Restraints on encryption products ruled unconstitutional.

Recent action in the courts, government, and marketplace suggests that regulators may soon be lifting Iron Curtain restraints on encryption technology.

Lawyers who want to securely encode sensitive e-mail or Internet communications with clients in the United States and abroad have been struggling, know it or not, against two powerful adversaries: the U.S. law enforcement and military establishments. Law enforcement wants to be able to decipher any code encountered during a court-approved wiretap. The military is concerned about potential enemies abroad obtaining technology for creating undecipherable codes.

Restrictions to placate these interests have stalled the growth of the U.S. encryption industry despite growing consumer and business demand for products. Three recent actions, however, seem to indicate that the tide is turning.

A federal judge in California has ruled that U.S. restrictions on the export of encryption programs are unconstitutional. District Judge Marilyn Hall Patel stopped short of forbidding the government to place restrictions on exports, but she said that the current rules are "an unconstitutional prior restraint in violation of the First Amendment." (Bernstein v. U S. Department of State, 945 F. Supp. 1279 (N.D. Cal. Dec. 9, 1996).)

Daniel Bemstein, a mathematics professor at the University of Illinois-Chicago, developed an encryption code called Snuffle that scrambles computer messages so they can be read only by using his decryption program, Unsnuffle. He published information about Snuffle in a paper and sought a license to distribute the coding information on the Internet.

The State Department denied the license because "cryptographic systems . . . with the capability of maintaining secrecy or confidentiality of information" are clearly listed among categories controlled by the Arms Export Control Act and the international Traffic in arms Regulations. In other words, coding technology is not intellectual property. For export purposes, it has been defined as a weapon.

Patel noted that the State Department office that makes licensing decisions has neither deadlines nor standards for denying a license and offers no way to appeal a denial. Patel said that the government may impose prohibitions on speech, but it may not condition that speech on obtaining a license or permit from a government official "in that official's boundless discretion."

Meanwhile, federal regulations that became effective January 1, 1997, have transferred responsibility over encryption exports to the Commerce Department. The new rules allow companies to sell more powerful programs abroad, so long as the companies first ensure that U.S. law enforcement officers, using court orders, will be able to intercept the communications. (Elizabeth Weise, Encryption Limits Unconstitutional, Judge Rules, Chi. Daily L. Bull., Dec. 19, 1996, at 2.)

Anticipating that the Internet will soon be used to conduct serious business transactions, a committee of the American Bar Association Science & Technology Section, meanwhile, has released a document called Digital Signature Guidelines.

Limited encryption codes used by Net-scape Navigator and Microsoft's Internet Explorer can scramble credit card numbers so that purchases can be made via computer. But real contracting on the Net, according to the ABA document, will require that parties not only encrypt messages but also be able to ensure that a message was sent by the alleged sender and that it has not been altered in transit. The ABA document opens with a tutorial on the general topic of encryption, then describes security systems needed for safe contracting on the Internet.

The ABA is selling its Digital Signature Guidelines for $34.95, plus shipping and handling charges. For more information or to place an order for the document, refer to product 545-0012 when contacting the ABA Service Center, P.O. Box 10892, Chicago, IL 60610-0892, [phone], e-mail [e-mail].