From: Bob Palacios <editor@cdt.org>
Date: Fri, 4 Oct 1996 16:24:22 +0800
To: cypherpunks@toad.com
Subject: CDT Policy Post 2.35 - Latest Admin Crypto Policy Pushes KeyEscrow
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   The Center for Democracy and Technology  /____/     Volume 2, Number 35
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      A briefing on public policy issues affecting civil liberties online
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 CDT POLICY POST Volume 2, Number 35                       October 3, 1996

 CONTENTS: (1) Latest Administration Crypto Policy Continues Push Towards
               Key Escrow
           (2) Analysis of the Administration's Next Step: Short-Term
               Export Relief to Compel Long-Term Key Escrow
           (3) How to Subscribe/Unsubscribe to the Policy Post list
           (4) About CDT, contacting us

  ** This document may be redistributed freely with this banner intact **
        Excerpts may be re-posted with permission of <editor@cdt.org>
         ** This document looks best when viewed in COURIER font **
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(1) LATEST ADMINISTRATION CRYPTO POLICY CONTINUES PUSH TOWARDS KEY ESCROW

This week the Administration announced the latest in a series of encryption
policies designed to promote the use of key escrow systems, both
domestically and abroad.  This latest initiative continues the drive
towards a global guarantee of law enforcement access to all encrypted
communications and stored data. CDT believes that such governmental access
systems -- whether through "key escrow" or "key recovery" -- threaten the
fundamental privacy rights of computer users, both domestically and abroad.

The latest Administration proposal would promote key escrow by temporarily
easing current export restrictions on moderately strong encryption
products.  The proposal would raise the current export limit from 40 bits
to 56 bits for companies that agree to produce key escrow products.
Companies would be required to report their progress every six months.
After two years, all exportable encryption systems stronger than 40-bits
would have to include key escrow.  Encryption producers will be compelled to
be part of this scheme in order to stay competitive, eventually producing and
adopting key escrow systems which so far have been largely rejected by the
public.

An overview of the latest Administration policy, considered within the
context of the government's relentless drive towards key escrow, is
attached below.

- THE UNSWERVING GOAL: GOVERNMENT ACCESS TO ALL COMMUNICATIONS AND
  STORED DATA

The long-standing goal of every major encryption plan by the Administration
has been to guarantee government access to all encrypted communications and
stored data. In 1993, the Clipper Chip policy achieved access through keys
held by the government.  In 1995, the "Clipper II" proposal allowed export
relief for commercial key escrow systems. This summer, "Clipper III" sought
access to keys through the dual incentives of export controls and a new
government "key management infrastructure."  In each case, the ultimate
goal has been a guarantee of government access to the plaintext of
encrypted information.  Law enforcement and national security interests
have driven this process.

The attempt to institutionalize key escrow worldwide is a fundamental
threat to the privacy and security of Internet users both domestically and
abroad.

* GUARANTEED ACCESS TO INTERNET COMMUNICATIONS AND STORED DATA WOULD BE
  A DRAMATIC EXPANSION OF CURRENT LAW ENFORCEMENT CAPABILITIES.

  Guaranteed access to Internet communications and stored files is a far
  greater intrusion into the privacy of computer users than current
  wiretapping.   As individuals conduct more aspects of their lives
  online, key escrow is tantamount to guaranteeing law enforcement
  access to all of our most intimate conversations, sensitive personal
  records, musings and thoughts in a way never available before.  Within
  the United States, Congress and the courts have established a delicate
  balance in electronic surveillance between law enforcement and
  individual privacy rights.  Key escrow destroys that balance,
  providing law enforcement with a comprehensive dossier of individual
  lives and activities.

* GLOBAL KEY ESCROW ENDANGERS THE PRIVACY RIGHTS OF COMPUTER USERS
  COMMUNICATING IN COUNTRIES THAT HAVE NO FOURTH AMENDMENT OR OTHER
  PRIVACY PROTECTIONS.

