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. iD^^ SECURITY AND FREEDOM THROUGH ENCRYPTION (SAFE) ACT Y 4. J 89/1: 104/100 Security and Freedon Through Encryp. . HEARING BEFORE THE COMMITTEE ON THE JUDICIARY HOUSE OF REPRESENTATIVES ONE HUNDRED FOURTH CONGRESS SECOND SESSION ON H.R. 3011 SECURITY AND FREEDOM THROUGH ENCRYPTION (SAFE) ACT SEPTEMBER 25, 1996 Serial No. 100 ^-^/ SS7 Printed for the use of the Committee on the Judiciary U.S. GOVERNMENT PRINTING OFFICE 3e-300 CC WASHINGTON 1996 : ForsalebytheU.S.GovernmentPrintingOffice SuperintendentofDocuments,CongressionalSalesOffice,Washington,DC 20402 ISBN 0-16-053944-7 . SECURITY AND FREEDOM THROUGH ENCRYPTION (SAFE) ACT 4. J 89/1:104/100 curity and Freedon Through Encryp. . HEARING BEFORE THE COMMITTEE ON THE JUDICIARY HOUSE OF REPRESENTATIVES ONE HUNDRED FOURTH CONGRESS SECOND SESSION ON H.R. 3011 SECURITY AND FREEDOM THROUGH ENCRYPTION (SAFE) ACT SEPTEMBER 25, 1996 Serial No. 100 7 Printed for the use of the Committee on the Judiciary U.S. GOVERNMENT PRINTING OFFICE 36-300 CC WASHINGTON : 1996 ForsalebytheU.S.GovernmentPrintingOffice SuperintendentofDocuments,CongressionalSalesOffice,Washington,DC 20402 ISBN 0-16-053944-7 COMMITTEE ON THE JUDICIARY HENRY J. HYDE, Illinois, Chairman CARLOS J. MOORHEAD, California JOHN CONYERS, Jr., Michigan F. JAMES SENSENBRENNER, Jr., PATRICIA SCHROEDER, Colorado Wisconsin BARNEY FRANK, Massachusetts BILL McCOLLUM, Florida CHARLES E. SCHUMER, New York GEORGE W. GEKAS, Pennsylvania HOWARD L. BERMAN, CaUfomia HOWARD COBLE, North Carolina RICK BOUCHER, Virginia LAMAR SMITH, Texas JOHN BRYANT, Texas STEVEN SCHIFF, New Mexico JACK REED, Rhode Island ELTON GALLEGLY, California JERROLD NADLER, New York CHARLES T. CANADY, Florida ROBERT C. SCOTT, Virginia BOB INGLIS, South Carolina MELVIN L. WATT, North Carolina BOB GOODLATTE, Virginia XAVIER BECERRA, California STEPHEN E. BUYER, Indiana ZOE LOFGREN, CaUfomia MARTIN R. HOKE, Ohio SHEILA JACKSON LEE, Texas SONNY BONO, CaUfomia MAXINE WATERS, CaUfomia FRED HEINEMAN, North Carolina ED BRYANT, Tennessee STEVE CHABOT, Ohio MICHAEL PATRICK FLANAGAN, IlUnois BOB BARR, Georgia Alan F. Coffey, Jr., General Counsel/StaffDirector Julian Epstein, Minority StaffDirector (II) CONTENTS HEARING DATE Page September25, 1996 1 TEXT OF BILL H.R. 3011 3 OPENING STATEMENT Hyde, Hon. Henry J., a Representative in Congress from the State ofIlUnois, and chairman, Committeeon theJudiciary 1 WITNESSES Brown, Mehnda, vice president and general counsel, Lotus Development Corp., onbehalfofthe Business SoftwareAlliance 55 Crowell, William P., Deputy Director, National SecurityAgency 31 Deneka, Dr. Charles W., chief technical officer. Coming, Inc., on behalf of the NationalAssociation ofManufacturers 79 Goodlatte, Hon. Bob, a Representative in Congress from the State ofVirginia 17 Gorelick, Jamie S., DeputyAttorney General, Department ofJustice 24 Katz, Roberta R., senior vice president, general counsel and secretary, Netscape Communications Corp 61 Reinsch, William A., Under Secretary, Bureau ofExport Administration, De- partment ofCommerce 40 Ripley, Patricia, managing director. Bear, Steams & Co., Inc 73 LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING Brown, Melinda, vice president and general counsel, Lotus Development Corp., on Behalfofthe Business SoftwareAlliance: Prepared statement 57 Crowell, William P., Deputy Director, National Security Agency: Prepared statement 34 Deneka, Dr. Charles W., chief technical officer, Coming, Inc., on behalf of the National Association ofManufacturers: Prepared statement 80 Goodlatte, Hon. Bob, a Representative in Congress from the State ofVirginia: Prepared statement 20 Gorelick, Jamie S., Deputy Attomey General, Department of Justice: Pre- pared statement 27 Hyde, Hon. Henry J., a Representative in Congress from the State ofIlUnois, and chairman. Committee on theJudiciary: Opening statement 13 Jackson Lee, Hon. Sheila, a Representative in Congress from the State of Texas: Prepared statement 16 Katz, Roberta R., senior vice president, general counsel, and secretary, Netscape CommunicationsCorp.: Prepared statement 64 Lofgren, Hon. Zoe, a Representative in Congress from the State ofCalifornia: Prepares statement 14 Ripley, Patricia, managing director. Bear, Steams & Co., Inc.: Prepared statement 75 APPENDIX Material submitted forthe hearing 91 (III) SECURITY AND FREEDOM THROUGH ENCRYPTION (SAFE) ACT WEDNESDAY, SEPTEMBER 25, 1996 House of Representatives, Committee on the Judiciary, Washington, DC. The committee met, pursuant to notice, at 9:44 a.m., in room 2141, Rayburn House Office Building, Hon. Henry J. Hyde (chairman ofthe committee) presiding. Present: Representatives Henry J. Hyde, Charles T. Canady, Bob Inglis, Bob Goodlatte, Sonny Bono, Ed Bryant of Tennessee, Steve Chabot, Michael Patrick Flanagan, John Conyers, Jr., John Bryant ofTexas, Robert C. Scott, Zoe Lofgren, and Sheila Jackson Lee. Also present: Joseph Gibson, counsel; Kenny Prater, clerk; and John Flannery, minority special counsel. OPENING STATEMENT OF CHAIRMAN HYDE Mr. Hyde. The committee will come to order. Today the committee considers H.R. 3011, the Security