in

the inquiry, it is far from clear that we should make that separation at all. The various proposals before this Committee on mandatory key access pose far more risks
58

than they eliminate. The proposal should therefore be rejected both for the risks

that it creates for private transmissions of electronic information, and for the dangers that it poses to the constitutional protections for individual liberty that have

long helped to keep this nation both free and strong.

Senator ASHCROFT. Cindy Cohn is an attorney with McGlashan

and Sarrail, of San Mateo, CA. She served as the lead counsel in

Bernstein v. U.S. Department of State, in which the court held that

software code was protected speech and that export regulations violate free speech guarantees.

Ms. Cohn, thank you very much for being with us and we would

be pleased to have your testimony.

STATEMENT OF CINDY A- COHN

Ms. COHN. Thank you, Senator. I want to thank the subcommittee for inviting me here today. Although there have been very

many hearings and much discussion about cryptography here in

Washington, this is the first hearing, I believe, to seek testimony

from one of the attorneys directly involved in the legal challenges

to the cryptography regulations.

I have been asked here, as you said, because I am lead counsel

in the case of Bernstein v. Department of Justice, et al. The name

of the defense agency keeps changing, but at the moment it is Department ofJustice. With the help of the Electronic Frontier Foundation, Professor Daniel J. Bernstein has been trying for over 6

years to publish on the Internet a very simple cryptographic computer program which he himself wrote. He has been told that if he

does so, he will be prosecuted.

We have argued that American scientists, be they academics, in

industry, or hobbyists, should not have to submit their own work

prior to publication to faceless Government bureaucrats. This is especially the case when those same bureaucrats have unfettered discretion to bar them from publishing their own work. But that is

what the current scheme allows. The Federal District Court for the

Northern District of California has agreed with us that the regulations are a violation of the first amendment on their face, meaning

that they violate the rights of all Americans and not just Professor

Bernstein.

I wanted to take this opportunity to tell you about two other

similar cases which are also pending. The first, Karn v. U.S. Department of State, is here in the D.C. district court. The Karn case

is the clearest example of the quip often made about the administration's cryptography policy that it is based upon a belief that terrorists cannot type. Mr. Karn was told that although a book containing computer source code could be freely sent abroad, a floppy

disk containing the exact same information could not, under fear

of prosecution.

The second case, Junger v. Christopher, is in Cleveland, OH, and

is based upon the Government's position that Professor Junger, a

law professor at Case Western University, could be prosecuted for

teaching a Computers and the Law course in his normal way.

In the Bernstein case, we have received three rulings from the

district court so far, all of them in our favor. The final ruling in

our favor was appealed by the administration, argued in December

1997 before the Ninth Circuit Court of Appeals, and is now waiting
59

decision. I have attached a copy of the third district court opinion

to my written statement for your review. I hope that your staff will

take the time to review it, as well as my more full comments in

my written statement. The opinion gives a clear and concise statement of some of the key constitutional requirements that any legislation on cryptographic software must meet and a better explanation than I could ever give you about why the current regulations are flatly unconstitutional.

As I mentioned before, the Bernstein case challenges the current

Government restrictions on cryptographic software on the grounds

that they are in violation of the first amendment. Although our

case focuses, as it must, on the current regulatory scheme, the

analysis would apply as well to most of the proposed domestic restrictions on cryptography, and certainly on any that would restrict

or license the creation, distribution, or receipt of cryptographic software. Indeed, the constitutional problems which arise if domestic

controls are imposed are even more severe.

I want to tell you a little bit about the doctrines of first amendment law that are raised in the Bernstein case and that the district

court adopted. The Bernstein case focuses on the easiest flaws to

see in the current scheme, the lack of procedural protections. The

Supreme Court has long held that if the Government wants to institute a pre-publication licensing scheme on speech, it must contain, first, a provision of a prompt decision, no more than two

weeks, by the agency; second, a provision that only a court can stop

publication. The Government must bring a court action if it wants

to stop publication and it cannot simply act administratively. And,

third, the Government bears the burden of proof in court. This

comes from a seminal Supreme Court case called Freedman v.

Maryland.

I should point out that as much as I would like to take credit

for this legal analysis, we were not the first ones to see this problem. In fact, the first people to point out these constitutional problems in the cryptographic regulations were the Justice Department's own Office of Legal Counsel in 1978. You see, the agencies

have known for over 20 years that their regulations are flatly unconstitutional and it was their own lawyers who told them so. This

is why you rarely hear them mention the first amendment in their

presentations to you, or if so, only in brief passing.

The key point in our case and in your consideration of any proposed legislation is that source code is protected expression for purf>oses of the first amendment. On this point, the administration

argely agrees. Let me repeat that. Despite what the Department

of Justice representative said here today, in our legal case the administration has not denied that in regulating computer software

it is also regulating the expressive activities of Americans. This

conclusion, which is obvious to anyone who has ever written or

read a computer program, is also consistent with what Congress

has repeatedly held. Software is treated as identical to other forms

of protected expression in both the Copyright Act and the Freedom

of Information Act.

Now, up to this point, everything that I have said isn't just my

opinion; it is the opinion of the Federal district court. My legal

team and I believe, however, that there are other strong constitu-
60

tional reasons to prevent the regulation of cryptographic software.

I won't elaborate on the ones already ably discussed by Professor

Sullivan and Professor Epstein, but there are a couple of additional

ones that I would like to bring to your attention.

In addition to procedural protections, the Constitution requires

that any regulation which institutes a licensing scheme or any

other form of prior restraint must pass the strictest of tests. Even

a claim of national security or public safety must be carefully

weighed against our fundamental rights and must be supported

with hard evidence of direct, immediate, and irreparable harm

from the publication of the material, not just conjecture and not

just a few frightening scenarios.

Further, aside from prior restraint, a scheme which targets

speech on the subject of cryptography and treats that speech differently from speech on other topics must pass the test of strict

scrutiny; that is, the regulation must address a compelling Government interest and be narrowly tailored to reach only that interest

and no further.

Further, the Government must prove that their restrictions on

speech actually meet their goals. This would be difficult in this

case, since terrorists, child predators, and drug dealers can simply

purchase or download strong German, Swiss, or Japanese

encryption software that is freely available all over the United

States and the world•over 500 encryption programs at last count.

If necessary, as I mentioned before, criminals could even type in or

scan one of the many computer programs printed in the books published on this subject.

Neither the current scheme nor any administration-supported socalled compromise scheme proposed so far address these first

amendment problems. And even the SAFE bill, which is well-intentioned, fails to contain an assurance of judicial review of any agency decision to prevent publication due to alleged national security

concerns, a key element required by the Constitution. SAFE also

does not clearly protect scientists such as Professor Bernstein. It

only protects those who seek to distribute mass-market software already available abroad. That means that American scientists can

no longer participate in the ongoing international development of

this vital and important area of science.

As you mentioned before, in our research for this case we have

found that the Framers of the Constitution used cryptography on

a regular basis. Even the Constitution and the Bill of Rights themselves were often encoded as Thomas Jefferson and James Madison

exchanged drafts of those documents. In fact, cryptography was

used by a virtual who's who of the Framers of our Constitution, not

only Jefferson and Madison, but Benjamin Franklin, Alexander

Hamilton, John and Abigail Adams, Aaron Burr, and many others.

In sharp contrast to the administration's arguments today, they

viewed cryptography as an essential instrument in protecting information, both political and personal. Our research indicates that

when the first and fourth and fifth amendments were enacted in

the late 1700's, any suggestion that the Government should have

the ability to prevent individuals from encrypting their messages

or that the Government should have a back-door key to all
61

encrypted messages would have struck the Constitution's Framers

as ridiculous.

In sum, our legal challenge to the current restrictions on

encryption software is succeeding. It is succeeding because the first

amendment is clearly violated when the Government institutes a

pre-publication licensing scheme that allows agency bureaucrats

unfettered discretion to deny Americans the ability to publish their

own ideas. It is succeeding because the courts have recognized the

importance of keeping the first amendment intact as we move on

to the information age. As you consider the many legislative proposals about cryptography, we hope that you will do the same.

Thank you.

Senator ASHCROFT. Thank you very much, Ms. Conn.

[The prepared statement of Ms. Cohn follows:]

PREPARED STATEMENT OF CINDY A. COHN

I want to thank the Sub-Committee for inviting me here today. Although there

have been very many hearings and much discussion about cryptography here in

Washington, this is the first, I believe, to seek testimony from one of the attorneys

directly involved in the legal challenges to the cryptography regulations.

I I've been asked here because I am lead counsel in the case of Bernstein v. Department of Justice, et al. With the help of the Electronic Frontier Foundation, Professor

Daniel J. Bernstein has been trying for over six years to publish on the Internet

a simple cryptographic computer program which he wrote. He has been told that

' if he does, he will be prosecuted.

i We argued that American scientists, be they academics, in industry or hobbyists,

should not have to submit their own work prior to publication to faceless government bureaucrats. This is especially so when those same bureaucrats have unchecked discretion to bar them from publishing his work. That is what the current

scheme allows. In fact, before we brought suit those same agency bureaucrats told

> Professor Bernstein that publishing an academic paper about his software would be

I illegal and that putting his software into a public library would be illegal. The Fed-

" eral District Court for the Northern District of California has agreed with us that

the regulations are in violation of the First Amendment on their face, meaning that

I they violate the First Amendment rights of all Americans, not just Professor Bernstein.

KARN AND JUNGER: TWO OTHER LEGAL CHALLENGES

Two other similar cases are also pending. The first Karn v. U.S. Department of

State, is here in D.C. District Court. The Karn case is the clearest example of the

I quip often made about the Administration's cryptography policy•that it is based

upon the belief that terrorists can't type. Mr. Karn was told that, although a book

containing computer source code could be freely sent abroad, a floppy disk containing the exact same information could not. The second case Junger v. Christopher,

• is in Cleveland, Ohio, and is based upon the government's position that Professor

Junger, a Law professor at Case Western University could be prosecuted for teacht. ing a Computers and the Law course in his usual way.

' RULINGS OF THE BERNSTEIN CASE \

In the Bernstein case we have received three rulings from the District Court so

? far, all in our favor:

I (1) April 1996: Computer program source code is speech;

f (2) December 1996: ITAR was unconstitutional;

( (3) August 1997: New Commerce Department cryptography regulations issued in

December, 1996 are unconstitutional.

In short, the Federal District Court has declared that every single one of the cur-

|l rent (and previous) regulations of encryption software are unconstitutional.

The final ruling in our favor was appealed by the Administration, argued in December, 1997 before the Ninth Circuit Court of Appeals, and is now awaiting decision. I have attached a copy of the third District Court opinion to my written states' ment for your review. I hope you have your staff take the time to review it•it gives

a clear and concise statement of some of the key constitutional requirements that

50-474 98-3
62

any legislation on cryptographic software must meet and a better explanation than

I could ever give you about why the current regulations are unconstitutional.

As I mentioned before, the Bernstein case challenges the current government restrictions on cryptographic software on the grounds that they are in violation of the

First Amendment. Although our case focuses, as it must, on the current regulations,

the analysis would apply as well to proposed domestic restrictions which would restrict or license the creation, distribution or receipt of cryptographic software. Indeed the constitutional problems which would arise if domestic controls were imposed are even more severe than those of the current scheme.

The first doctrine of First Amendment law which the cryptography regulations

violate is prior restraint of speech. The Bernstein case focuses on the easiest flaws

to see in the current scheme•the lack of procedural protections. The Supreme

Court has long held that if the government wants to institute a prepublication licensing scheme, it must contain:

(1) Prompt decision•no more than 2 weeks;

(2) Only a court can stop publication; the government must bring a court case

rather than act administratively;

(3) Government bears burden of proof in Court.

This comes from a seminal Supreme Court case called Freedman v. Maryland.

I should point out that as I would like to take credit for our legal analysis, we

were not the first to see this problem. In fact, the first people to point out this problem in the regulations were in the Justice Department's Office of Legal Counsel in

1978. You see, the agencies have known for 20 years that this scheme is unconstitutional. Their own lawyers told them so. That is why you never hear them mention

the First Amendment in their presentations to you.

COMPUTER SOFTWARE IS PROTECTED EXPRESSION

The key point in our case, and in your consideration of any proposed legislation,

is that source code is protected expression for purposes of the First Amendment On

this point, the administration largely agrees. Let me repeat that•the Administration has not denied that in regulating computer software it is also regulating the

"expressive activities" of Americans. This conclusion, which is obvious to anyone

who has ever written or read a computer program, is also consistent with what Congress has repeatedly acknowledged. Software is treated as identical to other forms

of protected expression in both the Copyright Act and the Freedom of Information

Act.

From a legal standpoint, the Bernstein case is not complex, nor does it break any

dramatic new ground. It simply asks the courts to recognize that the First Amendment extends to science on the Internet, just as it does to science on paper and in

the classroom. For it is this scientific freedom which has allowed us to even have

an Internet, as well as the many other technologies which we enjoy today.

OTHER FIRST AMENDMENT TESTS WHICH CRYPTOGRAPHY REGULATIONS MUST MEET

Up to this point everything I've said isn't just my opinion. It's been decided by

the Federal District Court. My legal team and I believe that there are other strong

Constitutional reasons which prevent the regulation of cryptographic software. The

District Court did not need to address these additional reasons, since it agreed with

us that the first alone was sufficient to invalidate the regulations.

In addition to procedural protections, the Constitution requires that any regulation which institutes a licensing scheme, or any other form of prior restraint, pass

the strictest of tests. Even a claim of national security or public safety must be carefully weighed against our fundamental rights, and must be supported, with hard evidence of direct, immediate and irreparable harm, not just conjecture and a few

frightening scenarios.

Further, aside from prior restraint, a scheme which targets speech on the subject

of cryptography and treats that speech differently from speech on other topics must

pass the tests of strict scrutiny•that the regulation address a compelling government interest and be narrowly tailored to reach only that interest and no further.

That is, the government's concern about national security cannot reach so broadly

as to prevent law-abiding citizens from having access to software which they can

use for completely lawful purposes. Put into another context, it means that the government cannot require all of us to deposit our house keys with them on the off

chance that one of us is a criminal.

Further, the government must prove that their restrictions on speech actually

meet their goals. Here, such proof would be difficult since terrorists, pedophiles and

drug dealers can simply purchase or download strong German, Swiss or Japanese

encryption software that is freely available all over the U.S. and the world•over
63

500 at last count. If necessary, criminals could even type in or scan one of the computer programs printed in the many books published on the subject.

THE ADMINISTRATION'S LEGISLATIVE PROPOSALS FAIL THESE FIRST AMENDMENT TESTS

Neither the current scheme nor any administration-supported, so-called "compromise" schemes proposed so far addresses these First Amendment problems. And

even the SAFE bill, which is well-intentioned, fails to contain an assurance ofjudicial review of any agency decision to prevent publication due to alleged national security concerns, a key element required by the Constitution. SAFE also does not

clearly protect scientists such as Professor Bernstein, but only protects those who

seek to distribute mass market software already available abroad. This means that

American scientists can no longer participate in the ongoing international development of this vital and important area of science.

ENCRYPTED SPEECH IS STILL SPEECH

In addition, we believe that regulation of encryption software and technology violates the First Amendment because of what encryption does. Encryption allows people to use electronic envelopes to protect their speech. The Supreme Court has noted

that a state could not regulate ink or paper without raising constitutional concerns.

We believe that similarly the government cannot prevent Americans from using

electronic envelopes or require them to use key-escrowed envelopes without violating their First Amendment rights. This is because such rules compel them to speak

to the Government anytime they wish to speak to anyone else. Encrypted speech

is still speech. The elimination of privacy creates a chilling effect on that speech

which implicates the First Amendment.

ENCRYPTION WAS USED BY THE FOUNDING FATHERS

In fact, in our research for this case we have discovered that the Founding Fathers used cryptography on a regular basis. Even the Constitution and the Bill of

Rights themselves were often encoded, as Thomas Jefferson and James Madison exchanged drafts of those seminal documents. Cryptography was used by a virtual

Who's Who of the American Founding Fathers•not only Jefferson and Madison but

Benjamin Franklin, Alexander Hamilton, John and Abigail Adams, Aaron Burr, and

many others. In sharp contrast to the Administration's arguments today, they

viewed cryptography as an essential instrument for protecting information, both political and personal. Our research indicates that when the First and Fourth Amendments were enacted in the late 1700s, any suggestion that the Government should

have the ability to prevent individuals from encrypting their messages, or that the

Government should have a back-door key to all encrypted messages, would have

struck the Constitution's framers as ridiculous.

CONCLUSION

In sum, our legal challenge to the current restrictions on encryption software is

succeeding. It is succeeding because the First Amendment is clearly violated when

the government institutes a prepublication licensing scheme which allows agency

bureaucrats unfettered discretion to prevent American scientists from publishing

their own ideas. It is succeeding because the Courts have recognized the importance

of keeping the First Amendment intact as we move into the information age. As you

consider the many legislative proposals about cryptography, we hope you will do the

same.
974 F.Supp. 1288

97 Daily Journal D.KR. 13,899

(Cite as: 974 F.Supp. 1288)

Daniel J. BERNSTEIN, Plaintiff.

T.

UNITED STATES DEPARTMENT OF

STATE, et el. Defendant*.

NO.C-M4682MHP.

United States District Court,

N.D. California.

Aug. 25, 1997.

Mathematician aought declaratory and

injunetive relief against enforcement of the

Anna Export Control Act (AECA) and the

International Traffic in Anna Regulations

OTAR) on the ground that they were

unconstitutional on their face and as applied

to the mathematician's cryptographic

computer source code. On cross-motions for

summary judgment, the District Court, 946

F.Supp. 1279, invalidated parts of the

regulations. Mathematician filed an amended

complaint after a new executive order

transferred regulatory authority to the

Department of Commerce. On varioua

motions, the District Court, Patel, J., held

that: (1) there was no basis for a statutory,

non-constitutional challenge to the executive

order, (2) the encryption regulations issued by

the Bureau of Export Administration (BXA)

were directed quite specifically and "by their

term*" to the entire field of applied scientific

research and discourse and, thus, were subject

to a facial prior restraint analysis, even

though the export of commercial cryptographic

software programs may not have been

undertaken for expressive reasons; and (3) the

regulations were unconstitutional prior

restraints in violation of the First

Amendment, inasmuch aa encryption software

was singled out and treated differently from

other software regulated under the Export

Administration Regulations (EAR).

Page 1

Ordered accordingly.

[1] CONSTITUTIONAL LAW < '46(1)

ttaltiCl)

Claim that President and Department of

Commerce lacked statutory authority under

International Emergency Economic

Act (TEEPA) to regulate computer software

encryption producta implicated validity of

existing regulation* and was to be nrldi cis•cid

before review of any constitutional questions.

International Emergency Economic Powers

Act, If 202-207,50 U.S.C. A II1701-1706.

12] WAR AND NATIONAL EMERGENCY

<*=> 604

402k504

President waa not "agency" within MtsawtwJ cf

Administrative Procedure Act (APA) axel,

thus, bis actions in banning export of

computer software encryption producta under

International Emergency Economic Powers

Act (TEEPA) was not reviewable under APA

5 U.S.C.A I 551 et seq.; International

Emergency Economic Powers Act, II 202-207,

50 U.S.C.A. II 1701-1706.

See publication Words and Phrases for other

judicial nrnstnM*tions and definitions.

[SI WAR AND NATIONAL EMERGENCY

•>«•

402k503

District court could not review nonAdministrative Procedure Act (APA) statutory

claims about whether President exceeded his

statutory authority under International

Emergency Economic Powers Act (IEEPA) to

transfer jurisdiction over computer software

encryption items to Commerce Department 5

U.S.C.A I 681 et see..; International

Emergency Economic Powers Act, II 202-207,

60U.S.C.A II 1701-1706.

[41 WAS AND NATIONAL EMERGENCY

•»m

402x604

Declaration of national emergency and

issuance of executive order that transferred to

Department of Commerce jurisdiction over

export of nonmUitary computer software

encryption products waa action that rested

with President and waa baaed on his broad

discretion under International Emergency

Economic Powers Act (IEEPA); thus,

legitimacy of executive order would not be

addressed by district court. International

Copr. e West 1997 No Claim to Orig. U.S. Govt. Works

DBHB.
65

974 F.Supp. 1288

(Cite as: 974 F.Supp. 1288)

Emergency Economic Powers Act, il 202-207,

202, SO U.S.C.A. 99 1701-1706, 1701; Export

Administration Act of 1979, 9 2 et seq., 50

App.U.S.C.A. 9 2401 et seq.; 15 C.F.R t

730.1 et seq

[51 WAR AND NATIONAL EMERGENCY

402k601

Computer encryption software wee "property

in which any foreign country or a national

thereof haa any interest,-within meaning of

International Emergency Economic Powers

Act (TEEPA) and, thus, encryption software

was subject to regulation, despite

mathematician's claim that, as speech,

encryption software was within exemption for

personal communications and informational

materials International Emergency

Economic Power. Act, 85 202-207, 203(aXl),

(bXl. 3), 60 U.S.C.A. il 1701-1706, 1702(aXl),

(bOU, 3); 31 C.F.R {I 600.311, 600.312.

See publication Words and Phrasee for other

judicial constructions and definitions.

161 WAR AND NATIONAL EMERGENCY

*=604

402x604

Cryptographic computer software was not

"any postal, telegraphic, telephonic or other

personal communication which does not

transfer anything of value" within meaning of

exemption from regulation under

International Emergency Economic Powers

Act (TEEPA); encryption software was not

limits to arariamir discussion of

cryptographic ideas, and there were

potentially billions of dollars at stake in

export of commercial encryption software.

U.S.C.A. Const-Amend. 1; International

Emergency Economic Powers Act, 99 202-207,

203(aXl), (bXl, 3), 60 U.S.C.A 99 1701-1706,

1702(a)(1), (bXl. 3Y, 31 C.F.R. 91 600.311,

500.312.

See publication Words and Phrases for other

judicial constructions and definitions.

[71 WAR AND NATIONAL EMERGENCY

*>504

402x504

Page 2

Computer software encryption products were

within scope of Export Administration Act

CEAA) as items controlled for foreign policy or

national security reasons and, thus, those

products did not fall within exemption from

International Emergency Economic Powers

Act (IEEPA) for informational mat«*ifl't

U.S.C.A. Const.Amend. 1; International

Emergency Economic Powers Act, 99 202-207,

203(bX3), 50 U.S.C.A. 91 17011706,

1702(bX3); Export Administration Act of

1979, 99 2 et seq., HaXl), «aXl), 50

App.U.S.C.A. 99 2401 et seq., 2404(aXl),

2405(aXl).

[8] CONSTITUTIONAL LAW ®= 90.1(1)

92x90.1(1)

Narrow determination that source code for

computer software encryption products was

"speech" protected by First Amendment did

not remove encryption technology from all

government regulation under International

Emergency Economic Powers Act (IEEPA).

U.S.C.A. Const.Amend. 1; International

Emergency Economic Powers Act, 99 202207,

203taXl), (bXl, 3), 50 UJS.C.A. 99 1701-1706,

1702(aXl), (bXl, 3); 31 C.F.R. 99 500.311,

500.312.

See publication Words and Phrases for other

judicial constructions and definitions.

[81 WAR AND NATIONAL EMERGENCY

4=. 501

402x501

Narrow determination that source code for

computer software encryption products was

"speech" protected by First Amendment did

not remove encryption technology from all

government regulation under International

Emergency Economic Powers Act (TEEPA).

U.S.C.A. Const.Amend. 1; International

Emergency Economic Powers Act, 99 202-207,

203(a)(1), (bXl. 3), 60 U.S.C.A. 99 1701-1706,

1702(aXl), (bXl. 3>, 31 CJ.R 91 600.311,

500.312.

See publication Words and Phrases for other

judicial constructions and definitions.

[9] CONSTITUTIONAL LAW <

92x90(3)

• 90(3)

Copr. • West 1997 No Claim to Grig. VS. Govt. Works
66

974 F.Supp. 1288

(Cite as: 974 F.Supp. 1288)

Chief purpose of constitutional protection

afforded by First Amendment is to prevent

prior restraint* on publication. U.S.C.A

Const.Amend, 1.

[10] CONSTITUTIONAL LAW «=* 90(3)

92k9(X3)

Governments may impose valid time, place

and m*""** restrictions when they are

content-neutral, narrowly tailored to serve

substantial governmental interest, and leave

open alternative channels for communication,

but government may not condition speech on

obtaining ttsaejea or permit from government

aflbjej in that official's boundless discretion.

U.S.C.A. Const.Amend. 1.

[10] CONSTITUTIONAL LAW «• 90.1(4)

92k90.1(4)

Governments may impose valid time, place

and manner restrictions when they are

content-neutral, narrowly tailored to serve

substantial governmental interest, and leave

open alternative channels for communication,

but government may not condition speech on

obtaining license or permit from government

official in that official's boundless discretion.

U.S.C.A. ConstAmend. 1.