  An international key escrow scheme will necessarily entail the escrow
  of key information in foreign countries, with access by foreign
  governments through much weaker privacy protections.  Such global key
  escrow jeopardizes the privacy rights of any American who communicates
  or stores files abroad, where key information might be released with
  few privacy protections. Moreover, global key escrow endangers the
  privacy and free expression of computer users everywhere by
  establishing the global machinery for government surveillance without
  privacy protections.

* THE CHOICE TO ACCEPT THE COSTS AND RISKS OF KEY ESCROW SHOULD BE MADE
  BY INDIVIDUAL USERS, NOT FORCED UPON THEM.

  Additional access points to encrypted data will create added
  vulnerabilities, new security problems, and additional costs.  While
  some users may decide that the benefits of key escrow outweigh the
  costs, governments should not be imposing these costs and risks on
  users who do not want them.  Individuals should be able to choose the
  type of encryption they want.

The global adoption of government access systems has serious, negative
consequences on the privacy of computer users. The recent Administration
announcement is another step in that wrong direction.

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WHAT YOU CAN DO -- ADOPT YOUR LEGISLATOR

As Members of Congress head home for the fall elections, they need to hear
from Internet users about the importance of encryption policy reform for
the future of the Net.

Adopt your legislator -- tell them that the Administration's Key Escrow
plan threatens the basic privacy rights of Internet users, and let us know
what they say!

Please take a moment to join the "Adopt Your Legislator" campaign. By
taking a moment to sign up to contact your member of Congress, you can make
a critical difference in the debate over privacy and security on the
Internet.

Details can be found at:  http://www.crypto.com/
                    and   http://www.cdt.org/crypto/

Tell them it's "My Lock, My Key!"

(The Adopt Your Legislator Campaign is a joint effort organized by the
Voters Telecommunications Watch (VTW), the Electronic Frontier Foundation
(EFF) and the Center for Democracy and Technology (CDT)).
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(2) ANALYSIS OF THE ADMINISTRATION'S NEXT STEP: SHORT-TERM EXPORT RELIEF
    TO COMPEL LONG-TERM KEY ESCROW

The latest Administration encryption policy, announced October 1, continues
this trend towards governmental access to all encrypted information.  Using
a carrot-and-stick approach, the plan promises moderate, short-term export
relief in return for the development and eventual adoption of key recovery
systems.

The Administration unveiled its encryption initiative at a White House
briefing by CIA Director John Deutch, Domestic Policy Advisor to the Vice
President Greg Simon, Undersecretary of Commerce William Reinsch, and
high-level representatives of the Department of Justice and the Office of
Management and Budget.  The basic outlines of the proposal included below
were culled from the Administration's statement and Tuesday's White House
briefing.

Major features of the new policy include:

* ALLOWS EXPORT OF 56-BIT ENCRYPTION PRODUCTS FOR THE NEXT TWO YEARS,
  "contingent upon industry commitments to build and market future
  products that support key recovery." Six-month licenses for 56-bit
  exports would be granted and renewed for up to two years -- contingent
  on satisfactory progress towards key escrow.

* REQUIRES KEY ESCROW CAPABILITIES AFTER TWO YEARS in all exportable
  products with more than 40 bits.

* "ENCOURAGES" THE ADOPTION OF KEY ESCROW SYSTEMS through international
  agreements, standards processes, and a new key management
  infrastructure.

* TRANSFERS JURISDICTION OVER ENCRYPTION EXPORT LICENSING TO THE
  DEPARTMENT OF COMMERCE, but grants the Department of Justice a formal
  vote in the process.

The President is expected to sign an Executive Order enacting many of these
changes in mid-October. Other pieces will be published as agency rules or
regulations; a small part of the proposal (rules governing key holders) may
require legislation.

WHAT IT ALL MEANS FOR INTERNET USERS:

In the short run, computer users may see more widespread availability of
moderately stronger encryption products (up to 56-bit key length) if
vendors choose to and are able to meet the "commitments" required under
the proposal.  In the longer term, however, even these moderately stronger
products will only be exportable with key escrow.  Ultimately, this
proposal is designed to force the widespread adoption of key escrow systems,
both domestically and abroad.


