From: Mark Voorhees <0006368931@mcimail.com>
Date: Thu, 2 Jun 94 07:55:58 PDT
To: David Koontz <koontzd@lrcs.loral.com>
Subject: Re: Clipper in patent trouble?
Message-ID: <13940602144231/0006368931PK4EM@mcimail.com>
MIME-Version: 1.0
Content-Type: text/plain


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                                      Information Law Alert
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411 First St., Brooklyn, NY 11215-2507        May 27, 1994
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Clipper's dirty little secret
ADMINISTRATION'S CRYPTO PLAN MAY HAVE PATENT PROBLEMS
MIT professor says he deserves royalties 

     An MIT computer scientist is trying to earn
royalties on the use of the Administration's Clipper
encryption plan. Negotiations, which one government
official described as "erratic," have been going on for a
couple months.
 
     Silvio Micali, the professor, holds one patent that
he says covers a critical part of the government's
Clipper project. He says the U.S. Patent and Trademark
Office approved but has not yet publicly issued a second
patent improving on the original invention.
 
     The royalty negotiations throw a wildcard onto the
table of U.S. cryptography policy at an uncertain time.
If the patent covers Clipper, opponents of U.S. policy
will likely seize on the patent dispute as just one more
reason to kill Clipper; users of Clipper will face higher
costs; and the U.S. government will also have a much
harder time exporting Clipper technology. Foreign
governments recoil at the prospect of paying royalties to
a U.S. citizen.
 
     Still, it is unclear how committed Micali is to
facing off against barrel-chested U.S. negotiators. So
far, he has been talking amiably to Michael Rubin, deputy
general counsel of the National Institute of Standards
and Technology, without the aid of a lawyer. "I didn't
think that in dealing with the U.S. government, I would
need a lawyer," Micali says. "I may be proved wrong."
 
     The key escrow, or Clipper, proposal is a coding
scheme to provide privacy to voice, fax, and computer
communications through the use of a secret codes. The
code is embedded in a computer chipDthe Clipper chipDthat
the government wants installed in telephones, fax
machines and computers. 
 
     But there's a catch: The secret key that unlocks
messages is broken into two pieces and held in escrow by
the government. With a court order, the government can
reunite the two escrowed keys and tap the coded
communications.
 
     Micali says that his patent covers the basic notion
of escrowed keys in which trustees are given guaranteed
pieces of the key. And while most of the 18 claims of the
patent don't seem relevant to Clipper, the last four
could be troubling.
 
     One of the claims clearly covers the division of a
secret key into pieces and the recreation of those pieces
in order to tap a line.
 
     If it applies to Clipper, Micali's patent would pose
a vexing problem. Unlike most of the rest of the key U.S.
cryptographic patents, the government does not seem to be
able to use Micali's technology for free. Micali says he
made the invention on his own time, not while working on
a government-funded project, which would give the U.S.
government royalty-free use.
 
     At least initially, the government will be the
primary user of Clipper chip encryption devices.
Officially, it is a voluntary standard for government
use. But the Clinton Administration hopes the concept
will spread into the private market. If that happens,
consumers could face a higher price tag because of the
Micali patent. The Clipper chip itself currently costs
$25.
 
     A NIST official says the government is now
evaluating Micali's patent and talking to the professor.
The analysis includes whether the government provided any
sort of funding to Micali's research that led to the
invention underlying the patent.
 
     Micali initially approached the government several
years ago about adopting a cryptographic scheme that he
says is preferable to Clipper. 
 
     Clipper is a private key system in which the same
key, a so-called session key, is used to both code and
decode a message. From a practical point of view, this
requires the sender and user to exchange keys beforehand,
which can be dangerous, time-consuming and expensive.
 
     Micali envisioned a public key system that would
still give the government access to tap phone lines.
Public key, of course, is the greatest recent
cryptographic breakthrough because it frees the parties
from selecting a key in advance. 
 
     In a public key system, a sender will code a message
with the receiver's public key, which is widely known.
The receiver will then decode the message with his or her
private key, which is mathematically related to the
public key but difficult to compute.
 
     Under Micali's scheme, users would break their
private keys into pieces and give each escrow agent a
piece and a mathematical proof that the piece is
legitimate. Upon proper authority, the government could
then reassemble the pieces of the key to tap a message.
 
     The government obviously opted for Clipper rather
than Micali's approach, but Micali did not go away. Last
January, the patent office issued his patent, so the
topic of conversations shifted to royalties. 
 
     Micali won't say what sum he is seeking from the
government except that it is reasonable compared to
standard practices. It is not unusual for patent holders
to seek 5 percent to 10 percent of sales if they feel
they hold a core patent and up to 2 percent if their
invention is peripheral.
 
     The Micali patent covers a public key system, which
Micali says would give users more control over their keys
and would be less expensive, even with royalty payments,
than a hardware-based solution, like Clipper. Most of the
patent's claims, therefore, don't cover Clipper, which is
a private key system. (A user, however, may want to use a
public key system like RSA to generate the session key
under Clipper.) 
 
      Micali's patent lawyer was wise enough to round out
the patent with four general claims that cover the use of
escrowed keys, regardless of the method. Micali says his
second patent, which is not yet public, may cover Clipper
even more directly.
 
     Claim interpretation, of course, is a matter of
impression and imprecision, especially when it relates to
inventions implemented in software. And it may be that
NIST decides that Micali's claims don't specifically
cover Clipper.

     In that case, Micali would be facing a legal bill
of hundreds of thousands of dollars to make his case in
court.

     Until that time, Micali is not revealing his
strategy other than to say that he may soon need a
lawyer.
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