[Ill CONSTITUTIONAL LAW «=• 90.1(1)

92k90.1(l)

First Amendment is more tolerant of

subsequent criminal punishment of speech

than it is of prior restraints on same speech.

U.S.C.A. Const.Amend. 1.

[12] CONSTITUTIONAL LAW «=> 90(3)

92k90(3)

Danger inherent in prior restraint is largely

procedural, in that restraint bypasses judicial

process and locates in government official the

delicate responsibility of passing on

permissibility of speech. U.S.C.A.

ConstAmend. 1.

[13] CONSTITUTIONAL LAW «= 90.1(4)

92k90.1(4)

When risks of prior restraint associated with

unbridled licensing schemes are present to

significant degree, courts must entertain

immediate facial attack on law. U.S.C.A.

Const.Amend- 1.

Page 3

[141 CONSTITUTIONAL LAW *» 90.1(1)

MM01(0

Computer software encryption regulations

issued by Bureau of Export Administration

(BXA) were directed quite specifically and "by

their terms" to entire field of applied scientific

research and discourse and, thus, were subject

to facial prior restraint analysis, even though

export of commercial cryptographic software

program may not have been undertaken for

expressive reasons; activity is often

undertaken by erienrlets for purely expressive

reasons. U.S.C.A. Const.Amend. 1;

International Emergency Economic lowers

Act, tl 202-207, 60 U.S.C.A. II 1701-1706;

Export Administration Act of 1979, I 2 et aaq.,

60 App.U.S.C.A. I 2401 et seq.; 16 C.F.R. I

730.1 etseq.

[16] CONSTITUTIONAL LAW *=> 90.1(1)

92x90.1(1)

Computer encryption regulations issued by

Bureau of Export Administration (BXA) were

unconstitutional prior restraints in violation

of First Amendment; encryption software was

singled out and treated differently from other

software regulated under Export

Administration Regulations (EAR), although

exception existed for printed materials,

exception was unreliable because BXA

reserved right to control scannable source code

in printed form, exception sought to codify

distinction between paper and electronic

publication that made little or no sense and

was untenable, and Internet was subject to

same exacting level of First Amendment

scrutiny as print media. U.S.C.A.

ConstAmend. 1; International Emergency

Economic Powers Act, II 202-207, 60 U.S.C.A.

II 1701-1706; Export Administration Act of

1979, I 2 et seq., 60 App.U.S.C.A. I 2401 et

seq.; 16 C.F.R. I 730.1 et seq.

[15] CONSTITUTIONAL LAW <*= 90.1(9)

92k90.1(9)

Computer encryption regulations issued by

Bureau of Export Administration (BXA) were

unconstitutional prior restraints in violation

of First Amendment; encryption software was

singled out and treated differently from other

software regulated under Export

Administration Regulations (EAR), although

Copr. • West 1997 No Claim to Orig. U.S. Govt Works
67

974 F.Supp. 1288

(Cite as: 974 F.Supp. 1288)

exception existed for printed material*.

exception wai unreliable because BXA

reserved right to control acannable aource code

in printed form, exception sought to codify

distinction between paper and electronic

publication that made little or no sense and

was untenable, and Internet was subject to

same «•ct»"g level of First Amendment

scrutiny as print media. U.S.C.A

Const.Amend. 1; International Emergency

Economic Powers Act, II 202-207, 60 U.S.C.A.

II 1701-1706; Export Administration Act of

1979, I 2 et seq., 50 App.U.S.C.A } 2401 et

seq.; 15 C.F.R, I 730.1 et seq.

[15] WAR AND NATIONAL EMERGENCY

«•»«•

402k504

Computer encryption regulations issued by

Bureau of Export Administration (BXA) were

unconstitutional prior restraints in violation

of First Amendment; encryption software was

singled out and treated differently from other

software regulated under Export

Administration Regulations (EAR), although

exception existed for printed materials,

exception was unreliable because BXA

reserved right to control acannable source code

in printed form, exception sought to codify

distinction between paper and electronic

publication that made little or no sense and

was untenable, and Internet was subject to

same exacting level of First Amendment

scrutiny as print media. U.S.C.A.

Const.Amend. 1; International Emergency

Economic Powers Act, SI 202-207, 50 U.S.C.A

II 1701-1706; Export Administration Act of

1979, I 2 et seq., 60 App.U.S.C.A. I 2401 et

seq.; 15 C.F.R. 5 730.1 et seq.

[161 CONSTITUTIONAL LAW «*» 90.1(1)

92x90.1(1)

Computer encryption regulations issued by

Bureau of Export Administration (BXA) did

not need to regulate software directly for its

fffrntoM in order to make regulations function

as unconstitutional prior restraint on speech;

it would be enough that they were directed at

expressive activity. U.S.C.A ConstAmend. 1;

International Emergency Economic Powers

Act, II 202-207, 50 U.S.C.A. II 1701-1706;

Export Administration Act of 1979, 8 2 et seq.,

Page 4

50 App.U.S.C.A. I 2401 et seq.; 15 C.F.R. }

730.1 et seq.

[16] WAR AND NATIONAL EMERGENCY

«*»6M

402x504

Computer encryption regulations issued by

Bureau of Export Administration (BXA) did

not need to regulate software directly for its

content in order to make regulations function

as unconstitutional prior restraint on speech;

it would be enough that they were directed at

expressive activity. U.S.C.A. Const.Amend. 1;

International Emergency Economic Powers

Act, II 202-207, 50 U.S.C.A II 1701-1706;

Export Administration Act of 1979,1 2 et seq.,

50 App.U.S.C.A. 8 2401 et seq.; 15 C.F.R. I

730.1 et seq.

[17] CONSTITUTIONAL LAW «=» 90.1(4)

92x90.1(4)

Computer software encryption regulations

issued by Bureau of Export Administration

(BXA) pursuant to Export Administration

Regulations (EAR) did not have sufficient

procedural safeguards to withstand prior

restraint challenge; although regulations

provided that license applications would be

resolved or referred to President within 90

days, there was no time limit on application

referred to President, internal appeals process

required only that agency "shall decide an

appeal within a reasonable time after receipt

of the appeal,'* no standards existed for ruling

on applications, and internal appellate

decision was final and not subject to judicial

review. U.S.C.A. Const.Amend. 1;

International Emergency Economic Powers

Act, II 202-207, 50 U.S.C.A. II 1701-1706;

Export Administration Act of 1979, II 2 et

seq., 13(e), 50 App.U.S.C.A. II 2401 et seq.,

2412(e); 15 C.F.R. II 730.1 et seq., 750.4(a),

756.2(cXl, 2).

[17] WAR AND NATIONAL EMERGENCY

402x504

Computer software encryption regulations

issued by Bureau of Export Administration

(BXA) pursuant to Export Administration

Regulations (EAR) did not have sufficient

procedural safeguards to withstand prior

Copr. • West 1997 No Claim to Orig. U.S. Govt Works
68

974 F.Supp. 1288

(Cite as: 974 F.Supp. 1288)

P«g« 8

challenge; although regulation!

provided that lieenee application would be

resolved or referred to President within 90

dayi, there wes no time limit on application

referred to President, interns) appeal* proceoi

required only that agency "shall decide an

appeal within a reasonable time after receipt

of the appeal," no itandanU existed for ruling

on applications, and internal appellate

decision wee final and not subject to judicial

review. U.S.C.A. ConstAmend 1;

teJtBaj^jejasJ Emergency l?*,f»ivimi> Powers

Act, tl 203-207. 60 U.S.C.A. II 1701-1706;

Export Administration Act of 1979, II 2 at

wo.., 13(e), 60 App.U.S.C.A. II 2401 at *aq.,

2412(a); 16 C.F.R. II 730.1 at aeq., 760.4(a),

756.2(cXl, 2).

(181 CONSTITUTIONAL LAW •*= 47

92k47

First Amendment doea not render inapplicable

the rule that federal court should not extend

ita invalidation of statute further than is

necessary to dispose of case before court

U.S.C.A. ConstAmend. 1.

[19] DECLARATORY JUDGMENT «= 304

118Ak304

Departments of Energy (DOE) and Justice

(DOJ) and Central Intelligence Agency (CIA)

were not appropriate defendants in action

challenging regulations that restricted

exportation of encryption software, even

though officials from each agency were

involved in some way with licensing reviews;

roles played by DOE, DOJ and CIA are

limited to consulting and adviaing Secretary of

Commerce who was responsible for final

decisions on export licenses. U.S.C.A.

ConstAmend. 1; International Emergency

Economic Powers Act, II 202-207, 50 U.S.C.A.

II 1701-1706; Export Administration Act of

1979, I 2 et aeq., 60 App.U.S.C.A. I 2401 et

aeq.; 16 C.F.R. II 730.1 et aeq., 760.4(d, e),

772.

120] CIVIL BIGHTS «= 262.1

78k262.1

Mathematician who challenged enforcement of

Anna Export Control Act (AECA) and

International Traffic in Arms Regulations

(TTAR) on prior restraint grounds was entitled

to injunction against enforcement of

regulations against him or against anyone

who sought to use, discuss or publish his

encryption program, in order to protect

mathematician from fear of prosecution for

teaching and writing about encryption.

U.S.C.A. ConstAmend. 1; International

Emergency Economic Powers Act, II 202-207,

60 U.S.C.A. II 1701-1706; Export

Administration Act of 1979, I 2 et aeq., 60

App.U.S.C.A. I 2401 et aeq.; 16 C.F.R. I 730.1

eteeq.

•1291 Cindy A. Conn, McGIashan 4 Sarrail.

San Mateo, CA, Lea Tien. Berkeley, CA, M.

Edward Boas, Steefel, Levitt 4 Weiss, San

Francisco, CA, James B Wheaton,

Environmental Law Foundation, Oakland,

CA, for Plaintiff.

Frank W. Hunger, Asst. Atty. Gen., U.S.

Dept. of Justice Torts, Civil Div., San

Francisco, CA, Michael J. Yamaguchl, U.S.

Atty., Mary Beth Uitti, U.S. Attorney's Office,

San Francisco, CA, Vincent M Gamy,

U.S.D.J.Civil Div., Washington, DC, Anthony

J. Coppolino, U.S. Dent of Justice, Civil

Division-Federal Programs Branch,

Washington, DC, for Defendants

OPINION

PATEL, District Judge.

Plaintiff Daniel Bernstein originally

brought this action against the Department of

State and the individually named defendants

seeking declaratory and injunrtive relief from

their enforcement of the Arms Export Control

Act CAECA-), 22 U.S.C. I 2778 (1990), and

the International Traffic in Arms Regulations

(TTAR"), 22 C.F.B Pta. 120-30 (1994), on the

grounds that they are unconstitutional on

their face and aa applied to plaintiff. Hie

court granted in part and denied in part the

parties' cross motions for summary judgment

on December 9, 1996. Just prior to the court's

order, President Clinton by Executive Order

13026 transferred jurisdiction over the export

of nonmilitary encryption products to the

Department of Commerce pursuant to the

Export Administration Act of 1979 CEAA"),

Copr. • West 1997 No Claim to Orig. U.S. Govt Works
69

974 FJSupp. 1288

(Cite as: 974 F.Supp. 1288, *1291)

60 U.S.C.App. 38 2401 et seq. (1991), and the

Export Administration Regulations ("EAR"),

15 C.F.R. Pt. 730 et seq. (1997). On December

30,1996, the Commerce Department issued an

jajjafjp rule regulating the export of certain

•1292 encryption products. 61 FecLReg. 68672

(Dec 30, 1996). Plaintiff subsequently

SjSjSjSjBS»s| MB ramp]flint to tssflsjajl the DBW

regulations and new defendants. Now before

this court are the parties' second cross-motions

for summary judgment on the question of

whether the licensing requirements for the

export of cryptographic devices, software and

related technology covered by the

sjtasjpjmjfl)ti to the EAR constitute an

impermissible infringement on speech in

violation ofthe First Amendment.

Having considered the parties' arguments

and submissions, and for the reason set forth

below, the court enters the following

TitoTnrwttTvfiim and order.

BACKGROUND [FN1]

FN1. Some of the information in this

section is taken directly from the court's

previous opinions in this action, Bernstein

v. United States Dept. of State, 922

F.Supp. 1426 (N.D.Cal.1996) (Bernstein I),

and Bernstein v. United State Dept. of

State, 946 F.Supp. 1279 (N.D.Cal.1996)

(Bernstein ID; other background

information is left out or condensed and

reference is made to those opinions.

Additional information comes from the

parties' current submissions or other

sources as indicated.

At the time this action was filed, plaintiff

was a PhD candidate in mathematics at

University of California at Berkeley working

in the field of cryptography, an area of applied

mathematics that seeks to develop

confidentiality in electronic communication.

Plaintiff is currently a Research Assistant

Professor in the Department of Mathematics,

Statistics and Computer Science at the

Encryption basically involves running a

readable message known as University of

Illinois at Chicago.

Page 6

L Cryptography

Encryption basically involves running a

readable message known as "plaintext"

through a computer MBJSSBJBSJ that translates

the message according to an equation or

algorithm into unreadable "ciphertext."

Decryption is the translation back to plaintext

when the message is received by someone with

an appropriate "key." The message is both

encrypted and decrypted by compatible keys.

[FN2] The uses of cryptography are farranging in an electronic age, from protecting

personal messages over jfc*j Internet and

transactions on bank ATMs to ensuring the

secrecy of military intelligence. In a

prepublication copy of a report done by the

National Research Council ("NRC") at the

request of the Defense Department on

national cryptography policy, the NRC

identified four major uses of cryptography:

ensuring data integrity, authenticating users,

facilitating nonrepudiation (the linking of a

satcific message with a specific sender) and

maintaining confidentiality. Tien Decl., Exh.

E, National Research Council, National

Academy of Sciences, Cryptograph's Role in

Securing the Information Society C-2

(Prepublication Copy May 30, 1996)

(hereinafter "NRC Report").

FN2. In symmetric cryptography the

encryption key is the same as the

decryption key. Asymmetric, or publickey, cryptography uses different keys for

encryption and decryption and generally

only the encryption key is disclosed.

Once a field dominated almost exclusively

by governments concerned with protecting

their own secrets as well as accessing

information held by others, the last twenty

years has seen the popularisation of

cryptography as industries and individuals

alike have increased their use of electronic

media and have sought to protect their

electronic products and communications. NRC

Report at vii As part of this transformation,

cryptography has also become a dynamic

academic discipline within applied

mathematics. Appel Dec. at 6; Blaze Dec. at

2.

Copr. • West 1997 No Claim to Orig. U.S. Govt. Works
974 F.Supp. 1288

(Cite as: 974 F.Supp. 1288, M292)

ri Prior Regulatory Framework

Plaintiff* original complaint and both of the

court'i decisions in this action wen directed at

the regulstion* in fata at the time, the TTAR,

promulgated to aTsfleajmwl the AECA The

ITAR, administered within the State

Department by the Director of the Office of

Defense Trade Control* CODTC*), Bureau of

Politico-Military Affairs, regulate* the import

and export of defence article* and defence

aanricee by designating each item* to the

United States Munitions list ("USML"). 22

U.S.C. I 277fcXaXl)- [FN3) Items listed on the

USML, which st the time hasssjaj all

cryptographic lystema and software, require a

license before they can be M293 imported or

exported. 22 U.S.C. I 2778<bX2). The ITAR

allows for a "commodity jurisdiction

procedure" by which the ODTC determine* if

an article or service is covered by the USML

when doubt exists about an item. 22 C.F.R. 8

120.4(a).

FN3. For a full description of the ITAR,

sse Bernstein I, 922 F.Supp. at 1429-30

and Bernstein H, 946 F.Supp. at 1283-84.

Aa a graduate student, Bernstein developed

an encryption algorithm he call* "Snuffle."

He describe* Snuffle as a zero-delay privatekey encryption system. Complaint Exh. A

Bernstein has articulated his mathematical

ideas in two ways: in an academic paper in

English entitled "The Snuffle Encryption

System," and in "source code" written in "C",

a high-level computer programming language,

[FN4] detailing both the encryption and

decryption, which he calls "Snuffle.c" and

"Unsnuffle.c", respectively. Once source code

is converted into "object code," a binary

system consisting of a series of Os and la read

by a computer, the computer is capable of

encrypting and decrypting data.

FN4. Source code is the text of a source

program and is generally written in a

high-level language that is two or more

steps removed from mafh'w4* language

which is a low-level language. High-level

languages are closer to natural language

than low-level languages which direct the

Page 7

functioning of the computer. Source code

must be translated by way of a

translating program into machine

language before it can be read by a

computer. The object code la the output of

that translation. It is possible to write a

source program in high-level language

without knowing about the actual

functions of the computer that carry out

the program. Encyclopedia of Computer

Science 962, 1263-64 (Anthony Ralston ft

Edwin D. Reilly ads., 3d ed. 19 I 6)

In 1992 plaintiff submitted s commodity

jurisdiction ("CJ") request to the State

Department to determine whether Snuffle c

and Unanuffle.c (together referred to as

Snuffle 6.0), each submitted in C language

source.files, and his f-^ftdeTiif paper describing

the Snuffle system, were controlled by ITAR.

IFN51 The ODTC determined that the

commodity Snuffle 6.0 was a defense article on

the USML under Catsgory XIH of the ITAR

and subject to licensing by the Department of

State prior to export. The ODTC identified

the item as s "stand-alone cryptographic

algorithm which ia not incorporated into a

finished software product" Complaint Exh. B.

FN6. Again, a more detailed description

of plaintiff* communications with the

ODTC appears in Bernstein I, 922 F.Supp

at 1430, and Bernstein II, 946 F.Supp. at

1284-85. Those opinions also describe the

confusion surrounding the determination

ofthe academic paper.

Alleging that he was not free to teach,

publish or discuss with other scientists his

theories on cryptography embodied in his

Snuffle program, plaintiff brought this action

challenging the AECA and the ITAR on the

grounds that they violated the First

fesassswawsst In Bernstein I this court found

that source code was speech for purposes ofthe

First Amendment and therefore plaintiffs

claim* presented a colorable constitutional

challenge and were accordingly justiciable. In

Bernstein II the court concluded that the

licensing requirements for encryption softwsre

under the ITAR constituted an unlawful prior

restraint The court also considered vagueness

Copr. e West 1997 No Claim to Orig. U.S. Govt Works
71

974 F.Supo. 1288

(Cite u: 974 F.Supp. 1288, *1293)

and overbreadth challenges to certain terms

contained in the ITAR. The court issued its

decision in Bernstein II on December 9,1996.

HL The Transfer of Jurisdiction and the

Current Regulatory Framework

On November 16, 1996, President Clinton

issued Executive Order 13026, tided

"Administration of Export Controls on

Encryption Products," in which he ordered

that jurisdiction over export controls on

nonmilitary encryption products and related

technology be transferred from the

Department of State to the Department of

Commerce. The President's Executive Order

specifies that encryption products that would

be designated as defense articles under the

USML and regulated under the AECA are

now to be placed on the Commerce Control

List ("CCL") under the EAR. The White

House Press Release accompanying the

Executive Order clarified that encryption

products) designed for military applications

would remain on the USML and continue to

be regulated under the ITAR. Press Release

Accompanying Exec Order No. 13026, at 2

(hereinafter "Press Release"). The Executive

Order also provides a caveat that is repeated

in the Press Release and throughout the new

regulations: "the export of encryption

software, like the export of other encryption

products described in this section, must be

controlled because of such software's

functional capacity, •1294 rather than because

of any possible informational value of such

software...." Exec. Order No. 13026, 61

FedReg. S8768 (1996). The Press Release

states • thai encryption products must be

controlled for foreign policy and national

security interests and concludes by noting that

ifthe new regulations do not provide adequate

controls on encryption products then such

products will be redesignated as defense

articles and placed again on the USML. Press

. at 1,4.

The EAR were promulgated to implement

the EAA, but the EAA is not permanent

legislation. Lapses in the EAA have been

declared national emergencies and the

President has issued Executive Orders

Page 8

authorizing continuation of the EAR export

controls under the authority of the

International Emergency Economic Powers

Act ("IEEPA"), 50 UJS.C. 91 1701-1706. See

e.g., Exec. Order No. 12924, 69 FedReg.

43437 (1994). Executive Order 13026 states

that the authority of the President to

administer these changes in the export control

system under the EAR derives in part from

the IEEPA and that the new controls on

encryption products are "additional steps with

respect to the national emergency described

and declared" in the previous Executive

Orders continuing in effect the EAR. Exec.

Order No. 13026,61 Fed-Reg. 58767 (1996).

On December 30,1996, the Bureau ofExport

Administration ("BXA") under the

Department of Commerce issued an interim

rule amending the EAR "by exercising

jurisdiction over, and imposing new combined

national security and foreign policy controls

on, certain encryption items that were on the

(USML)." 61 FedReg. 68572 (1996) (to be

codified at 15 CJ.R. Pts. 730-774)

("encryption regulations" or "new

regulations"). The EAR is structured around

the CCL, 15 CJ.R. Pt 774, 61 FedReg. 12937

(1996), which categorizes items whose export

is regulated according to various criteria,

including the reason for their control. The

new regulations add a category called

"Encryption Items" or "El" as a reason for

control. 61 FedReg. 68579 (1996) (to be

codified at 16 C.F.R. 5 738.2(dX2XD(A)).

Encryption items are defined as "all

encryption commodities, software, and

technology that contain encryption features

and are subject to the EAR." 61 FedReg.

68585 (to be codified at 15 C.F.R. t 772). This

does not i~-i"^« those items still listed on the

USML and controlled by the Department of

State. With certain exceptions, one must

obtain a license from the BXA prior to

exporting any item listed on the CCL. See 15

C.F.R. Pts. 740-44. All items on the CCL are

given an Export Control Classification

Number ("ECCN") which can be used to

determine the categories under which an item

is controlled and the reasons for its control.

The new regulations add three categories of

Copr. • West 1997 No Claim to Orig. US. Govt. Works
72

974 F.Supp. 1388

(Cite as: 974 F.Supp. 1288, '1294)

items to the CCL which are controlled for El

reasons, [FN6] all of them more generally

classified in Category 5, which covers

telecommunications and information security.

See 15 C.FJL g 738.2(a). Those items are

ECCN 5A002, covering encryption

commodities-, ECCN 6D002, covering

encryption software; and ECCN 6E002,

covering encryption technology. 61 Fed-Reg,

68586-87 (to be codified at 15 C.F.R. I 774

supp. D. For export licensing purposes,

encryption software is treated the same as an

encryption commodity. See note following

ECCN 5D002. A commodity is defined

generally as "talny article, material, or supply

except technology and software.'' 61 Fed-Reg.

68585 (to be codified at 15 C.F.R. Pt. 772).

Encryption software is regulated differently

from other software controlled by the CCL and

is defined as "[cjomputer programs that

provide capability of encryption functions or

confidentiality of information or information

systems. Such software includes source code,

object code, applications software, or system

software." 61 FedJteg. 68585 (to be codified

at 15 C.F.R. Ft 772). [FN7] Definitions of

•1295 encryption source code and encryption

object code have also been added. [FN81

Technology has not been amended by the

encryption regulations and is defined

generally as the technical data or technical

assistance necessary for the development or

use of a product 15 C.F.R. Pt 772.

Controlled technology is that technology

required for the development or use of items

on the CCL. 15 C.F.R. Pt 774 supp. 2

(General Technology Note). New restrictions

on technical assistance have been added,

however, to require a license to provide

tsjsjhfjtcaj assistance (including training) to

foreign persons with the intent to aid them in

the foreign development of items that if they

were domestic would be controlled under

ECCNs 5A002 and 5D002. [FN9] 61 FedJteg.

68584 (to be codified at 16 C.F.R. 5 744.9(a));

61 FedJteg. 68579 (to be codified at 15 C.F.R.

I 736.2(bX7Xii)).

FN6. These items are also controlled for

national security and anti-terrorism

reasons. 61 FedJteg. 68586-87 (to be

codified at 15 C.F.R. 5 774 supp. 1).

Page 9

FN7. Under Part 772 of the new

regulations which la dedicated to

definitions of terms, the term

"commodity" contains the following note:

Note that the provisions of the EAR

applicable to the control of software (ex

publicly available provisions) are not

applicable to encryption software.

Encryption software is controlled ^traiirt,

like the items controlled under ECCN

5A002, it has a functional capacity to

encrypt information on a computer

system, and not because of any

brfbrassjtfcwsil or theoretical value that

such software may reflect, contain or

represent, or that its export may convey

to others abroad. 61 Fed-Reg. 68585 (to

be codified at 15 C.F.R. Pt 772).

FN8. Encryption source code is defined as

"[a] precise set of operating instructions to

a computer that, when compiled, allows

for the execution of an encryption function

on a computer." Encryption object code is

defined as "Iclomputer programs

containing an encryption source code that

has been compiled into a form of code that

can be directly executed by a computer to

perform an encryption function." 61

FedJteg. 68685 (to be codified at 16

C.F.R. Pt 772).