A.  EXPORT CONTROL RELIEF AS AN INCENTIVE FOR KEY ESCROW:  The
    Administration proposal would allow for short-term export of 56-bit
    DES equivalent encryption products in return for commitments from
    exporters to develop "key recovery" systems.

* Starting on Jan. 1, 1997, the Administration would begin granting six
  month general licenses for export of 56-bit encryption products.

* Licenses would be granted "contingent on commitments from exporters to
  explicit benchmarks and milestones for developing and incorporating
  key recovery features into their products and services."

* Additional six month licenses would be granted "if milestones are
  met."

* In two years, "the export of 56-bit products that do not support key
  recovery will no longer be permitted."

* Export of longer key lengths would continue for certain sensitive
  financial applications.

* Export of longer key lengths may be allowed more generally once key
  escrow mechanisms are in place.

Questions remain as to exactly what form the commitments from exporters
will take, who will qualify for these relaxations, and what will happen at
the end of two years to 56-bit non-escrow products in the marketplace and
how they will be supported.  No interoperability restrictions on products
have been mentioned, and the Administration seemed to indicate that it
would be willing to tolerate a greater degree of interoperability between
products.

WHAT EXPORT CONTROLS MEANS FOR INTERNET USERS:

This Administration export control scheme coerces industry into developing
key escrow systems, domestically and abroad, whether they want to or not.
Since 1992, export controls have been the favorite vehicle for enforcing
the adoption of such key escrow systems.  The strong public desire for
secure global communications has allowed government to use key escrow as a
precondition for export relief.   Export controls are a force for key
escrow in the domestic market as well as the international market because
of the need for secure international communications and the cost of
producing product lines for U.S. use only.  The Administration realizes
this: as CIA Director Deutch stated at the White House press briefing, he
was more concerned with encryption that people "buy at Sears" than about
less popular strong encryption products that the Administration concedes
will always be available.

In addition to their impact on the market for key escrow, the proposal's
export controls and key length limits themselves hurt user privacy and
security.

* Export controls don't make sense for a global Internet; they place
  business at a competitive disadvantage and prevent deployment of a
  secure global infrastructure.

* 56-bits is not enough for many applications.  CDT welcomes the
  Administration's recognition that 40-bit products are not strong
  enough, but last winter's study by a panel of encryption experts
  argued that DES keys can be cracked relatively quickly by well-
  financed groups, and that 70- to 90-bit keys are more appropriate.

* Key length limits are a flawed approach because they presuppose that
  some entities should be able to break keys and some should not -- a
  solution that is unlikely to appeal to worldwide consumers of
  encryption.


B.  "KEY RECOVERY":  Government access to the plaintext of encrypted
    data remains the centerpiece of the Administration proposal.  Major
    features of the key escrow requirements in the latest proposal
    include:

* Key escrow systems would rely on a trusted party to recover a user's
  confidentiality keys for use by law enforcement acting under "proper
  authority."

* The trusted recovery party might in some cases be internal to the
  user's organization, but in all cases notice to surveillance targets
  that their key information had been released would be prohibited.

* Access to keys internationally "would be provided in accordance with
  destination country policies and bilateral understandings."

* The Administration will pursue legislation to govern the release of
  keys, provide criminal and civil penalties for unauthorized releases
  or theft of keys, and provide liability protection for key holders.

* The Administration will continue to "encourage" the adoption of key
  escrow systems through it's broad efforts to promote international key
  escrow agreements, government key escrow purchasing standards, and the
  creation of a key management infrastructure.

None of the officials at the White House briefing were able to give
specific information about the requirements to be placed on key holders
(e.g., response times, security clearances, etc.)  The Administration did
indicate a broader approach to allowing industry key escrow systems that
more limited access to confidential information through, for example,
recovery of specific plaintext or separation of key information.

