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The Fbi Vs. Silicon Valley: Guess Who's Winning

Washington Outlook


Just a few weeks ago, it looked as if High-Tech Land was near victory in a protracted war with Washington. Its objective: relax export controls on software and hardware that encrypt into unbreakable code everything from corporate secrets to personal diaries. An industry-backed bill to ease the curbs, pushed by Representative Bob Goodlatte (R-Va.), was sailing through key House committees.

But with the doggedness of a gumshoe, Federal Bureau of Investigation Director Louis J. Freeh has handed the techies a stunning setback. Raising the specter of pedophiles, drug dealers, and terrorists hiding their dirty secrets in electronic code, Freeh has been pressing Congress to go beyond export controls and impose unprecedented restraints on encrypted products in the U.S., as well.

He's winning. On Sept. 9, the House National Security Committee gutted the Goodlatte bill's provisions liberalizing encryption exports. Two days later, the House Intelligence Committee added domestic controls that guarantee law enforcement officials access to coded information. Curbs are vital so "we do not plow into the Information Age having weakened our ability to protect the national security," says Committee Chairman Porter J. Goss (R-Fla.).

Capitol Hill's about-face has high-tech execs and civil libertarians aghast. The issue has united the likes of Microsoft, Intel, auto makers, and phone companies with the American Civil Liberties Union and religious broadcaster Pat Robertson.

VIOLATING PRIVACY? They see Big Brother not only hampering commerce but also violating rights to privacy and free speech. Freeh's plan to guarantee police access to decoding "keys" would be technically impossible or hugely expensive, says Microsoft Corp. lobbyist Jack Krumholtz. "We risk impeding the growth of electronic commerce," he warns. Adds Rhett Dawson, president of the Information Technology Industry Council, which represents computer producers and users: "There is a sense on the Hill that this is a good time to run over Fourth Amendment" limits on searches and seizures.

Freeh's proposal would require everyone who encrypts data to use technology that permits law enforcers to break the code. In one approach, company or personal records would be encrypted in easily breakable code--or the decoding keys would be held by a designated party, such as a central repository in a company. Police could then get a court order and obtain the keys without the users' knowledge. "Not only does the government have the right to break down your door, but your door can't be stronger than their battering ram--or you must leave a key at the police station," fumes Stephen D. Crocker, chief technology officer at Cybercash Inc. It's a dramatic expansion of police wiretap power, warns Donald Haines of the ACLU. "It puts everyone at risk."

Freeh counters that a world in which criminals have unbreakable codes poses a real threat to law enforcement. That argument has swayed many lawmakers, who fear appearing soft on crime.

Just a few years ago, the campaign to curb encryption was waged largely by the super-secret National Security Agency. It aimed to keep state-of-the-art products out of the hands of foreign terrorists. Since the U.S. was the world leader in data-scrambling technology, that meant extending cold war export controls. "It would have been very difficult for an agency no one ever heard of to fight Bill Gates and the entire software and hardware industry," says Washington attorney and former NSA official Stewart A. Baker. "Freeh can."

Stung by their sudden defeat, industry and civil liberties groups are holding emergency meetings to plan an all-court press. Their first goal: prevent the House Commerce Committee, next in line to take a crack at the Goodlatte bill, from also adding domestic controls. After Commerce votes in September, lobbying will shift to the Rules Committee, which must sort out several radically different versions of the legislation and send one along for a vote. The coalition is also fighting a strict encryption bill in the Senate.

Meanwhile, the industry is trying to figure out where the White House stands. Vice-President Al Gore and Commerce Under Secretary William A. Reinsch, who oversees export policy, say the Administration still doesn't support mandatory domestic curbs--and the FBI chief is merely expressing his own views. Opponents don't completely buy that. Freeh may be out on his own, but he's clearly got the backing of the Administration, says Rebecca Gould of the Business Software Alliance. "There's no doubt there's been a change in policy."

The likely outcome: a tactical retreat by industry to avoid an all-out rout. The techies have long rejected a compromise, believing they would prevail. Now, pressure from the coalition of business and civil libertarians will probably prevent Congress from imposing domestic controls. But the price will be living with a modified version of export controls. "For once, they are in a position where they may have to negotiate," says Reinsch. The electronic wizards seem to have met their match in a Washington cop named Louis Freeh.EDITED BY OWEN ULLMANN By John Carey

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