FN9. This provision notes "that the mere

teaching or discussion of information

about cryptography, including, for

example, in an academic setting, by itself

would not establish the intent described

in this section, even where foreign persons

are present* 61 Fed.Reg. 68584 (to be

codified at 15 C.F.R. I 744.9(a)).

The EAR defines export as "a

shipment or transmission of items subject to

the EAR out ofthe United States, or release of

technology or software subject to the EAR to a

foreign national in the United States...." 15

C.F.R. I 734.2(0X1). The encryption

regulations add a specific definition of export

for encryption source code and object code

software controlled under ECCN 6D002 which

tnrhidfs

downloading, or causing the downloading of,

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(Cite as: 974 F.Supp. 1288, M295)

such software to location! (including

electronic bulletin boards, Internet file

transfer protocol, and World Wide Web sites)

outside the United States, over wire, cable,

radio, electromagnetic, photooptical,

photoelectric or other comparable

communication facilities accessible to

persons outside the United States, including

transfers from electronic bulletin boards,

Internet file transfer protocol and World

Wide Web sites, unless the person making

the software available takes precautions

adequate to prevent unauthorised transfer of

such code outside the United States.

61 FedJteg. 68678 (to be codified at 16 C.F.R.

8 734.2(bX9)).

A number of licensing exceptions are

available under the EAR. See 16 C.F.R. Pt.

740. Under the encryption regulations, after a

one-time review by BXA, licensing exceptions

will be available for certain commercial

encryption items, including mass-market

encryption software, key-recovery software

and commodities, and non-recovery encryption

items up to 66-bit key length DES or

equivalent strength software accompanied by

a commitment to develop recoverable items.

61 FedJteg. 68681 (to be codified at 16 C.F.R.

9 742.15). In general, items that are already

publicly available or <**"*•»'** "de minimus'

domestic content are not subject to the EAR.

16 C.F.R. 88 734.3(bX3) & 734.4. However, as

directed by the President and implemented by

the new regulations, these exceptions do not

apply to encryption commodities or software.

61 FedJteg. 68577-78 (to be codified at 16

C.F.R St 732.2(b) ft (d), 734.3(bX3), 734.4(b));

Exec Order No. 13026, 61 FedJteg. 58768

(1996) ("I have determined that the export of

encryption products described in this section

could harm national security and foreign

policy interests even where comparable

products are or appear to be available from

sources outside the United States ... "). This

exception fin* encryption software to the

general exclusion of publicly available items

appears to pertain to publicly available or

published information and software within the

United States as well 61 FedJleg. 68578 (to

be codified at 16 C.F.R. 5 734.7(c)). In

addition, the EAR allows for broadly defined

Page 10

exceptions from the regulations for

information resulting from fi|*^fl"n»ntn]

research and educational information. 16

C.F.R. 88 734.8, 734.9, & supp. 1. Neither

"1296 ofthese exceptions applies to encryption

software controlled under ECCN 5D002. 61

FedJleg. 68679 (to be codified at 15 C.F.R 58

734.8, 734.9). They do appear to apply to

encryption technology. Finally, phonographic

records and most printed matter are not

subject to the EAR and encryption software is

not axaanpted from this exclusion. 15 C.F.R 9

734.3(bX2). Indeed, an intriguing if somewhat

baffling note appears in the new regulations:

"A printed book or other printed material

setting forth encryption source code is not

itself subject to the EAR (see S 734.3AX2)).

"However, notwithstanding 8 734.3CbX2),

encryption source code in electronic form or

media (e.g. computer diskette or CD ROM)

remains subject to the EAR (see 8

734.3(bX3))." [FN101 61 FedJteg. 68578 (to be

codified at 15 C.F.R. 8 734.3).

FN10. The introductory information

about the new regulations includes the

following with respect to the exception for

printed materials: The administration

continues to review whether and to what

extent scannable encryption source or

object code in printed form should be

subject to the EAR and reserves the

option to impose export controls on such

software for national security and foreign

policy reasons.'' 61 FedJleg. 68575.

Licenses are required for export of items

controlled by ECCNs 5A002, 5D002 and

5E002 for all destinations except Canada. 61

Fed-Reg. 68580 (to be codified at 15 C.F.R 8

742.15(a)). Applications for licenses "will be

reviewed on a case-by-case basis by BXA, in

conjunction with other agencies, to determine

whether the export or reexport is consistent

with U.S. national security and foreign policy

interests." 61 FedJteg. 68581 (to be codified

at 15 C.FJL 8 742.15(b)). The EAR provides

that license applications will be resolved or

referred to the President within 90 days. 16

C.F.R. 8 750.4(a). While an applicant who is

denied a license is informed of appeal

procedures, 15 C.F.R 8 750.6(aX6), the EAR

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does not appear to allow for judicial review.

15 CJJL I 756.2(cX2); 50 UAC.App. I

2412(a).

LEGAL STANDARD

Under Federal Rule of Civil Procedure 56,

summary judgment ahell be granted "against

a party who faila to make a ahowing sufficient

to establish the existence of an element

essential to that party's case, and on which

that party will bear the burden of proof at

trial ... since a complete failure of proof

concerning an eeaential element of the

nonmoving party's caae necessarily renders all

other facts immaterial." Celotex Corp. v.

Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548,

2552, 91 L.Ed.2d 265 (1986); see also T.W.

Elec. Serv. r. Pacific Elec. Contractors Ass'n,

809 F.2d 626, 630 (9th Cir.1987) (the

nonmoving party may not rely on the

pleadings but must present significant

probative evidence supporting the claim);

Anderson v. Liberty Lobby, Inc., 477 U.S. 242,

248, 106 S.Ct 2606, 2610, 91 L.Ed.2d 202

(1986) (a dispute about a material fact is

genuine "if the evidence is such that a

reasonable jury could return a verdict for the

nonmoving party.").

The court's function, however, is not to

make credibility determinations, Anderson,

477 U.S. at 249, 106 S.Ct. at 2510-11, and the

inferences to be drawn from the facts must be

viewed in a light most favorable to the party

opposing the motion. T.W. Elec. Serv., 809

F.2d at 631.

Where as here, the question is purely a legal

one involving no disputes of material fact, the

matter is appropriately handled on a motion

for itTTtmoTy judgment.

DISCUSSION

Plaintiff contends that the EAR, specifically

the amendments; regulating encryption items,

both facially and as applied, constitutes a

prior restraint on plaintiffs right to free

speech, is unconstitutionally vague and

overbroad, is content-based, and violates his

freedom of association. Plaintiff also claims

Page 11

that the presidential transfer ofjurisdiction to

the Commerce Department and the encryption

regulations themselves exceed their statutory

authority and are ultra vires. Plaintiff

requests declaratory and nationwide

injunctive relief. In addition to opposing

plaintiffs riajasa, defendants seek to dheajas

certain defendants as extraneous and ask that

the court vacate its decision in Bernstein IL

L Statutory Authority of the President and

the Agency to Regulate Encryption Items

(11 In his amended complaint plaintiff

alleges that the presidential transfer of

jurisdiction *1297 and the subsequent agency

regulations are ultra vires because this

President and the Department of Commerce

lacked statutory authority under the IEEPA to

regulate encryption products. plaintiff

contends that the IEEPA, by its own terms,

restricts the regulation of information

protected by the First Amendment, Plaintiff

also argues that use of the IEEPA requires an

international emergency, which is not

identified in the President's Executive Order.

Plaintiff also maintains that the regulation of

encryption products by the President and the

Secretary violates the APA.

Defendants contend that the court lacks

jurisdiction to review presidential

determinations under the IEEPA. To the

extent a claim may still lie against the

Secretary, defendants argue that the IEEPA

does not preclude export controls on

encryption items.

Although the parties do not identify this

claim as a threshold issue, plaintiff's

argument is that the transfer ofjurisdiction to

Commerce and the Secretary's regulations

were in excess of their statutory authority and

are therefore invalid. To the extent this issue

innjttcaxea the very validity of the current

regulations, the court finds that it should be

addressed before a review on the merits. In

addition, courts must consider

nonconstitutional questions before reaching

constitutional considerations in order to avoid

passing on constitutionality where possible.

Jean v. Nelson, 472 U.S. 846, 854, 105 S.Ct.

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2992, 2996-97, 86 L.Ed.2d 664 (1986).

A. The IEEPA

The IEEPA authorises the President "to

deal with any I»HI«I«1 and extraordinary

threat, which has iU source in whole or

substantial part outside the United States, to

the national security, foreign policy, or

economy ofthe United States, ifthe President

declares a national emergency with respect to

such threat," 60 U.S.C. I 1701(a). Under this

authority the President may "investigate,

regulate, or prohibit any transaction in

foreign exchange," 60 U.S.C. 8 1702(aXlXAXi),

and "investigate, regulate, direct and compel,

nullify, void, prevent or prohibit, any ...

exportation of ... any property in which any

foreign country or a foreign national thereof

has any interest..." 60 U.S.C. S 1702(sXlXB>.

However, the IEEPA explicitly excludes any

authority

to regulate or prohibit! directly or indirectly-

-any postal, telegraphic, or other personal

communication, which does not involve a

transfer of anything of value; ... or the

importation from any country, or the

exportation to any country, whether

commercial or otherwise, regardless of

format or medium of transmission, of any

information or informational materials,

including but not limited to, publications,

films, posters, phonograph records,

photographs, microfilms, microfiche, tapes,

compact disks, CD ROMs, artworks, and

news wire feeds.

60 U.S.C. I 1702(bXl) & (3) (1991 &

Supp.1996). The statute goes on to limit the

above exemption to those exports which are

not otherwise controlled under sections 2404

and 2405 ofthe EAA. 60 U.S.C. 5 1702(bX3).

The IEEPA was passed in 1977 as a

refinement of the Trading With the Enemy

Act of 1917 (TWEA-), which at the time

provided a source of presidential emergency

authority. SJtep. No. 96-466, at 2 (1977),

reprinted in 1977 U.S.C.C.A.N. 4540,4641. In

the Senate Report accompanying the passage

of the IEEPA, the Committee suggests that

what became section 1702(b) was intended to

exclude donations and humanitarian

Page 12

contributions from emergency regulation so

long as luch transfers did not subvert the

effective exercise of emergency authority.

S.Rep. No. 96-466, at 5 Section 1702<bX3) of

the IEEPA was enacted in 1988 and ••n^Awi

in 1994 to broaden and strengthen the

exemption for informational matariala.

According to the House Conference Report,

language adopted in 1968 was irrt*»»p>d to

ensure "that no embargo may prohibit or

restrict directly or indirectly the import or

export of information that is protected under

the First Amendment to the U.S.

Constitution. The language was explicitly

intended, by including the words 'directly or

indirectly' to have a broad scope." H.R. Con.

Rep. No. 103-482, at 239 (1994), reprinted in

1994 U.S.C.C.A.N. 302, 483. However, overlynarrow interpretations of section 1702(bX3) by

the Treasury Department prompted the 1994

amendment to "facilitate transactions and

activities incident to •1298 the flow of

information and informational materials

without regard to the type of information, its

format, or means of transmission, and

electronically transmitted information...."

H.R. Con. Rep. No. 103-482, at 239.

B. Statutory Authority of the President to

Regulate Encryption Items Under the IEEPA

[2] Plaintiff argues that President Clinton

exceeded his authority under the IEEPA

because the encryption items regulated are

properly exempt from regulation under section

1702(b) and because the transfer was not a

temporary exercise of emergency authority.

[FN11] Defendants claim that the President's

actions are not reviewable.

FN11. At oral argument plaintiff

retreated from his position that the ultra

vires claim was directed at the President.

However, Count VI of plaintiffs

supplemental complaint clearly alleges

that the President's actions exceeded his

authority under the IEEPA.

It is clear that the President's order is not

reviewable under the APA. Franklin v.

Massachusetts, 606 U.S. 788, 796, 112 S.Ct.

2767, 2773, 120 UEd.2d 636 (1992). In

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Franklin, in action Making APA review of the

decennial reapportionment of the House of

Representatives, the Supreme Court concluded

that "the final action complained of ie that of

the Preiident, and the Preeident ia not an

agency within the meaning of the [APA]." Id.

Ilia Court want on to note that the Preaident'i

action* ware atill revieweble for

constitutionality. LI at 801, 112 S.Ct at

2776-76.

[31 Lea* clear ia the extant to which a court

may review a non-APA claim that the

Preeident avraederi hie statutory authority

where there is no allegation of a constitutional

violation. Not long after Franklin the

Supreme Court decided Dalton r. Specter, 611

U.S. 462, 114 S.Ct 1719, 128 L Ed.2d 497

(1994), in which it reviewed a claim that the

President evrandad hie statutory authority

under the Defense Base Closure and

Realignment Act The court below had

attempted to follow Franklin by reasoning

that whan the President's actions exceed his

statutory authority ha also violates the

constitutional separation of powers doctrine.

Id. at 471, 114 act at 1726. The Dalton

Court rejected this conclusion, holding that

"claims simply alleging that the President has

exceeded bis statutory authority are not

'constitutional' claims, subject to judicial

review under the exception recognised in

Franklin." Id. at 473-74. U4.S.Ct. at 1726-27

(footnote omitted). However, the Court did not

rule out the possibility of judicial review of

statutory claims entirely.

We may assume for the sake of argument

that aaaja aaajsjsj that the Tiiwiilaul has

violated a statutory mandate are judicially

reviewable outside the framework of the

APA. But longstanding authority holds that

such review ia not available whan the

statute in question commits the decision to

the discretion of the President.

Id. at 474, 114 S.Ct at 1727 (citing Dames &

Moore v. Regan, 463 U.S. 664, 667, 101 S.Ct.

2972,2980, 69 L.Ed.2d 918(1981)). The Court

went on to conclude that the statute in

question did not limit the President's

discretion and was therefore unreviewahle.

Notably, Dames & Moore, the case cited by

Page 13

the Court for the proposition that some nonAPA statutory claims may still be subject to

judicial review, involved review of various

Executive Orders and regulations issued

pursuant to the IEEPA which nullified

attachments on Iranian assets in the United

States and suspended claims «g»i•» Iran

following the hostage crisis. While the Court

did not address the reviewability of the

claims, [FN12] it did indicate that whan the

President acts under authorisation from

Congress "the executive action 'would be

supported by the strongest of presumptions

and the widest latitude of judicial

|SJ|SJBJSJSJSJ||SJS. and the burden of persuasion

would rest heavily upon any who might attack

it' " Dames & Moore, 463 U.S. at 668, 101

&Ct at 2981 (quoting Youngstewn Sheet &

Tube Co. v. Sawyer, 343 U.S. 679, 637, 72

&Ct. 863, 871, 96 L.Ed. 1163 (1962)). The

Court concluded that the IEEPA did authoriss

the nullification of attachments but did not

directly authorize the suspension of claims.

Id. at 676, 72 S.Ct. at 932-33. However,

despite this conclusion, "1299 the Court went

on to find that due in part to the tenor and

breadth of the IEEPA and congressional

acquiescence in the practice of claim

settlement by executive agreement the

President did not lack the power to settle

claims against Iran.

FN12. In fact due to the significance of

the issues involved, the Court granted

certiorari prior to judgment and ordered

expedited briefing.

Although the Supreme Court suggested

the possibility of judicial review of nonAPA statutory claims, it did not indicate,

beyond the very narrow and specific

instance Identified in Dames & Moore,

under what circumstances that review

might take place. One appellate court has

concluded that Dalton does not preclude

judicial review of executive action for

conformity with an authorising statute, or

any other statute. Chamber of Commerce

of U.S. v. Reich, 74 F.3d 1322, 1331

(D.C.Cir.1996). Unlike the actions in

Franklin and Dalton where the final

action taken was by the President and

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much like the present case. Chamber of

Commerce involved an Executive Order

which initiated agency regulations where

the regulations carried direct and final

consequences for the plaintiff. However,

the court in Chamber of Commerce speaks

boldly about the reviewability of

executive action without readily

«ti"****pniahiing between whether such

review lies equally for the President as for

an executive official. [FN13] In fact, in a

footnote the court concedes that the

"Delton Court's hesitancy to review

presidential action ... suggests a

reluctance to bring judicial power to bear

directly on the President. Of course, here

we an concerned with the long

established non-statutory review of a

claim directed at a subordinate executive

official1' Id. at 1331 n. 4. Indeed, the

court goee on to note that in all the cases

cited by the Delton court, "special reasons

aadatsjd for concluding that judicial review

waa precluded" Id. at 1331 n. 6. Those

reasons involved matters of political

discretion and national security. Id.

FN13. The Ninth Circuit on at least one

occasion has declined to endorse the

Chamber of Commerce decision. Alameda

Newspapers, Inc. v. City of Oakland, 95

F.3d 1406, 1419 (9th Cir. 1996).

Finally, in United States v. Spawr Optical

Research, Inc., 685 F.2d 1076 (9th Cir. 1982),

the Ninth Circuit, in a case predating

Franklin and Delton, reviewed an Executive

Order by President Ford under the IEEPA's

predecessor, the TWEA, continuing the EAA

export regulations pending expiration of that

Act. llie Spawn wen convicted of the

unlicensed exportation of laser mirrors after

the EAA's expiration "when the sole basis for

the regulations was the Executive Order." Id.

at 1080. Much like plaintiff hen, the Spawn

argued on appeal that the government lacked

authority to prosecute them because then was

no genuine emergency, the regulations wen

not related to any emergency then in effect,

and Congress had intended to let the

regulations lapse. Id. Reviewing language

very similar to that of the IEEPA, the court

Page 14

found that the statute afforded broad and

extensive powers. Id. Noting that in the face

of such broad discretion, courts have been

wary of reviewing the political considerations

involved in declaring or continuing a national

emergency, the Spawr court fcefjejjj to do so

ss well. Id. However, the court then concluded

that "laflthough we will not address these

essentially-political questions, we ere free to

review whether the actions taken pursuant to

a wtttj/mal emergency comport with the power

delegated by Congress." Id. at 1081 (citing

United States v. Yosbida infri•^t">"al. Inc.,

63 C.C.P.A. 16, 526 F.2d 660, 679 (Cust &

PatApp. 1976)). In swift analysis the court

went on to find that the regulations were

rationally related to the emergency *

>

'i'"*^*

and that Congress did not intend to terminate

the regulations. Id. In fact, the court noted

that each time the EAA had lapsed previously

the President had issued an Executive Order

declaring a national emergency to continue

the export regulations and "Congress not only

tolerated this practice, it expressed approval of

the President's reliance on the TWEA to

maintain the export regulations." Id. Such

has been the case under the IEEPA as well.

[FN14] See, e.g., Exec Older No. 12444,

•1300 48 Fed-Reg. 48215 (1983); Exec. Order

No. 12730, 56 FedJteg. 40373 (1990),

reprinted in 50 U.S.C.App. ft 1701 at 598

(1991); Exec. Order No. 12924, 59 Fed-Reg.

43437 (1994). Plaintiff notes that in recent

years Congress has criticized use of the IEEPA

to extend export regulations when the EAA

lapses. Plf. Mem. in Opp. at 17 n. 49 (citing

statements made by various members of

Congress). Be that as it may, it is within

Congress' power to change this practice and it

has chosen not to.

FN14. In fact, as defendants point out,

when the TWEA was •"**~*~< and the

IEEPA enacted (as Title II of the same

bill), the House Report on the legislation

indicated that while it rejected a

suggestion by the committee to make the

EAA permanent legislation, the

committee expected that in the case of

future lapses of the EAA "the authority of

Title n of this bill could be used to

continue the Export Administration

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Regulation* in effect if, and to the extent

that, the President declared a national

emergency ae a result of inch lapee

according' to the procedure* of the

National Emergencies Act" H.R.Rep. No.

96-469,813(1977).

While the analysis in Spawr ia useful given

that the facta are strikingly efanflar to the

i«*fftp**t action, thai court cannot ignore the

skepticism with which the Supreme Court

recently hat approached judicial review of a

presidential exercise of statutory authority

abeent a constitutional claim. Aa noted above,

thij case differs from Franklin and Dalton in

that the final action ia taken by the agency

rather than the President. [FN15] But that

does not sja^ajfleajstty change the analysis of

whether the actions the President took are

reviewable. On this score Chamber of

Commerce is not illuminating and the

Supreme Court's allusion to Dames & Moore

remains opaque. Indeed, given that the law is

still unsettled on this question and that

considerations precluding review do not apply

to agencies-thereby allowing plaintiff to seek

the same relief from agency action on the

basis of a claim that the agency acted in

excess of statutory authority-the court favors

deference to the executive. In light of the

recent Supreme Court decisions in this area,

this court concludes that it cannot review

whether the President exceeded his statutory

authority under the IEEPA to transfer

jurisdiction of encryption items to the

Commerce Department

FN15. Admittedly, in both of those cases

review was precluded in large part

because the Court found that the

authorizing statutes at issue granted

broad discretion to the President

However, this action is not so different as

to allow a court to review what the Ninth

Circuit has found to be the extensive

discretion afforded by section 6(b) of the

TWEA, which was essentially reenacted

as section 1702 of the IEEPA. Both

sections 1701 and 1702 provide little

guidance with which to judge the actions

taken by the President Where "the Act

provides no standards by which to judge

Page 16

the exercise of discretion by the Executive

Branch, we cannot subject that exercise of

discretion to judicial review." Medina v.

Clinton, 86 F.3d 166, 168 (9th Cir.1996)

(citing Dalton, 114 S.Ct at 1728, 611 VS.

at 476-77).

C. Statutory Authority of the Commerce

Secretary to Regulate Encryption Items Under

the IEEPA

Of critical importance in both Franklin and

Dalton was the fact that the President was

responsible for the final action under the

statutes at issue. "What is crucial is the tact

that Itlhe President not the [Commission],

takes the final action that affects' the military

installations." Dalton, 611 U.S. at 470, 114

S.Ct. at 1726 (quoting Franklin, 606 U.S. at

799.112S.Ct at 2774-76). Here we have the

situation at issue in Chamber of Commerce,

where the President's Executive Order

initiated the regulatory process and left it to

the agency to finalise the rules. That the

Secretary's regulations are based on the

President's Executive Order hardly seems to

insulate them from judicial review...."

Chamber of Commerce, 74 F.3d at 1327; see

also Milena Ship Management Co. Ltd. v.

Newcomb, 804 F.Supp. 846, 860 (E.D.La. 1992)

(reviewing agency action taken pursuant to an

unchallenged executive order under the

IEEPA). Accordingly, this court will examine

whether the Commerce Department's

regulation of encryption items is consistent

with the IEEPA. [FN16}

FN16. Since the EAA has expired, the

"sole basis for the regulations" is the

Executive Order, which itself is premised

on the IEEPA. Spawr, 686 F.2d at 1080.

[4] To the extent that plaintiff argues that

the regulations governing encryption are not a

temporary exercise of emergency power, the

question really belongs to the legitimacy of

the Executive Order in the first instance and

the court declines to address it The

declaration of a national emergency is an

action that rests with the President and is

based on his broad discretion under section

1701 of the IEEPA. Moreover, the question of

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(Cite as: 974 F.Supp. 1288, MSOO)

employing the IEEPA-or the TWEA before itto maintain export regulation* during Up••

in the EAA wu cuenntinllj laid to rest by the

Ninth Circuit in Spawr and by the legislative

hiatory ofthe IEEPA.

•1301 [I}t is »»*»»t***v«KU that Congran

intended to permit the President to use the

TWEA to employ the earns regulatory tools

during a national emergency es it had

employed under the EAA. We, therefore,

conclude that the President had the

authority during the nine-month Lapse in the

EAA to maintain the export regulations,

Spawr, 685 F.2d at 1082.

[6] The gravamen of plaintiff's ultra vires

argument is that the IEEPA doss not

authorise the regulation of speech,

particularly, speech that does not involve a

foreign interest in property, and that as

speech, encryption software fits well within

the exemption for personal communications

and informational material• in sections

1702<bXl)&(3).

With respect to whether encryption software

fits within the scope of 'property in which any

foreign country or a national thereof has any

interest", the court finds that section

1702(aXl) is sufficiently broad to allow for

many forms of property, both tangible and

intangible, and many forms of interest, both

direct and indirect See 31 C.F.R. H 600.311,

600.312; see also Spawr, 685 F.2d at 1081 n.

10 (finding that section 5(b) of the TWEA was

broad enough to allow regulation "of any

property to any foreign country"). Encryption

software or other technology comes within this

[6] Plaintiff also alleges that the regulations

are beyond the statutory authority of the

IEEPA because they affect personal

communications and informational BSSSSSSSBSI

Section 1702(bXl) prohibits direct or indirect

regulation of "any postal, telegraphic,

telephonic or other personal communication"

which does not transfer anything of value. Aa

defendants convincingly argue, to the extent

this argument is directed at academic

discussion of cryptographic ideas, the

regulations attempt to exempt such

Page 16

communications-although whether they do so

according to the demands of the First

Amendment is a separate question. To the

extent this argument is directed at

cryptographic software generally, it does not

appear to fit within this seemingly narrow and

simple provision. Nor can it be assured that

software would have no value. Indeed, there

are potentially billions of dollars at stake in

the export of commercial encryption software.