  NOTE: KEY ESCROW V. KEY RECOVERY -- CDT recognizes that real progress
  has been made in the development of systems that provide access to the
  plaintext of encrypted data while minimizing the collection and
  disclosure of sensitive key information.  However, from a privacy
  policy perspective these approaches have the same basic privacy
  problem: they are designed to provide law enforcement with guaranteed
  access to all encrypted information.

WHAT "KEY RECOVERY" MEANS FOR INTERNET USERS:

CDT recognizes that some companies and users may wish to use key escrow
systems.  The Administration's apparent recognition that these systems are
best designed in the private sector is welcome.  However, this policy's
acknowledged desire to widely promote key escrow is dangerous and threatens
the privacy of users:

* Users are being pushed towards key escrow, whether they want it or
  not. The Administration is using the enormous pressure of export
  controls, competitive markets, and industry standards to force
  adoption of key escrow.  Each user should be free to decide for
  themselves whether to accept the costs of key escrow.

* International key escrow doesn't protect privacy in a world without a
  Fourth Amendment -- What legal standards apply to communications when
  keys are held in foreign countries? Officials have been unable to
  clearly explain how the privacy of computer users will be preserved.

* Key escrow dramatically expands law enforcement capabilities --
  Guaranteed access to encrypted information is a far greater intrusion
  into our lives than the delicate balance struck under U.S. privacy
  law.

* Key escrow is unproven -- The NRC's recent study argued that a policy
  relying on key escrow is "not appropriate at this time" and "is likely
  to have a significant negative impact on the natural development of
  applications."

* Key escrow creates new security vulnerabilities, such as the creation
  of large aggregations of sensitive key information, that are poorly
  understood.


C.  TRANSFER OF JURISDICTION TO THE COMMERCE DEPARTMENT:  According to
    the White House, "after consultation with Congress, jurisdiction for
    commercial encryption controls will be transferred from the State
    Department to the Commerce Department."

* Encryption licenses will be reviewed under the Commerce Department's
  "normal process" by a committee with representatives from the
  Departments of Commerce, State, Defense, Energy, and for encryption
  exports, Justice.

* The Justice Department will have a single vote in the review
  committee, which will make its decisions by majority rule.

* The State Department will only have jurisdiction over special, single
  customer, military-specific encryption products.

WHAT TRANSFERRING JURISDICTION MEANS FOR INTERNET USERS:

While the switch to Commerce has been perceived as helpful by some, CDT
believes the benefits are unclear if fundamental policy remains unchanged.
The switch to Commerce will have little impact on the underlying policy
direction aimed at institutionalizing key escrow.  Moreover, the Commerce
Department's review committee is heavily weighted towards the law
enforcement and national security perspective (State, Defense, Justice, and
Energy), with the Commerce Department the lone representative of industry
and consumer interests. Finally, the presence of domestic law enforcement
in export control decisions raises serious questions about the ultimate
goal of this policy.

IV.  CONCLUSION

The Administration's latest encryption proposal remains wedded to a
flawed, key escrow and export control oriented approach that does not
address the privacy concerns of users.  While it contains some welcome
ideas, at its heart the Administration proposal uses the short-term easing
of export controls to promote key escrow through a Faustian bargain with an
industry desperate to produce strong security products.

Such manipulation of the market for encryption products is designed to
forward law enforcement's dangerous agenda of worldwide governmental access
to all encrypted information.  The march towards institutionalized key
escrow is a real threat to the privacy of computer users, particularly in a
world where not everyone has a Fourth Amendment.  The United States should
be a force for Internet privacy and security worldwide.  Rather than
forcing key escrow on a wary public, the Administration should look to work
with Congress, privacy and Internet advocates, the user community, and
industry to craft a truly voluntary policy that meets the privacy and
security needs of computer users in the global Information Age.

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(4) ABOUT THE CENTER FOR DEMOCRACY AND TECHNOLOGY/CONTACTING US

The Center for Democracy and Technology is a non-profit public interest
organization based in Washington, DC. The Center's mission is to develop
and advocate public policies that advance democratic values and
constitutional civil liberties in new computer and communications
technologies.

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End Policy Post 2.35                                            10/3/96
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