and Free- dom Through Encryption (SAFE) Act. Encr3rption is the process of encoding data or communications in a form that only the intended recipient can understand. Once the exclusive domain of the national security agencies, encryption has become increasingly impor- tant to persons and companies in the private sector; for example, to protect intellectual property and other forms ofproprietary information that are stored and transmitted in digital formats. The encrjrption debate encompasses two main issues. The first is whether there should be any restrictions on the domestic use and sale of encryption technology and, in particular, whether domestic users must place their keys in escrow with the Government or some neutral third party. Current law does not have any such restrictions. The second issue is whether there should be restrictions on the export of encryption technology. Current law regulates the export of encryption technology in the same manner as military technology. To date, the State Department has generally only al- lowed the export ofrelatively weak encryption technology. With respect to the domestic use of encryption, the administration generally favors a key escrow system, and its representatives will explain more about this proposal shortly. The law enforcement and national security agencies believe that a key escrow system is necessary to maintain their ability to perform lawful wiretaps and to read computer data obtained through lawful means. The computer industry, the larger business community, and privacy groups oppose any mandatory key escrow system. They be- (1) lieve that a mandatory system would unnecessarily invade the privacy of users and that law enforcement can solve its problems by acquiring better technology to decode encrypted materials. They argue that the benefits of preventing crime through the widespread use of encryption outweigh any harm to law enforcement caused by that use. With respect to the export control issue, the administration has to date generally opposed the lifting of the current export controls. It argues that the controls are still effective and that our allies would be distressed about the damage to law enforcement efforts ifwe lifted the controls. The computer industry and the privacy groups argue that the controls ought to be substantially relaxed, if not eliminated. They argue that the controls are easily evaded because many encryption products are already available to anyone over the Internet, and because it is legal for anyone to come into the United States, buy encryption products, and take them out of the country. Ifthe situa- tion does not change, they believe that Americans will no longer dominate this field. [The bill, H.R. 3011, follows:] 104th congress H.R.3011 2d Session To amend title 18, United States Code, to affirm the rights of United States persons to use and sell encryption and to relax export controls on encryption. IN THE HOUSE OF REPRESENTATIVES March 5, 1996 Mrs. GOODLATTE (for himself, Mr. DeLay, Mr. BOEHKER, Mr. MOORHEAD, Mrs. SCHROEDER, Mr. Gejdensox, Mr. Manzullo, Mr. Coble, Mr. BarrofGeorgia, Mr. BoKO, Ms. LOFGREN, Mr. Campbell, Ms. EsHOO, Mr. DOOLITTLE, Mr. Farr of California, Mr. McKeon, Mr. Engel, Mrs. Waldholtz, Mr. E^^^^•G, Mr. Mica, Mr. Chahibuss, Mr. Ever- ett, Mr. Ehlers, Mr. Orton, Mr. Matsui, Mr. BOUCHER, Mr. Chabot, Mr. MOAKLEY, and Mr. Bartlett ofMaryland) introduced the foUowng bill; which was referred to the Conunittee on the Judiciary, and in addition to the Committee on International Relations, for a period to be subsequently determined by the Speaker, in each case for consider- ation of such provisions as fall within the jurisdiction of the committee concerned A BILL To amend title 18, United States Code, to affirm the rights of United States persons to use and sell encryption and to relax export controls on encryption. 1 Be it enacted by the Senate and house ofRepresenta- 2 tives ofthe United States ofAmerica in Congress assembled, — 1 2 1 SECTION 1.SHORTTITLE. 2 This Act may be cited as the "Security and Freedom 3 Through Encryption (SAFE) Act". 4 SEC.2. SALEANDUSEOFENCRYPTION. — 5 (a) In General. Part I of title 18, United States 6 Code, is amended by inserting after chapter 121 the fol- 7 lowingnew chapter: "CHAPTER 122—ENCRYPTED WIRE AND 8 ELECTRONIC INFORMATION 9 "2801. Definitions. "2802. Freedom touseencryption. "2803. Freedom tosellencryption. "2804. Prohibitiononmandatorykeyescrow. "2805. Unlawfuluseofencryption in furtheranceofacriminalact. 10 **§2801. Definitions 1 "As used in this chapter 12 "(1) the terms 'person', 'State', 'wire commu- 13 nication', 'electronic communication', 'investigative 14 or law enforcement officer', 'judge of competent ju- 15 risdiction', and 'electronic storage' have the mean- 16 ings given those terms in section 2510 of this title; 17 "(2) the terms 'encrypt' and 'encryption' refer 18 to the scrambling of wire or electronic information 19 using mathematical formulas or algorithms in order 20 to preserve the confidentiality, integrity, or authen- 21 ticity of, and prevent unauthorized recipients from 22 accessing or altering, such information; •HR soil IH