See Jered Sandberg, "Judge Rules Encryption

Software la Speech in Case on Export Curbs,"

Wall St J., Apr. 18, 1996, at B7. Thus, the

regulations do not exceed this statutory

provision.

[7] Finally, plaintiff contends that the

regulations go beyond the authority provided

by section 1702(bX3) which specifically limits

regulation of information or informational

materials regardless of format or medium of

transmission. Plaintiff argues that the broad

scope of this provision precludes regulation of

encryption software. In addition, plaintiff

contends that by specifically referencing

sections 2404 end 2405 of the EAA, and

saaiinpti "g•fr^m the informational materials

exemption-items "otherwise controlled for

export" under those sections, the court is

bound by principles of statutory construction

to consider only those items controlled when

section 1702(bX3) was last •mended, or April

30, 1994. Plaintiff then concludes that

because encryption software fits within the

scope of this provision and was not otherwise

controlled under the EAA as of April of 1994,

it cannot be regulated under the IEEPA.

Defendants contend that section 1702<bX3)

does not expressly provide for software, and

that to include software in those items

exempted from regulation for their

informational value would lead to absurd

results. Moreover, defendants counter

plaintiff's statutory construction argument

and claim that the items exempted from this

provision by virtue of being controlled under

the EAA are not only those that were on the

Commerce Control List as of April of 1994 but

any others that have since been addedfaaduding the encryption technology at issue

here. Defendants also argue that to read

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(Cite as; 974 F.Supp. 1288. *1301)

•action 1702(bX3) as exempting encryption

software on the basis thai it U protected under

the First Amendment would be to impose «

novel theory of free speech not contemplated

by Congress.

As noted above, the IEEPA explicitly

sajsMej any authority

"to regulate or prohibit, directly or

indirectly-... the importation from any

country, or the exportation to any country,

whether commercial or otherwies, regardless

•1302 of format or medium of transmission,

of any information or informational

saajtsrials, including but not Ussxssd to,

publications, films, posters, phonograph

records, photographs, microfilms, microfiche,

tapes, compact disks, CD ROMs, artworks,

and news wire feeds. The exports exempted

from regulation or prohibition by this

paragraph do not i«clyAi those which are

otherwise controlled for export under section

2404 of the Appendix to this title, or under

section 2406 of the Appendix to this title to

the extent that such controls promote the

nonproliferation or antiterrorism policies of

the United States...."

60 U.S.C. i 1702(bX3)(Supp.l996).

First, the court must consider whether

software-in this case, encryption softwarecomes within the exception to the exception;

if so, then the instant regulations do not

exceed their statutory authority. In other

words, anything controlled by sections 2404

and 2405 of the EAA may be regulated

regardless of its informational content. Under

the referenced sections of the EAA the

President may "prohibit or curtail the

exportation of any goods, technology, or other

information subject to the jurisdiction of the

United States" for either national security or

foreign policy reasons. 50 U.S.C.App. 5

2405(aXl) (foreign policy controls); 60

U.S.C.App. I 2404(aXD (national security

controls). It is not disputed that Executive

Order 13026, by transferring encryption

products to the Commerce Control List

("CCL"), subjected them to regulation under

sections 2404 and 2405 of the EAA.

The question becomes whether reference to

Page 17

sections 2404 and 2405 of the EAA should bs

understood to include all items currently on

the CCL-in which case the jseosiil

regulations effectively remove encryption

products from the exempuon -or whether roles

of statutory construction require the court to

construe the reference to those sections as

including only those items listed at the time

section 1702(b) was last Mssmfm\ or April 30,

1994. A ssoimleij issue ssa^ssamwa this

already posses'"*»*•i rnstter further: game

sections 2404 and 2406 do not themselves

ilasluiisls specify* items on the CCL, which is

governed by regulation, does the construction

of the IEEPA with respect to those sections

also apply to their implementing regulations?

Plaintiff relies on a canon of statutory

construction ilisriiisrnl in liasestt v. Welch,

303 L'.S 303, 314, 58 S Ct. 559, 564-66, 82

L.Ed. 868 (1938) and Paarce v. Director, Office

of Workers' Comp. Programs, 603 F.2d 763,

767 (9th Cir.1979) which holds that without

clear congressional indication to the contrary,

where one statute adopts provisions of •nnthr

by specific reference to the provisions adopted

(known as a statute of specific reference) the

effect is that such adoption takes the provision

ss it existed at the time of adoption and does

not trtfludw subsequent sxsjssrfsasamr,

conversely, where a statute adopts the general

law in a given area (a statute of general

reference), it is construed to adopt that law's

subsequent amendmenu See 2A Sutherland,

Statutory Construction 5 61.07 (4th ed.1984).

Plaintiff claims that the IEEPA is a statute of

specific reference and cannot be read as

adopting subsequent changes to sections 2404

and 2405 of the EAA. Plaintiff further

supports this position by pointing to the fact

that at least one agency has interpreted the

"informational materials" provision to exclude

items that ware, as of April 30, 1994,

controlled for export under sections 5 and 6 of

the EAA. 31 C.F.R. 5 560.315(b) (Office of

Foreign Assets Control regulation of Iranian

transactions).

Defendants contend that the IEEPA is more

like the statute in United States v. Smith, 683

F.2d 1236 (9th Cir.1982), in which the Ninth

Circuit read the Youth Corrections Act

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(Cite as: 974 F.Supp. 1288, *1302)

("YCA") u not incorporating

provisions of the general probation statute.

The court •todaj that while than war*

persuasive arguments on both sides, the YCA

did not really appear to adopt or incorporate

the referenced provisions of the probation

statute. "Rathar, it merely provide, that the

YCA ia not to "be conatmad in any wiaa to

amend, repeal, or affect the proriatona of the

probation statute." Id. at 1239. According to

the court this waa not properly a statute of

aparifir reference in which certain provisions

of another statute *n incorporated into it, but

one that "actually atJalswMaWsl that these an

distinct statutes". Id. Under defendants'

reasoning, section *1303 1702(bX3) of the

IEEPA does not incorporate sections 2404 and

2406 of the EAA but rather distinguishes

them and as such those sections are to be read

with their full and currant force.

This court believes that defendants have the

better argument. The rules of statutory

interpretation are not hard and fast "A

provision which, in terms, however, reads as a

specific reference may, in context, be

construed as a general reference." United

States v. RodrigueiKodriguei, 863 F.2d 830,

831 (11th Cir.1989). Such ia the case here.

Read in context, section 1702(bX3) excludes

rather than incorporates those items covered

under the EAA Moreover, the sections

referenced are themselves fairly general and

are clearly intended to be fleshed out by

regulations suited to meet the changing needs

of n»iifiwftl security and foreign policy. Given

the goals of the IEEPA and the powers it gives

the President, it would seem odd indeed for

Congress to exclude from the exemption those

items the President deems sensitive to the

national security under the EAA but to freer*

that list of items aa of a certain date. As the

court noted in Smith, this "is the more

appropriate interpretation in view of the

policies that the [statute] is designed to

advance. It ia proper, and indeed essential, to

interpret the words of a statute in the light of

the purposes Congress was ssnrinrj to serve."

683 F.2d at 1240 (citations •omitted).

Therefore, because encryption products are

currently regulated under sections 2404 and

2406 of the EAA they do not fall within the

Page 18

exemption for informational materials. [FN17]

FN17. Evan -T•~'lg the

excludes from regulation only those items

designated before April 30, 1994, many

software products were regulated at that

time. That being so, there ia no support

for the contention that software generally

would fall within the exemption.

[8] Accordingly, this court finds that the

regulation of encryption items ia not

prohibited by section 1702(bX3) and therefore

does not exceed the statutory authority

provided by the IEEPA It is worth noting at

this juncture that this court's rather narrow

determination that source code ia speech

protected by the First Amendment does not

serve to remove encryption technology from

all government regulation. Both parties

exaggerate the debate needlessly. Plaintiff

does so by eewraasilsjae; the First Amendment,

by assuming that once one ia dealing with

speech that it ia immaterial what the

consequences of that speech may be.

Defendants do ao by minimising speech, by

constantly referring to "mere speech" or "mere

ideas" in their briefs and assuming that the

functionality of speech can somehow be

divorced from the speech itself. This

controversy ia before this court precisely

because there is no clear line between

communication and its consequences. While

defendants may have the authority to regulate

encryption source code, they must nonetheless

do so within the bounds of the First

Amendment.

n. Prior Restraint [FN181

FN18. Portions of the court's analysis of

prior restraint cases in taken directly

from its opinion in Bernstein H, 946

F.Supp. at 1286-90.

A Analytical Framework

[9) Aa the Supreme Court has stated, in

determining the extent of the constitutional

protection afforded by the guarantees of the

First Amendment, "it has-been generally, if

not universally, considered that it is the chief

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(Cite u. 974 F.Supp. 1288. * 1M3)

purpose of the guaranty to prevent previous

restraints upon publication." Near v.

Minnesota, 283 U.S. 687, 713. 61 S.Ct. 626.

630, 75 L.Ed. 1357 (1931). It U for this reseon

that th* Court has held "Any prior inliahil

on expression coma* to thia Court with a

*heavy JsajsaaaajSeaV against ita eonatitutional

validity." Organisation for a Batter Austin T.

Keefe, 402 VS. 416,419.91 S.Ct 1676,1678,

29 L. Ed-2d 1 (1971) (citation, omitted).

[10] White prior restraint, have often coma

in the form of judicial injunctions on

publication, see •.(., C.B.S. v. Davis, 610 U.S.

1316, 114 &Ct. 912, 127 L.Ed.2d 368 (1994);

Now York Times Co. v. United States. 403

U.S. 713,91 S.Ct 2140, 29 L.Ed.2d 822 (1971),

they are also recognised in licensing schemes

Saa e.g., FW/PBS, Inc. v. Dallas, 493 U.S. 216.

110 &Ct 696, 107 L.Ed.2d 603 (1990);

Lakewood v. Plain Dealer Publishing Co., 486

U.S. 760, 108 M304 S.Ct 2138, 100 L.Ed.2d

771 (1988). Governments may impose valid

time, place and Maaaaat restrictions when they

are content neutral, narrowly tailored to serve

a substantial governmental interest, and leave

open alternative channels for communication.

Sea e.g., Chirk v. Community for Creative

Non Violence, 468 U.S. 288, 293, 104 S.Ct.

3066, 306849, 82 L.Ed.2d 221 (1984).

However, "even if a government may

constitutionally impoee-contentneutral

prohibitions on a particular manner of speech,

it may not condition that speech on obtaining

a license or permit from a government official

in that official's boundless discretion."

Lakewood, 486 U.S. at 764,106 S.Ct at 2147.

Ill] It it axiomatic that the Pint

Amendment ia more tolerant of subsequent

criminal punishment of apeech than it ia of

prior restraints on the aama speech.

Hie thread running through all ftaaa rntcn

ia that prior reatrainta on speech and

publication are the moat aerioua and the

least tolerable infringement on Firet

Amendment righta. A criminal penalty or a

judgment in a defamation eaee ia subject to

the whole panoply of protectiona afforded by

deferring the impact of the judgment until

all avenues of appellate review have been

Pace 19

A prior lealiahil. by contraat and by

irreversible sanction. If it can be said that a

threat of criminal or civil sanction after

publication "chills' spear 1.. prior restraint

Irema* it at least for the time.

Nebraska Press Asa'n v. Stuart, 437 U.S. 639,

660, 96 S.Ct 3791, 2802-03, 49 L.Ed.2d 683

(1976).

[12) While the Supreme Court has

consistently rejected the idea that a prior

i eeti aiiii can never be employed, id. at 670,96

S.Ct at 3806, it nonathelees begins with a

presumption of invalidity. The danger

inherent in prior reatrainta ia largely

procedural, in that they bypass the judicial

proceea and locate in a government official the

delicate responsibility of peering on the

permissibility of speech. See Freedman v.

Maryland, 380 U.S. 61, 56, 86 S.Ct. 734, 738,

13 L.Ed_2d 649 (1965) (holding that "a

noncriminal proceot which roquiree the prior

submission of a film to a censor avoids

constitutional infirmity only if it takes place

under procedural safeguards doaignod to

obviate the dangers of a censorship system")

rVeedman sets forth three procedural

safeguards that have been used by the

Supreme Court to examine licensing schemer

1) any restraint prior to judicial review can

only be imnoonri for a brief and specified

period during which the status quo prevails; 2)

expeditious judicial review must be available;

and 3) the censor must bear the burden of

going to court to suppress speech and once

there bears the burden of proof. FW/PBS, 493

U.S. at 237, 110 S.Ct. at 605-06 (citing

•Veedman, 380 U.S. at 58-60, 85 S.Ct. at 738-

39).

[131 When the riaka associated with

unbridled licensing schemes are present to a

significant degree, "courts must entertain an

immediate facial attark on the law."

Lakewood, 486 U.S. at 769,106 S.Ct. at 3145.

B. Analysis

In Bernstein II thia court held that the ITAR

effected an unconstitutional prior restraint on

speech due to inadequate procedural

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974 F.Supp. 1288

(Cite as: 974 F.Supp. 1288, *1304)

safeguards. Plaintiff contends that the new

encryption regulations suffer from identical

deficiencies Defendants do not argue that the

effect of the new regulations is notably

different from that of the ITAJR, [FN19] They

do, however, present arguments against some

of the reasoning in Bernstein II and to the

extent that these arguments are applicable to

the current analysis, the court will address

FN19. In their motion for reconsideration,

defpnriants concede that the "essential

requirements that previously applied to

encryption source code under the ITAit

would continue under the EAR." Df.

Motion for Reconsideration, at 2. The

government also acknowledged at oral

argument that the issues before the court

were basically unchanged.

1. Controls on Encryption Commodities and

Software

[14] First, defendants protest that a facial

challenge is not applicable here because there

is not a "dose enough nexus to expression, or

to conduct commonly associated with

expression, to pose a real and substantial

threat of identified censorship risks."

Lakewood, 486 U.S. at 759, 108 S.Ct. at 2145.

In *1305 Lakewood, a newspaper challenged a

city ordinance which required •TH^IA! permits

for newsracks on public property and gave the

mayor authority to grant or deny applications

for those permits. The Court contrasted laws

that are directed at expression, such as one

governing the circulation of newspapers, with

laws of general applicability not aimed at

conduct commonly associated with expression,

such as a law requiring building permits. Id.

at 760-61, 108 S.Ct. at 2145-46. The former

risks self-censorship on the part of those

applying for permits and censorship on the

part of the decisionmaker. The latter rarely

do. See also Freedman, 380 U.S. 61, 85 S.Ct

734,13 L.Ed.2d 649 (licensing of films); FW/

PBS, 493 U.S. 215,110 S.Ct. 596,107 L.Ed.2d

603 (licensing ofsexually-oriented businesses).

Defendants contend that while licensing

schemes that vest unbridled discretion to

regulate conduct commonly associated with

Page 20

expression are appropriate for facial attack

under prior restraint doctrine, such is not the

case here where the activity at issue is the

programming of a computer to encrypt

information. fFN20] Defendants also cite

Roulette v. City of Seattle, 97 F.3d 300, 305

(9th Cir. 1996), to support their contention that

only laws narrowly and specifically directed at

expressive activities are subject to facial

challenge. At issue in Roulette was an

ordinance that prohibited people from sitting

or lying on public sidewalks in certain areas

and during certain times. The court, in a

pithy opinion, held that "[tJhe fact that sitting

can possibly be expressive, however, isn't

enough to sustain plaintiffs* facial challenge

to the Seattle ordinance.... Consistent with

, Js speech-protective purpose, the Supreme

Court has entertained facial freedom-ofexpression challenges only against statutes

that, Tiy their terms,' sought to regulate"

words or expressive conduct Id, at 303

(quoting Broadrick v. Oklahoma, 413 U.S.

601, 612-13, 93 S.Ct. 2908, 2915-16, 37

L.Ed.2d 830 (1973)).

FN20. Defendants again spend a great

deal of energy arguing that encryption

source code is not speech by citing to all

the undisputed facts that show its

functional capacity-its ability to actually

secure communication. Df. Mem. in

Support, at 9-10. Defendants argue that

just because "a program may be

understood by those trained in

programming does not negate the

functional nature of the program, nor

render it a mere 'idea'.... " Df. Mem. in

Opp., at 5. Again, the court does not

disagree that encryption software is

highly functional, but functionality does

not remove it from the realm of speech.

Just because an idea is functional does not

"negate" its expressiveness. Indeed, it is

functional speech. Programming is not,

as defendants would have it, merely

mechanical. It is both an art and a

science. "[A] computer program is not just

a way of getting a computer to perform

operations but rather ... is a novel formal

medium for expressing ideas about

methodology." Plaintiff. Mem. in Opp.,

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(ate as; 974 F.Supp. 128a *1307)

from New York Time* that MM•j security

alone is insufficient without more. Yet that i*

exactly whet both the President and the BXA

have offered here ee the justification for the

regulation; national security and foreign

policy interests. Exec Order No. 13026, 61

FedJReg. 68767; 61 FedJleg. 68673.

Particularly now, when none of the encryption

items subject to export controls under the EAR

have military applications, a less amorphous

rationale is required. [FN21 ]

FN21. One might make the argument

that encryption software could be validly

regulated for its "secondary effects," much

like adult theaters were in Young T.

American Mini Theatres, Inc., 427 U.S.

60, 96 S.Ct. 2440, 49 L.EA2d 310 (1976),

and Renton v. Playtime Theatres, Inc.,

475 U.S. 41, 106 S.Ct 925, 89 L.Ed-2d 29

(1986), where the Supreme Court upheld

zoning ordinances aimed at the secondary

effects of such theaters in the surrounding

community. However, the secondary

effects rationale has never been extended

beyond sexually explicit speech. See Boos

v. Barry, 486 U.S. 312.108 S.Ct. 1157, 99

L.E<L2d 333 (1988) (refusing to apply the

rationale to political speech). See also

Reno, - U.S. at --, 117 S.Ct. at 2342, 138

L.Ed.2d at 893-95, 97 C.D.O.S. at 5002

(considering the secondary effects doctrine

in relation to a statute regulating speech

on the Internet).

[16] Nor is it necessary that an item be

regulated for its content to make the

regulations function as a prior restraint on

speech. It is enough that they are directed at

expressive activity. As the plurality opinion

in FW/PBS suggests, even a licensing scheme

with a content-neutral purpose must still

contain adequate procedural safeguards in

order to be constitutional. CFN22J Thus,

without deciding whether the regulations are

content-based, the court turns to the

procedural safeguards afforded under the

encryption regulations. As noted above, the

Court in FW/PBS •1308 read Freedman to

hold that for a licensing scheme to be

constitutional, 1) the licensor must make the

licensing decision within a specific and

Page 23

reasonable period of time; 2) there most be

prompt Judicial review; and 3) the censor

must bear the burden of going to court to

uphold e licensing denial and once there beers

the burden of justifying the denial FW/PBS,

493 U.S. at 227-28,110 S.Ct. at 606-06 (citing

Freedman, 380 U.S. at 68-60, 86 S.Ct. at 738-

40). The new regulations, like the ITAR, are

woefully inadequate.

FN22. In FW/PBS Justice O'Connor,

Joined by Justices Stevens and Kennedy,

stated: Because we conclude that the

city's licensing scheme lacks adequate

procedural safeguards, we do not reach

the issue decided by the Court of Appeals

whether the ordinance is properly viewed

as a content-neutral time, place, and

manner restriction aimed at secondary

effects arising out of the sexually oriented

businesses. FW/PBS, 493 U.S. at 223,110

S.Ct at 603.

[17] The EAR provides that license

applications will be resolved or referred to the

President within 90 days. IFN23] 15 C.F.R. 9

760.4(a). However, there is no time limit on

an application that has been referred to the

President. If a license is denied, the agency

provides an internal appeals process, 16

C.F.R. PL 756, but the only time limit on the

appeals decision is that the agency "shall

decide an appeal within a reasonable time

after receipt of the appeal" 15 C.F.R. 5

756.2(cXl). That decision is final and not

subject to judicial review. 15 C.F.R. !

756.2(cX2); 60 U.S.C.App. 8 2412(e); see also

United States v. Boxarov, 974 F.2d 1037,

1044-45 (9th Cir.1992) (EAA's preclusion of

judicial review does not violate nondelegation

doctrine), cert denied, 507 U.S. 917, 113 S.Ct.

1273, 122 L.Ed.2d 668 (1993). [FN24] And

most important, and most lacking, are any

stsjodarda for deriding an application. The

EAR reviews applications for licenses "on a

case-by-case basis" and appears to '"p*1no

limits on agency discretion. 61 FedJleg.

68681 (to be codified at 15 C.F.R. S 742.15(b)).

Like the ordinance in Lakewood, where the

mayor could deny a permit without any more

justification than that it was not in the public

interest, nothing in the regulations prevents

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(Cite as: 974 F.Supp. 1388, •1308)

the BXA from justifying a denial of an

application by stating that it ia contrary to

national security and foreign policy interests.

[FN25] Aa the Court noted in Lakewood,

these an illusory constraints. 486 VS. at

769, 108 act at 2160-61; aw also Desert

Outdoor Advertising Inc. T, City of Moreno

Valley, 103 F.Sd 614, 818 (9th Cir.1998)

(finding billboard permit requirement

unconstitutional because city officials had

"discretion to deny a permit on the basis of

smhignons and subjective reasons"). This

court has stated previously that while it ia

mindful of the problems inherent in Judicial

review of licensing decisions regarding

cryptographic software, both with respect to

the sophistication of the technology and the

potentially classified nature of the licensing

considerations, there must still be some

review available if the export controls on

cryptographic software are to survive the

presumption against prior restraints on

speech. In this case, for the reasons

enumerated, the court concludes that the

encryption regulations are an unconstitutional

prior restraint in violation of the First

FN23. Given the other more obvious

deficiencies in the procedural aspects of

the regulations, the court does not

consider whether 90 days is fast enough

given the demands in the field of

cryptography.

FN24. To the extent the EAR are

authorized by the TEEPA, that statute

does not appear to preclude judicial

review. Milena Ship Management Co.

Ltd. v. Neweomb, 804 F.Supp. 846,850 a

2 (E.D.La.1992) (nothing in IEEPA

provides clear evidence of intent to

preclude judicial review). However, ifthe

EAR are authorised exclusively by

Executive Order 13026, that order seems

to preclude judicial review. Exec Order

No. 13026,61 FedJlag. 68768.

FN25. As the court rlianisand in Bernstein

II with respect to the ITAR, some of the

dangers of a ttandardless licensing

scheme had already been realized.

Page 14

According to the NRC Report, the risk of

discriminatory treatment associated with

such schemes was reflected in the Report's

comments that companies were reluctant

to express their full dissatisfaction with

the rules and implementation of export

controls over cryptographic products for

bar that "any explicit connection between

critical comments and their oflasnasg

might result in unfavorable treatment of

a future application for an export license

for one of their products." NRC Report at

4-29.

2. Controls on Encryption Technology

Plaintiff does not distinguish the regulation

of encryption technology-es opposed to

commodities end softwsre-for the purposes of

prior restraint analysis. With respect to

vagueness, the only provision he addresses as

vague is "technical assistance." 16 CF.R I

744.9(a). Defendants allege that plaintiff

lacks «*«"^'"g to challenge the controls on

technology because they have not been applied

to him and any injury is speculative. 'MM

Even if plaintiff is found to have standing,-

AttfanAmnim contend that a facial challenge is

still inappropriate because United States v.

Edler Indus., Inc., 579 F.2d 516, 520 (9th

Cir.1978), found that the technical data

provisions of the predecessor to the AECA

survived constitutional. challenge with a

narrowing construction.

(181 It does not appear necessary to arlrlrsss

the vagueness argument advanced by

plaintiff, or any of the other constitutional

arguments, as the bulk of the encryption

regulations have been adjudged to constitute a

prior restraint on speech. The First

Amendment does not "render inapplicable the

rule that a federal court should not extend its

invalidation of a statute further than is

necessary to dispose of the case before it.*

Brockatt v. Spokane Arcades, Inc., 472 U.S.

491, 502,106 S.Ct. 2794, 2801.86 L.EA2d 394

(1985) (citation omitted). The restrictions on

IgeJaafagl assistance under the new regulations

prohibit a parson from providing technical

assistance without a license to foreign persons

"with the intent to aid a foreign person in the

Copr. • West 1997 No Claim to Orig. U.S. Govt. Works
974 F-SUPPL 1288

(Cite as: 974 F.Supp. 1288, •1309)

development or manufacture outaida the

United State* of encryption commodities and

software that, if ofUnited States origin, would

be controlled fir 'El' reason* under ECCN

6A002 or 6D002." 61 Fed-Reg. 68684 (to be

codified at 16 CSJt. I 744.9). The technical

assistance provision also states thet the "mere

teaching or discussion of information about

cryptography" does not establish the requisite

intent 61 Fed-Reg. 68684 (to be codified at 16

CJML I 744.9(a)). However cryptic this

provision might be viewed in relation to the

more expansive exemptions for educational

fasBBssssssssl and SBBSB*"*****ej reeearcfa

elsewhere in the regulations, because it is

dopendent on the '^^»*t"«^^»*^ and regulation of

encryption mmmodifies and software, it is

unenforceable under the court's holding shore.

m. Proper Defendant*

[19] Plaintiff named three additional

defendants in his aajsjajsnasnia1 MBMBSBI ***•the

Departments of Energy ("DOE") and Justice

("DOJ") and the Central Intelligence Agency

(*CIA")~becanae aflejaJi from each are now

involved in some way with licensing reviews.

61 FedJteg. 68686 (to be codified at 16 CJR.

I 760.3(bX2Xv)); 16 C.F.R. S 760.4(dMe); 16

C.F.R. | 772 (listing committees involved in

interagency review and their members).

Plaintiff also contends that these agencies are

involved with overall juriadictional decisions

as well. Press Release, at 4 (stating that after

legislative reauthorization of export controls

the Secretaries of Defense and State together

with the Attorney General "shall reexamine

whether adequate controls on encryption

products can be mfiwt^iw^H under the

provisions of the new statute and advise the

Secretary of Commerce of their conclusions as

well as any recommendations for action").

Defendants ejssssl flsgi there is no Justification

for joining every agency that participates in

the review process and that the Secretary of

Commerce is the only proper defendant

The court is tsstbass to agree with

defendants. The roles played by the DOE,

DOJ and the CIA are limited to consulting

and advising the Secretary of Commerce who

is responsible for final decisions. Even ifthose

Page 26

agencies are asked to review any new

legislation that may be passed, [FN26] their

roles are advisory. Accordingly, any

determination against the Secretary of

Commerce is sufficient and the DOE, DOJ and

the CIA ere dismissed aa osssxsiantsj

Furthermore, because the applicable

regulations are no longer implemented by the

Department of State, the Secretary ofState ia

FN26. It ia not clear from the Press

Release accompanying the President's

Executive Order 13026 whether the

review those agencies are to provide is

limited to the enactment of new

legislation or whether they will also

review the new regulations.

IV. Scope ofRelief

[201 Plaintiff requests that in addition to

declaratory relief, the court issue a permanent

injunction against defendants barring

nationwide application of the encryption

regulations on the grounds that loss of First

Amendment fV^Aim* constitutes irreparable

injury, Elrod v. Burns, 427 U.S. 347, 373, 96

act 2873, 2689-90, 49 L.Ed.2d 647 (1976),

and that ha will not be afforded complete

relief unless an injunction extends to irtintepts.

coUeaguee and others not before the court

Bresgal v. Brock, 843 F.2d 1163 (9th *1310

Cir.1987). Defendants protest that a

nationwide injunction is improper because

relief should be no broader than necessary,

Meinholri v. United States Dept of Defense,

34 F.3d 1469,1480 (9th Cir. 1994). and because

the issues are novel and of public importance.

Azurin v. Von Rash, 792 F.2d 914, 916 (9th

Cir. 1986).

In Bresgal, the Ninth Circuit found in the

absence of a certified nationwide class that a

district court could still order nationwide

relief in order to ensure the prevailing parties

were given the relief to which they were

e**tHiftd eo long as the injunction was directed

against a party to the action, in that case the

Secretary of Labor. 843 F.2d at 1170-71.

However, this holding must still be weighed

against the rule that an injunction should be

Copr. • West 1997 No Claim to Orig. U.S. Govt Works
89

974 F^upp. 1288

(Cite a* 974 F.Supp. 1288. M310)

no more burdensome than ••ay to afford

complete relief. Meinhold, 34 F.3d at 1480

(quoting Califano T. Yamasaki, 443 U.S. 682,

702, 99 S.Ct 2646, 2668-69, 61 L.Ed.2d 176

(1979)). In thil instance the court, particularly

given its determination of facial invalidity of

the regulations, could indeed order nationwide

relief. However, as it did in Bernstein E, the

court concludes that because tha legal

questions at issue are novel, complex and of

public importance, the injunctive reliefshould

be as narrow as possible pending appeal See

Axurin, 792 F.2d at 916. While declaratory

relief should be f^^^nt, plafafcuT should not

bar prooecution for teaching and writing

about encryption. Nor should plaintiff have to

conduct his scholarly activities under

stipulation with the government.

Accordingly, defendants are enjoined from

enforcing the regulations against pi"*"****" or

against anyone who seeks to use, discuss or

publish plaintiff's encryption progyaaa,

V. Effect of Previous Order

Defendants ask the court to vacate its order

in Bernstein II as the controversy has shifted

to the new regulations and Category xm of

the , USML no longer covers plaintiff's

software. Plaintiff argues the court should

reaffirm its previous order because the

President left open the possibility that

jurisdiction would be shifted back to the

Department of State if export controls under

the Commerce Department prove inadequate.

The likelihood of the jurisdiction being

transferred beck to the State Department

assess too remote to justify maintaining an

order that no longer applies to the controversy

before the court. While the government

cannot avoid the constitutional deficiencies of

its regulations by rotating oversight of them

from department to department, the court does

not believe that such was the intent here.

Moreover, should the President direct that

export controls on encryption be regulated

under the TTAR once more, plaintiff can come

back before this court at that time. However,

given the continuing validity of the rationale

in Bernstein II to the present order, neither is

it noceosaiy to vacate that decision.

Accordingly, the court's holding in Bernstein

Page 28

H, In so far as it relates to tha ITAR, is hereby

superseded by the fsaent order.

CONCLUSION

For the aforementioned reasons,

1) plaintiff's motion for summary judgment

is GRANTED in part and DENIED in part in

accordance with the foregoing;

2) defendants' motion for summary

judgment is DENTED in part and GRANTED

in part in accordance with the foregoing;

3) the Departments ofState, Energy, Justice

and the Central Intelligence Agency are

dismissed as ess%esjsssssj

4) the court's holding in Bernstein v. United

States Dept of State, 946 F.Supp. 1279, is

superseded by this order;

6) the court declares that the Export

Adininistration Regulations, 16 C.F.R. PL 730

et aeq.(1997) and all rules, policies and

practices promulgated or pursued thereunder

insofar as they apply to or require licensing

for encryption and decryption software and

related devices and technology are in violation

of the First Amendment on the grounds of

prior restraint and are, therefore,

unconstitutional as discussed above, and shall

not be applied to plaintiffs publishing of such

items, including scientific papers, algorithms

or computer programs;

6) defendants are permanently enjoined from

doing or causing to be done the following acts:

•1311 a) further and future enforcement,

operation or execution of the statutes,

regulations, rules, policies and practices

declared unconstitutional under this order,

including criminal or civil prosecutions with

respect to plaintiff or anyone who uses,

rtisrn•c> or publishes or seeks to use,

discuss or publish plaintiff's encryption

program and related materials described in

paragraph 6) of this order; and

b) threatening, detaining, prosecuting,

discouraging or otherwise interfering with

plaintiff or any other person described in

Copr. • West 1997 No Claim to Orig. U.S. Govt. Works
90

974 F.Supp. 12S8 Pag* XI

(Cite at: t74 F.Supp. 1288. *1S1U

paragraph 6) above in the eieroie of their

federal conatltuttonal righti u declared in

this order.

rr IS SO ORDERED.

END OP DOCUMENT

Copr. • West 1997 No Claim to Orig. U.S. Gort Work*
91

Senator ASHCROFT. Tim Casey is the chief technology counsel for

law and public policy with MCI. He holds both law and engineering

degrees and has a great deal of experience dealing with high-tech

legal issues for MCI.

Mr. Casey, we are glad that you have come to the committee, and

would you please begin your testimony?

STATEMENT OF TIM D. CASEY

Mr. CASEY. Thank you. On behalf of MCI, thank you, Mr. Chairman, for inviting me to testify before your subcommittee on this

very important issue.

MCI believes that controls on the use of strong encryption, including key recovery systems, are contrary to the best interests of

the American people for at least three reasons. Such controls, one,

could harm the ability of American businesses to compete with foreign companies for foreign and domestic customers; two, undermine

the enormous potential of the Internet, including global electronic

commerce, to improve the lives of all Americans; and, three, violate

the constitutional rights of privacy and abrogate the protections of

the fourth and fifth amendments.

But perhaps even more important than those considerations,

there are a number of practical problems associated with any key

recovery system that render them futile or even counterproductive

to even attempt. Companies such as MCI are concerned that

encryption controls will negatively impact our ability to compete

with multinational carriers for multinational customers.

MCI offers customized Internet products such as electronic commerce tools and customized browsers that incorporate encryption

tools. Because foreign carriers from countries without encryption

controls will offer strong encryption to which no government entity

holds the keys, we believe that potential customers seeking the

highest level of protection will choose their products over ours.

In addition to competitive business concerns raised by controls on

strong encryption, the enormous potential of the Internet, including

Internet-based global electronic commerce, could be undercut by

the Government's effort to limit online privacy. Without strong

encryption and severe limits on the Government's ability to access

Internet communications, people can lose confidence in the Internet

and fail to make use of its full potential. This could destroy the

great potential of the Internet to bring new and better services to

people, to enhance the efficiency of our economy, and to further

strengthen our democracy.

The FBI's proposal for key recovery, in general, and its recent

call to include domestic controls on the use of strong encryption, in

particular, raise serious questions about the people's right to privacy under the Constitution, although that has clearly already

been pointed out by the fellow speakers. As a practical matter,

while law enforcement insists that its access to private communications will be limited in scope and possibly subject to properly obtained warrants, the American people are well aware that private

efforts to hack into computer systems, including the Internet, are

tenacious and pervasive. As a result, providing law enforcement

with a key to every communication on the Internet will surely lead

to an increase in abuse of those keys by private parties.
92

Numerous newspaper articles report Americans' concerns regarding the unauthorized use of their personal information. People are

increasingly using encryption to protect e-mail and data files. And

perhaps in response to the questions earlier about why more people

aren't using it, a lot of the programs that have been developed

today are not the easiest in the world to use, and I think as the

technology becomes more prevalent and available, simpler forms of

encryption tools will be allowed and people will then begin to use

them more frequently.

Neither the Government nor a trusted third party can guarantee

that personal information will not be misused under the key recovery proposals. It has been widely reported that once someone's

credit card report, medical history, or other sensitive information

has been misused, the consequences can be grave and the misuse

difficult or impossible to correct. The very viability of Internet commerce and the integrity of its communications are dependent on

the unobstructed use of superior encryption products.

Many consumers are still very wary about purchasing products

and services via the Internet, fearful that their credit card numbers

could be appropriated. Businesses are rightly worried about threats

to the confidentiality and authenticity of their online communications and transactions. Strong encryption can significantly mitigate

these concerns by affording individuals and companies on a multinational basis protection from computer crimes and unauthorized

access.

As a related matter, limiting privacy on the Internet may bolster

the plans of some to impose a new and unreasonably strict copyright regime in cyber space. Providers like MCI may be forced to

monitor and/or block the communications of individuals and businesses in a fruitless effort to identify potential copyright infringements. Technical impossibility and practical concerns aside, such

monitoring or blocking would invade the privacy of every Internet

user.

I certainly do not advocate the violation of copyright laws. However, denying people the right to keep their communications private from the Government and Internet service providers or copyright owners alike is not the way to fight crime and not the way

to protect valuable information. In fact, strong encryption can actually help fight crime and protect copyrights and other intellectual

property. By ensuring the security of financial transactions, for example, strong encryption can help reduce white collar crime. In addition, strong encryption provides an inexpensive methods for authors and other creators to protect against the theft of copyrighted

works on the Internet.

In considering both domestic restrictions and export controls of

strong encryption, I want to make an important point about Internet domain names. Domain names ending with the ".com" designation are available to any domestic or foreign company. It can be

used by computers anywhere in the world. The typical Internet

user is not aware of the location of the domain he or she is accessing.

To take one example, the Government of Singapore has monitored and may still be monitoring all Internet communications entering that country. As a result, the communications of Internet
93

users around the world accessing the ".com" domain residing in

Singapore could be exposed to the watchful eye of that local government. The only way to ensure the highest level of privacy throughout the Internet is to ensure that the strongest encryption is available in the United States for sale or export and to discourage the

use of encryption controls abroad.

In addition to all these concerns, practical limitations on the effectiveness of key recovery suggest that its use does not justify the

cost to individual privacy. Put simply, key recovery will not work

to solve the anti-criminal issue that it is primarily based upon.

First, encryption users employing a two-step key process can require a password, often called a challenge phrase, to decrypt the

key to an encrypted message. As a result, a stored key without its

corresponding password would not function or help law enforcement.

Another type of encryption growing in popularity is the split key

method. These systems require a combination of keys to reconstruct the real key originally used to encrypt a message. Because

such second-level protections can be modified at the will of the

user, stored keys would quickly become worth less than the cost of

administering them. Furthermore, common sense suggests that

among the most diligent users of such methods would be criminals

bent on hiding their communications from the authorities. No matter what system we come up with, there will always be a smarter

criminal out there who can defeat it.

MCI recognizes the need to be tough on crime, but doing so

should not come at the expense of privacy or fail to make practical

sense. The American people are making it increasingly clear that

privacy is at the forefront of their concerns. To any suggestion that

privacy concerns are exaggerated, I would point to the countries

around the world that currently impose controls on the use of

encryption. They include Belarus, China, Pakistan, and Russia. I

would ask the committee members if you believe the American people want the United States to join that list of countries.

I believe that strong encryption is the key to privacy on the

Internet and that such privacy, in turn, is the key to realizing the

enormous potential of the Internet and global electronic commerce.

MCI has watched the debate over encryption labor on for years

without progress. We believe that the time has come to embrace an

approach supportive of innovative, strong self-regulation rather

than continuing to pursue an elusive compromise between industry

and law enforcement.

Thank you again for allowing me to testify today and I would be

happy to answer any questions you might have.

Senator ASHCROFT. Thank you, Mr. Casey.

[The prepared statement of Mr. Casey follows:]

PREPARED STATEMENT OF TIM D. CASEY

I. INTRODUCTION

MCI believes that controls on the use of strong encryption, including key recovery

systems, are contrary to the best interests of the American people for at least three

reasons. Such controls could: (1) harm the ability of American business to compete

with foreign companies for foreign and domestic customers; (2) undermine the enormous potential of the Internet, including global electronic commerce, to improve the

lives of all Americans; and (3) violate the constitutional right to privacy and abro50-474 98-4
94

gate the protections of the 4th and 5th Amendments. In addition to these important

considerations, there are a number of practical problems associated with key recovery systems that render them futile or even counter-productive.

II. ENCRYPTION CONTROLS ARE CONTRARY TO AMERICA'S BEST INTERESTS

1. Impact on U.S. business

Companies like MCI are concerned that encryption controls will negatively impact

our ability to compete with multinational carriers for multinational customers. MCI

offers customized Internet products•such as World Wide Web browsers•that incorporate encryption tools. Because foreign carriers from countries without encryption

controls will offer strong encryption to which no government entity holds the keys,

we believe that potential customers seeking the highest level of protection will

choose their products over ours.

By limiting the sale and use of domestically developed U.S. encryption technology

abroad, current export controls endanger America's technological competitiveness

and its overall economic security. If those in the international marketplace cannot

obtain strong encryption products from U.S. firms, they will increasingly turn to foreign suppliers•threatening America's edge in the critical sectors of computer technology and telecommunications. In addition, one of several legislative versions promoted by federal authorities now pending in the U.S. House of Representatives

would prohibit domestic manufacturing, sale or importation of any encryption product or service, unless the government is given immediate access to the plain text

of communications and stored files so that they can be immediately read without

the knowledge of the user. We believe that this requirement would have a chilling

effect on our ability to gain new customers and retain our current ones.

2. Potential of the Internet and global electronic commerce

In addition to the specter to American business raised by controls on strong

encryption, the enormous potential of the Internet, including Internet-based global

electronic commerce, could be undercut by the government's efforts to limit online

privacy.

Anyone who once doubted the Internet's potential to transform the daily lives of

all Americans, must now see that the Internet has already revolutionized the way

millions of people communicate, conduct business, and access information. Without

strong encryption and severe limits on the government's ability to access Internet

communications, people may lose confidence in the Internet and fail to make use

of its full potential. This could destroy the great potential of the Internet to bring

new and better services to people, enhance the efficiency of our economy, and further strengthen our democracy.

We stand on the brink of a a great change in the way people and companies conduct business around the world. Electronic commerce will create efficiencies in the

cost of doing business, open new markets, and bring new products and services to

all people. But this promise will never be fulfilled if the average citizen feels his

or her privacy is not secure on the Internet. As a recent front-page Washington Post

article reports, of the millions of people already using the Internet, growing numbers are turning to encryption and other methods to protect their privacy online.

3. Constitutional issues

The FBI's proposal for key recovery in general, and Director Freeh's recent call

to include domestic controls on the use of strong encryption in particular, raise serious questions about the people's right to privacy under the Constitution.

I urge the Committee Members to parse the words of the 4th Amendment very

carefully in considering the constitutionality of controlling strong encryption. The

4th Amendment requires that a warrant particularly describe the places to be

searched or the things to be seized. I ask the Committee Members to consider the

extent to which key recovery abrogates this important limit on the government's authority. By the verv nature of a proposal to store keys in advance, can the "places

to be searched" and the "things to be seized" be particularly described?

The 5th Amendment's command is very simple: "No person shall * * * be deprived of life, liberty, or property without due process of law." I suspect that most

Americans would consider the keys to their encryption communications and stored

data to be their personal property. By requiring the surrender of all keys to all communications and stored data, the American people may feel that their government

seeks to deprive them of that property without due process.

As a practical matter, while law enforcement insists that its access to private

communications will be limited in scope and subject to properly-obtained warrants,

the American people are well aware that private efforts to "hack" into computer systems•including the Internet•are tenacious and pervasive. As a result, providing
95

law enforcement with a key to every communication on the Internet will surely lead

to an increase in abuse of those keys by private parties.

III. THE AMERICAN PEOPLE'S STRONG INTEREST IN PRIVACY

The Post article reports that the American people are becoming increasingly frustrated with unauthorized use of their personal information. The measures people

are using to protect that information increasingly include encryption of e-mail and

data files. It is important to understand that a compromise in privacy•even if limited and controlled as the government promises•is a compromise nonetheless. Neither the government nor a "trusted third party" can guarantee that personal information will not be misused under the key recovery proposals. It's been widely reported that once someone's credit report, medical history, or other sensitive information has been misused, the consequences can be grave, and the misuse difficult or

impossible to correct.

A recent survey also provides strong evidence of the people's serious concern with

online privacy matters. So leery are Americans of privacy on the Internet, that 40

percent of the 20,000 respondents to a survey by the Georgia Institute of Technology

reported that they have given false personal information when registering at a

website. By way of comparison, only 8 percent of those surveyed reported that they

were concerned enough about "spamming"•or unsolicited, bulk e-mail•on the

Internet to support a legislative solution. This is particularly striking because

spamming is widely considered to be one of the biggest problems on the Internet.

The very viability of Internet commerce and the integrity of its communications

are dependent on the unobstructed use of superior encryption products. Many consumers are still very wary about purchasing products and services via the Internet,

fearful that their credit-card numbers could be appropriated or their privacy compromised. Businesses, moreover, are rightly worried about threats to the confidentiality and authenticity of their online communications and transactions. Strong

encryption can significantly mitigate these concerns by affording individuals and

companies protection from computer crimes and unauthorized access. And in doing

so, encryption can facilitate and speed the realization of the Internet's enormous

economic and social potential.

IV. COPYRIGHT LIABILITY AND PRIVACY

As a related matter, limiting privacy on the Internet may bolster the plans of

some to impose a new and unreasonably strict copyright regime in cyberspace. Providers like MCI may be forced to monitor and/or block the communications of individuals and businesses in a fruitless effort to identify potential copyright infringements. Technical impossibility and practical concerns aside, such monitoring or

blocking would invade the privacy of every Internet user.

As explained, the American people have the right to be secure in their communications. I certainly do not advocate the violation of copyright laws; however, denying people the right to keep their communications private•from the government

and Internet service providers alike•is not the way to fight crime, and not the way

to protect valuable copyrights.

In fact, strong encryption can actually help fight crime and protect copyrights and

other intellectual property. By ensuring the security of financial transactions, for example, strong encryption can help reduce white collar crime. In addition, strong

encryption provides an inexpensive method for authors and other creators to protect

against the theft of copyrighted works on the Internet.

V. INTERNET DOMAIN NAMES

In considering both domestic restrictions and export controls of strong encryption,

I want to make an important point about Internet domain names. Domain names

ending with the ".com" designation are available to any domestic or foreign company, and can be used by computers anywhere in the world. The typical Internet

user is not aware of the location of the domain he or she is accessing. To take one

example, the government of Singapore has monitored and may still be monitoring

all Internet communications entering that country. As a result, the communications

of Internet users around the world accessing a ".com" address residing in Singapore

could be exposed to the watchful eye of that local government. The only way to ensure the highest level of privacy throughout the Internet is to ensure that the

strongest encryption is available in the U.S. for sale or export and to discourage the

use of encryption controls abroad.
96

VI. PRACTICAL PROBLEMS WITH KEY RECOVERY

In addition to all these concerns, practical limitations on the effectiveness of key

recovery suggest that its use does not justify the cost to individual privacy. Put simply, key recovery will not work to solve the anti-criminal issue that it is primarily

based upon. First, encryption users employing a two-step key process can require

a password•often called a "passphrase or "challenge phrase (which can itself be

encrypted)•to decrypt the key to an encrypted message. As a result, a stored key•

without its corresponding password•would not function.

Another type of encryption growing in popularity is the split-key method. These

systems require a combination of keys to reconstruct the "real" key originally used

to encrypt a message. Because such second-level protections can be modified at will

by the user, stored keys would quickly become worth less than the cost of administering them. Furthermore, common sense suggests that among the most diligent

users of such methods would be criminals bent on hiding their communications from

the authorities.

I am unaware of any key recovery system that puts the keys in the hands of users

that could not be easily defeated by criminals, even those whose only crime is circumvention of encryption control laws. Centralized systems can be imagined by

which, for example, a corporate computer would produce and issue keys to users.

I feel strongly, however, given the American people's concern with online privacy,

that they will want to choose encryption systems in which they create and manage

their own keys. And I'm certain that any proposal forcing companies like MCI to

issue and store its customers' keys would contribute to the competitive disadvantage

created by encryption controls in general.

vn. CONCLUSION

MCI recognizes the need to be tough on crime; but doing so should not come at

the expense of privacy. The American people are making it increasingly clear that

privacy is at the forefront of their concerns. To any suggestion that privacy concerns

are exaggerated, I would point to the countries around the world that currently impose controls on the use of encryption. They include: Belarus, China, Pakistan, and

Russia. I would ask the Committee Members if you believe the American people

want the United States to join that list of countries.

I believe that strong encryption is the key to privacy on the Internet, and that

such privacy, in turn, is the key to realizing the enormous potential of the Internet

and global electronic commerce. MCI has watched the debate over encryption labor

on for years without progress. We believe that the time has come to embrace an

approach supportive of innovative, strong self-regulation rather than continuing to

pursue an elusive compromise between industry and law enforcement

Senator ASHCROFT. Let me just say that as I ask questions, I

would be pleased if those of you to whom the question is not directed•feel free to answer the question anyhow because it is in my

best interest to try and have as much information and analysis as

I can.

Professor Sullivan, it appears that the Justice Department has

argued that the fourth amendment problem is avoided when the

Government forces an individual to hand over something to a third

party rather than to the Government directly. Do you agree with

that or do you have a comment on that?

Ms. SULLIVAN. With respect, Mr. Chairman, I don't think that is

correct. I think that if the Government uses private agents to accomplish unconstitutional ends, it can't cure the problem by outsourcing the dragnet. A dragnet is a dragnet even if it is outsourced. The problem here really arises from compelling a search,

executing a search at the time that the key has to be given up to

third parties, and is no answer to that to say that the fourth

amendment will be complied with at a later time when somehow

probable cause or reasonableness has been established.

Mr. EPSTEIN. In fact, I thought that Mr. Litt made a fatal concession during his testimony to you when he said, in effect, the search

takes place at the time that the key is turned over, not at the time
97

that the warrant is sought for the information guarded by the key.

If that is true, then you have to have the warrant requirement and

the probable cause requirements and particular description requirements satisfied at the early stages. And if you ever wanted to

talk about a proverbial fishing expedition, this is it. You have billions of pieces of information that will be compromised and you

may be looking at a thousand of them over the entire course of

their lifetime.

Senator ASHCROFT. Professor Epstein, you mentioned in your

written commentary the issue of a taking by Government when

something is mandated by way of a key. Would you care to comment on that?

Mr. EPSTEIN. I would be delighted to. The takings issue is, of

course, one that lurks in the background of all of these cases, and

the precise question you have to worry about is the Government

takes the key, puts it in the hands of the third-party agent and it

is lost or stolen from that agent. The question is who is going to

bear the risk of loss associated with the compromised data which

takes place because of that loss or that theft.

Under standard law, what you would try to do is figure out what

the optimal risk allocation arrangement is between a bailee of the

property•in this case, the key•and the owner of the safe. And the

usual rule allocates that loss in accordance with the distribution of

benefits and costs. In this case, the Government insists it is for its

benefit and it recognizes that it poses a cost on the individual who

is forced to turn the key over. So if you were just using standard

private law analogies, the risk of loss caused by a third party defalcation would always fall on the Government.

What is striking about these cases is the losses here are immunized from Government compensation, and then the issue is whether or not the deviation from the common law rules on liability with

respect to the loss of property constitutes a taking. Academically,

I have no doubt that that ought to be the case. In terms of current

doctrine, it is a bit more clouded. What happens under current law

is the Government may be able to plead some form of sovereign immunity or it may be able to say that the taking was by a third

party and not by us.

I think that these are pretty thin verbal distinctions, but even

if they are correct, this is a committee which is concerned with

property rights as well as with the Constitution and one of the

costs that we have to worry about in putting this program forward

is, in effect, the cost of loss for which the Government will not assume responsibility and from which it will insulate all third parties

from responsibilities.

These are social losses. If they are uncompensated, the standard

economic theory applies. If the Government is allowed to externalize the costs of certain activities, it will engage in too much of those

activities. That is as true of searching and seizing in criminal investigations as anything else.

The right question to ask Mr. Litt, if he were here, is as follows.

If we gave you a large budget, how much would you spend on insurance for losses and how much would you spend on some other

systems? My guess is they would not want to fund the losses. They

want to keep them off-budget. If put on budget, they would change
98

their behaviors. And since that is the case, we ought never to allow

them to start down this dangerous path to begin with.

Senator ASHCROFT. MS. Cohn, you bring an interesting and compelling analysis in terms of free speech. Apparently, Government

will allow us to speak in codes domestically, but if we get close to

the border, our free speech is inhibited. Is that your argument that

if you stand too close to Canada, you can't speak the same things

that you could if you were in the heart of the Midwest?

Ms. COHN. Well, it is certainly a piece of it, and there is Supreme

Court doctrine and ninth circuit doctrine, which is where I practice,

that does say that your first amendment right to speak includes

your first amendment right to speak to foreigners and that the first

amendment doesn't stop at the borders in terms of Americans'

rights. And so we think that there is a problem when the Government says, well, you can speak all you want to other Americans,

but if you want to try to speak to foreigners, we are going to make

sure that you speak in a language we can understand.

It is interesting to me because one of the great tools used in

World War II were the Navajo code talkers, and they were chosen

precisely because it was such an obscure language that nobody outside the United States was thought to be able to understand it. It

appears that that was the case, since their codes were never broken. The idea that the U.S. Government is essentially saying, well,

you know, you Navajos have to speak in English now, is, I think,

severely problematic to the first amendment.

Ms. SULLIVAN. If I could just add to that, the right to speak also

entails the right not to speak, and the Supreme Court has recognized that sometimes the right to speak anonymously is protected

by the first amendment. Indeed, it recently held that a woman trying to influence her fellow citizens of a town not to vote for a school

board levy had a right to send out pamphlets and try to influence

their vote without signing those documents. And in the course of

the opinions striking down the law that would have made her reveal her identity, the Court noted that the Framers often spoke

with pseudonyms. Publius wrote the Federalist Papers, and that

pseudonym was responded to by other pseudonyms from the antiFederalists, Cato and the Federal Farmer, and so forth.

Justices as diverse otherwise as Justice Stevens and Justice

Thomas agree that the right to speak anonymously is protected by

the first amendment. If there is a right not to have to reveal your

signature on a document, it would follow, it would seem, that if you

wanted to keep the content of the document private, that ought to

be allowed as well. If Paul Revere wants to say "one if by land and

two if by sea" and not reveal the meaning of that signal, that, I

think the Framers' generation understood, was a form of speech

that perhaps needs to be protected by this right of anonymity.

Mr. EPSTEIN. I would say that there are two issues and the Justice Department has managed to confuse them. The first is what

counts as speech, and the second, what counts as a justification for

the limitation of speech. I think the argument that a publication

of a book which tells people how to encrypt information is not

speech is simply fact-specific. The real serious question is whether

or not the security risk is sufficiently grave that you could justify
99

the restriction under something like the clear and present danger

doctrine.

What we have heard from everybody on this panel is that we

have a very porous world out there and information which allows

you to achieve the same result is already available from countless

sources, and if it is not available, it will soon be made available

from foreign sources. So it seems to me that the size of the Government interest is going to be extraordinarily weak.

Therefore, in order to avoid the question of being explicit with

their justifications, what they try to do is to pretend that something which isn't the case is the case, namely that speech is not

implicated, so that the issue of justification never arises. And I

think that that is just burying your head in the sand and that a

much more candid approach would say, yes, when you are dealing

with export arrangements, the Government issues may be somewhat stronger than they are in the domestic situation. But even if

you were to concede a differential standard, I don't think you get

anything close to the kinds of restrictions here, particularly since

any export controls will surely inhibit the development of the national market by virtue of the fact that virtually all of our customers have worldwide subsidiaries and have to enter into regular

commerce with foreign nations.

Senator ASHCROFT. SO that it is hard to have a narrowly tailored,

effective remedy when there are robust encryption devices proliferating all around the world?

Mr. EPSTEIN. Yes. Let me just give you an alternative proposal.

You try to figure out what the cost of this monstrosity is going to

be and then ask yourself whether or not, if you took general revenues, devoted them all to the FBI and law enforcement and kept

them to traditional means•whether they would be better off with

those additional revenues than with these play toys. And I think

the answer to that question is yes, and so I think what we are

doing is we are going down the wrong road in this particular area.

And I would stress that I think it is a business judgment and a

political judgment, as well as a constitutional judgment, and if they

all line up in the same way, I don't think that we have a particularly vexatious choice to make.

Senator ASHCROFT. Mr. Casey, could you explain how efforts to

impose liability on online third parties threatens the privacy interests of end users?

Mr. CASEY. Well, there are a number of ongoing efforts both in

the United States and in the EC to attempt to regulate various

forms of content being transmitted over the Internet. Perhaps the

most notable one in the United States has to do with efforts both

in the House and in the Senate to restrict copyright transmissions

over the Internet so that illegal or infringing copyrighted works

cannot be transmitted.

And as part of that effort, it has been suggested that the service

providers who merely act to transport those works from place to

place be required at some point in time when technology perhaps

becomes available to monitor for infringing works on the Internet,

to review those works, and to make a determination as to whether

or not they are infringing and should therefore be stopped.
100

And, of course, the only way that you can make a subjective decision like that is to actually look at whatever material it was that

was being transported. And so if you, for example, have encryption,

that becomes impossible because not only is it impossible to try to

stop the transmissions, monitor them and look at what they are

and make a decision about it, but is also impossible if the works

have been encrypted. So we have laws going in opposite directions.

Not only should we not have monitoring requirements for Internet traffic, but we should also encourage the use of encryption so

that the very works that are trying to be protected can be protected

by the people who develop such works. And this is also an issue

in many other areas where it involves other forms of content that

people would like to have regulated and controlled in some fashion.

Senator ASHCROFT. Professor Epstein.

Mr. EPSTEIN. Yes. I think it is very important that we keep in

this particular area the same distinctions that we make, for example, under the general Telecommunications Act, a strong distance

between those people who carry content, but don't examine it•that

is, common carriers on the one hand and broadcasters who are responsible for figuring out what the content is on the other.

The moment you start to impose on a common carrier the obligations that are associated with the management of content, it seems

to me that what you do is you impair their operations and you reduce the confidence that they could extend to other individuals that

they will act merely as a conduit in the wire. Instead, what happens is they become the cogenitor of the information. The only people I think who ought to take that particular role on are those who

assume it voluntarily, and if a common carrier wants to do it, let

it do it from a separate division, and so forth, where it clearly articulates some standards.

But I think that the general rule on liability is quite clear, which

is to the extent that you are a common carrier engaged in the

transmission of information, you are not responsible for the content

unless somebody brings it home to you and you have an opportunity to stop it. So a lending library, for example, would be innocent of any responsibility for the books that it lends until the Government could show quite specifically why this one ought not to

distribute it. It works fine in other areas. I don't see any reason

to deviate from that rule.

Senator ASHCROFT. Let me just say how much I have appreciated

the contributions you all have made.

Senator Patrick Leahy of Vermont is an active participant in the

debate on these issues and he has asked that we submit for the

record remarks of his. And without objection from the committee

and since no one else is here to object, I think I can safely assume

that I will include those remarks.

[The prepared statement of Senator Leahy follows:]

PREPARED STATEMENT OF SENATOR PATRICK LEAHY, A U.S. SENATOR FROM THE

STATE OF VERMONT

Cryptography is important for our economy, our national security and our privacy,

and it will only become more critical with our increasing reliance on computers,

computer networks and other digital communications and electronic media. Even if

many of us still struggle to understand how encryption works, appreciating the im-
101

portance of this technology is an imperative of our inexorable transition into what

we call the Information Age.

PRIVACY

Some have tried to simplify the encryption debate as one in which you are either

for law enforcement and national security or for Internet freedom. Characterizing

the debate in these simplistic terms is neither productive nor accurate. This is not

a black-and-white issue. As with other new and advanced technologies that engage

both law enforcement and civil liberties interests, the solution in this policy debate

will only be reached by balancing all legitimate interests. The starting point is our

Constitution and the Bill of Rights, which confirms our right to speak freely, associate with whom we wish, to refuse to incriminate ourselves, and to be left alone.

We hear almost daily reports about the threats to privacy from the growth of

interconnected computer networks and computer databases. The exponential growth

in use of the Internet and similar interactive communications technologies by Americans to obtain critical medical services, to conduct business, and to be entertained

and communicate with their friends raises special concerns about the privacy and

confidentiality of those communications. Encryption technology offers an effective

way to ensure that only the people we choose can read our communications or our

e-mail, review our medical records, or take money out of our bank account. For

those who want to protect the fruits of their intellectual endeavors, encryption also

provides a technical means to enforce yet another important constitutional right, the

copyright.

In some places in the world, protecting the confidentiality of encrypted files can

be a matter of life and death. I have read horror stories sent to me over the Internet

about how human rights groups in the Balkans have had their computers confiscated during raids by security police seeking to root out the identities of people

who have complained about abuses. Thanks to the PGP encryption software, the

encrypted files were undecipherable by the police and the names of the people who

entrusted their lives to the human rights groups were safe.

I congratulate Chairman Ashcroft and the Ranking Member, Senator Feingold, for

convening this hearing and providing a forum to discuss the important privacy and

constitutional interests at stake in the encryption debate. How we resolve this debate today will have important repercussions for the exercise of our constitutional

rights tomorrow. Every American, not just those in the software industry and not

just those in law enforcement agencies, has a stake in the outcome.

FBI "WISH LIST"

At the heart of the encryption debate is the power this technology gives computer

users to choose who may access their communications and stored records, to the exclusion of all others. For the same reason that encryption is a powerful privacy enhancing tool, it also poses challenges for law enforcement. Law enforcement agencies

want access even when we do not choose to give it.

The FBI has made clear that law enforcement will settle for no less than immediate access to the plaintext of encrypted communications and stored data, and, absent industry capitulation, will seek legislation to this effect. Indeed, while much

of this debate has focused on relaxation of export controls, the FBI has upped the

ante. Recognizing that the encryption genie is out of the bottle, the FBI now wants

to stuff it back in with import restrictions and domestic controls on encryption.

In response to written questions I posed to the FBI in connection with the Judiciary Committee's encryption hearing on June 25, 1997, the FBI stated:

"Without the adoption of legislation which provides that encryption products manufactured or imported into the U.S. include features that allow for the immediate

access to the 'plaintext' of encrypted criminal-related information (both transmitted

and stored), pursuant to lawful court order, investigations and subsequent prosecution of criminal activity will continue to be thwarted * * * [I]f the current voluntary

efforts are not successful, * * * it is the responsibility of the FBI * * * to seek alternative approaches to alleviate the problems caused by encryption. This would include legislative remedies which effectively address law enforcement concerns regarding the import of robust encryption products, as well as encryption products

manufactured for use in the U.S." (Emphasis supplied).

The Administration's recent letter of March 4, 1998, from the Vice President is

fully consistent with this position. While indicating that the Administration prefers

a "good faith dialogue" and "cooperative solutions" over "seeking to legislate domestic controls," the latter approach is nowhere ruled out.
102

LEAHY ENCKYTOON BILLS

Our country is certainly not alone in grappling with the tension between what

encryption has to offer for privacy and confidentiality, and the challenge this poses

for public safety. The Organization For Economic Co-Operation and Development

(OECD) recently issued a report on Cryptography Policy that summarizes many of

the issues that need to be addressed. For example, if lawful access is to be preserved

to encrypted information, how should this be done? As the OECO noted, "other

issues that may need to be addressed include where keys will be stored, who will

be allowed to hold keys, and what will be the responsibilities and the liabilities of

keyholders."

At the beginning of this Congress I introduced with Senator Burns two encryption

bills, one of which, the "Encrypted Communications Privacy Act", S. 376, proposes

answers to these questions that our society and others around the world are facing.

This bill is pending in the Judiciary Committee and was endorsed most recently by

the U.S. Chamber of Commerce.

This legislation would ensure the right of Americans to choose how to protect

their privacy and promote the global competitiveness of American companies. It

calls for an overhaul of our export restrictions on encryption and prohibits a government-mandated key escrow encryption system. For those business or individual

users who choose to use an encryption method with a recoverable key stored with

another party, the bill would set up stringent procedures for law enforcement and

foreign governments to follow to obtain decoding keys or decryption assistance to

read the plaintext of encrypted communications obtained under court order or other

lawful process.

There may be a market for a user-friendly, cost-effective form of key recovery with

user choice on key holder, so that businesses and individuals can recover encrypted

data that is important to them. Law enforcement access to those keys should be accommodated subject to appropriate procedures to safeguard privacy and civil liberties. That is the thrust of my encryption bill.

By contrast with the voluntary, market-driven approach of my bill, the Administration has so far insisted on burdensome regulations of key recovery systems, guaranteed access to both encrypted communications and stored filed, access to keys by

both domestic and foreign law enforcement agencies on a minimal showing, and no

notice of key disclosures to the owners of those keys. These conditions pose significant obstacles to a market-driven approach in the development of key recovery systems.

Americans should be free to choose any encryption method that suits their needs

to protect the privacy of their online communications and computer files. Government efforts to dictate to Americans the type of encryption they should use will be

fruitless. If consumers have no need for the government-sanctioned encryption, they

simply will not use it. The marketplace has a decisive voice in this issue, as the

failure ofthe Clipper Chip clearly demonstrated.

Furthermore, key recovery will simply not be widely accepted in the marketplace,

even for use on stored data, without having in place privacy safeguards defining

how and under what circumstances law enforcement agents and others may get access to decryption keys or decryption assistance. Many users have legitimate concerns about investing in, let alone using, key recovery products without clear answers on how the FBI, or foreign governments•including those with bad human

rights records or a history of economic espionage•will get access to their keys. We

need clarity on these fundamental privacy issues.

Moreover, costs will be associated with keeping secure the highly confidential

decryption keys that a key recovery system will generate. Not every computer user

will be able to, or will want to, bear those costs, particularly over long periods of

time. How much would such a system increase the cost of using strong encryption?

These practical considerations about key recovery systems make compelled or coerced adoption of such schemes entirely inappropriate and downright foolhardy.

NEEDED: STRONG ENCRYPTION

We are mindful of the national security and law enforcement concerns that have

dictated the Administration's policy choices on encryption. These agencies fear that

the widespread use of strong encryption will undercut their ability to eavesdrop on

terrorists or other criminals, or decipher computer files containing material evidence

of a crime. But in trying to stuff the encryption genie back into the bottle with policies that threaten privacy, the FBI is short-sighted.

Strong encryption is a significant crime-prevention tool to stop online theft, vandalism and snooping. Just last month, we learned that Defense Department computers had been the target of a synchronized cyber-attack. The vulnerability of our gov-
103

eminent computer systems puts vast amounts of sensitive government information

at risk of unauthorized access and disclosure.

Government computer systems are not the only ones at risk. Computer security

is not just a law enforcement issue; it is also an economic one. Breaches of computer

security are resulting in direct financial losses to American companies from the

theft of trade secret and proprietary information. This hurts our economy. We

should keep in mind the adage that "the best defense is a good offense." Americans

and American firms must be encouraged to take preventive measures and use

encryption to protect their computer information and systems.

We need to encourage•and not stand in the way of•the use of strong encryption

and other technical solutions to protecting our computer systems. Encouraging the

use of strong encryption is a plus for both our law enforcement and national security

agencies. Strong encryption protects Americans and American businesses from industrial espionage and foreign spying, and strong encryption reduces the vulnerability of electronic information to online snoops and breaches of privacy. Also, importantly, adopting an encryption policy that protects the global competitiveness of

our high-tech industries will serve our national security interests better in the long

run than driving encryption expertise and markets overseas.

I look forward to working with the Chairman and other Members of this Committee to craft a constructive American encryption policy that gets the government out

of the way of better privacy protection for our electronic communications and information. Our national encryption policy has focused almost entirely on the needs of

our law enforcement and national security agencies, neglecting the needs of individuals, businesses and our economy. We have a legislative stalemate right now that

needs to be resolved, and I hope it can still be resolved in this congressional session.

We need to bring some common sense and better balance to this issue.

Senator ASHCROFT. The record will remain open for a week. If

anyone chooses or wants to submit something, I would encourage

you to do so. I find your analysis very helpful. I think there is a

paucity of information and understanding in the Congress about

this set of issues, and so I would invite you to supplement your

presentations in any way that you feel would be appropriate.

I am hoping that today's hearing will balance the debate on

encryption so that the important privacy interests of innocent citizens are not ignored. I am particularly grateful for all your contributions there. I enjoyed Professor Epstein's risk-balancing and

risk analysis. It has a certain Chicago flavor about it. However, it

has been 30 years since I was at law school in Chicago, and I would

have to ask you to slow it down a little bit if I were there today.

Maybe it is just that the cranial matter deteriorates with age.

Law enforcement has important and legitimate concerns with

encryption, but those concerns must be balanced against the rights

of law-abiding citizens, just as they have been in other contexts

and other generations. Of particular interest to me has been the

focus on the historic involvement of Americans with encryption,

and the assumption that somehow we are smarter and more sophisticated than they were a couple hundred years ago. That is an

assumption which reveals our ignorance rather than our intelligence. And your contributions in that respect are noted and appreciated.

With that in mind, I adjourn the hearing. Thank you.

[Whereupon, at 12:08 p.m., the subcommittee was adjourned.]

APPENDIX

QUESTIONS AND ANSWERS

RESPONSES OF ROBERT S. LITT TO QUESTIONS FROM SENATOR ASHCROFT

Question 1. If the government forced me to hand over a set of my files to a third

party who copied them all, returned the originals, and promised not to hand over

the files to the government unless and until agents demonstrated to a magistrate

that they had probable cause to analyze the files and that the files were relevant,

would the original direction that I hand over the files to a third party pose any

Fourth Amendment concerns in your view?

Answer 1. The hypothetical you have described would pose significant constitutional concerns, particularly insofar as it contemplates that the government would

be providing a third party access to inspect and distribute your personal and sensitive documents. However, the hypothetical differs in certain important respects

from the sort of hypothetical "mandatory" plaintext regime discussed by Principal

Associate Deputy Attorney General Robert Litt in his testimony.

The hypothetical question appears to assume several things that would not be

true under a well-designed mandatory plaintext recovery regime:

(i) that the government would require citizens themselves to "hand over" their

personal files to a third party who would be able to peruse those files himself.

(ii) that the third party could lawfully transmit the files to other, nongovernmental, persons and entities.

(iii) that the third party would be bound solely by his or her own "promise" not

to hand over the files to the government unless and until agents demonstrated to

a magistrate that they had probable cause to analyze the files and that the files

were relevant.

A well-designed mandatory plaintext recovery regime•such as the proposed regimes with which the Department of Justice is familiar•would have the following

characteristics:

(i) In a plaintext recovery system or key-recovery system, the trusted third party

would not possess any personal files belonging to the owner of an encryption product, but would rather possess a copy of the decryption key to that product, or analogous decryption tools, that would be sufficient to decrypt communications encrypted

with such products.

(ii) It would be a crime for the trusted third party to use the key (or analogous

decryption tools) to obtain unauthorized access to private citizens' files, communications and data.

(iii) It would be a crime for the trusted third party to transfer the key (or analogous decryption tools) to any unauthorized person, inside or outside of the government.

Accordingly, the third party would not be able to violate the privacy or sanctity

of private information, unless that party were willing to expose itself to criminal

sanction. The same, of course, is true today: a person willing to expose himself to

criminal sanctions can break into your house and steal your personal files. Thus,

contrary to the concerns expressed by Professor Sullivan, a well-designed plaintext

recovery regime should not dramatically multiply the opportunities for information

to be transferred into the wrong hands through the mistaken or fraudulent release

of keys." There would be no appreciable risk of abuse, just as there is not a strong

likelihood today that banks will violate their trust and their legal obligations by inspecting the contents of private safe-deposit boxes or revealing such contents to unauthorized persons. What is more, any fear of abuse could be tempered considerably

by permitting encryption manufacturers, distributors and/or users to choose among

(105)
106

numerous third parties with whom to entrust their key (or comparable decryption

tools).

Importantly, as the Department explained, any legislation in this area, whether

or not it imposed plaintext recovery requirements, should not lessen the showing the

government must make to obtain access to plaintext from a trusted third party. If

a search warrant for data was required before, it should be required under any new

regime. We believe that such a regime could be structured to comply with the requirements of the Fourth Amendment. Moreover, Congress could require under such

a regime that even if law enforcement obtains a search warrant for data or communications, it would need additional authority, such as a court order, to obtain the

key or other information necessary to perform any decryption if the information is

encrypted.

Question 2. Some have argued that the mandatory imposition of domestic key recovery is comparable to the mandate in CALEA (Communications Assistance for

Law Enforcement Act). CALEA ordered telecommunications carriers to ensure that

their systems could continue to accommodate wiretaps regardless of the introduction

of new technology or services.

(a) Could you tell me your best estimate of the cost of compliance with CALEA?

Do you know if anyone has estimated the costs?

Answer 2a. Currently, there does not exist a government estimate of the cost of

compliance with CALEA.

The telecommunications industry is in the best position to provide an estimate of

the cost to comply with CALEA. Specifically, it is the manufacturers of telecommunications equipment that, to a large extent, will determine the cost of implementation. Carriers will determine the cost of deploying CALEA-compliant solutions. However, to date, manufacturers' concerns over competitive issues and proprietary information have made them either unwilling or unable to provide cost data

to the government.

CALEA authorized $500 million to reimburse telecommunications carriers for

costs associated with modifying equipment, facilities or services installed or deployed on or before January 1, 1995. The $500 million was not intended to cover

all costs of CALEA compliance. Rather, it was to be applied to embedded base equipment, facilities or services within areas of highest law enforcement priority. Equipment, facilities or services of carriers which are not reimbursed will be grandfathered until such time that they undergo significant upgrade, major modification

or are replaced. Thereafter, the cost of making equipment, facilities or services

CALEA-compliant will be borne by carriers if that action is determined to be reasonably achievable.

Question 2b. How would the administration like to see the use of encryption for

telephone communications treated? How would that differ from the current provisions of CALEA?

Answer 2b. The Administration has steadfastly maintained that encryption is extremely beneficial when used to protect the privacy of communications and continues to support the availability and use of such strong, commercially available

encryption products and services for legitimate purposes. However, the Administration, and all of law enforcement, is extremely concerned about the serious threat to

America's public safety and national security posed by the proliferation and use of

strong, commercially available, non-recoverable encryption products and services by

criminals and terrorists because such products and services prevent law enforcement from gaining lawful access to plaintext of encrypted, criminally related communications in accordance with the Fourth Amendment. It is for this reason the Administration, and the entire law enforcement community, is calling for the adoption

of a balanced public policy concerning commercially available encryption products

and services. Such a balanced encryption policy must satisfy both the needs of individual and companies for communications privacy and the nation's public safety and

national security needs. Unfortunately, most commercially available products for

encrypting communications are non-recoverable and do not allow for access to the

plaintext of such lawfully seized, criminally related communications.

In response to continuing advances in telecommunications technologies which

were thwarting law enforcement's lawful ability to conduct court ordered electronic

surveillance, Congress enacted CALEA for the purpose of clarifying the existing

statutory obligation of telecommunications carriers to provide law enforcement with

the technical assistance necessary to carry out surveillance under court order or

other lawful authorization. CALEA only applies to telecommunications carriers and

is not applicable to information service providers, private network and interconnection services and faculties, entities that are nevertheless required by the federal

wiretap statute to provide law enforcement with the technical assistance necessary

to carry out surveillance under court order or other lawful authorization.
107

Under Section 103(bX3) of CALEA, telecommunications carriers are only required

to have the ability to decrypt and provide to law enforcement the plaintext of

encrypted communications if:

(1) The product or service used to encrypt the communication was provided by the

telecommunication carrier, and

(2) The telephone company itself possesses the information necessary to decrypt

the encrypted communication.

The Administration believes that public safety and the national security would be

better protected if all products or services that encrypt communications include the

ability to provide plaintext to law enforcement when legally authorized.

Question 2c. Isn't it true that CALEA requires telephone common carriers to design their systems to preserve what has always been in their control, that is, the

isolation and routing of calls so that they can be intercepted by law enforcement?

And isn't it true that by contrast the FBI proposal requires manufacturers to take

away from users the control over their keys? So, how are these two similar at all?

Answer 2c. Both CALEA and the Administration's encryption policy are concerned

with preserving the surveillance abilities that Congress and the Courts have provided to law enforcement in the face of technological change, so to that extent the

underlying issues are similar. The particular technical questions they present are,

however, somewhat different.

RESPONSES OF ROBERT S. LITT TO QUESTIONS FROM SENATOR LEAHY

Question 1. According to the Vice President's letter of March 4, 1998, the Administration is making efforts to engage in a "dialogue" with industry to "produce cooperative solutions."

(a) If this negotiation effort does not produce satisfactory solutions, will the Administration then consider seeking to legislate domestic controls on encryption?

(b) If this negotiation effort does not produce satisfactory solutions, will the Administration then consider seeking to legislate import controls on encryption?

Answer la and b. Although we have no present plans to seek domestic controls,

if the negotiations do not produce satisfactory results, the Administration may consider the entire range of legislative options that could implement a policy that balances the need of citizens, business, law enforcement and national security.

Question lc. Does the Administration support the proposals in the "Technical Assistance Draft" bill circulated by the Federal Bureau of Investigation in August

1997?

Answer lc. The Administration believes that the 'Technical Assistance Draft" bill

recognizes the important concerns of protecting the public safety and national security. The Administration has not, however, endorsed the bill and prefers approaches

that do not involve mandatory key recovery.

Question 2. Five versions of the SAFE bill, H.R. 695, are currently pending in the

House of Representatives. Which version, if any, does the Administration support?

Answer 2. The Administration is not supporting any particular piece of legislation

at this time, because we prefer a voluntary, cooperative approach. For some time,

the Administration's position has been to encourage the design, manufacture, and

use of encryption products and services that allow for the plaintext of encrypted

data to be recovered. The Administration is in the process of pursuing an intensive

dialogue between industry and law enforcement. Our goal in this process is to bring

the creative genius of America's technology leaders to bear in developing technical,

market-savvy solutions that will enable Americans to realize the benefits to strong

encryption while continuing to protect public safety and national security. The Administration is not advocating any single product, technology, or even technical approach. Rather, we are flexible•provided that the resulting solutions and arrangements preserve the Nation's ability to protect the public safety and defend our national security.

Question 3. While the various agencies within the Administration have expressed

concern about the export control provisions in the "Encrypted Communications Privacy Act," S. 376, please identify the concerns, if any, of the Department of Justice

with the bill's proposed new sections, §§2801, 2802, 2803, and 2804 of Title 18,

which sections provide, inter alia, procedures for law enforcement access to

decryption keys or decryption assistance?

Answer 3. We believe that timely access to plaintext by law enforcement authorities acting under lawful authority is an important goal to ensure public safety and

national security. In light of the Administration effort to work with industry rather

than pursuing a legislative solution, we do not believe it is appropriate to comment

on particular provisions of specific bills. We think constructive dialogue in a variety
108

of areas and fora is far preferable to a stalemate that arises from a battle of wills

and rhetoric; working together is better than fighting legislative battles.

Question 4. The FBI Director acknowledged in testimony on July 9, 1997 before

the Senate Judiciary Committee that while law enforcement is interested in access

to encrypted communications there may be little market interest in key recovery for

communications. As Director Freeh then stated, "You can't let the market forces

deal with this public safety issue because their interests are quite different from

ours." Do you agree that while some businesses and users may opt to use key recovery for stored data, there is little interest in the market for key recovery systems

for communications?

Answer 4. Although there has been some preliminary interest in recovery systems

for communications, there does not appear to be a market for such systems at the

present time.

Question 5. Former Senator Sam Nunn testified on March 17, 1998, before another subcommittee of the Judiciary Committee that "the continuing federal government-private sector deadlock over encryption and export policies * * * must be broken and that a consensus must emerge [since] encryption is essential for infrastructure protection * * * [and] if the deadlock continues, building the trust required between the public and private sectors in the broad area of infrastructure protection

will be even more difficult.'' Do you agree that resolution of the encryption debate

is crucial for enhancing protection of our country's critical infrastructures?

Answer 5. The Administration believes that resolving the encryption debate is an

important priority. Encryption can help protect our national infrastructure, as can

products that ensure the recovery of encrypted data. That is why we are engaged

in a process of intensive discussions with industry.

Question 6. Former Senator Nunn indicated that the National Security Council

should do a better job of coordinating encryption policy among the Federal agencies.

Is the Administration taking any steps to address this concern? If so, what steps

are being taken?

Answer 6. The Administration is fully satisfied with the National Security Council's efforts on encryption.

Question 7. The Administration is "not wedded to any single technology solution."

Please, identify the alternatives to key recovery that the Administration is examining to provide law enforcement with surreptitious access to encrypted communications and data.

Answer 7. The Administration is not advocating any single product, technology,

or even technical approach. Rather, we are flexible•provided that the resulting solutions and arrangements preserve the Nation's ability to protect the public safety

and defend our national security. Specifically, even if a product is not key recovery,

if it provides a means to recover encrypted data or communications it could be satisfactory to the Administration. We hope that our ongoing constructive discussions

with industry will permit the flexibility to identify a variety ofsolutions.

Industry has the technical know-how to develop commercially viable mechanisms

that maintain the government's ability to safeguard its citizens, while protecting our

citizens from unwarranted intrusions from any source. The primary responsibility

for developing technical solutions•be they key recovery solutions or other solutions•lies with industry, which has the expertise and the institutional interest in

seeing the success of its products. Just as the computer industry has developed low

cost encryption products, we look to industry to develop recovery solutions that can

balance commercial and privacy interests and public safety and national security

needs.

Question 8. The Administration has sponsored ten pilot projects as part of its "Key

Recovery Development Pilot Project" (KRDP).

Question 8a. In September 1997, the National Security Agency advised me in response to written questions that information about the results of the KRDP would

"be available in about 60 days." Please provide me with the results of those pilot

projects.

Answer 8a. It is anticipated that the final report will be completed in June or July

of 1998 and we will provide it to you at that time.

Question 8b. In January 1998, the FBI advised me in response to written questions that "a final market analysis encompassing all the lessons learned, issues, recommendations and market data will be developed" at the conclusion of the KRDP.

If that analysis has been completed, please provide it to me. If not, when will it be

completed?

Answer 8b. It is anticipated that the final report, which we understand will include the final market analysis, will be completed in June or July of 1998 and we

will provide it to you at that time.
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Question 9. I understand the entire FORTEZZA Program of Key Recovery with

escrowed keys has been discontinued.

Question 9a. If that understanding is correct, please explain why this program

was decommissioned?

Answer 9a. The use of the CLIPPER Chip is no longer supported in the

FORTEZZA product line. In its place a private key escrow scheme that operates

within the high assurance Public Key Infrastructure (PKI) supporting FORTEZZA

Cards has been instituted. This scheme is being used to meet the key recovery requirement of the Department of Defense's Defense Messaging System (DMS). In this

implementation the Certificate Authority (CA) Workstation when initializing a

FORTEZZA Card securely escrows the private component of the public key pair

used for confidentiality. The escrowed private key can be used to support the recovery both of encrypted data that has been stored and encrypted data that is in transit.

The Department of Defense has moved to a Key Recovery concept that would

allow corporate and self escrow based implementations. The private key escrow concept adopted for FORTEZZA allows a distributed architecture for key recovery and

allocates the Key Recovery Agent responsibility to the owners and operators of the

CA function.

Question 9b. Is the FORTEZZA program with escrowed keys being included in the

report or analysis ofthe KRDP?

Answer 9b. No, there were no KRDP pilots sponsored using FORTEZZA.

Question 9c. Is the Department, the FBI or any other federal agency using telephones with CLIPPER Chips key escrow technology?

Question 9d. How many telephones equipped with CLIPPER Chips are currently

being used?

Answer 9c and d. The FBI purchased approximately 9,000 TSD-3600s. It distributed approximately 2,900 TSD-36008 to the Department of Justice, 1,000 to the

Drug Enforcement Administration, 1,000 to the United States Marshall Service, and

1,200 to the Department of the Treasury. The Bureau distributed the remaining

CLIPPER Chip telephone security devices to its Headquarters, Field Offices and

Legats. The Department of Justice and its components do not maintain information

on how often the TSD-3600s are used and we do not know the extent to which the

Department of the Treasury uses its TSD-3600s.

NSA has informed the Department that it has approximately two dozen telephones that rely on the CLIPPER Chip technology, but that those telephones are

not in use. We do not know the extent to which other agencies may use the CLIPPER Chip technology.

Question 9e. If these CLIPPER Chip equipped telephones are not being used,

please explain why not?

Answer 9e. The Department has not studied the extent to which its staff use the

TSD-3600s or the reasons why they may not be used. We should note, however,

that the CLIPPER Chip technology has never been authorized for use in classified

communications.

The NSA has informed the Department that it used a small number of CLIPPER

Chip devices during the time NSA was assisting the National Manager for Key Escrow and the Escrow Agents in the design, development and deployment of the

CLIPPER Chip. NSA reports that it now sees no further use of the CLIPPER Chip

concept in communications equipment, the NSA involvement has fallen dormant

along with the use of the CLIPPER telephone devices.

Question 9f. Is the government's experience with CLIPPER Chip equipped telephones being included in the report or analysis of the KRDP?

Answer 9fT No, because it was not a pilot of the KRDP.

Question 9g. Are the escrow agents for CLIPPER Chips equipped telephones functioning or whether they have been decommissioned?

Answer 9g. There is still a capability for the CLIPPER escrow agents to retrieve

keys. However, it is our observation that to return CLIPPER to an operational status would take considerable time. It is our understanding that all of the Escrow

Agent staff at NIST and Treasury has been reassigned; however, the escrow files

still exist at these agencies.

Question 10. In January 1998, the FBI advised me in response to a written question that the "Department of Justice is studying the feasibility of utilizing Bilateral

and Multilateral Agreement Treaties which are currently in place" for providing foreign governments with keys to the encrypted files and communications of Americans.

Question 10a. Have any of agreements on the provision of decryption keys or

decryption assistance been negotiated?
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Answer 10a. The Department of Justice is of the view that existing bilateral and

multilateral agreements will permit law enforcement assistance as appropriate. This

does not mean that law enforcement will routinely share keys with foreign governments. Typically, law enforcement would expect to provide decryption assistance

rather than keys in response to foreign law enforcement requests for assistance.

Question 10b. Please identify the concerns, if any, of the Department of Justice

with the proposed new § 2806 of Title 18 in S. 376, which section provides standards

for release of decryption keys or provision of decryption assistance to foreign governments.

Answer 10b. As mentioned above, in light of the Administration effort to work

with industry rather than pursuing a legislative solution, we do not believe it is appropriate to comment on particular provisions of specific bills. However, we would

reiterate our view that existing bilateral and multilateral agreements will permit

law enforcement assistance as appropriate.

RESPONSES OF KATHLEEN M. SULLIVAN TO QUESTIONS FROM CHAIRMAN ASHCROFT

Question 1. Under the First Amendment, isn't there something of an overbreadth

problem with a law that prohibits everyone from using a device with numerous legitimate applications to prevent a few illegitimate uses?

Answer 1. Yes. Total bans on a medium of expression•here, securely encrypted

internet communications•are strongly disfavored under First Amendment law. Normally the government is expected to regulate more precisely to target potential

problems stemming from speech. A content-based law must be the least speech-restrictive means of targeting a problem. But even if a law is content-neutral, as a

law aimed at facilitating law enforcement might well be thought to be, it must be

narrowly tailored to its ends. Blunderbuss prohibitions, without any attempt at limitation to particularly dangerous markets or uses, are difficult to describe as narrowly tailored. The problem of overbreadth here is particularly acute when corporations handling massive amounts of information are subject to encryption regulations

that fail to distinguish among transactions posing very different levels of risk to

government interest.

Question 2. Does the sheer volume of material that may be decrypted on a hard

drive compared to the relatively modest scope of a typical telephone wiretap effect

the Fourth Amendment analysis?

Answer 2. Yes. The Fourth Amendment, by its terms, imposes an obligation of

particularity on the government when it seeks a warrant to search or seize our persons, houses, papers or effects or their modern-day equivalents: warrants shall not

issue unless they set forth probable cause "particularly describing the place to be

searched, and the persons or things to be seized." The statutory framework we have

developed to regulate telephone wiretapping tries to embody the value of particularity by narrowly limiting the scope and duration eavesdropping searches, and by requiring the government to refrain from listening to conversations unrelated to the

purpose of the inquiry. Decrypting an entire hard drive to flush out one or a handful

of allegedly incriminating communications, in contrast, is more akin to a general

search, the very sort of practice against which the Fourth Amendment was originally directed.

Question 3. If the government simply banned encryption technology (or deadbolt

locks) would that action raise any Fourth Amendment concerns? How about First

Amendment problems?

Answer 3. Yes. Forcing the people to transfer a key to an encrypted document (or

to a deadbolt lock) to a third party who for this purpose becomes a federal agent

arguably constitutes a search and seizure at the moment it occurs. Making it more

difficult for the people to shield themselves against government searches by banning

encryption (which of course necessarily makes it more difficult for the people to

shield themselves against private marauders as well) may not quite as obviously

constitute a literal search or seizure, but it plainly raises serious Fourth Amendment concerns•just as would banning deadbolt locks or non-glassine envelopes. Ordinarily, we are free to protect ourselves from intrusive scrutiny by using commonly

available measures; cutting off access to such measures increases the probability

that an unreasonable search or seizure will occur by making it more likely that it

will succeed. The government might well reply that increasing the potential level

of searches should not matter because Fourth Amendment protections still remain

for those that do occur, but that ignores the extent to which the lack of protection

will decrease privacy at the outset and so change the nature and volume of information that will be produced and stored.
Ill

The First Amendment has often been interpreted to raise doubt about laws that

predictably decrease the quantity of speech people would otherwise engage in. Buckley v. Valeo, the case striking down political expenditure limits, for example, reasoned that "the primary effect of these expenditure limitations is to restrict the

quantity of campaign speech," an effect sufficient to trigger strict First Amendment

review which the limits could not survive. Likewise, a ban on securely encrypted

communications would predictably discourage speech, just as would a ban on the

use of envelopes to enclose letters sent by mail. Such a disincentive to the full and

free exchange of ideas would raise serious First Amendment concern.

RESPONSES OF KATHLEEN M. SULLIVAN TO QUESTIONS FROM SENATOR LEAHY

Question 1. Ms. Sullivan stated that "cooperative solutions may not be constitutional." Does this observation suggest that Congress must closely monitor the results, if any, of the Administration's ongoing negotiations with industry on resolving

the encryption debate?

Answer 1. Yes. Neither branch should be eager to countenance "agreements" that

are in fact regulatory in nature. For the government to impose conditions on particular transactions in its capacity as trading partner is fine. For the government

to require back-door key recovery in all of a private entity's transactions as a condition of doing any business with the government is another matter. The Supreme

Court has long suggested that conditions on funding must be "germane" to the purposes of that funding; earmarking federal expenditures for particular uses is

unproblematic, but using government leverage to alter what a contractor does in all

areas of its business raises difficult, although not entirely settled, constitutional

issues. Constitutional concerns such as these may not be waived by agreement, and

thus should help to inform both the Administration's negotiations in this area and

the Congress's oversight of them.

Question 2. What constitutional problem, if any, would arise ifthe Administration

administratively restricted the importation of encryption with a key length of over

56 bits?

Answer 2. Discrimination against foreign trade is constitutional to the extent Congress authorizes it. Assuming adequate statutory authorization, such a ban would

stand or fall with a comparable domestic encryption ban on First and Fourth

Amendment grounds.

Question 3. Ms. Sullivan testified that conditioning "the right to make or sell

encryption software upon the government's prior approval of that software's key recovery capabilities might raise familiar First Amendment concerns about prior restraint." What constitutional problem, if any, would arise if the government did not

require "prior approval" of key recovery capabilities, but instead required manufacturers of encryption software to meet a result-oriented standard that law enforcement be able to obtain immediate access to the plaintext of encrypted information,

with violations subject to criminal or civil penalties?

Answer 3. Under the First Amendment, the possible remaining problem with this

approach would be that it might diminish incentives to speak (see answer #3 to Senator Ashcroft above) because making such decryption capacity available to government will, of necessity, make it available to private criminal interlopers as well. For

Fourth Amendment issues, see #4(b) below.

Question 4. Ms. Sullivan testified that analogizing mandatory key recovery to "the

requirement that digital telephones be configured to allow the government to wiretap conversations * * * is inapt" because "[t]elephone users necessarily surrender

some control of their communications to telephone companies" and "by contrast, the

Internet makes possible unmediated communication between speaker and listener."

Just as telephone communications are facilitated by telephone companies, however,

Internet communications are facilitated by Internet service providers.

Question 4a. Is the point of this part of the testimony that efforts to regulate usercontrolled encryption may trigger different constitutional considerations than regulating service provider facilities?

Answer 4a. The point of this part of the testimony was to suggest that telephone

users may be deemed to have partially waived their reasonable expectations of privacy in telephone calls for Fourth Amendment purposes to the extent that they have

always been aware, from the dawn of telephones, that the telephone company may

be able to intercept those calls. For this reason, the Court has held that there is

no Fourth Amendment search or seizure when the telephone company keeps a pen

register of numbers dialed•any more than when a bank surrenders copies of one's

canceled checks or government agents pick up household trash left curbside where

it might also be searched by sanitation workers and scavengers. The issue of what
112

constitutes a reasonable expectation of privacy has long turned on notions of custom

and usage. In a nascent field such as Internet communications, we of course have

little in the way of longstanding custom to go by. But to the extent that Internet

service providers have to date served merely as disinterested conduits for speech•

a status reflected, for example, in Congress s provision in the Communications Decency Act that they should not be understood as publishers for tort purposes•one

is entitled to reasonable expectations of privacy against them.

Even if courts analogize ISPs to telephone companies, reasonable expectations of

privacy ought extend to the content to messages, as opposed to the addresses

accessed. An ISP might log addresses as the telephone company logs phone numbers

dialed. But it does not follow that common earners of either type ought to be presumed able to overhear the calls or messages sent over their lines.

Question 4b. What constitutional problems, if any, would arise if service providers

for wire and electronic communications (which includes both telephone companies

and Internet service providers) were required, to the extent they provided

encryption services, to provide only encryption that enabled law enforcement to obtain immediate access to the plaintext of encrypted communications?

Answer 4b. Under the Fourth Amendment, forcing speakers who are bearers of

reasonable expectations of privacy in their encrypted communications to surrender

keys to a third party who is in effect a government agent for this purpose arguably

amounts to a search and seizure triggering the protections of the Fourth Amendment. This proposal merely shifts the responsibility for search and seizure from the

third-party escrow agent to the ISP, who is under government compulsion to open

the speaker's communication to government view, and who presumably would not

do so if the matter were left to the market. Thus it is not clear how this approach

would eliminate any Fourth Amendment objection.

RESPONSE OF RICHARD A EPSTEIN TO A QUESTION FROM CHAIRMAN ASHCROFT

Question. Do you believe that Congress can insulate the United States from liability for economic losses occasioned by mandatory key recovery despite the Takings

Clause?

Answer. The answer comes at several levels. First, as I mentioned in the testimony, it is not clear at present whether the takings clause would hold the United

States liable for losses occasioned by the mandatory key recovery system. The taking clause is often focused on matters of physical dispossession, and many cases

hold that any alteration of liability rules is within the power of the United States

to effectuate. But those cases typically involve reassignments of liability between

private parties, and do not concern the direct liability of the government. In these

cases, it seems odd that the government can both seize the information and then

insulate itself from the losses that follow. But the question is still open as a matter

of current constitutional law.

Assuming that the takings clause does apply, what can the United States do to

insulate itself from liability? Here the obvious answer is to make sure that the independent key escrow agent takes that liability upon itself. But that solution is subject

to two major defects. First, no independent third party would assume that risk unless compensated for it. And that will require someone to pay. It seems hardly appropriate that private companies should pay to implement programs to which they

are opposed, and from which they derive no direct benefit. So the compensation

should come from the United States, which now pays, as it were, in advance to have

someone else take the risk for it. But that solution is unsatisfactory because once

the leak takes place, it will be difficult to trace it to some dereliction by the third

party source. The leak could have come from the company itself, or from the government should it take the material. Indeed the liability issues are always difficult

when many parties share access to the same information. How the burdens of proof

will sort themselves out, and how damages will be measured are anyone's guesses.

But I should hope that if the Constitution imposes the obligation on the government

to compensate for information that it takes and then loses, that there would be no

easy out. After all, there is no easy out that allows the government to escape liability when it takes land for public use. Why have a different result here.

RESPONSES OF RICHARD A EPSTEIN TO QUESTIONS FROM SENATOR LEAHY

Question 5. While Professor Epstein describes as "inappropriate" any government

stipulation that "it would not do business with any firm that refuses in its unrelated

transactions to adopt a system of escrowed key recovery," would such a stipulation
113

be unconstitutional? Moreover, would such a stipulation for related transactions be

either inappropriate or unconstitutional?

Answer 5. It is quite clear that current Supreme Court law regards the relatedness of the two transactions as key to deciding whether the doctrine of unconstitutional conditions applies. And surely the distinction has some role to play in any

overall analysis. Thus if the United States insisted that it have a back door key to

any transaction to which it was a party, one would be hard-pressed to say that it

abused its state powers by imposing a condition that is found in ordinary business

transactions between private parties. So the constitutional pendulum would swing

heavily to the government side. But the situation is quite different if the rule stated

is that private firms can only do business with the government if they give the government keys to all their transactions, for now the state is imposing the kind of condition that in all likelihood it could exact only if it had monopoly power. Most private firms would find it impossible to obtain those terms in competitive markets.

So here the constitutional doubts would increase. But the issue is not settled today.

As to the appropriateness of the government behavior, a lot depends on collateral

circumstances. I could easily see a private company object to the terms on the

ground that the loss of information will prejudice its activities not only in this particular transaction with the government, but elsewhere, as with the loss of trade

secrets generally. But so long as the one transaction is not tied to others, then it

still has the option of forgoing this transaction. If the government cannot find another contractor, then it can rethink its position. But if it can, then it is hard (since

there is no tie-in arrangement involved) to attack its decision as inappropriate. It

looks instead like a case of hard negotiation between parties who have different interests.

Question •. What constitutional problems, if any, would arise if the government

required that any encryption product manufactured, sold, distributed or imported in

the United States be "recovery-capable"•that is, the product must have the capability to be turned on at the purchaser's option to provide access to the plaintext of

encrypted information without the knowledge or cooperation of the user?

Answer 6. I do not think that the fact of importation changes the analysis at all.

Thus suppose that the United States allows strong encryption for domestically made

products. What possible reason is there to impose the limits on encryption on imported products. Even ifthe ban were perfectly constitutional, no one would buy the

products, and the real issue would be discrimination against foreign trade. So now

suppose that the ban is imposed on domestic products. If it is unsustainable against

fourth amendment objections for domestic products, then it is unsustainable against

foreign products. And it would be very odd, if claims are made by users, to say that

the ban would be unconstitutional against domestic products but constitutional

against imports. The two cases stand and fall together.

RESPONSE OF TIM D. CASEY TO A QUESTION FROM CHAIRMAN ASHCROFT

Question. I understand from your testimony that some may be seeking to require

MCI and other on-line service providers to monitor, ifit were possible, au electronic

traffic that may cross their system. Do you believe that a good encryption policy will

solve this problem or do we need more?

Answer. As explained in my testimony before the subcommittee and in other forums, monitoring all electronic communications for the presence of copyright violations or other illegal conduct is not possible as a matter of technology and as a matter of law. Even if the technology were available to monitor the content of communications to the level necessary to perceive a copyright violation, for example, such

allocation of human and electronic resources would undermine even the current efficiency of the Internet and certainly would destroy its potential as a future mass medium of commerce and communications.

In addition, as a matter of law, any legislation that would require service providers to monitor the content of all electronic communications would implicate the

First, Fourth, and Fifth Amendments of the U.S. Constitution. Another important

consideration is the Electronic Communications Privacy Act. Under that law, carriers like MCI are generally prohibited from reading their customers' 3-mails or

other electronic communications. As a result, any monitoring requirement would implicate that Act.

Nonetheless, MCI and other service providers understand the concerns of copyright holders in the age of digital communications. As the Chairman is likely aware,

the service provider and content communities have recently crafted a compromise

that will provide recourse for victims of copyright violations without imposing on

service providers the behemoth and illegal task of monitoring all communications.
114

We expect the result of these negotiations to be presented for consideration before

Congress in the near future.

With respect to encryption as a method of preventing copyright infringement, the

argument cuts both ways. As I testified, encryption provides a readily-available and

inexpensive tool for copyright holders to protect their works. If copyright holders did

a better job of protecting their works as distributed or otherwise made available to

the public, their piracy concerns would not be as severe. Unfortunately, once a work

has been decrypted by a pirate, the present problem resurfaces, but decent

encryption would make a pirate's task much more difficult On the other hand,

encryption will be available to those who are determined to violate the law and

cover their tracks in the process, thereby making it more difficult for copyright owners to gather evidence of infringement. As a result, encryption is neither the problem nor the solution with respect to on-line copyright infringement The wide-spread

availability of strong encryption, however, is vital to the health and well-being of

the Internet for the myriad reasons to which I and others testified before the Subcommittee.

RESPONSES OF TIM D. CASEY TO QUESTIONS FROM SENATOR LEAHY

Question 1. You testified about the use of encryption to protect copyrights. Could

you identify and provide the Subcommittee with examples of how encryption has

been used to this end?

Answer 1. Probably the most widely used method of protecting intellectual property on the Internet is through the encrypted distribution of software, music and

other copyrighted works. Copyright owners can encrypt works that are distributed

electronically, as accessible via e-mail, the World Wide Web, or in accordance with

other forms of electronic commerce. A wide variety of commercially available products (for use within the U.S.) allow any user to transmit text documents, sound or

image files that are inaccessible without first decrypting the file. This method puts

the control in the hands of the individual senders and recipients of works.

Encryption will increasingly be used by large content distributors to ensure that

works are disseminated securely over the Internet The American Bar Association

maintains a website through which encrypted news articles can be downloaded;

however, those articles are unreadable to those who have not previously obtained

a key to decrypt the file.

MCI uses marketing and training materials in CD ROM form that contain copyrighted images and writings. We encrypt these materials in order to prevent their

unauthorized use or copying. For example, it is possible to encrypt an image on a

CD ROM in such a way that the image can be viewed on a computer screen, but

not printed or copied to the computer user's hard drive. Such protections are freely

available for content delivered over the Internet as well.

Question 2. You referred in your testimony to domain names. I have introduced

a bill, S. 1727, directing the National Research Council to perform a comprehensive

study of the implications for trademark and intellectual property rights holders of

the addition of generic top-level domain names and related dispute resolution procedures. Does MCI support this legislation?

Answer 2. MCI supports the idea of a limited study designed to identify the concerns of trademark owners in the domain name context and to raise awareness of

issues associated with revamping that system. I would only caution that given the

international response to the Administration's Green Paper on the subject, any such

effort should be done in a way that will gain acceptance from the international community. As such, the study should (1) be expressly limited in scope; (2) emphasize

that it is meant to complement, and not interfere, with the process already underway; and (3) include as part of the discussion assurances that the National Research

Council has a history of impartiality and is not a U.S. governing authority.

As an additional consideration, inviting an international organization involved in

these issues•such as the World Intellectual Property Organization•to participate

in the study could enhance its acceptance abroad.
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RESPONSES OF CINDY A. COHN TO QUESTIONS FROM SENATOR ASHCROFT

MCGLASHAN & SARRAIL,

San Mateo, CA, April 7, 1998.

Re: Subcommittee Hearing on "Privacy in the Digital Age: Encryption and Mandatory Access" held March 17, 1998.

Senator JOHN ASHCROFT,

Chairman, Subcommittee on the Constitution, Federalism, and Property Rights, U.S.

Senate, Committee on the Judiciary, Washington, DC.

DEAR HONORABLE SENATOR ASHCROFT: I received your facsimile of April 3, 1998,

with two additional questions for me arising out of my testimony before the Subcommittee on March 17, 1998. I will attempt to respond to each of your questions

in turn.

Question 1. You made reference in your testimony to a Justice Department Office

of Legal Counsel opinion discussing some of the First Amendment problems with

restrictions on encryption. Could you summarize that opinion?

Answer 1. For your convenience, I have attached copies of the four Office Legal

Counsel memorandums and several related letters. The memorandum which is most

detailed in its analysis was written in May, 1978, as a memorandum to Dr. Frank

Press, Science Advisor to the President. All of the memos concern the previous regulatory scheme under the International Traffic and Arms Regulations (ITAR). However the substance of the current regulations under the Export Administration Act

(EAR) is identical for purposes of First Amendment analysis.

In the memo, the Justice Department states that the controls on the export of

cryptographic information do reach First Amendment interests, especially in the

area of the regulation of technical data. It observes that since the cryptography export regulations create a licensing scheme on protected expression, they constitute

a prior restraint. The memorandum then recites the standard First Amendment

tests for prior restraint which must be applied, stating:

"It is established that prior restraints on publications are permissible only in extremely narrow circumstances and that the burden on the government of sustaining

any such restraint is a heavy one." (Citations omitted)

It continues:

"Even in those limited circumstances in which prior restrains have been deemed

constitutionally permissible, they have been circumscribed by specific, narrowlydrawn standards for deciding whether to prohibit disclosure and by substantial procedural protections." (Citations omitted)

The memorandum then concludes:

"Even if it is assumed the government's interest in regulating the flow of cryptographic information is sufficient to justify some form of prior review process, the

existing ITAR provisions we think fall short of satisfying the strictures necessary to

survive close scrutiny under the First Amendment. There are at least two fundamental flaws in the regulation as it is now drawn: First, the standards governing the

issuance or denial of licenses are not sufficiently precise to guard against arbitrary

and inconsistent administrative actions; Second, there is no mechanism established

to provide prompt judicial review of State Department decisions barring disclosure."

(Emphasis added)

These cases make clear that before any restraint upon protected expression may

become final it must be subject to prompt judicial review in a proceeding in which

the government will bear the burden ofjustifying its decisions. The burden of bringing a judicial proceeding cannot be imposed on those desiring export licenses in

these circumstances. The ITAR as it is presently written fails to contemplate this

requirement.

The additional memoranda on this subject are dated July 5, 1984; July 28, 1981

and July 1, 1981. The letters are dated August 28, 1994; June 20, 1978 and August

29, 1978. All of these OLC documents conclude that there are important First

Amendment concerns raised by the regulation of cryptographic information, and

most of them, like the May 1, 1978 memorandum, conclude that the ITAR regulations are unconstitutional under the First Amendment.

Question 2. Are there any limits to your software as speech concept? For example,

would it raise First Amendment problems for the government to make it a crime

to spread programs containing a virus with the requisite intent?

Answer 2. The limits on the concept of software as speech are the same as the

limits on any other speech. For example, just because speech is protected by the

First Amendment does not mean that we do not properly criminalize speech in the

furtherance of a criminal conspiracy, which constitutes defamation, or which vie-
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lates a trade secret. The concept of copyright is not affected by the fact that most

copyrighted material is also protected by the First Amendment The First Amendment similarly does not protect someone's right to yell "fire" in a crowded theater,

to pass a ransom note or to send a letter bomb. These basic limitations would apply

to software as well as other forms ofspeech.

Accordingly, it should not raise First Amendment problems for the government to

make it a crime to spread programs containing a virus with the requisite intent.

Further, any other intentional criminal activity which involved the use of computer

software could be prosecuted notwithstanding the fact that the software itself was

protected expression, just as it could if the crime involved a letter or a conversion.

I hope this responds to your concerns. Given the serious First Amendment and

other constitutional difficulties in the regulation of encryption software and related

information, we hope that any bill which you will introduce will recognize these

Constitutional issues and will expressly provide for the judicial review necessary

under the First Amendment in order to ensure that any new law will be properly

implemented by the Administration. Without such protections, our experience in litigating this issue leads us to believe that the Administration will attempt to undermine the basic intention of the law, and rely on the lack ofjudicial review to avoid

censure.

If you would like to discuss these matters further, please do not hesitate to contact me. Thank you again for allowing me to address the Subcommittee.

Sincerely,

MCGLASHAN & SARRAIL.

Professional Corporation.

CINDY A COHN.

[The memorandums and letters referred to in response to Question 1 are retained

in Committee files.]
ADDITIONAL SUBMISSION FOR THE RECORD

PREPARED STATEMENT BY RICHARD A. EPSTEIN AND KATHLEEN M. SULLIVAN ON

BEHALF OF THE AMERICANS FOR COMPUTER PRIVACY

At the close of the Senate Judiciary subcommittee hearings on "Privacy and the

Digital Age: Encryption and Mandatory Access," its chairman, Senator Ashcroft, invited all participants to make further comments on the issues raised during the

hearings. We wish to accept that invitation to offer some comments on the testimony and statement submitted to the Committee on behalf of the Department of

Justice by Robert S. Litt, the Principal Associate Deputy Attorney General.

We find much to agree with in Mr. Litt's statement. We applaud the decision of

the Department ofJustice not to seek immediate legislation on the question of mandatory access to private encrypted messages. We appreciate the recognition of the

Department that important privacy interests must be respected in working out any

long-term viable solution. And we agree that cooperative efforts between the Department of Justice and the affected industries and institutions could improve the harmonization of privacy and security interests. Nonetheless we think Mr. Litt's prepared statement and oral testimony do not do an adequate job in balancing the relevant interests, both on practical and constitutional grounds. Our joint comments

express our concerns with the positions taken by the Department ofJustice.

Practical and Administrative Concerns. As a practical matter, we think that reconciling the claims of privacy and security pose a more daunting challenge than Mr.

Litt acknowledges. He writes: "The Administration's approach [to escrowed key recovery] has found support in the marketplace, in part because businesses and individuals need a routinely available method to recover encrypted information." (Testimony, page 2). This assertion, however, glosses over the very different objectives

and requirements of private and law enforcement key recovery. First, private parties have no need or desire for key recovery systems that operate without their

knowledge and cooperation; yet that feature is one on which the Department ofJustice insists. Second, private key recovery systems do not have to operate within the

strict time limits, often measured in hours, that the government demands for its key

recovery. Third, a private encryption system does not require the long-term storage

of all communications once they are completed, which is one of the central demands

of the government system. Fourth, private key recovery does not contemplate the

sharing of keys with foreign governments, which is again part of the Department

ofJustice's present demand.

The cumulative impact of these differences matters. The Ad Hoc Group of Cryptographers and Computer Sciences concluded that "the requirements of government

key recovery are almost completely incompatible with those of commercial

encryption users." (Ad Hoc Group, The Risks of Key Recovery, Key Escrow, and

Trusted Third Party Encryption, at 7). Nothing in Mr. Litt's written or oral statements explained how these profound differences are to be overcome, or how the

widely different private approaches to key recovery could be meshed with a single

government imperative. His observation of "marketplace support" may reflect the

business decision of a few companies to seek to gain a leg up in the encryption business by complying with the government demands on the use of encryption in export

markets. It does not reflect the strong conviction of the many supplies and users

of encryption services who remain deeply troubled by the inherent insecurities that

mandatory government access introduces into all encryption systems.

Second, we disagree with the Department of Justice's assessment of the ability

of private industry to serve two masters by developing secure methods of mandatory

access. Mr. Litt observes that industry wizards can always develop "market savvy"

solutions to key recovery because of their "technical know-how" to deal with complex

problems. But private industry is not able to perform miracles. Once it understands

that trapdoor key recovery necessarily compromise the integrity of any encryption

device, it can no more design around that problem than a skilled mathematician can

(117)
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square the circle or reduce pi to a simple fraction. And even if private industry could

design the impossible, it could not administer it consistent with the level of security

that it demands. Any successful key recovery program requires the extensive cooperation of government agencies, none of whom have in place the massive technical

infrastructure that is necessary to manage billions of keys to the massive and everexpanding stream of encrypted data that is sent over the wires. Yet we have heard

nothing to suggest that government has made the huge staffing and resource commitments without which any full-scale program of key recovery will quickly fail; nor

is there any recognition that the government or its designated key-recovery agents

might have to bear some financial liability when encrypted messages are compromised. The Department of Justice is worried about the possibility that it will be

faulted if it does not foil some major terrorist incident without a key recovery system in place. It fails, however, to express equal concern at the possibility that the

defective design or ineffective government administration of a mandatory access system could bring on the very catastrophe that it wishes to prevent.

Third, we believe that the Department of Justice has refused to acknowledge the

major shortcomings in its surveillance system that will remain even if a comprehensive (but flawed) key recovery system could be put into place. The presence of this

system will induce terrorist and criminal elements to find ways to transmit their

information outside the system, and to use any of the hundreds of strong encryption

devices that are now on the market, both in the United States and elsewhere. Even

if constrained to use back door encryption systems, they could flood the system with

thousands of false messages to throw law enforcement systems off the scent; they

could use multiple layers of code so that the plaintext message recovered is unintelligible to outsiders without further information; and they could always treat the key

escrow program as an object of its own attacks. We fear therefore that terrorist and

criminal elements will be adept at evading or invading a system that can effectively

compromise the legitimate activities or ordinary individuals and businesses. Yet

nothing in Mr. Litts testimony offers reason to believe that trap door recovery will

secure the ends of law enforcement against these dangers. What reason is there to

believe that drug kingpins will store their "little black books" in a key recovery system when so many unbreakable systems are already freely available in the marketplace?

Constitutional Concerns. Our uneasiness about the practical soundness of the Justice Department's position carries over the analysis ofits legal position. Initially Mr.

Litt's statement notes that the government is now pursuing "voluntary" cooperation

with its programs. To the extent that this expression only means that the government has asked private software manufacturers to include back door keys in their

encryption devices, we see no constitutional difficulties with this program•as long

as the private manufacturers are allowed to "just say no." But the question of

whether the government approach should be regarded as "voluntary" takes on a different coloration if the price for noncompliance with the government position is the

loss of government contracts or grants, and when compliance with these government

requests promises favorable treatment in a wide range of government programs.

And we are even more worried about government requests that strong encryption

be used not only in business with the government, but in all business that government contractors and grantees have with other parties. At this point the massive

power that government has over all aspects of our economy gives its voluntary requests a far more ominous tone that could easily verge on institutional coercion. An

additional concern raised by the Justice Department's position is the prospect of uneven treatment of private and public entities, for we have no doubt that many government agencies (the military, the NSA, Social Security and Medicare operations)

would refuse to turn over to the Department of Justice trapdoor keys for their sensitive information.

Our concerns are not eased when we look at some of the constitutional claims advanced in Mr. Litt's testimony. Initially, we take issue with his optimistic assessment that no Fourth Amendment concern is warranted because "a well-designed

plaintext recovery regime would ensure that users' reasonable expectations of privacy were preserved." In our view, the relevant set of reasonable expectations

should not be shaped by private capitulation to government's insistence on intrusive

systems of surveillance. Rather, the original purpose of the reasonable expectations

test was to augment private protection against trespassory invasions by requiring

government additionally to respect the privacy of ordinary individuals who had

made reasonable efforts to keep their information away from the prying eyes and

ears of the government and other private parties. That is what the ordinary user

of the telephone does by shutting the door to the booth; and that is what private

individuals and businesses do when they encrypt their information for storage or

transmission. Government may not bootstrap itself out of societal understandings
119

that some areas of life deserve presumptive protection from government invasion

simply by invading those areas. So long as internet users and businesses reasonably

believe that backdoor entry degrades the protection that is afforded by strong

encryption•just as reasonable expectations of privacy would be degraded if they

had to store extra keys to their houses or duplicates of their private papers with

government-designated third parties•they are entitled to the traditional protections

provided by the Fourth Amendment against unreasonable searches and seizures.

Mr. Litt further claims that private individuals and firms need have no fear of

the key recovery system because the government will be able to turn the key in the

lock only after it complies with all the requirements that it now faces to getting information, including, where appropriate, any needed search warrants. But the DeEartment of Justice assurance is not responsive to the full set of risks introduced

y mandatory government access. It does nothing to address the risks of unauthorized third parties gaining illicit access to confidential communications or data, or

of some rogue law enforcement agents, unimpeded by any notice and knock conditions, conducting unauthorized searches of their own. Nor does it address the invasion of reasonable expectations worked by the mandatory surrender of privacy at

the outset.

Most important, in his oral testimony, Mr. Litt conceded that forcing individuals

to turn over their keys to a government-designated agent represents a seizure of

that key, thus implicating the Fourth Amendment. If so, then we are baffled as to

how he can defend the constitutionality of the system. General warrants and dragnet searches were the prime targets of the Fourth Amendment; they are not insulated from review when the government outsources its activities to chosen contractors who become for these purposes federal agents. The all-inclusive scope of the

government-mandated seizure involved in mandatory key access necessarily runs

afoul of the Fourth Amendment's requirement that all searches be done only with

probable cause on particular description of the items to be seized.

Mr. Litt's statements also fail to quell our uneasiness about the government's position on the potential violation of the Fifth Amendment's privilege against self-incrimination. In his written statement, Mr. Litt suggests that there is no compulsion

on a user of encryption if the government merely requires the manufacturer to build

in a government-accessible key, ignoring the fact that any compulsion on the manufacturer will run also against the user through the purchase. Mr. Litt also suggests

that even compelling the encryption user directly to supply a key to a third party

is unproblematic because such a communication is no more testimonial than a compelled consent form authorizing a foreign bank to disclose bank records, such as the

one the Court held permissible in Doe v. United States, 487 U.S. 201 (1998). This

argument ignores important differences between compelled key access and the

forced bank record access upheld in Doe. First, many communications encrypted on

the internet will be private or personal, intended only for the unmediated view of

the intended recipient, unlike bank records whose privacy one has waived by voluntarily surrendering information to the bank, see United States v. Miller, 425 U.S.

435 (1976). Second, the act of producing the key to any particular internet message

is arguably more "testimonial than generic authorization of access to unspecified

and thus ''hypothetical" bank accounts that was upheld in Doe. Finally, even if Mr.

Litt were correct that any Fifth Amendment privilege claim against mandatory key

access would ultimately fail as a technical matter because the compulsion on the

user would be disaggregate from any incriminating testimony extracted from the

third-party recovery agent, it is surely constitutionally troubling to design a system

for the very purpose of making it impossible for any encryption user ever to assert

a Fifth Amendment privilege with respect to an encrypted communication.

Mr. Litt similarly dismisses too readily, we think, important First Amendment

concerns raised by mandatory key access. He suggests that encrypted communications do not count as speech at all because numeric code cannot be readily understood by lay observers. The First Amendment, however, has long been interpreted

to protect complex scientific, artistic, musical, or mathematical notation as well as

other forms of expression. As the Supreme Court recently noted, "a narrow, succinctly articuilable message is not a condition of constitutional protection, which if

confined to expressions conveying a 'particularized message,' would never reach the

unquestionably shielded painting of Jackson Pollock, music of Arnold Schonberg, or

Jabberwocky verse of Lewis Carroll." Hurley v. Irish-American Gay Group ofBoston,

115S. Ct. 2338(1995).

Mr. Litt further suggests that, even if encryption does count as speech, any mandatory key access scheme would merely be required to satisfy the intermediate scrutiny appropriate to "time, place or manner" regulations or "incidental restrictions on

communicative conduct." This is far from clear. For one thing, a total ban on a

uniquely valuable medium of expression•here, the medium of securely encrypted
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internet communications•has never been considered a mere "manner" regulation.

A manner regulation merely forces a speaker to shift to a substitute form of communication, but by definition an insecure communication cannot substitute for a secure

one. A ban on unescrowed encryption thus resembles the total bans on sign-posting

or leafleting that have been struck down as exceeding the limits of permissible manner regulation. For another, Mr. Litt ignores the compulsion of speech entailed by

mandatory key access: a third-party must be given information the speaker otherwise would not disclose, and indeed under some versions of key access, that information would have to be textually embedded in each discrete communication the

speaker chose to make. But the right to speak has long been thought to entail a

strong presumptive right not to speak, including the right to speak anonymously.

While compelled speech is permitted under certain circumstances, such as in food

and drug labeling or securities exchange disclosures, compelling all users of the

internet to disclose their keys at all times and for all purposes would involve compelled speech on an unprecedented and constitutionally troubling scale.

Morever, even if encryption regulation were considered content-neutral, as Mr.

Litt suggests it should be, that would not eliminate all First Amendment concern.

To the contrary, laws that significantly deter speech may well violate the First

Amendment even if they do not prevent the speech altogether, as illustrated by numerous decisions invalidating laws restricting the receipt of payment for speech. It

could hardly be argued that requiring letters to be posted in transparent glassine

envelopes would be a permissable end run around the unconstitutionality of a fan

on the sending of letters themselves.

Most troubling of all of Mr. Litt's First Amendment arguments is his suggestion

that mandatory key access will not "chill'' speech because it gives government "no

greater access to the content of private parties" communications than it currently

has." This argument suffers from the same fallacy as his argument under the heading of the Fourth Amendment that forced key disclosure to government-designated

agents does not breach reasonable expectations of privacy. In either form, the argument assumes that a government unconstrained by knock-and-announce rules will

never err or overreach in seeking keys, and that criminal interlopers will never take

advantage of the expanded opportunities for theft or fraud opened up to them by

the expansion of non-user-controlled key storage sites. If either assumption is relaxed, as in an imperfect world they must be, then there can be no question of a

chilling effect on speech.

Finally, we think that one common thread explains why the Department of Justice has failed to attach adequate weight to the constitutional objections against its

proposal. At the end of his testimony, Mr. Litt notes a conversation that he had with

a representative of the computer industry who challenged him with this observation:

"We don't ban cars, do we* Then why are you trying to ban encryption?" Mr. Litt

answered that challenge in two ways. First, he denied that the government seeks

an outright ban, but he could not deny that the government proposals if adopted

would operate to reduce the levels of private encryption and the security of any

encryption still undertaken. Next Mr. Litt sought to justify the proposed government restrictions by enumerating the various types of regulation routinely allowed

for automobiles: safety inspections, minimum gas mileage requirements; pollution

emission requirements; seatbelts and airbags; drivers' licenses and highway regulations. In his view, the same principles that allow extensive regulation of the automobile allow the proposed regulation of communication.

We believe that his analogy is fundamentally flawed because it overlooks the difference in level of scrutiny Drought to different activities. The driving of an automobile, however important it may be in the lives of ordinary individuals, does not

implicate the preferred freedom that the Bill of Rights accords to speech. Nor does

driving a car on a public highway implicate Fourth Amendment liberties to the

same extent as other activities conducted out of public view. The security of the person or of a person's papers against government searches and seizures has long been

accorded far more protection that the security of a driver of a car. Hence the scrutiny brought to the use of automobiles is often that of the rational basis test, a deferential standard under which the government is able to prevail by a showing of

any reasonable connection between the regulations imposed and the public interest

advanced. Indeed most of the regulations listed by Mr. Litt satisfy even greater

amounts of scrutiny. Safety inspections and pollution controls help prevent tortious

wrongs to other individuals; licensing requirements, speed limits and other safety

rules protect each individual user of the highway from harms by others; airbags and

seatbelts are also directed at fundamental safety concerns. And the most dubious

item on his list, mandatory mileage controls, would at most require the computer

and communications industry to increase output and reduce price, which they have

done at a dizzying pace.
121 '

None of these highway safety regulations begins to touch the interests of individual privacy that he at the core of the present dispute. Mr. Litt would be hard

pressed to show that the government could make comprehensive searches of all

automobiles on public highways on the suspicion that some tiny fraction of vehicles

might be carrying drugs or contraband•a form of dragnet far more extensive than

the limited border checkpoints and temporary roadblocks for sobriety checks that

have previously been approved under the Fourth Amendment. Nor could government constitutionally make it a condition of traveling the public highways mat all

drivers file in advance a copy of their travel plans with a government-designated

agent in order to facilitate the government's possible location of a handful of

wneelborne criminal suspects. Indeed the most that the government could glean

from these highway cases is the possible authority to tag encrypted messages with

license numbers so that they could be identified by source. Yet even here the First

Amendment's protection of anonymous speech and its prohibition against compelled

speech might well be held to strike down those tracing efforts.

The issues raised by this hearing, however, go beyond these legal refinements.

The Constitution today affords a high level of protection to privacy interests, which

is implicitly denied by the government effort to analogize its mandatory access system to comprehensive regulation of the use of automobiles. Cars represent an area

where the case for state regulation is at its peak. Mandatory access to private information represents that are where the government's claims meet with far stiffer resistance. We think it only appropriate to express our grave misgivings with a Department of Justice position that supports regulation of private speech and communication that is more intensive and more intrusive than any scheme of automobile

regulation now on the books. Its position represents a manifest inversion of constitutional priorities. Areas of great constitutional sensitivity deserve the highest levels

of constitutional protection.

o